SPECIFIED CONTRACTORS & DEVELOPMENT, INC.

AND SPOUSES ARCHITECT

ENRIQUE O. OLONAN AND CECILIA R. OLONAN, Petitioners, vs. JOSE POBOCAN
G.R. NO. 212472 JANUARY 11, 2018
PONENTE: J. TIJAM/FIRST DIVISION

Nature of the Action: Petition for Review on Certiorari under Rule 45;
Jose Pobocan was in the employ of Specified Contractors until his retirement sometime in March
2011. Architect Olonan allegedly agreed to give respondent one (1) unit for every building
Specified Contractors were able to construct as part of respondent's compensation package to
entice him to stay with the company. Pursuant to the alleged oral agreement, Specified Contractors
supposedly ceded, assigned and transferred Unit 708 of Xavlerville Square Condominium and Unit
208 of Sunrise Holiday Mansion Bldg. I (subject units) in favor of respondent.

In a March 14, 2011 letter, respondent requested the execution of Deeds of Assignment or Deeds
of Sale over the subject units in his favor in view of his impending retirement.The demand went
unheeded so he filed a Complaint on November 21, 2011 before the RTC of Quezon City praying
that petitioners be ordered to execute and deliver the appropriate deeds of conveyance and to pay
damages.
Instead of filing an answer, petitioner interposed a Motion to Dismiss denying the existence of the
alleged oral agreement. They argued that, assuming that said agreement existed, the cause of action
had long prescribed because these agreements were supposedly entered into in 1994 and 1999.

Issue:
Whether or not the respondent’s cause of action in the oral agreement has already prescribed
Ruling:
Yes. The respondent’s cause of action has already prescribed.
Ina personal action, the plaintiff seeks the recovery of personal property, the enforcement of a
contract, the recovery of damages. Real actions, on the other hand, are those affecting title to or
possession of real property, or interest therein. As a personal action based upon an oral contract,
Article 1145 providing a prescriptive period of six years applies in this case instead. The shorter
period provided by law to institute an action based on an oral contract is due to the frailty of human
memory. Nothing prevented the parties from reducing the alleged oral agreement into writing,
stipulating the same in a contract of employment or partnership, or even mentioning the same in
an office memorandum early on.

The complaint for specific performance was instituted on November. 21, 2011, or 17 years from
the oral agreement of 1994 and almost 12 years after the December 1, 1999 oral agreement. Thus,
the respondent's action upon an oral contract was filed beyond the six-year period within which he
should have instituted the same.

Ramon E. Reyes and Clara R. Pastor vs. Bancom Development Corporation

G.R. No. 190286 January 11, 2018
C.J. Sereno/ FIRST DIVISION

Nature of the Action: Petition for Review on Certiorari

Facts:
Petitioners Reyes Group executed a Continuing Guaranty Agreement in favor of respondent
Bancom. In the instrument, the Reyes Group agreed to guarantee the full and due payment of
obligations incurred by Marbella under an Underwriting Agreement with Bancom. These
obligations included certain Promissory Notes5 Issued by Marbella in favor of Bancom on 24 May
1979 for the aggregate amount of P2,828, 140.32.

Marbella was unable to pay back the notes at the time of their maturity. Consequently, she Issued
several sets of replacement Promissory Notes which have also defaulted. Because of Marbella's
continued failure to pay back the loan despite repeated demands, Bancom filed a Complaint for
Sum of Money with a prayer for damages before the RTC of Makati on 7 July 1981.9 The case,
which sought payment of the total sum of P4,300,247.35, was instituted against (a) Marbella as
principal debtor; and (b) the individuals comprising the Reyes Group as guarantors of the loan.
In their defense, Marbella and the Reyes Group argued that they had been forced to execute the
Promissory Notes and the Continuing Guaranty against their will.10 They also alleged that the
foregoing instruments should be interpreted in relation to earlier contracts pertaining to the
development of a condominium project known as Marbella II.

Issue:
Whether or not petitioners are solidarily liable with Marbella for the payment of the loan pursuant
to the Continuing Agreement
Ruling:
YES.
Having executed a Continuing Guaranty in favor of Bancom, petitioners are solidarily liable with
Marbella for the payment of the amounts indicated on the Promissory Notes. The obligations of
Marbella and the Reyes Group under the Promissory Notes and the Continuing Guaranty,
respectively, are plain and unqualified. Under the notes, Marbella promised to pay Bancom the
amounts stated on the maturity dates indicated. 50 The Reyes Group, on the other hand, agreed to
become liable if any of Marbella's guaranteed obligations were not duly paid on the due date.51
There is absolutely no support for the assertion that these agreements were not meant to be binding.

As to petitioners, the Continuing Guaranty evidently binds them to pay Bancom the amounts
indicated on the original set of Promissory Notes, as well as any and all instruments Issued upon
the renewal, extension, amendment or novation thereof. 53 The Court notes that the final set of
Promissory Notes Issued by Marbella in this case reflect the total amount of P3,002,333.84.

VICTORIA RACELIS, Petitioner vs. Spouses Germil Javier and Rebecca Javier,
Respondents.
G.R. 189609 January 29, 2018
Justice Leonen

Nature of the Action: Petition for review on certiorari under Rule Rule 45
Facts:
Racelis was appointed as administrator by his late father of his residential house and lot located in
Marikina City. Acting on the request of her father, Racelis immediately advertised the sale of the
property. In August 2001, Spouses Javier offered to purchase the Marikina property. However,
they could not afford to pay the price of Php 3.5 Million. They offered instead to lease the property
while they raise enough money. Spouses Javier used the property as their residence and as the site
of their tutorial school, the Nifio Good Shepherd Tutorial Center. Sometime in July 2002, Racelis
inquired whether the Spouses Javier were still interested to purchase the property. The Spouses
Javier reassured her of their commitment and even promised to pay Pl 00,000.00 to buy them more
time within which to pay the purchase price. On July 26, 2002, the Spouses Javier tendered the
sum of P65,000.00 representing "initial payment or goodwill money." Realizing that the Spouses
Javier had no genuine intention of purchasing the property, Racelis wrote to inform them that her
family had decided to terminate the ease agreement and to offer the property to other interested
buyers.

The Spouses Javier refused to vacate due to the ongoing operation of their tutorial business. They
wrote Racelis on March 16, 2004, informing her of their inability to purchase the property at
P3,500,000.00 because "Mrs. Rebecca Javier's plan for overseas employment did not
materialize."22 They also informed her that they had "purchased a more affordable lot. "23 They
insisted that the sum of P78,000.00 was advanced rent and proposed that this amount be applied
to their outstanding liability until they vacate the premises. Disagreeing on the application of the
P78,000.00, Racelis and the Spouses Javier brought the matter to the barangay for conciliation.
Unfortunately, the parties failed to reach a settlement. During the proceedings, Racelis demanded
the Spouses Javier to vacate the premises. However, the Spouses Javier refused to give up
possession of the property and even refused to pay rent for the succeeding months. On May 12,
2004, Racelis caused the disconnection of the electrical service over the property forcing the
Spouses Javier to purchase a generator. This matter became the subject of a complaint for damages
filed by the Spouses Javier against Racelis. Racelis was absolved from liability. The Spouses Javier
no longer interposed an appeal. Meanwhile, Racelis filed a complaint for ejectment against the
Spouses Javier before the Metropolitan Trial Court in Marikina City.
Issue #1:
Whether or not respondents Spouses Germil and Rebecca Javier can exercise their right to suspend
the payment of rent under Article 1658 of the Civil Code; and
Ruling #1:
The Civil Code allows a lessee to postpone the payment I of rent if the lessor fails to either (1)
"make the necessary repairs" on the property or (2) "maintain the lessee in peaceful and adequate
enjoymeht of the property leased." This provision implements the obligation imposed Ion lessors
under Article 1654(3) of the Civil Code.65 I I The failure to maintain the lessee in the peaceful
and adequate enjoymeht of the property leased does not contemplate all acts of disturbartce.66
Lessees may suspend the payment of rent under Article 1658 of the Code only iftheir legal
possession is disrupted.

In this case, the disconnection of electrical service over the leased premises on May 14, 2004 74
was not just an act of physical disturbance but one that is meant to remove respondents from the
leased premises and disturb their legal possession as lessees. Ordinarily, this would have entitled
respondents to invoke the right accorded by Article 1658 of the Civil Code. However, this rule
will not apply in the present case because the lease had already expired when petitioner requested
for the temporary disconnection of electrical service. Petitioner demanded respondents to vacate
the premises by May 30, 2004.75 Instead of surrendering the premises to petitioner, respondents
unlawfully withheld possession of the property. Respondents continued to stay in the premises
until they moved to their new residence on September 26, 2004. 76 At that point, petitioner was
no longer obligated to maintain respondents in the "peaceful and adequate enjoyment of the lease
for the entire duration of the contract."77 Therefore, respondents cannot use the disconnection of
electrical service as justification to suspend the payment of rent.

Issue #2:
not the P78,000.00 initial payment can be used to offset Spouses Germil and Rebecca Javier's
accrued rent. I I
Ruling #2:
Under Article 1482 of the Civil Code, whenever earnest money is given in a contract of sale, 83 it
shall be considered as "proof of the perfection of the contract."84 However, this is a disputable
presumption, which prevails in the absence of contrary evidence. The delivery of earnest money
is not conclusive proof that a contract of sale exists. Based on the evidence on record, petitioner
and respondents executed a contract to sell, not a contract of sale. Petitioner reserved ownership
of the property and deferred the execution of a deed of sale until receipt of the full purchase price.

Earnest money, under Article 1482 of the Civil Code, is ordinarily given in a perfected contract of
sale. 95 However, earnest money may also be given in a contract to sell. In a contract to sell,
earnest money is generally intended to compensate the seller for the opportunity cost of not looking
for any other buyers. It is a show of commitment on the part of the party who intimates his or her
willingness to go through with the sale after a specified period or upon compliance with the
conditions stated in the contract to sell.

Earnest money, therefore, is paid for the seller's benefit. It is part of the purchase price while at the
same time proof of commitment by the potential buyer. Absent proof of a clear agreement to the
contrary, it is intended to be forfeited if the sale does not happen without the seller's fault. The
potential buyer bears the burden of proving that the earnest money was intended other than as part
of the purchase price and to be forfeited if the sale does not occur without the fault of the seller.
Respondents were unable to discharge this burden.
Therefore, respondents' unpaid rent amounting to P84,000.00102 cannot be offset by the earnest
money. However, it should be reduced by respondents' advanced deposit of P30,000.00. As found
by the Regional Trial Court, petitioner failed to establish that respondents' advanced deposit had
already been consumed or deducted from respondents' unpaid rent.

ESMERALDO GATCHALIAN, Petitioner, versus CESAR FLORES, et. Al.

G.R. No. 225176 January 19, 2018
Justice Tijam/ First Division

Nature of the Action: Petition for Review on Certiorari under Rule 45

Facts:
Petitioner is one of the co-owners of a parcel of land (Road Lot 23) located at Brgy. Vitalez,
Paranaque City. The land is registered under the name of petitioner's parents, spouses Sixto
Gatchalian and Liceria Gatchalian. On June 2, 2011, petitioner filed a Complaint for Ejectment
with Damages against respondents Cesar Flores, Jose Paolo Araneta (sic), Corazon Quing and
Cynthia Flores (respondents) with the MTC Paranaque City.

The survey conducted on the property established that the lot of Segundo Mendoza encroached a
portion of Road Lot 23 which the Gatchalian's had tolerated. When the latter demonstrated acts of
gross ingratitude to the Gatchalian family, petitioner and his family were constrained to withdraw
their tolerated possession, use and occupation of the portion of Road Lot 23. Verbal and written
demands to vacate were then served upon them but remained unheeded. Hence, the filing of the
ejectment case against the respondents. MeTC ruled in favor of the petitioners. RTC reversed the
Ruling. When the case was elevated to the CA, it initially ruled in favor of petitioners but was
later reversed on the ground that private character of Road Lot 23 has been stripped by Municipal
Ordinance No. 88-04, series of 1988 constituting the said road lot as a public right-of-way. CA
also ruled that by virtue of laches, the road lot has been converted to public property of the
municipality.

Issue:
Whether or not the property remains privately owned by petitioner
Ruling:
YES.
At the outset, petitioner filed before the MeTC an action for ejectment against the respondents. It
is settled that in ejectment proceedings, the only Issue for the Court's resolution is, who between
the parties is entitled to the physical or material possession of the subject property. Issues as to
ownership are not involved, except only for the purpose of determining the Issue of possession.

It is undisputed that the road lot is registered under the name of petitioner's parents. Even the
respondents did not dispute this fact. It is also undisputed that the municipal government has not
undertaken any expropriation proceedings to acquire the subject property neither did the petitioner
donate or sell the same to the municipal government. Therefore, absent any expropriation
proceedings and without any evidence that the petitioner donated or sold the subject property to
the municipal government, the same is still private property.

In the case of Woodridge School, Inc. v. ARB Construction Co., Inc. 13, this Court held that: In
the case of Abellana, Sr. v. Court of Appeals, the Court held that "the road lots in a private
subdivision are private property, hence, the local government should first acquire them by
donation, purchase or expropriation, if they are to be utilized as a public road." Otherwise, they
remain to be private properties of the owner-developer.

H. VILLARICA PAWNSHOP, INC., HL VILLARICA PAWNSHOP, INC., HRV

VILLARICA PAWNSHOP, INC. AND VILLARICA PAWNSHOP, INC., Petitioners, -
versus-SOCIAL SECURITY COMMISSION, SOCIAL SECURITY SYSTEM, AMADOR
M. MONTEIROS N. CASUGA AND JOCELYN Q. GARCIA, Respondents.
G.R. No. 228087 January 24, 2018
Justice Gesmundo/ Third Division

Nature of the Action: Petition for Review on Cetiorari under Rule 45

Facts:
Petitioners are private corporations engaged in the pawnshop business and are compulsorily
registered with the Social Security System (SSS) under Republic Act (R.A.) No. 8282. On January
7, 2010, Congress enacted R.A. No. 9903, otherwise known as the Social Security Condonation
Law of 2009, which took effect on February 1, 2010. The said law offered delinquent employers
the opportunity to settle, without penalty, their accountabilities or overdue contributions within six
(6) months from the date of its effectivity.

Consequently, petitioners sent separate letters to SSS seeking reimbursement of the accrued
penalties which they have paid in 2009. Invoking Section 4 of R.A. No. 9903 and Section 2 (f) of
the SSC Circular No. 2010-004 or the Implementing Rules and Regulations of R.A. No. 9903
(IRR), petitioners claimed that the benefits of the condonation program extend to all employers
who have settled their arrears or unpaid contributions even prior to the effectivity of the law.
However, all applications for refund were denied by SSS for being filed outside the coverage of
the said law. As a result, petitioners filed their petition seeking reimbursement of the penalties they
have paid in 2009.

Issue:
Whether or not the phrases "shall be condoned" and "shall likewise have their accrued penalties
waived" under Section 4 of the R.A. No. 9903 give employers the right to a refund of the penalties
paid.

Ruling:
No.
A plain reading of Section 4 of R.A. No. 9903 shows that it does not give employers who have
already settled their delinquent contributions as well as their corresponding penalties the right to a
refund of the penalties paid. What was waived here was the amount of accrued penalties that have
not been paid prior to the law's effectivity-it does not include those that have already been settled.
The words "condoned", "waived" and "accrued" are unambiguous enough to be understood and
directly applied without any resulting confusion.

As discussed earlier, the word "condonation" is the creditor's act of extinguishing an obligation by
renunciation and the word "waive" is an abandonment or relinquishment of an existing legal right.
On the other hand, the term "accrue" in legal parlance means "to come into existence as an
enforceable claim."Thus, the phrases "shall be condoned" and "shall likewise have their accrued
penalties waived" under Section 4 of the R.A. No. 9903 can only mean that, at the time of its
effectivity, only existing penalties may be extinguished or relinquished. No further interpretation
is necessary to clarify the law's applicability.

RODOLFO LAYGO and WILLIE LAYGO, petitioners, vs. MUNICIPAL

MAYOR OF SOLANO, NUEVA VIZCAYA, respondent.
G.R. No. 188448. January 11, 2017
Justice Jardeleza/Third Division

Nature of the Action: Petition for Review on Certiorari under Rule 45 of

Facts:
In July 2005, Bandrang sent two letter-complaints to Mayor Dickson and the Sangguniang Bayan
of Solano, Nueva Viscaya informing them of the illegal sublease she entered into with petitioners
Rodolfo Laygo and Willie Laygo over 4 public market stalls which petitioners leased from the
Municipal Government.
In August 2005, the Sangguniang Bayan endorsed the letter of Bandrang and a copy of
Resolution No. 183-2004 to Mayor Dickson for appropriate action.
Mayor Dickson, in response, informed the Sanggunian that the stalls were constructed under a
Build-Operate-Transfer (BOT) scheme, which meant that the petitioners had the right to keep their
stalls until the BOT agreement was satisfied. Thereafter, Bandrang wrote another letter to
the Sanggunian, praying and recommending to Mayor Dickson, by way of a resolution, the
cancellation of the lease contract. Bandrang sent another letter but it went unheeded. Hence,
Bandrang filed a Petition for Mandamus before RTC Nueva Viscaya.
In his Answer, Mayor Dickson claims that that Bandrang had no cause of action
because the stalls were on a BOT scheme covered by an ordinance. On the other hand,
petitioners denied that they were the lessees of Stalls 77 A and B and 78 A and B. Even on the
assumption that there was, petitioners maintained that the prohibition on subleasing would not
apply because the contract between the Municipality and Clarita was one under a BOT scheme.
Resolution No. 183-2004 only covered stall holders who violated their lease contracts with the
Municipal Government. Since their contract with the Municipal Government was not a lease
contract but a BOT agreement, Resolution No. 183-2004 would neither apply to them, nor be
enforced against them.

Issue:
Whether or not the contract between the government and the petitioners is one of lease
Ruling:
YES.We find that the Municipal Government was able to prove its claim, through secondary
evidence, that its contract with petitioners was one of lease.
 We have no reason to doubt the certifications of the former mayor of Solano, Mayor
Galima, and the Municipal Planning and Development Office (MPDO) which show that the
contract of the Municipal Government with petitioners' mother, Clarita, was converted into a
BOT agreement for a time in 1992 due to the fire that razed the public market. These
certifications were presented and offered in evidence by petitioners themselves. They prove
that Clarita was allowed to construct her stalls that were destroyed using her own funds, and
with the payment of the lease rentals being suspended until she recovers the cost she spent on
the construction. The construction was, in fact, supervised by the MPDO for a period of three
months. The stalls were eventually constructed completely and awarded to Clarita. She
thereafter re-occupied the stalls under a lease contract with the Municipal Government. In fact,
in his Notice dated August 21, 2007, the Municipal Treasurer of Solano reminded petitioners
of their delinquent stall rentals from May 2006 to July 2007. As correctly posited by the
Municipal Government, if the stalls were under a BOT scheme, the Municipal Treasurer could
not have assessed petitioners of any delinquency.
In the same vein, the Sangguniang Bayan Resolution No. 183-2004, which quoted
Items No. 9 and 11 of the lease contract on the absolute prohibition against subleasing and the
possible termination of the contract in view of back rentals or any violation of the stipulations
in the contract, is presumed to have been regularly Issued. It deserves weight and our respect,
absent a showing of grave abuse of discretion on the part of the members of the Sanggunian.
PRUDENTIAL BANK (now BANK OF THE PHILIPPINE
ISLANDS), petitioner, vs. RONALD RAPANOT and HOUSING & LAND
USE REGULATORY BOARD, respondents.
G.R. No. 191636. January 16, 2017
Ponente: Justice Caguioa/First Division

Nature of the Action: Appeal by Certiorari under Rule 45

Facts: Golden Dragon is the developer of Wack-Wack Twin Towers Condominium,
located in Mandaluyong City. On May 9, 1995, Rapanot paid Golden Dragon the amount of
P453,329.64 as reservation fee for a 41.1050-square meter unit in said condominium,
particularly designated as Unit 2308-B2. On September 13, 1995, the Bank extended a loan
to Golden Dragon to be utilized as additional working capital. To secure the loan, Golden
Dragon executed a Mortgage Agreement in favor of the Bank, which had the effect of
constituting a real estate mortgage over several condominium units owned and registered under
Golden Dragon's name. One of these units is that owned by Rapanot. The mortgage was
annotated on CCT No. 2383 on September 13, 1995.
On May 21, 1996, Rapanot and Golden Dragon entered into a Contract to Sell covering
Unit 2308-B2. On April 23, 1997, Rapanot completed payment of the full purchase price of
said unit. Thereafter, Rapanot made several verbal demands for the delivery of the unit but the
Golden Dragon fails to comply. Hence, a complaint was filed before the HLURB. A decision
was rendered in favor of Rapanot which was affirmed up to Court of Appeals. In its appeal by
Certiorari, the Bank contends that CA committed reversible error when it concluded that the
Bank was properly afforded due process before the HLURB, and when it failed to recognize
the Bank as a mortgagee in good faith.

Issue #1: Whether or not the mortgage agreement executed between Golden Dragon and the Bank
is null and void as against Rapanot
Ruling #1:
Yes. First of all, under Presidential Decree No. 957 (PD 957), no mortgage on any condominium
unit may be constituted by a developer without prior written approval of the National Housing
Authority, now HLURB. PD 957 further requires developers to notify buyers of the loan value of
their corresponding mortgaged properties before the proceeds of the secured loan are released.
In Far East Bank & Trust Co. v. Marquez, the Court clarified the legal effect of a
mortgage constituted in violation of the foregoing provision, thus:
The lot was mortgaged in violation of Section 18 of PD 957. Respondent, who was the buyer of
the property, was not notified of the mortgage before the release of the loan proceeds by petitioner.
Acts executed against the provisions of mandatory or prohibitory laws shall be void. Hence, the
mortgage over the lot is null and void insofar as private respondent is concerned.
 Thus, the Mortgage Agreement cannot have the effect of curtailing Rapanot's right as
buyer of Unit 2308-B2, precisely because of the Bank's failure to comply with PD 957.

Issue #2: Whether or not the Bank is a mortgage in good faith

Ruling #2:
No. The Bank cannot be considered as a mortgagee in good faith.It bears stressing that
banks are required to exercise the highest degree of diligence in the conduct of their affairs.
The Court explained this exacting requirement in the recent case of Philippine National Bank
v. Vila, thus:
In Land Bank of the Philippines v. Belle Corporation, the Court
exhorted banks to exercise the highest degree of diligence in its dealing with
properties offered as securities for the loan obligation: cSEDTC
When the purchaser or the mortgagee is a bank, the rule
on innocent purchasers or mortgagees for value is applied more
strictly. Being in the business of extending loans secured by real
estate mortgage, banks are presumed to be familiar with the rules
on land registration. Since the banking business is impressed
with public interest, they are expected to be more cautious, to
exercise a higher degree of diligence, care and prudence, than
private individuals in their dealings, even those involving
registered lands. Banks may not simply rely on the face of the
certificate of title. Hence, they cannot assume that, x x x the title
offered as security is on its face free of any encumbrances or
lien, they are relieved of the responsibility of taking further steps
to verify the title and inspect the properties to be mortgaged. As
expected, the ascertainment of the status or condition of a
property offered to it as security for a loan must be a standard
and indispensable part of the bank's operations. x x x (Citations
omitted)

RUTCHER T. DAGASDAS, petitioner, vs. GRAND PLACEMENT AND

GENERAL SERVICES CORPORATION, respondent.
G.R. No. 205727. January 18, 2017
Ponente: Justice Del Castillo/First Division
Nature of the Action: Petition for Review on Certiorari; Illegal Dismissal Case
Facts:
Dagasdas was hired as a Network Technician to be deployed in Saudi Arabia. On
February 11, 2008, Dagasdas reported at ITM's worksite in Khurais, Saudi Arabia. There, he
was allegedly given tasks suited for a Mechanical Engineer, which were foreign to the job he
applied for and to his work experience. Consequently, he was transferred to the Civil
Engineering Department, was temporarily given a position as Civil Construction Engineer. He
was promised by the employer that he will be given the position he applied for, but before it
happened, he was terminated from ITM. Later, ITM gave him a termination notice indicating
that he was dismissed pursuant to clause 17.4.3 of his contract, which provided that ITM
reserved the right to terminate any employee within the three-month probationary period
without need of any notice to the employee.

Issue:
Whether or not the clause in the contract giving the employer the right to terminate any emlpoyee
within the three-month probationary period is valid
Ruling:
NO. While our Civil Code recognizes that parties may stipulate in their contracts such
terms and conditions as they may deem convenient, these terms and conditions must not be
contrary to law, morals, good customs, public order or policy. The above-cited clause is
contrary to law because as discussed, our Constitution guarantees that employees, local or
overseas, are entitled to security of tenure. To allow employers to reserve a right to terminate
employees without cause is violative of this guarantee of security of tenure.
 As regards a probationary employee, his or her dismissal may be allowed only if there
is just cause or such reason to conclude that the employee fails to qualify as regular employee
pursuant to reasonable standards made known to the employee at the time of engagement.
Here, ITM failed to prove that it informed Dagasdas of any predetermined standards
from which his work will be gauged. In the contract he signed while still in the Philippines,
Dagasdas was employed as Network Technician; on the other hand, his new contract indicated
that he was employed as Superintendent. However, no job description — or such duties and
responsibilities attached to either position — was adduced in evidence. It thus means that the
job for which Dagasdas was hired was not definite from the beginning.

SPRING HOMES SUBDIVISION CO., INC., SPOUSES PEDRO L. LUMBRES and

REBECCA T. ROARING, petitioners vs. SPOUSES PEDRO TABLADA, JR. and
ZENAIDA TABLADA, respondents.
G.R. No. 200009, January 23, 2017
Ponente: Justice Peralta/Second Division

NATURE OF THE ACTION: petition for review on certiorari under Rule 45

FACTS:
Sometime in 1992, Spouses Lumbres entered into a Joint Venture Agreement with Spring Homes
Subdivision Co., Inc, for the development of several parcels of land consisting of an area of 28,378
square meters. For reasons of convenience, the Spouses Lumbres transferred the titles to the
parcels of land in the name of Spring Homes. On January 9, 1995, Spring Homes entered into a
Contract to Sell with respondents, Spouses for the sale of a parcel of land in the said subdivision.

On March 20, 1995, the Spouses Lumbres filed with the RTC of Calamba City a complaint for
Collection of Sum of Money, Specific Performance and Damages against Spring Homes for its
alleged failure to comply with the terms of the Joint Venture Agreement. Unaware of the pending
action, the Spouses Tablada began constructing their house on the subject lot and thereafter
occupied the same. Thereafter, Spring Homes Issued a Deed of Absolute Sale in favor of Sps
Tablada who paid a total of Php 179, 500 which is more than the purchase price indicated in the
sale. The title, however, remained with Spring Homes for its failure to cause the cancellation of
the TCT.
Subsequently, Spos. Lumbres and Spring Home entered into a Compromise Agreement wherein
Sps. Lumbres were authorized to collect Spring Homes’ account receivables arising from the
conditional sales of several properties and in case of default, cancel said sales. Sps. Tablada were
declared to be in default and hence, a new title was Issued in the name of Sps. Lumbres.

On June 20, 2001, the Spouses Tablada filed a complaint for Nullification of Title, Reconveyance
and Damages against Spring Homes and the Spouses Lumbres praying for the nullification of the
second Deed of Absolute Sale executed in favor of the Spouses Lumbres, as well as the title Issued
as a consequence thereof, the declaration of the validity of the first Deed of Absolute Sale executed
in their favor, and the issuance of a new title in their name.

ISSUE #1:
1. Whether or not Spouses Lumbres are entitled to the ownership of the immovable property on
the ground that they were the first to register the same before the Registry of Property
RULING #1:
1. No. They are not entitled to the ownership of the property because they are in bad faith.

The Court has consistently ruled that ownership of an immovable property which is the
subject of a double sale shall be transferred: ( 1) to the person acquiring it who in good
faith first recorded it in the Registry of Property; (2) in default thereof, to the person who
in good faith was first in possession; and (3) in default thereof, to the person who presents
the oldest title, provided there is good faith. The requirement of the law then is two-fold:
acquisition in good faith and registration in good faith. Good faith must concur with the
registration -that is, the registrant must have no knowledge of the defect or lack of title of
his vendor or must not have been aware of Facts which should have put him upon such
inquiry and investigation as might be necessary to acquaint him with the defects in the title
of his vendor. If it is shown that a buyer was in bad faith, the alleged registration they have
made amounted to no registration at all.
Here, the first buyers of the subject property, the Spouses Tablada, were able to take said
property into possession but failed to register the same because of Spring Homes'
unjustified failure to deliver the owner's copy of the title whereas the second buyers, the
Spouses Lumbres, were able to register the property in their names. But while said the
Spouses Lumbres successfully caused the transfer of the title in their names, the same was
done in bad faith. As correctly observed by the Court in Spouses Lumbres v. Spouses
Tablada, the Spouses Lumbres cannot claim good faith since at the time of the execution
of their Compromise Agreement with Spring Homes, they were indisputably and
reasonably informed that the subject lot was previously sold to the Spouses Tablada. They
were also already aware that the Spouses Tablada had constructed a house thereon and
were in physical possession thereof. They cannot, therefore, be permitted to freely claim
good faith on their part for the simple reason that the First Deed of Absolute Sale between
Spring Homes and the Spouses Tablada was not annotated at the back of the subject
property's title. It is beyond the Court's imagination how spouses Lumbres can feign
ignorance to the first sale when the records clearly reveal that they even made numerous
demands on the Spouses Tablada to pay, albeit erroneously, an alleged balance of the
purchase price.

ISSUE #2:
Whether or not the first Deed of Sale executed in favor of the Spouses Tablada is valid and with
sufficient consideration.

RULING #2:
YES. While the Spouses Lumbres would like the Court to believe that based on the Contract to
Sell, the total selling price of the subject property is P409,500.00, the contract itself, as well as the
surrounding circumstances following its execution, negate their argument. As appropriately found
by the Court, said amount actually pertains to the sum of: (1) the cost of the land area of the lot at
105 square meters priced at Pl ,500 per square meter; and (2) the cost of the house to be constructed
on the land at 42 square meters priced at P6,000 per square meter. But it would be a grave injustice
to hold the Spouses Tablada liable for more than the cost of the land area when it was duly proven
that they used their own funds in the construction of the house. As shown by the records, the
Spouses Tablada was forced to use their own money since their PAG-IBIG loan application did
not materialize, not through their own fault, but because Spring Homes failed, despite repeated
demands, to deliver to them the owner's duplicate copy of the subject property's title required by
the loan application.

KABISIG REAL WEALTH DEV., INC. and FERNANDO C. TIO, petitioners vs. YOUNG
BUILDERS CORPORATION, respondent
G.R. No. 212375, January 25, 2017
Ponente: Justice Peralta/ Second Division

NATURE OF THE ACTION: Petition for Review on Certiorari under Rule 45

FACTS:
Sometime in April 2001, Kabisig Real Wealth Dev., Inc. (Kabisig), through Ferdinand Tio (Tio),
contracted the services of Young Builders Corporation (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.

ISSUE:
1. Whether or not the contract between Young Builders and Kabisig is valid despite not being in
written form
2. Whether or not the reduction of actual damages in this case is proper
RULING:
1.YES It is settled that once perfected, 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.7 Article 1356 of the Civil Code provides:

Art. 1356. Contracts shall be obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present.
XXXX

There is nothing in the law that requires a written contract for the agreement in question to be
valid and enforceable. Also, the Court notes that neither Kabisig nor Tio had objected to the
renovation work, until it was already time to settle the bill.

2. YES. Under Article 2199 of the Civil Code, actual or compensatory damages are those awarded
in satisfaction of, or inrecompense for, loss or injury sustained. They proceed from a sense of
natural justice and are designed to repair the wrong that has been done, to compensate for the
injury inflicted. They either refer to the loss of what a person already possesses (dano emergente),
or the failure to receive as a benefit that which would have pertained to him (lucro cesante), as in
this case.

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. The burden of proof is on the party who would be defeated if no evidence
would be presented on either side. He must establish his case by a preponderance of evidence,
which means that the evidence adduced by one side is superior to that of the other. Here, the
evidence reveals that Young Builders failed to submit any competent proof o f the specific amount
o f actual damages being claimed. The documents submitted by Young Builders 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.

DELFIN C. GONZALEZ, JR., petitioner, vs. MAGDALENO M. PEÑA, ALABANG

COUNTRY CLUB, INC., and MS. ARSENIA VERA, respondents.
G.R. No. 214303. January 30, 2017
CJ Sereno/First Division

NATURE OF THE ACTION: Petition for Review on Certiorari

FACTS:
In its Decision dated 28 May 1999, the RTC of Bago City adjudged petitioner liable to respondent
Magdaleno M. Peña for the payment of the agency's fees and damages amounting to P28.5 million.
Petitioner, together with his co-petitioners in that case, appealed the Decision, while Peña moved
for execution pending appeal of this Ruling.

The motion was granted which resulted in the sale to Peña of petitioner’s ACCI shares. Though a
private sale, Peña was able to sell and transfer the subject shares to respondent Vera. On 19 October
2011, this Court Issued a Decision in G.R. Nos. 145817, 145822, 162562, entitled Urban Bank,
Inc. v. Peña, which vacated with finality the Decision of the RTC of Bago City, The Supreme
Court held that the concomitant execution pending appeal was likewise null and without effect.
Thus, Urban Bank and its officers and directors, including petitioner herein, were entitled to the
full restoration of their ownership and possession of all properties that were executed pending
appeal, such as the subject shares.

The restitution proceedings were raffled to RTC of Makati City. In its Omnibus Resolution dated
30 April 2014, the RTC concluded that Peña's private sale of the shares to Vera was valid, given
that the latter was an innocent purchaser for value. As such, Vera could not be charged with
knowledge of the controversy involving the ACCI shares. Considering the validity of the sale, the
trial court held that the actual restitution of the property to petitioner was no longer possible.

ISSUE:
Whether or not RTC committed an error in declaring the impossibility of the actual restitution of
the shares
RULING:
YES
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.
Here, the RTC did not make any finding on whether or not it was physically impossible
to effect the actual restitution of the property. On the other hand, petitioner correctly points out
that since 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.
As regards legal impossibility, the RTC appears to have jumped to the conclusion that
because of the perfected sale of the shares to Vera, petitioner can no longer claim actual
restitution of the property.
Article 1505 of the Civil Code instructs that "x x x where goods are sold by a person
who is not the owner thereof, and who does not sell them under authority or with the consent
of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner
of the goods is by his conduct precluded from denying the seller's authority to sell. x x x."
The Court itself settled that Peña acquired the properties by virtue of a null and void
execution sale. In effect, his buyers acquired no better title to the goods than he had. Therefore,
the RTC erred in appreciating the existence of legal impossibility in this case on the mere
pretext that the properties had already been transferred to third parties. By virtue of Article
1505, the true owners of the goods are definitely not legally precluded from claiming the
ownership of their actual properties.
UNITED ALLOY PHILIPPINES CORPORATION, SPOUSES DAVID C.
CHUA and LUTEN CHUA, petitioners, vs. UNITED COCONUT
PLANTERS BANK, respondent.
G.R. No. 175949. January 30, 2017
Justice Peralta/ Second Division

NATURE OF THE ACTION: petition for review on certiorari

FACTS:
On December 18, 2000, herein petitioner corporation, United Alloy Philippines
Corporation (UNIALLOY) applied for and was granted a credit accommodation by herein
respondent United Coconut Planters Bank (UCPB) in the amount of PhP50,000,000.00. Part of
UNIALLOY's obligation under the Credit Agreement was secured by a Surety Agreement
executed by UNIALLOY Chairman, Jakob Van Der Sluis (Van Der Sluis), UNIALLOY President,
David Chua and his spouse, Luten Chua (Spouses Chua), and one Yang Kim Eng (Yang).

Subsequently, UNIALLOY failed to pay its loan obligations. As a result, UCPB filed against
UNIALLOY, the spouses Chua, Yang and Van Der Sluis an action for Sum of Money with Prayer
for Preliminary Attachment before RTC Makati City. On June 17, 2003, the RTC of Makati
rendered Judgment in the collection case in favor of UCPB

ISSUE:
1. Whether or not petitioners, together with their co-defendants Van Der Sluis and Yang, are liable
to pay respondent the amounts awarded by the RTC of Makati City in its June 17, 2003 Decision
2. Whether or not the imposition of 24% interest rate on the total amount due is unconscionable,
hence, void
RULING:

1. As ruled upon by both the RTC and the CA, UNIALLOY failed to pay its obligations under the
above promissory notes and that herein petitioner Spouses Chua, together with their co-defendants
Van Der Sluis and Yang freely executed a Surety Agreement whereby they bound themselves
jointly and severally with UNIALLOY, to pay the latter's loan obligations with UCPB.
As correctly held by both the RTC and the CA, Article 1159 of the Civil Code expressly
provides that "[o]bligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith." The RTC as well as the CA
found nothing which would justify or excuse petitioners from non-compliance with their
obligations under the contract they have entered into. Thus, it becomes apparent that petitioners
 are merely attempting to evade or, at least, delay the inevitable performance of their obligation
to pay under the Surety Agreement and the subject promissory notes which were executed in
respondent's favor.

2. YES. Settled is the rule that 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.
Moreover, 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. This unilateral authority is anathema to the mutuality of contracts
and enable lenders to take undue advantage of borrowers. Although the Usury Law has been
effectively repealed, courts may still reduce iniquitous or unconscionable rates charged for the
use of money. 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.
The Court, thus, finds it proper to modify the interest rates imposed on respondents'
obligation. Pursuant to the Ruling in Nacar v. Gallery Frames, et al., the sums of
US$435,494.44 and PhP26,940,950.80 due to UCPB shall earn interest at the rate of 12% per
annum from the date of default, on August, 1, 2001, until June 30, 2013 and thereafter, at the
rate of 6% per annum, from July 1, 2013 until finality of this Decision. The total amount owing
to UCPB as set forth in this Decision shall further earn legal interest at the rate of 6% per
annum from its finality until full payment thereof, this interim period being deemed to be by
then an equivalent to a forbearance of credit.
Finally, pursuant to the parties' Credit Agreement as well as the subject Promissory
Notes, respondents are also liable to pay a penalty charge at the rate of 1% per month or
12% per annum.

17 CASE DIGESTS

JENESTOR B. CALDITO AND MARIA FILOMENA T. CALDITO, PETITIONERS vs.

ISAGANI V. OBADO and GEREON V. OBADO, RESPONDENTS
G.R. NO. 181586, January 30, 2017
Justice Reyes/Third Division

NATURE OF THE ACTION: Complaint for quieting of ownership

FACTS:
Sometime in 1995, Antonio Ballesteros executed an Affidavit of Ownership narrating his
claim over the subject parcel of land. In his affidavit, Antonio claimed that Lot No. 1633 was co-
owned by Felipe with his five siblings, namely: Eladia, Estanislao, Maria, Severmo and Tomasa,
all sumamed Obado.

On the next day following the execution of the said affidavit, Antonio and Elena
Ballesteros (Spouses Ballesteros) sold the subject parcel of land to the petitioners for the sum of
P70,000.000 evidenced by a Deed of Absolute Sale. Thereafter, the petitioners declared the subject
lot for taxation purposes and paid the realty taxes thereon.

In 2002, the petitioners attempted to build a house on the subject parcel of land but the
respondents prevented them from completing the same. The respondents then filed a complaint
before the barangay but no amicable settlement was reached between the parties. Hence, the
petitioners instituted a complaint for quieting of ownership against the respondents before the
RTC, as well as an injunctive writ to prevent the respondents from interfering with the construction
of their house. For their part, the respondents averred that the Spouses Ballesteros were not the
owners and possessors of the subject parcel of land. They maintained that Lot No. 1633 was
inherited by their father, Patemo, from its original owner Felipe, and they have been paying the
real property taxes for the entire property. They asserted that the petitioners are buyers in bad faith
since their family had been in possession of the entire Lot No. 1633 since 1969 and had been in.
open, peaceful and uninterrupted possession of the whole property up to the present or for more
than 30 years in the concept of an owner.

ISSUE:
1. Whether or not tax declarations are good indicia of possession in the concept of ownership
2. Whether or not the Issue of bad faith and good faith of a buyer is relevant in case of an
unregistered land
3. Whether or not the plaintiff or complainant has a legal or an equitable title to or interest in the
real property subject of the action
RULING:
1.YES. Although tax declarations or realty tax payment of property are not
conclusive evidence of ownership, as in the instant case, they are good
indicia of possession in the concept of owner, for no one in his right mind
would be paying taxes for a property that is not in his actual or constructive
possession. They constitute evidence of great weight in support of the
claim of title of ownership by prescription when considered with the actual ‘possession of the
property by the applicant.

The respondents also presented the following pieces of evidence: (1) old certified
photocopies of declarations of real property and original copy of tax receipts from year 1921 to
1944 in the name of Felipe, covering payments by the latter for Lot No. 1633 from which the
subject parcel of land was taken; (2) original copy of tax receipts from year 1961 to year 1989 in
the name of the respondents’ father Patemo, covering payments by the latter for Lot No. 1633;(3)
original copy of tax receipt dated July 21, 2004 in the name of Isagani, covering payments by the
latter for Lot No. 1633; (4) original copy of the Certification Issued by the Municipal Treasurer of
Sarrat, Ilocos Norte that Lot No. 1633 covered by Tax Declaration No. 03-001-00271 declared in
the name of Felipe is not delinquent in the payment of realty taxes.

2. NO.

While the findings of the CA that the petitioners were a buyer in bad faith is in accord with
the evidence on record, it must be pointed out, however, that they overlooked the fact that Lot No.
1633 is an unregistered piece of land. The Court had already ruled that the Issue of good faith or
bad faith of a buyer is relevant only where the subject of the sale is a registered land but not where
the property is an unregistered land. One who purchases an unregistered land does so at his peril.
His claim of having bought the land in good faith, i.e. without notice that some other person has a
right to, or interest in, the property, would not protect him if it turns out that the seller does not
actually own the property. All the same, the application of this doctrine will not affect the outcome
of this case.

Obviously, the petitioners cannot benefit from the deed of sale of the subject parcel of
land, executed by the Spouses Ballesteros in their favor, to support their claim of possession in
good faith and with just title. The Court noted that in Filomena’s testimony, she even admitted that
the respondents own the bigger portion of Lot No. 1633. Thus, it is clear that the petitioners chose
to close their eyes to Facts which should have put a reasonable man on his guard. The petitioners
failed to ascertain whether the Spouses Ballesteros were the lawful owner of the subject parcel of
land being sold. Far from being prudent, the petitioners placed full faith on the Affidavit of
Ownership that Antonio executed. Hence, when the subject parcel of land was bought by the
petitioners, they merely stepped into the shoes of the Spouses Ballesteros and acquired whatever
rights and obligations appertain thereto.

3. NO. In this case, the petitioners’ cause of action relates to an action to quiet title which
has two indispensable requisites, namely: (1) the plaintiff or complainant has a legal or an
equitable title to or interest in the real property subject of the action; and (2) the deed, claim,
encumbrance or proceeding claimed to be casting cloud on his title must be shown to be in fact
invalid or inoperative despite its prima facie appearance of validity or legal efficacy.
 From the foregoing provisions, it is clear that the petitioners’ cause of action must
necessarily fail mainly in view of the absence of the first requisite since the petitioners were not
able to prove equitable title or ownership over the subject parcel of land.

The petitioners’ claim of legal title over the subject parcel of land by virtue of the Deed
of Sale and Affidavit of Ownership Issued by Antonio cannot stand because they failed to prove
the title of their immediate predecessors-in-interest, the Spouses Ballesteros. The Court cannot
give full credence to Antonio’s Affidavit of Ownership for he simply made general and self-
serving statements therein which were favorable to him, and which were not supported with
documentary evidence, with no specifics as to when their predecessors-in-interest acquired the
subject parcel of land, and when the Donations Propter Nuptias were made. Indeed, such is
hardly the well-nigh incontrovertible evidence required in cases of this nature. The petitioners
must present proof of specific acts of ownership to substantiate his claim and cannot just offer
general statements which are mere conclusions of law than factual evidence of possession.
Moreso, Antonio

was not even called to the witness stand to testify on the contents of his Affidavit of Ownership,
thus, making the affidavit hearsay evidence and its probative value questionable. Accordingly, this
affidavit must be excluded from the judicial proceedings being inadmissible hearsay evidence.

FLORDALIZA LLANES GRANDE, petitioner, vs. PHILIPPINE

NAUTICAL TRAINING COLLEGE, respondent.
G.R. No. 213137. March 1, 2017
Justice Peralta/Second Division

NATURE OF THE ACTION: Illegal Dismissal Case

FACTS:
Respondent Philippine Nautical Training College, or PNTC, is a private entity engaged
in the business of providing maritime training and education. In 2002, petitioner was appointed
Course Director for the Training Department of respondent school. In November 2007, she
resigned as she had to pursue graduate studies and carry on her plan to immigrate to Canada.
In May 2009, petitioner was invited by respondent to resume teaching since it intended
to offer BS Nursing and other courses for maritime training. Sometime thereafter, petitioner
was, again, employed by respondent as Director for Research and Course Department. She was
also given the position of Vice President for Training Department. After two years, several
employees of respondent's Registration Department, including the VP for Training Department
were placed under preventive suspension in view of the anomalies in the enlistment of
students.
On March 1, 2011, the VP for Corporate Affairs, Frederick Pios (Pios), called
petitioner for a meeting. Pios relayed to petitioner the message of PNTC's President for her to
tender her resignation from the school in view of the discovery of anomalies in the Registration
Department that reportedly involved her. Pios assured petitioner of absolution from the alleged
anomalies if she would resign.
Petitioner then prepared a resignation letter, signed it and filed it with the Office of the PNTC
President. In the evening of the same date, petitioner, accompanied by counsel, filed a police
blotter for a complaint for unjust vexation against Pios on the ground that the latter forced her to
file resignation from employment and that he was forced to succumbed to the order. The net day,
the petitioner filed a complaint for illegal influence.
ISSUE:
Whether or not petitioner’s consent in filing her resignation is vitiated on the ground of undue
influence
RULING:
YES. While indeed there was no employment of force from the language used by Pios,
we are convinced that there was the presence of undue influence exerted on petitioner for her
to leave her employment. The conversation showed that respondent wanted to terminate
petitioner's employment but would want it to appear that she voluntarily resigned. Undue
influence is defined under Article 1337 of the Civil Code, thus:
 Art. 1337. There is undue influence when a person takes improper
advantage of his power over the will of another, depriving the latter of a
reasonable freedom of choice. The following circumstances shall be
considered: the confidential, family, spiritual, and other relations between the
parties, or the fact that the person alleged to have been unduly influenced was
suffering from mental weakness, or was ignorant or in financial distress.
Indeed, it is very unlikely that petitioner who was in the thick of preparation for an
upcoming visit and inspection from the Maritime Training Council and who had just requested
for the acquisition of textbooks and teaching aids, and had just submitted a Master Plan to the
corporate officers would simply resign voluntarily. She was in the process of compiling the
necessary documents and library holdings for submission to the Maritime Training Council.
Clearly, her consent was vitiated.

Manuel Ubas Sr, petitioner vs. Wilson Chan, respondent

GR. NO. 215910, February 06, 2017
Ponente: Justice Perlas-Bernabe/FIRST DIVISION

NATURE OF THE ACTION: Complaint for Sum of Money with Application for Writ of
Attachment
FACTS: Manuel Ubas alleges in his complaint that the respondent, , "doing business under the
name and style of UNIMASTER”, was indebted to him in the amount of Php 1, 500,000 for the
materials allegedly purchased for the construction of the Macagtas Dam in Catarman, Northern
Samar (Macagtas Dam project). He claimed that the said obligation has long become due and
demandable and yet, respondent unjustly refused to pay the same despite repeated demands.
Further, he averred that respondent had Issued three (3) bank checks but were later dishonored
due to a stop payment order. As such, respondent was guilty of fraud in incurring the obligation.

Respondent filed an Answer with Motion to Dismiss stating that the complaint states no cause of
action because the checks do not belong to him but to Unimasters Conglomeration, Inc. and that
there is no contract that ever existed between him and petitioner.

ISSUE:
Whether or not checks may serve as proof of an obligation between the parties in this case
RULING:
Yes. In Pacheco v. CA, the Court has expressly recognized that a check "constitutes an evidence
of indebtedness" and is a veritable "proof of an obligation." Hence, petitioner may rely on the same
as proof of respondent's personal obligation to him.Although the checks were under the account
name of Unimasters, it should be emphasized that the manner or mode of payment does not alter
the nature of the obligation. The source of obligation, as claimed by petitioner in this case, stems
from his contract with respondent. When they agreed upon the purchase of the construction
materials on credit for the amount of Pl,500,000,00, the contract between them was perfected.
Therefore, even if corporate checks were Issued for the payment of the obligation, the fact remains
that the juridical tie between the two (2) parties was already established during the contract's
perfection stage and, thus, does not preclude the creditor from proceeding against the debtor during
the contract's consummation stage.
That a privity of contract exists between petitioner and respondent is a conclusion amply supported
by the averments and evidence on record in this case.

DASMARIÑAS T. ARCAINA and MAGNANI T.

BANTA, petitioners, vs. NOEMI L. INGRAM, represented by MA.
NENETTE L. ARCHINUE, respondent.
G.R. No. 196444. February 15, 2017
JUSTICE JARDELEZA/THIRD DIVISION

NATURE OF THE ACTION: case for recovery of ownership and title to real property,
possession and damages with preliminary injunction (recovery case)
FACTS:
Arcaina is the owner of Lot No. 3230 (property) located at Salvacion, Sto. Domingo,
Albay. Sometime in 2004, her attorney-in-fact, Banta, entered into a contract with Ingram for
 the sale of the property. Banta showed Ingram and the latter's attorney-in-fact, respondent Ma.
Nenette L. Archinue (Archinue), the metes and bounds of the property and represented that
Lot No. 3230 has an area of more or less 6,200 square meters (sq. m.) per the tax declaration
covering it.
Banta and Ingram thereafter executed a Memorandum of Agreement acknowledging
the previous payments and that Ingram still had an obligation to pay the remaining balance in
the amount of P145,000.00. They also separately executed deeds of absolute sale over the
property in Ingram's favor. Subsequently, Ingram caused the property to be surveyed and
discovered that the lot has an area of 12,000 sq. m. Upon learning of the actual area of the
property, Banta allegedly insisted that the difference of 5,800 sq. m. remains unsold. This was
opposed by Ingram who claims that she owns the whole lot by virtue of the sale. Thus,
Archinue, on behalf of Ingram, instituted the recovery case against petitioners before the
MCTC.

ISSUE:
1. whether the sale was made on a lump sum or per-square-meter basis.
2. Whether or not the vendor is obliged to deliver all that was included in the boundaries of the
land in case of conflict between the contract of sale and the actual area of the land
RULING:
1. We now resolve the main Issue in this case and hold that Lot No. 3230 was sold for
a lump sum. In sales involving real estate, the parties may choose between two types of pricing
agreement: a unit price contract wherein the purchase price is determined by way of reference
to a stated rate per unit area (e.g., P1,000.00 per sq. m.) or a lump sum contract which states
a full purchase price for an immovable the area of which may be declared based on an estimate
or where both the area and boundaries are stated (e.g., P1 million for 1,000 sq. m., etc.). Here,
the Deed of Sale executed by Banta on March 21, 2005 and the Deed of Sale executed by
Arcaina on April 13, 2005 both show that the property was conveyed to Ingram at the
predetermined price of P1,860,000.00. There was no indication that it was bought on a per-
square-meter basis. Thus, Article 1542 of the Civil Code governs the sale, viz.:
Art. 1542. In the sale of real estate, made for a lump sum and not at the
rate of a certain sum for a unit of measure or number, there shall be no increase
or decrease of the price, although there be a greater or less area or number than
that stated in the contract.
The same rule shall be applied when two or more immovables are sold
for a single price; but if, besides mentioning the boundaries, which is
indispensable in every conveyance of real estate, its area or number should be
designated in the contract, the vendor shall be bound to deliver all that is
included within said boundaries, even when it exceeds the area or number
specified in the contract; and, should he not be able to do so, he shall suffer a
reduction in the price, in proportion to what is lacking in the area or number,
unless the contract is rescinded because the vendee does not accede to the
failure to deliver what has been stipulated.

2. It depends. In a lump sum contract, a vendor is generally obligated to deliver all the
land covered within the boundaries, regardless of whether the real area should be greater or
smaller than that recited in the deed. However, in case there is conflict between the area
actually covered by the boundaries and the estimated area stated in the contract of sale, he/she
shall do so only when the excess or deficiency between the former and the latter is reasonable.
Applying Del Prado to the case before us, we find that the difference of 5,800 sq. m.
is too substantial to be considered reasonable. We note that only 6,200 sq. m. was agreed upon
between petitioners and Ingram. Declaring Ingram as the owner of the whole 12,000 sq. m. on
the premise that this is the actual area included in the boundaries would be ordering the delivery
of almost twice the area stated in the deeds of sale. Surely, Article 1542 does not contemplate
such an unfair situation to befall a vendor — that he/she would be compelled to deliver double
the amount that he/she originally sold without a corresponding increase in price. In Asiain v.
Jalandoni, we explained that "[a] vendee of a land when it is sold in gross or with the
description 'more or less' does not thereby ipso facto take all risk of quantity in the land. The
use of 'more or less' or similar words in designating quantity covers only a reasonable excess
or deficiency." Therefore, we rule that Ingram is entitled only to 6,200 sq. m. of the property.
 An area of 5,800 sq. m. more than the area intended to be sold is not a reasonable excess that
can be deemed included in the sale.
The contract of sale is the law between Ingram and petitioners; it must be complied
with in good faith. Petitioners have already performed their obligation by delivering the 6,200
sq. m. property. Since Ingram has yet to fulfill her end of the bargain, she must pay petitioners
the remaining balance of the contract price amounting to P145,000.00.
SPOUSES AMADO O. IBAÑEZ and ESTHER R.
IBAÑEZ, petitioners, vs. JAMES HARPER as Representative of the Heirs
of FRANCISCO MUÑOZ, SR., the REGISTER OF DEEDS OF MANILA
and the SHERIFF OF MANILA, respondents.
G.R. No. 194272. February 15, 2017
Justice Jardeleza/Third Division

NATURE OF THE ACTION: Complaint for injunction and damages

FACTS:
Sometime in October 1996, spouses Amado and Esther Ibañez (spouses Ibañez)
borrowed from Francisco E. Muñoz, Sr. (Francisco), Consuelo Estrada (Consuelo) and Ma.
Consuelo E. Muñoz (Ma. Consuelo) the amount of P1,300,000, payable in three months, with
interest at the rate of 3% a month.
On October 14, 1996, the spouses Ibañez Issued a Promissory Note binding themselves
jointly and severally to pay Ma. Consuelo and Consuelo the loan amount with interest.
Alleging that the conditions of the mortgage have been violated and all check payments were
dishonored by the drawee, Ma. Consuelo and Consuelo applied for foreclosure of the real estate
mortgage. Sps, Ibañez filed a complaint for injunction and damages against Francisco,
Consuelo and Ma. Consuelo. Sometime thereafter, an Amended Compromise Agreement has
been executed and signed by the spouses Ibañez and Francisco, on behalf of the other two. The
RTC approved the Amended Compromise Agreement and adopted it as its Hatol.

ISSUE:
Whether or not the obligation created in the Amended Compromise Agreement is solidary
RULING:
No.
Here, the spouses Ibañez agreed to pay Francisco, Ma. Consuelo and Consuelo the total
amount of P3,000,000, with the initial payment of P2,000,000 to be sourced from the proceeds
of a GSIS loan and secured by the spouses Ibañez while the remaining balance of P1,000,000
to be paid one year from the date of the Amended Compromise Agreement.
As correctly identified by the CA, the Amended Compromise Agreement clearly refers
to the spouses Ibañez as plaintiffs and Francisco, Consuelo and Ma. Consuelo as the defendants
they covenanted to pay. There is nothing in the Hatol, and the Amended Compromise
Agreement it is based on, which shows a declaration that the obligation created was solidary.
In any case, solidary obligations cannot be inferred lightly. They must be positively
and clearly expressed. Articles 1207 and 1208 of the Civil Code provide:
Art. 1207. The concurrence of two or more creditors or of two or
more debtors in one and the same obligation does not imply that each one
of the former has a right to demand, or that each one of the latter is bound
to render, entire compliance with the prestations. There is a solidary liability
only when the obligation expressly so states, or when the law or the nature of
the obligation requires solidarity.
Art. 1208. If from the law, or the nature or the wording of the obligations
to which the preceding article refers the contrary does not appear, the credit or
debt shall be presumed to be divided into as many equal shares as there
are creditors or debtors, the credits or debts being considered distinct from
one another, subject to the Rules of Court governing the multiplicity of
suits. (Emphasis supplied.)
 In this case, given that solidarity could not be inferred from the agreement, the
presumption under the law applies — the obligation is joint. This means that Francisco, Ma.
Consuelo and Consuelo are each entitled to equal shares in the P3,000,000 agreed upon in the
Amended Compromise Agreement and that payment to Consuelo and Ma. Consuelo will not
have the effect of discharging the obligation with respect to Francisco.
The spouses Ibañez assigned the proceeds of the GSIS loan and executed a real estate
mortgage over the Puerto Azul property only in Ma. Consuelo and Consuelo's favour. By doing
so, they did not discharge their obligation in accordance with the terms of the Amended
Compromise Agreement and left their loan obligation to Francisco unsettled. Thus, and as
correctly held by the CA, it was gravely erroneous for the trial court to rule that all the
stipulations in the Hatol have been complied with. Under the circumstances, the obligations to
Francisco, and consequently, his heirs, have clearly not been complied with.

SPOUSES ROMEO PAJARES and IDA T.

PAJARES, petitioners, vs. REMARKABLE LAUNDRY AND DRY
CLEANING, represented by ARCHEMEDES G. SOLIS, respondent.
G.R. No. 212690. * February 20, 2017.
Justice Del Castillo/First Division
NATURE OF THE ACTION: Complaint denominated as "Breach of Contract and Damages"
FACTS: On September 3, 2012, Remarkable Laundry and Dry Cleaning (respondent) filed a
Complaint denominated as "Breach of Contract and Damages" against spouses Romeo and Ida
Pajares (petitioners) before the RTC of Cebu City . Respondent alleged that it entered into a
Remarkable Dealer Outlet Contract with petitioners whereby the latter, acting as a dealer outlet,
shall accept and receive items or materials for laundry which are then picked up and processed by
the former in its main plant or laundry outlet; that petitioners violated Article IV (Standard
Required Quota & Penalties) of said contract, which required them to produce at least 200 kilos of
laundry items each week, when, on April 30, 2012, they ceased dealer outlet operations on account
of lack of personnel; that respondent made written demands upon petitioners for the payment of
penalties imposed and provided for in the contract, but the latter failed to pay; and, that petitioners'
violation constitutes breach of contract.
ISSUE:
Whether or not a complaint for damages may lie when the cause of action is breach of contract
RULING:
YES. An analysis of the factual and material allegations in the Complaint shows that
there is nothing therein which would support a conclusion that respondent's Complaint is one
for specific performance or rescission of contract. It should be recalled that the principal
obligation of petitioners under the Remarkable Laundry Dealership Contract is to act as
respondent's dealer outlet.
Breach of contract may also be the cause of action in a complaint for damages filed
pursuant to Article 1170 of the Civil Code. It provides:
Art. 1170. Those who in the performance of their obligations are guilty
of fraud, negligence, or delay, and those who in any manner contravene the
tenor thereof, are liable for damages. (Emphasis supplied)
In sum, after juxtaposing Article IV of the Remarkable Dealer Outlet Contract vis-à-
vis the prayer sought in respondent's Complaint, this Court is convinced that said Complaint is
one for damages. True, breach of contract may give rise to a complaint for specific performance
or rescission of contract. In which case, the subject matter is incapable of pecuniary estimation
and, therefore, jurisdiction is lodged with the RTC. However, breach of contract may also be
the cause of action in a complaint for damages. Thus, it is not correct to immediately conclude,
as the CA erroneously did, that since the cause of action is breach of contract, the case would
only either be specific performance or rescission of contract because it may happen, as in this
case, that the complaint is one for damages. Since the total amount of the damages claimed by
the respondent in its Complaint filed with the RTC on September 3, 2012 amounted only to
P280,000.00, said court was correct in refusing to take cognizance of the case.

KNIGHTS OF RIZAL, Petitioner.

vs.
DMCI HOMES, INC., DMCI PROJECT DEVELOPERS, INC., CITY OF MANILA,
 NATIONAL COMMISSION FOR CULTURE AND THE ARTS, NATIONAL
HISTORICAL COMMISSION OF THE PHILIPPINES, Respondents.

G.R. No. 213948 April 18, 2017

Justice Carpio/EN BANC

Nature of the Action: Petition for Injunction, with Applications for Temporary Restraining
Order, Writ of Preliminary Injunction, and Others

Facts:
DMCI Project Developers, Inc. (DMCI-PDI) 3 acquired a 7,716.60-square meter lot in the City
of Manila and earmarked it for the construction of DMCI-PDI's Torre de Manila condominium
project.
On 24 July 2012, the City Council of Manila Issued Resolution No. 121 enjoining the Office of
the Building Official to temporarily suspend the Building Permit of DMCI-PDI, citing among
others, that "the Torre de Manila Condominium, based on their development plans, upon
completion, will rise up high above the back of the national monument, to clearly dwarf the
statue of our hero, and with such towering heights, would certainly ruin the line of sight of the
Rizal Shrine from the frontal Roxas Boulevard vantage point[.]"

KOR, a "civic, patriotic, cultural, nonpartisan, non-sectarian and non-profit organization" created
under Republic Act No. 646, filed a Petition for Injunction contends that the project is a
nuisance per se because "[t]he despoliation of the sight view of the Rizal Monument is a
situation that annoy's or offends the senses' of every Filipino who honors the memory of the
National Hero Jose Rizal. It is a present, continuing, worsening and aggravating status or
condition. Hence, the PROJECT is a nuisance per se. It deserves to be abated summarily, even
without need of judicial proceeding.

Issue:
Whether or not Torre de Manila is a nuisance per se.
Ruling:

No. Article 694 of the Civil Code defines a nuisance as any act, omission, establishment,
business, condition of property, or anything else which: (1) injures or endangers the health or
safety of others; (2) annoys or offends the senses; (3) shocks, defies or disregards decency or
morality; (4) obstructs or interferes with the free passage of any public highway or street, or any
body of water; or (5) hinders or impairs the use of property.

Thy Court recognizes two kinds of nuisances. The first, nuisance perse, is on "recognized as a
nuisance under any and all circumstances, because it constitutes a direct menace to public health
or safety, and, for that reason, may be abated summarily under the undefined law of
necessity." 89 The second, nuisance peraccidens, is that which "depends upon certain conditions
and circumstances, and its existence being a question of fact, it cannot be abated without due
hearing thereon in a tribunal authorized to decide whether such a thing in law constitutes a
nuisance. "90

It can easily be gleaned that the Torre de Manila is not a nuisance per se. The Torre de Manila
project cannot be considered as a "direct menace to public health or safety." Not only is a
condominium project commonplace in the City of Manila, DMCI-PDI has, according to the
proper government agencies, complied with health and safety standards set by law. DMCI-PDI
has been granted the following permits and clearances prior to starting the project: (1) Height
Clearance Permit from the Civil Aviation Authority of the Philippines;91 (2) Development Permit
from the HLURB;92 (3) Zoning Certification from the HLURB;93 (4) Certificate of
Environmental Compliance Commitment from the Environment Management Bureau of the
Department of Environment and Natural Resources;94 (5) Barangay Clearance95 (6) Zoning
Permit;96 (7) Building Permit;97 (8) and Electrical and Mechanical Permit.98

SPS. CRISTINO & EDNA CARBONELL, Petitioners,

vs.
METROPOLITAN BANK AND TRUST COMPANY, Respondent.

April 26, 2017 G.R. No. 178467

Justice Bersamin/Third Division

NATURE OF THE ACTION: Complaint for Damages

FACTS:
The petitioners initiated against the respondent Civil Case No. 65725, an action for damages,
alleging that they had experienced emotional shock, mental anguish, public ridicule, humiliation,
insults and embarrassment during their trip to Thailand because of the respondent's release to
them of five US$ 100 bills that later on turned out to be counterfeit.
The petitioners continued that upon their return to the Philippines, they had confronted the
manager of the respondent's Pateros branch on the fake dollar bills, but the latter had insisted that
the dollar bills she had released to them were genuine inasmuch as the bills had come from the
head office; that in order to put the Issue to rest, the counsel of the petitioners had submitted the
subject US$ 100 bills to the Bangko Sentral ng Pilipinas (BSP) for examination; that the BSP
had certified that the four US$100 bills were near perfect genuine notes; and that their counsel
had explained by letter their unfortunate experience caused by the respondent's release of the
fake US dollar bills to them, and had demanded moral damages of ₱10 Million and exemplary
damages.

Prior to the filing of the suit in the RTC, the petitioners had two meetings with the respondent's
representatives. In the course of the two meetings, the latter's representatives reiterated their
sympathy and regret over the troublesome experience that the petitioners had encountered, and
offered to reinstate US$500 in their dollar account, and, in addition, to underwrite a round-trip
all-expense-paid trip to Hong Kong, but they were adamant and staged a walk-out.8

ISSUE:
Whether or not the respondent is liable for the payment of moral and exemplary damages
RULING:
No.

The relationship existing between the petitioners and the respondent that resulted from a contract
of loan was that of a creditor-debtor. Even if the law imposed a high standard on the latter as a
bank by vi1iue of the fiduciary nature of its banking business, bad faith or gross negligence
amounting to bad faith was absent. Hence, there simply was no legal basis for holding the
respondent liable for moral and exemplary damages. In breach of contract, moral damages may
be awarded only where the defendant acted fraudulently or in bad faith. That was not true herein
because the respondent was not shown to have acted fraudulently or in bad faith. This is pursuant
to Article 2220 of the Civil Code, to wit:

Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the
court should find that, under the circumstances, such damages are justly due. The same rule
applies to breaches of contract where defendant acted fraudulently or in bad faith.

With the respondent having established that the characteristics of the subject dollar notes had
made it difficult even for the BSP itself as the country's own currency note expert to identify the
counterfeiting with ease despite adhering to all the properly laid out standard operating
procedure and precautions in the handling of US dollar bills, holding it liable for damages in
favor of the petitioners would be highly unwarranted in the absence of proof of bad faith, malice
or fraud on its part. That it formally apologized to them and even offered to reinstate the
USD$500.00 in their account as well as to give them the all-expense-paid round trip ticket to
Hong Kong as means to assuage their inconvenience did not necessarily mean it was liable. In
civil cases, an offer of compromise is not an admission of liability, and is inadmissible as
evidence against the offeror.

MAKILITO B. MAHINAY, Petitioner

vs. DURA TIRE & RUBBER INDUSTRIES, INC., Respondent

June 5, 2017 G.R. No. 194152

Justice Leonen/ SECOND DIVISION

NATURE OF THE ACTION: Complaint for judicial declaration of right to redeem

FACTS:
A & A SWISS mortgaged a parcel of land with an area of 3,616 sq. meters to Dura Tire as
security for credit purchases to be made by Move Overland. Under the mortgage agreement,
Dura Tire was given the express authority to extrajudicially foreclose the property should Move
Overland fail to pay its credit purchases.

Meanwhile, A&A Swiss sold the property to Mahinay for the sum of ₱540,000.00. In the Deed
of Absolute Sale, Mahinay acknowledged that the property had been previously mortgaged by
A&A Swiss to Dura Tire, holding himself liable for any claims that Dura Tire may have against
Move Overland.

Move Overland failed to pay its credit purchases, and so Dura Tire applied for the extrajudicial
foreclosure of the property. espite the protest, Sheriff Romeo Laurel (Sheriff Laurel) proceeded
with the sale and Issued a Certificate of Sale in favor of Dura Tire, the highest bidder at the
sale. 16 The property was purchased at ₱950,000.00, and the Certificate of Sale was registered on
February 20, 1995.17 On March 23, 1995, Mahinay filed a Complaint18 for specific performance
and annulment of auction sale before the Regional Trial Court of Cebu City. The case went up to
the Supreme Court where Mahinay argued that the one (1)-year period of redemption was tolled
when he filed the Complaint for annulment of foreclosure sale on March 23, 1995 and resumed
when the June 16, 2006 Decision of the Court of Appeals became final and executory on August
8, 2007.

ISSUE: whether the one (1)-year period of redemption was tolled when Mahinay filed his
Complaint for annulment of foreclosure sale.

RULING:
No. The pendency of an action to annul the foreclosure sale or to enforce the right to redeem does
not toll the running of the period of redemption.
By force of law, specifically, Section 6 of Act No. 3135, Mahinay's right to redeem arose when
the mortgaged property was extrajudicially foreclosed and sold at public auction.1âwphi1 There
is no dispute that Mahinay had a lien on the property subsequent to the mortgage. Consequently,
he had the right to buy it back from the purchaser at the sale, Dura Tire in this case, "from and at
any time within the term of one year from and after the date of the sale."
The "date of the sale" referred to in Section 6 is the date the certificate of sale is registered with
the Register of Deeds. This is because the sale of registered land does not '"take effect as a
conveyance, or bind the land' until it is registered."60

he right of redemption being statutory,61 the mortgagor may compel the purchaser to sell back
the property within the one (1 )-year period under Act No. 3135. If the purchaser refuses to sell
back the property, the mortgagor may tender payment to the Sheriff who conducted the
foreclosure sale. 62 Here, Mahinay should have tendered payment to Sheriff Laurel instead of
insisting on directly paying Move Overland's unpaid credit purchases to Dura Tire.

With Mahinay failing to redeem the property within the one (1)-year period of redemption, his
right to redeem had already lapsed. As discussed, the pendency of an action to annul the
foreclosure sale or to enforce the right to redeem does not toll the running of the period of
redemption. The trial court correctly dismissed the Complaint for judicial declaration of right to
redeem.

SPS. ROBERTO ABOITIZ AND MARIA CRISTINA CABARRUS, Petitioners

vs.
SPS. PETER L. PO AND VICTORIA L. PO, Respondents
G.R. No. 208450 June 5, 2017
Justice Leonen/ SECOND DIVISION

NATURE OF THE ACTION: complaint to recover the land and to declare nullity of title with
damages.33

FACTS:
In 1973, Mariano Seno executed a Deed of Absolute Sale in favor of his son, Ciriano. On May 5,
1978, Ciriaco sold the two (2) lots to Victoria Po. The parties executed a Deed of Absolute Sale.
Mariano Seno was survived by his five (5) children.

Sometime in 1990, Peter Po discovered that Ciriaco “had executed a quitclaim renouncing his
interest in favor of Roberto. In the quitclaim, Ciriaco stated that he was the declared owner of the
two lots.

The Spouses Po confronted Ciriaco. By way of remedy, Ciriaco and the Spouses Po executed a
Memorandum of Agreement dated June 28, 1990 in which Ciriaco agreed to pay Peter the
difference between the amount paid by the Spouses Po as consideration for the entire property
and the value of the land the Spouses Po were left with after the quitclaim. However, the
Mariano Heirs, including Ciriaco, executed separate deeds of absolute sale in favor of Roberto.
Thereafter, Roberto immediately developed the lot as part of a subdivision called North Town
Homes. On April 19, 1993, Roberto filed an application for original registration of the first lot
which was granted by the trial court. The lot was immediately subdivided with portions sold to
Ernesto and Jose.

On November 19, 1996, the Spouses Po filed a complaint to recover the land and to declare
nullity of title with damages.

ISSUE:
1. Whether or not Spouses Po’s action for reconveyance and cancellation of title has prescribed
2. Whether or not Spouses Po are barred by laches
2. Whether or not Spouses Po can recover the property on the ground that the buyers were not
innocent purchasers of value
RULING:

1. The Spouses Po's action has not prescribed.

"[A]n action for reconveyance ... prescribes in [10] years from the issuance of the Torrens title
over the property." The basis for this is Section 53, Paragraph 3 of Presidential Decree No. 1529
in relat Registration of the property is a "constructive notice to the whole world." Thus, in
registering the property, the adverse party repudiates the implied trust. Necessarily, the cause of
action accrues upon registration.

An action for reconveyance and annulment of title does not seek to question the contract which
allowed the adverse party to obtain the title to the property. What is put on Issue in an action for
reconveyance an d cancellation of title is the ownership of the property and its registration. 118 It
does not question any fraudulent contract. 119 Should that be the case, the applicable provisions
are Articles 1390 and 1391 of the Civil Code.
Thus, an action for reconveyance and cancellation of title prescribes in 10 years from the time of
the issuance of the Torrens title over the property.

Considering that the Spouses Po's complaint was filed on November 19, 1996, less than three (3)
years from the issuance of the Torrens title over the property on April 6, 1994, it is well within
the 10-year prescriptive period imposed on an action for reconveyance.

2. No.There is laches when a party was negligent or has failed "to assert a right within a
reasonable time," thus giving rise to the presumption that he or she has abandoned it. 128 Laches
has set in when it is already inequitable or unfair to allow the party to assert the right. 129 The
elements of laches were enumerated in Ignacio v. Basilio:

There is laches when: (1) the conduct of the defendant or one under whom he claims, gave rise to
the situation complained of; (2) there was delay in asserting a right after knowledge of the
defendant's conduct and after an opportunity to sue; (3) defendant had no knowledge or notice
that the complainant would assert his right; (4) there is injury or prejudice to the defendant in the
event relief is accorded to the complainant. 130 (Citation omitted)

This Court rules that the Spouses Po is not barred by laches. There is no showing that they
abandoned their right to the property. The factual findings reveal that the Spouses Po had their
rights over the property registered in the assessor's office. 140 They testified that they introduced
improvements by cultivating fruit trees after they purchased the lots.141 When the Spouses Po
discovered that Ciriaco executed a quitclaim renouncing his interest over Lot No. 2807 in favor
of Roberto, the Spouses Po executed a Memorandum of Agreement with Ciriaco to protect their
interest in Lot No. 2835.142

Based on these circumstances, the elements of laches are clearly lacking in this case. There was
no delay in asserting their right over the property, and the Spouses Aboitiz had knowledge that
the Spouses Po would assert their right.

2. An innocent purchaser for value refers to the buyer of the property who pays for its full and
fair price without or before notice of another person's right or interest in it. He or she buys the
property believing that "the [seller] [i]s the owner and could [transfer] the title to the property."

However, if a property is registered, the buyer of a parcel of land is not obliged to look beyond
the transfer certificate of title to be considered a purchaser in good faith for value.

The protection of innocent purchasers in good faith for value grounds on the social interest
embedded in the legal concept granting indefeasibility of titles.1âwphi1 Between the third party
and the owner, the latter would be more familiar with the history and status of the titled property.
Consequently, an owner would incur less costs to discover alleged invalidities relating to the
property compared to a third party. Such costs are, thus, better borne by the owner to mitigate
costs for the economy, lessen delays in transactions, and achieve a less optimal welfare level for
the entire society.223 (Citations omitted)

The only exception to the rule is when the purchaser has actual knowledge of any defect or other
circumstance that would cause "a reasonably cautious man" to inquire into the title of the
seller.224 If there is anything which arouses suspicion, the vendee is obliged to investigate beyond
the face of the title. 225 Otherwise, the vendee cannot be deemed a purchaser in good faith
entitled to protection under the law.226

In this case, there is no showing that respondents Jose, Ernesto, and Isabel had any knowledge of
the defect in the title. Considering that the annotation that the Spouses Po are invoking is found
in the tax declaration and not in the title of the property, respondents Jose, Ernesto, and Isabel
cannot be deemed purchasers in bad faith.
 KT CONSTRUCTION SUPPLY, INC., represented by WILLIAM GO, Petitioner
vs. PHILIPPINE SAVINGS BANK, Respondent

G.R. No. 228435 JUNE 21, 2017

Justice Mendoza/ Second Division

NATURE OF THE ACTION: complaint for sum of money

FACTS:

Petitioner KT Construction Supply, Inc. (KTConstruction) obtained a loan from respondent

Philippine Savings Bank (PSBank) in the amount of ₱2.5 million. The said loan was evidenced
by a Promissory Note4 executed on the same date. The said note was signed by William K.
Go (Go) and Nancy Go-Tan (Go-Tan) as Vice-President/General Manager and
Secretary/Treasurer of KT Construction, respectively. In addition, both Go and Go-Tan signed
the note in their personal capacities.

The promissory note stipulated that the loan was payable within a period of sixty (60) months. In
addition, the said note provided for the payment of attorney's fees in case of litigation.

Thereafter, PSBank sent a demand letter to KT Construction asking the latter to pay its
outstanding obligation in the amount of ₱725,438.81, excluding interest, penalties, legal fees,
and other charges. For its failure to pay despite demand, PSBank filed a complaint for sum of
money against KT Construction.

ISSUE:
1. Whether or not an acceleration clause in a promissory note is valid
2. Whether or not the creditor has the burden to prove payment in an obligation to pay a sum of
money
3. Whether or not a promissory note is invalid if it is a contract of adhesion
4. Whether or not the award of attorneys’ fees may be awarded in accordance with the agreement
in the promissory note
RULING:

1.YES. It has long been settled that an acceleration clause is valid and produces legal effects.9 In
the case at bench, the promissory note explicitly stated that default in any of the installments
shall make the entire obligation due and demandable notice even without or demand. Thus, KT
Construction was erroneous in saying that PSBank's complaint was premature on the ground that
the loan was due only on October 12, 2011. KT Construction's entire loan obligation became due
and demandable when it failed to pay an installment pursuant to the acceleration clause.

Moreover, KT Construction could not evade responsibility by claiming that it had not received
any demand letter for the payment of the loan. PSBank had sent a demand letter, 10 dated
February 3, 2011, asking KT Construction to pay the remaining obligation within five (5) days
from receipt of the letter. More importantly, even granting that KT Construction did not receive
the demand letter, the loan still became due and demandable because the parties expressly
waived the necessity of demand. 11

2.NO. KT Construction is mistaken that it could not be held liable for the entire loan obligation
because PSBank failed to prove how many installments it had failed to pay. In Bognot
v.RR!Lending Corporation, 12 the Court explained that once the indebtedness had been
established, the burden is on the debtor to prove payment, wit:

Jurisprudence tells us that one who pleads payment has the burden of proving it; the burden rests
on the defendant to prove payment, rather than on the plaintiff to prove non-payment. Indeed,
once the existence of an indebtedness is duly established by evidence, the burden of showing
with legal certainty that the obligation has been discharged by payment rests on the debtor. 13
In the case at bench, KT Construction admitted that it obtained a loan with PSBank. It,
nevertheless, averred that it had been regularly paying the loan. Thus, KT Construction could
have easily provided deposit slips and other documentary evidence to prove the fact of payment.
It, however, merely alleged that it religiously paid its obligation without presenting any the
evidence to substantiate said obligation.

3. NO. t may be true that KT Construction had no hand in its preparation. Still, it has been ruled
in a plethora of cases that a contract of adhesion is not invalid per se. 14Contracts of adhesion,
where one party imposes a ready-made form of contract on the other, are not entirely prohibited.
The one who adheres to the contract is, in reality, free to reject it entirely; if he adheres, he gives
his consent. 15

4.YES. KT Construction also claimed that attorney's fees should not be awarded for lack of
legal basis. The promissory note, however, categorically provided for the payment of attorney's
fees in case of default. The said stipulation constituted a penal clause to which the parties were
bound, it being part of the contract between the parties. 16 KT Construction was mistaken in
relying on Article 2208 of the Civil Code because the same applies only when there is no
stipulation as to the payment of attorney's fees in case of default.

EDUARDO N. RIGUER, Petitioner vs. ATTY. EDRALIN S. MATEO, Respondent

G.R. No. 222538 June 21, 2017

Justice Mendoza/ SECOND DIVISION

NATURE OF THE ACTION: Complaint for Collection of Attorney's Fees with Urgent Prayer
for Issuance of Preliminary Attachment

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.6

On January 16, 2007, 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." 7 The said document stated that Riguer agreed to pay Atty. Mateo the
following: a)₱30,000.00 as reimbursement for the latter's expenses in the civil case; b)
₱50,000.00 in case of a favorable decision in the civil case; and c) ₱250,000.00 once the land
covered by TCT No. 12112 was sold. 8

On May 21, 2009, the appeal was decided in favor of Riguer, prompting Atty. Mateo to demand
payment of the fees agreed upon in the Kasunduan. toRiguer refused pay. Riguer contends that
there is fraud because 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 ₱30,000.00
and ₱50,000.00 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 ₱250,000.00
attorney's fees was unreasonable.

ISSUE:
Whether or not the contract in this case may be nullified on the ground of fraud
RULING:

No. The Court agrees that 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. The Court, in Tankeh v.DBP, 18 wrote:

Second, the standard of proof required is clear and convincing evidence. This standard of proof
is derived from American common law. It is less than proof beyond reasonable doubt (for
criminal cases) but greater than preponderance of evidence (for civil cases). The degree of
believability is higher than that of an ordinary civil case. Civil cases only require a
preponderance of evidence to meet the required burden of proof.

However, 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 burden of evidence rests on the part of the plaintiff or the
party alleging fraud. The quantum of evidence is such that fraud must be clearly and
convincingly shown.

SANTOS-YLLANA REALTY CORPORATION, Petitioner

vs.
SPOUSES RICARDO DEANG and FLORENTINA DEANG, Respondents

G.R. No. 190043 June 21, 2017

Justice Velasco Jr./ THIRD DIVISION

NATURE OF THE ACTION: Complaint for Damages with Prayer for Injunctive Relief

FACTS:
Florentina Deang (Florentina) is the owner of Rommel Dry Goods. She is a former lessee of a
stall in Santos-Yllana Shopping Center. Due to Florentina's failure to pay her rents and other
charges due on the rented stall, petitioner, Santos-Yllana Realty Corporation filed a Complaint
for Ejectment with Damages against respondents before the MTC Angeles City. A Compromise
Agreement has been executed and a judgment has been rendered in accordance thereto.
Thereafter, petitioner filed a motion for Execution because of Florentina’s failure to pay her rents
and other charges. The MTC Court granted the motion.

Respondents moved to quash the writ but the sheriff still implemented the respondents’ stall.
Aggrieved by the implementation of the Writ of Execution, respondents filed a Complaint for
Damages with Prayer for Injunctive Relief against petitioner and Sheriffs Sicat and Pangan
before the Manila R TC, Branch 44, alleging that the Writ of Execution was illegally
implemented. They claim to have suffered damages as a result of the illegal closure of their stall
since important documents, checks, money, and bank books, among others, were locked inside
the stall and could not be retrieved, thereby preventing them from operating their business, and
causing their business to suffer and their goodwill to be tarnished. Respondents, thus, prayed that
judgment be rendered ordering petitioner to pay them ₱500,000 as actual damages, P250,000 as
moral damages, ₱250,000 as exemplary damages, and ₱l00,000 as attorney's fees, plus ₱3,000
per appearance fee per hearing.9

ISSUE: Whether or not the petitioner should be held liable for the payment of damages
RULING:

No. To hold petitioners liable for damages, despite having been categorically absolved, is
manifestly unjust and inequitable.

Applying the foregoing disquisition in the present case,We cannot sustain the judgment
affirming petitioner's liability for damages to respondents.

Moral damages are awarded to enable the injured party to obtain means, diversions, or
amusements that will serve to alleviate the moral suffering he has undergone, by reason of the
defendant's culpable action. 25 For a claim for moral damages to prosper, the claimant must prove
that: (1) first, there must be an injury, whether physical, mental or psychological, clearly
sustained by the claimant; (2) second, there must be culpable act or omission factually
established; (3) third, the wrongful act or omission of the defendant is the proximate cause of
the injury sustained by the claimant; and (4) fourth, the award of damages is predicated on any of
the cases stated in Article 2219 26 of the Civil Code. 27

As discussed, the culpable act or omission on the part of petitioner that resulted in injury to
respondents was not factually established.

The Court likewise cannot affirm petitioner's liability for exemplary damages, attorney's fees,
and cost of suit. The award of exemplary damages is proper only if respondents showed their
entitlement to moral, temperate or compensatory damages; yet, similar to the moral damages
claimed, respondents were not able to establish their entitlement. Anent the liability of
petitioners for attorney's fees and cost of suit, the same must similarly be deleted in light of the
reversal of judgment as to them.

PARADIGM DEVELOPMENT CORPORATION OF THE PHILIPPINES, Petitioner

vs.
BANK OF THE PHILIPPINE ISLANDS, Respondent

G.R. No. 191174 June 7, 2017

Justice Reyes/THIRD DIVISION

NATURE OF THE ACTION: Complaint for Annulment of Mortgage, Foreclosure, Certificate

of Sale and Damages; Petition for Review on Certiorari

FACTS:

Sometime in February 1996, Sengkon Trading obtained a loan from Far East Bank and Trust
Company (FEBTC) under a credit facility denominated as Omnibus Line in the amount of P100
Million. On April 19, 1996, FEBTC again granted Sengkon another credit facility, denominated
as Credit Line, in the amount of P60 Million as contained in the "Agreement for Credit Line."
Two real estate mortgage (REM) contracts were executed by PDCP to partially secure Sengkon's
obligations under this Credit Line.

In a letter, FEBTC informed Sengkon regarding the renewal, increase and conversion of its P100
Million Omnibus Line to P150 Million LC-TR Line and P20 Million Discounting Line, the
renewal of the P60 Million Credit Line and P8 Million Bills Purchased Line. Eventually,
Sengkon defaulted in the payment of its loan obligations. FEBTC demanded payment from
PDCP of alleged credit line and trust receipt availments with a principal balance of Php 244M
plus interest and charges. PDCP responded by requesting for segregation of Sengkon's
obligations under the Credit Line and for the pertinent statement of account and supporting
documents. Negotiations were then held and PDCP proposed to pay approximately P50 Million,
allegedly corresponding to the obligations secured by its property, for the release of its properties
but FEBTC pressed for a comprehensive repayment scheme for the entirety of Sengkon's
obligations.
FEBTC, which was later acquired by BPI , nitiated foreclosure proceedings against the two real
estate mortgage before RTC Quezon City. Upon verification with the Registry of Deeds,
PDCPdiscovered that FEBTC extra-judicially foreclosed
Said mortgages. Consequently, PDCP filed a complaint for Annulment of Mortgage,
Foreclosure, Certificate of Sale and Damage alleging that the REMs and their foreclosure were
null and void.

ISSUE:
1. Whether or not the registration of Real Estate Mortgage (REM) contrary to the intent of parties
would render the mortgage contracts invalid
2. Whether or not FEBTC’s act of registering the REMs, despite the agreement to the contrary,
constitute serious fraud so as to annul the contract.
3. Whether or not there was novation that took place replacing Sengkon as the obligor
4. Whether or not failure to give personal notice to the mortgagor, as agreed upon in the contract,
is fatal to the institution of foreclosure proceedings
5. Whether or not the execution of a dragnet clause in the REMs covering PDCP’s properties can
be made to answer for Sengkon’s obligations in other credit facilities even if the Promissory Notes
supporting the Petition for Extrajudicational Foreclosure refer to the latter.

RULING:

1. NO. To begin with, the registration of the REM contract is not essential to its validity. Article
2085 of the Civil Code provides:

Art. 2085. The following requisites are essential to the contracts of pledge and mortgage:

(1) That they be constituted to secure the fulfillment of a principal obligation;

(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or
mortgaged;

(3) That the persons constituting the pledge or mortgage have the free disposal of their
property, and in the absence thereof, that they be legally authorized for the purpose.

Third persons who are not parties to the principal obligation may secure the latter by pledging or
mortgaging their own property. In relation thereto, Article 2125 of the Civil Code reads:

Article 2125. In addition to the requisites stated in Article 2085, it is indispensable, in order that
a mortgage may be validly constituted, that the document in which it appears be recorded in the
Registry of Property. If the instrument is not recorded, the mortgage is nevertheless binding
between the parties.

2. No. The act does not constitute serious fraud. In Solidbank Corporation v. Mindanao
Ferroalloy Corporation, 39 the Court discussed the nature of fraud that would annul or avoid a
contract, thus:

Fraud refers to all kinds of deception - whether through insidious machination, manipulation,
concealment or misrepresentation- that would lead an ordinarily prudent person into error after
taking the circumstances into account. In contracts, a fraud known as dolo causante or causal
fraud is basically a deception used by one party prior to or simultaneous with the contract, in
order to secure the consent of the other. Needless to say, the deceit employed must be serious. In
contradistinction, only some particular or accident of the obligation is referred to by incidental
fraud or dolo incidente, or that which is not serious in character and without which the other
party would have entered into the contract anyway. 40 (Citations omitted)

Under Article 1344 of the Civil Code, the fraud must be serious to annul or avoid a contract and
render it voidable. This fraud or deception must be so material that had it not been present, the
defrauded party would not have entered into the contract.

In the present case, even if FEB TC represented that it will not register one of the REMs, PDCP
cannot disown the REMs it executed after FEB TC reneged on its alleged promise. As earlier
stated, with or without the registration of the REMs, as between the parties thereto, the same is
valid and PDCP is already bound thereby. The signature of PDCP's President coupled with its act
of surrendering the titles to the four properties to FEBTC is proof that no fraud existed in the
execution of the contract. Arguably at most, FEBTC's act of registering the mortgage only
amounted to dolo incidente which is not the kind of fraud that avoids a contract.

3. Novation is a mode of extinguishing an obligation by changing its objects or principal

obligations, by substituting a new debtor in place of the old one, or by subrogating a third person
to the rights of the creditor. Article 1293 of the Civil Code defines novation as "consists in
substituting a new debtor in the place of the original one, [which] may be made even without the
knowledge or against the will of the latter, but not without the consent of the creditor." However,
while the consent of the creditor need not be expressed but may be inferred from the creditor's
clear and unmistakable acts,41to change the person of the debtor, the former debtor must be
expressly released from the obligation, and the third person or new debtor must assume the
former's place in the contractual 42 relation.

Thus, in Ajax Marketing and Development Corporation v. CA, 43 the Court had already ruled
that:

The well-settled rule is that novation is never presumed. Novation will not be allowed unless it is
clearly shown by express agreement, or by acts of equal import. Thus, to effect an objective
novation it is imperative that the new obligation expressly declare that the old obligation is
thereby extinguished, or that the new obligation be on every point incompatible with the new
one. In the same vein, to effect a subjective novation by a change in the person of the debtor it is
necessary that the old debtor be released expressly from the obligation, and the third person or
new debtor assumes his place in the relation. There is no novation without such release as the
third person who has assumed the debtor's obligation becomes merely a co-debtor or
surety. 44 (Emphasis ours)

In the present case, PDCP failed to prove by preponderance of evidence that Sengkon was
already expressly released from the obligation and that STI assumed the former's obligation.
Again, as correctly pointed out by the CA, the Deed of Assumption of Line/Loan with Mortgage
(Deed of Assumption) which was supposed to embody STI's assumption of all the obligations of
Sengkon under the line, including but not necessarily limited to the repayment of all the
outstanding availments thereon, as well as all applicable interests and other charges, was not
signed by the parties.

4. indeed, FEBTC's failure to comply with its contractual obligation to send notice to PDCP of
the foreclosure sale is fatal to the validity of the foreclosure proceedings. In Metropolitan Bank
v. Wong,54 the Court ruled that while as a rule, personal notice to the mortgagor is not required,
such notice may be subject of a contractual stipulation, the breach of which is sufficient to
nullify the foreclosure sale, thus:

In resolving the first query, we resort to the fundamental principle that a contract is the law
between the parties and, that absent any showing that its provisions are wholly or in part contrary
to law, morals, good customs, public order, or public policy, it shall be enforced to the letter by
the courts.

In fact, the 2002 case of Nepomuceno Productions,64 cited by the CA, already made it clear that
while personal notice to the mortgagor in extrajudicial foreclosure proceedings is not necessary,
this holds true only if the parties did not stipulate therefor. Stated differently, personal notice is
necessary if the parties so agreed in their mortgage contract. In the present case, the parties
provided in their REMs that:

12. All correspondence relative to this mortgage, including demand letters, summonses,
subpoenas, or notifications of any judicial or extrajudicial action shall be sent to the [PDCP] at or
at the address that may hereafter be given in writing by the [PDCP] to the [FEBTC]. x x x. 65

This provision clearly establishes the agreement between the parties that personal notice is
required before FEBTC may proceed with the foreclosure of the property and thus, FEBTC's act
of proceeding with the foreclosure despite the absence of personal notice to the mortgagor was
its own lookout.

5. No. On the implied premise that what is material is only the identity of the debtor whose
obligation the mortgagor secures, the CA cited Prudential Bank v. Alviar 48 and applied the
dragnet clause in PDCP's REMs. According to the CA, since the REMs contain a dragnet clause,
then PDCP's properties can be made to answer even if the PNs supporting the Petition for
Extrajudicial Foreclosure of Mortgage refer to Sengkon's obligations in its other credit
facilities. 49

The CA unfortunately misapplied the Ruling in Prudential Bank. In that case, the Court's
discussion on the application of the blanket mortgage clause or dragnet clause was not as much
as critically important as the Court's novel application of the doctrine of reliance on security test.

A dragnet clause is a stipulation in a REM contract that extends the coverage of a mortgage to
advances or loans other than those already obtained or specified in the contract. Where there are
several advances, however, a mortgage containing a dragnet clause will not be extended to cover
future advances, unless the document evidencing the subsequent advance refers to the mortgage
as providing security therefor or unless there are clear and supportive evidence to the
contrary. 50 This is especially true in this case where the advances were not only several but were
covered by different sub-facilities.

Indeed, in some instances, it has been held that in the absence of clear, supportive evidence of a
contrary intention, a mortgage containing a "dragnet clause" will not be extended to cover future
advances unless the document evidencing the subsequent advance refers to the mortgage as
providing security therefor. 51 (Citations omitted and emphasis and underlining ours)

In the present case, PDCP's REMs indeed contain a blanket mortgage clause in the following
language:

That, for and in consideration of credit accommodations obtained from the [FEBTC], and to
secure the payment of the same and those that may hereafter be obtained, the principal of all of
which is hereby fixed at x x x PESOS x x x, Philippine Currency, as well as those that the
[FEBTC] may extend to the [PDCP], including interest and expenses or any other obligation
owing to the [FEBTC], whether direct or indirect, principal or secondary, as appears in the
accounts, books and records of the [FEBTC] x x x. 52

Nonetheless, the parties do not dispute that what the REMs secured were only Sengkon's
availments under the Credit Line and not all of Sengkon's availments under other sub-facilities
which are also secured by other collaterals.53 Since the liability of PDCP's properties was not
unqualified, the PNs, used as basis of the Petition for Extrajudicial

Foreclosure of Mortgage should sufficiently indicate that it is within the terms of PDCP's limited
liability. In this case, the PNs failed to make any reference to PDCP's availments, if any, under
its Credit Line. In fact, it did not even mention Sengkon's securities under the Credit Line.
Notably, the Disclosure Statements, which were "certified correct" by FEBTC's authorized
representative, Ma. Luisa C. Ellescas, and which accompanied the PNs, failed to disclose
whether the loan secured thereby was actually secured or not.

43 cases

DELFIN DOMINGO DADIS, Petitioner vs. SPOUSES MAGTANGGOL DE GUZMAN

and NORA Q. DE GUZMAN, and THE REGISTER OF DEEDS OF TALAVERA, NUEV
A ECIJA, Respondent

G.R. No. 206008 June 7, 2017

Justice Peralta/ SECOND DIVISION

NATURE OF THE ACTION: Complaint5 for reconveyance and damages ;

FACTS:
Delfin and his wife were the owner of a parcel of land in Guimba, Nueva Ecija. Their daughter,
Marissa ntered into a contract of real estate mortgage (REM) over the subject property in favor of
Magtanggol to secure a loan obligation of 1,210,000.00. Spouses De Guzman made it appear
that Marissa was authorized by the Spouses Dadis by virtue of a Special Power of
Attorney (SPA). he SP A was a forged document because it was never Issued by him or Corazon
as the signatures contained therein are not theirs, especially so since he was in the United States
of America (USA) at the time.
it was only three years ago, when Corazon died, that Magtanggol informed him of the
transaction, but he could not remedy the situation as he had to go back to the USA. After another
3 years, he found out the cancellation of their title and the issuance of a new one, in favor of the
Spouses De Guzman; after his verification, he immediately caused the filing of an Affidavit of
Adverse Claim, which was annotated at the back of the title. He argues that neither he nor his
family benefited from the loan secured by the mortgage and that no demand letter, as well as
notices of the foreclosure proceedings and the consolidation of title, were sent to him. Delfin
filed a Complaint for reconveyance and damages against respondents Spouses De Guzman.

ISSUE:
Whether or not Magtanggol is a mortgagor in good faith

RULING:

NO.

The doctrine of mortgagee in good faith presupposes that the mortgagor, who is not the rightful
owner of the property, has already succeeded in obtaining a Torrens title over the property in his
or her name and that, after obtaining the said title, he or she succeeds in mortgaging the property
to another who relies on what appears on the said title.20 In this case, Marissa is undoubtedly not
the registered owner of the subject lot; and the certificate of title was in the name of her parents
at the time of the mortgage transaction. She merely acted as the attorney-in-fact of Corazon and
Delfin by virtue of the falsified SPA. The protection accorded by law to mortgagees in good faith
cannot be extended to mortgagees of properties that are not yet registered with the RD or
registered but not under the mortgagor's name.21

When the mortgagee does not directly deal with the registered owner of the real property, like an
attorney-in-fact of the owner, it is incumbent upon the mortgagee to exercise greater care and a
higher degree of prudence in dealing with such mortgagor.

Here, Magtanggol maintained that he did not bother to inquire from Corazon and Marissa the
whereabouts of Delfin because, at the time the mortgage transaction was held, the SPA presented
was well-prepared, duly signed, and notarized and that it was them who actually handed it
together with their companions, Imelda Reyes and Roger Sumawang, and that Corazon did not
tell him the whereabouts of her husband, who, unknown to him, was in the USA at the time. 25

SPOUSES MAXIMO ESPINOZA and WINIFREDA DE VERA, Petitioners vs. SPOUSES

ANTONIO MAYANDOC and ERLINDA CAYABYAB MAYANDOC, Respondents

G.R. No. 211170 July 3, 2017

Justice Peralta/ SECOND DIVISION

NATURE OF THE ACTION: complaint for reimbursement for useful expenses; Petition for
Review on Certiorari

FACTS:

A parcel of land located in Dagupan City was originally owned by Eusebio Espinoza. After the
death of Eusebio, the said parcel of land was divided among his heirs, namely: Pastora Espinoza,
Domingo Espinoza and Pablo Espinoza. Petitioner Maximo is the son of Domingo Espinoza and
his wife, Agapita who died in 1965, and 1963, respectively. Thereafter, in 1972, Pastora
Espinoza executed a Deed of Sale conveying her share of the same property to respondents and
Leopoldo Espinoza. However, on that same date, a fictitious deed of sale was executed by
petitioner Maximo's father, Domingo Espinoza, conveying the three-fourth (3/4) share in the
estate in favor of respondent Erlinda Cayabyab Mayandoc's parents. A new title was Issued in
favor of them. Five years after, another fictitious deed of sale was executed Nemesio Cayabyab,
Candida Cruz, petitioners-spouses Maximo Espinoza and Winifreda De Vera and Leopoldo
Espinoza over the land in favor of respondents- spouses Mayandoc.

Respondents filed a complaint for reimbursement for useful expenses, pursuant to Articles 448
and 546 of the New Civil Code, alleging that the house in question was built on the disputed land
in good faith sometime in 1995 and was finished in 1996. They further asserted that at the time
that their house was constructed, they were possessors in good faith, having lived over the land
in question for many years and that petitioners questioned their ownership and possession only in
1997 when a complaint for nullity of documents was filed by the latter. Petitioners, in their
Answer, argued that respondents can never be considered as builders in good faith because the
latter were aware that the deeds of sale over the land in question were fictitious and, therefore,
null and void; thus, as builders in bad faith, they lose whatever has been built over the land
without right to indemnity.

Respondents, manifested their option to buy the land where the house stood, but petitioners
expressed that they were not interested to sell the land or to buy the house in question.

RTC rendered a decision requiring the petitioners to sell the land. When the latter appeals to the
CA, it affirmed the RTC’s decision with modifications. CA remands the case to the RTC for
further proceedings consistent with the proper application of Articles 448, 546 and 548 of the
New Civil Code and to render a complete judgment of the case.

ISSUE:
1. Whether or not the respondents are builders in good faith
2. Whether or not the Court of Appeals did not err in ruling that instead of requiring the petitioners
to sell the land, the R TC must determine the option which the petitioners would choose

RULING:

1. Yes. Respondents are builders in good faith.

To be deemed a builder in good faith, it is essential that a person asserts title to the land on
which he builds, i.e., that he be a possessor in the concept of owner, and that he be unaware that
there exists in his title or mode of acquisition any flaw which invalidates it.10 The RTC, as
affirmed by the CA, found respondents to be builders in good faith, thus:

The plaintiffs are builders in good faith. As asserted by plaintiffs and not rebutted by defendants,
the house of plaintiffs was built on the lot owned by defendants in 1995. The complaint for
nullity of documents and reconveyance was filed in 1997, about two years after the subject
conjugal house was constructed. Defendants-spouses believed that at the time when they
constructed their house on the lot of defendants, they have a claim of title. Art. 526, New Civil
Code, states that a possessor in good faith is one who has no knowledge of any flaw or defect in
his title or mode of acquisition. This determines whether the builder acted in good faith or not.
Surely, plaintiffs would not have constructed the subject house which plaintiffs claim to have
cost them ₱800,000.00 to build if they knew that there is a flaw in their claim of title.
Nonetheless, Art. 527, New Civil Code, states clearly that good faith is always presumed, and
upon him who alleges bad faith on the part of the possessor lies the burden of proof. The records
do not show that the burden of proof was successfully discharged by the defendants.

The settled rule is bad faith should be established by clear and convincing evidence since the law
always presumes good faith.12 In this particular case, petitioners were not able to prove that
respondents were in bad faith in constructing the house on the subject land. Bad faith does not
simply connote bad judgment or negligence.13 It imports a dishonest purpose or some moral
obliquity and conscious doing of a wrong.14 It means breach of a known duty through some
motive, interest or ill will that partakes of the nature of fraud.15 For anyone who claims that
someone is in bad faith, the former has the duty to prove such. Hence, petitioners err in their
argument that respondents failed to prove that they are builders in good faith in spite of the
findings of the RTC and the CA that they are.

2. Yes. The CA, therefore, did not err in its Ruling that instead of requiring the petitioners to sell
the land, the R TC must determine the option which the petitioners would choose.1âwphi1 As
aptly ruled by the CA:

The rule that the right of choice belongs to the owner of the land is in accordance with the
principle of accession. However, even if this right of choice is exclusive to the land owner, he
cannot refuse to exercise either option and demand, instead for the removal of the building.

Instead of requiring defendants-appellants to sell the land, the court a quo must determine the
option which they would choose. The first option to appropriate the building upon payment of
indemnity or the second option, to sell the land to the plaintiffs-appellees. Moreover, the court a
quo should also ascertain: (a) under the first option, the amount of indemnification for the
building; or (b) under the second option, the value of the subject property vis-a-vis that of the
building, and depending thereon, the price of, or the reasonable rent for, the subject prope1iy.

Hence, following the Ruling in the recent case of Briones v. Macabagdal, this case must be
remanded to the court a quo for the conduct of further proceedings to assess the current fair
market of the land and to determine other matters necessary for the proper application of Article
448, in relation to Articles 546 and 548 of the New Civil Code.23

Therefore, this Court agrees with the CA that there is a need to remand the case to the RTC for
further proceedings, specifically, in assessing the current fair market value of the subject land
and other matters that are appropriate in the application of Article 448, in relation to Articles 546
and 548 of the New Civil Code.

LUIS JUAN L. VIRATA and UEMMARA PHILIPPINES CORPORATION (now known

as CAVITEXINFRASTRUCTURE CORPORATION), Petitioners
vs.
ALEJANDRO NG WEE, WESTMONT INVESTMENT CORP., ANTHONY T. REYES,
SIMEON CUA, VICENTE CUALOPING, HENRY CUALOPING, MARIZA
SANTOSTAN, and MANUEL ESTRELLA, Respondents
 G.R. No. 220926 July 5, 2017

Justice Velasco/ THIRD DIVISION

NATURE OF THE ACTION: Complaint for Sum of Money with Damages with prayer for the
issuance of a Writ of Preliminary Attachment

FACTS:
Ng Wee was was enticed by the bank manager to make money placements with a domestic
corporation organized and licensed to operate as an investment house, Wincorp .Offered to him
were "sans recourse" transactions wherein Wincorp shall extend a credit facility on "best effort"
basis and that every drawdown by the accredited borrower shall be evidenced by a promissory
note executed in favor of Wincorp and/or the investor/s. Wincorp then scouts for investors
willing to provide the funds needed by the accredited borrower. The investor is matched with the
accredited borrower. An investor who provides the fund is Issued a Confirmation Advice which
indicates the amount of his investment, the due date, the term, the yield, the maturity and the
name of the borrower.

Lured by representations that the "sans recourse" transactions are safe, stable, high-yielding, and
involve little to no risk, Ng Wee, sometime in 1998, placed investments thereon. Ng Wee's initial
investments were matched with Hottick Holdings Corporation (Hottick), one of Wincorp's
accredited borrowers. Hottick was extended a credit facility in consideration of the following
securities it Issued in favor of Wincorp. One of this is a suretyship agreement executed by
petition Luis Juan Virata. However, Hottick defaulted in paying its outstanding obligations so
Wincorp filed a collection suit.

Alarmed by the news of Hottick's default and financial distress, Ng Wee confronted Wincorp and
inquired about the status of his investments. Wincorp assured him that the losses from the
Hottick account will be absorbed by the company and that his investments would be transferred
instead to a new borrower account – Power Merge Corporation owned by Virata. The latter was
also extended credit facility in the maximum amount of Php 1.3. Billion. Following protocol,
Power Merge Issued Promissory Notes in favor of Wincorp,

Unknown to Ng Wee, however, was that on the very same dates the Credit Line Agreement and
its subsequent Amendment were entered into by Wincorp and Power Merge, additional contracts
(Side Agreements) were likewise executed by the two corporations absolving Power Merge of
liability as regards the Promissory Notes it Issued. Another Side Agreement was executed
containing identical provisions save the amount. By virtue of these contracts, Wincorp was able
to assign its rights to the uncollected Hottick obligations and hold Power Merge papers
instead.3 However, this also meant that if Power Merge subsequently defaults in the payment of
its obligations, it would refuse, as it did in fact refuse, payment to its investors.

Despite repeated demands, Ng Wee was not able to collect Power Merge's outstanding obligation
under the Confirmation Advices in the amount of ₱213,290,410.36. This prompted Ng Wee, on
October 19, 2000, to institute a Complaint for Sum of Money with Damages. In his Complaint,
Ng Wee claimed that he fell prey to the intricate scheme of fraud and deceit that was hatched by
Wincorp and Power Merge. As he later discovered, Power Merge's default was inevitable from
the very start since it only had subscribed capital in the amount of ₱37,500,000.00, of which only
₱9,375,000.00 is actually paid up. He then attributed gross negligence, if not fraud and bad faith,
on the part of Wincorp and its directors for approving Power Merge's credit line application and
its subsequent increase to the amount of ₱2,500,000,000.00 despite its glaring inability to pay.

ISSUE:
1. Whether or not Wincorp is liable for committing actionable fraud
2. Whether or not Wincorp is also liable to Ng Wee for breach of warranty
3. Whether or not Wincorp should also be held liable for fraud even as an agent
4. Whether or not the Side Agreements executed by Virata and Power Merge bind third persons
such as Ng Wee

RULING:
1. Yes. Under Article 1170 of the New Civil Code, those who in the performance of their
obligations are guilty of fraud are liable for damages. The fraud referred to in this Article is the
deliberate and intentional evasion of the normal fulfillment of obligation.97 Clearly, this
provision is applicable in the case at bar. It is beyond quibble that Wincorp foisted insidious
machinations upon Ng Wee in order to inveigle the latter into investing a significant amount of
his wealth into a mere empty shell of a corporation. And instead of guarding the investments of
its clients, Wincorp executed Side Agreements that virtually exonerated Power Merge of liability
to them; Side Agreements that the investors could not have been aware of, let alone authorize.

The summation of Wincorp's actuations establishes the presence of actionable fraud, for which
the company can be held liable. In Jason vs. People, the Court upheld the Ruling that where one
states that the future profits or income of an enterprise shall be a certain sum, but he actually
knows that there will be none, or that they will be substantially less than he represents, the
statements constitute an actionable fraud where the hearer believes him and relies on the
statement to his injury.98

Just as in Jason, it is abundantly clear in the present case that the profits which Wincorp
promised to the investors would not be realized by virtue of the Side Agreements. The investors
were kept in the dark as regards the existence of these documents, and were instead presented
with Confirmation Advices from Wincorp to give the transactions a semblance of legitimacy,
and to convince, if not deceive, the investors to roll over their investments or to part with their
money some more.

2. Yes. Aside from its liability arising from its fraudulent transactions, Wincorp is also liable to
Ng Wee for breach of warranty. It cannot be emphasized enough that Wincorp is not the mere
agent that it claims to be; its operations ought not be reduced to the mere matching of investors
with corporate borrowers. Instead, it must be borne in mind that it not only performed the
functions of a financial intermediary duly registered and licensed to perform the powers of an
investment house, it is also engaged in the selling of securities, albeit in violation of various
commercial laws. And just as in any other contracts of sale, the vendor of securities is likewise
bound by certain warranties, including those contained in Article 1628 of the New Civil Code on
assignment of credits, to wit:

Article 1628. The vendor in good faith shall be responsible for the existence and legality of the
credit at the time of the sale, unless it should have been sold as doubtful; but not for the solvency
of the debtor, unless it has been so expressly stipulated or unless the insolvency was prior to the
sale and of common knowledge.

xxxx

The vendor in bad faith shall always be answerable for the payment of all expenses, and for
damages. (emphasis added)

That the securities sold to Ng Wee turned out to be "with recourse," not "sans recourse" as
advertised, does not remove it from the coverage of the above article. In fact, such circumstance
would even classify Wincorp as a vendor in bad faith, within the contemplation of the last
paragraph of the provision. But other than the fraudulent designation of the transaction as "sans
recourse," Wincorp's bad faith was also brought to the fore by the execution of the Side
Agreements, which cast serious suspicion over, if it did not effectively annul, the existence and
legality of the credits assigned to Ng Wee under the numerous Confirmation Advices in the
name of his trustees.

3. Yes. Through the contract of agency, a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the
latter.119 As the basis of agency is representation, there must be, on the part of the principal, an
actual intention to appoint, an intention naturally inferable from the principal's words or actions.
In the same manner, there must be an intention on the part of the agent to accept the appointment
and act upon it. Absent such mutual intent, there is generally no agency.120
There is no dearth of statutory provisions in the New Civil Code that aim to preserve the
fiduciary character of the relationship between principal and agent. Of the established rules under
the code, one cannot be more basic than the obligation of the agent to carry out the purpose of
the agency within the bounds of his authority.121 Though he may perform acts in a manner more
advantageous to the principal than that specified by him,122 in no case shall the agent carry out
the agency if its execution would manifestly result or damage to the principal.123

In the instant case, the SPAs executed by Ng Wee constituted Wincorp as agent relative to the
borrowings of Power Merge, allegedly without risk of liability on the part of Wincorp. However,
the SPAs, as couched, do not specifically include a provision empowering Wincorp to excuse
Power Merge from repaying the amounts it had drawn from its credit line via the Side
Agreements. They merely authorize Wincorp "to agree, deliver, sign, execute loan documents"
relative to the borrowing of a corporate borrower. Otherwise stated, Wincorp had no authority to
absolve Power Merge from the latter's indebtedness to its lenders. Doing so therefore violated the
express terms of the SPAs that limited Wincorp's authority to contracting the loan.

Finally, the benefit from the Side Agreements, if any, redounded instead to the agent itself,
Wincorp, which was able to hold Power Merge papers that are more valuable than the
outstanding Hottick obligations that it exchanged. In discharging its duties as an alleged agent,
Wincorp then elected to put primacy over its own interest than that of its principal, in clear
contravention of the law.125 And when Wincorp thereafter concealed from the investors the
existence of the Side Agreements, the company became liable for fraud even as an agent.126

4. No. Virata and Power Merge cannot invoke the Side Agreements as bases for its alleged
exemption from liability to Ng Wee, simply because the latter was not privy to the covenants. Ng
Wee cannot be charged with knowing the existence of the Side Agreements, let alone ratify the
same.

The basic principle of relativity of contracts is that, as a general rule, contracts take effect only
between the parties, their assigns and heirs.133 The sound reason for the exclusion of non-parties
to an agreement is the absence of a vinculum or juridical tie which is the efficient cause for the
establishment of an obligation.134

Needless to state, Ng Wee does not fall under any of the classes that are deemed privy as far as
the Side Agreements are concerned. At most, he only authorized Wincorp, through the SPAs,
to "agree, deliver, sign, [and} execute loan documents" relative to the borrowing of Power
Merge. This authority does not extend to excusing Power Merge from paying its obligations
under the Promissory Notes that it Issued for the benefit of the investors. Thus, even if we were
to assume that the execution of the Side Agreements was with the imprimatur of the Wincorp
board of directors, Power Merge would still have been able to determine, based on a cursory
reading of the SPAs, that Wincorp's acquiescence to the Side Agreements is an ultra vires act
insofar as its principals, Ng Wee included, are concerned.

JOSE S. OCAMPO, Petitioner vs. RICARDO S. OCAMPO, SR., Respondent

G.R. No. 227894 July 5, 2017

Justice Velasco/Third Division

NATURE OF THE ACTION:Complaint for partition and annulment of TCT

FACTS:
Petitioner Jose and respondent Ricardo are co-owners of the subject property. The property
consists of a 150-square meter lot and the improvements located at Sampaloc, Manila.
Respondent claimed that petitioner and his wife, Andrea Mejia Ocampo, conspired in falsifying
his signature on a notarized Extra-Judicial Settlement with Waiver. In his Complaint for partition
and annulment of TCT, respondent claimed that petitioner and his wife, Andrea Mejia Ocampo,
conspired in falsifying his signature on a notarized Extra-Judicial Settlement with Waiver.
Thereafter, petitioner and his wife moved for the dismissal of the complaint, but it was denied by
the trial court. Thereafter, they filed their Answer with Motion for Preliminary Hearing on the
Affirmative Defense of prescription. Petitioner argued that their title became indefeasible one
year after its issuance on November 24, 1971, and that the action to annul the TCT had
prescribed since it was filed only on June 29, 1992, or 21 years and 7 months from the issuance
of the title. He further claimed that the action to annul the ESW is a collateral attack on the title,
and the rule on non-prescription against a co-owner does not apply since he and his wife had
become exclusive owners of the Subject Property.

ISSUE:
Whether or not the action for annulment of title and partition has already prescribed

RULING:

NO. Since the respondent was in actual possession of the disputed land at the time of the filing of
the complaint, the present case may be treated as an action for quieting of title.

In the recent case of Pontigon v. Sanchez, We explained thus:

Under the Torrens System as enshrined in P.D. No. 1529, the decree of registration and the
certificate of title Issued become incontrovertible upon the expiration of one (1) year from the
date of entry of the decree of registration, without prejudice to an action for damages against the
applicant or any person responsible for the fraud. However, actions for reconveyance based on
implied trusts may be allowed beyond the one-year period.

Given the falsity of the ESW, it becomes apparent that petitioner obtained the registration
through fraud. This wrongful registration gives occasion to the creation of an implied or
constructive trust under Article 1456 of the New Civil Code.29 An action for reconveyance based
on an implied trust generally prescribes in ten years. However, if the plaintiff remains in
possession of the property, the prescriptive period to recover title of possession does not run
against him. In such case, his action is deemed in the nature of a quieting of title, an action that is
imprescriptible.30

In the case before us, the certificate of title over the subject property was Issued on November
24, 1970. Yet, the complaint for partition and annulment of the title was only filed on July 1,
1992, more than twenty (20) years since the assailed title was Issued. Respondent's complaint
before the RTC would have been barred by prescription. However, based on respondent's
submission before the trial court, both petitioner and respondent were residing at the subject
property at the time the complaint was filed.

Considering that respondent was in actual possession of the disputed land at the time of the
filing of the complaint, the present case may be treated as an action for quieting of title.