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Case Digests 9 PDF Free
Case Digests 9 PDF Free
SUBMITTED TO:
Atty. Lulu Reyes
SUBMITTED BY:
Pic-it, Christian B.
Aguilar, Joana Rose
Balusdan, Septfonette Fe
Belvis, Eunice
Bondad, Nicole Y.
Cortez, Kimberly Agniezka R.
Datario, Mary Ruth V.
De Guzman, Chanell Dolor D.
Fango-ok, Cita C.
(LL.B. I; Block B)
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 2
Table of Contents
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OCAMPO III. VS. PEOPLE ........................................................................................................................ 16
Leung Ben v. O'Brien ............................................................................................................................. 17
Pelayo v. Lauron .................................................................................................................................... 18
ASJ Corporation v. Sps. Evangelista ........................................................................................................ 20
RAMAS VS.QUIAMCO.............................................................................................................................. 21
Nikko Hotel Manila Garden v. Reyes ...................................................................................................... 22
St. Mary's Academy v. Carpitanos .......................................................................................................... 24
TSPI, INCORPORATION VS. TSPIC EMPLOYEES UNION ............................................................................ 26
REGINO VS. PCST ................................................................................................................................... 27
PSBA v. Court of Appeals ....................................................................................................................... 28
Cosmo Entertainment v. La Ville ............................................................................................................ 30
Ayala Corp. vs. Rosa Diana Realty .......................................................................................................... 31
Bricktown Development vs. Amor Tierra Development.......................................................................... 33
Sarte Flores v. Sps. Lindo ....................................................................................................................... 38
Philippine Realty and Holding Corp. v. Ley Const. and Dev. Corp. ........................................................... 40
Titan-Ikeda Construction v. Primetown Property ................................................................................... 42
PADCOM v. Ortigas................................................................................................................................ 44
MC Engineering v. Court of Appeals ....................................................................................................... 46
BPI v. Pineda.......................................................................................................................................... 48
State Investment v. CA .......................................................................................................................... 49
People v. Nurfrasir Hashim, et al............................................................................................................ 51
Abellana v. People ................................................................................................................................. 53
People v. Malicsi.................................................................................................................................... 56
People v. Sia .......................................................................................................................................... 58
People v. Doctolero ............................................................................................................................... 59
People v. Abulencia ............................................................................................................................... 61
Bermudez v. Melencio-Herrera.............................................................................................................. 62
People v. Relova .................................................................................................................................... 64
Manantan v. Court of Appeals ............................................................................................................... 65
People v. Bayotas .................................................................................................................................. 67
Barredo v. Garcia ................................................................................................................................... 69
Del Carmen, Jr. v. Geronimo Bacoy et.al ................................................................................................ 70
Ludo and Luym Corp. v. Court of Appeals .............................................................................................. 72
Thermochem v. Naval............................................................................................................................ 73
Philippine Hawk Corp. v. Lee.................................................................................................................. 75
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 3
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 4
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 16
ISSUE: Whether or not the amount loaned out was private in nature.
HELD: Yes, the loan was private in nature because Art. 1953 of the
NewCivil Code provides that ―a person who receives a loan of money or
anyother fungible thing acquires the ownership thereof, and is bound to
paythe creditor an equal amount of the same kind and quality.‖ The fact that
the petitioner-Governor contracted the loan, the publicfund changed its
nature to private character, thus it is not malversation which is the
subject of this case, instead it must be a simple collection of money suit
against the petitioner in case of non payment . Therefore, thepetitioner is
acquitted for the crime of malversation.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 17
ISSUE: Whether or not the statutory obligation to restore money won at gaming
is an obligation arising from contract, express or implied.
HELD: Yes. In permitting the recovery money lost at play, Act No. 1757
has introduced modifications in the application of Articles 1798, 1801, and
1305 of the Civil Code. The first two of these articles relate to gambling
contracts, while article 1 3 0 5 t r e a t s o f t h e n u l l i t y o f c o n t r a c t s
p r o c e e d i n g f r o m a v i c i o u s o r i l l i c i t consideration. Taking all these
provisions together, it must be apparent that the obligation to return money
lost at play has a decided affinity to contractual obligation; and the
Court believes that it could, without violence to the doctrines of the civil law, be
held that such obligations is an innominate quasi-contract. It is however,
unnecessary to place the decision on this ground. In the opinion of
the Court, the cause of action stated in the compla int in the court
below is based on a contract, express or implied, and is therefore of such
nature that the court had authority to issue the writ of attachment. The
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 18
application for the writ of certiorari must therefore be denied and the
proceedings dismissed.
Pelayo v. Lauron
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 19
ISSUE: W h e t h e r o r n o t t h e d e f e n d a n t s s h o u l d b e h e l d l i a b l e
f o r t h e f e e s demanded by the plaintiff upon rendering medical assistance
to the defendants‘ daughter-in-law.
HELD: No. The Court held that the rendering of medical assistance is one of
the o b l i g a t i o n s t o w h i c h s p o u s e s a r e b o u n d b y m u t u a l
s u p p o r t , e x p r e s s l y determined by law and readily demanded. Therefore,
there was no obligation on the part of the in-laws but rather on the part of the
husband who is not a party. Thus, decision affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 20
ISSUE: W h e t h e r o r n o t t h e d e t e n t i o n o f t h e a l l e g e d c h i c k s v a l i d
a n d recognized under the law.
HELD: N o , b e c a u s e A S J C o r p o r a t i o n m u s t g i v e d u e t o t h e
E v a n g e l i s t a Spouses in paying the installment, thus, it must not delay the
delivery of the chicks. Thus, under the law, they are obliged to pay
damages with each other for the breach of the obligation. Therefore, in a
contract of service, each party must be in good faith i n t h e p e r f o r m a n c e o f
t h e i r o b l i g a t i o n , t h u s w h e n t h e p e t i t i o n e r h a d detained the hatched
eggs of the respondents spouses, it is an implication of putting prejudice to
the business of the spouses due to the delay of paying installment to the
petitioner.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 21
RAMAS VS.QUIAMCO
NESTO RAMAS UYPITCHING and RAMAS UYPITCHING SONS, INC.,
Petitioners, versus ERNESTO QUIAMCO, Respondent.,
G.R. No. 146322, 2006 Dec 6, 2nd Division
CORONA, J.:
FACTS: Q u i a m c o has amicably settled with Davalan,
G a b u t e r o a n d Generoso for the crime of robbery and that in
r e t u r n , t h e t h r e e h a d surrendered to Quiamco a motorcycle with its
registration. However, Atty. Ramas has sold to Gabutero the motorcycle
in installment but when the latter did not able to pay the installment,
Davalon continued the payment but when he became insolvent, he said that
the motorcycle was taken by Q u i a m c o ‘ s m e n . H o w e v e r , a f t e r s e v e r a l
y e a r s , t h e p e t i t i o n e r R a m a together with policemen took the
motorcycle without the respondent‘s permit and shouted that the
respondent Quiamco is a thief of motorcycle. Respondent then filed an
action for damages against petitioner alleging t h a t p e t i t i o n e r i s
l i a b l e f o r u n l a w f u l t a k i n g o f t h e m o t o r c y c l e a n d utterance of a
defamatory remark and filing a baseless complaint. Also, p e t i t i o n e r s
claim that they should not be held liable for petitioner‘s
exercise of its right as seller -mortgagee to recover the
m o r t g a g e d motorcycle preliminary to the enforcement of its right to foreclose
on the mortgage in case of default.
HELD: No. The petitioner being a lawyer must know the legal procedure
for the recovery of possession of the alleged mortgaged property in which said
procedure must be conducted through judicial action. Furthermore, t h e
petitioner acted in malice and intent to cause damage to the
respondent when even without probable cause, he still instituted an
act against the law on mortgage.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 22
ISSUES: Whether or not Ms. Ruby Lim is liable under Articles 19 and 21 of the
Civil C o d e i n a s k i n g M r . R e y e s t o l e a v e t h e p a r t y a s h e w a s n o t
i n v i t e d b y t h e celebrant thereof and whether or not Hotel Nikko, as the
employer of Ms. Lim, be solidarily liable with her.
HELD: The Court found more credible the lower court‘s findings of
facts. There was no proof of motive on the part of Ms. Lim to humiliate
Mr. Reyes and to e x p o s e h i m t o r i d i c u l e a n d s h a m e . M r . R e y e s ‘
v e r s i o n o f t h e s t o r y w a s unsupported, failing to present any witness
to back his story. Ms. Lim, not having abused her right to ask Mr. Reyes to
leave the party to which he was not invited, cannot be made liable for damages
under Articles 19 and 21 of the Civil Code. Necessarily, neither can her
employer, Hotel Nikko, be held liable as its liability springs from that of
its employees. When a right is exercised in a manner which does not
conform with the norms enshrined in Article 19 and results in damage to
another, a legal wrong is thereby committed for which the wrongdoer
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 23
must be responsible. Article 21states that any person who willfully causes
loss or injury to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the damage.
Without proof of any ill-motive on her part, Ms. Lim‘s act cannot amount to
abusive conduct. The maxim ―Volenti Non Fit Injuria‖ (self-inflicted
injury) was upheld by the Court, that is, to which a person assents is
not esteemed in law as injury, t h a t c o n s e n t t o i n j u r y p r e c l u d e s
t h e r e c o v e r y o f d a m a g e s b y o n e w h o h a s knowingly and voluntarily
exposed himself to danger.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 24
February 6, 2002
The Court of Appeals affirmed the decision of the trial court. The Court of
Appeals held petitioner St. Mary‘s Academy liable for the death of
Sherwin Carpitanos under Articles 218 and 219 of the Family Code,
pointing out that petitioner was negligent in allowing a minor to drive and in
not having a teacher accompany the minor students in the jeep.
HELD: No. Under Article 219 of the Family Code, if the person under custody is
a minor, those exercising special parental authority are principally
and solidarily liable for damages caused by the acts or omissions of the
unemancipated minor while under their supervision, instruction, or custody.
However, for petitioner to be liable, there must be a finding that the act or
omission considered as negligent was the proximate cause of the injury caused
because the negligence must have a causal connection to the accident.
Respondents Daniel spouses and Villanueva admitted that the immediate
cause of the accident was not the negligence of petitioner or the reckless
driving of James Daniel II, but the detachment of the steering wheel guide of
the jeep. Hence, liability for the accident, whether caused by the negligence of
the minor driver or mechanical detachment of the steering wheel guide of the
jeep, must be pinned on the minor‘s parents primarily. The negligence
of petitioner St. Mary‘s Academy was only a remote cause of the
accident. Between the remote cause and the injury, there intervened
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 25
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 26
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 27
FACTS: P e t i t i o n e r K r i s t i n e R e g i n o w a s a p o o r s t u d e n t e n r o l l e d a t
t h e P a n g a s i n a n C o l l e g e o f S c i e n c e a n d Te c h n o l o g y . Th u s , a
f u n d r a i s i n g project pertaining to a dance party was organized by
PCST, requiring all its students to purchase two tickets in consideration as a
prerequisite for the final exam. Regino, an underprivileged, failed to
purchase the tickets because of her status as well as that project was
against her religious belief, thus, she was not allowed to take the final
examination by her two professors.
ISSUE: Was the refusal of the university to allow Regino to take the
final examination valid?
HELD: No, the Supreme Court declared that the act of PCST was not valid,
though, it can impose its administrative policies, necessarily, and the amount
of tickets or payment shall be included or expressed in the
s t u d e n t handbooks given to every student before the start of the regular
classes of the semester. In this case, the fund raising project was not included
in the activities to be undertaken by the university during the semester. The
petitioner is entitled for damages due to her traumatic experience on the acts
of the university causing her to stop studying sand later transfer to
another school.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 28
ISSUE: Whether or not the case should be dismiss base on the contention that
the complaint states no cause of action against them.
HELD: No. Based on the petitioners‘ contention, it is true that this is not under
the provision of Article 2180 in conjunction with Article 2176 of the Civil Code
as established by jurisprudence that, it had been stressed that the law (Article
2180) plainly provides that the damage should have been caused or inflicted
by pupils or students of the educational institution sought to be held liable for
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 29
the acts of its pupils or students while in its custody. The victim‘s assailant is
not a student neither an employee of the petitioner so it must be absolve of
damages. However as ruled by this court, the respondent cause of action is
based on a bilateral contract or obligation which the parties are bound to
comply with not based on the precepts of quasi-delicts as the petitioner based
its contention to dismiss the said case.
When an academic institution accepts students for enrolment, there is
established a contract between them, resulting in bilateral obligations which
both parties are bound to comply with. For its part, the school undertakes to
provide the student with an education that would presumably suffice to equip
him with the necessary tools and skills to pursue higher education or a
profession. On the other hand, the student covenants to abide by the school's
academic requirements and observe its rules and regulations. Aside from this,
academic institution must meet also the implicit obligation which to provide an
atmosphere which is conducive to learning and this cannot be achieve if upon
entering the school premises there is a fear or threat against to student‘s life or
limb. In order to held the petitioners liable this should be proven in court
according to rule of evidence that there is a lack of negligence corresponding to
the circumstance of person, time and place to fulfil its obligation. It is also
unduly oppressive to the academic institution to just make them liable res ipsa
loquitor on the damage itself. This case is now remanded to the lower court of
origin to continue the proceedings.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 30
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 31
days from August 5, 2000, or until August 20, 2000, within which to file the
said pleading. On August 18, 2000, the petitioner filed its Petition for Review
on Certiorari with the CA but was dismissed base on the fact that it was filed
beyond the extended period granted to the petitioner. Hence, the recourse to
this Court is sought by the petitioner.
ISSUE: Whether or not the petition for review on certiorari should be dismissed
for having been filed out of time.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 32
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 33
building with a gross floor area of 23,305.09 square meters. Needless to say,
while the first set of building plans complied with the deed restrictions, the
latter set exceeded the same.
Because of this, Ayala filed an injunctive relief but was denied by the
Regional Trial Court (RTC) that led Rosa-Diana to complete the building. Ayala
then filed a violation of the Deed of Restriction but was denied by the RTC
based on no cause of action. The Court of Appeals affirmed the lower court
base on the principle of estoppel and/or abandonment, hence this petition is.
ISSUE: Whether or not there is a violation of the Deed of Restriction which can
be a valid ground to grant the plaintiff for its prayer of either rescission or
specific performance.
HELD: Yes. It is obvious base on the facts that there is a violation of the Deed
of Restriction but this cannot be used as a valid ground to grant the petitioner
its prayer of either rescission of contract of its specific performance. It is true
that Article 1159 of the New Civil Code provides that ―Obligations arising from
contracts have the force of the law of the contracting parties and should be
complied with in good faith‖, and this is clearly violated not only negligently but
with bad faith but the prayer of relief is not justifiable base on merit of the
case. First, the specific performance is not feasible as the building already
completed neither the cancellation of the sale because the original parties are
not impleaded (Manuel Sy and Sy Ka Kieng). Second, rescinding the sale is not
granted as the original parties already violated the first requirement of the
contract and Ayala did nothing to it impliedly allowing or ratifying it. Third,
Ayala allowed other corporation to violate the Deed of Restriction which they
made and instead of praying relief of specific performance or cancellation of
sale, they prayed instead for damages.
Therefore, instead of Rescission or Specific Performance as the petitioner
prayed, the Court grants instead damages to the petitioner by virtue of the
violation of the Deed of Restriction by the defendant in accordance to case
decided by this court ―Ayala vs. Rey Burton Development Corporation‖.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 34
the petitioner with legal interest. The Court of Appeals affirmed in toto the RTC
decision, hence this petition is.
ISSUE: Whether or not the initial payment should be forfeited in favor of the
petitioner as liquidated damages in accordance to the contract as the contract
is validly rescinded.
HELD: No. It is established in the decision of the Court that the contract is
validly rescinded as it clearly establish in the contract the right of the petitioner
to rescind it if there is a failure of payment. But this will not give rise or
guarantee the right also of the petitioner to forfeit the initial payment. As stated
in the contract, ―The OWNER shall have the right to resell the lot/s subject
hereof to another buyer and all payments made, together with all
improvements introduced on the aforementioned lot/s shall be forfeited in favor
of the OWNER as liquidated damages, and in this connection, the PURCHASER
obligates itself to peacefully vacate the aforesaid lot/s without necessity of notice
or demand by the OWNER.‖ This give rise that there is a reciprocal condition
before forfeiture is guaranteed that the respondent should have been in
possession of the said land in order for him to vacate it. It is well establish on
the facts that the respondent never had the possession of the land. This
argument not only guarantee the return of the initial payment but also the
payment of interest as the petitioner enjoy the benefit of the money when in its
possession that should have been use to benefit the respondent.
The Court also in its decision highlight the good faith of the respondent
as there are negotiation happened in order to amend the contract but this
contract never materialize. The court therefore orders the petitioner to return
the initial payment made by the respondent to the petitioner with interest.
Decision of the lower courts is hereby affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 36
FACTS: This is an action for Sum of Money and Damages filed by Pilipinas
Hino, Inc., thereinafter referred to as the plaintiff against Fernando V. Reyes,
Ponciano V. Reyes, and Teresita R. Tan, hereinafter referred to as the
defendants.
That on or about 15 August 1989, a contract of lease was entered into
between herein parties, under which the defendants, as lessors, leased real
property located at Bigaa, Balagtas, Bulacan, to herein plaintiff for a term of
two (2) years, from 16 August 1989 to 15 August 1991. Pursuant to the
contract of lease, plaintiff-lessee deposited with the defendants-lessors the
amount of Four Hundred Thousand (P400,000.00) Pesos to answer for repairs
and damages that may be caused by the lessee on the leased premises during
the period of the lease. After the expiration of the lease contract, the plaintiff
and defendants made a joint inspection of the premises to determine the extent
of the damages thereon, both agreed that the cost of repairs would amount to
P60,000.00 and that the amount of P340,000.00 shall then be returned by the
defendants to plaintiff. However, defendants returned to plaintiff only the
amount of P200,000.00, still having a balance of P140,000.00.
Notwithstanding repeated demands, defendants unjustifiably refused to return
the balance of P140,000.00 holding that the true and actual damage on the
lease premises amounted to P298,738.90.
On August 10, 1990, plaintiff and defendants entered into a contract to
sell denominated as a Memorandum of Agreement to sell whereby the latter
agreed to sell to the former the leased property subject of this suit in the
amount of P45,611,000.00. The aforesaid Memorandum of Agreement to sell
granted the owner (defendants) the option to rescind the same upon failure of
the buyer (plaintiff) to pay any of the first six (6) installments with the
corresponding obligation to return to the buyer any amount paid by the buyer
in excess of the downpayment as stated in paragraphs 7 and 9 of the
Memorandum of Agreement. Pursuant to said Memorandum of Agreement,
plaintiff remitted on August 10, 1990 to the defendants the amount of
P1,811,000.00 as downpayment. Subsequently, plaintiff paid the first and
second installments in the amount of P1,800,000.00 and P5,250,000.00,
respectively, thereby making the total amount paid by the plaintiff to the
defendants, on top of the downpayment, P7,050,000.00. Unfortunately,
plaintiff failed to pay the 3rd installment and subsequent installments: and
thereupon, defendants decided to, and in fact did, in a letter dated 20
November 1990, rescinded and terminated the contract and promised to return
to the plaintiff all the amounts paid in excess of the downpayment after
deducting the interest due from 3rd to 6th installments, inclusive. Thus, from
the amount of P7,050,000.00 due to be returned to the plaintiff, defendants
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 37
deducted P924,000.00 as interest and P220,000.00 as rent for the period from
15 February to 15 March 1991, thereby returning to the plaintiff the amount of
P5,906,000.00 only, as acknowledged by plaintiff in the letter dated 4 April
1991.
The Regional Trial Court, as affirmed by the Court of Appeals, partly
grant the petition and required the defendant to return the P924,000.00 with
interest but dismiss the claim of balance of P140,000.00 base on no cause of
action. Not satisfied with the judgement, the plaintiff elevated the suit. Hence
this petition is.
HELD: The decision of lower court is hereby affirmed ordering the return of
P924,000.00 and dismissing the claim of balance of P140,000.00.
As to the case of claim of balance of P140,000.00, the contention of the
plaintiff that they agreed for only the P60,000.00 as payment for repairs and
damages of the subject property has no merit. There is no evidence presented
in the proceeding that would support that contention so it is justified for the
defendant to claim that amount to cover the damages and repairs as per agreed
upon in the contract. Worthy to mention is, the total amount that was claim by
defendant as repairs and damages is far lesser than actual damages proven in
court.
As to the case of the amount of P924,000.00, this is unjustly withhold as
interest because it is expressly stated in the contract that no interest should be
collected when the defendant exercise their right to forfeit, ―When the owners
exercise their option to forfeit the downpayment, they shall return to the buyer
any amount paid by the buyer in excess of the downpayment with no obligation
to pay interest thereon.‖. This is very categorical and should be complied as
expressly state pursuant to Article 1159 of the New Civil Code which state that
―Obligation arising from contract have the force of the law between the
contracting parties and should be complied with in good faith.‖ There is
nothing wrong against this stipulation to make it void as this never contradict
any law, morals, good customs, public policy and public order. Therefore, the
defendant is required to return this amount to the petitioner.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 38
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 39
alternative remedies: either a personal action for the collection of debt or a real
action to foreclose the mortgage, but not both. The Court of Appeals ruled that
petitioner had only one cause of action against Edna for her failure to pay her
obligation and he could not split the single cause of action by filing separately a
foreclosure proceeding and a collection case. By filing a petition for foreclosure
of the real estate mortgage, the Court of Appeals held that petitioner had
already waived his personal action to recover the amount covered by the
promissory note.
Petitioner filed a motion for reconsideration but was denied. Hence this
petition.
ISSUE: Whether or not the loan obtained by the defendant can be recovered
without violating the multiplicity of suit base on single action or cause.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 40
Philippine Realty and Holding Corp. v. Ley Const. and Dev. Corp.
PHILIPPINE REALTY AND HOLDINGS CORPORATION, Petitioner, vs LEY
CONSTRUCTION AND DEVELOPMENT CORPORATION, Respondent.
(G. R. No. 165548, June 13, 2011 3rd Division)
SERENO, J.:
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 41
HELD: Yes. All the claim of LCDC is valid and should not be offset to the claim
of PRHC except the overpayment and the expenses of repaired that was done
by PRHC on the poorly done waterproofing construction. Actually the claim
that the P36,000,000.00 that was used to augment the increase of the price of
the material is valid because it was tacitly authorize by the agent of PRHC base
on the circumstances and facts presented rendering the first agreement which
the increase in price of material should be bore by LCDC amended. Acts of
agent always bind the principal unless contrary is proven as he is its alter ego.
Actually the excess which is P2,248,463.00 which was infuse by LCDC beyond
this amount agreed was correctly decided by lower court that it should be on
the account of LCDC. This cannot be claim through the virtue of unjust
enrichment. In unjust enrichment one of its elements is the one should be
unjustly benefited at the others expense. Unjustly benefited should be cause or
derive or confer through mistake, fraud, coercion, or request. LCDC knowing
that they only agreed the maximum amount of P36,000,000.00 spent more and
did not confer it through mistake, coercion, fraud or request.
The claim of PRHC that the damage incurred by it from the delay of the
completion cannot also be tenable. The increase in the material price and lack
of supply of the materials was not due solely to LCDC fault or LCDC act in bad
faith to delay the completion but due to fortuitous event such us typhoon,
power failure and interruption of water supplies. The elements of fortuitous
event that would lead the excuse of the debtor to its obligation are: (a) the
cause of the breach of the obligation must be independent of the will of the
debtor; (b) the event must be either unforeseeable or unavoidable; (c) the event
must be such as to render it impossible for the debtor to fulfil his obligation in
a normal manner; and (d) the debtor must be free from any participation in, or
aggravation of the injury to the creditor. These elements are all satisfied as
base on presented facts and circumstance.
Therefore, the PRHC is oblige to pay the remaining contract price unpaid
including the payment of P36,000,000.00 and offset the overpayment made to
LCDC including the repairs of the work of waterproofing which was poorly
done.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 42
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 43
ISSUE: Whether or not the petitioner is liable to the actual cost of completing
the project.
HELD: No. But the petitioner is liable to return the condominiums to the
respondent in excess of the compensation it justly would receive for the service
work it rendered to the respondent in building the tower‘s architectural work of
MPT. The SC then remanded this case to the lower court for the proper
identification of the value of the condominiums in order to offset it to the actual
finish work made by the petitioner before the actual takeover so that the excess
will be return to the respondent. This is in accordance to the concept of
solution indebiti as this is mistakenly delivered to the petitioner as payment of
the construction but unfortunately it was not completed.
The claim that delay was incurred is no merit because the respondent
never sent a written demand letter to the petitioner as required in the contract.
It should have sent this demand letter before it takeover of the said project but
the respondent instead just came and takeover the project. The report of ITI
also is not binding because as evidence of delay of the on-going construction
because the petitioner did not consent for it to take over the management as
the respondent just authorize it to assess the percentage of accomplishment in
spite of the present of a construction manager.
Therefore the decision of the lower court is reversed and the proceeding
should be in accordance to the decision of the SC. This case is therefore
remanded.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 44
PADCOM v. Ortigas
PADCOM CONDOMINIUM CORPORATION, petitioner, vs. ORTIGAS CENTER
ASSOCIATION, INC., respondent.
(G.R. No. 146807, May 9, 2002 1st Division)
DAVIDE, JR., C.J.:
ISSUE: Whether or not the petitioner based on the foregoing facts can be
required to be a member of the respondent association and should pay the
corresponding membership fee.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 45
violated in here because petitioner corporation has the right not to buy it in
order for it to escape the membership requirement. The petitioner at the first
place buy it knowing that the contract required membership and it should be
complied with in good faith. By virtue of this he should pay the membership fee
as it is required to all members.
The membership fee also can be based on the principle of unjust
enrichment. Assuming in gratis argumenti that PADCOM is not a member of
the Association, it cannot evade payment without violating the equitable
principles underlying quasi-contracts. Article 2142 of the Civil Code provides:
Certain lawful, voluntary and unilateral acts give rise to the juridical relation of
quasi-contract to the end that no one shall be unjustly enriched or benefited at
the expense of another. Generally, it may be said that a quasi-contract is based
on the presumed will or intent of the obligor dictated by equity and by the
principles of absolute justice. Examples of these principles are: (1) it is
presumed that a person agrees to that which will benefit him; (2) nobody wants
to enrich himself unjustly at the expense of another; or (3) one must do unto
others what he would want others to do unto him under the same
circumstances. As resident and lot owner in the Ortigas area, PADCOM was
definitely benefited by the Association‘s acts and activities to promote the
interests and welfare of those who acquire property therein or benefit from the
acts or activities of the Association.
The petition is therefore denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 46
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 47
ISSUE: Whether or not the petitioner is liable for the increase in the price of
the main contract to the respondent amounting to P632,590.13.
HELD: No. The main contract clearly provides that as a condition precedent
for any upward or downward adjustment in the contract price, there must first
be a TRUE VALUATION of the materials and labor costs to be determined
through evaluation and inspection by representatives of petitioner and
Sucodeco. A similar provision is found in the subcontract requiring, before any
change in the subcontract price, for a TRUE VALUATION to be determined by
Sucodeco, petitioner and respondent Gerent. The records establish that
respondent Gerent was responsible for making the estimates of the actual cost
of the civil works which served as basis for the original price of the main
contract. But actually there is no true valuation that was made and only
estimate. The claim should have been granted if the increase in the contract is
based on true valuation but is not. There is no true valuation that happened so
there is no cause to support the claim.
The contention of the respondent that its claim is based on the principle
of unjust enrichment particularly ―accion in rem verso‖ as enshrined in Article
22 of the Civil Code has no merit. Article 22 of the Civil Code provides that
―[e]very person who through an act or performance by another, or by any other
means, acquires or comes into possession of something at the expense of the
latter without just or legal ground, shall return the same to him.‖ Two
conditions must generally concur before the rule on unjust enrichment can
apply, namely: (a) a person is unjustly benefited, and (b) such benefit is derived
at another‘s expense or damage. Such a situation does not exist in this
case. The benefit or profit derived by petitioner neither comes from respondent
Gerent nor makes the Gerent any poorer. The profit derived by petitioner
comes from Sucodeco by virtue of the main contract to which respondent
Gerent is not a party. Respondent Gerent‘s rights under the subcontract are
not diminished in any way, and Gerent remains fully compensated according to
the terms of its own subcontract. The profit derived by petitioner is neither
unjust, nor made at the expense of respondent Gerent.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 48
BPI v. Pineda
Bank of the Philippine Islands, as Successor to Peoples Bank and Trust
Company, Petitioner, versus Benjamin Pineda, doing business under the
name and style of Pioneer Iron Works, Respondent.
(G.R. No. L-62441, December 14, 1987, 3rd Division)
BIDIN, J:
FACTS: Southern Industrial Project, Inc. (SIP) and Bacong Shipping Company
(Bacong) purchased the three vessels thru financing furnished by Peoples Bank
and Trust Company, now the Bank of the Philippine Islands (BPI). To secure
payment, said vessels were mortgaged to BPI. The operation of the said vessels
were placed under the booking agency of Interocean Shipping Corporation
(Interocean), with the undertaking that the freight revenues from their charter
and operation shall be deposited with the Trust Department of BPI and that
disbursements made therefrom shall be covered by vouchers bearing the
approval of SIP.
BPI and SIP were not satisfied with the amount of revenues being
deposited with the said bank, and so S.A. Gacet, Inc. (Gacet) was organized
to manage and supervise the operation of the vessels, as such, a Management
Contract was entered into by the parties. Gacet and Interocean contracted the
services of respondent Benjamin Pineda to carry out repairs, fabrication and
installation of necessary parts in said vessels in order to make them seaworthy
and in good working operation which amounted to 84,522.70 pesos leaving
a balance of 62,095.95 pesos.
ISSUE: Whether or not the petitioner is liable for the cost of repairs undertaken
by the respondent on the subject vessels based on a juridical relation of quasi-
contract.
HELD: Yes. The petitioner is liable for the cost of repairs undertaken on the
subject vessels.
purpose of the contracts is the protection of the vessels. Among them are liens
on the same under which the obligation to private respondent properly belongs.
State Investment v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 50
State sued Moulic to recover the value of the checks. In her Answer,
Moulic contends that she incurred no obligation on the checks because the
jewelry was never sold and the checks were negotiated without her knowledge
and consent. She also instituted a Third-Party Complaint against Corazon
Victoriano, who later assumed full responsibility for the checks. The trial court
dismissed the Complaint as well as the Third-Party Complaint. State elevated
the order of dismissal to the Court of Appeals, but the appellate court affirmed
the trial court on the ground that the Notice of Dishonor to Moulic was made
beyond the period prescribed by the Negotiable Instruments Law. Hence, this
petition.
ISSUE: Whether or not petitioner was a holder of the checks in due course and
may enforce full payment of the checks.
HELD: Yes. The petitioner was a holder of the checks in due course and may
enforce full payment of the checks.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 51
Petition granted. The decision appealed from is reversed and a new one
entered declaring private respondent Nora Moulic liable to petitioner State
Investment House, Inc.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 52
In the case of People v. Lalli, the Court increased the amount of moral
and exemplary damages having convicted the accused therein of the crime of
trafficking in persons. The payment of 500,000.00 pesos as moral damages and
100,000.00 pesos as exemplary damages for the crime of Trafficking in Persons
as a Prostitute finds basis in Article 2219 of the Civil Code, which states that
moral damages may be recovered in analogous cases of seduction, abduction,
rape, or other lascivious acts, to which the criminal case of Trafficking in
Persons as a Prostitute fits.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 53
Abellana v. People
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 54
In Banal v. Tadeo, Jr., the Court elucidated on the civil liability of the
accused despite his exoneration in this wise: While an act or omission is
felonious because it is punishable by law, it gives rise to civil liability not so
much because it is a crime but because it caused damage to another. Viewing
things pragmatically, we can readily see that what gives rise to the civil liability
is really the obligation and moral duty of everyone to repair or make whole the
damage caused to another by reason of his own act or omission, done
intentionally or negligently, whether or not the same be punishable by law.
Civil liability arises when one, by reason of his own act or omission, done
intentionally or negligently, causes damage to another. Hence, for petitioner to
be civilly liable to spouses Alonto, it must be proven that the acts he committed
had caused damage to the spouses. Based on the records of the case, the acts
allegedly committed by the petitioner did not cause any damage to spouses
Alonto.
The Supreme Court affirmed the decision of the Court of Appeals insofar
as they set aside the conviction of the petitioner for the crime of falsification of
public document. The portion which affirmed the imposition of civil liabilities
on the petitioner, i.e., the restoration of ownership and possession, the
payment of 1,103,000.00 pesos representing the value of the property, and the
payment of damages is deleted for lack of factual and legal basis.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 55
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 56
People v. Malicsi
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 57
The trial court rendered its decision, finding appellant guilty of four
counts of qualified rape. The trial court sentenced appellant to suffer the
penalty of death for each count of rape, and to pay AAA 300,000.00 pesos for
all counts as civil indemnity and 200,000.00 as moral damages for all counts.
On appeal, the Court of Appeals affirmed the trial court‘s decision with
modification, finding appellant guilty of four counts of simple rape instead of
qualified rape and reducing the penalty imposed to reclusion perpetua. Hence,
this appeal.
ISSUE: Whether or not the award of moral damages were properly granted to
the victim upon conviction of the appellant.
HELD: Yes. The award of moral damages were properly granted to the victim
upon conviction of the appellant.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 58
People v. Sia
People of the Philippines, Plaintiff-Appellee, versus Rosauro Sia y Dichoso,
Johnny Balalio y Deza, Jimmy Ponce y Tol and John Doe and Pedro
Munoz (at large), Accused-Appellants.
(G.R. No. 137457, November 21, 2001, En Banc)
YNARES-SANTIAGO, J:
FACTS: Christian Bermudez was a taxicab driver whose service was engaged
by accused-appellant Rosauro Sia. The former followed the latter‘s instructions
and returned to the Sia residence. As soon as he alighted from the Tamaraw
FX taxi he was driving, his hands were tied by Johnny Balalio and was handed
to a certain Pedro and was taken to accused Rosauro. Christian was beaten to
death and accused Jimmy Ponce saw Rosauro hand the carton-wrapped
lifeless body of the victim inside the taxicab which was later on taken by the
assailants. The victim‘s lifeless body, wrapped in a carton box, was recovered
several days later in a fishpond in Meycauayan, Bulacan. For the felonies, the
accused were indicted for violation of Republic Act 6539, otherwise known as
the Anti-Carnapping Law, and Murder in two separate Informations.
At the arraignment, only Johnny Balalio and Jimmy Ponce appeared and
pleaded not guilty. The third accused, Rosauro Sia, escaped from police
custody while on the way to the hospital for treatment. As a consequence, the
two cases were subsequently consolidated and jointly tried against accused
Johnny Balalio and Jimmy Ponce only.
After trial, the Regional Trial Court rendered a judgment against both
accused imposing upon them the supreme penalty of death and payment of
damages. The cases of accused Rosauro Sia who escaped from custody before
he was arraigned and as against Peter Doe who was never apprehended and
whose identity has never been known were ordered to be archived, subject to
activation when they are arrested and brought before the bar of justice. The
case was subjected to automatic review by the Supreme Court on automatic
review.
ISSUE: Whether or not upon the conviction of the accused, the award of
damages were correctly granted to the heirs of the victim.
HELD: Yes. The award of damages were correctly granted to the heirs of the
victim, however, the award for the burial and other expenses incurred in
connection with the death of the victim were deleted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 59
People v. Doctolero
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 60
FACTS: Vicente Ganongan Jr. and Roderick Litorco went to their friends‘
boarding house on Honeymoon Road, Baguio City. Thereat, Vicente Ganongan,
Roderick Litorco, Regie Daodaoan, Rex Tabanganay, Jeffrey Alimani and
Florencio Dagson had a drinking spree in a nearby store. On their way home,
they stopped as a gun was pointed at them b y a man who identified himself as
a barangay kagawad. At this time, Carlos Doctolero Sr. was standing at the
edge of Honeymoon road. He then put his arm over Daodaoan‘s
shoulder. Daoadaoan shoved Doctolero‘s hand and retreated. Doctolero
stepped back and fired twice at Daodaoan but missed. Tabanganay asked
Daodaoan if he was hit and upon answering that he was not, Tabanganay
shouted at his friends to run. When Ganongan turned around to run, Doctolero
fired at him, hitting him twice. Oliver Alimani came to Ganongan‘s aid when
the latter yelled that he was hit. Thereafter, they hailed a taxi and rushed
Ganongan to Saint Louis University Hospital where he expired.
ISSUE: Whether or not the damages awarded to the heirs of the victim proper
based on the conviction of the accused-appellant on the crime charged.
HELD: No. The damages awarded to the heirs of the victim were not proper
based on the conviction of the accused-appellant.
Since treachery was not proven to be resent in this case, the Court
deemed it proper to convict the accused of the crime of homicide
instead of murder, thus damages were reduced to 112,413.40 pesos
representing funeral expenses which were duly proven and covered by
receipts. Expenses relating to the 9 t h day, 40 t h day and 1 st year
anniversaries of death cannot be considered in the award of actual
damages as these were incurred after a considerable lapse of time
from the burial of the victim. With respect to the award of moral
damages, the same was reduced to 50,000.00 pesos in accordance
with existing jurisprudence.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 61
People v. Abulencia
People of the Philippines, Plaintiff-Appellee, versus Rolly Abulencia y
Coyos, Defendant-Appellant.
(G.R. No. 138403. August 22, 2001, En Banc)
PER CURIAM:
An information was filed against Rolly Abulencia for rape with homicide
and he was thereafter convicted by the trial court of the crime charged
sentenced to suffer the penalty of death and to indemnify the heirs of the
victim. Hence, this appeal.
HELD: No. The civil liability imposed upon the defendant-appellant was not
reasonable based on the circumstances of the crime committed.
The Court modified the decision on the civil aspect of the case. Although
this matter has not been raised by the parties, especially the Solicitor General,
it is a settled rule that in a criminal case, an appeal to the Supreme Court
throws the whole case open for review, and it becomes the duty of the Court to
correct such errors as may be found in the appealed judgment, whether they
are made the subject of assignments of error or not.
With regard to the civil indemnity, the trial court awarded only 75,000.00
pesos. Current jurisprudence has fixed at 100,000.00 pesos the civil indemnity
in cases of rape with homicide, which is fully justified and properly
commensurate with the seriousness of that special complex crime. The trial
court did not award moral damages to the victim‘s family. Based on prevailing
jurisprudence, however, moral damages may be awarded to the heirs of the
victim without need for pleading or proof of its basis for their mental, physical
and psychological sufferings are too obvious to still require their recital at the
trial. Hence, moral damages in the amount of 50,000.00 pesos must be
awarded.
In People vs. Lagarto, the Court held that attendant circumstances may be
considered to determine civil liability. Thus, in view of the evident cruelty
inflicted upon Rebelyn, as shown by the multiple burns and contusions on her
body, the Court grants the award of exemplary damages in the amount of
25,000.00 pesos.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 62
The decision appealed from is affirmed with modification insofar as the civil
aspect is concerned.
Bermudez v. Melencio-Herrera
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 63
ISSUE: Whether or not the present civil action is based on delict and
cannot proceed independently of the criminal case.
HELD: No. The present civil action is not based on delict but on quasi-delict,
thus it can proceed independently of the criminal case.
In cases of negligence, the injured party or his heirs has the choice
between an action to enforce the civil liability arising from crime under Article
100 of the Revised Penal Code and an action for quasi-delict under Article
2176-2194 of the Civil Code. If a party chooses the latter, he may hold the
employer solidarily liable for the negligent act of his employee, subject to the
employer's defense of exercise of the diligence of a good father of the family.
In the case at bar, the action filed by appellant was an action for
damages based on quasi-delict. The fact that they reserved their right in the
criminal case to file an independent civil action did not preclude them from
choosing to file a civil action based on quasi-delict. Even without such a
reservation, the Court allowed the injured p a r t y i n t h e c r i m i n a l
c a s e w h i c h r e s u l t e d i n t h e a c q u i t t a l o f t h e a c c u s e d t o re cover
damages based on quasi-delict. It does not follow that a person who is not
criminally liable is also free from civil liability. While the guilt of the
accused in a criminal prosecution must be established beyond reasonable
doubt, only a preponderance of evidence is required in a civil action
for damages under Article 29 of the Civil Code. The judgment of
acquittal extinguishes the civil liability of the accused only when it
includes a declaration that the facts from which the civil liability might arise
did not exist.
Petition granted and the appealed orders of the trial court were annulled.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 64
People v. Relova
People of the Philippines, Petitioner, versus Hon. Benjamin Relova and
Manuel Opulencia, Respondents.
(G.R. No. L-45129, March 6, 1987, 1st Division)
FELICIANO, J:
The Acting City Fiscal of Batangas then filed before the Court of First
Instance another Information against private respondent for Theft of electric
power under Article 308 in relation to Article 309, paragraph (1), of the Revised
Penal Code. Private respondent filed a M o t i o n t o Q u a s h a l l e g i n g
t h a t h e h a d b e e n p r e v i o u s l y acquitted of the offense charged in the
second information and that the filing thereof was violative of his
constitutional right against double jeopardy. The respondent Judge
granted said motion and ordered the dismissal of the case. Hence, this
petition.
ISSUES: Whether or not private respondent can still be held civilly liable after
an acquittal from a city ordinance violation.
HELD: Yes. The private respondent can still be held civilly liable after an
acquittal from a city ordinance violation.
The Supreme Court held that the accused was placed in double jeopardy;
hence, he could not be tried again in a criminal case for violation of the Revised
Penal Code after being acquitted from a violation of city ordinance based on the
same act.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 65
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 66
HELD: NO. Our law recognizes two kinds of acquittal, with differ ent
effects on the civil liability of the accused. First is an acquittal on the
ground that the accused is not the author of the act or omission complained
of as a felony. This instance closes the door to civil liability, for a person who
has been found not to be the perpetrator of any act or omission cannot and can
never be held liable for such act or omission. There being no delict, civil liability
ex delicto is out of the question, and the civil action, if any, which will be
instituted must be based on ground other than the delict complained of.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 67
People v. Bayotas
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 68
ISSUE: Whether or not the death of the accused pending appeal of his
conviction extinguishes his civil liability.
HELD: Y e s . T h e d e a t h o f t h e a c c u s e d p e n d i n g a p p e a l o f h i s
c o n v i c t i o n extinguishes his civil liability because tire liability is based
solely on the criminal act committed. Corollarily, the claim for civil liability
survives notwithstanding the death of the accused, if the same may also
be predicted as one source of obligation other than delict. Moreover, when
a defendant dies before judgment becomes executory, there cannot be
any determination by final judgment whether or not the felony upon which the
civil action might arise exists,' for the simple reason that `there is no party
defendant.' The Rules of Court state that a judgment in a criminal
case becomes final 'after the lapse of the period for perfecting an
appeal or w h e n t h e s e n t e n c e h a s b e e n p a r t i a l l y o r t o t a l l y
s a t i s f i e d o r s e r v e d , o r t h e defendant has expressly waived in writing his
right to appeal. 'In addition, where the civil liability does not exist
independently of the c r i m i n a l r e s p o n s i b i l i t y , t h e e x t i n c t i o n o f t h e
l a t t e r b y d e a t h , i p s o f a c t o extinguishes the former, provided, of course,
that death supervenes before final judgment. As in this case, the right to
institute a separate civil action is not r e s e r v e d , t h e d e c i s i o n t o b e
rendered must, of necessity, cover 'both the criminal and the
civil aspects of the case.' Th e accused died before
final judgment was rendered, thus, he is absolved of both his
c r i m i n a l a n d c i v i l liabilities based solely on delict or the crime committed.
Appeal dismissed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 69
Barredo v. Garcia
Fausto Barredo, Petitioner, versus Severino Garcia and Timoteo Almario,
Respondents.
(73 PHIL 607, July 8, 1942, En Banc)
BOCOBO, J:
FACTS: O n M a y 3 , 1 9 3 6 , t h e r e w a s a h e a d - o n c o l l i s i o n b e t w e e n
a t a x i o f t h e Malate Taxi driven by Fontanilla and a carretela guided
by Dimapilis. The carretela was overturned and a passenger, 16 -year-
old boy Garcia, suffered injuries from which resulted to his death. A
criminal action was filed against Fontanilla, and he was convicted .
The court in the criminal case granted the petition to reserve the civil
action against Barredo, the proprietor of the Malate Ta x i a n d t h e
employer of Fontanilla, making him primarily and directly
responsible under culpa aquiliana. It was undisputed that
F o n t a n i l l a ‘ s negligence was the cause of the accident as he was driving on
the wrong side of the road at high speed, and there was no showing that
Barredo exercised the diligence of a good father of a family. B a r r e d o ‘ s
theory of defense is that Fontanilla ‘s negligence being
punishable by the Revised Penal Code, that his liability as employer is
only subsidiary liable but Fontanilla was sued for civil liability, hence, Barredo
claims that he cannot be held liable.
HELD: N o , t h e S u p r e m e C o u r t r u l e d t h a t c o m p l a i n a n t ‘ s l i a b i l i t y
i s n o t o n l y subsidiary but also primary liability. The Court affirmed the
decision of the Court of Appeals which ruled that the liability sought to
be imposed upon Barredo in t h i s a c t i o n i s n o t a c i v i l o b l i g a t i o n
a r i s i n g f r o m a f e l o n y , b u t a n o b l i g a t i o n imposed in Article 1903 of
the Civil Code by reason of his negligence in the selection or supervision
of his servant or employee.
Th u s , t h e p e t i t i o n i s d e n i e d . B a r r e d o m u s t indemnify plaintiffs
under the provisions of Art. 1903 of the Civil Code.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 71
Oscar Del Carmen, Jr., Petitioner, versus Geronimo Bacoy, Guardian and
representing the children, namely:Mary Marjorie B. Monsalud, Metzie Ann
B. Monsalud, Kareen B. Monsalud, Leonardo B. Monsalud, Jr., and Cristina
B. Monsalud, Respondents.
(G.R. No. 173870, April 25, 2012, 1st Division)
DEL CASTILLO, J:
FACTS: Sometime in 1993, Emilia Bacoy Monsalud (Emilia), along with her
spouse Leonardo Monsalud, Sr. and their daughter Glenda Monsalud, were on
their way home from a Christmas party they attended when they were run over
by a Fuso passenger jeep bearing plate number UV-PEK-600 that was being
driven by Allan Maglasang (Allan). The jeep was registered in the name of
petitioner Oscar del Carmen, Jr. (Oscar Jr.) and used as a public utility vehicle
plying the Molave, Zamboanga del Sur to Sominot, Zamboanga del Sur and vice
versa route. Reckless Imprudence Resulting in Multiple Homicide was filed
against Allan before the Regional Trial Court said court declared Allan guilty
beyond reasonable doubt of the crime charged.
The RTC exculpated the spouses Del Carmen from civil liability for
insufficiency of evidence. However, their son Oscar Jr. was held civilly liable in
a subsidiary capacity anchoring their on the principle of res ipsa loquitur.
ISSUE: Whether or not the principle of ―Res Ipsa Loquitor is applicable in the
instant case and that the employer can be subsidiarily liable.
HELD: The court also declared the doctrine of res ipsa loquitur inapplicable
since the property owner cannot be made responsible for the damages caused
by his property by reason of the criminal acts of another. It then adjudged
that only Allan should bear the consequences of his criminal acts.
Furthermore, the court cited Article 103 of the Revised Penal Code which
provides that for an employer to be subsidiarily liable for the criminal acts of
his employee, the latter should have committed the same in the discharge of
his duties. The court agreed with Oscar Jr. that this condition is wanting in
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 72
Allan‘s case as he was not acting in the discharge of his duties as a conductor
when he drove the jeep.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 73
ISSUE: Whether or not the private respondents are responsible for the
damage done to the pier by the ship based on the doctrine of RES IPSA
LOQUITOR
HELD: The Supreme Court sustained the Regional Trial Court decision
partly on the ground that the incompetence of eyewitness Naval was
not an assigned error at the appellate court. The doctrine of RES IPSA
LOQUITOR says that when the thing that causes the damage is in the
control and management of the respondent, and in the ordinary
course of things the accident does not happen if those who hav e the
management use proper care, it affords reasonable evidence, in the absence
of explanation, that the accident arose from want of care. The
principle applies here. The MV Miguela was in the exclusive control of
respondent Olasiman, and a s i d e f r o m p e t i t i o n e r ‘ s w i t n e s s t e s t i m o n y
t h a t t h e v e s s e l r a m m e d t h e p i l e cluster, respondent did not show
persuasively other possible causes of the damage. Therefore,
respondents were responsible for the damage. Petition is granted and
the decision of the Regional Trial Court reinstated.
Thermochem v. Naval
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 74
HELD: Yes. The Court held that the driver of the onc oming Nissan Path
finder vehicle was liable and the driver of the U -turning taxicab was
contributorily liable. From petitioner Castro's testimonial admissions, it is
established that he was driving at a speed faster than 50 kilometers per
hour. But as he allegedly stepped on the brake, it locked causing his
Nissan Pathfinder to skid to the left and consequently hit the taxicab. The
sudden malfunction of the vehicle's brake system is the usual excuse of drivers
involved in collisions which are the result of speedy driving. Malfunction or loss
of brake is not a fortuitous event. The owner and his driver are presumed
to know about the conditions of the vehicle and is duty bound to take
care thereof with the diligence of a good father of the family. A mechanically
defective vehicle should avoid the streets. Moreover, the record shows that the
Nissan Pathfinder was on the wrong lane when the collision occurred. This
was a disregard of traffic safety rules. The law considers what would be
reckless, blameworthy or negligent in a man of ordinary diligence and prudence
and determines liability by that. As mentioned earlier, the driver of the taxi is
contributorily liable. U-turns are not generally advisable particularly on
major streets. The driver of the taxi ought to have known that vehicles
coming from the Rosario bridge are on a downhill slope. Obviously,
there was lack of foresight on his part, making him contributorily liable.
Considering the contributory negligence of the driver of
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 75
p r i v a t e respondent's taxi, the award of P47, 850.00, for the repair of the
taxi, should be reduced in half. All other awards for damages are deleted for
lack of merit.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 76
On appeal, the Court of Appeals affirmed the decision of the trial court
with modification in the award of damages. Hence, this petition.
In this case, the bus driver, who was driving on the right side of the road,
already saw the motorcycle on the left side of the road before the collision.
However, he did not take the necessary precaution to slow down, but drove on
and bumped the motorcycle, and also the passenger jeep parked on the left
side of the road, showing that the bus was negligent in veering to the left lane,
causing it to hit the motorcycle and the passenger jeep.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 77
The Court upholds the finding of the trial court and the Court of Appeals
that petitioner is liable to respondent, since it failed to exercise the diligence of
a good father of the family in the selection and supervision of its bus driver,
Margarito Avila, for having failed to sufficiently inculcate in him discipline and
correct behavior on the road. Indeed, petitioner‘s tests were concentrated on
the ability to drive and physical fitness to do so. It also did not know that Avila
had been previously involved in sideswiping incidents.
In fine, the Court of Appeals correctly awarded civil indemnity for the
death of respondent‘s husband, temperate damages, and moral damages for
the physical injuries sustained by respondent in addition to the damages
granted by the trial court to respondent. The trial court overlooked awarding
the additional damages, which were prayed for by respondent in her Amended
Complaint. The appellate court is clothed with ample authority to review
matters, even if they are not assigned as errors in the appeal, if it finds that
their consideration is necessary in arriving at a just decision of the case.
Dy Teban v. Ching
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 78
HELD: Yes. There was negligence on the part of the respondent when the latter
failed to put and used an early warning device because it was found out that
there was no early warning device being prescribed by law that was used by
the driver in order to warn incoming vehicle. Fu rthermore, the
proximate cause of the accident was due to the position of the trailer where it
covered a cemented part of the road, thus confused and made trick
way for other vehicles to pass by. Thus the respondent is declared
liable due to violation of road rules and regulations.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 79
ISSUE: Whether Safeguard Security can be held liable for the acts of
its agent.
HELD: Yes. The law presumes that any injury committed either by fault or
omission of an employee reflects the negligence of the employer. In
quasi-delicts cases, in order to overcome this presumption, the employer must
prove that there was no negligence on his part in the supervision of his
employees. It w a s d e c l a r e d t h a t i n t h e s e l e c t i o n o f e m p l o y e e s a n d
agents, employers are required to examine them as to their
q u a l i f i c a t i o n s , experience and service records. Thus, due diligence
on the supervision and operation of employees includes the formulation of
suitable rules and regulations for the guidance of employees and the
issuance of proper instructions intended for the protection of the
public and persons with whom the employer has relations through his
employees. Thus, in this case, Safeguard Security committed
negligence in identifying the qualifications and ability of its agents.
Villanueva v. Domingo
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 80
ISSUE: Whether the owner Villanueva be held liable for the mishap.
HELD: Under the Motor Vehicle law, it was declared that the registered
owner of any vehicle is primary land directly liable for any injury it incurs
while it is being operated. Thus, even the petitioner claimed that he
was no longer the present owner of the car, still the registry was
under his name, thus it is presumed that he still possesses the car
and that the damages caused by the car be charge against him being
the registered owner. The primary function of Motor vehicle registration is to
identify the owner so that if any accident happens, or that any damage
or injury is caused by the vehicle, responsibility therefore can be fixed on a
definite individual, the registered owner.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 81
FACTS: Eliza Sunga was a passenger of a jeepney owned and operated by the
petitioner Calalas. Private respondent Sunga sat in the rear protion of the
jeepney where the conductor gave Sunga an extension seat. When the jeep
stopped, Sunga gave way to a passenger going outside the jeep. However, an
Isuzu Truck driven by Verene and owned by Salva, accidentally hit Sunga
causing the latter to suffer physical injuries where the attending physician
ordered a three months of rest. Sunga filed an action for damages against the
petitioner for breach of contract of common carriage by the petitioner.
On the other hand, the petitioner Calalas filed an action against Salva,
being the owner of the truck. The lower court ruled in favor of ther petitioner,
thus the truck owner is liable for the damage to the jeep of the petitioner.
ISSUE: Whether or not the petitioner is liable for the injury suffered by Sunga.
HELD: Yes. The petitioner is liable for the injury suffered by Sunga.
Under Article 1756 of the New Civil Code, it provides that common
carriers are presumed to have been at fault or to have acted negligently unless
they prove that they observed extraordinary diligence as defined in Arts. 1733
and 1755 of the Code. This provision necessarily shifts to the common carrier
the burden of proof.
In this case, the law presumes that any injury suffered by a passenger of
the jeep is deemed to be due to the negligence of the driver. This is a case on
Culpa Contractual where there was pre-existing obligations and that the fault
is incidental to the performance of the obligation. Thus, it was clearly observed
that the petitioner has negligence in the conduct of his duty when he allowed
Sunga to seat in the rear portion of the jeep which is prone to accident.
Decision affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 82
Picart v. Smith
Amado Picart, Plaintiff-appellant, versus Frank Smith, Jr., Defendant-
appellee, Alejo Mabanag for appellant, G. E. Campbell for appellee.
(G.R. No. L-12219, March 15, 1918, En banc)
STREET, J.:
FACTS: The plaintiff, riding on his pony was half way across the Carlatan
bridge when the defendant approached from the opposite direction in an
automobile, going at the rate of about ten or twelve miles per hour. As the
defendant neared the bridge he saw a horseman on it and blew his horn to give
warning of his approach. He continued his course and after he had taken the
bridge he gave two more successive blasts, as it appeared to him that the man
on horseback before him was not observing the rule of the road. The plaintiff
saw the automobile coming and heard the warning signals. However, thinking
that he has no sufficient time to go to the other side of the road, he pulled the
pony closely up against the railing on the right side of the bridge instead of
going to the left. The defendant, instead of veering to the right while yet some
distance away or slowing down, continued to approach directly toward the
horse. When he had gotten quite near, there being then no possibility of the
horse getting across to the other side, the defendant quickly turned his car
sufficiently to the right to escape hitting the horse alongside of the railing
where it as then standing; but in so doing the automobile passed in such close
proximity to the animal that it became frightened and turned its body across
the bridge with its head toward the railing. In so doing, it was struck on the
hock of the left hind leg by the flange of the car and the limb was broken. The
horse fell and its rider was thrown off with some violence. As a result of its
injuries the horse died. The plaintiff received contusions which caused
temporary unconsciousness and required medical attention for several days.
As the defendant started across the bridge, he had the right to assume
that the horse and the rider would pass over to the proper side; but as he
moved toward the center of the bridge he clearly saw that this would not be
done; and he must in a moment have perceived that it was too late for the
horse to cross with safety in front of the moving vehicle. The control of the
situation had then passed entirely to the defendant; and it was his duty either
to bring his car to an immediate stop or, seeing that there were no other
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 83
persons on the bridge, to take the other side and pass sufficiently far away
from the horse to avoid the danger of collision. Instead of doing this, the
defendant ran straight on until he was almost upon the horse.
The plaintiff himself was not free from fault, for he was guilty of
antecedent negligence in planting himself on the wrong side of the road. But it
was the defendant who had the last clear chance to avoid the impending harm
and when he failed to do so, he is deemed negligent, thus liable to pay damages
in favor of the plaintiff.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 84
Durban Apartments Corporation, doing business under the name and style
of City Garden Hotel, Petitioner, versus Pioneer Insurance and Surety
Corporation, Respondent.
(G.R. No. 179419, January 12, 2011, 2nd Division)
NACHURA, J.:
FACTS: On July 22, 2003, respondent Pioneer Insurance and Surety Corporation by
right of subrogation, filed a complaint for Recovery of Damages against petitioner,
Durban Apartments Corporation. On April 30, 2002, See arrived and checked in at the
City Garden Hotel in Makati corner Kalayaan Avenues, Makati City before midnight,
and its parking attendant, defendant Justimbaste got the key of Vitara from See to
park it. On May 1, 2002, See was awakened in his room by a call from the Hotel Chief
Security Officer who informed him that his Vitara was carnapped. The Vitara was lost
due to the negligence of petitioner and defendant because it was discovered during the
investigation that this was the second time that a similar incident of carnapping
happened in the valet parking service of Durban Apartments and no necessary
precautions were taken to prevent its repetition. Durban Apartments was wanting in
due diligence in the selection and supervision of its employees. The petitioner failed
and refused to pay its valid, just, and lawful claim despite written demands. The
Regional Trial Court rendered a decision ordering petitioner Durban Apartments
Corporation to pay respondent Pioneer Insurance and Surety Corporation the sum
of P1,163,250.00 with legal interest until the obligation is fully paid and attorney‘s
fees and litigation expenses amounting toP120,000.00. The petitioner appealed on the
appellate court but it affirmed the trial court‘s decision. Hence, this petition.
ISSUE: Whether or not the petitioner is liable to respondent for the loss of See‘s
vehicle.
HELD: Yes. The petitioner is liable to respondent for the loss of See‘s vehicle.
Art. 1998. The deposit of effects made by travelers in hotels or inns shall
also be regarded as necessary. The keepers of hotels or inns shall be
responsible for them as depositaries, provided that notice was given to them, or
to their employees, of the effects brought by the guests and that, on the part of
the latter, they take the precautions which said hotel-keepers or their
substitutes advised relative to the care and vigilance of their effects.
Plainly, from the facts found by the lower courts, the insured See
deposited his vehicle for safekeeping with petitioner, through the latter‘s
employee, Justimbaste. In turn, Justimbaste issued a claim stub to See. Thus,
the contract of deposit was perfected from See‘s delivery, when he handed over
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 85
to Justimbaste the keys to his vehicle, which Justimbaste received with the
obligation of safely keeping and returning it. Ultimately, petitioner is liable for
the loss of See‘s vehicle.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 86
HOOVEN's bad faith lies not so much on its breach of contract - as there
was no showing that its failure to comply with its part of the bargain was
motivated by ill will or done with fraudulent intent - but rather on its appalling
temerity to sue petitioner for payment of an alleged unpaid balance of the
purchase price notwithstanding knowledge of its failure to make complete
delivery and installation of all the materials under their contracts. Although
petitioner was found to be liable to respondent to the extent of P6,377.66,
petitioner's right to withhold full payment of the purchase price prior to the
delivery and installation of all the merchandise cannot be denied since under
the contracts the balance of the purchase price became due and demandable
only upon the completion of the project. Consequently, the resulting social
humiliation and damage to petitioner's reputation as a respected businessman
in the community, occasioned by the filing of this suit provide sufficient
grounds for the award of P50,000.00 as moral damages. On the part of Lagon,
he is ordered by the court to pay HOOVEN the amount corresponding to the
value of the materials admittedly delivered to him.
Decision is modified.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 87
FACTS: On 3 February 1984, the spouses Lorenzo and Lorenza Francisco and
Engineer Bienvenido C. Mercado entered into a Contract of Development for the
development into a subdivision of several parcels of land in Pampanga. Under the
Contract, respondent agreed to undertake at his expense the development work for the
Franda Village Subdivision. Respondent committed to complete the construction
within 27 months. Respondent also advanced P200,000.00 for the initial expenses of
the development work. In return, respondent would receive 50% of the total gross
sales of the subdivision lots and other income of the subdivision. Respondent also
enjoyed the exclusive and irrevocable authority to manage, control and supervise the
sales of the lots within the subdivision. The Contract required respondent to submit to
petitioners, within the first 15 days of every month, a report on payments collected
from lot buyers with copies of all the contracts to sell. However, respondent failed to
submit the monthly report. On 27 February 1987, respondent filed with the trial court
an action to rescind the Contract with a prayer for damages. Petitioners countered
that respondent breached the Contract by failing to finish the subdivision within the
27 months agreed upon, and therefore respondent was in delay.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 88
party incurs in delay if the other does not comply or is not ready to comply with what
is incumbent upon him. It is only when one of the parties fulfills his obligation that
delay by the other begins.
Decision affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 89
Jacinto Tanguilig doing business under the name and style J.M.T.
Engineering and General Merchandising, Petitioner, versus Court Of
Appeals and Vicente Herce Jr., Respondents.
(G.R. No. 117190 January 2, 1997, 1st Division)
BELLOSILLO, J.:
Petitioner denied that the construction of a deep well was included in the
agreement to build the windmill system, for the contract price of P60,000.00 was
solely for the windmill assembly and its installation. He also disowned any obligation
to repair or reconstruct the system since its collapse was attributable to a typhoon, a
force majeure, which relieved him of any liability.
HELD: Yes. Tanguilig is liable to reconstruct the damaged windmill considering that
its collapse is due to a typhoon.
The Supreme Court has consistently held that in order for a party to claim
exemption from liability by reason of fortuitous event under Art. 1174 of the Civil Code
four (4) requisites must concur: (a) the cause of the breach of the obligation must be
independent of the will of the debtor; (b) the event must be either unforeseeable or
unavoidable; (c) the event must be such as to render it impossible for the debtor to
fulfill his obligation in a normal manner; and, (d) the debtor must be free from any
participation in or aggravation of the injury to the creditor. Petitioner failed to show
that the collapse of the windmill was due solely to a fortuitous event. Petitioner
merely stated that there was a "strong wind." But a strong wind in this case cannot be
fortuitous. On the contrary, a strong wind should be present in places where
windmills are constructed. Petitioner is ordered to "reconstruct subject defective
windmill system, in accordance with the one-year guaranty".
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 90
Decision is modified.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 91
FACTS: Spouses Fernando Periquet and Petra Francisco were left childless after the
death of their only child, Elvira, so they took in a son out of wedlock of Marta
Francisco-Reyes, sister of Petra. Though he was not legally adopted, the boy was given
the name Fernando Periquet, Jr. and was reared to manhood by the spouses Periquet.
On March 20, 1966, Fernando Periquet died. When Petra died, she was survived by
her siblings, nieces and nephews and by the petitioner. But a few days before her
death, Petra asked her lawyer to prepare her last will and testament. However, she
died before she could sign it. In the said will, Petra left her estate to petitioner,
Fernando Periquet, Jr. and provided for certain legacies to her other heirs. Felix
Franciso, brother of Petra, assigned his hereditary rights to the petitioner. However,
later on, he filed an action for annulment of the Assignment of Hereditary Rights
claiming "gross misrepresentation and fraud," "grave abuse of confidence," "mistake
and undue influence," and "lack of cause and/or consideration" in the execution of the
challenged deed of assignment.
ISSUE: Whether or not the Assignment of Hereditary Rights is tainted with fraud.
HELD: No. The Assignment of Hereditary Rights is not tainted with fraud.
The kind of fraud that will vitiate a contract refers to those insidious words or
machinations resorted to by one of the contracting parties to induce the other to enter
into a contract which without them he would not have agreed to. In the case at bench,
no such fraud was employed by herein petitioner. Resultantly, the assignment of
hereditary rights executed by Felix Francisco in favor of herein petitioner is valid and
effective.
Felix Francisco could not be considered to have been deceived into signing the
subject deed of assignment for the following reasons: The assignment was executed
and signed freely and voluntarily by Felix Francisco in order to honor, respect and give
full effect to the last wishes of his deceased sister, Petra. The same was read by him
and was further explained by Atty. Diosdado Guytingco. Furthermore, witnesses for
petitioner, who also served as witnesses in the execution and signing of the deed of
assignment, declared that Felix Francisco was neither forced nor intimidated to sign
the assignment of hereditary rights.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 92
FACTS: Bernard Oseraos had several transactions with Legaspi Oil Co. for the sale of
copra to the latter. The price at which appellant sells the copra varies from time to
time, depending on the prevailing market price when the contract is entered into. On
February 16, 1976, appellant's agent Jose Llover signed contract No. 3804 for the sale
of 100 tons of copra at P82.00 per 100 kilos with delivery terms of 20 days effective
March 8, 1976. After the period to deliver had lapsed, appellant sold only 46,334 kilos
of copra thus leaving a balance of 53,666 kilos. Accordingly, demands were made
upon appellant to deliver the balance with a final warning that failure to deliver will
mean cancellation of the contract, the balance to be purchased at open market and
the price differential to be charged against appellant. On October 22, 1976, since there
was still no compliance, appellee exercised its option under the contract and
purchased the undelivered balance from the open market at the prevailing price of
P168.00 per 100 kilos, or a price differential of P86.00 per 100 kilos, a net loss of
P46,152.76 chargeable against appellant.
tenor thereof, are liable for damages. Pursuant to said article, private respondent is
liable for damages.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 94
Phase 1 of the project was completed without issue. The Phase 2 of the
project, however, encountered numerous delays. All negotiations came to a
dead end thus a complaint was filed in court. Philippine Charter Insurance
Corporation and Dynamic Planners and Construction Corporation are ordered
jointly and severally to pay Central Colleges of the Philippines the total amount
of P13,924,351.47. PCIC moved for the reconsideration of the said decision,
but the CA disposed of it with a denial in its November 19, 2007 Resolution.
Hence, this petition.
HELD: Yes. DPCC incurred delay from the time CCP called its attention that it
had breached the contract and extrajudicially demanded the fulfillment of its
commitment against the bonds.
The Court finds itself unable to agree. Article 1169 of the New Civil Code
provides:
The civil law concept of delay or default commences from the time the
obligor demands, judicially or extrajudicially, the fulfillment of the obligation
from the obligee. In legal parlance, demand is the assertion of a legal or
procedural right. Hence, DPCC incurred delay from the time CCP called its
attention that it had breached the contract and extrajudicially demanded the
fulfillment of its commitment against the bonds.
It is the obligor‘s culpable delay, not merely the time element, which
gives the obligee the right to seek the performance of the obligation. As such,
CCP‘s cause of action accrued from the time that DPCC became in culpable
delay as contemplated in the surety and performance bonds.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 95
FACTS: In 1992, respondent Primetown Property Group, Inc. awarded the contract for
the structural works of its 32-storey Makati Prime Tower (MPT) to petitioner Titan-
Ikeda Construction and Development Corporation. In September 1995, respondent
engaged the services of Integratech, Inc. (ITI), an engineering consultancy firm, to
evaluate the progress of the project. In its report, ITI informed respondent that
petitioner, at that point, had only accomplished 31.89% of the project (or was 11
months and six days behind schedule). Meanwhile, petitioner and respondent were
discussing the possibility of the latter‘s takeover of the project‘s supervision. Despite
ongoing negotiations, respondent did not obtain petitioner‘s consent in hiring ITI as
the project‘s construction manager. Neither did it inform petitioner of ITI‘s September
7, 1995 report.
Subsequently, both parties agreed that Primetown will take over the project.
Petitioner then demanded for the payment due him in relation to its partial
performance of its obligation. For failure of Primetown to pay despite repeated
demands, petitioner filed a case for specific performance against Primetown.
Meanwhile, Primetown demanded reimbursement for the amount it spent in having
the project completed.
ISSUE: Whether or not Titan-Ikeda incurred delay in the performance of its obligation.
HELD: No. Titan-Ikeda did not incur delay in the performance of its obligation.
It was found that because respondent modified the MPT's architectural design,
petitioner had to adjust the scope of work. Moreover, respondent belatedly informed
petitioner of those modifications. It also failed to deliver the concrete mix and rebars
according to schedule. For this reason, petitioner was not responsible for the project's
delay. Mora or delay is the failure to perform the obligation in due time because of dolo
(malice) or culpa (negligence). A debtor is deemed to have violated his obligation to the
creditor from the time the latter makes a demand. Once the creditor makes a demand,
the debtor incurs mora or delay. Respondent never sent petitioner a written demand
asking it to accelerate work on the project and reduce, if not eliminate, slippage. In
view of the foregoing, we hold that petitioner did not incur delay in the performance of
its obligation.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 96
The Regional Trial Court rendered its judgment against PNEI which was
affirmed by the Court of Appeals.
ISSUE: Whether or not there was delay for the payment of the legal
compensation.
HELD: No. There was no delay in the payment of the legal compensation.
Legal compensation could not have occurred in the case at bar due to the
absence of one requisite: that both debts must be due and demandable.
Petitioner‘s obligation to PNEI is payable on demand, and there being no
demand made, it follows that the obligation is not yet due. Thus, this obligation
may not be subject to compensation for lack of a requisite under the law.
Without compensation having taking place, petitioner remains obligated to
PNEI to the extent stated in the promissory note. This obligation may
undoubtedly be garnished in respondent‘s favor to satisfy PNEI‘s judgment
debt.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 97
FACTS: Petitioner‘s wife died and her wish is to be buried before Christmas.
After her death on Dec 21, 1990, in fulfillment of her wishes, petitioner went to
respondent‘s store to inquire the availability of materials to be used in building
his wife‘s niche. Respondent‘s employee advised petitioner that to come back
the following morning. That following morning, petitioner made a payment of
P2,100 to secure the delivery of the materials. However, the materials were not
delivered on time.
Several times petitioner went to respondent‘s store to ask for the delivery.
Later that day, the petitioner was forced to dismiss his laborer since there is
nothing to work with for the materials did not arrive. Petitioner however
purchased the materials from other stores. After his wife was buried, he sued
respondent for damages because of delay. For his part, respondent offered a
lame excuse of fortuitous event that the reason for delay is because the trucks
tires were flat.
ISSUE: Whether or not respondent is guilty of delay that will entitle petitioner
for damages, although it was not specified in the invoice the exact time of
delivery.
HELD: Yes. Respondent is guilty of delay that will entitle petitioner for
damages, although it was not specified in the invoice the exact time of delivery.
The law expressly provides that those who in the performance of their
obligation are guilty of fraud, negligence, or delay and those who in any
manner contravene the tenor thereof, are liable for damages. The appellate
court appears to have belittled petitioner‘s submission that under the
prevailing circumstances time was of the essence in the delivery of the
materials to the grave site. In their contract of purchase and sale, petitioner
had already complied fully with what was required of him as purchaser, i.e.,
the payment of the purchase price of P2,110.00. It was incumbent upon
respondent to immediately fulfill his obligation to deliver the goods otherwise
delay would attach.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 98
Respondent refused to pay the balance because he had already paid this
amount to SPGMI which constructed a deep well to which the windmill system
was to be connected since the deep well, and assuming that he owed the
15,000.00 this should be offset by the defects in the windmill system which
caused the structure to collapse after strong winds hit their place. According to
petitioner, the 60,000.00 consideration is only for the construction of the
windmill and the construction of the deep well was not part of it. The collapse
of the windmill cannot be attributed to him as well, since he delivered it in good
and working condition and respondent accepted it without protest. Respondent
contested that the collapse is attributable to a typhoon, a force majeure that
relieved him of liability.
The Regional Trial Court ruled in favor of petitioner, but this decision
was overturned by the Court of Appeals which ruled in favor of respondent.
ISSUE: Whether or not the collapse of the windmill can be attributed to force
majeure thus extinguishing the liability of petitioner.
HELD: Yes. The collapse of the windmill can be attributed to force majeure
thus extinguishing the liability of petitioner.
In order for a party to claim exemption from liability by reason of
fortuitous event under Art 1174 of the Civil Code the event should be the sole
and proximate cause of the loss or destruction of the object of the contract.
In Nakpil vs. Court of Appeals, the Supreme Court held that 4 requisites
must concur that there must be a (a) the cause of the breach of the obligation
must be independent of the will of debtor (b) the event must be either
unforeseeable or unavoidable; (c) the event be such to render it impossible for
the debtor to fulfill his obligation in a normal manner; and (d) the debtor must
be free from any participation in or aggravation of the injury to the creditor.
Petitioner merely stated that there was a strong wind, and a strong wind
in this case is not fortuitous, it was neither unforeseeable nor unavoidable,
places with strong winds are the perfect locations to put up a windmill, since it
needs strong winds for it to work.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 99
FACTS: Siblings Juan Galicia Sr. and Celerina Labuguin entered into a
contract to sell a parcel of land in Nueva Ecija to a certain Albrigido Leyva:
3,000 upon agreement, 10,000 ten days after the agreement, 10,000
representing vendor‘s indebtedness to Phil Veterans Bank, and 27,000 payable
within one year from execution of contract. Leyva only paid parts of the
obligation. But even after the grace period for payment made in the contract
and while litigation of such case, the petitioners still allowed Leyva to make
payments.
With regard to the obligation payable to the Phil Veterans bank by the
vendee, as they deemed that it was not paid in full, such obligation they
completed by adding extra amount to fulfill such obligation. This was fatal in
their case as this is Leyva‘s argument that they constructively fulfilled the
obligation which is rightfully due to him.
Petitioners claim that they are only ―OBLIGEES‖ with regards to the
contract, so the principle of constructive fulfillment cannot be invoked against
them. Petitioners, being both creditor and debtor to private respondent, in
accepting piecemeal payment even after the grace period, are barred to take
action through estoppel.
ISSUE: Whether or not there was constructive fulfillment in the part of the
petitioners that shall make rise the obligation to deliver to Leyva the deed of
sale.
HELD: Yes. There was constructive fulfillment in the part of the petitioners that
shall make rise the obligation to deliver to Leyva the deed of sale.
In short, it is puerile for petitioners to say that they are the only obligees
under the contract since they are also bound as obligors to respect the
stipulation in permitting private respondent to assume the loan with the
Philippine Veterans Bank which petitioners impeded when they paid the
balance of said loan. As vendors, they are supposed to execute the final deed of
sale upon full payment of the balance as determined hereafter.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 100
The kind of fraud that will vitiate a contract refers to those insidious
words or machinations resorted to by one of the contracting parties to induce
the other to enter into a contract which without them he would not have agreed
to. It must have a determining influence on the consent of the victim. The will
of the victim, in effect, is maliciously vitiated by means of a false appearance of
reality.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 101
ISSUE: Whether or not Finvest can be deemed to have incurred in delay in the
payment of its obligations to PSE.
HELD: No. Finvest cannot be deemed to have incurred in delay in the payment
of its obligations to PSE.
In the present petition, PSE insists that Finvest‘s liability for fines,
penalties and charges has been established, determined and substantiated,
hence, liquidated. A debt is liquidated when the amount is known or is
determinable by inspection of the terms and conditions of relevant documents.
Under the attendant circumstances, it cannot be said that Finvest‘s debt is
liquidated. At the time PSE left the negotiating table, the exact amount of
Finvest‘s fines, penalties and charges was still in dispute and as yet
undetermined. Consequently, Finvest cannot be deemed to have incurred in
delay in the payment of its obligations to PSE. It cannot be made to pay an
obligation the amount of which was not fully explained to it. The public sale of
the pledged seat would, thus, be premature.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 102
FACTS: On March 10, 1993, private respondent Atty. Felipe Lustre purchased
a Toyota Corolla from Toyota Shaw, Inc. for which he made a down payment of
P164,620.00, the balance of the purchase price to be paid in 24 equal monthly
installments. Private respondent thus issued 24 postdated checks for the
amount of P14,976.00 each. The first was dated April 10, 1991; subsequent
checks were dated every 10th day of each succeeding month.
The trial court dismissed the complaint which was affirmed by the
appellate court.
Decision affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 103
ISSUE: Whether or not the alleged issuance of the post-dated checks as mere
security is a ground for the discharge of the instrument.
HELD: No. The alleged issuance of the post-dated checks as mere security is
not a ground for the discharge of the instrument
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 105
FACTS: Frank Roa obtained a loan at 16 1/4% interest rate per annum from
Ayala Investment and Development Corporation. For security, Roa's house and
lot were mortgaged. Later, Roa sold the house and lot to ALS and Antonio
Litonjua, who assumed Roa's debt to Ayala Investment. Ayala Investment,
however, granted a new loan to be applied to Roa's debt, secured by the same
property at a different interest rate of 20% per annum.
In the present case, the loan contract was only perfected on the date of
the second release of the loan.
Decision affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 106
Leaño was in delay because under Art. 1169, provides that Reciprocal
Obligation; 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. From
the moment one of the parties fulfills his obligation, delay by the other begins.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 107
ISSUE: Whether or not Duray incur delay when they did not deliver the
purchase price or consign it in court on or before the expiration of the contract.
HELD: No. The obligation under option to buy is a reciprocal obligation. The
performance of one obligation is conditioned on the simultaneous fulfillment of
the other obligation. The payment of the purchase price by the creditor is
contingent upon the execution and delivery of a deed of sale by the debtor.
In this case, private respondent Duray opted to buy the property, their
obligation was to advise petitioner of their decision & readiness to pay the
price. They were not obliged to make actual payment. Only upon execution of
deed of sale were they required to pay.
Notice of the creditor‘s decision to exercise his option to buy need not be
coupled with actual payment of the price, so long as this is delivered to the
owner of the property upon performance of his part of the agreement.
Consequently, since the obligation was not yet due, consignation in court of the
purchase price was not yet required (Nietes vs CA, 46 SCRA 654).
Consignation is the act of depositing the thing due with the court or judicial
authorities whenever the creditor cannot accept or refuses to accept payment
and it generally requires a prior tender of payment. Consignation is not proper
because the debt is not due and owing.
Under Art. 1169, provides that reciprocal obligation, 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. Only from the moment one of the
parties fulfills his obligation, does delay by the other begins.
In this case, private respondent Duray already communicated their interest to
buy before the contact expires & it was the petitioner who refused because they
want the money first. Thus, as there was no compliance yet with what is
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 108
incumbent upon the petitioner, PR had not incurred delay when the cashier‘s
check was issued even after the contract expired.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 109
HELD: YES. The suspension of its deliveries to Integrated whenever the latter
failed to pay on time, as in this case, is legally justified under the second
paragraph of Article 1583 of the Civil Code hence the Fil-anchor did not violate
the order agreement. Fil-anchor is not a party to the agreement between
Philacor neither is it a contract pour autrui so no direct bearing
indemnification for damages comprehends not only the loss suffered, that is to
say actual damages (damnum emergens), but also profits which the obligee
failed to obtain, referred to as compensatory damages (lucrum cessans).
However, to justify a grant of actual or compensatory damages, it is necessary
to prove with a reasonable degree of certainty, premised upon competent proof
and on the best evidence obtainable by the injured party, the actual amount of
loss. Trial court in arriving at the amount merely estimates or self-serving
claim of unrealized profit prepared by Integrated. Deletion of the award of
moral damages is proper, since private respondent could not be held liable for
breach of contract. Moral damages may be awarded when in a breach of
contract the defendant acted in bad faith, or was guilty of gross negligence
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 110
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 111
Laforteza v. Machuca
ROBERTO Z. LAFORTEZA, GONZALO Z. LAFORTEZA, MICHAEL Z.
LAFORTEZA, DENNIS Z. LAFORTEZA, and LEA Z. LAFORTEZA, petitioners,
vs. ALONZO MACHUCA, respondent.
G.R. No. 137552; 2000 Jun 16; 3rd Division
Gonzaga-Reyes, J.:
FACTS: Roberto Laforteza and Gonzalo Laforteza, Jr. were authorized to sell
the subject property and sign any document for the settlement of the estate of
the late Francisco Q. Laforteza by virtue of a Special Power of Attorney (SPA)
executed in their favor by Michael, Dennis and Lea Laforteza. The SPA
contained a provision that in any document or paper to exercise authority
granted, the signature of both attorneys-in-fact must be affixed.
Pursuant to such, the agents entered into a Contract to Sell subject
property in favor of Alonzo Machuca. Said contract contained that a P30 000
earnest money should be paid and after which, 30 days will be allotted for the
buyer to pay P600 000 prior conveyance of property.
The earnest money was paid. Machuca asked for an extension of the 30
day period which was acceded to by Roberto. However, when Machuca notified
that he's already ready to pay P600 000, Roberto told him that the subject
property is no longer on sale and that their contract is rescinded for his failure
to comply with the contractual obligations. Machuca then filed an action for
specific performance with which he was favored. The Court of Appeals affirmed
said decision. Hence, a petition for review was filed.
HELD: No. The failure of the respondent to pay the balance of the purchase
price was a breach of the contract and was a ground for rescission thereof. The
extension of thirty (30) days allegedly granted to the respondent by Roberto Z.
Laforteza (assisted by his counsel Attorney Romeo Gutierrez) was correctly
found by the Court of Appeals to be ineffective inasmuch as the signature of
Gonzalo Z. Laforteza did not appear thereon as required by the Special Powers
of Attorney.
Even assuming for the sake of argument that the petitioners were ready
to comply with their obligation, we find that rescission of the contract will still
not prosper.
It is not disputed that the petitioners did not make a judicial or notarial
demand for rescission. The November 20, 1989 letter of the petitioners
informing the respondent of the automatic rescission of the agreement did not
amount to a demand for rescission, as it was not notarized. It was also made
five days after the respondent‘s attempt to make the payment of the purchase
price. This offer to pay prior to the demand for rescission is sufficient to defeat
the petitioners‘ right under article 1592 of the Civil Code. Besides, the
Memorandum Agreement between the parties did not contain a clause
expressly authorizing the automatic cancellation of the contract without court
intervention in the event that the terms thereof were violated. A seller cannot
unilaterally and extrajudicially rescind a contract of sale where there is no
express stipulation authorizing him to extrajudicially rescind. Neither was
there a judicial demand for the rescission thereof. Thus, when the respondent
filed his complaint for specific performance, the agreement was still in force
inasmuch as the contract was not yet rescinded. At any rate, considering that
the six-month period was merely an approximation of the time it would take to
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 112
reconstitute the lost title and was not a condition imposed on the perfection of
the contract and considering further that the delay in payment was only thirty
days which was caused by the respondents justified but mistaken belief that
an extension to pay was granted to him, we agree with the Court of Appeals
that the delay of one month in payment was a mere casual breach that would
not entitle the respondents to rescind the contract. Rescission of a contract will
not be permitted for a slight or casual breach, but only such substantial and
fundamental breach as would defeat the very object of the parties in making
the agreement.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 113
Regala v. Carin
RODOLFO REGALA, Petitioner, vs. FEDERICO P. CARIN, Respondent.
(G.R. No. 188715 April 6, 2011 Third Division)
CARPIO MORALES, J.:
FACTS: Armando Regala appeals from the judgment in Criminal Case No. 7929
rendered by the Regional Trial Court of Masbate, Masbate, Branch 46, 5th
Judicial Region, convicting him of the crime of Robbery with Rape.
Accused-appellant was apprehended by the police four days after the incident.
He was identified at a police line-up by Nerissa and her grandmother.
The trial court held that the defense of alibi cannot overcome the positive
identification of the accused. The Court found accused Armando Regala y
Abriol guilty beyond reasonable doubt of the crime of Robbery with Rape.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 115
HELD: No. Fraud has been defined as the deliberate intention to cause damage
or prejudice. It is the voluntary execution of a wrongful act, or a willful
omission, knowing and intending the effects which naturally and necessarily
arise from such act or omission. the fraud referred to in Article 1170 of the
Civil Code is the deliberate and intentional evasion of the normal fulfillment of
obligation.
We fail to see how the act of the petitioner bank in requiring the
respondent to sign the joint motion to dismiss could constitute as fraud.
The JMD cannot in any way have prejudiced Dr. Gueco. The motion to dismiss
was in fact also for the benefit of Dr. Gueco, as the case filed by petitioner
against it before the lower court would be dismissed with prejudice. The whole
point of the parties entering into the compromise agreement was in order that
Dr. Gueco would pay his outstanding account and in return petitioner would
return the car and drop the case for money and replevin before the
Metropolitan Trial Court. The joint motion to dismiss was but a natural
consequence of the compromise agreement and simply stated that Dr. Gueco
had fully settled his obligation, hence, the dismissal of the case. Petitioner‘s act
of requiring Dr. Gueco to sign the joint motion to dismiss cannot be said to be
a deliberate attempt on the part of petitioner to renege on the compromise
agreement of the parties.
The law presumes good faith. Dr. Gueco failed to present an iota of
evidence to overcome this presumption. In fact, the act of petitioner bank in
lowering the debt of Dr. Gueco from P184,000.00 to P150,000.00 is indicative
of its good faith and sincere desire to settle the case. If respondent did suffer
any damage, as a result of the withholding of his car by petitioner, he has only
himself to blame. Necessarily, the claim for exemplary damages must fail. In no
way, may the conduct of petitioner be characterized as ―wanton, fraudulent,
reckless, oppressive or malevolent.‖
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 116
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 117
Republic v. CTA
REPUBLIC OF THE PHILIPPINES, represented by the COMMISSIONER OF
CUSTOMS, petitioner, vs. THE COURT OF TAX APPEALS and AGFHA,
INCORPORATED, respondents., G.R. No. 139050, 2001 Oct 2, 3rd
Division)
Vitug, J.:
HELD: No.
The requisites for the forfeiture of goods under Section 2530(f), in
relation to (1) (3-5), of the Tariff and Customs Code are: (a) the wrongful
making by the owner, importer, exporter or consignee of any declaration or
affidavit, or the wrongful making or delivery by the same person of any invoice,
letter or paper - all touching on the importation or exportation of merchandise;
(b) the falsity of such declaration, affidavit, invoice, letter or paper; and (c) an
intention on the part of the importer/consignee to evade the payment of the
duties due.
The Collector of Customs, Court of Tax Appeals and the Court of Appeals
are unanimous in concluding that no fraud has been committed by private
respondent in the importation of the bales of cloth. The records do appear to
sustain this conclusion.
Fraud must be proved to justify forfeiture.[8] It must be actual,
amounting to intentional wrong-doing with the clear purpose of avoiding the
tax.[9] Forfeiture is not favored in law nor in equity.[10] Mere negligence is not
equivalent to the fraud contemplated by law.[11] What is here involved is an
honest mistake, not even directly attributable to private respondent, which will
not deprive the government of its right to collect the proper tax. The conclusion
of the appellate court, being consistent with the evidence on record and not
contrary to law and jurisprudence, hardly can be overturned by this Court.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 118
FACTS: The Davao Light and Power Co., Inc. (DLPC) supply electricity to Doña
Segunda Hotel owned by Diaz Realty Inc. with which Antonio Diaz (Diaz) is the
Vice-President. A notice of disconnection was sent by DLPC for non-payment of
electric consumption of the hotel in the amount of P190,111.02 with a warning
that if such will not be paid, services will be discontinued. Said letter was
ignored which prompted DLPC to file a complaint for collection of sum of
money.
Meanwhile, National Food Authority (NFA) established its KADIWA store
on a portion of the building of Diaz. DLPC connected service for the former's
electric meter after a contract has been perfected between them pursuant to an
application by KADIWA.
Later on, KADIWA closed and it informed DLPC that the light and power
connection rights of NFA/KADIWA would be transferred to Diaz and that the
P1,020.00 deposit of NFA/KADIWA for the power connection had been
refunded to it by Diaz. Then, Diaz requested that a new electrical connection
for the building in his name be installed, separate from the one assigned to him
by NFA pursuant to a new leased entered. Said request was denied on ground
of the company's closed classification thereby allowing simulation with a
reminder of payment of its dues. Diaz informed assumption of the KADIWA
account but DLPC maintained its position and submits that it has no
knowledge of the deposit of P1 020.
However, Mendiola, who replaced the leased area of the KADIWA, and
DLPC entered into another service contract. Petitions for injunctions were filed
by Diaz against DLPC. Following such, DLPC filed a criminal action for theft of
electricity. In defense, Diaz alleged the following: (1) that the complaint was
intended to harass him; (2) he was entitled to electric service by virtue of his
subrogation to the right of NFA/KADIWA; (3) the installation of Meter No.
86673509 was made with the knowledge and consent of DLPC; (4) there is a
pending case between the parties regarding Meter Nos. 84738 and 86673509;
and (5) the filing of the action is premature.
HELD: No. Malicious prosecution has been defined as an action for damages
brought by or against whom a criminal prosecution, civil suit or other legal
proceeding has been instituted maliciously and without probable cause, after
the termination of such prosecution, suit, or other proceeding in favor of the
defendant therein. It is an established rule that in order for malicious
prosecution to prosper, the following requisites must be proven by petitioner:
(1) the fact of prosecution and the further fact that the defendant (respondent)
was himself the prosecutor, and that the action finally terminated with an
acquittal; (2) that in bringing the action, the prosecutor acted without probable
cause; and (3) that the prosecutor was actuated or impelled by legal malice,
that is, by improper or sinister motive. The foregoing are necessary to preserve
a person‘s right to litigate which may be emasculated by the undue filing of
malicious prosecution cases. From the foregoing requirements, it can be
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 119
inferred that malice and want of probable cause must both be clearly
established to justify an award of damages based on malicious prosecution.
While the institution of separate criminal actions under the provisions of
P.D. 401, as amended by B.P. Blg. 876, and under the provisions of the
Revised Penal Code on theft may refer to identical acts committed by petitioner,
the prosecution thereof cannot be limited to one offense because a single
criminal act may give rise to a multiplicity of offenses; and where there is
variance or difference between the elements of an offense in one law and
another law, as in the case at bar, there will be no double jeopardy because
what the rule on double jeopardy prohibits refers to identity of elements in the
two (2) offenses. Otherwise stated, prosecution for the same act is not
prohibited; what is forbidden is prosecution for the same offense. Hence, no
fault could be attributed to respondent DLPC when it instituted the two
separate actions.
Petition denied.
Yasona v. De Ramos
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 120
ISSUE: Whether the filing of the criminal complaint for estafa by petitioners
against respondents constituted malicious prosecution.
HELD: The court held that "malicious prosecution is an action for damages
brought by one against whom a criminal prosecution, civil suit, or other legal
proceeding has been instituted maliciously and without probable cause, after
the termination of such prosecution, suit, or other proceeding in favor of the
defendant therein." To constitute "malicious prosecution," there must be proof
that the prosecution was prompted by a sinister design to vex or humiliate a
person, and that it was initiated deliberately by the defendant knowing that his
charges were false and groundless.
Concededly, the mere act of submitting a case to the authorities for
prosecution does not make one liable for malicious prosecution.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 121
In this case, however, there is reason to believe that a malicious intent was
behind the filing of the complaint for estafa against respondents. The records
show that the sale of the property was evidenced by a deed of sale duly
notarized and registered with the local Register of Deeds. After the execution of
the deed of sale, the property was surveyed and divided into two portions.
Separate titles were then issued in the names of Aurea Yasoña (TCT No. 73252)
and Jovencio de Ramos (TCT No. 73251). Since 1973, Jovencio had been
paying therealty taxes of the portion registered in his name. In 1974, Aurea
even requested Jovencio to use his portion as bond for the temporary release of
her son who was charged with malicious mischief. Also, when Aurea borrowed
money from the Rural Bank of Lumban in 1973and the PNB in 1979, only her
portion covered by TCT No. 73252 was mortgaged. All these pieces of evidence
indicate that Aurea had long acknowledged Jovencio‘s ownership of half of the
property. Furthermore, it was only in 1993 when petitioners decided to file the
estafa complaint against respondents. If petitioners had honestly believed that
they still owned the entire property, it would not have taken them 22 years to
question Jovencio‘s ownership of half of the property. The only conclusion that
can be drawn from the circumstances is that Aurea knew all along that she
was no longer the owner of Jovencio‘s portion after having sold it to him way
back in 1971. Likewise, other than petitioners‘ bare allegations, no other
evidence was presented by them to substantiate their claim. Malicious
prosecution, both in criminal and civil cases, requires the elements of (1)
malice and (2) absence of probable cause.
These two elements are present in thepresent controversy. Petitioners
were completely awarethat Jovencio was the rightful owner of the lot covered
byTCT No. 73251, clearly signifying that they were impelledby malice and
avarice in bringing the unfounded action.That there was no probable cause at
all for the filing of the estafa case against respondents led to the dismissalof the
charges filed by petitioners with the ProvincialProsecutor‘s Office in Siniloan,
Laguna.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 122
Yambao v. Zuniga
CECILIA YAMBAO, petitioner, vs. MELCHORITA C. ZUÑIGA, LEOVIGILDO
C. ZUÑIGA, REGINALDO C. ZUÑIGA, AND THE MINORS, HERMINIGILDO C.
ZUÑIGA, JR., AND LOVELY EMILY C. ZUÑIGA – both represented by their
legal guardian, the aforenamed MELCHORITA C. ZUÑIGA, respondents.,
(G.R. No. 146173, 2003 Dec 11, 2nd Division)
QUISUMBING, J.:
FACTS: Petitioner Cecilia Yambao is the owner of the bus driven by Ceferino
Venturina which bumped a pedestrian in the person of Herminigildo Zuñiga.
By virtue of such incident, Herminigildo died.
Heirs of the deceased filed a Complaint against petitioner and her driver,
Venturina, for damages alleging that Venturina drove the bus in a reckless,
careless and imprudent manner, in violation of traffic rules and regulations,
without due regard to public safety, thus resulting in the victim‘s premature
death.
Petitioner denied the allegations and shift blame to the Deceased
theorizing that the latter was the one who bumped her bus. She further alleged
that she was not liable for any damages because as an employer, she exercised
the proper diligence of a good father of a family, both in the selection and
supervision of her bus driver.
The court favored the heirs which the Court of Appeals affirmed. Hence,
a Petition for Review was filed.
HELD: No. At the outset, we must state that the first issue raised by the
petitioner is a factual one. Whether a person is negligent or not is a question of
fact, which this Court cannot pass upon in a petition for review on certiorari,
as our jurisdiction is limited to reviewing errors of law. The resolution of factual
issues is the function of the trial court and its findings on these matters are, as
a general rule, binding on this Court, more so where these have been affirmed
by the Court of Appeals. We have carefully examined and weighed the
petitioner‘s arguments on the first issue submitted, as well as the evidence on
record, and find no cogent reason to disregard the cited general rule, much less
to reverse the factual findings of the trial court as upheld by the court a quo.
Hence, we sustain the trial court‘s finding, as affirmed by the Court of Appeals,
that it was Venturina‘s reckless and imprudent driving of petitioner‘s bus,
which is the proximate cause of the victim‘s death.
when an employee, while performing his duties, causes damage to
persons or property due to his own negligence, there arises the juris tantum
presumption that the employer is negligent, either in the selection of the
employee or in the supervision over him after the selection. For the employer to
avoid the solidary liability for a tort committed by his employee, an employer
must rebut the presumption by presenting adequate and convincing proof that
in the selection and supervision of his employee, he or she exercises the care
and diligence of a good father of a family. In the instant case, we find that
petitioner has failed to rebut the presumption of negligence on her part.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 123
ISSUE: Whether or not petitioner should be held liable for the injuries of
Catalino Borja.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 124
damages inflicted on the plaintiff. All these elements were established in this
case. Knowing fully well that it was carrying dangerous chemicals, petitioner
was negligent in not taking all the necessary precautions in transporting the
cargo.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 125
HELD: No. The petitioner has a cause of action against private respondent.
Petition dismissed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 126
The record shows that, typhoon 'Welming' hit Central Luzon, passing
through defendant's Angat Hydro-electric Project and Dam at lpo, Norzagaray,
Bulacan. Strong winds struck the project area, and heavy rains intermittently
fell. Due to the heavy downpour, the water in the reservoir of the Angat Dam
was rising perilously at the rate of sixty (60) centimeters per hour. To prevent
an overflow of water from the dam, since the water level had reached the
danger height of 212 meters above sea level, the defendant corporation caused
the opening of the spillway gates."
The RTC and Court of Appeals adjudged the National Power Corporation
liable for damages against Engineering Construction, Inc. The appellate court,
however, reduced the amount of damages awarded by the trial court. Hence,
this present petition for review.
It is clear from the appellate court's decision that based on its findings of
fact and that of the trial court's, petitioner NPC was undoubtedly negligent
because it opened the spillway gates of the Angat Dam only at the height of
typhoon "Welming" when it knew very well that it was safer to have opened the
same gradually and earlier, as it was also undeniable that NPC knew of the
coming typhoon at least four days before it actually struck. And even though
the typhoon was an act of God or what we may call force majeure, NPC cannot
escape liability because its negligence was the proximate cause of the loss and
damage.
Petition is dismissed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 127
Muaje-Tuazon v. Verchez
Anabelle Muaje-Tuazon and Almer R. Abing, Petitioners, versus
Wenphil Corporation, Elizabeth P. Orbita*, and Court of Appeals,
Respondents.
(G.R. No. 162447, December 27, 2006, 3rd Division)
QUISUMBING, J.:
Before the start of the third round from October 18, 1999 to January 16,
2000, Abing was assigned to the SM North Edsa Annex branch while Tuazon
was assigned to the Meycauayan branch. Before the announcement of the third
round winners, management received reports that as early as the first round of
the contest, the Meycauayan, MCU Caloocan, Tandang Sora and Fairview
branches cheated. An internal investigation ensued.
ISSUE: Whether or not there is compliance with the due process requirement.
The records show that the petitioners were given written notices
informing them that they were charged with serious misconduct and
dishonesty in relation to the "Biggie Size It! Crew Challenge" program, and
notifying them of the scheduled hearings on February 4 and 7, 2000. Although
notices were given to them only on February 3, 2000, it will be noted that there
were other investigations or hearings set after February 4 and 7 where they
had the opportunity to explain their side after they were apprised of their
alleged infractions. We note likewise that petitioners, thinking that their verbal
explanations were sufficient, opted to forego a written explanation, and did not
appear during the set hearing. These actions were choices that petitioners
voluntarily made.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 128
Petition is denied.
RCPI v. Verchez
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 129
Verchez, with his daughters Grace and Zenaida and spouses, filed a
complaint against RCPI before the RTC for damages, the judgment of RTC
rendered in favor of the plaintiffs and against the defendant, and on appeal, the
Court of Appeals, affirmed the trial court‘s decision. Hence, RCPI‘s present
petition for review on certiorari at the Supreme Court.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 130
FACTS: Respondent Rosalito Gammad show that on March 14, 1996, his wife
Marie Grace Pagulayan-Gammad, was on board an air-conditioned Victory
Liner bus bound for Tuguegarao, Cagayan from Manila. At about 3:00 a.m.,
the bus while running at a high speed fell on a ravine somewhere in Barangay
Baliling, Sta. Fe, Nueva Vizcaya, which resulted in the death of Marie Grace
and physical injuries to other passengers.
At the pre-trial, petitioner did not want to admit the proposed stipulation
that the deceased was a passenger of the Victory Liner Bus which fell on the
ravine and that she was issued Passenger Ticket No. 977785. Respondents, for
their part, did not accept petitioner‘s proposal to pay P50,000.00.
It is settled that the negligence of counsel binds the client. This is based
on the rule that any act performed by a counsel within the scope of his general
or implied authority is regarded as an act of his client. Consequently, the
mistake or negligence of counsel may result in the rendition of an unfavorable
judgment against the client. However, the application of the general rule to a
given case should be looked into and adopted according to the surrounding
circumstances obtaining. Thus, exceptions to the foregoing have been
recognized by the court in cases where reckless or gross negligence of counsel
deprives the client of due process of law, or when its application will result in
outright deprivation of the client‘s liberty or property or where the interests of
justice so require, and accord relief to the client who suffered by reason of the
lawyer‘s gross or palpable mistake or negligence.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 131
The RTC and CA both ruled in favor of the respondent. Hence, this
present petition for review.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 132
the burden being on him to establish otherwise. GPS has failed to do so.
Petition is granted.
LRTA v. Natividad
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 133
FACTS: On 14 October 1993, about half an hour past 7:00 p.m., Nicanor
Navidad, then drunk, entered the EDSA LRT station after purchasing a ―token‖
(representing payment of the fare). While Navidad was standing on the platform
near the LRT tracks, Junelito Escartin, the security guard assigned to the area
approached Natividad. A misunderstanding or an altercation between the two
apparently ensued that led to a fist fight. No evidence, however, was adduced
to indicate how the fight started or who, between the two, delivered the first
blow or how Natividad later fell on the LRT tracks. At the exact moment that
Natividad fell, an LRT train, operated by Rodolfo Roman, was coming in.
Natividad was struck by the moving train, and he was killed instantaneously.
The heirs of Nicanor filed a complaint for damages against Junelito Escartin,
Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc. (Metro Transit),
and Prudent fotir the death of her husband. LRTA and Roman filed a
counterclaim against Natividad and a cross-claim against Escartin and
Prudent. Prudent, in its answer, denied liability and averred that it had
exercised due diligence in the selection and supervision of its security guards.
The LRTA and Roman presented their evidence while Prudent and Escartin,
instead of presenting evidence, filed a demurrer contending that Natividad had
failed to prove that Escartin was negligent in his assigned task.
ISSUE: Whether or not the liability of LRTA arises from the breach of contract
due to failure to exercise diligence.
HELD: Yes. The liability of LRTA arises from the breach of contract due to
failure to exercise diligence.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 134
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 135
Rodzssen Supply Co. Inc., Petitioner, versus Far East Bank & Trust Co.,
Respondent.
(G.R. No. 109087, May 9, 2001, 3rd Division)
PANGANIBAN, J.:
FACTS: On January 15, 1979, defendant Rodzssen Supply, Inc. opened with
plaintiff Far East Bank and Trust Co. a 30-day domestic letter of credit, in the
amount of P190,000.00 in favor of Ekman and Company, Inc. (Ekman) for the
purchase from the latter of five units of hydraulic loaders, to expire on
February 15, 1979. The three loaders were delivered to defendant for which
plaintiff paid Ekman and which defendant paid plaintiff before expiry date of
letter of credit. The remaining two loaders were delivered to defendant but the
latter refused to pay. Ekman pressed payment to plaintiff. Plaintiff paid Ekman
for the two loaders and later demanded from defendant such amount as it paid
Ekman. Defendant refused payment contending that there was a breach of
contract by plaintiff who in bad faith paid Ekman, knowing that the two units
of hydraulic loaders had been delivered to defendant after the expiry date of
subject.
The RTC rendered judgment in favor of herein respondent, stating that
upon delivery by Ekman of the loaders, Rodzssen became liable for the
payment of the units. In the honest belief that it was still under obligation to,
and upon presentation of necessary documents by Ekman, FEBTC was in good
faith in paying Ekman. The RTC further noted that Rodzssen‘s offer to return
the 2 units to FEBTC was made only 3 years after it received the goods and
when FEBTC pressed for the payments. Hence, this present petition for review
on certiorari.
The Supreme Court agrees with the Court of Appeals that petitioner
should pay respondent bank the amount the latter expended for the equipment
belatedly delivered by Ekman and voluntarily received and kept by petitioner.
Equitable considerations behoove us to allow recovery by respondent. True, it
erred in paying Ekman, but petitioner itself was not without fault in the
transaction. It must be noted that the latter had voluntarily received and kept
the loaders since October 1979.
FEBTC‘s right to seek recovery from petitioner is anchored not upon the
inefficacious LC, but on Article 2142 of the Civil Code, which reads, ―Certain
lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-
contract to the end that no one shall be unjustly enriched or benefited at the
expense of another.‖ When both parties to a transaction are mutually negligent
in the performance of their obligations, the fault of one cancels the negligence
of the other and, as in this case, their rights and obligations may be
determined equitably under the law proscribing unjust enrichment.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 136
UE v. Jader
University of the East, Petitioner, versus. Romeo A. Jader, Respondent.
(G.R. No. 132344, February 17, 2000, 1st Division)
YNARES-SANTIAGO, J.:
The Supreme Court held that petitioner was guilty of negligence and this
liable to respondent for the latter‘s actual damages. Educational institutions
are duty-bound to inform the students of their academic status and not wait
for the latter to inquire from the former. However, respondent should not have
been awarded moral damages though JADER suffered shock, trauma, and pain
when he was informed that he could not graduate and will not be allowed to
take the bar examinations as what CA held because it‘s also respondent‘s duty
to verify for himself whether he has completed all necessary requirements to be
eligible for the bar examinations. As a senior law student, he should have been
responsible in ensuring that all his affairs specifically those in relation with his
academic achievement are in order. Before taking the bar examinations, it
doesn‘t only entail a mental preparation on the subjects but there are other
prerequisites such as documentation and submission of requirements which
prospective examinee must meet.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 137
Bargemen arrived in the evening, found the valves of the tank open and
resumed pumping in absence of any instruction. The following morning, an
undetermined amount of alkyl benzene was lost due to overflow. Consignee,
surveyor and a marine surveyor had a conference to determine the amount of
loss. A compromise quantity of 67.649MT was lost, amounting to
PHP811,609,53. Private respondent instituted a collection suit as subrogee of
consignee after their failure to extrajudicially settle with petitioners.
The RTC and Court of Appeals ruled that Bayne must pay. Hence, this
present petition for review.
HELD: Yes. Bayne‘s failure to supervise is the proximate cause of the loss, thus
making them liable for damages.
Petition is dismissed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 139
On appeal to the Court of Appeals, the decision of the trial court was
reversed and set aside. It found Capt. Jusep guilty of negligence in deciding to
transfer the vessel to the North Harbor only at 8:35 a.m. of October 21, 1994
and thus held petitioner liable for damages.
HELD: Yes. Article 2176 of the Civil Code provides that whoever by act or
omission causes damage to another, there being fault or negligence, is obliged
to pay for the damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict. The test for
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 140
In the case at bar, the Court of Appeals was correct in holding that Capt.
Jusep was negligent in deciding to transfer the vessel only at 8:35 in the
morning of October 21, 1994. As early as 12:00 midnight of October 20, 1994,
he received a report from his radio head operator in Japan that a typhoon was
going to hit Manila after 8 hours. This, notwithstanding, he did nothing, until
8:35 in the morning of October 21, 1994, when he decided to seek shelter at
the North Harbor, which unfortunately was already congested.
The finding of negligence cannot be rebutted upon proof that the ship
could not have sought refuge at the North Harbor even if the transfer was done
earlier. It is not the speculative success or failure of a decision that determines
the existence of negligence in the present case, but the failure to take
immediate and appropriate action under the circumstances. Capt. Jusep,
despite knowledge that the typhoon was to hit Manila in 8 hours, complacently
waited for the lapse of more than 8 hours thinking that the typhoon might
change direction. Furthermore, he did not transfer as soon as the sun rose
because, according to him, it was not very cloudy and there was no weather
disturbance yet.
Yes. Anent the second issue, we find petitioner vicariously liable for the
negligent act of Capt. Jusep. Under Article 2180 of the Civil Code an employer
may be held solidarily liable for the negligent act of his employee. Thus -
Art. 2180. The obligation imposed in Article 2176 is demandable not only
for one‘s own acts or omissions, but also for those of persons for whom one is
responsible.
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though
the former are not engaged in any business or industry.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 142
FACTS: The plaintiff Ford drew and issued its Citibank Check No. SN-04867 in
the amount of P4,746,114.41, in favor of the Commissioner of Internal Revenue
as payment of plaintiff‘s percentage or manufacturer‘s sales taxes for the third
quarter of 1977. The aforesaid check was deposited with the defendant IBAA
(now PCIBank) and was subsequently cleared at the Central Bank. Upon
presentment with the defendant Citibank, the proceeds of the check was paid
to IBAA as collecting or depository bank. The proceeds of the same Citibank
check of the plaintiff was never paid to or received by the payee thereof, the
Commissioner of Internal Revenue. As a consequence, upon demand of the
Bureau and/or Commissioner of Internal Revenue, the plaintiff was compelled
to make a second payment to the Bureau of Internal Revenue of its
percentage/manufacturers‘ sales taxes for the third quarter of 1977 and that
said second payment of plaintiff in the amount of P4,746,114.41 was duly
received by the Bureau of Internal Revenue.
ISSUE: Whether or not PCIB is liable to Ford Philippines the amount of several
checks which were allegedly embezzled by a syndicate group.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 143
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 144
FACTS: San Miguel Corporation entered into a Time Charter Party Agreement
with Julius Ouano, doing business under the name and style J. Ouano Marine
Services. Under the terms of the agreement, SMC chartered the M/V Doña
Roberta owned by Julius Ouano for a period of two years, from June 1, 1989 to
May 31, 1991, for the purpose of transporting SMC‘s beverage products from
its Mandaue City plant to various points in Visayas and Mindanao.
On November 11, 1990, during the term of the charter, SMC issued
sailing orders to the Master of the MN Doña Roberta, Captain Sabiniano
Inguito, to sail for Opol, Cagayan Nov. 12, 1990. Meanwhile, at 4:00 a.m. of
November 12, 1990, typhoon Ruping was spotted 570 kilometers east-
southeast of Borongan, Samar, moving west-northwest at 22 kilometers per
hour in the general direction of Eastern Visayas. The typhoon had maximum
sustained winds of 240 kilometers per hour near the center with gustiness of
up to 280 kilometers per hour.
At 7:00 a.m., November 12, 1990, one hour after the M/V Doña Roberta
departed from Mandaue City SMC Radio Operator Rogelio P. Moreno contacted
Captain Inguito through the radio and advised him to take shelter. Captain
Inguito replied that they will proceed since the typhoon was far away from
them, and that the winds were in their favor.
At 1:15 a.m., November 13, 1990, Captain Inguito called Moreno over the
radio and requested him to contact Rico Ouano, son of Julius Ouano, because
they needed a helicopter to rescue them. The vessel was about 20 miles west of
Sulauan Point.
Upon being told by SMC‘s radio operator, Rico Ouano turned on his radio
and read the distress signal from Captain Ingiuto. When he talked to the
captain, the latter requested for a helicopter to rescue them. Rico Ouano talked
to the Chief Engineer who informed him that they can no longer stop the water
from coming into the vessel because the crew members were feeling dizzy from
the petroleum fumes.
At 2:30 a.m. of November 13, 1990, the M/V Doña Roberta sank. Out of
the 25 officers and crew on board the vessel, only five survived.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 145
ISSUE: Whether or nor Ouano is liable for the negligence of his employee.
Held: Yes. A charter party is a contract by virtue of which the owner or the
agent of a vessel binds himself to transport merchandise or persons for a fixed
price. It has also been defined as a contract by virtue of which the owner or the
agent of the vessel leases for a certain price the whole or a portion of the vessel
for the transportation of goods or persons from one port to another.
SC concur with the findings of the Court of Appeals that the charter
party in these cases was a contract of affreightment, contrary to petitioner
Ouano‘s protestation that it was a demise charter.
It appearing that Ouano was the employer of the captain and crew of the
M/V Doña Roberta during the term of the charter, he therefore had command
and control over the vessel. His son, Rico Ouano, even testified that during the
period that the vessel was under charter to SMC, the Captain thereof had
control of the navigation of all voyages.
Under the foregoing definitions, as well as the clear terms of the Charter
Party Agreement between the parties, the charterer, SMC, should be free from
liability for any loss or damage sustained during the voyage, unless it be shown
that the same was due to its fault or negligence.
The evidence does not show that SMC or its employees were amiss in
their duties. The facts indubitably establish that SMC‘s Radio Operator, Rogelio
P. Moreno, who was tasked to monitor every shipment of its cargo, contacted
Captain Inguito as early as 7:00 a.m., one hour after the M/V Doña Roberta
departed from Mandaue, and advised him to take shelter from typhoon Ruping.
This advice was reiterated at 2:00 p.m. At that point, Moreno thought of calling
Ouano‘s son, Rico, but failed to find him. At 4:00 p.m., Moreno again advised
Captain Inguito to take shelter and stressed the danger of venturing into the
open sea. The Captain insisted that he can handle the situation.
In the assailed decision, the Court of Appeals found that the proximate cause
of the sinking of the vessel was the negligence of Captain Sabiniano Inguito
SC likewise agrees with the CA that Ouano is vicariously liable for the
negligent acts of his employee, Captain Inguito. Under Articles 2176 and 2180
of the Civil Code, owners and managers are responsible for damages caused by
the negligence of a servant or an employee, the master or employer is
presumed to be negligent either in the selection or in the supervision of that
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 146
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 147
FACTS: On the night of March 10, 1995, Jose Marcial K. Ochoa died while on board an
Avis taxicab owned and operated by G& S Transport Corporation, a common carrier.
The death certificate issued by the Office of the Civil Registrar of Quezon Citycited the
cause of his death as vehicular accident it was found that the death of Jose Marcial
Ochoa was caused by negligence on the part of the taxicab driver employed by G & S
Transport Corporation, Bibiano Padilla. However, the taxicab driver,Bibiano Padilla,
was acquitted of the crime of reckless imprudence resulting in homicide. Regardless,
the petitioners alleged that respondent, as a common carrier, was under legal
obligation to observe and exercise extraordinary diligence in transporting its
passengers to their destination safely and securely. The contract was entered the
moment Ochoa entered the vehicle owned by the respondent. The failure of the
respondent, as evidenced by the death of Ochoa, led the petitioners to aver that they, the
respondents, are liable for having breached the contract of common carriage. The heirs thus prayed
for G& S to pay them actual damages, moral damages, exemplary damages, and attorney‘s fees and
expenses of litigation.
ISSUE: Whether or not the petitioner may proceed with the civil action given that there
was already an acquittal in the related criminal case.
HELD: Yes. The Supreme Court declared the HELD of Cancio, Jr., v. Isip, which stated
that in the instant case, it must be stressed that the action filed by petitioner is an
independent civil action, which remains separate and distinct from any criminal
prosecution based on the same act. Not being deemed instituted in the criminal action
based on culpa criminal, a HELD on the culpability of the offender will have no
bearing on said independent civil action based on an entirely different cause of action,
i.e., culpa contractual. Considering Article 31 of the Civil Code, the petitioners‘ claim
for damages is valid considering that the civil action, being based on an obligation,
proceeded independently of the criminal proceedings and regardless of the result of
the latter. Thus, the respondent is liable to pay the petitioners for damages because by
not transporting Jose Marcial Ochoa safely to his destination the former breached its
contract with the passenger.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 148
Pacis v. Morales
Alfredo P. Pacis and Cleopatra D. Pacis, Petitioners, versus Jerome
Jovanne Morales, Respondent.
(G.R. No. 169467, February 25, 2010, 2nd Division)
CARPIO, J:
FACTS: Petitioners Alfredo P. Pacis and Cleopatra D. Pacis filed with the trial
court a civil case for damages against respondent Jerome Jovanne Morales.
Petitioners are the parents of Alfred Dennis Pacis,Jr. who died in a shooting
incident inside the Gun Store in Baguio City. Alfred Dennis Pacis, then 17years
old and a first year student at the BCF taking up BS Computer Science, died
due to a gunshot wound in the head which he sustained while he was at the
Gun store owned and operated by defendant Jerome Jovanne Morales. The
bullet which killed Alfred Dennis Pacis was fired from a gun brought in by a
customer of the gun store for repair. The gun was left by defendant Morales in
a drawer of a table located inside the gun store. Defendant Morales was in
Manila at the time. His employee Armando Jarnague, who was the
regular caretaker of the gun store was also not around. He left earlier and
requested sales agents Matibag and Herbolario to look after the gun store while
he and defendant Morales were away. Jarnague entrusted to Matibag and
Herbolario a bunch of keys used in the gun store which included the key to the
drawer where the fatal gun was kept. It appears that Matibag and Herbolario
later brought out the gun from the drawer and placed it on top of the table. The
Alfred got hold of the same. Matibag asked Alfred to return the gun. The latter
followed and handed the gun to Matibag. It went off, the bullet hitting the
Alfred in the head. A criminal case for homicide was filed against Matibag,
however, was acquitted of the charge against him because of the exempting
circumstance of accident. By agreement of the parties, the evidence adduced in
the criminal case for homicide against Matibag was reproduced and adopted by
them as part of their evidence in the instant case. The trial court rendered its
decision in favor of petitioners. Respondent appealed to the CA. The CA
reversed the trial courts Decision and absolved respondent from civil liability
under Article 2180 of the Civil Code. Petitioners filed a motion for
reconsideration,which the Court of appeals denied. Hence, this petition. The trial
court held respondent civilly liable for the death of Alfred under Article 2180 in
relation to Article 2176 of the Civil Code.
HELD: Yes. In this case, instead of enforcing their claim for damages in the
homicide case filed against Matibag, petitioners opted to file an independent
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 149
civil action for damages against respondent whom they alleged was Matibag‘s
employer. Petitioners based their claim for damages under Articles 2176and
2180 of the Civil Code. Unlike the subsidiary liability of the employer under
Article 102 of the Revised Penal Code, the liability of the employer, or any
person for that matter, under Article 2176 of the Civil Code is primary and
direct, based on a persons own negligence. Article 2176 states: Art. 2176.
Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the parties, is called
quasi-delict and is governed by the provisions of this Chapter. This case
involves the accidental discharge of a firearm inside a gun store. Under PNP
Circular No.9, entitled the Policy on Firearms and Ammunition
Dealership/Repair, a person who is in the business of purchasing and selling
of firearms and ammunition must maintain basic security and safety
requirements of a gun dealer, otherwise his License to Operate Dealership will
be suspended or canceled.
For failing to insure that the gun was not loaded, respondent himself was
negligent. Furthermore, it was not shown in this case whether respondent had
a License to Repair which authorizes him to repair defective firearms to restore
its original composition or enhance or upgrade firearms. Clearly, respondent did
not exercise the degree of care and diligence required of a good father of a family, much
less the degree of care required of someone dealing with dangerous weapons, as would
exempt him from liability in this case.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 150
FACTS: On March 15, 2005, respondent Vivian Tan Lee filed before the RTC of
Quezon City a Complaint against petitioner Philippine Hawk Corporation and
defendant Margarito Avila for damages based on quasi-delict, arising from a
vehicular accident that occurred on March 17, 1991 in Barangay Buensoceso,
Gumaca, Quezon. The accident resulted in the death of respondent‘s husband,
Silvino Tan, and caused respondent physical injuries.
On June 18, 1992, respondent filed an Amended Complaint, in her own behalf
and in behalf of her children, in the civil case for damages against
petitioner. Respondent sought the payment of indemnity for the death of
Silvino Tan, moral and exemplary damages, funeral and interment expenses,
medical and hospitalization expenses, the cost of the motorcycle‘s repair,
attorney‘s fees, and other just and equitable reliefs.
The accident involved a motorcycle, a passenger jeep, and a bus with Body No.
119. The bus was owned by petitioner Philippine Hawk Corporation, and was
then being driven by Margarito Avila.
In its Answer, petitioner denied liability for the vehicular accident, alleging
that the immediate and proximate cause of the accident was the recklessness
or lack of caution of Silvino Tan. Petitioner asserted that it exercised the
diligence of a good father of the family in the selection and supervision of its
employees, including Margarito Avila.
On March 25, 1993, the trial court issued a Pre-trial Order stating that the
parties manifested that there was no possibility of amicable settlement between them.
The trial court found that before the collision, the motorcycle was on the left side of
the road, just as the passenger jeep was. Prior to the accident, the motorcycle was in
a running position moving toward the right side of the highway. The trial court agreed
with the bus driver that the motorcycle was moving ahead of the bus from the left side
of the road toward the right side of the road, but disagreed that the motorcycle crossed
the path of the bus while the bus was running on the right side of the road.
The trial court held that if the bus were on the right side of the highway, and
Margarito Avila turned his bus to the right in an attempt to avoid hitting the
motorcyle, then the bus would not have hit the passenger jeep, which was then parked
on the left side of the road. The fact that the bus also hit the passenger jeep showed
that the bus must have been running from the right lane to the left lane of the
highway, which caused the collision with the motorcycle and the passenger jeep
parked on the left side of the road. The trial court stated that since Avila saw the
motorcycle before the collision, he should have stepped on the brakes and slowed
down, but he just maintained his speed and veered to the left. The trial court found
Margarito Avila guilty of simple negligence.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 151
The trial court held petitioner bus company liable for failing to exercise the
diligence of a good father of the family in the selection and supervision of Avila, having
failed to sufficiently inculcate in him discipline and correct behavior on the road.
HELD: Yes. The Court agrees with the bus driver Margarito that the motorcycle
was moving ahead of the bus towards the right side from the left side of the
road, but disagrees with him that it crossed the path of the bus while the bus
was running on the right side of the highway.
If the bus were on the right side of the highway and Margarito turned his
bus to the right in an attempt to avoid hitting it, then the bus would not have
hit the passenger jeep vehicle which was then parked on the left side of the
road. The fact that the bus hit the jeep too, shows that the bus must have been
running to the left lane of the highway from right to the left, that the collision
between it and the parked jeep and the moving rightways cycle became
inevitable. Besides, Margarito said he saw the motorcycle before the collision
ahead of the bus; that being so, an extra-cautious public utility driver should
have stepped on his brakes and slowed down. Here, the bus never slowed
down, it simply maintained its highway speed and veered to the left. This is
negligence indeed.
Petitioner contends that the Court of Appeals was mistaken in stating that the
bus driver saw respondent‘s motorcycle ―about 15 meters away‖ before the collision,
because the said distance, as testified to by its witness Efren Delantar Ong, was Ong‘s
distance from the bus, and not the distance of the bus from the motorcycle. Petitioner
asserts that this mistaken assumption of the Court of Appeals made it conclude that
the bus driver, Margarito Avila, had the last clear chance to avoid the accident, which
was the basis for the conclusion that Avila was guilty of simple negligence.
A review of the records showed that it was petitioner‘s witness, Efren Delantar
Ong, who was about 15 meters away from the bus when he saw the vehicular
accident. Nevertheless, this fact does not affect the finding of the trial court that
petitioner‘s bus driver, Margarito Avila, was guilty of simple negligence as affirmed by
the appellate court. Foreseeability is the fundamental test of negligence.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 152
The trial court found Mercury Drug and Del Rosario jointly and severally liable
to pay respondents. The Court of Appeals affirmed the said decision.
ISSUE: Whether or not petitioner Mercury Drug is liable for the negligence of its
employee.
HELD: Yes. Article 2176 and 2180 of the Civil Code provide:
―The obligation imposed by article 2176 is demandable not only for one‘s
own acts or omissions, but also for those of persons for whom one is responsible.‖
The liability of the employer under Article 2180 is direct and immediate. It is
not conditioned on a prior recourse against the negligent employee, or a prior showing
of insolvency of such employee. It is also joint and solidary with the employee. To be
relieved f the liability, petitioner should show that it exercised the diligence of a good
father of a family, both in the selection of the employee and in the supervision of the
performance of his duties.
In this case, the petitioner Mercury Drug does not provide for back-up driver for
long trips. As the time of the accident, Del Rosario has been driving for more than
thirteen hours, without any alternate. Moreover, Del Rosario took the driving test and
psychological exam for the position of Delivery Man and not as Truck Man.
With this, petitioner Mercury Drug is liable jointly and severally liable to pay
the respondents.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 153
Mendoza v. Soriano
Flordeliza Mendoza, Petitioner, versus Mutya Soriano, Respondent.
(G.R. No. 164012, June 8, 2007, 2nd Division)
QUISUMBING, J:
FACTS: Sonny Soriano, while crossing Commonwealth Avenue near Luzon Avenue,
was hit by a speeding Tamaraw FX driven by Lomer Macasasa. Soriano was thrown
five meters away, while the vehicle stopped some 25 meters from the point of impact.
Gerard Villaspin, one of Soriano‘s companions, asked Macasasa to bring Soriano to
the hospital, but the first flee. Respondent‘s wife and daughter filed a complaint for
damages against Macasasa and petitioner Flordeliza Mendoza, the registered owner of
the vehicle.
Petitioner Mendoza contends that she was not liable since as owner of the
vehicle, she had exercised the diligence of a good father of a family over her employee.
Macasas.
The trial court dismissed the complaint against Macasasa and Mendoza. It
found Soriano negligent for crossing not in the pedestrian overpass. The Court of
Appeals, on the other hand, reversed the assailed decision of the lower court.
HELD: Yes. While the appellate court agreed that Soriano was negligent, it also found
Macasasa negligent for speeding, such that he was unable to avoid hitting the victim.
It observed that Soriano‘s own negligence did not preclude recovery for damages from
Macasasa‘s negligence. It further held that since petitioner failed to present evidenced
to the contrary and conformably with Article 2180 of the Civil Code, the presumption
of negligence of the employer in the selection and supervision of employees stood.
The records show that Macasasa violated two traffic rules under the Land
Transportation and Office Code. Under Article 2185 of the Civil Code, a person driving
a motor vehicle is presumed negligent if at the time of the mishap, he was violating
traffic regulations.
Further, under Article 2180, employers are liable for the damages caused by
their employees acting within the scope of their assigned tasks. The liability arises due
to the presumed negligence of the employers in supervising their employees unless
they prove that they observed all the diligence of a good father of a family to prevent
the damage. In this case petitioner is held primarily and solidarily liable for the
damages caused by Macasasa.
However, Article 2179 states that ―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
court shall mitigate the damages awarded.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 154
HELD that Soriano was guilty of contributory negligence for not using the
pedestrian overpass, 20% reduction of the amount of the damages awarded was
awarded to petitioner.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 155
Cerezo v. Tuazon
Hermana Cerezo, Petitioner, versus David Tuazon
(G.R. No. 141538, March 23, 2004, 1st Division)
CARPIO, J:
FACTS: Country Bus Lines passenger bus collided with a tricycle. Tricycle driver
Tuazon filed a complaint for damages against Mrs. Cerezo, as owner of the bus line,
her husband Attorney Juan Cerezo, and bus driver Danilo A. Foronda.
HELD: Yes. Contrary to Mrs. Cerezo‘s assertion, Foronda is not an indispensable party
to the case. An indispensable party is one whose interest is affected by the court‘s
action in the litigation, and without whom no final resolution of the case is possible.
However, Mrs. Cerezo‘s liability as an employer in an action for a quasi-delict is not
only solidary, it is also primary and direct. Foronda is not an indispensable party to
the final resolution of Tuazon‘s action for damages against Mrs. Cerezo.
The responsibility of two or more persons who are liable for a quasi-delict is
solidary. Where there is a solidary obligation on the part of debtors, as in this case,
each debtor is liable for the entire obligation. Hence, each debtor is liable to pay for
the entire obligation in full. There is no merger or renunciation of rights, but only
mutual representation. Where the obligation of the parties is solidary, either of the
parties is indispensable, and the other is not even a necessary party because complete
relief is available from either. Therefore, jurisdiction over Foronda is not even
necessary as Tuazon may collect damages from Mrs. Cerezo alone.
When an employee causes damage, the law presumes that the employer has
himself committed an act of negligence in not preventing or avoiding the damage. This
is the fault that the law condemns. While the employer is civilly liable in a subsidiary
capacity for the employee‘s criminal negligence, the employer is also civilly liable
directly and separately for his own civil negligence in failing to exercise due diligence
in selecting and supervising his employee. The idea that the employer‘s liability is
solely subsidiary is wrong.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 156
However, the present action is clearly for the quasi-delict of Mrs. Cerezo and
not for the delict of Foronda.
Thus, the petition was denied ordering the defendant Hermana Cerezo to pay
the plaintiff.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 157
FACTS: On November 22, 1998, at around 6:30 p.m., respondent Jose A. Espinas was
driving his car along Leon Guinto Street in Manila. Upon reaching the intersection of
Leon Guinto and President Quirino Streets, Espinas stopped his car. When the signal
light turned green, he proceeded to cross the intersection. He was already in the
middle of the intersection when another car, traversing President Quirino Street and
going to Roxas Boulevard, suddenly hit and bumped his car. As a result of the impact,
Espinas‘ car turned clockwise. The other car escaped from the scene of the incident,
but Espinas was able to get its plate number.
After verifying with the Land Transportation Office, Espinas learned that the
owner of the other car, with plate number UCF-545, is Filcar.
Espinas sent several letters to Filcar and to its President and General Manager
Carmen Flor, demanding payment for the damages sustained by his car. On May 31,
2001, Espinas filed a complaint for damages against Filcar and Carmen Flor before
the Metropolitan Trial Court (MeTC) of Manila, and the case was raffled to Branch 13.
In the complaint, Espinas demanded that Filcar and Carmen Flor pay the amount
of P97,910.00, representing actual damages sustained by his car.
Filcar argued that while it is the registered owner of the car that hit and
bumped Espinas‘ car, the car was assigned to its Corporate Secretary Atty. Candido
Flor, the husband of Carmen Flor. Filcar further stated that when the incident
happened, the car was being driven by Atty. Flor‘s personal driver, Timoteo Floresca.
Atty. Flor, for his part, alleged that when the incident occurred, he was
attending a birthday celebration at a nearby hotel, and it was only later that night
when he noticed a small dent on and the cracked signal light of the car. On seeing the
dent and the crack, Atty. Flor allegedly asked Floresca what happened, and the driver
replied that it was a result of a ―hit and run‖ while the car was parked in front of
Bogota on Pedro Gil Avenue, Manila.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 158
Filcar denied any liability to Espinas and claimed that the incident was not due
to its fault or negligence since Floresca was not its employee but that of Atty. Flor.
Filcar and Carmen Flor both said that they always exercised the due diligence required
of a good father of a family in leasing or assigning their vehicles to third parties.
ISSUE: Whether or not Filcar, as registered owner of the motor vehicle which figured
in an accident, may be held liable for the damages caused to Espinas.
HELD: Yes. The rationale for the rule that a registered owner is vicariously liable for
damages caused by the operation of his motor vehicle is explained by the principle
behind motor vehicle registration, which has been discussed by this Court
in Erezo, and cited by the CA in its decision:
As explained by this Court in Erezo, the general public policy involved in motor
vehicle registration is the protection of innocent third persons who may have no
means of identifying public road malefactors and, therefore, would find it difficult – if
not impossible – to seek redress for damages they may sustain in accidents resulting
in deaths, injuries and other damages; by fixing the person held primarily and directly
liable for the damages sustained by victims of road mishaps, the law ensures that
relief will always be available to them.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 159
To identify the person primarily and directly responsible for the damages would
also prevent a situation where a registered owner of a motor vehicle can easily escape
liability by passing on the blame to another who may have no means to answer for the
damages caused, thereby defeating the claims of victims of road accidents. We take
note that some motor vehicles running on our roads are driven not by their registered
owners, but by employed drivers who, in most instances, do not have the financial
means to pay for the damages caused in case of accidents.
These same principles apply by analogy to the case at bar. Filcar should not be
permitted to evade its liability for damages by conveniently passing on the blame to
another party; in this case, its Corporate Secretary, Atty. Flor and his alleged driver,
Floresca. Following our reasoning in Equitable, the agreement between Filcar and Atty.
Flor to assign the motor vehicle to the latter does not bind Espinas who was not a
party to and has no knowledge of the agreement, and whose only recourse is to the
motor vehicle registration.
Neither can Filcar use the defenses available under Article 2180 of the Civil
Code - that the employee acts beyond the scope of his assigned task or that it
exercised the due diligence of a good father of a family to prevent damage - because
the motor vehicle registration law, to a certain extent, modified Article 2180 of the Civil
Code by making these defenses unavailable to the registered owner of the motor
vehicle. Thus, for as long as Filcar is the registered owner of the car involved in the
vehicular accident, it could not escape primary liability for the damages caused to
Espinas.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 160
CARPIO, J.:
FACTS: On 2 September 2000, an Isuzu oil tanker running along Del Monte
Avenue in Quezon City hit Loretta V. Baylon, daughter of respondent spouses
Sergio P. Baylon and MaritessVillena-Baylon. At the time of the accident, the
oil tanker was registered in the name of petitioner FEB Leasing and Finance
Corporation (petitioner). The oil tanker was leased to BG Hauler, Inc. and was
being driven by the latter‘s driver, Manuel Y. Estilloso. The oil tanker was
insured8 by FGU Insurance Corp.
The accident took place at around 2:00 p.m. as the oil tanker was
coming from Balintawak and heading towards Manila. Upon reaching the
intersection of Bonifacio Street and Del Monte Avenue, the oil tanker turned
left. While the driver of the oil tanker was executing a left turn side by side with
another vehicle towards Del Monte Avenue, the oil tanker hit Loretta who was
then crossing Del Monte Avenue coming from Mayon Street. Due to the strong
impact, Loretta was violently thrown away about three to five meters from the
point of impact. She fell to the ground unconscious. She was brought for
treatment to the Chinese General Hospital where she remained in a coma until
her death two days after.
The spouses Baylon filed with the Regional Trial Court a Complaint for
damages against petitioner, BG Hauler, the driver, and FGU Insurance.
Petitioner filed its answer with compulsory counterclaim while FGU Insurance
filed its answer with counterclaim. On the other hand, BG Hauler filed its
answer with compulsory counterclaim and cross-claim against FGU Insurance.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 161
FGU Insurance on the other hand, averred that the victim was guilty of
contributory negligence. FGU Insurance concluded that the spouses Baylon
could not expect to be paid the full amount of their claims. FGU Insurance
pointed out that the insurance policy covering the oil tanker limited any claim
to a maximum of P400,000.00.
The Regional Trial Court found that the death of Loretta was due to the
negligent act of the driver. The RTC held that BG Hauler, as the employer, was
solidarily liable with the driver. The RTC further held that petitioner, as the
registered owner of the oil tanker, was also solidarily liable.
Petitioner, BG Hauler, and the driver appealed the RTC Decision to the
Court of Appeals. The Court of Appeals affirmed the decision of the Regional
Trial Court. Two separate motions for reconsideration were filed by the
petitioner but the same were denied by the court.
HELD: Yes.Under Section 5 of Republic Act No. 4136, as amended, all motor
vehicles used or operated on or upon any highway of the Philippines must be
registered with the Bureau of Land Transportation (now Land Transportation
Office) for the current year. Furthermore, any encumbrances of motor vehicles
must be recorded with the Land Transportation Office in order to be valid
against third parties.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 162
In this case, petitioner admits that it is the registered owner of the oil
tanker that figured in an accident causing the death of Loretta. As the
registered owner, it cannot escape liability for the loss arising out of negligence
in the operation of the oil tanker. Its liability remains even if at the time of the
accident, the oil tanker was leased to BG Hauler and was being driven by the
latter‘s driver, and despite a provision in the lease contract exonerating the
registered owner from liability.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 163
PERALTA, J.:
FACTS:On the night of September 30, 1984, Teresa Elena Legarda-de los
Santos (Teresa Elena), the wife of respondent Wilfredo de los Santos (Wilfredo),
performed at the Rizal Theater in Makati City, Metro Manila as a member of the
cast for the musical play, Woman of the Year.
Two other members of the cast of Woman of the Year, namely, Annabel
Vilches (Annabel) and Jerome Macuja, joined Teresa Elena in the Galant
Sigma.
Around 11:30 p.m., while travelling along the Katipunan Road (White
Plains), the Galant Sigma collided with the shuttle bus owned by petitioner and
driven by Alfredo S. Mejia (Mejia), an employee of petitioner. The Galant Sigma
was dragged about 12 meters from the point of impact, across the White Plains
Road landing near the perimeter fence of Camp Aguinaldo, where the Galant
Sigma burst into flames and burned to death beyond recognition all four
occupants of the car.
After trial on the merits, the Regional Trial Court decided in favor of the
Respondents.
HELD: No. Under Article 2180 of the New Civil Code, when an injury is caused
by the negligence of the employee, there instantly arises a presumption of law
that there was negligence on the part of the master or employer either in the
selection of the servant or employee, or in supervision over him after selection
or both. The liability of the employer under Article 2180 is direct and
immediate; it is not conditioned upon prior recourse against the negligent
employee and a prior showing of the insolvency of such employee. Therefore, it
is incumbent upon the private respondents (in this case, the petitioner) to
prove that they exercised the diligence of a good father of a family in the
selection and supervision of their employee.
In the present case, Filsyn merely presented evidence on the alleged care
it took in the selection or hiring of Mejia way back in 1974 or ten years before
the fatal accident. Neither did Filsyn present any proof of the existence of the
rules and regulations governing the conduct of its employees. It is significant to
note that in employing Mejia, who is not a high school graduate, Filsyn waived
its long-standing policy requirement of hiring only high school graduates. It
insufficiently failed to explain the reason for such waiver other than their
allegation of Mejia's maturity and skill for the job.
Petition is DENIED.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 165
ISSUE:Whether or not the lower courts erred in finding the Petitioner liable for
damages when the counterclaim failed to state a cause of action for there is no
averment whatsoever therein that said petitioner failed to exercise due diligence
of a good father of a family in the selection and supervision of its drivers or
employees.
HELD: No. The imputed error was without merit. Petitioner contends that
private Respondents‘ counterclaim failed to state a cause of action for there is
no averment therein that petitioner failed to exercise the diligence of a good
father of a family in the selection and supervision of its drivers or employees. It
is to be noted that petitioner Viron Transportation Co., Inc., as the registered
owner of the bus involved in the subject vehicular accident originally brought
the action for damages against private respondents. Private respondents as
defendants in the court a quo denied any liability and filed instead a
counterclaim for damages claiming that it was the driver of the bus who was at
fault in the operation of the bus. We find that the counterclaim of private
respondents alleges the ultimate facts constituting their cause of action. It is
not necessary to state that petitioner was negligent in the supervision or
selection of its employees, as its negligence is presumed by operation of law.
The liability of the employer was explained in a case thus:
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 166
―As employers of the bus driver, the petitioner is, under Article 2180 of the Civil
Code, directly and primary liable for the resulting damages. The presumption
that they are negligent flows from the negligence of their employee. That
presumption, however, is only juristantum, not juriset de jure. Their only
possible defense is that they exercised all the diligence of a good father of a
family to prevent the damage. Article 2180 states that, ―the obligation imposed
by Article 2176 is demandable not only for one‘s own acts or omissions, but
also for those of persons for whom one is responsible‖.
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though
the former are not engaged in any business or industry.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 167
Unaware that what was given to him was the wrong medicine,
respondent took one pill of Dormicum on three consecutive days.
Suspecting that the tablet he took may have a bearing on his physical
and mental state at the time of the collision, respondent returned to Dr. Sy‘s
clinic. Upon being shown the medicine, Dr. Sy was shocked to find that what
was sold to respondent was Dormicum, instead of the prescribed Diamicron.
Thus, on April 14, 1994, respondent filed with the Regional Trial Court
(RTC), of Quezon City a complaint for damages against petitioner.
After hearing, the trial court rendered its decision in favor of respondent.
ISSUE: Whether petitioner was negligent, and if so, whether such negligence
was the proximate cause of respondent‘s accident.
HELD: Yes, Proximate cause is defined as any cause that produces injury in a
natural and continuous sequence, unbroken by any efficient intervening cause,
such that the result would not have occurred otherwise. Proximate cause is
determined from the facts of each case, upon a combined consideration of logic,
common sense, policy, and precedent.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 168
Here, the vehicular accident could not have occurred had petitioner‘s
employee been careful in reading Dr. Sy‘s prescription. Without the potent
effects of Dormicum, a sleeping tablet, it was unlikely that respondent would
fall asleep while driving his car, resulting in a collision.
The responsibility treated of in this article shall cease when the persons
herein mentioned prove that they observed the diligence of a good father of a
family to prevent damage.
It is thus clear that the employer of a negligent employee is liable for the
damages caused by the latter. When an injury is caused by the negligence of an
employee, there instantly arises a presumption of the law that there has been
negligence on the part of the employer, either in the selection of his employee
or in the supervision over him, after such selection. The presumption, however,
may be rebutted by a clear showing on the part of the employer that he has
exercised the care and diligence of a good father of a family in the selection and
supervision of his employee.6 Here, petitioner's failure to prove that it exercised
the due diligence of a good father of a family in the selection and supervision of
its employee will make it solidarily liable for damages caused by the latter.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 169
On appeal to the Court of Appeals, the Regional Trial Court decision was
affirmed with modification.
ISSUE: Whether Safeguard should be held solidarily liable for the damages
awarded to respondents.
HELD: Yes. The responsibility treated of in this Article 2176 shall cease when
the persons herein mentioned prove that they observed all the diligence of a
good father of a family to prevent damage.
and persons with whom the employer has relations through his or its
employees and the imposition of necessary disciplinary measures upon
employees in case of breach or as may be warranted to ensure the performance
of acts indispensable to the business of and beneficial to their employer. To
this, we add that actual implementation and monitoring of consistent
compliance with said rules should be the constant concern of the employer,
acting through dependable supervisors who should regularly report on their
supervisory functions.36 To establish these factors in a trial involving the issue
of vicarious liability, employers must submit concrete proof, including
documentary evidence.
It was found that Safeguard had exercised the diligence in the selection
of Pajarillo since the record shows that Pajarillo underwent a psychological and
neuro-psychiatric evaluation conducted by the St. Martin de Porres Center
where no psychoses ideations were noted, submitted a certification on the Pre-
licensing training course for security guards, as well as police and NBI
clearances.
However this court ruled that Safeguard fell short of the diligence
required in the supervision of its employee, particularly Pajarillo.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 171
Pleyto v. Lomboy
ERNESTO PLEYTO and PHILIPPINE RABBIT BUS LINES,
INC., petitioners, vs. MARIA D. LOMBOY and CARMELA
LOMBOY, respondents.
(G.R. No. 148737, June 16,2004, 2nd Division)
QUISUMBING, J.:
FACTS:Petitioner Philippine Rabbit Bus Lines, Inc. (PRBL), with principal office
at Tarlac City, Tarlac, is a public carrier, engaged in carrying passengers and
goods for a fare. It serviced various routes in Central and Northern Luzon.
Petitioner Ernesto Pleyto was a bus driver employed by PRBL at the time of the
incident in question.
Respondent Maria D. Lomboy of Calasiao, Pangasinan, is the surviving
spouse of the late Ricardo Lomboy, who died in Pasolingan, Gerona, Tarlac, in
a vehicular accident at around 11:30 a.m. of May 16, 1995. The accident was a
head-on collision between the PRBL bus driven by petitioner Pleyto and the car
where Ricardo was a passenger. Respondent Carmela Lomboy is the eldest
daughter of Ricardo and Maria Lomboy. Carmela suffered injuries requiring
hospitalization in the same accident which resulted in her father‘s death.
On November 29, 1995, herein respondents, as pauper-litigants, filed an
action for damages against PRBL and its driver, Pleyto, with the Regional Trial
Court of Dagupan City. In their complaint, the Lomboys prayed that they be
indemnified for the untimely death of Ricardo Lomboy, his lost earnings, the
medical and hospitalization expenses of Carmela, and moral damages.
The Regional Trial Court found Pleyto negligent and lacking in precaution
when he overtook the tricycle with complete disregard of the approaching car in
the other lane.
Petitioners appealed the judgment of the trial court to the Court of Appeals.
The appellate court, however, affirmed the decision of the trial court, with
modification in the award of damages.
Petitioners then moved for reconsideration, but the appellate court denied
it.
Hence this petition.
ISSUE: Whether or not petitioner PRBL is liable for the negligence of driver
Pleyto.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 173
ISSUES:
HELD:
1. Article 2180 of the Civil Code provides: Employers shall be liable for the
damages caused by their employees and household helpers acting within the
scope of their assigned tasks, even though the former are not engaged in any
business or industry. From the above provision, when an injury is caused by
the negligence of an employee, a legal presumption instantly arises that the
employer was negligent, either or both, in the selection and/or supervision of
his said employee duties. The said presumption may be rebutted only by a
clear showing on the part of the employer that he had exercised the diligence of
a good father of a family in the selection and supervision of his employee. If the
employer successfully overcomes the legal presumption of negligence, he is
relieved of liability. In other words, the burden of proof is on the employer.2.
The question is: how does an employer prove that he had indeed exercised the
diligence of a good father of a family in the selection and supervision of his
employee. Making proof in its or his case, it is paramount that the best and
most complete evidence is formally entered. In the case at bar, while there is no
rule which requires that testimonial evidence, to hold sway, must be
corroborated by documentary evidence, inasmuch as the witnesses‘ testimonies
dwelt on mere generalities, we cannot consider the same as sufficiently
persuasive proof that there was observance of due diligence in the selection
and supervision of employees. Petitioner‘s attempt to prove its
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 174
Petition is Denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 175
Yambao v. Zuniga
CECILIA YAMBAO, petitioner, vs. MELCHORITA C. ZUÑIGA, LEOVIGILDO
C. ZUÑIGA, REGINALDO C. ZUÑIGA, AND THE MINORS, HERMINIGILDO C.
ZUÑIGA, JR., AND LOVELY EMILY C. ZUÑIGA – both represented by their
legal guardian, the aforenamed MELCHORITA C. ZUÑIGA, respondents.
(G.R. No. 146173. December 11, 2003, 2nd Division)
QUISUMBING, J.:
At around 3:30 p.m. of May 6, 1992, the bus owned by the petitioner was
being driven by her driver, one Ceferino G. Venturina along the northbound
lane of Epifaniodelos Santos Avenue (EDSA), within the vicinity of Bagong
Barrio, Kalookan City. With Venturina was the bus conductor, Fernando
Dumaliang. Suddenly, the bus bumped HerminigildoZuñiga, a pedestrian.
Such was the force of the impact that the left side of the front windshield of the
bus was cracked. Zuñiga was rushed to the Quezon City General Hospital
where he was given medical attention, but due to the massive injuries
sustained, he succumbed shortly thereafter.
The trial court rendered judgment in favor of the plaintiffs and against
the defendants ordering the defendants jointly and severally, with Plaridel
Surety & Insurance Co., and Times Surety & Insurance Co. Inc. to the extent of
their respective liabilities under their respective insurance policies to pay the
herein plaintiffs.
Yambao then duly moved for reconsideration, but her motion was denied
for want of merit.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 176
Petitioner‘s claim that she exercised due diligence in the selection and
supervision of her driver, Venturina, deserves but scant consideration. Her
allegation that before she hired Venturina she required him to submit his
driver‘s license and clearances is worthless, in view of her failure to offer in
evidence certified true copies of said license and clearances. Bare allegations,
unsubstantiated by evidence, are not equivalent to proof under the rules of
evidence. Moreover, as the court a quo aptly observed, petitioner contradicts
herself. She declared that Venturina applied with her sometime in January
1992 and she then required him to submit his license and clearances.
However, the record likewise shows that she did admit that Venturina
submitted the said requirements only on May 6, 1992, or on the very day of the
fatal accident itself. In other words, petitioner‘s own admissions clearly and
categorically show that she did not exercise due diligence in the selection of her
bus driver.
In any case, assuming arguendo that Venturina did submit his license
and clearances when he applied with petitioner in January 1992, the latter still
fails the test of due diligence in the selection of her bus driver. For an employer
to have exercised the diligence of a good father of a family, he should not be
satisfied with the applicant‘s mere possession of a professional driver‘s license;
he must also carefully examine the applicant for employment as to his
qualifications, his experience and record of service.Petitioner failed to present
convincing proof that she went to this extent of verifying Venturina‘s
qualifications, safety record, and driving history. The presumption juristantum
that there was negligence in the selection of her bus driver, thus, remains
unrebutted.
Nor did petitioner show that she exercised due supervision over
Venturina after his selection. For as pointed out by the Court of Appeals,
petitioner did not present any proof that she drafted and implemented training
programs and guidelines on road safety for her employees. In fact, the record
is bare of any showing that petitioner required Venturina to attend periodic
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 177
seminars on road safety and traffic efficiency. Hence, petitioner cannot claim
exemption from any liability arising from the recklessness or negligence of
Venturina.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 178
Mindanao Terminal loaded and stowed the cargoes aboard the M/V
Mistrau. The vessel set sail from the port of Davao City and arrived at the port
of Inchon, Korea. It was then discovered upon discharge that some of the cargo
was in bad condition. The Marine Cargo Damage Surveyor of Incok Loss and
Average Adjuster of Korea, through its representative Byeong Yong Ahn
(Byeong), surveyed the extent of the damage of the shipment. In a survey
report, it was stated that 16,069 cartons of the banana shipment and 2,185
cartons of the pineapple shipment were so damaged that they no longer had
commercial value.
Del Monte Produce filed a claim under the open cargo policy for the
damages to its shipment. McGee‘s Marine Claims Insurance Adjuster evaluated
the claim and recommended that payment in the amount of $210,266.43 be
made. A check for the recommended amount was sent to Del Monte Produce;
the latter then issued a subrogation receipt to Phoenix and McGee.
voyage. It was further held that Phoenix and McGee had no cause of action
against Mindanao Terminal because the latter, whose services were contracted
by Del Monte, a distinct corporation from Del Monte Produce, had no contract
with the assured Del Monte Produce. The RTC dismissed the complaint and
awarded the counterclaim of Mindanao Terminal in the amount of P83,945.80
as actual damages and P100,000.00 as attorney‘s fees.9 The actual damages
were awarded as reimbursement for the expenses incurred by Mindanao
Terminal‘s lawyer in attending the hearings in the case wherein he had to
travel all the way from Metro Manila to Davao City.
HELD:No.It was established that Mindanao Terminal loaded and stowed the
cargoes of Del Monte Produce aboard the M/V Mistrau in accordance with the
stowage plan, a guide for the area assignments of the goods in the vessel‘s
hold, prepared by Del Monte Produce and the officers of M/V Mistrau. The
loading and stowing was done under the direction and supervision of the ship
officers. The vessel‘s officer would order the closing of the hatches only if the
loading was done correctly after a final inspection. The said ship officers would
not have accepted the cargoes on board the vessel if they were not properly
arranged and tightly secured to withstand the voyage in open seas. They would
order the stevedore to rectify any error in its loading and stowing. A foreman‘s
report, as proof of work done on board the vessel, was prepared by the
checkers of Mindanao Terminal and concurred in by the Chief Officer of M/V
Mistrau after they were satisfied that the cargoes were properly loaded.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 180
YHT Realty v. CA
YHT REALTY CORPORATION, ERLINDA LAINEZ and ANICIA
PAYAM, petitioners, versus THE COURT OF APPEALS and MAURICE
McLOUGHLIN, respondents.
(G.R. No. 126780, February 17, 2005, 2nd Division)
TINGA, J.:
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 181
After investigation done by the police, the respondent sued the petitioner
for reimbursement and damages which the lower court granted. So, this
petition is.
ISSUE: Whether or not the employee including the hotel will be liable in spite of
written agreement that the employer should not be liable as stipulated in the
safety deposit contract.
HELD: Yes. The employee including the hotel who employed them should be
solidarily liable as in accordance to the provision of Article 2180 of the Civil
Code which state that the owners and managers of an establishment or
enterprise are likewise responsible for damages caused by their employees in
the service of the branches in which the latter are employed or on the occasion
of their functions. The stipulation stating that, ―To release and hold free and
blameless TROPICANA APARTMENT HOTEL from any liability arising from any
loss in the contents and/or use of the said deposit box for any cause
whatsoever, including but not limited to the presentation or use thereof by any
other person should the key be lost.‖, is void. This is in accordance to Article
2003 of the Civil code which state that ―The hotel-keeper cannot free himself
from responsibility by posting notices to the effect that he is not liable for the
articles brought by the guest. Any stipulation between the hotel-keeper and the
guest whereby the responsibility of the former as set forth in Articles 1998 to
2001 is suppressed or diminished shall be void.‖
The Supreme Court then affirmed the decision of the lower court and
ordered that the petitioners are jointly and severally liable with the loss of the
money and the expenses of the respondent in connection with the case. Moral
damage also was awarded because his reputation was tainted due to the filing
of the case as he is a known philanthropist and businessman.
Ramos v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 182
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 183
quo rendered judgment in favor of petitioners. Essentially, the trial court found
that private respondents were negligent in the performance of their duties to
Erlinda. On appeal by private respondents, the Court of Appeals reversed the
trial court‘s decision and directed petitioners to pay their "unpaid medical bills"
to private respondents. So, this petition is.
ISSUE: Whether or not all respondents named herein in this petition should be
liable jointly and severally.
HELD: In the first decision of the Supreme Court they upheld the decision of
the Regional Trial Court rendering all respondents liable for being negligence in
their respective duties and responsibilities. In accordance to the principle of
Res Ipsa Loquitor the Court did not give merit to the expert testimonies
presented by respondent. This simply a recognition of the postulate that, as a
matter of common knowledge and experience, the very nature of certain types
of occurrences may justify an inference of negligence on the part of the person
who controls the instrumentality causing the injury in the absence of some
explanation by the defendant who is charged with negligence. Still, before
resort to the doctrine may be allowed, the following requisites must be
satisfactorily shown:
1. The accident is of a kind which ordinarily does not occur in the
absence of someone's negligence;
2. It is caused by an instrumentality within the exclusive control of the
defendant or defendants; and
3. The possibility of contributing conduct which would make the plaintiff
responsible is eliminated.
On the part of Dr. Perfecta Gutierrez, this Court finds that she
omitted to exercise reasonable care in not only intubating the patient,
but also in not repeating the administration of atropine (TSN, August 20,
1991, pp. 5-10), without due regard to the fact that the patient was
inside the operating room for almost three (3) hours. For after she
committed a mistake in intubating [the] patient, the patient's nailbed
became bluish and the patient, thereafter, was placed in trendelenburg
position, because of the decrease of blood supply to the patient's brain.
The evidence further shows that the hapless patient suffered brain
damage because of the absence of oxygen in her (patient's) brain for
approximately four to five minutes which, in turn, caused the patient to
become comatose.
On the part of Dr. Orlino Hosaka, this Court finds that he is liable
for the acts of Dr. Perfecta Gutierrez whom he had chosen to administer
anesthesia on the patient as part of his obligation to provide the patient a
good anesthesiologist', and for arriving for the scheduled operation
almost three (3) hours late.
On the part of DLSMC (the hospital), this Court finds that it is
liable for the acts of negligence of the doctors in their "practice of
medicine" in the operating room. Moreover, the hospital is liable for
failing through its responsible officials, to cancel the scheduled operation
after Dr. Hosaka inexcusably failed to arrive on time.
However in the second decision of the Supreme Court, they absolve Delos
Santos Medical Center base on the doctrine of Control Test. It has been
consistently held that in determining whether an employer-employee
relationship exists between the parties, the following elements must be present:
(1) selection and engagement of services; (2) payment of wages; (3) the power to
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 184
hire and fire; and (4) the power to control not only the end to be achieved, but
the means to be used in reaching such an end.
DLSMC maintains that first, a hospital does not hire or engage the services of a
consultant, but rather, accredits the latter and grants him or her the privilege
of maintaining a clinic and/or admitting patients in the hospital upon a
showing by the consultant that he or she possesses the necessary
qualifications, such as accreditation by the appropriate board (diplomate),
evidence of fellowship and references. Second, it is not the hospital but the
patient who pays the consultant‘s fee for services rendered by the latter. Third,
a hospital does not dismiss a consultant; instead, the latter may lose his or her
accreditation or privileges granted by the hospital. Lastly, DLSMC argues that
when a doctor refers a patient for admission in a hospital, it is the doctor who
prescribes the treatment to be given to said patient. The hospital‘s obligation is
limited to providing the patient with the preferred room accommodation, the
nutritional diet and medications prescribed by the doctor, the equipment and
facilities necessary for the treatment of the patient, as well as the services of
the hospital staff who perform the ministerial tasks of ensuring that the
doctor‘s orders are carried out strictly. Based on this, there is no employer-
employee relationship which can make the hospital liable with the Doctors
jointly and severally.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 185
LEAH ALESNA REYES, ROSE NAHDJA, JOHNNY, and minors LLOYD and
KRISTINE, all surnamed REYES, represented by their mother, LEAH
ALESNA REYES, petitioners, versus
SISTERS OF MERCY HOSPITAL, SISTER ROSE PALACIO, DR. MARVIE
BLANES, and DR. MARLYN RICO,respondents.
(G.R. No. 130547 October 3, 2000 2nd Division)
MENDOZA, J.:
FACTS: Petitioner Leah Alesna Reyes is the wife of the late Jorge Reyes. The
other petitioners, namely, Rose Nahdja, Johnny, Lloyd, and Kristine, all
surnamed Reyes, were their children. Five days before his death on January 8,
1987, Jorge had been suffering from a recurring fever with chills. After he failed
to get relief from some home medication he was taking, which consisted of
analgesic, antipyretic, and antibiotics, he decided to see the doctor.
On January 8, 1987, he was taken to the Mercy Community Clinic by his
wife. He was attended to by respondent Dr. Marlyn Rico, resident physician
and admitting physician on duty, who gave Jorge a physical examination and
took his medical history. She noted that at the time of his admission, Jorge
was conscious, ambulatory, oriented, coherent, and with respiratory
distress. Typhoid fever was then prevalent in the locality, as the clinic had been
getting from 15 to 20 cases of typhoid per month. Suspecting that Jorge could
be suffering from this disease, Dr. Rico ordered a Widal Test, a standard test
for typhoid fever, to be performed on Jorge. Blood count, routine urinalysis,
stool examination, and malarial smear were also made. After about an hour,
the medical technician submitted the results of the test from which Dr. Rico
concluded that Jorge was positive for typhoid fever. As her shift was only up to
5:00 p.m., Dr. Rico indorsed Jorge to respondent Dr. Marvie Blanes.
Dr. Marvie Blanes attended to Jorge at around six in the evening. She
also took Jorge‘s history and gave him a physical examination. Like Dr. Rico,
her impression was that Jorge had typhoid fever. Antibiotics being the accepted
treatment for typhoid fever, she ordered that a compatibility test with the
antibiotic chloromycetin be done on Jorge. Said test was administered by nurse
Josephine Pagente who also gave the patient a dose of triglobe. As she did not
observe any adverse reaction by the patient to chloromycetin, Dr. Blanes
ordered the first five hundred milligrams of said antibiotic to be administered
on Jorge at around 9:00 p.m. A second dose was administered on Jorge about
three hours later just before midnight.
At around 1:00 a.m. of January 9, 1987, Dr. Blanes was called as Jorge‘s
temperature rose to 41°C. The patient also experienced chills and exhibited
respiratory distress, nausea, vomiting, and convulsions. Dr. Blanes put him
under oxygen, used a suction machine, and administered hydrocortisone,
temporarily easing the patient‘s convulsions. When he regained consciousness,
the patient was asked by Dr. Blanes whether he had a previous heart ailment
or had suffered from chest pains in the past. Jorge replied he did not. After
about 15 minutes, however, Jorge again started to vomit, showed restlessness,
and his convulsions returned. Dr. Blanes re-applied the emergency measures
taken before and, in addition, valium was administered. Jorge, however, did
not respond to the treatment and slipped into cyanosis, a bluish or purplish
discoloration of the skin or mucous membrane due to deficient oxygenation of
the blood. At around 2:00 a.m., Jorge died. He was forty years old. The cause of
his death was "Ventricular Arrythemia Secondary to Hyperpyrexia and typhoid
fever."
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 186
After this the petitioner filed a case to the court and their principal
contention was that Jorge did not die of typhoid fever. Instead, his death was
due to the wrongful administration of chloromycetin.
ISSUE: Whether or not the attending physician including the hospital will be
liable base on the principle of Res Ipsa Loquitor.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 187
FACTS: Pregnant with her fourth child, Corazon Nogales ("Corazon"), who was
then 37 years old, was under the exclusive prenatal care of Dr. Oscar Estrada.
Around midnight of 25 May 1976, Corazon started to experience mild labor
pains prompting Corazon and Rogelio Nogales ("Spouses Nogales") to see Dr.
Estrada at his home. After examining Corazon, Dr. Estrada advised her
immediate admission to the Capitol Medical Center ("CMC"). Corazon was then
brought to the labor room of the CMC. Dr. Rosa Uy ("Dr. Uy"), who was then a
resident physician of CMC, conducted an internal examination of Corazon. Dr.
Uy then called up Dr. Estrada to notify him of her findings.
Dr. Estrada ordered for 10 mg. of valium to be administered immediately
by intramuscular injection. Dr. Estrada later ordered the start of intravenous
administration of syntocinon admixed with dextrose, 5%, in lactated Ringers'
solution, at the rate of eight to ten micro-drops per minute. At 6:13 a.m.,
Corazon started to experience convulsions.
At 6:15 a.m., Dr. Estrada ordered the injection of ten grams of
magnesium sulfate. However, Dr. Ely Villaflor ("Dr. Villaflor"), who was
assisting Dr. Estrada, administered only 2.5 grams of magnesium sulfate. At
6:22 a.m., Dr. Estrada, assisted by Dr. Villaflor, applied low forceps to extract
Corazon's baby. At 6:27 a.m., Corazon began to manifest moderate vaginal
bleeding which rapidly became profuse.afterwhich Corazon died.
ISSUE: Whether CMC is vicariously liable for the negligence of Dr. Estrada.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 188
In the instant case, CMC impliedly held out Dr. Estrada as a member of
its medical staff. Through CMC's acts, CMC clothed Dr. Estrada with apparent
authority thereby leading the Spouses Nogales to believe that Dr. Estrada was
an employee or agent of CMC. CMC cannot now repudiate such authority.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 189
FACTS: On April 4, 1984, Natividad Agana was rushed to the Medical City
General Hospital (Medical City Hospital) because of difficulty of bowel
movement and bloody anal discharge. After a series of medical examinations,
Dr. Miguel Ampil, petitioner in G.R. No. 127590, diagnosed her to be suffering
from "cancer of the sigmoid. On April 11, 1984, Dr. Ampil, assisted by the
medical staff of the Medical City Hospital, performed an anterior resection
surgery on Natividad. After Dr. Fuentes had completed the hysterectomy, Dr.
Ampil took over, completed the operation and closed the incision. After a
couple of days, Natividad complained of excruciating pain in her anal region.
On August 31, 1984, Natividad flew back to the Philippines, still
suffering from pains. Two weeks thereafter, her daughter found a piece of
gauze protruding from her vagina. Upon being informed about it, Dr. Ampil
proceeded to her house where he managed to extract by hand a piece of gauze
measuring 1.5 inches in width. Dr. Ampils assurance did not come true.
Instead, the pains intensified, prompting Natividad to seek treatment at the
Polymedic General Hospital. Dr. Ramon Gutierrez detected the presence of
another foreign object in her vagina -- a foul-smelling gauze measuring 1.5
inches in width which badly infected her vaginal vault.
ISSUE: Whether or not Dr. Ampil is liable for negligence and malpractice and
whether PSI may be held solidarily liable for the negligence of Dr. Ampil.
HELD: First, it is not disputed that the surgeons used gauzes as sponges to
control the bleeding of the patient during the surgical operation.
Second, immediately after the operation, the nurses who assisted in the
surgery noted in their report that the sponge count (was) lacking 2 that such
anomaly was announced to surgeon and that a search was done but to no avail
prompting Dr. Ampil to continue for closure.
Third, after the operation, two (2) gauzes were extracted from the same
spot of the body of Mrs. Agana where the surgery was performed.
To put it simply, such act is considered so inconsistent with due care as
to raise an inference of negligence. There are even legions of authorities to the
effect that such act is negligence per se.
This is a clear case of medical malpractice or more appropriately, medical
negligence. Private hospitals, hire, fire and exercise real control over their
attending and visiting consultant staff. While consultants are not, technically
employees, the control exercised, the hiring, and the right to terminate
consultants all fulfill the important hallmarks of an employer-employee
relationship, with the exception of the payment of wages. In assessing whether
such a relationship in fact exists, the control test is determining. Accordingly,
on the basis of the foregoing, the purpose of allocating responsibility in medical
negligence cases, an employer-employee relationship in effect exists between
hospitals and their attending and visiting physicians.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 190
Professional Services v. CA
PROFESSIONAL SERVICES, INC., petitioner, versus THE COURT OF
APPEALS and NATIVIDAD and ENRIQUE AGANA, respondents,
G.R. No. 126297 February 11, 2008 1st Division
SANDOVAL-GUTIERREZ, J.:
G.R. No. 126297 February 2, 2010 EN BANC
CORONA, J.:
FACTS: On April 4, 1984, Natividad Agana was admitted at the Medical City
General Hospital (Medical City) because of difficulty of bowel movement and
bloody anal discharge. Dr. Ampil diagnosed her to be suffering from "cancer of
the sigmoid." Thus, on April 11, 1984, Dr. Ampil, assisted by the medical
staff1 of Medical City, performed an anterior resection surgery upon her.
During the surgery, he found that the malignancy in her sigmoid area had
spread to her left ovary, necessitating the removal of certain portions of it.
Thus, Dr. Ampil obtained the consent of Atty. Enrique Agana, Natividad‘s
husband, to permit Dr. Juan Fuentesto perform hysterectomy upon Natividad.
Dr. Fuentes performed and completed the hysterectomy. Afterwards, Dr. Ampil
took over, completed the operation and closed the incision. However, the
operation appeared to be flawed. In the corresponding Record of Operation
dated April 11, 1984, the attending nurses entered these remarks:
1. sponge count lacking 2
2. announced to surgeon searched done but to no avail continue for
closure.
After a couple of days, Natividad complained of excruciating pain in her
anal region. She consulted both Dr. Ampil and Dr. Fuentes about it. They told
her that the pain was the natural consequence of the surgical operation
performed upon her. Dr. Ampil recommended that Natividad consult an
oncologist to treat the cancerous nodes which were not removed during the
operation.
On May 9, 1984, Natividad, accompanied by her husband, went to the
United States to seek further treatment. After four (4) months of consultations
and laboratory examinations, Natividad was told that she was free of cancer.
Hence, she was advised to return to the Philippines.
On August 31, 1984, Natividad flew back to the Philippines, still
suffering from pains. Two (2) weeks thereafter, her daughter found a piece of
gauze protruding from her vagina. Dr. Ampil was immediately informed. He
proceeded to Natividad‘s house where he managed to extract by hand a piece of
gauze measuring 1.5 inches in width. Dr. Ampil then assured Natividad that
the pains would soon vanish.
Despite Dr. Ampil‘s assurance, the pains intensified, prompting
Natividad to seek treatment at the Polymedic General Hospital. While confined
thereat, Dr. Ramon Gutierrez detected the presence of a foreign object in her
vagina -- a foul-smelling gauze measuring 1.5 inches in width. The gauze had
badly infected her vaginal vault. A recto-vaginal fistula had formed in her
reproductive organ which forced stool to excrete through the vagina. Another
surgical operation was needed to remedy the situation. Thus, in October 1984,
Natividad underwent another surgery.
ISSUE: Whether or not the petitioner here in the case and Doctor Ampil is
jointly and severally liable of the obligation due to the respondent because of
medical malpractice.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 191
HELD: Yes. The Supreme Court is firm in its decision on rendering them liable
to the respondent as it prove that there are two motions for reconsideration but
it never flip flop.
It should be borne in mind that the corporate negligence ascribed to PSI
is different from the medical negligence attributed to Dr. Ampil. The duties of
the hospital are distinct from those of the doctor-consultant practicing within
its premises in relation to the patient; hence, the failure of PSI to fulfill its
duties as a hospital corporation gave rise to a direct liability to the Aganas
distinct from that of Dr. Ampil.
Clearly, PSI is estopped from passing the blame solely to Dr. Ampil. Its
act of displaying his name and those of the other physicians in the public
directory at the lobby of the hospital amounts to holding out to the public that
it offers quality medical service through the listed physicians. This justifies
Atty. Agana‘s belief that Dr. Ampil was a member of the hospital‘s staff. It
must be stressed that under the doctrine of apparent authority, the
question in every case is whether the principal has by his voluntary act
placed the agent in such a situation that a person of ordinary prudence,
conversant with business usages and the nature of the particular
business, is justified in presuming that such agent has authority to
perform the particular act in question. In these cases, the circumstances
yield a positive answer to the question.
The challenged Decision also anchors its HELD on the doctrine of
corporate responsibility. The duty of providing quality medical service is no
longer the sole prerogative and responsibility of the physician. This is because
the modern hospital now tends to organize a highly-professional medical
staff whose competence and performance need also to be monitored by the
hospital commensurate with its inherent responsibility to provide quality
medical care. Such responsibility includes the proper supervision of the
members of its medical staff. Accordingly, the hospital has the duty to
make a reasonable effort to monitor and oversee the treatment prescribed
and administered by the physicians practicing in its premises.
Unfortunately, PSI had been remiss in its duty. It did not conduct
an immediate investigation on the reported missing gauzes to the great
prejudice and agony of its patient.
Cantre v. Sps. Go
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 192
FACTS: Nora Go gave birth to her 4th child. Two hours later, she suffered
profuse bleeding inside her womb due to some placenta parts which were not
completely expelled after delivery. She then suffered hypovolemic shock, so her
BP dropped to 40/0. Dr. Milagros Cantre, an Ob-Gyne specialist and Nora's
attending physician, together with an assisting resident physician, performed
various medical procedures to stop the bleeding and to restore Nora's BP. While
Dr. Cantre was massaging Nora's uterus for it to contract and stop bleeding,
she ordered a droplight to warm Nora and her baby. At that time, she was
unconscious.
While in the recovery room, Nora's husband John David noticed a fresh
gaping wound (2 1/2 x 3 1/2 in) in the inner portion of her left arm near the
armpit. When he asked the nurses about the cause of the injury, he was
informed that it was due to a burn. John David filed a request for investigation.
Dr. Cantre said that what caused the injury was the blood pressure cuff. John
David brought Nora to the NBI for a physical examination. The medico-legal
said that the injury appeared to be a burn and that a droplight when placed
near the skin for about 10 minutes could cause such burn. He dismissed the
likelihood that the wound was caused by a blood pressure cuff since the scar
was not around the arm, but just on one side of the arm. Nora's injury was
referred to a plastic surgeon for skin grafting. However, her arm would never be
the same--the surgery left an unsightly scar, her movements are restricted, and
the injured arm aches at the slightest touch.
Sps. Go filed a complaint for damages against Dr. Cantre, the medical
director, and the hospital. In the RTC, parties have rested their respective
cases, but the court admitted additional exhibits [consist mostly of medical
records produced by the hospital during trial pursuant to a subpoena duces
tecum] offered by Sps. Go, which were not testified to by any witness. RTC
ruled in favor of the spouses. CA affirmed RTC with modification (complaint
dismissed with respect to the medical director and the hospital; only moral
damages awarded).
ISSUE: Whether or not Dr. Cantre is liable for the injury suffered by Nora Go.
HELD: Yes. Dr. Cantre's counsel admitted the existence of the additional
exhibits when they were formally offered for admission by the RTC. In any case,
given the circumstances of this case, a HELD on Dr. Cantre's negligence may
be made based on the res ipsa loquitur doctrine even in the absence of the
additional exhibits.
The Hippocratic Oath mandates physicians to give primordial
consideration to their patients' well-being, and if a doctor fails to live up to this
precept, he is accountable for his acts. This notwithstanding, courts face a
unique restraint in adjudicating medical negligence
cases because physicians are not guarantors of care, and they never set
out to intentionally cause injury to their patients. HOWEVER, intent is
immaterial in these cases because where negligence exists and is proven, it
automatically gives the injured a right to reparation for the damage
caused.
Res ipsa loquitur x Medical negligence cases
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 193
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 194
DR. RUBI LI, Petitioner, versus SPOUSES REYNALDO and LINA SOLIMAN,
as parents/heirs of deceased Angelica Soliman, Respondents.
G.R. No. 165279 June 7, 2011 EN BANC
VILLARAMA, JR., J.:
FACTS: This case involved the death of Angelica Soliman, respondents‘ 11-year
old daughter. Previously, Angelica was diagnosed
withosteosarcoma, osteoblastic type, a highly malignant cancer of the [thigh]
bone. To remove the tumor, her right leg was amputated. And to eliminate any
remaining cancer cells and minimize the chances of recurrence and prevent the
disease from spreading to other parts of her body (metastasis), she
subsequently underwent chemotherapy. The chemotherapy was administered
by petitioner Dr. Rubi Li, an oncologist at St. Luke‘s Medical Center (SLMC)
upon consent by her parents, herein respondents. Angelica died just eleven
days after the administration of the first cycle of the chemotherapy regimen.
The parents of the child thereafter sued the doctor for damages before
the RTC, charging the latter (along with other doctors and the SLMC itself) with
negligence in causing Angelica‘s untimely demise. It was specifically averred in
the complaint that the doctor assured the parents that Angelica would recover
in view of 95% chance of healing with chemotherapy (―Magiging normal na ang
anak nyo basta ma-chemo. 95% ang healing”), and when asked regarding the
side effects, petitioner mentioned only slight vomiting, hair loss and weakness
(―Magsusuka ng kaunti. Malulugas ang buhok. Manghihina”). The parents thus
claimed that they would not have given their consent to chemotherapy had the
doctor not falsely assured them of its side effects.
The trial court however dismissed the case. It found that the doctor was
not liable for damages as she observed the best known procedures and
employed her highest skill and knowledge in the administration of
chemotherapy drugs on Angelica [though] despite all efforts said patient died.
The parents appealed to the Court of Appeals (CA). While concurring with
the trial court‘s finding that there was no negligence committed by the
petitioner in the administration of chemotherapy treatment to Angelica, the CA
found that the doctor failed to fully explain to the parents of the patient all the
known side effects of chemotherapy. The CA thus adjudged the doctor liable
for damages.
ISSUE: Whether or not Dr. Rubi Li can be held liable [of failing] to fully disclose
serious side effects of chemotherapy to the parents of her patient despite the
absence of finding that she was negligent in administering the said treatment.
HELD: No. The four essential elements that a plaintiff must prove in a medical
malpractice action based on the doctrine of informed consent, paraphrased as
follows: (1) the physician‟s duty to disclose material risks; (2) the physician‟s
failure to disclose, or inadequate disclosure, of those risks; (3) the patient‟s
consent to the treatment she otherwise would not have consented to, which
is a direct and proximate result of the physician‘s failure to disclose; and
(4) plaintiff‟s injury as a consequence the proposed treatment. The gravamen
in an informed consent case requires the plaintiff to point to significant
undisclosed information relating to the treatment which would have altered her
decision to undergo it.
Applying the foregoing to this case, it was held that petitioner Dr. Rubi
Li, an oncologist who performed chemotherapy on respondents‘ daughter, who
was sick with malignant bone cancer, adequately disclosed material risks
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 195
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 196
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 197
FACTS: On February 26, 1996, Charles Vallereja, a 7-year old son of the
spouses Florentino Vallejera and Theresa Vallejera, was hit by a Ford Fiera van
owned by the petitioners and driven at the time by their employee, Vincent
Norman Yeneza y Ferrer. Charles died as a result of the accident.
In time, an Information for Reckless Imprudence Resulting to
Homicide was filed against the driver before the Municipal Trial Court in Cities
(MTCC), Bacolod City, docketed as Criminal Case No. 67787, entitled People of
the Philippines v. Vincent Norman Yeneza. Unfortunately, before the trial could
be concluded, the accused driver committed suicide, evidently bothered by
conscience and remorse. On account thereof, the MTCC, in its order of
September 30, 1998, dismissed the criminal case.
On June 23, 1999, in the RTC of Bacolod City, the spouses Vallejera filed
a complaint for damages against the petitioners as employers of the deceased
driver, basically alleging that as such employers, they failed to exercise due
diligence in the selection and supervision of their employees.
ISSUE: Whether or not the employer which is the petitioner here in the case is
liable on the damages incurred by its employee.
HELD: Yes. Under Article 2180 of the Civil Code, the liability of the employer is
direct or immediate. It is not conditioned upon prior recourse against the
negligent employee and a prior showing of insolvency of such employee. Here,
the complaint sufficiently alleged that the death of the couple's minor son was
caused by the negligent act of the petitioners' driver; and that the petitioners
themselves were civilly liable for the negligence of their driver for failing "to
exercise the necessary diligence required of a good father of the family in the
selection and supervision of its employee, the driver, which diligence, if
exercised, would have prevented said accident."
Had the respondent spouses elected to sue the petitioners based on
Article 103 of the Revised Penal Code, they would have alleged that the guilt of
the driver had been proven beyond reasonable doubt; that such accused driver
is insolvent; that it is the subsidiary liability of the defendant petitioners as
employers to pay for the damage done by their employee (driver) based on the
principle that every person criminally liable is also civilly liable. Since there
was no conviction in the criminal case against the driver, precisely because
death intervened prior to the termination of the criminal proceedings, the
spouses' recourse was, therefore, to sue the petitioners for their direct and
primary liability based on quasi-delict.
The circumstance that no reservation to institute a separate civil action
for damages was made when the criminal case was filed is of no moment for
the simple reason that the criminal case was dismissed without any
pronouncement having been made therein. In reality, therefor, it is as if there
was no criminal case to speak of in the first place. And for the petitioners to
insist for the conviction of their driver as a condition sine qua non to hold them
liable for damages is to ask for the impossible.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 198
Magat v. Medialdea
VICTORINO D. MAGAT, petitioner, versus HON. LEO D. MEDIALDEA and
SANTIAGO A. GUERRERO, respondents.
(G.R. No. L-37120 April 20, 1983 2nd Division)
ESCOLIN, J.:
FACTS: Defendant Santiago Guerrero entered into a contract with the U.S.
Navy Exchange, Subic Bay, Philippines for the operation of a fleet of taxicabs.
Guerrero and his aforesaid agent Isidro Aligada were able to import from Japan
with the assistance of the plaintiff Magat and his Japanese business associates
the necessary taximeters for Guerrero‘s taxicabs in partial fulfillment of
commitments with the U.S. Navy Exchange, Subic Bay, Philippines.
Guerrero and his agent have repeatedly assured Magat of his financial
capabilities to pay for the goods ordered by him and in fact he accomplished
the necessary application for a letter of credit with his banker, but he
subsequently instructed his banker not to give due course to his application for
a letter of credit and that for reasons only known to him, he failed and refused
to open the necessary letter of credit to cover payment of the goods ordered by
him.
Meanwhile, Guerrero has been operating his taxicabs without the
required radio transceivers and when the U.S. Navy Authorities were pressing
defendant for compliance with his commitments with respect to the
installations of radio transceivers on his taxicabs, he impliedly laid the blame
for the delay upon Magat, thus destroying his reputation with the said Naval
Authorities of Subic Bay, Philippines, with whom he transacts business.
Victorino Magat filed a complaint for alleged breach of contract against
Santiago Guerrero.
ISSUE: Whether or not the complaint for breach of contract states a valid
cause of action.
HELD: Article 1170 of the Civil Code provides: ―those who in the performance
of their obligation are guilty of fraud, negligence, or delay, and those who in
any manner contravene the tenor thereof are liable for damages.
The phrase "in any manner contravene the tenor" of the obligation
includes any ilicit act or omission which impairs the strict and faithful
fulfillment of the obligation and every kind of defective performance.
The damages which the obligor is liable for includes not only the value of
the loss suffered by the obligee (daño emergente) but also the profits which the
latter failed to obtain (lucro cesante). If the obligor acted in good faith, he shall
be liable for those damages that are the natural and probable consequences of
the breach of the obligation and which the parties have foreseen or could have
reasonably foreseen at the time the obligation was constituted; and in case of
fraud, bad faith, malice or wanton attitude, he shall be liable for all damages
which may be reasonably attributed to the non-performance of the obligation.
In the case at bar, petitioner had fulfilled his part of the bargain while
private respondent failed to comply with his correlative obligation by refusing to
open a letter of credits to cover payment of the goods ordered by him, and that
consequently, petitioner suffered not only loss of his expected profits, but
moral and exemplary damages as well. Therefore he is liable for the damages
he caused to the petitioner.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 199
ISSUE: Whether or not the Court of Appeals erred in the application of Article
1191 of the Civil Code, as it ruled that there is no breach of obligation inspite
of the lapse of their stipulated period and the failure of the respondent to pay.
HELD: No. The failure of respondent to pay the value of the purchase price
within ten (10) years from execution of the deed did not amount to a
substantial breach.
The transaction between Eulalio Mistica and respondents, as evidenced
by the Kasulatan, was clearly a Contract of Sale. A deed of sale is considered
absolute in nature when there is neither a stipulation in the deed that title to
the property sold is reserved to the seller until the full payment of the price;
nor a stipulation giving the vendor the right to unilaterally resolve the contract
the moment the buyer fails to pay within a fixed period.
In a contract of sale, the remedy of an unpaid seller is either specific
performance or rescission. Rescission, however, is allowed only where the
breach is substantial and fundamental to the fulfillment of the obligation. In
the present case, the failure of respondents to pay the balance of the purchase
price within ten years from the execution of the Deed did not amount to a
substantial breach.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 200
Co v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 201
ISSUE: Whether or not the Court of Appeals erred in ordering the spouses Co
to return the $30,000.00 paid by Custodio pursuant to the ―option‖ granted to
her over the property.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 202
already received by the Cos. Under Article 1482 of the Civil Code, earnest
money given in a sale transaction is considered part of the purchase price and
proof of the perfection of the sale.
Despite the fact that Custodio failed to pay the amounts of
US$40,000.00 and US$60,000.00 on or before December 4, 1984 and January
5, 1985 respectively, the Cos did not sue for either specific performance or
rescission of the contract. The Cos were of the mistaken belief that Custodio
had lost her ―option‖ over the Beata property when she failed to pay the
remaining balance of $70,000.00 pursuant to their August 8, 1986 letter. In
the absence of an express stipulation authorizing the sellers to extrajudicially
rescind the contract of sale, the Cos cannot unilaterally and extrajudicially
rescind the contract of sale.
Accordingly, Custodio acted well within her rights when she attempted to
pay the remaining balance of $70,000.00 to complete the sum owed of
$100,000.00 as the contract was still subsisting at that time. When the Cos
refused to accept said payment and to deliver the Beata property, Custodio
immediately sued for the rescission of the contract of sale and prayed for the
return of the $30,000.00 she had initially paid.
Under Article 1385 of the Civil Code, rescission creates the obligation to
return the things, which were the object of the contract, but such rescission
can only be carried out when the one who demands rescission can return
whatever he may be obliged to restore. This principle has been applied to
rescission of reciprocal obligations under Article 1191 of the Civil Code. The
Court of Appeals therefore did not err in ordering the Cos to return the amount
of $30,000.00 to Custodio after ordering the rescission of the contract of sale
over the property.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 203
FACTS: When the late Emilio Dalope died, he left a 589-square meter untitled
lot in Sta. Barbara, Pangasinan, to his wife, Felisa Dalope (Felisa) and their
nine children, one of whom was Rosa Dalope-Funcion. To enable Rosa and her
husband Antonio Funcion (the Funcions) get a loan from respondent
Development Bank of the Philippines (DBP), Felisa sold the whole lot to the
Funcions. With the deed of sale in their favor and the tax declaration
transferred in their names, the Funcions mortgaged the lot with the DBP. On
February 12, 1979, after the Funcions failed to pay their loan, the DBP
foreclosed the mortgage on the lot and consolidated ownership in its name on
June 17, 1981.
Four years later or on September 20, 1983 the DBP conditionally sold
the lot to Sofia Quirong for the price of P78,000.00. In their contract of sale,
Sofia Quirong waived any warranty against eviction. The contract provided that
the DBP did not guarantee possession of the property and that it would not be
liable for any lien or encumbrance on the same. Quirong gave a down payment
of P14,000.00. Two months after that sale or on November 28, 1983 Felisa and
her eight children (collectively, the Dalopes) filed an action for partition and
declaration of nullity of documents with damages against the DBP and the
Funcions before the Regional Trial Court (RTC) of Dagupan City. On December
27, 1984, notwithstanding the suit, the DBP executed a deed of absolute sale of
the subject lot in Sofia Quirong‘s favor. The deed of sale carried substantially
the same waiver of warranty against eviction and of any adverse lien or
encumbrance.
On May 11, 1985, Sofia Quirong having since died, her heirs (petitioner
Quirong heirs) filed an answer in intervention in Civil Case D-7159 in which
they asked the RTC to award the lot to them and, should it instead be given to
the Dalopes, to allow the Quirong heirs to recover the lot‘s value from the DBP.
But, because the heirs failed to file a formal offer of evidence, the trial court did
not rule on the merits of their claim to the lot and, alternatively, to relief from
the DBP. On December 16, 1992 the RTC rendered a decision, declaring the
DBP‘s sale to Sofia Quirong valid only with respect to the shares of Felisa and
Rosa Funcion in the property. It declared Felisa‘s sale to the Funcions, the
latter‘s mortgage to the DBP, and the latter‘s sale to Sofia Quirong void insofar
as they prejudiced the shares of the eight other children of Emilio and Felisa
who were each entitled to a tenth share in the subject lot.
On June 10, 1998 the Quirong heirs filed the present action against the DBP
before the RTC of Dagupan City, Branch 44, in Civil Case CV-98-02399-D for
rescission of the contract of sale between Sofia Quirong, their predecessor, and
the DBP and praying for the reimbursement of the price of P78,000.00 that she
paid the bank plus damages. The heirs alleged that they were entitled to the
rescission of the sale because the decision in Civil Case D-7159 stripped them
of nearly the whole of the lot that Sofia Quirong, their predecessor, bought from
the DBP. The DBP filed a motion to dismiss the action on ground of
prescription and res judicata but the RTC denied their motion.
On June 14, 2004, after hearing the case, the RTC rendered a
decision, rescinding the sale between Sofia Quirong and the DBP and ordering
the latter to return to the Quirong heirs the P78,000.00 Sofia Quirong paid the
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 204
bank. On appeal by the DBP, the Court of Appeals (CA) reversed the RTC
decision and dismissed the heirs‘ action on the ground of prescription. The CA
concluded that, reckoned from the finality of the December 16, 1992 decision
in Civil Case D-7159, the complaint filed on June 10, 1998 was already barred
by the four-year prescriptive period under Article 1389 of the Civil Code. The
Quirong heirs filed a motion for reconsideration of the decision but the
appellate court denied it, thus, this petition.
ISSUE: Whether or not the Quirong heirs‘ action for rescission of respondent
DBP‘s sale of the subject property can be granted.
HELD: No. Action for rescission, which is based on a subsequent economic loss
suffered by the buyer, was precisely the action that the Quirong heirs took
against the DBP. Consequently, it prescribed as Article 1389 provides in four
years from the time the action accrued. Since it accrued on January 28, 1993
when the decision in Civil Case became final and executory and ousted the
heirs from a substantial portion of the lot, the latter had only until January 28,
1997 within which to file their action for rescission. Given that they filed their
action on June 10, 1998, they did so beyond the four-year period.
The remedy of "rescission" is not confined to the rescissible contracts
enumerated under Article 1381. Article 1191 of the Civil Code gives the injured
party in reciprocal obligations, such as what contracts are about, the option to
choose between fulfillment and "rescission." Arturo M. Tolentino, a well-known
authority in civil law, is quick to note, however, that the equivalent of Article
1191 in the old code actually uses the term "resolution" rather than the
present "rescission." The calibrated meanings of these terms are distinct.
"Rescission" is a subsidiary action based on injury to the plaintiff‘s economic
interests as described in Articles 1380 and 1381. "Resolution," the action
referred to in Article 1191, on the other hand, is based on the defendant‘s
breach of faith, a violation of the reciprocity between the parties. As an action
based on the binding force of a written contract, therefore, rescission
(resolution) under Article 1191 prescribes in 10 years. Ten years is the period
of prescription of actions based on a written contract under Article 1144.
The distinction makes sense. Article 1191 gives the injured party an
option to choose between, first, fulfillment of the contract and, second, its
rescission. An action to enforce a written contract (fulfillment) is definitely an
"action upon a written contract," which prescribes in 10 years (Article 1144). It
will not be logical to make the remedy of fulfillment prescribe in 10 years while
the alternative remedy of rescission (or resolution) is made to prescribe after
only four years as provided in Article 1389 when the injury from which the two
kinds of actions derive is the same.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 205
FACTS: 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
contract 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 in the amount of P1,155,000.00 in
favor of The Plaza. On July 28, 1980, The Plaza paid P1,155,000.00 less
withholding taxes as down payment to Gaite. Thereafter, Rhogen commenced
construction of the restaurant building.
In a letter dated September 10, 1980, Engineer Angelito Z. Gonzales, the
Acting Building Official of the Municipality of Makati, ordered Gaite to cease
and desist from continuing with the construction of the building for violation of
Sections 301 and 302 of the National Building Code (P.D. 1096) and its
implementing rules and regulations. The letter was referred to The Plaza‘s
Project Manager, Architect Roberto L. Tayzon.
Gaite notified Reyes that he is suspending all construction works until
Reyes and the Project Manager cooperate to resolve the issue he had raised to
address the problem. This was followed by another letter dated November 18,
1980 in which Gaite expressed his sentiments on their aborted project and
reiterated that they can still resolve the matter with cooperation from the side
of The Plaza. In his reply-letter dated November 24, 1980, Reyes asserted that
The Plaza is not the one to initiate a solution to the situation, especially after
The Plaza already paid the agreed down payment of P1,155,000.00, which
compensation so far exceeds the work completed by Rhogen before the
municipal authorities stopped the construction for several violations. Reyes
made it clear they have no obligation to help Rhogen get out of the situation
arising from non-performance of its own contractual undertakings, and that
The Plaza has its rights and remedies to protect its interest.
On January 9, 1981, Gaite informed The Plaza that he is terminating
their contract based on the Contractor‘s Right to Stop Work or Terminate
Contracts as provided for in the General Conditions of the Contract. In his
letter, Gaite accused Reyes of not cooperating with Rhogen in solving the
problem concerning the revocation of the building permits, which he described
as a "minor problem." Additionally, Gaite demanded the payment ofP63,058.50
from The Plaza representing the work that has already been completed by
Rhogen.
On January 13, 1981, The Plaza, through Reyes, countered that it will
hold Gaite and Rhogen fully responsible for failure to comply with the terms of
the contract and to deliver the finished structure on the stipulated date. Reyes
argued that the down payment made by The Plaza was more than enough to
cover Rhogen‘s expenses.
On March 26, 1981, The Plaza filed Civil Case No. 40755 for breach of
contract, sum of money and damages against Gaite and FGU in the Court of
First Instance (CFI) of Rizal. The court granted the petition and uphold by CA
with modification to award of damages.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 206
ISSUE:
1. Whether or not the rescission is valid.
2. Whether or not quantum meruit is to be appreciated here.
HELD:
1. Yes. Reciprocal obligations are those which arise from the same cause,
and in which each party is a debtor and a creditor of the other, such that
the obligation of one is dependent upon the obligation of the other. They
are to be performed simultaneously such that the performance of one is
conditioned upon the simultaneous fulfillment of the other. Respondent
The Plaza predicated its action on Article 1191 of the Civil Code, which
provides for the remedy of "rescission" or more properly resolution, a
principal action based on breach of faith by the other party who violates
the reciprocity between them. The breach contemplated in the provision
is the obligor‘s failure to comply with an existing obligation. Thus, the
power to rescind is given only to the injured party. The injured party is
the party who has faithfully fulfilled his obligation or is ready and willing
to perform his obligation.
The construction contract between Rhogen and The Plaza provides for
reciprocal obligations whereby the latter‘s obligation to pay the contract price
or progress billing is conditioned on the former‘s performance of its
undertaking to complete the works within the stipulated period and in
accordance with approved plans and other specifications by the owner.
Pursuant to its contractual obligation, The Plaza furnished materials and paid
the agreed down payment. It also exercised the option of furnishing and
delivering construction materials at the jobsite pursuant to Article III of the
Construction Contract. However, just two months after commencement of the
project, construction works were ordered stopped by the local building official
and the building permit subsequently revoked on account of several violations
of the National Building Code and other regulations of the municipal
authorities.
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
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 207
was found to have executed the works not in accordance with the approved
plans or failed to seek prior approval of the Municipal Engineer. 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.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 208
FACTS: In the first quarter of 1998, Solar Harvest and Davao corrugated
entered into an unwritten agreement. Solar Harvest placed orders for
customized boxes for its business of exporting bananas at USD 1.1o each.
Petitioner made a full payment of USD 40150. By January 3, 2001 petitioner
had not received any of the ordered boxes. On February 19, 2001 Davao
corrugated replied that as early as April 3, 1998, order/boxes are completed
and Solar Harvest failed to pick them up from their warehouse within 30 days
from completion as agreed upon. Respondent mentioned that petitioner even
placed additional order of 24,000.00 boxes, out of which, 14,000 had already
been manufactured without any advance payment from Solar Harvest. Davao
Corrugated then demanded that Solar Harvest remove boxes from their
warehouse, pay balance of USD 15,400.00 for the additional boxes and
P132,000.00 as storage fee. On August 17, 2001 Solar Harvest filed complaint
against Davao Corrugated for sum of money and damages claiming that the
agreement was for the delivery of the boxes, which Davao Corrugated did not
do. They further alleged that whenever repeated follow-up was made to Davao
Corrugated, they would only see sample boxes and get promise of delivery. Due
to Davao Corrugated‘s failure to deliver, Solar Harvest had to cancel the order
and demanded payment and/or refund which Davao Corrugated refused to
pay. Davao Corrugated counterclaimed that they had already completed
production of the 36,500 boxes plus additional 14,000 boxes (which was part
of the additional 24,000 order that is unpaid). The agreement was for Solar
Harvest to pick up the boxes, which they did not do. They even averred that on
October 8, 1998 Solar Harvest‘s representative Bobby Que even went to the
warehouse to inspect and saw that indeed boxes were ready for pick up. On
Febuary 20, 1999, Que visited the factory again and said that they ought to sell
the boxes to recoup some of the costs fo the 14,000 additional orders because
their transaction to ship the bananas did not materialize. Solar Harvest denies
that they made the additional order. On March 20, 2004 the Regional Trial
Court ruled in favour of Davao Corrugated.
HELD: No. The Court of Appeals held that it was unthinkable that for around
two years petitioner merely followed up and did not demand the delivery of the
boxes. Even assuming that the agreement is for delivery by Davao Corrugated,
respondent would not be liable for breach of contract as petitioner had not yet
demanded from it the delivery of the boxes. There is no error in the decision of
the Regional Trial Court. Furthermore, the claim for reimbursement is actually
one for rescission or resolution of contract under Article 1191 of the Civil Code.
The right to rescind contracts arises once the party defaults in the performance
of his obligation. Article 1191 should be taken in conjunction with Article 1169:
Those obliged to deliver or to do something in delay from the time oblige
judicially or extrajudicially demands form them the fulfilment of their
obligation. However the demand from creditor shall not necessary that delay
may exist:
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 209
Reyes v. Tuparan
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 210
FACTS: On September 10, 1992, Mila A. Reyes (petitioner) filed a complaint for
Rescission of Contract with Damages against Victoria T. Tuparan (respondent)
before the RTC. In her Complaint, petitioner alleged, among others, that she
was the registered owner of a 1,274 square meter residential and commercial
lot located in Karuhatan, Valenzuela City, and covered by TCT No. V-4130; that
on that property, she put up a three-storey commercial building known as RBJ
Building and a residential apartment building; that since 1990, she had been
operating a drugstore and cosmetics store on the ground floor of RBJ Building
where she also had been residing while the other areas of the buildings
including the sidewalks were being leased and occupied by tenants and street
vendors.
In December 1989, respondent leased from petitioner a space on the
ground floor of the RBJ Building for her pawnshop business for a monthly
rental of ₱4,000.00. A close friendship developed between the two which led to
the respondent investing thousands of pesos in petitioner‘s financing/lending
business from February 7, 1990 to May 27, 1990, with interest at the rate of
6% a month.
On June 20, 1988, petitioner mortgaged the subject real properties to the
Farmers Savings Bank and Loan Bank, Inc. (FSL Bank) to secure a loan of
₱2,000,000.00 payable in installments. On November 15, 1990, petitioner‘s
outstanding account on the mortgage reached ₱2,278,078.13. Petitioner then
decided to sell her real properties for at least ₱6,500,000.00 so she could
liquidate her bank loan and finance her businesses. As a gesture of friendship,
respondent verbally offered to conditionally buy petitioner‘s real properties for
₱4,200,000.00 payable on installment basis without interest and to assume the
bank loan. To induce the petitioner to accept her offer, respondent offered the
following conditions/concessions.
After petitioner‘s verbal acceptance of all the conditions/concessions,
both parties worked together to obtain FSL Bank‘s approval for respondent to
assume her (petitioner‘s) outstanding bank account. The assumption would be
part of respondent‘s purchase price for petitioner‘s mortgaged real properties.
FSL Bank approved their proposal on the condition that petitioner would sign
or remain as co-maker for the mortgage obligation assumed by respondent.
Respondent, however, defaulted in the payment of her obligations on
their due dates. Instead of paying the amounts due in lump sum on their
respective maturity dates, respondent paid petitioner in small amounts from
time to time. To compensate for her delayed payments, respondent agreed to
pay petitioner an interest of 6% a month. As of August 31, 1992, respondent
had only paid ₱395,000.00, leaving a balance of ₱805,000.00 as principal on
the unpaid installments and ₱466,893.25 as unpaid accumulated interest.
HELD: No. The Court agrees with the HELD of the courts below that the
subject Deed of Conditional Sale with Assumption of Mortgage entered into by
and among the two parties and FSL Bank on November 26, 1990 is a contract
to sell and not a contract of sale. The title and ownership of the subject
properties remains with the petitioner until the respondent fully pays the
balance of the purchase price and the assumed mortgage obligation.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 211
Thereafter, FSL Bank shall then issue the corresponding deed of cancellation of
mortgage and the petitioner shall execute the corresponding deed of absolute
sale in favor of the respondent.
Accordingly, the petitioner‘s obligation to sell the subject properties
becomes demandable only upon the happening of the positive suspensive
condition, which is the respondent‘s full payment of the purchase price.
Without respondent‘s full payment, there can be no breach of contract to speak
of because petitioner has no obligation yet to turn over the title. Respondent‘s
failure to pay in full the purchase price is not the breach of contract
contemplated under Article 1191 of the New Civil Code but rather just an event
that prevents the petitioner from being bound to convey title to the respondent.
Thus, the Court fully agrees with the CA when it resolved: "Considering,
however, that the Deed of Conditional Sale was not cancelled by Vendor Reyes
(petitioner) and that out of the total purchase price of the subject property in
the amount of ₱4,200,000.00, the remaining unpaid balance of Tuparan
(respondent) is only ₱805,000.00, a substantial amount of the purchase price
has already been paid. It is only right and just to allow Tuparan to pay the said
unpaid balance of the purchase price to Reyes."
Granting that a rescission can be permitted under Article 1191, the
Court still cannot allow it for the reason that, considering the circumstances,
there was only a slight or casual breach in the fulfillment of the obligation.
Unless the parties stipulated it, rescission is allowed only when the breach of
the contract is substantial and fundamental to the fulfillment of the obligation.
Whether the breach is slight or substantial is largely determined by the
attendant circumstances.
On the issue of interest, petitioner failed to substantiate her claim that
respondent made a personal commitment to pay a 6% monthly interest on the
₱805,000.00 from the date of delinquency, December 31, 1991. As can be
gleaned from the contract, there was a stipulation stating that: "All the
installments shall not bear interest." The CA was, however, correct in imposing
interest at the rate of 6% per annum starting from the filing of the complaint
on September 11, 1992.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 212
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 213
another letter informing World Class that the second Reservation Agreement
was incomplete because it did not expressly provide the time of
completion of the condominium unit. World Class countered that the
provisional Contract to Sell it previously submitted to GG Sportswear expressly
provided for the completion date (December 15, 1998) and insisted that GG
Sportswear pay its overdue account. So, this petition is.
HELD: No. There was no breach on the part of World Class to justify the
rescission and refund. GG Sportswear likewise has no legal basis to demand
either the rescission of the Agreement or the refund of payments it made to
World Class under the Agreement.
Unless the parties stipulated it, rescission is allowed only when the breach of
the contract is substantial and fundamental to the fulfillment of the
obligation. Whether the breach is slight or substantial is largely determined by
the attendant circumstances. But this is not the real issue here because no
breach was made by the respondent.
Even if we apply Article 1191 of the Civil Code, which provides:
“Art. 1191. 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 court observe that GG Sportswear, not World Class, substantially
breached its obligations under the Agreement when it was remiss in the timely
payment of its obligations, such that its January 1997 installment was paid
only in March 1997, or two months after due date. GG Sportswear did not pay
the succeeding installment dated April 1997 (presumably for February 1997)
until it had filed its complaint in June 1997. A substantial breach of a
reciprocal obligation, like failure to pay the price in the manner prescribed by the
contract, entitles the injured party to rescind the obligation. Under this
contractual term, it was World Class, not GG Sportswear, which had the
ground to demand the rescission of the Agreement, as well as the prerogative to
secure the forfeiture of all the payments already made by GG Sportswear.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 214
HELD: No. Rescission is only allowed when the breach is so substantial and
fundamental as to defeat the object of the parties in entering into the
contract. We find no such substantial or material breach.
It is true that respondent failed to pay the 7th and 8th installments of
the purchase price. However, considering the circumstances of the instant
case, particularly the provisions of the kasunduan, respondent cannot be
deemed to have committed a serious breach. In the first place, respondent was
not in default as petitioner never made a demand for payment.1avvphi1
Moreover, the kasunduan sa bilihan ng lupa and the kasunduan should
both be given effect rather than be declared conflicting, if there is a way of
reconciling them. Petitioner and respondent would not have entered into either
of the agreements if they did not intend to be bound or governed by them.
Indeed, taken together, the two agreements actually constitute a single
contract pertaining to the sale of a land to respondent by petitioner. Their
stipulations must therefore be interpreted together, attributing to the doubtful
ones that sense that may result from all of them taken jointly. Their proper
construction must be one that gives effect to all and favour the efficacy of the
contract.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 215
FACTS: In May 1992, Napala offered to purchase from the Spouses Tongson
their 364-square meter parcel of land, situated in Davao City and covered by
Transfer Certificate of Title (TCT) No. 143020, for P3,000,000. Finding the offer
acceptable, the Spouses Tongson executed with Napala a Memorandum of
Agreement dated 8 May 1992.
On 2 December 1992, respondents‘ lawyer Atty. Petronilo A. Raganas, Jr.
prepared a Deed of Absolute Sale indicating the consideration as
only P400,000. When Carmen Tongson "noticed that the consideration was
very low, she [complained] and called the attention of Napala but the latter told
her not to worry as he would be the one to pay for the taxes and she would
receive the net amount of P3,000,000."
To conform with the consideration stated in the Deed of Absolute Sale, the
parties executed another Memorandum of Agreement, which allegedly replaced
the first Memorandum of Agreement, showing that the selling price of the land
was only P400,000.
Upon signing the Deed of Absolute Sale, Napala paid P200,000 in cash to
the Spouses Tongson and issued a postdated Philippine National Bank (PNB)
check in the amount of P2,800,000, representing the remaining balance of the
purchase price of the subject property. Thereafter, TCT No. 143020 was
cancelled and TCT No. T-186128 was issued in the name of EPBI.
When presented for payment, the PNB check was dishonored for the reason
"Drawn Against Insufficient Funds." Despite the Spouses Tongson's repeated
demands to either pay the full value of the check or to return the subject parcel
of land, Napala failed to do either. Left with no other recourse, the Spouses
Tongson filed with the Regional Trial Court, Branch 16, Davao City a
Complaint for Annulment of Contract and Damages with a Prayer for the
Issuance of a Temporary Restraining Order and a Writ of Preliminary
Injunction.
In their Answer, respondents countered that Napala had already
delivered to the Spouses Tongson the amount ofP2,800,000 representing the
face value of the PNB check, as evidenced by a receipt issued by the Spouses
Tongson. Respondents pointed out that the Spouses Tongson never returned
the PNB check claiming that it was misplaced. Respondents asserted that the
payment they made rendered the filing of the complaint baseless.
At the pre-trial, Napala admitted, among others, issuing the postdated PNB
check in the sum of P2,800,000. The Spouses Tongson, on the other hand,
admitted issuing a receipt which showed that they received the PNB check from
Napala. Thereafter, trial ensued.
ISSUE: Whether or not rescission is not tenable because the contract entered
into is based on fraud employed.
HELD: Yes. Indisputably, the Spouses Tongson as the sellers had already
performed their obligation of executing the Deed of Sale, which led to the
cancellation of their title in favor of EPBI. Respondents as the buyers, on the
other hand, failed to perform their correlative obligation of paying the full
amount of the contract price. While Napala paidP200,000 cash to the Spouses
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 216
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 217
FACTS: It appears that on July 28, 1976 plaintiff Bonifacio Maceda, Jr.
(Maceda) obtained a loan from the defendant DBP in the amount of P7.3
million to finance the expansion of the Old Gran Hotel in Leyte. Upon approval
of said loan, plaintiff Maceda executed a promissory note and a mortgage of
real estate. Project cost of the New Gran Hotel wasP10.5M. DBP fixed a debt-
equity ratio of 70%-30%, corresponding to DBP and Maceda‘s respective
infusion in the hotel project. Maceda‘s equity infusion was P2.93M, or 30%
of P10.5M. The DBP Governor at that time, Recio Garcia, in-charge of loans for
hotels, allegedly imposed the condition that DBP would choose the building
contractor, namely, Moreman Builders Co. (Moreman). The contractor would
directly receive the loan releases from DBP, after verification by DBP of the
construction progress. The period of loan availment was 360 days from date of
initial release of the loan. Similarly, suppliers of equipment and furnishings for
the hotel were also to be paid directly by DBP. The construction deadline was
set for December 22, 1977.
Maceda filed a complaint for Rescission of the building contract with
Damages against the contractor Moreman, before the then Manila Court of
First Instance Branch 39, which was docketed as Civil Case No. 113498. In its
decision dated November 28, 1978, the CFI rescinded the building contract,
suspended the period of availment, allowed Maceda to himself take over
construction, and directed DBP to release to Maceda the sum of P1.003M,
which had previously been approved for release in January 1978. The DBP was
further ordered to give plaintiff Maceda such other amounts still pending
release. Moreman filed an appeal which was subsequently dismissed in 1990
by the Supreme Court. Entry of judgment on this case was issued on April 23,
1990.
In the meantime, Maceda also instituted the case a quo for Specific
Performance with Damages against defendant DBP before the Makati RTC in
1984. The Manila CFI‘s November 28, 1978 Decision and the factual findings
therein contained became part of the evidence submitted before the Makati
RTC. In essence, Maceda‘s complaint before the Makati RTC alleged that DBP
conspired with the contractor, Moreman, by approving anomalous loan
releases to the latter despite exaggerated charges and valuation made by said
contractor on the hotel project. In effect, it was alleged that despite only a 15%
accomplishment which should have cost only P700,000.00, the contractor,
thru the active connivance of the DBP, was able to rake in a total
ofP3,174,358.38 or 60% of the cost of the projected hotel building. When
plaintiff Maceda himself tried to resume the completion and construction of the
hotel project, after the building contract with Moreman was already rescinded
by the CFI Manila, defendant allegedly blocked efforts of the plaintiff by
delaying the release of funds from his loan with the DBP and imposing onerous
conditions which made it difficult for plaintiff to pursue the construction of the
New Gran Hotel. It was further alleged that due to such delays on the part of
the DBP, the period of availment of the loan expired without the plaintiff‘s [sic]
having availed of the total approved amount of their loan. The construction of
the hotel was never finished. Worse, due to interests and penalties, the
obligation of the plaintiff has ballooned to P11,817,365.90 as of January 31,
1984, not to mention the amount ofP810,702.68 supposedly representing
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 218
interests and charges for the period of February 1, 1978 to October 1979.
Finally, DBP allegedly threatened to foreclose the mortgaged properties of the
plaintiff.
HELD: Yes. The court finds credit in the finding that DBP actively connived
with the contractor in the anomalous loan releases. DBP falsely argues that
releases on the loan were coursed thru the plaintiff-appellant and the checks
were drawn jointly in the names of Maceda and Moreman. As found by the
RTC, the records show that checks were drawn only in the name of Moreman
and plaintiff‘s conformity to fund releases were solicited by DBP after the fact of
release, not before. Direct releases to the plaintiff, instead of Moreman, began
only after Moreman was discharged as contractor. Further, it was agreed that
payment to Moreman Builders would be assessed against actual construction
of the project upon DBP‘s verification. Thus, DBP contributed in the swindling
perpetrated by Moreman against the plaintiff because it improperly discharged
its duty as verifier of the construction project.
Under Article 1191 of the Civil Code, the aggrieved party has a choice
between specific performance and rescission with damages in either case.
However, we have ruled that if specific performance becomes impractical or
impossible, the court may order rescission with damages to the injured party.
After the lapse of more than 30 years, it is now impossible to implement the
loan agreement as it was written, considering the absence of evidence as to the
rising costs of construction, as well as the obvious changes in market
conditions on the viability of the operations of the hotel. We deem it equitable
and practicable to rescind the obligation of DBP to deliver the balance of the
loan proceeds to Maceda. In exchange, we order DBP to pay Maceda the value
of Maceda‘s cash equity of P6,153,398.05 by way of actual damages, plus the
applicable interest rate. The present HELD comes within the purview of
Maceda‘s and DBP‘s prayers for "other reliefs, just or equitable under the
premises."
Raquel-Santos v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 219
FACTS: Yes. The CA was correct in applying Article 1191 of the Civil Code,
which indicates the remedies of the injured party in case there is a breach of
contract:
ART. 1191. 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 fulfillment and the
rescission of the obligation, with the payment of damages in either case.
He may also seek rescission, even after he has chosen fulfillment, if the
latter should become impossible.
Initially, respondents sought the fulfillment of Finvest‘s obligation to
deliver the stock certificates, instead of a rescission. They changed their minds
later and amended the prayer in their complaint and opted for a refund of the
purchase price plus damages. The trial court allowed the amendment, there
being no objection from Finvest.
For a valid transfer of stocks, the requirements are as follows: (a) there
must be delivery of the stock certificate; (b) the certificate must be endorsed by
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 220
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 221
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 222
HELD: Yes. Article 1191 of the Civil Code provides that 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 rescission referred to in this
article, more appropriately referred to as resolution, is not predicated on injury
to economic interests on the part of the party plaintiff, but of breach of faith by
the defendant which is violative of the reciprocity between the parties. The
right to rescind may be waived, expressly or impliedly.
The petitioner maintain that they did not waive their right to demand
rescission as a result of the disputed deviations and because of the fact that
DEAC commenced construction without first securing a building permit as was
incumbent upon it under their contract. In fact, apart from the present case,
the Spouses Francisco filed a criminal suit against respondent Dadula taking
him to task for these violations, of which the latter was found guilty.
Respondents DEAC and Dadula, to whom the obligation of securing the
building permit pertained, should obviously have ensured compliance with the
requirements set forth by law. At the very least, good faith and fair dealing
ordain that they inform the Spouses Francisco that the building permit had not
yet been issued especially that they had already received a substantial amount
of money from the latter and had already started the construction of the
building.
Given the fact that the construction in this case is already 75% complete,
the trial court was correct in ordering partial rescission only of the undelivered
or unfinished portion of the construction. Equitable considerations justify
rescission of the portion of the obligation which had not been delivered.
Cannu V. Galang
SPS. FELIPE AND LETICIA CANNU, petitioners, versus SPS. GIL AND
FERNANDINA GALANG AND NATIONAL HOME MORTGAGE FINANCE
CORPORATION,respondents.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 223
ISSUE: Whether or not the action for rescission will be granted due that there
was a substantial breach of the obligation.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 224
percent thereof, this percentage is still substantial. Their failure to fulfill their
obligation gave the respondents-spouses Galang the right to rescission.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 225
ISSUE: Whether or not there is legal, or even a factual, ground for the
rescission of the Memorandum of Agreement.
HELD: No. There is no legal basis for the rescission. The remedy of rescission
under Art. 1191 of the Civil Code is predicated on a breach of faith by the other
party that violates the reciprocity between them. The MOA between petitioners
and respondents is a conditional contract to sell. Ownership over the lots is not
to pass to the petitioners until full payment of the purchase price. Petitioners‘
obligation to pay, in turn, is conditioned upon the release of the lots from
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 226
mortgage with the PNB to be secured by the respondents. Although there was
no express provision regarding reserved ownership until full payment of the
purchase price, the intent of the parties in this regard is evident from the
provision that a deed of absolute sale shall be executed only when the lots have
been released from mortgage and the balance paid by petitioners. Since
ownership has not been transferred, no further legal action need have been
taken by the respondents, except an action to recover possession in case
petitioners refuse to voluntarily surrender the lots.
The records show that the lots were finally released from mortgage in
July 1991. Petitioners have always expressed readiness to pay the balance of
the purchase price once that is achieved. Hence, petitioners should be allowed
to pay the balance now, if they so desire, since it is established that
respondents‘ demand for them to pay in April 1991 was premature.
Paguyo v. Astorga
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 227
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 228
and offer to repay the purchase price after their liquidity position would have
improved and after respondents would have refurbished the building, updated
the real property taxes, and turned the building into a profitable business
venture. The court stated however that, it will not allow itself to be an
instrument to the dissolution of contract validly entered into, for a party should
not, after its opportunity to enjoy the benefits of an agreement, be allowed to
later disown the arrangement when the terms thereof ultimately would prove to
operate against its hopeful expectations.
Casino v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 229
ISSUE: Whether or not the rescission of the contract by the private respondent
is valid.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 230
the several letters respondent sent to him demanding compliance with his
obligation.
Carrascoso v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 231
FACTS: El Dorado Plantation, Inc. was the registered owner of a parcel of land
with an area of approximately 1,825 hectares covered by Transfer Certificate of
Title (TCT) No. T-93 situated in Sablayan, Occidental Mindoro.
On February 15, 1972, at a special meeting of El Dorado‘s Board of
Directors, a Resolution was passed authorizing Feliciano Leviste, then
President of El Dorado, to negotiate the sale of the property and sign all
documents and contracts bearing thereon.
On March 23, 1972, by a Deed of Sale of Real Property, El Dorado,
through Feliciano Leviste, sold the property to Fernando O. Carrascoso, Jr.
From the provisions of the Deed of Sale, Carrascoso was to pay the full
amount of the purchase price on March 23, 1975.
The 3-year period for Carrascoso to fully pay for the property on March
23, 1975 passed without him having complied therewith.
Lauro Leviste (Lauro), a stockholder and member of the Board of
Directors of El Dorado, through his counsel, Atty. Benjamin Aquino, by letter
dated December 27, 1976, called the attention of the Board to Carrascoso‘s
failure to pay the balance of the purchase price of the property amounting to
P1,300,000.00. And Lauro‘s lawyer manifested that:
Lauro‘s desire to rescind the sale was reiterated in two other letters
addressed to the Board dated January 20, 1977 and March 3, 1977.
Jose P. Leviste, as President of El Dorado, later sent a letter of February
21, 1977 to Carrascoso informing him that in view of his failure to pay the
balance of the purchase price of the property, El Dorado was seeking the
rescission of the March 23, 1972 Deed of Sale of Real Property.
Lauro and El Dorado finally filed on March 15, 1977 a complaint for
rescission of the March 23, 1972 Deed of Sale of Real Property between El
Dorado and Carrascoso with damages before the Court of First Instance (CFI)
of Occidental Mindoro, docketed as Civil Case No. R-226.
Lauro and El Dorado also sought the cancellation of TCT No. T-6055 in
the name of Carrascoso and the revival of TCT No. T-93 in the name of El
Dorado, free from any liens and encumbrances. Furthermore, the two prayed
for the issuance of an order for Carrascoso to: (1) reconvey the property to El
Dorado upon return to him of P500,000.00, (2) secure a discharge of the real
estate mortgage constituted on the property from HSB, (3) submit an
accounting of the fruits of the property from March 23, 1972 up to the return
of possession of the land to El Dorado, (4) turn over said fruits or the
equivalent value thereof to El Dorado and (5) pay the amount of P100,000.00
for attorney‘s fees and other damages.
Also on March 15, 1977, Lauro and El Dorado caused to be annotated on
TCT No. T-6055 a Notice of Lis Pendens, inscribed as Entry No. 39737.
In his Answer with Compulsory Counterclaim, Carrascoso alleged that:
(1) he had not paid his remaining P1,300,000.00 obligation under the March
23, 1972 Deed of Sale of Real Property in view of the extensions of time to
comply therewith granted him by El Dorado; (2) the complaint suffered from
fatal defects, there being no showing of compliance with the condition
precedent of exhaustion of intra-corporate remedies and the requirement that a
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 232
ISSUE: Whether or not the Court of Appeals acted with grave abude of
discretion and committed a mistake of law in not declaring that the action for
rescission was prematurely filed.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either case.
He may also seek rescission, even after he has chosen fulfillment, if the
latter should become impossible.
The court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third
persons who have acquired the thing, in accordance with Articles 1385
and 1388 and the Mortgage Law.
Reciprocal obligations are those which arise from the same cause, and in
which each party is a debtor and a creditor of the other, such that the
obligation of one is dependent upon the obligation of the other. They are to be
performed simultaneously such that the performance of one is conditioned
upon the simultaneous fulfillment of the other.
The right of rescission of a party to an obligation under Article 1191 is
predicated on a breach of faith by the other party who violates the reciprocity
between them.
A contract of sale is a reciprocal obligation. The seller obligates itself to
transfer the ownership of and deliver a determinate thing, and the buyer
obligates itself to pay therefor a price certain in money or its equivalent. The
non-payment of the price by the buyer is a resolutory condition which
extinguishes the transaction that for a time existed, and discharges the
obligations created thereunder. Such failure to pay the price in the manner
prescribed by the contract of sale entitles the unpaid seller to sue for collection
or to rescind the contract.
In the case at bar, El Dorado already performed its obligation through
the execution of the March 23, 1972 Deed of Sale of Real Property which
effectively transferred ownership of the property to Carrascoso. The latter, on
the other hand, failed to perform his correlative obligation of paying in full the
contract price in the manner and within the period agreed upon.
The terms of the Deed are clear and unequivocal: Carrascoso was to pay
the balance of the purchase price of the property amounting to P1,300,000.00
plus interest thereon at the rate of 10% per annum within a period of three (3)
years from the signing of the contract on March 23, 1972. When Jose Leviste
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 233
informed him that El Dorado was seeking rescission of the contract by letter of
February 21, 1977, the period given to him within which to fully satisfy his
obligation had long lapsed.
The El Dorado Board Resolution and the Affidavit of Jose Leviste
interposing no objection to Carrascoso‘s mortgaging of the property to any
bank did not have the effect of suspending the period to fully pay the purchase
price, as expressly stipulated in the Deed, pending full payment of any
mortgage obligation of Carrascoso.
Goldenrod v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 234
FACTS: Pio Barreto and Sons, Inc. owned forty-three (43) parcels of registered
land with a total area of 18,500 square meters located at Carlos Palanca St.,
Quiapo, Manila, which were mortgaged with United Coconut Planters Bank
(UCPB). In 1988, the obligation of the corporation with UCPB remained unpaid
making foreclosure of the mortgage imminent.
Goldenrod, Inc. offered to buy the property from BARRETO & SONS. On
25 May 1988, through its president, petitioner wrote respondent Anthony Que,
President of respondent BARRETO & SONS, as follows:
……….we prefer that the lots be reconsolidated back to its mother
titles.
Enclosed is the earnest money of P1 million which shall form part of
the purchase price.
Payment of the agreed total consideration shall be effected in
accordance with our offer as you have accepted and upon execution of the
necessary documents of sale to be implemented after the said
reconsolidation of the lots.
Kindly acknowledge receipt of the earnest money.
When the term of existence of BARRETO & SONS expired, all its assets
and liabilities including the property located in Quiapo were transferred to Pio
Barreto Realty Development, Inc. Petitioner's offer to buy the property resulted
in its agreement with respondent BARRETO REALTY that petitioner would pay
the following amounts: (a) P24.5 million representing the outstanding
obligations of BARRETO REALTY with UCPB on 30 June 1988, the deadline set
by the bank for payment; and, (b) P20 million which was the balance of the
purchase price of the property to be paid in installments within a 3-year period
with interest at 18% per annum.
On 30 August 1988 Alicia P. Logarta, President of Logarta Realty and
Development Corporation, which acted as agent and broker of petitioner, wrote
private respondent Anthony Que informing him on behalf of petitioner that it
could not go through with the purchase of the property due to circumstances
beyond its fault.
On 31 August 1988 respondent BARRETTO REALTY sold to Asiaworld
Trade Center Phils., Inc., Lot 2, one of the two (2) consolidated lots, for the
price of P23 million. On 13 October 1988 respondent BARRETTO REALTY
executed a deed transferring by way of " dacion " the property reconsolidated as
Lot 1 in favor of UCPB, which in turn sold the property to ASIAWORLD for P24
million.
On 12 December 1988 Logarta again wrote respondent Que demanding
the return of the earnest money to GOLDENROD. On 7 February 1989
petitioner through its lawyer reiterated its demand, but the same remained
unheeded by private respondents. This prompted petitioner to file a complaint
with the Regional Trial Court of Manila against private respondents for the
return of the amount of P1 million and the payment of damages including lost
interests or profits.
On 15 March 1991 the trial court rendered a decision ordering private
respondents jointly and severally to pay petitioner P1,000.000.00 with legal
interest from 9 February 1989 until fully paid.The trial court found that there
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 235
ISSUE: Whether or not the Court of Appeals erred in disregarding the finding of
the trial court that the earnest money given by petitioner to respondent
BARRETTO REALTY should be returned to the former.
HELD: Under Art. 1482 of the Civil Code, whenever earnest money is given in a
contract of sale, it shall be considered as part of the purchase price and as
proof of the perfection of the contract. Petitioner clearly stated without any
objection from private respondents that the earnest money was intended to
form part of the purchase price. It was an advance payment which must be
deducted from the total price. Hence, the parties could not have intended that
the earnest money or advance payment would be forfeited when the buyer
should fail to pay the balance of the price, especially in the absence of a clear
and express agreement thereon.
In University of the Philippines v. de los Angeles , the right to rescind
contracts is not absolute and is subject to scrutiny and review by the proper
court. We held further, in the more recent case of Adelfa Properties, Inc. v.
Court of Appeals , that rescission of reciprocal contracts may be extrajudicially
rescinded unless successfully impugned in court. If the party does not oppose
the declaration of rescission of the other party, specifying the grounds
therefore, and it fails to reply or protest against it, its silence thereon suggests
an admission of the veracity and validity of the rescinding party's claim.
Private respondents did not interpose any objection to the rescission by
petitioner of the agreement. As found by the Court of Appeals, private
respondent BARRETTO REALTY even sold Lot 2 of the subject consolidated lots
to another buyer, ASIAWORLD, one day after its President Anthony Que
received the broker's letter rescinding the sale. Subsequently, on 13 October
1988 respondent BARRETO REALTY also conveyed ownership over Lot 1 to
UCPB which, in turn, sold the same to ASIAWORLD.
Art. 1385 of the Civil Code provides that rescission creates the obligation
to return the things which were the object of the contract together with their
fruits and interest. The vendor is therefore obliged to return the purchase price
paid to him by the buyer if the latter rescinds the sale, or when the transaction
was called off and the subject property had already been sold to a third person,
as what obtained in this case. Therefore, by virtue of the extrajudicial
rescission of the contract to sell by petitioner without opposition from private
respondents who, in turn, sold the property to other persons, private
respondent BARRETTO REALTY, as the vendor, had the obligation to return
the earnest money of P1000,000.00 plus legal interest from the date it received
notice of rescission from petitioner
WHEREFORE, the Petition is GRANTED. The decision of the Court of
Appeals is REVERSED and SET ASIDE. Private respondent Pio Barretto Realty
Development, Inc., its successors and assigns are ordered to return to
petitioner Goldenrod, Inc., the amount of P1,000,000.00 with legal interest
thereon.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 236
Serrano v. CA
SPOUSES ARTURO AND NICETA SERRANO, petitioners, versus COURT OF
APPEALS AND HEIRS OF EMILIO S. GELI, respondents.
(G.R. No. 133883. December 10, 2003 2nd Division)
CALLEJO, SR., J.:
FACTS: Petitioner spouses Arturo and Niceta Serrano are the owners of a
parcel of land and the house constructed thereon located in Quezon City; and
another parcel of land located again in Quezon City. The couple mortgaged said
properties in favor of Government Service Insurance System (GSIS) for a
security loan of P50,000.00 They were able to pay P18,000.00 on 1969. On the
same year, the spouses Serrano as vendors and spouses Emilio and Evelyn
Geli as vendees executed a deed of absolute sale with partial assumption of the
mortgage for the price of P70, 000. Spouses Geli paid the amount of
P38,000.00 and the balance of P32,000.00 to be paid to GSIS. Emilio Geli and
his children, respondents herein, failed to settle the amount to the GSIS.
Petitioners filed a complaint for the rescission of the deed of absolute sale
with partial assumption of mortgage on September 6, 1984. The trial court
rendered a decision ordering rescission of the deed. Emilio and petitioners
appealed the decision to the Court of Appeals (CA). The GSIS foreclosed the
mortgage during the pendency of the appeal. A certificate of sale over the
property was Issued in favor of the GSIS it being the highest bidder. In 1987,
Emilio paid the redemption price of P67, 701.84 to GSIS. Accordingly, the GSIS
executed a deed of transfer and turned over to Emilio the transfer certificate
title (TCT) without informing Serrano and the CA. In 1991, the CA dismissed
Emilio and petitioners‘ appeal for failure to pay the requisite docket fees which
became final and executory.
ISSUE: Whether or not the trial court‘s judgment ordering the rescission of the
deed of absolute sale with partial assumption of mortgage executed by
petitioners and respondents is proper.
HELD: The payment by Emilio of the redemption price to the GSIS was made
pending appeal by the respondents from the trial court‘s order and concealed
said payment to petitioners. The respondents‘ appealed the decision before the
CA which was subsequently dismissed for failure to pay the requisite docket
fees. Neither did respondents file any motion for reconsideration for the
dismissal of the appeal. Consequently, the trial court‘s decision became final
and executory.
With the rescission of the deed of sale, the rights of Emilio Geli under
said deed to redeem the property had been extinguished. The petitioners
cannot even be compelled to subrogate the respondents to their right under the
real estate mortgage over the property which the petitioners executed in favor
of GSIS since the payment of the redemption price was made without the
knowledge of the petitioners. The respondents, however, are entitled to be
reimbursed by the petitioners to the extent that the latter were benefited.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 237
FACTS: Concepcion Palma Gil, and her sister, Nieves Palma Gil, were the co-
owners of a parcel of commercial land with an area of 829 square meters,
identified as Lot No. 59-C, covered by Transfer Certificate of Title (TCT) No. 432
located in Davao City. The spouses Angel and Nieves Villarica had constructed
a two-storey commercial building on the property. On October 13, 1953,
Concepcion filed a complaint against her sister Nieves with the then Court of
First Instance of Davao City, for specific performance, to compel the defendant
to cede and deliver to her an undivided portion of the said property with an
area of 256.2 square meters. After due proceedings, the court rendered
judgment in favor of Concepcion, ordering the defendant to deliver to the
plaintiff an undivided portion of the said property with an area of 256.2 square
meters.
Nieves appealed to the Court of Appeals which affirmed the assailed
decision. On motion of the Concepcion, the court Issued a writ of execution.
Nieves, however, refused to execute the requisite deed in favor of her sister. The
court Issued an order authorizing the sheriff to execute the requisite deed of
transfer to the plaintiff over an undivided portion of the property with a total
area of 256.2 square meters. The sheriff thereafter executed a Deed of Transfer
to Concepcion over Lot 59-C-1 and Lot 59-C-2 with a total area of 256.2 square
meters. On October 24, 1956, Concepcion executed a deed of absolute sale
over Lot 59-C-1 in favor of Iluminada Pacetes. In the said deed, the area of Lot
59-C-1 appeared as ―256 square meters‖ although under the subdivision plan,
the area of the property was only 218 square meters. The spouses Angel and
Nieves Villarica filed a complaint against the sheriff and Concepcion with the
Court of First Instance of Davao City for the nullification of the deed of transfer
executed by the sheriff.
ISSUE: Whether or not Iluminada Pacetes had the right to sell the two parcels
of land to Maglana.
HELD: Article 1191 in tandem with Article 1592 of the New Civil Code were
central to the issues at bar. In reciprocal obligations, neither party incurred
delay if the other does not comply in a proper manner with that which was
incumbent upon him. From the moment one of the parties fulfills his
obligation, delay in the other begins. Thus, reciprocal obligations should be
performed simultaneously for the performance of one is conditioned and the
simultaneous fulfillment of the other. The right of rescission of a party to an
obligation under Article 1191 is predicated on a breach of faith by the other
party that violates the reciprocity between them. The consignation of the
vendee of the purchase price of the property is sufficient to defeat the right of
the petitioners to demand for the rescission of the said deed of absolute sale.
The deed of absolute sale executed by Concepcion Gil in favor of
Iluminada Pacetes is an executory contract and not an executed contra t is a
settle matter. In a perfect contract of sale of realty, the right to rescind the said
contract depends upon the fulfillment or non-fulfillment of the prescribed
condition
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 238
Reyes v. Lim
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 239
FACTS: On November 7, 1994, petitioner David Reyes as seller, and Jose Lim
as buyer, entered into a contract to sell a parcel of land located at Pasay City.
Harrison Lumber Inc. occupied the property as lessee. The contract contained
terms and conditions which are as follows: 1) the total consideration of
property is P28M, 2) P10M to be paid upon the signing of the contract, the
balance payable on March 8, 1995 upon vacation of tenants and occupants of
the property and the execution of deed of absolute sale, 3) that in the event
that the property is not vacated on the date stipulated, vendee shall withhold
the balance and vendor agrees to pay a penalty of 4% of the downpayment
(P10M) until its complete vacation. Lim paid the amount of P10M to Reyes as
provided in the contract.
On March 23, 1995, petitioner filled a complaint for annulment of
contract and damages against respondents Lim, Chuy Cheng Keng and
Harrison. The complaint alleged that Reyes informed Harrison to vacate
property before the end of January and that failure to do so would make them
liable for the penalty as provided in the contract. It was further alleged that
Lim connived with Harrison not to vacate the property until the unpaid
purchase price had been equaled by the accumulated penalty.
On March 1, 1995, Lim denied connivance with Keng and Harrison to
defraud Reyes.
ISSUE: Whether or not the petitioner should deposit the P10 million down
payment to the custody of the trial court as an effect of rescission of the
Contract to Sell.
HELD: The Supreme Court Held that an action for rescission could prosper
only if the party demanding rescission can return whatever he may be obliged
to restore should the court grant the rescission. The trial court in the exercise
of its equity jurisdiction may validly order the deposit of P10 million down
payment in court. The purpose of the exercise of equity jurisdiction in this
case is to prevent unjust enrichment and to ensure restitution. Reyes is
seeking rescission of the Contract to Sell.
To subscribe top Reyes‘ contention will unjustly enrich Reyes at the
expense of Lim. Reyes sold to Line One Foods Corporation the property. Reyes
cannot claim ownership of the P10 million down payment because Reyes had
already sold to another buyer the property for which Lim made the down
payment. The Supreme Court find the equities weigh heavily in favor of Lim,
who paid the P10 million down payment in good faith only to discover later that
Reyes had subsequently sold the property to another buyer.
Ong v. Tui
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 240
ONG YONG, JUANITA TAN ONG, WILSON T. ONG, ANNA L. ONG, WILLIAM
T. ONG, WILLIE T. ONG, And JULIE ONG ALONZO, petitioners,
versus DAVID S. TIU, CELY Y. TIU, MOLY YU GAW, BELEN SEE YU, D.
TERENCE Y. TIU, JOHN YU, LOURDES C. TIU, INTRALAND RESOURCES
DEVELOPMENT CORP., MASAGANA TELAMART, INC., REGISTER OF
DEEDS OF PASAY CITY, And the SECURITIES AND EXCHANGE
COMMISSION, respondents.
(G.R. No. 144476. February 1, 2002 2nd Division)
BUENA, J.:
ISSUE: Whether or not the decision of the CA confirming the rescission of the
Pre Subscription Agreement entered into by the Tiu group and the Ong group is
proper.
HELD: The Court of Appeals did not err in HELD that the "Pre-Subscription
Agreement" of the parties dated August 15, 1994 may be rescinded under
Article 1191 of the New Civil Code. Reciprocity in a contract of sale, is the
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 241
correlative duty of the obligation of the seller to deliver the property is the
obligation of the buyer to pay the agreed price. In the case at bar, the
correlative obligation of the Tius is to let the Ongs have and exercise the
functions of the positions of President and Secretary and the obligation of the
Ongs is to let the Tius have and exercise the functions of Vice-President and
Treasurer. The Ongs allege that rescission is applicable only to reciprocal
obligations and the "Pre-Subscription Agreement" does not provide for
reciprocity, hence, the remedy of rescission is not available.
The Ongs cited the case of Songcuan vs. IAC, to illustrate their point that
"As in the Songcuan case, there are here two (2) separate and distinct
obligations each independent of the other the obligation to subscribe to, and to
pay, 50% of the increased capital stock of FLADC; and the obligation to install
the Ongs and the Tius as members of the Board of Directors and to certain
corporate positions, but only after the Ongs and the Tius have subscribed each
to 50% of the increased capital stock of FLADC." In this petition, in lieu of Art.
1191, the Ongs invoke Articles 1156 and 1159 of the New Civil Code which
state:
"Art. 1156. An obligation is a juridical necessity to give, to do or
not to do.
"Art. 1159. Obligations arising from contracts have the force of
law between the contracting parties and should be complied with in
good faith."
and that should there be any violation, those who failed to fulfill their
obligations should be required to perform their obligations under the
agreement.Contrary to the Ongs' assertion, the Songcuan case does not apply
squarely to this case.
In the Songcuan case, the Court ruled that Art. 1191 to rescind the right
of the Alviars to repurchase does not apply because their corresponding
obligations can hardly be called reciprocal because the obligation of the Alviars
to lease to Songcuan the subject premise arises only after the latter had
reconveyed the realties to them. On the other hand, in the instant case, the
obligations of the two (2) groups to pay 50% of the increased capital stock of
FLADC and to install them as members of the Board of Directors and to certain
corporate positions are simultaneous and arise upon the execution of the pre-
subscription agreement.
The Ongs illustrate reciprocity in the following manner: In a contract of
sale, the correlative duty of the obligation of the seller to deliver the property is
the obligation of the buyer to pay the agreed price. In the case at bar, the
correlative obligation of the Tius to let the Ongs have and exercise the
functions of the positions of President and Secretary is the obligation of the
Ongs to let the Tius have and exercise the functions of Vice-President and
Treasurer.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 242
FACTS: Carmelo & Bauermann, Inc. used to own a parcel of land, together
with two two-storey buildings constructed thereon. On June 1, 1967, Carmelo
entered into a lease with Mayfair Theater, Inc. for a period of 20 years. The
lease covered a portion of the second floor and mezzanine. Two years later,
Mayfair entered into a second lease with Carmelo for the lease of another
property, a part of the second floor and two spaces on the ground floor. The
lease was also for a period of twenty years. Both leases contained a provision
granting Mayfair a right of first refusal to purchase the said properties.
However, on July 30, 1978, within the 20-year-lease term, the subject
properties were sold by Carmelo to Equatorial Realty Development, Inc. for the
sum of P11.3M without their first being offered to Mayfair.
As a result, Mayfair filed a complaint for specific performance and
damages. After trial, the court ruled in favor of Equatorial. On appeal, the
Court of Appeals reversed and set aside the judgment of the lower court. On
November 21, 1996, the Supreme Court denied Equatorial‘s petition for review
and declared the contract between Carmelo and Equatorial rescinded. The
decision became final and executory.
On September 18, 1997, Equatorial filed an action for the collection of
sum of money against Mayfair claiming payment of rentals or reasonable
compensation for the defendant‘s use of the premises after its lease contracts
had expired. The lower court debunked the claim of the petitioner for unpaid
rentals, holding that the rescission of the Deed of Absolute Sale in the mother
case did not confer on Equatorial any vested or residual proprietary rights,
even in expectancy.
HELD: Equatorial did not obtain right of ownership over the property when it
entered into the Deed of Absolute Sale. Ownership of the property is acquired
by buyer only upon the delivery of the thing to him. There is delivery if the
thing sold is placed in the control and possession of the vendee. While the
execution of a public instrument of sale is recognized by law as the equivalent
of delivery of the thing sold, such constructive or symbolic delivery, being only
presumptive, is deemed negated by the failure of the vendee to take actual
possession of the property sold. Since Mayfair was in actual possession of the
property by virtue of the lease contract with Carmelo, there was no
consummation of the sale, and therefore, Equatorial did not get ownership
right (real right).
Further, the Deed of Absolute Sale entered into by Carmelo and
Equatorial was a violation of the right of first refusal granted by Carmelo to
Mayfair. The execution of the deed of absolute sale as a form of constructive
delivery is a legal fiction. It holds true only if there is no legal impediment that
may prevent the passing of the property from the vendor to the vendee. The
right of first refusal Held by Mayfair was such legal impediment. Therefore,
there was no transfer of ownership from Camelot to Equatorial. As a result, no
rental can be collected by equatorial from Mayfair.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 243
Velarde v. CA
Spouses MARIANO Z. VELARDE and AVELINA D.
VELARDE, petitioners, versus COURT OF APPEALS, DAVID A. RAYMUNDO
and GEORGE RAYMUNDO, respondents.
(G.R. No. 108346 July 11, 2001 3rd Division)
PANGANIBAN, J.:
HELD: There is a breach of contract because the petitioners did not merely
stopped paying the mortgage obligations but they also failed to pay the balance
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 244
purchase price. Their conditional offer to Mr. Raymundo cannot take the place
of actual payment as would discharge the obligation of the buyer under
contract of sale.
Mr. Raymundo‘s source of right to rescind the contract is Art. 1191 of the
Civil Code predicated on a breach of faith by the other party who violates the
reciprocity between them. Moreover, the new obligations as preconditions to
the performance of the petitioners‘ own obligation were repudiation of an
existing obligation, which was legally due and demandable under the contract
of sale.
The breach committed by the petitioners was the non-performance of a
reciprocal obligation. The mutual restitution is required to bring back the
parties to their original situation prior to the inception of the contract. The
initial payment and the mortgage payments advanced by petitioners should be
returned by private respondents, lest the latter unjustly enriched at the
expense of the other. Rescission creates the obligation to return the obligation
of contract. To rescind, is to declare a contract void at its inception and to put
an end to it as though it never was.
The decision of the CA is affirmed with modification that private
respondents are ordered to return to petitioners, the amount they have
received in advanced payment.
Asuncion v. Evangelista
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 245
ISSUE: Whether or not rescission is a valid legal recourse in the case at bar.
HELD: Article 1191 of the Civil Code governs the situation where there is non-
compliance by one party in case of reciprocal obligations.
The Supreme Court found that private respondent failed to perform his
substantial obligations under the MOA. Hence, petitioner sought the
rescission of the agreement and ceased infusing capital into the piggery
business of private respondent. He later justified his refusal to execute any
deed of sale and deliver the certificates of stock by accusing petitioner of having
failed to assume his debts.
The Court holds that the respondent‘s insistence that petitioner execute
a formal assumption of mortgage independent and separate from his own
execution of a deed of cases is legally untenable, considering that a recorded
real estate mortgage is a lien inseparable from the property mortgaged and
until discharged, it follows the property.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 246
In fine, that the MOA entered into by petitioner and private respondent
should indeed be rescinded. The respondent appellate court erred in assessing
damages against petitioner for his refusal to fully pay private respondent‘s
overdue loans. Such refusal was justified, considering that private respondent
was the first to refuse to deliver to petitioner the lands and certificates of stock
that were the consideration for the almost 6M in debt that petitioner was to
assume and pay.
The instant petition was granted. Decisions of the lower and appellate
courts were reversed and set aside. The MOA entered into by the parties is
declared rescinded.
Uy v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 247
FACTS: Petitioners William Uy and Rodel Roxas are agents authorized to sell
eight (8) parcels of land by the owners thereof. By virtue of such authority,
petitioners offered to sell the lands, located in Tuba, Tadiangan, Benguet to
respondent National Housing Authority (NHA) to be utilized and developed as a
housing project.
On February 14, 1989, NHA approved the acquisition of the said parcels
of land with an area of 31.8231 hectares at the cost of P23.867 million,
pursuant to which the parties executed a series of Deeds of Absolute Sale
covering the subject lands. Of the eight parcels of lands, however, only five
were paid for by the NHA because of the report it received from the Land
Geosciences Bureau of the Department of Environment and Natural Resources
that the remaining area is located at an active landslide area and therefore, not
suitable for development into a housing project. NHA eventually cancelled the
sale over the remaining three (3) parcels of land.
On March 9, 1992, petitioners filed a complaint for damages. After trial,
the RTC of Quezon City rendered the cancellation of contract to be justified and
awarded P1.255 million as damages in favor of petitioners.
Upon appeal by petitioners, the Court of Appeals reversed the decision
and entered a new one dismissing the complaint including the award of
damages.
The motion for reconsideration having been denied, petitioners seek relief
from this court contending, inter alia, that the CA erred in declaring that NHA
had any legal basis to rescind the subject sale.
ISSUE: Whether or not the cancellation of the sale has sufficient justifiable
basis.
HELD: The cancellation of the sale was based on the negation of the cause
arising from the realization that the land, which were the object of the sale,
were not suitable for housing cause is the essential reason which moves the
contracting parties to enter into a contract. The National Housing Authority
would not have entered into the contract were the lands not suitable for
housing. In other words, the quality of the land was an implied condition for
the NHA to enter into the contract. NHA was justified in canceling the contract.
Petitioners confuse the cancellation of the contract by the NHA as a
rescission of the contract under Article 1191 of the Civil Code. The right to
rescission is predicated on a breach of faith by the other party that violates the
reciprocity between them. The power to rescind is given to the injured party.
In this case, the NHA did not rescind the contract. Indeed, it did not have the
right to do so for the other parties to the contract, the vendors did not commit
any breach, much less a substantial breach, of their obligation. The NHA did
not suffer any injury. The cancellation was not therefore a rescission under
Article 1191. Rather, it was based on the negation of the cause arising from
the realization that the lands, which were the objects of the sale, were not
suitable for housing.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 248
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 249
ISSUE: Whether or not lost of earning capacity of the victim should be included
as part of civil indemnification.
HELD: Yes. The award of damages for loss of earning capacity is concerned
with the determination of losses or damages sustained by respondents, as
dependents and intestate heirs of the deceased. This consists not of the full
amount of his earnings, but of the support which they received or would have
received from him had he not died as a consequence of the negligent act. Thus,
the amount recoverable is not the loss of the victim‘s entire earnings, but
rather the loss of that portion of the earnings which the beneficiary would have
received.
The victim‘s heirs presented in evidence Señora‘s pay slip from the PNP,
showing him to have had a gross monthly salary of P12,754.00. Meanwhile, the
victim‘s net income was correctly pegged at 50% of his gross income in the
absence of proof as regards the victim‘s living expenses.
Deceased‘s net earning capacity should be computed in this method. The
formula is:
Net earning capacity = life expectancy x gross annual income less
living expenses
with life expectancy computed as 3/4
2/3 x (80 - age of deceased)
and living expenses fixed at half of the victim‘s gross income.
Thus, Señora‘s net earning capacity was computed to be P1,887,847.00.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 250
FACTS: On September 27, 1996, the petitioners filed a complaint for damages
with the RTC against OMC and Bonifacio Arambala. The complaint states that
on November 24, 1995, at around 6:15 a.m., Arambala was driving a truck
with a trailer owned by OMC, along Meralco Road, Sucat, Muntinlupa City.
When Arambala noticed that the truck had suddenly lost its brakes, he told his
companion to jump out. Soon thereafter, he also jumped out and abandoned
the truck. Driverless, the truck rammed into the house and tailoring shop
owned by petitioner Leticia Tan and her husband Celedonio Tan, instantly
killing Celedonio who was standing at the doorway of the house at the time.
The petitioners alleged that the collision occurred due to OMC‘s gross
negligence in not properly maintaining the truck, and to Arambala‘s
recklessness when he abandoned the moving truck. Thus, they claimed that
the respondents should be held jointly and severally liable for the actual
damages that they suffered, which include the damage to their properties, the
funeral expenses they incurred for Celedonio Tan‘s burial, as well as the loss of
his earning capacity. The petitioners also asked for moral and exemplary
damages, and attorney‘s fees.
The respondents denied any liability for the collision, essentially claiming that
the damage to the petitioners was caused by a fortuitous event, since the truck
skidded due to the slippery condition of the road caused by spilled motor oil.
HELD: Yes. As both the RTC and the CA found that the respondents‘ gross
negligence led to the death of Celedonio Tan, as well as to the destruction of
the petitioners‘ home and tailoring shop, we see no reason to disturb this
factual finding. We, thus, concentrate on the sole issue of what damages the
petitioners are entitled to.
Respondents OMC Carriers, Inc. and Bonifacio Arambala are ordered to
jointly and severally pay the petitioners the following:
(1) P50,000.00 as indemnity for the death of Celedonio Tan;
(2) P72,295.00 as actual damages for funeral expenses;
(3) P200,000.00 as temperate damages for the damage done to petitioner
Leticia‘s house, tailoring shop, household appliances and shop
equipment;
(4) P300,000.00 as damages for the loss of Celedonio Tan‘s earning
capacity;
(5) P500,000.00 as moral damages;
(6) P200,000.00 as exemplary damages; and
(7) 10% of the total amount as attorney‘s fees; and costs of suit.
In addition, the total amount adjudged shall earn interest at the rate of
6% per annum from May 14, 2003, and at the rate of 12% per annum, from the
finality of this Resolution on the balance and interest due, until fully paid.
Death of person would automatically entitle heirs of decedent actual
damages. The funeral expense also is fully proven. The temperate damages are
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 251
also awarded because actual cost of damages on properties and the exact
earning capacity of the decedent cannot be determined. Exemplary damages
also was awarded base on the nature of offense to avoid repetition. Attorney‘s
fee is also proper in this case. Accordingly, legal interest at the rate of 6% per
annum on the amounts awarded starts to run from May 14, 2003, when the
trial court rendered judgment. From the time this judgment becomes final and
executory, the interest rate shall be 12% per annum on the judgment amount
and the interest earned up to that date, until the judgment is wholly satisfied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 252
Private respondents brought the suit for damages in the RTC which
found the driver guilty of gross negligence in the operation of his vehicle and
Victory Liner, Inc. also guilty of gross negligence in the selection and
supervision of Joson, Jr. Petitioner and its driver were Held liable jointly and
severally for damages.
On appeal, the decision was affirmed by the Court of Appeals, with the
modification that the award of attorney‘s fees was fixed at P50,000.00.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 253
GSIS v. Labung-Deang
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 254
The owner's duplicate copy of the title could not be found despite diligent
search and so the personnel of the petitioner were not able to release the same.
Subsequently, petitioner commenced the reconstitution proceedings with the
Court of First Instance of Pampanga for the issuance of a new owner's copy of
the same. After the completion of judicial proceedings, petitioner secured and
released the reconstituted copy of the owner's duplicate of title to the
respondents. However, respondents filed a complaint against the petitioner for
damages because of the consequences of undue delay as they were not able to
secure a loan; the proceeds of which could have been used in defraying the
estimated cost of the renovation of their residential house and which could
have been invested in some profitable business undertaking. The lower court
ruled in favor of the respondents. The petitioner appealed to the Court of
Appeals which affirmed the appeal judgment. Hence, this petition.
HELD: Yes. The petitioner is liable for damages to the respondents for the
negligent act of its employees acting within the scope of their assigned duties.
For insufficient reason and no legal basis found, moral damages and
attorney‘s fees were removed. The Court granted only temperate damages
considering that petitioner spent for the reconstitution of the owners' duplicate
copy of the title.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 255
BPI filed with the Court of First Instance of Rizal a complaint for recovery
of a sum of money against D. G. with preliminary attachment. The trial court
issued an order for preliminary attachment but was subsequently lifted. BPI
moved for reconsideration, but the trial court denied. D. G. filed with the trial
court a counterclaim asking for compensatory damages while spouses and
asked Josefa Jeceil asked for moral damages; and all of them claimed for
exemplary damages and attorney‘s fees. Both the complaint and counterclaim
filed were dismissed. Both parties appealed to the appellate court affirming the
dismissal of the complaint but reversing the dismissal of the counterclaim in
favor of the respondents. Hence, this petition.
HELD: No. The petitioner is not guilty of gross negligence in the handling of the
money market placement of respondents, thus not liable to pay exemplary
damages.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 256
loss has been suffered but its amount cannot, from the nature of the case, be
proved with certainty. The Court deems it prudent to award reasonable
temperate damages to respondents under the circumstances.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 257
Khe Hong Cheng, alias Felix Khe, Sandra Joy Khe and Ray Steven Khe,
Petitioners, versus Court of Appeals, Hon. Teofilo Guadiz, and Philam
Insurance Co., Inc., Respondents.
(G.R. No. 144169, March 28, 2001, 1st Division)
KAPUNAN, J:
Having been subrogated into the rights of the consignee, Philam filed
with the Regional Trial Court (RTC) of Makati an action to recover the sum of
money paid to the consignee against Khe Hong. While the case was pending,
Khe Hong executed deeds of donation of parcels of land in favor of his children,
herein co-petitioners; and new transfer certificate of title were issued in their
names. The RTC rendered a favorable judgment to Philam and after the
decision became final, a writ of execution was issued.
Despite earnest efforts of the sheriff, he could not find any property of
Khe Hong that can be levied to satisfy the judgment because he had already
conveyed his properties to his children. Philam filed for the rescission of the
deeds of donation executed by Khe Hong in fraud of his creditor and for
nullification of the titles issued in the names of his children with the RTC.
Petitioners moved for the dismissal of the case, to which the RTC denied. On
appeal by petitioners, the RTC‘s decision in favor of Philam was affirmed by the
Court of Appeals. Hence, this petition.
ISSUE: Whether or not the petitioner Khe Hong Cheng is guilty of executing the
deeds of donation in fraud of his creditor, warranting the rescission of the same
in an accion pauliana.
HELD: Yes. Petitioner Khe Hong Cheng is guilty of executing the deeds of
donation in fraud of his creditor, warranting the rescission of the same in an
accion pauliana.
An accion pauliana accrues only when the creditor discovers that he has
no other legal remedy for the satisfaction of his claim against the debtor other
than an accion pauliana. It presupposes the following: 1) A judgment; 2) the
issuance by the trial court of a writ of execution for the satisfaction of the
judgment; and 3) the failure of the sheriff to enforce and satisfy the judgment
of the court. It requires that the creditor has exhausted the property of the
debtor.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 258
ISSUE: Whether or not respondent can be held liable for the delay caused by
circumstances falling under force majeure.
HELD: No. Respondent cannot be held liable for the delay caused by
circumstances falling under force majeure.
Under Article 1174 of the Civil Code the obligor is exempt from liability
for a breach of an obligation due to an ―act of God‖ or force majeure. The
shortage in supplies and cement may be characterized as force majeure. In the
present case, hardware stores did not have enough cement available in their
supplies or stocks at the time of the construction in the 1990s. Likewise,
typhoons, power failures and interruptions of water supply all clearly fall
under force majeure. Since LCDC could not possibly continue constructing the
building under the circumstances prevailing, it cannot be held liable for any
delay that resulted from the causes aforementioned. A perusal of the
construction agreements shows that the parties never agreed to make LCDC
liable even in cases of force majeure.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 259
Tanseco then filed with the Housing and Land Use Regulatory Board‘s
(HLURB) Expanded National Capital Region Field Office a complaint against
Megaworld for rescission of contract, refund of payment, and damages. In its
Answer, Megaworld attributed the delay to the 1997 Asian financial crisis
which was beyond its control; and argued that default had not set in, Tanseco
not having made any judicial or extrajudicial demand for delivery before receipt
of the notice of turnover. The HLURB Arbiter dismissed Tanseco‘s complaint for
lack of cause of action. On appeal by Tanseco, the HLURB Board of
Commissioners sustained the HLURB Arbiter‘s Decision on the ground of
laches for failure to demand rescission when the right thereto accrued.
Tanseco‘s Motion for Reconsideration having been denied, she appealed to the
Office of the President which dismissed the appeal for failure to show that the
findings of the HLURB were tainted with grave abuse of discretion. Tanseco
filed a Petition for Review with the Court of Appeals which granted the petition.
Hence, Megaworld filed the present Petition for Review.
ISSUE: Whether or not the petitioner cannot be held liable for breach of
obligation in view of the happening of a fortuitous event.
HELD: No. Petitioner is liable for breach of obligation stipulated in the contract
between the parties.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 260
business risks. The fluctuating movement of the Philippine peso in the foreign
exchange market is an everyday occurrence, hence, not an instance of caso
fortuito. Megaworld‘s excuse for its delay does not thus lie.
Sicam v. Jorge
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 261
ISSUE: Whether or not petitioners cannot be held liable for the loss of the
pawned articles due to a fortuitous event.
HELD: No. Petitioners are liable for the loss of the pawned articles for being
negligent in securing the pawnshop.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 262
HELD: No. The assassination of former Senator Benigno Aquino, Jr. is not a
fortuitous event that will justify the adjustment of the terms of the contract of
lease.
A fortuitous event is that which could not be foreseen, or which even if
foreseen, was inevitable. To exempt the obligor from liability for a breach of an
obligation due to an ―act of God,‖ the following requisites must concur: (a) the
cause of the breach of the obligation must be independent of the will of the
debtor; (b) the event must be either unforeseeable or unavoidable; (c) the event
must be such as to render it impossible for the debtor to fulfill his obligation in
a normal manner; and (d) the debtor must be free from any participation in, or
aggravation of the injury to the creditor.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 263
The order of ejectment was upheld and the decision appealed from was
set aside.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 264
HELD: No. The stipulation that in the event of a fortuitous event or force
majeure the contract shall be deemed suspended during said period does not
mean that the happening of any of those events stops the running of the period
the contract has been agreed upon to run. It only relieves the parties from the
fulfillment of their respective obligations during that time.
Both parties admitted that the April 25, 1990 fire was a force majeure or
unforeseen event and that the same even burned practically all the softdrink
bottles and wooden shells which are the objects of the agreement. However, the
court says that there was no cause for terminating the contract but at most a
temporary suspension of work. Thus, as a result of the fire, the obligation has
not been extinguished.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 265
Dioquino v. Laureano
Pedro D. Dioquino, Plaintiff-Appellee, versus Federico Laureano, Aida De
Laureano and Juanito Laureano, Defendants-Appellants.
(G.R. No. L-25906, May 28, 1970, En Banc)
FERNANDO, J:
The defendant rode on the car of plaintiff on his way to the Barracks in
Masbate. While about to reach their destination, the car was stoned by some
mischievous boys, and its windshield was broken. Defendant chased the boys
and he was able to catch one of them. The boy was taken to the plaintiff and
admitted having thrown the stone that broke the car's windshield. The plaintiff
and the defendant together with the boy returned to the barracks and the
father of the boy was called, but no satisfactory arrangements were made.
Defendant refused to file any charges against the boy and his parents because
he thought that the stone-throwing was merely accidental and that it is an
event of force majeure.
Under the Civil Code, the rule was well-settled that in the absence of a
legal provision or an express covenant, no one should be held to account for
fortuitous cases. If it could be shown that such indeed was the case, liability is
ruled out. There is no requirement of diligence beyond what human care and
foresight can provide.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 266
The heirs of the two passengers filed a complaint for sum of money
against Bachelor Express, its alleged owner Samson Yasay, and the driver
Rivera. After due trial, the trial court issued an order dismissing the complaint.
Upon appeal, the Court of Appeals reversed the trial court‘s decision. Hence,
this petition.
ISSUE: Whether or not the case at bar is within the context of force majeure.
HELD: Yes. The case at bar is within the context of force majeure.
The sudden act of the passenger who stabbed another passenger in the
bus is within the context of force majeure. However, in order that a common
carrier may be absolved from liability in case of force majeure, it is not enough
that the accident was caused by force majeure. The common carrier must still
prove that it was not negligent in causing the injuries resulting from such
accident.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 267
FACTS: MV Pioneer Cebu was owned and operated by the defendant and used
in the transportation of goods and passengers in the interisland shipping. It
had a passenger capacity of three hundred twenty-two including the crew. It
undertook the said voyage on a special permit issued by the Collector of
Customs inasmuch as, upon inspection, it was found to be without an
emergency electrical power system. The special permit authorized the vessel to
carry only two hundred sixty passengers due to the said deficiency and for lack
of safety devices for 322 passengers. A headcount was made of the passengers
on board, resulting on the tallying of 168 adults and 20 minors, although the
passengers manifest only listed 106 passengers. It has been admitted, however,
that the headcount is not reliable.
When the vessel left Manila, its officers were already aware of the
typhoon Klaring building up somewhere in Mindanao. There being no typhoon
signals on the route from Manila to Cebu, and the vessel having been cleared
by the Customs authorities, the MV Pioneer Cebu left on its voyage to Cebu
despite the typhoon. When it left the Port of Manila, it had on board the
spouses Alfonso Vasquez and Filipinas Bagaipo and a four-year old boy, Mario
Marlon Vasquez. The MV Pioneer Cebu encountered typhoon 'Klaring' and
struck a reef on the southern part of Malapascua Island, located somewhere
north of the island of Cebu and subsequently sunk.
Due to the loss of their children, petitioners sued for damages before the
Court of First Instance of Manila. Respondent defended on the plea of force
majeure and the extinction of its liability by the actual total loss of the vessel.
The lower court held the respondent liable. On appeal, respondent Court
reversed the aforementioned judgment and absolved private respondent from
any and all liability. Hence, this Petition for Review on Certiorari,
ISSUE: Whether or not the respondent would be exempt from liability due to its
defense of fortuitous event.
HELD: No. The respondent is not exempted from liability. To constitute a caso
fortuito, the event must have been impossible to foresee, or if it could be
foreseen, must have been impossible to avoid. There must be an entire
exclusion of human agency from the cause of injury or loss.
While the typhoon was an inevitable occurrence, yet, having been kept
posted on the course of the typhoon by weather bulletins at intervals of six
hours, the captain and crew were well aware of the risk they were taking as
they hopped from island to island from Romblon up to Tanguingui. They held
frequent conferences, and oblivious of the utmost diligence required of very
cautious persons, they decided to take a calculated risk. In so doing, they failed
to observe that extraordinary diligence required of them explicitly by law.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 268
The decision appealed is reversed and the judgment of the lower court is
reinstated.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 269
FACTS: Spouses Tito and Leny Tumboy and their minor children named Ardee
and Jasmin, boarded at a Yobido Liner bus bound for Davao City. Along Picop
Road in Km. 17, Sta. Maria, Agusan del Sur, the left front tire of the bus
exploded. The bus fell into a ravine around three feet from the road and struck
a tree. The incident resulted in the death of 28-year-old Tito Tumboy and
physical injuries to other passengers. Hence, a complaint for breach of contract
of carriage, damages and attorney's fees was filed by Leny and her children
against Alberta Yobido, the owner of the bus, and Cresencio Yobido, its driver,
before the Regional Trial Court of Davao City. When the defendants therein
filed their answer to the complaint, they raised the affirmative defense of caso
fortuito. The lower court rendered a decision dismissing the action for lack of
merit. Dissatisfied, the plaintiffs appealed to the Court of Appeals, which
reversed the lower court‘s decision. Hence, this petition.
ISSUE: Whether or not the explosion of the front tire of the bus is considered to
be a fortuitous event which would exempt the petitioner from liability.
HELD: No. The explosion of the front tire of the bus is not considered a
fortuitous event which would exempt the petitioner from liability.
The explosion of the new tire may not be considered a fortuitous event
because there are human factors involved in the situation. The fact that the
tire was new did not imply that it was entirely free from manufacturing defects
or that it was properly mounted on the vehicle. Neither may the fact that the
tire bought and used in the vehicle is of a brand name noted for quality,
resulting in the conclusion that it could not explode within five days' use. Be
that as it may, it is settled that an accident caused either by defects in the
automobile or through the negligence of its driver is not a caso fortuito that
would exempt the carrier from liability for damages.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 270
Juntilla v. Fontanar
Roberto Juntilla, Petitioner, versus Clemente Fontanar, Fernando Banzon
and Berfol Camoro, Respondents.
(G.R. No. L-45637, May 31, 1985, 1st Division)
GUTIERREZ, JR., J:
FACTS: The petitioner was a passenger of the public utility jeepney on the
course of the trip from Danao City to Cebu City. The jeepney was driven by
defendant Berfol Camoro. It was registered under the franchise of defendant
Clemente Fontanar but was actually owned by defendant Fernando Banzon.
When the jeepney reached Mandaue City, the right rear tire exploded causing
the vehicle to turn turtle. In the process, the plaintiff who was sitting at the
front seat was thrown out of the vehicle. Upon landing on the ground, the
plaintiff momentarily lost consciousness. Upon his arrival in Danao City, he
immediately entered the Danao City Hospital to attend to his injuries, and also
requested his father-in-law to proceed immediately to the place of the accident
and look for his lost wrist watch. In spite of the efforts of his father-in-law, the
wrist watch could no longer be found.
Petitioner filed a civil case for breach of contract with damages before the
City Court of Cebu City, Branch I against Clemente Fontanar, Fernando
Banzon and Berfol Camoro. The respondents filed their answer, alleging inter
alia that the accident that caused losses to the petitioner was beyond the
control of the respondents taking into account that the tire that exploded was
newly bought and was only slightly used at the time it blew up. The City Court
rendered judgment in favor of the petitioner. The respondents appealed to the
Court of First Instance of Cebu, which reversed the judgment of the City Court
upon a finding that the accident in question was due to a fortuitous event.
Hence, this petition.
ISSUE: Whether or not the incident in this case was due to a fortuitous event,
absolving the respondents from any obligation.
HELD: No. The incident was not due to a fortuitous event. In the case at bar,
the cause of the unforeseen and unexpected occurrence was not independent
of the human will.
There are specific acts of negligence on the part of the respondents. The
records show that the passenger jeepney turned turtle and jumped into a ditch
immediately after its right rear tire exploded. The evidence shows that the
passenger jeepney was running at a very fast speed before the accident. There
is also evidence to show that the passenger jeepney was overloaded at the time
of the accident. The petitioner stated that there were three passengers in the
front seat and fourteen passengers in the rear.
While it may be true that the tire that blew-up was still good because the
grooves of the tire were still visible, this fact alone does not make the explosion
of the tire a fortuitous event. No evidence was presented to show that the
accident was due to adverse road conditions or that precautions were taken by
the jeepney driver to compensate for any conditions liable to cause accidents.
The accident was caused either through the negligence of the driver or because
of mechanical defects in the tire.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 271
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 272
FACTS: San Miguel Corporation insured several beer bottle cases with an
aggregate value of P5, 836, 222.80 with petitioner Philippine American General
Insurance Company. The cargo was loaded on board the M/V Peatheray
Patrick-G to be transported from Mandaue City to Bislig, Surigao Del Sur. After
having been cleared by the Coast Guard Station in Cebu the previous day, the
vessel left the port of Mandaue City for Bislig, Surigao Del Sur. The weather
was calm when the vessel started its voyage. The following day, M/V Peatheray
Patrick-G listed and subsequently sunk off Cawit Point, Cortes, Surigao Del
Sur. As a consequence thereof, the cargo belonging to San Miguel Corporation
was lost.
ISSUE: Whether or not the sinking of the M/V Peatherav Patrick-G was due to
a fortuitous event.
HELD: Yes. The sinking of the M/V Peatherav Patrick-G was due to a
fortuitous event.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 273
Mindex v. Morillo
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 274
FACTS: A verbal agreement was entered into between Ephraim Morillo and
Mindex Resources Corporation (MINDEX) for the lease of the former‘s 6 x 6 ten-
wheeler cargo truck for use in MINDEX‘s mining operations in Binaybay,
Bigaan, San Teodoro, Oriental Mindoro, at the stipulated rental of P300.00 per
hour for a minimum of eight (8) hours a day or a total of P2, 400.00 daily.
MINDEX has been paying the rentals until April 10, 1991. Unknown to Morillo,
on April 11, 1991, the truck was burned by unidentified persons while it was
parked unattended at Sitio Aras, Bigaan, San Teodoro, Oriental Mindoro, due
to mechanical trouble. Upon learning of the burning incident, Morillo offered to
sell the truck to MINDEX but the latter refused. Instead, it replaced the
vehicle‘s burned tires and had it towed to a shop for repair and overhauling.
Both parties presented their proposals as a remedy for the said incident.
The Regional Trial Court (RTC) found petitioner responsible for the destruction
or loss of the leased 6 x 6. The appellate court sustained the RTC‘s finding that
petitioner was not without fault for the loss and destruction of the truck and,
thus, liable therefore. Petitioner claims that the burning of the truck was a
fortuitous event. Hence, this petition.
ISSUE: Whether or not a fortuitous event is involved in the damage dealt to the
rented truck.
HELD: No. A fortuitous event is not involved in the damage dealt to the rented
truck.
Both the RTC and the CA found petitioner negligent and thus liable for the loss
or destruction of the leased truck. True, both parties may have suffered from
the burning of the truck but as found by both lower courts, the negligence of
petitioner makes it responsible for the loss. Well-settled is the rule that factual
findings of the trial court, particularly when affirmed by the CA, are binding on
the Supreme Court.
Article 1667 of the Civil Code holds lessees responsible for the
deterioration or loss of the thing leased, unless they prove that it took place
without their fault.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 275
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 276
NAPOCOR once more advertised for the delivery of coal to its Calaca
thermal plant. PHIBRO participated anew in this subsequent bidding.
NAPOCOR disapproved PHIBRO‘s application for pre-qualification to bid for not
meeting the minimum requirements. Upon further inquiry, PHIBRO found that
the real reason for the disapproval was its purported failure to satisfy
NAPOCOR‘s demand for damages due to the delay in the delivery of the first
coal shipment. This prompted PHIBRO to file an action for damages with
application for injunction against NAPOCOR with the Regional Trial Court
(RTC), Makati City. The trial court rendered a decision in favor of PHIBRO.
Unsatisfied, NAPOCOR, through the Solicitor General, elevated the case to the
Court of Appeals (CA). The Court of Appeals rendered a Decision affirming in
toto the Decision of the Regional Trial Court. Hence, this petition.
ISSUE: Whether or not PHIBRO‘s delay in the delivery of imported coal was due
to a fortuitous event.
HELD: Yes. PHIBRO‘s delay in the delivery of imported coal was due to a
fortuitous event.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 277
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 278
HELD: Yes. The loan contracted by respondent must first be satisfied before
any portion of the inheritance may be transmitted to his heirs.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 279
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 280
Florence S. Ariola could not be held accountable for any liability incurred
by her late father. The documentary evidence presented, particularly the
promissory notes and the continuing guaranty agreement, were executed and
signed only by the late Efraim Santibañez and his son Edmund. As the
petitioner failed to file its money claim with the probate court, at most, it may
only go after Edmund as co-maker of the decedent under the said promissory
notes and continuing guaranty, of course, subject to any defenses Edmund
may have as against the petitioner.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 281
The petitioner does not appear to have an interest in the property based on the
memorandum of encumbrances annotated at the back of the title. His claim
that he is an heir (nephew) of the original owner of the lot covered by the
disputed lot and the present occupant thereof is not annotated in the said
memorandum of encumbrances. Neither was his claim entered on the
Certificate of Titles in the name of their original/former owners on file with the
Register of Deeds. Also, private respondent's compliance of the RTC‘s order of
publication of the petition in a newspaper of general circulation is sufficient
notice of the petition to the public at large.
The GSIS has not filed any action for the annulment of the deed of sale,
nor for the forfeiture of the lot in question. Therefore, the contract of sale
remains valid between the parties, unless and until annulled in the proper suit
filed by the rightful party and remains binding upon all heirs and their
predecessors in interest.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 282
FACTS: Plaintiff and Project Builders, Inc. (PBI) entered into an agreement
whereby it was agreed that plaintiff would provide a maximum amount of
P2,000,000.00 against which said defendant would discount and assign to
plaintiff on a ‗with recourse non-collection basis‘ its accounts receivable under
the contracts to sell specified in said agreement. And on June 15, 1976, the
same parties entered into an agreement whereby it was agreed that PBI‘s credit
line with plaintiff be increased to P5,000,000.00. It was stipulated that the
credit line of P5,000,000.00 granted includes the amount already
assigned/discounted. The discounts were on different date accounts
receivables with different maturity dates from different condominium-unit
buyers. And each time a certain account receivable was discounted, the
covering Contract to Sell was assigned by defendant to plaintiff.
The foreclosed property was redeemed a year later, but after application
of the redemption payment, plaintiff claims that there is still a deficiency in the
amount of P1,323,053.08. The trial court dismissed the complaint. The Court
of Appeals however overturned the judgment of the trial court. Hence, this
petition.
In the case, the assignment, was with recourse, and default in the
payment of installments had been duly established when petitioner corporation
foreclosed on the mortgaged parcels of land. The resort to foreclosure of the
mortgaged properties did not preclude private respondent from collecting
interest from the assigned Contracts to Sell from the time of foreclosure to the
redemption of the foreclosed property. The imposition of interest was a mere
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 283
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 284
Hong Kong and Shanghai Banking Corp., Ltd. Staff Retirement Plan,
Petitioner, versus Spouses Bienvenido and Editha Broqueza, Respondents.
(G.R. No. 178610, November 17, 2010, 2nd Division)
CARPIO, J:
ISSUE: Whether or not the HSBCL-SRP has the right to demand immediate
payment since the Promissory Notes do not contain a period.
HELD: Yes. The HSBCL-SRP has the right to demand immediate payment since
the Promissory Notes do not contain a period.
Article 1179 of the Civil Code applies. Article 1179 provides: Every obligation
whose performance does not depend upon a future or uncertain event, or upon
a past event unknown to the parties, is demandable at once. Every obligation
which contains a resolutory condition shall also be demandable, without
prejudice to the effects of the happening of the event.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 285
Petition granted. The decision appealed from is reversed and set aside.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 286
FACTS: Private respondents were the original owners of a parcel of land which
they mortgaged to petitioner bank and were subsequently foreclosed for the
former‘s default on their obligation. A Transfer Certificate of Title was
eventually issued in petitioner‘s name being the sole bidder in the auction sale
conducted during the foreclosure of said land. Petitioner and private
respondents entered into a Deed of Conditional Sale wherein petitioner agreed
to reconvey the foreclosed property to private respondents under the condition
that petitioner shall deliver to private respondents, their heirs, administrators
and assigns a good and sufficient deed of conveyance covering the property,
subject matter of the said deed of conditional sale, upon completion of payment
by said private respondents.
Petitioner then informed private respondents that the prestation to
execute and deliver a deed of conveyance in their favor had become legally
impossible in view of Sec.6 of Republic Act 6657 (Comprehensive Agrarian
Reform Law) and Sec.1 of Executive Order 407. The former law annulling all
sales, dispositions, leases, management contracts or transfers of possession of
private lands executed by the original landowner in violation of the retention
limits provided thereof upon its effectivity while the latter law requires all
government instrumentalities to immediately execute deeds of transfer in favor
of the Republic of the Philippines as represented by the Department of Agrarian
Reform and to surrender to the latter department all landholdings suitable for
agriculture. Aggrieved, private respondents filed a complaint for specific
performance with damages against petitioner before the trial court. Judgment
was rendered in favor of the private respondents. Upon appeal, the Court of
Appeals reversed the trial court‘s decision. Hence, this petition.
ISSUE: Whether or not said laws had rendered legally impossible compliance
by petitioner with its obligation to execute a deed of conveyance of the subject
land in favor of private respondents.
HELD: No. The laws mentioned in this case did not render it legally impossible
for petitioner to comply with its obligation.
Tomimbang v. Tomimbang
Maria Soledad Tomimbang, Petitioner, versus Atty. Jose Tomimbang,
Respondent.
(G.R. No. 165116, August 4, 2009, 3rd Division)
PERALTA, J:
The evidence on record clearly shows that after renovation of seven out of the
eight apartment units had been completed, petitioner and respondent agreed
that the former shall already start making monthly payments on the loan even
if renovation on the last unit was still pending. She agreed and complied with
respondent's demand for her to begin paying her loan, since she believed this
was in accordance with her commitment to pay whenever she was able. By her
very own admission and partial performance of her obligation, there can be no
other conclusion but that under the novated agreement, petitioner's obligation
is already due and demandable.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 288
deletion of the condition that payments shall be made only after completion of
renovations.
Gonzales v. Heirs
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 289
Feliz L. Gonzales, Petitioner, versus The Heirs of Thomas and Paula Cruz,
herein represented by Elena C. Talens, Respondents.
(G.R. No. 131784, September 16, 1999, 3rd Division)
PANGANIBAN, J:
FACTS: Paula Año Cruz together with the heirs of Thomas and Paula Cruz,
entered into a Contract of Lease/Purchase with the defendant, Felix L.
Gonzales, of a half-portion of a parcel of land containing an area 12 hectares,
more or less, and an accretion of two hectares in Rizal. The defendant Gonzales
paid the annual rental on the property in accordance with the provisions of the
Contract of Lease/Purchase and thereafter took possession of the property,
installing thereon the defendant Jesus Sambrano as his caretaker. The
defendant Gonzales did not, however, exercise his option to purchase the
property immediately after the expiration of the one-year lease. He remained in
possession of the property without paying the purchase price provided for in
the Contract of Lease/Purchase and without paying any further rentals
thereon. A letter was sent by one of the plaintiffs-heirs to the defendant
Gonzales informing him of the lessors' decision to rescind the Contract due to a
breach thereof committed by the defendant and asked him to vacate the
premises within 10 days. The defendant Gonzales refused to vacate the
property and continued possession thereof. The plaintiffs filed a complaint for
recovery of possession of the property. The trial court ruled that the plaintiffs
could not validly rescind the contract and thereafter take possession of the
land in question. On appeal, the Court of Appeals reversed the trial court‘s
decision. Hence, this petition.
ISSUE: Whether or not the condition of the contract is a precedent before the
defendant is to pay the down payment
HELD: Yes. The condition of the contract is a precedent before the defendant is
to pay the down payment
Petition granted and the decision appealed from is reversed and set
aside.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 290
It was discovered that Young was pilfering funds from the bank through
check kiting operations and he tendered his resignation. He also defaulted on
his obligations. His shares of stock were purchased by Insular Life in a public
auction. The shares were then consolidated in its name. Young filed a case for
annulment of notarial sale, specific performance and damages. The case was
dismissed by the trial court. On appeal, the Court of Appeals (CA) considered
the MOA as a contract of sale. Hence, this petition.
ISSUE: Whether or not Insular Life is bound to comply with its obligations in
favor of Young.
HELD: No. Insular Life is bound to comply with its obligations in favor of
Robert Young.
Petition granted and the decision appealed from is reversed and set
aside.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 291
FACTS: It is alleged by the petitioner that the respondent Judge issued the writ
of preliminary injunction, despite clear and express prayer in the Amended
Complaint that private respondent Kambiak Y. Chan, Jr. (Chan) sought the
issuance of a writ of preliminary mandatory injunction. During the hearing for
the issuance of temporary restraining order, it was made clear to the
respondent Judge that the property in question was occupied by the petitioner
by virtue of a writ of possession issued by the Regional Trial Court in a petition
for the issuance of writ of possession thereof. Despite the lawful order of a
coordinate and co-equal court, the respondent Judge issued the questioned
orders to restore possession to private respondent Chan, alleging an obviously
grave abuse of discretion, tantamount to lack of jurisdiction. The respondent
Judge issued the questioned order granting the issuance of a writ of
preliminary injunction who subsequently denied the petitioner‘s motion to
dismiss and supplemental motion to dismiss and the very urgent motion for
reconsideration. The motion for inhibition and the motion to dissolve the writ of
preliminary injunction were also denied
Petitioner filed with the Court of Appeals a petition for certiorari and
prohibition assailing the trial court‘s issuance of a writ of preliminary
injunction. The Court of Appeals promulgated a decision dismissing the
petition HELD that the trial court had jurisdiction to issue the injunction that
did not interfere with the writ of possession of a coordinate court. Hence, this
appeal.
ISSUE: Whether or not the conditional sale agreement is consummated and
effectual.
The conditional sale agreement was the only document that the
respondent presented during the summary hearing of the application for a
temporary restraining order before the Regional Trial Court. The conditional
sale agreement is officious and ineffectual. First, it was not consummated.
Second, it was not registered and duly annotated on the Transfer Certificate of
Title (TCT) covering the subject property. Third, it was executed about eight
years after the execution of the real estate mortgage over the subject property.
The mortgagee did not give its consent to the change of debtor. It is a
fundamental axiom in the law on contracts that a person not a party to an
agreement cannot be affected thereby. Worse, not only was the conditional sale
agreement executed without the consent of the mortgagee-creditor, United
Savings Bank, the same was also a material breach of the stipulations of the
real estate mortgage over the subject property. The petitioner as opposed to
Chan bears a TCT, deeds of assignment, and certificates of sale in its favor
showing that it has a better right to possession of the disputed land.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 292
After the presentation of the evidence, the trial court rendered a decision
dismissing the complaint for lack of merit. Upon appeal, The Court of Appeals
held that respondents did not breach the Contract of Sale and disallowed the
rescission. Hence, this petition.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 293
Hermosa v. Longara
Luz Hermosa, as Administratrix of the Intestate Estate of Fernando
Hermosa, Sr., and Fernando Hermosa, Jr., Petitioners, versus Epifanio M.
Longara, Respondents.
(G.R. No. L- 5267, October 27, 1953, En Banc)
LABRADOR, J:
HELD: No. The condition of the obligation is a potestative condition, hence void
and unenforceable.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 294
FACTS: On June 1, 1948, Damasa Crisostomo applied for 200 shares of stock
worth PhP100.00 each at Quezon Colleges, Inc. Within her letter of application,
she stipulated, ―You will find (Babayaran kong lahat pagkatapos na ako ay
makapag-pahuli ng isda) pesos as my initial payment and the balance payable
in accordance with law and the rules and regulations of the Quezon College.‖
Damasa Crisostomo died on October 26, 1948. As no payment appears to have
been made on the subscription mentioned in the foregoing letter, the Quezon
College, Inc. presented a claim before the Court of First Instance of Bulacan in
her testate proceeding, for the collection of the sum of 20,000.00 pesos
representing the value of the subscription to the capital stock of the Quezon
College, Inc. This claim was opposed by the administrator of the estate, and the
Court of First Instance of Bulacan, after hearing issued an order dismissing the
claim of the Quezon College, Inc. on the ground that the subscription in
question was neither registered in nor authorized by the Securities and
Exchange Commission. From this order the Quezon College, Inc. has appealed.
There is nothing in the record to show that the Quezon College, Inc.
accepted the term of payment suggested by Damasa Crisostomo, or that if
there was any acceptance the same came to her knowledge during her lifetime.
As the application of Damasa Crisostomo is obviously at variance with the
terms evidenced in the form letter issued by the Quezon College, Inc., there
was absolute necessity on the part of the College to express its agreement to
Damasa's offer in order to bind the latter. Conversely, said acceptance was
essential, because it would be unfair to immediately obligate the Quezon
College, Inc. under Damasa's promise to pay the price of the subscription after
she had caused fish to be caught. Thus, it cannot be said that the letter
ripened into a contract.
Indeed, the need for express acceptance on the part of the Quezon
College, Inc. becomes the more imperative, in view of the proposal of Damasa
Crisostomo to pay the value of the subscription after she has harvested fish, a
condition obviously dependent upon her sole will and, therefore, facultative in
nature, rendering the obligation void. Under the Civil Code it is provided that if
the fulfillment of the condition should depend upon the exclusive will of the
debtor, the conditional obligation shall be void.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 295
Plaintiffs then demanded that defendants comply with the deed of sale.
On July 20, 1983 Defendant Corporation informed plaintiff‘s lawyer that it is
unwilling to continue with the sale due to plaintiff‘s failure to comply with the
essential preconditions of the contract. Private respondent prayed for judgment
ordering the petitioner corporation to comply with the contract by delivering to
him the scrap iron subject thereof. The lower courts ruled in favor of
respondent. Hence, this petition.
In this case, the obligation of petitioner to sell did not arise; it therefore
cannot be compelled by specific performance to comply with its prestation.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 296
The contract also provided for a grace period of one month within which
to make payments, together with the one corresponding to the month of grace.
Should the month of grace expire without the installments for both months
having been satisfied, an interest of 18% per annum will be charged on the
unpaid installments. Should a period of ninety days elapse from the expiration
of the grace period without the overdue and unpaid installment paid with
proper interests, Fernando, as vendor, was authorized to declare the contract
cancelled. The defendant later filed an ejectment case for failure of petitioner to
pay within the terms of contract.
ISSUE: Whether or not the transaction between the parties was a conditional
sale.
HELD: Yes. The transaction between the parties was a conditional sale not an
absolute sale.
The intention of the parties was to reserve the ownership of the land in
the seller until the buyer has paid the total purchase price. The ownership of
the lot was not transferred to Carmelita Leaño. In a contract to sell real
property on installments, the full payment of the purchase price is a positive
suspensive condition, the failure of which is not considered a breach, casual or
serious, but simply an event that prevented the obligation of the vendor to
convey title from acquiring any obligatory force. In the case at bar, petitioner‘s
non-payment of the installments after April 1, 1989, prevented the obligation of
respondent to convey the property from arising. In fact, it brought into effect
the provision on cancellation.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 297
De Leon v. Ong
Raymundo S. De Leon, Petitioner, versus Benita T. Ong, Respondents.
(G.R. No. 170405, February 2, 2010, 3rd Division)
CORONA, J:
HELD: Yes. The transaction entered into was a contract of sale. In a contract of
sale, the seller conveys ownership of the property to the buyer upon the
perfection of the contract. Should the buyer default in the payment of the
purchase price, the seller may either sue for the collection thereof or have the
contract judicially resolved and set aside.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 298
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 299
ISSUE: Whether or not the agreement between Eliodoro, Sr. and respondent is
subject to a suspensive condition.
HELD: Yes. The agreement between Eliodoro, Sr. and respondent is subject to
a suspensive condition, the procurement of a court approval, not full payment.
Because petitioners did not consent to the sale of their ideal shares in the
disputed lots, the CA correctly limited the scope of the Receipt to the pro-
indiviso share of Eliodoro, Sr. Thus, it correctly modified the intestate court‘s
HELD by excluding their shares from the ambit of the transaction.
The petition was partially granted. The appealed decision and resolution
are affirmed with modification.
CIR v. Primetown
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 300
FACTS: Gilbert Yap, vice chair of respondent Primetown Property Group, Inc.,
applied for the refund or credit of income tax respondent paid in 1997.
According to Yap, because respondent suffered losses, it was not liable for
income taxes. Nevertheless, respondent paid its quarterly corporate income tax
and remitted creditable withholding tax from real estate sales to the BIR in the
total amount of P26,318,398.32. Therefore, respondent was entitled to tax
refund or tax credit.
On May 13, 1999, revenue officer Elizabeth Y. Santos required
respondent to submit additional documents to support its claim. Respondent
complied but its claim was not acted upon. Thus, on April 14, 2000, it filed a
petition for review in the Court of Tax Appeals (CTA). On December 15, 2000,
the CTA dismissed the petition as it was filed beyond the two-year prescriptive
period for filing a judicial claim for tax refund or tax credit. Respondents now
assail that decision for dismissal of the CTA.
ISSUE: Whether or not the period for the filing of the action has already
expired.
HELD: No. The period for the filing of the action has not yet expired.
Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of
the Administrative Code of 1987 deal with the same subject matter — the
computation of legal periods. Under the Civil Code, a year is equivalent to 365
days whether it be a regular year or a leap year. Under the Administrative Code
of 1987, however, a year is composed of 12 calendar months. Needless to state,
under the Administrative Code of 1987, the number of days is irrelevant.
Following this formula, respondent‘s petition (filed on April 14, 2000) was
filed on the last day of the 24th calendar month from the day respondent filed
its final adjusted return. Hence, it was filed within the reglementary period.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 301
NAMARCO v. Tecson
National Marketing Corporation, Plaintiff-Appellant, versus Miguel Tecson,
et al., Defendants; Miguel Tecson, Defendant-Appellee; The Insurance
Commissioner, Petitioner.
(G.R. No. L-29131, August 27, 1969, En Banc)
CONCEPCION, C. J:
FACTS: The instant case stemmed from Price Stabilization Corporation vs.
Tecson. Said case became final and executory on December 21, 1955. National
Marketing Corporation, as successor to Price Stabilization Corporation, filed a
motion for revival of judgment on December 21, 1965. Defendant Tecson
moved for the dismissal of the case on the ground of prescription, the
prescriptive period being ten (10) years. On a previous court case, the CFI
rendered judgment: (a) Ordering the defendants Miguel D. Tecson and Alto
Surety Insurance Co., Inc. to pay jointly and severally plaintiff PRATRA the
sum of P7,200.00 plus 7% interest from May 25, 1960 until the amount is fully
paid, plus P500.00 for attorney's fees, and plus costs; (b) ordering defendant
Miguel D. Tecson to indemnify his co-defendant Alto Surety & Insurance Co.,
Inc. on the cross-claim for all the amounts it would be made to pay in this
decision, in case defendant Alto Surety & Insurance Co., Inc. pay the amount
adjudged to plaintiff in this decision. From the date of such payment defendant
Miguel D. Tecson would pay the Alto Surety & Insurance Co., Inc., interest at
12% per annum until Miguel D. Tecson has fully reimbursed plaintiff of the
said amount.
In People vs. Del Rosario, with the approval of the Civil Code of the
Philippines, the Court have reverted to the provisions of the Spanish Civil Code
in accordance with which a month is to be considered as the regular 30-day
month and not the solar or civil month, with the particularity that, whereas the
Spanish Code merely mentioned months, days or nights, ours has added
thereto the term years and explicitly ordains that it shall be understood that
years are of three hundred sixty-five days.
The very conclusion thus reached by appellant shows that its theory
contravenes the explicit provision of Art. 13 limiting the connotation of each
year, as the term were used in our laws, to 365 days. The action to enforce a
judgment which became final on December 21, 1955 prescribes in 10 years.
Since the Civil Code computes years in terms of 365 days each, the action has
prescribed on December 19, 1955, since the two intervening leap years added
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 302
two more days to the computation. It is not the calendar year that is
considered.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 303
FACTS: The complaint avers that plaintiff and defendant are co-owners of said
property, the former being the owner of one-third interest and the latter of the
remaining two-thirds. The division is asked because plaintiff and defendant are
unable to agree upon the management of the property and upon the partition
thereof. Plaintiff and defendant were co owners pro indiviso of the property
known as Crystal Arcade in the proportion of one-third interest belonging to
the former and two-thirds to the latter. In the deed of sale executed by the
parties on said date, they stipulated that, should either of them decide to sell
his or her share, the other party will have an irrevocable option to purchase it
at the seller's price. Then a disagreement ensued between the parties as to
what really occurred concerning the deal.
The clause on which defendant relies for the enforcement of its right to
buy the property, it would seem that it is not a term, but a condition.
Considering the first alternative, that is, until defendant shall have obtained a
loan from the National City Bank of New York, it is clear that the granting of
such loans is not definite and cannot be held to come within the terms "day
certain" provided for in the Civil code, for it may or it may not happen. As a
matter of fact, the loan did not materialize. And if we consider that the period
given was until such time as defendant could raise money from other sources,
we also find it to be indefinite and contingent and so it is also a condition and
not a term within the meaning of the law.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 304
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 305
Lirag Textile Mills Inc. and Felix Lirag, Petitioners, versus Court of
Appeals and Cristan Alcantara, Respondents.
(G.R. No. L-6515, October 18, 1954, 1st Division)
ESGUERRA, J:
FACTS: Petitioners Lirag Textile Mills, Inc. and Felix K. Lirag seek a review by
certiorari of the decision of the respondent Court of Appeals in favor of
respondent. Respondent Court of Appeals affirmed the decision of the lower
court, principally its conclusion that the trial court did not commit any error in
its evaluation of the evidence when it found that it was not true that petitioner
Lirag Textile Mills suffered pecuniary loss and in market opportunities which it
used as a justification to terminate the services of plaintiff Alcantara; that it
was not also true that the latter suffered from lack of skill; that, therefore,
there was a violation of the written contract of employment executed by and
between petitioners and private respondent Alcantara; that petitioner Lirag was
responsible for inducing private respondent Alcantara to leave his employment
with the Philippine Chamber of Industries where he was holding a permanent
position and to accept employment with petitioner Lirag Textile Mills; and that
appellee Alcantara was correctly awarded moral damages and attorney's fees.
ISSUE: Whether or not the petitioners are liable to pay respondent back
salaries.
HELD: Yes. The petitioners are liable to pay respondent back salaries.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 306
Daguhoy v. Ponce
Daguhoy Enterprises, Inc., Plaintiff-Appellee, versus Rita L. Ponce and
Domingo Ponce, Defendants-Appellants.
(G.R. No. L-6515, October 18, 1954, En Banc)
MONTEMAYOR, J:
The Daguhoy Enterprises, Inc., filed in the Court of First Instance of the
City a civil case against Rita L. Ponce and her husband Domingo Ponce, for the
collection of a loan of 6,190.00 pesos with interest at 12 per cent per annum
from June 24, 1950, plus 2,500.00 pesos as attorney's fees and 34.00 pesos as
expenses of litigation. Defendant filed an answer admitting practically all the
allegations of the complaint, set up affirmative defenses, and a counterclaim
asking for the cancellation of the mortgage which secured the payment of the
loan of 6,190.00 pesos. They also filed a petition for the inclusion of Potenciano
Gapol as a third party litigant, at the same time filing a third party complaint
against him asking for damages in the amount of 25,000.00 pesos. The plaintiff
corporation answered the counterclaim and opposed the petition for the
inclusion of a third party litigant. Thereafter, Plaintiff Corporation filed a
motion for judgment on the pleadings which petition was opposed by the
defendants. Defendants are appealing from the adverse decision rendered by
the lower court.
ISSUE: Whether or not the loans immediately demandable despite the six year
installment for payments.
HELD: Yes. The loans immediately demandable despite the six year installment
for payments.
Although the original loan including the increase was payable within six
years from June 1950, and so did not become due and payable until 1956, it
was held that under Article 1198 of the new Civil Code, the debtor lost the
benefit of the period by reason of her failure to give the security in the form of
the two deeds of mortgage and register them including defendants‘ act in
withdrawing said two deeds from the office of the register of deeds and then
mortgaging the same property in favor of the RFC; and so the obligation
became pure and without any condition and consequently, the loan became
due and immediately demandable.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 307
FACTS: From 1917 to 1934, the sugar cane planters Manapla and Cadiz,
Negros Occidental, executed identical milling contracts, under which the sugar
central "North Negros Sugar Co. Inc." would mill the sugar produced by the
sugar cane planters of the Manapla and Cadiz districts.
Beginning with the year 1948, and in the following years, when the
planters-members of the North Negros Planters Association, Inc. considered
that the stipulated 30-year period of their milling contracts executed in the
year 1918 had already expired and terminated in the crop year 1947-1948, and
the planters-members of the Victorias Planters Association, Inc. likewise
considered the stipulated 30-year period of their milling contracts, as having
likewise expired and terminated in the crop year 1948-1949, under the
pertinent provisions of the standard milling contract. Notwithstanding the
repeated representations made by the herein petitioners with the respondent
corporation, the herein respondent has refused and still refuses to accede to
the same, contending that under the provisions of the milling contract. A
complaint was filed and the trial court rendered judgment in favor of the
petitioners and against the respondent and declares that the milling contracts
expired and terminated upon the lapse of the therein stipulated 30-year period.
From this judgment the respondent corporation has appealed.
ISSUE: Whether or not the milling contracts expired and terminated upon the
lapse of the therein stipulated 30-year period.
HELD: Yes. The milling contracts expired and terminated upon the lapse of the
therein stipulated 30-year period.
The fact that the contracts make reference to "first milling" does not
make the period of thirty (30) years one of thirty (30) milling years. The term
first milling used in the contracts under consideration was for the purpose of
reckoning the thirty-year period stipulated therein. At most on the last year of
the thirty-year period stipulated in the contracts the delivery of sugar cane
could be extended up to a time when all the amount of sugar cane raised and
harvested should have been delivered to the appellant's mill as agreed upon.
Further, the parties stipulated that in the event of flood, typhoon, earthquake,
or other force majeure, war, insurrection, civil commotion, organized strike,
etc., the contract shall be deemed suspended during said period, does not
mean that the happening of any of those events stops the running of the period
agreed upon. It only relieves the parties from the fulfillment of their respective
obligations during that time, the planters from delivering sugar cane and the
central from milling it.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 308
Jespajo v. CA
Jespajo Realty Corporation, Petitioner, versus Honorable Court of
Appeals, Tan Te Gutierrez and Co Tong, Respondents.
(G.R. No. 113626, September 27, 2002, 2nd Division)
AUSTRIA-MARTINEZ, J:
The lessor corporation sent a written notice to the lessees informing them
of the formers‘ intention to increase the monthly rentals on the occupied
premises to P3,500.00 monthly effective February 1, 1990. The lessees through
its counsel in a letter dated March 10, 1990 manifested their opposition
alleging that the same is in contravention of the terms of the contract of lease
as agreed upon. Due to the opposition and the failure of the lessees to pay the
increased monthly rentals in the amount of P3,500.00, the lessor through its
counsel in a letter dated April 10,1990 demanded that the lessees vacate the
premises and pay the amount of P7,000.00 corresponding to the months of
February and March, 1990.
HELD: No. A contract of lease entered into stipulated for an indefinite period
and shall continue for as long as the lessee is paying the rent, is interminable
by the lessor alone.
Lastly, after having the lessees believe that their lease contract is one
with an indefinite period subject only to prompt payment of the monthly
rentals by the lessees, we agree with private respondents that the lessor is
estopped from claiming otherwise.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 309
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 310
FACTS: Before the year 1933, Jose A. Villamor was a distributor of lumber
belonging to Mr. Miller who was the agent of the Insular Lumber Company in
Cebu City. Defendant being a friend and former classmate of plaintiff,
Borromeo, used to borrow from the latter certain amounts from time to time.
On one occasion with some pressing obligation to settle with Mr. Miller,
defendant borrowed from plaintiff a large sum of money for which he
mortgaged his land and house in Cebu City. Mr. Miller filed civil action against
the defendant and attached his properties including those mortgaged to
plaintiff, inasmuch as the deed of mortgage in favor of plaintiff could not be
registered because it was not properly drawn up. Plaintiff then pressed the
defendant for the settlement of his obligation, but defendant instead offered to
execute a document promising to pay his indebtedness even after the lapse of
ten (10) years. Liquidation was made and defendant was found to be indebted
to plaintiff in the sum of P7,220, for which defendant signed a promissory note
on November 29, 1933 with interest at the rate of 12% per annum, agreeing
topay-―as soon as I have money .‖ The note further stipulates that defendant
―hereby relinquish, renounce, or otherwise waive my rights to the prescriptions
established by our Code of Civil Procedure for the collection or recovery of the
above sum of P7,220.‖
HELD: NO. The obligation in this case is one which is subject to a potestative
condition, one which is dependent solely on the will of the debtor. The
statement ―as soon as I have money‖ is the condition which is dependent on
the debtor‘s will. Although this condition is void, it has been relied upon by the
creditor resulting to the delayed filing of the action. Prescription in this case
cannot be applied strictly for it will result to grave injustice on the part of the
creditor. For as was also made clear therein, there had been since then verbal
requests on the part of the creditor made to the debtor for the settlement of the
loan. Furthermore, plaintiff did not file any complaint against the defendant
within ten (10) years from the execution of the document as there was no
property registered in defendant‘s name who furthermore assured him that he
could collect even after the lapse of ten years. The debtor is therefore liable for
the amount of the obligation plus interests.
Gonzales v. Jose
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 311
HELD: NO. The words ―as soon as possible‖ in the promissory notes denote
that such is an obligation subject to a potestative condition. Article 1128 of the
Civil Code provides: ―If the obligation does not specify a term, but it is to be
inferred from its nature and circumstances that it was intended to grant the
debtor time for its performance, the period of the term shall be fixed by the
court‖. The action to ask the court to fix the period has already prescribed in
accordance with section 43 (1) of the Code of Civil Procedure. This period of
prescription is ten (10) years, which has already elapsed from the execution of
the promissory notes until the filing of the action on June 1, 1934. The
actionwhich should be brought in accordance with Article 1128 is different
from theaction for the recovery of the amount of the notes, although the effects
of bothare the same, being, like other civil actions, subject to the rules of
prescription.
Baluyut v. Poblete
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 312
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 313
Malayan Realty v. Uy
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 314
HELD: The 2nd paragraph of Article 1687 provides that in the event that the
lessee has occupied the leased premises for over a year, the courts may fix a
longer term for the lease. The power of the courts to establish a grace period is
potestative or discretionary, depending on the particular circumstances of the
case. Thus, a longer term may be granted where equities come into play, and
may be denied where none appears, always with due deference to the parties‘
freedom to contract. In the present case, respondent has remained in
possession of the property from the time the complaint for ejectment was filed
on September 18, 2001 up to the present time. Effectively, respondent‘s lease
has been extended for more than five years, which time is, under the
circumstances, deemed sufficient as an extension and for him to find another
place to stay.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 315
HELD: Under Article 280 of the Labor Code, all those who have been with the
company for one year by said date must automatically be considered regular
employees by operation of law. The 61 employees all qualify as regular
employees by this provision. The characterization of the employee‘s services as
no longer necessary or sustainable, and therefore properly terminable, is an
exercise of business judgment on the part of the employer. The wisdom or
soundness of such characterizing or decision is not subject to discretionary re
view on the part of the Labor Arbiter nor of the NLRC so long, of course, as
violation of law or merely arbitrary and malicious action is not shown. As found
by the NLRC, the private respondent‘s decision to close the plant was a result
of a study conducted which established that the most prudent course of action
for the private respondent was to stop operations in said plants and transfer
production to other more modern and technologically advanced plants of
private respondent.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 316
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 317
Thus, on March 10, 1993, the Sheriff levied on the real properties of petitioner,
which were formerly subjects of the lis pendens. Petitioner, however, filed
numerous motions to block the enforcement of the said writ. The challenge of
the execution of the aforesaid compromise judgment even reached the Supreme
Court. All these efforts, however, were futile. On November 22, 1994,
petitioner‘s real properties located in Mabalacat, Pampanga were auctioned. In
the said auction, Riverland, Inc. was the highest bidder for P12 million and it
was issued a Certificate of Sale covering the real properties subject of the
auction sale. Subsequently, another auction sale was held on February 8,
1995, for the sale of real properties of petitioner in Bacolod City. Again,
Riverland, Inc. was the highest bidder. The Certificates of Sale issued for both
properties provided for the right of redemption within one yearfrom the date of
registration of the said properties. On June 2, 1995, Santos and Riverland Inc.
filed a Complaint for Declaratory Relief and Damages alleging that there was
delay on the part of petitioner in paying the balance of P13 million. They
further alleged that under the Compromise Agreement, the obligation became
due on October 26, 1992, but payment of the remaining P12 million was
effected only on November 22, 1994. Thus, respondents prayed that petitioner
be ordered to pay legal interest on the obligation, penalty, attorney‘s fees and
costs of litigation. Furthermore, they prayed that the aforesaid sales be
declared final and not subject to legal redemption. In its Answer, petitioner
countered that respondents have no cause of action against it since it had fully
paid its obligation to the latter. It further claimed that the alleged delay in the
payment of the balance was due to its valid exercise of its rights to protect its
interests as provided under the Rules. Petitioner counterclaimed for attorney‘s
fees and exemplary damages. On October 4, 1996, the trial court rendered a
Decision dismissing herein respondents‘ complaint and ordering them to pay
attorney‘s fees and exemplary damages to petitioner. Respondents then
appealed to the Court of Appeals. The appellate court reversed the HELD of the
trial court.
ISSUE: Whether or not the Court of Appeals was correct in its decision,
reversing the trial court‘s decision, regarding the legal interest of herein
respondents on aforementioned properties.
HELD: The Supreme Court held the decision of the Court of Appeals correct. A
compromise is a contract whereby the parties, by making reciprocal
concessions, avoid litigation or put an end to one already commenced. It is an
agreement between two or more persons, who, for preventing or putting an end
to a lawsuit, adjust their difficulties by mutual consent in the manner which
they agree on, and which every one of them prefers in the hope of gaining,
balanced by the danger of losing. The general rule is that a compromise has
upon the parties the effect and authority of res judicata, with respect to the
matter definitely stated therein, or which by implication from its terms should
be deemed to have been included therein. This holds true even if the agreement
has not been judicially approved. In the case at bar, the Compromise
Agreement was entered into by the parties on October 26, 1990. It was
judicially approved on September 30, 1991. Applying existing jurisprudence,
the compromise agreement as a consensual contract became binding between
the parties upon its execution and not upon its court approval. From the time a
compromise is validly entered into, it becomes the source of the rights and
obligations of the parties thereto. The purpose of the compromise is precisely to
replace and terminate controverted claims. In accordance with the compromise
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 318
agreement, the respondents asked for the dismissal of the pending civil cases.
The petitioner, on the other hand, paid the initial P1.5 million upon the
execution of the agreement. This act of the petitioner showed that it
acknowledges that the agreement was immediately executory and enforceable
upon its execution. As to the remaining P13 million, the terms and conditions
of the compromise agreement are clear and unambiguous. The two-year period
must be counted from October 26, 1990, the date of execution of the
compromise agreement, and not on the judicial approval of the compromise
agreement on September 30, 1991. When respondents wrote a demand letter to
petitioner on October 28, 1992, the obligation was already due and
demandable. When the petitioner failed to pay its due obligation after the
demand was made, it incurred delay. Article 1169 of the New Civil Code
provides: Those obliged to deliver or to do something incur in delay from the
time the obligee judicially or extrajudicially demands from them the fulfillment
of their obligation. Delay as used in this article is synonymous to default or
mora, which means delay in the fulfillment of obligations. It is the non-
fulfillment of the obligation with respect to time. In order for the debtor to be in
default, it is necessary that the following requisites be present: (1) that the
obligation be demandable and already liquidated; (2) that the debtor delays
performance; and (3) that the creditor requires the performance judicially or
extrajudicially. In the case at bar, the obligation was already due and
demandable after the lapse of the two-year period from the execution of the
contract. The two-year period ended on October 26, 1992. When the
respondents gave a demand letter on October 28, 1992, to the petitioner, the
obligation was already due and demandable. Furthermore, the obligation is
liquidated because the debtor knows precisely how much he owes and when he
should pay the amount due. The second requisite is also present. Petitioner
delayed in the performance. It was able to fully settle its outstanding balance
only on February8, 1995, which is more than two years after the extra-judicial
demand. Moreover, it filed several motions and elevated adverse resolutions to
the appellate court to hinder the execution of a final and executory judgment,
and further delay the fulfillment of its obligation. Third, the demand letter sent
to the petitioner on October 28, 1992, was in accordance with an extra-judicial
demand contemplated by law. Verily, the petitioner is liable for damages for the
delay in the performance of its obligation. This is provided for in Article 1170 of
the New Civil Code. When the debtor knows the amount and period when he is
to pay, interest as damages is generally allowed as a matter of right. The
complaining party has been deprived of funds to which he is entitled by virtue
of their compromise agreement. The goal of compensation requires that the
complainant be compensated for the loss of use of those funds. This
compensation is in the form of interest. In the absence of agreement, the legal
rate of interest shall prevail. The legal interest for loan as forbearance of money
is 12% per annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of Article 1169 of the
Civil Code.
Melotindos v. Tobias
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 319
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 320
FACTS: The case originated from an unlawful detainer case filed by petitioner
before the trial court alleging that respondents Huang Chao Chun and Yang
TungFa violated their amended lease contract over a 1,112 square meter lot it
owns, when they did not pay the monthly rentals thereon in the total amount
of P4,322,900.00. It also alleged that the amended lease contract already
expired on September 16, 1996 but respondents refused to surrender
possession thereof plus the improvements made thereon, and pay the rental
arrearages despite repeated demands. The parties entered into the amended
lease contract sometime in August 1991. The same amended the lease contract
previously entered into by the parties on August 8, 1991.Respondent were
joined by the Tsai Chun International Resources Inc. in their answer to the
Complaint, wherein they alleged that the actual lessee is the corporation.
Respondents and the corporation denied petitioner‘s allegations. The MTC
dismissed the case. The MTC ruled that the lessees could extend the contract
entered into by the parties unilaterally for another five years for reasons of
justice and equity. It also ruled that the corporation‘s failure to pay the
monthly rentals as they fell due was justified by the fact that petitioner refused
to honor the basis of the rental increase as stated in their Lease Agreement.
This was affirmed by the RTC. It also held that the parties had a reciprocal
obligation: unless and until petitioner presented ―the increased realty tax,‖
private respondents were not under any obligation to pay the increased
monthly rental. The decision was likewise affirmed by the Court of Appeals.
ISSUE: Whether or not the court could still extend the term of the lease, after
its expiration.
HELD: In general, the power of the courts to fix a longer term for a lease is
discretionary. Such power is to be exercised only in accordance with the
particular circumstances of a case: a longer term to be granted where equities
demanding extension come into play; to be denied where none appear - always
with due deference to the parties‘ freedom to contract. Thus, courts are not
bound to extend the lease. Article 1675 of the Civil Code excludes cases falling
under Article 1673from those under Article 1687. Article 1673 provides among
others, that the lessor may judicially eject the lessee upon the expiration of
―the period agreed upon or that, which is fixed for the duration of the leases.‖
Where no period has been fixed by the parties, the courts, pursuant to Article
1687, have the potestative authority to set a longer period of lease. In the case,
the Contract of Lease provided for a fixed period of five (5) years -- ―specifically‖
from September 16, 1991 to September 15, 1996.Because the lease period was
for a determinate time, it ceased, by express provision of Article 1669 of the
Civil Code, ―on the day fixed, without need of a demand.‖ Here, the five-year
period expired on September 15, 1996, whereas the Complaint for ejectment
was filed on October 6, 1996. Because there was no longer any lease that could
be extended, the MeTC, in effect, made a new contract for the parties, a power
it did not have. As stated in Bacolod-Murcia Milling v. Banco Nacional Filipino,
―It is not the province of the court to alter a contract by construction or to
make a new contract for the parties; its duty is confined to the interpretation of
the one which they have made for themselves, without regard to its wisdom or
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 321
folly, as the court cannot supply material stipulations or read into contract
words which it does not contain.‖ Furthermore, the extension of a lease
contract must be made before the term of the agreement expires, not after.
Upon the lapse of the stipulated period, courts cannot belatedly extend or
make a new lease for the parties, even on the basis of equity. Because the
Lease Contract ended on September15, 1996, without the parties reaching any
agreement for renewal, respondent scan be ejected from the premises. On the
other hand, respondents and the lower courts argue that the Contract of Lease
provided for an automatic renewal of the lease period. Citing Koh v. Ongsiaco
and Cruz v. Alberto, the MeTC -- upheld by the RTC and the CA-- ruled that
the stipulation in the Contract of Lease providing an option to renew should be
construed in favor of and for the benefit of the lessee. This HELD has however,
been expressly reversed in Fernandez v. CA and was recently reiterated in Heirs
of Amando Dalisay v. Court of Appeals. Thus, pursuant to Fernandez, Dalisay
and Article 1196 of the Civil Code, the period of the lease contract is deemed to
have been set for the benefit of both parties. Its renewal may be authorized only
upon their mutual agreement or at their joint will. Its continuance, effectivity or
fulfillment cannot be made to depend exclusively upon the free and
uncontrolled choice of just one party. While the lessee has the option to
continue or to stop paying the rentals, the lessor cannot be completely deprived
of any say on the matter. Absent any contrary stipulation in a reciprocal
contract, the period of lease is deemed to be for the benefit of both parties. In
the instant case, there was nothing in the aforesaid stipulation or in the
actuation of the parties that showed that they intended an automatic renewal
or extension of the term of the contract. First, demonstrating petitioner‘s
disinterest in renewing the contract was its letter dated August 23, 1996,
demanding that respondents vacate the premises for failure to pay rentals
since1993. As a rule, the owner-lessor has the prerogative to terminate the
lease upon its expiration. Second, in the present case, the disagreement of the
parties over the increased rental rate and private respondents‘ failure to pay it
precluded the possibility of a mutual renewal. Third, the fact that the lessor
allowed the lessee to introduce improvements on the property was indicative,
not of the former‘s intention to extend the contract automatically, but merely of
its obedience to its express terms allowing the improvements. After all, at the
expiration of the lease, those improvements were to ―become its property.‖As to
the contention that it is not fair to eject respondents from the premises after
only five years, considering the value of the improvements they introduced
therein, suffice it to say that they did so with the knowledge of the risk -- the
contract had plainly provided for a five-year lease period.
Parties are free to enter into any contractual stipulation, provided it is
not illegal or contrary to public morals. When such agreement, freely and
voluntarily entered into, turns out to be disadvantageous to a party, the courts
cannot rescue it without crossing the constitutional right to contract. They are
not authorized to extricate parties from the necessary consequences of their
acts, and the fact that the contractual stipulations may turn out to be
financially disadvantageous will not relieve the latter of their obligations.
Petition granted. Decision set aside. Respondents ordered to vacate the
premises, to restore peaceful possession thereof to petitioner, and to pay
accrued rentals.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 322
HELD: NO. The provisions of the Labor Code recognize the existence and
legality of term employments. The case at bar is one which involves term
employment. Therefore, Alegre‘s employment was terminated upon the
expiration of his last contract with Brent School on July 16, 1976 without the
necessity of any notice. The advance written advice given the Department of
Labor with copy to said petitioner was a mere reminder of the impending
expiration of his contract, not a letter of termination, nor an application for
clearance to terminate which needed the approval of the Department of Labor
to make the termination of his services effective. In any case, such clearance
should properly have been given, not denied.
Lim v. People
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 323
FACTS: On January 10, 1966, Lim (Appellant) went to the house of Maria
Ayrosoand proposed to sell Ayroso's tobacco. Ayroso agreed to the proposition
of theappellant to sell her tobacco consisting of 615 kilos at P1.30 a kilo.
Theappellant was to receive the over price for which she could sell the
tobacco.Of the total value of P799.50, the appellant had paid to Ayroso
onlyP240.00, and this was paid on three different times. Demands for the
paymentof the balance of the value of the tobacco were made upon the
appellant byAyroso, and particularly by her sister, Salud Bantug. Salud
Bantug furthertestified that she had gone to the house of the appellant several
times, but theappellant often eluded her; and that the 'camarin' of the
appellant was empty.Although the appellant denied that demands for payment
were made upon her, it is a fact that on October 19, 1966, she wrote a letter to
Salud Bantug statingthat she could not pay in full the amount of P799.50
because it is also hard todemand payment from her ―suki‖ in the market of
Cabanatuan. Pursuant to thisletter, the appellant sent a money order for
P100.00 on October 24, 1967, andanother for P50.00 on March 8, 1967; and
she paid P90.00 on April 18, 1967 or a total of P240.00. As no further amount
was paid, the complainant filed acomplaint against the appellant for estafa.
ISSUE: Whether or not the Article 1197 of the Civil Code can be applied in
thiscase
HELD: NO. It is clear in the agreement that the proceeds of the sale of
thetobacco should be turned over to the complainant as soon as the same was
sold, or, that the obligation was immediately demandable as soon as the
tobacco wasdisposed of. Hence, Article 1197 of the New Civil Code, which
provides that thecourts may fix the duration of the obligation if it does not fix a
period, does notapply.Anent the argument that petitioner was not an agent
because theagreement does not say that she would be paid the commission if
the goodswere sold, the fact that appellant received the tobacco to be sold at
P1.30 perkilo and the proceeds to be given to complainant as soon as it was
sold, strongly negates transfer of ownership of the goods to the petitioner. The
agreement constituted her as an agent with the obligation to return the tobacco
if the same was not sold.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 324
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 325
ISSUES: Whether or not the sale by the petitioner bank of the shares of stocks
of private respondent on March 21, 1958 is valid since the shares of stocks
hadbeen pledged to insure an extension of the period to pay the July
installment.Whether or not the Court may fix a period in the parties‘ agreement
toextend the payment of the loan, including the installment which was due on
orbefore July 1957 it being imprecise.
HELD: The Supreme Court held that since there was an agreement to extend
indefinitely the payment of the installment of P50,000.00 in July 1957
asprovided in the promissory note, consequently, petitioner Pacific Banking
Corporation was precluded form enforcing the payment of the said installment
of July 1957, before the expiration of the indefinite period of extension, which
period had to be fixed by the court as provided in Article 1197 of the Civil
Code.Hence, the disputed foreclosure and subsequent sale was premature.
Wherefore, the petition is dismissed. YES. In case the period of extension is not
precise, the provisions of Article 1197 of the Civil Code should apply. The
pledge executed as collateral security no longer contained a provision on
installment due on or before July1957. The pledge constituted on February 19,
1958 on the shares of stocks of Insular was sufficient consideration for the
extension, considering that pledgewas additional collateral required by the
Pacific in addition to the continuingguaranty of Carkin. Even the ledge did not
provide for dates of payment of installments; or any fixed date for maturity of
the whole indebtedness.Accordingly, the date of maturity of the indebtedness
should be as may bedetermined by the court under Article 1197 of the Civil
Code.
Agoncillo v. Javier
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 326
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 327
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 328
Ong Guan Cuan and The Bank of The Philippine Islands, Plaintiff-
appellees, versus Century Insurance Company, LTD., defendant-appelant.
(G.R. No. L-22738 or 46 SCRA 592, December 2, 1924, En Banc)
Villamor (Ignacio), J.:
FACTS: A building of plaintiff Ong Guan Cuan was insured with defendant
CenturyInsurance Company (Century) against fire for P30,000 as well as
themerchandise therein for P15,000. On February 28 1923, the building and
themerchandise were burned while the policies issued were in force. Under
theconditions of the policies, the defendant may at its option reinstate or
replacethe destroyed property instead of paying for the amount of the loss and
that it isnot bound to reinstate exactly or completely the damaged property.
Century proposed reconstruction of the house destroyed but plaintiff denied
that the new house which will be constructed would be smaller and of
materials of lower kind than those employed in the construction of the
housewhich was destroyed. Plaintiff filed a complaint compelling defendant to
pay thesum of P45,000, the value of the insurance of the building and the
merchandise.On April 19, 1924, the CFI of Iloilo City rendered judgment in
favor of theplaintiff.Hence the defendant appealed from the judgment and
prayed that it bepermitted to rebuild the house as provided in the conditions of
the insurancepolicies.
ISSUE: Whether or not defendant Century may be allowed to rebuild the house
asits option instead of payment of the insured value as stipulated in the
insurancepolicies.
HELD: NO. The conditions in the insurance policies that the parties entered
intoallowed Century to either pay the insured value of the house, or rebuild
itmaking the obligation of the company an alternative one. In
alternativeobligations, the debtor, Century, must notify the creditor of his
election statingwhich of the two prestations it is disposed to fulfill. The
objective is to give thecreditor opportunity to give consent or deny the election
of the debtor. Onlyafter said notice shall election take legal effect when
consented by the creditor (Article 120 Civil Code) or if impugned by the latter
when declared proper by acompetent court. In the instant case, appellant
company did not give formalnotice of its election to rebuild the house and the
proposed reconstruction of thehouse was rejected by the creditor.In alternative
obligations, the value of the prestations must be equivalentor similar in value
to each other. The proposed rebuilding of the house by the insurance company
would be of lesser value than the other prestation. Thepetitioner would build a
smaller house and of materials of lower kind than thoseemployed in the
construction of the burned house. The other prestation ispayment of the
amount of P45,000 corresponding to the value of the burnedbuilding (P30, 000)
and the value of the merchandise burned (P15,000). Therefore, the only
recourse of the insurer is to pay the stipulated value of theinsurance policy.
Legarda v. Miailhe
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 329
HELD: On February 17, 1943, the only currency available was the Philippine
currency, or the Japanese Military notes, because all other currencies,
including the English, were outlawed by a proclamation issued by the
Japanese Imperial Commander on January 3, 1942. The right toelection ceased
to exist on the date of plaintiff‘s payment because it had become legally
impossible. And this is so because in alternativeobligations there is no right to
choose undertakings that are impossible orillegal. In other words, the
obligation on the part of the debtor to pay the mortgage indebtedness has since
then ceased to be alternative. It appears therefore, that the tender of payment
in Japanese Military noteswas a valid tender because it was the only currency
permissible at thetime and its payment was tantamount to payment in
Philippine currency. However, payment with the clerk of court did not have any
legal effect because it was made in certified check, and a check does not
meetthe requirements of legal tender. Therefore, her consignation did not
havethe effect of relieving her from her obligation of the defendant.
Reyes v. Martinez
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 330
FACTS: Estanislao Reyes filed an action before the Court of First Instance of
Laguna against the Martinez heirs upon four several causes of action in
whichthe plaintiff seeks to recover five parcels of land, containing proximately
onethousand coconut trees, and to obtain a declaration of ownership in his
favor asagainst the defendants with respect to said parcels; to recover from
thedefendants the sum of P9,377.50, being the alleged proceeds of some
coconuttrees; to recover from the defendants the sum of P43,000, as alleged
value of the proceeds of the lands involved in the receivership in the case of
Martinez vs.Grano, to which the plaintiff supposes himself to be entitled, but
which havegone, so he claims, to the benefit of the defendants in said
receivership andlastly, to recover the sum of the P10,000 from the defendants
as damages resulting from their improper meddling in the administration of the
receiver ship property. The plaintiff has been laboring along for several years in
an unsuccessfullegal battle with the defendants, springing from his claim to be
the owner of theproperty involved in the receivership. This cause of action is
founded upon thecontract and the claim put forth by the plaintiff is to have the
five parcelsadjudge to him in lieu of another parcel formerly supposed to
contain onethousand trees between him and certain of the Martinez heirs. By
this contract,Reyes was to be given the parcel described in clause 8, but in a
proviso to saidclause, the parties contracting with Reyes agreed to assure to
him certain otherland containing an equivalent number of trees in case he
should so elect. Thelitigation shows that the plaintiff elected to take and hold
the parcel described inclause 8, and his right thereto has all along been
recognized in the dispositionsmade by the court with respect to said land.
Thus, Reyes must be taken to have elected to take that particular parcel and
he is now estopped from asserting acontrary election to take the five parcels of
land described in his complaint.However, the title of the parcel is in the heirs of
Inocente Martinez and itdoes not appear that they have transferred said title to
Reyes.
HELD: Yes. The claim of the defendants to the interest of P8,000 from July
31,1926 cannot be conceded as the judgment itself bears interest at the lawful
ratefrom the date the same was rendered. The Martinez heirs are ordered
toprocure the sufficient deed conveying to appellant Estanislao Reyes the
parcelsof land mentioned in paragraph 8 of the contract. The judgment against
Reyesin favor of the Martinez heirs is enjoined.
Quizana v. Redugerio
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 331
FACTS: This is an appeal to the Court from a decision rendered by the Court of
theFirst Instance of Marinduque, wherein the defendant Gaudencio Redugerio
wasto pay the plaintiff Martina Quizana the sum of P550 with the interest from
thetime of the filing of the complaint and from an order of the same court
denying amotion of the defendant for the reconsideration of the judgment on
the groundthat they were deprived of their day in court. There were actionable
documents attached to the complaint signed by thedefendant-appellant
spouses Redugerio and Pastrado on October 4, 1948 andcontaining the
provision that Quizana is to be paid on January 1949 and in caseof failure,
they will mortgage the coconut plantation in Sta. Cruz, Marinduque. The
defendants admitted that they offered the transfer of possession but was
eventually refused by the petitioner.So eventually, the defendants appealed in
the CFI which set the hearing on August 16, 1951.However, the counsel for
defendants presented an ―urgent motion for continuance‖ for the date of
hearing coincides with his appearance in two (2) criminal cases previously set
for trial before hearing on the aforesaid date. The motion was not acted upon
until the day of the trial. The CFI denied the motion for continuance, and in the
absence of defendants, rendered its questioned decision.
ISSUE: Whether or not the trial court was correct in ignoring the 2nd part of
thewritten obligation and solely basing its decision on the last part of the
1stpart; i.e., that payment should have been made on January 21, 1949.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 332
ISSUE: Whether or not Marsman Drysdale and Gotesco are jointly liable to PGI.
HELD: PGI executed a technical service contract with the joint venture and was
never a party to the JVA. While the JVA clearly spelled out, inter alia, the
capital contributions of Marsman Drysdale (land) and Gotesco (cash) as well as
the funding and financing mechanism for the project, the same cannot be used
to defeat the lawful claim of PGI against the two joint venturers-partners. The
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 333
TSC clearly listed the joint venturers Marsman Drysdale and Gotesco as the
beneficial owner of the project, and all billing invoices indicated the consortium
therein as the client. The only time that the JVA may be made to apply in the
present petitions is when the liability of the joint venturers to each other would
set in.
In the absence of stipulation, the share of each in the profits and losses
shall be in proportion to what he may have contributed, but the industrial
partner shall not be liable for the losses. As for the profits, the industrial
partner shall receive such share as may be just and equitable under the
circumstances. If besides his services he has contributed capital, he shall also
receive a share in the profits in proportion to his capital. In the JVA, Marsman
Drysdale and Gotesco agreed on a 50-50 ratio on the proceeds of the project.
They did not provide for the splitting of losses, however. Applying the above-
quoted provision of Article 1797 then, the same ratio applies in splitting the
P535,353.50 obligation-loss of the joint venture.
The appellate court‘s decision must be modified, however. Marsman
Drysdale and Gotesco being jointly liable, there is no need for Gotesco to
reimburse Marsman Drysdale for ―50% of the aggregate sum due‖ to PGI.
Allowing Marsman Drysdale to recover from Gotesco what it paid to PGI would
not only be contrary to the law on partnership on division of losses but would
partake of a clear case of unjust enrichment at Gotesco‘s expense. The grant
by the lower courts of Marsman Drysdale cross-claim against Gotesco was thus
erroneous. Marsman Drysdale‘s supplication for the award of attorney‘s fees in
its favor must be denied. It cannot claim that it was compelled to litigate or
that the civil action or proceeding against it was clearly unfounded, for the JVA
provided that, in the event a party advances funds for the project, the joint
venture shall repay the advancing party. Marsman Drysdale was thus not
precluded from advancing funds to pay for PGI‘s contracted services to abate
any legal action against the joint venture itself. It was in fact hardline
insistence on Gotesco having sole responsibility to pay for the obligation,
despite the fact that PGI‘s services redounded to the benefit of the joint
venture, that spawned the legal action against it and Gotesco. Finally, an
interest of 12% per annum on the outstanding obligation must be imposed
from the time of demand as the delay in payment makes the obligation one of
forbearance of money, conformably with this Court‘s HELD in Eastern Shipping
Lines, Inc. v. Court of Appeals. Marsman Drysdale and Gotesco should bear
legal interest on their respective obligations.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 334
FACTS: Respondent Romeo Jaring was the lessee of a 14.5 hectares fishpond
inBarilto, Bataan. The lease was for a period of five (5) years ending
September12, 1990. On June 19, he subleased the fishpond for the remaining
period of hislease to the spouses Placido and Purita Alipio and the spouses
Bienvenido andRemedons Manuel. The stipulated amount of the rent was P
485,600.00 payablein two (2) installments of P300,00.00 and P185,600 with
second installment falling due on June 30, 1989. Each of the four sublease
parties signed thecontract. The first installment was duly paid, but the second
installment the sublessees only satisfied a portion thereof, leaving an unpaid of
P50,600.00.Despite due demand, the lessees failed to comply with their
obligation so that onOctober 13,1989 private respondent sued Alipio and
Manuel spouses for thecollection of the said amount before the RTC, and in the
alternative, he prayedfor the rescission of the sublease contract should the
defendant failed to pay thebalance.Petitioner Purita moved to dismiss the case
on the ground that herhusband had passed away on December 1988. She
based her action on Rule 3Section 31 of 1964 Rules of Court.
ISSUE: Whether or not a creditor can sue the surviving spouses for the
collectionof debt which is owned by the conjugal partnership of gains, and not
in aproceeding for the settlement of the estate of the decedent.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 335
FACTS: I. CA-G.R. SP NO. 23324PH Credit Corp., filed a case against Pacific
Lloyd Corp., Carlos Farrales, Thomas H. Van Sebille and Federico C. Lim, for
sum of money. After service of summons upon the defendants, they failed to
file their answer within thereglementary period, hence they were declared in
default. Judgment is renderedin favor of plaintiff PH Credit Corporation. After
the aforesaid decision has become final and executory, a Writ of Execution was
issued and consequently implemented by the assigned Deputy Sheriff. Personal
and real properties of defendant Carlos M. Farrales were levied and sold at
public auction wherein PH Credit Corp. was the highest bidder. Motion for the
issuance of a writ of possession was filed and the same wasgranted. Petitioner
claims that she, as a third-party claimant with the courtbelow, filed an ‗Urgent
Motion for Reconsideration and/or to suspend the Orderdated October 12,
1990‘, but without acting there [on], respondent Judge issued the writ of
possession on October 26, 1990. She claims that the actuations of respondent
Judge were tainted with grave abuse of discretion. Respondent Judgeissued an
order considering the assailed Order as well as the writ of possessionas ‗of no
force and effect‘ thus the issue here has become moot and academic.II. CA-G.R.
SP NO. 25714Petitioner claims that the respondent Judge‘s Order dated
January 31, 1991 was tainted with grave abuse of discretion based on the
following grounds:―1. Respondent Judge refused to consider as ―waived‖ private
respondent‘sobjection that his obligation in the January 31, 1984 decision was
merely jointand not solidary with the defendants therein. According to
petitioner, privaterespondent assailed the levy on execution twice in 1984 and
once in 1985 butnot once did the latter even mention therein that his
obligation was joint forfailure of the dispositive portion of the decision to
indicate that it was solidary. Thus, private respondent must be deemed to have
waived that objection, petitioner concludes.
―2. The redemption period after the auction sale of the properties had
longlapsed so much [so] that the purchaser therein became the absolute
ownerthereof. Thus, respondent Judge allegedly abused his discretion in
setting asidethe auction sale after the redemption period had expired.―3.
Respondent Judge erred in applying the presumption of a joint obligation inthe
face of the conclusion of fact and law contained in the decision showing thatthe
obligation is solidary.‖ The Court of Appeals affirmed the trial court‘s HELD
declaring null andvoid (a) the auction sale of Respondent Ferrales‘ real property
and (b) the Writ of Possession issued in consequence thereof. It held that,
pursuant to the January31, 1984 Decision of the trial court, the liability of
Farrales was merely joint andnot solidary. Consequently, there was no legal
basis for levying and sellingFarrales‘ real and personal properties in order to
satisfy the whole obligation.
ISSUE: Whether or not the Court of Appeals erred when it disregarded the body
of the decision and concluded that the obligation was merely a joint obligation
dueto the failure of the dispositive portion of the decision dated 31 January
1984 tostate that the obligation was joint and solidary.
HELD: No. A solidary obligation is one in which each of the debtors is liable
forthe entire obligation, and each of the creditors is entitled to demand
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 336
thesatisfaction of the whole obligation from any or all of the debtors. On the
otherhand, a joint obligation is one in which each debtors is liable only for
aproportionate part of the debt, and the creditor is entitled to demand only
aproportionate part of the credit from each debtor. The well-entrenched rule
isthat solidary obligations cannot be inferred lightly. They must be positively
andclearly expressed. A liability is solidary ―only when the obligation expressly
sostates, when the law so provides or when the nature of the obligation
sorequires.‖In the dispositive portion of the January 31, 1984 Decision of the
trialcourt, the word solidary neither appears nor can it be inferred therefrom.
Thefallo merely stated that the following respondents were liable: Pacific
LloydCorporation, Thomas H. Van Sebille, Carlos M. Farrales and Federico C.
Lim.Under the circumstances, the liability is joint, as provided by the Civil
Code,which we quote:― Art. 1208. If from the law, or the nature or the wording
of theobligations to which the preceding article refers[,] the contrary does not
appear,the credit or debt shall be presumed to be divided into as many equal
shares asthere are creditors or debtors x x x.‖ Hence the execution must
conform withthat which is ordained or decreed in the dispositive portion of the
decision.Petitioner maintains that the Court of Appeals improperly and
incorrectlydisregarded the body of the trial court‘s Decision, which clearly
stated as follows:―To support the Promissory Note, a Continuing Suretyship
Agreement wasexecuted by the defendants, Federico C. Lim, Carlos M. Farrales
and Thomas H.Van Sebille, in favor of the plaintiff corporation, to the effect
that if Pacific LloydCorporation cannot pay the amount loaned by plaintiff to
said corporation, thenFederico C. Lim, Carlos M. Farrales and Thomas H. Van
Sebille will holdthemselves jointly and severally together with defendant Pacific
LloydCorporation to answer for the payment of said obligation.‖ The only
exception when the body of a decision prevails over the fallo iswhen the
inevitable conclusion from the former is that there was a glaring errorin the
latter, in which case the body of the decision will prevail. In this instance,there
was no clear declaration in the body of the January 31, 1984 Decision
towarrant a conclusion that there was an error in the fallo. Nowhere in the
formercan have we found a definite declaration of the trial court that, indeed,
respondent‘sliability was solidary. If petitioner had doubted this point, it
should have filed amotion for reconsideration before the finality of the Decision
of the trial court.
CDCP VS ESTRELLA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 337
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 338
Republic Glass Corp. and Gervel, Inc., petitioners, versus Lawrence Qua,
respondent.
(G.R. No. 14413, July 30, 2004, First Division)
Carpio, J.:
HELD: The petition is denied. Although the Agreement does not state
thatpayment of the entire obligation is an essential condition
forreimbursement, RGC and Gervel cannot automatically claim for
indemnityfrom Qua because Qua himself is liable directly to Metrobank and
PDCP. The elements of novation are not established in the instant
case.Contrary to RGC and Gervel‘s claim, payment of any amount will
notautomatically result in reimbursement. If a solidary debtor pays
theobligation in part, he can recover reimbursement from the co-debtors onlyin
so far as his payment exceeded his share in the obligation. This isprecisely
because if a solidary debtor pays an amount equal to hisproportionate share in
the obligation, then he in effects pays only what isdue from him. If the debtor
pays less than his share in the obligation, hecannot demand reimbursement
because his payment is less than hisactual debt.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 339
HELD: NO, the liability pursuant to the decision of the labor arbiter dated
March10, 1987 should be as it is hereby, considered joint and petitioner‘s
paymentwhich has been accepted considered as full satisfaction of its liability,
withoutthe prejudice to the enforcement of the awards against the other
fiverespondents in the said case.A solidary or joint and several obligations is
one in which each debtor isliable for the entire obligation and each creditor is
entitled to demand theobligation. In a joint obligation each obligor answers
only a part of the wholeliability and to each obligation belong only a part of the
correlative rights. There is solidary liability only when the obligation expressly
so states,when the law so provides or when the nature of the obligation so
required.When it is not provided in a judgment that the defendant are liable to
pay jointlyand severally a certain sum of money, none of them may be
compelled to satisfyin full said judgment.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 340
ISSUE: Whether or not the appellate court erred in holding that MMTC should
besolidary liable with the other defendants.
HELD: No, the appellate court did not err in its decision. Whether or not
thediligence of a good father of a family has been observed by petitioner is a
matterof proof which under the circumstances in the case at bar has not been
clearly established. It is not felt by the Court that there is enough evidence on
recordas would overturn the presumption of negligence, and for failure to
submit allevidence within its control, assuming the putative existence thereof;
petitionerMMTC must suffer the consequences of its own inaction and
indifference. The mere formulation of various company policies on safety
without showing that they were being complied with is not sufficient to exempt
petitioner from liability arising from negligence of its employees. It is
incumbent uponpetitioner to show that in recruiting and employing the erring
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 341
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 342
FACTS: Petitioner, together with Gregorio Pantanosas Jr., and Rene Naybe,
hadtheir obligations arouse from the signing of a promissory note amounting to
P50, 000 holding themselves jointly and severally liable to private respondent
Philippine Bank of Communications, Cagayan de Oro City branch. The
promissory note was due on May 5, 1983. The promissors failed to fulfill their
obligations despite demand by thebank. As a consequence, an action to collect
was filed with the court but wasdismissed due to failure to prosecute. Said
dismissal was reconsidered by thetrial court and later ordered the sheriff to
serve the summons. On January 27,1987, the lower court dismissed the case
against defendant Pantanosas asprayed for by the private respondent herein.
Meanwhile, only the summonsaddressed to petitioner was served as the sheriff
learned that defendant Naybehad gone to Saudi Arabia.Petitioner argued that
said promissory note has vitiated his consentthrough fraud and deceit which
was later corroborated by Pantanosas for he onlysigned for the amount of
P5,000 on one of the copies of the promissory note,and not the alleged amount,
to buy chainsaw. He also claimed that since theliabilities of Pantanosas and
Naybe, his co-promissors, had extinguished, hisshould also be extinguished, as
provided for by Article 2080 of the Civil Code onguarantors. The Regional Trial
Court and the Court of Appeals rejected hispetitions and so a petition for
review on certiorari was filed with the SupremeCourt.
HELD: The Supreme Court held that the petitioner signed the promissory note
asa solidary co-maker and not as a guarantor. A solidary or joint and several
obligations are one in which each debtor is liable for the entire obligation, and
eachcreditor is entitled to demand the whole obligation. On the other hand,
Article 2047 of the Civil Code states: ―By guaranty a person, called the
guarantor, binds himself to the creditor tofulfill the obligation of the principal
debtor in case the latter should fail to do so.‖
If a person binds himself solidarily with the principal debtor, the
provisionsof Section 4, Chapter 3, Title I of this Book shall be observed. In such
a case thecontract is called a suretyship. While a guarantor may bind himself
solidarilywith the principal debtor, the liability of a guarantor is different from
that of asolidary debtor. Thus, Tolentino explains: ―A guarantor who binds
himself in solidum with the principal debtor under theprovisions of the second
paragraph does not become a solidary co-debtor to allintents and purposes.
There is a difference between a solidary co-debtor and afiador in solidum
(surety). The latter, outside of the liability he assumes to paythe debt before the
property of the principal debtor has been exhausted, retainsall the other rights,
actions and benefits which pertain to him by reason of thefiansa; while a
solidary co-debtor has no other rights than those bestowed uponhim in Section
4, Chapter 3, Title I, Book IV of the Civil Code.‖Section 4, Chapter 3, Title I,
Book IV of the Civil Code states the law on joint andseveral obligations. Under
Art. 1207 thereof, when there are two or moredebtors in one and the same
obligation, the presumption is that the obligation is joint so that each of the
debtors is liable only for a proportionatepart of the debt. There is a solidary
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 343
liability only when the obligation expresslyso states, when the law so provides
or when the nature of the obligation sorequires.Because the promissory note
involved in this case expressly states thatthe three signatories therein are
jointly and severally liable, any one, some or allof them may be proceeded
against for the entire obligation. The choice is left tothe solidary creditor to
determine against whom he will enforce collection. Consequently, the dismissal
of the case against Judge Pontanosas may not bedeemed as having discharged
petitioner from liability as well. As regardsNaybe, suffice it to say that the court
never acquired jurisdiction over him.Petitioner, therefore, may only have
recourse against his co-makers, as providedby law.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 344
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 345
FACTS: Alfredo Ching (Ching) was the Senior Vice President of Philippine
BloomingMills, Inc. (PBM). In his personal capacity and not as a corporate
officer, Chingsigned a Deed of Suretyship dated 21 July 1977 binding himself
solidarily liabletogether with the debtor PBM.On March 24 and August 6 1980,
Traders Royal Bank (TRB) granted PBM letters of Credit on application of Ching
in his capacity as Senior vice Presidentof PBM. Ching later accomplished and
delivered to TRB trust receipts, whichacknowledged receipt in trust for TRB of
the merchandise subject of the lettersof credit. Under the trust receipts, PBM
had the right to sell the merchandise forcash with the obligation to turn over
the entire proceeds of the sale to TRB aspayment of PBM‘s indebtedness. Ching
further executed an Undertaking for each trust receipt, whichuniformly granted
the TRB the right to take possession of the goods at any timeto protect the
TRB‘s interests.On 27 April 1981, PBM obtained a P3, 500,000 trust loan from
TRB. Chingsigned as co-maker in the notarized Promissory Note evidencing
said loan.PBM defaulted in its payment of the two (2) trust receipts as well as
thetrust loan.On 1 April 1982, PBM and Ching filed a petition for suspension of
payments with the Securities and Exchange Commission (SEC). The petition
sought to suspend payment of PBM‘s obligations and prayed that the SEC
allowPBM to continue its normal business operations free from the interference
of itscreditors. One of the listed creditors of PBM was TRB.On 9 July 1982; the
SEC placed all of PBM‘s assets, liabilities, and obligations under the
rehabilitation receivership of Kalaw, Escaler andAssociates. On 13 May 1983,
ten months after the SEC placed PBM underrehabilitation receivership, TRB
filed with the trial court a complaint for collection against PBM and Ching. TRB
asked the trial court to order defendants to pay solidarily the indebtedness of
PBM.On 25 May 1983, TRB moved to withdraw the complaint against PBM on
the ground that the SEC had already placed PBM under receivership. The trial
court thus dismissed the complaint against PBM.
On 23 July 1983, PBM and Ching also moved to dismiss the complaint
onthe ground that the trial court had no jurisdiction over the subject matter of
thecase. PBM and Ching invoked the assumption of jurisdiction by the SEC
over allof PBM‘s assets and liabilities. The trial court denied the motion to
dismiss with respect to Ching and affirmed its dismissal of the case with
respect to PBM. The trial court stressedthat TRB was holding Ching liable
under the Deed of Suretyship. As Ching‘sobligation was solidary, the trial court
ruled that TRB could proceed against Ching as surety upon default of the
principal debtor PBM.Upon the trial court‘s denial of his Motion for
Reconsideration, Ching fileda Petition for Certiorari and Prohibition before the
Court of Appeals. Theappellate court granted Ching‘s petition and ordered the
dismissal of the case. The appellate court ruled that SEC assumed jurisdiction
over Ching and PBM tothe exclusion of courts or tribunals of coordinate rank.
TRB assailed the Court of Appeal‘s decision before the Supreme Court. In
Traders Royal Bank v. Court of Appeals, the highest tribunal upheld the TRB
andruled that Ching was merely a nominal party in the SEC case. Creditors
may sueindividual sureties of debtor corporations, like Ching, in a separate
proceeding before regular courts despite the pendency of a case before the SEC
involvingthe debtor corporation.In his Answer dated 6 November 1989, Ching
denied liability as surety andaccommodation co-maker of PBM. He claimed that
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 346
the SEC had already issued adecision approving a revised rehabilitation plan
for PBM‘s creditors. He further claimed that even as a surety, he has the right
to the defenses personal to PBM. Thus, his liability as surety would attach only
if, after the rehabilitation of payments scheduled under the rehabilitation plan,
there would remain a balanceof PBM‘s debt to TRB. The trial court ruled that
Ching is liable to TB under the Deed of Suretyship. On appeal, the Court of
Appeals affirmed the decision of the lowercourt. The Court of Appeals denied
Ching‘s Motion for Reconsideration for lack of merit.
ISSUES: Whether or not Ching is liable for obligations PBM contracted after
theexecution of the Deed of Suretyship. Whether or not Ching‘s liability is
limited to the amount stated in PBM‘s rehabilitation plan.
HELD: Ching is liable for credit obligations contracted by PBM against TRB
beforeand after the execution of the 21 July 1977 Deed of Suretyship. This is
evidentfrom the tenor of the deed itself, referring to amounts PBM ―may now
beindebted or may hereafter become indebted‖ to TRB. The law expressly
allows asuretyship for ―future debts‖ as provided for in Article 2053 of the Civil
Code.Under the Civil Code, a guaranty may be given to secure even future
debts; theamount of which may not be known at the time the guaranty is
executed. Acontinuing guaranty is one which is not limited to a single
transaction, but whichcontemplates a future course of dealing, covering a
series of transactions, generally for an indefinite time or until revoked.Anent
the second issue, in granting the loan to PBM, TRB required Ching‘ssurety
precisely to insure full recovery of the loan in case PBM becomesinsolvent or
fails to pay in full. Ching cannot invoke Article 1222 of the CivilCode. Thus,
Ching cannot use PBM‘s failure to pay in full as justification for hisown
reduced liability to TRB. TRB, as creditor, has the right under the surety
toproceed against Ching for the entire amount of PBM‘s loan. This is clear
fromArticle 1216 of the Civil Code, which states that: ―the creditor may proceed
against any one of the solidary debtors or some or all of them
simultaneously.The demand made against one of them shall not be an obstacle
to those whichmay subsequently be directed against the others, so long as the
debt has not been fully collected.‖
Queensland-Tokyo v. George
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 347
ISSUE: Whether or not the CA erred in reversing the decision of the RTC which
dismissed the respondent‘s complaint.
HELD: The essential elements of estoppel are: (1) conduct of a party amounting
to false representation or concealment of material facts or at least calculated to
convey the impression that the facts are otherwise than, and inconsistent with,
those which the party subsequently attempts to assert; (2) intent, or at least
expectation, that this conduct shall be acted upon by, or at least influence, the
other party; and (3) knowledge, actual or constructive, of the real facts. ere, it
is uncontested that petitioner had in fact signed the Customer‘s Agreement in
the morning of October 22, 1992, knowing fully well the nature of the contract
he was entering into. The Customer‘s Agreement was duly notarized and as a
public document it is evidence of the fact, which gave rise to its execution and
of the date of the latter.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 348
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 349
ISSUE: The trial court held that Eugene Lim is solidarily liable with Shrimp
Specialists.
HELD: Shrimp Specialists asserts that Fuji has not presented any evidence to
show that Eugene Lim acted in bad faith. Fuji also failed to present any
evidence to prove that Eugene Lim had maliciously and deliberately caused
Shrimp Specialists to default on its obligation without any valid reason. Hence,
Eugene Lim cannot be made personally liable for the obligations of Shrimp
Specialists.
A corporation is vested by law with a personality separate and distinct
from the people comprising it. Ownership by a single or small group of
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 350
stockholders of nearly all of the capital stock of the corporation is not by itself a
sufficient ground to disregard the separate corporate personality. Thus,
obligations incurred by corporate officers, acting as corporate agents, are direct
accountabilities of the corporation they represent. In Uy v. Villanueva, the
Court explained: The general rule is that obligations incurred by the
corporation, acting through its directors, officers, and employees, are its sole
liabilities.
In this case, none of these exceptional circumstances is present. In its
decision, the trial court failed to provide a clear ground why Eugene Lim was
held solidarily liable with Shrimp Specialists. The trial court merely stated that
Eugene Lim signed on behalf of the Shrimp Specialists as President without
explaining the need to disregard the separate corporate personality. The CA
correctly ruled that the evidence to hold Eugene Lim solidarily liable should be
more than just signing on behalf of the corporation because artificial entities
can only act through natural persons. Thus, the CA was correct in dismissing
the case against Eugene Lim.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 351
FACTS: On April 28, 2006, Asset Builders Corporation (ABC) entered into an
agreement with Lucky Star Drilling & Construction Corporation (Lucky Star) as
part of the completion of its project to construct the ACG Commercial Complex
on ―NHA Avenue corner Olalia Street, Barangay Dela Paz, Antipolo City.‖ As
can be gleaned from the ―Purchase Order,‖ Lucky Star was to supply labor,
materials, tools, and equipment including technical supervision to drill one (1)
exploratory production well on the project site. The total contract price for the
said project was P1, 150,000.00.
To guarantee faithful compliance with their agreement, Lucky Star
engaged respondent Stronghold which issued two (2) bonds in favor of
petitioner. The first, SURETY BOND G.R. No. 141558, dated May 9,
2006, covers the sum of P575, 000.00 or the required downpayment for the
drilling work. On May 20, 2006, ABC paid Lucky Star P575, 000.00 (with 2%
withholding tax) as advance payment, representing 50% of the contract price.
Lucky Star, thereafter, commenced the drilling work. By July 18, 2006, just a
few days before the agreed completion date of 60 calendar days, Lucky Star
managed to accomplish only ten (10) % of the drilling work. On the same date,
petitioner sent a demand letter to Lucky Star for the immediate completion of
the drilling workwith a threat to cancel the agreement and forfeit the bonds
should it still fail to complete said project within the agreed period.
On August 3, 2006, ABC sent a Notice of Rescission of Contract with
Demand for Damages to Lucky Star.
On August 16, 2006, ABC sent a Notice of Claim for payment to
Stronghold to make good its obligation under its bonds.
Despite notice, ABC did not receive any reply either from Lucky Star or
Stronghold, prompting it to file its Complaint for Rescission with Damages
against both before the RTC on November 21, 2006. In its ―Answer (with
Compulsory Counterclaim and Cross-Claim),‖ dated January 24, 2007,
Stronghold denied any liability arguing that ABC had not shown any proof that
it made an advance payment of 50% of the contract price of the project. It
further averred that ABC‘s rescission of its contract with Lucky Star virtually
revoked the claims against the two bonds and absolved them from further
liability.
Lucky Star, on the other hand, failed to file a responsive pleading within
the prescribed period and, thus, was declared in default by the RTC in its
Order dated August 24, 2007. On February 27, 2009, the RTC rendered the
assailed decision ordering Lucky Star to pay ABC but absolving Stronghold
from liability. Hence, this petition.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 352
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 353
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 354
would free Eparwa from any liability for payment of the security guards‘ money
claims.
In its Decision promulgated on 20 April 2001, the appellate court
granted LDCU‘s petition and reinstated the Labor Arbiter‘s decision. The
appellate court also allowed LDCU to claim reimbursement from Eparwa.
Eparwa filed a motion for reconsideration of the appellate court‘s decision.
Eparwa stressed that jurisprudence is consistent in HELD that the ultimate
liability for the payment of the monetary award rests with LDCU alone.
The appellate court denied Eparwa‘s motion for reconsideration for lack
of merit. Hence, this petition.
ISSUE: Is LDCU alone ultimately liable to the security guards for the wage
differentials and premium for holiday and rest day pay?
HELD: The petition has merit. Eparwa and LDCU‘s Solidary Liability and
LDCU‘s Ultimate Liability
LDCU‘s ultimate liability comes into play because of the expiration of
the Contract for Security Services. There is no privity of contract between the
security guards and LDCU, but LDCU‘s liability to the security guards remains
because of Articles 106, 107 and 109 of the Labor Code. Eparwa is already
precluded from asking LDCU for an adjustment in the contract price because
of the expiration of the contract, but Eparwa‘s liability to the security guards
remains because of their employer-employee relationship. In lieu of an
adjustment in the contract price, Eparwa may claim reimbursement from
LDCU for any payment it maymake to the security guards. However, LDCU
cannot claim anyreimbursement from Eparwa for any payment it may make to
the securityguards. Hence, the petition is granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 355
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 356
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 357
Paula de la Cerna, et. Al., petitioners, versus Mnaul Rebaca Potot, et. Al.,
and The Honorable Court of the Philippines, respondents.
(220 SCRA 517, March 30, 1993, En Banc)
Reyes, J.B.L., J.:
FACTS: Celerino Delgado and Conrad Leviste entered into a loan agreement on
orabout October 16, 1972, which was evidenced by a promissory note. On
thesame date, Delgado executed a chattel mortgage over a jeep owned by
him.And acting as the attorney-in-fact of herein petitioner, Manolo P. Cerna
(petitioner), he also mortgaged a ―Taunus‖ car owned by the latter. The period
lapsed without Delgado paying the loan. This prompted Leviste to file a
collection suit against Delgado and petitioner as solidarydebtors. Petitioner
filed a motion to dismiss. The grounds cited in the Motionwere lack of cause of
action and the death of Delgado. Anent the latter, petitioner claimed that the
claim should be filed in the proceedings for thesettlement of the estate of
Delgado as the action did not survive Delgado‘sdeath. Moreover, he also stated
that since Leviste already opted to collect onthe note, he could no longer
foreclose the mortgage. The trial court denied themotion to dismiss. The
petitioner then filed a special civil action for certiorari, mandamus, and
prohibition with preliminary injunction on the ground that the respondent
judge committed grave abuse of discretion. However, the Court of
Appealsdenied the petition because herein petitioner failed to prove the death
of Delgado and the consequent settlement of the latter‘s estate.On February 18,
1977, petitioner filed his second motion to dismiss. Thetrial court again denied
the said motion. Petitioner filed a motion to reconsiderthe said order but this
was denied. Then, petitioner filed another petition forcertiorari and prohibition
with the Court of Appeals. The respondent court dismissed the petition. The
respondent court hold petitioner and Delgado were solidary debtors.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 358
FACTS: Maximino Nazareno, Sr. and Aurea Poblete were husband and wife.
Aurea died on April 15, 1970, while Maximino, Sr. died on December 18, 1980.
They had five children, namely, Natividad, Romeo, Jose, Pacifico, and
Maximino, Jr.
Natividad and Maximino, Jr. are the petitioners in this case, while the
estate of Maximino, Sr., Romeo, and his wife Eliza Nazareno are the
respondents. Duringtheir marriage, Maximino Nazareno, Sr. and Aurea Poblete
acquired properties in Quezon City and in the Province of Cavite. Upon the
reorganization of the courtsin 1983, the case was transferred to the RTC of
Naic, Cavite. Romeo was appointed administrator of his father‘s estate. In the
course of the intestateproceedings, Romeo discovered that his parents had
executed several deeds of sale conveying a number of real properties in favor of
his sister, Natividad. Oneof the deeds involved six lots in Quezon City which
were allegedly sold byMaximino, Sr., with the consent of Aurea, to Natividad on
January 29, 1970 forthe total amount of P47,800.00.Among the lots covered by
the above Deed of Sale is Lot 3-B which isregistered under TCT No. 140946.
This lot had been occupied by Romeo, hiswife Eliza, and by Maximino, Jr. since
1969. Unknown to Romeo, Natividad soldLot 3-B on July 31, 1982 to
Maximino, Jr., for which reason the latter was issued TCT No. 293701 by the
Register of Deeds of Quezon City. When Romeo found out about the sale to
Maximino, Jr., he and his wife Eliza locked Maximino, Jr. out of the house. On
August 4, 1983, Maximino, Jr. brought an action for recovery of possession
and damages with prayer for writs of preliminary injunction andmandatory
injunction with the RTC of Quezon City. On December 12, 1986, thetrial court
ruled in favor of Maximino, Jr. In CA-G.R. CV No. 12932, the CA affirmed the
decision of the trial court. On June 15, 1988, Romeo in turn filed on behalf of
the estate of Maximino, Sr., the present case for annulment of sale
withdamages against Natividad and Maximino, Jr. The case was filed in the
RTC of Quezon City. Romeo sought the declaration of nullity of the sale made
on January 29, 1970 to Natividad and that made on July 31, 1982 to
Maximino, Jr. onthe ground that both sales were void for lack of consideration.
On March 1,1990, Natividad and Maximino, Jr. filed a third-party complaint
against thespouses Romeo and Eliza. They alleged that Lot 3, which was
included in theDeed of Absolute Sale of January 29, 1970 to Natividad, had
been surreptitiously appropriated by Romeo by securing for himself a new title
in his name. They alleged that Lot 3 is being leased by the spouses Romeo and
Eliza to third persons.In the trial court, it rendered a decision declaring the
nullity of the Deed of Sale dated January 29, 1970 except as to lots 3, 3-b, 13
and 14 which hadpassed on to third persons. On motion for reconsideration,
the trial court modified its decision. On appeal to the Court of Appelas, the
decision of the trialcourt was modified in the sense that the titles to Lot 3 (in
the name of Romeo Nazareno) and Lot 3-B ( in the name of Maximino
Nazareno, Jr.), as well as toLots 10 and 11 were cancelled and ordered restored
to the estate of Maximino,Sr.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 359
ISSUE: Whether or not the the Deed of Absolute Sale on January 29, 1970 is
an indivisible contract founded on an indivisible obligation
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 360
FACTS: Petitioners Alonzo and Sison alleged that they are the registered
ownersof a parcel of land located at Lot 3, Block 11, M. Agoncillo St.,
Novaliches, Quezon City, evidenced by TCT No. 152153. At around June 1996,
petitionersdiscovered that a portion on the left side of the parcel of land was
occupied bythe respondents San Juan, without their knowledge or consent. A
demand letterwas sent to the respondents requiring them to vacate the said
premises, butthey refused to comply. Petitioners then filed a complaint against
the respondents. During the pendency of the case, the parties agreed to enter
intoa Compromise Agreement which the trial court approved in a judgment
bycompromise dated May 7, 1997. In the Compromise Agreement, it was
expressly stipulated that should any two of the installments of the purchase
price be not paid by the respondents, the said agreement shall be considered
null and void. Alleging that the respondents failed to abide by the provisions of
the Compromise Agreement by their failure to pay the amounts due thereon,
petitioners then filed an Amended Motion for Execution. Petitioners alleged
thatthe respondents failed to pay the installments for July 31, 1997 and
August 31,1997 on their due dates, thus the Compromise Agreement
submitted by theparties became null and void. With this, the trial court found
no reason to directthe issuance of the writ of execution and denied the
petitioners‘ Amended Motion for Execution. Petitioners filed their motion for
reconsideration to which the respondents opposed. The trial court likewise
denied the petitioners‘ motion for reconsideration.
ISSUE: Whether or not the petitioners have a right to enforce the provision on
Compromise Agreement by asking for the issuance of a writ of execution
because of the failure of the respondents to pay.
HELD: The Supreme Court held that the items 11 and 12 of the Compromise
Agreement provided, in clear terms, that in case of failure to pay on the part of
the respondents, they shall vacate and surrender possession of the land that
they are occupying and the petitioners shall be entitled to obtain immediately
from the trial court the corresponding writ of execution for the ejectment of the
respondents. This provision must be upheld, because the Agreement
supplanted the complaint itself. When the parties entered into a Compromise
Agreement, the original action for recovery of possession was set aside and the
action waschanged to a monetary obligation. Once approved judicially, the
Compromise Agreement cannot and must not be disturbed except for vices of
consent orforgery. For failure of the respondents to abide by the judicial
compromise, petitioners are vested with the absolute right under the law and
the agreementto enforce it by asking for the issuance of the writ of execution.
Doctrinally, a Compromise Agreement is immediately final and executory.
Petitioners‘ courseof action, asking for the issuance of a writ of execution was
in accordance withthe very stipulation in the agreement that the lower court
could not change. Hence, the petition is granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 361
FACTS: The RTC of Manila, Branch 27, with Judge Ricardo Diaz, then
presiding, issued a writ of attachment over real properties covered by TCT Nos.
80718 and10281 of private respondents. In his decision Judge Diaz ordered
privaterespondent Afable to pay petitioner until fully paid. Respondent Afable
appealed to the Court of Appeals and then to the Supreme Court. In both
instances, thedecision of the lower court was affirmed. Entries of judgment
were made andthe record of the case was remanded to Branch 27 presided at
that time byrespondent Judge Cruz. Petitioners elevated said orders to the
Court of Appealsin a petition for certiorari, prohibition and mandamus.
However, respondent appellate court dismissed the petiton.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 362
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 363
On April 29, 2003, petitioner presented Ms. Jesusa Magtira, who was
then the ―check releaser‖ of the PNP, to prove that the respondent received the
LBP check due to MGM, and that respondent herself gave the check to Cruz.
On September 8, 2003, the RTC rendered its Decision in favor of
respondent and against petitioner.
The RTC declared that while Cruz‘s testimony seemed to offer a plausible
explanation on how and why the LBP check ended up with him, the petitioner,
already admitted in its Answer, and Pre-trial Brief, that MGM, did in fact
deliver the construction materials worth P2,288,562.60 to the PNP. The RTC
also pointed out the fact that the petitioner made the same admissions in open
court to expedite the trial, leaving only one issue to be resolved: whether the
respondent had been paid or not. Since this was the only issue, the RTC said
that it had no choice but to go back to the documents and the ―documentary
evidence clearly indicates that the check subject of this case was never received
by [respondent].‖ In addition, the PNP‘s own Warrant Register showed that it
was Edgardo Cruz who received the LBP check, and Receipt No. 001 submitted
by the petitioner to support its claim was not issued by MGM, but by Montaguz
Builders, a different entity. Finally, the RTC held that Cruz‘s testimony, which
appeared to be an afterthought to cover up the PNP‘s blunder, were
irreconcilable with the petitioner‘s earlier declarations and admissions, hence,
not credit-worthy.
The petitioner appealed this decision to the Court of Appeals, which
affirmed with modification the RTC‘s HELD on September 27, 2006.
The Court of Appeals, in deciding against the petitioner, held that the
petitioner‘s admissions and declarations, made in various stages of the
proceedings are express admissions, which cannot be overcome by allegations
of respondent‘s implied admissions. The petitioner is now before this
Court, praying for the reversal of the lower courts‘ decisions on the ground that
―the Court of Appeals committed a serious error in law by affirming the
decision of the trial court.‖
ISSUE: Whether or not the contract executed with the respondent is actually a
fictitious contract to conceal the fact that only one contractor will be supplying
all the materials and labor for the PNP condominium project.
HELD: Both the RTC and the Court of Appeals upheld the validity of the
contract between the petitioner and the respondent on the strength of the
documentary evidence presented and offered in Court and on petitioner‘s own
stipulations and admissions during various stages of the proceedings.
It is worthy to note that while this petition was filed under Rule 45 of the
Rules of Court, the assertions and arguments advanced herein are those that
will necessarily require this Court to re-evaluate the evidence on record.
This Court has, on many occasions, distinguished between a question of
law and a question of fact. We held that when there is doubt as to what the
law is on a certain state of facts, then it is a question of law; but when the
doubt arises as to the truth or falsity of the alleged facts, then it is a question
of fact.[58] ―Simply put, when there is no dispute as to fact, the question of
whether or not the conclusion drawn therefrom is correct, is a question of law.‖
The petitioner admitted to the existence and validity of the Contract of
Agreement executed between the PNP and MGM, as represented by the
respondent, on December 11, 1995. It likewise admitted that respondent
delivered the construction materials subject of the Contract, not once, but
several times during the course of the proceedings. The only matter petitioner
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 364
assailed was respondent‘s allegation that she had not yet been paid. If Cruz‘s
testimony were true, the petitioner should have put respondent in her place the
moment she sent a letter to the PNP, demanding payment for the construction
materials she had allegedly delivered. Instead, the petitioner replied that it had
already paid respondent as evidenced by the LBP check and the receipt she
supposedly issued. This line of defense continued on, with the petitioner
assailing only the respondent‘s claim of nonpayment, and not the rest of
respondent‘s claims, in its motion to dismiss, its answer, its pre-trial brief, and
even in open court during the respondent‘s testimony.
Petitioner‘s admissions were proven to have been made in various stages
of the proceedings, and since the petitioner has not shown us that they were
made through palpable mistake, they are conclusive as to the petitioner.
The RTC and the Court of Appeals correctly ruled that the petitioner‘s
obligation has not been extinguished. The petitioner‘s obligation consists of
payment of a sum of money. In order for petitioner‘s payment to be effective in
extinguishing its obligation, it must be made to the proper person.
Payment made by the debtor to the person of the creditor or to one
authorized by him or by the law to receive it extinguishes the obligation. When
payment is made to the wrong party, however, the obligation is not
extinguished as to the creditor who is without fault or negligence even if the
debtor acted in utmost good faith and by mistake as to the person of the
creditor or through error induced by fraud of a third person.
In general, a payment in order to be effective to discharge an obligation,
must be made to the proper person. Thus, payment must be made to the
obligee himself or to an agent having authority, express or implied, to receive
the particular payment. Payment made to one having apparent authority to
receive the money will, as a rule, be treated as though actual authority had
been given for its receipt. Likewise, if payment is made to one who by law is
authorized to act for the creditor, it will work a discharge. The receipt of money
due on a judgment by an officer authorized by law to accept it will, therefore,
satisfy the debt.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 365
ISSUE: Whether or not the mortgage contract void insofar as third persons are
concerned.
HELD: No mortgage on any unit or lot shall be made by the owner or developer
without prior written approval of the Authority. Such approval shall not be
granted unless it is shown that the proceeds of the mortgage loan shall be used
for the development of the condominium or subdivision project and effective
measures have been provided to ensure such utilization. The loan value of
each lot or unit covered by the mortgage shall be determined and the buyer
thereof, if any, shall be notified before the release of the loan. The buyer may,
at his option, pay his installment for the lot or unit directly to the mortgagee
who shall apply the payments to the corresponding mortgage indebtedness
secured by the particular lot or unit being paid for, with a view to enabling said
buyer to obtain title over the lot or unit promptly after full payment thereof.‖
Petitioner cannot claim to be a mortgagee in good faith. Indeed it was
negligent, as found by the Office of the President and by the CA. Petitioner
should not have relied only on the representation of the mortgagor that the
latter had secured all requisite permits and licenses from the government
agencies concerned. The former should have required the submission of
certified true copies of those documents and verified their authenticity through
its own independent effort.
Having been negligent in finding out what respondent‘s rights were over
the lot, petitioner must be deemed to possess constructive knowledge of those
rights.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 366
ISSUE: Whether the parties agreed to the 4% monthly interest on the loan. If
so, does the rate of interest apply to the 6-month payment period only or until
full payment of the loan.
only when the contract is vague and ambiguous that courts are permitted to
resort to the interpretation of its terms to determine the parties‘ intent.
In the present case, the respondent issued a check for P1,000,000.00. In
turn, Pantaleon, in his personal capacity and as authorized by the Board,
executed the promissory note quoted above. Thus, the P1,000,000.00 loan
shall be payable within six (6) months, or from January 8, 1994 up to June 8,
1994. During this period, the loan shall earn an interest of P40,000.00 per
month, for a total obligation of P1,240,000.00 for the six-month period. We
note that this agreed sum can be computed at 4% interest per month, but no
such rate of interest was stipulated in the promissory note; rather a fixed sum
equivalent to this rate was agreed upon.
When the obligation is breached, and it consists in the payment of a sum
of money, i.e., a loan or forbearance of money, the interest due should be that
which may have been stipulated in writing. Furthermore, the interest due shall
itself earn legal interest from the time it is judicially demanded. In the absence
of stipulation, the rate of interest shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.‖
Macalalag v. People
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 368
ISSUE: Whether petitioner`s payments over and above the value of thesaid
checks would free her from criminal liability.
HELD: The Court argued that, ―Even if we agree with petitioner Macalalagthat
the interests on her loans should not be imputed to the face value of the
checks she issued, petitioner Macalalag is still liable for Violation of Batas
Pambansa Blg. 22. Petitioner Macalalag herself declares that beforethe
institution of the two cases against her, she has made a total paymentof
P156,000.00; Applying this amount to the first check (No. C-889835), what will
be left is P56,000.00, an amount insufficient to cover herobligation with respect
to the second check. As stated above, whenEstrella presented the checks for
payment; the same were dishonored onthe ground that they were drawn
against a closed account. Despite noticeof dishonor, petitioner Macalalag failed
to pay the full face value of thesecond check issued.Only a full payment of the
face value of the second check at the time of its presentment or during the five-
day grace period15 could haveexonerated her from criminal liability. A contrary
interpretation woulddefeat the purpose of Batas Pambansa Blg. 22, that of
safeguarding theinterest of the banking system and the legitimate public
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 369
checking accountuser,16 as the drawer could very well have himself exonerated
by themere expediency of paying a minimal fraction of the face value of
thecheck. Hence, the Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 370
Antonio Tan, petitioner, versus Court of Appelas and the Cultural Center
of the Philippines, respondents.
(367 SCRA 571 or GR NO. 116285, October 19, 2001, 2nd Division)
De Leon, Jr., J.:
FACTS: On May 14, 1978, petitioner Antonio Tan obtained two loans in the
totalamount of four million pesos from respondent Cultural Center of the
Philippines (CCP), evidenced by 2 promissory notes with maturity dates on May
14, 1979 and July 6, 1979, respectively. Petitioner defaulted but later he had
the loansrestructured by respondent CCP. Petitioner accordingly executed a
promissorynote on August 31, 1979 in the amount of P3,411,421.32 payable in
five (5)installments. Petitioner however, failed to pay any of the supposed
installmentsand again offered another mode of paying restructured loan which
respondentCCP refused to consent.On May 30, 1984, respondent wrote
petitioner demanding the fullpayment, within ten (10) days, from receipt of the
letter, of the latter‘srestructured loan which as of April 30, 1984 amounted to
P6, 088,735. OnAugust 29, 1984, respondent CCP filed with the RTC of Manila
a complaint for acollection of a sum of money. Eventually, petitioner was
ordered to pay saidamount, with 25% thereof as attorney‘s fees and P500,
000.00 as exemplarydamages. On appeal, the Court of Appeals, reduced the
attorney‘s fees to 5%of the principal amount to be collected from petitioner and
deleted theexemplary damages.Still unsatisfied with the decision, petitioner
seeks for the deletion of theattorney‘s fees and the reduction of the penalties.
HELD: YES. Article 1226 of the New Civil Code provides that in obligations with
apenal clause, the penalty shall substitute the indemnity for damages and
thepayment of interests in case of non-compliance, if there is no stipulation to
thecontrary. Nevertheless, damages shall be paid if the obligor refuses to pay
thepenalty or is guilty of fraud in the fulfillment of the obligation. The penalty
maybe enforced only when it is demandable in accordance with the
provisions.In the case at bar, the promissory note expressly provides for
theimposition of both interest and penalties in case of default on the part of
thepetitioner in the payment of the subject restructured loan. Since the said
stipulation has the force of law between the parties and does not appear to be
inequitable or unjust, it must be respected.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 371
Eastern Shipping Lines Inc., petitioner, versus Hon. Court of Appeals and
Mercantile Insurance Company, Inc., respondents.
(G.R. No. 97412, July 12, 1994, En Banc)
Vitug, J.:
ISSUE: a.)Whether the payment of legal interest on an award for loss ordamage
is to be computed from the time the complaint is filed or form thedate the
decision appealed from is rendered; and b)Whether theapplicable rate of
interest is twelve percent or six percent.
HELD: When an obligation, regardless of its source, i.e., law, contracts, quasi-
contracts, delicts or quasi-delicts is breached, the contravenor canbe held
liable for damages. With regard particularly to an award of interest in the
concept of actual and compensatory damages, the rate of interest, as well as
the accrual thereof, is imposed, as follows: When the obligation is breached,
and it consists in the payment of asum of money, i.e., a loan or forbearance of
money, the interest dueshould be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the
time it is judiciallydemanded. In the absence of stipulation, the rate of interest
shall be 12%per annum to be computed from default, i.e., from judicial or
extrajudicialdemand under and subject to the provisions of Article 1169 23 of
the CivilCode.2. When a obligation, not constituting a loan or forbearance of
money, isbreached, an interest on the amount of damages awarded may
beimposed at the discretion of the court at the rate of 6% per annum.
Nointerest, however, shall be adjudged on unliquidated claims or
damagesexcept when or until the demand can be established with
reasonablecertainty. Accordingly, where the demand is established with
reasonablecertainty, the interest shall begin to run from the time the claim is
made judicially or extrajudicially (Art. 1169, Civil Code) but when such
certaintycannot be so reasonably established at the time the demand is made,
theinterest shall begin to run only from the date of the judgment of the courtis
made (at which time the quantification of damages may be deemed tohave been
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 372
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 373
The Regional Trial Court ordered the use of the 1996 dollar exchange rate in
computing respondent‘s dollar-denominated loans. The Court of Appeals granted the
bank‘s application for injunction but the properties were sold to public auction.
Despite the devaluation of the peso, Bangko Sentral ng Pilipinas never declared
a situation of extraordinary inflation. Respondents should pay their dollar
denominated loans at the exchange rate fixed by the Bangko Sentral on the date of
maturity.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 374
NSBC v. PNB
New Sampaguita Builders Construction, Inc (NSBCI) and Spouses Eduardo R. Dee
and Arcelita M. Dee, Petitioners versus Philippine National Bank, Respondents.
PANGANIBAN, J:
FACTS: On February 11, 1989, Board Resolution No. 05, Series of 1989 was approved
by Petitioner New Sampaguita Builders Construction, Inc (NSBCI) authorizing the
company to apply for or secure a commercial loan with the Philippine National Bank
(PNB), under such terms agreed by the Bank and the NSBCI, using or mortgaging the
real estate properties registered in the name of its President and Chairman of the
Board Petitioner Eduardo R. Dee as collateral; and authorizing petitioner-spouses to
secure the loan and to sign any and all documents which may be required by PNB,
and that petitioner-spouses shall act as sureties or co-obligors who shall be jointly
and severally liable with NSBCI for the payment of any obligations. Later on, Petitioner
NSBCI failed to comply with its obligations under the promissory notes.
On June 18, 1991, NSBCI sent a letter to the Branch Manager of the PNB
Dagupan Branch requesting for a 90-day extension for the payment of interests.
Petitioner Eduardo Dee later tendered four post-dated checks. Upon presentment,
however, the checks were dishonored by the drawee bank. PNB wrote the petitioner
informing him that unless the dishonored checks were made good, PNB shall refer the
matter to its legal counsel for legal action. Petitioners nevertheless failed to pay their
loan obligations within the time frame given them and as a result, PNB filed with the
Provincial Sheriff of Pangasinan at Lingayen a Petition for Sale. The sheriff foreclosed
the real estate mortgage and sold at public auction the mortgaged properties of
petitioner-spouses, with respondent PNB being declared the highest bidder for the
amount of P10,334,000.00. PNB informed Petitioner NSBCI that the proceeds of the
sale conducted on February 26, 1992 were not sufficient to cover its total claim
amounting to P12,506,476.43 and thus demanded from the latter the deficiency of
P2,172,476.43 plus interest and other charges until the amount was fully paid.
Petitioners refused to pay the above deficiency claim which compelled PNB to institute
the instant complaint for the collection of its deficiency claim.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 375
and would also negate the element of mutuality in their contracts. The clause cited
earlier made the fulfillment of the contracts ―dependent exclusively upon the
uncontrolled will‖ of respondent and was therefore void. Besides, the pro forma
promissory notes have the character of a contract d‘adhésion, ―where the parties do
not bargain on equal footing, the weaker party‘s the debtor‘s participation being
reduced to the alternative ‗to take it or leave it.‘‖
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 376
Upon acceptance of his application, petitioner was issued Diners Club card
No. 3651-212766-3005. As of May 8, 1987, petitioner incurred credit charges plus
appropriate interest and service charges in the aggregate amount of P33,819.84 which
had become due and demandable. Demands for payment made against petitioner
proved futile. Hence, private respondent filed a complaint for Collection of Sum of
Money against petitioner before the lower court.
ISSUE: Whether or not the subject contract is one-sided in that the contract allows for
the escalation of interests, but does not provide for a downward adjustment of the
same in violation of Central Bank Circular 905.
HELD: No. The subject contract is not one-sided that it allows for the escalation of
interest.
The claim is without basis. First, by signing the contract, petitioner and private
respondent agreed upon the rate as stipulated in the subject contract. Such is now
allowed by C.B. Circular 905. Second, petitioner failed to cite any particular provision
of said Circular which was allegedly violated by the subject contract.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 377
Petition denied.
NSBC v. PNB
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 378
New Sampaguita Builders Construction, Inc (NSBCI) and Spouses Eduardo R. Dee
and Arcelita M. Dee, Petitioners versus Philippine National Bank, Respondents.
PANGANIBAN, J:
FACTS: On February 11, 1989, Board Resolution No. 05, Series of 1989 was approved
by Petitioner New Sampaguita Builders Construction, Inc (NSBCI) authorizing the
company to apply for or secure a commercial loan with the Philippine National Bank
(PNB), under such terms agreed by the Bank and the NSBCI, using or mortgaging the
real estate properties registered in the name of its President and Chairman of the
Board Petitioner Eduardo R. Dee as collateral; and authorizing petitioner-spouses to
secure the loan and to sign any and all documents which may be required by PNB,
and that petitioner-spouses shall act as sureties or co-obligors who shall be jointly
and severally liable with NSBCI for the payment of any obligations. Later on, Petitioner
NSBCI failed to comply with its obligations under the promissory notes.
On June 18, 1991, NSBCI sent a letter to the Branch Manager of the PNB
Dagupan Branch requesting for a 90-day extension for the payment of interests.
Petitioner Eduardo Dee later tendered four post-dated checks. Upon presentment,
however, the checks were dishonored by the drawee bank. PNB wrote the petitioner
informing him that unless the dishonored checks were made good, PNB shall refer the
matter to its legal counsel for legal action. Petitioners nevertheless failed to pay their
loan obligations within the time frame given them and as a result, PNB filed with the
Provincial Sheriff of Pangasinan at Lingayen a Petition for Sale. The sheriff foreclosed
the real estate mortgage and sold at public auction the mortgaged properties of
petitioner-spouses, with respondent PNB being declared the highest bidder for the
amount of P10,334,000.00. PNB informed Petitioner NSBCI that the proceeds of the
sale conducted on February 26, 1992 were not sufficient to cover its total claim
amounting to P12,506,476.43 and thus demanded from the latter the deficiency of
P2,172,476.43 plus interest and other charges until the amount was fully paid.
Petitioners refused to pay the above deficiency claim which compelled PNB to institute
the instant complaint for the collection of its deficiency claim.
uncontrolled will‖ of respondent and was therefore void. Besides, the pro forma
promissory notes have the character of a contract d‘adhésion, ―where the parties do
not bargain on equal footing, the weaker party‘s the debtor‘s participation being
reduced to the alternative ‗to take it or leave it.‘‖
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 380
After almost seven years from the time of the execution of the contract and
notwithstanding payment of P3.5 million on the part of respondent-spouses, petitioner
still failed to comply with her obligation as expressly provided in the contract. Hence,
in a letter, respondent-spouses demanded the return of the amount of P3.5 million
within 15 days from receipt of the letter. When petitioner still failed to return the
amount despite demand, respondent-spouses were constrained to file a complaint for
sum of money before the Regional Trial Court of Malabon against herein petitioner as
well as Roberto U. Arias (Arias) who allegedly acted as petitioner‘s agent.
On May 7, 2004, the Regional Trial Court rendered its decision finding
respondent-spouses entitled to interest but only at the rate of 6% per annum and not
12% as prayed by them. It also found respondent-spouses entitled to attorney‘s fees as
they were compelled to litigate to protect their interest. Aggrieved, petitioner and Arias
filed their notice of appeal in the Court of Appeals but it affirmed the lower court‘s
decision. Hence, this petition.
ISSUE: Whether or not the imposition of interest and attorney‘s fees is proper.
The Court sustained the HELD of both the Regional Trial Court and the
Court of appeals that it is proper to impose interest notwithstanding the
absence of stipulation in the contract. Article 2210 of the Civil Code expressly
provides that "interest may, in the discretion of the court, be allowed upon
damages awarded for breach of contract."
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 381
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 382
FACTS: Guess? Footwear and BPI Express Card Corporation entered into two
merchant agreements, whereby Guess? Footwear agreed to honor validly issued Bank
of the Philippine Islands (BPI) Express Credit Cards presented by cardholders in the
purchase of its goods and services. In the first agreement, petitioner Benny Hung
signed as owner and manager of Guess? Footwear. He signed the second agreement as
president of Guess? Footwear which he also referred to as B & R Sportswear
Enterprises. Respondent BPI mistakenly credited, through 352 checks, P3,480,427.23
to the account of Guess? Footwear. When informed of the overpayments, petitioner
Benny Hung transferred P963,604.03 from the bank account of B & R Sportswear
Enterprises to BPI‘s account as partial payment. In a letter, BPI demanded the balance
payment amounting to P2,516,826.68, but Guess? Footwear failed to pay. BPI filed a
collection suit before the Regional Trial Court of Makati City.
ISSUE: Whether or not the obligation arose from a loan or forbearance of money.
HELD: No. The obligation did not arise from a loan or forbearance of money.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 383
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 384
Jose Marques and Maxilite Technologies, Inc., Petitioners, versus Far East
Bank and Trust Company, Far East Bank Insurance Brokers, Inc., and
Makati Insurance Company, Respondents.
(G.R. No. 171379, January 10, 2011, 2nd Division)
CARPIO, J:
On March 9, 1995, a fire gutted the Aboitiz Sea Transport Building along
M.J. Cuenco Avenue, Cebu City, where Maxilite‘s office and warehouse were
located. As a result, Maxilite suffered losses amounting to at least P2.1 million,
which Maxilite claimed against the fire insurance policy with Makati Insurance
Company. Makati Insurance Company denied the fire loss claim on the ground
of non-payment of premium. Maxilite and Marques sued FEBTC, FEBIBI, and
Makati Insurance Company. The Regional trial Court and Court of Appeals
ruled in favor of Maxilite.
ISSUE: Whether or not FEBTC, FEBIBI and Makati Insurance Company are
jointly and severally liable to pay respondents the full coverage of the subject
insurance policy.
HELD: No. FEBTC, FEBIBI and Makati Insurance Company are not jointly and
severally liable to pay respondents the full coverage of the subject insurance
policy.
FEBTC is solely liable for the payment of the face value of the insurance
policy and the monetary awards stated in the Court of Appeals‘ decision.
Suffice it to state that FEBTC, FEBIBI, and Makati Insurance Company are
independent and separate juridical entities, even if FEBIBI and Makati
Insurance Company are subsidiaries of FEBTC. Absent any showing of its
illegitimate or illegal functions, a subsidiary‘s separate existence shall be
respected, and the liability of the parent corporation as well as the subsidiary
shall be confined to those arising in their respective business. Besides, the
records are bereft of any evidence warranting the piercing of corporate veil in
order to treat FEBTC, FEBIBI, and Makati Insurance Company as a single
entity. Likewise, there is no evidence showing FEBIBI‘s and Makati Insurance
Company‘s negligence as regards the non-payment of the insurance premium.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 385
FACTS: Spouses Johnson and Evangeline Sy secured a loan from Land Bank Legazpi
City in the amount of PhP16 million. Under the loan agreement, PhP 6 million of the
loan would be short-term and would mature on February 28, 1997, while the balance
of PhP 10 million would be payable in seven years. The Notice of Loan Approval dated
February 22, 1996 contained an acceleration clause wherein any default in payment of
amortizations or other charges would accelerate the maturity of the loan.
Subsequently, however, the Spouses Sy found they could no longer pay their loan.
They sold three of their mortgaged parcels of land for PhP 150,000 to Angelina Gloria
Ong, Evangeline‘s mother, under a Deed of Sale with Assumption of Mortgage.
Evangeline‘s father, petitioner Alfredo Ong, later went to Land Bank to inform it
about the sale and assumption of mortgage. Atty. Edna Hingco, the Legazpi City Land
Bank Branch Head, told Alfredo and his counsel Atty. Ireneo de Lumen that there was
nothing wrong with the agreement with the Spouses Sy but provided them with
requirements for the assumption of mortgage. They were also told that Alfredo should
pay part of the principal which was computed at PhP 750,000 and to update due or
accrued interests on the promissory notes so that Atty. Hingco could easily approve
the assumption of mortgage. Two weeks later, Alfredo issued a check for PhP 750,000
and personally gave it to Atty. Hingco. He also submitted the other documents
required by Land Bank, such as financial statements. Atty. Hingco then informed
Alfredo that the certificate of title of the Spouses Sy would be transferred in his name
but this never materialized. No notice of transfer was sent to him. On December 12,
1997, Alfredo initiated an action for recovery of sum of money with damages against
Land Bank as Alfredo‘s payment was not returned by Land Bank. The Regional Trial
Court held that that under the principle of equity and justice, the bank should return
the amount Alfredo had paid with interest at 12% per annum computed from the filing
of the complaint. The trial court further held that Alfredo was entitled to attorney‘s
fees and litigation expenses for being compelled to litigate. The Court of Appeals
affirmed the trial court‘s decision.
HELD: No. Alfredo‘s payment to Land Bank does not constitute as forbearance of
money.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 386
Bank does not constitute forbearance of money, since there was no agreement or
obligation for Alfredo to pay Land Bank the amount of PhP 750,000, and the obligation
of Land Bank to return what Alfredo has conditionally paid is still in dispute and has
not yet been determined. Thus, it cannot be said that Land Bank‘s alleged obligation
has become a forbearance of money.
Appeal denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 387
The respondent thus sent demand letters to the petitioner but the latter failed
to pay. The respondent filed the herein complaint for collection of sum of
money against the petitioner. The Regional Trial Court ruled in favor of the
respondent while the Court of Appeals affirmed the trials court‘s decision but
modified the interest rates and penalty charges imposed.
ISSUE: Whether or not the modified interest rates and penalty charges decreed by the
CA are exorbitant.
HELD: No. The modified interest rates and penalty charges decreed by the Court of
Appeals are not exorbitant.
As found by the Court of Appeals, the payments made by the petitioner before
the complaint was filed were duly deducted from the outstanding balance; while the
payments made during the pendency of the case were applied to the due and
outstanding penalty charges.
The Supreme Court affirms the interest rate decreed by the Court of Appeals.
Stipulated interest rates are illegal if they are unconscionable and courts are allowed
to temper interest rates when necessary. In exercising this vested power to determine
what is iniquitous and unconscionable, the Court must consider the circumstances of
each case. What may be iniquitous and unconscionable in one case, may be just in
another.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 388
FACTS: On December 8, 1993, Pantaleon, the President and Chairman of the Board of
PRISMA, obtained a P1,000,000.00 loan from the respondent, with a monthly interest
of P40,000.00 payable for six months, or a total obligation of P1,240,000.00 to be paid
within six months. To secure the payment of the loan, Pantaleon issued a promissory
note. As of January 4, 1997, the petitioners had already paid a total of P1,108,772.00.
However, the respondent found that the petitioners still had an outstanding balance of
P1,364,151.00 as of January 4, 1997, to which it applied a 4% monthly interest. Thus,
on August 28, 1997, the respondent filed a complaint for sum of money with the
Regional Trial Court to enforce the unpaid balance, plus 4% monthly interest,
P30,000.00 in attorney‘s fees, P1,000.00 per court appearance and costs of suit.
ISSUE: Whether the parties agreed to the 4% monthly interest on the loan.
HELD: No. The parties did not agree to the 4% monthly interest on the loan.
In the present case, the respondent issued a check for P1,000,000.00. In turn,
Pantaleon, in his personal capacity and as authorized by the Board, executed the
promissory note quoted above. Thus, the P1,000,000.00 loan shall be payable within
six (6) months, or from January 8, 1994 up to June 8, 1994. During this period, the
loan shall earn an interest of P40,000.00 per month, for a total obligation of
P1,240,000.00 for the six-month period. We note that this agreed sum can be
computed at 4% interest per month, but no such rate of interest was stipulated in the
promissory note; rather a fixed sum equivalent to this rate was agreed upon.
Article 1956 of the Civil Code specifically mandates that "no interest shall be
due unless it has been expressly stipulated in writing." Under this provision, the
payment of interest in loans or forbearance of money is allowed only if: (1) there was
an express stipulation for the payment of interest; and (2) the agreement for the
payment of interest was reduced in writing. The concurrence of the two conditions is
required for the payment of interest at a stipulated rate. Thus, we held in Tan v.
Valdehueza and Ching v. Nicdao that collection of interest without any stipulation in
writing is prohibited by law.
In the absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 389
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 390
FACTS: On July 28, 1976 plaintiff Bonifacio Maceda, Jr. (Maceda) obtained a loan
from the defendant Development Bank of the Philippines (DBP) in the amount of P7.3
million to finance the expansion of the Old Grand Hotel in Leyte. Upon approval of
said loan, plaintiff Maceda executed a promissory note and a mortgage of real estate.
Project cost of the New Gran Hotel wasP10.5M. DBP fixed a debt-equity ratio of 70%-
30%, corresponding to DBP and Maceda‘s respective infusion in the hotel project.
Maceda‘s equity infusion was P2.93M, or 30% of P10.5M. The DBP Governor at that
time, Recio Garcia, in-charge of loans for hotels, allegedly imposed the condition that
DBP would choose the building contractor, namely, Moreman Builders Co. (Moreman).
The contractor would directly receive the loan releases from DBP, after verification by
DBP of the construction progress. The period of loan availment was 360 days from
date of initial release of the loan. Similarly, suppliers of equipment and furnishings for
the hotel were also to be paid directly by DBP.
ISSUE: Whether or not the damages awarded in favor of Maceda are unreasonable and
excessive.
HELD: No. The damages awarded in favor of Maceda are not unreasonable and
excessive.
Under Article 1191 of the Civil Code, the aggrieved party has a choice
between specific performance and rescission with damages in either case.
However, we have ruled that if specific performance becomes impractical or
impossible, the court may order rescission with damages to the injured party.
After the lapse of more than 30 years, it is now impossible to implement the
loan agreement as it was written, considering the absence of evidence as to the
rising costs of construction, as well as the obvious changes in market
conditions on the viability of the operations of the hotel. We deem it equitable
and practicable to rescind the obligation of DBP to deliver the balance of the
loan proceeds to Maceda. In exchange, we order DBP to pay Maceda the value
of Maceda‘s cash equity of P6,153,398.05 by way of actual damages, plus the
applicable interest rate. The trial court also awarded the following
amounts: P700,000 as moral damages; P150,000 as exemplary
damages; P500,000 as temperate damages; and P100,000 as attorney‘s fees.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 391
Petition granted.
PNB v. Encina
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 392
FACTS: On September 13, 1995, as additional capital for their metal craft business,
plaintiffs-appellants ENCINA obtained a P500,000.00 loan with defendant-appellee
PNB, secured by a promissory note, a real estate mortgage, and a credit agreement, on
parcels of land located at Occidental Mindoro. Thereafter, plaintiffs-appellants
obtained an additional P200,000.00 and P400,000.00 loan from PNB. It subsequently
granted a P1,250,000.00 all purpose credit facility to plaintiffs-appellants ENCINA.
As borne by the records, the Encina spouses never challenged the validity of
their loan and the accessory contracts with PNB on the ground that they violated the
principle of mutuality of contracts in view of the provision therein that the interest rate
shall be set by management. Their only contention concerning the interest rate was
that the charges imposed by the bank violated the Usury Law. This was the essence of
the second cause of action alleged in the complaint.
It should be definitively ruled in this regard that the Usury Law had been
rendered legally ineffective by Resolution No. 224 dated December 3, 1982 of the
Monetary Board of the Central Bank, and later by Central Bank Circular No. 905
which took effect on January 1, 1983 and removed the ceiling on interest rates for
secured and unsecured loans regardless of maturity. The effect of these circulars is to
allow the parties to agree on any interest that may be charged on a loan. The virtual
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 393
repeal of the Usury Law is within the range of judicial notice which courts are bound
to take into account. After all, the fundamental tenet is that the law is deemed part of
the contract. Thus, the trial court was correct in HELD that the second cause of action
was without basis.
Imperial v. Jaucian
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 394
FACTS: The present controversy arose from a case for collection of money, filed by
Alex A. Jaucian against Restituta Imperial, on October 26, 1989. The complaint
alleges, inter alia, that defendant obtained from plaintiff six separate loans for which
the former executed in favor of the latter six separate promissory notes and issued
several checks as guarantee for payment. When the said loans became overdue and
unpaid, especially when the defendant‘s checks were dishonored, plaintiff made
repeated oral and written demands for payment.
ISSUE: Whether or not the penalties charged per month is in the guise of hidden
interest.
HELD: Yes. The penalties charged per month was in the guise of hidden interest.
Article 1229 of the Civil Code states that the judge shall equitably reduce the
penalty when the principal obligation has been partly or irregularly complied with by
the debtor. Even if there has been no performance, the penalty may also be reduced
by the courts if it is iniquitous or unconscionable. In exercising this power to
determine what is iniquitous and unconscionable, courts must consider the
circumstances of each case. What may be iniquitous and unconscionable in one may
be totally just and equitable in another. In the present case, iniquitous and
unconscionable was the parties‘ stipulated penalty charge of 5 percent per month or
60 percent per annum, in addition to regular interests and attorney‘s fees. Also, there
was partial performance by petitioner when she remitted P116,540 as partial payment
of her principal obligation of P320,000. Under the circumstances, the trial court was
justified in reducing the stipulated penalty charge to the more equitable rate of 14
percent per annum. Nevertheless, it appears that petitioner‘s failure to comply fully
with her obligation was not motivated by ill will or malice. The twenty-nine partial
payments she made were a manifestation of her good faith. Again, Article 1229 of the
Civil Code specifically empowers the judge to reduce the civil penalty equitably, when
the principal obligation has been partly or irregularly complied with. Upon this
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 395
premise, we hold that the RTC‘s reduction of attorney‘s fees -- from 25 percent to 10
percent of the total amount due and payable -- is reasonable.
Petition denied.
Pabugais v. Sahijwani
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 396
On November 29, 1996, the trial court rendered a decision declaring the
consignation invalid for failure to prove that petitioner tendered payment to
respondent and that the latter refused to receive the same. Petitioner appealed the
decision to the Court of Appeals. Petitioner‘s motion to withdraw the amount
consigned was denied by the Court of Appeals and the decision of the trial court was
affirmed. On a motion for reconsideration, the Court of Appeals declared the
consignation as valid in an Amended Decision dated January 16, 2003. It held that
the validity of the consignation had the effect of extinguishing petitioner‘s obligation to
return the option/reservation fee to respondent. Hence, petitioner can no longer
withdraw the same.
ISSUE: Whether or not the amount consigned with the trial court can be withdrawn by
the petitioner.
HELD: No. The amount consigned with the trial court can no longer be withdrawn by
petitioner.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 397
Petition denied.
Lo v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 398
Antonio Lo, Petitioner, versus The Hon. Court of Appeals and National
Onions Growers Cooperative Marketing Association,
Inc., Respondents.
(G.R. No. 141434, September 23, 2003, 3rd Division)
CORONA, J:
FACTS: Antonio Lo acquired two parcels of land with an office constructed thereon in
an auction sale on November 9, 1995 from the Land Bank of the Philippines. At
variance, private respondent National Onion Growers Cooperative Marketing
Association, Inc. was the occupant of the parcels of land under a subsisting contract
of lease with Land Bank. The lease was valid until December 31, 1995.
Upon the expiration of the lease contract, Lo demanded that private respondent
vacate the leased premises and surrender its possession to him. The agricultural
cooperative refused on the ground of a contest against petitioner‘s acquisition of the
parcels of land in an action for annulment of sale, redemption and damages.
On February 23, 1996, petitioner filed an action for ejectment and subsequently
asked for imposition of the contractually stipulated penalty of P5, 000 per day of delay
in surrendering the possession of the property. Thereafter, the trial court decided the
case in favor of petitioner. Private respondent was ordered to vacate the leased
premises. On appeal to the Regional Trial Court, the trial court‘s decision was affirmed
in toto. The agricultural cooperative then elevated the case to the Court of Appeals
that affirmed the lower court‘s decision but modified that the penalty to be imposed
must be reduced to P1, 000. Unsatisfied with the decision of the court, Lo filed the
instant petition for review.
ISSUE: Whether or not the Court of Appeals has the authority to reduce the penalty
awarded by the trial court, the same having been stipulated by the parties in their
contract of lease.
HELD: Yes. The Court of Appeals has the authority to reduce the penalty awarded by
the trial court, the same having been stipulated by the parties in their contract of
lease.
While courts are not at liberty to ignore the freedom of the parties to agree on
such terms and conditions as they see fit as long as they are not contrary to law,
morals, good customs, public order or public policy, courts may equitably reduce a
stipulated penalty if it is iniquitous or unconscionable, or if the principal obligation
has been partly or irregularly complied with. This power of the courts is explicitly
sanctioned by Article 1229 of the Civil Code which provides that the judge shall
equitably reduce the penalty when the principal obligation has been partly or
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 399
irregularly complied with by the debtor. Even if there has been no performance, the
penalty may also be reduced by courts if it is iniquitous or unconscionable.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 400
FACTS: Petitioners Tolomeo Ligutan and Leonidas dela Llana obtained on May 11,
1981 a loan in the amount of P120, 000.00 from respondent Security Bank and Trust
Company. Petitioners executed a promissory note binding themselves, jointly and
severally, to pay the sum borrowed with an interest of 15.189% per annum upon
maturity and to pay a penalty of 5% every month on the outstanding principal and
interest in case of default. In addition, petitioners agreed to pay 10% of the total
amount due by way of attorney‘s fees if the matter were indorsed to a lawyer for
collection or if a suit were instituted to enforce payment. The obligation matured on
September 8, 1981; the bank, however, granted an extension but only until December
29, 1981.
When petitioners defaulted on their obligation, the bank filed a complaint for
recovery of the due amount. On September 5, 1988, the trial court ruled in favor of the
bank. It ordered the petitioners to pay, jointly and severally, the sum of P114, 416.00
with interest thereon at the rate of 15.189% per annum, 2% service charge and 5% per
month penalty charge, commencing on May 20, 1982 until fully paid.
The Court of Appeals affirmed it but deleted the 2% service charge. Not fully
satisfied with the decision, both parties moved for reconsideration. Petitioners prayed
for the reduction of the 5% penalty for being unconscionable. The bank, on the other
hand, asked that the payment of interest and penalty be commenced not from the date
of filing of complaint but from the time of default as so stipulated in the contract of the
parties.
performance in good faith by the obligor, when the penalty clause itself suffers from
fatal infirmity, and when exceptional circumstances so exist as to warrant it.
In the case at bar, given the circumstances, not to mention the repeated acts of
breach by petitioners of their contractual obligation, this Court sees no cogent ground
to HELD of the appellate court.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 402
Pascual v. Ramos
Spouses Silvestre and Celia Pascual, Petitioners, v. Rodrigo V.
Ramos, Respondent.
(G.R. No. 144712, July 4, 2002, 1st Division)
DAVIDE, JR., C.J.:
FACTS: Ramos alleged that on June 3, 1987, for and in consideration of P150,000,
the Spouses Pascual executed in his favor a Deed of Absolute Sale with Right to
Repurchase over 2 parcels of land and the improvements thereon located in Bambang,
Bulacan, Bulacan. This document was annotated at the back of the title. The Pascuals
did not exercise their right to repurchase the property within the stipulated one-year
period; hence, Ramos prayed that the title or ownership over the subject parcels of
land and improvements thereon be consolidated in his favor.
In their Answer, the Pascuals admitted having signed the Deed of Absolute Sale
with Right to Repurchase for a consideration of P150, 000 but averred that what the
parties had actually agreed upon and entered into was a real estate mortgage. They
further alleged that there was no agreement limiting the period within which to
exercise the right to repurchase and that they had even overpaid Ramos. The trial
court found that the transaction between the parties was actually a loan in the
amount of P150, 000.00, the payment of which was secured by a mortgage of the
property. It also found that the Pascuals had made payments in the total sum of
P344,000.00, and that with interest at 7% per annum, they had overpaid the loan by
P141,500.00. Accordingly, the trial court ruled in favor of the defendants.
After the trial court sustained petitioners‘ claim that their agreement with
Ramos was actually a loan with real estate mortgage, the Pascuals should not be
allowed to turn their back on the stipulation in that agreement to pay interest at the
rate of 7% per month. The Pascuals should accept not only the favorable aspect of the
court‘s declaration that the document is actually an equitable mortgage but also the
necessary consequence of such declaration, that is, that interest on the loan as
stipulated by the parties in that same document should be paid. Besides, when
Ramos moved for a reconsideration of the decision of the trial court pointing out that
the interest rate to be used should be 7% per month, the Pascuals never lifted a finger
to oppose the claim. It was only in their motion for the reconsideration of the decision
of the Court of Appeals that the Pascuals made an issue of the interest rate and
prayed for its reduction to 12% per annum.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 403
The interest rate of 7% per month was voluntarily agreed upon by Ramos and
the Pascuals. There is nothing from the records and, in fact, there is no allegation
showing that petitioners were victims of fraud when they entered into the agreement
with Ramos. Neither is there a showing that in their contractual relations with
Ramos, the Pascuals were at a disadvantage on account of their moral dependence,
ignorance, mental weakness, tender age or other handicap, which would entitle them
to the vigilant protection of the courts as mandated by Article 24 of the Civil Code.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 404
FACTS: Petitioner First Metro granted respondent Este Del Sol a loan of
P7,385,500.00 to finance the construction and development of respondent‘s Mountain
Reserve. The loan was payable on 36 consecutive monthly amortizations and the
interest on the loan was egged at 16% per annum based on the diminishing balance.
In case of deposit, a 20% one time penalty on the amount due and such mount shall
bear interest at the highest rate permitted by law plus liquidated damages at the rate
of 2% per month and attorney‘s fees equivalent to 25% of the sum sought to be
received. In accordance with the terms of the loan agreement, respondents Este Del
Sol executed several documents as security for payment. Moreover, it executed as
provided for by the loan agreement, an Underwriting Agreement whereby Forts Metro
shall underwrite on a best efforts basis the public offering of one hundred twenty
thousand common shares of Este Del Sol. In addition, the Underwriting Agreement
provided that for supervising the public offering of the shares, Este Del Sol shall pay
First Metro an annual supervision fee of P 200,000.00 per annum and a consultancy
fee of P 332,500.00 per annum for a period of four (4) consecutive years.
Simultaneous with the execution of and in accordance with the terms of the
Underwriting Agreement, a consultancy Agreement was also executed whereby Este
Del Sol engaged the services of petitioner First Metro for a fee as consultant to render
general consultancy services.
Since Este Del Sol failed to meet the schedule of repayment it appeared to have
incurred a total obligation of P 12,679,630.98. Thus First Metro caused the extra
judicial foreclosure of the real estate mortgage where First Metro was the highest
bidder. However, there remained a balance of P 6,863,297.73 Hence, First Metro
instituted an instant collection suit against respondent, including those other
respondents who have securities of the loan of respondent Este Del Sol by virtue of
their continuing surety agreements.
ISSUE: Whether or not the underwriting and consultancy agreements are mere
subterfuges to camouflage the usurious interest charged by First Metro.
HELD: No. The underwriting and consultancy agreements are not mere subterfuges to
camouflage the usurious interest charged by First Metro.
The form of the contract entered into between the petitioner and respondent is
not conclusive for the law will not permit a usurious loan to hide itself behind a legal
form. An apparently legal loan is usurious when it is intended that additional
compensation for the loan providing for payment by the borrower for the leaders
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 405
services which of little value or which are not in fact to be rendered. Here, the loan
Underwriting and Consultancy Agreement are not separate and independent
transactions rather they were executed and delivered contemporaneous by and
executed by First Metro as essential conditions for the grant of the loan. However, in
usurious loans, the entire obligation does not become void because the unpaid
principal debt still stands and remains.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 406
In violation of their agreement, DOMEL failed to deliver the buri midribs and
rattan poles within the stipulated period. Thus, on September 23, 1981, DOMEL and
NNRMC agreed to restructure the latter‘s purchase orders in a Memorandum of
Agreement. Under the agreement, NNRMC extended the expiry date of its two letters
of credit to November 5, 1981. It also reduced the quantity of the rattan poles from
300,000 to only 100,000 pieces while the quantity of buri midribs remained at 22,000
bundles. Further, DOMEL undertook to deliver the goods on or before October 31,
1981. However, no deliveries were again made on the said date. Consequently,
demands were made by NNRMC on January 19, 1982 for the payment of damages,
which demands were ignored by DOMEL. Hence, NNRMC filed a complaint for
damages before the Regional Trial Court of Pasig. After trial, judgment was rendered
in favor of plaintiff and against defendant.
The amount of P2,000.00 as penalty for every day of delay is excessive and
unconscionable. In determining whether a penalty clause is ―iniquitous and
unconscionable,‖ a court may very well take into account the actual damages
sustained by a creditor who was compelled to sue the defaulting debtor, which actual
damages would include the interest and penalties the creditor may have had to pay on
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 407
its own from its funding source. In this case, NNRMC was only able to prove that it
incurred the amounts of P5,995.83 as opening charges on the two Letters of Credit
and an additional P1,911.85 as amendment charges on the same Letters of Credit.
Other than that, NNRMC failed to prove it had suffered actual damages resulting from
the non-delivery of the specified buri midribs and rattan poles. In fact, what it
allegedly suffered are what it calls ―Foregone Interest Income‖ and ―Foregone Profit‖
from the two Letters of Credit. Such could not be considered as actual damages.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 408
FACTS: The Medel spouses obtained several loans of which they were unable to pay in
full. On July 23, 1986, Servando and Leticia with the latter's husband, Dr. Rafael
Medel, consolidated all their previous unpaid loans totaling P440,000.00, and sought
from Veronica another loan in the amount of P60,000.00, bringing their indebtedness
to a total of P500,000.00, payable on August 23, 1986. They executed a promissory
note indicating payment for the balance.
ISSUE: Whether or not the stipulated interest rate is excessive, iniquitous and
unconscionable.
HELD: Yes, the stipulated rate of interest per month is excessive, iniquitous
and unconscionable.
Basically, the issue revolves on the validity of the interest rate stipulated
upon. Thus, the question presented is whether or not the stipulated rate of
interest at 5.5% per month on the loan in the sum of P500,000.00, that
plaintiffs extended to the defendants is usurious. In other words, is the Usury
Law still effective, or has it been repealed by Central Bank Circular No. 905,
adopted on December 22, 1982, pursuant to its powers under P.D. No. 116, as
amended by P.D. No. 1684?
We agree with petitioners that the stipulated rate of interest at 5.5% per
month on the P500,000.00 loan is excessive, iniquitous, unconscionable and
exorbitant. However, we cannot consider the rate "usurious" because this
Court has consistently held that Circular No. 905 of the Central Bank, adopted
on December 22, 1982, has expressly removed the interest ceilings prescribed
by the Usury Law and that the Usury Law is now "legally inexistent".
Nevertheless, we find the interest at 5.5% per month, or 66% per annum,
stipulated upon by the parties in the promissory note iniquitous or
unconscionable, and, hence, contrary to morals ("contra bonos mores"), if not
against the law. The stipulation is void. The courts shall reduce equitably
liquidated damages, whether intended as an indemnity or a penalty if they are
iniquitous or unconscionable. Consequently, the Court of Appeals erred in
upholding the stipulation of the parties. Rather, we agree with the trial court
that, under the circumstances, interest at 12% per annum, and an additional
1% a month penalty charge as liquidated damages may be more reasonable.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 409
Reformina v. Tomol
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 410
FACTS: An action for Recovery of Damages for Injury to Person and Loss of Property
was filed. The Regional Trial Court rendered judgment in favor of the plaintiffs and
against the defendants, ordering the latter to pay jointly and severally the former. On
appeal, the decision was modified. In the computation of the legal interest decreed
sought to be executed, petitioners claimed that it should be at 12% per annum
invoking Central bank Circular. The respondents, however, insist that said legal
interest should be at the rate of 6% per annum pursuant to Article 2209 of the New
Civil code
ISSUE: Whether or not the judgment covers all kinds of monetary judgment.
Petition dismissed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 411
Lo v. KJH
Sonny Lo, Petitioner, versus KJS Eco-Formwork System Phil.,
Inc., Respondent.
(G.R. No. 149420, October 8, 2003, 1st Division)
YNARES-SANTIAGO, J:
FACTS: KJS Eco-Formwork System Phil. (KJS) is engaged in the sale of steel
scaffoldings while Sonny Lo (Lo) is a building contractor. On February 22, 1990,
petitioner ordered scaffolding equipments from respondent worth P540,425.80. He
paid a down payment in the amount of P150,000. The balance was made payable in
10 monthly installments. Respondent delivered the equipments. Petitioner was able to
pay the first two monthly installments. His business suffered financial difficulties and
he was unable to settle his obligations despite demands.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 412
FACTS: Private respondent Loreto Tan (Tan) is the owner of a parcel of land abutting
the national highway. Expropriation proceedings were instituted by the government.
Tan filed a motion requesting the issuance of an order for the release to him of the
expropriation price of P32,480.00. Philippine National Bank (PNB) was required by the
trial court to release to Tan the amount and deposited it by the government.
ISSUE: Whether or not the Special Power of Attorney authorized Sonia Gonzaga to
receive payment intended for private respondent.
HELD: No. The Special Power of Attorney did not authorized Sonia Gonzaga to receive
payment intended for private respondent.
There is no question that no payment had ever been made to private respondent
as to the check was never delivered to him. Under Article 1233 of the Civil Code, a
debt shall not be understood to have been paid unless the thing or service in which
the obligation consists has been completely delivered or rendered, as the case may be.
The burden of proof of sad payment lies with the debtor. The decision of the Court of
Appeals is affirmed with the modification that the award by the Regional Trial Court of
P5,000 as attorney‘s fees is reinstated.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 413
The Regional Trial Court ruled for the Vazquez ordering Cathay Airways to pay
the spouses, stating further that there was a breach of contract not because of
overbooking but because the latter pushed through with the upgrading despite
objections of the spouses.
The Vazquezes are aware of the privileges, but such privileges may be waived.
Spouses should have been consulted first. It should not have been imposed on them
over their vehement objection. By insisting of the upgrade, Pacific Airways breached its
contract of carriage with the Vazquezes. Nominal damages are adjudicated in order
that the right of the plaintiff, which have been violated may be vindicated or
recognized and not for indemnifying the plaintiff for any loss suffered by him.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 414
Citibank v. Sabeniano
Citibank, N.A. (Formerly First National City Bank) and Investor‟s Finance
Corporation, doing business under the name and style of FNCB
Finance, Petitioners, versus Modesta R. Sabeniano, Respondent.
(G.R. No. 156132, February 6, 2007, 3rd Division)
CHICO-NAZARIO, J:
FACTS: Petitioner Citibank is a banking corporation duly authorized under the laws of
the United States of America to do commercial banking activities n the Philippines.
Sabeniano was a client of both Petitioners Citibank and First National City Bank
(FNCB) Finance. Respondent filed a complaint against petitioners claiming to have
substantial deposits, the proceeds of which were supposedly deposited automatically
and directly to respondent‘s account with the petitioner Citibank and that allegedly
petitioner refused to despite repeated demands. Petitioner alleged that respondent
obtained several loans from the former and in default, Citibank exercised its right to
set-off respondent‘s outstanding loans with her deposits and money.
The Regional Trial Court declared the act illegal, null and void and ordered the
petitioner to refund the amount plus interest, ordering Sabeniano, on the other hand
to pay Citibank her indebtedness. The Court of Appeals affirmed the decision entirely
in favor of the respondent.
ISSUE: Whether or not petitioner may exercise its right to set-off respondent‘s loans
with her deposits and money in Citibank-Geneva.
HELD: No. The petitioner cannot exercise its right to set-off respondent‘s loans with
her deposits and money in Citibank-Geneva.
The Court maintains its original position in the Decision that the off-
setting or compensation of respondent‘s loans with Citibank-Manila using her
dollar accounts with Citibank-Geneva cannot be effected. The parties cannot be
considered principal creditor of the other. As for the dollar accounts,
respondent was the creditor and Citibank-Geneva was the debtor; and as for
the outstanding loans, petitioner Citibank, particularly Citibank-Manila, was
the creditor and respondent was the debtor. Since legal compensation was not
possible, petitioner Citibank could only use respondent‘s dollar accounts with
Citibank-Geneva to liquidate her loans if she had expressly authorized it to do
so by contract.
Motion denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 415
FACTS: Petitioner Telengtan Brothers and Sons is a domestic corporation while United
States Lines is a foreign corporation engaged in overseas shipping. It was made
applicable that consignees who fail to take delivery of their containerized cargo within
the 10-day free period are liable to pay demurrage charges.
On June 22, 1981, United States Lines filed a suit against petitioner seeking
payment of demurrage charges plus interest and damages. Petitioner incurred
P94,000 which the latter refused to pay despite repeated demands. Petitioner
disclaims liability alleging that it has never entered into a contract nor signed an
agreement to be bound by it.
The Regional Trial Court ruled that petitioner is liable to respondent and all be
computed as of the date of payment in accordance with Article 1250 of the Civil Code.
The Court of Appeals affirmed the decision.
HELD: No. The re-computation of the judgment award is not in accordance with
Article 1250 of the Civil Code.
The Supreme Court found as erroneous the trial court‘s decision as affirmed by
the Court of Appeals. The Court holds that there has been no extraordinary inflation
within the meaning of Article 1250 of the Civil Code. Accordingly, there is no plausible
reason for ordering the payment of an obligation in an amount different from what has
been agreed upon because of the purported supervention of extraordinary inflation.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 416
ISSUE: Whether or not the Court of Appeals applied the correct legal rate of interest to
which respondent is lawfully entitled.
HELD: No. The Court of Appeals did not apply the correct legal rate of interest to
which respondent is lawfully entitled.
In the case at bar, the Court of Appeal‘s failure to apply the correct legal rate of
interest, to which respondent is lawfully entitled, amounts to a "plain error."
In Eastern Shipping Lines, Inc. v. Court of Appeals, it was held that absent any
stipulation, the legal rate of interest in obligations which consists in the payment of a
sum of money, as in the present case, is 12% per annum. As stated in the decision of
the Court, which is final and executory, petitioner is liable to pay respondent the
amount adjudged in the foreign judgment, with "interest thereon at the legal rate
12% per annum from the filing of the complaint therein on August 28, 1980 until the
said foreign judgment is fully satisfied." Since petitioner already made partial
payments, his obligation was reduced to 61,734,633 Yen.
Thus, petitioner should pay respondent the amount of 61,734,633 Yen plus
"damages for the delay at the rate of 6% per annum from August 28, 1980 up to and
until payment is completed," with interest thereon at the rate of 12% per annum from
the filing of the complaint on August 28, 1980, until fully satisfied.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 417
Padilla v. Paredes
Albert R. Padilla, Petitioner, versus Spouses Floresco Paredes and Adelina
Paredes, and The Honorable Court of Appeals, Respondents.
(G.R. No. 124874, March 17, 2000, 2nd Division)
QUISUMBING, J:
After trial, the lower court ruled in favor of petitioner, saying that even if
petitioner indeed breached the contract to sell, it was only a casual and slight
breach that did not warrant rescission of the contract. The Court of Appeals,
however, reversed the HELD of the trial court and confirmed private
respondents' rescission of the contract to sell.
ISSUE: Whether or not the private respondents are entitled to rescind the contract to
sell the land to petitioner.
HELD: Yes. The private respondents are entitled to rescind the contract to sell the
land to petitioner.
The Supreme Court sustained the HELD of the Court of Appeals that private
respondent may validly rescind the contract to sell, however, the reason for this is not
that respondents have the power to rescind but because their obligation there under
did not arise. The Court of Appeals is correct in ordering the return to petitioner of the
amounts received from him by private respondents, on the precept that no one shall
be unjustly enriched himself at the expense of another.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 418
FACTS: A suit for collection of a sum of money was filed by Eden Tan against the
Norberto and Carmon Tibajia. A writ of attachment was issued by the trial court on 17
August 1987 and on 17 September 1987, the Deputy Sheriff filed a return stating that
a deposit made by the Tibajia spouses in the Regional Trial Court of Kalookan City in
the amount of P442,750.00 in another case, had been garnished by him. On 10 March
1988, the Regional Trial Court, Branch 151 of Pasig, Metro Manila rendered its
decision in favor of the plaintiff Eden Tan, ordering the Tibajia spouses to pay her an
amount in excess of Three Hundred P300,000.00. On appeal, the Court of Appeals
modified the decision by reducing the award of moral and exemplary damages. The
decision having become final, Eden Tan filed the corresponding motion for execution
and thereafter, the garnished funds which by then were on deposit with the cashier of
the Regional Trial Court of Pasig, Metro Manila, were levied upon.
HELD: No. The payment by means of check is considered payment in legal tender.
The HELD applies the statutory provisions which lay down the rule that a check
is not legal tender and that a creditor may validly refuse payment by check, whether it
be a manager‘s check, cashier‘s or personal check. The decision of the Court of
Appeals is affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 419
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 420
FACTS: In March 1968, Development Bank of the Philippines (DBP) granted to private
respondents an industrial loan in the amount of P2,500,000 – P500,000 in cash and
P2,000,000 in DBP Progress Bank. It was evidenced by a promissory note and secured
by a mortgage executed by respondents over their present and future properties.
Another loan was granted by DBP in the form of a 5-year revolving guarantee to
P1,700,000.
HELD: Yes. The prestation to collect by the DBP is unconscionable and usurious.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 421
FACTS: Respondent Chona Losin (Losin) was in the fastfood and catering services
business named Glamours Chicken House. Since 1993, Vitarich Corp (Vitarich),
particularly its Davao Branch, had been her supplier of poultry meat. In the months of
July to November 1996, Losin‘s orders of dressed chicken and other meat products
allegedly amounted to P921,083.10. During this said period, Losin‘s poultry meat
needs for her business were serviced by Rodrigo Directo (Directo) and Allan Rosa
(Rosa), both salesmen and authorized collectors of Vitarich, and Arnold Baybay
(Baybay), a supervisor of said corporation.
On March 2, 1998, Vitarich filed a complaint for Sum of Money against Losin,
Directo, Rosa, and Baybay before the Regional Trial Court. The Regional Trial Court
rendered its decision in favor of Vitarich, however the Court of Appeals rendered the
assailed decision in favor of Losin.
As a general rule, one who pleads payment has the burden of proving it. The
burden rests on the debtor to prove payment, rather than on the creditor to prove non-
payment. The debtor has the burden of showing with legal certainty that the obligation
has been discharged by payment. True, the law requires in civil cases that the party
who alleges a fact has the burden of proving it. Section 1, Rule 131 of the Rules of
Court provides that the burden of proof is the duty of a party to prove the truth of his
claim or defense, or any fact in issue by the amount of evidence required by law. In
this case, however, the burden of proof is on Losin because she alleges an affirmative
defense, namely, payment. Losin failed to discharge that burden. After examination of
the evidence presented, this Court is of the opinion that Losin failed to present a single
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 422
official receipt to prove payment. This is contrary to the well-settled rule that a receipt,
which is a written and signed acknowledgment that money and goods have been
delivered, is the best evidence of the fact of payment although not exclusive. All she
presented were copies of the list of checks allegedly issued to Vitarich through its
agent Director, a Statement of Payments Made to Vitarich, and apparently copies of
the pertinent history of her checking account with Rizal Commercial Banking
Corporation (RCBC).
Appeal granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 423
FACTS: On November 12, 1994, Renato Cabilzo (Cabilzo) issued a Metrobank check,
payable to ―CASH‖ and postdated on 24 November 1994 in the amount of P1, 000.00.
The check was drawn against Cabilzo‘s Account with Metrobank Pasong Tamo Branch
and was paid by Cabilzo to a certain Mr. Marquez, as his sales commission.
Subsequently, the check was presented to Westmont Bank for payment. Westmont
Bank, in turn, indorsed the check to Metrobank for appropriate clearing. After the
entries thereon were examined, including the availability of funds and the authenticity
of the signature of the drawer, Metrobank cleared the check for encashment in
accordance with the Philippine Clearing House Corporation (PCHC) Rules. On
November 16, 1994, Cabilzo‘s representative was at Metrobank Pasong Tamo Branch
to make some transaction when he was asked by bank personnel if Cabilzo had issued
a check in the amount of P91, 000.00 to which the former replied in the negative. On
the afternoon of the same date, Cabilzo himself called Metrobank to reiterate that he
did not issue a check in the amount of P91, 000.00 and requested that the questioned
check be returned to him for verification, to which Metrobank complied. Upon receipt
of the check, Cabilzo discovered that Metrobank Check which he issued in the amount
of P1, 000.00 was altered to P91, 000.00 and the date November 24 1994 was changed
to November 14,1994. Hence, Cabilzo demanded that Metrobank re-credit the amount
of P91, 000.00 to his account. Metrobank, however, refused reasoning that it has to
refer the matter first to its Legal Division for appropriate action. Repeated verbal
demands followed but Metrobank still failed to re-credit the amount of P91, 000.00 to
Cabilzo‘s account. On 30 June 1995, Cabilzo, thru counsel, finally sent a letter-
demand to Metrobank for the payment of P90, 000.00, after deducting the original
value of the check in the amount of P1, 000.00. Such written demand
notwithstanding, Metrobank still failed or refused to comply with its obligation.
Consequently, Cabilzo instituted a civil action for damages against Metrobank.
Metrobank cannot lightly impute that Cabilzo was negligent and is therefore
prevented from asserting his rights under the doctrine of equitable estoppel when the
facts on record are bare of evidence to support such conclusion. The doctrine of
equitable estoppel states that when one of the two innocent persons, each guiltless of
any intentional or moral wrong, must suffer a loss, it must be borne by the one whose
erroneous conduct, either by omission or commission, was the cause of injury.
Metrobank‘s reliance on this dictum is misplaced. For one, Metrobank‘s
representation that it is an innocent party is flimsy and evidently, misleading. At the
same time, Metrobank cannot asseverate that Cabilzo was negligent and this
negligence was the proximate cause of the loss in the absence of even a scintilla proof
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 424
to buttress such claim. Negligence is not presumed but must be proven by the one
who alleges it, which petitioner failed to.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 425
FACTS: In May 1997, respondent Bathala Marketing, renewed its Contract of Lease
with Ponciano Almeda. Under the contract, Ponciano agreed to lease a porton of
Almeda Compound for a monthly rental of P1,107,348.69 for four years. On January
26, 1998, petitioner informed respondent that its monthly rental be increased by 73%
pursuant to the condition No. 7 of the contract and Article 1250. Respondent refused
the demand and insisted that there was no extraordinary inflation to warrant such
application. Respondent refused to pay the Value Added Tax (VAT) and adjusted
rentals as demanded by the petitioners but continually paid the stipulated amount.
The Regional Trial Court ruled in favor of the respondent and declared that
plaintiff is not liable for the payment of VAT and the adjustment rental, there being no
extraordinary inflation or devaluation. The Court of Appeals affirmed the decision
deleting the amounts representing 10% VAT and rental adjustment.
ISSUE: Whether or not the amount of rentals due the petitioners should be adjusted
by reason of extraordinary inflation or devaluation.
HELD: No. The amount of rentals due the petitioners should not be adjusted by
reason of extraordinary inflation or devaluation.
Petitioners are stopped from shifting to respondent the burden of paying the
VAT. The sixth Condition states that respondent can only be held liable for new taxes
imposed after the effectivity of the contract of lease, after 1977, VAT cannot be
considered a ―new tax‖. Neither can petitioners legitimately demand rental adjustment
because of extraordinary inflation or devaluation. Absent an official pronouncement or
declaration by competent authorities of its existence, its effects are not to be applied.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 426
The Regional Trial Court ordered the use of the 1996 dollar exchange rate in
computing respondent‘s dollar-denominated loans. The Court of Appeals granted the
bank‘s application for injunction but the properties were sold to public auction.
Despite the devaluation of the peso, Bangko Sentral ng Pilipinas never declared
a situation of extraordinary inflation. Respondents should pay their dollar
denominated loans at the exchange rate fixed by the Bangko Sentral on the date of
maturity.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 427
Palanca v. Guides
Simplicio A. Palanca, Petitioner, versus Ulyssis Guides joined by her
husband Lorenzo Guides, Respondent.
(G.R. No. 146365, February 28, 2005, 2nd Division)
TINGA, J:
ISSUE: Whether or not the petitioner‘s claim of unpaid charges from the respondent is
proper.
HELD: No. The petitioner‘s claim of unpaid charges from the respondent was not
proper.
Petitioner was deemed to have waived his right to present evidence and thus
was unable to adduce evidence of such inflation or fluctuation. Even if there were
such, petitioner did not make a demand on respondent for the satisfaction of the
claim.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 428
Atlas paid to National Mines and Allied Workers Union (NAMAWU) the amount
of P4,298,307.77 in compliance with the writ of garnishment issued against Atlas to
satisfy the judgment in favor of NAMAWU. Atlas alleged that there was overpayment,
hence the suit against PCIB to obtain reimbursement. PCIB contended that Atlas still
owed P908,398.75 because NAMAWU had been partially paid in the amount of
P601,260.00. The Regional Trial Court ruled against Atlas to pay P908,398.75 to
PCIB. However, the Court of Appeals reversed the decision.
Article 1236 of the Civil Code applies in this instance. It provides that
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.
PCIB is the debtor in this case, it having purchased along with MBC
legally garnished properties, while Atlas is the third person who paid the
obligation of the debtor without the latter‘s knowledge and consent. Since Atlas
readily paid NAMAWU without the knowledge and consent of PCIB, Atlas may
only recover from PCIB or, more precisely charge to PCIB, only the amount of
payment which has benefited the latter.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 429
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 430
FACTS: Petitioner Jose Lagon (Lagon) is the owner of a commercial building while
respondent is a domestic corporation known to be the biggest manufacturer and
installer of aluminum materials in the country. Parties entered into two contracts
whereby for a total consideration of P104,870. Hooven Comalco Industries (Hooven)
agreed to sell and install various aluminum materials in Lagon‘s building. Upon
execution of contracts, Lagon paid Hooven P48,000 in advance.
On February 24, 1987, Hooven commenced an action for sum of money. It was
alleged that materials were delivered and installed but P69,329 remained unpaid even
after the completion of the project and despite repeated demands. The Regional Trial
Court held partly on the basis of the ocular inspection finding that the total actual
deliveries cost P87,140 deducting there from P48,000. The Court of Appeals set aside
the decision and held in favor of Hooven.
ISSUE: Whether or not all the materials specified in the contracts had been delivered
and installed by respondent in petitioner‘s commercial building.
HELD: No. Not all of the materials specified in the contracts had been delivered and
installed by respondent in petitioner‘s commercial building.
Decision modified.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 431
ISSUE: Whether or not BPI is still liable to the private respondent on the account
subject to the holdout agreement after it is withdrawn by the heirs of Velasco.
HELD: Yes. BPI is still liable to the private respondent on the account subject to the
holdout agreement after it is withdrawn by the heirs of Velasco.
The account was proved to belong to Eastern even if it was in the names of Lim
and Velasco. As the real creditor of the bank, Eastern has the right to withdraw it or
demand payment thereof. BPI cannot be relieved of its duty to pay Eastern simply
because it already allowed the heirs of Velasco to withdraw the whole balance of the
account. Payment made by the debtor to the wrong party does not extinguish the
obligation as to the creditor who is without fault or negligence.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 432
The respondent was able to establish that the LBP check was not received by
her or by her authorized personnel. The PNP‘s own records show that it was claimed
and signed for by Cruz, who is openly known as being connected to Highland
Enterprises, another contractor. Hence, absent any showing that the respondent
agreed to the payment of the contract price to another person, or that she authorized
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 433
Cruz to claim the check on her behalf, the payment, to be effective must be made to
her.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 434
ISSUE: Whether the respondent NLRC committed grave abuse of discretion when it
ruled that private respondent was a regular employee and not a project employee.
HELD: No. The respondent NLRC did not commit grave abuse of discretion when it
ruled that private respondent was a regular employee and not a project employee.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 435
FACTS: Spouses Johnson and Evangeline Sy secured a loan from Land Bank
Legazpi City in the amount of PhP16 million. The loan was secured by three (3)
residential lots, five (5) cargo trucks, and a warehouse. Under the loan
agreement, PhP6 million of the loan would be short-term and would mature on
February 28, 1997, while the balance of PhP 10 million would be payable in
seven (7) years. The Notice of Loan Approval dated February 22, 1996
contained an acceleration clause wherein any default in payment of
amortizations or other charges would accelerate the maturity of the loan.
Subsequently, however, the Spouses Sy found they could no longer pay their
loan. They sold three (3) of their mortgaged parcels of land for PhP 150,000 to
Angelina Gloria Ong, Evangeline‘s mother, under a Deed of Sale with
Assumption of Mortgage.
Evangeline‘s father, petitioner Alfredo Ong, later went to Land Bank to
inform it about the sale and assumption of mortgage. Atty. Edna Hingco, the
Legazpi City Land Bank Branch Head, told Alfredo and his counsel Atty. Ireneo
de Lumen that there was nothing wrong with the agreement with the Spouses
Sy but provided them with requirements for the assumption of mortgage. They
were also told that Alfredo should pay part of the principal which was
computed at PhP 750,000 and to update due or accrued interests on the
promissory notes so that Atty. Hingco could easily approve the assumption of
mortgage. Two weeks later, Alfredo issued a check for PhP 750,000 and
personally gave it to Atty. Hingco. On December 12, 1997, Alfredo initiated an
action for recovery of sum of money with damages against Land Bank in Civil
Case No. T-1941, as Alfredo‘s payment was not returned by Land Bank. The
RTC held that that under the principle of equity and justice, the bank should
return the amount Alfredo had paid with interest at 12% per annum computed
from the filing of the complaint.
The Regional Trial Court (RTC) further held that Alfredo was entitled to
attorney‘s fees and litigation expenses for being compelled to litigate. The Court
of Appeals affirmed the RTC Decision.
ISSUE: Whether or not Art. 1236 of the Civil Code should apply in the instant
case.
HELD: Yes. Art. 1236 of the Civil Code should apply in the instant case.
The Court agrees with Land Bank on this point as to the first part of
paragraph 1 of Art. 1236. Land Bank was not bound to accept Alfredo‘s
payment, since as far as the former was concerned, he did not have an interest
in the payment of the loan of the Spouses Sy. It is clear from the records that
Land Bank required Alfredo to make payment before his assumption of
mortgage would be approved. He was informed that the certificate of title would
be transferred accordingly. He, thus, made payment not as a debtor but as a
prospective mortgagor.
Alfredo, as a third person, did not, therefore, have an interest in the
fulfilment of the obligation of the Spouses Sy, since his interest hinged on Land
Bank‘s approval of his application, which was denied. The circumstances of the
instant case show that the second paragraph of Art. 1236 does not apply.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 436
Appeal denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 437
Binalbagan v. CA
BINALBAGAN TECH. INC., and HERMILO J. NAVA, petitioners, versus THE
COURT OF APPEALS, MAGDALENA L. PUENTEVELLA, ANGELINA P.
ECHAUS, ROMULO L. PUENTEVELLA, RENATO L. PUENTEVELLA, NOLI L.
PUENTEVELLA and NELIA LOURDES P. JACINTO, respondents.
(G.R. No. 100594, March 10, 1993, 3rd Division)
MELO, J:
It appears that there was a pending case, Civil Case No. 7435 of Regional
Trial Court stationed at Himamaylan, Negros Occidental. In this pending case
the intestate estate of the late Luis B. Puentevella, thru Judicial Administratrix,
Angelina L. Puentevella sold said aforementioned lots to Raul Javellana with
the condition that the vendee-promisee would not transfer his rights to said
lots without the express consent of Puentevella and that in case of the
cancellation of the contract by reason of the violation of any of the terms
thereof, all payments therefor made and all improvements introduced on the
property shall pertain to the promissor and shall be considered as rentals for
the use and occupation thereof.
The trial court rendered a decision in favor of the petitioner because of
prescription. Nonetheless, the Court of Appeals reversed said decision.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 438
HELD: No. Respondent did not incur delay in performing its obligation under
the contract of sale.
By accepting the cylinders when they were delivered to the warehouse,
petitioner waived the claimed delay in the delivery of said items. Supreme
Court held that time was not of the essence. There having been no failure on
the part of the respondent to perform its obligations, the power to rescind the
contract is unavailing to the petitioner.
Petition is denied. Court of appeals decision is affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 439
FACTS: On July 3, 1995, De Leon (owner of Delta) and his spouse obtained a
P4 million loan from the BANK for the express purpose of developing Delta
Homes I. To secure the loan, the spouses De Leon executed in favor of the
BANK a real estate mortgage (REM) on several of their properties, including Lot
4. Subsequently, this REM was amended10 by increasing the amount of the
secured loan from P4 million to P8 million. Both the REM and the amendment
were annotated on TCT No. T-637183.
Sometime in 1997, DELTA executed a Contract to Sell with respondent
Angeles Catherine Enriquez (Enriquez) over the house and lot in Lot 4 with the
condition that upon full payment of the total consideration the Owner shall
execute a final deed of sale in favor of the Vendee/s.
When DELTA defaulted on its loan obligation, the BANK, instead of
foreclosing the REM, agreed to a dation in payment or a dacion en pago.
Enriquez filed a complaint against DELTA and the BANK before Office of the
HLURB19 alleging that DELTA violated the terms of its License to Sell. The
HLURB Arbiter Atty. Raymundo A. Foronda upheld the validity of the purchase
price, but ordered DELTA to accept payment of the balance of P108,013.36
from Enriquez, and (upon such payment) to deliver to Enriquez the title to the
house and lot free from liens and encumbrances.
DELTA appealed the arbiter‘s Decision to the HLURB Board of
Commissioners. The Commission ordered [Enriquez] to pay [DELTA] the
amount due from the time she suspended payment up to filing of the complaint
with 12% interest thereon per annum; thereafter the provisions of the Contract
to Sell shall apply until full payment is made.
The OP adopted by reference the findings of fact and conclusions of law
of the HLURB Decisions, which it affirmed in toto. The CA ruled against the
validity of the dacion en pago executed in favor of the BANK on the ground that
DELTA had earlier relinquished its ownership over Lot 4 in favor of Enriquez
via the Contract to Sell.
ISSUE: Whether or not the dacion en pago extinguished the loan obligation,
such that Delta has no more obligations to the Bank.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 441
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 442
Aquintey v. Tibong
AGRIFINA AQUINTEY, Petitioner, versus SPOUSES FELICIDAD AND RICO
TIBONG, Respondents.
(G.R. No. 166704, December 20, 2006, 1st Division)
CALLEJO, SR., J:
FACTS: On May 6, 1999, petitioner Aquintey filed before Regional Trial Court
Baguio, a complaint for sum of money and damages against respondents.
Agrifina alleged that Felicidad secured loans from her on several occasions at
monthly interest rates of 6% to 7%. Despite demands, spouses Tibong failed to
pay their outstanding loans of P773,000,00 exclusive of interests. However,
spouses Tiong alleged that they had executed deeds of assignment in favor of
Agrifina amounting to P546,459 and that their debtors had executed
promissory notes in favor of Agrifina. Spouses insisted that by virtue of these
documents, Agrifina became the new collector of their debts. Agrifina was able
to collect the total amount of P301,000 from Felicdad‘s debtors. She tried to
collect the balance of Felicidad and when the latter reneged on her promise,
Agrifina filed a complaint in the office of the barangay for the collection of
P773,000.00. There was no settlement.
The Regional Trial Court favored Agrifina. The Court of Appeals affirmed
the decision with modification ordering defendant to pay the balance of total
indebtedness in the amount of P51,341,00 plus 6% per month.
ISSUE: Whether or not the deed of assignment in favor of petitioner has the
effect of payment of the original obligation that would partially extinguish the
same
HELD: Yes. The deed of assignment in favor of petitioner has the effect of
payment of the original obligation that would partially extinguish the same.
Substitution of the person of the debtor may be affected by delegacion.
Meaning, the debtor offers, the creditor accepts a third person who consent of
the substitution and assumes the obligation. It is necessary that the old debtor
be released from the obligation and the third person or new debtor takes his
place in the relation. Without such release, there is no novation. Court of
Appeals correctly found that the respondent‘s obligation to pay the balance of
their account with petitioner was extinguished pro tanto by the deeds of credit.
Court of Appeals decision is affirmed with the modification that the principal
amount of the respondents is P33,841.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 443
Vda de Jayme v. CA
MAMERTA VDA. DE JAYME, and her children and/or heirs of the late
GRACIANO JAYME, namely: WILFREDO, MARCIAL, MANUEL, ANTONIO, all
surnamed JAYME; the heirs of DOMINADOR JAYME, namely: SUPREMA
(surviving spouse) and his children, namely: ARMANDO, NICANOR,
ZENAIDA, CATHERINE, ROSALINE, DORIS, VICKY and MARILYN, all
surnamed JAYME; and the heirs of the late NILIE JAYME SANCHEZ,
namely, INOCENCIO SANCHEZ (surviving spouse) and her children: ELSA,
CONCEPCION, CLEOFE, ALEJANDRO, EFREN and MACRINA, all surnamed
SANCHEZ; and FLORA JAYME RAVANES, assisted by her husband, CESAR
RAVANES, Petitioners, versus HON. COURT OF APPEALS, SIXTEENTH
DIVISION, CEBU ASIANCARS INC., GEORGE NERI, CONNIE NERI, WILLIAM
LEONG KOC LEE, EDUARD JAMES LEE, ROBERTO UY KIM, AND CHARLES
UY KIM;[1] METROPOLITAN BANK AND TRUST COMPANY, RENE
NATIVIDAD AND/OR JOHN DOE in substitution of MAXIMO PEREZ, sued
in his capacity as City Sheriff of Mandaue City, Respondents.
(G.R. No. 128669, October 4, 2002, 2nd Division)
QUISUMBING, J:
HELD: YES. The alienation of the building by Asiancars in favor of MBTC for
the partial satisfaction of its indebtedness is valid.
The ownership of the building had been effectively in the name of the
lessee-mortgagor (Asiancars), though with the provision that said ownership be
transferred to the Jaymes upon termination of the lease or the voluntary
surrender of the premises. The lease was constituted on January 8, 1973 and
was to expire 20 years thereafter, or on January 8, 1993. The alienation via
dacion en pago was made by Asiancars to MBTC on December 18, 1980,
during the subsistence of the lease. At this point, the mortgagor, Asiancars,
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 444
could validly exercise rights of ownership, including the right to alienate it, as
it did to MBTC.
Assailed decision affirmed.
Caltex v IAC
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 445
FACTS: On January 12, 1975, Asia Pacific entered into an agreement with
Caltex whereby petitioner agreed to supply private respondent‘s aviation fuel
for 2 years. As of June 30, 1980, asia Pacific had an outstanding obligation n
the total amount of P 4,072,682.13. Caltex executed a Ded of Assignment
wherein it assigned to petitioner its receivables from the National treasury of
the Philippines. Pursuant to the Deed of assignment, National Treasury
warrant the amount of P5,475,294 representing the refund. Caltex refused to
return the excess amount of P510,550.63 because it represented the interest
and service charges and the rate of 18% per annum on the unpaid and overdue
account of respondent.
The Regional Trial Court dismissed the case. The Intermediate Appellate
Court reversed the decision and ordered petitioner to return the amount of
P510,550.63 to private respondent.
ISSUE: Whether or not the Deed of Assignment entered into by the parties
constituted dacion en pago, such that the obligation is totally extinguished,
hence, no interest and service charges could anymore be imposed.
HELD: No. The Deed of Assignment entered into by the parties does not
constitute dacion en pago
The Deed of Assignment executed by the parties is not a dation in
payment in payment and did not totally extinguish respondent‘s obligation. It
is clear that in this case, dation in payment does not necessarily mean total
extinguishment of the obligation. The obligation is totally extinguished only
when the parties, by agreement, express or implied, or by their silence,
consider the thing a equivalent to the obligation.
Decision of Intermediate Appellate Court set aside.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 446
Lo v. Court of Appeals
ANTONIO LO, Petitioner, versus THE HON. COURT OF APPEALS AND
NATIONAL ONIONS GROWERS COOPERATIVE MARKETING ASSOCIATION,
INC., Respondents.
(G.R. No. 141434, September 23, 2003, 3rd Division)
CORONA, J:
FACTS: At the core of the present controversy are two parcels of land
measuring a total of 2,147 square meters, with an office building constructed
thereon. Petitioner acquired the subject parcels of land in an auction sale on
November 9, 1995 for P20,170,000 from the Land Bank of the Philippines
(Land Bank). Private respondent National Onion Growers Cooperative
Marketing Association, Inc., an agricultural cooperative, was the occupant of
the disputed parcels of land under a subsisting contract of lease with Land
Bank. The lease was valid until December 31, 1995. Upon the expiration of the
lease contract, petitioner demanded that private respondent vacate the leased
premises and surrender its possession to him. Private respondent refused on
the ground that it was, at the time, contesting petitioner‘s acquisition of the
parcels of land in question in an action for annulment of sale, redemption and
damages.
Petitioner filed an action for ejectment before the MTC. He asked, inter
alia, for the imposition of the contractually stipulated penalty of P5,000 per day
of delay in surrendering the possession of the property to him. On September
3, 1996, the trial court decided the case in favor of petitioner. On appeal to the
RTC, the MTC decision was affirmed in toto. The CA rendered its assailed
decision affirming the decision of the trial court, with the modification that the
penalty imposed upon private respondent for the delay in turning over the
leased property to petitioner was reduced from P 5,000 to P 1000 per day.
ISSUE: Whether or not the Court of Appeals erred in reducing the penalty
awarded by the trial court, the same having been stipulated by the parties.
HELD: No. the Court of Appeals did not err in reducing the penalty awarded by
the trial court, the same having been stipulated by the parties.
Generally, courts are not at liberty to ignore the freedom of the parties to
agree on such terms and conditions as they see fit as long as they are not
contrary to law, morals, good customs, public order or public policy.
Nevertheless, courts may equitably reduce a stipulated penalty in the contract
if it is iniquitous or unconscionable, or if the principal obligation has been
partly or irregularly complied with. This power of the courts is explicitly
sanctioned by Article 1229 of the Civil Code which provides:
Article 1229. The judge shall equitably reduce the penalty when the
principal obligation has been partly or irregularly complied with by the debtor.
Even if there has been no performance, the penalty may also be reduced by the
courts if it is iniquitous or unconscionable.
The question of whether a penalty is reasonable or iniquitous is
addressed to the sound discretion of the court and depends on several factors,
including, but not limited to, the following: the type, extent and purpose of the
penalty, the nature of the obligation, the mode of breach and its consequences,
the supervening realities, the standing and relationship of the parties.
In this case, the stipulated penalty was reduced by the appellate court
for being unconscionable and iniquitous. Petition denied; CA decision affirmed.
Petition dismissed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 447
ISSUE: Whether or not the detention of the alleged chicks valid and recognized
under the law.
HELD: No. The detention of the alleged chicks is not valid and not recognized
under the law.
ASJ Corporation must give due to the Evangelista Spouses in paying the
installment, thus, it must not delay the delivery of the chicks. Thus, under the
law, they are obliged to pay damages with each other for the breach of the
obligation.
Therefore, in a contract of service, each party must be in good faith in
the performance of their obligation, thus when the petitioner had detained the
hatched eggs of the respondents spouses, it is an implication of putting
prejudice to the business of the spouses due to the delay of paying installment
to the petitioner.
Petition partly granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 448
Paculdo v. Regalado
NEREO J. PACULDO, Petitioner, versus BONIFACIO C. REGALADO,
Respondent.
(G.R. No. 123855, November 20, 2000, 1st Division)
PARDO, J:
ISSUE: Whether or not petitioner was truly in arrears in the payment of rentals
on the subject property at the time of the filing of the complaint of ejectment.
HELD: No. The petitioner was not in arrears in the payment of rentals on the
subject property at the time of the filing of the complaint for ejectment.
The lease over the Fairview wet market property is the most onerous
among all the obligations of petitioner to respondent. It was established that
the wet market is a going concern and that petitioner has invested about
P35,000,000 in form of improvements, over the property. Hence, petitioner
would stand to lose more if the lease would not proceed. CA decision was based
on a misapprehension of the facts and the law on the application of payment.
Hence, the ejectment case must be dismissed. CA decision is set aside.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 449
FACTS: China Banking Corporation extended several loans to Native West and
so Ching, Native West‘s President. Native west executed a promissory note in
favor of China Bank. So Ching, with the marital consent of his wife additionally
executed two real estate mortgages over their properties. The promissory notes
matured and despite due demands, neither private respondents paid. China
Bank filed petition for the extrajudicial foreclosure of the mortgaged properties.
Upon receipt of the foreclosure, private respondents filed a complaint before
RTC for accounting with damages and with temporary restraining order.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 450
FACTS: In May 1982, petitioner Mobil Oil entered into a supply agreement with
private respondent Continental Cement, under which the former would supply
the latter‘s industrial fuel oil or bunker fuel oil requirements. MOP extended to
CCC an unsecured credit line of P2,000,000 against which CCC‘s purchases of
oil could initially be charged. MOP made a total of 67 deliveries of BFO, each
delivery consisting of 20,000 liters to CCC‘s factory. CCC discovered that, the
supposed BFO was in fact, pure water. A joint undertaking was initiated.
On August 23, 1983, Caltex informed CCC that it would be the new
owner of Mop effective September 1, 1983 and that Caltex would assume all
rights and obligations of MOP under all its existing contracts. CA upheld the
findings of the trial court that the water-contaminated BFO delivered by MOP
caused damages to CCC‘s rotary kin.
ISSUE: Whether or not petitioners can be held liable for the contaminated BO
delivered on the ground that CFS, as carrier-hauler, was an agent of Mobil.
HELD: The Court of Appeals correctly ruled that MOP could be held liable for
the acts of CFS. The hauling contract executed by and between MOP and CFS
laid out the responsibilities of CFS. The presumption LAID DOWN IN Article
1523 of the Civil Code is not applicable.
Decision of the Court of Appeals in affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 451
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 452
Benos v. Lawilao
SPS. JAIME BENOS and MARINA BENOS, Petitioners, versus SPS.
GREGORIO LAWILAO and JANICE GAIL LAWILAO, Respondents.
(G.R. No. 172259, December 5, 2006, 1st Division)
YNARES-SANTIAGO, J:
ISSUE: Whether or not the contract of Pacto de Retro Sale be rescinded by the
petitioner.
HELD: In the instant case, records show that Lawilao filed the petition for
consignation against the bank in Civil Case without notifying the Benos.
Hence, Lawilao failed to prove their offer to pay the balance, even before the
filing of the consignation case. Lawilao never notified the Benos. Thus, as far as
the Benos are concerned, there was no full and complete payment of the
contract price which gives them the right to rescind.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 453
ISSUE: Whether or not there was a perfected and enforceable contracts of sale
on October 11,1983 which modified the earlier contracts to sell which had not
been validly rescinded.
HELD: It is apropos to stress that the agreements are contracts to sell and not
contract of sale, hence, rescission either by judicial action or notarial act is not
applicable. Private respondent‘s act of cancelling the contract to sell was not
done arbitrarily. Because the contracts to sell had long been cancelled when
private respondent fled the accion publiciana de possession, there was no more
installment buyer and seller relationship to speak of. It had been reduced to a
mere case of an owner claiming possession of its property that had long been
illegally withheld from it by another.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 454
FACTS: Petitioner Eternal Gardens and private NPUM entered into a Land
Development Agreement. Under the agreement, EG was to develop a parcel of
land owned by NPUM into a memorial park. The P1.5 million initial installment
mentioned in the Deed of Absolute Sale, shall be deducted out of the proceeds
from the First Party‘s 40% at the end of the 5th year. Subsequent payment
should be changed against what is due to the first Party under the Land
Development agreement. Later, 2 claimants of the land surfaced but were
dismissed.
The case was remanded to the Court of Appeals (CA) for proper
determination and dispositions. CA required EG to produce documents
necessary for accounting but failed to do so, hence, the right is waived. CA
directed EG to pay private respondent the amounts of P167,065,195.00 as
principal and P167,235,451.00 interest.
ISSUE: Whether or not the petitioner is liable for interest despite the land
dispute
HELD: Even during the pendency of the land dispute cases, EG was required to
deposit the accruing interests with a reputable commercial bank ― to avoid
possible wastage of funds‖ when the case was given due course. Yet, EG
hedged in depository the amounts due and made obvious attempts to stay
payment by filing sundry motions and pleadings. CA correctly held EG liable
for interest of 12%. It is tantamount to a forbearance of money.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 455
Rayos v. Reyes
SPOUSES TEOFILO and SIMEONA RAYOS, and GEORGE RAYOS,
Petitioners, versus DONATO REYES, SATURNINO REYES, TOMASA R.
BUSTAMANTE and TORIBIA R. CAMELO, Respondents.
(G.R. No. 150913, February 20, 2003, 2nd Division)
BELLOSILLO, J:
FACTS: Three parcels were formerly owned by the spouses Francisco and
Asuncion Tazal who on 1 September 1957 sold them for P724.00 to
respondents‘ predecessor-in-interest, one Mamerto Reyes, with right to
repurchase within two (2) years from date thereof by paying to the vendee the
purchase price and all expenses incident to their reconveyance. After the sale
the vendee a retro took physical possession of the properties and paid the taxes
thereon.
The otherwise inconsequential sale became controversial when two (2) of
the three (3) parcels were again sold on 24 December 1958 by Francisco Tazal
for P420.00 in favor of petitioners‘ predecessor-in-interest Blas Rayos without
first availing of his right to repurchase the properties.
ISSUE: Whether or not there was a valid consignation and tender of payment
made in the instant case.
HELD: In order that consignation may be effective the debtor must show that
(a) there was a debt due; (b) the consignation of the obligation had been made
because the creditor to whom a valid tender of payment was made refused to
accept it; (c) previous notice of the consignation had been given to the person
interested in the performance of the obligation; (d) the amount due was placed
at the disposal of the court; and, (e) after the consignation had been made the
person interested was notified thereof.
In the instant case, petitioners failed, first, to offer a valid and
unconditional tender of payment; second, to notify respondents of the intention
to deposit the amount with the court; and third, to show the acceptance by the
creditor of the amount deposited as full settlement of the obligation, or in the
alternative, a declaration by the court of the validity of the consignation. The
failure of petitioners to comply with any of these requirements rendered the
consignation ineffective.
Consignation and tender of payment must not be encumbered by
conditions if they are to produce the intended result of fulfilling the obligation.
In the instant case, the tender of payment of P724.00 was conditional and void
as it was predicated upon the argument of Francisco Tazal that he was paying
a debt which he could do at any time allegedly because the 1 September 1957
transaction was a contract of equitable mortgage and not a deed of sale with
right to repurchase
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 456
FACTS: On April 25, 1991, private respondent, Vicente Alegre, invested with
CIFC, P500,000.00 pesos, in cash. Petitioner issued a promissory note to
mature on May 27, 1991. The note for P516,238.67 covered private
respondent's placement plus interest at twenty and a half percent for thirty-two
days. On May 27, 1991, CIFC issued BPI Check No. 513397 P514,390.94 in
favor of the private respondent as proceeds of his matured investment plus
interest. The CHECK was drawn from petitioner's current account number
0011-0803-59, maintained with BPI, main branch at Makati City. On June 17,
1991, private respondent's wife deposited the CHECK with RCBC, in Puerto
Princesa, Palawan. BPI dishonored the CHECK with the annotation, that the
"Check (is) Subject of an Investigation." BPI took custody of the CHECK
pending an investigation of several counterfeit checks drawn against CIFC's
aforestated checking account. BPI used the check to trace the perpetrators of
the forgery. Immediately, private respondent notified CIFC of the dishonored
CHECK and demanded, on several occasions, that he be paid in cash. CIFC
refused the request, and instead instructed private respondent to wait for its
ongoing bank reconciliation with BPI.
ISSUE: Whether or not there was valid tender of payment in the instant case.
HELD: A check is not a legal tender, and therefore cannot constitute valid
tender of payment. "Since a negotiable instrument is only a substitute for
money and not money, the delivery of such an instrument does not, by itself,
operate as payment. A check, whether a manager's check or ordinary check, is
not legal tender, and an offer of a check in payment of a debt is not a valid
tender of payment and may be refused receipt by the obligee or creditor. Mere
delivery of checks does not discharge the obligation under a judgment. The
obligation is not extinguished and remains suspended until the payment by
commercial document is actually realized
The delivery of promissory notes payable to order, or bills of exchange or
other mercantile documents shall produce the effect of payment only when they
have been cashed, or when through the fault of the creditor they have been
impaired.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 457
ISSUE: Whether or not the Court can supplant its own reading of an
ambiguous contract for the actual intention of the contracting parties as
testified to in open court and under oath.
HELD: Art. 1370. If the terms of a contract are clear and leave no doubt upon
the intention of the contracting parties, the literal meaning of its stipulation
shall control.
When the words of a contract are plain and readily understood, there is
no room for construction. As the agreement of the parties are reduced to
writing, such agreement is considered as containing all its terms and there can
be, between the parties and their successors-in-interest, no evidence of the
terms of the written agreement other than the contents of the writing.
In the case under consideration, the terms of the "Deed of Sale with
Assumption of Mortgage Debt" are clear and leave no doubt as to what were
sold thereunder.
The contract under scrutiny is so explicit and unambiguous that it does
not justify any attempt to read into it any supposed intention of the parties, as
the said contract is to be understood literally, just as they appear on its face.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 458
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 459
FACTS: On March 4, 1952, Ortigas sold Lot 5 and 6, Block 31 of the Highway
Hills Subdivision at Mandaluyong to Augusto Padilla y Angeles and Natividad
Angeles. The latter transferred their rights in favour of Emma Chavez, upon
completion of payment a deed was executed with stipulations, one of which is
that the use of the lots are to be exclusive for residential purposes only. This
was annotated in the Transfer Certificate of Titles No. 101509 and 101511.
Feati then acquired Lot 5 directly from Emma Chavez and Lot 6 from Republic
Flour Mills.
On May 5, 1963, Feati started construction of a building on both lots to
be devoted for banking purposes but could also be for residential use. Ortigas
sent a written demand to stop construction but Feati continued contending
that the building was being constructed according to the zoning regulations as
stated in Municipal Resolution 27 declaring the area along the West part of
EDSA to be a commercial and industrial zone. Civil case No. 7706 was made
and decided in favour of Feati.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 460
FACTS: Food Fest Land Inc. (Food Fest) entered into a September 14, 1999
Contract of Lease1 with Daniel T. So (So) over a commercial space in San
Antonio Village, Makati City for a period of three years (1999-2002) on which
Food Fest intended to operate a Kentucky Fried Chicken carry out branch.
Before forging the lease contract, the parties entered into a preliminary
agreement dated July 1, 1999, the pertinent portion of which states that the
lease shall not become binding upon us unless and until the government
agencies concerned shall authorize, permit or license us to open and maintain
our business at the proposed Lease Premises.
While Food Fest was able to secure the necessary licenses and permits for the
year 1999, it failed to commence business operations. For the year 2000, Food
Fest‘s application for renewal of barangay business clearance was "held in
abeyance until further study of [its] kitchen facilities."
As the barangay business clearance is a prerequisite to the processing of
other permits, licenses and authority by the city government, Food Fest was
unable to operate. Fearing further business losses, Food Fest, by its claim,
communicated its intent to terminate the lease contract to So who, however,
did not accede and instead offered to help Food Fest secure authorization from
the barangay.
On April 26, 2001, So filed a complaint for ejectment and damages
against Food Fest before the Metropolitan Trial Court (MeTC) of Makati City.
The MeTC, by Decision of July 4, 2005,7 rendered judgment in favor of So.The
Regional Trial Court (RTC), by Decision of November 30, 2006,9 reversed the
MeTC Decision.
Court of Appeals however, declared that Food Fest‘s obligation to pay
rent was not extinguished upon its failure to secure permits to operate.
ISSUE: Whether or not the principle of rebus sic stantibus is applicable to the
instant case.
HELD: No. The principle of rebus sic stantibus is not applicable to the instant
case.
As for Food Fest‘s invocation of the principle of rebus sic stantibus as
enunciated in Article 1267 of the Civil Code to render the lease contract
functus officio, and consequently release it from responsibility to pay rentals,
the Court is not persuaded.
This article, which enunciates the doctrine of unforeseen events, is not,
however, an absolute application of the principle of rebus sic stantibus, which
would endanger the security of contractual relations. The parties to the
contract must be presumed to have assumed the risks of unfavorable
developments. It is, therefore, only in absolutely exceptional changes of
circumstances that equity demands assistance for the debtor.19
Food Fest was able to secure the permits, licenses and authority to
operate when the lease contract was executed. Its failure to renew these
permits, licenses and authority for the succeeding year, does not, however,
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 461
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 462
ISSUE: Whether or not the donation made is a mortis causa or an inter vivos
donation.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 463
ISSUE: Whether or not petitioner can avail of the benefit of Article 1267 of the
New Civil Code.
HELD: No. Petitioner cannot avail of the benefit of Article 1267 of the New Civil
Code.
The petitioner cannot take refuge of the said article. Article 1267 of the
New Civil Code provides that when the service has become so difficult as to
manifestly beyond the contemplation of the parties, the obligor may also be
released therefrom, in whole or in part. This article, which enunciates the
doctrine of unforeseen events, is not, however an absolute application of the
principle of rebus sic stantibus, which would endanger the security of
contractual relations. The principle of rebus sic stantibus neither fits in with
the facts of the case. Under this theory, the parties stipulate in the light of
certain prevailing conditions, and once these conditions cease to exist, the
contract also ceases to exist.
In this case, petitioner averred that three (3) abrupt change in the
political climate of the country after the EDSA Revolution and its poor financial
condition rendered the performance of the lease contract impractical and
inimical to the corporate survival of the petitioner. However, as held in Central
Bank v. CA, mere pecuniary inability to fulfill an engagement does not
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 464
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 465
ISUUE: Whether or not respondent court erred in making a contract for the
parties by invoking Article 1267 of the New Civil Code.
HELD: Article 1267 speaks of "service" which has become so difficult. Taking
into consideration the rationale behind this provision, 9 the term "service"
should be understood as referring to the "performance" of the obligation. In the
present case, the obligation of private respondent consists in allowing
petitioners to use its posts in Naga City, which is the service contemplated in
said article.
Furthermore, a bare reading of this article reveals that it is not a
requirement thereunder that the contract be for future service with future
unusual change. According to Senator Arturo M. Tolentino, 10 Article 1267
states in our law the doctrine of unforseen events. This is said to be based on
the discredited theory of rebus sic stantibus in public international law; under
this theory, the parties stipulate in the light of certain prevailing conditions,
and once these conditions cease to exist the contract also ceases to exist.
Considering practical needs and the demands of equity and good faith, the
disappearance of the basis of a contract gives rise to a right to relief in favor of
the party prejudiced.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 466
Reyna v. COA
RUBEN REYNA and LLOYD SORIA, Petitioners, versus COMMISSION ON
AUDIT, Respondent.
(G.R. No. 167219, February 8, 2011, En Banc)
PERALTA, J:
FACTS: The Land Bank of the Philippines (Land Bank) was engaged in a cattle-
financing program wherein loans were granted to various cooperatives.
Pursuant thereto, Land Bank's Ipil, Zamboanga del Sur Branch (Ipil Branch)
went into a massive information campaign offering the program to
cooperatives.Cooperatives who wish to avail of a loan under the program must
fill up a Credit Facility Proposal (CFP) which will be reviewed by the Ipil
Branch. The Ipil Branch approved the applications of four cooperatives.One of
the conditions stipulated in the CFP is that prior to the release of the loan, a
Memorandum of Agreement (MOA) between the supplier of the cattle, Remad
Livestock Corporation (REMAD), and the cooperative, shall have been signed.
As alleged by petitioners, the terms of the CFP allowed for pre-payments or
advancement of the payments prior to the delivery of the cattle by the supplier
REMAD but such was not stipulated in the contracts.
Three checks were issued by the Ipil Branch to REMAD to serve as
advanced payment for the cattle. REMAD, however, failed to supply the cattle
on the dates agreed upon.
In post audit, the Land Bank Auditor disallowed the amount of
P3,115,000.00 under CSB No. 95-005 dated December 27, 1996 and Notices of
Disallowance Nos. 96-014 to 96-019 in view of the non-delivery of the cattle.
Also made as the basis of the disallowance was the fact that advanced payment
was made in violation of bank policies and COA rules and regulations.
Petitioners were made liable for the amount
HELD: The Court rules that writing-off a loan does not equate to a condonation
or release of a debt by the creditor.
As an accounting strategy, the use of write-off is a task that can help a
company maintain a more accurate inventory of the worth of its current assets.
In general banking practice, the write-off method is used when an account is
determined to be uncollectible and an uncollectible expense is recorded in the
books of account.
If in the future, the debt appears to be collectible, as when the debtor
becomes solvent, then the books will be adjusted to reflect the amount to be
collected as an asset. In turn, income will be credited by the same amount of
increase in the accounts receivable.
Write-off is not one of the legal grounds for extinguishing an obligation under
the Civil Code. It is not a compromise of liability. Neither is it a condonation,
since in condonation gratuity on the part of the obligee and acceptance by the
obligor are required. In making the write-off, only the creditor takes action by
removing the uncollectible account from its books even without the approval or
participation of the debtor.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 467
FACTS: Sometime in 1979, petitioner applied for and was granted several
financial accommodations amounting to P1,300,000.00 by respondent
Associated Bank. The loans were evidence and secured by four (4) promissory
notes, a real estate mortgage covering three parcels of land and a chattel
mortgage over petitioner's stock and inventories.
Unable to settle its obligation in full, petitioner requested for, and was granted
by respondent bank, a restructuring of the remaining indebtedness which then
amounted to P1,057,500.00, as all the previous payments made were applied
to penalties and interests.
The mortgaged parcels of land were substituted by another mortgage
covering two other parcels of land and a chattel mortgage on petitioner's stock
inventory. The released parcels of land were then sold and the proceeds
amounting to P1,386,614.20, according to petitioner, were turned over to the
bank and applied to Trans-Pacific's restructured loan. Subsequently,
respondent bank returned the duplicate original copies of the three promissory
notes to Trans-Pacific with the word "PAID" stamped thereon. Despite the
return of the notes, or on December 12, 1985, Associated Bank demanded from
Trans-Pacific payment of the amount of P492,100.00 representing accrued
interest on PN No. TL-9077-82. According to the bank, the promissory notes
were erroneously released.
ISSUE: Whether or not petitioner has indeed paid in full its obligation to
respondent bank.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 468
Dalupan v. Harden
FRANCISCO DALUPAN, Plaintiff-appellant, versus FRED M. HARDEN,
Defendant-appellant.
(G.R. No. L-3975, November 27, 1951, En Banc)
BAUTISTA ANGELO, J:
FACTS: The case is an appeal taken from an order of the First Instance of
Manila dated May 19, 1950, setting aside the writs of execution and
garnishment issued to the sheriff of Manila commanding him to levy on two (2)
checks, one for P9,028.50, and another for P24,546.00, payable to Fred M.
Harden which were then in possession of the receiver appointed in case
involving the liquidation of the conjugal partnership of the spouses Fred M.
Harden and Esperanza P. de Harden.
On August 26, 1948, plaintiff filed an action against the defendant for
the collection of P113,837.17, with interest thereon from the filing of the
complaint, which represents 50 per cent of the reduction plaintiff was able to
secure from the Collector of Internal Revenue in the amount of unpaid taxes
claimed to be due from the defendant. Defendant acknowledged this claim and
prayed that judgment be rendered accordingly. In the meantime, the receiver in
the liquidation case No. R-59634 and the wife of the defendant, Esperanza P.
de Harden, filed an answer in intervention claiming that the amount sought by
the plaintiff was exorbitant and prayed that it be reduced to 10 per cent of the
rebate. By reason of the acquiescence of the defendant to the claim on one
hand, and the opposition of the receiver and of the wife on the other, an
amicable settlement was concluded by the plaintiff and the intervenor whereby
it was agreed that the sum of P22,767.43 be paid to the plaintiff from the funds
under the control of the receiver "and the balance of P91,069.74 shall be
charged exclusively against the defendant Fred M. Harden from whatever share
he may still have in the conjugal partnership between him and Esperanza P. de
Harden.
ISSUE: Whether or not the proffer made by the plaintiff to the defendant is
binding.
HELD: YES, the proffer made by the plaintiff to the defendant is binding.
Examining the terms the court finds that the stipulation limits the right
of the plaintiff to ask for the execution of the judgment to whatever share Fred
M. Harden may still have in the conjugal partnership between him and his wife
after the final liquidation and partition thereof. The execution of the judgment
is premised upon a condition precedent, which is the final liquidation and
partition of the conjugal partnership. Note that the condition does not refer to
the liquidation of a particular property of the partnership. It refers to the over-
all and final liquidation of the partnership. Such being the stipulation of the
parties which was sanctioned and embodied by the Court in its decision, it is
clear that the writ of execution asked for by the plaintiff on the two checks is
premature.
Order affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 469
FACTS: These proceedings were brought to recover from the defendant the
sum of P2,000, amount of the fees, which, according to the complaint, are
owing for professional medical services rendered by the plaintiff to a daughter
of the defendant from March 10 to July 15, 1913, which fees the defendant
refused to pay, notwithstanding the demands therefor made upon him by the
plaintiff.
The defendant denied the allegations of the complaint, and furthermore
alleged that the obligation which the plaintiff endeavored to compel him to
fulfill was already extinguished.
HELD: It is true that number 8 of section 334 of the Code of Civil Procedure
provides as a legal presumption "that an obligation delivered up to the debtor
has been paid." Article 1188 of the Civil Code also provides that the voluntary
surrender by a creditor to his debtor, of a private instrument proving a credit,
implies the renunciation of the right of action against the debtor; and article
1189 prescribes that whenever the private instrument which evidences the
debt is in the possession of the debtor, it will be presumed that the creditor
delivered it of his own free will, unless the contrary is proven.
But the legal presumption established by the foregoing provisions of law
cannot stand if sufficient proof is adduced against it. In the case at bar the trial
court correctly held that there was sufficient evidence to the contrary, in view
of the preponderance thereof in favor of the plaintiff and of the circumstances
connected with the defendant's possession of said receipt Exhibit 1.
Furthermore, in order that such a presumption may be taken into account, it
is necessary, as stated in the laws cited, that the evidence of the obligation be
delivered up to the debtor and that the delivery of the instrument proving the
credit be made voluntarily by the creditor to the debtor. In the present case, it
cannot be said that these circumstances concurred, inasmuch as when the
plaintiff sent the receipt to the defendant for the purpose of collecting his fee, it
was not his intention that that document should remain in the possession of
the defendant if the latter did not forthwith pay the amount specified therein.
Judgment appealed from affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 470
ISSUE: Whether or not there was confusion of the rights of the creditor and
debtor
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 471
FACTS: Defendant Pelagio Yusingco was the owner of the steamship Yusingco
and, as such, he executed, on November 19, 1927, a power of attorney in favor
of Yu Seguioc to administer, lease, mortgage and sell his properties, including
his vessels or steamship. Yu Seguioc mortgaged to the plaintiff Yek Tong Lin
Fire & Marine Insurance Co., Ltd., with the approval of the Bureau of Customs,
the steamship Yusingco belonging to the defendant. One year and some
months later, the steamship Yusingco needed some repairs which were made
by the Earnshaw Docks & Honolulu Iron Works. The repairs were made upon
the guaranty of the defendant and appellant Vicente Madrigal at a cost of
P8,244.66.
When neither A. Yusingco Hermanos nor Pelagio Yusingco could pay said
sum to the Earnshaw Docks & Honolulu Iron Works, the defendant and
appellant Vicente Madrigal had to make payment thereof with the stipulated
interest thereon, which was at the rate of 9 per cent per annum, on March 9,
1932, because he was bound thereto by reason of the bond filed by him, the
payment then made by him having amounted to P8,777.60. When said
defendant discovered that he was not to be reimbursed for the repairs made on
the steamship Yusingco, he brought an action against his codefendant Pelagio
Yusingco and A. Yusingco Hermanos to compel them to reimburse, thereby
giving rise to civil case No. 41654 of the Court of First Instance of Manila,
entitled "Vicente Madrigal, plaintiff, vs. Pelagio Yusingco and A. Yusingco
Hermanos, defendants" which resulted in a judgment favorable to him and
adverse to the Yusingcos.
HELD: After the steamship Yusingco had been sold by virtue of the judicial writ
issued in civil case No. 41654 for the execution of the judgment rendered in
favor of Vicente Madrigal, the only right left to the plaintiff was to collect its
mortgage credit from the purchaser thereof at public auction, inasmuch as the
rule is that a mortgage directly and immediately subjects the property on which
it is imposed, whoever its possessor may be, to the fulfillment of the obligation
for the security of which it was created (article 1876, Civil code); but it so
happens that it cannot take such steps now because it was the purchaser of
the steamship Yusingco at public auction, and it was so with full knowledge
that it had a mortgage credit on said vessel. Obligations are extinguished by
the merger of the rights of the creditor and debtor (articles 1156 and 1192,
Civil Code).
Appealed judgment reversed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 472
ISSUE: Whether or not set-off or compensation has taken place in the instant
case.
HELD: Compensation or offset under the New Civil Code takes place only when
two persons or entities in their own rights, are creditors and debtors of each
other. (Art. 1278).
A distinction must be made between a debt and a mere claim. A debt is
an amount actually ascertained. It is a claim which has been formally passed
upon by the courts or quasi-judicial bodies to which it can in law be submitted
and has been declared to be a debt. A claim, on the other hand, is a debt in
embryo. It is mere evidence of a debt and must pass thru the process
prescribed by law before it develops into what is properly called a debt. Absent,
however, any such categorical admission by an obligor or final adjudication, no
compensation or off-set can take place. Unless admitted by a debtor himself,
the conclusion that he is in truth indebted to another cannot be definitely and
finally pronounced, no matter how convinced he may be from the examination
of the pertinent records of the validity of that conclusion the indebtedness
must be one that is admitted by the alleged debtor or pronounced by final
judgment of a competent court or in this case by the Commission.
There can be no doubt that Unisphere is indebted to the Corporation for
its unpaid monthly dues in the amount of P13,142.67. This is admitted.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 473
ISSUE: Whether or not expenses for the storage and preservation of the
purchased fungible goods, namely sulfuric acid, be on seller's account
pursuant to Article 1504 of the Civil Code
HELD: Petitioner tries to exempt itself from paying rental expenses and other
damages by arguing that expenses for the preservation of fungible goods must
be assumed by the seller. Rental expenses of storing sulfuric acid should be at
private respondent's account until ownership is transferred, according to
petitioner. However, the general rule that before delivery, the risk of loss is
borne by the seller who is still the owner, is not applicable in this case because
petitioner had incurred delay in the performance of its obligation. Article 1504
of the Civil Code clearly states: "Unless otherwise agreed, the goods remain at
the seller's risk until the ownership therein is transferred to the buyer, but
when the ownership therein is transferred to the buyer the goods are at the
buyer's risk whether actual delivery has been made or not, except that: (2)
Where actual delivery has been delayed through the fault of either the buyer or
seller the goods are at the risk of the party at fault."
On this score, the Court quoted with approval the findings of the
appellate court, thus: The defendant [herein private respondent] was not
remiss in reminding the plaintiff that it would have to bear the said expenses
for failure to lift the commodity for an unreasonable length of time. But even
assuming that the plaintiff did not consent to be so bound, the provisions of
Civil Code come in to make it liable for the damages sought by the defendant.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 474
Apodaca v. NLRC
ERNESTO M. APODACA, Petitioner, versus NATIONAL LABOR RELATIONS
COMMISSION, JOSE M. MIRASOL and INTRANS PHILS., INC.,
Respondents.
(G.R. No. 80039, April 18, 1989, 1st Division)
GANCAYCO, J:
ISSUE: Whether or not the National Labor Relations Commission (NLRC) has
jurisdiction to resolve a claim for non-payment of stock subscriptions to a
corporation.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 475
ISSUE: Whether or not the petitioners are liable for the remaining balance
HELD: In contractual relations, the law allows the parties leeway and considers
their agreement as the law between them.Contract stipulations that are not
contrary to law, morals, good customs, public order or public policy shall be
binding and should be complied with in good faith. No party is permitted to
change his mind or disavow and go back upon his own acts, or to proceed
contrary thereto, to the prejudice of the other party. In the present case, we
find that both parties failed to comply strictly with their contractual
stipulations on the progress billings and change orders that caused the delays
in the completion of the project.
Under the circumstances, fairness and reason dictate that we simply
order the set-off of the petitioners‘ contractual liabilities totaling P575,922.13
against the repair cost for the defective gutter, pegged at P717,524.00, leaving
the amount of P141,601.87 still due from the respondent. Support in law for
this HELD for partial legal compensation proceeds from Articles 1278, 1279,
1281, and 1283 of the Civil Code. In short, both parties are creditors and
debtors of each other, although in different amounts that are already due and
demandable.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 476
ISSUE: Whether or not the Regional Trial Court correctly ruled that COEC may
validly set-off its claims for undelivered treasury bills against that of IITC‘s
claims.
HELD: Yes. The Regional Trial Court correctly ruled that COEC may validly set-
off its claims for undelivered treasury bills against that of IITC‘s claims.
The Court finds in favor of respondent, COEC, when it pointed out that it
has already unquestionably proven that IITC acted as a principal, and not as a
conduit, in the sale of treasury bills to COEC. Furthermore, it asserts that the
treasury bills in question are generic in nature because the confirmations of
sale and purchase do not mention specific treasury bills with serial numbers.
The securities were sold as indeterminate objects which have a monetary
equivalent, as acknowledged by the parties in the Tripartite Agreement. As
such, because both IITC and COEC are principal creditors of the other over
debts which consist of consumable things or a sum of money, the RTC
correctly ruled that COEC may validly set-off its claims for undelivered
treasury bills against that of IITC‘s claims.
Petition partially granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 477
ISSUE: Whether or not the cost of repairs incurred by the petitioners should be
compensated against the unpaid rentals.
HELD: Petitioners failed to properly discharge their burden to show that the
debts are liquidated and demandable. Consequently, legal compensation is
inapplicable.
The petitioners attempted to prove that they spent for the repair of the
roofing, ceiling and flooring, as well as for waterproofing. However, they failed
to appreciate that, as per their lease contract, only structural repairs are for
the account of the lessor, herein respondent SPI. In which case, they
overlooked the need to establish that aforesaid repairs are structural in nature,
in the context of their earlier agreement. It would have been an altogether
different matter if the lessor was informed of the said structural repairs and he
implicitly or expressly consented and agreed to take responsibility for the said
expenses. Such want of evidence on this respect is fatal to this appeal.
Consequently, their claim remains unliquidated and, legal compensation is
inapplicable.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 478
FACTS: In 1987, the Republic of the Philippines lost around 1.5 Billion Pesos
after it had waived its right to collect on an outstanding indebtedness from
petitioner, by virtue of a so-called ―friendly foreclosure agreement‖ that
ultimately was friendly only to petitioner.
Petitioner United Planters Sugar Milling Co. (UPSUMCO) was engaged in
the business of milling sugar. In 1974, as UPSUMCO commenced operations, it
obtained a set of loans from respondent Philippine National Bank (PNB). The
loans were secured over two parcels of land where the milling plant stood and
chattel mortgages over the machineries and equipment.
On 27 February 1987, through a Deed of Transfer, PNB assigned to the
Government its ―rights, titles and interests‖ over UPSUMCO, among several
other assets.[6] The Deed of Transfer acknowledged that said assignment was
being undertaken ―in compliance with Presidential Proclamation No. 50.‖ The
Government subsequently transferred these ―rights, titles and interests‖ over
UPSUMCO to the respondent Asset and Privatization Trust (APT).
HELD: The right of PNB to set-off payments from UPSUMCO arose out of
conventional compensation rather than legal compensation, even though all of
the requisites for legal compensation were present as between those two
parties. The determinative factor is the mutual agreement between PNB and
UPSUMCO to set-off payments. Even without an express agreement stipulating
compensation, PNB and UPSUMCO would have been entitled to set-off of
payments, as the legal requisites for compensation under Article 1279 were
present.
As soon as PNB assigned its credit to APT, the mutual creditor-debtor
relation between PNB and UPSUMCO ceased to exist. However, PNB and
UPSUMCO had agreed to a conventional compensation, a relationship which
does not require the presence of all the requisites under Article 1279. And PNB
too had assigned all its rights as creditor to APT, including its rights under
conventional compensation. The absence of the mutual creditor-debtor relation
between the new creditor APT and UPSUMCO cannot negate the conventional
compensation. Accordingly, APT, as the assignee of credit of PNB, had the right
to set-off the outstanding obligations of UPSUMCO on the basis of conventional
compensation before the condonation took effect on 3 September 1987.
Motion denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 479
FACTS: It appears that on November 19, 1993, respondent R&R Metal Casting
and Fabricating, Inc. (R&R) obtained a judgment in its favor against Pantranco
North Express, Inc. (PNEI). PNEI was ordered to pay respondent P213,050 plus
interest as actual damages, P50,000 as exemplary damages, 25 percent of the
total amount payable as attorney‘s fees, and the costs of suit. However, the writ
of execution was returned unsatisfied since the sheriff did not find any
property of PNEI recorded at the Registries of Deeds of the different cities of
Metro Manila. Neither did the sheriff receive a reply to the notice of
garnishment he sent to PNB-Escolta.On March 27, 1995, respondent filed with
the trial court a motion for the issuance of subpoenae duces tecum and ad
testificandum requiring petitioner PNB Management and Development Corp.
(PNB MADECOR) to produce and testify on certain documents pertaining to
transactions between petitioner and PNEI from 1981 to 1995.
ISSUE: Whether or not legal compensation have occured in the instant case.
HELD: Legal compensation could not have occurred because of the absence of
one requisite in this case: that both debts must be due and demandable.
Petitioner‘s obligation to PNEI appears to be payable on demand, following the
above observation made by the CA and the assertion made by petitioner.
Petitioner is obligated to pay the amount stated in the promissory note upon
receipt of a notice to pay from PNEI. If petitioner fails to pay after such notice,
the obligation will earn an interest of 18 percent per annum.
Since petitioner‘s obligation to PNEI is payable on demand, and there
being no demand made, it follows that the obligation is not yet due. Therefore,
this obligation may not be subject to compensation for lack of a requisite under
the law. Without compensation having taken place, petitioner remains
obligated to PNEI to the extent stated in the promissory note. This obligation
may undoubtedly be garnished in favor of respondent to satisfy PNEI‘s
judgment debt.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 480
FERNAN, J.:
ISSUE: Whether or not private respondent is liable to the petitioner for the
commission or margin for the direct sale which the former concluded and
consummated with Dole Philippines, Incorporated without coursing the same through
herein petitioner.
HELD: No. Private respondent is not liable to the petitioner for the commission or
margin for the direct sale which the former concluded and consummated with Dole
Philippines, Incorporated without coursing the same through herein petitioner.
It must be remembered that compensation takes place when two persons, in their own
right, are creditors and debtors to each other. Article 1279 of the Civil Code provides
that: "In order that compensation may be proper, it is necessary: [1] that each one of
the obligors be bound principally, and that he be at the same time a principal creditor
of the other; [2] that both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the latter has
been stated; [3] that the two debts be due; [4] that they be liquidated and demandable;
[5] that over neither of them there be any retention or controversy, commenced by
third persons and communicated in due time to the debtor."
When all the requisites mentioned in Art. 1279 of the Civil Code are present,
compensation takes effect by operation of law, even without the consent or knowledge
of the creditors and debtors. 5 Article 1279 requires, among others, that in order that
legal compensation shall take place, "the two debts be due" and "they be liquidated
and demandable." Compensation is not proper where the claim of the person asserting
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 481
the set-off against the other is not clear nor liquidated; compensation cannot extend to
unliquidated, disputed claim existing from breach of contract. Undoubtedly, petitioner
admits the validity of its outstanding accounts with private respondent in the amount
of P22,213.75 as contained in its answer. But whether private respondent is liable to
pay the petitioner a 20% margin or commission on the subject sale to Dole
Philippines, Inc. is vigorously disputed. This circumstance prevents legal
compensation from taking place.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 482
Francia v. IAC
ENGRACIO FRANCIA, Petitioner, versus
INTERMEDIATE APPELLATE COURT and HO FERNANDEZ, Respondents.
(G.R.No. 67649, June 28, 1998, 3rd Division)
FACTS: Engracio Francia is the registered owner of a residential lot and a two-story
house built upon it situated at Barrio San Isidro, now District of Sta. Clara, Pasay
City, Metro Manila. On October 15, 1977, a 125 square meter portion of Francia's
property was expropriated by the Republic of the Philippines for the sum of P4,116.00
representing the estimated amount equivalent to the assessed value of the aforesaid
portion.Since 1963 up to 1977 inclusive, Francia failed to pay his real estate taxes.
Thus, on December 5, 1977, his property was sold at public auction by the City
Treasurer of Pasay City pursuant to Section 73 of Presidential Decree No. 464 known
as the Real Property Tax Code in order to satisfy a tax delinquency of P2,400.00. Ho
Fernandez was the highest bidder for the property. Francia was not present during the
auction sale since he was in Iligan City at that time helping his uncle ship bananas.
On March 3, 1979, Francia received a notice of hearing of LRC Case No. 1593-P "In re:
Petition for Entry of New Certificate of Title" filed by Ho Fernandez, seeking the
cancellation of TCT No. 4739 (37795) and the issuance in his name of a new certificate
of title. On March 20, 1979, Francia filed a complaint to annul the auction sale. He
later amended his complaint on January 24, 1980.
ISSUE: Whether or not Francia‘s tax delinquency of P2,400.00 has been extinguished
by legal compensation.
HELD: No. Francia‘s tax delinquency of P2,400.00 has not been extinguished by legal
compensation.
"(1) that each one of the obligors be bound principally and that he be at the same time
a principal creditor of the other;
We have consistently ruled that there can be no off-setting of taxes against the claims
that the taxpayer may have against the government. A person cannot refuse to pay a
tax on the ground that the government owes him an amount equal to or greater than
the tax being collected. The collection of a tax cannot await the results of a lawsuit
against the government.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 483
Neither are they a proper subject of recoupment since they do not arise out of the
contract or transaction sued on. "The general rule based on grounds of public policy is
well-settled that no set-off admissible against demands for taxes levied for general or
local governmental purposes. The reason on which the general rule is based, is that
taxes are not in the nature of contracts between the party and party but grow out of
duty to, and are the positive acts of the government to the making and enforcing of
which, the personal consent of individual taxpayers is not required.
Petition is dismissed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 484
Trinidad v. Acapulco
AUSTRIA-MARTINEZ, J.:
FACTS:On May 6, 1991, respondent Estrella Acapulco filed a Complaint before the
RTC seeking the nullification of a sale she made in favor of petitioner Hermenegildo M.
Trinidad. She alleged: Sometime in February 1991, a certain Primitivo Cañete
requested her to sell a Mercedes Benz for P580,000.00. Cañete also said that if
respondent herself will buy the car, Cañete was willing to sell it for P500,000.00.
Petitioner borrowed the car from respondent for two days but instead of returning the
car as promised, petitioner told respondent to buy the car from Cañete for
P500,000.00 and that petitioner would pay respondent after petitioner returns from
Davao. Following petitioner‘s instructions, respondent requested Cañete to execute a
deed of sale covering the car in respondent‘s favor for P500,000.00 for which
respondent issued three checks in favor of Cañete. Respondent thereafter executed a
deed of sale in favor of petitioner even though petitioner did not pay her any
consideration for the sale. When petitioner returned from Davao, he refused to pay
respondent the amount of P500,000.00 saying that said amount would just be
deducted from whatever outstanding obligation respondent had with petitioner. Due
to petitioner‘s failure to pay respondent, the checks that respondent issued in favor of
Cañete bounced, thus criminal charges were filed against her. Respondent then
prayed that the deed of sale between her and petitioner be declared null and void; that
the car be returned to her; and that petitioner be ordered to pay damages.
ISSUE:Whether or not petitioner‘s claim for legal compensation was already too late
HELD: No. Petitioner‘s claim for legal compensation was not too late.
The court ruled in favor of the petitioner. Compensation takes effect by operation of
law even without the consent or knowledge of the parties concerned when all the
requisites mentioned in Article 1279 of the Civil Code are present. This is in
consonance with Article 1290 of the Civil Code which provides that: Article 1290.
When all the requisites mentioned in article 1279 are present, compensation takes
effect by operation of law, and extinguishes both debts to the concurrent amount, even
though the creditors and debtors are not aware of the compensation. Since it takes
place ipso jure, when used as a defense, it retroacts to the date when all its requisites
are fulfilled.
Petitioner‘s stance is that legal compensation has taken place and operates
even against the will of the parties because: (a) respondent and petitioner were
personally both creditor and debtor of each other; (b) the monetary obligation of
respondent was P566,000.00 and that of the petitioner was P500,000.00 showing that
both indebtedness were monetary obligations the amount of which were also both
known and liquidated; (c) both monetary obligations had become due and
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 485
Petition is granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 486
On maturity of the two promissory notes, the borrowers failed to pay the
indebtedness.
On June 11, 1986, Servando and Leticia secured from Veronica still
another loan in the amount of P300,000.00, maturing in one month, secured by
a real estate mortgage over a property belonging to Leticia Makalintal
Yaptinchay, who issued a special power of attorney in favor of Leticia Medel,
authorizing her to execute the mortgage. Servando and Leticia executed a
promissory note in favor of Veronica to pay the sum of P300,000.00, after a
month, or on July 11, 1986. However, only the sum of P275,000.00, was given
to them out of the proceeds of the loan.
Like the previous loans, Servando and Medel failed to pay the third
loan on maturity.
ISSUE: Whether or not there was a novation of the August 23, 1986 promissory
note when respondent Veronica Gonzales issued the February 5, 1992 receipt.
HELD: No. There was no novation of the August 23, 1986 promissory note
when respondent Veronica Gonzales issued the February 5, 1992 receipt.
To be clear, novation is not presumed. This means that the parties to a contract
should expressly agree to abrogate the old contract in favor of a new one. In the
absence of the express agreement, the old and the new obligations must be
incompatible on every point. The issuance of the receipt created no new obligation.
Instead, the respondents only thereby recognized the original obligation by stating in
the receipt that the P400,000.00 was ―partial payment of loan‖ and by referring to ―the
promissory note subject of the case in imposing the interest.‖ The loan mentioned in
the receipt was still the same loan involving the P500,000.00 extended to
Servando. Advertence to the interest stipulated in the promissory note indicated that
the contract still subsisted, not replaced and extinguished, as the petitioners claim.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 488
Hernandez-Nievera v. Hernandez
CAROLINA HERNANDEZ-NIEVERA, DEMETRIO P. HERNANDEZ, JR., and
MARGARITA H. MALVAR, Petitioners, versus WILFREDO HERNANDEZ, HOME
INSURANCE AND GUARANTY CORPORATION, PROJECT MOVERS REALTY AND
DEVELOPMENT CORPORATION, MARIO P. VILLAMOR and LAND BANK OF THE
PHILIPPINES, Respondents.
(GR No. 171165, February 14, 2011, 2nd Division)
PERALTA, J.:
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 489
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 490
Tomimbang v. Tomimbang
MARIA SOLEDAD TOMIMBANG, Petitioner, versus ATTY. JOSE
TOMIMBANG, Respondent.
(GR No. 165116, August 4, 2009, 3rd Division)
PERALTA, J.;
The loan is already due and demandable due to the subsequent agreement
entered in to by the parties.
Article 1291 of the Civil Code provides, thus:
The petitioner admitted that she started to comply with the demand of the
respondent to pay on a monthly basis. Her partial performance of her obligation is
unmistakable proof that indeed the original agreement between her and respondent
had been novated by the deletion of the condition that payments shall be made only
after completion of renovations. Hence, by her very own admission and partial
performance of her obligation, there can be no other conclusion but that under the
novated agreement, petitioner's obligation is already due and demandable.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 491
FACTS:The First Iligan Savings and Loan Association, Inc. (FISLAI) and
the Davao Savings and Loan Association, Inc. (DSLAI) banks that entered into a
merger, with DSLAI as the surviving corporation. The articles of merger were
not registered with the SEC but when DSLAI changed its corporate name to MSLAI the
amendment was approved by the SEC.Meanwhile, the Board of Directors of FISLAI
passed a resolution, assigning its assets in favor of DSLAI which in turn assumed the
former‘s liabilities.The business of MSLAI, however, failed was ordered its closure and
placed under receivership.
Prior to the closure of MSLAI, Uy filed an action for collection of sum of money
against FISLAI. The RTC issued a summary decision in favor of Uy, directing
defendants therein (which included FISLAI) to pay the former the sum of P136,
801.70. Therafter,sheriff Bantuas levied on six (6) parcels of land owned by FISLAI and
Willkom was the highest bidder. New certificates of title covering the subject
properties were issued in favor of Willkom who sold one of the subject parcels of land
to Go.
MSLAI, represented by PDIC, filed a complaint forAnnulment of Sheriff’s Sale,
Cancellation of Title and Reconveyance of Properties against respondents.
Therespondents averred that MSLAI had no cause of action against them or the right
to recover the subject properties because MSLAI is a separate and distinct entity from
FISLAI as the merger did not take effect.
ISSUE: Whether or not there was novation of the obligation by substituting the person
of the debtor
HELD: No. There was no novation of the obligation by substituting the person of the
debtor.
It is a rule that novation by substitution of debtor must always be made with the
consent of the creditor. Article 1293 of the Civil Code is explicit, thus:
Art. 1293. Novation which consists in substituting a new debtor in the place of
the original one, may be made even without the knowledge or against the will of the
latter, but not without the consent of the creditor. Payment by the new debtor gives
him the rights mentioned in Articles 1236 and 1237.
In this case, there was no showing that Uy, the creditor, gave her consent to the
agreement that DSLAI (now MSLAI) would assume the liabilities of FISLAI. Such
agreement cannot prejudice Uy. Thus, the assets that FISLAI transferred to DSLAI
remained subject to execution to satisfy the judgment claim of Uy against FISLAI. The
subsequent sale of the properties by Uy to Willkom, and of one of the properties by
Willkom to Go, cannot, therefore, be questioned by MSLAI.
The consent of the creditor to a novation by change of debtor is as
indispensable as the creditor‘s consent in conventional subrogation in order that a
novation shall legally take place. Since novation implies a waiver of the right which the
creditor had before the novation, such waiver must be express.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 492
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 493
FACTS:On May 6, 1999, petitioner Aquintey filed before RTC Baguio, a complaint for
sum of money and damages against respondents. Agrifina alleged that Felicidad
secured loans from her on several occasions at monthly interest rates of 6% to 7%.
Despite demands, spouses Tibong failed to pay their outstanding loans of P773,000,00
exclusive of interests. However, spouses Tiong alleged that they had executed deeds of
assignment in favor of Agrifina amounting to P546,459 and that their debtors had
executed promissory notes in favor of Agrifina. Spouses insisted that by virtue of these
documents, Agrifina became the new collector of their debts. Agrifina was able to
collect the total amount of P301,000 from Felicdad‘s debtors. She tried to collect the
balance of Felicidad and when the latter reneged on her promise, Agrifina filed a
complaint in the office of the barangay for the collection of P773,000.00. There was no
settlement. RTC favored Agrifina. Court of Appeals affirmed the decision with
modification ordering defendant to pay the balance of total indebtedness in the
amount of P51,341,00 plus 6% per month.
Novation which consists in substituting a new debtor in the place of the original one
may be made even without the knowledge or against the will of the latter but not
without the consent of the creditor. Substitution of the person of the debtor may be
effected by delegacion, meaning, the debtor offers, and the creditor, accepts a third
person who consents to the substitution and assumes the obligation. Thus, the
consent of those three persons is necessary. In this kind of novation, it is not enough
to extend the juridical relation to a third person; it is necessary that the old debtor be
released from the obligation, and the third person or new debtor take his place in the
relation. Without such release, there is no novation; the third person who has
assumed the obligation of the debtor merely becomes a co-debtor or a surety. If there
is no agreement as to solidarity, the first and the new debtor are considered obligated
jointly.
In the case at bar, the court found that respondents‘ obligation to pay the
balance of their account with petitioner was extinguished, pro tanto, by the deeds of
assignment of credit executed by respondent Felicidad in favor of petitioner. As
gleaned from the deeds executed by respondent Felicidad relative to the accounts of
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 494
her other debtors, petitioner was authorized to collect the amounts of P6,000.00 from
Cabang, and P63,600.00 from Cirilo. They obliged themselves to pay petitioner.
Respondent Felicidad, likewise,unequivocably declared that Cabang and Cirilo no
longer had any obligation to her.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 495
FACTS: On August 28, 2001, R&B Insurance issued Marine Policy No. MN
00105/2001 in favor of Columbia to insure the shipment of 132 bundles of electric
copper cathodes against All Risks. On August 28, 2001, the cargoes were shipped on
board the vessel "Richard Rey" from Isabela, Leyte, to Pier 10, North Harbor, Manila.
They arrived on the same date.
Columbia engaged the services of Glodel for the release and withdrawal of the
cargoes from the pier and the subsequent delivery to its warehouses/plants. Glodel, in
turn, engaged the services of Loadmasters for the use of its delivery trucks to
transport the cargoes to Columbia‘s warehouses/plants in Bulacan
and Valenzuela City.
The goods were loaded on board twelve (12) trucks owned by Loadmasters,
driven by its employed drivers and accompanied by its employed truck helpers. Of the
six (6) trucks route to Balagtas, Bulacan, only five (5) reached the destination. One (1)
truck, loaded with 11 bundles or 232 pieces of copper cathodes, failed to deliver its
cargo.
Later on, the said truck, was recovered but without the copper cathodes.
Because of this incident, Columbia filed with R&B Insurance a claim for insurance
indemnity in the amount ofP1,903,335.39. After the investigation, R&B Insurance
paid Columbia the amount ofP1,896,789.62 as insurance indemnity.
On November 19, 2003, the RTC rendered a decision holding Glodel liable for
damages for the loss of the subject cargo and dismissing Loadmasters‘ counterclaim
for damages and attorney‘s fees against R&B Insurance.
ISSUE: Whether or not Loadmasters and Glodel are common carriers to determine
their liability for the loss of the subject cargo.
HELD: Yes. Loadmasters and Glodel are common carriers to determine their liability
for the loss of the subject cargo.
Under Article 1732 of the Civil Code, common carriers are persons, corporations,
firms, or associations engaged in the business of carrying or transporting passenger or
goods, or both by land, water or air for compensation, offering their services to the
public. Loadmasters and Glodel, being both common carriers, are mandated from the
nature of their business and for reasons of public policy, to observe the extraordinary
diligence in the vigilance over the goods transported by them according to all the
circumstances of such case, as required by Article 1733 of the Civil Code.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 496
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 497
ISSUE: Whether or not the farmers-borrowers to whom credits have been extended,
are primarily liable for the payment of the borrowed amounts.
HELD: Yes. The farmers-borrowers to whom credits have been extended, are primarily
liable for the payment of the borrowed amounts.
The Terms and Conditions of the IBRD 4th Rural Credit Project (Project Terms and
Conditions) executed by the Central Bank and the RBG shows that the farmers-
borrowers to whom credits have been extended, are primarily liable for the payment of
the borrowed amounts. The loans were extended through the RBG which also took
care of the collection and of the remittance of the collection to the Central Bank. RBG,
however, was not a mere conduit and collector. While the farmers-borrowers were the
principal debtors, RBG assumed liability under the Project Terms and Conditions by
solidarily binding itself with the principal debtors to fulfill the obligation.1awphi
Petition is granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 498
FACTS:Sometime in 1996 and 1997, petitioner Swagman Hotels and Travel, Inc.,
through Atty. Leonor L. Infante and Rodney David Hegerty, its president and vice-
president, respectively, obtained from private respondent Neal B. Christian loans
evidenced by three promissory notes dated 7 August 1996, 14 March 1997, and 14
July 1997. Each of the promissory notes is in the amount of US$50,000 payable after
three years from its date with an interest of 15% per annum payable every three
months. In a letter dated 16 December 1998, Christian informed the petitioner
corporation that he was terminating the loans and demanded from the latter payment
in the total amount of US$150,000 plus unpaid interests in the total amount of
US$13,500. On 2 February 1999, private respondent Christian filed with the Regional
Trial Court of Baguio City, Branch 59, a complaint for a sum of money and damages
against the petitioner corporation, Hegerty, and Atty. Infante. The petitioner
corporation, together with its president and vice-president, filed an Answer raising as
defenses lack of cause of action and novation of the principal obligations. According
to them, Christian had no cause of action because the three promissory notes were
not yet due and demandable.
ISSUE: Whether or not there is a valid novation, may the original terms of contract
which has been novated still prevail.
HELD: Yes. There is a valid novation, the original terms of contract which has been
novated may still prevail.
There was therefore a novation of the terms of the three promissory notes in
that the interest was waived and the principal was payable in monthly installments of
US$750. Alterations of the terms and conditions of the obligation would generally
result only in modificatory novation unless such terms and conditions are considered
to be the essence of the obligation itself.[25] The resulting novation in this case was,
therefore, of the modificatory type, not the extinctive type, since the obligation to pay a
sum of money remains in force.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 499
Thus, since the petitioner did not renege on its obligation to pay the monthly
installments conformably with their new agreement and even continued paying
during the pendency of the case, the private respondent had no cause of action to file
the complaint. It is only upon petitioner‘s default in the payment of the monthly
amortizations that a cause of action would arise and give the private respondent a
right to maintain an action against the petitioner.
Petition is granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 500
AUSTRIA-MARTINEZ, J.;
ISSUE: Whether or not the trial court erred in admitting petitioners‘ amended
complaint.
HELD: No. The trial court did not err in admitting petitioners‘ amended complaint.
that it is not within the issues made by the pleadings, the court may allow the
pleadings to be amended and shall do so freely when the presentation of the merits of
the action will be subserved thereby and the objecting party fails to satisfy the court
that the admission of such evidence would prejudice him in maintaining his action or
defense upon the merits.
As can be gleaned from the records, it was petitioners‘ belief that respondent‘s
evidence justified the amendment of their complaint. The trial court agreed thereto
and admitted the amended complaint. On this score, it should be noted that courts
are given the discretion to allow amendments of pleadings to conform to the evidence
presented during the trial.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 502
QUISUMBING, J.;
SIHI agreed to extend a credit line to Delta for P25,000,000.00 in three separate credit
agreements dated May 11, June 19, and August 22, 1979. Delta eventually became
indebted to SIHI to the tune of P24,010,269.32
From April 1979 to May 1980, petitioner California Bus Lines, Inc. (hereafter
CBLI), purchased on installment basis 35 units of M.A.N. Diesel Buses and two (2)
units of M.A.N. Diesel Conversion Engines from Delta. To secure the payment of the
purchase price of the 35 buses, CBLI and its president, Mr. Dionisio O. Llamas,
executed sixteen (16) promissory notes in favor of Delta on January 23 and April 25,
1980.[5] In each promissory note, CBLI promised to pay Delta or order, P2,314,000
payable in 60 monthly installments starting August 31, 1980, with interest at 14% per
annum. CBLI further promised to pay the holder of the said notes 25% of the amount
due on the same as attorney‘s fees and expenses of collection, whether actually
incurred or not, in case of judicial proceedings to enforce collection. In addition to the
notes, CBLI executed chattel mortgages over the 35 buses in Delta‘s favor. When CBLI
defaulted on all payments due, it entered into a restructuring agreement with Delta on
October 7, 1981, to cover its overdue obligations under the promissory notes.CBLI
continued having trouble meeting its obligations to Delta. This prompted Delta to
threaten CBLI with the enforcement of the management takeover clause.
HELD: No. The Restructuring Agreement dated October 7, 1981, between petitioner
CBLI and Delta Motors, Corp. did not novate the five promissory notes Delta Motors,
Corp. assigned to respondent SIHI.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 503
debtor, or subrogating a third person in the rights of the creditor.For novation to take
place, four essential requisites have to be met, namely, (1) a previous valid obligation;
(2) an agreement of all parties concerned to a new contract; (3) the extinguishment of
the old obligation; and (4) the birth of a valid new obligation.
In this case, the attendant facts do not make out a case of novation. The
restructuring agreement between Delta and CBLI executed on October 7, 1981, shows
that the parties did not expressly stipulate that the restructuring agreement novated
the promissory notes. Absent an unequivocal declaration of extinguishment of the
pre-existing obligation, only a showing of complete incompatibility between the old and
the new obligation would sustain a finding of novation by implication.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 504
KAPUNAN, J.;
FACTS:During the period August, 1991 to April, 1993, petitioner received from private
complainant Felicitas M. Calilung several pieces of jewelry with a total value of One
hundred Sixty Three Thousand One hundred Sixty Seven Pesos and Ninety Five
Centavos (P163,167.95). The agreement between private complainant and petitioner
was that the latter would sell the same and thereafter turn over and account for the
proceeds of the sale, or otherwise return to private complainant the unsold pieces of
jewelry within two months from receipt thereof. Since private complainant and
petitioner are relatives, the former no longer required petitioner to issue a receipt
acknowledging her receipt of the jewelry.When petitioner failed to remit the proceeds of
the sale of the jewelry or to return the unsold pieces to private complainant, the latter
sent petitioner a demand letter. Notwithstanding receipt of the demand letter,
petitioner failed to turn over the proceeds of the sale or to return the unsold pieces of
jewelry. Private complainant was constrained to refer the matter to the barangay
captain of Sta. Monica, Lubao, Pampanga.
ISSUE:Whether or not there was a novation of petitioner‘s criminal liability when she
and private complainant executed the Kasunduan sa Bayaran.
HELD: No. There was no novation of petitioner‘s criminal liability when she and
private complainant executed the Kasunduan sa Bayaran.
It is well-settled that the following requisites must be present for novation to take
place: (1) a previous valid obligation; (2) agreement of all the parties to the new
contract; (3) extinguishment of the old contract; and (4) validity of the new one.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 505
liability to remit the proceeds of the sale of the jewelry or to return the same to private
complainant.
In any case, novation is not one of the grounds prescribed by the Revised Penal
Code for the extinguishment of criminal liability.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 506
BELLOSILLO, J.;
FACTS:This petition arose from a civil case for collection of a sum of money with
preliminary attachment filed by respondent Pablo V. Reyes against his first cousin
petitioner Arsenio R. Reyes and spouse Nieves S. Reyes. According to private
respondent, petitioner-spouses borrowed from him P600,000.00 with interest at five
percent (5%) per month, which totalled P1,726,250.00 at the time of filing of the
Complaint. The loan was to be used supposedly to buy a lot in Parañaque. It was
evidenced by an acknowledgment receipt dated 15 July 1990 signed by the petitioner-
spouses Arsenio R. Reyes and Nieves S. Reyes and witness Romeo Rueda.
In their Answer petitioners admitted their loan from respondent but averred that there
was a novation so that the amount loaned was actually converted into respondent's
contribution to a partnership formed between them on 23 March 1990.
For novation to take place, the following requisites must concur: (a) there must be a
previous valid obligation; (b) there must be an agreement of the parties concerned to a
new contract; (c) there must be the extinguishment of the old contract; and, (d) there
must be the validity of the new contract.
In the case at bar, the third requisite is not present. The parties did agree that
the amount loaned would be converted into respondent's contribution to the
partnership, but this conversion did not extinguish the loan obligation. The date when
the acknowledgment receipt/promissory note was made negates the claim that the
loan agreement was extinguished through novation since the note was made while the
partnership was in existence.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 507
PUNO, J.;
FACTS:In 1978, petitioner spouses Florante and Laarni Bautista purchased a house
and lot in Pilar Village, Las Pinas, Metro Manila. To partially finance the purchase,
they obtained from the Apex Mortgage & Loan Corporation a loan in the amount of
P100,180.00. They executed a promissory note on December 22, 1978 obligating
themselves, jointly and severally, to pay the "principal sum of P100,180.00 with
interest rate of 12% and service charge of 3%" for a period of 240 months, or twenty
years, from date, in monthly installments of P1,378.83. Late payments were to be
charged a penalty of one and one-half per cent (1 1/2%) of the amount due. In the
same promissory note, petitioners authorized Apex to "increase the rate of interest
and/or service charges" without notice to them in the event that a law, Presidential
Decree or any Central Bank regulation should be enacted increasing the lawful rate of
interest and service charges on the loan. Payment of the promissory note was secured
by a second mortgage on the house and lot purchased by petitioners.Petitioner
spouses failed to pay several installments. On September 20, 1982, they executed
another promissory note in favor of Apex. This note was in the amount of
P142,326.43 at the increased interest rate of twenty-one per cent (21%) per annum
with no provision for service charge but with penalty charge of 1 1/2% for late
payments.
ISSUE: Whether or not there was valid novation in the case at bar.
Novation has four (4) essential requisites: (1) the existence of a previous valid
obligation; (2) the agreement of all parties to the new contract; (3) the extinguishment
of the old contract; and (4) the validity of the new one. In the instant case, all four
requisites have been complied with. The first promissory note was a valid and
subsisting contract when petitioner spouses and Apex executed the second promissory
note. The second promissory note absorbed the unpaid principal and interest of
P142,326.43 in the first note which amount became the principal debt therein,
payable at a higher interest rate of 21% per annum. Thus, the terms of the second
promissory note provided for a higher principal, a higher interest rate, and a higher
monthly amortization, all to be paid within a shorter period of 16.33 years. These
changes are substantial and constitute the principal conditions of the obligation. Both
parties voluntarily accepted the terms of the second note; and also in the same note,
they unequivocally stipulated to extinguish the first note. Clearly, there was animus
novandi, an express intention to novate. The first promissory note was cancelled and
replaced by the second note. This second note became the new contract governing the
parties' obligations.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 508
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 509
KAPUNAN, J.:
FACTS:On April 12, 1996, the spouses Antero and Virginia Soriano (respondent
spouses), as sellers, entered into a "Contract to Sell " with Evadel Realty and
Development Corporation (petitioner), as buyer, over a parcel of land denominated as
Lot 5536-C of the Subdivision Plan of Lot 5536 covered by Transfer Certificate of Title
No. 125062 which was part of a huge tract of land known as the Imus Estate. Upon
payment of the first installment, petitioner introduced improvements thereon and
fenced off the property with concrete walls. Later, respondent spouses discovered that
the area fenced off by petitioner exceeded the area subject of the contract to sell by
2,450 square meters. Upon verification by representatives of both parties, the area
encroached upon was denominated as Lot 5536-D-1 of the subdivision plan of Lot
5536-D of Psd-04-092419 and was later on segregated from the mother title and
issued a new transfer certificate of title, TCT No. 769166, in the name of respondent
spouses. Respondent spouses successively sent demand letters to petitioner on
February 14, March 7, and April 24, 1997, to vacate the encroached area. Petitioner
admitted receiving the demand letters but refused to vacate the said area.
Petitioner's claim that there was a novation of contract because there was a "second"
agreement between the parties due to the encroachment made by the national road on
the property subject of the contract by 1,647 square meters, is unavailing. Novation,
one of the modes of extinguishing an obligation, requires the concurrence of the
following: (1) there is a valid previous obligation; (2) the parties concerned agree to a
new contract; (3) the old contract is extinguished; and (4) there is valid new contract.
Novation may be express or implied. In order that an obligation may be extinguished
by another which substitutes the same, it is imperative that it be so declared in
unequivocal terms (express novation) or that the old and the new obligations be on
every point incompatible with each other (implied novation).
In the instant case, there was no express novation because the "second"
agreement was not even put in writing. Neither was there implied novation since it was
not shown that the two agreements were materially and substantially incompatible
with each other. We quote with approval the following findings of the trial court: Since
the alleged agreement between the plaintiffs [herein respondents] and defendant
[herein petitioner] is not in writing and the alleged agreement pertains to the novation
of the conditions of the contract to sell of the parcel of land subject of the instant
litigation, ipso facto, novation is not applicable in this case since, as stated above,
novation must be clearly proven by the proponent thereof and the defendant in this
case is clearly barred by the Statute of Frauds from proving its claim.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 510
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 511
ISSUE: Whether or not the interruption or suspension granted by the MeTC must be
considered in computing the period because it has the effect of tolling or stopping the
counting of the period for execution.
HELD: Yes. The interruption or suspension granted by the MeTC must be considered
in computing the period because it has the effect of tolling or stopping the counting of
the period for execution.
Sec. 6. Execution by motion or by independent action. –A final and executory judgment
or order may be executed on motion within five (5) years from the date of its entry.
After the lapse of such time, and before it is barred by the statute of limitations, a
judgment may be enforced by action. The revived judgment may also be enforced by
motion within five (5) years from the date of its entry and thereafter by action before it
is barred by the statute of limitations.
The rules are clear. Once a judgment becomes final and executory, the
prevailing party can have it executed as a matter of right by mere motion within five
years from the date of entry of judgment. If the prevailing party fails to have the
decision enforced by a motion after the lapse of five years, the said judgment is
reduced to a right of action which must be enforced by the institution of a complaint
in a regular court within ten years from the time the judgment becomes final.
When petitioner Villeza filed the complaint for revival of judgment on October 3,
2000, it had already been eleven (11) years from the finality of the judgment he sought
to revive. Clearly, the statute of limitations had set in.
The May 9, 2008 Decision of the Court of Appeals in CA-GR No. SP No. 84035 is
AFFIRMED.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 512
ISSUE: Whether or not the Court of Appeals erred in HELD that petitioner's
right to any relief under the law has already prescribed or is barred by laches.
HELD: No. The Court of Appeals did not err in HELD that petitioner's right to
any relief under the law has already prescribed or is barred by laches.
Under the provisions of Article 1146 of the Civil Code, actions upon an injury to
the rights of the plaintiff o r u p o n a q u a s i - d e l i c t m u s t b e i n s t i t u t e d w i t h i n
f o u r y e a r s f r o m t h e t i m e t h e cause of action accrued. T h e C o u r t f i n d s
n o e r r o r i n t h e H E L D o f t h e C A t h a t I n s u r a n c e o f t h e Philippine
Island's cause of action accrued at the time it discovered the alleged fraud
committed by the Gregorio spouses. It is at this point that the four -year
prescriptive period should be counted. However, the Court does not
agree with the CA in its HELD that the discovery of the fraud should
be reckoned from the time of registration of the titles covering the subject
properties. Neither may the principle of laches apply in the present case.
The essence of laches or ―stale demands‖ is the failure or neglect for
an unreasonable and unexplained length of time to do that which, by
exercising d u e d i l i g e n c e , c o u l d o r s h o u l d h a v e b e e n d o n e e a r l i e r ,
t h u s , g i v i n g r i s e t o a presumption that the party entitled to assert it either has
abandoned or declined t o a s s e r t i t . I t i s n o t c o n c e r n e d w i t h m e r e
l a p s e o f t i m e ; t h e f a c t o f d e l a y , standing alone, being insufficient to
constitute laches. I n a d d i t i o n , i t i s a r u l e o f e q u i t y a n d a p p l i e d n o t t o
p e n a l i z e n e g l e c t o r sleeping on one's rights, but rather to avoid
recognizing a right when to do so would result in a clearly unfair situation.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 513
Petition is granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 514
FACTS: On 5 November 1968, Pacita V. Aure, Nicomedes Aure Bundac, and Zeny
Abundo (Aure Group), owners of a 2,064 square meter parcel of land in Tagaytay
City (Property), leased the Property to ESSO Standard Eastern, Inc., (ESSO Eastern), a
foreign corporation doing business in the country through its subsidiary ESSO
Standard Philippines, Inc. (ESSO Philippines). The lease period is 90 years and the
rent is payable monthly for the first 10 years, and annually for the remaining period.
The lease contract (Contract) contained an assignment veto clause barring the parties
from assigning the lease without prior consent of the other. Excluded from the
prohibition were certain corporations to whom ESSO Eastern may unilaterally assign
its leasehold right.
ESSO Eastern sold ESSO Philippines to the Philippine National Oil Corporation
(PNOC). Apparently, the Aure Group was not informed of the sale. ESSO Philippines,
whose corporate name was successively changed to Petrophil Corporation then to
Petron Corporation (Petron), took possession of the Property.
Petitioner Romeo D. Mariano (petitioner) bought the Property from the Aure
Group and obtained title to the Property issued in his name bearing an annotation of
ESSO Eastern‘s lease. He sent to Petron a notice to vacate the Property. Petitioner
informed Petron that Presidential Decree No. 471 (PD 471), dated 24 May 1974,
reduced the Contract‘s duration from 90 to 25 years, ending on 13 November 1993.
Despite receiving the notice to vacate on 21 December 1998, Petron remained on the
Property.
Petitioner sued Petron in the Regional Trial Court of Tagaytay City, Branch 18,
(trial court) to rescind the Contract and recover possession of the Property. Aside from
invoking PD 471, petitioner alternatively theorized that the Contract was terminated
on 23 December 1977 when ESSO Eastern sold ESSO Philippines to PNOC, thus
assigning to PNOC its lease on the Property, without seeking the Aure Group‘s prior
consent.
ISSUE: Whether or not the Contract subsists between petitioner and Petron.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 515
FACTS: Spouses Julian and Guillerma Sambaan were the registered owner of a
property located in Bulua, Cagayan de oro City. The respondents and the petitioner
Myrna Bernales are the children of Julian and Guillerma. Myrna, who is the eldest of
the siblings, is the present owner and possessor of the property in question.
Julian died in an ambush in 1975. Before he died, he requested that the
property in question be redeemed from Myrna and her husband Patricio Bernales.
Thus, in 1982 one of Julian‘s siblings offered to redeem the property but the
petitioners refused because they were allegedly using the property as tethering place
for their cattle. In January 1991, respondents received an information that the subject
property was already transferred to Myrna Bernales. The Deed of Absolute Sale dated
December 7, 1970 bore the forged signatures of their parents, Julian and Guillerma.
On April 1993, the respondents, together with their mother Guillerma, filed a
complaint for Annulment of Deed of Absolute Sale and cancellation of TCT No. T-
14204 alleging that their parent‘s signatures were forged. The trial court rendered a
decision on August 2, 2001 cancelling the TCT and ordering another title to be issued
in the name of the late Julian Sambaan.
Petitioners went to the CA and appealed the decision. The CA affirmed the
decision of the lower court. A motion for reconsideration of the decision was, likewise,
denied in 2004.
ISSUE: Whether or not the Deed of Absolute Sale is authentic as to prove the
ownership of the petitioners over the subject property.
HELD: No. The Deed of Absolute Sale is not authentic as to prove the ownership of the
petitioners over the subject property.
It is a question of fact rather than of law. Well-settled is the rule that the Supreme
Court is not a trier of facts. Factual findings of the lower courts are entitled to great
weight and respect on appeal, and in fact accorded finality when supported by
substantial evidence on the record. Substantial evidence is more than a mere scintilla
of evidence. It is that amount of relevant evidence that a reasonable mind might accept
as adequate to support a conclusion, even if other minds, equally reasonable, might
conceivably opine otherwise. But to erase any doubt on the correctness of the assailed
HELD, we have carefully perused the records and, nonetheless, arrived at the same
conclusion. We find that there is substantial evidence on record to support the Court
of Appeals and trial court‘s conclusion that the signatures of Julian and Guillerma in
the Deed of Absolute Sale were forged.
Conclusions and findings of fact by the trial court are entitled to great weight on
appeal and should not be disturbed unless for strong and cogent reasons because the
trial court is in a better position to examine real evidence, as well as to observe the
demeanor of the witnesses while testifying in the case. The fact that the CA adopted
the findings of fact of the trial court makes the same binding upon this court.
With the presentation of the forged deed, even if accompanied by the owner‘s duplicate
certificate of title, the registered owner did not thereby lose his title, and neither does
the assignee in the forged deed acquire any right or title to the said property.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 516
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 517
CORONA, J.:
ISSUE: Whether or not filing of Civil Case No. 36852 by the Venegases had the effect
of interrupting the prescriptive period for the filing of the complaint for judicial
foreclosure of mortgage.
HELD: No. The filing of Civil Case No. 36852 by the Venegases does not have the effect
of interrupting the prescriptive period for the filing of the complaint for judicial
foreclosure of mortgage.
We agree with the CA's HELD that Civil Case No. 36852 did not have the effect of
interrupting the prescription of the action for foreclosure of mortgage as it was not an
action for foreclosure but one for annulment of title and nullification of the deed of
mortgage and the deed of sale. It was not at all the action contemplated in Article 1155
of the Civil Code which explicitly provides that the prescription of an action is
interrupted only when the action itself is filed in court. Petitioner could have protected
its right over the property by filing a cross-claim for judicial foreclosure of mortgage
against respondents in Civil Case No. 36852. The filing of a cross-claim would have
been proper there. All the issues pertaining to the mortgage validity of the mortgage
and the propriety of foreclosure would have been passed upon concurrently and not
on a piecemeal basis. This should be the case as the issue of foreclosure of the subject
mortgage was connected with, or dependent on, the subject of annulment of mortgage
in Civil Case No. 36852. The actuations clearly manifested that petitioner knew its
rights under the law but chose to sleep on the same.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 518
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 519
Mesina v. Garcia
MELANIE M. MESINA, DANILO M. MESINA, and SIMEON M. MESINA, Petitioners,
versus GLORIA C. GARCIA, Respondent.
(G.R. No. 168035, November 30, 2006, 1st Division)
CHICO-NAZARIO, J.:
FACTS: Atty. Honorio Valisno Garcia and Felicisima Mesina, during their lifetime,
enstered into a Contract to Sell over a lot consisting of 235 square meters, situated at
Diversion Road, Sangitan, Cabanatuan City, covered and embraced by TCT No. T-
31643 in the name of Felicisima Mesina which title was eventually cancelled and TCT
No. T-78881 was issued in the name of herein petitioners. The Contract to Sell
provides that the cost of the lot is P70.00 per square meter for a total amount of
P16,450.00; payable within a period not to exceed 7 years at an interest rate of 12%
per annum, in successive monthly installments of P260.85 per month, starting May
1977. Thereafter, the succeeding monthly installments are to be paid within the first
week of every month, at the residence of the vendor at Quezon City, with all unpaid
monthly installments earning an interest of 1% per month. Instituting this case at
bar, respondent asserts that despite the full payment made on 7 February 1984
for the consideration of the subject lot, petitioners refused to issue the necessary Deed
of Sale to effect the transfer of the property to her.
Article 1155 of the Civil Code is explicit that the prescriptive period is interrupted
when an action has been filed in court; when there is a written extrajudicial demand
made by the creditors; and when there is any written acknowledgment of the debt by
the debtor.
The records reveal that starting 19 April 1986 until 2 January 1997 respondent
continuously demanded from the petitioners the execution of the said Deed of
Absolute Sale but the latter conjured many reasons and excuses not to execute the
same. Respondent even filed a Complaint before the Housing and Land Use
Regulatory Board way back in June, 1986, to enforce her rights and to compel the
mother of herein petitioners, who was still alive at that time, to execute the necessary
Deed of Absolute Sale for the transfer of title in her name. On 2 January 1997,
respondent, through her counsel, sent a final demand letter to the petitioners for the
execution of the Deed of Absolute Sale, but still to no avail. Consequently, because of
utter frustration of the respondent, she finally lodged a formal Complaint for Specific
Performance with Damages before the trial court on 20 January 1997.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 520
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 521
CORONA, J.:
FACTS: The lot in controversy is Lot 4389 located at Dumaguete City and covered by
Original Certificate of Title No. 2986-A (OCT 2986-A) in the names of co-owners Felix
and Juana Gaudiane. Felix died in 1943 while his sister Juana died in 1939. Herein
respondents are the descendants of Felix while petitioners are the descendants of
Juana.
ISSUE: Whether the court gravely erred in not giving due course to the claim of
petitioners and legal effect of prescription and laches adverted by defendants-
appellants in their answer and affirmative defenses proven during the hearing by
documentary and testimonial evidence.
HELD: No. The court did not gravely err in not giving due course to the claim of
petitioners and legal effect of prescription and laches adverted by defendants-
appellants in their answer and affirmative defenses proven during the hearing by
documentary and testimonial evidence.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 522
As explained earlier, only Lot No. 4156 was sold. It was through this
misrepresentation that appellees‘ predecessor-in-interest succeeded in withholding
possession of appellees‘ share in Lot No. 4389. Appellees cannot, by their own
fraudulent act, benefit therefrom by alleging prescription and laches.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 523
QUISUMBING, J.:
FACTS:Petitioner was employed in the singapore airlines limited as the pilot captain of
B-707. Sometime in 1982, defendant, hit by a recession, initiated cost-cutting
measures. Seventeen expatriate captains in the Airbus fleet were found in excess of
the defendant's requirement. Consequently, defendant informed its expatriate pilots
including plaintiff of the situation and advised them to take advance leaves. Realizing
that the recession would not be for a short time, defendant decided to terminate its
excess personnel. It did not, however, immediately terminate it's A-300 pilots. It
reviewed their qualifications for possible promotion to the B-747 fleet. Among the 17
excess Airbus pilots reviewed, twelve were found qualified. Unfortunately, plaintiff was
not one of the twelve. Aggrieved, plaintiff on June 29, 1983, instituted a case for illegal
dismissal before the Labor Arbiter. Defendant moved to dismiss on jurisdictional
grounds. Before said motion was resolved, the complaint was withdrawn.
Article 291. Money claims. - All money claims arising from employee-employer
relations accruing during the effectivity of this Code shall be filed within three (3)
years from the time the cause of action accrued; otherwise they shall be forever
barred.
It should be noted further that Article 291 of the Labor Code is a special law
applicable to money claims arising from employer-employee relations; thus, it
necessarily prevails over Article 1144 of the Civil Code, a general law. Basic is the rule
in statutory construction that 'where two statutes are of equal theoretical application
to a particular case, the one designed therefore should prevail.'
In the instant case, the action for damages due to illegal termination was filed
by plaintiff-appellee only on January 8, 1987 or more than four (4) years after the
effectivity date of his dismissal on November 1, 1982. Clearly, plaintiff-appellee's
action has already prescribed.
Petition is dismissed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 524
FACTS: Elsa Arcilla and her husband, Calvin Arcilla secured on three occasions, loans
from the Banco Filipino Savings and Mortgage bank in the amount of Php.107,946.00
as evidenced by the ―Promissory Note‖ executed by the spouses in favor of the said
bank. To secure payment of said loans, the spouses executed ―Real Estate Mortgages‖
in favor of the appellants (Banco Filipino) over their parcels of land. The appellee
spouses failed to pay their monthly amortization to appellant. On September 2, 1985
the appellee‘s filed a complaint for ―Annulment of the Loan Contracts, Foreclosure Sale
with Prohibitory and Injunction‖ which was granted by the RTC. Petitioners appealed
to the Court of Appeals, but the CA affirmed the decision of the RTC.
ISSUE: Whether or not the CA erred when it held that the cause of action of the
private respondents accrued on October 30, 1978 and the filing of their complaint for
annulment of their contracts in 1085 was not yet barred by the prescription.
HELD: No. The Court of Appeals did not err when it held that the cause of action of
the private respondents accrued on October 30, 1978 and the filing of their complaint
for annulment of their contracts in 1085 was not yet barred by the prescription.
The court held that the petition is unmeritorious. Petitioner‘s claim that the action of
the private respondents have prescribed is bereft of merit. Under Article 1150 of the
Civil Code, the time for prescription of all kinds of action where there is no special
provision which ordains otherwise shall be counted from the day they may be brought.
Thus the period of prescription of any cause of action is reckoned only from the date of
the cause of action accrued. The period should not be made to retroact to the date of
the execution of the contract, but from the date they received the statement of account
showing the increased rate of interest, for it was only from the moment that they
discovered the petitioner‘s unilateral increase thereof.
Petition is dismissed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 525
FACTS: Carlos Delgado was the absolute owner of a parcel of land with an area of
692,549 square meter situated in the Municipality of Catarman Samar. Carlos
Delgado granted and conveyed by way of donation with quitclaim all rights, title,
interest claim and demand over a portion of land with an area of 165,000 square
meter in favor of the Commonwealth of the Philippines. The acceptance was then
made to President Quezon in his capacity as Commander-in-Chief. The Deed of
Donation was executed with a condition that the said land will be used for the
formation of the National Defense of the Philippines. The said parcel of land then
covered by the Torrens System of the Philippines and was registered in the name of
Commonwealth of the Philippines for a period of 40 years. The land was registered
under TCT 0-2539-160 in favor of the Commonwealth however without any
annotation.
Jose Delgado filed a petition for reconveyance for a violation of the condition.
The RTC ruled in favor of the plaintiff Delgado. But the CA reversed the said decision
because of prescription. The petitioner filed only before 24 years o discovery which the
law only requires 10 years of filing.
ISSUE: Whether or not the petitioner‘s action for reconveyance is already barred by
prescription.
HELD: Yes. The petitioner‘s action for reconveyance is already barred by prescription.
The Supreme Court denied the petition and affirmed the decision of the Court of
Appeals because the time of filing has been prescribed. Under Article 1144 of the Civil
Code on Prescription based on written contracts, the filing of action for reconveyance
is within 10 years from the time the condition in the Deed of Donation was violated.
The petitioner herein filed only 24 years in the first action and 43 years in the second
filing of the 2nd action.
The action for reconveyance on the alleged excess of 33, 607 square meter
mistakenly included in the title was also prescribed Article 1456 of the Civil Code
states, if property is acquired through mistake or fraud, the person obtaining it is, by
force of law, considered a trustee of an implied trust for the benefits of the person from
whom the property comes, if within 10 years such action for reconveyance has not
been executed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 526
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 527
Six years after the execution of the quitclaims, respondents discovered that indeed
subject lot was still a common property in the name of the deceased spouses.
Eventually, an action for Quieting of Title was filed by petitioners on December 22,
1983.
The trial court considered Lot No. 5872 as still a common property and
therefore must be divided into six parts, there being six heirs. Petitioners appealed to
the Court of Appeals which sustained the decision of the trial court.
ISSUE: Whether or not the action for quieting of title had already prescribed.
HELD: No. The action for quieting of title did not prescribe.
The Supreme Court ruled that an action for quieting of title is imprescriptible
especially if the plaintiff is in possession of the property being litigated. One who is in
actual possession of a land, claiming to be the owner thereof may wait until his
possession is disturbed or his title is attacked before making steps to vindicate his
right because his undisturbed possession gives him a continuing right to seek the aid
of the courts to ascertain the nature of the adverse claim and its effect on his title.
Moreover, the Court held that laches is inapplicable in this case. This is because, as
mentioned earlier, petitioners‘ possession of the subject lot has rendered their right to
bring an action for quieting of title imprescriptible.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 528
FACTS: Petitioner F.A.T. Kee Computer Systems, Inc. is engaged in the business
of selling computer equipment and in the rendering of maintenance services for its
sold units. On the other hand, ONLINE is engaged in bu
s i n e s s o f s e l l i n g computer units, parts, and software.
In its complaint, it was alleged that ONLINE sold computer printers to FATKEE
which was evidenced by invoice receipts containing a stipulation that an
―interest of 28% per annum is to be charged on all accounts overdue ‖ and ―an
additional sum equal to 25% of the amount will be charged b
y v e n d o r f o r attorney‘s fees plus cost of collection in case of suit.‖ It was
also said that the president of FAT KEE, President Frederick Huang, Jr.,
made an offer to pay the a m o u n t w h i c h w a s o r i g i n a l l y i n U S d o l l a r s
i n t o P h i l i p p i n e l e g a l t e n d e r w h i c h ONLINE accepted.
After payments made in March to May 1998, ONLINE decided to stop the
application of interest in view of its good relationship with FAT KEE.FAT KEE
continued to pay; however, a balance remained according to ONLINE‘s computations.
Despite the repeated demands of ONLINE, FAT KEE failed to pay the remaining
balance without a valid reason.FAT KEE answered the complaint stating that they
were never informed of O N L I N E ‘ s a g r e e m e n t t o i t s o f f e r o f p a y i n g U S
d o l l a r s . I t a l s o a l l e g e d t h a t t h e invoice receipts were unilaterally prepared by
ONLINE. Furthermore, FAT KEE stated that the payments tendered were in
Philippine peso, in accordance with the Statement of Account, and that these were
accepted by ONLINE. They said they already had paid the total amount of the debt.
According to the testimony of Huang, he said that t
h e r e w a s n o agreement between FAT KEE and ONLINE for the payment in US
dollars. There was neither an agreement to a specific exchange rate.
means for ascertaining it, at least where actual fraud has not been practiced on the
party claiming the estoppel.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 530
AUSTRIA-MARTINEZ, J.:
FACTS:Petitioner Tanay Recreation Center and Development Corp. (TRCDC) is the
lessee of a 3,090-square meter property located in Sitio Gayas, Tanay, Rizal, owned by
Catalina Matienzo Fausto, under a Contract of Lease. On this property stands the
Tanay Coliseum Cockpit operated by petitioner. The lease contract provided for a 20-
year term, subject to renewal within sixty days prior to its expiration. The contract
also provided that should Fausto decide to sell the property, petitioner shall have the
―priority right‖ to purchase the same.
On June 17, 1991, petitioner wrote Fausto informing her of its intention to
renew the lease. However, it was Fausto‘s daughter, respondent Anunciacion F.
Pacunayen, who replied, asking that petitioner remove the improvements built
thereon, as she is now the absolute owner of the property. It appears that Fausto had
earlier sold the property to Pacunayen and title has already been transferred in her
name. Petitioner filed an Amended Complaint for Annulment of Deed of Sale, Specific
Performance with Damages, and Injunction
ISSUE: Whether or not the contention in this case refers to petitioner‘s priority right to
purchase, also referred to as the right of first refusal.
HELD: No. Petitioner‘s priority right to purchase, does not refer to as the right of first
refusal.
When a lease contract contains a right of first refusal, the lessor is under a legal duty
to the lessee not to sell to anybody at any price until after he has made an offer to sell
to the latter at a certain price and the lessee has failed to accept it. The lessee has a
right that the lessor's first offer shall be in his favor. Petitioner‘s right of first refusal is
an integral and indivisible part of the contract of lease and is inseparable from the
whole contract. The consideration for the lease includes the consideration for the
right of first refusal and is built into the reciprocal obligations of the parties.
It was erroneous for the CA to rule that the right of first refusal does not apply
when the property is sold to Fausto‘s relative. When the terms of an agreement have
been reduced to writing, it is considered as containing all the terms agreed upon. As
such, there can be, between the parties and their successors in interest, no evidence
of such terms other than the contents of the written agreement, except when it fails to
express the true intent and agreement of the parties. In this case, the wording of the
stipulation giving petitioner the right of first refusal is plain and unambiguous, and
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 531
leaves no room for interpretation. It simply means that should Fausto decide to sell
the leased property during the term of the lease, such sale should first be offered to
petitioner. The stipulation does not provide for the qualification that such right may
be exercised only when the sale is made to strangers or persons other than Fausto‘s
kin. Thus, under the terms of petitioner‘s right of first refusal, Fausto has the legal
duty to petitioner not to sell the property to anybody, even her relatives, at any price
until after she has made an offer to sell to petitioner at a certain price and said offer
was rejected by petitioner.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 532
SANTOS, J.:
FACTS: Manotok was the administrator of a parcel of land which it leased to Benjamin
Mendoza; that the contract of lease expired on December 31, 1988; that even after the
expiration of the lease contract, Benjamin Mendoza, and after his demise, his son,
Romeo, continued to occupy the premises and thus incurred a total of P44,011.25 as
unpaid rentals from January 1, 1989 to July 31, 1996; that on July 16, 1996,
Manotok made a demand on Benjamin Mendoza to pay the rental arrears and to
vacate the premises within fifteen (15) days from receipt of the demand letter; that
despite receipt of the letter and after the expiration of the 15-day period, the Mendozas
refused to vacate the property and to pay the rentals. The complaint prayed that the
court order Mendoza and those claiming rights under him to vacate the premises and
deliver possession thereof to Manotok, and to pay the unpaid rentals from January 1,
1989 to July 31, 1996 plus P875.75 per month starting August 1, 1996, subject to
such increase allowed by law, until he finally vacates the premise.
ISSUE: Whether or not the Honorable Court of Appeals committed error in giving
efficacy to a lease contract signed in 1988 when the alleged signatory was already
dead since 1986.
HELD: No. The Honorable Court of Appeals did not commit error in giving efficacy to a
lease contract signed in 1988 when the alleged signatory was already dead since 1986.
This is a case for unlawful detainer. It appears that respondent corporation leased
the property subject of this case to petitioner‘s father. After expiration of the lease,
petitioner continued to occupy the property but failed to pay the rentals. On July 16,
1996, respondent corporation made a demand on petitioner to vacate the premises
and to pay their arrears.
The decision of the Court of Appeals dated February 17, 1973 is hereby
affirmed with costs against petitioner.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 533
QUISUMBING, J.:
On October 27, 1992, Citibank informed respondent that the traveler‘s check
could not be cleared unless it was duly signed by Lim, the original purchaser of the
traveler‘s check. A Miss Arajo, from the accounting staff of Queensland, returned the
check to Lim for his signature, but the latter, aware of his P44,465 loss, demanded for
a liquidation of his account and said he would get back what was left of his
investment.
ISSUE: Whether or not the CA erred in reversing the decision of the RTC which
dismissed the respondent‘s complaint.
HELD: No. The Court of Appeals did not err in reversing the decision of the RTC
which dismissed the respondent‘s complaint.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 534
those which the party subsequently attempts to assert; (2) intent, or at least
expectation, that this conduct shall be acted upon by, or at least influence, the
other party; and (3) knowledge, actual or constructive, of the real facts. ere, it is
uncontested that petitioner had in fact signed the Customer‘s Agreement in the
morning of October 22, 1992, knowing fully well the nature of the contract he was
entering into. The Customer‘s Agreement was duly notarized and as a public
document it is evidence of the fact, which gave rise to its execution and of the date
of the latter.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 535
R.A. No. 8042 explicitly prohibits the substitution or alteration to the prejudice of the
worker, of employment contracts already approved and verified by the Department of
Labor and Employment (DOLE) from the time of actual signing thereof by the parties
up to and including the period of the expiration of the same without the approval of
the DOLE. The subsequently executed side agreement of an overseas contract worker
with her foreign employer which reduced her salary below the amount approved by the
POEA is void because it is against our existing laws, morals and public policy. The
said side agreement cannot supersede her standard employment contract approved by
the POEA.
the party must have been afforded an opportunity to pursue his claim in order that
the delay may sufficiently constitute laches.
In the instant case, respondent filed his claim within the three-year prescriptive
period for the filing of money claims set forth in Article 291 of the Labor Code from the
time the cause of action accrued. Thus, we find that the doctrine of laches finds no
application in this case.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 537
PARDO, J.:
Petitioners filed the petition for reconstitution of OCT 632 nineteen (19) years after the
title was allegedly lost or destroyed. We thus consider petitioners guilty of laches.
Laches is negligence or omission to assert a right within a reasonable time, warranting
the presumption that the party entitled to assert it either has abandoned or declined
to assert it.
Petitioners were not parties in the case before the trial court for the judicial
reconstitution of OCT 632. It was Eulalio Ragua, later succeeded by his heirs, who
filed the petition for reconstitution. Not being parties to the petition, petitioners have
no personality to file the motion for execution of judgment. In any event, the decision
cannot be executed as timely appeals therefrom were taken by the parties.
In a petition for judicial reconstitution of title, the Register of Deeds is merely a
nominal party. In fact, it is not even required to implead him. In the instant cases, the
Republic of the Philippines together with other intervenors and oppositors, interposed
appeals to the Court of Appeals within the prescribed period.
There is no merit to petitioners' argument that the Court of Appeals' decision in
CA-G.R. CV No. 20701 is legally incompatible with its decision in CA-G.R. CV Nos.
00705-00706. CA-G.R. CV No. 20701 confirmed the legal rights of petitioners over the
parcels of land ceded to them by virtue of the deeds of assignments executed by
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 538
Eulalio Ragua. The decision of the Court of Appeals in CA-G.R. CV No. 20701 did not
involve the validity of the Ragua title.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 539
BUENA, J.:
FACTS:Mr. Chia offered the subject property for sale to private respondent G.T.P.
Development Corporation (hereafter, GTP), with assumption of the mortgage
indebtedness in favor of petitioner METROBANK secured by the subject property.
Pending negotiations for the proposed sale, Atty. Bernardo Atienza, acting in behalf of
respondent GTP, went to METROBANK to inquire on Mr. Chia's remaining balance on
the real estate mortgage. METROBANK obliged with a statement of account of Mr.
Chia amounting to about P115,000.00 as of August ,1980. The deed of sale and the
memorandum of agreement between Mr. Chia and respondent GTP were eventually
executed and signed. Atty. Atienza went to METROBANK Quiapo Branch and paid one
hundred sixteen thousand four hundred sixteen pesos and seventy-one centavos
(P116,416.71) for which METROBANK issued an official receipt acknowledging
payment. This notwithstanding, petitioner METROBANK refused to release the real
estate mortgage on the subject property despite repeated requests from Atty. Atienza,
thus prompting respondent GTP to file an action for specific performance against
petitioner METROBANK and Mr. Chia.
ISSUE: Whether or not the CA erred in reversing the decision of the lower court.
HELD: No. The Court of Appeals did not err in reversing the decision of the lower
court.
The Court found no compelling reasons to disturb the assailed decision. All things
studiedly viewed in proper perspective, the Court are of the opinion, and so rule, that
whatever debts or loans mortgagor Chia contracted with Metrobank after September 4,
1980, without the conformity of plaintiff-appellee, could not be adjudged as part of the
mortgage debt the latter so assumed. We are persuaded that the contrary HELD on
this point in Our October 24, 1994 decision would be unfair and unjust to plaintiff-
appellee because, before buying subject property and assuming the mortgage debt
thereon, the latter inquired from Metrobank about the exact amount of the mortgage
debt involved.
petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 540
QUISUMBING, J.:
FACTS: Salome, Consorcia, Alfredo, Maria, Rosalia, Jose, Quirico and Julita, all
surnamed Bornales, were the original co-owners of the lot in question.
On July 14, 1940, Salome sold part of her 4/16 share to Soledad Daynolo. Thereafter,
Soledad Daynolo immediately took possession of the land described above and built a
house thereon. A few years later, Soledad and her husband, Simplicio Distajo,
mortgaged the subject portion of the lot as security for a debt to Jose Regalado, Sr.
This transaction was evidenced by a Deed of Mortgage.
On April 14, 1948, three of the eight co-owners of Lot 162, specifically, Salome,
Consorcia and Alfredo, sold 24,993 square meters of said lot to Jose Regalado, Sr. On
May 4, 1951, Simplicio Distajo, heir of Soledad Daynolo who had since died, paid the
mortgage debt and redeemed the mortgaged portion of Lot 162 from Jose Regalado, Sr.
The latter, in turn, executed a Deed of Discharge of Mortgage in favor of Soledad‘s
heirs, namely: Simplicio Distajo, Rafael Distajo and Teresita Distajo-Regalado. On
same date, the said heirs sold the redeemed portion of Lot 162 for P1,500.00 to herein
petitioners, the spouses Manuel Del Campo and Salvacion Quiachon.
ISSUE: Whether or not the sale of the subject portion constitutes a sale of a concrete
or definite portion of land owned in common does not absolutely deprive herein
petitioners of any right or title thereto.
HELD: No. The sale of the subject portion constitutes a sale of a concrete or definite
portion of land owned in common does not absolutely deprive herein petitioners of any
right or title thereto.
There can be no doubt that the transaction entered into by Salome and Soledad
could be legally recognized in its entirety since the object of the sale did not even
exceed the ideal shares held by the former in the co-ownership. As a matter of fact, the
deed of sale executed between the parties expressly stipulated that the portion of Lot
162 sold to Soledad would be taken from Salome‘s 4/16 undivided interest in said lot,
which the latter could validly transfer in whole or in part even without the consent of
the other co-owners. Salome‘s right to sell part of her undivided interest in the co-
owned property is absolute in accordance with the well-settled doctrine that a co-
owner has full ownership of his pro-indiviso share and has the right to alienate, assign
or mortgage it, and substitute another person in its enjoyment.
Petition is granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 541
FACTS:On September 19, 1970, the [respondent] filed the initiatory complaint herein
for specific performance against her uncle [Petitioner] Miguel Cuenco which averred,
inter alia that her father, the late Don Mariano Jesus Cuenco (who became Senator)
and said [petitioner] formed the ‗Cuenco and Cuenco Law Offices‘; that on or around
August 4, 1931, the Cuenco and Cuenco Law Offices served as lawyers in two (2) cases
entitled ‗Valeriano Solon versus Zoilo Solon‘ (Civil Case 9037) and ‗Valeriano Solon
versus Apolonia Solon‘ (Civil Case 9040) involving a dispute among relatives over
ownership of lot 903 of the Banilad Estate which is near the Cebu Provincial Capitol;
that records of said cases indicate the name of the [petitioner] alone as counsel of
record, but in truth and in fact, the real lawyer behind the success of said cases was
the influential Don Mariano Jesus Cuenco; that after winning said cases, the
awardees of Lot 903 subdivided said lot into three (3) parts as follows:
Petitioner later claimed the property after the death of his brother.
ISSUES: Whether or not the laches barred the right of action of respondent.
From the time Lot 903-A was subdivided and Mariano‘s six children -- including
Concepcion -- took possession as owners of their respective portions, no whimper of
protest from petitioner was heard until 1963. By his acts as well as by his omissions,
Miguel led Mariano and the latter‘s heirs, including Concepcion, to believe that
Petitioner Cuenco respected the ownership rights of respondent over Lot 903-A-6.
That Mariano acted and relied on Miguel‘s tacit recognition of his ownership thereof is
evident from his will, executed in 1963. Indeed, as early as 1947, long before Mariano
made his will in 1963, Lot 903-A -- situated along Juana Osmeña Extension,
Kamputhaw, Cebu City, near the Cebu Provincial Capitol -- had been subdivided and
distributed to his six children in his first marriage. Having induced him and his heirs
to believe that Lot 903-A-6 had already been distributed to Concepcion as her own,
petitioner is estopped from asserting the contrary and claiming ownership thereof.
The principle of estoppel in pais applies when -- by one‘s acts, representations,
admissions, or silence when there is a need to speak out -- one, intentionally or
through culpable negligence, induces another to believe certain facts to exist; and the
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 542
latter rightfully relies and acts on such belief, so as to be prejudiced if the former is
permitted to deny the existence of those facts.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 543
Laurel v. Desierto
SALVADOR H. LAUREL, Petitioner, versus HON. ANIANO A. DESIERTO, in his
capacity as Ombudsman, Respondent.
(G.R. No. 145368, July 1, 2002, 1st Division)
KAPUNAN, J.:
FACTS: On June 13, 1991, President Corazon C. Aquino issued Administrative Order
No. 223 "constituting a Committee for the preparation of the National Centennial
Celebration in 1998." The Committee was mandated "to take charge of the nationwide
preparations for the National Celebration of the Philippine Centennial of the
Declaration of Philippine Independence and the Inauguration of the Malolos
Congress." Subsequently, President Fidel V. Ramos issued Executive Order No. 128,
"reconstituting the Committee for the preparation of the National Centennial
Celebrations in 1988." It renamed the Committee as the "National Centennial
Commission." Appointed to chair the reconstituted Commission was Vice-President
Salvador H. Laurel. Presidents Diosdado M. Macapagal and Corazon C. Aquino were
named Honorary Chairpersons.
Petitioner Salvador H. Laurel moves for a reconsideration of this Court‘s
decision declaring him, as Chair of the National Centennial Commission (NCC), a
public officer. Petitioner also prays that the case be referred to the Court En Banc.
The issue in this case is whether petitioner, as Chair of the NCC, is a public officer
under the jurisdiction of the Ombudsman. Assuming, as petitioner proposes, that the
designation of other members to the NCC runs counter to the Constitution, it does not
make petitioner, as NCC Chair, less a public officer. Such ―serious constitutional
repercussions‖ do not reduce the force of the rationale behind this Court‘s decision.
Second, petitioner invokes estoppel. He claims that the official acts of the
President, the Senate President, the Speaker of the House of Representatives, and the
Supreme Court, in designating Cabinet members, Senators, Congressmen and
Justices to the NCC, led him to believe that the NCC is not a public office.
The contention has no merit. In estoppel, the party representing material facts
must have the intention that the other party would act upon the representation. It is
preposterous to suppose that the President, the Senate President, the Speaker and the
Supreme Court, by the designation of such officials to the NCC, intended to mislead
petitioner just so he would accept the position of NCC Chair. Estoppel must be
unequivocal and intentional. Moreover, petitioner himself admits that the principle of
estoppel does not operate against the Government in the exercise of its sovereign
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 544
powers.
Third, as ground for the referral of the case to the Court En Banc, petitioner
submits that our decision in this case modified or reversed doctrines rendered by this
Court, which can only be done by the Court En Banc.It is argued that by designating
three of its then incumbent members to the NCC, the Court took the position that the
NCC was not a public office. The argument is a bit of a stretch. Section 4 (3), Article
VIII of the Constitution provides that ―no doctrine or principle of law laid down by the
court in a decision rendered en banc or in division may be modified or reversed except
by the court sitting en banc.‖ In designating three of its incumbent members to the
NCC, the Court did not render a ―decision,‖ in the context of said constitutional
provision, which contemplates an actual case. Much less did the Court, by such
designation, articulate any ―doctrine or principle of law.‖ Invoking the same provision,
petitioner asserts that the decision in this case reversed or modified Macalino vs.
Sandiganbayan, holding that the Assistant Manager of the Treasury Division and the
Head of the Loans Administration & Insurance Section of the Philippine National
Construction Corporation (PNCC) is not a public officer under Republic Act No. 3019.
This contention also has no merit. The rationale for the HELD in Macalino is that ―the
PNCC has no original charter as it was incorporated under the general law on
corporations.‖ However, as we pointed out in our decision, a conclusion that
EXPOCORP is a government-owned or controlled corporation would not alter the
outcome of this case because petitioner‘s position and functions as Chief Executive
Officer of EXPOCORP are by virtue of his being Chairman of the NCC. The other issues
raised by petitioner are mere reiterations of his earlier arguments. The Court, however,
remains unswayed thereby.
Petition is dismissed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 545
AUSTRIA-MARTINEZ, J.:
FACTS: Shoemart, Inc., is a corporation duly organized and existing under the laws of
the Philippines engaged in the operation of department stores. On December 4, 1985,
Shoemart, through its Executive Vice-President, Senen T. Mendiola, and spouses
Manuel R. Hanopol and Beatriz T. Hanopol executed a Contract of Purchase on Credit.
For failure of spouses Hanopol to pay the principal amount of One Hundred
Twenty-Four Thousand Five Hundred Seventy-One Pesos and Eighty-Nine Centavos
(P124,571.89) as of October 6, 1987, Shoemart instituted extrajudicial foreclosure
proceedings against the mortgaged properties.
Spouses Hanopol alleged that Shoemart breached the contract when the latter
failed to furnish the former with the requisite documents by which the former‘s
liability shall be determined, namely: charge invoices, purchase booklets and purchase
journal, as provided in their contract; that without the requisite documents, spouses
Hanopol had no way of knowing that, in fact, they had already paid, even overpaid,
whatever they owed to Shoemart; that despite said breach, Shoemart even had the
audacity to apply for extrajudicial foreclosure with the Sheriff.
ISSUE: Whether or not Shoemart acted with manifest bad faith in pursuing with the
foreclosure and auction sale of the property of spouses Hanopol, and, accordingly,
should be held liable for damages.
HELD: No. Shoemart did not act with manifest bad faith in pursuing with the
foreclosure and auction sale of the property of spouses Hanopol, and, accordingly,
should be held liable for damages.
All the three (3) elements for litis pendentia as a ground for dismissal of an action are
present, namely: (a) identity of parties, or at least such parties who represent the same
interest in both actions; (b) identity of rights asserted and relief prayed for, the relief
being founded on the same facts; and (c) the identity, with respect to the two (2)
preceding particulars in the two (2) cases, in such that any judgment that may be
rendered in the pending case, regardless of which party is successful, would amount
to res judicata in the other.
In the case at bench, the parties are the same; the relief sought in the case
before the Court of Appeals and the trial court are the same, that is, to permanently
enjoin the foreclosure of the real estate mortgage executed by spouses Hanopol in
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 546
favor of Shoemart; and, both are premised on the same facts. The judgment of the
Court of Appeals would constitute a bar to the suit before the trial court.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 547
FACTS: Before us are two (2) consolidated petitions for review, one filed by the
Terminal Facilities and Services Corporation (TEFASCO) and the other by the
Philippine Ports Authority (PPA). TEFASCO is a domestic corporation organized and
existing under the laws of the Philippines with principal place of business at Barrio
Ilang, Davao City. It is engaged in the business of providing port and terminal facilities
as well as arrastre, stevedoring and other port-related services at its own private port
at Barrio Ilang. Sometime in 1975 TEFASCO submitted to PPA a proposal for the
construction of a specialized terminal complex with port facilities and a provision for
port services in Davao City. To ease the acute congestion in the government ports at
Sasa and Sta. Ana, Davao City, PPA welcomed the proposal and organized an inter-
agency committee to study the plan. The committee recommended approval. On April
21, 1976 the PPA Board of Directors passed Resolution No. 7 accepting and approving
TEFASCO's project proposal. Long after TEFASCO broke round with massive
infrastructure work, the PPA Board curiously passed on October 1, 1976 Resolution
No. 50 under which TEFASCO, without asking for one, was compelled to submit an
application for construction permit. Without the consent of TEFASCO, the application
imposed additional significant conditions. The series of PPA impositions did not stop
there. Two (2) years after the completion of the port facilities and the commencement
of TEFASCO's port operations, or on June 10, 1978, PPA again issued to TEFASCO
another permit, under which more onerous conditions were foisted on TEFASCO's port
operations. In the purported permit appeared for the first time the contentious
provisions for ten percent (10%) government share out of arrastre and stevedoring
gross income and one hundred percent (100%) wharfage and berthing charges. On
February 10, 1984 TEFASCO and PPA executed a Memorandum of Agreement (MOA)
providing among others for (a) acknowledgment of TEFASCO's arrears in government
share at Three Million Eight Hundred Seven Thousand Five Hundred Sixty-Three
Pesos and Seventy-Five Centavos (P3,807,563.75) payable monthly, with default
penalized by automatic withdrawal of its commercial private port permit and permit to
operate cargo handling services; (b) reduction of government share from ten percent
(10%) to six percent (6%) on all cargo handling and related revenue (or arrastre and
stevedoring gross income); (c) opening of its pier facilities to all commercial and third-
party cargoes and vessels for a period coterminous with its foreshore lease contract
with the National Government; and, (d) tenure of five (5) years extendible by five (5)
more years for TEFASCO's permit to operate cargo handling in its private port
facilities. In return PPA promised to issue the necessary permits for TEFASCO's port
activities. TEFASCO complied with the MOA and paid the accrued and current
government share.
On August 30, 1988 TEFASCO sued PPA and PPA Port Manager, and Port
Officer in Davao City for refund of government share it had paid and for damages as a
result of alleged illegal exaction from its clients of one hundred percent (100%)
berthing and wharfage fees. The complaint also sought to nullify the February 10,
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 548
1984 MOA and all other PPA issuances modifying the terms and conditions of the
April 21, 1976 Resolution No. 7 above-mentioned. PPA appealed the decision of the
trial court to the Court of Appeals. The appellate court in its original decision
recognized the validity of the impositions and reversed in toto the decision of the trial
court. TEFASCO moved for reconsideration which the Court of Appeals found partly
meritorious. Thus the Court of Appeals in its Amended Decision partially affirmed the
RTC decision only in the sense that PPA was directed to pay TEFASCO (1) the
amounts of Fifteen Million Eight Hundred Ten Thousand Thirty-Two Pesos and Seven
Centavos (P15,810,032.07) representing fifty percent (50%) wharfage fees and Three
Million Nine Hundred Sixty-One Thousand Nine Hundred Sixty-Four Pesos and Six
Centavos (P3,961,964.06) representing thirty percent (30%) berthing fees which
TEFASCO could have earned as private port usage fee from 1977 to 1991. The Court
of Appeals held that the one hundred percent (100%) berthing and wharfage fees were
unenforceable because they had not been approved by the President under P.D. No.
857, and discriminatory since much lower rates were charged in other private ports as
shown by PPA issuances effective 1995 to 1997. Both PPA and TEFASCO were
unsatisfied with this disposition hence these petitions.
ISSUE: Whether or not the collection by PPA of one hundred percent (100%) wharfage
fees and berthing charges; (c) the propriety of the award of fifty percent (50%) wharfage
fees and thirty percent (30%) berthing charges as actual damages in favor of TEFASCO
for the period from 1977 to 1991 is valid.
HELD: The imposition by PPA of ten percent (10%), later reduced to six percent (6%),
government share out of arrastre and stevedoring gross income of TEFASCO is void.
This exaction was never mentioned in the contract, much less is it a binding
prestation, between TEFASCO and PPA. What was clearly stated in the terms and
conditions appended to PPA Resolution No. 7 was for TEFASCO to pay and/or secure
from the proper authorities "all fees and/or permits pertinent to the construction and
operation of the proposed project." The government share demanded and collected
from the gross income of TEFASCO from its arrastre and stevedoring activities in
TEFASCO's wholly owned port is certainly not a fee or in any event a proper condition
in a regulatory permit. Rather it is an onerous "contractual stipulation" which finds no
root or basis or reference even in the contract aforementioned.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 549
As security for the credit accommodations and for those which may thereinafter
be granted, petitioner mortgaged to respondent PNB the following: 1) three (3) parcels
of land with improvements in F. Pasco Avenue, Santolan, Pasig; 2) his house and lot in
Quezon City; and 3) several pieces of machinery and equipment in his Pasig coco-
chemical plant.
Petitioner made use of his LC/TR line to purchase raw materials from foreign
importers. He signed a total of eleven (11) documents denominated as "Application
and Agreement for Commercial Letter of Credit," on various dates
In a letter dated January 3, 1980 and signed by Branch Manager Fil S. Carreon
Jr., respondent PNB advised petitioner Mendoza that effective December 1, 1979, the
bank raised its interest rates to 14% per annum, in line with Central Bank's Monetary
Board Resolution No. 2126 dated November 29, 1979.
additional machinery and equipment and proof of ownership thereof. Cura also
suggested that petitioner reduce his total loan obligations to Three Million Pesos
(P3,000,000.00).
On September 25, 1981, petitioner sent another letter addressed to PNB Vice-
President Jose Salvador, regarding his request for restructuring of his loans. He
offered respondent PNB the following proposals: 1) the disposal of some of the
mortgaged properties, more particularly, his house and lot and a vacant lot in order to
pay the overdue trust receipts; 2) capitalization and conversion of the balance into a 5-
year term loan payable semi-annually or on annual installments; 3) a new Two Million
Pesos (P2,000,000.00) LC/TR line in order to enable Atlantic Exchange Philippines to
operate at full capacity; 4) assignment of all his receivables to PNB from all domestic
and export sales generated by the LC/TR line; and 5) maintenance of the existing Five
Hundred Thousand Pesos (P500,000.00) credit line.
The petitioner testified that respondent PNB Mandaluyong Branch found his
proposal favorable and recommended the implementation of the agreement. However,
Fernando Maramag, PNB Executive Vice-President, disapproved the proposed release
of the mortgaged properties and reduced the proposed new LC/TR line to One Million
Pesos (P1,000,000.00). Petitioner claimed he was forced to agree to these changes and
that he was required to submit a new formal proposal and to sign two (2) blank
promissory notes.
In a letter dated July 2, 1982, petitioner offered the following revised proposals
to respondent bank: 1) the restructuring of past due accounts including interests and
penalties into a 5-year term loan, payable semi-annually with one year grace period on
the principal; 2) payment of Four Hundred Thousand Pesos (P400,000.00) upon the
approval of the proposal; 3) reduction of penalty from 3% to 1%; 4) capitalization of the
interest component with interest rate at 16% per annum; 5) establishment of a One
Million Pesos (P1,000,000.00) LC/TR line against the mortgaged properties; 6)
assignment of all his export proceeds to respondent bank to guarantee payment of his
Petitioner failed to pay the subject two (2) Promissory Notes Nos. 127/82 and
128/82 as they fell due. Respondent PNB extra-judicially foreclosed the real and
chattel mortgages, and the mortgaged properties were sold at public auction to
respondent PNB, as highest bidder, for a total of Three Million Seven Hundred Ninety
Eight Thousand Seven Hundred Nineteen Pesos and Fifty Centavos (P3,798,719.50).
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 551
The trial court decided for the petitioner. Upon appeal, the Court of Appeals
reversed the decision of the trial court and dismissed the complaint.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 552
CARPIO, J.,
ISSUE: Whether or not FEBTC is estopped from claiming that the insurance premium
has been unpaid.
HELD: Both trial and appellate courts basically agree that FEBTC is estopped from
claiming that the insurance premium has been unpaid. That FEBTC induced Maxilite
and Marques to believe that the insurance premium has in fact been debited from
Maxilite‘s account is grounded on the the following facts: (1) FEBTC represented and
committed to handle Maxilite‘s financing and capital requirements, including the
related transactions such as the insurance of the trust receipted merchandise; (2)
prior to the subject Insurance Policy No. 1024439, the premiums for the three
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 553
separate fire insurance policies had been paid through automatic debit arrangement;
(3) FEBIBI sent FEBTC, not Maxilite nor Marques, written reminders dated 19 October
1994, 24 January 1995, and 6 March 1995 to debit Maxilite‘s account, establishing
FEBTC‘s obligation to automatically debit Maxilite‘s account for the premium amount;
(4) there was no written demand from FEBTC or Makati Insurance Company for
Maxilite or Marques to pay the insurance premium; (5) the subject insurance policy
was released to Maxilite on 19 August 1994; and (6) the subject insurance policy
remained uncancelled despite the alleged non-payment of the premium, making it
appear that the insurance policy remained in force and binding.
Roblett Construction v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 554
ISSUE: Whether or not the agreement between the parties is binding upon them.
HELD: Yes. It must be emphasized that the same agreement was used by plaintiff as
the basis for claiming defendant's obligation of P237,909.38 and also used by
defendant as the same basis for its alleged payment in full of its obligation to plaintiff.
But while plaintiff treats the entire agreement as valid, defendant wants the court to
treat that portion which treats of the offsetting of P115,000.00 as valid, whereas it
considers the other terms and conditions as "onerous, illegal and want of prior
consent and Board approval." This Court cannot agree to defendant's contention. It
must be stressed that defendant's answer was not made under oath, and therefore,
the genuineness and due execution of the agreement which was the basis for
plaintiff's claim is deemed admitted (Section 8, Rule 8, Rules of Court). Such
admission, under the principle of estoppel, is rendered conclusive upon defendant and
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 555
cannot be denied or disproved as against plaintiff (Art. 1431, Civil Code). Either the
agreement is valid or void. It must be treated as a whole and not to be divided into
parts and consider only those provisions which favor one party (in this case the
defendant). Contracts must bind both contracting parties, its validity or compliance
cannot be left to the will of one of them (Art. 1308, New Civil Code).
Simedarby v. Goodyear
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 556
FACTS: Macgraphics leased a billboard to Sime Darby to bare its name and
logo at a monthly rental of P120, 000.00 for four years and was set to expire on
March 30, 1998. Sime Darby paid Macgraphics a total of P1.2 million
representing the ten-month deposit which the latter would apply to the last ten
months of the lease. Thereafter, Sime Darby was bought by Goodyear for a total
of P1.65 billion including the assignment of the receivables in connection with
its billboard advertising. Sime Darby then notified Macgraphics of the
assignment of the Magallanes billboard in favor of Goodyear.
Macgraphics then sent a letter to Sime Darby, dated July 11, 1996, informing
the latter that it could not give its consent to the assignment of lease to
Goodyear and advised Goodyear that any advertising service it intended to get
from them would have to wait until after the expiration or valid pre-termination
of the lease then existing with Sime Darby. Goodyear demanded partial
rescission of deed and the refund of P1, 239,000.00value of Sime Darby's
leasehold rights over the Magallanes billboard. Sime Darby refused and a
complaint was filed by Goodyear.
ISSUE: Whether or not the doctrine of laches can be applied in the present
case
HELD:The Court finds that the doctrine of laches cannot be applied in this
case. Laches is the failure or neglect, for an unreasonable and unexplained
length of time, to do that which, by exercising due diligence, could or should
have been done earlier; it is negligence or omission to assert a right within a
reasonable time, warranting the presumption that the party entitled to assert it
either has abandoned or declined to assert it. There is no absolute rule as to
what constitutes laches or staleness of demand; each case is to be determined
according to its particular circumstances, with the question of laches
addressed to the sound discretion of the court. Because laches is an equitable
doctrine, its application is controlled by equitable considerations and should
not be used to defeat justice or to perpetuate fraud or injustice.
From the records, it appears that Macgraphics first learned of the assignment
when Sime Darby sent its letter-notice dated May 3, 1996. From the letters
sent by Macgraphics to Goodyear, it is apparent that Macgraphics had to study
and determine both the legal and practical implications of entertaining
Goodyear as a client. After review, Macgraphics found that consenting to the
assignment would entail the commitment of manpower and resources that it
did not foresee at the inception of the lease. It thereafter communicated its
non-conformity to the assignment. To the mind of the Court, there was never a
delay.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 557
FACTS: The principal executed a special power of attorney in favor of her daughter
authorizing her to contract a loan from a bank and to mortgage the principal‘s two
lots. The principal also executed an affidavit of non-tenancy for the approval of the
loan. The bank granted a loan secured by two promissory notes and a real estate
mortgage over the principal‘s two lots. The mortgage document was signed by the
agent and her husband as mortgagors in their individual capacities, without stating
that the agent was executing the mortgage contract for and in behalf of the
principal. The bank foreclosed the mortgage due to non-payment of the loan. A notice
of public auction sale was sent to principal. The latter‘s lawyer responded with a letter
to the bank requesting that the public auction be postponed. The letter went
unheeded and the public auction was held as scheduled wherein the mortgaged
properties were sold to the bank. Subsequently, the bank consolidated its title and
obtained new titles in its name after the redemption period lapsed without the
principal taking any action. Around five years later, the principal filed a complaint for
annulment of mortgage and extrajudicial foreclosure of the properties with damages
with the regional trial court (RTC) of Naga City. The principal sought nullification of
the real estate mortgage and extrajudicial foreclosure sale, as well as the cancellation
of the bank‘s title over the properties.
ISSUE: Whether or not the principal can be bound by the real estate mortgage
executed by the agent.
HELD: The RTC rendered judgment in favor of the principal, holding that the principal
cannot be bound by the real estate mortgage executed by the agent unless it is shown
that the same was made and signed in the name of the principal; hence, the mortgage
will bind the agent only. The Court of Appeals (CA) affirmed the RTC‘s HELD. It held
that it must be shown that the real estate mortgage was executed by the agent on
behalf of the principal, otherwise the agent may be deemed to have acted on his own
and the mortgage is void. However, the CA further declared that the principal loan
agreement was not affected, which had become an unsecured credit. The Supreme
Court held that the principal is not bound by the real estate mortgage executed by the
authorized agent in her own name without indicating the principal. It is not sufficient
for the principal to have authorized the agent through a special power of attorney to
execute the mortgage on behalf of the principal; the mortgage contract itself must
clealy state that the agent was executing the mortgage contract for and on behalf of
the principal.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 558
CARPIO, J.:
FACTS: Kings Properties Corporation (petitioner) filed this Petition for Review on
Certiorari assailing the Court of Appeals‘ Decision[2] dated 20 December 2004 in CA-
G.R. CV No. 68828 as well as the Resolution[3] dated 10 October 2005 denying the
Motion for Reconsideration. In the assailed decision, the Court of Appeals reversed the
Regional Trial Court‘s Decision dated 4 July 2000. This case involves an action for
cancellation of certificates of title, registration of deed of sale and issuance of
certificates of title filed by Canuto A. Galido before Branch 71 of the Regional Trial
Court of Antipolo City (trial court). On 18 April 1966, the heirs of Domingo Eniceo,
namely Rufina Eniceo and Maria Eniceo, were awarded with Homestead Patent No.
112947 consisting of four parcels of land located in San Isidro, Antipolo, Rizal and
particularly described as follows; Lot No. 1 containing an area of 96,297 square
meters; Lot No. 3 containing an area of 25,170 square meters; Lot No. 4 containing an
area of 26,812 square meters; and Lot No. 5 containing an area of 603 square meters.
The Antipolo property with a total area of 14.8882 hectares was registered under
Original Certificate of Title (OCT) No. 535. Subsequently a deed of sale covering the
Antipolo property was executed between Rufina Eniceo and Maria Eniceo as vendors
and respondent as vendee. They sold the Antipolo property to respondent for
P250,000. A certain Carmen Aldana delivered the owner‘s duplicate copy of OCT No.
535 to respondent.Petitioner alleges that when Maria Eniceo died in June 1975,
Rufina Eniceo and the heirs of Maria Eniceo, who continued to occupy the Antipolo
property as owners, thought that the owner‘s duplicate copy of OCT No. 535 was lost.
On 5 April 1988, the Eniceo heirs registered with the Registry of Deeds of Marikina
City a Notice of Loss dated 2 April 1988 of the owner‘s copy of OCT No. 535. The
Eniceo heirs also filed a petition for the issuance of a new owner‘s duplicate copy of
OCT No. 535 with Branch 72 of the Regional Trial Court of Antipolo, Rizal. The RTC
rendered a decision finding that the certified true copy of OCT No. 535 contained no
annotation in favor of any person, corporation or entity. The RTC ordered the Registry
of Deeds to issue a second owner‘s copy of OCT No. 535 in favor of the Eniceo heirs
and declared the original owner‘s copy of OCT NO. 535 cancelled and considered of no
further value. Thus the Registry of Deeds issued a second owner‘s copy of OCT No.
535 in favor of the Eniceo heirs. Petitioner states that as early as 1991, respondent
knew of the RTC decision in LRC Case No. 584-A because respondent filed a criminal
case against Rufina Eniceo and Leonila Bolinas for giving false testimony upon a
material fact during the trial of LRC Case No. 584-A. Petitioner alleges that sometime
in February 1995, Bolinas came to the office of Alberto Tronio Jr. , petitioner‘s general
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 559
manager, and offered to sell the Antipolo property. Tronio ascertained that OCT No.
535 was clean and had no lien and encumbrances. After the necessary verification,
petitioner decided to buy the Antipolo property. On 14 March 1995, respondent
caused the annotation of his adverse claim in OCT No. 535. On 20 March 1995, the
Eniceo heirs executed a deed of absolute sale in favor of petitioner covering lots 3 and
4 of the Antipolo property for P500,000. On the same date, Transfer Certificate of Title
(TCT) Nos. 277747 and 277120 were issued. TCT No. 277747 covering lots 1 and 5 of
the Antipolo property was registered in the names of Rufina Eniceo, Ambrosio Eniceo,
Rodolfo Calove, Fernando Calove and Leonila Calove Bolinas. TCT No. 277120
covering lots 3 and 4 of the Antipolo property was registered in the name of petitioner.
On 5 April 1995, the Eniceo heirs executed another deed of sale in favor of petitioner
covering lots 1 and 5 of the Antipolo property for P1,000,000. TCT No. 278588 was
issued in the name of petitioner and TCT No. 277120 was cancelled. On 17 August
1995, the Secretary of the Department of Environment and Natural Resources (DENR
Secretary) approved the deed of sale between the Eniceo heirs and respondent. On 16
January 1996, respondent filed a civil complaint with the trial court against the
Eniceo heirs and petitioner. Respondent prayed for the cancellation of the certificates
of title issued in favor of petitioner, and the registration of the deed of sale and
issuance of a new transfer certificate of title in favor of respondent. The trial
court rendered its decision dismissing the case for lack of legal and factual basis.
Respondent appealed to the Court of Appeals. On 20 December 2004, the CA rendered
a decision reversing the trial court‘s decision. Aggrieved by the CA‘s decision and
resolution, petitioner elevated the case before the High Court.
ISSUES: Whether the adverse claim of respondent over the Antipolo property should
be barred by laches
HELD:The contract between the Eniceo heirs and respondent executed was a perfected
contract of sale. A contract is perfected once there is consent of the contracting parties
on the object certain and on the cause of the obligation. In the present case, the object
of the sale is the Antipolo property and the price certain is P250,000. The contract of
sale has also been consummated because the vendors and vendee have performed
their respective obligations under the contract. In a contract of sale, the seller
obligates himself to transfer the ownership of the determinate thing sold, and to
deliver the same to the buyer, who obligates himself to pay a price certain to the seller.
The execution of the notarized deed of sale and the delivery of the owner‘s duplicate
copy of OCT No. 535 to respondent is tantamount to a constructive delivery of the
object of the sale. The Eniceo heirs also claimed in their answer that the deed of sale is
fake and spurious. However, as correctly held by the CA, forgery can never be
presumed. The party alleging forgery is mandated to prove it with clear and convincing
evidence. Whoever alleges forgery has the burden of proving it. In this case, petitioner
and the Eniceo heirs failed to discharge this burden.
1991, respondent still failed to have the deed of sale registered with the Registry of
Deeds. The essence of laches is the failure or neglect, for an unreasonable and
unexplained length of time, to do that which, through due diligence, could have been
done earlier, thus giving rise to a presumption that the party entitled to assert it had
either abandoned or declined to assert it. Respondent discovered in 1991 that a new
owner‘s copy of OCT No. 535 was issued to the Eniceo heirs. Respondent filed a
criminal case against the Eniceo heirs for false testimony. When respondent learned
that the Eniceo heirs were planning to sell the Antipolo property, respondent caused
the annotation of an adverse claim. On 16 January 1996, when respondent learned
that OCT No. 535 was cancelled and new TCTs were issued, respondent filed a civil
complaint with the trial court against the Eniceo heirs and petitioner. Respondent‘s
actions negate petitioner‘s argument that respondent is guilty of laches. True,
unrecorded sales of land brought under Presidential Decree No. 1529 or the Property
Registration Decree (PD 1529) are effective between and binding only upon the
immediate parties. The registration required in Section 51 of PD 1529 is intended to
protect innocent third persons, that is, persons who, without knowledge of the sale
and in good faith, acquire rights to the property. Petitioner, however, is not an
innocent purchaser for value. Hence the petition was denied.
Metrobank v. Cabilzo
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 561
CHICO-NAZARIO, J.:
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 562
HELD: The degree of diligence required of a reasonable man in the exercise of his
tasks and the performance of his duties has been faithfully complied with by Cabilzo.
In fact, he was wary enough that he filled with asterisks the spaces between and after
the amounts, not only those stated in words, but also those in numerical figures, in
order to prevent any fraudulent insertion, but unfortunately, the check was still
successfully altered, indorsed by the collecting bank, and cleared by the drawee bank,
and encashed by the perpetrator of the fraud, to the damage and prejudice of Cabilzo.
Metrobank cannot lightly impute that Cabilzo was negligent and is therefore
prevented from asserting his rights under the doctrine of equitable estoppel when the
facts on record are bare of evidence to support such conclusion. The doctrine of
equitable estoppel states that when one of the two innocent persons, each guiltless of
any intentional or moral wrong, must suffer a loss, it must be borne by the one whose
erroneous conduct, either by omission or commission, was the cause of injury.
Metrobank‘s reliance on this dictum is misplaced. For one, Metrobank‘s
representation that it is an innocent party is flimsy and evidently, misleading. At the
same time, Metrobank cannot asseverate that Cabilzo was negligent and this
negligence was the proximate cause of the loss in the absence of even a scintilla proof
to buttress such claim. Negligence is not presumed but must be proven by the one
who alleges it, which petitioner failed to.
Mesina v. Garcia
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 563
CHICO-NAZARIO, J.:
FACTS: Atty. Honorio Valisno Garcia and Felicisima Mesina, during their lifetime,
enstered into a Contract to Sell over a lot consisting of 235 square meters, situated at
Diversion Road, Sangitan, Cabanatuan City, covered and embraced by TCT No. T-
31643 in the name of Felicisima Mesina which title was eventually cancelled and TCT
No. T-78881 was issued in the name of herein petitioners. The Contract to Sell
provides that the cost of the lot is P70.00 per square meter for a total amount of
P16,450.00; payable within a period not to exceed 7 years at an interest rate of 12%
per annum, in successive monthly installments of P260.85 per month, starting May
1977. Thereafter, the succeeding monthly installments are to be paid within the first
week of every month, at the residence of the vendor at Quezon City, with all unpaid
monthly installments earning an interest of 1% per month. Instituting this case at
bar, respondent asserts that despite the full payment made on 7 February 1984
for the consideration of the subject lot, petitioners refused to issue the necessary Deed
of Sale to effect the transfer of the property to her.
HELD: Article 1155 of the Civil Code is explicit that the prescriptive period is
interrupted when an action has been filed in court; when there is a written
extrajudicial demand made by the creditors; and when there is any written
acknowledgment of the debt by the debtor.
The records reveal that starting 19 April 1986 until 2 January 1997 respondent
continuously demanded from the petitioners the execution of the said Deed of
Absolute Sale but the latter conjured many reasons and excuses not to execute the
same. Respondent even filed a Complaint before the Housing and Land Use
Regulatory Board way back in June, 1986, to enforce her rights and to compel the
mother of herein petitioners, who was still alive at that time, to execute the necessary
Deed of Absolute Sale for the transfer of title in her name. On 2 January 1997,
respondent, through her counsel, sent a final demand letter to the petitioners for the
execution of the Deed of Absolute Sale, but still to no avail. Consequently, because of
utter frustration of the respondent, she finally lodged a formal Complaint for Specific
Performance with Damages before the trial court on 20 January 1997.
Pahamotang v. PNB
JOSEPHINE PAHAMOTANG and ELEANOR PAHAMOTANG-BASA, Petitioners,
versus THE PHILIPPINE NATIONAL BANK (PNB) and the HEIRS OF ARTURO
ARGUNA, Respondents.
GARCIA, J.:
FACTS: On July 1, 1972, Melitona Pahamotang died. She was survived by her
husband Agustin Pahamotang, and their eight (8) children, namely: Ana, Genoveva,
Isabelita, Corazon, Susana, Concepcion and herein petitioners Josephine and Eleonor,
all surnamed Pahamotang. On September 15, 1972, Agustin filed with the then Court
of First Instance of Davao City a petition for issuance of letters administration over the
estate of his deceased wife. The petition, docketed as Special Case No. 1792, was
raffled to Branch VI of said court, hereinafter referred to as the intestate court. In his
petition, Agustin identified petitioners Josephine and Eleonor as among the heirs of
his deceased spouse. It appears that Agustin was appointed petitioners' judicial
guardian in an earlier case - Special Civil Case No. 1785 – also of the CFI of Davao
City, Branch VI. On December 7, 1972, the intestate court issued an order granting
Agustin‘s petition.
The late Agustin then executed several mortgages and later sale of the
properties with the PNB and Arguna respectively. The heirs later questioned the
validity of the transactions prejudicial to them. The trial court declared the real estate
mortgage and the sale void but both were valid with respect to the other parties. The
decision was reversed by the Court of Appeals; to the appellate court, petitioners
committed a fatal error of mounting a collateral attack on the foregoing orders instead
of initiating a direct action to annul them.
ISSUE: Whether the Court of Appeals erred in reversing the decision of the trial court
HELD: In the present case, the appellate court erred in appreciating laches against
petitioners. The element of delay in questioning the subject orders of the intestate
court is sorely lacking. Petitioners were totally unaware of the plan of Agustin to
mortgage and sell the estate properties. There is no indication that mortgagor PNB and
vendee Arguna had notified petitioners of the contracts they had executed with
Agustin. Although petitioners finally obtained knowledge of the subject petitions
filed by their father, and eventually challenged the July 18, 1973, October 19, 1974,
February 25, 1980 and January 7, 1981 orders of the intestate court, it is not
clear from the challenged decision of the appellate court when they (petitioners)
actually learned of the existence of said orders of the intestate court. Absent any
indication of the point in time when petitioners acquired knowledge of those
orders, their alleged delay in impugning the validity thereof certainly cannot be
established. And the Court of Appeals cannot simply impute laches against them.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 565
VITUG, J.:
The annotations, however, were never made because of the untimely demise of
Dr. Felipe C. Roque. The death of Dr. Roque on 10 February 1994 constrained
petitioner to deal with respondent Efren P. Roque, one of the surviving children of the
late Dr. Roque, but the negotiations broke down due to some disagreements. In a
letter, dated 3 November 1994, respondent advised petitioner "to desist from any
attempt to enforce the aforementioned contract of lease and memorandum of
agreement". On 15 February 1995, respondent filed a case for annulment of the
contract of lease and the memorandum of agreement, with a prayer for the issuance of
a preliminary injunction. Efren P. Roque alleged that he had long been the absolute
owner of the subject property by virtue of a deed of donation inter vivos executed in
his favor by his parents, Dr. Felipe Roque and Elisa Roque, on 26 December 1978,
and that the late Dr. Felipe Roque had no authority to enter into the assailed
agreements with petitioner. The donation was made in a public instrument duly
acknowledged by the donor-spouses before a notary public and duly accepted on the
same day by respondent before the notary public in the same instrument of donation.
The title to the property, however, remained in the name of Dr. Felipe C. Roque, and it
was only transferred to and in the name of respondent sixteen years later, or on 11
May 1994, while he resided in the United States of America, delegated to his father the
mere administration of the property. Respondent came to know of the assailed
contracts with petitioner only after retiring to the Philippines upon the death of his
father. On 9 August 1996, the trial court dismissed the complaint of respondent; it
explained:
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 566
remains valid considering that no third person is involved. Plaintiff cannot be the third
person because he is the successor-in-interest of his father, Felipe Roque, the lessor,
and it is a rule that contracts take effect not only between the parties themselves but
also between their assigns and heirs (Article 1311, Civil Code) and therefore, the lease
contract together with the memorandum of agreement would be conclusive on plaintiff
Efren Roque. He is bound by the contract even if he did not participate therein.
Moreover, the agreements have been perfected and partially executed by the receipt of
his father of the downpayment and deposit totaling to P500,000.00." The trial court
ordered respondent to surrender TCT No. 109754 to the Register of Deeds of Quezon
City for the annotation of the questioned Contract of Lease and Memorandum of
Agreement.
On appeal, the Court of Appeals reversed the decision of the trial court and held
to be invalid the Contract of Lease and Memorandum of Agreement. While it shared
the view expressed by the trial court that a deed of donation would have to be
registered in order to bind third persons, the appellate court, however, concluded that
petitioner was not a lessee in good faith having had prior knowledge of the donation in
favor of respondent, and that such actual knowledge had the effect of registration
insofar as petitioner was concerned. The appellate court based its findings largely on
the testimony of Veredigno Atienza during cross-examination.
ISSUE: Whether or not the respondent is barred by laches and estoppel from denying
the contracts.
HELD: The Court cannot accept petitioner's argument that respondent is guilty of
laches. Laches, in its real sense, is the failure or neglect, for an unreasonable and
unexplained length of time, to do that which, by exercising due diligence, could or
should have been done earlier; it is negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party entitled to assert it either
has abandoned or declined to assert it. Respondent learned of the contracts only in
February 1994 after the death of his father, and in the same year, during November,
he assailed the validity of the agreements. Hardly, could respondent then be said to
have neglected to assert his case for an unreasonable length of time.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 567
YNARES-SANTIAGO, J.:
On November 23, 1998, the trial court rendered decision RESCINDING the
Construction Agreement between plaintiff Meatmaster Int‘l. Corp. and defendant Lelis
Integrated Dev‘t. Corp. with both parties shouldering their own respective damage.
Initially, the trial court dismissed the appeal for failure of the respondent to pay
the requisite docket fees within the reglementary period. Upon motion by the
respondent however, the trial court reconsidered and gave due course to the notice of
appeal because respondent paid the docket fees.
In a motion to dismiss filed before the appellate court, the petitioner alleged
that respondent‘s appeal suffers from jurisdictional infirmity because of late payment
of docket fees.
CA set aside the decision of the trial court and directed petitioner to pay
respondent the amount of P1,863,081.53. Petitioner‘s motion for reconsideration was
denied Hence, the instant petition.
ISSUE: Whether or not the Court of Appeals erred in entertaining the appeal of
respondent despite the finality of the trial court‘s decision.
HELD: Yes. It is well-established that the payment of docket fees within the prescribed
period is mandatory for the perfection of an appeal. This is so because a court
acquires jurisdiction over the subject matter of the action only upon the payment of
the correct amount of docket fees regardless of the actual date of filing of the case in
court. The payment of the full amount of the docket fee is a sine qua non requirement
for the perfection of an appeal. The court acquires jurisdiction over the case only upon
the payment of the prescribed docket fees.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 568
In the case at bar, the respondent seasonably filed the notice of appeal but it paid the
docket fees one (1) month after the lapse of the appeal period. As admitted by the
respondent, the last day for filing the notice of appeal was on March 29, 1999, but it
paid the docket fees only on April 30, 1999 because of oversight. Obviously, at the
time the said docket fees were paid, the decision appealed from has long attained
finality and no longer appealable.
Respondent‘s contention that the petitioner is now estopped from raising the
issue of late payment of the docket fee because of his failure to assail promptly the
trial court‘s order approving the notice of appeal and accepting the appeal fee, is
untenable. Estoppel by laches arises from the negligence or omission to assert a right
within a reasonable time, warranting a presumption that the party entitled to assert it
either has abandoned or declined to assert it. In the case at bar, petitioner raised at
the first instance the non-payment of the docket fee in its motion for reconsideration
before the trial court. Petitioner reiterated its objection in the motion to dismiss before
the appellate court and finally, in the instant petition. Plainly, petitioner cannot be
faulted for being remiss in asserting its rights considering that it vigorously registered
a persistent and consistent objection to the Court of Appeals‘ assumption of
jurisdiction at all stages of the proceedings.
Larena v. Mapili
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 569
FACTS: Hipolito Mapili during his lifetime owned a parcel of unregistered land
declared for taxation purposes in his name. The property had descended by
succession from Hipolito to his only son Magno and on to the latter‘s own widow and
children. These heirs, the herein respondents, took possession of the property up to
the outbreak of World War II when they evacuated to the hinterlands.
On the other hand, petitioner Aquilina Larena took possession of the property in
the1970‘s alleging that she had purchased it from her aunt (Filomena Larena) on
February 17, 1968. Filomena Larena in turn claimed to have bought it from Hipolito
on October 28, 1949, as evidence by the Affidavit of Transfer of Real Property executed
on the same date. The Regional Trial Court, however, declared the said affidavit as
spurious because Hipolito was already dead when the alleged transfer was made to
Filomena Larena.
On appeal, the Court of Appeals declared that respondents had never lost their
right to the land in question as they were the heirs to whom the property had
descended upon the death of the original claimant and possessor.
ISSUE: Whether or not Filomena Larena acquired the subject property by means of
sale, prescription, and/or laches.
HELD: No, Filomena did not acquire said property by means of sale, prescription
and/or laches. First, the tax declarations are not a conclusive evidence of ownership,
but a proof that the holder has a claim of title over the property. It is good indicia of
possession in the concept of owner. It may strengthen Aquilina‘s bona fide claim of
acquisition of ownership. However, petitioners failed to present the evidence needed to
tack the date of possession on the property in question.
Santos v. Santos
LEOUEL SANTOS, Petitioner,
versus THE HONORABLE COURT OF APPEALS AND JULIA ROSARIO BEDIA-
SANTOS, Respondents.
VITUG, J.:
The spouses Jesus and Rosalia were the parents of the respondents and the
husband of the petitioner. The spouses owned a parcel of registered land with a four-
door apartment administered by Rosalia who rented them out. On January 19, 1959,
the spouses executed a deed of sale of the properties in favor of their children Salvador
and Rosa. Rosa in turn sold her share to Salvador on November 20, 1973, which
resulted in the issuance of new TCT. Despite the transfer of the property to Salvador,
Rosalia continued to lease and receive rentals from the apartment units.
On January 9, 1985, Salvador died, followed by Rosalia who died the following
month. Shortly after, petitioner Zenaida, claiming to be Salvador‘s heir, demanded the
rent from Antonio Hombrebueno, a tenant of Rosalia. When the latter refused to pay,
Zenaida filed an ejectment suit against him with the Metropolitan Trial Court of
Manila, which eventually decided in Zenaida‘s favor.
The trial court decided in favor of private respondents in as much as the deeds
of sale were fictitious, the action to assail the same does not prescribe.Upon appeal,
the Court of Appeals affirmed the trial court‘s decision. It held that the subject deeds
of sale did not confer upon Salvador the ownership over the subject property, because
even after the sale, the original vendors remained in dominion, control, and possession
thereof.
ISSUE: Whether or not the cause of action of the respondents had prescribed and/or
barred by laches.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 571
HELD: No, the cause of action by the respondents had not prescribed nor is it barred
by laches.
First, the right to file an action for the reconveyance of the subject property to
the estate of Rosalia has not prescribed since deeds of sale were simulated and
fictitious. The complaint amounts to a declaration of nullity of a void contract, which
is imprescriptible. Hence, respondents‘ cause of action has not prescribed.
Second, neither is their action barred by laches. The elements of laches are: 1)
conduct on the part of the defendant, or of one under whom he claims, giving rise to
the situation of which the complainant seeks a remedy; 2) delay in asserting the
complainant‘s rights, the complainant having knowledge or notice of the defendant‘s
conduct as having been afforded an opportunity to institute a suit; 3) lack of
knowledge or notice on the part of the defendant that the complainant would assert
the right in which he bases his suit; and 4) injury or prejudice to the defendant in the
event relief is accorded to the complainant, or the suit is not held barred. These
elements must all be proved positively. The lapse of four (4) years is not an
unreasonable delay sufficient to bar respondent‘s action. Moreover, the fourth (4 th)
element is lacking in this case. The concept of laches is not concerned with the lapse
of time but only with the effect of unreasonable lapse. The alleged sixteen (16) years of
respondents‘ inaction has no adverse effect on the petitioner to make respondents
guilty of laches.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 572
Villanueva- Mijares v. CA
JOSEFINA VILLANUEVA-MIJARES, WALDETRUDES VILLANUEVA-NOLASCO,
GODOFREDO VILLANUEVA, EDUARDO VILLANUEVA, GERMELINA VILLANUEVA-
FULGENCIO, MILAGROS VILLANUEVA-ARQUISOLA, and CONCEPCION
MACAHILAS VDA. DE VILLANUEVA,Petitioners, versus THE COURT OF APPEALS,
PROCERFINA VILLANUEVA, PROSPERIDAD VILLANUEVA, RAMON VILLANUEVA,
ROSA VILLANUEVA, VIRGINIA NEPOMUCENO, PAULA NEPOMUCENO, TARCELA
NEPOMUCENO, MERCEDES VILLANUEVA, ADELAIDA VILLANUEVA, APARICION
VILLANUEVA, JOSEFINA VILLANUEVA, BETTY VILLANUEVA, BOBBY
VILLANUEVA, MERLINDA VILLANUEVA, MORBINA VILLANUEVA, FLORITA
VILLANUEVA, DIONISIO VILLANUEVA, and EDITA VILLANUEVA, Respondents.
QUISUMBING, J.:
Private respondents, who are also descendants of Felipe, filed an action for
partition with annulment of documents and/or reconveyance and damages against
petitioners. They contended that Leon fraudulently obtained the sale in his favor
through machinations and false pretenses. The RTC declared that private respondents‘
action had been barred by res judicata and that petitioners are the ―legal owners of the
property in question in accordance with the individual titles issued to them.
ISSUE: Whether or not laches apply against the minor‘s property that was held in
trust.
HELD: No. At the time of the signing of the Deed of Sale of August 26,1948, private
respondents Procerfina, Prosperedad, Ramon and Rosa were minors. They could not
be faulted for their failure to file a case to recover their inheritance from their uncle
Leon, since up to the age of majority, they believed and considered Leon their co-heir
administrator. It was only in 1975, not in 1948, that they became aware of the
actionable betrayal by their uncle. Upon learning of their uncle‘s actions, they filed for
recovery. Hence, the doctrine of stale demands formulated in Tijam cannot be applied
here. They did not sleep on their rights, contrary to petitioner‘s assertion.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 573
Garcia v. Villar
FACTS: Lourdes V. Galas (Galas) was the original owner of a piece of property
(subject property) located at Malindang St., Quezon City. On July 6, 1993,
Galas, with her daughter, Ophelia G. Pingol (Pingol), as co-maker, mortgaged
the subject property to Yolanda Valdez Villar (Villar) as security for a loan.On
October 10, 1994, Galas, again with Pingol as her co-maker, mortgaged the
same subject property to Pablo P. Garcia (Garcia) to secure her loan of One
Million Eight Hundred Thousand Pesos (P1,800,000.00). On November 21,
1996, Galas sold the subject property to Villar. On October 27, 1999, Garcia
filed a Petition for Mandamus with Damages against Villar. Garcia
subsequently amended his petition to a Complaint for Foreclosure of Real
Estate Mortgage with Damages. Garcia alleged that when Villar purchased the
subject property, she acted in bad faith and with malice as she knowingly and
willfully disregarded the provisions on laws on judicial and extrajudicial
foreclosure of mortgaged property. Garcia further claimed that when Villar
purchased the subject property, Galas was relieved of her contractual
obligation and the characters of creditor and debtor were merged in the person
of Villar. Therefore, Garcia argued, he, as the second mortgagee, was
subrogated to Villar‘s original status as first mortgagee, which is the creditor
with the right to foreclose. Garcia further asserted that he had demanded
payment from Villar, whose refusal compelled him to incur expenses in filing
an action in court.
ISSUE: Whether or not Garcia‘s demand upon Villar is proper to either pay
Galas‘s debt of P1,800,000.00, or to judicially foreclose the subject property to
satisfy the aforesaid debt
HELD: Villar‘s purchase of the subject property did not violate the prohibition
on pactum commissorium. The power of attorney provision above did not
provide that the ownership over the subject property would automatically pass
to Villar upon Galas‘s failure to pay the loan on time. What it granted was the
mere appointment of Villar as attorney-in-fact, with authority to sell or
otherwise dispose of the subject property, and to apply the proceeds to the
payment of the loan.This provision is customary in mortgage contracts, and is
in conformity with Article 2087 of the Civil Code, which reads:Art. 2087. It is
also of the essence of these contracts that when the principal obligation
becomes due, the things in which the pledge or mortgage consists may be
alienated for the payment to the creditor.Galas‘s decision to eventually sell the
subject property to Villar for an additional P1,500,000.00 was well within the
scope of her rights as the owner of the subject property. The subject property
was transferred to Villar by virtue of another and separate contract, which is
the Deed of Sale. Garcia never alleged that the transfer of the subject property
to Villar was automatic upon Galas‘s failure to discharge her debt, or that the
sale was simulated to cover up such automatic transfer.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 574
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 575
HELD: Petitioners assail the CA's HELD that the issuance of a writ of possession does
not prescribe.[48] They maintain that Articles 1139, 1149, and 1150 of the Civil Code
regarding prescriptive periods cover all kinds of action, which necessarily include the
issuance of a writ of possession. Petitioners posit that, for purposes of the latter, it is
the five-year prescriptive period provided in Article 1149 of the Civil Code which
applies because Act No. 3135 itself did not provide for its prescriptive period. Thus,
Veterans Bank had only five years from September 12, 1983, the date when the
Certificate of Sale was issued in its favor, to move for the issuance of a writ of
possession. Respondent argues that jurisprudence has consistently held that a
registered owner of the land, such as the buyer in an auction sale, is entitled to a writ
of possession at any time after the consolidation of ownership.
The Court could not accept petitioners' contention. We have held before that
the purchaser's right "to request for the issuance of the writ of possession of the land
never prescribes. "The right to possess a property merely follows the right of
ownership," and it would be illogical to hold that a person having ownership of a
parcel of land is barred from seeking possession thereof. Moreover, the provisions
cited by petitioners refer to prescription of actions. An action is "defined as an ordinary
suit in a court of justice, by which one party prosecutes another for the enforcement
or protection of a right, or the prevention or redress of a wrong." On the other hand "a
petition for the issuance of the writ, under Section 7 of Act No. 3135, as amended, is
not an ordinary action filed in court, by which one party `sues another for the
enforcement or protection of a right, or prevention or redress of a wrong.' It is in the
nature of an ex parte motion [in] which the court hears only one side. It is taken or
granted at the instance and for the benefit of one party, and without notice to or
consent by any party adversely affected. Accordingly, upon the filing of a proper
motion by the purchaser in a foreclosure sale, and the approval of the corresponding
bond, the writ of possession issues as a matter of course and the trial court has no
discretion on this matter."Hence the Petition was denied for lack of merit. The CA
Decision dated June 10, 2005 in CA-G.R. SP No. 89248 was affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 576
FACTS: On May 31, 1973, Marian Clinics, Inc. (MCI) and University Physicians‘
Services, Incorporated (UPSI) entered into a Lease Agreement whereby the former
leased to the latter the Marian General Hospital (MGH) and four schools for a period of
ten (10) years, from June 1, 1973 to May 31, 1983. The land, buildings, facilities,
fixtures and equipment appurtenant thereto, including the Soledad Building, were
included in the lease, for which a monthly rental of P70,000 was agreed upon.
On November 29, 1990, UPSI appealed the above Order to the Court of Appeals,
claiming that said Order varies the term of the IAC judgment, arguing that said
judgment did not order the replacement of the leased properties lost or deteriorated
and/or to pay their value if replacement cannot be made. UPSI further claims that the
Court erred in giving MCI the discretion to determine the circumstances when
replacement or payment of value shall be made.
HELD: UPSI further argues that Article 1667 of the Civil Code is not applicable
considering that the inventories of the leased properties which it was obligated to
return was not yet established. UPSI also asserts that the order for the replacement of
the subject fixtures had been rendered moot as it had already been extinguished by
thedacion en pago dated September 1, 1980 with the DBP, by the deed of conditional
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 577
sale executed by the DBP in favor of UPSI, and by UPSI‘s payment in full. As regards
Article 1667 of the Civil Code, we hold that the applicability thereof, or of the provision
of the lease contract holding UPSI liable in case of loss or deterioration of the subject
properties, are not dependent on the presence, at the moment, of inventories. The
execution court may conduct hearings to determine the existence of such an inventory
reconstruct the same and determine the value of the properties that should be
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 578
ABAD, J.:
The Makati City RTC rendered a decision, dismissing the complaint against the
Martins. The trial court found that, although the floods submerged DBS‘ vehicles, the
leased premises remained tenantable and undamaged. Moreover, the Martins had
begun the repairs that DBS requested but were not given sufficient time to complete
the same. It held that DBS unjustifiably abandoned the leased premises and breached
the lease contract. Thus, the trial court ordered its deposit of P1,200,000.00 deducted
from the unpaid rents due the Martins and ordered DBS to pay them the remaining
P15,198,360.00 in unpaid rents.
On appeal to the Court of Appeals, the court rendered judgment reversing and
setting aside the RTC decision. The CA found that floods rendered the leased premises
untenantable and that the RTC should have ordered the rescission of the lease
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 579
contract especially since the contract provided for such remedy. The CA ordered the
Martins to apply the deposit of P1,200,000.00 to the rents due up to July 7, 1999
when DBS filed the complaint and exercised its option to rescind the lease. The CA
ordered the Martins to return the remaining balance of the deposit to DBS. With the
denial of their separate motions for reconsideration DBS and the Martins filed their
respective petitions for review before this Court in G.R. 174632 and 174804. The
Court eventually consolidated the two cases.
ISSUE: Whether or not the CA erred in holding that DBS is entitled to the rescission of
the lease contract only from July 7, 1999 when it filed its action for rescission,
entitling the Martins to collect rents until that time.
HELD: Unless the terms of a contract are against the law, morals, good customs, and
public policy, such contract is law between the parties and its terms bind them. In
Felsan Realty & Development Corporation v. Commonwealth of Australia,13 the Court
regarded as valid and binding a provision in the lease contract that allowed the lessee
to pre-terminate the same when fire damaged the leased building, rendering it
uninhabitable or unsuitable for living. Here, paragraph VIII14 of the lease contract
between DBS and the Martins permitted rescission by either party should the leased
property become untenantable because of natural causes. Thus In case of damage to
the leased premises or any portion thereof by reason of fault or negligence attributable
to the lessee, its agents, employees, customers, or guests, the lessee shall be
responsible for undertaking such repair or reconstruction. In case of damage due to
fire, earthquake, lightning, typhoon, flood, or other natural causes, without fault or
negligence attributable to the lessee, its agents, employees, customers or guests, the
lessor shall be responsible for undertaking such repair or reconstruction. In the latter
case, if the leased premises become untenantable, either party may demand for the
rescission of this contract and in such case, the deposit referred to in paragraph III
shall be returned to the lessee immediately. The Martins claim that DBS cannot
invoke the above since they undertook the repair and reconstruction of the leased
premises, incurring P1.6 million in expenses. The Martins point out that the option to
rescind was available only if they failed to do the repair work and reconstruction.
But, under their agreement, the remedy of rescission would become unavailable
to DBS only if the Martins, as lessors, made the required repair and reconstruction
after the damages by natural cause occurred, which meant putting the premises after
the floods in such condition as would enable DBS to resume its use of the same for
the purposes contemplated in the agreement, namely, as office, warehouse, and
parking space for DBS‘ repossessed vehicles. Here, it is undisputed that the floods of
May 25 and August 13, 1997 submerged the DBS offices and its 326 repossessed
vehicles. The floods rendered the place unsuitable for its intended uses. And, while the
Martins did some repairs, they did not restore the place to meet DBS‘ needs. The
photographs16 taken of the place show that the Martins filled the grounds with soil
and rocks to raise the elevation but did not level and compact the same so they could
accommodate the repossessed vehicles. Moreover, the heaviness of the filling materials
caused portions of the perimeter walls to collapse or lean dangerously.17 Indeed, the
Office of the City Engineer advised DBS that unless those walls were immediately
demolished or rehabilitated, they would endanger passersby
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 580
Undeniably, the DBS suffered considerable damages when flood waters deluged
its offices and 326 repossessed vehicles. Notably, DBS vacated the leased premises in
June of 1998, without rescinding the lease agreement, evidently to allow for
unhindered repair of the grounds. In fact, DBS continued to pay the monthly rents
until September 1998, showing how DBS leaned back to enable the Martins to finish
the repair and rehabilitation of the place. 19 The Martins provided basis for rescission
by DBS when they failed to do so.
Hence the Court denied the petition and affirmed with mocifications the April
26, 2006 decision of the Court of Appeals in CA-G.R. CV 76210 in that Felicidad T.
Martin, Melissa M. Isidro, Grace M. David, Caroline M. Garcia, Victoria M. Roldan, and
Benjamin T. Martin, Jr. are ORDERED to return the full deposit of P1,200,000.00 to
DBS Bank Philippines, Inc. (formerly known as Bank of Southeast Asia, now merged
with and into BPI Family Bank) with interest of 12% per annum to be computed from
the finality of this decision until the amount is fully paid.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 581
NACHURA, J.:
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 582
ISSUE: Whether or not the case must prosper and continue considering the present
circumstances
HELD : No. The Court ruled that Under Article 2028 of the Civil Code, a compromise
agreement is a contract whereby the parties, by making reciprocal concessions, avoid
litigation or put an end to one already commenced. Compromise is a form of amicable
settlement that is not only allowed, but also encouraged in civil cases. Contracting
parties may establish such stipulations, clauses, terms, and conditions as they deem
convenient, provided that these are not contrary to law, morals, good customs, public
order, or public policy. Thus, finding the above Compromise Agreement to have been
validly executed and not contrary to law, morals, good customs, public order, or
public policy, we approve the same. Thus the Compromise Agreement was and
judgment is hereby rendered in accordance therewith. By virtue of such approval, this
case was deemed terminated.
Duncan v. Glaxo
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 583
TINGA, J.:
FACTS: Tecson was hired by Glaxo as a medical representative on Oct. 24, 1995.
Contract of employment signed by Tecson stipulates, among others, that he agrees to
study and abide by the existing company rules; to disclose to management any
existing future relationship by consanguinity or affinity with co-employees or
employees with competing drug companies and should management find that such
relationship poses a prossible conflict of interest, to resign from the company.
Company's Code of Employee Conduct provides the same with stipulation that
management may transfer the employee to another department in a non-
counterchecking position or preparation for employment outside of the company after
6 months.
Tecson was initially assigned to market Glaxo's products in the Camarines Sur-
Camarines Norte area and entered into a romantic relationship with Betsy, an
employee of Astra, Glaxo's competition. Before getting married, Tecson's District
Manager reminded him several times of the conflict of interest but marriage took place
in Sept. 1998. In Jan. 1999, Tecson's superiors informed him of conflict of intrest.
Tecson asked for time to comply with the condition (that either he or Betsy resign from
their respective positions). Unable to comply with condition, Glaxo transferred Tecson
to the Butuan-Surigao City-Agusan del Sur sales area. After his request against
transfer was denied, Tecson brought the matter to Glaxo's Grievance Committee and
while pending, he continued to act as medical representative in the Camarines Sur-
Camarines Norte sales area. On Nov. 15, 2000, the National Conciliation and
Mediation Board ruled that Glaxo's policy was valid...
HELD: Glaxo has a right to guard its trade secrets, manufacturing formulas,
marketing strategies, and other confidential programs and information from
competitors. The prohibition against pesonal or marital relationships with employees
of competitor companies upon Glaxo's employees is reasonable under the
circumstances because relationships of that nature might compromise the interests of
the company. That Glaxo possesses the right to protect its economic interest cannot
be denied. It is the settled principle that the commands of the equal protection clause
are addressed only to the state or those acting under color of its authority. Corollarily,
it has been held in a long array of US Supreme Court decisions that the equal
protection clause erects to shield against merely privately conduct, however,
discriminatory or wrongful. The company actually enforced the policy after repeated
requests to the employee to comply with the policy. Indeed the application of the policy
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 584
was made in an impartial and even-handed manner, with due regard for the lot of the
employee.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 585
PUNO, J.:
FACTS: Petitioner was the employer of the respondents. Under the policy of Star Paper
the employees are:1. New applicants will not be allowed to be hired if in case he/she
has a relative, up to the 3rd degree of relationship, already employed by the
company.2. In case of two of our employees (singles, one male and another female)
developed a friendly relationship during the course of their employment and then
decided to get married, one of them should resign to preserve the policy stated above.
Respondents Comia and Simbol both got married to their fellow employees.
Estrella on the other hand had a relationship with a co-employee resulting to her
pregnancy on the belief that such was separated. The respondents allege that they
were forced to resign as a result of the implementation of the said assailed company
policy.
The Labor Arbiter and the NLRC ruled in favor of petitioner. The decision was
appealed to the Court of Appeals which reversed the decision.
HELD: It is significant to note that in the case at bar, respondents were hired after
they were found fit for the job, but were asked to resign when they married a co-
employee. Petitioners failed to show how the marriage of Simbol, then a Sheeting
Machine Operator, to Alma Dayrit, then an employee of the Repacking Section, could
be detrimental to its business operations. Neither did petitioners explain how this
detriment will happen in the case of Wilfreda Comia, then a Production Helper in the
Selecting Department, who married Howard Comia, then a helper in the cutter-
machine. The policy is premised on the mere fear that employees married to each
other will be less efficient. If we uphold the questioned rule without valid justification,
the employer can create policies based on an unproven presumption of a perceived
danger at the expense of an employee‘s right to security of tenure.
Petitioners contend that their policy will apply only when one employee marries
a co-employee, but they are free to marry persons other than co-employees. The
questioned policy may not facially violate Article 136 of the Labor Code but it creates a
disproportionate effect and under the disparate impact theory, the only way it could
pass judicial scrutiny is a showing that it is reasonable despite the discriminatory,
albeit disproportionate, effect. The failure of petitioners to prove a legitimate business
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 586
concern in imposing the questioned policy cannot prejudice the employee‘s right to be
free from arbitrary discrimination based upon stereotypes of married persons working
together in one company.
In the case of Estrella, the petitioner failed to adduce proof to justify her
dismissal. Hence, the Court ruled that it was illegal.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 587
Consequently, respondent sued petitioner for damages before the RTC of Pasig
City, Branch 261. Respondent alleged, among others, that petitioner‘s employment
with Professional Pension Plans, Inc. violated the non-involvement clause in her
contract of employment. In upholding the validity of the non-involvement clause, the
trial court ruled that a contract in restraint of trade is valid provided that there is a
limitation upon either time or place. In the case of the pre-need industry, the trial
court found the two-year restriction to be valid and reasonable. On appeal, the Court
of Appeals affirmed the trial court‘s HELD. It reasoned that petitioner entered into the
contract on her own will and volition. Thus, she bound herself to fulfill not only what
was expressly stipulated in the contract, but also all its consequences that were not
against good faith, usage, and law. The appellate court also ruled that the stipulation
prohibiting non-employment for two years was valid and enforceable considering the
nature of respondent‘s business.
ISSUE: Whether the Court of Appeals erred in sustaining the validity of the non-
involvement clause
HELD: In this case, the non-involvement clause has a time limit: two years from the
time petitioner‘s employment with respondent ends. It is also limited as to trade,
since it only prohibits petitioner from engaging in any pre-need business akin to
respondent‘s. More significantly, since petitioner was the Senior Assistant Vice-
President and Territorial Operations Head in charge of respondent‘s Hongkong and
Asean operations, she had been privy to confidential and highly sensitive marketing
strategies of respondent‘s business. To allow her to engage in a rival business soon
after she leaves would make respondent‘s trade secrets vulnerable especially in a
highly competitive marketing environment. In sum, The Court finds the non-
involvement clause not contrary to public welfare and not greater than is necessary to
afford a fair and reasonable protection to respondent. Hence the restraint is valid and
such stipulation prevails.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 588
CHICO-NAZARIO, J.:
FACTS: The present petition stemmed from a complaint[3] dated 1 December 1988,
filed by herein respondent Luna alleging, inter alia¸ that she began working for
Beautifont, Inc. in 1972, first as a franchise dealer and then a year later, as a
Supervisor. Sometime in 1978, Avon Cosmetics, Inc. (Avon), herein petitioner,
acquired and took over the management and operations of Beautifont, Inc.
Nonetheless, respondent Luna continued working for said successor company. Aside
from her work as a supervisor, respondent Luna also acted as a make-up artist of
petitioner Avon‘s Theatrical Promotion‘s Group, for which she received a per diem for
each theatrical performance. The contract was that:The Company agrees:1) To
allow the Supervisor to purchase at wholesale the products of the Company.The
Supervisor agrees:1) To purchase products from the Company exclusively for
resale and to be responsible for obtaining all permits and licenses required to sell the
products on retail. The Company and the Supervisor mutually agree:1) That this
agreement in no way makes the Supervisor an employee or agent of the Company,
therefore, the Supervisor has no authority to bind the Company in any contracts with
other parties. 2) That the Supervisor is an independent retailer/dealer insofar as
the Company is concerned, and shall have the sole discretion to determine where and
how products purchased from the Company will be sold. However, the Supervisor
shall not sell such products to stores, supermarkets or to any entity or person who
sells things at a fixed place of business. 3) That this agreement supersedes any
agreement/s between the Company and the Supervisor. 4) That the Supervisor
shall sell or offer to sell, display or promote only and exclusively products sold by the
Company. 5) Either party may terminate this agreement at will, with or without
cause, at any time upon notice to the other.
Later, respondent Luna entered into the sales force of Sandre Philippines which
caused her termination for the alleged violation of the terms of the contract. The trial
court ruled in favor of Luna that the contract was contrary to public policy thus the
dismissal was not proper. The Court of Appeals affirmed the decision, hence this
petition.
ISSUE: Whether the Court of Appeals erred in HELD that the Supervisor‘s Agreement
was invalid for being contrary to public policy.
Whether there was subversion of the autonomy of contracts by the lower courts.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 589
Applying the preceding principles to the case at bar, there is nothing invalid or
contrary to public policy either in the objectives sought to be attained by paragraph 5,
i.e., the exclusivity clause, in prohibiting respondent Luna, and all other Avon
supervisors, from selling products other than those manufactured by petitioner Avon.
In the case at bar, the termination clause of the Supervisor‘s Agreement clearly
provides for two ways of terminating and/or canceling the contract. One mode does
not exclude the other. The contract provided that it can be terminated or cancelled for
cause, it also stated that it can be terminated without cause, both at any time and
after written notice. Thus, whether or not the termination or cancellation of the
Supervisor‘s Agreement was ―for cause,‖ is immaterial. The only requirement is that of
notice to the other party. When petitioner Avon chose to terminate the contract, for
cause, respondent Luna was duly notified thereof.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 590
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 591
JOHNSON, J.:
FACTS: The plaintiff alleges that the provisions and conditions contained in the third
paragraph of their contract constitute an illegal and unreasonable restriction upon his
liberty to contract, are contrary to public policy, and are unnecessary in order to
constitute a just and reasonable protection to the defendant; and asked that the same
be declared null and void and of no effect. The defendant interposed a general and
special defense. In his special defense he alleges that during the time the plaintiff was
in the defendant's employ he obtained knowledge of his trade and professional secrets
and came to know and became acquainted and established friendly relations with his
customers so that to now annul the contract and permit plaintiff to establish a
competing drugstore in the town of Legaspi, as plaintiff has announced his intention
to do, would be extremely prejudicial to defendant's interest." The defendant further,
in an amended answer, alleges that this action not having been brought within four
years from the time the contract referred to in the complaint was executed, the same
has prescribed.
ISSUE: Whether the contract is valid and the autonomy of contracts be upheld
HELD: Considering the nature of the business in which the defendant is engaged, in
relation with the limitation placed upon the plaintiff both as to time and place, The
Court is of the opinion, and so decide, that such limitation is legal and reasonable and
not contrary to public policy, otherwise, the autonomy of the contract will be
subverted.
Arwood v. DM Consunji
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 592
CORONA, J .:
FACTS: Petitioner and respondent, as owner and contractor, respectively, entered into
a civil, structural and architectural works Agreement dated February 6, 1989 for the
construction of petitioners Westwood condominium at No. 23 Eisenhower St.,
Greenhills, San Juan, Metro Manila. The contract price for the condominium project
aggregated P20, 800,000.00.
Thus on August 13, 1993, respondent as plaintiff in a civil case filed its
complaint for the recovery of the balance of the contract price and for damages against
petitioner.
Respondent specifically prayed for the payment of the: (a) amount of P962,
434.78 with interest of 2% per month or a fraction thereof, from November 1990 up to
the time of payment; (b) the amount of P250,000 as Attorneys fees and litigation
expenses; (c) amount of P150,000.00 as exemplary damages; and (d)cost of suit.
On appeal, the Court of Appeals affirmed the lower court‘s decision with
modification
ISSUE: Whether or not the imposition of two percent interest on the amount adjudged
is proper.
HELD: Yes. It must be noted that the agreement provided the contractor, respondent
in this case, two (2) options in case of delay in monthly payments, to wit: a) suspend
works on the project until payment is remitted by the owner or continue the work but
the owner shall be required to pay interest at a rate of two (2) percent per month or a
fraction thereof. Evidently, respondent chose the latter option, as the condominium
project was in fact already completed. Since the agreement stands as the law between
the parties, the court cannot ignore the existence of such provision providing for a
penalty for every months delay.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 593
CARPIO, J.:
FACTS: On 20 January 1994, spouses Roberto and Maria Antonette Co obtained from
respondent Rural Bank of Pamplona, Inc. a P100,000.00 loan due in three months or
on 20 April 1994. The loan was secured by a real estate mortgage on a 262-square
meter residential lot owned by spouses Co located in San Felipe, Naga City and
covered by Transfer Certificate of Title (TCT) No. 24196. Petitioners, spouses Benedict
and Maricel Dy Tecklo, meanwhile instituted an action for collection of sum of money
against spouses Co. When the two loans remained unpaid after becoming due and
demandable, respondent bank instituted extrajudicial foreclosure proceedings. In its 5
September 1994 petition for extrajudicial foreclosure, respondent bank sought the
satisfaction solely of the first loan although the second loan had also become due. At
the public auction scheduled on 19 December 1994, respondent bank offered the
winning bid of P142,000.00, which did not include the second loan. The provisional
certificate of sale to respondent bank was annotated on the TCT of the mortgaged
property as Entry No. 60794. Petitioners then exercised the right of redemption as
successors-in-interest of the judgment debtor. Stepping into the shoes of spouses Co,
petitioners tendered on 9 August 1995 the amount of P155,769.50, based on the
computation made by the Office of the Provincial Sheriff.
ISSUE: Whether or not the redemption amount includes the second loan in the
amount of P150,000.00 even if it was not included in respondent bank‘s application
for extrajudicial foreclosure.
HELD: Petitioners pointed out that the second loan was not annotated as an
additional loan on the TCT of the mortgaged property. Petitioners argued that the
second loan was just a private contract between respondent bank and spouses Co,
which could not bind third parties unless duly registered. Petitioners stressed that
respondent bank‘s application for extrajudicial foreclosure referred solely to the first
loan.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 594
Respondent bank insisted that the mortgage secured not only the first loan but
also future loans spouses Co might obtain from respondent bank. According to
respondent bank, this was specifically provided in the mortgage contract. Respondent
bank contended that petitioners, as redemptioner by virtue of the preliminary
attachment they obtained against spouses Co, should assume all the debts secured by
the mortgaged property. In order to effect redemption, the judgment debtor or his
successor -in-interest need only pay the purchaser at the public auction sale the
redemption amount composed of (1) the price which the purchaser at the public
auction sale paid for the property and (2) the amount of any assessment or taxes
which the purchaser may have paid on the property after the purchase, plus the
applicable interest. Respondent bank‘s demand that the second loan be added to the
actual amount paid for the property at the public auction sale finds no basis in law or
jurisprudence.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 595
FACTS: On July 22, 1997, petitioner spouses Rosendo Maglasang and Patrocinia
Monilar (spouses Maglasang) obtained a loan (subject loan) from PCRB
forP1,070,000.00. The subject loan was evidenced by a promissory note and was
payable on January 18, 1998. To secure the payment of the subject loan, the spouses
Maglasang executed, in favor of PCRB a real estate mortgage over their property, Lot
12868-H-3-C, [6] including the house constructed thereon (collectively referred to
as subject properties), owned by petitioners Mary Melgrid and Bonifacio Cortel
(spouses Cortel), the spouses Maglasang‘s daughter and son-in-law, respectively. Aside
from the subject loan, the spouses Maglasang obtained two other loans from PCRB
which were covered by separate promissory notes [7] and secured by mortgages on their
other properties.
Sometime in November 1997 (before the subject loan became due), the spouses
Maglasang and the spouses Cortel asked PCRB‘s permission to sell the subject
properties. They likewise requested that the subject properties be released from the
mortgage since the two other loans were adequately secured by the other mortgages.
The spouses Maglasang and the spouses Cortel claimed that the PCRB, acting through
its Branch Manager, Pancrasio Mondigo, verbally agreed to their request but required
first the full payment of the subject loan. The spouses Maglasang and the spouses
Cortel thereafter sold to petitioner Violeta Banate the subject properties
for P1,750,000.00. The spouses Magsalang and the spouses Cortel used the amount to
pay the subject loan with PCRB. After settling the subject loan, PCRB gave the
owner‘s duplicate certificate of title of Lot 12868-H-3-C to Banate, who was able to
secure a new title in her name. The title, however, carried the mortgage lien in favor of
PCRB, prompting the petitioners to request from PCRB a Deed of Release of
Mortgage. As PCRB refused to comply with the petitioners‘ request, the petitioners
instituted an action for specific performance before the RTC to compel PCRB to
execute the release deed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 596
On appeal, the CA reversed the RTC‘s decision. The CA did not consider as valid
the petitioners‘ new agreement with Mondigo, which would novate the original
mortgage contract containing the cross-collateral stipulation. It ruled that Mondigo
cannot orally amend the mortgage contract between PCRB, and the spouses
Maglasang and the spouses Cortel; therefore, the claimed commitment allowing the
release of the mortgage on the subject properties cannot bind PCRB. Since the cross-
collateral stipulation in the mortgage contract (requiring full settlement of all three
loans before the release of any of the mortgages) is clear, the parties must faithfully
comply with its terms. The CA did not consider as material the release of the owner‘s
duplicate copy of the title, as it was done merely to allow the annotation of the sale of
the subject properties to Banate.[11]
Dismayed with the reversal by the CA of the RTC‘s HELD, the petitioners filed
the present appeal by certiorari, claiming that the CA HELD is not in accord with
established jurisprudence.
ISSUE: Whether the purported agreement between the petitioners and Mondigo
novated the mortgage contract over the subject properties and is thus binding upon
PCRB.
HELD: We find the petitioners‘ argument unpersuasive. Novation, in its broad concept,
may either be extinctive or modificatory. It is extinctive when an old obligation is
terminated by the creation of a new obligation that takes the place of the former; it is
merely modificatory when the old obligation subsists to the extent that it remains
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 597
Pascual v. Ramos
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 598
FACTS: Ramos alleged that on 3 June 1987, for and in consideration of P150,000, the
Spouses Pascual executed in his favor a Deed of Absolute Sale with Right to
Repurchase over two parcels of land and the improvements thereon located in
Bambang, Bulacan, Bulacan. This document was annotated at the back of the title.
The Pascuals did not exercise their right to repurchase the property within the
stipulated one-year period; hence, Ramos prayed that the title or ownership over the
subject parcels of land and improvements thereon be consolidated in his favor.
In their Answer, the Pascuals admitted having signed the Deed of Absolute Sale
with Right to Repurchase for a consideration of P150, 000 but averred that what the
parties had actually agreed upon and entered into was a real estate mortgage. They
further alleged that there was no agreement limiting the period within which to
exercise the right to repurchase and that they had even overpaid Ramos. The trial
court found that the transaction between the parties was actually a loan in the
amount of P150,000, the payment of which was secured by a mortgage of the property
covered by TCT No. 305626. It also found that the Pascuals had made payments in the
total sum of P344,000, and that with interest at 7% per annum, they had overpaid the
loan by P141,500. Accordingly, in its Decision of 15 March 1995 the trial court ruled
in favor of the defendants. The Pascuals interposed the following defenses: (a) the trial
court had no jurisdiction over the subject or nature of the petition; (b) Ramos had no
legal capacity to sue; (c) the cause of action, if any, was barred by the statute of
limitations; (d) the petition stated no cause of action; (e) the claim or demand set forth
in Ramos‘s pleading had been paid, waived, abandoned, or otherwise extinguished;
and (f) Ramos has not complied with the required confrontation and conciliation before
the barangay.
The Court of Appeals affirmed in toto the trial court‘s Orders of 5 June 1995
and 7 September 1995.
HELD: The Pascuals are actually raising as issue the validity of the stipulated interest
rate. It must be stressed that they never raised as a defense or as basis for their
counterclaim the nullity of the stipulated interest. While overpayment was alleged in
the Answer, no ultimate facts which constituted the basis of the overpayment was
alleged. In their pre-trial brief, the Pascuals made a long list of issues, but not one of
them touched on the validity of the stipulated interest rate. Their own evidence clearly
shows that they have agreed on, and have in fact paid interest at, the rate of 7% per
month.
After the trial court sustained petitioners‘ claim that their agreement with
RAMOS was actually a loan with real estate mortgage, the Pascuals should not be
allowed to turn their back on the stipulation in that agreement to pay interest at the
rate of 7% per month. The Pascuals should accept not only the favorable aspect of the
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 599
court‘s declaration that the document is actually an equitable mortgage but also the
necessary consequence of such declaration, that is, that interest on the loan as
stipulated by the parties in that same document should be paid. Besides, when
Ramos moved for a reconsideration of the 15 March 1995 Decision of the trial court
pointing out that the interest rate to be used should be 7% per month, the Pascuals
never lifted a finger to oppose the claim. Admittedly, in their Motion for
Reconsideration of the Order of 5 June 1995, the Pascuals argued that the interest
rate, whether it be 5% or 7%, is exorbitant, unconscionable, unreasonable, usurious
and inequitable. However, in their Appellants‘ Brief, the only argument raised by the
Pascuals was that Ramos‘s petition did not contain a prayer for general relief and,
hence, the trial court had no basis for ordering them to pay Ramos P511,000
representing the principal and unpaid interest. It was only in their motion for the
reconsideration of the decision of the Court of Appeals that the Pascuals made an
issue of the interest rate and prayed for its reduction to 12% per annum.
It is a basic principle in civil law that parties are bound by the stipulations in
the contracts voluntarily entered into by them. Parties are free to stipulate terms and
conditions which they deem convenient provided they are not contrary to law, morals,
good customs, public order, or public policy.
The interest rate of 7% per month was voluntarily agreed upon by Ramos and
the Pascuals. There is nothing from the records and, in fact, there is no allegation
showing that petitioners were victims of fraud when they entered into the agreement
with Ramos. Neither is there a showing that in their contractual relations with
Ramos, the Pascuals were at a disadvantage on account of their moral dependence,
ignorance, mental weakness, tender age or other handicap, which would entitle them
to the vigilant protection of the courts as mandated by Article 24 of the Civil Code.
CHUA TEE DEE, doing business under the name and style of PIONEER
ENTERPRISES, Petitioner versus COURT OF APPEALS and J.C. AGRICOM
DEVELOPMENT CORPORATION, INC., Respondents.
FACTS: On May 22, 1985, Agricom and Dee entered into a 15-year lease contract over
the rubber plantation owned by the former. Among the stipulations in the contract
was the payment of deposit in the amount of P135,000.00 and payment of back
rentals in case of non-payment of rentals for three months. The contract also
stipulated that Agricom had the duty to maintain Dee in the quiet peaceful possession
and enjoyment of the leased premises. However, sometime in 1986, a labor case for
illegal dismissal and unfair labor practice was filed against Agricom, Amado Dee (Chua
Tee Dee‘s husband) and Pioneer. This case arose from the fact that some of the
plantation laborers were dismissed from work due to the contract of lease with Dee.
The labor case dragged on for a number of years. In addition, Dee also complained of
being pestered by some individuals who claimed portions of the plantation as their
own property.
Later on, Pioneer defaulted in its monthly payments, prompting Agricom to file a
complaint for sum of money. In its Answer, Dee asserted that Agricom
committed breach of contract for its failure to maintain her in peaceful possession and
enjoyment of the leased premises. The breach, in turn, entitled her to suspend
payment of rentals. While the case was pending, Dee extended a personal loan of
P30,000 to Lillian Carreido. When judgment was finally rendered, the complaint was
dismissed and the lease contract terminated, the court stating that it was Agricom‘s
duty as lessor to maintain the lessee in peaceful possession and enjoyment of the
leased premises. Upon motion for recommendation, the lower court reversed its own
HELD, ordering Dee to pay Agricom back rentals and rentals for the first three years of
the lease already paid for. The CA affirmed the order.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 601
claims of loss due to the labor dispute, the Supreme Court agreed with the CA that
Dee failed to prove this. During the period of pendency of the labor case, Dee regularly
paid the monthly rentals. It was only after the labor case has been resolved that she
started to fail to pay her rentals, strongly indicating that the labor case has not
dampened her peaceful and adequate possession of the leased premises.
The Supreme Court, however, ruled that Dee should not be made to pay rentals for the
first three years of the lease, since those rentals were already paid for. Moreover, the
personal loan extended by Dee to Lillian Carriedo should not be charged against
Agricom. While it is true that the petitioner and Carriedo had agreed that the
personal loan of the latter shall be ―chargeable against Agricom‘s account,‖ the private
respondent is not privy to the agreement; nor did it agree to pay the said loan. It must
be stressed that the private respondent has a personality separate and distinct from
its stockholders.
GQ Garments v. Miranda
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 602
FACTS: Angel Miranda is the registered owner of a 9,646 square meters parcel
of land located at Niog, Bacoor, Cavite ("Property"). The property was covered by
Transfer Certificate of Title (TCT) No. T-606793 of the Registry of Deeds of
Cavite.
In 1984, Angelito Miranda, the son of Angel Miranda, established the Executive
Machineries and Equipment Corporation (EMECO), a domestic corporation
engaged primarily in the manufacture and fabrication of rubber rollers.
Angelito owned 80% of the stocks of the corporation, while his wife Florenda
owned 10%. That year, Angel entered into a verbal contract of lease over the
Property with EMECO, and allowed it to build a factory thereon. The agreement
was on a month-to-month basis, at the rate of P8,000 per month. EMECO
constructed its factory on the property. At the outset, EMECO paid the monthly
rentals. However, after Angelito died on June 21, 1988, EMECO failed to pay
the rentals but still continued possessing the leased premises.
On November 19, 1989, the factory of EMECO was totally razed by fire. In a
letter to EMECO dated June 3, 1991, Angel demanded the payment of accrued
rentals in the amount of P280,000.00 as of May 1991. EMECO was also
informed that the oral contract of lease would be terminated effective June 30,
1991. However, EMECO failed to pay the accrued rentals and to vacate the
property. Another demand letter dated September 27, 1991 was sent to
EMECO. It vacated the leased premises, but the accrued rentals remained
unpaid.
Later, Kho was able to locate Angel at Noveleta, Cavite and offered, in behalf of
petitioner, to lease the property, as to which Angel agreed. On December 23,
1991, Angel and the corporation, represented by its Executive Vice-President,
Davy John Barlin, executed a contract of lease5 over the subject property. The
lease was for a period of 15 years, commencing on February 1, 1992 until
January 31, 2007 for a monthly rental of P30,000.00. Petitioner
paid P90,000.00 representing two months deposit and advance rental for one
month. As lessee, it was authorized to introduce improvements, structures,
and buildings on the property as it may deem necessary and for the purpose
for which it was leased.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 603
However, on January 27, 1992, Florenda, together with several armed men
who identified themselves as policemen, forcibly evicted petitioner from the
leased premises, claiming that she was the owner and that the place was
already covered by another existing contract of lease. During the encounter,
Florenda and her men took some equipment, machinery and other properties
belonging to petitioner, thereby causing loss and damage to said properties.
Meanwhile, petitioner sought the help of the Philippine National Police (PNP).
General Gerardo N. Flores, Deputy Director General and Chief Directorial Staff,
issued a Memorandum6 to Superintendent Wenceslao A. Soberano, Provincial
Director of the Cavite PNP Provincial Command, ordering the latter to prevent
his men from interfering with the pending civil case. Petitioner subsequently
regained possession over the leased premises. However, Florenda and her
group were undaunted. They went back to the place and ousted the guards and
other personnel manning the corporation's office, and even removed their
equipment, and ransacked anew their raw materials, electric wire and other
valuables inside.
On April 20, 1992, petitioner instituted an action for damages and recovery of
possession of the property before the RTC of Cavite City, Branch 17, with
Angel, EMECO and Florenda, as alternative defendants.
The appellate court absolved Angel of any liability due to the absence of evidence
showing that he had participated, directly or indirectly, in the looting of GQ Garment's
properties and in forcibly ejecting the latter from the premises in question. While
under Article 1654, paragraph 3, of the New Civil Code, a lessor is obliged to maintain
the lessee in peaceful and adequate enjoyment of the lease for the entire duration of
the contract, the law, however, does not apply to him since the unlawful acts were
caused by a third person or an intruder. Under Article 1664, he is not obliged to
answer for a mere act of trespass which a third person may cause on the use of the
thing leased, but the lessee shall have a direct action against the intruder.
ISSUE: Whether or not respondent Angel Miranda should likewise be held liable for
damages to the petitioner.
HELD: The duty of the lessor to maintain the lessee in the peaceful and
adequate enjoyment of the leased property for the entire duration of the
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 604
contract is merely a warranty that the lessee shall not be disturbed in having
legal and not physical possession of the property.
In this case, the trespass perpetrated by respondent Florenda Miranda and her
confederates was merely trespass in fact. They forcibly entered the property
and caused damage to the equipment and building of petitioner, because the
latter refused to enter into a contract of lease with EMECO over the property
upon respondent Florenda Miranda's failure to present respondent Angel
Miranda to sign the contract of lease. It turned out that respondent Florenda
Miranda attempted to hoodwink petitioner and forged respondent Angel
Miranda's signature on the contract of lease she showed to petitioner. It
appears that respondent Florenda Miranda tried to coerce the petitioner into
executing a contract of lease with EMECO over the property, only to be
rebuffed by the petitioner.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 605
AUSTRIA-MARTINEZ, J.:
R.C. Nicolas converted the space into a bowling and billiards center and
subleased separate portions thereof to Midland Commercial Corporation, Jerry
Yu, Romeo Tolentino, Julio Acuin, Nicanor Bas, and Pedro T. Bercero
(petitioner). Petitioner‘s sublease contract with R.C. Nicolas was for a three-
year period or until August 16, 1988.
Meanwhile, for failure to pay rent, respondent filed an ejectment case against
R.C. Nicolas before the Metropolitan Trial Court. Respondent also impleaded
the sub-lessees of R.C. Nicolas as parties-defendants.
During the pendency of Civil Case No. 52933, several sub-lessees including
petitioner, entered into a compromise settlement with respondent. In the
compromise settlement, the sub-lessees recognized respondent as the lawful
and absolute owner of the property and that the contract between respondent
and R.C. Nicolas had been lawfully terminated because of the latter‘s non-
payment of rent; and that the sub-lessees voluntarily surrendered possession
of the premises to respondent; that the sub-lessees directly executed lease
contracts with respondent considering the termination of leasehold rights of
R.C. Nicolas.
Petitioner entered into a lease contract with respondent for a three-year period,
from August 16, 1988 to August 31, 1991.
On October 21, 1988, respondent and petitioner, as well as several other sub-
lessees of R.C. Nicolas, filed a Joint Manifestation and Motion in Civil Case No.
52933, manifesting to the MeTC-Branch 41 that they entered into a
compromise settlement and moved that the names of the sub-lessees as
parties-defendants be dropped and excluded.
On November 14, 1988, R.C. Nicolas filed a complaint for ejectment and
collection of unpaid rentals against petitioner before the Metropolitan Trial
Court, rendered a Decision in favor of R.C. Nicolas and ordered the eviction of
petitioner from the leased premises.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 606
HELD: Void are all contracts in which the cause or object does not exist at the
time of the transaction. In the present case, the lease contract between
petitioner and respondent is void for having an inexistent cause - respondent
did not have the right to lease the property to petitioner considering that its
lease contract with R.C. Nicolas was still valid and subsisting, albeit pending
litigation. Having granted to R.C. Nicolas the right to use and enjoy its property
from 1983 to 1993, respondent could not grant that same right to petitioner in
1988. When petitioner entered into a lease contract with respondent, the latter
was still obliged to maintain R.C. Nicolas‘s peaceful and adequate possession
and enjoyment of its lease for the 10-year duration of the contract.
Hemedes v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 607
GONZAGA_REYES, J.:
Maxima Hemedes and her husband Raul Rodriguez constituted a real estate
mortgage over the subject property in favor of R & B Insurance to serve as
security for a loan which they obtained.
Despite the earlier conveyance of the subject land in favor of Maxima Hemedes,
Justa Kausapin executed a ―Kasunduan‖ whereby she transferred the same
land to her stepson Enrique D. Hemedes, pursuant to the resolutory condition
in the deed of donation executed in her favor by her late husband Jose
Hemedes. Enrique D. Hemedes obtained two declarations of real property,
when the assessed value of the property was raised. Also, he has been paying
the realty taxes on the property from the time Justa Kausapin conveyed the
property to him. In the cadastral survey, the property was assigned in the
name of Enrique Hemedes. Enrique Hemedes is also the named owner of the
property in the records of the Ministry of Agrarian Reform office at Calamba,
Laguna.
Dominium leased the property to its sister corporation Asia Brewery, Inc. (Asia
Brewery) who made constructions therein. Upon learning of Asia Brewery‘s
constructions, R & B Insurance sent it a letter informing the former of its
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 608
Maxima Hemedes also wrote a letter addressed to Asia Brewery asserting that
she is the rightful owner of the subject property and denying the execution of
any real estate mortgage in favor of R&B.
Dominium and Enrique D. Hemedes filed a complaint with the CFI for the
annulment of TCT issued in favor of R & B Insurance and/or the reconveyance
to Dominium of the subject property alleging that Dominion was the absolute
owner of the land.
ISSUE: Whether or not the donation in favor of Enrique Hemedes was valid.
HELD: NO. Enrique D. Hemedes and his transferee, Dominium, did not acquire
any rights over the subject property. Justa Kausapin sought to transfer to her
stepson exactly what she had earlier transferred to Maxima Hemedes – the
ownership of the subject property pursuant to the first condition stipulated in
the deed of donation executed by her husband. Thus, the donation in favor of
Enrique D. Hemedes is null and void for the purported object thereof did not
exist at the time of the transfer, having already been transferred to his sister.
Similarly, the sale of the subject property by Enrique D. Hemedes to Dominium
is also a nullity for the latter cannot acquire more rights than its predecessor-
in-interest and is definitely not an innocent purchaser for value since Enrique
D. Hemedes did not present any certificate of title upon which it relied.
The declarations of real property by Enrique D. Hemedes, his payment of realty
taxes, and his being designated as owner of the subject property in the
cadastral survey of Cabuyao, Laguna and in the records of the Ministry of
Agrarian Reform office in Calamba, Laguna cannot defeat a certificate of title,
which is an absolute and indefeasible evidence of ownership of the property in
favor of the person whose name appears therein. Particularly, with regard to
tax declarations and tax receipts, this Court has held on several occasions that
the same do not by themselves conclusively prove title to land.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 609
CORPORATION,Respondent.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 610
On November 14, 2001, this Court rendered a decision in G.R. Nos. 143513
(Polytechnic University of the Philippines v. Court of Appeals) and 143590 (National
Development Corporation v. Firestone Ceramics, Inc.),15 which declared that the sale
to PUP by NDC of the portion leased by Firestone pursuant to Memorandum Order No.
214 violated the right of first refusal granted to Firestone under its third lease contract
with NDC.
ISSUE: Whether or not our HELD in Polytechnic University of the Philippines v. Court
of Appeals applies in this case involving another lessee of NDC who claimed that the
option to purchase the portion leased to it was similarly violated by the sale of the
NDC Compound in favor of PUP pursuant to Memorandum Order No. 214.
HELD: The CA was correct in declaring that there exists no justifiable reason not to
apply the same rationale in Polytechnic University of the Philippines v. Court of
Appeals in the case of respondent who was similarly prejudiced by petitioner NDC‘s
sale of the property to PUP, as to entitle the respondent to exercise its option to
purchase until October 1988 inasmuch as the May 4, 1978 contract embodied the
option to renew the lease for another ten (10) years upon mutual consent and giving
respondent the option to purchase the leased premises for a price to be negotiated and
determined at the time such option was exercised by respondent. It is to be noted that
Memorandum Order No. 214 itself declared that the transfer is "subject to such
liens/leases existing on the subject property."
The option in this case was incorporated in the contracts of lease by NDC for
the benefit of firestone which, in view of the total amount of its investments in the
property, wanted to be assured that it would be given the first opportunity to buy the
property at a price for which it would be offered. Consistent with their agreement, it
was then implicit for NDC to have first offered the leased premises of 2.60 hectares to
FIRESTONE prior to the sale in favor of PUP. Only if FIRESTONE failed to exercise its
right of first priority could NDC lawfully sell the property to petitioner PUP.
In the light of the foregoing, the Court held that respondent, which did not offer
any amount to petitioner NDC, and neither disputed the P1,500.00 per square meter
actual value of NDC‘s property at that time it was sold to PUP at P554.74 per square
meter, as duly considered by this Court in the Firestone case, should be bound by
such determination. Accordingly, the price at which the leased premises should be
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 611
sold to respondent in the exercise of its right of first refusal under the lease contract
with petitioner NDC, which was pegged by the RTC at P554.74 per square meter,
should be adjusted to P1,500.00 per square meter, which more accurately reflects its
true value at that time of the sale in favor of petitioner PUP. Indeed, basic is the rule
that a party to a contract cannot unilaterally withdraw a right of first refusal that
stands upon valuable consideration.40 We have categorically ruled that it is not
correct to say that there is no consideration for the grant of the right of first refusal if
such grant is embodied in the same contract of lease. Since the stipulation forms part
of the entire lease contract, the consideration for the lease includes the consideration
for the grant of the right of first refusal. In entering into the contract, the lessee is in
effect stating that it consents to lease the premises and to pay the price agreed upon
provided the lessor also consents that, should it sell the leased property, then, the
lessee shall be given the right to match the offered purchase price and to buy the
property at that price. We have further stressed that not even the avowed public
welfare or the constitutional priority accorded to education, invoked by petitioner PUP
in the Firestone case, would serve as license for us, and any party for that matter, to
destroy the sanctity of binding obligations. While education may be prioritized for
legislative and budgetary purposes, it is doubtful if such importance can be used to
confiscate private property such as the right of first refusal granted to a lessee of
petitioner NDC.42 Clearly, no reversible error was committed by the CA in sustaining
respondent‘s contractual right of first refusal and ordering the reconveyance of the
leased portion of petitioner NDC‘s property in its favor. Hence the petition was denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 612
Villegas v. CA
JOSELITO VILLEGAS and DOMINGA VILLEGAS, Petitioners, versus COURT OF
APPEALS, Respondent
(G.R. No. 129977, February 1, 2001, 1st Division)
VILLARAMA, JR., J.:
FACTS: Before September 6, 1973, Lot B-3-A, with an area of 4 hectares was
registered under TCT No. 68641 in the names of Ciriaco D. Andres and Henson
Caigas. This land was also declared for real estate taxation under Tax Declaration No.
C2-4442. On September 6, 1973, Andres and Caigas, with the consent of their
respective spouses, Anita Barrientos and Consolacion Tobias, sold the land to Fortune
Tobacco Corporation for P60,000.00. Simultaneously, they executed a joint affidavit
declaring that they had no tenants on said lot. On the same date, the sale was
registered in the Office of the Register of Deeds of Isabela. TCT No. 68641 was
cancelled and TCT No. T-68737 was issued in Fortune‘s name. On August 6, 1976,
Andres and Caigas executed a Deed of Reconveyance of the same lot in favor of
Filomena Domingo, the mother of Joselito Villegas, defendant in the case before the
trial court. Although no title was mentioned in this deed, Domingo succeeded in
registering this document in the Office of the Register of Deeds on August 6, 1976,
causing the latter to issue TCT No. T-91864 in her name. It appears in this title that
the same was a transfer from TCT No. T-68641. On April 13, 1981, Domingo declared
the lot for real estate taxation under Tax Declaration No. 10-5633. On December 4,
1976, the Office of the Register of Deeds of Isabela was burned together with all titles
in the office. On December 17, 1976, the original of TCT No. T-91864 was
administratively reconstituted by the Register of Deeds. On June 2, 1979, a Deed of
Absolute Sale of a portion of 20,000 square meters of Lot B-3-A was executed by
Filomena Domingo in favor of Villegas for a consideration of P1,000.00. This document
was registered on June 3, 1981 and as a result TCT No. T-131807 was issued by the
Register of Deeds to Villegas. On the same date, the technical description of Lot B-3-A-
2 was registered and TCT No. T-131808 was issued in the name of Domingo. On
January 22, 1991, this document was registered and TCT No. 154962 was issued to
the defendant, Joselito Villegas.
On April 10, 1991, the trial court upon a petition filed by Fortune ordered the
reconstitution of the original of TCT No. T-68737. After trial on the merits, the trial
court rendered its assailed decision in favor of Fortune Tobacco, declaring it to be
entitled to the property. Petitioners thus appealed this decision to the Court of
Appeals, which affirmed the trial court‘s decision.
ISSUE: Whether or not the Court of Appeals was correct in affirming the trial court‘s
decision.
HELD: Even if Fortune had validly acquired the subject property, it would still be
barred from asserting title because of laches. The failure or neglect, for an
unreasonable length of time to do that which by exercising due diligence could or
should have been done earlier constitutes laches. It is negligence or omission to assert
a right within a reasonable time, warranting a presumption that the party entitled to
assert it has either abandoned it or declined to assert it. While it is by express
provision of law that no title to registered land in derogation of that of the registered
owner shall be acquired by prescription or adverse possession, it is likewise an
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 613
enshrined rule that even a registered owner may be barred from recovering possession
of property by virtue of laches.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 614
FACTS: Carmelo owned a parcel of land, together with two 2-storey buildings
constructed thereon. On June 1, 1967 Carmelo entered into a contract of lease with
Mayfair for the latter‘s lease of a portion of Carmelo‘s property. Two years later, on
March 31, 1969, Mayfair entered into a second contract of lease with Carmelo for the
lease of another portion of Carmelo‘s property.
Both contracts of lease provide identically worded paragraph 8, which reads:
‗That if the LESSOR should desire to sell the leased premises, the LESSEE shall
be given 30-days exclusive option to purchase the same.
In the event, however, that the leased premises is sold to someone other than
the LESSEE, the LESSOR is bound and obligated, as it hereby binds and obligates
itself, to stipulate in the Deed of Sale thereof that the purchaser shall recognize this
lease and be bound by all the terms and conditions thereof.
Mr. Henry Pascal of Carmelo informed Mr. Henry Yang, President of Mayfair, through
a telephone conversation that Carmelo was desirous of selling the entire Claro M.
Recto property. Mr. Pascal told Mr. Yang that a certain Jose Araneta was offering to
buy the whole property for US Dollars 1,200,000, and Mr. Pascal asked Mr. Yang if the
latter was willing to buy the property for Six to Seven Million Pesos.
Under your company‘s two lease contracts with our client, it is uniformly provided:
‗8. That if the LESSOR should desire to sell the leased premises the LESSEE shall be
given 30-days exclusive option to purchase the same. In the event, however, that the
leased premises is sold to someone other than the LESSEE, the LESSOR is bound and
obligated, as it here binds and obligates itself, to stipulate in the Deed of Sale thereof
that the purchaser shall recognize this lease and be bound by all the terms and
conditions hereof.
Carmelo did not reply to this letter.
Four years later, on July 30, 1978, Carmelo sold its entire C.M. Recto Avenue
land and building, which included the leased premises housing the ‗Maxim‘ and
‗Miramar‘ theatres, to Equatorial by virtue of a Deed of Absolute Sale, for the total sum
of P11,300,000.00.
In September 1978, Mayfair instituted the action a quo for specific performance
and annulment of the sale of the leased premises to Equatorial. It dismissed the
complaint with costs against the plaintiff. The Court of Appeals reversed the decision
of the trial court.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 615
ISSUE: Whether or not the decision of the Court of Appeals‘ decision was correct.
HELD: The Court agrees with the Court of Appeals that the aforecited contractual
stipulation provides for a right of first refusal in favor of Mayfair. It is not an option
clause or an option contract. It is a contract of a right of first refusal.
As early as 1916, in the case of Beaumont vs. Prieto, unequivocal was our
characterization of an option contract as one necessarily involving the choice granted
to another for a distinct and separate consideration as to whether or not to purchase a
determinate thing at a predetermined fixed price.
Further, what Carmelo and Mayfair agreed to, by executing the two lease
contracts, was that Mayfair will have the right of first refusal in the event Carmelo
sells the leased premises. It is undisputed that Carmelo did recognize this right of
Mayfair, for it informed the latter of its intention to sell the said property in 1974.
There was an exchange of letters evidencing the offer and counter-offers made by both
parties. Carmelo, however, did not pursue the exercise to its logical end. While it
initially recognized Mayfair‘s right of first refusal, Carmelo violated such right when
without affording its negotiations with Mayfair the full process to ripen to at least an
interface of a definite offer and a possible corresponding acceptance within the ―30-day
exclusive option‖ time granted Mayfair, Carmelo abandoned negotiations, kept a low
profile for some time, and then sold, without prior notice to Mayfair, the entire Claro
M. Recto property to Equatorial.
Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the
property in question rescissible. We agree with respondent Appellate Court that the
records bear out the fact that Equatorial was aware of the lease contracts because its
lawyers had, prior to the sale, studied the said contracts. As such, Equatorial cannot
tenably claim to be a purchaser in good faith, and, therefore, rescission lies.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 616
PUP v. CA
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES, Petitioner versus COURT OF
APPEALS and FIRESTONE CERAMICS, INC., Respondents.
(G.R. No. 143513, November 14, 2001, 1 st Division)
VILLARAMA, JR., J.:
FACTS: In the early sixties, petitioner National Development Corporation (NDC), had
in its disposal a ten-hectare property located along Pureza St., Sta. Mesa, Manila. The
estate was popularly known as the NDC compound and covered by Transfer
Certificates of Title Nos. 92885, 110301 and 145470. Private respondent Firestone
Ceramics Inc. manifested its desire to lease a portion of the property for its ceramic
manufacturing business. NDC and FIRESTONE entered into a contract of lease
denominated as Contract No. C-30-65 covering a portion of the property measured at
2.90118 hectares for use as a manufacturing plant for a term of ten years, renewable
for another ten years under the same terms and conditions. In consequence of the
agreement, FIRESTONE constructed on the leased premises several warehouses and
other improvements needed for the fabrication of ceramic products. Three and a half
years later, FIRESTONE entered into a second contract of lease with NDC over the
latter's four-unit pre-fabricated reparation steel warehouse stored in Daliao, Davao.
FIRESTONE agreed to ship the warehouse to Manila for eventual assembly within the
NDC compound. The second contract, denominated as Contract No. C-26-68, was for
similar use as a ceramic manufacturing plant and was agreed expressly to be "co-
extensive with the lease of LESSEE with LESSOR on the 2.60 hectare-lot. The parties
signed a similar contract concerning a six-unit pre-fabricated steel warehouse which,
as agreed upon by the parties, would expire on 2 December 1978. Prior to the
expiration of the aforementioned contract, FIRESTONE wrote NDC requesting for an
extension of their lease agreement. Consequently, the Board of Directors of NDC
adopted the Resolution extending the term of the lease, subject to several conditions
among which was that in the event NDC "with the approval of higher authorities,
decide to dispose and sell these properties including the lot, priority should be given to
the LESSEE". In pursuance of the resolution, the parties entered into a new agreement
for a ten-year lease of the property, renewable for another ten years, expressly
granting FIRESTONE the first option to purchase the leased premises in the event that
it decided "to dispose and sell these properties including the lot‖.
The parties' lessor-lessee relationship went smoothly until early 1988 when
FIRESTONE, cognizant of the impending expiration of their lease agreement with NDC,
informed the latter through several letters and telephone calls that it was renewing its
lease over the property. While its letter of 17 March 1988 was answered by Antonio A.
Henson, General Manager of NDC, who promised immediate action on the matter, the
rest of its communications remained unacknowledged. FIRESTONE's predicament
worsened when rumors of NDC's supposed plans to dispose of the subject property in
favor of petitioner Polytechnic University of the Philippines came to its knowledge.
Forthwith, FIRESTONE served notice on NDC conveying its desire to purchase the
property in the exercise of its contractual right of first refusal. Apprehensive that its
interest in the property would be disregarded, FIRESTONE instituted an action for
specific performance to compel NDC to sell the leased property in its favor. Following
the denial of its petition, FIRESTONE amended its complaint to include PUP and
Executive Secretary Catalino Macaraeg, Jr., as party-defendants, and sought the
annulment of Memorandum Order No. 214.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 617
After trial, judgment was rendered declaring the contracts of lease executed
between FIRESTONE and NDC covering the 2.60-hectare property and the warehouses
constructed thereon valid and existing until 2 June 1999. The Court of Appeals
affirmed the decision of the trial court ordering the sale of the property in favor of
FIRESTONE.
ISSUE: Whether or not the Court of Appeals decided a question of substance in a way
definitely not in accord with law or jurisprudence.
HELD: The courts a quo did not hypothesize, much less conjure, the sale of the
disputed property by NDC in favor of petitioner PUP. Aside from the fact that the
intention of NDC and PUP to enter into a contract of sale was clearly expressed in the
Memorandum Order No. 214, a close perusal of the circumstances of this case
strengthens the theory that the conveyance of the property from NDC to PUP was one
of absolute sale, for a valuable consideration, and not a mere paper transfer as argued
by petitioners.
A contract of sale, as defined in the Civil Code, is a contract where one of the
parties obligates himself to transfer the ownership of and to deliver a determinate
thing to the other or others who shall pay therefore a sum certain in money or its
equivalent. It is therefore a general requisite for the existence of a valid and
enforceable contract of sale that it be mutually obligatory, i.e., there should be a
concurrence of the promise of the vendor to sell a determinate thing and the promise
of the vendee to receive and pay for the property so delivered and transferred. The
Civil Code provision is, in effect, a "catch-all" provision which effectively brings within
its grasp a whole gamut of transfers whereby ownership of a thing is ceded for a
consideration.
Contrary to what petitioners PUP and NDC propose, there is not just one party
involved in the questioned transaction. Petitioners NDC and PUP have their respective
charters and therefore each possesses a separate and distinct individual personality.
Litonjua v. L and R
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 618
FACTS: This stems from loans obtained by the spouses Litonjua from L&R
Corporation in the aggregate sum of P400,000.00; P200,000.00 of which was obtained
on August 6, 1974 and the remaining P200,000.00 obtained on March 27, 1978. The
loans were secured by a mortgage constituted by the spouses upon their two parcels of
land and the improvements thereon The mortgage was duly registered with the
Register of Deeds.
Spouses Litonjua sold to Philippine White House Auto Supply, Inc. (PWHAS) the
parcels of land they had previously mortgaged to L & R Corporation for the sum of
P430,000.00. Meanwhile, with the spouses Litonjua having defaulted in the payment
of their loans, L & R Corporation initiated extrajudicial foreclosure proceedings with
the Ex-Oficio Sheriff of Quezon City. The mortgaged properties were sold at public
auction to L & R Corporation as the only bidder for the amount of P221,624.58.
The Deputy Sheriff informed L & R Corporation of the payment by PWHAS of
the full redemption price and advised it that it can claim the payment upon surrender
of its owner‘s duplicate certificates of title. The spouses Litonjua presented for
registration the Certificate of Redemption issued in their favor to the Register of Deeds
of Quezon City. The Certificate also informed L & R Corporation of the fact of
redemption and directed the latter to surrender the owner‘s duplicate certificates of
title within five days.
On April 22, 1981, L & R Corporation wrote a letter to the Sheriff, copy furnished to
the Register of Deeds, stating: (1) that the sale of the mortgaged properties to PWHAS
was without its consent, in contravention of paragraphs 8 and 9 of their Deed of Real
Estate Mortgage; and (2) that it was not the spouses Litonjua, but PWHAS, who was
seeking to redeem the foreclosed properties, when under Articles 1236 and 1237 of the
New Civil Code, the latter had no legal personality or capacity to redeem the same.
On the other hand, the spouses Litonjua asked the Register of Deeds to
annotate their Certificate of Redemption as an adverse claim on the titles of the
subject properties on account of the refusal of L & R Corporation to surrender the
owner‘s duplicate copies of the titles to the subject properties. With the refusal of the
Register of Deeds to annotate their Certificate of Redemption, the Litonjua spouses
filed a Petition on July 17, 1981 against L & R Corporation for the surrender of the
owner‘s duplicate of Transfer Certificates of Title No. 197232 and 197233 before the
then CFI.
While the said case was pending, L & R Corporation executed an Affidavit of
Consolidation of Ownership. The Register of Deeds cancelled Transfer Certificates of
Title No. 197232 and 197233 and in lieu thereof, issued Transfer Certificates of Title
No. 280054 and 28055 in favor of L & R Corporation, free of any lien or encumbrance.
A complaint for Quieting of Title, Annulment of Title and Damages with preliminary
injunction was filed by the spouses Litonjua and PWHAS against herein respondents
before the then CFI.
HELD: In the case at bar, PWHAS cannot claim ignorance of the right of first refusal
granted to L & R Corporation over the subject properties since the Deed of Real Estate
Mortgage containing such a provision was duly registered with the Register of Deeds.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 619
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 620
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 621
Josefa v Zhandong
VICENTE JOSEFA, petitioner, vs. ZHANDONG TRADING
CORPORATION, respondent.
(G.R. No. 150903, December 8, 2003, 3rd Division)
SANDOVAL-GUTIERREZ, J.:
After hearing, the trial court rendered its Decision ordering defendant
Vicente Josefa to pay to the plaintiff the amount of P4,558,100.00
representing the value of 47,980 pieces of hardboards at P95.00 per
piece, with interest at 12% per annum from the filing of the complaint
until fully paid;to pay to the plaintiff the amount of P200,000.00 as
attorney‘s fees plus P100,000.00 as litigation expenses; Ordering
defendant Tan Y Ching, aka Tony Tan, to reimburse to co-defendant
Vicente Josefa the amount of P4,474,200.00 which Josefa paid to Tan
with interest at the legal rate from the date Josefa paid the amount to
Tan until fully paid. The court also dismissed the counterclaims of
defendants Tan and Josefa for lack of merit.
HELD: No. Since petitioner had fully paid Tan for all the hardboards,
respondent Zhandong has no right to demand payments from him. To be
sure, he cannot be made responsible for Tan‘s failure to pay respondent
for the subject hardboards. Contracts take effect only between the
parties, their successors in interest, heirs and assigns.When there is no
privity of contract, there is likewise no obligation or liability to speak
about and thus no cause of action arises. Clearly, petitioner, not being
privy to the transaction between respondent and Tan, should not be
made to answer for the latter‘s default.
Actually, what appears to have transpired was that Tan ordered 313
crates of hardboards from respondent with instructions to deliver them
to petitioner‘s establishment; that petitioner paid Tan the corresponding
amounts; that in turn, Tan paid respondent with checks which were
eventually dishonored; that Chy went to Tan‘s house to protest; that Tan
replaced these checks with his personal checks and those of his mother;
and that after these checks bounced, respondent realized that it could
not collect from Tan, hence, it turned to petitioner to recover the
amounts. As explained earlier, petitioner has no liability to
respondent. Consequently, the latter‘s complaint against him cannot, in
any way, prosper and must accordingly be dismissed. Since petitioner
was able to prove that he paid Tan the amount of P4,474,200.00 for the
hardboards, then respondent Zhandong should collect the amount from
the latter.
The petition is GRANTED.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 623
PEREZ, J.:
FACTS:
On 30 May 1996, Booklight was extended an omnibus line credit
facility by SBC in the amount of P10,000,000.00. Said loan was covered
by a Credit Agreement and a Continuing Suretyship with petitioner as
surety, to secure full payment and performance of the obligations arising
from the credit accommodation.
After trial, the RTC ruled that petitioner is jointly and solidarily
liable with Booklight under the Continuing Suretyship Agreement.
ISSUE: Whether or not petitioner should be held solidarily liable for the
second credit facility extended to Booklight.
HELD: Yes. There is no novation to speak of. It is the first credit facility
that expired and not the Credit Agreement. There was a second loan
pursuant to the same credit agreement. The terms and conditions under
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 624
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 625
CORONA, J.:
After trial, the RTC upheld the validity of the promissory notes. It
found that, in 2001 alone, Equitable restructured respondents' loans
amounting to US$228,200 and P1,000,000. The trial court, however,
invalidated the escalation clause contained therein because it violated
the principle of mutuality of contracts. Nevertheless, it took judicial
notice of the steep depreciation of the peso during the intervening
period and declared the existence of extraordinary
deflation. Consequently, the RTC ordered the use of the 1996 dollar
exchange rate in computing respondents' dollar-denominated loans.
Lastly, because the business reputation of respondents was (allegedly)
severely damaged when Equitable froze their accounts, the trial court
awarded moral and exemplary damages to them.
In the March 1, 2004 order of the RTC, both notices were denied
due course because Equitable and respondents ―failed to submit proof
that they paid their respective appeal fees.‖
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 626
On March 26, 2004, Equitable filed a petition for relief in the RTC
from the March 1, 2004 order. It, however, withdrew that petition on
March 30, 2004and instead filed a petition for certiorari with an
application for an injunction in the CA to enjoin the implementation and
execution of the March 24, 2004 omnibus order.
ISSUES:
1. Whether or not the promissory notes are valid.
2. Whether or not the escalation clause violated the principle of
mutuality of contract.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 627
HELD:
1.YES.The RTC upheld the validity of the promissory notes despite
respondents‘ assertion that those documents were contracts of
adhesion.
A contract of adhesion is a contract whereby almost all of its
provisions are drafted by one party. The participation of the other party
is limited to affixing his signature or his ―adhesion‖ to the contract. For
this reason, contracts of adhesion are strictly construed against the
party who drafted it.
That was not the case here. As the trial court noted, if the terms
and conditions offered by Equitable had been truly prejudicial to
respondents, they would have walked out and negotiated with another
bank at the first available instance. But they did not. Instead, they
continuously availed of Equitable's credit facilities for five long years.
Equitable dictated the interest rates if the term (or period for
repayment) of the loan was extended. Respondents had no choice but to
accept them. This was a violation of Article 1308 of the Civil Code.
Furthermore, the assailed escalation clause did not contain the
necessary provisions for validity, that is, it neither provided that the rate
of interest would be increased only if allowed by law or the Monetary
Board, nor allowed de-escalation. For these reasons, the escalation
clause was void.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 629
In the early part of October 1986, Dio informed SFMPI, through its
president and controlling stockholder, Mildred F. Tantoco, that she was
planning to build a mausoleum on her lot and sought the approval
thereof. Dio even showed to Tantoco the plans and project specifications
accomplished by her private contractor at an estimated cost of
P60,000.00. The plans and specifications were approved, but Tantoco
insisted that the mausoleum be built by it or its agents at a minimum
cost of P100,000.00 as provided in Rule 69 of the Rules and Regulations
the SFMPI. The total amount excluded certain specific designs in the
approved plan which if included would cost Dio much more. In a
letterdated October 13, 1986, Dio, through counsel, demanded that she
be allowed to construct the mausoleum within 10 days, otherwise, she
would be impelled to file the necessary action/s against SFMPI and
Tantoco.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 630
On October 17, 1986, SFMPI wrote Dio informing her that under
Rule 69 of SFMPI Rules and Regulations, she was prohibited from
engaging an outside contractor for the construction of buildings,
improvements and memorials. A lot owner was only allowed to submit a
preferred design as long as it is in accordance with park standards.
Aggrieved, Dio, now petitioner, filed the present petition for review
on certiorari.
ISSUE:
1. Whether or not petitioner had knowledge of Rule 69 of SFMPI
Rules and Regulations for memorial works in the mausoleum areas of
the park when the Pre-Need Purchase Agreement and the Deed of Sale
was executed;
2. Whether the said rule is valid and binding upon petitioner.
HELD:
1. YES. Under the Pre-Need Purchase Agreement executed by
petitioner and respondents, the parties covenanted that upon the
completion of all payments by the purchaser, the seller would convey to
the purchaser a certificate of ownership to the aforesaid interment
property for the interment of human remains only. The certificate of
SFMPI now existing or which may hereafter be adopted for the
government of said cemetery and said certificate shall be in the form
used by the seller, a copy of which petitioner acknowledged she had
examined and approved. Petitioner agreed to abide by all such rules and
regulations governing SFMPI, among them Rule 69 which prevents lot
owners from ―contract[ing] other contractors for the construction of the
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 631
said buildings and memorial‖ but gives the owners free rein ―to give their
own design for the mausoleum to be constructed, as long as it is in
accordance with the park standards.‖
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 632
PILTEL v. Tecson
PILIPINO TELEPHONE CORPORATION, petitioner, vs. DELFINO
TECSON, respondent.
(G. R. No. 156966, May 7, 2004, 3rd Division)
VITUG, J.:
FACTS:On various dates in 1996, Delfino C. Tecson applied for six (6)
cellular phone subscriptions with petitioner Pilipino Telephone
Corporation (PILTEL), a company engaged in the telecommunications
business, which applications were each approved and covered,
respectively, by six mobiline service agreements.
On 05 April 2001, respondent filed with the Regional Trial Court of
Iligan City, Lanao Del Norte, a complaint against petitioner for a "Sum of
Money and Damages." Petitioner moved for the dismissal of the
complaint on the ground of improper venue, citing a common provision
in the mobiline service agreements to the effect that:
"Venue of all suits arising from this Agreement or any other suit
directly or indirectly arising from the relationship between PILTEL and
subscriber shall be in the proper courts of Makati, Metro Manila.
Subscriber hereby expressly waives any other venues."
The Regional Trial Court of Iligan City, Lanao del Norte, denied
petitioner‘s motion to dismiss and required it to file an answer within 15
days from receipt thereof.
Petitioner PILTEL filed a motion for the reconsideration, through
registered mail, of the order of the trial court. In its subsequent order,
the trial court denied the motion for reconsideration.
Petitioner filed a petition for certiorari before the Court of Appeals.
The Court of Appeals, in its decision, saw no merit in the petition
and affirmed the assailed orders of the trial court. Petitioner moved for
reconsideration, but the appellate courtdenied the motion.
ISSUE: Whether or not the contract is valid and binding.
HELD:YES.Section 4, Rule 4, of the Revised Rules of Civil
Procedure allows the parties to agree and stipulate in writing, before the
filing of an action, on the exclusive venue of any litigation between them.
Such an agreement would be valid and binding provided that the
stipulation on the chosen venue is exclusive in nature or in intent, that it
is expressed in writing by the parties thereto, and that it is entered into
before the filing of the suit. The provision contained in paragraph 22 of
the "Mobile Service Agreement," a standard contract made out by
petitioner PILTEL to its subscribers, apparently accepted and signed by
respondent, states that the venue of all suits arising from the agreement,
or any other suit directly or indirectly arising from the relationship
between PILTEL and subscriber, "shall be in the proper courts of Makati,
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 633
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 634
PAL v. CA
PHILIPPINE AIRLINES, INC., petitioner, vs. COURT OF APPEALS and
GILDA C. MEJIA, respondents.
(G.R. No. 119706, March 14, 1996, 2nd Division)
REGALADO, J.:
FACTS:On January 27, 1990, plaintiff Gilda C. Mejia shipped thru
defendant, Philippine Airlines, one (1) unit microwave oven, with a gross
weight of 33 kilograms from San Francisco, U.S.A. to Manila, Philippines.
Upon arrival, however, of said article in Manila, Philippines, plaintiff
discovered that its front glass door was broken and the damage rendered
it unserviceable. Demands both oral and written were made by plaintiff
against the defendant for the reimbursement of the value of the damaged
microwave oven, and transportation charges paid by plaintiff to
defendant company. But these demands fell on deaf ears.
On September 25, 1990, plaintiff Gilda C. Mejia filed the instant
action for damages against defendant in the lower court.
The damaged oven is still with defendant. Plaintiff is engaged in
(the) catering and restaurant business. Hence, the necessity of the oven.
Plaintiff suffered sleepless nights when defendant refused to pay her (for)
the broken oven and claims P10,000.00 moral damages, P20,000.00
exemplary damages, P10,000.00 attorney's fees plus P300.00 per court
appearance and P15,000.00 monthly loss of income in her business
beginning February, 1990.
As stated at the outset, respondent Court of Appeals similarly ruled
in favor of private respondent by affirming in full the trial court's
judgment, with costs against petitioner.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 636
Ermitano v. CA
SPOUSES LUIS M. ERMITAÑO and MANUELITA C. ERMITAÑO,
petitioners, vs. THE COURT OF APPEALS AND BPI EXPRESS CARD
CORP., respondents.
(G.R. No. 127246, April 21, 1999, 2 nd division)
QUISUMBING, J
FACTS:Petitioner Luis Ermitaño applied for a credit card from private
respondent BPI Express Card Corp. (BECC) on October 8, 1986 with his
wife, Manuelita, as extension cardholder. The spouses were given credit
cards with a credit limit of P10,000.00. They often exceeded this credit
limit without protest from BECC.
On August 29, 1989, Manuelita's bag was snatched from her as
she was shopping at the Greenbelt Mall in Makati, Metro Manila. Among
the items inside the bag was her BECC credit card. That same night she
informed, by telephone, BECC of the loss. The call was received by BECC
offices through a certain Gina Banzon. This was followed by a letter
dated August 30, 1989. She also surrendered Luis' credit card and
requested for replacement cards. In her letter, Manuelita stated that she
"shall not be responsible for any and all charges incurred [through the
use of the lost card] after August 29, 1989.
However, when Luis received his monthly billing statement from
BECC dated September 20, 1989, the charges included amounts for
purchases made on August 30, 1989 through Manuelita's lost card. Two
purchases were made, one amounting to P2,350.05 and the other,
P607.50. Manuelita received a billing statement dated October 20, 1989
which required her to immediately pay the total amount of P3,197.70
covering the same (unauthorized) purchases. Manuelita again wrote
BECC disclaiming responsibility for those charges, which were made
after she had served BECC with notice of the loss of her card.
Despite the spouses' refusal to pay and the fact that they
repeatedly exceeded their monthly credit limit, BECC sent them a notice
stating that their cards had been renewed until March 1991.
Notwithstanding this, however, BECC continued to include in the
spouses' billing statements those purchases made through Manuelita's
lost card. Luis protested this billing in his letter dated June 20, 1990.
However, BECC, in a letter dated July 13, 1990, pointed out to Luis
the following stipulation in their contract:
In the event the card is lost or stolen, the cardholder agrees to
immediately report its loss or theft in writing to BECC . . . purchases
made/incurred arising from the use of the lost/stolen card shall be for the
exclusive account of the cardholder and the cardholder continues to be
liable for the purchases made through the use of the lost/stolen BPI
Express Card until after such notice has been given to BECC and the latter
has communicated such loss/theft to its member establishments.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 637
Pursuant to this stipulation, BECC held Luis liable for the amount
of P3,197.70 incurred through the use of his wife's lost card, exclusive of
interest and penalty charges.
In his reply, Luis stressed that the contract BECC was referring to
was a contract of adhesion and warned that if BECC insisted on charging
him and his wife for the unauthorized purchases, they will sue BECC for
damages. This warning notwithstanding, BECC continued to bill the
spouses for said purchases.
On April 10, 1991, Luis used his credit card to purchase gasoline
at a Caltex station. The latter, however, dishonored his card. In reply to
Luis' demand for an explanation, BECC wrote that it transferred the
balance of his old credit card to his new one, including the unauthorized
charges. Consequently, his outstanding balance exceeded his credit limit
of P10,00000. He was informed that his credit card had not been
cancelled but, since he exceeded his credit limit, he could not avail of his
credit privileges.
Once more, Luis pointed out that notice of the lost card was given
to BECC before the purchases were made.
Subsequently, BECC cancelled the spouses' credit cards and
advised them to settle the account immediately or risk being sued for
collection of said account.
Constrained, petitioners sued BECC for damages. The trial court
ruled in their favor, stating that there was a waiver on the part of BECC
in enforcing the spouses' liability.
But, on appeal this decision was reversed. The Court of Appeals
stated that the spouses should be bound by the contract, even though it
was one of adhesion.
Hence, this recourse by petitioners.
gave such notices to BECC is admitted by BECC in the letter sent to Luis
by Roberto L. Maniquiz, head of BECC's Collection Department.
Having thus performed her part of the notification procedure, it was
reasonable for Manuelita — and Luis, for that matter — to expect that
BECC would perform its part of the procedure, which is to forthwith
notify its member-establishments. It is not unreasonable to assume that
BECC would do this immediately, precisely to avoid any unauthorized
charges.
Clearly, what happened in this case was that BECC failed to notify
promptly the establishment in which the unauthorized purchases were
made with the use of Manuelita's lost card. Thus, Manuelita was being
liable for those purchases, even if there is no showing that Manuelita
herself had signed for said purchases, and after notice by her concerning
her card's loss was already given to BECC.
The cardholder was no longer in control of the procedure after it
has notified BECC of the card's loss or theft. It was already BECC's
responsibility to inform its member-establishments of the loss or theft of
the card at the soonest possible time. We note that BECC is not a
neophyte financial institution, unaware of the intricacies and risks of
providing credit privileges to a large number of people. It should have
anticipated an occurrence such as the one in this case and devised
effective ways and means to prevent it, or otherwise insure itself against
such risk.
Prompt notice by the cardholder to the credit card company of the
loss or theft of his card should be enough to relieve the former of any
liability occasioned by the unauthorized use of his lost or stolen card.
The questioned stipulation in this case, which still requires the
cardholder to wait until the credit card company has notified all its
member-establishments, puts the cardholder at the mercy of the credit
card company which may delay indefinitely the notification of its
members to minimize if not to eliminate the possibility of incurring any
loss from unauthorized purchases. Or, as in this case, the credit card
company may for some reason fail to promptly notify its members
through absolutely no fault of the cardholder. To require the cardholder
to still pay for unauthorized purchases after he has given prompt notice
of the loss or theft of his card to the credit card company would simply
be unfair and unjust. The Court cannot give its assent to such a
stipulation which could clearly run against public policy.
The Decision of the Regional Trial Court is reinstated.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 639
Uniwide v. Titan-Ikeda
UNIWIDE SALES REALTY AND RESOURCES
CORPORATION, petitioner, vs. TITAN-IKEDA CONSTRUCTION AND
DEVELOPMENT CORPORATION, respondent.
(G.R. No. 126619, December 20, 2006, 3rd Division)
TINGA, J.:
FACTS:The case originated from an action for a sum of money filed by
Titan-Ikeda Construction and Development Corporation against Uniwide
Sales Realty and Resources Corporation with the Regional Trial Court
arising from Uniwide's non-payment of certain claims billed by Titan
after completion of three projects covered by agreements they entered
into with each other. Upon Uniwide's motion to dismiss/suspend
proceedings and Titan's open court manifestation agreeing to the
suspension, Civil Case No. 98-0814 was suspended for it to undergo
arbitration. Titan's complaint was thus re-filed with the CIAC. Before the
CIAC, Uniwide filed an answer which was later amended and re-
amended, denying the material allegations of the complaint, with
counterclaims for refund of overpayments, actual and exemplary
damages, and attorney's fees. The agreements between Titan and
Uniwide are briefly described below.
The first agreement (Project 1) was a written "Construction
Contract" entered into by Titan and Uniwide sometime in May 1991
whereby Titan undertook to construct Uniwide's Warehouse Club and
Administration Building in Libis, Quezon City for a fee
of P120,936,591.50, payable in monthly progress billings to be certified
to by Uniwide's representative. The parties stipulated that the building
shall be completed not later than 30 November 1991. As found by the
CIAC, the building was eventually finished on 15 February 19928 and
turned over to Uniwide.
Sometime in July 1992, Titan and Uniwide entered into the second
agreement (Project 2) whereby the former agreed to construct an
additional floor and to renovate the latter's warehouse located at the
EDSA Central Market Area in Mandaluyong City. There was no written
contract executed between the parties for this project. Construction was
allegedly to be on the basis of drawings and specifications provided by
Uniwide's structural engineers. The parties proceeded on the basis of a
cost estimate of P21,301,075.77 inclusive of Titan's 20% mark-up. Titan
conceded in its complaint to having received P15,000,000.00 of this
amount. This project was completed in the latter part of October 1992
and turned over to Uniwide.
The parties executed the third agreement (Project 3) in May 1992.
In a written "Construction Contract," Titan undertook to construct the
Uniwide Sales Department Store Building in Kalookan City for the price
ofP118,000,000.00 payable in progress billings to be certified to by
Uniwide's representative.It was stipulated that the project shall be
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 640
completed not later than 28 February 1993. The project was completed
and turned over to Uniwide in June 1993.
Uniwide asserted in its petition that: (a) it overpaid Titan for
unauthorized additional works in Project 1 and Project 3; (b) it is not
liable to pay the Value-Added Tax (VAT) for Project 1; (c) it is entitled to
liquidated damages for the delay incurred in constructing Project 1 and
Project 3; and (d) it should not have been found liable for deficiencies in
the defectively constructed Project 2.
The Arbitral Tribunal conducted a preliminary conference with the
parties and thereafter issued a Terms of Reference (TOR) which was
signed by the parties. The tribunal also conducted an ocular inspection,
hearings, and received the evidence of the parties consisting of affidavits
which were subject to cross-examination. On 17 April 1995, after the
parties submitted their respective memoranda, the Arbitral Tribunal
promulgated a Decision rendering that: (as to project 1) Uniwide is
absolved of any liability for the claims made by Titan on this Project; as
to project 2, Uniwide is absolved of any liability for VAT payment on this
project, the same being for the account of the Titan. On the other hand,
Titan is absolved of any liability on the counterclaim for defective
construction of this project; Uniwide is held liable for the unpaid balance
in the amount of P6,301,075.77 which is ordered to be paid to the Titan
with 12% interest per annum commencing from 19 December 1992 until
the date of payment; as to project 3, Uniwide is held liable for the unpaid
balance in the amount of P5,158,364.63 which is ordered to be paid to
the Titan with 12% interest per annum commencing from 08 September
1993 until the date of payment. Lastly, Uniwide is held liable to pay in
full the VAT on this project, in such amount as may be computed by the
Bureau of Internal Revenue to be paid directly thereto.
Uniwide filed a motion for reconsideration which was denied by the
CIAC. Uniwide accordingly filed a petition for review with the Court of
Appeals, which rendered its decision. Uniwide's motion for
reconsideration was likewise denied by the Court of Appeals.
Hence this petition.
ISSUES:
(1) Whether or not Uniwide is entitled to a return of the amount it
allegedly paid by mistake to Titan for additional works done on Project 1;
(2) Whether or not Uniwide is liable for the payment of the Value-
Added Tax (VAT) on Project 1;
(3) Whether or not Uniwide is entitled to liquidated damages for
Projects 1 and 3; and
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 641
HELDS:
(1) NO. Yet even conceding that the additional works on Project 1
were not authorized or committed into writing, the undisputed fact
remains that Uniwide paid for these additional works. Thus, to claim a
refund of payments made under the principle of solutio indebiti, Uniwide
must be able to establish that these payments were made through
mistake. Again, this is a factual matter that would have acquired a
mantle of invulnerability had it been determined by both the CIAC and
the Court of Appeals. However, both bodies failed to arrive at such a
conclusion. Moreover, Uniwide is unable to direct the attention of the
Court to any pertinent part of the record that would indeed establish that
the payments were made by reason of mistake.
(2) Yes. Uniwide claims that the VAT was already included in the
contract price for Project 1. Citing Sections 99 and 102 of the National
Internal Revenue Code, Uniwide asserts that VAT, being an indirect tax,
may be shifted to the buyer by including it in the cash or selling price
and it is entirely up to the buyer to agree or not to agree to absorb the
VAT.Thus, Uniwide concludes, if there is no provision in the contract as
to who should pay the VAT, it is presumed that it would be the seller.
The contract for Project 1 is silent on which party should shoulder
the VAT while the contract for Project 3 contained a provision to the
effect that Uniwide is the party responsible for the payment of the
VAT. Thus, when Uniwide paid the amount of P2,400,000.00 as billed by
Titan for VAT, it assumed that it was the VAT for Project 3. However, the
CIAC and the Court of Appeals found that the same was for Project 1.
Thus the amount of P2,400,000.00which was paid by Uniwide is
the VAT for Project 1. This conclusion was drawn from an Order of
Paymentwherein Titan billed Uniwide the amount of P2,400,000.00 as
"Value Added Tax based on P60,000,000.00 Contract," computed on the
basis of 4% of P60,000,000.00. Said document which was approved by
the President of Uniwide expressly indicated that the project involved was
the "UNIWIDE SALES WAREHOUSE CLUB & ADMIN BLDG." located at
"90 E. RODRIGUEZ JR. AVE., LIBIS," The reduced base for the
computation of the tax, according to the Court of Appeals, was an
indication that the parties agreed to pass the VAT for Project 1 to
Uniwide but based on a lower contract price.
(3) No. The Rule of Procedure Governing Construction Arbitration
promulgated by the CIAC contains no provision on the application of the
Rules of Court to arbitration proceedings, even in a suppletory capacity.
Hypothetically admitting that there is such a provision, suppletory
application is made only if it would not contravene a specific provision in
the arbitration rules and the spirit thereof. The Tribunal holds that such
importation of the Rules of Court provision on amendment to conform to
evidence would contravene the spirit, if not the letter of the CIAC
rules. This is for the reason that the formulation of the Terms of
Reference is done with the active participation of the parties and their
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 642
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 643
FACTS:
Salas, Jr. was the registered owner of a vast tract of land in Lipa
City, Batangas spanning 1,484,354 square meters.
On May 15, 1987, he entered into an Owner-Contractor Agreement
with respondent Laperal Realty Corporation to render and provide
complete (horizontal) construction services on his land.
On September 23, 1988, Salas, Jr. executed a Special Power of
Attorney in favor of respondent Laperal Realty to exercise general control,
supervision and management of the sale of his land, for cash or on
installment basis.
On June 10, 1989, Salas, Jr. left his home in the morning for a
business trip to Nueva Ecija. He never returned.
On August 6, 1996, Teresita Diaz Salas filed with the Regional Trial
Court of Makati City a verified petition for the declaration of presumptive
death of her husband, Salas, Jr., who had then been missing for more
than seven (7) years. It was granted on December 12, 1996.
Meantime, respondent Laperal Realty subdivided the land of Salas,
Jr. and sold subdivided portions thereof to respondents Rockway Real
Estate Corporation and South Ridge Village, Inc. on February 22, 1990;
to respondent spouses Abrajano and Lava and Oscar Dacillo on June 27,
1991; and to respondents Eduardo Vacuna, Florante de la Cruz and
Jesus Vicente Capalan on June 4, 1996 (all of whom are hereinafter
referred to as respondent lot buyers).
On February 3, 1998, petitioners as heirs of Salas, Jr. filed in the
Regional Trial Court of Lipa City a Complaint for declaration of nullity of
sale, reconveyance, cancellation of contract, accounting and damages
against herein respondents.
On April 24, 1998, respondent Laperal Realty filed a Motion to
Dismiss on the ground that petitioners failed to submit their grievance to
arbitration as required under Article VI of the Agreement.
On August 9, 1998, the trial court issued the herein assailed Order
dismissing petitioners' Complaint for non-compliance with the foregoing
arbitration clause.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 644
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 645
Medrano v. CA
BIENVENIDO R. MEDRANO and IBAAN RURAL BANK, petitioners, vs.
COURT OF APPEALS, PACITA G. BORBON, JOSEFINA E. ANTONIO
and ESTELA A. FLOR, respondents.
(G.R. No. 150678, February 18, 2005, 2 nd Division)
CALLEJO, SR., J.:
Borbon relayed to her business associates and friends that she had
a ready buyer for a mango orchard. Flor then advised her that her
cousin-in-law owned a mango plantation which was up for sale. She told
Flor to confer with Medrano and to give them a written authority to
negotiate the sale of the property. Thus, on September 3, 1986, Medrano
issued the Letter of Authority to respondents. The letter served as the
authority of the latter to negotiate with any prospective buyer for the sale
of a certain real estate property more specifically a mango plantation.
Medrano also promised to pay the respondents for their labor and effort
in finding a purchaser thereof, a commission of 5% of the total purchase
price to be agreed upon by the buyer and seller.
Two days after the visit, respondent Josefina Antonio called Lee to
inquire about the result of his ocular inspection. Lee told her that the
mango trees "looked sick" so he was bringing an agriculturist to the
property. Three weeks thereafter, Antonio called Lee again to make a
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 646
follow-up of the latter‘s visit to Ibaan. Lee informed her that he already
purchased the property and had made a down payment of
P1,000,000.00. The remaining balance of P1,200,000.00 was to be paid
upon the approval of the incorporation papers of the corporation he was
organizing by the Securities and Exchange Commission. According to
Antonio, Lee asked her if they had already received their commission.
She answered "no," and Lee expressed surprise over this.
After the case was submitted for decision, Medrano died, but no
substitution of party was made at this time.
valid and binding. Applying the principle of agency, the appellate court
ruled that Bienvenido Medrano constituted the respondents as his
agents, granting them authority to represent and act on behalf of the
former in the sale of the 17-hectare mango plantation.
HELD:Yes. The letter of authority must be read as a whole and not in its
truncated parts. Certainly, it was not the intention of Medrano to expect
the respondents to do just that (to negotiate) when he issued the letter of
authority. The clear intention is to reward the respondents for procuring
a buyer for the property. Before negotiating a sale, a broker must first
and foremost bring in a prospective buyer. It has been held that a broker
earns his pay merely by bringing the buyer and the seller together, even
if no sale is eventually made. The essential feature of a broker‘s
conventional employment is merely to procure a purchaser for a property
ready, able, and willing to buy at the price and on the terms mutually
agreed upon by the owner and the purchaser. And it is not a prerequisite
to the right to compensation that the broker conduct the negotiations
between the parties after they have been brought into contact with each
other through his efforts.
The case of Macondray v. Sellner is quite instructive:
The business of a real estate broker or agent, generally, is only to find a
purchaser, and the settled rule as stated by the courts is that, in the
absence of an express contract between the broker and his principal, the
implication generally is that the broker becomes entitled to the usual
commissions whenever he brings to his principal a party who is able and
willing to take the property and enter into a valid contract upon the
terms then named by the principal, although the particulars may be
arranged and the matter negotiated and completed between the principal
and the purchaser directly.
Notably, there are cases where the right of the brokers to recover
commissions were upheld where they actually took no part in the
negotiations, never saw the customer, and even some in which they did
nothing except advertise the property, as long as it can be shown that
they were the efficient cause of the sale.
In the case at bar, the role of the respondents in the transaction is
undisputed. Whether or not they participated in the negotiations of the
sale is of no moment. Armed with an authority to procure a purchaser
and with a license to act as broker, we see no reason why the
respondents cannot recover compensation for their efforts when, in fact,
they are the procuring cause of the sale.
Tan v. Gullas
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 649
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 650
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 651
Gozun v. Mercado
JESUS M. GOZUN, petitioner, vs. JOSE TEOFILO T. MERCADO
a.k.a. „DON PEPITO MERCADO, respondent.
(G.R. No. 167812, December 19, 2006, 3 rd Division)
CARPIO MORALES, J.:
Given the urgency and limited time to do the job order, petitioner
availed of the services and facilities of Metro Angeles Printing and of St.
Joseph Printing Press, owned by his daughter Jennifer Gozun and
mother Epifania Macalino Gozun, respectively.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 652
It bears noting that Lilian signed in the receipt in her name alone,
without indicating therein that she was acting for and in behalf of
respondent. She thus bound herself in her personal capacity and not as
an agent of respondent or anyone for that matter.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 653
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 654
HELD: No.Petitioner originally sold the subject lot to Alfonso, and the
latter subsequently sold the same to herein respondents. As assignees or
successors-in-interest of Alfonso to Lot 3, Block 4, Phase II in petitioner‘s
subdivision project, respondents succeed to what rights the former had;
and what is valid and binding against Alfonso is also valid and binding
as against them. In effect, respondents stepped into the shoes of Alfonso
and such transfer of rights also vests upon them the power to claim
ownership and the authority to demand to build a residential house on
the lot to the same extent as Alfonso could have enforced them against
petitioner.
Article 1311 of the New Civil Code states that, "contracts take effect
only between the parties, their assigns and heirs, except in case where
the rights and obligations arising from the contract are not transmissible
by their nature, or by stipulation or by provision of law." In this case, the
rights and obligations between petitioner and Alfonso are transmissible.
There was no mention of a contractual stipulation or provision of law
that makes the rights and obligations under the original sales contract
for Lot 3, Block 4, Phase II intransmissible. Hence, Alfonso can transfer
her ownership over the said lot to respondents and petitioner is bound to
honor its corresponding obligations to the transferee or new lot owner in
its subdivision project.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 655
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 656
Chan v. Maceda
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 657
SANDOVAL-GUTIERREZ, J.:
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 658
On August 25, 1989, or after almost four (4) years, the trial court
dismissed respondent's complaint for his failure to prosecute and for lack
of interest." On September 6, 1994, or five years thereafter, respondent
filed a motion for reconsideration, but the same was denied because of
the failure of respondent and his counsel to appear on the scheduled
hearing.
Thus, upon the return of the records to the RTC, respondent was
allowed to present his evidence ex-parte.
ISSUE:
(2) If so, does respondent have the right to demand the release of
the said materials and equipment or claim for damages?
HELD:
(1)No. Under Article 1311 of the Civil Code, contracts are binding
upon the parties (and their assigns and heirs) who execute them. When
there is no privity of contract, there is likewise no obligation or liability to
speak about and thus no cause of action arises. Specifically, in an action
against the depositary, the burden is on the plaintiff to prove the
bailment or deposit and the performance of conditions precedent to the
right of action. A depositary is obliged to return the thing to the
depositor, or to his heirs or successors, or to the person who may have
been designated in the contract.
(2) No. Petitioners are still not liable because, as expressly provided
for in Article 2199 of the Civil Code, actual or compensatory damages
cannot be presumed, but must be proved with reasonable degree of
certainty. A court cannot rely on speculations, conjectures, or guesswork
as to the fact and amount of damages, but must depend upon competent
proof that they have been suffered by the injured party and on the best
obtainable evidence of the actual amount thereof. It must point out
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 660
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 661
Baluyot vs. CA
TIMOTEO BALUYOT, JAIME BENITO, BENIGNO EUGENIO, ROLANDO
GONZALES, FORTUNATO FULGENCIO and CRUZ-NA-LIGAS
HOMESITE ASSOCIATION, INC., petitioners, vs. THE HONORABLE
COURT OF APPEALS, THE QUEZON CITY GOVERNMENT and
UNIVERSITY OF THE PHILIPPINES, respondents.
(G.R. No. 122947, July 22, 1999, 2nd Division)
MENDOZA, J.:
The motion was granted by the trial court. On the same day, a
Joint Motion to Dismiss was filed by UP and the Quezon City government
on the ground that the complaint fails to state a cause of
action. Petitioners opposed the motion.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 662
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 663
Cuyco v Cuyco
SPOUSES ADELINA S. CUYCO and FELICIANO U. CUYCO,
Petitioners, vs. SPOUSES RENATO CUYCO and FILIPINA
CUYCO,Respondents.
(G.R. No. 168736, April 19, 2006, 1st Division)
YNARES-SANTIAGO, J.:
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 664
Go, doing business under the name and style of “ACG Express Liner” v
Cordero
ALLAN C. GO, doing business under the name and style "ACG
Express Liner," Petitioner, vs. MORTIMER F.
CORDERO, Respondent.
(G.R. No. 164703, May 4, 2010, 1st Division)
company which provided the ship engine for the first SEACAT 25. Padua
told Cordero that Go instructed him to fax the requested quotation of the
second engine to the Park Royal Hotel in Brisbane where Go was then
staying. Cordero tried to contact Go and Landicho to confirm the matter
but they were nowhere to be found, while Robinson refused to answer his
calls. Cordero immediately flew to Brisbane to clarify matters with
Robinson, only to find out that Go and Landicho were already there in
Brisbane negotiating for the sale of the second SEACAT 25. Despite
repeated follow-up calls, no explanation was given by Robinson, Go,
Landicho and Tecson who even made Cordero believe there would be no
further sale between AFFA and ACG Express Liner.
On May 31, 2000, the trial court rendered its judgment in favor of
Plaintiff and against defendants Allan C. Go, Tony Robinson, Felipe
Landicho, and Vincent Tecson. On January 29, 2001, the CA rendered
judgment granting the petition for certiorari in CA-G.R. SP No. 60354
and setting aside the trial court‘s orders of execution pending appeal.
The case before the Supreme Court is a consolidation of the petitions for
review under Rule 45 separately filed by Go (G.R. No. 164703) and
Cordero (G.R. No. 164747).
ISSUE:
(1) Whether petitioner Cordero has the legal personality to sue the
respondents for breach of contract; and
(2) whether the respondents may be held liable for damages to Cordero
for his unpaid commissions and termination of his exclusive
distributorship appointment by the principal, AFFA.
HELD:
While it is true that a third person cannot possibly be sued for
breach of contract because only parties can breach contractual
provisions, a contracting party may sue a third person not for breach but
for inducing another to commit such breach. Article 1314 of the Civil
Code provides:
Art. 1314. Any third person who induces another to violate his
contract shall be liable for damages to the other contracting party.
The elements of tort interference are: (1) existence of a valid contract; (2)
knowledge on the part of the third person of the existence of a contract;
and (3) interference of the third person is without legal justification.
The presence of the first and second elements is not disputed. Through
the letters issued by Robinson attesting that Cordero is the exclusive
distributor of AFFA in the Philippines, respondents were clearly aware of
the contract between Cordero and AFFA represented by Robinson. In
fact, evidence on record showed that respondents initially dealt with and
recognized Cordero as such exclusive dealer of AFFA high-speed
catamaran vessels in the Philippines. In that capacity as exclusive
distributor, petitioner Go entered into the Memorandum of Agreement
and Shipbuilding Contract No. 7825 with Cordero in behalf of AFFA.
held liable for the balance of petitioner Cordero‘s commission from the
sale of the first SEACAT 25, in the amount of US$31,522.09 or its peso
equivalent, which AFFA/Robinson did not pay in violation of the
exclusive distributorship agreement, with interest at the rate of 6% per
annum from June 24, 1998 until the same is fully paid.
Respondents having acted in bad faith, moral damages may be
recovered under Article 2219 of the Civil Code.
Tayag vs. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 668
ISSUE:Whether or not the tenants are allowed to sell their rights over the
land to the Lacsons
HELD:The petitioner failed to establish the essential requisites for the
issuance of a writ of preliminary injunction.
The trial court cannot enjoin the respondents, at the instance of the
petitioner, from selling, disposing of and encumbering their property. As
the registered owners of the property, the respondents have the right to
enjoy and dispose of their property without any other limitations than
those established by law, in accordance with Article 428 of the Civil
Code. Under Article 1306 of the New Civil Code, the respondents may
enter into contracts covering their property with another under such
terms and conditions as they may deem beneficial provided they are not
contrary to law, morals, good conduct, public order or public policy.
The respondents cannot be enjoined from selling or encumbering their
property simply and merely because they had executed Deeds of
Assignment in favor of the petitioner, obliging themselves to assign and
transfer their rights or interests as agricultural farmers/laborers/sub-
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 669
tenants over the landholding, and granting the petitioner the exclusive
right to buy the property subject to the occurrence of certain conditions.
The respondents were not parties to the said deeds. There is no evidence
that the respondents agreed, expressly or impliedly, to the said deeds or
to the terms and conditions set forth therein. Indeed, they assailed the
validity of the said deeds on their claim that the same were contrary to
the letter and spirit of P.D. No. 27 and Rep. Act No. 6657. The petitioner
even admitted when he testified that he did not know any of the
respondents, and that he had not met any of them before he filed his
complaint in the RTC.
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY
GRANTED. The Decision of the Court of Appeals nullifying the Orders of
the RTC is AFFIRMED. The writ of injunction issued by the Court of
Appeals permanently enjoining the RTC from further proceeding is
hereby LIFTED and SET ASIDE. The Regional Trial Court is ORDERED to
continue with the proceedings as provided for by the Rules of Court, as
amended.
So vs. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 670
QUISUMBING, J.:
FACTS:In 1963, Tek Hua Trading Co., through its managing partner, So
Pek Giok, entered into lease agreements with lessor Dee C. Chuan and
Sons Inc (DCCSI). Subjects of four (4) lease contracts were premises
located at Nos. 930, 930- Int., 924-B and 924-C, Soler Street, Binondo,
Manila. Tek Hua used the areas to store its textiles. The contracts each
had a one year term. They provided that should the lessee continue to
occupy the premises after the term, the lease shall be on a month to
month basis.
When the contracts expired, the parties did not renew the
contracts, but Tek Hua continued to occupy the premises in 1976 Tek
Hua Trading Corp. was dissolved. Later, the original members of Tek Hua
Trading Co., including Manuel C.Tiong, formed Tek Hua Enterprising
Corp., herein respondent corporation.
So Pek Giok, managing partner of Tek Hua Trading, died in 1986.
So Pek Giok‘s grandson, petitioner So Ping Bun, occupied the warehouse
for his own textile business, Trendsetter Marketing.
On August 1, 1989, lessor DCCSI sent letters addressed to Tek Hua
enterprises, informing the latter of the 25% increase in rent effective
September 1, 1989. The rent increase was later on reduced to 20%
effective January 1, 1990, upon other lessees‘ demand. Again on
December 1, 1990, the lessor implemented a 30% rent increase.
Enclosed in these letters were new lease contracts for signing. DCCSI
warned that failure of the lessee to accomplish the contracts shall be
deemed as lack of interest on the lessee‘s part, and agreement to the
termination of the lese. Private respondents did not answer any of these
letters. Still, the lease contracts were not rescinded.
On March 1, 1991, private respondent Tiong sent a letter to
petitioner asking Mr. So Ping Bun to vacate the premise because he used
a warehouse.
Petitioner refused to vacate. On March 4, 1992, petitioner
requested formal contracts of lease with DCCSI in favor Trendsetter
Marketing. So Ping Bun claimed that after the death of his grandfather,
So Pek Giok, he had been occupying the premises for his textile business
and religiously paid rent. DCCSI acceded to petitioner‘s request. The
lease contracts in favor of Trendsetter were executed.
A duty which the law of torts is concerned with is respect for the
property of others, and cause of action ex delicto may be predicated upon
an unlawful interference by one person of the enjoyment by the other of
his private property. This may pertain to a situation where a third person
induces a party to renege on or violate his undertaking under a contract.
In the case before us, petitioner‘s Trendsetter Marketing asked DCCSI to
execute lease contracts in its favor, and as a result petitioner deprived
respondent corporation of the latter‘s property right. Clearly, and as
correctly viewed by the appellate court, the three elements of tort
interference above mentioned are present in the instant case.
Authorities debate on whether interference may be justified where
the defendant acts for the sole purpose of furthering his own financial or
economic interest. One view is that, as a general rule, justification for
interfering with the business relations of another exist where the actor‘s
motive is to benefit himself. Such justification does not exist where his
sole motive is to cause harm to the other. Added to this, some authorities
believe that it is not necessary that the interferer‘s interest outweigh that
of the party whose rights are invaded, and that an individual acts under
an economic interest that is substantial, not merely I de minimis for he
acts in self protection. Moreover, justification for protecting ones
financial position should not be made to depend on a comparison of his
economic interest in the subject matter with that of others. It is sufficient
if the impetus of his conduct lies in a proper business interest rather
than in wrongful motives.
As early as Gilchrist vs. Cuddy we held that where there was no
malice in the interference of a contract, and the impulse behind one‘s
conduct lies in a proper business interest rather than in wrongful
motives, a party cannot be a malicious interferer. Where the alleged
interferer is financially interested and such interest motivates his
conduct it cannot be said that he is an officious or malicious
intermeddler.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 672
ABAD, J.:
FACTS: In March 1997 petitioner International Freeport Traders, Inc.
(IFTI) ordered a shipment of Toblerone chocolates and assorted
confectioneries from Jacobs Suchard Tobler Ltd. of Switzerland through
its Philippine agent, Colombo Merchants Phils., Inc., under the delivery
term "F.O.B. Ex-Works."
To ship the goods, Jacobs dealt with Danmar Lines of Switzerland
(Danmar) which issued to Jacobs negotiable house bills of lading1 signed
by its agent, respondent Danzas Intercontinental, Inc..The bills of lading
stated that the terms were "F.O.B." and "freight payable at destination,"
with Jacobs as the shipper, China Banking Corporation as the
consignee, and IFTI as the party to be notified of the shipment. The
shipment was to be delivered at the Clark Special Economic Zone with
Manila as the port of discharge. The goods were also covered by Letters of
Credit MK-97/0467 and MK-97/0468 under a "freight collect"
arrangement.
Since Danmar did not have its own vessel, it contracted Orient
Overseas Container Line (OOCL) to ship the goods from Switzerland.
OOCL issued a non-negotiable master bill of lading,2 stating that the
freight was prepaid with Danmar as the shipper and Danzas as the
consignee and party to be notified. The shipment was to be delivered at
Angeles City in Pampanga. Danmar paid OOCL an arbitrary fee of
US$425.00 to process the release of the goods from the port and ship the
same to Clark in Angeles City. The fee was to cover brokerage, trucking,
wharfage, arrastre, and processing expenses.
The goods were loaded on board the OOCL vessel on April 20, 1997
and arrived at the port of Manila on May 14, 1997. Upon learning from
Danmar that the goods had been shipped, Danzas immediately informed
IFTI of its arrival. IFTI prepared the import permit needed for the clearing
and release of the goods from the Bureau of Customs and advised
Danzas on May 20, 1997 to pick up the document. Danzas got the
import permit on May 26, 1997. At the same time, it asked IFTI to 1)
surrender the original bills of lading to secure the release of the goods,
and 2) submit a bank guarantee inasmuch as the shipment was
consigned to China Banking Corporation to assure Danzas that it will be
compensated for freight and other charges.
But IFTI did not provide Danzas a bank guarantee, claiming that
letters of credit already covered the shipment. IFTI insisted that Danzas
should already endorse the import permit and bills of lading to OOCL
since the latter had been paid an arbitrary fee. But Danzas did not do
this.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 673
Because IFTI did not provide Danzas with the original bills of lading
and the bank guarantee, the latter withheld the processing of the release
of the goods. Danzas reiterated to IFTI that it could secure the release of
the goods only if IFTI submitted a bank guarantee. Ultimately, IFTI
yielded to the request and applied for a bank guarantee which was
approved on May 23, 1997. It claimed to have advised Danzas on even
date of its availability for pick up but Danzas secured it only on June 6,
1997.
In a letter dated June 6, 1997, Danzas told IFTI that the issuance
of a promissory note would assure the delivery of the goods to Clark. On
June 10, 1997 IFTI faxed a letter to Danzas, stating that Edwin Mabazza
of OOCL confirmed that it had been paid an arbitrary fee. IFTI
maintained, however, that it was not in a position to decide whether
Danzas was to be liable for the charges. Nonetheless, IFTI issued a
promissory note and requested that the goods be released to avoid any
further charges.
Minutes later, IFTI faxed another letter reiterating its request that
the goods be released pending payment of whatever charges Danzas had
incurred for the release and delivery of the goods to Clark. IFTI promised
to pay Danzas any charges within five days upon delivery of the goods as
soon as the investigation as to which company will shoulder the
expenses is settled.
On June 13, 1997 Danzas secured the release of the goods and
delivered the same to IFTI at Clark on June 16, 1997. IFTI faxed a letter
to Danzas, confirming the delivery. IFTI also said that Danzas‘ General
Manager and OOCL‘s Mabazza visited IFTI‘s office to settle the charges
on the goods. Danzas agreed to charge IFTI only the electric charges and
storage fees totaling P56,000.00 (or roughly US$2,210.00) from the
original billing of about US$7,000.00. In turn, IFTI agreed to give Danzas
another opportunity to service its account and requested it to disregard
IFTI‘s June 10, 1997 fax letter where it said that it would no longer
employ Danzas for its future shipments for Subic and Clark.
On January 19, 1998, however, Danzas wrote IFTI, demanding payment
of P181,809.45 for its handling of the shipment. IFTI ignored the
demand. On March 26, 1998 Danzas filed separate complaints for sum of
money against IFTI and OOCL before the Metropolitan Trial Court (MeTC)
of Parañaque City, Branch 78. The court subsequently dismissed the
complaint against OOCL after it settled the case amicably.
In the main, Danzas claimed that IFTI engaged its services
for P181,809.45 to process the release of the goods from the port and
deliver it to IFTI at Clark but the latter reneged on its obligation,
compelling Danzas to file the suit.
IFTI countered that it had no liability to Danzas since IFTI was not
privy to the hiring of Danzas. Following normal procedure, IFTI coursed
the import permit to Danzas since it was the party that issued the house
bills of lading. IFTI added that under arbitrary shipments, imported
goods are allowed to stay free of charge in the port for three working days
and in the storage for five to six calendar days. Storage fees, electricity
charges, and demurrage become due only after such period. In this case,
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 674
IFTI informed Danzas on May 20, 1997 to pick up the import permit but
Danzas picked it up only on May 26, 1997. And instead of endorsing it
with the bills of lading to OOCL, Danzas itself processed the release of
the goods. Since Danzas failed to process the release or transshipment of
the goods within the three-day period, then it should shoulder all the
charges from May 20, 1997 to June 13, 1999.
On January 2, 2002, the MeTC rendered a decision in favor of
Danzas and ordered IFTI to pay (1) P181,809.45 plus legal interest to be
computed from March 26, 1998 until fully paid; (2) P25,000.00 as
attorney‘s fees; and (3) the costs of suit. On appeal, however, the
Regional Trial Court dismissed the complaint.
Danzas elevated the case to the Court of Appeals which reversed
the RTC decision. The CA ruled that IFTI‘s fax letters dated June 10,
1997 showed the parties engaged in negotiation stage. When IFTI heeded
Danzas‘ request for a bank guarantee, its action brought about a
perfected contract of lease of service. The bank guarantee, procured by
IFTI, contained all the requisites of a perfected contract. The cause of the
contract was the release of the goods from the port and its delivery at
Clark; the consideration was the compensation for the release and
delivery of the goods to IFTI.
ISSUES:
2. Whether or not IFTI is liable to Danzas for the costs of the delay
in the release of the goods from the port.
HELD:
1. The facts show the existence of several contracts: one between
IFTI and Jacobs, another between Jacobs and Danmar, and still another
between Danmar and OOCL. IFTI bought chocolates and confectioneries
from Jacobs; Jacobs got Danmar to deliver the goods to its destination;
Danmar got OOCL to carry the goods for it by ship to Manila. For this
purpose, Danmar paid OOCL an arbitrary fee to process the release of
the goods from the port of Manila and deliver the same to Clark. In all
these transactions, Danzas acted as an agent of Danmar who signed the
house bills of lading in favor of Jacobs.
In short, the combined services of different carriers were used for
the delivery of the goods: Danmar, as the initial carrier, assumed the
responsibility of conveyance when it received the goods for
transportation; OOCL, as the forwarding carrier, had the duty to deliver
the goods to Danzas which was designated as the consignee in the
master bill of lading; and Danzas, being the agent of Danmar, assumed
the responsibility for delivering the goods from Manila to IFTI at
Clark.6 Evidently, although Danmar intended the arbitrary fee that it
paid OOCL to cover the latter‘s delivery of the goods all the way to
Danzas, the latter had no notion of and was not a party to such
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 675
arrangement. Since the last leg of the delivery of the goods to IFTI at
Clark devolved on Danzas, the latter insisted that it was entitled to
collect a separate fee following the terms of the sale and the house bills of
lading .
At first, IFTI did not want to pay more but when Danzas would not
move the goods until it was assured that it would be paid, IFTI eventually
negotiated with Danzas for its services. IFTI prepared the import permit
and advised Danzas to pick up the document. But Danzas told IFTI that
it also needed the house bills of lading and the bank guarantee. If IFTI
believed that it was OOCL‘s responsibility to deliver the goods at its
doorsteps, then it should not have asked Danzas to pick up the import
permit and submit to it the bank guarantee and promissory note that it
required. IFTI should have instead addressed its demand to OOCL for the
delivery of the goods.
What is clear to the Court is that, by acceding to all the
documentary requirements that Danzas imposed on it, IFTI voluntarily
accepted its services. The bank guarantee IFTI gave Danzas assured the
latter that it would eventually be paid all freight and other charges
arising from the release and delivery of the goods to it.
Another indication that IFTI recognized its contract with Danzas is
when IFTI requested Danzas to have the goods released pending payment
of whatever expenses the latter would incur in obtaining the release and
delivery of the goods at Clark. It also admitted that it initially settled with
Danzas‘ General Manager and OOCL‘s Mabazza the issue regarding the
charges on the goods after Danzas agreed to bill IFTI for the electric
charges and storage fees totaling P56,000.00. Certainly, this concession
indicated that their earlier agreement did not push through.
Every contract has the elements of (1) consent of the contracting
parties; (2) object certain which is the subject matter of the contract; and
(3) cause of the obligation which is established. A contract is perfected by
mere consent, which is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the
contract.
Generally, contracts undergo three distinct stages: (1) preparation
or negotiation; (2) perfection; and (3) consummation. Negotiation begins
from the time the prospective contracting parties manifest their interest
in the contract and ends at the moment of agreement of the parties. The
perfection or birth of the contract takes place when the parties agree
upon the essential elements of the contract. The last stage is the
consummation of the contract where the parties fulfill or perform the
terms they agreed on, culminating in its extinguishment. Here, there is
no other conclusion than that the parties entered into a contract of lease
of service for the clearing and delivery of the imported goods.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 676
Since the goods arrived at the Port of Manila on May 14, 1997, they
could remain there until May 20, 1997 free of charge. The fact that IFTI
had the import permit ready by May 20, 1997 was immaterial since it
had not yet given the bank guarantee required of it. The Court is not
convinced that IFTI had the bank guarantee ready as early as May 23,
1997 for, if that were the case, surely it did not make sense for it not to
hand over such document to Danzas when the latter claimed the import
permit on May 26, 1997.
Since the delay in the processing of the release of the goods was
due to IFTI‘s fault, the CA rightly adjudged it liable for electric charges,
demurrage, and storage fees of P122,191.75 from May 20, 1997 to June
13, 1999.
The petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 677
QUISUMBING, J.:
ISSUES:
Was there a perfected contract of lease?
Had estoppel in pais set in?
HELD:A close review of the events in this case, in the light of the parties‘
evidence, shows that there was no perfected contract of lease between
the parties. Mid-Pasig was not aware that Rockland deposited the P1
million check in its account. It only learned of Rockland‘s check when it
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 678
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 679
MMDA v. JANCOM
METROPOLITAN MANILA DEVELOPMENT AUTHORITY, petitioner, vs.
JANCOM ENVIRONMENTAL CORPORATION and JANCOM INTERNATIONAL
DEVELOPMENT PROJECTS PTY. LIMITED OF AUSTRALIA, respondents.
(G.R. No. 147465. January 30, 2002, 3rd Division)
MELO, J.:
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 680
the contract. The execution and signing of the contract is not disputed by
the parties. As the Court of Appeals aptly held: Contrary to petitioners‘
insistence that there was no perfected contract, the meeting of the offer
and acceptance upon the thing and the cause, which are to constitute
the contract (Arts. 1315 and 1319, New Civil Code), is borne out by the
records.
Admittedly, when petitioners accepted private respondents‘ bid
proposal (offer), there was, in effect, a meeting of the minds upon the
object (waste management project) and the cause (BOT scheme). Hence,
the perfection of the contract. In City of Cebu vs. Heirs of Candido Rubi,
the Supreme Court held that ―the effect of an unqualified acceptance of
the offer or proposal of the bidder is to perfect a contract, upon notice of
the award to the bidder.
In fact, in asserting that there is no valid and binding contract
between the parties, MMDA can only allege that there was no valid notice
of award; that the contract does not bear the signature of the President
of the Philippines; and that the conditions precedent specified in the
contract were not complied with.
In asserting that the notice of award to JANCOM is not a proper
notice of award, MMDA points to the Implementing Rules and
Regulations of Republic Act No. 6957, otherwise known as the BOT Law,
which require that i) prior to the notice of award, an Investment
Coordinating Committee clearance must first be obtained; and ii) the
notice of award indicate the time within which the awardee shall submit
the prescribed performance security, proof of commitment of equity
contributions and indications of financing resources.
Admittedly, the notice of award has not complied with these
requirements. However, the defect was cured by the subsequent
execution of the contract entered into and signed by authorized
representatives of the parties; hence, it may not be gainsaid that there is
a perfected contract existing between the parties giving to them certain
rights and obligations (conditions precedents) in accordance with the
terms and conditions thereof. We borrow the words of the Court of
Appeals:
Petitioners belabor the point that there was no valid notice of award
as to constitute acceptance of private respondent‘s offer. They maintain
that former MMDA Chairman Oreta‘s letter to JANCOM EC dated
February 27, 1997 cannot be considered as a valid notice of award as it
does not comply with the rules implementing Rep. Act No. 6957, as
amended. The argument is untenable.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 681
QUISUMBING, J.:
ISSUES:
Was there a perfected contract of lease?
Had estoppel in pais set in?
HELD: A close review of the events in this case, in the light of the parties‘
evidence, shows that there was no perfected contract of lease between
the parties. Mid-Pasig was not aware that Rockland deposited the P1
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 682
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 683
FACTS: Manila Metal Corp. executed a real estate mortgage (TCT. 32098)
as a security for its loan from PNB amounting to 900,000 php, later on
1,000,000 php and 653,000 php. Aug. 5, 1982: PNB filed a petition for
extrajudicial foreclosure for the property to be sold at a public auction
911,532.21 php (outstanding as of June 30) + interest + attorney's fees.
Sept. 2, 1982: PNB won the public auction at 1,000,000 php; Feb. 17,
1983: Certificate of Sale was issued and registered at the Registry of
Deeds and was annotated at the dorsal portion of the title (Redeemable
until Feb 17,1983); Petitioner requested 1 year extension until Feb
17,1984 but was rejected by PNB saying it is their policy not to accept
partial redemption; Jun. 1,1984: Since petitioner failed to redeem, TCT.
32098 was cancelled and a new title was issued in favor of PNB
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 685
Montecillo v. Reynes
RIDO MONTECILLO, petitioner, vs. IGNACIA REYNES and SPOUSES
REDEMPTOR and ELISA ABUCAY, respondents.
(G.R. No. 138018 , July 26, 2002, 3rd Division)
CARPIO, J.:
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 686
and surreptitiously caused the transfer of the title to the Mabolo Lot in
his name.
During pre-trial Montecillo claimed that the consideration for the
sale of the Mabolo Lot was the amount he paid to Cebu Iced and Cold
Storage Corporation for the mortgage debt of Bienvenido Jayag.
Montecillo argued that the release of the mortgage was necessary since
the mortgage constituted a lien on the Mabolo Lot.
Reynes, however stated that she had nothing to do with Jayag‘s
mortgage debt except that the house mortgaged by Jayag stood on a
portion of the Mabolo Lot. Reynes further stated that the payment by
Montecillo to release the mortgage on Jayag‘s house is a matter between
Montecillo and Jayag. The mortgage on the house being a chattel
mortgage could not be interpreted in any way as an encumbrance on the
Mabolo Lot. Reynes further claimed that the mortgage debt had long
prescribed since the P47,000.00 mortgage debt was due for payment on
January 30,1967.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 687
Soler v CA
JASMIN SOLER, petitioner, vs. COURT OF APPEALS, COMMERCIAL
BANK OF MANILA, and NIDA LOPEZ, respondents.
(G.R. No. 123892 , May 21, 2001, 1 st Division)
PARDO, J.:
against COMBANK and Ms. Lopez for collection of professional fees and
damages.
In its answer, COMBANK stated that there was no contract between
COMBANK and petitioner; that Ms. Lopez merely invited petitioner to
participate in a bid for the renovation of the COMBANK Ermita Branch;
that any proposal was still subject to the approval of the COMBANK‘s
head office.
The trial court rendered judgment in favor of plaintiff. On appeal,
the Court of Appeals reversed the decision. Hence, this petition.
ISSUE:Whether or not the Court of Appeals erred in HELD that there was
no contract between petitioner and respondents, in the absence of the
element of consent.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 689
useful to Ms. Lopez for she did not appear to the board without any
designs at the time of the deadline set by the board.
Decision reversed and set aside. Decision of the trial court affirmed.
Palattao vs. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 690
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 691
HELD:There was no valid consent in the case at bar. Contracts that are
consensual in nature, like a contract of sale, are perfected upon mere
meeting of the minds. Once there is concurrence between the offer and
the acceptance upon the subject matter, consideration, and terns of
payment, a contract is produced. The offer must be certain. To convert
the offer into a contract, the acceptance must be absolute and must not
qualify the terms of the offer; it must be plain, unequivocal,
unconditional, and without variance of any sort from the proposal. A
qualified acceptance, or one that involves a new proposal, constitutes a
counter-offer and is a rejection of the original offer. Consequently, when
something is desired which is not exactly is proposed in the offer, such
acceptance is not sufficient to generate consent because any modification
or variation from the terms of the offer annuals the offer.
In the case at bar, while it is true that private respondent informed
petitioner that he is accepting the latter‘s offer to sell the leased property,
it appears that they did not reach an agreement as to the extent of the lot
subject of the proposed sale.
Letters reveal that private respondent did not give his consent to
buy only 413.28 square meters of the leased lot, as he desired to
purchase the whole 490 square-meter- leased premises which, however,
was not what was exactly proposed in petitioner‘s offer. Clearly,
therefore, private respondent‘s acceptance of petitioner‘s offer was not
absolute, and will consequently not generate consent that would perfect
a contract.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 692
ABS-CBN v. CA
ABS-CBN BROADCASTING CORPORATION, petitioner, vs.
HONORABLE COURT OF APPEALS, REPUBLIC BROADCASTING
CORP, VIVA PRODUCTION, INC., and VICENTE DEL
ROSARIO, respondents.
(G.R. No. 128690, January 21, 1999, 1st Division)
DAVIDE, JR., CJ.:
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 693
The RTC then rendered decision in favor of RBS and against ABS-
CBN. On appeal, the same decision was affirmed. Hence, this decision.
Limson v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 695
On July 31, 1978, she agreed to but the property at the price of
P34. 00 per square meter and gave P20, 000.00 as ―earnest money‖. The
respondent spouses signed a receipt thereafter and gave her a 10-day
option period to purchase the property. Respondent spouses informed
petitioner that the subject property was mortgaged to Emilio Ramos and
Isidro Ramos. Petitioner was asked to pay the balance of the purchase
price to enable the respondent spouses to settle their obligation with the
Ramoses. Petitioner agreed to meet respondent spouses and the Ramoses
on August 5, 1978, to consummate the transaction; however, the
respondent spouses and the Ramoses did not appear, same with their
second meeting.
Petitioner alleged that it was only on September 15, 1978, that TCT
No. S-72946 covering the property was issued to respondent spouses. On
the same day, petitioner filed and Affidavit of Adverse Claim with the
Office of the Registry of Deeds of Makati, Metro Manila. The Deed of Sale
between respondent spouses and respondent Sunvar was executed on
September 15, 1978 and TCT No. S-72377 was issued in favor of Sunvar
on September 26, 1978 with the Adverse Claim of petitioner annotated
thereon.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 696
HELD:The Supreme Court held that the agreement between the parties
was a contract of option and not a contract to sell. An option is
continuing offer or contract by which the owner stipulates with another
that the latter shall have the right to buy the property at a fixed price
within a time certain, or under, or in compliance with, certain terms and
conditions, or which gives the owner of the property the right to sell or
demand a sale. It is also sometimes called an ―unaccepted offer‖. An
option is not of itself a purchase, but merely secures the privilege to buy.
It is not a sale of property but a sale of the right to purchase. Its
distinguishing characteristic is that it imposes no binding obligation on
the person holding the option, aside from the consideration for the offer.
Villanueva v. PNB
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 697
AUSTRIA-MARTINEZ, J.:
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 699
Catalan v. Basa
CORAZON CATALAN, LIBRADA CATALAN-LIM, EULOGIO CATALAN,
MILA CATALAN-MILAN, ZENAIDA CATALAN, ALEX CATALAN, DAISY
CATALAN, FLORIDA CATALAN and GEMMA CATALAN, Heirs of the
late FELICIANO CATALAN, Petitioners, vs.JOSE BASA, MANUEL
BASA, LAURETA BASA, DELIA BASA, JESUS BASA and ROSALINDA
BASA, Heirs of the late MERCEDES CATALAN, Respondents.
PUNO, C.J.:
1992, and Tax Declaration No. 12911 was issued in the name of
respondents.
Thus, all the elements for validity of contracts having been present
in the 1951 donation coupled with compliance with certain solemnities
required by the Civil Code in donation inter vivos of real property under
Article 749.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 702
Domingo v. CA
EUGENIO DOMINGO, CRISPIN MANGABAT and SAMUEL
CAPALUNGAN, petitioners, vs. HON. COURT OF APPEALS, FELIPE C.
RIGONAN and CONCEPCION R. RIGONAN, respondents.
QUISUMBNG, J.:
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 704
Mendozana v. Ozamiz
MARIO J. MENDEZONA and TERESITA M. MENDEZONA, LUIS J.
MENDEZONA and MARICAR L. MENDEZONA and TERESITA ADAD
VDA. DE MENDEZONA, petitioners, vs.JULIO H. OZAMIZ, ROBERTO
J. MONTALVAN, JOSE MA. OZAMIZ, CARMEN H. OZAMIZ, PAZ O.
MONTALVAN, MA. TERESA O.F. ZARRAGA, CARLOS O. FORTICH,
JOSE LUIS O. ROS, PAULITA O. RODRIGUEZ, and LOURDES O.
LON, respondents.
[G.R. No. 143370. February 6, 2002, 2nd Division]
DE LEON, JR., J.:
Also, the Court noted that the heirs only sought the nullification of
one document, while they did not dare touch other transactions made by
Carmen during the time of her alleged incapacity.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 705
Lim v. CA
MARIANO T. LIM, JAIME T. LIM, JOSE T. LIM, JOVITA T. LIM,
ANACORITA T. LIM, ANTONIETTA T. LIM, RUBEN T. LIM, BENJAMIN
T. LIM, ET AL., petitioners, vs. COURT OF APPEALS, LORENZO O.
TAN and HERMOGENES O. TAN, respondents.
(G.R. No. L-55201, February 3, 1994, 2nd division)
PUNO, J.:
FACTS: The deceased spouses Tan Quico and Josefa Oraa, who both
died intestate left 96 hectares of land. The late spouses were survived by
four children; Cresencia, Lorenzo, Hermogenes and Elias. Elias died on
May 2, 1935. Cresencia died on December 20, 1967. She was survived by
her husband, Lim Chay Sing, and children, Mariano, Jaime, Jose Jovita,
Anacoreta, Antonietta, Ruben, Benjamin and Rogelio who are now the
petitioners in the case at bench.
ISSUE:
Whether or not Cresencia indeed sold her share of the land to Lorenzo.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 706
Ruiz v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 707
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 709
After trial on the merits, the trial court ruled that petitioners
breached the Contract by: (1) hiring Rosales to do development work on
the subdivision within the 27-month period exclusively granted to
respondent; (2) interfering with the latter's development work; and (3)
stopping respondent from managing the sale of lots and collection of
payments.
Because petitioners were the first to breach the Contract and even
interfered with the development work, the trial court declared that
respondent did not incur delay even if he completed only 28% of the
development work. Further, the HSRC extended the Contract up to July
1987. Since the Contract had not expired at the time respondent filed the
action for rescission, petitioners' defense that respondent did not finish
the development work on time was without basis.
The trial court also found that respondent did not fail to pay the
50% share of petitioners from the proceeds of the lot sales. The trial
court viewed respondent's failure to submit the required report as only a
slight infraction not warranting petitioners' interference with
respondent's right to sell the lots and collect payments from sales
pursuant to Article X (3) of the Contract. The trial court noted that
petitioners had tolerated the non-submission of the monthly report until
petitioners made the demand for accounting on 16 July 1986, which
respondent readily complied. The trial court stressed that respondent's
right under the Contract to sell lots and collect payments was exclusive
and irrevocable.
The trial court decreed the rescission of the Contract and awarded
damages to respondent.
HELD: The Supreme Court found no reversible error in the HELD of the
trial and appellate courts that respondent's non-submission of the
monthly report was merely a slight infraction of the Contract.
Respondent's failure to submit the monthly report cannot serve as
sufficient basis for the cancellation of the Contract. The cancellation of a
contract will not be permitted for a slight or casual breach. Only a
substantial and fundamental breach, which defeats the very object of the
parties in making the contract, will justify a cancellation. In the instant
case, the development work continued for more than two years despite
the lack of a monthly report.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 711
Facts:Epifania Dela Cruz alleged that in 1992, she discovered that her
rice land in has been transferred and registered in the name of her
nephew, Eduardo C. Sison, without her knowledge and consent,
purportedly on the strength of a Deed of Sale she executed.
Issue:
1.) Whether fraud attended the execution of a contract
2.) Whether the deed of absolute sale is valid.
HELD:
1.) A comparison of the deed of sale in favor of Demetrio and the
deed of sale in favor Eduardo, draws out the conclusion that there was
no trickery employed. One can readily see that the first deed of sale is in
all significant respects different from the second deed of sale. A casual
perusal, even by someone as old as Epifania, would enable one to easily
spot the differences. Epifania could not have failed to miss them.
The Court is bound by the appellate court‘s findings, unless they are
contrary to those of the trial court, in which case we may wade into the
factual dispute to settle it with finality.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 712
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 713
Held:No. This brings us to the first issue raised by petitioner bank that
the Memorandum of Agreement is voidable on the ground that its
consent to enter said agreement was vitiated by fraud because private
respondents withheld from petitioner bank the material information that
the real consideration for the sale with assumption of mortgage of the
property by Manuel Behis to Rayandayan and Arceño isP2,400,000.00,
and not P250,000.00 as represented to petitioner bank. According to
petitioner bank, had it known of the real consideration for the sale, i.e.
P2.4 million, it would not have consented into enteringthe Memorandum
of Agreement with Rayandayan and Arceño as it was put in the dark as
to the real capacity and financial standing of private respondents to
assume the mortgage from Manuel Behis. Petitioner bank pointed out
that it would not have assented to the agreement, as it could not expect
the private respondents to pay the bank the approximately P343,000.00
mortgage debt when private respondents have to pay at the same time
P2,400,000.00 to Manuel Behis on the sale of the land.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 716
Respondents were later to claim that when they were about to hand
in the balance of the purchase price, petitioner requested them to keep it
first as he was yet to settle an on-going "squabble" over the land.
Nevertheless, respondents gave petitioner small sums of money from
time to time which totaled P9,100, on petitioner‘s request according to
them; due to respondents‘ inability to pay the amount of the remaining
balance in full, according to petitioner.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 717
HELD: Yes. That the kasunduan did not specify the technical boundaries
of the property did not render the sale a nullity. The requirement that a
sale must have for its object a determinate thing is satisfied as long as,
at the time the contract is entered into, the object of the sale is capable
of being made determinate without the necessity of a new or further
agreement between the parties.9 As the above-quoted portion of the
kasunduan shows, there is no doubt that the object of the sale is
determinate.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 718
FACTS: Juliana Melliza during her lifetime owned three parcels of residential land in
Iloilo City. On 1932, she donated to the then Municipality of Iloilo a certain lot to
serve as site for the municipal hall. The donation was however revoked by the parties
for the reason that area was found inadequate to meet the requirements of the
development plan. Subsequently the said lot was divided into several divisions.
Sometime in 1938, Juliana Melliza sold her remaining interest on the said lot to
Remedios San Villanueva. Remedios in turn transferred the rights to said portion of
land to Pio Sian Melliza. The transfer Certificate of title in Melliza‘s name bears on
annotation stating that a portion of said lot belongs to the Municipality of Iloilo.
Later the City of Iloilo, which succeeds to the Municipality of Iloilo, donated the
city hall sit to the University of the Philippines, Iloilo Branch. On 1952, the University
of the Philippines enclosed the site donated with a wire fence.
Pio Sian Melliza then filed action in the Court of First Instance of Iloilo against
Iloilo City and the University of the Philippines for recovery of the parcel of land or of
its value specifically LOT 1214-B.
Petitioner contends that LOT 1214-B was not included in those lots which were
sold by Juliana Melliza to the then municipality of Iloilo and to say he would render
the Deed of Sale invalid because the law requires as an essential element of sale,
determinate object.
ISSUE: Whether or not IF Lot 1214 – B is included in the Deed of Sale, it would render
the contract invalid because the object would allegedly not be determinate as required
by law.
RULLING: No. The requirement of the law specifically Article 1460 of the Civil Code
that the sale must have for its object a determinate thing, is fulfilled as long as, at the
time the contract is entered into, the object of the sale is able of being determinate
without the necessity of a new or further agreement between the parties.
The specific mention of some of the lots plus the statement that the lots object
of the sale are the ones needed for city hall site sufficient provides a basis, as of
the time, of the execution of the contract, for rendering determinate said lots
without the need of a new further agreement of the parties. The Arellano plan
was in existence as early as 1928. As stated, the previous donation of land for
city hall site on November 27, 1931 was revoked on March 6, 1932 for being
inadequate in area under said Arellano plan. Appellant claims that although
said plan existed, its metes and bounds were not fixed until 1935, and thus it
could not be a basis for determining the lots sold on November 15, 1932.
Appellant however fails to consider that the area needed under that plan for
city hall site was then already known; that the specific mention of some of the
lots covered by the sale in effect fixed the corresponding location of the city hall
site under the plan; that, therefore, considering the said lots specifically
mentioned in the public instrument and the projected city hall site, with its
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 719
area, as then shown in the Arellano plan it could be determined which, and
how much of the portions of land contiguous to those specifically named, were
needed for the construction of the city hall site.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 720
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 721
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 722
reason for it to disturb the trial court's finding that the deed of sale was
simulated. The trial court's discussion on the said issue is hereby quoted:
After evaluating the evidence, both testimonial and documentary,
presented by the parties, this court is convinced that the Deed of
Absolute Sale relied upon by the defendants [petitioners herein] is
simulated and fictitious and has no consideration.
As registered owners of the lots in question, the private respondents have
a right to eject any person illegally occupying their property. This right is
imprescriptible. Even if it be supposed that they were aware of the petitioners'
occupation of the property, and regardless of the length of that possession, the
lawful owners have a right to demand the return of their property at any time
as long as the possession was unauthorized or merely tolerated, if at all. This
right is never barred by laches.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 723
FACTS: Sometime in 1996 or thereabouts, Gabriel Sr. sold the subject lot with
an area of 74 square meters located at Fairview Subdivision, Baguio City, to
petitioner Antonita Orduña (Antonita), but no formal deed was executed to
document the sale. The contract price was apparently payable in installments
as Antonita remitted from time to time and Gabriel Sr. accepted partial
payments. One of the Orduñas would later testify that Gabriel Sr. agreed to
execute a final deed of sale upon full payment of the purchase price.
As early as 1979, however, Antonita and her sons, Dennis and Anthony
Orduña, were already occupying the subject lot on the basis of some
arrangement undisclosed in the records and even constructed their house
thereon. They also paid real property taxes for the house and declared it for tax
purposes, as evidenced by Tax Declaration in which they place the assessed
value of the structure at PhP 20,090.
After the death of Gabriel Sr., his son and namesake, respondent Gabriel
Jr., secured TCT No. T-71499 over the subject lot and continued accepting
payments from the petitioners. On December 12, 1996, Gabriel Jr. wrote
Antonita authorizing her to fence off the said lot and to construct a road in the
adjacent lot. On December 13, 1996, Gabriel Jr. acknowledged receipt of a PhP
40,000 payment from petitioners. Through a letter dated May 1, 1997, Gabriel
Jr. acknowledged that petitioner had so far made an aggregate payment of PhP
65,000, leaving an outstanding balance of PhP 60,000. A receipt Gabriel Jr.
issued dated November 24, 1997 reflected a PhP 10,000 payment.
Subsequently, Bernard sold to the Cids the subject lot for PhP 80,000. Armed
with a Deed of Absolute Sale of a Registered Land dated January 19, 2000, the
Cids were able to cancel TCT No. T-72782 and secure TCT No. 72783 covering
the subject lot. Cids subsequently sold it to Eduardo J. Fuentebella (Eduardo),
instrumental witnesses of the first transaction aboved..
Sometime in May 2000, or shortly after his purchase of the subject lot,
Eduardo, through his lawyer, sent a letter addressed to the residence of Gabriel
Jr. demanding that all persons residing on or physically occupying the subject
lot vacate the premises or face the prospect of being ejected.
Learning of Eduardo‘s threat, petitioners went to the residence of Gabriel
Jr. at No. 34 Dominican Hill, Baguio City. There, they met Gabriel Jr.‘s
estranged wife, Teresita, who informed them about her having filed an affidavit-
complaint against her husband and the Cids for falsification of public
documents on March 30, 2000. According to Teresita, her signature on the
June 30, 1999 Gabriel Jr.–Bernard deed of sale was a forgery. Teresita further
informed the petitioners of her intent to honor the aforementioned 1996 verbal
agreement between Gabriel Sr. and Antonita and the partial payments they
gave her father-in-law and her husband for the subject lot.
On July 3, 2001, petitioners, joined by Teresita, filed a
Complaint for Annulment of Title, Reconveyance with Damages against the
respondents before the RTC, docketed as Civil Case No. 4984-R, specifically
praying that TCT No. T-3276 dated May 16, 2000 in the name of Eduardo be
annulled. Corollary to this prayer, petitioners pleaded that Gabriel Jr.‘s title to
the lot be reinstated and that petitioners be declared as entitled to acquire
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 724
ownership of the same upon payment of the remaining balance of the purchase
price therefor agreed upon by Gabriel Sr. and Antonita.
HELD: Yes. The Court to be sure takes stock of the fact that the contracting
parties to the 1995 or 1996 sale agreed to a purchase price of PhP 125,000
payable on installments. But the original lot owner, Gabriel Sr., died before full
payment can be effected. Nevertheless, petitioners continued remitting
payments to Gabriel, Jr., who sold the subject lot to Bernard on June 30,
1999. Gabriel, Jr., as may be noted, parted with the property only for PhP
50,000. On the other hand, Bernard sold it for PhP 80,000 to Marcos and
Benjamin. From the foregoing price figures, what is abundantly clear is that
what Antonita agreed to pay Gabriel, Sr., albeit in installment, was very much
more than what his son, for the same lot, received from his buyer and the
latter‘s buyer later. The Court, therefore, cannot see its way clear as to how the
RTC arrived at its simplistic conclusion about the transaction between Gabriel
Sr. and Antonita being without "adequate consideration."
It is undisputed on the facts that there is a Contract to Sale between the
original owner of the land and the petitioners. This must be given favourably
effect unless other circumstance in accordance to the law warrant otherwise.
Where the land sold is in the possession of a person other than the vendor, the
purchaser must go beyond the certificates of title and make inquiries
concerning the rights of the actual possessor. And where, as in the instant
case, Gabriel Jr. and the subsequent vendors were not in possession of the
property, the prospective vendees are obliged to investigate the rights of the one
in possession. Evidently, Bernard, Marcos and Benjamin, and Eduardo did not
investigate the rights over the subject lot of the petitioners who, during the
period material to this case, were in actual possession thereof. Bernard, et al.
are, thus, not purchasers in good faith and, as such, cannot be accorded the
protection extended by the law to such purchasers. Moreover, not being
purchasers in good faith, their having registered the sale, will not, as against
the petitioners, carry the day for any of them under Art. 1544 of the Civil Code
prescribing rules on preference in case of double sales of immovable
property. Occeñav. Esponilla laid down the following rules in the application of
Art. 1544: (1) knowledge by the first buyer of the second sale cannot defeat the
first buyer‘s rights except when the second buyer first register in good faith the
second sale; and (2) knowledge gained by the second buyer of the first sale
defeats his rights even if he is first to register, since such knowledge taints his
registration with bad faith.
Upon the facts obtaining in this case, the act of registration by any of the
three respondent-purchasers was not coupled with good faith. At the
minimum, each was aware or is at least presumed to be aware of facts which
should put him upon such inquiry and investigation as might be necessary to
acquaint him with the defects in the title of his vendor.
The petitioner contract with the Gabriel Sr. should be enforce and
accordingly ordered them to pay the balance and for Gabriel Jr. to execute a
Absulote Deed of Sale in favor the petitioner for the transfer of land unto them.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 725
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 726
of P57,819.72, for the principal sum due on July 27, 1985; P42,192.30, for
Int.-CBP; P27,329.05, for interest; and P3,423.40, as penalties.
Sometime in January 1986, Sierra Grande learned that Bernardino
Villanueva tried to secure the duplicate original title of the subject parcel of
land from Manphil claiming to be the President of Hayari. As a result, on
November 20, 1986, Sierra Grande, through Susan Villanueva Tan, the
Corporate Secretary, wrote Manphil stating that Bernardino Villanueva was not
in any way connected officially with Sierra Grande and was not authorized to
deal in any way with the Roberts property nor borrow the transfer certificate
title to the same property. Susan Tan also wrote the Bangko Sentral ng
Pilipinas (BSP), as the subject property was already on receivership, informing
the latter of the following: that Hayari had not made any request to borrow any
duplicate original title; that Bernardino Villanueva was not connected in any
way with Hayari; that Bernardino Villanueva had no authority to borrow any
duplicate original title; and that whatever authorization Bernardo Villanueva
had in dealing with the Roberts property had been withdrawn and abrogated
under a board resolution. The letter also requested that even if payments were
made on the loan of Hayari by a third party, the subject duplicate original title
must not be released without the express consent of Hayari.
However, on October 20, 1988, Manphil allowed Elmer Tan to pre-terminate
Hayari's obligation after making total payments to Manphil in the amount
of P3,134,921.00.
Hence, Golden Apple and Rosvibon, on November 28, 1988, filed with the
Regional Trial Court of Pasay City, a Complaint against Sierra Grande and
Manphil for specific performance and damages.
ISSUE: Whether or not the cause or consideration paid in the sale is sufficient.
HELD: No. It must be noted that the property in question, subject of the
Contract to Sell for the sum of P441,032.00, is a land with a contained area of,
more or less, One Thousand Nine Hundred and One (1,901) sq. m. with a two-
storey residential building located in Pasay City. In claiming that the said price
of the property is not inadequate, petitioners stated that the payment of Elmer
Tan to pre-terminate Hayari's obligation amounting to Three Million One
Hundred Thirty-Four Thousand Nine Hundred Twenty-One Pesos
(P3,134,921.00) as part of the consideration paid for the property should be
included. However, as correctly argued by respondent Sierra Grande, the
amortizations paid by Elmer Tan to Manphil was for a loan incurred by Hayari
and not by respondent Sierra Grande; thus, any payment of the amortizations
on the loan of Hayari cannot be considered as part of the consideration for the
sale of the land owned by respondent Sierra Grande. It is then safe to declare
that respondent Sierra Grande did not benefit from the loan or from its pre-
termination. Moreover, the records are bereft of any evidence to support the
claim of petitioners that the sum of money paid by Elmer Tan, on behalf of
Hayari, was part of the consideration for the same property. What only appears
is that the only consideration paid for the sale of the Roberts property was the
sum contained in the Contract to Sell, which was P441,032.00 which,
considering the size and location of the property, is inadequate. What prompted
Elmer Tan to pay the total amount of P3,134,921.00 cannot be gleaned from
the records, except that it was for the loan incurred by Hayari, which is an
independent juridical entity, separate and distinct from Sierra Grande. Hence,
the CA did not commit any error in declaring that there was an insufficiency of
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 728
consideration or price as the same is shown on the very face of the Contract to
Sell.
Anent the contention of petitioners that inadequacy of price does not
invalidate a contract, the said rule is not without an exception. As provided in
the Civil Code:
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause
shall not invalidate a contract, unless there has been fraud, mistake or
undue influence.
The CA was clear as to its main reason for invalidating the contracts in
question – there was fraud. The inadequacy of price was merely one of the
circumstances upon which the CA was able to find the existence of fraud and
not the main cause for the invalidation of the subject contracts.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 729
Askay v. Cosalan
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 730
FACTS: The plaintiff in this case is Askay, an illiterate Igorrote between 70 and
80 years of age, residing in the municipal district of Tublay, Province of
Benguet, who at various times has been the owner of mining property. The
defendant is Fernando A. Cosalan, the nephew by marriage of Askay, and
municipal president of Tublay, who likewise has been interested along with his
uncle in mining enterprises
About 1907, Askay obtained title to the Pet Kel Mineral Claim located in
Tublay, Benguet. On November 23, 1914, if we are to accept defendant's
Exhibit 1, Askay sold this claim to Cosalan. Nine years later, in 1923, Askay
instituted action in the Court of First Instance of Benguet to have the sale of
the Pet Kel Mineral Claim declared null, to secure possession of the mineral
claim, and to obtain damages from the defendant in the amount of P10,500.00.
Judgment was rendered dismissing the complaint and absolving the defendant
from the same, with costs against the plaintiff. On being informed of the
judgment of the trial court, plaintiff attacked it on two grounds: The first,
jurisdictional, and the second, formal. Both motions were denied and an
appeal was perfected.
ISSUE: Whether or not the plaintiff has established his cause of action by a
preponderance of the evidence.
HELD: Plaintiff contends that the sale of the Pet Kel Mineral Claim was
accomplished through fraud and deceit on the part of the defendant. Plaintiff
may be right but in our judgment he has failed to establish his claim. Fraud
must be both alleged and proved. One fact exists in plaintiffs favor, and this is
the age and ignorance of the plaintiff who could be easily by the defendant, a
man of greater intelligence. Another fact is the inadequacy of the consideration
for the transfer which, according to the conveyance, consisted of P1 and other
valuable consideration, and which, according to the oral testimony, in reality
consisted of P107 in cash, a bill-fold, one sheet, one cow, and two carabaos.
Gross inadequacy naturally suggest fraud is some evidence thereof, so that it
may be sufficient to show it when taken in connection with other
circumstances, such as ignorance or the fact that one of the parties has an
advantage over the other. But the fact that the bargain was a hard one,
coupled with mere inadequacy of price when both parties are in a position to
form an independent judgment concerning the transaction, is not a sufficient
ground for the cancellation of a contract. Against the plaintiff and in favor of
the defendant, the Court had the document itself executed in the presence of
witnesses and before a notary public and filed with the mining recorder. The
notary public, Nicanor Sison, and one of the attesting witnesses, Apolonio
Ramos, testified to the effect that in the presence of the plaintiff and the
defendant and of the notary public and the subscribing witnesses, the deed of
sale was interpreted to the plaintiff and that thereupon he placed his thumb
mark on the document. Two finger print experts, Dr. Charles S. Banks and A.
Simkus, have declared in depositions that the thumb mark on exhibit is that of
Askay. No less than four other witnesses testified that at various times Askay
had admitted to them that he had sold the Pet Kel Mine to Fernando A.
Cosalan.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 731
FACTS: The spouses Aurelio and Esperanza Balite were the owners of a parcel
of land at Catarman, Northern Samar. When Aurelio died intestate, his wife
Esperanza and their children inherited the subject property and became co-
owners thereof. In the meantime, Esperanza became ill and was in dire need of
money for her hospital expenses. She, through her daughter, Cristeta, offered
to sell to Rodrigo Lim, her undivided share for the price of P1,000,000.00.
Esperaza and Rodrigo agreed that under the Deed of Absolute Sale, it will be
made to appear that the purchase price of the property would be P150,000.00
although the actual price agreed upon by them for the property was
P1,000,000.00. On April 16, 1996, Esperanza executed a Deed of Absolute
Sale in favor of Rodrigo. They also executed on the same day a Joint Affidavit
under which they declared that the real price of the property was
P1,000,000.00 payable to Esperanza by installments. Only Esperanza and two
of her children Antonio and Cristeta knew about the said transaction. When
the rest of the children knew of the sale, they wrote to the Register of Deeds
saying that their mother did not inform them of the sale of a portion of the said
property nor did they give consent thereto. Nonetheless, Rodrigo made partial
payments to Antonio who is authorized by his mother through a Special Power
of Attorney.
On October 23, 1996, Esperanza signed a letter addressed to Rodrigo
informing the latter that her children did not agree to the sale of the property to
him and that she was withdrawing all her commitments until the validity of the
sale is finally resolved. On October 31, 1996, Esperanza died intestate and
was survived by her children. Meanwhile, Rodrigo caused to be published in
the Samar Reporter the Deed of Absolute Sale.
On June 27, 1997, petitioners filed a complaint against Rodrigo with the
Regional Trial Court for the annulment of sale, quieting of title, injunction and
damages. Subsequently, Rodrigo secured a loan from the Rizal Commercial
Banking Corporation in the amount of P2,000,000.00 and executed a Real
Estate Mortgage over the property as security thereof. On motion of the
petitioners, they were granted leave to file an amended complaint impleading
the bank as additional party defendant. On March 30, 1998, the court Issued
an order rejecting the amended complaint of the petitioners. Likewise, the trial
court dismissed the complaint. It Held that pursuant to Article 493 of the Civil
Code, a co-owner is not invalidated by the absence of the consent of the other
co-owners. Hence, the sale by Esperanza of the property was valid; the excess
from her undivided share should be taken from the undivided shares of
Cristeta and Antonio, who expressly agreed to and benefit from the sale. The
Court of Appeals likewise Held that the sale was valid and binding insofar as
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 732
ISSUE: Whether or not the Deed of Absolute Sale is null and void on the
ground that it is falsified; it has an unlawful cause; and it is contrary to law
and/or public policy.
Suntay v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 733
HELD: The HLURB had no jurisdiction over the spouses Suntay. Section 1 of
PD 1344 states the jurisdiction of the HLURB:
SECTION 1. In the exercise of its function to regulate the real estate
trade and business and in addition to its power provided for in
Presidential Decree No. 957, the [HLURB] shall have exclusive
jurisdiction to hear and decide cases of the following nature:
A. Unsound real estate business practices;
B. Claims involving refund and any other claims filed by
subdivision lot or condominium unit buyers against the
project owner, developer, dealer, broker or salesman; and
C. Cases involving specific performance of contractual and
statutory obligation filed by buyers of subdivision
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 734
Uy v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 735
FACTS: Petitioners William Uy and Rodel Roxas are agents authorized to sell
eight (8) parcels of land by the owners thereof. By virtue of such authority,
petitioners offered to sell the lands, located in Tuba, Tadiangan, Benguet to
respondent National Housing Authority (NHA) to be utilized and developed as a
housing project.
On February 14, 1989, NHA approved the acquisition of the said parcels
of land with an area of 31.8231 hectares at the cost of P23.867 million,
pursuant to which the parties executed a series of Deeds of Absolute Sale
covering the subject lands. Of the eight parcels of lands, however, only five
were paid for by the NHA because of the report it received from the Land
Geosciences Bureau of the Department of Environment and Natural Resources
that the remaining area is located at an active landslide area and therefore, not
suitable for development into a housing project. NHA eventually cancelled the
sale over the remaining three (3) parcels of land.
On March 9, 1992, petitioners filed a complaint for damages. After trial,
the RTC of Quezon City rendered the cancellation of contract to be justified and
awarded P1.255 million as damages in favor of petitioners.
Upon appeal by petitioners, the Court of Appeals reversed the decision
and entered a new one dismissing the complaint including the award of
damages.
The motion for reconsideration having been denied, petitioners seek relief
from this court contending, inter alia, that the CA erred in declaring that NHA
had any legal basis to rescind the subject sale.
ISSUE: Whether or not a party‘s entry into a contract affects the validity of the
contract.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 736
HELD: Yes. This emanates for the purpose of payment for an onerous contract
which is the commission of the respondent if the sale become perfect. It must
be established that all the elements of a contract of loan are present. Like any
other contract, a contract of loan is subject to the rules governing the
requisites and validity of contracts in general. It is elementary in this
jurisdiction that what determines the validity of a contract, in general, is the
presence of the following elements: (1) consent of the contracting parties; (2)
object certain which is the subject matter of the contract; and (3) cause of the
obligation which is established.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 737
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 738
FACTS: 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
contract 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 in the amount of P1,155,000.00 in
favor of The Plaza. On July 28, 1980, The Plaza paid P1,155,000.00 less
withholding taxes as down payment to Gaite. Thereafter, Rhogen commenced
construction of the restaurant building.
In a letter dated September 10, 1980, Engineer Angelito Z. Gonzales, the
Acting Building Official of the Municipality of Makati, ordered Gaite to cease
and desist from continuing with the construction of the building for violation of
Sections 301 and 302 of the National Building Code (P.D. 1096) and its
implementing rules and regulations. The letter was referred to The Plaza‘s
Project Manager, Architect Roberto L. Tayzon.
Gaite notified Reyes that he is suspending all construction works until
Reyes and the Project Manager cooperate to resolve the issue he had raised to
address the problem. This was followed by another letter dated November 18,
1980 in which Gaite expressed his sentiments on their aborted project and
reiterated that they can still resolve the matter with cooperation from the side
of The Plaza. In his reply-letter dated November 24, 1980, Reyes asserted that
The Plaza is not the one to initiate a solution to the situation, especially after
The Plaza already paid the agreed down payment of P1,155,000.00, which
compensation so far exceeds the work completed by Rhogen before the
municipal authorities stopped the construction for several violations. Reyes
made it clear they have no obligation to help Rhogen get out of the situation
arising from non-performance of its own contractual undertakings, and that
The Plaza has its rights and remedies to protect its interest.
On January 9, 1981, Gaite informed The Plaza that he is terminating
their contract based on the Contractor‘s Right to Stop Work or Terminate
Contracts as provided for in the General Conditions of the Contract. In his
letter, Gaite accused Reyes of not cooperating with Rhogen in solving the
problem concerning the revocation of the building permits, which he described
as a "minor problem." Additionally, Gaite demanded the payment ofP63,058.50
from The Plaza representing the work that has already been completed by
Rhogen.
On January 13, 1981, The Plaza, through Reyes, countered that it will
hold Gaite and Rhogen fully responsible for failure to comply with the terms of
the contract and to deliver the finished structure on the stipulated date. Reyes
argued that the down payment made by The Plaza was more than enough to
cover Rhogen‘s expenses.
On March 26, 1981, The Plaza filed Civil Case No. 40755 for breach of
contract, sum of money and damages against Gaite and FGU in the Court of
First Instance (CFI) of Rizal. The court granted the petition and uphold by CA
with modification to award of damages.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 739
ISSUE:
3. Whether or not the petitioner will be liable base on damages incurred by
the respondent.
4. Whether or not quantum meruit is to be appreciated here.
HELD:
3. Yes. Reciprocal obligations are those which arise from the same cause,
and in which each party is a debtor and a creditor of the other, such that
the obligation of one is dependent upon the obligation of the other. They
are to be performed simultaneously such that the performance of one is
conditioned upon the simultaneous fulfillment of the other. Respondent
The Plaza predicated its action on Article 1191 of the Civil Code, which
provides for the remedy of "rescission" or more properly resolution, a
principal action based on breach of faith by the other party who violates
the reciprocity between them. The breach contemplated in the provision
is the obligor‘s failure to comply with an existing obligation. Thus, the
power to rescind is given only to the injured party. The injured party is
the party who has faithfully fulfilled his obligation or is ready and willing
to perform his obligation.
The construction contract between Rhogen and The Plaza provides for
reciprocal obligations whereby the latter‘s obligation to pay the contract price
or progress billing is conditioned on the former‘s performance of its
undertaking to complete the works within the stipulated period and in
accordance with approved plans and other specifications by the owner.
Pursuant to its contractual obligation, The Plaza furnished materials and paid
the agreed down payment. It also exercised the option of furnishing and
delivering construction materials at the jobsite pursuant to Article III of the
Construction Contract. However, just two months after commencement of the
project, construction works were ordered stopped by the local building official
and the building permit subsequently revoked on account of several violations
of the National Building Code and other regulations of the municipal
authorities.
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
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 740
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. 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.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 741
FACTS: This case involves Lot No. 9 which has 1,007 square meter parcel of
land located at Kinasang-an, Pardo, Cebu City and fronting the Cebu provincial
highway. The lot originally belonged to Pastor Pacres who left it intestate to his
heirs Margarita, Simplicia, Rodrigo, Francisco, Mario and Vearanda. On the
same year, the heirs leased "the ground floor of the ancestral home together
with a lot area of 300 square meters including the area occupied by the house"
to respondent Hilario Ramirez, who immediately took possession thereof.
Subsequently in 1974, four of the Pacres sibling namely, Rodrigo, Francisco,
Simplicia and Margarita sold their shares in the ancestral home and the lot on
which it stood to Ramirez. The deeds of sale described the subjects thereof as
part and portion of the 300 square meters actually in possession and
enjoyment by vendee and her spouse, Hilario Ramirez, by virtue of a contract of
lease in their favor.
ISSUE: Whether or not petitioners were able to prove the existence of the
alleged oral agreements such as the partition and the additional obligations of
surveying and titling
HELD: No. Petitioners were able to prove the existence of the alleged oral
agreements such as the partition and the additional obligations of surveying
and titling.
The court find no compelling reason to deviate from the foregoing rule
and disturb the trial and appellate courts' factual finding that the existence of
an oral partition was not proven. Our examination of the records indicates
that, contrary to petitioners' contention, the lower courts' conclusion was
justified. Petitioners' only piece of evidence to prove the alleged oral partition
was the joint affidavit supposedly executed by some of the Pacres siblings and
their heirs in 1993, to the effect that such an oral partition had previously been
agreed upon. Petitioners did not adequately explain why the affidavit was
executed only in 1993, several years after respondents Ygoa and Ramirez took
possession of the front portions of Lot No. 9.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 742
Liguez v. CA
Conchita Liguez, Petitioner, versus Court of Appeals, Maria Ngo Vda. De
Lopez, et.al., Respondents.
(G.R. No. L-11240, December 18, 1957, En Banc)
REYES, J.B.L., J:
FACTS: Conchita Liguez filed a complaint against the widow and heirs of the
late Salvador P. Lopez to recover a parcel of 51.84 hectares of land. Plaintiff
averred to be its legal owner, pursuant to a deed of donation of said land,
executed in her favor by the late owner, Salvador P. Lopez. The defense
interposed that the donation was null and void for having an illicit cause or
consideration, which was plaintiff's entering into marital relations with
Salvador P. Lopez, a married man; and that the property had been adjudicated
to the appellees as heirs of Lopez by the court.
The Court of Appeals held that the deed of donation was inoperative, and
null and void (1) because the husband, Lopez, had no right to donate conjugal
property to the plaintiff appellant; and (2) because the donation was tainted
with illegal causa or consideration (illicit sexual relation), of which donor and
donee were participants. Appellant vigorously contends that the Court of First
Instance as well as the Court of Appeals erred in holding the donation void for
having an illicit cause or consideration. It is argued that under Article 1274 of
the Civil Code of 1889 which was the governing law in 1943, when the
donation was executed, in contracts of pure beneficence the consideration is
the liberality of the donor, and that liberality per se can never be illegal, since it
is neither against law or morals or public policy. Hence, this petition.
ISSUE: Whether or not the deed of donation made by Lopez in favor of Liguez
was valid.
HELD: No. The deed of donation made by Lopez in favor of Liguez was valid.
Under Article 1274, liberality of the donor is deemed causa only in those
contracts that are of "pure" beneficence; that is to say, contracts designed
solely and exclusively to procure the welfare of the beneficiary, without any
intent of producing any satisfaction for the donor; contracts, in other words, in
which the idea of self-interest is totally absent on the part of the transferor.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 743
Justina Santos executed two other contracts one extending the term to
99 years and the term fixing the term of the option of 50 years. In the two wills,
she bade her legatees to respect the contract she had entered into with Wong,
but it appears to have a change of heart in a codicil. Claiming that the various
contracts were made because of her machinations and inducements practiced
by him, she now directed her executor to secure the annulment of the
contracts. The complaint alleged that Wong obtained the contracts through
fraud. Wong denied having taken advantage of her trust in order to secure the
execution of the contracts on question. He insisted that the various contracts
were freely and voluntarily entered into by the parties. The lower court declared
all the contracts null and void with the exception of the first, which is the
contract of lease. Hence, this appeal.
ISSUE: Whether or not the contracts entered into by the parties are void.
HELD: Yes. The contracts entered into by the parties are void.
The Court held the lease and the rest of the contracts were obtained with
the consent of Justina freely given and voluntarily, hence the claim that the
consent was vitiated due to fraud or machination is bereft of merit. However
the contacts are not necessarily valid because the Constitution provides that
aliens are not allowed to own lands in the Philippines. The illicit purpose then
becomes the illegal causa, rendering the contracts void. Taken singly, the
contracts show nothing that is necessarily illegal, but considered collectively,
they reveal an insidious pattern to subvert by indirection what the Constitution
directly prohibits. To be sure, a lease to an alien for a reasonable period is
valid, so is an option giving an alien the right to buy real property on condition
that he is granted Philippine citizenship.
Article 1416 of the Civil Code provides an exception to the pari de licto,
that when the agreement is not illegal per se but is merely prohibited, and the
prohibition of the law is designed for the protection of the plaintiff, he may
recover what he has paid or delivered.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 744
Londres v. CA
Sonia Londres, Armando Fuentes, Chi-chita Fuentes Quintia, Roberto
Fuentes, Leopoldo Fuentes, Oscar Fuentes, and Marilou Fuentes Esplana,
Petitioners, versus Court of Appeals, Department of Public Works and
Highways, Department of Transportation and Communications, Elena
Alovera Santos and Consolacion Alivio Alovera, Respondents.
(G.R. No. 136427, December 17, 2002, 1st Division)
CARPIO, J:
FACTS: The present case stemmed from a battle of ownership over Lots 1320
and 1333 both located in Barrio Baybay, Roxas City, Capiz. Paulina originally
owned these two parcels of land. After Paulina‘s death, ownership of the lots
passed to her daughter, Filomena. The surviving children of Filomena, namely,
Sonia Fuentes Londres, Armando V. Fuentes, Chi-Chita Fuentes Quintia,
Roberto V. Fuentes, Leopoldo V. Fuentes and Marilou Fuentes Esplana, herein
petitioners, now claim ownership over Lots 1320 and 1333. On the other hand,
private respondents Consolacion and Elena anchor their right of ownership
over Lots 1320 and 1333 on the Absolute Sale executed by Filomena on April
24, 1959. Filomena sold the two lots in favor of Consolacion and her husband,
Julian. Elena is the daughter of Consolacion and Julian.
ISSUE: Whether or not the notarized copy of the absolute sale should prevail.
HELD: No. The notarized copy of the absolute sale should not prevail.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 745
Upon inquiry with the SSS, an employee there told the Vegas that the
SSS did not approve of members transferring their mortgaged homes. The
Vegas could, however, simply make a private arrangement with Reyes provided
they paid the monthly amortizations on time. This practice, said the SSS
employee, was commonplace. Armed with this information, the Vegas agreed
for Reyes to execute in their favor a deed of assignment of real property with
assumption of mortgage and paid Reyes P20,000.00 after she undertook to
update the amortizations before leaving the country. The Vegas then took
possession of the house in January 1981.
But Reyes did not readily execute the deed of assignment. She left the
country and gave her sister, Julieta Reyes Ofilada (Ofilada), a special power of
attorney to convey ownership of the property. Sometime between 1983 and
1984, Ofilada finally executed the deed promised by her sister to the
Vegas. Ofilada kept the original and gave the Vegas two copies. The latter gave
one copy to the Home Development Mortgage Fund and kept the
other. Unfortunately, a storm in 1984 resulted in a flood that destroyed the
copy left with them. Vegas filed an action for consignation, damages, and
injunction with application for preliminary injunction and temporary
restraining order against the SSS and the trial court ruled in favor of Vegas.
The SSS appealed to the Court of Appeals which reversed the trial court‘s
decision. Hence, this petition.
ISSUE: Whether or not the Spouses Vegas presented adequate proof of Reyes‘
sale of the subject property to them.
HELD: Yes. Spouses Vegas presented adequate proof of Reyes‘ sale of the
subject property to them.
In this case, not only did the Vegas prove the loss of the deed of
assignment in their favor and what the same contained, they offered strong
corroboration of the fact of Reyes‘ sale of the property to them. They took
possession of the house and lot after they bought it. Indeed, they lived on it
and held it in the concept of an owner for 13 years before PDC came into the
picture. They also paid all the amortizations to the SSS with Antonio Vega‘s
personal check, even those that Reyes promised to settle but did not. And
when the SSS wanted to foreclose the property, the Vegas sent a manager‘s
check to it for the balance of the loan. Neither Reyes nor any of her relatives
came forward to claim the property. The Vegas amply proved the sale to them.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 746
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 747
FACTS: The lot in question covered by Transfer Certificate of Title No. 51330
was acquired by plaintiff Aurelio Roque and Maria Mesina during their conjugal
union and the house constructed thereon was likewise built during their
marital union. Out of their union, plaintiff and Maria Mesina had four children.
When Maria Mesina died on August 28, 1966, the only conjugal properties left
are the house and lot above stated of which plaintiff herein, as the legal
spouse, is entitled to one-half share pro-indiviso thereof. With respect to the
one-half share pro-indiviso now forming the estate of Maria Mesina, plaintiff
and the four children, the defendants here, are each entitled to one-fifth (1/5)
share pro-indiviso.
Aurelio Roque then entered into a contract of Absolute Sale with the
spouses Aurora and Jose Repuyan. However, on August 20, 1980, Aurelio filed
a complaint for Rescission of Contract against Spouses Repuyan for the latter‘s
failure to pay the balance of the purchase price. A deed of absolute sale was
then executed on February 4, 1982 between Aurelio S. Roque, Corazon Roque,
Feliciano Roque, Severa Roque and Osmundo Roque and Clara Balatbat,
married to Alejandro Balatbat. On April 14, 1982, Clara Balatbat filed a motion
for the issuance of a writ of possession which was granted by the trial court on
September 14, 1982 "subject, however, to valid rights and interest of third
persons over the same portion thereof, other than vendor or any other person
or persons privy to or claiming any rights or interests under it." The
corresponding writ of possession was issued on September 20, 1982. The lower
court then rendered judgment in favor of the Spouses Repuyan and declared
the Deed of Absolute Sale as valid. On appeal by petitioner Balatbat, the Court
of Appeals affirmed the lower court‘s decision. Hence, this petition.
ISSUE: Whether or not the delivery of the owner‘s certificate of title to spouses
Repuyan by Aurelio Roque is for validity or enforceability.
HELD: Yes. The delivery of the owner‘s certificate of title to spouses Repuyan
by Aurelio Roque is for validity or enforceability.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 748
Upon learning of the acquisition of his lot, Teves formally asked the
corporation to turn over to him possession thereof or the corresponding
rentals. He stated in his demand letters that he merely allowed UPSUMCO to
use his property until its corporate dissolution; and that it was not mortgaged
by UPSUMCO with the PNB and, therefore, not included among the foreclosed
properties acquired by URSUMCO. URSUMCO refused to heed Teves' demand,
claiming that it acquired the right to occupy the property.
The absolute ownership over the registered land was indeed transferred
to Teves is further shown by his acts subsequent to the execution of the
contract. That the contract of sale was not registered does not affect its validity.
Being consensual in nature, it is binding between the parties, the Abanto heirs
and Teves. Formalities intended for greater efficacy or convenience or to bind
third persons, if not done, would not adversely affect the validity or
enforceability of the contract between the contracting parties themselves. Thus,
by virtue of the valid sale, Angel Teves stepped into the shoes of the heirs of
Andres Abanto and acquired all their rights to the property.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 749
Petition denied.
Sarming v. Dy
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 750
FACTS: A controversy arose regarding the sale of Lot 4163 which was half-
owned by the original defendant, Silveria Flores (Silveria), although it was
solely registered under her name. The other half was originally owned by
Silveria‘s brother, Jose. On January 1956, the heirs of Jose entered into a
contract with plaintiff Alejandra Delfino (Delfino), for the sale of their one-half
share of Lot 4163 after offering the same to their co-owner, Silveria, who
declined for lack of money. Silveria did not object to the sale of said portion to
Alejandra.
Two years later, when Alejandra Delfino purchased the adjoining portion
of the lot she had been occupying, she discovered that what was designated in
the deed, Lot 5734, was the wrong lot. However, despite repeated demands,
Silveria did not do so, prompting Alejandra and the vendors to file a complaint
against Silveria for reformation of the deed of sale with damages before the
Regional Trial Court. The trial court ruled in favor of herein respondents.
Petitioners appealed the decision to the Court of Appeals, which affirmed the
HELD of the trial court. Hence, this petition.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 751
FACTS: Makati Leasing and Finance Corporation (MLFC) alleges that a lease
agreement relating to various equipments was entered into between MLFC, as
lessor, and Cebu Contractors Consortium Co. (CCCC), as lessee. The terms
and conditions of the lease were defined in said agreement and in two lease
schedules of payment. To secure the lease rentals, a chattel mortgage, and a
subsequent amendment thereto, were executed in favor of MLFC over other
various equipment owned by CCCC.
The trial court rendered decision upholding the lease agreement and
finding CCC liable to MLFC in lease rentals. On appeal, the appellate court
affirmed the trial court‘s decision. Hence, this petition.
ISSUE: Whether or not the right of action for reformation accrued from the
date of execution of the contract.
HELD: Yes. The right of action for reformation accrued from the date of
execution of the contract.
MLFC‘s own evidence discloses that it offers two types of financing lease:
a direct lease and a sale- lease back. The client sells to MLFC equipment that
it owns, which will be leased back to him. The transaction between CCC and
MLFC involved the second type of financing lease.CCC argues that the sale and
lease back scheme is nothing more than an equitable mortgage and
consequently, asks for its reformation. The right of action for reformation
accrued from the date of execution of the contract of lease in 1976. This was
properly exercised by CCC when it filed its answer with counterclaim to MLFC‘s
complaint in 1978 and asked for the reformation of the lease contract.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 752
FACTS: Petitioner ADR Shipping Services, Inc. entered into a contract with
private respondent Gallardo for the use of the former‘s vessel MV Pacific Breeze
to transport logs to Taiwan. The logs were the subject of a sales agreement
between private respondent as seller being a timber concessionaire and log
dealer, and Sty wood Philippines, as buyer. Private respondent paid an advance
charter fee of P242,000 representing ten percent of the agreed charter fee.
Under the charter agreement, the boat should be ready to load by February
5,1988. The boat failed to arrive on time, prompting private respondent to
notify petitioner of its cancellation of the charter contract and the withdrawal of
the advance payment deposited to the account of ADR shipping. ADR Shipping
refused to return the advance payment to Gallardo claiming that the agreement
on the date of February 5, 1988 was just the ―reference commencing date‖ and
the true loading date was February 16, 1988. This prompted the latter to file a
case for sum of money and damages. The Regional Trial Court ordered ADR
Shipping to pay Gallardo the advance payment with 6 percent interest per
annum and attorney‘s fees. The decision of the trial court was affirmed by the
Court of Appeals. Hence, this petition.
HELD: Yes. Private respondent is entitled to the refund of the advance payment
it made to petitioner. There was ambiguity in the interpretation of the contract
provisions as to the date of the loading of the ship. Ambiguities in a contract
are interpreted strictly, albeit not unreasonably, against the drafter thereof
when justified in light of the operative facts and surrounding circumstances. In
this case, ambiguity must be construed strictly against ADR which drafted and
caused the inclusion of the ambiguous provisions. The charter agreement
explicitly states that February 5, 1988 is the intended date when the ship is
expected ready to load while February 16, 1988 is merely the canceling date.
Considering that the subject contract contains the foregoing express
provisions, the parties have no other recourse but to apply the literal meaning
of the stipulations. The cardinal rule is that when the terms of the contract are
clear, leaving no doubt as to the intention of the parties, the literal meaning of
its stipulations is controlling. Pursuant to the provision of Art 1191 of the Civil
Code, 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, and the
injured party may rescind the obligation, with payment of damages. In this
case the private respondent is entitled to the return of his down payment,
subject to a legal interest of 6 percent per annum, and to the payment of
damages.
Movido v. Pastor
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 753
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 754
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 755
ISSUE: Whether or not deduction of the alleged overpayment from the salaries
of the affected members of the Union constitute diminution of benefits in
violation of law.
HELD: The deduction of the alleged overpayment from the salaries of the
respondents is a valid act. The CBA provided in its provision in the
computation for the increase in TSPIC‘s employees, hence, the intention
therein must be pursued basing on the principle that littera necat spiritus
vivificate. The fundamental doctrine in labor law that the CBA is the law
between the parties and they are obliged to comply with its provisions.
Therefore, the error found by TSPIC in pursuance to the terms in the CBA
must be sustained. The Court also agrees that TSPIC in charging the over
payments made to the respondents through staggered deductions from their
salaries does not constitute diminution of benefits. Any amount given to the
employees in excess of what they were entitled to, as computed above, may be
legally deducted by TSPIC from the employees‘ salaries because on the first
place that excess was not vested in them legally as aright because that will
amount to unjust enrichment.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 756
FACTS: Spouses Rafael and Zenaida Estanislao obtained a loan from East
West Banking Corporation evidenced by a promissory note and secured by two
deeds of chattel mortgage of two dump trucks and a bulldozer for the first and
bulldozer and a wheel loader for the other. Spouses defaulted in the
amortizations and the entire obligation became due and demandable. The bank
filed a suit for replevin with damages but subsequently, the bank moved for
suspension of the proceedings on account of an earnest attempt to arrive at an
amicable settlement of the case. Both parties executed a Deed of Assignment,
drafted by the bank, where it provides that the two dump trucks and the
bulldozer shall be transferred, assigned and conveyed for the full payment of
the debt. But the bank, for an unknown reason failed to sign on the deed, but
it accepted the three heavy vehicles freely and voluntarily upon delivery made
by the petitioner. After some time, the bank file a petition in court praying for
the delivery of the other heavy vehicles mortgaged in the second chattel
mortgage. The regional trial court dismissed the complaint for lack of merit but
it was reversed and set aside by the court of appeals.
Aquintey v. Tibong
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 757
FACTS: On May 6, 1999, petitioner Agrifina Aquintey filed before the RTC of
Baguio City, a complaint for sum of money and damages against the
respondents, spouses Felicidad and Rico Tibong. Agrifina alleged that Felicidad
had secured loans from her on several occasions, at monthly interest rates of
6% to 7%. Despite demands, the spouses Tibong failed to pay their outstanding
loan, amounting to P773, 000.00 exclusive of interests. In their Answer with
Counterclaim, spouses Tibong admitted that they had secured loans from
Agrifina. The proceeds of the loan were then re-lent to other borrowers at
higher interest rates. They, likewise, alleged that they had executed deeds of
assignment in favor of Agrifina, and that their debtors had executed promissory
notes in Agrifina‘s favor. According to the spouses Tibong, this resulted in a
novation of the original obligation to Agrifina. They insisted that by virtue of
these documents, Agrifina became the new collector of their debtors; and the
obligation to pay the balance of their loans had been extinguished.
HELD: Novation which consists in substituting a new debtor in the place of the
original one may be made even without the knowledge or against the will of the
latter but not without the consent of the creditor. Substitution of the person of
the debtor may be effected by delegacion, meaning, the debtor offers, and the
creditor, accepts a third person who consents to the substitution and assumes
the obligation. Thus, the consent of those three persons is necessary. In this
kind of novation, it is not enough to extend the juridical relation to a third
person; it is necessary that the old debtor be released from the obligation, and
the third person or new debtor take his place in the relation. Without such
release, there is no novation; the third person who has assumed the obligation
of the debtor merely becomes a co-debtor or a surety. If there is no agreement
as to solidarity, the first and the new debtor are considered obligated jointly. In
the case at bar, the court found that respondents‘ obligation to pay the balance
of their account with petitioner was extinguished, protanto, by the deeds of
assignment of credit executed by respondent Felicidad in favor of petitioner. As
gleaned from the deeds executed by respondent Felicidad relative to the
accounts of her other debtors, petitioner was authorized to collect the amounts
of P6,000.00 from Cabang, and P63,600.00 from Cirilo. They obliged
themselves to pay petitioner. Respondent Felicidad, likewise, unequivocably
declared that Cabang and Cirilo no longer had any obligation to her.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 758
ISSUE: Whether or not the real estate mortgage on the property then covered
by TCT No. 495225 is valid and whether the mortgaged property was the
exclusive property of Arnel Cruz when it was mortgaged.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 759
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 760
FACTS: Private respondents, Mr. and Mrs. Gabriel Caballero, are the registered
owners of two parcels of land situated in Cubao, Quezon City described in
Transfer Certificate for Title No. 247309 (Lot 1) and TCT No. 247310 (Lot 2).
The spouses‘ residence stood in Lot 2.Sometime in 1979, they obtained a loan
from the Cavite Development Bank in the amount of P225,000.00. The two lots
were mortgaged to secure their loan. The loan matured in 1984. To pay the
loan they offered Lot 1 for sale. The offer was advertised in the Bulletin Today.
However, offers to purchase from prospective buyers did not materialize. On
October 24, 1985, a certain Mrs. Lagrimas approached the spouses offering to
broker the sale to an interested buyer. Initially, the spouses told the broker
that they were selling only to direct buyers. Nonetheless, Mrs. Lagrimas
brought to the spouses her buyer, herein petitioner Napoleon H. Gonzales,
whoturned out to be Mrs. Lagrimas‘ relative. Petitioner offered to buy the
vacant lot for P470, 000.00. Initially, respondents refused to reduce their
asking price. Petitioner bargained for a lower price with the suggestion that on
paper the price will be markedly lower so the spouses would pay lower capital
gains tax. Petitioner assured the spouses this could be done since he had
connections with the Bureau of Internal Revenue. The spouses agreed to sell at
P470.000.00. Petitioners paid the bankP375, 000.00, to be deducted from the
purchase price. After the mortgage was cancelled and upon release of the two
titles, Gonzales asked for the deeds of sale of the two lots and delivery of the
titles to him. Defendants signed the deed of sale covering only Lot 1 but refused
to deliver its title until petitioner paid the remaining balance of P70,000.00
This prompted petitioner to file a complaint for specific performance and
damages.
ISSUE: Whether or not the sale involved only Lot 1 and not both Lots.
HELD: YES. Principally, the issue here is whether the contract of sale between
the parties involved Lot 1 and 2 as claimed by petitioner or only Lot 1 as
private respondents contend. In a case where we have to judge conflicting
claims on the intent of the parties, as in this instance, judicial determination of
the parties‘ intention is mandated. Contemporaneous and subsequent acts of
the parties material to the case are to be considered. Petitioner admits he
himself caused the preparation of the deed of sale presented before the lower
court. Yet he could not explain why I referred only to the sale of Lot 1 and not
to the two lots, if the intention of the parties was really to cover the sale of two
lots. As the courts a quo observed, even if it were true that two lots were
mortgaged and were about to be foreclosed, the ads private respondents placed
in the Bulletin Today offered only Lot 1 and was strong indication that they did
not intend to sell Lot 2. The 501 sq.m. Lot was offered forP1,150.00 per sq.m. It
alone would have fetched P576, 150.00. The loan still to be paid the bank was
only P375, 000.00 which was what petitioner actually paid the bank. As the
trial court observed, it was incomprehensible why the spouses would part with
two lots, one with a 2-storey house, and both situated at a prime commercial
district for less than the price of one lot. Contrary to what petitionerwould
make us believe, the sale of Lot 1 valued at P576,150.00 for P470,000.00, with
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 761
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 762
FACTS: Petitioners are the wife and the children of the late Julio Garcia who
inherited from his mother, Ma. Alibudbud, a portion of a 90,655 square meter
property denominated as lot 1642 of the Sta. Rosa Estate in Brgy. Caingin
Sta.Rosa Laguna. The lot was co-owned and registered in the names of three
persons with the following shares: Vicente de Guzman (1/2), Enrique
Hemedes(1/4) and Francisco Alibudbud, the father of Ma. Alibudbud (1/4).
Although there was no separate title in the name of Julio Garcia, there were tax
declaration in his name to the intent of his grandfather‘s share covering the
area of 21460square meter. On July 5, 1984, petitioner as heirs of Julio
Garcia, and respondent Federico Brines entered a Kasunduan ng Pagbibilihan
(Kasunduan for Brevity)over the 21460 square meter portion for the sum of
P150.000.00. Respondent paid P65, 000.00 upon execution of the contract
while the balance of P85,000.00 was made payable within six (6) months from
the date of the execution of the instrument. The time of the execution of the
kasunduan, petitionersallegedly informed respondent that TCT No. RT-1076
was in the possession of their cousin, Conchila Alibudbud, who having bought
Vicente de Guzman‘s ½shares, owned the bigger portion of lot 1642. This
standing notwithstanding, respondent willingly entered into the Kasunduan
provided that the full payment of the purchase price will be made upon delivery
to him of the title. Respondent took possession of the property subject of the
Kasunduan and made various payments to petitioiners amounting to
P58500.00. However upon failure of petitioner to deliver to him a separate title
to the property in the name of Julio Garcia he refused to make further
payments, prompting petitioner to file a civil action before the RTC for a
rescission of the Kasunduan, return by respondent to petitioner of the
possession of the subject parcel of land, and payment by respondent of
damages in favor of petitioners.
ISSUE: Whether or not the petitioner may rescind the Kasunduan pursuant to
Article 1191 of the Civil Code for the failure of respondent to give full payment
of the balance of the purchase price.
HELD: NO, the rights of the parties are governed by the terms and the nature
of the contract they entered. Hence, although the nature of the Kasunduan was
never places in dispute by both parties, it is necessary to ascertain whether the
Kasunduan is a contract to sell or a contract of Sale. Although both parties
haveconsistency referred to the Kasunduan as a contract to Sell, a careful
reading of the provision of the Kasunduan reveals that it is a contract of Sale. A
deed of sale is absolute in nature in the absence of any stipulation reserving
title to the vendor until full payment of the purchase price. The delivery of a
separation title in the name of Julio Garcia was a condition imposed on
respondent‘s obligation to pay the balance of the purchase price. It was not a
condition imposed in the perfection of the contract of Sale. The rescission will
not prosper since the power to rescind is only given to the injured party. The
injured party is the party who has faithfully fulfilled his obligation. In the case
at bar, the petitioners were not ready, willing and able to comply with their
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 763
Philbank v. Lim
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 764
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 765
actions against the sureties. The legal action against the sureties arose not only
from the security agreement but also from the promissory note.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 766
Spouses Efren N. Rigor and Zosima D. Rigor, for themselves and as owners
of Chiara Construction, petitioners, versus Consolidated Orix Leasing and
Finance Corporation,respondent.
387 SCRA 437, August 20, 2000, 3rd Division)
Carpio, J.:
ISSUE: Whether or not venue was properly laid under the provisions of the
chattel mortgage contract in the light of Article 1374 of the Civil Code.
HELD: Yes. Art. 1374 provides that the various stipulations of a contract shall
be interpreted together, attributing to the doubtful ones that sense which may
result from all of them taken jointly. Applying the doctrine to the instant case,
we cannot sustain petitioners‘ contentions. The promissory note and the deed
of chattel mortgage must be construed together. Private respondent explained
that its older standard promissory notes confined venue in Makati City where it
had its main office. After it opened a branch office in Dagupan City, private
respondent made corrections in the deed of chattel mortgage, but due to
oversight, failed to make the corresponding corrections in the promissory
notes. Petitioners affixed their signatures in both contracts. The presumption is
applied that a person takes ordinary care of his concerns. It is presumed that
petitioners did not sign the deed of chattel mortgage without informing
themselves of its contents. As aptly stated in a case, they being of age and
businessmen of experience, it must be presumed that they acted with due care
and have signed the documents in question with full knowledge of their import
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 767
and the obligation they were assuming thereby. In any event, petitioners did
not contest the deed of chattel mortgage under Section 8, Rule 8 of the Revised
Rules of Civil Procedure. As held in Velasquez, this omission effectively
eliminated any defense relating to the authenticity and due execution of the
deed, e.g. that the document was spurious, counterfeit, or of different import
on its face as the one executed by the parties; or that the signatures appearing
thereon were forgeries; or that the signatures were unauthorized. Clearly, the
Court of Appeals did not err in HELD that venue was properly laid in Dagupan
City as provided in the deed of chattel mortgage. The Court holds that private
respondent is not barred from filing its case against petitioners in Dagupan
City where private respondent has a branch office as provided for in the deed of
chattel mortgage. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 768
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 769
FACTS: When the late Emilio Dalope died, he left a 589-square meter untitled
lot in Sta. Barbara, Pangasinan, to his wife, Felisa Dalope and their nine
children, one of whom was Rosa Dalope-Funcion. To enable Rosa and her
husband Antonio Funcion get a loan from respondent Development Bank of the
Philippines (DBP), Felisa sold the whole lot to the Funcions. With the deed of
sale in their favor and the tax declaration transferred in their names, the
Funcions mortgaged the lot with the DBP. After the Funcions failed to pay
their loan, the DBP foreclosed the mortgage on the lot and consolidated
ownership in its name. Four years later the DBP conditionally sold the lot to
Sofia Quirong for the price of P78,000.00. In their contract of sale, Sofia
Quirong waived any warranty against eviction. The contract provided that the
DBP did not guarantee possession of the property and that it would not be
liable for any lien or encumbrance on the same. Quirong gave a down payment
of P14,000.00. Two months after that sale or Felisa and her eight children filed
an action for partition and declaration of nullity of documents with damages
against the DBP and the Funcions before the Regional Trial Court (RTC) of
Dagupan City. The trial court rendered a decision, declaring the DBP's sale to
Sofia Quirong valid only with respect to the shares of Felisa and Rosa Funcion
in the property. The DBP resisted the writ by motion to quash, claiming that
the decision could not be enforced because it failed to state by metes and
bounds the particular portions of the lot that would be assigned to the different
parties in the case. The trial court denied the DBP's motion. The Court of
Appeals reversed the trial court‘s decision and dismissed the heirs' action on
the ground of prescription. Hence, this petition.
ISSUE: Whether or not the Quirong heirs' action for rescission of respondent
DBP's sale of the subject property to Sofia Quirong was already barred by
prescription.
HELD: Yes. The Quirong heirs' action for rescission of respondent DBP's sale of
the subject property to Sofia Quirong was already barred by prescription.
The court finds that the incident did not affect the finality of the decision,
the prescriptive period remained to be reckoned from January 28, 1993, the
date of such finality. The remedy of "rescission" is not confined to the
rescissible contracts enumerated under Article 1381. Article 1191 of the Civil
Code gives the injured party in reciprocal obligations, such as what contracts
are about, the option to choose between fulfillment and "rescission."
"Rescission" is a subsidiary action based on injury to the plaintiff's economic
interests as described in Articles 1380 and 1381. As an action based on the
binding force of a written contract, therefore, rescission (resolution) under
Article 1191 prescribes in 10 years. Ten years is the period of prescription of
actions based on a written contract under Article 1144.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 770
ISSUE: Whether or not the Real Estate Mortgage executed over the subject
Antipolo properties and the foreclosure sale were committed in fraud and as a
consequence of such fraud can be rescinded.
HELD: No. The Real Estate Mortgage executed over the subject Antipolo
properties and the foreclosure sale was not committed in fraud and cannot be
rescinded.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 772
FACTS: Carmelo & Bauermann, Inc. (Carmelo) used to own a parcel of land, together
with two two-storey buildings constructed thereon. On June 1, 1967, Carmelo entered
into a lease with Mayfair Theater, Inc. (Mayfair) for a period of 20 years. The lease
covered a portion of the second floor and mezzanine. Two years later, Mayfair entered
into a second lease with Carmelo for the lease of another property, a part of the second
floor and two spaces on the ground floor. The lease was also for a period of 20 years.
However, on July 30, 1978, within the 20-year-lease term, Carmelo sold the subject
properties to Equatorial Realty Development, Inc. (Equatorial) for the sum of P11.3M
without their first being offered to Mayfair. As a result, Mayfair filed a complaint for
specific performance and damages. After trial, the court ruled in favor of Equatorial.
On appeal, the Court of Appeals (CA) reversed and set aside the judgment of the lower
court. The Supreme Court denied Equatorial‘s petition for review and declared the
contract between Carmelo and Equatorial rescinded. The decision became final and
executory and Mayfair filed a motion for its execution, which the court granted.
However, Carmelo could no longer be located thus Mayfair deposited with the court its
payment to Carmelo. On September 18, 1997, Equatorial filed an action for the
collection of sum of money against Mayfair claiming payment of rentals or reasonable
compensation for the defendant‘s use of the premises after its lease contracts had
expired. The lower court debunked the claim of the petitioner for unpaid rentals,
holding that the rescission of the Deed of Absolute Sale in the mother case did not
confer on Equatorial any vested or residual proprietary rights, even in expectancy.
ISSUE: Whether or not Equatorial may collect rentals or reasonable compensation for
Mayfair‘s use of subject premises after its lease contracts had expired.
HELD: No. Equitorial may not collect rentals or reasonable compensation for Mayfair‘s
use of the subject premises after its lease contracts had expired.
Rent is a civil fruit that belongs to the owner of the property producing it by
right of accession. Consequently and ordinarily, the rentals that fell due from the time
of the perfection of the sale to petitioner until its rescission by final judgment should
belong to the owner of the property during that period. Petitioner never took actual
control and possession of the property sold, in view of the respondent‘s timely
objection to the sale and continued actual possession of the property. The objection
took the form of a court action impugning the sale that was rescinded by a judgment
rendered by the Court in the mother case. It has been held that the execution of a
contract of sale as a form of constructive delivery is a legal fiction. It holds true only
when there is no impediment that may prevent the passing of the property from the
hands of the vendor into those of the vendee. When there is such impediment, fiction
yields to reality; the delivery has not been effected. Hence, respondent‘s opposition to
the transfer of property by way of sale to Equatorial was a legally sufficient
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 773
impediment that effectively prevented the passing of the property into the latter‘s
hands.
Siguan v. Lim
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 774
Maria Antonia Siguan, Petitioner, versus Rosa Lim, Linde Lim, Ingrid Lim
and Neil Lim, Respondents.
(G.R. No. 134685, November 19, 1999, 1st Division)
DAVIDE, JR., C.J.:
FACTS: Rosa Lim (Lim) issued two Metrobank checks in the sums of P300,000 and
P241,668, respectively, payable to "cash." Upon presentment by petitioner with the
drawee bank, the checks were dishonored for the reason "account closed." Demands
to make good the checks proved futile. As a consequence, a criminal case for violation
of Batas Pambansa were filed by petitioner against Lim. The court a quo convicted Lim
as charged. It also appears that on July 31, 1990, Lim was convicted of estafa by the
Regional Trial Court of Quezon City. This decision was affirmed by the Court of
Appeals. On appeal, however, the Supreme Court, in a decision promulgated on 7
April 1997, acquitted Lim but held her civilly liable in the amount of P169,000, as
actual damages, plus legal interest.
In the instant case, the alleged debt of Lim in favor of petitioner was incurred in
August 1990, while the deed of donation was purportedly executed on August 10,
1989. The Supreme Court is not convinced with the allegation of the petitioner that
the questioned deed was antedated to make it appear that it was made prior to
petitioner's credit. Notably, that deed is a public document, it having been
acknowledged before a notary public. As such, it is evidence of the fact which gave
rise to its execution and of its date, pursuant to Section 23, Rule 132 of the Rules of
Court.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 775
In the present case, the fact that the questioned Deed was registered only on
July 2, 1991 is not enough to overcome the presumption as to the truthfulness of the
statement of the date in the questioned deed, which is August 10, 1989. Petitioner's
claim against Lim was constituted only in August 1990, or a year after the questioned
alienation.
Petition dismissed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 776
Khe Hong Cheng, alias Felix Khe, Sandra Joy Khe and Ray Steven Khe,
Petitioners, v. Court Of Appeals, Hon. Teofilo Guadiz, RTC 147, Makati City and
Philam Insurance Co., Inc., Respondents.
(G.R. No. 144169, March 28, 2000, 1st Division)
KAPUNAN, J:
FACTS: Petitioner Khe Hong Chang alias Felix Khe is the owner of the vessel which
said vessel shipped 3,400 bags of copra at Masbate owned by the Philippine
Agricultural Trading Corporation. The shipment of copra was covered by an insurance
issued by American Home Insurance Company. The vessel sank while at sea which
resulted to the loss of bags of copra. The insurer paid the amount of Php 345,000.00
to the consignee. The American Home filed a case for the recovery of the money paid to
the consignee, based on breach of contract of carriage. During the pendency of the
case, petitioner executed deed of donation in favor of his children. The trial court
rendered its decision in favor of the plaintiff however when the Sheriff executed the
writ of execution they found out that petitioner no longer had any property and that
he conveyed the subject properties to his children. Respondent Philam filed a
complaint for the rescission of the deeds of donation executed by petitioner Khe Hong
Cheng in favor of his children and for the nullification of their titles. Respondent
Philam alleged, inter alia, that petitioner Khe Hong Cheng executed the aforesaid
deeds in fraud of his creditors, including respondent Philam. The Regional Trial Court
rendered its decision in favor of Philam. The Court of Appeals affirmed the decision of
the Regional Trial Court.
HELD: No. The action for rescission has not yet prescribed.
Article 1389 of the Civil Code simply provides that, "The action to claim
rescission must be commenced within four years." Since this provision of law is
silent as to when the prescriptive period would commence, the general rule,
from the moment the cause of action accrues, therefore, applies. Art. 1150. The
time for prescription for all kinds of actions, when there is no special provision
which ordains otherwise, shall be counted from the day they may be brought.‖
Article 1383 of the Civil Code provides as follows: Art. 1383. An action for
rescission is subsidiary; it cannot be instituted except when the party suffering
damage has no other legal means to obtain reparation for the same. It is thus
apparent that an action to rescind or an accion pauliana must be of last resort,
availed of only after all other legal remedies have been exhausted and have
been proven futile. As mentioned earlier, respondent Philam only learned about
the unlawful conveyances made by petitioner Khe Hong Cheng in January
1997 when its counsel accompanied the sheriff to Butuan City to attach the
properties of petitioner Khe Hong Cheng. There they found that he no longer
had any properties in his name. It was only then that respondent Philam's
action for rescission of the deeds of donation accrued because then it could be
said that respondent Philam had exhausted all legal means to satisfy the trial
court's judgment in its favor. Since respondent Philam filed its complaint
for accion pauliana against petitioners on February 25, 1997, barely a month
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 777
from its discovery that petitioner Khe Hong Cheng had no other property to
satisfy the judgment award against him, its action for rescission of the subject
deeds clearly had not yet prescribed.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 778
HERMOSISIMA, JR., J:
FACTS: Federico Suntay was the registered owner of a parcel of land in dispute. He
applied as a miller contractor of the National Rice and Corn Corporation (NARIC) but
the same was disapproved by NARIC because he was tied up with several unpaid
loans. For purposes of circumvention, he asked his nephew-lawyer, Rafael to prepare
an absolute deed of sale of the said land in dispute in consideration of Php 20,000.00
in favor of Rafael. Less than three months after his conveyance, the same parcel of
land was sold back to Federico for the same consideration. However on the second sale
there was irregularity because it appears that said land was not sold but was
mortgaged in favor of the Hagonoy Rural Bank. Moreover, after the execution of the
deed, Federico remained in possession of the property sold.
Federico requested Rafael to deliver his copy of TCT no. T-36714 so that
Federico could have the counter deed of sale in his favor registered on his name but
Rafael refuses. Federico filed a complaint for reconveyance and damages against
Rafael. The trial court rendered its decision that Rafael is the owner of the property in
dispute but not to the extent of ordering Federico to pay back rentals for the use of the
property. The Court of Appeals rendered its decision in favor of Federico.
ISSUE: Whether or not said second deed of absolute sale is null and void.
HELD: Yes. The said second deed of absolute sale is null and void.
The Supreme Court hold that the deed of sale executed by Federico in favor of
his now deceased nephew, Rafael, is absolutely simulated and fictitious and, hence,
null and void, said parties having entered into a sale transaction to which they did not
intend to be legally bound. As no property was validly conveyed under the deed, the
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 779
second deed of sale executed by the late Rafael in favor of his uncle, should be
considered ineffective and unavailing.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 780
FACTS: On January 10, 2002, Pacifico S. Brobio died intestate, leaving three
parcels of land. He was survived by his wife, respondent Eufrocina A. Brobio,
and four legitimate and three illegitimate children; petitioner Carmela Brobio
Mangahas is one of the illegitimate children. On May 12, 2002, the heirs of the
deceased executed a Deed of Extrajudicial Settlement of Estate of the Late
Pacifico Brobio with Waiver. According to petitioner, respondent promised to
give her an additional amount for her share in her father‘s estate. Thus, after
the signing of the Deed, petitioner demanded from respondent the promised
additional amount, but respondent refused to pay, claiming that she had no
more money.
A year later, while processing her tax obligations with the Bureau of
Internal Revenue (BIR), respondent was required to submit an original copy of
the Deed. Left with no more original copy of the Deed, respondent summoned
petitioner to her office and asked her to countersign a copy of the Deed.
Petitioner refused to countersign the document, demanding that respondent
first give her the additional amount that she promised. Considering the value of
the three parcels of land (which she claimed to be worth P20M), petitioner
asked for P1M, but respondent begged her to lower the amount. Petitioner
agreed to lower it to P600,000.00. Because respondent did not have the money
at that time and petitioner refused to countersign the Deed without any
assurance that the amount would be paid, respondent executed a promissory
note. Petitioner agreed to sign the Deed when respondent signed the
promissory note. When the promissory note fell due, respondent failed and
refused to pay despite demand. Petitioner made several more demands upon
respondent but the latter kept on insisting that she had no money. On January
28, 2004, petitioner filed a Complaint for Specific Performance with damages
against respondent.
ISSUE: Whether or not the promissory note was attended with intimidation.
HELD: No. The Promissory note was not attended with intimidation.
The Supreme Court ruled that contracts are voidable where consent
thereto is given through mistake, violence, intimidation, undue influence, or
fraud.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 781
Hernandez v. Hernandez
Cornelia M. Hernandez, Petitioner, versus Cecilio F.
Hernandez, Respondent.
(G.R. No. 158576, March 9, 2011, 1st Division)
PEREZ, J:
Cornelia received was a receipt and quitclaim document that was ready
for signing. As testified to by Cornelia, due to her frail condition and urgent
need of money in order to buy medicines, she nevertheless signed the quitclaim
in Cornelio‘s favor. Quitclaims are also contracts and can be voided if there was
fraud or intimidation that leads to lack of consent. The facts show that a
simple accounting of the proceeds of the just compensation will be enough to
satisfy the curiosity of Cornelia. However, Cecilio did not disclose the truth and
instead of coming up with the request of his aunt, he made a contract intended
to bar Cornelia from recovering any further sum of money from the sale of her
property. The preparation by Cecilio of the receipt and quitclaim document
which he asked Cornelia to sign, indicate that even Cecilio doubted that he
could validly claim 83.07% of the price of Cornelia‘s land on the basis of the 11
November 1993 agreement. Based on the attending circumstances, the receipt
and quitclaim document is an act of fraud perpetuated by Cecilio. Very clearly,
both the service contract of 11 November 1993 letter- agreement, and the later
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 782
receipt and quitclaim document, the first vitiated by mistake and the second
being fraudulent, are void.
Fuentes, et al v. Roca
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 783
FACTS: On October 11, 1982, Sabina Taroza sold to her own son Tarciano T.
Roca her titled of 358 square meters lot located at Canelar, Zamboanga under
a Deed of Absolute Sale. Six years later, Tarciano T. Roca offered to sell the lot
to petitioners Manuel and Leticia Fuentes. The agreement required the Fuentes
spouses to pay Tarciano a down payment of P60,000.00 for the transfer of the
lot‘s title to him. And, within six months, Tarciano was to clear the lot of
structures and occupants and secure the consent of his estranged wife, Rosario
Gabriel Roca (Rosario), to the sale. Upon Tarciano‘s compliance with these
conditions, the Fuentes spouses were to take possession of the lot and pay him
an additional P140,000.00 or P160,000.00, depending on whether or not he
succeeded in demolishing the house standing on it. If Tarciano was unable to
comply with these conditions, the Fuentes spouses would become owners of
the lot without any further formality and payment.
The sale was void from the beginning. Consequently, the land remained
the property of Tarciano and Rosario despite that sale. When the two died, they
passed on the ownership of the property to their heirs, namely, the Rocas. As
lawful owners, the Rocas had the right, under Article 429 of the Civil Code, to
exclude any person from its enjoyment and disposal. In fairness to the Fuentes
spouses, however, they should be entitled, among other things, to recover from
Tarciano‘s heirs, the Rocas, the P200,000.00 that they paid him, with legal
interest until fully paid, chargeable against his estate. Further, the Fuentes
spouses appear to have acted in good faith in entering the land and building
improvements on it. The Fuentes spouses had no way of knowing that Rosario
did not come to Zamboanga to give her consent. There is no evidence that they
had a premonition that the requirement of consent presented some difficulty.
Indeed, they willingly made a 30 percent down payment on the selling price
months earlier on the assurance that it was forthcoming.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 784
HELD: It is true that the action for reconveyance of property resulting from
fraud may be barred by the statute of limitations which requires that the action
shall be filed within 4 years from discovery of fraud, but be it noted that the
basis of reconveyance by the respondent is threat, duress and intimidation. As
provided in Art. 1391 of the civil code an action for annulment for it shall be
brought within four years, thus when Marcos ouster from power on February
21, 1986 and since the respondents filed its complaint for reconveynace on
September 15, 1989 the four years prescriptive period was not prescribed. The
SC denied for the dismissal of reconveyance and remitted the case to the RTC
for trial with cost against the petitioner.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 785
FACTS: Petitioner, William Alain Miailhe, on his own behalf and on behalf of
Victoria Desbarats-Miailhe, Monique Miailhe-Sichere and Elaine Miailhe-
Lencquesaing filed a Complaint for Annulment of Sale, Reconveyance and
Damages against [Respondent] Republic of the Philippines and defendant
Development Bank of the Philippines.
The petitioner alleged that DBP forged, threatened and intimidated
petitioner to sell the property to DBP for the grossly low price. The RTC and CA
rendered their decision in favor of DBP and that the action is already
prescribed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 786
ISSUE: Whether or not the sale of property is void and the prescriptive period
had elapsed.
HELD: No. The sale of property is valid and the prescriptive period has not
elapsed.
The Court found that the sale is not void for a suit for the annulment of
voidabale contract on account of fraud shall be filed within four years from the
discovery of the same, here, from the time the questioned sale transaction on
May 24, 1984 took place, FHPC didn't deny that it had actual knowledge of the
same. Simply, petitioner was fully aware of the sale of the PCIB shares to
TMEE and espite full knowledge petitioners did not question the said sale from
its inception and sometime thereafter. it was only four years and seven
months had elapsed following the knowledge or discovery of the alleged
fraudulent sale that the petitioner assailed the same, by then it was too late for
the petitioners to beset same transaction, since the prescriptive period had
already come into play.
The Court therefore denied the instant petition and affirmed the
resolution of the SB with cost against the petitioner.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 787
FACTS: Respondent Mapalad was the registered owner of four (4) parcels of
land located along Roxas Boulevard, Baclaran, Parañaque
The PCGG issued writs of sequestration for Mapalad and all its properties.
Josef, Vice president/treasurer and General Manager of Mapalad discovered
that the 4 TCTs were missing, however the four missing tcts turned out to be in
possession of Nordelak Development Corporation. Nordelak came into
possession of the 4 TCTs by deed of sale purportedly executed by Miguel
Magsaysay in his capacity as President and Board Chairman of Mapalad.
Mapalad filed an action for annulment of deed of sale and reconveyance
of title with damages against Nordelak.
The Regional Trial Court ruled in favor of Nordelak. The Court of Appeals
reversed the decision of trial court.
ISSUE: Whether or not there was a valid sale between Mapalad and Nordelak.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 788
Oesmer v. PDC
RIZALINO, substituted by his heirs, JOSEFINA, ROLANDO and FERNANDO,
ERNESTO, LEONORA, BIBIANO, JR., LIBRADO and ENRIQUETA, all
surnamed OESMER, Petitioners, versus PARAISO DEVELOPMENT
CORPORATION, Respondent.
(G.R. No. 157493, February 5, 2007, 3rd Division)
CHICO-NAZARIO, J:
ISSUE: Whether or not Contract to Sell is void considering that one of the heirs
did not sign it as to indicate its consent to be bound by its terms.
HELD: It is well-settled that contracts are perfected by mere consent, upon the
acceptance by the offeree of the offer made by the offeror. From that moment,
the parties are bound not only to the fulfillment of what has been expressly
stipulated but also to all the consequences which, according to their nature,
may be in keeping with good faith, usage and law. To produce a contract, the
acceptance must not qualify the terms of the offer. However, the acceptance
may be express or implied. For a contract to arise, the acceptance must be
made known to the offeror. Accordingly, the acceptance can be withdrawn or
revoked before it is made known to the offeror.
In the case at bar, the Contract to Sell was perfected when the
petitioners consented to the sale to the respondent of their shares in the
subject parcels of land by affixing their signatures on the said contract. Such
signatures show their acceptance of what has been stipulated in the Contract
to Sell and such acceptance was made known to respondent corporation when
the duplicate copy of the Contract to Sell was returned to the latter bearing
petitioners‘ signatures.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 789
FACTS: Cleopas Ape died in 1950 and left a parcel of land (Lot 2319) to his 11
children. The children never formally divided the property amongst themselves
except through hantal-hantal whereby each just occupied a certain portion and
developed each.
On the other hand, the spouses Lumayno were interested in the land so
they started buying the portion of land that each of the heirs occupied. On 11
Apr 1973, one of the children, Fortunato, entered into a contract of sale with
Lumayno. In exchange of his lot, Lumayno agreed to pay P5,000.00. She paid
in advance P30.00. Fortunato was given a receipt prepared by Lumayno‘s son
in law (Andres Flores). Flores also acted as witness. Lumayno also executed
sales transactions with Fortunato‘s siblings separately.
In 1973, Lumayno compelled Fortunato to make the the delivery to her of
the registrable deed of sale over Fortunato‘s portion of the Lot No. 2319.
Fortunato assailed the validity of the contract of sale. He also invoked his right
to redeem (as a co-owner) the portions of land sold by his siblings to Lumayno.
Fortunato died during the pendency of the case.
HELD: No. Fortunato was a ―no read no write‖ person. It was incumbent for the
the other party to prove that details of the contract was fully explained to
Fortunato before Fortunato signed the receipt.
A contract of sale is a consensual contract, thus, it is perfected by mere
consent of the parties. It is born from the moment there is a meeting of minds
upon the thing which is the object of the sale and upon the price. Upon its
perfection, the parties may reciprocally demand performance, that is, the
vendee may compel the transfer of the ownership and to deliver the object of
the sale while the vendor may demand the vendee to pay the thing sold. For
there to be a perfected contract of sale, however, the following elements must
be present: consent, object, and price in money or its equivalent.
For consent to be valid, it must meet the following requisites: (a) it
should be intelligent, or with an exact notion of the matter to which it refers;
(b) it should be free and (c) it should be spontaneous. Intelligence in consent is
vitiated by error; freedom by violence, intimidation or undue influence;
spontaneity by fraud.
Lumayno claimed that she explained fully the receipt to Fortunato, but
Flores‘ testimony belies it. Flores said there was another witness but the other
was a maid who was also lacked education. Further, Flores himself was not
aware that the receipt was ―to transfer the ownership of Fortunato‘s land to her
mom-in-law‖. It only occurred to him to explain the details of the receipt but he
never did.
Decision reversed and set aside.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 790
Francisco v. Herrera
JULIAN FRANCISCO (Substituted by his Heirs, namely: CARLOS ALTEA
FRANCISCO; the heirs of late ARCADIO FRANCISCO, namely: CONCHITA
SALANGSANG-FRANCISCO (surviving spouse), and his children namely:
TEODULO S. FRANCISCO, EMILIANO S. FRANCISCO, MARIA THERESA S.
FRANCISCO, PAULINA S. FRANCISCO, THOMAS S. FRANCISCO; PEDRO
ALTEA FRANCISCO; CARINA FRANCISCO-ALCANTARA; EFREN ALTEA
FRANCISCO; DOMINGA LEA FRANCISCO-REGONDON; BENEDICTO ALTEA
FRANCISCO and ANTONIO ALTEA FRANCISCO), Petitioner, versus
PASTOR HERRERA, Respondent.
(G.R. No. 139982, November 21, 2002, 2nd Division)
QUISUMBING, J:
FACTS: Petitioner bought 2 parcels of land from Eligio Herrera Sr. The children
of Eligio, Sr. conteneded that the contract price for the two parcels of land was
grossly inadequate so they tried to negotiate with petitioner. However petitioner
refused.
The children of Herrera filed a complaint for annulment of sale. The
Regional Trial Court (RTC) rendered its decision in favor of the children and the
Court of Appeals affirmed the decision of RTC.
HELD: In the present case, it was established that the vendor Eligio, Sr.
entered into an agreement with petitioner, but that the former‘s capacity to
consent was vitiated by senile dementia. Hence, we must rule that the assailed
contracts are not void or inexistent per se; rather, these are contracts that are
valid and binding unless annulled through a proper action filed in court
seasonably.
An annullable contract may be rendered perfectly valid by ratification,
which can be express or implied. Implied ratification may take the form of
accepting and retaining the benefits of a contract. As found by the trial court
and the Court of Appeals, upon learning of the sale, respondent negotiated for
the increase of the purchase price while receiving the installment payments. It
was only when respondent failed to convince petitioner to increase the price
that the former instituted the complaint for reconveyance of the properties.
Clearly, respondent was agreeable to the contracts, only he wanted to get more.
Further, there is no showing that respondent returned the payments or made
an offer to do so. This bolsters the view that indeed there was ratification. One
cannot negotiate for an increase in the price in one breath and in the same
breath contend that the contract of sale is void.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 791
FACTS: Rosario Braganza and her sons loaned from De Villa Abrille P70,000 in
Japanese war notes and in consideration thereof, promised in writing to pay
him P10,00 + 2% per annum in legal currency of the Philippines 2 years after
the cessation of the war. Because they have no paid, Abrille is sued them in
March 1949.
The Manila court of first instance and Court of Appeals held the family
solidarily liable to pay according to the contract they signed. The family
petitioned to review the decision of the CA whereby they were ordered to
solidarily pay De Villa Abrille P10,000 + 2% interest, praying for consideration
of the minority of the Braganza sons when they signed the contract.
ISSUE: Whether or not the boys, who were 16 and 18 respectively, are to be
bound by the contract of loan they have signed.
HELD: The Court found that Rosario will still be liable to pay her share in the
contract because they minority of her sons does not release her from liability.
She is ordered to pay 1/3 of P10,000 + 2% interest.
However with her sons, the SC reversed the decision of the CA which
found them similarly liable due to their failure to disclose their minority. The
SC sustained previous sources in Jurisprudence – ―in order to hold the infant
liable, the fraud must be actual and not constructive. It has been held that his
mere silence when making a contract as to his age does not constitute a fraud
which can be made the basis of an action of deceit.‖
The boys, though not bound by the provisions of the contract, are still
liable to pay the actual amount they have profited from the loan. Art. 1340
states that even if the written contract is unenforceable because of their non-
age, they shall make restitution to the extent that they may have profited by
the money received. In this case, 2/3 of P70,00, which is P46,666.66, which
when converted to Philippine money is equivalent to P1,166.67.
Wherefore, as the share of these minors was 2/3 of P70,000 of
P46,666.66, they should now return P1,166.67.3 Their promise to pay P10,000
in Philippine currency, (Exhibit A) cannot be enforced, as already stated, since
they were minors incapable of binding themselves. Their liability, to repeat, is
presently declared without regard of said Exhibit A, but solely in pursuance of
Article 1304 of the Civil Code.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 792
Katipunan v. Katipunan
MIGUEL KATIPUNAN, INOCENCIO VALDEZ, EDGARDO BALGUMA and
LEOPOLDO BALGUMA, JR., Petitioners, versus BRAULIO KATIPUNAN, JR.,
Respondent.
(G.R. No. 132415, January 30, 2002, 3rd Division)
SANDOVAL-GUTIERREZ, J:
FACTS: Respondent Braulio Katipunan, Jr. is the owner of a 203 square meter
lot and a five-door apartment constructed thereon located at 385-F Matienza
St., San Miguel, Manila.
Petitioner Miguel Katipunan, entered into a Deed of Absolute Sale4 with
brothers Edgardo Balguma and Leopoldo Balguma, Jr. (co-petitioners),
represented by their father Atty. Leopoldo Balguma, Sr., involving the subject
property for a consideration of P187,000.00.
Respondent filed a complaint for annulment of the Deed of Absolute Sale.
He contended that the said contract was obtained through insidious words and
machinations. The Regional Trial Court (RTC) dismissed the complaint. The
Court of Appeals (CA) reversed the decision of RTC.
ISSUE: Whether or not CA ered when it overturned the factual findings of the
trial court which are amply supported by the evidence on record.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 793
ISSUE: Whether or not the Court of Appeals erred in affirming the decision of
Executive Secretary Ruben D. Torres and the HLURB declaring the rescission
of the contract of sale of a house and lot between the petitioner and private
respondent
HELD: The Court agreed with the Court of Appeals that respondent de Leon
was entitled to annul the sale. There was fraud in the sale of the subject house.
It is not safely habitable. It is built in a subdivision area where there is an
existing 30-meter right of way of the Manila Electric Company (Meralco) with
high-tension wires over the property, posing a danger to life and property. The
construction of houses underneath the high tension wires is prohibited as
hazardous to life and property because the line carries 115,000 volts of
electricity, generates tremendous static electricity and produces electric sparks
whenever it rained.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 794
Within the 8-year redemption period, Bonifacio and Albino tendered their
payment to Dr. Corrompido. But Dr. Corrompido only released the document of
sale with pacto de retro after Saturnina paid the share of her deceased son,
Alberto, plus the note.
ISSUE: Whether or not the sale entered into is valid and binding.
HELD: No. The sale entered into is not valid and not binding.
The legal guardian only has the plenary power of administration of the minor‘s
property. It does not include the power to alienation which needs judicial
authority. Thus when Saturnina, as legal guardian of petitioner Rito, sold the
latter‘s pro indiviso share in subject land, she did not have the legal authority
to do so. The contarct of sale as to the pro indiviso share of Petitioner Rito was
unenforceable. However when he acknowledged receipt of the proceeds of the
sale on July24, 1986, petitioner Rito effectively ratified it. This act of
ratification rendered the sale valid and binding as to him.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 795
VDA. DE OUANO v. RP
ANUNCIACION VDA. DE OUANO, MARIO P. OUANO, LETICIA OUANO
ARNAIZ, and CIELO OUANO MARTINEZ, Petitioners, versus THE REPUBLIC
OF THE PHILIPPINES, THE MACTAN-CEBU INTERNATIONAL AIRPORT
AUTHORITY, and THE REGISTER OF DEEDS FOR THE CITY OF
CEBU, Respondents.
ISSUE: Whether or not the testimonials of the petitioners proving the promises,
assurances and representations by the airport officials and lawyers are
inadmissible under the Statue of Frauds.
Petition is granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 796
SHOEMAKER v. LA TONDEÑA
HARRY IVES SHOEMAKER, Petitioner, versus LA TONDEÑA,
INC., Respondent.
(G.R. No. L-45667, May 9, 1939, En Banc)
VILLA-REAL, J.:
ISSUE: Whether or not the court a quo erred in sustaining the demurrer
interposed by the defendant company to the second amended complaint filed
by plaintiff, on the ground that the facts alleged therein do not constitute a
couse of action.
HELD: No. The court a quo did not err in sustaining the demurrer interposed
by the defendant company to the second amended complaint filed by plaintiff,
on the ground that the facts alleged therein do not constitute a couse of action.
FACTS: This appeal involves the legal right of the PNB to obtain a judgement
against Vegetable Oil Co., Inc., for Php 15,812,454 and to foreclose a mortgage
on the property of the PVOC for Php 17,000,000.00 and the legal right of the
Phil C. Whitaker as intervenor to obtain a judgement declaring the mortgage
which the PNB seeks to foreclose to be without force and effect, requiring an
accouting from the PNB of the sales of the property and assets of the Vegetable
Co. and ordering the PVOC and the PNB to pay him the sum of Php
4,424,418.37
In 1920, the Vegetable Oil Company, found itself in financial straits. It was in
debt to the extent of approximately Php 30,000,000.00. The PNB was the
largest creditor. The VOC owed the bank Php 17,000,000.00. The PNB was
securedly principally by a real and chattel mortgage in favor of the bank on its
vessels Tankerville and H.S. Everett to guarantee the payment of sums not
exceed Php 4,000,000.00
ISSUE: Whether or not the plaintiff had failed to comply with the contract, that
it was alleged to have celebrated with the defendant and the intervenor, that it
would furnish funds to the defendant so that it could continue operating its
factory.
HELD: Yes. The plaintiff failed to comply with the contract, that it was alleged
to have celebrated with the defendant and the intervenor, that it would furnish
funds to the defendant so that it could continue operating its factory.
In the present instance, it is found that the Board of Directors of the PNB had
not consented to an agreement for practically unlimited backing of the V
corporation and had not ratified any promise to trhat effect made by its general
manager.
All the evidence, documentary and oral, pertinent to the issue considered and
found to disclose no binding promise, tacit, or express made by the PNB to
continue indefinitely the operation of the V corporation. Accordingly, intervenor
Whitaker is not entitled to recover damages from the bank.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 798
The case will be remanded to the lower court for the entry of judgment
and further proceedings as herein indicated. Judgment affirmed in part and
reversed in part, without special finding as to costs in either instance.
VDA. DE OUANO v. RP
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 799
ISSUE: Whether or not the testimonials of the petitioners proving the promises,
assurances and representations by the airport officials and lawyers are
inadmissible under the Statue of Frauds.
HELD: No.The testimonials of the petitioners proving the promises, assurances
and representations by the airport officials and lawyers are admissible under
the Statue of Frauds.
The SC ruled that since the respondent didn‘t object during trial to the
admissibility of petitioner‘s testimonial evidenc under the Statute of Frauds, it
means then that they have waived their objection and are now barred from
raising the same. In any event, the Statute of Frauds is not applicable herein.
Consequently, petitioners‘ pieces of evidence are admissible and should be duly
given weight and credence, since the records tend to support that the MCIAA
did not as the Ouanos and Inocians posit, object the introduction of parole
evidence to prove its commitment to allow the fromer landowners to repurchase
their properties upon the occurrence of certain events.
Petition is granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 800
PERALTA, J.:
The SC held that Statute of frauds is descriptive of statutes that require certain
classes of contracts to be in writing, and that do not deprive the parties of the
right to contract with respect to the matters therein involved, but merely
regulate the formalities of the contract necessary to render its enforceability. In
other words, the Statute of fraud only lays down the method by which the
enumerated contracts maybe proved. It does not also declare any contract
invalid because they are not reduced into writing inasmuch as, by law,
contracts are obligatory in whatever form they may have been entered into
provided that all their essential requisites for validity are present. Thus the
claim of the respondent is well-substantiated.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 801
Petitioners alleged that they never received from respondent any demand for
payment, be it verbal or written, respecting the alleged loan; since the alleged
loan was one with a period — payable in six months, it should have been
expressly stipulated upon in writing by the parties but it was not.
HELD: No. The Honorable Court of Appeals did not err in concluding that the
transaction in dispute was a contract of loan and not a mere matter of check
encashment as found by the trial court.
At all events, a check, the entries of which are no doubt in writing, could prove
a loan transaction.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 802
branch where he was later to deposit respondent‘s check did not rule out
petitioners‘ securing a loan. It is pure naivete to believe that if a businessman
has such an outstanding balance in his bank account, he would have no need
to borrow a lesser amount.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 803
PARDO, J.:
The parties expressly agredd that in case of payment has been fully paid
respondents would execute an individual deed of absolute sale in plaintiffs
flavor.
The trial court rendered its decision in favor of the respondents. However
the CA ruled that contract of sale was not been perfrected between spouses
David and/or Vda. De Basco and respondents. As with regard to the spouses
Ventura, the CA affirmed the RTC.
ISSUE:Whether or not contract of sale has not been perfected but petitioners
and respondents.
HELD: No. The contract of sale has been perfected but petitioners and
respondents.
The SC ruled that there was a perfected contact. However, the statute of frauds
is inapplicable. The rule is settled that the statute of frauds applies only to
executor and not to completed, executed or partially executed contract. In the
case of spouses David, the payment made rendered the sales contract beyong
the ambit of the statutre of frauds/
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 804
Cordial v. Miranda
GENARO CORDIAL, Petitioner, versus DAVID MIRANDA, Respondent.
(G.R. No. 135495, December 14, 2000, 3rd Division)
PANGANIBAN, J.:
FACTS: David Miranda, a businessman from Angeles City, was engaged in
rattan business since 1980. He buys large quantities of rattan poles from
suppliers coming from Palawan, Isabela, Ilocos Sur, Baler, Quezon and
Cagayan de Oro City. Among his many regular suppliers, of particular interest
in this case, were Roberto Savilla. Her Villanueva, Roberto Savilla. Her
Villanueva, Roberto Santiago, and in 1990 one Gener Buelva.
Gener Buelva was an employee of one Mike Samaya, who was also a
supplier of rattan to Respondent Miranda. Gener Buelva, wanting to become an
independent rattan supplier in January 1990, was recommended by his
employer Samaya to Respondent Miranda who readily accepted him, thus,
started such business relationship.
In the business relations between Buelva and Miranda, the former was
given cash advances by the latter, to buy rattan in Palawan, shipping said
purchased rattan by boat to Manila, paid ex-Manila, after liquidating cash
advances. Buelva also paid forest royalties to the concessionaire, thru Roberto
Savilla. The business transactions, however, did not last long because Buelva
then in Manila met an accident and died on June 19, 1990.
They agreed that Cordial will be his supplier of rattan poles. Cordial
shipped rattan poles as to the agreed number of pieces and sizes however
Miranda refused to pay the cost of the rattan poles delivered. Miranda alleged
that there exist no privity of contract between Miranda and Cordial.
Cordial filed a complaint againt Miranda. The RTC rendered its decision
in favor of the petitioner. The CA reversed the decision of the RTC.
HELD: No. The Statute of Frauds does not apply in this case.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 805
Petition is granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 806
QUISUMBING, J.:
ISSUE: Whether or not the appellate court erred in declaring the Deed of Sale
unenforceable against the private respondent fro being unauthorized contract.
HELD: No. The appellate court did not err in declaring the Deed of Sale
unenforceable against the private respondent fro being unauthorized contract.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 807
The court has ruled that the nullity of the unenforceable contract is of a
permanent nature and it will exist as long the unenforceable contract is not
duly ratifired. The mere lapse of time cannot igve efficacy to such a contract.
The defect is such that it cannot be cured except by the subsequent ratification
of the unenforceable contract by the person in whose name the contract was
executed. In the instant case, there is no showing of any express or implied
ratification of the assailed Deed of Sale by the private respondents Procerfina,
Ramon,. Prosperidad, and Rosa. Thus, the said Deed of Sale must remain
unenforceable as to them.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 808
Rosencor v. Inquing
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 809
GONZAGA-REYES, J.:
FACTS: Plaintiffs and plaintiffs-intervenors averred that they are the lessess since
1971 of a two-story residential apartment and owned by spouses Faustino and
Cresencia Tiangco. The lease was nocovered by any contract. The lesses were renting
the premises then for Php 150.00 a month and were allegedly verbally granted by the
lessors the pre-emptive right to purchase the property if ever they decide to sell the
same.
Upon the death of the spouses Tiangco, the management of the property was
adjudicated to their heirs who were represented by Eufrocina deLeon.
The lessees received a letter from de Leon advising them that the heirs of the late
spouses have already sold the property to Resencor.
The lessees filed an action f\before th RTC praying for the following: a)
rescission of the Deed of Absolute Sale between de Leon and Rocencor, b) the
defendants Rosencor/Rene Joaquin be ordered to reconvey the property to de Leon, c)
de Leon be ordered to reimburse the plaintiffs for the repair of the property or apply
the said amount as part of the purchase of the property.
The RTC dismissed the complaint while the Ca reversed the decision of the RTC.
ISSUE: Whether or not a right of first refusal is indeed covered by the provisions of the
NCC on the Statute of Frauds.
HELD: A right of first refusal is not among those listed as unenforceable under the
statute of frauds. Furthermore, the application of Article 1403, par. 2(e) of the NCC,
presupposes the existence of a perfected, albeit unwritten, contract of sale. A right of
first refusal, such as the one involved in the instant case, is not by any means a
perfected contract of sale of real property. At best, it is a contractual grant, not of the
sale of the real property involed byt of the right of first refusal over the property sought
to be sold.
It is thus evident that the statute of frauds does not contemplate cases
involving a right of right of first refusal. As such, a right of first refusal need not be
written to be enforceable and may be proven by oral evidence.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 810
Firme v. UKAL
SPOUSES CONSTANTE FIRME AND AZUCENA E. FIRME, Petitioners,
vs.UKAL ENTERPRISES AND DEVELOPMENT CORPORATION, Respondent.
CARPIO, J.:
FACTS: Petitioner Spouses Firme are the registered owner of a parcel of land located
on Dahlia Avenue, Fairview Park, Quezon City.
Bukal Enterprises filed a complaint for specific performance and damges with
the trial court, aleeging that the Spouses Firme reneged on their agreement to sell the
property. The complaint asked the trial court to order the Spouses Firme to execute
the deed of sale and to delover the title of the property to Bukal Enterpises upon
payment of the agreed purchase price.
The RTC rendered its decision against Bukal. The CA reversed and set aside the
decision of the RTC.
HELD: The CA held that partial performance of the contract of sale takes the oral
contract out of the scope of Statute of Frauds. This conclusion arose from the
appellate court‘s erronoues finding that there was a perfected contract of sale. The
recors shoe that there was no perfected contract of sale. There is therefore no basis for
the application of the Stature of Frauds. The application of the Statute of Frauds
presupposes the existence of a perfected contract.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 811
FACTS: Petitioners are the heirs of Maralino Doronio, while respondents are the heirs
of Fortunato Doronio.
The property in dispute is one of a private deed of donation propter nuptias who
was executed by Spouses Simeon Doronio and Cornelia Gante in facor of Maralino
Doronio and his wife Veronica Pico.
The heirs of Fortuanto Doronio contended that only the half of the property was
actually incorporated in the deed of donation because it stated that Fortunato is the
owner of the adjacent property. Eager to obtain the entire property, the heirs of
Marcelino filed a petition ―For the Registration of a Private Deed of Donation‖. The RTC
granted the petition.
The heirs of Fortunato files a pleading in the form of petition. In the petition,
they prayed that an order be issued declaring null and void the registration of the
private deed of donation.
The RTC ruled in favor of the heirs of Marcelino. The CA reversed the decision of
RTC>
HELD: Article 633 of the OCC provides that figts of real property , in order to be valid,
must appear in a public document. It is settled that a donation of real estate propter
nuptias is void unless made by public instrument.
In the instant case, the donation propter nuptias did not become valid. Neither
did it create any right because it was not made in a public instrument. Hence, it
conveyed no title to the land in question to petitioner‘s predecessors.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 812
Gurrea v. Suplico
NATIVIDAD ARIAGA VDA. DE GURREA, CARLOS GURREA, JULIETA GURREA,
TERESA GURREA-RODRIGUEZ, RICARDO GURREA, Jr., MA. VICTORIA GURREA-
CANDEL, and RAMONA GURREA-MONTINOLA, Petitioners,
vs ENRIQUE SUPLICO, Respondent
FACTS: The petition arose from a complaint for anuulment of tilte with prayer for
preliminary injunction filed with the court of First Instance by Rosalina Gurrea in her
capacity as attorney-in-fact of the heirs of Ricardo Gurrea. The complaint was filed
against Atty. Enrique Suplico.
Atty. Suplico alleged that the property in dispurte was for the payment of his
services rendered to the late Ricardo Gurrrea which the offered to him as payment.
HELD: Having been established that the subject property was still the object of
litigation at the time the subject deed of Transfer of Rights and Interest was executed,
the assignment of rights and interest over the subject property in favor of respondent
is null and void for being violative of the provisions of Article 1491 of the Civil Code
which expressly prohibits lawyers from acquiring property or rights which may be the
object of any litigation in which they may take part by virtue of their profession.
It follows that respondent‘s title over the subject property should be cancelled and the
property reconveyed to the estate of Ricardo, the same to be distributed to the latter?s
heirs. This is without prejudice, however, to respondent?s right to claim his attorney?s
fees from the estate of Ricardo, it being undisputed that he rendered legal services for
the latter.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 813
Frenzel v. Catito
ALFRED FRITZ FRENZEL, Petitioner, vs.EDERLINA P. CATITO, Respondent.
FACTS: Alfred Frenzel and Ederlina Catito had an amorous relationship which started
in King‘s Cross, a night spot in Sydney.
During their relationship Alfred bought properties in the Philippines in the
name of Ederlina. Their relationship started to deteriorate when the husband of
Ederlina threatened Ederlina that he would file a bigamy case against her for having
an illicit affair with Alfred, who was also married.
HELD: The sales of three parcels of land in favor of the petitioner who is a foreigner is
illegal per se. The transactions are void ab initio because they were entered into in
violation of the Constitution. Thus, to allow the petitioner to recover the properties or
the money used in the purchase of the parcels of land would be subversive of public
policy.
An action for recovery of what has been paid without just cause has been
designated as an accion in rem verso. This provision does not apply if, as in this case,
the action is proscribed by the Constitution or by the application of the pari delicto
doctrine. 68 It may be unfair and unjust to bar the petitioner from filing an accion in
rem verso over the subject properties, or from recovering the money he paid for the
said properties, but, as Lord Mansfield stated in the early case of Holman vs.
Johnson:69 "The objection that a contract is immoral or illegal as between the plaintiff
and the defendant, sounds at all times very ill in the mouth of the defendant. It is not
for his sake, however, that the objection is ever allowed; but it is founded in general
principles of policy, which the defendant has the advantage of, contrary to the real
justice, as between him and the plaintiff."
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 814
La Buga'al-Blaan v. Ramos
LA BUGA‟AL-BLAAN, Petitioners vs RAMOS, Respondent
PANGANIBAN, J.:
FACTS: The Petition for Prohibition and Mandamus before the Court challenges the
constitutionality of (1) Republic Act No. [RA] 7942 (The Philippine Mining Act of 1995);
(2) its Implementing Rules and Regulations (DENR Administrative Order No. [DAO] 96-
40); and (3) the FTAA dated March 30, 1995, executed by the government with
Western Mining Corporation (Philippines), Inc. (WMCP).
On January 27, 2004, the Court en banc promulgated its Decision granting the
Petition and declaring the unconstitutionality of certain provisions of RA 7942, DAO
96-40, as well as of the entire FTAA executed between the government and WMCP,
mainly on the finding that FTAAs are service contracts prohibited by the 1987
Constitution.
HELD: Section 7.9 of the WMCP FTAA has effectively given away the State's share
without anything in exchange. Moreover, it constitutes unjust enrichment on the part
of the local and foreign stockholders in WMCP, because by the mere act of divestment,
the local and foreign stockholders get a windfall, as their share in the net mining
revenues of WMCP is automatically increased, without having to pay anything for
it.Being grossly disadvantageous to government and detrimental to the Filipino people,
as well as violative of public policy, Section 7.9 must therefore be stricken off as
invalid.
Section 7.8(e) of the WMCP FTAA likewise is invalid, since by allowing the sums
spent by government for the benefit of the contractor to be deductible from the State's
share in net mining revenues, it results in benefiting the contractor twice over. This
constitutes unjust enrichment on the part of the contractor, at the expense of
government. For being grossly disadvantageous and prejudicial to government and
contrary to public policy, Section 7.8(e) must also be declared without effect. It may
likewise be stricken off without affecting the rest of the FTAA.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 815
Agan v. PIATCO
AGAN, Petitioner vs. PIATCO, Respondent)
PUNO, J.:
Various petitions were filed before this Court to annul the 1997 Concession
Agreement, the ARCA and the Supplements and to prohibit the public respondents
DOTC and MIAA from implementing them.
In a decision dated May 5, 2003, this Court granted the said petitions and declared
the 1997 Concession Agreement, the ARCA and the Supplements null and void.
HELD: Section 19, Article XII of the 1987 Constitution mandates that the State
prohibit or regulate monopolies when public interest so requires. Monopolies are not
per se prohibited. Given its susceptibility to abuse, however, the State has the
bounden duty to regulate monopolies to protect public interest. Such regulation may
be called for, especially in sensitive areas such as the operation of the country‘s
premier international airport, considering the public interest at stake.
By virtue of the PIATCO contracts, NAIA IPT III would be the only international
passenger airport operating in the Island of Luzon, with the exception of those already
operating in Subic Bay Freeport Special Economic Zone ("SBFSEZ"), Clark Special
Economic Zone ("CSEZ") and in Laoag City. Undeniably, the contracts would create a
monopoly in the operation of an international commercial passenger airport at the
NAIA in favor of PIATCO.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 816
COMELEC v. Quijano-Padilla
COMMISSION ON ELECTIONS, Petitioner, vs. JUDGE MA. LUISA QUIJANO-
PADILLA, Respondents.
SANDOVAL-GUTIERREZ, J.:
FACTS: The Philippine Congress passed Republic Act No. 8189, otherwise known as
the "Voter's Registration Act of 1996," providing for the modernization and
computerization of the voters' registration list and the appropriate of funds therefor "in
order to establish a clean, complete, permanent and updated list of voters."
The COMELEC issued invitations to pre-qualify and bid for the supply and
installations of information technology equipment and ancillary services for its VRIS
Project. Private respondent Photokina Marketing Corporation (PHOTOKINA) won the
bid however the budget appropriated by the Congress for the COMELEC‘s
modernization project was only 1B which was not sufficient to PHOTOKINA bid in the
amount of 6.588B.
PHOTOKINA filed a petition for mandamus, prohibition and damages (with prayer for
temporary restraining order, preliminary prohibitory injunction and preliminary
mandatory injunction) against the COMELEC and all its Commissioners.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 817
The SC ruled that PHOTOKINA, though the winning bidder, cannot compel the
COMELEC to formalize the contract. Since PHOTOKINA‘s bid is beyond the amount
appropriated by Congress for the VRIS Project, the proposed contract is not binding
upon the COMELEC and is considered void; and that in issuing the questioned
preliminary writs of mandatory and prohibitory injunction and in not dismissing
Special Civil Action No. Q-01-45405, respondent judge acted with grave abuse of
discretion. Petitioners cannot be compelled by a writ of mandamus to discharge a
duty that involves the exercise of judgment and discretion, especially where
disbursement of public funds is concerned.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 818
Jaworski v. PAGCOR
SENATOR ROBERT S. JAWORSKI, Petitioner,
vs.PHILIPPINE AMUSEMENT AND GAMING CORPORATION and SPORTS AND
GAMES ENTERTAINMENT CORPORATION, Respondents.
SANDOVAL-GUTIERREZ, J.:
HELD: While PAGCOR is allowed under its charter to enter into operator?s and/or
management contracts, it is not allowed under the same charter to relinquish or share
its franchise, much less grant a veritable franchise to another entity such as SAGE.
PAGCOR can not delegate its power in view of the legal principle of delegata potestas
delegare non potest, inasmuch as there is nothing in the charter to show that it has
been expressly authorized to do so. In Lim v. Pacquing,10 the Court clarified that
"since ADC has no franchise from Congress to operate the jai-alai, it may not so
operate even if it has a license or permit from the City Mayor to operate the jai-alai in
the City of Manila." By the same token, SAGE has to obtain a separate legislative
franchise and not "ride on" PAGCOR?s franchise if it were to legally operate on-line
Internet gambling.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 819
Oesmer v. PDC
RIZALINO, substituted by his heirs, JOSEFINA, ROLANDO and FERNANDO,
ERNESTO, LEONORA, BIBIANO, JR., LIBRADO and ENRIQUETA, all surnamed
OESMER, Petitioners, vs. PARAISO DEVELOPMENT CORPORATION, Respondent.
SANDOVAL-GUTIERREZ, J.:
FACTS: Petitioner Ernesto to meet with a certain Sotero Lee, President of respondent
Paraiso Development Corporation, at Otani Hotel in Manila. The said meeting was for
the purpose of brokering the sale of petitioners‘ properties to respondent corporation.
A Contract to Sell was drafted. A check in the amount of P100,000.00, payable to
Ernesto, was given as option money. Sometime thereafter, Rizalino, Leonora, Bibiano,
Jr., and Librado also signed the said Contract to Sell. However, two of the brothers,
Adolfo and Jesus, did not sign the document. However petitioners informed
respondent corporation about their intention to rescind the Contract to Sell and to
return the amount of Php 100,000.00. respondent did not respond to the aforesaid
letter. Petitioners, therefore, filed a complaint for Declaration of Nullity or for
Annulment of Option Agreement or Contract to Sell with damages.
The RTC rendered its decision in favor to respondent. CA affirmed the decision of RTC
with modification.
ISSUE: Whether or not Contract to Sell is void considering that on of the heirs did not
sign it as to indicate its consent to be bound by its terms.
HELD: It is well-settled that contracts are perfected by mere consent, upon the
acceptance by the offeree of the offer made by the offeror. From that moment, the
parties are bound not only to the fulfillment of what has been expressly stipulated but
also to all the consequences which, according to their nature, may be in keeping with
good faith, usage and law. To produce a contract, the acceptance must not qualify the
terms of the offer. However, the acceptance may be express or implied. For a contract
to arise, the acceptance must be made known to the offeror. Accordingly, the
acceptance can be withdrawn or revoked before it is made known to the offeror.
In the case at bar, the Contract to Sell was perfected when the petitioners consented
to the sale to the respondent of their shares in the subject parcels of land by affixing
their signatures on the said contract. Such signatures show their acceptance of what
has been stipulated in the Contract to Sell and such acceptance was made known to
respondent corporation when the duplicate copy of the Contract to Sell was returned
to the latter bearing petitioners‘ signatures
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 820
PANGANIBAN, J.:
Gaspar, Visitacion, Flor, Pedro and Aurelio, Jr. learned of the sale,
and on August 21, 1996, they wrote a letter to the Register of Deeds
(RD), saying that they were not informed of the sale of a portion of the
said property by their mother nor did they give their consent thereto, and
requested the [RD] to hold in abeyance any processal or approval of any
application for registration of title of ownership in the name of the buyer
of said lot, which has not yet been partitioned judicially or
extrajudicially, until the issue of the legality/validity of the above sale
has been cleared."
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 822
civil action for the nullification of the "Real Estate Mortgage" executed by
the respondent in favor of the Bank as the action of the petitioners before
the court was a special civil action.
On appeal, the CA held that the sale was valid and binding insofar
as Esperanza Balite‘s undivided share of the property was concerned. It
affirmed the trial court‘s HELD that the lack of consent of the co-owners
did not nullify the sale. The buyer, respondent herein, became a co-
owner of the property to the extent of the pro indiviso share of the
vendor, subject to the portion that may be allotted to him upon the
termination of the co-ownership. The appellate court disagreed with the
averment of petitioners that the registration of the sale and the issuance
of TCT No. 6683 was ineffective and that they became the owners of the
share of Esperanza upon the latter‘s death.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 824
The juridical nature of the Contract remained the same. What was
concealed was merely the actual price. Where the essential requisites are
present and the simulation refers only to the content or terms of the
contract, the agreement is absolutely binding and enforceable between
the parties and their successors in interest.
Pineda v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 825
Pineda then requested the appellees for a written authority for the
release of the title from the GSIS. On January 1, 1985, the appellees gave
Pineda the aforementioned authority with the understanding that Pineda
will personally deliver the title to the appellees. The record shows that
pursuant to the agreement to sell the following payments were made by
the appellants to Pineda: 1) $25,000.00 on December 26, 1984; 2)
$10,000.00 on January 18, 1985; 3) P50,000.00 on January 24, 1985; 4)
$500.00 on February 1, 1985; and 5) $330 on February 7, 1985 . The
appellants physically occupied the premises on June or July 1985.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 827
HELD:No. It appears that the Bañez spouses were the original owners of
the parcel of land and improvements located at 32 Sarangaya St., White
Plains, Quezon City. On January 11, 1983, the Bañez spouses and
petitioner Pineda executed an agreement to exchange real properties.
However, the exchange did not materialize.
Cruz v. Bancom
On January 25, 1996, the trial court rendered the herein assailed
Decision in favor of the plaintiffs. It ruled that the contract of sale
between plaintiffs and Candelaria was absolutely
simulated. Consequently, the second contract of sale, that is, between
Candelaria and Norma, produced no legal effect. As for Bancom, the trial
court held that the Bank was not a mortgagee in good faith thus it can
not claim priority of rights over plaintiffs‘ property.
In reversing the RTC, the CA held that the Deeds of Sale were valid
and binding, not simulated. Thus, the Contract of Mortgage between
Sulit and respondent was likewise valid.
ISSUES:
(1) Whether or not the Deeds of Sale and Mortgage are valid.
(2) Whether or not the mortgagee acted in good faith.
HELD:
(1) No. As a general rule, when the terms of a contract are clear and
unambiguous about the intention of the contracting parties, the literal
meaning of its stipulations shall control. But if the words appear to
contravene the evident intention of the parties, the latter shall prevail
over the former. The real nature of a contract may be determined from
the express terms of the agreement, as well as from the
contemporaneous and subsequent acts of the parties thereto.
On the other hand, simulation takes place when the parties do not
really want the contract they have executed to produce the legal effects
expressed by its wordings. Simulation or vices of declaration may be
either absolute or relative. Article 1345 of the Civil Code distinguishes
an absolute simulation from a relative one while Article 1346 discusses
their effects, as follows:
for any purpose contrary to law, morals, good customs, public order or
public policy binds the parties to their agreement.‖
Clearly, the Deeds of Sale were executed merely to facilitate the use of
the property as collateral to secure a loan from a bank. Being merely a
subterfuge, these agreements could not have been the source of any
consideration for the supposed sales.Indeed, the execution of the two
documents on the same day sustains the position of petitioners that the
Contracts of Sale were absolutely simulated, and that they received no
consideration therefor.
The failure of Sulit to take possession of the property purportedly sold
to her was a clear badge of simulation that rendered the whole
transaction void and without force and effect, pursuant to Article 1409 of
the Civil Code.The fact that she was able to secure a Certificate of Title to
the subject property in her name did not vest her with ownership over
it.A simulated deed of sale has no legal effect; consequently any transfer
certificate of title (TCT) issued in consequence thereof should be
cancelled. A simulated contract is not a recognized mode of acquiring
ownership.
(2) No. As a general rule, every person dealing with registered land
may safely rely on the correctness of the certificate of title and is no
longer required to look behind the certificate in order to determine the
actual owner. To do so would be contrary to the evident purpose of
Section 39 of Act 496 which we quote hereunder:
“Second. Taxes within two years after the same became due and payable.
“Third. Any public highway, way, private way established by law, or any
Government irrigation canal or lateral thereof, where the certificate of title
does not state that the boundaries of such highway, way, or irrigation
canal or lateral thereof, have been determined.
This rule is, however, subject to the right of a person deprived of land
through fraud to bring an action for reconveyance, provided the rights of
innocent purchasers for value and in good faith are not
prejudiced. An innocent purchaser for value or any equivalent phrase
shall be deemed, under Section 38 of the same Act, to include an
innocent lessee, mortgagee or any other encumbrancer for value.
Respondent, however, is not an ordinary mortgagee; it is a mortgagee-
bank. As such, 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.The ascertainment of
the status or condition of a property offered to it as security for a loan
must be a standard and indispensable part of its operations.
The evidence before us indicates that respondent bank was not a
mortgagee in good faith. First, at the time the property was mortgaged to
it, it failed to conduct an ocular inspection.Judicial notice is taken of the
standard practice for banks before they approve a loan.
Cuaton v. Salud
YNARES-SANTIAGO, J.:
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 832
HELD:.In Ruiz v. Court of Appeals, we declared that the Usury Law was
suspended by Central Bank Circular No. 905, s. 1982, effective on
January 1, 1983, and that parties to a loan agreement have been given
wide latitude to agree on any interest rate. However, nothing in the said
Circular grants lenders carte blanche authority to raise interest rates to
levels which will either enslave their borrowers or lead to a hemorrhaging
of their assets. The stipulated interest rates are illegal if they are
unconscionable.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 833
In the present case, the 10% and 8% interest rates per month on
the one-million-peso loan of petitioner are even higher than those
previously invalidated by the Court in the above cases. Accordingly, the
reduction of said rates to 12% per annum is fair and reasonable.
Infotech v. COMELEC
INFORMATION TECHNOLOGY FOUNDATION OF THE PHILIPPINES,
MA. CORAZON M. AKOL, MIGUEL UY, EDUARDO H. LOPEZ,
AUGUSTO C. LAGMAN, REX C. DRILON, MIGUEL HILADO, LEY
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 834
PANGANIBAN, J.:
In the May 2001 elections, the counting and canvassing of votes for
both national and local positions were also done manually, as no
additional ACMs had been acquired for that electoral exercise allegedly
because of time constraints.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 835
On February 17, 2003, the poll body released the Request for
Proposal (RFP) to procure the election automation machines. The Bids
and Awards Committee (BAC) of Comelec convened a pre-bid conference
on February 18, 2003 and gave prospective bidders until March 10, 2003
to submit their respective bids.
Out of the 57 bidders, the BAC found MPC and the Total
Information Management Corporation (TIMC) eligible. For technical
evaluation, they were referred to the BAC‘s Technical Working Group
(TWG) and the Department of Science and Technology (DOST).
On May 29, 2003, five individuals and entities (including the herein
Petitioners Information Technology Foundation of the Philippines,
represented by its president, Alfredo M. Torres; and Ma. Corazon Akol)
wrote a letter to Comelec Chairman Benjamin Abalos Sr. They protested
the award of the Contract to Respondent MPC "due to glaring
irregularities in the manner in which the bidding process had been
conducted." Citing therein the noncompliance with eligibility as well as
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 836
liable for the entire project or joint venture, because it is sufficient that
the lead company and the member in charge of a particular contract or
aspect of the joint venture agree to be solidarily liable.
Pabugais v. Sahijwan
YNARES-SANTIAGO, J.:
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 838
5. DEFAULT – In case the FIRST PARTY [herein respondent] fails to pay the
balance of the purchase price within the stipulated due date, the sum of
P600,000.00 shall be deemed forfeited, on the other hand, should the
SECOND PARTY [herein petitioner] fail to deliver within the stipulated
period the documents hereby undertaken, the SECOND PARTY shall return
the sum of P600,000.00 with interest at 18% per annum.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 840
ISSUES:
HELD: YES. Consignation is the act of depositing the thing due with the
court or judicial authorities whenever the creditor cannot accept or
refuses to accept payment and it generally requires a prior tender of
payment. In order that consignation may be effective, the debtor must
show that: (1) there was a debt due; (2) the consignation of the obligation
had been made because the creditor to whom tender of payment was
made refused to accept it, or because he was absent or incapacitated, or
because several persons claimed to be entitled to receive the amount due
or because the title to the obligation has been lost; (3) previous notice of
the consignation had been given to the person interested in the
performance of the obligation; (4) the amount due was placed at the
disposal of the court; and (5) after the consignation had been made the
person interested was notified thereof. Failure in any of these
requirements is enough ground to render a consignation ineffective.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 841
(2) NO. The amount consigned with the trial court can no longer be
withdrawn by petitioner because respondent‘s prayer in his answer that
the amount consigned be awarded to him is equivalent to an acceptance
of the consignation, which has the effect of extinguishing petitioner‘s
obligation.
Liguez v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 842
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 843
CASTRO, J.:
FACTS: Justina Santos y Canon Faustino and her sister Lorenza were
the owners in common of a piece of land in Manila.
The sisters lived in one of the houses, while Wong Heng, a Chinese, lived
with his family in the restaurant. Wong had been a long-time lessee of a
portion of the property, having a monthly rental of P2,620.
On September 22, 1957 Justina Santos became the owner of the entire
property as her sister died with no other heir. Then already well
advanced in years, being at the time 90 years old, blind, crippled and an
invalid, she was left with no other relative to live with, but she was taken
cared of by Wong.
On November 18, 1958 she executed two other contracts, one extending
the term of the lease to 99 years, and another fixing the term of the
option at 50 years. Both contracts are written in Tagalog. In two wills
executed on August 24 and 29, 1959, she bade her legatees to respect
the contracts she had entered into with Wong, but in a codicil of a later
date (November 4, 1959) she appears to have a change of heart. Claiming
that the various contracts were made by her because of machinations
and inducements practised by him, she now directed her executor to
secure the annulment of the contracts.
Both parties however died, Wong Heng on October 21, 1962 and Justina
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 844
Santos on December 28, 1964. Wong was substituted by his wife, Lui
She, the other defendant in this case, While Justina Santos was
substituted by the Philippine Banking Corporation. Justina Santos
maintained — now reiterated by the Philippine Banking Corporation —
that the lease contract should have been annulled along with the four
other contracts because it lacks mutuality, among others
Paragraph 5 of the lease contract states that "The lessee may at any time
withdraw from this agreement." It is claimed that this stipulation offends
article 1308 of the Civil Code which provides that "the contract must
bind both contracting parties; its validity or compliance cannot be left to
the will of one of them."
ISSUES:
2. Was the contract between Wong (Lui She) and Justina Santos (Phil.
Banking) enforceable?
HELD:
1. Yes. In the early case of Taylor vs. Uy Tiong Piao, the Supreme Court
said: Article 1256 [now art. 1308] of the Civil Code in our opinion creates
no impediment to the insertion in a contract for personal service of a
resolutory condition permitting the cancellation of the contract by one of
the parties. Such a stipulation, as can be readily seen, does not make
either the validity or the fulfillment of the contract dependent upon the
will of the party to whom is conceded the privilege of cancellation; for
where the contracting parties have agreed that such option shall exist,
the exercise of the option is as much in the fulfillment of the contract as
any other act which may have been the subject of agreement. Indeed, the
cancellation of a contract in accordance with conditions agreed upon
beforehand is fulfillment
Further, in the case at bar, the right of the lessee to continue the lease or
to terminate it was so circumscribed by the term of the contract that it
cannot be said that the continuance of the lease depends upon his will.
At any rate, even if no term had been fixed in the agreement, this case
would at most justify the fixing of a period but not the annulment of the
contract.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 845
But if an alien was given not only a lease of, but also an option to buy, a
piece of land, by virtue of which the Filipino owner cannot sell or
otherwise dispose of his property, this to last for 50 years, then it became
clear that the arrangement was a virtual transfer of ownership whereby
the owner divested himself in stages not only of the right to enjoy the
land (jus possidendi, jus utendi, jus fruendi and jus abutendi) but also of
the right to dispose of it (jus disponendi) — rights the sum total of which
make up ownership. It was just as if today the possession is transferred,
tomorrow, the use, the next day, the disposition, and so on, until
ultimately all the rights of which ownership is made up are consolidated
in an alien. And yet this was just exactly what the parties in this case did
within this pace of one year, with the result that Justina Santos'
ownership of her property was reduced to a hollow concept. If this can be
done, then the Constitutional ban against alien landholding in the
Philippines, is indeed in grave peril.
The contracts in question are annulled and set aside; the land subject-
matter of the contracts was ordered returned to the estate of Justina
Santos as represented by the Philippine Banking Corporation.
Vigilar v. Aquino
GREGORIO R. VIGILAR, SECRETARY OF THE DEPARTMENT OF
PUBLIC WORKS AND HIGHWAYS (DPWH), DPWH
UNDERSECRETARIES TEODORO E. ENCARNACION AND EDMUNDO
E. ENCARNACION AND EDMUNDO V. MIR, DPWH ASSISTANT
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 846
SERENO, J.:
Petitioners, for their part, set up the defense that the Complaint
was a suit against the state; that respondent failed to exhaust
administrative remedies; and that the ―Contract of Agreement‖ covering
the project was void for violating Presidential Decree No. 1445, absent
the proper appropriation and the Certificate of Availability of Funds.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 847
ISSUE: whether or not the court of appeals erred in ordering the coa to
allow payment to respondent on a quantum meruit basis despite the
latter‘s failure to comply with the requirements of presidential decree no.
1445.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 848
BUENA, J.:
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 850
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 851
Go Chan v. Young
Gochan vs. Young
GR 131889, 12 March 2001
FACTS: Felix Gochan and Sons Realty Corporation (Gochan Realty) was
registered with the SEC on June 1951, with Felix Gochan, Sr., Maria Pan Nuy
Go Tiong, Pedro Gochan, Tomasa Gochan, Esteban Gochan and Crispo Gochan
as its incorporators. Felix Gochan Sr.'s daughter, Alice inherited 50 shares of
stock in Gochan Realty from the former. Alice died in 1955, leaving the 50
shares to her husband, John Young, Sr. In 1962, the Regional Trial Court of
Cebu adjudicated 6/14 of these shares to her children, Richard Young, David
Young, Jane Young Llaban, John Young Jr., Mary Young Hsu and Alexander
Thomas Young (the Youngs). Having earned dividends, these stocks numbered
179 by 20 September 1979. 5 days later (25 September), at which time all the
children had reached the age of majority, their father John Sr., requested
Gochan Realty to partition the shares of his late wife by cancelling the stock
certificates in his name and issuing in lieu thereof, new stock certificates in the
names of the Youngs. On 17 October 1979, Gochan Realty refused, citing as
reason, the right of first refusal granted to the remaining stockholders by the
Articles of Incorporation. In 1990, John, Sr. died, leaving the shares to the
Youngs. On 8 February 1994, Cecilia Gochan Uy and Miguel Uy filed a
complaint with the SEC for issuance of shares of stock to the rightful owners,
nullification of shares of stock, reconveyance of property impressed with trust,
accounting, removal of officers and directors and damages against Virginia
Gochan, et. al. (Gochans) A Notice of Lis Pendens was annotated to the real
properties of the corporation.
indispensable party. The appellate court further ruled that the cancellation of
the notice of lis pendens on the titles of the corporate real estate was not
justified. Moreover, it declared that the Youngs' Motion for Reconsideration
before the SEC was not pro forma; thus, its filing tolled the appeal period. The
Gochans moved for reconsideration but were denied in a Resolution dated 18
December 1997. The Gochans filed the Petition for Review on Certiorari.
ISSUE: Whether the action filed by the Spouses Uy was not a derivative suit,
because the spouses and not the corporation were the injured parties.
Francisco v. Herrera
JULIAN FRANCISCO (Substituted by his Heirs, namely: CARLOS ALTEA
FRANCISCO; the heirs of late ARCADIO FRANCISCO, namely: CONCHITA
SALANGSANG-FRANCISCO (surviving spouse), and his children namely:
TEODULO S. FRANCISCO, EMILIANO S. FRANCISCO, MARIA THERESA S.
FRANCISCO, PAULINA S. FRANCISCO, THOMAS S. FRANCISCO; PEDRO
ALTEA FRANCISCO; CARINA FRANCISCO-ALCANTARA; EFREN ALTEA
FRANCISCO; DOMINGA LEA FRANCISCO-REGONDON; BENEDICTO ALTEA
FRANCISCO and ANTONIO ALTEA FRANCISCO), petitioner, vs. PASTOR
HERRERA, respondent., G.R. No. 139982, 2002 Nov 21, 2nd Division)
QUISUMBING, J.:
FACTS: Eligio Herrera, Sr., the father of respondent, was the owner of two
parcels of land. Petitioner bought from said landowner the first parcel for the
price of P1,000,000, paid in installments, and the second parcel of land for
P750,000.
Contending that the contract price for the two parcels of land was grossly
inadequate, the children of Eligio, Sr., tried to negotiate with petitioner to
increase the purchase price. When petitioner refused, herein respondent then
filed a complaint for annulment of sale.
Trial court ruled in favor of respondents, which was affirmed by the Court of
Appeals. Hence, a petition for review was filed.
HELD: A void or inexistent contract is one which has no force and effect from
the very beginning. Hence, it is as if it has never been entered into and cannot
be validated either by the passage of time or by ratification. There are two types
of void contracts: (1) those where one of the essential requisites of a valid
contract as provided for by Article 1318[10] of the Civil Code is totally wanting;
and (2) those declared to be so under Article 1409[11] of the Civil Code. By
contrast, a voidable or annullable contract is one in which the essential
requisites for validity under Article 1318 are present, but vitiated by want of
capacity, error, violence, intimidation, undue influence, or deceit.
Article 1318 of the Civil Code states that no contract exists unless there
is a concurrence of consent of the parties, object certain as subject matter, and
cause of the obligation established. Article 1327 provides that insane or
demented persons cannot give consent to a contract. But, if an insane or
demented person does enter into a contract, the legal effect is that the contract
is voidable or annullable as specifically provided in Article 1390.
In the present case, it was established that the vendor Eligio, Sr. entered
into an agreement with petitioner, but that the former‘s capacity to consent
was vitiated by senile dementia. Hence, we must rule that the assailed
contracts are not void or inexistent per se; rather, these are contracts that are
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 854
valid and binding unless annulled through a proper action filed in court
seasonably.
Implied ratification may take the form of accepting and retaining the
benefits of a contract.[13] This is what happened in this case. Respondent‘s
contention that he merely received payments on behalf of his father merely to
avoid their misuse and that he did not intend to concur with the contracts is
unconvincing. If he was not agreeable with the contracts, he could have
prevented petitioner from delivering the payments, or if this was impossible, he
could have immediately instituted the action for reconveyance and have the
payments consigned with the court. None of these happened. As found by the
trial court and the Court of Appeals, upon learning of the sale, respondent
negotiated for the increase of the purchase price while receiving the installment
payments. It was only when respondent failed to convince petitioner to increase
the price that the former instituted the complaint for reconveyance of the
properties. Clearly, respondent was agreeable to the contracts, only he wanted
to get more. Further, there is no showing that respondent returned the
payments or made an offer to do so. This bolsters the view that indeed there
was ratification. One cannot negotiate for an increase in the price in one breath
and in the same breath contend that the contract of sale is void.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 855
Mendezona v. Ozamiz
MARIO J. MENDEZONA and TERESITA M. MENDEZONA, LUIS J. MENDEZONA
and MARICAR L. MENDEZONA and TERESITA ADAD VDA. DE
MENDEZONA, petitioners, versus,
JULIO H. OZAMIZ, ROBERTO J. MONTALVAN, JOSE MA. OZAMIZ, CARMEN H.
OZAMIZ, PAZ O. MONTALVAN, MA. TERESA O.F. ZARRAGA, CARLOS O.
FORTICH, JOSE LUIS O. ROS, PAULITA O. RODRIGUEZ, and LOURDES O.
LON, respondents.
(G.R. No. 143370, 2002 February 6, 2ND Division)
DE LEON, JR., J.:
FACTS: Carmen Ozamiz sold to her nephews, Mario, Antonio and Luis Mendezona
three parcels of residential land in Cebu City, per a Deed of Absolute Sale in 1989 for
a consideration of P1,040,000.00, where a partition agreement was entered into by the
three vendees, where the usufructuary rights was reserved to the vendor
Carmen Ozamiz during her lifetime. The transfer was duly authorized by the Bureau of
Internal Revenue for the Register of Deeds to transfer the property to the vendees.
It appears that on January 15, 1991, the respondents instituted the petition for
guardianship with the Regional Trial Court of Oroquieta City, alleging therein that
Carmen Ozamiz, then 86 years old, after an illness in July 1987, had become
disoriented and could not recognize most of her friends; that she could no longer take
care of herself nor manage her properties by reason of her failing health, weak mind
and absent-mindedness. Thus, Paz O. Montalvan was designated as guardian over the
person of Carmen Ozamiz while petitioner Mario J. Mendezona, respondents Roberto
J. Montalvan and Julio H. Ozamiz were designated as joint guardians over the
properties of the said ward. Inventories and Accounts, listing therein Carmen Ozamiz‘s
properties, cash, shares of stock, vehicles and fixed assets, including a 10,396 square
meter property known as the Lahug property was filed by Roberto Montalvan and
Julio Osamis. Said Lahug property is the same property covered by the Deed of
Absolute Sale executed by Carmen Ozamiz in favor of the petitioners. This caused the
inscription on the titles of petitioners a notice of lis pendens giving rise to the suit.
Carmen Ozamiz granted Mario Mendezona a General Power of Attorney on August 11,
1990 to relate to the administration of the property. The Regional trial court favored
the petitioners, thus, declaring the Deed of Sale valid. Court of Appeals reversed RTC
decision, hence, this petition.
ISSUE: Whether or not the deed of sale contracted by Carmen Ozamis is valid.
HELD: Yes, the Supreme Court held that the contract entered into by Carmen Ozamis
is valid for the reason that there are nine other important documents that were, signed
by Carmen Ozamiz either before or after April 28, 1989 which is contrary to their
assertion of complete incapacity of Carmen Ozamiz to handle her affairs since 1987.
Moreover, a person is presumed to be of sound mind at any particular time and the
condition is presumed to continue to exist, in the absence of proof to the
contrary. Competency and freedom from undue influence, shown to have existed in the
other acts done or contracts executed, are presumed to continue until the contrary is
shown, wherefore, the RTC decision is reinstated.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 856
ISSUE: Whether or not petitioners Manzanillas are under any legal duty to
reconvey the undivided one-half portion of the property to private respondent
Justina Campo.
HELD: If it were true that petitioners deliberately allowed the loan to lapse and
the mortgage to be foreclosed, We do not see how these circumstances can be
utilized by them to their advantage. There was no guarantee that petitioners
would be able to redeem the property in the event the mortgage thereon was
foreclosed as in fact they failed to redeem because they had no money. On the
other hand, had they opted to eventually exercise their right of redemption
after foreclosure, they would be under a legal duty to convey one-half portion
thereof sold to the Campo spouses because by then, title to the property would
still be in their name. Either way, petitioners were bound to lose either the
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 857
entire property in case of failure to redeem or the one-half portion thereof sold
to private respondent in the case of redemption. Further, should petitioners let
the period of redemption lapse without exercising the right of redemption, as
what happened in this case, there was no guarantee that the same could be re-
acquired by them from GSIS nor would GSIS be under any legal duty to resell
the property to them.
There may be a moral duty on the part of petitioners to convey the one-
half portion of the property previously sold to private respondents. However,
they are under no legal obligation to do so. Hence, the action to quiet title filed
by private respondent must fail.
Justice is done according to law. As a rule, equity follows the law. There
may be a moral obligation, often regarded as an equitable consideration
(meaning compassion), but if there is no enforceable legal duty, the action
must fail although the disadvantaged party deserves commiseration or
sympathy.
There was neither mistake nor fraud on the part of petitioners when the
subject property was re-acquired from the GSIS. The fact that they previously
sold one-half portion thereof has no more significance in this re-acquisition.
Private respondent's right over the one-half portion was obliterated when
absolute ownership and title passed on to the GSIS after the foreclosure sale.
The property as held by GSIS had a clean title. The property that was passed
on to petitioners retained that quality of title.
As regards the rights of private respondent Ines Carpio, she is a buyer in
good faith and for value. There was no showing that at the time of the sale to
her of the subject property, she knew of any lien on the property except the
mortgage in favor of the Biñan Rural Bank. No other lien was annotated on the
certificate of title. She is also not required by law to go beyond what appears on
the face of the title. When there is nothing on the certificate of title to indicate
any cloud or vice in the ownership of the property or any encumbrances
thereon, the purchaser is not required to explore further than what the Torrens
Title upon its face indicates in quest for any hidden defect or inchoate right
thereof.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 858
HELD: Justice is done according to law. As a rule, equity follows the law. There
may be a moral obligation, often regarded as an equitable consideration
(meaning compassion), but if there is no enforceable legal duty, the action
must fail although the disadvantaged party deserves commiseration or
sympathy.
The choice between what is legally just and what is morally just, when
these two options do not coincide, is explained by Justice Moreland in Vales vs.
Villa, 35 Phil. 769, 788 where he said:
"Courts operate not because one person has been defeated or overcome by
another, but because he has been defeated or overcome illegally. Men may do
foolish things, make ridiculous contracts, use miserable judgment, and lose
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 859
money by them - indeed, all they have in the world; but not for that alone can
the law intervene and restore. There must be, in addition, a violation of law, the
commission of what the law knows as an actionable wrong before the courts
are authorized to lay hold of the situation and remedy it."
In the instant case, the bank acted within its legal rights when it refused
to give Remolado any extension to repurchase after October 31, 1973. It had
given her about two years to liquidate her obligation. She failed to do so.
Petition granted; judgment reversed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 860
Republic v. Cojuangco
REPUBLIC OF THE PHILIPPINES,
Petitioner,
- versus -
x--------------------------x
- versus -
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 861
x--------------------------x
- versus -
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 862
x------------------------x
HELD: The conditions for the application of Articles 1455 and 1456 of the Civil
Code (like the trustee using trust funds to purchase, or a person acquiring
property through mistake or fraud), and Section 31 of the Corporation Code
(like a director or trustee willfully and knowingly voting for or assenting to
patently unlawful acts of the corporation, among others) require factual
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 863
Thus, the Sandiganbayan could not fairly find that Cojuangco had committed
breach of any fiduciary duties as an officer and member of the Board of
Directors of the UCPB. For one, the Amended Complaint contained no clear
factual allegation on which to predicate the application of Articles 1455 and
1456 of the Civil Code, and Section 31 of the Corporation Code. Although the
trust relationship supposedly arose from Cojuangco‘s being an officer and
member of the Board of Directors of the UCPB, the link between this alleged
fact and the borrowings or advances was not established. Nor was there
evidence on the loans or borrowings, their amounts, the approving authority,
etc. As trial court, the Sandiganbayan could not presume his breach of
fiduciary duties without evidence showing so, for fraud or breach of trust is
never presumed, but must be alleged andproved.[128]
The thrust of the Republic that the funds were borrowed or lent might even
preclude any consequent trust implication. In a contract of loan, one of the
parties (creditor) delivers money or other consumable thing to another (debtor)
on the condition that the same amount of the same kind and quality shall be
paid.[129] Owing to the consumable nature of the thing loaned, the resulting
duty of the borrower in a contract of loan is to pay, not to return, to the
creditor or lender the very thing loaned. This explains why the ownership of the
thing loaned is transferred to the debtor upon perfection of the contract.[130]
Ownership of the thing loaned having transferred, the debtor enjoys all the
rights conferred to an owner of property, including the right to use and enjoy
(jus utendi), to consume the thing by its use (jus abutendi), and to dispose (jus
disponendi), subject to such limitations as may be provided by law.[131]
Evidently, the resulting relationship between a creditor and debtor in a
contract of loan cannot be characterized as fiduciary.[132]
To say that a relationship is fiduciary when existing laws do not provide for
such requires evidence that confidence is reposed by one party in another who
exercises dominion and influence. Absent any special facts and circumstances
proving a higher degree of responsibility, any dealings between a lender and
borrower are not fiduciary in nature.[133] This explains why, for example, a
trust receipt transaction is not classified as a simple loan and is characterized
as fiduciary, because the Trust Receipts Law (P.D. No. 115) punishes the
dishonesty and abuse of confidence in the handling of money or goods to the
prejudice of another regardless of whether the latter is the owner.[134]
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 864
Ringor v. Ringor
ROSPERO RINGOR, SATURNINO RINGOR, ANDRES RINGOR, substituted
by SHAKUNTALA DEBIE, CLARO ALEJO, GERONIMA and SANDIE LOUR,
all surnamed RINGOR, RAYMUNDA RINGOR, LUISA R. RIMANDO,
EMILIANA R. TIU and HEIRS OF JOSE M. RINGOR, INC., Petitioners, vs.
CONCORDIA, FELIPA, EMETERIA, all surnamed RINGOR, MARCELINA
RINGOR, in behalf of her deceased father, AGAPITO RINGOR, AVELINA,
CRESENCIA, and FELIMON, all surnamed ALMASEN, in behalf of their
deceased mother, ESPIRITA RINGOR, and TEOFILO M. ABALOS, in behalf
of his deceased mother, GENOVEVA RINGOR, Respondents., G.R. No.
147863, 2004 Aug 13, 1st Division)
QUISUMBING, J.:
FACTS: Jacobo Ringor owns a parcel of land in Pangasinan. He had three
wives. He had Juan and Catalina as his children with his first wife and did not
have any child with his other wives. Catalina predeceased his father and left
Juan as his lone heir.
Juan got married and had 7 children. Later on, Jacobo applied for the
registration of his lands under the Torrens system. He filed three land
registration cases alone, with his son Juan, or his grandson Jose, applying
jointly with him.
Subsequently, in a Compraventa dated November 3, 1928, Jacobo
allegedly sold and transferred to Jose his one-half (½) undivided interest in
Parcel 1 covered by OCT No. 25885. Jacobo‘s thumbmark appeared on the
Compraventa.[16] These lands are now covered by TCT No. 15916, in the name
of petitioner corporation, Heirs of Jose M. Ringor, Inc., organized after the
initiation of the instant case.[17] By another Compraventa also dated
November 3, 1928, the three-fourths (¾) undivided interests of Jacobo in
Parcels 2 and 3 covered by OCT No. 25886 were likewise sold and transferred
to Jose. The Compraventas were duly registered sometime in 1940. The OCTs
were cancelled and new TCTs were issued in the name of Jose. Jacobo allegedly
sold to Jose for P800 all the lands declared to him in Expediente 4449.
This case involves partition of estate whereby a lot of heirs are claiming
share over the estate.
ISSUE: Whether or not a valid express trust was established by Jacobo Ringor.
be manifested by inference from what the trustor has said or done, from the
nature of the transaction, or from the circumstances surrounding the creation
of the purported trust.
However, an inference of the intention to create a trust, made from
language, conduct or circumstances, must be made with reasonable certainty.
It cannot rest on vague, uncertain or indefinite declarations. An inference of
intention to create a trust, predicated only on circumstances, can be made only
where they admit of no other interpretation.
In the present case, credible witnesses testified that (1) the lands subject
of Expedientes 241 and 4449 were made and transferred in the name of Jose
merely for convenience since Juan predeceased Jacobo; (2) despite the
Compraventas, transferring all the lands in Jose‘s name, Jacobo continued to
perform all the acts of ownership including possession, use and administration
of the lands; (3) Jacobo did not want to partition the lands because he was still
using them; (4) when Jacobo died, Jose took over the administration of the
lands and conscientiously and unfailingly gave his siblings their share in the
produce of the lands, in recognition of their share as co-owners; and (5) Jose
did not repudiate the claim of his siblings and only explained upon their
expression of the desire for partitioning, that it was not going to be an easy
task.
From all these premises and the fact that Jose did not repudiate the
claim of his co-heirs, it can be concluded that as far as the lands covered by
Expediente Nos. 241 and 4449 are concerned, when Jacobo transferred these
lands to Jose, in what the lower court said were simulated or falsified sales,
Jacobo‘s intention impressed upon the titles of Jose a trust in favor of the true
party-beneficiaries, including herein respondents.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 866
HELD: The Supreme Court held that held that the possession of a co-owner is
like that of a trustee and shall not be regarded as adverse to the other co-
owners but in fact as beneficial to all of them. Acts which may be considered
adverse to strangers may not be considered adverse insofar as co-owners are
concerned. A mere silent possession by a co-owner, his receipt of rents, fruits
or profits from the property, the erection of buildings and fences and the
planting of trees thereon, and the payment of land taxes, cannot serve as proof
of exclusive ownership, if it is not borne out by clear and convincing evidence
that he exercised acts of possession which unequivocably constituted an ouster
or deprivation of the rights of the other co-owners.
Thus, in order that a co-owner's possession may be deemed adverse to
the cestui que trust or the other co-owners, the following elements must
concur: (1) that he has performed unequivocal acts of repudiation amounting
to an ouster of the cestui que trust or the other co-owners; (2) that such
positive acts of repudiation have been made known to the cestui que trust or
the other co-owners; and (3) that the evidence thereon must be clear and
convincing.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 867
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 869
HELD: Trust is the legal relationship between one person having an equitable
ownership in property and another person owning the legal title to such
property. the equitable ownership of the former entitling him to the
performance of certain duties and the exercise of certain powers by the latter.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 870
Trusts are either express or implied. An express trust is created by the direct
and positive acts of the parties, by some writing or deed or will or by words
evidencing an intention to create a trust. No particular words are required for
the creation of an express trust, it being sufficient that a trust is clearly
intended.
On the other hand, implied trusts are those which, without being
expressed, are deducible from the nature of the transaction as matters of intent
or which are superinduced on the transaction by operation of law as matters of
equity, independently of the particular intention of the parties. In turn, implied
trusts are either resulting or constructive trusts.
Resulting trusts are based on the equitable doctrine that valuable
consideration and not legal title determines the equitable title or interest and
are presumed always to have been contemplated by the parties. They arise
from the nature or circumstances of the consideration involved in a transaction
whereby one person thereby becomes invested with legal title but is obligated
in equity to hold his legal title for the benefit of another. On the other hand,
constructive trusts are created by the construction of equity in order to satisfy
the demands of justice and prevent unjust enrichment. They arise contrary to
intention against one who, by fraud, duress or abuse of confidence, obtains or
holds the legal right to property which he ought not, in equity and good
conscience, to hold.
While the deed of extrajudicial partition and the registration of Lot No.
1700 occurred in 1947 when the Code of Civil Procedure or Act No. 190 was yet
in force, we hold that the trial court correctly applied Article 1456. In Diaz et al.
v. Gorricho and Aguado, 16 the Court categorically held that while it is not a
retroactive provision of the new Civil Code, Article 1456 "merely expresses a
rule already recognized by our courts prior to the Code's promulgation."
In the case at bench, petitioner Catalina Buan vda de Esconde, as
mother and legal guardian of her children, appears to have favored her elder
son, private respondent, in allowing that he be given Lot No. 1700 in its
entirety in the extrajudicial partition of the Esconde estate to the prejudice of
her other children. Although it does not appear on record whether Catalina
intentionally granted private respondent that privileged bestowal, the fact is
that, said lot was registered in private respondent's name. After TCT No. 394
was handed to him by his mother, private respondent exercised exclusive
rights of ownership therein to the extent of even mortgaging the lot when he
needed money.
If, as petitioners insist, a mistake was committed in allotting Lot No.
1700 to private respondent, then a trust relationship was created between
them and private respondent. However, private respondent never considered
himself a trustee. If he allowed his brother Benjamin to construct or make
improvements thereon, it appears to have been out of tolerance to a brother.
The rule that a trustee cannot acquire by prescription ownership over
property entrusted to him until and unless he repudiates the trust, applies to
express trusts 19 and resulting implied trusts. 20 However, in constructive
implied trusts, prescription may supervene 21 even if the trustee does not
repudiate the relationship. Necessarily, repudiation of the said trust is not a
condition precedent to the running of the prescriptive period.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 871
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 872
where the payor could not lawfully take title to land in his own name and he
used the grantee as mere dummy to hold for him and enable him to evade the
land laws Applying the Ramos HELD to the case at bar, the Bank cannot use
the defense of nor seek enforcement of its alleged implied trust with Tala since
its purpose was contrary to law. As admitted by the Bank, it ―warehoused‖ its
branch site holdings to Tala to enable it to pursue its expansion program and
purchase new branch sites including its main branch in Makati, and at the
same time avoid the real property holdings limit under Sections 25(a) and 34 of
the General Banking Act which it had already reached.[70] The Bank stated in
its Memorandum that ―the (n)ew branch sites which the Respondent (Bank) will
be disqualified from buying, by reason of the aforecited limitations under
existing banking laws and regulations, will be acquired for it by the Petitioner
(Tala) which will forthwith lease them to the Respondent (Bank).‖[71] The Bank
also admitted that the agreement that the branch sites ―will be returned to the
bank anytime at its pleasure at the same transfer price‖ was differently stated
in the lease contracts as a ―first preference to buy‖ because the Bank was
apprehensive that the agreement to return property, ―if spelled out as-is in the
documents, might provide basis for the Central Bank to question the sale and
simultaneous lease back of the branch sites as simulated and accordingly,
derail the expansion program of the Respondent.‖
Clearly, the Bank was well aware of the limitations on its real estate
holdings under the General Banking Act and that its ―warehousing agreement‖
with Tala was a scheme to circumvent the limitation. Thus, the Bank opted
not to put the agreement in writing and call a spade a spade, but instead
phrased its right to reconveyance of the subject property at any time as a ―first
preference to buy‖ at the ―same transfer price.‖ This arrangement which the
Bank claims to be an implied trust is contrary to law. Thus, while we find the
sale and lease of the subject property genuine and binding upon the parties, we
cannot enforce the implied trust even assuming the parties intended to create
it. In the words of the Court in the Ramos case, ―the courts will not assist the
payor in achieving his improper purpose by enforcing a resultant trust for him
in accordance with the ‗clean hands‘ doctrine.‖[73] The Bank cannot thus
demand reconveyance of the property based on its alleged implied trust
relationship with Tala.
Petition dismiss.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 873
HELD: Trusts are either express or implied. Express trusts are created by the
intention of the trustor or of the parties. Implied trusts come into being by
operation of law." (Art. 1441) "No express trusts concerning an immovable or
any interests therein may be proven by parol evidence." (Art. 1443) "An implied
trust may be proven by oral evidence." (Art. 1457) That rule applies squarely to
express trusts. The basis of the rule is that the possession of a trustee is not
adverse. Not being adverse, he does not acquire by prescription the property
held in trust. Thus, Section 38 of Act 190 provides that the law of prescription
does not apply `in the case of continuing and subsisting trust. With respect to
constructive trusts, the rule is different. The prescriptibility of an action for
reconveyance based on constructive trust is now settled. Prescription may
supervene in an implied trust.
Applied to the case at bar, if an express trust had been constituted upon
the occupancy of the property by respondents in favor of the petitioners,
prescription of action would not lie, the basis of the rule being that the
possession of the trustee is not adverse to the beneficiary. But if there were
merely a constructive or implied trust, the action to recover may be barred by
prescription of action or by acquisitive prescription by virtue of respondents'
continuous and adverse possession of the property in the concept of owner-
buyer for thirty-three years.
Judgment affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 874
Filipinas Port v. Go
FILIPINAS PORT V. GO
G.R. No. 161886 March 16, 2007
FACTS: Sept 4 1992: Eliodoro C. Cruz, Filport‘s president from 1968-1991,
wrote a letter to the corporation‘s BOD questioning the creation and election of
the following positions with a monthly remuneration of P13, 050.00 each. Cruz
requested the board to take necessary action/actions to recover from those
elected to the aforementioned positions the salaries they have received.
Jun 4 1993: Cruz, purportedly in representation of Filport and its
stockholders, among which is herein co-petitioner Mindanao Terminal and
Brokerage Services, Inc. (Minterbro), filed with the SEC a derivative suit against
Filport's BOD for acts of mismanagement detrimental to the interest of the
corporation and its shareholders at large.
Cruz prayed that the BOD be made to pay Filport, jointly and severally,
the sums of money variedly representing the damages incurred as a result of
the creation of the offices/positions complained of and the aggregate amount of
the questioned increased salaries.
RTC: BOD have the power to create positions not in the by-laws and can
increase salaries. But Edgar C. Trinidad under the third and fourth causes of
action to restore to the corporation the total amount of salaries he received as
assistant vice president for corporate planning; and likewise ordering
Fortunato V. de Castro and Arsenio Lopez Chua under the fourth cause of
action to restore to the corporation the salaries they each received as special
assistants respectively to the president and board chairman. In case of
insolvency of any or all of them, the members of the board who created their
positions are subsidiarily liable.
Appealed: creation of the positions merely for accommodation purposes -
GRANTED
HELD: NO
Section 35 of the Corporation Code, the creation of an executive
committee (as powerful as the BOD) must be provided for in the bylaws of the
corporation
Notwithstanding the silence of Filport‘s bylaws on the matter, we cannot
rule that the creation of the executive committee by the board of directors is
illegal or unlawful. One reason is the absence of a showing as to the true
nature and functions of executive committee
But even assuming there was mismanagement resulting to corporate damages
and/or business losses, respondents may not be held liable in the absence of a
showing of bad faith in doing the acts complained of. ("dishonest
purpose","some moral obliquity","conscious doing of a wrong", "partakes of the
nature of fraud") determination of the necessity for additional offices and/or
positions in a corporation is a management prerogative which courts are not
wont to review in the absence of any proof that such prerogative was exercised
in bad faith or with malice.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 875
Mendizabel v. Apao
NESTOR MENDIZABEL, ELIZABETH MENDIZABEL, IGNACIO MENDIZABEL,
and ADELINA VILLAMOR, Petitioners, versus FERNANDO APAO and
TEOPISTA PARIDELA-APAO, Respondents., G.R. No. 143185, 2006 Feb 20,
3rd Division)
CARPIO, J.:
FACTS: Fernando Apao (―Fernando‖) purchased from spouses Alejandro and
Teofila Magbanua (―vendors‖) a parcel of land for P400. The vendors executed
a deed of sale with right of repurchase within six months for P400, failing
which, the sale would become absolute. The vendors failed to repurchase the
property. Fernando thus took possession of the same.
Fernando had the land surveyed which resulted in a subdivision of the
land into two separate and distinct lots identified as Lot Nos. 407 and 1080.
Fernando learned that Ignacio Mendizabel (―Ignacio‖) had filed prior to the
Bureau of Lands‘ survey a homestead application over Lot No. 1080.
Fernando became the claimant-protestant in Ignacio‘s application. The lot was
awarded to Ignacio which the Secretary of Agriculture and Natural Resources
set aside and ruled that the free patent application No. 18-1481 of Fernando
Apao shall be given due course for Lot No. 407 and Homestead Application No.
18-8905 of Ignacio Mendizabel for Lot No. 1080.
Dissatisfied with the decision of the Secretary of Agriculture and Natural
Resources, Fernando appealed to the Office of the President. Fernando did not
receive any notice of the decision on his appeal. Barely 10 days after he filed
his appeal, Fernando found out from the Office of the Register of Deeds of
Pagadian City that Lot No. 1080 had been partitioned between Ignacio and his
son Nestor Mendizabel (―Nestor‖). Fernando learned that Lot No. 1080 was
already titled separately as Lot No. 1080-A covered by Original Certificate of
Title No. P-29 822 in the name of Nestor, and Lot No. 1080-B covered by
Original Certificate of Title No. P-29 823 in the name of Ignacio. The Register of
Deeds issued the certificates of title on 14 December 1982.
Fernando talked to Nestor and Ignacio, pleading with them to reconvey
the property to him. Nestor and Ignacio rejected Fernando‘s request.
Fernando and his wife Teopista Paridela-Apao filed for Annulment of
Titles, Reconveyance and Damages against spouses Nestor and Elizabeth
Mendizabel and spouses Ignacio Mendizabel and Adelina Villamor. The trial
court ruled in favor of Fernando hold trust in the latter's benefit to which the
Court of Appeals affirmed. Hence, petition for review was filed.
HELD: "Implied trusts are those without being expressed, which are deducible
from the nature of the transaction, as matters of intent, or which are super
induced on the transaction by operation of law, as matters of equity,
independently of the particular intention of the parties."
In turn, implied trusts are either resulting or constructive trusts.
Constructive trusts are created by the construction of equity in order to satisfy
the demands of justice and prevent unjust enrichment. They arise contrary to
intention against one who, by fraud, duress or abuse of confidence, obtains or
holds the legal right to property which he ought not, in equity and good
conscience, to hold.
The records show that respondents bought the property from spouses
Alejandro and Teofila Magbanua on 21 March 1955 as evidenced by a deed of
sale.[55] Fernando testified that he was in actual, open, peaceful, and
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 876
continuous possession of the property at the time he filed his application for a
free patent and was then enjoying its fruits. These facts were corroborated by
the testimonies of Brañanula and Lizardo, residents of Barangay Mabini,
Malangas, Zamboanga del Sur. Petitioners, however, assert that the deed of
sale, ―although Annex A of respondents‘ complaint,‖ should not be given weight
for it was not offered in evidence.
Considering the circumstances in the present case, therefore, we hold
that respondents have a better right to the property since they had long been in
possession of the property in the concept of owners. In contrast, petitioners
were never in possession of the property. Despite the irrevocability of the
Torrens titles issued in their names, petitioners, even if they are already the
registered owners under the Torrens system, may still be compelled under the
law to reconvey the property to respondents.
Petition dismiss.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 877
HELD: A trust may either be express or implied. Express trusts are those
which are created by the direct and positive acts of the parties, by some writing
or deed, or will, or by words evincing an intention to create a trust. Implied
trusts are those which, without being express, are deducible from the nature of
the transaction as matters of intent or, independently of the particular
intention of the parties, as being super induced on the transaction by operation
of law basically by reason of equity. These species of implied trust are
ordinarily subdivided into resulting and constructive trusts. A resulting trust is
one that arises by implication of law and presumed always to have been
contemplated by the parties, the intention as to which can be found in the
nature of their transaction although not expressed in a deed or instrument of
conveyance. Resulting trusts are based on the equitable doctrine that it is the
more valuable consideration than the legal title that determines the equitable
interest in property.Upon the other hand, a constructive trust is a trust not
created by any word or phrase, either expressly or impliedly, evincing a direct
intention to create a trust, but one that arises in order to satisfy the demands
of justice. It does not come about by agreement or intention but in main by
operation of law construed against one who, by fraud, duress or abuse of
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 878
confidence, obtains or holds the legal right to property which he ought not, in
equity and good conscience, to hold.
ne basic distinction between an implied trust and an express trust is
that while the former may be established by parol evidence, the latter cannot.
Even then, in order to establish an implied trust in real property by parol
evidence, the proof should be as fully convincing as if the acts giving rise to the
trust obligation are proven by an authentic document. An implied trust, in fine,
cannot be established upon vague and inconclusive proof.
Furthermore, is the long standing and broad doctrine of clean hands that
will not allow the creation or the use of a juridical relation, a trust whether
express or implied included, to perpetrate fraud or tolerate bad faith nor to
subvert, directly or indirectly, the law. The trust agreement between Ramon
and Lorenzo, if indeed extant, would have been in contravention of, in fact, the
fundamental law.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 879
ISSUE: Whether or not the enforceability of the implied trust had prescribed.
HELD: Private respondents have sufficiently pleaded (in addition to the cause
of action for declaration of free patents and certificates of title) an action for
reconveyance, more specifically, one which is based on implied trust. An
implied trust arises where the defendant (or in this case petitioners) allegedly
acquires the disputed property through mistake or fraud so that he (or they)
would be bound to hold and reconvey the property for the benefit of the person
who is truly entitled to it.[18] In the complaint, private respondents clearly
assert that they have long been the absolute and exclusive owners and in
actual possession and cultivation of Lot 1015 and Lot 1017 and that they were
fraudulently deprived of ownership thereof when petitioners obtained free
patents and certificates of title in their names. These allegations certainly
measure up to the requisite statement of facts to constitute an action for
reconveyance.
neither the action for declaration of nullity of free patents and certificates
of title of Lot 1015 and Lot 1017 nor the action for reconveyance based on an
implied trust of the same lots has prescribed. We have ruled that ―a free patent
issued over private land is null and void, and produces no legal effects
whatsoever. Quos nullum est, nullum producit effectum.‖[21] Moreover, private
respondents‘ claim of open, public, peaceful, continuous and adverse
possession of the two (2) parcels of land and its illegal inclusion in the free
patents of petitioners and in their original certificates of title also amounts to
an action for quieting of title which is imprescriptible.
The action for reconveyance based on implied trust, on the other hand,
prescribes only after ten (10) years from 1990 and 1991 when the free patents
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 880
and the certificates of title over Lot 1017 and Lot 1015, respectively, were
registered. Obviously the action had not prescribed when private respondents
filed their complaint against petitioners on 19 December 1995. At any rate, the
action for reconveyance in the case at bar is also significantly deemed to be an
action to quiet title for purposes of determining the prescriptive period on
account of private respondents‘ allegations of actual possession of the disputed
lots.[23] In such a case, the cause of action is truly imprescriptible.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 881
Ramos v. Ramos
RAMOS V. RAMOS
61 SCRA 284
FACTS: Spouses Martin Ramos and Candida Tanate died on October 4, 1906
and October 26, 1880, respectively. They were survived by their 3 children.
Moreover, Martin was survived by his 7 natural children. In December 1906, a
special proceeding for the settlement of the intestate estate of said spouses was
conducted. Rafael Ramos, a brother of Martin, administered the estate for more
than 6 years. Eventually, a partition project was submitted which was signed
by the 3 legitimate children and 2 of the 7 natural children. A certain Timoteo
Zayco signed in representation of the other 5 natural children who were
minors. The partition was sworn to before a justice of peace.
ISSUE: Whether or not the plaintiffs‘ action was barred by prescription, laches
and res judicata to the effect that they were denied of their right to share in
their father‘s estate.
HELD: YES, there was inexcusable delay thereby making the plaintiffs‘ action
unquestionably barred by prescription and laches and also by res judicata.
Inextricably interwoven with the questions of prescription and res judicata is
the question on the existence of a trust. It is noteworthy that the main thrust
of plaintiffs‘ action is the alleged holding of their shares in trust by defendants.
Emanating from such, the Supreme Court elucidated on the nature of trusts
and the availability of prescription and laches to bar the action for
reconveyance of property allegedly held in trust. It is said that trust is the
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 882
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 883
Ty v. Court of Appeals
THE INTESTATE ESTATE OF ALEXANDER T. TY, represented by the
Administratrix, SYLVIA S. Ty, petitioner, VS. COURT OF APPEALS, HON.
ILDEFONSO E. GASCON, and ALEJANDRO B. TY, respondents
G.R. No. 112872 April 19, 2001
Privite respondent Alejandro Ty then filed two complaints for the recovery of the
above-mentioned property, praying for the declaration of nullity of the deed of
absolute sale of the shares of stock executed by private respondent in favor of
the deceased Alexander, praying for the recovery of the pieces of property that
were placed in the name of deceased Alexander, they were acquired through
private-respondent‘s money, without any cause or consideration from deceased
Alexander.
The motions to dismiss were denied. Petitioner then filed petitions for certiorari
in the Courts of Appeals, which were also dismissed for lack of merit. Thus, the
present petitions now before the Court.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 884
ISSUE: Whether or not the period in which to enforce implied trust had
prescribed.
Even assuming arguendo that Pedro Barz acquired title to the property
through mistake or fraud, petitioners are nonetheless barred from filing their
claim of ownership. An action for reconveyance based on an implied or
constructive trust prescribes within ten years from the time of its creation or
upon the alleged fraudulent registration of the property.[7] Since registration of
real property is considered a constructive notice to all persons, then the ten-
year prescriptive period is reckoned from the time of such registering, filing or
entering.[8] Thus, petitioners should have filed an action for reconveyance
within ten years from the issuance of OCT No. 521 in November 16, 1968. This,
they failed to do so.
Relying on the case of Heirs of Jose Olviga vs. Court of Appeals,[9]
petitioners argue that the ten-year period for filing an action for reconveyance
of property arising from an implied or constructive trust applies only when the
person enforcing the trust is not in possession of the property, since if a person
claiming to be the owner is in actual possession of the property, the action to
seek reconveyance or to quiet title does not prescribe. Petitioners claim that
they and their predecessors-in-interest were the ones in actual possession of
the subject property alleging that in the survey made by Geodetic Engineer
Leopoldo Tuastumban, it was reported that there were nine houses and one
rattan shop owned by the heirs of Loreto Retuerto constructed thereon.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 886
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 887
CHIAO LIONG TAN, petitioner, vs. THE HONORABLE COURT OF APPEALS, HON.
MANUEL T. MURO, Presiding Judge, RTC of Manila, Branch 54 and TAN BAN
YONG, respondents., G.R. No. 106251, 1993 Nov 19, 2nd Division)
NOCON, J.:
FACTS: Petitioner Chiao Liong Tan Claims to be the owner of an Isuzu Elf van As
owner thereof, petitioner says he has been in possession, enjoyment and utilization of
the said motor vehicle until it was taken from him by his older brother, Tan Ban Yong,
the private respondents herein.
Petitioner relies principally on the fact that the Isuzu Elf van is registered in his
name under Certificate of Registration No. 1501909. He claims in his testimony before
the trial court that the said vehicle was purchased from Balintawak Isuzu Motor
Center for a price of over P100,000.00; that he sent his brother to pay for the van and
the receipt for payment was placed in his (petitioner's) name because it was his money
that was used to pay for the vehicle; that he allowed his brother to use the van
because the latter was working for his company, the CLT Industries; and that his
brother later refused to return the van to him and appropriated the same for himself.
Judgment was rendered declaring Tan Ban Yong as owner, which the Court of
Appeals affirmed.
HELD: Other than those enumerated, the New Civil Code had acknowledged the cases
of implied trust. Thus, although no specific provision could be cited to apply to the
parties herein, it is undeniable that an implied trust was created when the certificate
of registration of the motor vehicle was placed in the name of petitioner although the
price thereof was not paid by him but by private respondent. The principle that a
trustee who puts a certificate of registration in his name cannot repudiate the trust by
relying on the registration is one of the well-known limitations upon a title. A trust,
which derives its strength from the confidence one reposes on another especially
between brothers, does not lose that character simply because of what appears in a
legal document.
Even under the Torrens System of land registration, this Court in some
instances did away with the irrevocability or indefeasibility of a certificate of title to
prevent injustice against the rightful owner of the property.
It is true that the judgment in a replevin suit must only resolve in whom is the
right of possession. Primarily, the action of replevin is possessory in character and
determines nothing more than the right of possession. However, when the title to the
property is distinctly put in issue by the defendant's plea and by reason of the policy
to settle in one action all the conflicting claims of the parties to the possession of the
property in controversy, the question of ownership may be resolved in the same
proceeding.
Procedure-wise, the Court observes that the action by petitioner as plaintiff in
the trial court was only one for Replevin and Damages. Since replevin is only a
provisional remedy where the replevin plaintiff claims immediate delivery of personal
property pending the judgment of the trial court in a principal case, the petitioner
should have filed in the trial court as a main case an action to recover possession of
the Isuzu Elf van which was in the possession of the private respondent. Logically, the
basis of petitioner's cause of action should have been his ownership of said van.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita
Obligations and Contracts 888
HELD: As differentiated from constructive trusts, where the settled rule is that
prescription may supervene, in resulting trust, the rule of imprescriptibility
may apply, for as long as the trustee has not repudiated the trust. Once the
resulting trust is repudiated, however, it is converted into a constructive trust
and is subject to prescription.
A resulting trust is repudiated if the following requisites concur: (a) the
trustee has performed unequivocal acts of repudiation amounting to an ouster
of the cestui qui trust; (b) such positive acts of repudiation have been made
known to the cestui qui trust; and, (c) the evidence thereon is clear and
convincing.
Neither the registration of the Oroquieta property in the name of
petitioner Emilia O'Laco nor the issuance of a new Torrens title in 1944 in her
name in lieu of the alleged loss of the original may be made the basis for the
commencement of the prescriptive period. For, the issuance of the Torrens title
in the name of Emilia O'Laco could not be considered adverse, much less
fraudulent. Precisely, although the property was bought by respondent-
spouses, the legal title was placed in the name of Emilia O'Laco. The transfer of
the Torrens title in her name was only in consonance with the deed of sale in
her favor. Consequently, there was no cause for any alarm on the part of
respondent-spouses. As late as 1959, or just before she got married, Emilia
continued to recognize the ownership of respondent-spouses over the
Oroquieta property. Thus, until that point, respondent-spouses were not aware
of any act of Emilia which would convey to them the idea that she was
repudiating the resulting trust. The second requisite is therefore absent.
Hence, prescription did not begin to run until the sale of the Oroquieta
property, which was clearly an act of repudiation.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad,
Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok,
Cita