Master Case 2

1. Interphil Laboratories, Inc. v. OEP Philippines, Inc.
G.R. No. 203697; March 20, 2019

Reyes, A., Jr., J. | Third Division
2. Jeffrey Calaoagan v. People of the Philippines

G.R. No. 222974; March 20, 2019
Gesmundo, J. | First Division
3. VDM Trading, Inc., et al. v. Leonita Carungcong and Wack Wack Twin Towers Condominium Association,
Inc.
G.R. No. 206709, February 06, 2019
Caguioa, J. | Second Division
4. Hun Hyung Park v. Eung Won Choi

G.R. No. 220826, March 27, 2019
5. Spouses Luis G. Batalla And Salvacion Batalla v. Prudential Bank, et al.

G.R. No. 200676; March 25, 2019
J. Reyes, Jr., J. | Second Division
6. Central Visayas Finance Corporation v. Spouses Eliezer S. Adlawan, et al.

G.R. No. 212674; March 25, 2019
Del Castillo, J. | First Division
7. Spouses Rainier Jose M. Yulo and Juliet L. Yulo v. Bank of the Philippine Islands
G.R. No. 217044; January 16, 2019
Leonen, J. | Third Division
8. Domestic Petroleum Retailer Corporation v. Manila International Airport Authority

G.R. No. 210641; March 27, 2019
9. Karen Nuñez Vito, et al. v. Norma Moises-Palma

G.R. No. 224466 (Formerly UDK-15574), March 27, 2019
10. Spouses Luis G. Batalla And Salvacion Batalla v. Prudential Bank, et al.
G.R. No. 200676; March 25, 2019
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:
TABLE OF CONTENTS
Page
OBLIGATIONS
A. In General
3. Prescription of Actions
(1) Socorro T. Clemente, as substituted by Salvador T. 1
Clemente v. Republic of the Philippines (Department of
Public Works and Highways, Region IV-A)
G.R. No. 220008, February 20, 2019
Carpio, J. | Second Division
(2) Domestic Petroleum Retailer Corporation v. Manila 3

International Airport Authority
G.R. No. 210641; March 27, 2019
B. Sources of Civil Obligations

3. Quasi-contracts
b. Solutio Indebiti
G.R. No. 210641; March 27, 2019
D. Kinds of Civil Obligations

1. As to Perfection and Extinguishment
b. Conditional
G.R. No. 220008, February 20, 2019
(5) Karen Nuñez Vito, et al. v. Norma Moises-Palma 9

c. With a term or period

G.R. No. 220008, February 20, 2019
3. As to rights and obligations of multiple parties

b. Solidary
(7) Keihin-Everett Forwarding Co., Inc. v. Tokio Marine 12
Malayan Insurance Co., Inc. and Sunfreight Forwarders &
Customs Brokerage, Inc.
G.R. No. 212107; January 28, 2019
Reyes, J. Jr., J. | Second Division
E. Breach of Obligations
(8) Interphil Laboratories, Inc. v. OEP Philippines, Inc. 14
Page
G.R. No. 203697; March 20, 2019
G. Modes of Extinguishment
1. Payment or performance
Special Forms of Payment
a. Dation in Payment
6. Novation
Kinds of Novation
a. As to its nature
i) subjective or personal
(10) Food Fest Land, Inc., et al. v. Romualdo C. Siapno, et al. 18
G.R. No. 226088; February 27, 2019
Peralta, J. | Third Division
CONTRACTS
E. Essential Elements of Contracts
3. cause of the obligation
(11) Dr. Rico Vargas, et al. v. Jose F. Acsayan, Jr. 20
G.R. No. 206780; March 20, 2019
H. Interpretation of Contracts
G.R. No. 206780; March 20, 2019
SALES
A. In General
Kinds of Sale
B. Elements of a Contract of Sale

Essential Elements
G.R. No. 206780; March 20, 2019
D. Rights and Obligations of the Vendor

Warranties
(15) Spouses Luis G. Batalla And Salvacion Batalla v. 27
Prudential Bank, et al.
G.R. No. 200676; March 25, 2019
F. Remedies for Breach of Contract

Remedies of an Unpaid Seller
Page
LEASE
III. Rights and Obligations of the Lessor and Lessee
G.R. No. 210641; March 27, 2019
AGENCY
III. Essential Elements of a Contract of Agency
(1) Consent of the contracting parties: principal & agent only
(18) Spouses Rainier Jose M. Yulo and Juliet L. Yulo v. Bank 32
of the Philippine Islands
G.R. No. 217044; January 16, 2019
CREDIT: PLEDGE, MORTGAGE AND ANTICHRESIS

III. Chattel and Real Estate Mortgage
D. Rights and Obligations of the Mortgagee
(19) Central Visayas Finance Corporation v. Spouses Eliezer 34
S. Adlawan, et al.
G.R. No. 212674; March 25, 2019
CREDIT TRANSACTIONS: LOAN, DEPOSIT,

GUARANTY AND SURETYSHIP
II. Loans
C. Characteristics
(20) Spouses Luis G. Batalla And Salvacion Batalla v. 36
Prudential Bank, et al.
G.R. No. 200676; March 25, 2019
F. Rights and Obligations of Bailor and Bailee in Mutuum

To pay interest : Kinds : Rate
(21) Hun Hyung Park v. Eung Won Choi 38
G.R. No. 220826, March 27, 2019
TORTS
II. Elements of Quasi-Delict
(22) VDM Trading, Inc., et al. v. Leonita Carungcong and 40
Wack Wack Twin Towers Condominium Association, Inc.
G.R. No. 206709, February 06, 2019
A. Act or Omission, there being Fault or Negligence
3. Proof of Negligence: Burden of Proof
Doctrine of Rep Ipsa Loquitor
G.R. No. 203697; March 20, 2019
Page
B. Damage or Injury
(24) Jeffrey Calaoagan v. People of the Philippines 44
G.R. No. 222974; March 20, 2019

G.R. No. 203697; March 20, 2019
OBLIGATIONS
Socorro T. Clemente, as substituted by Salvador T. Clemente v. Republic of
the Philippines (Department of Public Works and Highways, Region IV-A)
G.R. No. 220008, February 20, 2019
NATURE OF THE ACTION

Petition for review on certiorari of the CA Decision affirming the RTC Decision
that dismissed the Complaint for Revocation of Donation filed by the donors.
FACTS
Municipal Mayor Amado A. Clemente (Mayor Clemente), Dr. Vicente A.
Clemente, Judge Ramon A. Clemente, and Milagros A. Clemente (Clemente
Siblings) executed a Deed of Donation dated 16 March 1963 over a one-hectare
portion of their property in favor of the Republic of the Philippines, through the
DPWH, solely for the land to be used as site for a government hospital. In
accordance with the Deed of Donation, the construction of a building for a
hospital was started in the following year. However, for reasons unknown, the
construction was never completed and only its foundation remains.
In 2003, Socorro and Rosario P. Clemente, as successors-in-interest of Mayor

Clemente, wrote to the District Engineer asking for information on the
development of the government hospital. The District Engineer informed her that
the DPWH no longer had a plan to construct a hospital at the site and that the
DPWH had no budget for the hospital construction.
In 2004, almost forty-one (41) years after the Deed of Donation was executed,
Socorro filed a Complaint for Revocation of Donation, Reconveyance and
Recovery of Possession alleging that the Republic of the Philippines failed to
comply with the condition imposed on the Deed of Donation, which was to use
the property "solely for hospital site only and for no other else, where a
government hospital shall be constructed.”
The RTC held that since the parties did not fix the period within which to comply
with the condition, but a period was indeed intended, the Court may fix the period
for the performance of the donee's obligation, under Article 1197 of the Civil
Code. However, since Socorro failed to pray for the fixing of the period, the RTC
dismissed the case.
In this appeal, DPWH argues that the action has already prescribed because it
has been more than ten (10) years since the violation of the condition in the
Deed of Donation.
ISSUE
In a donation with a condition where a period for compliance was not expressly
provided, is an action for reconveyance filed after more than 10 years after the
execution of the deed of donation barred by prescription or laches?
RULING
NO, this has not been barred by prescription or laches.
An action for reconveyance based on a violation of a condition in a Deed of

Donation should be instituted within ten (10) years from the time of such
violation. Moreover, an action to revoke a donation based on non-compliance of
the condition prescribes after four (4) years from such non-compliance. Thus, in
both cases, to be able to determine whether the action has prescribed, the time
of non-compliance must first be determined. This is because the failure to comply
1
OBLIGATIONS
with the condition imposed will give rise to the cause of action against the
obligor-donee, which is also the starting point of when to count the prescriptive
period.
It is imperative to determine the period within which the donee has to comply with
the condition to construct a government hospital and use the site solely as a
hospital site, because it is only after such time that it can be determined with
certainty that there was a failure to comply with the condition. Without such
determination, there is no way to determine whether the donee failed to comply
with its obligation, and consequently, whether the prescriptive period to file an
action has started to run. Prescription cannot set in if the period to comply with
the obligation cannot be determined with certainty.
In this case, the Deed of Donation is bereft of any period within which the donee
should have complied with the condition of constructing a government hospital.
Thus, the action has not yet prescribed.
Moreover, laches has not set in. Laches is defined as the failure or neglect for an
unreasonable and unexplained length of time to do that which, by exercising due
diligence, could or should have been done earlier; it is negligence or omission to
assert a right within a reasonable time, warranting a presumption that the party
entitled to assert it either has abandoned it or declined to assert it.
Because of the failure of the Deed of Donation to specify the period within which
to comply with the condition, there can be no delay in asserting the right against
respondent. In contrast, respondent is guilty of unreasonable delay and neglect
in complying with its obligation to construct a government hospital and to use the
Subject Property as a hospital site.
2
OBLIGATIONS
Domestic Petroleum Retailer Corporation v. Manila International Airport
Authority
G.R. No. 210641; March 27, 2019

Petition for review on certiorari assailing the CA Decision which affirmed the RTC
Decision which ordered for the refund by the lessor of overpayment of rentals.
FACTS
Domestic Petroleum Retailer Corporation (DPRC) leased a parcel of land and a
building from Manila International Airport Authority (MIAA). After some time,
MIAA passed a resolution increasing the rentals paid by its concessionaires and
lessees. Hence, MIAA demanded payment of rental in arrears based on the
increase.
DPRC protested in writing to MIAA the increased rentals. However, it also

signified its intention to comply in good faith with the terms and conditions of the
lease contract by paying the amount charged.
On December 1, 2004, the SC promulgated its Decision in the case of MIAA v.

Airspan Corporation, et al. which nullified the same resolution in this case issued
by MIAA for non-observance of the notice and hearing requirements for the fixing
rates required by the Administrative Code.
DPRC demanded the refund of its overpayment of rentals, which MIAA refused.
Hence, on December 23, 2008, DPRC filed a complaint for collection of sum of
money. The RTC ruled in favor of DPRC and order MIAA to refund DPRC for the
full amount of the overpayment.
On appeal, the CA modified the RTC, ruling because DPRC's claim against MIAA
is purportedly in the nature of solutio indebiti, the claim of refund must be
commenced within six (6) years from date of payment pursuant to Article 1145(2)
of the Civil Code. Hence, since DPRC demanded the refund of the increase in
monthly rentals mistakenly paid only on July 27, 2006 and filed this case before
the RTC only on December 23, 2008, it can recover only those paid during the
period from January 9, 2003 to December 5, 2005, i.e., DPRC can only claim
refund within the six years preceding the filing of an action for refund. The CA
ruled that DPRC has, by reason of the 6 years prescriptive period, lost its right to
recover the amount paid during the period December 11, 1998 to December 5,
2002.
ISSUE
In an action for refund of overpayment of rent to a government agency, is the
reckoning point the first overpayment, barring refund of other overpayments
outside of the prescriptive period?
RULING
NO, aside from erroneously applying the six-year prescriptive period governing
quasi-contracts, the CA likewise erred in stating that the applicable prescriptive
period is reckoned from the date of DPRC's first overpayment on December 11,
1998.
Considering that DPRC's cause of action is not based on a quasi-contract and is

instead founded on the enforcement of a contract, the CA erred in applying
Article 1145(2) of the Civil Code in the instant case. Instead of the prescriptive
3
OBLIGATIONS
period of six years for quasi-contracts, it is Article 1144 of the Civil Code that
finds application in the instant case. This Article provides that an action based on
a written contract must be brought within 10 years from the time the right of
action accrues.
Moreover, in Español v. Board of Administrators, Philippine Veterans

Administration, as to when the right of action of a party who claims payment from
the government due to the nullification of an administrative policy or issuance
accrues, it was held that the claimant has a cause of action for payment against
the government only from the time that the SC declared invalid the questioned
administrative policy. This is so because it is at that point when the presumption
of legality of the questioned administrative policy had been rebutted and thus it
can be said with certainty that the government infringed on the right of the
claimant.
Therefore, considering that the SC’s Decision in MIAA v. Airspan Corporation, et

al. invalidating the MIAA Resolution was promulgated only on December 1, 2004,
the right of action of DPRC for the refund of the overpaid rentals accrued only on
the said date. Hence, the filing of DPRC's Complaint for sum of money on
December 23, 2008 was well within the prescriptive period.
Therefore, regardless of whether the prescriptive period to be applied in the

instant case is the one pertaining to actions arising from quasi-contracts, i.e., six
years, or from contracts, i.e., 10 years, considering that the prescriptive period
started to run only on December 1, 2004, DPRC's claim for a complete refund of
all the overpaid rentals has not prescribed.
More so, it is likewise undisputed that on July 27, 2006, DPRC sent MIAA a
written demand for the refund of rent, which covers the overpayment of monthly
rentals made by DPRC since December 11, 1998.
According to Article 1155 of the Civil Code, the prescription of actions is

interrupted when a written extrajudicial demand is made. And so, when written
extrajudicial demand for refund of overpayments was made by petitioner DPRC
on July 27, 2006, not only was the prescriptive period to file an action
suspended; jurisprudence holds that the interruption of the prescriptive period by
written extrajudicial demand means that the said period would commence anew
from the receipt of the demand, written extrajudicial demand wipes out the period
that has already elapsed and starts anew the prescriptive period.
Hence, after DPRC made its written extrajudicial demand on July 27, 2006, it
actually had until July 27, 2016 to file an action for the full recovery of the
overpayment of monthly rentals. Accordingly, at the time of the institution of the
Complaint for Collection of Sums of Money by DPRC on December 23, 2008, no
claim for refund of overpaid monthly rentals had prescribed.
4
OBLIGATIONS
Authority
G.R. No. 210641; March 27, 2019

FACTS
increase.

Subsequently, the SC promulgated its Decision in the case of MIAA v. Airspan

Corporation, et al. which nullified the same resolution in this case issued by MIAA
for non-observance of the notice and hearing requirements for the fixing rates
required by the Administrative Code.
Hence, DPRC filed a complaint for collection of sum of money. The RTC ruled in
favor of DPRC. The CA affirmed the RTC Decision; the CA ruled that DPRC's
payment of the increased rental was due to a mistake in the interpretation and
imposition of the MIAA Resolution, which was later found to be invalid for lack of
the required prior notice and public hearing, giving rise to the application of the
principle of solutio indebiti under Articles 2154, 2155 and 2156 of the Civil Code.
ISSUE
Is payment based on a government resolution later found to be void tantamount
to solution indebiti?
RULING
NO, 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.
In the instant case, the essential requisites of solutio indebiti are not present.
First, there exists a binding relation between DPRC and MIAA. It is undisputed by
all parties that MIAA and DPRC are mutually bound to each other under a
Contract of Lease. Hence, with MIAA and 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 payor or, i.e., DPRC, and the person who received the payment,
i.e., MIAA.
Second, there was no payment by mistake. petitioner DPRC's overpayment of

rentals from 1998 to 2005 was not made by sheer inadvertence of the facts or
5
OBLIGATIONS
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. From the very beginning, petitioner DPRC was consistent
in its belief that the increased rentals were not due as Resolution No. 98-30 was,
in its view, void.
However, petitioner DPRC still made payment despite its objection, not due to
any mistaken belief, but for the sole reason that prior to MIAA v. Airspan
Corporation, et al., the MIAA Resolution was still presumed to be legal, having
the force of law in the absence of any judicial declaration to the contrary. Hence,
without any judicial declaration on the nullity of the resolution at that time, DPRC
had no alternative but to make the subject payments, though under protest.
Therefore, it is not correct to say that the subject payments made by DPRC were
made by mistake or inadvertence.
Hence, the principle of solutio indebiti is not applicable.
6
OBLIGATIONS
G.R. No. 220008, February 20, 2019

FACTS

dismissed the case.
In this appeal, DPWH argues that the obligation to construct a hospital was
fulfilled when it started to construct a hospital.
ISSUE
In a conditional obligation for the construction of a hospital and for the land to be
used as a hospital site, is starting a construction for such hospital equivalent to
its fulfillment?
RULING
NO, when the parties provided in the Deed of Donation that the donee should
construct a government hospital, their intention was to have such hospital built
and completed, and to have a functioning hospital on the subject property.
The nature of the donation made by the Clemente Siblings is a donation subject
to a condition – the condition being the construction of a government hospital and
the use of the property solely for hospital purposes. Upon the non-fulfillment of
the condition, the donation may be revoked and all the rights already acquired by
the donee shall be deemed lost and extinguished. This is a resolutory condition
7
OBLIGATIONS
because it is demandable at once by the donee but the non-fulfillment of the
condition gives the donor the right to revoke the donation.
It is clear from the records that the donee failed to comply with its obligation to
construct a government hospital and to use the premises as a hospital site.
When the parties provided in the Deed of Donation that the donee should
construct a government hospital, their intention was to have such hospital built
and completed, and to have a functioning hospital on the subject property. This
can be evidenced by the accompanying words in the Deed of Donation – "solely
for hospital site only and for no other else, where a government hospital shall be
constructed."
The condition imposed upon the donee has two parts – first, to construct a
government hospital, and second, to use the subject property solely as a hospital
site. The argument of DPWH that the mere construction of the foundation of a
building complies with the condition that a government hospital be constructed on
the subject property is specious. A foundation of a building is obviously not a
government hospital.
The other condition in the Deed of Donation, which is to use the subject property
solely as a hospital site, is also not complied with when the subject property is
left idle, which means the subject property is not being used as a hospital site.
The foundation of a building cannot function as a hospital site. Thus, even if we
are to consider, for the sake of argument, that the construction of the foundation
of a hospital building is enough to comply with the obligation to construct a
government hospital, the subsequent abandonment of the construction results in
the non-compliance with the second part of the donee's obligation – which is to
use the subject property solely as a hospital site.
Based on the foregoing, the donee failed to comply with the resolutory condition
imposed in the Deed of Donation.
8
OBLIGATIONS
Karen Nuñez Vito, et al. v. Norma Moises-Palma

Petition for review on certiorari assailing the CA Decision which found the
existence of dation in payment, whereas the RTC found the existence of a
contract of sale, while the MTC found the sale to be invalid.
FACTS
When both Vicentico Nuñez and his spouse died, their property was inherited by
their four children: Karen Nuñez Vito (Karen), Warren Nuñez (Warren), Lynette
Nuñez Macinda (Lynette), Alden Nuñez (Alden) (collectively, petitioners).
Subsequently, Norma Moises-Palma (Norma) was able to have Karen, Warren

and Lunette sign a Deed of Adjudication and Sale (DAS) wherein they
purportedly sold to Norma their respective pro indiviso shares in the subject lot.
After the execution of the DAS, Norma immediately took possession of the lot.
Norma executed a PN in favor of the petitioners whereby she obligated herself to

pay P50,000.00. Despite non-payment of the purchase price and the absence of
Alden's signature on the DAS, Norma was able to cause the registration of the
document and a TCT was issued to her.
Petitioners thereafter filed against Norma a case for Declaration of Nullity of

Deed of Adjudication and Sale for non-payment of the purchase price despite
demand.
ISSUE
Is non-payment of the purchase price in a contract of sale considered as a
resolutory condition which extinguishes such sale?
RULING
YES, the non-payment of the purchase price in a contract of sale is a negative
resolutory condition.
Pursuant to Article 1458 of the Civil Code, a contract of sale is a reciprocal

obligation to give; and the prestation or obligation of the seller or vendor is "to
transfer the ownership of and to deliver a determinate thing" while the prestation
or obligation of the buyer or vendee is "to pay therefor a price certain in money or
its equivalent." The full payment of the purchase price is the buyer's prestation.
Based on Justice J.B.L. Reyes' opinion in Sing, Yee & Cuan, Inc. that the non-
payment of the purchase price in a contract of sale is a negative resolutory
condition, the happening or fulfillment thereof will extinguish the obligation or the
sale pursuant to Article 1231 of the Civil Code, which provides that fulfillment of a
resolutory condition is another cause of extinguishment of obligations. Despite its
extinguishment, since the vendor has lost ownership of the land, the contract
must itself be resolved and set aside. It is noted, however, that the resolution of
the sale is the tacit resolutory condition under Article 1191 which is implied in
reciprocal obligations.
Consequently, the sale transaction in the DAS is deemed resolved.
9
OBLIGATIONS
G.R. No. 220008, February 20, 2019

FACTS

dismissed the case.
ISSUE
In a conditional obligation where a period was intended by the parties, can there
be a breach of the condition even if the court has not yet fixed a period?
RULING
YES, while ideally, a period to comply with the condition should have been fixed
by the Court, this will be an exercise in futility because of the fact that it has been
more than fifty (50) years since the Deed of Donation has been executed; and
thus, the reasonable time contemplated by the parties within which to comply
with the condition has already lapsed.
In Central Philippine University v. Court of Appeals, it was held that when the
obligation does not fix a period but from its nature and circumstances it can be
inferred that a period was intended, the general rule provided in Art. 1197 of the
Civil Code applies, which provides that the courts may fix the duration thereof
because the fulfillment of the obligation itself cannot be demanded until after the
court has fixed the period for compliance therewith and such period has arrived.
10
OBLIGATIONS
This general rule however cannot be applied considering the different set of
circumstances existing in the instant case. More than a reasonable period of fifty
(50) years has already been allowed by the petitioner to avail of the opportunity
to comply with the condition even if it be burdensome, to make the donation in its
favor forever valid. But, unfortunately, it failed to do so. Hence, there is no more
need to fix the duration of a term of the obligation when such procedure would be
a mere technicality and formality and would serve no purpose than to delay or
lead to an unnecessary and expensive multiplication of suits.
Moreover, under Art. 1191 of the Civil Code, when one of the obligors cannot
comply with what is incumbent upon him, the obligee may seek rescission and
the court shall decree the same unless there is just cause authorizing the fixing
of a period. In the absence of any just cause for the court to determine the period
of the compliance, there is no more obstacle for the court to decree the
rescission claimed.
11
OBLIGATIONS
Keihin-Everett Forwarding Co., Inc. v. Tokio Marine Malayan Insurance Co.,
Inc. and Sunfreight Forwarders & Customs Brokerage, Inc.
G.R. No. 212107; January 28, 2019
Reyes, J. Jr., J. | Second Division

Appeal from the CA Decision which held Keihin-Everett Forwarding Co., Inc.
(Keihin-Everett) liable to pay Tokio Marine Malayan Insurance Co., Inc.'s (Tokio
Marine's) claim with right of reimbursement from Sunfreight Forwarders &
Customs Brokerage, Inc. (Sunfreight Forwarders).
FACTS
Honda Trading Phils. Ecozone Corporation (Honda Trading) ordered 80 bundles
of Aluminum Alloy Ingots from PT Molten Aluminum Producer Indonesia (PT
Molten). Honda Trading insured the entire shipment with Tokio Marine & Nichido
Fire Insurance Co., Inc. (TMNFIC), and also engaged the services of 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, Keihin-Everett had an Accreditation Agreement with Sunfreight
Forwarders whereby Sunfreight Fowarders undertook to render common carrier
services for Keihin-Everett and to transport inland goods within the Philippines.
The shipment was caused to be released from the pier by Keihin-Everett and
turned over to 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 was reportedly taken away.
Claiming to have paid Honda Trading's insurance claim for the loss it suffered,
Tokio Marine filed a complaint for damages against Keihin-Everett. Tokio Marine
maintained that it had been subrogated to all the rights and causes of action
pertaining to Honda Trading. Keihin-Everett denied liability for the lost shipment
on the ground that the loss thereof occurred while the same was in the
possession of Sunfreight Forwarders. Hence, Keihin-Everett filed a third-party
complaint against the latter, who, in turn, denied liability on the ground that it was
not privy to the contract between Keihin-Everett and Honda Trading.
The RTC found Keihin-Everett and Sunfreight Forwarders jointly and severally
liable to pay Tokio Marine's claim, ruling that the driver of Sunfreight Forwarders
as the cause of the evil caused. On appeal, the CA held only Keihin-Everett liable
with the right to be reimbursed by Sunfreight Forwarders.
ISSUE
Can a sub-common carrier be held solidarily liable with the original common
carrier?
RULING
NO, the liability of Keihin-Everett and Sunfreight Forwarders are not solidary.
There is solidary liability only when the obligation expressly so states, when the
law so provides, or when the nature of the obligation so requires.
Thus, under Article 2194 of the Civil Code, liability of two or more persons is
solidary in quasi-delicts. But in this case, Keihin-Everett's liability to Honda
Trading (to which Tokio Marine had been subrogated as an insurer) stemmed not
from quasi-delict, but from its breach of contract of carriage. Sunfreight
Forwarders was only impleaded in the case when Keihin-Everett filed a third-
party complaint against it. There was no direct contractual relationship between
12
OBLIGATIONS
Sunfreight Forwarders and Honda Trading. Accordingly, there was no basis to
directly hold Sunfreight Forwarders liable to Honda Trading for breach of
contract. If at all, Honda Trading can hold Sunfreight Forwarders for quasi-delict,
which is not the action filed in the instant case.
It is not expected however that Keihin-Everett must shoulder the entire loss. The
case of Torres-Madrid Brokerage, Inc. v. FEB Mitsui Marine Insurance Co., Inc.
is instructive, wherein the original common carrier was found to be entitled to
reimbursement from the sub-common carrier due to the latter's own breach of its
contract of carriage with the original common carrier.
In the same manner, Keihin-Everett has a right to be reimbursed based on its

Accreditation Agreement with Sunfreight Forwarders. By accrediting Sunfreight
Forwarders to render common carrier services to it, Keihin-Everett in effect
entered into a contract of carriage with a fellow common carrier, Sunfreight
Forwarders.
It is undisputed that the cargoes were lost when they were in the custody of
Sunfreight Forwarders. Hence, under Article 1735 of the Civil Code, the
presumption of fault on the part of Sunfreight Forwarders (as common carrier)
arose. Since Sunfreight Forwarders failed to prove that it observed extraordinary
diligence in the performance of its obligation to Keihin-Everett, it is liable to the
latter for breach of contract. Consequently, Keihin-Everett is entitled to be
reimbursed by Sunfreight Forwarders due to the latter's own breach occasioned
by the loss and damage to the cargoes under its care and custody. As with the
cited Torres-Madrid Brokerage case, Sunfreight Forwarders, too, has the option
to absorb the loss or to proceed after its missing driver, the suspect in the
hijacking incident.
13
OBLIGATIONS
Interphil Laboratories, Inc. v. OEP Philippines, Inc.
G.R. No. 203697; March 20, 2019

Petition for review on certiorari challenging the CA Decision which affirmed the
RTC Decision finding negligence on the basis of res ipsa loquitor.
FACTS
Interphil Laboratories, Inc. (Interphil) and OEP Philippines, Inc. (OEP) entered
into a Manufacturing Agreement (Agreement) whereby Interphil undertook to
process and package 90- and 120-mg Diltelan capsules for OEP under the terms
and conditions stated in the Agreement. Section VI of the Agreement provides,
among others, that should a batch or any of the products fail to meet the
processing or packaging standards specified by OEP, Interphil shall either
correct the deficiency in such batch or destroy the batch on OEP's instructions.
Later, OEP discovered a defect in the packaging of several 90-mg Diltelan

capsules which had been sold and delivered by Interphil, wherein 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 which Interphil processed and
packaged.
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 batch. Due to
the foregoing, OEP demanded that Interphil reimburse it 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.
Hence, OEP filed a complaint with the RTC. 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.
However, OEP was able to show that it needed to do so immediately because of
the danger and health risks posed to the public.
ISSUE
Does the provision cited by Interphil bar OEP from exercising discretion when it
comes to the destruction of defectively packaged capsules thereby making OEP
in breach of its contractual obigations?
RULING
NO, not only are 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.
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.
14
OBLIGATIONS
Explaining the same further, RCPI v. Verchez, stated that 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 are 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.
15
OBLIGATIONS

FACTS
Vicentico Nuñez (Vicentico) borrowed money from Rosita Moises (Rosita) and
executed a real estate mortgage (REM) over his property; the money loaned by
Rosita came from her daughter, Norma Moises-Palma (Norma). Allegedly, the
loan was subsequently paid as evidenced by an Affidavit Authorizing Release of
Mortgage (AARM).
When both Vicentico and his spouse died, the property was inherited by their four
children: Karen Nuñez Vito (Karen), Warren Nuñez (Warren), Lynette Nuñez
Macinda (Lynette), Alden Nuñez (Alden) (collectively, petitioners).
Subsequently, Norma was able to have Karen, Warren and Lunette sign a Deed
of Adjudication and Sale (DAS) wherein they purportedly sold to Norma their
respective pro indiviso shares in the subject lot. The DAS provided that the
Vicentino’s REM is cancelled and considered null and void and no effect. After
the execution of the DAS, Norma immediately took possession of the lot and had
it registered in her name. Norma executed a PN in favor of the petitioners. Upon
prodding of petitioners, Norma executed an Acknowledgment of Debt (AOD),
whereby she admitted that she owed petitioners the purchase price of the DAS.
Alden instituted a case against Norma for Annulment of TCT. During the
pendency of this case, Alden and Norma entered into a Compromise Agreement,
whereby Alden, for a consideration, agreed to respect Norma's ownership and
possession of the share being claimed by him.

Deed of Adjudication and Sale. The MTC ruled in favor of the petitioners.
However, the RTC found the DAS to be valid. The CA ruled that the transactions
entered into by the parties is not sale but dation in payment because the DAS
was used to pay Vicentino’s loan.
ISSUE
Is alienation by the creditor in satisfaction of a debt in money always a dation in
payment?
RULING
NO, while the DAS seems to suggest a dation in payment, the subsequent
actuations of the parties, especially Norma, negate the same or the contemplated
offset. If the DAS was intended to be a dation in payment, the execution of the
PN and AOD by Norma as well as the Compromise Agreement by Alden and
Norma whereby Alden agreed, for an agreed consideration, to respect Norma's
ownership and possession of the share being claimed by him, shows an opposite
declaration, i.e., there was no dation in payment or offset.
If the intention by the parties was that the heirs of Vicentico were ceding the
subject lot to Norma as payment of the loan of their father to Rosita, it would be
out of the ordinary for Norma to execute a PN two days after the DAS,
16
OBLIGATIONS
acknowledging her indebtedness 00 to them, promising to pay the same within a
specified period, and declaring against her interest that the said amount
represented the "cost" of the land that she bought from them.
Subsequently, it would be unlikely for her to execute the AOD wherein she
acknowledged that she owed Karen, Warren and Lynette if the consideration of
the DAS was Vicentico's indebtedness. Alden was no longer included because
by then Norma had already paid him pursuant to their Compromise Agreement.
And, Norma should have insisted in the case filed by Alden against her that there
was an offset of his father's loan to her, through Rosita, her mother.
Moreover, in the AARM, a duly notarized document, they acknowledged that they
are releasing the REM, the fact being that the late Vicentico Nuñez had already
paid Rosita and absolving the Vicentico of any liabilities whatsoever. Indeed, as
claimed by petitioners, the loan of their father Vicentico had been paid as duly
acknowledged in a registered public instrument by the heirs of Rosita, including
Norma.
Thus, there is preponderant evidence that supports the finding that the DAS was
not intended by the parties to be a dation in payment. And, even assuming that
the DAS was a dation in payment, the documents that were subsequently
executed had the effect of novating the same.
Under Article 1291 of the Civil Code, obligations may be modified by: (1)
changing their object or principal conditions; (2) substituting the person of the
debtor; and (3) subrogating a third person in the rights of the creditor.
When Norma executed the PN, AOD and Compromise Agreement, she was
acknowledging that the principal condition or stipulation on the payment of the
purchase price in the DAS had been modified from the offset or cancellation of
Vicentico's indebtedness secured by the REM, without which would have
amounted to a dation in payment, to a loan payable within a certain period, which
converted the transaction to a sale on credit.
Given the foregoing, the CA erred in its finding that the transaction between the
parties is a dation in payment or dacion en pago. The MTC and RTC were,
therefore, correct in considering the transaction as a contract of sale.
17
OBLIGATIONS
Food Fest Land, Inc., et al. v. Romualdo C. Siapno, et al.
G.R. No. 226088; February 27, 2019
Peralta, J. | Third Division

Appeal of the CA Decision affirming the RTC Decision holding the lessee and it’s
assignee liable to the lessor for the unpaid rental increases.
FACTS
Food Fest Land, Inc. (Food Fest) leased the parcel of land owned by Romualdo
C. Siapno, Teodoro C. Siapno and Felipe C. Siapno (collectively as Siapno).
Their contract of lease contained an annual rental escalation clause as well as
the provision that “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.”
Food Fest assigned all its rights and obligations under the Contract of Lease unto
Tucky Foods, Inc. (Tucky Foods). Later, Tucky Foods assigned all the said rights
and obligations under such contract to Joyfoods Corporation (Joyfoods).
Afterwards, the rental escalation clause was no longer observed by the lessee.
Hence, Siapno filed a complaint for collection of sum of money against Food Fest
and Joyfoods.
Food Fest argues that the its assignment of its rights and obligations under the
Contract of Lease to Tucky Foods, and the assignment by Tucky Foods of the
same rights and obligations to Joyfoods, ought to have resulted in Food Fest's
release from its obligations under the Contract of Lease and its substitution
therein by Joyfoods.
ISSUE
Does novation by the substitution on the part of the debtor amount to a waiver of
rights of the creditor?
RULING
YES, 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.
Novation of an obligation by substituting the person of the debtor, as the term

suggests, entails the replacement of the debtor by a third person. When validly
made, it releases the debtor from the obligation which is then assumed by the
third person as the new debtor. To validly effect such kind of novation, however,
it is not enough for the debtor to merely assign his debt to a third person, or for
the latter to assume the debt of the former; the consent of the creditor to the
substitution of the debtor is essential and must be had.
Testate Estate of Lazaro Mota v. Serra held that consent must be given
expressly for the reason that, since novation extinguishes the personality of the
first debtor who is to be substituted by a new one, it implies on the part of the
creditor a waiver of the right that he had before the novation which waiver must
be express under the principle that renuntiatio non praesumitor, recognized by
the law in declaring that a waiver of right may not be performed unless the will to
waive is indisputably shown by him who holds the right.
The settled facts do not show that Siapno had expressly consented in writing to
the substitution of Food Fest by Joyfoods. The consent of Siapno to such
18
OBLIGATIONS
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.
Verily, without the consent of Siapno — conveyed in the form required under the
Contract of Lease — there can be no substitution of Food Fest by Joyfoods.
19
CONTRACTS
Dr. Rico Vargas, et al. v. Jose F. Acsayan, Jr.
G.R. No. 206780; March 20, 2019

Petition for review on certiorari assailing the CA Decision which reversed and set
aside the RTC Decision which declared as valid the verbal agreement to sell.
FACTS
Maximino and Estela Tabangcora (Sps. Tabangcora) offered to sell to Jose F.
Acsayan, Jr. (Acsayan) a parcel of land. The property was registered under the
names of spouses Vargas, the brother-in-law and sister, respectively, of
Maximino Tabangcora.
Apparently, a Deed of Assignment executed by spouses Vargas which

purportedly ceded the subject property in favor of Tavar Farm & Marketing,
represented by the spouses Tabangcora. By virtue of such Deed of Assignment,
the spouses Tabangcora claimed ownership over the subject property. The Deed
of Assignment states that “the ASSIGNORS, for valuable considerations, do
hereby assign, transfer and convey unto the ASSIGNEE, its successors and
assigns, the above described parcel of land including all the improvements
thereon, free from liens and encumbrances.”
Acsayan then made several payments to the spouses Tabangcoram but the
Deed of Absolute Sale was never executed. Acsayan decided to investigate the
status of the subject property on his own and found that a real estate mortgage
over the subject property had been executed by the spouses Tabangcora and
spouses Vargas in favor of Stardiamond, a corporation incorporated by
petitioners Libarnes, Paranis, Maximino, Tabangcora.
Believing that petitioners conspired and connived with one another to deprive him
of the land he allegedly purchased, Acsayan filed a Complaint seeking to declare
him the absolute owner of the property, among others. The RTC held the validity
of the sale between the Sps. Vargas and Sps. Tabangcora. On appeal, the CA
invalidated the Deed of Assignment purportedly because the parties never
mentioned anything about a valuable consideration that was paid by the spouses
Tabangcora to spouses Vargas.
ISSUE
Is a contract that does not mention anything about a valuable consideration that
was paid considered as void?
RULING
NO, under Art. 1354 of the Civil Code, consideration is presumed unless the
contrary is proven. The presumption that a contract has sufficient consideration
cannot be overthrown by a mere assertion that it has no consideration.
Paragraph No. 2 of the said Deed of Assignment states as follows:
The ASSIGNORS, for valuable considerations, do hereby assign, transfer

and convey unto the ASSIGNEE, its successors and assigns, the above
described parcel of land including all the improvements thereon, free from
liens and encumbrances.
The valuable consideration need not be specified. To rebut the presumption that
there was consideration, it is incumbent upon respondent to show that no
consideration was passed between the parties. However, respondent cannot
20
CONTRACTS
explicitly state that the Deed of Assignment was executed without any
consideration at all. In his attempt to nullify the Deed of Assignment, respondent
raised some peripheral issues surrounding the execution of the said Deed.
21
CONTRACTS
G.R. No. 206780; March 20, 2019

FACTS
Acsayan, Jr. (Acsayan) a parcel of land, which is to be paid as follows: 1) as
downpayment, he shall immediately pay the indebtedness incurred by the
spouses Tabangcora with the Land Bank of the Philippines (LBP) which was
covered by a mortgage over the subject property herein; and 2) the balance shall
be paid upon execution of a Deed of Absolute Sale in favor of respondent.. The
property was registered under the names of spouses Vargas, the brother-in-law
and sister, respectively, of Maximino Tabangcora,

the spouses Tabangcora claimed ownership over the subject property.
Acsayan then paid the LNP loan and made several payments to the spouses
Tabangcoram but the Deed of Absolute Sale was never executed. Acsayan
decided to investigate the status of the subject property on his own and found
that a real estate mortgage over the subject property had been executed by the
spouses Tabangcora and spouses Vargas in favor of Stardiamond, a corporation
incorporated by petitioners Libarnes, Paranis, Maximino, Tabangcora.
him the absolute owner of the property, among others.
ISSUE
Are the transaction entered into by Acsayan and Sps. Tabangcora a contract of
sale?
RULING
NO, as to the nature of the transaction between the spouses Tabangcora and
Acsayan, the same was not one of sale.
From the start of their transaction, Acsayan knew that the initial money (he called
the downpayment) which he will give to spouses Tabangcora was intended to
pay the loan of the spouses Tabangcora with LBP. As a matter of fact, he even
issued a check with LBP as the payee. If from the very start, the parties intended
to enter into a contract of sale, Acsayan should have required the execution of a
written instrument evidencing their transaction. Acasayan should have acted with
that measure of precaution which may reasonably be required of a prudent man
in a like situation.
Another instance that negates a sale transaction between the spouses

Tabangcora and Acsayan was their verbal agreement to impose a 2% interest on
the money given to the spouses Tabangcora. As observed by the CA, as to why
Acsayan readily loaned a big amount without collateral was because respondent
was enticed by the 2% monthly interest.
22
CONTRACTS
At any rate, in the event of doubt as to the nature and conditions of a contract
that cannot be decided by the language of an x x x agreement, in justice, it must
be presumed that the debtor assumed the lesser obligation and that the liability
contracted is that which permits the greatest reciprocity of interest and rights.
Since there was doubt as to whether the agreement between the parties was a
loan or a sale, it is more sound that the agreement in question be considered as
a loan contract — with the spouses Tabangcora not surrendering all the rights to
the property but simply conferring upon respondent merely to collect from the
spouses Tabangcora what is owing to him (with interest for the use of his money)
thereby promoting a greater reciprocity of rights and obligations between them.
23
SALES

FACTS
Vicentico Nuñez (Vicentico) borrowed money from Rosita Moises (Rosita) and as
security, executed a real estate mortgage over his property; the money loaned by
Mortgage (AARM).
When both Vicentico and his spouse died, the property previously mortgaged
was inherited by their four children: Karen Nuñez Vito (Karen), Warren Nuñez
(Warren), Lynette Nuñez Macinda (Lynette), Alden Nuñez (Alden) (collectively,
petitioners).
respective pro indiviso shares in the subject lot. After the execution of the DAS,
Norma immediately took possession of the lot.


Deed of Adjudication and Sale for non-payment of the purchase price.
ISSUE
Is payment of the purchase price always condition making a sale a conditional
sale?
RULING
NO, the DAS in this case is an absolute sale because there is no stipulation in
the contract that title to the property remains with the sellers until full payment of
the purchase price.
A contract of sale is defined in Article 1458 of the Civil Code, to wit: by the
contract of sale, one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
Sps. Ramos v. Sps. Heruela differentiated an absolute sale from a conditional

sale: a contract of sale is absolute when title to the property passes to the
vendee upon delivery of the thing sold. A deed of sale is absolute when there is
no stipulation in the contract that title to the property remains with the seller until
full payment of the purchase price. The sale is also absolute if there is no
stipulation giving the vendor the right to cancel unilaterally the contract the
24
SALES
moment the vendee fails to pay within a fixed period. In a conditional sale, as in a
contract to sell, ownership remains with the vendor and does not pass to the
vendee until full payment of the purchase price. The full payment of the purchase
price partakes of a suspensive condition, and non-fulfillment of the condition
prevents the obligation to sell from arising.
Pursuant to Ramos, the DAS is an absolute sale because there is no stipulation

in the contract that title to the property remains with the sellers until full payment
of the purchase price and there is no stipulation giving the vendors the right to
cancel unilaterally the contract the moment the vendee fails to pay within a fixed
period. It will be recalled that after the execution of the DAS, Norma immediately
took possession of the subject lot and there was no retention of ownership by the
heirs of Vicentico until full payment of the purchase price by Norma that was
stipulated in the DAS.
25
SALES
G.R. No. 206780; March 20, 2019

FACTS
Acsayan, Jr. (Acsayan) a parcel of land. The property was registered under the
names of spouses Vargas, the brother-in-law and sister, respectively, of
Maximino Tabangcora.

the spouses Tabangcora claimed ownership over the subject property.
Acsayan then made several payments to the spouses Tabangcoram but the
Deed of Absolute Sale was never executed. Acsayan decided to investigate the
status of the subject property on his own and found that a real estate mortgage
over the subject property had been executed by the spouses Tabangcora and
spouses Vargas in favor of Stardiamond, a corporation incorporated by
petitioners Libarnes, Paranis, Maximino, Tabangcora.
Acsayan also discovered that at the time the spouses Tabangcora were
negotiating the alleged sale to him, the subject land and the improvement
thereon were already foreclosed by LBP and a certificate of sale had already
been issued in favor of LBP. Thus, he realized that the down payment he paid
was actually used by the spouses Tabangcora not for the payment of the loan,
but to redeem the subject property that was previously foreclosed by LBP.
him the absolute owner of the property, among others. The RTC held the validity
of the sale between the Sps. Vargas and Sps. Tabangcora. On appeal, the CA
held that the deed of assignment is void and never passed anything.
ISSUE
Can an assignment of right be considered as a sale?
RULING
YES. Under Article 1624 of the Civil Code, assignment of rights partakes of a
nature of a sale, such that it is perfected at the moment there is a meeting of the
minds upon the thing which is the object of the contract and upon the price. The
meeting of the minds contemplated here is that between the assignor of the
credit and his assignee, there being no necessity for the consent of any other
person not a party to the contract.
26
SALES
Spouses Luis G. Batalla And Salvacion Batalla v. Prudential Bank, et al.
G.R. No. 200676; March 25, 2019

Petition for review on certiorari seeking to reverse and set aside the CA Decision
which affirmed the RTC Decision that dismissed the case for rescission on the
ground of failure to prove the defects were due to the seller’s fault.
FACTS
Spouses Luis G. Batalla and Salvacion Batalla (Spouses Batalla) purchased a
brand-new Honda Civic from respondent Honda Cars San Pablo, Inc. (Honda).
To finance the purchase of the said motor vehicle, Spouses Batalla obtained a
car loan with Prudential Bank (Prudential).
A remote control door mechanism was immediately installed after the car was
delivered to the Spouses Batalla. The Spouses Batalla had the car examined by
two separate persons who 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. Subsequently, 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.
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. Other than Spouses Batalla's own
testimony claiming that the car doors were defective, no other evidence was
presented. The RTC dismissed the complaint because the 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.
ISSUE
Would a defect immediately call for the application of the implied warranty
against hidden defects?
RULING
NO, Even assuming that the car delivered to Spouses Batalla had a defective car
door, the Spouses Batalla still do not have any grounds for rescinding the
contract of sale.
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.
In case of a breach of an implied warranty against hidden defects, the buyer may
27
SALES
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. 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.
28
SALES

FACTS
Vicentico Nuñez (Vicentico) borrowed money from Rosita Moises (Rosita) and as
security, executed a real estate mortgage over his property; the money loaned by
Mortgage (AARM).
When both Vicentico and his spouse died, the property previously mortgaged
was inherited by their four children: Karen Nuñez Vito (Karen), Warren Nuñez
(Warren), Lynette Nuñez Macinda (Lynette), Alden Nuñez (Alden) (collectively,
petitioners).
respective pro indiviso shares in the subject lot. After the execution of the DAS,
Norma immediately took possession of the lot.


Deed of Adjudication and Sale for non-payment of the purchase price despite
demand. The MTC found the DAS to be invalid. The RTC ruled that the DAS is
valid and granted Norma an extension of time to pay the purchase price.
ISSUE
Can the courts grant the buyer an extension of time for the payment of the
purchase price after the seller demanded payment?
RULING
NO, the court may not grant the buyer a new term when a demand for rescission
of the contract has been made upon him judicially.
Article 1592. In the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed upon the
rescission of the contract shall of right take place, the vendee may pay, even
after the expiration of the period, as long as no demand for rescission of the
contract has been made upon him either judicially or by notarial act. After the
demand, the court may not grant him a new term.
This provision contemplates (1) a contract of sale of an immovable property and

(2) a stipulation in the contract that failure to pay the price at the time agreed
upon will cause the rescission of the contract. The vendee or the buyer can still
pay even after the time agreed upon, if the agreement between the parties has
these requisites. This right of the vendee to pay ceases when the vendor or the
29
SALES
seller demands the rescission of the contract judicially or extrajudicially. In case
of an extrajudicial demand to rescind the contract, it should be notarized.
30
LEASE
Authority
G.R. No. 210641; March 27, 2019

FACTS
increase.

Subsequently, the SC promulgated its Decision in the case of MIAA v. Airspan

Corporation, et al. which nullified the same resolution in this case issued by MIAA
for non-observance of the notice and hearing requirements for the fixing rates
required by the Administrative Code.
Hence, DPRC filed a complaint for collection of sum of money.
MIAA argues that DPRC's cause of action for refund is not based on contract
because there is no provision in the Contract of Lease that DPRC can rely upon
for refund. According to MIAA, DPRC’s cause of action is based on quasi-
contract since MIAA allegedly does not have the right to hold on the excess
amounts.
ISSUE
If a contract of lease does not have any express provision on the refund of rent,
does the lessee still have a right based on contract for such refund?
RULING
YES, MIAA's supposition that there is no provision in the Contract of Lease that
DPRC can rely upon to ask for a refund is completely mistaken.
Just because the Contract of Lease in itself may be silent as to DPRC's

entitlement to a refund does not mean that such claim for refund is not provided
for in the contract and cannot be asserted by DPRC.
It must be stressed that applicable laws form part of, and are read into, contracts
without need for any express reference thereto. Specifically on lease contracts,
Article 1659 of the Civil Code, in relation to Article 1657, states that the aggrieved
party in a contract of lease may ask for indemnification when the other party fails
to comply with his/her obligations, one of which is to ask from the lessee the
price of the lease only according to the terms stipulated.
Hence, with these provisions of law read into the parties' Contract of Lease,
MIAA's argument that there is no provision in the Contract of Lease that DPRC
can rely on to claim for refund of overpayment of monthly rentals is erroneous.
31
AGENCY
Spouses Rainier Jose M. Yulo and Juliet L. Yulo v. Bank of the Philippine
Islands
G.R. No. 217044; January 16, 2019

Petition for Review on Certiorari filed by Spouses Rainier Jose M. Yulo (Rainier)
and Juliet L. Yulo (Juliet), assailing the CA Decision which upheld the RTC
Decision affirming the MTC Decision holding Rainier and Juliet jointly and
severally liable to the credit card company.
FACTS
The Bank of the Philippine Islands (BPI) issued Rainier a pre-approved credit
card. His wife, Juliet, 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.
Subsequently, the Yulo Spouses defaulted on their payments. Eventually, BPI

filed a complaint for sum of money against the Yulo Spouses. The Yulo Spouses
alleged, among others, that BPI did not fully disclose to them the Terms and
Conditions (TOC) on their use of the issued credit cards.
Both the MTC and RTC found that the Yulo Spouses failed to comply with the
TOC of their contract. The RTC noted that BPI presented as evidence the
Delivery Receipt for the credit card packet, which was signed by Rainier's
authorized representative, Jessica Baitan (Baitan). The RTC held that 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 TOC. BPI
presented as evidence the check mark in the box beside "Authorized
Representative" in the Delivery Receipt.
ISSUE
Can a Delivery Receipt purportedly signed by an “authorized representative”
sufficient to establish a contract of agency?
RULING
NO, such Delivery Receipt is insufficient to sustain a contract of agency.
As a pre-screened client, 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
TOC on credit accommodation use, a pre-screened credit card holder's consent
is not immediately apparent. Thus, BPI, as the credit card provider, had the
burden of proving its allegation that petitioner Rainier consented to the TOC
surrounding the use of the credit card issued to him.
While the Delivery Receipt showed that Baitan received the credit card packet for
Rainier, it failed to indicate Baitan's relationship with him. BPI also failed to
substantiate its claim that 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 BPI’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
32
AGENCY
of the principal.
Rallos v. Felix Go Chan & Sons Realty Corporation lays down the essential
elements of agency: (1) there is consent, express or implied, of the patties to
establish the relationship; (2) the object is the execution of a juridical act in
relation to a third person; (3) the agents (sic) acts as a representative and not for
himself; and (4) the agent acts within the scope of his authority.
BPI fell short in establishing an agency relationship between Rainier and Baitan,
as the evidence presented did not support its claim that Rainier authorized Baitan
to act on his behalf. Without proof that Rainier read and agreed to the TOC of his
pre-approved credit card, the Yulo Spouses cannot be bound by it.
33
Central Visayas Finance Corporation v. Spouses Eliezer S. Adlawan, et al.
G.R. No. 212674; March 25, 2019

Petition for review on certiorari of the CA Decision which affirmed the RTC Order
dismissing a second case for collection of sum of money and/or deficiency
judgment after a foreclosure sale.
FACTS
Eliezer and Leila Adlawan (Sps. Adlawan) obtained a P3.7M loan from Central
Visayas Finance Corporation (CVFC) covered by a Promissory Note (PN) and a
Chattel Mortgage (CM) over a Komatsu Highway Dump Truck.
The Sps. Adlawan failed to pay the loan, prompting CVFC to file an action
against the Sps. Adlawan for replevin. The RTC ruled in CVFC's favor, and the
Sps. Adlawan were ordered to deliver possession of the dump truck to CVFC.
CVFC then foreclosed on the chattel mortgage and caused the sale at public
auction of the dump truck, which was then sold to it as the highest bidder for
P500,000.00
Subsequently, CVFC commenced a second case before the RTC for collection of
sum of money and/or deficiency judgment relative to the Sps. Adlawan’s
supposed unpaid balance on their loan less the value of dump truck. The RTC
dismissed the case on the ground of res judicata.
ISSUE
Can a creditor foreclose on the chattel mortgage and thereafter file a case for
collection of sum of money for the deficiency?
RULING
NO, one effect of respondent's election of the remedy of extra-judicial foreclosure
is its waiver of the remedy of collection of the unpaid loan.
As held in The Bachrach Motor Co., Inc. v. Icarangal, by causing the auction sale
of the mortgaged properties, respondent effectively adopted and pursued the
remedy of extra-judicial foreclosure, using the writ of replevin as a tool to get hold
of the mortgaged properties. As emphasized in Bachrach, one effect of
respondent's election of the remedy of extra-judicial foreclosure is its waiver of
the remedy of collection of the unpaid loan.
However, another effect of its election of the remedy of extra-judicial foreclosure

is that whatever deficiency remains after applying the proceeds of the auction
sale to the total loan obligation may still be recovered by respondent. But to
recover any deficiency after foreclosure, the rule is that a mortgage creditor must
institute an independent civil action. However, in PCI Leasing & Finance, Inc. v.
Dai, the claim should at least be included in the pre-trial brief.
In sustaining the rule that prohibits mortgage creditors from pursuing both the
remedies of a personal action for debt or a real action to foreclose the mortgage,
the SC held in the case of Bachrach that a rule which would authorize the plaintiff
to bring a personal action against the debtor and simultaneously or successively
another action against the mortgaged property, would result not only in
multiplicity of suits so offensive to justice and obnoxious to law and equity, but
also in subjecting the defendant to the vexation of being sued in the place of his
residence or of the residence of the plaintiff, and then again in the place where
34
the property lies. Hence, a remedy is deemed chosen upon the filing of the suit
for collection or upon the filing of the complaint in an action for foreclosure of
mortgage, pursuant to the provisions of Rule 68 of the Rules of Court As to
extrajudicial foreclosure, such remedy is deemed elected by the mortgage
creditor upon filing of the petition not with any court of justice but with the office of
the sheriff of the province where the sale is to be made, in accordance with the
provisions of Act No. 3135, as amended by Act No. 4118.
As petitioner had already instituted judicial foreclosure proceedings over the

mortgaged property, they are now barred from availing of an ordinary action for
collection, regardless of whether or not the decision in the foreclosure case had
attained finality. In fine, the dismissal of the collection case is in order.
35
CREDIT TRANSACTIONS: LOAN, DEPOSIT, GUARANTY
AND SURETYSHIP
Spouses Luis G. Batalla And Salvacion Batalla v. Prudential Bank, et al.

G.R. No. 200676; March 25, 2019

Petition for review on certiorari seeking to reverse and set aside the CA Decision
which affirmed the RTC Decision that dismissed the case for rescission on the
ground of failure to prove the defects were due to the seller’s fault.
FACTS
Spouses Luis G. Batalla and Salvacion Batalla (Spouses Batalla) purchased a
brand-new Honda Civic from respondent Honda Cars San Pablo, Inc. (Honda).
To finance the purchase of the said motor vehicle, Spouses Batalla executed a
promissory note (PN) in favor of and obtained a car loan with Prudential Bank
(Prudential).
Three days after receiving the car, the rear right door of the car broke down. The
Spouses Batalla had the car examined by two separate persons who 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.
Subsequently, 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.
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. Other than rescission of the contract of
sale, Spouses Batalla also sought for the rescission of the car loan agreement
and PN 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.
ISSUE
Assuming that the purpose for which the loan proceeds were used are void, can
the debtor rescind such loan?
RULING
NO, the transactions of Spouses Batalla with Prudential and Honda are distinct
and separate from each other.
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
36
AND SURETYSHIP
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'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.
37
AND SURETYSHIP
Hun Hyung Park v. Eung Won Choi

G.R. No. 220826, March 27, 2019

Petition for review on certiorari assailing the CA Decision that reversed and set
aside the RTC Decision affirming the MeTC Decision holding the borrower liable
to pay the lender interest of 12% per annum from the time the case filed until the
whole amount is paid.
FACTS
Hun Hyung Park (Park) extended a loan for P1.875M to Eung Won Choi (Choi).
As payment for the loan, Choi issued a check in the same amount. 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 sent a letter and informed Choi of the dishonor. Choi received the demand
letter on May 19, 2000 through a certain Ina Soliven. Nevertheless, Choi failed to
resolve the dishonored check.
A criminal action was filed against Choi on August 31, 2000. The MeTC ruled
ordered Choi to pay Park P1.875M plus interest of 12% per annum from August
31, 2000 until the whole amount is paid.
Choi argues that in place of a formal document such as a promissory note, Park
required him to give him the subject check in the amount of P1,875,000.00 which
includes the interest of 25% which is equivalent to P375,000.00.
ISSUE
Can a check whose amount purportedly included interest be sufficient to prove
that an interest was agreed upon by the parties?
RULING
NO, no interest shall be due unless it has been expressly stipulated in writing.
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 no 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 if
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
38
AND SURETYSHIP
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 interest
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. Article 2212 of the new Civil Code
contemplates, and therefore applies, only when there exists stipulated or
conventional interest.
39
AND SURETYSHIP
VDM Trading, Inc., et al. v. Leonita Carungcong and Wack Wack Twin
Towers Condominium Association, Inc.
G.R. No. 206709, February 06, 2019

Petition for Review on Certiorari assailing the CA Decision reversing the RTC
Decision that found liability for actual damages against the supposed
tortfeasor.
FACTS
VDM Trading, Inc. (VDM) is the owner of a unit in Wack Wack Twin Towers
Condominium (Wack Wack). Nena Domingo (Nena), the majority stockholder
of VDM, and her husband, Luis Domingo (Luis), are the actual occupants of
the unit.
It was discovered that soapy water was heavily penetrating through the ceiling
of the unit, apparently from the unit above owned by Leonita Carungcong
(Carungcong) and was being leased by Hak Yek Tan (Tan). Wack Wack
explained that explained that unit above’s balcony, which was being used as a
laundry area, had unauthorized piping and plumbing works installed, which
were in violation of Wack Wack’s rules and regulations.
According to Atty. Villareal, the attorney-in-fact of the Sps. Domingo, the unit
suffered damages; hence VDM and the Sps. Domingo through Atty. Villareal
filed a complaint for damages against Carungcong, Wack Wack and Tan.
During trial, the sole witness of VDM and the Sps. Domingo was Atty.
Villareal. They also offered photographs into evidence depicting a wet bed,
wet floor, and wet cabinet apparently taken from the master bedroom.
However, there was no proof offered showing that such plumbing works were
even prohibited, disallowed, or undertaken in a negligent manner. Nor was
there evidence presented to show that the supposed widespread leak of
soapy water in the various parts of the unit was caused by plumbing works on
the balcony of the unit above.
ISSUE
Will the testimony of a sole witness be enough to prove liability based on
quasi-delict?
RULING
NO, in this case, a perusal of the evidence on record shows that the elements
of a quasi-delict are absent insofar as Carungcong and Wack Wack are
concerned.
By alleging that damage was caused to their property by virtue of

[Carungcong, Wack Wack and Tan’s individual and collective fault and/or
negligence, [VDM and the Sps. Domingo’s] cause of action is anchored on
quasi-delict.
40
AND SURETYSHIP
Andamo v. Intermediate Appellate Court held that a quasi-delict has the

following elements: a) the damage suffered by the plaintiff; b) the act or
omission of the defendant supposedly constituting fault or negligence; and c)
the causal connection between the act and the damage sustained by the
plaintiff, or proximate cause.
In this case, as to the first element, the full extent of the damage caused to
the unit was not sufficiently proven.
Aside from the purely self-serving testimony of Atty. Villareal, the sole witness
of the petitioners who is also the petitioners' counsel, there was no sufficient
evidence presented to show the extent of the damage caused to the unit. The
photographs offered into evidence by the petitioners merely depict a wet bed,
wet floor, and wet cabinet apparently taken from one room only, i.e., the
master bedroom. No photographs were presented to prove that the other
rooms of were also damaged by the leak.
As regards the second element of a quasi-delict, a careful perusal of the

evidence on record shows that the petitioners failed to present even a shred
of evidence that there was fault or negligence on the part of the Carungcong
and Wack Wack.
Huang v. Philippine Hoteliers, Inc. held that in a cause of action based on

quasi-delict, the negligence or fault should be clearly established as it is the
basis of the action. The burden of proof is thus placed on the plaintiff, as it is
the duty of a party to present evidence on the facts in issue necessary to
establish his claim or defense by the amount of evidence required by law.
Therefore, if the plaintiff alleged in his complaint that he was damaged
because of the negligent acts of the defendant, he has the burden of proving
such negligence.
As to the supposed fault or negligence of Carungcong, while it is undisputed

that plumbing works were done on the balcony of the unit owned by
Carungcong, there is no evidence presented that suggests that such plumbing
works were illegally or negligently made. The petitioners could not even point
out what specific rule or regulation was supposedly violated by Carungcong or
her lessee, Tan, in undertaking the plumbing works. There was no proof
offered showing that such plumbing works were even prohibited, disallowed,
or undertaken in a negligent manner.
As to the third element, proximate cause between the supposed damage

caused and the plumbing works undertaken was not established.
Proximate cause is that cause which, in natural and continuous sequence,

unbroken by any efficient intervening cause, produces the injury and without
which the result would not have occurred.
Stated in simple terms, it must be proven that the supposed fault or
41
AND SURETYSHIP
negligence committed by the respondents, i.e., the undertaking of plumbing

works on the unit above, was the cause of the damage to the unit.
In this case, there was no evidence presented to show that the supposed
widespread leak of soapy water in the various parts of the unit was caused by
plumbing works on the balcony of the unit above. No witness or document
establishing a causal link between the plumbing works and the damage to the
unit was offered. The petitioners could have utilized assessors or technical
experts on building and plumbing works to personally examine and assess the
damage caused to the unit to provide some substantiation to the claim of
proximate cause. However, no such witness was presented. The petitioners
relied solely on the testimony of their own counsel, Atty. Villareal. Proximate
cause cannot be established by the mere say-so of a self-serving witness.
All in all, the petitioners failed to prove the existence of the elements of a
quasi-delict in the instant case.
42
AND SURETYSHIP

G.R. No. 203697; March 20, 2019

Petition for review on certiorari challenging the CA Decision which affirmed
the RTC Decision finding negligence on the basis of res ipsa loquitor.
FACTS
process and package 90- and 120-mg Diltelan capsules for OEP under the
terms and conditions stated in the Agreement. 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).
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 which Interphil processed and packaged.
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 batch.
Due to the foregoing, OEP demanded that Interphil reimburse it 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.
Hence, OEP filed a complaint with the RTC. Both the RTC and CA ruled
found that, on the basis of the doctrine of res ipsa loquitor, Interphil was
negligent in the performance of its obligations. Interphil alleges that OEP was
at fault for supplying and delivering the reel/s of foils which are similar in
appearance and which were not distinctly labeled with colored tape.
ISSUE
Can the supply by one party of raw materials similar in appearance be
considered as the proximate cause of the injury barring the application of the
doctrine of res ipsa loquitor?
RULING
43
AND SURETYSHIP
NO, any fault there is not the proximate and immediate cause of the damage,
as it was clearly the erroneous packaging that caused OEP to recall arid
destroy the products, causing much expense.
The elements of res ipsa loquitur are: (1) the accident is of such character as
to warrant an inference that it would not have happened except for the
defendant's negligence; (2) the accident must have been caused by an
agency or instrumentality within the exclusive management or control of the
person charged with the negligence complained of; and (3) the accident must
not have been due to any voluntary action or contribution on the part of the
person injured.
Utilizing res ipsa loquitur is a matter of evidence, a mode of proof, or a mere

procedural convenience, since it furnishes a substitute for, and relieves a
plaintiff of the burden of producing a specific proof of negligence. It recognizes
that parties may establish prima facie negligence without direct proof, thus, it
allows the principle to substitute for specific proof of negligence. It permits the
plaintiff to present along with proof of the accident, enough of the attending
circumstances to invoice the doctrine, create an inference or presumption of
negligence and thereby place on the defendant the burden of proving that
there was no negligence on his part.
In this case, as argued by OEP and as found valid by both the RTC and the
CA, the elements of res ipsa loquitor have been clearly established by the
facts on record.
First, it is uncontroverted that Interphil had exclusive control in the packaging

of the materials, before the company delivered the same to OEP, sealed and
warranted to be ready for delivery to the latter's client, Elan Taiwan. Second,
Interphil had exclusive management and control at the time of the packaging,
and as to all the processes appurtenant to the same. Third, there is no
contributory fault on the part of OEP.
While Interphil alleges that OEP was at fault for supplying and delivering the
reel/s of foils which are similar in appearance and which were not distinctly
labeled with colored tape, any fault there is not the proximate and immediate
cause of the damage, as it was clearly the erroneous packaging that caused
OEP to recall arid destroy the products, causing much expense.
Interphil cannot escape the finding of negligence by attempting to cast shade

on the possible liability of OEP, especially after its own warranties as to the
pristine condition of the packaging.
44
AND SURETYSHIP
Jeffrey Calaoagan v. People of the Philippines

G.R. No. 222974; March 20, 2019

Appeal by certiorari which seeks to reverse and set aside the CA Decision
affirming the RTC Decision finding accused guilty beyond reasonable doubt of
slight physical injuries under Article 266(1) of the Revised Penal Code (RPC).
FACTS
The RTC held that Jeffrey Calaoagan (Calaoagan) physically maltreated
minors AAA and BBB, in violation of Sec. 10(a) of R.A. No. 7610. On appeal,
the CA held that Calaoagan was only guilty of slight physical injuries under
Article 266(1) of the RPC because BBB was allegedly already eighteen (18)
years old at the time of the incident. Hence, the CA ordered him to pay
P20,000.00 as moral damages, and P20,000.00 as temperate damages.
ISSUE
Can moral and temperate damages be awarded in a criminal action?
RULING
YES. Under par. (1), Art. 2219 of the Civil Code, moral damages may be
recovered in a criminal offense resulting in physical injuries. Moral damages
compensate for the mental anguish, serious anxiety, and moral shock
suffered by the victim and his family as being a proximate result of the
wrongful act. An award requires no proof of pecuniary loss. Pursuant to
prevailing jurisprudence, an award of Five Thousand Pesos (P5,000.00) moral
damages is appropriate for less serious, as well as slight physical injuries.
In this case, the CA awarded P20,000.00 as moral damages. However,

Calaoagan only committed slight physical injuries against AAA and BBB.
Thus, the award of moral damages to AAA and BBB must be reduced to
P5,000.00.
On the other hand, temperate or moderate damages, which are more than
nominal but less than actual or 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 proved with certainty. As
such, its award is premised on the fact that actual damages could have been
recovered were it not for the fact that the precise amount of damages could
not be accurately ascertained. In other words, if a party-claimant had not
suffered any damages, no damages, either actual nor temperate, are
recoverable.
In this case, the CA simply awarded temperate damages to BBB because he

suffered pecuniary loss for the treatment of his injuries, although the actual
amount could not be determined. However, there was no discussion on the
facts and circumstances surrounding the alleged pecuniary loss. BBB neither
asserted that he suffered any pecuniary loss nor any kind of loss of earning
45
AND SURETYSHIP
capacity as to justify the temperate damages awarded by the CA. As such,

the Court deletes the award of P20,000.00 as temperate damages for lack of
factual basis.
46
AND SURETYSHIP

G.R. No. 203697; March 20, 2019

Petition for review on certiorari challenging the CA Decision which affirmed
the RTC Decision finding negligence on the basis of res ipsa loquitor.
FACTS
process and package 90- and 120-mg Diltelan capsules for OEP under the
terms and conditions stated in the Agreement. 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).
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 which Interphil processed and packaged.
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 batch.
Due to the foregoing, OEP demanded that Interphil reimburse it 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.
Hence, OEP filed a complaint with the RTC, which ordered Interphil liable for
actual and exemplary damages.
ISSUE
Can a negligent person be held liable for actual and exemplary damages?
RULING
YES, 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 and the profits it failed to realize due to
the gross negligence of Interphil.
47
AND SURETYSHIP
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.
There are two kinds of actual or compensatory damages: one is the loss of
what a person already possesses, and the other is the failure to receive as a
benefit that which would have pertained to him x x x. In the latter instance, the
familiar rule is that damages consisting of unrealized profits, frequently
referred as "ganacias frustradas" or "lucrum cessans" are not to be granted
on the basis of mere speculation, conjecture, or surmise, but rather by
reference to some reasonably definite standard such as market value,
established experience, or direct inference from known circumstances .
Absolute certainty, however, is not necessary to establish the amount of

ganacias frustradas or lucrum cessans. As held in Producers Bank of the
Philippines, when the existence of a loss is established, absolute certainty as
to its amount is not required. The benefit to be derived from a contract which
one of the parties has absolutely failed to perform is of necessity to some
extent, a matter of speculation, but the injured party is not to be denied for
that reason alone. He must produce the best evidence of which his case is
susceptible and if that evidence warrants the inference that he has been
damaged by the loss of profits which he might with reasonable certainty have
anticipated but for the defendant's wrongful act, he is entitled to recover.
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.
Arco Pulp and Paper Co., Inc., et al. v. Lim held that the purpose of exemplary
damages is to serve as a deterrent to future and subsequent parties from the
commission of a similar offense.
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
48
AND SURETYSHIP
good measure to deter the wrongdoer and others like him from similar
conduct in the future.
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, 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.
49

Master Case 2

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Master Case 2

Uploaded by

Copyright:

Available Formats

1. Interphil Laboratories, Inc. v. OEP Philippines, Inc.

G.R. No. 203697; March 20, 2019

2. Jeffrey Calaoagan v. People of the Philippines

4. Hun Hyung Park v. Eung Won Choi

5. Spouses Luis G. Batalla And Salvacion Batalla v. Prudential Bank, et al.

6. Central Visayas Finance Corporation v. Spouses Eliezer S. Adlawan, et al.

8. Domestic Petroleum Retailer Corporation v. Manila International Airport Authority

9. Karen Nuñez Vito, et al. v. Norma Moises-Palma

CIVIL LAW REVIEW 2

ATTY. CRISOSTOMO A. URIBE

(2) Domestic Petroleum Retailer Corporation v. Manila 3

B. Sources of Civil Obligations

D. Kinds of Civil Obligations

(5) Karen Nuñez Vito, et al. v. Norma Moises-Palma 9

c. With a term or period

3. As to rights and obligations of multiple parties

B. Elements of a Contract of Sale

D. Rights and Obligations of the Vendor

F. Remedies for Breach of Contract

CREDIT: PLEDGE, MORTGAGE AND ANTICHRESIS

CREDIT TRANSACTIONS: LOAN, DEPOSIT,

F. Rights and Obligations of Bailor and Bailee in Mutuum

(25) Interphil Laboratories, Inc. v. OEP Philippines, Inc. 45

NATURE OF THE ACTION

In 2003, Socorro and Rosario P. Clemente, as successors-in-interest of Mayor

An action for reconveyance based on a violation of a condition in a Deed of

NATURE OF THE ACTION

DPRC protested in writing to MIAA the increased rentals. However, it also

On December 1, 2004, the SC promulgated its Decision in the case of MIAA v.

Considering that DPRC's cause of action is not based on a quasi-contract and is

Moreover, in Español v. Board of Administrators, Philippine Veterans

Therefore, considering that the SC’s Decision in MIAA v. Airspan Corporation, et

Therefore, regardless of whether the prescriptive period to be applied in the

According to Article 1155 of the Civil Code, the prescription of actions is

NATURE OF THE ACTION

DPRC protested in writing to MIAA the increased rentals. However, it also

Subsequently, the SC promulgated its Decision in the case of MIAA v. Airspan

Second, there was no payment by mistake. petitioner DPRC's overpayment of

Hence, the principle of solutio indebiti is not applicable.

NATURE OF THE ACTION

In 2003, Socorro and Rosario P. Clemente, as successors-in-interest of Mayor

NATURE OF THE ACTION

Subsequently, Norma Moises-Palma (Norma) was able to have Karen, Warren

Norma executed a PN in favor of the petitioners whereby she obligated herself to

Petitioners thereafter filed against Norma a case for Declaration of Nullity of

Pursuant to Article 1458 of the Civil Code, a contract of sale is a reciprocal

Consequently, the sale transaction in the DAS is deemed resolved.

NATURE OF THE ACTION

In 2003, Socorro and Rosario P. Clemente, as successors-in-interest of Mayor

NATURE OF THE ACTION

In the same manner, Keihin-Everett has a right to be reimbursed based on its

NATURE OF THE ACTION

Later, OEP discovered a defect in the packaging of several 90-mg Diltelan

As a result of the defectively packaged capsules and the necessary reworking of

NATURE OF THE ACTION

Petitioners thereafter filed against Norma a case for Declaration of Nullity of

NATURE OF THE ACTION

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

NATURE OF THE ACTION

Apparently, a Deed of Assignment executed by spouses Vargas which

The ASSIGNORS, for valuable considerations, do hereby assign, transfer

NATURE OF THE ACTION

Apparently, a Deed of Assignment executed by spouses Vargas which

Another instance that negates a sale transaction between the spouses