FERRO CHEMICALS, INC. vs. ANTONIO M.

GARCIA, ROLANDO
NAVARRO, JAIME Y. GONZALES AND CHEMICAL INDUSTRIES OF THE
PHILIPPINES, INC.

JAIME Y. GONZALES vs. HON. COURT OF APPEALS AND FERRO

CHEMICALS, INC.

ANTONIO M. GARCIA vs. FERRO CHEMICALS, INC.

G.R. No. 168134 / G.R. No. 168183 / G.R. No. 168196, October 5,
2016, J. Perez

Fraud is a question of fact and the circumstances constituting it must

be alleged and proved in the court below.

The elements of tortious interference with contractual relations are: (1)

existence of a valid contract; (2) knowledge on the part of the third person of
the existence of the contract and (3) interference on the part of the third
person without legal justification or excuse.

Attorneys fees must be reasonable, just and equitable because, as

part of damages, they are not meant to enrich the winning party at the
expense of the losing litigant.

Facts:

In 1988, Antonio Garcia and Ferro Chemicals entered into a Deed of

Absolute Sale and Purchase of Shares of Stock over shares of Chemical
Industries registered under the name of Antonio Garcia. Under the
agreement, Antonio Garcia warranted, among others, that the shares are free
from liens and encumbrances except those under the Security Bank and
Insular Bank.

On 17 January 1989, Antonio Garcia and Consortium Banks entered

into a Compromise Agreement with respect to First Consortium Case (this
case involves the payment of Garcias liability under surety agreements with
the consortium banks).

On 3 March 1989, Antonio Garcia and Ferro Chemicals entered into a

Deed of Right to Repurchase. On 12 July 1989, Antonio Garcia notified Ferro
Chemicals of his intention to exercise his right to buy back the sold shares
under the repurchase deed. On 31 July 1989, Antonio Garcia reiterated his
intent to reacquire the subject shares by sending another notice to Ferro
Chemicals coupled with the tender of the amount of the agreed repurchase
price.

On 11 August 1989, the RTC of Makati, Branch 145, issued a Writ of

Execution to enforce the Judgment by Compromise in the First Consortium
Case. On 22 August 1989, the Consortium Banks were declared as the
highest bidders of the levied shares at the public auction.
 On 26 September 1989, Ferro Chemicals (thru Chemphil Export)
successor-in-interest, opposed the consolidation of ownership of the subject
shares in the names of the Consortium Banks. Consequently, the Second
Consortium Case was litigated. Ferro Chemicals lost the Second Consortium
Case on 1 April 1996 with finality.

On 3 December 1996, Ferro Chemicals initiated an action for damages

based on fraud, claiming that Antonio Garcia, Jaime Gonzales and Rolando
Navarro and Chemical Industries conspired and abetted to fraudulently
induce it to purchase Antonio Garcia's shares by falsely warranting that these
shares are free from liens and encumbrances. These representations were
made despite their knowledge that the subject shares were previously
garnished by Consortium Banks.

The RTC ruled in favor of Ferro Chemicals and found therein defendants
solidarily liable for the value of the lost shares, costs of litigation, attorney's
fees and exemplary damages. The CA affirmed the RTCs ruling with the
following modifications: a) it discharged Rolando Navarro from liability; b) it
struck down the award of attorneys fees; c) it deleted the grant for
reimbursement of litigation expenses.

Issues:

1) Whether Antonio Garcia is guilty of fraud and breach of obligation.

2) Whether Rolando Navarro and Jaime Gonzales are guilty of tortious
interference.
3) Whether Ferro Chemical is entitled to reimbursement of its litigation
expenses, as payment of attorneys fees.

Ruling:

1) Antonio Garcia is not guilty of fraud and breach of obligation.

Fraud, in its general sense, is deemed to comprise anything calculated

to deceive, including all acts, omissions, and concealment involving a breach
of legal or equitable duty, trust or confidence justly reposed, resulting in the
damage to another, or by which an undue and unconscionable advantage is
taken of another. It is a question of fact and the circumstances constituting it
must be alleged and proved in the court below.

Here, the impassioned efforts to buy back the disputed shares way
before the Second Consortium Case commenced and even after the shares
were assigned already to Chemphil Export, clearly show that Antonio Garcia
did not intend to defraud Ferro Chemicals.

2) Rolando Navarro and Jaime Gonzales are not guilty of tortious

interference.

Under Article 1314 of the New Civil Code, any third person who induces
another to violate his contract shall be liable for damages to the other
contracting party. The tort recognized in that provision is known as
interference with contractual relations. The interference is penalized because
it violates the property right of a party in a contract to reap the benefits that
should result therefrom. The elements of tortious interference with
contractual relations are: (1) existence of a valid contract; (2) knowledge on
the part of the third person of the existence of the contract and (3)
interference on the part of the third person without legal justification or
excuse.

A perusal of the allegations proffered against Rolando Navarro would

show that none of his conduct prior or even subsequent to the execution of
the subject deed, which was primarily done in furtherance of his duties as
corporate secretary, constitutes tortious interference. As the Corporate
Secretary of Chemical Industries, Rolando Navarro is under obligation to
record in the stock and transfer book any and all alienation involving the
shares of stocks of the corporation. He is also under no obligation to record
the attachment of the Consortium Banks, not being a transfer of ownership
but merely a burden on the title of the owner.

Jaime Gonzales, on other hand, the assignee of the subject shares,

cannot, for that reason alone, be held liable for tortious interference. He did
nothing more than act as instrumental witness of the deed of sale and give
Antonio Garcia financial advice on the matter. None of these acts is
actionable tort.

3) Ferro Chemical is not entitled to reimbursement of its litigation

expenses, as payment of attorneys fees, because Ferro Chemicals failed to
justify satisfactorily its claim. Likewise, the award of attorney's fees in the
sum of P1,000,000.00 plus additional 10% of the value of the shares is
unreasonable and excessive. Article 2208 of the New Civil Code enumerates
the instances where such may be awarded and, in any event, it must be
reasonable, just and equitable. Attorney's fees as part of damages are not
meant to enrich the winning party at the expense of the losing litigant. They
are not awarded every time a party prevails in a suit because of the policy
that no premium should be placed on the right to litigate. The award of
attorney's fees is the exception rather than the rule.

RESTITUTO BUENVIAJE vs. SPOUSES JOVITO R. and LYDIA B.

SALONGA, JEBSON HOLDINGS CORPORATION and FERDINAND JUAT
BANEZ
G.R. No. 216023, October 5, 2016, J. Perlas-Bernabe

Specific performance and rescission/resolution

are alternative remedies available to a party. When a party prays for either of
the two, he is bound by the choice he made.

Facts:
 Jebson, through its EVP Baez, entered into a Joint Venture Agreement
with the Sps. Salonga for the Brentwoods Tagaytay Villas Project. Under the
JVA, the Sps. Salonga shall contribute the land, while Jebson undertook to
construct the units and secure all the necessary permits. It was agreed that
once the project is completed, the Sps. Salonga will be given 3 units (out of
the 10 units), while Jebson will be entitled to 7 units. Jebson was also
authorized to sell the units with the conformity of the Sps. Salonga.

Jebson entered into a Contract to Sell (CTS) with Buenviaje over Unit 5.
Under the CTS, part of the purchase price shall be paid periodicall, while the
rest shall be paid through an asset swapping arrangement, with Buenviaje
conveying a house and lot and golf shares to Jebson.

Despite full payment of the purchase price, Jebson failed to complete

and deliver the unit of Buenviaje. Hence, the latter filed a Complaint for
Specific Performance w/ Damages and Attorneys Fees against Jebson, Banez
and the Sps. Salonga before the HLURB-RIV. The said Complaint was
consolidated with 2 other complaints filed by Beliz Reality and the Sps. Co,
who similarly entered into a swapping arrangement with Jebson.

The HLURB-RIV rescinded the CTS and held the Sps. Salonga solidarily
liable with Jebson and Banez. The HLURB-RIVs ruling was reversed by the
HLURB-BOC, which was later affirmed by the OP and CA. The CA held that the
rescission of the CTS is impractical; and ordered that the units be finished
and delivered to Buenviaje and Beliz Realty, rescinding only the "swapping
arrangement." The CA also upheld Buenviaje's liability for moral damages
and attorney's fees to Sps. Salonga as a result of Buenviajes connivance with
Jebson in diluting the cash portion of its payments to the prejudice of the
spouses.

Issues:

1) Whether the grant of the remedy of specific performance in

Buenviaje's favor was proper under the prevailing circumstances of the
case.
2) Whether the Sps. Salonga are solidarily liable with Jebson and Banez to
Buenviaje for the completion of the construction and delivery of the
unit.
3) Whether the "swapping arrangement" was invalid.
4) Whether Buenviaje is liable to Sps. Salonga for moral damages and
attorney's fees.

Ruling:

1) The grant of the remedy of specific performance in Buenviaje's favor

was proper.

Specific performance and "rescission" (more accurately referred to

as resolution) are alternative remedies available to a party who is aggrieved
by a counter-party's breach of a reciprocal obligation provided for in Article
1191 of the Civil Code.

Rescission/resolution does not merely terminate the contract and

release the parties from further obligations to each other, but abrogates the
contract from its inception and restores the parties to their original positions
as if no contract has been made. Consequently, mutual restitution, which
entails the return of the benefits that each party may have received as a
result of the contract, is thus required. Notably, rescission/resolution will not
be permitted for a slight or casual breach, but only for such substantial and
fundamental violations as would defeat the very object of the parties in
making the agreement. Ultimately, the question of whether a breach of
contract is substantial depends upon the attending circumstances.

In this case, Buenviaje primarily prayed for the remedy of specific

performance. Thus, he is bound by the choice he had made. The fundamental
rule is that reliefs granted a litigant are limited to those specifically prayed for
in the complaint; other reliefs prayed for may be granted only when related
to the specific prayer(s) in the pleadings and supported by the evidence on
record.

Further, there is no finding that specific performance has become

impossible or that there are insuperable legal obstacles to the completion of
the constructed units so as to justify resolution.

2) The Sps. Salonga are not solidarily liable with Jebson and Banez to
Buenviaje for the completion of the construction and delivery of the unit.

With the propriety of specific performance having been decreed,

Buenviaje's claim to be restituted the alleged purchase price of
P10,625,000.00 - for which Sps. Salonga were claimed to be solidarily liable -
thus, holds no basis. Mutual restitution cannot arise because it is
incompatible with the remedy of specific performance, which is the relief
prayed for and consequently, granted to the injured party herein.

Moreover, the obligations to be fulfilled are obligations of Jebson to

Buenviaje under the subject CTS. Under Article 1311 of the Civil Code,
contracts can only bind the parties who had entered into it and it cannot
favor or prejudice third persons. Contracts take effect only between the
parties, their successors in interest, heirs and assigns. Thus, absent any
privity of contract as to them, there is no basis to hold Sps. Salonga liable for
any of the obligations stated under the said CTS.

Also, the imputation of joint or solidary liability against a particular

person- such as that insistently claimed against Sps. Salonga by Buenviaje
first presupposes the existence of that person's obligation. As already
mentioned, no source of obligation under the subject CTS can be traced to
Sps. Salonga.
 Neither has Buenviaje persuasively argued that Sps. Salonga may be
held solidarily liable pursuant to law, which is a distinct source of obligation.
Section 40 of PD 957cannot be applied because Sps. Salonga had no direct or
indirect control over Jebson throughout the course of the Brentwoods Project.
Even if it is assumed that they had some sort of control over Jebson, they did
not act in bad faith and had no hand in inducing Jebson's acts from which
Buenviaje's cause of action arose.

Articles 1822 and 1824 of the Civil Code likewise do not apply because
they pertain to the obligations of a co-partner in the event that the
partnership to which he belongs is held liable. In this case, Buenviaje never
dealt with any partnership constituted by and between Jebson and Sps.
Salonga. While Jebson and Sps. Salonga entered into a JVA, which may be
considered as a form of partnership, their joint venture was never privy to
any obligation with Buenviaje

3) The "swapping arrangement" was valid.

Article 1381 of the Civil Code provides that contracts in fraud of

creditors are those executed with the intention to prejudice the rights of
creditors. In determining whether or not a certain conveying contract is
fraudulent, what comes to mind first is the question of whether the
conveyance was a bona fide transaction or a trick and contrivance to defeat
creditors. To creditors seeking contract rescission on the ground of fraudulent
conveyance rest the onus of proving by competent evidence the existence of
such fraudulent intent on the part of the debtor. Here, the onus of proving
that the "swapping arrangement" was a fraudulent conveyance, or a trick and
contrivance to defeat creditor rights, was not sufficiently discharged by Sps.
Salonga.

4) Buenviaje is liable to Sps. Salonga for moral damages and attorney's fees.

In order that moral damages under Article 2219 of the Civil Code may
be awarded, there must be pleading and proof of moral suffering, mental
anguish, fright and the like. As to attorney's fees, the general rule is that the
same cannot be recovered as part of damages because of the policy that no
premium should be placed on the right to litigate. Even when a claimant is
compelled to litigate with third persons or to incur expenses to protect his
rights, still attorney's fees may not be awarded where no sufficient showing
of bad faith could be reflected in a party's persistence in a case other than an
erroneous conviction of the righteousness of his cause. Here, there is no
factual basis to declare Buenviaje liable to Sps. Salonga for moral damages
and attorney's fees.

UNIVERSAL INTERNATIONAL INVESTMENT (BVI) LIMITED vs. RAY

BURTON DEVELOPMENT CORPORATION / UNIVERSAL INTERNATIONAL
INVESTMENT (BVI) LIMITED vs. RAY BURTON DEVELOPMENT
CORPORATION
G.R. No. 182201 / G.R. No. 185815, November 14, 2016, C.J. Sereno
 If the terms of the contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations
shall control.

Facts:

Universal filed a Complaint for Specific Performance or Rescission of

Contract and Damages. Petitioner likewise moved for the issuance of a writ of
preliminary attachment against the properties of RBDC. Universal sought the
delivery of 1the condominium units and its CCTs. In the event that delivery
were to be proven impossible, it prayed for the rescission of the Contracts to
Sell with a refund of the purchase price plus the penalty interest stipulated
under Section 6 thereof.

The ENCRFO issued a Decision in favor of Universal. The case was

appealed to the BOC, which issued an Order directing the remand of the case
to the ENCRFO so that the latter could include China Bank in the proceedings.
Here, the CA dismissed the action for lack of merit.

Issues:

1) Whether petitioner is entitled to liquidated damages specified in

Section 6 of the Contracts to Sell.
2) Whether petitioner is entitled to its claim for losses amounting to
P19,646,483.72.
3) Whether petitioner is entitled to damages on account of the
contractual breaches committed by respondent.

Ruling:

1) If the terms of the contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations shall
control. In this case, the very words of Section 6 of the Contracts to Sell refer
only to situations of (1) force majeure or (2) substantial delay in the
condominium project, Elizabeth Place.

Universal is not alleging either of these two circumstances. Rather, it is

claiming damages for RBDC's failure to deliver possession of the
condominium units, parking slots, and their CCTs. Hence, Section 6 of the
Contracts to Sell is clearly inapplicable to petitioner's cause of action.

2) Petitioner is not entitled to its claim for losses amounting to

P19,646,483.72.

Article 2200 of the Civil Code speaks of indemnification for lost profits
that would have been obtained by the claimant if not for the injury caused by
the erring party. In the present case, however, Universal does not even allege
that it is marketing the properties for profit, either by lease or by sale. Even
assuming that the condominium units were utilized for profit, there is no
evidence as to the amount of profits that Universal would have earned from
the properties. To justify a grant of compensatory damages, it is necessary
that the actual amount of loss to be proved with a reasonable degree of
certainty, premised upon competent proof and the best evidence obtainable
by the injured party.

The P19,646,483.72 difference between the total contract price and

the present market value of the properties cannot be considered as unearned
profits because that presupposes that Universal has (1) successfully
marketed the properties (2) at a favorable retail price that would allow it to
recover its original investment. In order to recover actual damages, the
alleged unearned profits must not be conjectural or based on contingent
transactions. The amount claimed in this case is merely speculative.

3) Petitioner is entitled to temperate/moderate damages.

RBDC only has two obligations specified by Section 3 of their

agreement: (1) to deliver deeds of absolute sale; and (2) to deliver the
corresponding CCTs. RBDC admittedly failed to perform these obligations, but
invoked the excuse that Universal had defaulted on the payment of transfer
charges under Section 5(a) of the Contracts to Sell.

In order that the debtor may be held to be in default, the following

requisite conditions must be present: (1) the obligation is demandable and
already liquidated; (2) the debtor delays performance of the obligation; and
(3) the creditor requires the performance judicially or extrajudicially. Here,
nowhere in the records can on find a demand from RBDC for Universal to pay
any sum. Clearly, Universal has not defaulted on the payment of transfer
charges.

Temperate damages may be recovered when the court finds that some
pecuniary loss has been suffered but the amount cannot, from the nature of
the case, be proven with certainty. In this case, there is no doubt that
Universal sustained pecuniary loss, albeit difficult to quantify, arising from
RBDC's failure to execute deeds of absolute sale and to deliver the CCTs of
the properties.

The calculation of temperate damages is usually left to the sound

discretion of the courts. The amount must be reasonable, bearing in mind
that the same should be more than nominal, but less than compensatory. In
jurisprudence, this Court has pegged temperate damages to an amount
equivalent to a certain percentage of the actual damages claimed by the
injured party.

Petitioner is likewise entitled to exemplary damages and attorneys

fees. Article 2232 of the Civil Code of the Philippines provides that in
contracts, the court may award exemplary damages if the defendant acted in
a wanton, fraudulent, reckless, oppressive, or malevolent manner. In this
case, respondent acted in that manner when, despite demand for and full
payment of the properties, it refused to execute deeds of absolute sale and
release the CCTs to petitioner without any sound basis. In addition, all
damages awarded shall earn interest of 6% per annum from the date of
finality of the judgment until full payment.

PHILIPPINE STOCK EXCHANGE, INC. vs. ANTONIO K. LITONJUA AND

AURELIO K. LITONJUA, JR.
G.R. No. 204014, December 5, 2016, J. Perez

For a contract to be binding: there must be consent of the contracting

parties; the subject matter of the contract must be certain; and the cause of
the obligation must be established.

Facts:

On 20 April 1999, the Litonjua Group wrote a letter-agreement to

Trendline Securities, Inc. (Trendline) through its President Priscilla D. Zapanta
(Zapanta), confirming a previous agreement for the acquisition of the 85%
majority equity of Trendline's membership seat in PSE. In a letter-confirmation
dated 21 April 1999, the Litonjua Group undertook to pay the amount of
Pl8,547,643.81 directly to PSE within 3 working days upon confirmation that it
will be for the full settlement of all claims and outstanding obligations
including interest of Trendline to lift its membership suspension and the
resumption to normal trading operation. Further in the letter, Trendline was
obligated to secure the approval and written confirmation of PSE for a new
corporation to be incorporated that will own a seat.

On 29 April 1999, the PSE, through Atty. Ruben L. Almadro (Atty.

Almadro), Vice-President for Compliance and Surveillance Department, sent a
letter to Trendline advising the latter that PSE has resolved to accept the
amount of Pl9,000,000.00 as full and final settlement of its outstanding
obligation. In compliance, the Litonjua Group in a letter dated 12 May 1999,
delivered to PSE through Atty. Almadro 3 check payments, all dated 13 May
1999 and payable to PSE, totaling to an amount of Pl9,000,000.00.

Despite several exchange of letters of conformity and delivery of

checks representing payment of full settlement of Trendline's obligations, PSE
failed to lift the suspension imposed on Trendline's seat. On 30 July 2006, the
Litonjua Group, through a letter, requested PSE to reimburse the
P19,000,000.00 it had paid with interest, upon knowledge that the specific
performance by PSE of transferring the membership seat under the
agreement will no longer be possible. PSE, however, refused to refund the
claimed amount as without any legal basis. As a result, the Litonjua Group on
10 October 2006 filed a Complaint for Collection of Sum of Money with
Damages against PSE.

Declining reimbursement, PSE in its Answer Ad Cautelam raised

primarily that it received the amount not from the Litonjua Group but from
Trendline as a settlement of its obligation. It insisted that the cause of action
of the Litonjua Group is against Trendline and not the exchange, the latter
being a non-party to the letter agreement.

The RTC held that the Litonjua Group is entitled to claim a refund from
PSE based on the principle of solutio indebiti as defined in Article No. 2154 of
the New Civil Code. The CA affirmed the decision of the RTC but principally
relied on the principle of constructive trust instead of solutio indebiti as an
appropriate remedy against the unjust enrichment of PSE.

Issues:

1) Whether PSE is considered a party to the letter-agreement.

2) Whether PSE is liable to return the payment received.
3) Whether the PSE is liable to pay exemplary damages.

Ruling:

1) No. According to Article 1305 of the Civil Code, "a contract is a meeting
of minds between two persons whereby one binds himself, with respect to the
other, to give something or render some service." For a contract to be
binding: there must be consent of the contracting parties; the subject matter
of the contract must be certain; and the cause of the obligation must be
established. Admittedly in this case, no board resolution was issued to
authorize PSE to become a party to the letter-agreement. No consent was
given by PSE to be bound by the terms of the letter-agreement. Hence, PSE is
not considered as a party to the letter-agreement.

2) Yes. This is pursuant to the principles of unjust enrichment and

estoppel; it is only but rightful to return the money received since PSE has no
intention from the beginning to be a party to the agreement. There is unjust
enrichment when a person unjustly retains a benefit to the loss of another, or
when a person retains money or property of another against the fundamental
principles of justice, equity and good conscience. The principle of unjust
enrichment requires two conditions: (1) that a person is benefited without a
valid basis or justification, and (2) that such benefit is derived at the expense
of another. The main objective of the principle against unjust enrichment is to
prevent one from enriching himself at the expense of another without just
cause or consideration. Applying law and jurisprudence, the principle of
unjust enrichment requires PSE to return the money it had received at the
expense of the Litonjua Group since it benefited from the use of it without
any valid justification.

3) Yes. In contracts and quasi-contracts, the court may award exemplary

damages if the defendant acted in a wanton, fraudulent, reckless, oppressive,
or malevolent manner. Exemplary damages cannot be recovered as a matter
of right; the court will decide whether or not they should be adjudicated.
While the amount of the exemplary damages need not be proven, the plaintiff
must show that he is entitled to moral, temperate or compensatory damages
before the court may consider the question of whether or not exemplary
damages should be awarded.
 PSE, despite demands by the Litonjua Group, continuously refused to
return the money received despite the fact that it received it without any
legal right to do so. This conduct, as found by the trial court, falls within the
purview of wanton, oppressive and malevolent in nature. Thus, absent any
other compelling reason to overturn the findings, we uphold the award of
exemplary damages.

POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT

CORPORATION vs. SEM-CALACA POWER CORPORATION
G.R. No. 204719, December 5, 2016, J. Peralta

If the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations
shall control. Conversely, when the terms of the contract are unclear or are
ambiguous, interpretation must proceed beyond the words' literal meaning.

Facts:

The Electric Power Industry Reform Act of 2001 (EPIRA), or Republic Act
(R.A.) No. 9136 provided for the privatization of the assets of the National
Power Corporation (NPC). It also provided for the creation of petitioner Power
Sector Assets and Liabilities Management Corporation (PSALM), which shall
manage the orderly sale, disposition, and privatization of NPC generation
assets, real estate and other disposable assets, and IPP contracts.

PSALM sold the Calaca Power Plant, an asset of NPC, to DMCI though
an Asset Purchase Agreement (APA). DMCI later sold the same to SEM-Calaca
Power Corporation (SCPC). Upon taking over the management and operations
of the Calaca Power Plant, SCPC started providing electricity to customers
listed in Schedule W of the APA, among which is MERALCO.

169,000 kW appears in Schedule W as MERALCOs monthly average

demand, while 10.841% is found under the name of MERALCO. SCPC
contends that it is obliged to supply 10.841% of MERALCO's total requirement
but not to exceed 169,000 kW in any hourly interval. However, PSALM
contends that SCPC is bound to supply the entire 10.841% of what MERALCO
requires, without regard to any cap or limit.

In 2010, when SCPC fell short of supplying the entire 10.841% of

MERALCO's requirements, the deficiency was filled by supply from the
Wholesale Electricity Spot Market (WESM). Thus, NPC and PSALM, billed
MERALCO for the electricity delivered by SCPC and that supplied through
WESM. SCPC claims, however, that PSALM withheld MERALCO's payments
even for the electricity that SCPC supplied without the latter's knowledge nor
consent. NPC also allegedly replaced SCPC Power Bills to MERALCO with
PSALM Power Bills, with instructions that payments be remitted directly to
PSALM instead of SCPC. PSALM then refused to release the payments due to
SCPC until after deducting the cost of power supplied by WESM.
 SCPC initiated the instant case by filing a Petition for Dispute
Resolution (with Prayer for Provisional Remedies) before the Energy
Regulatory Commission (ERC) against NPC and PSALM. ERC ruled in favor of
SCPC, and ruled, among others, that SCPC's obligation under Schedule W of
the APA is to deliver 10.841% of MERALCO's energy requirements but not to
exceed 169,000 kW capacity allocation, at any given hour. This was later
affirmed by the Court of Appeals.

Issue:

Whether there was error in the CA's affirmation of the ERC's

interpretation of Schedule W of the socalled Asset Purchase Agreement (APA),
i.e., the contract between the parties PSALM and SCPC, to mean that SCPC's
obligation thereunder is to deliver 10.841% of MERALCO's energy
requirements but not to exceed 169,000 kW capacity allocation, at any given
hour.

Ruling:

No error attended the CA's affirmation of the ruling of the ERC. Among
the key principles in the interpretation of contracts is that espoused in Article
1370, paragraph 1, of the Civil Code, which states that [i]f the terms of a
contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulations shall control. The rule means
that where the language of a written contract is clear and unambiguous, the
contract must be taken to mean that which, on its face, it purports to mean,
unless some good reason can be assigned to show that the words should be
understood in a different sense.

Conversely, when the terms of the contract are unclear or are

ambiguous, interpretation must proceed beyond the words' literal meaning.
Paragraph 2 of the same Article 1370 provides that [i]f the words appear to
be contrary to the evident intention of the parties, the latter shall prevail over
the former. Further, Article 1374 of the Civil Code provides that [t]he
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.

The rule is that when the intention of the parties cannot be discerned
from the plain and literal language of the contract, or where there is more
than just one way of reading it for its meaning, the court must make a
preliminary inquiry of whether the contract before it is an ambiguous one. A
contract provision is ambiguous if it is susceptible of two reasonable
alternative interpretations. In such case, its interpretation is left to the court,
or another tribunal with jurisdiction over it.

In the case at bar, the Court finds that ambiguity indeed surrounds the
figures 10.841% and 169,000 kW found in the contract, the former because it
does not indicate a base value with a specific quantity and a definite unit of
measurement and the latter because there is uncertainty as to whether it is a
cap or limit on the party's obligation or not. These were similarly the findings
of both the ERC and the appellate court.

Following the above rules and principles, the ERC correctly interpreted
the ambiguity in Schedule W in a way that would render all of the contracts'
provisions effectual. SCPC's obligation is to deliver 10.841% of MERALCO's
energy requirements but not to exceed 169,000 kW capacity allocation, at
any given hour.

PRYCE PROPERTIES CORPORATION vs. SPOUSES SOTERO OCTOBRE,

JR. AND HENRISSA A. OCTOBRE , AND CHINA BANKING CORPORATION
G.R. No. 186975, December 7, 2016, J. Jardeleza

Facts:

Spouses Octobre signed a Reservation Agreement with petitioner Pryce

Properties Corporation for the purchase of two lots in Puerto Heights Village,
Puerto Heights, Cagayan de Oro City. The parties subsequently executed a
Contract to Sell over the lot for the price of P2,897,510.00. Pryce issued a
certification that Spouses Octobre had fully paid the purchase price and
amortization interests, as well as the transfer fees and other charges in
relation to the property, amounting to a total of P4,292,297.92. But Pryce had
yet to deliver the certificates of title, which prompted Spouses Octobre to
formally demand its delivery. Despite repeated demands, Pryce failed to
comply. Thus, Spouses Octobre filed a complaint before the Housing and Land
Use Regulatory Board for specific performance, revocation of certificate of
registration, refund of payments, damages and attorney's fees.

Pryce was unable to deliver the titles to Spouses Octobre because it

had previously transferred custody of the titles, along with others pertaining
to the same development project, to China Banking Corporation as part of the
Deed of Assignment under which Pryce obligated itself to deliver to China
Bank the "contracts to sell and the corresponding owner's duplicate copies of
the transfer certificates of title, tax declaration, real estate tax receipts and
all other documents and papers relating to the assigned receivables until
such receivables are paid or repurchased by Pryce. The titles to the lots
purchased by Spouses Octobre were among those held in custody by China
Bank. When Pryce defaulted in its loan obligations to China Bank, China Bank
refused to return the titles to Pryce.

The HLURB Arbiter ordered Pryce to refund the payments made by the
spouses with legal interest and to pay the latter compensatory damages
amounting to P30,000.00, attorney's fees and costs of suit.

On appeal, the HLURB Board of Commissioners modified the Decision

by ordering Pryce to pay the redemption value to China Bank so that the
latter may release the titles covering the lots purchased by Spouses Octobre.
In default thereof, Pryce shall refund the payments with legal interest. The
HLURB Board upheld the grant of compensatory damages, attorney's fees
and costs to Spouses Octobre. Pryce moved for reconsideration but it was
denied.

Thereafter, Pryce appealed the case to the Office of the President,

which affirmed in full the HLURB Board's Decision. Undeterred, Pryce elevated
the case to the Court of Appeals which denied the petition for review and
affirmed the Office of the President's Decision.

Pryce went to the Supreme Court primarily arguing that the Court of
Appeals erred in upholding the award of compensatory damages because
Spouses Octobre failed to present competent proof of the actual amount of
loss.

Issue:

Whether a breach of contract automatically triggers the award of

actual or compensatory damages.

Ruling:

No. To be entitled to compensatory damages, the amount of loss must

be capable of proof and must be actually proven with a reasonable degree of
certainty, premised upon competent proof or the best evidence obtainable.
The burden of proof of the damage suffered is imposed on the party claiming
the same, who should adduce the best evidence available in support thereof.

The records of this case are bereft of any evidentiary basis for the
award of P30,000.00 as compensatory damages. When the HLURB Arbiter
initially awarded the amount, it merely mentioned that [Spouses Octobre]
are entitled to compensatory damages, which is just and equitable in the
circumstances, even against an obligor in good faith since said damages are
the natural and probable consequences of the contractual breach
committed. On the other hand, the Court of Appeals justified the award of
compensatory damages by stating that "it is undisputed that petitioner Pryce
committed breach of contract in failing to deliver the titles 'to respondents
[Spouses] Octobre which necessitated the award of compensatory damages.

In the absence of adequate proof, compensatory damages should not

have been awarded. Nonetheless, we find that nominal damages, in lieu of
compensatory damages, are proper in this case. Under Article 2221, nominal
damages may be awarded in order that the plaintiffs right, which has been
violated or invaded by the defendant, may be vindicated or recognized, and
not for the purpose of indemnifying the plaintiff for any loss suffered. xxx xxx.
So long as there is a violation of the right of the plaintiff-whether based on
law, contract, or other sources of obligations-an award of nominal damages is
proper. Proof of bad faith is not required. The HLURB Arbiter and the Court of
Appeals appear to have confused nominal damages with compensatory
damages, since their justifications more closely fit the former.

It is undisputed that Pryce failed to deliver the titles to the lots subject
of the Contract to Sell even as Spouses Octobre had already fully settled the
purchase price. Its inability to deliver the titles despite repeated demands
undoubtedly constitutes a violation of Spouses Octobre's right under their
contract. That Pryce had transferred custody of the titles to China Bank
pursuant to a Deed of Assignment is irrelevant, considering that Spouses
Octobre were not privy to such agreement.

In fine, contractual breach is sufficient to justify an award for nominal

damages but not compensatory damages.

KABISIG REAL WEALTH DEV., INC. AND FERNANDO C. TIO vs. YOUNG
BUILDERS CORPORATION
G.R. No. 212375, January 25, 2017, J. Peralta

A contract is generally binding in whatever form, whether written or

oral, it may have been entered into, provided the essential requisites for its
validity are present.

To determine the compensation due and to avoid unjust enrichment

from resulting out of a fulfilled contract, the principle of quantum meruit may
be used. Under this principle, a contractor is allowed to recover the
reasonable value of the services rendered despite the lack of a written
contract.

Facts:

Kabisig, through Ferdinand Tio, contracted the services of Young

Builders to supply labor, tools, equipment, and materials for the renovation of
its building in Cebu City. Young Builders then finished the work in September
2001 and billed Kabisig for P4,123,320.95. However, despite numerous
demands, Kabisig failed to pay. It contended that no written contract was
ever entered into between the parties and it was never informed of the
estimated cost of the renovation. Thus, Young Builders filed an action for
Collection of Sum of Money against Kabisig.

The RTC ruled in favor of Young Builders, ordering Kabisig and Tio to
pay. The CA affirmed the RTC ruling but modified the award of damages by
deleting actual damages.

Issues:

1) Whether there was a valid contract between Kabisig and Young

Builders.
2) Whether the Young Builders is entitled to actual damages.

Ruling:

1) There was a valid contract between Kabisig and Young Builders.

 For a contract to be valid, it must have the following essential
elements: (1) consent of the contracting parties; (2) object certain, which is
the subject matter of the contract; and (3) cause of the obligation which is
established. Consent is manifested by the meeting of the offer and the
acceptance of the thing and the cause, which are to constitute the contract.
By law, a contract of sale, is perfected at the moment there is a meeting of
the minds upon the thing that is the object of the contract and upon the
price. Here, it is clear that Tio commissioned the company of his friend,
Nelson Yu, to supply labor, tools, equipment, and materials for the renovation
of Kabisig's building into a restaurant.

A contract is generally binding in whatever form, whether written or

oral, it may have been entered into, provided the aforementioned essential
requisites for its validity are present. Hence, even if there is no written
contract, the agreement between Kabisig and Young Builders is still valid and
enforceable.

2) Young Builders is not entitled to actual damages but is entitled to

temperate damages.

For an injured party to recover actual damages, however, he is

required to prove the actual amount of loss with reasonable degree of
certainty premised upon competent proof and on the best evidence available.
He must establish his case by a preponderance of evidence. In other words,
damages cannot be presumed and courts. Here, Young Builders failed to
submit any competent proof of the specific amount of actual damages being
claimed. The documents submitted either do not bear the name of Kabisig or
Tio, their conformity, or signature, or do not indicate in any way that the
amount reflected on its face actually refers to the renovation project.

However, Young Builders is entitled to temperate/moderate damages,

which are more than nominal but less than compensatory damages. They
may be recovered when the court finds that some pecuniary loss has been
suffered but its amount cannot, from the nature of the case, be proved with
certainty.

The principle of quantum meruit may be used to determine the

compensation due and prevent unjust enrichment. Under this principle, a
contractor is allowed to recover the reasonable value of the services rendered
despite the lack of a written contract. The measure of recovery under the
principle should relate to the reasonable value of the services performed.
Being predicated on equity, said principle should only be applied if no express
contract was entered into, and no specific statutory provision was applicable.
Under the established circumstances, the total amount of P2,400,000.00
which the CA awarded is deemed to be a reasonable compensation.

Finally, the rate of interest should be modified. When the obligation is

breached, and it consists in the payment of a sum of money, as in this case,
the interest due should be that which may have been stipulated in writing. In
the absence of stipulation, the rate of interest shall be 12%, later reduced to
6%,per annum to be computed from default, i.e., from judicial or extrajudicial
demand, subject to the provisions of Article 1169 of the Civil Code. Also, the
rate of legal interest for a judgment awarding a sum of money shall be 6%
per annum from the time such judgment becomes final and executory until its
satisfaction, this interim period being deemed to be by then an equivalent to
a forbearance of credit.

DELFIN C. GONZALES, JR. vs. MAGDALENO M. PENA, ALABANG

COUNTRY CLUB, INC. and ARSENIA VERA
G.R. No. 214303, January 30, 2017, C.J. Sereno

Void transactions do not produce any legal or binding effect, and any
contract directly resulting from that illegality is likewise void and inexistent.

Facts:

In another case, petitioner was adjudged liable to respondent Pena for

payment of agencys fees and damages. Pena moved for the execution of the
said judgment and, as a result, was able to purchase petitioners Alabang
Country Club, Inc. (ACCI) shares. Pena, later sold the said share to respondent
Vera.

The decision finding petitioner liable to Pena was subsequently

declared null and void. As a result, the execution pending appeal by Pena was
likewise nullified. The Supreme Court ruled that petitioner was entitled to full
restoration of all properties that were executed, such as the ACCI shares. The
SC also remanded the proceedings for restitution to the RTC.

Petitioner sought the execution of the SC decision, seeking restoration

of his ACCI shares. ACCI, however, countered that the shares could no longer
be returned to petitioner because they were already sold by Pena to a 3 rd
party Vera.

The RTC held that the sale of the ACCI shares to Vera was valid, Vera
being an innocent purchaser for value. The RTC held that restitution was
impossible and ordered Pena to just pay petitioner the value of the shares.

Issue:

Whether restitution of the ACCI shares is possible.

Ruling:

Restitution of the ACCI shares is possible.

Void transactions do not produce any legal or binding effect, and any
contract directly resulting from that illegality is likewise void and
inexistent. Therefore, Pea could not have been a valid transferee of the
property. As a consequence, his successor-in-interest, Vera, could not have
validly acquired those shares. The RTC thus erred in refusing to restore the
actual ACCI shares to petitioner on the basis of their void transfer to Vera.

Neither was the RTC correct in its characterization of the actual

restitution of the ACCI shares to petitioner as "impossible." For the obligation
to be considered impossible under Article 1266 of the Civil Code, its physical
or legal impossibility must first be proven.

Restitution was not physically impossible because the shares are

movable by nature, the same can be transferred back to Gonzalez, Jr. by
recording the transaction in the stock and transfer book of the club. There is
also no legal impossibility because Article 1505 of the Civil Code provides
that true owners of goods are not legally precluded from claiming the
ownership of their actual properties. Since Pea acquired the properties by
virtue of a null and void execution sale, Vera acquired no better title to the
goods than he had.

UNITED ALLOY PHILIPPINES CORPORATION, SPOUSES DAVID C. CHUA

AND LUTEN CHUA vs. UNITED COCONUT PLANTERS BANK
G.R. No. 175949, January 30, 2017, J. Peralta

Contracts have the force of law between the contracting parties and
should be complied with in good faith.

Any contract which appears to be heavily weighed in favor of one of

the parties so as to lead to an unconscionable result is void. Any stipulation
regarding the validity or compliance of the contract which is left solely to the
will of one of the parties, is likewise, invalid.

Facts:

Petitioner Unialloy was granted credit accommodation by respondent

UCPB pursuant to a Credit Agreement. The Credit Agreement was secured by
a Surety Agreement executed by petitioners Chua and other officers of
Unialloy.

Unialloy failed to pay its obligations to UCPB. Hence, the latter filed a
collection case against Unialloy and its sureties.

The RTC ruled in favor of UCPB, ordering Unialloy and its sureties to
pay. The CA affirmed the RTCs ruling.

Issues:

1) Whether petitioners, together with their co-defendants, are liable to

pay respondent the amounts awarded by the RTC.
2) Whether the interest rates imposed on the PNs are valid.

Ruling:
1) Petitioners, together with their co-defendants, are liable to pay respondent
the amounts awarded.

Article 1159 of the Civil Code expressly provides that obligations

arising from contracts have the force of law between the contracting parties
and should be complied with in good faith. Here, petitioners bound
themselves jointly and solidarily with Unialloy pay the latters loan with UCPB.
They are bound to comply with the Surety Agreement and PNs that they
executed.

2) The interest rates imposed on the PNs are not valid and must be modified.

Any contract which appears to be heavily weighed in favor of one of the

parties so as to lead to an unconscionable result is void. Any stipulation
regarding the validity or compliance of the contract which is left solely to the
will of one of the parties, is likewise, invalid. Here, the interest rates imposed
on the PNs were made subject to review and adjustment at the sole discretion
and under the exclusive will of UCPB. Hence, the rates must be modified.
Courts have the authority to strike down or to modify provisions in
promissory notes that grant the lenders unrestrained power to increase
interest rates, penalties and other charges at the latter's sole discretion and
without giving prior notice to and securing the consent of the borrowers.
Furthermore, excessive interests, penalties and other charges not revealed in
disclosure statements issued by banks, even if stipulated in the promissory
notes, cannot be given effect under the Truth in Lending Act.