ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners,

vs.
THE HON. COURT OF APPEALS and BUEN REALTY DEVELOPMENT
CORPORATION, respondents.
G.R. No. 109125 December 2, 1994

FACTS:
Ang Yu, et al. claim that they are tenants or lessees of the residential and commercial spaces
owned by the Unjiengs since 1935 and they have been paying rentals since then.
In 1986, defendants informed plaintiffs that they are offering to sell the premises and are giving
them priority to acquire the same and offered a price of P6-million while plaintiffs made a counter
offer of P5-million.
Plaintiffs wrote to the defendants twice, asking that they specify the terms and conditions of the
offer to sell and the plaintiffs did not receive any reply, since defendants failed to specify the terms
and conditions of the offer to sell, they were compelled to file the complaint to compel defendants
to sell the property to them.
Later, the Petitioners found out that the property was about to be sold, which then they responded
with instituting this case for Specific Performance to compel the Unjiengs to sell the property to
the Petitioners.
The Trial Court ruled that the Unjieng’s offer to sell was never accepted by the Petitioners for the
reason that they did not agree upon terms and condition of the proposed sale. Therefore, there
was no contract at all.
The Court of Appeals affirmed the decision of the lower court which ruled that the defendants
should subsequently offer their property to the Petitioners for the price of P11 Million or below,
which then plaintiffs will receive the right of first refusal.
On November 15, 1990, the property was sold to Buen Realty and Development Corporation for
P15 Million, transferring the title of the property to Buen Realty through a Deed of sale.
On July 1, 1991, Buen Realty demanded the petitioners to vacate the premises that caused the
Petitioners to file a Motion for Execution on August 27, 1991, of the Court of Appeals Judgment.
Court of Appeals directed RTC on August 30, 1991 to order the Unjiengs to issue a Deed of sale
in favor of the plaintiffs and nullify the sale to Buen Realty in recognition of the right of first refusal.
The court set aside the title issued to Buen Realty Corporation for having executed in bad faith.
Then on December 4, 1991, the Court of Appeals reversed itself when the Private Respondents
Appealed.

ISSUES
Whether or not the agreement developed a contract.
RULING:
No. The agreement between the Petitioners and the Unjiengs did not constitute or develop a
perfect contract of sale. Because in the agreement, the right given to the Petitioners, however, it
lacks the corresponding obligation resulting to an imperfect contract of sale. A contract undergoes
various stages that include its negotiation or preparation, its perfection and, finally, its
consummation. Until the contract is perfected, it cannot, as an independent source of obligation,
serve as a binding juridical relation. In sales, particularly, to which the case at bench belongs,
the contract is perfected when a person, called the seller, obligates himself, for a price certain, to
deliver and to transfer ownership of a thing or right to another, called the buyer, over which the
latter agrees.
Whether private respondent Buen Realty Development Corporation, the alleged purchaser of the
property, has acted in good faith or bad faith and whether or not it should, in any case, be
considered bound to respect the registration of the lis pendens are matters that must be
independently addressed in appropriate proceedings.
 DEVELOPMENT BANK OF THE PHILIPPINES (DBP), petitioner,
vs.
THE HONORABLE MIDPAINTAO L. ADIL, Judge of the Second Branch of the Court of
First Instance of Iloilo and SPOUSES PATRICIO CONFESOR and JOVITA
VILLAFUERTE, respondents.
G.R. No. L-48889 May 11, 1989

FACTS:
On February 10, 1940, spouses Patricio Confessor and Jovita Villafuerte obtained an agricultural
loan from Agricultural and Industrial Bank, now Development Bank of the Philippines, in the sum
of P2,000, as evidenced by a promissory note of said date whereby they bound themselves jointly
and severally to pay the amount in ten equal yearly amortizations.
As the obligation remained unpaid even after the lapse if the ten-year period, Confessor, who was
then a member of the Congress of the Philippines, executed a second promissory note on April
11, 1961, expressly acknowledging the said loan and promising to pay the same on or before
June 15, 1961.
The spouses still failed to pay the obligation on the specified date. As a result, the DBP filed a
complaint on September 11, 1970 in the City Court of Iloilo City. The city court ordered payment
from spouses. The CFI of Iloilo reversed the decision. Hence, this petition.

ISSUE:
Whether or not a promissory which was executed in consideration of a previous promissory note
which has already been barred by prescription is valid.

RULING:
Yes, the second promissory note is valid because the said promissory note is not a mere
acknowledgement of the debt that has prescribed already. Rather, it is a new promise to pay the
debt. A new promise is a new cause of action. Although a debt barred by prescription is
enforceable, a new contract recognizing and assuming the prescribed debt would be valid and
enforceable.
Art. 1112. Persons with capacity to alienate property may renounce prescription already obtained,
but not the right to prescribe in the future. Prescription is deemed to have been tacitly renounced
when the renunciation results from acts which imply the abandonment of the right acquired. There
is no doubt that prescription has set in as to the first promissory note of February 10, 1940.
However, when respondent Confessor executed the second promissory note on April 11, 1961
whereby, he promised to pay the amount covered by the previous promissory note on or before
June 15, 1961, and upon failure to do so, agreed to the foreclosure of the mortgage, said
respondent thereby effectively and expressly renounced and waived his right to the prescription
of the action covering the first promissory note.
 ARTURO PELAYO, plaintiff-appellant,
vs.
MARCELO LAURON, ET AL., defendants-appellees.
G.R. No. L-4089 January 12, 1909

FACTS:
Pelayo, the plaintiff herein, was a physician who filed a lawsuit in November 1906 alleging that
the defendants Marcelo Lauron and Juana Abella sought medical assistance from him for their
daughter-in-law, who was about to give birth. It was decided, through consultation, to remove both
the fetus and the afterbirth by surgery. He calculated that his services cost around P500, which
the defendants declined to pay.
On the other hand, the defendants denied anything and alleged as a special defense that the
daughter-in-law died because of the pregnancy, that the daughter-in-law stayed with her husband
separately from them, and that her stay at their house on the day of the birth was merely
accidental.
Due to the lack of adequate proof to claim a right of action, the lower court ruled for the defendants.
This case is, therefore, before the SC.

ISSUE:
Whether or not Marcelo Lauron et al, are liable to Arturo Pelayo.

RULING:
No. The Court prescribed the order of its reasoning. First, the court quoted the general law on
obligations under Article 1158 stating that “Obligations arising from law are not presumed. Only
those expressly determined in this Code or in special laws are demandable.” By means of an
explicit rule of law, the provision of medical assistance in the event of sickness is one of the
reciprocal duties of partners who are bound by mutual assistance. Therefore, in this situation, if
the dead daughter-in-law was unable to pay for her childbirth expenses, the responsibility would
fall on the husband. Therefore, the party obliged to provide assistance is responsible for all costs,
including the medical expert's fees for his professional services. It is only the husband who is
obligated to provide assistance, and not his parents. The fact that it wasn't Mr. Pelayo's husband
who asked for support is of no significance. Since no agreement was made that the defendants
would pay for the costs, they were not responsible. Within the context of the statute, with regard
to the duty that falls on the husband to provide assistance, the father and mother-in-law are
strangers.
 THE METROPOLITAN BANK AND TRUST COMPANY, Petitioner,
vs.
ANA GRACE ROSALES AND YO YUK TO, Respondents.
G.R. No. 183204 January 13, 2014

FACTS:
Respondent Ana Grace Rosales (Rosales) is the owner of China Golden Bridge Travel Services,
a travel agency. Respondent Yo Yuk To is the mother of respondent Rosales.
In 2000, respondents opened a Joint Peso Account with Petitioner Metropolitan Bank and Trust
Company. As of August 4, 2004, respondents’ Joint Peso Account showed a balance of
P2,515,693.52.
In May 2002, respondent Rosales accompanied her Taiwanese National client, Liu Chiu Fang, to
petitioner’s branch in Escolta to open a savings account, as required by the Philippine Leisure
and Retirement Authority (PLRA). Respondent Rosales acted as an interpreter for Liu Chiu Fang.
Respondents opened with petitioner’s Pritil-Tondo branch a Joint Dollar Account with an initial
deposit of US$14,000.00.
On July 31, 2003, petitioner issued a “Hold Out” order against respondents’ accounts.
On September 3, 2003, a criminal case for Estafa through False Pretences, Misrepresentation,
Deceit, and Use of Falsified Documents, against respondent Rosales. Petitioner accused
respondent Rosales and an unidentified woman as the ones responsible for the unauthorized and
fraudulent withdrawal of US$75,000.00 from Liu Chiu Fang’s dollar account with petitioner’s
Escolta branch. The Office of the City Prosecutor dismissed the complaint.
Respondents filed a Complaint for Breach of Obligation and Contract with damages against
petitioner. Respondents alleged that they attempted several times to withdraw their deposits but
were unable to because petitioner had placed their accounts under “Hold Out” status. Petitioner
alleged that respondents have no cause of action because it has a valid reason for issuing the
“Hold Out” order. It averred that due to fraudulent scheme of respondent Rosales, it was
compelled to reimburse Liu Chiu Fang the amount of US$75,000.00 and to file a criminal
complaint against respondent Rosales.
While the criminal case was being tried, the City Prosecutor of Manila filed an Estafa case against
respondent Rosales.
The RTC rendered a decision finding petitioner liable for damages for breach of contract. It ruled
that it is the duty of petitioner to release the deposit to respondents as the act of withdrawal of a
bank deposit is an act of demand by the creditor.
The CA affirmed the decision of the RTC.

ISSUE:
Whether or not petitioner is liable for breach of contract.
RULING:
Yes. The Court finds petitioner guilty of breach of contract when it unjustifiably refused to release
respondents’ deposit despite demand. In cases of breach of contract, moral damages may be
recovered only if the defendant acted fraudulently or in bad faith, or is guilty of gross negligence
amounting to bad faith, or in wanton disregard of his contractual obligations.
In this case, a review of the circumstances surrounding the issuance of the “Hold Out” order
reveals that petitioner issued a “Hold Out” order in bad faith. First of all, the order was issued
without legal basis. Second, petitioner did not inform respondents of the reason for the “Hold Out.”
Third, the order was issued prior to the filing of the criminal complaint.
The Court finds that petitioner indeed acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner when it refused to release the deposits of respondent without any legal basis.
 DOMETILA M. ANDRES, doing business under the name and style "IRENE'S WEARING
APPAREL," petitioner,
vs.
MANUFACTURERS HANOVER & TRUST CORPORATION and COURT OF
APPEALS, respondents.
G.R. No. 82670 September 15, 1989

FACTS:
Andres, using the business name "Irene's Wearing Apparel," was engaged in the manufacture of
lady’s garments, children's wear, men's apparel and linens for local and foreign buyers. Among
its foreign buyers was Facets Funwear, Inc. (hereinafter referred to as FACETS) of the United
States.
Sometime in August 1980, FACETS instructed the First National State Bank of New Jersey,
Newark, New Jersey, U.S.A. (hereinafter referred to as FNSB) to transfer $10,000.00 to petitioner
via Philippine National Bank, Sta. Cruz Branch, Manila (hereinafter referred to as PNB).
FNSB instructed private respondent Manufacturers Hanover and Trust Corporation to effect the
above- mentioned transfer through its facilities and to charge the amount to the account of FNSB
with private respondent.
On August 28, 1980, petitioner received the remittance of $10,000.00 through Demand Draft No.
225654 of the PNB.
After learning that the respondents delayed the remittance of money to the petitioners and
FACETS informed the FNSB.
On September 8, 1980, unaware that petitioner had already received the remittance, FACETS
informed private respondent about the delay and at the same time amended its instruction by
asking it to effect the payment through the Philippine Commercial and Industrial Bank (hereinafter
referred to as PCIB) instead of PNB.
Private respondent, also unaware that petitioner had already received the remittance of
$10,000.00 from PNB instructed the PCIB to pay $10,000.00 to petitioner. And the petitioner
received a second $10,000.00 remittance.
FNSB discovered that private respondent had made a duplication of the remittance, it asked for
a recredit of its account in the amount of $10,000.00. Private respondent complied with the
request.
Private respondent asked petitioner for the return of the second remittance of $10,000.00 but the
latter refused to pay.

ISSUE:
Whether or not the private respondent has the right to recover the second $10,000 remittance it
had delivered to petitioner.
RULING:
Yes. The private respondent has the right to recover the second $10,000 remittance it had
delivered to petitioner. According to Article 1157, under the sources of obligation, Quasi-contracts,
Solutio indebiti which states that no one shall be unjustly enriched or benefited at the expense of
another. Under this, the petitioner has an obligation to return money paid by mistake to the
respondents.
 NATIONAL POWER CORPORATION, Petitioner, vs.
THE HONORABLE COURT OF APPEALS (Ninth Division), HADJI ABDUL CARIM
ABDULLAH, CARIS ABDULLAH, HADJI ALI LANGCO1 and DIAMAEL
PANGCATAN, Respondents.
G.R. No. 124378 March 8, 2005

FACTS:
On 15 November 1973, the Office of the President of the Philippines issued Memorandum Order
No. 398 - "Prescribing Measures to Preserve the Lake Lanao Watershed, To Enforce the
Reservation of Areas Around the Lake Below Seven Hundred And Two Meters Elevation, and for
Other Purposes." Said decree instructed the NPC to build the Agus Regulation Dam at the mouth
of Agus River in Lanao del Sur, at a normal maximum water level of Lake Lanao at 702 meters
elevation. Pursuant thereto, petitioner built and operated the said dam in 1978.
Private respondents who owned fishponds sited along the Lake Lanao shore have spent
substantial amounts to construct, maintain, and stock their respective fishponds between 1984
and 1986.
In October and November of 1986, all the improvements were washed away when the water level
of the lake escalated and the subject lakeshore area was flooded. Private respondents blamed
the inundation on the Agus Regulation Dam built and operated by the NPC in 1978. They
theorized that NPC failed to increase the outflow of water even as the water level of the lake rose
due to the heavy rains
The private respondents filed a complaint for damages before the RTC of Marawi City, Branch 9,
on 24 February 1987, docketed as Civil Case No. 115-87. They alleged that the negligence and
inexperience of NPC’s employees assigned to operate the Agus Regulation Dam were the
proximate causes of the damage caused to their properties and livelihood. And asked for
reimbursement of necessary expenses as may be proved in the trial, moral and exemplary
damages, and the costs.
ISSUE:
Whether the NPC legally answerable for the damages endured by the private respondents.
RULING:
YES, the NPC is legally answerable for the damages endured by the Private Respondents. MO
398 clothed the NPC with the power to build the Agus Regulation Dam and to operate it for the
purpose of generating energy. Twin to such power are the duties to maintain the normal maximum
lake elevation at 702 meters and to build benchmarks to warn the inhabitants in the area that
cultivation of land below said elevation is forbidden.
“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.” In crimes and quasi-delicts, the defendant
shall be liable for all damages, which are the natural and probable consequences of the act or
omission complained of.
 SANTOS VENTURA HOCORMA FOUNDATION, INC., petitioner,
vs.
ERNESTO V. SANTOS and RIVERLAND, INC., respondents.
G.R. NO. 153004, November 5, 2004
FACTS:
The pertinent portions of the Agreement read as follows:

• Defendant Foundation shall pay Plaintiff Santos P14.5 million in the following manner:
a. P1.5 million immediately upon the execution of this agreement;
b. The balance of P13 Million shall be paid, whether in one lump sum or in installments, at the
discretion of the Foundation, within a period of not more than two (2) years from the execution of
this agreement

• Immediately upon the execution of this agreement plaintiff Santos shall cause the dismissal
of civil cases with prejudice and for the immediate lifting of the aforesaid various notices of lis
pendens on the real properties aforementioned. And in the instances that Foundation shall
sell or dispose of any of the lands, the proceeds of any such sale, shall be partially devoted
to the payment of the Foundation's obligations.
• Failure of compliance of any of the foregoing terms and conditions by either or both parties to
this agreement shall ipso facto and ipso jure automatically entitle the aggrieved party to a writ
of execution for the enforcement of this agreement.
Santos moved for the dismissal of the aforesaid civil cases and caused the lifting of the notices
of lis pendens on the real properties involved. Petitioner SVHFI, paid P1.5 million to respondent
Santos, leaving a balance of P13 million.
SVHFI sold two real properties to Development Exchange Livelihood Corporation. By discovering
the disposition made by the petitioner, respondent Santos sent a letter to the petitioner demanding
the payment of the remaining P13 million, which was ignored by the latter. On September 30,
1991, the Regional Trial Court of Makati City, Branch 62, approved the compromise agreement.
On October 28, 1992, Santos send another letter to SVHFI inquiring when it would pay the
balance. There was no response from SVHFI. Then Santos applied for the issuance of the writ of
execution of its compromise agreement. Granted by the RTC.
On November 22, 1994, petitioner's real properties were auctioned. Riverland, Inc. was the
highest bidder for P12 million and it was issued a Certificate of Sale. The Certificates of Sale
issued for both properties provided for the right of redemption within one year from the date of
registration of the said properties.
Santos and Riverland, Inc. filed a Complaint for Declaratory Relief and Damages alleging that
there was delay on the part of the petitioner in paying the balance of P13 million.

ISSUE:
Whether or not the respondents are entitled to legal interest considering that the compromise
agreement does not provide for the payment of interest.
RULING:
Yes, Petitioner's failure to comply with terms of their contract entitles them to damages, by way
of interest. Respondents proffer that their right to damages is based on delay in the payment of
an obligation provided in the Compromise Agreement. This was approved by the trial court and
became the law governing their contract.
A compromise is an agreement between two or more persons, who, for preventing or putting an
end to a lawsuit, adjust their difficulties by mutual consent. It is one which everyone involved
prefers in the hope of gaining, balanced by the danger of losing.
The general rule is that a compromise has upon the parties the effect and authority of res judicata,
with respect to the matter definitely stated therein, or which by implication from its terms should
be deemed to have been included therein. This holds true even if the agreement has not been
judicially approved.
The Compromise Agreement was entered into by the parties on October 26, 1990. It was judicially
approved on September 30, 1991. Applying existing jurisprudence, the compromise agreement
became binding between the parties upon its execution and not upon its court approval.
Delay as used in this article is synonymous to default or mora which means delay in the fulfillment
of obligations. It is the non-fulfillment of the obligation with respect to time. Article 1169 of the New
Civil Code provides that those obliged to deliver or to do something incur in delay from the time
the obligee judicially or extrajudicially demands from them the fulfilment of their obligation.
 AGAPITO MANUEL, petitioner, vs.
HON. COURT OF APPEALS, HON. RAMON MAKASIAR and SPOUSES JESUS DE JESUS and
CARMEN DE JESUS, respondents.
G.R.NO.95469, July 25,1991

FACTS:

The private respondents are the owners of an apartment unit which was rented by the petitioner
on a month to month basis for a monthly rental of P466.00 payable in advance; that the petitioner
failed to pay the corresponding rentals for the month of May 1987 up to the filing of the complaint
on August 31, 1987; that on July 9, 1987, private respondents, through their counsel, sent a
demand letter to the petitioner (Exhibit "R") requiring him to pay his rentals in arrears and to vacate
the leased premises within five (5) days from receipt thereof, otherwise private respondents will
be constrained to file the appropriate legal action against him; that the demand letter of private
respondents' counsel was received by the petitioner on July 14, 1987; that in response thereto,
the petitioner addressed a letter dated July 15, 1987 to private respondent Carmen de Jesus,
furnishing a copy thereof to her counsel, stating that the amount of rentals, which the private
respondents allegedly refused to receive, had been deposited at United Coconut Planters Bank,
Taft Avenue Branch, with Account No. 8893 in the name of the petitioner's son, Mario Manuel,
and could be withdrawn upon notice of payment; that in order to collect the said rentals allegedly
deposited with the bank, the private respondents' counsel sent a letter dated August 14, 1987 to
the petitioner, requesting the payment of the unpaid rentals to his (private respondents' counsel)
office; that the said letter was received by the petitioner on August 18, 1987, and, instead of
complying with private respondents' counsel's request, the petitioner addressed a letter dated
August 24, 1987 to the private respondents' counsel requesting that the rentals in arrears be paid
to the private respondents at petitioner's house. The private respondents did not heed the
petitioner's request
ISSUE:
Whether or not private respondents Spouse De Jesus under the circumstances prevailing in this
instant case, were really in mora accipiendi that even if no deposit or consignation had been
made.
HELD:
No, the contention of petitioner that private respondents are in mora accipiendi cannot be upheld
either. The failure of the owners to collect or their refusal to accept the rentals are not valid
defenses. Consignation, under such circumstances, is necessary, and by this we mean one that
is effected in full compliance with the specific requirements of the law therefor.
Section 5(b) of Batas Pambansa Blg. 25, as amended, provides that in case of refusal by the
lessor to accept payment of the rental agreed upon, the lessee shall either deposit, by way of
consignation, the amount in court or in a bank in the name of and with notice to the lessor. The
failure of herein petitioner to comply with said requirement makes the consignation defective and
gives rise to a cause of action for ejectment. Compliance with the requisites of a valid consignation
is mandatory. It must be complied with frilly and strictly in accordance with the law. Substantial
compliance is not enough.
 ANTONIO R. CORTES (in his capacity as Administrator of the estate of Claro S.
Cortes), petitioner,
vs.
HON. COURT OF APPEALS and VILLA ESPERANZA DEVELOPMENT
CORPORATION, respondents.
G.R. NO. 126083, July 12, 2006
FACTS:
The antecedents show that for the purchase price of P3,700,000.00, the Corporation as buyer,
and Cortes as seller, entered into a contract of sale over the lots covered by Transfer Certificate
of Title. The Corporation advanced to Cortes the total sum of P1,213,000.00. Sometime in
September 1983, the parties executed a deed of absolute sale containing the following terms:

• Upon execution of this instrument, the Vendee shall pay unto the Vendor sum of TWO MILLION
AND TWO HUNDRED THOUSAND (P2,200,000.00) PESOS, less all advances paid by the
Vendee to the Vendor in connection with the sale;
• The balance of ONE MILLION AND FIVE HUNDRED THOUSAND [P1,500,000.00] PESOS,
shall be payable within ONE (1) YEAR from date of execution of this instrument.
• All expense for the registration of this document with the Register of Deeds concerned,
including the transfer tax, shall be divided equally between the Vendor and the Vendee.
On January 14, 1985, the Corporation filed the instant case for specific performance seeking to
compel Cortes to deliver the TCTs and the original copy of the Deed of Absolute Sale.
Cortes claimed that the owner's duplicate copy of the three TCTs were surrendered to the
Corporation and it is the latter which refused to pay in full the agreed down payment. He added
that portion of the subject property is occupied by his lessee who agreed to vacate the premises
upon payment of disturbance fee.
Due to the Corporation's failure to pay in full the sum of P2,200,000.00, he in turn failed to fully
pay the disturbance fee of the lessee who now refused to pay monthly rentals. He thus prayed
that the Corporation be ordered to pay the outstanding balance plus interest and in the alternative,
to cancel the sale and forfeit the P1,213,000.00 partial down payment, with damages in either
case.
On June 24, 1993, the trial court rendered a decision rescinding the sale and directed Cortes to
return to the Corporation the amount of P1,213,000.00, plus interest.

ISSUE:
Whether or not there is delay in the performance of the parties’ obligation that would justify the
rescission of the contract.

RULING:
Yes, the both parities’ is in delay. The decisive factor in evaluating an agreement is the intention
of the parties, as shown not necessarily by the terminology used in the contract but by their
conduct, words, actions and deeds prior to, during and immediately after executing the
agreement. As such, therefore, documentary and parol evidence may be submitted and admitted
to prove such intention.
There is no doubt that the contract of sale gave rise to a reciprocal obligation of the parties.
Reciprocal obligations are those which arise from the same cause, and which each party is a
debtor and a creditor of the other. Neither party incurs in delay if the other does not comply or is
not ready to comply in a proper manner.
Article 1191 of the Civil Code, states that “the power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with what is incumbent upon him.”
As to when said failure or delay in performance arise, Article 1169 of the same Code provides
that “in reciprocal obligations, neither party incurs in delay if the other does not comply or is not
ready to comply in a proper manner with what is incumbent upon him. From the moment one of
the parties fulfills his obligation, delay by the other begins.”
The issue therefore is whether there is delay in the performance of the parties' obligation that
would justify the rescission of the contract of sale. To resolve this issue, we must first determine
the true agreement of the parties.
 RODRIGO RIVERA, Petitioner, v. SPOUSES SALVADOR CHUA AND S. VIOLETA
CHUA, Respondents.
SPS. SALVADOR CHUA AND VIOLETA S. CHUA, Petitioners, v. RODRIGO
RIVERA, Respondent.
G.R. Nos. 184458/184472. January 14, 2015 (1169)
FACTS:
The parties were friends of long standing having known each other since 1973: Rivera and
Salvador are kumpadres, the former is the godfather of the Spouses Chua’s son.
On 24 February 1995, Rivera obtained a loan from the Spouses Chua in the tune of P120,000.00
embodied in a promissory note with stipulations that failure on the part of Rivera to pay the amount
on December 31, 1995, he agrees to pay 5% interest monthly from the date of default.
Three years from the date of payment stipulated in the promissory note, Rivera, issued and
delivered to Spouses Chua two (2) checks drawn against his account at Philippine Commercial
International Bank (PCIB) but upon presentment for payment, the two checks were dishonored
for the reason “account closed.” As of 31 May 1999, the amount due the Spouses Chua was
pegged at P366,000.00 covering the principal of P120,000.00 plus five percent (5%) interest per
month from 1 January 1996 to 31 May 1999.
The Spouses Chua alleged that they have repeatedly demanded payment from Rivera to no avail.
Because of Rivera’s unjustified refusal to pay, the Spouses Chua were constrained to file a suit
before the MeTC, Branch 30, Manila.
The MeTC ruled against Rivera requiring him to pay the spouses Chua P120,000.00 plus
stipulated interest at the rate of 5% per month from 1 January 1996, and legal interest at the rate
of 12% percent per annum from 11 June 1999 and was affirmed by the RTC of Manila. The Court
of Appeals further affirmed the decision upon appeal of the two inferior courts but with modification
of lowering the stipulated interest to 12% per annum. Hence, a petition at the Supreme Court.

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

RULING:
Yes. Rivera is still liable under the terms of the Promissory Note that he issued. The Promissory
Note is unequivocal about the date when the obligation falls due and becomes demandable—31
December 1995. As of 1 January 1996, Rivera had already incurred in delay when he failed to
pay the amount of ₱120,000.00 due to the Spouses Chua on 31 December 1995 under the
Promissory Note.
Article 1169 of the Civil Code explicitly provides that “Those obliged to deliver or to do something
incur in delay from the time the obligee judicially or extrajudicially demands from them the
fulfillment of their obligation.”
However, the demand by the creditor shall not be necessary in order that delay may exist:
(1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the obligation it appears that the designation
of the time when the thing is to be delivered or the service is to be rendered was a controlling
motive for the establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered it beyond his power to
perform.
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready
to comply in a proper manner with what is incumbent upon him. From the moment one of the
parties fulfills his obligation, delay by the other begins.
 MINDANAO TERMINAL AND BROKERAGE SERVICE, INC. Petitioner,
vs.
PHOENIX ASSURANCE COMPANY OF NEW YORK/MCGEE & CO., INC., Respondent.
G.R. NO. 162467, May 8, 2009
FACTS:
Del Monte Philippines, Inc. contracted Mindanao Terminal and Brokerage Service, Inc. a
stevedoring company, to load and stow a shipment of fresh green Philippine bananas and fresh
pineapples belonging to Del Monte Fresh Produce International, Inc. into the cargo hold of the
vessel M/V Mistrau. The vessel was docked at the port of Davao City and the goods were to be
transported by it to the port of Inchon, Korea in favor of consignee Taegu Industries, Inc. Del
Monte Produce insured the shipment under an "open cargo policy" with private respondent
Phoenix Assurance Company of New York (Phoenix), a non-life insurance company, and private
respondent McGee & Co. Inc. (McGee), the underwriting manager/agent of Phoenix.
Mindanao Terminal loaded and stowed the cargoes aboard. It was then discovered upon
discharge that some of the cargo was in bad condition. The Marine Cargo Damage Surveyor of
Incok Loss and Average Adjuster of Korea, through its representative Byeong Yong Ahn
(Byeong), surveyed the extent of the damage of the shipment. In a survey report, it was stated
that 16,069 cartons of the banana shipment and 2,185 cartons of the pineapple shipment were
so damaged that they no longer had commercial value.
Del Monte Produce filed a claim under the open cargo policy for the damages to its shipment.
McGee’s Marine Claims Insurance Adjuster evaluated the claim and recommended that payment
in the amount of $210,266.43 be made.
Phoenix and McGee instituted an action for damages against Mindanao Terminal in the Regional
Trial Court of Davao City, Branch 12. The RTC, decide that the only participation of Mindanao
Terminal was to load the cargoes on board the M/V Mistrau under the direction and supervision
of the ship’s officers. Accordingly, Mindanao Terminal cannot be held liable for whatever
happened to the cargoes after it had loaded and stowed them. Moreover, citing the survey report,
it was found by the RTC that the cargoes were damaged on account of a typhoon which M/V
Mistrau had encountered during the voyage. It was further held that Phoenix and McGee had no
cause of action against Mindanao Terminal because the latter, whose services were contracted
by Del Monte, had no contract with the assured Del Monte Produce.
The RTC dismissed the complaint and awarded the counterclaim of Mindanao Terminal in the
amount of ₱83,945.80 as actual damages and ₱100,000.00 as attorney’s fees. The actual
damages were awarded as reimbursement for the expenses incurred by Mindanao Terminal’s
lawyer in attending the hearings in the case wherein he had to travel all the way from Metro Manila
to Davao City.

ISSUE:
Whether or not Mindanao Terminal is liable for not having exercised extraordinary diligence in the
transport and storage of the cargo.
RULING:
No. As it is clear that Mindanao Terminal had duly exercised the required degree of diligence in
loading and stowing the cargoes, which is the ordinary diligence of a good father of a family, the
grant of the petition is in order.
The present case is clearly not an unfounded civil action against the plaintiff as there is no showing
that it was instituted for the mere purpose of vexation or injury. It is not sound public policy to set
a premium to the right to litigate where such right is exercised in good faith, even if
erroneously. Likewise, the RTC erred in awarding ₱83,945.80 actual damages to Mindanao
Terminal. Although actual expenses were incurred by Mindanao Terminal in relation to the trial of
this case in Davao City, the lawyer of Mindanao Terminal incurred expenses as he attended the
trials coming all the way from Manila. But there is no showing that Phoenix and McGee made a
false claim against Mindanao Terminal resulting in the protracted trial of the case necessitating
the incurrence of expenditures.
 JUAN F. NAKPIL & SONS and JUAN F. NAKPIL, petitioners,
vs.
THE COURT OF APPEALS, UNITED CONSTRUCTION COMPANY, INC., JUAN J. CARLOS,
and the PHILIPPINE BAR ASSOCIATION, respondents.
G.R. No. L-47863 April 15, 1988
FACTS:
Philippine Bar Association decided to construct an office building on its 840 square meters lot
located at the corner of Aduana and Arzobispo Streets, Intramuros, Manila., PBA contracted the
services of third-party defendants-appellants Juan F. Nakpil & Sons and Juan F. Nakpil for the
plans, specifications and design. And United Construction Company, Inc. for the construction of
the building. The building was completed in June 1966.
On August 2, 1968, an unusually strong earthquake hit Manila and the building in question
sustained major damage. The front columns of the building buckled causing the building to tilt
forward dangerously. As a temporary remedial measure, the building was shored up by UCCI at
the expense of P13,661.28.
On Nov. 29, 1968 PBA commenced action for recovery damages against UCCI. UCCI then filed
a complaint against Nakpils alleging in essence that the collapse of the building was due to the
defects of architect plans.
Upon the investigation of the Commissioner it was found that the damage of the buildings were
caused by the defect in the plans and specifications prepared by the Nakpils and UCCI deviations
from said plans and specifications and its failure to observe the requisite workmanship in the
construction and PBA’s failure to supervise the construction of the building.
ISSUE:
Whether or not UCCI as wells as Nakpils are liable even if the damage was due to a fortuitous
event.

RULING:
Yes. The Court ruled in the affirmative. The Civil Code provides that when there is a fortuitous
event the debtor is exempt from liability however there is an exception. If fraud, negligence, delay
in the event on the part of the party then the party liable cannot be exempted therefore PBA can
recover damages from UCCI and Nakpils. The negligence of the defendant was shown when and
proved that there was an alteration of the plans and specification that had been so stipulated
among them. The court’s decision was there should be no question that NAKPIL and UNITED are
liable for damages because of the collapse of the building.
“One who negligently creates a dangerous condition cannot escape liability for the natural and
probable consequences thereof, although the act of a third person, or an act of God for which he
is not responsible, intervenes to precipitate the loss.”
 HONGKONG AND SHANGHAI BANKING CORP., LTD. STAFF RETIREMENT PLAN,
Retirement Trust Fund, Inc.) Petitioner,
vs.
SPOUSES BIENVENIDO AND EDITHA BROQUEZA, Respondents.
G.R. No. 178610 November 17, 2010
FACTS:
Petitioners Gerong and [Editha] Broqueza are employees of Hongkong and Shanghai Banking
Corporation. They are also members of respondent Hongkong Shanghai Banking Corporation,
Ltd. Staff Retirement Plan. The HSBCL-SRP is a retirement plan established by HSBC through
its Board of Trustees for the benefit of the employees.
On October 1, 1990, petitioner [Editha] Broqueza obtained a car loan in the amount of
Php175,000.00. On December 12, 1991, she again applied and was granted an appliance loan
in the amount of Php24,000.00. On the other hand, petitioner Gerong applied and was granted
an emergency loan in the amount of Php35,780.00 on June 2, 1993. These loans are paid through
automatic salary deduction.
In 1993, a labor dispute arose between HSBC and its employees. Majority of HSBC’s employees
were terminated, among whom are petitioners Editha Broqueza and Fe Gerong. The employees
then filed an illegal dismissal case before the National Labor Relations Commission (NLRC)
against HSBC.
The dismissal of petitioners was making them not able to pay the monthly amortizations of their
respective loans. Thus, respondent HSBCL-SRP considered the accounts of petitioners
delinquent. Demands to pay the respective obligations were made upon petitioners, but they failed
to pay.

ISSUE:
Whether or not the loan is immediately demandable.

RULING:
Yes. The RTC ruled that Gerong and Editha Broqueza’s termination from employment disqualified
them from availing of benefits under their retirement plans. As a consequence, there is no longer
any security for the loans. HSBCL-SRP has a legal right to demand immediate settlement of the
unpaid balance because of Gerong and Editha Broqueza’s continued default in payment and their
failure to provide new security for their loans. Moreover, the absence of a period within which to
pay the loan allows HSBCL-SRP to demand immediate payment. The loan obligations are
considered pure obligations, the fulfillment of which are demandable at once.
 MILA A. REYES, Petitioner,
vs.
VICTORIA T. TUPARAN, Respondent.
G.R. No. 188064 June 1, 2011

FACTS:
In December 1989, Tuparan leased a space on the ground floor of the RBJ Building of Reyes for
her pawnshop business for a monthly rental of ₱4,000.00. A close friendship developed between
the two which led to the respondent investing thousands of pesos in petitioner’s financing/lending
business with interest at the rate of 6% a month.
On June 20, 1988, petitioner mortgaged the subject real properties to the Farmers Savings Bank
and Loan Bank, Inc. to secure a loan of ₱2,000,000.00 payable in installments. On November 15,
1990, Reyes outstanding account on the mortgage reached ₱2,278,078.13 then she decided to
sell her real properties for at least ₱6,500,000.00 so she could liquidate her bank loan and finance
her businesses. Tuparan verbally offered to conditionally buy Reyes real properties for
₱4,200,000.00 payable on installment basis without interest and to assume the bank loan.
Both parties worked together to obtain FSL Bank’s approval for respondent to assume her
outstanding bank account. The parties and FSL Bank executed the corresponding Deed of
Conditional Sale of Real Properties with Assumption of Mortgage. Due to their close personal
friendship and business relationship, both parties chose not to reduce into writing the other terms
of their agreement
Tuparan defaulted in the payment of her obligations on their due dates. Tuparan paid Reyes in
small amounts from time to time. To compensate for her delayed payments, respondent agreed
to pay petitioner an interest of 6% a month and have a balance of ₱805,000.00 as principal on
the unpaid installments.
Reyes consented Tuparan in owning the subject real properties and even wanted to convert the
entire property into a modern commercial complex because Tuparan repeatedly professed
friendship and assured her that all their verbal side agreement would be honored Tuparan had
not collected any rentals from the petitioner for the space occupied by her drugstore and
cosmetics store.

ISSUE:
Whether or not the contract entered into by the parties is a contract to sell.

RULING:
Yes. The CA agreed with the RTC that the contract entered into by the parties is a contract to sell
but ruled that the remedy of rescission could not apply because the respondent’s failure to pay
the petitioner the balance of the purchase price in the total amount of ₱805,000.00 was not a
breach of contract, but merely an event that prevented the seller (petitioner) from conveying title
to the purchaser (respondent). It reasoned that out of the total purchase price of the subject
property in the amount of ₱4,200,000.00, respondent’s remaining unpaid balance was only
₱805,000.00. Since respondent had already paid a substantial amount of the purchase price, it
was but right and just to allow her to pay the unpaid balance of the purchase price plus interest.
Accordingly, the petitioner’s obligation to sell the subject properties becomes demandable only
upon the happening of the positive suspensive condition, which is the respondent’s full payment
of the purchase price. Without respondent’s full payment, there can be no breach of contract to
speak of because petitioner has no obligation yet to turn over the title. Respondent’s failure to pay
in full the purchase price is not the breach of contract contemplated under Article 1191 of the New
Civil Code but rather just an event that prevents the petitioner from being bound to convey title to
the respondent.
A contract of sale is defined in Article 1458 of the Civil Code, thus: 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.
 CENTRAL PHILIPPINE UNIVERSITY, petitioner,
vs.
COURT OF APPEALS, REMEDIOS FRANCO, FRANCISCO N. LOPEZ, CECILIA P. VDA. DE
LOPEZ, REDAN LOPEZ AND REMARENE LOPEZ, respondents.
G.R. No. 112127 July 17, 1995

FACTS:
In 1939, Don Ramon Lopez, Sr. executed a deed of donation in favor of the latter of a parcel of
land with the following conditions; the land described shall be utilized by the CPU exclusively for
the establishment and use of a medical college, the said college shall not sell, transfer or convey
to any third party, and the said land shall be called "RAMON LOPEZ CAMPUS", any net income
from the land or any of its parks shall be put in a fund to be known as the "RAMON LOPEZ
CAMPUS FUND" to be used for improvements of said campus.
In 1989, the heirs of Don Ramon Lopez, Sr., filed an action for annulment of donation,
reconveyance and damages against CPU not complying with the conditions of the donation. They
also argued that petitioner had in fact negotiated with the National Housing Authority (NHA) to
exchange the donated property with another land owned by the latter.
Petitioner alleged that the right of private respondents to file the action had prescribed; that it did
not violate any of the conditions in the deed of donation because it never used the donated
property for any other purpose than that for which it was intended; and, that it did not sell, transfer
or convey it to any third party.

ISSUE:
Whether or not Central Philippine University failed to comply with resolutory condition.

RULING:
Yes. Under Art. 1181 of the Civil Code, on conditional obligations, the acquisition of rights, as well
as the extinguishment or loss of those already acquired, shall depend upon the happening of the
event which constitutes the condition. Thus, when a person donates land to another on the
condition that the latter would build upon the land a school, the condition imposed was not a
condition precedent or a suspensive condition but a resolutory one. It is not correct to say that the
schoolhouse had to be constructed before the donation became effective, that is, before the
donee could become the owner of the land, otherwise, it would be invading the property rights of
the donor. The donation had to be valid before the fulfillment of the condition. If there was no
fulfillment or compliance with the condition, such as what obtains in the instant case, the donation
may now be revoked and all rights which the donee may have acquired under it shall be deemed
lost and extinguished.
 ROWENA R. SALONTE, Petitioner,
vs.
COMMISSION ON AUDIT, CHAIRPERSON MA. GRACIA PULIDO-TAN, COMMISSIONER
JUANITO G. ESPINO, JR., COMMISSIONER HEIDI L. MENDOZA, and FORTUNATA M.
RUBICO, DIRECTOR IV, COA COMMISSION SECRETARIAT, in their official
capacities, Respondents.
G.R. No. 207348 August 19, 2014
FACTS:
The City of Mandaue and F.F. Cruz and Co., Inc. entered into a Contract of Reclamation agreed
to undertake, at its own expense, the reclamation of 180 hectares, more or less, of foreshore and
submerged lands fromthe Cabahug Causeway in that city.
Executed MOA were the City of Mandaue allowed F.F. Cruz to put up structures on a portion of
a parcel of land owned by the city for the use of and to house F.F. Cruz personnel assigned at
the project site. However, the structures and facilities built by F.F. Cruz subject of the MOA stood
in the direct path of the road widening project. Thus, the Department of Public Works and
Highways and Darza, entered into an Agreement to Demolish, Remove and Reconstruct
Improvement. Whereby the latter would demolish the improvements outside of the boundary and
receive the total amount of PhP 1,084,836.42 in compensation.
Rowena Solante prepared and, with the approval of Samuel B. Darza, then issued Disbursement
Voucher for PhP 1,084,836.42 in favor of F.F. Cruz. In the voucher, Solante certified that the
expense covered by it was "necessary, lawful and incurred under my direct supervision."
Thereafter, Darza addressed a letter-complaint to the Office of the Ombudsman, Visayas, inviting
attention to several irregularities regarding the implementation of MCDP II. The letter was referred
to the COA.
F.F. Cruz and Company, Inc. was paid ₱1,084,836.42 for the cost of the property affected by the
widening of Plaridel Extension, Mandaue Causeway. However, under Section 5 of its MOA with
Mandaue City, the former was no longer the lawful owner of the properties at the time the payment
was made.
However, the Special Audit office did not allow it and naming, Darza and Solante liable for the
transaction.

ISSUE:
Whether or not Mandaue and F.F. Cruz owned the material during the period material were
demolished.

RULING:
No. F.F. Cruz is still the owner. Article 1193 states that “Obligations for whose fulfillment a day
certain has been fixed, shall be demandable only when that day comes”
The Contract of Reclamation reveals that the six (6)-year period provided for project completion,
or, with like effect, termination of the contract was a mere estimate and cannot be considered a
period or a "day certain" in Article 1193. As such, the lapse of six (6) years from the perfection of
the contract did not, by itself, make the obligation to finish the reclamation project demandable,
such as to put the obligor in a state of actionable delay for its inability to finish. Thus, F.F. Cruz
cannot be deemed to be in delay.
As it were, the Mandaue-F.F. Cruz MOA states that the structures built by F.F. Cruz on the
property of the city will belong to the latter only upon the completion of the project. Clearly, the
completion of the project is a suspensive condition that has yet to be fulfilled. Until the condition
arises, ownership of the structures properly pertains to F.F. Cruz.
 SPOUSES CHIN KONG WONG CHOI AND ANA O. CHUA, Petitioners,
vs.
UNITED COCONUT PLANTERS BANK, Respondent.
G.R. No. 207747, March 11, 2015
FACTS:
Chin Kong Wong Choi and Ana O. Chua entered into a Contract to Sell with Primetown Property
Group, Inc. The Contract to Sell provided that Spouses Choi agreed to buy condominium in Kiener
Hills Cebu from Primetown for a consideration of P1,151,718.75, with a down payment of
P100,000.00 and the remaining balance payable in 40 equal monthly installments of P26,292.97.
On 23 April 1998, respondent United Coconut Planters Bank (UCPB), a commercial bank duly
organized and existing under the laws of the Philippines, executed a Memorandum of
Agreement and Sale of Receivables and Assignment of Rights and Interests with Primetown. The
Agreement provided that Primetown, in consideration of P748,000,000.00, "assigned, transferred,
conveyed and set over unto [UCPB] all Accounts Receivables accruing from Primetown's Kiener
together with the assignment of all its rights, titles, interests and participation over the units
covered by or arising from the Contracts to Sell from which the Accounts Receivables have
arisen." Included in the assigned accounts receivable was the account of Spouses Choi, who
proved payment of one monthly amortization to UCPB on 3 February 1999.

On 11 April 2006, the Spouses Choi filed a complaint for refund of money with interest and
damages against Primetown and UCPB before the Housing and Land Use Regulatory Board
(HLURB) Regional Field Office No. VI (RFO VI). Spouses Choi alleged that despite their full
payment of the purchase price, Primetown failed to finish the construction of Kiener and to deliver
the condominium unit to them.

ISSUE:
Whether or not the Agreement between Primetown and UCPB, makes Primetown have a liabilities
and obligations to Spouses Choi.

RULING:
Yes. An assignment of credit has been defined as an agreement by virtue of which the owner of
a credit, known as the assignor, by a legal cause - such as sale, dation in payment or exchange
or donation - and without need of the debtor’s consent, transfers that credit and its accessory
rights to another, known as the assignee, who acquires the power to enforce it to the same extent
as the assignor could have enforced it against the debtor. In every case, the obligations between
assignor and assignee will depend upon the judicial relation which is the basis of the
assignment. An assignment will be construed in accordance with the rules of construction
governing contracts generally, the primary object being always to ascertain and carry out the
intention of the parties. This intention is to be derived from a consideration of the whole instrument,
all parts of which should be given effect, and is to be sought in the words and language employed.
 COUNTRY BANKERS INSURANCE CORPORATION and ENRIQUE SY, petitioners,
vs.
COURT OF APPEALS and OSCAR VENTANILLA ENTERPRISES
CORPORATION, respondents
G.R. No. 85161 September 9, 1991

FACTS:
Oscar Ventanilla Enterprises Corporation and the Enrique F. Sy, entered into a lease agreement
over the Avenue, Broadway and Capitol Theaters, including their air-conditioning systems,
projectors and accessories needed for showing the films or motion pictures. The term of the lease
was for six (6) years commencing. After more than two (2) years of operation of the Avenue,
Broadway and Capitol Theaters, the lessor OVEC made demands for the repossession of the
said leased properties in view of the Sy's arrears in monthly rentals and non-payment of
amusement taxes.
OVEC and Sy had a conference and by reason of Sy's request for reconsideration of OVECs
demand for repossession of the three theaters, the former was allowed to continue operating the
leased premises upon his conformity to certain conditions imposed by the latter in a supplemental
agreement.
The accrued amusement tax liability of the three (3) theaters to the City Government of
Cabanatuan City had accumulated to P84,000.00 despite the fact that Sy had been deducting the
amount of P4,000.00 from his monthly rental with the obligation to remit the said deductions to
the city government.
OVEC padlocked the gates of the three theaters under lease and took possession thereof in the
morning of February 11, 1980 by posting its men around the premises of the movie houses and
preventing the lessee's employees from entering the same. And Sy, through his counsel, filed the
present action for reformation of the lease agreement, damages and injunction. Through the virtue
of restraining order, Sy regained possession and operation of the Avenue, Broadway and Capital
theaters.
The trial court came to the following conclusions: Sy is not entitled to a reformation of the lease
agreement; OVEC's repossession of the leased premises following the cancellation and
termination of the lease was in accordance with the parties' agreement and applicable law; and
the consequent forfeiture of Sy's cash deposit in favor of OVEC was clearly agreed upon by them
in the lease agreement. Sy was not entitled to the writ of preliminary injunction issued in his favor
after the lawsuit was filed, and the injunction bond submitted by Sy is accountable for any losses
OVEC may have suffered as a result of the injunction, according to the trial court.

ISSUE:
Whether or not there is argument that the forfeiture clause stipulated in the lease agreement.
RULING:
No. A provision which calls for the forfeiture of the remaining deposit still in the possession of the
lessor, without prejudice to any other obligation still owing, in the event of the termination or
cancellation of the agreement by reason of the lessee's violation of any of the terms and
conditions of the agreement is a penal clause that may be validly entered into. A penal clause is
an accessory obligation which the parties attach to a principal obligation for the purpose of
insuring the performance thereof by imposing on the debtor a special presentation in case the
obligation is not fulfilled or is irregularly or inadequately fulfilled.
As a general rule, in obligations with a penal clause, the penalty shall substitute the indemnity for
damages and the payment of interests in case of non-compliance. This is specifically provided for
in Article 1226. In such case, proof of actual damages suffered by the creditor is not necessary in
order that the penalty may be demanded (Article 1228, New Civil Code). However, there are
exceptions to the rule that the penalty shall substitute the indemnity for damages and the payment
of interests in case of non-compliance with the principal obligation. They are first, when there is a
stipulation to the contrary; second, when the obligor is sued for refusal to pay the agreed penalty;
and third, when the obligor is guilty of fraud (Article 1226). It is evident that in all said cases, the
purpose of the penalty is to punish the obligor. Therefore, the obligee can recover from the obligor
not only the penalty but also the damages resulting from the non-fulfillment or defective
performance of the principal obligation.
PHILIPPINE COMMERCIAL INTERNATIONAL BANK (now BDO UNIBANK, INC.), Petitioner,
vs.
ARTURO P. FRANCO, substituted by his heirs, namely: MAURICIA P. FRANCO,
FLORIBEL P. FRANCO, AND ALEXANDER P. FRANC0, Respondents
G.R. No. 180069 March 5, 2014

FACTS:
The complaint essentially alleges, among others, that plaintiff secured from defendant. And
despite demands, defendants refused and still refuses to return to plaintiff the trust amounts, plus
the stipulated interest that in all of the trust transactions that defendant PCIB had entered into.
PCIB represented to plaintiff that in making the trust investment, plaintiff was actually providing
for his future since the money invested was going to be managed and administered by their PCIB-
Trust Services Group and will be commingled, pooled and automatically rolled- over for better
investment return.
The plaintiff invested his lifetime savings in the hope that the defendant bank will actually provide
for their future by reinvesting and rolling-over their investment automatically, without any need for
the plaintiff to take any further action.
Occasionally, plaintiff had visited the defendant bank to request for a status on his investments,
bank officers would normally pull out his ledger card and show plaintiff the updated amount due
him.
In 1995, plaintiff discovered that one of his children had leukemia and in the ensuing
hospitalization and treatment, plaintiff spent a lot of money; that because his funds were already
exhausted, plaintiff then turned to his Trust Indenture Certificates and started inquiring as to how
he could liquidate the trust; that in the beginning, defendant bank constantly asked for time to look
for his records, Branch and Trust Department says it might take some time to retrieve their records
On June 22, 2000, he received a letter signed by defendant’s counsel, Curato Divina & Partners,
in effect denying plaintiff’s request for payment by stating that due to the conversion of all
outstanding PCI Bank trust indenture accounts into common trust certificates, all such PCIBank
trust indenture certificates have been rendered "null and void." Plaintiff prays for the payment of
the amounts under the Trust Indenture Certificates, plus interest, moral and exemplary damages
and attorney’s fees.

ISSUE:
Whether or not the issue of alleged payment by petitioner Bank on the subject trust certificate
indentures.
RULING:
Jurisprudence abounds that, in civil cases, one who pleads payment has the burden of proving
it. Even where the plaintiff must allege non-payment, the general rule is that the burden rests on
the defendant to prove payment, rather than on the plaintiff to prove non-payment.9 When the
creditor is in possession of the document of credit, he need not prove non-payment for it is
presumed. The creditor's possession of the evidence of debt is proof that the debt has not been
discharged by payment.
In this case, respondent's possession of the original copies of the subject TICs strongly supports
his claim that petitioner Bank's obligation to return the principal plus interest of the money
placement has not been extinguished. The TICs in the hands of respondent is a proof of
indebtedness and prima facie evidence that they have not been paid. Petitioner Bank could have
easily presented documentary evidence to dispute the claim, but it did not. In its omission, it may
be reasonably deduced that no evidence to that effect really exist. Worse, the testimonies of
petitioner Bank's own witnesses, reinforce, rather than belie, respondent's allegations of non-
payment.
 CESAR V. AREZA and LOLITA B. AREZA, Petitioners,
vs.
EXPRESS SAVINGS BANK, INC. and MICHAEL POTENCIANO, Respondents
G.R. No. 176697 September 10, 2014

FACTS:
Petitioners Cesar V. Areza and LolitaB. Areza maintained two bank deposits with respondent
Express Savings Bank’s Biñan branch. They were engaged in the business of "buy and sell" of
brand new and second-hand motor vehicles. On 2 May 2000, they received an order from a
certain Gerry Mambuay (Mambuay) for the purchase of a second-hand Mitsubishi Pajero and a
brand-new Honda CRV.
The buyer, Mambuay, paid petitioners with nine (9) Philippine Veterans Affairs Office (PVAO)
checks payable to different payees and drawn against the Philippine Veterans Bank (drawee),
each valued at Two Hundred Thousand Pesos (₱200,000.00) for a total of One Million Eight
Hundred Thousand Pesos (₱1,800,000.00).
petitioners claimed that Michael Potenciano was present during the transaction and immediately
offered the services of the Bank for the processing and eventual crediting of the said checks to
petitioners’ account. On the other hand, Potenciano countered that he was prevailed upon to
accept the checks by way of accommodation of petitioners who were valued clients of the Bank.
On 3 May 2000, petitioners deposited the said checks in their savings account with the Bank.
On 6 May 2000, Potenciano informed petitioners that the checks they deposited with the Bank
were honored. He allegedly warned petitioners that the clearing of the checks pertained only to
the availability of funds and did not mean that the checks were not infirmed.
PVAO returned the subject checks to the drawee in July 2000, claiming that the amount on the
face of the checks had been changed from the original amount of 4,000.00 to 200,000.00. The
checks were returned to Equitable-PCI Bank via Special Clearing Receipts by the drawee.
Equitable-PCI Bank informed the Bank in August 2000 that the drawee had dishonored the checks
due to significant modifications. The Philippine Clearing House initially received an objection from
Equitable-PCI Bank. The latter found in favor of the drawee Philippine Veterans Bank in February
2001. In turn, Equitable-PCI Bank debited the Bank's deposit account in the amount of
$1,800,000.00. The Bank insisted that they informed petitioners of said development.
On March 2001, petitioners issued a check in the amount of ₱500,000.00. Said check was
dishonored by the Bank for the reason "Deposit Under Hold." According to petitioners, the Bank
unilaterally and unlawfully put their account with the Bank on hold. On 22 March 2001, petitioners’
counsel sent a demand letter asking the Bank to honor their check. The Bank refused to heed
their request and instead, closed the Special Savings Account of the petitioners with a balance of
₱1,179,659.69 and transferred said amount to their savings account. The Bank then withdrew the
amount of ₱1,800,000.00representing the returned checks from petitioners’ savings account.
ISSUE:
Whether or not he Bank can set-off the amount it paid to Equitable-PCI Bank with petitioners’
savings account.

RULING:
No. Under Art. 1278 of the New Civil Code, compensation shall take place when two persons, in
their own right, are creditors and debtors of each other. And the requisites for legal compensation
are:
(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.
It is well-settled that the relationship of the depositors and the Bank or similar institution is that of
creditor-debtor. Article 1980 of the New Civil Code provides that fixed, savings and current
deposits of money in banks and similar institutions shall be governed by the provisions concerning
simple loans. The bank is the debtor and the depositor is the creditor. The depositor lends the
bank money and the bank agrees to pay the depositor on demand. The savings deposit
agreement between the bank and the depositor is the contract that determines the rights and
obligations of the parties.
 LEONARDO BOGNOT, Petitioner,
vs.
RRI LENDING CORPORATION, represented by its General Manager, DARIO J.
BERNARDEZ, Respondent
G.R. No. 180144 September 24, 2014

FACTS:
In September 1996, Leonardo Bognot and his younger brother, Rolando Bognot applied for and
obtained a loan of P500,000.00 from RRI Lending, payable on November 30, 1996. The loan was
evidenced by a promissory note and was secured by a postdated check dated November 30,
1996.
Evidence on record shows that the petitioner renewed the loan several times on a monthly basis.
He paid a renewal fee of ₱54,600.00 for each renewal, issued a new post-dated check as security,
and executed and/or renewed the promissory note previously issued. The respondent on the other
hand, cancelled and returned to the petitioner the post-dated checks issued prior to their renewal.
The petitioner purportedly paid the renewal fees and issued a post-dated check dated June 30,
1997 as security. As had been done in the past, the respondent superimposed the date "June 30,
1997" on the upper right portion of Promissory Note No. 97-035 to make it appear that it would
mature on the said date.
Several days before the loan’s maturity, Rolando’s wife, Julieta Bognot, went to the respondent’s
office and applied for another renewal of the loan. She issued in favor of the respondent
Promissory Note in the amount of ₱54,600.00 as renewal fee.
On the excuse that she needs to bring home the loan documents for the Bognot siblings’
signatures and replacement. Mrs. Bognot, however, never returned these documents nor issued
a new post-dated check. Consequently, the respondent sent the petitioner follow-up letters
demanding payment of the loan, plus interest and penalty charges. These demands went
unheeded.
Mrs. Bognot convinced the respondent’s clerk to release to her the promissory note and the other
loan documents; that since Mrs. Bognot never issued any replacement check, no loan extension
took place and the loan, originally payable on June 30, 1997, became due on this date; and
despite repeated demands, the Bognot siblings failed to pay their joint and solidary obligation.
The petitioner claimed that the complaint states no cause of action because the respondent’s
claim had been paid, waived, abandoned or otherwise extinguished.

ISSUE:
Whether or not the parties’ obligation was extinguished by: (i) payment; and (ii) novation by
substitution of debtors.
RULING:
Jurisprudence tells us that one who pleads payment has the burden of proving it; the burden rests
on the defendant to prove payment, rather than on the plaintiff to prove non-payment. Indeed,
once the existence of an indebtedness is duly established by evidence, the burden of showing
with legal certainty that the obligation has been discharged by payment rests on the debtor.
In the present case, the petitioner failed to satisfactorily prove that his obligation had already been
extinguished by payment. As the CA correctly noted, the petitioner failed to present any evidence
that the respondent had in fact encashed his check and applied the proceeds to the payment of
the loan. Neither did he present official receipts evidencing payment, nor any proof that the check
had been dishonored.
The petitioner merely relied on the respondent’s cancellation and return to him of the check dated
April 1, 1997. The evidence shows that this check was issued to secure the indebtedness. The
acts imputed on the respondent, standing alone, do not constitute sufficient evidence of payment.
Article 1249, paragraph 2 of the Civil Code provides: The delivery of promissory notes payable to
order, or bills of exchange or other mercantile documents shall produce the effect of payment only
when they have been cashed, or when through the fault of the creditor they have been impaired.