Professional Documents
Culture Documents
2.
Facts:
The petition before us has its roots in a complaint for specific performance to compel herein
petitioners (except the last named, Catalina Balais Mabanag) to consummate the sale of a parcel
of land with its improvements located along Roosevelt Avenue in Quezon City entered into by
the parties sometime in January 1985 for the price of P1,240,000.00.
January 19, 1985, defendants-appellants Romulo Coronel, et. al. (hereinafter referred to as
Coronels) executed a document entitled "Receipt of Down Payment" (Exh. "A") in favor of
plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona)... conditions appurtenant to
the sale are the following:
1. Ramona will make a down payment of Fifty Thousand (P50,000.00) pesos upon execution of
the document aforestated;
2. The Coronels will cause the transfer in their names of the title of the property registered in the
name of their deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos down
payment;
3. Upon the transfer in their names of the subject property, the Coronels will execute the deed of
absolute sale in favor of Ramona and the latter will pay the former the whole balance of One
Million One Hundred Ninety Thousand (P1,190,000.00) Pesos.
Plaintiff-appellee Concepcion D. Alcaraz (hereinafter referred to as Concepcion), mother of
Ramona, paid the down payment of Fifty Thousand (P50,000.00),the property originally
registered in the name of the Coronel's father was transferred in their names,the Coronels sold
the property covered by TCT No. 327043 to intervenor-appellant Catalina B. Mabanag
(hereinafter referred to as Catalina) for One Million Five Hundred Eighty Thousand
(P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand Coronels canceled and
rescinded the contract (Exh. "A") with Ramona by depositing the down payment paid by
Concepcion in the bank in trust for Ramona Patricia Alcara Catalina caused the annotation of a
notice of adverse claim covering the same property with the Registry of Deeds of Quezon City
the Coronels executed a Deed of Absolute Sale over the subject property in favor of Catalina (a
new title over the subject property was issued in the name of Catalina under TCT No. 351582)
judgment for specific performance is hereby rendered ordering defendant to execute in favor of
plaintiffs a deed of absolute sale covering that parcel of land embraced in and covered by
Transfer Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of Deeds for
Quezon City, together with all the improvements.
Motion for reconsideration was filed by petitioners before the new presiding judge of the Quezon
City RTC but the same was denied by Judge Estrella T. Estrada
Issues: Precise determination of the legal significance of the document entitled "Receipt of
Down Payment" which was offered in evidence by both parties.
Ruling:
We hold that the contract between the petitioner and the respondent was a contract to sell
where the ownership or title is retained by the seller and is not to pass until the full payment of
the price, such payment being a positive suspensive condition and failure of which is not a
breach, casual or serious, but simply an event that prevented the obligation of the vendor to
convey title from acquiring binding force.
The contract entered into in the case at bar, the sellers were the ones who were unable to
enter into a contract of absolute sale by reason of the fact that the certificate of title to the
property was still in the name of their father. It was the sellers in this case who, as it were, had
the impediment which prevented, so to speak, the execution of a contract of absolute sale.
What is clearly established by the plain language of the subject document is that when the
said "Receipt of Down Payment" was prepared and signed by petitioners Romulo A. Coronel, et.
al., the parties had agreed to a conditional contract of sale, consummation of which is subject
only to the successful transfer of the certificate of title from the name of petitioners' father,
Constancio P. Coronel, to their names Since the condition contemplated by the parties which is
the issuance of a certificate of title in petitioner's names was fulfilled on February 6, 1985, the
respective obligations of the parties under the contract of sale became mutually demandable, that
is, petitioners, as sellers, were obliged to present the transfer certificate of title already in their
names to private respondent Ramona P. Alcaraz, the buyer, and to immediately execute the deed
of absolute sale, while the buyer on her part, was obliged to forthwith pay the balance of the...
purchase price amounting to P1,190,000.00.
Had petitioners-sellers not complied with this condition of first transferring the title to the
property under their names, there could be no perfected contract of sale. the sale to the other
petitioner, Catalina B. Mabanag, gave rise to a caseof double sale where Article 1544 of the Civil
Code will apply, to wit: The record of the case shows that the Deed of Absolute Sale dated April
25, 1985 as proof of the second contract of sale was registered with the Registry of Deeds of
Quezon City giving rise to the issuance of a new certificate of title in the name of Catalina B.
Mabanag on June 5, 1985.
Thus, the second paragraph of Article 1544 shall apply. The above-cited provision on
double sale presumes title or ownership to pass to the buyer, the exceptions being:
(a) when the second buyer, in good faith, registers the sale ahead of the first buyer, and
(b) should there be no inscription by either of the two buyers, when the second buyer, in
good faith, acquires possession of the property ahead of the first buyer. Unless, the second buyer
satisfies these requirements, title or ownership will not transfer to him to the prejudice of the first
buyer.
If a vendee in a double sale registers the sale after he has acquired knowledge that there
was a previous sale of the same property to a third party or that another person claims said
property in a previous sale, the registration will constitute a registration in bad faith and will not
confer upon him any right.
Principles:
In a contract to sell, the prospective seller explicitly reserves the transfer of title to the
prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer
ownership of the property subject of the contract to sell until the happening of an event, which
for present purposes we shall take as the full payment of the purchase price. What the seller
agrees or obliges himself to do is to fulfill his promise to sell the subject property when the
entire amount of the purchase price is delivered to him.
3.
G.R. No. 108129
September 23, 1999
Petition:
For review the Decision of the Court of Appeals, which set aside the judgment of the Regional
Trial Court of Pasig, Branch 151 for alleged breach of contract where petitioner prevailed in the
trial court but appellate court reversed and found petitioner guilty of delay and liable for
damages.h
ANTECEDENT FACTS:
On June 27, 1986, petitioner Aerospace Industries, Inc., purchased five hundred (500) metric
tons of sulfuric acid from private respondent Philippine Phosphate Fertilizer Corporation
(Philphos).
In July 1986, the agreement provided that the buyer shall pay its purchases in equivalent
Philippine currency value, 5 days prior to the shipment date. Petitioner as buyer committed to
secure the means of transport to pick-up the purchases from private respondent’s loadports. Per
agreement, one hundred metric tons (100 MT) of sulfuric acid should be taken from Basay,
Negros Oriental storage tank, while the remaining four hundred metric tons (400 MT) should be
retrieved from Sangi, Cebu.
On August 6, 1986, private respondent sent an advisory letter to petitioner to withdraw the
sulfuric acid purchased at Basay because private respondent had been incurring incremental
expense of two thousand (P2,000.00) pesos for each day of delay in shipment.cha
On October 3, 1986, petitioner paid five hundred fifty-three thousand, two hundred eighty
(P553,280.00) pesos for 500 MT of sulfuric acid.
On November 19, 1986, petitioner chartered M/T Sultan Kayumanggi, owned by Ace Bulk Head
Services. The vessel was assigned to carry the agreed volumes of freight from designated loading
areas. M/T Kayumanggi withdrew only 70.009 MT of sulfuric acid from Basay because said
vessel heavily tilted on its port side. Consequently, the master of the ship stopped further
loading. Thereafter, the vessel underwent repairs.
In a demand letter 5 dated December 12, 1986, private respondent asked petitioner to retrieve the
remaining sulfuric acid in Basay tanks so that said tanks could be emptied on or before
December 15, 1986. Private respondent said that it would charge petitioner the storage and
consequential costs for the Basay tanks, including all other incremental expenses due to loading
delay, if petitioner failed to comply.
On December 18, 1986, M/T Sultan Kayumanggi docked at Sangi, Cebu, but withdrew only
157.51 MT of sulfuric acid. Again, the vessel tilted. Further loading was aborted. Two survey
reports conducted by the Societe Generale de Surveillance (SGS) Far East Limited, dated
December 17, 1986 and January 2, 1987, attested to these occurrences.
Later, on a date not specified in the record, M/T Sultan Kayumanggi sank with a total of 227.51
MT of sulfuric acid on board.
Petitioner chartered another vessel, M/T Don Victor, with a capacity of approximately 500 MT.
6 On January 26 and March 20, 1987, Melecio Hernandez, acting for the petitioner, addressed
letters to private respondent, concerning additional orders of sulfuric acid to replace its sunken
purchases. Petitioner’s letter 9 dated May 15, 1987, reiterated the same request to
private Respondent.
On January 25, 1988, petitioner’s counsel, Atty. Pedro T. Santos, Jr., sent a demand letter to
private respondent for the delivery of the 272.49 MT of sulfuric acid paid by his client, or the
return of the purchase price of three hundred seven thousand five hundred thirty (P307,530.00)
pesos. Private respondent in reply, 11 on March 8, 1988, instructed petitioner to lift the
remaining 30 MT of sulfuric acid from Basay, or pay maintenance and storage expenses
commencing August 1, 1986.
On July 6, 1988, petitioner wrote another letter, insisting on picking up its purchases consisting
of 272.49 MT and an additional of 227.51 MT of sulfuric acid. According to petitioner it had
paid the chartered vessel for the full capacity of 500 MT.
By telephone, petitioner requested private respondent’s Shipping Manager, Gil Belen, to get its
additional order of 227.51 MT of sulfuric acid at Isabel, Leyte.Belen relayed the information to
his associate, Herman Rustia, the Senior Manager for Imports and International Sales of
private Respondent.
In a letter dated July 22, 1988, Rustia replied that they cannot accommodate request to lift
Sulfuric Acid ex-Isabel due to Pyrite limitation and delayed arrival of imported Sulfuric Acid
from Japan
On July 25, 1988, petitioner’s counsel wrote to private respondent another demand letter for the
delivery of the purchases remaining, or suffer tedious legal action his client would commence.
On May 4, 1989, petitioner filed a complaint for specific performance and/or damages before the
Regional Trial Court of Pasig, Branch 151. Private respondent filed its answer with
counterclaim, stating that it was the petitioner who was remiss in the performance of its
obligation in arranging the shipping requirements of its purchases and, as a consequence, should
pay damages.
RULING:
The trial court ruled in favor of the petitioner where Philippine Phosphate Fertilizer
Corp. were ordered to pay them the following renumerations.
Court of Appeals
SET ASIDE Trial Court’s decision dismissing the complaint with costs against the petitioner
and on the counterclaim ordering Aerospace Chemical Industries, Inc. to pay Philippine
Phosphate Fertilizer Corporation the sum of P324,516.63 representing the balance of the
maintenance cost and tank rental charges incurred by the defendant for the failure of the plaintiff
to haul the rest of the sulfuric acid on the designated date.
Supreme Court
DENIED the petition and AFFIRMED the decision of the Court of Appeals with
MODIFICATION the amount of damages awarded in favor of private respondent is
REDUCED to P272,000.00 and be OFFSET against petitioner’s advance payment of
P303,483.37 representing the price of the 272.481 MT of sulfuric acid not lifted and ORDERED
the excess amount of P31,483.37 be RETURNED to petitioner. chanrob1e
ISSUE:
1. Did the respondent court err in holding that the petitioner committed breach of contract,
considering that:
a. the petitioner allegedly paid the full value of its purchases, yet received only a
portion of said purchases?
b. petitioner and private respondent allegedly had also agreed for the purchase and
supply of an additional 227.519 MT of sulfuric acid, hence prior delay, if any, had
been waived?
2. Did the respondent court err in awarding damages to private respondent?
3. Should expenses for the storage and preservation of the purchased fungible goods,
namely sulfuric acid, be on seller's account pursuant to Article 1504 of the Civil Code?
Ruling
1. No, CA did not err in absolving the private respondent from liability.
Petitioner, as the buyer, was obligated under the contract to undertake the shipping
requirements of the cargo from the private respondent's loadports to the petitioner's
designated warehouse. It was petitioner which chartered M/T Sultan Kayumanggi. The
vessel was petitioner's agent. When it failed to comply with the necessary loading
conditions of sulfuric acid, it was incumbent upon petitioner to immediately replace M/T
Sultan Kayumanggi with another sea worthy vessel.
Where there has been breach of contract by the buyer, the seller has a right of action for
damages. Following this rule, a cause of action of the seller for damages may arise where
the buyer refuses to remove the goods, such that buyer has to remove them. Article 1170
of Civil Code provides: "Those who in the performance of their obligations are guilty of
fraud, negligence, or delay and those who in any manner contravene the tenor thereof, are
liable for damages."
2. No, respondent court did not err in awarding damages to private respondent.
Where there has been breach of contract by the buyer, the seller has a right of action for
damages. Following this rule, a cause of action of the seller for damages may arise where
the buyer refuses to remove the goods, such that buyer has to remove them. Article 1170
of Civil Code provides: "Those who in the performance of their obligations are guilty of
fraud, negligence, or delay and those who in any manner contravene the tenor thereof, are
liable for damages."
Delay begins from the time the obligee judicially or extrajudicially demands from the
obligor the performance of the obligation. Art. 1169 states: "Art. 1169. Those obliged to
deliver or to do something incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of their obligation." In order that the
debtor may be in default, it is necessary that the following requisites be present:
(1) that the obligation be demandable and already liquidated;
(2) that the debtor delays performance; and
(3) that the creditor requires the performance judicially or extrajudicially.
Records reveal that a tanker ship had to pick up sulfuric acid in Basay, then proceed to
get the remaining stocks in Sangi, Cebu. A period of three days appears to us reasonable
for a vessel to travel between Basay and Sangi. Logically, the computation of damages
arising from the shipping delay would then have to be from December 15, 1986, given
said reasonable period after the December 12th letter. More important, private respondent
was forced to vacate Basay wharf only on December 15th. Its Basay expenses incurred
before December 15, 1986, were necessary and regular business expenses for which the
petitioner should not be obliged to pay.
3. No, Article 1504 is not applicable.
The general rule that before delivery, the risk of loss is borne by the seller who is still the
owner, is not applicable in this case because petitioner had incurred delay in the
performance of its obligation. Article 1504 of the Civil Code clearly states: "Unless
otherwise agreed, the goods remain at the seller's risk until the ownership therein is
transferred to the buyer, but when the ownership therein is transferred to the buyer the
goods are at the buyer's risk whether actual delivery has made or not except
that: (2) Where actual delivery had been delayed through the fault of either the buyer or
seller the goods are at the risk of the party at fault.
As pointed out earlier, petitioner is guilty of delay, after private respondent made the
necessary extrajudicial demand by requiring petitioner to lift the cargo at its designated
loadports. When petitioner failed to comply with its obligations under the contract it
became liable for its shortcomings. Petitioner is indubitably liable for proven damages.
RATIONALE OF DECISIONS (In case i-ask sa RECIT)
RTC
To begin with, even if we assume that it is incumbent upon the plaintiff to ‘lift’ the sulfuric acid
it ordered from defendant, the fact that force majeure intervened when the vessel which was
previously listing, but which the parties, including a representative of the defendant, did not
mind, sunk, has the effect of absolving plaintiff from ‘lifting’ the sulfuric acid at the designated
load port. But even assuming the plaintiff cannot be held entirely blameless, the allegation that
plaintiff agreed to a payment of a 2,000-peso incremental expenses per day to defendant for
delayed ‘lifting’ has not been proven.
Court of Appeals
Based on the facts of this case as hereinabove set forth, it is clear that the plaintiff had the
obligation to withdraw the full amount of 500 MT of sulfuric acid from the defendant’s loadport
at Basay and Sangi on or before August 15, 1986. As early as August 6, 1986 it had been
accordingly warned by the defendant that any delay in the hauling of the commodity would mean
expenses on the part of the defendant amounting to P2,000.00 a day. The plaintiff sent its vessel,
the ‘M/T Sultan Kayumanggi’, only on November 19, 1987. The vessel, however, was not
capable of loading the entire 500 MT and in fact, with its load of only 227.519 MT, it sank.
Contrary to the position of the trial court, the sinking of the ‘M/T Sultan Kayumanggi’ did not
absolve the plaintiff from its obligation to lift the rest of the 272.481 MT of sulfuric acid at the
agreed time. It was the plaintiff’s duty to charter another vessel for the purpose. It did contract
for the services of a new vessel, the ‘M/T Don Victor’, but did not want to lift the balance of
272.481 MT only but insisted that its additional order of 227.51 MT be also given by the
defendant to complete 500 MT, apparently so that the vessel may be availed of in its full
capacity.
We find no basis for the decision of the trial court to make the defendant liable to the plaintiff
not only for the cost of the sulfuric acid, which the plaintiff itself failed to haul, but also for
unrealized profits as well as exemplary damages and attorney’s fees.
Respondent Court of Appeals found the petitioner guilty of delay and negligence in the
performance of its obligation.
Facts
Consequently, an amended complaint was filed wherein the Administrator alleged that the house
and lot were sold to the late Marcelo Villalba by Magdaleno Soliva, the late husband of
[petitioner, on December 18, 1965 for P3,500.00 on installment basis and that Marcelo Villalba
had paid the total amount of P2,250.00; that no demands were made on Respondent Valenta to
vacate the property prior to the filing of the original complaint in 1982; and that [Respondent
Valenta has been in continuous, public and uninterrupted possession of the property for
seventeen (17) years, i.e., from 1965 to 1982, so that [petitioner’s] claim of ownership has
already prescribed.
On March 11, 1993, the court a quo rendered a Decision, ordering the reconveyance of subject
lot to respondent and intervenor. The CA held that laches had already set in. The inaction of
petitioner for almost 16 years had barred her action to recover the disputed property from the
Villalbas.
The appellate court found that 1) until the death of Marcelo Villalba in 1978, his payment of the
full purchase price of the disputed house and lot was never demanded; 2) no evidence was
presented to show when petitioner had made a verbal demand on Valenta Villalba to vacate the
premises; and 3) the complaint for recovery of ownership and possession was filed only on May
5, 1982 — 16 years after the former’s cause of action had accrued.
Petitioner argues that the transaction between the parties was a contract to sell rather than a
contract of sale.
Petitioner further contends that the oral contract of sale between the parties was invalid, because
the late Captain Marcelo Villalba and his wife had failed to comply with their obligation to pay
in full the purchase price of the house and lot.
Issues
(1) whether petitioner is barred from recovering the disputed property; and
(2) whether the conveyance ordered by the court a quo would unjustly enrich respondents at her
expense.chanrob1es virtua1 1aw 1ibrary
Held:
First Issue:chanrob1es virtual 1aw library
she was bound by her admission in her Complaint and during the hearings that she had sold the
property to the Villalbas so therefore it was a contract of sale.
All the essential elements of a valid contract are present in this case. No issue was raised by
petitioner on this point
Furthermore, contrary to petitioner’s submission, the nonpayment of the full consideration did
not invalidate the contract of sale. Under settled doctrine, nonpayment is a resolutory condition
that extinguishes the transaction existing for a time and discharges the obligations created
thereunder. The remedy of the unpaid seller is to sue for collection or, in case of a
substantial breach, to rescind the contract. 18 These alternative remedies of specific
performance and rescission are provided under Article 1191 of the Civil Code as
follows:jgc:chanrobles.com.ph
"Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him.cralaw : red
"The injured party may choose between fulfillment and the rescission of the obligation, with the
payment of damages in either case. He may also seek rescission even after he has chosen
fulfillment, if the latter should become impossible.
"The Court shall decree the rescission claimed, unless there be just cause authorizing the fixing
of a period.
The rescission of a sale of immovables, on the other hand, is governed by Article 1592 of the
Civil Code as follows:jgc:chanrobles.com.ph
"Article 1592. In the sale of immovable property, even though it may have been stipulated that
upon failure to pay the price at the time agreed upon the rescission of the contract shall of right
take place, the vendee may pay, even after the expiration of the period, as long as no demand
for rescission of the contract has been made upon him either judicially or extrajudicially or by
a notarial act. After the demand, the court may not grant him a new term."cralaw virtua1aw
library
Upon the facts found by the trial and the appellate courts, petitioner did not exercise her right
either to seek specific performance or to rescind the verbal contract of sale until May 1982, when
she filed her complaint for recovery of ownership and possession of the property. Petitioner
complied with her obligation to deliver the property in 1966. However, respondent’s husband
failed to comply with his reciprocal obligation to pay, when the money he had been expecting
from Manila never materialized. He also failed to make further installments after May 13, 1966.
26. As early as 1966, therefore, petitioner already had the right to compel payment or to
ask for rescission, pursuant to Article 1169 of the Civil Code, which
reads:jgc:chanrobles.com.ph
"Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation.
"However, the demand by the creditor shall not be necessary in order that delay may
exist:chanrob1es virtua1 1aw 1ibrary
"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."
In view thereof, the appellate court aptly ruled that petitioner’s claim was already barred by
laches. It has been consistently held that laches does not concern itself with the character of the
defendant’s title, but only with the issue of whether or not the plaintiff — by reason of long
inaction or inexcusable neglect — should be barred entirely from asserting the claim, because to
allow such action would be inequitable and unjust to the defendant. Likewise, it must be stressed
that unlike prescription, laches is not concerned merely with the fact of delay, but even more
with the effect of unreasonable delay
The contention of petitioner that her right to recover is imprescriptible because the property was
registered under the Torrens system is untenable . It was the finding of the trial court that the
property was not yet covered by a free patent on January 4, 1966, when Captain Villalba
acquired possession thereof. petitioner sold the house and lot to respondent on January 4, 1966,
before she had even acquired the title to convey it. Moreover, she applied for a free patent after
she lost, by operation of law, the title she had belatedly acquired from one Castrence. These
circumstances raise serious questions over the former’s good faith in delaying the assertion of
her rights to the property. They bar her from seeking relief under the principle that "one who
comes to court must come with clean hands.
Second Issue:chanrob1es virtual 1aw library
Unjust Enrichment
While petitioner is now barred from recovering the subject property, all is not lost for her. By
Respondent Villalba’s own admission, a balance of P1,250 of the total purchase price remains
unpaid. Reason and fairness suggest that petitioner be allowed to collect this sum. It is a basic
rule in law that no one shall unjustly enrich oneself at the expense of another. For indeed, to
allow respondent to keep the property without paying fully for it amounts to unjust enrichment
on her part.
Since the obligation consists of the payment of a sum of money, and Respondent Villalba
has incurred delay in satisfying that obligation, legal interest at six percent (6%) per
annum is hereby imposed on the balance of P1,250, to be computed starting May 5, 1982
— when the claim was made judicially — until the finality of this Court’s judgment.
Following our ruling in Eastern Shipping Lines, Inc. v. CA, 44 the sum so awarded shall
likewise bear interest at the rate of 12 percent per annum from the time this judgment
becomes final and executory until its satisfaction.
PRINCIPLE
There is a valid sale even though the purchase price is not paid in full. The unpaid seller’s
remedy is an action to collect the balance or to rescind the contract within the time allowed by
law. In this case, laches barring the claim of petitioner to recover the property has already set in.
However, in the interest of substantial justice, and pursuant to the equitable principle proscribing
unjust enrichment, she is entitled to receive the unpaid balance of the purchase price plus legal
interest thereon.chanrob1es virtua1 1aw 1ibrary
In general, laches is the failure or neglect, for an unreasonable and unexplained length of time, to
do that which — by the exercise of due diligence — could or should have been done earlier. 19 It
is the negligence or omission to assert a right within a reasonable period, warranting the
presumption that the party entitled to assert it has either abandoned or declined to assert it. 20
Under this time-honored doctrine, relief has been denied to litigants who, by sleeping on their
rights for an unreasonable length of time — either by negligence, folly or inattention — have
allowed their claims to become stale. 21 Vigilantibus, sed non dormientibus, jura subveniunt.
The laws aid the vigilant, not those who slumber on their rights. The following are the essential
elements of laches:chanrob1es virtual 1aw library
(1) Conduct on the part of the defendant that gave rise to the situation complained of; or the
conduct of another which the defendant claims gave rise to the same;
(2) Delay by the complainant in asserting his right after he has had knowledge of the defendant’s
conduct and after he has had an opportunity to sue;
(3) Lack of knowledge by or notice to the defendant that the complainant will assert the right on
which he bases his suit; and
(4) Injury or prejudice to the defendant in the event relief is accorded to the complainant. 23
SC in agreement that the RTC and the CA correctly appreciated the operation of ordinary
acquisitive prescription in respondent’s favor. To acquire ownership and other real rights over
immovables under Article 1134 of the Civil Code, possession must be for 10 years. It must also
be in good faith and with just title
Good faith consists of the reasonable belief that the person from whom the possessor received
the thing was its owner, but could not transmit the ownership thereof
there is just title when the adverse claimant came into possession of the property through one of
the modes recognized by law for the acquisition of ownership or other real rights, but the grantor
was not the owner or could not transmit any right. 40
The RTC and the CA held that the Villalbas’ had continuously possessed the property for a total
of 16 years. Capt. Villalba came into possession through a sale by petitioner, whom he believed
was the owner, though — at the time of the sale — she was not. Clearly, all the elements of
ordinary acquisitive prescription were present.
Petitioner is thus precluded from invoking the 30-year prescriptive period for commencing real
action over immovables. Prescription of the action is without prejudice to acquisitive
prescription, according to Article 1141 of the Civil Code, which we quote:jgc:chanrobles.com.ph
"Art. 1141. Real actions over immovables prescribe after thirty years.chanrob1es virtua1 1aw
1ibrary
"This provision is without prejudice to what is established for the acquisition of ownership and
other real rights by prescription.
5.
II. Creditor-debtor relationship only arises after the credit card issuer has approved the
cardholder’s purchase request. This involves the actual credit on loan agreement
involving three contracts, namely:
1. the sales contract between the credit card holder and the merchant or the business
establishment which accepted the credit card;
2. the loan agreement between the credit card issuer and the credit card holder; and
3. the promise to pay between the credit card issuer and the merchant or business
establishment.
From the loan agreement perspective, the contractual relationship begins to exist only
upon the meeting of the offer and acceptance of the parties involved. In more
concrete terms, when cardholders use their credit cards to pay for their purchases,
they merely offer to enter into loan agreements with the credit card company. Only
after the latter approves the purchase requests that the parties enter into binding loan
contracts.
Article 1319. Consent is manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a counter-offer. This view finds support
in the reservation found in the card membership agreement itself, particularly paragraph 10,
which clearly states that AMEX "reserves the right to deny authorization for any requested
Charge." By so providing, AMEX made its position clear that it has no obligation to approve any
and all charge requests made by its card holders.
B. AMEX not guilty of culpable delay since AMEX has no obligation to approve the
purchase requests of its credit cardholders, Pantaleon cannot claim that AMEX defaulted
in its obligation.
Article 1169. Those obliged to deliver or to do something incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their obligation The
three requisites for a finding of default are:
(a) that the obligation is demandable and liquidated;
(b) the debtor delays performance; and
(c) the creditor judicially or extrajudicially requires the debtor’s performance.
Based on the above, the first requisite is no longer met and without a demandable obligation,
there can be no finding of default therefore no obligation relating to the loan agreement exists
between them. Apart from the lack of any demandable obligation, we also find that Pantaleon
failed to make the demand required by Article 1169 of the Civil Code. Before the credit card
issuer accepts this offer, no obligation relating to the loan agreement exists between them. On the
other hand, a demand is defined as the "assertion of a legal right; xxx an asking with authority,
claiming or challenging as due."A demand presupposes the existence of an obligation between
the parties.
Thus, every time that Pantaleon used his AMEX credit card to pay for his purchases, what the
stores transmitted to AMEX were his offers to execute loan contracts. These obviously could not
be classified as the demand required by law to make the debtor in default, given that no
obligation could arise on the part of AMEX until after AMEX transmitted its acceptance of
Pantaleon’s offers. Pantaleon’s act of "insisting on and waiting for the charge purchases to be
approved by AMEX" is not the demand contemplated by Article 1169 of the Civil Code.
C. On AMEX’s obligation to act on the offer within a specific period of time AMEX’s
credit authorizer, Edgardo Jaurigue, explained that having no pre-set spending limit in a
credit card simply means that the charges made by the cardholder are approved based on
his ability to pay, as demonstrated by his past spending, payment patterns, and personal
resources.
This right to review is a necessary implication of AMEX’s right to deny authorization for any
requested charge. As for Pantaleon’s previous experiences with AMEX that in the past 12 years,
AMEX has always approved his charge requests in three or four seconds, this record does not
establish that Pantaleon had a legally enforceable obligation to expect AMEX to act on his
charge requests within a matter of seconds. as a general rule, a practice or custom is not a source
of a legally demandable or enforceable right. In the credit card membership agreement, the
contract that primarily governs the relationship between AMEX and Pantaleon.
Significantly, there is also no provision in this agreement that obligates AMEX to act on all
cardholder purchase requests within a specifically defined period of time nor can Pantaleon look
to the law or government issuances as the source of AMEX’s alleged obligation to act upon his
credit card purchases within a matter of seconds. The State does not require credit card
companies to act upon its cardholders’ purchase requests within a specific period of time. In light
of the foregoing, we find and so hold that AMEX is neither contractually bound nor legally
obligated to act on its cardholders’ purchase requests within any specific period of time, much
less a period of a "matter of seconds" that Pantaleon uses as his standard.
D. AMEX acted with good faith However, AMEX is not given an unlimited right to put off
action on cardholders’ purchase requests for indefinite periods of time. In acting on
cardholders’ purchase requests, AMEX must take care not to abuse its rights and cause
injury to its clients and/or third persons.
Article 19. Every person must, in the exercise of his rights and in the performance of his duties,
act with justice, give everyone his due and observe honesty and good faith. (enumerates the
standards of conduct)
Article 21. Any person who willfully causes loss or injury to another in a manner that is contrary
to morals, good customs or public policy shall compensate the latter for the damage. (provides
the remedy for the person injured by the willful act, an action for damages.)
Burden of proving bad faith rests upon the party alleging it. Although it took AMEX some time
before it approved Pantaleon’s three charge requests, we find no evidence to suggest that it acted
with deliberate intent to cause Pantaleon any loss or injury, or acted in a manner that was
contrary to morals, good customs or public policy. We give credence to AMEX’s claim that its
review procedure was done to ensure Pantaleon’s own protection as a cardholder and to prevent
the possibility that the credit card was being fraudulently used by a third person.
Article 1374 of the Civil Code requires that the various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense which may result from all of them
taken jointly. Here, the work schedule approved by petitioner was intended, not only to serve as
its basis for the payment of monthly progress billings, but also for evaluation of the progress of
work by the contractor. Article 13.01 (g) (iii) of the Construction Agreement provides that the
contractor shall be deemed in default if, among others, it had delayed without justifiable cause
the completion of the project "by more than thirty (30) calendar days based on official work
schedule duly approved by the OWNER."
The plain and unambiguous terms of the Construction Agreement authorize petitioner to
confiscate the Performance Bond to answer for all kinds of damages it may suffer as a result of
the contractor’s failure to complete the building. Having elected to terminate the contract and
expel the contractor from the project site under Article 13 of the said Agreement, petitioner is
clearly entitled to the proceeds of the bond as indemnification for damages it sustained due to the
breach committed by Mabunay. Such stipulation allowing the confiscation of the contractor’s
performance bond partakes of the nature of a penalty clause. Performance Bond guaranteed the
full and faithful compliance of Mabunay’s obligations under the Construction Agreement, and
that nowhere in law or jurisprudence does it state that the obligation or undertaking by a surety
may be apportioned.
The Award made in the Decision dated February 2, 2010 of the Construction Industry
Arbitration Commission Is hereby REINSTATED with the following MODIFICATIONS:
"Accordingly, in view of our foregoing discussions and dispositions, the Tribunal hereby
adjudges, orders and directs:
1) Respondent Utassco to pay to petitioner J Plus Asia Development Corporation the full
amount of the Performance Bond, ₱8,400,000.00, pursuant to Art. 13 of the Construction
Agreement dated December 24, 2007, with interest at the rate of 6% per annum computed from
the date of the filing of the complaint until the finality of this decision, and 12% per annum
computed from the date this decision becomes final until fully paid; and
2) Respondent Mabunay to indemnify respondent Utassco of the amounts respondent
Utassco will have paid to claimant under this decision, plus interest thereon at the rate of 12%
per annum computed from the date he is notified of such payment made by respondent Utassco
to claimant until fully paid, and to pay Utassco ₱100,000.00 as attorney's fees.
7.
PETITION:
Reversal of the Court of Appeals (CA) decision that upheld judgment of the Regional Trial
Court, Branch 25, in Iloilo City (RTC) annulling the extra-judicial foreclosure of the real estate
and chattel mortgages at the instance of DBP because the debtor-mortgagor, Guariña
Agricultural and Realty Development Corporation had not yet defaulted on its obligations in
favor of DBP.
ANTECEDENT FACTS:
In July 1976, Guariña Corporation applied for a loan from DBP to finance the development of its
resort complex situated in Trapiche, Oton, Iloilo. The loan, in the amount of ₱3,387,000.00, was
approved on August 5, 1976. Guariña Corporation executed a promissory note that would be due
on November 3, 1988.
On October 5, 1976, Guariña Corporation executed a real estate mortgage over several real
properties in favor of DBP as security for the repayment of the loan.
On May 17, 1977, Guariña Corporation executed a chattel mortgage over the personal properties
existing at the resort complex and those yet to be acquired out of the proceeds of the loan, also to
secure the performance of the obligation. Prior to the release of the loan, DBP required Guariña
Corporation to put up a cash equity of ₱1,470,951.00 for the construction of the buildings and
other improvements on the resort complex.
The loan was released in several instalments, and Guariña Corporation used the proceeds to
defray the cost of additional improvements in the resort complex. In all, the amount released
totalled ₱3,003,617.49, from which DBP withheld ₱148,102.98 as interest.
Guariña Corporation demanded the release of the balance of the loan, but DBP refused. Instead,
DBP directly paid some suppliers of Guariña Corporation over the latter's objection. DBP found
upon inspection of the resort project, its developments and improvements that Guariña
Corporation had not completed the construction works.
In a letter dated February 27, 1978 and a telegram dated June 9, 1978, DBP thus demanded that
Guariña Corporation expedite the completion of the project, and warned that it would initiate
foreclosure proceedings should Guariña Corporation not do so.
Unsatisfied with the non-action and objection of Guariña Corporation, DBP initiated
extrajudicial foreclosure proceedings.
RULING:
RTC rendered its judgment extra-judicial sales of the mortgaged properties of the plaintiff by the
Office of the Provincial Sheriff of Iloilo are null and void, so is the issuance of certificates of
sale to the defendant of said properties, the registration thereof with the Registry of Deeds and
the issuance of the transfer certificates of title involving the real property in its name.
The defendant ordered to give back to the plaintiff or its representative the actual possession and
enjoyment of all the properties foreclosed and possessed by it. To pay the plaintiff the reasonable
rental for the use of its beach resort during the period starting from the time it took over its
occupation and use up to the time possession is actually restored to the plaintiff.
The plaintiff, to pay the defendant the loan it obtained as soon as it takes possession and
management of the beach resort and resume its business operation.
The CA AFFIRMED WITH MODIFICATIONS RTC's judgment but deleted the award of
attorney's fees.
The Supreme Court AFFIRMS the CA decision and ORDERS the petitioner to pay the costs
of suit.
ISSUE: (1 and Obli issue gyud, 2 and 3 in case lang i-ask sa RECIT)
No, the appeal lacks merit and substance for no breach of contract has yet been
committed by Guarina. The contract of loan is completed upon release of the loan wherein DBP
did not yet release the full amount to Guarina. The foreclosure is premature and is nukll and
void.
Under the law, a loan requires the delivery of money or any other consumable object by
one party to another who acquires ownership thereof, on the condition that the same amount or
quality shall be paid. Loan is a reciprocal obligation, as it arises from the same cause where one
party is the creditor, and the other the debtor. The obligation of one party in a reciprocal
obligation is dependent upon the obligation of the other, and the performance should ideally be
simultaneous. This means that in a loan, the creditor should release the full loan amount.
Reciprocal obligations are those which arise from the same cause, and in which each
party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the
obligation of the other (Areola vs. Court of Appeals). They are to be performed simultaneously
such that the performance of one is conditioned upon the simultaneous fulfilment of the other
(Jaime Ong vs. Court of Appeals).
It is undisputed that appellee obtained a loan from appellant, and as security, executed
real estate and chattel mortgages. However, it was never established that appellee was already in
default. Appellant, in a telegram to the appellee reminded the latter to make good on its
construction works, otherwise, it would foreclose the mortgage it executed. It did not mention
that appellee was already in default. The records show that appellant did not make any demand
for payment of the promissory note. It appears that the basis of the foreclosure was not a default
on the loan but appellee's failure to complete the project in accordance with appellant's standards.
Therefore, Guarina is not in delay of its obligation and as DBP failed to release the full
amount of the loan and in compensatio morae delay of the other incurs no obligation.
No. Law of the case has been defined as the opinion delivered on a former appeal that
whatever is irrevocably established as the controlling legal rule of decision between the same
parties in the same case continues to be the law of the case, whether correct on general principles
or not, so long as the facts on which such decision was predicated continue to be the facts of the
case before the court.
In Mangold vs Bacon, it further explains the law of the case wherein the general rule is
that legal conclusions announced on a first appeal, whether on the general law or the law as
applied to the concrete facts, not only prescribe the duty and limit the power of the trial court to
strict obedience and conformity thereto, but they become and remain the law of the case in all
other steps below or above on subsequent appeal.
The doctrine of law of the case simply means that when an appellate court has once
declared the law in a case, its declaration continues to be the law of that case even on a
subsequent appeal, notwithstanding that the rule thus laid down may have been reversed in other
cases.
To start with, the ex parte proceeding on DBP's application for the issuance of the writ of
possession was entirely independent from the judicial demand for specific performance herein.
In fact, the interlocutory appeal concerning the issuance of the writ of possession while the main
case was pending, was not at all intertwined with any legal issue properly raised and litigated in
the appeal to determine whether or not DBP's foreclosure was valid and effectual. And, secondly,
the ruling did not settle any question of law involved herein because this case for specific
performance was not a continuation.
Yes, for the extrajudicial foreclosure of DBP was premature and the sale is null and
ineffectual.
Consequently, the restoration of possession and the payment of reasonable rentals were in
accordance with Article 561 of the Civil Code, which expressly states that one who recovers,
according to law, possession unjustly lost shall be deemed for all purposes which may redound to
his benefit to have enjoyed it without interruption.
Therefore, Guarina is entitled to such rental payments and restoration of property for the
foreclosure was premature and sale was deemed null and ineffectual as such DBP is required to
pay the company the loss of income and return of property.
8.
G.R. No. 174433 February 24, 2014
PRINCIPLE:
Although banks are free to determine the rate of interest they could impose on their
borrowers, they can do so only reasonably, not arbitrarily. They may not take advantage of
the ordinary borrowers' lack of familiarity with banking procedures and jargon. Hence,
any stipulation on interest unilaterally imposed and increased by them shall be struck
down as violative of the principle of mutuality of contracts.
FACTS:
Respondent Spouses Enrique Manalo and Rosalinda Jacinto (Spouses Manalo) signed the Real
Estate Mortgage (REM) on November 3, 1993 in favor of PNB with Transfer Certificate Title
No. S- 23191 as security for the loan. It was agreed upon that the Spouses Manalo would make
monthly payments on the interest. The credit facility was renewed and increased several times
over the , the last again renewed for ₱7,000,000.00. As a consequence, the parties executed a
Supplement to and Amendment of Existing Real Estate Mortgage whereby the property covered
by TCT No. 171859 was added as security for the loan
PNB claimed that their last recorded payment was made on December, 1997. After the Spouses
Manalo still failed to settle their unpaid overdue account despite the two demand letters, PNB
foreclose the mortgage. During the foreclosure sale, PNB was the highest bidder for
₱15,127,000.00 of the mortgaged properties of the Spouses Manalo. After more than a year after
the Certificate of Sale had been issued by the Sheriff to PNB, the Spouses Manalo instituted an
action for the nullification of the foreclosure proceedings and damages. They allege that a
1000000 loan from one benito Tan was not applied to their Pnb loan and that there was an
agreement between the spouses and the bank that there would be restructuring of the loan to a
long term one, both allegations denied by the bank in that they had credited the 1M to the loan
and there was no prior agreement to restructure
RTC rendered its decision in favor of PNB, that the foreclosure proceedings were valid. During
pretrial plaintiff-spouses had agreed to stipulate that defendants had the right to foreclose upon
the subject properties and in the course of the presentation of their evidence, they modified their
position and claimed [that] the loan document executed were contracts of adhesion which were
null and void because they were prepared entirely under the defendant bank’s supervision. They
also questioned the interest rates and penalty charges imposed arguing that these were iniquitous,
unconscionable and therefore likewise void.
Not having raised the foregoing matters as issues during the pre-trial, plaintiff-spouses are
presumably estopped from allowing these matters to serve as part of their evidence, more so
because at the pre-trial they expressly recognized the defendant bank’s right to foreclose upon
the subject property . RTC held that that the Spouses Manalo were now estopped from
questioning the interest rates unilaterally imposed by PNB because they had paid at those rates
for three years without protest;
Ruling of the CA
The Spouses Manalo appealed to the CA insisting that: (1) the credit agreements they entered
into with PNB were contracts of adhesion;(2) no interest was due from them because their credit
agreements with PNB did not specify the interest rate, and PNB could not unilaterally increase
the interest rate without first informing them;15 and (3) PNB did not comply with the notice and
publication requirements under Section 3 of Act 3135.
CA affirmed the decision of the RTC insofar as it upheld the validity of the foreclosure
proceedings initiated by PNB, but modified the Spouses Manalo’s liability for interest. Should
the recomputed amount be less than the winning bid in the foreclosure sale, the difference should
be immediately returned to the Spouses Manalo.
The CA found it necessary to pass upon the issues of PNB’s failure to specify the applicable
interest and the lack of mutuality in the execution of the credit agreements
Applying Article 1956 of the Civil Code that “No interest shall be due unless it has been
expressly stipulated in writing.”, the CA held that PNB’s failure to indicate the rate of interest in
the credit agreements would not excuse the Spouses Manalo from their contractual obligation to
pay interest to PNB because of the express agreement to pay interest in the credit agreements.
Nevertheless, the CA ruled that PNB’s inadvertence to specify the interest rate should be
construed against it because the credit agreements were clearly contracts of adhesion due to their
having been prepared solely by one party ( PNB).
The CA further held that PNB could not unilaterally increase the rate of interest considering that
the credit agreements specifically provided that prior notice was required before an increase in
interest rate could be effected. It found that PNB did not adduce proof showing that the Spouses
Manalo had been notified before the increased interest rates were imposed; and that PNB’s
unilateral imposition of the increased interest rate was null and void for being violative of the
principle of mutuality of contracts enshrined in Article 1308 of the Civil Code. Reinforcing its
“contract of adhesion” conclusion, it added that the Spouses Manalo’s being in dire need of
money rendered them to be not on an equal footing with PNB. Consequently, the CA, relying on
Eastern Shipping Lines, v. Court of Appeals,19 fixed the interest rate to be paid by the Spouses
Manalo at 12% per annum, computed from their default.
The CA deemed to be untenable the Spouses Manalo’s allegation that PNB had failed to comply
with the requirements for notice and posting under Section 3 of Act 3135. There was required
Notice of Sheriff’s Sale in three public places; that the Affidavit of Publication enjoyed the
presumption of regularity, such that the Spouses Manalo’s bare allegation of non-publication
without other proof did not overcome the presumption.
On appeal PNB claims that the Spouses Manalo’s continuous payment of interest without protest
indicated their assent to the interest rates imposed, as well as to the subsequent increases of the
rates.
ISSUE: Whether or not there was mutuality of consent in the imposition of interest rates
on the Spouses’ PNB loan
HELD
The credit agreement executed succinctly stipulated that the loan would be subjected to interest
at a rate "determined by the Bank to be its prime rate plus applicable spread, prevailing at the
current month."31 This stipulation was carried over to or adopted by the subsequent renewals of
the credit agreement. PNB thereby arrogated unto itself the sole prerogative to determine and
increase the interest rates imposed on the Spouses Manalo. Such a unilateral determination of the
interest rates contravened the principle of mutuality of contracts embodied in Article 1308 of the
Civil Code:
The contract must bind both contracting parties; its validity or compliance cannot be left
to the will of one of them
The Court has declared that a contract where there is no mutuality between the parties partakes
of the nature of a contract of adhesion, and any obscurity will be construed against the party who
prepared the contract, the latter being presumed the stronger party to the agreement, and who
caused the obscurity. PNB should then suffer the consequences of its failure to specifically
indicate the rates of interest in the credit agreement. We spoke clearly on this in Philippine
Savings Bank v. Castillo,35 to wit:
The unilateral determination and imposition of the increased rates is violative of the principle of
mutuality of contracts under Article 1308 of the Civil Code, which provides that ‘[t]he contract
must bind both contracting parties; its validity or compliance cannot be left to the will of one of
them. Any contract which appears to be heavily weighed in favor of one of the parties so as to
lead to an unconscionable result, thus partaking of the nature of a contract of adhesion, is void.
Any stipulation regarding the validity or compliance of the contract left solely to the will of one
of the parties is likewise invalid.
PNB could not also justify the increases it had effected on the interest rates by citing the fact that
the Spouses Manalo had paid the interests without protest, and had renewed the loan several
times. We rule that the CA, rightly concluded that "a borrower is not estopped from assailing the
unilateral increase in the interest made by the lender since no one who receives a proposal to
change a contract, to which he is a party, is obliged to answer the same and said party’s silence
cannot be construed as an acceptance thereof.
Lastly, the CA observed, and properly so, that the credit agreements had explicitly provided that
prior notice would be necessary before PNB could increase the interest rates. In failing to notify
the Spouses Manalo before imposing the increased rates of interest, therefore, PNB violated the
stipulations of the very contract that it had prepared. Hence, the varying interest rates imposed by
PNB have to be vacated and declared null and void, and in their place an interest rate of 12% per
annum computed from their default is fixed pursuant to the ruling in Eastern Shipping Lines, Inc.
v. Court of Appeals, which jurisprudence also provides that interest should be computed from the
time of the judicial or extrajudicial demand.
The CA’s directive to PNB (a) to recompute the Spouses Manalo’s indebtedness under the
oversight of the RTC; and (b) to refund to them any excess of the winning bid submitted during
the foreclosure sale over their recomputed indebtedness was warranted and equitable.
Since the Spouses Manalo made no judicial or extrajudicial demand from which to reckon the
interest on any amount to be refunded to them, Such demand could only be reckoned from the
promulgation of the CA’s decision because it was there that the right to the refund was first
judicially recognized.
1. Any amount to be refunded to the Spouses Manalo shall bear interest of 12% per
annum computed from March 28, 2006, the date of the promulgation of the CA decision,
until June 30, 2013; and 6% per annum computed from July 1, 2013 until finality of this
decision; and
2. The amount to be refunded and its accrued interest shall earn interest of 6% per annum
until full refund.