Civil Law Case Digest 1


 G.R. No. 220400, March 20, 2019…………………………………3

THIRD DIVISION
NATURE OF THE CASE: COMPLAINT FOR SUM OF
MONEY
PONENTE: LEONEN,J
ANNIE TAN, PETITIONER, v. GREAT HARVEST
ENTERPRISES, INC., RESPONDENT
 G.R. No. 202430, March 06, 2019…………………………………5
THIRD DIVISION
NATURE OF THE CASE: ENFORCEMENT OF
ARBITRAL AWARD
PONENTE: LEONEN, J.:
METRO BOTTLED WATER CORPORATION,
PETITIONER, v. ANDRADA CONSTRUCTION &
DEVELOPMENT CORPORATION, INC., RESPONDENT.

 G.R. No. 233774, April 10, 2019………………………………………9
SECOND DIVISION
MA. LUISA A. PINEDA, PETITIONER, v. VIRGINIA ZUÑIGA VDA. DE
VEGA, RESPONDENT.
PONENTE: CAGUIOA, J.

 G.R. No. 225433…………………………………………………………..11
LARA'S GIFTS & DECORS, INC., Petitioner, - versus - MIDTOWN

INDUSTRIAL SALES, INC., Respondent.
EN BANC
Ponente: Carpio, J.
Nature of the Action: Complaint for Sum of money

 G.R. No. 210297, April 03, 2019………………………………………….29
THIRD DIVISION
BNL MANAGEMENT CORPORATION AND ROMEO DAVID,
PETITIONERS, v. REYNALDO UY, RODIEL BALOY, ATTY.
LUALHATI CRUZ, ALBERTO WONG, TERESITA PASIA, ROLAND
INGEL, AND MARISSA SEVILLA, RESPONDENTS PONENTE:
LEONEN, J.
NATURE OF THE ACTION: DAMAGES AND SPECIFIC
PERFORMANCE
 G.R. No. 201116, March 04, 2019…………………………………33
Second Division
PHILAM INSURANCE CO., INC., NOW CHARTIS PHILIPPINES
INSURANCE, INC., PETITIONER, v. PARC CHATEAU
CONDOMINIUM UNIT OWNERS ASSOCIATION, INC., AND/OR
EDUARDO B. COLET, RESPONDENTS.
Ponente: REYES, J. JR., J.:
Nature of the case: Complaint for recovery of unpaid insurance
premium
 G.R. No. 239088, April 03, 2019…………………………………………52
SPOUSES JOHN T. SY AND LENY N. SY, AND VALENTINO T. SY,

PETITIONERS, v. MA. LOURDES DE VERA-NAVARRO AND
BENJAEMY HO TAN LANDHOLDINGS, INC., HEREIN
REPRESENTED BY GRACE T. MOLINA, IN HER CAPACITY AS
CORPORATE SECRETARY, RESPONDENTS.
SECOND DIVISION
CAGUIOA, J. NATURE OF THE ACTION: DECLARATION OF
NULLITY OF DEED OF SALE,CANCELLATION OF TCT
 G.R. No. 225705, April 01,

2019……………………………………………..74
FIRST DIVISION
NATURE OF THE ACTION: Reimbursement of medical and
transportation expenses, damages, attorney's fees and legal interest
PONENTE: DEL CASTILLO, J
MAUNLAD TRANS, INC.; UNITED PHILIPPINE LINES, INC.,
SEACHEST ASSOCIATES; CARNIVAL CORPORATION; AND/OR
RONALD MANALIGOD, PETITIONERS, v. ROMEO RODELAS, JR.,
RESPONDENT.
 G.R. No. 213023, April 10, 2019……………………………………...76
THIRD DIVISION
MICHAEL C. GUY, PLAINTIFF-APPELLEE, v. RAFFY TULFO,
ALLEN MACASAET, NICOLAS V. QUIJANO, JR., JANET BAY,
JESUS P. GALANG, RANDY HAGOS, JEANY LACORTE, AND
VENUS TANDOC, ACCUSED-APPELLANT.
NATURE OF THE ACTION: DAMAGES
PONENTE: LEONEN, J.
 G.R. No. 211533, June 19, 2019…………………………………….78
CHEVRON PHILIPPINES, INC. (FORMERLY KNOWN AS CALTEX

PHILIPPINES, INC.), PETITIONER, V. LEO Z. MENDOZA,
RESPONDENT.
 G.R. No. 212071, June 19, 2019
LEO Z. MENDOZA, PETITIONER, V. CHEVRON PHILIPPINES, INC.,
RESPONDENT.
SECOND DIVISION
Ponente: CAGUIOA, J:
Nature of the Action: Complaint for Torts and Damages with Preliminary
Mandatory Injunction
Arellano University School of Law

2019-2020
CIVIL LAW REVIEW 2

Case Digest for Years 2018-2019
Submitted to:
ATTY. CRISOSTOMO A. URIBE
Submitted by:
#29 JAVIER, IMEE JOY
STUDENT NO. 2016-0364
TABLE OF CONTENTS
I. OBLIGATIONS
a. General
b. Nature and effects of obligation
c. Sources of Civil Obligations
Solutio Indebiti
 G.R. No. 210641, March 27,
2019.......................................................1
SECOND DIVISION
NATURE OF THE CASE: COMPLAINT FOR COLLECTION OF
SUMS OF MONEY
DOMESTIC PETROLEUM RETAILER CORPORATION,
PETITIONER, v. MANILA INTERNATIONAL AIRPORT
AUTHORITY, RESPONDENT.
PONENTE: CAGUIOA, J.:
QUASI CONTRACTS
 G.R. No. 220400, March 20,
2019…………………………………3
THIRD DIVISION
NATURE OF THE CASE: COMPLAINT FOR SUM OF
MONEY
PONENTE: LEONEN,J
ANNIE TAN, PETITIONER, v. GREAT HARVEST
ENTERPRISES, INC., RESPONDENT
d. Compliance with Obligations
 G.R. No. 202430, March 06,

2019…………………………………5
THIRD DIVISION
NATURE OF THE CASE: ENFORCEMENT OF
ARBITRAL AWARD
METRO BOTTLED WATER CORPORATION,
PETITIONER, v. ANDRADA CONSTRUCTION &
DEVELOPMENT CORPORATION, INC., RESPONDENT.
e. Kinds of Civil Obligations
1. As to perfection and Extinguishment

2. As to Plurality of Prestation
3. As to rights and obligations of multiple parties
 G.R. No. 198237, October 08,

2018……………………………………………..7
FIRST DIVISION
BANK OF THE PHILIPPINE ISLANDS, Petitioner, v. LAND
INVESTORS AND DEVELOPERS CORPORATION, Respondent.
Ponente: TIJAM, J.
Nature of the case: Complaint form sum of money and damages
4. As to performance of prestation
BREACH OF OBLIGATIONS
Manner of Breach
1. Fraud
2. Negligence
3. Delay
 G.R. No. 233774, April 10,

2019………………………………………9
SECOND DIVISION
VEGA, RESPONDENT.
 G.R. No.
225433…………………………………………………………..11

EN BANC
Ponente: Carpio, J.
4. Any other manner of contravention
 G.R. No. 203697, March 20,

2019………………………………………13
THIRD DIVISION
NATURE OF THE CASE: COMPLAINT FOR REIMBURSEMENT
AND DAMAGES
INTERPHIL LABORATORIES, INC., PETITIONER, v. OEP
PHILIPPINES, INC., RESPONDENT.
PONENTE: REYES, A., JR., J.:
g. MODES OF EXTINGUISHMENT OF OBLIGATION
1. Payment or performance
 G.R. No. 200553, December 10,

2018……………………………………..15
SPOUSES GILDARDO C. LOQUELLANO AND ROSALINA JULIET B.

LOQUELLANO, Petitioners, v. HONGKONG AND SHANGHAI
BANKING CORPORATION, LTD., HONGKONG AND SHANGHAI
BANKING CORPORATION-STAFF RETIREMENT PLAN AND
MANUEL ESTACION, Respondents
PONENTE: PERALTA, J.:
Nature of the Action: Complaint for Annulment of Sale with Damages
 G.R. No. 212107, January 28,

2019........................................................17
DIVISION
NATURE OF THE CASE: Complaint for damages
PONENTE:
KEIHIN-EVERETT FORWARDING CO., INC., PETITIONER, v.
TOKIO MARINE MALAYAN INSURANCE CO., INC. ** AND
SUNFREIGHT FORWARDERS & CUSTOMS BROKERAGE, INC.,
RESPONDENTS.
Special Forms of Payment
a. Dation in Payment
 G.R. No. 211204, December 10,

2018……………………………………..19
GOLDSTAR RIVERMOUNT, INC., Petitioner, v. ADVENT CAPITAL

AND FINANCE CORP., (FORMERLY ALL ASIA CAPITAL AND
TRUST CORP.) Respondent.
PONENTE: J. REYES, JR., J.
b. Application of Payments
c. Payment by Cession or assignment
2. Novation
 G.R. No. 226088, February 27,

2019.............................................21
NATURE OF THE CASE: COMPLAINT FOR SUM OF MONEY

PONENTE: PERALTA, J
FOOD FEST LAND, INC. AND JOYFOODS
CORPORATION, Petitioners, v. ROMUALDO C. SIAPNO,
TEODORO C. SIAPNO, JR. AND FELIPE C.
SIAPNO, Respondents.
CONTRACTS
A. In general
1. Definition
2. Elements of Contract
B. Fundamental Characteristic/ Principle of Contracts
1. Consensuality of Contracts
2. Autonomy of Contracts
 G.R. No. 211206, November 07,

2018…………………………………….23
THIRD DIVISION
ROSEMARIE Q. REY, Petitioner, v. CESAR G. ANSON, Respondent
PONENTE: PERALTA, J.
Nature of the case: Complaint for Recomputation of Loans and recovery
of excess payments
 G.R. No. 194126, October 17,
2018………………………………………25
SECOND DIVISION
INDUSTRIAL PERSONNEL AND MANAGEMENT SERVICES,
INC., Petitioner, v. COUNTRY BANKERS INSURANCE
CORPORATION, Respondent.
3. Mutuality of Contracts
 G.R. No. 208336, November 21,

2018……………………………………27
FIRST DIVISION
VILLA CRISTA MONTE REALTY & DEVELOPMENT
CORPORATION, Petitioner, v. EQUITABLE PCI BANK (NOW
KNOWN AS BANCO DE ORO UNIBANK, INC.), AND THE EX-
OFFICIO SHERIFF OF QUEZON CITY AND/OR HIS DEPUTY OR
AUTHORIZED REPRESENTATIVES, Respondents.
PONENTE: BERSAMIN, J.:
NATURE OF THE CASE: Nullification of Title
4. Obligatory Force of Contracts
 G.R. No. 210297, April 03,

2019………………………………………….29
THIRD DIVISION
INGEL, AND MARISSA SEVILLA, RESPONDENTS
PONENTE: LEONEN, J.
PERFORMANCE
5. Relativity of Contracts
C. CLASSIFICATION OF CONTRACTS
I. According to Perfection
II. According to Solemnity or form
III. According to Purpose
D. Stages of Contracts
E. Essential Elements of Contracts
F. Form of Contracts
Special Form
b. Enforceability
 G.r. no. 196733, November 21,

2018……………………………………31
FIRST DIVISION
HEIRS OF ROGER JARQUE, Petitioners, v. MARCIAL
JARQUE, LELIA JARQUE-LAGSIT, AND TERESITA
JARQUE-BAILON, Respondents
PONENTE: JARDELEZA, J
G. Reformation of Contracts
H. Interpretation of Contracts
 G.R. No. 201116, March 04, 2019…………………………………

33
Second Division
premium
 G.R. No. 211780, November 21,

2018……………………………….35
THIRD DIVISION
CEZAR YATCO REAL ESTATE SERVICES, INC., GRD PROPERTY
RESOURCES, INC., GAMALIEL PASCUAL, JR., MA. LOURDES
LIMJAP PASCUAL, AND AURORA PIJUAN, Petitioners, v. BEL-AIR
VILLAGE ASSOCIATION, INC., REPRESENTED BY ITS PRESIDENT
ANTONIO GUERRERO, AND THE REGISTER OF
DEEDS, Respondents.
I. Kinds of Contracts as Validity
 Valid and Binding

 Valid and Defective
Rescissible Contracts
Voidable Contracts
Unenforceable Contracts
 Void or Inexistent
 G.R. No. 211425, November 19,
2018…………………………………37
THIRD DIVISION
HEIRS OF TOMAS ARAO, REPRESENTED BY PROCESO
ARAO, EULALIA ARAO-MAGGAY, GABRIEL ARAO AND
FELIPA A. DELELIS, Petitioners, v. HEIRS OF PEDRO
ECLIPSE, REPRESENTED BY BASILIO ECLIPSE; HEIRS OF
EUFEMIA ECLIPSEPAGULAYAN, REPRESENTED BY
BASILIA P. CUARESMA; HEIRS OF HONORATO ECLIPSE,
REPRESENTED BY VICENTE ECLIPSE, JUANITA E.
AGAMATA AND JIMMY ECLIPSE; AND HEIRS OF MARIA
ECLIPSE-DAYAG, REPRESENTED BY OSMUNDO E.
DAYAG, Respondents.
Nature of the case: Nullity of a Deed of Absolute sale
SALES
A. In General
Characteristics
 G.R. No. 218343, November 28,

2018…………………………………..39
SECOND DIVISION
JUN MIRANDA, Petitioner, v. SPS. ENGR. ERNESTO AND AIDA
MALLARI AND SPS. DOMICIANO C. REYES AND CARMELITA
PANGAN, Respondents.
Ponente: CAGUIOA, J.
Nature of the Case: Recovery of Possession
Distinguished from other transactions

 G.R. No. 230832, November 12,
2018…………………………………41
THIRD DIVISION
ROYAL PLAINS VIEW, INC. AND/OR RENATO
PADILLO, Petitioners, v. NESTOR C. MEJIA, Respondent.
Nature of the case: Complaint for declaration of Nullity
B. Elements of Contract of Sale

C. Perfection of the Contract
D. Rights and Obligation of the Vendor
Double sale
 G.R. No. 205680, November 21,
2018…………………………………..43
HEIRS OF CIRIACO BAYOG-ANG, NAMELY: CELERINO VALLE

AND PRIMITIVO VALLE, Petitioners, v. FLORENCE QUINONES,
JOINTLY WITH HER HUSBAND, JEREMIAS DONASCO, AS
SUBSTITUTED BY THEIR SURVIVING CHILDREN, NAMELY: JEANY
FLOR Q. DONASCO, ROYCE Q. DONASCO, AND WILMER Q.
DONASCO, Respondents.
Ponente: TIJAM, J.
Nature of the action: Specific Performance and Damages
Redemption
Warranties
 G.R. No. 222616, April 03,
2019………………………………………….45
SECOND DIVISION
NATURE OF THE ACTION: RECOVERY OF POSSESSION AND
DAMAGES WITH APPLICATION FOR WRIT OF PRELIMINARY
INJUNCTION
PONENTE: CARPIO, J
SPOUSES OROZCO (DECEASED), SUBSTITUTED BY HIS HEIRS, v.
FLORANTE G. LOZANO, SR. (DECEASED), SUBSTITUTED BY HIS
HEIRS, RESPONDENTS.
 G.R. No. 200676, March 25,

2019……………………………………….47
SECOND DIVISION
SPOUSES LUIS G. BATALLA AND SALVACION BATALLA,
PETITIONERS, v. PRUDENTIAL BANK, NAGATOME AUTO PARTS,
ALICIA RANTAEL, AND HONDA CARS SAN PABLO, INC.,
RESPONDENTS.
NATURE OF THE ACTION: Complaint for Rescission of Contracts
and damages
E. Rights and Obligation of the Vendee

F. Remedies for Breach of Contract
G. Extinguishment of Sale
Redemption
 G.R. No. 215691, November 21,
2018…………………………………..50
FIRST DIVISION
SPOUSES FRANCIS N. CELONES AND FELICISIMA
CELONES, Petitioners, v. METROPOLITAN BANK AND TRUST
COMPANY AND ATTY. CRISOLITO O. DIONIDO, Respondents.
PONENTE: TIJAM, J.
Nature of the case: Declaratory Relief and Injunction
Equitable Mortgage
 G.R. No. 239088, April 03,
2019…………………………………………52

SECOND DIVISION
LEASE
TERMINATION OF THE LEASE

Implied Lease
 G.R. No. 215922, October 01,
2018…………………………………..54
FIRST DIVISION
THELMA C. MULLER, GRACE M. GRECIA, KURT FREDERICK
FRITZ C. MULLER, AND HOPE C. MULLER, IN SUBSTITUTION OF
THE LATE FRITZ D. MULLER, Petitioners, v. PHILIPPINE NATIONAL
BANK, Respondent.
PONENTE: DEL CASTILLO, J.
Nature of the Action: Complaint for Ejectment
AGENCY
Kinds of Agency
a. As to manner of creation: Express & Implied

 G.R. No. 226587, November 21,
2018………………………………….56
THIRD DIVISION
DONABELLE V. GONZALES-SALDANA, Petitioner, v. SPOUSES
GORDON R. NIAMATALI AND AMY V. NIAMATALI, Respondents.
Nature of the Action: Recovery of sum of money
Essential Elements of a Contract of Agency
 G.R. No. 217044, January 16,

2019....................................................58
NATURE OF THE CASE: Collection for Sum of Money
PONENTE: LEONEN, J
SPOUSES RAINIER JOSE M. YULO AND JULIET L.
YULO, Petitioners, v. BANK OF THE PHILIPPINE
ISLANDS, Respondent.
FORM:
 G.R. No. 209119, October 03,
2018………………………………………60
FIRST DIVISION
PHILIPPINE INTERNATIONAL TRADING
CORPORATION, Petitioner, v. THRESHOLD PACIFIC
CORPORATION AND EDGAR REY A. CUALES, Respondents.
PONENTE: LEONARDO-DE CASTRO, C.J.:
Nature of the case: Complaint for Sum of Money
PARTNERSHIP
VI. Obligations of Partners among themselves
C. To participate in the losses
 G.R. No. 212734, December 05,

2018……………………………………..62
FIRST DIVISION
MABUHAY HOLDINGS CORPORATION, Petitioner, v. SEMBCORP
LOGISTICS LIMITED, Respondent.
PONENTE: TIJAM, J.:
CREDIT TRANSACTIONS
iii. Chattel and Real Estate Mortgage
 G.R. No. 196510, September 12,

2018…………………………………64
FIRST DIVISION
SOFIA TABUADA, NOVEE YAP, MA. LORETA NADAL, AND
GLADYS EVIDENTE, Petitioners, v. ELEANOR TABUADA, JULIETA
TRABUCO, LAURETA REDONDO, AND SPS. BERNAN CERTEZA &
ELEANOR D. CERTEZA, Respondents.
Ponente: BERSAMIN, J.
Nature of the action: Preliminary Injunction
TORTS AND DAMAGES
B. KINDS OF DAMAGES
Nature of Liability
 G.R. No. 220826, March 27,
2019……………………………………….66
SECOND DIVISION
HUN HYUNG PARK, PETITIONER, v. EUNG WON* CHOI,
RESPONDENT.
NATURE OF THE ACTION: Complaint for Estafa and
Violation of B.P. 22
ACTUAL OR COMPENSATORY
 G.R. No. 219708, October 03,

2018………………………………………68
THIRD DIVISION
TOURISM INFRASTRUCTURE AnD ENTERPRISE ZONE
AUTHORITY, Petitioner, v. GLOBAL-V BUILDERS CO., Respondent.
PONENTE:PERALTA, J.
Nature of the case: Petition for review on Certiorari
G.R. No. 203697, March 20,

2019……………………………………………….70
THIRD DIVISION
AND DAMAGES
TEMPERATE OR MODERATE
 G.R. No. 208590, October 03,
2018……………………………………72
FIRST DIVISION
SULPICIO LINES, INC. (NOW KNOWN AS PHILIPPINE SPAN ASIA
CARRIER CORPORATION), Petitioner, v. MAJOR VICTORIO
KARAAN, SPOUSES NAPOLEON LABRAGUE AND HERMINIA
LABRAGUE, AND ELY LIVA, Respondents.
Ponente: TIJAM, J.:
Nature of the action: Complaint for Damages
EXEMPLARY
 G.R. No. 208590, October 03,
2018………………………………….74
FIRST DIVISION
Ponente: TIJAM, J.:
ATTY’S FEES
G.R. No. 225705, April 01,

2019……………………………………………..74
FIRST DIVISION
RESPONDENT.
MORAL DAMAGES
 G.R. No. 213023, April 10,

2019……………………………………...76
THIRD DIVISION
PONENTE: LEONEN, J.
 G.R. No. 211533, June 19,
2019…………………………………….78

RESPONDENT.
G.R. No. 212071, June 19, 2019
RESPONDENT.
SECOND DIVISION
1. G.R. No. 210641, March 27, 2019
SECOND DIVISION
NATURE OF THE CASE: COMPLAINT FOR COLLECTION OF
SUMS OF MONEY
DOMESTIC PETROLEUM RETAILER CORPORATION, PETITIONER, v.
MANILA INTERNATIONAL AIRPORT AUTHORITY, RESPONDENT.
FACTS:
On December 23, 2008, petitioner Domestic Petroleum Retailer Corporation
(DPRC) filed a Complaint for "Collection of Sums of Money" against
respondent Manila International Airport (MIAA) before the RTC averring that:
on June 4, 1998, DPRC and MIAA entered into a Contract of Lease whereby
the former leased from the latter a 1,631.12-square meter parcel of land and a
630.88-square meter building both located at Domestic Road, Pasay City.
DPRC was obliged to pay monthly rentals of P75,357.74 for the land and
P33,310.46 for the building; DPRC faithfully complied with its obligation to pay
the monthly rentals since the start of the lease contract. On April 2, 1998,
MIAA passed Resolution No. 98-30 which took effect on June 1, 1998
increasing the rentals paid by its concessionaires and lessees. MIAA issued
Administrative Order No. 1, Series of 1998. On November 19, 1998, MIAA
demanded its payment of P655,031.13 as rental in arrears which was based
on the increase prescribed in Resolution No. 98-30 with 2% interest
compounded monthly. On December 1, 2004, the First (1 st ) Division of the
Court promulgated its Decision in the case of Manila International Airport
Authority v. Airspan Corporation, et al. In the said case, the Court nullified
Resolution Nos. 98-30 and 99-11 issued by respondent MIAA for non-
observance of the notice and hearing requirements for the fixing rates
required by the Administrative Code. DPRC's decision to stop paying the
increased rental rate was based on the Decision dated December 1, 2004 in
the case of Manila International Airport Authority vs. Air span Corporation, et
al. Petitioner DPRC paid MIAA a total amount of P9,593,179.87, which is in
excess of the stipulated monthly rentals from December 11, 1998 up to
December 5, 2005. However, MIAA required the payment of P645,216.21
allegedly representing the balance of the rentals from January up to June
2006. On July 27, 2006, DPRC sent its reply to MIAA denying the unpaid
obligation, reiterating that the rental could no longer be computed based on
the nullified Resolution No. 98-30, and demanding for the refund of its
overpayment in the amount of P9,593,179.87. MIAA ignored its demand,
prompting DPRC to send a final written demand dated November 5, 2008.
DPRC was constrained to file the Complaint for Collection of Sums of Money.
RTC rendered its Decision, ruling in favor of petitioner DPRC. Court of
Appeals (CA) affirmed the RTC's Decision holding respondent MIAA liable to
petitioner DPRC. In the assailed Decision, the CA found that the liability of
respondent MIAA to petitioner DPRC for overpaid monthly rentals was in the
nature of a quasi-contract of solutio indebiti.
Issue:Whether or not SOLUTIO INDEBITI is applicable to the action for

collection of sum of money filed by DPRC against MIAA?
RULING:
No, Solutio Indebiti is not applicable between the parties. Article 2154 of the
Civil Code explains the concept of the quasi-contract of solutio indebiti:
Art. 2154. If something is received when there is no right to demand it, and it
was unduly delivered through mistake, the obligation to return it arises.
The quasi-contract of solutio indebiti harks back to the ancient principle that
no one shall enrich himself unjustly at the expense of another. In order to
establish the application of solutio indebiti in a given situation, two conditions
must concur: (1) a payment is made when there exists no binding
relation between the payor who has no duty to pay, and the person who
received the payment, and (2) the payment is made through mistake, and
not through liberality or some other cause. 18 In the instant case, the Court
finds that the essential requisites of solutio indebiti are not present. There
exists a binding relation between petitioner DPRC and respondent MIAA. First
and foremost, it is undisputed by all parties that respondent MIAA and
petitioner DPRC are mutually bound to each other under a Contract of Lease.
Hence, with respondent MIAA and petitioner DPRC having the juridical
relationship of a lessor-lessee, it cannot be said that in the instant case, the
overpayment of monthly rentals was made when there existed no binding
juridical tie or relation between the pay In arguing in its Comment that
petitioner DPRC's cause of action is not based on a contract, respondent
MIAA asserts that DPRC's cause of action for refund is not based on contract
(since there is no provision in the Contract that DPRC can rely upon for
refund) but on quasi-contract since MIAA allegedly does not have the right to
hold on the excess amounts."Respondent MIAA's supposition that there is no
provision in the Contract of Lease that petitioner DPRC can rely upon to ask
for a refund is completely mistaken. To reiterate, respondent MIAA readily
admits that according to the Contract of Lease, petitioner DPRC's monthly
rentals shall be subject to price escalation only when respondent MIAA issues
a valid Administrative Order calling for price escalation and when petitioner
DPRC is given prior notice. By still imposing a price escalation despite the
non-observance of both requirements, both the RTC and CA found that
respondent MIAA violated the Contract of Lease. It must be stressed that
applicable laws form part of, and are read into, contracts without need for any
express reference thereto. For the concept of solutio indebiti to apply, the
undue payment must have been made by reason of either an essential
mistake of fact or a mistake in the construction or application of a doubtful or
difficult question of law. Mistake entails an error, misconception, or
misunderstanding. In the instant case, petitioner DPRC made the
overpayments in monthly rentals from December 11, 1998 to December 5,
2005 not due to any mistake, error, or omission as to any factual matter
surrounding the payment of rentals. Nor did petitioner DPRC make the
overpayments due to any mistaken construction or application of a doubtful
question of law. Instead, petitioner DPRC deliberately made the payments in
accordance with respondent MIAA's Resolution No. 98-30, albeit under
protest. In the case at hand, petitioner DPRC's overpayment of rentals from
1998 to 2005 was not made by sheer inadvertence of the facts or the
misconstruction and misapplication of the law. Petitioner DPRC did not make
payment because it mistakenly and inadvertently believed that the increase in
rentals instituted by the subsequently voided Resolution No. 98-30 was
indeed due and demandable. Therefore, it is not correct to say that the
subject payments made by petitioner DPRC were made by mistake or
inadvertence. Therefore, with the absence of the two essential requisites
of solutio indebiti in the instant case, petitioner DPRC's cause of action is not
based on the quasi-contract of solutio indebiti.
2. G.R. No. 220400, March 20, 2019
THIRD DIVISION
PONENTE: LEONEN,J
ANNIE TAN, PETITIONER, v. GREAT HARVEST ENTERPRISES,
INC., RESPONDENT.
FACTS:
On February 3, 1994, Great Harvest hired Tan to transport 430 bags of
soya beans worth P230,000.00 from Tacoma Integrated Port Services, Inc.
(Tacoma) in Port Area, Manila to Selecta Feeds in Camarin, Novaliches,
Quezon City. That same day, the bags of soya beans were loaded into Tan's
hauling truck. Her employee, Rannie Sultan Cabugatan (Cabugatan), then
delivered the goods to Selecta Feeds. At Selecta Feeds, however, the
shipment was rejected. Upon learning of the rejection, Great Harvest
instructed Cabugatan to deliver and unload the soya beans at its warehouse
in Malabon. Yet, the truck and its shipment never reached Great Harvest's
warehouse. Thereafter, Great Harvest asked Tan about the missing delivery.
At first, Tan assured Great Harvest that she would verify the whereabouts of
its shipment, but after a series of follow-ups, she eventually admitted that she
could not locate both her truck and Great Harvest's goods. She reported her
missing truck to the Western Police District Anti-Carnapping Unit and the
National Bureau of Investigation. The National Bureau of Investigation
informed Tan that her missing truck had been found in Cavite. However, the
truck had been cannibalized and had no cargo in it. Tan spent over
P200,000.00 to have it fixed. Tan filed a Complaint against Cabugatan and
Rody Karamihan (Karamihan), whom she accused of conspiring with each
other to steal the shipment entrusted to her. An Information for theft was filed
against Karamihan, while Cabugatan was charged with qualified theft. Great
Harvest, through counsel, sent Tan a letter demanding full payment for the
missing bags of soya beans. On April 26, 1994, it sent her another demand
letter. Still, she refused to pay for the missing shipment or settle the matter
with Great Harvest.Thus, on June 2, 1994, Great Harvest filed a Complaint for
sum of money against Tan. In her Answer, Tan denied that she entered into a
hauling contract with Great Harvest, insisting that she merely accommodated
it. Tan also pointed out that since Great Harvest instructed her driver to
change the point of delivery without her consent, it should bear the loss
brought about by its deviation from the original unloading point. The Regional
Trial Court (RTC) granted Great Harvest's Complaint for sum of money. It
found that Tan entered into a verbal contract of hauling with Great Harvest,
and held her responsible for her driver's failure to deliver the soya beans to
Great Harvest. The Court of Appeals also held that the cargo loss was due to
Tan's failure to exercise the extraordinary level of diligence required of her as
a common carrier, as she did not provide security for the cargo or take out
insurance on it. Thus, Tan filed her Petition for Review on
Certiorari, maintaining that her Petition falls under the exceptions to a Rule 45
petition since the assailed Court of Appeals Decision was based on a
misapprehension of facts. Petitioner contends that she is not liable for the loss
of the soya beans and points out that the agreement with respondent Great
Harvest was to deliver them to Selecta Feeds, an obligation with which she
complied. She claims that what happened after that was beyond her control.
When Selecta Feeds rejected the soya beans and respondent directed
Cabugatan to deliver the goods to its warehouse, respondent superseded her
previous instruction to Cabugatan to return the goods to Tacoma, the loading
point. Hence, she was no longer required to exercise the extraordinary
diligence demanded of her as a common carrier. Tan opines that she is not
liable for the value of the lost soya beans since the truck hijacking was a
fortuitous event and because "the carrier is not an insurer against all risks of
travel.
ISSUE: Whether or not there is breach of contract of carriage between
petitioner Tan and Great Harvest?
RULING: YES, there is breach of contract of carriage between Tan and Great
Harvest. Here, petitioner is a common carrier obligated to exercise
extraordinary diligence over the goods entrusted to her. Her responsibility
began from the time she received the soya beans from respondent's broker
and would only cease after she has delivered them to the consignee or any
person with the right to receive them. Article 1732 of the Civil Code defines
common carriers as "persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land,
water or air, for compensation, offering their services to the public." The Civil
Code outlines the degree of diligence required of common carriers in Articles
1733, 1755, and 1756: ARTICLE 1733. Common carriers, from the nature of
their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of
the passengers transported by them, according to all the circumstances of
each case.
ARTICLE 1755. A common carrier is bound to carry the passengers safely as
far as human care and foresight can provide, using the utmost diligence of
very cautious persons, with a due regard for all the circumstances.
ARTICLE 1756. In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence as prescribed in
articles 1733 and 1755. Petitioner's argument is that her contract of carriage
with respondent was limited to delivering the soya beans to Selecta Feeds.
Thus, when Selecta Feeds refused to accept the delivery, she directed her
driver to return the shipment to the loading point. Respondent refutes
petitioner's claims and asserts that their standing agreement was to deliver
the shipment to respondent's nearest warehouse in case the consignee
refused the delivery. Defendant's assertion that the diversion of the goods
was done without her consent and knowledge is self-serving and is effectively
belied by the positive testimony of witness Cynthia Chua, Account Officer of
plaintiff corporation. Equally self-serving is defendant's claim that she is not
liable for the loss of the soyabeans (sic) considering that the plaintiff has no
existing contract with her. Such a sweeping submission is also belied by the
testimony of plaintiff's witness Cynthia Chua who categorically confirmed the
existing business relationship of plaintiff and defendant for hauling and
delivery of goods as well as the arrangement to deliver the rejected goods to
the plaintiff's nearest warehouse in the event that goods are rejected by the
consignee with prior approval of the consignor. Verily, the testimony alone of
appellee's Account Officer, Cynthia Chua, dispels the contrary allegations
made by appellant in so far as the nature of their business relationship is
concerned. Consistently and without qualms, said witness narrated the details
respecting the company's relations with the appellant and the events that
transpired before, during and after the perfection of the contract and the
subsequent loss of the subject cargo. Said testimony and the documentary
exhibits, i.e., the Tacoma waybill and the appellee's waybill, prove the
perfection and existence of the disputed verbal contract. Furthermore, Article
1734 of the Civil Code holds a common carrier fully responsible for the goods
entrusted to him or her, unless there is enough evidence to show that the
loss, destruction, or deterioration of the goods falls under any of the
exceptions. Nothing in the records shows that any of these exceptions caused
the loss of the soya beans. Petitioner failed to deliver the soya beans to
respondent because her driver absconded with them. She cannot shift the
blame for the loss to respondent's supposed diversion of the soya beans from
the loading point to respondent's warehouse, as the evidence has
conclusively shown that she had agreed beforehand to deliver the cargo to
respondent's warehouse if the consignee refused to accept it.
3. G.R. No. 202430, March 06, 2019
THIRD DIVISION
NATURE OF THE CASE: ENFORCEMENT OF ARBITRAL AWARD
METRO BOTTLED WATER CORPORATION, PETITIONER, v.
ANDRADA CONSTRUCTION & DEVELOPMENT CORPORATION,
INC., RESPONDENT.
FACTS:
On April 28, 1995, Metro Bottled Water and Andrada Construction entered
into a Construction Agreement for the construction of a reinforced concrete
manufacturing plant in Gateway Business Park, General Trias, Cavite for the
contract price of P45,570,237.90. The Construction Agreement covered all
materials, labor, equipment, and tools, including any other works required. It
provided: 8. Change Order
a. Without invalidating this Agreement, the OWNER may, at any
time, order additions, deletions or revisions in the Work by
means of a Change Order. The CONTRACTOR shall determine
whether the Change Order causes a decrease or increase in the
Purchase Price or shortening or extension of the Contract
Period. Within three (3) days from receipt of the Change Order,
CONTRACTOR shall give written notice to the OWNER of the
value of the works required under the Change Order which will
increase the Contract Price and of the extension in the Contract
Period necessary to complete such works. On the other hand, if
the Change Order involves deletions of some works required in
the original Contract Documents, the value of the works deleted
shall be deducted from the Contract Price and the Contract
Period shortened accordingly.
In either case, any addition or reduction in the Contract Price or
extension or shortening of the Contract Period shall be mutually
agreed in writing by the OWNER and the CONTRACTOR prior
to the execution of the works covered by the Change Order.
The project was to be completed within 150 calendar days or by October 10,
1995, to be reckoned from Andrada Construction's posting of a Performance
Bond to answer for liquidated damages, costs to complete the project, and
third party claims. The Performance Bond was issued by Intra Strata
Assurance Corporation (Intra Strata). On May 10, 1995, Metro Bottled Water
extended the period of completion to November 30, 1995 upon Andrada
Construction's request, due to the movement of one (1) bay of the plant
building, weather conditions, and change orders. On November 14, 1995,
E.S. De Castro and Associates, Metro Bottled Water's consultant for the
project, recommended the forfeiture of the Performance Bond to answer for
the completion and correction of the project, as well as liquidated damages for
delay. Metro Bottled Water filed a claim against the Performance Bond issued
by Intra Strata. Andrada Construction opposed the claim for lack of legal and
factual basis. On September 6, 1996, Andrada Construction wrote to Metro
Bottled Water contesting E.S. De Castro and Associates' Special Report. The
works performed by Andrada Construction were inspected by Metro Bottled
Water and E.S. De Castro and Associates. Punch lists were prepared to
monitor Andrada Construction's rectifications. Andrada Construction sent
letters to Metro Bottled Water requesting for payment of unpaid work
accomplishments amounting to P7,292,721.27.Metro Bottled Water refused to
pay. Thereafter, Andrada Construction filed a Request for Arbitration before
the Construction Industry Arbitration Commission, alleging that Metro Bottled
Water refused to pay its unpaid work accomplishment. The Construction
Industry Arbitration Commission found that Andrada Construction was entitled
to unpaid work accomplishment in the amount of P4,607,523.40, with legal
interest from November 24, 2000. It, however, denied Metro Bottled Water's
counterclaims. The Construction Industry Arbitration Commission agreed with
the arbitral tribunal's evaluation that Metro Bottled Water confirmed the
completed works, and thus, Andrada Construction was entitled to
compensation. To deny the payment would be to permit unjust enrichment at
Andrada Construction's expense. The Court of Appeals (CA) found no error in
the entitlement of legal interest Respondent submits that there was no error in
the application of unjust enrichment considering that petitioner "has already
reaped enormous benefits out of the use of the construction project" and has
"continued to profit [from the] unhampered commercial operations of the
plant. It asserts that equity and law are "applied distinctly based on the
antecedents of each case" and that the factual circumstances of this case
necessarily require the application of equity rather than "strict legalism or
form." In rebuttal, petitioner argues that it indeed raised questions of law when
it questioned respondent's entitlement to recover its claims despite its
admission that there was no written approval by petitioner, as required by the
Construction Agreement and the Civil Code.
ISSUE: Whether or not the Arbitral tribunal is correct in applying equitable

principle of unjust enrichment in determining petitioner's liability to respondent
for unpaid work accomplishment?
RULING:
Yes, the Arbitral Tribunal was correct. Here, services were rendered for which
compensation was demanded. The contract between the parties, however,
inadequately provides for the mechanism by which compensation may be
due. The fair and expeditious resolution of the issue requires the arbitral
tribunal to instead apply equitable principles to arrive at a just conclusion.
In CE Construction:
Jurisprudence has settled that even in cases where parties enter into
contracts which do not strictly conform to standard formalities or to the
typifying provisions of nominate contracts, when one renders services to
another, the latter must compensate the former for the reasonable value of
the services rendered. This amount shall be fixed by a court. This is a matter
so basic, this Court has once characterized it as one that "springs from the
fountain of good conscience":
As early as 1903, in Perez v. Pomar, this Court ruled that where one has
rendered services to another, and these services are accepted by the latter, in
the absence of proof that the service was rendered gratuitously, it is but just
that he should pay a reasonable remuneration therefore because "it is a well-
known principle of law, that no one should be permitted to enrich himself to
the damage of another." Similarly in 1914, this Court declared that in this
jurisdiction, even in the absence of statute, ". . . under the general principle
that one person may not enrich himself at the expense of another, a judgment
creditor would not be permitted to retain the purchase price of land sold as the
property of the judgment debtor after it has been made to appear that the
judgment debtor had no title to the land and that the purchaser had failed to
secure title thereto . . ." The foregoing equitable principle which springs from
the fountain of good conscience are applicable to the case at bar. Here, the
arbitral tribunal computed the entire cost of Change Order Nos. 1 to 109 at
P5,242,697.76. This includes that of Change Order Nos. 1 to 38, which
petitioner categorically admitted were authorized changes. Upon subtracting
the contract price and other costs chargeable to respondent, the arbitral
tribunal found that there was still an unpaid amount of P4,607,523.40,
resulting from the costs of the change orders, which petitioner refuses to pay.
There was, therefore, no error in the arbitral tribunal's finding and the Court of
Appeals' affirmation that petitioner is still liable to respondent for that amount.
SO ORDERED.
4. G.R. No. 198237, October 08, 2018
FIRST DIVISION
BANK OF THE PHILIPPINE ISLANDS, Petitioner, v. LAND
INVESTORS AND DEVELOPERS CORPORATION, Respondent.
Ponente: TIJAM, J.
Nature of the case: Complaint form sum of money and damages
FACTS:
Between the years 1995 and 1999, respondent maintained savings and
current accounts with the Pamplona, Las Piñas Branch of Far East Bank &
Trust Company (FEBTC). FEBTC later on merged with BPI. In its transactions
with the bank, respondent authorized any two of its Ruth Fariñas (Fariñas),
Orlando Dela Peña (Dela Peña) and Juanito Collas (Collas) as bank
signatories. Dela Peña was respondent's President. Sometime in 2001, Dela
Peña was convicted for estafa and was consequently dismissed from
employment. It was also around this time that respondent discovered that
Dela Peña, acting in alleged conspiracy or taking advantage of the gross
negligence of BPI, succeeded in unlawfully withdrawing various amounts from
respondent's deposit accounts. Respondent alleged that BPI was negligent
and violated its fiduciary duties when it allowed the withdrawals in the total
amount of P3,652,095.01 on the basis of Dela Peña's lone signature or thru
the forged signatures of his cosignatories. Despite demand, BPI failed to heed
respondent's claims which prompted the latter to file the complaint a quo for
sum of money and damages against BPI and Dela Peña.
BPI initially moved to dismiss the complaint on the ground that

respondent's claims covering the withdrawals prior to September 30, 1998
have already prescribed. While agreeing with the RTC that respondent failed
to demonstrate that indeed Dela Peña conspired with BPI, the CA
nevertheless held that the non-existence of conspiracy would not necessarily
exculpate BPI from liability if there is evidence to show that the latter violated
its fiduciary duty to respondent. In other words, the CA ruled that a negligent
bank is liable regardless of any allegation of conspiracy.
Controlling Issue: Whether or not Dela Pena is solidarily liable with BPI?
RULING:
Nevertheless, Dela Peña cannot be held solidarily liable with BPI as

held by the CA. To emphasize, BPI's liability proceeds from a breach of
contract. Under Article 1980 of the Civil Code, "fixed, savings, and current
deposits of money in banks shall be governed by the provisions concerning
simple loan[s]." By the contract of loan or mutuum, one party delivers money
to another upon the condition that the same amount shall be paid. To recall,
respondent was defrauded by several withdrawals from its deposit accounts
being allowed by BPI solely on the basis of Dela Peña's signature despite
specific instructions that withdrawals be done only upon the signatures of any
two of respondent's authorized signatories, and additional withdrawals being
allowed on the basis of the forged signatures of respondent's other authorized
signatory. It is basic that those who, in the performance of their obligations,
are guilty of negligence, and those who in any manner contravene the tenor
thereof, are liable for damages. When BPI allowed Dela Peña to make
unauthorized withdrawals, it failed to comply with its obligation to secure said
accounts by allowing only those withdrawals authorized by respondent. In so
doing, BPI violated the terms of its contract of loan with respondent and
should be held liable in this regard.
On the other hand, Dela Peña's liability arises from the commission of
the crime of estafa. Dela Peña had in fact been charged and convicted of
estafa. Thus, respondent's action to recover actual damages against Dela
Peña was deemed instituted with the criminal action, unless waived, reserved
or previously instituted. There is no indication that such reservation had been
done by respondent. As such, to hold Dela Peña solidarily liable for damages
in this case may result in double recovery which is proscribed. In any case, it
is clear that the civil liability upon which Dela Peña was being held liable by
the CA is totally distinct and separate from the source of BPI's liability. Thus,
BPI and Dela Peña's respective liabilities cannot be deemed joint and
solidary.
5. G.R. No. 233774, April 10, 2019
SECOND DIVISION
VEGA, RESPONDENT.
FACTS:
Petitioner filed a complaint dated June 10, 2005 against respondent,
praying for the payment of the latter's principal obligation and the interest
thereon or, in default of such payment, the foreclosure of the property subject
of a real estate mortgage. In her complaint, petitioner alleged that, on March
25, 2003, respondent borrowed from her P500,000.00 payable within one
year with an interest rate of 8% per month. To secure the loan, respondent
executed a real estate mortgage (2003 Agreement) over a parcel of land
covered by Transfer Certificate of Title No. T-339215, together with all the
buildings and improvements existing thereon (Property), in petitioner's
favor. On the loan's maturity, respondent failed to pay her loan despite
demand. As of May 2005, the unpaid accumulated interest amounted to
P232,000.00. In her answer, respondent denied petitioner's material
allegations and countered that the complaint was dismissible for lack of prior
barangay conciliation proceeding and for failure to join her husband as a
party. She also argued that the interest rate agreed upon was excessive and
unconscionable, thus illegal. She further denied receiving P500,000.00 from
petitioner and claimed that the said amount was the accumulated amount of
another obligation she earlier secured from petitioner.
The RTC rendered a Decision finding that (1) the existence of the loan and
the real estate mortgage had been established and, thus, judicial foreclosure
would be proper given respondent's non-compliance therewith; (2) since the
undated Agreement had no provision on the payment of interest, the legal
interest of 12% per annum should be imposed; (3) the 2003 Agreement's
interest rate was unconscionable. The CA Decision reversed and set aside
the RTC Decision and dismissed the complaint.
Controlling Issue: Whether or not respondent incurred delay in the

performance of his obligations under the loan agreement with the Petitioner?
RULING:
After the CA found that petitioner failed to prove that extrajudicial

demand was made upon respondent as required by law and after it had
observed that petitioner had not asserted any of the exceptions to the
requisite demand under Article 1169 of the Civil Code, the CA concluded that
respondent could not be considered in default. Necessarily, petitioner's case
should fail. While the CA is correct on its factual finding, its legal conclusion is,
however, flawed. What petitioner seeks to enforce against respondent is a
contract of loan, which is secured by a real estate mortgage. Based on the
sources of obligations enumerated under Article 1157 of the Civil Code, the
obligation that petitioner seeks to make respondent liable for is one which
arises from contract. Liability for damages arises pursuant to Article 1170 of
the Civil Code against "[t]hose who in the performance of their obligations are
guilty of fraud, negligence, or delay, and those who in any manner contravene
the tenor thereof." Delay or mora is governed by Article 1169 of the Civil
Code, which provides:
ART. 1169. 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.
However, the demand by the creditor shall not be necessary in order that
delay may exist:
(1) When the obligation or the law expressly so declares; or

(2) When from the nature and the circumstances of the obligation it appears
that the designation of the time when the thing is to be delivered or the service
is to be rendered was a controlling motive for the establishment of the
contract; or
(3) When demand would be useless, as when the obligor has rendered it
beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the other does

not comply or is not ready to comply in a proper manner with what is
incumbent upon him. From the moment one of the parties fulfills his
obligation, delay by the other begins. Default or mora, which is a kind of
voluntary breach of an obligation, signifies the idea of delay in the fulfillment of
an obligation with respect to time. In positive obligations, like an obligation to
give, the obligor or debtor incurs in delay from the time the obligee or creditor
demands from him the fulfillment of the obligation. Demand may be judicial the
creditor files a complaint against the debtor for the fulfillment of the obligation
or extrajudicial if the creditor demands from the debtor the fulfillment of the
obligation either orally. or in writing. Whether the demand is judicial or
extrajudicial, if the obligor or debtor fails to fulfill or perform his obligations, like
payment of a loan, as in this case, he is in mora solvendi, and, thus, liable for
damages.
While delay on the part of respondent was not triggered by an extrajudicial
demand because petitioner had failed to so establish receipt of her demand
letter, this delay was triggered when petitioner judicially demanded the
payment of respondent's loan from petitioner. While the CA was correct in
observing that default generally begins from the moment the creditor
demands the performance of the obligation, and without such demand, judicial
or extrajudicial, the effects of default will not arise, it failed to acknowledge
that when petitioner filed her complaint dated June 10, 2005, such filing
constituted the judicial demand upon respondent to pay the latter's principal
obligation and the interest thereon. Respondent, having thus incurred in delay
(counted from the filing of the complaint), is liable for damages pursuant to
Article 1170 of the Civil Code.
SO ORDERED.
6. G.R. No. 225433

EN BANC
Ponente: Carpio, J.
FACTS:
Respondent alleged that from January 2007 up to December 2007,

petitioner purchased from respondent various industrial and construction
materials in the total amount of Pl,263,104.22. The purchases were on a sixty
(60)-day credit term, with the condition that 24% interest per annum would be
charged on all accounts overdue, as stated in the sales invoices. Petitioner
paid for its purchases by issuing several Chinabank postdated checks in favor
of respondent. However, when respondent deposited the Chinabank checks
on their maturity dates, the checks bounced. After repeated demands from
respondent, petitioner replaced the bounced checks with new postdated
Export and Industry Bank checks. However, when respondent deposited the
replacement checks on their maturity dates, the checks were likewise
dishonored for being "Drawn Against Insufficient Funds," and subsequently,
for "Account Closed." Respondent sent a demand letter5 dated 21 January
2008, which was received by petitioner on 22 January 2008, informing
petitioner of the bounced checks and demanding that petitioner settle its
accounts. Still petitioner failed to pay, prompting respondent to file on 5
February 2008 a Complaint for Sum of Money with Prayer for Attachment
against petitioner. The trial court rendered a Decision in favor of Plaintiff
Midtown. The Court of Appeals (CA) ruled that petitioner failed to prove that
the materials delivered were substandard and of poor quality to justify its
claim that the checks were issued without valuable consideration.
Controlling Issue: Whether or not Lara’s Gift is in Default of its contractual

obligations?
RULING:
Default in the Contractual Obligations Petitioner admits that it made

purchases amounting to Pl,263,104.22, but that the materials delivered were
substandard or of poor quality. In effect, petitioner is alleging fraud in the
transactions, which petitioner is bound to substantiate. Whoever alleges fraud
or mistake affecting a transaction must substantiate his allegation and has the
burden of proof. 15 As found by the trial court and the appellate court,
petitioner failed to substantiate its claim that the materials delivered by
respondent did not comply with the specifications required or that the
materials were substandard and of poor quality. The best evidence of the
transaction between petitioner and respondent are the sales invoices and the
checks issued by petitioner as payments for the materials purchased. The
sales invoices show that petitioner, through its authorized staff or employees,
acknowledged receipt of the deliveries without protest. The sales invoices
clearly stated that petitioner "RECEIVED MERCHANDISE IN GOOD ORDER
& CONDITION." Furthermore, petitioner admits issuing the postdated checks
as payment for the materials delivered. The postdated checks were
subsequently dishonored for being "drawn against insufficient funds" or for
"account closed." Petitioner insists that the checks were issued without
valuable consideration since most of the materials delivered did not comply
with the required specifications. However, other than its bare allegation that
the materials delivered were substandard and of poor quality, petitioner failed
to prove or substantiate its claims. As found by the trial court, none of
petitioner's witnesses was able to present proof that the materials delivered
were substandard or of poor quality.
7. G.R. No. 203697, March 20, 2019
THIRD DIVISION
AND DAMAGES
FACTS:
Sometime in 1998, OEP and Interphil entered into a Manufacturing
Agreement (Agreement)6 whereby Interphil undertook to process and package
90- and 120-mg Diltelan capsules for OEP under the terms and conditions
stated in the Agreement. INTERPHIL agrees that it will, at all times, maintain
and cause to be maintained, the highest standards of workmanship and care
in its processing operations hereunder, to the end that INTERPHIL shall
produce pure Products which meet the standards established by [OEP] or
such Products. INTERPHIL shall not be responsible for Product defects
arising from the use of ingredients which have been supplied by [OEP].
Likewise, in order to comply with Section 2.2.2.1 of the Department of Health's
(DOH) Administrative Order (A.O.) No. 56, Series of 1989, the parties issued
a letter to the Bureau of Food and Drugs (BFD), stating: [P]arties hereby
agree to be jointly responsible for the quality of the Product without prejudice
to the liability after the determination of the cause in case of defect in quality.
If the cause of the defect be the manufacturing process or
packaging, INTERPHIL should assume the liability and if the cause be the
formulae, process, methods, instructions or raw materials provided by [OEP],
then the latter shall assume the liability arising out of the defect. After the
execution of the Agreement, from January 1999 to May 2000, Interphil
accepted the delivery of several 90- and 120-mg Diltelan capsules, as well as
printed foils and boxes for these capsules, for purposes of processing and
packaging pursuant to the Agreement, while charging OEP for a packaging
fee and the aforementioned packaging materials inspection fee, in
consideration of Interphil's commitment to inspect the materials delivered.
Thereafter, Interphil sorted, wrapped and boxed the capsules, and
subsequently delivered the same to OEP. OEP, subsequently, delivered the
capsules to its client, Orient Eropharma Co., Ltd./Elan Pharma Ltd. of Taiwan
(Elan Taiwan). The conflict between the parties arose on August 8, 2000,
when OEP received a facsimile from Elan Taiwan informing the former that
Elan Taiwan had received several urgent phone calls from certain hospitals in
Taiwan regarding a defect in the packaging of several 90-mg Diltelan
capsules which had been sold and delivered by Interphil. Elan Taiwan further
reported that several 90-mg Diltelan capsules were inadvertently wrapped in
foils meant and labeled for 120-mg Diltelan capsules and then placed in
boxes meant and labeled for 90-mg Diltelan capsules. OEP immediately
informed Interphil of the packaging defect. Investigations conducted by both
OEP and Interphil revealed that the defectively packaged capsules belonged
to a single batch, Lot No. 001369, which Interphil processed and packaged in
April 2000. As a result of the defectively packaged capsules and the
necessary reworking of the same to the public due to the danger and health
risks, OEP alleges that it had no choice but to recall and destroy all capsules
belonging to the aforementioned Lot No. 001369. As a consequence, this
resulted in the incurring of numerous costs and expenses on the part of OEP.
Due to the foregoing, OEP demanded that Interphil reimburse it the total of
P5,183,525.05 for the expenses that it had incurred for and in connection with
the recall and destruction of these capsules, including the costs of the
materials destroyed. However, Interphil refused and did not pay the amount
demanded. Due to Interphil's refusal to pay the same, OEP filed a complaint
with the RTC. After trial, the RTC rendered a Decision in favor of OEP, finding
that on the basis of the doctrine of res ipsa loquitor, Interphil was negligent in
the performance of its obligations under the Agreement, and that there was no
merit in Interphil's defense that OEP, likewise, breached the Agreement in
unilaterally destroying the complained-of products without observing the
agreed procedure for the recall and destruction in case a defect in a certain
batch of capsules is found. The Court of Appeals (CA) found that the
proximate cause for the damage incurred by OEP was the fact that Interphil
erroneously packed the 90-mg Diltelan capsules in the 120-mg labeled foils,
an action which was in the exclusive hands and control of Interphil.
ISSUE#1 Whether or not OEP can, likewise, be held liable for breach of the
Agreement due to its unilateral destruction of the products?
RULING:
No bad faith or contributory fault can be attributed to OEP due to its unilateral
destruction of the products. Notwithstanding its own negligence, Interphil accuses
OEP for unilaterally destroying the products without informing Interphil nor giving
a chance to the latter to rectify the same, in contravention of the Agreement. In
effect, Interphil pins liability on OEP on the basis of culpa contractual, or a breach
of contract, particularly Section VI of the Agreement. On culpa contractual, Article
1170 of the Civil Code states that those who in the performance of their
obligations are guilty of fraud, negligence or delay and those who in any manner
contravene the tenor thereof are liable for damages. Explaining the same further,
the Court, in RCPI v. Verchez, stated:
8. In culpa contractual the mere proof of the existence of the contract and the
failure of its compliance justify, prima facie, a corresponding right of relief.
The law, recognizing the obligatory force of contracts, will not permit a
party to be set free from liability for any kind of misperformance of the
contractual undertaking or a contravention of the tenor thereof. A breach
upon the contract confers upon the injured party a valid cause for
recovering that which may have been lost or suffered. The remedy serves
to preserve the interests of the promissee that may include his expectation
interest, which is his interest in having the benefit of his bargain by being
put in as good a position as he would have been in had the contract been
performed, or his reliance interest, which is his interest in being
reimbursed for loss caused by reliance on the contract by being put in as
good a position as he would have been in had the contract not been
made; or his restitution interest, which is his interest in having restored to
him any benefit that he has conferred on the other party. In this case, the
Court finds that OEP sufficiently rebutted the presumption of fault and/or
negligence. Not only is the finding of the CA correct that the provisions
cited by Interphil do not bar OEP from exercising discretion when it comes
to the destruction of defectively packaged capsules as in this case, OEP
was able to show that it needed to do so immediately because of the
danger and health risks posed to the public due to the wrong packaging.
What was at stake is not only the good reputation of a company, but also
the possibility of prejudicing consumers who could be adversely-affected
by the incorrect content of the capsules, and it would be a matter of
recklessness to do anything but urgently recall the same from public
distribution. If OEP would have spent precious time corresponding with
Interphil or allowing the latter to fix the matter, it would have just
aggravated an already precarious situation. Thus, the CA did not err in
treating OEP's action as a prudent move to prevent against the risk of
contamination, contamination which would compromise the safety of the
consumers or end-users. No bad faith is present in OEP's decision to
recall and destroy the products. The Court reminds the parties of the
statutory presumption of good faith, and, absent any valid rebuttal of the
same on the part of Interphil, that presumption will stand. As with its
previous arguments, Interphil has been unable to validly counter nor
adduce evidence which would militate against its clear fault and liability,
and in doing so overcome its burden to show that the findings of fact and
conclusions of law from the RTC and the CA were found wanting.
9. G.R. No. 212107, January 28, 2019
DIVISION
NATURE OF THE CASE: Complaint for damages
PONENTE:
KEIHIN-EVERETT FORWARDING CO., INC., PETITIONER, v.
TOKIO MARINE MALAYAN INSURANCE CO., INC. ** AND
SUNFREIGHT FORWARDERS & CUSTOMS BROKERAGE, INC.,
RESPONDENTS.
FACTS:
In 2005, Honda Trading Phils. Ecozone Corporation (Honda Trading)
ordered 80 bundles of Aluminum Alloy Ingots from PT Molten Aluminum
Producer Indonesia (PT Molten) and the entire shipment was insured Tokio
Marine & Nichido Fire Insurance Co., Inc. (TMNFIC) under Policy No. 83-
00143689, Honda Trading also engaged the services of petitioner Keihin-
Everett to clear and withdraw the cargo from the pier and to transport and
deliver the same to its warehouse at the Laguna Technopark in Biñan,
Laguna. Meanwhile, petitioner Keihin-Everett had an Accreditation Agreement
with respondent Sunfreight Forwarders whereby the latter undertook to render
common carrier services for the former and to transport inland goods within
the Philippines. On November 8, 2005, the shipment was caused to be
released from the pier by petitioner Keihin-Everett and turned over to
respondent Sunfreight Forwarders for delivery to Honda Trading.En route to
the latter's warehouse, the truck carrying the containers was hijacked and the
container van with Serial No. TEXU 389360-5 was reportedly taken away.
Although said container van was subsequently found in the vicinity of the
Manila North Cemetery and later towed to the compound of the Metro Manila
Development Authority (MMDA), it appears that the contents thereof were no
longer retrieved.Only the container van with Serial No. GATU 040516-3
reached the warehouse. As a consequence, Honda Trading suffered losses in
the total amount of P2,121,917.04, representing the value of the lost 40
bundles of Aluminum Alloy Ingots. Claiming to have paid Honda Trading's
insurance claim for the loss it suffered, respondent Tokio Marine commenced
the instant suit on October 10, 2006 with the filing of its complaint for
damages against petitioner Keihin-Everett. Respondent Tokio Marine
maintained that it had been subrogated to all the rights and causes of action
pertaining to Honda Trading.
Controlling Issue: Whether or not the CA erred in affirming with modification

the Decision of the RTC dated October 27, 2011 holding petitioner Keihin-
Everett liable to respondent Tokio Marine?
RULING:
YES, Keihin-Everett insisted that Tokio Marine is not the insurer but
TMNFIC, hence, it argued that Tokio Marine has no right to institute the
present action. As it pointed out, the Insurance Policy shows in its face that
Honda Trading procured the insurance from TMNFIC and not from
TokioMarine.
While this assertion is true, Insurance Policy No. 83-00143689 itself expressly
made Tokio Marine as the party liable to pay the insurance claim of Honda
Trading pursuant to the Agency Agreement entered into by and between
Tokio Marine and TMNFIC. As properly appreciated by both the RTC and the
CA, the Agency Agreement shows that TMNFIC had subsequently changed
its name to that of Tokio Marine.By agreeing to this stipulation in the
Insurance Policy, Honda Trading binds itself to file its claim from Tokio Marine
and thereafter to accept payment from it. At any rate, even if we consider
Tokio Marine as a third person who voluntarily paid the insurance claims of
Honda Trading, it is still entitled to be reimbursed of what it had paid. As held
by this Court in the case of Pan Malayan Insurance Corp. v. Court of
Appeals, the insurer who may have no rights of subrogation due to "voluntary"
payment may nevertheless recover from the third party responsible for the
damage to the insured property under Article 1236 of the Civil Code. Under
this circumstance, Tokio Marine's right to sue is based on the fact that it
voluntarily made payment in favor of Honda Trading and it could go after the
third party responsible for the loss (Keihin-Everett) in the exercise of its legal
right of subrogation.
10. G.R. No. 200553, December 10, 2018
SPOUSES GILDARDO C. LOQUELLANO AND ROSALINA JULIET B.

LOQUELLANO, Petitioners, v. HONGKONG AND SHANGHAI
BANKING CORPORATION, LTD., HONGKONG AND SHANGHAI
BANKING CORPORATION-STAFF RETIREMENT PLAN AND
MANUEL ESTACION, Respondents
PONENTE: PERALTA, J.:
Nature of the Action: Complaint for Annulment of Sale with Damages
FACTS:
Petitioner Rosalina applied with respondent HSBC-SRP a housing loan

in the amount of P400,000.00 payable in twenty-five (25) years at six percent
(6%) per annum, through monthly salary deduction from petitioner Rosalina's
salary savings account with respondent HSBC. It was provided in the loan
application that the loan was secured by setting-off petitioner Rosalina's
retirement benefits and chattel mortgage. She executed a promissory note for
the payment of the said loan. On September 5, 1990, petitioners spouses
Gildardo and Rosalina Loquellano and Manuel S. Estacion, the managing
trustee for and in behalf of the respondent HSBC-SRP, entered into a
contract of real estate mortgage wherein petitioners constituted a mortgage
over their house and lot to secure the payment of their housing loan.
Petitioner Rosalina had been religiously paying the monthly installments and
interests due on the housing loan through automatic salary deductions.
Petitioner Rosalina being involved in an illegal strike against HSBC was
terminated in her work. Petitioners were unable to make any payments of the
amortizations due in Rosalina's salary savings account. Respondent HSBC-
SRP sent demand letters to petitioner Rosalina for the payment of her
outstanding obligation in full. Rosalina offered to make partial payment of her
housing loan arrears in the amount of P69,205.99, which respondent HSBC-
SRP rejected. In a letter to petitioner Rosalina, respondent HSBC-SRP
demanded for the payment of the entire housing loan obligation in the amount
of P289,945.00. Notwithstanding, petitioner Rosalina received an Installment
Due Reminder dated September 27, 1995, reflecting the then current monthly
installment and interest due thereon. Petitioner Rosalina, subsequently,
received more installment due reminders showing a reduction in the
outstanding balance of her housing loan. She continuously made deposits to
her salary savings account with the respondent bank for the payment of her
monthly amortizations. Respondent bank debited petitioner Rosalina's savings
account and credited the payments to the balance of the installment and the
interest due on the housing loan up to June 1996. On May 20, 1996,
petitioners' mortgaged property was extrajudicially foreclosed by respondent
HSBC-SRP and was sold at public auction for the amount of P324,119.59,
with respondent Manuel S. Estacion as the highest bidder. A Certificate of
Sale was issued. Petitioners filed with the Regional Trial Court (RTC) a
Complaint for Annulment of Sale with Damages and Preliminary Injunction
against Hongkong and Shanghai Banking Corporation, Ltd; Manuel S.
Estacion; Hongkong and Shanghai Banking Corporation-Staff Retirement
Plan,Petitioners alleged, among others, that the foreclosure of their
mortgaged property was tainted with bad faith, considering that they had paid
all the arrears, interests and penalties due on their housing loan since August
1995, and were updated with their loan obligations up to June 1996.
CONTROLLING ISSUE: Whether the extrajudicial foreclosure and auction

sale of petitioners' property by respondent HSBC-SRP was valid?
RULING:
We find that respondent HSBC-SRP's filing of the extrajudicial
foreclosure proceedings on May 20, 1996 has no basis and, therefore, invalid.
It is established that petitioners failed to pay the monthly amortizations of their
housing loan secured by a real estate mortgage on their property since
January 1994, i.e., after petitioner Rosalina was terminated by the bank on
December 27,1993. Thus, respondent HSBC-SRP sent demand letters dated
June 13, 1994 and November 28, 1994 to petitioner Rosalina asking her to
pay the outstanding housing loan obligation in full. Petitioner Rosalina's offer
of partial payment was rejected by respondent HSBC-SRP. In the meantime,
no foreclosure proceedings was yet filed by respondent HSBC-SRP against
petitioners' mortgaged property. Subsequently, petitioner Rosalina received
an Installment Due Reminder dated July 26, 1995, informing her of the
overdue monthly amortizations, interests and penalty in the amount of
P55,681.85, with an outstanding balance of P315,958.00. On August 11,
1995, petitioner Rosalina then deposited in her salary savings account the
payment for all the principal and interest arrearages from January 1994 up to
August 1995. The payments she made in her account were accepted by
respondent bank and credited them to the payment of the overdue monthly
amortizations of her housing loan. While respondent HSBC- SRP wrote
petitioner Rosalina a letter demanding payment of the latter's entire unpaid
housing loan obligation, now with a reduced balance in the amount of
P289,945.00, however, petitioner Rosalina continuously received Installment
Due Reminders for the housing loan which showed a diminishing loan balance
by reason of respondent HSBC-SRP's acceptance of payments of her
monthly installments and interests due from September 1995 up to June
1996. Therefore, respondent HSBC-SRP is now estopped from foreclosing
the mortgage property on May 20, 1996. Article 1431 of the Civil Code defines
estoppel as follows:
Art. 1431. Through estoppel an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved as
against the person relying thereon.
To stress, respondent HSBC-SRP continuously sent out monthly Installment

Due Reminders to petitioner Rosalina despite its demand letter dated
September 25, 1995 to pay the full amount of the loan obligation within 3 days
from receipt of the letter. It, likewise, continuously accepted petitioner
Rosalina's subsequent monthly amortization payments until June 1996; thus,
making their default immaterial. Moreover, there was no more demand for the
payment of the full obligation afterwards. Consequently, petitioners were
made to believe that respondent HSBC-SRP was applying their payments to
their monthly loan obligations as it had done before. It is now estopped from
enforcing its right to foreclose by reason of its acceptance of the delayed
payments. Also, Article 1235 of the Civil Code provides that when the creditor
accepts performance, knowing its incompleteness and irregularity without
protest or objection, the obligation is deemed complied with. Respondent
HSBC-SRP accepted Rosalina's payment of her housing loan account for
almost one year without any objection.
SO ORDERED
11. G.R. No. 211204, December 10, 2018
GOLDSTAR RIVERMOUNT, INC., Petitioner, v. ADVENT CAPITAL

AND FINANCE CORP., (FORMERLY ALL ASIA CAPITAL AND
TRUST CORP.) Respondent.
Nature of the case: Complaint for Declaration of Nullity of Dation in
Payment
FACTS:
On December 9, 1998, petitioner Goldstar Rivermount, Inc. (Goldstar)

borrowed P55,000,000 from respondent Advent Capital and Finance Corp.
(Advent). The loan was payable in seven years, and it was secured by a real
estate mortgage over Goldstar's property, covered by Transfer Certificate of
Title No. T-278069, and a chattel mortgage over its equipment. Goldstar failed
to pay its amortizations, which prompted it to offer its mortgaged properties as
payment for the loan that had ballooned to P66,012,292.85. On May 26, 2000,
Goldstar and Advent signed a Dation in Payment as settlement for the loan.
They also executed a Memorandum of Agreement (Memorandum) on the
same day, wherein Goldstar was given the right to redeem the properties
within one year, and may continue to occupy and lease it for a monthly rental
of P600,000.00.
Later on, Goldstar learned that Advent had previously assigned its
receivables from the loan to the Development Bank of the Philippines (DBP).
Goldstar alleged that Advent was no longer its creditor when they agreed to a
Dation in Payment thus, making the contract void. It is Goldstar's position that
since Advent had assigned its rights to DBP prior to the Dation in Payment,
their contract is a nullity. Goldstar filed a complaint for declaration of nullity of
the Dation in Payment in the Regional Trial Court (RTC). The RTC dismissed
the complaint and rendered a Decision in Advent's favor.
The CA affirmed the RTC and sustained its finding that the Deed of
Assignment between Advent and DBP was for the security of Advent's loan.
CONTROLLING ISSUE: Whether or not Advent may validly enter into a

Dation in Payment with Goldstar?
RULING:
The Court agrees with the CA's finding and found more bases to
support the CA's Decision. Section 9 of the Deed of Assignment is crystal
clear that Advent shall deal with Investment Enterprises, unless declared in
default.
Section 10 of the Deed of Assignment gives Advent the authority to act in
behalf of DBP in case the Project Loans are declared due and demandable.
Advent has the power to enter into a contract with Investment Enterprises,
such as Goldstar, to secure payment of an outstanding obligation, and to do
acts to protect not just its interest as creditor, but also of DBP as assignee. In
sum, both Sections 9 and 10 of the Deed of Assignment are proof that Advent
may validly enter in a Dation in Payment with Goldstar. Sections 9 and 10
validate the Dacion in Payment and the Memorandum signed by Goldstar and
Advent, as they settle a due and demandable loan and, at the same time,
secure Advent's loan to DBP. Article 1159 of the New Civil Code states that
"[o]bligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith." If the terms of
a contract are clear and leave no doubt as to the intention of the contracting
parties, the literal meaning of its stipulations shall control. In its Decision, the
CA simply enforced what was stated in the terms and conditions of the Deed
of Assignment. Having established its basis in law and evidence on record,
we see no error in the CA's Decision.
Goldstar's argument that Advent was no longer its creditor at the time
the Dation in Payment and the Memorandum were signed is untenable,
because the Deed of Assignment specifically provides a condition before DBP
may exercise its rights as assignee. The deed clearly stated that Advent must
be declared in default before DBP may take over as assignee of the Project
Loans. The unanimous finding of the trial court and the appellate court that
the condition was not met is persuasive and binding upon the Court in the
absence of substantial evidence to the contrary.
Under the terms and conditions of said Deed of Assignment of
AACTC, as amended, the latter assigns, transfers and conveys in favor of
DBP, its titles and interests in and to the credits specifically set forth in the
subloan agreements executed between AACTC and its borrowers, including
the mortgages, pledges, guarantees and other collaterals securing the
subloans. By virtue of this provision, there is now a substitution of creditor and
DBP is now effectively your creditor. Hence, the OECF obligation under your
AACTC subloan is now transferred to DBP and becomes your direct
obligation to DBP.
Article 1315 of the New Civil Code provides that "[c]ontracts are perfected by
mere consent, and 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." From the moment Goldstar and Advent executed the
Dation in Payment, Goldstar agreed to transfer its rights and titles over the
mortgaged properties as settlement of its loan obligation. Goldstar cannot
resort to delaying tactics in fulfilling its part of the contract, by alleging
amendments in the Deed of Assignment. To reiterate, the Dation in Payment
was signed on May 26, 2000, while the Amendment and Addendum was
executed two months later on July 27, 2000. Undoubtedly, the Amendment
and Addendum was non-existent at the time Goldstar and Advent signed the
Dation in Payment. Therefore, Goldstar cannot rely on a non-existing
document to nullify a legally binding agreement. The original terms of the
Deed of Assignment prevail; in which case, Advent is the creditor and has the
right to collect and manage Goldstar's loan.
For this reason, we now request you to pay directly to DBP all amortizations
falling due on your account until its maturity on December 24, 2005. We shall
regularly send you the billing statements for amortizations falling due for your
reference in making the remittances. Goldstar's argument is unsustainable.
First, whether or not Advent has defaulted in its payment since July 28, 2000
is a question of fact, which should be left for the trial court to decide. Second,
the letter is immaterial and irrelevant in resolving whether or not Advent may
validly enter into a Dation in Payment at the time of its execution on May 26,
2000. The basis of the letter is the Amendment and Addendum, which is
inexistent at the time the Dation in Payment was signed. Further, the letter
does not change the fact that, at the time of the execution of the Dation in
Payment, Advent has the right to enter into any contract with Investment
Enterprises, like Goldstar, under the original terms of the Deed of Assignment.
12. G.R. No. 226088, February 27, 2019

DIVISION
PONENTE: PERALTA, J
FOOD FEST LAND, INC. AND JOYFOODS
CORPORATION, Petitioners, v. ROMUALDO C. SIAPNO, TEODORO
C. SIAPNO, JR. AND FELIPE C. SIAPNO, Respondents.
FACTS:
Respondents Romualdo C. Siapno, Teodoro C. Siapno and Felipe C. Siapno
are the registered owners of a 521-square-meter parcel of land (subject land)
in Dagupan City.
On April 14, 1997, respondents entered into a Contract of Lease involving the
subject land with petitioner Food Fest Land, Inc. (Food Fest), a local
corporation who wanted to use such land as the site of a fastfood
restaurant. The contract has the following particulars —
13. The term of the lease shall be fifteen (15) years. On the third (3rd) year
of the lease, however, Food Fest shall have the right to pre-terminate
the lease.
14. During the subsistence of the lease, Food Fest shall have the right to
use the subject land for such lawful purposes, including but not limited
to the operation of a restaurant business therein.
15. In consideration therefor, Food Fest shall pay respondents rent in the
following amounts:
a. For the first year, the rate of rent shall be P43,901.00 per
month.11
b. For the succeeding years, however, the rate of monthly rent
shall escalate by 10% annually. They are payable within the first
ten (10) days of the following month.
In addition to the foregoing, the Contract of Lease also featured a non- waiver
clause:16. NON-WAIVER- The failure of the parties to insist upon a strict
performance of any of the terms, conditions and covenants hereof shall not be
deemed a relinquishment or waiver of any rights or remedy that said party
may have, nor shall it be construed as a waiver of any subsequent breach or
default of the terms, conditions and covenants hereof which shall continue to
be in full force and effect. No waiver by the parties of any of their rights
under this Contract of Lease shall be deemed to have been made unless
expressed in writing and signed by the party concerned.
Pursuant to the Contract of Lease, Food Fest proceeded to build and operate
its restaurant within the subject land. In October 1998, Food Fest assigned all
its rights and obligations under the Contract of Lease unto one Tuck:y Foods,
Inc. (Tucky Foods). In September 2001, Tucky Foods assigned all the said
rights and obligations under such contract to petitioner Joyfoods Corporation
(Joyfoods). At the start of the eleventh year of the lease, however,
respondents called the attention of Food Fest and Joyfoods regarding its
intent to enforce the rental escalation clause of the Contract of Lease for the
said year. Accordingly, respondents informed Food Fest and Joyfoods that the
rent for the eleventh year of the lease shall be P113,867.89 per month, unless
such amount is renegotiated. On October 27, 2008, during the lease's twelfth
year, Joyfoods sent to respondents a letter conveying its intent to pre-
terminate the lease. In the letter, Joyfoods stated that "due to severe and
irreversible business losses" it will cease its operations on the 29th of
November 2008 and will turnover the subject land to the respondents on the
13Th of December 2008. On April 20, 2009, respondents lodged before the
RTC of a Complaint for sum of money against Food Fest and Joyfoods. In it,
respondents mainly seek payment of the sum of P988,907.74 from Food Fest
and Joyfoods - which sum respondents refer to as the "escalation for the
years 2007 and 2008."In essence, the sum P988,907.74 was supposed to
represent the balance between the amount of rent due under the Contract of
Lease for the period beginning from the lease's eleventh year of up to its pre-
termination, on one hand, and the amount of rent that was actually paid by
Food Fest and Joyfoods during the said period, on the other (unpaid balance).
RTC rendered a decision ordering JoyFoods and FoodFest to pay
respondents the unpaid balance in the amount of P988,907.74. The Court of
Appeals (CA) affirmed the decision of RTC.
Controlling Issue: Whether or not Novation had taken place when Food
Fest assigned all its rights and obligations under the Contract of Lease
to Joy Foods?
RULING:
We find that the established facts do not permit the conclusion that novation
had taken place. First. The settled facts do not show that respondents had
expressly consented in writing to the substitution of Food Fest by Joyfoods.
The consent of respondents to such substitution has to be in writing, in . light
of the non-waiver clause of the Contract of Lease. As can be recalled, the
non waiver clause of the Contract of Lease required the parties thereto to
express any waiver of their rights under said contract in writing lest their
waiver be considered null,
16. NON-WAIVER - The failure of the parties to insist upon a strict
performance of any of the terms, conditions and covenants hereof shall not be
deemed a relinquishment or waiver of any rights or remedy that said party
may have, nor shall it be construed as a waiver of any subsequent breach or
default of the terms, conditions and covenants hereof which shall continue to
be in full force and effect. No waiver by the parties of any of their rights
under this Contract of Lease shall be deemed to have been made unless
expressed in writing and signed by the party concerned. Respondents'
consent to the substitution of Food Fest falls within the ambit of the foregoing
clause, because a novation by the substitution of the person of the
debtor implies a waiver on the part of the creditor of his right to enforce
the obligation as against the original debtor. Verily, without the consent of
the respondents — conveyed in the form required under the Contract of
Lease — there can be no substitution of Food Fest by Joyfoods. On this score
alone, Food Fest and Joyfoods' plea is dismissible. Second. Yet, even if we
are to set aside the non-waiver clause of the Contract of Lease, Food Fest
and Joyfoods' claim of novation is still doomed to fail. This is so because the
consent of respondents to the substitution of Food Fest, just the same, cannot
be deduced or implied from any of the established acts of the former. Indeed,
under the settled facts, the respondents did nothing in the way of releasing
Food Fest from its obligations other than, perhaps, its acceptance of rental
payments from Joyfoods. The consent of respondents to the substitution of
Food Fest by Joyfoods, however, cannot be presumed from the sole fact that
they accepted payments from Joyfoods. It is well settled that mere
acceptance by a creditor of payments from a third person for the benefit of the
debtor, sans any agreement that the original debtor will also be released from
his obligation, does not result in novation but merely the addition of
debtors. In the same vein, to effect a subjective novation by a change in
the person of the debtor it is necessary that the old debtor be released
expressly from the obligation, and the third person or new debtor
assumes his place in the relation. There is no novation without such
release as the third person who has assumed the debtor's obligation
becomes merely a co-debtor or surety. All things considered, We find no
valid reason to overturn the RTC and the CA's ruling holding both Food Fest
and Joyfoods liable for the unpaid balance. Under the limited facts of the
instant ease, no novation by the substitution of the person of debtor can be
appreciated. Joyfoods' assumption of the debt of Food Fest only made the
former a co-debtor of the latter.
16. G.R. No. 211206, November 07, 2018
THIRD DIVISION
ROSEMARIE Q. REY, Petitioner, v. CESAR G. ANSON, Respondent
PONENTE: PERALTA, J.
Nature of the case: Complaint for Recomputation of Loans and recovery
of excess payments
FACTS:
Rosemarie Rey (Rey) is the President and one of the owners of Southern
Luzon Technological College Foundation Incorporated. Rey incurred four
loans from Anson in the total amount of P2,214,587.50 and each loan secured
by a Real Estate Mortgage. Four months thereafter, Rosemarie Rey failed to
fulfill her obligation on the second loan. On February 25, 2005, Cesar Anson
sent Rosemarie Rey a Statement of Account seeking full payment of all four
loans amounting to P2,214,587.50. Instead of paying her loan obligations,
Rosemarie Rey, through counsel, sent Cesar Anson a letter dated August 8,
2005, stating that the interest rates imposed on the four loans were irregular,
if not contrary to law. The 7.5% and 7% monthly interest rates imposed on the
first and second loans, respectively, were excessive and unconscionable and
should be adjusted to the legal rate. Moreover, no interest should have been
imposed on the third and fourth loans in the absence of any written agreement
imposing interest. Per Rosemarie Rey's computation using the legal rate of
interest, all four loans were already fully paid, as well as the interests thereon.
Rey contended that she had overpaid the amount of P283,434.19. She
demanded from Cesar Anson the return of the excess payment; otherwise,
she would be compelled to seek redress in court. On August 16, 2005, the
Spouses Rey filed a Complaint for Recomputation of Loans and Recovery of
Excess Payments and Cancellation of Real Estate Mortgages and Checks
against Cesar Anson with the RTC. They prayed for the recomputation of all
four loans reflecting the reduction of the interest rates of the first and second
loans to 12% per annum and the disallowance of interest on the third and
fourth loans; the return of overpayment amounting to P269,700.68; the
cancellation and discharge of the real estate mortgages securing the first and
second loans; and the award of P75,000.00 as attorney's fees and
P25,000.00 as litigation expenses. The RTC granted the Spouses Rey's
complaint for recomputation of the loans. The Court of Appeals reversed and
set aside the Decision of the RTC.
Controlling Issue: Whether or not the interest rates on the first and second
loans are unconscionable and contrary to morals?
RULING:
The freedom of contract is not absolute. Article 1306 of the Civil Code
provides that "[t]he contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem convenient, provided they
are not contrary to law, morals, good customs, public order, or public policy."
In Sps. Albos v. Sps. Embisan, et al. the Court held:
As case law instructs, the imposition of an unconscionable rate of interest on
a money debt, even if knowingly and voluntarily assumed, is immoral and
unjust. It is tantamount to a repugnant spoliation and an iniquitous deprivation
of property, repulsive to the common sense of man. It has no support in law,
in principles of justice, or in the human conscience nor is there any reason
whatsoever which may justify such imposition as righteous and as one that
may be sustained within the sphere of public or private morals. Summarizing
the jurisprudential trend towards this direction is the recent case of Castro v.
Tan in which We held:
While we agree with petitioners that parties to a loan agreement have wide
latitude to stipulate on any interest rate in view of the Central Bank Circular
No. 905 s. 1982 which suspended the Usury Law ceiling on interest effective
January 1, 1983, it is also worth stressing that interest rates whenever
unconscionable may still be declared illegal. There is certainly nothing in said
circular which 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.
In several cases, we have ruled that stipulations authorizing iniquitous

or unconscionable interests are contrary to morals, if not against the law.
In Medel v. Court of Appeals, we annulled a stipulated 5.5% per month or
66% per annum interest on a P500,000.00 loan and a 6% per month or 72%
per annum interest on a P60,000.00 loan, respectively, for being excessive,
iniquitous, unconscionable and exorbitant. In Ruiz v. Court of Appeals, we
declared a 3% monthly interest imposed on four separate loans to be
excessive. In both cases, the interest rates were reduced to 12% per annum.
In this case, the 5% monthly interest rate, or 60% per annum,

compounded monthly, stipulated in the Kasulatan is even higher than the 3%
monthly interest rate imposed in the Ruiz case. Thus, we similarly hold the 5%
monthly interest to be excessive, iniquitous, unconscionable and exorbitant,
contrary to morals, and the law. It is therefore void ab initio for being violative
of Article 1306 of the Civil Code. With this, and in accord with
the Medel and Ruiz cases, we hold that the Court of Appeals correctly
imposed the legal interest of 12% per annum in place of the excessive interest
stipulated in the Kasulatan.
In the case before us, even if Rosemarie Rey initially suggested the interest
rate on the first loan, voluntariness does not make the stipulation on an
interest, which is iniquitous, valid. 32 As Rosemarie Rey later realized through
the counsel of her lawyer that the interest rates of the first and second loans
were excessive and no interest should be imposed on the third and fourth
loans, she came to court for recomputation of the loans and recovery of
excess payments.
In this case, the first loan had a 7.5% monthly interest rate or 90%
interest per annum, while the second loan had a 7% monthly interest rate or
84% interest per annum, which rates are very much higher than the 3%
monthly interest rate imposed in Ruiz v. Court of Appeals33 and the 5%
monthly interest rate imposed in Sps. Albos v. Sps. Embisan, et al.34 Based
on the ruling of the Spouses Albos case, the Court holds that the interest
rates of 7.5% and 7% are excessive, unconscionable, iniquitous, and contrary
to law and morals; and, therefore, void ab initio. Hence, the Court of Appeals
erred in sustaining the imposition of the said interest rates, while the RTC
correctly imposed the legal interest of 12% per annum in place of the said
interest rates. Anent the third and fourth loans both in the amount of
P100,000.00, the Court of Appeals correctly held that as the agreement of 3%
monthly interest on the third loan and 4% monthly interest on the fourth loan
was merely verbal and not put in writing. no interest was due on the third and
fourth loans. This is in accordance with Article 1956 of the Civil Code which
provides that "[n]o interest shall be due unless it has been stipulated in
writing." Hence, the payments made as of March 18, 2005 in the third loan
amounting to P141,360.00 resulted in the overpayment of P41,360.00.
Moreover, the payments made as of February 2, 2005 in the fourth loan
amounting to P117,960.00 resulted in an overpayment of P17,960.00.
Consequently, as found by the Court of Appeals, there was a total
overpayment of P59,320.00 for the third and fourth loans.
17. G.R. No. 194126, October 17, 2018
SECOND DIVISION
INDUSTRIAL PERSONNEL AND MANAGEMENT SERVICES,
INC., Petitioner, v. COUNTRY BANKERS INSURANCE
CORPORATION, Respondent.
Nature of the case: Petition for Review on Certiorari
FACTS:
The Country Bankers Insurance Corporation (Country Bankers for

brevity) and IPAMS agreed to provide bonds for the entire immigration
process of nurse applicants of IPAM. Under the agreement of IPAMS and
Country Bankers, the latter will provide surety bonds and the premiums
therefor were paid by IPAMS on behalf of the nurse applicants. A
Memorandum of Agreement (MOA) was executed by the said parties on
February 1, 2002 which stipulated the various requirements for collecting
claims from Country Bankers,
On the basis of the MOA, IPAMS submitted its claims under the surety bonds
issued by Country Bankers. For its part, Country Bankers, upon receipt of the
documents enumerated under the MOA, paid the claims to IPAMS. According
to IPAMS, starting 2004, some of its claims were not anymore settled by
Country Bankers. In 2004, Country Bankers was not able to pay six (6) claims
of IPAMS. The total amount of unpaid claims was P11,309,411.56. The
counsel of Country Bankers started to oppose the payment of claims and
insisted on the production of official receipts of IPAMS on the expenses it
incurred for the application of nurses. IPAMS opposed this, saying that the
Country Bankers' insistence on the production of official receipts was contrary
to, and not contemplated in, the MOA and was an impossible condition
considering that the U.S. authorities did not issue official receipts. In lieu of
official receipts, IPAMS submitted statements of accounts, as provided in the
MOA. The Insurance Commission (IC) ruled that there is no ground for the
refusal of Country Bank to pay the claims of IPAMs.
The CA reversed and set aside the rulings of the IC.
Controlling Issue: Whether or not Country Bankers has no ground to refuse

payment of IPAM’s claim?
RULING:
At the onset, it is important to note that according to the autonomy
characteristic of contracts, the contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs,
public order, or public policy.
The stipulation of the MOA at issue is the provision enumerating requirements
(Requirements for Claim Clause) that must be presented by petitioner IPAMS
in order to make a valid claim against the surety bond. Petitioner IPAMS and
respondent Country Bankers in essence made a stipulation to the effect that
mere demand letters, affidavits, and statements of accounts are enough proof
of actual damages — that more direct and concrete proofs of expenditures by
the petitioner such as official receipts have been dispensed with in order to
prove actual losses.
As to why the parties agreed on the sufficiency of the listed requirements
under the MOA goes into the motives of the parties, which is not hard to
understand, considering that the covered transactions, i.e., the processing of
applications of nurses in the U.S., are generally not subject to the issuance of
official receipts by the U.S. government and its agencies.
Considering the foregoing, the question is crystallized: Can the parties
stipulate on the requirements that must be presented in order to claim against
a surety bond? And the answer is a definite YES, pursuant to the autonomy
characteristic of contracts, they can. In an insurance contract, founded on the
autonomy of contracts, the parties are generally not prevented from imposing
the terms and conditions that determine the contract's obligatory force.
Thus, the view posited by the CA that the Requirements for Claim Clause is
contrary to law because it is incongruent with Article 2199 of the Civil Code
and, therefore, an exception to the rule on autonomy of contracts
is erroneous. A more thorough examination of Article 2199 does not support
the CA's view.
Article 2199 of the Civil Code states:
Article 2199. Except as provided by law or by stipulation, one is entitled to
an adequate compensation only for such pecuniary loss suffered by him as he
has duly proved. Such compensation is referred to as actual or compensatory
damages.
The law is clear and unequivocal when it states that one is entitled to
adequate compensation for pecuniary loss only for such losses as he has duly
proved EXCEPT: (1) when the law provides otherwise, or (2) by
stipulation of the parties. Otherwise stated, the amount of actual damages
is limited to losses that were actually incurred and proven, except when the
law provides otherwise, or when the parties stipulate that actual damages are
not limited to the actual losses incurred or that actual damages are to be
proven by specific documents agreed upon. The submission of official
receipts and other pieces of evidence as a prerequisite for the payment of
claims is excused by stipulation of the parties; and in lieu thereof, the
presentation of statement of accounts with detailed expenses, demand letters,
and affidavits is, by express stipulation, sufficient evidence for the payment of
claims. To reiterate, Article 2199 of the Civil Code explicitly provides that the
prerequisite of proof for the recovery of actual damages is not absolute.
In the instant case, it is not disputed by any party that in the MOA entered into
by the petitioner IPAMS and respondent Country Bankers, the parties
expressly agreed upon a list of requirements to be fulfilled by the petitioner in
order to claim from respondent Country Bankers under the surety bond.
Hence, it is crystal clear that the petitioner IPAMS and respondent Country
Bankers, by express stipulation, agreed that in order for the former to have
a valid claim under the surety bond, the only requirements that need to be
submitted are the two demand letters, an Affidavit stating reason of any
violation to be executed by responsible officer of the Recruitment Agency, a
Statement of Account detailing the expenses incurred, and the Transmittal
Claim Letter. Evidently, the parties did not include as preconditions for
the payment of claims the submission of official receipts or any other
more direct or concrete piece of evidence to substantiate the
expenditures of petitioner IPAMS.
18. G.R. No. 208336, November 21, 2018
FIRST DIVISION
VILLA CRISTA MONTE REALTY & DEVELOPMENT
CORPORATION, Petitioner, v. EQUITABLE PCI BANK (NOW
KNOWN AS BANCO DE ORO UNIBANK, INC.), AND THE EX-
OFFICIO SHERIFF OF QUEZON CITY AND/OR HIS DEPUTY OR
AUTHORIZED REPRESENTATIVES, Respondents.
PONENTE: BERSAMIN, J.:
NATURE OF THE CASE: Nullification of Title
FACTS:
Sometime in 1994, plaintiff-appellant Villa Crista Monte Realty

Corporation (VCRC) acquired from a certain Alfonso Lim the 80,000 square
meters (8 hectares) parcel of land located at Old Balara, Quezon City, which
land appellant intended to develop into a residential subdivision. In order to
fully develop its subdivision project, appellant applied for and was granted a
credit line of P80 Million by then Equitable Philippine Commercial International
Bank (E-PCIB), now Banco De Oro. By way of security for the said credit line,
appellant executed a Real Estate Mortgage over the 80,000 square meters of
its properties with all the existing improvements thereon. VCRC subsequently
applied for an additional P50 Million credit accommodation from E-PCIB to
which the latter readily acceded. It being later established that the 41 lots, out
of the 174 subdivided lots, would already be sufficient securities for the credit
accommodation, appellant then asked for the release of the remaining 133
titles from the earlier mortgage. E-PCIB granted appellant's request on the
condition that the real estate mortgage contract be amended to conform to the
changes in the amount of the credit line and in the properties subject of the
mortgage, to which condition appellant readily agreed. Under its approved
P130 Million credit line, appellant separately obtained the following amounts
on various occasions from March 20, 1997 to August 15, 1997 covered by 15
promissory notes in different amounts.
Each of the aforesaid amount was covered by a promissory note in the
prescribed form of the E-PCIB. The increased rates ranged from 21% to 36%
and were ostensibly anchored on the uniform provision in the promissory
notes on monthly repricing. VCRC reneged on paying its loan obligations
amounting to P129,700,00.00, prompting E-PCIB to initiate foreclosure
proceedings on the mortgaged properties. Although the said auction sale was
initially enjoined, the injunction was nonetheless lifted; and so, the auction
sale proceeded where E-PCIB emerged as the highest bidder. This led to
appellant's filing of the Supplemental Complaint with the RTC Quezon City
assailing the said auction sale and the amount claimed therein (including the
alleged unwarranted assessments and charges), as well as praying for the
nullification of the titles that were consolidated in the name of E-PCIB. The
RTC rendered judgment in favor of Equitable PCI Bank (E-PCIB), holding that
the loan contracts between the parties were supported by several promissory
notes and that the plaintiff (petitioner herein) paid the adjusted interest rates;
and that the evidence on record sustained the validity of the real estate
mortgage and its amendment.
The CA affirmed the judgment of the RTC. The petitioner sought
reconsideration, but the CA denied its motion. Hence, this appeal.
Controlling Issue: Whether or not the promissory notes and the

corresponding repricing of interest rates by E-PCIB valid?
RULING:
The inescapable conclusion is that a de-escalation clause is an
indispensable requisite to the validity and enforceability of an escalation
clause in the contract. In other words, in the absence of a corresponding
de-escalation clause, the escalation clause shall be considered null and
void. Although it would not necessarily prevent the lender from
discriminatorily increasing the interest rates, the de-escalation clause's main
objective is to prevent the unwanted one-sidedness in favor of the lender, a
quality that is repugnant to the principle of mutuality of contracts. The clause
proposes to ensure that any unconsented increase in interest rates is
ineffective for transgressing the principle of mutuality of contracts. Indeed, the
clause creates a balance in the contractual relationship between the lender
and the borrower and tempers the power of the stronger player between the
two, which is the former. No express de-escalation clause was stipulated in
the promissory notes signed by the petitioner. Yet, the absence of the clause
did not invalidate the repricing of the interest rates. The repricing notices
issued to the petitioner by E-PCIB indicated that on some occasions, the bank
had reduced or adjusted the interest rates downward. For example, the 26%
interest rate for PN No. 970019HD for P2 million on July 30, 1997 was
reduced to 22.5% in August 1997; the 26% interest rate for PN No. 970044HD
for P2.7 million in July 1997 was decreased to 22.5% in August 1997. It
becomes inescapable for the Court to uphold the validity and enforceability of
the escalation clause involved herein despite the absence of the de-escalation
clause. The actual grant by the respondent of the decreases in the interest
rates imposed on the loans extended to the petitioner rendered inexistent the
evil of inequality sought to be thwarted by the enactment and application of
Presidential Decree No. 1684. We do not see here a situation in which the
petitioner did not stand on equality with the lender bank. The binding effect on
the parties of any agreement is premised on two settled principles, namely:
(1) that any obligation arising from contract has the force of law between the
parties; and (2) that there must be mutuality between the parties based on
their essential equality. Any contract that appears to be heavily weighed in
favor of only one of the parties so as to lead to an unconscionable result is
void. Specifically, any stipulation regarding the validity or compliance of the
contract that is left solely to the will of one of the parties is likewise invalid.
The principle of mutuality of contracts is embodied in Article 1308 of the Civil
Code, to wit:
Article 1308. The contract must bind both contracting parties; its validity or
compliance cannot be left to the will of one of them.
The significance of Article 1308 cannot be doubted. It is elementary that there
can be no contract in the absence of the mutual assent of the parties. When
the assent of either party is wanting, the act of the non-assenting party has no
efficacy for his act is as if it was done under duress or by an incapacitated
person. Naturally, any modification made in the contract must still be with or
upon the consent of the contracting parties. There must still be a meeting of
the minds of all the parties on the modification, especially when the
modification relates to an important or material aspect of the agreement. In
loan contracts, the rate of interest is always important or material because it
can make or break the capital ventures. Contrary to the petitioner's position,
there was mutuality of contracts between itself and the respondent. Tio, the
petitioner's President, who signed the promissory notes in behalf of the
petitioner, was aware of the provision in the documents pertaining to the
monthly repricing of the interest rates. Although the promissory notes
succinctly stipulated that the loans were subject to interest without need of
prior notice to the borrower, the respondent sent notices to the petitioner each
and every time it increased the interest rate. Equally of significance was that
the respondent allowed the petitioner the sufficient time and
opportunity either to reject the imposition of the increased interest rates by
paying the outstanding obligations or by accepting the same through payment
of whatever amounts were due. The sufficient time and opportunity negated
the petitioner's insistence about the respondent having unilaterally determined
the interest rates in violation of the principle of mutuality of contracts
embodied in Article 1308. The foregoing distinctions indicated that the
petitioner herein was never a party at a disadvantage. SO ORDERED.
19. G.R. No. 210297, April 03, 2019
THIRD DIVISION
INGEL, AND MARISSA SEVILLA, RESPONDENTS
PONENTE: LEONEN, J.
PERFORMANCE
FACTS:
BNL Management owned six (6) condominium units at the Imperial

Bayfront Tower Condominium, A. Mabini Street, Malate, Manila (Imperial
Bayfront). These units were leased to its clients under separate contracts of
lease. BNL Management also held exclusive rights to three (3) parking spaces
of Imperial Bayfront. On December 16, 1996, BNL Management, through
David, wrote a letter to the building administrator of Imperial Bayfront,
acknowledging receipt of The November billing statement. In a May 7, 1997
response, Building Administrator Erma Abella explained that the failure to
annotate ownership of the parking spaces was due to BNL Management not
submitting the necessary documents to the Association. It added that the
maintenance issues were due to lack of funds as a result of BNL
Management's nonpayment of association dues.
BNL Management requested that it be removed from the Association's list of
delinquent members. BNL Management received a letter from Sevilla
containing a breakdown of its arrears in the payment of association dues from
November 1996 to June 1999. It received a Second Notice of Billing on
August 11, 1999, which informed it of its pending arrears worth P180,981.80,
representing unpaid association dues from November 1996 to August 1999.
The Second Notice also contained a warning that after a third notice had been
sent, the Association would terminate utility services. BNL Management
received the Third Notice of Billing. Still, BNL Management did not pay the
arrears. Since the Association refused to restore its electricity and water, BNL
Management and David filed before the Regional Trial Court a
Complaint against Uy, et al. for damages and specific performance with
preliminary mandatory/prohibitory injunction. The Regional Trial Court (RTC)
dismissed the Complaint. The Court of Appeals (CA) held that Uy, et al.'s act
of cutting off BNL Management's electricity and water supply was legal.
CONTROLLING ISSUE: Whether or not BNL Management were bound by

the terms and conditions of the declaration of restrictions attached to the
Master Deed?
RULING:
In a multi-occupancy dwelling such as Apartments, limitations are
imposed under R.A. 4726 in accordance with the common interest and safety
of the occupants therein which at times may curtail the exercise of ownership.
To maintain safe, harmonious and secured living conditions, certain
stipulations are embodied in the duly registered deed of restrictions, in this
case the Master Deed, and in-house rules which the condominium
corporation, like respondent, is mandated to implement. Upon acquisition of a
unit, the owner not only affixes his conformity to the sale; he also binds
himself to a contract with other unit owners. The declaration of restrictions is
enforceable by the management body of the condominium. In Twin Towers
Condominium Corporation v. Court of Appeals:
To reiterate, the Condominium Act expressly provides that the Master Deed
may empower the management body of the Condominium "to enforce the
provisions of the declaration of restrictions." The Master Deed authorizes
petitioner, as the management body, to enforce the provisions of the Master
Deed in accordance with petitioner's By-Laws. Thus, petitioner's Board of
Directors is authorized to determine the reasonableness of the penalties and
interests to be imposed against those who violate the Master Deed. Petitioner
has validly done this by adopting the House Rules.
The Master Deed binds ALS since the Master Deed is annotated on the
condominium certificate of title of ALS' Unit. The Master Deed is ALS' contract
with all Condominium members who are all co-owners of the common areas
and facilities of the Condominium. Contracts have the force of law between
the parties and are to be complied with in good faith. From the moment the
contract is perfected, the parties are bound to comply with what is expressly
stipulated as well as with what is required by the nature of the obligation in
keeping with good faith, usage and the law. Thus, when ALS purchased its
Unit from petitioner, ALS was bound by the terms and conditions set forth in
the contract, including the stipulations in the House Rules of petitioner, such
as House Rule 26.2.
Here, when petitioners bought the condominium units from Imperial Bayfront,
they were bound by the terms and conditions of the declaration of restrictions
attached to the Master Deed. As the Court of Appeals found, the Master Deed
expressly allows its condominium association to subject its owners,
purchasers, tenants, and lessees to rules and regulations for "the efficient and
mutually beneficial management and operation of the project." These were the
House Rules and Regulations, which vested in the Association the power to
interrupt utility services in case of nonpayment of association dues.
As the Court of Appeals held, petitioners cannot feign ignorance and insist
that these rules cannot apply to them. Neither can they justify their
nonpayment of dues with mere allegations that the House Rules and
Regulations are invalid and that the Association's Board of Directors was not
duly elected. Petitioners' action for damages is not the proper forum to
determine the legitimacy of the Association's Board of Directors and whether
its acts are ultra vires.
SO ORDERED.
20. G.R. No. 196733, November 21, 2018
FIRST DIVISION
HEIRS OF ROGER JARQUE, Petitioners, v. MARCIAL JARQUE,
LELIA JARQUE-LAGSIT, AND TERESITA JARQUE-
BAILON, Respondents
PONENTE: JARDELEZA, J.
Nature of the case: Complaint for Annulment of Deeds
FACTS:
On June 20, 1960, Roger mortgaged the lot to Dominador Grajo
which he redeemed through his nephew Quirino Jarque before the
period of redemption expired. He subsequently mortgaged the property
again to Benito Coranes (Benito) for P700.00. However, when Roger
was about to redeem the property, Benito told him that it had already
been redeemed by Lupo. When Roger went to Lupo to take back the
property, Lupo pleaded with Roger to let the property remain with him
as he needed. a source of income to support his children's education.
Roger acceded to Lupo's request. When Lupo died in 1980, Roger
informed Lupo's wife, Asuncion, of his desire to take back the property.
Asuncion however, requested that she be allowed to continue
possessing the property since she needed a source of livelihood for her
family's survival. Once again, Roger acquiesced. Upon Asuncion's
death in 1981, her eldest child, Dominga, likewise pleaded with Roger to
allow her to continue possession of the property. Again, Roger yielded
to the request.
When Dominga died in 1992, single and without issue, her siblings,
respondents here, continued to possess the property under the same
terms and conditions as their predecessors-in-interest. Thus, from 1992
until the filing of the complaint, Roger and his children repeatedly asked
to take back the property, which respondents rejected under the same
assurance that they will take care of the property. In 2004, Roger's sons
went to Casiguran to finally take back the property for good. However,
they were surprised to discover that respondents were already claiming
ownership over the disputed lot. Upon inquiry with the Municipal
Assessor's Office, they found that Dominga, during her lifetime,
executed and registered a Ratification of Ownership of Real
Property, where she claimed to have acquired the property thru
redemption from Benito. Likewise, they learned that Marcial and
Teresita executed a Waiver and Confirmation of Rights of Real
Property in favor of Lelia, who caused the issuance of a tax declaration
over the property in her name. This prompted Roger to file a complaint
for annulment of deeds and other documents, recovery of ownership
and possession, accounting, and damages against respondents with the
MCTC. On March 7, 2007, the MCTC rendered a Decision in favor of
petitioners declared petitioners as the rightful owners and possessors of
the property. The MCTC concluded that redemption is not a mode of
acquisition of property and found no other instrument which shows that
the disputed lot was conveyed to Dominga. The RTC affirmed in toto the
MCTC's Decision. The CA found that apart from Roger's bare
allegations, there is nothing to support the claimed oral partition.
CONTROLING ISSUE: Whether or not the oral partition of the lot was
valid?
RULING:
We, nevertheless, find that a partition occurred when Roger occupied
the disputed lot in the concept of owner after Laureano's death. In
general, a partition is the separation, division, and assignment of a thing
held in common among those to whom it may belong. Every act
intended to put an end to indivision among co-heirs is deemed to be a
partition. In Hernandez v. Andal, we explained:
On general principle, independent and in spite of the statute of frauds,
courts of equity have enforced oral partition when it has been
completely or partly performed. "Regardless of whether a parol partition
or agreement to partition is valid and enforceable at law, equity will in
proper cases, where the parol partition has actually been consummated
by the taking of possession in severalty and the exercise of ownership
by the parties of the respective portions set off to each, recognize and
enforce such parol partition and the rights of the parties thereunder.
Thus, it has been held or stated in a number of cases involving an oral
partition under which the parties went into possession, exercised acts of
ownership, or otherwise partly performed the partition agreement, that
equity will confirm such partition and in a proper case decree title in
accordance with the possession in severalty. "In numerous cases it has
been held or stated that parol partitions may be sustained on the ground
of estoppel of the parties to assert the rights of a tenant in common as
to parts of land divided by parol partition as to which possession in
severalty was taken and acts of individual ownership were exercised.
And a court of equity will recognize the agreement and decree it to be
valid and effectual for the purpose of concluding the right of the parties
as between each other to hold their respective parts in severalty. "A
parol partition may also be sustained on the ground that the parties
thereto have acquiesced in and ratified the partition by taking
possession in severalty, exercising acts of ownership with respect
thereto, or otherwise recognizing the existence of the partition.
"A number of cases have specifically applied the doctrine of part
performance, or have stated that a part performance is necessary, to
take a parol partition out of the operation of the statute of frauds. It has
been held that where there was a partition in fact between tenants in
common, and a part performance, a court of equity would have regard
to and enforce such partition agreed to by the parties."
In this case, Roger's exercise of ownership over Lot No. 2560 after
Laureano's death in 1946 is established by evidence. In 1960, he was able to
mortgage the property to, and subsequently redeem it from, Dominador Grajo.
This is also supported by Quirino Jarque (Quirino), Sergio's son and Roger's
nephew, who testified that: (I) Lot No. 2560 and another one in Busay,
Casiguran, Sorosogon were Roger's shares or inheritance from his parents'
estate; (2) respondents' father, Lupo's share is the cocoland in Sta. Cruz,
Casiguran, Sorsogon which was sold by Lupo's son, Marcial; and (3) his
father Sergio inherited a rice field in Cagdagat, Casiguran, Sorsogon of which
Quirino is the tiller and cultivator.
As soon as Lot No. 2560 was identified, occupied, and possessed by Roger to
the exclusion of all the other heirs, the co-ownership as to said property was
terminated. These are acts which happened prior to the alleged sale of the
property to Benito in 1972. Thus, at the time of the sale, Servanda had no
right to sell Lot No. 2560 either as sole owner or co-owner. This conclusion
holds true even if Servanda, as Laureano's surviving spouse, had
usufructuary rights over the property. Usufruct, in essence, is nothing else but
the right to enjoy another's property. While this right to enjoy the property of
another temporarily includes both the jus utendi and the jus fruendi, the owner
retains the jus disponendi or the power to alienate the same. Having only the
usufruct over the property, Servanda may only sell her right of usufruct over,
and not the title to, Lot No. 2560. Necessarily, her successors may acquire
only such rights.
SO ORDERED
21. G.R. No. 201116, March 04, 2019
Second Division
premium
Facts:
On October 7, 2003, petitioner Philam Insurance Co., Inc. (Philam) [now

Chartis Philippines Insurance, Inc.] submitted a proposal to respondent Parc
Chateau Condominium Unit Owners Association, Inc. (Parc Association) to
cover fire and comprehensive general liability insurance of its condominium
building, Parc Chateau Condominium. Respondent Eduardo B. Colet (Colet),
as Parc Association's president, informed Philam, through a letter dated
November 24, 2003, that Parc Association's board of directors selected it,
among various insurance companies, to provide the insurance requirements
of the condominium. After Philam appraised the condominium, it issued Fire
and Lightning Insurance Policy No. 0601502995 for P900 million and
Comprehensive General Liability Insurance Policy No. 0301003155 for P1
Million, both covering the period from November 30, 2003 to November 30,
2004. The parties negotiated for a 90-day payment term of the insurance
premium, worth P791,427.50 including taxes. This payment term was
embodied in a Jumbo Risk Provision, which further provided that the premium
installment payments were due on November 30, 2003, December 30, 2003,
and January 30, 2004. The Jumbo Risk Provision also stated that if any of the
scheduled payments are not received in full on or before said dates, the
insurance shall be deemed to have ceased at 4 p.m. of such date, and the
policy shall automatically become void and ineffective. Parc Association's
board of directors found the terms unacceptable and did not pursue the
transaction. Parc Association verbally informed Philam, through its insurance
agent, of the board's decision. Since no premiums were paid, Philam made
oral and written demands upon Parc Association, who refused to do so
alleging that the insurance agent had been informed of its decision not to take
up the insurance coverage. Philam sent demand letters with statement of
account claiming P363,215.21 unpaid premium based on Short Scale Rate
Period. Philam also cancelled the policies. On June 3, 2005, Philam filed a
complaint against Parc Association and Colet for recovery of P363,215.21
unpaid premium, plus attorney's fees and costs of suit in the Metropolitan Trial
Court. MeTC dismissed the case. The MeTC determined that since Philam
admitted that Parc Association did not pay its premium, one of the elements of
an insurance contract was lacking, that is, the insured must pay a premium.
The MeTC explained that payment of premium is a condition precedent for the
effectivity of an insurance contract. Non-payment of premium prevents an
insurance contract from becoming binding even if there was an acceptance of
the application or issuance of a policy, unless payment of premium was
waived. With one of the elements missing, there is no insurance contract to
speak of and Philam has no right to recover from defendant Parc Association.
The RTC pronounced that there was no valid insurance contract between the
parties because of non-payment of premium, and there was no express
waiver of full payment of premiums. Philam averred that Parc Association's
newsletter and treasurer's report confirmed that there was a perfected
insurance contract. The RTC held that Parc Association's newsletter and
treasurer's report, informing the condominium unit owners that the building
was insured, is not proof of a perfected insurance contract. The newsletter
stated that negotiations were ongoing to try to lower the insurance premium
per square meter, while the treasurer's report did not categorically mention
that there was a perfected and effective insurance contract. Hence, the RTC
affirmed in part the MeTC decision. The CA rendered a Decision denying
Philam's petition and affirming the RTC Decision. The CA discussed that
based on Section 77 of Presidential Decree 612 or the Insurance Code of the
Philippines, the general rule is that no insurance contract issued by an
insurance company is valid and binding unless and until the premium has
been paid. Parc Association further argued that non-payment of premium
means no juridical tie was created between the insured and the insurer, and
the insured was not exposed to the insurable risk for lack of consideration.
Parc Association asserted that it would be unjust to allow Philam to recover
premiums on an insurance contract that was never effective and despite not
having been exposed to any risk at all. In its Reply, Philam insisted that there
was a perfected insurance contract, and Parc Association's request for terms
of payment indicate its intention to be bound by the insurance contract.
Controlling Issue: Whether or not respondents' request for terms of payment

of premium after the policies were issued and the grant of said request by
petitioner constitute the parties' intention to be bound by the insurance
contract?
Ruling:
No, the Court has to determine the intention of the parties. In doing so, the
Court has to read the transcript of stenographic notes of the witnesses and
review the language or tenor of some of the documentary evidence, such as:
Philam's proposal, Colet's acceptance letter, the Jumbo Risk Provision, and
the written communications between Philam and Parc Association. The CA
correctly determined that the Jumbo Risk Provision clearly indicates that
failure to pay in full any of the scheduled installments on or before the due
date shall render the insurance policy void and ineffective as of 4 p.m. of such
date. Parc Association's failure to pay on the first due date (November 30,
2003), resulted in a void and ineffective policy as of 4 p.m. of November 30,
2003. Hence, there is no credit extension to consider as the Jumbo Risk
Provision itself expressly cuts off the inception of the insurance policy in case
of default. The Court resolves to deny the petition after finding that the CA did
not commit any reversible error in the assailed decision and resolution. The
CA had exhaustively explained the law and jurisprudence, which are the
bases of its decision and resolution. Both trial courts and the appellate court
are consistent in its findings of fact that there is no perfected insurance
contract, because of the absence of one of the elements, that is, payment of
premium. As a consequence, Philam cannot collect P363,215.21 unpaid
premiums of void insurance policies.
SO ORDERED.
22. G.R. No. 211780, November 21, 2018
THIRD DIVISION
CEZAR YATCO REAL ESTATE SERVICES, INC., GRD PROPERTY
RESOURCES, INC., GAMALIEL PASCUAL, JR., MA. LOURDES
LIMJAP PASCUAL, AND AURORA PIJUAN, Petitioners, v. BEL-AIR
VILLAGE ASSOCIATION, INC., REPRESENTED BY ITS PRESIDENT
ANTONIO GUERRERO, AND THE REGISTER OF
DEEDS, Respondents.
FACTS:
Sometime in the 1950s, Makati Development Corporation developed

Bel-Air Village, a residential subdivision in Makati City, and sold lots to
interested buyers. The contracts of sale between Makati Development
Corporation and the lot buyers in Bel-Air Village were subjected to specific
conditions and easements embodied in the Deed Restrictions, which had a
lifetime of 50 years, or from January 15, 1957-2007. Sometime in 1998, the
Association created the 2007 Committee to assess and propose amendments
to the Deed Restrictions, in anticipation of its impending expiration. The 2007
Committee circulated questionnaires among the homeowners and held
meetings to gather input on the proposed amendments.
On December 12, 2006, 718 members out of a total of 934 members in
good standing and eligible to vote, attended the special membership meeting.
Of the votes cast, 72% chose to extend the period of the Deed Restrictions,
3% rejected the extension, and 25% abstained. On February 8, 2007, Cezar
Yatco Real Estate Services, GRD Property Resources, Masterman Land
Corporation (Masterman), Gamaliel, Lourdes, Sofia Limjap (Sofia), and Pijuan
(collectively, the complainants), who had all voted against the Deed
Restrictions' extension, filed a Verified Complaint before the Housing and
Land Use Regulatory Board.
In their Verified Complaint, the complainants alleged that the Deed
Restrictions was only effective for 50 years, or from January 15, 1957 to
January 15, 2007, as it did not provide for its extension. Thus, the
complainants contended that the Association's resolution extending the Deed
Restrictions' effectivity was illegally and arbitrarily approved. They also
averred that no quorum was reached in the December 12, 2006 special
membership meeting. In its May 21, 2008 Decision, the Housing and Land
Use Regulatory Board Expanded National Capital Region Field Office
(Regional Field Office) declared the extension of the Deed Restrictions as null
and void. The Office of the President reversed the decision of HLURB.
Controlling issue: Whether or not private respondent Bel-Air Village

Association, Inc.'s members can, by majority vote, extend the Deed
Restrictions' term of effectivity?
RULING:
The cardinal rule in contract interpretation is found in Article 1370 of

the Civil Code, which provides: Article 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 stipulations shall control. If the words appear to be
contrary to the evident intention of the parties, the latter shall prevail over the
former. As held in Abad, courts must first determine whether or not a
stipulation in a contract is ambiguous or susceptible of multiple interpretations.
Absent any ambiguity, or when the terms of the contract are found to clearly
reflect the intentions of the contracting parties, the stipulation will be
interpreted as it is written, and will be treated as the binding law between the
contracting parties. In contrast, private respondent insists that a plain reading
of the Deed Restrictions would show that the term of restrictions may be
amended by a majority vote of the members. It emphasizes that the term of
effectivity is a necessary element of the Deed Restrictions; thus, its members
may validly extend its effectivity. The Deed Restrictions is a restrictive
covenant that governs how lot owners can use or enjoy their properties. It was
annotated on the land titles issued to the lot owners and it is not disputed that
lot owners are bound by these annotations under Section 39 of Act 496, or the
Land Registration Act, which provides: Section 39. Every applicant receiving a
certificate of title in pursuance of a decree of registration, and every
subsequent purchaser of registered land who takes a certificate of title for
value in good faith, shall hold the same free of all encumbrance except those
noted on said certificate, and any of the following incumbrances which may be
subsisting, namely:
Read as a whole, the Deed Restrictions as a restrictive covenant was
intended for the "sanitation, security and the general welfare of the
community, "providing the rules and regulations for the lot owners' privacy and
continued enjoyment of their property. Petitioners' interpretation of limiting
amendments to so-called restrictions, then declaring that the term is not a
restriction, cannot be upheld. A plain reading of Part VI, or the Term of
Restrictions, would show that the term of effectivity was not set in stone, and
that private respondent was empowered to cancel it altogether, through its
members' majority vote. The contracting parties' clear intention was to give
the lot owners freedom to establish rules and regulations, under which they
could best use their properties and protect their interests. This is apparent
from the second sentence: "However, the Association may, from time to time,
add new ones, amend or abolish particular restrictions [or] parts thereof by
majority rule.
The import of Article VI is so clear that it precludes the Court from giving a
different interpretation. In many instances, the Supreme Court underscored
that, as a rule, if the statute is clear, plain and free from ambiguity, it must be
given its literal meaning and applied without interpretation. SO ORDERED.
23. G.R. No. 211425, November 19, 2018
THIRD DIVISION
HEIRS OF TOMAS ARAO, REPRESENTED BY PROCESO ARAO,
EULALIA ARAO-MAGGAY, GABRIEL ARAO AND FELIPA A.
DELELIS, Petitioners, v. HEIRS OF PEDRO ECLIPSE,
REPRESENTED BY BASILIO ECLIPSE; HEIRS OF EUFEMIA
ECLIPSEPAGULAYAN, REPRESENTED BY BASILIA P.
CUARESMA; HEIRS OF HONORATO ECLIPSE, REPRESENTED BY
VICENTE ECLIPSE, JUANITA E. AGAMATA AND JIMMY ECLIPSE;
AND HEIRS OF MARIA ECLIPSE-DAYAG, REPRESENTED BY
OSMUNDO E. DAYAG, Respondents.
Nature of the case: Nullity of a Deed of Absolute sale
FACTS:
In 1994, respondents (spouses Eclipse's successors-in-interest)
discovered that the land in question had been subject of a Deed of Absolute
Sale dated September 5, 1969 by which the registered owner, Policarpio, with
the consent of his wife Cecilia, sold the land in question to Tomas Arao
(Tomas), married to Tomasa Balubal. They averred that the sale was
registered, resulting in the cancellation of OCT No. 1546, which was replaced
by Transfer Certificate of Title (TCT) No. T-13798 in the name of Tomas,
married to Terasa Balubal. On June 30, 1977, Tomas executed a Deed of
Absolute Sale of the subject land in favor of his children Eulalia, Proceso and
Felipa Arao, whose heirs are herein petitioners. Eventually, Eulalia and Felipa
registered the land in their names as TCT No. T-39071. Respondents
maintained that the said Deed of Sale dated September 5, 1969 was a forgery
because at the time of its execution, Policarpio and Cecilia were already
dead. Policarpio died on November 21, 1936, while Cecilia died on June 3,
1925. Respondents thus argued that on the basis of the said forged deed, the
subsequent transfer from Tomas to Eulalia and Felipa was likewise void.
Hence, they filed the present action for Nullity of a Deed of Absolute Sale and
Reconveyance of Lot No. 1667, Recovery of Ownership and Possession with
Damages against herein petitioners, the heirs of Tomas. Petitioners moved for
the dismissal of the complaint on the ground of prescription, arguing that
actions for annulment of title and reconveyance prescribe in 10 years. Their
motion was denied. The RTC rendered a Decision dismissing the complaint
and counterclaim on the ground of laches. The CA issued the now appealed
Decision finding that the doctrine of laches is not applicable since
respondents' cause of action is imprescriptible pursuant to Article 1410 of the
Civil Code.
Controlling Issue: Whether or not the Deed of sale was void and laches is
not applicable to this case?
RULING:
Before resolving whether laches has set in, it is important to determine

first how and by what contract Tomas (petitioners' predecessor-in-interest)
acquired the title of the subject lot in his name. This is because if the assailed
contract is void ab initio, then laches will not apply. Article 1410 of the Civil
Code states that an "action to declare the inexistence of a void contract does
not prescribe." The foregoing provision is echoed by this Court in the case
of Fil-Estate Golf and Development, Inc. v. Navarro when it held that a
complaint for cancellation of title based on the nullity of the deed of
conveyance does not prescribe. In other words, an action that is predicated
on the fact that the conveyance complained of was null and void ab initio is
imprescriptible. And if the action is imprescriptible, it follows then that the
defense of laches cannot be invoked. Thus:
Laches is a doctrine in equity and our courts are basically courts of law and
not courts of equity. Equity, which has been aptly described as "justice outside
legality," should be applied only in the absence of, and never against,
statutory law. Aequetas nunguam contravenit legis. The positive mandate of
Art. 1410 of the New Civil Code conferring imprescriptibility to actions for
declaration of the inexistence of a contract should pre-empt and prevail over
all abstract arguments based only on equity. Certainly, laches cannot be set
up to resist the enforcement of an imprescriptible legal right, and petitioners
can validly vindicate their inheritance despite the lapse of time.
Records of the case reveal three different Deeds of Absolute Sale which
directly and indirectly conveyed title to Tomas over the property in question.
Respondents' present action is based on the nullity of the September 5, 1969
Deed of Absolute Sale. When this 1969 Deed of Sale was executed, the seller
thereof, Policarpio, was already deceased, having died on November 21,
1936. It is settled that the death of a person terminates contractual capacity. If
any one party to a supposed contract was already dead at the time of its
execution, such contract is undoubtedly simulated and false, and, therefore,
null and void by reason of its having been made after the death of the party
who appears as one of the contracting parties therein. There is no doubt,
therefore, that this 1969 Deed of Sale is spurious and the signature of the
seller appearing thereon is forged. Suffice it to say, a forged deed is a nullity
and conveys no title. As a forged deed is null and void, and conveys no title,
all the transactions subsequent to the alleged sale are likewise void. Since the
Deed of Absolute Sale dated September 5, 1969 is null and void, it follows
then that all the TCTs which were issued by virtue of the said spurious and
forged document are also null and void.
Notwithstanding the fact that petitioners have in their favor the said certificates
of title in their name, the same is of no beneficial effect on them. Their title
cannot be used to validate the forgery or cure the void sale. Verily, when the
instrument presented is forged, even if accompanied by the owner's duplicate
certificate of title, the registered owner does not thereby lose his title, and
neither does the assignee in the forged deed acquire any right or title to the
property. As held:
Insofar as a person who fraudulently obtained a property is concerned, the
registration of the property in said person's name would not be sufficient to
vest in him or her the title to the property. A certificate of title merely confirms
or records title already existing and vested. The indefeasibility of the Torrens
title should not be used as a means to perpetrate fraud against the rightful
owner of real property. Good faith must concur with registration because,
otherwise, registration would be an exercise in futility. A Torrens title does not
furnish a shield for fraud, notwithstanding the long-standing rule that
registration is a constructive notice of title binding upon the whole world.
Needless to state, all subsequent certificates of title, including petitioners'
titles, are also void because of the legal truism that the spring cannot rise
higher than its source.
24. G.R. No. 218343, November 28, 2018
SECOND DIVISION
JUN MIRANDA, Petitioner, v. SPS. ENGR. ERNESTO AND AIDA
MALLARI AND SPS. DOMICIANO C. REYES AND CARMELITA
PANGAN, Respondents.
Ponente: CAGUIOA, J.
Nature of the Case: Recovery of Possession
FACTS:
On March 3, 2004, the Spouses Mallari filed the suit [for recovery of
possession] below against Jun Miranda (Miranda). Thereunder, they alleged
that, sometime after causing the Certificate of Sale in their favor to be
annotated in TCT No. NT-266485, they conducted an inspection of the subject
property. At which time, they discovered that the same was in the possession
of Miranda who claimed to be the owner thereof, having bought the property
from the Spouses Reyes sometime in 1996. Claiming to be entitled to the
ownership and possession of the property, they prayed that Miranda be
ordered to vacate and to surrender the possession thereof to them. In his
Answer, Miranda denied all the material allegations in the Spouses Mallari's
complaint. He averred that he is already, and continues to be, the owner of
the subject property as he bought the same from the Spouses Reyes way
back March 20, 1996 despite that he failed to cause the registration of the sale
as he lost the owner's copy of TCT No. NT-266485. Asserting that the
Spouses Reyes no longer have rights or interests over the subject property at
the time of the levy, he maintained that the Spouses Mallari acquired no right
over the same. Further, he insisted that the Spouses Mallari have no cause of
action since the said spouses are mere claimants in an execution sale and no
formal demand to vacate was made upon him. Claiming to be an innocent
purchaser for value who cannot be deprived of possession over the subject
property, he prayed that the complaint be dismissed, that he be declared the
rightful owner of the subject property, and for an award of damages.
The RTC rendered the assailed Decision granting the Spouses Mallari's
complaint and dismissing Miranda's third-party complaint. The CA in its
Decision denied Miranda's appeal and affirmed the RTC Decision.
Controlling Issue:
Whether the CA erred when it upheld the supposed rights of Spouses Mallari
as attaching creditors of the subject property despite their knowledge of the
prior unregistered sale to Miranda?
RULING:
Since both parties, Spouses Mallari and Miranda, claim exclusive

ownership over the subject property, the right of ownership recognized in
favor of one necessarily excludes the other of such right since this is not a
case of co-ownership. Article 1458 of the Civil Code provides that by the
contract of sale one of the contracting parties obligates himself to transfer
ownership and to deliver a determinate thing, and the other to pay a price
certain in money or equivalent. Pursuant to Article 1475 of the Civil Code, a
contract of sale is a consensual one because it is perfected at the moment
there is a meeting of minds upon the thing which is the object of the contract
and upon the price.
As to transfer of ownership, Article 1477 of the Civil Code provides that
the ownership of the thing sold shall be transferred to the vendee upon the
actual or constructive delivery thereof. Under Article 712 of the same Code,
ownership and other real rights over property are acquired and transmitted in
consequence of certain contracts, by tradition. However, the parties may
stipulate that ownership in the thing shall not pass to the purchaser until he
has fully paid the price under Article 1478. The Deed of Absolute Sale
between Spouses Reyes, the then registered owners of the subject property,
and Miranda was executed in March 1996 and possession was already
transferred to Miranda, through constructive delivery when the Deed of
Absolute Sale, a public instrument, was executed conformably to Article
1498 of the Civil Code, and through real delivery when actual possession was
turned over to Miranda pursuant to Article 1497 of the Civil Code. Pursuant to
the applicable provisions of the Civil Code on the contract of sale and modes
of acquiring ownership, Miranda acquired ownership of the subject property
when he took actual physical, or at least constructive, possession thereof. The
non-registration of the Deed of Absolute Sale with the Registry of Deeds for
the Province of Nueva Ecija did not affect the sale's validity and effectivity. In
the 1958 case of Sapto v. Fabiana (Sapto) penned by Justice J. B. L. Reyes,
the Court stated: The issue is whether the deed of sale executed by
appellants' predecessors in favor of the appellee over the land in question,
although never registered, is valid and binding on appellants and operated to
convey title and ownership to the appellee. Since ownership of the subject
property had been transferred to Miranda in 1996, it ceased to be owned by
Spouses Reyes as early as then. Not being owned by Spouses Reyes, the
subject property could not therefore be made answerable for any judgment
rendered against them.
25. G.R. No. 230832, November 12, 2018
THIRD DIVISION
ROYAL PLAINS VIEW, INC. AND/OR RENATO
PADILLO, Petitioners, v. NESTOR C. MEJIA, Respondent.
Nature of the case: Complaint for declaration of Nullity
FACTS:
During his lifetime, Dominador executed a Contract of Sale in favor of

Bias Mejia (Bias), father of respondent Nestor C. Mejia (Nestor), involving the
western portion of the subject land, consisting of 7,309 square meters. The
parties however, agreed to reduce the area of the purchased lot to six
hectares. Despite the sale, the title over the property remained in the name of
Dominador married to Maria Ramones (spouses Ramones). The remaining
portion of the lot was sold to a certain Pablo Benitez (Pablo) through a Deed
of Absolute Sale of Land. After that transaction, Bias died and he was
survived by his son, Nestor. Sometime in 2005, Nestor met petitioner Renato
Padillo (Renato), the President of petitioner Corporation, Royal Plains View,
Inc., a real estate company. At that time, Nestor was in actual physical
occupation of a parcel of land with an entire area of 12.3 hectares, registered
in the name of spouses Ramones. Nestor had in his possession, too, of an
ancient instrument denominated as Contract of Sale executed on September
17, 1960 by the parties then alive (Dominador in favor of Blas, for the six
hectares) and another Deed of Sale dated February 17, 1965, in favor of
Pablo, for the other 6.3 hectares. Renato and Nestor agreed to split the entire
lot into two titles. Both titles were still under the name of spouses Ramones.
Subsequently, Nestor and petitioner Corporation entered into a contract
denominated as Deed of Conditional Sale involving that said parcel of land
and registered in the name of Dominador.
Renato attempted several times to contact Nestor, but the latter did not
take his calls and simply vanished. Instead, Renato received a document
entitled "Rescission of Deed of Conditional Sale" dated February 5, 2010 from
Nestor whereby the latter rescinded the April 11, 2007 Deed of Conditional
Sale alleging that petitioners (Renato and the Corporation) had defaulted in
the payment of the monthly installments agreed upon. Renato alleged that
since the time when TCT No. T-225549 was gone, petitioner Corporation
already stopped its marketing business. Also, no one who bought the
individual lot had entered the subject property yet, as they were barred by
respondent Nestor. Because of this, petitioners are now facing various cases
in court filed by some disgruntled lot buyers. Petitioners filed a Complaint for
Declaration of Nullity of the Instrument denominated as Rescission of
Conditional Sale, Specific Performance, Sums of Money, etc. against
respondent Nestor and the heirs of the spouses Ramones.The RTC issued a
Decision dismissing petitioners' complaint with prejudice. The CA reversed the
decision of RTC. Thus, Petitioners filed a Petition for review before the
Supreme Court.
Controlling issue: Whether or not the agreement between the parties is a

contract of sale or Contract to sell?
RULING:
This Court agrees with the CA that the Deed of Conditional Sale executed
between the parties is a contract to sell. Pertinent portion of the agreement
indicative that it is a contract to sell reads:
That for and in consideration of the sum of EIGHT MILLION PESOS
(P8,000,000.00) Philippine currency, receipt of which is hereby acknowledged
from the VENDEE, the VENDOR does hereby SELL, CEDE, TRANSFER and
CONVEY unto the said VENDEE, its heirs[,] successors, executors and
assigns, the above-mentioned property subject to the terms and conditions
herein set forth: e. And upon full payment of the agreed consideration the
Vendor shall execute the deed of absolute sale in favor of the Vendee.
It is settled jurisprudence, to the point of being elementary, that an agreement
which stipulates that the seller shall execute a deed of sale only upon or after
full payment of the purchase price is a contract to sell, not a contract of sale.
In Reyes v. Tuparan, this Court declared in categorical terms that where the
vendor promises to execute a deed of absolute sale upon the completion by
the vendee of the payment of the price, the contract is only a contract to sell.
The aforecited stipulation shows that the vendors reserved title to the subject
property until full payment of the purchase price. It is clear that the buyer's
protection under R.A. No. 6552 only applies to contracts of sale of real estate
on installment payments, including residential condominium apartments,
but excluding industrial lots, commercial buildings and sales to tenants.
A purchase by a company involved in the real estate business, just like
the petitioners in this case, of a six-hectare lot can hardly be considered as
residential. This is the same interpretation conveyed in the case of Spouses
Garcia v. Court of Appeals,56 when this Court held that the subject lands,
comprising five parcels and aggregating 69,028 square meters, do not
comprise residential real estate within the contemplation of the Maceda Law.
Moreso in this case where it was shown that petitioner Corporation is already
engaged in the selling of the portions of the said lots to individual buyers. But
this is not to say that sellers in a contract to sell of industrial and commercial
lots are precluded to cancel the contract when buyers defaulted in one
installment. The old case of Luzon Brokerage Co., Inc. v. Maritime Building
Co., Inc. made it clear that R.A. No. 6552 or the Maceda Law expressly
recognizes the vendor's right of cancellation of sale on installments of
industrial and commercial properties with full retention of previous payments.
In the said case, the Supreme Court En Bane held: In other words, whether
the property is residential, commercial or industrial, Maceda Law does not
make any distinction insofar as the availability of the remedy of cancellation
by the seller in case of nonpayment of installments is concerned. The only
distinction lies on the added protection given by the law to residential buyers,
which is not enjoyed by commercial and industrial lot buyers. Indeed, the
Maceda Law addressed the predicament of thousands upon thousands of
residential property buyers who, in the words of this Court, are hounded to
suffer the loss of their life earnings only because of an oversight or difficulty in
paying one or two installments. 59 This is not the case for industrial or
commercial lot buyers, who, the law perceives to have deep pockets. To
quote the verbatim pronouncement of this Court. The Act even
in residential properties recognizes and reaffirms the vendor's right to cancel
the contract to sell upon breach and [nonpayment] of the stipulated
installments but requires a grace period after at least two years of regular
installment payments (of one month for every one year of installment
payments made, but to be exercise[d] by the buyer only once in every five
years of the life of the contract) with a refund of certain percentages of
payments made on account of the cancelled contract (starting with fifty
percent with gradually increasing percentages after five years of installments).
SO ORDERED.
26. G.R. No. 205680, November 21, 2018
HEIRS OF CIRIACO BAYOG-ANG, NAMELY: CELERINO VALLE

AND PRIMITIVO VALLE, Petitioners, v. FLORENCE QUINONES,
JOINTLY WITH HER HUSBAND, JEREMIAS DONASCO, AS
SUBSTITUTED BY THEIR SURVIVING CHILDREN, NAMELY: JEANY
FLOR Q. DONASCO, ROYCE Q. DONASCO, AND WILMER Q.
DONASCO, Respondents.
Ponente: TIJAM, J.
Nature of the action: Specific Performance and Damages
FACTS:
In 1998, an action for Specific Performance and Damages was filed

by Florence Quinones (Florence), together with her husband Jeremias
Donasco (respondents), before the RTC of Midsayap Cotabato against the
heirs of Bayog-Ang (petitioners). The subject of this dispute is a 10,848
square-meter parcel of land which is part of the property previously owned by
Ciriaco Bayog-Ang (Bayog-Ang). Respondents claimed that the said parcel of
land was sold to her by Bayog-Ang as evidenced by a Deed of Absolute Sale
dated February 25, 1964, and she demanded from the petitioners that the
said portion be segregated and transferred but the same went unheeded.
Worse, the petitioners, through alleged malicious manipulation, executed an
Extrajudicial Settlement of Estate in 1996 adjudicating the land in their favor,
and as a result of which, OCT No. RP-1078 (1596) was canceled and
Transfer Certificate of Title No. T-91543 was issued on April 3, 1997 under
their names. Respondents prayed for the nullification of the Deed of Extra-
Judicial Settlement and for the segregation of the parcel of land which they
bought from Bayog-Ang, and asked for moral damages, attorney's fees and
litigation expenses. Petitioners, in their Answer, denied any knowledge of the
deed of sale executed by Bayog-Ang in favor of Florence nor of the latter's
claim over the land. They also claimed that before the execution of the extra-
judicial settlement, they went to the Register of Deeds to verify the status of
the land and found nothing was annotated on the certificate of title. By way of
affirmative defenses, they claimed that the respondents' action was barred by
prescription and laches, and that respondents were never in possession of the
subject lot. They averred that the action was one based on written contract
which prescribed in 10 years reckoned from the execution of the Deed of
Absolute Sale in 1964, and the complaint, filed only in 1998, is thus belatedly
filed. The RTC rendered judgment in favor of the Petitioners. The CA ruled in
favor of the respondents. Hence, the present Petition for Review on Certiorari.
Controlling Issue: Whether or not Article 1544 of the New Civil Code does
not apply in the present case?
RULING:
Article 1544 of the New Civil Code provides:

Art. 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person

acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who
in good faith was first in the possession; and, in the absence thereof, to the
person who presents the oldest title, provided there is good faith. For Article
1544 to apply, it is required that the same thing must have been sold to
different vendees. It contemplates a case of double or multiple sales by a
single vendor. More specifically, it covers a situation where a single vendor
sold one and the same immovable property to two or more buyers. What is
undisputed from the facts of this case is that while respondents anchor their
claim on the subject lot through the Deed of Absolute Sale executed between
Bayog-Ang and Florence, petitioners claim the same as part of their
inheritance as heirs of Bayog-Ang. Thus, there is no double sale in the
present case because the "second transaction," as the RTC would describe it,
is not a sale. Therefore, the proper question that should have been addressed
was whether Florence was able to prove by preponderance of evidence that
she already acquired ownership of the subject lot from Bayog-Ang, as this will
determine whether the subject lot remained part of Bayog-Ang's estate which
passed to his heirs by succession at the moment of his death. Under Article
712 of the Civil Code, tradition as a consequence of contracts and succession
are modes of acquiring or transferring ownership, to wit: Art. 712.
Ownership is acquired by occupation and by intellectual creation. Ownership
and other real rights over property are acquired and transmitted by law, by
donation, by testate and intestate succession, and in consequence of certain
contracts, by tradition.
They may also be acquired by means of prescription. Succession is a mode of

acquisition by virtue of which the property, rights and obligations to the extent
of the value of the inheritance, of a person are transmitted through his death
to another or others either by his will or by operation of law. 29 The inheritance
includes all the property, rights and obligations of a person which are not
extinguished by his death.30 These provisions emphasize that what is passed
by a decedent to his heirs by succession are those which he owned at the
time of his death. It follows then that his heirs cannot inherit from him what he
does not own anymore. Under the law on sales, Article 1496 of the New Civil
Code provides that "the ownership of the thing sold is acquired by the vendee
from the moment it is delivered to him in any of the ways specified in Articles
1497 to 1501, or in any other manner signifying an agreement that the
possession is transferred from the vendor to the vendee." In particular, Article
1497 provides that "the thing sold shall be understood as delivered, when it is
placed in the control and possession of the vendee," while Article 1498 states
that "when the sale is made through a public instrument, the execution thereof
shall be equivalent to the delivery of the thing which is the object of the
contract, if from the deed the contrary does not appear or cannot clearly be
inferred. Thus, in accordance with Article 1498, the sale of the subject land
through the Deed of Absolute Sale dated February 25, 1964, which is a public
instrument, transferred ownership from Bayog-Ang to Florence, there being
no indication of any intention to the contrary. SO ORDERED.
27. G.R. No. 222616, April 03, 2019
SECOND DIVISION
NATURE OF THE ACTION: RECOVERY OF POSSESSION AND
DAMAGES WITH APPLICATION FOR WRIT OF PRELIMINARY
INJUNCTION
PONENTE: CARPIO, J
SPOUSES OROZCO (DECEASED), SUBSTITUTED BY HIS HEIRS, v.
FLORANTE G. LOZANO, SR. (DECEASED), SUBSTITUTED BY HIS
HEIRS, RESPONDENTS.
FACTS:
On 23 May 1980, Spouses Cresente R. Orozco and Lucia A. Orozco
(Spouses Orozco) purchased from Spouses Reynaldo and Floriana Fuentes
(Spouses Fuentes) two residential lots. Spouses Orozco sold half of one of
the two lots to Florante G. Lozano, Sr. (Lozano) for P5,000.00. Half of that
which was sold by Spouses Orozco to Lozano was assigned as Lot No. 3780-
A. At the time of the sale, Orozco used a rope to measure Lot No. 3780,
which Orozco thought had an area of 570 square meters. Lozano constructed
a building between Lot No. 3780-A and Lot No. 3780-B which Lozano used as
a boarding house. Spouses Orozco did not prevent Lozano from building the
boarding house because Spouses Orozco thought that the said boarding
house was constructed within the 285 square meter portion which Spouses
Orozco sold to Lozano. Allegedly, Spouses Orozco were surprised when
Lozano asked them to sign a piece of paper, purportedly an acknowledgment
receipt of the payment of P500.00 for the additional area on top of the 285
square meters principally sold. Spouses Orozco claimed that they did not sign
such acknowledgment receipt because according to them there was no
additional area sold to Lozano. On the other hand, Lozano claimed that
Spouses Orozco agreed to sell to him an additional 62 square meters of
Spouses Orozco's 325.5 square meter portion and that Lozano agreed to
make an additional payment of P1,000.00 in consideration for the said added
portion. On 24 April 1981, evidenced by an acknowledgment receipt, Lozano
paid Spouses Orozco P400.00. Subsequently, Lozano paid Spouses Orozco
P300.00, totaling P700.00, leaving P300.00 as the remaining unpaid balance
for the 62 square meter added portion. Without receiving the full payment,
Spouses Orozco made repeated demands to Lozano to vacate the portion of
Spouses Orozco's lot that Lozano allegedly encroached upon but the latter
refused to vacate. Spouses Orozco and Lozano then brought their dispute for
barangay conciliation. Spouses Orozco filed a complaint for Recovery of
Possession and Damages with Application for Writ of Preliminary Injunction.
The (MCTC) ordered Lozano to vacate the portion of Lot No. 3780-B
encroached upon and to restore the possession of the said portion to
Spouses Orozco. The Regional Trial Court (RTC), reversed the decision of
the MCTC. The RTC held that there was a valid contract of sale between
Spouses Orozco and Lozano. The CA affirmed the Decision of the RTC. The
CA held that there was no encroachment on the part of Lozano because the
sale of Lot No. 3780-A partook of the nature of a sale of land in a mass under
Article 1542 of the Civil Code. By virtue of the valid contract of sale, Spouses
Orozco agreed to completely transfer the ownership of half of Lot No. 3780 to
Lozano.
ISSUE: Whether the contract of sale of Lot No. 3780 between Spouses
Orozco and Lozano included the disputed portion?
RULING:
First, the contract of sale between Spouses Orozco and Lozano completely
transferred the title of ownership of half of Lot No. 3780. Considering that the
object of the deed of sale was half of Lot No. 3780, there is no encroachment
on the part of Lozano because the sale of Lot No. 3780 was a sale of land made
for a lump sum under Article 1542 of the Civil Code. The sale of Lot No. 3780
between Spouses Orozco and Lozano is a sale of land in a lump sum under
Article 1542 of the Civil Code.
Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a
certain sum for a unit of measure or number, there shall be no increase or
decrease of the price, although there be a greater or lesser areas or number than
that stated in the contract. The same rule shall be applied when two or more
immovables are sold for a single price; but if, besides mentioning the
boundaries, which is indispensable in every conveyance of real estate, its
area or number should be designated in the contract, the vendor shall be
bound to deliver all that is included within said boundaries, even when it
exceeds the area or number specified in the contract; and, should he not be
able to do so, he shall suffer a reduction in the price, in proportion to what is
lacking in the area or number, unless the contract is rescinded because the
vendee does not accede to the failure to deliver what has been stipulated. Article
1542 provides that when a contract of sale concerns the delivery of a determinate
object, particularly real estate, in consideration for a lump sum payment, the
vendor has the obligation to deliver everything within the boundaries even when it
exceeds the area or number specified within the said boundaries. Upon delivery,
if the area of the real estate set forth in the contract does not coincide with the
actual area delivered within the boundaries, Article 1542 provides that there shall
be no increase or decrease in the price even if the area be more or less than that
indicated in the contract of sale. Under Article 1542, the determinate object of the
contract of sale and the property to be delivered is the particular portion of the
real estate enclosed within the boundaries mentioned in the contract of sale. In
the case where the area of the immovable is stated in the contract based on an
estimate, the actual area delivered may not measure up exactly with the area
stated in the contract. According to Article 1542 of the Civil Code, in the sale
of real estate, made for a lump sum and not at the rate of a certain sum for a
unit of measure or number, there shall be no increase or decrease of the
price although there be a greater or lesser area or number than that stated
in the contract. However, the discrepancy must not be substantial. A vendee of
land, when sold in gross or with the description more or less with reference to its
area, does not thereby ipso facto take all risk of quantity in the land. The use of
"more or less" or similar words in designating quantity covers only a reasonable
excess or deficiency. Where both the area and the boundaries of the
immovable are declared, the area covered within the boundaries of the
immovable prevails over the stated area. In cases of conflict between areas
and boundaries, it is the latter which should prevail. What really defines a
piece of ground is not the area, calculated with more or less certainty,
mentioned in its description, but the boundaries therein laid down, as
enclosing the land and indicating its limits. In a contract of sale of land in a
mass, it is well established that the specific boundaries stated in the
contract must control over any statement with respect to the area contained
within its boundaries. It is not of vital consequence that a deed or contract of
sale of land should disclose the area with mathematical accuracy. It is sufficient if
its extent is objectively indicated with sufficient precision to enable one to identify
it. An error as to the superficial area is immaterial. Thus, the obligation of the
vendor is to deliver everything within the boundaries, inasmuch as it is the
entirety thereof that distinguishes the determinate object. In the said Deed of
Sale, Spouses Orozco agreed to sell to Lozano "one-half portion of Lot No.
3780." Lozano, in turn, agreed to pay Spouses Orozco a lump sum of P5,000.00
for one-half portion of Lot No. 3780 which was described in the Deed of Sale with
specific boundaries. The CA is correct in ruling that Article 1542 of the Civil Code
applies in the present case. It is clear that Spouses Orozco were divesting of and
ceding to Lozano one-half of Lot No. 3780 for a lump sum payment of P5,000.00.
Hence, by virtue of the Deed of Sale, the title of ownership over half of 651
square meters of Lot No. 3780 or 325.5 square meters was validly transferred to
Lozano.
28. G.R. No. 200676, March 25, 2019
SECOND DIVISION
SPOUSES LUIS G. BATALLA AND SALVACION BATALLA,
PETITIONERS, v. PRUDENTIAL BANK, NAGATOME AUTO PARTS,
ALICIA RANTAEL, AND HONDA CARS SAN PABLO, INC.,
RESPONDENTS.
NATURE OF THE ACTION: Complaint for Rescission of Contracts
and damages
FACTS:
In March 1998, petitioner Spouses Luis G. Batalla and Salvacion Batalla

(Spouses Batalla) purchased a brand new Honda Civic from respondent
Honda Cars San Pablo, Inc. (Honda). Respondent Alicia Rantael (Rantael),
then acting manager of Pilipinas Bank, now merged with respondent
Prudential Bank (Prudential), brokered the deal. To finance the purchase of
the said motor vehicle, Spouses Batalla applied for a car loan with Prudential.
On March 23, 1998, they executed a promissory note for the sum of
P292,200.00 payable within 36 months. On May 29, 1998, the Car Loan
Agreement was approved. As such, Prudential issued a Manager's Check in
the said amount payable to Honda. For their part, Spouses Batalla paid
P214,000.00 corresponding to the remaining portion of the purchase price for
the Honda Civic. In addition, they also paid P11,000.000.00 for delivery cost
and the installation of a remote control door mechanism, and P28,333.56 for
insurance. Spouses Batalla received the car after Rantael informed them that
it was parked near Prudential. However, after three days, the rear right door of
the car broke down. The Spouses Batalla consulted a certain Jojo Sanchez
(Sanchez), who claimed that the power lock of the rear right door was
defective and that the car was no longer brand new because the paint of the
roof was merely retouched. Spouses Batalla sent a letter to the manager of
Prudential notifying it of the said defects and demanding the immediate
replacement of the motor vehicle. On August 27, 1998, they took the car to
the Auto Body Shop for a thorough evaluation of the status of the vehicle.
According to Arturo Villanueva (Villanueva), the vehicle was no longer brand
new because the rooftop was no longer shiny in appearance. Thereafter, the
manager of Prudential, together with two individuals from Honda, met
Spouses Batalla and offered to repair the vehicle. Spouses Batalla rejected it
because they wanted the car to be replaced with a brand new one without
hidden defects. Unable to secure a brand new car in replacement of the
alleged defective vehicle, Spouses Batalla filed a Complaint for Rescission of
Contracts and Damages against Prudential and Honda. RTC dismissed the
Spouses Batalla's complaint. The trial court ruled that the car sold to Spouses
Batalla was a brand new one and that any perceived defects could not be
attributed to Honda. It highlighted that Spouses Batalla failed to prove that the
defects in the car door were due to the fault of Honda and that the car was
merely repainted to make it appear brand new. In addition, the RTC
expounded that the perceived defects were minor defects which did not
diminish the fitness of the car for its intended use. On the other hand, it
posited that Spouses Batalla must pay the loan amount to Prudential as they
admitted that they have not paid the same. The Court of Appeals (CA)
affirmed with modification the RTC decision. The appellate court ruled that
Spouses Batalla cannot rescind the promissory note and car loan agreement
on account of the car's alleged defects because they are distinct from the
contract of sale entered into with Honda. In any case, it found that the
documentary evidence, which Spouses Batalla never disputed, presented by
Honda, proved that the motor vehicle was brand new with no signs of
alteration and tampering. The CA, however, reduced the attorney's fees in
favor of Honda from P175,000.00 to P30,000.00.
Issues:
1. WHETHER THE MOTOR VEHICLE DELIVERED BY HONDA HAD
HIDDEN DEFECTS?
Article 1561 of the Civil Code provides for an implied warranty against hidden
defects in that the vendor shall be responsible for any hidden defects which
render the thing sold unfit for the use for which it is intended, or should they
diminish its fitness for such use to such an extent that, had the vendee been
aware thereof, he would not have acquired it or would have given a lower
price. In an implied warranty against hidden defects, vendors cannot raise the
defense of ignorance as they are responsible to the vendee for any hidden
defects even if they were not aware of its existence.
In order for the implied warranty against hidden defects to be applicable, the
following conditions must be met:
a. Defect is Important or Serious
i. The thing sold is unfit for the use which it is intended
ii. Diminishes its fitness for such use or to such an extent that the
buyer would not have acquired it had he been aware thereof
b. Defect is Hidden
c. Defect Exists at the time of the sale
d. Buyer gives Notice of the defect to the seller within reasonable
time.21 (Emphasis supplied)
In case of a breach of an implied warranty against hidden defects, the buyer

may either elect between withdrawing from the contract and demanding a
proportionate reduction of the price, with damages in either case. Here,
Spouses Batalla opted to withdraw from the contract of sale after their
demand for a replacement car was not granted.
As can be seen, the redhibitory action pursued by Spouses Batalla was
without basis. For one, it was not sufficiently proven that the defects of the car
door were important or serious. The hidden defect contemplated under Article
1561 of the Civil Code is an imperfection or defect of such nature as to
engender a certain degree of importance and not merely one of little
consequence. Spouses Batalla failed to prove that such defect had severely
diminished the roadworthiness of the motor vehicle. In fact, they admitted that
they had no problem as to the road worthiness of the car. In addition, it cannot
be ascertained whether the defects existed at the time of the sale. As
previously mentioned, a remote-control door mechanism was immediately
installed after the car was delivered to Spouses Batalla. The modification
made to the motor vehicle raises the possibility that the defect could have
been caused or had occurred after the installation of the remote control door
system. As the party alleging hidden defects, Spouses Batalla had the burden
to prove the same. Unfortunately, they failed to do so considering that they did
not present as witnesses, the persons who had actually examined the car
door and found it defective. Their testimony could have shed light on the
origin of the said defect and whether it was of such extent that the motor
vehicle was unfit for its intended use or its fitness had been greatly
diminished. Thus, other than Spouses Batalla's own testimony claiming that
the car doors were defective, no other evidence was presented to establish
the severity of the said defects and whether they had persisted at the time of
the sale.
2. WHETHER SPOUSES BATALLA MAY RESCIND THE CONTRACT
OF SALE, CAR LOAN AGREEMENT AND PROMISSORY NOTE
DUE TO THE DEFECTS OF THE MOTOR VEHICLE SOLD.
RULING:
The Loan agreement independent of the contract of sale. Other than
rescission of the contract of sale, Spouses Batalla also sought for the
rescission of the car loan agreement and promissory note with Prudential.
They believed that they had ground to rescind the car loan agreement and
promissory note they executed with Prudential. Spouses Batalla surmised that
the object of these documents was the delivery of a brand-new car without
hidden defects, and because of the alleged defects of the vehicle, there was
no valid object for the contract.
A contract of loan is one where one of the parties delivers money or other
consumable thing upon the condition that the same amount of the same kind
and quality shall be paid. It is perfected upon delivery of the object of the
contract. On the other hand, a contract of sale is a special contract whereby
the seller obligates himself to deliver a determinate thing and to transfer its
ownership to the buyer. The same is perfected by mere consent of the parties.
Thus, it is readily apparent that a contract of loan is distinct and separate from
a contract of sale. In a loan, the object certain is the money or consumable
thing borrowed by the obligor, while in a sale the object is a determinate thing
to be sold to the vendee for a consideration. In addition, a loan agreement is
perfected only upon the delivery of the object i.e., money or another
consumable thing, while a contract of sale is perfected by mere consent of the
parties.
Under this premise, it is not hard to see the absurdity in the position of
Spouses Batalla that they could rescind the car loan agreement and
promissory note with Prudential on the ground of alleged defects of the car
delivered to them by Honda. The transactions of Spouses Batalla with
Prudential and Honda are distinct and separate from each other. From the
time Spouses Batalla accepted the loan proceeds from Prudential, the loan
agreement had been perfected. As such, they were bound to comply with their
obligations under the loan agreement regardless of the outcome of the
contract of sale with Honda. Even assuming that the car that Spouses Batalla
received was not brand new or had hidden defects, they could not renege on
their obligation of paying Prudential the loan amount.
Spouses Batalla erroneously relies on Supercars Management &
Development Corporation v. Flores as basis to rescind the loan agreement
with Prudential on account of the perceived defects of the car delivered to
them. In the said case, only the contract of sale with the car dealer was
rescinded on account of breach of contract for delivering a defective vehicle.
While therein lendee-bank was originally impleaded for rescission of contract,
the trial court dropped it as party-defendant because the breach of contract
pertained to the contract of sale and not to the car loan agreement. In the
same vein, Spouses Batalla's recourse in case of defects in the motor vehicle
delivered to them was limited against Honda and does not extend to
Prudential as it merely lent the money to purchase the car.
SO ORDERED.
29. G.R. No. 215691, November 21, 2018
FIRST DIVISION
SPOUSES FRANCIS N. CELONES AND FELICISIMA
CELONES, Petitioners, v. METROPOLITAN BANK AND TRUST
COMPANY AND ATTY. CRISOLITO O. DIONIDO, Respondents.
PONENTE: TIJAM, J.
Nature of the case: Declaratory Relief and Injunction
FACTS:
The Spouses Celones together with their company, Processing Partners

and Packaging Corporation (PPPC), obtained various loans from Metrobank
and for which they mortgaged various properties. The total obligation of
Spouses Celones with Metrobank was P64,474,058.73. The Spouses
Celones defaulted in paying their loan, as such, Metrobank foreclosed all the
mortgaged properties. During the foreclosure sale, Metrobank was declared
as the winning bidder. Prior to the expiration of the one year redemption
period, Metrobank filed petitions for issuance of writs of possession before
several courts to take possession of the foreclosed properties. Sometime in
2007, the spouses Celones offered to redeem the properties from Metrobank.
The latter issued a Conditional Notice of Approval for Redemption (CNAR)
dated December 13, 2007 stating that the offer of Spouses Celones to
redeem the property in the amount of P55 Million has been approved to be
paid on or before December 20, 2007. Pressed for time, Spouses Celones
sought the help of banking and financing institutions who are willing to extend
them a loan. Finally, they found Atty. Dionido who agreed to loan them the
said amount. Atty. Dionido then issued two (2) manager's check, one
amounting to P35 Million and another amounting to P20 Million. In lieu of
executing a loan agreement, Spouses Celones, PPPC, Metrobank and Atty.
Dionido executed a MOA, wherein the parties agreed for the subrogation of
Atty. Dionido to all the rights, interests of Metrobank over the loan obligation
of Spouses Celones and the foreclosed properties. On the belief that they
have redeemed the foreclosed properties, the Spouses Celones demanded
from Metrobank the issuance of a Certificate of Redemption. However, the
latter refused to issue the same on the ground that all its rights and interests
over the foreclosed properties had been transferred to Atty. Dionido, as such,
he should be the one to issue the said certificate. Aggrieved, Spouses
Celones filed before the trial court a case for Declaratory Relief and Injunction
to compel Metrobank to issue the certificates of redemption and to deliver to
them the certificates of title over the foreclosed properties. The RTC issued an
Order in favor of Spouses Celones. Upon appeal to the CA, the latter reversed
the RTC Order. Thus, Petitioners spouses Celona filed a petition for review
on certiorari against respondents Metrobank and Atty. Dionido, assailing the
Decision and the Resolution of the Court of Appeals (CA) reversing the Order
of the Regional Trial Court (RTC), declaring the Memorandum of
Agreement (MOA) without force and effect and declaring that Spouses
Celones were the ones who redeemed the mortgaged properties.
Controlling Issue: Whether or not Spouses Celones were able to redeem the
foreclosed properties from Metrobank using the loan acquired from Atty.
Dionido?
Ruling:
Examination of the MOA showed no express stipulation as to the

novation or extinction of the CNAR. Thus, for implied novation to exist, it is
necessary to determine whether the CNAR and the MOA are incompatible on
every point such that they cannot be reconciled and stand together. Under the
CNAR, it is provided that Metrobank approved the offer of Spouses Celones
to redeem the property in the amount of P55 Million. While under the MOA,
Metrobank assigned all its rights and interests to Atty. Dionido over the
foreclosed properties including the issuance of a certificate of redemption.
After careful scrutiny of the records, we find that the CNAR only deals with
the redemption right of Spouses Celones while the MOA deals with the
assignment of credit of Metrobank to Atty. Dionido. As such, the CNAR and
the MOA can be reconciled and can both stand together. Under the MOA,
Metrobank assigned all its rights and interests over the foreclosed properties
to Atty. Dionido. "An assignment of credit has been defined as the process of
transferring the right of the assignor to the assignee who would then have the
right to proceed against the debtor." Atty. Dionido being an assignee of
Metrobank, he merely steps into the shoes of the assignor, Metrobank. Atty.
Dionido can acquire no greater right than that pertaining to his assignor. Thus,
when Atty. Dionido agreed to the assignment of Metrobank's rights and
interests over the foreclosed properties under the MOA, he acquires exactly
the rights and interests over the foreclosed properties as of the date of the
signing of the MOA. Unfortunately for Atty. Dionido, he merely acquired what
right Metrobank has, as of the date of the signing of the MOA, which was the
issuance of a Certificate of Redemption, because as of that date, the
foreclosed properties have already been redeemed by Spouses Celones from
Metrobank. The fact that Spouses Celones had already redeemed the
foreclosed properties was evidenced by the fact that as soon as Metrobank
was paid the redemption amount, the latter issued payment slips in the name
of Spouses Celones. Further, after the payment of the P55 Million, Metrobank
caused the dismissal of the civil cases it filed for issuance of writ of
possession due to the fact that the foreclosed properties had already been
redeemed by the Spouses Celones. Had the P55 Million been paid by Atty.
Dionido to Metrobank as a consideration for the assigment of credit, the
receipt should have been under the name of Atty. Dionido and not under the
name of Spouses Celones.
Finding that the foreclosed properties had already been redeemed by

Spouses Celones, the Certificate of Redemption should naturally be issued by
the assignee, Atty. Dionido. To accept his contention that the redemption
period of the foreclosed properties had already lapsed and that Spouses
Celones has lost their right over the foreclosed properties is to go against the
basic principle of assigment of credit that the assignee cannot acquire no
greater right than the assignor. SO ORDERED.
30. G.R. No. 239088, April 03, 2019

SECOND DIVISION
FACTS:
This case stems from a Complaint filed by petitioners Sps. Sy against

respondents Ma. Lourdes De Vera-Navarro (respondent De Vera-Navarro)
and Benjaemy Ho Tan Landholdings, Inc. (respondent BHTLI) before the RTC
for Declaration of Nullity of Deed of Absolute Sale, Cancellation of Transfer
Certificate of Titles, Recovery of Ownership, and Damages, docketed as Civil
Case No. 6333. In their Complaint, it is alleged that petitioner John was one of
the co-owners of a parcel of land and the four-storey building found therein
situated at Rizal Street, Barangay Zone IV, Zamboanga City, covered by
Transfer Certificate of Title No. (TCT) T-171,105 (subject property). Petitioners
Sps. Sy alleged that the subject property has a market value of more than
P40,000,000.00.
The controversy arose when on May 31, 2006, petitioner John, for
himself and in representation of his co-owners, borrowed P3,720,000.00 from
respondent De Vera-Navarro, secured by a Real Estate Mortgage
Contract (Mortgage Contract) over the subject property. Afterwards, to the
surprise of petitioner John, he was informed by respondent BHTLI through a
letter from its representative that the ownership of the subject property had
been transferred to respondent De Vera-Navarro; that a TCT was issued in
favor of respondent De Vera-Navarro; and that respondent BHTLI was
demanding that the petitioners Sps. Sy vacate the subject property. In the
main, petitioners Sps. Sy claimed that they are the rightful owners of the
subject property since the undated Deed of Absolute Sale executed
purportedly between petitioner John and respondent De Vera-Navarro is
allegedly null and void, and that, despite the execution of the Deed of
Absolute Sale by respondent De Vera-Navarro in favor of respondent BHTLI,
the latter has no right to own the property as it was allegedly not a buyer in
good faith. The RTC issued a Decision declaring the purported Deed of
Absolute Sale between petitioner John and respondent De Vera-Navarro
an equitable mortgage and thus null and void. The CA reversed the rulings
of the RTC and denied the appeal of petitioners Sps. Sy, while granting the
appeal of respondent BHTLI.
Issue: Whether or not the transaction between petitioner John and

respondent De Vera-Navarro was a valid contract of sale and not an equitable
mortgage?
RULING:
The purported contract of sale between petitioner John and respondent
De Vera-Navarro is an equitable mortgage and not a legitimate contract of
sale.
An equitable mortgage is defined as one which although lacking in some
formality, or form or words, or other requisites demanded by a statute,
nevertheless reveals the intention of the parties to charge real property as
security for a debt and contains nothing impossible or contrary to law. Its
essential requisites are: (1) that the parties entered into a contract
denominated as a contract of sale; and (2) that their intention was to
secure an existing debt by way of a mortgage. Article 1602 of the Civil
Code states that a contract shall be presumed to be an equitable mortgage, in
any of the following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another
instrument extending the period of redemption or granting a new period is
executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the
parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation.
Article 1604 of the Civil Code, in turn, provides that the abovementioned
badges of an equitable mortgage apply to a contract purporting to be an
absolute sale, such as in the instant case. At this juncture, it must be stressed
that the RTC, after an exhaustive trial and appreciation of the evidence
presented by the parties, concluded that the supposed contract of sale
entered between petitioner John and respondent De Vera-Navarro is in fact
an equitable mortgage.
The factual findings of the trial court, its calibration of the testimonies of the
witnesses, and its assessment of their probative weight are given high
respect, if not conclusive effect, unless the trial court ignored, misconstrued,
misunderstood or misinterpreted cogent facts and circumstances of
substance, which, if considered, will alter the outcome of the case.
Jurisprudence consistently shows that the presence of even one of the
circumstances enumerated in Article 1602 suffices to convert a purported
contract of sale into an equitable mortgage. 31 The existence of any of the
circumstances defined in Article 1602 of the New Civil Code, not the
concurrence nor an overwhelming number of such circumstances, is sufficient
for a contract of sale to be presumed an equitable mortgage. In fact, the Court
has previously ruled that when in doubt, courts are generally inclined to
construe a transaction purporting to be a sale as an equitable mortgage,
which involves a lesser transmission of rights and interests over the property
in controversy. Applying the foregoing to the instant case, the Court finds that
the presence of at least four badges of an equitable mortgage creates a very
strong presumption that the purported contract of sale entered between
petitioner John and respondent De Vera-Navarro is an equitable mortgage.
First, it is not disputed by any party that the supposed vendor of the subject
property, petitioner John, remains to be in possession of the subject property
despite purportedly selling the latter to respondent De Vera-Navarro. It is
uncanny for a supposed buyer to desist from taking possession over property
which he/she has already purchased.Second, the purchase price of the
purported sale indicated in the undated Deed of Absolute Sale is inadequate.
The inadequacy of the purchase price is even confirmed by the acts of
respondent De Vera-Navarro herself. Third, the evidence on record shows
that respondent De Vera-Navarro retained for herself the supposed purchase
price. Aside from the testimony of petitioner John that no consideration was
paid at all for the supposed contract of sale, the RTC also noted that no proof
was presented by respondent De Vera-Navarro that she actually parted with
the sum of P5,000,000.00 in favor of petitioner John pursuant to the undated
Deed of Absolute Sale. Fourth, from the evidence presented by petitioners
Sps. Sy, it is established that the real intention of the parties is for the
purported contract of sale to merely secure the payment of their debt owing to
respondent De Vera Navarro.
31. G.R. No. 215922, October 01, 2018
FIRST DIVISION
THELMA C. MULLER, GRACE M. GRECIA, KURT FREDERICK
FRITZ C. MULLER, AND HOPE C. MULLER, IN SUBSTITUTION OF
THE LATE FRITZ D. MULLER, Petitioners, v. PHILIPPINE NATIONAL
BANK, Respondent.
PONENTE: DEL CASTILLO, J.
Nature of the Action: Complaint for Ejectment
FACTS:
Spouses Fritz and Thelma Muller are the occupants of two (2) parcels
of land with improvements owned by [Philippine National Bank (PNB)] with an
aggregate area of 1,250 sq. meters. In May 26, 1987, [PNB] informed the
[Mullers] that their lease will expire on June 1, 1987; that they had rental
arrears for two and a half years amounting to PhP18,000.00; Seeking [to
renew the lease contract for] another year, x x x Fritz Muller wrote to PNB
proposing to buy] the subject properties. PNB denied the request for renewal
of the lease on June 13, 1987. On October 2, 1987, [PNB Iloilo] informed Fritz
that his offer to purchase the subject properties was not given due course by
the Head Office. On March 17, 1988, PNB demanded for the Mullers to
vacate the subject properties within fifteen (15) days from the said date, in
view of the expiration of the lease. The demand fell on deaf ears. Due to
continued occupation of the Mullers, PNB sent its final demand letter . The
Mullers failed to pay due attention to the written demands against them which
prompted PNB to institute a Complaint for Ejectment. The Municipal Trial
Court in rendered a Decision in favor of PNB.
The RTC reversed the decision of MTCC. However, the CA issued the
assailed Decision, decreeing that (1) contrary to the RTC ruling, reasonable
compensation for the use and occupancy of the subject properties should be
reckoned from receipt of initial demand and not receipt of last demand; (2)
prescription does not apply hence PNB can collect rentals which accrued prior
to receipt of last demand.
Controlling issue: Whether respondent PNB is entitled to rentals in arrears

prior to July 17, 2006 and whether its claims therefor have prescribed?
RULING:
Under Article 1670 of the Civil Code, "if at the end of the contract the
lessee should continue enjoying the thing leased for fifteen days with the
acquiescence of the lessor, and unless a notice to the contrary by either party
has previously been given, it is understood that there is an implied new lease,
not for the period of the original contract, but for the time established in
Articles 1682 and 1687. The other terms of the original contract shall be
revived." Thus, when petitioners' written lease agreement with respondent
expired on June 1, 1987 and they did not vacate the subject properties, the
terms of the written lease, other than that covering the period thereof, were
revived. The lease thus continued. In this sense, the prescriptive periods cited
by petitioners - as provided for in Articles 1144 and 1145 of the Civil Code -
are inapplicable. As far as the parties are concerned, the lease between them
subsisted and prescription did not even begin to set in. Even then, it can be
said that so long as petitioners continued to occupy the subject properties -
with or without PNB's consent - there was a lease agreement between them.
They cannot escape the payment of rent, by any manner whatsoever.
First of all, given the circumstances where liberality is obviously not present
and was never a consideration for the lease contract, petitioners cannot be
allowed to enjoy PNB's properties without paying compensation therefor; this
would be contrary to fundamental rules of fair play, equity, and law. Even
when the parties' lease agreement ended and petitioners failed or refused to
vacate the premises, it may be said that a forced lease was thus created
where petitioners were still obligated to pay rent to respondent as reasonable
compensation for the use and occupation of the subject properties. Indeed,
even when there is no lease agreement between the parties, or even when
the parties occupant and property owner - are strangers as against each
other, still the occupant is liable to pay rent to the property owner by virtue of
the forced lease that is created by the former's use and occupation of the
latter's property.
There is no question that after the expiration of the lease contracts
which respondent contracted with Aniana Galang and BPI, she lost her right
to possess the property since, as early as the actual expiration date of the
lease contract, petitioners were not negligent in enforcing their right of
ownership over the property. While respondent was finally evicted from the
leased premises, the amount of monthly rentals which respondent should pay
the petitioners as forced lessors of said property from 20 June 1988 (for the
ground floor) and 15 August 1988 until 6 January 1998 (for the second and
third floors), or a period of almost ten years remains to be resolved. At the
outset, it should be recalled that there existed no consensual lessor-lessee
relationship between the parties. At most, what we have is a forced lessor-
lessee relationship inasmuch as the respondent, by way of detaining the
property without the consent of herein petitioners, was in unlawful possession
of the property belonging to petitioner spouses. SO ORDERED.
32. G.R. No. 226587, November 21, 2018
THIRD DIVISION
DONABELLE V. GONZALES-SALDANA, Petitioner, v. SPOUSES
GORDON R. NIAMATALI AND AMY V. NIAMATALI, Respondents.
Nature of the Action: Recovery of sum of money
FACTS:
Sometime in January 2002, respondent-spouses Niamatali
(respondent-spouses), then residing in the United States of America,
made known to petitioner Donabelle Gonzales-Saldana (petitioner)
their intention to acquire real properties in Metro Manila. Petitioner,
who was then working in the Department of Labor and Employment
(DOLE), informed them that a certain parcel of land located in Las
Piñas City would be sold in a public auction conducted by the DOLE
Sheriff's Office.
Thereafter, respondent-spouses asked petitioner to participate in the
public auction on their behalf. Consequently, on January 30, 2002, they
remitted US$60,000.00 or P3,000,000.00 to petitioner's bank account
for the purchase of the Las Piñas property.
In March 2002, however, respondent spouses received from
petitioner photocopies of Transfer Certificates of Title (TCT) Nos.
105904 and 223102 covering properties located in Manila and
Parañaque contrary to their agreement that petitioner would purchase
the Las Piñas property. Petitioner explained to them that the auction
sale of the Las Piñas property did not push through because of a third-
party claim, but the judgment creditor agreed to sell to her the
Parañaque and Manila properties which were also levied on execution.
Upon their return to the Philippines in July 2002, petitioner brought
respondent-spouses to the Las Piñas property but it was locked up and
a signboard was posted, on which the words "Future Home of Lutheran
School and Community Center" were written. Thus, respondent-
spouses informed petitioner that they were no longer interested in
acquiring the Las Piñas property and asked for the return of the
P3,000,000.00, to which petitioner acceded. She even sent to
respondent-spouses a letter wherein she acknowledged receipt of the
P3,000,000.00 and promised to return said amount on or before
September 14, 2002. The RTC ruled against the respondent spouses
and ordered the dismissal of the case. However, CA reversed the
decision of the RTC. It pronounced that petitioner's admission was
sufficient to prove that she received money from the respondent-
spouses even without the documents presented by the latter. The
appellate court added that petitioner was legally bound to return the
P3,000,000.00 which she received from respondent-spouses
considering that the purchase of the Las Piñas property did not
materialize.
Controlling Issue: Whether or not there is implied agency between petitioner

and Spouses Niamatali?
RULING:
There is an implied agency between petitioner and respondent-spouses. By
the contract of agency, a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or
authority of the latter. Agency may be express, or implied from the acts of the
principal, from his silence or lack of action, or his failure to repudiate the
agency, knowing that another person is acting on his behalf without authority.
Acceptance by the agent may also be express, or implied from his acts which
carry out the agency, or from his silence or inaction according to the
circumstances. A contract of agency may be inferred from all the dealings
between petitioner and respondent-spouses.
The question of whether an agency has been created is ordinarily a
question which may be established in the same way as any other fact, either
by direct or circumstantial evidence. The question is ultimately one of
intention.20 In this case, respondent-spouses communicated with petitioner as
regards the purchase of the Las Piñas property and they remitted
P3,000,000.00 to petitioner's account for such purpose. For her part,
petitioner made inquiries with the DOLE Sheriff's Office and even talked to the
judgment creditor for the purchase of the said property. Also, she received
P3,000,000.00 from respondent-spouses to finalize the transaction. Thus, it is
beyond dispute that an implied agency existed between petitioner and
respondent-spouses for the purpose of purchasing the Las Piñas property.
Petitioner, however, acted beyond the scope of her authority. It is worthy to
note that it was petitioner who introduced to respondent-spouses the idea of
participating in the auction sale of the Las Piñas property. When the parties
came to an agreement as to the purchase of the said property, petitioner was
then unaware of other properties which were going to be sold on auction.
As a result, the parties never agreed on a substitute property to be
purchased in case the bidding of the Las Piñas property failed to materialize.
As it happened, the Las Piñas property could not be auctioned on account of
a third-party claim. Thus, when petitioner was informed that certain properties
in Manila and Parañaque were to be auctioned for the same judgment
creditor, she proceeded to participate in the bidding and decided not to wait
for respondent-spouses' approval. It was only after the sale that petitioner
informed respondent-spouses that she already settled for the Manila and
Parañaque properties, worth more than P3,000,000.00 in valuation. Thus,
even though petitioner may have been motivated by good intentions and by a
sincere belief that the purchase of the Manila and Parañaque properties
would benefit respondent-spouses, it cannot be gainsaid that she acted
outside the scope of the authority given to her, i.e., to purchase the Las Piñas
property. Hence, petitioner's failure to fulfill her obligation entitles respondent-
spouses to the return of the P3,000,000.00 which they remitted to her
account.
SO ORDERED.
33. G.R. No. 217044, January 16, 2019

DIVISION
NATURE OF THE CASE: Collection for Sum of Money
PONENTE: LEONEN, J
SPOUSES RAINIER JOSE M. YULO AND JULIET L.
YULO, Petitioners, v. BANK OF THE PHILIPPINE
ISLANDS, Respondent.
FACTS:
On October 9, 2006, the Bank of the Philippine Islands (BPI) issued
Rainier Yulo a pre-approved credit card. His wife, Juliet Yulo, was also given
a credit card as an extension of his account. Rainier and Juliet (the Yulo
Spouses) used their respective credit cards by regularly charging goods and
services on them. The Yulo Spouses regularly settled their accounts with the
Bank of the Philippine Islands at first, but started to be delinquent with their
payments by July 2008. Their outstanding balance ballooned to P264,773.56
by November 29, 2008. On February 23, 2009, the BPI filed a
Complaint before the Metropolitan Trial Court of Makati City for sum of money
against the Yulo Spouses. The MTC found that the Bank of the Philippine
Islands successfully proved by preponderance of evidence that the Yulo
Spouses failed to comply with the Terms and Conditions of their contract and
ordered the Spouses Yulo to pay the bank the sum of P229,378.68.
The RTC declared that when it comes to pre-approved credit cards, like
those issued to the Yulo Spouses, the credit card provider had the burden of
proving that the credit card recipient agreed to be bound by the Terms and
Conditions governing the use of the credit card. The RTC noted that the BPI
presented as evidence the Delivery Receipt for the credit card packet, which
was signed by Rainier's authorized representative, Jessica Baitan (Baitan). It
held that the BPI successfully discharged its burden, as the signed Delivery
Receipt and Rainier's use of credit card were proofs that Rainier agreed to be
bound by its Terms and Conditions. CA concurred with the Regional Trial
Court's finding that Rainier, through his authorized representative, received
the pre-approved credit card issued by the Bank of the Philippine Islands, and
thus, agreed to be bound by its Terms and Conditions.
CONTROLLING ISSUE: Whether or not petitioners Rainier Jose M. Yulo

and Juliet L. Yulo are bound by the Terms and Conditions on their use
of credit cards issued by respondent?
RULING:
As a pre-screened client, petitioner Rainier did not submit or sign any
application form as a condition for the issuance of a credit card in his account.
Unlike a credit card issued through an application form, with the applicant
explicitly consenting to the Terms and Conditions on credit accommodation
use, a pre-screened credit card holder's consent is not immediately apparent.
Thus, respondent, as the credit card provider, had the burden of proving its
allegation that petitioner Rainier consented to the Terms and Conditions
surrounding the use of the credit card issued to him. While the Delivery
Receipt showed that Baitan received the credit card packet for petitioner
Rainier, it failed to indicate Baitan's relationship with him. Respondent BPI
also failed to substantiate its claim that petitioner Rainier authorized Baitan to
act on his behalf and receive his pre-approved credit card. The only evidence
presented was the check mark in the box beside "Authorized Representative"
in the Delivery Receipt. This self-serving evidence is obviously insufficient to
sustain respondent's claim. A contract of agency is created when a person
acts for or on behalf of a principal, with the latter's consent or authority. Unless
required by law, an agency does not require a particular form, and may be
express or implied from the acts or silence of the principal.
34. G.R. No. 209119, October 03, 2018
FIRST DIVISION
PHILIPPINE INTERNATIONAL TRADING
CORPORATION, Petitioner, v. THRESHOLD PACIFIC
CORPORATION AND EDGAR REY A. CUALES, Respondents.
PONENTE: LEONARDO-DE CASTRO, C.J.:
Nature of the case: Complaint for Sum of Money
FACTS:
This case stemmed from a Complaint for Sum of Money filed by

petitioner Philippine International Trading Corporation (PITC) against
respondents Threshold Pacific Corporation (TPC) and Edgar Rey A. Cuales
(Cuales) before the Regional Trial Court (RTC).
The parties, PITC, represented by its President, Jose Luis U. Yulo, Jr. (Yulo),
and TPC, represented by its Managing Director, respondent Cuales, executed
the IFA whereby PITC agreed to assist TPC financially in the amount of
P50,000,000.00 for the latter's importation of urea fertilizers. Thus, on July 9,
1993, PITC opened a Land Bank of the Philippines (LandBank) Letter of
Credit in favor of La Filipina Uy Gongco Corp., a local fertilizer supplier. The
letter of credit amounted to P5,273,325.00, net of the following: (1) LandBank
bank charges amounting to P31,640.03 and (2) storage and delivery charges
incurred by PITC amounting to P571,533.60. As a result, TPC was able to
purchase the required fertilizers and sell these to ASPAI on credit. Meanwhile,
on August 6, 1993, respondent TPC, as the assignor, executed a Deed of
Assignment in favor of petitioner PITC pursuant to the IFA, WHEREAS, the
ASSIGNOR is the ASSIGNEE of the sugar and molasses quedans of the
Allied Sugar Planters Association, Inc. (ASPAI) for the crop year 1993-1994
up to the amount of P57,000,000.00, hereinafter referred to as the "quedans".
On July 7, 1994, claiming that TPC failed to pay the outstanding loan
obligation, PITC filed a Complaint for Sum of Money before the RTC. In its
Answer with Counterclaim, TPC and Cuales denied liability in the subject
transactions. The RTC found TPC and Cuales liable to PITC. The Court of
Appeals reversed the RTC Decision and ruled in favor of TPC and Cuales.
ISSUE: Whether or not the loan agreement does not expressly stipulate an
agency between petitioner PITC and respondent TPC?
RULING:
The petition is meritorious. It is undisputed that TPC and Cuales
entered into and executed the IFA and its addendums with PITC. What is at
issue then is the true nature of TPC's liability under the loan agreement, as
embodied in the IFA and its addendums. The settled rule is that the
contracting parties have the autonomy to establish such terms and conditions
as they deem fit, provided these are not contrary to law, morals, good
customs, public order, or public policy. Once there is a meeting of the minds
between the parties, the contract constitutes the law between them. Thus, in
resolving disputes involving contractual obligations, the Court's utmost duty is
to interpret the contract and uphold the parties' intention.
Loan agreement does not expressly stipulate an agency between
petitioner PITC and respondent TPC
A plain reading of the loan's stipulations reveals the following:
(i) TPC, as the borrower, applied for financial accommodation from PITC to
fund for its importation of urea fertilizers;
(ii) Upon importation, TPC will sell these fertilizers to ASPAI;
(iii) The principal amount of P50 million shall be payable in four instalments,
plus interests and penalties, if applicable;
(iv) To secure the payment of the principal, TPC agreed to provide PITC,
among others:
(a) post-dated checks issued by ASPAI and payable to PITC, which checks
shall be further secured by certificates of title of properties with the total
appraised value of not less than 60 million; and
(b) sugar quedans issued by Noah's Ark, assigned by ASPAI to TPC, and,
with Noah's Ark written conformity, endorsed by TPC in favor of PITC.
(v) In case any one of the post-dated checks issued as security fails to clear
for whatever reason, entire obligation is immediately due and demandable;
and
(vi) Attorney's fees shall be 25% of the total sum claimed in the Complaint,
exclusive of other damages, expenses, and costs of litigation.
The primary rule in interpreting contracts is that when an agreement is clear
and unequivocal on its face, the courts are bound to respect and uphold its
tenor based on the stipulations' express language. This is supported by the
Rules of Evidence, where only the instrument may be presented to prove the
terms and conditions of a written agreement. Extraneous evidence is
generally inadmissible. From the above-enumerated loan provisions,
therefore, it is clear that there is no express stipulation constituting TPC as
ASPAI's agent.
In general, an agency may be express or implied. However, an agent must

possess a special power of attorney if he intends to borrow money in his
principal's behalf, to bind him as a guarantor or surety, or to create or convey
real rights over immovable property, 46 including real estate mortgages. While
the special power of attorney may be either oral or written, the authority given
must be express. In other words, there must be "a clear mandate from the
principal specifically authorizing the performance of the act,"not merely overt
acts from which an agency may be inferred. Consequently, the agent's
"authority must be duly established by competent and convincing evidence
other than the self-serving assertion of the party claiming that such
authority was verbally given." In the present case, respondents TPC and
Cuales' allegations substantially rely on the latter's own testimony. Certainly,
as signatory in and TPC's representative to the loan transaction, Cuales shall
endeavor to exonerate himself and TPC from the liabilities thereunder. We
cannot give much weight to his bare allegations and testimony inasmuch as
these obviously serve respondents' own interests. Respondents offer no proof
to justify denial of liability other than his own account and recollection of the
transaction. In Our mind, respondents' disavowal of liability is "negative and
self-serving evidence that has no weight in law and cannot be given greater
evidentiary value over the testimony of credible witnesses who testified on
affirmative matters.
Furthermore, while respondents TPC and Cuales raised the subject
agreement's ambiguity as an issue, they did not assail the loan instruments'
genuineness and due execution. In fact, in their Answer, they admitted that
respondent Cuales entered into the IFA and its addendums in his official
capacity as respondent TPC's Managing Director. Thus, these loan
instruments best represent the parties' actual intent and agreement.
Respondent Cuales's oral testimony, as it is purely composed of his personal
recollections, is not as reliable as written or documentary evidence.
35. G.R. No. 212734, December 05, 2018
FIRST DIVISION
MABUHAY HOLDINGS CORPORATION, Petitioner, v. SEMBCORP
LOGISTICS LIMITED, Respondent.
PONENTE: TIJAM, J.:
FACTS:
On January 23, 1996, Mabuhay and IDHI incorporated Water Jet

Shipping Corporation (WJSC) in the Philippines to engage in the venture of
carrying passengers on a common carriage by inter-island fast ferry. On
February 5, 1996, they also incorporated Water Jet Netherlands Antilles, N.Y.
(WJNA) in Curasao, Netherlands. On December 6, 1996, Sembcorp effected
full payment of its equity investment. Special audits of WJNA and WJSC were
then carried out and completed on January 8, 1999. Said audits revealed that
WJSC and WJNA both incurred losses. On November 26, 1999, Sembcorp
requested for the payment of its Guaranteed Return from Mabuhay and IDID.
Mabuhay admitted its liability but asserted that since the obligation is joint, it is
only liable for fifty percent (50%) of the claim or US$464,937.75. Thereafter,
Sembcorp sent a Final Demand to Mabuhay to pay the Guaranteed Return.
Mabuhay requested for three (3) months to raise the necessary funds but still
failed to pay any amount after the lapse of the said period. On December 4,
2000, Sembcorp filed a Request for Arbitration before the International Court
of Arbitration of the International Chamber of Commerce (ICC) in accordance
with the Agreement and sought the relief of payment of the sum of
US$929,875.50; (2)alternatively, damages; (3) interest on the above sum at
such rate as the Arbitral Tribunal deems fit and just; (4) cost of the arbitration;
and (5) Such further and/or other relief as the Arbitral Tribunal deems fit and
just. The Sole Arbitrator hereby decides and ruled in favor of SEMBCORP.
Consequently, on April 14, 2005, Sembcorp filed a Petition for Recognition
and Enforcement of a Foreign Arbitral Award. Mabuhay filed an Opposition
citing the following grounds for non-enforcement under Article V of the 1958
Convention on the Recognition and Enforcement of Foreign Arbitral Awards
(New York Convention). Mabuhay argued that the dispute is an intra-
corporate controversy, hence, excluded from the scope of the arbitration
clause in the Agreement. It alleged that Sembcorp became the controlling
stockholder of IDHI by acquiring substantial shares of stocks through its
nominee, Mr. Pablo N. Sare (Sare). Mabuhay thus claimed that it has already
been released from the joint obligation with IDHI as Sembcorp assumed the
risk of loss when it acquired absolute ownership over the aforesaid shares.
The RTC dismissed the petition and ruled that the Final Award could not be
enforced. The CA promulgated its Decision reversing and setting aside the
RTC Decision.
Controlling Issue: Whether or not Mabuhay’s payment of Guaranteed

Payment to Sembcorp violates Art.1799 of the New Civil Code?
Ruling:
Mabuhay contends that it entered into a joint venture, which is akin to a

particular partnership, with Sembcorp. Applying the laws on partnership, the
payment of the Guaranteed Return to Sembcorp is a violation of Article 1799
of the Civil Code, as it shields the latter from sharing in the losses of the
partnership. Ergo, enforcement of the Final Award would be contrary to public
policy as it upholds a void stipulation. The restrictive approach to public policy
necessarily implies that not all violations of the law may be deemed contrary
to public policy. It is not uncommon for the courts in Contracting States of the
New York Convention to enforce awards which does not conform to their
domestic laws.
At any rate, Mabuhay's contention is bereft of merit. The joint venture between
Mabuhay, IDHI, and Sembcorp was pursued under the Joint Venture
Corporations, WJSC and WJNA. By choosing to adopt a corporate entity as
the medium to pursue the joint venture enterprise, the parties to the joint
venture are bound by corporate law principles under which the entity must
operate. Among these principles is the limited liability doctrine. The use of a
joint venture corporation allows the co-venturers to take full advantage of the
limited liability feature of the corporate vehicle which is not present in a formal
partnership arrangement. In fine, Mabuhay's application of Article 1799 is
erroneous.
SO ORDERED.
36. G.R. No. 196510, September 12, 2018
FIRST DIVISION
SOFIA TABUADA, NOVEE YAP, MA. LORETA NADAL, AND
GLADYS EVIDENTE, Petitioners, v. ELEANOR TABUADA, JULIETA
TRABUCO, LAURETA REDONDO, AND SPS. BERNAN CERTEZA &
ELEANOR D. CERTEZA, Respondents.
Ponente: BERSAMIN, J.
Nature of the action: Preliminary Injunction
FACTS:
On January 27, 2005, the petitioners commenced Civil Case No. 05-
28420 in the RTC against respondents Spouses Bernan and Eleanor Certeza
(Spouses Certeza), Eleanor Tabuada, Julieta Trabuco and Laureta Redondo.
The complainant included a prayer for a temporary restraining order (TRO)
and for the issuance of the writ of preliminary injunction. Summons and the
copy of the complaint and its annexes, along with the notice of raffle, were
served by personal and substituted service on the respondents on January
31, 2005 at their respective stated addresses. According to the returns of
service, respondent Eleanor Tabuada personally received the summons and
notice of raffle but refused to acknowledge receipt thereof; Redondo received
her summons through her husband, Emilio, who also refused to acknowledge
receipt thereof; Trabuco was served with summons through her neighbor
Grace Miguel, who also did not acknowledge receipt; and the Spouses
Certeza received their summons personally and acknowledged receipt
thereof. At the ex parte hearing held on September 9, 2005 to receive their
evidence, the petitioners presented Sofia Tabuada, who testified that her late
husband was Simeon Tabuada, the son of Loreta Tabuada and the brother-in
law of defendant Eleanor Tabuada; that her co-plaintiffs were her daughters;
that defendant Julieta Trabuco was the daughter of Eleanor Tabuada while
Laureta Redondo was the latter's neighbor; that Loreta Tabuada had died on
April 16, 1990 while her husband had died on July 18, 1997; that she received
the notice sent by the Spouses Certeza regarding their land, known as Lot
4272-B-2, located at Barangay Tacas, Jaro, Iloilo City that her husband had
inherited from his mother, Loreta Tabuada, and where they were residing,
informing them that the land had been mortgaged to them (Spouses Certeza);
that she immediately inquired from Eleanor Tabuada and Trabuco about the
mortgage, and both admitted that they had mortgaged the property to the
Spouses Certeza; that she was puzzled to see the signature purportedly of
Loreta Tabuada on top of the name Loreta Tabuada printed on the Mortgage
of Real Rights dated July 1, 1994 and the Promissory Note dated July 4, 1994
despite Loreta Tabuada having died on April 16, 1990; that the property under
mortgage was the where she and her daughters were residing. The RTC
rendered judgment in favor of the petitioners.
The CA promulgated its decision, reversing and setting aside the
judgment of the RTC, and dismissing the case.
Controlling Issue: Whether or not the Real Estate Mortgage was null and
void?
RULING:
Real estate mortgage was null and void
Under Article 2085 of the Civil Code, a mortgage, to be valid, must have the
following requisites, namely: (a) that it be constituted to secure the fulfillment
of a principal obligation; (b) that the mortgagor be the absolute owner of the
thing mortgaged; and (c) that the person constituting the mortgage has free
disposal of the property, and in the absence of the right of free disposal, that
the person be legally authorized for the purpose.
It is uncontested that the late Loreta Tabuada had died in 1990, or four years
before the mortgage was constituted; and that Eleanor Tabuada and Trabuco
admitted to petitioner Sofia Tabuada that they had mortgaged the property to
the Spouses Certezas. Accordingly, the RTC was fully justified in declaring
the nullity of the mortgage based on its finding that Eleanor Tabuada had
fraudulently represented herself to the Spouses Certeza as the late Loreta
Tabuada, the titleholder.37 That the titleholder had been dead when the
mortgage was constituted on the property by Eleanor Tabuada was not even
contested by Eleanor Tabuada and Tabuco. In any event, Eleanor Tabuada
had not been legally authorized to mortgage the lot to the Spouses Certeza.
Respondents Spouses Certeza were not mortgagees in good faith. The

Spouses Certeza contend that they were mortgagees in good faith
considering that they had no notice prior to the filing of Civil Case No. 05-
28420 that the real owner of the property had died several years before the
execution of the mortgage; and that they had believed in good faith in the
representations made by Eleanor Tabuada that she had been Loreta
Tabuada, the titleholder.
The contentions of the Spouses Certeza lack persuasion.
The Spouses Certeza admitted that the petitioners were the relatives by blood
or affinity of their co-defendants Eleanor Tabuada, et al.; and that Sofia
Tabuada, et al. and the petitioners had been living in their respective
residences built on the property subject of the mortgage. 40 Such admissions
belied the Spouses Certeza's contention of being mortgagees in good faith. At
the very least, they should have been prudent and cautious enough as to
have inquired about Eleanor Tabuada's assertion of her capacity and authority
to mortgage in view of the actual presence of other persons like the
petitioners herein on the property. Such prudence and caution were
demanded of persons like them who are about to deal with realty; they should
not close their eyes to facts that should put a reasonable man on his guard
and still claim he acted in good faith. 41 Indeed, the status of a mortgagee in
good faith does not apply where the title is still in the name of the rightful
owner and the mortgagor is a different person pretending to be the owner. In
such a case, the mortgagee is not an innocent mortgagee for value and the
registered owner will generally not lose his title.
37. G.R. No. 220826, March 27, 2019
SECOND DIVISION
HUN HYUNG PARK, PETITIONER, v. EUNG WON* CHOI,
RESPONDENT.
NATURE OF THE ACTION: Complaint for Estafa and Violation of
B.P. 22
FACTS:
On June 28, 1999, Park, who was engaged in the business of lending
money, extended a loan to Choi in the amount of P1,875,000.00. As payment
for the loan, Choi issued PNB Check No. 0077133 in the same amount dated
August 28, 1999 in favor of Park. On October 5, 1999, Park attempted to
deposit the check to his bank account but the same was returned to him
dishonored for having been drawn against a closed account. Thereafter, Park,
through counsel, sent a letter to Choi on May 11, 2000 informing the latter of
the dishonored check. Based on the registry return receipt attached to
Park's Complaint-Affidavit,and as stipulated by Choi during the pre-trial
conference, Choi received the demand letter on May 19, 2000 through a
certain Ina Soliven. Nevertheless, Choi failed to resolve the dishonored check.
With the loan remaining unpaid, Park instituted a complaint against Choi
for estafa and violation of B.P. 22. Following Park's complaint, the Office of
the City Prosecutor of Makati in an Information dated August 31, 2000,
charged Choi with one count of violation of B.P. 22. The RTC granted Park's
appeal. The RTC held that while the evidence presented was insufficient to
prove Choi's criminal liability for B.P. 22, it did not altogether extinguish his
civil liability. Accordingly, the RTC ordered Choi to pay Park the face value of
the check (P1,875,000.00) with legal interest. Meanwhile, aggrieved by the
RTC's remand of the case to the MeTC, Park elevated the matter to the CA.
Insofar as Choi's alleged indebtedness was concerned, the MeTC held that
the prosecution had proven that the check subject matter of the case was
issued by Choi to Park in exchange of the cash loaned to him. Choi, on the
other hand, did not even adduce any evidence to controvert Park's claim of
indebtedness. The Court of Appeals (CA) reversed the RTC’s Decision. Choi,
on his appeal alleged that he is only liable to pay P1,500,000 and 25% legal
interest of P375,000 which is P1, 875,000 in total.
Issue: Whether or not Choi is liable to pay Park the principal amount of
P1,875,000 and corresponding legal interest?
RULING:
Choi is liable to pay Park the principal amount of P1,875,000.00 and
corresponding legal interests thereon. Having dispensed with the
procedural issues, the Court proceeds to determine the extent of Choi's
liability to Park. Suffice it to state that based on the records, it is clear that
Choi is liable to Park for the loan extended by the latter to him. This is so
because, Choi in his Counter-Affidavit, already admitted that he borrowed
money from Park, arguing only regarding the extent of his liability — i.e., that
what he owed was P1,500,000.00 and not P1,875,000.00. In his Counter-
Affidavit, Choi himself stipulated. That in place of a formal document such as
a promissory note, [Park] required me instead to give him the subject check in
the amount of P1,875,000.00 which includes the interest of Twenty-Five
percent (25%) which is equivalent to P375,000.00 and the date of said check
of August 28, 1999 served to indicate the maturity date of the two-month
period within which the aforementioned loan was to be paid. In other words,
the subject check was not intended by us to be in payment of the loan but to
serve merely as an evidence of my indebtedness to the complaint in lieu of a
promissory note as I have duly informed the complainant of the lack of
sufficient funds to cover the same check when I handed over to him that
check. In this regard, the Court finds that Choi is liable to pay Park the face
value of the check in the amount of P1,875,000.00 as principal. The Court
notes that the only bases relied upon by Choi in support of his contention that
P1,500,000.00 is the principal and P375,000.00 to be the interest are his own
allegations in his Counter-Affidavit. Without more, Choi's bare allegations on
the terms of the loan fail to persuade. This is so because in accordance with
Article 1956 of the Civil Code, no interest shall be due unless it has been
expressly stipulated in writing.92 Here, without further proof of any express
agreement that P375,000.00 of the P1,875,000.00 pertains to interest, the
Court is predisposed, based on the facts of the case, to rule that the entire
principal amount owed by Choi to Park is the face value of the check, or
P1,875,000.00Yet, other than mere allegation of payment of P1,590,000.00,
Choi has adduced no evidence to prove the fact of payment. A party claiming
that an obligation has been discharged by payment has the burden of proving
the same. Given the foregoing, the Court therefore finds that: first, Choi was
not deprived of due process, and was in fact, given more than ample
opportunity to present his case; and second, that, as correctly observed by
the MeTC and subsequently affirmed by the RTC, Choi is liable to pay Park
the amount P1,875,000.00 along with its corresponding legal interest. A final
note on interest. There are two types of interest - monetary interest and
compensatory interest. Interest as a compensation fixed by the parties for the
use or forbearance of money is referred to as monetary interest, while interest
that may be imposed by law or by courts as penalty for damages is referred to
as compensatory interest. Right to interest therefore arises only by virtue of a
contract or by virtue of damages for delay or failure to pay the principal loan
on which interest is demanded. Inasmuch as the parties did not execute a
written loan agreement, and consequently, did not stipulate on the imposition
of interest, Article 1956 of the Civil Code, which states that "[n]o interest shall
be due unless it has been expressly stipulated in writing," operates to
preclude the imposition and running of monetary interest on the principal. In
other words, no monetary interest having been agreed upon between the
parties, none accrues in favor of Park. Nevertheless, the moment a debtor
incurs in delay in the payment of a sum of money, the creditor is entitled to the
payment of interest as indemnity for damages arising out of that delay. Article
2209 of the Civil Code provides that: "[i]f the obligation consists in the
payment of sum of money, and the debtor incurs in delay, the indemnity for
damages, there being no stipulation to the contrary, shall be the payment of
the interest agreed upon, and in the absence of stipulation, the legal interest,
which is six percent (6%) per annum." Consequently, by operation of Article
2209 of the Civil Code, Choi becomes liable to pay Park compensatory
interest to indemnify Park for the damages the latter suffered as a result of
Choi's delay in the payment of the loan. Delay in this case, pursuant to Article
1169 of the Civil Code, begins to run from the time Park extrajudicially
demanded from Choi the fulfillment of his loan obligation that is, on May 19,
2000. There being no stipulation as to the rate of compensatory interest, the
rate is six percent (6%) per annum pursuant to Article 2209 of the Civil Code.
To be clear, however, Article 2212 of the Civil Code, which provides that
"[i]nterest due shall earn legal interest from the time it is judicially demanded,
although the obligation may be silent upon this point," does not apply because
"interest due" in Article 2212 refers only to accrued interest. A look at the
counterpart provision of Article 2212 of the new Civil Code, Article 1109 of the
old Civil Code, supports this. It provides: Art. 1109. Accrued interest shall
draw interest at the legal rate from the time the suit is filed for its recovery,
even if the obligation should have been silent on this point. In commercial
transactions the provisions of the Code of Commerce shall govern. Article
2212 of the new Civil Code contemplates, and therefore applies, only when
there exists stipulated or conventional interest.
38. G.R. No. 219708, October 03, 2018
THIRD DIVISION
TOURISM INFRASTRUCTURE AND ENTERPRISE ZONE
AUTHORITY, Petitioner, v. GLOBAL-V BUILDERS CO., Respondent.
PONENTE:PERALTA, J.
Nature of the case: Petition for review on Certiorari
FACTS:
In 2007 and 2008, the Philippine Tourism Authority (PTA) entered into
five Memoranda of Agreement (MOA) with respondent Global-V Builders Co.
(Global-V). The Memoranda of Agreement. On July 31, 2012, Global-V filed a
Request for Arbitration and a Complaint before the CIAC, seeking payment
from the Tourism Infrastructure and Enterprise Zone Authority (TIEZA), the
office that took over the functions of PTA, of unpaid bills in connection with the
five projects, as well as payment of interest, moral and exemplary damages,
and attorney's fees. The claims of Global-V amounted to P16,663,736.34. On
March 7, 2013, the parties and their respective counsels attended the
preliminary conference. TIEZA manifested that its participation in the
preparation of the Terms of Reference (TOR) was being done to safeguard its
rights in the proceedings, without waiving its challenge on the jurisdiction of
CIAC. TIEZA also informed the Arbitral Tribunal that it was intending to
amend its Answer Ex Abundanti Ad Cautelam in view of two supervening
events: its Request for Special Audit (on all MOAs entered into by the parties)
dated January 29, 2013 and the Commission on Audit's (COA's) Notice of
Disallowance dated January 3, 2013, which was received by TIEZA on March
5, 2013. The said Notice disallowed the payment of the amount of
P12,161,423.11 for the Construction of Stamped Concrete Sidewalk and
Installation of Streetlights (Main Road) Project, as COA found the concrete
stamping logo to be unnecessary in the promotion of trade and business of
TIEZA in Boracay and in the tourism infrastructure development as a whole,
and the cost of the project was extravagant.
On April 18, 2013, the Arbitral Tribunal resolved the issues raised in the
aforementioned pleadings submitted by the parties. The Arbitral Tribunal
affirmed with finality its ruling in the Order dated January 29, 2013 that CIAC
has jurisdiction over this case. The Arbitral Tribunal said that it only allowed
the jurisdictional issue to be reopened on the manifestation of TIEZA that a
supervening event occurred, which was the special audit being conducted by
COA on all MOAs and projects entered into between TIEZA and Global-V.
The Arbitral Tribunal noted, however, that TIEZA made its request to COA to
conduct the said special audit on the day that the Arbitral Tribunal issued the
Order dated January 29, 2013, denying TIEZA's motion for reconsideration
and affirming its ruling in the Order dated December 18, 2012 that CIAC has
jurisdiction over this case. The Arbitral Tribunal stood by its previous ruling
that CIAC has jurisdiction over this case. It stated that to rule otherwise would
open a ground for CIAC to lose its jurisdiction merely by COA's act of
conducting a special audit; there is no established jurisprudence to support
the proposition that CIAC could lose jurisdiction in this manner. The Court of
Appeals held that the agreements between PTA and. Global-V have a binding
effect against TIEZA, especially that the latter stepped into the shoes of PTA
only after the completion of the projects. The change in the organizational
structure and officers of PTA cannot defeat the validity of the contracts. To
rule otherwise would cause great injustice to Global-V, which completed its
undertakings under the contracts. Further, the public is now enjoying and
benefiting from the said projects; hence, it is only proper that Global-V be
compensated therefor. The Court of Appeals upheld the Arbitral Tribunal's
award of 6% interest on the monetary award, attorney's fees, and cost of
arbitration.
Controlling Issue: Whether the Court of Appeals erred in imposing 6% legal

interest, attorney's fees, and cost of arbitration against TIEZA?
RULING:
TIEZA contends that the Court of Appeals erred in imposing 6% legal

interest, attorney's fees and cost of arbitration against it despite the lack of
basis for such award. It questions the award of attorney's fees and cost of
arbitration as it did not act in gross and evident bad faith. The contention is
without merit.
The Court of Appeals correctly sustained the imposition of 6% legal interest

on the monetary award pursuant to Nacar v. Gallery Frames, et al., which held
that "[w]hen the judgment of the court awarding a sum of money becomes
final and executory, the rate of legal interest x x x shall be 6% per annum from
such finality until its satisfaction, this interim period being deemed to be by
then an equivalent to a forbearance of credit." The Court upholds the award of
attorney's fees and cost of arbitration against TIEZA. The Arbitral Tribunal
stated that Global-V's witness presented a letter of agreement wherein
Global-V agreed to pay its counsel attorney's fees in the amount of
P350,000.00. The Arbitral Tribunal awarded attorney's fees to Global-V on the
ground that TIEZA acted in gross and evident bad faith in its refusal to pay the
valid, just and demandable claims of Global-V under Article 2208, paragraph
5 of the Civil Code. For the same reason justifying the award of attorney's
fees, the cost of arbitration was also charged against TIEZA. The said award
was affirmed by the Court of Appeals, and the Court sustains the same. SO
ORDERED.
39. G.R. No. 203697, March 20, 2019
THIRD DIVISION
AND DAMAGES
FACTS:
Sometime in 1998, OEP and Interphil entered into a Manufacturing
Agreement (Agreement)6 whereby Interphil undertook to process and package
90- and 120-mg Diltelan capsules for OEP under the terms and conditions
stated in the Agreement. INTERPHIL agrees that it will, at all times, maintain
and cause to be maintained, the highest standards of workmanship and care
in its processing operations hereunder, to the end that INTERPHIL shall
produce pure Products which meet the standards established by [OEP] or
such Products. INTERPHIL shall not be responsible for Product defects
arising from the use of ingredients which have been supplied by [OEP]. After
the execution of the Agreement, Interphil agreed to inspect the type and
quality of the packaging supplies delivered to its plant, for which it charged
OEP a "packaging materials inspection fee." From January 1999 to May 2000,
Interphil accepted the delivery of several 90- and 120-mg Diltelan capsules,
as well as printed foils and boxes for these capsules, for purposes of
processing and packaging pursuant to the Agreement, while charging OEP for
a packaging fee and the aforementioned packaging materials inspection fee,
in consideration of Interphil's commitment to inspect the materials delivered.
Thereafter, Interphil sorted, wrapped and boxed the capsules, and
subsequently delivered the same to OEP. OEP, subsequently, delivered the
capsules to its client, Orient Eropharma Co., Ltd./Elan Pharma Ltd. of Taiwan
(Elan Taiwan). The conflict between the parties arose on August 8, 2000,
when OEP received a facsimile from Elan Taiwan informing the former that
Elan Taiwan had received several urgent phone calls from certain hospitals in
Taiwan regarding a defect in the packaging of several 90-mg Diltelan
capsules which had been sold and delivered by Interphil. Elan Taiwan further
reported that several 90-mg Diltelan capsules were inadvertently wrapped in
foils meant and labeled for 120-mg Diltelan capsules and then placed in
boxes meant and labeled for 90-mg Diltelan capsules. OEP immediately
informed Interphil of the packaging defect. Investigations conducted by both
OEP and Interphil revealed that the defectively packaged capsules belonged
to a single batch, Lot No. 001369, which Interphil processed and packaged in
April 2000. As a result of the defectively packaged capsules and the
necessary reworking of the same to the public due to the danger and health
risks, OEP alleges that it had no choice but to recall and destroy all capsules
belonging to the aforementioned Lot No. 001369. As a consequence, this
resulted in the incurring of numerous costs and expenses on the part of OEP.
Due to the foregoing, OEP demanded that Interphil reimburse it the total of
P5,183,525.05 for the expenses that it had incurred for and in connection with
the recall and destruction of these capsules, including the costs of the
materials destroyed. However, Interphil refused and did not pay the amount
demanded. Due to Interphil's refusal to pay the same, OEP filed a complaint
with the RTC of Makati City. After trial, the RTC rendered a Decision in favor
of OEP, finding that on the basis of the doctrine of res ipsa loquitor, Interphil
was negligent in the performance of its obligations under the Agreement, and
that there was no merit in Interphil's defense that OEP, likewise, breached the
Agreement in unilaterally destroying the complained-of products without
observing the agreed procedure for the recall and destruction in case a defect
in a certain batch of capsules is found.
ISSUE#2 Whether or not Interphil is liable for damages?
The Court finds that Interphil is liable for actual damages to OEP, the latter
pleading in its complaint and able to substantiate the amounts owed to them
as a result of the costs and expenses it incurred in the amount of
P5,183,525.05 and the profits it failed to realize due to the gross negligence of
Interphil in the amount of P306,648.81 as compensatory damages. While
OEP incorrectly distinguished the damages as two separate entities, as in this
jurisdiction actual and compensatory damages are one and the same, this is
largely a matter of semantics and the Court finds that OEP was able to prove
the amounts owed to them, as found by the RTC and concurred in by the CA.
Under Articles 2199 and 2200 of the Civil Code, actual or compensatory
damages are those awarded in satisfaction of or in recompense for loss or
injury sustained. They proceed from a sense of natural justice and are
designed to repair the wrong that has been done. . Interphil is also liable for
exemplary damages. Under Article 2232 of the Civil Code, the court may
award exemplary damages if the defendant in a contract or a quasi-contract
acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.
In Arco Pulp and Paper Co., Inc., et al. v. Lim the Court expounded, thus:
The purpose of exemplary damages is to serve as a deterrent to future and

subsequent parties from the commission of a similar offense. The case
of People v. Rante citing People v. Dalisay held that:
Also known as 'punitive' or 'vindictive' damages, exemplary or corrective
damages are intended to serve as a deterrent to serious wrong doings, and
as a vindication of undue sufferings and wanton invasion of the rights of an
injured or a punishment for those guilty of outrageous conduct. These terms
are generally, but not always, used interchangeably. In common law, there is
preference in the use of exemplary damages when the award is to account for
injury to feelings and for the sense of indignity and humiliation suffered by a
person as a result of an injury that has been maliciously and wantonly
inflicted, the theory being that there should be compensation for the hurt
caused by the highly reprehensible conduct of the defendant—associated with
such circumstances as willfulness, wantonness, malice, gross negligence or
recklessness, oppression, insult or fraud or gross fraud—that intensifies the
injury. The terms punitive or vindictive damages are often used to refer to
those species of damages that may be awarded against a person to punish
him for his outrageous conduct. In either case, these damages are intended in
good measure to deter the wrongdoer and others like him from similar
conduct in the future. x x x 70 (Citation and emphases in the original deleted)
While Interphil did not necessarily act in a willful, malicious, or wanton
manner, it is clear that it was grossly negligent in its defective packaging. This
gross negligence not only prejudiced the contractual relationship between the
parties, but also endangered the health of the end consumers who received
the packages, seen in the fact that the hospitals themselves sent notice of the
infirmity after receiving the defective items. Therefore, the Court adheres to
the findings of the lower courts that Interphil is also liable for exemplary
damages to serve as a warning to the public to be more circumspect when it
comes to product handling, particularly those involving the health and safety
of the consumers. SO ORDERED.
40. G.R. No. 208590, October 03, 2018
FIRST DIVISION
Ponente: TIJAM, J.:
FACTS:
Respondents Major Victorio Karaan (Major Karaan), Napoleon

Labrague (Napoleon) and Herminia Labrague (Herminia) (Spouses
Labrague), and Ely Liva (Liva) were passengers of M/V Princess of the Orient
owned by petitioner Sulpicio Lines, Inc. (now known as Philippine Span Asia
Carrier Corporation) when it sank on September 18, 1998 somewhere
between Cavite and Batangas, near Fortune Island. On June 30, 1999,
respondents lodged a Complaint based on breach of contract of carriage
against petitioner praying for various amounts of damages as
passengers/survivors of the sinking of petitioner's vessel. The RTC issued an
Order ordering petitioner to pay the respondents actual, moral, exemplary and
nominal damages. The CA, the latter modified the damages awarded to
respondents
Issues:
1. May temperate damages be awarded when the claim for actual

damages was proven?
RULING:
The award of temperate damages was proper
At the outset, petitioner's argument that the CA erroneously deleted the award
of actual damages, despite the amounts having been duly proven, and
imposing temperate damages in its stead, is inaccurate and misleading.
Our reading of the CA Decision reveals that the CA imposed temperate
damages because it deemed the amounts put forth by the respondents'
insufficiently proven. Verily, the CA stated, "[t]he respondents, except for their
own testimonies, were not able to proffer any other evidence of their loss.
Sans the receipts and the documents supporting their claims of actual
damages, the same cannot be awarded."
Undoubtedly, the law sanctions the award of temperate damages in case of
insufficiency of evidence of actual loss suffered. Article 2224 of the Civil Code
states:
Article 2224. Temperate or moderate damages, which are more than nominal
but less than compensatory damages, may be recovered when the court finds
that some pecuniary loss has been suffered but its amount cannot, from the
nature of the case, be provided with certainty.
In this case, we find that no egregious error on the part of the CA in imposing
temperate damages. The records of the case, which remain uncontroverted,
undoubtedly establishes that respondents suffered loss during the unfortunate
sinking of M/V Princess of the Orient. However, no independent proof, other
than respondents' bare claims, were presented to provide a numerical value
to their loss. Absent a contrary proof which would justify decreasing or
otherwise modifying the amount pegged by the CA, this Court is constrained
to affirm the amounts it imposed as temperate damages.
ISSUE #2: Whether or not exemplary damages be awarded when the
conditionality for awarding it under Article 2232 of the Civil Code is absent?
RULING:
The award of exemplary damages was proper

The Civil Code provides for the rules concerning the award of exemplary
damages, as follows:
Article. 2229. Exemplary or corrective damages are imposed, by way of
example or correction for the public good, in addition to the moral, temperate,
liquidated or compensatory damages.
Article. 2232. In contracts and quasi-contracts, the court may award
exemplary damages if the defendant acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner.
Article. 2233. Exemplary damages cannot be recovered as a matter of right;
the court will decide whether or not they should be adjudicated.
Article. 2234. While the amount of the exemplary damages need not be
proved, the plaintiff must show that he is entitled to moral, temperate or
compensatory damages before the court may consider the question of
whether or not exemplary damages should be awarded. In case liquidated
damages have been agreed upon, although no proof of loss is necessary in
order that such liquidated damages may be recovered, nevertheless, before
the court may consider the question of granting exemplary in addition to the
liquidated damages, the plaintiff must show that he would be entitled to moral,
temperate or compensatory damages were it not for the stipulation for
liquidated damages.
In this case, we see no error in the award of exemplary damages considering
the lower courts' consistent finding that respondents are entitled to moral and
temperate damages for the sinking of M/V Princess of the Orient.
SO ORDERED.
41. G.R. No. 225705, April 01, 2019
FIRST DIVISION
RESPONDENT.
FACTS:
[Respondent] was hired by petitioner Seachest, through its manning
agent, Maunlad, as Galley Steward on-board MV Carnival. After several
months, respondent started experiencing seasickness and extreme low back
pains. Despite medications administered by the ship's clinic, the pain
persisted and extended down to respondent's left thigh. Subsequently,
respondent was repatriated and arrived in the Philippines on 23 January
2010. He reported to petitioner Maunlad, was referred to the Metropolitan
Hospital where he underwent physical therapy sessions, among others, and
was diagnosed with 'lumbar spondylosis with disc extrusion, L3-L4.
Respondent was advised to undergo surgery, spine laminectomy, but did not
approve of the same and instead underwent physical therapy sessions.
According to respondent, as per petitioners' medical doctors, surgery was not
a guarantee on the return of his normal condition, thus, he refused. On 6 May
2010, respondent returned for a follow-up, and the report on his condition
stated:
Follow-up case of 28 year old male with Herniated Nucleus Pulposus, L3-L4,
Left.
EMG-NCV Study - chronic left L5 – S1 radiculopathy
Not keen on surgery.
Continue rehabilitation.
His suggested disability grading is Grade 8 - 2/3 loss of motion or lifting power
of the trunk.
To come back after 3 weeks
As respondent's condition did not improve for purposes of resuming his
regular duties as a seafarer, he filed a Complaint on 14 May 2010 for total and
permanent disability, reimbursement of medical and transportation expenses,
damages, attorney's fees and legal interest against petitioners. Petitioners, in
their Position Paper, insisted that respondent is only entitled to a Grade 8
disability assessment as found by the company physician, with the equivalent
monetary benefits of (US$16,795.00), which they offered but was refused.
The Labor Arbiter rendered a Decision on 22 June 2012 ruling that: 1) the
assessment of the company-designated physician giving a Grade 8 disability
rating was premature, made only to comply with the 120-day period as
mandated in the POEA Contract; and 2) the work-related disability incurred by
respondent prevented him from seeking employment and thus, he was
entitled to the payment of permanent disability benefits.
Petitioners appealed the said Decision to the NLRC. However, the NLRC
affirmed the findings of the Labor Arbiter. The CA essentially held that the
company-designated physician failed to arrive at a definite assessment of
respondent's fitness or disability within the 120/240-day periods provided
under the law; that the company-designated physician's last report on
respondent's condition which "suggested" a disability grading of "Grade 8 -
2/3 loss of motion or lifting power of the trunk" is not a final or definite
assessment of his fitness or disability because respondent was still required
to return after three weeks for further examination; that regardless of the fact
that respondent was required to return for further examination, the statutory
120/240-day periods would have elapsed without respondent being issued
either a final and definitive disability assessment or a fit-to-work certification;
that respondent's condition would not have improved even with the prescribed
surgery, which he refused to undergo, because as admitted by the company-
designated physician it did not guarantee improvement of respondent's
condition; that to this day, respondent is still unable to resume his regular sea
duties, his inability to find work continues, and he was not re-employed by
petitioners; and that with the lapse of the statutory 120/240-day periods
without respondent having gone back to work, he is deemed totally and
permanently disabled. Petitioners moved to reconsider but the CA stood its
ground. Hence, the present Petition.
Issues: Whether or not respondent is entitled to the award of attorney’s

fees?
On the issue of attorney's fees, the Court finds that, since there was no
ground for the institution of the instant labor case to begin with, respondent
has no right to demand the payment of such fees. As was held in Pacific
Ocean Manning, Inc. v. Penales,
Under Article 2208 of the Civil Code, attorney's fees can be recovered
'when the defendant's act or omission has compelled the plaintiff to litigate
with third persons or to incur expenses to protect his interest.' Considering the
above pronouncements, this Court sees no reason why damages or attorney's
fees should be awarded to Penales. It is obvious that he did not give the
petitioners' company-designated physician ample time to assess and evaluate
his condition, or to treat him properly for that matter. The petitioners had a
valid reason for refusing to pay his claims, especially when they were
complying with the terms of the POEA SEC with regard to his allowances and
treatment.
SO ORDERED.
42. G.R. No. 213023, April 10, 2019
THIRD DIVISION
PONENTE: LEONEN, J.
FACTS:
On March 24, 2004, an article entitled "Malinis ba talaga o naglilinis-linisan

lang (Sino si Finance Sec. Juanita Amatong?)" 5 was published in Abante
Tonite, a newspaper of general circulation in the Philippines. Written by Raffy
T. Tulfo (Tulfo), the article reported that a certain Michael C. Guy (Guy), who
was then being investigated by the Revenue Integrity Protection Service of
the Department of Finance for tax fraud, went to former Department of
Finance Secretary Juanita Amatong (Secretary Amatong)'s house to ask for
help. Secretary Amatong then purportedly called the head of the Revenue
Integrity Protection Service and directed that all the documents that the
Revenue Integrity Protection Service had obtained on Guy's case be
surrendered to her. GUY claimed that the article had tainted his reputation,
Guy filed before the Office of the City Prosecutor of Makati City a Complaint-
Affidavit against Tulfo and the following representatives of Abante
Tonite's publisher, Monica Publishing Corporation. After a preliminary
investigation, the Office of the City Prosecutor filed an Amended Information
charging Tulfo and Macasaet, et al. with the crime of libel.The RTC convicted
Tulfo and Macasaet, et al. of the crime of libel. RTC ordered Tulfo and
Macasaet, et al. to pay Guy: (1) P5,000,000.00 as actual damages; (2)
P5,000,000.00 as moral damages; and (3) P211,200.00 as attorney's fees.
The Court of Appeals (CA) affirmed the trial court's Judgment convicting Tulfo
and Macasaet, et al. of libel. The Court of Appeals (CA) modified its August
30, 2013 Decision and deleted the award of exemplary damages. It likewise
deleted the Regional Trial Court's award of actual damages for lack of factual
and legal basis. Guy filed this Petition for Review on Certiorari, seeking the
reversal of the Court of Appeals Amended Decision and the reinstatement of
the Regional Trial Court Judgment.
Issue: Whether or not Guy is entitled to claim Moral damages?
RULING:
Moral damages are "compensatory damages awarded for mental pain and
suffering or mental anguish resulting from a wrong." 71 They are awarded to
the injured party to enable him to obtain means that will ease the suffering he
sustained from respondent's reprehensible act. Unlike actual and temperate
damages, moral damages may be awarded even if the injured party failed to
prove that he has suffered pecuniary loss. As long as it was established that
complainant's Injury was the result of the offending party's action, the
complainant may recover moral damages. Article 2219 of the Civil Code
specifically states that moral damages may be recovered in cases of libel,
slander, or defamation. The amount of moral damages that courts may award
depends upon the set of circumstances for each case. There is no fixed
standard to determine the amount of moral damages to be given. Courts are
given the discretion to fix the amount to be awarded in favor of the injured
party, so long as there is sufficient basis for awarding such amount. Here,
petitioner insists that he is entitled to moral damages in the amount of
P5,000,000.00. He argues that he suffered social humiliation and anxiety from
the libelous article. His 77-year-old mother castigated him for disgracing their
family. His children questioned him after they had been interrogated in school
for the article about their father. Finally, petitioner claims that the article tainted
his reputation, prompting his clients and business associates to refuse to
transact with him. While this Court recognizes the embarrassment and
unease suffered by petitioner, it must be emphasized that moral damages
may only be awarded when the claimant has sufficiently proved: (1) the
factual foundation of the award; and (2) the causal connection of petitioner's
suffering to respondents' act. Here, other than his bare allegations of
besmirched reputation and loss of clientele, petitioner failed to present
evidence supporting his assertions. He submitted no evidence substantiating
his claimed loss. He also failed to adduce proof to support his claim that his
reputation was tainted due to the libelous article. Moreover, he did not present
in court any testimony from the business associates who had allegedly lost
faith in him. Indeed, as the Court of Appeals found, the client, whom he had
supposedly lost due to the libelous article, has been transacting business with
him again. Nonetheless, moral damages should still be awarded.
SO ORDERED.
43. G.R. No. 211533, June 19, 2019

RESPONDENT.
G.R. No. 212071, June 19, 2019
RESPONDENT.
SECOND DIVISION
FACTS:
Sometime in 1997, Mendoza applied with Caltex for dealership of a

company-owned service station in Sta. Cruz, Virac, Catanduanes ("Virac").
Pursuant to the selection procedure of Caltex, Mendoza passed the
psychographic exam, had undergone the required on-the-job evaluation and
training ("OJET") and made a successful defense of his business proposal.
The dealer selection board of Caltex, however, awarded the Virac dealership
to the Spouses Carmen ("Carmen") Francisco and Jose ("Jose") Romeo
Francisco (collectively, "the Franciscos"). Jose happened to be the grandson
of the owner/lessor of the lot occupied by the Virac service station. On July 9,
1998, Mendoza re-applied for dealership of a dealer-owned service station
either in Virac or San Andres, since one (1) of the two (2) Caltex service
stations in Catanduanes had closed. Mendoza offered four (4) service station
sites to Caltex, three (3) of which were owned by him. Caltex, apprised
Mendoza that "it has been decided that the Caltex dealership be awarded to
the site which offers a more strategic location and is more accessible to the
target market. Through a letter-reply Caltex explained to Mendoza. Still
discontented with the explanation of Caltex, Mendoza filed his Complaint [for
Torts & Damages with Preliminary Mandatory Injunction and/or Temporary
Restraining Order (Complaint) before the Regional Trial Court. RTC ruled
against Mendoza. The CA held that Chevron is not entitled to moral and
exemplary damages.
Issue: Whether or not Chevron is entitled to Moral damages?
RULING:
Chevron is not entitled to moral damages.
A corporation is not as a rule entitled to moral damages because, not being a
natural person, it cannot experience physical suffering or such sentiments as
wounded feelings, serious anxiety, mental anguish and moral shock. The only
exception to this rule is where the corporation has a good reputation that
is debased, resulting in its social humiliation. Be that as it may, as
explained in the very recent case of Noell Whessoe, Inc. v. Independent
Testing Consultants, Inc., the Court held that "claims for moral damages
must have sufficient factual basis, either in the evidence presented or in
the factual findings of the lower courts."
Similarly, in the earlier case of Crystal v. Bank of the Philippine Islands, the
Court held that:
There must still be proof of the existence of the factual basis of the
damage and its causal relation to the defendant's acts. This is so because
moral damages, though incapable of pecuniary estimation, are in the category
of an award designed to compensate the claimant for actual
injury suffered and not to impose a penalty on the wrongdoer.
In the instant case, the CA factually found that: "Here, no evidence was
presented by Chevron to establish the factual basis of its claim for
moral damages. Mere allegations do not suffice; they must be substantiated
by clear and convincing proof. Thus, We delete the award of moral damages
in favor of Chevron." In any case, the Court finds that the CA did not commit
any reversible error in not granting moral damages in favor of Chevron.
Chevron supports its claim for moral damages merely by pointing out that
Mendoza copy furnished third persons his correspondence with Chevron.
However, there was absolutely no evidence presented showing that
Chevron's reputation was even remotely scathed by the letters of Mendoza. It
is very much implausible and inconceivable how the mere act of furnishing
copy of the letters from a single, unknown trader can even slightly affect the
reputation of one of the largest oil companies in the country. Hence, the CA's
assessment that no evidence was presented by Chevron to establish the
factual basis of its claim for moral damages must be left undisturbed.
SO ORDERED.

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

 G.R. No. 220400, March 20, 2019…………………………………3

 G.R. No. 202430, March 06, 2019…………………………………5

 G.R. No. 233774, April 10, 2019………………………………………9

 G.R. No. 225433…………………………………………………………..11

LARA'S GIFTS & DECORS, INC., Petitioner, - versus - MIDTOWN

 G.R. No. 210297, April 03, 2019………………………………………….29

 G.R. No. 239088, April 03, 2019…………………………………………52

SPOUSES JOHN T. SY AND LENY N. SY, AND VALENTINO T. SY,

 G.R. No. 225705, April 01,

 G.R. No. 213023, April 10, 2019……………………………………...76

 G.R. No. 211533, June 19, 2019…………………………………….78

CHEVRON PHILIPPINES, INC. (FORMERLY KNOWN AS CALTEX

Arellano University School of Law

CIVIL LAW REVIEW 2

ATTY. CRISOSTOMO A. URIBE

d. Compliance with Obligations

 G.R. No. 202430, March 06,

e. Kinds of Civil Obligations

1. As to perfection and Extinguishment

 G.R. No. 198237, October 08,

 G.R. No. 233774, April 10,

LARA'S GIFTS & DECORS, INC., Petitioner, - versus - MIDTOWN

4. Any other manner of contravention

 G.R. No. 203697, March 20,

g. MODES OF EXTINGUISHMENT OF OBLIGATION

 G.R. No. 200553, December 10,

SPOUSES GILDARDO C. LOQUELLANO AND ROSALINA JULIET B.

 G.R. No. 212107, January 28,

 G.R. No. 211204, December 10,

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

 G.R. No. 226088, February 27,

NATURE OF THE CASE: COMPLAINT FOR SUM OF MONEY

B. Fundamental Characteristic/ Principle of Contracts

 G.R. No. 211206, November 07,

 G.R. No. 208336, November 21,

4. Obligatory Force of Contracts

 G.R. No. 210297, April 03,

 G.r. no. 196733, November 21,

 G.R. No. 201116, March 04, 2019…………………………………

 G.R. No. 211780, November 21,

I. Kinds of Contracts as Validity

 Valid and Binding

 G.R. No. 218343, November 28,

Distinguished from other transactions

B. Elements of Contract of Sale

HEIRS OF CIRIACO BAYOG-ANG, NAMELY: CELERINO VALLE

 G.R. No. 200676, March 25,

E. Rights and Obligation of the Vendee

SPOUSES JOHN T. SY AND LENY N. SY, AND VALENTINO T. SY,

TERMINATION OF THE LEASE

a. As to manner of creation: Express & Implied

Essential Elements of a Contract of Agency

 G.R. No. 217044, January 16,

VI. Obligations of Partners among themselves

C. To participate in the losses

 G.R. No. 212734, December 05,

 G.R. No. 196510, September 12,

TORTS AND DAMAGES

 G.R. No. 219708, October 03,

G.R. No. 203697, March 20,

G.R. No. 225705, April 01,

 G.R. No. 213023, April 10,