14 Seguiran - Digests

CIVIL LAW REVIEW 2
CASE DIGESTS
(Prescription, Obligations, Contracts, Sales, Lease, Trusts,
Agency, Partnership, Credit Transactions and Torts and
Damages)
Gabrielle Ann F. Seguiran

LAW1715710
University of Makati School of Law
Atty. Crisostomo A. Uribe
1
TABLE OF CONTENTS
CASE NO. TOPIC / CASE TITLE PAGE
OBLIGATIONS
IN GENERAL
Prescription of Actions
1 Active Wood Products vs. SIHI, G.R. No. 240277, October 14, 2020 7
2 Filcon Ready Mixed vs. UCPB, G.R. No. 229877, July 15, 2020 9
3 Selerio vs. Bancasan, G.R. No. 222442, June 23, 2020 11
SOURCES OF CIVIL OBLIGATION
Quasi-Contracts - Solutio Indebiti

4 Philhealth vs. COA, G.R. No. 235832, November 03, 2020 13
5 Yon Mitori vs. Union Bank, G.R. No. 225538, October 14, 2020 15
KINDS OF CIVIL OBLIGATIONS
Solidary
6 Team Pacific vs. Parente, G.R. No. 206789, July 15, 2020 17
7 Wyeth Philippines vs. CIAC, G.R. No. 220045-48, June 22, 2020 19
8 Llorente vs. Star City, G.R. No. 212050, January 15, 2020 21
EXTINGUISHMENT OF OBLIGATIONS
Compensation
9 BDO vs. Ypil, G.R. No. 212024, October 12, 2020 23
Novation
10 Arrivas vs. Bacotoc, G.R. No. 228704, December 02, 2020 25
2
CONTRACTS
IN GENERAL
Definition
11 Italkarat 18, Inc., vs. Gerasmio, G.R. No. 22141, September 28, 2020 27
FUNDAMENTAL CHARACTERISTICS / PRINCIPLES
Consensuality; Contract of Adhesion

12 Regala vs. Manila Hotel, G.R. No. 204684, October 05, 2020 29
Autonomy of Contracts
13 FSUU vs. Curaza, G.R. No. 223621, June 10, 2020 31
14 Santiago vs. Spouses Garcia, G.R. No. 228356, March 09, 2020 33
Mutuality of Contracts
15 Home Credit vs. Prudente, G.R. No. 200010, August 27, 2020 35
STAGES OF CONTRACTS
Perfection
16 Gemudiano vs. NAESS Shipping, G.R. No. 223825, January 20, 2020 37
FORM OF CONTRACTS
17 Purisima vs. Purisima, G.R. No. 200484, November 18, 2020 39
18 Cellpage vs. Solid Guaranty, G.R. No. 22673, June 17, 2020 41
REFORMATION OF CONTRACTS
19 Banico vs. Stager, G.R. No. 232825, September 16, 2020 43
INTERPRETATION OF CONTRACTS
20 Pascual vs. Pangyarihan-Ang, G.R. No. 235711, March 11, 2020 45
3
21 Godinez vs. Spouses Norman, G.R. No. 225449, February 26, 2020 47
KINDS OF CONTRACTS AS TO VALIDTY
Voidable
22 Kepco vs. CIR, G.R. Nos. 225750-51, July 28, 2020 49
Void
23 Eupena vs. Bobier, G.R. No. 211078, July 08, 2020 51
24 Gatmaytan vs. Misibis Land, G.R. No. 222166, June 10, 2020 53
SALES
ELEMENTS OF A CONTRACT OF SALE
Price or Consideration
25 Spouses Viovicente vs. Spouses Viovicente, G.R. No. 219074, July 28, 2020 55
RIGHTS AND OBLIGATIONS OF THE VENDOR AND VENDEE
Buyer in Good Faith

26 Heirs of Cudal vs. Spouses Suguitan, G.R. No. 244405, August 27, 2020 57
Double Sale
27 Spouses German vs. Spouses Santuyo, G.R. No. 210845, January 22, 2020 59
28 Odrada vs. Lazaro, G.R. No. 205515, January 20, 2020 61
Maceda Law
Star Asset Management vs. Register of Deeds of Davao, G.R. No. 233737,
29 63
February 3, 2021
30 Pryce Properties vs. Nolasco, G.R. No. 203990, August 24, 2020 65
EXTINGUISHMENT OF SALE
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Redemption
31 Zomer Development vs. Court of Appeals, G.R. No. 194461, January 07, 2020 67
LEASE
RIGHTS AND OBLIGATIONS OF THE LESSOR AND LESSEE
Improvements
32 CJH Development vs. Aniceto, G.R. No. 224006, July 06, 2020 69
AGENCY
KINDS OF AGENCY
Agency by Estoppel
33 Eternal Gardens vs. Perlas, G.R. No. 236126, September 07, 2020 71
PARTNERSHIP
ESSENTIAL REQUISITES
34 Santiago vs. Spouses Garcia, G.R. No. 228356, March 09, 2020 73
CREDIT TRANSACTIONS
LOANS
Essential Elements
35 Catapang vs. Lipa Bank, G.R. No. 240645, January 27, 2020 75
PROVISIONS COMMON TO PLEDGE AND MORTGAGE
Equity of Redemption
36 Fallarme vs. Pagedped, G.R. No. 247229, September 03, 2020 77
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TORTS AND DAMAGES
ELEMENTS OF QUASI-DELICT
Negligence
37 PS Bank vs. Sakata, G.R. No. 229450, June 17, 2020 79
Degree of Diligence
38 Aleson Shipping vs. CGU International, G.R. No. 217311, July 15, 2020 81
PROOF OF NEGLIGENCE
Doctrine of Res Ipsa Loquitur

39 Guerrero vs. Phil. Phoenix Surety, G.R. No. 223178, December 9, 2020 83
PERSONS LIABLE
Vicarious Liability
40 BPI vs. Central Bank, G.R. No. 197593, October 12, 2020 85
41 Heirs of Mendoza vs. ES Trucking, G.R. No. 243237, February 17, 2020 87
LIABILITY FOR TORTS: DAMAGES
42 Lim vs. Lintag, G.R. No. 234405, December 09, 2020 89
43 MERALCO vs. AAA Cryogenics, G.R. No. 207429, November 18, 2020 91
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1. ACTIVE WOOD VS. SIHI
ACTIVE WOOD PRODUCTS CO., INC., REPRESENTED BY ITS PRESIDENT AND CHAIRMAN,
CHUA TIONG SIO, PETITIONER, VS. STATE INVESTMENT HOUSE, INC., RESPONDENT.
G.R. No. 240277 | October 14, 2020 | Second Division | Delos Santos, J.
NATURE OF THE ACTION

Petition for Review on Certiorari seeking to reverse and set aside the Decision and the Resolution of
the Court of Appeals, affirming the Joint Decision and the Order of the Regional Trial Court which
declared that the action of State Investment House, Inc. against Active Wood Products Co., Inc. has
not prescribed.
FACTS
On 07 June 1982, AWP filed a Complaint for Injunction with Prayer for Temporary Restraining Order
(TRO) and Writ of Preliminary Injunction against SIHI to prevent the extrajudicial foreclosure of the
real estate mortgage it had executed in favor of SIHI. AWP alleged that the real estate mortgage
contracts were given as securities for the payment of credit accommodation. AWP asserted that by
allowing it to pay the interest and related charges even after the maturity dates of the promissory
notes that it had executed in favor of SIHI, the latter has expressly novated the terms and conditions
stipulated in those documents. Thus, it claimed that SIHI could not foreclose the mortgaged
properties based on the stipulations in the original real estate mortgage contracts and promissory
notes.
RTC issued a TRO. Court ordered AWP to post an injunction bond. RTC then issued another Order
that restrained the foreclosure of the real estate mortgage to maintain the status quo.
SIHI countered that the obligation had been restructured several times upon the request of AWP. In
addition, AWP executed Financing Agreements, whereby AWP agreed to pay SIHI additional 12% per
[annum] in case of default in the payment of the obligations on their respective maturity dates and a
penalty, as liquidated damages. It claimed that AWP's obligation as of 11 May 1982, inclusive of
interest and charges was [P]6,875,682.02. It made repeated demands upon AWP to pay its overdue
account but the latter failed and refused to do so. On the allegation of novation, it maintained that
AWP's original obligation was not extinguished because it was restructured several times.
Meanwhile, on 28 June 1983, SIHI filed a Petition for Extrajudicial Foreclosure with the Office of the
Provincial Sheriff of Bulacan.
RTC directed the issuance of a Writ of Preliminary Injunction upon filing of an injunction bond. Ex-
officio [P]rovincial [S]heriff, however, still proceeded with the foreclosure sale on 29 November 1983
and sold the mortgaged properties to SIHI as the highest bidder.
In an Order issued on 27 February 1984, the RTC nullified the auction sale conducted by Sheriff
Evangelista but denied the motion to cite [S]heriff in contempt of court. On 17 April 1984, the RTC
issued a Writ of Preliminary Injunction in favor of AWP and ordered SIHI and the ex-officio provincial
sheriff of Malolos, Bulacan to refrain from proceeding with the foreclosure sale of the mortgaged
properties..
SIHI challenged the Orders before the then Intermediate Appellate Court (IAC) which reversed the
RTC. On certiorari, however, the Supreme Court reversed the IAC and upheld both Orders
Upon motion, AWP filed an Amended Complaint wherein it alleged that the real estate mortgage was
null and void because what it secured was not a loan but merely an assignment of receivables. AWP
filed an Omnibus Motion and prayed That said eight (8) Real Estate Mortgage(s) be also declared
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barred by the statute of limitations. RTC denied AWP's omnibus motion. AWP went to the Court via
a Petition for Certiorari with a prayer for a TRO and/or a writ of preliminary injunction. On 15
February 2000, the Court issued a resolution that enjoined the RTC from deciding. The TRO was,
however, lifted. Eventually, the Court dismissed the petition for certiorari for lack of merit and
affirmed the RTC's denial of AWP's omnibus motion.
On September 5, 2016, RTC rendered a Joint Decision that the ten-year prescriptive period of the
mortgage action has not lapsed.
The CA denied appeal filed by AWP and sustained the RTC's finding that SIHI's right to foreclose the
real estate mortgage has not yet prescribed. It held that the running of the 10-year prescriptive
period was effectively stopped when AWP filed a complaint for injunction with prayer for a writ of
preliminary injunction and temporary restraining order on June 7, 1982 against SIHI. The period
commenced to run again on September 5, 2016 when such case was dismissed and the writ of
preliminary injunction was accordingly lifted by the RTC. Moreover, the CA found that SIHI
sufficiently showed that it sent demand letters to AWP on July 30, 1982 and August 2, 1982, which
also interrupted the running of the prescriptive period pursuant to Article 1155 of the Civil Code.
ISSUE
Whether or not SIHI's right to foreclose has prescribed - NO
RULING
In the main, the Court notes that the CA actually agreed with AWP that extrajudicial foreclosure is
not a judicial action that interrupts the running of the prescriptive period in enforcing a right arising
from a mortgage. Citing Tambunting, Jr. as applicable, the CA then ruled that what effectively stopped
the running of the 10-year prescriptive period was AWP's filing of the injunction suit on June 7, 1982.
Oddly, AWP did not directly assail and argue against this pronouncement of the CA.
In Cando v. Spouses Olazo, the Court explained:

[A]n action to enforce a right arising from a mortgage should be enforced within 10
years from the time the right of action accrues; otherwise, it will be barred by
prescription and the mortgage creditor will lose his rights under the mortgage. The
right of action accrues when the mortgagor defaults in the payment of his obligation
to the mortgagee.
In the instant case, it is settled that SIHI's right of action started to accrue in 1981, when AWP
defaulted in paying its obligation. AWP's defaults can be gleaned from the following undisputed facts:
(1) AWP paid interest and related charges even after the maturity dates; (2) the obligation had to be
restructured several times upon the request of AWP; and (3) AWP sought extensions of payment on
its unpaid obligation.
Under Article 1155, the prescription of action is interrupted when: (1) they are filed before the court;
(2) there is a written extrajudicial demand by the creditors; and (3) there is any written
acknowledgment of the debt by the debtor.
The Court agrees with the conclusion of the CA that the 10-year prescriptive period was interrupted
on June 7, 1982 when AWP filed a complaint for injunction to restrain the intended foreclosure and
commenced to run again on September 5, 2016 when the RTC dismissed the complaint and lifted the
writ of preliminary injunction. In sum, the Court finds that SIHI's right to foreclose has not prescribed.
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2. FILCON READY MIXED VS. UCPB
FILCON READY MIXED, INC. AND GILBERT S. VERGARA, PETITIONERS, VS. UCPB GENERAL
INSURANCE COMPANY, INC., RESPONDENT.
G.R. No. 229877 | July 15, 2020 | First Division | Lazaro-Javier, J.
NATURE OF THE CASE

Petition for review on certiorari assailing the dispositions of the Court of Appeals which reversed the
trial court's ruling and held that respondent's action for sum of money had not prescribed
FACTS
Gutang is the registered owner of a Honda Civic with plate number ZDR-835. The vehicle was insured
with respondent UCPB covering the period April 17, 2007 to April 17, 2008. On November 16, 2007,
the car figured in a vehicular accident in Quezon City involving three (3) other vehicles: a Toyota
Revo, a Mitsubishi Adventure and a cement mixer owned by petitioner Filcon and driven by
petitioner Vergara.
Vergara left the cement mixer with its engine running at the uphill portion of Boni Serrano Extension.
It moved backward and hit the front portion of the Mitsubishi Adventure parked behind it. This car,
in turn, hit the front portion of the insured vehicle.
Respondent essentially averred that the proximate cause of the accident was Vergara's gross
negligence and lack of precaution. As a consequence, the insured vehicle got damaged. Gutang
brought the car to Honda Cars Pasig City for repair. As Gutang's insurer, respondent paid the total
cost of repairs.
By virtue of this legal subrogation, respondent sent a demand letter dated September 1, 2011, but
the petitioners simply ignored it. Hence, respondent was constrained to file the present action for
sum of money.
Petitioners, on the other hand, interposed extinctive prescription as an affirmative defense. They
claimed that under Article 1146 of the Civil Code, actions based on quasi-delict prescribes in four (4)
years.
The trial court dismissed the complaint on ground of prescription. Since the accident happened on
November 16, 2007, the claim should have been filed only until November 16, 2011. Here, the claim
was filed on February 1, 2012 or more than two (2) months late. The RTC affirmed.
The CA reversed. It found that respondent successfully proved it was subrogated to the rights of its
assured, Marco Gutang. It ruled that since respondent's cause of action was anchored on legal
subrogation, an obligation created by law, the same must be brought within ten (10) years from the
time the right of action accrued, following the pronouncement of this Court in Vector Shipping Corp,
et al. v. American Home Assurance Company. Considering that respondent indemnified Gutang on
February 6, 2008, the action will prescribe on February 6, 2018.
ISSUE
Whether or not respondent's action for money claims against petitioners is barred by prescription –
NO
RULING
At the outset, it is noted that in the recent case of Henson, Jr. v. UCPB General Insurance Co., Inc., the
Court overturned Vector and held that subrogation under Article 2207 of the Civil Code only allows
the insurer, as the new creditor who assumes ipso jure the old creditor's rights without the need of
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any contract, to go after the debtor. But this does not mean that a new obligation is created between
the debtor and the insurer. The insurer, as the new creditor, remains bound by the limitations of the
old creditor's claims against the debtor, which includes, among others, the aspect of prescription.
Hence, the debtor's right to invoke the defense of prescription cannot be circumvented by the mere
expedient of successive payments of certain insurers that purport to create new obligations when, in
fact, what remains subsisting is only the original obligation. Be that as it may, it should, however, be
clarified that this Court's abandonment of the Vector doctrine should be prospective in application
In Henson, the Court came up with guidelines relative to the application of Vector and its Decision
vis-a-vis the prescriptive period in cases where the insurer is subrogated to the rights of the insured
against the wrongdoer based on a quasi-delict, thus:
1. For actions of such nature that have already been filed and are currently
pending before the courts at the time of the finality of this Decision, the rules on
prescription prevailing at the time the action is filed would apply. Particularly:
(a) For cases that were filed by the subrogee-insurer during the applicability of
the Vector ruling (i.e., from Vector's, finality on August 15, 2013 up until the finality of
this Decision), the prescriptive period is ten (10) years from the time of payment by
the insurer to the insured, which gave rise to an obligation created by law.
Rationale: Since the Vector doctrine was the prevailing rule at this time, issues of
prescription must be resolved under Vector's, parameters.
(b) For cases that were filed by the subrogee-insurer prior to the applicability of
the Vector ruling (i.e., before August 15, 2013), the prescriptive period is four (4)
years from the time the tort is committed against the insured by the wrongdoer.
Rationale: The Vector doctrine, which espoused unique rules on legal subrogation
and prescription as aforedescribed, was not yet a binding precedent at this time;
hence, issues of prescription must be resolved under the rules prevailing
before Vector, which, incidentally, are the basic principles of legal subrogation vis-a-
vis prescription of actions based on quasi-delicts.
xxx
We apply here paragraph 1(b). Since the action was filed on February 1, 2012, prior to Vector, the
applicable prescriptive period is four (4) years pursuant to Article 1146 of the Civil Code.
Respondent, therefore, had four (4) years from November 16, 2007 when the vehicular mishap took
place or until November 16, 2011 within which to file its action for sum of money against Vergara
and his employer Filcon.
Within the four (4) year prescriptive period, or on September 1, 2011, respondent sent petitioners
a demand letter of even date. The latter never denied receipt thereof. Pursuant to Article 1155 of
the Civil Code, respondent's demand letter and petitioners' receipt thereof had the effect of
interrupting the four (4) year prescriptive period and gave respondent a whole fresh period of four
(4) years from petitioners' receipt of the demand letter within which to file the action for sum of
money. Records show that respondent filed the action just within five (5) months from September
1, 2011, the date when it sent the demand letter to petitioners, who, as stated, never denied receipt
thereof.
The Court of Appeals, thus, correctly reversed the dispositions of both MeTC and RTC and in lieu
thereof, properly ruled that complaint was filed within the prescriptive period of four (4) years.
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3. SELERIO VS. BANSACAN
NIEVES SELERIO AND ALICIA SELERIO, PETITIONERS, VS. TREGIDIO B. BANCASAN,

RESPONDENT.
G.R. No. 222442 | June 23, 2020 | First Division | Caguioa, J.

Petition for Review on Certiorari under Rule 45 assailing the Decision and Resolution of the Court of
Appeals which reversed Orders of the Regional Trial Court and held that respondent's action has not
prescribed.
FACTS
Nieves is the claimant, occupant, and possessor of a parcel of land in Davao City. Nieves executed a
Deed of Transfer and Waiver of Rights, Interests and Improvements over the subject land in favor of
respondent Tregidio conveying, ceding, and selling the property including all improvements found
thereon.
Nieves supposedly sold the subject property to Tregidio for P200,000.00; and the former
acknowledged to have received 50% of the amount from the latter. In the Deed, the parties agreed
that the 50% balance of the total consideration shall be paid only when Nieves and her family shall
have vacated the subject premises which shall not go beyond April 30,1994.
After the supposed conveyance, however, Jose Selerio, and Cecilia Ababo filed a Civil Case for
Partition, Accounting of Property Income and Attorney's Fees against Nieves, Tregidio and others.
Jose Selerio and Cecilia Selerio Ababa claimed to be the illegitimate children of Nieves' husband. In
that case, the parties executed a Compromise Agreement duly approved by the RTC wherein the
parties agreed to proceed with the sale over the subject property.
On February 2. 2007, Tregidio, through counsel, sent a letter to petitioners demanding the latter to
vacate the subject property. The demand remained unheeded. Consequently, Tregidio filed a
Complaint for Recovery of Possession, Damages and Attorney's Fees against petitioners alleging that
he is entitled to the possession of the property by virtue of the Deed executed in his favor.
Petitioners filed an Amended Answer. This time, they alleged, as an affirmative defense that the Deed
must be appreciated as similar to a contract to sell rather than a contract of sale. They furthermore
argued that Tregidio's cause of action had already prescribed; that in effect, he is enforcing a written
contract which prescribes in 10 years from the time the right of action accrued; that as stipulated in the
contract, petitioners had to vacate the property not later than April 30, 1994; and that since he filed his
Complaint only on March 14, 2007, he had slept on his rights for more than 12 years.
RTC dismissed respondent's Complaint in agreement with the petitioners. It held that the action was
actually one for specific performance based on a written contract, which prescribes in 10
years pursuant to Article 1144. As the case was filed only on March 14, 2007 or after almost 13 years
from the time petitioners were obliged to vacate the property on April 30, 1994, the action was
already barred by prescription
The CA reversed. CA held that the parties entered into a contract of sale. As respondent was already
the owner of the subject property, the CA held that the prescriptive period for the latter's action to
recover the property did not commence to run until February 2, 2007, i.e., when petitioners’ refusal
to vacate the property despite demand, respondent's cause of action accrued.
ISSUE
Whether or not respondent's action for recovery of possession has prescribed – NO
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RULING
The Court agrees with the CA that the action has not prescribed, albeit for a different reason.
Article 1144 of the Civil Code provides that an action based on a written contract must be brought
within 10 years from the time the right of action accrues.
Stated simply, a cause of action based on a written contract accrues when the right of the plaintiff is
violated. In this regard, the Court agrees with the RTC that respondent's cause of action to obtain
possession or to enforce the sale accrued on May 1, 1994, when petitioners breached the Deed by
failing or refusing to vacate the subject property on the date agreed upon, i.e., April 30, 1994. The
allegations in the Complaint unequivocally show that respondent anchors his purported right to own
and to possess the property on the Deed. Indeed, even the supposed constructive delivery of the
subject property emanates from the said Deed. Pursuant to Article 1144 of the Civil Code therefore,
respondent had 10 years from May 1, 1994 to file the appropriate action.
Article 1144, however, must be read in conjunction with Article 1155 of the Civil Code. Article 1155
states that "[t]he prescription of actions is interrupted when they are filed before the court, when
there is a written extrajudicial demand by the creditors, and when there is any written
acknowledgment of the debt by the debtor."
Jurisprudence holds that an interruption of the prescriptive period wipes out the period that has
elapsed, sets the same running anew, and creates a fresh period for the filing of an action.
Applying the foregoing rules, the 10-year period that commenced to run on May 1, 1994 was
interrupted when the parties executed the Compromise Agreement dated September 2, 1997.
Undoubtedly, the Compromise Agreement is a written acknowledgment of petitioner Nieves'
obligation to deliver ownership and/or possession of the subject property and of respondent's
correlative obligation to pay the unpaid balance of the purchase price once said petitioner vacates
the property. Precisely, the parties expressly agreed that the "sale of the house and lot to [defendant
spouses Teddy and Emy [Bancasan] shall proceed as agreed and approved by the parties."
In fine, the period to enforce the Deed has not prescribed. The 10-year period, which commenced on
May 1, 1994, was interrupted when the parties executed the Compromise Agreement on September
2, 1997. This interruption wiped out the period that already elapsed and started a fresh prescriptive
period from September 2, 1997 to September 2, 2007. Thus, the written extrajudicial demand sent
by respondent on February 2, 2007 was made within the prescriptive period. In fact, said written
demand likewise interrupted the prescriptive period, which commenced anew when petitioners
received said demand. Undoubtedly therefore, the Complaint filed on February 28, 2007 was
made within the prescriptive period.
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4. PHILHEALTH VS. COA
PHILIPPINE HEALTH INSURANCE CORPORATION, PETITIONER, VS. COMMISSION ON AUDIT,

MICHAEL G. AGUINALDO, CHAIRPERSON, AND ANGELINA B. VILLANUEVA, DIRECTOR IV,
RESPONDENTS.
G.R. No. 235832 | November 03, 2020 | En Banc | Inting, J.

Petition for Certiorari with Prayer for Issuance of Temporary Restraining Order and Writ of
Preliminary Injunction assailing the Decision of the Commission on Audit Commission Proper. The
assailed Decision affirmed the Decision of the COA-Corporate Government Sector A that affirmed the
Notices of Disallowance issued by Philippine Health Insurance Corporation Resident Auditor against
the PHIC.
FACTS
PHIC is a government corporation created under RA 7875, as amended by RA 9241 and RA 10606.
Its functions include the administration of the country's national health insurance program as well
as the formulation and promulgation of policies for the sound administration of the program. On the
other hand, the COA is a constitutional commission vested with the power, authority and duty to
examine, audit and settle all accounts concerning the revenues, receipts and expenditures or uses of
government funds and properties pursuant to Section 1, Article IX-A, in relation to Section 2, Article
IX-D of the Constitution.
The Resident Auditor issued NDs against certain benefits granted by the PHIC Board of Directors
(BOD) to its personnel. Except for ND No. HO 2009-001 (on payment of liability insurance premium),
the Resident Auditor issued all the NDs in question on the ground that their covered benefits were
given to the officers and employees of PHIC without approval from the Office of the President (OP)
as required under Memorandum Order No. 20 and Administrative Order No. 103. Meanwhile, the
Resident Auditor issued ND No. HO2009-001 because the payment of liability insurance premium for
the BOD and Officers of PHIC violated Section 73 of RA 9184 and GPPB Resolution No. 21-05.
Consequently, the Resident Auditor held liable the concerned officers and employees of PHIC as well
as the payees for the disallowed amounts. With the denial of its motion for reconsideration on NDs,
PHIC filed its consolidated memorandum of appeal before the COA-CGS.
The COA-CGS denied the appeals interposed by PHIC and accordingly, affirmed the NDs in the total
amount of P204,072,574.37. While the COA Proper dismissed the petition for review as regards ND
No. 09-005-725(08) for lack of merit and for late filing with respect to the remaining NDs.
According to the COA Proper, PHIC failed to file a petition for review relative to the said NDs and Hos
within the reglementary period of 180 days or six months. Because of this, the decision sustaining
the NDs already became final and executory. While PHIC filed a motion for extension of time to file
petition, the COA Proper did not act on it and PHIC could not assume that the belated filing of the
petition was justified.
Relative to ND No. 09-005-725, the COA Proper decreed that the amount of f 16,275,578.16
representing payment of Efficiency Gift to PHIC employees for CY 2007 was disallowed for lack of
approval from the OP. It stressed that even if PHIC is exempt from the coverage of the Office of
Compensation and Position Classification, it should report to the OP, through the Department of
Budget and Management (DBM), its position classification and compensation plans. It underscored
that the prior approval of the OP did not remove from the BOD of PHIC the power to fix compensation
and allowances of its personnel, but requires it to submit its plans to the OP, through the DBM, to
comply with the law. The COA Proper also determined that the officials of PHIC who authorized,
13
approved or certified the subject grants could not be deemed in good faith since the law requires the
prior approval of the OP. It further ruled that in its earlier decisions, it affirmed the disallowance on
similar benefits. Thus, it held that the PHIC officials were not in good faith due to such previous NDs
on the same subject matter. Regarding the recipient-employees, the COA Proper decreed that they
might be in good faith but under the principle of solutio indebiti, a person who receive something by
mistake had the obligation to return it.
ISSUE
Whether or not the amount of efficiency gift must be returned by its payees or recipients pursuant to
the principle of solutio indebiti - YES
RULING
The payees or recipients of the Efficiency Gift must return the amount they received since it was
erroneously given to and received by them. To stress, while termed as "Efficiency Gift," there is no
indication that the disallowed amount was genuinely intended as compensation for services
rendered by the recipients. Moreover, pursuant to the principle of solutio indebiti and as specified
under Article 2154 of the Civil Code, whenever a person receives something by mistake, the recipient
has the obligation to return or refund the benefit so given, otherwise unjust enrichment on the part
of the payee will arise. In sum, since the recipients of the Efficiency Gift have received and retained
benefits to which they are not entitled to, then they have now the duty to return the amount given
them.
.
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5. YON MITORI VS. UNION BANK
YON MITORI INTERNATIONAL INDUSTRIES,* PETITIONER, VS. UNION BANK OF THE

PHILIPPINES, RESPONDENT.
G.R. No. 225538 | October 14, 2020 | First Division | Caguioa, J.

Petition for Review on Certiorari under Rule 45 assailing the Decision and Resolution rendered by
the Court of Appeals. The assailed Decision and Resolution affirmed, with modification, the Decision
and Order issued by the Regional Trial Court of Pasig City which granted the Complaint for Sum of
Money filed by Union Bank of the Philippines against Rodriguez Ong Tan the registered owner and
operator of Yon Mitori International Industries.
FACTS
Tan, doing business under the name and style of Yon Mitori, deposited in his Union Bank account, the
amount of P420,000.00 through BPI Check which was drawn against the account of Angli Lumber &
Hardware, Inc., one of Tan's alleged clients.
The BPI Check was entered in Tan's bank record thereby increasing his balance to P513,700.60. Tan
withdrew from the said account the amount of P480,000.00. Later that day, the BPI Check was
returned to Union Bank as the account against which it was drawn had been closed. It was then that
Union Bank discovered that Tan's account had been mistakenly credited. Union Bank alleged that the
value of the BPI Check had been inadvertently credited to Tan's account due to a technical error in
its system.
Thus, the branch manager of Union Bank immediately called Tan to recover the funds mistakenly
released. However, Tan refused to return the funds, claiming that the BPI Check proceeded from a
valid transaction between Angli Lumber and Yon Mitori. Tan alleged that the BPI Check had been
given to him for value in the course of business and claimed that he should not be faulted for
withdrawing the value of said check from his account since Union Bank made the corresponding
funds available by updating his account to reflect his new balance. Tan further argued that Union
Bank wrongfully and unlawfully deducted the amount of P34,700.60 from his account.
The RTC ruled in favor of Union Bank. It found all the requisites for the application of solutio indebiti
under Article 2154 of the Civil Code present. It held that since Union Bank mistakenly released the
amount of P480,000.00 in favor of Tan without being obligated to do so, Tan must be ordered to
return said amount to preclude unjust enrichment at Union Bank's expense. Further, the RTC ruled
that under Article 1980 of the Civil Code, "fixed, savings, and current deposits of money in banks and
similar institutions shall be governed by the provisions concerning simple loan." By reason of the
erroneous payment made in Tan's favor, Tan and Union Bank became mutual debtors and creditors
of each other. This gave rise to Union Bank's right to set-off the erroneous payment made against
Tan's remaining deposit, consistent with the principle of legal compensation under the Civil Code.
The CA affirmed the RTC's findings and held that Tan would be unjustly enriched at Union Bank's
expense if he were permitted to derive benefit from the funds erroneously credited to his account.
ISSUE
Whether or not Tan has the obligation to return the funds erroneously credited in his favor - YES
RULING
In this case, the fact that Tan received the BPI Check for value in the ordinary course of business does
not negate his obligation to return the funds erroneously credited in his favor. Tan's remedy, if any,
lies not against Union Bank, but against the drawer of the BPI Check Angli Lumber. All told, Tan's
15
obligation to return the erroneously credited funds to Union Bank stands. Since Tan refused to return
the mistakenly credited amount of P420,000.00, Union Bank applied Tan's remaining balance of
P34,700.60 to set off his debt before it filed its Complaint before the RTC. Thus, the sum due to Union
Bank is P385,299.40, as stated in the RTC Decision.
16
6. TEAM PACIFIC VS. PARENTE
TEAM PACIFIC CORPORATION, FEDERICO M. FERNANDEZ, AND AURORA Q. GARCIA,

PETITIONERS, VS. LAYLA M. PARENTE, RESPONDENT.
G.R. No. 206789 | July 15, 2020 | Third Division | Leonen, J.

Petition for Review on Certiorari assailing the Decision and Resolution of the Court of Appeals, which
reversed the National Labor Relations Commission's and Labor Arbiter's rulings and found that Layla
M. Parente was illegally dismissed by Team Pacific Corporation.
FACTS
Team Pacific hired Parente as a production operator in its Hermetic Department. Later, Parente was
promoted to being a quality assurance calibration technician. While on her maternity leave, Parente
was asked to see Team Pacific's human resource and administrative manager, Aurora Q. Garcia.
Parente protested, saying that she was still on maternity leave and experiencing post-natal weakness,
dizziness, and shakiness. However, when she was told that there were reports circulating within the
plant that she would be terminated from employment, Parente acceded.
During their meeting Garcia handed Parente a letter and informed her of her dismissal, effective on
June 22, 2009, the day after the end of her maternity leave. She was told that she would receive her
separation pay on the same date. Parente was about to ask why she was being dismissed, but Garcia
interrupted her and asked her to just affix her name and signature on the space provided in the letter.
Parente then went to the DOLE, where she was advised to first accept her separation pay before filing
a complaint. After she had been required to process her clearance and sign several documents,
Parente received her separation pay she then lodged her Complaint for illegal dismissal.
The Labor Arbiter dismissed Parente's Complaint. It found her dismissal valid, noting that the
Termination Letter clearly stated that the retrenchment was to prevent losses amid the global
economic crisis, which had led to establishment closures and layoffs. It ruled that Team Pacific
complied with the Labor Code's requirements for retrenchment, as there was no showing of bad faith
or malice, and Parente was duly notified one month prior to the date of her dismissal.
The NLRC affirmed said decision. It found that Parente's documents contradicted her claim of illegal
dismissal and that Parente's acts of receiving the notice of termination, processing her clearance,
accepting her separation pay, and receiving her employment certificate were conclusive on her. It
ruled that Parente had been estopped from suing Team Pacific, which believed that she voluntarily
accepted her dismissal.
The CA noted that Team Pacific did not submit to the Labor Arbiter's jurisdiction when it refused to
receive summons and file its position paper and other documents. Thus, no evidence was found to
support Team Pacific's claim of business losses to justify the dismissal. It held that Parente was not
estopped from questioning her dismissal just because she accepted her separation pay and that
waivers and quitclaims are frowned upon, especially as to employees who may have been pressured
by employers seeking to evade legal responsibilities. It also noted how Parente was in no position to
resist the money offered as she had just given birth, as well as the DOLE’s advice that she accept her
separation pay before filing a complaint.
ISSUE
Whether or not petitioners Garcia and Fernando are solidarily liable with petitioner Team Pacific
Corporation - NO
RULING
17
In case of dismissals, directors and officers of corporations may only be held solidarily liable with the
corporation if they acted in bad faith or with malice. In MAM Realty Development Corporation v.
National Labor Relations Commission:
A corporation, being a juridical entity, may act only through its directors, officers and
employees. Obligations incurred by them, acting as such corporate agents, are not
theirs but the direct accountabilities of the corporation they represent. True, solidary
liabilities may at times be incurred but only when exceptional circumstances warrant
such as, generally, in the following cases:
1. When directors and trustees or, in appropriate cases, the officers of a
corporation—
a. vote for or assent to patently unlawful acts of the corporation;
b. act in bad faith or with gross negligence in directing the corporate affairs;
c. are guilty of conflict of interest to the prejudice of the corporation, its
stockholders or members, and other persons.
2. When a director or officer has consented to the issuance of watered stock or who,
having knowledge thereof, did not forthwith file with the corporate secretary his
written objection thereto.
3. When the director, trustee or officer has contractually agreed or stipulated to hold
himself personally and solidarity liable with the Corporation.
4. When a director, trustee or officer is made, by specific provision of law, personally
liable for his corporate action.
In labor cases, for instance, the Court has held corporate directors and officers solidarily liable with
the corporation for the termination of employment of employees done with malice or in bad faith.
In this case, respondent failed to present clear and convincing evidence that petitioners Garcia or
Fernandez acted in bad faith or with malice. They did not breach any duty or were motivated by ill
will. Absent proof, the corporation's separate and distinct personality must be respected.
18
7. WYETH PHILIPPINES VS. CIAC
WYETH PHILIPPINES, INC., PETITIONER, VS. CONSTRUCTION INDUSTRY ARBITRATION

COMMISSION ("CIAC"), CIAC ARBITRATORS VICTOR P. LAZATIN, SALVADOR P. CASTRO, JR.
AND MARIO E. VALDERRAMA; SKI CONSTRUCTION GROUP, INC.; AND MAPFRE INSULAR
INSURANCE CORPORATION, RESPONDENTS.
G.R. No. 220045-48 | June 22, 2020 | Third Division | Leonen, J.

Petition for Review on Certiorari filed by petitioner Wyeth Philippines, Inc. assailing the Consolidated
Decision/Resolution and Resolution of the Court of Appeals, which modified the Award of the
Construction Industry Arbitration Commission Arbitral Tribunal.
FACTS
Petitioner is the project owner of the "Dryer 3 and Wet Process Superstructure Works" in Cabuyao,
Laguna. In 2007, Wyeth invited bidders to submit proposals for its project through its consultant,
Jacobs Engineering Singapore Pte. Ltd. In 2007, SKI was awarded the bid provided it executes the
superstructure works in accordance with a Notice to Proceed issued by Wyeth.
After signing the Notice to Proceed, SKI was given an advance payment of P72,840,000.00. As
required under the Contract, SKI caused respondent Mapfre Insular Insurance Corp. to issue the
payment, advance payment, and performance bonds in favor of Wyeth.
Wyeth notified Mapfre that it might need to call upon the bonds and Wyeth, through its managing
director informed SKI of the termination of the contract. SKI replied saying the termination was done
without giving them 14 days to address the problems, pursuant to Clause 8 of the Conditions of the
Contract and claimed they essentially only had three days to complete the project from the time they
were informed of their default on January 23, 2008, until the Project Manager suspended all the
construction activities starting January 26, 2008, even if they supposedly had until February 6, 2008
to complete it.
Wyeth wrote a letter to Mapfre, calling on the performance of the bonds they issued and requesting
confirmation that it will not be barred from claiming on the bonds pending settlement with SK to
which Mafre confirmed. However, Mapfre stated that it will only act on the bonds after SKI's liability
has been clearly established. In 2009, Mapfre refused to pay the amount under the payments bond.
When the parties failed to arrive at an amicable settlement on the claims after various meetings, they
agreed to refer the dispute to arbitration pursuant to Article 10 of their contract. Wyeth filed a
Complaint before the RTC to recover the amount under the payments bond. However, the parties
eventually agreed to resolve the dispute through arbitration before the CIAC. SKI filed a complaint
against Wyeth before the Commission for the adjudication of its claims.
Mafre claims that Wyeth was not entitled to recover anything as it acted in good faith in rejecting
Wyeth's claim because the same had been extinguished by judicial compensation. However, should
it be held liable to Wyeth, Mapfre prayed to be indemnified by SKI.
CIAC found that Wyeth validly terminated the contract because SKI incurred delay in the construction
of the project and SKI was held liable for the payment of additional costs incurred by reason of the
delay and that Wyeth, as project owner, had a wide latitude in exercising its prerogative to terminate
the contract and that the termination was valid because SKI could further prejudice the completion
of the project should it be given another chance to discharge its contractual obligations.
The CA affirmed that decision of RTC and held that SKI is liable for the delay, as it is undisputed that
SKI did not achieve the milestones stated in the Conditions of the Contract, and failed to ask for an
extension of time if the delays were indeed not attributable to it.
19
ISSUE
Whether Mapfre is jointly and severally liable with respondent SKI pursuant to the bonds it issued in
favor of petitioner - YES
RULING
Under the bonds executed by respondent SKI as principal and Mapfre as surety, they bound
themselves to indemnify petitioner: (1) in the Advance Payment Bond, the amount of P72,840,000.00
for failure to recoup the advance payment granted to respondent SKI; (2) under the Payment Bond,
the amount of P48.56 million to pay for claims for labor and materials used or reasonably required
for use in the performance of the Contract; and (3) under the Performance Bond, P48.56 million for
any loss or damages that petitioner may suffer as a consequence of failure by respondent SKI to
perform its obligations under the Contract.
Both the Arbitral Tribunal and the Court of Appeals held that respondent Mapfre is jointly and
severally liable with respondent SKI pursuant to the Advance Payment Bond, Payment Bond and
Performance Bond it issued in favor of petitioner. Respondent Mapfre is clearly bound by its
undertaking under the bonds. Considering that respondent Mapfre did not appeal the Court of
Appeals decision, its joint and several liability under the bonds it issued in favor of petitioner is
"deemed final" with respect to it, since issues not raised on appeal are already final and cannot be
disturbed.
Considering that this Court upholds the monetary claims of petitioner as found by the Arbitral
Tribunal, respondent Mapfre is also jointly and severally liable with respondent SKI to the extent
awarded by the Arbitral Tribunal for the following amounts: (1) P42,293,679.02 under the Advance
Payment Bond; (2) P6,852,678.71 under the Payment Bond; and (3) P24,280,000.00 under the
Performance Bond.
20
8. LLORENTE VS. STAR CITY
QUINTIN ARTACHO LLORENTE, PETITIONER, VS. STAR CITY PTY LIMITED, REPRESENTED BY
THE JIMENO AND COPE LAW OFFICES AS ATTORNEY-IN-FACT, RESPONDENT.
G.R. No. 212050 | January 15, 2020 | First Division | Caguioa, J.

Petitions for review on certiorari under Rule 45 of the Rules of Court respectively filed by petitioner
Quintin Llorente and petitioner Star City Pty Limited assailing the Decision and the Resolution of the
Court of Appeals, which affirmed with modification the Decision rendered by the Regional Trial
Court.
FACTS
SCPL, an Australian corporation which operates the Star City Casino in Sydney, New South Wales,
Australia, claims that it is not doing business in the Philippines and is suing for an isolated transaction
and filed a complaint for collection of sum of money with prayer for preliminary attachment against
Llorente, who was a patron of its Star City casino and Equitable PCI Bank (EPCIB).
Allegedly, Llorente is one of the numerous patrons of its casino in Sydney, Australia. As such, he
maintained therein Patron Account Number 471741. On 12 July 2000, he negotiated two (2)
Equitable PCI bank drafts with check numbers 034967 and 034968 worth US $150,000.00 each or
for the total amount of US $300,000.00 subject drafts in order to play in the Premium Programme of
the casino. This Premium Programme offers the patron a 1% commission rebate on his turnover at
the gambling table and a 10% rebate for complimentary expenses. Before upgrading Llorente to this
programme, SCPL contacted first EPCIB to check the status of the subject drafts and confirmed that
the same were issued on clear funds without any stop payment orders. Thus, Llorente was allowed
to buy in on a Premium Programme and his front money account in the casino was credited with US
$300,000.00.
In 2000, SCPL deposited the subject drafts with Thomas Cook Ltd and after some time received the
advice of Bank of New York about the "Stop Payment Order" prompting it to make several demands
upon Llorente to make good his obligation. However, the latter refused to pay and alleged that he
caused the stoppage of the subject drafts' payment because SCPL's personnel and representatives
committed fraud and unfair gaming practices during his stay in the casino. It likewise asked EPCIB in
2002 for a settlement which the latter denied on the ground that it was Llorente who requested the
Stop Payment Order and no notice of dishonor was given.
On the other hand, EPCIB denied that it unjustifiably and maliciously refused to settle the obligation
since it merely complied with the instructions of Llorente, as payee of the subject drafts, to stop
payment thereon. And the SCPL had no cause of action against it because there was no privity of
contract between them. EPCIB likewise filed a cross-claim against Llorente since it already
reimbursed the face value of the subject drafts, pursuant to the demand of the latter. For such reason,
it should be relieved of any and all liabilities under the subject drafts.
The RTC held that both Llorente and EPCIB are solidarily liable for the value of the subject drafts. It
ruled that when Llorente, as payee of the subject drafts, signed at the back thereof, he is said to have
become an indorser who warrants that on due presentment, the instruments would be accepted or
paid or both, as the case may be, according to their tenor, and that if they be dishonored and the
necessary proceedings on dishonor be duly taken, they will pay the amount thereof to the holder. The
same is also true for EPCIB, being the drawer of the subject drafts. It is of no moment if the bank was
not a privy to the transaction for its liability as a drawer is not based on direct transaction but by
virtue of the warranties it made within the purview of the Negotiable Instruments Law. The RTC even
pointed that Llorente and EPCIB could not seek refuge on the alleged lack of notice of dishonor to
21
them since they were responsible forthe dishonor of the subject drafts aside from the fact that it
would be futile to require such notice since it was EPCIB who countermanded the payment.
The CA deemed it proper to discharge EPCIB from any responsibility considering that it already paid
Llorente the face amount of the subject drafts amounting to US$300,000.00 as evidenced by the
Indemnity Agreement executed. It reasoned that allowing EPCIB 's solidary liability would sanction
unjust enrichment on Llorente's part who would be allowed to profit or enrich himself inequitably at
EPCIB's expense.
ISSUE
Whether or not EPCIB as the drawer of the subject demand/bank drafts is solidarily liable with
Llorente - NO
RULING
There is no legal basis to make EPCIB solidarily liable with Llorente. According to Article 1207 of the
Civil Code, there is solidary liability only when the obligation expressly so states, or when the law or
the nature of the obligation requires solidarity.
In this case, there is no contract or agreement wherein the solidary liability of EPCIB is expressly
provided. Under the NIL and the nature of the liability of the drawer, solidary obligation is also not
provided Thus, EPCIB's liability is not solidary but primary due to the SPO that Llorente issued
against the subject demand/bank drafts.
Consequently, both Llorente and EPCIB are individually and primarily liable as endorser and drawer
of the subject demand/bank drafts, respectively. Given the nature of their liability, SCPL may proceed
to collect the damages hereinafter awarded simultaneously against both Llorente and EPCIB, or
alternatively against either Llorente or EPCIB, provided that in no event can SCPL recover from both
more than the damages awarded.
In the event that SCPL is able to collect from EPCIB based on this judgment, any amount that EPCIB
pays to SCPL can be collected by EPCIB from Llorente by virtue of its cross-claim against Llorente
and pursuant to the indemnity clause of the Indemnity Agreement, which is valid as between Llorente
and EPCIB.
22
9. BDO VS. YPIL
BANCO DE ORO UNIBANK, INC. (NOW BDO UNIBANK, INC.), PETITIONER, VS. EDGARDO C.
YPIL, SR., CEBU SUREWAY TRADING CORPORATION, AND LEOPOLDO KHO, RESPONDENTS.
G.R. No. 212024 | October 12, 2020 | Second Division | Hernando, J.

Petition for Review on Certiorari under Rule 45 of the Rules of Court challenging the Decision and
the Resolution of the Court of Appeals, affirming the Orders of the Regional Trial Court
FACTS
Kho, representing CSTC, offered a proposal to respondent Edgardo C. Ypil, Sr. (Ypil) to invest in the
Prudentialife Plan - Millionaires in Business scheme. Ypil acquiesced and Kho was able to solicit the
total amount of P300,000.00 from him. Eventually, though, Ypil opted to get a refund of the amounts
he paid and manifested such intent through a letter. However, CSTC or Kho did not answer. Ypil
likewise made several oral demands but to no avail.
Ypil thus filed a complaint against CSTC and Kho and asked for the principal payment plus interest
and damages. The RTC granted Ypil's prayer. Relevantly, Sheriff Guaren issued a Notice of
Garnishment of the amount of P300,000.00 plus lawful expenses from the accounts of CSTC and/or
Kho addressed to the Manager and/or Cashier of the Bank's North Mandaue Branch. The Bank
received the said notice on the same day. Yet, the Bank, through its North Mandaue Branch Head
Polloso, sent its Reply to Sheriff Guaren informing him that CSTC and/or Kho have no available
garnishable funds. Notably, the RTC discovered that the Bank already debited from CSTC's savings
and current accounts some amounts to offset its (CSTC's) outstanding obligation with the Bank under
a loan agreement.
The Bank averred that since CSTC defaulted in its obligations to the Bank, its entire obligation
immediately became due and demandable without need of demand or notice. It asserted that since
the Bank and CSTC were creditors and debtors of each other, legal compensation already took effect.
CSTC and Kho alleged that the Bank resorted to legal compensation to frustrate the order of
garnishment. Moreover, they averred that legal compensation cannot take effect because CSTC's loan
was not yet due and demandable.
The RTC ordered the Bank to make available the garnished deposits of CSTC and Kho pursuant to the
Notice of Garnishment. It ruled that the bank, cannot, however, unilaterally debit the defendants'
accounts which are already in custodia legis, even assuming for argument’s sake that legal
compensation ensued ipso jure. If the bank has any claims against the defendants CSTC and Kho, it
must file the proper pleading for intervention to protect whatever it claims to be its rights to include
the right of legal compensation.
Meanwhile, the RTC rendered a Judgment Based on Compromise Agreement. Apparently, Ypil and
Kho submitted a Compromise Agreement wherein Kho, in behalf of CSTC, agreed to pay the garnished
amount of P300,000.00 as full and final settlement of CSTC's obligation, given that the said amount is
more or less the same amount it owes Ypil. Moreover, Ypil and Kho agreed to waive any other claims
and counterclaims in the specific performance case.
Aggrieved, the Bank filed a Manifestation before the RTC stating that the garnished amount is the
subject of its pending certiorari petition with the CA. As such, it requested the trial court to suspend
any attempt to implement the Judgment Based on
Compromise Agreement insofar as the garnished amount is concerned, at least until the CA resolves
its certiorari petition. Nevertheless, considering that the CA did not issue any injunctive order, the
23
RTC issued an Order denying the Bank's prayer for the suspension of the execution of the assailed
Order.
The CA declared that the RTC correctly held that the service of the Notice of Garnishment upon the
Bank effectively placed CSTC's deposits under custodia legis, notwithstanding the debiting of CSTC's
accounts by the Bank. However, the CA found that not all the elements of legal compensation
pursuant to Article 1279 of the Civil Code are present in this case. This is because notwithstanding
CSTC's indebtedness to the Bank, there is no proof as to when the obligation became due, liquidated
anddemandable.
ISSUE
Whether or not legal compensation took place ipso jure as between the Bank and CSTC when CSTC
defaulted in its obligations to the Bank - NO
RULING
It is settled that compensation is a mode of extinguishing to the concurrent amount the debts of
persons who in their own right are creditors and debtors of each other. The object of compensation
is the prevention of unnecessary suits and payments thru the mutual extinction by operation of law
of concurring debts. The said mode of payment is encapsulated in Article 1279 of the Civil Code which
provides that in order that compensation may be proper, it is necessary:
1) That each one of the obligors be bound principally, and that he be at the same time a principal
creditor of the other;
2) That both debts consist in a sum of money, or if the things due are consumable, they be of the
same kind, and also of the same quality if the latter has been stated;
3) That the two debts be due;
4) That they be liquidated and demandable;
5) That over neither of them there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor.
In relation to this, Article 1290 of the Civil Code states that when all the requisites mentioned in
Article 1279 are present, compensation takes effect by operation of law, and extinguishes both debts
to the concurrent amount, even though the creditors and debtors are not aware of the compensation.
In this case, there is no dispute that the Bank and CSTC are both creditors and debtors of each other.
Moreover, the debts consist in or involve a sum of money, particularly CSTC's loan and its deposit
with the Bank. However, the Court finds that CSTC's debt was not due and liquidated properly, and
that there is an existing controversy involving CSTC's funds with the Bank. Also, there is no dispute
that Kho, in behalf of CSTC, and Ypil entered into a Compromise Agreement which the trial court
approved through a Judgment Based on Compromise Agreement. The funds were validly garnished
through an order of the trial court with competent jurisdiction. More importantly, no legal
compensation took place which could have rendered CSTC's deposits unavailable for garnishment.
24
10. ARRIVAS VS. BACOTOC
DIOSA ARRIVAS, PETITIONER, VS. MANUELA BACOTOC, RESPONDENT.

G.R. No. 228704 | December 02, 2020 | First Division | Peralta, C.J.

Petition for review on certiorari under Rule 45 of the Rules of Court assailing the Decision and the
Resolution of the Court of Appeals which affirmed, with modifications, the Decision of the Regional
Trial Court finding herein petitioner guilty beyond reasonable doubt of the crime of Estafa under
Article 315, paragraph l(b) of the Revised Penal Code.
FACTS
Diosa Arrivas and Manuela Bacotoc are both engaged in buying and selling of jewelries, and had done
business together countless times. Allegedly, Arrivas told Bacotoc that she knew someone who was
interested in a male's ring and was willing to buy one at a price ranging from P50,000.00 to
P80,000.00. She asked Bacotoc if she had an available item within the given specification. When
Bacotoc told Arrivas that she had an available ring, Arrivas asked Bacotoc if she could bring the said
ring to her client. Considering the price of the ring, Bacotoc was hesitant at first to entrust the same
to Arrivas. The latter, however, was able to convince Bacotoc, and promised that she will return the
ring if the buyer would not buy the same, or immediately deliver the amount if the buyer decides to
purchase the ring. They then agreed to execute a trust receipt as they usually do whenever they
transact business together.
After the lapse of two days, however, Arrivas was not able to deliver the payment of the ring or return
the same to Bacotoc. The latter tried to look for Arrivas in her usual place of business but she could
not be found. It was only after two weeks that Bacotoc was able to finally meet with Arrivas. During
their said meeting, Arrivas told Bacotoc that the payment for the ring will be made in thirty days.
However, the said thirty days lapsed and Arrivas still failed to make any payment to Bacotoc.
Thereafter, when Bacotoc again met Arrivas, the latter asked for reconsideration and pleaded that
she be allowed to pay the price of the ring in installments as well as pay her old accounts, to which
Bacotoc agreed. Nevertheless, no payment was made by Arrivas.
Thus, Bacotoc demanded for the payment of the ring in the amount of P75,000.00. However, Arrivas
again failed to comply with her promise.
The RTC rendered judgment convicting Arrivas. The trial court further noted that Arrivas admitted
the identity of the subject ring and that she understood the terms and conditions of the trust receipt
when she signed the same. The RTC also found that none of the receipts evidencing the alleged
payments transaction involving the subject ring. It added that the receipts showed that these were
payments made to Arrivas's previous accounts with Bacotoc. The CA, on the other hand, denied
Arrivas's appeal and affirmed, with modifications, the ruling of the trial court.
Hence, this petition and Arrivas contended that there was no demand made by Bacotoc prior to the
partial payment of P20,000.00, and that this partial payment was for the principal of P75,000.00, or
the amount of the subject men's ring. Thus, the trust relationship between them was novated, and it
was converted into one between a debtor and a creditor. Basing on this premise, Arrivas contends
that Article 1292 of the Civil Code should have been applied since a contract of sale novated the
principal obligation of trust, and this was before the consummation of the crime of Estafa.
ISSUE
Whether or not there was novation of the principal obligation of trust - NONE
25
RULING
Novation is defined as the extinguishment of an obligation by the substitution or change of the
obligation by a subsequent one which terminates the first, either by changing the object or principal
conditions, or by substituting the person of the debtor, or subrogating a third person in the rights of
the creditor. Article 1292 of the Civil Code on novation further provides that in order that an
obligation may be extinguished by another which substitute the same, it is imperative that it be so
declared in unequivocal terms, or that the old and the new obligations be on every point incompatible
with each other.
It is well settled that novation is never presumed - novatio non praesumitur. As the party alleging
novation, the onus of showing clearly and unequivocally that novation had indeed taken place rests
on the petitioner. This, however, she failed to do.
26
11. ITALKARAT 18, INC., VS. GERASMIO
ITALKARAT 18, INC. PETITIONER, VS. JURALDINE N. GERASMIO, RESPONDENT.

G.R. No. 221411 | September 28, 2020 | Third Division | Hernando, J.
NATURE OF THE CASE

Petition for Review on Certiorari which seeks to reverse and set aside the Decision and Resolution of
the Court of Appeals
FACTS
Respondent Juraldine N. Gerasraio filed a complaint for illegal dismissal, reinstatement, backwages,
separation pay, declaration of the quitclaim and release as null and void, 13 th month pay, litigation
expenses, damages and attorney's fees, against petitioner Italkarat 18, Inc. (Company).
Juraldine alleged that the Company hired him on June 1, 1990. In 1993, he was designated as the
Maintenance Head and Tool and Die Maker until his dismissal on November 20, 2008 on the ground
of serious business losses. He claimed that during and prior to the last quarter of 2008, the Company
had repeatedly informed its employees of its proposed retrenchment program because it was
suffering from serious business losses. In particular, Juraldine claimed that Noel San Pedro (San
Pedro), the then Officer-In-Charge (OIC)/Manager of the Company, informed him sometime in
November 2008 that the Company was planning to retrench a substantial number of workers in the
Maintenance and Tool and Die Section; and that if he opts to retire early, he will be given a sum of
P170,000.00. San Pedro then allegedly cautioned Juraldine that if he will not accept the offer to retire
early, the Company would eventually retrench or terminate him from his employment, in which case,
he might not even receive anything.
In light of the foregoing, Juraldine executed and signed a resignation letter and quitclaim. He was then
informed to return to get his check worth P170,000.00. However, to his dismay, Juraldine was later
informed by San Pedro that he would be receiving only the amount of P26,901.34. Thus, Juraldine,
through his lawyer, sent a letter essentially demanding the amount of P170,000.00 he was allegedly
promised earlier. Since the Company did not respond, Juraldine filed the instant complaint for illegal
dismissal.
On the other hand, the Company essentially alleged that Juraldine voluntarily resigned from his job,
thus, his claims are baseless. It further alleged that during the last year of his employment, Juraldine
took leaves of absence in order to process his papers for a possible seaman's job.
Moreover, the Company stated that Juraldine tendered his resignation and demanded from the
Company the payment of his separation pay on account of his long years of service. He executed and
signed a waiver and quitclaim which shows, inter alia, the computation of his receivables. He
then signed the voucher for this purpose and thereafter received the check issued to him
representing his last pay. Surprisingly, he send a demand letter.
Labor Arbiter (LA) rendered a Decision declaring the complainant to have been unlawfully dismissed.
The LA ruled that Juraldine was only forced to resign because of San Pedro's misrepresentation that
he would be paid P170,000.00 as separation pay.
The NLRC found that Juraldine voluntarily resigned from his job.
Aggrieved, Juraldine filed a Petition for Certiorari with the CA. In a Decision dated February 22, 2012,
the CA granted the Petition for Certiorari and found that the NLRC committed grave abuse of
discretion. CA found that Juraldine's resignation was not unconditional since he was demanding
27
payment for his separation pay in accordance with the alleged company practice. The CA opined that
Juraldine latched on San Pedro's promise that he would be paid P170,000.00 if he would resign.
ISSUE
Whether or not a contract exists between Juraldine and the Company regarding the former’s
separation pay - NO
RULING
In our jurisdiction, a contract is defined in Article 1305 of the Civil Code as a meeting of the minds.
This means that a contract may exist in any mode, whether written or not. In this case, however,
Juraldine utterly failed to show that he has a perfected contract with the Company regarding his
separation pay.
To prove that the Company owed him separation pay, Juraldine primarily relied on his resignation
letter and the subsequent demand letter written by his lawyer. The CA incorrectly appreciated the
resignation letter as one demanding for separation pay. The contents of the said resignation letter
would reveal that Juraldine merely believed that he was entitled to separation pay and was not even
demanding for a certain amount. In short, his resignation was irrevocable and is patently
unconditional.
Juraldine, while he believed to be entitled to separation pay, never intended to revoke his resignation.
In fact, as already mentioned, the supposed separation pay does not appear to be the primary reason
why Juraldine tendered his resignation as the totality of circumstances would show that he was
already intending to resign and work abroad even before San Pedro allegedly talked with him and
even before the Company's supposed announcement made sometime in the last quarter of the year
2008 to retrench some workers.
Likewise, the subsequent demand letter appears to be the result of Juraldine's disappointment when
the amount reflected in the check he received did not match his expectations, which were purely
based on his own belief to what he was entitled to, and is a mere afterthought. It must be reiterated
that he who asserts a fact must prove such fact through evidence. In this case, Juraldine merely
presented his bare and self-serving allegations, which were actually belied by the totality of evidence
on record. He did not even present anything that would evince that there was a contract between him
and the Company regarding his separation pay.
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12. REGALA VS. MANILA HOTEL
ALLAN REGALA, PETITIONER, VS. MANILA HOTEL CORPORATION, RESPONDENT.


Petition for Review on Certiorari assailing the Decision of the Court of Appeals, which set aside the
Decision and Resolution of the National Labor Relations Commission
FACTS
A complaint for constructive dismissal and regularization, non-payment of paternity leave pay, and
claims for backwages was filed by Regala against MHC, and its officers.
Regala alleged that he was not recognized as a regular rank-and-file employee despite having
rendered services to MHC for several years. Regala also claimed that MHC constructively dismissed
him from employment when it allegedly reduced his regular work days to two (2) days from the
normal five (5)-day work week starting December 2, 2009, which resulted in the diminution of his
take home salary.
On its part, MHC denied outright that Regala is its regular employee, and claimed that he is a mere
freelance or "extra waiter" engaged by MHC on a short-term basis. It explained that it employs extra
waiters at fixed and/or determinable periods particularly when there are temporary spikes in the
volume of its business. It is during these specific periods when management is forced to supplement
the hotel's regular staff of waiters with temporary fixed-term employees, such as Regala, in order to
meet increases in business activities in its food and beverage functions, special events and banquets.
In engaging extra or temporary waiters, MHC relies on loose referrals from its employees and on a
list of waiters who have expressed interest in part-time or temporary engagements.
MHC then presented a sample fixed-term service contract, and copies of Regala's Department Outlet
Services Contracts for Extra Waiters/Cocktail Attendants (Service Agreements) covering the periods
of his supposed temporary engagement with MHC, or from March 1, 2010 to March 3, 2010. MHC
contended that prior to engaging the services of extra waiters, applicant waiters, such as Regala, and
MHC execute fixed-term service contracts and agree on a specific duration of engagement depending
on the requirement of the hotel in a given period.
Regala was hired by MHC sometime in February 2000. In the course of his employment as
waiter/cook helper, Regala worked for six (6) days every week, and was paid a daily salary of
P382.00 until sometime in December 2009. MHC also remitted contributions in Regala's behalf to SSS
and Philhealth.
ISSUE
Whether or not the Service Agreement qualify as a contract of adhesion, thereby contrary to the first
criteria for fixed-term employment contracts set forth in Brent - YES
RULING
It can be deduced with certainty from the circumstances of the case that they do not meet the criteria
of valid fixed-term employment contracts.
MHC contends that the Service Agreements, including the fixed-term service contracts, which Regala
was required to sign from time to time were freely entered into by him, that the terms thereof were
determined and made known to Regala at the time of his engagement, and that there was no showing
that he was forced, coerced, or manipulated into signing the same. In the same vein, the CA held in its
29
May 22, 2012 Decision that "an examination of the employment contracts between the parties shows
no indication that [Regala] was forced or coerced to execute the same.
The foregoing contentions deserve no merit.
While this Court has recognized the validity of fixed-term employment contracts, it has consistently
held that they are the exception rather than the general rule. A fixed-term employment is valid only
under certain circumstances. We thus laid down in Brent School, Inc. v. Zamora parameters or criteria
under which a "term employment" cannot be said to be in circumvention of the law on security of
tenure, namely:
1) The fixed period of employment was knowingly and voluntarily agreed upon by the parties
without any force, duress, or improper pressure being brought to bear upon the employee and absent
any other circumstances vitiating his consent; or
2) It satisfactorily appears that the employer and the employee dealt with each other on more or less
equal terms with no moral dominance exercised by the former or the latter.
In GMA Network, Inc. v. Pabriga,[78] we held that "[t]hese indications, which must be read together,
make the Brent doctrine applicable only in a few special cases wherein the employer and employee
are more or less in equal footing in entering into the contract." The reason for this precept is premised
on the following principles - "when a prospective employee, on account of special skills or market
forces, is in a position to make demands upon the prospective employer, such prospective employee
needs less protection than the ordinary worker. Lesser limitations on the parties' freedom of contract
are thus required for the protection of the employee."
As to the first guideline, the Service Agreements signed by Regalado not even prove that he knowingly
agreed to be hired by MHC for a fixed-term way back in February 2000. At best, they only account for
Regala's supposed fixed-term status from March 1 to 3, 2009.
It is worth noting at this point that MHC persistently asserted that Regala agreed upon a fixed-term
employment while making reference to his fixed- term service contracts. Concomitantly, it failed to
disprove the allegations of Regala that he was made to sign various fixed-term service contracts
prepared by MHC before he can be given work assignments. Indeed, MHC's failure to furnish copies
thereof gives rise to the presumption that their presentation is prejudicial to its cause.
At any rate, the sample fixed-term service contract presented by MHC, including the Service
Agreements of Regala, readily show that they were entirely prepared by its Personnel Department.
On this premise, it appears that the Service Agreements and/or the fixed-term service contracts are
contracts of adhesion whose terms must be strictly construed against its unilateral crafter, MHC.
A contract of adhesion is one wherein a party, such as MHC in this case, prepares the stipulations in
the contract, and the other party, like Regala, merely affixes his signature or his "adhesion" thereto.
It is an agreement in which the parties bargaining are not on equal footing, the weaker party's
participation being reduced to the alternative 'to take it or leave it.' Clearly, the Service Agreements
and fixed-term service contracts were contracts of adhesion, which evidently gave Regala no realistic
chance to negotiate the terms and conditions of his employment, or at best, bargain for his job at
MHC. Hence, it cannot be gainsaid that Regala signed the Service Agreements and the fixed-term
service contracts willingly and with full knowledge of their impact.
30
13. FSUU VS. CURAZA
FATHER SATURNINO URIOS UNIVERSITY (FSUU) INC., AND/OR REV. FR. JOHN CHRISTIAN U.
YOUNG - PRESIDENT, PETITIONERS, VS. ATTY. RUBEN B. CURAZA, RESPONDENT.
G.R. No. 223621 | June 10, 2020 | Third Division | Leonen, J.

Petition for Review on Certiorari assailing the Court of Appeals Decision with regard to part-time
employee Atty. Ruben B. Curaza's eligibility for retirement benefits under Republic Act No. 7641
FACTS
Father Saturnino Urios University hired Atty. Curaza to teach commercial law subjects in the
Commerce Department during the second semester of school year 1979 to 1980. He was
subsequently given teaching loads in the College of Engineering and the College of Arts and Sciences.
He later taught subjects as a pioneering professor in the College of Law.
On November 21, 2008, Atty. Curaza wrote a letter applying for early retirement, pursuant to the
University's Personnel Policy and Procedure and the Retirement Pay Law. He was informed that his
retirement application could not be approved as the University did not grant retirement benefits to
its part-time teachers. Atty. Curaza thus wrote another letter on March 5, 2009, reiterating his
application, together with a copy of the Labor Advisory on Retirement Pay Law. By the time Atty.
Curaza had turned 60 years old, the application remained unacted upon
On June 25, 2010, Atty. Curaza filed a complaint against the University, its president and vice
president for retirement benefits, damages, and attorney's fees before the NLRC Regional Arbitration
Branch.
The University then submitted a position paper asserting that Atty. Curaza was only a part-time
instructor, and not a permanent employee. He was paid monthly, on a per hour, per teaching load,
and per semester basis. His last teaching load was only a three-unit subject in the College of
Engineering, during the second semester of school year 2008 to 2009, and his last gross salary was
P1,400.00.
It was pointed out in the position paper that the Collective Bargaining Agreement between the
University and its Faculty and Employees Association expressly excludes part-time faculty from its
coverage. The University further argued that Republic Act No. 7641, or the Retirement Pay Law,
similarly excludes part-time instructors in private educational institutions from its coverage.
Moreover, the University officials remarked in the position paper that even if part-time instructors
were entitled to retirement benefits under Republic Act No. 7641, Atty. Curaza was still not entitled
to the same benefits, considering that he had no teaching load during the school years 1991 to 1992
and 1992 to 1993, and did not teach at all from school years 1990 to 1991 until 2000 to 2001, as well
as school years 2002 to 2003 until 2008 to 2009.
Labor Arbiter held that under Republic Act No. 7641, part-time employees are entitled to retirement
benefits. He held that the law prevails over provisions of company policy. Thus, having reached 60
years of age, and having rendered more than five (5) years of service with the University, Atty. Curaza
is entitled to retirement benefits under the law. On appeal, NLRC affirmed the LA’s Decision. The CA
likewise affirmed the previous rulings.
ISSUE
Whether or not a Collective Bargaining Agreement may exclude part-time faculty from entitlement
to retirement benefits – NO
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RULING
The Court of Appeals correctly held that part-time employees with fixed-term employment are
among the employees entitled to retirement benefits under Republic Act No. 7641.
Republic Act No. 7641 specifically states that "any employee may be retired upon reaching the
retirement age[,]" and that in case of retirement, in the absence of a retirement agreement, an
employee who reaches the retirement age "who has served at least five (5) years... may retire and
shall be entitled to retirement pay[.]" No exception is made for part-time employees.
The Court of Appeals reasoned that although parties to a Collective Bargaining Agreement may
establish such stipulations, clauses, terms, and conditions as they may deem convenient, these must
not be contrary to law. It held that the exclusion of part-time faculty from the coverage of the
Collective Bargaining Agreement is contrary to the provisions and intendment of Republic Act No.
7641 and its Implementing Rules.
32
14. SANTIAGO VS. SPOUSES GARCIA
MERIAN B. SANTIAGO, PETITIONER, VS. SPOUSES EDNA L. GARCIA AND BAYANI GARCIA,
RESPONDENTS.
G.R. No. 228356 | March 09, 2020 | First Division | Reyes, J. Jr., J.
NATURE OF THE CASE

Petition for Review on Certiorari assailing the Decision and Resolution of the Court of Appeals ruling
that the contractual relation between the parties is one of investment and, as such, entails risk on the
part of the petitioner as investor.
FACTS
In November 2000, petitioner Merian was enticed by respondent Edna to invest money in the latter's
lending business with a promise of a high return in terms of monthly interest ranging from 5% to
8%. The parties agreed that monthly interest shall be remitted by Edna to Merian and that the
principal amount invested shall be returned to Merian upon demand. Neither of the parties, however,
presented evidence to show that such agreement was reduced in writing.
Merian began investing several amounts from November 15, 2000 to June 30, 2003, reaching an
aggregate amount of P1,569,000.00. Edna had remitted to Merian the amount of P877,000.00 as
interest on said amounts. However, in December 2003, Edna defaulted in remitting to Merian the
interest due from said investments. Despite demands, Edna failed to remit the interest to Merian.
Consequently, Merian, through her lawyer, sent a letter demanding for the return of Merian's total
investment. Edna agreed to pay the principal amount invested on a "pay when able" basis. Edna paid
Merian P15,000.00 in cash and P5,000.00 in gift cheque, for a total of P20,000.00. Merian then signed
a receipt prepared by Edna wherein she acknowledged that the P20,000.00 constitutes partial
payment for the principal amount of P1,569,000.00.
Merian learned that several other persons were likewise taken advantage of by Edna so she filed a
complaint for sum of money with prayer for the issuance of a writ of preliminary attachment against
Spouses Garcia. The spouses sought for the dismissal of the complaint for lack of cause of action since
the amounts given by Merian were investments, not loans.
The RTC rendered its decision finding that a partnership was formed between Merian and Edna – the
former as capitalist partner and the latter as industrial partner. It ruled that a person who invested
in a business which incurred losses cannot convert such investment into a loan. As such, the RTC
dismissed Merian's complaint.
The CA disagreed with the RTC that a partnership was formed. It CA found that the money was given
not as Merian's contribution or share in Edna's capital in the lending business, but as an investment
that will earn interest in case of profit. Nevertheless, the CA agreed with the RTC that the complaint
lacked cause of action as Merian was without legal right to recover her investment in case of losses.
ISSUE
Whether or not the parties can stipulate as to a sharing of losses and profits - YES
Whether or not whether Edna is contractually bound to return Merian's capital - YES
RULING
There is merit in the petition.
The facts therefore demonstrate that Edna was engaged in the business of lending and that she
solicited funds from Merian which Edna then used to grant loans to other persons. The parties'
33
contemporaneous and subsequent acts reveal their intent to enter into an investment contract in a
lending business. Parenthetically, the lending activity conducted by Edna is what the law under
Republic Act (R.A.) No. 9474 or the Lending Company Act of 2007 presently seeks to regulate. Under
R.A. 9474, only corporations with a validly subsisting authority from the Securities and Exchange
Commission can engage in the business of granting loans sourced from its own capital funds or from
funds coming from not more than nineteen (19) persons. Nevertheless, since R.A. No. 9474 was
passed into law only on May 22, 2007, the lending activities of Edna conducted from 2000 to 2003
cannot be considered unlawful.
Having established that the transaction between Merian and Edna is one of investment in a lending
business, the question to be addressed is whether Edna is contractually bound to return Merian's
capital. Investment is ordinarily defined as the placement of capital or lay out of money in a way
intended to secure income or profit from its employment. As in all contractual relations, an
investment contract is largely governed by the stipulations, clauses, terms, and conditions as the
parties may deem convenient, which shall be respected as long as it is not contrary to law, morals,
good customs, public order, or public policy. Thus, the parties are free to agree that the investment
shall entail the sharing of profits and losses, or otherwise.
In this case, Merian alleged that she and Edna agreed that Merian will be investing capital on the
lending business which shall earn a 5% monthly interest; that the capital will be revolving; and that
the capital shall be returned upon demand. That Edna agreed to return the principal amount to
Merian is further supported by the acknowledgment receipt which Edna herself had written. In said
acknowledgment receipt, Edna paid the amount of P20,000.00 as "partial payment from the
principal" – thus acknowledging her obligation to return the principal amount invested. Notably as
well, Edna failed to present countervailing evidence to demonstrate the real agreement between the
parties as her husband, who solely participated at the trial, merely denied knowledge of the
agreement between Merian and Edna.
Even assuming that the agreement between the parties was that Merian shall bear the risk of losing
the principal amount she invested, in case of business loss, there was no allegation nor proof
presented that, indeed, Edna's lending business suffered business loss. The ruling, therefore, that the
principal amount should no longer be returned because of Merian's assumption of risk lacks factual
basis.
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15. HOME CREDIT VS. PRUDENTE
HOME CREDIT MUTUAL BUILDING AND LOAN ASSOCIATION AND/OR RONNIE B. ALCANTARA,
PETITIONERS, VS. MA. ROLLETTE G. PRUDENTE, RESPONDENT.
G.R. No. 200010 | August 27, 2020 | First Division | Lopez, J.

Petition for Review on Certiorari under Rule 45 assailing the Court of Appeal's Decision, which
reversed the findings of the National Labor Relations Commission
FACTS
In 1997, Home Credit Mutual Building and Loan Association gave its employee Rollette Prudente her
first service vehicle. Later, Rollete purchased the vehicle from Home Credit at its depreciated value.
In 2003, Home Credit granted Rollete's request for a second service vehicle. However, Home Credit
required Rollete to pay for additional equity in excess of the maximum limit of P660,000.00. In 2008,
Rollete again purchased the vehicle at its depreciated value.
In 2009, Rollette applied for a third service vehicle. This time, Home Credit informed Rollette that
she must pay the equity more than P550,000.00. Home Credit likewise adopted a cost sharing scheme
where Rollette must shoulder 40% of the acquisition price. Aggrieved, Rollette filed a complaint
against Home Credit for violation of Article 100 of the Labor Code on non-diminution of benefits
before the Labor Arbiter (LA).
The LA dismissed Rollette's complaint and held that Home Credit's new 60%-40% cost sharing
scheme on the acquisition of service vehicle did not constitute diminution of benefit. The LA
explained that what ripened into a company practice is the employer's act of granting transportation
facility to its employees. However, as to the specific details of the grant, i.e., the covered employees,
period of depreciation, car model, company share or participation, may vary as these call for the
exercise of management prerogative. The NLRC affirmed.
Rollette elevated the case to the CA through a petition for certiorari. The CA reversed the labor
tribunals' findings. It held that the car plan at full company cost or on a non-participation basis has
evolved into a company practice. The employer cannot unilaterally withdraw or reduce the benefit.
Also, the service vehicle given to Rollette is not akin to a bonus or an act of gratuity which can be
withdrawn at will. The car plan was part of Rollette's hiring package. Lastly, there was no competent
evidence showing that the car provision was contingent on the realization of company profits. In sum,
the new scheme diminished Rollette's benefits as she will be forced to shell out part of the vehicle's
cost.
ISSUE
Whether or not the withdrawal by the company of the grant of service vehicle at full company cost is
contrary to the principle of mutuality of contracts - NO
RULING
The petition is meritorious
Generally, employees have a vested right over existing benefits that the employer voluntarily granted
them. These benefits cannot be reduced, diminished, discontinued or eliminated consistent with the
constitutional mandate to protect the rights of workers and promote their welfare. Apropos is Article
100 of the Labor Code, viz.:
ART. 100. Prohibition against Elimination or Diminution of Benefits. - Nothing in this

Book shall be construed to eliminate or in any way diminish supplements, or other
35
employee benefits being enjoyed at the time of promulgation of this Code. (Emphasis
Supplied.)
In Arco Metal Products, Co., Inc. v. Samahan ng mga Manggagawa sa Arco Metal-NAFLU (SAMARM-
NAFLU, et al.), we stressed that the principle of non-diminution of benefits is founded on the
constitutional mandate to "protect the rights of workers and promote their welfare" and "to afford
labor full protection." In his separate concurring opinion, Justice Arturo Brion clarified that the basis
for non-diminution rule is not Article 100 which refers solely to "benefits enjoyed at the time of the
promulgation of the Labor Code" thus:
x x x Article 100 refers solely to the non-diminution of benefits enjoyed at the time of
the promulgation of the Labor Code. Employer-employee relationship is contractual
and is based on the express terms of the employment contract as well as on its implied
terms, among them, those not expressly agreed upon but which the employer has
freely, voluntarily and consistently extended to its employees. Under the principle of
mutuality of contracts embodied in Article 1308 of the Civil Code, the terms of a
contract - both express and implied - cannot be withdrawn except by mutual consent
or agreement of the contracting parties, x x x
Clearly, the non-diminution rule applies only if the benefit is based on an express policy, a written
contract, or has ripened into a practice. In this case, Rollette's claim that the car plan was part of her
hiring package was unsubstantiated. Admittedly, Home Credit has no existing car plan at the time
Rollette was hired. Rollette's employment contract does not even contain any express provision on
her entitlement to a service vehicle at full company cost. Therefore, it is incongruous for the CA to
conclude that the grant of a service vehicle was part of Rollette's hiring package.
Here, the labor tribunals correctly held that Home Credit's act of giving service vehicles to Rollette
has been a company practice - but not as to the non-participation aspect. There was no substantial
evidence to prove that the car plan at full company cost had ripened into company practice. Notably,
the only time Rollette was given a service vehicle fully paid for by the company was for her first car.
For the second vehicle, the company already imposed a maximum limit of P660,000.00 but Rollette
never questioned this. She willingly paid for the equity in excess of said limit. Thus, the elements of
consistency and deliberateness are not present.
36
16. GEMUDIANO VS. NAESS SHIPPING
LUIS G. GEMUDIANO, JR., PETITIONER, VS. NAESS SHIPPING PHILIPPINES, INC. AND/OR
ROYAL DRAGON OCEAN TRANSPORT, INC. AND/OR PEDRO MIGUEL F. OCA, RESPONDENTS.
G.R. No. 223825 | January 20, 2020 | Second Division | Reyes, J. JR., J.

Petition for Review on Certiorari assailing the Decision and the Resolution of the Court of Appeals
dismissing the complaint for breach of contract filed by Luis G. Gemudiano, Jr. against respondents
FACTS
In 2012, petitioner applied with Naess Shipping for possible employment as seaman upon learning
of a job opening in its domestic vessel operations. He had an interview with Naess Shipping and
completed the training on International Safety Management (ISM) Code at the Far East Maritime
Foundation, Inc. As advised by Naess Shipping's crewing manager Fetero, petitioner underwent the
mandatory pre- employment medical examination (PEME) where he was declared fit for sea service.
The expenses for the PEME were shouldered by petitioner.
In 2013, petitioner signed an Embarkation Order duly approved by Fetero stipulating the terms and
conditions of his employment, and directing him to request for all the necessary documents and
company properties from the person he was going to replace in his vessel of assignment.
In 2013, Naess Shipping, for and in behalf of its principal Royal Dragon, executed a "Contract of
Employment for Marine Crew on Board Domestic Vessels" (contract of employment) engaging the
services of petitioner as Second Officer aboard the vessel "M/V Meiling 11," an inter-island bulk and
cargo carrier, for a period of six months. Subsequently, petitioner and respondents executed an
"Addendum to Contract of Employment for Marine Crew Onboard Domestic Vessels" (Addendum)
stating that the employment relationship between them shall commence once the Master of the
Vessel issues a boarding confirmation to the petitioner but the latter received a call from Fetero
informing him that Royal Dragon cancelled his embarkation. Thus, he filed a complaint for breach of
contract against respondents before the Arbitration Branch of the NLRC.
Allegedly, respondents' unilateral and unreasonable failure to deploy him despite the perfected
contract of employment constitutes breach and gives rise to a liability to pay damages on account of
respondents' dishonesty and bad faith, as well as their wanton, fraudulent and malevolent violation
of the contract of employment.
Respondents, on the other hand, argued that petitioner's employment did not commence because his
deployment was withheld by reason of misrepresentation as petitioner did not disclose the fact that
be is suffering from diabetes mellitus and asthma which render him unfit for sea service.
In 2014, the Labor Arbiter found respondents to have breached their contractual obligation to
petitioner and ordered them to pay him his salary representing for the duration of the contract which
was affirmed by the NLRC and held that even without petitioner's actual deployment, the perfected
contract already gave rise to respondents' obligations under the Philippine Overseas Employment
Administration-Standard Employment Contract (POEA-SEC).
On appeal, the CA annulled and set aside the decision of NLRC. It emphasized that the perfected
contract of employment did not commence since petitioner's deployment to his vessel of assignment
did not materialize.
ISSUE
37
Whether or not the contract of employment between the petitioner and respondents was perfected
– YES
RULING
There is no doubt that there was already a perfected contract of employment between petitioner and
respondents. The contract had passed the negotiation stage or "the time the prospective contracting
parties manifest their interest in the contract." It had reached the perfection stage or the so-called "
birth of the contract" as it was clearly shown that the essential elements of a contract, i.e., consent,
object, and cause, were all present at the time of its constitution. Petitioner and Fetero, respondents'
Crewing Manager, freely entered into the contract of employment, affixed their signatures thereto
and assented to the terms and conditions of the contract (consent), under which petitioner binds
himself to render service (object) to respondents on board the domestic vessel " M/V Meiling 11" for
the gross monthly salary of P30,000.00 (cause).
Also, the Addendum provides a condition which holds in suspense the performance of the respective
obligations of petitioner and respondents under the contract of employment, or the onset of their
employment relations. It is a condition solely dependent on the will or whim of respondents since
the commencement of the employment relations is at the discretion or prerogative of the latter's
master of the ship through the issuance of a boarding confirmation to the petitioner. The Court in
Naga Telephone Co., Inc. v. Court of Appeals referred to this kind of condition as a "potestative
condition," the fulfillment of which depends exclusively upon the will of the debtor, in which case ,
the conditional obligation is void.
Clearly , the condition set forth in the Addendum is one that is imposed not on the birth of the contract
of employment since the contract has already been perfected, but only on the fulfillment or
performance of their respective obligations, i.e., for petitioner to render services on board the ship
and for respondents to pay him the agreed compensation for such services. A purely potestative
imposition, such as the one in the Addendum, must be obliterated from the face of the contract
without affecting the rest of the stipulations considering that the condition relates to the fulfillment
of an already existing obligation and not to its inception. Moreover, the condition imposed for the
commencement of the employment relations offends the principle of mutuality of contracts ordained
in Article 1308 of the Civil Code which states that contracts must bind both contracting parties , and
its validity or compliance cannot be left to the will of one of them. The Court is thus constrained to
treat the condition as void and of no effect, and declare the respective obligations of the parties as
unconditional. Consequently, the employer-employee relationship between petitioner and
respondents should be deemed to have arisen as of the agreed effectivity date of the contract of
employment, or on March 12, 2013.
38
17. PURISIMA VS. PURISIMA
PASCUAL PURISIMA, JR., LEONARDO PURISIMA, EUFRATA PURISIMA, AND ESTELITA DAGUIO,
PETITIONERS VS. MACARIA PURISIMA AND SPOUSES ERLINDA AND DANIEL MEDRANO,
RESPONDENTS.
G.R. No. 200484 | November 18, 2020 | Third Division | Hernando, J.

Petition for Review on Certiorari assailing the Decision of the Court of Appeals, reversing and setting
aside the Decision of the Regional Trial Court which dismissed the complaint for reconveyance,
cancellation and quieting of title of herein respondents.
FACTS
On November 8, 1999, Macaria Purisima (Macaria) and the Spouses Erlinda and Daniel Medrano filed
a complaint for reconveyance, cancellation and quieting of title •against their late brother's heirs,
Pascual Purisima, Jr. (Purisima Jr.), Leonardo Purisima, Eufrata Purisima and Estelita Daguio,
(collectively, petitioners). Respondents alleged that their brother, Pascual Purisima Sr. (Pascual Sr.),
owned a lot in Cagayan. However, sometime in 1960, Pascual Sr. sold portions of the aforesaid
property to respondents to answer for his medical bills.
At the time of the sale, the whole land was not yet titled but it was surveyed for a patent application
under Purisima Sr.' s name by the Land Management Bureau on April 21, 1960. Banking on mutual
trust, the survey as well as the sale was not recorded by the parties. Since the 1960s and prior to the
death of Purisima Sr. on April 12, 1971, respondents had been in open, continuous and exclusive
possession of the apportioned properties. They had been paying realty taxes thereon and had their
own tenants tilling their respective portions of land. On September 19, 1978, petitioners, as heirs of
Pascual Sr., executed an Extrajudicial Settlement of Estate of Deceased, over the unregistered
property of their father which included the sale of the properties apportioned to the respondents.
Purisima Jr. was granted Free Patent under the name of "Heirs of Pascual Sr." which covered the
whole of Lot, including the portions that were already sold to the respondents. The Free Patent was
later on registered with the Registry of Deeds and Original Certificate of Title was issued in favor of
the "Heirs of Pascual Purisima Sr. rep. by Pascual Purisima Jr.".
Hence, respondents filed a case before the RTC to remove the cloud on their title over the apportioned
lots and for their ownership to be not disturbed.
After due hearings, the RTC rendered a Decision dismissing the complaint for lack of written evidence
of sale of the properties. The trial court further held that even if there were a sale that transpired, it
was not enforceable since it was not embodied in a written document. The CA found that it was
proper for the appellate court to give credence to the evidence presented by the respondents and
found that the reconveyance of the apportioned properties. According to the CA, the trial court erred
in concluding that the 1960 sale was void since it was not reduced into writing. The Statute of Frauds,
which requires a written instrument for the enforceability of certain contracts, applies only to
executory contracts, not to consummated contracts. The 1960 sale has been consummated as
evidenced by its express recognition in the 1978 Extrajudicial Settlement of Estate of Deceased,
Pascual Purisima, Sr. and Sale.
ISSUE
Whether or not the CA was correct in finding that the Statute of Frauds is inapplicable
notwithstanding the fact that sale of the real properties was done orally – YES
RULING
39
The CA was correct in not applying the Statute of Frauds in the case at bar. The Statute of Frauds
affects merely the enforceability of the contract. In the early case of Iiiigo v. Estate of Adriana Maloto,
this Court elucidated on when the Statute of Frauds vis-a-vis a contract of sale would be inapplicable:
By Article 1403 (2) (e) of the Civil Code, a verbal contract for the sale of real property
is unenforceable, unless ratified. For such contract offends the Statute of Frauds. But
long accepted and well settled is the rule that the Statute of Frauds is applicable only
to executory contracts - not to contracts either totally or partially performed.
As it is, the 1960 oral sale was already fully consummated as evidenced by the 1978 Extrajudicial
Settlement of Estate of Deceased, Pascual Purisima, Sr and Sale which was undisputed and
acknowledged by the petitioners themselves, and as established by the pieces of evidence presented
by the respondents such as the testimonies of their tenants and other documentary evidence.
There can be no escaping the fact that the sale between the respondents and Purisima Sr. was
consummated and that the Statute of Frauds has no application in the case. Verily, a contract of sale,
whether oral or written, is classified as a consensual contract, which means that the sale is perfected
by mere consent and no particular form is required for its validity. The 1960 oral sale thus stands
and all its consequences under the law are thus binding to the parties and their successors-in-
interest.
Consequent to every sale is the transfer of ownership in exchange for a price paid or promised. This
may be gleaned from Article 1458 of the Civil Code which defines a contract of sale as follows:
“Art. 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership and to deliver a determinate thing, and the other to pay
thereof a price certain in money or its equivalent.
Thus, the transfer of the properties to respondents arising from the 1960 sale by Purisima Sr. of the
apportioned properties effectively vested ownership to the respondents from that time.
40
18. CELLPAGE VS. SOLID GUARANTY
CELLPAGE INTERNATIONAL CORPORATION, PETITIONER, VS. THE SOLID GUARANTY, INC.,

RESPONDENT.
G.R. No. 226731| June 17, 2020 | First Division | Reyes, J. JR., J.

Petition for Review on Certiorari under Rule 45 seeking the reversal of the Decision and the
Resolution issued by the Court of Appeals
FACTS
Petitioner approved Jomar Powerhouse Marketing Corporation's (JPMC) application for credit line
for the purchase of cellcards, with a condition that JPMC will provide a good and sufficient bond to
guaranty the payment of the purchases. In compliance with this condition, JPMC secured from The
Solid Guaranty, Inc. (Solid Guaranty) the surety bonds.
JPMC purchased cellcards amounting to P7,002,600.00 from Cellpage. In partial payment for its
purchases, JPMC issued to Cellpage postdated checks. When Cellpage presented these checks to the
bank for payment, the same were all dishonored for being drawn against insufficient funds. Thus,
Cellpage demanded from JPMC the full payment of its outstanding obligation but the latter failed to
pay. Cellpage also demanded from Solid Guaranty the payment of JPMC's obligation pursuant to the
surety bonds issued by Solid Guaranty. Solid Guaranty, however, refused to accede to Cellpage's
demand.
Thus, Cellpage filed a complaint for sum of money against JPMC and Solid Guaranty before the RTC
which ruled in favor of Cellpage and declared JPMC and Solid Guaranty jointly and solidarily liable to
the former. However, the CA ruled that Cellpage cannot demand from Solid Guaranty the
performance of the latter's obligation under the surety contract. In so ruling, this Court invoked the
pronouncement in First Lepanto-Taisho Insurance Corporation v. Chevron Philippines, Inc., where
we applied strictly the terms and conditions of the surety contract which expressly states that a copy
of the principal agreement must be attached and made an integral part of the surety contract.
The CA found that the surety bonds issued by Solid Guaranty insured the payment/remittance of the
cost of products on credit by JPMC in accordance with the terms and conditions of the agreement it
entered into with Cellpage. According to the CA, the word agreement pertains to the credit line
agreement between JPMC and Cellpage. Applying the ruling in First Lepanto, the CA ruled that JPMC's
failure to submit the written credit line agreement to Solid Guaranty, affected not the validity and
effectivity of the surety bonds, but rather the right of the creditor, Cellpage, to demand from Solid
Guaranty the performance of its obligation under the surety contract.
ISSUE
Whether or not a written agreement is necessary for the demandability of performance - NO
RULING
Under Section 176 of the Insurance Code provides that the liability of the surety or sureties shall be
joint and several with the obligor and shall be limited to the amount of the bond. It is determined
strictly by the terms of the contract of suretyship in relation to the principal contract between the
obligor and the obligee. Also, Article 1356 of the Civil Code provides that contracts shall be obligatory
in whatever form they may have been entered into, provided all the essential requisites for their
validity are present. Thus, an oral agreement which has all the essential requisites for validity may
be guaranteed by a surety contract. To rule otherwise contravenes the clear import of Article 1356
of the Civil Code.
41
Basic is the rule that a contract is the law between the contracting parties and obligations arising
therefrom have the force of law between them and should be complied with in good faith. The parties
are not precluded from imposing conditions and stipulating such terms as they may deem necessary
as long as the same are not contrary to law, morals, good customs, public order or public policy.
Among these conditions is the requirement to submit a written principal agreement before the surety
can be made liable under the suretyship contract. Thus, whether or not a written principal agreement
is required in order to demand performance from the surety would depend on the terms of the surety
contract itself.
In this case, the surety bonds do not expressly require the submission of a written principal
agreement. Nowhere in the said surety bonds did Solid Guaranty and Cellpage stipulate that Solid
Guaranty's performance of its obligations under the surety bonds is preconditioned upon Cellpage's
submission of a written principal agreement. It is clear that Solid Guaranty bound itself solidarity
with JPMC for the payment of the amount stated in the surety bonds in case of the latter's failure to
perform its obligations to Cellpage. Furthermore, the existence of a valid principal agreement is not
in question. The principal contract between JPMC and Cellpage was duly substantiated by issue slips,
delivery receipts and purchase orders, and was acknowledged by Solid Guaranty.
The oft-repeated rule in suretyship is that a surety's liability is joint and solidary with that of the
principal debtor. This makes a surety agreement an ancillary contract as it presupposes the existence
of a principal agreement. Although the surety's obligation is merely secondary or collateral to the
obligation contracted by the principal, this Court has nevertheless characterized the surety's liability
to the creditor of the principal as direct, primary, and absolute. In other words, the surety is directly
and equally bound with the principal.
Solid Guaranty cannot escape its liability arising from the surety bonds. By the terms of the surety
bonds, Solid Guaranty obligated itself solidarily with JPMC for the fulfillment of the latter's obligation
to Cellpage. Upon JPMC's failure to perform its obligations to the latter, Solid Guaranty's liabilities
under the bonds accrued. Hence, Solid Guaranty is solidarity liable with JPMC for the payment of its
obligations to Cellpage up to the face amount of the surety bonds.
42
19. BANICO VS. STAGER
ULYSSES RUDI V. BANICO, PETITIONER, VS. LYDIA BERNADETTE M. STAGER A.K.A

BERNADETTE D. MIGUEL (SUBSTITUTED BY HER COMPULSORY HEIRS, NAMELY: BOBBY
UNILONGO I, PROSPERO UNILONGO I, PROSPERO UNILONGO II, MARICON U. BAYOG, GLENN
UNILONGO AND LUZVIMINDA UNILONGO), RESPONDENTS.
G.R. No. 232825 | September 16, 2020 | First Division | Lopez, J.

Petition for Review on Certiorari under Rule 45 assailing the Court of Appeal's Decision
FACTS
Lydia Bernadette M. Stager (Lydia) owns a) real property identified as Lot No. 199 and situated in
Barangay Manoc-Manoc, Boracay Island. Lydia offered to sell the entire lot to Ulysses Rudi Banico
(Ulysses) but he only agreed to buy an area suitable for building a beach resort. Accordingly, Ulysses'
lawyer drafted a Deed of Absolute Sale. On February 8, 1992, Lydia and Ulysses signed the contract.
Upon payment of the purchase price, Ulysses took possession of the flat terrain and hired a surveyor.
However, Ulysses discovered that the land described in the deed of sale refers to the elevated and
rocky portion and not the flat area which he bought and occupied. Ulysses confronted Lydia who
promised to make necessary corrections. At that time, Lydia convinced Ulysses to buy an additional
400-square meter portion of Lot No. 199 that is adjacent to the flat terrain for P160,000.00 on
installment basis. Ulysses agreed on the condition that Lydia will amend the deed of sale reflecting
the correct location, area and consideration. The parties entered into a contract to sell over the 400-
square meter lot. Ulysses gave initial payment and Lydia issued the corresponding receipt. Meantime,
Ulysses began constructing the resort and paid the remaining amount. In 1997, Ulysses asked Lydia
to prepare the amended deed of sale but she refused because he still has an unpaid balance of
P12,000.00. Yet, Ulysses maintained that he already paid Lydia more than P160,000.00.
Then Ulysses brought the matter to the barangay. Thereat, Lydia honored the transaction over the
800-square meter lot and presented a notarized Deed of Absolute Sale containing the accurate
description. However, Ulysses did not sign the deed because it failed to state the true consideration.
Ulysses filed against Lydia an action for specific performance and damages and asked that Lydia be
ordered to execute an amended contract reflecting all the stipulations between the parties. Lydia
claimed that the contract over the 800-square meter lot is distinct from the additional 400-square
meter lot. The first transaction was based on the consummated Deed of Absolute Sale. She even
executed a Deed of Absolute Sale but Ulysses rejected it. In contrast, the second transaction
transpired but Ulysses failed to settle the balance of the purchase price.
The RTC in its Decision ordered the reformation of the Deed of Absolute Sale to reflect the exact
location of the 800-sq m lot that Ulysses purchased from Lydia. The RTC also examined the receipts
and found that Ulysses still had a balance of P6,600.00 in the contract to sell over the 400-sq m lot.
When a mutual mistake of the parties causes the failure of the instrument to disclose their real
agreement, said instrument may be reformed. Thus, the Deed of Sale covering the first real estate
transaction between the parties should be amended or reformed. It should be noted that Stager even
executed a second Deed of Sale that is duly notarized covering the first lot which actually already
reflected the correct description thereof.
The CA denied the reformation because Ulysses' cause of action had prescribed. Further, the CA noted
that it was Ulysses' lawyer who drafted the contract and any error must be construed against the
party who caused the ambiguity. It affirmed the RTC's finding that several receipts do not prove
payment of the P160,000.00 purchase price. Thus, it ordered the Heirs of Lydia to execute the
corresponding deed of sale in favor of Ulysses upon satisfaction of the unpaid amount.
43
ISSUE
Whether or not the Deed of Absolute Sale between Lydia and Ulysses failed to reflect the true
intention of the parties allowing reformation of the instrument – YES
RULING
A contract is a meeting of the minds between two persons whereby one binds himself, with respect
to the other, to give something or to render some service. If the contract is reduced into writing, it is
considered as containing all the terms agreed upon and is presumed to set out the true covenant of
the parties. However, equity orders the reformation of a written instrument when the real intention
of the contracting parties are not expressed by reason of mistake, fraud, inequitable conduct or
accident. Article 1359 of the New Civil Code provides that when there having been a meeting of the
minds of the parties to a contract, their true intention is not expressed in the instrument purporting
to embody the agreement, by reason of mistake, fraud, inequitable conduct or accident, one of the
parties may ask for the reformation of the instrument to the end that such true intention may be
expressed.
The rationale is that it would be unjust to allow the enforcement of an instrument which does not
reflect or disclose the parties' real meeting of the minds. In an action for reformation, the court does
not attempt to make another contract for the parties but the instrument is made or construed to
express or conform to their real intention.
In this case, there was a meeting of the minds between the parties to the contract but the deed did
not express their true intention due to mistake in the technical description of the lot. All the requisites
of an action for reformation of instrument are present.
First, there was a meeting of minds between the contracting parties. In executing the Deed of
Absolute Sale dated February 8, 1992, Lydia conveyed the 800-sq m portion of Lot No. 199 to Ulysses
who accepted it in consideration of P350,000.00. Inarguably, there is a perfected contract of sale at
the moment the parties agreed upon the thing that is the object of the contract and upon the price.
Second, the written instrument did not express the true intention of the parties. It bears emphasis
that Ulysses bought an area suitable for building a beach resort. Upon payment of the purchase price,
Ulysses occupied the flat terrain, surveyed it and began constructing the resort. Verily, Ulysses would
not possess the flat terrain if it was not the lot sold to him. Besides, the flat terrain is a proper location
for building the resort and not the elevated rocky northern part. At any rate, Lydia should have
objected when Ulysses occupied the flat terrain if it were true that she was still the owner of such
area. Quite the contrary, Lydia promised to rectify the erroneous description of the lot in the deed of
sale. She did not protest the construction of the resort and instead, offered Ulysses an additional 400-
sq m portion of Lot No. 199 that is adjacent to the flat terrain. Moreover, Lydia acknowledged the
transaction over the 800-sq m lot before the barangay and presented a notarized Deed of Absolute
Sale dated December 6, 2001, containing the accurate description of the flat terrain. At this juncture,
we stress that Lydia never rebutted these acts and even admitted them in her answer.
Third, there is a mistake in identifying the exact location of the lot which caused the failure of the
instrument to disclose the parties' real agreement.
Taken together, the Deed of Absolute Sale dated February 8, 1992 failed to reflect the true intention
of the parties. As such, Ulysses may validly ask for reformation of the instrument.
44
20. PASCUAL VS. PANGYARIHAN-ANG
TERESITA E. PASCUAL, WIDOW OF THE LATE ROMULO PASCUAL, WHO WAS THE HEIR OF
THE LATE CATALINA DELA CRUZ AND ATTORNEY- IN-FACT OF HER CHILDREN AND FOR HER
OWN BEHALF, PETITIONER, VS. ENCARNACION PANGYARIHAN-ANG, SPOUSES EMELITA ANG
GAN AND VICENTE GAN, SPOUSES NILDA ANG-ROMAN AND ROBERTO ROMAN, SPOUSES
ROSITA ANG-ESTRELLA AND LUNAVER ESTRELLA, ERNEST ANG, ANTONIO ANG, SPOUSES
RUBY ANG-TAN AND JULIO TAN, SPOUSES MA. VICTORIA ANG-SAN PEDRO AND AMADO SAN
PEDRO, AND DANILO ANG, RESPONDENTS.
G.R. No. 235711 | March 11, 2020 | First Division | Peralta, C.J.

Petition for review on certiorari under Rule 45 assailing the Decision and the of the Court of Appeals,
which affirmed the Decision of the Regional Trial Court in favor of herein respondents
FACTS
In 1989, Romulo Pascual entered into a sale transaction with Encarnacion P. Ang, et al., through
Antonio Ang, covering three parcels of land located in Navotas City which was embodied in a
document denominated as Pagpapatunay at Pananagutan. Petitioner claimed that the same were
already surveyed and titles thereto were already issued under the name of her husband Romulo
Pascual, and that respondents failed to pay in full their purchase price. This lead her in filing a
complaint for the rescission of the said document and claimed that the purchase price should be
increased, considering the price of the subject properties are no longer the same, and also taking into
consideration the depreciation of the Philippine peso from the time of the execution of the contract
in 1989 up to present.
On the other hand, respondents admitted the sale transaction, but argued that their agreement would
show that the title to the subject lots should first be registered under their names, and not under the
name of Romulo Pascual, before they pay the balance of the purchase price. They further argued that
it was petitioner who breached their agreement as she intentionally refused to register the two lots
under their names because she is asking for a much higher price, different from what was originally
agreed upon.
The RTC ruled that while the provision (paragraph 5) in their "Pagpapatunay at Pananagutan" is
ambiguous as it can be interpreted in two ways - the titles mentioned in the said provision is either
in the name of Romulo Pascual and/or plaintiff, or in defendants' names. The evidence on records
would show that the intention of the parties in the said provision is that petitioner should secure first
the titles of the subject properties in respondents' names before they pay the remaining balance of
the purchase price of the subject properties. The RTC also dismissed petitioner's argument that the
purchase price must be increased. It ratiocinated that the amount agreed upon by the parties is at
P350.00 per square meter, and that the contract is the law between the parties and courts have no
choice but to enforce such contract so long as it is not contrary to law, morals, good customs, or public
policy.
The CA affirmed the ruling of the RTC. It noted that petitioner testified that respondents paid
P50,000.00 as downpayment for the three lots, and respondents made several payments thereafter
on installment basis. It was only after petitioner secured the OCT of the subject first lot under
respondents' name that respondents paid her its full purchase price. The CA also held that
respondents' non-payment of the balance of the purchase price is due to the failure of petitioner to
comply with their obligation in the contract. Thus, petitioner is not entitled to rescind the contract as
she is not the injured party.
ISSUE
45
Whether or not petitioner’s failure to comply with their obligation in the contract that resulted to the
non-payment of the balance of the purchase price entitles the petitioner to rescind the contract - NO
RULING
Articles 1370 of the New Civil Code provides that if the terms of a contract are clear and leave no
doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall
control. If the words appear to be contrary to the evident intention of the parties, the latter shall
prevail over the former. Also, Article 1371 of the same code provides that in order to judge the
intention of the contracting parties, their contemporaneous and subsequent acts shall be principally
considered.
In this case, as petitioner testified, respondents paid P50,000.00 as downpayment for the three lots,
and respondents made several payments thereafter on installment basis. It was only after petitioner
secured the OCT of the subject first lot under respondents' name that respondents paid her its full
purchase price. Thus, it is clear that paragraph 5 of the "Pagpapatunay at Pananagutan" should be
interpreted according to what transpired on the payment and registration of the first lot.
Resultantly, respondents' non-payment of the balance of the purchase price is due to the failure of
petitioner to comply with their obligation in the contract. Thus, petitioner is not entitled to rescind
the contract as she is not the injured party. Finally, petitioner is not entitled to the compensation for
the use of the subject lots. To repeat, it was petitioner who failed to comply with their obligation in
the contract that resulted to the non-payment of the balance of the purchase price. Thus, petitioner
cannot benefit from her own wrongdoing. Also, petitioner's neglect or omission to assert a supposed
right for more than sixteen (16) years is too long a time as to warrant the presumption that they had
abandoned such right. The law aids the vigilant, not those who slumber on their rights. Vigilantibus,
sed non dormientibus jura subverniunt.
46
21. GODINEZ VS. SPOUSES NORMAN
SPOUSES RENE LUIS GODINEZ AND SHEMAYNE GODINEZ, PETITIONERS, VS. SPOUSES
ANDREW T. NORMAN AND JANET A. NORMAN, RESPONDENTS.
G.R. No. 225449 | February 26, 2020 | Third Division | Leonen, J.

Petition for Certiorari under Rule 65 filed by spouses Rene Luis Godinez and Shemayne Godinez (the
Godinez Spouses) alleging that the Court of Appeals committed grave abuse of discretion amounting
to lack or excess of jurisdiction when it ordered them to reimburse the amounts paid by spouses
Andrew and Janet Norman (the Norman Spouses) under a contract to sell.
FACTS
In 2006, the Godinez Spouses agreed to sell the leasehold rights over a housing unit at 8-A and 8-B
Grouper Street, East Kalayaan, Subic Bay Freeport Zone, to the Norman Spouses for US$175,000.00.
Respondents paid US$10,000.00 to the petitioners as partial payment. The parties agreed that the
remaining balance would be paid within 30 working days from the payment of the US$10,000.00.
After payment of this initial installment, the respondents moved their furniture and appliances into
the houses, and assigned a house helper to act as their caretaker. However, the respondents
eventually asked the petitioners for an extension of time to pay the remaining balance. The
petitioners agreed to give them more time, provided they pay US$30,000.00 to the account of Rene
Godinez. Thus, on December 1, 2006, or around three (3) months after the full payment on the
property was due, Andrew Norman transferred US$30,000.00 to the account of Woodra Enterprises,
a corporation owned by the Godinez Spouses.
Despite the extension, the respondents were still unable to pay the remaining balance and the parties
agreed that the respondents would remove their furniture and appliances, so that the petitioners
could use the units again. Around three (3) months later, respondents learned that the housing unit
had been sold to another buyer. The respondents requested the return of their payments from the
petitioners through demand letters which went unheeded. Thus, they filed a complaint against the
Godinez Spouses, praying for the return of the US$40,000.00.
The RTC granted the Norman Spouses' prayer for the return of their partial payments and found that
the spouses had a perfected contract of sale, and that the partial payments were in the form of earnest
money, which formed part of the purchase price. Upon rescission of the contract of sale due to
substantial breach, the earnest money should have been returned to the Norman Spouses, since the
parties never stipulated its forfeiture in favor of the Godinez Spouses. The CA affirmed said decision
and held that the contract was not a contract of sale, but a contract to sell. Thus, the nonfulfillment of
the obligation to pay the full amount of the purchase price was not a breach of contract but rather an
unfulfilled suspensive condition, which prevented the seller from conveying title to the buyer.
ISSUE
Whether or not the partial payments should be converted into rentals pursuant to rules on
interpretation of contracts - YES
RULING
As for prospective sellers, this court generally orders the reimbursement of the installments paid for
the property when setting aside contracts to sell. This is true especially if the property's possession
has not been delivered to the prospective buyer prior to the transfer of title. The conversion of partial
payments into rentals is also consistent with Article 1378 of the Civil Code, which teaches that doubts
in the interpretation of onerous contracts should be settled in favor of the greatest reciprocity of
interests. The Court find it only proper that respondents reciprocate their use of the premises with
the payment of rentals while full payment on their contract to sell was still pending.
47
In this case, petitioners turned over possession of the premises to respondents after the latter made
partial payments amounting to US$10,000.00. Respondents then moved their furniture and groceries
into one of the housing unit's rooms and also hired a house helper to watch over the premises in the
interim. Respondents made subsequent payments, bringing its total to US$40,000.00, but the
contract to sell still failed to take effect because of respondents' subsequent default in paying the
balance. During this five (5) month period, petitioners were unable to enjoy their property despite
retaining a key to the premises. Thus, petitioners should have been compensated for respondents'
use of the property.
Determining reasonable rentals would depend on the circumstances of the parties, the nature of the
property being rented, and the prevailing situation in the relevant market at the time of the
transaction, among others.
While there is no definitive legal standard for computing reasonable rentals on residential properties,
this Court notes that US$40,000.00 amounts to 22.9%, or over a fifth, of the total purchase price of
petitioner's housing unit, which is not commensurate to the value respondents may have derived
from their four (4) month possession of the property. Of the partial payments amounting to
US$40,000.00 made by respondents Andrew T. Norman and Janet A. Norman, US$22,925.00 is
considered reasonable rentals paid for use of the property of petitioners Rene Luis Godinez and
Shemayne Godinez. Petitioners Rene Luis Godinez and Shemayne Godinez are, however, ordered to
return US$17,075.00 of the US$40,000.00 to respondents Andrew T. Norman and Janet A. Norman.
48
22. KEPCO VS. CIR
KEPCO PHILIPPINES CORPORATION, PETITIONER, COMMISSIONER OF INTERNAL REVENUE,

RESPONDENT.
G.R. Nos. 225750-51 | July 28, 2020 | First Division | Peralta, C.J.

This resolves the Petition for Review filed under Rule 45 of the Rules of Court which seeks to reverse
the Decision dated November 26, 2015 and Resolution dated July 11, 2016 of the Court of Tax Appeals
(CTA) En Banc dismissing Kepco Philippines Corporation's (Kepco) appeal for being filed out of time;
and Manifestation and Motion to Render Judgment on the Case Based on the Parties' Compromise
Settlement under Section 204(A) of the National Internal Revenue Code (Manifestation) filed by
Kepco which prays to declare the case closed and terminated.
FACTS
In 2009, Kepco received Final Letter of Demand (FLD) for deficiency VAT in the amount of
P159,640,750.79 and for deficiency FWT in the amount of P124,286,821.11. Kepco filed its protest
to the FLD. Subsequently, Kepco filed its petition before the CTA Division (docketed as CTA Case No.
8112).
The CTA Division partly granted Kepco's petition and cancelled the deficiency FWT assessment and
the compromise penalties. Kepco was ordered to pay deficiency VAT plus interest and surcharges.
Kepco and the CIR filed motions for reconsideration but were denied for lack of merit. Kepco elevated
the case to the CTA En Banc in which Kepco's petition was dismissed in for being filed out of time,
and granting the CIR's petition.
Kepco sought reconsideration but the CTA En Banc denied the motion. Thus, Kepco filed the instant
petition. The CIR, through the Office of the Solicitor General (OSG), filed his Comment and Kepco, its
Reply. Meantime, Kepco filed a Manifestation that it entered into a compromise agreement with the
CIR on its tax assessments for the years 2006, 2007 and 2009. As proof, Kepco attached the Certificate
of Availment issued by the CIR certifying that the National Evaluation Board (NEB) approved Kepco's
application for compromise settlement for deficiency taxes for TYs 2006, 2007 and 2009. Thus, Kepco
moved that the case be declared closed and terminated.
OSG opposed Kepco's manifestation and motion. It averred that the compromise agreement is not
valid because first, it failed to allege and prove any of the grounds for a valid compromise, the CTA
did not yet issue any adverse Decision against Kepco, hence, there is no "doubtful validity" to speak
of as a ground for a valid compromise pursuant to Section 2 of RR No. 8-2004; and third, Kepco did
not pay in full the compromise amount upon filing of the application in violation of Section 2 of RR
No. 9-2013. The OSG posits that the CIR improperly arrogated unto himself the power of the NEB to
decide on the offer of compromise when the CIR accepted Kepco's additional payment of
P16,661,759.20 before the NEB could approve or reject Kepco's original application.
Meanwhile, the CIR filed his own Reply to the OSG's Comment. The CIR asserts that Kepco paid the
full 40% of the basic tax assessed for TYs 2006, 2007 and 2009 when it applied for compromise. In
consonance with Revenue Memorandum Order (RMO) No. 20-2007, the application was evaluated
and processed, the LT Enforcement Collection Division recommended the approval of Kepco's
application and thereafter, forwarded the favorable recommendation to Large Taxpayers Service
(LTS)-Evaluation Board. After various proposals from the LTS-Evaluation Board to increase the
compromise amount and the immediate compliance of Kepco by paying the proposed increase, the
LTS-Evaluation Board recommended the approval of the application to the NEB based on doubtful
validity. Eventually, the NEB approved Kepco's application and the CIR issued Certificate of
Availment in its favor.
49
ISSUE
Whether or not the compromise agreement between Kepco and the CIR is valid – YES
RULING
Article 2038 of the Civil Code provides that a compromise in which there is mistake, fraud, violence,
intimidation, undue influence, or falsity of documents, is subject to the provisions of Article 1330 of
this Code. This make compromises tainted with such circumstances voidable.
A compromise agreement has the effect of res judicata on the parties. Compromises are generally to
be favored and those entered into in good faith cannot be set aside, except when there is mistake,
fraud, violence, intimidation, undue influence, or falsity of documents. The compromise agreement
has the force of law between the parties and no party may discard unilaterally the compromise
agreement. Where a party has received the consideration for the compromise agreement, such party
is estopped from questioning its terms and asking for the reopening of the case on the ground of
mistake.
In this case, the parties to the compromise agreement have voluntarily settled the tax liability arising
from PNB's failure to withhold the final tax on PNOC's interest income. The parties have fully
implemented in good faith the compromise agreement. The new BIR Commissioner cannot just annul
the legitimate compromise agreements made by his predecessors in the performance of their regular
duties where the parties entered into the compromise agreements in good faith and had already fully
implemented the compromise agreements. Furthermore, there is no mistake because PNOC's
delinquent account clearly falls within the coverage of EO No. 44. Also, PNOC clearly filed its
application for tax compromise before the deadline. Thus, none of the circumstances that make a
compromise voidable is present in this case.
Accordingly, the compromise settlement between Kepco and the CIR is valid.
50
23. EUPENA VS. BOBIER
LETICIA ELIZONDO EUPENA, PETITIONER, VS. LUIS G. BOBIER, RESPONDENT.

G.R. No. 211078 | July 08, 2020 | Third Division | Carandang, J.
NATURE OF THE CASE

Petition for Review on Certiorari assailing the Decision and the Resolution of the Court of Appeals
which reversed the Regional Trial Court's Decision and dismissed the complaint for unlawful
detainer filed by petitioner against respondent
FACTS
Eupena filed a Complaint for unlawful detainer against Bobier. Eupena claimed to be the owner of a
parcel of land in Taytay, Rizal and evidenced by a TCT. She alleged to have leased the subject property
to Bobier and presented a Contract of Lease.
Bobier started to default on his rent payments. Eupena sent a demand letter seeking payment of
P27,000.00 as rent in arrears. Because of Bobier's refusal, Eupena asked that the court order Bobier
to vacate the subject land and pay the rent in arrears.
Bobier denied Eupena's ownership over the subject land. He averred that he was the owner of the
land and merely sought Eupena's financial assistance when he could not complete his amortization
payments over the land's purchase.
According to Bobier, he purchased the land from Extraordinary Development Corporation (EDC) in
1995 under a lease-to-own arrangement. He had been diligent in paying until 2001, when he started
experiencing some financial difficulty. EDC sent a Notice of Cancellation giving Bobier 15 days from
receipt thereof to settle his unpaid amortizations. Fearing the loss of his house and lot, Bobier and
his wife approached Eupena.
Bobier executed a Special Power of Attorney authorizing Eupena to claim, collect and receive from
EDC the title issued his name as registered owner of real property, upon full payment of his
outstanding obligation with the said developer. The title shall serve as collateral for the loan that he
contracted Eupena for the payment of the unpaid amortizations. Bobier only discovered that Eupena
was able to transfer the title of the property to the latter's name when he received a copy of the
complaint.
MTC granted Eupena's Complaint and ordered Bobier to vacate. It ruled that since the lease contract
clearly shows the agreement for Bobier to lease Eupena's property, then Bobier was estopped from
assailing Eupena's ownership.
Bobier appealed with the RTC, claiming that the SPA only gave Eupena the authority "to retrieve the
title issued in [respondent's] name and no other." He accused Eupena of keeping the loan agreement
from him because it contained "a provision regarding the automatic execution of a deed of absolute
sale if and when [Bobier] fails to pay the loan.”
RTC affirmed the MTC's decision in toto. It ruled that there was no pactum commissorium because
the automatic appropriation clause prohibited by Article 2088 of the Civil Code was not present in
the SPA.
The CA granted the petition and dismissed the Complaint against Bobier. The appellate court found
the elements of pactum commissorium present because the title of the subject lot was transferred
under Eupena's name just over a year after the SPA was executed. Thus, the CA provisionally declared
51
petitioner's title void. Without a valid title, the CA then dismissed petitioner's Complaint for unlawful
detainer against respondent.
ISSUE
Whether or not the lease agreement is void for being a result of a possible case of pactum
commissorium - YES
RULING
Bobier's allegations do not only show his ownership over the lot but also accuse Eupena of
fraudulently acquiring title over the same. The nature of Bobier's averments show the inseparable
link between ownership and possession that the trial courts should have determined.
Instead of categorically denying Bobier's allegations, Eupena simply based her claim of ownership
(and right to possession) on TCT No. 698957 and the lease contract. Eupena had every opportunity,
from the MTC to the CA to rebut Bobier's assertions but failed to do so.
The abovementioned facts, along with Bobier's unrefuted allegations that Eupena concealed: (1) the
loan agreement; and (2) the deed of sale he allegedly executed in Eupena's favor, show that Eupena
possibly obtained TCT No. 698957 via a pactum commissorium. In fact, Eupena manifested the
presence of a loan agreement, which the RTC (in a separate action for reconveyance) declared void
for being a pactum commissorium. While the action for reconveyance is still the subject of a Notice
of Appeal, such pronouncement corroborates Bobier's claims.
Given the factual backdrop, the validity of the lease agreement becomes suspect. Even without
presenting the loan agreement containing the void stipulation, the parties' actions before the
institution of the ejectment case reveals Eupena's intention to automatically acquire the property.
Following Our ruling in Bustamante v. Sps. Rosel, this is also embraced under the concept of a pactum
commissorium. Because Eupena illegally obtained TCT No. 698957, the lease agreement becomes
void following Article 1409(1) of the Civil Code. Under Article 1409(1), contracts whose purpose is
contrary to law are void and inexistent from the beginning. Here, the lease agreement is the result of
a pactum commissorium, resulting in its invalidity for violating Article 2088 of the Civil Code.
We are more inclined to believe that because of Bobier's need to pay EDC and his fear of losing the
house and lot (which he has been paying for the past 6 years out of the 10-year lease-to-own contract
with EDC), Bobier was compelled to accede to Eupena's demand of signing the lease contract.
According to Bobier, he signed the lease contract with the understanding that the "rent payments"
are, in reality, his loan payments to Eupena. The fact that the lease agreement (executed one month
after the issuance of TCT No. 698957) indicated Bobier's residence as Phase 6, B3, Lot 3 of Golden
City Subdivision, Taytay, Rizal - the very lot subject of the lease agreement - lends credence to his
version of the events as against Eupena's complete lack of evidence to prove otherwise.
While the lease agreement is clear in its terms, the factual milieu of this case militates against
upholding its validity.
With the possibility of a pactum commissorium, Eupena's ownership over the subject land becomes
invalid. The lease agreement, upon which the unlawful detainer complaint is based, is void. Eupena,
thus, failed to prove the first element of an unlawful detainer - i.e., that possession by Bobier was by
a valid lease contract.
52
24. GATMAYTAN VS. MISIBIS LAND
MERCEDES S. GATMAYTAN AND ERLINDA V. VALDELLON, PETITIONERS, VS. MISIBIS LAND,

INC., RESPONDENT.
G.R. No. 222166 | June 10, 2020 | First Division | Caguioa, J.

Petition for review on certiorari against the orders issued by the Regional Trial Court
FACTS
Petitioners purchased from Oscar and Cidra Garcia (Spouses Garcia) a parcel of land in Misibis,
Cagraray Island, Albay with an area of 6.4868 hectares. Petitioners, armed with the original owner's
duplicate copy of TCT No. T-77703, attempted to register the corresponding Deed of Absolute Sale
(1991 DOAS) with the Register of Deeds of Albay (RD). They were successful in having the 1991 DOAS
duly annotated on TCT No. T-77703, but they were not able to cause the transfer of the Torrens title
in their name since they lacked the Department of Agrarian Reform (DAR) clearance necessary to do
so.
In 2010, when Petitioners resumed processing the transfer of the Torrens title to their names, they
discovered that the disputed lot had been consolidated by Misibis Land, Inc. (MLI) with other
adjoining lots in Misibis, and sub-divided into smaller lots covered by several new Torrens titles.
Upon further investigation, Petitioners learned that TCT No. T-77703 had been stamped "cancelled",
and replaced by subsequent Torrens titles.
With this discovery, Petitioners immediately caused the annotation of their Affidavit of Adverse
Claim on MLI's Torrens titles and subsequently filed a complaint before the RTC (Complaint) against
Spouses Garcia, DAA Realty and MLI, as well as Philippine National Bank (PNB) to whom the disputed
lot had been mortgaged.
MLI argued that petitioners' cause of action is already barred by prescription since an action for
reconveyance of real property based on an implied constructive trust arising from fraud prescribes
ten (10) years after the issuance of title in favor of the defrauder.
The RTC dismissed the complaint on the ground of prescription of action.
ISSUE
Whether or not the contract of sale is void for lack of consent - YES
Whether or not a void contract upon which a reconveyance is based is subject to prescription - NO
RULING
Under Article 1390 of the Civil Code, a contract is voidable when the consent of one of the contracting
parties is vitiated by mistake, violence, intimidation, undue influence or fraud. When the consent is
totally absent and not merely vitiated, the contract is void. An action for reconveyance may also be
based on a void contract. When the action for reconveyance is based on a void contract, as when there
was no consent on the part of the alleged vendor, the action is imprescriptible. The property may be
reconveyed to the true owner, notwithstanding the TCTs already issued in another's name. The
issuance of a certificate of title in the latter's favor could not vest upon him or her ownership of the
property; neither could it validate the purchase thereof which is null and void. Registration does not
vest title; it is merely the evidence of such title. Our land registration laws do not give the holder any
better title than what he actually has. Being null and void, the sale produces no legal effects
whatsoever.
53
In all cases of registration procured by fraud, the owner may pursue all his legal and equitable
remedies against the parties to such fraud without prejudice, however, to the rights of any innocent
holder for value of a certificate of title. After the entry of the decree of registration on the original
petition or application, any subsequent registration procured by the presentation of a forged
duplicate certificate of title, or a forged deed or other instrument, shall be null and void. In this case,
both DAA Realty and MLI may be deemed to have been constructively notified of the 1991 DOAS in
favor of Petitioners, as it was duly annotated on Spouses Garcia's TCT No. T-77703. Hence, contrary
to MLI's assertions, it may not be considered an innocent purchaser for value in this case.
Moreover, Petitioners' action for reconveyance can also be viewed from the law on sales. Petitioners
alleged that a prior sale had been consummated in their favor. It must be noted that the copy of the
1991 DOAS forming part of the records shows that it is a public document. That the 1991 DOAS is a
public document is further confirmed by the fact that Petitioners were successful in having the 1991
DOAS duly annotated on TCT No. T-77703, and that the only reason they were unable to cause the
transfer of the Torrens title in their name was because they lacked the DAR clearance necessary to
do so. According to Article 1498 of the Civil Code, the execution of this public document may partake
constructive delivery of the property so as to constitute the Petitioners as full owners thereof. In turn,
the validity of this sale, documented through the 1991 DOAS, was hypothetically admitted by MLI
through its Motion for Preliminary Hearing. In other words, the second sale to DAA Realty,
documented through the 1996 DOAS, may be considered void, since Spouses Garcia would no longer
be the owners of the disputed lot at such time. As early as 1991, Petitioners may be considered full
owners of the property covered by TCT No. T-77703. This means that DAA Realty could not have
acquired anything in 1996. It follows that MLI purchased nothing from DAA Realty in 2005.
54
25. SPOUSES VIOVICENTE VS. SPOUSES VIOVICENTE
SPOUSES TEODORICO M. VIOVICENTE AND DOMINGA L. VIOVICENTE, PETITIONERS, VS.

SPOUSES DANILO L. VIOVICENTE AND ALICE H. VIOVICENTE, THE REGISTER OF DEEDS OF
CALAMBA, LAGUNA, RESPONDENTS.
G.R. No. 219074 | July 28, 2020 | First Division | Lazaro-Javier, J.

Assail the dispositions of the Court of Appeals reversing the trial court's decision and dismissing
petitioners' complaint for reconveyance of property and nullity of sale against respondents
FACTS
Teodorico Viovicente testified that he was married to Dominga and respondent Danilo Viovicente
was their eldest son. He was the registered owner of a property located at Pacita Complex II, Phase I,
Blk 17, Lot 12, San Pedro, Laguna covered by TCT No. T- 264547. He acquired it through a GSIS real
estate loan and paid it through salary deductions for fifteen (15) years.
Danilo went to their house in Tacloban City and forced him and Dominga to sign a Deed of Absolute
Sale. They initially refused because the property was intended for Danilo's siblings for their eventual
study in Manila. Because of his refusal, Danilo angrily shouted and threw a briefcase at him but
missed. Out of fear, he and Dominga signed the Deed even without receiving any payment as
consideration. When he was able to secure a copy of the Deed in 2002, he noted that the
acknowledgment portion falsely stated that he personally appeared before a notary in Makati City on
July 14, 1993. This was physically impossible since he reported for work at the GSIS-Tacloban City
that day.
In 2002, he learned that Danilo and his wife respondent Alice were able to transfer the property to
their names and were issued TCT-356656 through a fictitious Deed of Absolute Sale. He denied ever
signing it and personally appearing before a notary public in Makati where the Deed of Sale dated
December 14, 1995 was supposedly executed. The GSIS-Tacloban City certified that he reported for
work that day. Hence, he and Dominga filed the Complaint for reconveyance of property, nullity of
the supposed sale of real property, and cancellation of TCT No. T-356656 issued in the names of
Danilo and his wife.
Danilo denied using force and intimidation to obtain his parents' signature on the Deed of Sale. He
testified that sometime in 1983, Teodorico commented that it would be convenient to have a house
in Manila where his siblings could stay. He initially dismissed the idea for lack of funds. Teodorico
then suggested that he (Teodorico) could apply for a loan to cover the downpayment while Danilo
would be in charge of paying the amortizations; and upon full payment thereof, Teodorico would
convey the property to him to which he agreed.
The trial court ruled in petitioners' favor directing defendants to reconvey to plaintiffs the property
originally covered by Transfer Certificate of Title T-356656 and declaring the Deed of Absolute Sale
as null and void; and directing the Register of Deeds of Calamba, Laguna to cancel Transfer Certificate
of Title T-356656 issued in the name of defendant Danilo L. Viovicente and to issue a new Transfer
Certificate of Title in the name of plaintiff Teodorico M. Viovicente, married to Dominga L. Viovicente.
The CA reversed said decision and found that the cancellation of TCT No. 264547 was not based on
the Deed of Sale dated June 24, 1993 but on the Deed of Sale dated December 14, 1995. Petitioners
failed to overthrow the presumption that this Deed of Sale dated December 14, 1995 was actually
executed and the consequent Torrens title, issued with regularity. Petitioners' assertion that the Deed
of Sale dated December 14, 1995 was forged was unsubstantiated. Lastly, the action for reconveyance
had already prescribed because TCT No. 356656 was issued on January 16, 1996 while the action
was only filed in 2003.
55
ISSUE
Whether or not the deed of sale is void for lack or absence of consideration – YES
RULING
Article 1458 of the Civil Code provide that 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. The elements of a valid contract of sale are:
(1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money
or its equivalent. Absent any of the elements, the sale is fictitious or otherwise void. Specifically,
Article 1471 of the Civil Code decrees that if the price in a contract of sale is simulated, the sale is
void.
On its face, the Deed of Absolute Sale purports to be supported by a consideration in the form of a
price certain in money. However, based on the evidence presented by plaintiffs, they were merely
forced by Danilo Viovicente to sign the Deed of Absolute Sale and that they did not receive any
consideration in the amount of P111,180.00 from Danilo Viovicente. There was indisputably a total
absence of consideration contrary to what is stated in the Deed of Absolute Sale. Where, as in this
case, the deed of absolute sale states that the purchase price has been paid but in fact has never been
paid, the deed of sale is null and void ab initio for lack of consideration.
Danilo did not present any evidence to prove his supposed amortization payments, much less, his
agreement with Teodorico that the latter will obtain a GSIS loan to purchase the property while he
(Danilo) will pay the amortizations thereof. Meanwhile, Teodorico presented GSIS Certification dated
May 12, 1986 certifying that Teodorico was granted a housing unit at Pacita Complex II, Laguna on
June 1, 1983 costing P111,180.00 and had been paying monthly amortization of P1,317.07. GSIS
Certification dated February 12, 2002 certified that Teodorico's housing loan was already fully paid
on December 8, 1992 under OR No. 507693421.
In sum, TCT No. 356656 is void because, for one, it was issued based on a spurious Deed of Sale
unilaterally executed on December 14, 1995. For another, the Deed absolutely lacked consideration
from respondents.
56
26. HEIRS OF CUDAL VS. SPOUSES SUGUITAN
HEIRS OF ISABELO CUDAL, SR., REPRESENTED BY LIBERTAD CUDAL, AND HEIRS OF ANTONIO
CUDAL, REPRESENTED BY VICTORIANO CUDAL, PETITIONERS, VS. SPOUSES MARCELINO A.
SUGUITAN, JR. AND MERCEDES J. SUGUITAN, RESPONDENTS.
G.R. No. 244405 | August 27, 2020 | First Division | Reyes, J. JR., J.

Petition for Review on Certiorari under Rule 45 assailing the Decision and the Resolution of the Court of
Appeals
FACTS
A certain Juan Salva (who died intestate sometime in 1945) was the registered owner of a parcel of land
(Lot H-5865) located in Cagayan. The said property consisted of several lots including Lot 2006. In 1969,
a certain Angela Cudal, claiming to be Juan Salva's granddaughter and only heir, executed an Affidavit of
Adjudication and Sale adjudicating unto herself the entire estate of Juan Salva extrajudicially, and selling
the 7,092 square meters of Lot 2006 to Isabelo Cudal, Sr. and the remaining 5,000 square meters to
Antonio Cudal.
In 1975, a certain Visitacion Pancho, also an alleged heir of Juan Salva, executed a Confirmation of
Ownership, renouncing all her rights and interests over the 10,214-square meter portion of Lot 2006 in
favor of Jose Say. This portion is denominated as Lot 12 subject of the present controversy. Jose registered
the Confirmation of Ownership in the Registry of Deeds of Cagayan. OCT No. P-283 was partially cancelled
and Jose also secured the issuance of TCT in his name. Jose conveyed his right over Lot 12 in a Deed of
Absolute Sale in favor of La Vilma Realty Co., Inc. La Vilma Realty thereafter registered the Deed of
Absolute Sale and caused the issuance of TCT.
In 2001, La Vilma Realty executed a Deed of Absolute Sale in favor of Marcelino Suguitan, Jr., and the latter
caused the registration of the said Deed with the Registry of Deeds of Cagayan and secured the issuance
of TCT in the name of respondents. Marcelino also bought a rice mill located on the eastern portion of Lot
12, not from La Vilma Realty, but from a certain Agcaoili.
It appeared that respondents filed a complaint for forcible entry against Libertad Cudal and five other
John Does before the MTC. Said complaint, however, was dismissed and was affirmed on appeal to the
RTC.
In 2007, the heirs of Isabelo, Sr. and Antonio (herein petitioners) filed a Complaint for Quieting of Title,
Annulment of Instruments and Documents, and Cancellation of Certificate of Titles with Damages against
the respondents and La Vilma Realty alleging that the issuance of TCT No. T-125624 in Marcelino's name
clouded their rights and title as owners of Lot 12.
Respondents and La Vilma Realty argued that they are purchasers for value in good faith, and that the sale
in favor of Isabelo, Sr. and Antonio was not registered in the Registry of Deeds of Cagayan and cannot
prejudice third persons and the whole world.
The RTC held that Visitacion cannot validly convey to Jose her rights over Lot 12 through the Confirmation
of Ownership since at the time of the execution of said Confirmation, Angela already sold Lot 2006 to
Isabelo, Sr. and Antonio. The RTC also ruled that Marcelino cannot be considered a purchaser for value in
good faith.
The CA reversed the RTC Decision. It explained that an innocent purchaser for value shall have the
attributes of a man of reasonable caution" and an "ordinarily prudent and cautious man. In this case,
considering that petitioners were occupying the lot, Marcelino conducted an investigation as to the nature
of their claim over Lot 12 before he purchased the same. Thus, he is deemed to have exercised due
diligence, conducted an investigation, and weighed the surrounding facts and circumstances like what any
57
prudent man in a similar situation would do, acts which are consistent with that of an innocent purchaser
of value.
ISSUE
Whether or not the respondents can be considered as buyers in good faith – NO
RULING
The question of who among the parties has a better right over Lot 12 must be answered by determining
whether respondents acquired Lot 12 in good faith and for value from La Vilma Realty, the registered
owner. This is so because respondents are dealing with registered land, and as will be discussed, the
capacity of their predecessor- in-interest to convey title is relevant to determine whether they are
innocent purchasers for value.
To determine whether respondents are buyers in good faith, the Court's pronouncement in Spouses
Bautista v. Silva is instructive:
A holder of registered title may invoke the status of a buyer for value in good faith as a
defense against any action questioning his title. Such status, however, is never presumed
but must be proven by the person invoking it. A buyer for value in good faith is one who
buys property of another, without notice that some other person has a right to, or interest
in, such property and pays full and fair price for the same, at the time of such purchase, or
before he has notice of the claim or interest of some other persons in the property. He
buys the property with the well-founded belief that the person from whom he receives
the thing had title to the property and capacity to convey it. To prove good faith, a buyer
of registered and titled land need only show that he relied on the face of the title to the
property. He need not prove that he made further inquiry for he is not obliged to explore
beyond the four corners of the title. Such degree of proof of good faith, however, is
sufficient only when the following conditions concur: first, the seller is the registered
owner of the land; second, the latter is in possession thereof; and third, at the time of the
sale, the buyer was not aware of any claim or interest of some other person in the
property, or of any defect or restriction in the title of the seller or in his capacity to convey
title to the property.
Absent one or two of the foregoing conditions, then the law itself puts the buyer on notice and obliges the
latter to exercise a higher degree of diligence by scrutinizing the certificate of title and examining all
factual circumstances in order to determine the seller's title and capacity to transfer any interest in the
property. Under such circumstance, it is no longer sufficient for said buyer to merely show that he relied
on the face of the title; he must now also show that he exercised reasonable precaution by inquiring
beyond the title. Failure to exercise such degree of precaution makes him a buyer in bad faith.
Additionally, in Gabutan v. Nacalaban, it was stated that the buyer must investigate the rights of the actual
possessor in cases where the purchased land is in possession of a person other than the seller, to wit:
The "honesty of intention" which constitutes good faith implies a freedom from
knowledge of circumstances which ought to put a person on inquiry. If the land purchased
is in the possession of a person other than the vendor, the purchaser must be wary and
must investigate the rights of the actual possessor. Without such inquiry, the purchaser
cannot be said to be in good faith and cannot have any right over the property.
In this case, what is not disputed is that despite La Vilma Realty being the registered owner, petitioners
are in actual possession of Lot 12. Hence, following the discussion above, respondents cannot merely rely
on the face of La Vilma Realty's title but must now exercise a higher degree of diligence and investigate
petitioners' claim. On this score, we find that the CA erred in finding that respondents were buyers in good
faith.
58
27. SPOUSES GERMAN VS. SPOUSES SANTUYO
SPOUSES DANILA AND CLARITA GERMAN, PETITIONERS, VS. SPOUSES BENJAMIN AND
EDITHA SANTUYO AND HELEN S. MARIANO, DECEASED, SUBSTITUTED BY HER HEIRS,
NAMELY, JOSE MARIO S. MARIANO, MA. CATALINA SAFIRA S. MARIANO AND MA. LEONOR M.
HUELGAS, MARY THERESA IRENE S. MARIANO AND MACARIO S. MARIANO, RESPONDENTS.
G.R. No. 210845 | January 22, 2020 | Third Division | Leonen, J.

Petition for Review on Certiorari under Rule 45 assailing the Decision and Resolution of the Court of
Appeals, Manila which reversed and set aside a Decision rendered by the Regional Trial Court and held
that Spouses Benjamin and Editha Santuyo were purchasers in good faith
FACTS
In 2001, the German Spouses filed a case for Declaration of Nullity of Sale, Recovery of Ownership,
Reconveyance with Damages against the Spouses Santuyo and Helen before the RTC claiming that despite
their payment of the full purchase price in 1988, the Mariano Spouses failed to execute the final Deed of
Sale. Instead, the property was sold to Helen Mariano's sister, Editha Santuyo, and Editha's husband.
Allegedly, Spouses Bautista were the registered owners of a 400-square meter parcel of land in Barangay
Balatas, Naga City who made sale transactions to two (2) different different sellers in 1986 to Mariano
Spouses who, on the same day, sold the property to the German Spouses on the condition that Helen
Mariano (Helen) would sign the Deed of Sale upon the German Spouses' payment of the full purchase price
and in 1991 (between the Bautista Spouses and the Santuyo Spouses).
Petitioners also claim that Helen Mariano conspired with the Santuyo Spouses in order to acquire the
property when she assisted the Santuyo Spouses despite knowing that the property had been previously
sold to her and her spouse, Jose Mariano and that Santuyo Spouses could not have been in good faith when
they registered the property in their names. Santuyo Spouses claimed that the German Spouses did not
have the right to assert ownership over the property because their transaction with the Mariano Spouses
was only a contract to sell. Since the German Spouses failed to pay the full purchase price, they could not
compel the Mariano Spouses to execute a Deed of Sale in their favor and that they have better right of
ownership over the property as they were able to register their title in good faith.
The RTC found that the sale of the property to the German Spouses was valid and enforceable, despite
Helen Mariano's failure to sign the Deed of Sale because they fully paid the price. The Bautista Spouses
could not transfer ownership to the Santuyo Spouses in a subsequent sale because they were no longer
the owners of the property at the time but the CA reversed and set aside such decision and dismissed the
German Spouses' complaint. Pursuant to Article 173 of the New Civil Code, Helen had 10 years from the
date of the sale to annul it. Thus, since there was no proof that she sought to annul the 1986 sale, it was
still valid and enforceable.
CA also did not give credence to the German Spouses' claim that the rules on double sale under Article
1544 of the Civil Code applied and held that the contract between the Mariano Spouses and the German
Spouses was a contract to sell, not a contract of sale. Thus, since the deed of sale was not executed, the
German Spouses did not have any right to file a case for reconveyance of the property, or to have the sale
between the Bautista Spouses and the Santuyo Spouses nullified and further held that they were unable
to prove that the Santuyo Spouses were purchasers in bad faith and that the property's certificate of title
did not have any liens or encumbrances that the Santuyo Spouses should have been aware of.
ISSUES
1. Whether or not the transactions made by the petitioner constitutes double sale - YES
2. Whether or not respondents the Santuyo Spouses were purchasers in good faith - NO
RULING
59
1. Yes. Article 1544 of the Civil Code provides that if the same thing should have been sold to
different vendees, the ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property. Should it be immovable
property , the ownership shall belong to the person acquiring it who in good faith first recorded
it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the
person who in good faith was first in the possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good faith. For Article 1544 to apply , the following
requisites must concur:(a) The two (or more) sales transactions in the issue must pertain to
exactly the same subject matter, and must be valid sales transactions; (b) The two (or more)
buyers at odds over the rightful ownership of the subject matter must each represent conflicting
interests; and (c) The two (or more) buyers at odds over the rightful ownership of the subject
matter must each have bought from the very same seller. In this case, there was a double sale
when Bautista Spouses sold the same property. First, to the Mariano Spouses in 1986; and second,
to the respondents Santuyo Spouses in 1991. Neither of the parties contest the existence of these
two (2) transactions. Clearly, there are conflicting interests in the ownership, because if title over
the property had already been transferred to the Mariano Spouses, then no right could be passed
on to respondents Santuyo Spouses in the second sale. Undisputedly, the respondents Santuyo
Spouses were the ones who were able to register the property in their names with the Registry of
Deeds.
2. Generally, persons dealing with registered land may safely rely on the correctness of the
certificate of title, without having to go beyond it to determine the property's condition. However,
when circumstances are present that should prompt a potential buyer to be on guard, it is
expected that they inquire first into the status of the land. One such circumstance is when there
are occupants or tenants on the property, or when the seller is not in possession of it. In this case,
petitioners had continuously possessed the land even prior to the 1986 sales and at the time of
the sale between Jose Mariano and spouses German, the latter were already in possession of the
land way back in 1985 and after the sale in 1986, with the permission of the spouses Mariano,
plaintiffs German renovated their residential house therein which was completed in 1987. Since
then they have been in actual physical possession of the land and residing therein. The plaintiffs '
possession thereof was known to the defendants Santuyo even before the execution of the deed
of sale in their favor in 1991. The claim of defendants Santuyo cannot prevail upon the plaintiffs
Germans who first acquired and possessed the property from spouses Mariano after the latter has
bought the land from the Bautistas. This court is not convinced by what defendant Editha has
declared that before she bought the land from the Bautistas , she had not yet seen the land but she
knows that it is located inside Mariano Subdivision; that in 1986, she does not know where it is
located. That even in 1990 when she was already employed by the Mariano spouses at the Sto.
Niño Memorial park, she did not visit the land. And that before the land was sold to her in 1991,
she did not investigate or determine what was the physical condition of the land. Respondent
Santuyo Spouses' claim that it is enough that the title is in the name of the seller is unavailing. To
buy real property while having only a general idea of where it is and without knowing the actual
condition and identity of the metes and bounds of the land to be bought, is negligent and careless.
Failure to take such ordinary precautionary steps, which could not have been difficult to
undertake for respondents Santuyo Spouses, as they were situated near where the property is
located, precludes their defense of good faith in the purchase. Likewise, the involvement and
cooperation of respondent Helen Mariano in the 1991 sale casts doubt on respondents Santuyo
Spouses' good faith. Due to respondents' lack of good faith, they cannot rely on the indefeasibility
of their Transfer Certificate of Title. Thus, in accordance with Article 1544 of the Civil Code, it is
the first buyer, namely the Mariano Spouses, who had a better right of ownership, and no
ownership could pass on to the respondents Santuyo Spouses as a result.
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28. ODRADA VS. LAZARO
NOEL M. ODRADA, PETITIONERS, V. VIRGILIO LAZARO AND GEORGE ASENIERO

RESPONDENT.
G.R. No. 205515 | January 20, 2020 | First Division | Reyes, JR., J.

Petition for review on certiorari under Rule 45 seeking to reverse and set aside the Decision and
Resolution of the Court of Appeals which affirmed with modification the Decision of the Regional Trial
Court
FACTS
Odrada is the registered owner of a black Range Rover. He bought it from Roberto S. Basa, the previous
registered owner of the motor vehicle, for P1.2 Million. On December 4, 2003, Odrada arranged for an
exchange of motor vehicle with a certain Alfonso De Leon where the latter took the Range Rover for a test
drive. At around 6:00 p.m. De Leon was about to drop Odrada's driver at his office when Odrada suddenly
heard successive gun shots nearby. After investigating what had happened, he learned that his motor
vehicle had been shot by personnel of the Philippine National Police Eastern Police District (PNP-EPD).
Because of the incident, Odrada learned that respondent George Aseniero, claiming to be the owner of the
Ranger Rover, had reported to the Anti-Carnapping Unit of the PNP-EPD that the said motor vehicle had
been stolen. Due to the shooting incident, Odrada's Range Rover was considerably damaged and he
discovered that the motor vehicle sustained 16 bullet holes. On top of the P300,000.00 estimated cost of
repair, he also lost income of the same amount, which he would have earned had the transaction with De
Leon pushed through. As a result, he filed a Complaint for Damages against respondents.
Respondents claim that sometime in February 2003, William Joseph Rosmarino acquired the Range Rover
from Eagle Ridge as payment for the services he rendered to the latter. Eagle Ridge then made
arrangements with Transmix Builders and Construction, Inc. to give the said motor vehicle to Rosmarino,
who in turn placed it on display at Kotse Pilipinas. Through Jose Pue, manager of Kotse Pilipinas, Aseniero
was able to buy the Range Rover for P1.2 Million. In order to facilitate the transaction, Rosmarino
requested Transmix to transfer the ownership of the Range Rover directly to Aseniero.
On November 5, 2003, Pueo called Aseniero and offered to take the Range Rover to the Land
Transportation Office (LTO) for registration but the latter was hesitant as the vehicle was being
mechanically serviced. Pueo was able to persuade him. However, after getting the Range Rover from the
mechanic, Pueo brought the car to Oscar Tan (Tan), Pueo's business colleague in Kotse Pilipinas, to serve
as collateral for the P700,000.00 loan the former obtained from the latter. The following day, Aseniero
tried to call Pueo to ask about the car but the latter could no longer be reached by phone and was also not
in his office.
Thereafter, Aseniero went to the LTO to ask for a hold order where he found that the Range Rover was
already registered in Odrada's name. He also discovered that the said motor vehicle was allegedly sold by
Transmix to Basa, who eventually sold the same to Odrada. Aseniero confronted Transmix about the
purported transaction but the latter denied having sold the car to Basa and disavowed the Deed of Sale
covering the sale. Transmix thereafter executed a Deed of Confirmation of Sale in Aseniero's favor
attesting to the fact that the Range Rover was only sold to him.
Then, Aseniero went to the Traffic Management Group (TMG) to present the Deed of Sale and
Confirmation of Deed of Sale Transmix had executed in his favor to prove ownership over the Range
Rover. On the bases of these documents, the TMG issued a request for an alarm watch list for the said car.
As such, respondents prayed that Odrada's complaint be dismissed and that he be ordered to pay
exemplary damages in the amount of P100,000.00, moral damages in the amounts of P1 Million and
P500,000.00 for Arsenio and Lazaro respectively, attorney’s fees, and costs of suit.
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RTC ruled in respondents' favor and dismissed the complaint. The CA affirmed the RTC Decision. Hence,
this present petition.
ISSUE
Whether Odrada is the lawful owner of the black range rover in question – NO
RULING
After a careful perusal of the records, the Court finds that the courts a quo correctly ruled in favor of
Aseniero and adjudging him to be the lawful owner of the motor vehicle.
The courts a quo correctly ruled that the evidence on record tilted in favor of Aseniero's claim of
ownership. Between Odrada and Aseniero, it was the latter who was able to prove a clear and consistent
transmission of ownership from Transmix as the original owner of the motor vehicle. Odrada failed to
establish that Basa had validly acquired the motor vehicle from Transmix. On the other hand, Aseniero
had sufficiently shown that Transmix had only sold the motor vehicle to him. Consequently, even if Odrada
may have acquired possession over the property, Aseniero may still recover the same as he was unlawfully
deprived of its possession.
Ownership belongs to the first possessor in good faith

Even assuming that respondents failed to overcome the presumption of regularity accorded to the Deed
of Sale between Basa and Transmix, ownership over the Range Rover would still rest with Aseniero. Such
scenario would amount to a double sale and the rules on double sale would apply.
The rule on double sale is provided in Article 1544 of the Civil Code. It reads:
ARTICLE 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken possession thereof
in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith
first recorded it in the Registry of Property.
The Deed of Sale between Basa and Transmix was executed on September 4, 2003. On the other hand, the
Deed of Sale between Transmix and Aseniero was executed on November 5, 2003. While the Deed of Sale
between Basa and Transmix bore an earlier date, there is no evidence to sufficiently establish when Basa
had actually possessed the Range Rover. It must be remembered that Basa never appeared in court to
testify on the circumstances of the purchase of the motor vehicle and when he acquired possession
thereto. The execution of the deed of sale alone did not transfer the ownership of the motor vehicle from
Transmix to Basa because ownership over movable property is transferred by delivery and not merely by
contract.
In contrast, without any direct testimonial or documentary evidence to establish when Basa actually
acquired possession of the property, the closest piece of evidence which could somehow indicate that
Basa already possessed the motor vehicle would be the Deed of Sale between Basa and Odrada. Even if it
were to be presumed that Basa had possession of the Range Rover at the time it was sold to Odrada, it
would still be after Aseniero had actual possession of the Range Rover. Further, there is no evidence to
show that Aseniero was aware of the September 4, 2003 Deed of Sale between Basa and Transmix. As
such, it is clear that it was Aseniero who first possessed the Range Rover in good faith.
Consequently, ownership over the motor vehicle rightfully belongs to Aseniero as the first possessor in
good faith. Since Basa did not acquire ownership over the Range Rover, he did not transmit any rights
when he sold the same to Odrada. This is in keeping with the principle that one cannot give what one does
not have — nemo dat quod non habet.
As the lawful owner of the Range Rover, Aseniero cannot be faulted in reporting the said motor vehicle as
stolen after he was unjustly deprived of its possession. It is but a reaction from an owner who has been
divested of possession of his property. Aseniero acted well within his rights in initiating the posting of a
Flash Report with the PNP in order to recover the Range Rover taken from him.
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29. STAR ASSET MANAGEMENT VS. REGISTER OF DEEDS OF DAVAO
STAR ASSET MANAGEMENT ROPOAS, INC., SUBSTITUTED BY DALLAS ENERGY AND

PETROLEUM CORPORATION, PETITIONER VS. REGISTER OF DEEDS OF DAVAO CITY AND
FOOTHILLS REALTY DEVELOPMENT CORPORATION REPRESENTED BY MARYLINE C. LIM,
RESPONDENT.
G.R. No. 233737 | February 3, 2021 | First Division | Carandang, J.
NATURE OF THE CASE

Petition for review on certiorari assailing the decision of the Court of Appeals which upheld the trial
court's ruling which held that the compromise agreement between the parties partakes of the nature
of contract to sell which is covered by the Maceda Law, hence the compromise agreement was
improperly cancelled.
FACTS
The case involves three parcels of land located in Barangay Baliok, Talomo, Davao City previously
registered in the name of Star Asset.
On December 12, 2012, Star Asset filed a Petition for Cancellation of Adverse Claim in said TCTs
before the trial court. Star Asset claimed that it eventually acquired the properties from Unimark. In
the meantime, after the foreclosure of the properties, Goldland impugned the validity of the
foreclosure proceedings which prompted Star Asset to enter into a Compromise Agreement with the
former with an undertaking to ·sell back the properties to Goldland.
Star Asset claimed that Goldland failed to comply with its obligation under the compromise
agreement, hence, on March 21, 2012, Star Asset was constrained to cancel said compromise
agreement. On March 22, 2012, one day after the cancellation of the Compromise Agreement,
Foothills Realty, as successor-in-interest of Goldland, caused the annotation of its adverse claim.
Foothills Realty also argued that the cancellation of the compromise agreement should have
complied with Republic Act No. (R.A.) 6552, otherwise known as the "Realty Installment Buyer Act"
or the "Maceda Law."According to Foothills Realty, there should have been a notarial act of rescission
as required by R.A. 6552 and failure to serve the same will not be tantamount to cancellation of the
compromise agreement. Hence, the annotation of the adverse claim anchored on the compromise
agreement is still proper.
The RTC held that the compromise agreement between the parties partakes of the nature of contract
to sell which is covered by the Maceda Law. According to the RTC, the compromise agreement was
improperly cancelled because Star Asset, substituted later by Dallas Energy, failed to: (1) send a
notarized notice of cancellation to Goldland (Foothills Realty's transferor); and (2) refund the cash
surrender value to the latter. The CA affirmed the RTC’s ruling.
ISSUE
Whether or not the Maceda Law is applicable in this case and that the Compromise Agreement was
improperly cancelled - NO
RULING
Under Section 2 of R.A. 6552, it is the "policy of the State to protect buyers of real estate on installment
payments against onerous and oppressive conditions." The scope of the law only encompasses "[s]ale
or financing of real estate on installment payments, including residential condominium apartments
but excluding industrial lots, commercial buildings and sales to tenants under R.A. 3844, as amended
by R.A. 6389."Under the said law, when the buyer has paid at least two installments, he is entitled to
the following rights in case he defaults in the payment of succeeding installments
63
In Active Realty & Development Corporation v. Daroya, the Court explained the essence of the
Maceda Law as follows:
The law seeks to address the acute housing shortage problem in our country that has prompted
thousands of middle and lower class buyers of houses, lots and condominium units to enter into all
sorts of contracts with private housing developers involving installment schemes. Lot buyers, mostly
low income earners eager to acquire a lot upon which to build their homes, readily affix their
signatures on these contracts, without an opportunity to question the onerous provisions therein as
the contract is offered to them on a "take it or leave it" basis.
Real estate developers thus enjoy an unnecessary advantage over lot buyers who they often exploit
with iniquitous results. They get to forfeit all the installment payments of defaulting buyers and resell
thesame lot to another buyer with the same exigent conditions. To help especially the low income lot
buyers, the legislature enacted R.A. No. 6552 delineating the rights and remedies of lot buyers and
protect them from one-sided and pernicious contract stipulations.
In this case, the buyer under the compromise agreement, Foothills Realty, is a company based in
Davao City that is engaged in the business of real estate development, undertaking, establishing, or
managing subdivision housing problems, industrial or commercial estates, golf course projects,
resort projects and other real estate developments.
The properties subject of this case have an aggregate land area of 300,000 square meters. By its sheer
size, the subject properties can hardly be classified as residential properties as to be covered by the
Maceda law. As aforesaid, the Maceda law was enacted to curb out the bad practices of real estate
developers like Foothills Realty. For that reason, We find that Foothills Realty is taking an
incongruous position by invoking the Maceda law in as much as the said law was enacted precisely
to guard against its practice.
Foregoing considered, it was sufficiently established that Star Asset complied with the conditions laid
down in the compromise agreement in order that the compromise agreement may be validly
cancelled.
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30. PRYCE PROPERTIES VS. NOLASCO
PRYCE PROPERTIES CORP. (NOW PRYCE CORPORATION), PETITIONER, VS. NARCISO R.

NOLASCO, JR. RESPONDENT.
G.R. No. 203990 | August 24, 2020 | Second Division | Hernando, J.

Petition for Review on Certiorari under Rule 45 seeking to reverse and set aside the Decision and the
Resolution of the Court of Appeals, which affirmed with modifications the Decision of the Regional
Trial Court
FACTS
A complaint for recovery of a sum of money was filed by Narciso R. Nolasco, Jr. (Nolasco) against
Pryce Corporation, formerly Pryce Properties Corporation (Pryce) alleging that in 1995, he
purchased three lots located in Cagayan de Oro City from Pryce. He deposited a total amount of
P393,435.00 through check payments in favor of Pryce and the latter did not deliver to Nolasco the
copies of the lots' certificates of title and their sales agreement.
When he finally received the sales agreement, it contained unacceptable conditions to which he
conveyed his objections to Pryce. Since he had not yet signed the sales agreement, there was still no
meeting of the minds between him and Pryce and that despite demands for refund of his deposit
payments, Pryce failed to comply.
Pryce countered that Nolasco could not yet be issued certificates of title since their transaction was
not a contract of sale but a contract to sell. Nolasco was allegedly furnished a copy of the Contract to
Sell as early as November 8, 1995, which he signed and even requested for an amended Contract to
Sell to reflect a new amortization schedule. Nolasco, under Republic Act No. 6552 (RA 6552) or the
Maceda Law, was not entitled to a refund of his deposits since he failed to complete the payments
within the grace period provided by Pryce, resulting in their forfeiture and the rescission of the
contract to sell.
Finding that the sole issue for resolution is whether Pryce is liable to refund to Nolasco the amounts
he deposited plus interest, the RTC forwent with the trial and ordered the parties to submit their
respective memoranda.
The RTC ruled in favor of Nolasco. It found that there had been a perfected contract of sale between
Nolasco and Pryce pursuant to Article 1482 of the Civil Code. It also ruled that under RA 6552 or the
Maceda Law, Pryce can rescind the contract of sale for failure of Nolasco to pay at least two (2) years
of installments to Pryce. The latter, however, did not rescind the contract. As regards the issue of
refund of the payments he made to Pryce, the RTC declared Nolasco as entitled thereto.
The CA affirmed the RTC in part. The CA found that the contract entered into by Pryce and Nolasco
was a contract to sell. The CA nonetheless upheld Nolasco's entitlement to a refund, as Pryce did not
exercise the remedy of cancellation under RA 6552 and under equity considerations.
ISSUE
Whether or not Pryce properly rescinded the contract in accordance with RA 6552 and thus Nolasco
is not entitled to a refund – NO
RULING
The Realty Installment Buyer Protection Act, otherwise known as RA 6552 or the Maceda Law,
protects buyers of real estate on installment payments against onerous and oppressive conditions.
One of the legal features of RA 6552 is Section 4 thereof, which provides for the remedies of a
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defaulting buyer that has paid less than two years of installment amortizations for a purchase of real
property.
Section 4 of RA 6552 requires four (4) conditions before the seller may actually cancel the contract
thereunder: first, the defaulting buyer has paid less than two (2) years of installments; second, the
seller must give such defaulting buyer a sixty (60)-day grace period, reckoned from the date the
installment became due; third, if the buyer fails to
pay the installments due at the expiration of the said grace period, the seller must give the buyer a
notice of cancellation and/or a demand for rescission by notarial act; and fourth, the seller may
actually cancel the contract only after the lapse of thirty (30) days from the buyer's receipt of the said
notice of cancellation and/or demand for rescission by notarial act.
There was compliance with the first and second requisites when Pryce sent Nolasco, a defaulting
buyer whose payments did not amount to two years' worth of installments, its December 5, 1998
letter giving him sixty (60) days to make good on his obligation. Pryce, however, did not meet the last
two conditions. As properly determined by the CA, there was no notice of notarial rescission served
upon Nolasco. Necessarily, thirty (30) days could not have lapsed from a non-existent service of such
notice.
Rescission is an act or a deed, directly or impliedly done, where a contract is cancelled, annulled, or
abrogated by the parties, one of them, or by the court. An act or a deed of rescission is distinct and
separate from an allegation of rescission, an allegation being an assertion, declaration, or statement
of a party to an action, contained generally in an affidavit or a legal pleading, setting out what is yet
to be proven.
In this case, Pryce's Answer with Counterclaims cannot be deemed as a notarial rescission under RA
6552. Here, Pryce only alleged the fact of rescission in its Answer with Counterclaims without further
evidence that would adequately determine its truth. It is not the independent notarial rescission
contemplated by RA 6552. Also, the Answer with Counterclaims containing the alleged notice of
rescission to Nolasco had been filed more than four (4) months after the lapse of the sixty (60)-day
grace period. The more prudent action that Pryce should have undertaken was to send Nolasco an
actual and clear notice of rescission, executed separately from the Answer with Counterclaims and
served on February 6, 1999 at the earliest, which was the first day after the expiration of the grace
period for payment granted to Nolasco. Alternatively, Pryce could have even appended a separate
notice of rescission to the Answer with Counterclaims at the latest.
It has been held that in the absence of a lawful rescission of a contract governed by RA 6552, the same
remains valid and subsisting. We affirm the courts below in directing the refund of the deposit
payments made by Nolasco to Pryce. While this buyer's option to claim refund is not explicitly
mentioned in RA 6552, equity considerations have already filled up this legal vacuum. Court, finding
the provisions of RA 6552 applicable to the transaction, ordered the refund of the amounts actually
paid by the buyer, justifying the same with equitable reasons as laid out by relevant jurisprudence.
It bears mentioning, however, that RA 6552 grants the following rights to real property buyers on
installment upon default, whether or not he/she has paid two (2) years' worth of installment
payments, as contained in Section 6. The courts a quo left out the discussion of this option of the
defaulting buyer to pay advance installments or the full unpaid balance of the purchase price. Rightly
so, since Nolasco was firm in his choice to claim a refund by filing at the outset a case for recovery of
sum of money against Pryce.
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31. ZOMER DEVELOPMENT VS. COURT OF APPEALS
ZOMER DEVELOPMENT COMPANY, INC., PETITIONER, VS. SPECIAL TWENTIETH DIVISION OF

THE COURT OF APPEALS, CEBU CITY AND UNION BANK OF THE PHILIPPINES, RESPONDENTS.
G.R. No. 194461 | January 07, 2020 | En Banc | Leonen, J.

Petition for Mandamus which seeks to compel the Court of Appeals to rule on the constitutionality of
Section 473 of Republic Act No. 8791, or the General Banking Law of 2002
FACTS
Zomer Development, a domestic corporation, owned three parcels of land in Cebu City covered by TCTs.
The properties were mortgaged to International Exchange Bank as security for its loan.
When Zomer Development failed to pay its indebtedness, International Exchange Bank foreclosed on the
properties. A Notice of Extra-judicial Foreclosure Sale was posted and published informing the public that
the properties would be sold at an auction.
When the auction was conducted, International Exchange Bank emerged as the highest bidder. Thus, the
Sheriff issued to it Certificates of Sale on November 19, 2001. The Certificates of Sale provided for a period
of redemption of twelve months from registration, "or sooner and/or later, as provided for under
applicable laws."
On December 10, 2001, International Exchange Bank registered the Certificates of Sale in the Register of
Deeds. Consequently, Transfer Certificates of Title were issued in its name.
On February 18, 2002, Zomer Development filed a Complaint for Declaration of Nullity of Notice of Sale,
Certificate of Sale & TCTs and Declaration as Unconstitutional Sec. 47, RA No. 8791. It argued that Section
47 of Republic Act No. 8791, or the General Banking Law of 2002, violates its right to equal protection
since the law provides a shorter period for redemption of three (3) months or earlier to juridical entities
compared to the one (1) year redemption period given to natural persons. This discrimination, it argued,
gives "undue advantage to lenders who are non-banks."
The Regional Trial Court dismissed the Complaint. The Court of Appeals rendered a Decision dismissing
the appeal "without prejudice to appellant's filing of the appropriate case before the Supreme Court. It
held that "the case is novel and can be best resolved by the Supreme Court," since any pronouncement
may have "far reaching effects" on existing procedural rules like Supreme Court Circular No. 7-2002.
ISSUE
Whether or not Sec. 47, RA No. 8791 which provides for a shorter period for redemption of three months
or earlier to juridical entities, and one-year redemption period given to natural persons is violative of the
equal protection clause - NO
RULING
In Goldenway Merchandising, this Court squarely addressed the argument that Republic Act No. 8791,
Section 47 violated the equal protection clause when it provided a shorter redemption period for juridical
persons. This Court, in finding the argument unmeritorious, stated:
Petitioner's claim that Section 47 infringes the equal protection clause as it discriminates
mortgagors/property owners who are juridical persons is bereft of merit.
The equal protection clause is directed principally against undue favor and individual or
class privilege. It is not intended to prohibit legislation which is limited to the object to
which it is directed or by the territory in which it is to operate. It does not require absolute
equality, but merely that all persons be treated alike under like conditions both as to
67
privileges conferred and liabilities imposed. Equal protection permits of reasonable
classification. We have ruled that one class may be treated differently from another where
the groupings are based on reasonable and real distinctions. If classification is germane
to the purpose of the law, concerns all members of the class, and applies equally to present
and future conditions, the classification does not violate the equal protection guarantee.
We agree with the CA that the legislature clearly intended to shorten the period of redemption for juridical
persons whose properties were foreclosed and sold in accordance with the provisions of Act No. 3135.
The difference in the treatment of juridical persons and natural persons was based on the nature of the
properties foreclosed — whether these are used as residence, for which the more liberal one-year
redemption period is retained, or used for industrial or commercial purposes, in which case a shorter
term is deemed necessary to reduce the period of uncertainty in the ownership of property and enable
mortgagee- banks to dispose sooner of these acquired assets. It must be underscored that the General
Banking Law of 2000, crafted in the aftermath of the 1997 Southeast Asian financial crisis, sought to
reform the General Banking Act of 1949 by fashioning a legal framework for maintaining a safe and sound
banking system. In this context, the amendment introduced by Section 47 embodied one of such safe and
sound practices aimed at ensuring the solvency and liquidity of our banks. It cannot therefore be disputed
that the said provision amending the redemption period in Act 3135 was based on a reasonable
classification and germane to the purpose of the law.
While it is a given that redemption by property owners is looked upon with favor, it is equally true that
the right to redeem properties remains to be a statutory privilege. Redemption is by force of law, and the
purchaser at public auction is bound to accept it. Further, the right to redeem property sold as security
for the satisfaction of an unpaid obligation does not exist preternaturally. Neither is it predicated on
proprietary right, which, after the sale of the property on execution, leaves the judgment debtor and vests
in the purchaser. Instead, it is a bare statutory privilege to be exercised only by the persons named in the
statute.
In other words, a valid redemption of property must appropriately be based on the law which is the very
source of this substantive right. It is, therefore, necessary that compliance with the rules set forth by law
and jurisprudence should be shown in order to render validity to the exercise of this right. Hence, when
the Court is beckoned to rule on this validity, a hasty resort to elementary rules on construction proves
inadequate. Especially so, when there are deeper underpinnings involved, not only as to the right of the
owner to take back his property, but equally important, as to the right of the purchaser to acquire the
property after deficient compliance with statutory requirements, including the exercise of the right within
the period prescribed by law.
The Court cannot close its eyes and automatically rule in favor of the redemptioner at all times. The right
acquired by the purchaser at an execution sale is inchoate and does not become absolute until after the
expiration of the redemption period without the right of redemption having been exercised. “But inchoate
though it be, it is, like any other right, entitled to protection and must be respected until extinguished by
redemption." Suffice it to say, the liberal application of redemption laws in favor of the property owner is
not an austere solution to a controversy, where there are remarkable factors that lead to a more sound
and reasonable interpretation of the law.
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32. CJH DEVELOPMENT VS. ANICETO
CJH DEVELOPMENT CORPORATION, PETITIONER, VS. CORAZON D. ANICETO, RESPONDENT.


Petition for Review assailing the Decision and Resolution of the Court of Appeals, which reversed the
Regional Trial Court Decision
FACTS
Aniceto owned El Rancho Cafe and Restaurant, which then stood on Camp John Hay in Baguio City.
CJH Development had allowed her to use a junkyard within the vicinity, on which she built her
restaurant from October to December 2003.
Aniceto and CJH Development formally entered into a Lease Contract effective until November 30,
2004. When the lease expired, it was renewed on a monthly basis. On November 18, 2005, Aniceto
and CJH Development entered into another Lease Contract that would last until November 17, 2006.
Pertinently, under Article VI, Section 1 of the Lease Contract, all permanent improvements made by
Aniceto shall form an integral part of the premises and become CJH Development's property upon
the termination of the lease.
When the term of this Lease Contract lapsed, the parties amended it to extend for six more months,
or until May 17, 2007. Before the second lease expired, Aniceto asked for another extension from the
officer-in-charge of CJH Development. The request was denied. Nevertheless, El Rancho continued to
operate on a monthly basis, with Aniceto paying advance rentals up to February 28, 2008.
However, on January 30, 2008, officer wrote Aniceto, informing her to vacate the premises as it would
undergo land development. Aniceto was given until March 1, 2008 to remove all furniture,
equipment, and furnishing within the premises. Aniceto twice tried to convince to extend the lease,
reasoning that El Rancho would not get in the way of the land development. On both occasions, the
officer denied.
Aniceto filed a Complaint seeking to enjoin the closure and demolition of El Rancho. The Complaint was
lodged against CJH and its officers. The trial court issued a 72-hour TRO, directing CJH to cease and desist
from closing El Rancho. Eventually, however, it denied the application for the issuance of a writ of
preliminary injunction.
While Aniceto was seeking reconsideration of the denial, on May 1, 2008, El Rancho was demolished.
The case itself became a complaint for damages. CJH Development argued that Aniceto had no cause
of action because the lease had long expired. The monthly extension, it said, was only allowed
pursuant to the hold-over provision of the Lease Contract. It also maintained that the demolition was
legal and within its rights as owner of El Rancho's structure, citing Article VI, Section 1 of the Lease
Contract.
The trial court held that the demolition was illegal and may not be justified by the Lease Contract.
On appeal, the Court of Appeals, set aside the Regional Trial Court Decision. Relying on Article VI,
Section 1 of the Lease Contract, the Court of Appeals ruled that CJH Development was well within its
rights as owner to demolish the restaurant.
ISSUE
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Whether or not a contract may grant the lessor ownership over the permanent improvements
without reimbursement – NO
RULING
Article 1678 of the Civil Code provides the rule on improvements introduced by the lessee upon the
premises. It states:
ARTICLE 1678. If the lessee makes, in good faith, useful improvements which are
suitable to the use for which the lease is intended, without altering the form or
substance of the property leased, the lessor upon the termination of the lease shall
pay the lessee one-half of the value of the improvements at that time. Should the
lessor refuse to reimburse said amount, the lessee may remove the improvements,
even though the principal thing may suffer damage thereby. He shall not, however,
cause any more impairment upon the property leased than is necessary.
With regard to ornamental expenses, the lessee shall not be entitled to any
reimbursement, but he may remove the ornamental objects, provided no damage is
caused to the principal thing, and the lessor does not choose to retain them by paying
their value at the time the lease is extinguished.
In Land Bank of the Philippines v. AMS Farming Corporation, this Court explained that a lessee who
builds on the leased premises is treated differently from a builder in good faith. Unlike a lessee, a
builder in good faith believed that he or she owned the land. Under Articles 448 and 546 of the Civil
Code, the builder in good faith is granted the rights of retention and reimbursement for the necessary
and useful expenses spent on the improvements.
On the other hand, a lessee is conclusively presumed to know that he or she does not own the land.
If the lessee introduces improvements on the leased premises, the law only grants him or her the
right to remove these improvements, or be paid 50% of their value in case the lessor decides to retain.
Because the lessee is deemed to have known the nature of occupation and possession of the premises,
he or she is deemed to have introduced the improvements at his or her own risk. The lessee knows
that at some point, the life of the lease contract will end, and the lessor will eventually demand the
premises back.
Moreover, the reimbursement to the lessee is predicated on the lessor's choice to appropriate the
improvements introduced by the lessee. The lessee cannot compel the lessor to retain the
improvement or pay the reimbursement. The lessee may only remove the improvements if the lessor
refused to appropriate and reimburse.
Here, the last sentence of the Lease Contract's Article VI, Section 1 provides that CJH Development
does not have to reimburse Aniceto for her permanent improvements on the premises.
This outright violates Article 1678, which mandates the lessor to choose whether or not to
appropriate the improvement. If so, the lessee must be reimbursed half of its value; if not, the lessee
has the right to remove the improvements. Either way, the lessor cannot own the improvement
without paying the lessee. Hence, CJH Development cannot insist on a blanket provision that grants
it ownership over the structure of the restaurant. For this, the last sentence of Article VI, Section 1
must be struck down.
In any case, it appears that CJH Development decided not to appropriate and use the permanent
improvement introduced by Aniceto. Hence, it is not liable to reimburse Aniceto for the demolished
structures.
70
33. ETERNAL GARDENS VS. PERLAS
ETERNAL GARDENS MEMORIAL PARK CORP., PETITIONER, VS. KATHERINE JUNETTE B.

PERLAS, KATHRYN JACQUELYN F. BOISER, AND SPOUSES CLAUDIO AND ROSITA BONIFACIO,
RESPONDENTS.
G.R. No. 236126 | September 07, 2020 | Second Division | Delos Santos, J.

Petition for Review on Certiorari
FACTS
Eternal Gardens is an entity engaged in developing memorial parks and offers an array of memorial
care products and services. Respondents Boiser siblings are two of the five children of Narciso and
Zenaida Boiser.
During her lifetime, Zenaida purchased from Eternal Gardens 24 burial lots (subject property)
covered by Certificate of Ownership issued on June 7, 1985. Zenaida died on September 13, 1999.
Sometime in 2000, Boiser siblings found out that the subject property were sold to Spouses Bonifacio
by Kathryn's former live-in partner, Michael Magpantay. This prompted the filing of a Complaint for
nullification of contract by Boiser siblings against Magpantay, Spouses Bonifacio, and Eternal
Gardens before the RTC.
Siblings averred that shortly after their mother's death, Kathryn instructed Magpantay to inquire
from Eternal Gardens the status of the subject property. She was then informed by Magpantay that
Zenaida had sold the subject property to a person who further sold them to another.
Upon conducting their own investigation with the employees of Eternal Gardens, Boiser siblings
learned that the subject property were sold by Zenaida to Magpantay in February 2000. The latter
then sold the lots to Spouses Bonifacio. Boiser siblings made several attempts to communicate with
Eternal Gardens to clarify the situation and requested to furnish them the documents evidencing the
sale, but to no avail. Siblings contended that Zenaida could have not sold the subject property to
Magpantay in 2000 because she was already dead at the time of the transaction. They also alleged
that Eternal Gardens conspired with Magpantay given the circumstances.
Eternal Gardens asseverated that Boiser siblings had no cause of action against it as Kathryn herself,
together with Magpantay, submitted the Affidavit of Loss with an Undertaking purported to be signed
by Zenaida stating that the title to the subject property was lost. It also claimed that Kathryn had
knowledge of the Deed of Assignment covering the subject property executed in favor of Magpantay.
Finally, Eternal Gardens insisted that the documents submitted to it being all public documents, it is
not duty-bound to inquire beyond what are stated therein. Its duty to issue a certificate of ownership,
according to it, becomes ministerial upon submission of the requirements for a valid transfer.
Spouses Bonifacio contended that they are the absolute owners and buyers in good faith of the subject
property as evidenced by a Certificate of Ownership. They asseverated that in April 2000, Magpantay
executed a Deed of Assignment in their favor transferring his rights. Upon full payment of the
purchase price of the subject property, employees of Eternal Gardens, issued an Acknowledgment
Receipt. A certificate of ownership was subsequently issued in their names
RTC held Eternal Gardens liable to return the amount paid by Spouses Bonifacio less the value of the
lot actually used as burial site for their grandchild. It brushed aside Eternal Gardens' claim that it did
not authorize or know the participation of its employees in the transaction between Magpantay and
Spouses Bonifacio. By issuing a certificate of ownership in favor of Spouses Bonifacio, the RTC ruled
that Eternal Gardens ratified its employees' actions.
The CA partially granted the appeal. It agreed with the RTC's finding that the deed of assignment did
not transfer any right to Magpantay as it was executed after the death of Zenaida. It, however, opined
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that Spouses Bonifacio cannot be faulted when they relied on the certificate of ownership registered
in the name of Magpantay as it did not contain any defect on its face which would warrant to
investigate on the seller's ownership. Thus, the CA upheld the ruling of the RTC on Eternal Gardens'
liability to return the amount paid by Spouses Bonifacio after deducting the value of the lot used to
bury their grandchild. It, however, also found Magpantay and Kathryn solidarity liable with Eternal
Gardens as their participation was indispensable for the subsequent transaction involving Spouses
Bonifacio.
ISSUE
Whether or not Eternal Gardens shall be made liable by virtue of agency by estoppel- YES
RULING
Eternal Gardens reiterated in its Reply that it is not liable because Balbin and Resoles acted beyond
the authority given to them by becoming agents of Magpantay in selling the subject property to
Spouses Bonifacio. Eternal Gardens even cited Article 1897 of the Civil Code, which provides:
Art. 1897. The agent who acts as such is not personally liable to the party with whom
he contracts, unless he expressly binds himself or exceeds the limits of his authority
without giving such party sufficient notice of his powers.
It should be emphasized that the principle of agency, specifically Article 1897, finds no application in
this case. As correctly found by the CA, Balbin and Resoles were not authorized to sell the subject
property in the name of Magpantay. A special power of attorney is required before an agent can enter
into any contract on behalf of the principal where the ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable consideration. Here, there was none. Both the RTC and
the CA found that no such authority was given by Magpantay to sell the subject lots to Spouses
Bonifacio.
This notwithstanding, Eternal Gardens still cannot be absolved from liability to Spouses Bonifacio. It
can no longer deny the authority of its employees, Balbin and Resoles, in transacting with Spouses
Bonifacio under the doctrine of apparent authority. In Engineering Geoscience, Inc. v. Philippine
Savings Bank, the Court explained:
Under this doctrine, acts and contracts of the agent, as are within the apparent scope
of the authority conferred on him, although no actual authority to do such acts or to
make such contracts has been conferred, bind the principal. Furthermore, the
principal's liability is limited only to third persons who have been led reasonably to
believe by the conduct of the principal that such actual authority exists, although none
was actually given.
In this case, as aptly concluded by the CA, by issuing the certificate of ownership to Spouses Bonifacio,
Eternal Gardens acknowledged the authority of its employees to transact business on its behalf. It
can no longer renege on its duty when it knowingly accepted the documents accomplished by its own
employees.
The rule on apparent authority is based on the principle of estoppel. Through estoppel an admission
or representation is rendered conclusive upon the person making it, and cannot be denied or
disproved as against the person relying thereon. Thus, if a corporation knowingly permits one of its
officers or any other agent to act within the scope of an apparent authority, it holds him out to the
public as possessing the power to do those acts; and the corporation will, as against anyone who has
in good faith dealt with it through such agent, be estopped from denying the agent's authority. In this
light, Spouses Bonifacio cannot be blamed for believing that Balbin and Resoles had the authority to
transact for and on behalf of Eternal Gardens. Consequently, Eternal Gardens is estopped from
denying Balbin and Resoles' authority.
72
34. SANTIAGO VS. SPOUSES GARCIA
MERIAN B. SANTIAGO, PETITIONER, VS. SPOUSES EDNA L. GARCIA AND BAYANI GARCIA,
RESPONDENTS.
G.R. No. 228356 | March 09, 2020 | First Division | Reyes, J. Jr., J.
NATURE OF THE CASE

Petition for Review on Certiorari assailing the Decision and Resolution of the Court of Appeals ruling
that the contractual relation between the parties is one of investment and, as such, entails risk on the
part of the petitioner as investor.
FACTS
In November 2000, petitioner Merian was enticed by respondent Edna to invest money in the latter's
lending business with a promise of a high return in terms of monthly interest ranging from 5% to
8%. The parties agreed that monthly interest shall be remitted by Edna to Merian and that the
principal amount invested shall be returned to Merian upon demand. Neither of the parties, however,
presented evidence to show that such agreement was reduced in writing.
Merian began investing several amounts from November 15, 2000 to June 30, 2003, reaching an
aggregate amount of P1,569,000.00. Edna had remitted to Merian the amount of P877,000.00 as
interest on said amounts. However, in December 2003, Edna defaulted in remitting to Merian the
interest due from said investments. Despite demands, Edna failed to remit the interest to Merian.
Consequently, Merian, through her lawyer, sent a letter demanding for the return of Merian's total
investment. Edna agreed to pay the principal amount invested on a "pay when able" basis. Edna paid
Merian P15,000.00 in cash and P5,000.00 in gift cheque, for a total of P20,000.00. Merian then signed
a receipt prepared by Edna wherein she acknowledged that the P20,000.00 constitutes partial
payment for the principal amount of P1,569,000.00.
Merian learned that several other persons were likewise taken advantage of by Edna so she filed a
complaint for sum of money with prayer for the issuance of a writ of preliminary attachment against
Spouses Garcia. The spouses sought for the dismissal of the complaint for lack of cause of action since
the amounts given by Merian were investments, not loans.
The RTC rendered its decision finding that a partnership was formed between Merian and Edna – the
former as capitalist partner and the latter as industrial partner.
The CA disagreed with the RTC that a partnership was formed. Nevertheless, the CA agreed with the
RTC that the complaint lacked cause of action as Merian was without legal right to recover her
investment in case of losses.
ISSUE
Whether or not a partnership has been formed between Merian and Edna - NO
RULING
There is merit in the petition.
The Court cannot subscribe to the view that Merian and Edna formed a partnership. By the contract
of partnership two or more persons bind themselves to contribute money, property, or industry to a
common fund, with the intention of dividing the profits among themselves. Partnership is essentially
a result of an agreement or a contract, either express or implied, oral or in writing, between two or
more persons. Here, there was neither allegation nor proof that Merian and Edna agreed to enter into
a partnership for purposes of carrying out the lending business.
73
There was likewise no agreement for the sharing of profits, only that Merian expects to receive
remittance of monthly interest from the amount she invested. At any rate, the receipt by a person of
a share of the profits, or of a payment of a contingent amount in case of profits earned, is not a
conclusive evidence of partnership. Article (Art.) 1769(3) of the Civil Code provides that "the sharing
of gross returns does not of itself establish a partnership, whether or not the persons sharing them
have a joint or common right or interest in any property from which the returns are derived". There
must be an unmistakable intention to form a partnership which is lacking in this case. Most
importantly, the facts do not disclose that there is mutual agency between Merian and Edna, that is,
neither party alleged that she can bind by her acts the other, and can be bound by the acts of the other
in the ordinary course of business.
74
35. CATAPANG VS. LIPA BANK
REDENTOR CATAPANG AND CASIANA CATAPANG GARBIN, PETITIONERS, V. LIPA BANK,

RESPONDENT
G.R. No. 240645 | January 27, 2020 | First Division | Caguioa, J.

Petition for Review on Certiorari under Rule 45 by petitioners assailing the Decision and Resolution
of the Court of Appeals
FACTS
Petitioner Redentor and his aunt, petitioner Casiana, alleged that the former's parents, the Spouses
Alejandro and Rosalinda Catapang (Sps. Catapang), obtained a loan from respondent Lipa Bank. The
loan was secured by a Deed of Real Estate Mortgage over the Sps. Catapang's property located at
Barrio Namuco, Rosario, Batangas.
Catapang failed to pay their loan obligation; thus, the mortgage was foreclosed. They also failed to
exercise their right of redemption. Thereafter, the aforesaid property was consolidated in the name
of respondent and a new title was issued in its favor.
Subsequently, the Sps. Catapang, who were allowed by respondent to stay in the property, offered to
repurchase the property. However, respondent refused to negotiate with them. Instead, it offered to
sell the property to petitioner Redentor, for P1.5 Million. Respondent then executed a Sales Contract
with Redentor, which provided that a downpayment of P400,000 should be paid by Redentor upon
the signing and execution of the Sales Contract.
However, out of the required P400,000 downpayment, only the amount of P200,000 was paid by
Redentor. In order to secure the complete amount of downpayment, upon the advice of respondent
loan division head, Mr. Damian, Redentor supposedly secured a loan of P270,000.00 with respondent.
As collateral for the said loan, Redentor presented and submitted to respondent the owner's
duplicate copy of a TCT covering a certain parcel of land registered in the name of his aunts Gregoria
Catapang and petitioner Casiana (the subject property).
Allegedly, without Redentor's knowledge and consent, respondent successfully convinced petitioner
Casiana to sign a Promissory Note for a P270,000.00 loan and a Deed of Real Estate Mortgage over
the subject property for P1,440,000.00.
Petitioners Redentor and Casiana allege that the Promissory Note and Deed of Real Estate Mortgage
executed by the latter supposedly in relation to the Sales Contract were procured with fraud as
petitioner Casiana had nothing to do with the repurchase of the subject property.
Hence, petitioners filed a Complaint before RTC of Rosario, Batangas, praying that the Promissory
Note and the Deed of Real Estate Mortgage be declared null and void, as well as the Sales Contract,
arguing that it was dependent on the supposedly null and void Promissory Note and Deed of Real
Estate Mortgage.
On the part of respondent, it alleged that (1) Redentor voluntarily entered into a Sales Contract with
the former; (2) it was Redentor who wanted to secure a loan in order to fully pay the downpayment;
(3) it was Redento and Casiana, who voluntarily and willingly submitted to respondent the owner's
duplicate copy so that the subject property could be used as collateral to secure the loan.
75
With respect to the Promissory Note for P270,000 and Deed of Real Estate Mortgage, Lipa Bank
claimed that such transactions were entered into by Casiana as transactions separate from the Sales
Contract.
The RTC held that the Sales Contract entered into by petitioner Redentor and respondent Lipa Bank
is valid and effective. It found that the Promissory Note and Real Estate Mortgage signed by plaintiff
Casiana Catapang are null and void and ineffective; but the CA is not convinced. Hence, this Petition.
ISSUE
Whether or not the real estate mortgage was entered into without consent thereby invalidating the
contract of loan - YES
RULING
The absence of a meeting of the minds makes a contract null and void.
A contract is a meeting of minds between two persons whereby one binds himself, with respect to
the other, to give something or to render some service. There can be no contract unless all of the
following requisites concur: (1) consent of the contracting parties; (2) object certain which is the
subject matter of the contract; and (3) the cause of the obligation which is established. When one of
the elements is wanting, no contract can be perfected.
Hence, where the contracting parties do not agree as to the subject matter of the contract, consent is
absent, making the contract null and void.
Applying the foregoing to the instant case, the contract of loan and its accessory contract of mortgage
as contained in the Promissory Note and Deed of Real Estate Mortgage were entered into without the
consent of petitioner Casiana and were absolutely simulated by respondent Lipa Bank, making the
same void ab initio. The evidence revealed that when respondent Lipa Bank's representative asked
petitioner Casiana to sign the aforesaid documents, he openly misrepresented the very substance,
tenor, and purpose of these documents, taking advantage of petitioner Casiana's lack of education
and failure to understand English. This establishes the failure to agree as to the subject matter of the
aforesaid documents rendering the Promissory Note and Deed of Real Estate Mortgage null and void.
With respect to the Promissory Note, Article 1332 of the Civil Code provides that when one of the
parties is unable to read, or if the contract is in a language not understood by him, and mistake or
fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully
explained to the former.
Applying the foregoing to the instant case, the Court concurs with the factual finding of the RTC that
petitioner Casiana is not capable of understanding English and that she did not understand the words
in the Promissory Note and Deed of Real Estate Mortgage as they were in the English language. The
Court finds the RTC's factual finding supported by the evidence on record.
76
36. FALLARME VS. PAGEDPED
LUZ V. FALLARME, PETITIONER, VS. ROMEO PAGEDPED, RESPONDENT.

G.R. No. 247229 | September 03, 2020 | First Division | Reyes, J. JR., J.

Petition for review on certiorari seeking the reversal of the Decision and the Resolution of the Court
of Appeals which granted the appeal and reversed the ruling of the Regional Trial Court
FACTS
In 1999, the Avilas obtained a P200,000.00 loan from Romeo Pagedped (Pagedped) secured by a real
estate mortgage (REM) over the property. The Avilas delivered to Pagedped the owner's duplicate
copy of TCT No. T-61200, and the REM was annotated on the title. Upon the failure of the Avilas to
settle their obligation despite repeated demands, Pagedped judicially foreclosed the REM and the
property was sold at a public auction with Pagedped emerging as the highest bidder. The Sheriff's
Certificate of Sale was registered and entered with the Register of Deedsand annotated on TCT No.
T-61200, as Entry No. 6809-36-178. After a year, Pagedped consolidated his ownership over the
parcel of land and was issued TCT No. T-91349 over the same, thereby cancelling TCT No. T-61200.
All the annotations on TCT No. T-61200 were carried over to TCT No. T-91349 when Pagedped
discovered that several annotations were made on TCT No. T-61200 in the name of Fallarme.
Fallarme, on the other hand, instituted a case against the Avilas and a Notice of Attachment and later
a Notice of Levy upon Realty were issued by the court involving one-half portion of the subject parcel
of land. Subsequently, Fallarme caused the sale at public auction of the said portion. At the public
auction, Fallarme emerged as the highest bidder, for which reason, she was issued a Sheriff's
Certificate of Sale.
In 2010, Pagedped filed a petition for the cancellation of all annotations appearing on TCT No. T-
91349 alleging that he was surprised to discover that a Notice of Attachment dated April 4, 2003 and
a Notice of Levy upon Realty in 2005 by Sheriff Landingin involving the case of Fallarme were
annotated at the back of his TCT No. T-91349, and that thereafter a Sheriff's Certificate of Sale was
issued by Sheriff Landingin in favor of Fallarme and was also registered and entered with the Office
of the Register of Deeds and annotated on the same title. Pagedped was neither notified nor
impleaded as a party to the foreclosure proceedings initiated by Fallarme, even though the Deed of
REM executed in his favor was entered and annotated earlier than Fallarme's. He alleged that
Fallarme knew of the encumbrance in his favor as appearing in the title, yet she failed to notify him
of her foreclosure to his damage and prejudice.
The RTC granted Pagedped's petition and the Register of Deeds of Baguio City was directed to cancel
all entries mentioned therein. The CA held that the RTC correctly held that the encumbrances in favor
of Fallarme are inferior to that of Pagedped. This is because any subsequent lien annotated at the
back of a certificate of title cannot, in any way, prejudice a mortgage previously registered even if the
sale took place after the annotation of the subsequent lien or encumbrance.
Meanwhile, Fallarme sent Pagedped a letter saying that the judgment in the case to judicially
foreclose the REM is ineffective to her since she was not made a party to said case. Pagedped refused
the offer to redeem 1/2 portion of the property which prompted Fallarme to file a complaint for
redemption and consignation before the RTC of Baguio City, Branch 7 which ruled in favor of
Fallarme and held that since she was not joined as a party in the case instituted by Pagedped for the
judicial foreclosure of real estate mortgage constituted upon the subject land, her right to redeem the
the subject portion of the property thereof as a subordinate lien holder remained unforeclosed and
unaffected.
77
Pagedped argued that he was not notified of the notices of attachment and levy annotated on the copy
of TCT No. T-61200 on file with the Office of the Register of Deeds, thus, such annotations were not
binding on him. This also justifies why Fallarme was not impleaded in the judicial foreclosure of real
estate mortgage which he instituted against the Avilas. In addition, Fallarme cannot demand for
equity of redemption as she was neither the mortgagor nor a transferee of such mortgagor. She also
failed to exercise her equity of redemption within a reasonable time.
The CA held that since what was involved in this case was a judicial foreclosure of mortgage, there is
only equity of redemption in accordance with Rule 68 of the Rules of Court. When Fallarme purchased
the 1/2 portion of the subject parcel of land at the execution sale, she acquired the same subject to
the encumbrance (real estate mortgage constituted in favor of Pagedped) annotated on TCT No. T-
61200. The equity of redemption which Fallarme acquired over the l/2 portion of the subject land
subsequent to the real estate mortgage in favor of Pagedped may be divested or barred only by
making Fallarme a party to the proceedings to foreclose. The CA held that for failure of Fallarme to
seasonably invoke her equity of redemption, she is precluded from doing so by reason of estoppel.
ISSUE
Whether or not Fallarme can invoke her equity of redemption by reason of estoppel – YES
RULING
While redemption is looked upon with favor, it is equally true that the right to redeem properties
remains to be a statutory privilege. Redemption is by force of law, and the purchaser at the public
auction is bound to accept it. The right to redeem property sold as security for the satisfaction of an
unpaid obligation does not exist preternaturally neither is it predicated on proprietary right, which
after the sale of the property on execution, leaves the judgment debtor and vests in the purchaser. It
is a bare statutory privilege to be exercised only by the persons named in the statute. A valid
redemption of property must be appropriately based on the law which is the very source of this
substantive right. It is, therefore, necessary that compliance with the rules set forth by law and
jurisprudence should be shown in order to render validity to the exercise of this right.
Failure of the mortgagee to join a subordinate lien holder as defendant in the foreclosure proceeding
does not nullify the foreclosure proceeding, but kept alive the equity of redemption acquired by said
junior lien-holder. The equity of redemption also does not constitute as a bar to the registration of
the property in the name of the mortgagee. Registration may be granted in the name of the mortgagee
but subject to the subordinate lien holders' equity of redemption, which should be exercised within
90 days from the date the decision becomes final. Such registration is but a necessary consequence
of the execution of the final deed of sale in the foreclosure proceedings.
Case law has clarified that if the subsequent or junior lien-holders are not joined in the foreclosure
action, the judgment in the mortgagor's favor is ineffective as to them. What they retain is what is
known as the "unforeclosed equity of redemption" and a separate foreclosure proceeding should be
brought to require them to redeem from the first mortgagee, or the party acquiring title to the
mortgaged property at the foreclosure sale, within 90 days, under penalty of losing that prerogative
to redeem.
78
37. PS BANK VS. SAKATA
PHILIPPINE SAVINGS BANK, PETITIONER, V. MARIA CECILIA SAKATA, RESPONDENT.

G.R. No. 229450 | June 17, 2020 | Third Division | Leonen, J.

Petiiton for Review on Certiorari assails the Decision and Resolution of the Court of which affirmed
the Decision of the Regional Trial Court
FACTS
Respondent opened savings account and current account with the PS. Stamped on the Deposit
Account Information and Specimen Signature Card for her savings account were the words: "With
Instruction to transfer funds from savings account to current account.
Sakata left for Osaka, Japan to work. While in Japan, she remitted cash to her PS Bank savings account,
and issued checks for the support of her children and the amortization of a house and lot she
purchased. Sakata went back to the Philippines and went to PS Bank to close her checking account
and surrender unused checks. When Sakata had her passbook updated, she noticed that the deposit
and withdrawal entries were lumped in one entry instead of having a per transaction entry. This
prompted Sakata to request for a copy of the itemized transaction entries as she had trouble verifying
the bank transactions. However, PS Bank denied her requests.
Upon updating her savings account, Sakata was surprised to find out that instead of P1,000,000.00,
she only had a remaining balance of P391.00 and discovered that there was a deposit of
P4,488,197.01 and a withdrawal of P4,751.112.42 . Sakata informed the teller that she could not have
made those transactions as she was in Japan during that time, but she was only asked to return to the
bank. Sakata talked to the PS Bank branch manager who instructed her to write a letter requesting
for specimen signature cards for her savings and current accounts, statement of account for her
current account, printout of her passbook, and the original checks which were encashed and paid by
the bank.
Upon examination of the documents, Sakata found that there were 25 checks debited from her
account which she did not issue or sign. She claimed that she never possessed a checkbook bearing
the serial numbers of the 25 checks, and the entries and signatures on them were all forged. Upon
demand, PS Bank refused to give Sakata the original copies of the 25 checks.
Sakata, through her counsel, made a formal request asking PS Bank to hand over the 25 checks and
the specimen signature cards. A demand letter was also sent to PS Bank on the same date asking them
to recredit P1,087,500.000 to Sakata's account representing the amount withdrawn through the
forged checks plus interest.
PS Bank failed to re-credit the amount prompting Sakata to file a Civil Case for Sum of Money and
Damages.
PS Bank insisted that Sakata authorized her mother, Gemma Bartolome, to request and receive two
additional checkbooks and claimed the 25 checks were validly encashed as they were verified by
their bank personnel.
The RTC ruled in favor of Sakata and ordered PS Bank to pay Sakata and that PS Bank should shoulder
the loss incurred by Sakata on account of forgery because it failed to observe the due diligence
required of banking institutions. The CA affirmed said decision.
ISSUE
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Whether or not PS Bank is negligent for failure to ascertain the genuineness of the signature of
respondent – YES
RULING
Banking institutions are imbued with public interest, and the trust and confidence of the public to
them are of paramount importance. As such, they are expected to exercise the highest degree of
diligence, and high standards of integrity and performance. By the nature of its functions, a bank is
under obligation to treat the accounts of its depositors with meticulous care, always having in mind
the fiduciary nature of their relationship. Thus, the prime duty of a bank is to ascertain the
genuineness of the signature of the drawer or the depositor on the check being encashed, with
reasonable business prudence.
On the other hand, negligence is the omission to do something which a reasonable man, guided by
those considerations that ordinarily regulate the conduct of human affairs, would do, or doing of
something which a prudent and reasonable man would not do. The presumption remains that every
person takes ordinary care of his or her concerns, and that the ordinary course of business has been
followed.
A bank is bound to know the signatures of its customers and if it pays a forged check, it must be
considered as making the payment out of its own funds, and cannot ordinarily charge the amount so
paid to the account of the depositor whose name was forged. Being negligent in failing to detect the
forgery, petitioner bears the loss.
In this case, even assuming that her mother indeed presented the questioned checks while
respondent was in Japan, she cannot be held negligent in entrusting the same to her mother. Having
established the forgery of respondent's signatures and petitioner's negligence in failing to detect the
forgery on the checks, the checks are wholly inoperative. Thus, only petitioner is liable for making
payments on the forged checks.
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38. ALESON SHIPPING VS. CGU INTERNATIONAL
ALESON SHIPPING LINES, PETITIONER, VS. CGU INTERNATIONAL INS. PLC. AND CANDADO
SHIPPING LINES, INC., RESPONDENTS.

Petition for review assailing the Decision and Resolution of the Court of Appeals which held Aleson
Shipping Lines, Inc. liable for the damages resulting from a vessel collision.
FACTS
Candano Shipping Lines, Inc. (Candano Shipping) signed a time charter agreement with Apo Cement
Corporation (Apo Cement) over the former's vessel, M/V Romeo. The agreement was executed for
the delivery of Apo Cement's cargo consisting of cement from Cebu to Albay. The cargo was insured
with CGU International Insurance (CGU Insurance). On July 14, 2002, at around 12 midnight, M/V
Romeo was on its way out of the pier in Apo channel when it collided with M/V Aleson Carrier 5 (M/V
Aleson), which was owned by Aleson Shipping. M/V Aleson's front hull hit the side of M/V Romeo. As
a result, a gaping hole in the mid-section of M/V Romeo caused it to instantly sink, taking with it the
bags of cement worth P3,427,500.
Apo Cement demanded payment from Candano Shipping and Aleson Shipping, but to no avail. Hence,
it made an insurance claim with CGU Insurance, which was granted then CGU filed a case against
Candano Shipping and Aleson Shipping claiming for damages. Aleson Shipping denied liability and
asserted that only Candano Shipping should be held liable because the latter's vessel, M/V Romeo,
was at fault in the collision. On the other hand, its officers and crew at M/V Aleson have exercised
diligence and care to avoid the incident.
Meanwhile, Candano Shipping maintained that M/V Romeo was seaworthy and that it exercised
extraordinary diligence in the care and custody of the cargo, and in the operation of the vessel. It
blamed Aleson Shipping for the incident, claiming that Aleson Shipping was careless in command of
M/V Aleson Carrier 5. It further, argued that the complaint should be dismissed, because CGU
Insurance failed to observe the arbitration clause under the time charter.
CGU Insurance's surveyor and investigator, Lopez, testified that based on his interviews with the
Chief Engineer of M/V Romeo and the stevedores and supervisor of the port, M/V Aleson hit and
caused an opening at the mid-section of M/V Romeo. Lopez found that the port authority instructed
M/V Aleson to wait until M/V Romeo has cleared the last buoy, but M/V Aleson still proceeded to
enter the pier.
Captain Cabeltes of M/V Aleson testified for Aleson Shipping and acknowledged that the Apo channel
cannot accommodate two (2) vessels at a time. When M/V Aleson was about to enter the pier, he
admitted that he failed to verify from the radio operator whether it can proceed to enter the pier. He
merely relied on the message relayed to him by a crew that M/V Aleson must "standby for proceeding
to port."
The RTC held that Aleson Shipping solely liable for the collision. It ruled that under Article 1733 of
the New Civil Code, Aleson Shipping and Candano Shipping are bound to observe extraordinary
diligence as common carriers. If there was loss, destruction, or deterioration of the goods it carries,
common carriers are presumed responsible, unless they can prove that they observed extraordinary
diligence.
The CA further held that it found no strong and cogent reason to depart from the conclusions and
findings of the trial court. It ruled that the evidence defeats Aleson Shipping's arguments. As the
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records bare, the collision was due to the fault of M/V Aleson's Captain. Despite being informed that
M/V Romeo was loading at the pier, M/V Aleson still proceeded to enter. Captain Cabeltes likewise
failed to blow its horn to alert M/V Romeo.
Petitioner, on the other hand claims that respondent CGU Insurance's action against it is based on
maritime tort governed by the Code of Commerce. It follows that there can be no presumption of
negligence against petitioner. It is not a common carrier under a contract of carriage which must
exercise extraordinary diligence. Moreover, the doctrine of last clear chance will not then be
applicable in this case, because under Article 827 of the Code of Commerce, if both vessels may be
blamed, both shall be jointly responsible for the damages. Petitioner further claims that respondent
Candano Shipping was solely at fault for the collision which was due to the error and negligence of
its officers and crew. On the other hand, petitioner asserts that it exercised ordinary diligence—the
degree of diligence demanded from it under the Code of Commerce.
ISSUE
Whether or not the petitioner exercised the degree of diligence required – NO
RULING
A vessel, functioning as a common carrier, may be held liable for damages under Article 1759 of the
Civil Code. It states which states that common carriers are liable for the death of or injuries to
passengers through the negligence or wilful acts of the former's employees, although such employees
may have acted beyond the scope of their authority or in violation of the orders of the common
carriers. This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees. The high
degree of diligence exacted by the law creates a presumption against common carriers when goods
are lost, destroyed or deteriorated. To overcome this presumption, common carriers must prove that
they exercised extraordinary diligence in the handling and transportation of the goods.
In cases where cargos are lost, destroyed, or deteriorated, an action based on the contract of carriage
may be filed against the shipowner of the vessel based on Civil Code provisions on common carrrier.
Similarly, in cases of damages resulting from maritime collision, the Civil Code provisions on common
carrier are applicable if the cause of action is based on contract of carriage. However, if the cause of
action is based on maritime tort, the provisions of the Code of Commerce are applicable. An action
based on quasi-delict resulting from maritime collision is not specifically regulated by the Civil Code,
but by the Code of Commerce. Thus, if the cause of action is based on quasi-delict and not on contract,
the rules provided by the Code of Commerce applies.
In this case, the cause of action of respondent CGU Insurance against petitioner is not based on the
time charter but on tort. Petitioner is not a common carrier with respect to any of the parties.
Accordingly, the applicable provisions are found in Articles 826 and 827 of the Code of Commerce.
To be cleared of liability under these provisions, a vessel must show that it exercised ordinary
diligence. This level of diligence is the diligence which "an ordinary prudent man would exercise with
regard to his own property.
Applying this standard to petitioner, this Court finds that it failed to observe the diligence by the law.
Based on the testimony of its own witness, M/V Aleson was recklessly operated. Captain Cabeltes
admitted that M/V Romeo was still in the pier when M/V Aleson was about to enter the Apo channel.
Despite knowledge of this information, Captain Cabeltes failed to act with caution. He himself
declared that he was informed by the pier operator to standby and to not enter the wharf yet, but it
still proceeded.
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39. GUERRERO VS. PHIL. PHOENIX SURETY
VICENTE T. GUERRERO, PETITIONER, VS. PHIL. PHOENIX SURETY& INSURANCE, INC.,

RESPONDENT
G.R. No. 223178 | December 9, 2020 | First Division | Carandang, J.
NATURE OF THE CASE

Petition for Review on Certiorari assailing the Decision of the Court of Appeals which affirmed the
Regional Trial Court's Decision ordering petitioner Guerrero and his co-defendant, Cordero, to pay
respondent Phil. Phoenix Surety & Insurance, Inc. the losses incurred by Phoenix, attorney's fees, and
cost of suit.
FACTS
An Isuzu Sportivo vehicle (Isuzu) owned by Gaticales figured in a vehicular accident along the
National Highway, Barangay Gines, Zarraga, Iloilo, with Guerrero's Chevrolet pick-up truck
(Chevrolet). At the time, the Chevrolet was driven by Cordero. It was found that Guerrero's Chevrolet
overlapped the center line of the highway, encroaching the lane occupied by the Isuzu (which was
moving in the opposite direction) and resulting in a head-on collision between the two vehicles.
Gaticales then filed an own damage claim with Phoenix — a corporation engaged in non-life
insurance where Gaticales had the Isuzu insured.
Phoenix averred that the accident could have been avoided if Cordero exercised due care in driving
the Chevrolet and if Guerrero exercised the required diligence in supervising Cordero as Cordero's
employer. Phoenix thus sought to have Guerrero solidarily liable with Cordero for the
abovementioned amounts.
In a Decision dated May 6, 2013, the RTC granted Phoenix's complaint and declared Guerrero and
Cordero solidarily liable to Phoenix,
Using the principle of res ipsa loquitur, the trial court concluded that Cordero and Guerrero were
solidarily liable because the accident was due to Cordero's negligent driving of Guerrero's Chevrolet.
The RTC declared that: (1) Guerrero's Chevrolet hit the front left portion of Gaticales' Isuzu because
of Cordero's negligence (as shown by the police report that the Chevrolet overlapped to the center
line of the highway and that Cordero immediately fled thescene after the accident); (2) the Chevrolet
was under the exclusive control of Cordero; and (3) Gaticales is not guilty of contributory negligence.
In his Motion for Reconsideration, Guerrero alleged that the RTC improperly applied the doctrine of
res ipsa loquitur because none of the requisites for the doctrine's application are present.
In its Decision dated June 23, 2015, the appellate court affirmed the findings of the RTC. The appellate
court held that the requirements for the operation of the said doctrine were met, i.e.,(1) the accident
is of a kind which ordinarily does not occur in the absence of someone's negligence; (2) it is caused
by an instrumentality within the exclusive control of Cordero – the negligent party as pointed out by
Phoenix; and (3) there is no possibility of contributory negligence on the part of Gaticales. Coupled
with Cordero's act of fleeing the scene of the accident, Cordero and Guerrero (as Cordero's employer)
were found liable to Phoenix and Gaticales for the amounts previously awarded by the trial court.
ISSUE
Whether or not the plaintiff Phoenix sufficiently created a presumption of negligence through the
principle of res ipsa loquitur – NO
RULING
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Phoenix's failure to properly present the Certification does not extinguish any doubts on the
genuineness of the said Certification. With its inadmissibility, the lower courts erred in assigning any
probative value to the Certification. Therefore, the Certification cannot be used as basis for applying
the doctrine of res ipsa loquitur. This Court is now left to determine whether the pictures Phoenix
presented during trial will suffice to prove Cordero's negligence under the principle of res ipsa
loquitur. The pictures presented by Phoenix are likewise inadmissible in evidence for Phoenix's its
failure to prove its due execution and authenticity.
Therefore, It cannot be presumed that (1) the Chevrolet was the instrumentality that caused the
accident; (2) Gaticales was the only injured party; and (3) Gaticales was not guilty of any contributory
negligence.
84
40. BPI VS. CENTRAL BANK
BANK OF THE PHILIPPINE ISLANDS, PETITIONER, VS. CENTRAL BANK OF THE PHILIPPINES
(NOW BANGKO SENTRAL NG PILIPINAS) AND CITIBANK, N.A., RESPONDENTS.

Petition for Review on Certiorari challenging the Decision and Resolution of the Court of Appeals,
which reversed and set aside the Decision of the Regional Trial Court
FACTS
Petitioner BPI and respondent Citibank, N.A. (Citibank) are both members of the Clearing House
established and supervised by the CBP. Both banks maintained demand deposit balances with the
CBP for their clearing transactions with other commercial banks coursed through the said clearing
facilities. In 1982, BPI Laoag City Branch discovered outstanding discrepancies in its inter-bank
reconciliation statements in CBP in the amount of P9 million. Hence, petitioner BPI filed a letter-
complaint before the CBP on the latter's irregular charging of its demand deposit account in the
amount of P9 million and requested CBP to conduct the necessary investigation of the matter. CBP
and petitioner BPI agreed to refer the matter to the National Bureau of Investigation (NBI) to conduct
a separate investigation which showed that an organized criminal syndicate using a scheme known
as "pilferage scheme" committed the bank fraud. It was further disclosed that two accounts were
opened at BPI by Bustamante and another at Citibank Greenhills Branch by Desiderio with Rolando
San Pedro as the authorized signatory or owner of the account. Thereafter, Citibank Greenhills
Branch received by way of deposit to the Current Account of MMC various checks drawn against BPI
Laoag City Branch. Upon arrival of the checks at the CBP Clearing House, Valentino, CBP's
Bookkeeper, with the assistance of Janitor-Messenger Estacio, intercepted and pilfered the BPI Laoag
City Branch checks, and tampered the clearing envelope. They reduced the amounts appearing on the
clearing manifest, the BPI clearing statement and the CBP manifest to conceal the fact that the BPI
Laoag City Branch checks showing the original amounts were deposited with Citibank Greenhills
Branch. Thereafter, the altered CBP manifest and clearing statement, together with the clearing
envelope which contained the checks intended for BPI Laoag City Branch but without the pilfered
checks deposited with the Citibank Greenhills Branch in the account of MMC and drawn against
Bustamante's BPI Laoag City Branch account, were forwarded to CBP Laoag Clearing Center.
As a result of the aforesaid fraud committed against petitioner BPI, Desiderio and Estacio, together
with other personalities, were convicted of three (3) counts of Estafa thru Falsification of Public
Documents by the Sandiganbayan (SB). On the other hand, Valentino was discharged and utilized as
the main witness for the prosecution. In addition, Carlito Bondoc, the former Assistant Manager of
Citibank Greenhills Branch and Rogelio Vicente (Vicente), Assistant Manager of BPI Laoag City
Branch, were charged as co-conspirators in the bank fraud against petitioner BPI. However, the case
against Vicente was dismissed without prejudice by the SB after Valentino recanted his earlier
statement implicating Vicente and for insufficiency of evidence to support his conviction.
The RTC gave credence to the NBI Investigation Report that the immediate and proximate cause of
the defraudation were the criminal acts of CBP employees, Valentino and Estacio. The lower court
ruled that CBP, as employer, shall be liable for the damage caused by its employees, Valentino and
Estacio, to petitioner BPI under Articles 2176 and 2180 of the Civil Code. The CA reversed and set
aside the RTC's decision. The appellate court dismissed the complaint filed by petitioner BPI and
ordered the cancellation of the payment made by CBP in the amount of P4.5 million to BPI. It reasoned
that under Article 2180 of the Civil Code, the State is generally liable only for quasi-delicts in case the
act complained of was performed by a special agent. Both Valentino and Estacio were not special
agents as neither of them was duly empowered by a definite order or commission to perform some
act or were charged with some definite purpose which gives rise to the claim. They were employed
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in accordance with ordinary rules and regulations governing civil service and assigned to carry out
tasks naturally related to their employment. The appellate court clarified that the State may be held
liable for quasi-delicts as an ordinary employer when it is performing proprietary acts. Finally, the
CA held that Article 2180 provides that diligence of a good father of a family or ordinary diligence
absolves the employer or master from any liability committed by their employees. The CA found that
the CBP met the standard of ordinary diligence in determining both Valentino's and Estacio's
respective qualifications prior to their employment through the conduct of mental, psychological,
and physical examinations as required by the Civil Service Commission. They were also required to
obtain National Intelligence and Security Authority (NISA) and NBI clearances prior to their
employment.
ISSUE
Whether or not CBP is liable for the torts committed by its employees Valentino and Estacio – NO
RULING
The test of liability depends on whether or not the employees, acting in behalf of CBP, were
performing governmental or proprietary functions. The State in the performance of its governmental
functions is liable only for the tortuous acts of its special agents. On the other hand, the State becomes
liable as an ordinary employer when performing its proprietary functions. Employers shall be liable
for the damages caused by their employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any business or industry. The State is
responsible in like manner when it acts through a special agent; but not when the damage has been
caused by the official to whom the task done properly pertains, in which case what is provided in
Article 2176 shall be applicable. The responsibility treated of in this article shall cease when the
persons herein mentioned prove that they observed all the diligence of a good father of a family to
prevent damage.
In this case, CBP's establishment of clearing house facilities for its member banks to which Valentino
and Estacio were assigned as Bookkeeper and Janitor-Messenger, respectively, is a governmental
function. As such, the State or CBP in this case, is liable only for the torts committed by its employee
when the latter acts as a special agent but not when the said employee or official performs his or her
functions that naturally pertain to his or her office.
A special agent is defined as one who receives a definite and fixed order or commission, foreign to
the exercise of the duties of his office. Evidently, both Valentino and Estacio are not considered as
special agents of CBP during their commission of the fraudulent acts against petitioner BPI as they
were regular employees performing tasks pertaining to their offices, namely, bookkeeping and
janitorial-messenger. Thus, CBP cannot be held liable for any damage caused to petitioner BPI by
reason of Valentino and Estacio's unlawful acts.
Nonetheless, even assuming that CBP is an ordinary employer, it still cannot be held liable. Article
2180 of the Civil Code provides that an employer shall be liable for the damages caused by their
employees acting within the scope of their assigned tasks. An act is deemed an assigned task if it is
done by an employee, in furtherance of the interests of the employer or for the account of the
employer at the time of the infliction of the injury or damage. Obviously, Valentino and Estacio's
fraudulent acts of tampering with and pilfering of documents are not in furtherance of CBP's interests
nor done for its account as the said acts were unauthorized and unlawful. Also, petitioner BPI has the
burden to prove that Valentino and Estacio's fraudulent acts were performed within the scope of
their assigned tasks, which it failed to do. It is only then that the presumption that CBP, as employer,
was negligent would arise which then compels CBP to show evidence that it exercised due diligence
in the selection and supervision of its employees. Thus, where a public officer acts without or in
excess of jurisdiction, any injury or damage caused by such acts is his or her own personal liability
and cannot be imputed to the State.
86
41. HEIRS OF MENDOZA VS. ES TRUCKING
HEIRS OF CATALINA P. MENDOZA, PETITIONERS, VS. ES TRUCKING AND FORWARDERS,

RESPONDENT.
G.R. No. 243237 | February 17, 2020 | Third Division | Carandang, J.

Petition for Review on Certiorari under Rule 45 challenging the Decision of the Court of Appeals,
affirming the Decision of the Regional Trial Court, dismissing the complaint for damages filed by
petitioners
FACTS
In 2003, Catalina P. Mendoza (Catalina) was walking along Sta. Maria Road after visiting a lotto outlet
nearby. While crossing the street she was sideswiped by a 14-wheeler prime mover truck at the
junction of Gov. Ramos Street and Sta. Maria Road in Zamboanga City causing her death. The vehicle
is registered under the name of ES Trucking and Forwarders (ES Trucking) with Sumarni Asprer
Ruste as its sole proprietor. At the time of the incident, the vehicle was driven by Clin Timtim
(Timtim). In 2013, the counsel of the Heirs of Catalina sent a demand letter to respondent seeking
reimbursement for the actual expenses they incurred. Respondent offered financial assistance and
the proceeds from the third-party liability insurance but the Heirs of Catalina refused the offer.
Instead, they insisted on the amount they were claiming. Subsequently, a Certification to File Action
was issued after the parties failed to reach a settlement. A criminal case for Reckless Imprudence
resulting to Homicide was filed against the driver in the MTCC and a complaint for quasi-delict
against ES Trucking was separately filed in the RTC of Zamboanga City.
The MTCC found Timtim guilty of Reckless Imprudence resulting to homicide. While the RTC
dismissed the complaint for insufficient evidence and want of cause of action against the Defendant
herein. The RTC found no evidence of recklessness that can be attributed to the driver of the truck
and concluded that Catalina was not bumped on the front side of the truck but most probably on the
left side of the vehicle, as she appeared not to have been run over by its front tire. The CA affirmed
the ruling of the RTC and held that it was incorrect for the Heirs of Catalina to conclude that a criminal
conviction will establish ES Trucking's civil liability. For the CA, even if there is such negligence, the
employer may defend itself through proof that it exercised due diligence in the selection and
supervision of its employees. To rule otherwise will create an absurd result, where the case for quasi-
delict is already prejudged. It further ruled that there was no sufficient evidence of negligence
because the death of Catalina was brought about by a terrible accident, which could only be blamed
on being in the wrong place at the wrong time.
ISSUES
1. Whether or not ES Trucking be held vicariously liable for damages as there is no sufficient
evidence that Timtim was negligent - YES
2. Whether or not ES Trucking is required to observe due diligence in the selection and
supervision of employees pursuant to Article 2180 of the Civil Code – YES
RULING
1. Yes. Timtim was recklessly driving the prime mover truck that caused the death of Catalina
Mendoza. It would be a grave injustice to simply accept the testimony of PO3 Agbalos and
adopt the conclusion of the CA that the terrible incident "could only be blamed on being in
the wrong place at the wrong time." This incident would not have happened had Timtim been
vigilant in checking his front, rear, and side mirrors for any obstruction on the road, and had
he timely stepped on his breaks to avoid hitting Catalina. Contrary to the ruling of the lower
courts, the fact that the truck was traveling on the right lane when the incident happened
does not automatically mean that the driver was not negligent. Catalina had already crossed
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half of the road when she was sideswiped by the vehicle driven by Timtim. A prudent driver
would have immediately slowed down and stopped the vehicle to give way to the pedestrian
crossing the road. It is also worthy to point out that the finding of negligence on the part of
Timtim made by the MTCC is consistent with Our pronouncement that Timtim was negligent
at the time of the incident.
2. The basis for the liability of an employer of an erring driver resulting to injury or damage to
a stranger may be found in Articles 2176 and 2180 of the New Civil Code. Article 2176
provides that whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a quasi-delict and is governed by
the provisions of this Chapter. While Article 2180 provides that the obligation imposed by
Article 2176 is demandable not only for one's own acts or omissions, but also for those of
persons for whom one is responsible. The owners and managers of an establishment or
enterprise are likewise responsible for damages caused by their employees in the service of
the branches in which the latter are employed or on the occasion of their functions. The
responsibility treated of in this article shall cease when the persons herein mentioned prove
that they observed all the diligence of a good father of a family to prevent damage.
In this case, it has been proven that Timtim recklessly drove the prime mover truck which
caused the death of Catalina. Although the employer is not the actual tortfeasor, the law
makes the employer vicariously liable on the basis of the civil law principle of paterfamilias
for failure to exercise due care and vigilance over the acts of one's subordinates to prevent
damage to another. When the employee causes damage due to his own negligence while
performing his own duties, there arises a presumption that the employer is negligent. This
may be rebutted only by proof of observance of the diligence of a good father of a family. The
"diligence of a good father" referred to in the last paragraph of Article 2180 means diligence
in the selection and supervision of employees.
Even if Timtim is a holder of a professional driver's license and is permitted to drive

restriction no. 8, which refers to "ARTICULATED VEHICLE 4501 KGS & ABOVE G V W" and
includes the vehicle (with gross vehicle weight capacity of 8000kg), no evidence was
presented to prove that he was certified to drive a prime mover truck by TESDA as DOTr DO
No. 2011-25 requires, as an additional requirement for the issuance of certificate of public
convenience, that drivers of heavy trucks should be certified by TESDA with "Driving National
Certificate (NC) III." ES Trucking should not have been satisfied with the mere possession of
a professional driver's license. Having failed to present proof that Timtim possesses the
requisite certification from TESDA, ES Trucking cannot claim to have exercised due diligence
in the selection and supervision of its employees. ES Trucking was not only negligent in hiring
Timtim but even in supervising the latter. ES Trucking permitted Timtim to drive the subject
vehicle to transport goods of its customers knowing that the vehicle is not duly registered
with the LTFRB.
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42. LIM VS. LINTAG
MARTIN N. LIM, JR., PETITIONER, VS. MARIA CONCEPCION D. LINTAG, RESPONDENT.

G.R. No. 234405 | December 09, 2020 | First Division | Peralta, C.J.

On appeal is the Decision of the Court of Appeals (CA) which affirmed Decision of the Regional Trial
Court in Criminal Case No. 09-3335 and 09-3336, finding Martin N. Lim (petitioner) civilly liable to
Maria Concepcion D. Lintag (Lintag).
FACTS
On October 30, 2009, two (2) separate Informations for estafa were filed against petitioner.
Petitioner pleaded "not guilty" upon arraignment. Trial ensued and the succeeding facts were
established:
Lintag purchased a condominium unit from New San Jose Builders, Inc. (NSJBI) for the total contract
price of P2,400,000.00. The payment scheme was on a monthly basis and Lintag hands check
payments to petitioner, a sales agent, who then remits it to NSJBI.
Lintag issued a check which was drawn from her checking account with BPI Family Savings Bank.
The check was payable to the order of New San Jose Builders, Inc., for the amount of P1,300,000.00.
Petitioner issued a NSJBI acknowledgment receipt.
Lintag once again met with petitioner to replace the check after the latter made representations that
NSJBI wanted Lintag to issue two different checks - one check for partial payment of the
condominium unit, and the other to cover expenses for transfer of unit under Lintag and her
husband's names. Consequently, Lintag issued two crossed-checks. A check was issued as partial
payment for the unit and was payable to New San Jose Builders, Inc., for the amount of P1,141,655.52.
The other check was issued to cover expenses for transfer and was payable to CASH, for the amount
of P158,344.48. Petitioner received the checks and placed them inside his clutch bag, and then
handed another NSJBI acknowledgment receipt.
On his way home, petitioner was allegedly accosted by two unidentified men who were armed with
deadly weapons. The men grabbed petitioner's clutch bag and immediately absconded, taking the
checks with them.
Petitioner, however, failed to inform Lintag and NSJBI that the checks were stolen. Lintag testified
that she and petitioner communicated on several occasions, through text messages or personal
interactions, to finalize the purchase of the unit. Lintag stated that, on January 8, 2009, petitioner
even reminded her to ensure that her accounts had sufficient funds.
On February 6, 2009, Lintag learned that her current account with BPI had been credited for the
checks, but not as payment to NSJBI. She also discovered that a check had been tampered with when
the payee was changed from New San Jose Builders, Inc. to CASH. It was also only after such discovery
that petitioner revealed the robbery incident to Lintag. Aggrieved Lintag filed a complaint for estafa
with abuse of confidence, under Article 315 (l)(b), and estafa through falsification of commercial
documents, under Article 315 (2)(a), against petitioner.
The RTC rendered a Decision, acquitting petitioner from estafa, but holding him civilly liable. The CA
affirmed the RTC Decision with modification. Thus, the present petition.
ISSUE
Whether or not Lim is liable for civil damages - YES
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RULING
It is entrenched in jurisprudence, that the extinction of penal action does not carry with it the
extinction of civil action where (a) the acquittal is based on reasonable doubt as only a
preponderance of evidence is required; (b) the court declares that the liability of the accused is only
civil; and (c) the civil liability of the accused does not arise from or is not based upon the crime of
which the accused was acquitted.
The RTC acquitted petitioner on ground of reasonable doubt because the prosecution failed to submit
sufficient evidence that petitioner misappropriated the checks.
The RTC, however, held petitioner civilly liable for failing to report the alleged robbery incident. On
appeal, the CA modified the civil liability by increasing the damages due after determining that the
proximate cause for Lintag's financial damage is the failure to report the robbery incident. The Court
now affirms but modifies the award of damages of the CA.
The lower courts duly established that Lintag suffered financial damage when petitioner failed to
deliver the checks to NSJBI. As mentioned, the RTC and the CA attributed said failure to the robbery
incident. The Court, however, refuses to believe the veracity of the robbery incident but agrees with
the lower courts that petitioner employed dishonesty in his dealings with Lintag.
A perusal of the records would disclose that the robbery incident was unsupported and
uncorroborated. The witness of petitioner was not present during the alleged robbery. Thus, the
preponderance of evidence is considered in favor of Lintag as petitioner failed to support his
affirmative defense with evidence that could have justified or excused his failure to deliver the checks
to NSJBI.
Absent any plausible defense, the Court holds that petitioner was unable to overcome the burden and
holds him civilly liable. The Court affirms the award of actual damages in the amount of
P1,300,000.00 as this has been duly proven during trial.
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43. MERALCO VS. AAA CRYOGENICS
MANILA ELECTRIC COMPANY (MERALCO), PETITIONER VS. AAA CRYOGENICSPHILIPPINES,

INC., RESPONDENT.
G.R. No. 207429 | November 18, 2020 | Third Division | Hernando, J.

Petition for Review on Certiorari assailing the Decision and Resolution of the Court of Appeals which
affirmed with modifications the Decision of the Regional Trial Court.
FACTS
AAA was engaged in the production of liquid forms of gases. In the production of these products, AAA
relied on computers and electronic processors that required a very stable source of power, otherwise
the whole plant would shut down and freeze up.
AAA’s Plant Supervisor reported fluctuations and interruptions in the electrical power supplied by
MERALCO. As a result of these power fluctuations and interruptions, AAA suffered losses in the
amount of P21,092,760.
AAA sent several letters informing MERALCO of its problems with respect to the supply of power, but
MERALCO could not remedy the situation, except to advise AAA to install power generators in order
to level put the supply of power.
In the meantime, AAA stopped paying its electrical bills until its total accountabilities reached
P13,657,141,46. MERALCO, thus, disconnected and terminated its service contract with AAA.
MERALCO computed AAA’s unpaid bills to amount to P10,453,477.55
Then, AAA filed an action for Injunction and Damages against MERALCO seeking to collect the amount
of P21,092,760.00 representing its losses due to power fluctuations and interruptions.
On the other hand, MERLACO filed an actions against AAA for Collection of Sum of Money to collect
the sum of P13,657,141.56 representing the latter’s unpaid electric bill.
RTC found MERALCO liable for actual damages amounting to P21,092,760.00 arising from its failure
to deliver constant energy supply to AAA, in breach of its contractual obligation. It also held AAA
liable for its unpaid electricity bills in the amount of P10,453,477.55. CA affirmed the trial court’s
ruling.
ISSUE
Whether the power fluctuations and interruptions occurred were caused by MERALCO in violation
of its contractual obligations which entitles AAA to damages – NO, as to actual damages, YES, as to
exemplary damages
RULING
The occurrence of the power fluctuations and interruptions is well-supported by evidence.
A review of the records show that the RTC’s finding of the occurrence of the power fluctuations and
interruptions is well –supported by evidence. Such finding is based on the testimony of Cruz, who
explained in detail AAA’s level of purity in cases of power fluctuations and interruptions in
MERALCO’s supply of electricity. Such fall in the unsullied state of gases is shown in the computer
printouts of the Log Sheet Readings, which accurately record the exact date and time when such fall
occurs. Thus, while MERALCO is correct that the Log Sheet Readings pertain to the purity of gases,
and not to the power fluctuations and interruptions per se, it is wrong to conclude that the RTC’s
91
finding of its occurrence has no basis. On the contrary, We find that such finding is adequately
supported not only by the testimony of Cruz, but also by MERALCO’s conduct itself.
As to the amount of actual damages, We find that AAA was unable to prove with reasonable degree
of certainty the amount of actual damages it suffered.
Despite the occurrence of the power fluctuations and interruptions, We find that AAA was unable to
prove with a reasonable degree of certainty the amount of actual damages it suffered.
Under Article 2199 of the Civil Code, “except as provided by law or by stipulation, one is entitled to
an adequate compensation only for such pecuniary loss suffered by them as they have duly proved.”
Jurisprudence instructs that “the claimant must prove the actual amount of loss with a reasonable
degree of certainty premised upon competent proof and on the best evidence obtainable.”
Here, to establish the amount of actual damages it suffered, AAA offered in evidence two documents:
(1) Summary of Production Losses due to Fluctuation; and (2) Comparative Presentation of
Production under Normal Power Supply, Production when there is Power Fluctuation and Quantity
in Cubic Meters of Productive Losses due to Power Fluctuation. However, the basis and source of
these documents were never presented in court, and neither were they testified to by any witness of
AAA. While the first document contains information on the quantity of unproduced gases by AAA, as
well as their selling price, there is no indication as to where these figures were based or how they
were derived. There is likewise no receipt nor any supporting document offered in court to support
such figures. The same is true for the second document, which lacks information as to the source or
basis of the figures under "Production Under Normal Power Supply." Without these information, the
resulting figures may very well be a product of speculation or sheer estimation. We therefore cannot
allow AAA to recover the amount of P2l,092,760.00 without running afoul of the well-established
doctrine that the amount of actual damages must be proved with a reasonable degree of certainty.
Nevertheless, Meralco cannot escape liability for this sole reason. Under Article 2224 of the Civil
Code, "temperate or moderate damages, which are more than nominal but less than compensatory
damages, may be recovered when the court finds that some pecuniary loss has been suffered but its
amount cannot, from the nature of the case, be provided with certainty."
As to the grant of exemplary damages, We find that the same was properly awarded by the CA. The
records show that despite Meralco's repeated assurance of better electric supply, and despite
knowledge of the serious production losses experienced by AAA due to the power fluctuations and
interruptions, it still failed to provide any remedy, in wanton disregard of its contractual obligation
to deliver energy "at reasonably constant potential and frequency." As a public utility vested with
vital public interest, Meralco should be reminded of its "obligation to discharge its functions with
utmost care and diligence.
92

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CIVIL LAW REVIEW 2

Gabrielle Ann F. Seguiran

Atty. Crisostomo A. Uribe

CASE NO. TOPIC / CASE TITLE PAGE

3 Selerio vs. Bancasan, G.R. No. 222442, June 23, 2020 11

SOURCES OF CIVIL OBLIGATION

Quasi-Contracts - Solutio Indebiti

KINDS OF CIVIL OBLIGATIONS

FUNDAMENTAL CHARACTERISTICS / PRINCIPLES

Consensuality; Contract of Adhesion

17 Purisima vs. Purisima, G.R. No. 200484, November 18, 2020 39

19 Banico vs. Stager, G.R. No. 232825, September 16, 2020 43

20 Pascual vs. Pangyarihan-Ang, G.R. No. 235711, March 11, 2020 45

KINDS OF CONTRACTS AS TO VALIDTY

ELEMENTS OF A CONTRACT OF SALE

RIGHTS AND OBLIGATIONS OF THE VENDOR AND VENDEE

Buyer in Good Faith

28 Odrada vs. Lazaro, G.R. No. 205515, January 20, 2020 61

RIGHTS AND OBLIGATIONS OF THE LESSOR AND LESSEE

PROVISIONS COMMON TO PLEDGE AND MORTGAGE

Doctrine of Res Ipsa Loquitur

LIABILITY FOR TORTS: DAMAGES

42 Lim vs. Lintag, G.R. No. 234405, December 09, 2020 89

NATURE OF THE ACTION

In Cando v. Spouses Olazo, the Court explained:

NATURE OF THE CASE

NIEVES SELERIO AND ALICIA SELERIO, PETITIONERS, VS. TREGIDIO B. BANCASAN,

NATURE OF THE ACTION

PHILIPPINE HEALTH INSURANCE CORPORATION, PETITIONER, VS. COMMISSION ON AUDIT,

NATURE OF THE ACTION

YON MITORI INTERNATIONAL INDUSTRIES,* PETITIONER, VS. UNION BANK OF THE

NATURE OF THE ACTION

TEAM PACIFIC CORPORATION, FEDERICO M. FERNANDEZ, AND AURORA Q. GARCIA,

NATURE OF THE ACTION

WYETH PHILIPPINES, INC., PETITIONER, VS. CONSTRUCTION INDUSTRY ARBITRATION

NATURE OF THE ACTION

NATURE OF THE ACTION

NATURE OF THE ACTION

DIOSA ARRIVAS, PETITIONER, VS. MANUELA BACOTOC, RESPONDENT.

NATURE OF THE ACTION

ITALKARAT 18, INC. PETITIONER, VS. JURALDINE N. GERASMIO, RESPONDENT.

NATURE OF THE CASE

ALLAN REGALA, PETITIONER, VS. MANILA HOTEL CORPORATION, RESPONDENT.

NATURE OF THE ACTION

The foregoing contentions deserve no merit.

NATURE OF THE ACTION

NATURE OF THE CASE

NATURE OF THE ACTION

ART. 100. Prohibition against Elimination or Diminution of Benefits. - Nothing in this

NATURE OF THE ACTION

NATURE OF THE ACTION

CELLPAGE INTERNATIONAL CORPORATION, PETITIONER, VS. THE SOLID GUARANTY, INC.,

NATURE OF THE ACTION

ULYSSES RUDI V. BANICO, PETITIONER, VS. LYDIA BERNADETTE M. STAGER A.K.A

NATURE OF THE ACTION

NATURE OF THE ACTION

NATURE OF THE ACTION

KEPCO PHILIPPINES CORPORATION, PETITIONER, COMMISSIONER OF INTERNAL REVENUE,

NATURE OF THE ACTION

LETICIA ELIZONDO EUPENA, PETITIONER, VS. LUIS G. BOBIER, RESPONDENT.

NATURE OF THE CASE

MERCEDES S. GATMAYTAN AND ERLINDA V. VALDELLON, PETITIONERS, VS. MISIBIS LAND,

NATURE OF THE ACTION

The RTC dismissed the complaint on the ground of prescription of action.