FILE NAME:

Delay, Cabanting v BPI

FORMAT OF THE DIGEST:

Delay

Cabanting v BPI
GR 201927, February 17, 2016

Peralta, J.:

Facts:

Cabanting bought a Mitsubishi Adventure from Diamond Motors on installment basis. He

also executed a Promissory note with Chattel Mortgage on the vehicle in favor of Diamond
Motors wherein the parties stipulated that in case of failure to pay “the entire sum outstanding
under this note shall immediately become due and payable without the necessity of notice or
demand which I/We hereby waive." On the same day, Diamond motors assigned to BPI Bank all
its right, title and interest to the Promissory note.

When Cabanting failed to pay his monthly amortizations, BPI filed a case for Replevin
and damages against Cabanting. RTC rendered a decision in favor of BPI and ordered Cabanting
to pay his unpaid balance. The decision was affirmed by the CA on appeal.

Issue:
Is the demand from the bank before the obligation of Cabanting becomes due and
demandable?

Ruling:

No. The Supreme Court held that no prior demand was necessary. Decision of the CA
affirmed. According to the SC:

Petitioners are bound by the aforementioned stipulation in the Promissory Note with
Chattel Mortgage waiving the necessity of notice and demand to make the obligation due and
payable. Agner v. BPI Family Savings Bank, Inc., which is closely similar to the present case, is
squarely applicable. Petitioners therein also executed a Promissory Note with Chattel Mortgage
containing the stipulation waiving the need for notice and demand. The Court ruled:

xxx Even assuming, for argument's sake, that no demand letter was sent by respondent,
there is really no need for it because petitioners legally waived the necessity of notice or demand
in the Promissory Note with Chattel Mortgage, which they voluntarily and knowingly signed in
favor of respondent's predecessor-in-interest. Said contract expressly stipulates:
 In case of my/our failure to pay when due and payable, any sum which I/We are obliged
to pay under this note and/or any other obligation which I/We or any of us may now or in the
future owe to the holder of this note or to any other party whether as principal or guarantor xxx
then the entire sum outstanding under this note shall, without prior notice or demand,
immediately become due and payable.

Further, the Court even ruled in Navarro v. Escobido that prior demand is not a condition
precedent to an action for a writ of replevin, since there is nothing in Section 2, Rule 60 of the
Rules of Court that requires the applicant to make a demand on the possessor of the property
before an action for a writ of replevin could be filed.

Clearly, as stated above, Article 1169 (1) of the Civil Code allows a party to waive the
need for notice and demand. Petitioners' argument that their liability cannot be deemed due and
payable for lack of proof of demand must be struck down.
FILE NAME:
Medical Malpractice, Borromeo v Family Care Hospital

FORMAT OF THE DIGEST:

Medical Malpractice

Borromeo v Family Care Hospital

GR 191018, January 25, 2016

Brion, J.:

Facts:
Carlos Borromeo lost his wife Lillian when she died after undergoing a routine
appendectomy. The hospital and the attending surgeon submit that Lillian bled to death due to a
rare, life-threatening condition that prevented her blood from clotting normally. Carlos believes,
however, that the hospital and the surgeon were simply negligent in the care of his late wife.

RTC ruled in favor of Borromeo. CA reversed the decision.

Issue:
Is there medical malpractice in the case?

Ruling:
None. Whoever alleges a fact has the burden of proving it. This is a basic legal principle
that equally applies to civil and criminal cases. In a medical malpractice case, the plaintiff has
the duty of proving its elements, namely: (1) a duty of the defendant to his patient; (2) the
defendant's breach of this duty; (3) injury to the patient; and (4) proximate causation between the
breach and the injury suffered. In civil cases, the plaintiff must prove these elements by a
preponderance of evidence.

A medical professional has the duty to observe the standard of care and exercise the
degree of skill, knowledge, and training ordinarily expected of other similarly trained medical
professionals acting under the same circumstances. A breach of the accepted standard of care
constitutes negligence or malpractice and renders the defendant liable for the resulting injury to
his patient.

The standard is based on the norm observed by other reasonably competent members of
the profession practicing the same field of medicine. Because medical malpractice cases are
often highly technical, expert testimony is usually essential to establish: (1) the standard of care
that the defendant was bound to observe under the circumstances; (2) that the defendant's
conduct fell below the acceptable standard; and (3) that the defendant's failure to observe the
industry standard caused injury to his patient.
 The expert witness must be a similarly trained and experienced physician. Thus, a
pulmonologist is not qualified to testify as to the standard of care required of an anesthesiologist
and an autopsy expert is not qualified to testify as a specialist in infectious diseases.

The petitioner failed to present an expert witness.

In ruling against the respondents, the RTC relied on the findings of Dr. Reyes in the light
of Dr. Avila's opinion that the former's testimony should be given greater weight than the
findings of Dr. Ramos and Dr. Hernandez. On the other hand, the CA did not consider Dr. Reyes
or Dr. Avila as expert witnesses and disregarded their testimonies in favor of Dr. Ramos and Dr.
Hernandez. The basic issue, therefore, is whose testimonies should carry greater weight?

We join and affirm the ruling of the CA.

FILE NAME:
Conditional Obligation, Hilltop Market v Yaranon

FORMAT OF THE DIGEST:

Conditional Obligation

Hilltop Market v Yaranon

GR 188057; July 12, 2017

Carpio, J.:

Facts:
On 22 June 1974, petitioner Hilltop Market Fish Vendors' Association, Inc. (Hilltop), and
respondent City of Baguio, entered into a Contract of Lease over a lot owned by the City of
Baguio, with an area of 568.80 square meters and located at the Hilltop Market, Baguio City.

The contract provided that the period of lease is 25 years, renewable for the same period
at the option of both parties, and the annual lease rental is P25,000, with the first payment
commencing upon the issuance by the City Engineer's Office of the Certificate of full occupancy
(Certificate) of the building to be constructed by Hilltop. Before the Certificate is issued, the City
of Baguio can continue collecting market fees from the vendors who are allowed to occupy any
portion of the building. At the termination of the lease period, the City of Baguio will own the
building without payment or reimbursement for Hilltop's costs.

On 16 October 1980, the City Council of Baguio, through its then Mayor Ernesto Bueno,
issued Resolution No. 74-80 rescinding the contract of lease with Hilltop, for its continued
failure to comply with its obligation to complete the Rillera building. In Resolution Nos. 18-81
and 50-86, the City Council of Baguio reiterated its resolution to rescind the contract and sought
to undertake the completion of the building.

On 28 February 2005, respondent then Mayor Braulio Yaranon (Yaranon) issued

Administrative Order No. 030 S. 2005 (AO No. 30), ordering the City Building and Architects
Office (CBAO) and Public Order and Safety Division to immediately close the Rillera building
to have it cleaned, sanitized and enclosed; to prevent illegal activities in it; and for its completion
and preparation for commercial use. On 7 March 2005, Hilltop filed with the RTC a Complaint
with Very Urgent Application for Temporary Restraining Order and Writ of Preliminary
Injunction.

RTC ruled in favor of the City of Baguio and dismissed the complaint. The CA affirmed
the decision of the RTC.

Issue:
Is the period of lease already begun?
Ruling:
Yes. In a contract of lease, the cause or essential purpose is the use and enjoyment of the
thing. The thing or subject matter of the contract in this case was clearly identified and agreed
upon as the lot where the building would be constructed by Hilltop. The considerations were the
annual lease rental and the ownership of the building upon the termination of the lease period.
Considering that Hilltop and the City of Baguio agreed upon the essential elements of the
contract, the contract of lease had been perfected.

From the moment that the contract is perfected, the parties are bound to fulfill what they
have expressly stipulated. Thus, the City of Baguio gave the use and enjoyment of its lot to
Hilltop. Both the RTC and the CA found that upon the execution of the contract on 22 June
1974, Hilltop took possession of the lot and constructed the Rillera building on it. Thereafter,
Hilltop's members occupied the Rillera building and conducted business in it up to the present.
The findings of fact of the RTC and the CA are final and conclusive and cannot be reviewed on
appeal by this Court.

Since Hilltop exercised its right as lessee based on the contract of lease and the law, it has
no basis in claiming that the contract of lease did not commence.

Contrary to Hilltop's contention, the issuance of the Certificate was not a suspensive
condition which determines the perfection of the contract or its effectivity.
FILE NAME:
Obligation with Penal clause, J. Plus Asia Devt. v Utility Assurance

FORMAT OF THE DIGEST:

Obligation with Penal clause

J. Plus Asia Devt. v Utility Assurance

GR 199650, June 26, 2013

Villarama, jr., J.:

Facts:
On the target date as specified in the Construction Agreement, Mabunay accomplished
only 31.39% of the construction; hence, petitioner terminated their contract and sent demand
letters to Mabunay and respondent surety. But as the demands went unheeded, petitioner filed a
Request for Arbitration before the CIAC who rendered its Decision in favor of petitioner. The
CA reversed the CIAC’s ruling that Mabunay had incurred delay hat not all requisites in order to
consider the obligor or debtor in default were present in this case.

Issue:
Is Mabunay already in default?

Ruling:
Yes. We reverse the CA.

Default or mora on the part of the debtor is the delay in the fulfillment of the prestation
by reason of a cause imputable to the former. It is the non-fulfillment of an obligation with
respect to time.27
Article 1169 of the Civil Code provides:

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.

We cannot sustain the appellate court’s interpretation as it is inconsistent with the terms
of the Construction Agreement. 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." Records showed
that as early as April 2008, or within four months after Mabunay commenced work activities, the
project was already behind schedule for reasons not attributable to petitioner.
FILE NAME:
Payment of Performance, Evangelista v Screenex

FORMAT OF THE DIGEST:

Payment or Performance

Evangelista v Screenex
GR 211564, November 20, 2017

Sereno, CJ:

Facts:
Sometime in 1991, Evangelista obtained a loan from respondent Screenex, Inc. which
issued two (2) checks to Evangelista, The first check was UCPB Check No. 275345 for
P1,000,000 and the other one is China Banking Corporation Check No. BDO 8159110 for
P500,000. There were also vouchers of Screenex that were signed by the accused evidencing that
he received the 2 checks in acceptance of the loan granted to him.

As security for the payment of the loan, Evangelista gave two (2) open-dated checks: UCPB
Check Nos. 616656 and 616657, both pay to the order of Screenex, Inc. From the time the
checks were issued by Evangelista, they were held in safe keeping together with the other
documents and papers of the company by Philip Gotuaco, Sr., father-in-law of respondent
Alexander Yu, until the former’s death on 19 November 2004.

Before the checks were deposited, there was a personal demand from the family for
Evangelista to settle the loan and likewise a demand letter sent by the family lawyer.

The RTC ruled that the checks should be taken as evidence of Evangelista’s indebtedness
to Gotuaco, such that even if the criminal aspect of the charge had not been established, the
obligation subsisted. The CA denied the petition.

Issue:
Is the delivered check produces the effect of payment?

Ruling:
The delivery of the check produces the effect of payment when through the fault of the
creditor they have been impaired.

It is a settled rule that the creditor’s possession of the evidence of debt is proof that the
debt has not been discharged by payment. It is likewise an established tenet that a negotiable
instrument is only a substitute for money and not money, and the delivery of such an instrument
does not, by itself, operate as payment. Thus, in BPI v. Spouses Royeca, we ruled that despite the
lapse of three years from the time the checks were issued, the obligation still subsisted and was
merely suspended until the payment by commercial document could actually be realized.
 However, payment is deemed effected and the obligation for which the check was given
as conditional payment is treated discharged, if a period of 10 years or more has elapsed from the
date indicated on the check until the date of encashment or presentment for payment. The failure
to encash the checks within a reasonable time after issue, or more than 10 years in this instance,
not only results in the checks becoming stale but also in the obligation to pay being deemed
fulfilled by operation of law.
FILE NAME:

Novation, Ace Foods v Micro Pacific Technologies

FORMAT OF THE CASE:

Novation

Ace Foods v Micro Pacific Technologies

GR 200602, December 11, 2013

Perlas-Bernabe, J.

Facts:

ACE Foods is a domestic corporation engaged in the trading and distribution of consumer
goods in wholesale and retail bases, while MTCL is one engaged in the supply of computer
hardware and equipment.

On October 29, 2001, ACE Foods accepted MTCL's proposal and accordingly issued
Purchase Order No. 100023[10] for the subject products amounting to P646,464.00. Thereafter,
or on March 4, 2002, MTCL delivered the said products to ACE Foods as reflected in Invoice
No. 7733.The fine print of the invoice states, inter alia, that "[t]itle to sold property is reserved in
MICROPACIFIC TECHNOLOGIES CO., LTD. until full compliance of the terms and
conditions of above and payment of the price." After delivery, the subject products were then
installed and configured in ACE Foods's premises. MTCL's demands against ACE Foods to pay
the purchase price, however, remained unheeded. Instead of paying the purchase price, ACE
Foods sent MTCL a Letterdated September 19, 2002, stating that it "ha[s] been returning the
[subject products] to [MTCL] thru [its] sales representative Mr. Mark Anteola who has agreed to
pull out the said [products] but had failed to do so up to now."

Issue:

Was there a novation?

Ruling:

At this juncture, the Court must dispel the notion that the stipulation anent MTCL’s
reservation of ownership of the subject products as reflected in the Invoice Receipt, i.e., the title
reservation stipulation, changed the complexion of the transaction from a contract of sale into a
contract to sell. Records are bereft of any showing that the said stipulation novated the contract
of sale between the parties which, to repeat, already existed at the precise moment ACE Foods
accepted MTCL’s proposal. To be sure, novation, in its broad concept, may either be extinctive
or modificatory. It is extinctive when an old obligation is terminated by the creation of a new
obligation that takes the place of the former; it is merely modificatory when the old obligation
subsists to the extent it remains compatible with the amendatory agreement. In either case,
however, novation is never presumed, and the animus novandi, whether totally or partially, must
appear by express agreement of the parties, or by their acts that are too clear and unequivocal to
be mistaken.

In the present case, it has not been shown that the title reservation stipulation appearing in
the Invoice Receipt had been included or had subsequently modified or superseded the original
agreement of the parties. The fact that the Invoice Receipt was signed by a representative of
ACE Foods does not, by and of itself, prove animus novandi since: (a) it was not shown that the
signatory was authorized by ACE Foods (the actual party to the transaction) to novate the
original agreement; (b) the signature only proves that the Invoice Receipt was received by a
representative of ACE Foods to show the fact of delivery; and (c) as matter of judicial notice,
invoices are generally issued at the consummation stage of the contract and not its perfection,
and have been even treated as documents which are not actionable per se, although they may
prove sufficient delivery. 39 Thus, absent any clear indication that the title reservation stipulation
was actually agreed upon, the Court must deem the same to be a mere unilateral imposition on
the part of MTCL which has no effect on the nature of the parties’ original agreement as a
contract of sale. Perforce, the obligations arising thereto, among others, ACE Foods’s obligation
to pay the purchase price as well as to accept the delivery of the goods,remain enforceable and
subsisting.
FILE NAME:

Contracts, Cruz v Gruspe

FORMAT OF THE CASE:

Contracts

Cruz v Gruspe

GR 191431, March 13, 2013

Brion, J.

Facts:

Cruz operated a mini bus where his driver Davin caused a collision against a Toyota
Corolla car owned by Gruspe.

The following day, Cruz and a certain Leonardo Ibias went to Gruspe’s office and
apoligized for the incident, and executed a Joint Affidavit of Undertaking promising jointly and
severally to replace the damaged car in 20 dayswith the same model or of the same quality; or
alternatively, they would pay the cost of Gruspe’s car amounting to Php 350 thousands, with
interest of 12% per month for any delayed payment beyond the agreed date (November). Both of
them failed to pay. However, Cruz and Leonardo denied the claim against them and alleged that
they were forced by Gruspe, a lawyer and the one who prepared the affidavit, to affix their
signatures without explaining and informing them of its contents. Cruz claimed that he only
signed in order to release the minibus because it was his only source of income. Leonardo, who
was a barangay official accompanying Cruz, on the other hand, claimed that he was deceived
into signing the contract. He was later represented by his widow Esperanza in this suit. Even if
the Joint Affidavit of Undertaking was considered as a contract, Cruz and Esperanza claim that it
is invalid because Cruz and Leonardo’s consent thereto was vitiated; the contract was prepared
by Gruspe who is a lawyer, and its contents were never explained to them. Moreover, Cruz and
Leonardo were simply forced to affix their signatures; otherwise, the minivan would not be
released. Also, they claim that prior to the filing of the complaint for sum of money,

Gruspe did not make any demand upon them. Hence, pursuant to Article 1169 of the
Civil Code, they could not be considered in default. Without this demand, Cruz and Esperanza
contend that Gruspe could not yet take any action.

Issue:

Whether there was a valid contract.

Ruling:

Yes.

Contracts are obligatory no matter what their forms may be, whenever the essential
requisites for their validity are present. In determining whether a document is an affidavit or a
contract, the Court looks beyond the title of the document, since the denomination or title given
by the parties in their document is not conclusive of the nature of its contents. In the construction
or interpretation of an instrument, the intention of the parties is primordial and is to be pursued.
If the terms of the document are clear and leave no doubt on the intention of the contracting
parties, the literal meaning of its stipulations shall control. If the words appear to be contrary to
the parties’ evident intention, the latter shall prevail over the former.

A simple reading of the terms of the Joint Affidavit of Undertaking readily discloses that
it contains stipulations characteristic of a contract. As quoted in the CA decision, the Joint
Affidavit of Undertaking contained a stipulation where Cruz and Leonardo promised to replace
the damaged car of Gruspe, 20 days from October 25, 1999 or up to November 15, 1999, of the
same model and of at least the same quality. In the event that they cannot replace the car within
the same period, they would pay the cost of Gruspe’s car in the total amount of ₱350,000.00,
with interest at 12% per month for any delayed payment after November 15, 1999, until fully
paid. These, as read by the CA, are very simple terms that both Cruz and Leonardo could easily
understand.

There is also no merit to the argument of vitiated consent An allegation of vitiated

consent must be proven by preponderance of evidence; Cruz and Leonardo failed to support their
allegation.

Although the undertaking in the affidavit appears to be onerous and lopsided, this does
not necessarily prove the alleged vitiation of consent. They, in fact, admitted the genuineness and
due execution of the Joint Affidavit and Undertaking when they said that they signed the same to
secure possession of their vehicle. If they truly believed that the vehicle had been illegally
impounded, they could have refused to sign the Joint Affidavit of Undertaking and filed a
complaint, but they did not. That the release of their mini bus was conditioned on their signing
the Joint Affidavit of Undertaking does not, by itself, indicate that their consent was forced –
they may have given it grudgingly, but it is not indicative of a vitiated consent that is a ground
for the annulment of a contract.

Thus, on the issue of the validity and enforceability of the Joint Affidavit of Undertaking,
the CA did not commit any legal error that merits the reversal of the assailed decision.
FILE NAME:

Mutuality, Juico v China Bank

FORMAT OF THE CASE:

Mutuality

Juico v China Bank

GR 187678, April 10, 2013

Villarama, JR., J.:

Facts:

Petitioner Spouses Juico obtained a loan from respondent Chinabank as evidenced by 2

Promissory Notes for the sums of P6,216,000.00 and P4,139,000.00 respectively. The loan was
secured by a Real Estate Mortgage (REM) over petitioners’property located at white plains QC.
When petitioners failed to pay the monthly amortizations, respondent demanded the full payment
of the outstanding balance with accrued monthly interests.

Petitioners received respondent’s last demand letter dated August 29, 2000. As of
February 23, 2001, the amount due on the 2 promissory notes totaled P19,201,776.63
representing the principal,interests, penalties and attorney’s fees. On the same day, the
mortgaged property was sold at public auction, with respondent as highest bidder
P10,300,000.00.

Subsequently, petitioners received a demand letter from respondent for the payment
ofP8,901,776.63, the amount of deficiency after applying the proceeds of the foreclosure sale to
the mortgage debt. As its demand remained unheeded, respondent filed a collection suit praying
that that judgment be rendered ordering the petitioners to pay jointly and severally P8,901,776.63
representing the amount of deficiency, plus interests.

In their Answe, petitioners claims that the complaint states no cause of action
considering that the principal of the loan was already paid when the mortgaged property was
extrajudicially foreclosed and sold for P10,300,000. Petitioners contended thatshould they be
held liable for any deficiency, it should be only for P55,000 representing the difference between
the total outstanding obligation of P10,355,000 and the bid price of P10,300,000.

At the trial, respondent presented Ms. Annabelle Cokai Yu, its Senior Loans Assistant,
as witness. On cross-examination, Ms. Yu reiterated that the interest rate changes every month
based on the prevailing market rate and she notified petitioners of the prevailing rate by calling
them monthly before their account becomes past due. When asked if there was any written
authority from petitioners for respondent to increase the interest rate unilaterally, she answered
that petitioners signed a promissory note indicating that they agreed to pay interest at the
prevailing rate.

Issue:

Was the increase in interest rates is void for violating the mutuality of contracts?

Ruling:

Yes . Article 1308. The contract must bind both contracting parties; its validity or
compliance cannot be left to the will of one of them. Article 1956 of the Civil Code likewise
ordains that "no interest shall be due unless it has been expressly stipulated in writing." The
binding effect of any agreement between parties to a contract is premised on xxx (2) that there
must be mutuality between the parties based on their essential equality. 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 Escalation clauses refer to stipulations
allowing an increase in the interest rate agreed upon by the contracting parties. This Court has
long recognized that there is nothing inherently wrong with escalation clauses Nevertheless, an
escalation clause "which grants the creditor an unbridled right to adjust the interest
independently and upwardly, completely depriving the debtor of the right to assent to an
important modification in the agreement" is void. A stipulation of such nature violates the
principle of mutuality of contracts. In a case, SC said that petitioner’s assent to the modifications
in the interest rates cannot be implied from their lack of response to the memos sent by
respondent It is now settled that an escalation clause is void where the creditor unilaterally
determines and imposes an increase in the stipulated rate of interest without the express
conformity of the debtor. Such unbridled right given to creditors to adjust the interest
independently and upwardly would completely take away from the debtors the right to assent to
an important modification in their agreement and would also negate the element of mutuality in
their contracts .
FILE NAME:

Vices of Consent, Riguer v Mateo

FORMAT OF THE CASE:

Vices of consent

Riguer v Mateo

GR 222538, June 21, 2017

Mendoza, J:

Facts:

Sometime in 2002, petitioner Eduardo N. Riguer (Riguer) engaged the services of

respondent Atty. Edralin S. Mateo (Atty. Mateo) to represent him in civil and criminal cases
involving a parcel of land covered by Transfer Certificate of Title (TCT) No. 12112. They
agreed that the compensation for Atty. Mateo's legal services would be the acceptance fee,
appearance fee, and pleading fees, which Riguer religiously paid.The RTC rendered a judgment
favorable to Riguer in the civil case. During the pendency of the appeal, Atty. Mateo was able to
make him sign a document entitled "Kasunduan."... stated that Riguer agreed to pay Atty. Mateo
the following: a) P30,000.00 as reimbursement for the latter's expenses in the civil case; b)
P50,000.00 in case of a favorable decision in the civil case; and c) P250,000.00 once the land
covered by TCT No. 12112 was sold.

The appeal was decided in favor of Riguer, prompting Atty. Mateo to demand payment of
the fees agreed upon in the Kasunduan. Riguer refused to pay.

After two (2) years or on May 30, 2011, Atty. Mateo filed a Complaint for Collection of
Attorney's Fees with Urgent Prayer for Issuance of Preliminary Attachment before the MTCC.

The MTCC ruled in favor of Atty. Mateo and ordered Riguer to pay him P250,000.00
with six percent (6%) interest as attorney's fees and P5,494.50 as costs of suit... the RTC
concurred with the MTCC. It held that the Kasunduan bound Riguer and that the latter's claim
that the said document was inserted in the voluminous documents he signed for the appeal was
mere speculation.

The attorney's fees in the amount of P250,000.00 were just and equitable on the basis of
quantum meruit. Likewise, it held that Atty. Mateo could rightfully recover the costs of suit as he
was constrained to litigate to enforce his claim for attorney's fees.
Issue:

Is Atty. Mateo entitled to recover P250,000.00 in attorney’s fee pursuant to Kasunduan?

Ruling:

Riguer stresses that he was misled in signing the Kasunduan as it was included in the
voluminous documents for appeal. He asserts that Atty. Mateo took advantage of his lack of
education and advanced age in making him sign it. Riguer points out that he paid the P30,000.00
and P50,000.00 embodied in the Kasunduan as Atty. Mateo verbally required him to do so. He
insists that the said document belied the true intent of the parties and that the P250,000.00
attorney's fees was unreasonable.

Riguer failed to establish that he was deceived and misled by Atty. Mateo in signing the
Kasunduan. Though Atty. Mateo judicially admitted that he prepared the said document during
the pendency of the appeal,[17] it was insufficient to prove that he employed fraud and deceit in
making Riguer sign the said document together with other documents for the appeal.

In nullifying contracts on the basis of fraud, the same must be established by clear and
convincing evidence.

When fraud is alleged in an ordinary civil case involving contractual relations, an entirely
different standard of proof needs to be satisfied. The imputation of fraud in a civil case requires
the presentation of clear and convincing evidence. Mere allegations will not suffice to sustain the
existence of fraud.

The Court, nevertheless, reduces the agreed attorney's fees for being unconscionable

In Rayos v. Atty. Hernandez,[22] the Court wrote that the stipulated attorney's fees could
be reduced if the same were unconscionable based on established standards,... Stipulated
attorney's fees are unconscionable whenever the amount is by far so disproportionate compared
to the value of the services rendered as to amount to fraud perpetrated upon the client. This
means to say that the amount of the fee contracted for, standing alone and unexplained would be
sufficient to show that an unfair advantage had been taken of the client, or that a legal fraud had
been perpetrated on him. The decree of unconscionability or unreasonableness of a stipulated
amount in a contingent fee contract, will not, however, preclude recovery. It merely justifies the
fixing by the court of a reasonable compensation for the lawyer's services.

Generally, the amount of attorney's fees due is that stipulated in the retainer agreement
which is conclusive as to the amount of the lawyer's compensation. A stipulation on a lawyer's
compensation in a written contract for professional services ordinarily controls the amount of
fees that the contracting lawyer may be allowed, unless the court finds such stipulated amount
unreasonable or unconscionable.

Applying the aforementioned standards, no other conclusion can be reached other than
that the P250,000.00 attorney's fees was unconscionable. First, the attorney's fees amounted to
almost 50% of the value of the property litigated as it was only sold for P600,000.00. Second,
Riguer was a farmer of advanced age with limited educational attainment. Third, the stipulated
attorney's fees in the Kasunduan referred to Atty. Mateo's services for the appeal because the
legal fees during the proceedings in the trial court had already been paid. Lastly, Atty. Mateo
judicially admitted that he believed he was entitled to 10% attorney's fees. It was stated in the
Kasunduan that Atty. Mateo was to be paid P250,000.00 because he claimed that the litigated
property had a fair market value of around P3 million. The same, however, was sold for only
P600,000.00.
FILE NAME:

Interpretation of Contracts, Stronghold Insurance v Stroem

FORMAT OF THE CASE:

Interpretation of Contracts

Stronghold Insurance v Stroem

GR 204689, January 21, 2015

Leonen, J.:

Facts:

Spouses Rune and Lea Stroem (Spouses Stroem) entered into an Owners-Contractor
Agreement with Asis-Leif & Company, Inc. (Asis-Leif) for the construction of a two-storey
house on the lot owned by Spouses Stroem.

On November 15, 1999, pursuant to the agreement, Asis-Leif secured Performance Bond
No. LP/G(13)83056 in the amount of P4,500,000.00 from Stronghold Insurance Company, Inc.
(Stronghold). Stronghold and Asis-Leif, through Ms. Ma. Cynthia Asis-Leif, bound themselves
jointly and severally to pay the Spouses Stroem the agreed amount in the event that the
construction project is not completed.

Asis-Leif failed to finish the project on time despite repeated demands of the Spouses
Stroem.Spouses Stroem subsequently rescinded the agreement. They then hired an independent
appraiser to evaluate the progress of the construction project.

Appraiser Asian Appraisal Company, Inc.'s evaluation resulted in the following percentage of
completion: 47.53% of the residential building, 65.62% of the garage, and 13.32% of the
swimming pool, fence, gate, and land development.

On April 5, 2001, Stronghold sent a letter to Asis-Leif requesting that the company settle
its obligations with the Spouses Stroem. No response was received from Asis-Leif.[12]

On September 12, 2002, the Spouses Stroem filed a Complaint (with Prayer for
Preliminary Attachment)for breach of contract and for sum of money with a claim for damages
against Asis-Leif, Ms. Cynthia Asis-Leif, and Stronghold. Only Stronghold was served
summons. Ms. Cynthia Asis-Leif allegedly absconded and moved out of the country.

Issue:

Was the dispute — liability of a surety under a performance bond — connected to a

construction contract and, therefore, falls under the exclusive jurisdiction of the CIAC?
Ruling:

This court in Prudential held that the construction contract expressly incorporated the
performance bond into the contract. In the present case, Article 7 of the Owners-Contractor
Agreement merely stated that a performance bond shall be issued in favor of respondents, in
which case petitioner and Asis-Leif Builders and/or Ms. Ma. Cynthia Asis-Leif shall pay
P4,500,000.00 in the event that Asis-Leif fails to perform its duty under the Owners-Contractor
Agreement. Consequently, the performance bond merely referenced the contract entered into by
respondents and Asis-Leif, which pertained to Asis-Leif's duty to construct a two-storey
residence building with attic, pool, and landscaping over respondents' property.

To be clear, it is in the Owners-Contractor Agreement that the arbitration clause is found.

The construction agreement was signed only by respondents and the contractor, Asis-Leif, as
represented by Ms. Ma. Cynthia Asis-Leif. It is basic that "[c]ontracts take effect only between
the parties, their assigns and heirs. Not being a party to the construction agreement, petitioner
cannot invoke the arbitration clause. Petitioner, thus, cannot invoke the jurisdiction of the CIAC.

Moreover, petitioner's invocation of the arbitration clause defeats the purpose of

arbitration in relation to the construction business. The state has continuously encouraged the
use of dispute resolution mechanisms to promote party autonomy.[83] In LICOMCEN,
Incorporated v. Foundation Specialists, Inc.,this court upheld the CIAC's jurisdiction in line with
the state's policy to promote arbitration:

The CIAC was created through Executive Order No. 1008 (E.O. 1008), in recognition of
the need to establish an arbitral machinery that would expeditiously settle construction industry
disputes. The prompt resolution of problems arising from or connected with the construction
industry was considered of necessary and vital for the fulfillment of national development goals,
as the construction industry provides employment to a large segment of the national labor force
and is a leading contributor to the gross national product.[85] (Citation omitted)

However, where a surety in a construction contract actively participates in a collection

suit, it is estopped from raising jurisdiction later. Assuming that petitioner is privy to the
construction agreement, we cannot allow petitioner to invoke arbitration at this late stage of the
proceedings since to do so would go against the law's goal of prompt resolution of cases in the
construction industry.
FILE NAME:

Void or inexistent Contracts, Guillermo v Phil Info Agency

FORMAT OF THE CASE

Void or inexistent Contracts

Guillermo v Phil Info Agency

GR 223751, March 15, 2017

Leonen, J.

Facts:

Petitioners argue that the Court of Appeals erred when it found that petitioners had failed
to prove the existence of a contract, and dismissed their appeal on that ground. Proof of the
existence of a contract is evidentiary in nature. Moreover, in instances where there is no written
contract, a perfected contract may be found to exist by examining prior, subsequent, and
contemporaneous actions of the parties.In this case, existence of a contract was shown by
petitioners' submission of "Joyride" materials, and the various meetings and memoranda issued
by respondents.56 These official memoranda showed that the "Joyride" project was approved,
adopted, and pushed by the Office of the President.

Issue:

Was there a contract?

Ruling:

To support the foregoing prayer, the Complaint attempted to lay down the elements of a
contract between the petitioners on one hand, and respondents on the other. Thus, it alleged a
series of communications, meetings, and memoranda, all tending to show that petitioners agreed
to complete and deliver the "Joyride" project, and that respondents agreed to pay ₱25,000,000.00
as consideration.

Assuming that the Complaint's factual allegations are true, they are not sufficient to
establish that the Regional Trial Court could grant its prayer.

The Complaint attempts to establish a contract that involves expenditure of public funds.
As pointed out by respondents, contracts involving the expenditure of public funds have
additional requisites to be valid. Sections 46, 47, and 48 of Book V, Title I, Subtitle B, Chapter 8
of the Administrative Code provides for essential requisites for the validity of contracts:
 SECTION 46. Appropriation Before Entering into Contract. - (1) No contract involving
the expenditure of public funds shall be entered into unless there is an appropriation therefor, the
unexpended balance of which, free of other obligations, is sufficient to cover the proposed
expenditure; and

(2) Notwithstanding this provision, contracts for the procurement of supplies and
materials to be carried in stock may be entered into under regulations of the Commission
provided that when issued, the supplies and materials shall be charged to the proper
appropriations account.

SECTION 47. Certificate Showing Appropriation to Meet Contract. - Except in the case
of a contract for personal service, for supplies for current consumption or to be carried in stock
not exceeding the estimated consumption for three (3) months, or banking transactions of
government-owned or controlled banks, no contract involving the expenditure of public funds by
any government agency shall be entered into or authorized unless the proper accounting official
of the agency concerned shall have certified to the officer entering into the obligation that funds
have been duly appropriated for the purpose and that the amount necessary to cover the proposed
contract for the current calendar year is available for expenditure on account thereof, subject to
verification by the auditor concerned. The certificate signed by the proper accounting official and
the auditor who verified it, shall be attached to and become an integral part of the proposed
contract, and the sum so certified shall not thereafter be available for expenditure for any other
purpose until the obligation of the government agency concerned under the contract is fully
extinguished.

SECTION 48. Void Contract and Liability of Officer. - Any contract entered into
contrary to the requirements of the two (2) immediately preceding sections shall be void, and the
officer or officers entering into the contract shall be liable to the Government or other
contracting party for any consequent damage to the same extent as if the transaction had been
wholly between private parties.

In Philippine National Railways v. Kanlaon Construction Enterprises Co., lnc.,82 this

Court has held that contracts that do not comply with the foregoing requirements are void:
 Thus, the Administrative Code of 1987 expressly prohibits the entering into contracts
involving the expenditure of public funds unless two prior requirements are satisfied. First, there
must be an appropriation law authorizing the expenditure required in the contract. Second, there
must be attached to the contract a certification by the proper accounting official and auditor that
funds have been appropriated by law and such funds are available. Failure to comply with any of
these two requirements renders the contract void.
FILE NAME:

Implied Trust, Sime Darby v Mendoza

FORMAT OF THE CASE:

Implied Trust

Sime Darby v Mendoza

GR 202247, June 19, 2013

Carpio, J.:

Facts:

Petitioner Sime Darby Pilipinas, Inc. employed Jesus B. Mendoza as sales manager to
handle sales, marketing, and distribution of the company's tires and rubber products. On 3 July
1987, Sime Darby bought a Class “A” club share4 in Alabang Country Club (ACC) from
Margarita de Araneta as evidenced by a Deed of Absolute Sale.5 The share, however, was placed
under the name of Mendoza in trust for Sime Darby since the By-Laws6 of ACC state that only
natural persons may own a club share. As part of the arrangement, Mendoza endorsed the Club
Share Certificate in blank and executed a Deed of Assignment, also in blank, and handed over
the documents to Sime Darby. From the time of purchase in 1987, Sime Darby paid for the
monthly dues and other assessments on the club share.

When Mendoza retired in April 1995, Sime Darby fully paid Mendoza his separation pay
amounting to more than P3,000,000. Nine years later, or sometime in July 2004, Sime Darby
found an interested buyer of the club share for P1,101,363.64. Before the sale could push
through, the broker required Sime Darby to secure an authorization to sell from Mendoza since
the club share was still registered in Mendoza’s name. However, Mendoza refused to sign the
required authority to sell or special power of attorney unless Sime Darby paid him the amount of
P300,000, claiming that this represented his unpaid separation benefits. As a result, the sale did
not push through and Sime Darby was compelled to return the payment to the prospective buyer.
Hence, this case.

Issue:

Was there implied trust relation between the petitioner and respondent?

Ruling:

Yes. While the share was bought by Sime Darby and placed under the name of Mendoza,
his title is only limited to the usufruct, or the use and enjoyment of the club’s facilities and
privileges while employed with the company. In Thomson v. Court of Appeals, we held that a
trust arises in favor of one who pays the purchase price of a property in the name of another,
because of the presumption that he who pays for a thing intends a beneficial interest for himself.
While Sime Darby paid for the purchase price of the club share, Mendoza was given the legal
title. Thus, a resulting trust is presumed as a matter of law. The burden then shifts to the
transferee to show otherwise.

Mendoza, as the transferee, claimed that he only signed the assignment of rights in blank
in order to give Sime Darby the right of first refusal in case he decides to sell the share later on.
A right of first refusal, in this case, would mean that Sime Darby has a right to match the
purchase price offer of Mendoza’s prospective buyer of the club share and Sime Darby may buy
back the share at that price. However, Mendoza’s contention of the right of first refusal is a self-
serving statement. He did not present any document to show that there was such an agreement
between him and the company, not even an acknowledgment from Sime Darby that it actually
intended the club share to be given to him as a reward for his performance and past service.

In fact, the circumstances which occurred after the purchase of the club share point to the
opposite. First, Mendoza signed the share certificate and assignment of rights both in blank.
Second, Mendoza turned over possession of the documents to Sime Darby. Third, from the time
the share was purchased in 1987 until 1995, Sime Darby paid for the monthly bills pertaining to
the share. Last, since 1987, the monthly bills were regularly sent to Sime Darby’s business
address until Mendoza requested in August 2004, long after he retired from the employ of the
company, that such bills be forwarded to his personal address starting September 2004.

It can be gathered then that Sime Darby did not intend to give up its beneficial interest
and right over the share. The company merely wanted Mendoza to hold the share in trust since
Sime Darby, as a corporation, cannot register a club share in its own name under the rules of the
ACC. At the same time, Mendoza, as a senior manager of the company, was extended the
privilege of availing a club membership, as generously practiced by Sime Darby.

However, Mendoza violated Sime Darby’s beneficial interest and right over the club
share after he was informed by Atty. Ronald E. Javier of Sime Darby’s plan to sell the share to
an interested buyer. Mendoza refused to give an authorization to sell the club share unless he was
paid P300,000 allegedly representing his unpaid retirement benefit. In August 2004, Mendoza
tried to appropriate the club share and demanded from ACC that he be recognized as the true
owner of the share as the named member in the stock certificate as well as in the annual report
issued by ACC. Despite being informed by Sime Darby to stop using the facilities and privileges
of the club share, Mendoza continued to do so. Thus, in order to prevent further damage and
prejudice to itself, Sime Darby properly sought injunction in this case.
FILE NAME:

Agency Concept, Bpi v Laingo

FORMAT OF THE CASE:

Agency Concept

Bpi v Laingo

GR 205206, March 16, 2016

Carpio, J.:

Facts:

On 25 September 2000, Rheozel died due to a vehicular accident as evidenced by a

Certificate of Death issued by the Office of the Civil Registrar General of Tagum City, Davao
del Norte. Since Rheozel came from a reputable and affluent family, the Daily Mirror headlined
the story in its newspaper on 26 September 2000.

On 27 September 2000, Laingo instructed the family's personal secretary, Alice Torbanos
(Alice) to go to BPI, Claveria, Davao City branch and inquire about the savings account of
Rheozel. Laingo wanted to use the money in the savings account for Rheozel's burial and funeral
expenses.

Alice went to BPI and talked to Jaime Ibe Rodriguez, BPI's Branch Manager regarding
Laingo's request. Due to Laingo's credit standing and relationship with BPI, BPI accommodated
Laingo who was allowed to withdraw P995,000 from the account of Rheozel. A certain Ms.
Laura Cabico, an employee of BPI, went to Rheozel's wake at the Cosmopolitan Funeral Parlor
to verify some information from Alice and brought with her a number of documents for Laingo
to sign for the withdrawal of the P995,000.

More than two years later or on 21 January 2003, Rheozel's sister, Rhealyn Laingo-
Concepcion, while arranging Rheozel's personal things in his room at their residence in Ecoland,
Davao City, found the Personal Accident Insurance Coverage Certificate No. 043549 issued by
FGU Insurance. Rhealyn immediately conveyed the information to Laingo.

Laingo sent two letters dated 11 September 2003 and 7 November 2003 to BPI and FGU
Insurance requesting them to process her claim as beneficiary of Rheozel's insurance policy. On
19 February 2004, FGU Insurance sent a reply-letter to Laingo denying her claim. FGU
Insurance stated that Laingo should have filed the claim within three calendar months from the
death of Rheozel as required under Paragraph 15 of the Personal Accident Certificate of
Insurance which states:
 15. Written notice of claim shall be given to and filed at FGU Insurance Corporation
within three calendar months of death or disability.

On 20 February 2004, Laingo filed a Complaint4 for Specific Performance with Damages
and Attorney's Fees with the Regional Trial Court.

Issue:

Are BPI and FGU are liable?

Ruling:

Yes. The provision is clear that an agent is bound to carry out the agency. The
relationship existing between principal and agent is a fiduciary one, demanding conditions of
trust and confidence. It is the duty of the agent to act in good faith for the advancement of the
interests of the principal. In this case, BPI had the obligation to carry out the agency by
informing the beneficiary, who appeared before BPI to withdraw funds of the insured who was
BPI's depositor, not only of the existence of the insurance contract but also the accompanying
terms and conditions of the insurance policy in order for the beneficiary to be able to properly
and timely claim the benefit.

Upon Rheozel's death, which was properly communicated to BPI by his mother Laingo,
BPI, in turn, should have fulfilled its duty, as agent of FGU Insurance, of advising Laingo that
there was an added benefit of insurance coverage in Rheozel's savings account. An insurance
company has the duty to communicate with the beneficiary upon receipt of notice of the death of
the insured. This notification is how a good father of a family should have acted within the scope
of its business dealings with its clients. BPI is expected not only to provide utmost customer
satisfaction in terms of its own products and services but also to give assurance that its business
concerns with its partner entities are implemented accordingly.

There is a rationale in the contract of agency, which flows from the "doctrine of
representation," that notice to the agent is notice to the principal, Here, BPI had been informed of
Rheozel's death by the latter's family. Since BPI is the agent of FGU Insurance, then such notice
of death to BPI is considered as notice to FGU Insurance as well. FGU Insurance cannot now
justify the denial of a beneficiary's insurance claim for being filed out of time when notice of
death had been communicated to its agent within a few days after the death of the depositor-
insured. In short, there was timely notice of Rheozel's death given to FGU Insurance within three
months from Rheozel's death as required by the insurance company.
 The records show that BPI had ample opportunity to inform Laingo, whether verbally or
in writing, regarding the existence of the insurance policy attached to the deposit account. First,
Rheozel's death was headlined in a daily major newspaper a day after his death. Second, not only
was Laingo, through her representative, able to inquire about Rheozel's deposit account with BPI
two days after his death but she was also allowed by BPI's Claveria, Davao City branch to
withdraw from the funds in order to help defray Rheozel's funeral and burial expenses. Lastly, an
employee of BPI visited Rheozel's wake and submitted documents for Laingo to sign in order to
process the withdrawal request. These circumstances show that despite being given many
opportunities to communicate with Laingo regarding the existence of the insurance contract, BPI
neglected to carry out its duty.

Since BPI, as agent of FGU Insurance, fell short in notifying Laingo of the existence of
the insurance policy, Laingo had no means to ascertain that she was entitled to the insurance
claim. It would be unfair for Laingo to shoulder the burden of loss when BPI was remiss in its
duty to properly notify her that she was a beneficiary.

Thus, as correctly decided by the appellate court, BPI and FGU Insurance shall bear the
loss and must compensate Laingo for the actual damages suffered by her family plus attorney's
fees. Likewise, FGU Insurance has the obligation to pay the insurance proceeds of Rheozel's
personal accident insurance coverage to Laingo, as Rheozel's named beneficiary.
FILE NAME:

Revocation, International Exchange Bank v Briones

FORMAT OF THE DIGEST:

Revocation

International Exchange Bank v Briones

GR 205657, March 29, 2017

Leonen, J.:

Facts:

Spouses Briones took out a loan which was executed though a promissory note which
appointed the bank as attorney-in-fact of the spouse with the obligation among others to file an
insurance claim in case of loss or damage to the vehicle of the car. The vehicle was subsequently
carnapped. iBank instead of filing for insurance filed in behalf of Spouses it collected from
former. Now respondents was forced to claim for insurance.

Issue:

Was the agency relationship revoked or terminated when Spouses Briones themselves
claimed for insurance?

Ruling:

No. The Court ruled that the agency was not revoked. In the promissory note with chattel
mortgage, the Spouses Briones authorized petitioner to claim, collect, and apply· the insurance
proceeds towards the full satisfaction of their loan if the mortgaged vehicle were lost or
damaged. Clearly, a bilateral contract existed between the parties, making the agency
irrevocable. Petitioner was also aware of the bilateral contract; thus, it included the designation
of an irrevocable agency in the promissory note with chattel mortgage that it prepared for the
Spouses Briones to sign.