OBLIGATION

AND
CONTRACTS
January 24, 2017
 CABAHUG
VS
NAPOCOR

G.R. No. 186069

January 30, 2013

 FACTS
Spouses Cabahug, being owners of two parcels of land which were subject to expropriation
proceedings by the NPC. NPC electrical cables would be installed in the portions of the
province and would traverse the land owned by the petitioners. Cabahug, in consideration of
the easement fees, granted NPC a continuous easement right of way. Two years thereafter,
Cabahug filed a complaint before RTC for payment of just compensation after having
learned that the compensation given by NPC was very low compared to the appraisal made
by the province of Leyte. RTC rendered decision in favor of Cabahug. However, at the
Court of Appeals, it was ruled that vested right has already accrued in favor of NPC and to
allow spouses Cabahug to pursue the case would be violation of the contract and unjust
enrichment in favor of Cabahug.
 ISSUE

Whether or not NPC may still be held liable to pay for the full
market value of the affected property despite the fact transfer
of title thereto was not required by the easement.
 RULING

YES. The power of Eminent Domain may be exercised

although title is not transferred to the expropriator in easement
of right of way, Just compensation which should be neither
more nor less than the money equivalent of the property is,
moreover, due where the nature and effect of the easement is to
impose limitations against the use of the land for an indefinite
period and deprive the landowner of ordinary use.
 U N I O N BA N K O F T H E P H I L I P P I N E S ,
Petitioner
vs.
D E V E LO P M E N T B A N K O F T H E P H I L I P P I N E S ,
Respondent

G.R. No. 191555

January 20, 2014

 FACTS
Foodmasters, Inc. (FI) had outstanding loan obligations to both
Union Bank’s predecessor-in-interest, Bancom Development
Corporation, and to DBP. FI and DBP entered into a Deed of
Cession of Property In Payment of Debt (dacion en pago) whereby
the former ceded in favor of the latter certain properties (including a
processing plant) in consideration of the following:
•The full and complete satisfaction of FI’s loan obligations to DBP
•The direct assumption by DBP of FI”s obligation to Bancom in the
amount of P17,000,000.00 (Assumed Obligation)
DBP as the new owner of the processing plant, leased back for 20
years the said property to FI which was, in turn, obliged to pay
monthly rentals to be shared by DBP and Bancom.
DBP also entered into a separate agreement with Bancom whereby the former
confirmed its assumption of FI’s obligations to Bancom and undertook to remit
up to 30% of any and all rentals due from FI to Bancom which would see as
payment of the assumed obligations to be paid in monthly installments. On May
23, 1979, FI assigned its leasehold rights to Foodmasters Worldwide. On May 9,
1984, Bancom conveyed all its receivables including DBP’s assumed obligations
to Union Bank. Claiming that the subject rentals have not been duly remitted
despite its repeated demands, Union Bank filed a collection case against DBP
before the RTC.
DBP countered that the obligations it assumed were payable only out of the
rental payments made by FI. Since, FI had yet to pay the same, DBP’s obligation
to Union Bank had not arisen.
RTC Ruling: the complaint is meritorious and ordered DBP to pay Union Bank the sum
of P4,049,033.59 representing the amount of the subject rentals including interest until
fully paid and FW as third party defendant, to indemnify DBP for its payment of the
subject rentals to UB. RTC ruled that when DBP failed to remit the subject rentals to
Union Bank, it defaulted on its assumed obligations.
CA Ruling on May 27, 1994: CA set aside the RTC’s ruling and ordered:
FW to pay DBP the amount of 32,441,401.85 representing the total rental debt incurred
under the Lease Agreement and DBP after having been paid by FW its unpaid rentals.
CA ruled that DBP did not default in its obligations to remit the subject rentals. Union
Bank and DBP filed a separate petitions for review on certiorari before the Supreme
Court and SC denied both petitions in Resolution. SC upheld the CA’s finding. Union
Bank filed a motion for execution before the RTC praying that DBP be directed to pay
the amount of P9,732,420.555 (Subject Rentals).
DBP opposed Union Bank’s motion and filed its own motion for execution against FW. RTC
granted both motions of execution of Union Bank and DBP as a result notice of garnishment
against DBP were issued.

On September 13, 2005, Union Bank filed a Manifestation and Motion to Affirm Legal
Compensation to the RTC praying that the RTC apply legal compensation between itself and
DBP in order to offset the return of the funds previously received from DBP.

Union Bank anchored its motion on two grounds, namely:

 On December 29, 1998, DBP’s assumed obligations became due and demandable and
 Considering that FW became non-operational and non-existent, DBP became primarily
liable to the balance of its assumed obligation which as of Union Bank’s computation after
its claimed set-off, amounted to 1,849,391.87
 ISSUE

Whether or not the CA correctly upheld the

denial of Union Bank’s motion to affirm legal
compensation.
 RULING
The petition is bereft of merit. The rule on legal compensation is stated in
Article 1290 of the Civil Code which provides that when all the requisites
mentioned in Article 1279 are present, compensation takes effect by
operation of law and extinguishes both debts to the concurrent amount
even though the creditors and debtors are not aware of the compensation.
In this case, Union Bank filed a motion to seek affirmation that legal
compensation had taken place in order to effectively offset its own
obligation to return the funds it previously received from DBP as directed
under September 2005 Writ of execution with DBP’s assumed obligations
under the Assumption Agreement. However, legal compensation could
not take place between these debts for the apparent reason that requisites
3 and 4 under Article 1279 of the Civil Code are not present.