OBLIGATIONS AND CONTRACTS

CASES
























Submitted to:
Atty. Maria Lulu G. Reyes






































Leung Ben vs O`Brien, 38P182, 6 April 1918

Facts: Respondent O`Brien lost a certain sum to petitioner Leung Ben in a series oI gambling,
banking, and percentage games which prompted the Iormer to Iile an action against the latter Ior
the recovery oI said sum. Respondent prayed Ior an attachment which was granted.

Issue: Whether or not petitioner in instant case has the obligation to return any money won in
gambling to the loser.

Ruling: The court held that the obligation to return the money is one under a statue. Thereby, an
obligation ex lege. This statute reIerred to is Act No. 1757 oI the Philippine Commission, which
Iines and penalizes several Iorms oI gambling, containing several provisions acknowledging the
right oI the loser to recover money lost in said gambling or in the playing oI certain games.
Petition denied.
Pelayo vs Lauron, 12P453, 12 January 1909

Facts: Petitioner is a physician seeking Ior the payment oI his services rendered in the giving oI
birth oI the daughter-in-law oI the respondents who called him Ior said services.

Issue: Whether or not respondents have the obligation to pay petitioner Ior his services because
they were the ones who called him Ior said services.

Ruling: The obligation to give support to one`s spouse is one provided Ior by law. The petitioner
who believes he has the right to recover his Iees must direct the action not to the respondents but
to the husband who is bound to give support which includes among others medical assistance to
his spouse as provided Ior by law.
Petition denied.
otel Nikko vs Reyes, 452SCRA532, 28 February 2005

Facts: Respondent was asked allegedly in a rude manner to leave a birthday party in which he
was not invited. Thus, respondent, Roberto Reyes a.k.a. Amay Bisaya, Iiled a suit against the
hotel and its manager, Ruby Lim.

Issue: Whether or not respondent may be awarded damages.

Ruling: The doctrine oI volenti non Iit injuria means a selI-inIlicted injury. The court held that
what respondent might have suIIered is due to his own Iault Ior being a gate-crasher. In said
doctrine, a person cannot recover any damages Ior his own Iault. Damages may only be
recovered when in the exercise oI one`s right there was injustice or bad Iaith. Ruby Lim has the
right to ask any gate-crasher to leave the party because it has always been the wish oI the
celebrant that only Iamily and close Iriends in the guest list should be around. Only when Lim
abuse such right can Reyes claim damages under Article 19 and 21 oI the Civil Code and which
abuse was not proven.
Petition granted.
St. Mary`s Academy vs Carpitanos, GR No. 143363, 6 February 2002

Facts: Respondent-Spouses Carpitanos are claiming damages Ior the death oI their son, Sherwin,
caused by an incident when the latter was with other students oI Petitioner-School on their way
to an activity sponsored by said school. The activity`s purpose is to campaign Ior the school and
to solicit enrollees. Part oI said activity is to go to diIIerent schools and being a student oI said
school, Sherwin was a member oI the campaigning group. On one oI their trips, the jeep, driven
by James Daniel II then 15 years old and a student oI the same school and owned by Vivencio
Villanueva, the other respondents, had a malIunction that caused the incident.

Issue: Whether or not petitioner is liable Ior the death oI respondent`s son.

Ruling: The court held that, Ior the petitioner to be held liable, there must be a Iinding that the
act or omission considered as negligent was the proximate cause oI the injury caused because the
negligence must have a causal connection to the accident. In the instant case, respondents Iailed
to show that the negligence oI the petitioner is the proximate cause oI the injury sustain but the
malIunction oI the jeep. The negligence oI petitioner is a remote cause and between said remote
cause and injury there intervened the negligence oI the minor driver`s parents or the malIunction.
ence, the reliance oI the respondents on Article 219 oI the Civil Code that 'those given the
authority and responsibility under the preceding Article shall be principally and solidarily liable
Ior damages caused by acts or omissions oI the unemancipated minor was unIounded.
Decision oI appellate court reversed and set aside.
Ramas vs Quiamco, GR No. 146322, 6 December 2006

Facts: Respondent Iiled an action Ior damages against petitioner Ior unlawIully taking a
motorcycle, utterance oI deIamatory remark, and precipitate Iiling oI a baseless and malicious
complaint. These acts allegedly humiliated and embarrassed respondent and injured his
reputation and integrity.

Issue: Whether or not petitioner may be held liable Ior the acts allegedly committed by the same.

Ruling: Article 19 oI the Civil Code provides that, every person must in the exercise oI his
rights and in the perIormance oI his duties, act with justice, give everyone his due, and observe
honesty and good Iaith. II such right was abused, the person opens himselI to liability. The
exercise oI rights must be in accordance to its purpose Ior which it was established and must not
be excessive or unduly harsh, without intention to harm another. Otherwise, there will be liability
Ior any injuries sustained by the oIIended party. In the instant case, petitioner may have the right
to recover said motorcycle but that right was exercised with bad Iaith and even contrary to the
procedure laid down by law.
Petition denied.



























Regino vs Pangasinan College, 443SCRA56, 18 November 2004

Facts: Petitioner Regino was not allowed to take her Iinal exams on several subjects making her
Iail the same since she was not able to buy tickets Ior a dance party sold by the school allegedly
Ior school improvements. It was said that iI students would buy tickets they will receive extra
points on their subjects. Since petitioner`s only means oI going to school is through relatives she
was not able to buy tickets and because her religion would not allow her to go out late at night.
On said examination day, she was asked by the teacher to leave the room and not take the exams
that resulted to the Iiling oI the case at bar.

Issue: Whether or not petitioner may recover damages Ior injuries sustained.

Ruling: The court held that a student and a school have a contract Irom the time oI enrollment.
There being a contract, whatever is done against the same is a breach oI the same. From the time
oI institution oI contract, the selling oI the tickets was not stipulated thereIore, the other party is
not obliged to comply because it was agreed upon. ence, respondent is liable Ior said breach oI
contract being a source oI obligation as provided Ior by the law.
Petition granted.
PSBA vs CA, 205SCRA729, 4 February 1992

Facts: Carlitos Bautista, a third year commerce student oI petitioner PSBA, died due to a
stabbing incident whose assailants were not students oI petitioner which prompted the parents oI
the deceased to Iile suit against the Iormer.

Issue: Whether or not petitioner may be held liable Ior Bautista`s death.

Ruling: The court held that when schools accept students Ior enrollment, there is already a
contract thus, there is a bilateral obligation. There may be obligation arising Irom quasi-delict but
it does not really govern because there exist a contractual relationship between PSBA and
Bautista. Also, there may be an obligation Irom tort even iI there is a contract because the act
that breaks the contract may be a tort. Contractual relation is a condition sine qua non to the
school`s liability.
Petition denied.
Cosmo Entertainment vs La Ville, 437SCRA145, 20 August 2004

Facts: Respondent is the registered owner oI a parcel oI land with the commercial building
situated thereon. In 1993, it entered into a Contract oI Lease with petitioner Ior seven (7) years
with a monthly rental oI PhP250/ sq. m. with deposit oI PhP447, 000. Upon execution, petitioner
took over the property. owever, due to business reverses in 1996, petitioner deIaulted in rental
payments. The Iollowing year, respondent made a demand Ior the payment oI the due rentals.
Failing to give payment, respondent Iiled suit Ior illegal detainer. Petitioner contends that it
could have been able to pay its rentals had respondent only consented to the sublease oI
petitioners to other possible tenants. The sublease however, could not be pursued unless
respondents consent.

Issue: Whether or not contention oI petitioner is meritorious.

Ruling: The contract entered into allows petitioner to sublease the property with prior approval
oI respondent. The non-approval oI respondent to a sublease to possible tenants is a valid
exercise oI its rights because it was stipulated in the contract which both parties have given its
consent. Contracts have a Iorce and eIIect oI law between the parties provided that the
stipulations are not contrary to law, public morals and/or customs.
Petition denied.
Ayala Corp vs Rosa Diana Realty, 346SCRA663, 1 December 2004

Facts: Petitioner is the registered owner oI a parcel oI land. Ayala sold the lot to Manuel Sy and
Sy Ka Kieng with special conditions. Failing to abide on the conditions, buyers sold the parcel oI
land to respondent with the approval oI petitioner with the special conditions attached.
Respondent then passed to petitioner the building plan and was approved by the latter. owever,
a diIIerent plan was submitted to the city engineer. Upon knowing such deviation, petitioner Iiled
an action Ior speciIic perIormance and in the alternative Ior rescission oI contract. Respondent
contends that petitioner Iailed to establish its right to the relieI sought in as much as: a) Ayala
does not enIorce Deed oI Restrictions (DoR) uniIormly and strictly, b) Ayala lost its right due to
own acts and omission, and c) DoR is no longer valid and eIIective against lot buyers due to
waiver or estoppel.

Issue: Whether or not petitioner has a cause oI action against respondent.

Ruling: Contractual obligation has Iorce and eIIect oI law between the parties. In as much as the
parties are concerned, the contract entered into is binding between them since they consented on
the same. Since the building had already been constructed and can no longer be undone
according to conditions reiterated on the contract, damages may only be the proper remedy.
Petition granted.
Bricktown Development vs Amor Tierra Dev`t, 239SCRA126, 12 December 1994

Facts: In 1981, Petitioner executed two (2) Contracts to Sell in Iavor oI respondents Ior a certain
sum. owever, respondent was only able to pay PhP 1,334,443.21 out oI total amount oI PhP
21,639,875.00. On October 1981, a notice Ior the cancellation oI the contract was given to
respondent. And in 1983, reIund oI payment already tendered was demanded but petitioner Iailed
to give. Thus, respondent instituted an action Ior reIund.

Issue: Whether or not contracts to sell were validly cancelled by petitioner-corporation and
whether amounts already paid by respondent were rightly IorIeited by petitioner-corporation.

Ruling: In the contract entered into by the parties, a 60-day grace period was stipulated in case oI
Iailure to pay amount agreed upon. AIter the lapse oI a grace period and still there is still Iailure,
petitioner shall have the right to cancel said contract which shall take eIIect aIter 30 days Irom
receipt oI the notice oI cancellation, any payments made shall be IorIeited in Iavor oI the owner.
owever, interim events aIter lapse oI grace period, such as that oI negotiation on how to settle
the obligation, dictate that respondent is not in bad Iaith.
ReIund granted.
Pilipinas ino vs CA, 338SCRA355, 18 August 2000

Facts: PlaintiII Iiled a case Ior sum oI money and damages against respondent. PlaintiII is a
corporation which entered into a contract oI lease with private respondents. Upon execution oI
contract, plaintiII deposited PhP 400,000.00 to insure any damages on the premises aIter the end
oI the contract. AIter the term oI the contract, the parties allegedly agreed that damages on the
premises amounted to PhP 60,000.00, thus, respondents are obliged to return PhP 340,000.00 but
was only able to return PhP 200,000.00. The second cause oI action is the reIund oI payment
tendered on the subsequent contract to sell entered into by the parties aIter the end oI the term oI
the contract to lease on which the plaintiII had deIaulted on the payment oI the installments on
the latter contract.

Issue: Whether or not petitioner has cause oI action against private respondent.

Ruling: As to the Iirst cause oI action, indeed, there was an agreement as to how the deposit may
be applied, but the alleged cost oI damage to the property was not supported by clear and
convincing evidence and that aIter the private respondent hired another to assess the damage to
the property, the cost is more than PhP 60,000.00. And that there was an overpayment since
private respondent gave plaintiII PhP 200,000.00. As to the second cause oI action, the parties
agreed that in case oI Iailure to pay Iirst six (6) installments, the seller has the right to cancel the
contract with the obligation to return to the buyer any amount paid.
Petition partly granted.




































PADCOM vs Ortigas, 382SCRA223, 9 May 2002

Facts: PlaintiII owns and manages the Padilla OIIice Condominium Building originally owned
by Ortigas & Co., Ltd., by Tierra Development Corporation (TDC). The terms oI the sale is that
the transIeree and its successors-in-interest must become members oI an association Ior realty
owners and long-term lessees in the area later known as the Ortigas Center. Respondent was then
organized to advance the interests and promote the general welIare oI the real estate owners and
long-term lessees oI lots in the Ortigas Center. Dues had to be paid Ior members and plaintiII
owed the association PhP 639,961.47 as membership dues and penalties Irom April 1983 to June
1993. ence, a suit was Iiled praying Ior payment oI the same.

Issue: Whether or not plaintiII has obligation to tender payment to respondent.

Ruling: The contract to sell the property to plaintiII stipulates that the Iormer must be a member
oI an association as evident in the annotation at the back oI the title oI the property. Its obligation
to pay membership Iee is a condition otherwise, it will enrich itselI at the expense oI the
association because the latter had been providing services Ior the general welIare oI its members
including the plaintiII.
Petition denied.
MC Engineering vs CA, 380SCRA116, 3 April 2002

Facts: MC Engineering, Inc. and Surigao Coconut Development Corporation (SUCODECO)
signed a contract Ior restoration oI the latter`s restoration oI building, land improvement,
electrical, and mechanical equipment destroyed by a typhoon. MC Engineering subcontracted
with Gerent Builders, Inc. Ior the building and land improvement phase oI the Iirst contract.
AIter Iull payment oI the price oI such subcontract, Gerent is claiming its share in the adjustment
oI the prices agreed upon between MC Engineering and SUCODECO. MC Engineering reIuses
to pay. Gerent then Iiled a case against MC Engineering.

Issue: Whether or not Gerent is entitled to such adjustment.

Ruling: The Court held that the contract entered into between MC Engineering and SUCODECO
is entirely diIIerent Irom that oI Gerent. The latter being a subcontract with MC Engineering. To
hold them entitled to adjustments oI prices due to the agreement between MC Engineering and
SUCODECO would make Gerent enrich itselI at the expense oI another, not being a party to the
contract between MC Engineering and SUCODECO.
BPI vs Pineda, 156SCRA404, 14 December 1987

Facts: Southern Industrial Project, Inc. (SIP) is a corporation the majority stockholder oI which is
the Concon Family. Bacong Shipping Company, S.A. is a Panamanian corporation organized to
operate vessels purchased by the SIP under Panamanian Flag and its president is Gregorio A.
Concon. SIP and/or Bacong purchased vessels thru Iinancing by Peoples Bank and Trust Co.
(PBTC) now Bank oI the Philippine Islands (BPI). To secure payments, these vessels were
mortgaged to PBTC. For operations, vessels were placed under the booking agency oI deIendant
Inter Ocean Shipping Corp. and that Ireight revenues be deposited to PBTC and disbursements
be covered by vouchers bearing approval oI SIP. Diversions were made to manage the operations
oI the vessels. A management contract was entered into with SA Gacet Inc. which stipulates that:
Gacet may not borrow money Ior the husbandring oI vessels without authority Irom the bank, all
oIIice records be open Ior inspection, bank may obtain copies oI documents Irom any/all oI
Gacet`s booking agents on transactions, bank has right to inquire on inIormation on cargo, and
bank has right to check on remittances made by shipper to the booking agent. The bank will also
be the depository oI all revenues and may control expenses since they will all be withdrawn
against said deposit. Gacet and Inter Ocean contracted the services oI Pineda Ior the repair,
Iabrication and installation oI said vessels. The balance oI amount was paid through checks
which the bank dishonored. ence, an action was Iiled Ior recovery oI the balance. A Ioreclosure
was instituted due to Iailure to pay mortgage. A deed was then instituted transIerring all assets
and liabilities oI SPI to bank including that oI Pineda.

Issue: Whether or not Pineda may recover balance Irom bank.

Ruling: In the interpretation oI contract, the intention oI the contracting parties should always
prevail because their will has the Iorce oI law between them. In the contracting oI services oI
Pineda, the bank approved the same. The repair redounded to the beneIit oI the new owner
without which vessels would not be seaworthy. A party cannot unjustly enrich himselI at the
expense oI the other, a source oI obligation, that is provided Ior by law.
Petition denied.
State Investment vs CA, 198SCRA390, 19 June 1991

Facts: In 1982, Respondent-Spouses pledged certain shares oI stock to petitioner to secure a loan.
BeIore the pledge, the respondent along with the spouses Jose and Marcelina Aquino signed an
agreement with petitioner Ior the latter`s purchase oI receivables as an accommodation. When
the loan became due, respondent paid partly with own Iunds and partly Irom another loan Irom
petitioner. The new loan was secured by the same pledge agreement. When the new loan
matured, petitioner demanded payment. Respondent expressed willingness to pay provided that
upon payment, the shares oI stock be released. Petitioner denied the request contending that the
loan extended to Aquino spouses remained unpaid. A notice oI notarial sale was sent to
respondents providing Ior the auction sale oI shares oI stock which prompted respondents to Iile
a suit against petitioner.

Issue: Whether or not petitioner may demand payment oI loan.

Ruling: The Court held that although there was tender oI payment made by private respondent,
the same would not extinguish their obligation with the petitioner as there was Iailure to make a
consignation oI payment. To release them Irom the obligation would unjustly enrich themselves
at the expense oI another.
Petition granted.















People vs Sia, 370SCRA123, 21 November 2001

Facts: Christian Bermudez was beaten to death and the taxi cab he was driving was taken by the
assailants. The accused were charged oI murder and a violation oI Anti-Carnapping Law. The
lower court rendered judgment convicting the accused and sentenced them to suIIer the penalty
oI death. ence, an automatic review by the Supreme Court (SC).

Issue: Whether or not accused is liable Ior damages Ior the death oI Bermudez.

Ruling: In the death indemnity awarded by the lower court, the SC adjudged it to be proper as
well as the moral damages. The burial and other expenses were however, deleted because records
are bereIt oI any receipt or voucher to justiIy the lower court`s award oI burial and other
expenses incurred in connection oI death. Moreover, loss oI earning capacity may be awarded
despite non-availability oI documentary evidence. What would be considered is the number oI
years the victim would otherwise have lived, and rate oI the loss sustained by the heirs oI the
deceased. It was undisputed that victim is earning PhP 650/day and that he was 27 years old at
the time oI his death. Loss oI earning capacity may be computed by multiplying the liIe
expectancy with net earnings. Net earnings derived Irom total earnings less expenses necessary
in the creation oI such earnings or income less living or other incidental expenses. In the instant
case, the Iollowing is the computed net earnings capacity:

Gross Annual Earnings rate/day x number oI working days
PhP 650 x 261
GAE PhP 169, 650.00

Net Earnings Capacity 2/3 x years victim is expected to still live x net earnings
2/3 x (80-27) x | PhP 169,650 (169,650 x 50)|
NEC PhP 2,996,867.20
Judgment aIIirmed with modiIication.
People vs Doctolero, 363SCRA404, 20 August 2001

Facts: Victim, Vicente Ganongan, Jr., with one Roderick Litorco agreed to meet with their
Iriends and drink gin. AIter sometime, the group decided to end their drinking spree and headed
home but were unable to go home since one oI their Iriends is too drunk to go home. As they
headed back to the boarding house oI the host Iriend, the accused, Carlos Doctolero, Sr.
allegedly got on their way and when the group tried to escape, Iired at them thereby hitting the
victim that caused his instant death.

Issue: Whether or not accused is liable Ior damages.

Ruling: The lower court awarded civil indemnity to the heirs oI the victim which the Supreme
Court (SC) Iound proper. owever, both actual damages and moral damages were reduced, the
Iormer being to the extent oI those supported by receipts. The hospital and burial expenses were
retained but not the 9
th
and 40
th
day and the Iirst death anniversary, otherwise, award oI damages
would be continuous.
Judgment aIIirmed with modiIication.
People vs Abulencia, 363SCRA496, 22 August 2001

Facts: Victim, Rebelyn Garcia, minor, was allegedly raped and killed by accused, Rolly
Abulencia. InIormation was Iiled charging accused oI rape with homicide. Lower court
convicted the accused and sentenced him to suIIer the penalty oI death and awarded damages in
the amount oI PhP 75,000, exemplary damages oI PhP 20,000 and actual damages oI PhP 6,425.

Issue: Whether or not award oI damages was proper.

Ruling: The obligation to pay damages in cases oI delict is provided by law. The Supreme Court
(SC) in aIIirming the decision oI the lower court increased the amount oI damages Irom PhP
75,000 to PhP 100,000 as the latter amount is Iixed in cases oI rape with homicide. The
exemplary damages increased by PhP 5,000. And Iurther gave moral damages in the amount oI
PhP 50,000.00 as the reason is obvious Ior the mental agony that the Iamily went through due to
the death oI a Iamily member. The actual damages being supported by receipts was retained.
Judgment aIIirmed with modiIication on the damages awarded.
Bermudez vs Melecio-errera, 158SCRA168, 26 February 1988

Facts: A cargo truck driven by Domingo Pontino and owned by Cordova Ng Sun Kwan hit a
jeep. Six-year old Rogelio, son oI plaintiII, is a passenger oI the jeep who sustained injuries
which caused his death. PlaintiII Iiled petition Ior reservation to Iile a separate civil case when a
criminal case was Iiled against Pontino. AIter which, plaintiII Iiled a civil case Ior damages.
aving treated the case as a criminal one, the lower court acquitted Kwan and ordered the
suspension oI the hearing oI the civil case until the criminal case has been decided.

Issue: Whether or not the reservation made by the plaintiII made the case based on crime.

Ruling: In cases oI negligence, the oIIended party may choose to prosecute the deIendants
according to a crime or a quasi-delict. II a party chooses the latter, he may hold the employer
solidarity liable Ior the negligent act oI his employee, subject to the employer's deIense oI
exercise oI the diligence oI a good Iather oI the Iamily.
In the case at bar, the action Iiled by appellant was an action Ior damages based on quasi-delict.
The Iact that appellants reserved their right in the criminal case to Iile an independent civil action
did not preclude them Irom choosing to Iile a civil action Ior quasi-delict.
Petition granted.
People vs Relova, 148SCRA292, 6 March 1987

Facts: DeIendant Manuel Opulencia was charged oI a violation oI an ordinance and was
acquitted due to prescription. InIormation was Iiled charging deIendant oI theIt punishable under
the Revised Penal Code (RPC). DeIendant then contends that the charge is a violation oI his right
against double jeopardy.

Issue: Whether or not deIendant may still be civilly liable under the circumstances.

Ruling: Acquittal on the ground oI violation oI right against double jeopardy does not warrant
release oI civil liability since in the latter what is needed is only a preponderance oI evidence.
The civil liability is diIIerent Irom the criminal aspect oI the charge.
Manantan vs CA, 350SCRA137, 29 January 2001

Facts: The Provincial Fiscal oI Isabela Iiled an inIormation charging petitioner Manantan with
reckless imprudence resulting in homicide. On arraignment, petitioner pleaded not guilt to the
charge. The prosecution`s evidence, as summarized by the trial court indicated that Manantan
was driving 40 km/hr along the highway (although according to Charles Cudamon, the car was
running at a speed oI 80 to 90 km/hr on the wrong lane oI the highway because the car was
overtaking a tricycle, when they met a passenger jeepney with bright lights on). The deIense
version was essentially the same as that oI the prosecution, except that deIense witness Miguel
Tabangin declared that Manantan did not drink beer that night. RTC Iound the accused was not
guilty but on appeal, the court modiIied the decision in Iavor oI the private respondents.

Issue: Whether or not extinguishment oI criminal liability also extinguishes civil liability.

Ruling: Our law recognizes two kinds oI acquittal, with diIIerent eIIects on the civil liability oI
the accused. First is an acquittal on the ground that the accused is not the author oI the act or
omission complained oI. The second is an acquittal based on reasonable doubt on the guilt oI the
accused. In this case, even iI the guilt oI the accused has not been satisIactorily established, he is
not exempt Irom civil liability which may be proved by preponderance oI evidence only. A
scrutiny oI the lower court`s decision in this case supports the conclusion oI the appellate court
that the acquittal was based on reasonable doubt; hence petitioner`s civil liability was not
extinguished by his discharge. The Court note that the trial court did not discount the possibility
that the accused was really negligent. The Ioregoing clearly shows that petitioner`s acquittal was
predicated on the conclusion that his guilt had not been established with moral certainty. Stated
diIIerently, it is an acquittal based on reasonable doubt and a suit to enIorce civil liability Ior the
same act or omission lies.
Petition dismissed.

People vs. Bayotas, 236SCRA239,

Facts: Rogelio Bayotas was charged with Rape and eventually convicted thereoI on June 19,
1991. Pending appeal Ior his conviction, Bayotas died on February 4, 1994 at the National
Bilibid ospital due to cardio-respiratory arrest secondary to hipato carcinoma gastric
malingering. Consequently the Supreme Court dismissed the criminal aspect oI the appeal. It
however, required the Solicitor General to Iile its comment with regard to Bayotas` civil liability
arising Irom his commission oI the oIIense charged. In his comment the Solicitor General
expressed his view that the death oI accused did not extinguish his civil liability as a result oI his
commission oI the oIIense charged. Counsel oI the accused appellant opposed the view arguing
that the death oI the accused while the judgment oI conviction is pending appeal extinguishes
both his criminal and civil liability.

Issue: Whether or not the death oI the accused pending appeal oI his conviction extinguishes his
civil liability.

Ruling: Article 89 states the 'criminal liability is totally extinguished by the death oI the convict,
as to the personal penalties; and as to the pecuniary penalties liability thereIore is extinguished
only when the death oI the oIIender occurs beIore Iinal judgment. It should be stressed that the
extinction oI civil liability Iollows the extinction oI the criminal liability under Art. 38, only
when the civil liability arises Irom the criminal act as its only basis. Stated diIIerently, where the
civil liability does not exist independently oI the criminal responsibility, the extinction oI the
latter by death, ipso Iacto extinguishes the Iormer, provided that the death supervenes beIore
Iinal judgment. In pursuing recovery oI civil liability arising Irom crime, the Iinal determination
oI the criminal liability is a condition precedent to the prosecution oI the civil action, such that
when the criminal action is extinguished by the demise oI accused-appellant pending appeal
thereoI, said civil action cannot survive. The claim Ior civil liability springs out oI and is
dependent upon Iacts, which iI true, would constitute a crime. Such civil liability is an inevitable
consequence oI the criminal liability and is to be declared and enIorced in the criminal
proceeding.
II the private oIIended party, upon extinction oI the civil liability ex delicto desires to recover
damages Irom the same act or omission complained oI, he must Iile a separate civil action, this
time predicated not on the Ielony previously charged but on other sources oI obligation. The
source oI obligation upon which the action is premised determines against whom the same shall
be enIorced. II the same act or omission complained oI, also arises Irom quasi delict or may, by
provisions oI law, result in an injury to person or property, the separate civil action must be Iiled
against the executor or administrator oI the estate oI the accused.


































Barredo vs Garcia, 73P607, 8 July 1942

Facts: Fontanilla is the employee oI Barredo who is held liable Ior the death oI Garcia caused by
the negligence oI the taxi driver Fontanilla. A head-on collision happened between Malate
Taxicab driven by Fontanilla owned by Barredo and a carratela guided by a certain Dimapilin. A
separate civil action was reserved and granted.

Issue: Whether or not the separate civil action Iiled against petitioner makes him primarily and
directly liable under Art. 1903 oI the Civil Code as employer oI Fontanilla.

Ruling: There are distinctions between crimes against culpa aquiliana, which are the Iollowing:
1) crimes aIIect public interest the other private concern, 2) Penal Code punishes or corrects the
criminal act while the Civil Code by means oI indemniIication, merely repairs the damage, and
3) delicts are not as broad as quasi-delicts. In the instant case, Barredo is being held liable not
under the commission oI the crime but under quasi-delict, in which he was not able to overcome
his own negligence in the selection and supervision oI his employees. Barredo then has two (2)
liabilities, subsidiarily in the conviction oI Fontanilla, and primarily under Art. 1903.
Judgment aIIirmed.
SaIeguard Security vs Tangco, 511SCRA67, 14 December 2006

Facts: Evangline Tangco was shot to death when she was mistaken to stage a hold-up in a bank
when all she wanted to do is to deposit her Iirearm to the accused-guard oI the bank, Pajarillo.
Pajarillo was charged oI homicide. Lauro Tangco, husband oI the deceased, reserved his right to
Iile a separate civil action in said criminal case. The lower and appellate court convicted
Pajarillo.

Issue: Whether or not petitioner may be held solidarily liable Ior the death oI Evangeline Tangco.

Ruling: An act or omission causing damage ot another may give rise to two separate civil
liabilities oI the oIIender, civil liability ex delicto and individual civil liability such as those
arising Irom: a) an act or omission complained oI as a Ielony, and b) an individual civil action.
The individual civil action Iiled was Ior quasi-delict which right was reserved by the private
oIIended party. In quasi-delicts, there is a presumption oI negligence and it is up to the accused
to rebut such presumption. In the instant case, petitioner may not be negligent in the selection oI
its employees as it was able to prove that its applicants undergo several tests but it Iell short on
its supervision. It contends that its employees undergo training and has rules to Iollow. owever,
training undergone by Pajarillo is when he was still a guard in an establishment whose nature is
Iar diIIerent Irom that oI a bank. The rules set Iorth by petitioner is not known to Pajarillo.
Petition denied.
Villanueva vs Domingo, 438SCRA485, 20 September 2004

Facts: Respondent Priscilla Domingo is the registered owner oI a silver Mitsubishi Lancer Car
model 1980 with co-respondent Leandro Luis Domingo as authorized driver. Petitioner
Villanueva was then the registered owner oI a green Mitsubishi Lancer bearing Plate No. PK
201 `91. One evening, Iollowing a green light, Priscilla`s car driven by Luis was cruising along
the middle lane oI South Superhighway at a moderate speed Irom north to south. Suddenly, a
green Mitsubishi Lancer driven by OcIemia darted Irom Vito Cruz Street towards the South
Superhighway directly into the path oI the Iormer car and bumping its leIt Iront portion. As a
result oI the impact, the silver car hit two parked vehicles at the roadside, the second hitting
another parked car in Iront oI it. A complaint was Iiled to implead Auto Palace Car Exchange as
commercial agent and Albert jaucian as principal deIendant doing business under the name and
style oI Auto Palace Car Exchange. Villanueva claimed that he is no longer the owner oI the car
as the same was already swapped to another vehicle.

Issue: Whether or not Villanueva be held liable.

Ruling: The Court held that the registered owner oI any vehicle is directly and primarily
responsible to the public and third persons while it is being operated. The public has the right to
assume or presume that the registered owner is the actual owner thereoI, Ior it would be diIIicult
Ior the public to enIorce the actions that they may have Ior injuries caused to them by the
vehicles being negligently operated iI the public should be required to prove who the actual
owner is.
Petition denied.
Calalas vs CA, GR 122039, 31 May 2000

Facts: Private respondent Eliza Sunga was given an extension seat aIter the jeepney she rode into
was already Iull to capacity. Such extension seat is a wooden stool at the rear end oI the vehicle.
When a passenger is to go down, she has to give way and when she did, an Isuzu truck driven by
Verena and owned by Salva bumped the leIt rear portion oI the vehicle. As a result, Sunga was
injured. She then Iiled a complaint Ior damages against Calalas, the owner oI the jeepney.
Calalas Iiled a third party complaint against Salva.

Issue: Whether or not Salva and Verena are liable as well as Calalas Ior violation oI a contract oI
carriage.

Ruling: The Iirst, quasi-delict, also known as culpa aquiliana or culpa extra contractual, has as its
source the negligence oI the tortIeasor. The second, breach oI contract or culpa contractual, is
premised upon the negligence in the perIormance oI a contractual obligation.
Consequently, in quasi-delict, the negligence or Iault should be clearly established
because it is the basis oI the action, whereas in breach oI contract, the action can be prosecuted
merely by proving the existence oI the contract and the Iact that the obligor, in this case the
common carrier, Iailed to transport his passenger saIely to his destination.

In case oI death or
injuries to passengers, Art. 1756 oI the Civil Code provides that common carriers are presumed
to have been at Iault or to have acted negligently unless they prove that they observed
extraordinary diligence as deIined in Arts. 1733 and 1755 oI the Code. This provision necessarily
shiIts to the common carrier the burden oI prooI.
There is, thus, no basis Ior the contention that the ruling in Civil Case No. 3490, Iinding
Salva and his driver Verena liable Ior the damage to petitioner's jeepney, should be binding on
Sunga. It is immaterial that the proximate cause oI the collision between the jeepney and the
truck was the negligence oI the truck driver. The doctrine oI proximate cause is applicable only
in actions Ior quasi-delict, not in actions involving breach oI contract. The doctrine is a device
Ior imputing liability to a person where there is no relation between him and another party. In
such a case, the obligation is created by law itselI. But, where there is a pre-existing contractual
relation between the parties, it is the parties themselves who create the obligation, and the
Iunction oI the law is merely to regulate the relation thus created. InsoIar as contracts oI carriage
are concerned, some aspects regulated by the Civil Code are those respecting the diligence
required oI common carriers with regard to the saIety oI passengers as well as the presumption oI
negligence in cases oI death or injury to passengers.
Ludo and Luym Corp. vs CA, 351SCRA35, 1 February 2001

Facts: Petitioner, a domestic corporation engaged in copra processing, owns and operates a
private wharI used by vessels Ior loading and unloading oI copra and other processed products.
Among its wharI`s Iacilities are Iender pile clusters Ior docking and mooring which was
destroyed by private respondent Gabisan Shipping Lines` MV Miguela when it rammed on the
same. Petitioner demanded damages but private respondent reIused. ence, petitioner Iiled a
complaint Ior damages. The lower court rendered decision in Iavor oI petitioner while on appeal
the Court oI Appeals (CA) reversed the same and dismissed the case.

Issue: Whether or not the doctrine oI res ipsa loquitor is applicable in the instant case and
whether respondent company is negligent.

Ruling: The court ruled that the doctrine oI res ipsa loquitor may establish prima Iacie
negligence without direct prooI and allows the principle to substitute Ior speciIic prooI oI
negligence. This may be used when direct is present and readily available under the
circumstances. Also in a case cited by the Supreme Court (SC), it explained the doctrine that
where the thing which causes injury is under the management oI the deIendant and the accident
would not ordinarily happen had the one in charge oI its management exercised proper care it is
evident that the incident arose due to lack oI care when no explanation is given by the deIendant.
This is such in the case at bar. There is now a presumption oI negligence on respondent`s part
which they Iailed to rebut.
Also, the respondent company is negligent as it hired a captain and a chieI mate who do
not possess the needed qualiIications to man a vessel. The Iormer being an elementary graduate
and whose only experience in navigation is to be a watchman, while the latter was only a high
school graduate whose experience on the same is to be a quartermaster.
Petition granted.
Thermochem vs Naval, 344SCRA77, 20 October 2000

Facts: Private respondent is the owner oI the taxi that was hit during a collision when its driver
made a u-turn and while doing so a Nissan PathIinder owned by petitioner Thermochem, Inc.
driven by petitioner Jerome Castro collided with said taxi, Iiled a damage suit due to the incident.
The trial court rendered decision in Iavor oI private respondent Leonora Naval and ordered
petitioners jointly and severally liable.

Issue: Whether or not petitioner is negligent.

Ruling: The Court held that Petitioner Castro is liable and the driver oI the taxi is contributorily
liable. Castro allegedly was driving at a speed higher than 50 km/hr as it was downhill slope and
that upon stepping on the brakes, it locked causing the car to skid to the leIt and hit the taxi. The
owner is presumed to know the conditions oI his vehicle and should have exercised the diligence
oI a good Iather oI a Iamily to make sure his vehicle is not deIective and would not cause any
injury to others. owever, the driver oI the taxi is not without Iault. U-turns are generally not
advisable on major streets and this should have known by the Iormer. There was lack oI Ioresight
on his part in Iailing to consider that vehicles would be coming Irom a downhill slope.
Decision is modiIied. Actual damages reduced to halI.
Picart vs Smith, 37P813, 15 March 1918

Facts: While plaintiII was riding his pony, deIendant approached Irom the opposite direction in
his automobile. The latter continued his course and observed that plaintiII is not observing
proper rules oI the road. It appears that plaintiII saw the automobile coming and heard the
warning signals. Both parties continued to approach each other until Iinally deIendant quickly
turned his car to the right to escape hitting the horse but the automobile passed in such close
proximity to the animal. In doing so, the horse Iell and its rider was thrown oII with some
violence. PlaintiII now claims damages.

Issue: Whether or not deIendant is guilty oI negligence.

Ruling: The control oI the situation had passed entirely to the deIendant; and it was his duty to
either bring his car to an immediate stop or, seeing that there were no other persons on the
bridge, to take the other side and pass suIIiciently Iar away Irom the horse to avoid the danger oI
collision. Instead oI doing this, the deIendant ran straight on until he was almost upon the horse.
It goes without saying that the plaintiII himselI was not Iree Irom Iault, Ior he was guilty
oI antecedent negligence in planting himselI on the wrong side oI the road. Both are negligent
thus, it is necessary to discover which agent is immediately and directly responsible. Under these
circumstances the law is that the person who has the last Iair chance to avoid the impediment
without reIerence to do so is chargeable with the consequences, without reIerence to the prior
negligence oI the other party.
It is enough to say that the negligence oI the deIendant was in this case the immediate
and determining cause oI the accident and that the antecedent negligence oI the plaintiII was a
more remote Iactor in the case.




















Lagon vs ooven Comalco, 349SCRA363, 17 January 2001

Facts: Petitioner Lagon is a businessman and owner oI a commercial building. Respondent
OOVEN on the other hand is a domestic corporation known to be the biggest manuIacturer and
installer oI aluminum materials. Lagon and OOVEN entered into two contracts, both
denominated Proposal, whereby Ior a total consideration oI P104, 870.00 OOVEN agreed to
sell and install various aluminum materials in Lagon`s commercial building. Upon execution oI
the contracts, Lagon paid OOVEN P48, 00.00 in advance. On 24 February 1987 Respondent
Iiled suit against Lagon Ior the alleged Iailure oI the latter to pay its obligations.

Issue: Whether all the materials speciIied in the contracts had been delivered and installed.

Ruling: AIter careIul and diligent consideration oI the exhibits, The Court is Iully convinced that
the mass oI documentary evidence adduced by respondent suIIers Irom patent irregularities and
material inconsistencies on their Iaces, raising serious questions requiring cogent explanations.
These Ilaws inevitably deplete the weight oI its evidence, with the result that Ior lack oI the
requisite quantum oI evidence, respondent dismally Iailed in the lower court to discharge its
burden necessary to prevail in this case.
Further, all the delivery receipts did not appear to have been signed by petitioner or his
duly authorized representative acknowledging receipt oI the materials listed therein. A closer
examination oI the receipts clearly showed that the deliveries were made to a certain Jose Rubin,
claimed to be petitioner's driver, Armando Lagon, and a certain bookkeeper. owever, deliveries
must be made to the buyer or his duly authorized representative named in the contracts. In other
words, unless the buyer speciIically designated someone to receive the delivery oI materials and
his name is written on the Proposals opposite the words "Authorized Receiver/Depository," the
seller is under obligation to deliver to the buyer only and to no other person; otherwise, the
delivery would be invalid and the seller would not be discharged Irom liability. In the present
case, petitioner did not name any person in the Proposals who would receive the deliveries in his
behalI, which meant that OOVEN was bound to deliver exclusively to petitioner.
























Francisco vs CA, 401SCRA594

Facts: Spouses Francisco and Engineer Mercado entered into a contract oI development whereby
the latter undertook to develop several pieces oI land into a subdivision. Further, buyers oI said
houses in the subdivision should deal with Mercado rather than the spouses. In the course oI the
contract, Spouses wanted to rescind the contract alleging that Mercado had been in delay in
developing the said subdivision.

Issue: Whether or not the contract may be rescinded.

Ruling: Delay may exist when the obligor Iails to IulIill his obligations within the time expressly
stipulated but there is no delay incurred by a developer where the uman Settlements Regulatory
Commission extended the period Ior him to Iinish the development work and such period has not
yet expired. In reciprocal obligations, neither party incurs in delay iI the other does not comply
or is not ready to comply with what is incumbent upon him. It is only when one oI the parties
IulIills his obligation that delay by the other begins. Respondent`s Iailure to submit the monthly
report cannot serve or suIIicient basis Ior the cancellation oI the Contract.
Tanguilig vs CA, 266SCRA78, 2 January 1997

Facts: Tanguilig in behalI oI J.M.T. Engineering and General Merchandising entered into a
contract with respondent one erce, Jr. Ior the construction oI a windmill amounting to PhP
60,000.00. e paid the total amount oI PhP 45,000.00, leaving a balance oI PhP 15,000.00.
Sometime in March 1988, Tanguiling Iiled a complaint to collect the balance due to the
reIusal and Iailure oI respondent to pay. Respondent contends that he had already paid this
amount Ior the construction oI a deep well to which the windmill was to be connected. On the
other hand, petitioner contends that the construction oI a deep well was not included in their
contract. Respondent Iurther contends that the Php 15,000.00 should be oIIset by the deIects in
the windmill which caused the structure to collapse aIter a strong wind hit their place.
The Regional Trial Court ruled in Iavor oI petitioner. The construction oI the deep well
is not part oI the agreement and that there is no clear and convincing prooI that the windmill Iell
down due to the deIect it its construction. The Court oI Appeals however reversed this decision.

Issues: Whether or petitioner's argument that private respondent was already in deIault in the
payment oI his outstanding balance oI P15,000.00 and hence should bear his own loss, is tenable.

Ruling: In reciprocal obligations, neither party incurs in delay iI the other does not comply or is
not ready to comply in a proper manner with what is incumbent upon him.

When the windmill
Iailed to Iunction properly it became incumbent upon petitioner to institute the proper repairs in
accordance with the guaranty stated in the contract. Thus, respondent cannot be said to have
incurred in delay; instead, it is petitioner who should bear the expenses Ior the reconstruction oI
the windmill. Article 1167 oI the Civil Code is explicit on this point that iI a person obliged to do
something Iails to do it, the same shall be executed at his cost.

































Periquet vs CA, 238SCRA697

Facts: Spouses Periquet were leIt childless aIter the death oI their only child, so they took in a
son out oI wedlock oI Petra`s sister. The child was not legally adopted but was given the name
Fernando Periquet, Jr. and was reared to manhood by the Spouses. When Fernando died, he leIt a
will and named Petra as his universal heir. Soon aIter, Petra died. er will was not signed by her
as she died beIore the will was done. In the said will, Petra leIt her entire estate to Fernando, Jr
and leIt certain legacies to other Iamily members. Deed oI Assignment was executed in Iavor oI
petitioner but other members did not want to sign the same. A compromise agreement was later
on entered into between the petitioner and the members who did not want to sign the deed oI
assignment. Some members who signed the deed now Iiled the instant action to annul the same
alleging misrepresentation and Iraud.

Issue: Whether or not the deed may be annulled.

Ruling: No Iraud was employed by herein petitioner. Resultantly, the Assignment oI ereditary
Rights executed by Felix Francisco in Iavor oI petitioner is valid and eIIective. The kind oI Iraud
that will vitiate a contract reIers to those insidious words or machinations resorted to by one oI
the contracting parties to induce the other to enter into a contract which without them he would
not have agreed to. It must have a determining inIluence on the consent oI the victim. The will oI
the victim, in eIIect, is maliciously vitiated by means oI a Ialse appearance oI reality. Felix
Francisco could not have been deceived since he signed them Ireely and voluntarily to honor and
respect the wishes oI his deceased sister. Further, there was valid cause or consideration in the
execution oI the deed. And that the allegation oI Iraud is an aIterthought on the part oI the
assignor.
Legaspi Oil vs CA, 224SCRA213

Facts: Bernard Oseraos acting through his authorized agents, had several transactions with
Legaspi Oil Co. Ior the sale oI copra to the latter. A contract Ior sale oI 100 tons oI copra at PhP
82.00 per 100 kilos with delivery time oI 20 days was entered into. AIter the period to deliver
had lapsed, appellant sold only 46, 334 kilos oI copra tus leaving a balance oI 53, 666 kilos as
per running account card. Demands were made to deliver the same and Iailure to do so would
mean cancellation oI the contract and purchase oI the undelivered copra Irom the open market
and the price diIIerential shall be charged against Oseraos. ThereaIter, Legaspi purchased the
same Irom the open market at the prevailing rate oI PhP 168 per 100 kilos or a price diIIerential
oI PhP 86 per 100 kilos, a net loss oI PhP 46, 152. 76. Legaspi then Iiled a complaint Ior breach
oI contract and Ior damages.

Issue: Whether or not Oseraos is liable Ior damages arising Irom Iraud or bad Iaith in
deliberately breaching the contract oI sale entered into by the parties.

Ruling: The Court held that Oseraos is guilty oI Iraud. Fraud may be deIined as the voluntary
execution oI a wrongIul act, or willIul omission, knowing and intending the eIIects which
naturally and necessarily arise Irom such act or omission. Art. 1170 oI the Civil Code provides,
Fraud is the deliberate and intentional evasion oI the normal IulIillment oI obligation. The
conduct oI Oseraos clearly maniIests his deliberate Iraudulent intent to evade his contractual
obligation Ior the price oI copra had in the meantime more than doubled Irom chargeable against
appellant.














PNB Madecor vs Uy, 363SCRA128

Facts: Guillermo Uy doing business under the name G.U. Enterprises, consigned to respondent
Gerardo Uy his receivables due Iorm Pantranco. Gerardo Iiled a collection suit. e sought to
collect Irom Pantranco the said amount. Pantranco then assigned its receivables Irom PNB
Madecor to Gerardo. PNB assails that Pantranco had no more receivables Irom them as the latter
is still indebted to the Iormer due Irom its unpaid rentals Irom the lease oI its properties and that
PNB had the two accounts oIIset.

Issue: Whether or not the oIIsetting oI the accounts is valid.

Ruling: It could not be said that Pantranco had been duly inIormed oI its delay in paying the
rentals as there was no notice and demand oI the same. The notice and demand alleged by PNB
was not correct as Pantranco was only notiIied oI its intention to oIIset both accounts which was
not agreed upon by Pantranco.










































Barzaga vs CA, 268SCRA105, 12 February 1997

Facts: On 21 December 1990, petitioner went to the hardware store oI private respondent Alviar
to inquire about certain materials to be used in the construction oI a niche Ior his wiIe to be
buried beIore Christmas Day. e also asked iI the materials could be delivered at once because
the materials he was buying would have to be delivered at the Memorial Cemetery in
Dasmarias, Cavite, by eight o'clock that morning since his hired workers were already at the
burial site and time was oI the essence. Alviar's storekeeper agreed to deliver the items at the
designated time, date and place. With this assurance, Barzaga purchased the materials and paid
in Iull the amount oI P2,110.00. ThereaIter he went to the cemetery.
owever, the construction materials did not arrive at the promised date, time and place.
Barzaga returned several times to the hardware store to inquire about the delay. The storekeeper
assured him each time he inquired that although the delivery truck was not yet around it had
already leIt the garage and that as soon as it arrived the materials would be brought over to the
cemetery in no time at all. Because oI what happened he decided to cancel his transaction with
the store and look Ior construction materials elsewhere.
e was able to purchase the materials needed but the niche was Iinished on the 26
th
.
Tormented by his inability to IulIill his wiIe's dying wish, Barzaga wrote private respondent
Alviar demanding recompense Ior the damage he suIIered. Alviar did not respond.
Consequently, petitioner sued him beIore the Regional Trial Court.

Issue: Whether or not respondent appellate court erred in ruling that there was no contractual
commitment as to the exact time oI delivery since this was not indicated in the invoice receipts.

Ruling: This case is clearly one oI non-perIormance oI a reciprocal obligation. In their contract
oI purchase and sale, petitioner had already complied Iully with what was required oI him as
purchaser, i.e., the payment oI the purchase price oI P2, 110.00. It was incumbent upon
respondent to immediately IulIill his obligation to deliver the goods otherwise delay would
attach. The record convinces us that respondent Alviar was negligent and incurred in delay in the
perIormance oI his contractual obligation. This suIIiciently entitles petitioner Barzaga to be
indemniIied Ior the damage he suIIered as a consequence oI delay or a contractual breach. The
law expressly provides that those who in the perIormance oI their obligation are guilty oI Iraud,
negligence, or delay and those who in any manner contravene the tenor thereoI, are liable Ior
damages. The private respondent incurred delay because the time was the controlling Iactor in
the delivery oI the said materials which delayed the burial oI Barzaga`s wiIe.



Tanguilig vs CA, 266SCRA78, 2 January 1997

Facts: Tanguilig in behalI oI J.M.T. Engineering and General Merchandising entered into a
contract with respondent one erce, Jr. Ior the construction oI a windmill amounting to Php
60,000.00. e paid the total amount oI Php 45,000.00, leaving a balance oI Php 15,000.00.
Sometime in March 1988, Tanguiling Iiled a complaint to collect the balance due to the
reIusal and Iailure oI respondent to pay. Respondent contends that he had already paid this
amount Ior the construction oI a deep well to which the windmill was to be connected. On the
other hand, petitioner contends that the construction oI a deep well was not included in their
contract. Respondent Iurther contends that the Php 15,000.00 should be oIIset by the deIects in
the windmill which caused the structure to collapse aIter a strong wind hit their place.
The Regional Trial Court ruled in Iavor oI petitioner. The construction oI the deep well
is not part oI the agreement and that there is no clear and convincing prooI that the windmill Iell
down due to the deIect it its construction. The Court oI Appeals however reversed this decision.

Issues: Whether or petitioner's argument that private respondent was already in deIault in the
payment oI his outstanding balance oI P15,000.00 and hence should bear his own loss, is tenable.

Ruling: In reciprocal obligations, neither party incurs in delay iI the other does not comply or is
not ready to comply in a proper manner with what is incumbent upon him.

When the windmill
Iailed to Iunction properly it became incumbent upon petitioner to institute the proper repairs in
accordance with the guaranty stated in the contract. Thus, respondent cannot be said to have
incurred in delay; instead, it is petitioner who should bear the expenses Ior the reconstruction oI
the windmill. Article 1167 oI the Civil Code is explicit on this point that iI a person obliged to do
something Iails to do it, the same shall be executed at his cost.












Tayag vs CA, 219SCRA280, 3 March 1993

Facts: Petitioners seek to rescind the deed oI conveyance executed by Galicia, Sr., their Iather,
together with Celerina Labuguin, in Iavor oI Albrigido Leyva. The contract involved an
undivided one-halI portion oI a piece oI land situated at Poblacion, Guimba, Nueva Ecija.
Petitioners alleged that respondent is in breach oI the conditions oI the deed regarding the
payment and settlement oI the purchase price oI the land. Respondent however Iailed to comply.
Despite the post payments however, petitioners accepted them. On the other hand, respondent
contends on his deIense that he IulIilled his obligation to pay.

Issue: Whether or not payments had in Iact been made.

Ruling: As to the issue oI whether payments had in Iact been made, there is no doubt that the
second installment was actually paid to the heirs oI Juan Galicia, Sr. due to JoseIina Tayag's
admission in judicio that the sum oI P10,000.00 was Iully liquidated. It is thus erroneous Ior
petitioners to suppose that "the evidence in the records do not support this conclusion". A
contrario, when the court oI origin, as well as the appellate court, emphasized the Irank
representation along this line oI JoseIina Tayag beIore the trial court, petitioners chose to remain
completely mute even at this stage despite the opportunity accorded to them, Ior clariIication.
Consequently, the prejudicial aItermath oI JoseIina Tayag's spontaneous reaction may no longer
be obliterated on the basis oI estoppel.
InsoIar as the third item oI the contract is concerned, it may be recalled that respondent
court applied Article 1186 oI the Civil Code on constructive IulIillment which petitioners claim
should not have been appreciated because they are the obligees while the proviso in point speaks
oI the obligor. But, petitioners must concede that in a reciprocal obligation like a contract oI
purchase,, both parties are mutually obligors and also obligees, and any oI the contracting parties
may, upon non-IulIillment by the other privy oI his part oI the prestation, rescind the contract or
seek IulIillment. In short, it is puerile Ior petitioners to say that they are the only obligees under
the contract since they are also bound as obligors to respect the stipulation in permitting private
respondent to assume the loan with the Philippine Veterans Bank which petitioners impeded
when they paid the balance oI said loan. As vendors, they are supposed to execute the Iinal deed
oI sale upon Iull payment oI the balance as determined hereaIter.






Periquet, Jr. vs CA, 238SCRA697, 5 December 1994

Facts: Spouses Fernando Periquet and Petra Francisco took in a son out oI wedlock aIter the
death oI their only child Elvira. Although not legally adopted, the boy was named Fernando
Periquet Jr. and reared to manhood. When Fernando Periquet died, he named his wiIe Petra as
his universal heir in a special Proceeding. AIter Iour months, Petra died leaving her last will and
testament unsigned but leIt her estate to petitioner. Petra was survived by her brother, sister and
children oI her deceased siblings. ThereaIter, said heirs assigning petitioner their hereditary
rights executed several deeds. owever, Florentino Zaragosa and Alberta Zaragosa Morgan
reIused to execute deeds oI assignment in Iavor oI petitioner. Petitioner and the concerned heirs
oI the spouses Fernando Periquet and Petra Francisco including their counsels also signed a
Compromise agreement. The agreement stated that heir`s acknowledgement oI the validity oI
the last will and testament oI the deceased spouses and the assignment oI hereditary rights to
petitioner. On December 20, 1969, the trial court approved the same agreement. Another order
oI even date was Issued ordering the adjudication and transIer oI the residue oI the estate to the
petitioner. In 1970, Felix Francisco Iiled an action Ior annulment oI the same based on 'gross
misrepresentation and Iraud, grave abuse oI conIidence, mistake and undue inIluence and lack oI
cause. The trial court denied the petition. On appeal, the judgment was modiIied in the sense
that the Assignment oI ereditary Rights was annulled and Francisco was relieved Irom the legal
eIIects thereoI. It declared the latter to be the older oI one Iourth oI all the estate oI Petra
Francisca Vda de Periquet, made up oI the combined estates oI the deceased spouses. AIter
denial oI motion Ior reconsideration, petition Ior review was Iiled.

Issue: Whether or not the respondent court erred in disregarding and ignoring the trial court`s
strong Iindings oI Iact that no Iraud, deception, gross misrepresentation or undue inIluence
attended the execution and signing oI the Deed oI Assignment oI ereditary Rights.

Ruling: Felix Francisco could not be considered to have been deceived into signing the subject
deed oI assignment Ior the Iollowing reasons: (1) the assignment was executed and signed Ireely
and voluntarily by Francisco, was read and explained to him by his counsel. Witness`s signatory
to the agreement proves this; (2) There was a valid cause or consideration in the execution oI the
assignment oI hereditary rights. It was the generosity oI Felix Francisco that impelled him to
execute the questioned instrument; (3) the allegation oI Iraud is an aIterthought on the party oI
the assignor, Felix Francisco who Iiled the annulment aIter Iour years aIter he executed the
instrument.
Clearly, Felix slept on his rights and allowed laches to set in. This is Iatal to his case. e
cannot Ieign ignorance oI the existence oI said cases as he was actually waiting Ior their Iinal
disposition aIter asserting his own rights. e never conIronted the petitioner about his alleged
share in the estate oI the deceased in the period between 1966 and 1970, thus raising the
inconvertible conclusion that Iraud never attended the execution oI deed oI assignment.
The kind oI Iraud that will vitiate a contract reIers to those insidious words or
machinations resorted to by one oI the contracting parties to induce the other to enter into a
contract which without them he would not have agreed to. It must have a determining inIluence
on the consent oI the victim. The will oI the victim, in eIIect, is maliciously vitiated by means oI
Ialse appearance oI reality.
In the case at bench, no such Iraud was employed by herein petitioner. The assignment
oI hereditary rights executed by Felix Francisco in Iavor oI herein petitioner is valid and
eIIective.
All told, the assignment oI hereditary rights executed by the late Felix Francisco in Iavor
oI petitioner is hereby declared valid and eIIective.























































RCBC vs CA, 198SCRA392, 25 March 1999

Facts: Private respondent Atty. Felipe Lustre purchased a Toyota Corolla Irom Toyota Shaw,
Inc. Ior which he made a down payment oI P164,620.00, the balance oI the purchase price to be
paid in 24 equal monthly installments. Private respondent thus issued 24 postdated checks. The
Iirst was dated April 10, 1991; subsequent checks were dated every 10
th
day oI each succeeding
month. To secure the balance, private respondent executed a promissory note and a contract oI
chattel mortgage over the vehicle in Iavor oI Toyota Shaw, Inc. The contract oI chattel
mortgage, in paragraph 11 thereoI, provided Ior an acceleration clause stating that should the
mortgagor deIault in the payment oI any installment.
On March 14, 1991, Toyota Shaw, Inc. assigned all its rights and interests in the chattel
mortgage to petitioner Rizal Commercial Banking Corporation (RCBC). All the checks dated
April 10, 1991 to January 10, 1993 were thereaIter encashed and debited by RCBC Irom private
respondent's account, except Ior one which was previously debited Irom private respondent's
account but was later recalled and re-credited to him. Because oI the recall, the last two checks,
dated February 10, 1993 and March 10, 1993, were no longer presented Ior payment. This was
purportedly in conIormity with petitioner bank's procedure that once a client's account was
Iorwarded to its account representative, all remaining checks outstanding as oI the date the
account was Iorwarded were no longer presented Ior payment. On the theory that respondent
deIaulted in his payments, petitioner demanded Irom private respondent the payment oI the
balance oI the debt, including liquidated damages.

Issue: Whether or not private respondent should be held in deIault.

Ruling: In the case at bench, plaintiII-appellant's imputation oI deIault to deIendant-appellee
rested solely on the Iact that the 5
th
check Issued by appellee was recalled Ior lack oI signature.
owever, the check was recalled only aIter the amount covered thereby had been deducted Irom
deIendant-appellee's account, as shown by the testimony oI plaintiII's own witness Francisco
Bulatao who was in charge oI the preparation oI the list and trial balances oI bank customers.
The "deIault" was thereIore not a case oI Iailure to pay, the check being suIIiciently Iunded, and
which amount was in Iact already debited Irom appellee's account by the appellant bank which
subsequently re-credited the amount to deIendant-appellee's account Ior lack oI signature. All
these actions RCBC did on its own without notiIying deIendant until sixteen (16) months later
when it wrote its demand letter dated January 21, 1993.
Clearly, appellant bank was remiss in the perIormance oI its Iunctions Ior it could have
easily called the deIendant's attention to the lack oI signature on the check and sent the check to,
or summoned, the latter to aIIix his signature. It is also to be noted that the demand letter
contains no explanation as to how deIendant-appellee incurred arrearages in the amount oI
P66,255.70, which is why deIendant-appellee made a protest notation thereon. Notably, all the
other checks Issued by the appellee dated subsequent to August 10, 1991 and dated earlier than
the demand letter, were duly encashed. This Iact should have already prompted the appellant
bank to review its action relative to the unsigned check.













State Investment vs CA, 198SCRA392, 19 June 1991

Facts: Respondent spouses Jose and Marcelina Aquino signed an agreement with petitioner State
Ior the latter`s purchase oI receivables amounting to P375,000.00. When the 1
st
Account Iell due,
respondent spouses paid the same partly with their own Iunds and partly Irom the proceeds oI
another loan which they obtained also Irom petitioner designated as the 2
nd
Account. ThereaIter,
the spouses pledged certain shares oI stock to petitioner in order to secure a loan oI P120,000.00.
When the new loan matured, State demanded payment. Respondents expressed willingness to
pay, requesting that upon payment, the shares oI stock pledged be released. Petitioner State
denied the request on the ground that the loan which it had extended to the spouses Jose and
Marcelina Aquino has remained unpaid.
ThereaIter, petitioner sent to respondent spouses a Notice oI Notarial Sale stating that by
virtue oI the pledge agreement, the shares oI stock will be sold at public auction. This prompted
respondents to Iile a case beIore the Regional Trial Court oI Quezon City alleging that the
intended Ioreclosure sale was illegal because Irom the time the obligation under the 2
nd
Account
became due, they had been able and willing to pay the same, but petitioner had insisted that
respondents pay even the loan account oI Jose and Marcelino Aquino, which had not been
secured by the pledge. It was Iurther alleged that their Iailure to pay their loan was excused
because the Petitioner State itselI had prevented the satisIaction oI the obligation.

Issues: Whether or not the conditions to be complied with by the debtor desirous oI being
released Irom his obligation in cases where the creditor unjustly reIuses to accept payment have
been met by the spouses Aquino.

Ruling: The conditions had not been complied with. Article 1256 oI the civil code states that: ' II
the creditor to whom tender oI payment has been made reIuses without just cause to accept it, the
debtor shall be released Irom responsibility by consignation oI the thing or sum due. Where the
creditor unjustly reIuses to accept payment, the debtor desirous oI being released Irom his
obligation must comply with two (2) conditions, viz: (a) tender oI payment; and (b) consignation
oI the sum due. Tender oI payment must be accompanied or Iollowed by consignation in order
that the eIIects oI payment may be produced. Thus, in Llamas v. Abaya, the Supreme Court
stressed that a written tender oI payment alone, without consignation in court oI the sum due,
does not suspend the accruing oI regular or monetary interest. In the instant case, respondent
spouses Aquino, while they are properly regarded as having made a written tender oI payment to
petitioner state, Iailed to consign in court the amount due at the time oI the maturity oI the 2
nd

Account No. It Iollows that their obligation to pay principal-cum-regular or monetary interest
under the terms and conditions oI the said Account was not extinguished by such tender oI
payment alone.


















BPI Investment vs CA, 377SCRA117, 15 February 2002

Facts: Frank Roa obtained a loan at an interest rate oI 16 1/4 per annum Irom Ayala
Investment and Development Corporation (AIDC), now BPIIC, Ior the construction oI a house
on his lot which were mortgaged to AIDC to secure the loan. Sometime in 1980, Roa sold the
house and lot to private respondents ALS and Antonio Litonjua Ior P850,000. They paid
P350,000 in cash and assumed the P500,000 balance oI Roa`s indebtedness with AIDC. The
latter, however, was not willing to extend the old interest rate to private respondents and
proposed to grant them a new loan oI P500,000 to be applied to Roa`s debt and secured by the
same property, at an interest rate oI 20 per annum and service Iee oI 1 per annum on the
outstanding principal balance payable within ten years in equal monthly amortization oI
P9,996.58 and penalty interest at the rate oI 21 per annum per day Irom the date the
amortization became due and payable.
Consequently, in March 1981, private respondents executed a mortgage deed containing
the above stipulations with the provision that payment oI the monthly amortization shall
commence on May 1, 1981. On August 13, 1982, ALS and Litonjua updated Roa`s arrearages by
paying BPIIC the sum oI P190,601.35. This reduced Roa`s principal balance to P457,204.90
which, in turn, was liquidated when BPIIC applied thereto the proceeds oI private respondents`
loan oI P500,000. On September 13, 1982, BPIIC released to private respondents P7,146.87,
purporting to be what was leIt oI their loan aIter Iull payment oI Roa`s loan. In June 1984, BPIIC
instituted Ioreclosure proceedings against private respondents on the ground that they Iailed to
pay the mortgage indebtedness which Irom May 1, 1981 to June 30, 1984, amounted to Four
undred Seventy Five Thousand Five undred Eighty Five and 31/100 Pesos (P475,585.31). A
notice oI sheriII`s sale was published on August 13, 1984. applied to the initial monthly
amortization Ior the loan.

Issue: Whether or not the contract oI loan involves reciprocal obligation.

Ruling: A contract oI loan involves a reciprocal obligation, wherein the obligation or promise oI
each party is the consideration Ior that oI the other. As averred by private respondents, the
promise oI BPIIC to extend and deliver the loan is upon the consideration that ALS and Litonjua
shall pay the monthly amortization commencing on May 1, 1981, one month aIter the supposed
release oI the loan. It is a basic principle in reciprocal obligations that neither party incurs in
delay, iI the other does not comply or is not ready to comply in a proper manner with what is
incumbent upon him. Only when a party has perIormed his part oI the contract can he demand
that the other party also IulIills his own obligation and iI the latter Iails, deIault sets in.
Consequently, petitioner could only demand Ior the payment oI the monthly amortization aIter
September 13, 1982 Ior it was only then when it complied with its obligation under the loan
contract. ThereIore, in computing the amount due as oI the date when BPIIC extrajudicially
caused the Ioreclosure oI the mortgage, the starting date is October 13, 1982 and not May 1,
1981.


Leao vs CA, 369SCRA36, 15 November 2001

Facts: On November 13, 1985, ermogenes Fernando and Carmelita Leao executed a contract
to sell involving a piece oI land. In the contract, Carmelita Leao bound herselI to pay Fernando
the sum oI one hundred seven thousand and seven hundred and IiIty pesos (P107,750.00) as the
total purchase price oI the lot. The contract also provided Ior a grace period oI one month within
which to make payments, together with the one corresponding to the month oI grace. Should a
period oI ninety (90) days elapse Irom the expiration oI the grace period without the overdue and
unpaid installments having been paid with the corresponding interests up to that date, respondent
Fernando was authorized to declare the contract cancelled and to dispose oI the parcel oI land, as
iI the contract had not been entered into. The payments made, together with all the improvements
made on the premises, shall be considered as rents paid Ior the use and occupation oI the
premises and as liquidated damages. AIter the execution oI the contract, Carmelita Leao made
several payments in lump sum. ThereaIter, she constructed a house on the lot valued at
P800,000.00. The last payment that she made was on April 1, 1989.
On September 16, 1991, the trial court rendered a decision in an ejectment case earlier
Iiled by respondent Fernando ordering petitioner Leao to vacate the premises and to pay
P250.00 per month by way oI compensation Ior the use and occupation oI the property Irom May
27, 1991 until she vacated the premises, attorney`s Iees and costs oI the suit. On August 24,
1993, the trial court issued a writ oI execution which was duly served on petitioner Leao. On
September 27, 1993, petitioner Leao Iiled a complaint Ior speciIic perIormance with
preliminary injunction. Petitioner Leao assailed the validity oI the judgment oI the municipal
trial court Ior being violative oI her right to due process and Ior being contrary to the avowed
intentions oI Republic Act No. 6552 regarding protection to buyers oI lots on installments.
Petitioner Leao deposited P18,000.00 with the clerk oI court, Regional Trial Court, Bulacan, to
cover the balance oI the total cost oI Lot 876-B

Issue: Whether there was in delay in the payment oI the monthly amortizations.

Ruling: As regards the Issue oI whether petitioner was delay in paying the amortizations, the
Supreme Court ruled that while the contract provided that the purchase price was payable within
a ten-year period, the same contract speciIied that the purchase price shall be paid in monthly
installments Ior which the corresponding penalty shall be imposed in case oI deIault. Petitioner
Leano cannot ignore the provision oI the payment oI monthly installments by claiming that the
ten-year period within which to pay has not elapsed. In reciprocal obligations, neither party
incurs delay iI the other does not comply or is not ready to comply in a proper manner with what
is incumbent upon him but Irom the moment IulIills his obligation, delay by the other begins.



eirs oI Bacus vs CA, 371SCRA295, 3 December 2001

Facts: On June 1, 1984, Bacus leased to private respondent Duray a parcel oI agricultural land.
The lease was Ior six years, ending May 31, 1990. The contract contained an option to buy
clause. Close to the expiration oI the contract, Luis Bacus died on October 10, 1989. ThereaIter,
on March 15, 1990, the Duray spouses inIormed Roque Bacus, one oI the heirs oI Luis Bacus,
that they were willing and ready to purchase the property under the option to buy clause. They
requested Roque Bacus to prepare the necessary documents, such as a Special Power oI Attorney
authorizing him to enter into a contract oI sale, on behalI oI his sisters who were then abroad.
On March 30, 1990, due to the reIusal oI petitioners to sell the property, Faustino Duray`s
adverse claim covering the segregated 2,000 square meter portion.
Subsequently, on April 5, 1990, Duray Iiled a complaint Ior speciIic perIormance against the
heirs oI Luis Bacus with the Lupon Tagapamayapa oI Barangay Bulacao, asking that he be
allowed to purchase the lot speciIically reIerred to in the lease contract with option to buy. At
the hearing, Duray presented a certiIication Irom the manager oI Standard Chartered Bank, Cebu
City, addressed to Luis Bacus, stating that at the request oI Mr. Lawrence Glauber, a bank client,
arrangements were being made to allow Faustino Duray to borrow Iunds oI approximately
P700,000 to enable him to meet his obligations under the contract with Luis Bacus.

Issue: Whether or not when the respondents opted to buy the property, were they already
required to deliver the money or consign it in court beIore the execution oI the deed oI transIer.
Whether or not the private respondents incur delay when they did not deliver the
purchase price or consign it in court or beIore the expiration oI the contract.

Ruling: The petitioners were not required to deliver the money or consign it in court. Obligations
under an option to buy are reciprocal obligations. The perIormance oI one obligation is
conditioned on the simultaneous IulIillment oI the other obligation. In an option to buy, the
payment oI the purchase price by the creditor is contingent upon the execution and delivery oI a
deed oI sale by the debtor. In the case at bar, the respondents were not yet obliged to make actual
payment. Consequently, since the obligation was not yet due, consignation in court oI the
purchase price was not yet required.
The private respondents did not incur delay when they did not deliver the purchase price
or consign it in court or beIore the expiration oI the contract. Consignation is the act oI
depositing the thing due with the court or judicial authorities whenever the creditor cannot accept
or reIuses to accept payment and it requires a prior tender oI payment. Petitioners` contention
that private respondents Iailed to comply with their obligation under the option to buy because
they Iailed to actually deliver the purchase price or consign it in court beIore the contract expired
is not tenable. Ergo, the private respondents did not incur any delay when they did not yet deliver
payment or make consignation beIore the expiration oI the contract. In reciprocal obligations,
neither party incurs delay iI the other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. Only Irom the moment one oI the parties IulIills his
obligation, does delay by the other begins.
On March 15, 1990, respondents communicated with the petitioners that they intended to
exercise their exclusive right to buy the parcel oI land stipulated in the contract but which was
not given due course by the petitioners unless there is delivery oI the sum oI money. As there
was no compliance with what was incumbent upon the petitioners under the option to but, private
respondents had not incurred in delay when the cashier`s check was issued even aIter the
contract expired.


































Integrated Packaging Corporation vs CA, 333SCRA170, 8 June 2000

Facts: Petitioner and private respondent executed on May 5, 1978, an order agreement whereby
private respondent bound itselI to deliver to petitioner reams oI printing paper with the stated
quality worth P1,040,060.00 under the Iollowing schedule: May and June 1978450 reams at
P290.00/ream; August and September 1978700 reams at P290/ream; January 1979575
reams at P307.20/ream; March 1979575 reams at P307.20/ream; July 1979575 reams at
P307.20/ream; and October 1979575 reams at P307.20/ream. In accordance with the standard
operating practice oI the parties, the materials were to be paid within a minimum oI thirty days
and maximum oI ninety days Irom delivery.
Later, on June 7, 1978, petitioner entered into a contract with Philippine Appliance
Corporation (Philacor) to print three volumes oI "Philacor Cultural Books" Ior delivery on the
Iollowing dates: Book VI, on or beIore November 1978; Book VII, on or beIore November 1979
and; Book VIII, on or beIore November 1980, with a minimum oI 300,000 copies at a price oI
P10.00 per copy or a total cost oI P3,000,000.00.
As oI July 30, 1979, private respondent had delivered to petitioner 1,097 reams oI
printing paper out oI the total 3,450 reams stated in the agreement. Petitioner alleged it wrote
private respondent to immediately deliver the balance because Iurther delay would greatly
prejudice petitioner. From June 5, 1980 and until July 23, 1981, private respondent delivered
again to petitioner various quantities oI printing paper amounting to P766,101.70. owever,
petitioner encountered diIIiculties paying private respondent said amount. Accordingly, private
respondent made a Iormal demand upon petitioner to settle the outstanding account. On July 23
and 31, 1981 and August 27, 1981, petitioner made partial payments totalling P97,200.00 which
was applied to its back accounts covered by delivery invoices dated September 29-30, 1980 and
October 1-2, 1980.
Meanwhile, petitioner entered into an additional printing contract with Philacor.
UnIortunately, petitioner Iailed to Iully comply with its contract with Philacor Ior the printing oI
books VIII, IX, X and XI. Thus, Philacor demanded compensation Irom petitioner Ior the delay
and damage it suIIered on account oI petitioner`s Iailure.

Issues:Whether or not private respondent violated the order agreement.
Whether or not private respondent is liable Ior petitioner`s breach oI contract with
Philacor.

Ruling: For the Iirst issue, the transaction between the parties is a contract oI sale whereby Fil-
Anchor obligates itselI to deliver printing paper to Integrated which, in turn, binds itselI to pay a
sum oI money. Both parties conceded that the order agreement gives rise to reciprocal
obligations such that the obligation oI one is dependent upon the obligation oI the other.
Reciprocal obligations are to be perIormed simultaneously, so that the perIormance oI one is
conditioned upon the simultaneous IulIillment oI the other. Fil-Anchor undertakes to deliver
printing paper oI various quantities subject to petitioner`s corresponding obligation to pay, on a
maximum 90-day credit, Ior the materials. Petitioner Integrated did not IulIill its side oI the
contract as its last payment in August 1981 could only cover materials covered by delivery
invoices dated September and October oI 1980. Consequently, Fil-Anchor`s suspension oI its
deliveries to petitioner whenever the latter Iailed to pay on time is legally justiIied. Fil-Anchor
has the right to cease making Iurther delivery; hence, it did not violate the order agreement. On
the contrary, it was Integrated which breached the agreement as it Iailed to pay on time the
materials delivered by private respondent.
As to 2
nd
Issue, Fil-Anchor cannot be eld liable under the contracts entered into by
petitioner with Philacor because it is not a party to said agreements. It is also not a contract pour
autriu. The contracts could not aIIect third persons like private respondent because oI the basic
civil law principle oI relativity oI contracts which provides that contracts can only bind the
parties who entered into it, and it cannot Iavor or prejudice a third person, even iI he is aware oI
such contract and has acted with knowledge thereoI.






























LaIorteza vs Machuca, 333SCRA643, 16 June 2000

Facts: The property involved consists oI a house and which is registered in the name oI the late
Francisco Q. LaIorteza. DeIendants Lea Zulueta-LaIorteza, Michael LaIorteza and Dennis
LaIorteza each executed a Special Power oI attorney (SPA) in Iavor oI co-deIendants Roberto
LaIorteza and Gonzalo LaIorteza, appointing them jointly to sell the subject property and sign
any document Ior the settlement oI the estate oI the late Francisco LaIorteza.
In the exercise oI the above authority,, the heirs oI Francisco thru Roberto and Gonzalo,
entered into a contract to sell with Machuca over subject property Ior the sum oI P 630, 000.00
payable as Iollows: 1) Php 30,000 as earnest money to be IorIeited in Iavor oI LaIorteza iI the
sale is not eIIected due to vendee`s Iault; and 2) Php 600,000 upon issuance oI a new certiIicate
oI title and upon execution oI an extra-judicial settlement oI the decedent`s estate with sale in
Iavor oI vendees.
The 4
th
paragraph oI the contract to sell contained the proviso that the buyer-lessee shall
be notiIied in writing and shall have thirty (30) days to produce the balance oI Php 600,000
which shall be paid to seller-lessors upon issuance by the proper court oI the new title.
Consequently, lessees paid the earnest money oI Php 30,000 and rentals Ior subject
property. Upon the issuance oI the reconstituted title, deIendants inIormed in writing the vendee
that he has a month to produce the money. Vendee requested an additional month, to which
Roberto signed his conIormity to vendor`s letter request; which was however, not approved by
Gonzales, the 2
nd
attorney-in-Iact. On the date agreed upon, vendor told Roberto that he was
ready with the Php 600,000, but Roberto said that the subject property was no longer Ior sale.
ThereaIter, deIendants inIormed plaintiII that they were cancelling the contract to sell in
view oI the noncompliance oI Machuca oI his contractual obligation.
PlaintiII reiterated his request to tender oI payment oI Php 600, 000 and deIendants
insisted on its rescission. A case Ior speciIic perIormance was decided by the trial court as a
consequence oI the conIlict, Iavoring Machuca, to which the Court oI Appeals aIIirmed with
modiIications, awarding moral damages to Machuca Ior the evident bad Iaith oI the LaIortezas.

Issues: Whether or not the trial and appellate courts correctly construed the Memorandum oI
Agreement as imposing reciprocal obligations.
Whether or not the Court a quo correctly ruled that rescission will not lie in the instant
case.

Ruling: The Court do not subscribe to the petitioners` view that the Memorandum Agreement
was a contract to sell. There is nothing contained in the Memorandum Agreement Irom which it
can reasonably be deduced that the parties intended to enter into a contract to sell, i.e. one
whereby the prospective seller would explicitly reserve the transIer oI title to the prospective
buyer, meaning, the prospective seller does not as yet agree or consent to transIer ownership oI
the property subject oI the contract to sell until the Iull payment oI the price, such payment being
a positive suspensive condition, the Iailure oI which is not considered a breach, casual or serious,
but simply an event which prevented the obligation Irom acquiring any obligatory Iorce.
Although the memorandum agreement was also denominated as a "Contract to Sell", we hold
that the parties contemplated a contract oI sale. A deed oI sale is absolute in nature although
denominated a conditional sale in the absence oI a stipulation reserving title in the petitioners
until Iull payment oI the purchase price. In such cases, ownership oI the thing sold passes to the
vendee upon actual or constructive delivery thereoI. The mere Iact that the obligation oI the
respondent to pay the balance oI the purchase price was made subject to the condition that the
petitioners Iirst deliver the reconstituted title oI the house and lot does not make the contract a
contract to sell Ior such condition is not inconsistent with a contract oI sale.
It is not disputed that the petitioners did not make a judicial or notarial demand Ior
rescission. The letter oI the petitioners inIorming the respondent oI the automatic rescission oI
the agreement did not amount to a demand Ior rescission, as it was not notarized. It was also
made Iive days aIter the respondent`s attempt to make the payment oI the purchase price. This
oIIer to pay prior to the demand Ior rescission is suIIicient to deIeat the petitioners` right under
Article 1592 oI the Civil Code. Besides, the Memorandum Agreement between the parties did
not contain a clause expressly authorizing the automatic cancellation oI the contract without
court intervention in the event that the terms thereoI were violated. A seller cannot unilaterally
and extrajudicially rescind a contract oI sale where there is no express stipulation authorizing
him to extrajudicially rescind. Thus, when the respondent Iiled his complaint Ior speciIic
perIormance, the agreement was still in Iorce inasmuch as the contract was not yet rescinded. At
any rate, considering that the six-month period was merely an approximation oI the time it would
take to reconstitute the lost title and was not a condition imposed on the perIection oI the
contract and considering Iurther that the delay in payment was only thirty days which was caused
by the respondents justiIied but mistaken belieI that an extension to pay was granted to him, we
agree with the Court oI Appeals that the delay oI one month in payment was a mere casual
breach that would not entitle the respondents to rescind the contract. Rescission oI a contract will
not be permitted Ior a slight or casual breach, but only such substantial and Iundamental breach
as would deIeat the very object oI the parties in making the agreement.
Admittedly, the Iailure oI the respondent to pay the balance oI the purchase price was a
breach oI the contract and was a ground Ior rescission thereoI. The extension oI thirty (30) days
allegedly granted to the respondent by Roberto Z. LaIorteza was correctly Iound by the CA to be
ineIIective inasmuch as the signature oI Gonzalo Z. LaIorteza did not appear thereon as required
by the SPA. owever, the evidence reveals that aIter the expiration oI the six-month period
provided Ior in the contract, the petitioners were not ready to comply with what was incumbent
upon them, i.e. the delivery oI the reconstituted title oI the house and lot. It was only on
September 18, 1989 or nearly eight months aIter the execution oI the Memorandum oI
Agreement when the petitioners inIormed the respondent that they already had a copy oI the
reconstituted title and demanded the payment oI the balance oI the purchase price. The
respondent could not thereIore be considered in delay Ior in reciprocal obligations, neither party
incurs in delay iI the other party does not comply or is not ready to comply in a proper manner
with what was incumbent upon him































International Corporate Bank vs Gueco, 351SCRA516, 12 February 2001

Facts: Respondents Gueco Spouses executed promissory notes which were payable in monthly
installments and chattel mortgage over a car to serve as security Ior the notes obtained a loan
Iorm petitioner International Corporate Bank (now Union Bank oI the Philippines. ThereaIter,
the Spouses deIaulted in the payment oI the installments and consequently, the petitioner Iiled on
August 7, 1995 a civil action Ior 'Sum oI Money with Prayer Ior a Writ oI Replivin.
On August 25, 1995, Dr. Gueco met with the sheriII and a bank representative.. The bank
demanded payment oI the amount oI P 184,000.00 which is the unpaid balance Ior the car loan
which was lowered to P 154,000.00 aIter negotiations and recomputations. As a result oI the
non-payment oI the reduced amount on that date, the car was detained within the bank`s
compound.
On August 28, 1995, Dr. Gueco Iurther renegotiated Ior the reduction oI the outstanding
loan to P 150,000.00. The Iollowing day, Dr. Gueco delivered a manager`s check in the amount
oI P 150,000.00 but the car was not released because oI his reIusal to sign the JOINT Motion to
Dismiss.
AIter several demand letters and meetings with bank representatives, the respondents
initiated a civil action Ior damages which was dismissed Ior lack oI merit.

Issue: Whether or not there was no agreement with respect to the execution oI the Joint Motion
to Dismiss as a condition Ior the compromise agreement.

Ruling: There was no agreement with respect to the execution oI the Joint Motion to Dismiss as
a condition Ior the compromise agreement. Petitioner has the burden oI prooI that the oral
compromise entered into by the parties included the stipulation that the parties would joint Iile a
motion to dismiss. Factual Iindings oI the lower court and the appellate court Iound no evidence
to acknowledge the contestation oI the petitioner bank that there was indeed such an agreement.
Further, the only Iinding was that the agreement between the parties was merely regarding the
lowering oI the price and not anent the Joint Motion to Dismiss.
The respondents are not entitled to the damages awarded by the Court oI Appeals. In
awarding the damages, both the trial and appellate courts Iound out that there was Iraud, when in
the Iindings oI the Supreme Court, there was none. Fraud is the deliberate intention to cause
damage or prejudice. It is the voluntary execution oI a wrongIul act, or the willIul omission.
Knowing and intending the eIIects which naturally and necessarily arise Irom such act or
omission. There was no Iraud on the part oI the petitioner bank in requiring the respondent to
sign the joint motion to dismiss.


Republic vs CTA, 366SCRA489, 2 October 2001

Facts: On 12 December 1992, a shipment oI bales oI textile gray cloth, under a Bill oI Lading,
arrived at the Manila International Container Port (MICP) aboard the vessel "S/S ACX Daisy."
The shipment's Inward Foreign ManiIest stated that the bales oI cloth were consigned to GQ
GARMENTS, Inc. The Clean Report oI Findings (CRF) issued by the Societe Generale de
Surveilance (SGS), however, mentioned AGFA, Incorporated, to be the consignee oI the
shipment. Forthwith, the shipping agent, FIL-JAPAN, requested Ior an amendment oI the Inward
Foreign ManiIest so as to correct the name oI the consignee Irom that oI GQ GARMENTS, Inc.,
to that oI AGFA, Inc.
On 22 January 1993, FIL-JAPAN Iorwarded to AGFA, Inc., the amended Inward
Foreign ManiIest which the latter, in turn, submitted to the MICP Law Division. The MICP
indorsed the document to the Customs Intelligence Investigation Services (CIIS). The CIIS
placed the subject shipment under old Order, on the ground that GQ GARMENTS, Inc., could
not be located in its given address and was thus suspected to be a Iictitious Iirm.
AGFA, Inc., through its president Wilson Kho, Iiled a motion Ior intervention
contending that AGFA, Inc., is the lawIul owner and actual consignee oI the subject shipment.
The motion Ior intervention was granted on 2 March 1993. Following a hearing, the Collector oI
Customs came up with a draIt decision ordering the liIting oI the warrant oI seizure and
detention on the basis oI its Iindings that GQ GARMENTS, Inc., was not a Iictitious corporation
and that there was a valid waiver oI rights over the bales oI cloth by GQ GARMENTS, Inc., in
Iavor oI AGFA, Inc. The draIt decision was submitted to the Deputy Commissioner Ior
clearance and approval, who, in turn, transmitted it to the CIIS Ior comment. The CIIS opposed
the draIt decision, insisting that GQ GARMENTS, Inc., was a Iictitious corporation and that
even iI it did exist, its president, John Barlin, had no authority to waive the right over the subject
shipment in Iavor oI AGFA, Inc.

Issue: Whether or not private respondent committed Iraud in the transactions warranting the
IorIeiture oI the shipment.

Ruling: There was no Iraud committed by private respondent in the importation oI the bales cloth
as unanimously concluded by the Collector oI Customs, Court oI Tax Appeals and the Court oI
Appeals. Fraud must be proved to justiIy IorIeiture. It must be actual, amounting to intentional
wrongdoing with the clear purpose oI avoiding tax. Mere negligence is not equivalent to Iraud
contemplated by law. What is involved is an honest mistake, not even directly attributable to
private respondent, which will not deprive the government oI its right to collect the proper tax.















ambao vs Zuiga, 418SCRA266, 11 December 2003

Facts: At around 3:30 p.m. oI May 6, 1992, the bus owned by the petitioner was being driven by
her driver, one CeIerino G. Venturina along the northbound lane oI EpiIanio delos Santos
Avenue (EDSA). With Venturina was the bus conductor, Fernando Dumaliang. Suddenly, the
bus bumped erminigildo Zuiga, a pedestrian. Such was the Iorce oI the impact that the leIt
side oI the Iront windshield oI the bus was cracked. Zuiga was rushed to the Quezon City
General ospital where he was given medical attention, but due to the massive injuries
sustained, he succumbed shortly thereaIter.
Private respondents, as heirs oI the victim, Iiled a Complaint against petitioner and her
driver, Venturina, Ior damages. The complaint essentially alleged that Venturina drove the bus
in a reckless, careless and imprudent manner, in violation oI traIIic rules and regulations, without
due regard to public saIety, thus resulting in the victim`s premature death.
In her Answer, the petitioner vehemently denied the material allegations oI the
complaint. She tried to shiIt the blame Ior the accident upon the victim, theorizing that
erminigildo bumped into her bus, while avoiding an unidentiIied woman who was chasing
him. She Iurther alleged that she was not liable Ior any damages because as an employer, she
exercised the proper diligence oI a good Iather oI a Iamily, both in the selection and supervision
oI her bus driver.

Issue: Whether or not the petitioner exercised the diligence oI a good Iather oI a Iamily in the
selection and supervision oI her employees, thus absolving her Irom any liability.

Ruling: The 'diligence oI a good Iather reIerred to in the last paragraph oI the aIorecited statute
means diligence in the selection and supervision oI employees. Thus, when an employee, while
perIorming his duties, causes damage to persons or property due to his own negligence, there
arises the juris tantum presumption that the employer is negligent, either in the selection oI the
employee or in the supervision over him aIter the selection. For the employer to avoid the
solidary liability Ior a tort committed by his employee, an employer must rebut the presumption
by presenting adequate and convincing prooI that in the selection and supervision oI his
employee, he or she exercises the care and diligence oI a good Iather oI a Iamily. In the instant
case, we Iind that petitioner has Iailed to rebut the presumption oI negligence on her part.
er allegation that beIore she hired Venturina she required him to submit his driver`s
license and clearances is worthless, in view oI her Iailure to oIIer in evidence certiIied true
copies oI said license and clearances. Bare allegations, unsubstantiated by evidence, are not
equivalent to prooI under the rules oI evidence. Moreover, as the court a quo aptly observed,
petitioner contradicts herselI. She declared that Venturina applied with her sometime in January
1992 and she then required him to submit his license and clearances. owever, the record
likewise shows that she did admit that Venturina submitted the said requirements only on May 6,
1992, or on the very day oI the Iatal accident itselI. In other words, petitioner`s own admissions
clearly and categorically show that she did not exercise due diligence in the selection oI her bus
driver.
In any case, assuming arguendo that Venturina did submit his license and clearances
when he applied with petitioner in January 1992, the latter still Iails the test oI due diligence in
the selection oI her bus driver. Case law teaches that Ior an employer to have exercised the
diligence oI a good Iather oI a Iamily, he should not be satisIied with the applicant`s mere
possession oI a proIessional driver`s license; he must also careIully examine the applicant Ior
employment as to his qualiIications, his experience and record oI service. Petitioner Iailed to
present convincing prooI that she went to this extent oI veriIying Venturina`s qualiIications,
saIety record, and driving history. The presumption juris tantum that there was negligence in the
selection oI her bus driver, thus, remains unrebutted.
Nor did petitioner show that she exercised due supervision over Venturina aIter his
selection. For as pointed out by the Court oI Appeals, petitioner did not present any prooI that
she draIted and implemented training programs and guidelines on road saIety Ior her employees.
In Iact, the record is bare oI any showing that petitioner required Venturina to attend periodic
seminars on road saIety and traIIic eIIiciency. ence, petitioner cannot claim exemption Irom
any liability arising Irom the recklessness or negligence oI Venturina.
In sum, petitioner`s liability to private respondents Ior the negligent and imprudent acts
oI her driver, Venturina, under Article 2180 oI the Civil Code is both maniIest and clear.
Petitioner, having Iailed to rebut the legal presumption oI negligence in the selection and
supervision oI her driver, is responsible Ior damages, the basis oI the liability being the
relationship oI pater Iamilias or on the employer`s own negligence.





















Smith Bell Dodwell vs Borja, 383SCRA341, 10 June 2002

Facts: On September 23, 1987, Smith Bell Iiled a written request with the Bureau oI Customs Ior
the attendance oI the latter`s inspection team on vessel M/T King Family which was due to arrive
at the port oI Manila on September 24, 1987.Said vessel contained 750 metric tons oI alkyl
benzene and methyl methacrylate monomer.
On the same day, Supervising Customs Inspector Manuel Ma. D. Nalgan instructed
Catalino Borja to board said vessel and perIorm his duties as inspector upon the vessel`s arrival
until its departure. At that time, Borja was a customs inspector oI the Bureau oI Customs
receiving a salary oI P31,188.25 per annum.
At about 11 o`clock in the morning on September 24, 1987, while M/T King Family was
unloading chemicals unto two (2) barges owned by ITTC, a sudden explosion occurred setting
the vessels aIire. Upon hearing the explosion, Borja, who was at that time inside the cabin
preparing reports, ran outside to check what happened. Again, another explosion was heard.
Seeing the Iire and Iearing Ior his liIe, Borja hurriedly jumped over board to save
himselI. owever, the water was likewise on Iire due mainly to the spilled chemicals. Despite
the tremendous heat, Borja swam his way Ior one (1) hour until he was rescued by the people
living in the squatters` area and sent to San Juan De Dios ospital.
'AIter weeks oI intensive care at the hospital, his attending physician diagnosed Borja to be
permanently disabled due to the incident. Borja made demands against Smith Bell and ITTC Ior
the damages caused by the explosion. owever, both denied liabilities and attributed to each
other negligence.

Issue: Whether or not there was negligence on the part oI petitioner Smith Bell, the owner oI the
vessel M/T King Family.

Ruling: Negligence is conduct that creates undue risk oI harm to another. It is the Iailure to
observe that degree oI care, precaution and vigilance that the circumstances justly demand,
whereby the other person suIIers injury. Petitioner`s vessel was carrying as cargo alkyl benzene
and methyl methacrylate monomer, both oI which are dangerous chemicals. While knowing that
their vessel was carrying dangerous inIlammable chemicals, it`s oIIicers and crew Iailed to take
all the necessary precautions to prevent an accident. ThereIore, petitioner, the owner oI the
vessel was negligent thus liable Ior damages.






Ilusorio vs CA, 393SCRA69, 27 November 2002

Facts: Petitioner is a prominent businessman who was the Managing Director oI Multinational
Investment Bank Corporation and the Chairman and/or President oI several other corporations.
e was a depositor in good standing oI respondent bank, the Manila Banking Corporation. As
he was then running about 20 corporations, and was going out oI the country a number oI times,
petitioner entrusted to his secretary, Katherine E. Eugenio, his credit cards and his checkbook
with blank checks. It was also Eugenio who veriIied and reconciled the statements oI said
checking account.
Between the dates September 5, 1980 and January 23, 1981, Eugenio was able to encash and
deposit to her personal account about seventeen (17) checks drawn against the account oI the
petitioner at the respondent bank, with an aggregate amount oI P119,634.34. Petitioner did not
bother to check his statement oI account until a business partner apprised him that he saw
Eugenio use his credit cards. Petitioner Iired Eugenio immediately, and instituted a criminal
action against her Ior estaIa thru IalsiIication beIore the OIIice oI the Provincial Fiscal oI Rizal.
Private respondent, through an aIIidavit executed by its employee, Mr. Dante Razon, also
lodged a complaint Ior estaIa thru IalsiIication oI commercial documents against Eugenio on the
basis oI petitioner`s statement that his signatures in the checks were Iorged.
Petitioner then requested the respondent bank to credit back and restore to its account the
value oI the checks which were wrongIully encashed but respondent bank reIused.

Issue: Whether or not petitioner has a cause oI action against respondent bank.

Ruling: The court agrees that petitioner has no cause oI action against Manila Bank. To be
entitled to damages, petitioner has the burden oI proving negligence on the part oI the bank Ior
Iailure to detect the discrepancy in the signatures on the checks. Curiously though, petitioner
Iailed to submit additional specimen signatures as requested by the National Bureau oI
Investigation Irom which to draw a conclusive Iinding regarding Iorgery. The Court oI Appeals
Iound that petitioner, by his own inaction, was precluded Irom setting up Iorgery. Said the
appellate court:
Moreover, petitioner`s contention that Manila Bank was remiss in the exercise oI its duty
as drawee lacks Iactual basis. Consistently, the CA and the RTC Iound that Manila Bank
employees exercised due diligence in cashing the checks. The bank`s employees in the present
case did not have a hint as to Eugenio`s modus operandi because she was a regular customer oI
the bank, having been designated by petitioner himselI to transact in his behalI. According to the
appellate court, the employees oI the bank exercised due diligence in the perIormance oI their
duties.
As borne by the records, it was petitioner, not the bank, who was negligent. Negligence
is the omission to do something which a reasonable man, guided by those considerations which
ordinarily regulate the conduct oI human aIIairs, would do, or the doing oI something which a
prudent and reasonable man would do. In the present case, it appears that petitioner accorded his
secretary unusual degree oI trust and unrestricted access to his credit cards, passbooks, check
books, bank statements, including custody and possession oI cancelled checks and reconciliation
oI accounts.
NPC vs CA, 161SCRA334, 16 May 1988

Facts: On August 4, 1964, plaintiII Engineering Construction, Inc., being a successIul bidder,
executed a contract in Manila with the National Waterworks and Sewerage Authority
(NAWASA), whereby the Iormer undertook to Iurnish all tools, labor, equipment, and materials
(not Iurnished by Owner), and to construct the proposed 2nd lpo-Bicti Tunnel, Intake and Outlet
Structures, and Appurtenant Structures, and Appurtenant Features, and to complete said works
within eight hundred (800) calendar days Irom the date the Contractor receives the Iormal notice
to proceed.
The project involved two (2) major phases: the Iirst phase comprising, the tunnel work
covering a distance oI seven (7) kilometers, passing through the mountain, Irom the Ipo river, a
part oI Norzagaray, Bulacan, where the Ipo Dam oI the deIendant National Power Corporation is
located, to Bicti; the other phase consisting oI the outworks at both ends oI the tunnel.
By September 1967, the plaintiII corporation already had completed the Iirst major phase
oI the work, namely, the tunnel excavation work. Some portions oI the outworks at the Bicti site
were still under construction. As soon as the plaintiII corporation had Iinished the tunnel
excavation work at the Bicti site, all the equipment no longer needed there were transIerred to
the Ipo site where some projects were yet to be completed.
The record shows that on November 4,1967, typhoon 'Welming' hit Central Luzon,
passing through deIendant's Angat ydro-electric Project and Dam at lpo, Norzagaray, Bulacan.
Strong winds struck the project area, and heavy rains intermittently Iell. Due to the heavy
downpour, the water in the reservoir oI the Angat Dam was rising perilously at the rate oI sixty
(60) centimeters per hour. To prevent an overIlow oI water Irom the dam, since the water level
had reached the danger height oI 212 meters above sea level, the deIendant corporation caused
the opening oI the spillway gates."

Issue: Whether or not there was negligence on the part oI National Power Corporation in opening
the spillway gates oI Angat dam.

Ruling: It is clear that NPC did not exercise extraordinary care or proper diligence in the opening
oI the spillway gates oI the Angat Dam. Maintainers oI the dam knew very well that it was Iar
more saIer to open them gradually. But the spillway gates were opened only when typhoon
Welming was already at its height, in a vain eIIort to race against time and prevent the overIlow
oI water Irom the dam as it was rising dangerously at the rate oI sixty centimeters per hour. This
action could have been taken as earlier when the water in the reservoir was still low.
The principle embodied in the act oI God doctrine in order to be exempt Irom liability
strictly requires that the act must be one occasioned exclusively by the violence oI nature and
human agencies are to be excluded Irom creating or entering into the cause oI the mischieI. Thus,
it has been held that when the negligence oI a person concurs with an act oI God in producing a
loss, such person is not exempt Irom liability by showing that the immediate cause oI the damage
was the act oI God. To be exempt Irom liability Ior loss because oI an act oI God, he must be
Iree Irom any previous negligence or misconduct.















Muaje-Tuazon vs Wenphil, 511SCRA521, 27 December 2006

Facts: Petitioners Annabelle M. Tuazon and Almer R. Abing worked as branch managers oI the
Wendy`s Iood chains in MCU Caloocan and Meycauayan, respectively, oI respondent Wenphil
Corporation. From September 14 to November 8, 1998, Wendy`s had a 'Biggie Size It! Crew
Challenge promotion contest. The branch with the highest sales oI 'Biggie Size It wins. The
Meycauayan and MCU Caloocan branches won Iirst and second places, respectively. Because oI
its success, respondent had a second run oI the contest Irom April 26 to July 4, 1999. The
Meycauayan branch won again. The MCU Caloocan branch Iailed to make it among the winners.
BeIore the start oI the third round Irom October 18, 1999 to January 16, 2000, Abing was
assigned to the SM North Edsa Annex branch while Tuazon was assigned to the Meycauayan
branch. BeIore the announcement oI the third round winners, management received reports that
as early as the Iirst round oI the contest, the Meycauayan, MCU Caloocan, Tandang Sora and
Fairview branches cheated. An internal investigation ensued.
On February 3, 2000, petitioners were summoned to the main oIIice regarding the
reported anomaly. A petitioner denied there was cheating. Immediately thereaIter, petitioners
were notiIied, in writing, oI hearings scheduled on February 4 and 7, 2000 and oI their
immediate suspension. ThereaIter, on February 29, 2000, petitioners were dismissed.
Petitioners Iiled, with the Regional Arbitration Branch, a complaint Ior illegal
suspension and dismissal against respondent Wenphil Corporation and its General Manager,
Elizabeth P. Orbita. Petitioners insisted that they were innocent oI the accusations and were
dismissed without cause. They claimed that the real reason Ior their termination was their
persistent demands Ior overtime and holiday pay. They aver that (a) they were not notiIied
beIorehand why they were called to the main oIIice; (b) their right to due process was denied;
and (c) they were not aIIorded counsel despite their request Ior one.

Issue: Whether or not the petitioners were illegally dismised.

Ruling: Petitioners contend that respondents did not suIIiciently prove the existence oI a just
cause Ior their termination, hence they were illegally dismissed.
There is no denying that petitioners were managerial employees. They executed
management policies, they had the power to hire personnel and assign them tasks; and
discipline the employees in their branch. They recommended actions on employees to the
head oIIice. Pertinent is Article 212 (m) oI the Labor Code deIining a managerial employee as
one who is vested with powers or prerogatives to lay down and execute management policies
and/or hire, transIer, suspend, lay-oII, recall, discharge, assign or discipline employees.
Consequently, as managerial employees, in the case oI petitioners, the mere existence oI grounds
Ior the loss oI trust and conIidence justiIy their dismissal. Pursuant to our ruling in Caoile v.
National Labor Relations Commission, as long as the employer has a reasonable ground to
believe that the managerial employee concerned is responsible Ior the purported misconduct, or
the nature oI his participation renders him unworthy oI the trust and conIidence demanded by his
position, the managerial employee can be dismissed.
In the present case, the tape receipts presented by respondents showed that there were
anomalies committed in the branches managed by the petitioners. On the principle oI respondeat
superior or command responsibility alone, petitioners may be held liable Ior negligence in the
perIormance oI their managerial duties, unless petitioners can positively show that they were not
involved. Their position requires a high degree oI responsibility that necessarily includes
unearthing oI Iraudulent and irregular activities. Their bare, unsubstantiated and uncorroborated
denial oI any participation in the cheating does not prove their innocence nor disprove their
alleged guilt. Additionally, some employees declared in their aIIidavits that the cheating was
actually the idea oI the petitioners.
Petitioners make much oI the Iact that the aIIidavits were executed only aIter the
investigation. This is oI no moment. For even without the aIIidavits, suIIicient basis exists Ior
respondents` loss oI trust and conIidence on the petitioners as managerial oIIicers.



























RCPI vs Verchez, 481SCRA384, 31 January 2006

Facts: On January 21, 1991, Editha ebron Verchez (Editha) was conIined due to an ailment.
On even date, her daughter Grace immediately hied to the Radio Communications oI the
Philippines, Inc. (RCPI) whose services she engaged to send a telegram to her sister Zenaida
Verchez-Catibog (Zenaida) who was residing in Quezon City reading: 'Send check money
Mommy hospital. For RCPI`s services, Grace paid P10.50 Ior which she was issued a receipt.
As three days aIter RCPI was engaged to send the telegram to Zenaida no response was received
Irom her, Grace sent a letter to Zenaida, this time thru JRS Delivery Service, reprimanding her
Ior not sending any Iinancial aid.
Immediately aIter she received Grace`s letter, Zenaida, along with her husband Fortunato
Catibog, leIt on January 26, 1991 Ior Sorsogon. On her arrival at Sorsogon, she disclaimed
having received any telegram. In the meantime, Zenaida and her husband, together with her
mother Editha leIt Ior Quezon City on January 28, 1991 and brought Editha to the Veterans
Memorial ospital in Quezon City where she was conIined Irom January 30, 1991 to March 21,
1991.
The telegram was Iinally delivered to Zenaida 25 days later or on February 15, 1991. On
inquiry Irom RCPI why it took that long to deliver it, a messenger oI RCPI replied that he had
nothing to do with the delivery thereoI as it was another messenger who previously was assigned
to deliver the same but the address could not be located, hence, the telegram was resent on
February 2, 1991, and the second messenger Iinally Iound the address on February 15, 1991.
On September 8, 1993, Verchez, along with his daughters Grace and Zenaida and their
respective spouses, Iiled a complaint against RCPI beIore the Regional Trial Court (RTC) oI
Sorsogon Ior damages. In their complaint, the plaintiIIs alleged that, inter alia, the delay in
delivering the telegram contributed to the early demise oI the late Editha to their damage and
prejudice, Ior which they prayed Ior the award oI moral and exemplary damages and attorney`s
Iees.

Issue: Are the stipulations in the Telegram Transmission Form,` in the nature 'contracts oI
adhesion?

Ruling: RCPI misunderstands the nature oI a contract oI adhesion. Neither the readability oI the
stipulations nor their physical location in the contract determines whether it is one oI adhesion.
A contract oI adhesion is deIined as one in which one oI the parties imposes a ready-made Iorm
oI contract, which the other party may accept or reject, but which the latter cannot modiIy. One
party prepares the stipulation in the contract, while the other party merely aIIixes his signature or
his 'adhesion thereto, giving no room Ior negotiation and depriving the latter oI the opportunity
to bargain on equal Iooting.
While a contract oI adhesion is not necessarily void and unenIorceable, since it is
construed strictly against the party who draIted it or gave rise to any ambiguity therein, it is
stricken down as void and unenIorceable or subversive oI public policy when the weaker party is
imposed upon in dealing with the dominant bargaining party and is reduced to the alternative oI
taking it or leaving it, completely deprived oI the opportunity to bargain on equal Iooting.
Victory Liner vs Gammad, 444SCRA355, 25 November 2004

Facts: Respondent Rosalito Gammad show that on March 14, 1996, his wiIe Marie Grace
Pagulayan-Gammad, was on board an air-conditioned Victory Liner bus bound Ior Tuguegarao,
Cagayan Irom Manila. At about 3:00 a.m., the bus while running at a high speed Iell on a ravine
somewhere in Barangay Baliling, Sta. Fe, Nueva Vizcaya, which resulted in the death oI Marie
Grace and physical injuries to other passengers.
On May 14, 1996, respondent heirs oI the deceased Iiled a complaint Ior damages arising
Irom culpa contractual against petitioner. In its answer, the petitioner claimed that the incident
was purely accidental and that it has always exercised extraordinary diligence in its 50 years oI
operation.

Issue: Whether petitioner should be held liable Ior breach oI contract oI carriage.

Ruling: Petitioner was correctly Iound liable Ior breach oI contract oI carriage. A common
carrier is bound to carry its passengers saIely as Iar as human care and Ioresight can provide,
using the utmost diligence oI very cautious persons, with due regard to all the circumstances. In
a contract oI carriage, it is presumed that the common carrier was at Iault or was negligent when
a passenger dies or is injured. Unless the presumption is rebutted, the court need not even make
an express Iinding oI Iault or negligence on the part oI the common carrier. This statutory
presumption may only be overcome by evidence that the carrier exercised extraordinary
diligence.
In the instant case, there is no evidence to rebut the statutory presumption that the
proximate cause oI Marie Grace`s death was the negligence oI petitioner. ence, the courts
below correctly ruled that petitioner was guilty oI breach oI contract oI carriage.
















FGU vs Sarmiento, 386SCRA312, 6 August 2002

Facts: G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty
(30) units oI Condura S.D. white reIrigerators aboard one oI its Isuzu truck, driven by Lambert
Eroles, Irom the plant site oI Concepcion Industries, Inc., along South Superhighway in Alabang,
Metro Manila, to the Central Luzon Appliances in Dagupan City. While the truck was traversing
the north diversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it
collided with an unidentiIied truck, causing it to Iall into a deep canal, resulting in damage to the
cargoes.
FGU Insurance Corporation (FGU), an insurer oI the shipment, paid to Concepcion
Industries, Inc., the value oI the covered cargoes in the sum oI P204,450.00. FGU, in turn, being
the subrogee oI the rights and interests oI Concepcion Industries, Inc., sought reimbursement oI
the amount it had paid to the latter Irom GPS. Since the trucking company Iailed to heed the
claim, FGU Iiled a complaint Ior damages and breach oI contract oI carriage against GPS and its
driver Lambert Eroles with the Regional Trial Court, Branch 66, oI Makati City. In its answer,
respondents asserted that GPS was the exclusive hauler only oI Concepcion Industries, Inc.,
since 1988, and it was not so engaged in business as a common carrier. Respondents Iurther
claimed that the cause oI damage was purely accidental.

Issues:Whether or not respondent GPS may be considered as a common carrier deIined under
law and existing jurisprudence.
Whether respondent may be presumed to have been negligent when the goods it
undertook to transport saIely were subsequently damaged while in its protective custody and
possession.
Whether the doctrine oI Res Ipsa Loquitor is applicable in the instant case.

Ruling: On the Iirst issue, GPS, being an exclusive contractor and hauler oI Concepcion
Industries, Inc., rendering or oIIering its services to no other individual or entity, cannot be
considered a common carrier. Common carriers are persons, corporations, Iirms or associations
engaged in the business oI carrying or transporting passengers or goods or both, by land, water,
or air, Ior hire or compensation, oIIering their services to the public, whether to the public in
general or to a limited clientele in particular, but never on an exclusive basis. The true test oI a
common carrier is the carriage oI passengers or goods, providing space Ior those who opt to avail
themselves oI its transportation service Ior a Iee. Given accepted standards, GPS scarcely Ialls
within the term "common carrier."The above conclusion nothwithstanding, GPS cannot escape
Irom liability.
In culpa contractual, upon which the action oI petitioner rests as being the subrogee oI
Concepcion Industries, Inc., the mere prooI oI the existence oI the contract and the Iailure oI its
compliance justiIy, prima Iacie, a corresponding right oI relieI. The law, recognizing the
obligatory Iorce oI contracts, will not permit a party to be set Iree Irom liability Ior any kind oI
misperIormance oI the contractual undertaking or a contravention oI the tenor thereoI. A breach
upon the contract conIers upon the injured party a valid cause Ior recovering that which may
have been lost or suIIered
A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a
deIendant liable where the thing which caused the injury complained oI is shown to be under the
latters management and the accident is such that, in the ordinary course oI things, cannot be
expected to happen iI those who have its management or control use proper care. It aIIords
reasonable evidence, in the absence oI explanation by the deIendant, that the accident arose Irom
want oI care. It is not a rule oI substantive law and, as such, it does not create an independent
ground oI liability. The maxim simply places on the deIendant the burden oI going Iorward with
the prooI.

Resort to the doctrine, however, may be allowed only when (a) the event is oI a kind
which does not ordinarily occur in the absence oI negligence; (b) other responsible causes,
including the conduct oI the plaintiII and third persons, are suIIiciently eliminated by the
evidence; and (c) the indicated negligence is within the scope oI the deIendant's duty to the
plaintiII.

Thus, it is not applicable when an unexplained accident may be attributable to one oI
several causes, Ior some oI which the deIendant could not be responsible.
Res ipsa loquitur generally Iinds relevance whether or not a contractual relationship
exists between the plaintiII and the deIendant, Ior the inIerence oI negligence arises Irom the
circumstances and nature oI the occurrence and not Irom the nature oI the relation oI the parties.
Nevertheless, the requirement that responsible causes other than those due to deIendants conduct
must Iirst be eliminated, Ior the doctrine to apply, should be understood as being conIined only
to cases oI pure (non-contractual) tort since obviously the presumption oI negligence in culpa
contractual, as previously so pointed out, immediately attaches by a Iailure oI the covenant or its
tenor. In the case oI the truck driver, whose liability in a civil action is predicated on culpa
acquiliana, while he admittedly can be said to have been in control and management oI the
vehicle which Iigured in the accident, it is not equally shown, however, that the accident could
have been exclusively due to his negligence, a matter that can allow, Iorthwith, res ipsa loquitur
to work against him.
















LRTA vs Natividad, 397SCRA75, 6 February 2003

Facts: On 14 October 1993, about halI an hour past seven o`clock in the evening, Nicanor
Navidad, then drunk, entered the EDSA LRT station aIter purchasing a "token" (representing
payment oI the Iare). While Navidad was standing on the platIorm near the LRT tracks, Junelito
Escartin, the security guard assigned to the area approached Navidad. A misunderstanding or an
altercation between the two apparently ensued that led to a Iist Iight. No evidence, however, was
adduced to indicate how the Iight started or who, between the two, delivered the Iirst blow or
how Navidad later Iell on the LRT tracks. At the exact moment that Navidad Iell, an LRT train,
operated by petitioner RodolIo Roman, was coming in. Navidad was struck by the moving train,
and he was killed instantaneously.
On 08 December 1994, the widow oI Nicanor, herein respondent Marjorie Navidad,
along with her children, Iiled a complaint Ior damages against Junelito Escartin, RodolIo Roman,
the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and Prudent Ior the death oI her
husband. LRTA and Roman Iiled a counterclaim against Navidad and a cross-claim against
Escartin and Prudent. Prudent, in its answer, denied liability and averred that it had exercised due
diligence in the selection and supervision oI its security guards.

Issue: Whether or not the Court oI Appeals erred in Iinding that petitioners are liable Ior the
death oI Navidad.
Whether or not the Court oI Appeals erred in Iinding that Roman is an employee oI
LRTA.

Ruling: Law and jurisprudence dictate that a common carrier, both Irom the nature oI its business
and Ior reasons oI public policy, is burdened with the duty oI exercising utmost diligence in
ensuring the saIety oI passengers
The law requires common carriers to carry passengers saIely using the utmost diligence
oI very cautious persons with due regard Ior all circumstances. Such duty oI a common carrier to
provide saIety to its passengers so obligates it not only during the course oI the trip but Ior so
long as the passengers are within its premises and where they ought to be in pursuance to the
contract oI carriage. The statutory provisions render a common carrier liable Ior death oI or
injury to passengers (a) through the negligence or wilIul acts oI its employees or b) on account oI
wilIul acts or negligence oI other passengers or oI strangers iI the common carrier`s employees
through the exercise oI due diligence could have prevented or stopped the act or omission. In
case oI such death or injury, a carrier is presumed to have been at Iault or been negligent, and by
simple prooI oI injury, the passenger is relieved oI the duty to still establish the Iault or
negligence oI the carrier or oI its employees and the burden shiIts upon the carrier to prove that
the injury is due to an unIoreseen event or to Iorce majeure. In the absence oI satisIactory
explanation by the carrier on how the accident occurred, which petitioners, according to the
appellate court, have Iailed to show, the presumption would be that it has been at Iault, an
exception Irom the general rule that negligence must be proved.
The Ioundation oI LRTA`s liability is the contract oI carriage and its obligation to
indemniIy the victim arises Irom the breach oI that contract by reason oI its Iailure to exercise
the high diligence required oI the common carrier. In the discharge oI its commitment to ensure
the saIety oI passengers, a carrier may choose to hire its own employees or avail itselI oI the
services oI an outsider or an independent Iirm to undertake the task. In either case, the common
carrier is not relieved oI its responsibilities under the contract oI carriage.
Regrettably Ior LRT, as well as perhaps the surviving spouse and heirs oI the late
Nicanor Navidad, this Court is concluded by the Iactual Iinding oI the Court oI Appeals that
"there is nothing to link (Prudent) to the death oI Nicanor (Navidad), Ior the reason that the
negligence oI its employee, Escartin, has not been duly proven x x x." This Iinding oI the
appellate court is not without substantial justiIication in our own review oI the records oI the
case.
There being, similarly, no showing that petitioner RodolIo Roman himselI is guilty oI
any culpable act or omission, he must also be absolved Irom liability. Needless to say, the
contractual tie between the LRT and Navidad is not itselI a juridical relation between the latter
and Roman; thus, Roman can be made liable only Ior his own Iault or negligence.

























Rodzssen Supply Co. Inc vs Far East Bank, 357SCRA618, 9 May 2001

Facts: On January 15, 1979, petitioner Rodzssen Supply Inc. applied Ior, and obtained an
irrevocable 30-day domestic Letter oI Credit (LC) in Iavor oI Ekman and Company Inc., Irom
respondent Far East Bank and Trust Company Inc., in the amount oI P190, 000.00, to Iinance the
purchase oI Iive units oI hydraulic loaders. Said LC was set to expire on February 15, 1979 but
subsequent amendments extended its validity up to October 16, 1979.
On March 16, 1979, three units oI the hydraulic loaders were delivered Ior which the
bank on March 26, 1979, paid Ekman. The shipment oI the remaining two units oI hydraulic
loaders valued at P76,000.00 sent by Ekman was readily received by the deIendant beIore the
expiry date oI the LC. Upon Ekman's presentation oI the documents Ior the P76,000.00
representing Iinal negotiation on the LC beIore the expiry date, and aIter a series oI negotiations,
the bank paid to Ekman the amount oI P76,000.00 and when the bank demanded payment Irom
Rodzssen, it reIused to pay without any valid reason.

Issue: Whether or not the petitioner is liable to pay respondent bank.

Ruling: The bank paid Ekman when the Iormer was no longer bound to do so under the subject
Letter oI Credit. The records show that respondent paid the Iormer P76,000 Ior the last two
hydraulic loaders on March 14, 1980, Iive months aIter the expiration oI the Letter oI Credit on
October 16, 1979.
The subject Letter oI Credit had become invalid upon the lapse oI the period Iixed. Thus,
respondent should not have paid Ekman Ior it was not obliged to do so as the Letter oI Credit had
already expired and had in Iact been cancelled.
owever, Petitioner is still liable to pay and reimburse respondent bank the amount oI
P76, 000.00 plus interest. Respondent`s right to seek recovery Irom petitioner is anchored, not
upon the ineIIicacious Letter oI Credit, but on Article 2142 oI the Civil Code which reads:
'Certain lawIul, voluntary and unilateral acts give rise to the juridical relation oI quasi-contract
to the end that no one shall be unjustly enriched at the expense oI another. Though respondent
bank erred in paying Ekman, the act oI petitioner that is voluntarily receiving and keeping the
loaders has put them in an equal Iooting. When both parties in a transaction are mutually
negligent in the perIormance oI their obligations, the Iault oI one cancels the negligence oI the
other, as in this case, their rights and obligations may be determined equitably under the law
proscribing unjust enrichment.





University oI the East vs Jader, 17 February 2000

Facts: Respondent was not able to take the bar examinations as he was not able to pass the exam
in the subject which he Iailed during his graduating year in petitioner school. Respondent
thought he passed the said subject as he was allowed to graduate. e even attended the
graduating ceremonies attended by his Iamily and had his pictures taken. e even threw a party
Ior said graduation. e enrolled in review classes as well only to Iind out that he could not take
the Bar.

Issue: Whether or not U.E. can held liable Ior damages Ior misleading a student into believing
that the latter had satisIied all the requirements Ior graduation when such is not the case.

Ruling: When a student is enrolled in any educational or learning institution, a contract oI
education is entered into between said institution and the student. The proIessors, teachers or
instructors hired by the school are considered merely as agents and administrators tasked to
perIorm the school's commitment under the contract. Since the contracting parties are the school
and the student, the latter is not duty-bound to deal with the Iormer's agents, such as the
proIessors with respect to the status or result oI his grades, although nothing prevents either
proIessors or students Irom sharing with each other such inIormation.
Educational institutions are duty-bound to inIorm the students oI their academic status
and not wait Ior the latter to inquire Irom the Iormer. It is the contractual obligation oI the school
to timely inIorm and Iurnish suIIicient notice and inIormation to each and every student as to
whether he or she had already complied with all the requirements Ior the conIerment oI a degree
or whether they would be included among those who will graduate. Petitioner ought to have
known that time was oI the essence in the perIormance oI its obligation to inIorm respondent oI
his grade. It cannot Ieign ignorance that respondent will not prepare himselI Ior the bar exams
since that is precisely the immediate concern aIter graduation oI an LL.B. graduate. It Iailed to
act seasonably. Petitioner cannot just give out its student's grades at any time because a student
has to comply with certain deadlines set by the Supreme Court on the submission oI
requirements Ior taking the bar. Petitioner is thereIore liable Ior damages because oI belatedly
inIorming respondent oI the result oI the removal examination, particularly at a time when he
had already commenced preparing Ior the bar exams, and in misleading the latter into believing
that he had satisIied all requirements Ior the course.









Bayne Adjusters vs CA, 323SCRA231, 25 January 2000

Facts: In May 1987, Colgate Palmolive Philippine, Inc., imported alkyl benzene Irom Japan and
insured it with private respondent Insurance Company oI North America against all risk Ior its
Iull value. Petitioner Bayne Adjusters and Surveyors Inc. on the other hand was contracted by
the consignee to supervise the proper handling and discharge oI the cargo Irom the chemical
tanker to a receiving barge.
When the cargo arrived in Manila petitioner's surveyor supervised the transIer oI the
cargo Irom the chemical tanker to the receiving barge. Pumping oI the liquid cargo Irom the
barge to the consignee's tank was however interrupted several times due to mechanical problems
with the pump. When the pump broke down once again on June 29, 1987, the petitioner's
surveyor leIt the premises without leaving any instruction with the barge Ioreman what to do in
the event that the pump becomes operational again. No other surveyor was leIt in the premises
and the assigned surveyor did not seal the valves leading to the tank to avoid unsupervised
pumping oI the cargo. Later that day, the consignee asked the petitioner to send a surveyor to
conduct tank sounding. Petitioner sent Amado Fontillas, a cargo surveyor, not a liquid bulk
surveyor, to the premises and it was agreed that pumping operation would resume the Iollowing
day at 1030 hours. Fontillas tried to inIorm both the barge men and the assigned surveyor oI the
scheduled resumption oI pumping operation but he could not Iind them so he leIt the premises.
When the barge men arrived in the early evening, they Iound the valves oI the tank open and
resumed pumping operation in the absence oI any instruction Irom the surveyor to the contrary.
The Iollowing morning it was Iound that an undetermined amount oI alkyl benzene was lost due
to overIlow. The consignee Iiled a claim with the private respondent insurance corporation Ior
the value oI the lost liquid cargo. Private respondent on the other hand Iiled action Ior collection
oI sum oI money as subrogee oI the consignee aIter Iailure to extrajudicially settle the matter
with Bayne Adjusters.

Issue: Whether or not petitioner was negligent in the perIormance oI its obligation.

Ruling: Both parties agree that the petitioner is bound to supervise the proper discharge oI the
liquid cargo and transIer oI the same.
It is clear that under the standard procedure the surveyor is required to seal all cargo
compartment manhole covers and the barge and maniIold covers to avoid unsupervised discharge
oI the liquid cargo and to avert loss or contamination thereoI. Although the cessation oI the
pumping operations in this case was not voluntarily requested by the consignee, but was due to
mechanical problems with the pump, there is greater reason to comply with the above quoted
standard procedure. The recurring pump break down should have warned the petitioner's
assigned surveyor oI the need to exercise extreme caution and closer supervision to saIeguard the
proper discharge oI the cargo as the pump break down hindered normal pumping operations.
Instead the petitioner's assigned surveyor disregarded the standard procedure and leIt the pump
site without leaving any instruction or directive with the barge pump operators. This paved the
way Ior the barge pump operator's discharge oI the cargo without expert supervision resulting to
the spillage oI the liquid cargo which is the proximate cause Ior the damages. ence, petitioner is
negligent.












Delsan Transport vs. C&A Construction, Inc., GR No. 156034, 1 October 2003

Facts: C & A Construction, Inc. was engaged by the National ousing Authority (NA) to
construct a deIlector wall at the Vitas Reclamation Area. The project was completed in 1994 but
it was not Iormally turned over to NA.
On October 9, 1994, M/V Delsan Express, a ship owned and operated by petitioner
Delsan Transport Lines, Inc., anchored at the Navotas Fish Port Ior the purpose oI installing a
cargo pump and clearing the cargo oil tank. At around 12:00 midnight oI October 20, 1994,
Captain Demetrio T. Jusep oI M/V Delsan Express received a report Irom his radio head operator
in Japan that a typhoon was going to hit Manila in about eight (8) hours. At approximately 8:35
in the morning oI October 21, 1994, Capt. Jusep tried to seek shelter at the North arbor but
could not enter the area because it was already congested. At 10:00 a.m., Capt. Jusep decided to
drop anchor at the vicinity oI Vitas mouth, 4 miles away Irom a Napocor power barge. At that
time, the waves were already reaching 8 to 10 Ieet high. Capt. Jusep ordered his crew to go Iull
ahead to counter the wind which was dragging the ship towards the Napocor power barge. To
avoid collision, Capt. Jusep ordered a Iull stop oI the vessel. e succeeded in avoiding the power
barge, but when the engine was re-started and the ship was maneuvered Iull astern, it hit the
deIlector wall constructed by respondent. The damage caused by the incident amounted to
P456,198.24.
Respondent demanded payment oI the damage Irom petitioner but the latter reIused to
pay. Consequently, respondent Iiled a complaint Ior damages with the Regional Trial Court oI
Manila, Branch 46, which was docketed as Civil Case No. 95-75565. In its answer, petitioner
claimed that the damage was caused by a Iortuitous event.

Issue: Whether or not Capt. Jusep was negligent; (2) II yes, whether or not petitioner is solidarily
liable under Article 2180 oI the Civil Code Ior the quasi-delict committed by Capt. Jusep?

Ruling: Article 2176 oI the Civil Code provides that whoever by act or omission causes damage
to another, there being Iault or negligence, is obliged to pay Ior the damage done. Such Iault or
negligence, iI there is no pre-existing contractual relation between the parties, is called a quasi-
delict . The test Ior determining the existence oI negligence in a particular case may be stated as
Iollows: Did the deIendant in doing the alleged negligent act use the reasonable care and caution
which an ordinary prudent person would have used in the same situation? II not, then he is guilty
oI negligence.
In the case at bar, Capt. Jusep was negligent in deciding to transIer the vessel only at 8:35
in the morning oI October 21, 1994. As early as 12:00 midnight oI October 20, 1994, he received
a report Irom his radio head operator in Japan that a typhoon was going to hit Manila aIter 8
hours. This, notwithstanding, he did nothing, until 8:35 in the morning oI October 21, 1994,
when he decided to seek shelter at the North arbor, which unIortunately was already congested.
e cannot claim that he waited Ior the sun to rise instead oI moving the vessel at midnight
immediately aIter receiving the report because oI the diIIiculty oI traveling at night. The hour oI
8:35 a.m. is way past sunrise. Furthermore, he did not transIer as soon as the sun rose because,
according to him, it was not very cloudy and there was no weather disturbance yet.
Furthermore, when he ignored the weather report notwithstanding reasonable Ioresight oI
harm, Capt. Jusep showed anexcusable lack oI care and caution which an ordinary prudent
person would have observed in the same situation. ad he moved the vessel earlier, he could
have had greater chances oI Iinding a space at the North arbor considering that the Navotas
Port where they docked was very near North arbor. Even iI the latter was already congested, he
would still have time to seek reIuge in other ports.
PCIB vs CA, 350SCRA446, 29 January 2001

Facts: Ford, Philippines issued Citibank Checks in the amounts oI P4,746,114.41, P5,851,706.37
and P6,311,591.73. These checks were Ior the payment oI percentage taxes due Ior diIIerent
periods in the years 1978 and 1979. They were coursed through PCIBank in the ordinary
banking procedure, sent to the Central clearing with indorsement 'all prior indorsement and/or
lack oI indorsement guaranteed, presented to Citibank Ior payment and were given
corresponding BIR Revenue Tax Receipts. Upon veriIication, it was discovered that these
payments were not deposited to the account oI the CIR Ior which Ford was compelled to make
second payments oI same amounts.
The NBI Iound out that the anomalies were instituted by one and the same syndicate
consisting oI employees oI Ford, PCIBank and BIR. Such syndicate made possible the issuance
oI spurious BIR receipts, switching oI worthless Bank oI America checks and valid Citibank
checks and diversion oI Iunds to a dummy account.

Issue: Whether or not petitioner Ford has the right to recover Irom the collecting bank (PCIB)
and the drawee bank (Citibank) the value oI the checks intended as payment to the CIR.

Ruling: The Court decided that PCIB is exclusively liable Ior the value oI Citibank Check No.
SN-04867 because its actions were the proximate cause oI Ford`s injury. PCIB Iailed to veriIy
the authority oI Mr. Rivera, Ford`s employee, to negotiate checks and instead prepared two
manager`s checks which enabled the syndicate to encash the same. It was Iound negligent when
it did not ensure that the check in payment oI percentage taxes be deposited in the account oI the
CIR considering that PCIB is the authorized collecting bank oI BIR. In addition, the clearing
stamp at the back oI the check stating 'All prior indorsements and/or lack oI indorsement
guaranteed provided warranty as to the authenticity and propriety oI the negotiation oI checks
which leIt Citibank with no option but to pay it.
As Ior Citibank Check Nos. SN-10597 and 16508, Citibank and PCIB were held jointly
liable Ior the corresponding amounts. ad Citibank taken note oI the absence oI clearing stamps
and initials at the back oI the two checks, the switching oI the worthless Bank oI America checks
and the valid Citibank checks would have been discovered on time. Citibank was deIicient in
perIorming what was incumbent upon it. PCIB, on the other hand, cannot escape liability Ior
Central Bank Circular No. 580, series oI 1977 provides that any theIt aIIecting items in transit
Ior clearing shall be Ior the account oI sending bank, which in this case is PCIB.
The general rule is that a bank is liable Ior the Iraudulent acts or representations oI an
oIIicer or agent acting within the course and apparent scope oI his employment or authority. II
an oIIicer or employee oI a bank, in his oIIicial capacity, receives money to satisIy an evidence
oI indebtedness lodged with his bank Ior collection, the bank is liable Ior his misappropriation oI
such sum.
Thus invoking the doctrine oI comparative negligence, the Court viewed that both PCIB
and Citibank Iailed in their respective obligations and both were negligent in the selection and
supervision oI their employees resulting to the embezzlement oI millions oI cash.
The banking business is so impressed with public interest such that the appropriate
standard oI diligence must be very high. A bank`s liability as an obligor is not merely vicarious
but primary, wherein the deIense oI exercise oI due diligence in the selection and supervision oI
its employees is oI no moment.
Ford was absolved Irom sharing with the liability oI the banks even iI one oI the
members oI the syndicate is one oI its employees since such employee was never authorized by
Ford`s Board oI Directors to recall check SN-04867. The act oI Mr. Rivera was not within the
scope oI his assignment as employee oI Ford.
SMC and eirs oI Ouana vs CA, GR No. 141716, 4 July 2002

Facts: San Miguel Corporation entered into a Time Charter Party Agreement with Julius Ouano,
doing business under the name and style J. Ouano Marine Services. Under the terms oI the
agreement, SMC chartered the M/V Doa Roberta owned by Julius Ouano Ior a period oI two
years, Irom June 1, 1989 to May 31, 1991, Ior the purpose oI transporting SMC`s beverage
products Irom its Mandaue City plant to various points in Visayas and Mindanao.
On November 11, 1990, during the term oI the charter, SMC issued sailing orders to the
Master oI the MN Doa Roberta, Captain Sabiniano Inguito who obtained the necessary sailing
clearance Irom the Philippine Coast Guard. The vessel leIt Mandaue City 6:00 a.rn. November
12, 1990.
At 7:00 a.m., November 12, 1990, one hour aIter the M/V Doa Roberta departed Irom
Mandaue City and while it was abeam Cawit Island oII Cebu, SMC Radio Operator Rogelio P.
Moreno contacted Captain Inguito through the radio and advised him to take shelter. Captain
Inguito replied that they will proceed since the typhoon was Iar away Irom them, and that the
winds were in their Iavor.


At 2:00 p.m., Moreno again communicated with Captain Inguito and advised him to take
shelter. The captain responded that they can manage.

earing this, Moreno immediately tried to
get in touch with Rico Ouano to tell him that Captain Inguito did not heed their advice. owever,
Rico Ouano was out oI his oIIice, so Moreno leIt the message with the secretary.
Moreno again contacted Captain Inguito at 4:00 p.m. oI November 12, 1990 and
reiterated the advice and pointed out that it will be diIIicult to take shelter aIter passing Balicasag
Island because they were approaching an open sea. Still, the captain reIused to heed his advice.

At 1:15 a.m., November 13, 1990, Captain Inguito called Moreno over the radio and
requested him to contact Rico Ouano, son oI Julius Ouano, because they needed a helicopter to
rescue them. The vessel was about 20 miles west oI Sulauan Point.


At 1:15 a.m., November 13, 1990, Captain Inguito called Moreno over the radio and
requested him to contact Rico Ouano, son oI Julius Ouano, because they needed a helicopter to
rescue them. Upon being told by SMC`s radio operator, Rico Ouano turned on his radio and read
the distress signal Irom Captain Ingiuto.
At 2:30 a.m. oI November 13, 1990, the M/V Doa Roberta sank. Out oI the 25 oIIicers
and crew on board the vessel, only Iive crew members survived.

Issue: Who can be held liable Ior damages?

Ruling: The evidence does not show that SMC or its employees were amiss in their duties. The
Iacts indubitably establish that SMC`s Radio Operator, Rogelio P. Moreno, who was tasked to
monitor every shipment oI its cargo, contacted Captain Inguito several times and advised him to
take shelter Irom typhoon Ruping. owever, Capt. Inguito reIused to heed the advice.
In contrast to the care exercised by Moreno, Rico Ouano tried to communicate with the
captain only aIter receiving the S.O.S. message. Neither Ouano nor his son was available during
the entire time that the vessel set out and encountered Ioul weather. Considering that the charter
was a contract oI aIIreightment, the shipowner had the clear duty to ensure the saIe carriage and
arrival oI goods transported on board its vessels. More speciIically, Ouano expressly warranted
in the Time Charter Party that his vessel was seaworthy meaning, that the vessel is adequately
equipped Ior the voyage and manned with a suIIicient number oI competent oIIicers and crew.

Seaworthiness is deIined as the suIIiciency oI the vessel in materials, construction, equipment,
oIIicers, men, and outIit, Ior the trade or service in which it is employed. It includes the Iitness oI
a ship Ior a particular voyage with reIerence to its physical and mechanical condition, the extent
oI its Iuel and provisions supply, the quality oI its oIIicers and crew, and its adaptability Ior the
time oI voyage proposed.
Ouano is thereIore vicariously liable Ior the negligent acts oI his employee, Captain
Inguito. Under Articles 2176 and 2180 oI the Civil Code, owners and managers are responsible
Ior damages caused by the negligence oI a servant or an employee, the master or employer is
presumed to be negligent either in the selection or in the supervision oI that employee. This
presumption may be overcome only by satisIactorily showing that the employer exercised the
care and the diligence oI a good Iather oI a Iamily in the selection and the supervision oI its
employee. Ouano however in this case miserably Iailed to overcome the presumption oI his
negligence. e Iailed to present prooI that he exercised the due diligence oI a bonus
paterIamilias in the selection and supervision oI the captain oI the M/V Doa Roberta thus his
liability.






























Mendoza vs Soriano, 8 June 2007

Facts: At around 1:00 a.m., July 14, 1997, Sonny Soriano, while crossing Commonwealth
Avenue near Luzon Avenue in Quezon City, was hit by a speeding Tamaraw FX driven by
Lomer Macasasa. Soriano was thrown Iive meters away, while the vehicle only stopped some 25
meters Irom the point oI impact. Gerard Villaspin, one oI Soriano`s companions, asked
Macasasa to bring Soriano to the hospital, but aIter checking out the scene oI the incident,
Macasasa returned to the FX, only to Ilee. A school bus brought Soriano to East Avenue
Medical Center where he later died. Subsequently, the Quezon City Prosecutor recommended
the Iiling oI a criminal case Ior reckless imprudence resulting to homicide against Macasasa.
On August 20, 1997, respondents Mutya Soriano and Julie Ann Soriano, Soriano`s wiIe and
daughter, respectively, Iiled a complaint Ior damages against Macasasa and petitioner Flordeliza
Mendoza, the registered owner oI the vehicle. The complaint was docketed as Civil Case No. C-
18038 in the Regional Trial Court oI Caloocan City, Branch 121. Respondents prayed that Macasasa
and petitioner be ordered to pay them: P200,000 moral damages; P500,000 Ior lost income; P22,250
Ior Iuneral services; P45,000 Ior burial lot; P15,150 Ior interment and lapida; P8,066 Ior
hospitalization, other medical and transportation expenses; P28,540 Ior Iood and drinks during the
wake; P50,000 exemplary damages; P60,000 indemnity Ior Soriano`s death; and P25,000 Ior
attorney`s Iees plus P500 per court appearance.
In her answer, petitioner Mendoza maintained that she was not liable since as owner oI
the vehicle, she had exercised the diligence oI a good Iather oI a Iamily over her employee,
Macasasa.

Issue: Whether or not the owner is still liable Ior damages.

Ruling: While respondents could recover damages Irom Macasasa in a criminal case and
petitioner could become subsidiarily liable, still petitioner, as owner and employer, is directly
and separately civilly liable Ior her Iailure to exercise due diligence in supervising Macasasa.
We must emphasize that this damage suit is Ior the quasi-delict oI petitioner, as owner and
employer, and not Ior the delict oI Macasasa, as driver and employee.
Under Article 2180 oI the Civil Code, employers are liable Ior the damages caused by their
employees acting within the scope oI their assigned tasks. The liability arises due to the
presumed negligence oI the employers in supervising their employees unless they prove that they
observed all the diligence oI a good Iather oI a Iamily to prevent the damage.
In this case, we hold petitioner primarily and solidarily liable Ior the damages caused by
Macasasa. Respondents could recover directly Irom petitioner since petitioner Iailed to prove that
she exercised the diligence oI a good Iather oI a Iamily in supervising Macasasa. Indeed, it is
unIortunate that petitioner harbored the notion that the Regional Trial Court did not have
jurisdiction over the case and opted not to present her evidence on this point.


Cerezo vs Tuazon, 426SCRA167, 23 March 2004

Facts: NA 241 collided with a tricycle bearing plate number TC RV 126 along Captain M. Palo
Street, Sta. Ines, Mabalacat, Pampanga. On 1 October 1993, tricycle driver Tuazon Iiled a
complaint Ior damages against Mrs. Cerezo, as owner oI the bus line, her husband Attorney Juan
Cerezo ('Atty. Cerezo), and bus driver Danilo A. Foronda ('Foronda). At the time oI the
incident, plaintiII |Tuazon| was in his proper lane when the second-named deIendant |Foronda|,
being then the driver and person in charge oI the Country Bus with plate number NA 241, did
then and there willIully, unlawIully, and Ieloniously operate the said motor vehicle in a
negligent, careless, and imprudent manner without due regard to traIIic rules and regulations,
there being a 'Slow Down sign near the scene oI the incident, and without taking the necessary
precaution to prevent loss oI lives or injuries, his negligence, carelessness and imprudence
resulted to severe damage to the tricycle and serious physical injuries to plaintiII thus making
him unable to walk and becoming disabled, with his thumb and middle Iinger on the leIt hand
being cut|.|
On 1 October 1993, Tuazon Iiled a motion to litigate as a pauper. Subsequently, the trial
court issued summons against Atty. Cerezo and Mrs. Cerezo ('the Cerezo spouses) at the
Makati address stated in the complaint.

Issue: Whether or not Mrs. Cerezo is still liable.

Ruling: The same negligent act may produce civil liability arising Irom a delict under Article 103
oI the Revised Penal Code, or may give rise to an action Ior a quasi-delict under Article 2180 oI
the Civil Code. An aggrieved party may choose between the two remedies. An action based on a
quasi-delict may proceed independently Irom the criminal action.
Tuazon chose to Iile an action Ior damages based on a quasi-delict. In his complaint,
Tuazon alleged that Mrs. Cerezo, 'without exercising due care and diligence in the supervision
and management oI her employees and buses, hired Foronda as her driver. Tuazon became
disabled because oI Foronda`s 'recklessness, gross negligence and imprudence, aggravated by
Mrs. Cerezo`s 'lack oI due care and diligence in the selection and supervision oI her employees,
particularly Foronda.
The responsibility oI two or more persons who are liable Ior a quasi-delict is solidary. Where
there is a solidary obligation on the part oI debtors, as in this case, each debtor is liable Ior the
entire obligation. ence, each debtor is liable to pay Ior the entire obligation in Iull. There is no
merger or renunciation oI rights, but only mutual representation. Where the obligation oI the
parties is solidary, either oI the parties is indispensable, and the other is not even a necessary
party because complete relieI is available Irom either. ThereIore, jurisdiction over Foronda is not
even necessary as Tuazon may collect damages Irom Mrs. Cerezo alone.
Moreover, an employer`s liability based on a quasi-delict is primary and direct, while the
employer`s liability based on a delict is merely subsidiary. The words 'primary and direct, as
contrasted with 'subsidiary, reIer to the remedy provided by law Ior enIorcing the obligation
rather than to the character and limits oI the obligation. Although liability under Article 2180
originates Irom the negligent act oI the employee, the aggrieved party may sue the employer
directly. When an employee causes damage, the law presumes that the employer has himselI
committed an act oI negligence in not preventing or avoiding the damage. This is the Iault that
the law condemns. While the employer is civilly liable in a subsidiary capacity Ior the
employee`s criminal negligence, the employer is also civilly liable directly and separately Ior his
own civil negligence in Iailing to exercise due diligence in selecting and supervising his
employee. The idea that the employer`s liability is solely subsidiary is wrong.














































Viron vs De Los Santos, 345SCRA509, 22 November 2000

Facts: PlaintiII, a public utility transportation company, is the registered owner oI Viron Transit
Bus No. 1080, with Plate No. TB-AVC-332; while the deIendant Rudy Samidan is the registered
owner oI the Forward Cargo Truck with Plate No. TD-524 which, at the time oI the vehicular
accident in question, was driven and operated by the deIendant Alberto delos Santos y
Natividad. On August 16, 1993, at around 2:30 in the aIternoon, the aIoresaid bus was driven by
plaintiII`s regular driver WilIredo Villanueva along MacArthur ighway within the vicinity oI
Barangay Parsolingan, Gerona, Tarlac coming Irom the North en route to its destination in
Manila. It was Iollowing the Forward Cargo Truck proceeding Irom the same direction then
being driven, as aIoresaid, by the deIendant Alberto delos Santos. The cargo truck swerved to
the right shoulder oI the road and, while about to be overtaken by the bus, again swerved to the
leIt to occupy its lane. It was at that instance that the collision occurred, the leIt Iront side oI the
truck collided with the right Iront side oI the bus causing the two vehicles substantial damages.

Issue: Whether or not the Court oI Appeals erred in Iinding that the accident was due to the Iault
oI the petitioner`s driver.

Ruling: There is no doubt whatsoever, in the mind oI the Court, on the basis oI the documentary
evidence and the testimonies oI the witnesses, that the vehicular collision was due to the
negligence oI plaintiII`s regular driver, WilIredo Villanueva y Gaudia, at that time. The cargo
truck was on its proper lane at the time oI the collision. In Iact, the cargo truck even swerved to
the right shoulder oI the road to give much room Ior the Viron bus to pass. Notwithstanding the
condition oI the road and the in-coming Dagupan Bus Irom the opposite direction, the Viron bus
nonetheless proceeded to overtake the cargo truck, bringing about the collision. The evidence is
uniIorm as to that Iact. Indeed, no witnesses Ior the plaintiII ever contradicted the obtrusive Iact
that it was while in the process oI overtaking the cargo truck that the Viron bus collided with the
Iormer vehicle.
It is here well to recall that the driver oI an overtaking vehicle must see to it that the
conditions are such that an attempt to pass is reasonably saIe and prudent, and in passing must
exercise reasonable care. In the absence oI clear evidence oI negligence on the part oI the
operator oI the overtaken vehicle, the courts are inclined to put the blame Ior an accident
occurring while a passage is being attempted on the driver oI the overtaking vehicle (People vs.
Bolason, (C.A.) 53 OII. Gaz. 4158). As already intimated elsewhere in this judgment, no
evidence was presented by the plaintiII to even intimate at the negligence oI the driver oI the
cargo truck.
It is plain to see that the Iault or negligence was attributable to the driver oI the Viron
passenger bus. Petitioner proceeds to attack, albeit Ieebly, the credibility oI the two witnesses
presented by private respondents, namely, Alberto delos Santos himselI, who was then the driver
oI the Forward Cargo Truck and a certain Manuel Dulnuan, who was then travelling along the
same highway coming Irom the opposite direction when the accident occurred. According to
petitioner, the two witnesses contradicted each other when 'witness Dulnuan testiIied that the
petitioner`s passenger bus while attempting to overtake the respondents` truck, noticed the
Dagupan passenger bus coming Irom the opposite direction and to avoid hitting said passenger
bus, the Viron Transit passenger bus swerved to the right, hitting in the process the Iront leIt side
portion oI the respondents` truck; while, 'witness Alberto delos Santos testiIied that prior to the
accident, he swerved his truck to the right shoulder oI the road (western lane) and when he
attempted to return to his lane, the accident happened. Contrary to petitioner`s assertion, the
testimonies oI the two witnesses complement, iI not corroborate each other. The Viron
passenger bus collided with the cargo truck in a vain attempt to overtake the latter. At the sight
oI an oncoming bus in the opposite direction, the Viron passenger bus swerved to the right lane
which was then occupied by the cargo truck resulting in the collision oI the two vehicles. In
reIerence to Alberto delos Santos` testimony, the lower court pointed out that the said driver oI
the cargo truck was on its proper lane at the time oI impact, and even swerved earlier toward the
right shoulder oI the road just to give room to the bus. In any event, it is doctrinally entrenched
that the assessment oI the trial judge as to the issue oI credibility binds the appellate court
because he is in a better position to decide the issue, having heard the witnesses and observed
their deportment and manner oI testiIying during the trial, except when the trial court has plainly
overlooked certain Iacts oI substance and value, that, iI considered, might aIIect the result oI the
case, or where the assessment is clearly shown to be arbitrary. Petitioner has not shown this case
to Iall under the exception.


























Mercury Drug vs Baking, 523SCRA184, May 25, 2007

Facts:
On November 25, 1993, Sebastian M. Baking, respondent, went to the clinic oI Dr. Cesar
Sy Ior a medical check-up. On the Iollowing day, aIter undergoing an ECG, blood, and
hematology examinations and urinalysis, Dr. Sy Iound that respondent`s blood sugar and
triglyceride were above normal levels. Dr. Sy then gave respondent two medical prescriptions
Diamicron Ior his blood sugar and Benalize tablets Ior his triglyceride.
Respondent then proceeded to petitioner Mercury Drug Corporation (Alabang Branch) to
buy the prescribed medicines. owever, the saleslady misread the prescription Ior Diamicron
as a prescription Ior Dormicum. Thus, what was sold to respondent was Dormicum, a potent
sleeping tablet.
Unaware that what was given to him was the wrong medicine, respondent took one pill oI
Dormicum on three consecutive days November 6, 1993 at 9:00 p.m., November 7 at 6:00 a.m.,
and November 8 at 7:30 a.m.
On November 8 or on the third day he took the medicine, respondent Iigured in a vehicular
accident. The car he was driving collided with the car oI one Josie Peralta. Respondent Iell
asleep while driving. e could not remember anything about the collision nor Ielt its impact.
Suspecting that the tablet he took may have a bearing on his physical and mental state at
the time oI the collision, respondent returned to Dr. Sy`s clinic. Upon being shown the
medicine, Dr. Sy was shocked to Iind that what was sold to respondent was Dormicum, instead
oI the prescribed Diamicron.

Issue: Whether petitioner was negligent, and iI so, whether such negligence was the proximate
cause oI respondent`s accident.

eld: It is generally recognized that the drugstore business is imbued with public interest. The
health and saIety oI the people will be put into jeopardy iI drugstore employees will not exercise
the highest degree oI care and diligence in selling medicines. Inasmuch as the matter oI
negligence is a question oI Iact, we deIer to the Iindings oI the trial court aIIirmed by the Court
oI Appeals. Obviously, petitioner`s employee was grossly negligent in selling to respondent
Dormicum, instead oI the prescribed Diamicron. Considering that a Iatal mistake could be a
matter oI liIe and death Ior a buying patient, the said employee should have been very cautious in
dispensing medicines. She should have veriIied whether the medicine she gave respondent was
indeed the one prescribed by his physician. The care required must be commensurate with the
danger involved, and the skill employed must correspond with the superior knowledge oI the
business which the law demands.
It is thus clear that the employer oI a negligent employee is liable Ior the damages caused
by the latter. When an injury is caused by the negligence oI an employee, there instantly arises
a presumption oI the law that there has been negligence on the part oI the employer, either in the
selection oI his employee or in the supervision over him, aIter such selection. The presumption,
however, may be rebutted by a clear showing on the part oI the employer that he has exercised
the care and diligence oI a good Iather oI a Iamily in the selection and supervision oI his
employee. ere, petitioner's Iailure to prove that it exercised the due diligence oI a good Iather
oI a Iamily in the selection and supervision oI its employee will make it solidarily liable Ior
damages caused by the latter.
SaIeguard Security vs Tangco, 511SCRA67, 14 December 2006

Facts: Evangline Tangco was shot to death when she was mistaken to stage a hold-up in a bank
when all she wanted to do is to deposit her Iirearm to the accused-guard oI the bank, Pajarillo.
Pajarillo was charged oI homicide. Lauro Tangco, husband oI the deceased, reserved his right to
Iile a separate civil action in said criminal case. The lower and appellate court convicted
Pajarillo.

Issue: Whether or not petitioner may be held solidarily liable Ior the death oI Evangeline Tangco.

Ruling: An act or omission causing damage ot another may give rise to two separate civil
liabilities oI the oIIender, civil liability ex delicto and individual civil liability such as those
arising Irom: a) an act or omission complained oI as a Ielony, and b) an individual civil action.
The individual civil action Iiled was Ior quasi-delict which right was reserved by the private
oIIended party. In quasi-delicts, there is a presumption oI negligence and it is up to the accused
to rebut such presumption. In the instant case, petitioner may not be negligent in the selection oI
its employees as it was able to prove that its applicants undergo several tests but it Iell short on
its supervision. It contends that its employees undergo training and has rules to Iollow. owever,
training undergone by Pajarillo is when he was still a guard in an establishment whose nature is
Iar diIIerent Irom that oI a bank. The rules set Iorth by petitioner is not known to Pajarillo.
Petition denied.
PLETO V. LOMBO, 432 SCRA 329 June 16, 2004

Facts:
Petitioner Philippine Rabbit Bus Lines, Inc. (PRBL), with principal oIIice at Tarlac City,
Tarlac, is a public carrier, engaged in carrying passengers and goods Ior a Iare. It serviced
various routes in Central and Northern Luzon. Petitioner Ernesto Pleyto was a bus driver
employed by PRBL at the time oI the incident in question.
Respondent Maria D. Lomboy oI Calasiao, Pangasinan, is the surviving spouse oI the late
Ricardo Lomboy, who died in Pasolingan, Gerona, Tarlac, in a vehicular accident at around
11:30 a.m. oI May 16, 1995. The accident was a head-on collision between the PRBL bus driven
by petitioner Pleyto and the car where Ricardo was a passenger. Respondent Carmela Lomboy is
the eldest daughter oI Ricardo and Maria Lomboy. Carmela suIIered injuries requiring
hospitalization in the same accident which resulted in her Iather`s death.
On November 29, 1995, herein respondents, as pauper-litigants, Iiled an action Ior
damages against PRBL and its driver, Pleyto, with the RTC oI Dagupan City. In their complaint,
which was docketed as Civil Case No. 95-00724-D, the Lomboys prayed that they be
indemniIied Ior the untimely death oI Ricardo Lomboy, his lost earnings, the medical and
hospitalization expenses oI Carmela, and moral damages.

Issue:
Whether or not the PRBL is also liable Ior the acts oI its employee.

eld:
Indeed, petitioner Pleyto violated traIIic rules and regulations when he overtook the
tricycle despite the presence oI an oncoming car in the other lane. Article 2185 oI the Civil Code
lays down the presumption that a person driving a motor vehicle has been negligent iI at the time
oI the mishap, he was violating any traIIic regulation. As Iound by both the Court oI Appeals and
the trial court, petitioners Iailed to present any convincing prooI rebutting such presumption.
A driver abandoning his proper lane Ior the purpose oI overtaking another vehicle in an
ordinary situation has the duty to see to it that the road is clear and not to proceed iI he cannot do
so in saIety. When a motor vehicle is approaching or rounding a curve, there is special necessity
Ior keeping to the right side oI the road and the driver does not have the right to drive on the leIt
hand side relying upon having time to turn to the right iI a car approaching Irom the opposite
direction comes into view. The Court oI Appeals Iound PRBL liable Ior Pleyto`s negligence
pursuant to Article 2180 in relation to Article 2176 oI the Civil Code. Under Article 2180, when
an injury is caused by the negligence oI a servant or an employee, the master or employer is
presumed to be negligent either in the selection or in the supervision oI that employee. This
presumption may be overcome only by satisIactorily showing that the employer exercised the
care and the diligence oI a good Iather oI a Iamily in the selection and the supervision oI its
employee.


















Viron vs De Los Santos, 345SCRA509, 22 November 2000

Facts: PlaintiII, a public utility transportation company, is the registered owner oI Viron Transit
Bus No. 1080, with Plate No. TB-AVC-332; while the deIendant Rudy Samidan is the registered
owner oI the Forward Cargo Truck with Plate No. TD-524 which, at the time oI the vehicular
accident in question, was driven and operated by the deIendant Alberto delos Santos y
Natividad. On August 16, 1993, at around 2:30 in the aIternoon, the aIoresaid bus was driven by
plaintiII`s regular driver WilIredo Villanueva along MacArthur ighway within the vicinity oI
Barangay Parsolingan, Gerona, Tarlac coming Irom the North en route to its destination in
Manila. It was Iollowing the Forward Cargo Truck proceeding Irom the same direction then
being driven, as aIoresaid, by the deIendant Alberto delos Santos. The cargo truck swerved to
the right shoulder oI the road and, while about to be overtaken by the bus, again swerved to the
leIt to occupy its lane. It was at that instance that the collision occurred, the leIt Iront side oI the
truck collided with the right Iront side oI the bus causing the two vehicles substantial damages.

Issue: Whether or not the Court oI Appeals erred in Iinding that the accident was due to the Iault
oI the petitioner`s driver.

Ruling: There is no doubt whatsoever, in the mind oI the Court, on the basis oI the documentary
evidence and the testimonies oI the witnesses, that the vehicular collision was due to the
negligence oI plaintiII`s regular driver, WilIredo Villanueva y Gaudia, at that time. The cargo
truck was on its proper lane at the time oI the collision. In Iact, the cargo truck even swerved to
the right shoulder oI the road to give much room Ior the Viron bus to pass. Notwithstanding the
condition oI the road and the in-coming Dagupan Bus Irom the opposite direction, the Viron bus
nonetheless proceeded to overtake the cargo truck, bringing about the collision. The evidence is
uniIorm as to that Iact. Indeed, no witnesses Ior the plaintiII ever contradicted the obtrusive Iact
that it was while in the process oI overtaking the cargo truck that the Viron bus collided with the
Iormer vehicle.
It is here well to recall that the driver oI an overtaking vehicle must see to it that the
conditions are such that an attempt to pass is reasonably saIe and prudent, and in passing must
exercise reasonable care. In the absence oI clear evidence oI negligence on the part oI the
operator oI the overtaken vehicle, the courts are inclined to put the blame Ior an accident
occurring while a passage is being attempted on the driver oI the overtaking vehicle (People vs.
Bolason, (C.A.) 53 OII. Gaz. 4158). As already intimated elsewhere in this judgment, no
evidence was presented by the plaintiII to even intimate at the negligence oI the driver oI the
cargo truck.
It is plain to see that the Iault or negligence was attributable to the driver oI the Viron
passenger bus. Petitioner proceeds to attack, albeit Ieebly, the credibility oI the two witnesses
presented by private respondents, namely, Alberto delos Santos himselI, who was then the driver
oI the Forward Cargo Truck and a certain Manuel Dulnuan, who was then travelling along the
same highway coming Irom the opposite direction when the accident occurred. According to
petitioner, the two witnesses contradicted each other when 'witness Dulnuan testiIied that the
petitioner`s passenger bus while attempting to overtake the respondents` truck, noticed the
Dagupan passenger bus coming Irom the opposite direction and to avoid hitting said passenger
bus, the Viron Transit passenger bus swerved to the right, hitting in the process the Iront leIt side
portion oI the respondents` truck; while, 'witness Alberto delos Santos testiIied that prior to the
accident, he swerved his truck to the right shoulder oI the road (western lane) and when he
attempted to return to his lane, the accident happened. Contrary to petitioner`s assertion, the
testimonies oI the two witnesses complement, iI not corroborate each other. The Viron
passenger bus collided with the cargo truck in a vain attempt to overtake the latter. At the sight
oI an oncoming bus in the opposite direction, the Viron passenger bus swerved to the right lane
which was then occupied by the cargo truck resulting in the collision oI the two vehicles. In
reIerence to Alberto delos Santos` testimony, the lower court pointed out that the said driver oI
the cargo truck was on its proper lane at the time oI impact, and even swerved earlier toward the
right shoulder oI the road just to give room to the bus. In any event, it is doctrinally entrenched
that the assessment oI the trial judge as to the issue oI credibility binds the appellate court
because he is in a better position to decide the issue, having heard the witnesses and observed
their deportment and manner oI testiIying during the trial, except when the trial court has plainly
overlooked certain Iacts oI substance and value, that, iI considered, might aIIect the result oI the
case, or where the assessment is clearly shown to be arbitrary. Petitioner has not shown this case
to Iall under the exception.
Sykl vs Begasa, 23 October 2003
Facts: On June 22, 1992, respondent Salvador Begasa and his three companions Ilagged down a
passenger jeepney driven by Joaquin Espina and owned by Aurora Pisuena. While respondent
was bording the jeeepney, a truck driven by Elizalde Sablayan and owned by petitioner Ernesto
Syki bumped the rear end oI the passenger jeepney. Respondent Iell and Iractured his leIt thigh
bone.
Respondent Iiled a complaint Ior damages Ior breach oI common carrier`s contractual
obligations and quasi-delict against Aurora Piuena, Ernesto Syki, and Elizalde Sablayan.
The trial court dismissed the complaint against Aurora Pisuena but ordered petitioner
Syki and his truck driver to pay the respondent.
Petitioner Syki and his driver appealed to the Court oI Appeals but the court aIIirmed the
Iindings oI the trial court in toto.

Issue: Whether or not the appellate court erred in ruling that the petitioner Iailed to observe the
diligence oI a good Iather oI a Iamily in the selection and supervision oI his driver.

Ruling: The petition has no merit. Article 2180 oI the Civil Code states that, Employers shall be
liable Ior the damages caused by their employees and household helpers acting within the scope
oI their assigned tasks, even though the Iormer are not engaged in any business or industry.
The responsibility treated in this article shall cease when the persons herein mentioned
prove they observed all diligence oI a good Iather oI a Iamily to prevent damage.
From the above provision, when an injury is caused by the negligence oI an employee, a
legal presumption instantly arises that the employer was negligent in the selection and
supervision oI said employee. II the employer successIully overcomes the legal presumption oI
negligence, he is relieved oI liability. In other words, the burden oI prooI is on the employer.
The employer must not merely present testimonial evidence to prove that he observed the
diligence oI a good Iather oI a Iamily in the selection and supervision oI his employee, but he
must support such testimonial evidence with concrete or documentary evidence.
In the case, petitioner`s evidence consisted entirely oI testimonial evidence. Petitioner,
however, never presented the alleged police clearance given to him by Sablayan nor the results
oI Sablayan`s driving test. Petitioner also did not present records oI the regular inspections that
his mechanic allegedly conducted. The unsubstantiated and selI-serving testimonies oI petitioner
and his mechanic were, without doubt, insuIIicient to overcome the legal presumption that the
petitioner was negligent in the selection and supervision oI his driver.




ambao vs Zuniga, 418SCRA266, 11 December 2003

Facts: Petitioner Cecilia ambao is the registered owner oI Lady Cecil and Ronie Trans
passenger bus. Respondents are the legal heirs oI the late erminigildo Zuniga who died due to
an incident whereby said bus, driven by CeIerino Venturina with Fernando Dumaliang as bus
conductor, bumped Zuniga, a pedestrian. Private respondents Iiled a complaint against
petitioners and her driver Ior damages. Venturina allegedly drove the bus in reckless, careless,
and imprudent manner, in violation oI traIIic rules and regulations without due regard to public
saIety, thus resulting in the victim`s premature death. Petitioner alleges that she exercised proper
diligence oI a good Iather oI a Iamily, both in the selection and supervision oI her bus driver.
Trial Court rendered decision against ambao stating Article 1756 oI the Civil Code and that
petitioner Iailed to prove that she observed the diligence required by Articles 1733 and 1755. The
Court oI Appeals aIIirmed the judgment although CA ruled that Articles 1755 and 1756 are
misplaced. That source oI obligation is quasi-delict. That ambao is directly and primarily liable
as employer under Article 2180 oI the Civil Code as she Iailed to show prooI that she was
diligent in the selection and supervision oI her employees.

Issue: Whether or not petitioner maybe held liable

Ruling: Negligence is a question oI Iact. The Supreme Court cannot determine since it is not a
trier oI Iact. Diligence oI petitioner, the Court is not persuaded on the evidences presented by
petitioner that she has however observed due diligence as a good Iather oI a Iamily. Article 2180
oI the Civil Code states that, When employee caused damage, employer is presumed to be
negligent, either in selection or supervision oI its employees. The employer must show adequate
and convincing prooI. The evidences presented are not adequate, no certiIied copies oI the
evidences like that oI the Driver`s license, NBI clearance, PNP and barangay clearance, and SSS
number were shown. Submission oI requirements must be made only on the Iatal accident itselI.
No training programs and guidelines Ior supervision were presented.
The petition was denied.





























Regino vs Pangasinan Colleges, GR No. 156109, 8 November 2004

Facts: Petitioner Khristine Rea M. Regino was a Iirst year computer science student oI
Pangasinan Colleges oI Science and Technology (PCST). Reared in a poor Iamily, Regino went
to college mainly through the Iinancial support oI her relatives. She enrolled Logic and Statistics
subjects under Rachelle Gamurot and Elissa Baladad, respectively as teachers.
In February 2002, PCST Held a Iund raising campaign dubbed 'The Rave Party and
Dance Revolution the proceeds which were to go to the construction oI the school`s tennis and
volleyball courts. Each student was required to pay Ior two tickets at the price oI P100.00 each.
The project was allegedly implemented by recompensing students who purchased tickets with
additional points in their test scores; those who reIused to pay were denied the opportunity to
take the Iinal examinations.
Financially strapped and prohibited by her religion Irom attending dance parties and
celebration, Regino reIused to pay tickets. On March 14 and 15, 2002, the scheduled dates oI
examinations in Logics and Statistics, the teachers allegedly disallowed her Irom taking the tests.
Petitioner then Iiled as pauper litigant, a complaint Ior damages against PCST. She prayed Ior
P500,000.00 as nominal; P500,000.00 as moral and at least P1,000,000.00 as exemplary
damages, P250,000.00 as actual damages & cost oI litigation and attorney`s Iees.
The Regional Trial Court dismissed the complaint Ior lack oI merit. It ruled that
Commission on igher Education, not the court, has jurisdiction over the controversy.

Issue: Whether or not there was a breach oI contract and liability oI tort.

Ruling: The doctrine oI exhaustion oI administrative remedies is basic. Court Ior reasons oI law,
comity and convenience should not entertain suits unless the available administrative remedies
have Iirst been resorted to and the proper authorities have been given the appropriate opportunity
to act and correct their alleged errors. Exhaustion oI administrative remedies is applicable when
there is a competence on the part oI the administrative bodies to act upon the matter complained
oI.
The terms oI the school-student contract are deIined at the moment oI its inception-upon
enrolment oI the student.
PCST imposed the assailed revenue-raising measure belatedly in the middle oI the
semester, It exacted the dance party Iee as a condition Ior students in taking the Iinal
examinations and ultimately Ior recognition oI their ability to Iinish a course. The Iee, however,
was not part oI the school-student contract entered into at the start oI the school year.
WhereIore, the petition is hereby granted, and the assailed orders reversed. The trial
court is directed to reinstate the complaint and with all deliberate speed, to continue the
proceedings in Civil Case No. U-7541. No costs.


T Realty vs CA, 451SCRA638
Facts: Private respondent McLoughlin, an Australian businessman-philanthropist, used to stay at
Sheraton otel during his trips to the Philippines prior to 1984 when he met Tan. Tan beIriended
McLoughlin by showing him around.
On 30 October 1987, McLoughlin arrived Irom Australia and registered with Tropicana.
e rented a saIety deposit box as it was his practice to rent a saIety deposit box every time he
registered at Tropicana in previous trips. As a tourist, McLoughlin was aware oI the procedure
observed by Tropicana relative to its saIety deposit boxes. The saIety deposit box could only be
opened through the use oI two keys, one oI which is given to the registered guest, and the other
remaining in the possession oI the management oI the hotel. When a registered guest wished to
open his saIety deposit box, he alone could personally request the management who then would
assign one oI its employees to accompany the guest and assist him in opening the saIety deposit
box with the two keys.
AIter returning to Manila, he checked out oI Tropicana on 18 December 1987 and leIt Ior
Australia. When he arrived in Australia, he discovered that the envelope with Ten Thousand US
Dollars (US$10,000.00) was short oI Five Thousand US Dollars (US$5,000). e also noticed
that the jewelry which he bought in ongkong and stored in the saIety deposit box upon his
return to Tropicana was likewise missing, except Ior a diamond bracelet.
9


Issue: Whether the Iinding oI gross negligence on the part oI petitioners in the perIormance oI
their duties as innkeepers is supported by the evidence on record.

Ruling: The petition is devoid oI merit. Noteworthy is the Iact that Payam and Lainez, who were
employees oI Tropicana, had custody oI the master key oI the management when the loss took
place. In Iact, they even admitted that they assisted Tan on three separate occasions in opening
McLoughlin's saIety deposit box. This only proves that Tropicana had prior knowledge that a
person aside Irom the registered guest had access to the saIety deposit box. et the management
Iailed to notiIy McLoughlin oI the incident and waited Ior him to discover the taking beIore it
disclosed the matter to him. ThereIore, Tropicana should be held responsible Ior the damage
suIIered by McLoughlin by reason oI the negligence oI its employees.
Under Article 1170 oI the New Civil Code, those who, in the perIormance oI their
obligations, are guilty oI negligence, are liable Ior damages. As to who shall bear the burden oI
paying damages, Article 2180, paragraph (4) oI the same Code provides that the owners and
managers oI an establishment or enterprise are likewise responsible Ior damages caused by their
employees in the service oI the branches in which the latter are employed or on the occasion oI
their Iunctions. Also, this Court has ruled that iI an employee is Iound negligent, it is presumed
that the employer was negligent in selecting and/or supervising him Ior it is hard Ior the victim to
prove the negligence oI such employer








Ramos vs CA, 321SCRA584
Facts: PlaintiII Erlinda Ramos was, until the aIternoon oI June 17, 1985, a 47-year old robust
woman. Except Ior occasional complaints oI discomIort due to pains allegedly caused by the
presence oI a stone in her gall bladder, she was as normal as any other woman. Because the
discomIorts somehow interIered with her normal ways, she sought proIessional advice. She was
advised to undergo an operation Ior the removal oI a stone in her gall bladder (TSN, January 13,
1988, p. 5). She underwent a series oI examinations which included blood and urine tests (Exhs.
"A" and "C") which indicated she was Iit Ior surgery.
Through the intercession oI a mutual Iriend, Dr. Buenviaje (TSN, January 13, 1988, p. 7),
she and her husband Rogelio met Ior the first time Dr. Orlino ozaka (should be osaka; see
TSN, February 20, 1990, p. 3), one oI the deIendants in this case, on June 10, 1985. They agreed
that their date at the operating table at the DLSMC (another deIendant), would be on June 17,
1985 at 9:00 A.M.. Dr. osaka decided that she should undergo a "cholecystectomy" operation
aIter examining the documents presented to him. Rogelio E. Ramos, however, asked Dr. osaka
to look Ior a good anesthesiologist. Dr. osaka, in turn, assured Rogelio that he will get a good
anesthesiologist.
At the operating room, erminda saw about two or three nurses and Dr. PerIecta
Gutierrez, the other deIendant, who was to administer anesthesia. Inside the operating room Dr.
Gutierrez was intubating the hapless patient. She thereaIter noticed bluish discoloration oI the
nailbeds oI the leIt hand oI the hapless Erlinda even as Dr. osaka approached her. She then
heard Dr. osaka issue an order Ior someone to call Dr. Calderon, another anesthesiologist.
About two days thereaIter, Rogelio E. Ramos was able to talk to Dr. osaka. The latter inIormed
the Iormer that something went wrong during the intubation
Erlinda Ramos stayed at the ICU Ior a month. About Iour months thereaIter or on
November 15, 1985, the patient was released Irom the hospital. Since that IateIul aIternoon oI
June 17, 1985, she has been in a comatose condition. She cannot do anything. She cannot move
any part oI her body. She cannot see or hear. She is living on mechanical means. She suIIered
brain damage as a result oI the absence oI oxygen in her brain Ior Iour to Iive minutes.

Issue: Whether or not the doctrine oI res ipsa loquitor applies in the case

Ruling: Res ipsa loquitur is a Latin phrase which literally means "the thing or the transaction
speaks Ior itselI." The phrase "res ipsa loquitur'' is a maxim Ior the rule that the Iact oI the
occurrence oI an injury, taken with the surrounding circumstances, may permit an inIerence or
raise a presumption oI negligence, or make out a plaintiII's prima facie case, and present a
question oI Iact Ior deIendant to meet with an explanation.
The doctrine oI res ipsa loquitur appropriate in the case at bar. As will hereinaIter be
explained, the damage sustained by Erlinda in her brain prior to a scheduled gall bladder
operation presents a case Ior the application oI res ipsa loquitur.
On the responsibilty oI Dr. osakaas the head oI the surgical team the "captain oI the
ship," doctrine applies. it is the surgeon's responsibility to see to it that those under him perIorm
their task in the proper manner. Respondent Dr. osaka's negligence can be Iound in his Iailure
to exercise the proper authority (as the "captain" oI the operative team) in not determining iI his
anesthesiologist observed proper anesthesia protocols. In Iact, no evidence on record exists to
show that respondent Dr. osaka veriIied iI respondent Dra. Gutierrez properly intubated the
patient.
With regard to the responsibility oI the hospital, hospitals exercise signiIicant control in
the hiring and Iiring oI consultants and in the conduct oI their work within the hospital premises.
The basis Ior holding an employer solidarily responsible Ior the negligence oI its
employee is Iound in Article 2180 oI the Civil Code which considers a person accountable not
only Ior his own acts but also Ior those oI others based on the Iormer's responsibility under a
relationship oI patria potestas.
In other words, while the burden oI proving negligence rests on the plaintiIIs, once
negligence is shown, the burden shiIts to the respondents (parent, guardian, teacher or employer)
who should prove that they observed the diligence oI a good Iather oI a Iamily to prevent
damage. The hospital Iailed to adduce evidence with regard to the degree oI supervision which it
exercised over its physicians. Respondent hospital is consequently solidarily responsible with its
physicians Ior Erlinda's condition.
















Reyes vs Sisters oI Mercy, 3 October 2000
Facts: Jorge Reyes had Iever with chills Ior 5 days, her wiIe Leah Reyes, herein petittioner, took
Jorge to Sisters oI Mercy Community Clinic by Dr. Marlyn Rico as the resident physician. Dr.
Rico conducted some test and the Iindings show that Jorge is suIIering Irom typhoid Iever. Dr.
Rico then asked a nurse to see iI the antibiotic chloromycetin to be administered to the patient is
compatible to him. The test showed that the medicine is compatible, thus, Dr. Rico administered
500 mg oI said medicine and a second dose was given 3 hours later. As a result the temperature
oI the patient rose to 41 C together with chills and exhibited respiratory distress, nausea,
vomiting and convulsions. And about 2 am, the patient died oI venticular arrythemia secondary
to hyperpyrexia and typhoid Iever. The petitioner Iiled a complaint Ior damages on the wrongIul
administration chlomyceti.
Issue: Whether or not the the respondents maybe held liable
Ruling: The doctrine oI res ipsa loquitur is simply a recognition oI the postulate that, as a matter
oI common knowledge and experience, the very nature oI certain types oI occurrences may
justiIy an inIerence oI negligence on the part oI the person who controls the instrumentality
causing the injury in the absence oI some explanation by the deIendant who is charged with
negligence. It is grounded in the superior logic oI ordinary human experience and on the basis oI
such experience or common knowledge, negligence may be deduced Irom the mere occurrence
oI the accident itselI. ence, res ipsa loquitur is applied in conjunction with the doctrine oI
common knowledge.
In the instant case, the doctrine oI res ipsa loquitor does not apply. The respondent
doctors were not negligent in the administration oI the drug, since the drug adminitered by them
is the standadard procedure on all cases oI typhoid Iever, and the diagnosis on the patient showed
that he was indeed suIIering Irom typhoid Iever, thus teher was a proper prescription oI
medicine. It was the patient and his Iamily who were negligent.








Nogales vs Capitol Medical Center, 511SCRA204
Facts: Pregnant with her Iourth child, Corazon Nogales ("Corazon"), who was then 37 years old,
was under the exclusive prenatal care oI Dr. Oscar Estrada. Around midnight oI 25 May 1976,
Corazon started to experience mild labor pains prompting Corazon and Rogelio Nogales
("Spouses Nogales") to see Dr. Estrada at his home. AIter examining Corazon, Dr. Estrada
advised her immediate admission to the Capitol Medical Center ("CMC"). Corazon was then
brought to the labor room oI the CMC. Dr. Rosa Uy ("Dr. Uy"), who was then a resident
physician oI CMC, conducted an internal examination oI Corazon. Dr. Uy then called up Dr.
Estrada to notiIy him oI her Iindings.
Dr. Estrada ordered Ior 10 mg. oI valium to be administered immediately by
intramuscular injection. Dr. Estrada later ordered the start oI intravenous administration oI
syntocinon admixed with dextrose, 5, in lactated Ringers' solution, at the rate oI eight to ten
micro-drops per minute. At 6:13 a.m., Corazon started to experience convulsions.
At 6:15 a.m., Dr. Estrada ordered the injection oI ten grams oI magnesium sulIate.
owever, Dr. Ely VillaIlor ("Dr. VillaIlor"), who was assisting Dr. Estrada, administered only
2.5 grams oI magnesium sulIate. At 6:22 a.m., Dr. Estrada, assisted by Dr. VillaIlor, applied low
Iorceps to extract Corazon's baby. At 6:27 a.m., Corazon began to maniIest moderate vaginal
bleeding which rapidly became proIuse.aIterwhich Corazon died.

Issue: Whether CMC is vicariously liable Ior the negligence oI Dr. Estrada.

Ruling: AIter a thorough examination oI the voluminous records oI this case, the Court Iinds no
single evidence pointing to CMC's exercise oI control over Dr. Estrada's treatment and
management oI Corazon's condition. It is undisputed that throughout Corazon's pregnancy, she
was under the exclusive prenatal care oI Dr. Estrada. At the time oI Corazon's admission at CMC
and during her delivery, it was Dr. Estrada, assisted by Dr. VillaIlor, who attended to Corazon.
There was no showing that CMC had a part in diagnosing Corazon's condition. While Dr.
Estrada enjoyed staII privileges at CMC, such Iact alone did not make him an employee oI
CMC.
42
CMC merely allowed Dr. Estrada to use its Iacilities
43
when Corazon was about to give
birth, which CMC considered an emergency. Considering these circumstances, Dr. Estrada is not
an employee oI CMC, but an independent contractor.
In general, a hospital is not liable Ior the negligence oI an independent contractor-
physician. There is, however, an exception to this principle. The hospital may be liable iI the
physician is the "ostensible" agent oI the hospital.
44
This exception is also known as the "doctrine
oI apparent authority."
Under the doctrine oI apparent authority a hospital can be held vicariously liable Ior the
negligent acts oI a physician providing care at the hospital, regardless oI whether the physician is
an independent contractor, unless the patient knows, or should have known, that the physician is
an independent contractor.
In the instant case, CMC impliedly held out Dr. Estrada as a member oI its medical staII.
Through CMC's acts, CMC clothed Dr. Estrada with apparent authority thereby leading the
Spouses Nogales to believe that Dr. Estrada was an employee or agent oI CMC. CMC cannot
now repudiate such authority.
ProIessional Services vs Agana, 513SCRA478
Facts: On April 4, 1984, Natividad Agana was rushed to the Medical City General ospital
(Medical City ospital) because oI diIIiculty oI bowel movement and bloody anal discharge.
AIter a series oI medical examinations, Dr. Miguel Ampil, petitioner in G.R. No. 127590,
diagnosed her to be suIIering Irom "cancer oI the sigmoid. On April 11, 1984, Dr. Ampil,
assisted by the medical staII oI the Medical City ospital, perIormed an anterior resection
surgery on Natividad. AIter Dr. Fuentes had completed the hysterectomy, Dr. Ampil took over,
completed the operation and closed the incision. AIter a couple oI days, Natividad complained oI
excruciating pain in her anal region.
On August 31, 1984, Natividad Ilew back to the Philippines, still suIIering Irom pains.
Two weeks thereaIter, her daughter Iound a piece oI gauze protruding Irom her vagina. Upon
being inIormed about it, Dr. Ampil proceeded to her house where he managed to extract by hand
a piece oI gauze measuring 1.5 inches in width. Dr. Ampils assurance did not come true. Instead,
the pains intensiIied, prompting Natividad to seek treatment at the Polymedic General ospital.
Dr. Ramon Gutierrez detected the presence oI another Ioreign object in her vagina -- a Ioul-
smelling gauze measuring 1.5 inches in width which badly inIected her vaginal vault.

Issue: Whether or not Dr. Ampil is liable Ior negligence and malpractice and whether PSI may
be held solidarily liable Ior the negligence oI Dr. Ampil.

Ruling: First, it is not disputed that the surgeons used gauzes as sponges to control the bleeding
oI the patient during the surgical operation.
Second, immediately aIter the operation, the nurses who assisted in the surgery noted in
their report that the sponge count (was) lacking 2 that such anomaly was announced to surgeon
and that a search was done but to no avail prompting Dr. Ampil to continue Ior closure.
Third, aIter the operation, two (2) gauzes were extracted Irom the same spot oI the body
oI Mrs. Agana where the surgery was perIormed.
To put it simply, such act is considered so inconsistent with due care as to raise an
inIerence oI negligence. There are even legions oI authorities to the eIIect that such act is
negligence per se.
This is a clear case oI medical malpractice or more appropriately, medical negligence.
Private hospitals, hire, Iire and exercise real control over their attending and visiting consultant
staII. While consultants are not, technically employees, the control exercised, the hiring, and the
right to terminate consultants all IulIill the important hallmarks oI an employer-employee
relationship, with the exception oI the payment oI wages. In assessing whether such a
relationship in Iact exists, the control test is determining. Accordingly, on the basis oI the
Ioregoing, the purpose oI allocating responsibility in medical negligence cases, an employer-
employee relationship in eIIect exists between hospitals and their attending and visiting
physicians.

















People vs Delos Santos, GR No. 131588, 27 March 2001

Facts: A Special Counter Insurgency Operation Unit Training oI the Philippine National Police
(PNP), was held at Camp Damilag, Manolo Fortich, Bukidnon, Irom September 1, 1995 to
October 15, 1995. The last phase oI the training was the 35 kilometer "endurance run" Irom said
Camp to Camp Alagar, Cagayan de Oro City. The run which took place October 5, 1995 started
at 2:20 a.m. The trainees were wearing black T-shirts, black short pants, and green and black
combat shoes.
While they were negotiating Maitum ighway, they saw an Isuzu ElI truck, driven by
respondent Glenn delos Santos, coming at high speed towards them. The vehicle lights were in
the high beam. At a distance oI 100 meters, the rear security guards started waving their hands
Ior the vehicle to take the other side oI the road, but the vehicle just kept its speed, apparently
ignoring their signals and coming closer and closer to them. As a result thereoI, twelve (12) PNP
trainees were killed on the spot, 11 others were seriously wounded while 10 (PO1) sustained
minor injuries.

Issue: Whether or not Glenn de los Santos is criminally liable, and consequently civilly liable Ior
said acts.

Ruling: Glenn showed an inexcusable lack oI precaution. Article 365 oI the Revised Penal Code
states that reckless imprudence consists in voluntarily, but without malice, doing or Iailing to do
an act Irom which material damage results by reason oI inexcusable lack oI precaution on the
part oI the person perIorming or Iailing to perIorm such act, taking into consideration (1) his
employment or occupation; (2) his degree oI intelligence; (4) his physical condition; and (3)
other circumstances regarding persons, time and place.
Being then a young college graduate and an experienced driver, Glenn should have
known to apply the brakes or swerve to a saIe place immediately upon hearing the Iirst bumping
thuds to avoid Iurther hitting the other trainees. By his own testimony, it was established that the
road was slippery and slightly going downward; and, worse, the place oI the incident was Ioggy
and dark. e should have observed due care in accordance with the conduct oI a reasonably
prudent man, such as by slackening his speed, applying his brakes, or turning to the leIt side even
iI it would mean entering the opposite lane. It is highly probable that he was driving at high
speed at the time. And even iI he was driving within the speed limits, this did not mean that he
was exercising due care under the existing circumstances and conditions at the time.
Considering that the incident was not a product oI a malicious intent but rather the result
oI a single act oI reckless driving, Glenn is criminally liable thereIore civilly liable as well.
















Magat vs Medialdea, GR No. L-37120, 20 April 1983

Facts: DeIendant Santiago Guerrero entered into a contract with the U.S. Navy Exchange, Subic
Bay, Philippines Ior the operation oI a Ileet oI taxicabs. Guerrero and his aIoresaid agent Isidro
Aligada were able to import Irom Japan with the assistance oI the plaintiII Magat and his
Japanese business associates the necessary taximeters Ior Guerrero`s taxicabs in partial
IulIillment oI commitments with the U.S. Navy Exchange, Subic Bay, Philippines.
Guerrero and his agent have repeatedly assured Magat oI his Iinancial capabilities to pay
Ior the goods ordered by him and in Iact he accomplished the necessary application Ior a letter oI
credit with his banker, but he subsequently instructed his banker not to give due course to his
application Ior a letter oI credit and that Ior reasons only known to him, he Iailed and reIused to
open the necessary letter oI credit to cover payment oI the goods ordered by him.
Meanwhile, Guerrero has been operating his taxicabs without the required radio
transceivers and when the U.S. Navy Authorities were pressing deIendant Ior compliance with
his commitments with respect to the installations oI radio transceivers on his taxicabs, he
impliedly laid the blame Ior the delay upon Magat, thus destroying his reputation with the said
Naval Authorities oI Subic Bay, Philippines, with whom he transacts business.
Victorino Magat Iiled a complaint Ior alleged breach oI contract against Santiago
Guerrero.

Issue: Whether or not the complaint Ior breach oI contract states a valid cause oI action.

Ruling: Article 1170 oI the Civil Code provides: 'those who in the perIormance oI their
obligation are guilty oI Iraud, negligence, or delay, and those who in any manner contravene the
tenor thereoI are liable Ior damages.
The phrase "in any manner contravene the tenor" oI the obligation includes any ilicit act
or omission which impairs the strict and IaithIul IulIillment oI the obligation and every kind oI
deIective perIormance.
The damages which the obligor is liable Ior includes not only the value oI the loss
suIIered by the obligee (dao emergente) but also the proIits which the latter Iailed to obtain
(lucro cesante). II the obligor acted in good Iaith, he shall be liable Ior those damages that are the
natural and probable consequences oI the breach oI the obligation and which the parties have
Ioreseen or could have reasonably Ioreseen at the time the obligation was constituted; and in case
oI Iraud, bad Iaith, malice or wanton attitude, he shall be liable Ior all damages which may be
reasonably attributed to the non-perIormance oI the obligation.
In the case at bar, petitioner had IulIilled his part oI the bargain while private respondent
Iailed to comply with his correlative obligation by reIusing to open a letter oI credits to cover
payment oI the goods ordered by him, and that consequently, petitioner suIIered not only loss oI
his expected proIits, but moral and exemplary damages as well. ThereIore he is liable Ior the
damages he caused to the petitioner.






























Vda. De Mistica vs Naguiat, GR No. 137909, 11 December 2003

Facts: Eulalio Mistica, predecessor-in-interest oI herein petitioner, is the owner oI the parcel oI
land which was leased to respondent Bernardinio Naguiat sometime in 1970.
On April 5, 1979 Mistica entered into a contract to sell with respondent over a portion oI
the aIorementioned lot containing an area oI 200 square meters. This agreement was reduced to
writing in a document. Pursuant to said agreement, respondent gave a down payment oI P2, 000.
e made another partial payment oI P1, 000 on February 8, 1980. e Iailed to make any
payments thereaIter. Mistica died sometime in October 1986.
On December 4, 1991 petitioner Iiled a complaint Ior rescission alleging that the Iailure
and reIusal oI respondent to pay the balance oI the purchase price constitute a violation oI the
contract which established her to rescind the same. That respondent have been in possession oI
the subject matter, should be ordered to vacate and surrender possession oI the same.
The CA, Disallowing rescission, eld that respondents did not breach the Contract oI
Sale. It explained that the conclusion oI the ten-year period was not a resolutory term, because
the Contract had stipulated that payment -- with interest oI 12 percent -- could still be made iI
respondents Iailed to pay within the period. According to the appellate court, petitioner did not
disprove the allegation oI respondents that they had tendered payment oI the balance oI the
purchase price during her husband`s Iuneral, which was well within the ten-year period.
Moreover, rescission would be unjust to respondents, because they had already
transIerred the land title to their names. The proper recourse, the CA eld, was to order them to
pay the balance oI the purchase price, with 12 percent interest.

Issue: Whether or not the Court oI Appeals erred in the application oI Article 1191 oI the Civil
Code, as it ruled that there is no breach oI obligation inspite oI the lapse oI their stipulated period
and the Iailure oI the respondent to pay.

Ruling: The Iailure oI respondent to pay the value oI the purchase price within ten (10) years
Irom execution oI the deed did not amount to a substantial breach.
In the Kasulatan, it was stipulated that payment could be made even aIter ten (10) years
Irom execution provided that the vendee paid 12 interest. The Stipulation oI the parties
constitute the law between them, thus court have no alternative but to enIorce them as agreed
upon and written. Consequently, the Court oI Appeals did not commit any error.








Co vs CA, GR No. 112330, 17 August 1999

Facts: Sometime in October 9, 1984, Mrs. Adoracion Custodio entered into a verbal contract
with spouses enry and Elizabeth Co Ior the purchase oI the spouses` house and lot and in
consideration oI the sum oI $100,000.00. One week thereaIter and shortly beIore Mrs. Custodio
leIt Ior the United States, plaintiII paid to the deIendant the amount oI $1000.00 and P40,000.00
as earnest money, in order that the same may be reserved Ior her purchase. Said earnest money is
to be deducted Irom the total purchase price oI the property. The purchase price is payable in two
payments; particularly, $40,000.00 on December 1984 and the balance oI $60, 000.00 on January
5, 1985.
On January 25, 1985, plaintiII paid to the deIendant the sum oI $30,000 as partial
payment. DeIendant`s counsel Atty. Leopoldo Cotaco wrote a letter to plaintiII demanding that
she pay the balance. Not having received any response thereto, said lawyer wrote another letter
inIorming her that she lost her 'option to purchase the property subject oI the case.
On September 5, 1986, Atty. Estrella O. Laysa, counsel oI Custodio, wrote a letter to
Atty. Leopoldo Cotaco inIorming him that Custodio is now ready to pay the remaining balance
to complete the sum oI $100,000.00, the agreed amount as selling price` and on October 24,
1986, plaintiII Iiled the instant complaint.
The trial court ruled in Iavor oI Custodio and ordered the spouses Co to reIund the
amount oI $30,000.00. Not satisIied with the decision, the spouses Co appealed to the Court oI
Appeals, which aIIirmed the decision oI the RTC. ence, this appeal.

Issue: Whether or not the Court oI Appeals erred in ordering the spouses Co to return the
$30,000.00 paid by Custodio pursuant to the 'option granted to her over the property.

Ruling: An option` is a contract granting a privilege to buy or sell within an agreed time and at a
determined price. It is a separate and distinct contract Irom that which the parties may enter into
upon the consummation oI the option and it must be supported by consideration. owever, the
contract entered into by the Cos and Custodio reveal that what the parties entered into is a
perIected contract oI sale and not an option contract.
A contract oI sale is a consensual contract and is perIected at the moment there is a
meeting oI the minds upon the thing which is the object oI the contract and upon the price. From
that moment, the parties may reciprocally demand perIormance subject to the provisions oI the
law governing the Iorm oI contracts.
The elements oI a valid contract oI sale under Article 1458 oI the Civil Code are: (1)
consent or meeting oI the minds; (2) determinate subject matter; and (3) price certain in money
or its equivalent. As evidenced by the March 15, 1985 letter, all three elements oI a contract oI
sale are present in the transaction between the petitioners and respondent. Custodio`s oIIer to
purchase the Beata property, subject oI the sale at a price oI $100,000.00 was accepted by the
Cos. Even the manner oI payment oI the price was set Iorth in the letter. Earnest money in the
amounts oI US$1,000.00 and P40,000.00 was already received by the Cos. Under Article 1482
oI the Civil Code, earnest money given in a sale transaction is considered part oI the purchase
price and prooI oI the perIection oI the sale.
Despite the Iact that Custodio Iailed to pay the amounts oI US$40,000.00 and
US$60,000.00 on or beIore December 4, 1984 and January 5, 1985 respectively, the Cos did not
sue Ior either speciIic perIormance or rescission oI the contract. The Cos were oI the mistaken
belieI that Custodio had lost her 'option over the Beata property when she Iailed to pay the
remaining balance oI $70,000.00 pursuant to their August 8, 1986 letter. In the absence oI an
express stipulation authorizing the sellers to extrajudicially rescind the contract oI sale, the Cos
cannot unilaterally and extrajudicially rescind the contract oI sale.
Accordingly, Custodio acted well within her rights when she attempted to pay the
remaining balance oI $70,000.00 to complete the sum owed oI $100,000.00 as the contract was
still subsisting at that time. When the Cos reIused to accept said payment and to deliver the
Beata property, Custodio immediately sued Ior the rescission oI the contract oI sale and prayed
Ior the return oI the $30,000.00 she had initially paid.
Under Article 1385 oI the Civil Code, rescission creates the obligation to return the
things, which were the object oI the contract, but such rescission can only be carried out when
the one who demands rescission can return whatever he may be obliged to restore. This
principle has been applied to rescission oI reciprocal obligations under Article 1191 oI the Civil
Code. The Court oI Appeals thereIore did not err in ordering the Cos to return the amount oI
$30,000.00 to Custodio aIter ordering the rescission oI the contract oI sale over the property.





















UFC vs CA, 33SCRA1, 13 May 1970
Facts: Magdalo Francisco ceded to Universal Food Corporation trademark, the use, transport oI
MaIran sauce in return Ior the permanent position oI Magdalo as chieI chemist, but suddenly
Magdalo was terminated without Iault and without justiIiable cause and without proper
compensation. That a bill oI assignment oI use oI trademark and Iormula was entered into by
UFC and Magdalo. The literal reading oI the Bill oI Assignment seem to support the view that
the Iormula itselI was ceded by the patentee, yet the language employed in the entire instrument
would lead one to the conclusion that what was actually ceded and transIerred was only the use
oI the Iormula as the precise intention oI the parties.
Issue: Whether or not there has been a subatantial breach in the contract.
Ruling: UFC is in subatantial breach beacause it terminated Magdalo without just cause and
without compensation. Royalty, when used in connection with a license under a patent means
that the compensation paid by the licensee to the licensor Ior the use oI the licensor`s patented
invention.
The general rule is that rescission oI a contract willl not be permitted Ior a slight or casual
breach, but only Ior such substantial and Iundamental breach as would deIeat the very object oI
tghe parties in making the agreement. And since the UFC is in substantial breach, the petitioner
must return to respondent the use and the right to such use oI the Iormula. Thus, the respondents
in their complaint Ior trescission speciIically and particularly pray, among others, that the
petitioner corporation be adjudged as without any right to use said trademark and Iormula.
Thus, the Bil oI Assignment was rescinded, and the deIendant corporation is ordered to
return and restore to the plaintiII the right to the use oI his MaIran sauce trademark and Iormula.









UP vs Delos Angeles, 35SCRA102
Facts: That on or about 2 November 1960, UP and ALUMCO entered into a logging agreement
under which the latter was granted exclusive authority, Ior a period starting Irom the date oI the
agreement to 31 December 1965, extendible Ior a Iurther period oI Iive (5) years by mutual
agreement, to cut, collect and remove timber Irom the Land Grant, in consideration oI payment
to UP oI royalties, Iorest Iees, etc.; that ALUMCO cut and removed timber thereIrom but, as oI 8
December 1964, it had incurred an unpaid account oI P219,362.94, which, despite repeated
demands, it had Iailed to pay; that aIter it had received notice that UP would rescind or terminate
the logging agreement, ALUMCO executed an instrument, entitled "Acknowledgment oI Debt
and Proposed Manner oI Payments," dated 9 December 1964, which was approved by the
president oI UP.
ALUMCO continued its logging operations, but again incurred an unpaid account, Ior the
period Irom 9 December 1964 to 15 July 1965, in the amount oI P61,133.74, in addition to the
indebtedness that it had previously acknowledged.
That on 19 July 1965, petitioner UP inIormed respondent ALUMCO that it had, as oI that
date, considered as rescinded and oI no Iurther legal eIIect the logging agreement that they had
entered in 1960; and on 7 September 1965, UP Iiled a complaint against ALUMCO

Issue: Whether petitioner U.P. can treat its contract with ALUMCO rescinded, and may
disregard the same beIore any judicial pronouncement to that eIIect.

Ruling: The party who deems the contract violated may consider it resolved or rescinded, and act
accordingly, without previous court action, but it proceeds at its own risk. For it is only the Iinal
judgment oI the corresponding court that will conclusively and Iinally settle whether the action
taken was or was not correct in law. But the law deIinitely does not require that the contracting
party who believes itselI injured must Iirst Iile suit and wait Ior a judgment beIore taking
extrajudicial steps to protect its interest. Otherwise, the party injured by the other's breach will
have to passively sit and watch its damages accumulate during the pendency oI the suit until the
Iinal judgment oI rescission is rendered when the law itselI requires that he should exercise due
diligence to minimize its own damages (Civil Code, Article 2203).
In the light oI the Ioregoing principles, and considering that the complaint oI petitioner
University made out a prima facie case oI breach oI contract and deIaults in payment by
respondent ALUMCO, to the extent that the court below issued a writ oI preliminary injunction
stopping ALUMCO's logging operations, and repeatedly denied its motions to liIt the injunction.







Cannu vs Galang, 459SCRA80

Facts: Spouses Galang obtained a loan Irom Fortune Savings and Loan Association Ior P173,
800.00 to purchase a house and lot in Las Pinas. Such loan is subject to a real estate mortgage.
The real estate mortgage was purchased by National ome Mortgage Finance Corporation. The
said property was purchased by the spouses Cannu Ior P120, 000.00 and assumes balance with
NMFC and CERF Realty and Developer oI P 45, 000.00. A Deed oI Sale with Assumption oI
Mortgage Obligation was executed by the parties. The spouses Cannu took possession oI the
property and occupied, but the spouses Galang reIused to pay and vacate such property. Galang
alleged that they paid the Iull payment oI remaining loan to NMFC. NMFC was held in
abeyance in the release oI the TCT. The spouses Cannu Iiled a complaint Ior speciIic
perIormance and damages, on the other hand, spouses Galang Iiled an action Ior rescission and
them and NMFC damages.

Issue: Whether or not the action Ior rescission will prosper

Ruling: A contract is a meeting oI the mind and has a Iorce and eIIect oI law between the parties
which must be complied with in good Iaith. Out oI the P250, 000.00 purchase price supposed on
July 1990, only P75, 000.00 was paid, the breach is substantial, and where there is a substantial
breach in the contract, an action Ior rescission will prosper. Failure to pay the balance which has
been due a long time ago and despite repeated demands is a substantial breach oI the obligation
which deIeats the object oI the obligation. The petitioner is not religious in paying the
amortization with NMFC. ThereIore, the contract is rescinded.












































Villanueva vs Estate oI Gonzaga, GR No. 157318, 9 August 2006

Facts: On January 15, 1990, petitioner Villanueva and respondent Estate oI Gonzaga represented
by administratrix, respondent Ma. Villa Gonzaga, executed a MOA where the petitioner and
respondent agrees to sell and purchase several lots Ior a total price oI P486, 000 subject to
conditions. It was stipulated Iurther that upon payment oI 60 oI the purchase price, the
petitioner may start to introduce improvements in the area iI they so desire, and that upon release
by the PNB oI the lots subject oI his agreement, the respondent shall immediately execute a deed
oI Sale in Iavor oI the petitioner. As stipulated in the agreement, petitioners introduced
improvements aIter paying 60 oI the total purchase price. Petitioner then requested permission
Irom respondent to use the premises Ior the next milling season. Respondent reIused because the
petitioner has not paid the Iull purchase price. Petitioner assured their readiness to pay the
balance but reminded respondent oI her obligation to redeem the lots Irom mortgage with PNB.
On April 10, 1991, respondent inIormed petitioner that the PNB had agreed to release the
lots Irom mortgage, but petitioners demanded that respondent show the clean titles to the lots
Iirst beIore they pay the balance oI the purchase price.
On May 28, 1991, respondent executed a Deed oI Rescission rescinding the MOA
because petitioner Iailed to pay the balance and that they used the lots as transloading station
without permission.

Issue: Whether or not there is a legal, or even a Iactual, ground Ior the rescission oI the MOA.

Ruling: There is no legal basis Ior the rescission. The Civil Code remedy oI rescission under
Article 1191 oI the Civil Code is predicated on a breach oI Iaith by the other party that violates
the reciprocity between them. The remedy does apply to contracts to sell. The MOA between
petitioners and respondents is a conditional contract to sell. Ownership over the lots is not pass to
the petitioners until Iull payment oI the purchase price. Petitioners` obligation to pay, in turn, is
conditioned upon the release oI the lots Irom mortgage with the PNB to be secured by the
respondents. The record shows that the lots were Iinally release Irom mortgage in July 1991.
Petitioners have always expressed readiness to pay the balance oI the purchase price once that is
achieved. ence, petitioners should be allowed to pay the balance now. owever, petitioners
may not demand production by the respondents oI the titles to the lots as a condition Ior their
payment; it was not required under the MOA.









Paguyo vs Astorga, 470SCRA33, 16 September 2005

Facts: erein petitioners were the owners oI a small Iive-storey building located at Makati City.
This lot which the Paguyo building stands was the subject oI a civil case, rendered a decision on
January 20, 1998 approving a compromise agreement made between the Armases and the
petitioners. In order Ior the petitioners to complete their title and ownership over the lots in
question, there was an urgent need to make complete payment to the Armases. On November 29,
1998, in order to raise the much needed amount, petitioner Lourdes Paguyo entered into an
agreement captioned as Receipt oI Earnest Money with respondent Astoga, Ior the sale oI the
Iormer`s property consisting oI the lot which was to be purchased Irom the Armases. owever,
contrary to their express representation with respect to the subject lot, petitioners Iailed to
comply with their obligation to acquire the lot Irom the Armas Iamily despite the Iull Iinancial
support oI respondents. Due also to the urgent necessity oI obtaining money to Iinance their
construction business, petitioner proposed to respondent the separate sale oI the building in
question while she continued to work on the acquisition oI the lot Irom the Armas Iamily.
Respondents agreed to petitioner`s proposal to buy the building Iirst, thus, the parties executed
Iour documents. ThereaIter, the respondents renamed the building into GINZA building and
registered the same in the name oI respondents St. Andrew Realty Inc. Pursuant to their
agreement contained in the Mutual Undertaking, respondent company Iiled an ejectment case
and obtained a Iavorable decision against petitioners
The petitioners then Iiled a complaint Ior the rescission oI the Receipt oI Earnest Money
with the undertaking to return the sum oI P763, 890.50 and rescission oI the other Iour
documents they signed.

Issue: Whether or not rescission is proper

Ruling: The law speaks oI the right oI the injured party to choose between rescission or
IulIillment oI the obligation, with the payment oI damages in either case. ere, petitioners claim
to be the injured party and consequently seek the rescission oI the Deed oI Absolute Sale oI the
Building and the other documents. But petitioners Iailed to prove any oI the instances mentioned
in Article 1355 and 1470 oI the Civil Code, which would invalidate, or even aIIect, the Deed oI
Sale oI the Building and the related documents. Neither does the Iact that the subject contracts
have been prepared by respondents ipso Iacto entail that their validity and legality be strictly
interpreted against them. Petitioner insinuation that she was disadvantaged will not hold.
ere, petitioner, being not only cultured but a person with great business acumen as well,
cannot claim to be weaker or disadvantaged party subject contract so as to call Ior a strict
interpretation against respondents.







Casino vs CA, 470SCRA57

Facts: Respondent alleges that on December 22, 1989, it entered into a contract with petitioner
Ior the supply and installation by the latter oI narra wood parquet to the Manila Luxury
Condominium Project oI which respondent is the developer. The contract stipulated that Iull
delivery by petitioner oI labor and material was in May 1990. Respondent paid to petitioner 40
oI the total contract price that aIter delivery only 26, 727.02 sq. It. oI wood parquet materials,
petitioner incurred in delay in the delivery oI the remainder oI 34, 245.98 sq. It.; that petitioner
misrepresented to respondent that he is qualiIied to do the work contracted when in truth and in
Iact he was not and, Iurthermore, he lacked the necessary Iunds to execute the work. That in
order to minimize loses, the respondent contracted the services oI another to complete the
unIinished work. The respondent in its complaint prays Ior rescission oI contract.

Issue: Whether or not the subject decision declaring the rescission oI the questioned contract by
private respondent as valid and holding the petitioner liable Ior breach oI contract is contrary to
or in Article 1191, new civil code

Ruling: The petition lacks merit. It is undisputed under their contract that petitioner and
respondent had respective obligations. But while respondent was able to IulIill that which is
incumbent upon it by making a down payment representing 40 oI the agreed price upon the
signing oI the contract and even paid the Iirst billing oI petitioner, the latter Iailed to comply with
his contractual commitment. For, aIter delivering only less than one-halI oI the contracted
materials, petitioner Iailed, by the end oI the agreed period, to deliver and install the remainder
despite demands Ior him to do so. Doubtless, it is petitioner who breached the contract. With the
reality that petitioner has Iailed to comply with his prestations under his contract with
respondent, the latter is vested by law the right to rescind the parties` agreement. The breach he
committed cannot, by any measure, be considered as slight or casual. For sure, petitioner`s
Iailure to make complete delivery and installation way beyond the time stipulated despite
respondent`s demands, is doubtless a substantial and Iundamental breach.














Carrascoso vs CA, GR No. 123672 , 14 December 2005

Facts: El Dorado Plantation, Inc. was the registered owner oI a parcel oI land with an area oI
approximately 1,825 hectares covered by TransIer CertiIicate oI Title (TCT) No. T-93 situated in
Sablayan, Occidental Mindoro.
On February 15, 1972, at a special meeting oI El Dorado`s Board oI Directors, a
Resolution was passed authorizing Feliciano Leviste, then President oI El Dorado, to negotiate
the sale oI the property and sign all documents and contracts bearing thereon.
On March 23, 1972, by a Deed oI Sale oI Real Property, El Dorado, through Feliciano
Leviste, sold the property to Fernando O. Carrascoso, Jr.
From the provisions oI the Deed oI Sale, Carrascoso was to pay the Iull amount oI the
purchase price on March 23, 1975.
The 3-year period Ior Carrascoso to Iully pay Ior the property on March 23, 1975 passed
without him having complied therewith.
Lauro Leviste (Lauro), a stockholder and member oI the Board oI Directors oI El
Dorado, through his counsel, Atty. Benjamin Aquino, by letter dated December 27, 1976, called
the attention oI the Board to Carrascoso`s Iailure to pay the balance oI the purchase price oI the
property amounting to P1,300,000.00. And Lauro`s lawyer maniIested that:
Lauro`s desire to rescind the sale was reiterated in two other letters addressed to the
Board dated January 20, 1977 and March 3, 1977.
Jose P. Leviste, as President oI El Dorado, later sent a letter oI February 21, 1977 to
Carrascoso inIorming him that in view oI his Iailure to pay the balance oI the purchase price oI
the property, El Dorado was seeking the rescission oI the March 23, 1972 Deed oI Sale oI Real
Property.
Lauro and El Dorado Iinally Iiled on March 15, 1977 a complaint Ior rescission oI the
March 23, 1972 Deed oI Sale oI Real Property between El Dorado and Carrascoso with damages
beIore the Court oI First Instance (CFI) oI Occidental Mindoro, docketed as Civil Case No. R-
226.
Lauro and El Dorado also sought the cancellation oI TCT No. T-6055 in the name oI
Carrascoso and the revival oI TCT No. T-93 in the name oI El Dorado, Iree Irom any liens and
encumbrances. Furthermore, the two prayed Ior the issuance oI an order Ior Carrascoso to: (1)
reconvey the property to El Dorado upon return to him oI P500,000.00, (2) secure a discharge oI
the real estate mortgage constituted on the property Irom SB, (3) submit an accounting oI the
Iruits oI the property Irom March 23, 1972 up to the return oI possession oI the land to El
Dorado, (4) turn over said Iruits or the equivalent value thereoI to El Dorado and (5) pay the
amount oI P100,000.00 Ior attorney`s Iees and other damages.
Also on March 15, 1977, Lauro and El Dorado caused to be annotated on TCT No. T-
6055 a Notice oI Lis Pendens, inscribed as Entry No. 39737.
In his Answer with Compulsory Counterclaim, Carrascoso alleged that: (1) he had not
paid his remaining P1,300,000.00 obligation under the March 23, 1972 Deed oI Sale oI Real
Property in view oI the extensions oI time to comply therewith granted him by El Dorado; (2) the
complaint suIIered Irom Iatal deIects, there being no showing oI compliance with the condition
precedent oI exhaustion oI intra-corporate remedies and the requirement that a derivative suit
instituted by a complaining stockholder be veriIied under oath; (3) El Dorado committed a gross
misrepresentation when it warranted that the property was not being cultivated by any tenant to
take it out oI the coverage oI the Land ReIorm Code; and (4) he suIIered damages due to the
premature Iiling oI the complaint Ior which Lauro and El Dorado must be held liable.
The Regional Trial Court dismissed the complaint on the ground oI prematurity but on
January 31, 1996, the appellate court reversed the decision oI the trial court.

Issue: Whether or not the Court oI Appeals acted with grave abude oI discretion and committed a
mistake oI law in not declaring that the action Ior rescission was prematurely Iiled.

Ruling: Art. 1191 oI the Civil Code states that:
The power to rescind obligations is implied in reciprocal ones, in case one oI the
obligors should not comply with what is incumbent upon him.
The injured party may choose between the IulIillment and the rescission oI the
obligation, with the payment oI damages in either case. e may also seek rescission,
even aIter he has chosen IulIillment, iI the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause
authorizing the Iixing oI a period.
This is understood to be without prejudice to the rights oI third persons who have
acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law.
Reciprocal obligations are those which arise Irom the same cause, and in which each
party is a debtor and a creditor oI the other, such that the obligation oI one is dependent upon
the obligation oI the other. They are to be perIormed simultaneously such that the perIormance
oI one is conditioned upon the simultaneous IulIillment oI the other.
The right oI rescission oI a party to an obligation under Article 1191 is predicated on a
breach oI Iaith by the other party who violates the reciprocity between them.
A contract oI sale is a reciprocal obligation. The seller obligates itselI to transIer the
ownership oI and deliver a determinate thing, and the buyer obligates itselI to pay thereIor a
price certain in money or its equivalent. The non-payment oI the price by the buyer is a
resolutory condition which extinguishes the transaction that Ior a time existed, and discharges
the obligations created thereunder. Such Iailure to pay the price in the manner prescribed by the
contract oI sale entitles the unpaid seller to sue Ior collection or to rescind the contract.
In the case at bar, El Dorado already perIormed its obligation through the execution oI
the March 23, 1972 Deed oI Sale oI Real Property which eIIectively transIerred ownership oI
the property to Carrascoso. The latter, on the other hand, Iailed to perIorm his correlative
obligation oI paying in Iull the contract price in the manner and within the period agreed upon.
The terms oI the Deed are clear and unequivocal: Carrascoso was to pay the balance oI
the purchase price oI the property amounting to P1,300,000.00 plus interest thereon at the rate
oI 10 per annum within a period oI three (3) years Irom the signing oI the contract on March
23, 1972. When Jose Leviste inIormed him that El Dorado was seeking rescission oI the
contract by letter oI February 21, 1977, the period given to him within which to Iully satisIy his
obligation had long lapsed.
The El Dorado Board Resolution and the AIIidavit oI Jose Leviste interposing no
objection to Carrascoso`s mortgaging oI the property to any bank did not have the eIIect oI
suspending the period to Iully pay the purchase price, as expressly stipulated in the Deed,
pending Iull payment oI any mortgage obligation oI Carrascoso.
















Goldenrod vs CA, GR No. 126812, 24 November 1998

Facts: Pio Barreto and Sons, Inc. owned Iorty-three (43) parcels oI registered land with a total
area oI 18,500 square meters located at Carlos Palanca St., Quiapo, Manila, which were
mortgaged with United Coconut Planters Bank (UCPB). In 1988, the obligation oI the
corporation with UCPB remained unpaid making Ioreclosure oI the mortgage imminent.
Goldenrod, Inc. oIIered to buy the property Irom BARRETO & SONS. On 25 May 1988,
through its president, petitioner wrote respondent Anthony Que, President oI respondent
BARRETO & SONS, as Iollows:
....we preIer that the lots be reconsolidated back to its mother titles.
Enclosed is the earnest money oI P1 million which shall Iorm part oI the purchase
price.
Payment oI the agreed total consideration shall be eIIected in accordance with our oIIer
as you have accepted and upon execution oI the necessary documents oI sale to be
implemented aIter the said reconsolidation oI the lots.
Kindly acknowledge receipt oI the earnest money.
When the term oI existence oI BARRETO & SONS expired, all its assets and liabilities
including the property located in Quiapo were transIerred to Pio Barreto Realty Development,
Inc. Petitioner's oIIer to buy the property resulted in its agreement with respondent BARRETO
REALT that petitioner would pay the Iollowing amounts: (a) P24.5 million representing the
outstanding obligations oI BARRETO REALT with UCPB on 30 June 1988, the deadline set
by the bank Ior payment; and, (b) P20 million which was the balance oI the purchase price oI the
property to be paid in installments within a 3-year period with interest at 18 per annum.
On 30 August 1988 Alicia P. Logarta, President oI Logarta Realty and Development
Corporation, which acted as agent and broker oI petitioner, wrote private respondent Anthony
Que inIorming him on behalI oI petitioner that it could not go through with the purchase oI the
property due to circumstances beyond its Iault.
On 31 August 1988 respondent BARRETTO REALT sold to Asiaworld Trade Center
Phils., Inc., Lot 2, one oI the two (2) consolidated lots, Ior the price oI P23 million. On 13
October 1988 respondent BARRETTO REALT executed a deed transIerring by way oI "
dacion " the property reconsolidated as Lot 1 in Iavor oI UCPB, which in turn sold the property
to ASIAWORLD Ior P24 million.
On 12 December 1988 Logarta again wrote respondent Que demanding the return oI the
earnest money to GOLDENROD. On 7 February 1989 petitioner through its lawyer reiterated its
demand, but the same remained unheeded by private respondents. This prompted petitioner to
Iile a complaint with the Regional Trial Court oI Manila against private respondents Ior the
return oI the amount oI P1 million and the payment oI damages including lost interests or proIits.
On 15 March 1991 the trial court rendered a decision

ordering private respondents jointly
and severally to pay petitioner P1,000.000.00 with legal interest Irom 9 February 1989 until Iully
paid.The trial court Iound that there was no written agreement between the parties concerning
IorIeiture oI the earnest money iI the sale did not push through. On appeal, the Court oI Appeals
reversed the trial court` decision and ordered the dismissal oI the complaint; hence, this petition.
Issue: Whether or not the Court oI Appeals erred in disregarding the Iinding oI the trial court that
the earnest money given by petitioner to respondent BARRETTO REALT should be returned
to the Iormer.

Ruling: Under Art. 1482 oI the Civil Code, whenever earnest money is given in a contract oI
sale, it shall be considered as part oI the purchase price and as prooI oI the perIection oI the
contract. Petitioner clearly stated without any objection Irom private respondents that the earnest
money was intended to Iorm part oI the purchase price. It was an advance payment which must
be deducted Irom the total price. ence, the parties could not have intended that the earnest
money or advance payment would be IorIeited when the buyer should Iail to pay the balance oI
the price, especially in the absence oI a clear and express agreement thereon.
In University of the Philippines v. de los Angeles , the right to rescind contracts is not
absolute and is subject to scrutiny and review by the proper court. We held Iurther, in the more
recent case oI Adelfa Properties, Inc. v. Court of Appeals , that rescission oI reciprocal contracts
may be extrajudicially rescinded unless successIully impugned in court. II the party does not
oppose the declaration oI rescission oI the other party, speciIying the grounds thereIore, and it
Iails to reply or protest against it, its silence thereon suggests an admission oI the veracity and
validity oI the rescinding party's claim.
Private respondents did not interpose any objection to the rescission by petitioner oI the
agreement. As Iound by the Court oI Appeals, private respondent BARRETTO REALT even
sold Lot 2 oI the subject consolidated lots to another buyer, ASIAWORLD, one day aIter its
President Anthony Que received the broker's letter rescinding the sale. Subsequently, on 13
October 1988 respondent BARRETO REALT also conveyed ownership over Lot 1 to UCPB
which, in turn, sold the same to ASIAWORLD.
Art. 1385 oI the Civil Code provides that rescission creates the obligation to return the
things which were the object oI the contract together with their Iruits and interest. The vendor is
thereIore obliged to return the purchase price paid to him by the buyer iI the latter rescinds the
sale, or when the transaction was called oII and the subject property had already been sold to a
third person, as what obtained in this case. ThereIore, by virtue oI the extrajudicial rescission oI
the contract to sell by petitioner without opposition Irom private respondents who, in turn, sold
the property to other persons, private respondent BARRETTO REALT, as the vendor, had the
obligation to return the earnest money oI P1000,000.00 plus legal interest Irom the date it
received notice oI rescission Irom petitioner
WEREFORE, the Petition is GRANTED. The decision oI the Court oI Appeals is
REVERSED and SET ASIDE. Private respondent Pio Barretto Realty Development, Inc., its
successors and assigns are ordered to return to petitioner Goldenrod, Inc., the amount oI
P1,000,000.00 with legal interest thereon.





















Serrano vs CA, 417SCRA415, 10 December 2003

Facts: Petitioner spouses Arturo and Niceta Serrano are the owners oI a parcel oI land and the
house constructed thereon located in Quezon City; and another parcel oI land located again in
Quezon City. The couple mortgaged said properties in Iavor oI Government Service Insurance
System (GSIS) Ior a security loan oI P50,000.00 They were able to pay P18,000.00 on 1969. On
the same year, the spouses Serrano as vendors and spouses Emilio and Evelyn Geli as vendees
executed a deed oI absolute sale with partial assumption oI the mortgage Ior the price oI P70,
000. Spouses Geli paid the amount oI P38,000.00 and the balance oI P32,000.00 to be paid to
GSIS. Emilio Geli and his children, respondents herein, Iailed to settle the amount to the GSIS.
Petitioners Iiled a complaint Ior the rescission oI the deed oI absolute sale with partial
assumption oI mortgage on September 6, 1984. The trial court rendered a decision ordering
rescission oI the deed. Emilio and petitioners appealed the decision to the Court oI Appeals
(CA). The GSIS Ioreclosed the mortgage during the pendency oI the appeal. A certiIicate oI sale
over the property was Issued in Iavor oI the GSIS it being the highest bidder. In 1987, Emilio
paid the redemption price oI P67, 701.84 to GSIS. Accordingly, the GSIS executed a deed oI
transIer and turned over to Emilio the transIer certiIicate title (TCT) without inIorming Serrano
and the CA. In 1991, the CA dismissed Emilio and petitioners` appeal Ior Iailure to pay the
requisite docket Iees which became Iinal and executory.

Issue: Whether or not the trial court`s judgment ordering the rescission oI the deed oI absolute
sale with partial assumption oI mortgage executed by petitioners and respondents is proper.

Ruling: The payment by Emilio oI the redemption price to the GSIS was made pending appeal
by the respondents Irom the trial court`s order and concealed said payment to petitioners. The
respondents` appealed the decision beIore the CA which was subsequently dismissed Ior Iailure
to pay the requisite docket Iees. Neither did respondents Iile any motion Ior reconsideration Ior
the dismissal oI the appeal. Consequently, the trial court`s decision became Iinal and executory.
With the rescission oI the deed oI sale, the rights oI Emilio Geli under said deed to
redeem the property had been extinguished. The petitioners cannot even be compelled to
subrogate the respondents to their right under the real estate mortgage over the property which
the petitioners executed in Iavor oI GSIS since the payment oI the redemption price was made
without the knowledge oI the petitioners. The respondents, however, are entitled to be
reimbursed by the petitioners to the extent that the latter were beneIited.






Gil vs CA, GR No. 127206, 12 September 2003

Facts: Concepcion Palma Gil, and her sister, Nieves Palma Gil, were the co-owners oI a parcel oI
commercial land with an area oI 829 square meters, identiIied as Lot No. 59-C, covered by
TransIer CertiIicate oI Title (TCT) No. 432 located in Davao City. The spouses Angel and
Nieves Villarica had constructed a two-storey commercial building on the property. On October
13, 1953, Concepcion Iiled a complaint against her sister Nieves with the then Court oI First
Instance oI Davao City, Ior speciIic perIormance, to compel the deIendant to cede and deliver to
her an undivided portion oI the said property with an area oI 256.2 square meters. AIter due
proceedings, the court rendered judgment in Iavor oI Concepcion, ordering the deIendant to
deliver to the plaintiII an undivided portion oI the said property with an area oI 256.2 square
meters.
Nieves appealed to the Court oI Appeals which aIIirmed the assailed decision. On motion
oI the Concepcion, the court Issued a writ oI execution. Nieves, however, reIused to execute the
requisite deed in Iavor oI her sister. The court Issued an order authorizing the sheriII to execute
the requisite deed oI transIer to the plaintiII over an undivided portion oI the property with a total
area oI 256.2 square meters. The sheriII thereaIter executed a Deed oI TransIer to Concepcion
over Lot 59-C-1 and Lot 59-C-2 with a total area oI 256.2 square meters. On October 24, 1956,
Concepcion executed a deed oI absolute sale over Lot 59-C-1 in Iavor oI Iluminada Pacetes. In
the said deed, the area oI Lot 59-C-1 appeared as '256 square meters although under the
subdivision plan, the area oI the property was only 218 square meters. The spouses Angel and
Nieves Villarica Iiled a complaint against the sheriII and Concepcion with the Court oI First
Instance oI Davao City Ior the nulliIication oI the deed oI transIer executed by the sheriII.

Issue: Whether or not Iluminada Pacetes had the right to sell the two parcels oI land to Maglana.

Ruling: Article 1191 in tandem with Article 1592 oI the New Civil Code were central to the
issues at bar. In reciprocal obligations, neither party incurred delay iI the other does not comply
in a proper manner with that which was incumbent upon him. From the moment one oI the
parties IulIills his obligation, delay in the other begins. Thus, reciprocal obligations should be
perIormed simultaneously Ior the perIormance oI one is conditioned and the simultaneous
IulIillment oI the other. The right oI rescission oI a party to an obligation under Article 1191 is
predicated on a breach oI Iaith by the other party that violates the reciprocity between them. The
consignation oI the vendee oI the purchase price oI the property is suIIicient to deIeat the right oI
the petitioners to demand Ior the rescission oI the said deed oI absolute sale.
The deed oI absolute sale executed by Concepcion Gil in Iavor oI Iluminada Pacetes is an
executory contract and not an executed contra t is a settle matter. In a perIect contract oI sale oI
realty, the right to rescind the said contract depends upon the IulIillment or non-IulIillment oI the
prescribed condition
The non-payment oI the purchase price oI property constitutes a very good reason to
rescind a sale Ior it violates the very essence oI the contract oI sale and it is a resolutory
condition Ior which the remedy is either rescission or speciIic perIormance under Article 1191 oI
the New Civil Code. The vendee is entitled to retain the purchase price or a part oI the purchase
price oI realty iI the vendor Iails to perIorm any essential obligation oI the contract.
The decision oI the Court oI Appeals aIIirming the decision oI the Regional Trial Court
dismissing the complaint oI the petitioners is aIIirmed.




Reyes vs Lim, 408SCRA560, 11 August 2003

Facts: On November 7, 1994, petitioner David Reyes as seller, and Jose Lim as buyer, entered
into a contract to sell a parcel oI land located at Pasay City. arrison Lumber Inc. occupied the
property as lessee. The contract contained terms and conditions which are as Iollows: 1) the total
consideration oI property is P28M, 2) P10M to be paid upon the signing oI the contract, the
balance payable on March 8, 1995 upon vacation oI tenants and occupants oI the property and
the execution oI deed oI absolute sale, 3) that in the event that the property is not vacated on the
date stipulated, vendee shall withhold the balance and vendor agrees to pay a penalty oI 4 oI
the downpayment (P10M) until its complete vacation. Lim paid the amount oI P10M to Reyes as
provided in the contract.
On March 23, 1995, petitioner Iilled a complaint Ior annulment oI contract and damages
against respondents Lim, Chuy Cheng Keng and arrison. The complaint alleged that Reyes
inIormed arrison to vacate property beIore the end oI January and that Iailure to do so would
make them liable Ior the penalty as provided in the contract. It was Iurther alleged that Lim
connived with arrison not to vacate the property until the unpaid purchase price had been
equaled by the accumulated penalty.
On March 1, 1995, Lim denied connivance with Keng and arrison to deIraud Reyes.

Issue: Whether or not the petitioner should deposit the P10 million down payment to the custody
oI the trial court as an eIIect oI rescission oI the Contract to Sell.

Ruling: The Supreme Court eld that an action Ior rescission could prosper only iI the party
demanding rescission can return whatever he may be obliged to restore should the court grant the
rescission. The trial court in the exercise oI its equity jurisdiction may validly order the deposit
oI P10 million down payment in court. The purpose oI the exercise oI equity jurisdiction in this
case is to prevent unjust enrichment and to ensure restitution. Reyes is seeking rescission oI the
Contract to Sell.
To subscribe top Reyes` contention will unjustly enrich Reyes at the expense oI Lim.
Reyes sold to Line One Foods Corporation the property. Reyes cannot claim ownership oI the
P10 million down payment because Reyes had already sold to another buyer the property Ior
which Lim made the down payment. The Supreme Court Iind the equities weigh heavily in
Iavor oI Lim, who paid the P10 million down payment in good Iaith only to discover later that
Reyes had subsequently sold the property to another buyer.









Ong vs Tiu, GR No. 144476, 1 February 2002

Facts: The Masagana Citimall, a commercial complex owned and managed by the First Landlink
Asia Development Corporation (FLADC), was threatened with incompletion because oI
Iinancial distress in the amount oI P190M Ior being indebted to the Philippine National Bank
(PNB). FLADC was then Iully owned by the Tiu group. In order to recover, the Tius invited the
Ongs to invest in FLADC. ence the two groups executed a Presubscription Agreement. By the
agreement, the parties agreed to maintain equal shareholdings in FLADC with the Ongs
investing cash while the Tius contributing property. SpeciIically, the Ongs were to subscribe to 1
million shares oI FLADC. Commensurate to their proposed subscriptions, the Ongs were to pay
P100M in cash while the Tius were to contribute their properties namely; a Iour-storey building,
a parcel oI land valued at P30M, a parcel oI land adjacent to said properties. Also Ior purposes oI
equality, among the agreements was that the positions oI President and Secretary oI FLADC
shall be eld by the Ongs while the Vice President and the Treasurer shall be eld by the Tius.
In order to liquidate the FLADC`s loan Irom the PNB, the parties proposed payment oI P100M
to be invested by Ongs to FLADC.
Intraland Resources and Development Corporation (Tius`) executed oI assignment over
the 4-storey building in Iavor oI FLADC. Masagana Telemart Inc. executed a deed oI assignment
over the said land properties in Iavor oI FLADC and the title was transIerred in the latter`s name.
The loan Irom the PNB was also settled but not in accord with the provisions oI the agreement.
The controversy arose when the Ongs reIused to credit the number oI FLADC shares in
the name oI Masagana Telemart commensurate to its property contributions and when the Ongs
reIused to credit the number oI FLADC shares in Iavor oI the Tius commensurate to their land
property contribution and when the Tius were proscribed Irom assuming and perIorming their
duties as Vice President and Treasurer.
The Tius sought the Securities and Exchange Commission (SEC) conIirmation oI the
rescission oI the PreSubscription Agreement. The SEC conIirmed the rescission oI the said
agreement. Both the Ong and the Tiu group appealed the order oI the SEC to the SEC en banc.
The SEC Issued an order conIirming the Iirst SEC order with modiIications. The Ongs appealed
to the Court oI Appeals (CA). The CA aIIirmed the SEC en banc orders and conIirmed the
rescission oI the Pre Subscription Agreement with modiIications.

Issue: Whether or not the decision oI the CA conIirming the rescission oI the Pre Subscription
Agreement entered into by the Tiu group and the Ong group is proper.

Ruling: The Court oI Appeals did not err in ruling that the "Pre-Subscription Agreement" oI the
parties dated August 15, 1994 may be rescinded under Article 1191 oI the New Civil Code.
Reciprocity in a contract oI sale, is the correlative duty oI the obligation oI the seller to deliver
the property is the obligation oI the buyer to pay the agreed price. In the case at bar, the
correlative obligation oI the Tius is to let the Ongs have and exercise the Iunctions oI the
positions oI President and Secretary and the obligation oI the Ongs is to let the Tius have and
exercise the Iunctions oI Vice-President and Treasurer. The Ongs allege that rescission is
applicable only to reciprocal obligations and the "Pre-Subscription Agreement" does not provide
Ior reciprocity, hence, the remedy oI rescission is not available.
The Ongs cited the case oI Songcuan vs. IAC, to illustrate their point that "As in the
Songcuan case, there are here two (2) separate and distinct obligations each independent oI the
other the obligation to subscribe to, and to pay, 50 oI the increased capital stock oI FLADC;
and the obligation to install the Ongs and the Tius as members oI the Board oI Directors and to
certain corporate positions, but only aIter the Ongs and the Tius have subscribed each to 50 oI
the increased capital stock oI FLADC." In this petition, in lieu oI Art. 1191, the Ongs invoke
Articles 1156 and 1159 oI the New Civil Code which state:
"Art. 1156. An obligation is a juridical necessity to give, to do or not to do.
"Art. 1159. Obligations arising Irom contracts have the Iorce oI law between
the contracting parties and should be complied with in good Iaith."
and that should there be any violation, those who Iailed to IulIill their obligations should be
required to perIorm their obligations under the agreement.Contrary to the Ongs' assertion, the
Songcuan case does not apply squarely to this case.
In the Songcuan case, the Court ruled that Art. 1191 to rescind the right oI the Alviars to
repurchase does not apply because their corresponding obligations can hardly be called
reciprocal because the obligation oI the Alviars to lease to Songcuan the subject premise arises
only aIter the latter had reconveyed the realties to them. On the other hand, in the instant case,
the obligations oI the two (2) groups to pay 50 oI the increased capital stock oI FLADC and to
install them as members oI the Board oI Directors and to certain corporate positions are
simultaneous and arise upon the execution oI the pre-subscription agreement.
The Ongs illustrate reciprocity in the Iollowing manner: In a contract oI sale, the
correlative duty oI the obligation oI the seller to deliver the property is the obligation oI the
buyer to pay the agreed price. In the case at bar, the correlative obligation oI the Tius to let the
Ongs have and exercise the Iunctions oI the positions oI President and Secretary is the obligation
oI the Ongs to let the Tius have and exercise the Iunctions oI Vice-President and Treasurer.














Equatorial Realty vs MayIair Theater, GR No. 136221, 12 May 2000

Facts: Carmelo & Bauermann, Inc. used to own a parcel oI land, together with two two-storey
buildings constructed thereon. On June 1, 1967, Carmelo entered into a lease with MayIair
Theater, Inc. Ior a period oI 20 years. The lease covered a portion oI the second Iloor and
mezzanine. Two years later, MayIair entered into a second lease with Carmelo Ior the lease oI
another property, a part oI the second Iloor and two spaces on the ground Iloor. The lease was
also Ior a period oI twenty years. Both leases contained a provision granting MayIair a right oI
Iirst reIusal to purchase the said properties. owever, on July 30, 1978, within the 20-year-lease
term, the subject properties were sold by Carmelo to Equatorial Realty Development, Inc. Ior the
sum oI P11.3M without their Iirst being oIIered to MayIair.
As a result, MayIair Iiled a complaint Ior speciIic perIormance and damages. AIter trial,
the court ruled in Iavor oI Equatorial. On appeal, the Court oI Appeals reversed and set aside the
judgment oI the lower court. On November 21, 1996, the Supreme Court denied Equatorial`s
petition Ior review and declared the contract between Carmelo and Equatorial rescinded. The
decision became Iinal and executory.
On September 18, 1997, Equatorial Iiled an action Ior the collection oI sum oI money
against MayIair claiming payment oI rentals or reasonable compensation Ior the deIendant`s use
oI the premises aIter its lease contracts had expired. The lower court debunked the claim oI the
petitioner Ior unpaid rentals, holding that the rescission oI the Deed oI Absolute Sale in the
mother case did not conIer on Equatorial any vested or residual proprietary rights, even in
expectancy.

Issue: Whether or not Equatorial may collect rentals or reasonable compensation Ior MayIair`s
use oI subject premises aIter its lease contracts had expired.

Ruling: Equatorial did not obtain right oI ownership over the property when it entered into the
Deed oI Absolute Sale. Ownership oI the property is acquired by buyer only upon the delivery
oI the thing to him. There is delivery iI the thing sold is placed in the control and possession oI
the vendee. While the execution oI a public instrument oI sale is recognized by law as the
equivalent oI delivery oI the thing sold, such constructive or symbolic delivery, being only
presumptive, is deemed negated by the Iailure oI the vendee to take actual possession oI the
property sold. Since MayIair was in actual possession oI the property by virtue oI the lease
contract with Carmelo, there was no consummation oI the sale, and thereIore, Equatorial did not
get ownership right (real right).
Further, the Deed oI Absolute Sale entered into by Carmelo and Equatorial was a
violation oI the right oI Iirst reIusal granted by Carmelo to MayIair. The execution oI the deed
oI absolute sale as a Iorm oI constructive delivery is a legal Iiction. It holds true only iI there is
no legal impediment that may prevent the passing oI the property Irom the vendor to the vendee.
The right oI Iirst reIusal eld by MayIair was such legal impediment. ThereIore, there was no
transIer oI ownership Irom Camelot to Equatorial. As a result, no rental can be collected by
equatorial Irom MayIair.


Velarde vs CA, GR No. 108346, 11 July 2001

Facts: On August 8, 1986, a Deed oI Sale with Assumption oI Mortgage was executed by
deIendant David Raymundo, as vendor, in Iavor oI plaintiIIs Avelina and Mariano Velarde
(herein petitioners) over a house and lot located at Kamias St., Dasmarias Village, Makati.
Among the terms and conditions oI the said contract was the assumption oI the payment
oI the mortgage obligations on the said property in the amount oI P1, 800, 000 in Iavor oI the
Bank oI the Philippine Islands, Makati, Metro Manila. In this connection, the parties agreed that
plaintiIIs were to apply an assumption oI mortgage beIore the said bank and while pending on
BPI`s approval oI the application, plaintiIIs were to continue paying the monthly interests oI the
loan secured by a real estate mortgage.
Pursuant to the said agreements, plaintiIIs paid BPI the monthly interest Ior three (3)
months until the Bank disapproved their Application Ior Assumption oI Mortgage on December
15, 1986. This prompted plaintiIIs not to make any Iurther payment.
On January 5, 1985, deIendants, thru counsel, wrote plaintiIIs inIorming them that their
non-payment to the mortgage bank constituted non-perIormance oI their obligation.
In response, counsel Ior plaintiIIs wrote deIendants inIorming them the willingness oI
plaintiIIs to pay the balance only with three (3) conditions speciIied therein.
On January 8, 1987, deIendants sent plaintiIIs a notarial notice oI cancellation/rescission
oI the intended sale due to the latter`s Iailure to comply with the terms and conditions oI the
agreed contract.
Consequently, petitioners Iiled a complaint against respondents Ior speciIic perIormance,
nullity oI cancellation, writ Ior possession and damages. The RTC oI Makati, Branch 149, thru
then judge ares-Santiago, dismissed the complaint. A Motion Ior Reconsideration was,
however, granted by the same court thru another judge.
On appeal, the Court oI Appeals reinstated the decision oI ares-Santiago.

Issue: The Issue is whether or not the rescission is proper.

Ruling: The right oI rescission oI a party to an obligation under Article 1191 oI the Civil Code is
predicated on breach by the other party who violates the reciprocity between them. The breach
contemplated in the said provision is the obligor`s Iailure to comply with an existing obligation.
When the obligor cannot comply with what is incumbent upon it, the obligee may seek rescission
and, in the absence oI any just cause Ior the court to determine the period oI compliance, the
court shall decree the rescission.
In the present case, private respondents validly exercised their right to rescind the
contract, because oI the Iailure oI petitioners to comply with their obligation to pay the balance
oI the purchase price. Indubitably, the latter violated the very essence oI reciprocity in the
contract oI sale, a violation that consequently gave rise to private respondents` right to rescind
the same in accordance with law.
True, petitioners expressed their willingness to pay the balance oI the purchase price one
month aIter it became due; however, this was not equivalent to actual payment as would
constitute a IaithIul compliance oI their reciprocal obligation.
In the instant case, the breach committed did not merely consist oI a slight delay in
payment or an irregularity; such breach would not normally deIeat the intention oI the parties to
the contract. ere, petitioners not only Iailed to pay the P1.8 million balance, but they also
imposed upon private respondents new obligations as preconditions to the perIormance oI their
own obligation. In eIIect, the qualiIied oIIer to pay was a repudiation oI an existing obligation,
which was legally due and demandable under the contract oI sale.


Asuncion vs Evangelista, GR No. 133491, 13 October 1999

Facts: Private respondent Evangelista was the majority stockholder oI the Embassy Farm, Inc.,
with 90 oI the shares in his name. e also served as its president and CEO. Its principal oIIice
was established at the piggery Iacility that has been existing on the landholdings oI private
respondents in Barangay Loma de Gato, Marilao, Bulacan, consisting about 104, 447 sq. m.
In 1980, 1981, and 1982, private respondent obtained three personal loans in three
diIIerent banks to provide himselI working capital to run the Iarm and sustain its operations. is
debt exposure totaled P3,056, 625.78.
By June 24, 1984, private respondent`s aggregate debt had ballooned to almost
P6,000,000 in overdue principal payments, interests, penalties and other Iinancial charges.
On August 2, 1984, petitioner Asuncion and private respondent executed a Memorandum
oI Agreement. Among the terms and conditions contained in the agreement was the stipulation
that petitioner has purchased private respondent`s landholdings and shares oI stock in Embassy
Farms, Inc. Ior the price equivalent to private respondent`s total outstanding loans which
petitioner shall assume. For his part, private respondent was obligated to execute, sign and
deliver any and all documents necessary Ior the transIer and conveyance oI several parcels oI
land he owned and to cede, transIer and convey in a manner absolute and irrevocable any and all
oI his shares oI stocks in the said corporation.
As oI August, 1985, the total amount paid by petitioner to private respondent was
P3,194,941.88. owever, the landholdings over the subject parcels oI land and the shares oI
stock in the corporation remained is still in the name oI private respondent.
Petitioner demanded Ior the perIormance oI obligation but private respondent resisted.
Eventually, case was Iiled Ior rescission oI the Memorandum oI Agreement on April 10, 1986.
On July, 1, 1994, the trial court rendered a decision in Iavor oI private respondent holding
that petitioner can not demand the delivery oI the landholdings and the share oI stock because he
has not yet Iully paid the whole loan oI private respondent. The Court oI Appeals aIIirmed it.

Issue: Whether or not rescission is a valid legal recourse in the case at bar.

Ruling: Article 1191 oI the Civil Code governs the situation where there is non-compliance by
one party in case oI reciprocal obligations.
The Supreme Court Iound that private respondent Iailed to perIorm his substantial
obligations under the MOA. ence, petitioner sought the rescission oI the agreement and ceased
inIusing capital into the piggery business oI private respondent. e later justiIied his reIusal to
execute any deed oI sale and deliver the certiIicates oI stock by accusing petitioner oI having
Iailed to assume his debts.
The Court holds that the respondent`s insistence that petitioner execute a Iormal
assumption oI mortgage independent and separate Irom his own execution oI a deed oI cases is
legally untenable, considering that a recorded real estate mortgage is a lien inseparable Irom the
property mortgaged and until discharged, it Iollows the property.
In Iine, that the MOA entered into by petitioner and private respondent should indeed be
rescinded. The respondent appellate court erred in assessing damages against petitioner Ior his
reIusal to Iully pay private respondent`s overdue loans. Such reIusal was justiIied, considering
that private respondent was the Iirst to reIuse to deliver to petitioner the lands and certiIicates oI
stock that were the consideration Ior the almost 6M in debt that petitioner was to assume and
pay.
The instant petition was granted. Decisions oI the lower and appellate courts were
reversed and set aside. The MOA entered into by the parties is declared rescinded.



Uy vs CA, GR No. 120465, 9 September 1999

Facts: Petitioners William Uy and Rodel Roxas are agents authorized to sell eight (8) parcels oI
land by the owners thereoI. By virtue oI such authority, petitioners oIIered to sell the lands,
located in Tuba, Tadiangan, Benguet to respondent National ousing Authority (NA) to be
utilized and developed as a housing project.
On February 14, 1989, NA approved the acquisition oI the said parcels oI land with an
area oI 31.8231 hectares at the cost oI P23.867 million, pursuant to which the parties executed a
series oI Deeds oI Absolute Sale covering the subject lands. OI the eight parcels oI lands,
however, only Iive were paid Ior by the NA because oI the report it received Irom the Land
Geosciences Bureau oI the Department oI Environment and Natural Resources that the
remaining area is located at an active landslide area and thereIore, not suitable Ior development
into a housing project. NA eventually cancelled the sale over the remaining three (3) parcels oI
land.
On March 9, 1992, petitioners Iiled a complaint Ior damages. AIter trial, the RTC oI
Quezon City rendered the cancellation oI contract to be justiIied and awarded P1.255 million as
damages in Iavor oI petitioners.
Upon appeal by petitioners, the Court oI Appeals reversed the decision and entered a new
one dismissing the complaint including the award oI damages.
The motion Ior reconsideration having been denied, petitioners seek relieI Irom this court
contending, inter alia, that the CA erred in declaring that NA had any legal basis to rescind the
subject sale.

Issue: Whether or not the cancellation oI the sale has suIIicient justiIiable basis.

Ruling: The cancellation oI the sale was based on the negation oI the cause arising Irom the
realization that the land, which were the object oI the sale, were not suitable Ior housing cause is
the essential reason which moves the contracting parties to enter into a contract. The National
ousing Authority would not have entered into the contract were the lands not suitable Ior
housing. In other words, the quality oI the land was an implied condition Ior the NA to enter
into the contract. NA was justiIied in canceling the contract.



























Victory Liner vs eirs oI Andres Malecdan, GR No. 154278, 27 December 2002

Facts: Andres Malecdan was a 75 year-old Iarmer. On July 15, 1994, at around 7:00 p.m., while
Andres was crossing the National ighway on his way home Irom the Iarm, a Dalin Liner bus on
the southbound lane stopped to allow him and his carabao to pass. owever, as Andres was
crossing the highway, a bus oI petitioner Victory Liner, driven by Ricardo C. Joson, Jr.,
bypassed the Dalin Bus. In so doing, respondent hit the old man and the carabao on which he
was riding. As a result, Andres Malecdan was thrown oII the carabao, while the beast toppled
over. The Victory Liner bus sped past the old man, while the Dalin bus proceeded to its
destination without helping him.
The incident was witnessed by Andres Malecdan`s neighbor, Virgilio Lorena, who was
resting in a nearby waiting shed aIter working on his Iarm. Malecdan sustained a wound on his
leIt shoulder, Irom which bone Iragments protruded. e was taken by Lorena and another
person to the district hospital where he died a Iew hours aIter arrival. The carabao also died soon
aIterwards. Lorena executed a sworn statement beIore the police authorities. Subsequently, a
criminal complaint Ior reckless imprudence resulting in homicide and damage to property was
Iiled against the Victory Liner bus driver Ricardo Joson, Jr.
Private respondents brought the suit Ior damages in the RTC which Iound the driver
guilty oI gross negligence in the operation oI his vehicle and Victory Liner, Inc. also guilty oI
gross negligence in the selection and supervision oI Joson, Jr. Petitioner and its driver were eld
liable jointly and severally Ior damages.
On appeal, the decision was aIIirmed by the Court oI Appeals, with the modiIication that
the award oI attorney`s Iees was Iixed at P50,000.00.

Issue: Whether or not the aIIirmation by the CA oI granting the award oI moral and exemplary
damages and attorney`s Iees considering that there is no Iinding oI bad Iaith and gross
negligence on the part oI the petitioner was not established.

Ruling: Article 2176 provides: 'Whoever by act or omission causes damage to another, there
being Iault or negligence, is obliged to pay Ior the damage done. Such Iault or negligence, iI
there is no pre-existing contractual relation between the parties, is called a quasi-delict and is
governed by the provisions oI this Chapter. Article 2180 provides Ior the solidary liability oI an
employer Ior the quasi-delict committed by an employee. The responsibility oI employers Ior
the negligence oI their employees in the perIormance oI their duties is primary and, thereIore, the
injured party may recover Irom the employers directly, regardless oI the solvency oI their
employees.
Employers may be relieved oI responsibility Ior the negligent acts oI their employees
acting within the scope oI their assigned task only iI they can show that "they observed all the
diligence oI a good Iather oI a Iamily to prevent damage." For this purpose, they have the
burden oI proving that they have indeed exercised such diligence, both in the selection oI the
employee and in the supervision oI the perIormance oI his duties.
In the selection oI prospective employees, employers are required to examine them as to
their qualiIications, experience and service records. With respect to the supervision oI
employees, employers must Iormulate standard operating procedures, monitor their
implementation and impose disciplinary measures Ior breaches thereoI. These Facts must be
shown by concrete prooI, including documentary evidence.
In the instant case, petitioner presented the results oI Joson, Jr.`s written examination,
actual driving tests, x-ray examination, psychological examination, NBI clearance, physical
examination, hematology examination, urinalysis, student driver training, shop training, birth
certiIicate, high school diploma and reports Irom the General Maintenance Manager and the
Personnel Manager showing that he had passed all the tests and training sessions and was ready
to work as a proIessional driver. owever, the trial court noted that petitioner did not present
prooI that Joson, Jr. had nine years oI driving experience. Petitioner also presented testimonial
evidence that drivers oI the company were given seminars on driving saIety at least twice a year.
owever, the trial court noted that there is no record oI Joson, Jr. ever attending such a seminar.
Petitioner likewise Iailed to establish the speed oI its buses during its daily trips or to submit in
evidence the trip tickets, speed meters and reports oI Iield inspectors. The Iinding oI the trial
court that petitioner`s bus was running at a very Iast speed when it overtook the Dalin bus and hit
the deceased was not disputed by petitioner. Thus it was eld that the trial court did not err in
Iinding petitioner to be negligent in the supervision oI its driver Joson, Jr.




























GSIS vs Labung-Deang, GR No. 135644, 17 September 2001

Facts: Sometime in December 1969, the spouses Deang obtained a housing loan Irom the GSIS
in the amount oI eight thousand Iive hundred pesos (P8,500.00). Under the agreement, the loan,
which was secured by a real estate mortgage constituted over the spouses` property, was to
mature on December 23, 1979. As required by the mortgage deed, the spouses Daeng deposited
the owner`s duplicate copy oI the title with the GSIS.
On January 19, 1979, eleven (11) months beIore the maturity oI the loan, the spouses
Deang settled their debt with the GSIS and requested Ior the release oI the owner`s duplicate
copy oI the title since they intended to secure a loan Irom a private lender and use the land
covered by it as collateral security Ior the loan oI IiIty thousand pesos (P50,000.00) which they
applied Ior with one Milagros Runes. They would use the proceeds oI the loan applied Ior the
renovation oI the spouses` residential house and Ior business. owever, personnel oI the GSIS
were not able to release the owner`s duplicate oI the title as it could not be Iound despite diligent
search.
On July 6, 1979, the spouses Deang Iiled with the Court oI First Instance, Angeles City a
complaint against GSIS Ior damages, claiming that as result oI the delay in releasing the
duplicate copy oI the owner`s title, they were unable to secure a loan Irom Milagros Runes, the
proceeds oI which could have been used in deIraying the estimated cost oI the renovation oI their
residential house and which could have been invested in some proIitable business undertaking.
The trial court rendered decision in Iavor oI the spouses Labung-Deang. The Court oI
Appeals also aIIirmed the decision oI the lower court thus the petition.

Issue: Whether or not GSIS is liable Ior damages.

Ruling: Under the Facts, there was a pre-existing contract between the parties. GSIS and the
spouses Deang had a loan agreement secured by a real estate mortgage. The duty to return the
owner`s duplicate copy oI title arose as soon as the mortgage was released. Negligence is
obvious as the owners` duplicate copy could not be returned to the owners. Thus, GSIS is liable
Ior damages.
First, in a breach oI contract, moral damages are not awarded iI the deIendant is not
shown to have acted Iraudulently or with malice or bad Iaith. The Iact that the complainant
suIIered economic hardship or worries and mental anxiety is not enough.
Second, actual damages cannot be awarded as there is no Iactual basis Ior such award.
Actual damages to be compensable must be proven by clear evidence. A court cannot rely on
'speculation, conjecture or guess work as to the Iact and amount oI damages, but must depend
on actual prooI.
On the other hand, it is also apparent that the spouses Deang suIIered Iinancial damage
because oI the loss oI the owners` duplicate copy oI the title. Temperate damages may be
granted on the amount oI P20, 000.00 as a reasonable amount considering that GSIS spent Ior the
reconstitution oI the owners` duplicate copy oI the title.
WhereIore the petition is denied.

BPI Investment vs D.G. Carreon, GR No. 126524, 29 November 2001

Facts: Petitioner BPI Investment Corp. (BPI), Iormerly known as Ayala Investment and
Development Corp, was engaged in money market operations. Respondent D. G. Commercial
Corp. was a client oI petitioner. The individual respondents, spouses Daniel and Aurora Carreon
and JoseIa Jaceil also placed with BPI their personal money in money market placements.
On April 21, 1982, petitioner wrote respondents Daniel Carreon, demanding the return oI
an alleged overpayment amounting to P410, 937.09. The respondents, however, asserted that
there was no overpayment and asked Ior time to go over the documents and papers. Upon the
request oI petitioners, the spouses Daniel and Aurora Carreon sent to BPI a proposed
memorandum oI agreement dated May 7, 1982. The agreement provided that respondent
company, in the spirit oI goodwill, agreed to temporarily reimburse BPI the amount oI P410,
937.09 while the said controversy (transactions oI the placement) would be checked within the
period oI Iive years.
On May 10, 1982, petitioners without responding to the memorandum and proposal oI
the respondent company Iiled with the Court oI First Instance oI Rizal, a complaint Ior recovery
oI a sum oI money against respondent D. G. Carreon with preliminary attachment. On May 14,
1982, the trial court Issued an order oI attachment and posting a bond in the amount oI P200,
000. owever, on October 8, 1982, the trial court liIted the writ oI attachment. Petitioner moved
Ior reconsideration but was denied.

Issue: Whether or not respondents are entitled to damages as awarded by the respondent court.

Ruling: The Court Iinds petitioners not guilty oI gross negligence. Exemplary damages,
thereIore, cannot be awarded to respondents. Petitioner BPI did not act in wanton, Iraudulent,
reckless, oppressive, or malevolent manner when it asked Ior preliminary attachment. It was just
exercising a legal option. The sheriII oI the issuing court did the execution and the attachment.
ence, BPI is not to be blamed Ior the excessive and wrongIul attachment.
As to the Iiling oI the appellate court that the Iiling oI the case was aggravated and
eventually caused the death oI two oI the respondents, the Court agrees with the petitioner that
such correlation is bereIt oI basis and is Iar Ietched.
The award oI moral damages and attorney`s Iees is also not in keeping with existing
jurisprudence. Moral damages may be awarded in a breach oI contract when the deIendant acted
in bad Iaith, or was guilty oI gross negligence amounting to bad Iaith, or in wanton disregard oI
his contractual obligation. Finally, with the elimination oI award oI moral damages, so must the
award oI attorney`s Iees be deleted.
There is no doubt, however, that the damages sustained by respondents were due to
petitioner`s Iault or negligence, short oI gross negligence. Temperate or moderate damages may
be recovered when the court Iinds that some pecuniary loss has been suIIered but its amount
cannot, Irom the nature oI the case, be proved with certainty. The Court deems it prudent to
award reasonable temperate damage to respondents under the circumstances.














Khe Kong vs CA, GR No. 144169, 28 March 2001

Facts: Petitioner Khe ong Cheng, alias Felix Khe, is the owner oI Butuan Shipping Lines to
which the Philippine Agricultural Trading Corporation used its vessel M/V Prince Eric
Corporation to ship 3,400 bags oI Copra at Masbate Ior delivery to Dipolog. Such shipping oI
3,400 bags was covered by a marine insurance policy Issued by American ome Insurance
Company (eventually Philam). owever, said vessel sank somewhere between Negros Island
and Northern Mindanao which resulted to the total loss oI the shipment. Insurer Philam paid the
amount oI P 354, 000.00, which is the value oI the copra, to Philippine Agricultural Trading
Corporation. American ome was thereby subrogated unto the rights oI the consignee and Iiled a
case to recover money paid to the latter, based on breach oI common carriage.
While the case was pending, Khe ong Cheng executed deeds oI donations oI parcels oI
land in Iavor oI his children. As a consequence oI a Iavorable judgment Ior American ome, a
writ oI execution to garnish Khe ong Cheng`s property was Issued but the sheriII Iailed to
implement the same Ior Cheng`s property were already transIerred to his children. Consequently,
American home Iiled a case Ior the rescission oI the deeds oI donation executed by petitioner in
Iavor oI children Ior such were made in Iraud oI his creditors. Petitioner answered saying that the
action should be dismissed Ior it already prescribed. Petitioner posited that the registration oI the
donation was on December 27, 1989 and such constituted constructive notice. And since the
complaint was Iiled only in 1997, more than Iour years aIter registration, the action is thereby
barred by prescription.

Issue: Whether or not accion pauliana/rescission oI the deed oI donation is proper.

Ruling: For an accion pauliana to accrue, the Iollowing requisites must concur: (1) the plaintiII
asking Ior rescission has a credit prior to the alienation, although demandable late; (2) that the
debtor has made a subsequent contract conveying a patrimonial beneIit to a third person; (3) that
the creditor has no other Legal remedy to satisIy his claim; but would beneIit by rescission oI the
conveyance to the third person; (4) that the act being impugned is Iraudulent; and (5) that the
third person who received the property conveyed, iI by onerous title, has been an accomplice in
the Iraud. All the above enumerated elements are present in the case at bar.
Finally, an accion pauliana presupposes the Iollowing: 1) a judgment; 2) the issuance by
the trial court oI a writ oI execution Ior the satisIaction oI the judgment; and 3) the Iailure oI the
sheriII to enIorce and satisIy the judgment oI the court. In the case at bar, American exhausted
all the properties oI the debtor in Iutility. The date oI the trial court`s decision is immaterial.
What is important is that the credit oI the plaintiII antedates that oI the Iraudulent alienation by
the debtor oI his property. AIter all, the decision oI the trial court against the debtor retroacts to
the time when the debtor became indebted to the creditor.


















uibonhua vs CA, GR No. 95897, 14 December 1999

Facts: On June 8, 1983, Florencia uibonhoa entered into a memorandum oI agreement with the
siblings Lim, Gojocco and Chua, stating that she will lease Irom them three (3) adjacent
commercial lots in Binondo, Manila. A contract oI lease was thereaIter executed between the
parties, where such lease over the lots shall last Ior IiIteen (15) years commencing on July 1,
1983 and renewable upon agreement oI the parties. Further, it was agreed in the terms and
conditions oI the contract, among others that: (1) uibonhoa was allowed to construct a Iour-
storey building; (2) that the said building shall be completed within eight (8) months Irom the
date oI the execution oI the contract oI lease; (3) that uibonhoa shall pay to each lessor the sum
oI P 300, 000; (4) that uibonhoa shall pay to each lessor P 15, 000.00 as monthly rentals; (6)
that the obligation to start paying the rental shall commence only upon completion oI the
building within the eight-month period.
The building was completed only in September oI 1984, seven months late within the
eight-month period originally agreed upon as contained in the terms oI the contract. It seems that
the construction oI the building must have been aIIected by the county`s political and economic
stability due to Iormer Senator Benigno Aquino`s assassination because the prices Ior the
construction oI the building materials suddenly increased. Consequently, uibonhoa Iailed to
pay rentals despite continuous demands by the lessor and in December 1984, the siblings sent a
Iinal letter oI demand to the lessee to pay the rental arrearages and to vacate the leased premises.
Also, the lessor notiIied the lessee oI their intention to terminate the contract.

Issue: Whether or not the assassination oI Iormer senator Benigno Aquino was a Iortuitous event
that can thereby lead the parties to reIorm the contract.

Ruling: A Iortuitous event is that which could not be Ioreseen, or even iI Ioreseen, was
inevitable. To exempt the obligor Irom liability Ior breach oI an obligation due to an 'act oI
God, the Iollowing must concur: Iirst, the cause oI breach must be independent oI the will oI the
obligor. Second, the event must be unIoreseeable or inevitable. Third, the event must be such as
to render it impossible Ior the debtor to IulIill his obligation in a normal manner. And Iourth, the
debtor must be Iree Irom any participation in, or aggravation oI, the injury to the creditor.
Further, inIlation per se, does not account that a Iortuitous event transpired. InIlation is the sharp
increase oI money or credit or both without a corresponding increase in business transaction.
There is inIlation when there is an increase in the volume oI money and credit relative to
available parties to the lease contract. Ordinary diligence on the part oI the parties demanded that
they execute a written agreement iI indeed they wanted to enter into a new one because oI the
15-year liIe span oI the lease aIIecting real property and the Iact that third persons would be
aIIected thereby on account oI the express agreement allowing the lessee to lease the building to
third parties. owever, only when an extraordinary inIlation supervenes that the law aIIords the
parties a relieI in contractual obligations. Extraordinary inIlation exists when there is a decrease
or increase in the purchasing power oI the Philippine currency which is unusual or beyond the
common Iluctuation in the value oI said currency, and such decrease or increase could not have
been reasonably Ioreseen or was maniIestly beyond the contemplation oI the parties at the time
oI the establishment oI the obligation. Further, no decrease in the peso value oI such magnitude
having occurred, uibonhoa has no valid ground to ask the Court to intervene and modiIy the
lease agreement to suit her purpose. uibonhoa Iailed to prove by evidence, both documentary
and testimonial, that there was an extraordinary inIlation Irom July 1983 to February 1984.
Although she repeatedly alleged that the cost oI constructing the building doubled Irom P 6M to
P 12 M, she Iailed to show by how much, Ior instance, the price index oI goods and services had
risen during that intervening period. An extraordinary inIlation cannot be assumed. ence, Ior
uibonhoa to claim exemption Irom liability by reason oI Iortuitous event under Article 1174 oI
the Civil Code, she must prove that inIlation was the sole and proximate cause oI the loss or
destruction oI the contract or in this case, oI the delay in the construction oI the building. aving
Iailed to do so, uibonhoa`s contention is untenable. Finally, iI indeed a Iortuitous event
deterred the timely IulIillment oI uibonhoa`s obligation under the lease contract, she chose the
wrong remedy in Iiling the case Ior reIormation oI the contract. Instead, she should have availed
oI the remedy oI rescission oI contract in order that the court could release her Irom perIorming
her obligation under Articles 1266 and 1267 oI the Civil Code, so that the parties could be
restored to their status quo ante to the execution oI the lease contract.



























Ace Agro vs CA, GR No. 119729, 21 January 1997

Facts: Petitioner Ace-Agro Development Corporation and private respondent Cosmos Bottling
Corporation entered into service contracts, which they renewed every year. On April 25, 1990,
Iire broke out in private respondent`s plant, destroying, among other places, the area where
petitioner did its work. As a result, petitioner`s work was stopped.
Petitioner expressed surprise at the termination oI the contract and requested private
respondent. Petitioner brought this case against private respondent Ior breach oI contract and
damages it complained that the termination oI its service contract was illegal and arbitrary and
that, as a result, it stood to lose proIits and to be eld liable to its employees Ior back wages,
damages and/or separation pay.

Issue: Whether the contract terminated on account oI a force mafeure was justiIied.

Ruling: Obligations may be extinguished by the happening oI unIoreseen events, under whose
inIluence the obligation would never have been contracted, because in such cases, the very basis
upon which the existence oI the obligation is Iounded would be wanting.
Both parties admitted that the April 25, 1990 Iire was a force mafeure or unIoreseen
event and that the same even burned practically all the soIt drink bottles and wooden shells
which are the objects oI the agreement. But the story did not end there.
It is true that deIendant-appellant still had other bottles that needed cleaning and wooden
shells that needed repairing; thereIore, the suspension oI the work oI the plaintiII-appellee
brought about by the Iire is, at best, temporary as Iound by the trial court. ence, plaintiII-
appellee`s letters oI reconsideration oI the termination oI the agreement addressed to deIendant-
appellant dated June 13, 1990 and July 17, 1990


































Dioquino vs Laureano, GR No. L-25906, 28 May 1970

Facts: Petitioner Dioquino met respondent Laureano at the MVO oIIice when the Iormer went to
register his car at the said oIIice. Respondent was a patrol oIIicer oI the MVO oIIice and at the
time was waiting Ior a jeepney to take him to the oIIice oI the Provincial Copmmander.
Petitioner requested respondent to introduce him to one oI the clerks in the MVO oIIice, who
could Iacilitate the registration oI his car and the request was graciously attended to. AIterwards,
respondent rode on the car oI petitioner with petitioner`s driver to the oIIice oI the provincial
commander. Along the way, some mischievous boys stoned the car and its windshield was
broken. Respondent chased and was able to catch one oI the boys and took him to petitioner.
The petitioner, however, did not Iile charges against the boy and his parents because the stone
throwing was merely accidental and due to Iorce majeure. Respondent reIused to pay the
windshield himselI, even aIter petitioner tried to settle and even asked respondent`s wiIe to
convince her husband, since the same due to Iorce majeure.
Petitioner prevailed in the trial court. ence, this appeal to the Court was Iiled.

Issue: Whether or not the respondent is liable Ior the broken windshield oI petitioner`s car.

Ruling: The damage to the windshield caused by the mischievous boys was a Iortuitous event
resulting in a loss, which must be borne by the owner oI the car.
Article 1174 oI the Civil Code provides that iI the nature oI the obligation requires the
assumption risk, compels the conclusion that in the absence oI a legal provision or an express
covenant, 'no one should be eld to account Ior Iortuitous cases.
Where the risk is quite evident such that the possibility oI danger is not only Ioreseeable,
but also actually Ioreseen, then it could be said that the nature oI the obligation is such that a
party could rightIully be deemed to have assumed it. It is not enough thereIore that the event
should not have been Ioreseen or anticipated, but it must be one impossible to Ioresee or to avoid
in order that a party may be said to have assumed the risk resulting Irom the nature oI the
obligation itselI.
In the case, there is no assumption oI risk by the borrower oI a car to respond to damages
Ior the broken windshield caused by an accidental stone-throwing incident by boys playing along
the road. Decision reversed as to the liability oI respondent.




Bachelor Express vs CA, GR No. 85691, 31 July 1990

Facts: On August 1, 1980, Bus No. 800 owned by Bachelor Express, Inc. and driven by
Cresencio Rivera was the situs oI a stampede which resulted in the death oI passengers
Ornominio Beter and Narcisa Rautraut. The evidence shows that the bus came Irom Davao City
on its way to Cagayan de Oro City passing Butuan City; that while at Tabon-Tabon, Butuan City,
the bus picked up a passenger; that about IiIteen (15) minutes later, a passenger at the rear
portion suddenly stabbed a PC soldier which caused commotion and panic among the
passengers; that when the bus stopped, passengers Ornominio Beter and Narcisa Rautraut were
Iound lying down the road, the Iormer already dead as a result oI head injuries and the latter also
suIIering Irom severe injuries which caused her death later. The passenger assailant alighted
Irom the bus and ran toward the bushes but was killed by the police. ThereaIter, the heirs oI
Ornominio Beter and Narcisa Rautraut, private respondents herein (Ricardo Beter and Sergia
Beter are the parents oI Ornominio while TeoIilo Rautraut and Zoetera |should be Zotera|
Rautraut are the parents oI Narcisa) Iiled a complaint Ior "sum oI money" against Bachelor
Express, Inc. its alleged owner Samson asay and the driver Rivera.

Issue: Whether or not Bachelor Express, Inc. can be eld liable Ior the death oI Beter and
Rautraut.

Ruling: The running amuck oI the passenger was the proximate cause oI the incident as it
triggered oII a commotion and panic among the passengers such that the passengers started
running to the sole exit shoving each other resulting in the Ialling oII the bus by passengers Beter
and Rautraut causing them Iatal injuries. The sudden act oI the passenger who stabbed another
passenger in the bus is within the context oI force mafeure.
owever, in order that a common carrier may be absolved Irom liability in case oI force
mafeure, it is not enough that the accident was caused by force mafeure. The common carrier
must still prove that it was not negligent in causing the injuries resulting Irom such accident.
Considering the Iactual Iindings oI the Court oI Appeals-the bus driver did not
immediately stop the bus at the height oI the commotion; the bus was speeding Irom a Iull stop;
the victims Iell Irom the bus door when it was opened or gave way while the bus was still
running; the conductor panicked and blew his whistle aIter people had already Iallen oII the bus;
and the bus was not properly equipped with doors in accordance with law-it is clear that the
petitioners have Iailed to overcome the presumption oI Iault and negligence Iound in the law
governing common carriers.
The petitioners' argument that the petitioners "are not insurers oI their passengers" deserves no
merit in view oI the Iailure oI the petitioners to prove that the deaths oI the two passengers were
exclusively due to force mafeure and not to the Iailure oI the petitioners to observe extraordinary
diligence in transporting saIely the passengers to their destinations as warranted by law.
The liability, iI any, oI the petitioners is anchored on culpa contractual or breach oI
contract oI carriage.

Vasquez vs CA, GR No. L-42926, 13 September 1985

Facts: A vessel sailed Irom Manila to Cebu despite the knowledge by the captain and oIIicers
that a typhoon was building up somewhere in Mindanao. When it passed Tanguigui Island, the
weather suddenly changed and the vessel struck a reeI, sustained leaks and eventually sank. The
ship sank with the children oI the petitioners who sued Ior damages beIore the Court oI First
Instance oI Manila, which was granted. Respondents` deIense oI force mafeure to extinguish its
liability was not entertained. On appeal, the judgment was reversed.

Issue: Whether or not the deIense oI force mafeure is valid.

Ruling: A Iortuitous event is constituted by the Iollowing: 1) The event must be independent oI
the human will; 2) the occurrence must render it impossible Ior the debtor to IulIill the obligation
in a normal manner; and 3) the obligor must be Iree oI participation in the aggravation oI the
injury suIIered by the obligee or iI it could be Ioreseen, it must have been impossible to avoid.
There must be an entire exclusion oI human agency Irom the cause oI the injury or loss. Such is
not the case at bar. Despite the Iact that they were kept posted about the weather conditions, the
vessel still proceeded even though the captain already knew that they were within the typhoon
zone. They Iailed to exercise the extraordinary diligence required Irom them, explicitly mandated
by the law, Ior the saIety oI the passengers.























obido vs CA, GR No. 113003, 17 October 1997

Facts: On April 26, 1988, spouses Tito and Leny Tumboy and their minor children named Ardee
and Jasmin, boarded at Mangagoy , Surigao Del Sur, a obido Liner bus bound Ior Davao City.
Along Picop Road in Km. 17, Sta.Maria, Agusan del Sur, the leIt Iront tire oI the bus exploded.
The bus Iell into a ravine around three (3) Ieet Irom the road and struck a tree. The incident
resulted in the death oI 28-year-old Tito Tumboy and physical injuries to other passengers. On
Nov. 21, 1988, a complaint Ior breach oI contract oI carriage, damages and attorney`s Iees was
Iiled by Leny and her children against Alberta obido, the owner oI the bus, and Cresencio
obido, its driver, beIore the Regional Trial Court oI Davao City. When the deIendants therein
Iiled their answer to the complaint, they raised the aIIirmative deIense oI caso Iortuito. They
also Iiled a third-party complaint against Philippine Surety and Insurance, Inc. This third-party
deIendant Iiled an answer with compulsory counterclaim. At the pre-trial conIerence, the parties
agreed to a stipulation oI Facts.
On August 29, 1991, the lower court rendered a decision dismissing the action Ior lack oI
merit. On the Issue oI whether or not the tire blowout was a caso Iortuito, it Iound that 'the
Ialling oI the bus to the cliII was a result oI no other outside Iactor than the tire bolw-out. It
eld that the ruling in the La Mallorca and Pampanga Bus Co. v. De Jesus that a tire blowout is
a 'mechanical deIect oI the conveyance or a Iault in its equipment which was easily discoverable
iI the bus had been subjected to a more thorough or rigid check-up beIore it took to the road that
morning is inapplicable to this case. It reasoned out that in said case. It reasoned out that in said
case, it was Iound that the blowout was caused by the established Iact that the inner tube oI the
leIt Iront tire 'was pressed between the inner circle oI the leIt wheel and the rim which had
slipped out oI the leIt wheel '. In this case, however, the cause oI the explosion remains a
mystery until at present. As such, the court added, the tire blowout was 'a caso fortuito which
is completely an extraordinary circumstance independent oI the will oI the deIendants who
should be relieved oI 'whatever liability the plaintiIIs may have suIIered by reason oI the
explosion pursuant to Article 1174 oI the Civil Code.

Issue: Whether or not the Trial Court erred in their Iindings that the tire blowout was a caso
fortuito.

Ruling: On August 23, 1193, the Court oI Appeals rendered the decision reversing the decision
oI the trial court. Article 1755 provides that '(a) common carrier is bound to carry the passenger
saIely as Iar as human care and Ioresight can provide, using the utmost diligence very cautious
persons, with a due regard Ior all the circumstances. Accordingly, in culpa contractual, once a
passenger dies or is injured, the carrier is presumed to have been at Iault or to have acted
negligently. The disputable presumption may only be overcome by evidence that the carrier had
observed extraordinary diligences as prescribed by Articles 1733, 1755 and 1756 oI the Civil
Code or that the injury oI the passenger was due to Iortuitous event. Consequently, the court
need make an express Iinding oI Iault or negligence on the part oI the carrier to hold it
responsible Ior damages sought by the passenger.
The decision oI the Court oI Appeals was aIIirmed.
Juntilla vs. Fontanar, GR No. L-45637, 31 May 1985

Facts: PlaintiII was a passenger oI the public utility jeepney on the course oI the trip Irom Danao
City to Cebu City. The jeepney was driven by deIendant BerIol Camoro. It was registered under
the Iranchise oI deIendant Clemente Fontanar but was actually owned by deIendant Fernando
Banzon. When the jeepney reached Mandaue City, the right rear tire exploded causing the
vehicle to turn turtle. In the process, the plaintiII who was sitting at the Iront seat was thrown out
oI the vehicle. Upon landing on the ground, the plaintiII momentarily lost consciousness. When
he came to his senses, he Iound that he had a lacerated wound on his right palm. Aside Irom this,
he suIIered injuries on his leIt arm, right thigh and on his back. Because oI his shock and
injuries, he went back to Danao City and immediately went Danao City ospital to attend to his
injuries
Petitioner Roberto Juntilla Iiled a civil case Ior breach oI contract with damages beIore
the City Court oI Cebu City, Branch I against Clemente Fontanar, Fernando Banzon and BerIol
Camoro.
The respondents Iiled their answer, alleging inter alia that the accident that caused losses
to the petitioner was beyond the control oI the respondents taking into account that the tire that
exploded was newly bought and was only slightly used at the time it blew up.
AIter trial, the Civil Court oI Cebu rendered judgment in Iavor oI the petitioner and
against the respondents. The respondents appealed to the Court oI First Instance oI Cebu which
reversed the earlier judgment Iinding that the accident in question was due to a Iortuitous event.

Issue: Whether or not the accident that happened was due to a Iortuitous event, thereIore,
absolving the respondents Irom any obligation.

Ruling: There are speciIic acts oI negligence on the part oI the respondents. The records show
that the passenger jeepney turned turtle and jumped into a ditch immediately aIter its right rear
tire exploded. The evidence shows that the passenger jeepney was running at a very Iast speed
beIore the accident. There is also evidence to show that the passenger jeepney was overloaded at
the time oI the accident. The petitioner stated that there were three passengers in the Iront seat
and Iourteen passengers in the rear.
While it may be true that the tire that blew-up was still good because the grooves oI the
tire were still visible, this Iact alone does not make the explosion oI the tire a Iortuitous event.
No evidence was presented to show that the accident was due to adverse road conditions or that
precautions were taken by the jeepney driver to compensate Ior any conditions liable to cause
accidents. The sudden blowing-up, thereIore, could have been caused by too much air pressure
injected into the tire coupled by the Iact that the jeepney was overloaded and speeding at the time
oI the accident.
In the case at bar, the cause oI the unIoreseen and unexpected occurrence was not
independent oI the human will. The accident was caused either through the negligence oI the
driver or because oI mechanical deIects in the tire. Common carriers should teach their drivers
not to overload their vehicles, not to exceed saIe and legal speed limits, and to know the correct
measures to take when a tire blows up; thus insuring the saIety oI passengers at all times.
Philamgen Insurance vs MGG Marine, GR No. 135645, 8 March 2002

Facts: On March 1, 1987, San Miguel Corporation insured several beer bottle cases with an
aggregate value oI P5,836,222.80 with petitioner Philippine American General Insurance
Company. The cargo were loaded on board the M/V Peatheray Patrick-G to be transported Irom
Mandaue City to Bislig, Surigao del Sur.
AIter having been cleared by the Coast Guard Station in Cebu the previous day, the
vessel leIt the port oI Mandaue City Ior Bislig, Surigao del Sur on March 2, 1987. The weather
was calm when the vessel started its voyage.
The Iollowing day, March 3, 1987, M/V Peatheray Patrick-G listed and subsequently
sunk oII Cawit Point, Cortes, Surigao del Sur. As a consequence thereoI, the cargo belonging to
San Miguel Corporation was lost. Subsequently, San Miguel Corporation claimed the amount oI
its loss Irom petitioner.
The Court oI Appeals observed respondents Irom any liability because the cargo was lost
due to a Iortuitous event; strong winds and huge waves caused the vessel to sink.

Issue: Whether or not the loss oI the cargo was due to the occurrence oI a natural disaster, and
whether such natural disaster was the sole and proximate cause oI the loss.

Ruling: Common carriers, Irom the nature oI their business and Ior reasons oI public policy, are
mandated to observe extraordinary diligence in the vigilance over the goods and Ior the saIety oI
the passengers transported by them. Owing to this high degree oI diligence required oI them,
common carriers, as a general rule, are presumed to have been at Iault or negligent iI the goods
transported by them are lost, destroyed or iI the same deteriorated.
The parties do not dispute that on the day the M/V Peatheray Patrick-G sunk, said vessel
encountered strong winds and huge waves ranging Irom six to ten Ieet in height. The vessel
listed at the port side and eventually sunk at Cawit Point, Cortes, Surigao del Sur.
In the case at bar, it was adequately shown that beIore the M/V Peatheray Patrick-G leIt
the port oI Mandaue City, the Captain conIirmed with the Coast Guard that the weather condition
would permit the saIe travel oI the vessel to Bislig, Surigao del Sur. Thus, he could not be
expected to have Ioreseen the unIavorable weather condition that awaited the vessel in Cortes,
Surigao del Sur. It was the presence oI the strong winds and enormous waves which caused the
vessel to list, keel over, and consequently lose the cargo contained therein. The appellate court
likewise Iound that there was no negligence on the part oI the crew oI the M/V Peatheray
Patrick-G. Since the presence oI strong winds and enormous waves at Cortes, Surigao del Sur on
March 3, 1987 was shown to be the proximate and only cause oI the sinking oI the M/V
Peatheray Patrick-G and the loss oI the cargo belonging to San Miguel Corporation, private
respondents cannot be eld liable Ior the said loss.




Mindex vs Morillo, GR No. 138123, 12 March 2002

Facts: On February 1991, a verbal agreement was entered into between Ephraim Morillo and
Mindex Resources Corporation Ior the lease oI the Iormer`s 6 x 6 ten-wheeler cargo truck Ior use
in MINDEX`s mining operations in Binaybay, Bigaan, San Teodoro, Oriental Mindoro, at the
stipulated rental oI P300.00 per hour Ior a minimum oI eight (8) hours a day or a total oI
P2,400.00 daily. MINDEX has been paying the rentals until April 10, 1991.
Unknown to Morillo, on April 11, 1991, the truck was burned by unidentiIied persons
while it was parked unattended at Sitio Aras, Bigaan, San Teodoro, Oriental Mindoro, due to
mechanical trouble.
Upon learning oI the burning incident, Morillo oIIered to sell the truck to MINDEX but
the latter reIused. Instead, it replaced the vehicle`s burned tires and had it towed to a shop Ior
repair and overhauling.
Petitioner claims that the burning oI the truck was a Iortuitous event, Ior which it should
not be eld liable pursuant to Article 1174 oI the Civil Code. Moreover, the letter oI respondent
dated April 15, 1991, stating that the burning oI the truck was an "unIoreseen adversity," was an
admission that should exculpate the Iormer Irom liability.
The Regional Trial Court (RTC) Iound petitioner responsible Ior the destruction or loss
oI the leased 6 x 6. The appellate court sustained the RTC`s Iinding that petitioner was not
without Iault Ior the loss and destruction oI the truck and, thus, liable thereIore.

Issue: Whether or not the lower courts are correct in Iinding the petitioner liable due to
negligence and cannot be exonerated due to the deIense oI Iortuitous event.

Ruling: Both the RTC and the CA Iound petitioner negligent and thus liable Ior the loss or
destruction oI the leased truck. True, both parties may have suIIered Irom the burning oI the
truck; however, as Iound by both lower courts, the negligence oI petitioner makes it responsible
Ior the loss. Article 1667 oI the Civil Code holds lessees responsible Ior the deterioration or loss
oI the thing leased, unless they prove that it took place without their Iault.
In order Ior a Iortuitous event to exempt one Irom liability, it is necessary that one has
committed no negligence or misconduct that may have occasioned the loss. An act oI God cannot
be invoked to protect a person who has Iailed to take steps to Iorestall the possible adverse
consequences oI such a loss. One`s negligence may have concurred with an act oI God in
producing damage and injury to another; nonetheless, showing that the immediate or proximate
cause oI the damage or injury was a Iortuitous event would not exempt one Irom liability. When
the eIIect is Iound to be partly the result oI a person`s participation -- whether by active
intervention, neglect or Iailure to act -- the whole occurrence is humanized and removed Irom the
rules applicable to acts oI God.





NAPOCOR vs. Phillip Bros., GR No. 126204, 20 November 2001

Facts: The National Power Corporation (NAPOCOR) Issued invitations to bid Ior the supply and
delivery oI 120,000 metric tons oI imported coal Ior its Batangas Coal-Fired Thermal Power
Plant in Calaca, Batangas. The Phillip Brothers Oceanic, Inc. (PIBRO) prequaliIied and was
allowed to participate in the bidding. AIter the public bidding was conducted, PIBRO`s bid was
accepted.
On July 10, 1987, PIBRO inIormed NAPOCOR that industrial disputes might soon
plague Australia, the shipment`s point oI origin, which could seriously hamper PIBRO`s ability
to supply the needed coal. From July 23 to July 31, 1987, PIBRO again apprised NAPOCOR
oI the situation in Australia, particularly inIorming the latter that the ship owners therein are not
willing to load cargo unless a 'strike-Iree clause is incorporated in the charter party or the
contract oI carriage. In order to hasten the transIer oI coal, PIBRO proposed to NAPOCOR that
they equally share the burden oI a 'strike-Iree clause. NAPOCOR reIused. On August 6, 1987,
PIBRO received Irom NAPOCOR a conIirmed and workable letter oI credit. Instead oI
delivering the coal on or beIore the thirtieth day aIter receipt oI the Letter oI Credit, PIBRO
eIIected its Iirst shipment only on November 17, 1987.
In October 1987, NAPOCOR once more advertised Ior the delivery oI coal to its Calaca
thermal plant. PIBRO participated anew in this subsequent bidding. NAPOCOR disapproved
PIBRO`s application Ior pre-qualiIication to bid Ior not meeting the minimum requirements.
Upon Iurther inquiry, PIBRO Iound that the real reason Ior the disapproval was its purported
Iailure to satisIy NAPOCOR`s demand Ior damages due to the delay in the delivery oI the Iirst
coal shipment. This prompted PIBRO to Iile an action Ior damages with application Ior
injunction against NAPOCOR with the Regional Trial Court, Makati City. NAPOCOR averred
that the strikes in Australia could not be invoked as reason Ior the delay in the delivery oI coal
because PIBRO itselI admitted that as oI July 28, 1987 those strikes had already ceased. And,
even assuming that the strikes were still ongoing, PIBRO should have shouldered the burden oI
a 'strike-Iree clause because their contract was 'C and F Calaca, Batangas, Philippines,
meaning, the cost and Ireight Irom the point oI origin until the point oI destination would be Ior
the account oI PIBRO. Furthermore, NAPOCOR claimed that due to PIBRO`s Iailure to
deliver the coal on time, it was compelled to purchase coal Irom ASEA at a higher price.
NAPOCOR claimed Ior actual damages.
On January 16, 1992, the trial court rendered a decision in Iavor oI PIBRO. UnsatisIied,
NAPOCOR, through the Solicitor General, elevated the case to the Court oI Appeals. The Court
oI Appeals rendered a Decision aIIirming in toto the Decision oI the Regional Trial Court.

Issue: Whether or not PIBRO`s delay in the delivery oI imported coal was due to
NAPOCOR`s alleged delay in opening a letter oI credit and to force mafeure.

Ruling: The Court oI Appeals is justiIied in sustaining the Regional Trial Court`s decision
exonerating PIBRO Irom any liability Ior damages to NAPOCOR as it was clearly established
Irom the evidence, testimonial and documentary, that what prevented PIBRO Irom complying
with its obligation under the July 1987 contract was the industrial disputes which besieged
Australia during that time. Extant in our Civil Code is the rule that no person shall be
responsible Ior those events which could not be Ioreseen, or which, though Ioreseen, were
inevitable. This means that when an obligor is unable to IulIill his obligation because oI a
Iortuitous event or force mafeure, he cannot be eld liable Ior damages Ior non-perIormance. In
addition, it is worthy to note that PIBRO and NAPOCOR explicitly agreed in Section XVII oI
the 'Bidding Terms and SpeciIications that 'neither seller (PIBRO) nor buyer (NAPOCOR)
shall be liable Ior any delay in or Iailure oI the perIormance oI its obligations, other than the
payment oI money due, iI any such delay or Iailure is due to Force Mafeure.` SpeciIically, they
deIined force mafeure as 'any disabling cause beyond the control oI and without Iault or
negligence oI the party, which causes may include but are not restricted to Acts oI God or oI the
public enemy; acts oI the Government in either its sovereign or contractual capacity;
governmental restrictions; strikes, Iires, Iloods, wars, typhoons, storms, epidemics and
quarantine restrictions.










































Union Bank vs Santibanez, 452SCRA228

Facts: Father and son EIraim and Edmond Santibanez loaned twice Irom FCCC, amount to be
used Ior the purchase oI a diesel tractor, Iirst Ior the purchase price and second to pay the
balance oI another diesel tractor. EIraim died leaving Edmond as the special administrator oI the
decedent. Meanwhile FCCC assigned all its assets and liabilities to petitioner. Petitioner now
demands payment Irom Edmond and Florence, his sister but to no avail. A case then was Iiled
but was eventually dismissed, hence this petition.

Issue: Whether or not the obligation oI the deceased as regards the tractors were transmitted to
the heirs

Ruling: The Supreme Court held that there was no assumption oI the indebtedness since the
tractors were. By virtue oI an agreement, partitioned between Edmond and Florence. In order Ior
partition to be valid when there is a will leIt by the decedent such will must be Iirst probated in
court. Thus,absence such probate, partititon is invalid and thus assumption oI liability cannot be
given any Iorce and eIIect

San Agustin vs CA, GR No. 121940, 4 December 2001

Facts: On February 11, 1974, the Government Service Insurance System (GSIS) sold to Macaria
Vda de Caiquep, a parcel or residential land located at Pasig City, part oI the GISIS Low Cost
ousing Project evidenced by a Deed oI Absolute Sale. On February 19, 1974, the Register oI
Deeds oI Rizal Issued in the name oI Caiquep, TransIer CertiIicate oI Title. The next day,
Caiquep sold the subject lot to private respondent Maximo Menez. Sometime in 1979, Ior being
suspected as a subversive, military men ransacked Menez`s` house in Rizal. e surrendered to
the authorities and was detained Ior two years. When released, another order Ior his arrest was
Issued so he hid in Mindanao Ior another Iour years or until March 1984. In December 1990, he
discovered that the subject TCT was missing. e consulted a lawyer but the latter did not act
immediately on the matter. Upon consulting a new counsel, an AIIidavit oI Loss was Iiled with
the Register oI Deeds and a certiIied copy oI TCT was Issued. Private respondent also declared
the property Ior tax purposes and obtained a certiIication thereoI Irom the Assessor`s oIIice. is
search Ior the registered owner to diIIerent parts oI the country Iailed prompting the Iormer to
Iile a petition Ior the issuance oI owner`s duplicate copy to replace the lost one. During the
hearing, only Menez and counsel were present because the Register oI Deeds and the Provincial
Prosecutor were not notiIied. The trial court granted his petition aIter Menez presented his
evidence ex parte. San Agustin claimed this was the Iirst time he became aware oI the case oI
his aunt Ma. Vda de Caiquep and the present occupant oI the property. e Iiled a Motion to
Reopen Reconstitution Proceedings but RTC denied said motion. Petitioner moved Ior motion
Ior re consideration but was again denied.

Issue: Whether or not petitioner is bound by the contract entered into by his predecessor-in-
interest.

Ruling: The petitioner is bound by contracts entered into by his predecessor`s-in-interest. In this
case, the the GSIS has not Iiled any action Ior the annulment oI Deed oI Absolute Sale oI the lot
that the latter sold to Caiquep, nor the IorIeiture oI the lot in question. In our view, the suit Iiled
by the rightIul party, the GSIS. For now, the said contract oI sale is binding upon heirs oI
Macaria Vda de Caiquep., including petitioner who alleges to be one oI her heirs, in line with the
rule that heirs are bound by contracts entered into by their predecessors-in-interest.










Project Builders Inc. vs CA, GR No. 99433, 19 June 2001

Facts: PlaintiII and deIendant PBI entered to an agreement whereby it was agreed that plaintiII
would provide a 2,000,000.00 against which said deIendant would discount and assign to
plaintiII with recourse non-cancellation basis and also with the credit line to be increased to
5,000,000.00 deIendant PBI discounted with plaintiII on diIIerent dates account receivables with
diIIerent maturity dates Irom diIIerent condominium unit buyers. That total amount oI
receivables discounted by deIendant PBI is 7,986,815.00 and consists oI twenty accounts.
DeIendant allegedly deIaulted in the payment oI the subject account. owever, plaintiII still
claims that there is still a deIiciency in the amount oI P1,323,053.00.

Issue: Whether or not the agreement Iorged by petitioner and private respondent is a simple loan
or a Iinancing transaction.

Ruling: The term credit has been deIined to mean any loan, mortgage, deed oI trust, advance, or
discount.
An assignment oI credit is an act oI transIerring, either onerously or gratuitously, the
right oI an assignor to an assignee who would then be capable oI proceeding against the debtor
Ior enIorcement or satisIaction oI the credit. The transIer oI rights takes place upon perIection oI
the contract, and ownership oI the right, including all appurtenant accessory rights, is thereupon
acquired by the assignee. The assignment binds the debtor only upon acquiring knowledge oI
the assignment but he is entitled, even then, to raise against the assignee the same deIenses he
could set up against the assignor. Where the assignment is on account oI pure liberality on the
part oI the assignor, the rules on donation would likewise be pertinent; where valuable
consideration is involved, the assignment partakes oI the nature oI a contract oI sale or purchase.
Upon an assignment oI a contract to sell, the assignee is eIIectively subrogated in place oI
the assignor and in a position to enIorce the contract to sell to the same extent as the assignor
could.
An insistence oI petitioners that the subject transaction should be considered a simple
loan since private respondent did not communicate with the debtors, condominium unit buyers,
to collect payment Irom them, is untenable. In an assignment oI credit, the consent oI the debtor
is not essential Ior its perIection, his knowledge thereoI or lack oI it aIIecting only the
eIIicaciousness or ineIIicaciousness oI any payment he might make.
The assignment, it might be pointed out, was "with recourse," and deIault in the payment
oI installments had been duly established when petitioner corporation Ioreclosed on the
mortgaged parcels oI land. The resort to Ioreclosure oI the mortgaged properties did not
preclude private respondent Irom collecting interest Irom the assigned Contracts To Sell Irom the
time oI Ioreclosure to the redemption oI the Ioreclosed property. The imposition oI interest was
a mere enIorcement or exercise oI the right to the ownership oI the credit or receivables which
the parties stipulated in the 1976 Iinancing agreement. Thus -"I. That the Assignor shall comply
with all the terms and conditions speciIied on the said Contracts to Sell, executed by the assignor
and its individual purchaser or customers, and assigned/discounted to Assignee.
One oI the provisions in the contracts to sell, subject matter oI the assignment agreement,
related to the imposition oI interest in the event oI deIault by the debtor in the payment oI
installments, to wit: "All payments shall be made on or beIore their respective due dates without
necessity oI demand thereIore, and Iailure to make such payments on time shall entitle the
Developer to charge interest at the rate oI one percent (1) per month without prejudice to the
other remedies available to the Developer. As owner oI the account receivables, private
respondent was impressed with the entitlement over such interest payment.


















































DBP vs CA, GR No. 118180, 20 September 1996

Facts: Private respondents were the original owners oI a parcel oI land which they mortgaged to
petitioner bank and was subsequently Ioreclosed Ior the Iormer`s deIault on their obligation.
Consequently, a TransIer CertiIicate oI Title was eventually Issued in petitioner`s name being the
sole bidder in the auction sale conducted during the Ioreclosure oI said land.
ThereaIter, petitioner and private respondents entered into a Deed oI Conditional Salewherein
petitioner agreed to reconvey the Ioreclosed property to private respondents under the condition
that petitioner shall deliver to private respondents, their heirs, administrators and assigns a good
and suIIicient deed oI conveyance covering the property, subject matter oI the said deed oI
conditional sale, upon completion oI payment by said private respondents.
Upon completing the payment oI the Iull repurchase price, private respondents demanded Irom
petitioner the execution oI a Deed oI Conveyance in their Iavor.
Petitioner then inIormed private respondents that the prestation to execute and deliver a
deed oI conveyance in their Iavor had become legally impossible in view oI Sec.6 oI R.A. 6657
(Comprehensive Agrarian ReIorm Law) approved on June 10, 1988 and Sec.1 oI E.O. 407 Issued
June 10, 1990. The Iormer law annulling all sales, dispositions, leases, management contracts or
transIers oI possession oI private lands executed by the original landowner in violation oI the
retention limits provided thereoI upon its eIIectivity while the latter law requires all government
instrumentalities to immediately execute deeds oI transIer in Iavor oI the Republic oI the
Philippines as represented by the Department oI Agrarian ReIorm and to surrender to the latter
department all landholdings suitable Ior agriculture.
Aggrieved, private respondents Iiled a complaint Ior speciIic perIormance with damages against
petitioner.

Issue: The Issue is whether or not said laws had rendered legally impossible compliance by
petitioner with its obligation to execute a deed oI conveyance oI the subject land in Iavor oI
private respondents.

Ruling: It is a rule that iI the obligation depends upon a suspensive condition, the demandability
as well as the acquisition oI eIIectivity oI the rights arising Irom the obligationis suspended
pending the happening or IulIillment oI the Iact or event which constitutes the condition. Once
the event which constitutes the condition is IulIilled resulting in the eIIectivity oI the obligation,
its eIIects retroact to the moment when the essebtial elements which gave birth to the obligation
have taken place. Applying this precept to the case, the Iullpayment by the appellees on April 6,
1990 retroacts to the time the contract oI conditional sale was executed on April 6, 1984. From
that time, all elements oI the contract were present.Consequently; the contract oI sale was
perIected. As such, the said sale does not come under the coverage oI R.A. 6657 and E.O. 407.
Further, R.A. 6657 reIers to the original owners oI said agricultural lands and petitioner is
not as such.














Gonzales vs eirs, GR No. 131784, 19 September 1999

Facts: On December 1, 1983, Paula Cruz together with the plaintiIIs heirs oI Thomas and Paula
Cruz, entered into a Contract oI Lease/Purchase with the deIendant, Felix L. Gonzales, the sole
proprietor and manager oI Felgon Farms, oI a halI-portion oI a 'parcel oI land containing an area
oI 12 hectares, more or less, and an accretion oI 2 hectares, more or less, situated in Rodriguez
Town, Province oI Rizal. The contract oI Lease/Purchase contains the Iollowing provisions:
The contract stipulates that aIter the expiration oI the period oI the contract (which is one
year), the lessee shall purchase the said property Ior one million pesos payable within two years
with an interest oI 12 per annum subject to the devalued amount oI the Philippine peso,
according to the Iollowing schedule: 50 upon the execution oI the Deed oI Sale; 25 every six
months thereaIter, payable within the Iirst 10 days oI the beginning oI each period oI six months.
It likewise provides that the lessee shall pay by way oI annual rental P2,500.00 per hectare, upon
the signing oI the contract on December 1, 1983. Moreover, said contract bound the lessors to
obtain a separate and distinct TCT over the leased portion to the lessee not exceeding Iour years,
aIter which a new contract shall be executed by the parties which shall be the same in all respects
with the original contract oI lease/purchase insoIar as the terms and conditions are concerned.
The deIendant Gonzales paid the P2,500.00 per hectare or P15,000.00 annual rental on
the halI-portion oI the property in accordance with the second provision oI the Contract oI
Lease/Purchase and thereaIter took possession oI the property, installing thereon the deIendant
Jesus Sambrano as his caretaker. The deIendant Gonzales did not, however, exercise his option
to purchase the property immediately aIter the expiration oI the one-year lease on November 30,
1984. e remained in possession oI the property without paying the purchase price provided Ior
in the Contract oI Lease/Purchase and without paying any Iurther rentals thereon.
A letter was sent by one oI the plaintiIIs-heirs Ricardo Cruz to the deIendant Gonzales
inIorming him oI the lessors' decision to rescind the Contract oI Lease/Purchase due to a breach
thereoI committed by the deIendant. The letter also served as a demand on the deIendant to
vacate the premises within 10 days Irom receipt oI said letter.
The deIendant Gonzales reIused to vacate the property and continued possession thereoI.
The property subject oI the Contract oI Lease/Purchase is currently the subject oI an
Extra-Judicial Partition. Title to the property remains in the name oI the plaintiIIs' predecessors-
in-interest, Bernardina Calixto and Severo Cruz.
Alleging breach oI the provisions oI the Contract oI Lease/Purchase, the plaintiIIs Iiled a
complaint Ior recovery oI possession oI the property - subject oI the contract with damages, both
moral and compensatory and attorney's Iees and litigation expenses.

Issue: Whether or not the trial court gravely erred in holding that plaintiIIs-appellants could not
validly rescind and terminate the lease/purchase contract and thereaIter to take possession oI the
land in question and eject thereIrom deIendants-appellees.

Ruling: Alleging that petitioner has not purchased the property aIter the lapse oI one year,
respondents seek to rescind the Contract and to recover the property. Petitioner, on the other
hand, argues that he could not be compelled to purchase the property, because respondents have
not complied with paragraph nine, which obligates them to obtain a separate and distinct title in
their names. e contends that paragraph nine was a condition precedent to the purchase oI the
property.
Both the trial court and the Court oI Appeals (CA) interpreted this provision to mean that
the respondents had obliged themselves to obtain a TCT in the name oI petitioner-lessee. The
trial court eld that this obligation was a condition precedent to petitioner's purchase oI the
property. Since respondents had not perIormed their obligation, they could not compel petitioner
to buy the parcel oI land. The CA took the opposite view, holding that the property should be
purchased Iirst beIore respondents may be obliged to obtain a TCT in the name oI petitioner-
lessee-buyer.
As earlier noted, petitioner disagrees with the interpretation oI the two courts and
maintains that respondents were obligated to procure a TCT in their names beIore he could be
obliged to purchase the property in question.
Basic is the rule in the interpretation oI contracts that iI some stipulation therein should
admit oI several meanings, it shall be understood as bearing that import most adequate to render
it eIIectual. Considering the antecedents oI the ownership oI the disputed lot, it appears that
petitioner's interpretation renders clause nine most eIIectual.
The record shows that at the time the contract was executed, the land in question was still
registered in the name oI Bernardina Calixto and Severo Cruz, respondents' predecessors-in-
interest. There is no showing whether respondents were the only heirs oI Severo Cruz or whether
the other halI oI the land in the name oI Bernardina Calixto was adjudicated to them by any
means. In Iact, they admit that extrajudicial proceedings were still ongoing. ence, when the
Contract oI Lease/Purchase was executed, there was no assurance that the respondents were
indeed the owners oI the speciIic portion oI the lot that petitioner wanted to buy, and iI so, in
what concept and to what extent.
Thus, the clear intent oI the ninth paragraph was Ior respondents to obtain a separate and
distinct TCT in their names. This was necessary to enable them to show their ownership oI the
stipulated portion oI the land and their concomitant right to dispose oI it. Absent any title in their
names, they could not have sold the disputed parcel oI land.















Insular LiIe vs oung, GR No. 140964, 16 January 2002

Facts: The ome Bankers Savings and Trust Company, now Petitioner Insular Savings Bank was
bought by Robert oung and his co-respondents in the amount oI P65 M Irom Licaros Family.
As a result thereoI, 55 equity oI the bank was obtained by oung and his group while 45 oI
the bank`s equity is owned by George Go and his group. The respondents and others were
granted by the bank individual loans secured by promissory notes totaling P153 M.
Benito Araneta, a bank`s stockholder, signiIied his intention to purchase 99.82 oI its
outstanding capital stock Ior P340 M on condition that shares ownership will be consolidated in
oung`s name.
oung received partial payment oI P14 M as Araneta`s down payment. oung bought the
45 Bank`s equity Irom George Go and his company by making a short term loan oI P170 M
Irom Interbank to Iinance the purchase.
UnIortunately, Araneta withdrew Irom the intended sale and demanded the return oI his
down payment. This has caused serious Iinancial problem to oung since his loan Irom
Interbank became due. oung, in order to look Ior possible capital resources, engaged the
services oI Asian Oceanic, a domestic company owned and controlled by another petitioner
Insular LiIe. With the intervention oI Asian Oceanic, a Credit Agreement was entered into by
oung and the Insular LiIe. Under its provisions, Insular LiIe extended a loan to oung in the
amount oI P200 M. young, acting in his behalI and as attorney-in-Iact oI other stockholders
executed a Deed oI Pledge covering shares which represented 99.82 oI the Bank`s outstanding
capital stock. Moreover, oung executed a promissory note in Iavor oI Insular LiIe with same
amount with an interest rate oI 20 per annum to mature 120 days Irom execution. Credit
Agreement also provides that Insular LiIe has prior right to purchase oung`s shares and that oI
other shares owned by stockholders and 250,000 shares to be delivered aIter additional capital oI
P25M shall have been inIused.
A MOA was entered into by Insular LiIe and oung, authorized to represent other
stockholders which provides that Insular LiIe and its Pension Fund agreed to purchase common
shares totaling 1,142,232. Under its terms, MOA is subject to representations and warranties.
MOA is also subject to the condition precedents on the part oI oung and Insular LiIe.
Pursuant to MOA, a due diligence audit oI the bank was conducted where it was Iound
out that there were several check-kiting operations. oung, who was the then Bank`s President
was asked to explain the said anomalies since the irregularities happened during his incumbency
in a special meeting oI Bank`s Directors. e oIIered to the Bank his holding oI 45 as security
Ior the anomalous transactions. e admitted he has compromised the bank`s interest thus he
tendered his resignation. owever, the Board didn`t accept his resignation.
Atty. Jimenez, counsel oI Insular LiIe, prepared a letter, which oung signed addressed
to Chairman oI Bank`s Board oI Directors stating that he shall not be able to pay his obligations
under Credit Agreement between him and Insular LiIe because oI business reverses. e thus
unconditionally and irrevocably waives the beneIit oI the loan as Insular LiIe may consider his
obligations thereunder as deIaulted. e never interposes objection to Insular LiIe exercise oI the
rights under the said agreement. As a consequence thereoI, Insular LiIe, through counsel,
Ioreclosed the pledge constituted upon the shares. oung was notiIied oI the sale oI the shares in
a public auction on scheduled date and iI the shares not sold, a second action sale shall be eld
next day.
Twice the auction sale oI shares conducted since there were no bidders. The sole bidder
was the Insular LiIe. It appropriated to itselI not only the original shares but also shares
subsequently Issued by the Bank and delivered to Insular LiIe by way oI pledge. Thus, Insular
LiIe gave oung acquaintance oI his entire claim. Title to the said shares was consolidated in the
name oI Insular LiIe. Bangko Sentral ng Pilipinas Supervision and examination sector approved
Insular LiIe request to maintain its present ownership oI 99.82 oI the Bank.

Issues: Whether the CA erred in declaring the MOA dated October 9, 1991 valid and enIorceable
between the parties despite respondent oung`s Iailure to comply with the terms and conditions
thereoI;
Whether the CA erred in holding that the Ioreclosure oI the pledge eld on October 29,
1992 is void;
Whether the CA erred in awarding moral damages and attorney`s Iees in Iavor oI
respondent oung

Ruling: The MOA is merely a contract to sale although parties therein speciIically undertook to
enter into a contract oI sale iI the conditions are met and the representation and warranties by
oung prove to be true. The petitioners` obligation Insular LiIe to purchase, as well as the
concomitant obligations oI oung to convey to it the shares are subject to the IulIillment oI the
conditions contained in MOA. Once the conditions; presentation and warranties are satisIied,
then it is incumbent upon the parties to perIorm their respective obligations under the contract. In
the event that these conditions are not met or complied with, no obligation on the part oI their
party arises, oung Iailed to inIuse required additional capital oI P50 M into the bank. Due
diligence audit shows that oung was involved in Iraudulent plans like check-kiting which belies
his representations that the doubtIul accounts oI petitioner Bank amounted only to P60 M. the
anomalous transactions depleted the reserves oI the Bank had. oung committed Irauds
misrepresented the warranties and Iailed to comply with his obligations under the MOA.
ThereIore, no right in Iavor oI oung arose and no obligation on the Part oI Insular LiIe was
created.
CA erred when it declared in the Iallow oI its decision that the unpaid accounts oI the
other respondents have been Iully paid. It did not show how it reached the decision. As a result
thereoI, it violated the constitutional mandate that no decision shall be rendered by any court
without expressing clearly and distinctly the Facts and the law on which it is based. Due process
demands that parties to litigation be inIormed oI how it was decided with an explanation oI the
Iactual and legal reasons that led to the court`s decision.
The moral damages imposed by CA against respondent without basis. Article 2220 oI the
Civil Code, moral damages maybe awarded in breach oI contracts where the deIendants acted
Iraudulently or in bad Iaith. No such breach committed by the petitioners much less any badge oI
Iraud or bad pay on their part. Moral damages emphatically not intended to enrich a plaintiII at
the expense oI the deIendant.
The judgment oI CA can not be executed pending appeal. Once Iinal and executory, the
judgment must be remanded to the lower court where a motion Ior its execution maybe Iiled only
aIter its entry. In other words, beIore its Iinality, the judgment can not be executed. There can be
no discretionary execution oI a decision oI the CA.














Direct Funders vs Lavina, GR No. 141851, 16 January 2002

Facts: erein petitioner was granted with a writ oI possession. During the hearing Ior the
issuance oI temporary restraining order Iiled by herein private respondent, it was made clear to
the respondent Judge that the property in question was occupied by the petitioner by virtue oI a
writ oI possession Issued by the Regional Trial Court oI Pasig, Branch 157 in LRC Case No. R-
5475 in a petition Ior the issuance oI writ oI possession thereoI way back on October 23, 1997.
Despite the lawIul order oI a coordinate and co-equal court, the respondent Judge,
presiding Regional Trial Court oI Pasig, Branch 71, Issued the questioned orders to restore
possession to private respondent Chan, alleging an obviously grave abuse oI discretion,
tantamount to lack oI jurisdiction. On the same date on December 8, 1997, the temporary
restraining order (TRO) was Issued, the Court SheriII IV Cresencio Rabello, Jr. implemented the
TRO and submitted the Return on December 9, 1997. Then, on January 21, 1998, the respondent
Judge Issued the questioned order granting the issuance oI a writ oI preliminary injunction who
subsequently denied the petitioner`s motion to dismiss and supplemental motion to dismiss and
the very urgent motion Ior reconsideration on February 16, 1998.
On May 29, 1998, the motion Ior inhibition and the motion to dissolve the writ oI
preliminary injunction were also denied. On August 5, 1998, petitioner Iiled with the Court oI
Appeals a petition Ior certiorari and prohibition assailing the trial court`s issuance oI a writ oI
preliminary injunction. On September 28, 1999, the Court oI Appeals promulgated a decision
dismissing the petition ruling that the trial court had jurisdiction to Issue the injunction that did
not interIere with the writ oI possession oI a coordinate court. On October 19, 1999, petitioner
Iiled with the Court oI Appeals a motion Ior reconsideration oI the decision. On February 2,
2000, the Court oI Appeals denied petitioner`s motion stating that the arguments advanced were
'mere reiteration and restatements oI those contained in their pleadings. ence, this appeal to
the Supreme Court.

Issue: Whether petitioner or respondent Kambiak . Chan, Jr. has a better right to the possession
oI the subject property.

Ruling: The Supreme Court ruled in Iavor oI petitioner. It Iound that the conditional sale
agreement is oIIicious and ineIIectual. First, it was not consummated. Second, it was not
registered and duly annotated on the TransIer CertiIicate oI Title (No. 12357) covering the
subject property. Third, it was executed about eight (8) years aIter the execution oI the real
estate mortgage over the subject property.
To emphasize, the mortgagee (United Savings Bank) did not give its consent to the
change oI debtor. It is a Iundamental axiom in the law on contracts that a person not a party to
an agreement cannot be aIIected thereby. Worse, not only was the conditional sale agreement
executed without the consent oI the mortgagee-creditor, United Savings Bank, the same was also
a material breach oI the stipulations oI the real estate mortgage over the subject property. The
conditions oI the conditional sale agreement were not IulIilled, hence, respondent`s claim to the
subject property was as heretoIore stated ineIIectual. Article 1181 oI the Civil Code reads:

'Art. 1181. In conditional obligations, the acquisition oI rights, as well as the extinguishments or
loss oI those already acquired, shall depend upon the happening oI the event which constitutes
the condition.














Vda. De Mistica vs Spouses Naguiat, GR No. 137909, 11 December 2003

Facts: Eulalio Mistica, predecessor-in-interest oI herein petitioner, is the owner oI the parcel oI
land which was leased to respondent Bernardinio Naguiat sometime in 1970.
On April 5, 1979 Mistica entered into a contract to sell with respondent over a portion oI
the aIorementioned lot containing an area oI 200 square meters. This agreement was reduced to
writing in a document. Pursuant to said agreement, respondent gave a down payment oI P2, 000.
e made another partial payment oI P1, 000 on February 8, 1980. e Iailed to make any
payments thereaIter. Mistica died sometime in October 1986.
On December 4, 1991 petitioner Iiled a complaint Ior rescission alleging that the Iailure
and reIusal oI respondent to pay the balance oI the purchase price constitute a violation oI the
contract which established her to rescind the same. That respondent have been in possession oI
the subject matter, should be ordered to vacate and surrender possession oI the same.
The CA, Disallowing rescission, eld that respondents did not breach the Contract oI
Sale. It explained that the conclusion oI the ten-year period was not a resolutory term, because
the Contract had stipulated that payment -- with interest oI 12 percent -- could still be made iI
respondents Iailed to pay within the period. According to the appellate court, petitioner did not
disprove the allegation oI respondents that they had tendered payment oI the balance oI the
purchase price during her husband`s Iuneral, which was well within the ten-year period.
Moreover, rescission would be unjust to respondents, because they had already
transIerred the land title to their names. The proper recourse, the CA eld, was to order them to
pay the balance oI the purchase price, with 12 percent interest.

Issue: Whether or not the Court oI Appeals erred in the application oI Article 1191 oI the Civil
Code, as it ruled that there is no breach oI obligation inspite oI the lapse oI their stipulated period
and the Iailure oI the respondent to pay.

Ruling: Petitioner claims that she is entitled to rescind the Contract under Article 1191 oI the
Civil Code, because respondents committed a substantial breach when they did not pay the
balance oI the purchase price within the ten-year period. She Iurther avers that the proviso on the
payment oI interest did not extend the period to pay. To interpret it in that way would make the
obligation purely potestative and, thus, void under Article 1182 oI the Civil Code.
We disagree. The transaction between Eulalio Mistica and respondents, as evidenced by
the Kasulatan, was clearly a Contract oI Sale. A deed oI sale is considered absolute in nature
when there is neither a stipulation in the deed that title to the property sold is reserved to the
seller until the Iull payment oI the price; nor a stipulation giving the vendor the right to
unilaterally resolve the contract the moment the buyer Iails to pay within a Iixed period.
In a contract oI sale, the remedy oI an unpaid seller is either speciIic perIormance or
rescission. Under Article 1191 oI the Civil Code, the right to rescind an obligation is predicated
on the violation oI the reciprocity between parties, brought about by a breach oI Iaith by one oI
them. Rescission, however, is allowed only where the breach is substantial and Iundamental to
the IulIillment oI the obligation.
In the present case, the Iailure oI respondents to pay the balance oI the purchase price
within ten years Irom the execution oI the Deed did not amount to a substantial breach. In the
Kasulatan, it was stipulated that payment could be made even aIter ten years Irom the execution
oI the Contract, provided the vendee paid 12 percent interest. The stipulations oI the contract
constitute the law between the parties; thus, courts have no alternative but to enIorce them as
agreed upon and written.
Moreover, it is undisputed that during the ten-year period, petitioner and her deceased
husband never made any demand Ior the balance oI the purchase price. Petitioner even reIused
the payment tendered by respondents during her husband`s Iuneral, thus showing that she was
not exactly blameless Ior the lapse oI the ten-year period. ad she accepted the tender, payment
would have been made well within the agreed period.
































ermosa vs Longara, GR No. L-5267, 27 October 27 1953


Facts: EpiIanio M. Longara presented claims against the testate estate oI Fernando ermosa, Sr.
The claims are oI three kinds, namely: Php2,341.41 representing credit advances made to the
intestate, Php12,924.12 made to his son Francisco ermosa, and Php3,772.00 made to his
grandson, Fernando ermosa, Jr., aIter the death oI the intestate, which occurred in December
1944.
The claimant presented evidence and the Court oI Appeals Iound that the intestate had
asked Ior the said credit advances Ior himselI and Ior the members oI his Iamily ' on condition
that their payment should be made by Fernando ermosa Sr. as soon as he receive Iunds derived
Irom the sale oI his property in Spain. Claimant had testiIied without opposition that the credit
advances were to be 'payable as soon as Fernando ermosa Sr.`s property in Spain was sold and
he receive money derived Irom the sale. The Court oI Appeals eld that payment oI the
advances did not becomd due until the administratrix received the sum oI Php120,000.00 Irom
the buyer oI the property. Upon authorization oI the probate court in October 1947, and the same
was paid Ior subsequently.

Issue: Whether or not the condition made in the obligation is a purely suspensive condition
dependent or potestative upon the exclusive will oI the debtor.

Ruling: The condition oI the obligation was that the payment was to be made 'as soon as he
(obligor) receives Iunds Irom the sale oI his property in Spain. The will to sell on the part oI
the debtor (intestate) was present in Iact or presumed legally to exist although the price and other
condition thereoI were still within his discretion and Iinal approval. But in addition to this
acceptability oI the sale to him (obligor), there were still other conditions that had to concur to
eIIect the sale, mainly that oI the presence oI a buyer, ready, able and willing to purchase the
property under the condition demanded by the vendor.
















Trillana vs Quezon College, GR No. L-5003, 27 June 1953


Facts: Damasa Crisostomo sent a letter to the Board oI Trustees oI the Quezon College Ior her
wanting to enter a subscription oI 200 shares oI capital stock and that 'Babayaran kong lahat
pagkatapos na ako ay makapag-pahuli ng isda` Ior her initial payment.
Damasa Crisostomo died on October 26, 1948. As no payment appears to have been
made on the subscription mentioned in the letter, the Quezon College, Inc. presented a claim
beIore the Court oI First Instance oI Bulacan in her testate proceeding, Ior the collection oI the
sum oI Php 20,000.00, representing the value oI the subscription to the capital stock oI the
Quezon College, Inc. This claim was opposed by the administrator oI the estate, and the CFI oI
Bulacan, aIter hearing Issued an order dismissing the claim oI the Quezon College, Inc. on the
ground that the subscription in question was neither registered in nor authorized by the Securities
and Exchange Commission. From this order the Quezon College, Inc. has appealed.

Issue: Whether in the instant case, there is a potestative suspensive condition.

Ruling: It appears that the application sent by Damasa Crisostomo to the Quezon College, Inc.
was written on a general Iorm indicating that an applicant will enclose an amount as initial
payment and will pay the balance in accordance with law and the regulations oI the College. On
the other hand, in the letter actually sent by Damasa Crisostomo, the latter not only did not
enclose any initial payment but stated that 'babayaran kong lahat pagkatapos no ako ay
makapagpahuli ng isda. There is nothing in the record to show that the Quezon College, Inc.
accepted the term oI payment suggested by Damasa Crisostomo, or that iI there was any
acceptance the same came to her knowledge during her liIetime. As the application oI Damasa
Crisostomo is obviously at variance with the terms evidenced in the Iorm letter Issued by the
Quezon College, Inc.., there was absolute necessity on the part oI the College to express its
agreement to Damasa`s oIIer in order to bind the latter. Conversely, said acceptance was
essential because it would be unIair to immediately obligate the Quezon College, Inc. under
Damasa`s promise to pay the price oI the subscription aIter she had caused Iish to be caught. In
other words, the relation between Damasa Crisostomo and the Quezon College, Inc. had only
thus reached the preliminary stage whereby the latter oIIered its stock Ior subscription on the
terms stated in the Iorm letter, and Damasa applied Ior subscription Iixing her own plan oI
payment, - a relation, in the absence as in the present case oI acceptance by the Quezon College,
Inc. oI the counter oIIer oI Damasa Crisostomo, that had not ripened into an enIorceable
contract.
The need Ior express acceptance on the part oI the Quezon College, Inc. becomes the
more imperative, in view oI the proposal oI Damasa Crisostomo to pay the value oI the
subscription aIter she has harvested Iish, a condition obviously dependent upon her sole will and,
thereIore, Iacultative in nature, rendering the obligation void.
















Visayan Sawmill vs CA GR No. 83851, 3 March 1993

Facts: PlaintiII-appellee and deIendants-appellants entered into a sale involving scrap iron
subject to the condition that plaintiII-appellee will open a letter oI credit in Iavor oI deIendant-
appellant corporation. This is evidenced by a contract entitled 'Purchase and Sale oI Scrap Iron
duly signed by both parties.
PlaintiII-appellee through his man, started to dig and gather and scrap iron at the
deIendant-appellant`s premises, until May 30 when deIendants-appellants allegedly directed
plaintiII-appellee`s men to desist Irom pursuing the work in view oI an alleged case Iiled against
plaintiII-appellee by a certain Pursuelo. This is denied by deIendants-appellants who allege that
they sent a telegram to plaintiII-appellee canceling the contract oI sale because oI Iailure oI the
latter to comply with the conditions thereoI.
PlaintiII-appellee inIormed deIendants-appellants by telegram that the letter oI credit was
opened at the Bank oI the Philippine Islands, but then the transmittal was delayed.
PlaintiII-appellee sent a series oI telegrams stating that the case Iiled against him by
Pursuelo had been dismissed and demanding that deIendants-appellants comply with the deed oI
sale, otherwise a case will be Iiled against them.
DeIendants-appellants` lawyer, inIormed plaintiII-appellee`s lawyer that deIendant-
appellant corporation is unwilling to continue with the sale to plaintiII-appellee`s Iailure to
comply with essential preconditions oI the contract.
PlaintiII-appellee Iiled the complaint below with a petition Ior preliminary attachment.
That writ oI attachment was returned unserved because the deIendant-appellant corporation was
no longer in operation and also because the scrap iron as well as other pieces oI machinery can
no longer be Iound on the premises oI the corporation.

Issue: Whether the petitioner corporation`s obligation to sell is subject to a positive suspensive
condition.

Ruling: The Supreme Court Iinds merit in the instant petition. In the agreement in question,
entitled 'Purchase and Sale oI Scrap Iron, the seller bound and promised itselI to sell the scrap
iron upon the IulIillment by the private respondent oI his obligation to make or indorse an
irrevocable and unconditional letter oI credit in payment oI the purchase price. Its principal
stipulation read, to wit:
The petitioner corporation`s obligation to sell is unequivocally subject to a positive
suspensive condition, i.e., the private respondent`s opening, making or indorsing oI an
irrevocable and unconditional letter oI credit. The Iormer agreed to deliver the scrap iron only
upon payment oI the purchase price by means oI an irrevocable and unconditional letter oI credit.
Otherwise stated, the contract is not one oI sale where the buyer acquired ownership over the
property subject to the resolutory condition that the purchase price would be paid aIter delivery.
Thus, there was to be no actual sale until the opening, making or indorsing oI the irrevocable and
unconditional letter oI credit. Since what obtains in the the case at bar is a mere promise to sell,
the Iailure oI the private respondent to comply with the positive suspensive condition cannot
even be considered a breach casual or serious but simply an event that prevented the
obligation oI petitioner corporation to convey title Irom acquiring binding Iorce.
Leano vs CA, GR No.129018, 15 November 2001

Facts: On November 13, 1985, ermogenes Fernando, as vendor and Carmelita Leano, as
vendee executed a contract to sell involving a piece oI land, Lot No. 876-B, with an area oI 431
square meters, located at Sto.Cristo, Baliuag, Bulacan.
In the contract, Carmelita Leano bound herselI to pay ermogenes Fernandez the sum oI
one hundred and IiIty pesos (P107,750.00) as the total purchase price oI the lot.
The contract also provided Ior a grace period oI one month within which to make
payments, together with the one corresponding the month oI grace. Should the month oI grace
be expired without the installments Ior both months having been satisIied, an interest oI 18 per
annum will be charged on the unpaid installments.
Should a period oI (90) ninety days elapse Irom the expiration oI the grace period without
the overdue and unpaid installments having been paid with the corresponding interests up to that
date, respondent Fernando, as vendor, was authorized to declare the contract cancelled and to
dispose oI the parcel oI land, as iI the contract had not been entered into. The payments made,
together with all the improvements made on the premises, shall be considered as rents paid Ior
the use and occupation oI the premises and as liquidated damages.
AIter the execution oI the contract, Carmelita Leano made several payments in lump
sum. ThereaIter, she constructed a house on the lot valued at P800,000.00. The last payment that
she made was on April 1, 1989.
On September 16, 1991, the Trial Court rendered a decision in an ejectment case earlier
Iiled by respondent Fernando ordering petitioner to vacate the premises and to pay P250.00 per
month by way oI compensation Ior the use and occupation oI the property Irom May 27,1991
until she vacated the premises, attorney`s Iees and costs oI the suit. On August 24, 1993, the trial
court Issued a writ oI execution which was duly served on petitioner Leano.

Issue: Whether or not the petitioner was in delay the payment oI the monthly amortizations.

Ruling: While the contract provided that the total purchase price shall be paid in monthly
installments the same contract speciIied that the purchase price shall be paid in monthly
installments Ior which the corresponding penalty shall be imposed in case oI deIault. Petitioner
Leano cannot ignore such provision by claiming that the ten-year has not elapsed. Article 1169
oI the Civil Code provides that in reciprocal obligations, neither party incurs in delay iI the other
does not comply or is not ready to comply or is not ready to comply in a proper manner with
what is incumbent upon him. From the moment one oI the parties IulIills his obligation, delay
by the other begins.
In the case at bar, respondent Fernando perIormed his part oI the obligation by allowing
petitioner Leano to continue in possession and use oI the property. Clearly, when petitioner
Leano did not pay the monthly amortization in accordance with the terms and conditions oI the
contract, she was in delay and liable Ior damages. owever, the deIault committed by the
petitioner Leano in respect oI the obligation could be compensated by the interest and surcharges
imposed upon her under the contract in question. Petition denied, judgment aIIirmed in toto.









eirs oI Sandejas vs Alex Lina, GR No. 141634, 5 February 2001


Facts: On February 17, 1981, Eliodoro Sandejas, Sr. Iiled a petition in the lower court praying
that letters oI administration be issued in his Iavor Ior the settlement oI the estate oI his wiIe,
REMEDIOS R. SANDEJAS. On July 1, 1981, Letters oI Administration were issued by the
lower court appointing him as administrator oI the estate oI the decedent.
On November 19, 1981, the 4th Iloor oI Manila City all was burned and among the
records burned were the records regarding the letters oI administration given to Sandejas, Sr. As
a result, Sandejas, Sr. Iiled a Motion Ior Reconstitution oI the records oI the case which was
granted.
An Omnibus Pleading Ior motion to intervene and petition-in-intervention was Iiled by
Movant Alex Lina alleging among others that he and Administrator Sandejas Sr., in his capacity
as seller, bound and obligated himselI, his heirs, administrators, and assigns, to sell Iorever and
absolutely and in their entirety parcels oI land which Iormed part oI the estate.
Consequently, the lower court issued an Order granting the intervention oI Alex Lina.
The counsel Ior Sandejas, Sr. Iiled a ManiIestation alleging among others that the administrator,
Eliodoro Sandejas, Sr., died in Canada and said counsel is still waiting Ior oIIicial word on the
Iact oI the death oI the administrator. e also alleged, among others that the matter oI the claim
oI Intervenor Alex Lina becomes a money claim to be Iiled in the estate oI the late Sandejas, Sr.
The lower court issued an Order directing the counsel Ior the Iour heirs and other heirs oI
Teresita Sandejas to move Ior the appointment oI a new administrator within IiIteen days Irom
receipt oI this Order
Alex Lina Iiled an Omnibus Pleading Ior petition Ior letters oI administration and to
consolidate the cases. Intervenor Alex Lina Iiled a Motion Ior his appointment as a new
administrator oI the Intestate Estate oI Remedios Sandejas. The lower court issued an order
granting the Motion.
eirs Sixto, Roberto, Antonio and Benjamin, all surnamed Sandejas, Iiled a Motion Ior
Reconsideration and the appointment oI another administrator, Sixto Sandejas in lieu oI
Intervenor Alex Lina stating that it was only lately that Sixto Sandejas, a son and heir, expressed
his willingness to act as a new administrator oI the intestate estate oI his mother, Remedios
Sandejas. ThereaIter, Intervenor Alex Lina Iiled his ManiIestation and Counter Motion alleging
that he had no objection to the appointment oI Sixto Sandejas as administrator oI the intestate
estate oI his mother, provided that Sixto Sandejas be also appointed as administrator oI the
intestate estate oI his Iather, Eliodoro Sandejas, Sr. The lower court granted the said Motion and
substituted Alex Lina with Sixto Sandejas as petitioner in the said Petitions. AIter the payment oI
the administrator's bond and approval thereoI by the court, Administrator Sixto Sandejas on took
his oath as administrator oI the estate oI the deceased Remedios Sandejas and Eliodoro Sandejas
and was likewise issued Letters oI Administration on the same.
On November 29, 1993, Intervenor Iiled an Omnibus Motion to approve the deed oI
conditional sale executed between PlaintiII-in-lntervention Alex Lina and Elidioro Sandejas, Sr.
on June 7, 1982; to compel the heirs oI Remedios Sandejas and Eliodoro Sandejas, Sr. thru their
administrator, to execute a deed oI absolute sale in Iavor oI Intervenor Alex Lina pursuant to said
conditional deed oI sale to which the administrator Iiled a Motion to Dismiss and/or Opposition
to said omnibus motion on December 13, 1993.
On January 13, 1995, the lower court rendered the questioned order granting intervenor's
Motion.

Issue: Whether or not Eliodoro Sandejas Sr. is legally obligated to convey title to the property
reIerred to in the subject document which was Iound to be in the nature oI a contract to sell -
where the suspensive condition set Iorth therein, was not complied with.

Ruling: The Petition is partially meritorious. Petitioners argue that the CA erred in ordering the
conveyance oI the disputed 3/5 oI the parcels oI land, despite the nonIulIillment oI the
suspensive condition -- court approval oI the sale -- as contained in the 'Receipt oI Earnest
Money with Promise to Sell and to Buy. Instead, they assert that because this condition had not
been satisIied, their obligation to deliver the disputed parcels oI land was converted into a money
claim. Petitioners admit that the agreement between the deceased Eliodoro Sandejas Sr. and
respondent was a contract to sell. In a contract to sell, the payment oI the purchase price is a
positive suspensive condition. The vendor's obligation to convey the title does not become
eIIective in case oI Iailure to pay. On the other hand, the agreement between Eliodoro Sr. and
respondent is subject to a suspensive condition -- the procurement oI a court approval, not Iull
payment. There was no reservation oI ownership in the agreement. In accordance with paragraph
1 oI the Receipt, petitioners were supposed to deed the disputed lots over to respondent. This
they could do upon the court's approval, even beIore Iull payment. ence, their contract was a
conditional sale, rather than a contract to sell as determined by the CA. When a contract is
subject to a suspensive condition, its birth or eIIectivity can take place only iI and when the
condition happens or is IulIilled. Thus, the intestate court's grant oI the Motion Ior Approval oI
the sale Iiled by respondent resulted in petitioners' obligation to execute the Deed oI Sale oI the
disputed lots in his Iavor. The condition having been satisIied, the contract was perIected.
enceIorth, the parties were bound to IulIill what they had expressly agreed upon.



























CIR vs. Primetown

FACTS: On March 11, 1999, Primetown Property Group, Inc. (Primetown) applied Ior the
reIund or tax credit oI income tax it paid in 1997. As the claim was not acted upon, Primetown
Iiled a petition Ior review with the Court oI Tax Appeals (CTA) on April 14, 2000. The CTA
dismissed the petition as it was Iiled beyond the two-year period prescribed under the Tax Code
Ior Iiling oI judicial claims Ior reIund. The CTA ruled that based on Article 13 oI the Civil Code,
which provides that a year is understood to be equivalent to 365 days, the two-year prescriptive
period under Section 229 oI the Tax Code Ior the Iiling oI judicial claims is equivalent to 730
days. As 2000 was a leap year, Primetown`s petition, which was Iiled 731 days aIter Primetown
Iiled its Iinal adjusted return on April 14, 1998, was Iiled beyond the two-year prescriptive
period. On appeal, the Court oI Appeals (CA) reversed the CTA and ruled that Article 13 oI the
Civil Code does not distinguish between a regular and a leap year. Thus, even iI 2000 was a leap
year, the periods covered by April 15, 1998 to April 14, 1999 and April 15, 1999 to April 14,
2000 should be counted as 365 days each, or a total oI 730 days. ence, the petition was Iiled by
Primetown within the two-year prescriptive period. The BIR appealed.

Issue: ow is the two-year prescriptive period Ior the Iiling oI judicial claims Ior tax
reIunds and credits computed?

Ruling: The two-year period shall consist oI 24 months reckoned Irom the Iiling oI the Iinal
adjusted return. Article 13 oI the Civil Code provides that when the law speaks oI a year, it is
understood to be equivalent to 365 days. In the case oI National Marketing Corporation vs.
Tecson, the Supreme Court ruled that a year is equivalent to 365 days, regardless oI whether it is
a regular or a leap year. On the other hand, the Administrative Code oI 1987 provides that a year
shall be understood to consist oI 12 calendar months, and a calendar month is the period oI time
running Irom the beginning oI a certain numbered day up to, but not including, the
corresponding numbered day oI the next month, and iI there is not a suIIicient number oI days in
the next month, then up to and including the last day oI that month. To illustrate, one calendar
month Irom December 31, 2007 will be Irom January 1, 2008 until January 31, 2008; one
calendar month Irom January 31, 2008 will be Irom February 1, 2008 until February 29, 2008.
Thus, under the Administrative Code oI 1987, the number oI days is irrelevant. Both Article 13
oI the Civil Code and Section 31, Chapter VIII, Book I oI the Administrative Code oI 1987 deal
with the computation oI legal periods. owever, since the Administrative Code is the more
recent law, it shall govern the computation oI legal periods. The two-year prescriptive period,
reckoned Irom the time Primetown Iiled its Iinal adjusted return on April 14, 1998, consisted oI
24 months which ended on April 14, 2000. Thus, Primetown`s petition which was Iiled on April
14, 2000, the last day oI the 24th calendar month Irom the day Primetown Iiled its Iinal adjusted
return, was Iiled within the reglementary period.
NAMARCO vs Tecson, 139Phil584

FACTS: On November 14, 1955, the Court oI First Instance oI Manila rendered judgment, in
Civil Case No. 20520On December 21, 1965, the National Marketing Corporation, as successor
to all the properties, assets, rights, and choses in action oI the Price Stabilization Corporation, as
plaintiII in that case and judgment creditor therein, Iiled, with the same court, a complaint,
docketed as Civil Case No. 63701 thereoI, against the same deIendants, Ior the revival oI the
judgment rendered in said Case No. 20520. DeIendant Miguel D. Tecson moved to dismiss said
complaint, upon the ground oI lack oI jurisdiction over the subject matter thereoI and
prescription oI action. Acting upon the motion and plaintiII's opposition thereto, said Court
issued, on February 14, 1966, DeIendant Miguel Tecson seeks the dismissal oI the complaint on
the ground oI lack oI jurisdiction and prescription. As Ior lack oI jurisdiction, as the amount
involved is less than P10,000 as actually these proceedings are a revival oI a decision issued by
this same court, the matter oI jurisdiction must be admitted. But as Ior prescription. PlaintiIIs
admit the decision oI this Court became Iinal on December 21, 1955. This case was Iiled exactly
on December 21, 1965 but more than ten years have passed a year is a period oI 365 days (Art.
13, CCP). PlaintiII Iorgot that 1960, 1964 were both leap years so that when this present case
was Iiled it was Iiled two days too late.

ISSUE: Whether or not the contention oI appellant contravenes the constitution

ELD: The very conclusion thus reached by appellant shows that its theory contravenes the
explicit provision oI Art. 13 oI the Civil Code oI the Philippines, limiting the connotation oI each
"year" ? as the term is used in our laws ? to 365 days. Indeed, prior to the approval oI the Civil
Code oI Spain, the Supreme Court thereoI had held, on March 30, 1887, that, when the law
spoke oI months, it meant a "natural" month or "solar" month, in the absence oI express
provision to the contrary. Such provision was incorporated into the Civil Code oI Spain,
subsequently promulgated. ence, the same Supreme Court declared

that, pursuant to Art. 7 oI
said Code, "whenever months ... are reIerred to in the law, it shall be understood that the months
are oI 30 days," not the "natural," or "solar" or "calendar" months, unless they are "designated by
name," in which case "they shall be computed by the actual number oI days they have. This
concept was later, modiIied in the Philippines, by Section 13 oI the Revised Administrative
Code, Pursuant to which, "month shall be understood to reIer to a calendar month."

In the
language oI this Court, in People vs. Del Rosario

with the approval oI the Civil Code oI the
Philippines (Republic Act 386) ... we have reverted to the provisions oI the Spanish Civil Code
in accordance with which a month is to be considered as the regular 30-day month ... and not the
solar or civil month," with the particularity that, whereas the Spanish Code merely mentioned
"months, days or nights," ours has added thereto the term "years" and explicitly ordains that "it
shall be understood that years are oI three hundred sixty-Iive days."













Berg vs Magdalena Estates, GR No. L-3784, 17 October 1952

Facts: The complaint avers that plaintiII and deIendant are co-owners oI said property, the
Iormer being the owner oI one-third interest and the latter oI the remaining two-thirds. The
division is asked because plaintiII and deIendant are unable to agree upon the management oI the
property and upon the partition thereoI.
DeIendant answered setting up a special deIense and counterclaim. As a special deIense,
deIendant claims that on September 22, 1943, it sold to plaintiII one-third oI the property in
litigation subject to the express condition that should either vendor or vendee decide to sell his
undivided share, the party selling would grant to the other party Iirst an irrevocable option to
purchase the same at the seller`s price. It avers that in January 1946, plaintiII Iixed the sum oI
P200, 000 as the price oI said share and oIIered to sell it to deIendant, which oIIer was accepted
and Ior the payment oI said price plaintiII gave deIendant a period oI time which, including the
extensions granted would expire on May 31, 1947. DeIendant claims that in spite oI its
acceptance oI the oIIer, plaintiII reIused to accept the payment oI the price, and Ior this reIusal
deIendant suIIered damages in the amount oI P100, 000. For these reasons, deIendant asks Ior
speciIic perIormance.

Issue: Whether or not the obligation is one subject to a term.

Ruling: The obligation is rather subject to a condition. Under Article 1125 oI the old Civil Code,
obligations with a term, Ior the IulIillment oI which a day certain has been Iixed, shall be
demandable only when the day arrives. A day certain is understood to be that which must
necessarily arrive, even though it is not known when. In order that an obligation may be with a
term, it is, thereIore, necessary that it should arrive, sooner or later; otherwise, iI its arrival is
uncertain, the obligation is conditional.
Viewing in this light the clause on which deIendant relies Ior the enIorcement oI its right
to buy the property, it would seem that it is not a term, but a condition. Considering the Iirst
alternative, that is, until deIendant shall have obtained a loan Irom the National City Bank oI
New ork, it is clear that the granting oI such loan is not deIinite and cannot be held to come
within the terms 'day certain. And iI it is considered that the period given was until such time
as deIendant could raise money Irom other sources, then it is also to be indeIinite and contingent,
and so it is also a condition and not a term within the meaning oI the law. In any event, it is
apparent that the IulIillment oI the condition contained in this second alternative is made to
depend upon deIendant`s exclusive will, and viewed in this light, the plaintiII`s obligation to sell
did not arise, Ior, under article 1115 oI the old Civil Code, 'when the IulIillment oI the condition
depends upon the exclusive will oI the debtor the conditional obligation shall be void.


Lirag vs CA, GR No. L-30736, 14 April 1975

Facts: Respondent Court oI Appeals aIIirmed the decision oI the trial court in the latter`s
evaluation oI the evidence when it Iound that it was not true that petitioner Lirag Textile Mills
suIIered pecuniary loss and in market opportunities which it used as a justiIication to terminate
the services oI plaintiII Alcantara; that it was not also true that the latter suIIered Irom lack oI
skill; that, thereIore, there was a violation oI the written contract oI employment executed by and
between petitioners and private respondent Alcantara; that petitioner Lirag was responsible Ior
inducing private respondent Alcantara to leave his employment with the Philippine Chamber oI
Industries where he was holding a permanent position and to accept employment with petitioner
Lirag Textile Mills; and that appellee Alcantara was correctly awarded moral damages and
attorney's Iees. Petitioners then seek a review by certiorari oI the decision oI the respondent
Court oI Appeals

Issue: Whether or not respondent Court was correct in sentencing the petitioners to pay
respondent back salaries, moral damages and attorney's Iees.

Ruling: The main thrust oI petitioners' contention is that an employer's liability Ior terminating
without just cause the employment oI an employee is governed by the provisions oI Republic
Act 1787, amending Republic Act 1052.
The Iatal deIect oI petitioner's argument is that the above quoted provision oI the law
does not and cannot apply to an employer-employee relationship with an express contract Ior a
period oI employment. As could be clearly seen Irom the stipulation oI Iacts between the parties
in and as a Iact recognized by both the trial court and the respondent Appellate Court, the
contract oI employment was Ior an indeIinite period as it shall continue without ending, subject
to a resolutory period, unless sooner terminated by reason oI voluntary resignation or by virtue oI
a valid cause or causes (the resolutory period). There is an indeIinite period oI time Ior
employment agreed upon by and between petitioners and the private respondent, subject only to
the resolutory period agreed upon which may end the indeterminate period oI employment,
namely voluntary resignation on the part oI private respondent Alcantara or termination oI
employment at the option oI petitioner Lirag Textile Mills, but Ior a 'valid cause or causes. It
necessarily Iollows that iI the petitioner-employer Lirag Textile Mills terminates the employment
without a 'valid cause or causes, it committed a breach oI the contract oI employment executed
by and between the parties. The measure oI an employer's liability provided Ior in Republic Act
1052 as amended, is solely intended Ior contracts oI employment without a stipulated period. It
cannot possibly apply as a limitation to an employer's liability in cases where the employer
commits a breach oI contract by violating an indeIinite period oI employment expressly agreed
upon through his wrongIul act oI terminating said employment without any valid cause or
causes, which act may even amount to bad Iaith on the employer's part.
A "period" has been deIined "as a space oI time which has an inIluence on obligation as a
result oI a juridical act, and either suspends their demandableness or produces their
extinguishment." Obligations with a period are those whose consequences are subjected in one
way or another to the expiration oI said period or term. Article 1193 oI the Civil Code provides
that 'obligations with a resolutory period take eIIect at once, but terminate upon arrival oI the
day certain. A day certain is understood to be that which must necessarily come, although it may
not be known when. The Supreme Court has no doubt that the "indeIinite period" oI
employment expressly agreed upon by and between the parties in this case is really a resolutory
period because the employment is bound to terminate on a Iuture "day certain" such as the
employee's resignation or employer's termination oI employment upon a valid cause or causes,
like death oI the employee or termination oI employer's corporate existence, although it may not
be known when.
Petitioner Lirag Textile Mills, Inc. violated the contract oI employment with private
respondent Alcantara when the Iormer terminated his services without a valid cause. The act was
attended with bad Iaith and deceit because said petitioner made Ialse allegations oI a supposed
valid cause knowing them to be Ialse, thus making itselI liable Ior payment oI actual, moral and
exemplary damages, plus attorney`s Iees to private respondent Alcantara. Petitioner Lirag Textile
Mills, Inc. cannot be allowed the absolute and unilateral power to terminate without valid cause a
contract oI employment with a deIinite period it voluntarily entered into merely on the basis oI
its whim or caprice and under the Ialse pretense oI Iinancial distress. To countenance its
wrongIul act would be to place its employees in the disadvantageous position oI not being able to
protect themselves Irom the arbitrary, oppressive and wrongIul acts oI an economically powerIul
employer. The laudable ends oI social justice would not be served in that manner, especially in
the era oI a compassionate society. Petitioner Felix Lirag should also be held liable to private
respondent Alcantara Ior having induced the latter to leave a permanent position in the Philippine
Chamber oI Industries to accept a job in the Lirag Textile Mills, Inc., and when private
respondent Alcantara was dismissed without any valid cause, petitioner Felix Lirag did not do
anything to help him although he was in a position to do so by reason oI his eminent position in
the petitioner corporation. is responsibility is not only moral but also legal as under Art. 21 oI
the Civil Code: "Any person who willIully causes loss or injury to another in a manner that is
contrary to morals, good custom or public policy shall compensate the latter Ior the damage.
Daguhoy Enterprises, Inc. vs Ponce, GR No. L-6515, 18 October 1954

Facts: In the year 1950, deIendant-appellant Domingo Ponce was Chairman and Manager and his
son Buhay M. Ponce was Secretary-Treasurer, oI the plaintiII corporation Daguhoy Enterprises,
Inc. In that said year Rita L. Ponce, wiIe oI Domingo, executed in Iavor oI plaintiII corporation a
deed oI mortgage over a parcel oI land including the improvements thereon, situated in Manila,
to secure the payment oI a loan oI P5,000 granted to her by said corporation, payable within six
years with interest at 12 per cent per annum. On March 10, 1951, Rita L. Ponce with the consent
oI her husband Domingo executed another mortgage deed amending the Iirst one, whereby the
loan was increased Irom P5,000 to P6,190, the terms and conditions oI the mortgage remaining
the same. Rita and Domingo presented the two mortgage deeds Ior registration in the oIIice oI
the register oI deeds, but the said register aIter going over the papers noted deIects and
deIiciencies and advised Rita and Domingo to cure the deIects and Iurnish the necessary data.
Instead oI complying with the suggestion and requirements, the two withdrew the two mortgage
deeds and then mortgaged the same parcel oI land in Iavor oI the Rehabilitation Finance
Corporation (RFC) to secure a loan.
Potenciano Gapol was the majority stockholder in the Daguhoy Enterprises, Inc., and
naturally was interested in the security oI the payment oI the loan aIoresaid. Upon learning that
the deeds oI mortgage were not registered and what is more, that they were withdrawn Irom the
oIIice oI the register oI deeds and the land covered by the two deeds was again mortgaged to the
RFC, he Iiled a case against Domingo and Buhay Ponce" Ior accounting, not only Ior the amount
oI the loan oI P6,190 but apparently Ior other sums, possibly on the theory that the loan in
question was granted by Domingo and Buhay acting as Chairman-Manager and Secretary-
Treasurer, respectively oI the corporation. To account Ior the amount oI said loan, Domingo and
his son Buhay Iiled in court in said case a check oI the RFC in the amount oI P6,190 in Iavor oI
the Daguhoy Enterprises, Inc. and interests amounting to P266.10. AIter the deposit oI said
check and interests, Potenciano Gapol in representation oI the Daguhoy Enterprises, Inc.
petitioned the court in said case Ior permission to withdraw the amounts, presumably to apply
them to the payment oI the loan but the deIendants opposed therein unless the mortgage by Rita
was cancelled, the court denied the petition. A second petition Ior withdrawal was Iiled by
Gapol, agreeing to the cancellation oI the mortgage as soon as the amounts were withdrawn Irom
the Court and deposited with the Bank oI America, in the name oI Daguhoy Enterprises, Inc. but
was denied again. ThereaIter, the Daguhoy Enterprises, Inc. Iiled the present action against Rita
and her husband Domingo to collect the amount oI the loan, including interests.

Issue: Whether or not the sum in the Iorm oI an RFC check and some interest deposited in the
civil case may be withdrawn.

Ruling: Although the original loan oI P5,000 including the increase oI P1,190 was payable
within six years Irom June 1950 and so did not become due and payable until 1956, the trial
court held that under article 1198 oI the Civil Code, the debtor lost the beneIit oI the period by
reason oI her Iailure to give the security in the Iorm oI the two deeds oI mortgage and register
them, including deIendant`s act in withdrawing said two deeds Irom the oIIice oI the register oI
deeds and then mortgaging the same property in Iavor oI the RFC; and so the obligation became
pure and without any condition and consequently, the loan became due and immediately
demandable. Likewise, even iI the deIendants had already deposited a certain amount in Iavor oI
the corporation, they are not yet relieved Irom the payment oI interests Irom the time oI the
deposit because the loan is not yet paid.


Victorias Planters vs Victorias Milling, GR No. L-6648, 25 July 1955

Facts: The petitioners Victorias Planters Association, Inc. and North Negros Planters
Association, Inc. are non-stock corporations and were organized by, and are composed oI, sugar
cane planters in the districts oI Victorias, Manapla and Cadiz, having been established
principally as the representative entities oI the numerous sugar cane planters in said districts
whose sugar cane productions are milled by the respondent corporation. That at various dates,
Irom the year 1917 to 1934, the sugar cane planters pertaining to the districts oI Manapla and
Cadiz, Negros Occidental, executed identical milling contracts, setting Iorth the terms and
conditions under which the sugar central "North Negros Sugar Co. Inc." would mill the sugar
produced by the sugar cane planters oI the Manapla and Cadiz districts. Millings took place
every successive crop year thereaIter, except the 6-year period, comprising 4 years oI the last
World War II and 2 years oI post-war reconstruction oI respondent's central at Victorias, Negros
Occidental. That aIter the liberation, the North Negros Sugar Co., Inc. did not reconstruct its
destroyed central at Manapla, Negros Occidental, and in 1946, it advised the North Negros
Planters Association, Inc. that it had made arrangements with the respondent Victorias Milling
Co., Inc. Ior said respondent corporation to mill the sugar cane produced by the planters oI
Manapla and Cadiz holding milling contracts with it. Thus, aIter the war, all the sugar cane
produced were milled in the respondent corporation at Victorias. Beginning with the year 1948,
and in the Iollowing years, when the planters-members oI the North Negros Planters Association,
Inc. considered that the stipulated 30-year period oI their milling contracts executed in the year
1918 had already expired and terminated in the crop year 1947-1948, and the planters-members
oI the Victorias Planters Association, Inc. likewise considered the stipulated 30-year period oI
their milling contracts, as having likewise expired and terminated in the crop year 1948-1949,
under the pertinent provisions oI the standard milling contract on the duration thereoI.Repeated
representation were made with respondent corporation Ior negotiations regarding the execution
oI new milling but respondent still reIuses to accede to the same, contending that under the
provisions oI the mining contract, "It is the view oI the majority oI the stockholder-investors, that
our contracts with the planters call Ior 30 years oI milling not 30 years in time" and that "as
there was no milling during 4 years oI the recent war and two years oI reconstruction, so the
contracts has not yet expired.The trial court then rendered judgment in Iavor oI the petitioners.

Issue: Whether or not the trial court erred in rendering its disputed decision, Iavoring the
petitioner.

Ruling: Fortuitous event relieves the obligor Irom IulIilling a contractual obligation. The Iact that
the contracts make reIerence to "Iirst milling" does not make the period oI thirty (30) years one
oI thirty (30) milling years. The term "Iirst milling" used in the contracts under consideration
was Ior the purpose oI reckoning the thirty-year period stipulated therein. Even iI the thirty-year
period provided Ior in the contracts be construed as milling years, the deduction or extension oI
six (6) years would not be justiIied. At most on the last year oI the thirty-year period stipulated in
the contracts the delivery oI sugar cane could be extended up to a time when all the amount oI
sugar cane raised and harvested should have been delivered to the appellant's mill as agreed
upon. Further, the parties stipulated that in the event oI Ilood, typhoon, earthquake, or other force
mafeure, war, insurrection, civil commotion, organized strike, etc., the contract shall be deemed
suspended during said period, does not mean that the happening oI any oI those events stops the
running oI the period agreed upon. It only relieves the parties Irom the IulIillment oI their
respective obligations during that time the planters Irom delivering sugar cane and the central
Irom milling it. In order that the central, the herein appellant, may be entitled to demand Irom the
other parties the IulIillment oI their part in the contracts, the latter must have been able to
perIorm it but Iailed or reIused to do so and not when they were prevented by force mafeure such
as war. To require the planters to deliver the sugar cane which they Iailed to deliver during the
Iour (4) years oI the Japanese occupation and the two (2) years aIter liberation when the mill was
being rebuilt is to demand Irom the obligors the IulIillment oI an obligation which was
impossible oI perIormance at the time it became due. Nemo tenetur ad impossibilia. The obligee
not being entitled to demand Irom the obligors the perIormance oI the latter`s part oI the
contracts under those circumstances cannot later on demand its IulIillment. The perIormance oI
what the law has written oII cannot be demanded and required. The prayer that the plaintiIIs be
compelled to deliver sugar cane to the appellant Ior six (6) years more to make up Ior what they
Iailed to deliver during those trying years, the IulIillment oI which was impossible, iI granted,
would in eIIect be an extension oI the term oI the contracts entered into by and between the
parties.




































Jespajo vs CA, GR No. 113626, 27 September 2002

Facts: The subject oI this controversy is an apartment building owned by Jespajo Realty
Corporation. On February 1, 1985, said corporation, represented by its President, Jesus L. Uy,
entered into separate contracts oI lease with Tan Te Gutierrez and Co Tong. Pursuant to the
contract, Tan Te occupied room No. 217 oI the subject building at a monthly rent oI P847.00
while Co Teng occupied the Penthouse at a monthly rent oI P910.00. The terms oI the contract
states that an automatic 20 yearly increase in the monthly rentals will be applied. Since the
eIIectivity oI the lease agreement on February 1985, the lessees religiously paid their respective
monthly rentals together with the 20 yearly increased in the monthly rentals as stipulated in the
contract. On January 2, 1990, the lessor corporation sent a written notice to the lessees
inIorming them oI the Iormers` intention to increase the monthly rentals on the occupied
premises to P3,500.00 monthly eIIective February 1, 1990. The lessees then oppossed alleging
that the same is in contravention oI the terms oI the contract oI lease as agreed upon. Due to the
opposition and the Iailure oI the lessees to pay the increased monthly rentals in the amount oI
P3,500.00, the lessor demanded that the lessees to vacate the premises and pay the amount oI
P7,000.00 Ior the months oI February and March, 1990.The lessees exerted eIIort to pay the
rentals stipulated in the contract but was reIused by the lessor so that on May 2, 1990, they
instituted a case Ior consignation.

Issue: Whether or not the parties to a contract oI lease stipulated Ior an indeIinite period and
shall continue Ior as long as the lessee is paying the rent, is the said contract interminable even
by the lessor.

Ruling: The lease contract between petitioner and respondents is with a period subject to a
resolutory condition. The wording oI the agreement is unequivocal: 'The lease period xxx shall
continue Ior an indeIinite period provided the lessee is up-to-date in the payment oI his monthly
rentals. The condition imposed in order that the contract shall remain eIIective is that the lessee
is up-to-date in his monthly payments. It is undisputed that the lessees Gutierrez and Co Tong
religiously paid their rent at the increasing rate oI 20 annually. The agreement between the
lessor and the lessees are thereIore still subsisting, with the original terms and conditions agreed
upon, when the petitioner unilaterally increased the rental payment to more than 20 or
P3,500.00 a month.












Borromeo vs CA, GR No. L-22962, 28 September 1972

Facts: DeIendant Jose Villamor was a distributor oI lumber belonging to Mr. Miller who was the
agent oI the Insular Lumber Company in Cebu. DeIendant being a Iriend and Iormer classmate
oI plaintiII Borromeo used to borrow Irom the latter certain amount s Irom time to time. On one
occasion with some pressing obligation to settle with Mr. Miller, deIendant borrowed Irom
plaintiII a large some oI money Ior which he mortgaged his land and house in Cebu. Mr. Miller
Iiled an attachment on deIendant properties including those mortgaged to plaintiII. PlaintiII then
pressed the deIendant Ior settlement but instead executing a promissory note agreeing to pay as
soon as possible. The note Iurther stipulates that deIendant hereby relinquish, renounce or
otherwise waive my rights to the prescription established by our Code oI Civil Procedure Ior the
collection or recovery oI the sum oI P7,220.00.
AIter the world war, plaintiII made oral demands but deIendant Iailed to settle his
account. DeIendant raised the deIense that Iuture prescription cannot be waived. The trial court
rendered a decision and order deIendant to pay the sum oI 7,220. owever, the appellate court
reversed the decision thus absolving deIendant Ior the liability to pay.

Issue: Whether or not deIendant has liability to pay plaintiII aIter stipulation to pay aIter the
lapse oI ten years Irom date oI instrument amounting to waiver.

Ruling: There is nothing implausible in the view that the language renouncing the debtor`s right
to the prescription established by the Code oI Civil Procedure should be given meaning, as noted
in the preceding sentence oI the decision oI the respondent court, that the debtor could be trusted
to pay even aIter the termination oI the ten-year prescription period. For it was also made clear
therein, there had been since then verbal request on the part oI the creditor made to the debtor Ior
the settlement oI the loan. Nor was the Court oI Appeals unaware that such indeed was within
the contemplation oI the parties as shown by this sentence in its decision: 'PlaintiII did not Iile
any complaint against the deIendant within ten years Irom the execution oI the document as there
was no property registered in deIendant`s name who Iurthermore assured him that he could
collect even aIter the lapse oI ten years.
WhereIore, the decision oI the Court oI Appeals is reversed, thus giving eIIect to the
decision oI the trial court.
Gonzales vs. de Jose, GR No. L-43429, 24 October 1938

Facts: DeIendant Florentino de Jose executed two (2) promissory notes on June 22, 1922 and
September 13, 1922 in Iavor oI plaintiII Benito Gonzalez. The two (2) promissory notes were
both worded as Iollows:
'I promise to pay Mr. Benito Gon:ale: the sum of P (amount) as soon as possible.`
DeIendant appealed Irom the decision oI the Court oI First Instance oI Manila ordering
him to pay the plaintiII the sum oI P547.95 within thirty (30) days Irom the date oI notiIication
oI said decision, plus the costs. The deIendant interposed the deIense oI prescription because the
action was not Iiled by the plaintiII within the prescriptive period prescribed by law.

Issue: Whether or not the action has already prescribed.

Ruling: The words 'as soon as possible` in the promissory notes denote that such is an
obligation subject to a potestative condition. Article 1128 oI the Civil Code provides:
'II the obligation does not speciIy a term, but it is to be inIerred Irom its nature and
circumstances that it was intended to grant the debtor time Ior its perIormance, the period oI the
term shall be Iixed by the court.
The action to ask the court to Iix the period has already prescribed in accordance with
section 43 (1) oI the Code oI Civil Procedure. This period oI prescription is ten (10) years,
which has already elapsed Irom the execution oI the promissory notes until the Iiling oI the
action on June 1, 1934. The action which should be brought in accordance with Article 1128 is
diIIerent Irom the action Ior the recovery oI the amount oI the notes, although the eIIects oI both
are the same, being, like other civil actions, subject to the rules oI prescription.































Baluyut vs Poblete, 514SCRA370

Facts: Petitioer loaned Irom spouses Poblete the sum oI Php 850,000.00 which shall mature in
one as stipulated in the promissory note executed by Baluyut. By way oI a real estate mortgage,
Baluyut conveyed her property Ior the spouses to secure payment. Baluyut however Iailed to pay
the amount which prompted spouses to extrajudicially Ioreclose the property. An order oI the
court was issued ordering Baluyut to leave the property, but during such time, the spouses died.
ThereaIter, Baluyut Iiled Ior damages and annulment oI the contract and contended that the
period oI maturity oI the loan is one year. owever such case was dismissed.

Issue: Whether or not there was conIlict oI the maturity oI the loan

Ruling: : It is long-held cardinal rule that when the terms oI an agreement are reduced in writing,
it is deemed to contain all the terms and conditions agreed upon and no evidence oI such terms
can be admitted other than the contents oI the agreement itselI. In the present case, the
promissory note is the law between the parties, and that such promissory note contains that the
loan shall mature in one month.

Malayan Realty vs Uy, 10 November 2006

Facts: Petitioner is the owner oI an apartment it leased to Uy at a monthly rental which increased
yearly Irom 1989 and by 2001 the rent was at Php 4,671.65. owever, on August 31, 2001 Uy
was ordered to vacate the apartment but Uy reIused. A case was then Iiled beIore the trial court
which dismissed the complaint noting that there was no showing thath the leased contract was on
a monthly basis.

Issue: Whether or not the CA erred in granting a one year extension in Iavor oI Uy

Ruling: The supreme court held that in the event that the lessee has occupied the leased premises
Ior over a year, the courts may Iix a longer term Ior the lease. The power oI the courts to do such
is potestative or discretionary, depending on the particular circumstance oI the case. Thus, a
longer term may be granted where equities come into play

Kasapian ng Manggagawa ng Coca-Cola vs CA, 487SCRA487

Facts: Kasapian ng Malayang manggagawa sa Coca-cola Philippines had a negotiation deadlock
which was later on settled through the intervention oI NCMB administrator Magsalin. The CBA
now contains salary increases and regularization oI 61 employees. AIter a certiIication election
was conducted a renegotiation was demanded but was denied by respondent. In decemdewr 9,
1999. Pending several cases between petitioner and respondent, later closed its Manila and
Antipolo plants resulting in the termination oI 646 employees.

Issue: Whether or not the 61 employees were regularized as oI December 1, 1998 and are
entitled to the beneIits under the new CBA

Ruling: The Supreme Court held that there is the existence oI a valid memorandum oI agreement
which was Ireel entered into by the parties, thus constitute as the law between them. Thus,
December 1, 1998 Ior it immediately precedes the phrase converting non-regular employment
status to regular employment status means that the regularization be reached Irom the said date
entitling them to the beneIits under the new CBA.

Santos vs Santos, GR No. 153004, 5 November 2004

Facts: Ernesto V. Santos and Santos Ventura ocorma Foundation, Inc. (SVFI) were the
plaintiII and deIendant, respectively, in several civil cases Iiled in diIIerent courts in the
Philippines. On October 26, 1990, the parties executed a Compromise Agreement which
amicably ended all their pending litigations.In compliance with the Compromise Agreement,
respondent Santos moved Ior the dismissal oI the aIoresaid civil cases. Petitioner then Iailed to
comply with the conditions oI the compromise agreement so respondent Iiled a Complaint Ior
Declaratory RelieI and Damages

alleging that there was delay on the part oI petitioner in paying
the balance oI P13 million.
On June 2, 1995, Santos and Riverland Inc. Iiled a Complaint Ior Declaratory RelieI and
Damages alleging that there was delay on the part oI petitioner in paying the balance oI P13
million. In its Answer, petitioner countered that respondents have no cause oI action against it
since it had Iully paid its obligation to the latter. It Iurther claimed that the alleged delay in the
payment oI the balance was due to its valid exercise oI its rights to protect its interests as
provided under the Rules. Petitioner counterclaimed Ior attorney`s Iees and exemplary damages.
The trial court rendered a Decision dismissing herein respondents` complaint and ordering them
to pay attorney`s Iees and exemplary damages to petitioner. Respondents then appealed to the
Court oI Appeals. The appellate court reversed the ruling oI the trial court.

Issue: Whether the respondents are entitled to legal interest.

Ruling: A compromise is a contract whereby the parties, by making reciprocal concessions,
avoid litigation or put an end to one already commenced. It is an agreement between two or
more persons, who, Ior preventing or putting an end to a lawsuit adjust their diIIiculties by
mutual consent in the manner which they agree on, and which every one oI them preIers in the
hope oI gaining, balanced by the danger oI losing.
The general rule is that a compromise has upon the parties the eIIect and authority oI res
judicata, with respect to the matter deIinitely stated therein, or which by implication Irom its
terms should be deemed to have been included therein. This holds true even iI the agreement has
not been judicially approved.
The two-year period must be counted Irom October 26, 1990, the date oI execution oI the
compromise agreement, and not on September 30, 1991 when respondent wrote a demand letter
to petitioner on October 28, 1992, the obligation was already due and demandable. When the
petitioner Iailed to pay its due obligation aIter the demand was made, it incurred delay. Article
1169 oI the Civil Code provides: Those obliged to deliver or to do something incur in delay
Irom the time the obligee judicially or extrajudicially demands Irom them the IulIillment oI their
obligation.
In the case at bar, the obligation was already due and demandable aIter the lapse oI the
two-year period Irom the execution oI the contract. Furthermore, the obligation is liquidated
because the debtor knows precisely how much he is to pay and when he is to pay it. Petitioner
delayed in the perIormance as he Iully settled his outstanding balance on February 8, 1995 which
was more than two years aIter the extrajudicial demand. The demand letter sent to petitioner was
in accordance with an extrajudicial demand contemplated by law.
The petitioner is liable Ior damages Ior the delay in the perIormance oI its obligation as
provided Ior in Article 1170.
When the debtor knows the amount and period when he is to pay, interest as damages is
generally allowed as a matter oI right. The complaining party has been deprived oI Iunds to
which he is entitled by virtue oI their compromise agreement. The goal oI compensation
requires that the complainant be compensated Ior the loss oI use oI the Iunds.
This compensation is in the Iorm oI interest. In the absence oI the agreement, the legal
rate oI interest shall prevail. The legal interest Ior loan as Iorebearance oI money is 12 per
annum to be computed Irom the deIault, Irom judicial or extrajudicial demand under and subject
to the provisions oI Article 1169 oI the Civil Code.

Melotindos vs Tobias, GR No. 146658, 28 October 2002

Facts: Atty. Manuel D. Melotindos, was the lessee oI the ground Iloor oI a house owned by
Melecio Tobias since 1953 on a month-to-month basis Irom its owner In 1995, respondent
demanded Irom petitioner either to pay an increased rate oI monthly rentals or else to vacate the
place. For two (2) years nothing came out oI the demand to vacate.On 1 June 1998 respondent
asked petitioner to restore the premises to him Ior some essential repairs oI its dilapidated
structure. The renovation oI the house was commenced but had to stop midway because
petitioner reIused to vacate the portion he was occupying and worse he neglected to pay Ior the
lease Ior Iour (4) months Irom May to August 1998. ence Ior the second time, or on 19 October
1998, respondent demanded the payment oI the rental arrears as well as the restoration oI the
house to him. In 1999, since petitioner was insisting on keeping possession oI the house but did
not pay the rental Ior January 1999, although he had settled the arrears oI Iour (4) months,
respondent was compelled to Iile a complaint Ior ejectment.

Issue: Whether or not the lower courts erred in their rulings.

Ruling: It is not only the evidence on record but petitioner`s pleadings themselves that conIirm
his deIault in paying the rental Iees Ior more than three (3) months in 1999 and 1998 prior to the
Iiling oI the ejectment complaint. There is also suIIicient basis Ior the courts a quo to conclude
that respondent desperately needed the property in good Iaith Ior his own Iamily and Ior the
repair and renovation oI the house standing thereon. These Iacts represent legal grounds to eject
a tenant.
The Petition Ior Review is DENIED Ior lack oI merit.
LL and Co. vs uang, 378SCRA612, 7 March 2002

Facts: The case originated Irom an unlawIul detainer case Iiled by petitioner beIore the
Metropolitan Trial Court oI Quezon City on October 9, 1996 which was docketed as Civil Case
No. 16349.wherein petitioner alleged that respondents uang Chao Chun and ang Tung Fa
violated their amended lease contract over a 1,112 square meter lot it owns, designated as Lot
No. 1-A-1, when they did not pay the monthly rentals thereon in the total amount oI P4,
322,900.00. It also alleged that the amended lease contract already expired on September 16,
1996 but respondents reIused to surrender possession plus the improvements made, and pay the
rental arrearages despite repeated demands. The MTC ruled that the contract entered into by the
parties may be extended by the lessees Ior reasons oI justice and equity. It also ruled that the
corporation`s Iailure to pay the monthly rentals as they Iell due was justiIied by the Iact that
petitioner reIused to honor the basis oI the rental increase as stated in their Lease Agreement.

Issue: Whether or not the court could still extend the term oI the lease, aIter its expiration and the
expiration oI the lease a proper ground in a case oI unlawIul detainer.

Ruling: The Supreme Court held that the MTC had no power to extend the lease period because
the Contract, as amended, had already expired. In general, the power oI the courts to Iix a longer
term Ior a lease is discretionary. Such power is to be exercised only in accordance with the
particular circumstances oI a case, a longer term to be granted where equities demanding
extension come into play; to be denied where none appear, always with due deIerence to the
parties` Ireedom to contract. Thus, courts are not bound to extend the lease.Article 1675 oI the
Civil Code excludes cases Ialling under Article 1673 Irom those under Article 1687. Article
1673 provides among others, that the lessor may judicially eject the lessee upon the expiration oI
'the period agreed upon or that which is Iixed Ior the duration oI the leases. Where no period
has been Iixed by the parties, the courts, pursuant to Article 1687, have the potestative authority
to set a longer period oI lease.
In the case, the Contract oI Lease provided Ior a Iixed period oI Iive (5) years --
'speciIically Irom September 16, 1991 to September 15, 1996. Because the lease period was
Ior a determinate time, it ceased, by express provision oI Article 1669 oI the Civil Code, 'on the
day Iixed, without need oI a demand. ere, the Iive-year period expired on September 15, 1996,
whereas the Complaint Ior ejectment was Iiled on October 6, 1996. Because there was no longer
any lease that could be extended, the MeTC, in eIIect, made a new contract Ior the parties, a
power it did not have.



Brent School vs Zamora, 181SCRA702, 5 February 1990

Facts: The root oI the controversy at bar is an employment contract in virtue oI which Doroteo R.
Alegre as engaged as athletic director by Brent School, Inc. at a yearly compensation oI P20,000.
The contract Iixed a speciIic term Ior its existence, Iive (5) years, i.e., Irom July 18, 1971, the
date oI execution oI the agreement, to July 17, 1976. Subsequent subsidiary agreements dated
March 15, 1973, August 28, 1973, and September 14, 1974 reiterated the same terms and
conditions, including the expiry date, as those contained in the original contract.
Some three (3) months beIore the expiration oI the stipulated period, or more precisely on April
20, 1976, Alegre was given a copy oI the report Iiled by Brent School with the Department oI
Labor advising oI the termination oI his services eIIective on July 16, 1976.
Alegre objected to this termination oI his employment contending that since his services
were necessary and desirable in the usual business oI his employer, and his employment had
lasted Ior Iive (5) years, he had acquired the status oI a regular employee and could not be
removed except Ior valid cause.

Issue: Whether or not Alegre`s contention is tenable.

Ruling: NO. The provisions oI the Labor Code recognizes the existence and legality oI term
employments. The case at bar is one which involves term employment. ThereIore, Alegre`s
employment was terminated upon the expiration oI his last contract with Brent School on July
16, 1976 without the necessity oI any notice. The advance written advice given the Department
oI Labor with copy to said petitioner was a mere reminder oI the impending expiration oI his
contract, not a letter oI termination, nor an application Ior clearance to terminate which needed
the approval oI the Department oI Labor to make the termination oI his services eIIective. In any
case, such clearance should properly have been given, not denied.














Lim vs People, 133SCRA333, 21 November 1984

Facts: On January 10, 1966, the appellant, a businesswoman, went to the house oI Maria Ayroso
and proposed to sell Ayroso`s tobacco. Ayroso agreed to the proposition oI the appellant to sell
her tobacco consisting oI 615 kilos at P1.30 a kilo. The appellant was to receive the price Ior
which she could sell the tobacco. This agreement was made in the presence oI plaintiII`s sister,
Salud G. Bantug. Salvador Bantug drew the document dated January 10, 1966 in which
appellant acknowledged the receipt oI the tobacco. In the document, the parties agreed that the
proceeds oI the sale will be given to Ayroso as soon as the tobaccos were sold.
Appellant subsequently Iailed to pay the entire obligation prompting Ayroso to Iile an
estaIa case against her. Both the Court oI First Instance and the Court oI Appeals convicted her
oI the crime charged.

Issue: Whether or not the provisions oI Article 1197 oI the Civil Code is applicable.

Ruling: NO. It is clear in the agreement that the proceeds oI the sale oI the tobacco should be
turned over to the complainant as soon as the same was sold, or, that the obligation was
immediately demandable as soon as the tobacco was disposed oI. ence, Article 1197 oI the
New Civil Code, which provides that the courts may Iix the duration oI the obligation iI it does
not Iix a period, does not apply.
Anent the argument that petitioner was not an agent because the agreement does not say
that she would be paid the commission iI the goods were sold, the Iact that appellant received the
tobacco to be sold at P1.30 per kilo and the proceeds to be given to complainant as soon as it was
sold, strongly negates transIer oI ownership oI the goods to the petitioner. The agreement
constituted her as an agent with the obligation to return the tobacco iI the same was not sold.





PaciIic Banking vs CA, 5 May 1989

Facts: On April 15, 1955, private respondents Joseph and Eleanor art organized Insular Farms
Inc. (Insular), applied Ior and aIter eleven (11) months, obtained a lease Irom the Department oI
Agriculture Ior a period oI twenty Iive (25) years and renewable Ior another twenty Iive (25)
years. Subsequently, Joseph approached John Clarkin Ior Iinancial assistance and the two signed
a memorandum oI agreement and that oI 1,000 shares outstanding, so that Clarkin had 510
shares against the art`s. art was appointed President and General Manager oI the First City
National Bank.
Due to Iinancial diIIiculty, Insular Farms Inc. borrowed P250, 000 Irom PaciIic Banking
Corp. (PaciIic) in July oI 1956. On July 31, 1956, Insular executed a promissory note oI P250,
000 to the bank payable in Iive (5) installments. Said note provided that in case there is deIault in
the payment oI any installment due; all other installments shall become due and payable.
As the business Iurther deteriorated, art agreed to Clarkin`s proposal that all Insular`s
shares oI stocks be pledged to petitioner bank in lieu oI additional collateral and to insure an
extension oI the period to pay the July 1957 installment.
On March 3, 1958, PaciIic Farms Inc. was organized to engage in the same business as
Insular`s. The next day, PaciIic wrote Insular having later Iorty-eight (48) hours to pay the entire
obligation. On March 7, 1958, art received a notice that the pledged shares oI stocks oI Insular
would be sold to public auction to satisIy Insular`s obligation. Private respondents Iiled
complaint Ior reconveyance and damages with the CFI oI Manila, which was granted. The same
was liIted on the motion oI PaciIic.
On March 21, 1958, PaciIic sold Insular`s shares oI stocks to its own stockholders and
then resold them back to PaciIic all oI Insular`s assets. On September 28, 1959, Joseph Iiled
another complaint Ior recovery oI sum oI money comprising his investments and earning against
Insular. The Claims are dismissed so that the private respondents appealed to the Cain which the
court granted the claims and ordered the petitioners to pay the private respondents the claims
sought Ior.

Issue: Whether or not the Court may Iix a period in the parties` agreement to extend the payment
oI the loan, including the installment which was due on or beIore July 1957 it being imprecise.

Ruling: In case the period oI extension is not precise, the provisions oI Article 1197 oI the Civil
Code should apply. The pledge executed as collateral security no longer contained a provision on
installment due on or beIore July 1957. The pledge constituted on February 19, 1958 on the
shares oI stocks oI Insular was suIIicient consideration Ior the extension, considering that pledge
was additional collateral required by the PaciIic in addition to the continuing guaranty oI Carkin.
Even the ledge did not provide Ior dates oI payment oI installments; or any Iixed date Ior
maturity oI the whole indebtedness. Accordingly, the date oI maturity oI the indebtedness should
be as may be determined by the court under Article 1197 oI the Civil Code. ence, the disputed
Ioreclosure and subsequent sale were premature.
















Agoncillo vs Javier, 38SCRA424, 7 August 1918

Facts: On February 27 1904, Anastasio Alano, Jlose Alano and Florencio Alano executed in
Iavor oI the plaintiII, Dra. Marcela Marino a document stipulating that the Alanos as
testamentary heirs oI deceased Rev. Anastacio Cruz, would pay the sum oI P2, 730.50 within
one (1) year with interest oI 12 percent per annum representing the amount oI debt incurred by
Cruz. Moreover, the agreement provided that the Alanos are to convey the house and lot
bequeathed to them by Cruz in the event oI Iailure to pay the debt in money at its maturity. No
part oI interest or principal due has been paid except the sum oI P200. In 1912, Anastasio died
intestate. On August 8, 1914, CFI oI Batangas appointed Crisanto Javier as administrator oI
Anastasio`s estate.
The plaintiIIs Iiled the complaint against Florencio, Jose and Crisanto praying that unless
deIendants pay the debt Ior the recovery oI which the action was brought, they be required to
convey to plaintiIIs the house and lot described in the agreement, that the property be appraised
and iI its value is Iound to be less than the amount oI the debt, with accrued interest at the
stipulation rate, judgment be rendered in Iavor oI the plaintiIIs Ior the balance.

Issue: Whether or not the agreement that the deIendant-appellant, at the maturity oI the debt,
will pay the sum oI the money lent by the appellees or will transIer the rights to the ownership
and possession oI the house and lot bequeathed to the Iormer by the testator in Iavor oI the
appellees, is valid.

Ruling: This stipulation is valid because it is simply an alternative obligation, which is expressly
allowed by law. It is simply an undertaking that iI debt is not paid in money, it will be paid in
another way. The agreement is not open to the objection that the agreement is pacto comisorio. It
is not an attempt to permit the creditor to declare the IorIeiture oI the security upon the Iailure oI
the debtor to pay at its maturity. It is simply provided that iI the debt is not paid in money, it
shall be paid by the transIer oI the property at a valuation.
The contract is not susceptible oI the interpretation that the title to the house and lot in
question was to be transIerred to the creditor ipso facto upon the mere Iailure oI the debtors to
pay the debt at its maturity. The obligations assumed by the debtors were in the alternative, and
they had the right to elect which they would perIorm. The conduct oI parties shows that it was
not their understanding that the right to discharge the obligation by the payment oI the money
was lost to the debtors by their Iailure to pay the debt at its maturity. The plaintiII accepted the
payment Irom Anastacio in 1908, several years aIter the debt matured.
It is quite clear thereIore that under the terms oI the contract, and the parties themselves
have interpreted it, the liability oI the deIendant as to the conveyance oI the house and lot is
subsidiary and conditional, being dependent upon their Iailure to pay the debt in money. It must
Iollow thereIore that iI the action to recover the debt prescribed, the action to compel a
conveyance oI the house and lot is likewise barred, as the agreement to make such conveyance
was not an independent principal undertaking, but merely a subsidiary alternative pact relating to
the method by which the debt must be paid.
Ong Guan vs Century, 46SCRA592

Facts: A building oI plaintiII Ong Guan Cuan was insured with deIendant Century Insurance
Company (Century) against Iire by the deIendant in the sum oI P30, 000 as well as the
merchandise therein in the sum oI P15, 000. On February 28 1923, the building and the
merchandise insured were burned while the policies issued were in Iorce. Under the conditions
oI the policies, the deIendant may at its option reinstate or replace the destroyed property instead
oI paying Ior the amount oI the loss and that it is not bound to reinstate exactly or completely the
damaged property.
Century proposed reconstruction oI the house destroyed but plaintiII dissented Ior the
reason that the new house which will be constructed would be smaller and oI materials oI lower
kind than those employed in the construction oI the house destroyed.
PlaintiII Iiled a complaint compelling deIendant to pay the sum oI P45, 000, the value oI
the insurance oI the building and the merchandise. On April 19, 1924, the CFI oI Iloilo City
rendered judgment in Iavor oI the plaintiII. ence the deIendant appealed Irom the judgment and
prayed that it be permitted to rebuild the house as provided in the conditions oI the insurance
policies.

Issue: Whether or not deIendant Century may be allowed to rebuild the house as its option
instead oI payment oI the insured value as stipulated in the insurance policies entered into by the
plaintiII and the deIendant.

Ruling: NO. The conditions in the insurance policies that the parties entered into allowed
Century to either pay the insured value oI the house, or rebuild it making the obligation oI the
company an alternative one. In alternative obligations, the debtor, Century in this case, must
notiIy the creditor oI his election stating which oI the two (2) prestations it is disposed to IulIill.
The objective is to give the creditor opportunity to give consent or to impugn the election oI the
debtor. Only aIter said notice shall election take legal eIIect when consented by the creditor
(Article 120 Civil Code) or iI impugned by the latter when declared proper by a competent court.
In the instant case, appellant company did not give Iormal notice oI its election to rebuild the
house and the proposed reconstruction oI the house was rejected by the creditor Ior it would be
oI lower value.
In alternative obligations, the value oI the prestations must be equivalent or similar in
value to each other. In this case the proposed rebuilding oI the house by the insurance company
is oI lesser value than the other prestation since the other proposal would to be build a smaller
house and oI materials oI lower kind than those employed in the construction oI the house. The
other prestation in the amount oI P45, 000 corresponding to the value oI the burned building
(P30, 000) and the value oI the merchandise burned (P15,000). It would be an imposition
inequitable to compel plaintiII accept the rebuilding oI the house which would be oI lesser value.














Legarda vs Miailhe, 88Phil637

Facts: On June 3, 1944, plaintiIIs Iiled a complaint against the original deIendant William J. B.
Burke, alleging deIendant's unjustiIied reIusal to accept payment in discharge oI a mortgage
indebtedness in his Iavor, and praying that the latter be ordered to receive the sum oI P75,920.83
deposited by plaintiII Clara Tambunting de Legarda, the mortgagor, on the same date with the
clerk oI this court in payment oI the mortgage indebtedness oI said plaintiII to deIendant herein,
to execute the corresponding deed oI release oI mortgage, and to pay damages in the sum oI
P1,000. The deIendant answered that plaintiIIs have no cause oI action Ior the reason that Clara
Tambunting de Legarda an agreement was had on May 26, 1944, whereunder deIendant
condoned the interests due and to become due on the mortgage indebtedness till the termination
oI the war, in consideration oI the undertaking oI said plaintiII to pay her obligation to deIendant
upon such termination oI the war; and that the war then had not yet terminated. Decision was
rendered by this Court through the then Judge, onorable Jose Gutierrez David ordering
deIendant to accept the sum oI P75,920.83 deposited by plaintiII Clara Tambunting de Legarda
in the oIIice oI the clerk oI court; to execute Iorthwith a deed oI release oI mortgage covering the
property in question; to pay plaintiII the sum oI P120.40 representing the cost oI the certiIication
oI the check deposited in the court and consignation, together with the clerk's commission Ior the
deposit oI the money in court and the costs oI the suit.

Issue: Whether or not the agreement had by the plaintiIIs and William J. B. Burke during the
Japanese occupation was that the rate oI the annual interest oI the indebtedness was merely
reduced to 3 per cent, and said agreement was in the sense that the deIendant condoned the
interests then due and which become due on obligation with the understanding Clara Tambunting
de Legarda would pay her obligation upon the termination oI the war.

Ruling: The deIendant cannot insist on the payment oI English currency. The option to demand
payment oI the indebtedness has to be exercised upon maturity oI the obligation, which is
February 17, 1943. On this date, the only currency available is the Philippine currency, or the
Japanese Military notes, because all other currencies, including the English, were outlawed by a
proclamation issued by the Japanese Imperial Commander on January 3, 1942. This means that
the right oI election ceased to exist on that date because it had become legally impossible. And
this is so because in alternative obligations there is no right to choose undertakings that are
impossible or illegal. In other words, the obligation on the part oI the debtor to pay the mortgage
indebtedness has since then ceased to be alternative. It appears, thereIore, that the tender oI
payment made by the plaintiII in Japanese Military notes was a valid tender because it was the
only currency permissible at the time, and the same was made in accordance with the agreement
because payment in Japanese Military notes during the occupation is tantamount to payment in
the Philippine currency. But the consignation oI the sum oI P75,920.83 in Japanese currency
made by the plaintiIIs with clerk oI court does not have any legal eIIect because it was made in
certiIied check, does not meet the requirements oI a legal tender.













Reyes vs Martinez, 55SCRA492

Facts: Estanislao Reyes was instituted against the Martinez heirs upon Iour several causes oI
action in which Reyes seeks to recover Iive parcels oI land, containing approximately one
thousand coconut trees, said parcels being; to obtain a declaration oI ownership in his own Iavor
as against the Martinez with respect to said parcels; secondly, to recover Irom Martinez the sum
oI P9,377.50, being the alleged proceeds oI some 1,860 coconut trees which, prior to July 31,
1926, had been applied to the beneIit oI Reyes; thirdly, to recover Irom Martinez the sum oI
P43,000, as the alleged value oI the proceeds oI the lands involved in the receivership in the case
oI Martine: vs. Grao, to which Reyes supposes himselI to be entitled, but which have gone, so
he claims, to the beneIit oI the deIendants in said receivership; and Iourthly, to recover the sum
oI P10,000 Irom the deIendants as damages resulting Irom their improper meddling in the
administration oI the receivership property. In connection with this complaint the plaintiII
obtained, several months aIter the litigation was begun, an attachment against the deIendants
upon a judgment credit Ior P8, 000 awarded to them in the case oI Martinez vs. Grao, with the
result that the execution oI said money judgment against the plaintiII has been suspended since
the record returned to the trial court. In reply to the complaint the deIendants Iiled an answer and
cross-complaint in which the deIendants sought to recover damages and interest upon their claim
against the plaintiII. Upon hearing the cause, the trial court absolved the deIendants Irom the
complaint and also absolved the plaintiII Irom the cross-complaint oI the deIendants, without
express pronouncement as to costs. From this judgment both parties appealed.

Issue: Whether or not Reyes is entitled to recover Iive parcels oI land, containing approximately
one thousand coconut trees, said parcels being; to obtain a declaration oI ownership in his own
Iavor as against the Martinez with respect to said parcels and to recover Irom Martinez the sum
oI P9,377.50, being the alleged proceeds oI some 1,860 coconut trees which, prior to July 31,
1926, had been applied to the beneIit oI Reyes.

Ruling: The court held that Reyes must be taken to have elected to take that particular parcel and
he is now estopped Irom asserting a contrary election to take the Iive parcels oI land described in
paragraph IX oI his complaint. But the Iact is now brought out more clearly that the title to this
parcel is in the heirs oI Inocente Martinez and it does not appear that they have transIerred said
title to Reyes. It results thereIore that Reyes now has a claim Ior damages against the parties
signatory to the contract oI March 5, 1921, Ior the value oI the aIoresaid property. In view oI the
conclusion reached in Martine: vs. Grao, as well as in view oI the solution reached in the case,
the claim oI the deIendants, as appellants, to the interest on the sum oI P8,000 Irom July 31,
1926, cannot be conceded, as the judgment itselI bears interest at the lawIul rate Irom the date
the same was rendered.


















Quizana vs Redugerio, 94Phil922

Facts: This is an appeal to the Court Irom a decision rendered by the Court oI the First Instance
oI Marinduque, wherein the deIendant Gaudencio Redugerio was to pay the plaintiII Martina
Quizana the sum oI P550 with the interest Irom the time oI the Iiling oI the complaint and Irom
an order oI the same court denying a motion oI the deIendant Ior the reconsideration oI the
judgment on the ground that they were deprived oI their day in court.
There were actionable documents attached to the complaint signed by the deIendant-
appellant spouses Redugerio and Pastrado on October 4, 1948 and containing the provision that
Quizana is to be paid on January 1949 and in case oI Iailure, they will mortgage the coconut
plantation in Sta. Cruz, Marinduque. The deIendants admitted that they oIIered the transIer oI
possession but was eventually reIused by the petitioner.
So eventually, the deIendants appealed in the CFI which set the hearing on August 16,
1951.
owever, the counsel Ior deIendants presented an 'urgent motion Ior continuance Ior
the date oI hearing coincides with his appearance in two (2) criminal cases previously set Ior trial
beIore hearing on the aIoresaid date.
The motion was not acted upon til the day oI the trial. The CFI denied the motion Ior
continuance, and in the absence oI deIendants, rendered its questioned decision.

Issue: Whether or not the trial court was correct in ignoring the 2
nd
part oI the written obligation
and solely basing its decision on the last part oI the 1
st
part; i.e., that payment should have been
made on January 21, 1949.

Ruling: ES, the acceptance oI plaintiII oI the written obligation without objection and protest
and the Iact that he kept and based his action therein, are concrete and positive prooI that he
agreed and consented to all the terms, including the paragraph on the constitution oI the
mortgage.
Article 1206 provides: When only one prestation has been agreed upon but the obligation
may render substitution, the obligation is facultative obligation. The deIendant shall present a
duly executed deed oI mortgage over the property in the written obligation,with a period oI
payment to be agreed upon by the parties with the approval oI the court.




















Alipio vs CA, 341SCRA441

Facts: Romeo Jaring was the lessee oI a 14.5 hectare Iishpond in Barito, Mabuco, ermosa,
Bataan. The lease was Ior a period oI Iive years ending on September 12, 1990. On June 19,
1987, he subleased the Iishpond, Ior the remaining period oI his lease, to the spouses Placido and
Purita Alipio and the spouses Bienvenido and Remedios Manuel. The stipulated amount oI rent
was P485,600.00, payable in two installments oI P300,000.00 and P185,600.00, with the second
installment Ialling due on June 30, 1989. Each oI the Iour sublessees signed the contract. The
Iirst installment was duly paid, but oI the second installment, the sublessees only satisIied a
portion thereoI, leaving an unpaid balance oI P50,600.00. Despite due demand, the sublessees
Iailed to comply with their obligation, so that, on October 13, 1989, private respondent sued the
Alipio and Manuel spouses Ior the collection oI the said amount beIore the Regional Trial Court,
Branch 5, Dinalupihan, Bataan. In the alternative, he prayed Ior the rescission oI the sublease
contract should the deIendants Iail to pay the balance. Petitioner Purita Alipio moved to dismiss
the case on the ground that her husband, Placido Alipio, had passed away on December 1,
1988She based her action on Rule 3, 21 oI the 1964 Rules oI Court which then provided that
"when the action is Ior recovery oI money, debt or interest thereon, and the deIendant dies beIore
Iinal judgment in the Court oI First Instance, it shall be dismissed to be prosecuted in the manner
especially provided in these rules.

Issue: Whether or not a creditor can sue the surviving spouse Ior the collection oI a debt which is
owed by the conjugal partnership oI gains and such claim must be Iiled in proceedings Ior the
settlement oI the estate oI the decedent.

Ruling: A creditor cannot sue the surviving spouse oI a decedent in an ordinary proceeding Ior
the collection oI a sum oI money chargeable against the conjugal partnership and that the proper
remedy is Ior him to Iile a claim in the settlement oI estate oI the decedent.
Petitioner's husband died on December 1, 1988, more than ten months beIore private
respondent Iiled the collection suit in the trial court on October 13, 1989. This case thus Ialls
outside oI the ambit oI Rule 3, 21 which deals with dismissals oI collection suits because oI the
death oI the deIendant during the pendency oI the case and the subsequent procedure to be
undertaken by the plaintiII, i.e., the Iiling oI claim in the proceeding Ior the settlement oI the
decedent's estate. As already noted, Rule 3, 20 oI the 1997 Rules oI Civil Procedure now
provides that the case will be allowed to continue until entry oI Iinal judgment. A Iavorable
judgment obtained by the plaintiII therein will then be enIorced in the manner especially
provided in the Rules Ior prosecuting claims against the estate oI a deceased person. Petitioner
and her late husband, together with the Manuel spouses, signed the sublease contract binding
them to pay the amount oI stipulated rent. Under the law, the Alipios' obligation is one which is
chargeable against their conjugal partnership. Under Art. 161(1) oI the Civil Code, the conjugal
partnership is liable Ior all debts and obligations contracted by the husband Ior the beneIit oI the
conjugal partnership, and those contracted by the wiIe, also Ior the same purpose, in the cases
where she may legally bind the partnership. Petition is granted.


















P Credit Corp. vs CA, 370SCRA155, 22 November 2001

Facts: P Credit Corp., Iiled a case against PaciIic Lloyd Corp., Carlos Farrales, Thomas . Van
Sebille and Federico C. Lim, Ior a sum oI money. AIter service oI summons upon the
deIendants, they Iailed to Iile their answer within the reglementary period, hence they were
declared in deIault On January 31, 1984, a decision was rendered in Iavor oI plaintiII P Credit
Corporation and against deIendants PaciIic Lloyd Corporation, Thomas . Van Sebille, Carlos
M. Farrales, and Federico C. Lim, ordering the latter to pay the Iormer, the Iollowing: The sum
oI P118, 814.49 with interest oI 18 per annum, starting December 20, 1982 until Iully paid;
Surcharge oI 16 per annum Irom December 20, 1982; Penalty Charge oI 2 per month Irom
December 20, 1982, computed on interest and principal compounded; Attorney`s Iees in an
amount equivalent to 25 oI the total sum due; and Costs oI suit. The decision has become Iinal
and executory, a Writ oI Execution was issued and consequently implemented by the assigned
Deputy SheriII. Personal and real properties oI deIendant Carlos M. Farrales were levied and
sold at public auction wherein P Credit Corp. was the highest bidder. The personal properties
were sold at P18,900.00 while the real properties were sold Sometime in 1990, a motion Ior the
issuance oI a writ oI possession was Iiled and on October 12, 1990, the same was granted. The
writ oI possession itselI was issued on October 26, 1990. Said order and writ oI possession are
now the subject oI this petition. Petitioner claims that she, as a third-party claimant with the court
below, Iiled an Urgent Motion Ior Reconsideration and/or to Suspend the Order but without
acting there, respondent Judge issued the writ oI possession on October 26, 1990.

Issue: Whether or not the Court oI Appeals erred when it concluded that the obligation was
merely a joint obligation due to the Iailure oI the dispositive portion oI the decision dated to state
that the obligation was joint and solidary.

Ruling: The Supreme Court held that solidary obligation is one in which each oI the debtors is
liable Ior the entire obligation, and each oI the creditors is entitled to demand the satisIaction oI
the whole obligation Irom any or all oI the debtors. On the other hand, a foint obligation is one
in which each debtor is liable only Ior a proportionate part oI the debt, and the creditor is entitled
to demand only a proportionate part oI the credit Irom each debtor. The well-entrenched rule is
that solidary obligations cannot be inIerred lightly. They must be positively and clearly
expressed. A liability is solidary 'only when the obligation expressly so states, when the law so
provides or when the nature oI the obligation so requires.
'Art. 1207. The concurrence oI two or more creditors or oI two or more debtors in one and the
same obligation does not imply that each one oI the Iormer has a right to demand, or that each
one oI 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 oI the
obligation requires solidarity.
In the dispositive portion oI the January 31, 1984 Decision oI the trial court, the word solidary
neither appears nor can it be inIerred thereIrom. The fallow merely stated that the Iollowing
respondents were liable: PaciIic Lloyd Corporation, Thomas . Van Sebille, Carlos M. Farrales
and Federico C. Lim.















CDCP vs Estrella, GR No. 147791

Facts: On December 29, 1978, respondents Rebecca G. Estrella and her granddaughter,
Rachel E. Fletcher, boarded in San Pablo City, a BLTB bus bound Ior Pasay City. owever,
they never reached their destination because their bus was rammed Irom behind by a tractor-
truck oI CDCP in the South Expressway. They were brought to the Makati Medical Center.
ThereaIter, respondents Iiled a Complaint Ior damages against CDCP, BLTB, Espiridion
Payunan, Jr. and WilIredo Datinguinoo beIore the Regional Trial Court oI Manila
CDCP Iiled its Answer which was later amended to include a third-party complaint
against Philippine Phoenix Surety and Insurance, Inc. (Phoenix). On February 9, 1993, the trial
court rendered a decision Iinding CDCP and BLTB and their employees liable Ior damages,

Issue: Whether or not BLTB and its driver WilIredo Datinguinoo are solely liable Ior the
damages sustained by respondents.

Ruling: It is well-settled in Fabre, Jr. v. Court oI Appeals, that the owner oI the other vehicle
which collided with a common carrier is solidarily liable to the injured passenger oI the same.
We held, thus: The same rule oI liability was applied in situations where the negligence oI the
driver oI the bus on which plaintiII was riding concurred with the negligence oI a third party who
was the driver oI another vehicle, thus causing an accident. In Anuran v. Buo, Batangas
Laguna Tayabas Bus Co. v. Intermediate Appellate Court, and Metro Manila Transit Corporation
v. Court oI Appeals, the bus company, its driver, the operator oI the other vehicle and the driver
oI the vehicle were jointly and severally held liable to the injured passenger or the latter`s heirs.
The basis oI this allocation oI liability was explained in Viluan v. Court oI Appeals, thus:
Nor should it make any diIIerence that the liability oI petitioner |bus owner| springs Irom
contract while that oI respondents |owner and driver oI other vehicle| arises Irom quasi-delict. In
case oI injury to a passenger due to the negligence oI the driver oI the bus on which he was
riding and oI the driver oI another vehicle, the drivers as well as the owners oI the two vehicles
are jointly and severally liable Ior damages. x x x
As in the case oI BLTB, private respondents in this case and her co-plaintiIIs did not
stake out their claim against the carrier and the driver exclusively on one theory, much less on
that oI breach oI contract alone. AIter all, it was permitted Ior them to allege alternative causes
oI action and join as many parties as may be liable on such causes oI action so long as private
respondent and her co-plaintiIIs do not recover twice Ior the same injury. What is clear Irom the
cases is the intent oI the plaintiII there to recover Irom both the carrier and the driver, thus
justiIying the holding that the carrier and the driver were jointly and severally liable because
their separate and distinct acts concurred to produce the same injury.
In a 'joint obligation, each obligor answers only Ior a part oI the whole liability; in a
'solidary or 'joint and several obligation, the relationship between the active and the passive
subjects is so close that each oI them must comply with or demand the IulIillment oI the whole
obligation.
Industrial Management vs NLRC, 331SCRA640

Facts: In September 1984, private respondents Enrique Sulit, Socorro Mahinay, Esmeralco
Pegarido, Tita Bacusimo, Nierre, Virginia Bagus, Nemenzo, Dariogo and Roberto Iiled a
complaint with the DOLE, Regional Arbitration Branch No.111 in Cebu City against Filipinas
Carbon Mining Corp, Genardo Sicaty, Gonzales, Dhin Gin, Lo Kuan Chin petitioner Industrial
Management Development Corporation Ior payment oI separation pay and unpaid wages.
Labor Arbiter judgment-ordering Filipinas, Gonzales, Lo Kuan Chin to pay complainant
Enrique Sulit total amount oI P82, 800.00.
On September 3, 1987 petitioner Iiled a motion to quash alias writ oI execution and set
aside decision alleging among that the alias writ oI execution altered and charged the tenor oI the
decision by charging the liability oI therein respondent Irom joint to solidary by the insertion oI
the words and/or` between Gonzales and Filipinas.

Issue: Whether or not the petitioner`s liability pursuant to the decision oI the labor arbiter dated
March 10, 1987 is solidary.

Ruling: NO, the liability pursuant to the decision oI the labor arbiter dated March 10, 1987
should be as it is hereby, considered joint and petitioner`s payment which has been accepted
considered as Iull satisIaction oI its liability, without the prejudice to the enIorcement oI the
awards against the other Iive respondents in the said case.
A solidary or joint and several obligations is one in which each debtor is liable Ior the
entire obligation and each creditor is entitled to demand the obligation. In a joint obligation each
obligor answers only a part oI the whole liability and to each obligation belong only a part oI the
correlative rights.
There is solidary liability only when the obligation expressly so states, when the law so
provides or when the nature oI the obligation so required. When it is not provided in a judgment
that the deIendant are liable to pay jointly and severally a certain sum oI money, none oI them
may be compelled to satisIy in Iull said judgment.






Metro Manila Transit vs CA, 223SCRA521, 21 June 1993

Facts: At about 6 o`clock in the morning oI August 28, 1979 plaintiII-appellant Nanita Custudio
boarded as a paying passenger oI public utility jeepney, then driven by the deIendant Agudo
Cabebag and owned by his co-deIendant Victorino Camayo, bound Ior her work at Dynetics Inc.
located at Taguig Metro Manila where she then worked as a machine operator having a salary oI
P16.25 a day. While the passenger jeepney was traveling at a Iast clip along DBP Avenue,
another Iast moving vehicle Metro Manila Transit Corp bus driven by deIendant GodoIredo
Leonardo, negotiating oneydrew Road Taguig Ior its terminal at Bicutan. As both vehicles
approached the intersection oI DBP Avenue and oneydrew Road they Iailed to slow down and
slacken their speed neither did they blew their horns to warn approaching vehicles. As a
consequence, a collision between them occurred; and the passenger jeepney ramming the leIt
side oI MMTC bus. The collision impact caused plaintiII Custudio to hit the Iront windshield oI
the passenger jeepney and she was thrown out there Irom, Ialling unto the pavement,
unconscious with serious physical injuries. She was brought to Medical City ospital where she
regained consciousness only aIter one week. She was conIined Ior twenty Iour (24) days and as a
consequence, she was unable to work Ior three and halI months.

Issue: Whether or not deIendant MMTC was successIul in proving its deIense that it had
exercised the due diligence oI a good Iather oI the Iamily.

Ruling: ES, MMTC was able to prove that it was not only careIul and diligent in the choosing
and screening oI applicants Ior job opening; but also strict diligence in supervising its employees
by seeing to it that its employees were in proper uniIorms, being brieIed in traIIic rules and
regulations beIore the start oI duty, checking the employees to determine whether they were
positive Ior alcohol and Iollowing other rules and regulation and guidelines oI BLT as well as its
company. aving successIully proven such deIense, deIendant MMTC thereIore cannot be liable
Ior the accident.
aving reached this conclusion the court now holds that deIendant MMTC be totally
absolved Irom liability and that the complaint against it be dismissed.
Article 2211 states: In quasi-delict, interest as a part of the damages maybe awarded in
the discretion of the court, and not as a matter of right.
With the allegation and subsequent prooI oI negligence against deIendant. The employer-
employee relation between him and his co-deIendant MMTC in the instance, the case is
undoubtedly based a quasi-delict under Article 2180.















Inciong, Jr. vs CA, 257SCRA578, 26 June 1996

Facts: Petitioner's liability resulted Irom the promissory note in the amount oI P50,000.00 which
he signed with Rene C. Naybe and Gregorio D. Pantanosas on February 3, 1983, holding
themselves jointly and severally liable to private respondent Philippine Bank oI
Communications, Cagayan de Oro City branch. The promissory note was due on May 5, 1983.
Said due date expired without the promissors having paid their obligation. Consequently, on
November 14, 1983 and on June 8, 1984, private respondent sent petitioner telegrams demanding
payment thereoI. On December 11, 1984 private respondent also sent by registered mail a Iinal
letter oI demand to Rene C. Naybe. Since both obligors did not respond to the demands made,
private respondent Iiled on January 24, 1986 a complaint Ior collection oI the sum oI P50,000.00
against the three obligors.
On November 25, 1986, the complaint was dismissed Ior Iailure oI the plaintiII to prosecute
the case. owever, on January 9, 1987, the lower court reconsidered the dismissal order and
required the sheriII to serve the summonses. On January 27, 1987, the lower court dismissed the
case against deIendant Pantanosas as prayed Ior by the private respondent herein. Meanwhile,
only the summons addressed to petitioner was served as the sheriII learned that deIendant Naybe
had gone to Saudi Arabia.

Issue: Whether or not the decisions should be sustained.

Ruling: A solidary or joint and several obligation is one in which each debtor is liable Ior the
entire obligation, and each creditor is entitled to demand the whole obligation. Section 4,
Chapter 3, Title 1, Book IV oI the Civil Code states the law on joint and several obligations.
Under Art. 1207 thereoI, when there are two or more debtors in one and the same obligation, the
presumption is that the obligation is joint so that each oI the debtors is liable only Ior the
proportionate part oI the debt. There is a solidary liability only when the obligation expressly so
states, when the law so provides or when the nature oI the obligation so requires. While a
guarantor may bind himselI solidarily with the principal debtor, the liability oI a guarantor is
diIIerent Irom that oI a solidary debtor. Thus, Tolentino explains: "A guarantor who binds
himselI in solidum with the principal debtor under the provisions oI the second paragraph does
not become a solidary co-debtor to all intents and purposes. There is a diIIerence between a
solidary co-debtor, and a fiador in solidum (surety). The latter, outside oI the liability he
assumes to pay the debt beIore the property oI the principal debtor has been exhausted, retains all
the other rights, actions and beneIits which pertain to him by reason oI the fiansa, while a
solidary co-debtor has no other rights than those bestowed upon him in Section 4, Chapter 3,
Title 1, Book IV oI the Civil Code.



Philippine Blooming Mills vs CA, 15 October 2003

Facts: There was an action to compel Ching to pay TRB P959,611.96 under Letter oI Credit No.
479 AD covered by Trust Receipt No. 106; P1,191,137.13 under Letter oI Credit No. 563 AD
covered by Trust Receipt No. 113; and P3,500,000 under the trust loan covered by a notarized
Promissory Note Ching was the Senior Vice President oI PBM. In his personal capacity and not
as a corporate oIIicer, Ching signed a Deed oI Suretyship dated 21 July 1977 binding himselI as
a primary obligor(s) and not as mere guarantor(s), hereby warrant to the TRADERS ROAL
BANK, its successors and assigns, the due and punctual payment by the Iollowing individuals
and/or companies/Iirms, hereinaIter called the DEBTOR. TRB granted PBM letters oI credit on
application oI Ching in his capacity as Senior Vice President oI PBM. Ching later accomplished
and delivered to TRB trust receipts, which acknowledged receipt in trust Ior TRB oI the
merchandise subject oI the letters oI credit. Under the trust receipts, PBM had the right to sell
the merchandise Ior cash with the obligation to turn over the entire proceeds oI the sale to TRB
as payment oI PBM`s indebtedness. Letter oI Credit No. 479 AD, covered by Trust Receipt No.
106, has a Iace value oI US$591,043, while Letter oI Credit No. 563 AD, covered by Trust
Receipt No. 113, has a Iace value oI US$155,460.34. Ching Iurther executed an Undertaking Ior
each trust receipt. PBM obtained a P3,500,000 trust loan Irom TRB. Ching signed as co-maker
in the notarized Promissory Note evidencing this trust loan. PBM deIaulted in its payment oI
Trust Receipt No. 106 Ior P959,611.96, and oI Trust Receipt No. 113 Ior P1,191,137.13. PBM
also deIaulted on its P3,500,000 trust loan. PBM and Ching Iiled a petition Ior suspension oI
payments with the Securities and Exchange Commission docketed as SEC Case No. 2250. The
petition sought to suspend payment oI PBM`s obligations and prayed that the SEC allow PBM to
continue its normal business operations Iree Irom the interIerence oI its creditors. One oI the
listed creditors oI PBM was TRB.

Issue: Whether or not AlIredo Ching was liable Ior obligations contracted by PBM long aIter the
execution oI the Deed OI Suretyship.

Ruling: The Supreme Court held that Ching is liable Ior credit obligations contracted by PBM
against TRB beIore and aIter the execution oI the 21 July 1977 Deed oI Suretyship. This is
evident Irom the tenor oI the deed itselI, reIerring to amounts PBM may now be indebted or
may hereaIter become indebted to TRB. The law expressly allows a suretyship Ior 'Iuture
debts. Article 2053 oI the Civil Code, A guaranty may also be given as security for future
debts, the amount oI which is not yet known; there can be no claim against the guarantor until
the debt is liquidated. A conditional obligation may also be secured. Under the Civil Code, a
guaranty may be given to secure even Iuture debts, the amount oI which may not be known at the
time the guaranty is executed. This is the basis Ior contracts denominated as continuing guaranty
or suretyship. A continuing guaranty is one which is not limited to a single transaction, but
which contemplates a Iuture course oI dealing, covering a series oI transactions, generally Ior an
indeIinite time or until revoked. It is prospective in its operation and is generally intended to
provide security with respect to Iuture transactions within certain limits, and contemplates a
succession oI liabilities, Ior which, as they accrue, the guarantor becomes liable. Otherwise
stated, a continuing guaranty is one which covers all transactions, including those arising in the
Iuture, which are within the description or contemplation oI the contract oI guaranty, until the
expiration or termination thereoI. A guaranty shall be construed as continuing when by the terms
thereoI it is evident that the object is to give a standing credit to the principal debtor to be used
Irom time to time either indeIinitely or until a certain period; especially iI the right to recall the
guaranty is expressly reserved. ence, where the contract states that the guaranty is to secure
advances to be made 'Irom time to time, it will be construed to be a continuing one.



















































EPARWA SECURIT AND JANITORIAL SERVICES, INC. versus LICEO DE CAGAAN
UNIVERSIT, G.R. No. 150402. November 28, 2006

FACTS
On 1 December 1997, Eparwa and LDCU, through their representatives, entered into a
Contract Ior Security Services. On 21 December 1998, 11 security guards whom Eparwa
assigned to LDCU Irom 1 December 1997 to 30 November 1998 Iiled a complaint beIore the
National Labor Relations Commission`s Regional Arbitration in Cagayan de Oro City. The
complaint was Iiled against both Eparwa and LDCU Ior underpayment oI salary, legal holiday
pay, 13th month pay, rest day, service incentive leave, night shiIt diIIerential, overtime pay, and
payment Ior attorney`s Iees.
LDCU made a cross-claim and prayed that Eparwa should reimburse LDCU Ior any
payment to the security guards.
The Labor Arbiter Iound that the security guards are entitled to wage diIIerentials and
premium Ior holiday and rest day work. The Labor Arbiter held Eparwa and LDCU solidarily
liable pursuant to Article 109 oI the Labor Code.

ISSUE
Whether or not LDCU alone is ultimately liable to the security guards Ior the monetary
awards.

RULING
For the security guards, the actual source oI the payment oI their wage diIIerentials and
premium Ior holiday and rest day work does not matter as long as they are paid. This is the
import oI Eparwa and LDCU`s solidary liability. Creditors, such as the security guards, may
collect Irom anyone oI the solidary debtors. Solidary liability does not mean that, as between
themselves, two solidary debtors are liable Ior only halI oI the payment.
LDCU`s ultimate liability comes into play because oI the expiration oI the Contract Ior
Security Services. There is no privity oI contract between the security guards and LDCU, but
LDCU`s liability to the security guards remains because oI Articles 106, 107 and 109 oI the
Labor Code. Eparwa is already precluded Irom asking LDCU Ior an adjustment in the contract
price because oI the expiration oI the contract, but Eparwa`s liability to the security guards
remains because oI their employer-employee relationship. In lieu oI an adjustment in the
contract price, Eparwa may claim reimbursement Irom LDCU Ior any payment it may make to
the security guards. owever, LDCU cannot claim any reimbursement Irom Eparwa Ior any
payment it may make to the security guards.
Dimayuga vs PCIB, 5 August 1991

Facts: Carlos Dimayuga is the deIendant-appellant in a case Ior collection oI sum oI money
against whom the decision was rendered by the trial court on May 28, 1974. PlaintiII, who is
now the respondent in the instant petition, is a banking institution duly organized and existing
under and by virtue oI the laws oI the Philippines and is the creditor oI petitioner. On February 6,
1962, petitioner borrowed Irom the plaintiII the sum oI ten thousand (Pl0,000.00) pesos as
evidenced by a promissory note executed and signed by Pedro Tanjuatco and Carlos Dimayuga.
The indebtedness was to be paid on May 7, 1 962 with interest at the rate oI ten percent (10)
per annum in case oI non-payment at maturity as evidenced by and in accordance with the terms
and conditions oI the promissory note executed jointly and severally by deIendants. In the
promissory note, Carlos Dimayuga bound himselI to pay jointly and severally with Pedro
Tanjuatco interest at the rate oI 10 per annum on the said amount oI P10,000.00 until Irilly
paid. Moreover, both undertook to "jointly and severally authorize the respondent Philippine
Commercial and Industrial Bank, at its option to apply to the payment oI this note any and all
Iunds, securities or other real or personal property oI value which hands on deposit or otherwise
belonging to anyone or all oI us.

Issue: Whether or not the Court oI Appeals erred in dismissing the appeal Ior Iailure oI the
Record oI Appeal to show on its Iace that the appeal had been timely perIected.

Ruling: The approval oI the motion Ior extension and the mere Iailure oI the record on appeal to
show such approval should not deIeat the right to appeal Berkenkotter v. Court oI Appeals. The
appellate court may properly rely on the trial court's order oI approval and could determine
without sending Ior or examining any other records that the appeal was perIected on time as
expressly Iound by the trial court. It is well settled under the law and jurisprudence that when the
obligation is solidary, the creditor may bring his action in toto against the debtors obligated in
solidum. As expressly allowed by Article 1216 oI the Civil Code, the creditor may proceed
against any one oI the solidary debtors or some or all oI them simultaneously. "There is nothing
improper in the creditor's Iiling oI an action against the surviving solidary debtors alone, instead
oI instituting a proceeding Ior the settlement oI the estate oI the deceased debtor wherein his
claim could be Iiled. The notice is undoubtedly leIt to the solidary creditor to determine against
whom he will enIorce collection.



Cerna vs CA, 220SCRA517, 30 March 1993

Facts: Celerino Delgado and Conrad Leviste entered into a loan agreement evidenced by a
promissory note. On the same date, Delgado executed a chattel mortgage over a jeep owned by
him. And acting as the attorney-in-Iact oI herein petitioner, Manolo P. Cerna (petitioner), he also
mortgaged a 'Taunus car owned by the latter.
The period lapsed without Delgado paying the loan. This prompted Leviste to Iile a
collection suit against Delgado and petitioner as solidary debtors. The grounds cited in the
Motion were lack oI cause oI action and the death oI Delgado. Anent the latter, petitioner
claimed that the claim should be Iiled in the proceedings Ior the settlement oI the estate oI
Delgado as the action did not survive Delgado`s death. Moreover, he also stated that since
Leviste already opted to collect on the note, he could no longer Ioreclose the mortgage.
The petitioner then Iiled a special civil action Ior certiorari, mandamus, and prohibition
with preliminary injunction on the ground that the respondent judge committed grave abuse oI
discretion. owever, the Court oI Appeals denied the petition because herein petitioner Iailed to
prove the death oI Delgado and the consequent settlement oI the latter`s estate.
On February 18, 1977, petitioner Iiled his second motion to dismiss. The trial court
again denied the said motion. Petitioner Iiled a motion to reconsider the said order but this was
denied. Then, petitioner Iiled another petition Ior certiorari and prohibition with the Court oI
Appeals. The respondent court hold petitioner and Delgado were solidary debtors.

Issue: Whether or not petitioner is a co-debtor oI Delgado; hence, liable to pay the loan
contracted by Delgado.

Ruling: NO, petitioner is not a co-debtor oI Delgado. Nowhere did it appear in the promissory
note that petitioner was a co-debtor. Article 1311 oI the Civil Code is clear that 'contracts take
eIIect only between the parties. Moreover, Article 1207 oI the Civil Code states that 'there is
solidary liability only when the obligation expressly so states, or when the law or nature oI the
obligation so requires. It was clear that petitioner had no part in the contract. It was Delgado
alone who signed the said agreement. Thus, nowhere could it be seen Irom the agreement that
petitioner was solidarily bound with Delgado Ior the payment oI the loan.
There is also no legal provision nor jurisprudence in our jurisdiction which makes a third
person who secures the IulIillment oI another`s obligation by mortgaging his own property
solidarily bound with the principal obligor. A chattel mortgage may be an 'accessory contract
to a contract oI loan, but that Iact alone does not make a third-party mortgagor solidarily bound
with the principal debtor in the IulIilling oI the principal obligation that is, to pay the loan. The
signatory oI the principal contract remains to be primarily bound. It is only upon the deIault oI
the latter that the creditor may have recourse on the mortgagors by Ioreclosing the mortgaged
properties in lieu oI an action Ior recovery oI the amount oI the loan. And the liability oI the
third-party mortgagors extends only to the property mortgaged. Should there be any deIiciency,
the creditor has recourse on the principal debtor.
















Nazareno vs CA, 343SCRA637, 18 October 2000

Facts: Maximino Nazareno, Sr. and Aurea Poblete were husband and wiIe. Aurea died on April
15, 1970, while Maximino, Sr. died on December 18, 1980. AIter the death oI Maximino, Sr.,
Romeo Iiled an intestate case in the Court oI First Instance oI Cavite, Branch XV, where the case
was docketed as Sp. Proc. No. NC-28. Upon the reorganization oI the courts in 1983, the case
was transIerred to the Regional Trial Court oI Naic, Cavite. Romeo was appointed administrator
oI his Iather`s estate. In the course oI the intestate proceedings, Romeo discovered that his
parents had executed several deeds oI sale conveying a number oI real properties in Iavor oI his
sister, Natividad. One oI the deeds involved six lots in Quezon City which were allegedly sold by
Maximino, Sr., with the consent oI Aurea, to Natividad on January 29, 1970 Ior the total amount
oI P47,800.00.

Issue: Whether or not the Deed oI Absolute oI Sale can be equated as a divisible obligation.

Ruling: The Supreme court held that the Deed oI Absolute Sale is an indivisible contract
Iounded on an indivisible obligation. As such, it being indivisible, it can not be annulled by only
one oI them. And since this suit was Iiled only by the estate oI Maximino A. Nazareno, Sr.
without including the estate oI Aurea Poblete, the present suit must Iail. The estate oI Maximino
A. Nazareno, Sr. can not cause its annulment while its validity is sustained by the estate oI Aurea
Poblete. An obligation is indivisible when it cannot be validly perIormed in parts, whatever may
be the nature oI the thing which is the object thereoI. The indivisibility reIers to the prestation
and not to the object. The Deed oI Sale oI January 29, 1970 supposedly conveyed the six lots to
Natividad. The obligation is clearly indivisible because the perIormance oI the contract cannot be
done in parts, otherwise the value oI what is transIerred is diminished. Petitioners are mistaken in
basing the indivisibility oI a contract on the number oI obligors. In any case, iI petitioners` only
point is that the estate oI Maximino, Sr. alone cannot contest the validity oI the Deed oI Sale
because the estate oI Aurea has not yet been settled, the argument would nonetheless be without
merit. The validity oI the contract can be questioned by anyone aIIected by it. A void contract is
inexistent Irom the beginning. ence, even iI the estate oI Maximino, Sr. alone contests the
validity oI the sale, the outcome oI the suit will bind the estate oI Aurea as iI no sale took place
at all.

































Alonzo vs San Juan, 451SCRA45, 11 February 2005

Facts: A complaint Ior recovery oI possession was Iiled by Aurelio P. Alonzo and Teresita A.
Sison against Jaime and Perlita San Juan docketed as Civil Case No. Q-96-29415 beIore the
Regional Trial Court (RTC) oI Quezon City, Branch 77. plaintiIIs alleged that they are the
registered owners oI a parcel oI land located at Lot 3, Block 11, M. Agoncillo St., Novaliches,
Quezon City, with an area oI Iour hundred twenty-Iive (425) square meters, more or less,
evidenced by TransIer CertiIicate oI Title (TCT) No. N-152153 issued by the Register oI Deeds
oI Quezon City. At around June oI 1996, plaintiIIs discovered that a portion on the leIt side oI
the said parcel oI land with an area oI one hundred twenty-Iive (125) square meters, more or less,
was occupied by the deIendants Ior more than a year, without their prior knowledge or consent.
A demand letter was sent to the deIendants in August oI 1996 requiring them to vacate the
property but they reIused to comply; hence, the Iiling oI the Complaint. During the tendency oI
the case, the parties agreed to enter into a Compromise Agreement which the trial court approved
in a Judgment by Compromise. They Iailed to abide by the provisions oI the Compromise
Agreement by their Iailure to pay the amounts due thereon, plaintiIIs sent a letter demanding that
the deIendants vacate the premises. PlaintiIIs subsequently Iiled an Amended Motion Ior
Execution.

Issue: Whether or not the trial court`s interpretation is correct as to the compromise agreement
entered into by the parties.

Ruling: Compromise agreements are contracts, whereby the parties undertake reciprocal
obligations to resolve their diIIerences thus avoiding litigation, or put an end to one already
commenced. It is a cardinal rule in contract interpretation that the ascertainment oI the intention
oI the contracting parties is to be discharged by looking to the words they used to project that
intention in their contract, that is, all the words, not just a particular word or two, and words in
context, not words standing alone. Article 1374 oI the Civil Code requires that the various
stipulations oI a contract shall be interpreted together, attributing to the doubtIul ones that sense
which may result Irom all oI them taken jointly. It was error on the part oI the trial court to have
interpreted the compromise agreement in the manner it has done so. Applying the rule that the
various stipulations oI a contract should be taken together, the trial court should have interpreted
paragraph 10, in relation to paragraphs 11 and 12. To Iollow the interpretation oI the trial court,
the respondents would only have to deIault in the payment oI their obligation and the contract
would be rendered null and void to their beneIit and advantage leaving the petitioners without
any recourse at all. This surely was not what was envisioned when the parties entered into the
compromise. The Court itselI would not have approved the same Ior being contrary to law,
morals and public policy. Certainly, to sustain the interpretation oI the trial court would be to
sanction an absurdity as it would go against the very rationale oI entering into a Compromise
Agreement, i.e., to put an end to litigation. To Iollow the argument oI the trial court to its logical
conclusion, then it would mean that the parties would have to go back to square one and re-
litigate what they had already put to rest when they entered into the subject Compromise
Agreement.

David vs CA, 316SCRA710

Facts: The dispute in this petition concerns only the execution oI the decision oI the RTC oI
Manila, Branch 27, in Civil Case No. 94781, dated June 20, 1980.
The aIorementioned court, with the then presiding Judge Ricardo Diaz, issued a writ oI
attachment over real properties oI private respondent AIable. In his decision, Judge Diaz ordered
respondent AIable to pay petitioner David P65, 500.00 plus the legal interest Irom January 4,
1966. Respondent AIable appealed to the Court oI Appeals and then to the Supreme Court. In
both instances, the decision oI the lower court was aIIirmed thereby making the decision Iinal
and executory.
Upon petitioner`s motion, respondent Judge Cruz oI the RTC oI Manila, Branch 27
issued an Alias Writ oI Execution by virtue oI which respondent SheriII Melchor P. Pea
conducted a public auction. SheriII Pea inIormed the petitioner that the total amount oI the
judgment is P270, 940.52. The amount included a computation oI simple interest. Petitioner,
however, claimed that the judgment award should be P3, 027, 238.50, because the amount due
ought to be based on compounded interest.
Although the auctioned properties were sold to petitioner, SheriII Pea did not issue the
CertiIicate oI Sale because there was an excess in the bid price in the amount oI P2, 941, 524.47,
which the petitioner Iailed to pay despite notice. This excess was computed by the SheriII on the
basis oI petitioner`s bid price oI P3, 027, 238.50 minus the amount oI P270, 940.52 computed in
the judgment award.
On May 18, 1993, petitioner Iiled a motion praying that respondent Judge Cruz issue an
order directing respondent SheriII Pea to prepare and execute a certiIicate oI sale in Iavor oI
petitioner, placing therein the amount oI the judgment as P3, 027, 238.50, the amount he bid in
the auction sale which he won. is reason is that compound interest, which is allowed by Article
2212 oI the Civil Code, should apply in this case.
On July 5, 1993, his motion was denied. e moved Ior reconsideration but to no avail.

Issue: Whether or not respondent appellate court erred in aIIirming respondent Judge`s order Ior
the payment oI simple interest only rather than compounded interest.

Ruling: NO, the appellate court did not err.
This Supreme Court has interpreted Article 2212, and deIined standards Ior its
application in Philippine American Accidents Insurance v. Flores, 97 SCRA 811. As therein held,
Article 2212 contemplates the presence oI stipulated or conventional interest which has accrued
when demand was judicially made. In cases where no cases had been stipulated by the parties, as
in the aIorecited case, no accrued conventional interest could Iurther earn interest upon judicial
demand. In the case at bar, no interest was stipulated by the parties. In the promissory note
denominated as 'Compromise Agreement signed by the private respondent which was duly
accepted by petitioner, no interest was mentioned. In his complaint, petitioner merely prayed that
deIendant be ordered to pay plaintiII the sum oI P66, 500.00 with interest thereon at the legal
rate Irom the date oI the Iiling oI the complaint until Iully paid. Clearly here, the Philippine
American Accident Insurance ruling applies.















Macalalag vs People, GR No. 164358, 20 December 2006

Facts: On two separate occasions, particularly on 30 July 1995 and 16 October 1995, petitioner
Theresa Macalalag obtained loans Irom Grace Estrella (Estrella), each in the amount oI
P100,000.00, each bearing an interest oI 10 per month. Macalalag consistently paid the
interests starting 30 August 1995. Finding the interest rates so burdensome, Macalalag requested
Estrella Ior a reduction oI the same to which the latter agreed. On 16 April 1996 and 1 May
1996, Macalalag executed Acknowledgment/AIIirmation Receipts promising to pay Estrella the
Iace value oI the loans in the total amount oI P200,000.00 within two months Irom the date oI its
execution plus 6 interest per month Ior each loan. Under the two
Acknowledgment/AIIirmation Receipts, she Iurther obligated herselI to pay Ior the two (2) loans
the total sum oI P100,000.00 as liquidated damages and attorney's Iees in the total sum oI
P40,000.00 as stipulated by the parties the moment she breaches the terms and conditions
thereoI.
Macalalag issued two Philippine National Bank (PNB) Checks (Check No. C-889835
and No. 889836) on 30 June 1996, each in the amount oI P100,000.00, in Iavor oI Estrella.
owever, when Estrella presented said checks Ior payment with the drawee bank, the same were
dishonored Ior the reason that the account was already closed. Estrella sent a notice oI dishonor
and demand to make good the said checks to Macalalag, but the latter Iailed to do so. ence,
Estrella Iiled two criminal complaints Ior Violation oI Batas Pambansa Blg. 22

Issue: Whether or not the interest is unconscionable.

Ruling: The Ioregoing rates oI interests and surcharges are in accord with Medel vs. Court oI
Appeals, Garcia vs. Court oI Appeals, Bautista vs. Pilar Development Corporation, and the
recent case oI Spouses Solangon vs. Salazar. This Court invalidated a stipulated 5.5 per month
or 66 per annum interest on a P500,000.00 loan in Medel and a 6 per month or 72 per
annum interest on a P60,000.00 loan in Solangon Ior being excessive, iniquitous, unconscionable
and exorbitant. In both cases, we reduced the interest rate to 12 per annum. We held that while
the Usury Law has been suspended by Central Bank Circular No. 905, s. 1982, eIIective on
January 1, 1983, and parties to a loan agreement have been given wide latitude to agree on any
interest rate, still stipulated interest rates are illegal iI they are unconscionable. Nothing in the
said circular grants lenders carte blanche authority to raise interest rates to levels which will
either enslave their borrowers or lead to a hemorrhaging oI their assets. On the other hand, in
Bautista vs. Pilar Development Corp., this Court upheld the validity oI a 21 per annum interest
on a P142,326.43 loan, and in Garcia vs. Court oI Appeals, sustained the agreement oI the parties
to a 24 per annum interest on an P8,649,250.00 loan. It is on the basis oI these cases that we
reduce the 36 per annum interest to 12. An interest oI 12 per annum is deemed Iair and
reasonable. While it is true that this Court invalidated a much higher interest rate oI 66 per
annum in Medel and 72 in Solangon it has sustained the validity oI a much lower interest rate
oI 21 in Bautista and 24 in Garcia. We still Iind the 36 per annum interest rate in the case
at bar to be substantially greater than those upheld by this Court in the two (2) aIorecited cases.
Tan vs CA, 367SCRA571, 19 October 2001

Facts: On May 14, 1978 and July 6, 1978, Antonio Tan obtained two loans each in the principal
amount oI Two Million Pesos, or in the total principal amount oI Four Million Pesos Irom
respondent Cultural Center oI the Philippines evidenced by two promissory notes with maturity
dates on May 14, 1979 and July 6, 1979, respectively. Petitioner deIaulted but aIter a Iew partial
payments he had the loans restructured by respondent CCP, and petitioner accordingly executed
a promissory note on August 31, 1979 in the amount oI Three Million Four undred Eleven
Thousand Four undred Twenty-One Pesos and Thirty-Two Centavos payable in Iive
installments. Tan Iailed to pay any installment on the said restructured loan oI Three Million
Four undred Eleven Thousand Four undred Twenty-One Pesos and Thirty-Two Centavos, the
last installment Ialling due on December 31, 1980. In a letter dated January 26, 1982, petitioner
requested and proposed to respondent CCP a mode oI paying the restructured loan, twenty
percent oI the principal amount oI the loan upon the respondent giving its conIormity to his
proposal; and the balance on the principal obligation payable in thirty-six equal monthly
installments until Iully paid. Petitioner again sent a letter to respondent CCP requesting Ior a
moratorium on his loan obligation until the Iollowing year allegedly due to a substantial
deduction in the volume oI his business and on account oI the peso devaluation. No Iavorable
response was made to letters. Instead, respondent CCP, through counsel, wrote a letter dated
May 30, 1984 to the petitioner demanding Iull payment, within ten (10) days Irom receipt oI said
letter, oI the petitioner`s restructured loan which as oI April 30, 1984 amounted to Six Million
Eighty-Eight Thousand Seven undred Thirty-Five Pesos and Three Centavos. A case was Iiled
in the RTC oI Manila a complaint Ior collection oI a sum oI money, docketed as Civil Case No.
84-26363, against the petitioner aIter the latter Iailed to settle his said restructured loan
obligation. The petitioner interposed the deIense that he merely accommodated a Iriend, Wilson
Lucmen, who allegedly asked Ior his help to obtain a loan Irom respondent CCP. Petitioner
claimed that he has not been able to locate Wilson Lucmen. While the case was pending in the
trial court, the petitioner Iiled a ManiIestation wherein he proposed to settle his indebtedness to
CCP by proposing to make a down payment oI One undred Forty Thousand Pesos and to issue
twelve checks every beginning oI the year to cover installment payments Ior one year, and every
year thereaIter until the balance is Iully paid. owever, respondent CCP did not agree to the
petitioner`s proposals and so the trial oI the case ensued.

Issue: Whether or not the CA committed a mistake in giving its imprimatur to the decision
oI the trial court which compounded interest on surcharges.

Ruling: The Supreme Court Iind the continued monthly accrual oI the two percent (2) penalty
charge on the total amount due to be unconscionable inasmuch as the same appeared to have
been compounded monthly. Considering petitioner`s several partial payments and the Iact he is
liable under the note Ior the two percent penalty charge per month on the total amount due,
compounded monthly, Ior twenty-one years since his deIault in 1980, The Court Iind it Iair and
equitable to reduce the penalty charge to a straight twelve percent per annum on the total amount
due starting August 28, 1986, the date oI the last Statement oI Account. The oIIers oI the
petitioner to enter into a compromise Ior the settlement oI his debt by presenting proposed
payment schemes to respondent CCP. The said oIIers at compromise also showed his good Iaith
despite diIIiculty in complying with his loan obligation due to his Iinancial problems. owever,
we are not unmindIul oI the respondent`s long overdue deprivation oI the use oI its money
collectible Irom the petitioner. There is an express stipulation in the promissory note permitting
the compounding oI interest. The IiIth paragraph oI the said promissory note provides that:
'Any interest which may be due iI not paid shall be added to the total amount when due and shall
become part thereoI, the whole amount to bear interest at the maximum rate allowed by law.
ThereIore, any penalty interest not paid, when due, shall earn the legal interest oI twelve percent
per annum in the absence oI express stipulation on the speciIic rate oI interest, as in the case at
bar.




















Eastern Shipping Lines vs CA, 234SCRA78, 12 July 1994

Facts: Two Iiber drums oI riboIlavin were shipped Irom oklahoma, Japan Ior delivery oI
vessel SS Eastern Comet moved by Eastern Shipping Lines. Upon the arrival oI the shipment in
Manila, it was discharges unto the custody oI the deIendant Metroport Services, Inc. The latter
accepted the drum, which damage was unknown to the consignee. ThereIore, Allied Brokerage
made deliveries by the shipment to the consignee`s warehouse. Consignee contented that due to
the losses/damages sustained, it suuIered a loss oI P19,032.95 due to the Iault and negligence oI
deIendants. As a consequence oI the vessels suIIered, respondent insurance company was
compelled to pay the consignee.

Issue: Whether or not the present legal interest oI 12 per annum Irom October 1, 1982 shall be
applied.

Ruling: Rules in the determination oI legal interests
a. When an obligation, regardless oI its source, i.e., law, contracts, quasi-contracts, delicts or
quasi-delicts 18 is breached, the contravenor can be held liable Ior damages. 19 The provisions
under Title XVIII on 'Damages oI the Civil Code govern in determining the measure oI
reoverable damages. 20
b. With regard particularly to an award oI interest in the concept oI actual and compensatory
damages, the rate oI interest, as well as the accrual thereoI, is imposed, as Iollows:
1. When the obligation is breached, and it consists in the payment oI a sum oI money,
i.e., a loan or Iorbearance oI money, the interest due should be that which may have been
stipulated in writing. 21 Furthermore, the interest due shall itselI earn legal interest Irom the
time it is judicially demanded. 22 In the absence oI stipulation, the rate oI interest shall be
12 per annum to be computed Irom deIault, i.e., Irom judicial or extrajudicial demand under
and subject to the provisions oI Article 1169 23 oI the Civil Code.
2. When a obligation, not constituting a loan or Iorbearance oI money, is breached, an
interest on the amount oI damages awarded may be imposed at the discretion oI the court 24 at
the rate oI 6 per annum. 25 No interest, however, shall be adjudged on unliquidated claims
or damages except when or until the demand can be established with reasonable certainty. 26
Accordingly, where the demand is established with reasonable certainty, the interest shall
begin to run Irom the time the claim is made judicially or extrajudicially (Art. 1169, Civil
Code) but when such certainty cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only Irom the date oI the judgment oI the court is made (at
which time the quantiIication oI damages may be deemed to have been reasonably
ascertained). The actual base Ior the computation oI legal interest shall, in any case, be on the
amount oI Iinally adjudged.
3. When the judgment oI the court awarding a sum oI money becomes Iinal and
executory, the rate oI legal interest, whether the case Ialls under paragraph 1 or paragraph 2,
above, shall be 12 per annum Irom such Iinality until its satisIaction, this interim period
being deemed to be by then an equivalent to a Iorbearance oI credit.
WhereIore, the Supreme Court partly granted the petition. The Court aIIirmed the
appealed decision with the modiIication that the legal interest to be paid is 6 on the amount due
computed Irom the decision, dated 3 February 1988, oI the court a quo. A 12 interest, in lieu oI
6, shall be imposed on such amount upon Iinality oI this decision until the payment thereoI.







































































NSBC vs PNB, 435SCRA565, 30 July 2004

Facts: On February 11, 1989, Board Resolution No. 05, Series oI 1989 was approved by NSBCI
authorizing the company to apply Ior or secure a commercial loan with the PNB in an aggregate
amount oI P8.0M, under such terms agreed by the Bank and the NSBCI, using or mortgaging the
real estate properties registered in the name oI its President and Chairman oI the Board Eduardo
R. Dee as collateral; authorizing petitioner-spouses to secure the loan and to sign any documents
which may be required by PNB and that petitioner-spouses shall act as sureties or co-obligors
who shall be jointly and severally liable with NSBCI Ior the payment oI any obligations.
On August 15, 1989, Resolution No. 77 was approved by granting the request oI PNB
thru its Board NSBCI Ior an P8 Million loan broken down into a revolving credit line oI P7.7M
and an unadvised line oI P0.3M Ior additional operating and working capital to mobilize its
various construction projects. The loan oI |Petitioner| NSBCI was secured by a Iirst mortgage on
the Iollowing: a) three (3) parcels oI residential land located at Mangaldan, Pangasinan with total
land area oI 1,214 square meters|,| including improvements thereon and registered under TCT
Nos. 128449, 126071, and 126072 oI the Registry oI Deeds oI Pangasinan; b) six (6) parcels oI
residential land situated at San Fabian, Pangasinan with total area oI 1,767 square meters
including improvements thereon and covered by TCT Nos. 144006, 144005, 120458, 120890,
144161 and 121127 oI the Registry oI Deeds oI Pangasinan; and c) a residential lot and
improvements thereon located at Mangaldan, Pangasinan with an area oI 4,437 square meters
and covered by TCT No. 140378 oI the Registry oI Deeds oI Pangasinan.
The loan was Iurther secured by the joint and several signatures oI Eduardo Dee and
Arcelita Marquez Dee, who signed as accommodation-mortgagors since all the collaterals were
owned by them and registered in their names.

Issue: Whether or not the onorable Court oI Appeals seriously erred in not holding that
the Respondent PNB bloated the loan account oI petitioner corporation by imposing
interests, penalties and attorney`s Iees without legal, valid and equitable justiIication

Ruling: In these three Promissory Notes, evidently, no complaint Ior collection was Iiled with the
courts. It was not until January 30, 1992 that a Petition Ior Sale oI the mortgaged properties was
Iiled -- with the provincial sheriII, instead. Moreover, respondent did not supply the interest rate
to be charged on medium-term loans granted by automatic conversion. Because oI this
deIiciency, the legal rate oI 12 percent per annum on loans and Iorbearance oI money, as
provided Ior by CB Circular 416 shall be used. Although the Iirst Disclosure Statement was
Iurnished Petitioner NSBCI prior to the execution oI the transaction, it is not a contract that can
be modiIied by the related Promissory Note, but a mere statement in writing that reIlects the true
and eIIective cost oI loans Irom respondent. Novation can never be presumed and the animus
novandi 'must appear by express agreement oI the parties, or by their acts that are too clear and
unequivocal to be mistaken. To allow novation will surely Ilout the 'policy oI the State No
penalty charges or increases thereoI appear either in the Disclosure Statements or in any oI the
clauses in the second and the third Credit Agreements earlier discussed. While a standard
penalty charge oI 6 percent per annum has been imposed on the amounts stated in all three
Promissory Notes still remaining unpaid or unrenewed when they Iell due, there is no stipulation
therein that would justiIy any increase in that charges. The eIIect, thereIore, when the borrower
is not clearly inIormed oI the Disclosure Statements -- prior to the consummation oI the
availment or drawdown -- is that the lender will have no right to collect upon such charge or
increases thereoI, even iI stipulated in the Notes. Besides, the Notes are contracts oI adhesion;
although not invalid per se, any apparent ambiguity in the loan contracts -- taken as a whole --
shall be strictly construed against respondent who caused it. Worse, in the statements oI account,
the penalty rate has again been unilaterally increased by respondent to 36 percent without
petitioners` consent. As a result oI its move, such liquidated damages intended as a penalty shall
be equitably reduced by the Court to zilch or being iniquitous or unconscionable to protect its
citizens Irom a lack oI awareness oI the true cost oI credit.
With greater reason should such penalty charges be indicated in the second and third
Disclosure Statements, yet none can be Iound therein. While the charges are issued aIter the
respective availment or drawdown, the disclosure statements are given simultaneously therewith.
Obviously, novation still does not apply.















Polotan vs CA, 296SCRA247, 25 September 1998

Facts: Private respondent Security Diners International Corporation (Diners Club), a credit card
company, extends credit accomodations to its cardholders Ior the purchase oI goods and other
services Irom member establishments. Said goods and services are reimbursed later on by
cardholders upon proper billing. Petitioner Rodelo G. Polotan, Sr. applied Ior membership and
credit accmodations with Diners Club in October 1985. The application Iorm contained terms
and conditions governing the use and availment oI the Diners Club card, among which is Ior the
cardholder to pay all charges made through the use oI said card within the period indicated in the
statement oI account and any remaining unpaid balance to earn 3 interest per annum plus
prime rate oI Security Bank & Trust Company. Notably, in the application Iorm submitted by
petitioner, OIricano Canlas obligated himselI to pay jointly and severally with petitioner the
latter`s obligation to private respondent. Upon acceptance oI his application, petitioner was
issued Diners Club card No. 3651-212766-3005. As oI May 8, 1987, petitioner incurred credit
charges plus appropriate interest and service charges in the aggregate amount oI P33,819.84
which had become due and demandable.
Demands Ior payment made against petitioner proved Iutile. ence, private respondent
Iiled a Complaint Ior Collection oI Sum oI Money.

Issue: Whether or not the subject contract is one-sided because it allows escalation oI interests,
but does not provide Ior a downward adjustment oI the same in violation oI Central Bank
Circular 905.

Ruling: The claim is without basis. First, by signing the contract, petitioner and private
respondent agreed upon the rate as stipulated in the subject contract. Such is now allowed by
C.B. Circular 905. Second, petitioner Iailed to cite any particular provision oI said Circular
which was allegedly violated by the subject contract. Be that as it may, there is nothing
inherently wrong with escalation clauses. Escalation clauses are valid stipulations in commercial
contracts to maintain Iiscal stability and to retain the value oI money in long term contracts.
The contractual provision in question states that 'iI there occurs any change in the
prevailing market rates, the new interest rate shall be the guiding rate in computing the interest
due on the outstanding obligation without need oI serving notice to the Cardhoder other than the
required posting on the monthly statement served to the Cardholder. This could not be
considered an escalation clause Ior the reason that it neither states an increase nor a decrease in
interest rate. Said clause simply states that the interest rate should be based on the prevailing
market rate. Interpreting it diIIerently, while said clause does not expressly stipulate a reduction
in interest rate, it nevertheless provides a leeway Ior the interest rate to be reduced in case the
prevailing market rates dictate its reduction.
Admittedly, the second paragraph oI the questioned proviso which provides that 'the
Cardholder hereby authorizes Security Diners to correspondingly increase the rate oI such
interest in the event oI changes in prevailing market rates x x x is an escalation clause.
owever, it cannot be said to be dependent solely on the will oI private respondent as it is also
dependent on the prevailing market rates.
Escalation clauses are not basically wrong or legally objectionable as long as they are not
solely potestative but based on reasonable and valid grounds. Obviously, the Iluctuation in the
market rates is beyond the control oI private respondent.

New Sampaguita vs PNB, 435SCRA565, 30 July 2004

Facts: On February 11, 1989, Board Resolution No. 05, Series oI 1989 was approved by
Petitioner NSBCI authorizing the company to x x x apply Ior or secure a commercial loan with
the PNB in an aggregate amount oI P8.0M, under such terms agreed by the Bank and the NSBCI,
using or mortgaging the real estate properties registered in the name oI its President and
Chairman oI the Board Petitioner Eduardo R. Dee as collateral; and authorizing petitioner-
spouses to secure the loan and to sign any and all documents which may be required by
Respondent PNB, and that petitioner-spouses shall act as sureties or co-obligors who shall be
jointly and severally liable with Petitioner NSBCI Ior the payment oI any |and all| obligations.
On August 15, 1989, Resolution No. 77 was approved by granting the request oI
Respondent PNB thru its Board NSBCI Ior an P8 Million loan broken down into a revolving
credit line oI P7.7M and an unadvised line oI P0.3M Ior additional operating and working capital
to mobilize its various construction projects.
The loan oI Petitioner NSBCI was secured by a Iirst mortgage on the Iollowing: a) three
(3) parcels oI residential land located at Mangaldan, Pangasinan; b) six (6) parcels oI residential
land situated at San Fabian, Pangasinan; and c) a residential lot and improvements thereon
located at Mangaldan. The loan was Iurther secured by the joint and several signatures oI
Petitioners Eduardo Dee and Arcelita Marquez Dee, who signed as accommodation-mortgagors
since all the collaterals were owned by them and registered in their names. Moreover Petitioner
NSBCI executed three promissory notes. In addition, petitioner corporation also signed the
Credit Agreement dated August 31, 1989 relating to the revolving credit line` oI P7.7 Million x
x x and the Credit Agreement dated September 5, 1989 to support the unadvised line` oI
P300,000.00.
On August 31, 1989, petitioner-spouses executed a Joint and Solidary Agreement` (JSA)
in Iavor oI Respondent PNB unconditionally and irrevocably binding themselves to be jointly
and severally liable with the borrower Ior the payment oI all sums due and payable to the Bank
under the Credit Document. Later on, Petitioner NSBCI Iailed to comply with its obligations
under the promissory notes.
On June 18, 1991, Petitioner Eduardo R. Dee on behalI oI Petitioner NSBCI sent a letter
to the Branch Manager oI the PNB Dagupan Branch requesting Ior a 90-day extension Ior the
payment oI interests and restructuring oI its loan Ior another term. Subsequently, NSBCI
tendered payment to Respondent PNB oI three (3) checks aggregating P1,000,000.00.
In a meeting held on August 12, 1991, Respondent PNB`s representative, Mr. Rolly
Cruzabra, was inIormed by |Petitioner| Eduardo Dee oI his intention to remit to Respondent
PNB post-dated checks covering interests, penalties and part oI the loan principals oI his due
account.
On August 22, 1991, Respondent bank`s Crispin Carcamo wrote Petitioner Eduardo Dee,
inIorming him that Petitioner NSBCI`s proposal was acceptable, provided the total payment
should be P4,128,968.29 that would cover the amount oI P1,019,231.33 as principal,
P3,056,058.03 as interests and penalties, and P53,678.93 Ior insurance|,| with the issuance oI
post-dated checks to be dated not later than November 29, 1991.
On September 6, 1991, Petitioner Eduardo Dee wrote the PNB Branch Manager
reiterating his proposals Ior the settlement oI Petitioner NSBCI`s past due loan account
amounting to P7,019,231.33. Petitioner Eduardo Dee later tendered Iour (4) post-dated
Interbank checks aggregating P1,111,306.67 in Iavor oI Respondent PNB
Upon presentment, however, x x x check nos. 03500087 and 03500088 dated September
29 and October 29, 1991 were dishonored by the drawee bank and returned due to a stop
payment` order Irom petitioners.
On November 12, 1991, PNB`s Mr. Carcamo wrote Petitioner Eduardo Dee inIorming
him that unless the dishonored checks were made good, said PNB branch shall recall its
recommendation to the ead OIIice Ior the restructuring oI the loan account and reIer the matter
to its legal counsel Ior legal action. Petitioners did not heed respondent`s warning and as a result,
the PNB Dagupan Branch sent demand letters to Petitioner NSBCI at its oIIice address at 1611
ERDC Building, E. Rodriguez Sr. Avenue, Quezon City, asking it to settle its past due loan
account.
Petitioners nevertheless Iailed to pay their loan obligations within the time Irame given
them and as a result, Respondent PNB Iiled with the Provincial SheriII oI Pangasinan at
Lingayen a Petition Ior Sale
The sheriII Ioreclosed the real estate mortgage and sold at public auction the mortgaged
properties oI petitioner-spouses, with Respondent PNB being declared the highest bidder Ior the
amount oI P10,334,000.00.
Copies oI the SheriII`s CertiIicate oI Sale were sent by registered mail to petitioner
corporation`s address petitioner-spouses` address.
On April 6, 1992, the PNB Dagupan Branch Manager sent a letter to petitioners at their
address inIorming them that the properties securing their loan account had been sold at public
auction, that the SheriII`s CertiIicate oI Sale had been registered with the Registry oI Deeds oI
Pangasinan and that a period oI one (1) year thereIrom was granted to them within which to
redeem their properties.
Petitioners Iailed to redeem their properties within the one-year redemption period and so
Respondent PNB executed a Deed oI Absolute Sale consolidating title to the properties in its
name.
Respondent PNB inIormed Petitioner NSBCI that the proceeds oI the sale conducted on
February 26, 1992 were not suIIicient to cover its total claim amounting to P12,506,476.43 and
thus demanded Irom the latter the deIiciency oI P2,172,476.43 plus interest and other charges
until the amount was Iully paid.
Petitioners reIused to pay the above deIiciency claim which compelled Respondent PNB
to institute the instant Complaint Ior the collection oI its deIiciency claim.

Issue: Whether or not the escalation clause is valid and whether or not it is violative oI the
principle oI mutuality oI contracts.

Ruling: In each drawdown, the Promissory Notes speciIied the interest rate to be charged: 19.5
percent in the Iirst, and 21.5 percent in the second and again in the third. owever, a uniIorm
clause therein permitted respondent to increase the rate 'within the limits allowed by law at any
time depending on whatever policy it may adopt in the Iuture x x x, without even giving prior
notice to petitioners. The Court holds that petitioners` accessory duty to pay interest did not give
respondent unrestrained Ireedom to charge any rate other than that which was agreed upon. No
interest shall be due, unless expressly stipulated in writing. It would be the zenith oI Iarcicality
to speciIy and agree upon rates that could be subsequently upgraded at whim by only one party
to the agreement.
The 'unilateral determination and imposition oI increased rates is 'violative oI the
principle oI mutuality oI contracts ordained in Article 1308 oI the Civil Code. One-sided
impositions do not have the Iorce oI law between the parties, because such impositions are not
based on the parties` essential equality.
Although escalation clauses are valid in maintaining Iiscal stability and retaining the
value oI money on long-term contracts, giving respondent an unbridled right to adjust the interest
independently and upwardly would completely take away Irom petitioners the 'right to assent to
an important modiIication in their agreement and would also negate the element oI mutuality in
their contracts. The clause cited earlier made the IulIillment oI the contracts 'dependent
exclusively upon the uncontrolled will oI respondent and was thereIore void. Besides, the pro
Iorma promissory notes have the character oI a contract d`adhesion, 'where the parties do not
bargain on equal Iooting, the weaker party`s the debtor`s participation being reduced to the
alternative to take it or leave it.`
















Imperial vs Jaucian, 427SCRA517, 14 April 2004

Facts: The present controversy arose Irom a case Ior collection oI money, Iiled by Alex A.
Jaucian against Restituta Imperial, on October 26, 1989. The complaint alleges, inter alia, that
deIendant obtained Irom plaintiII six (6) separate loans Ior which the Iormer executed in Iavor oI
the latter six (6) separate promissory notes and issued several checks as guarantee Ior payment.
When the said loans became overdue and unpaid, especially when the deIendant`s checks were
dishonored, plaintiII made repeated oral and written demands Ior payment.
The loans were covered by six (6) separate promissory notes executed by deIendant. The
Iace value oI each promissory notes is bigger |than| the amount released to deIendant because
said Iace value already included the interest Irom date oI note to date oI maturity. Said
promissory notes indicate the interest oI 16 per month, date oI issue, due date, the
corresponding guarantee checks issued by deIendant, penalties and attorney`s Iees. The trial
court`s clear and detailed computation oI petitioner`s outstanding obligation to respondent was
aIIirmed by the CA Ior being convincing and satisIactory. owever, the CA held that without
judicial inquiry, it was improper Ior the RTC to rule on the constitutionality oI Section 1, Central
Bank Circular No. 905, Series oI 1982.

Issues: 1) Whether or not the penalties charged per month is in the guise oI hidden interest.
2) Whether or not the reduction oI attorney`s Iees by the RTC is reasonable.

Ruling: Iniquitous and unconscionable stipulations on interest rates, penalties and attorney`s Iees
are contrary to morals. Consequently, courts are granted authority to reduce them equitably. II
reasonably exercised, such authority shall not be disturbed by appellate courts.
Article 1229 of the Civil Code states thus.'The fudge shall equitably reduce the penalty
when the principal obligation has been partly or irregularly complied with by the debtor. Even
if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous
or unconscionable.`
In exercising this power to determine what is iniquitous and unconscionable, courts must
consider the circumstances oI each case. What may be iniquitous and unconscionable in one
may be totally just and equitable in another. In the present case, iniquitous and unconscionable
was the parties` stipulated penalty charge oI 5 percent per month or 60 percent per annum, in
addition to regular interests and attorney`s Iees. Also, there was partial perIormance by
petitioner when she remitted P116,540 as partial payment oI her principal obligation oI
P320,000. Under the circumstances, the trial court was justiIied in reducing the stipulated
penalty charge to the more equitable rate oI 14 percent per annum.
The Promissory Note carried a stipulation Ior attorney`s Iees oI 25 percent oI the
principal amount and accrued interests. Strictly speaking, this covenant on attorney`s Iees is
diIIerent Irom that mentioned in and regulated by the Rules oI Court. 'Rather, the attorney`s
Iees here are in the nature oI liquidated damages and the stipulation thereIor is aptly called a
penal clause. So long as the stipulation does not contravene the law, morals, public order or
public policy, it is binding upon the obligor. It is the litigant, not the counsel, who is the
judgment creditor entitled to enIorce the judgment by execution.
Nevertheless, it appears that petitioner`s Iailure to comply Iully with her obligation was
not motivated by ill will or malice. The twenty-nine partial payments she made were a
maniIestation oI her good Iaith. Again, Article 1229 oI the Civil Code speciIically empowers the
judge to reduce the civil penalty equitably, when the principal obligation has been partly or
irregularly complied with. Upon this premise, we hold that the RTC`s reduction oI attorney`s
Iees -- Irom 25 percent to 10 percent oI the total amount due and payable -- is reasonable.





































Pabugais vs Sahijwani, 423SCRA596, 23 February 2004

Facts: There was an Agreement And Undertaking dated December 3, 1993, Teddy G. Pabugais,
in consideration oI the amount oI FiIteen Million Four undred Eighty Seven Thousand Five
undred Pesos (P15,487,500.00), agreed to sell to respondent Dave P. Sahijwani a lot containing
1,239 square meters located at Jacaranda Street, North Forbes Park, Makati, Metro Manila.
Respondent paid petitioner the amount oI P600,000.00 as option/reservation Iee and the balance
oI P14,887,500.00 to be paid within 60 days Irom the execution oI the contract, simultaneous
with delivery oI the owner`s duplicate TransIer CertiIicate oI Title in respondent`s name the
Deed oI Absolute Sale; the CertiIicate oI Non-Tax Delinquency on real estate taxes and
Clearance on Payment oI Association Dues. The parties Iurther agreed that Iailure on the part oI
respondent to pay the balance oI the purchase price entitles petitioner to IorIeit the P600,000.00
option/reservation Iee; while non-delivery by the latter oI the necessary documents obliges him
to return to respondent the said option/reservation Iee with interest at 18 per annum. Petitioner
Iailed to deliver the required documents. In compliance with their agreement, he returned to
respondent the latter`s P600,000.00 option/reservation Iee by way oI Far East Bank & Trust
Company Check No. 25AO54252P, which was, however, dishonored.

Issue: Whether or not a valid tender oI payment exist and thus the interest imposed is valid.

Ruling: The Supreme Court held that the manager`s check in the amount oI P672,900.00
representing the P600,000.00 option/reservation Iee plus 18 interest per annum computed Irom
December 3, 1993 to August 3, 1994 which was tendered but reIused by respondent, and
thereaIter consigned with the court, was enough to satisIy the obligation. There being a valid
tender oI payment in an amount suIIicient to extinguish the obligation, the consignation is valid.
As regards petitioner`s right to withdraw the amount consigned, reliance on Article 1260 oI the
Civil Code is misplaced. The said Article provides Art. 1260. Once the consignation has been
duly made, the debtor may ask the judge to order the cancellation oI the obligation. BeIore the
creditor has accepted the consignation, or beIore a judicial conIirmation that the consignation has
been properly made, the debtor may withdraw the thing or the sum deposited, allowing the
obligation to remain in Iorce. The amount consigned with the trial court can no longer be
withdrawn by petitioner because respondent`s prayer in his answer that the amount consigned is
awarded to him is equivalent to an acceptance oI the consignation, which has the eIIect oI
extinguishing petitioner`s obligation.
Moreover, petitioner Iailed to maniIest his intention to comply with the "Agreement And
Undertaking" by delivering the necessary documents and the lot subject oI the sale to respondent
in exchange Ior the amount deposited. Withdrawal oI the money consigned would enrich
petitioner and unjustly prejudice respondent. he withdrawal oI the amount deposited in order to
pay attorney`s Iees to petitioner`s counsel, Atty. De Guzman, Jr., violates Article 1491 oI the
Civil Code which Iorbids lawyers Irom acquiring by assignment, property and rights which are
the object oI any litigation in which they may take part by virtue oI their proIession.
27

Furthermore, Rule 10 oI the Canons oI ProIessional Ethics provides that "the lawyer should not
purchase any interest in the subject matter oI the litigation which he is conducting." The assailed
transaction Ialls within the prohibition because the Deed assigning the amount oI P672,900.00 to
Atty. De Guzman, Jr., as part oI his attorney`s Iees was executed during the pendency oI this
case with the Court oI Appeals. In a motion to Intervene, Atty. De Guzman, Jr., not only asserted
ownership over said amount, but likewise prayed that the same be released to him. That
petitioner knowingly and voluntarily assigned the subject amount to his counsel did not remove
their agreement within the ambit oI the prohibitory provisions. To grant the withdrawal would be
to sanction a void contract.




















Lo vs CA, 411SCRA523, 23 September 2003

Facts: There are two parcels oI land measuring a total oI 2,147 square meters, with an oIIice
building constructed thereon, located at Bo. Potrero, Malabon, Metro Manila and covered by
TCT Nos. M-13166 and M-13167.Petitioner acquired the subject parcels oI land in an auction
sale on November 9, 1995 Ior P20,170,000 Irom the Land Bank oI the Philippines (Land
Bank).Private respondent National Onion Growers Cooperative Marketing Association, Inc., an
agricultural cooperative, was the occupant oI the disputed parcels oI land under a subsisting
contract oI lease with Land Bank. The lease was valid until December 31, 1995.Upon the
expiration oI the lease contract, petitioner demanded that private respondent vacate the leased
premises and surrender its possession to him. Private respondent reIused on the ground that it
was, at the time, contesting petitioner`s acquisition oI the parcels oI land in question in an action
Ior annulment oI sale, redemption and damages. On February 23, 1996, petitioner Iiled an action
Ior ejectment beIore the Metropolitan Trial Court oI Malabon, Branch 55.

Issue: Whether or not the Court oI Appeals has the authority to reduce the penalty awarded by
the trial court, the same having been stipulated by the parties in their Contract oI Lease.

Ruling: Generally, courts are not at liberty to ignore the Ireedom oI the parties to agree on such
terms and conditions as they see Iit as long as they are not contrary to law, morals, good
customs, public order or public policy. Nevertheless, courts may equitably reduce a stipulated
penalty in the contract iI it is iniquitous or unconscionable, or iI the principal obligation has been
partly or irregularly complied with. This power oI the courts is explicitly sanctioned by Article
1229 oI the Civil Code which provides:
Article 1229. The judge shall equitably reduce the penalty when the principal
obligation has been partly or irregularly complied with by the debtor. Even iI there has
been no perIormance, the penalty may also be reduced by the courts iI it is iniquitous or
unconscionable.
The question oI whether a penalty is reasonable or iniquitous is addressed to the sound
discretion oI the court and depends on several Iactors, including, but not limited to, the
Iollowing: the type, extent and purpose oI the penalty, the nature oI the obligation, the mode oI
breach and its consequences, the supervening realities, the standing and relationship oI the
parties. In this case, the stipulated penalty was reduced by the appellate court Ior being
unconscionable and iniquitous. As provided in the Contract oI Lease, private respondent was
obligated to pay a monthly rent oI P30,000. On the other hand, the stipulated penalty was
pegged at P5,000 Ior each day oI delay or P150,000 per month, an amount Iive times the
monthly rent. This penalty was not only exorbitant but also unconscionable, taking into account
that private respondent`s delay in surrendering the leased premises was because oI a well-
Iounded belieI that its right oI preemption to purchase the subject premises had been violated.
Considering Iurther that private respondent was an agricultural cooperative, collectively owned
by Iarmers with limited resources, ordering it to pay a penalty oI P150,000 per month on top oI
the monthly rent oI P30,000 would seriously deplete its income and drive it to bankruptcy.

Ligutan vs CA, 12 February 2002

Facts: Tolomeo Ligutan and Leonidas dela Llana obtained on 11 May 1981 a loan in the amount
oI P120,000.00 Irom respondent Security Bank and Trust Company. Petitioners executed a
promissory note binding themselves, jointly and severally, to pay the sum borrowed with an
interest oI 15.189 per annum upon maturity and to pay a penalty oI 5 every month on the
outstanding principal and interest in case oI deIault. In addition, petitioners agreed to pay 10
oI the total amount due by way oI attorney`s Iees iI the matter were indorsed to a lawyer Ior
collection or iI a suit were instituted to enIorce payment. The obligation matured on 8
September 1981; the bank, however, granted an extension but only up until 29 December
1981.Despite several demands Irom the bank, petitioners Iailed to settle the debt which, as oI 20
May 1982, amounted to P114,416.10. On 30 September 1982, the bank sent a Iinal demand
letter to petitioners inIorming them that they had Iive days within which to make Iull payment.
Since petitioners still deIaulted on their obligation, the bank Iiled on 3 November 1982, with the
Regional Trial Court oI Makati, Branch 143, a complaint Ior recovery oI the due amount.

Issue: Whether or not the penalty in the obligation is iniquitous and unconscionable.

Ruling: The question oI whether a penalty is reasonable or iniquitous can be partly subjective
and partly objective. Its resolution would depend on such Iactors as, but not necessarily conIined
to, the type, extent and purpose oI the penalty, the nature oI the obligation, the mode oI breach
and its consequences, the supervening realities, the standing and relationship oI the parties, and
the like, the application oI which, by and large, is addressed to the sound discretion oI the court.
In just an example, the Court has tempered the penalty charges aIter taking into account the
debtor`s pitiIul situation and its oIIer to settle the entire obligation with the creditor bank. The
stipulated penalty might likewise be reduced when a partial or irregular perIormance is made by
the debtor.
1|*||15|
The stipulated penalty might even be deleted such as when there has been
substantial perIormance in good Iaith by the obligor,
1|*||16|
when the penalty clause itselI suIIers
Irom Iatal inIirmity, or when exceptional circumstances so exist as to warrant it. The Court oI
Appeals, exercising its good judgment in the instant case, has reduced the penalty interest Irom
5 a month to 3 a month which petitioner still disputes. Given the circumstances, not to
mention the repeated acts oI breach by petitioners oI their contractual obligation, the Court sees
no cogent ground to modiIy the ruling oI the appellate court. Anent the stipulated interest oI
15.189 per annum, petitioners, Ior the Iirst time, question its reasonableness and prays that the
Court reduce the amount. This contention is a Iresh issue that has not been raised and ventilated
beIore the courts below. In any event, the interest stipulation, on its Iace, does not appear as
being that excessive. The essence or rationale Ior the payment oI interest, quite oIten reIerred to
as cost oI money, is not exactly the same as that oI a surcharge or a penalty. A penalty
stipulation is not necessarily preclusive oI interest, iI there is an agreement to that eIIect, the two
being distinct concepts which may separately be demanded.
1|*||18|
What may justiIy a court in not
allowing the creditor to impose Iull surcharges and penalties, despite an express stipulation
thereIore in a valid agreement, may not equally justiIy the non-payment or reduction oI interest.
Pascual vs Ramos, 384SCRA105

Facts: Ramos alleged that on 3 June 1987, Ior and in consideration oI P150,000, the Spouses
Pascual executed in his Iavor a Deed oI Absolute Sale with Right to Repurchase over two parcels
oI land and the improvements thereon located in Bambang, Bulacan, Bulacan. This document
was annotated at the back oI the title. The Pascuals did not exercise their right to repurchase the
property within the stipulated one-year period; hence, Ramos prayed that the title or ownership
over the subject parcels oI land and improvements thereon be consolidated in his Iavor.
In their Answer, the Pascuals admitted having signed the Deed oI Absolute Sale with
Right to Repurchase Ior a consideration oI P150, 000 but averred that what the parties had
actually agreed upon and entered into was a real estate mortgage. They Iurther alleged that there
was no agreement limiting the period within which to exercise the right to repurchase and that
they had even overpaid Ramos. The trial court Iound that the transaction between the parties was
actually a loan in the amount oI P150,000, the payment oI which was secured by a mortgage oI
the property covered by TCT No. 305626. It also Iound that the Pascuals had made payments in
the total sum oI P344,000, and that with interest at 7 per annum, they had overpaid the loan by
P141,500. Accordingly, in its Decision oI 15 March 1995 the trial court ruled in Iavor oI the
deIendants. The Pascuals interposed the Iollowing deIenses: (a) the trial court had no jurisdiction
over the subject or nature oI the petition; (b) Ramos had no legal capacity to sue; (c) the cause oI
action, iI any, was barred by the statute oI limitations; (d) the petition stated no cause oI action;
(e) the claim or demand set Iorth in Ramos`s pleading had been paid, waived, abandoned, or
otherwise extinguished; and (I) Ramos has not complied with the required conIrontation and
conciliation beIore the barangay.
The Court oI Appeals aIIirmed in toto the trial court`s Orders oI 5 June 1995 and 7
September 1995.

Issue: Whether or not the contract entered into is a contract oI loan.

Ruling: The Pascuals are actually raising as issue the validity oI the stipulated interest rate. It
must be stressed that they never raised as a deIense or as basis Ior their counterclaim the nullity
oI the stipulated interest. While overpayment was alleged in the Answer, no ultimate Iacts which
constituted the basis oI the overpayment was alleged. In their pre-trial brieI, the Pascuals made a
long list oI issues, but not one oI them touched on the validity oI the stipulated interest rate.
Their own evidence clearly shows that they have agreed on, and have in Iact paid interest at, the
rate oI 7 per month.
AIter the trial court sustained petitioners` claim that their agreement with RAMOS was
actually a loan with real estate mortgage, the Pascuals should not be allowed to turn their back on
the stipulation in that agreement to pay interest at the rate oI 7 per month. The Pascuals should
accept not only the Iavorable aspect oI the court`s declaration that the document is actually an
equitable mortgage but also the necessary consequence oI such declaration, that is, that interest
on the loan as stipulated by the parties in that same document should be paid. Besides, when
Ramos moved Ior a reconsideration oI the 15 March 1995 Decision oI the trial court pointing out
that the interest rate to be used should be 7 per month, the Pascuals never liIted a Iinger to
oppose the claim. Admittedly, in their Motion Ior Reconsideration oI the Order oI 5 June 1995,
the Pascuals argued that the interest rate, whether it be 5 or 7, is exorbitant, unconscionable,
unreasonable, usurious and inequitable. owever, in their Appellants` BrieI, the only argument
raised by the Pascuals was that Ramos`s petition did not contain a prayer Ior general relieI and,
hence, the trial court had no basis Ior ordering them to pay Ramos P511,000 representing the
principal and unpaid interest. It was only in their motion Ior the reconsideration oI the decision
oI the Court oI Appeals that the Pascuals made an issue oI the interest rate and prayed Ior its
reduction to 12 per annum.
It is a basic principle in civil law that parties are bound by the stipulations in the contracts
voluntarily entered into by them. Parties are Iree to stipulate terms and conditions which they
deem convenient provided they are not contrary to law, morals, good customs, public order, or
public policy.
The interest rate oI 7 per month was voluntarily agreed upon by Ramos and the
Pascuals. There is nothing Irom the records and, in Iact, there is no allegation showing that
petitioners were victims oI Iraud when they entered into the agreement with Ramos. Neither is
there a showing that in their contractual relations with Ramos, the Pascuals were at a
disadvantage on account oI their moral dependence, ignorance, mental weakness, tender age or
other handicap, which would entitle them to the vigilant protection oI the courts as mandated by
Article 24 oI the Civil Code.












First Metro Investment vs Este del Sol, 369SCRA99, 15 November 2001

Facts: On January 31, 1978, FMIC granted respondent Este del Sol a loan oI Seven Million
Three undred Eighty-Five Thousand Five undred Pesos to Iinance the construction and
development oI the Este del Sol Mountain Reserve, a sports/resort complex project located at
Barrio Puray, Montalban, Rizal. Under the terms oI the Loan Agreement, the proceeds oI the
loan were to be released on staggered basis. Interest on the loan was pegged at sixteen percent
per annum based on the diminishing balance. The loan was payable in thirty-six equal and
consecutive monthly amortizations to commence at the beginning oI the thirteenth month Irom
the date oI the Iirst release in accordance with the Schedule oI Amortization. In case oI deIault,
an acceleration clause was, among others, provided and the amount due was made subject to a
twenty percent one-time penalty on the amount due and such amount shall bear interest at the
highest rate permitted by law Irom the date oI deIault until Iull payment thereoI plus liquidated
damages at the rate oI two percent per month compounded quarterly on the unpaid balance and
accrued interests together with all the penalties, Iees, expenses or charges thereon until the
unpaid balance is Iully paid, plus attorney`s Iees equivalent to twenty-Iive percent oI the sum
sought to be recovered, which in no case shall be less than Twenty Thousand Pesos iI the
services oI a lawyer were hired. In accordance with the terms oI the Loan Agreement, respondent
Este del Sol executed several documents as security Ior payment, among them, (a) a Real Estate
Mortgage dated January 31, 1978 over two (2) parcels oI land being utilized as the site oI its
development project with an area oI approximately One Million Twenty-Eight Thousand and
Twenty-Nine square meters and particularly described in TCT Nos. N-24332 and N-24356 oI the
Register oI Deeds oI Rizal, inclusive oI all improvements, as well as all the machineries,
equipment, Iurnishings and Iurnitures existing thereon; and (b) individual Continuing Suretyship
agreements by co-respondents Valentin S. Daez, Jr., Manuel Q. Salientes, Ma. Rocio A. De
Vega, Alexander G. Asuncion, Alberto M. Ladores, Vicente M. De Vera, Jr. and Felipe B. Sese,
all dated February 2, 1978, to guarantee the payment oI all the obligations oI respondent Este del
Sol up to the aggregate sum oI Seven Million Five undred Thousand Pesos.

Issue: Whether or not the payment oI P6,863,297.73 plus interest thereon at twenty-one percent
per annum Irom June 24, 1980 until Iully paid, and twenty-Iive percent thereoI as and Ior
attorney`s Iees and costs is unconscionable and iniquitous.

Ruling: The Supreme Court Iind that there is no merit to petitioner FMIC`s contention that
Central Bank Circular No. 905 which took eIIect on January 1, 1983 and removed the ceiling on
interest rates Ior secured and unsecured loans, regardless oI maturity, should be applied
retroactively to a contract executed on January 31, 1978, as in the case at bar, that is, while the
Usury Law was in Iull Iorce and eIIect. It is an elementary rule oI contracts that the laws, in
Iorce at the time the contract was made and entered into, govern it. More signiIicantly, Central
Bank Circular No. 905 did not repeal nor in any way amend the Usury Law but simply
suspended the latter`s eIIectivity. The illegality oI usury is wholly the creature oI legislation. A
Central Bank Circular cannot repeal a law. Only a law can repeal another law. Thus, retroactive
application oI a Central Bank Circular cannot, and should not, be presumed.
In usurious loans, the entire obligation does not become void because oI an agreement Ior
usurious interest; the unpaid principal debt still stands and remains valid but the stipulation as to
the usurious interest is void, consequently, the debt is to be considered without stipulation as to
the interest. In simple loan with stipulation oI usurious interest, the prestation oI the debtor to
pay the principal debt, which is the cause oI the), is not illegal. The illegality lies only as to the
prestation to pay the stipulated interest; hence, being separable, the latter only should be deemed
void, since it is the only one that is illegal.
Thus, the nullity oI the stipulation on the usurious interest does not aIIect the lender`s right
to receive back the principal amount oI the loan. With respect to the debtor, the amount paid as
interest under a usurious agreement is recoverable by him, since the payment is deemed to have
been made under restraint, rather than voluntarily.
The Supreme Court agrees with the stipulated penalties liquidated damages and attorney`s
Iees, excessive, iniquitous and unconscionable and revolting to the conscience as they hardly
allow the borrower any chance oI survival in case oI deIault. And true enough, ESTE Iolded up
when the appellee extrajudicially Ioreclosed on its (ESTE`s) development project and literally
closed its oIIices as both the appellee and ESTE were at the time holding oIIice in the same
building. Accordingly, we hold that 20 penalty on the amount due and 10 oI the proceeds oI
the Ioreclosure sale as attorney`s Iees would suIIice to compensate the appellee, especially so
because there is no clear showing that the appellee hired the services oI counsel to eIIect the
Ioreclosure; it engaged counsel only when it was seeking the recovery oI the alleged deIiciency.
Attorney`s Iees as provided in penal clauses are in the nature oI liquidated damages. So long as
such stipulation does not contravene any law, morals, or public order, it is binding upon the
parties. Nonetheless, courts are empowered to reduce the amount oI attorney`s Iees iI the same
is 'iniquitous or unconscionable.












Domel Trading vs CA, 315SCRA13

Facts: On June 3, 1981, private respondent NDC NACIDA Raw Materials Corporation
(NNRMC) ordered Irom petitioner Domel Trading Corp. (DOMEL) 22, 000 bundles oI buni
midribs within thirty (30) days Irom the date oI the opening oI a letter oI credit. On June 4, 1981,
NNRMC again ordered 300,000 pieces oI rattan poles at P 9.65 per piece to be delivered within
sixty (60) days. In accordance with this agreement, NNRMC opened two letters oI credit with
PNB in Iavor oI DOMEL. owever, DOMEL Iailed to deliver the buni midribs and rattan poles
within the stipulated period. The two (2) then agreed to extend the expiry date oI the two letters
oI Credit; however, no deliveries were made again.

Issue: Whether or not DOMEL is liable to NNRMC Ior actual and contractual damages with
legal interest thereon when extra judicial demand was made until Iully paid and 15 oI the
Ioregoing sum Ior Attorney`s Iees.

Ruling: NO, DOMEL is not liable Ior damages which were not shown and proved to be incurred
by NNRMC. It shall only be liable Ior the actual expenses suIIered by the latter. In the case, the
determination oI whether a penalty clause is 'iniquitous and unconscionable, a court may very
well take into account the actual damages sustained by a creditor who was compelled to sue the
deIaulting debtor. Also, the actual damages would include the interest and penalties the creditor
may have had to pay on its own. ere, NNRMC was only able to prove that it acquired the
amounts oI P 5,495.83 as opening charge oI the two (2) letters oI credit and additional charges oI
the two (2) letters oI credit and an additional P 1,911.85 as amendment charges or the same other
actual damages resulting Irom the non-delivery. Moreover, pursuant to Article 1229 oI the Civil
Code, which states that: '. the Judge shall equitably reduce the penalty when the principal
obligation has been party on irregularly complied with by the debtor. Even iI there has been no
perIormance, the penalty may also be reduced by the courts iI it is iniquitous or unconscionable.
Consequently, the penalty awarded to DOMEL shall be reduced.

Medel vs CA, 299SCRA481

Facts: On November 7, 1985, Servando Franco and Leticia Medel obtained a loan Irom Veronica
R. Gonzales who was engaged in the money lending business under the name "Gonzales Credit
Enterprises", in the amount oI P50,000.00, payable in two months. Veronica gave only the
amount oI P47,000.00, to the borrowers, as she retained P3,000.00, as advance interest Ior one
month at 6 per month. Servado and Leticia executed a promissory note Ior P50,000.00, to
evidence the loan, payable on January 7, 1986. On November 19, 1985, another loan was
obtained in the amount oI P90, 000.00, payable in two months, at 6 interest per month. They
executed a promissory note to evidence the loan, maturing on January 19, 1986. They received
only P84,000.00, out oI the proceeds oI the loan. On maturity oI the two promissory notes, the
borrowers Iailed to pay the indebtedness. On June 11, 1986, Servando and Leticia secured Irom
Veronica still another loan in the amount oI P300,000.00, maturing in one month, secured by a
real estate mortgage over a property belonging to Leticia Makalintal aptinchay, who issued a
special power oI attorney in Iavor oI Leticia Medel, authorizing her to execute the mortgage.
Servando and Leticia executed a promissory note in Iavor oI Veronica to pay the sum oI
P300,000.00, aIter a month, or on July 11, 1986. owever, only the sum oI P275,000.00, was
given to them out oI the proceeds oI the loan.
On February 20, 1990, Veronica R. Gonzales, joined by her husband Danilo G.
Gonzales, Iiled with the Regional Trial Court oI Bulacan, a complaint Ior collection oI the Iull
amount oI the loan including interests and other charges. AIter due trial, the lower court declared
that the due execution and genuineness oI the Iour promissory notes had been duly proved, and
ruled that although the Usury Law had been repealed, the interest charged by the plaintiIIs on the
loans was unconscionable and "revolting to the conscience". ence, the trial court applied "the
provision oI the New |Civil| Code" that the "legal rate oI interest Ior loan or Iorbearance oI
money, goods or credit is 12 per annum."

Issue:Whether or not the interest rate stipulated by the parties is valid.

Ruling: The stipulated rate oI interest at 5.5 per month on the P500, 000.00 loan is excessive,
iniquitous, unconscionable and exorbitant. owever, we can not consider the rate "usurious"
because this Court has consistently held that Circular No. 905 oI the Central Bank, adopted on
December 22, 1982, has expressly removed the interest ceilings prescribed by the Usury Law
and that the Usury Law is now "legally inexistent".
In Security Bank and Trust Company vs. Regional Trial Court oI Makati, Branch 61 the
Court held that CB Circular No. 905 "did not repeal nor in anyway amend the Usury Law but
simply suspended the latter's eIIectivity." Indeed, we have held that "a Central Bank Circular
can not repeal a law. Only a law can repeal another law." In the recent case oI Florendo vs.
Court oI Appeals the Court reiterated the ruling that "by virtue oI CB Circular 905, the Usury
Law has been rendered ineIIective". "Usury has been legally non-existent in our jurisdiction.
Interest can now be charged as lender and borrower may agree upon."
Nevertheless, we Iind the interest at 5.5 per month, or 66 per annum, stipulated upon by
the parties in the promissory note iniquitous or unconscionable, and, hence, contrary to morals
("contra bonos mores"), iI not against the law. The stipulation is void. The courts shall reduce
equitably liquidated damages, whether intended as an indemnity or a penalty iI they are
iniquitous or unconscionable.
Consequently, the Court oI Appeals erred in upholding the stipulation oI the parties. Rather,
we agree with the trial court that, under the circumstances, interest at 12 per annum, and an
additional 1 a month penalty charge as liquidated damages may be more reasonable.


































ReIormina vs Tomol, 139SCRA260, 11 October 1985

Facts: On June 7, 1972, judgment was rendered by the Court oI First Instance oI Cebu in an
action Ior the recovery oI damages due to loss or injury to person or property docketed as Civil
Case No. R-11279 in Iavor oI plaintiIIs Pacita F. ReIormina and Francisco ReIormina.
On appeal, the Court oI Appeals in aIIirming the decision oI the RTC modiIied it
ordering deIendants-appellants Shell ReIining Co. (Phil.), Inc. and Michael, Incorporated to pay
Pacita and Francisco ReIormina the amount oI P100, 000.00 with legal interests Irom the Iiling
oI the complaint until paid as compensator and moral damages and P41, 000.00 compensation
Ior the value oI the lost boat oI the latter with legal interest Irom the Iiling oI the complaint until
Iully paid.
The said decision having become Iinal and executory on October 24, 1980, the case was
remanded to the lower court Ior execution, and this is where the controversy started. In the
computation oI the 'legal interest decreed in the judgment sought to be executed, petitioners
claim that the 'legal interest should be at the rate oI 12 per annum, invoking in support oI
their aIoresaid submission, Central Bank oI the Philippines Circular No. 416. Upon the other
hand, private respondents insist that said legal interest should be at the rate oI 6 per annum
only, pursuant to and by authority oI Article 2209 oI the New Civil Code in relation to Articles
2210 and 2211 thereoI.

Issue: Whether or not the contention oI the petitioner that the applicable rate oI legal interest in
the case at bar is 12 per annum.

Ruling: NO, the contention is not correct. Circular No. 416 oI the Central Bank which took eIIect
on July 29, 1974 pursuant to P.D. 116, which amended Act 2655 (Usury Law), which rate the
legal interest Irom 6 to 12 per annum applies only to Iorbearances oI money, goods or credit
and court judgments thereon, BUT NOT to court judgments Ior damages arising Irom injury to
persons and loss oI property which does not involve a loan in which cases the rate remains at 6
per annum.
















































Lo vs KJS, 413SCRA182, 8 October 2003

Facts: KJS ECO-FORMWORK System Phil., Inc. is a corporation engaged in the sale oI steel
scaIIoldings, while petitioner Sonny L. Lo, doing business under the name and style San`s
Enterprises, is a building contractor. On February 22, 1990, petitioner ordered scaIIolding
equipments Irom respondent worth P540, 425.80. e paid a down payment in the amount oI
P150, 000.00. The balance was made payable in ten monthly installments. Respondent delivered
the scaIIoldings to petitioner. Petitioner was able to pay the Iirst two monthly installments. is
business, however, encountered Iinancial diIIiculties and he was unable to settle his obligation to
respondent despite oral and written demands made against him. On October 11, 1990, petitioner
and respondent executed a Deed oI Assignment, whereby petitioner assigned to respondent his
receivables in the amount oI P335, 462.14 Irom Jomero Realty Corporation owever, when
respondent tried to collect the said credit Irom Jomero Realty Corporation, the latter reIused to
honor the Deed oI Assignment because it claimed that petitioner was also indebted to it. On
November 26, 1990, respondent sent a letter to petitioner demanding payment oI his obligation,
but petitioner reIused to pay claiming that his obligation had been extinguished when they
executed the Deed oI Assignment. Consequently, on January 10, 1991, respondent Iiled an action
Ior recovery oI a sum oI money against the petitioner beIore the Regional Trial Court oI Makati,
Branch 147, which was docketed as Civil Case No. 91-074.

Issue: Whether or not the CA erred in reversing the decision oI the trial court and in ordering
payment oI interest and attorney`s Iees.

Ruling: An assignment oI credit is an agreement by virtue oI which the owner oI a credit, known
as the assignor, by a legal cause, such as sale, dacion en pago, exchange or donation, and without
the consent oI the debtor, transIers his credit and accessory rights to another, known as the
assignee, who acquires the power to enIorce it to the same extent as the assignor could enIorce it
against the debtor. In dacion en pago, as a special mode oI payment, the debtor oIIers another
thing to the creditor who accepts it as equivalent oI payment oI an outstanding debt. In order that
there be a valid dation in payment, the Iollowing are the requisites: (1) There must be the
perIormance oI the prestation in lieu oI payment (animo solvendi) which may consist in the
delivery oI a corporeal thing or a real right or a credit against the third person; (2) There must be
some diIIerence between the prestation due and that which is given in substitution (aliud pro
alio); (3) There must be an agreement between the creditor and debtor that the obligation is
immediately extinguished by reason oI the perIormance oI a prestation diIIerent Irom that
due.1|17| The undertaking really partakes in one sense oI the nature oI sale, that is, the creditor
is really buying the thing or property oI the debtor, payment Ior which is to be charged against
the debtor`s debt. As such, the vendor in good Iaith shall be responsible, Ior the existence and
legality oI the credit at the time oI the sale but not Ior the solvency oI the debtor, in speciIied
circumstances. ence, it may well be that the assignment oI credit, which is in the nature oI a
sale oI personal property,1|19| produced the eIIects oI a dation in payment which may
extinguish the obligation. owever, as in any other contract oI sale, the vendor or assignor is
bound by certain warranties. From the above provision, petitioner, as vendor or assignor, is
bound to warrant the existence and legality oI the credit at the time oI the sale or assignment.
When Jomero claimed that it was no longer indebted to petitioner since the latter also had an
unpaid obligation to it, it essentially meant that its obligation to petitioner has been extinguished
by compensation.1|21| In other words, respondent alleged the non-existence oI the credit and
asserted its claim to petitioner`s warranty under the assignment. ThereIore, it behooved on
petitioner to make good its warranty and paid the obligation.
The Supreme Court Iound that the award by the Court oI Appeals oI attorney`s Iees is
without Iactual basis. No evidence or testimony was presented to substantiate this claim.
Attorney`s Iees, being in the nature oI actual damages, must be duly substantiated by competent
prooI.
































PNB vs CA, 256SCRA44

Facts: Private respondent Loreto Tan is the owner oI a parcel oI land abutting the national
highway in Bacolod City. Expropriation proceedings were instituted by the government against
private respondent Tan and other property owners. Tan then Iiled a motion requesting the
issuance oI an order Ior the release to him oI the expropriation price oI P 32,480.00. Thus, PNB
was required by the trial court to release to Tan the said amount deposited with its assistant
branch manger issued a managers check Ior P 32,480.00 and delivered the same to one Sonia
Gonzaga without Tan`s knowledge, consent or authority. Tan demanded payment Irom PNB;
however, the latter reIused on the ground that it had already paid and delivered the amount to
Sonia Gonzaga on the strength oI a Special Power oI Attorney allegedly executed in her Iavor by
Tan.

Issue: Whether or not there was a payment made to Tan by virtue oI the Special Power oI
Attorney.

Ruling: NO, there was no payment that had been made to private respondent Tan as the check
was never delivered to him. PNB had the obligation to deliver the amount oI P 32,480.00 when
the court ordered it to pay Tan. Pursuant to Article 1233 oI the Civil Code, a debt shall not be
understood to have been paid unless the thing or service in which the obligation consists has
been completely delivered or rendered, as the case maybe. In the case, neither the Special Power
oI Attorney nor the check issued by petitioner bank was ever presented on court, serves as their
evidence.



























Cathay PaciIic vs Vazquez, 399SCRA207

Facts: Respondents-spouses Dr. Daniel Earnshaw Vazquez and Maria Luisa Madrigal Vazquez
are Irequent Ilyers oI Cathay and are Gold Card members oI its Marco Polo Club. On 24
September 1996, the Vazquezes, together with their maid and two Iriends Pacita Cruz and
JoseIina Vergel de Dios, went to ongkong Ior pleasure and business. For their return Ilight to
Manila on 28 September 1996, they were booked on Cathay`s Flight. Two hours beIore their
time oI departure, the Vazquezes and their companions checked in their luggage at Cathay`s
check-in counter at Kai Tak Airport and were given their respective boarding passes, to wit,
Business Class boarding passes Ior the Vazquezes.When boarding time was announced, Dr.
Vazquez presented his boarding pass to the ground stewardess, who in turn inserted it into an
electronic machine reader or computer at the gate. The ground stewardess was assisted by a
ground attendant by the name oI Clara Lai an Chiu. When Ms. Chiu glanced at the computer
monitor, she saw a message that there was a 'seat change Irom Business Class to First Class Ior
the Vazquezes. Ms. Chiu approached Dr. Vazquez and told him that the Vazquezes`
accommodations were upgraded to First Class. Ms. Chiu inIormed the latter that the Business
Class was Iully booked, and that since they were Marco Polo Club members they had the priority
to be upgraded to the First Class. Dr. Vazquez continued to reIuse, so Ms. Chiu told them that iI
they would not avail themselves oI the privilege, they would not be allowed to take the Ilight.
Eventually, aIter talking to his two Iriends, Dr. Vazquez gave in. e and Mrs. Vazquez then
proceeded to the First Class Cabin.
Upon their return to Manila, the Vazquezes, in a letter oI 2 October 1996 addressed to
Cathay`s Country Manager, demanded that they be indemniIied in the amount oI P1million Ior
the 'humiliation and embarrassment caused by its employees.

Issue: Whether or not there was a breach oI contract on the part oI Cathay PaciIic, and that they
acted in bad Iaith in upgrading the seat accommodations oI Vasquezes Irom Business Class to
First Class Cathay.

Ruling: The contract between the parties was Ior Cathay to transport the Vazquezes to Manila on
a Business Class accommodation in Flight CX-905. We note that in all their pleadings, the
Vazquezes never denied that they were members oI Cathay`s Marco Polo Club. They knew that
as members oI the Club, they had priority Ior upgrading oI their seat accommodation at no extra
cost when an opportunity arises. But, just like other privileges, such priority could be waived.
The Vazquezes should have been consulted Iirst whether they wanted to avail themselves oI the
privilege or would consent to a change oI seat accommodation beIore their seat assignments
were given to other passengers. Normally, one would appreciate and accept an upgrading, Ior it
would mean a better accommodation. But, whatever their reason was and however odd it might
be, the Vazquezes had every right to decline the upgrade and insist on the Business Class
accommodation they had booked Ior and which was designated in their boarding passes. They
clearly waived their priority or preIerence when they asked that other passengers be given the
upgrade. It should not have been imposed on them over their vehement objection. By insisting
on the upgrade, Cathay breached its contract oI carriage with the Vazquezes.
We Iind no persuasive prooI oI Iraud or bad Iaith in this case. The Vazquezes were not
induced to agree to the upgrading through insidious words or deceitIul machination or through
willIul concealment oI material Iacts. Upon boarding, Ms. Chiu told the Vazquezes that their
accommodations were upgraded to First Class in view oI their being Gold Card members oI
Cathay`s Marco Polo Club. She was honest in telling them that their seats were already given to
other passengers and the Business Class Section was Iully booked. Ms. Chiu might have Iailed
to consider the remedy oI oIIering the First Class seats to other passengers. But, we Iind no bad
Iaith in her Iailure to do so, even iI that amounted to an exercise oI poor judgment.











































Citibank vs Sabeniano, 504SCRA378

Facts: Petitioner Citibank is a banking Corp. duly authorized and existing under the laws oI the
United States oI America and licensed to do commercial banking activities and perIorm trust
Iunctions in the Philippines. Petitioner Investor's Finance Corp which did business under the
name and style oI FNCB Finance was an aIIiliate company oI petitioner Citibank, speciIically
handling money market placements Ior its clients. It is now by virtue oI doing a merger, doing a
business as part oI its successor-in-interest, BPI Card Finance Corp. the said petitioner shall still
be reIerred to FNCB Finance. Respondent Iiled a complaint against the petitioner on August 8,
1985. Respondent claimed to have substantial deposits and money market placements with the
petitioners as well as money market placements with Ayala Investment and Development Corp.,
the proceeds oI which were supposedly deposited automatically and directly to respondent's
accounts with petitioner Citibank. Respondent alleged that petitioners reIused to return her
deposits and proceeds oI her money market placements despite her repeated demands, thus
compelling him to Iile a civil case against the petitioners Ior "Accounting, Sum, oI Money and
Damages".

Issue: Whether or not petitioners are indeed liable to return the Ioregoing amounts, together with
appropriate interests and penalties to respondent.

Ruling: There is an evident absence oI any documentary evidence on the payments oI two
promissory notes and use oI proceeds thereoI by respondent Ior opening TD accounts. Pujeda,
and Tan based their testimonies not just on their memories but also on the documents on Iile, the
supposed documents on which they based those portions oI their testimony on the payment oI
PN's and the opening oI the TD accounts Irom the proceeds thereoI were never presented beIore
courts nor made part oI the records oI the case.
Best evidence rule requires that the highest available degree oI prooI must be produced.
Production oI the document itselI to the exclusion oI any secondary or substitutionary evidence.













Telengton Bros vs US Lines, 483SCRA458

Facts: Petitioner Telengton is a domestic corporation doing business under the name and style oI
La Suerte Cigar and Cigarette Factory while Respondent US Lines is a Ioreign corp. engaged in
the business oI overseas shipping. On June 22, 1981, respondent Iiled a suit against petitioner
seeking payment oI demurrage charges plus damages. The complaint alleged that between year
1079 and 1980, goods belonging to petitioners loaded on containers aboard the respondent's
vessel arrived in Manila Irom US ports. AIter 10 day Iree period, petitioner still Iailed to
withdraw its goods Irom the containers wherein the goods have been shipped. Petitioner incurred
on all those shipments a demurrage in the total amount oI P94, 000.00 which the latter reIused to
pay despite repeated demands. Petitioner Telengton as deIendant disclaimed liability alleging
that it has never entered into a contract nor signed an agreement to be bound by any rule on
demurrage. Petitioner also states that upon arrival oI the conveying vessels, it presented the Bills
oI Lading, and all other pertinent documents covering seven shipments and demanded Irom
respondent delivery oI all the goods covered by the said B/L's, only to be inIormed that
respondent had already unloaded the goods Irom the container vans, stripped oI their contents
which contents were then stored in warehouses.

Issue: Whether or not the petitioner was the one at Iault.

Ruling: The Court Iinds that petitioner was the one at Iault in not withstanding its cargo Irom the
containers wherein the goods were shipped within 10 day Iree period. ad it done so, then there
would not have been any need oI depositing the cargo in a warehouse. With regard the payment
oI demurrage, the court came to the conclusion that petitioner is used to paying demurrage
charges, judging Irom the petitioner's way oI conducting business in the past.
anent the removal oI goods belonging to petitioner Irom respondent van's and deposited
them in warehouses, this was done by the authority oI the Bureau oI Customs and Ior that
purpose, respondent addressed a letter-request to the Collector oI Customs, Ior permission to
remove the goods oI petitioner Irom its vans. ence, there is prior authorization.








CF Sharp vs Northwest Airlines, 381SCRA314

Facts: On May 9, 1974, respondent, through its Japan Branch, entered an International Passenger
Sales Agency Agreement with petitioner, authorizing the latter to sell its air transport tickets.
Petitioner, however, Iailed to remit the proceeds oI the ticket sales, Ior which reason the
respondent Iiled a collection suit against petitioner beIore the Tokyo District Court. The said
court ordered petitioner to pay respondent including damages Ior the delay. Unable to execute
the decision in Japan, respondent Iiled a case to enIorce said judgment with the regional trial
court oI Manila which dismissed the case. This was aIIirmed by the Court oI Appeals, and was
subsequently partly aIIirmed by the Supreme Court. CF Sharp was then ordered to pay
Northwest so that the RTC issued a writ oI execution oI decision ruling that Sharp is to pay
Northwest the sum oI 83,158,195 yen at the exchange rate prevailing on the date oI the Ioreign
judgment plus 6 per annum until Iully paid, 6 damages and 6 interest. An appeal, the Court
oI Appeals reduced the interest and it ruled that the basis oI the conversion oI Petitioner`s
liability in its peso equivalent should be the prevailing rate at the time oI payment and not the
rate on the date oI the Ioreign judgment.

Issue: Whether or not the basis Ior the payment oI the amount due is the value oI the currency at
the time oI the establishment oI the obligation.

Ruling: NO, the rule that the value oI currency at the time oI the establishment oI the obligation
shall be the basis oI payment Iinds application only when there is an oIIicial pronouncement or
declaration oI the existence oI an extraordinary inIlation or deIlation. ence, petitioners
contention that Article 1250 oI the Civil Code which provides that 'in case oI an extra ordinary
inIlation or deIlation oI the currency stipulated should supervene, the value oI the currency at the
time oI establishment oI the obligation shall be the basis oI payment, unless there is an
agreement to the contrary shall apply in this case is untenable.







Padilla vs Paredes, 328SCRA434

Facts: On October 20, 1988, petitioner Albert Padilla and spouses Floresco and Adelina Paredes
entered into a contract to sell involving an untitled parcel oI land in La Union. Under the
contract, petitioner undertook to secure title to the property in the spouses` names. OI the total
purchase price, Padilla was to pay a down payment upon signing oI the contract, and the balance
was to be paid within ten (10) days Irom the issuance oI a court order directing issuance oI a
decree oI registration oI the property.
On December 27, 1989, the court ordered the issuance oI a decree oI land registration Ior
the subject property. The property was titled in the name oI private respondent Adelina Paredes.
The spouses then demanded payment oI the balance oI the purchase price as per the letter oI the
contract to sell. Note that petitioner made several payments to the spouses even beIore the court
issued an order Ior the issuance oI a decree oI registration. Nevertheless, petitioner Iailed to pay
the Iull purchase price even beIore the expiration oI the period set. ThereaIter, private
respondents again demanded payment oI the remaining balance within Iive (5) days Irom receipt
oI letter oI demand otherwise, they would consider the contract rescinded.
Petitioner made a payment oI P100, 000 to private respondents on February 28, 1990.
owever, it was still insuIIicient to cover the Iull purchase price. ThereaIter, private respondents
oIIered to sell to petitioner one-halI oI the property Ior all the payments the latter had made,
instead oI rescinding the contract. II petitioner did not agree with the proposal, private
respondents said they would take steps to enIorce the automatic rescission oI the contract.
Petitioner did not accept the proposal instead; he instituted an action Ior speciIic perIormance
against the spouses, alleging that he had already substantially complied with his obligation under
the contract to sell.
AIter trial, the court ruled in Iavor oI petitioner, saying that even iI petitioner breached
the contract to sell, it was only a casual and slight breach that did not warrant rescission oI the
contract. Acceptance oI delayed payments estopped private respondents Irom exercising their
right oI rescission. It is noteworthy that receipts duly signed by private respondents evidenced
the payments made.
On appeal, the Court oI Appeals reversed the ruling oI the trial court and conIirmed the
spouses` rescission oI the contract to sell. Further, the Court oI Appeals ruled that private
respondents made a timely objection to petitioner`s partial payments when they oIIered to sell to
petitioner only one-halI oI the property Ior such partial payments.

Issue: Whether or not the respondent Court erred in holding that private respondents are entitled
to rescind their contract to sell the land to petitioner due to the latter`s Iailure to pay Iull purchase
price within the stipulated period

Ruling: NO. The Supreme Court sustained the judgment to the eIIect that private respondents
may validly cancel the contract to sell their land to petitioner. Moreover, petitioner admittedly
Iailed to comply with the obligation to pay the Iull purchase price within the stipulated period.
Under the contract, petitioner was to pay the balance oI the purchase price within ten (10) days
Irom the date oI the court order Ior the issuance oI the decree oI registration oI the property.
Private respondents claim, and petitioner admits, that there was delay in the IulIillment oI
petitioner`s obligation. The order oI the court was dated December 27, 1989. By April 1990, or
Iour (4) months later, petitioner still had not Iully paid the purchase price, clearly in violation oI
the contract. Indeed, petitioner`s oIIer to pay is clearly not the payment contemplated in the
contract. While he might have tendered payment through a check, this is not considered payment
until the check is encashed. Besides, a mere tender oI payment is not suIIicient. Consignation is
essential to extinguish petitioner`s obligation to pay the purchase price.

































Tibajia vs CA, 223SCRA163

Facts: A suit Ior collection oI sum oI money was ruled in Iavor oI Eden Tan and against the
spouses Norberto Jr. and Carmen Tibajia. AIter the decision was made Iinal, Tan Iiled a motion
Ior execution and levied upon the garnished Iunds which were deposited by the spouses with the
cashier oI the Regional Trial Court oI Pasig. The spouses, however, delivered to the deputy
sheriII the total money judgment in the Iorm oI Cashier`s Check (P262,750) and Cash
(P135,733.70). Tan reIused the payment and insisted upon the garnished Iunds to satisIy the
judgment obligation. The spouses Iiled a motion to liIt the writ oI execution on the ground that
the judgment debt had already been paid. The motion was denied.

Issue: Whether the spouses have satisIied the judgment obligation aIter the delivery oI the
cashier`s check and cash to the deputy sheriII.

Ruling: A check, whether a manager`s check or ordinary check, is not legal tender, and an oIIer
oI a check in payment oI a debt is not a valid tender oI payment and may be reIused receipt by
the obligee or creditor (Philippine Airlines vs. Court oI Appeals; Roman Catholic Bishop oI
Malolos vs. Intermediate Appellate Court). The court is not, by decision, sanctioning the use oI a
check Ior the payment oI obligations over the objection oI the creditor.



































Metrobank vs Cabilzo, 510SCRA259

Facts: Respondent Renato D. Cabilzo was one oI Metrobank`s clients who maintained a current
account with Metrobank Pasong Tamo Branch. On 12 November 1994, Cabilzo issued a
Metrobank Check No. 985988, payable to 'CAS and postdated on 24 November 1994 in the
amount oI One Thousand Pesos (P1,000.00). The check was drawn against Cabilzo`s Account
with Metrobank Pasong Tamo Branch and was paid by Cabilzo to a certain Mr. Marquez, as his
sales commission. Subsequently, the check was presented to Westmont Bank Ior payment.
Westmont Bank, in turn, indorsed the check to Metrobank Ior appropriate clearing. AIter the
entries thereon were examined, including the availability oI Iunds and the authenticity oI the
signature oI the drawer, Metrobank cleared the check Ior encashment in accordance with the
Philippine Clearing ouse Corporation (PCC)Rules.
On 16 November 1994, Cabilzo`s representative was at Metrobank Pasong Tamo Branch
to make some transaction when he was asked by a bank personnel iI Cabilzo had issued a check
in the amount oI P91,000.00 to which the Iormer replied in the negative. On the aIternoon oI the
same date, Cabilzo himselI called Metrobank to reiterate that he did not issue a check in the
amount oI P91, 000.00 and requested that the questioned check be returned to him Ior
veriIication, to which Metrobank complied.
Upon receipt oI the check, Cabilzo discovered that Metrobank Check No. 985988 which he
issued on 12 November 1994 in the amount oI P1,000.00 was altered to P91,000.00 and the date
24 November 1994 was changed to 14 November 1994.|6|
On 30 June 1995, Cabilzo, thru counsel, Iinally sent a letter-demand to Metrobank Ior the
payment oI P90,000.00, aIter deducting the original value oI the check in the amount oI
P1,000.00. Such written demand notwithstanding, Metrobank still Iailed or reIused to comply
with its obligation.
Consequently, Cabilzo instituted a civil action Ior damages against Metrobank beIore the
RTC oI Manila, Branch 13. On 19 April 1996, Metrobank Iiled a Third-Party Complaint|12|
against Westmont Bank on account oI its unqualiIied indorsement stamped at the dorsal side oI
the check which the Iormer relied upon in clearing what turned out to be a materially altered
check.

Issue: Whether or not Metrobank, as the drawee bank is liable Ior the alterations in the subject
check bearing the authentic signature, as the bearer thereoI.

Ruling: An alteration is said to be material iI it changes the eIIect oI the instrument. It means
that an unauthorized change in an instrument that purports to modiIy in any respect the
obligation oI a party or an unauthorized addition oI words or numbers or other change to an
incomplete instrument relating to the obligation oI a party. In the case at bar, the check was
altered so that the amount was increased Irom P1,000.00 to P91,000.00 and the date was
changed Irom 24 November 1994 to 14 November 1994. Apparently, since the entries altered
were among those enumerated under Section 1 and 125, namely, the sum oI money payable and
the date oI the check, the instant controversy thereIore squarely Ialls within the purview oI
material alteration. When the drawee bank pays a materially altered check, it violates the terms
oI the check, as well as its duty to charge its client`s account only Ior bona Iide disbursements he
had made. Since the drawee bank, in the instant case, did not pay according to the original tenor
oI the instrument, as directed by the drawer, then it has no right to claim reimbursement Irom the
drawer, much less, the right to deduct the erroneous payment it made Irom the drawer`s account
which it was expected to treat with utmost Iidelity.






















































Palanca vs Guides, 452SCRA451

Facts: On 23 August 1983, petitioner Simplicio Palanca executed a Contract to Sell a parcel oI
land on installment with a certain JoseIa A. Jopson Ior P11,250.00. In accordance with the
contract, Jopson paid petitioner P1, 650.00 as her down payment, leaving a balance oI P9,
600.00.
Sometime in December 1983, Jopson assigned and transIerred all her rights and interests
over the property in question in Iavor oI the respondent Ulyssis Guides (hereaIter simply
respondent). In the deed oI transIer, respondent undertook to assume the balance oI Jopson`s
account and to pay the same in accordance with the terms and conditions oI the Contract to Sell.
AIter reimbursing Jopson P1,650.00, respondent acquired possession oI the lot and paid
petitioner the stipulated amortizations which were in turn acknowledged by petitioner through
receipts issued in the name oI respondent.
Believing that she had Iully paid the purchase price oI the lot, respondent veriIied the status
oI the lot with the Register oI Deeds, only to Iind out that title thereto was not in the name oI the
petitioner as it was covered by TransIer CertiIicate oI Title No. 105742 issued on 26 September
1978 in the name oI a certain Carissa T. de Leon. Respondent went to petitioner`s oIIice to
secure the title to the lot, but petitioner inIormed her that she could not as she still had unpaid
accounts. ThereaIter, respondent, through a lawyer, sent a letter to petitioner demanding
compliance with his obligation and the release oI the title in her name. As petitioner did not
heed her demands, respondent, joined by her husband, Iiled a Complaint Ior speciIic
perIormance with damages on 16 December 1987.
Petitioner sought the dismissal oI the complaint on the ground oI respondent`s alleged
Iailure to comply with the mandatory requirement oI Presidential Decree (P.D.) No. 1508, since
the submitted certiIication reIerred to a diIIerent deIendant, Oscar Rivera who was the manager
oI petitioner`s subdivision, and not petitioner himselI. Opposing petitioner`s motion, respondent
maniIested that Rivera appeared in the barangay conIerence on behalI oI petitioner as its
subdivision manager. Attached to the opposition was the aIIidavit oI the barangay secretary who
admitted that he thought that Rivera should be the one named in the certiIication since he was the
one who appeared at the hearing. The same secretary likewise stated that the date 'September 8,
1986 was a clerical error and should have appeared as 'September 8, 1987| instead. The trial
court denied petitioner`s motion to dismiss, noting that the error in the designation oI the parties
was already corrected by the Lupon Secretary and that there was substantial compliance with
P.D. No. 1508.

Issue:Whether or not the petitioner was unjustly deprived oI his right to present evidence in
support oI his cause when the trial court considered him to have rested his case when he Iailed to
appear during the 10 November 1995 hearing.

Ruling: Petitioner`s main contention is that he was denied due process. The Court notes that
petitioner was scheduled to present his evidence on 19 September 1995, but neither he nor his
counsel appeared. The hearing was reset to 06 November 1995 and subsequently reset Iive (5)
days later to 10 November. Contrary to petitioner`s protestations oI being unaware oI the
hearing, a careIul review oI the records oI the case reveals that Atty. Cario, on behalI oI Atty.
Novero, was present during the 06 November 1995 hearing. At the hearing, both parties agreed
to the resetting oI the presentation oI petitioner`s evidence to 10 November 1995. The same
Atty. Cario who appeared at least twice beIore the trial court Ior the petitioner signed the
Minutes oI the 06 November 1995 hearing.
The most basic tenet oI due process is the right to be heard. A court denies a party due
process iI it renders its orders without giving such party an opportunity to present its evidence.
Thus, in the application oI this principle, what is sought to be saIeguarded against is not the lack
oI previous notice, but the denial oI the opportunity to be heard. The question is not whether
petitioner succeeded in deIending his interest, but whether he had the opportunity to present his
side. Petitioner was provided opportunities to present his case but these he utterly squandered.
The Court likewise aIIirms the Iinding that there was substantial compliance with Sec. 6 oI
P.D. No. 1508, respondent having been able to suIIiciently explain the clerical errors in the
certiIication to Iile action earlier submitted and to submit the revised certiIication which bears
the proper caption oI the case. Petitioner`s attempt to make an issue by distinguishing himselI
Irom his manager Oscar Rivera to show that the barangay reconciliation proceedings had not
been undertaken Iails given the Iact that Rivera appeared at the hearings in behalI and at the
behest oI petitioner who was his subdivision manager.































PCIB vs CA, 481SCRA127

Facts: PCIB contracted WGCC to construct the 5th to 21st Iloors oI PCIB Tower II in Makati.
Alleging that the 'granite Iinish proved to be deIective such that aIter all eIIorts at negotiations
proved Iutile it hired another contractor to redo the 'deIective Iinish, but that WGCC reIused
to pay it actual damages incurred in the process, PCIB Iiled a request Ior arbitration with the
Construction Industry Arbitration Commission (CIAC), which, praying that WGCC be held
liable Ior 'construction deIiciencies.WGCC denied PCIB`s claim, alleging that it accomplished
the project IaithIully and in accordance with the speciIications-requirements oI PCIB which
accepted it aIter due inspection. It counterclaimed that PCIB was actually indebted to it Ior
material cost adjustment since the cost oI materials substantially increased in the course oI the
construction oI the project.The CIAC, by Decision oI June 21, 1996, Iound that PCIB was
entitled to recover Irom WGCC the sum oI P9, 741,829.00 representing cost oI repairs done by
another contractor on the project. On WGCC`s counterclaim, Iinding that under the parties`
contract, increase Ior labor and materials under certain conditions was allowed but that PCIB
presented no strong, or at best, token opposition to the evidence presented by WGCC Ior the
escalated cost oI materials, the CIAC awarded WGCC the amount oI P5, 777,157.84.
By its assailed Resolution, the CA granted WGCC's Motion to Dismiss PCB's
petition upon a finding that indeed PCB received a copy of the CAC decision on June
24, 1996 and, therefore, its petition was belatedly filed. On the nature of the petition,
the CA held that an original action for certiorari under Rule 65 and a petition for review
under Circular 1-95 of the Supreme Court cannot be the subject of a single pleading.

Issue:Whether or not the respondent court gravely abused its discretion to the grave and
irreparable damage to the petitioner and Iailed or unlawIully neglected to do an act which the law
enjoins it to do when it dismissed the petition in CA.

Ruling: The CIAC Rules oI Procedure does not contain a provision similar to Section 2, Rule 13
oI the Revised Rules oI Court, reiterated in the 1997 Rules oI Civil Procedure, which provides
that service to any party represented by counsel should be made upon his counsel, unless service
upon the party himselI is ordered by the court. Instead, Section 7, Article XV oI the CIAC Rules
oI Procedure provides:
Section 7. NotiIication oI Award to Parties Once an award has been made, provided that the
costs oI the arbitration have been Iully paid to the Secretariat by the parties or by one oI them,
the Secretariat shall notiIy the parties oI the text signed by the Arbitrator or Arbitral
Tribunal.Additional copies certiIied true by the Executive Director oI the Secretariat shall be
made available, on request and at any time, to the parties or their counsel but to no one else.
(Emphasis and underscoring supplied)
From the immediately-quoted provision oI the CIAC Rules, it is the parties who are to be
notiIied oI the 'text oI the CIAC decision. This answers PCIB`s counsel`s jarring complaint that
he was not oIIicially served with a copy oI the CIAC decision.
In Iine, copy oI the CIAC decision having admittedly been served on and received by
PCIB on June 24, 1996, PCIB`s counsel cannot assail the validity oI such service by now
claiming that the same was ineIIective as it was not served on him (counsel) as the duly
authorized representative oI PCIB.
It is an elementary rule oI procedure that 'perIection oI an appeal within the reglementary
period is not only mandatory but also jurisdictional so that Iailure to do so renders the questioned
decision Iinal and executory, and deprives an appellate court oI jurisdiction to alter the Iinal
judgment, much less to entertain the appeal.































Lagon vs ooven Comalco, 349SCRA363

Factcs: Petitioner Jose V. Lagon is a businessman and owner oI a commercial building in
Tacurong, Sultan Kudarat. Respondent OOVEN on the other hand is a domestic corporation
known to be the biggest manuIacturer and installer oI aluminum materials in the country with
branch oIIice at E. Quirino Avenue, Davao City.
Sometime in April 1981 Lagon and OOVEN entered into two (2) contracts, both
denominated Proposal, whereby Ior a total consideration oI P104,870.00 OOVEN agreed to
sell and install various aluminum materials in Lagon`s commercial building in Tacurong, Sultan
Kudarat. Upon execution oI the contracts, Lagon paid OOVEN P48,00.00 in advance.
On 24 February 1987 respondent OOVEN commenced an action Ior sum oI money
with damages and attorney`s Iees against petitioner Lagon beIore the Regional Trial Court oI
Davao City. OOVEN alleged in its complaint that on diIIerent occasions, it delivered and
installed several construction materials in the commercial building oI Lagon pursuant to their
contracts; that the total cost oI the labor and materials amounted to P117,329.00 out oI which
P69,329.00 remained unpaid even aIter the completion oI the project; and, despite repeated
demands, Lagon Iailed and reIused to liquidate his indebtedness. OOVEN also prayed Ior
attorney`s Iees and litigation expenses, and in support thereoI, presented its OIC, Alberto
Villanueva, and its employee, Ernesto Argente, and other witnesses, as well as several
documentary evidence consisting mainly oI the two (2) proposals, invoices and delivery receipts.

Issue: Whether all the materials speciIied in the contracts had been delivered and installed by
respondent in petitioner`s commercial building in Tacurong, Sultan Kudarat.

Ruling: As above speciIically stated, deliveries must be made to the buyer or his duly authorized
representative named in the contracts. In other words, unless the buyer speciIically designated
someone to receive the delivery oI materials and his name is written on the Proposals opposite
the words "Authorized Receiver/Depository," the seller is under obligation to deliver to the buyer
only and to no other person; otherwise, the delivery would be invalid and the seller would not be
discharged Irom liability. In the present case, petitioner did not name any person in the
Proposals who would receive the deliveries in his behalI, which meant that OOVEN was
bound to deliver exclusively to petitioner.
But we agree with petitioner that he is entitled to moral damages. OOVEN's bad Iaith
lies not so much on its breach oI contract - as there was no showing that its Iailure to comply
with its part oI the bargain was motivated by ill will or done with Iraudulent intent - but rather on
its appalling temerity to sue petitioner Ior payment oI an alleged unpaid balance oI the purchase
price notwithstanding knowledge oI its Iailure to make complete delivery and installation oI all
the materials under their contracts. It is immaterial that, aIter the trial, petitioner was Iound to be
liable to respondent to the extent oI P6,377.66. Petitioner's right to withhold Iull payment oI the
purchase price prior to the delivery and installation oI all the merchandise cannot be denied since
under the contracts the balance oI the purchase price became due and demandable only upon the
completion oI the project. Consequently, the resulting social humiliation and damage to
petitioner's reputation as a respected businessman in the community, occasioned by the Iiling oI
this suit provide suIIicient grounds Ior the award oI P50,000.00 as moral damages.
Moreover, considering the Iact that petitioner was drawn into this litigation by respondent
and was compelled to hire an attorney to protect and deIend his interest, and taking into account
the work done by said attorney throughout the proceedings, as reIlected in the record, we deem it
just and equitable to award attorney's Iees Ior petitioner in the amount oI P30,000.00. In addition,
we agree with the trial court that petitioner is entitled to recover P46,554.50 as actual damages
including litigation expenses as this amount is suIIiciently supported by the evidence.


















BPI vs CA, 232SCRA302

Facts: Private respondent Eastern Plywood Corporation and Benigno D. Lim, an oIIicer and
stockholder oI Eastern held at least one joint bank account. With the Commercial Bank and
Trust Co. the predecessor-in-interest oI the Petitioner Bank BPI.
Sometimes in March 1975 a joint checking account with Lim in the amount oI
Php.120,000 was opened by Mariano Velasco with Iund withdrawn Irom the account oI eastern
and Lim. Eastern obtained a loan oI Php.75,000 Irom CBCT and issue a negotiable promissory
note Ior Php.73,000.00 payable on demand to the order oI CBCT with interest oI 14 per annum
in addition, Eastern and Lim and CBCT signed another document entitled 'old Out
Agreement.

Issue: Whether or not BPI can demand payment oI the load oI Php.73,000.00 despite the
existence oI the oldout Agreement and whether BPI is still liable to private respondent on the
account subject oI the oldout Agreement aIter withdrawal by the heirs oI Velasco.

Ruling: The Account was proved and established to belong to the Eastern even iI it was
deposited in the name oI Lim and Velasco, Eastern has the right to withdraw it or to demand
payment thereoI. BPI cannot be relieved oI its duty to pay Eastern simply because it alreadt
allowed the heirs oI Velasco to withdraw the whole balance oI the account. The authorization
given to the heirs oI Velasco cannot be construed as Iinal determination or adjudication that the
account belong to Velasco. BPI was not ordered to release the accound to said heirs.
Payment made by the debtor to the wrong party does not extinguish the obligation or to
the creditor who without Iault or negligence even the debtor acted in good Iaith and did not
relinquish the obligation to the true depositor.



















































Audion Electric vs NLRC, 308SCRA340

Facts: Nicolas Madolid was employed by Audion Electric Company on June 30, 1976 to render
services as Iabricator, timekeeper and other various services. e continuously rendered service
and was assigned in diIIerent oIIices or projects as helper electrician, stockman and timekeeper.
e has rendered thirteen (13) years oI continuous, loyal and dedicated service with a clean
record. Nonetheless, he was surprised to receive a letter on August 3, 1989 inIorming him that he
will be considered terminated aIter the turnover oI materials, including Audion`s tools and
equipments not later than August 15. Naturally, Madolid claims that he was dismissed without
justiIiable cause and without due process and that his dismissal was done in bad Iaith that renders
the dismissal illegal. e claims that he is entitled to reinstatement with Iull back wages including
all other money claims.
On November 15, 1990, Labor Arbiter Cresencio R. Iniego rendered a decision in Iavor
oI Madolid. Audion Electric Company was ordered to reinstate Madolid to his Iormer position
with Iull back wages. Awards oI overtime pay, minimum wage increase adjustment,
proportionate 13th month pay as well as moral and exemplary damages were also pronounced.
Petitioner Audion appealed to the National Labor Relations Commission but the same
was denied. Respondent commission also denied the motion Ior reconsideration.

Issue: Whether or not the respondent Commission erred in sustaining the awards Ior money
claims in the absence oI any substantial evidence supporting the same.

Ruling: NO. Private respondent Madolid clearly speciIied in his aIIidavit the bases oI his money
claims including his status as a regular employee and not a project employee. Furthermore,
petitioner Iailed to rebut the claims oI private respondent. It Iailed to show prooI by means oI
payroll or other evidence to disprove the claim oI private respondent. Petitioner was given the
opportunity to cross-examine private respondent yet IorIeited such chance when it did not attend
the hearing consequently Iailing to rebut the claims oI Madolid. It is noteworthy that as a rule,
one who pleads payment has the burden oI proving it. Even where the plaintiII must allege non-
payment, the general rule is that the burden rests on the deIendant to prove payment, rather than
on the plaintiII to prove non-payment. The debtor has the burden oI showing with legal certainty
that the obligation has been discharged by payment. In this case, Audion was not able to comply
with the aIorementioned rule as maniIested.


































Binalbagan vs CA, 256SCRA44

Facts: On May 11, 1967, private respondents, through Angelina P. Echaus, in her capacity as
Judicial Administrator oI the intestate estate oI Luis B. Puentevella, executed a Contract to Sell
and a Deed oI Sale oI Iorty-two subdivision lots within the Phib-Khik Subdivision oI the
Puentevella Iamily, conveying and transIerring said lots to petitioner Binalbagan Tech., Inc.
(hereinaIter reIerred to as Binalbagan). In turn Binalbagan, through its president, petitioner
ermilo J. Nava (hereinaIter reIerred to as Nava), executed an Acknowledgment oI Debt with
Mortgage Agreement, mortgaging said lots in Iavor oI the estate oI Puentevella.
Upon the transIer to Binalbagan oI titles to the 42 subdivision lots, said petitioner took
possession oI the lots and the building and improvements thereon. Binalbagan started operating a
school on the property Irom 1967 when the titles and possession oI the lots were transIerred to it.
When the Supreme Court dissolved the aIoresaid injunction issued by the Court oI
Appeals, possession oI the building and other property was taken Irom petitioner Binalbagan and
given to the third-party claimants, the de la Cruz spouses. Petitioner Binalbagan transIerred its
school to another location. In the meantime, an appeal was interposed by the deIendants in Civil
Case No. 293 with the Court oI Appeals where the appeal was docketed as CA-G.R. No. 42211-
R. On October 30, 1978, the Court oI Appeals rendered judgment, reversing the appealed
decision in Civil Case No. 293. On April 29, 1981, judgment was entered in CA-G.R. No. 42211,
and the record oI the case was remanded to the court oI origin on December 22, 1981.
Consequently, in 1982 the judgment in Civil Case No. 7435 was Iinally executed and enIorced,
and petitioner was restored to the possession oI the subdivision lots an May 31, 1982. It will be
noted that petitioner was not in possession oI the lots Irom 1974 to May 31, 1982.
AIter petitioner Binalbagan was again placed in possession oI the subdivision lots,
private respondent Angelina Echaus demanded payment Irom petitioner Binalbagan Ior the
subdivision lots, enclosing in the letter oI demand a statement oI account as oI September 1982
showing a total amount due oI P367,509.93, representing the price oI the land and accrued
interest as oI that date.
As petitioner Binalbagan Iailed to eIIect payment, private respondent Angelina P. Echaus
Iiled on October 8, 1982 Civil Case No. 1354 oI the Regional Trial Court oI the Sixth Judicial
Region stationed in imamaylan, Negros Occidental against petitioners Ior recovery oI title and
damages. An amended complaint was Iiled by private respondent Angelina P. Echaus by
including her mother, brothers, and sisters as co-plaintiIIs, which was admitted by the trial court
on March 18, 1983.

Issue: Whether private respondents' cause oI action in Civil Case No. 1354 is barred by
prescription.

Ruling: The Supreme Court agreed with the Court oI Appeals. A party to a contract cannot
demand perIormance oI the other party's obligations unless he is in a position to comply with his
own obligations. Similarly, the right to rescind a contract can be demanded only iI a party thereto
is ready, willing and able to comply with his own obligations thereunder (Art. 1191, Civil Code;
Seva vs. Berwin, 48 Phil. 581 |1926|; Paras, Civil Code oI the Philippines, 12th ed. Vol. IV, p.
200). In a contract oI sale, the vendor is bound to transIer the ownership oI and deliver, as well
as warrant, the thing which is the object oI the sale (Art. 1495, Civil Code); he warrants that the
buyer shall, Irom the time ownership is passed, have and enjoy the legal and peaceIul possession
oI the thing
Art. 1547. In a contract oI sale, unless a contrary intention appears, there is:
(1) An implied warranty on the part oI the seller that he has a right
to sell the thing at the time when the ownership is to pass, and
that the buyer shall Irom that time have and enjoy the legal and
peaceIul possession oI the thing.


































Lorenzo Shipping vs BJ Marthel, 443SCRA163

Facts: From 1987 up to the institution oI this case, respondent supplied petitioner with spare
parts Ior the latter`s marine engines. Sometime in 1989, petitioner asked respondent Ior a
quotation Ior various machine parts. Acceding to this request, respondent Iurnished petitioner
with a Iormal quotation. Petitioner thereaIter issued to respondent Purchase Order Ior the
procurement oI one set oI cylinder liner, valued at P477,000, to be used Ior M/V Dadiangas
Express. Instead oI paying the 25 down payment Ior the Iirst cylinder liner, petitioner issued
in Iavor oI respondent ten postdated check to be drawn against the Iormer`s account with Allied
Banking Corporation. Subsequently, petitioner issued another purchase order Ior yet another
unit oI cylinder liner. This purchase order stated the term oI payment to be '25 upon delivery,
balance payable in 5 bi-monthly equal installments. Like the purchase order oI 02 November
1989, the second purchase order did not state the date oI the cylinder liner`s delivery. On 26
January 1990, respondent deposited petitioner`s check that was postdated 18 January 1990;
however, the same was dishonored by the drawee bank due to insuIIiciency oI Iunds. Respondent
thereaIter placed the order Ior the two cylinder liners with its principal in Japan, Daiei Sangyo
Co. Ltd., by opening a letter oI credit on 23 February 1990 under its own name with the First
Interstate Bank oI Tokyo. On 20 April 1990, Pajarillo delivered the two cylinder liners at
petitioner`s warehouse in North arbor, Manila. The sales invoices evidencing the delivery oI
the cylinder liners both contain the notation 'subject to veriIication under which the signature oI
Eric Go, petitioner`s warehouseman, appeared.
Respondent thereaIter sent a Statement oI Account dated 15 November 1990to petitioner.
While the other items listed in said statement oI account were Iully paid by petitioner, the two
cylinder liners delivered to petitioner on 20 April 1990 remained unsettled. Consequently, Mr.
Alejandro Kanaan, Jr., respondent`s vice-president, sent a demand letter dated 02 January 1991
to petitioner requiring the latter to pay the value oI the cylinder liners subjects oI this case. Due
to the Iailure oI the parties to settle the matter, respondent Iiled an action Ior sum oI money and
damages beIore the Regional Trial Court (RTC) oI Makati City.

Issue: Whether or not respondent incurred delay in perIorming its obligation under the contract
oI sale and whether or not said contract was validly rescinded by petitioner.

Ruling: It is a cardinal rule in interpretation oI contracts that iI the terms thereoI are clear and
leave no doubt as to the intention oI the contracting parties, the literal meaning shall control.
owever, in order to ascertain the intention oI the parties, their contemporaneous and subsequent
acts should be considered. While this Court recognizes the principle that contracts are respected
as the law between the contracting parties, this principle is tempered by the rule that the intention
oI the parties is primordial and 'once the intention oI the parties has been ascertained, that
element is deemed as an integral part oI the contract as though it has been originally expressed in
unequivocal terms.
In the present case, we cannot subscribe to the position oI petitioner that the documents, by
themselves, embody the terms oI the sale oI the cylinder liners. One can easily glean the
signiIicant diIIerences in the terms as stated in the Iormal quotation and Purchase Order No.
13839 with regard to the due date oI the down payment Ior the Iirst cylinder liner and the date oI
its delivery as well as Purchase Order No. 14011 with respect to the date oI delivery oI the
second cylinder liner. While the quotation provided by respondent evidently stated that the
cylinder liners were supposed to be delivered within two months Irom receipt oI the Iirm order oI
petitioner and that the 25 down payment was due upon the cylinder liners` delivery, the
purchase orders prepared by petitioner clearly omitted these signiIicant items. The petitioner`s
Purchase Order No. 13839 made no mention at all oI the due dates oI delivery oI the Iirst
cylinder liner and oI the payment oI 25 down payment. Its Purchase Order No. 14011 likewise
did not indicate the due date oI delivery oI the second cylinder liner.
ere, there is no showing that petitioner notiIied respondent oI its intention to rescind the
contract oI sale between them. Quite the contrary, respondent`s act oI proceeding with the
opening oI an irrevocable letter oI credit on 23 February 1990 belies petitioner`s claim that it
notiIied respondent oI the cancellation oI the contract oI sale. Truly, no prudent businessman
would pursue such action knowing that the contract oI sale, Ior which the letter oI credit was
opened, was already rescinded by the other party.
























































Acquintey vs Tibong, 511SCRA414

Facts: Petitioner AgriIina and Respondent Felicidad were classmates at the University oI
Pangasinan. Felicidad`s husband Rico also happened to be a distant relative oI AgriIina. Upon
Felicidad`s prodding, AgriIina agreed to lend money to Felicidad. According to Felicidad,
AgriIina would be earning interests higher than those given by the bank Ior her money.
Felicidad told AgriIina that since she (Felicidad) was engaged in the sale oI dry goods at the GP
Shopping Arcade, she would use the money to buy bonnels and thread. Thus, AgriIina lent a
total sum oI P773,000.00 to Felicidad, and each loan transaction was covered by either a
promissory note or an acknowledgment receipt. AgriIina stated that she had lost the receipts
signed by Felicidad Ior the Iollowing amounts: P100, 000.00, P34,000.00 and P2,000.00. On
May 6, 1999, petitioner AgriIina Aquintey Iiled beIore the RTC oI Baguio City, a complaint Ior
sum oI money and damages against the respondents, spouses Felicidad and Rico Tibong.
AgriIina alleged that Felicidad had secured loans Irom her on several occasions, at monthly
interest rates oI 6 to 7. Despite demands, the spouses Tibong Iailed to pay their outstanding
loan, amounting to P773, 000.00 exclusive oI interests.

Issue: Whether the obligation oI respondents to pay the balance oI their loans, including interest,
was partially extinguished by the execution oI the deeds oI assignment in Iavor oI petitioner,
relative to the loans oI Edna Papat-iw, elen Cabang, Antoinette Manuel, and Fely Cirilo in the
total amount oI P371,000.00.

Ruling: There is no longer a need Ior the Court to still resolve the issue oI whether respondents`
obligation to pay the balance oI their loan account to petitioner was partially extinguished by the
promissory notes executed by Juliet Tibong, Corazon Dalisay, Rita Chomacog, Carmelita
Casuga, Merlinda Gelacio and Antoinette Manuel because, as admitted by petitioner, she was
able to collect the amounts under the notes Irom said debtors and applied them to respondents`
accounts.
Under Article 1231(b) oI the New Civil Code, novation is enumerated as one oI the ways
by which obligations are extinguished. Obligations may be modiIied by changing their object or
principal creditor or by substituting the person oI the debtor. The burden to prove the deIense
that an obligation has been extinguished by novation Ialls on the debtor.
We Iind in this case that the CA correctly Iound that respondents` obligation to pay the balance
oI their account with petitioner was extinguished, pro tanto, by the deeds oI assignment oI credit
executed by respondent Felicidad in Iavor oI petitioner.
An assignment oI credit is an agreement by virtue oI which the owner oI a credit, known as the
assignor, by a legal cause, such as sale, dation in payment, exchange or donation, and without the
consent oI the debtor, transIers his credit and accessory rights to another, known as the assignee,
who acquires the power to enIorce it to the same extent as the assignor could enIorce it against
the debtor. It may be in the Iorm oI sale, but at times it may constitute a dation in payment, such
as when a debtor, in order to obtain a release Irom his debt, assigns to his creditor a credit he has
against a third person.|


Vda de Jayme vs CA, 390SCRA380

Facts: The spouses Graciano and Mamerta Jayme are the registered owners oI Lot 2700, situated
in the Municipality oI Mandaue (now Mandaue City), Cebu, consisting oI 2,568 sq.m. and
covered by TransIer CertiIicate oI Title No. 8290.
On January 8, 1973, they entered into a Contract oI Lease with George Neri, president oI
Airland Motors Corporation (now Cebu Asiancars Inc.), covering one-halI oI Lot 2700. The
lease was Ior twenty (20) years.
The terms and conditions oI the lease contract stipulated that Cebu Asiancars Inc.
(hereaIter, Asiancars) may use the leased premises as a collateral to secure payment oI a loan
which Asiancars may obtain Irom any bank, provided that the proceeds oI the loan shall be used
solely Ior the construction oI a building which, upon the termination oI the lease or the
voluntary surrender oI the leased premises beIore the expiration oI the contract, shall
automatically become the property oI the Jayme spouses (the lessors).
A Special Power oI Attorney dated January 26, 1974, was executed in Iavor oI
respondent George Neri, who used the lot to secure a loan oI P300,000 Irom the General Bank
and Trust Company. The loan was Iully paid on August 14, 1977.
Meeting Iinancial diIIiculties and incurring an outstanding balance on the loan, Asiancars
conveyed ownership oI the building on the leased premises to MBTC, by way oI 'dacion en
pago. The building was valued at P980,000 and the amount was applied as partial payment Ior
the loan. There still remained a balance oI P2,942,449.66, which Asiancars Iailed to pay.
Eventually, MBTC extrajudicially Ioreclosed the mortgage. A public auction was held on
February 4, 1981. MBTC was the highest bidder Ior P1,067,344.35. A certiIicate oI sale was
issued and was registered with the Register oI Deeds on February 23, 1981.

Issues: 1. Whether or not the REM should be annulled on the ground oI vitiated consent;
2. Whether or not the dacion en pago by Asiancars in Iavor oI MBTC is valid and
binding despite the stipulation in the lease contract that ownership oI the building will vest on the
Jaymes at the termination oI the lease.

Ruling: The Iacts show that the spouses aIIixed their signature on the Deed oI Real Estate
Mortgage, in the presence oI two instrumental witnesses, and duly notarized by Atty. RodolIo .
Cabrera. As a notarized document, it has in its Iavor the presumption oI regularity, and to
overcome this presumption, there must be evidence that is clear, convincing and more than
merely preponderant that there was irregularity in its execution; otherwise, the document should
be upheld.
The Deed oI Real Estate Mortgage entered into by the Jayme spouses partake oI a Third
Party Mortgage under Art. 2085 (3) oI the Civil Code which reads:
The Iollowing requisites are essential to the contracts oI pledge and mortgage:(3) That
the persons constituting the pledge or mortgage have the Iree disposal oI their property, and in
the absence thereoI, that they be legally authorized Ior the purpose.
Third persons who are not parties to the principal obligation may secure the latter by
pledging or mortgaging their own property.
Finally the Supreme Court stated that bad Iaith attended Asiancars` transIer oI the
building to MBTC. Asiancars was well aware oI its covenant with the Jaymes that the building`s
ownership was to be transIerred to the Jaymes upon termination oI the lease. Indeed, petitioners
suIIered mental anxiety and nervous shock upon learning that the ownership oI the building
standing on their property had already been transIerred to MBTC. The apparent disregard oI
petitioners` right by Asiancars and other private respondents provides enough basis Ior an award
oI moral as well as exemplary damages by the appellate court.















Caltex vs IAC, 13 November 1992

Facts: On January 12, 1978, private respondent Asia PaciIic Airways Inc. entered into an
agreement with petitioner Caltex (Philippines) Inc., whereby petitioner agreed to supply private
respondent's aviation Iuel requirements Ior two (2) years, covering the period Irom January 1,
1978 until December 31, 1979. Pursuant thereto, petitioner supplied private respondent's Iuel
supply requirements.
As oI June 30, 1980, private respondent had an outstanding obligation to petitioner in the
total amount oI P4,072,682.13, representing the unpaid price oI the Iuel supplied. To settle this
outstanding obligation, private respondent executed a Deed oI Assignment dated July 31, 1980,
wherein it assigned to petitioner its receivables or reIunds oI Special Fund Import Payments Irom
the National Treasury oI the Philippines to be applied as payment oI the amount oI
P4,072,683.13 which private respondent owed to petitioner.
On February 12, 1981, pursuant to the Deed oI Assignment, Treasury Warrant No.
B04708613 in the amount oI P5,475,294.00 representing the reIund to respondent oI Special
Fund Import Payment on its Iuel purchases was issued by the National Treasury in Iavor oI
petitioner.
Four days later, on February 16, 1981, private respondent, having learned that the amount
remitted to petitioner exceeded the amount covered by the Deed oI Assignment, wrote a letter to
petitioner, requesting a reIund oI said excess. Petitioner, acting on said request, made a reIund in
the amount oI P900,000.00 plus in Iavor oI private respondent. The latter, believing that it was
entitled to a larger amount by way oI reIund, wrote petitioner anew, demanding the reIund oI the
remaining amount.
In response thereto, petitioner inIormed private respondent that the amount not returned
(P510,550.63) represented interest and service charges at the rate oI 18 per annum on the
unpaid and overdue account oI respondent Irom June 1, 1980 to July 31, 1981. Thus, on
September 13, 1982, private respondent Iiled a complaint against petitioner in the Regional Trial
Court oI Manila, to collect the sum oI P510,550.63.00. On November 7, 1983, the trial court
rendered its decision dismissing the complaint, as well as the counterclaim Iiled by deIendant
therein. Private respondent (plaintiII) appealed to the Intermediate Appellate Court (IAC).
On August 27, 1985, a decision was rendered by the said appellate court reversing the
decision oI the trial court, and ordering petitioner to return the amount oI P510,550.63 to private
respondent.

Issue: Whether or not the Deed oI Assignment entered into by the parties constituted dacion en
pago, as ruled by the appellate court, such that the obligation is totally extinguished, hence aIter
said date, no interest and service charges could anymore be imposed on private respondent, so
that petitioner was not legally authorized to deduct the amount oI P510,550.63 as interest and
service charges on the unpaid and overdue accounts oI private respondent.

Ruling: The Supreme Court ruled that the Deed oI Assignment executed by the parties on July
31, 1980 is not a dation in payment and did not totally extinguish respondent's obligations as
stated therein. The then Intermediate Appellate Court ruled that the three (3) requisites oI dacion
en pago are all present in the instant case, and concluded that the Deed oI Assignment oI July 31,
1980 constitutes a dacion in payment provided Ior in Article 1245 oI the Civil Code which has
the eIIect oI extinguishing the obligation, thus supporting the claim oI private respondent Ior the
return oI the amount retained by petitioner.
The dation in payment extinguishes the obligation to the extent oI the value oI the thing
delivered, either as agreed upon by the parties or as may be proved, unless the parties by
agreement, express or implied, or by their silence, consider the thing as equivalent to the
obligation, in which case the obligation is totally extinguished." From the above, it is clear that a
dation in payment does not necessarily mean total extinguishment oI the obligation. The
obligation is totally extinguished only when the parties, by agreement, express or implied, or by
their silence, consider the thing as equivalent to the obligation.































Lo vs CA, 411SCRA523

Facts: Petitioner acquired the subject parcels oI land in an auction sale on November 9, 1995 Ior
P20,170,000 Irom the Land Bank oI the Philippines (Land Bank). Private respondent National
Onion Growers Cooperative Marketing Association, Inc., an agricultural cooperative, was the
occupant oI the disputed parcels oI land under a subsisting contract oI lease with Land Bank. The
lease was valid until December 31, 1995.
Upon the expiration oI the lease contract, petitioner demanded that private respondent
vacate the leased premises and surrender its possession to him. Private respondent reIused on the
ground that it was, at the time, contesting petitioner`s acquisition oI the parcels oI land in
question in an action Ior annulment oI sale, redemption and damages.
On February 23, 1996, petitioner Iiled an action Ior ejectment beIore the Metropolitan
Trial Court oI Malabon, Branch 55. e asked, inter alia, Ior the imposition oI the contractually
stipulated penalty oI P5,000 per day oI delay in surrendering the possession oI the property to
him. On September 3, 1996, the trial court decided the case in Iavor oI petitioner: On appeal to
the Regional Trial Court oI Malabon, Branch 74, the MTC decision was aIIirmed in toto on
August 29, 1997. Private respondent`s subsequent motion Ior reconsideration oI the RTC
decision was denied on November 26, 1997.

Issue: Whether or not the petition should be granted.

Ruling: The question oI whether a penalty is reasonable or iniquitous is addressed to the sound
discretion oI the court and depends on several Iactors, including, but not limited to, the
Iollowing: the type, extent and purpose oI the penalty, the nature oI the obligation, the mode oI
breach and its consequences, the supervening realities, the standing and relationship oI the
parties.
In this case, the stipulated penalty was reduced by the appellate court Ior being
unconscionable and iniquitous. As provided in the Contract oI Lease, private respondent was
obligated to pay a monthly rent oI P30,000. On the other hand, the stipulated penalty was
pegged at P5,000 Ior each day oI delay or P150,000 per month, an amount Iive times the
monthly rent. This penalty was not only exorbitant but also unconscionable, taking into account
that private respondent`s delay in surrendering the leased premises was because oI a well-
Iounded belieI that its right oI preemption to purchase the subject premises had been violated.
Considering Iurther that private respondent was an agricultural cooperative, collectively owned
by Iarmers with limited resources, ordering it to pay a penalty oI P150,000 per month on top oI
the monthly rent oI P30,000 would seriously deplete its income and drive it to bankruptcy. In
Ri:al Commercial Banking Corp. vs. Court of Appeals, the Court tempered the penalty charges
aIter taking into account the debtor`s pitiIul Iinancial condition.
















Paculdo vs Regalado, 345SCRA134

Facts: On December 27, 1990, petitioner Nereo Paculdo and respondent BoniIacio Regalado
entered into a contract oI lease over a parcel oI land with a wet market building, located at
Fairview Park, Quezon City. The contract was Ior twenty Iive (25) years, commencing on
January 1, 1991 and ending on December 27, 2015. For the Iirst Iive (5) years oI the contract
beginning December 27, 1990, Nereo would pay a monthly rental oI P450,000, payable within
the Iirst Iive (5) days oI each month with a 2 penalty Ior every month oI late payment.
Aside Irom the above lease, petitioner leased eleven (11) other property Irom the
respondent, ten (10) oI which were located within the Fairview compound, while the eleventh
was located along Quirino ighway Quezon City. Petitioner also purchased Irom respondent
eight (8) units oI heavy equipment and vehicles in the aggregate amount oI Php 1, 020,000.
On account oI petitioner`s Iailure to pay P361, 895.55 in rental Ior the month oI May,
1992, and the monthly rental oI P450, 000.00 Ior the months oI June and July 1992, the
respondent sent two demand letters to petitioner demanding payment oI the back rentals, and iI
no payment was made within IiIteen (15) days Irom the receipt oI the letter, it would cause the
cancellation oI the lease contract.
Without the knowledge oI petitioner, on August 3, 1992, respondent mortgaged the land
subject oI the lease contract, including the improvements which petitioner introduced into the
land amounting to P35, 000,000.00, to Monte de Piedad Savings Bank, as a security Ior a loan.
On August 12, 1992, and the subsequent dates thereaIter, respondent reIused to accept
petitioner`s daily rental payments.
Subsequently, petitioner Iiled an action Ior injunction and damages seeking to enjoin
respondents Irom disturbing his possession oI the property subject oI the lease contract. On the
same day, respondent also Iiled a complaint Ior ejectment against petitioner. The lower court
rendered a decision in Iavor oI the respondent, which was aIIirmed in toto by the Court oI
Appeals.

Issue: Whether or not the petitioner was truly in arrears in the payment oI rentals on the subject
property at the time oI the Iiling oI the complaint Ior ejectment.

Ruling: NO, the petitioner was not in arrears in the payment oI rentals on the subject property at
the time oI the Iiling oI the complaint Ior ejectment.
As Iound by the lower court there was a letter sent by respondent to herein petitioner,
dated November 19, 1991, which states that petitioner`s security deposit Ior the Quirino lot, be
applied as partial payment Ior his account under the subject lot as well as to the real estate taxes
on the Quirino lot. Petitioner interposed no objection, as evidenced by his signature signiIying
his conIormity thereto.
Meanwhile, in an earlier letter, dated July 15, 1991, respondent inIormed petitioner that
the payment was to be applied not only to petitioner`s accounts under the subject land and the
Quirino lot but also to heavy equipment bought by the latter Irom respondent. Unlike in the
November letter, the July letter did not contain the signature oI petitioner.
Petitioner submits that his silence is not consent but is in Iact a rejection.
As provided in Article 1252 oI the Civil Code, the right to speciIy which among his
various obligations to the same creditor is to be satisIied Iirst rest with the debtor.
In the case at bar, at the time petitioner made the payment, he made it clear to respondent
that they were to be applied to his rental obligations on the Fairview wet market property.
Though he entered into various contracts and obligations with respondent, all the payments
made, about P11, 000,000.00 were to be applied to rental and security deposit on the Fairview
wet market property. owever, respondent applied a big portion oI the amount paid by petitioner
to the satisIaction oI an obligation which was not yet due and demandable- the payment oI the
eight heavy equipments.
Under the law, iI the debtor did not declare at the time he made the payment to which oI
his debts with the creditor the payment is to be applied, the law provided the guideline; i.e. no
payment is to be applied to a debt which is not yet due and the payment has to be applied Iirst to
the debt which is most onerous to the debtor.
The lease over the Fairview wet market is the most onerous to the petitioner in the case at
bar.
Consequently, the petition is granted.









CBC vc CA, 265SCRA327

Facts: China Banking Corporation (China Bank) extended several loans to Native West
International Trading Corporation (Native West) and to So Ching, Native West`s president.
Native West in return executed a promissory not in Iavor oI China Bank. So Ching additionally
executed two mortgages over his properties, viz., a real estate mortgage executed on July 27,
1989 covering a parcel oI land situated in Quezon City and another executed on August 10, 1989
covering a parcel oI land located in Mandaluyong. The promissory notes matured and despite
due demands Irom China Bank neither private respondents Native West and So Ching paid.
Pursuant to the provision embodied in the two mortgage contracts, China Bank Iiled petitions Ior
the extra-judicial Ioreclosure oI the mortgaged properties. AIter due notice and publication, the
Ioreclosure sale oI the mortgaged properties was scheduled. Eight (8) days beIore the Ioreclosure
sale, respondents Iiled a complaint with the Regional Trial Court Ior accounting with damages
and with temporary restraining order against petitioner.
On April 7, 1993, the trial court issued a temporary restraining order to enjoin the
Ioreclosure sale. Petitioners moved Ior reconsideration but it was denied. When the case was
elevated to the Court oI Appeals, it aIIirmed in toto the decision oI the trial court; hence, this
instant petition.

Issue: Whether or not petitioner can extra-judicially Ioreclose the properties subject oI the
mortgages.

Ruling: ES. Foreclosure is valid where the debtors, as in this case, are in deIault in the payment
oI their obligation. The essence oI a contract oI mortgage indebtedness is that a property has
been identiIied or set aside Irom the mass oI the property oI the debtor-mortgagor as security Ior
the payment oI money or IulIillment oI an obligation to answer the amount oI indebtedness, in
case oI deIault oI payment. It is a well-settled rule that in a real estate mortgage when the
obligation is not paid when due, the mortgagee has the right to Ioreclose the mortgage and to
have the property seized and sold in view oI applying the proceeds to the payment oI the
obligation. In Iact, aside Irom the mortgage contracts, the promissory notes executed to evidence
the loans also authorize the mortgagee to Ioreclose on the mortgages.
Moreover, a mortgage given to secure advancements is a continuing security and is not
discharged by repayment oI the amount named in the mortgage, until the Iull amounts oI the
advancements are paid. Based on the two mortgage contracts, the intent oI the parties is to
constitute the real estate properties as continuing securities liable Ior Iuture obligations. It is
well-settled that mortgages given to secure Iuture advancements or loans are valid and legal
contracts, and the amounts named in consideration in said contracts do not limit the amount Ior
which the mortgage may stand as security iI Irom the Iour corners oI the instrument the intent to
secure Iuture and other indebtedness can be gathered.

Mobil vs CA, 272SCRA523

Facts: The petition Ior review on certiorari in the case at bar seeks the reversal oI the decision oI
the Court oI Appeals, aIIirming that oI the Regional Trial Court oI Quezon City, which Iound
herein petitioners Mobil Oil Philippines, Inc., and Caltex Philippines, Inc., jointly and severally
liable to private respondent Continental Cement Corporation in the amount oI eight million pesos
(P8,000,000.00) Ior actual damages, plus ten per cent (10) thereoI by way oI attorney's Iees,
Ior having delivered water-contaminated bunker Iuel oil to the serious prejudice and damage oI
the cement Iirm.
Sometime in May 1982, petitioner Mobil Oil Philippines, Inc., a Iirm engaged in the
marketing oI petroleum products to industrial users, entered into a supply agreement with private
respondent Continental Cement Corporation, a cement producer, under which the Iormer would
supply the latter's industrial Iuel oil or bunker Iuel oil requirements. MOPI extended to CCC an
unsecured credit line oI P2,000,000.00 against which CCC's purchases oI oil could initially be
charged. MOPI had a "hauling contract" with Century Freight Services whereby CFS undertook
the delivery oI Mobil products to designated consignees oI MOPI.
During the period starting Irom 12 July to 07 October 1982, MOPI made a total oI sixty-
seven deliveries oI BFO, each delivery consisting oI 20,000 liters, to CCC's cement Iactory in
Norzagaray, Bulacan. On 08 October 1982, CCC discovered that what should have been MOPI's
20,000 BFO delivery to CCC's Norzagaray plant, through CFS's lorry truck, was, in Iact, pure
water. CCC at once inIormed MOPI oI this anomaly and oI its intention to meanwhile hold in
abeyance all payments due to MOPI on its previous deliveries until such time as the parties
would have ascertained that those deliveries were not themselves adulterated. CCC suggested
that MOPI's storage tank in the Norzagaray plant be likewise investigated Ior possible
contamination. MOPI and CCC agreed to conduct an actual water content test. CCC Iiled a
motion to amend the complaint as to so implead both Caltex and MPI party-deIendants. The
amended complaint was Iiled with the motion. MOPI, MPI and Caltex thereupon Iiled an
amended answer. On 28 November 1984, upon motion oI deIendants, the RTC liIted the writ oI
attachment it had issued on condition that MPI would keep and maintain on deposit with the
Security Bank and Trust Company, an amount oI P10,000,000.00. the depository bank was later
changed to Citibank NT & SA.
In due course, the RTC rendered a decision The RTC Iound that there were deliveries oI
adulterated IFO even prior to 08 October 1982 based on the results oI the draining activity
conducted on 22 October 1982 and on 19 November 1982. The Iindings showed that the
adulteration oI the IFO was "well over the tolerable water contents as stated in the Petron Basic
Line which should only be 0.1. Although the tests did not include deliveries beIore October
1982, it was saIe to say, the court observed, that the residue in the storage tank would be "plain
water which would be in big volume" considering that the draining pipe in CCC's storage tank
Ior MOPI's IFO was eight (8) inches above the bottom oI the huge storage tank. The appellate
court agreed with the RTC that appellants aptly should be accountable Ior the water-
contaminated deliveries. As the seller, MOPI so warranted that the BFO it had sold was
adulteration-Iree IFO. The appellants, held the appellate court, were in no position to evade
liability by instead pointing to the carrier since it was Mobil which contracted Ior the hauler's
services and there was no evidence that CCC had any direct involvement in the hauling
agreement.

Issues: 1. Whether or not Petitioner Mobil is estopped Irom claiming that no Mobil BFO
remained unused by Continental on 22 October 1982; and that the deliveries oI BFO made by
Mobil to Continental beIore 8 October 1982 were not contaminated with water?
2. Whether or not Petitioners can be held liable Ior the contaminated BFO
delivered on 8 October 1982 on the ground that Country Freight Service, as carrier-hauler, was
an agent oI Mobil?

Ruling: The claim that the Court oI Appeals "conveniently made an inIerence that the subject
Continental storage tank contained Mobil BFO deliveries only because Mobil and Continental
agreed to jointly examine the same," and that the appellate court had so misapprehended the
Iacts, is unacceptable. The Iactual Iinding that deliveries previous to 08 October 1982 were
adulterated BFO was supported by the 22 October 1982 "joint undertaking." This document,
witnessed and signed by representatives oI both MOPI and CCC, clearly showed that a "detailed
veriIication oI water contained on all BFO delivered by MOBIL OIL PILS., INC., except those
that have already been used in cement operation by CCC," was undertaken. Implicit Irom this
statement was that there still was at the time an availability oI BFO in the storage tank
designated by CCC Ior past Mobil deliveries. The same could be said oI the second water
draining process, evidenced by the second "joint undertaking." Although done without the
participation oI MOPI, the latter, nonetheless, was notiIied oI the "counting" thrice, the last oI
which had indicated that Iailure on MOPI's part to send a representative would be tantamount to
a waiver oI its right to participate therein.
The Court oI Appeals, anent the second issue, correctly ruled that MOPI could be held
accountable Ior the acts oI CFS. The hauling contract executed by and between MOPI and CFS
(to which CCC was not a party) laid out the responsibilities oI CFS (the contractor).





























Benos vs Lawilao, 509SCRA549

Facts: On February 11, 1999, petitioner-spouses Jaime and Marina Benos and respondent-
spouses Gregorio and Janice Gail Lawilao executed a Pacto de Retro Sale where the Benos
spouses sold their lot covered by Tax Declaration No. 25300 and the building erected thereon Ior
P300,000.00, one halI oI which was to be paid in cash to the Benos spouses and the other halI to
be paid to the bank to pay oII the loan oI the Benos spouses which was secured by the same lot
and building. Under the contract, the Benos spouses could redeem the property within 18
months Irom date oI execution by returning the contract price, otherwise, the sale would become
irrevocable without necessity oI a Iinal deed to consolidate ownership over the property in the
name oI the Lawilao spouses.
AIter paying the P150,000.00, the Lawilao spouses immediately took possession oI the
property and leased out the building thereon. owever, instead oI paying the loan to the bank,
Janice Lawilao restructured it twice. Eventually, the loan became due and demandable. On
August 14, 2000, a son oI the Benos spouses paid the bank P159,000.00 representing the
principal and interest. On the same day, the Lawilao spouses also went to the bank and oIIered
to pay the loan, but the bank reIused to accept the payment. The Lawilao spouses then Iiled with
the Municipal Circuit Trial Court a petition Ior consignation against the bank and simultaneously
deposited the amount oI P159,000.00. Upon the bank`s motion, the court dismissed the petition
Ior lack oI cause oI action.
Subsequently, the Lawilao spouses Iiled with the Municipal Circuit Trial Court a
complaint Ior consolidation oI ownership. This complaint is the precursor oI the instant petition.
The Benos spouses moved to dismiss on grounds oI lack oI jurisdiction and lack oI cause oI
action but it was denied and the parties went to trial.
On November 14, 2002, the Municipal Circuit Trial Court rendered judgment in Iavor oI the
Benos spouses.

Issue: Whether or not the Lawilao spouses can consolidate ownership over the subject property.

Ruling: The evidence shows that the Lawilao spouses did not make a valid tender oI payment
and consignation oI the balance oI the contract price. As correctly Iound by the Regional Trial
Court. As matters stand, no valid tender oI payment and/or consignation oI the P150,000.00
which the Appellant still owes the Appellee has been eIIected by the Iormer.
The amount oI P159,000.00 deposited with the MCTC is in relation to Civil Case No.
310 earlier dismissed by said court, and not to the instant action. ence, this Court cannot
automatically apply such sum in satisIaction oI the aIoresaid debt oI the Appellant and order the
Appellee creditor to accept the same.
The Lawilao spouses did not appeal said Iinding, and it has become Iinal and binding on
them. Although they had repeatedly alleged in their pleadings that the amount oI P159,000.00
was still with the trial court which the Benos spouses could withdraw anytime, they never made
any step to withdraw the amount and thereaIter consign it. Compliance with the requirements oI
tender and consignation to have the eIIect oI payment are mandatory. Thus Tender oI payment
is the maniIestation by debtors oI their desire to comply with or to pay their obligation. II the
creditor reIuses the tender oI payment without just cause, the debtors are discharged Irom the
obligation by the consignation oI the sum due. Consignation is made by depositing the proper
amount to the judicial authority, beIore whom the tender oI payment and the announcement oI
the consignation shall be proved. All interested parties are to be notiIied oI the consignation.
Compliance with these requisites is mandatory.1|13| (Emphasis supplied)
In the instant case, records show that the Lawilao spouses Iiled the petition Ior
consignation against the bank in Civil Case No. 310 without notiIying the Benos spouses. The
petition was dismissed Ior lack oI cause oI action against the bank. ence, the Lawilao spouses
Iailed to prove their oIIer to pay the balance oI the purchase price and consignation. In Iact, even
beIore the Iiling oI the consignation case, the Lawilao spouses never notiIied the Benos spouses
oI their oIIer to pay. Thus, as Iar as the Benos are concerned, there was no Iull and complete
payment oI the contract price, which gives them the right to rescind the contract pursuant to
Articles 1191 in relation to Article 1592 oI the Civil Code, which provide:
Art. 1191. The power to rescind obligations is implied in reciprocal ones,
in case one oI the obligors should not comply with what is incumbent upon him.
The injured party may choose between the IulIillment and the rescission oI
the obligation, with the payment oI damages in either case. e may also seek
rescission, even aIter he has chosen IulIillment, iI the latter should become
impossible.
The court shall decree the rescission claimed, unless there be just cause
authorizing the Iixing oI a period.
















People`s Industrial vs CA, 24 October 1997

Facts: Private respondents Mar-ick Investment Corporation is the exclusive and registered owner
oI Mar-ick Subdivision in Barrio Buli, Cainta, Rizal. On May 29, 1961, private respondents
entered into six (6) agreements with petitioner People`s Industrial and Commercial Corporation
whereby it agreed to sell to petitioner six (6) subdivision lots. Except Ior Lot No. 8 that has an
area oI 253 square meters, all the lots measure 240 square meters each. Five oI the agreements,
involving Lots. Nos. 3, 4, 5, 6 and 7, similarly stipulate that the petitioner agreed to pay private
respondents Ior each lot, the amount oI P 7,333.20 with a down payment oI P 480.00. The
balance oI P 6,853.20 shall be payable in 120 equal monthly installments oI P 57.11 every 30th
oI the month, Ior a period oI ten years. With respect to Lot No. 8, the parties agreed to the
purchase price oI P7,730.00. With a down payment oI P506.00 and equal monthly installments
oI P60.20.
AIter the lapse oI ten years, however, petitioner still had not Iully paid Ior the six lots; It
had paid only the down payment and eight (8) installments, even aIter private respondents had
given petitioner a grace period oI Iour months to pay the arrears. As oI May 1, 1980, the total
amount due to private respondents under the contract was P214,418.00.

Issue: Whether or not the petition has merit.

Ruling: Under the law, there is a binding contract between the parties whose minds met on a
certain matter notwithstanding that they did not aIIix their signature to its written Iorm.
In the case at the bar, it was private respondent`s company lawyer and sole witness, Atty.
Manuel Villamayor, who volunteered that aIter the cancellation oI the 1961 agreements, the
parties should negotiate and enter into 'a new agreement based on the current price or at
P400.00 per square meter. owever, there was a hitch in the negotiations because aIter he had
draIted the contract and sent it to the petitioner, the latter 'deposited a check Ior down payment
but its representative reIused to sign the prepared contract. Private respondent even oIIered the
contract to sell. In the absence oI prooI to the contrary, this draIt contract may be deemed to
embody the agreement oI the parties. Moreover, when Tomas Siatianun, petitioner president,
testiIied, private respondent cross-examined him as regards to the October 1983 contract. Private
respondents did not and has not denied the existence oI that contract.



Eternal Gardens vs CA, 9 December 1997

Facts: Petitioner EGMPC and private respondent NPUM entered into a Land Development
Agreement dated October 6, 1976. Under the agreement, EGMPC was to develop a parcel oI
land owned by NPUM into a memorial park subdivided into lots. The parties Iurther agreed
(d) THAT the FIRST PARTY shall receive forty (40) percent of the gross collection less
Perpetual Care Fees (which in no case shall exceed 10 of the price per lot unless otherwise
agreed upon by both parties in writing) or Net Gross Collection (NGC) from this profect. This
shall be remitted monthly by the SECOND PARTY in the following manner. (i) Forty (40)
percent of the NGC, plus (ii) if it becomes necessary for the FIRST PARTY to vacate the property
earlier than two years from the date of this agreement, at the option of the FIRST PARTY, an
additional amount equivalent to twenty (20) percent of the NGC as cash advance for the first
four (4) years with interest at twelve (12) percent per annum which cash advance shall be
deductible out of the proceeds from the FIRST PARTYs 40 from the 5th year onward. The
SECOND PARTY further agrees that if the FIRST PARTY shall desire to have its profected
receivables collected at the 5th year, the SECOND PARTY shall assist in having the same
discounted in advance.
The P1.5 million initial payment mentioned in the Deed oI Absolute Sale, covering the
Iirst phase oI the project, shall be deducted out oI the proceeds Irom the FIRST PART`s 40 at
the end oI the 5th year. Subsequent payments made by the SECOND PART on account oI the
stated purchase price in said Deed oI Absolute Sale shall be charged against what is due to the
FIRST PART under this LAND DEVELOPMENT AGREEMENT.
Later, two claimants oI the parcel oI land surIaced - Maysilo Estate and the heirs oI a
certain Vicente Singson Encarnacion. EGMPC thus Iiled an action Ior interpleader against
Maysilo Estate and NPUM, docketed as Civil Case No. 9556 beIore the Regional Trial Court oI
Kalookan City, Branch 120. The Singson heirs in turn Iiled an action Ior quieting oI title against
EGMPC and NPUM, docketed as Civil Case No. C-11836 beIore Branch 122 oI the same court.
From these two cases, several proceedings ensued. One such case, Irom the interpleader
action, culminated in the Iiling and subsequent resolution oI G.R. No. 73794. In G.R. No.
73794, EGMPC assailed the appellate court`s resolution requiring 'petitioner Eternal Gardens
|to| deposit whatever amounts are due Irom it under the Land Development Agreement with a
reputable bank to be designated by the respondent court.

Issue: Whether or not the petition has merit.

Ruling: In the case at bar, a careIul analysis oI the records will show that petitioner admitted
among others in its complaint in Interpleader that it is still obligated to pay certain amounts to
private respondent; that it claims no interest in such amounts due and is willing to pay whoever
is declared entitled to said amounts. Such admissions in the complaint were reaIIirmed in open
court beIore the Court oI Appeals as stated in the latter court`s resolution dated September 5,
1985 in C.A. G.R. No. 04869 which states:
The private respondent (MEMORIAL) then reaIIirms beIore the Court its original
position that it is a disinterested party with respect to the property now the subject oI the
interpleader case.
In the light oI the willingness, expressly made beIore the court, aIIirming the complaint
Iiled below, that the private respondent (MEMORIAL) will pay whatever is due on the Land
Development Agreement to the rightIul owner/owners, there is no reason why the amount due on
subject agreement has not been placed in the custody oI the Court.`
Under the circumstances, there appears to be no plausible reason Ior petitioner`s
objections to the deposit oI the amounts in litigation aIter having asked Ior the assistance oI the
lower court by Iiling a complaint Ior interpleader where the deposit oI aIoresaid amounts is not
only required by the nature oI the action but is a contractual obligation oI the petitioner under the
Land Development Program.
As correctly observed by the Court oI Appeals, the essence oI an interpleader, aside Irom
the disavowal oI interest in the property in litigation on the part oI the petitioner, is the deposit oI
the property or Iunds in controversy with the court, it is a rule Iounded on justice and equity:
that the plaintiII may not continue to beneIit Irom the property or Iunds in litigation during the
pendency oI the suit at the expense oI whoever will ultimately be decided as entitled thereto.`
The case at bar was elevated to the Court oI Appeals on certiorari with prohibitory and
mandatory injunction. Said appellate court Iound that more than twenty million pesos are
involved; so that on interest alone Ior savings or time deposit would be considerable, now
accruing in Iavor oI the Eternal Gardens. Finding that such is violative oI the very essence oI the
complaint Ior interpleader as it clearly runs against the interest oI justice in this case, the Court oI
Appeals cannot be Iaulted Ior Iinding that the lower court committed a grave abuse oI discretion
which requires correction by the requirement that a deposit oI said amounts should be made to a
bank approved by the Court.







Rayos vs Reyes, 398SCRA26

Facts: The three (3) parcels oI land subject oI dispute in this case were Iormerly owned by the
spouses Francisco and Asuncion Tazal who on September 1, 1957 sold them Ior P724.00 to
respondents` predecessor-in-interest, one Mamerto Reyes, with right to repurchase within two
(2) years Irom date thereoI by paying to the vendee the purchase price and all the expenses
incident to their reconveyance. AIter the sale the vendee a retro took physical possession oI the
properties and paid the taxes thereon.
The otherwise inconsequential sale became controversial when the two (2) oI the three
(3) parcels were again sold on December 24, 1958 by Francisco Tazal Ior P420.00 in Iavor oI the
petitioners` predecessor-in-interest Blas Rayos without Iirst availing oI his right to repurchase
the property.
On September 1, 1959 the conventional right oI redemption in Iavor oI the spouses Tazal
expired without the right being exercised by either the Tazal spouses or the vendee Blas Rayos.
AIter the expiration oI the redemption period, Francisco Tazal attempted to repurchase
the properties Irom Mamerto Reyes by asserting that the September 1, 1957 deed oI sale with
right oI repurchase was actually an equitable mortgage and oIIering the amount oI P724.00 to
pay Ior the alleged debt. But Mamerto Reyes reIused the tender oI payment and vigorously
claimed that their agreement was not an equitable mortgage.
Subsequently, Tazal Iiled a complaint with the Court oI First Instance oI Pangasinan
against Mamerto Reyes, Ior the declaration oI the September 1, 1957 transaction as a contract oI
equitable mortgage. e also prayed Ior an order requiring deIendant Mamerto Reyes to accept
the amount oI P724.00 which he had deposited on May 31, 1960 with the trial court as Iull
payment Ior his debt, and canceling the supposed mortgage on the three (3) parcels oI land with
the execution oI the corresponding reconveyance in his Iavor.
While the said civil case was pending beIore the Court oI First Instance, Francisco Tazal
again sold the third parcel oI land previously purchased by Mamerto Reyes to petitioner-spouses
TeoIilo and Simiona Rayos. Petitioner-spouses likewise, bought Irom Blas Rayos the two (2) lots
that Tazal had sold to Mamerto Reyes and thereaIter to Blas Rayos.
On January 1963, the Court oI First Instance ruled in Iavor oI Mamerto Reyes but held
that Tazal could nonetheless redeem the three (3) parcels oI land within thirty (30) days Irom
Iinality oI judgment. owever, Tazal Iailed to repurchase the property.
When Mamerto died in 1986, petitioner-spouses TeoIilo and Simeona Rayos wrested
physical possession oI the disputed properties Irom Reyes` heirs.
Consequently, respondents Iiled a complaint Ior damages and recovery oI ownership and
possession oI the three (3) parcels oI land in dispute against herein petitioner-spouses alleging
that neither the petitioners nor their predecessor-in-interest Francisco Tazal and Blas Rayos
repurchased the properties beIore buying them in 1958 and 1961 or when the judgment in the
civil case Iiled by Tazal became Iinal and executory.
On the other hand, petitioners argued that the consignation oI P724.00 by Francisco Tazal
on May 31, 1960 had the Iull eIIect oI redeeming the properties Irom respondents and their
predecessor-in-interest.
Issue: Whether or not the consignation oI P724.00 by Francisco Tazal on May 31, 1960 had the
Iull eIIect oI redeeming the properties Irom the respondents and their predecessor-in-interest.

Ruling: NO, the consignation oI P724.00 on May 31, 1960 did not have the Iull eIIect oI
redeeming the properties Irom the respondents and their predecessor-in-interest.
In order that consignation may be eIIective the debtor must show that: (a) there was a
debt due; (b) the consignation oI the obligation had been made because the creditor to whom a
valid tender oI payment had been made reIused to accept it; (c) previous notice oI the
consignation had been given to the person interested in the perIormance oI the obligation; (d)
the amount due was placed in the disposal oI the court; and (e) aIter the consignation had been
made the person interested was notiIied thereoI.
In the instant case, petitioners Iailed, Iirst, to oIIer a valid and unconditional tender oI
payment, second, to notiIy the respondents oI the intention to deposit the amount with the court
as required in Article 1257 oI the Civil Code; third, to show the acceptance by the creditor oI the
amount deposited as Iull settlement oI the obligation, or in alternative, a declaration oI the court
oI the validity oI the consignation. The Iailure oI the petitioner to comply with any oI these
requirements rendered the consignation ineIIective.
Ergo, the petition Ior review is denied, thus, declaring void the Deed oI Absolute Sale
executed by Francisco Tazal in Iavor oI Blas Rayos, and by the latter in Iavor oI TeoIilo Rayos,
all encompassing the three (3) parcels oI land sold under the Sale with the Right to Repurchase,
insoIar as they authorized the transIer oI ownership and possession thereoI to petitioner-spouses;
proclaiming respondents who are heirs oI Mamerto Reyes as absolute owners oI the property in
question.










Cebu International vs CA, 316SCRA488

Facts: Cebu International Finance Corporation (CIFC), a quasi-banking institution, is engaged in
money market operations.
On April 25, 1991, private respondent, Vicente Alegre, invested with CIFC, Iive hundred
thousand (P500, 000.00) pesos, in cash. Petitioner issued a promissory note to mature on May
27, 1991. The note Ior P516, 238.67 covered private respondent`s placement plus interest at
twenty and a halI (20.5) percent Ior thirty two days.
On May 27, 1991, CIFC issued BPI check Ior P514, 390.94 in Iavor oI the private
respondent as proceeds oI his matured investment plus interest. The check was drawn Irom
petitioner`s current account maintained with the Bank oI the Philippine Islands main branch at
Makati City.
Private respondent wiIe deposited the check with RCBC. BPI dishonored the check with
the annotation that the 'check is subject oI an investigation. BPI took custody oI the check
pending an investigation oI several counterIeit checks drawn against CICF`s aIorestated account.
Immediately, private respondent notiIied CIFC oI the dishonored check and demanded,
on several occasions that he should be paid in cash. Due to the reIusal oI CIFC to pay private
respondent in cash, the latter Iiled a complaint Ior recovery oI sum oI money against the
petitioner with the Regional Trial Court oI Makati, Branch 132.
owever, on July 13, 1992, seeking to recover its Iunds, CIFC Iiled against BPI, a
separate civil action Ior collection oI money with the Regional Trial Court oI Makati, Branch
147. The collection suit alleged that BPI unlawIully deducted Irom CIFC`s checking account,
counterIeited checks amounting to P1, 724, 364.58. The action included the prayer to collect the
amount oI the check paid to Vicente Alegre but dishonored by BPI.
Meanwhile, in response to Alegre`s complaint, CIFC Iiled a motion Ior leave oI court to
Iile a third party complaint against BPI which was granted by the court. owever, pending the
third party complaint, CIFC and BPI entered into a compromise agreement which provided
among others that BPI shall debit the sum oI P514, 390.94 Irom CIFC`s account representing the
payment oI the BPI check payable to private respondent Alegre; that in case CIFC is adjudged
liable to Vicente Alegre, CIFC cannot go aIter BPI.

Issue: Whether or not the check as accepted by BPI constitutes legal tender oI payment.

Ruling: NO, a check is not a legal tender, and thereIore cannot constitute valid tender oI
payment.
Article 1249 oI the Civil Code deals with a mode oI extinction oI an obligation and
expressly provides Ior the medium in the payment oI debts. It provides that the payment oI debts
in money shall be made in the currency stipulated, and iI it is not possible to deliver such
currency, then in the currency, which is legal tender in the Philippines. It Iurther asserts that the
delivery oI promissory notes payable to order, or bills oI exchange or other mercantile
instruments shall produce the eIIect oI payment only when they have been cashed, or when
through the Iault oI the creditor they have been impaired.
In the case at bar, the money market transaction between the petitioner and private
respondent is in the nature oI a loan. The private respondent accepted the check, instead oI
requiring the payment in money. et, when he presented it to RCBC Ior encashment, the same
was dishonored. Under these circumstances, and aIter the notice oI dishonor, the holder has
immediate right oI recourse against the drawer, and consequently could immediately Iile an
action Ior the recovery oI the value oI the check.
As stated in the case oI Philippine Airlines, Inc. v. Court of Appeals, a negotiable
instrument is only a substitute Ior money, and not money. The delivery oI such instrument does
not, by itselI, operate as payment. A check whether a manager`s check or ordinary check, is not
legal tender, and an oIIer oI a check in payment oI a debt is not a valid tender oI payment and
may be reIused receipt by the creditor. Mere delivery oI the check does not discharge the
obligation under a judgment. The obligation is not extinguished until the payment by commercial
document is actually realized.
On the other hand, CICF can not assert that BPI shall be the one liable to Alegre because
the compromise agreement it entered into with BPI categorically provided that in case CICF is
adjudged liable to Vicente Alegre, arising Irom the dishonored check, BPI shall not be liable to
CICF.
Ergo, the petition is denied. The decision oI the Court oI Appeals which held that
petitioner was not discharged Irom the liability oI paying the value oI the subject check was
aIIirmed.







De Mesa vs CA, 317SCRA24, 19 October 1999

Facts: Petitioner Dolores Ligaya de Mesa is the owner oI parcels oI land in Makati, Pasay City
and General Santos City, which were mortgaged to the Development Bank oI the Philippines
(DBP) as a security Ior her loan in said bank. Failing to pay her debt, all her mortgaged
properties were Ioreclosed and sold at public auction. DBP was the winning bidding. Later
petitioner requested DBP to repurchase her properties, which was granted. On October 23, 1978,
de Mesa, under a deed oI sale with assumption oI mortgage sold the Ioreclosed properties to
private respondent OSSA under the condition that the later assume the payment oI the mortgage
oI petitioner to DBP on installment basis. On March 11, 1981, petitioner rescinded the Deed oI
Sale with assumption oI mortgage on the ground that OSSA Iailed to comply with the terms and
conditions oI their agreement. On April 11, 1981, OSSA oIIered to pay as stipulated in said Deed
oI Sale but the petitioner reIused to accept such payment, which prompted OSSA to Iile a
complaint Ior consignation against petitioner beIore the CFI oI Rizal, and at the same time
deposited the amount oI P34, 363.08 with said court. On August 5, 1981, DBP reIused to accept
the 9th quarterly installment paid by OSSA, prompting the later to Iile against DBP and
petitioner Ior speciIic perIormance and consignation which said court allowed OSSA to deposit
by way oI consignation all Iuture installments payment without need oI Iormal tender oI payment
and service oI notices oI consignation.
Petitioner sought reIuge to the CA but nothing happened.

Issue: Whether or not the procedural requirements oI consignation were complied with by
respondent OSSA.

Ruling: ES, Article 1256 oI the Civil Code states that if the creditor to whom the tender of
payment has been made refuses without fust cause to accept it, the debtor shall be released from
responsibility by the consignation of the things or sum due.
Petitioner next argues that there was no notice to her regarding OSSA`s consignation oI
the amounts corresponding to the 12th up to the 20th quarterly installments. The records show
however that several tender oI payment were consistently turned down by the petitioner, so much
so that the respondent Iound it pointless on making Iormal tenders oI payment and serving
notices oI consignation to petitioner. Moreover, in a motion dated 7 May 1987, OSSA prayed
beIore the lower court that it be allowed to deposit by way oI consignation all the quarterly
installments without making Iormal tender oI payment and serving notice oI consignation which
was granted by the trial court. The motion and the subsequent court order served on the
petitioner. In the consignation proceedings suIIiciently served as notice to petitioner oI OSSA`s
willingness to pay the quarterly installments and the consignation oI such payments with the
court. For reasons oI equity, the procedural requirements oI consignation are deemed
substantially complied with in the present case.















Occea vs CA, 73SCRA637

Facts: On February 25, 1975, private respondent Tropical ome Inc., Iiled a complaint at Rizal
CFI Ior modiIication oI the terms and conditions oI its subdivision contract with the petitioners.
Under said subdivision contract, respondent guaranteed (petitioners as landowners) as the
latter`s Iixed and sole share and participation an amount equivalent to 40 oI all cash receipts
Irom the sale oI the subdivision lots.
Petitioner moved to dismiss the complaint on account oI lack oI cause oI action but it was
denied, and upon consideration oI the lower court elevated the matter on certiorari to respondent
CA.
Respondent court in its questioned resolution oI June 28, 1976 set aside the preliminary
injunction previously issued by it and dismissed the petition anchored on Article 1267 oI the
Civil Code.
Petitioner insists that the worldwide increase in prices cited by respondent does not
constitute a suIIicient cause oI action Ior modiIication oI the subdivision contract. AIter receipt
oI respondent`s comment, the court in its resolution oI September 13, 1986 resolved to treat the
petition as a special civil action and declared the case submitted Ior decision.

Issue: Whether or not Article 1267 oI the Civil Code grants the courts the power to modiIy the
terms and conditions oI the contract.

Ruling: NO. The cited article does not grant the courts the authority to remake, modiIy or revise
the contract or to Iix the division oI shares between the parties as contractually stipulated
because such has the Iorce oI law between the parties.
Respondent`s complaint Ior modiIication oI contract maniIestly has no basis in law;
thereIore, states no cause oI action. Under the particular allegations oI respondent`s complaint
and the circumstances therein averred, the courts cannot even in equity grant the relieI sought.



Ortigas vs Feati Bank, 94 SCRA533

Facts: The Iollowing Iacts a reproduction oI the lower court's Iindings, which, in turn, are
based on a stipulation oI Iacts entered into by the parties are not disputed. PlaintiII is a limited
partnership and deIendant Feati Bank and Trust Co., is a corporation duly organized and existing
in accordance with the laws oI the Philippines. PlaintiII is engaged in real estate business,
developing and selling lots to the public, particularly the ighway ills Subdivision along
EpiIanio de los Santos Avenue, Mandaluyong, Rizal.
On March 4, 1952, plaintiII, as vendor, and Augusto Padilla y Angeles and Natividad
Angeles, as vendees, entered into separate agreements oI sale on installments over two parcels oI
land, known as Lots Nos. 5 and 6, Block 31, oI the ighway ills Subdivision, situated at
Mandaluyong, Rizal. On July 19, 1962, the said vendees transIerred their rights and interests
over the aIoresaid lots in Iavor oI one Emma Chavez. Upon completion oI payment oI the
purchase price, the plaintiII executed the corresponding deeds oI sale in Iavor oI Emma Chavez.
Both the agreements (oI sale on installment) and the deeds oI sale contained the
stipulations or restrictions. DeIendant-appellee, maintains that the area along the western part oI
EpiIanio de los Santos Avenue (EDSA) Irom Shaw Boulevard to Pasig River, has been declared
a commercial and industrial zone and alleges that plaintiII-appellant "completely sold and
transIerred to third persons all lots in said subdivision Iacing EpiIanio de los Santos Avenue" and
the subject lots thereunder were acquired by it "only on July 23, 1962 or more than two (2) years
aIter the area . . . had been declared a commercial and industrial zone . . ."

Issue: Whether or not the Municipal Resolution, declaring LOT Nos. 5 and 6 as commercial and
industrial zone constitute lost oI prestation.

Ruling: The motives behind the passage oI the questioned resolution being reasonable, and it
being a "legitimate response to a Ielt public need," not whimsical or oppressive, the non-
impairment oI contracts clause oI the Constitution will not bar the municipality's proper exercise
oI the power. Now ChieI Justice Fernando puts it aptly when he declared: "Police power
legislation then is not likely to succumb to the challenge that thereby contractual rights are
rendered nugatory."
Furthermore, the Court restated in Philippine American LiIe Ins. Co. v. Auditor General
that laws and reservation oI essential attributes oI sovereign power are read into contracts agreed
upon by the parties. It is, thereIore, clear that even iI the subject building restrictions were
assumed by the deIendant-appellee as vendee oI Lots Nos. 5 and 6, in the corresponding deeds oI
sale, and later, in TransIer CertiIicates oI Title Nos. 101613 and 106092, the contractual
obligations so assumed cannot prevail over Resolution No. 27, oI the Municipality oI
Mandaluyong, which has validly exercised its police power through the said resolution.
Accordingly, the building restrictions, which declare Lots Nos. 5 and 6 as residential, cannot be
enIorced.


















Magat vs CA, 337SCRA298

Facts: Private respondent Santiago A. Guerrero (Guerrero) was president and chairman oI
'Guerrero Transport Services, (GTS), a single proprietorship. In 1972, GTS won a bid Ior the
operation oI a Ileet oI taxicabs within the Subic Naval Base, in Olongapo. With the advent oI
Martial law, President Marcos issued Letter oI Instruction No. 1 (LOI). And pursuant to said
LOI, the Radio Control OIIice issued Administrative Circular No. 4 (Admin. Circular)
On September 25, 1972, Guerrero and Victorino D. Magat (Victorino), General Manager
oI Spectrum Electronic Laboratories, executed a letter-contract Ior the purchase oI transceivers.
The contract was signed and Victorino contracted his Japanese supplier.
On October 4, 1972, Aligada, middle man and broker, inIormed Victorino that a radio
Irequency was not yet assigned to Guerrero and that government regulations might complicate
the importation oI transceivers.
On October 7, 1972, Aligada inIormed Magat oI the assigned Irequency number and
advised him to proceed with the order upon receipt oI letter oI credit. Guerrero applied Ior a
letter with the Metropolitan Bank and Trust Company but was not pursued.
Due to the reIusal oI the Philippine government to issue permit to import the transceiver,
Guerrero was unable to get a letter oI credit Iorm the Central Bank, Victorino thus cancelled his
order with his Japanese supplier.
On May 22, 1973, Victorino Iiled with the RTC, Makati a complaint Ior damages arising
Irom the breach oI contract against Guerrero. But, it was dismissed. Victorino Iiled a petition
Ior review on certiorari with this court which the latter set aside its order oI dismissal and
remanded the case to the trial court Ior Iurther proceedings.
On July 12, 1991, the trial court decided in Iavor oI the heirs oI Victorino. Guerrero
appealed to the CA, which has been granted. The heirs oI Victorino Iiled with the CA a motion
Ior reconsideration but it was denied.

Issues: The 1st issue is whether or not the transceivers were contraband items prohibited by the
LOI and Administrative Circular to import; hence, the contract is void.
The 2nd issue is whether or not the contract was breached.

Ruling: Anent the 1st issue, NO. The contract was not void ab initio. Nowhere in the LOI and
Administrative Circular is there an express ban on the importation oI transceivers. The LOI and
Administrative Circular did not render 'radios and transceivers illegally per se. The
Administrative Circular merely ordered the Radio Control OIIice to suspend the acceptance and
processing. oI application. Ior permits to possess, own, transIer, purchase and sell radio
transmitters and transceivers. thereIore; possession and importation oI the radio transmitters
and transceivers was legal provided one had the necessary license Ior it. The LOI and
Administrative Circular did not render the transceivers outside the commerce oI man. They were
valid objects oI the contract.
Anent the 2nd issue, NO. The contract was not breached. AIIirming the validity oI the
contract, the law provides that when the service (required by the contract) has become so
maniIestly beyond the contemplation oI the parties, the obligor may also be released there Irom
in whole or in parts. ere, Guerrero`s inability to secure a letter oI credit and to comply with his
obligation was a direct consequence oI the denial oI the permit to import. For this, he cannot be
Iaulted. Even iI we assume that there was a breach oI contract, damages cannot be awarded.
Damnum absque infuria comes into the Iore.
















PNCC vs CA, 272SCRA183

Facts: On 7 January 1986, petitioner obtained Irom the Ministry oI uman Settlements a
Temporary Use Permit 2 Ior the proposed rock crushing project. The permit was to be valid Ior
two years unless sooner revoked by the Ministry. On 16 January 1986, private respondents wrote
petitioner requesting payment oI the Iirst annual rental in the amount oI P240,000 which was due
and payable upon the execution oI the contract. They also assured the latter that they had already
stopped considering the proposals oI other aggregates plants to lease the property because oI the
existing contract with petitioner.
In its reply-letter, petitioner argued that under paragraph oI the lease contract, payment oI
rental would commence on the date oI the issuance oI an industrial clearance by the Ministry oI
uman Settlements, and not Irom the date oI signing oI the contract. It then expressed its
intention to terminate the contract. As it had decided to cancel or discontinue with the rock
crushing project "due to Iinancial, as well as technical, diIIiculties."
Private respondents reIused to accede to petitioner's request Ior the pretermination oI the
lease contract. They insisted on the perIormance oI petitioner's obligation and reiterated their
demand Ior the payment oI the Iirst annual rental. Petitioner objected to private respondents'
claim and argued that it was "only obligated to pay the amount oI P20,000.00 as rental payments
Ior the one-month period oI lease, counted Irom 07 January 1986 when the Industrial Permit was
issued by the Ministry oI uman Settlements up to 07 February 1986 when the Notice oI
Termination was served" on private respondents.
On 19 May 1986, private respondents instituted with the Regional Trial Court oI Pasig an
action against petitioner Ior SpeciIic PerIormance with Damages. AIter the Iiling by petitioner oI
its Answer with Counterclaim, the case was set Ior trial on the merits. On 12 April 1989, the trial
court rendered a decision ordering petitioner to pay private respondents the amount oI P492,000
which represented the rentals Ior two years, with legal interest Irom 7 January 1986 until the
amount was Iully paid, plus attorney's Iees in the amount oI P20,000 and costs.
Petitioner then appealed to the Court oI Appeals alleging that the trial court erred in
ordering it to pay private respondent the amount oI P492,000 and in denying it the right to be
heard.

Issue: Whether or not the purpose oI the contract did not materialized because oI change oI
political climate.

Ruling: Petitioner invites the attention oI this Court to paragraph oI the lease contract, which
reads: "This lease shall be Ior a period oI Iive (5) years, commencing on the date oI issuance oI
the industrial clearance by the Ministry oI uman Settlements . . ." It then submits that the
issuance oI an industrial clearance is a suspensive condition without which the rights under the
contract would not be acquired. It can be deduced Irom this letter that the suspensive condition
issuance oI industrial clearance has already been IulIilled and that the lease contract has
become operative. Otherwise, petitioner did not have to solicit the conIormity oI private
respondents to the termination oI the contract Ior the simple reason that no juridical relation was
created because oI the non-IulIillment oI the condition.
Moreover, the reason oI petitioner in discontinuing with its project and in consequently
canceling the lease contract was "Iinancial as well as technical diIIiculties," not the alleged
insuIIiciency oI the Temporary Use Permit. Second. Invoking Article 1266 and the principle oI
rebus sic stantibus, petitioner asserts that it should be released Irom the obligatory Iorce oI the
contract oI lease because the purpose oI the contract did not materialize due to unIoreseen events
and causes beyond its control, i.e., due to the abrupt change in political climate aIter the EDSA
Revolution and Iinancial diIIiculties.











































NATELCO vs. COURT OF APPEALS, G.R. No. 107112, February 24, 1994
Facts:
In the case oI Reyes v. Caltex (Philippines), Inc., the doctrine that where a person by his
contract charges himselI with an obligation possible to be perIormed, he must perIorm it, unless
its perIormance is rendered impossible by the act oI God, by law, or by the other party, it being
the rule that in case the party desires to be excused Irom perIormance in the event oI
contingencies arising thereto, it is his duty to provide the basis thereIore was enunciated.
With the enactment oI the New Civil Code, a new provision was included therein,
namely, Article 1267 which provides that 'When the service has become so diIIicult as to be
maniIestly beyond the contemplation oI the parties, the obligor may also be released thereIrom,
in whole or in part.
Naga Telephone Co., Inc. remonstrates mainly against the application by the Court oI
Appeals oI Article 1267 in Iavor oI Camarines Sur II Electric Cooperative, Inc. Stated
diIIerently; the Iormer insists that the complaint should have been dismissed Ior Iailure to state a
cause oI action.
Petitioner Naga Telephone Co., Inc. (NATELCO) is a telephone company rendering local as well
as long distance telephone service in Naga City while private respondent Camarines Sur II
Electric Cooperative, Inc. (CASURECO II) a private corporation established Ior the purpose oI
operating an electric power service in the same city.
On November 1, 1977, the parties entered into a contract Ior the use by petitioners in the
operation oI its telephone service the electric light posts oI private respondent in Naga City. In
consideration thereIore, petitioners agreed to install, Iree oI charge, ten (10) telephone
connections Ior the use by private respondent.
AIter the contract has been enIorced Ior over ten (10) years, private respondent Iiled on
January 2, 1989 with the Regional Trial Court oI Naga City against petitioners Ior reIormation oI
the contract with damages, on the ground that it is too one-sided in Iavor oI petitioners; that it is
not in conIormity with the guidelines oI the National ElectriIication Administration (NEA)
which direct that the reasonable compensation Ior the use oI the posts is P10.00 per post, per
month; that aIter eleven (11) years oI petitioners' use oI the posts, the telephone cables strung by
them thereon have become much heavier with the increase in the volume oI their subscribers,
worsened by the Iact that their linemen bore holes through the posts at which points those posts
were broken during typhoons; that a post now costs as much as P2,630.00; so that justice and
equity demand that the contract be reIormed to abolish the inequities thereon.
As second cause oI action, private respondent alleged that starting with the year 1981,
petitioners have used 319 posts in the towns oI Pili, Canaman, Magarao and Milaor, Camarines
Sur, all outside Naga City, without any contract with it; that at the rate oI P10.00 per post,
petitioners should pay private respondent Ior the use thereoI the total amount oI P267,960.00
Irom 1981 up to the Iiling oI its complaint; and that petitioners had reIused to pay private
respondent said amount despite demands.
And as third cause oI action, private respondent complained about the poor servicing by
petitioners oI the ten (10) telephone units which had caused it great inconvenience and damages
to the tune oI not less than P100, 000.00.
In petitioners' answer to the Iirst cause oI action, they averred that it should be dismissed
because: 1) it does not suIIiciently state a cause oI action Ior reIormation oI contract; 2) it is
barred by prescription, the same having been Iiled more than ten (10) years aIter the execution oI
the contract; and (3) it is barred by estoppel, since private respondent seeks to enIorce the
contract in the same action. Petitioners Iurther alleged that their utilization oI private
respondent's posts could not have caused their deterioration because they have already been in
use Ior eleven (11) years; and that the value oI their expenses Ior the ten (10) telephone lines
long enjoyed by private respondent Iree oI charge are Iar in excess oI the amounts claimed by the
latter Ior the use oI the posts, so that iI there was any inequity, it was suIIered by them.
Regarding the second cause oI action, petitioners claimed that private respondent had
asked Ior telephone lines in areas outside Naga City Ior which its posts were used by them; and
that iI petitioners had reIused to comply with private respondent's demands Ior payment Ior the
use oI the posts outside Naga City, it was probably because what is due to them Irom private
respondent is more than its claim against them.
And with respect to the third cause oI action, petitioners claimed, inter alia, that their
telephone service had been categorized by the National Telecommunication Corporation (NTC)
as "very high" and oI "superior quality."
On the basis oI the Ioregoing countervailing evidence oI the parties, the trial court Iound,
as regards private respondent's Iirst cause oI action, that while the contract appeared to be Iair to
both parties when it was entered into by them during the Iirst year oI private respondent's
operation and when its Board oI Directors did not yet have any experience in that business, it had
become disadvantageous and unIair to private respondent because oI subsequent events and
conditions, particularly the increase in the volume oI the subscribers oI petitioners Ior more than
ten (10) years without the corresponding increase in the number oI telephone connections to
private respondent Iree oI charge. The trial court concluded that while in an action Ior
reIormation oI contract, it cannot make another contract Ior the parties, it can, however, Ior
reasons oI justice and equity, order that the contract be reIormed to abolish the inequities therein.
Thus, said court ruled that the contract should be reIormed by ordering petitioners to pay private
respondent compensation Ior the use oI their posts in Naga City, while private respondent should
also be ordered to pay the monthly bills Ior the use oI the telephones also in Naga City. And
taking into consideration the guidelines oI the NEA on the rental oI posts by telephone
companies and the increase in the costs oI such posts, the trial court opined that a monthly rental
oI P10.00 Ior each post oI private respondent used by petitioners is reasonable, which rental it
should pay Irom the Iiling oI the complaint in this case on January 2, 1989. And in like manner,
private respondent should pay petitioners Irom the same date its monthly bills Ior the use and
transIers oI its telephones in Naga City at the same rate that the public are paying.
On private respondent's second cause oI action, the trial court Iound that the contract does
not mention anything about the use by petitioners oI private respondent's posts outside oI Naga
City. ThereIore, the trial court held that Ior reason oI equity, the contract should be reIormed by
including therein the provision that Ior the use oI private respondent's posts outside Naga City,
petitioners should pay a monthly rental oI P10.00 per post, the payment to start on the date this
case was Iiled, or on January 2, 1989, and private respondent should also pay petitioners the
monthly dues on its telephone connections located outside Naga City beginning January,
1989.And with respect to private respondent's third cause oI action, the trial court Iound the
claim not suIIiciently proved.
Disagreeing with the judgment, petitioners appealed to respondent Court oI Appeals. In
the decision, dated May 28, 1992, respondent court aIIirmed the decision oI the trial court; but
based on diIIerent grounds, to wit: 1) that Article 1267 oI the New Civil Code is applicable, and
2) that the contract was subject to a potestative condition which rendered said condition void.

Issues:
Whether or not the Court oI Appeals erred in making a contract Ior the parties by
invoking Article 1267 oI the New Civil Code;
Whether or not the Court oI Appeals erred in ruling that prescription oI the action Ior
reIormation oI the contract in this case commenced Irom the time it became disadvantageous to
private respondent; and
Whether or not the Court oI Appeals erred in ruling that the contract was subject to a
potestative condition in Iavor oI petitioners.

eld:
The court did not agree to petitioners assertion that Article 1267 was never raised by the
parties in their pleadings and was never the subject oI trial. The main and pivotal issue in this
case is whether the continued enIorcement oI the contract between the parties has, through the
years become too iniquitous or disadvantageous to the plaintiII and too one- sided in Iavor oI
deIendant- appellant, so that a solution must be Iound to relieve plaintiII Irom the continued
operation oI said agreement and to prevent deIendant-appellant Irom Iurther unjustly enriching
itselI at plaintiII`s expense. It is indeed unIortunate that deIendant had turned deaI ears to
plaintiIIs request Ior renegotiation, constraining the latter to go to court. It is settled that when
trial court decides a case in Iavor oI a party on a certain ground, the appellant court may uphold
the decision below upon some other point, which was ignored or erroneously decided, by the
trial court.
On the issue oI prescription oI private respondent`s action Ior reIormation oI contract,
petitioners allege that respondent courts ruling that the right oI action 'arose only aIter said
contract had already become disadvantageous and unIair to it due to subsequent events and
conditions are erroneous. In reIormation oI contracts, what is reIormed is not the contract itselI,
but the instrument embodying the contract. It Iollows that whether the contract is
disadvantageous or not is irrelevant to reIormation and thereIore cannot be an element in the
determination oI the period Ior prescription oI the action to reIorm.
Petitioners allege that there is nothing purely potestative about the prestations oI either
party because petitioner`s permission Ior Iree use oI telephones is not made to depend purely on
their will, neither is private respondent`s permission Ior Iree use oI its posts dependent purely on
it`s will. Petitioner`s allegations must be upheld in this regard. A potestative condition is a
condition, the IulIillment oI which depends upon the sole will oI the debtor, in which case, the
conditional obligation is void, based on this deIinition, respondent court`s Iinding that the
provisions in the contract, to wit: a) that the term oI this contract shall as long as the party oI the
Iirst part (petitioner) has need Ior the electric light posts oI the party oI the second part (private
respondent) is a potestative condition, is correct. owever, it must have overlooked the other
condition in the same provisions to wit: 'It being understood that this contract shall terminate
when Ior any reason whatsoever, the party oI the second part (private respondent) is Iorced to
stop, abandoned (sic) its operation as a public service and it becomes necessary to remove the
electric light post. Which are casual conditions since they depend on chance, hazard, or the will
oI a third person. '
In sum, the contract is subject to mixed conditions, that is, they depend partly on the will
oI the debtor and partly on chance, hazard or the will oI a third person, which so not invalidate
the aIorementioned provisions.

















































TRANS-PACIFIC INDUSTRIAL SUPPL, INC vs. COURT OF APPEALS, G.R. No. 109172,
August 19, 1994

Facts:
Sometime in 1979, petitioner applied Ior and was granted several Iinancial
accommodations amounting to P1, 300,000.00 by respondent Associated Bank. The loans were
evidenced and secured by Iour (4) promissory notes, a real estate mortgage covering three (3)
parcels oI land and a chattel mortgage over petitioner's stock and inventories.
Unable to settle its obligation in Iull, petitioner requested Ior, and was granted by
respondent bank, a restructuring oI the remaining indebtedness, which then amounted to P1,
057,500.00, as all the previous payments made were applied to penalties and interests.
To secure the re-structured loan oI P1, 213,400.00, three (3) new promissory notes were
executed by Trans-PaciIic as Iollows: 1) a promissory note Ior the amount oI P1, 050,000.00
denominated as working capital; 2) a promissory note Ior the amount oI P121, 166.00
denominated as restructured interest; (3) a promissory note Ior the amount oI P42, 234.00
denominated similarly as restructured interest. The mortgaged parcels oI land were substituted
by another mortgage covering two (2) other parcels oI land and a chattel mortgage on petitioner's
stock inventory. The released parcels oI land were then sold and the proceeds amounting to P1,
386,614.20, according to petitioner, were turned over to the bank and applied to Trans-PaciIic's
restructured loan. Subsequently, respondent bank returned the duplicate original copies oI the
three (3) promissory notes to Trans-PaciIic with the word "PAID" stamped thereon.
Despite the return oI the notes, or on December 12, 1985, Associated Bank demanded
Irom Trans-PaciIic payment oI the amount oI P492, 100.00 representing accrued interest on the
Iirst promissory note. According to the bank, the promissory notes were erroneously released.
Initially, Trans-PaciIic expressed its willingness to pay the amount demanded by
respondent bank. Later, it had a change oI heart and instead initiated an action beIore the
Regional Trial Court oI Makati, Ior speciIic perIormance and damages. There it prayed that the
mortgage over the two (2) parcels oI land be released and its stock inventory be liIted and that its
obligation to the bank be declared as having been Iully paid.
AIter trial, the court a quo rendered judgment in Iavor oI Trans-PaciIic. Respondent bank
elevated the case to the appellate court, which reversed the decision oI the trial court.

Issue:
Whether or not petitioner has indeed paid in Iull its obligation to respondent bank.

eld:
The Supreme Court held that applying the legal presumption provided by Article 1271 oI
the Civil Code, the trial court ruled that petitioner has Iully discharged its obligation by virtue oI
its possession oI the documents (stamped "PAID") evidencing its indebtedness. Respondent
court disagreed and held, among others, that the documents Iound in possession oI Trans-PaciIic
are mere duplicates and cannot be the basis oI petitioner's claim that its obligation has been Iully
paid. Accordingly, since the promissory notes submitted by petitioner were duplicates and not
the originals, the delivery thereoI by respondent bank to the petitioner does not merit the
application oI Article 1271 (1st par.) oI the Civil Code, stating that the delivery oI a private
document evidencing a credit, made voluntarily by the creditor to the debtor, implies the
renunciation oI the action, which the Iormer had against the latter.
Respondent court is oI the view that the above provision must be construed to mean the
original copy oI the document evidencing the credit and not its duplicate, that when the law
speaks oI the delivery oI the private document evidencing a credit, it must be construed as
reIerring to the original. In this case, appellees (Trans-PaciIic) presented, not the originals but the
duplicates oI the three promissory notes.
The above pronouncement oI respondent court is maniIestly groundless. It is undisputed
that the documents presented were duplicate originals and are thereIore admissible as evidence.
Further, it must be noted that respondent bank itselI did not bother to challenge the authenticity
oI the duplicate copies submitted by petitioner.
owever, per review oI the records, the presumption created by the Art. 1271 oI the Civil
Code is not conclusive but merely prima Iacie. II there be no evidence to the contrary, the
presumption stands. Conversely, the presumption loses its legal eIIicacy in the Iace oI prooI or
evidence to the contrary. In the case beIore us, we Iind suIIicient justiIication to overthrow the
presumption oI payment generated by the delivery oI the documents evidencing petitioner`s
indebtedness.
It may not be amiss to add that Article 1271 oI the Civil Code raises a presumption, not
oI payment, but oI the renunciation oI the credit where more convincing evidence would be
required than what normally would be called Ior to prove payment. The rationale Ior allowing
the presumption oI renunciation in the delivery oI a private instrument is that, unlike that oI a
public instrument, there could be just one copy oI the evidence oI credit. Where several originals
are made out oI a private document, the intendment oI the law would thus be to reIer to the
delivery only oI the original rather than to the original duplicate oI which the debtor would
normally retain a copy. It would thus be absurd iI Article 1271 were to be applied diIIerently.
















































DALUPAN vs. ARDEN, G.R. No. L-3975, November 27, 1951
Facts:
The case is an appeal taken Irom an order oI the First Instance oI Manila dated May 19,
1950, setting aside the writs oI execution and garnishment issued to the sheriII oI Manila
commanding him to levy on two (2) checks, one Ior P9, 028.50, and another Ior P24, 546.00,
payable to Fred M. arden which were then in possession oI the receiver appointed in case
involving the liquidation oI the conjugal partnership oI the spouses Fred M. arden and
Esperanza P. de arden.
On August 26, 1948, plaintiII Iiled an action against the deIendant Ior the collection oI
P113, 837.17, with interest thereon Irom the Iiling oI the complaint, which represents IiIty (50)
per cent oI the reduction plaintiII was able to secure Irom the Collector oI Internal Revenue in
the amount oI unpaid taxes claimed to be due Irom the deIendant. DeIendant acknowledged this
claim and prayed that judgment be rendered accordingly. The receiver in the liquidation oI case
No. R-59634 and the wiIe oI the deIendant, Esperanza P. de arden, Iiled an answer in
intervention claiming that the amount sought by the plaintiII was exorbitant and prayed that it be
reduced to 10 per cent oI the rebate. By reason oI the acquiescence oI the deIendant to the claim
on one hand, and the opposition oI the receiver and oI the wiIe on the other, an amicable
settlement was concluded by the plaintiII and the intervenor whereby it was agreed that the sum
oI P22,767.43 be paid to the plaintiII Irom the Iunds under the control oI the receiver "and the
balance oI P91,069.74 shall be charged exclusively against the deIendant Fred M. arden Irom
whatever share he may still have in the conjugal partnership between him and Esperanza P. de
arden aIter the Iinal liquidation and partition thereoI, without pronouncement as to costs and
interests." The court rendered judgment in accordance with this stipulation.
Almost one year thereaIter, plaintiII Iiled a motion Ior the issuance oI a writ oI execution
to satisIy the balance oI P91, 069.74, which was Iavorably acted upon. At that time the receiver
had in his possession two (2) checks payable to Fred M. arden amounting to P33, 574.50,
representing part oI the proceeds oI the sale oI two (2) lots belonging to the conjugal partnership
which was ordered by the court upon the joint petition oI the spouses in order that they may have
Iunds with which to deIray their living and other similar expenses. One-halI oI the proceeds was
given to Mrs. arden. The sheriII attempted to garnish these two (2) checks acting upon the writ
oI execution secured by the plaintiII, but the receivership court quashed the writ, stating however
in the order that it will be 'without prejudice to the right oI Francisco Dalupan to attach the
money oI the deIendant Fred M. arden, aIter the same has been delivered to the latter. When
said checks were delivered to the latter. When said checks were delivered to Jose Salumbides in
his capacity as attorney-in-Iact oI Fred M. arden, plaintiII immediately secured another writ oI
garnishment in line with the suggestion oI the court, whereupon deIendant again Iiled a motion
to quash said writ, and aIter due hearing, the court granted the motion setting aside the writ oI
garnishment, as well as the writ oI execution previously issued in the case. This is the order now
subject oI appeal.

Issue:
Whether or not the proIIer made by the plaintiII to the deIendant is binding.

eld:
The proIIer made by the plaintiII to the deIendant to the eIIect that 'in the event you lose
your case with your wiIe, Mrs. Esperanza P. de arden, and that aIter adjudication oI the
conjugal property what is leIt with you will not be suIIicient Ior your livelihood. I shall be
pleased to write oII as bad debt the balance oI your account in the sum oI P42, 069.74. This
proIIer was contained in a letter sent by the plaintiII to the deIendant on March 23, 1949, which
was accepted expressly by Fred M. arden. arden regarded this proIIer as a binding obligation
and acted accordingly, and Ior plaintiII to say now that proIIer is but a mere gesture oI generosity
or an act oI Christian charity without any binding legal eIIect is unIair to say at least. This is an
added circumstance, which conIirms our view that the understanding between the plaintiII and
the deIendant is really to deIer payment oI the balance oI the claim until aIter the Iinal
liquidation oI the conjugal partnership.





































LOPEZ VITO vs. TAMBUNTING, G.R. No. L-9806, January 19, 1916

Facts:
These proceedings were brought to recover Irom the deIendant the sum oI P2, 000.00,
amount oI the Iees, which, according to the complaint, are owing Ior proIessional medical
services rendered by the plaintiII to a daughter oI the deIendant Irom March 10 to July 15, 1913,
which Iees the deIendant reIused to pay, notwithstanding the demands thereIore made upon him
by the plaintiII.
The deIendant denied the allegations oI the complaint and Iurthermore alleged that the
obligation, which the plaintiII endeavored to compel him to IulIill, was already extinguished.
The receipt signed by the plaintiII, Ior P700, the amount oI his Iees he endeavored to collect
Irom the deIendant aIter he had Iinished rendering the services in question was in the latter`s
possession, and this Iact was alleged by him as prooI that he had already paid said Iees to the
plaintiII.

Issue:
Whether or not the obligation alleged in the complaint has already been extinguished.

eld:
It is true that number 8 oI section 334 oI the Code oI Civil Procedure provides as a legal
presumption 'that an obligation delivered up to the debtor has been paid. Article 1188 oI the
Civil Code also provides that the voluntary surrender by a creditor to his debtor, oI a private
instrument proving a credit, implies the renunciation oI the right oI action against the debtor and
Article 1189 prescribes that whenever the private instrument which evidences the debt is in
possession oI the debtor, it will be presumed that the creditor delivered it oI his own Iree will,
unless the contrary is proven.
But the legal presumption established by the Ioregoing provisions oI law cannot stand iI
suIIicient prooI is adduced against it. In the case at bar the trial court correctly held that there
was suIIicient evidence to the contrary. In view oI the preponderance thereoI in Iavor oI the
plaintiII and oI the circumstances connected with the deIendant`s possession oI said receipt.
Furthermore, in order that such presumption may be taken into account, it is necessary.
As stated in the laws cited, that the evidence oI the obligation be delivered up to the debtor and
that the delivery oI the instrument proving the credit be made voluntarily by the creditor to the
debtor. In the present case, it cannot be said that these circumstances concurred, in as much as
when the plaintiII sent the receipt to the deIendant Ior the purpose oI collecting his Iee, it was not
his intention that the document should remain in the possession oI the deIendant iI the latter did
not Iorthwith pay the amount speciIied therein.























































TESTATE ESTATE OF LAZARO MOTA, Et. Al. vs. SERRA, G.R. No. 22825,
February 14, 1925

Facts:
On February 1, 1919, plaintiIIs and deIendants entered into a contract oI partnership Ior
the construction and exploitation oI a railroad line Irom the 'San Isidro and 'Palama centrals
to the place known as 'Nandong. The original capital stipulated was P150,000.00 which shall
be paid in equal parts and the plaintiIIs were entrusted with the administration oI said
partnership. The agreed capital did not prove suIIicient as it reached up to P226,092.92 as oI
May 15, 1920. On January 27, 1920, the deIendant entered into a contract oI sale with a
Venancio Concepcion, Phil C. Whitaker and Eusebio R. de Luzuariaga oI that Palma with its
running business, as well as all improvements, machineries an buildings, real and personal
properties, rights, and choses in action and interest, including the sugar plantation oI the harvest
year oI 1920 to 1921, covering all property oI the vendor. owever, beIore the delivery to the
purchasers oI the hacienda, Eusebio R. del Luzuriaga renounced all his rights in Iavor oI Messrs.
Venancio Concepcion and Phil C. Whitaker, thus executed deed oI sale oI said Palma Estate Ior
the amount oI P1,695,961.90 wherein only P945,861.90 was received by the vendor, leaving a
balance to be paid by installment as stipulated in the contract.
AIterwards, Concepcion and Whitaker bought Irom the plaintiIIs the one halI oI the
railroad line with a purchase price oI P237,722.15 excluding the amount which deIendant
owning to the plaintiIIs. OI the purchase price, Concepcion and Whitaker paid only P47,544.43.
The court a quo in its decision had that there was novation oI the contract by the substitution oI
the debtor and thereIore absolved the deIendant Irom the complaint with cost against the
plaintiIIs. There was no way oI reviving the contract which the plaintiIIs themselves in interest
has spontaneously and voluntarily extinguishes.

Issue:
Whether or not the dissolution oI a partnership extinguishes its obligations already
incurred and the partnership continues until they are liquidated, although it may not incur new
obligation.

eld:
It should be noted that in order to give novation its legal eIIect, the law requires that the
creditor should consent to the substitution oI a new debtor. This consent must be given expressly
Ior the reason that, since novation extinguishes the personality oI the Iirst debtor who is to be
substituted by new one, it implies on the part oI the creditor a waiver oI the right that he had
beIore the novation which waiver must be express under the principle that renuntiatio non
praesumitur, recognized by the law in declaring that a waiver oI right may not be perIormed
unless the will to waive is indisputably shown by him who holds the right
DeIendant transIerred his hacienda to Messrs. Phil. C. Whitaker and Venancio
Concepcion and made it known to the plaintiIIs that the new owners would hold themselves
liable Ior the cost oI constructing the said railroad line. PlaintiIIs could not prevent the deIendant
Irom selling to Phil. C. Whitaker and Venancio Concepcion his "acienda Palma" with the rights
that he had over the railroad in question. The deIendant ceased to be a partner in said line and,
thereIore, the plaintiIIs had to take the vendees as their new partners. PlaintiIIs had to come to an
understanding with the new owners oI the "acienda Palma" in connection with the railroad line
"Palma-San Isidro-Nandong." But in all oI this, there was nothing to show the express consent,
the maniIest and deliberate intention oI the plaintiIIs to exempt the deIendant Irom his obligation
and to transIer it to his successors in interest, Messrs. Phil. C. Whitaker and Venancio
Concepcion.
The plaintiIIs were not a party to the document neither in this any other document, nor in
others in the record, the Court Iound any stipulation whereby the obligation oI the deIendant was
novated with the consent oI the creditor, and as it has been held in the case oI Martinez vs.
Cavives (25 Phil., 581), the oral evidence tending to prove such a Iact as this is not in law
suIIicient.

Further the dissolution oI a Iirm does not relieve any oI its members Irom liability Ior
existing obligations, although it does save them Irom new obligation to which they have not
expressly or impliedly assented, and any oI them may be discharged Irom old obligations by
novation or other Iorm oI release. It is optional that partnership continues even aIter dissolution
Ior the purpose oI winding up its aIIairs.
The deIendant is indebted to the plaintiIIs in the amount oI P113,046.46 and is hereby
sentence to pay the plaintiII said amount together with the agreed interest at the rate oI 10
percent per annum Irom the date oI Iiling oI the complaint.

EK TON LIN FIRE MARINE INSURANCE vs. USINGCO, G.R. No. L-43608,
July 20, 1937

Facts:
Pelagio usingco was the owner oI the steamship usingco and, as such, he executed, on
November 19,1927, a power oI attorney in Iavor oI u Seguioc to administer, lease, mortgage
and sell his properties, including his vessels or steamships. With approval oI the Bureau oI
Customs, the steamship usingco belonging to the deIendant on account oI a promissory note
Ior P45,000 executed by him, upon receipt oI said sum as loan Irom China Banking Corporation,
on September 25,1928, and on account oI a guaranty in the sum oI P20,000 subscribed by it in
Iavor oI said bank in the 17
th
oI said month and year, the deed having been executed to that
eIIect, in absolute conIormity with the Chattel Mortgage Law.
One year and some months later, or in February,1930, and in April, 1931, the steamship
usingco needed some repairs which were made by the Earnshaw Docks & onolulu Iron
Works upon petition oI A. usingco ermanos which, according to documentary evidence oI
record, was co-owner oI Pelagio usingco. The repairs were made upon guaranty oI the
deIendant and appellant Vicente Madrigal at a cost oI P8,244.66.
In addition, it should be stated that when the deIendant and appellant Vicente Madrigal
instituted the civil case against Pelagio usingco and A. usingco ermanos in March 1932, the
steamship usingco was already in the possession oI Pelagio usingco in the port oI Surigao.
It should be added Iurther that the payment made by the plaintiII on account oI the credit
oI the China Banking Corporation against Pelagio usingco, by virtue oI the deed mortgage
executed bye the latter in Iavor oI said plaintiII, through an attorney in Iact, encumbering the
steamship usingco, amounted to only P16,190.38 plus P700.00 as insurance premium, which
are still less than that adjudicated to the plaintiII by the lawyer court.

Issue:
Whether or not the obligation is extinguished iI there is a merger oI the rights oI the
creditor and debtor.

eld:
The Court held that the only right leIt to the plaintiII was to collect its mortgage directly
and immediately subjects the property in which it is imposed, whoever its possessor may be, to
the IulIillment oI the obligation Ior the security oI which it was created. But in this case, it so
happens that it can not take such steps now because it was the purchaser oI the steamship
usingco at public auction, and it was so with Iull knowledge that it had a mortgage credit on
said vessel. Obligations are extinguished by the merger oI the rights oI the creditor and debtor.
The deIendant and appellant Vicente Madrigal enjoys preIerence in the payment oI his
judgment credit with the proceeds oI the sale oI the steamship usingco, by virtue oI the
assignment to him oI the credit oI the Earnshaw Docks & onolulu Iron Works, because it is so
provided not only in article 1922 oI the Civil Code but also in article 1926, rule 4, thereoI,
notwithstanding the preIerence reIerred to in rule 1 oI the latter article, which provides that
credits secured by a pledge exclude all others to extent oI the value is not secured by pledge but
by mortgage, so much so that the mortgage deed executed in its Iavor contains a clause to the
eIIect that iI the proceeds oI the sale oI the steamship usingco, in case it is sold by reason oI
deIault in the perIormance oI the conditions thereon, should be insuIIicient, the plaintiII could its
credit on other property oI the debtors .
WhereIore, the appealed judgment was modiIied, reversing it in so Iar as it orders the
deIendant and appellant Vicente Madrigal to turn over to the plaintiII the amount oI money paid
him by the provincial sheriII oI Surigao Irom the proceeds oI the sale oI the steamship usingco,
and aIIirming it in so Iar as it absolves said sheriII Irom the complaint, with the costs to the
plaintiII-appellant.





















































































E.G.V. REALT DEVELOPMENT CORPORATION VS. COURT OF APPEALS
G.R. No. 120236, July 20, 1999


Facts:
Respondent Unisphere, owner/occupant oI Unit 301 oI a condominium demanded Ior
compensation and reimbursement in the total amount oI Php 12,295.00 arising Irom two alleged
robberies in the said unit against Cristina Condominium Corporation (CCC), which is in charge
oI providing Ior the building`s security. CCC denied said liability, stating that the goods lost
belonged to a third party. Respondent withheld payment oI its monthly dues. CCC demanded
payment oI the said dues.
Petitioner E.G.V. Realty owner oI the said building and CCC jointly Iiled a petition with
the SEC Ior the collection oI the unpaid monthly dues in the amount oI P13,142.67 against
respondent, who alleged that it could not be deemed in deIault in the payment oI said unpaid
dues because its tardiness was occasioned by the petitioners` Iailure to comply with their
obligation to provide security Ior the building premises in order to prevent, iI not to stop, the
robberies taking place therein. It asserted as counterclaim that the amount oI P12,295.00
representing the total value oI its loss due to the two robberies be awarded to it by way oI
damages Ior latter`s Iailure to secure the premises. The CA decided a set-oII that the amount oI
P13,142.67, the unpaid monthly dues oI Unisphere to the Corporation should be oIIset the losses
suIIered by the Unisphere in the amount oI P12,295.00.

Issue:
Whether or not compensation is proper in the present case

eld:
A debt is an amount actually ascertained. It is claimed which has been Iormally passed
upon by the courts oI quasi-judicial bodies to which it can in law be submitted and has been
declared to be a debt. A claim, on the other hand, is a debt in embryo. It is mere evidence oI a
debt and must pass thru the process prescribed by law beIore it develops into what is properly
called a debt. (Vallarta vs. CA, 163 SCRA 587). Absent, however, any such categorical
admission by an obligor or Iinal adjudication, no compensation or set-oII can take place.
In order that compensation may be proper, it is necessary that : (1) each one oI the
obligors be bound principally, and that he be at the same time a principal creditor oI the other;(2)
both debts consist in a sum oI money, or iI the things due are consumable, they be oI the same
kind, and also oI the same quality iI the latter has been stated; (3) the two debts be due; (4) they
be liquidated and demandable; and (5) neither oI them there be any retention or controversy,
commenced by third persons and communicated in due time to the debtor;
Absent oI any showing that all oI these requisites exist, compensation may not take place.
It has not been suIIiciently established that compensation or set-oII is proper here as there is lack
oI evidence to show that petitioners E.G.V. Realty and CCC and respondent Unisphere are
mutually debtors and creditors oI each other.




AEROSPACE CEMICAL INDUSTRIES, INC. VS. COURT OF APPEALS,
G.R. No. 108129, September 23, 1999

Facts:
Aerospace Industries, Inc. purchased 500 metric tons oI sulIuric acid Irom Philippine
Phosphate Fertilizer Corporation. Petitioner as buyer committed to secure the means oI
transportation to pick-up the purchases Irom the load ports. Respondent asked Ior several times
that the sulIuric acid should be retrieved to minimize incremental costs. The ship, which loaded
the sulIuric acid, sank with 227.51 MT oI such. Petitioner chartered another vessel and disclosed
its additional orders to replace its sunken purchases. It is willing to pay the additional order,
however, its request provided that the liIting be made at Sangi, Ceby. Respondent denied the
request despite the demand letter sent by petitioner`s counsel Ior the delivery oI the 272.49 MT
oI sulIuric acid paid by his client, or the return oI the purchase price oI three hundred seven
thousand Iive hundred thirty (P307, 530.00) pesos. Because oI the Iailure oI respondent to act
according to the request and speciIications oI the petitioner, the latter Iiled a complaint Ior
speciIic perIormance and/or damages.
The trial Court Iavored the petitioner, which thereaIter was reversed by the Court oI
Appeals.


Issue:
Whether or not compensation can be applied in this case.

eld:
The Supreme Court held that considering that petitioner made an advance payment Ior
the un-liIted sulIuric acid in the amount oI P303, 483.37, it is proper to set oII this amount
against the rental expenses initially paid by private respondent. It is worth noting that the
adjustment and allowance oI private respondent`s counterclaim or set-oII in the present action,
rather than by another independent action, is encouraged by the law. Such practice serves to
avoid circuitry oI action, multiplicity oI suits, inconvenience, expenses, and unwarranted
consumption oI the court`s time.
The trend oI judicial decisions is toward a liberal extension oI the right to avail oI
counterclaims or set-oIIs. The rules on counterclaims are designed to achieve the disposition oI a
whole controversy involving the conIlicting claims oI interested parties at one time and in one
action, provided all parties can be brought beIore the court and the matter decided without
prejudicing the right oI any party. Set-oII in this case is proper and reasonable, which involves
deducting P272, 000.00 (rentals) Irom P 303, 483.37 (advance payment), which will leave the
amount oI P31,483.37 reIundable to petitioner.
ence, the petition was denied. The assailed decision oI the Court oI Appeals in was
aIIirmed.














































PNB MANAGEMENT AND DEVELOPMENT CORP. VS. R&R METAL
CASTING AND FABRICATING, INC. G. R. No. 132245, January 2, 2002

Facts:
On November 19, 1993, respondent R&R Metal Casting and Fabricating, Inc. (R&R)
obtained a judgment in its Iavor against Pantranco North Express, Inc. (PNEI). PNEI was
ordered to pay respondent P213,050 plus interest as actual damages, P50,000 as exemplary
damages, 25 percent oI the total amount payable as attorney`s Iees, and the costs oI suit.
owever, the writ oI execution was returned unsatisIied since the sheriII did not Iind any
property oI PNEI recorded at the Registries oI Deeds oI the diIIerent cities oI Metro Manila.
Neither did the sheriII receive a reply to the notice oI garnishment he sent to PNB-Escolta.
On March 27, 1995, respondent Iiled with the trial court a motion Ior the issuance oI
subpoenae duces tecum and ad testiIicandum requiring petitioner PNB Management and
Development Corp. (PNB MADECOR) to produce and testiIy on certain documents pertaining
to transactions between petitioner and PNEI Irom 1981 to 1995. From the testimony oI the
representative oI PNB MADECOR, it was discovered that NAREDECO, petitioner`s Iorerunner,
executed a promissory note in Iavor oI PNEI Ior P7.8 million, and that PNB MADECOR also
had receivables Irom PNEI in the Iorm oI unpaid rentals amounting to more than P7.5 million.
On the basis oI said testimony, respondent Iiled with the trial court a motion Ior the application
oI Iunds or properties oI PNEI, its judgment debtor, in the hands oI PNB MADECOR Ior the
satisIaction oI the judgment in Iavor oI respondent.
The trial court issued an order garnishing the amount owed by petitioner to PNEI under
the promissory note, to satisIy the judgment against PNEI and in Iavor oI respondent. On
appeal, the Court oI Appeals aIIirmed the decision. The appellate court also denied petitioner`s
motion Ior reconsideration.

Issue:
Whether or not the Court oI Appeals erred when it ruled that the requisites Ior legal
compensation as set Iorth under articles 1277 and 1278 oI the civil code do not concur in the case
at bar.

eld:
The Court decided that legal compensation could not have occurred because oI the
absence oI one requisite in this case that both debts must be due and demandable.
As observed by the Court oI Appeals, under the terms oI the promissory note, Iailure on
the part oI NAREDECO (PNB MADECOR) to pay the value oI the instrument aIter due notice
has been made by PNEI would entitle PNEI to collect an 18 interest per annum Irom date oI
notice oI demand. Petitioner makes a similar assertion in its petition. Petitioner`s obligation to
PNEI appears to be payable on demand. Petitioner is obligated to pay the amount stated in the
promissory note upon receipt oI a notice to pay Irom PNEI. II petitioner Iails to pay aIter such
notice, the obligation will earn an interest oI 18 percent per annum. Respondent alleges that
PNEI had already demanded payment.
The Court agrees with petitioner that this letter was not one demanding payment, but one
that merely inIormed petitioner oI (1) the conveyance oI a certain portion oI its obligation to
PNEI per a dacion en pago arrangement between PNEI and PNB, and (2) the unpaid balance oI
its obligation aIter deducting the amount conveyed to PNB. The import oI this letter is not that
PNEI was demanding payment, but that PNEI was advising petitioner to settle the matter oI
implementing the earlier arrangement with PNB.
Since petitioner`s obligation to PNEI is payable on demand, and there being no demand
made, it Iollows that the obligation is not yet due. ThereIore, this obligation may not be subject
to compensation Ior lack oI a requisite under the law. Without compensation having taken place,
petitioner remains obligated to PNEI to the extent stated in the promissory note. This obligation
may undoubtedly be garnished in Iavor oI respondent to satisIy PNEI`s judgment debt.
There is another alleged demand letter on record, dated January 24, 1990. It was
addressed to Atty. Domingo A. Santiago, Jr., Senior Vice President and ChieI Legal Counsel oI
PNB, and signed by Manuel Vijungco, chair oI the Board oI Directors oI PNEI. In said letter,
PNEI requested oIIsetting oI accounts between petitioner and PNEI. owever, PNEI`s own
Assistant General Manager Ior Finance at that time, Atty. Loreto N. Tang, testiIied that the letter
was not a demand letter.
ence, petition was denied. Decision aIIirmed

SILAIS MARKETING CORPORATION VS. INTERMEDIATE APPELLATE COURT,
G. R. No. L-74027, December 7, 1989

Facts:
On various dates in October, November and December, 1975, Gregorio de Leon (De
Leon Ior short) doing business under the name and style oI Mark Industrial Sales sold and
delivered to Silahis Marketing Corporation (Silahis Ior short) various items oI merchandise
covered by several invoices in the aggregate amount oI P 22,213.75 payable within thirty (30)
days Irom date oI the covering invoices. Allegedly due to Silahis' Iailure to pay its account upon
maturity despite repeated demands, de Leon Iiled beIore the then Court oI First Instance oI
Manila a complaint Ior the collection oI the said accounts including accrued interest thereon in
the amount oI P 661.03 and attorney's Iees oI P 5,000.00 plus costs oI litigation.
The answer admitted the allegations oI the complaint insoIar as the invoices were concerned but presented as
aIIirmative deIenses; |al a debit memo Ior P 22,200.00 as unrealized proIit Ior a supposed commission that Silahis should have
received Irom de Leon Ior the sale oI sprockets in the amount oI P 111,000.00 made directly to Dole Philippines, Incorporated by
the latter sometime in August 1975 without coursing the same through the Iormer allegedly in violation oI the usual practice
concerning sale oI merchandise to Dole Philippines, Inc.; and |b| Silahis' claim that it is entitled to return the stainless steel
screen covered by Exhibits '6-A' and '6-B' which was Iound deIective by its client, Borden International, Davao City, and to have
the corresponding amount cancelled Irom its account with de Leon.
The appellate court Iound that there was no agreement, verbal or otherwise, nor was there any contractual obligation
between De Leon and Silahis prohibiting any direct sales to Dole Philippines, Inc. by de Leon; nor was there anything in the debit
memo obligating de Leon to pay a commission to Silahis Ior the sale oI P 111,000.00 worth oI sprockets to Dole Philippines
although in the past, the Iormer did supply certain items to the latter Ior delivery to Dole Philippines, Incorporated.

Issue:
Whether or not private respondent is liable to the petitioner Ior the commission or margin
Ior the direct sale which the Iormer concluded and consummated with Dole Philippines,
Incorporated without coursing the same through herein.

eld:
When all the requisites mentioned in Art. 1279 oI the Civil Code are present, compensation takes eIIect by operation oI
law, even without the consent or knowledge oI the creditors and debtors.

Article 1279 requires, among others, that in order that
legal compensation shall take place, "the two debts be due" and "they be liquidated and demandable." Compensation is not proper
where the claim oI the person asserting the set-oII against the other is neither clear nor liquidated; compensation cannot extend to
unliquidated, disputed claim existing Irom breach oI contract.


Undoubtedly, petitioner admits the validity oI its outstanding accounts with private respondent in the amount oI P
22,213.75 as contained in its answer. But whether private respondent is liable to pay the petitioner a 20 margin or commission
on the subject sale to Dole Philippines, Inc. is vigorously disputed. This circumstance prevents legal compensation Irom taking
place.
The Court agrees with respondent appellate court that there is no evidence on record Irom which it can be inIerred that
there was any agreement between the petitioner and private respondent prohibiting the latter Irom selling directly to Dole
Philippines, Incorporated. It cannot be asserted that the debit memo was a contract binding between the parties considering that
the same, as correctly Iound by the appellate court, was not signed by private respondent nor was there any mention therein oI
any commitment by the latter to pay any commission to the Iormer involving the sale oI sprockets to Dole Philippines, Inc. in the
amount oI P 111,000.00. Indeed, such document can be taken as selI-serving with no probative value absent a showing or at the
very least an inIerence, that the party sought to be bound assented to its contents or showed conIormity thereto.
Moreover, private respondent's stand that it never agreed to give petitioner any commission on the direct sale to Dole
Philippines, Inc. by its company because it denied any utilization oI petitioners personnel and Iacilities at its Davao Branch in the
transaction with Dole Philippines, Inc. which would otherwise lend a basis Ior petitioner's monetary claim.
































Francia vs. Intermediate Appellate Court, G.R. No. L-67649, June 28, 1988

Facts:
Engracio Francia is the registered owner oI a residential lot and a two-story house built
upon it situated at Barrio San Isidro, now District oI Sta. Clara, Pasay City, Metro Manila. The
lot, with an area oI about 328 square meters, is described and covered by TransIer CertiIicate oI
Title No. 4739 (37795) oI the Registry oI Deeds oI Pasay City.
On October 15, 1977, a 125 square meter portion oI Francia's property was expropriated
by the Republic oI the Philippines Ior the sum oI P4,116.00 representing the estimated amount
equivalent to the assessed value oI the aIoresaid portion.
Since 1963 up to 1977 inclusive, Francia Iailed to pay his real estate taxes. Thus, on
December 5, 1977, his property was sold at public auction by the City Treasurer oI Pasay City
pursuant to Section 73 oI Presidential Decree No. 464 known as the Real Property Tax Code in
order to satisIy a tax delinquency oI P2,400.00. o Fernandez was the highest bidder Ior the
property. Francia was not present during the auction sale since he was in Iligan City at that time
helping his uncle ship bananas.
On March 3, 1979, Francia received a notice oI hearing oI LRC Case No. 1593-P "In re:
Petition Ior Entry oI New CertiIicate oI Title" Iiled by o Fernandez, seeking the cancellation oI
TCT No. 4739 (37795) and the issuance in his name oI a new certiIicate oI title. Upon
veriIication through his lawyer, Francia discovered that a Final Bill oI Sale had been issued in
Iavor oI o Fernandez by the City Treasurer on December 11, 1978. The auction sale and the
Iinal bill oI sale were both annotated at the back oI TCT No. 4739 (37795) by the Register oI
Deeds.
On March 20, 1979, Francia Iiled a complaint to annul the auction sale. e later amended
his complaint on January 24, 1980. On April 23, 1981, the lower court rendered decision in Iavor
oI o Fernandez, hence, this petition Ior certiorari.

Issue:
Whether or not price oI the property which was taken by the government as Eminent
Domain was inadequate that amounting to Iraud.

eld:
The Supreme Court dismissed the petition. Francia contends that his tax delinquency oI
P2,400.00 has been extinguished by legal compensation. e claims that the government owed
him P4,116.00 when a portion oI his land was expropriated on October 15, 1977. ence, his tax
obligation had been set-oII by operation oI law as oI October 15, 1977. There is no legal basis
Ior such contention. By legal compensation, obligations oI persons, who in their own right are
reciprocally debtors and creditors oI each other, are extinguished (Art. 1278, Civil Code). The
circumstances oI the case do not satisIy the requirements provided by Article 1279.
This principal contention oI the petitioner has no merit. The Court have consistently ruled
that there can be no oII-setting oI taxes against the claims that the taxpayer may have against the
government. A person cannot reIuse to pay a tax on the ground that the government owes him an
amount equal to or greater than the tax being collected. The collection oI a tax cannot await the
results oI a lawsuit against the government. Also, petitioner was notiIied as he admitted in his
testimony during the trial oI the case.















































AQUINTE VS. TIBONG, G.R. No. 166704, December 20, 2006.

Facts:
On May 6, 1999, petitioner AgriIina Aquintey Iiled beIore the Regional Trial Court oI
Baguio City, a complaint Ior sum oI money and damages against the respondent spouses.
AgriIina alleged that Felicidad had secured loans Irom her on several occasions, at monthly
interest rates oI 6 to 7. Despite demands, the spouses Tibong Iailed to pay their outstanding
loan, amounting to P773, 000.00 exclusive oI interests. In their Answer with Counterclaim, the
spouses Tibong admitted that they had secured loans Irom AgriIina. The proceeds oI the loan
were then re-lent to other borrowers at higher interests rates. They, likewise, alleged that they
had executed deeds oI assignment in Iavor oI AgriIina, and that their debtors had executed
promissory notes in AgriIina`s Iavor. According to the spouses Tibong, this resulted in a
novation oI the original obligation to AgriIina. They insisted that by virtue oI these documents,
AgriIina became the new collector oI their debtors; and the obligation to pay the balance oI their
loans had been extinguished.

Issue:
Whether or not the obligation oI respondents to pay the balance oI their loans, including
interest, was partially extinguished by the execution oI the deeds oI assignment in Iavor oI
petitioner, relative to the loans oI Edna Papat-iw, elen Cabang, Antoinette Manuel, and Fely
Cirilo in the total amount oI P371, 000.00.

eld:
As admitted by petitioner, she was able to collect the amounts under the promissory notes
Irom six debtors and applied them to respondents` accounts. Under Article 1231 (b) oI the New
Civil Code, novation is enumerated as one oI the ways by which obligations are extinguished.
Obligations may be modiIied by changing their object or principal creditor or by substituting the
person oI the debtor. The burden to prove the deIense that an obligation has been extinguished
by novation Ialls on the debtor. In this case, the Court oI Appeals (CA) correctly Iound that
respondents` obligation to pay the balance oI their account with petitioner was extinguished, pro
tanto, by the deeds oI assignment oI credit executed by respondent Felicidad in Iavor oI
petitioner. An assignment oI credit is an agreement by virtue oI which the owner oI a credit,
known as the assignor, by a legal cause, such as sale, dation in payment, exchange oI donation,
and without the consent oI the debtor, transIers his credit and accessory rights to another, known
as the assignee, who acquires the power to enIorce it to the same extent as the assignor could
enIorce it against the debtor. It may be in the Iorm oI sale, but at times it may constitute a dation
in payment, such as when a debtor, in order to obtain a release Irom his debt, assigns to his
creditor a credit he has against a third person. In its modern concept, what actually takes place in
dacion en pago is an objective novation oI the obligation where the thing oIIered as an accepted
equivalent oI the perIormance oI an obligation is considered as the object oI the contact oI sale,
while the debt is considered as the purchase price. In any case, common consent is an essential
prerequisite, be it sale or novation, to have the eIIect oI totally extinguishing the debt or
obligation. The requisites Ior dacion en pago are: 1) there must be a perIormance oI the
prestation in lieu oI payment (animo solvendi) which may consist in the delivery oI a corporeal
thing or a real right or a credit against a third person; 2) there must be some diIIerence between
the prestation due and that which is given in substitution (aliud pro alio); and 3) there must be an
agreement between the creditor and debtor that the obligation is immediately extinguished by
reason oI the perIormance oI a prestation diIIerent Iromthat due. All the requisites Ior a valid
dation in payment are present in this case.
Moreover, it bears stressing that petitioner, as assignee, acquired all the rights and
remedies passed by Felicidad, as assignee, at the time oI the assignment. Such rights and
remedies include the right to collect her debtors` obligations to her. Also, petitioner and
respondent Felicidad agreed that the amounts due Irom respondents` debtors were intended to
'make good in part the account oI respondents. Case law is that, an assignment will, ordinarily,
be interpreted or construed in accordance with the rules oI construction governing contacts
generally, the primary object being always to ascertain and carry out the intention oI the parties.
Considering all the Ioregoing, the Court Iinds that respondent still have a balance on their
account to petitioner in the principal amount oI P33, 841.00, the diIIerence between their loans
oI P773, 000.00 less P585, 659.00, the payment oI respondents` debtors amounting to P103,
500.00 and the P50, 000.00 payment made by respondents.
WhereIore, the petition is denied. The Decision and Resolution oI the Court oI Appeals
are aIIirmed with modiIication as to the balance.












































































SWAGMAN OTELS AND TRAVEL, INC. VS. COURT OF APPEALS,
G.R. No. 161135, April 8, 2005

Facts:
Sometime in 1996 and 1997, petitioner Swagman otels and Travel, INC. through Atty.
Leonor L. InIante and Rodney David egerty, its president and vice-president, respectively,
obtained Irom private respondent Neal B. Christian loans evidenced by three promissory notes
dated 7 August 1996, 14 March 1997, and 14 July 1997. Each oI the promissory notes is in the
amount oI US $ 50,000 payable aIter three years Irom its date with an interest oI 15 per annum
payable every three months. In a letter dated 16 December 1998, Christian inIormed the
petitioner corporation that he was terminating the loans and demanded Irom the latter payment in
the total amount oI US $ 150,000 plus unpaid interests in the total amount oI US $ 13,500.
On 2 February 1999, private respondent Christian Iiled with the Regional Trial Court oI
Baguio City, Branch 59, a complaint Ior a sum oI money and damages against the petitioner
corporation, egerty, and Atty. InIante. The complaint alleged as Iollows: on 7 August 1996, 14
march 1997 , and 14 July 1997, the petitioner, as will as its president and vice-president obtained
loans Irom him in the total amount oI US $ 150,00 payable quarterly or every three months. For
a while they paid an interest oI 15 per annum every three months in accordance with the three
promissory notes. oe ever, starting January 1998 until December 1998, they paid hi, only a
interest oI 6 per annum, instead oI 15 per annum, in violation oI the terms oI the three
promissory notes. Thus, Christian prayed that the trial court order them to pay him jointly and
solidarily the amount oI US $ 150,000 representing the total amount oI the loans; US $ 13,500
representing unpaid interests Irom January 1998 until December 1998; P100,000 Ior moral
damages; P50,000 Ior attorneys Iees; and the cost oI the suit.
In due course and aIter hearing, the trial court rendered a decision on 5 may 2000
declaring the Iirst two promissory notes dated 7 august 1996 and 14 March 1997 as already due
and demandable and that the interest on the loans had been reduced by the parties Irom 15 to
6 per annum. It them ordered the petitioner corporation to pay Christian the amount oI $
1000,000 representing the principal obligation covered by the promissory notes dated 7 August
1996 and 14 March 1997, 'plus interest oI 6 per month thereon until Iully paid, with all
interest payments already paid by the deIendant to the plaintiII to be deducted thereIrom.

Issue:
Whether or not where there is a valid novation, the original terms oI contract which has
been novated still prevail.

eld:
The Court held that it is undisputed that the three promissory notes were Ior the amount
oI P50,000 each and uniIormly provided Ior (1) a term oI three years; (2) an interest oI 15 per
annum, payable quarterly; and (3) the repayment oI the principal loans aIter three years Irom
their respective dates. owever, both the Court oI Appeals and the trial court Iound that a
renegotiation oI the three promissory notes indeed happened in December 1997 between the
private respondent and the petitioner resulting in the reduction not waiver oI the interest Irom
15 to 6 per annum, which Irom then on was payable monthly, instead oI quarterly.
The term oI the principal loans remained unchanged in that they were still due three years
Irom the respective dates oI the promissory notes. Thus, at the time the complaint was Iiled with
the trial court on 2 February 1999, none oI the three promissory notes was due yet, although, two
oI the promissory notes with the due dates oI 7 August 1999 and 14 March 2000 matured during
the pendency oI the case with the trial court. Both courts also Iound that the petitioner had been
religiously paying the private respondent US$750 per month Irom January 1998 and even during
the pendency oI the case beIore the trial court and that, the private respondent had accepted all
these monthly payments. Without a cause oI action, the private respondent had no right to
maintain an action in court, and the trial court should have thereIore dismissed his complaint.
On the issue oI novation, the Court observed that petitioner corporation argues the
existence oI novation based on its own version oI what transpired during the renegotiation oI the
three promissory notes in December 1997. By using its own version oI Iacts, the petitioner is, in
a way, questioning the Iindings oI Iacts oI the trial court and the Court oI Appeals.
As a rule, the Iindings oI Iact oI the trial court and the Court oI Appeals are Iinal and
conclusive and cannot be reviewed on appeal to the Supreme Court as long as they are borne out
by the record or are based on substantial evidence. This Court Iinds to be contrary to the
evidence on record the Iinding oI both the trial court and the Court oI Appeals that the
renegotiation in December 1997 resulted in the reduction oI the interest Irom 15 to 6 per
annum and that the monthly payments oI US$750 made by the petitioner were Ior the reduced
interests.
It is worthy to note that the cash voucher dated January 1998 states that the payment oI
US$750 represents 'Investment payment. All the succeeding cash vouchers describe the
payments Irom February 1998 to September 1999 as 'capital payment. All these cash vouchers
served as receipts evidencing private respondent`s acknowledgment oI the payments made by the
petitioner: two oI which were signed by the private respondent himselI and all the others were
signed by his representatives. The private respondent even identiIied and conIirmed the
existence oI these receipts during the hearing. SigniIicantly, cognizant oI these receipts, the
private respondent applied these payments to the three consolidated principal loans in the
summary oI payments he submitted to the court.
Under Article 1253 oI the Civil Code, iI the debt produces interest, payment oI the
principal shall not be deemed to have been made until the interest has been covered. In this case,
the private respondent would not have signed the receipts describing the payments made by the
petitioner as 'capital repayment iI the obligation to pay the interest was still subsisting. The
receipts, as well as private respondent`s summary oI payments, lend credence to petitioner`s
claim that the payments were Ior the principal loans and that the interests on the three
consolidated loans were waived by the private respondent during the undisputed renegotiation oI
the loans on account oI the business reverses suIIered by the petitioner at the time.
There was thereIore a novation oI the terms oI the three promissory notes in that the
interest was waived and the principal was payable in monthly installments oI US$750.
Alterations oI the terms and conditions oI the obligation would generally result only in
modiIicatory novation unless such terms and conditions are considered to be the essence oI the
obligation itselI. The resulting novation in this case was, thereIore, oI the modiIicatory type, not
the extinctive type, since the obligation to pay a sum oI money remains in Iorce.
Thus, since the petitioner did not breach on its obligation to pay the monthly installments
conIormably with their new agreement and even continued paying during the pendency oI the
case, the private respondent had no cause oI action to Iile the complaint. It is only upon
petitioner`s deIault in the payment oI the monthly amortizations that a cause oI action would
arise and give the private respondent a right to maintain an action against the petitioner.
AZOLLA FARMS AND FRANCISCO USECO VS. COURT OF APPEALS,
G. R. No. 138085, November 11, 2004

Facts:
Francis useco, through the approval oI the Board oI Directors oI Azolla Farms, made
loans to Savings Bank oI Manila to Iinance the National Azolla Production Program. e is the
Chairman, President and ChieI Operating OIIicer oI Azolla Farms. To secure release oI the loan,
he executed promissory notes and real estate mortgage in Iavor oI the respondent bank.
owever, beIore the remaining loan Irom the bank was released, the Azolla Farms project
collapsed. Petitioner utilized the respondent`s witness testiIying and identiIying various
documents relating to the invalid and illegal Ioreclosure oI useco`s real property subject oI real
estate mortgage and the promissory notes evidencing the incomplete and invalid consideration oI
said mortgage. Thus, complaint is amended to conIorm to issues raised and evidence presented.
On June 17, 1994, the trial court rendered its decision annulling the promissory notes and
real estate mortgage.
On February 19, 1999, the Court oI Appeals reversed the lower court`s decision declaring
. the promissory notes and real estate mortgage executed in Iavor oI deIendant-appellant, as well
as the extrajudicial Ioreclosure and sale oI the mortgaged property, as valid and binding. Further,
it orderd DeIendant-appellant is hereby ordered to pay plaintiII Azolla Farms International
Philippines, Inc. the amount oI IiIty thousand.

Issue:
Whether or not there was novation hence the promissory notes and real estate mortgage
are said to be invalid and not binding.

eld:
The Court enumerated the Iollowing requisites in order that novation takes place to wit:
(1) there must be a previous valid obligation; (2) there must be an agreement oI the parties
concerned to a new contract;(3) there must be the validity oI new contract; and (4) there must
be extinguishment oI old contract.
In the instant case, there was no novation, that the elements are not completely
established. In the Iirst place, there is no new obligation that supposedly novated the promissory
notes or the real estate mortgage, or a pre-existing obligation that was novated by the promissory
notes and the real estate mortgage. In Iact, there is only one agreement between the parties in
this case, such as the petitioners` P2,000,000.00 loan with respondent, as evidenced by the 3
promissory notes dated September 13 and 27, 1982, and January 4, 1983, and the real estate
mortgage. There was only one single loan agreement in the amount oI P2 million between the
parties as evidenced by the promissory notes and real estate mortgage - how can it be possibly
claimed by plaintiIIs that these notes and mortgage were 'novated when no previous notes or
mortgage or loan agreement had been executed? What transpired was an application Ior loan
was Iiled by plaintiIIs with Credit Manila in an amount greater than the P2 million eventually
granted. This loan application was endorsed to deIendant Savings Bank oI Manila, processed by
the latter and eventually approved by it in the amount oI P2 million.
ence, the petition was denied. The Court oI Appeals` Decision dated February 19, 1999,
was aIIirmed.

CALIFORNIA BUS LINES VS. STATE INVESTMENT OUSE, G.R. No. 147950,
December 11, 2003

Facts:
In 1979, Delta Motors Corporation (Delta) applied Ior Iinancial assistance to, and was
granted by, respondent quasi-banking corporation State Investment ouse (State) up to a credit
line oI P 25M. Delta discounted some oI its receivables Irom the sale oI its vehicles in Iavor oI
State. Eventually, Delta became indebted to state in the total amount oI more than P 24M.
In the same year, petitioner CaliIornia Bus Lines (CaliIornia) purchased 35 buses Irom
Delta and issued sixteen (16) promissory notes in Iavor oI Delta to secure the payment oI such.
In each promissory note, CaliIornia promised, inter alia, to: 1) pay Delta or the holder thereoI P
2.3 M within sixty (60) monthly installments, and 2) with interest at 14/ annum. CaliIornia
likewise executed chattel mortgages over the thirty-Iive (35) buses in Iavor oI Delta.
In 1981, because CaliIornia deIaulted, it entered into a restructuring agreement with Delta
which includes inter alia: 1) provided Ior a new schedule oI payments, 2) extension oI period to
pay, 3) daily instead oI monthly remittances, 4) interest rate oI 16/annum; and 5) 'management
takeover clause, i.e., in case oI CaliIornia`s deIault, Delta would have the authority to take over
CaliIornia`s operations ad management.
But CaliIornia continued deIaulting, so Delta was prompted to enIorce the 'management
takeover clause. Pre-empting such, CaliIornia Iiled in 1982 a complaint Ior injunction. Delta
answered and applied Ior the issuance oI a writ oI preliminary mandatory injunction to enIorce
the 'management takeover clause and a writ oI preliminary attachment over CaliIornia`s buses;
which the trial court granted.
In 1983, pursuant to a Memorandum oI Agreement (MOA) between Delta and State on
account oI the Iormer`s debt, Delta executed a Deed oI Sale assigning State Iive (5) out oI the
sixteen (16) promissory notes Irom CaliIornia, totaling to a value oI more than P 16M inclusive
oI interest at 14/annum. Consequently, State demanded payment oI such promissory notes
Irom CaliIornia. But CaliIornia reIused to do so on the ground that: 1) there is the pending
complaint Ior injunction and 2) the management and operation oI CaliIornia was taken over by
Delta.
In 1984, Delta and CaliIornia entered into a compromise agreement regarding the
compliant Ior injunction Iiled by the latter to which CaliIornia agreed that Delta would exercise
the right to extrajudicial Ioreclose the chattel mortgages over the thirty Iive (35) buses, which
was eventually approved by the court.
ThereaIter, CaliIornia vehemently reIused to pay the value stipulated in the Iive (5)
promissory notes to State, arguing that the compromise agreement it entered into with Delta had
the eIIect oI extinguishing all its obligations under the promissory notes.
Consequently, State Iiled Ior a writ oI preliminary attachment against the buses oI
CaliIornia which was not granted by the lower court but reversed by the appellate court.
owever, Iourteen (14) out oI the thirty Iive (35) buses oI CaliIornia were eventually sold at
public auction in Iavor oI Delta. The proceeds oI which were applied in Iavor oI State to cover a
part oI Delta`s debt to State.
Shortly, State moved to sell 16 oI the buses owned by CaliIornia and apply the proceeds
thereoI in payment oI the value stipulated in the Iive (5) promissory notes to which CaliIornia
opposed. ThereaIter, trial court rendered judgment, discharging CaliIornia Irom liability oI the
Iive (5) promissory notes and directed State to return the sixteen (16) buses or pay the amount
corresponding thereto with interest oI 12/annum. The trial court anchored its decision Irom the
restructuring agreement that such novated the Iive (5) promissory notes; thereIore, cannot be
enIorced against CaliIornia.
The decision oI the trial court was reversed by the Court oI Appeals.

Issues:
Whether or not the restructuring agreement between Delta and CaliIornia novated the Iive
(5) promissory notes which were assigned by Delta to State;
Whether or not the compromise agreement regarding the complaint Ior injunction
discharged the subject Iive (5) promissory notes; and
Whether or not State is estopped Irom questioning the compromise agreement since it
Iailed to intervene in the complaint Ior injunction.

eld:
On the Iirst issue, the Restructuring Agreement did not expressly nor impliedly novate
the promissory notes. Absent an unequivocal declaration oI extinguishment oI the pre-existing
obligation, only a showing oI a complete incompatibility between the old and the new obligation
would sustain a Iinding oI Novation by implication. The terms oI the old agreement is not
incompatible with the restructuring agreement because: 1) there was no change in the object oI
the prior obligations; 2) it merely provided Ior a new schedule oI payments; and 3) it merely
provided Ior additional securities; i.e., the 'takeover clause. Clearly, Delta and CaliIornia
recognized the continuing existence and validity oI the old one; hence, no novation. Finally, As
ruled in oung v. CA, a change in the incidental elements oI, or an addition oI such element to,
an obligation, unless otherwise expressed by the parties will not result in its extinguishment.
Consequently, the restructuring agreement can stand together with the promissory notes.
On the second issue, the compromise agreement did not discharge the Iive (5) promissory
notes because when Delta and CaliIornia entered into such, the Iive (5) promissory notes were no
longer subject oI the complaint Ior injunction since they were already assigned to State. Delta
cannot include in the compromise that which does not belong to it except iI there is a Special
Power oI Authority (SPA) granted by State to Delta, which is wanting in the case. Further, the
compromise agreement clearly stipulated that it merely covered the rights and obligations only oI
Delta and CaliIornia; ergo, it did not cover State`s rights as the new creditor oI CaliIornia in the
subject promissory notes.
And on the 3
rd
issue, State is not estopped. In the Iirst place, the Compromise Agreement
merely covered the rights and obligations between Delta and CaliIornia and the subject
promissory notes are excluded Irom such. CaliIornia`s obligations contained in the subject
promissory notes are separate and distinct Irom the eleven (11) other promissory notes that
remained with Delta. Ergo, a breach oI the independent obligation by CaliIornia to State gives
rise to separate cause oI action in Iavor oI State. On the contrary, to CaliIornia`s averments, there
was no reason at all Ior State to intervene in the complaint Ior injunction. State`s non-
intervention is precisely to better protect its rights in a separate and independent suit; ergo, the
compromise agreement is not res judicata to State; hence, it was not estopped Irom enIorcing its
rights against CaliIornia.

OCAMPO-PAULE VS. COURT OF APPEALS, G.R. No. 145872 2002, February 4, 2002

Facts:
During the period August, 1991 to April, 1993, petitioner received Irom private
complainant Felicitas M. Calilung several pieces oI jewelry with a total value oI One hundred
Sixty Three Thousand One hundred Sixty Seven Pesos and Ninety Five Centavos (P163,167.95).
The agreement between private complainant and petitioner was that the latter would sell the
same and thereaIter turn over and account Ior the proceeds oI the sale, or otherwise return to
private complainant the unsold pieces oI jewelry within two months Irom receipt thereoI. Since
private complainant and petitioner are relatives, the Iormer no longer required petitioner to issue
a receipt acknowledging her receipt oI the jewelry.
When petitioner Iailed to remit the proceeds oI the sale oI the jewelry or to return the
unsold pieces to private complainant, the latter sent petitioner a demand letter. Notwithstanding
receipt oI the demand letter, petitioner Iailed to turn over the proceeds oI the sale or to return the
unsold pieces oI jewelry. Private complainant was constrained to reIer the matter to the barangay
captain oI Sta. Monica, Lubao, Pampanga.
During the barangay conciliation proceedings, petitioner acknowledged having received
Irom private complainant several pieces oI jewelry worth P163,167.95. Both parties eventually
executed an agreement entitled "Kasunduan sa Bayaran," whereby petitioner promised to pay
private complainant P3,000.00 every month to answer Ior the jewelry which she received Irom
the latter.
When petitioner Iailed to comply with the terms oI the Kasunduan sa Bayaran, private
complainant sent her another demand letter dated March 9, 1994 but she still Iailed to comply
with her obligation.
Private complainant then Iiled a criminal complaint against petitioner in the OIIice oI the
Provincial Prosecutor. The Provincial Prosecutor recommended the Iiling oI a criminal case
against petitioner. Consequently, an inIormation charging petitioner with estaIa was Iiled in the
Regional Trial Court oI Guagua, Pampanga.

Issue:
Whether or not the agreement reIerred to as "Kasunduan ng Bayaran" resulted in the
novation oI petitioner`s obligation and extinguished her criminal liability.

eld:
The Court held that petitioner`s argument is untenable that there was a novation oI her
criminal liability when she and private complainant executed the Kasunduan ng Bayaran. It is
well- settled that the Iollowing requisites must be present Ior novation to take place: (1) a
previous valid obligation; (2) agreement oI all the parties to the new contract; (3) extinguishment
oI the old contract; and (4) validity oI the new one.
Novation, in its broad concept, may be either extinctive or modiIicatory. It is extinctive
when an old obligation is terminated by the creation oI a new obligation that takes the place oI
the Iormer; it is merely modiIicatory when the old obligation subsists to the extent it remains
compatible with the amendatory agreement.
The extinguishment oI the old obligation by the new one is a necessary element oI
novation which may be eIIected either expressly or impliedly. The term "expressly" means that
the contracting parties incontrovertibly disclose that their object in executing the new contract is
to extinguish the old one. Upon the other hand, no speciIic Iorm is required Ior an implied
novation, and all that is prescribed by law would be an incompatibility between the two
contracts. While there is really, no hard and Iast rule to determine what might constitute to be a
suIIicient change that can bring about novation, the touchstone Ior contrariety, however, would
be an irreconcible incompatibility between the old and the new obligations.
The test oI incompatibility is whether the two obligations can stand together, each one
having its independent existence. II they cannot, they are incompatible and the latter obligation
novates the Iirst. Corollarily, changes that breed incompatibility must be essential in nature and
not merely accidental. The incompatibility must take place in any oI the essential elements oI
the obligation, such as its object, cause or principal conditions thereoI; otherwise, the change
would be merely modiIicatory in nature and insuIIicient to extinguish the original obligation.
The execution oI the Kasunduan sa Bayaran does not constitute a novation oI the original
agreement between petitioner and private complainant. Said Kasunduan did not change the
object or principal conditions oI the contract between them. The change in manner oI payment
oI petitioner`s obligation did not render the Kasunduan incompatible with the original
agreement, and hence, did not extinguish petitioner`s liability to remit the proceeds oI the sale oI
the jewelry or to return the same to private complainant.





























SPOUSES REES VS. COURT OF APPEALS, G.R. No. 147758, June 26, 2002

Facts:
This petition arose Irom a civil case Ior collection oI a sum oI money with preliminary
attachment Iiled by respondent Pablo V. Reyes against his Iirst cousin petitioner Arsenio R.
Reyes and spouse Nieves S. Reyes. According to private respondent, petitioner-spouses
borrowed Irom him P600,000.00 with interest at Iive percent (5) per month, which totalled
P1,726,250.00 at the time oI Iiling oI the Complaint. The loan was to be used supposedly to buy
a lot in Paraaque. It was evidenced by an acknowledgment receipt dated 15 July 1990 signed
by the petitioner-spouses Arsenio R. Reyes and Nieves S. Reyes and witness Romeo Rueda.
Petitioners paid the interests on the loan with BPI Family Bank checks. Petitioners also
turned over to private respondent their Nissan pickup truck worth P400,000.00 in partial payment
oI the loan, and on 30 January 1993 petitioner Arsenio executed a deed oI absolute sale over the
vehicle in Iavor oI respondent. Subsequently, petitioners Iailed to make any Iurther payments
despite written demand Ior payment on 24 August 1993.
In their Answer petitioners admitted their loan Irom respondent but averred that there was a
novation so that the amount loaned was actually converted into respondent's contribution to a
partnership Iormed between them, Feliz Casa Realty Development, Ltd.
While the partnership existed, respondent received a total amount oI P84,000.00 in BPI
Family Bank checks as advances Irom the partnership Iunds. In October 1990 respondent wanted
to withdraw Irom the partnership and asked Ior the return oI his investment. Petitioners agreed
to convert his contribution into a non-interest-bearing loan oI petitioners. In view oI the
conversion, the advances to respondent through the BPI Family Bank checks would be deducted
Irom his investment. Petitioners were also Iorced to turn over their Nissan pickup truck to
respondent to pay the obligation.

Issue:
Whether or not there was a novation.

eld:
For novation to take place, the Iollowing requisites must concur: (a) there must be a
previous valid obligation; (b) there must be an agreement oI the parties concerned to a new
contract; (c) there must be the extinguishment oI the old contract; and, (d) there must be the
validity oI the new contract.
In the case at bar, the third requisite is not present. The parties did agree that the amount
loaned would be converted into respondent's contribution to the partnership, but this conversion
did not extinguish the loan obligation. The date when the acknowledgment receipt/promissory
note was made negates the claim that the loan agreement was extinguished through novation
since the note was made while the partnership was in existence.
SigniIicantly, novation is never presumed. It must appear by express agreement oI the
parties, or by their acts that are too clear and unequivocal to be mistaken Ior anything else. An
obligation to pay a sum oI money is not novated in a new instrument wherein the old is ratiIied
by changing only the terms oI payment and adding other obligations not incompatible with the
old one, or wherein the old contract is merely supplemented by the new one.


SPOUSES BAUTISTA VS. PILAR DEVELOPMENT CORPORATION,
G.R. No. 135046, August 17, 1999

Facts:
To partially obtain the purchase oI a house and lot in Pilar Village, Las Pias, Metro
Manila, spouses Bautista obtained a loan oI P 100, 180.00 Irom Apex Mortgage & Loan
Corporation (Apex). Consequently, they executed a promissory note on December 22, 1978,
obligating themselves to pay the principal amount with interest rate oI 12 and service charge oI
3 Ior a period oI 240 months, or twenty (20) years, Irom date, in monthly installments oI P 1,
378.83. Late payments were to be charged a penalty oI 1 oI the amount due, and authorizing
Apex to 'increase the rate oI interest and/or service charges without notice to them in the event
that a law, PD or any Central Bank regulation should be enacted increasing the lawIul rate oI
interest and service charges on the loan.
The spouses Iailed to pay several installments; hence, they executed a second promissory
note in Iavor oI Apex on September 20, 1982. the note amounted to P 142, 326.43 at an interest
rate oI 21/ annum with no provision Ior service charge but with penalty charge oI 1 Ior
late payments. Payment was to be made Ior a period oI 196 months or 16.33 years in monthly
installments oI P 2,576.68, inclusive oI principal and tax and authorizing Apex to 'increase the
rate oI interest and/or service charges on the event that any law or Central Bank regulation shall
be passed increasing or decreasing the same.
On November 1983, petitioners Iailed to pay installments again. Apex assigned the
second promissory note to respondent Pilar Development Corporation without notice to the
petitioners on June 6, 1984.
Consequently, as successor- in-interest oI Apex, respondent instituted a case Ior
collection against the spouses Ior the amount oI P 140, 515.11 representing the unpaid balance oI
the principal debt Irom November 23, 1983 including the interest at the rate oI 21 under the
second promissory note, and 25 and 36 per annum in accordance with a Central Bank
Circular.
Petitioner spouses contended that the terms oI the second promissory notes increasing the
interest rate to 21 and the escalation clause authorizing Apex to increase interest rates pursuant
to any law or Central Bank regulation are null and void in the absence oI a de-escalation clause
in the same note.

Issue:
Whether or not the interest rate must be pegged at 12 under the Iirst promissory note
and not at 21 as pegged in the second promissory note.

eld:
The Supreme Court held the interest rate should be pegged at 21 as pegged in the
second promissory note since the Iirst promissory note was cancelled by the express terms oI the
second promissory note. The Iirst note was novated. The elements oI novation are clearly present
in the instant case that : Iirst, the Iirst promissory note was a valid and subsisting contract when
petitioner spouses and Apex executed a second promissory note. Second, the second promissory
note absorbed the unpaid principal and interest oI P 142, 326.43 in the Iirst note which amount
became the principal therein, payable at a higher rate interest oI 21/ annum. Thus, the terms oI
the second promissory note provided Ior a higher principal, a higher interest rate, and a higher
monthly amortization, all to be paid within a shorter period oI 16.33 years. These changes are
substantial and constitute the principal conditions oI the obligations. Both parties voluntarily
accepted the terms oI the second note; and they unequivocally stipulated to extinguish the Iirst
one.
ence, there was animus novandi.










































EVADEL REALT VS. SORIANO, G.R. No. 144291, April 20, 2001

Facts:
On April 12, 1996, the spouses Antero and Virginia Soriano entered into a Contract to
Sell with Evadel Realty over a parcel oI land which is a part oI a huge tract oI land. The parcel oI
land consists oI 28,958 sq. m. In their contract, Evadel obliged itselI to deliver the amount oI P
28,958,000.00, which represents the Iirst installment, during the signing oI the agreement. The
second and last installment shall be delivered simultaneously with the delivery oI the Torrens
Title by spouses Soriano. Upon payment oI the Iirst installment, Evadel introduced
improvements thereon and Ienced oII the property with concrete walls.
Later the spouses discovered that the area Ienced oII exceeded the areas subject oI the
contract to sell. The spouses sent demand letters to petitioner Evadel to vacate the encroached
area, however the latter reIused. A complaint Ior accion reinvindicatoria was then Iiled by
spouses Soriano. In its answer, Evadel admitted the encroachment but claimed that it was a
builder in good Iaith since it relied on the boundaries pointed out by representatives oI
respondent. It also argued that there was novation oI contract due to the encroachment made by
the national road on the property subject oI the contract by 1,647 sq.m.

Issue:
Whether or not there was novation oI contract.

eld:
The present case at bar is one Ior accion reinvindicatoria which is an action to recover
ownership over real property. Respondent spouses seek to recover a certain portion oI land with
a total area oI 2,450 square meters Irom petitioner which portion was allegedly in excess oI the
total area oI the property actually sold by them to the latter. In a reinvindicatory action, the basic
issue Ior resolution is that oI ownership. Petitioner already admitted in its Amended Answer that
the lot in dispute is covered by TCT No. T-769166 oI respondent spouses. With this admission,
petitioner can no longer claim that it was a builder in good Iaith. Good Iaith consists in the belieI
oI the builder that the land he is building on is his and his ignorance oI any deIect or Ilaw in his
title. In this case, since petitioner, by its own admission, had knowledge oI respondent spouses`
title over the subject lot, it was clearly in bad Iaith when it introduced improvements thereon.
Further, the contract to sell between petitioner and respondent spouses, the genuineness
and due execution thereoI was admitted by petitioner, clearly delineated the metes and bounds oI
the lot subject thereoI. Attached to the said contract was a graphic illustration oI the lot
purchased by petitioner including a technical description thereoI.
Finally, petitioner`s claim that there was a novation oI contract because there was a
"second" agreement between the parties due to the encroachment made by the national road on
the property subject oI the contract by 1,647 square meters, is unavailing. Novation, one oI the
modes oI extinguishing an obligation, requires the concurrence oI the Iollowing: (1) there is a
valid previous obligation; (2) the parties concerned agree to a new contract; (3) the old contract
is extinguished; and (4) there is valid new contract. Novation may be express or implied. In order
that another that substitutes the same may extinguish an obligation, it is imperative that it be so
declared in unequivocal terms (express novation) or that the old and the new obligations be on
every point incompatible with each other (implied novation).
In the instant case, there was no express novation because the "second" agreement was
not even put in writing. Neither was there implied novation since it was not shown that the two
agreements were materially and substantially incompatible with each other. The second
agreement between the parties, as alleged by Evadel, was never put into writing so that there can
be no express novation. Moreover there can be no implied novation because it was not shown
that the alleged second agreement is incompatible in every point with the Iirst agreement on the
Contract to Sell.
Furthermore, the spouses Soriano were not shown to have agreed with the second
contract on agreement so that the second requisite oI novation, which is, the agreement between
the parties concerned to a new contract, is absent.



















































































MESINA VS. GARCIA
G.R. No. 168035, November 30, 2006.

Facts:
Atty. onorio Valisno Garcia and Felicisima Mesina, during their liIetime, or on April
26, 1977, to be exact, entered into a Contact to Sell over a lot consisting oI 235 square meters,
situated at Cabanatuan City, covered and embraced by TCT No. T-31643 in the name oI
Felicisima Mesina which title was eventually cancelled and TCT No. T-78881 was issued in the
name oI herein petitioners. Atty. onorio Valisno Garcia is the deceased husband oI herein
respondent Gloria C. Garcia while the late Felicisima Mesina is the mother oI petitioners.
The Contact to Sell provides that the cost oI the lot is P70.00 per square meter Ior a total
amount oI P16, 450.00, payable within a period oI 7 years at an interest rate oI 12 per annum,
in successive monthly installments oI P260.85 per month, starting May 1977. thereaIter, the
succeeding monthly installments are to be paid within the Iirst week oI every month, at the
residence oI the vendor at Quezon City, with all unpaid monthly installments earning an interest
oI 1 per month. It was also stipulated among others, that: should the spouses Garcia Iail to pay
5 successive monthly installments, Felicisima Mesina shall have a right to rescind this Contact to
Sell. All paid installments to be recomputed as rental Ior usage oI lot shall be at the rate oI P100
a month and that Felicisima Mesina shall have the Iurther option to return the downpayment plus
whatever balance spouses Garcia paid, thereby rescinding the Contact to Sell. Upon rescission oI
the Contact to Sell, spouses Garcia agrees to remove all the improvements built on the lot within
three months Irom rescission oI this contract, spouses Garcia shouldering all expenses oI said
removal.
Instituting the case at bar, respondent asserts that despite the Iull payment made on
February 7, 1984 Ior the consideration oI the subject lot, petitioners reIused to issue the
necessary Deed oI Sale to eIIect the transIer oI the property to her.

Issue:
Whether or not respondent`s cause oI action had already prescribed.

eld:
The Civil Code provides that an action based on a written contract, an obligation created
by law, and a judgment must be brought within 10 years Irom the time the right oI action
accrues. In the case at bar, the right oI action oI the respondent accrued on the date that the Iull
and Iinal payment oI the purchase price on the subject Contract to Sell had been eIIected on
February 7, 1984 thus, respondent had Irom said date until February 7, 1994, within which to
bring an action to enIorce the written contract. owever, respondent instituted her Complaint Ior
SpeciIic PerIormance with Damages on January 20, 1997. Nonetheless, Article 1155 oI the Civil
Code is explicit that the prescriptive period is interrupted when an action has been Iiled in court;
when there is a written extrajudicial demand made by the creditors; and when there is any written
acknowledgment oI the debt by the debtor. In the present case, it cannot be gainsaid that
respondent made a series oI written extrajudicial demands Ior the petitioner to execute the Deed
oI Absolute Sale in her Iavor beIore she Iinally lodged a Iormal complaint Ior SpeciIic
PerIormance with Damages beIore the trial court on January 20, 1997. Anent petitioners`
argument that since Article 1155 reIers only to creditors, both the trial court and the Court oI
Appeals upheld the right oI the respondent to have the Deed oI Absolute Sale issued in her Iavor.
It is understood, then, that the purchase price oI the subject property had already been paid in
Iull. ence, at the time oI Iull payment oI the purchase price, the respondent was no longer the
debtor oI petitioners` deceased mother because respondent already perIormed her obligation to
the latter. Upon the Iull payment oI the purchase price, respondent`s right to demand the
execution oI the Deed oI Absolute Sale begins and Felicisima Mesina`s, now survived by
petitioners, obligation to execute the said deed to respondent commenced. In all, the Court
upholds that the series oI extrajudicial demands made by herein respondent interrupted the
running oI the 1o year prescriptive period, thereby preventing prescription to bar the cause oI
action oI the respondent against petitioners.
WhereIore, the instant petition Ior review is denied. The Decision oI the Court oI Appeals
dated January 6, 2005, which upheld the Decision oI Regional Trial Court Cabanatuan City dated
January 6, 2003, is aIIirmed.

































EIRS OF JUANA GAUDIANE VS. COURT OF APPEALS, G.R. No. 119879,
March 11, 2004

Facts:
On November 4, 1927, Felix executed a document entitled Escritura de Compra-Venta
whereby he sold to his sister Juana his one-halI share in Lot No. 4156. What muddled the
otherwise clear contract oI sale was a statement in the Escritura that Lot No. 4156 was declared
under Tax Declaration No. 18321. owever, said tax declaration was Ior another parcel oI land,
Lot 4389 and not Lot 4156. Petitioners` predecessors-in-interest, Geronimo and Ines Iso (the
Isos), believed that the sale by Felix to their mother Juana in 1927 included not only Lot 4156
but also Lot 4389. In 1974, they Iiled a pleading in the trial court seeking to direct the Register
oI Deeds oI Dumaguete City to cancel OCT 2986-A covering Lot 4389 and to issue a new title in
Iavor oI the Isos. This was later withdrawn aIter respondents` predecessors-in-interest, Procopio
Gaudiane and Segundo Gaudiane, opposed it on the ground that the Isos IalsiIied their copy oI
the Escritura by erasing 'Lot 4156 and intercalating in its place 'Lot 4389. The Isos later Iiled
an action Ior quieting oI title, but it was dismissed due to the Iailure oI the plaintiIIs (the Isos) to
prosecute and to comply with the orders oI the court. When the judgment became Iinal,
respondents sent a letter to Ines Iso asking her to surrender the possession oI the one-halI portion
oI Lot No. 4389 comprising Felix` share. The Isos reIused. The respondents Iiled the present
case Ior partition oI Lot 4389, accounting oI proceeds and damages against herein petitioners.
The trial court rendered a decision in Iavor oI the respondents. On appeal, the Court oI Appeals
aIIirmed the decision oI the trial court.

Issue:
Whether or not the petitioners acquired the lot in question through prescription and
laches.

eld:
The Escritura reveals that Felix intended to sell his share in Lot 4156 only. In Iact, only
Lot 4156 was described in the Escritura. Consequently, the citation oI Tax Declaration No.
18321 vis-a-vis Lot 4156 was clearly a mistake. Even the petitioners` predecessors-in-interest,
the Isos, believed that Lot 4389 was not included in the Escritura because they erased 'Lot 4156
and Iraudulently replaced it with 'Lot 4389 in their prayer to cancel OCT 2986-A. ad they
honestly believed that Lot 4389 was included in the sale, there would have been no need Ior
them to resort to IalsiIication. Moreover, iI Felix had really sold his share in Lot 4389 to Juana,
the latter would have had the title to the property transIerred to her name alone. But she never
did and the title to Lot 4389 continued to be in the names oI both Felix and Juana.
Petitioners invoked that titled property may be acquired through prescription by a person
who possessed the same Ior 36 years without any objection Irom the registered owner who was
obviously guilty oI laches.
Petitioners` claim is already rendered moot by the ruling barring petitioners Irom raising
the deIense oI exclusive ownership due to res judicata. Even assuming arguendo that petitioners
are not so barred, their contention is erroneous. As correctly observed by the appellate court:
In the case at bar, appellees` predecessor-in-interest Iraudulently denied possession oI
one-halI oI Lot No. 4389 to appellants by misrepresenting the Escritura executed by Felix
Gaudiane included not only Lot No. 4156 but also Lot No. 4389. That oI course is not true. As
explained earlier, only Lot No. 4156 was sold. It was through this misrepresentation that
appellees` predecessor-in-interest succeeded in withholding possession oI appellees` share in Lot
No. 4389. Appellees cannot, by their own Iraudulent act, beneIit thereIrom by alleging
prescription and laches.










































LAUREANO VS. COURT OF APPEALS, G.R. No. 114776, February 2, 2000

Facts:
In 1982, Singapore Airlines Limited was hit by a recession, thereby tire expatriate pilots
including the plaintiII were advised to take advance leaves. Consequently, the deIendant
company terminated its excess personnel. The plaintiII, being unqualiIied Ior promotion was
terminated along with other pilots. e however was granted two months notice and one-month
salary.
On October 5, 1982, deIendant inIormed plaintiII oI his termination eIIective November
1, 1982 and that he will be paid three (3) months salary in lieu oI three months notice. Because
he could not uproot his Iamily on such short notice, plaintiII requested a three-month notice to
aIIord him to exhaust all possible avenues Ior reconsideration and retention. DeIendant gave
only two (2) months notice and one (1) month salary.
Aggrieved, plaintiII on June 29, 1983, instituted a case Ior illegal dismissal beIore the
Labor Arbiter. DeIendant moved to dismiss on jurisdictional grounds. BeIore said motion was
resolved, the complaint was withdrawn. ThereaIter, plaintiII Iiled the instant case Ior damages
due to illegal termination oI contract oI services beIore the court a quo.

Issue:
Whether the present action is based on contract which prescribes in ten (10) years under
Article 144 oI the New Civil Code or one Ior damages arising Irom an injury to the rights oI the
plaintiII which prescribes in Iour years under article 1146 oI the new civil code.

eld:
In illegal dismissal, it is settled, that the ten-year prescriptive period Iixed in Article 1144 oI the Civil Code may not be
invoked by petitioners, Ior the Civil Code is a law oI general application, while the prescriptive period Iixed in Article 292 oI the
Labor Code ,now Article 291, is a special law applicable to claims arising Irom employee-employer relations. It should be noted
Iurther that Article 291 oI the Labor Code is a special law applicable to money claims arising Irom employer-employee relations,
thus, it necessarily prevails over Article 1144 oI the Civil Code, a general law. Basic is the rule in statutory construction that
"where two statutes are oI equal theoretical application to a particular case, the one designed thereIore should prevail."
In the light oI Article 291, the Court agree with the appellate court's conclusion that
petitioner's action Ior damages due to illegal termination Iiled again on January 8, 1987 or more
than Iour (4) years aIter the eIIective date oI his dismissal on November 1, 1982 has already
prescribed.
In the instant case, the action Ior damages due to illegal termination was Iiled by
plaintiII-appelle only on January 8, 1987 or more than Iour (4) years aIter the eIIectivity date oI
his dismissal on November 1, 1982. Clearly, plaintiII-appellee's action has already prescribed.
Petitioner claims that the running oI the prescriptive period was tolled when he Iiled his
complaint Ior illegal dismissal beIore the Labor Arbiter oI the National Labor Relations
Commission. owever, this claim deserves scant consideration; it has no legal leg to stand on.
Now, as to whether petitioner's separation Irom the company due to retrenchment was valid, the
appellate court Iound that the employment contract oI petitioner allowed Ior pre-termination oI
employment. The Court ageed with the Court oI Appeals when it said that it is a settled rule that
contracts have the Iorce oI law between the parties. From the moment the same is perIected, the
parties are bound not only to the IulIillment oI what has been expressly stipulated but also to all
consequences which, according to their nature, may be in keeping with good Iaith, usage and
law. Thus, when plaintiII-appellee accepted the oIIer oI employment, he was bound by the terms
and conditions set Iorth in the contract, among others, the right oI mutual termination by giving
three months written notice or by payment oI three months salary. Such provision is clear and
readily understandable. In our view, neither Article 1144 nor Article 1146 oI the Civil Code can
be applied. What is applicable is Article 291 oI the Labor Code which states that money claims
arising Irom employee-employer relations acquiring during the eIIectivity oI this Code shall be
Iiled within three (3) years Irom the time the cause oI action accrued; otherwise they shall be
Iorever barred.


BANCO FILIPINO VS. COURT OF APPEALS, G.R. No. 129227 May 30, 2000

Facts:
Elsa Arcilla and her husband Calvin Arcilla, the private respondents herein, secured on
three occasions, loans Irom the Banco Filipino Savings and Mortgage Bank in the total amount
oI P107,946.00 as evidenced by a 'Promissory Note executed by the respondents in Iavor oI the
petitioner. To secure the payment to said loans, spouses Arcilla executed 'Real Estate
Mortgages in Iavor oI the petitioner over their parcels oI land. Under said deeds, the petitioner
may increase the rate oI interest, on said loans, within the limits allowed by law, as the
petitioner`s Board oI Directors may prescribe Ior its borrowers. At that time, under the Usury
Law, the maximum rate oI interest Ior loans secured by real estate mortgages was 12 per
annum. On January 10, 1975, the parties executed a 'Deed oI Consolidation and Amendment oI
Real Estate Mortgage whereby the aIorementioned loans oI the private respondents and the
'Real Estate Mortgage executed by them as security Ior the payment oI said loans were
consolidated. Likewise, under the said deed, the loan oI the spouses was increased to P188,
000.00.
On January 2, 1976, the Central Bank oI the Philippines issued Central Bank Circular No.
494 which provides that the maximum rate oI interest, including commissions, premium, Iees
and other charges on loans with maturity oI more than 730 days, by banking institutions,
including thriIt banks, or by Iinancial intermediaries authorized to engage in quasi-banking
Iunctions, shall be 19 per annum. In line with this Circular, the petitioner prepared and issued a
'Statement oI Account to the private respondents on their loan account to the eIIect that as oI
the said date, the balance oI their loan account, inclusive oI interests, computed at 17 per
annum, amounted to P284, 490.75. it turned out that the petitioner unilaterally increased the rate
oI interest on the loan account oI private respondents Irom 12 per annum to 17 per annum
on the authority oI the aIorementioned Central Bank Circular.
The spouses Iailed to pay their monthly amortization. Due to this, petitioner Iiled a
petition Ior the extrajudicial Ioreclosure oI the spouses` 'Real Estate Mortgage. The petitioner
was able to procure a 'CertiIicate oI Sale in its Iavor and subsequently, a writ oI possession.
On September 2, 1985, private respondents Iiled a complaint Ior the Annulment oI the
Loan Contracts, Foreclosure Sale with Prohibition and Injunction alleging that the loan contract
that they have entered into with the petitioner was null and void because the rate oI interests
charged by the petitioner were usurious.
On the other hand, the petitioner alleged that the cause oI action oI the private
respondents has already prescribed.

Issue:
Whether or not the action oI the private respondents has already prescribed.

eld:
The private respondents` cause oI action has not yet prescribed because it was Iiled
within the ten year prescriptive period. Under Article 1150 oI the Civil Code, the time Ior
prescription Ior all kinds oI actions, when there is no special provision which ordains otherwise,
shall be counted Irom the day they may be brought. Thus, the period oI prescription oI action is
reckoned only Irom the date the cause oI action accrued. The cause oI action arises when that
which should have been done is not done, or that which should not have been done was done.
The period should not be made to retroact to the date oI execution oI the contract on January 15,
1975 as claimed by the petitioner in the case at bar, Ior at that time, there would be no way Ior
the respondents to know oI the violation oI their rights.
ThereIore, the Court oI Appeals correctly Iound that respondents` cause oI action accrued
on October 30, 1978, the date they received the Statement oI Account showing the increased rate
oI interest, Ior it was only that time that they discovered the petitioners` unilateral increase
thereoI.

VDA. DE DELGADO VS. COURT OF APPEALS, G.R. No. 125728 August 28, 2001

Facts:
During his liIetime, Carlos Delgado granted and conveyed, by way oI donation or giIt
with quitclaim, all his rights, title and interest, claim and demand over a portion oI his land with
an area oI 165,000 square meters in Iavor oI the Commonwealth oI the Philippines or its
successors. Acceptance was made by then president Manuel Quezon in his capacity as the
Commander- in-ChieI oI the Philippine Army.
The condition oI such donation is, that the donated parcel oI land shall be Ior the
exclusive beneIit oI the Commonwealth oI the Philippines to be used as military reservation Ior
training cadres or Ior such other uses oI the Philippine Army as the Commander in ChieI or
ChieI oI StaII thereoI may determine, provided that when the Commonwealth oI the Philippines
no longer need the parcel oI land Ior any military purposes, then said parcel oI land shall
automatically revert to the donor or his heirs or assigns.
Upon declaration oI independence on July 4, 1946, the Commonwealth oI the Philippines
passed out oI existence. It was replaced by the existing Republic oI the Philippines, which took
over the subject land and turned portions oI it over to the then Civil Aeronautics Administration,
later renamed the Bureau oI Air Transportation OIIice. Said government agency has since
utilized the land in question, or portions oI it as a domestic national airport, with some portions
rented to the Philippine Airlines, and some to the provincial government Ior a capitol site and a
hospital site, and Ior some other uses which are not military in nature.
A petition Ior reconveyance was Iiled on December 25, 1970 by the heirs oI Carlos
Delgado, alleging as ground thereIore the violation oI the express condition exposed by the
donor. owever, the case was eventually dismissed by the lower court due to the Iailure oI the
plaintiII to prosecute.
Sometime in 1989, the heirs oI Delgado sent letters to the diIIerent agencies occupying
the subject property, inviting their attention to the donation and the violation oI the condition
imposed therein. No settlement or understanding was reached; such that on September 28, 1989,
the widow and the surviving heirs oI Delgado Iiled a new action Ior reconveyance.

Issue:
Whether or not the petitioners` action Ior reconveyance is already barred by prescription.

eld:
The petitioners` action Ior reconveyance is already barred by prescription. Applying
Article 1144 (1) oI the Civil Code on prescription oI actions based on a written contract, the
petitioners herein should have instituted the action Ior reconveyance within ten (10) years Irom
the time the condition in the Deed oI Donation was violated. The earliest date the petitioners
knew oI the said violation oI said condition was on July 4, 1946 when the Republic, as successor
oI the Commonwealth oI the Philippines, took over the properties and diverted the property uses
other than that imposed by the donor. As Iound by the Court oI Appeals, the cause oI action oI
the petitioners has already prescribed, having instituted the action only on December 29, 1970, or
twenty Iour (24) years aIter the condition was violated. Said action was dismissed by the trial
court on September 26, 1983 Ior Iailure oI petitioners to prosecute the case. The institution oI
the new action Ior reconveyance made on September 28, 1989, does not alter respondent court`s
conclusion but in Iact bolsters it; Ior by then, a total oI Iorty three (43) long years beIore were
allowed by petitioners to lapse beIore instituting the case at bar.
Even iI the written communication sent by petitioners sometime January 1969 and those
made on February 10 and March 16, 1989 can be considered as written extrajudicial demands
made by the creditors, they were nevertheless made way beyond the ten (10) year period oI
prescription stated in the law.








































MAESTRADO VS. COURT OF APPEALS, G.R. No. 133345, March 9, 2000

Facts:
These consolidated cases involve Lot No. 5872 and the rights oI the contending parties
thereto. The lot has an area oI 57.601 sq.m. and is registered in the name oI the deceased spouses
Ramon and Rosario Chaves. The spouses died intestate in 1943 and 1944, respectively. They
were survived by six heirs. To settle the estate oI said spouse, Angel Chaves, one oI the heirs,
initiated intestate proceedings and was appointed administrator oI said estates in the process. An
inventory oI the estates was made and thereaIter, the heirs agreed on a project partition. The
court approved the partition but a copy oI said decision was missing. Nonetheless, the estate was
divided among the heirs. Subsequently, in 1956, the partition case eIIected and the respective
shares oI the heirs were delivered to them.
SigniIicantly, Lot No.5872 was not included in a number oI documents. Parties oIIered
diIIerent explanations as to the omission oI said lot in the documents. Petitioners maintain the
existence oI an oral partition agreement entered into by all heirs aIter the death oI their parents.
To set things right, petitioners then prepared a quitclaim to conIirm the alleged oral agreement.
Respondents dispute voluntariness oI their consent to the quitclaims.
Six years aIter the execution oI the quitclaims, respondents discovered that indeed subject lot
was still a common property in the name oI the deceased spouses. Eventually, an action Ior
Quieting oI Title was Iiled by petitioners on December 22, 1983.
The trial court considered Lot No. 5872 as still a common property and thereIore must be
divided into six parts, there being six heirs. Petitioners appealed to the Court oI Appeals which
sustained the decision oI the trial court.

Issue:
Whether or not the action Ior quieting oI title had already prescribed.

eld:
First, petitioners are proper parties to bring an action Ior quieting oI title. Persons having
legal as well as equitable title to or interest in a real property may bring such action and "title". .
Moreover, iI the plaintiII in an action Ior quieting oI title is in possession oI the property being
litigated, such action is imprescriptible. One who is in actual possession oI a land, claiming to be
the owner thereoI may wait until his possession is disturbed or his title is attacked beIore taking
steps to vindicate his right because his undisturbed possession gives him a continuing right to
seek the aid oI the courts to ascertain the nature oI the adverse claim and its eIIects on his title.
Laches does not apply in this case because petitioners' possession oI the subject lot has rendered
their right to bring an action Ior quieting oI title imprescriptible and, hence, not barred by laches.
Moreover, since laches is a creation oI equity, acts or conduct alleged to constitute the same must
be intentional and unequivocal so as to avoid injustice. Laches operates not really to penalize
neglect or sleeping on one's rights, but rather to avoid recognizing a right when to do so would
result in a clearly inequitable situation.
In the case at bench, the cloud on petitioners' title to the subject property came about only
on December 1, 1983 when Angel Chaves transmitted respondents' letters to petitioners, while
petitioners' action was Iiled on December 22, 1983. Clearly, no laches could set in under the
circumstances since petitioners were prompt and vigilant in protecting their rights.
Second, Lot No. 5872 is no longer common property oI the heirs oI the deceased spouses
Ramon and Rosario Chaves. Petitioners' ownership over said lot was acquired by reason oI the
oral partition agreed upon by the deceased spouses' heirs sometime beIore 1956. That oral
agreement was conIirmed by the notarized quitclaims executed by the said heirs on August 16,
1977 and September 8, 1977.
It appeared, however, that the actual partition oI the estate conIormed to the alleged oral
partition despite a contrary court order. Despite claims oI private respondents that Lot No. 5872
was mistakenly delivered to the petitioners, nothing was done to rectiIy it Ior a period oI twenty-
seven (27) years Irom 1983.
The Court is convinced, however, that there was indeed an oral agreement oI partition
entered into by the heirs/parties. This is the only way that it can make sense out oI the actual
partition oI the properties oI the estate despite claims that a court order provided otherwise. Prior
to the actual partition, petitioners were not in possession oI Lot. No. 5872 but Ior some reason or
another, it was delivered to them. From 1956, the year oI the actual partition oI the estate oI the
deceased Chaves spouses, until 1983, no one among the heirs questioned petitioners' possession
oI or ownership over said Lot No. 5872. ence, we are convinced that there was indeed an oral
agreement oI partition among the said heirs and the distribution oI the properties was consistent
with such oral agreement. In any event, the parties had plenty oI time to rectiIy the situation but
no such move was done until 1983.In the instant case it is the petitioners, being the possessors oI
Lot No. 5872, who have established a superior right thereto by virtue oI the oral partition which
was also conIirmed by the notarized quitclaims oI the heirs.
Nevertheless, respondent court was convinced that Lot No. 5872 is still common property
oI the heirs oI the deceased spouses Ramon and Rosario Chaves because the TCT covering the
said property is still registered in the name oI the said deceased spouses. unIortunately,
respondent court was oblivious to the doctrine that the act oI registration oI a voluntary
instrument is the operative act which conveys or aIIects registered land insoIar as third persons
are concerned. ence, even without registration, the contract is still valid as between the parties.
In sum, the most persuasive circumstance pointing to the existence oI the oral partition is the Iact
that the terms oI the actual partition and distribution oI the estate are identical to the sharing
scheme in the oral partition.. No one among the heirs disturbed this status quo Ior a period oI
twenty-seven (27) years.
ence, the quitclaims dated August 16, 1977 and September 8, 1977 in the case at bench
are valid, duly conIirmed and undeniably established the title oI ownership oI the petitioners
over the subject Lot No. 5872.


























































TANA RECREATION CENTER AND DEVELOPMENT CORP. VS. CATALINA
MATIENZO FAUSTO
G.R. No. 140182, April 12, 2005


Facts:
Petitioner Tanay Recreation Center and Development Corp. (TRCDC) is the lessee oI a
3,090-square meter property located in Sitio Gayas, Tanay, Rizal, owned by Catalina Matienzo
Fausto, under a Contract oI Lease executed on August 1, 1971. On this property stands the
Tanay Coliseum Cockpit operated by petitioner. The lease contract provided Ior a 20-year term,
subject to renewal within sixty days prior to its expiration. The contract also provided that
should Fausto decide to sell the property, petitioner shall have the 'priority right to purchase the
same.
On June 17, 1991, petitioner wrote Fausto inIorming her oI its intention to renew the
lease. owever, it was Fausto`s daughter, respondent Anunciacion F. Pacunayen, who replied,
asking that petitioner remove the improvements built thereon, as she is now the absolute owner
oI the property. It appears that Fausto had earlier sold the property to Pacunayen on August 8,
1990, Ior the sum oI P10,000.00 under a 'Kasulatan ng Bilihan Patuluyan ng Lupa, and title has
already been transIerred in her name under TransIer CertiIicate oI Title (TCT) No. M-35468.
Despite eIIorts, the matter was not resolved. ence, on September 4, 1991, petitioner
Iiled an Amended Complaint Ior Annulment oI Deed oI Sale, SpeciIic PerIormance with
Damages, and Injunction.
In her Answer, respondent claimed that petitioner is estopped Irom assailing the validity
oI the deed oI sale as the latter acknowledged her ownership when it merely asked Ior a renewal
oI the lease. According to respondent, when they met to discuss the matter, petitioner did not
demand Ior the exercise oI its option to purchase the property, and it even asked Ior grace period
to vacate the premises.
The trial court rendered judgment extending the period oI the lease Ior another seven
years Irom August 1, 1991 at a monthly rental oI P10,000.00, and dismissed petitioner`s claim
Ior damages.
The Court oI Appeals aIIirmed with modiIications the trial court`s judgment. In arriving
at the assailed decision, the CA acknowledged the priority right oI TRCDC to purchase the
property in question. owever, the CA interpreted such right to mean that it shall be applicable
only in case the property is sold to strangers and not to Fausto`s relative. The CA stated that
'(T)o interpret it otherwise as to comprehend all sales including those made to relatives and to
the compulsory heirs oI the seller at that would be an absurdity, and 'her (Fausto`s) only motive
Ior such transIer was precisely one oI preserving the property within her bloodline and that
someone administer the property. The CA also ruled that petitioner already acknowledged the
transIer oI ownership and is deemed to have waived its right to purchase the property. The CA
even Iurther went on to rule that even iI the sale is annulled, petitioner could not achieve
anything because the property will be eventually transIerred to Pacunayen aIter Fausto`s death.

Issue:
Whether or not the petitioner is barred Irom exercising its right oI Iirst reIusal.

eld:
The petitioner is not barred Irom exercising its right oI Iirst reIusal. According to the
appellate court: when TRCDC, in a letter to Fausto, signiIied its intention to renew the lease
contract, it was Pacunayen who answered the letter on June 19, 1991. In that letter Pacunayen
demanded that TRCDC vacate the leased premises within 60 days and inIormed it oI her
ownership oI the leased premises. The pertinent portion oI the letter reads: 'Furtherly, please be
advised that the land is no longer under the absolute ownership oI my mother and the
undersigned is now the real and absolute owner oI the land.
Instead oI raising a howl over the contents oI the letter, as would be its expected and
natural reaction under the circumstances, TRCDC surprisingly kept silent about the whole thing.
As we mentioned in the Iactual antecedents oI this case, it even invited Pacunayen to its special
board meeting particularly to discuss with her the renewal oI the lease contract. Again, during
that meeting, TRCDC did not mention anything that could be construed as challenging
Pacunayen`s ownership oI the leased premises. Neither did TRCDC assert its priority right to
purchase the same against Pacunayen.
The essential elements oI estoppel are: (1) conduct oI a party amounting to Ialse
representation or concealment oI material Iacts or at least calculated to convey the impression
that the Iacts are otherwise than, and inconsistent with, those which the party subsequently
attempts to assert; (2) intent, or at least expectation, that this conduct shall be acted upon by, or
at least inIluence, the other party; and (3) knowledge, actual or constructive, oI the real Iacts.
The records are bereIt oI any proposition that petitioner waived its right oI Iirst reIusal
under the contract such that it is now estopped Irom exercising the same. In a letter dated June
17, 1991, petitioner wrote to Fausto asking Ior a renewal oI the term oI lease. Petitioner cannot
be Iaulted Ior merely seeking a renewal oI the lease contract because obviously, it was working
on the assumption that title to the property is still in Fausto`s name and the latter has the sole
authority to decide on the Iate oI the property. Instead, it was respondent who replied, advising
petitioner to remove all the improvements on the property, as the lease is to expire on the 1
st
oI
August 1991. Respondent also inIormed petitioner that her mother has already sold the property
to her. In order to resolve the matter, a meeting was called among petitioner`s stockholders,
including respondent, on July 27, 1991, where petitioner, again, proposed that the lease be
renewed. Respondent, however, declined. While petitioner may have sought the renewal oI the
lease, it cannot be construed as a relinquishment oI its right oI Iirst reIusal. Estoppel must be
intentional and unequivocal.
Also, in the excerpts Irom the minutes oI the special meeting, it was Iurther stated that the
possibility oI a sale was likewise considered. But respondent also reIused to sell the land, while
the improvements, 'iI Ior sale shall be subject Ior appraisal. AIter respondent reIused to sell the
land, it was then that petitioner Iiled the complaint Ior annulment oI sale, speciIic perIormance
and damages. Petitioner`s acts oI seeking all possible avenues Ior the amenable resolution oI the
conIlict do not amount to an intentional and unequivocal abandonment oI its right oI Iirst reIusal.
Respondent was well aware oI petitioner`s right to priority oI sale, and that the sale made
to her by her mother was merely Ior her to be able to take charge oI the latter`s aIIairs.
OI course, in the meeting she had with the oIIicers oI TRCDC, Pacunayen explained that
the sale made in her Iavor by her mother was just a Iormality so that she may have the proper
representation with TRCDC in the absence oI her parents, more so that her Iather had already
passed away, and there was no malice in her mine (sic) and that oI her mother, or any intention
on their part to deceive TRCDC. All these notwithstanding, and Ior her to show their good Iaith
in dealing with TRCDC, Pacunayen started the ground work to reconvey ownership over the
whole land, now covered by TransIer CertiIicare (sic) oI Title No. M-259, to and in the name oI
her mother (Fausto), but the latter was becoming sickly, old and weak, and they Iound no time to
do it as early as they wanted to.
Given the Ioregoing, the 'Kasulatan ng Bilihan Patuluyan ng Lupa dated August 8, 1990
between Fausto and respondent must be rescinded.
ence, the petition partially granted.

MENDOZA VS. COURT OF APPEALS, G.R. No. 160014, February 18, 2005

Facts:
Manotok was the administrator oI a parcel oI land which it leased to Benjamin Mendoza;
that the contract oI lease expired on December 31, 1988; that even aIter the expiration oI the
lease contract, Benjamin Mendoza, and aIter his demise, his son, Romeo, continued to occupy
the premises and thus incurred a total oI P44,011.25 as unpaid rentals Irom January 1, 1989 to
July 31, 1996; that on July 16, 1996, Manotok made a demand on Benjamin Mendoza to pay the
rental arrears and to vacate the premises within IiIteen (15) days Irom receipt oI the demand
letter; that despite receipt oI the letter and aIter the expiration oI the 15-day period, the
Mendozas reIused to vacate the property and to pay the rentals. The complaint prayed that the
court order Mendoza and those claiming rights under him to vacate the premises and deliver
possession thereoI to Manotok, and to pay the unpaid rentals Irom January 1, 1989 to July 31,
1996 plus P875.75 per month starting August 1, 1996, subject to such increase allowed by law,
until he Iinally vacates the premise.

Issue:
Whether or not the onorable Court oI Appeals committed error in giving eIIicacy to a
lease contract signed in 1988 when the alleged signatory was already dead since 1986.

eld:
The petition must be denied. This is a case Ior unlawIul detainer. It appears that
respondent corporation leased the property subject oI this case to petitioner`s Iather. AIter
expiration oI the lease, petitioner continued to occupy the property but Iailed to pay the rentals.
On July 16, 1996, respondent corporation made a demand on petitioner to vacate the premises
and to pay their arrears.
An action Ior unlawIul detainer may be Iiled when possession by a landlord, vendor,
vendee or other person oI any land or building is unlawIully withheld aIter the expiration or
termination oI the right to hold possession by virtue oI a contract, express or implied. The only
issue to be resolved in an unlawIul detainer case is physical or material possession oI the
property involved, independent oI any claim oI ownership by any oI the parties involved. In the
case at bar, petitioner lost his right to possess the property upon demand by Respondent
Corporation to vacate the rented lot. Petitioner cannot now reIute the existence oI the lease
contract because oI his prior admissions in his pleadings regarding his status as tenant on the
subject property.

LIM VS. QUEENSLAND TOKO COMMODITIES, INC., G.R. No. 136031, January 4, 2002

Facts:
Private respondent Queensland Tokyo Commodities, Incorporated (Queensland, Ior brevity) is a duly licensed broker
engaged in the trading oI commodities Iutures with Iull membership and with a Iloor trading right at the Manila Futures
Exchange, Inc. Sometime in 1992, Benjamin Shia, a market analyst and trader oI Queensland, was introduced to petitioner
JeIIerson Lim by Marissa Bontia, one oI his employees. Marissa`s Iather was a Iormer employee oI Lim`s Iather.

Shia suggested
that Lim invest in the Foreign Exchange Market, trading U.S. dollar against the Japanese yen, British pound, Deutsche Mark and
Swiss Franc. BeIore investing, Lim requested Shia Ior prooI that the Ioreign exchange was really lucrative. They conducted mock
tradings without money involved. As the mock trading showed proIitability, Lim decided to invest with a marginal deposit oI
US$5,000 in manager`s check. The marginal deposit represented the advance capital Ior his Iuture trading. It was made to apply
to any authorized Iuture transactions, and answered Ior any trading account against which the deposit was made, Ior any loss oI
whatever nature, and Ior all obligations, which the investor would incur with the broker.
5

During the Iirst day oI trading or on October 22, 1992, Lim made a net proIit oI P6,845.57. Shia went to the oIIice oI
Lim and inIormed him about it. e was elated. e agreed to continue trading. During the second day oI trading or on October 23,
1992, they lost P44,465. Meanwhile, on October 22, 1992, respondent learned that it would take seventeen (17) days to clear the
manager`s check given by petitioner. ence, on October 23, 1992, at about 11:00 A.M., upon management`s request, Shia
returned the check to petitioner who inIormed Shia that petitioner would rather replace the manager`s check with a traveler`s
check. Considering that it was 12:00 noon already, petitioner requested Shia to come back at 2:00 P.M. Shia went with petitioner
to the bank to purchase a traveler`s check at the PCI Bank, Juan Luna Branch at 2:00 P.M.. Shia noticed that the traveler`s check
was not indorsed but Lim told Shia that Queensland could sign the indorsee portion. Because Shia trusted the latter`s good credit
rating, and out oI ignorance, he brought the check back to the oIIice unsigned. Inasmuch as that was a busy Friday, the check was
kept in the drawer oI respondent`s consultant. Later, the traveler`s check was deposited with Citibank. On October 26, 1992,
Shia inIormed petitioner that they incurred a Iloating loss oI P44,695 on October 23, 1992. e told petitioner that they could still
recover their losses. e could unlock the Iloating loss on Friday. By unlocking the Iloating loss, the loss on a particular day is
minimized. On October 27, 1992, Citibank inIormed respondent that the traveler`s check could not be cleared unless it was duly
signed by Lim, the original purchaser oI the traveler`s check. A Miss Arajo, Irom the accounting staII oI Queensland, returned
the check to Lim Ior his signature, but the latter, aware oI his P44,465 loss, demanded Ior a liquidation oI his account and said he
would get back what was leIt oI his investment. Meanwhile, Lim signed only one portion oI the traveler`s check, leaving the
other halI blank.
Respondent asked Shia to talk to petitioner Ior a settlement oI his account but petitioner reIused to talk with Shia. Shia
made Iollow-ups Ior more than a week beginning October 27, 1992. Because petitioner disregarded this request, respondent was
compelled to engage the services oI a lawyer, who sent a demand letter to petitioner. This letter went unheeded. Thus, respondent
Iiled a complaint against petitioner Ior collection oI a sum oI money.

Issue:
Whether the petitioner is estopped Irom questioning the validity oI the Customer`s Agreement that he signed.

eld:
The essential elements oI estoppel are: (1) conduct oI a party amounting to Ialse representation or concealment oI
material Iacts or at least calculated to convey the impression that the Iacts are otherwise than, and inconsistent with, those which
the party subsequently attempts to assert; (2) intent, or at least expectation, that this conduct shall be acted upon by, or at least
inIluence, the other party; and (3) knowledge, actual or constructive, oI the real Iacts.
ere, it is uncontested that petitioner had in Iact signed the Customer`s Agreement in the morning oI October 22, 1992,
knowing Iully well the nature oI the contract he was entering into. The Customer`s Agreement was duly notarized and as a public
document it is evidence oI the Iact, which gave rise to its execution and oI the date oI the latter. Next, petitioner paid his
investment deposit to respondent in the Iorm oI a manager`s check in the amount oI US$5,000 as evidenced by PCI Bank
Manager`s Check No. 69007, dated October 22, 1992.

All these are indication that petitioner treated the Customer`s Agreement
as a valid and binding contract.
























































METROBANK & TRUST COMPAN VS. COURT OF APPEALS
G.R. No. 122899, June 8, 2000


Facts:
This petition Ior review on certiorari under Rule 45 oI the Rules oI Court assails (1) the
amended decision oI public respondent Court oI Appeals1 dated 03 July 1995 in CA-GR CV No.
33395 aIIirming the trial court's judgment ordering herein petitioner Metropolitan Bank and
Trust Company (hereaIter, METROBANK) to release/cancel the real estate mortgage constituted
over the subject property, and (2) the respondent court's resolution dated 04 December 1995
denying petitioner METROBANK's motion Ior reconsideration. The subject property is a
parcel oI land in Diliman, Quezon City consisting oI six hundred ninety (690) square meters
originally owned by businessman Tomas Chia under TransIer CertiIicate oI Title No. RT-16753
(106901 ) oI the Registry oI Deeds Ior Quezon City. Saddled with debts and business reverses,
Mr. Chia oIIered the subject property Ior sale to private respondent G.T.P. Development
Corporation (hereaIter, GTP), with assumption oI the mortgage indebtedness in Iavor oI
petitioner Metrobank secured by the subject property.
The deed oI sale and the memorandum oI agreement between Mr. Chia and respondent
GTP were eventually executed and signed on 04 September 1980 in the oIIice oI Atty. Atienza.
Twelve (12) days later, or on 16 September 1980, Atty. Atienza went to Metrobank Quiapo
Branch and paid one hundred sixteen thousand Iour hundred sixteen pesos and seventy-one
centavos (P116,416.71), Ior which Mertobank issued an oIIicial receipt acknowledging
payment. owever, Metrobank reIused to release the real estate mortgage on the subject
property despite repeated requests Irom Atty. Atienza, thus prompting respondent GTP to Iile on
October 17, 1980 an action Ior speciIic perIormance against petitioner METROBANK and Mr.
Chia.
AIter trial, judgment was rendered by the regional trial court on 11 December 1990
granting the relieIs prayed Ior by respondent GTP as plaintiII.

Issue:
Whether or not Metrobank is liable Ior not releasing the real estate mortgage aIter
payment oI the balance oI the loan.

eld:
In the case under scrutiny,the Court is convinced that it erred in reversing the appealed
judgment despite the Iinding that subject property covered by TCT 106901 Quezon City had
been sold, in a manner absolute and irrevocable, by the spouses, Tomas Chia and Vicenta Chan,
to plaintiII-appellee, and on September 16, 1980, the latter complied with its contractual
obligation thereunder by paying the total mortgage debt it assumed, amounting according to
Metrobank itselI, to P116,416.71, as oI September 16, 1980.
All things studiedly viewed in proper perspective, the Court is oI the opinion that
whatever debts or loans mortgagor Chia contracted with Metrobank aIter September 4, 1980,
without the conIormity oI plaintiII-appellee, could not be adjudged as part oI the mortgage debt
the latter so assumed. It is likewise persuaded that the contrary ruling on this point in Our
October 24, 1994 decision would be unIair and unjust to plaintiII-appellee because, beIore
buying subject property and assuming the mortgage debt thereon, the latter inquired Irom
Metrobank about the exact amount oI the mortgage debt involved.
The stipulation in subject Deeds oI Mortgage that mortgagors' debts subsequently
obtained would be covered by the same security became inapplicable, when mortgagor sold to
appellee the mortgaged property with the knowledge oI the mortgagee bank. Thus, since
September 4, 1980, it was obvious that whatever additional loan mortgagor got Irom Metrobank,
the same was not chargeable to and collectible Irom plaintiII-appellee. It is then decisively clear
that Metrobank is without any valid cause or ground not to release the Deeds oI Mortgage in
question, despite Iull payment oI the mortgage debt assumed by appellee.


Petitioner Metrobank is estopped Irom reIusing the discharge oI the real estate mortgage
on the claim that the subject property still secures "other unliquidated past due loans." The Court
enumerated the requisites Ior estoppel by conduct to operate, to wit:
1. there must have been a representation or concealment oI material Iacts;
2. the representation must have been with knowledge oI the Iacts;
3. the party to whom it was made must have been ignorant oI the truth oI the matter; and
4. it must have been with the intention that the other party would act upon it.
Respondent GTP, thru Atty. Atienza, requested Irom METROBANK that he be Iurnished
a copy oI the Iull indebtedness secured by the real estate mortgage. In response thereto,
petitioner Metrobank issued a statement oI account as oI September 15, 1980 which amount
was immediately settled and paid the next day amounting to P116,416.71. Petitioner Metrobank
is thus barred Irom taking a stand inconsistent with its representation upon which respondent
GTP, as an innocent third person to the real mortgage agreement, placed exclusive reliance.
Respondent GTP had the reasonable right to rely upon such representations as true, considering
that it had no participation whatsoever in the mortgage agreement and the preparation oI the
statement oI account, coupled with the expectation that a reputable banking institution such as
petitioner Metrobank do conduct their business concerns in the highest standards oI eIIiciency
and proIessionalism. For an admission or representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as against a person relying thereon. A party may
not go back on his own acts and representations to the prejudice oI the other party who relied
upon them. In the law oI evidence, whenever a party has, by his own declaration, act or
omission, intentionally and deliberately led another to believe a particular thing true, and to act
upon such belieI, he cannot, in any litigation arising out oI such declaration, act, or omission, be
permitted to IalsiIy it.
Just as decisive is petitioner Metrobank's Iailure to bring beIore respondent Court oI
Appeals the current statement evidencing what it claims as "other unliquidated past due loans" at
the scheduled hearing oI 8 March 1995. It is a well-settled rule that when the evidence tends to
prove a material Iact which imposes a liability on a party, and he has it in his power to produce
evidence which Irom its very nature must overthrow the case made against him iI it is not
Iounded on Iact, and he reIuses to produce such evidence, the presumption arises that the
evidence, iI produced would operate to his prejudice, and support the case oI his adversary.
ence, petitioner Metrobank's omission to present its evidence only created an adverse
inIerence against its cause. ThereIore, it cannot now be heard to complain since respondent Court
extended a reasonable opportunity to petitioner that it did not avail.


SPS. MANUEL VS. COURT OF APPEALS, G.R. No. 108228, February 1, 2001

Facts:
Lot 162 oI the cadastral survey oI Ponteverda, Capiz, and the subject property in this
case, is owned by Salome, Consorcia, AlIredo, Maria, Rosalia, Jose, Quirico and Julita all
surnamed Bornales. They are then considered as co-owners oI the said lot. ThereaIter, Salome
executed a Deed oI Absolute sale, corresponding her share in the lot, to Soledad. Soledad then
took possession oI the land and built a house thereon. Together with her husband, they
mortgaged the land to Jose Regalado, evidenced by a Deed oI Mortgage.
Simplicio Distajo, heir oI Soledad, paid the mortgage debt and redeemed the Mortgaged
land Irom Jose Regalado, Sr. who in turn executed a Deed oI Discharge oI Mortgage in Iavor oI
Soledad`s heirs. ThereaIter, the heirs then sold the redeemed property to herein petitioners,
Manuel Ocampo and Salvacio Quiachon, Mean while, Jose Regalado, Sr., caused the
reconstitution oI the Original CertiIicate oI lot 162 and later the title was transIerred to him.
erein petitions then Iiled a complaint Ior 'repartition, resurvey and reconveyance against the
heirs oI the Jose Regalado, Sr.

Issue:
Whether or not the respondents in their case are estopped Irom asserting that they own
the subject property in question.

eld:
The Supreme Court granted the petition oI herein petitioners Ior the repartition, resurvey
and reconveyance oI lot 162 Ior the determination oI their exact or respective portion in the said
lot.
The respondents are barred Irom asserting that they own the subject land in view oI the
deed oI Mortgage and discharge oI Mortgage executed between Regalado and petitioners
predecessors in interest under the equitable principle oI estoppel by deed, whereby a party to
a deed and his privies are precluded Irom asserting as against the other and his privies and right
or title in derogation oI the deed, or Irom denying the truth oI any material Iact asserted in it. A
perusal oI the documents evidencing the mortgage would readily reveal the Soledad, as
mortgagor, had declared herselI absolute owner oI the piece oI land being litigated. This
declaration oI Iact was accolade by Regalado as mortgage and accordingly, his heirs cannot not
be permitted to deny it.


























































LAUREL VS. ON. ANIANO A DESIERTO, G.R. No. 145368, April 12, 2002

Facts:
Salvador . Laurel served as a chair oI the National Centennial Commission. The court
declares him a public oIIicer. Salvador Laurel is praying to reconsider its decision and a case be
reIerred to the Court En Banc. Salvador contented that the decision against him because it has
serious constitutional repercussions as the NCC composition included member oI Cabinet,
Senate, ouse oI Representatives and the Supreme Court who are prohibited by the constitution
Irom holding any other oIIice during their term or tenure. e seeks estoppel Ior he claims that
oIIicial acts oI the President, Senate President, ouse oI Representatives and Supreme Court, in
designating Cabinet Members, Senators, Congressmen and Justices to the NCC is not a public
oIIice.

Issue:
Whether petitioner as Chair oI NCC is a public oIIicer under the jurisdiction oI the
Ombudsman; and
Whether or not petitioner invoking estoppel is proper.

eld:
Assuming that the designation oI other members oI NCC runs counter to the constitution
does not make Salvador Laurel as NCC Chair less public oIIicer. The serious constitutional do
not reduce the Iorce oI the rationale behind he court`s decision. It is unbelievable that the
President, Senate President, Speaker oI the ouse and the Supreme Court; by designating such
oIIicials to NCC intended to mislead Laurel accept the position oI NCC Chair.
In estoppel, the party representing material Iacts must have the intention that other party
would act upon the representation. Estoppel must be clear and intentional. Besides, petitioner
himselI admits that the principle oI estoppel does not operate against the Government in the
exercise oI its Sovereign Powers.
According to the Constitution, no doctrine or principle oI law laid down by the court in a
decision rendered en banc or in division may be modiIied or reversed except by the court sitting
en banc. In designating 3 oI its incumbent members to NCC, the Court didn`t render a decision
in the context oI said constitutional provision which contemplates an actual case. Much less did
the Court, by such designation, articulate any doctrine or principle oI law.
EXPOCORP is a government-owned or controlled corporation would not aIter the
outcome oI this case because the Petitioner`s position and Iunctions as chieI Executive OIIicer oI
EXPOCORP are by virtue oI his being chairman oI NCC.










SPOUSES ANOPOL VS. SOEMART INCORPORATED, G.R. No. 137774,
October 4, 2002

Facts:
Under the terms oI the contract, Shoemart extended credit accommodations, in the
amount oI Three undred Thousand Pesos (P300,000.00), Ior purchases on credit made by
holders oI SM Credit Card issued by spouses anopol Ior one year, renewable yearly thereaIter.
Spouses anopol were given a Iive percent (5) discount on all purchases made by their
cardholders, deductible Irom the semi-monthly payments to be made to Shoemart by spouses
anopol.
In consideration oI the credit accommodations, spouses anopol executed a Deed oI Real
Estate Mortgage in Iavor oI Shoemart on their properties covered by TCT Nos. (S-60763)
15079-A and (S-60762) 15078-A, situated in Barrio San Dionisio, Municipality oI Paraaque,
Province oI Rizal.
For Iailure oI spouses anopol to pay the principal amount oI One undred Twenty-Four
Thousand Five undred Seventy-One Pesos and Eighty-Nine Centavos (P124,571.89) as oI
October 6, 1987, Shoemart instituted extrajudicial Ioreclosure proceedings against the mortgaged
properties.
On March 29, 1989, to enjoin Shoemart and the SheriII Irom proceeding with the
scheduled Ioreclosure sale on April 6, 1989, spouses anopol instituted Civil Case No. 89-48355
Ior breach oI contract, reIund, release/cancellation oI real estate mortgage, damages with
injunction beIore the Regional Trial Court oI Manila. Spouses anopol alleged that Shoemart
breached the contract when the latter Iailed to Iurnish the Iormer with the requisite documents by
which the Iormer`s liability shall be determined, namely: charge invoices, purchase booklets and
purchase journal, as provided in their contract; that without the requisite documents, spouses
anopol had no way oI knowing that, in Iact, they had already paid, even overpaid, whatever
they owed to Shoemart; that despite said breach, Shoemart even had the audacity to apply Ior
extrajudicial Ioreclosure with the SheriII.
The trial court subsequently Iormed a Commission, composed oI three (3) members, one
representative Irom each party and Atty. Raymundo G. Vallega, the Branch Clerk oI Court oI
Branch 25, RTC Manila, as Chairman oI the Commission, Ior the accounting oI each party`s
records oI account with the corresponding receipts, charge invoices and other evidence oI
indebtedness or payment.
The Report oI the Chairman oI the Commission dated January 7, 1991, stated that the
deIendant, despite repeated plea oI the undersigned Chairman, did not present or submit any
prooI oI indebtedness or charge invoices Ior accounting purposes to support its position/claim,
claiming that plaintiIIs are now barred by estoppel and laches Irom demanding the charge
invoices covering all their transactions with Shoemart, Inc. way back December 4, 1985 in
pursuance oI paragraph 6 oI the contract on purchase on credit. DeIendant`s commissioner with
the assistance oI counsel merely submitted a statement oI account.
In eIIect, deIendant Shoemart reiterated its position/claim in its answer with counterclaim
that plaintiIIs have still an outstanding obligation/indebtedness (to it) in the amount oI
P178,095.47 as oI December 31, 1988 inclusive oI penalty charges being collected Irom them.
On March 21, 1994, the Regional Trial Court oI Manila (Branch 25) rendered a
Decision|17| in Iavor oI spouses anopol, ordering Shoemart, as represented to by its Executive
Vice-President, Senen T. Mendiola, to eIIect the cancellation oI the real estate mortgage
executed by spouses anopol in Iavor oI Shoemart and reIund the amount oI Three undred
Twenty-One Thousand Eight undred One Pesos and Two Centavos (P321,801.02) which
represents overpayment, with interest at the legal rate Irom the time when the complaint was
instituted on March 29, 1989 until Iull payment thereoI. In addition, Shoemart was ordered to
pay moral and exemplary damages in the amount oI Thirty Thousand Pesos (P30,000.00),
attorney`s Iees in the amount oI Twenty Thousand Pesos (P20,000.00), and the actual costs and
expenses oI the suit.
Shoemart appealed the decision to the Court oI Appeals which is docketed as CA-G.R.
CV No. 45500. In a Decision|18| dated November 27, 1996, the appellate court reversed and set
aside the lower court`s decision and, in its stead, the real estate mortgage was reinstated and
spouses anopol were ordered to pay Ten Thousand Pesos (P10,000.00) as attorney`s Iees.

Issue:
Whether or not the appellate court gravely erred when it did not consider the doctrine oI
estoppel against Shoemart on the report oI the commission on accounting.

eld:
In Iact, in a letter dated March 9, 1988, petitioner Manuel R. anopol declared that they
are not denying their liability as guarantor but merely requesting charge invoices Ior legal action
they will take against delinquent cardholders. In subsequent letters, petitioners spouses anopol
reiterated the purpose oI their request Ior the charge invoices and that they intend to settle their
account with Shoemart. Only when inIormed in the letter dated March 20, 1989 oI the
impossibility oI retrieving the charge invoices Irom December 4, 1985 up to January 15, 1988
(which petitioners had requested in a letter dated February 16, 1989) did petitioners Iirst bring up
the issue oI overpayment. From the Ioregoing sequence oI events, it can be Iairly inIerred that it
was only then that petitioner Manuel R. anopol was emboldened to claim overpayment since
Shoemart had no documents to reIute the Iormer`s claim. Furthermore, as to the allegation oI the
petitioners that Shoemart breached the contract when the latter Iailed to Iurnish them with the
requisite documents by which their liability may be determined, namely: charge invoices,
purchase booklets and purchase journal, as provided in their contract -- We have thoroughly
perused the contract between the parties and Iound that nowhere is it stated therein that Shoemart
is obliged to provide spouses anopol with charge invoices and purchase booklets. The contract
simply provides Ior a provision relative to the Statement oI Account.
It is clear Irom the Ioregoing provision that spouses anopol had three (3) days to
question the correctness oI the Statement oI Account and their Iailure to do so would render the
Statement conclusive.
Likewise, a Memorandum dated October 30, 1984 advised all principals, such as
petitioners, that iI their cardholders should have any question about a particular charge invoice,
the principal should advise Shoemart within three (3) months aIter the date oI their transaction,
otherwise, their queries may not be satisIied because all invoices will be stored only Ior three (3)
months aIter which they shall be disposed oI permanently.
Petitioners Iailed to explain their Iailure to question or take action regarding any
discrepancies in the Statement oI Account they received, doing so only when they had diIIiculty
settling their account with Shoemart. They never raised their claim oI overpayment throughout
the entire duration oI the contract.
By their silence and inaction, petitioners are deemed to have admitted the correctness oI
the Statement oI Account oI Shoemart. They are estopped Irom questioning the veracity oI the
same and claim overpayment. Shoemart has in its Iavor the presumption that acquiescence
resulted Irom a belieI that the thing acquiesced in was conIormable to the law or Iact.
Petitioners should not, aIter the opportunity to enjoy the beneIits oI the contract with
Shoemart, be allowed to later disown the arrangement with belated allegations oI overpayment
when the terms thereoI ultimately would prove to operate against their hopeIul expectations.
The principle oI estoppel in pais applies wherein when one, by his acts, representations or
admissions, or by his own silence when he ought to speak out, intentionally or through culpable
negligence, induces another to believe certain Iacts to exist and such other rightIully relies and
acts on such belieI, so that he will be prejudiced iI the Iormer is permitted to deny the existence
oI such Iacts.
Contrary to the claim oI petitioners, the doctrine oI estoppel cannot be applied to
Shoemart with respect to the Report oI the Chairman oI the Commission on the accounting
aspect which its own counsel considered "as the best evidence." Such statement was taken out oI
context. The respondents` counsel merely submitted that the Report oI the Commission should
be read as it is. Indeed, such declaration must be interpreted together with the contents oI the
Report itselI. The Report simply states the details oI the hearing conducted by the Commission
and its Iailure to reach a conclusion on the accounting aspect oI the case.

Terminal Facilities and Services Corporation vs. Philippine Ports Authority
G.R. No. 135639, February 27, 2002
Facts:
TEFASCO is a domestic corporation organized and existing under the laws oI the
Philippines with principal place oI business at Davao City. It is engaged in the business oI
providing port and terminal Iacilities as well as arrastre, stevedoring and other port-related
services at its own private port. Sometime in 1975, TEFASCO submitted to PPA a proposal Ior
the construction oI a specialized terminal complex with port Iacilities and a provision Ior port
services in Davao City. To ease the acute congestion in the government ports, PPA welcomed
the proposal and organized an inter-agency committee to study the plan. The committee
recommended approval thereoI. Consequently, PPA accepted the proposal.
Under the Ioregoing terms and conditions, TEFASCO contracted dollar loans Irom
private commercial institutions abroad to construct its specialized terminal complex with port
Iacilities and thereaIter poured millions worth oI investments in the process oI building the port.
Long aIter TEFASCO broke ground with massive inIrastructure work, the PPA Board curiously
passes a resolution under which TEFASCO, without asking Ior one, was compelled to submit an
application Ior construction permit, without the consent oI TEFASCO, the application imposed
additional signiIicant conditions.
The series oI PPA impositions did not stop there. Two years aIter the completion oI the
port Iacilities and the commencement oI TEFASCO`s port operations, PPA again issued to
TEFASCO another permit, under which more onerous conditions were Ioisted on TEFASCO`s
port operations. In the purported permit appeared Ior the Iirst time the contentious provisions Ior
ten percent government share out oI arrastre and stevedoring gross income and one hundred
percent wharIage and berthing charges.
On February 10, 1984 TEFASCO and PPA executed a Memorandum oI Agreement
providing among others Ior acknowledgement oI TEFASCO`s arrears in government share at
P3,807,563.75 payable monthly, with deIault penalized by automatic withdrawal oI its
commercial private port permit and permit to operate cargo handling services, reduction oI
government share Irom ten percent to six percent on all cargo handling and related revenue,
opening oI its pier Iacilities to all commercial and third party cargoes and vessels Ior a period
coterminous with its Ioreclosure lease contract with the National Government and tenure oI Iive
years extendible by Iive more years Ior TEFASCO`s permit to operate cargo handling in its
private port Iacilities. In return, PPA promised to issue necessary permits Ior TEFASCO`s port
activities. TEFASCO complied with the MOA and paid the accrues and current government
share.
owever, on August 30, 1988 TEFASCO sued PPA and PPA Port Manager and Port
OIIicer Iro reIund oI government share it had paid and Iro damages as a result oI the alleged
illegal exaction Irom its clients oI 100 berthing and wharIage Iees. The compliant also sought
to nulliIy the MOA and all another PPA issuances modiIying the terms and conditions.
The RTC oI Davao City ruled in Iavor oI TEFASCO nulliIying the MOA and other PPA
issuances and awarded damages against PPA. The latter appealed the decision oI the trial court
to the court oI appeals. The Court oI Appeals reversed in toto the decision oI the trial court.
Nonetheless, TEFASCO moved Iro reconsideration, which the appellate court Iound meritorious.
Both PPA and TEFASCO were unsatisIied with the disposition hence both elevated the issue to
the Supreme Court.

Issue:
Whether or not the petitioner`s cause oI action is meritorious.

eld:
The petition is meritorious. It was not mere privilege that PPA bestowed upon
TEFASCO to construction a specialized terminal complex with port Iacilities and provides port
services in Davao City under a PPA resolution. Rather, the arrangement was envisioned to be
mutually beneIicial, on one hand, to obtain business opportunities Ior TEFASCO, and on the
other, enhance PPA`s services. The authorization Ior TEFASCO to build and operate the
specialized terminal complex with port Iacilities assumed character oI a truly binding contract
between the grantor and the grantee. It was a two-way advantage Ior both TEFASCO and PPA.
The terms and conditions binding TEFASCO are only those enumerated or mentioned in the
inter-agency committee report. With due consideration Ior the policy that laws oI the land are
written into every contract, the said documents stand to be the only source oI obligations
between the parties. That being the case, it was arbitrary, unreasonable, and unIair Ior PPA to
add new burdens and uncertainties into their agreement oI which TEFASCO had no prior
knowledge even in the context oI regulation.
The record shows that PPA made express representations to TEFASCO that it would
authorize and support its port project under clear and categorical terms and conditions oI an
envisioned contract. TEFASCO complied with its obligation, which ultimately resulted to the
beneIit oI PPA. And the PPA accepted the project as completed and authorized TEFASCO to
operate the same. Under these circumstances, PPA is estopped Irom reneging on its
commitments and covenants as exclusively contained in the inter-agency committee report.

MENDOZA VS. COURT OF APPEALS, G.R. No. 116710, June 25, 2001

Facts:
Petitioner Danilo Mendoza was granted by respondent Philippine National Bank (PNB) a
Five undred Thousand Pesos credit line and a 1 Million Pesos Letter oI Credit/Trust Receipt
(LC/TR) line. As security Ior the credit accommodations and Ior those which may thereinaIter be
granted, petitioner mortgaged to respondent PNB the Iollowing: 1) three parcels oI land with
improvements in F. Pasco Avenue, Santolan, Pasig; 2) his house and lot in Quezon City; and 3)
several pieces oI machinery and equipment in his Pasig coco-chemical plant.
Due to the shut-down oI his end-user companies and the huge amount he spent Ior
business expansion, petitioner requested PNB to restructure his past due accounts into a 5-year
term loan and Ior an additional LC/TR line oI 2 Million Pesos. PNB Mandaluyong then required
petitioner to submit documents to give the bank more justiIication in recommending a
restructuring oI his accounts to higher authorities oI the Bank.
Petitioner sent another letter to PNB regarding his request Ior restructuring oI his loans
testiIying that respondent PNB Mandaluyong Branch Iound his proposal Iavorable and
recommended the implementation oI the agreement. owever, Fernando Maramag, PNB
Executive Vice-President, disapproved the proposed release oI the mortgaged properties and
reduced the proposed new LC/TR line to 1 Million Pesos.
Petitioner Iailed to pay the subject 2 Promissory Notes as they Iell due. PNB extra-
judicially Ioreclosed the real and chattel mortgages, and the mortgaged properties were sold at
public auction to PNB as highest bidder.
Petitioner contends that the PNB restructured his existing loan obligations to a 5-year
term loan and granted him another 2 Million Pesos LC/TR line; that the Promissory Notes
evidencing a 2-year restructuring period or with the due maturity date 'December 29, 1984
were Iilled out Iraudulently by PNB, and contrary to his verbal agreement with PNB; hence, his
indebtedness to PNB was not yet due and the extrajudicial Ioreclosure oI his real estate and
chattel mortgages was premature. PNB denies that petitioner's loan obligations were restructured
to 5 years and maintains that the subject 2 Promissory Notes Nos. 127/82 and 128/82 were Iilled
out regularly and became due as oI December 29, 1984 as shown on the Iace thereoI.
The trial court ruled in Iavor oI the petitioner and ordered the nulliIication oI the
extrajudicial Ioreclosure oI the real estate mortgage. The Court oI Appeals reversed said
decision.

Issues:
Whether or not the petitioner`s 5-year restructuring plan was deemed automatically
approved by PNB upon the Iormer`s compliance with the requirements according to the
instructions given to him.
Whether such compliance by petitioner amounts to estoppel on the part oI PNB.

eld:
According to the doctrine oI promissory estoppel`, an estoppel may arise Irom the
making oI a promise, even though without consideration, iI it was intended that the promise
should be relied upon and in Iact it was relied upon, and iI a reIusal to enIorce it would be
virtually to sanction the perpetration oI Iraud or would result in other injustice. In this respect,
the reliance by the promisee is generally evidenced by action or Iorbearance on his part, and the
idea has been expressed that such action or Iorbearance would reasonably have been expected by
the promissor.
ence the doctrine oI promissory estoppel presupposes the existence oI a promise on the
part oI one against whom estoppel is claimed. The promise must be plain and unambiguous and
suIIiciently speciIic so that the Judiciary can understand the obligation assumed and enIorce the
promise according to its terms. For petitioner to claim that PNB is estopped to deny the 5-year
restructuring plan, he must Iirst prove that PNB had promised to approve the plan in exchange
Ior the submission oI the proposal. No such promise was proven, thereIore, the doctrine does not
apply to the case at bar. A cause oI action Ior promissory estoppel does not lie where an alleged
oral promise was conditional, so that reliance upon it was not reasonable. It does not operate to
create liability where it does not otherwise exist. It has been held that no one receiving a
proposal to change a contract to which he is a party is obliged to answer the proposal, and his
silence per se cannot be construed as an acceptance.

































ROBLETT INDUSTRIAL CONSTRUCTION CORPORATION VS.
COURT OF APPEALS, G.R. No. 116682, January 2, 1997
Facts:
On September 23, 1986 respondent Contractors Equipment Corporation (CEC)
instituted an action for a sum of money against petitioner Roblett ndustrial Construction
Corporation (RCC) before the Regional Trial Court of Makati alleging that in 1985 it
leased to the latter various construction equipment which it used in its projects. A day
before the execution of their Agreement, RCC paid CEC P10, 000.00 in postdated
checks which when deposited were dishonored. As a consequence the latter debited
the amount to petitioner's account of P227, 909.38 thus increasing its balance to P237,
909.38. On July 24,1986 Mariano Manaligod Jr., General Manager of CEC, sent a letter
of demand to petitioner through its Vice President for Finance regarding the latter's
overdue account of P237,909.38 and sought settlement thereof on or before July
31,1986. n reply, petitioner requested for 30 days to have enough time to look for
funds to substantially settle its account.
On December 19,1990 the trial court rendered judgment ordering petitioner to
pay respondent: (a) P237,909.38 plus legal interest from 31 July 1986 until full payment;
(b) P2,000.00 as litigation expenses; (c) 20% of the sum due and payable as attorney's
fees and, (d) cost of suit. On 29 July 1994 respondent Court of Appeals affirmed the
decision of the trial court. Hence, this petition.

ssue:
Whether or not the court erred in not holding that petitioner's obligation to
respondent had been fully paid and that petitioner even overpaid respondent by P12,
000.00.

Held: t was established that the equipment leased was actually used for only 191
hours. Multiplying 191 hours by the rental rate of P540.00 per hour will amount to P103,
140.00 which is petitioner's correct rental obligation to respondent. An overpayment of
P12, 000.00 more or less results when the construction materials worth P115, 000.00
received by respondent from petitioner are taken into account. n the absence of any
showing that the trial court failed to appreciate facts and circumstances of weight and
substance that would have altered its conclusion, no compelling reason exists for this
Court to impinge upon matters more appropriately within its province. Consequently, we
sustain the finding of the trial court that the evidence relied upon by petitioner is
incomplete as it does not reflect the entire period of the lease agreement which, on the
basis of respondent's evidence, covered the period of 28 March to 12 July 1985.
Furthermore, estoppel in pais arises when one, by his acts, representations or admissions,
or by his own silence when he ought to speak out, intentionally or through culpable negligence,
induces another to believe certain Iacts to exist and such other rightIully relies and acts on such
belieI, so that he will be prejudiced iI the Iormer is permitted to deny the existence oI such Iacts.
This doctrine obtains in the present case. A statement oI account Ior P376, 350.18 covering the
period above mentioned was received Irom respondent by petitioner with nary a protest Irom the
latter. Neither did petitioner controvert the demand letter concerning the overdue account oI
P237, 909.38; on the contrary, it asked Ior ample time to source Iunds to substantially settle the
account.
















































Metrobank v. Cabilzo, 510 S 259

FACTS:
Petitioner Metrobank is a banking institution. Respondent Renato D. Cabilzo (Cabilzo)
was one oI Metrobank`s clients who maintained a current account with Metrobank Pasong Tamo
Branch. On 12 November 1994, Cabilzo issued a Metrobank Check No. 985988, payable to
'CAS and postdated on 24 November 1994 in the amount oI One Thousand Pesos
(P1,000.00). The check was drawn against Cabilzo`s Account with Metrobank Pasong Tamo
Branch under Current Account No. 618044873-3 and was paid by Cabilzo to a certain Mr.
Marquez, as his sales commission. Subsequently, the check was presented to Westmont Bank Ior
payment. Westmont Bank, in turn, indorsed the check to Metrobank Ior appropriate clearing.
AIter the entries thereon were examined, including the availability oI Iunds and the authenticity
oI the signature oI the drawer, Metrobank cleared the check Ior encashment in accordance with
the Philippine Clearing ouse Corporation (PCC) Rules.On 16 November 1994, Cabilzo`s
representative was at Metrobank Pasong Tamo Branch to make some transaction when he was
asked by a bank personnel iI Cabilzo had issued a check in the amount oI P91,000.00 to which
the Iormer replied in the negative. On the aIternoon oI the same date, Cabilzo himselI called
Metrobank to reiterate that he did not issue a check in the amount oI P91,000.00 and requested
that the questioned check be returned to him Ior veriIication, to which Metrobank complied.
Upon receipt oI the check, Cabilzo discovered that Metrobank Check No. 985988 which he
issued on 12 November 1994 in the amount oI P1,000.00 was altered to P91,000.00 and the date
24 November 1994 was changed to 14 November 1994. ence, Cabilzo demanded that
Metrobank re-credit the amount oI P91,000.00 to his account. Metrobank, Metrobank still Iailed
or reIused to comply with its obligation. Consequently, Cabilzo instituted a civil action Ior
damages against Metrobank. Metrobank claimed that as a collecting bank and the last indorser,
Westmont Bank should be held liable Ior the value oI the check. Westmont Bank indorsed the
check as the an unqualiIied indorser, by virtue oI which it assumed the liability oI a general
indorser, and thus, among others, warranted that the instrument is genuine and in all respect what
it purports to be. , claimed that Cabilzo was partly responsible in leaving spaces on the check,
which, made the Iraudulent insertion oI the amount and Iigures thereon, possible.

ISSUE:
Whether or not the trial court erred in holding that Metrobank is responsible Ior the
alteration oI the check bearing the genuine signature oI the drawer

Ruling:
An alteration is said to be material iI it changes the eIIect oI the instrument. It means that
an unauthorized change in an instrument that purports to modiIy in any respect the obligation oI
a party or an unauthorized addition oI words or numbers or other change to an incomplete
instrument relating to the obligation oI a party. In the case at bar, the check was altered so that
the amount was increased Irom P1,000.00 to P91,000.00 and the date was changed Irom 24
November 1994 to 14 November 1994. Indubitably, Cabilzo was not the one who made nor
authorized the alteration. Neither did he assent to the alteration by his express or implied acts.
There is no showing that he Iailed to exercise such reasonable degree oI diligence required oI a
prudent man which could have otherwise prevented the loss. As correctly ruled by the appellate
court, Cabilzo was never remiss in the preparation and issuance oI the check, and there were no
indicia oI evidence that would prove otherwise. Indeed, Cabilzo placed asterisks beIore and aIter
the amount in words and Iigures in order to Iorewarn the subsequent holders that nothing Iollows
beIore and aIter the amount indicated other than the one speciIied between the asterisks. Verily,
Metrobank cannot lightly impute that Cabilzo was negligent and is thereIore prevented Irom
asserting his rights under the doctrine oI equitable estoppel when the Iacts on record are bare oI
evidence to support such conclusion. Undoubtedly, Cabilzo was an innocent party in this instant
controversy. e was just an ordinary businessman who, in order to Iacilitate his business
transactions, entrusted his money with a bank, not knowing that the latter would yield a
substantial amount oI his deposit to Iraud, Ior which Cabilzo can never be Iaulted. In every case,
the depositor expects the bank to treat his account with the utmost Iidelity, whether such account
consists only oI a Iew hundred pesos or oI millions. In the present case, it is obvious that
Metrobank was remiss in that duty and violated that relationship.
Extinguishment oI Obligations
Estoppel by Laches
































Mesina v.Garcia, 509 S 431

FACTS:
This is a Petition Ior Review on Certiorari seeking to reverse and set aside the Court oI
Appeals Decision ordering petitioners to issue the necessary Deed oI Absolute Sale over the
parcel oI land, subject matter oI this case in Iavor oI respondent. Atty. onorio Valisno Garcia
and Felicisima Mesina, during their liIetime, or on 26 April 1977 exact entered into a Contract to
Sell over a lot consisting oI 235 square meters, situated at Diversion Road, Sangitan, Cabanatuan
City, covered and embraced by |TransIer CertiIicate oI Title| TCT No. T-31643 in the name oI
Felicisima Mesina which title was eventually cancelled and TCT No. T-78881 was issued in the
name oI herein |petitioners|. Atty. onorio Valisno Garcia is the deceased husband oI |herein
respondent Gloria C. Garcia| while the late Felicisima Mesina is the mother oI |petitioners|
Danilo, Simeon, and Melanie, all surnamed Mesina. The Contract to Sell provides that the cost
oI the lot is P70.00 per square meter Ior a total amount oI P16,450.00; payable within a period
not to exceed seven (7) years at an interest rate oI 12 per annum, in successive monthly
installments oI P260.85 per month, starting May 1977. ThereaIter, the succeeding monthly
installments are to be paid within the Iirst week oI every month, at the residence oI the vendor at
Quezon City, with all unpaid monthly installments earning an interest oI one percent (1) per
month. The Contract |to Sell| also stipulated, among others, that: Should the |spouses Garcia|
Iail to pay Iive (5) successive monthly installments, |Felicisima Mesina| shall have a right to
rescind this |C|ontract to |S|ell. All paid installments to be recomputed as rental Ior usage oI lot
shall be at the rate oI |P100.00| a month and that |Felicisima Mesina| shall have the Iurther
option to return the downpayment (sic) plus whatever balance |spouses Garcia| paid, thereby
rescinding the Contract to Sell. Upon rescission oI the Contract to Sell, |spouses Garcia| agrees
(sic) to remove all the improvements built on the lot within three (3) months Irom rescission oI
this contract, |spouses Garcia| shouldering all expenses oI said removal. |respondent| asserts that
despite the Iull payment made on 7 February 1984 Ior the consideration oI the subject lot,
|petitioners| reIused to issue the necessary Deed oI Sale to eIIect the transIer oI the property to
her.

ISSUE: Whether or not petitioners are in estoppel.

ELD:
The Civil Code provides that an action based on a written contract, an obligation created
by law, and a judgment must be brought within 10 years Irom the time the right oI action
accrues. the right oI action oI the respondent accrued on the date that the Iull and Iinal payment
oI the contract price was made. Accordingly, as the Iull payment oI the purchase price on the
subject Contract to Sell had been eIIected on 7 February 1984 thus, respondent had Irom said
date until 7 February 1994 within which to bring an action to enIorce the written contract, i.e.,
the Contract to Sell. It was then the contention oI the petitioners that when the respondent
instituted her Complaint Ior SpeciIic PerIormance with Damages on 20 January 1997, the same
had already been barred by prescription. The contention oI the petitioners is untenable. In the
present case it cannot be gainsaid that respondent made a series oI written extrajudicial demands
Ior the petitioners to execute the Deed oI Absolute Sale in her Iavor. ence, Irom the series oI
written extrajudicial demands made by respondent to have the execution oI the Deed oI Absolute
Sale in her Iavor, the prescriptive period oI 10 years has been interrupted. ThereIore, it cannot
be said that the cause oI action oI the respondent has already been prescribed.
With respect to the issue on estoppel, this Court, upon reviewing the records oI the case at bar,
Iinds no reason to overturn the Iindings oI the appellate court that, indeed, petitioners are
estopped Irom avowing that they never had knowledge as to the acceptance oI the delayed
payments made by the respondent, and that they never induced respondent to believe that she had
validly eIIected Iull payment. Finally, we cannot lend ourselves to concede to the contention oI
the petitioners that respondent Iailed to prove the Iact oI Iull payment oI the subject property as
there were no reliable and credible evidence adduced by the latter to support her unIounded
claims.






































SOPPER`S PARADISE REALT & DEVELOPMENT CORPORATION VS. EFREN P.
ROQUE, G.R. No. 148775, January 13, 2004
Facts:
On December 23, 1993, petitioner Shopper`s Paradise Realty & Development
Corporation, represented by its president, Veredigno Atienza, entered into a 25 year lease with
Dr. Felipe C. Roque, now deceased, over a parcel oI land, with an area oI 2,036 sq. meters
covered by TCT No. 30591 oI the Register oI Deeds oI Quezon City in the name oI Dr. Roque.
Petitioner issued to Dr. Roque a check Ior P250, 000.00 by way oI 'reservation payment.
Simultaneously, petitioner and Dr. Roque likewise entered into a memorandum oI agreement Ior
the construction, development and operation oI a commercial building complex on the property.
ConIormably with the agreement, petitioner issued a check Ior another P250, 000.00
'downpayment to Dr. Roque.
The contract oI lease and the memorandum oI agreement, both notarized, were to be
annotated on TCT No. 30591 within 60 days Irom December 23, 1993 or until February 23,
1994. The annotations, however, were never made because oI the untimely demise oI Dr.
Roque. The death oI Dr. Roque on February 10, 1994 constrained petitioner to deal with
respondent EIren Roque, one oI the surviving children oI the late Dr. Roque, but the negotiations
broke down due to some disagreements. In a letter, dated November 3, 1994, respondent advised
petitioner 'to desist Irom any attempt to enIorce the aIorementioned contract oI lease and
memorandum oI agreement. On February 15, 1995, respondent Iiled a case Ior annulment oI
the contract oI lease and the memorandum oI agreement, with a prayer Ior the issuance oI a
preliminary injunction. EIren Roque alleged that he had long been the absolute owner oI the
subject property by virtue oI a deed oI donation inter vivos executed in his Iavor by his parents,
Dr. Felipe Roque and Elisa Roque, on December 26, 1978, and that the late Dr. Felipe Roque
had no authority to enter into the assailed agreements with petitioner. The donation was made in
a public instrument duly acknowledged by the donor-spouses beIore a notary public and duly
accepted on the same day by respondent beIore the notary public in the same instrument oI
donation. The title to the property, however, remained in the name oI Dr. Felipe C. Roque, and it
was only transIerred to and in the name oI respondent 16 years later, or on May 11, 1994, under
TCT No. 109754 oI the Register oI Deeds oI Quezon City. Respondent, while he resided in the
USA, delegated to his Iather the mere administration oI the property. Respondent came to know
oI the assailed contracts with petitioner only aIter retiring to the Philippines upon the death oI his
Iather.
On August 9, 1996, the trial court dismissed the complaint oI respondent. The Court oI
Appeals reversed the decision oI the trial court and held to be invalid the Contract oI Lease and
Memorandum oI Agreement. While it shared the view expressed by the trial court that a deed oI
donation would have to be registered in order to bind third persons, the appellate court, however,
concluded that petitioner was not a lessee in good Iaith having had prior knowledge oI the
donation in Iavor oI respondent, and that such actual knowledge had the eIIect oI registration
insoIar as petitioner was concerned.

Issue: Whether or not respondent is barred by laches and estoppel Irom denying the contracts.

Ruling:
The trial court and the appellate court have not erred in holding that the non-registration
oI a deed oI donation does not aIIect its validity. As being itselI a mode oI acquiring ownership,
donation results in an eIIective transIer oI title over the property Irom the donor to the donee. In
donations oI immovable property, the law requires Ior its validity that it should be contained in a
public document, speciIying therein the property donated and the value oI the charges which the
donee must satisIy. The Civil Code provides, however, that 'titles oI ownership, or other rights
over immovable property, which are not duly inscribed or annotated in the Registry oI Property
shall not prejudice third persons. It is enough, between the parties to a donation oI an
immovable property, that the donation be made in a public document but, in order to bind third
persons, the donation must be registered in the registry oI Property.
A person dealing with registered land may thus saIely rely on the correctness oI the
certiIicate oI title issued thereIore, and he is not required to go beyond the certiIicate to
determine the condition oI the property but, where such party has knowledge oI a prior existing
interest which is unregistered at the time he acquired a right thereto, his knowledge oI that prior
unregistered interest would have the eIIect oI registration as regards to him. The appellate court
was not without substantial basis when it Iound petitioner to have had knowledge oI the donation
at the time it entered into the two agreements with Dr. Roque. During their negotiation,
petitioner, through its representatives, was apprised oI the Iact that the subject property actually
belonged to respondent.
Respondent is not guilty oI laches. Laches, in its real sense, is the Iailure or neglect, Ior
an unreasonable and unexplained length oI time, to do that which, by exercising due diligence,
could or should have been done earlier; it is negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party entitled to assert it either has abandoned
or declined to assert it.
Neither is respondent estopped Irom repudiating the contracts. The essential elements oI
estoppel in pais, in relation to the party sought to be estopped, are: 1) a clear conduct amounting
to Ialse representation or concealment oI material Iacts or, at least, calculated to convey the
impression that the Iacts are otherwise than, and inconsistent with, those which the party
subsequently attempts to assert; 2) an intent or, at least, an expectation, that this conduct shall
inIluence, or be acted upon by, the other party; and 3) the knowledge, actual or constructive, by
him oI the real Iacts. With respect to the party claiming the estoppel, the conditions he must
satisIy are: 1) lack oI knowledge or oI the means oI knowledge oI the truth as to the Iacts in
question; 2) reliance, in good Iaith, upon the conduct or statements oI the party to be estopped;
and 3) action or inaction based thereon oI such character as to change his position or status
calculated to cause him injury or prejudice. It has not been shown that respondent intended to
conceal the actual Iacts concerning the property; more importantly, petitioner has been shown
not to be totally unaware oI the real ownership oI the subject property.










Meatmasters International Corporation vs. Lelis Integrated Development Corporation, G.R. No.
163022, February 28, 2005

Facts:
On November 11, 1993, petitioner Meatmasters International Corporation engaged the
services oI respondent Lelis Integrated Development Corporation to undertake the construction
oI a slaughterhouse and meat cutting and packing plant. The Construction Agreement provided
that the construction oI petitioner`s slaughterhouse should be completed by March 10, 1994.
Respondent Iailed to Iinish the construction oI the said Iacility within the stipulated period,
hence, petitioner Iiled a complaint Ior rescission oI contract and damages on August 9, 1996
beIore the Regional Trial Court oI Pasig City, Branch 68.On November 23, 1998, the trial court
rendered decision rescinding the aIoresaid Construction Agreement.
A motion Ior reconsideration was Iiled by respondent on December 22, 1998, but the
same was denied. Upon appeal, the Court oI Appeals set aside the decision oI the trial court and
directed petitioner to pay respondent the amount oI P1, 863,081.53.

Issue:
Whether or not the Court oI Appeals erred in entertaining the appeal oI respondent
despite the Iinality oI the trial court`s decision.

eld:
Respondent`s contention that the petitioner is now estopped Irom raising the issue oI late
payment oI the docket Iee because oI his Iailure to assail promptly the trial court`s order
approving the notice oI appeal and accepting the appeal Iee, is untenable. Estoppel by laches
arises Irom the negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned or declined to assert it. In the
case at bar, petitioner raised at the Iirst instance the non-payment oI the docket Iee in its motion
Ior reconsideration beIore the trial court. Petitioner reiterated its objection in the motion to
dismiss beIore the appellate court and Iinally, in the instant petition. Plainly, petitioner cannot be
Iaulted Ior being remiss in asserting its rights considering that it vigorously registered a
persistent and consistent objection to the Court oI Appeals` assumption oI jurisdiction at all
stages oI the proceedings.
The Court recognizes that certain peculiar circumstances attendant in a case may warrant
the relaxation oI the strict application oI the rules on the payment oI docket Iees. Thus, in La
Salette College v. Pilotin, it held that the said rules may be qualiIied by the Iollowing: Iirst,
Iailure to pay those Iees within the reglementary period allows only discretionary, not automatic,
dismissal; second, such power should be used by the court in conjunction with its exercise oI
sound discretion in accordance with the tenets oI justice and Iair play, as well as with a great deal
oI circumspection in consideration oI all attendant circumstances. The pronouncements on the
matter are always inIluenced by the peculiar legal and equitable surroundings oI each case.
While the Rules oI Procedure must be IaithIully Iollowed, same Rules may be relaxed Ior
persuasive and weighty reasons to relieve a litigant oI an injustice commensurate with his Iailure
to comply with the prescribed procedure.
In the instant case, the respondent has not shown weighty and persuasive reasons to
compel us to exercise our discretion oI suspending the strict adherence to the Rules. Other than
its Ilimsy excuse that the procedural lapse was but a plain oversight, respondent has miserably
Iailed to proIIer a convincing justiIication Ior its procedural error.
Procedural rules are not to be belittled or dismissed simply because their non-observance
may have resulted in prejudice to a party`s substantive rights. Like all rules, they are required to
be Iollowed except only Ior the most persuasive oI reasons when they may be relaxed to relieve a
litigant oI an injustice not proportionate with the degree oI his thoughtlessness in not complying
with the procedure prescribed. UnIortunately, respondent Iailed to justiIy its late payment oI
docket Iees.







































MANIPOR vs. RICAFORT, G.R. No. 150159, July 25, 2003

Facts:
Respondent Spouses Pablo and Antonia RicaIort instituted an action Ior annulment oI
TransIer CertiIicate oI Title in the name oI the spouses Renato and Teresita Villareal
Respondents alleged that they are co-owners oI said property, together with Abelardo Villareal,
the Iather and predecessor oI therein deIendant Renato, as evidenced by an agreement whereby
Abelardo recognized their ownership oI one-halI portion oI the lot in question. Respondents
claimed that, in violation oI the agreement, Abelardo obtained during his liIetime an Original
CertiIicate oI Title over the lot without their knowledge and consent. AIter Abelardo died in
1993, Renato and his wiIe Teresita transIerred title over the land in their name.
In the course oI proceedings, the parties entered into a compromise settlement wherein
Renato and Teresita admitted the genuineness and due execution oI the agreement between
respondents and Abelardo, as well as the averments contained therein. ence, they agreed to
physically divide the lot in halI, with the back portion thereoI going to respondents. The parties
also agreed to cause a relocation survey to be conducted, the expenses oI which shall be borne
equally by them. Renato and Teresita Iurther bound themselves to pay respondents the amount oI
P40,000.00 as costs oI suit.
Not long thereaIter, respondents Iiled a motion|6| to cite Renato and Teresita in contempt
oI court Ior reIusing to comply with the terms oI the compromise agreement. BeIore the motion
was heard by the trial court, petitioners herein - Teresita Villareal Manipor, Lailanie Villareal
Macandog, Rodelo Villareal, Ely Villareal, Noelito Villareal and Luisito Villareal, Iiled a motion
Ior intervention and substitution oI parties,|7| alleging that Renato and Teresita have waived
their interest in the disputed lot in their Iavor. Petitioners are all siblings oI Renato and are his
co-heirs to the lot covered by title.
Later, upon realizing that the compromise judgment was already Iinal, petitioners Iiled a
maniIestation stating that they will be Iiling a petition Ior relieI Irom judgment instead. They
admitted that, with the exception oI their brother Luisito, who resides in the United States, more
than 60 days have already lapsed since the other Villareal siblings learned oI the compromise
judgment. owever, they alleged that Luisito learned oI the compromise judgment only much
later when the others "sought his consent" to the same on June 20, 2000. They maintained that
the Iiling oI a petition Ior relieI by Luisito was not yet time-barred.

Issue:
Whether or not the Court oI Appeals erred in attributing Iault on the part oI the
petitioners simply on the basis oI the denial oI their petition Ior relieI .

eld:
It appears that petitioners did not appeal Irom the Court oI Appeals resolutions denying
the Iirst petition Ior annulment oI compromise judgment and the subsequent motion Ior
reconsideration brought by petitioners as a result oI which the same became Iinal. Basic is the
rule that perIection oI an appeal in the manner and within the period prescribed by law is not
only mandatory but jurisdictional and Iailure to perIect an appeal has the eIIect oI rendering the
judgment or resolution Iinal and executory. ence, petitioners are precluded Irom resurrecting
any Issue relative to these resolutions aIter they have lapsed into Iinality by operation oI law.
Under Section 3 oI Rule 38,a petition Ior relieI must be Iiled within sixty (60) days aIter
the petitioner learns oI the judgment and within six months aIter entry thereoI. This six-month
period, as applied to a compromise judgment, runs Irom the date oI its rendition because a
judgment upon compromise is immediately executory and considered to have been entered on
the date it was approved by the trial court. The six-month period under Rule 38 presupposes that
the petitioner learned oI the judgment Irom which he seeks relieI also within the same time
Irame. Otherwise, a petition Ior relieI is not available and the only other remedy against such
judgment is an action Ior its annulment under Rule
Under the principle oI estoppel, an admission or representation is rendered conclusive
upon the person making it and cannot be denied or disproved as against the person relying
thereon. Verily, since petitioners themselves admitted that they donated and caused registration
oI the lot in Renato`s name, they cannot now be allowed to deIeat respondents` claim by
conveniently asserting that they are co-owners oI the lot. Otherwise, respondents, who rightIully
relied on the certiIicate oI title, would be prejudiced by petitioners` misleading conduct.
An indispensable party is deIined as one without whom no Iinal determination oI an
action can be had. Necessarily, an indispensable party is likewise a party in interest who stands
to be beneIited or injured by the judgment or is entitled to the avails oI the suit. In the instant
case, the non-inclusion oI petitioners as parties-deIendants will not aIIect the Iinal determination
because they are not the registered owners oI the lot. Moreover, it appears that they have ceded
their alleged rights to Renato and would thereIore have no rightIul interest, inchoate or
otherwise, that would be aIIected by the assailed compromise judgment.

























LARENA vs. MAPILI, G.R. No. 146341, August 7, 2003

Facts:
The record shows that ipolito Mapili during his liIetime owned a parcel oI unregistered
land .
ipolito Mapili died and was buried on July 14, 1934. e was survived by his only
son, Magno Mapili and daughters Julia, Azucena, Anatolia and Abundia. These daughters have
since died without Issue. Magno Mapili died in 1944 survived by his widow, Rosela Veneles,
and children Fructuosa, Jose, Generosa and Pantaleona.
On October 28, 1949, Filomena Larena executed an AIIidavit oI TransIer oI Real
Property involving the property, alleging that she bought the property Irom ipolito Mapili.
AIter the death oI Filomena, Aquila Larena, her niece took possession oI the property claiming
that she bought the same Irom her said aunt.
PlaintiIIs Fructuosa Mapili, Jose Mapili and Rosela Veneles are suing Aquila Larena, the
successor in interest oI Filomena .PlaintiIIs` complaint alleged that Filomena Larena Ialsely
stated in her AIIidavit oI TransIer oI Real Property that ipolito Mapili sold the property to her
on October 28, 1949 which ipolito Mapili could not have done because he was already dead at
that time .DeIendants` Answer contends that Filomena Larena lawIully acquired the said
property Irom ipolito Mapili in a private document oI sale which got lost during the last World
War. Filomena Larena then sold the property to deIendant Aquila Larena on February 17,
1968. DeIendant Aquila Larena attributed the statement in Filomena`s aIIidavit that she
purchased the land Irom ipolito Mapili on October 28, 1949 to a mistake committed by the one
who assisted her in executing said transIeror`s aIIidavit.`

Issue: Whether or not Larena acquired the subject property by means oI sale, prescription and/or
laches.

eld:
Prescription cannot be taken in petitioners Iavor because there is no evidence on record
that tacks on the property petitioner Aquila`s date oI possession. "Acquisitive prescription is a
mode oI acquiring ownership by a possessor through the requisite lapse oI time. In order to ripen
into ownership, possession must be en concepto de dueo, public, peaceIul and
uninterrupted."Coupled with the court a quo`s Iinding that the claims oI purchase were
unsubstantiated, petitioners` acts oI a possessory character - acts that might have been merely
tolerated by the owner - did not constitute possession. No matter how long tolerated possession
is continued, it does not start the running oI the prescriptive period.
Laches is likewise unavailing. DeIined, it is the "Iailure or neglect, Ior an unreasonable
and unexplained length oI time, to do that which could or should have been done earlier through
the exercise oI due diligence."It is an omission to assert a right within a reasonable time,
warranting a presumption that the party entitled thereto has either abandoned or declined to
assert it."
Assuming that petitioners took possession oI the property in the early 1970s, the Iiling by
respondents oI the Complaint in 1977 completely negates the assertion that the latter were
negligent in asserting their claim.


SANTOS vs. SANTOS, G.R. No. 133895, October 2, 2001

Facts:
Petitioner Zenaida M. Santos is the widow oI Salvador Santos, a brother oI private
respondents Calixto, Alberto, Antonio, all surnamed Santos and Rosa Santos-Carreon.
The spouses Jesus and Rosalia Santos owned a parcel oI land located at Sta. Cruz Manila.
On it was a Iour-door apartment administered by Rosalia who rented them out. The spouses had
Iive children, Salvador, Calixto, Alberto, Antonio and Rosa.
On January 19, 1959, Jesus and Rosalia executed a deed oI sale oI the properties in Iavor
oI their children Salvador and Rosa. Rosa in turn sold her share to Salvador . Despite the
transIer oI the property to Salvador, Rosalia continued to lease and receive rentals Irom the
apartment units.
On November 1, 1979, Jesus died. Six years aIter or on January 9, 1985, Salvador died,
Iollowed by Rosalia who died the Iollowing month. On January 5, 1989, private respondents
instituted an action Ior reconveyance oI property, where they alleged that the two deeds oI sale
executed on January 19, 1959 and November 20, 1973 were simulated Ior lack oI consideration.
They were executed to accommodate Salvador in generating Iunds Ior his business ventures and
providing him with greater business Ilexibility.
In her Answer, Zenaida denied the material allegations in the complaint and as special
and aIIirmative deIenses, argued that Salvador was the registered owner oI the property, which
could only be subjected to encumbrances or liens annotated on the title; that the respondents`
right to reconveyance was already barred by prescription and laches; and that the complaint
stated no cause oI action.

Issues:
Whether or not the lower courts erred in holding that the ownership over the litigated
property was aIIected by Iailure to exercise certain attributes oI ownership.
Whether or not the lower courts erred innot Iinding that the cause oI action had
prescribed and/or barred by laches.

eld :
The court noted that the buyer`s immediate possession and occupation oI the property
corroborated the truthIulness and authenticity oI the deed oI sale. Conversely, the vendor`s
continued possession oI the property makes dubious the contract oI sale between the parties.
As Iound by both the trial and appellate courts and amply supported by the evidence on
record, Salvador was never placed in control oI the property. The original sellers retained their
control and possession. ThereIore, there was no real transIer oI ownership.
The court also eld that the critical Iactor in the diIIerent modes oI eIIecting delivery,
which gives legal eIIect to the act is the actual intention oI the vendor to deliver, and its
acceptance by the vendee. Without that intention, there is no tradition.
On the second Issue,the court eld that the right to Iile an action Ior reconveyance on the
ground that the certiIicate oI title was obtained by means oI a Iictitious deed oI sale is virtually
an action Ior the declaration oI its nullity, which does not prescribe. The complaint Iiled by
respondents in the court a quo was Ior the reconveyance oI the subject property to the estate oI
Rosalia since the deeds oI sale were simulated and Iictitious. The complaint amounts to a
declaration oI nullity oI a void contract, which is imprescriptible. ence, respondents` cause oI
action has not prescribed.
Neither is their action barred by laches. The elements oI laches are:
1) conduct on the part oI the deIendant, or oI one under whom he claims, giving rise to the
situation oI which the complaint seeks a remedy;
2) delay in asserting the complainant`s rights, the complainant having had knowledge or
notice oI the deIendant`s conduct as having been aIIorded an opportunity to institute a
suit;
3) lack oI knowledge or notice on the part oI the deIendant that the complainant would
assert the right in which he bases his suit; and
4) injury or prejudice to the deIendant in the event relieI is accorded to the complainant, or
the suit is not eld barred.
These elements must all be proved positively. Neither petitioner nor her husband made
considerable investments on the property Irom the time it was allegedly transIerred to the latter.
They also did not enter into transactions involving the property since they did not claim
ownership oI it until December 1985. Petitioner stood to lose nothing. the concept oI laches is
not concerned with the lapse oI time but only with the eIIect oI unreasonable lapse. In this case,
the alleged 16 years oI respondents` inaction has no adverse eIIect on the petitioner to make
respondents guilty oI laches.




























VILLANUEVA-MIJARES vs. TE COURT OF APPEALS, G.R. No. 108921, April 12, 2000
Facts:
During his liIetime, Felipe some owned real property. e begot the Iollowing legitimate
children: Simplicio, Benito, Leon, Nicolasa, Eustaqio, Camila, Fausta, and Pedro.
Upon Felipe`s death, ownership oI the land was passed on to his children. In 1952, Pedro, one oI
the children oI Felipe got his share equivalent to one-sixth (1/6) oI the property The remaining
undivided portion oI the was held in trust by Leon Ior his co-heirs. During Leon`s liIetime, his
co-heirs made several seasonable and lawIul demands upon him to subdivide and partition the
property, but Ior one reason or another, no subdivision took place.
AIter the death oI Leon in August 1972, private respondents discovered that the shares oI
Iour oI the heirs oI Felipe, namely, Simplicio, Nicolasa, Fausta and Maria Baltazar, spouse oI
Benito, was purchased by Leon as evidenced by a Deed oI Sale executed on August 25, 1946 but
registered only in 1971. It also came to light that Leon had, sometime in July 1970, executed a
sale and partition oI the property in Iavor oI his own children, herein petitioners. By virtue oI
such Deed oI Partition, private respondents had succeeded in obtaining Original CertiIicate oI
Title (OCT) No. C-256. On April 25, 1975, petitioners managed to secure separate and
independent titles over their pro-indiviso shares in their respective names.
Private respondents then Iiled a case Ior partition with annulment oI documents and/or
reconveyance and damages.
Petitioners, Ior their part, claimed that the sale by Simplicio, Fausta, Nicolasa, and Maria
Baltazar was a valid sale; that prescription had set in since they had been in possession oI the
property in the concept oI owners thereoI since August 29, 1946, up to the present; and that
private respondents were estopped since no trust relationship existed between the litigants.

Issue:
Whether or not the private respondents are not barred by laches, estoppel in pais, and res
judicata.

eld:
Petitioners contend that the action oI the private respondents was already barred by
laches. They argue that private respondents Iiled their action more than twenty-nine (29) years
too late.
Laches is negligence or omission to assert a right within a reasonable time, warranting
the presumption that the party entitled to assert it has either abandoned or declined to assert it. Its
essential elements are: (1) conduct on the part oI the deIendant, or oI one under whom he claims,
giving rise to the situation complained oI; (2) delay in asserting complainant`s right aIter he had
knowledge oI the deIendant`s conduct and aIter he has an opportunity to sue; (3) lack oI
knowledge or notice on the part oI the deIendant that the complainant would assert the right on
which he bases his suit; and (4) injury or prejudice to the deIendant in the event relieI is accorded
to the complainant.
The court said there is no absolute rule on what constitutes laches. It is a creation oI
equity and applied not really to penalize neglect or sleeping upon one`s rights but rather to avoid
recognizing a right when to do so would result in a clearly inequitable situation. The question oI
laches, is addressed to the sound discretion oI the court and each case must be decided according
to its particular circumstances.
At the time oI signing oI the Deed oI Sale oI August 26, 1948, private respondents
ProcerIina, Prosperidad, Ramon and Rosa were minors. They could not be Iaulted Ior their
Iailure to Iile a case to recover their inheritance. They did not sleep on their rights, contrary to
petitioners` assertion. The action was not too late.
Neither is the action barred by prescription. The court held that an action Ior
reconveyance oI a parcel oI land based on implied or constructive trust prescribes in 10 years,
the point oI reIerence being the date oI registration oI the deed or the date oI the issuance oI the
certiIicate oI title oI the property. ere the questioned Deed oI Sale was registered only in 1971.
Private respondents Iiled their complaint in 1975, hence well within the prescriptive period.



















































































TOLENTINO vs. TE SECRETAR OF FINANCE and TE COMMISSIONER OF
INTERNAL REVENUE, 235 SCRA 630


Facts:
The valued-added tax (VAT) is levied on the sale, barter or exchange oI goods and
properties as well as on the sale or exchange oI services. It is equivalent to 10 oI the gross
selling price or gross value in money oI goods or properties sold, bartered or exchanged or oI the
gross receipts Irom the sale or exchange oI services. Republic Act No. 7716 seeks to widen the
tax base oI the existing VAT system and enhance its administration by amending the National
Internal Revenue Code. These are various suits Ior certiorari and prohibition, challenging the
constitutionality oI Republic Act No. 7716.

Issue:
Whether or not the republic act violates the constitutional protection Ior non-impairment
oI contracts.

eld:
Only slightly less abstract but nonetheless hypothetical is the contention oI CREBA that
the imposition oI the VAT on the sales and leases oI real estate by virtue oI contracts entered into
prior to the eIIectivity oI the law would violate the constitutional provision that "No law
impairing the obligation oI contracts shall be passed." It is enough to say that the parties to a
contract cannot, through the exercise oI prophetic discernment, Ietter the exercise oI the taxing
power oI the State. For not only are existing laws read into contracts in order to Iix obligations as
between parties, but the reservation oI essential attributes oI sovereign power is also read into
contracts as a basic postulate oI the legal order. The policy oI protecting contracts against
impairment presupposes the maintenance oI a government that retains adequate authority to
secure the peace and good order oI society.
In truth, the Contract Clause has never been thought as a limitation on the exercise oI the
State's power oI taxation save only where a tax exemption has been granted Ior a valid
consideration. Rather, its position, is that the removal oI its tax exemption cannot be made by a
general, but only by a speciIic, law.
That, in view oI the absence oI a Iactual Ioundation oI record, claims that the law is
regressive, oppressive and conIiscatory and that it violates vested rights protected under the
Contract Clause are prematurely raised and do not justiIy the grant oI prospective relieI by writ
oI prohibition.










Duncan v. Galaxo, 438 S 343

FACTS:
Petitioner Pedro Tecson ("Tecson") was employed in 1995 by respondent Glaxo
Wellcome Philippines, Inc. ("Glaxo") as a medical representative. e was assigned to market
Glaxo's products in the Camarines Sur-Camarines Norte sales area. Upon his employment,
Tecson signed an employment contract, wherein he agreed, among others, to study and abide by
existing company rules; to disclose to management any existing or Iuture relationship by
consanguinity or aIIinity with co-employees or employees oI competing drug companies; and iI
management Iound that such relationship posed a possible conIlict oI interest, to resign Irom the
company. Nonetheless, Tecson became romantically involved with Bettsy, an employee oI a
rival pharmaceutical Iirm Astra Pharmaceuticals ("Astra"). The two eventually married in
September oI 1998. The relationship, including the subsequent marriage, was cause Ior
consternation to Glaxo. On January 1999, Tecson's superiors inIormed him that his marriage to
Bettsy had given rise to a conIlict oI interest. Negotiations ensued, with Tecson adverting to his
wiIe's possible resignation Irom Astra, and Glaxo making it known that they preIerred to retain
his services owing to his good perIormance. et no resolution came to pass. In September 1999,
Tecson applied Ior a transIer to Glaxo's milk division, but his application was denied in view oI
Glaxo's "least-movement-possible" policy. Then in November 1999, Glaxo transIerred Tecson to
the Butuan City-Surigao City-Agusan del Sur sales area. Tecson asked Glaxo to reconsider its
decision, but his request was denied. The matter was then brought to the Glaxo Grievance
Committee, and subsequently to a voluntary arbitrator. On 15 November 2000, the National
Conciliation and Mediation Board (NCMB) rendered its Decision declaring as valid Glaxo's
policy on relationships between its employees and persons employed with competitor companies,
and aIIirming Glaxo's right to transIer Tecson to another sales territory.

ISSUE:
Whether or not the trial court erred in upholding Glaxo`s policy on marriage oI its
employees is contrary to public policy, morals and customs
Ruling:
Tecson was not relieved oI his employment with Glaxo. Neither was he transIerred to a
diIIerent position oI lower rank or remuneration. The alleged constructive dismissal pertained to
his transIer to Butuan Irom Naga City, a reassignment that would Iall within the ambit oI
management's prerogative to transIer employees. The Iact that the employee may be displaced
Irom established roots by reason oI the transIer is not suIIicient to deny the valid management
prerogative to transIer its employees. Tecson himselI had acknowledged this prerogative when
he signed the contract oI employment which expressly agreed "to be assigned any work or work
station Ior such periods as may be determined by the company and whenever the operations
require such assignment." May an employer impose conditions, restrictions or consequences on
an employee by reason oI the latter's choice to marry or choice oI spouse? The answer would
really all depend on the particular circumstances in each case. II the prohibitions or restrictions
are contained in a private employment policy or contract, the norms that would govern their
review are such as those contained in the Labor Code, and to an extent, the "public policy"
clauses oI the Civil Code. iI the restrictions or conditions on the employee's right to marry bear
no relevance to any interests that the employer should be concerned with, then they should be
voided iI they are oI obligatory import. II the prohibition or restriction pertains to the choice oI
spouse, rather than the choice to marry at all, there should be an examination oI the rationale
behind the constraint. Again, iI the restrictions or conditions bear no relevance to any interests
that the employer should be concerned with, then they should not be upheld. Restrictions that are
nothing more than the enIorcement oI personal biases, such as prohibitions on marrying
members oI a particular race or ethnic group, may be struck down. II the rationale in question
relates to a consideration so vital to the interests oI the employer as to warrant legal protection, it
should then be determined whether the means employed by the employer are reasonable enough
as to allow a measure oI balance between these key interests oI the employer and the
Iundamental right oI the employee to marry.


































Star Paper Corporation V. Simbol, 487 S 228

FACTS:
Petitioner Star Paper Corporation (the company) is a corporation engaged in trading
principally oI paper products. Josephine Ongsitco is its Manager oI the Personnel and
Administration Department while Sebastian Chua is its Managing Director.
Ronaldo D. Simbol (Simbol), WilIreda N. Comia (Comia) and Lorna E. Estrella (Estrella) were
all regular employees oI the company. Simbol was employed by the company on October 27,
1993. e met Alma Dayrit, also an employee oI the company, whom he married on June 27,
1998. Prior to the marriage, Ongsitco advised the couple that should they decide to get married,
one oI them should resign pursuant to a company policy promulgated in 1995. Simbol resigned
on June 20, 1998 pursuant to the company policy. Comia was hired by the company on February
5, 1997. She met oward Comia, a co-employee, whom she married on June 1, 2000. Ongsitco
likewise reminded them that pursuant to company policy, one must resign should they decide to
get married. Comia resigned on June 30, 2000. Estrella was hired on July 29, 1994. She met
Luisito Zuiga (Zuiga), also a co-worker. Petitioners stated that Zuiga, a married man, got
Estrella pregnant. The company allegedly could have terminated her services due to immorality
but she opted to resign on December 21, 1999. The respondents each signed a Release and
ConIirmation Agreement. They stated therein that they have no money and property
accountabilities in the company and that they release the latter oI any claim or demand oI
whatever nature. Respondents oIIer a diIIerent version oI their dismissal. Simbol and Comia
allege that they did not resign voluntarily; they were compelled to resign in view oI an illegal
company policy. As to respondent Estrella, she alleges that she had a relationship with co-worker
Zuiga who misrepresented himselI as a married but separated man. AIter he got her pregnant,
she discovered that he was not separated. Thus, she severed her relationship with him to avoid
dismissal due to the company policy. On November 30, 1999, she met an accident and was
advised by the doctor at the Orthopedic ospital to recuperate Ior twenty-one (21) days. She
returned to work on December 21, 1999 but she Iound out that her name was on-hold at the gate.
She was denied entry. She was directed to proceed to the personnel oIIice where one oI the staII
handed her a memorandum. The memorandum stated that she was being dismissed Ior immoral
conduct. She reIused to sign the memorandum because she was on leave Ior twenty-one (21)
days and has not been given a chance to explain. The management asked her to write an
explanation. owever, aIter submission oI the explanation, she was nonetheless dismissed by the
company. Due to her urgent need Ior money, she later submitted a letter oI resignation in
exchange Ior her thirteenth month pay.

ISSUE: Whether or not the trial court erred in upholding policy oI the employer banning spouses
Irom working in the same company and that such is a managemnt prerogative

Ruling: It is true that the policy oI petitioners prohibiting close relatives Irom working in the
same company takes the nature oI an anti-nepotism employment policy. Companies adopt these
policies to prevent the hiring oI unqualiIied persons based on their status as a relative, rather than
upon their ability. It is signiIicant to note that in the case at bar, respondents were hired aIter they
were Iound Iit Ior the job, but were asked to resign when they married a co-employee. Petitioners
Iailed to show how the marriage oI Simbol, then a Sheeting Machine Operator, to Alma Dayrit,
then an employee oI the Repacking Section, could be detrimental to its business operations.
Neither did petitioners explain how this detriment will happen in the case oI WilIreda Comia,
then a Production elper in the Selecting Department, who married oward Comia, then a
helper in the cutter-machine. The policy is premised on the mere Iear that employees married to
each other will be less eIIicient. II we uphold the questioned rule without valid justiIication, the
employer can create policies based on an unproven presumption oI a perceived danger at the
expense oI an employee`s right to security oI tenure.








































Avon Cosmetics v. Luna, 511 S 376
FACTS:
Luna began working Ior BeautiIont, Inc. in 1972, Iirst as a Iranchise dealer and then a
year later, as a Supervisor.Sometime in 1978, Avon Cosmetics, Inc. (Avon), herein petitioner,
acquired and took over the management and operations oI BeautiIont, Inc. Nonetheless,
respondent Luna continued working Ior said successor company. Aside Irom her work as a
supervisor, respondent Luna also acted as a make-up artist oI petitioner Avon`s Theatrical
Promotion`s Group, Ior which she received a per diem Ior each theatrical perIormance. On 5
November 1985, petitioner Avon and respondent Luna entered into an agreement, stipulating the
Iollowing: 1) The Company agrees: To allow the Supervisor to purchase at wholesale the
products oI the Company and The Supervisor agrees:
1) To purchase products Irom the Company exclusively Ior resale and to be responsible Ior
obtaining all permits and licenses required to sell the products on retail.
The Company and the Supervisor mutually agree: 2) That this agreement in no way
makes the Supervisor an employee or agent oI the Company, thereIore, the Supervisor
has no authority to bind the Company in any contracts with other parties.3) That the
Supervisor is an independent retailer/dealer insoIar as the Company is concerned, and
shall have the sole discretion to determine where and how products purchased Irom the
Company will be sold. owever, the Supervisor shall not sell such products to stores,
supermarkets or to any entity or person who sells things at a Iixed place oI business.4)
That this agreement supersedes any agreement/s between the Company and the
Supervisor.5) That the Supervisor shall sell or oIIer to sell, display or promote only and
exclusively products sold by the Company.6) Either party may terminate this agreement
at will, with or without cause, at any time upon notice to the other. By virtue oI the
execution oI the aIorequoted Supervisor`s Agreement, respondent Luna became part oI
the independent sales Iorce oI petitioner Avon. Sometime in the latter part oI 1988,
respondent Luna was invited by a Iormer Avon employee who was then currently a Sales
Manager oI Sandre Philippines, Inc., engaged in direct selling oI vitamins and other Iood
supplements, to sell said products. Luna apparently accepted the invitation as she then
became a Group Franchise Director oI Sandre Philippines, Inc. concurrently with being a
Group Supervisor oI petitioner Avon. As Group Franchise Director, respondent Luna
began selling and/or promoting Sandre products to other Avon employees and Iriends.
On 23 September 1988, she requested a law Iirm to render a legal opinion as to the legal
consequence oI the Supervisor`s Agreement she executed with petitioner Avon. In
response to her query, a lawyer oI the Iirm opined that the Supervisor`s Agreement was
'contrary to law and public policy.
2) As a result, Avon terminated and cancelled its supervisors agreement with Luna.
ISSUE: Whether or not the court erred in declaring that the supervisor`s agreement executed
between the parties as null and void and that avon had no right to cancel the contract
Ruling: Restrictions upon trade may be upheld when not contrary to public welIare and not
greater than is necessary to aIIord a Iair and reasonable protection to the party in whose Iavor it
is imposed. Even contracts which prohibit an employee Irom engaging in business in competition
with the employer are not necessarily void Ior being in restraint oI trade. Contracts requiring
exclusivity are not per se void. When is a restraint in trade unreasonable? Authorities are one in
declaring that a restraint in trade is unreasonable when it is contrary to public policy or public
welIare. Only those arrangements whose probable eIIect is to Ioreclose competition in a
substantial share oI the line oI commerce aIIected can be considered as void Ior being against
public policy. It has been argued that the Supervisor`s Agreement is in the nature oI a contract oI
adhesion; but just because it is does not necessarily mean that it is void. In the case at bar, there
was no indication that respondent Luna was Iorced to sign the subject agreement. Being oI age,
Iinancially stable and with vast business experience, she is presumed to have acted with due care
and to have signed the assailed contract with Iull knowledge oI its import. Under the premises, it
would be diIIicult to assume that she was morally abused. She was Iree to reject the agreement iI
she wanted to. Accordingly, a contract duly executed is the law between the parties, and they are
obliged to comply Iully and not selectively with its terms.






















Del Castillo V. Richmond, 45 P 679

FACTS:
Del Castillo and Richmond entered into a contract oI services which was reduced into writng
and signed by the parties. Among the stipulations was, AlIonso del Castillo also agrees not
to open, nor own nor have any interest directly or indirectly in any other drugstore either in
his own name or in the name oI another; nor have any connection with or be employed by
any other drugstore situated within a radius oI our miles Irom the district oI Legaspi,
municipality and Province oI Albay, while the said Shannon Richmond or his heirs may own
or have open a drugstore, or have an interest in any other one within the limits oI the districts
oI Legaspi, Albay, and Daraga oI the municipality oI Albay, Province oI Albay.
ISSUE:
Whether or not the trial court erred in upholding such policy oI the employer
Ruling:
Considering the nature oI the business in which the deIendant is engaged, in relation with
the limitation placed upon the plaintiII both as to time and place, we are oI the opinion, and so
decide, that such limitation is legal and reasonable and not contrary to public policy. OI course in
establishing whether the contract is a reasonable or unreasonable one, the nature oI the business
must also be considered. What would be a reasonable restriction as to time and place upon the
manuIacture oI railway locomotive engines might be a very unreasonable restriction when
imposed upon the employment oI a day laborer.




















ARWOOD INDUSTRIES, INC vs. D.M. CONSUNJI, INC, 394 SCRA 11

Facts:
Petitioner and respondent, as owner and contractor, respectively, entered into a Civil,
Structural and Architectural Works Agreement
3
(Agreement) dated February 6, 1989 Ior the
construction oI petitioner's condominium The contract price Ior the condominium project
aggregated P20,800,000.00.
Despite the completion oI the condominium project, the amount oI P962,434.78 remained
unpaid by petitioner. Repeated demands by respondent Ior petitioner to pay went unheeded.
Thus, on August 13, 1993, respondent Iiled its complaint Ior the recovery oI the balance
oI the contract price and Ior damages against petitioner.AIter trial, the court resolved to grant the
relieI prayed Ior by respondent.
Petitioner appealed to the Court oI Appeals, particularly opposing the Iinding oI the trial court
with regard to the imposition oI the monetary interest oI 2 per month on the adjudicated
amount.
The Court oI Appeals upeld the trial court despite. Respondent court Iound basis in
Article 6.03 oI the Agreement concerning the imposition oI the 2 interest, which reads:
"payment shall be made by the owner to the contractor within IiIteen (15) calendar days aIter
receipt oI the construction manager's certiIicate. in the event owner delays the payments (i.e.
beyond the stipulated time) to the contractor oI monthly progress billings, the contractor shall
have the option to either suspend the works on the project until such payments have been
remitted by the owner or continue the work but the owner shall be required to pay the interest at
a rate oI two (2) percent per month or the Iraction thereoI in days oI the amount due Ior
payment by the owner. the same interest shall be added to the billing oI the Iollowing month.

Issue:
Whether or not the imposition oI 2 monthly interest is proper.

eld:
Petitioner's stance hardly deserves the Court's attention.
The Agreement or the contract between the parties is the Iormal expression oI the parties`
rights, duties and obligations. It is the best evidence oI the intention oI the parties. Thus, "when
the terms oI an agreement have been reduced to writing, it is considered as containing all the
terms agreed upon and there can be, between the parties and their successors in interest, no
evidence oI such terms other than the contents oI the written agreement."
11

Since the Agreement stands as the law between the parties,
13
this Court cannot ignore the
existence oI such provision providing Ior a penalty Ior every month`s delay. Facta legem Iacunt
inter partes. Neither can petitioner impugn the Agreement to which it willingly gave its consent.
From the moment petitioner gave its consent, it was bound not only to IulIill what was expressly
stipulated in the Agreement but also all the consequences which, according to their nature, may
be in keeping with good Iaith, usage and law.
15
Petitioner`s attempt to mitigate its liability to
respondent should thus Iail.




PASCUAL vs. RAMOS, 384 SCRA 105

Facts:
The case at bar stemmed Irom the petition Ior consolidation oI title or ownership Iiled on
5 July 1993 with the trial court by herein respondent Rodrigo V. Ramos against herein
petitioners, Spouses Silvestre and Celia Pascual . In his petition, Ramos alleged that on 3 June
1987, Ior and in consideration oI P150,000, the Pascual executed in his Iavor a Deed oI Absolute
Sale with Right to Repurchase over two parcels oI land. This document was annotated at the
back oI the title. The PASCUALs did not exercise their right to repurchase the property within
the stipulated one-year period; hence, Ramos prayed that the title or ownership over the subject
parcels oI land and improvements thereon be consolidated in his Iavor.
In their Answer, the PASCUALs admitted having signed the Deed oI Absolute Sale with
Right to Repurchase Ior a consideration oI P150,000 but averred that what the parties had
actually agreed upon and entered into was a real estate mortgage.
Among the documents oIIered in evidence by Ramos during the trial on the merits was a
document denominated as Sinumpaang Salaysay signed by amos and Silvestre Pascual, but not
notarized. For their part, the PASCUALs presented documentary evidence consisting oI
acknowledgment receipts to prove the payments they had made.
RAMOS moved Ior the reconsideration oI the decision, alleging that the trial court erred
in using an interest rate oI 7 per annum in the computation oI the total amount oI obligation
because what was expressly stipulated in the Sinumpaang Salaysay was 7 per month. The total
interest due Irom 3 June 1987 to 3 April 1995 was P987,000. Deducting thereIrom the interest
payments made in the sum oI P344,000, the amount oI P643,000 was still due as interest.
Adding the latter to the principal sum oI P150,000, the total amount due Irom the PASCUALs
as oI 3 April 1995 was P793,000.
The trial court issued on 5 June 1995 an Ordering the to pay RAMOS P511,000
representing the principal loan plus interest. The trial court acknowledged that it had
inadvertently declared the interest rate to be 7 per annum when, in Iact, the Sinumpaang
Salaysay stipulated 7 per month. owever, the court declared that the 7 per month interest is
too burdensome and onerous. Invoking the protective mantle oI Article 24 oI the Civil Code,
which mandates the courts to be vigilant Ior the protection oI a party at a disadvantage due to his
moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the trial
court unilaterally reduced the interest rate Irom 7 per month to 5 per month.

Issue:
Whether or not the contract entered into by the parties is susceptible to judicial
interIerence.

Ruling:
It is a basic principle in civil law that parties are bound by the stipulations in the contracts
voluntarily entered into by them. Parties are Iree to stipulate terms and conditions which they
deem convenient provided they are not contrary to law, morals, good customs, public order, or
public policy.
The interest rate oI 7 per month was voluntarily agreed upon by Ramos and the
Pascuals. There is nothing Irom the records and, in Iact, there is no allegation showing that
petitioners were victims oI Iraud when they entered into the agreement with Ramos. Neither is
there a showing that in their contractual relations with Ramos, the Pascuals were at a
disadvantage on account oI their moral dependence, ignorance, mental weakness, tender age or
other handicap, which would entitle them to the vigilant protection oI the courts as mandated by
Article 24 oI the Civil Code
All men are presumed to be sane and normal and subject to be moved by substantially the
same motives. When oI age and sane, they must take care oI themselves. In their relations with
others in the business oI liIe, wits, sense, intelligence, training, ability and judgment meet and
clash and contest, sometimes with gain and advantage to all, sometimes to a Iew only, with loss
and injury to others. In these contests men must depend upon themselves upon their own
abilities, talents, training, sense, acumen, judgment. The Iact that one may be worsted by
another, oI itselI, Iurnishes no cause oI complaint. One man cannot complain because another is
more able, or better trained, or has better sense or judgment than he has; and when the two meet
on a Iair Iield the inIerior cannot murmur iI the battle goes against him. The law Iurnishes no
protection to the inIerior simply because he is inIerior, any more than it protects the strong
because he is strong. The law Iurnishes protection to both alike to one no more or less than to
the other. It makes no distinction between the wise and the Ioolish, the great and the small, the
strong and the weak. The Ioolish may lose all they have to the wise; but that does not mean that
the law will give it back to them again. Courts cannot Iollow one every step oI his liIe and
extricate him Irom bad bargains, protect him Irom unwise investments, relieve him Irom one-
sided contracts, or annul the eIIects oI Ioolish acts. Courts cannot constitute themselves
guardians oI persons who are not legally incompetent. Courts operate not because one person
has been deIeated or overcome by another, but because he has been deIeated or overcome
illegally. Men may do Ioolish things, make ridiculous contracts, use miserable judgment, and
lose money by then indeed, all they have in the world; but not Ior that alone can the law
intervene and restore. There must be, in addition, a violation oI law, the commission oI what the
law knows as an actionable wrong, beIore the courts are authorized to lay hold oI the situation
and remedy it.
It is not the province oI the court to alter a contract by construction or to make a new
contract Ior the parties; its duty is conIined to the interpretation oI the one which they have made
Ior themselves without regard to its wisdom or Iolly as the court cannot supply material
stipulations or read into the contract words which it does not contain.






























































EMEDES vs. COURT OF APPEALS, G.R. No. 107132, October 8, 1999

Facts:
The instant controversy involves a question oI ownership over an unregistered parcel oI
land, identiIied. It was originally owned by the late Jose emedes, Iather oI Maxima emedes
and Enrique D. emedes. On March 22, 1947 Jose emedes executed a document entitled
"Donation Inter Vivos With Resolutory Conditions"whereby he conveyed ownership over the
subject land, together with all its improvements, in Iavor oI his third wiIe, Justa Kauapin, subject
to the Iollowing resolutory conditions:
(a) Upon the death or remarriage oI the DONEE, the title to the property donated shall
revert to any oI the children, or their heirs, oI the DONOR expressly designated by the
DONEE in a public document conveying the property to the latter; or
(b) In absence oI such an express designation made by the DONEE beIore her death or
remarriage contained in a public instrument as above provided, the title to the property
shall automatically revert to the legal heirs oI the DONOR in common.
Pursuant to the Iirst condition abovementioned, Justa Kausapin executed a document
conveying to Maxima emedes the subject property .
It is claimed by R & B Insurance that on June 2, 1964, Maxima emedes and her
husband Raul Rodriguez constituted a real estate mortgage over the subject property in its Iavor
to serve as security Ior a loan which they obtained in the amount oI P6,000.00. On February 22,
1968, R & B Insurance extrajudicially Ioreclosed the mortgage since Maxima emedes Iailed to
pay the loan even aIter it became due on August 2, 1964. The land was sold at a public auction
on May 3, 1968 with R & B Insurance as the highest bidder and a certiIicate oI sale was Issued
by the sheriII in its Iavor.
Despite the earlier conveyance oI the subject land in Iavor oI Maxima emedes, Justa
Kausapin executed a "Kasunduan" on May 27, 1971 whereby she transIerred the same land to
her stepson Enrique D. emedes, pursuant to the resolutory condition in the deed oI donation
executed in her Iavor by her late husband Jose emedes.
On February 28, 1979, Enriques D. emedes sold the property to Dominium Realty and
Construction Corporation (Dominium). On April 10, 1981, Justa Kausapin executed an aIIidavit
aIIirming the conveyance oI the subject property in Iavor oI Enrique D. emedes as embodied in
the "Kasunduan" dated May 27, 1971, and at the same time denying the conveyance made to
Maxima emedes.

Issue:
Which oI the two conveyances is valid and binding.

Ruling:
A contract where consent is given through mistake, violence, intimidation, undue
inIluence, or Iraud is voidable.
owever it has been eld by this Court that "... mere preponderance oI evidence is not
suIIicient to overthrow a certiIicate oI a notary public to the eIIect that the grantor executed a
certain document and acknowledged the Iact oI its execution beIore him. To accomplish this
result, the evidence must be so clear, strong and convincing as to exclude all reasonable
controversy as to the Ialsity oI the certiIicate, and when the evidence is conIlicting, the certiIicate
will be upeld.". In the present case, the court eld that private respondents have Iailed to
produce clear, strong, and convincing evidence to overcome the positive value oI the "Deed oI
Conveyance oI Unregistered Real Property by Reversion" - a notarized document. The mere
denial oI its execution by the donor will not suIIice Ior the purpose.
In upholding the deed oI conveyance in Iavor oI Maxima emedes, the court also rules
that Enrique D. emedes and his transIeree, Dominium, did not acquire any rights over the
subject property. Justa Kausapin sought to transIer to her stepson exactly what she had earlier
transIerred to Maxima emedes - the ownership oI the subject property.
The declarations oI real property by Enrique D. emedes, his payment oI realty taxes, and his
being designated as owner oI the subject property in the cadastral survey and in the records oI
the Ministry oI Agrarian ReIorm cannot deIeat a certiIicate oI title, which is an absolute and
indeIeasible evidence oI ownership oI the property in Iavor oI the person whose name appears
therein.















































































Villegas v. CA, 499 S 276
FACTS:
This case originated Irom a libel suit Iiled by then Assemblyman Antonio V. Raquiza
against then Manila Mayor Antonio J. Villegas, who allegedly publicly imputed to him acts
constituting violations oI the Anti-GraIt and Corrupt Practices Act. e did this on several
occasions in August 1968 through (a) a speech beIore the Lion's Club oI Malasiqui, Pangasinan
on August 10; (b) public statements in Manila on August 13 and in Davao on August 17, which
was coupled with a radio-TV interview; and (c) a public statement shortly prior to his appearance
beIore the Senate Committee on Public Works (the Committee) on August 20 to Iormally submit
a letter-complaint implicating Raquiza, among other government oIIicials. The Committee,
however, observed that all the allegations in the complaint were based mainly on the
uncorroborated testimony oI a certain Pedro U. Fernandez, whose credibility turned out to be
highly questionable. Villegas also Iailed to submit the original copies oI his documentary
evidence. Thus, aIter thorough investigation, Raquiza was cleared oI all charges by the
Committee. AIter losing in the 1971 elections, Villegas leIt Ior the United States where he stayed
until his death on November 16, 1984. Nevertheless, trial proceeded in absentia; by the time oI
his death in 1984, the prosecution had already rested its case. Two months aIter notice oI his
death, the court issued an order dismissing the criminal aspect oI the case but reserving the right
to resolve its civil aspect. No memorandum was ever Iiled in his behalI. the trial court rendered
its decision, reiterating the criminal case against Villegas, ordering his estate to pay Raquiza
damages. The heirs oI Villegas appealed the decision Ior three grounds: Whether the trial court,
three months aIter notice oI the death oI the accused and beIore his counsel could Iile a
memorandum in his behalI, could validly render judgment in the case, Whether, in the absence oI
Iormal substitution oI parties, the trial court could validly render judgment against the heirs and
estate oI a deceased accused and Whether, under the Iacts oI the instant case, deceased Villegas
was liable Ior libel, and assuming he was, whether the damages awarded by the trial court were
just and reasonable

ISSUE:
Whether or not the trial court erred in rendering judgment aIter notice oI the death oI the
accused

ELD:
The source oI Villegas' civil liability in the present case is the Ielonious act oI libel he
allegedly committed. et, this act could also be deemed a quasi-delict within the purview oI
Article 33 in relation to Article 1157 oI the Civil Code. logically, the court a quo should have
dismissed both actions against Villegas which dismissal will not, however, bar Raquiza as the
private oIIended party Irom pursuing his claim Ior damages against the executor or administrator
oI the Iormer's estate, notwithstanding the Iact that he did not reserve the right to institute a
separate civil action based on Article 33 oI the Civil Code.
Petition is denied and Raquiza may still Iile a separate action Ior damages.





Equatorial Realty V. Carmelo, 264 S 483
FACTS:
Carmelo & Bauermann Inc. (Carmelo) owned a parcel oI land, together with two 2-storey
buildings constructed thereon located at Claro M Recto Avenue, Manila (TCT 18529, Register oI
Deeds oI Manila). On 1 June 1967, Carmelo entered into a contract oI lease with MayIair
Theater Ior the latter`s lease oI a portion oI Carmelo`s property. , i.e. a portion oI the 2/F oI the
two-storey building with Iloor area oI 1610 sq.ms. and the second Iloor and mezzanine oI the
two-storey building situated at CM Recto Avenue, Manila with a Iloor area oI 150 sq.ms. Ior use
by MayIair as a motion picture theater and Ior a term oI 20 years. MayIair thereaIter constructed
on the leased property a movie house known as Maxim Theatre. On 31 March 1969, MayIair
entered into a second contract oI lease with Carmelo Ior the lease oI another portion oI
Carmelo`s property, i.e. a portion oI the 2/F oI the two-storey building with Iloor area oI 1064
sq.ms. and two store spaces at the ground Iloor and mezzanine oI the two-storey building
situated at CM Recto Avenue, Manila with a Iloor area oI 300 sq.ms. and bearing street numbers
1871 and 1875 Ior similar use as a movie theater and Ior a similar term oI 20 years. MayIair put
up another movie house known as Miramar Theatre` on this leased property. Both contracts oI
lease provide identically worded paragraph 8, which reads 'That iI the LESSOR should desire to
sell the leased premises, the lessee shall be given 30-days exclusive option to purchase the same.
Sometime in August 1974, Mr. enry Pascal oI Carmelo inIormed Mr. enry ang, President oI
MayIair, through a telephone conversation that Carmelo was desirous oI selling the entire Claro
M. Recto property. Mr. Pascal told Mr. ang that a certain Jose Araneta was oIIering to buy the
whole property Ior US$1,200,000, and Mr. Pascal asked Mr. ang iI the latter was willing to buy
the property Ior P6 million to P7 million. Mr. ang replied that he would let Mr. Pascal know oI
his decision. On 23 August 1974, MayIair replied through a letter conIirming the correspondence
between Pascual and ang and reiterating paragraph 8 oI the two contracts oI lease. Carmelo did
no reply to this letter. On 18 September 1974, MayIair sent another letter to Carmelo purporting
to express interest in acquiring not only the leased premises but the entire building and other
improvements iI the price is reasonable. owever, both Carmelo and Equatorial questioned the
authenticity oI the second letter. Four years later, on 30 July 1978, Carmelo sold its entire CM.
Recto Avenue land and building, which included the leased premises housing the Maxim` and
Miramar` theatres, to Equatorial by virtue oI a Deed oI Absolute Sale, Ior the total sum oI
P1,300,000. In September 1978, MayIair instituted the action Ior speciIic perIormance and
annulment oI the sale oI the leased premises to Equatorial. AIter assessing the evidence, the
court rendered decision dismissing the complaint with costs against MayIair. On appeal, the
appellate court reversed the trial court and rendered judgment reversing and setting aside the
appealed Decision; directing MayIair to pay and return to Equatorial the amount oI
P11,300,000.00.
ISSUE: Whether or not the trial court declaring the absolute deed oI sale between Equatorial and
MayIair deemed rescinded
Ruling: The contractual stipulation (Paragraph 8) provides Ior a right oI Iirst reIusal in Iavor oI
MayIair. It is not an option clause or an option contact. It is a contract oI a right oI Iirst reIusal.
The true nature oI the paragraph 8 is ascertained to be that oI a contractual grant oI the right oI
Iirst reIusal to MayIair. To rule that a contractual stipulation such as that Iound in paragraph 8 oI
the contracts is governed by Article 1324 on withdrawal oI the oIIer on Article 1479 on promise
to buy and sell would render ineIIectual or 'inutile the provisions on right oI Iirst reIusal so
commonly inserted in leases oI real estate nowadays. Paragraph 8 was incorporated into the
contracts oI lease Ior the beneIit oI MayIair which wanted to be assured that it shall be given the
Iirst crack. MayIair is in eIIect stating that it consents to lease the premises and to pay the price
agreed upon provided the lessor also consents that, should it sell the leased property, then,
MayIair shall be given the right to match the oIIered purchase price and to buy the property at
that price. Equatorial (being aware oI the lease contracts because its lawyers had, prior to the
sale, studied the said contracts) is a buyer in bad Iaith, and thus renders the sale to it oI the
property in question rescissible.




































PUP v. CA, 368 S 691
FACTS:
In the early sixties, petitioner National Development Corporation (NDC), a government
owned and controlled corporation had in its disposal a ten (10)-hectare property located along
Pureza St., Sta. Mesa, Manila. The estate was popularly known as the NDC compound and
covered by TransIer CertiIicates oI Title Nos. 92885, 110301 and 145470. Sometime in May
1965 private respondent Firestone Ceramics Inc. (FIRESTONE) maniIested its desire to lease a
portion oI the property Ior its ceramic manuIacturing business. On 24 August 1965 NDC and
FIRESTONE entered into a contract oI lease denominated as Contract No. C-30-65 covering a
portion oI the property measured at 2.90118 hectares Ior use as a manuIacturing plant Ior a term
oI ten (10) years, renewable Ior another ten (10) years under the same terms and conditions. In
consequence oI the agreement, FIRESTONE constructed on the leased premises several
warehouses and other improvements needed Ior the Iabrication oI ceramic products. Three and a
halI (3-
1
/2) years later, or on 8 January 1969, FIRESTONE entered into a second contract oI
lease with NDC over the latter's Iour (4)-unit pre-Iabricated reparation steel warehouse stored in
Daliao, Davao. FIRESTONE agreed to ship the warehouse to Manila Ior eventual assembly
within the NDC compound. The second contract, denominated as Contract No. C-26-68, was Ior
similar use as a ceramic manuIacturing plant and was agreed expressly to be "co-extensive with
the lease oI LESSEE with LESSOR on the 2.60 hectare-lot. On 31 July 1974 the parties signed a
similar contract concerning a six (6)-unit pre-Iabricated steel warehouse which, as agreed upon
by the parties, would expire on 2 December 1978. Prior to the expiration oI the aIorementioned
contract, FIRESTONE wrote NDC requesting Ior an extension oI their lease agreement.
Consequently on 29 November 1978 the Board oI Directors oI NDC adopted Resolution No. 11-
78-117 extending the term oI the lease, subject to several conditions among which was that in the
event NDC "with the approval oI higher authorities, decide to dispose and sell these properties
including the lot, priority should be given to the LESSEE". On 22 December 1978, in pursuance
oI the resolution, the parties entered into a new agreement Ior a ten-year lease oI the property,
renewable Ior another ten (10) years, expressly granting FIRESTONE the Iirst option to purchase
the leased premises in the event that it decided "to dispose and sell these properties including the
lot. The parties' lessor-lessee relationship went smoothly until early 1988 when FIRESTONE,
cognizant oI the impending expiration oI their lease agreement with NDC, inIormed the latter
through several letters and telephone calls that it was renewing its lease over the property. While
its letter oI 17 March 1988 was answered by Antonio A. enson, General Manager oI NDC, who
promised immediate action on the matter, the rest oI its communications remained
unacknowledged. FIRESTONE's predicament worsened when rumors oI NDC's supposed plans
to dispose oI the subject property in Iavor oI petitioner Polytechnic University oI the Philippines
(PUP) came to its knowledge. Forthwith, FIRESTONE served notice on NDC conveying its
desire to purchase the property in the exercise oI its contractual right oI Iirst reIusal.
Apprehensive that its interest in the property would be disregarded, FIRESTONE instituted an
action Ior speciIic perIormance to compel NDC to sell the leased property in its Iavor.
Meanwhile, on 21 February 1989 PUP moved to intervene and asserted its interest in the subject
property, arguing that a "purchaser pendente lite oI property which is subject oI a litigation is
entitled to intervene in the proceedings." trial court ordering the sale oI the property in Iavor oI
FIRESTONE.

ISSUE:
Whether or not the trial court erred in ordering the NDC to sale the property to Iirestone
having the right oI Iirst reIusal

Ruling:
Such right was expressly stated by NDC and FIRESTONE in par. XV oI their third
contract denominated as A-10-78 executed on 22 December 1978 which, as Iound by the courts a
quo, was interrelated to and inseparable Irom their Iirst contract denominated as C-30-65
executed on 24 August 1965 and their second contract denominated as C-26-68 executed on 8
January 1969. Thus - Should the LESSOR desire to sell the leased premises during the term oI
this Agreement, or any extension thereoI, the LESSOR shall Iirst give to the LESSEE, which
shall have the right oI Iirst option to purchase the leased premises subject to mutual agreement oI
both parties.
The Supreme Court ruled in Iavor oI Firestone to exercise its right oI Iirst reIusal and PUP is
ordered to reconvey the property to NDC.
































Litonjua V. L & R, 320 S 405

FACTS: The spouses Reynaldo and Erlinda Litonjua contracted a loan Irom L & R Corporation
in the sum oI P400,000.00 drawn in two tranches P 200,000.00 on 06 August 1974 and the
other P200,000.00 on 27 March 1978. The loan was secured by a real estate mortgage
constituted by the spouses on their two parcels oI land located in Cubao, Quezon City, measuring
599 and 1,436 sq. m., respectively. The contract provided that the mortgagors were enjoined
Irom conveying the mortgaged property without the written consent oI the mortgagee and that
the mortgagee had a right oI Iirst reIusal in the event the mortgagors decided to sell the property.
The mortgage was duly registered with the Register oI Deeds oI Quezon City. While the
mortgage obligation was still outstanding, the Litonjua spouses sold the two parcels oI land to
Philippine White ouse Auto Supply, Inc. (PWAS), Ior the amount oI P 430,000.00. The sale
was annotated at the back oI the certiIicate oI title. When the Litonjuas deIaulted in the payment
oI the loan, L & R Corporation initiated extrajudicial Ioreclosure oI the mortgage. The
mortgaged parcels were sold at public auction to L & R Corporation, it being the sole bidder, on
23 July 1980. On 15 August 1980, when L & R presented its certiIicate oI sale to the Register oI
Deeds oI Quezon City, it was inIormed oI the previous sale made by the Litonjua spouses to
PWAS. L & R Corporation thereupon sought Irom the Register oI Deeds the cancellation oI
the annotation oI sale to PWAS calling attention to the proviso in the mortgage agreement
enjoining the Litonjua spouses Irom selling the property.Later, PWAS, Ior the account oI the
Litonjua spouses, tendered payment oI the Iull redemption price to L & R Corporation. Upon the
latter`s reIusal to honor the redemption, PWAS tendered the amount with the Branch Clerk oI
Court; correspondingly, the Deputy SheriII issued a certiIicate oI redemption in Iavor oI the
Litonjua spouses. The CertiIicate oI Redemption, however, could not be registered because L &
R Corporation would not surrender the owner`s duplicate certiIicates oI title. When the Register
oI Deeds likewise reIused to annotate the certiIicate oI redemption as an adverse claim on the
titles covering the two parcels oI land. L & R Corporation thereupon advised the tenants oI the
apartment units on the subject lots to tender rental payments to the corporation as being the new
owner.Apprised oI the Ioregoing; the Litonjua spouses Iiled a complaint Ior 'Quieting oI Title,
Annulment oI Title and Damages. The trial court dismissed the complaint on the thesis that the
sale between the spouses Litonjua and PWAS, as well as the redemption subsequently made,
was null and void and unenIorceable against L & R Corporation.On appeal, the judgment oI the
trial court was set aside by the Court oI Appeals in its decision oI 22 June 1994; however, on 11
September 1997, the appellate court reconsidered and reversed its previous stand.

Issue: Whether or not the sale was invalid.

Ruling: :The sale between the Litonjua spouses and PWAS is a valid considering that a
contractual agreement was entered into between the parties whereas beIore any other sale could
took eIIect, they have the right oI Iirst reIusal. ence, the auction sale was invalid.



















































JOSEFA, vs. ZANDONG TRADING CORPORATION, 417 SCRA 269
Facts:
On June 6, 1996, Zhandong Trading Corporation Iiled a complaint Ior sum oI money
petitioners.The complaint alleges inter alia that respondent Zhandong is engaged in the
importation and sale oI hardboards/staple boards and other merchandise. In the course oI its
business, its president, Eleanor Chy, met Tan, who reIerred petitioner Vicente JoseIa, as a client,
to Chy. Relying on Tan`s assurance that petitioner is 'a good customer and owns a construction
supply store, respondent, on various dates in February, March and April, 1996, sold and
delivered to said petitioner a total oI 313 crates oI boards, valued at P4,558,100.00 payable
within sixty (60) days Irom date oI delivery. owever, petitioner, instead oI paying respondent,
remitted his payments to Tan. In turn, Tan delivered various checks to respondent, which
accepted them upon Tan`s declaration that they came Irom petitioner. A number oI the checks
bounced. When respondent conIronted Tan, the latter Issued his own checks and those oI his
mother, Evelyn Chua. Later, without any valid reason, Tan stopped payment by checks. Those
Issued by his mother bounced. This prompted respondent to send petitioner and Tan a demand
letter dated May 14, 1996, but they ignored it. Consequently, respondent suIIered damages and
was constrained to Iile the instant complaint with the assistance oI counsel Ior a Iee.
In his answer, petitioner Vicente JoseIa speciIically denied the allegations in the
complaint. e averred that he did not directly deal with respondent Zhandong. e transacted
business with Tan and paid all his obligations to him. e is not privy to the agreement between
Tan and respondent; hence, iI his payments were not remitted to the latter, it should bear the
consequences. e did not comply with respondent`s demand letter because he had paid Tan in
Iull. AIter hearing, the trial court rendered its Decision,|2| the dispositive portion oI which
reads:

Issue:
Whether or not there exist a contract between petitioner and respondent JoseIa.

eld:
Contracts take eIIect only between the parties, their successors in interest, heirs and
assigns. When there is no privity oI contract, there is likewise no obligation or liability to speak
about and thus no cause oI action arises. Clearly, petitioner, not being privy to the transaction
between respondent and Tan, should not be made to answer Ior the latter`s deIault.
Since petitioner had Iully paid Tan Ior all the hardboards, respondent Zhandong has no
right to demand payments Irom him. To be sure, he cannot be made responsible Ior Tan`s Iailure
to pay respondent Ior the subject hardboards.
























































Dio v. St. Ferdinand Memorial, 509 S 453

FACTS:
On December 11, 1973, Teresita Dio agreed to buy, on installment basis, a memorial lot
Irom the St. Ferdinand Memorial Park, Inc. (SFMPI) in Lucena City. The 36-square-meter
memorial lot is particularly described as Block 2, Section F, Lot 15. The purchase was
evidenced by a Pre-Need Purchase Agreement dated December 11, 1973 and denominated as
Contract No. 384. She obliged herselI to abide by all such rules and regulations governing the
SFMPI dated May 25, 1972. SFMPI issued a Deed oI Sale and CertiIicate oI Perpetual Care1|3|
dated April 1, 1974 denominated as Contract No. 284. The ownership oI Dio over the property
was made subject to the rules and regulations oI SFMPI, as well as the government, including all
amendments, additions and modiIications that may later be adopted. Meanwhile, the mortal
remains oI Dio`s husband and Iather were interred in the lot at her own expense, without the
knowledge and intervention oI SFMPI. She engaged the services oI a private contractor Ior the
Iabrication oI niches and improvements on her lot. In August 1974, the remains oI Dio`s
daughter were likewise interred in the niche constructed on the lot, again without the knowledge
and intervention oI SFMPI.In 1986, Dio decided to build a mausoleum on the lot. In September
that year, she caused the preparation oI a design-plan Ior the construction oI a mausoleum and
the bidding out oI the project.In the early part oI October 1986, Dio inIormed SFMPI, through its
president and controlling stockholder, Mildred F. Tantoco, that she was planning to build a
mausoleum on her lot and sought the approval thereoI. Dio even showed to Tantoco the plans
and project speciIications accomplished by her private contractor at an estimated cost oI
P60,000.00. The plans and speciIications were approved, but Tantoco insisted that the
mausoleum be built by it or its agents at a minimum cost oI P100,000.00 as provided in Rule 69
oI the Rules and Regulations the SFMPI issued on May 25, 1972. The total amount excluded
certain speciIic designs in the approved plan which iI included would cost Dio much more. In a
letter1|4| dated October 13, 1986, Dio, through counsel, demanded that she be allowed to
construct the mausoleum within 10 days, otherwise, she would be impelled to Iile the necessary
action/s against SFMPI and Tantoco.On October 17, 1986, SFMPI wrote Dio inIorming her that
under Rule 69 oI SFMPI Rules and Regulations, she was prohibited Irom engaging an outside
contractor Ior the construction oI buildings, improvements and memorials. A lot owner was only
allowed to submit a preIerred design as long as it is in accordance with park standards.

ISSUE:
Whether or not the court erred in ruling that the petitioner was bound by the rules oI the
contract

RULING: Under the Pre-Need Purchase Agreement executed by petitioner and respondents, the
parties covenanted that upon the completion oI all payments by the purchaser, the seller would
convey to the purchaser a certiIicate oI ownership to the aIoresaid interment property Ior the
interment oI human remains only. The certiIicate oI SFMPI now existing or which may
hereaIter be adopted Ior the government oI said cemetery and said certiIicate shall be in the Iorm
used by the seller, a copy oI which petitioner acknowledged she had examined and approved.
Petitioner agreed to abide by all such rules and regulations governing SFMPI, among them Rule
69 which prevents lot owners Irom 'contracting other contractors Ior the construction oI the said
buildings and memorial but gives the owners Iree rein 'to give their own design Ior the
mausoleum to be constructed, as long as it is in accordance with the park standards.Under the
Deed oI Sale and CertiIicate oI Perpetual Care, petitioner agreed to be bound not only by the
existing rules but also by Iuture rules and regulations that may be adopted by respondent SFMPI.
It is also stated in the said rules and regulations kept in the oIIice oI respondent which could be
inspected by petitioner at any time. Thus, when petitioner executed the Pre-Need Purchase
Agreement and conIormed to the Deed oI Sale, it was with Iull knowledge oI the terms and
conditions thereoI, including the rules and regulations issued by respondent SFMPI. ence,
petitioner is precluded Irom asserting that she had no knowledge oI said rules and regulations,
and that she never consented to comply with them. More importantly, petitioner cannot Ieign
ignorance oI said rules.This is a contract oI adhesion, and such does not make the contract
invalid per se. There is no reason Ior the Court to apply the rule on stringent treatment towards
contracts oI adhesion. To reiterate, not only is petitioner educated, she is likewise a well-known
and experienced businesswoman; thus, she cannot claim to be the weaker or disadvantaged party
in the subject contracts so as to call Ior a strict interpretation against respondents. Moreover, she
executed the Pre-Need Purchase Agreement and Deed oI Sale without any complaint or protest.































PILTEL v. Tecson, 428 S 378

FACTS: On various dates in 1996, DelIino C. Tecson applied Ior six (6) cellular phone
subscriptions with petitioner Pilipino Telephone Corporation (PILTEL), a company engaged in
the telecommunications business, which applications were each approved and covered,
respectively, by six mobiline service agreements.On 05 April 2001, respondent Iiled with the
Regional Trial Court oI Iligan City, Lanao Del Norte, a complaint against petitioner Ior a 'Sum
oI Money and Damages. Petitioner moved Ior the dismissal oI the complaint on the ground oI
improper venue, citing a common provision in the mobiline service agreements to the eIIect that
- 'Venue oI all suits arising Irom this Agreement or any other suit directly or indirectly arising
Irom the relationship between PILTEL and subscriber shall be in the proper courts oI Makati,
Metro Manila. Subscriber hereby expressly waives any other venues. In an order, dated 15
August 2001, the Regional Trial Court oI Iligan City, Lanao del Norte, denied petitioner`s
motion to dismiss and required it to Iile an answer within 15 days Irom receipt thereoI.Petitioner
PILTEL Iiled a motion Ior the reconsideration, through registered mail, oI the order oI the trial
court. In its subsequent order, dated 08 October 2001, the trial court denied the motion Ior
reconsideration.Petitioner Iiled a petition Ior certiorari under Rule 65 oI the Revised Rules oI
Civil Procedure beIore the Court oI Appeals.The Court oI Appeals, in its decision oI 30 April
2002, saw no merit in the petition and aIIirmed the assailed orders oI the trial court. Petitioner
moved Ior a reconsideration, but the appellate court, in its order oI 21 January 2003, denied the
motion.


ISSUE:
Whether or not the trial court erred in rendering its decision against petitioner

ELD:
Indeed, the contract herein involved is a contract oI adhesion. But such an agreement is
not per se ineIIicacious. The rule instead is that, should there be ambiguities in a contract oI
adhesion, such ambiguities are to be construed against the party that prepared it. II, however, the
stipulations are not obscure, but are clear and leave no doubt on the intention oI the parties, the
literal meaning oI its stipulations must be held controlling. In the case at bar, respondent secured
six (6) subscription contracts Ior cellular phones on various dates. It would be diIIicult to
assume that, during each oI those times, respondent had no suIIicient opportunity to read and go
over the terms and conditions embodied in the agreements. Respondent continued, in Iact, to
acquire in the pursuit oI his business subsequent subscriptions and remained a subscriber oI
petitioner Ior quite sometime.










PILIPPINE AIRLINES VS. COURT OF APPEALS, 255 SCRA 48

Facts:
On January 27, 1990, plaintiII Gilda C. Mejia shipped thru deIendant, Philippine
Airlines, one (1) unit microwave oven under PAL Air Waybill No. 0-79-1013008-3, with a gross
weight oI 33 kilograms Irom San Francisco, U.S.A. to Manila, Philippines. Upon arrival,
however, oI said article in Manila, Philippines, plaintiII discovered that its Iront glass door was
broken and the damage rendered it unserviceable. Demands both oral and written were made by
plaintiII against the deIendant Ior the reimbursement oI the value oI the damaged microwave
oven, and transportation charges paid by plaintiII to deIendant company. But these demands Iell
on deaI ears. This is because, according to petitioner, was Iiled out oI time under paragraph 12, a
(1) oI the Air Waybill which provides: "(a) the person entitled to delivery must make a complaint
to the carrier in writing in case: (1) oI visible damage to the goods, immediately aIter discovery
oI the damage and at the latest within 14 days Irom the receipt oI the goods.
On September 25, 1990, Gilda C. Mejia Iiled an action Ior damages against the petitioner
in the lower court. The latter rendered a decision rendering PAL liable to pay, actual, moral and
exemplary damages as well as attorney`s Iees. On appeal, the Court oI Appeals similarly ruled
in Iavor oI private respondent by aIIirming in Iull the trial court's judgment, with costs against
petitioner.

Issue: Whether or not the respondent court erred in aIIirming the conclusions oI the trial court
that since the air waybill is a contract oI adhesion, its provisions should be strictly construed
against herein petitioner.

eld: The trial court relied on the ruling in the case oI Fieldmen's Insurance Co., Inc. vs. Vda.
De Songco, et al. in Iinding that the provisions oI the air waybill should be strictly construed
against petitioner. More particularly, the court below stated its Iindings thus:
'In this case, it is seriously doubted whether plaintiII had read the printed conditions at
the back oI the Air Waybill, or even iI she had, iI she was given a chance to negotiate on the
conditions Ior loading her microwave oven. Instead she was advised by deIendant's employee at
San Francisco, U.S.A., that there is no need to declare the value oI her oven since it is not brand
new. Further, plaintiII testiIied that she immediately submitted a Iormal claim Ior P30,000.00
with deIendant. But their claim was reIerred Irom one employee to another then told to come
back the next day, and the next day, until she was reIerred to a certain Atty. Paco. When they got
tired and Irustrated oI coming without a settlement oI their claim in sight, they consulted a
lawyer who demanded Irom deIendant on August 13, 1990.
Respondent appellate court approved said Iindings oI the trial court in this manner: 'We
cannot agree with deIendant-appellant's above contention. Under our jurisprudence, the Air
Waybill is a contract oI adhesion considering that all the provisions thereoI are prepared and
draIted only by the carrier. The only participation leIt oI the other party is to aIIix his signature
thereto. In the earlier case oI Angeles v. Calasanz, the Supreme Court ruled that the terms oI a
contract oI adhesion must be interpreted against the party who draIted the same.





ERMITAO vs COURT OF APPEALS, 306 SCRA 218
Facts:
Petitioner Luis Ermitao applied Ior a credit card Irom private respondent BPI Express
Card Corp. (BECC) on October 8, 1986 with his wiIe, Manuelita, as extension card holder. The
spouses were given credit limit oI P10, 000.00. They oIten exceeded this credit limit without
protest Irom BCC.
On August 9, 1989, Manuelita`s bag was snatched Irom her as she was shopping at the
greenbelt mall in Makati, Metro Manila. Among the items inside the bag was her BECC credit
card. That same night she inIormed, by telephone, BECC oI the loss. The call was received by
BECC oIIices through a certain Gina Banzon. This was Iollowed by a letter dated August 30,
1989. She also surrendered Luis` credit card and requested Ior replacement cards. In her letter,
Manuelita stated that she 'shall not be responsible Ior any and all charges incurred |through the
use oI the lost card| AIter August 29, 1989.
owever, when Luis received his monthly billing statement Irom BECC dated September
20,1989, the charges included amounts Ior purchases were made, one amounting to P2,350.05
and the other, P607.50. Manuelita received a billing statement dated October 20,1989 which
required her to immediately pay the total amount oI P3,197.70 covering the same (unauthorized)
purchases. Manuelita wrote again BECC disclaiming responsibility Ior those charges, which
were made aIter she had served BECC with notice oI loss oI her card.
owever, BECC, in a letter dated July 13, 1990, pointed to Luis the Iollowing stipulation
in their contract:
In his reply dated July 18, 1990, Luis stressed that the contract BECC was reIerring to
was a contract oI adhesion and warned that iI BECC insisted on charging him and his wiIe Ior
the unauthorized purchases, they will sue BECC continued to bill the spouses Ior said purchases.
The trial court only opined that the only purpose Ior the suspension oI the spouses` credit
privileges was to compel them to pay Ior the unauthorized purchases. The trial court ruled that
the latter portion oI the condition in the parties` contract, which states the liability Ior purchases
made aIter a card is lost or stolen shall be Ior the account oI the cardholder until aIter notice oI
the lost or theIt has been given to BECC and aIter the latter has inIormed its member
establishments, is void Ior being contrary to public policy and Ior being dependent upon the sole
will oI the debtor.

Issue:
Whether or not the Court oI Appeals gravely erred in relying on the case oI Serra v. Court
oI appeals, 229 SCRA 60, because unlike that case, petitioners have no chance at all to contest
the stipulations appearing in the credit card application that was draIted entirely by private
respondent, thus, a clear contract oI adhesion.

eld:
At the outset, we note that the contract between the parties in this case is indeed a
contract oI adhesion, so-called because its terms are prepared by only one party while the other
party merely aIIixes his signature signiIying his adhesion thereto. Such contracts are not void in
themselves. They are as binding as ordinary contracts. Parties who enter in to such contracts are
Iree to reject the stipulations entirely.
In this case, the cardholder, Manuelita, has complied with what was required oI her under
the contract with BECC, She immediately notiIied BECC oI loss oI her card on the same day it
was lost and, the Iollowing day, she sent a written notice oI the loss to BECC.
Clearly, what happened in this case was that BECC Iailed to notiIy promptly the
establishment in which the unauthorized purchases were made with the use oI Manuelita`s lost
card. Thus, Manuelita was being liable Ior those purchases, even iI there is no showing that
Manuelita herselI had signed Ior said purchases, and aIter notice by her concerning her card`s
loss was already given to BECC.





















































































Uniwide V. Titan-Ikeda, 511 S 335
FACTS:

PROJECT 1.The case originated Irom an action Ior a sum oI money Iiled by Titan-Ikeda
Construction and Development Corporation (Titan) against Uniwide Sales Realty and Resources
Corporation (Uniwide) with the Regional Trial Court (RTC), Branch 119, Pasay City arising
Irom Uniwide`s non-payment oI certain claims billed by Titan aIter completion oI three projects
covered by agreements they entered into with each other. The Iirst agreement (Project 1) was a
written 'Construction Contract entered into by Titan and Uniwide sometime in May 1991
whereby Titan undertook to construct Uniwide`s Warehouse Club and Administration Building
in Libis, Quezon City Ior a Iee oI P120,936,591.50, payable in monthly progress billings to be
certiIied to by Uniwide`s representative. The parties stipulated that the building shall be
completed not later than 30 November 1991. As Iound by the CIAC, the building was eventually
Iinished on 15 February 1992 and turned over to Uniwide.

PROJECT 2.Sometime in July 1992, Titan and Uniwide entered into the second agreement
(Project 2) whereby the Iormer agreed to construct an additional Iloor and to renovate the latter`s
warehouse located at the EDSA Central Market Area in Mandaluyong City. There was no
written contract executed between the parties Ior this project. Construction was allegedly to be
on the basis oI drawings and speciIications provided by Uniwide`s structural engineers. The
parties proceeded on the basis oI a cost estimate oI P21,301,075.77 inclusive oI Titan`s 20
mark-up. Titan conceded in its complaint to having received P15,000,000.00 oI this amount. This
project was completed in the latter part oI October 1992 and turned over to Uniwide.
PROJECT 3.

The parties executed the third agreement (Project 3) in May 1992. In a written
'Construction Contract, Titan undertook to construct the Uniwide Sales Department Store
Building in Kalookan City Ior the price oI P118,000,000.00 payable in progress billings to be
certiIied to by Uniwide`s representative.1|10| It was stipulated that the project shall be
completed not later than 28 February 1993. The project was completed and turned over to
Uniwide in June 1993.Uniwide asserted in its petition that: (a) it overpaid Titan Ior unauthorized
additional works in Project 1 and Project 3; (b) it is not liable to pay the Value-Added Tax
(VAT) Ior Project 1; (c) it is entitled to liquidated damages Ior the delay incurred in constructing
Project 1 and Project 3; and (d) it should not have been Iound liable Ior deIiciencies in the
deIectively constructed Project 2.
An arbiter was engaged to make ocular inspection, aIterwhich it rendered its decision Ior
Uniwide to pay its unpaid balance and to pay the VAT to the BIR.

ISSUE:
Whether or not the court erred in ordering the petitioner to pay those amounts declared by
the arbiter

ELD:
As a rule, Iindings oI Iact oI administrative agencies and quasi-judicial bodies, which
have acquired expertise because their jurisdiction is conIined to speciIic matters, are generally
accorded not only respect, but also Iinality, especially when aIIirmed by the Court oI Appeals. In
particular, Iactual Iindings oI construction arbitrators are Iinal and conclusive and not reviewable
by this Court on appeal. This rule, however admits oI certain exceptions. As exceptions, Iactual
Iindings oI construction arbitrators may be reviewed by this Court when the petitioner proves
aIIirmatively that: (1) the award was procured by corruption, Iraud or other undue means; (2)
there was evident partiality or corruption oI the arbitrators or oI any oI them; (3) the arbitrators
were guilty oI misconduct in reIusing to hear evidence pertinent and material to the controversy;
(4) one or more oI the arbitrators were disqualiIied to act as such under Section nine oI Republic
Act No. 876 and willIully reIrained Irom disclosing such disqualiIications or oI any other
misbehavior by which the rights oI any party have been materially prejudiced; or (5) the
arbitrators exceeded their powers, or so imperIectly executed them, that a mutual, Iinal and
deIinite award upon the subject matter submitted to them was not made. Other recognized
exceptions are as Iollows: (1) when there is a very clear showing oI grave abuse oI
discretion1|20| resulting in lack or loss oI jurisdiction as when a party was deprived oI a Iair
opportunity to present its position beIore the Arbitral Tribunal or when an award is obtained
through Iraud or the corruption oI arbitrators,1|21| (2) when the Iindings oI the Court oI Appeals
are contrary to those oI the CIAC,1|22| and (3) when a party is deprived oI administrative due
process. petitioner therein Iailed to show any serious error oI law amounting to grave abuse oI
discretion resulting in lack oI jurisdiction on the part oI the Arbitral Tribunal, in either the
methods employed or the results reached by the Arbitral Tribunal, in disposing oI the detailed
claims oI the respective parties.
























EIRS OF AUGUSTO L. SALAS, JR. vs LAPERAL REALT CORPORATION,
G.R. NO. 135362. December 13, 1999
Facts: Salas, Jr. was the registered owner oI a vast tract oI land in Lipa City, Batangas spanning
1,484,354 square meters. On May 15, 1987, he entered into an Owner-Contractor with
respondent Laperal Realty Corporation to render and provide complete (horizontal) construction
services on his land. On September 23, 1988, Salas, Jr. executed a Special Power oI Attorney in
Iavor oI respondent Laperal Realty to exercise general control, supervision and management oI
the sale oI his land, Ior cash or on installment basis. On June 10, 1989, Salas, Jr. leIt his home in
the morning Ior a business trip to Nueva Ecija. e never returned. On August 6, 1996, Teresita
Diaz Salas Iiled a veriIied petition Ior the declaration oI presumptive death oI her husband,
Salas, Jr., who had then been missing Ior more than seven (7) years. It was granted on December
12, 1996. Meantime, respondent Laperal Realty subdivided the land oI Salas, Jr. and sold
subdivided portions thereoI to respondents Rockway Real Estate Corporation and South Ridge
Village, Inc. on February 22, 1990; to respondent spouses Abrajano and Lava and Oscar Dacillo
on June 27, 1991; and to respondents Eduardo Vacuna, Florante de la Cruz and Jesus Vicente
Capalan on June 4, 1996.On February 3, 1998, petitioners as heirs oI Salas, Jr. Iiled in the
Regional Trial Court oI Lipa City a Complaint Ior declaration oI nullity oI sale, reconveyance,
cancellation oI contract, accounting and damages against herein respondents. On April 24, 1998,
respondent Laperal Realty Iiled a Motion to Dismiss

on the ground that petitioners Iailed to
submit their grievance to arbitration as required under Article VI oI the Agreement which
provides: All cases oI dispute between CONTRACTOR and OWNER`S representative shall be
reIerred to the committee represented by: a. One representative oI the OWNER; b. One
representative oI the CONTRACTOR; c. One representative acceptable to both OWNER and
CONTRACTOR.
Issue: Whether or not Iailure to arbitrate is a ground Ior dismissal.
eld: Arbitration is the 'wave oI the Iuture in dispute resolution. To brush aside a contractual
agreement calling Ior arbitration in case oI disagreement between parties would be a step
backward. A submission to arbitration is a contract. As such, the Agreement, containing the
stipulation on arbitration, binds the parties thereto, as well as their assigns and heirs. But only the
petitioners, as heirs oI Salas, Jr., and respondent Laperal Realty are certainly bound by the
Agreement. II respondent Laperal Realty, had assigned its rights under the Agreement to a third
party, making the Iormer, the assignor, and the latter, the assignee, such assignee would also be
bound by the arbitration provision since assignment involves such transIer oI rights as to vest in
the assignee the power to enIorce them to the same extent as the assignor could have enIorced
them against the debtor or in this case, against the heirs oI the original party to the Agreement.
owever, respondents Rockway Real Estate Corporation, South Ridge Village, Inc., Maharami
Development Corporation, spouses Abrajano, spouses Lava, Oscar Dacillo, Eduardo Vacuna,
Florante de la Cruz and Jesus Vicente Capellan are 3ot assignees oI the rights oI respondent
Laperal Realty under the Agreement to develop Salas, Jr.`s land and sell the same. They are,
rather, buyers oI the land that respondent Laperal Realty was given the authority to develop and
sell under the Agreement.



MEDRANO VS. COURT OF APPEALS, 452 SCRA 77

Facts:
Bienvenido R. Medrano was the Vice-Chairman oI Ibaan Rural Bank, a bank owned by the
Medrano Iamily. In 1986, Mr. Medrano asked Mrs. Estela Flor, to look Ior a buyer oI a
Ioreclosed asset oI the bank, a 17-hectare mango plantation priced at P2,200,000.00.
Mr. Dominador Lee, a businessman Irom Makati City, was a client oI respondent Mrs.
Pacita G. Borbon, a licensed real estate broker.
Borbon relayed to her business associates and Iriends that she had a ready buyer Ior a
mango orchard. Flor then advised her that her cousin-in-law owned a mango plantation which
was up Ior sale. She told Flor to conIer with Medrano and to give them a written authority to
negotiate the sale oI the property. Thus, on September 3, 1986, Medrano Issued the Letter oI
Authority.:
A Deed oI Sale was eventually executed on November 6, 1986 between the bank,
represented by its President/General Manager Teresa M. Ganzon (as Vendor) and KGB Farms,
Inc., represented by Dominador Lee (as Vendee), Ior the purchase price oI P1,200,000.00.|10|
Since the sale oI the property was consummated, the respondents asked Irom the petitioners their
commission, or 5 oI the purchase price. The petitioners reIused to pay and oIIered a measly
sum oI P5,000.00 eachence, the respondents were constrained to Iile an action against herein
petitioners.

Issue:
Whether or not the letter oI authority is binding and enIorceable against the deIendant
Bank only or both deIendants.

eld:
The petition is denied.
The records disclose that respondent Pacita Borbon is a licensed real estate brokerand
respondents JoseIina Antonio and Estela A. Flor are her associates. A broker is generally deIined
as one who is engaged, Ior others, on a commission, negotiating contracts relative to property
with the custody oI which he has no concern; the negotiator between other parties, never acting
in his own name but in the name oI those who employed him;he is strictly a middleman and Ior
some purposes the agent oI both parties. A broker is one whose occupation is to bring parties
together, in matters oI trade, commerce or navigation. For the respondents` participation in
Iinding a buyer Ior the petitioners` property, the petitioners reIuse to pay them commission,
asserting that they are not the eIIicient procuring cause oI the sale, and that the letter oI authority
signed by petitioner Medrano is not binding against the petitioners.
'Procuring cause is meant to be the proximate cause. The term 'procuring cause, in
describing a broker`s activity, reIers to a cause originating a series oI events which, without
break in their continuity, result in accomplishment oI prime objective oI the employment oI the
broker producing a purchaser ready, willing and able to buy real estate on the owner`s terms.
Anent the validity oI the letter-authority signed by Medrano, the court Iind no reversible
error with the Iindings oI the appellate and trial courts that the petitioners are liable thereunder.
Such Iactual Iindings deserve this Court`s respect in the absence oI any cogent reason to reverse
the same. Medrano`s obligation to pay the respondents commission Ior their labor and eIIort in
Iinding a purchaser or a buyer Ior the described parcel oI land is unquestionable. In the absence
oI Iraud, irregularity or illegality in its execution, such letter-authority serves as a contract, and is
considered as the law between the parties. As such, Medrano can not renege on the promise to
pay commission on the Ilimsy excuse that he is not the registered owner oI the property. The
evidence shows that he comported himselI to be the owner oI the property.
Res inter alios acta alteri nocere non debet .A transaction between others does not
prejudice one who was not a party to it.








































Tan V. Gullas, 393 S 334
FACTS:
Spouses Eduardo R. Gullas and Norma S. Gullas, were the registered owners oI a parcel
oI land in the Municipality oI Minglanilla, Province oI Cebu, measuring 104,114 sq. m., with
TransIer CertiIicate oI Title No. 31465.
1|4|
On June 29, 1992, they executed a special power oI
attorney

authorizing petitioners Manuel B. Tan, a licensed real estate broker, and his associates
Gregg M. Tecson and Alexander Saldaa, to negotiate Ior the sale oI the land at Five undred
FiIty Pesos (P550.00) per square meter, at a commission oI 3 oI the gross price. The power oI
attorney was non-exclusive and eIIective Ior one month Irom June 29, 1992. On the same date,
petitioner Tan contacted Engineer Edsel Ledesma, construction manager oI the Sisters oI Mary
oI Banneaux, Inc. (hereaIter, Sisters oI Mary), a religious organization interested in acquiring a
property in the Minglanilla area. In the morning oI July 1, 1992, petitioner Tan visited the
property with Engineer Ledesma. ThereaIter, the two men accompanied Sisters Michaela Kim
and Azucena Gaviola, representing the Sisters oI Mary, to see private respondent Eduardo Gullas
in his oIIice at the University oI Visayas. The Sisters, who had already seen and inspected the
land, Iound the same suitable Ior their purpose and expressed their desire to buy it. owever,
they requested that the selling price be reduced to Five undred Thirty Pesos (P530.00) per
square meter instead oI Five undred FiIty Pesos (P550.00) per square meter. Private respondent
Eduardo Gullas reIerred the prospective buyers to his wiIe. It was the Iirst time that the buyers
came to know that private respondent Eduardo Gullas was the owner oI the property. On July 3,
1992, private respondents agreed to sell the property to the Sisters oI Mary, and subsequently
executed a special power oI attorney in Iavor oI EuIemia Caete, giving her the special authority
to sell, transIer and convey the land at a Iixed price oI Two undred Pesos (P200.00) per square
meter. On July 17, 1992, attorney-in-Iact EuIemia Caete executed a deed oI sale in Iavor oI the
Sisters oI Mary Ior the price oI Twenty Million Eight undred Twenty Two Thousand Eight
undred Pesos (P20,822,800.00), or at the rate oI Two undred Pesos (P200.00) per square
meter. The buyers subsequently paid the corresponding taxes. ThereaIter, the Register oI Deeds
oI Cebu Province issued TCT No. 75981 in the name oI the Sisters oI Mary oI Banneaux, Inc.
Earlier, on July 3, 1992, in the aIternoon, petitioners went to see private respondent Eduardo
Gullas to claim their commission, but the latter told them that he and his wiIe have already
agreed to sell the property to the Sisters oI Mary. Private respondents reIused to pay the broker`s
Iee and alleged that another group oI agents was responsible Ior the sale oI land to the Sisters oI
Mary.
ISSUE:
Whether or not the trial court erred in Iinding that the plaintiIIs are not entitled to the
commission
ELD:
The records show that petitioner Manuel B. Tan is a licensed real estate broker, and
petitioners Gregg M. Tecson and Alexander Saldaa are his associates. During the trial, it was
established that petitioners, as brokers, were authorized by private respondents to negotiate Ior
the sale oI their land within a period oI one month reckoned Irom June 29, 1992. The authority
given to petitioners was non-exclusive, which meant that private respondents were not precluded
Irom granting the same authority to other agents with respect to the sale oI the same property.
Following the stipulation in the Special Power oI Attorney, petitioners are entitled to 3
commission Ior the sale oI the land in question. Petitioners maintain that their commission
should be based on the price at which the land was oIIered Ior sale, i.e., P530.00 per square
meter. owever, the actual purchase price Ior which the land was sold was only P200.00 per
square meter. ThereIore, equity considerations dictate that petitioners` commission must be
based on this price. To rule otherwise would constitute unjust enrichment on the part oI
petitioners as brokers.





















































































JESUS M. GOZUN vs JOSE TEOFILO T. MERCADO G.R. No. 167812
Facts:
In the local elections oI 1995, respondent vied Ior the gubernatorial post in Pampanga.
Upon respondent`s request, petitioner, owner oI JMG Publishing ouse, a printing shop located
in San Fernando, Pampanga, submitted to respondent draIt samples and price quotation oI
campaign materials. By petitioner`s claim, respondent`s wiIe had told him that respondent
already approved his price quotation and that he could start printing the campaign materials,
hence, he did print campaign materials like posters bearing respondent`s photograph, leaIlets
containing the slate oI party candidates, sample ballots, poll watcher identiIication cards, and
stickers. Given the urgency and limited time to do the job order, petitioner availed oI the services
and Iacilities oI Metro Angeles Printing and oI St. Joseph Printing Press, owned by his daughter
JenniIer Gozun and mother EpiIania Macalino Gozun, respectively. Petitioner delivered the
campaign materials to respondent`s headquarters along Gapan-Olongapo Road in San Fernando,
Pampanga. Meanwhile, on March 31, 1995, respondent`s sister-in-law, Lilian Soriano obtained
Irom petitioner 'cash advance oI P253, 000 allegedly Ior the allowances oI poll watchers who
were attending a seminar and Ior other related expenses. Lilian acknowledged on petitioner`s
1995 diary receipt oI the amount. Petitioner later sent respondent a Statement oI Account in the
total amount oI P2, 177,906, including the loan obtained by Lilian, respondent`s wiIe partially
paid P1,000,000 to petitioner who issued a receipt thereIor.no payments were made thereaIter
despite repeated demands. Being compadres to each other, it took more than three years Ior
respondent to honor his promise but still to no avail, hence, a complaint was Iiled.

Issue: Whether or not liable Ior damages.

eld: Anent the loan obtained by Lilian, it was shown that she was not authorized by respondent
to act on his behalI, hence the said loan cannot be enIorceable against him. On the issue oI the
printed materials however, even though it was not proven that he was the direct participant or
principal party in the transaction he is still liable thereoI.

The parties to a contract are the real parties in interest in an action upon it, as consistently held
by the Court. Only the contracting parties are bound by the stipulations in the contract; they are
the ones who would beneIit Irom and could violate it. Thus, one who is not a party to a contract,
and Ior whose beneIit it was not expressly made, cannot maintain an action on it. One cannot do
so, even iI the contract perIormed by the contracting parties would incidentally inure to one's
beneIit. In light thereoI, petitioner is the real party in interest in this case. The trial court`s
Iindings on the matter were aIIirmed by the appellate court. It erred, however, in not declaring
petitioner as a real party in interest insoIar as recovery oI the cost oI campaign materials made by
petitioner`s mother and sister are concerned, upon the wrong notion that they should have been,
but were not, impleaded as plaintiIIs.

In sum, respondent has the obligation to pay the total cost oI printing his campaign materials
delivered by petitioner in the total oI P1,924,906, less the partial payment oI P1,000,000, or
P924,906.


















































CAN VS. MACEDA, 402 SCRA 352

Facts:
On July 28, 1976, BoniIacio S. Maceda, Jr., herein respondent, obtained a P7.3 million
loan Irom the Development Bank oI the Philippines Ior the construction oI his New Gran otel
Project.
ThereaIter, on September 29, 1976, respondent entered into a building construction
contract with Moreman Builders Co., Inc.,. They agreed that the construction would be Iinished
not later than December 22, 1977.
Respondent purchased various construction materials and equipment in Manila. Moreman, in
turn, deposited them in the warehouse oI Wilson and Lily Chan, herein petitioners. The deposit
was Iree oI charge.
UnIortunately, Moreman Iailed to Iinish the construction oI the hotel at the stipulated time.
ence, on February 1, 1978, respondent Iiled an action Ior rescission and damages against
Moreman,.
On November 28, 1978, the court rendered its Decision|4| rescinding the contract
between Moreman and respondent and awarding damages to the latter
Meanwhile, during the pendency oI the case, respondent ordered petitioners to return to
him the construction materials and equipment which Moreman deposited in their warehouse.
Petitioners, however, told them that Moreman withdrew those construction materials in
1977.ence, on December 11, 1985, respondent Iiled with the Regional Trial Court, Branch 160,
Pasig City, an action Ior damages.
On August 25, 1989, or aIter almost Iour (4) years, the trial court dismissed respondent`s
complaint Ior his Iailure to prosecute and Ior lack oI interest." On September 6, 1994, or Iive
years thereaIter, respondent Iiled a motion Ior reconsideration, but the same was denied in the
Order dated September 9, 1994 because oI the Iailure oI respondent and his counsel to appear on
the scheduled hearing.
On October 14, 1994, respondent Iiled a second motion Ior reconsideration. This time, the
motion was granted and the case was ordered reinstated on January 10, 1995, or ten|
The lower court decided in Iavor oI then petitioner awarding damages to the complainant,
the decision which was aIIirmed by the Court oI Appeals another, shall indemniIy the latter Ior
the same.`

Issue:
Whether or not the Court oI Appeals acted with grave abuse oI discretion and under a
misapprehension oI the law and the Facts when it aIIirmed in toto the award oI actual damages
made by the trial court in Iavor oI respondent in this case.

eld:
Obviously, petitioners` assigned errors call Ior a review oI the lower court`s Iindings oI
Iact.
Succinct is the rule that this Court is not a trier oI Facts and does not normally undertake
the re-examination oI the evidence submitted by the contending parties during the trial oI the
case considering that Iindings oI Iact oI the Court oI Appeals are generally binding and
conclusive on this Court. The jurisdiction oI this Court in a petition Ior review on certiorari is
limited to reviewing only errors oI law,not oI Iact, unless it is shown, inter alia, that: (1) the
conclusion is a Iinding grounded on speculations, surmises or conjectures; (2) the inIerence is
maniIestly mistaken, absurd and impossible; (3) there is grave abuse oI discretion; (4) the
judgment is based on misapprehension oI Facts; (5) the Iindings oI Iact are conIlicting; and (6)
the Court oI Appeals, in making its Iindings went beyond the Issues oI the case and the same is
contrary to the admission oI both parties.
Petitioners submit that this case is an exception to the general rule since both the trial
court and the Court oI Appeals based their judgments on misapprehension oI Iacts.
At the outset, the case should have been dismissed outright by the trial court because oI
patent procedural inIirmities. It bears stressing that the case was originally Iiled on December
11, 1985. Four (4) years thereaIter, or on August 25, 1989, the case was dismissed Ior
respondent`s Iailure to prosecute. Five (5) years aIter, or on September 6, 1994, respondent Iiled
his motion Ior reconsideration. From here, the trial court already erred in its ruling because it
should have dismissed the motion Ior reconsideration outright as it was Iiled Iar beyond the
IiIteen-day reglementary period.|37| Worse, when respondent Iiled his second motion Ior
reconsideration on October 14, 1994, a prohibited pleading,|38| the trial court still granted the
same and reinstated the case on January 10, 1995. This is a glaring gross procedural error
committed by both the trial court and the Court oI Appeals.
It must be stressed that respondent`s claim Ior damages is based on petitioners` Iailure to
return or to release to him the construction materials and equipment deposited by Moreman to
their warehouse. ence, the essential Issues to be resolved are: (1) as respondent presented
prooI that the construction materials and equipment were actually in petitioners` warehouse
when he asked that the same be turned over to him? (2) II so, does respondent have the right to
demand the release oI the said materials and equipment or claim Ior damages?
Under Article 1311 oI the Civil Code, contracts are binding upon the parties (and their
assigns and heirs) who execute them. When there is no privity oI contract, there is likewise no
obligation or liability to speak about and thus no cause oI action arises. SpeciIically, in an action
against the depositary, the burden is on the plaintiII to prove the bailment or deposit and the
perIormance oI conditions precedent to the right oI action. A depositary is obliged to return the
thing to the depositor, or to his heirs or successors, or to the person who may have been
designated in the contract.
In the present case, the record is bereIt oI any contract oI deposit, oral or written, between
petitioners and respondent. II at all, it was only between petitioners and Moreman. And
granting arguendo that there was indeed a contract oI deposit between petitioners and Moreman,
it is still incumbent upon respondent to prove its existence and that it was executed in his Iavor.
owever, respondent miserably Iailed to do so. While our laws grant a person the remedial
right to prosecute or institute a civil action against another Ior the enIorcement or protection oI a
right, or the prevention or redress oI a wrong , every cause oI action ex-contractu must be
Iounded upon a contract, oral or written, express or implied.






















































BALUOT VS. COURT OF APPEALS, G.R. No. 122947, July 22, 1999

Facts:
Petitioners are residents oI Barangay Cruz-na-Ligas,Diliman, Quezon City. The Cruz-na-
Ligas omesite Association, Inc. is a non-stock corporation oI which petitioners and other
residents oI Barangay Cruz-na-Ligas are members. On March 13, 1992, petitioners Iiled a
complaint Ior speciIic perIormance and damages against private respondent University oI the
Philippines and Quezon City government as deIendant
In 1979, the U.P. Board oI Regents approved the donation oI about 9.2 hectares oI the
site directlyto the Quezon City government Ior the residents oI Brgy. Krus Na Ligas. AIter
several negotiations with the residents, the area was increased to 15.8 hectares .
That upon expiration oI the period oI eighteen (18) |months|, Ior alleged non-compliance oI
the deIendant Quezon City Government with terms and conditions quoted in the deed oI
donation, deIendant UP thru its President, Mr. Jose Abueva, Issued Administrative Order No.
21 declaring the deed oI donation revoked and the donated property be reverted to deIendant
UP;

Issue:
Whether or not plaintiII are party in interest in the deed oI donation and that their rights
stand to be prejudiced in the revocation oI the donation and that the have a cause oI action
against respondents.

eld:
A cause oI action exists iI the Iollowing elements are present, namely: (1) a right in Iavor
oI the plaintiII by whatever means and under whatever law it arises or is created; (2) an
obligation on the part oI the deIendant to respect or not to violate such right; and (3) an act or
omission on the part oI such deIendant in violation oI the right oI the plaintiII or constituting a
breach oI the obligations oI the deIendant to the plaintiII Ior which the latter may maintain an
action Ior recovery oI damages.
The court Iind all the elements oI a cause oI action contained in the amended complaint
oI petitioners. While, admittedly, petitioners were not parties to the deed oI donation, they
anchor their right to seek its enIorcement upon their allegation that they are intended
beneIiciaries oI the donation to the Quezon City government. Art. 1311, second paragraph, oI
the Civil Code provides:
II a contract should contain some stipulation in Iavor oI a third person, he may demand
its IulIillment provided he communicated his acceptance to the obligor beIore its revocation. A
mere incidental beneIit or interest oI a person is not suIIicient. The contracting parties must have
clearly and deliberately conIerred a Iavor upon a third person.
Under this provision oI the Civil Code, the Iollowing requisites must be present in order
to have a stipulation pour autrui:
(1) there must be a stipulation in Iavor oI a third person;
(2) the stipulation must be a part, not the whole oI the contract;
(3) the contracting parties must have clearly and deliberately conIerred a Iavor upon a
third person, not a mere incidental beneIit or interest;
(4) the third person must have communicated his acceptance to the obligor beIore its
revocation; and
(5) neither oI the contracting parties bears the legal representation or authorization oI the
third party.
The allegations in the paragraphs oI the amended complaint are suIIicient to bring
petitioners` action within the purview oI the second paragraph oI Art. 1311 on stipulations pour
autrui.






































































Cuyco V. Cuyco, 487 S 693
FACTS:
Petitioners, spouses Adelina and Feliciano Cuyco, obtained a loan in the amount oI
P1,500,000.00 Irom respondents, spouses Renato and Filipina Cuyco, payable within one year at
18 interest per annum, and secured by a Real Estate Mortgage
|4|
over a parcel oI land with
improvements thereon situated in Cubao, Quezon City.
Subsequently, petitioners obtained additional loans Irom the respondents in the aggregate amount
oI P1,250,000.00, broken down as Iollows: (1) P150,000.00 on May 30, 1992; (2) P150,000.00
on July 1, 1992; (3) P500,000.00 on September 5, 1992; (4) P200,000.00 on October 29, 1992;
and (5) P250,000.00 on January 13, 1993.Petitioners made payments amounting to P291,700.00,
but Iailed to settle their outstanding loan obligations. Thus, on September 10, 1997, respondents
Iiled a complaint Ior Ioreclosure oI mortgage with the RTC oI Quezon City. They alleged that
petitioners` loans were secured by the real estate mortgage; that as oI August 31, 1997, their
indebtedness amounted to P6, 967,241.14, inclusive oI the 18 interest compounded monthly;
and that petitioners` reIusal to settle the same entitles the respondents to Ioreclose the real estate
mortgage.
ISSUE: Whether or not petitioners must pay respondents legal interest oI 12 per annum on the
stipulated interest oI 18 per annum computed Irom the Iiling oI the complaint until Iull
payment
ELD: While a contract is the law between the parties, it is also settled that an existing law
enters into and Iorms part oI a valid contract without the need Ior the parties expressly making
reIerence to it. In the case at bar, the evidence shows that petitioners obtained several loans Irom
the respondent, some oI which as held by the CA were secured by real estate mortgage and
earned an interest oI 18 per annum. Upon deIault thereoI, respondents demanded payment
Irom the petitioners by Iiling an action Ior Ioreclosure oI the real estate mortgage. Applying the
rules in the computation oI interest, the principal amount oI loans subject oI the real estate
mortgage must earn the stipulated interest oI 18 per annum, which interest, as long as unpaid,
also earns legal interest oI 12 per annum, computed Irom the date oI the Iiling oI the complaint
on September 10, 1997 until Iinality oI the Court`s Decision. Such interest is not due to
stipulation but due to the mandate oI the law as embodied in Article 2212 oI the Civil Code.
From such date oI Iinality, the total amount due shall earn interest oI 12 per annum until
satisIied. Certainly, the computed interest Irom the Iiling oI the complaint on September 10,
1997 would no longer be true upon the Iinality oI this Court`s decision. As regards what loans
were secured by the real estate mortgage, respondents contended that all Iive additional loans
were intended by the parties to be secured by the real estate mortgage. Thus, the CA erred in
ruling that only two oI the Iive additional loans were secured by the real estate mortgage when
the documents evidencing said loans would show at least three loans were secured by the real
estate mortgage, namely: (1) P150,000.00 obtained on May 31, 1992; (2) P150,000.00 obtained
on July 1, 1992; and (3) P500,000.00 obtained on September 5, 1992.


















































TAAG VS. TE COURT OF APPEALS. G.R. No. 134971, March 25, 2004


Facts:
Respondents Angelica Tiotuyco Vda. de Lacson, and her children, were the registered
owners oI three parcels oI land.
On March 17, 1996, a group oI original Iarmers/tillers, individually executed in Iavor oI
the petitioner separate Deeds oI Assignment in which the assignees assigned to the petitioner
their respective rights as tenants/tillers oI the landholdings possessed and tilled by them. On July
24, 1996, the petitioner called a meeting oI the deIendants-tenants to work out the
implementation oI the terms oI their separate agreement. owever, on August 8, 1996, the
deIendants-tenants, wrote the petitioner stating that they were not attending the meeting and
instead gave notice oI their collective decision to sell all their rights and interests, as
tenants/lessees, over the landholding to the respondents.

Issue: Whether or not respondents have maliciously induced the co-deIendants Iarmers/tillers to
violate their contract with petitioner.

eld: The court does not agree with the contention oI the petitioner. The petitioner impleaded
the respondents as parties-deIendants solely on his allegation that the latter induced or are
inducing the deIendants-tenants to violate the deeds oI assignment, contrary to the provisions oI
Article 1314 oI the New Civil Code which reads:
Art. 1314. Any third person who induces another to violate his contract shall be liable Ior
damages to the other contracting party.
The court eld that Ior the said law to apply, the pleader is burdened to prove the
Iollowing: (1) the existence oI a valid contract; (2) knowledge by the third person oI the
existence oI the contract; and (3) interIerence by the third person in the contractual relation
without legal justiIication.
Where there was no malice in the interIerence oI a contract, and the impulse behind one`s
conduct lies in a proper business interest rather than in wrongIul motives, a party cannot be a
malicious interIerer. Where the alleged interIerer is Iinancially interested, and such interest
motivates his conduct, it cannot be said that he is an oIIicious or malicious intermeddler.
In Iine, one who is not a party to a contract and who interIeres thereon is not necessarily
an oIIicious or malicious intermeddler. The only evidence adduced by the petitioner to prove his
claim is the letter Irom the deIendants-tenants inIorming him that they had decided to sell their
rights and interests over the landholding to the respondents, instead oI honoring their obligation
under the deeds oI assignment. The petitioner himselI admitted when he testiIied that his claim
that the respondents induced the deIendants-assignees to violate contracts with him was based
merely on what 'he heard






SO PING BUN vs. COURT OF APPEALS, R. No. 120554, September 21, 1999

Facts: In 1963, Tek ua Trading Co with lessor Dee C. Chuan & Sons Inc. (DCCSI). The
contracts each had a one-year term. They provided that should the lessee continue to occupy the
premises aIter the term, the lease shall be on a month-to-month basis.
When the contracts expired, the parties did not renew the contracts, but Tek ua continued to
occupy the premises. In 1976, Tek ua Trading Co. was dissolved. Later, the original members
oI Tek ua Trading Co Iormed Tek ua Enterprising Corp., herein respondent corporation.So
Pek Giok, managing partner oI Tek ua Trading, died in 1986. So Pek Giok`s grandson,
petitioner So Ping Bun, occupied the warehouse Ior his own textile business, Trendsetter
Marketing. On March 4, 1992, petitioner requested Iormal contracts oI lease with DCCSI in
Iavor Trendsetter Marketing. So Ping Bun claimed that aIter the death oI his grandIather, So Pek
Giok, he had been occupying the premises Ior his textile business and religiously paid rent.
DCCSI acceded to petitioner`s request. The lease contracts in Iavor oI Trendsetter were
executed. In the suit Ior injunction, private respondents pressed Ior the nulliIication oI the lease
contracts between DCCSI and petitioner. They also claimed damages.

Issue: Whether the appellate court erred in aIIirming the trial court`s decision Iinding so ping
bun guilty oI tortuous interIerence oI contract.

eld: Damage is the loss, hurt, or harm which results Irom injury, and damages are the
recompense or compensation awarded Ior the damage suIIered. One becomes liable in an action
Ior damages Ior a nontrespassory invasion oI another`s interest in the private use and enjoyment
oI asset iI (a) the other has property rights and privileges with respect to the use or enjoyment
interIered with, (b) the invasion is substantial, (c) the deIendant`s conduct is a legal cause oI the
invasion, and (d) the invasion is either intentional and unreasonable or unintentional and
actionable under general negligence rules.
The elements oI tort interIerence are: (1) existence oI a valid contract; (2) knowledge on the part
oI the third person oI the existence oI contract; and (3) interIerence oI the third person is without
legal justiIication or excuse. A duty which the law oI torts is concerned with is respect Ior the
property oI others, and a cause oI action ex delicto may be predicated upon an unlawIul
interIerence by one person oI the enjoyment by the other oI his private property.This may pertain
to a situation where a third person induces a party to renege on or violate his undertaking under a
contract. In the case beIore us, petitioner`s Trendsetter Marketing asked DCCSI to execute lease
contracts in its Iavor, and as a result petitioner deprived respondent corporation oI the latter`s
property right. Clearly, and as correctly viewed by the appellate court, the three elements oI tort
interIerence above-mentioned are present in the instant case.























































METROPOLITAN MANILA DEVELOPMENT AUTORIT vs. JANCOM
ENVIRONMENTAL CORPORATION, 5 SCRA 320

Facts: BeIore the Court is a petition Ior review on certiorari under Rule 45 oI the Rules oI Civil
Procedure Iiled by petitioner Metropolitan Manila Development Authority (MMDA), seeking to
reverse and set aside the November 13, 2000 decision oI the Court oI Appeals declaring valid
and perIected the waste management contract entered into by the Republic oI the Philippines,
represented by the Secretary oI National Resources and the Executive Committee to oversee the
build-operate-transIer implementation oI solid waste management projects, and JANCOM
Environmental Corporation. In a letter dated February 27, 1997, then MMDA inIormed that the
EXECOM had approved the PBAC recommendation to award to JANCOM the San Mateo
Waste-to-Energy Project . On December 19, 1997, the BOT Contract Ior the waste-to-energy
project was signed between JANCOM and the Philippine Government. On March 5, 1998, the
BOT contract was submitted to President Ramos Ior approval but this was too close to the end oI
his term which expired without him signing the contract.

Issue: Whether there is a valid and binding contract between the Republic oI the Philippines and
JANCOM .

eld: Under Article 1305 oI the Civil Code, '|a| contract is a meeting oI minds between two
persons whereby one binds himselI, with respect to the other, to give something or to render
some service. A contract undergoes three distinct stages - preparation or negotiation, its
perIection, and Iinally, its consummation. Negotiation begins Irom the time the prospective
contracting parties maniIest their interest in the contract and ends at the moment oI agreement oI
the parties. The perIection or birth oI the contract takes place when the parties agree upon the
essential elements oI the contract. The last stage is the consummation oI the contract wherein
the parties IulIill or perIorm the terms agreed upon in the contract, culminating in the
extinguishment thereoI . Article 1315 oI the Civil Code, provides that a contract is perIected by
mere consent. Consent, on the other hand, is maniIested by the meeting oI the oIIer and the
acceptance upon the thing and the cause which are to constitute the contract . In the case at bar,
the signing and execution oI the contract by the parties clearly show that, as between the parties,
there was a concurrence oI oIIer and acceptance with respect to the material details oI the
contract, thereby giving rise to the perIection oI the contract. The execution and signing oI the
contract is not disputed by the parties signatories to the contract was not denied by the Solicitor
General. Moreover, as observed by the Court oI Appeals, 'it was not alleged, much less shown,
that those who signed in behalI oI the Republic had acted beyond the scope oI their authority.

























































Manila Metal v. PNB, 1 S 444

Facts: BeIore us is a petition Ior review on certiorari oI the Decision oI the Court oI Appeals
which aIIirmed the decision

oI the Regional Trial Court, and its Resolution,

denying the motion
Ior reconsideration Iiled by petitioner Manila Metal Container Corporation.
Petitioner was the owner oI a 8,015 square meter parcel oI land. To secure a P900,000.00
loan it had obtained Irom respondent Philippine National Bank, petitioner executed a real estate
mortgage over the lot. Respondent PNB later granted petitioner a new credit accommodation oI
P1,000,000.00; and, on November 16, 1973, petitioner executed an Amendment

oI Real Estate
Mortgage over its property. On March 31, 1981, petitioner secured another loan oI P653,000.00
Irom respondent PNB, payable in quarterly installments oI P32,650.00, plus interests and other
charges.
On August 5, 1982, respondent PNB Iiled a petition Ior extrajudicial Ioreclosure oI the real
estate mortgage and sought to have the property sold at public auction Ior P911,532.21,
petitioner`s outstanding obligation to respondent PNB as oI June 30, 1982, plus interests and
attorney`s Iees.
AIter due notice and publication, the property was sold at public auction on September
28, 1982 where respondent PNB was declared the winning bidder Ior P1,000,000.00. The
CertiIicate oI Sale

issued in its Iavor was registered with the OIIice oI the Register oI Deeds oI
Rizal, and was annotated at the dorsal portion oI the title on February 17, 1983. Thus, the period
to redeem the property was to expire on February 17, 1984.

Petitioner sent a letter dated August 25, 1983 to respondent PNB, requesting that it be
granted an extension oI time to redeem/repurchase the property. In its reply dated August 30,
1983, respondent PNB inIormed petitioner that the request had been reIerred to its Pasay City
Branch Ior appropriate action and recommendation.
In a letter

dated February 10, 1984, petitioner reiterated its request Ior a one year extension
Irom February 17, 1984 within which to redeem/repurchase the property on installment basis. It
reiterated its request to repurchase the property on installment. Meanwhile, some PNB Pasay
City Branch personnel inIormed petitioner that as a matter oI policy, the bank does not accept
'partial redemption.
Since petitioner Iailed to redeem the property, the Register oI Deeds cancelled TCT No.
32098 on June 1, 1984, and issued a new title in Iavor oI respondent PNB. Petitioner`s oIIers had
not yet been acted upon by respondent PNB.
Issue:
Whether or not petitioner and respondent PNB had entered into a perIected contract Ior
petitioner to repurchase the property Irom respondent.
eld:
The ruling oI the appellate court that there was no perIected contract oI sale between the
parties on June 4, 1985 is correct.
A contract is a meeting oI minds between two persons whereby one binds himselI, with
respect to the other, to give something or to render some service. Under Article 1318 oI the New
Civil Code, there is no contract unless the Iollowing requisites concur:
(1) Consent oI the contracting parties;
(2) Object certain which is the subject matter oI the contract;
(3) Cause oI the obligation which is established.
Contracts are perIected by mere consent which is maniIested by the meeting oI the oIIer
and the acceptance upon the thing and the cause which are to constitute the contract. Once
perIected, they bind other contracting parties and the obligations arising thereIrom have the Iorm
oI law between the parties and should be complied with in good Iaith. The parties are bound not
only to the IulIillment oI what has been expressly stipulated but also to the consequences which,
according to their nature, may be in keeping with good Iaith, usage and law.
By the contract oI sale, one oI the contracting parties obligates himselI to transIer the
ownership oI and deliver a determinate thing, and the other to pay thereIor a price certain in
money or its equivalent The absence oI any oI the essential elements will negate the existence oI
a perIected contract oI sale. As the Court ruled in Boston Bank oI the Philippines v. Manalo
A deIinite agreement as to the price is an essential element oI a binding agreement to
sell personal or real property because it seriously aIIects the rights and obligations oI the
parties. Price is an essential element in the Iormation oI a binding and enIorceable
contract oI sale. The Iixing oI the price can never be leIt to the decision oI one oI the
contracting parties. But a price Iixed by one oI the contracting parties, iI accepted by the
other, gives rise to a perIected sale.
A contract oI sale is consensual in nature and is perIected upon mere meeting oI the minds.
When there is merely an oIIer by one party without acceptance oI the other, there is no contract.
When the contract oI sale is not perIected, it cannot, as an independent source oI obligation,
serve as a binding juridical relation between the parties.

























RIDO MONTECILLO, petitioner, vs. IGNACIA RENES, 385 SCRA 244

Facts:
Respondents a complaint Ior Declaration oI Nullity and Quieting oI Title against
petitioner. Reynes asserted that she is the owner oI a lot subject oI the case. Reynes alleged that
on March 1, 1984 she signed a Deed oI Sale oI the Mabolo Lot in Iavor oI Montecillo.
Montecillo promised to pay the agreed P47,000.00 purchase price within one month Irom the
signing oI the Deed oI Sale
Reynes Iurther alleged that Montecillo Iailed to pay the purchase price aIter the lapse oI
the one-month period, prompting Reynes to demand Irom Montecillo the return oI the Deed oI
Sale. Since Montecillo reIused to return the Deed oI Sale,Reynes executed a document
unilaterally revoking the sale and gave a copy oI the document to Montecillo.
Subsequently, on May 23, 1984 Reynes signed a Deed oI Sale transIerring to the Abucay
Spouses the entire Mabolo Lot.Reynes and the Abucay Spouses alleged that on June 18, 1984
they received inIormation that the Register oI Deeds oI Cebu City Issued a CertiIicate oI Title in
the name oI Montecillo Ior the Mabolo Lot.
Reynes and the Abucay Spouses argued that "Ior lack oI consideration there (was) no
meeting oI the minds"between Reynes and Montecillo. In his Answer, Montecillo alleged that he
paid P50,000.00 Ior the release oI the chattel mortgage which he argued constituted a lien on the
Mabolo Lot.

Issue: Whether or not there is a perIection contract between parties in view oI the Issue on
consideration.

eld: Montecillo`s Deed oI Sale does not state that the P47,000.00 purchase price should be
paid by Montecillo to Cebu Ice Storage. Montecillo Iailed to adduce any evidence beIore the trial
court showing that Reynes had agreed, verbally or in writing, that the P47,000.00 purchase price
should be paid to Cebu Ice Storage. Absent any evidence showing that Reynes had agreed to the
payment oI the purchase price to any other party, the payment to be eIIective must be made to
Reynes, the vendor in the sale. Article 1240 oI the Civil Code provides as Iollows: "Payment
shall be made to the person in whose Iavor the obligation has been constituted, or his successor
in interest, or any person authorized to receive it."
The trial court Iound that Reynes had nothing to do with the mortgage debt.
Under Article 1318 oI the Civil Code, "there is no contract unless the Iollowing requisites
concur: (1) Consent oI the contracting parties; (2) Object certain which is the subject matter oI
the contract; (3) Cause oI the obligation which is established." Article 1352 oI the Civil Code
also provides that "Contracts without cause produce no eIIect whatsoever."
The court ruled that a contract oI purchase and sale is null and void and produces no
eIIect whatsoever where the same is without cause or consideration in that the purchase price
which appears thereon as paid has in Iact never been paid by the purchaser to the vendor."







JASMIN SOLER VS. COURT OF APPEALS, 358 SCRA 57

Facts
Petitioner a licensed proIessional interior designer was asked to talk to Nida Lopez, who
was manager oI the COMBANK Ermita Branch Ior they were planning to renovate the branch
oIIices. During their meeting, petitioner was hesitant to accept the job because oI her many out
oI town commitments, and also considering that Ms. Lopez was asking that the designs be
submitted by December 1986, which was such a short notice. Ms. Lopez insisted, however,
because she really wanted petitioner to do the design Ior renovation. Petitioner acceded to the
request. Ms. Lopez assured her that she would be compensated Ior her services. Petitioner even
told Ms. Lopez that her proIessional Iee was ten thousand pesos to which Ms. Lopez acceded.
AIter a Iew days, petitioner requested Ior the blueprint oI the building so that the proper
design, plans and speciIications could be given to Ms. Lopez in time Ior the board meeting in
December 1986. petitioner then engaged and paid the services oI other proIessionals Ior the
preparation oI the draIt. So come December 1986, the lay out and the design were submitted to
Ms. Lopez. She even told petitioner that she liked the designs.
Subsequently, petitioner repeatedly demanded payment Ior her services but Ms. Lopez
just ignored the demands. In February 1987, by chance petitioner and Ms. Lopez saw each other.
Petitioner inquired about the payment Ior her services, Ms. Lopez curtly replied that she was not
entitled to it because her designs did not conIorm to the bank`s policy oI having a standard
design, and that there was no agreement between her and the bank.

Issues:
Whether or not there was a perIected contract between petitioner and respondents and;
Whether or not Nida Lopez, the manager oI the bank branch, had authority to bind the
bank in the transaction.

eld:
The court Iinds the petition meritorious. The discussions between petitioner and Ms.
Lopez were to the eIIect that she had authority to engage the services oI petitioner. Lopez was
aware that petitioner hired the services oI people to help her come up with the designs Ior the
December, 1986 board meeting oI the bank. Ms. Lopez even insisted that the designs be rushed
in time Ior presentation to the bank. With all these discussion and transactions, it was apparent to
petitioner that Ms. Lopez indeed had authority to engage the services oI petitioner.
The next issue is whether there was a perIected contract between petitioner and the Bank.
"A contract is a meeting oI the minds between two persons whereby one binds himselI to
give something or to render some service to bind himselI to another Ior consideration. There is
no contract unless the Iollowing requisites concur: 1. Consent oI the contracting parties; 2.
Object certain which is the subject matter oI the contract; and 3. Cause oI the obligation which is
established.
"A contract undergoes three stages:
"(a) preparation, conception, or generation, which is the period oI negotiation and
bargaining, ending at the moment oI agreement oI the parties;
"(b) perIection or birth oI the contract, which is the moment when the parties come to
agree on the terms oI the contract; and
"(c) consummation or death, which is the IulIillment or perIormance oI the terms agreed
upon in the contract."
In the case at bar, there was a perIected oral contract. When Ms. Lopez and petitioner met in
November 1986, and discussed the details oI the work, the Iirst stage oI the contract commenced.
When they agreed to the payment oI the ten thousand pesos (P10,000.00) as proIessional Iees oI
petitioner and that she should give the designs beIore the December 1986 board meeting oI the
bank, the second stage oI the contract proceeded, and when Iinally petitioner gave the designs to
Ms. Lopez, the contract was consummated.
It is Iamiliar doctrine that iI a corporation knowingly permits one oI its oIIicers, or any other
agent, to act within the scope oI an apparent authority, it holds him out to the public as
possessing the power to do those acts; and thus, the corporation will, as against anyone who has
in good Iaith dealt with it through such agent, be estopped Irom denying the agent`s authority.


































PALATTAO vs. TE COURT OF APPEALS, G.R. No. 131726, May 7, 2002

Facts: Petitioner olanda Palattao entered into a lease contract whereby she leased to private
respondent a house and a 490-square-meter lot. The duration oI the lease contract was Ior three
years, commencing Irom January 1, 1991, to December 31, 1993, renewable at the option oI the
parties. The contract gave respondent lessee the Iirst option to purchase the leased property.
During the last year oI the contract, the parties began negotiations Ior the sale oI the
leased premises to private respondent. In a letter dated April 2, 1993, petitioner oIIered to sell to
private respondent 413.28 square meters oI the leased lot . Private respondent replied on April
15, 1993 wherein he inIormed petitioner that he 'shall deIinitely exercise his option. Private
respondent, however, maniIested his desire to buy the whole 490-square-meter leased premises
and inquired Irom petitioner the reason why only 413.28 square meters oI the leased lot were
being oIIered Ior sale. In a letter dated November 6, 1993, petitioner made a Iinal oIIer to sell
the lot at P7,500.00 per square meter with a downpayment oI 50 upon the signing oI the
contract oI conditional sale, the balance payable in one year with a monthly lease/interest
payment oI P14,000.00 which must be paid on or beIore the IiIth day oI every month that the
balance is still outstanding.On November 7, 1993, private respondent accepted petitioner`s oIIer
and reiterated his request Ior clariIication as to the size oI the lot Ior sale
Petitioner gave private respondent on or beIore November 24, 1993, within which to pay
the 50 downpayment in cash or manager`s check. Petitioner stressed that Iailure to pay the
downpayment on the stipulated period will enable petitioner to Ireely sell her property to others.
Petitioner likewise notiIied private respondent that she is no longer renewing the lease agreement
upon its expiration on December 31, 1993.
Private respondent did not accept the terms proposed by petitioner. Neither was there
any documents oI sale nor payment by private respondent oI the required downpayment. Private
respondent wrote a letter to petitioner on November 29, 1993 maniIesting his intention to
exercise his option to renew their lease contract Ior another three years, starting January 1, 1994
to December 31, 1996. This was rejected by petitioner, reiterating that she was no longer
renewing the lease. Petitioner demanded that private respondent vacate the premises, but the
latter reIused.

Issue: Whether or not the lower court erred in declaring that there was a perIected contract oI
sale between the parties over the leased property.

eld: Contracts that are consensual in nature, like a contract oI sale, are perIected upon mere
meeting oI the minds. Once there is concurrence between the oIIer and the acceptance upon the
subject matter, consideration, and terms oI payment, a contract is produced. The oIIer must be
certain. To convert the oIIer into a contract, the acceptance must be absolute and must not
qualiIy the terms oI the oIIer; it must be plain, unequivocal, unconditional, and without variance
oI any sort Irom the proposal. A qualiIied acceptance, or one that involves a new proposal,
constitutes a counter-oIIer and is a rejection oI the original oIIer. Consequently, when something
is desired which is not exactly what is proposed in the oIIer, such acceptance is not suIIicient to
generate consent because any modiIication or variation Irom the terms oI the oIIer annuls the
oIIer.
Documents revealed that private respondent did not give his consent to buy only 413.28
square meters oI the leased lot, as he desired to purchase the whole 490 square-meter-leased
premises which, however, was not what was exactly proposed in petitioner`s oIIer. Clearly,
thereIore, private respondent`s acceptance oI petitioner`s oIIer was not absolute, and will
consequently not generate consent that would perIect a contract.












































ABS-CBN BROADCASTING CORPORATION, vs. COURT OF APPEALS, G.R. No. 128690,
January 21, 1999

Facts:
In 1990, ABS-CBN and VIVA executed a Film Exhibition Agreement whereby Viva
gave ABS-CBN an exclusive right to exhibit some Viva Iilms. Sometime in December 1991, in
accordance with paragraph 2.4 |sic| oI said agreement stating that ABS-CBN shall have the right
oI Iirst reIusal to the next twenty-Iour (24) Viva Iilms Ior TV telecast provided that such right
shall be exercised by ABS-CBN Irom the actual oIIer in writing.
On April 2, 1992, deIendant Del Rosario and ABS-CBN`s general manager, Eugenio
Lopez III, met at the Tamarind Grill Restaurant in Quezon City to discuss the package proposal
oI VIVA. What transpired in that lunch meeting is the subject oI conIlicting versions. Mr. Lopez
testiIied that he and Mr. Del Rosario allegedly agreed that ABS-CBN was granted exclusive Iilm
rights to Iourteen (14) Iilms Ior a total consideration oI P36 million; that he allegedly put this
agreement as to the price and number oI Iilms in a "napkin" and signed it and gave it to Mr. Del
Rosario. On the other hand Del Rosario denied having made any agreement with Lopez
regarding the 14 Viva Iilms; denied the existence oI a napkin in which Lopez wrote something;
and insisted that what he and Lopez discussed at the lunch meeting was Viva`s Iilm package
oIIer oI 104 Iilms (52 originals and 52 re-runs) Ior a total price oI P60 million. Mr. Lopez
promising |sic|to make a counter proposal which came in the Iorm oI a proposal contract .
On April 06, 1992, Del Rosario and Mr. Graciano Gozon oI RBS Senior vice-president
Ior Finance discussed the terms and conditions oI Viva`s oIIer to sell the 104 Iilms, aIter the
rejection oI the same package by ABS-CBN.
On April 07, 1992, deIendant Del Rosario received a handwritten note Irom Ms. Concio,
a counter-proposal covering 53 Iilms, 52 oI which came Irom the list sent by deIendant Del
Rosario and one Iilm was added by Ms. Concio, Ior a consideration oI P35 million. The said
counter proposal was however rejected by Viva`s Board oI Directors.
On April 29, 1992, aIter the rejection oI ABS-CBN and Iollowing several negotiations
and meetings deIendant Del Rosario and Viva`s President Teresita Cruz, in consideration oI P60
million, signed a letter oI agreement dated April 24, 1992, granting RBS the exclusive right
to air 104 Viva-produced and/or acquired Iilms .
On 27 May 1992, ABS-CBN Iiled beIore the RTC a complaint Ior speciIic perIormance
with a prayer Ior a writ oI preliminary injunction and/or temporary restraining order against
private respondents .

Issue:
Whether the lower court erred in ruling that there was no perIected contract between
petitioner and private respondent

eld:
The issue should be resolved against ABS-CBN. A contract is a meeting oI minds
between two persons whereby one binds himselI to give something or render some service to
another37 |Art. 1305, Civil Code.| Ior a consideration. There is no contract unless the Iollowing
requisites concur: (1) consent oI the contracting parties; (2) object certain which is the subject oI
the contract; and (3) cause oI the obligation, which is established.38 |Art. 1318, Civil Code.| A
contract undergoes three stages:
(a) preparation, conception, or generation, which is the period oI negotiation and bargaining,
ending at the moment oI agreement oI the parties;
(b) perIection or birth oI the contract, which is the moment when the parties come to agree on
the terms oI the contract; and
(c) consummation or death, which is the IulIillment or perIormance oI the terms agreed upon in
the contract.
Contracts that are consensual in nature are perIected upon mere meeting oI the minds.
Once there is concurrence between the oIIer and the acceptance upon the subject matter,
consideration, and terms oI payment a contract is produced. The oIIer must be certain. To
convert the oIIer into a contract, the acceptance must be absolute and must not qualiIy the terms
oI the oIIer; it must be plain, unequivocal, unconditional, and without variance oI any sort Irom
the proposal. A qualiIied acceptance, or one that involves a new proposal, constitutes a counter-
oIIer and is a rejection oI the original oIIer. Consequently, when something is desired which is
not exactly what is proposed in the oIIer, such acceptance is not suIIicient to generate consent
because any modiIication or variation Irom the terms oI the oIIer annuls the oIIer.
When Mr. Del Rosario oI Viva met Mr. Lopez oI ABS-CBN at the Tamarind Grill on 2
April 1992 to discuss the package oI Iilms, said package oI 104 VIVA Iilms was VIVA`s oIIer to
ABS-CBN to enter into a new Film Exhibition Agreement. But ABS-CBN, sent through Ms.
Concio, counter-proposal in the Iorm a draIt contract proposing exhibition oI 53 Iilms Ior a
consideration oI P35 million. This counter-proposal could be nothing less than the counter-oIIer
oI Mr. Lopez during his conIerence with Del Rosario at Tamarind Grill Restaurant. Clearly,
there was no acceptance oI VIVA`s oIIer, Ior it was met by a counter-oIIer which substantially
varied the terms oI the oIIer.






















































Limson v. CA, 357 S 209
Facts: Petitioner Lourdes Ong Limson, in her Complaint Iiled beIore the trial court, alleged that
in July 1978 respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera, through their
agent Marcosa Sanchez, oIIered to sell to petitioner a parcel oI land consisting oI 48,260 square
meters, more or less, that respondent spouses inIormed her that they were the owners oI the
subject property; that on 31 July 1978 she agreed to buy the property at the price oI P34.00 per
square meter and gave the sum oI P20,000.00 to respondent spouses as "earnest money;" that
respondent spouses signed a receipt thereIor and gave her a 10-day option period to purchase the
property; that respondent Lorenzo de Vera then inIormed her that the subject property was
mortgaged to Emilio Ramos and Isidro Ramos; that respondent Lorenzo de Vera asked her to
pay the balance oI the purchase price to enable him and his wiIe to settle their obligation with the
Ramoses.
Petitioner also averred that she agreed to meet respondent spouses and the Ramoses to
consummate the transaction but due to the Iailure oI respondent Asuncion Santos-de Vera and
the Ramoses to appear, no transaction was Iormalized. In a second meeting, she claimed that she
was willing and ready to pay the balance oI the purchase price but the transaction again did not
materialize as respondent spouses Iailed to pay the back taxes oI subject property. Subsequently,
petitioner allegedly gave respondent Lorenzo de Vera three checks in the total amount oI
P36,170.00 Ior the settlement oI the back taxes oI the property and Ior the payment oI the
quitclaims oI the three tenants oI subject land. The amount was purportedly considered part oI
the purchase price and respondent Lorenzo de Vera signed the receipts thereIor.
Petitioner alleged that on 5 September 1978 she was surprised to learn from the
agent of respondent spouses that the property was the subject of a negotiation for the
sale to respondent Sunvar Realty Development Corporation represented by respondent
Tomas Cuenca, Jr. petitioner discovered that although respondent spouses purchased
the property from the Ramoses on 20 March 1970 it was only on 15 September 1978
that TCT No. S-72946 covering the property was issued to respondent spouses. As a
consequence, she filed on the same day an Affidavit of Adverse Claim with the Office of
the Registry of Deeds, which was annotated on TCT No. S-72946. She also claimed
that on the same day she informed respondent Cuenca of her "contract" to purchase the
property.

ssue: Whether or not there was a perfected contract to sell between petitioner and
respondent spouses.

eld: A scrutiny oI the Iacts as well as the evidence oI the parties overwhelmingly leads to the
conclusion that the agreement between the parties was a contract oI option and not a contract to
sell.
An option, as used in the law oI sales, is a continuing oIIer or contract by which the owner
stipulates with another that the latter shall have the right to buy the property at a Iixed price
within a time certain, or under, or in compliance with, certain terms and conditions, or which
gives to the owner oI the property the right to sell or demand a sale. It is also sometimes called
an "unaccepted oIIer." An option is not oI itselI a purchase, but merely secures the privilege to
buy. It is not a sale oI property but a sale oI the right to purchase. It is simply a contract by which
the owner oI property agrees with another person that he shall have the right to buy his property
at a Iixed price within a certain time. e does not sell his land; he does not then agree to sell it;
but he does sell something, i.e., the right or privilege to buy at the election or option oI the other
party. Its distinguishing characteristic is that it imposes no binding obligation on the person
holding the option, aside Irom the consideration Ior the oIIer. Until acceptance, it is not,
properly speaking, a contract, and does not vest, transIer, or agree to transIer, any title to, or any
interest or right in the subject matter, but is merely a contract by which the owner oI the property
gives the optionee the right or privilege oI accepting the oIIer and buying the property on certain
terms.
On the other hand, a contract, like a contract to sell, involves the meeting oI minds between
two persons whereby one binds himselI, with respect to the other, to give something or to render
some service. Contracts, in general, are perIected by mere consent, which is maniIested by the
meeting oI the oIIer and the acceptance upon the thing and the cause which are to constitute the
contract. The oIIer must be certain and the acceptance absolute.














































































Villanueva v. PNB, 6 December 2006
Fact: The Special Assets Management Department oI the Philippine National Bank issued an
advertisement Ior the sale thru bidding oI certain PNB properties consisting oI 22,780 square
meters, and lot consisting oI 41,190 square meters, with an advertised Iloor price oI P2,
268,000.00. Bidding was subject to the Iollowing conditions: 1) that cash bids be submitted not
later than April 27, 1989; 2) that said bids be accompanied by a 10 deposit in manager`s or
cashier`s check; and 3) that all acceptable bids be subject to approval by PNB authorities.
Reynaldo Villanueva oIIered to purchase Lot Nos. 17 and 19 Ior P3, 677,000.00. e also
maniIested that he was depositing P400, 000.00 to show his good Iaith but with the
understanding that said amount may be treated as part oI the payment oI the purchase price only
when his oIIer is accepted by PNB. At the bottom oI said letter there appears an unsigned
marginal note stating that P400, 000.00 was deposited into Villanueva`s account with PNB. PNB
Iorwarded the June 28, 1990 letter oI Villanueva to Ramon Guevara, Vice President, and SAMD.
Guevara inIormed Villanueva that only Lot No. 19 is available and that the asking price thereIor
is P2, 883,300.00. Instead oI submitting a revised oIIer, Villanueva merely inserted at the bottom
oI Guevara`s letter a July 11, 1990 marginal note, which reads:
Villanueva paid P200, 000.00 to PNB which issued O.R. No. 16997 to acknowledge receipt
oI the 'partial payment deposit on oIIer to purchase. This is a deposit made to show the sincerity
oI my purchase oIIer with the understanding that it shall be returned without interest iI my oIIer
is not Iavorably considered or be IorIeited iI my oIIer is approved but I Iail/reIuse to push
through the purchase. Also, P380, 000.00 was debited Irom Villanueva`s Savings Account No.
43612 and credited to SAMD. owever, Guevara wrote Villanueva that, upon orders oI the PNB
Board oI Directors to conduct another appraisal and public bidding oI Lot No. 19, SAMD is
deIerring negotiations with him over said property and returning his deposit oI P580, 000.00.
Undaunted, Villanueva attempted to deliver postdated checks covering the balance oI the
purchase price but PNB reIused the same.
ence, Villanueva Iiled with the RTC a Complaint

Ior speciIic perIormance and damages
against PNB. In its September 14, 1995 Decision, the RTC granted the Complaint.

Issue: Whether a perIected contract oI sale exists between petitioner and respondent PNB.

eld: Contracts oI sale are perIected by mutual consent whereby the seller obligates himselI, Ior
a price certain, to deliver and transIer ownership oI a speciIied thing or right to the buyer over
which the latter agrees. Mutual consent being a state oI mind, its existence may only be inIerred
Irom the conIluence oI two acts oI the parties: an oIIer certain as to the object oI the contract
and its consideration, and an acceptance oI the oIIer which is absolute in that it reIers to the exact
object and consideration embodied in said oIIer.
From beginning to end, respondent denied that a contract oI sale with petitioner was ever
perIected. Moreover, the marginal note was a Iurther counter-oIIer which did not lead to the
perIection oI a contract oI sale between the parties. Petitioner`s oIIer quoted the price oI
P3,677,000.00 Ior two lots but was silent on the term oI payment. Respondent`s counter-oIIer
quoted the price oI P2,833,300.00 and was also silent on the term oI payment. Up to that point,
the term or schedule oI payment was not on the negotiation table.



















































Catalan v. Basa, 31 July 2007
Facts: Some times on October 20, 1948, FELICIANO CATALAN was discharged Irom active
military service. The Board oI Medical OIIicers oI the Department oI Veteran AIIairs Iound that
he was unIit to render military service due to his mental health. On September 28, 1949,
Feliciano married Corazon Cerezo. On June 16, 1951, a document was executed, titled
'Absolute Deed oI Donation, wherein Feliciano allegedly donated to his sister MERCEDES
CATALAN one-halI oI his real property. On December 11, 1953, People`s Bank and Trust
Company Iiled Special Proceedings No. 4563beIore the Court oI First Instance to declare
Feliciano incompetent. On December 22, 1953, the trial court issued its Order Ior Adjudication
oI Incompetency Ior Appointing Guardian Ior the Estate and Fixing Allowance

oI Feliciano. The
Iollowing day, the trial court appointed People`s Bank and Trust Company as Feliciano`s
guardian. On November 22, 1978, Feliciano and Corazon Cerezo donated Lots to their son
Eulogio Catalan. On March 26, 1979, Mercedes sold the property in issue in Iavor oI her
children Delia and Jesus Basa. On April 1, 1997, BPI, acting as Feliciano`s guardian, Iiled a case
Ior Declaration oI Nullity oI Documents, Recovery oI Possession and Ownership, as well as
damages against the herein respondents. BPI alleged that the Deed oI Absolute Donation to
Mercedes was void ab initio, as Feliciano never donated the property to Mercedes. In addition,
BPI averred that even iI Feliciano had truly intended to give the property to her, the donation
would still be void, as he was not oI sound mind and was thereIore incapable oI giving valid
consent. Thus, it claimed that iI the Deed oI Absolute Donation was void ab initio, Mercedes
Catalan had no right to sell the property to anyone. BPI raised doubts about the authenticity oI
the deed oI sale, saying that its registration long aIter the death oI Mercedes Catalan indicated
Iraud. Thus, BPI sought remuneration Ior incurred damages and litigation expenses.

Issue: Whether or not the plaintiII Iailed to prove the insanity or imbecility oI.

eld: A donation is an act oI liberality whereby a person disposes gratuitously a thing or right in
Iavor oI another, who accepts it. Like any other contract, an agreement oI the parties is essential.
Consent in contracts presupposes the Iollowing requisites: (1) it should be intelligent or with an
exact notion oI the matter to which it reIers; (2) it should be Iree; and (3) it should be
spontaneous. The parties' intention must be clear and the attendance oI a vice oI consent, like any
contract, renders the donation voidable. In order Ior donation oI property to be valid, what is
crucial is the donor`s capacity to give consent at the time oI the donation. Certainly, there lies no
doubt in the Iact that insanity impinges on consent Ireely given. owever, the burden oI proving
such incapacity rests upon the person who alleges it; iI no suIIicient prooI to this eIIect is
presented, capacity will be presumed. A thorough perusal oI the records oI the case at bar
indubitably shows that the evidence presented by the petitioners was insuIIicient to overcome the
presumption that Feliciano was competent when he donated the property in question to
Mercedes. Petitioners make much ado oI the Iact that, as early as 1948, Feliciano had been
Iound to be suIIering Irom schizophrenia by the Board oI Medical OIIicers oI the Department oI
Veteran AIIairs. By itselI, however, the allegation cannot prove the incompetence oI Feliciano.
Needless to state, since the donation was valid, Mercedes had the right to sell the property to
whomever she chose.

EUGENIO DOMINGO, CRISPIN MANGABAT and SAMUEL CAPALUNGAN vs. COURT
OF APPEALS, G.R. No. 127540. October 17, 2001
Facts:
Paulina Rigonan owned three (3) parcels oI land, located at Batac and Espiritu, Ilocos Norte,
including the house and warehouse on one parcel. She allegedly sold them to private
respondents, the spouses Felipe and Concepcion Rigonan, who claim to be her relatives. In
1966, herein petitioners Eugenio Domingo, Crispin Mangabat and Samuel Capalungan, who
claim to be her closest surviving relatives, allegedly took possession oI the properties by means
oI stealth, Iorce and intimidation, and reIused to vacate the same. Consequently, on February 2,
1976, herein respondent Felipe Rigonan Iiled a complaint Ior reinvindicacion against petitioners
in the Regional Trial Court oI Batac, Ilocos Norte. On July 3, 1977, he amended the complaint
and included his wiIe as co-plaintiII. They alleged that they were the owners oI the three parcels
oI land through the deed oI sale executed by Paulina Rigonan on January 28, 1965; that since
then, they had been in continuous possession oI the subject properties and had introduced
permanent improvements thereon; and that deIendants (now petitioners) entered the properties
illegally, and they reIused to leave them when asked to do so. According to deIendants, the
alleged deed oI absolute sale was void Ior being spurious as well as lacking consideration. They
said that Paulina Rigonan did not sell her properties to anyone. As her nearest surviving kin
within the IiIth degree oI consanguinity, they inherited the three lots and the permanent
improvements thereon when Paulina died in 1966.
Issue: whether or not the private respondents suIIiciently establish the existence and due
execution oI the Deed oI Absolute and Irrevocable Sale oI Real Property.
eld: The trial court Iound the deed 'Iake being a carbon copy with no typewritten original
presented and the court concluded that the document`s execution 'was tainted with alterations,
deIects, tamperings, and irregularities which render it null and void ab initio.
i
Petitioners argue
that the Court oI Appeals erred in not applying the doctrine that Iactual Iindings oI trial courts
are entitled to great weight and respect on appeal, especially when said Iindings are established
by unrebutted testimonial and documentary evidence. In the present case, at the time oI the
execution oI the alleged contract, Paulina Rigonan was already oI advanced age and senile. She
died an octogenarian on March 20, 1966, barely over a year when the deed was allegedly
executed on January 28, 1965, but beIore copies oI the deed were entered in the registry
allegedly on May 16 and June 10, 1966. The general rule is that a person is not incompetent to
contract merely because oI advanced years or by reason oI physical inIirmities. owever, when
such age or inIirmities have impaired the mental Iaculties so as to prevent the person Irom
properly, intelligently, and Iirmly protecting her property rights then she is undeniably
incapacitated. The unrebutted testimony oI Zosima Domingo shows that at the time oI the
alleged execution oI the deed, Paulina was already incapacitated physically and mentally. She
narrated that Paulina played with her waste and urinated in bed. Given these circumstances,
there is in our view suIIicient reason to seriously doubt that she consented to the sale oI and the
price Ior her parcels oI land. Moreover, there is no receipt to show that said price was paid to
and received by her. Thus, the Supreme Court is in agreement with the trial court`s Iinding and
conclusion on the matter.
MARIO J. MENDEZONA vs. JULIO . OZAMIZ, G.R. N o. 143370. February 6, 2002
Facts:
On January 15, 1991, the respondents instituted the petition Ior guardianship, alleging
therein that Carmen Ozamiz, then 86 years old, aIter an illness in July 1987, had become
disoriented and could not recognize most oI her Iriends; that she could no longer take care oI
herselI nor manage her properties by reason oI her Iailing health, weak mind and absent-
mindedness. Mario Mendezona and Luis Mendezona, herein petitioners who are nephews oI
Carmen Ozamiz, and Pilar Mendezona, a sister oI Carmen Ozamiz, Iiled an opposition to the
guardianship petition. In the course oI the guardianship proceeding, the petitioners and the
oppositors thereto agreed that Carmen Ozamiz needed a guardian over her person and her
properties, and thus respondent Paz O. Montalvan was designated as guardian over the person oI
Carmen Ozamiz while petitioner Mario J. Mendezona, respondents Roberto J. Montalvan and
Julio . Ozamiz were designated as joint guardians over the properties oI the said ward. Included
in the property oI Ozamis is a parcel oI land known as Lahug. Said Lahug property is the same
property covered by the Deed oI Absolute Sale dated April 28, 1989 executed by Carmen
Ozamiz in Iavor oI the petitioners. Respondents Roberto J. Montalvan and Julio . Ozamiz
caused the inscription on the titles oI petitioners a notice oI lis pendens regarding Special
Proceeding No. 1250, thus giving rise to the suit Ior quieting oI title, , Iiled by herein petitioners.
Issue: whether or no the alleged sale was void by reason oI Carmen Ozamiz` old age.
eld: In this petition at bench, petitioners essentially take exception to two (2) main Iactual
Iindings oI the appellate court, namely, (a) that the notarized Deed oI Absolute Sale dated April
28, 1989 was a simulated contract, and (b) that Carmen Ozamiz`s mental Iaculties were seriously
impaired when she executed the said contract on April 28, 1989.
Simulation is deIined as 'the declaration oI a Iictitious will, deliberately made by agreement
oI the parties, in order to produce, Ior the purposes oI deception, the appearances oI a juridical
act which does not exist or is diIIerent Irom what that which was really executed.

The requisites
are: (a) an outward declaration oI will diIIerent Irom the will oI the parties; (b) the Ialse
appearance must have been intended by mutual agreement; and (c) the purpose is to deceive third
persons.


None oI these were clearly shown to exist in the case at bar. It has been held that a
person is not incapacitated to contract merely because oI advanced years or by reason oI physical
inIirmities. Only when such age or inIirmities impair her mental Iaculties to such extent as to
prevent her Irom properly, intelligently, and Iairly protecting her property rights, is she
considered incapacitated.

The respondents utterly Iailed to show adequate prooI that at the time
oI the sale on April 28, 1989 Carmen Ozamiz had allegedly lost control oI her mental Iaculties.
We note that the respondents sought to impugn only one document, the Deed oI Absolute Sale
dated April 28, 1989, executed by Carmen Ozamiz. owever, there are nine (9) other important
documents that were, signed by Carmen Ozamiz either beIore or aIter April 28, 1989 which were
not assailed by the respondents.

Such is contrary to their assertion oI complete incapacity oI
Carmen Ozamiz to handle her aIIairs since 1987. We agree with the trial court`s assessment that
'it is unIair Ior the respondents to claim soundness oI mind oI Carmen Ozamiz when it beneIits
them and otherwise when it disadvantages them.

A person is presumed to be oI sound mind at
any particular time and the condition is presumed to continue to exist, in the absence oI prooI to
the contrary.


Competency and Ireedom Irom undue inIluence, shown to have existed in the other
acts done or contracts executed, are presumed to continue until the contrary is shown.



















































LIM vs COURT OF APPEALS, 229 SCRA 616

Facts: The case involves the partition oI the properties oI the deceased spouses Tan Quico and
JoseIa Oraa. Both died intestate. They leIt some ninety six hectares oI land located in the
municipality oI Guinobatan and Camalig, Albay. The late spouses were survived by Iour
children; Cresencia, Lorenzo, ermogenes and Elias. Elias died on May 2, 1935, without Issue.
Cresencia died on December 20, 1967. She was survived by petitioners, her husband, Lim Chay
Sing, and children, Mariano, Jaime, Jose Jovita, Anacoreta, Antonietta, Ruben, Benjamin and
Rogelio. The sad spectacle oI the heirs squabbling over the properties oI their deceased parents
was again replayed in the case at bench. The protagonists were the widower and children oI
Cresencia on one side, and Lorenzo and ermogenes on the other side. The late Cresencia and
Lorenzo had contrasting educational background. Cresencia only reached the second grade oI
elementary school. She could not read or write in English. On the other hand, Lorenzo is a
lawyer and a CPA. eirs oI Cresencia alleged that since the demise oI the spouses Tan Quico
and JoseIa Oraa, the subject properties had been administered by respondent Lorenzo. They
claimed that beIore her death, Cresencia had demanded their partition Irom Lorenzo. AIter
Cresencia`s death, they likewise clamored Ior their partition. Their eIIort proved Iruitless.
Respondents Lorenzo and ermogenes` adamant stance against partition is based on various
contentions. Principally, they urge: 1) that the properties had already been partitioned, orally;
and 2) during her liIetime, the late Cresencia had sold and conveyed all her interests in said
properties to respondent Lorenzo. They cited as evidence the 'Deed oI ConIirmation oI Extra
Judicial Settlement oI the Estate oI Tan Quico and JoseIa Oraa and a receipt oI payment.

Issue: Whether or not there is error in the signing oI the Deed.

eld: In the petition at bench, the questioned Deed is written in English, a language not
understood by the late Cresencia an illiterate. It was prepared by the respondent Lorenzo, a
lawyer and CPA. Respondent Lorenzo did not cause the notarization oI the Deed. Considering
these circumstances, the burden was on private respondents to prove that the content oI the Deed
was explained to the illiterate Cresencia beIore she signed it. In this regard, the evidence
adduced by the respondents Iailed to discharge their burden.
In calibrating the credibility oI the witnesses on this issue, we take our mandate Irom Article
1332 oI the Civil Code which provides: 'When one oI the parties is unable to read, or iI the
contract is in a language not understood by him, and mistake or Iraud is alleged, the person
enIorcing the contract must show that the terms thereoI have been Iully explained to the Iormer.
This substantive law came into being due to the Iinding oI the Code Commission that there is
still a Iairly large number oI illiterates in this country, and documents are usually drawn up in
English or Spanish. It is also in accord with our state policy oI promoting social justice. It also
supplements Article 24 oI the Civil Code which calls on court to be vigilant in the protection oI
the rights oI those who are disadvantaged in liIe. Thus, the questioned Deed written in English, a
language not understood by the late Cresencia, an illiterate, is void.


















































RUIZ VS. COURT OF APPEALS, 401 SCRA 594
Facts:
Petitioner Corazon Ruiz is engaged in the business oI buying and selling jewelry. She
obtained loans Irom private respondent Consuelo Torres on diIIerent occasions and in diIIerent
amounts. Prior to their maturity, the loans were consolidated under 1 promissory note dated
March 22, 1995.
The consolidated loan oI P750, 000.00 was secured by a real estate mortgage on a lot in
Quezon City, covered by TransIer oI CertiIicate oI Title No. RT-96686, and registered in the
name oI petitioner. The mortgage was signed by petitioner Ior herselI and as attorney-in-Iact oI
her husband Rogelio. It was executed on 20 March 1995, or 2 days beIore the execution oI the
subject promissory note. ThereaIter, petitioner obtained 3 more loans Irom private respondent,
under the Iollowing promissory notes: 1) promissory note dated 21 April 1995, in the amount oI
P100,000.00; 2) promissory note dated 23 May !995 in the amount oI P100,000.00, and 3)
promissory note dated 21 December 1995, in the amount oI P100,000.00. These combined loans
oI P300,000.00 were secured by P571,000.00 worth oI jewelry pledged by petitioner to private
respondent. From April 1995 to March 1996, petitioner paid the stipulated 3 monthly interest
on the P750,000.00 loan, amounting to P270,000. AIter March 1996, petitioner was unable to
make interest payments as she had diIIiculties collecting Irom her clients in her jewelry business.
Because oI petitioner`s Iailure to pay the principal loan oI P750,000.00, as well as the interest
payment Ior April 1996, private respondent demanded payment not only oI the P750,000.00 loan
but also oI the P300,000.00 loan. When petitioner Iailed to pay, private respondent sought the
extrajudicial Ioreclosure oI the aIorementioned real estate mortgage.

Issue: Whether or not there is undue inIluence in the signing oI the promissory note, which
determines iI Ioreclosure proceedings could proceed.

eld: The promissory note in question did not contain any Iine print provision which could have
escaped the attention oI the petitioner. Petitioner had all the time to go over and study the
stipulations embodied in the promissory note. Aside Irom the March 22, 1995 promissory note
Ior P750,000.00, three other promissory notes oI diIIerent dates and amounts were executed by
petitioner in Iavor oI private respondent. These promissory notes contain similar terms and
conditions, with a little variance in the terms oI interests and surcharges. The Iact that petitioner
and private respondent had entered into not only one but several loan transactions shows that
petitioner was not in any way compelled to accept the terms allegedly imposed by private
respondent. Moreover, petitioner, in her complaint dated October 7, 1996 Iiled with the trial
court, never claimed that she was Iorced to sign the subject note. ThereIore, the Ioreclosure
proceedings may now proceed.























































DELA CRUZ VS. SPOUSES SISON
G.R. No. 163770, February 17, 2005
Facts:
Initially, the complainant in this case was EpiIania S. Dela Cruz (EpiIania), but she died
on November 1, 1996, while the case was pending in the Court oI Appeals. Upon her demise,
she was substituted by her niece, Laureana V. Alberto.
EpiIania claimed that sometime in 1992, she discovered that her rice land in Salomague
Sur, Bugallon, Pangasinan, has been transIerred and registered in the name oI her nephew,
Eduardo C. Sison, without her knowledge and consent, purportedly on the strength oI a Deed oI
Sale she executed on November 24, 1989.
EpiIania thus Iiled a complaint beIore the Regional Trial Court oI Lingayen, Pangasinan,
to declare the deed oI sale null and void. She alleged that Eduardo tricked her into signing the
Deed oI Sale, by inserting the deed among the documents she signed pertaining to the transIer oI
her residential land, house and camarin, in Iavor oI Demetrio, her Ioster child and the brother oI
Eduardo.
Respondents, spouses Eduardo and EuIemia Sison (Spouses Sison), denied that they
employed Iraud or trickery in the execution oI the Deed oI Sale. They claimed that they
purchased the property Irom EpiIania Ior P20,000.00. They averred that EpiIania could not have
been deceived into signing the Deed oI Absolute Sale because it was duly notarized beIore
Notary Public Maximo V. Cuesta, Jr.; and they have complied with all requisites Ior its
registration, as evidenced by the Investigation Report by the Department oI Agrarian ReIorm
(DAR), AIIidavit oI Seller/TransIeror, AIIidavit oI Buyer/TransIeree, CertiIication Issued by the
Provincial Agrarian ReIorm OIIicer (PARO), Letter Ior the Secretary oI Agrarian ReIorm,
CertiIicate Authorizing Payment oI Capital Gains Tax, and the payment oI the registration Iees.
Some oI these documents even bore the signature oI EpiIania, prooI that she agreed to the
transIer oI the property.

Issues: Whether the deed oI absolute sale is valid.

eld: On the Issue oI whether Iraud attended the execution oI a contract is Iactual in nature.
Normally, this Court is bound by the appellate court`s Iindings, unless they are contrary to those
oI the trial court, in which case we may wade into the Iactual dispute to settle it with Iinality.
AIter a careIul perusal oI the records, we sustain the Court oI Appeals` ruling that the Deed oI
Absolute Sale dated November 24, 1989 is valid. There being no evidence adduced to support
her bare allegations, thus, EpiIania Iailed to satisIactorily establish her inability to read and
understand the English language.
Although EpiIania was 79 years old at the time oI the execution oI the assailed contract,
her age did not impair her mental Iaculties as to prevent her Irom properly and intelligently
protecting her rights. Even at 83 years, she exhibited mental astuteness when she testiIied in
court. It is, thereIore, inconceivable Ior her to sign the assailed documents without ascertaining
their contents, especially iI, as she alleges, she did not direct Eduardo to prepare the same.
A comparison oI the deed oI sale in Iavor oI Demetrio and the deed oI sale in Iavor
Eduardo, draws out the conclusion that there was no trickery employed. One can readily see that
the Iirst deed oI sale is in all signiIicant respects diIIerent Irom the second deed oI sale. A casual
perusal, even by someone as old as EpiIania, would enable one to easily spot the diIIerences.
EpiIania could not have Iailed to miss them.
Indeed, iI the intention was to deceive, both deeds oI sale should have been mirror
images as to mislead EpiIania into thinking that she was signing what appeared to be the same
document.
In addition, the questioned deed oI sale was duly notarized. It is a settled rule that one
who denies the due execution oI a deed where one`s signature appears has the burden oI proving
that, contrary to the recital in the jurat, one never appeared beIore the notary public and
acknowledged the deed to be a voluntary act. EpiIania never claimed her signatures as Iorgeries.
In Iact, EpiIania never questioned the deed oI sale in Iavor oI Demetrio, accepting it as a valid
and binding document. It is only with respect to the deed oI sale in Iavor oI Eduardo that she
denies knowledge oI aIIixing her signature. UnIortunately, Ior both parties, the notary public,
Atty. Maximo V. Cuesta, Jr. beIore whom they appeared, died prior to the Iiling oI the case.






























RURAL BANK OF ST. MARIA, PANGASINAN VS. COURT OF APPEALS, 314 SCRA 255
Facts: Manuel Behis mortgaged a land in Iavor oI RBS, Pangasinan, in a Real Estate Mortgage
dated October 23, 1978 as a security Ior loans obtained amounting to P156,270.00.
UnIortunately thereaIter, Manuel, being a delinquent in paying his debts, sold the land. And so a
Deed oI Absolute Sale with Assumption oI Mortgage was executed between him as
vendor/assignor and Rayandayan and Arceo as vendees/assignees Ior the sum oI P250,000.00.
On the same day, Rayandayan and Arceo, together with Manual Behis executed another
Agreement embodying the consideration oI the sale oI the land in the sum oI P2.4 million. The
land, however, remained in the name oI Behis because the Iormer did not present to the Register
oI Deeds the contracts.
Meanwhile, the loan, still in the name oI Behis, accumulated an account amounting to
P316,368.13 in a Statement oI Account sent to Behis on May, 30, 1985.
ThereaIter, Rayandaran and Arceo presented the Deed oI Absolute Sale to the bank and
negotiated with the principal stockholder oI the bank, Engr. E. Natividad, in Manila Ior the
assumption oI the indebtedness oI Manuel Behis and the subsequent release oI the mortgage on
the property by the bank. Rayandaran and Arceo did not show to the bank the agreement with
Manuel Behis providing Ior the real consideration oI P2.4 million. Subsequently, the bank
consented to the substitution oI plaintiIIs as mortgage debtors in place oI Manuel Behis in a
Memorandum oI Agreement between private respondents and the bank with restricted and
liberalized terms Ior the payment oI the mortgage debt including the initial payment oI
P143,782.22.
The bank discontinued to comply with the Memorandum oI Agreement due to the
appearance oI Christina Behis, Manuel`s wiIe and a co-signatory in the mortgaged land, who
claimed that her signature was Iorged. For this reason, the bank considered the MA as void.
On January 7, 1986, plaintiIIs demanded in a letter that the bank comply with its
obligation under the Memorandum oI Agreement to which the latter denied. Petitioner bank
argued that the Memorandum oI Agreement is voidable on the ground that its consent to enter
said agreement was vitiated by Iraud because private respondents witheld Irom petitioner bank
the material inIormation that the real consideration Ior the sale with assumption oI mortgage oI
the property by Manuel Behis to Rayandayan and Arceo is P2,400,000.00, and not P250,000.00
as represented to petitioner bank. According to petitioner bank, had it known Ior the real
consideration Ior the sale, i.e. P2.4 million, it would not have consented into entering the
Memorandum oI Agreement with Rayandayan and Arceo as it was put in the dark as to the real
capacity and Iinancial standing oI private respondents to assume the mortgage Irom Manuel
Behis. Petitioner bank pointed out that it would not have assented to the agreement, as it could
not expect the private respondents to pay the bank the approximately P343,000.00 mortgage debt
when private respondents have to pay at the same time P2,400,000.00 to Manuel Behis on the
sale oI the land.

Issue: Whether or not there existed a Iraud in the case at bar.

eld: The kind oI Iraud that will vitiate a contract reIers to those insidious words or
machinations resorted to by one oI the contracting parties to induce to the other to enter into a
contract which without them he would not have agreed to. Simply stated, the Iraud must be
determining cause oI the contract, or must have caused the consent to be given. It is believed
that the non-disclosure to the bank oI the purchase price oI the sale oI the land between private
respondents and Manuel Behis cannot be the 'Iraud contemplated by Article 1338 oI the Civil
Code. From the sole reason submitted by the petitioner bank that it was kept in the dark as to the
Iinancial capacity oI private respondents, we cannot see how the omission or concealment oI the
real purchase price could have induced the bank into giving its consent to the agreement; or that
the bank would not have otherwise given its consent had it known oI the real purchase price.
Pursuant to Art. 1339 oI the Code, silence or concealment, by itselI, does not constitute
Iraud unless there is a special duty to disclose certain Facts. In the case at bar, private
respondents had no duty to do such.





















































































CAVEZ VS. PUBLIC ESTATES AUTORIT, 415 SCRA 403

Facts: Two Senate Committees, the Senate Blue Ribbon Committee and Committee on
Accountability oI Public OIIicers, conducted extensive public hearings to determine the actual
market value oI the public lands; and Iound out that the sale oI such was grossly undervalued
based on oIIicial documents submitted by the proper government agencies during the
investigations. It was Iound out that the Public Estates Authority (PEA), under the Joint Venture
Agreement (JVA), sold to Amari Coastal Bay Development Corporation 157.84 hectares oI
reclaimed public lands totaling to P 1.89 B or P 1,200 per square meter. owever during the
investigation process, the BIR pitted the value at P 7,800 per square meter, while the Municipal
Assessor oI Paraaque at P 6,000 per square meter and by the Commission on Audit (COA) at
P21,333 per square meter. Based on the oIIicial appraisal oI the COA, the actual loss on the part
oI the government is a gargantuan value oI P 31.78 B. owever, PEA justiIied the purchase price
based Irom the various appraisals oI private real estate corporations, amounting Irom P 500
1,000 per square meter. Further, it was also Iound out that there were various oIIers Irom
diIIerent private entities to buy the reclaimed public land at a rate higher than the oIIer oI Amari,
but still, PEA Iinalized the JVA with Amari. During the process oI investigation, Amari did not
hide the Iact that they agreed to pay huge commissions and bonuses to various persons Ior
proIessional eIIorts and services in successIully negotiating and securing Ior Amari the JVA.
The amount constituting the commissions and bonuses totaled to a huge P 1.76 B; an indicia oI
great bribery.

Issue: Whether or not the sale between PEA and Amari is unconstitutional.

eld: ES, it is unconstitutional Ior what was sold or alienated are lands oI the public domain.
Further, the Ponce doctrine, to which the respondent seeks reIuge and sanctuary, does not Iall
squarely in the case.
First, the subject oI the sale was a submerged land; i.e., 78 oI the total area sold by PEA
to Amari is still submerged land. Submerged lands, like Ioreshore lands, is oI the public domain
and cannot be alienated. As unequivocally stated in Article XII, Section 2 oI the Constitution, all
lands oI the public domain, waters, minerals, coals, petroleum, Iorces which are potential
energies, Iisheries, Iorests or timber, wildliIe, Ilora and Iauna, and other natural resources, with
the exception oI agricultural lands, are inalienable. Submerged lands Iall within the scope oI such
provision.
Second, in the Ponce case, the 'irrevocable option to purchase portions oI the Ioreshore
lands shall be enIorceable only upon reclamation, not prior to reclamation. In the case at bar,
even without actual reclamation, the submerged lands were immediately transIerred and sold to
Amari.
Third, the Ponce doctrine has been superseded by the provisions oI the Government
Auditing Code, which has been bolstered by the provisions oI the Local Government Code,
which states that any sale oI the public land must be made only thru a public bidding. There
being no public bidding in the subject sale oI land; the amended JVA is a negotiated contract in
patent violation oI such law.
Fourth, the Ponce doctrine which involved the validity to reclaim Ioreshore lands based
on RA 1899 (authorizing municipalities and chartered cities to reclaim Ioreshore lands) is not
applicable in the instant case because what is involved in the case at bar are submerged lands.
FiIth, in the Ponce case, the City oI Cebu was sanctioned to reclaim Ioreshore lands
under RA 1899 Ior it is a qualiIied end user government agency; thereIore, can sell patrimonial
property to private parties. But PEA is not an end user agency with respect to reclaimed lands
under the amended JVA Ior reclaimed lands are public and thereIore are inalienable.
Finally, the Ponce case was decided under the 1935 Constitution (1965-66), which
allowed private corporations to acquire alienable lands oI the public domain. The case at bar Ialls
within the ambit oI the 1987 Constitution which prohibits corporations Irom acquiring alienable
lands oI the public domain.
Ergo, the submerged lands, being inalienable and outside the commerce oI man, could
not be the subject oI the commercial transactions speciIied in the Amended JVA. ence, the
contract between Amari and the PEA is void.
































MELLIZA VS. CIT OF ILOILO, 23 SCRA 477


Facts:
Juliana Melliza during her liIetime owned three parcels oI residential land in Iloilo City.
On 1932, she donated to the then Municipality oI Iloilo a certain lot to serve as site Ior the
municipal hall. The donation was however revoked by the parties Ior the reason that area was
Iound inadequate to meet the requirements oI the development plan. Subsequently the said lot
was divided into several divisions.
Sometime in 1938, Juliana Melliza sold her remaining interest on the said lot to
Remedios San Villanueva. Remedios in turn transIerred the rights to said portion oI land to Pio
Sian Melliza. The transIer CertiIicate oI title in Melliza`s name bears on annotation stating that a
portion oI said lot belongs to the Municipality oI Iloilo.
Later the City oI Iloilo, which succeeds to the Municipality oI Iloilo, donated the city hall
sit to the University oI the Philippines, Iloilo Branch. On 1952, the University oI the Philippines
enclosed the site donated with a wire Ience.
Pio Sian Melliza then Iiled action in the Court oI First Instance oI Iloilo against Iloilo
City and the University oI the Philippines Ior recovery oI the parcel oI land or oI its value
speciIically LOT 1214-B.
Petitioner contends that LOT 1214-B was not included in those lots which were sold by
Juliana Melliza to the then municipality oI Iloilo and to say he would render the Deed oI Sale
invalid because the law requires as an essential element oI sale, determinate object.

Issue:
Whether or not IF Lot 1214 B is included in the Deed oI Sale, it would render the
contract invalid because the object would allegedly not be determinate as required by law.

eld:
The requirement oI the law speciIically Article 1460 oI the Civil Code, that the sale must
have Ior its object a determinate thing, is IulIilled as long as, at the time the contract is entered
into, the object oI the sale is cable oI being determinate without the necessity oI a new or Iurther
agreement between the parties.
The speciIic mention oI some oI the lots plus the statement that the lots object oI the sale
are the ones needed Ior city hall site suIIicient provides a basis, as oI the time, oI the execution
oI the contract, Ior rendering determinate said lots without the need oI a new Iurther agreement
oI the parties

























































ASKA VS. FERNANDO A. COSALAN, 46 PIL 179

Facts: The plaintiII in this case is Askay, an illiterate Igorrote between 70 and 80 years oI age,
residing in the municipal district oI Tublay, Province oI Benguet, who at various times has been
the owner oI mining property. The deIendant is Fernando A. Cosalan, the nephew by marriage
oI Askay, and municipal president oI Tublay, who likewise has been interested along with his
uncle in mining enterprises
About 1907, Askay obtained title to the Pet Kel Mineral Claim located in Tublay,
Benguet. On November 23, 1914, iI we are to accept deIendant's Exhibit 1, Askay sold this claim
to Cosalan. Nine years later, in 1923, Askay instituted action in the Court oI First Instance oI
Benguet to have the sale oI the Pet Kel Mineral Claim declared null, to secure possession oI the
mineral claim, and to obtain damages Irom the deIendant in the amount oI P10,500.00.
Judgment was rendered dismissing the complaint and absolving the deIendant Irom the same,
with costs against the plaintiII. On being inIormed oI the judgment oI the trial court, plaintiII
attacked it on two grounds: The Iirst, jurisdictional, and the second, Iormal. Both motions were
denied and an appeal was perIected.

Issue: Whether or not the plaintiII has established his cause oI action by a preponderance oI the
evidence.

eld: PlaintiII contends that the sale oI the Pet Kel Mineral Claim was accomplished through
Iraud and deceit on the part oI the deIendant. PlaintiII may be right but in our judgment he has
Iailed to establish his claim. Fraud must be both alleged and proved. One Iact exists in plaintiIIs
Iavor, and this is the age and ignorance oI the plaintiII who could be easily by the deIendant, a
man oI greater intelligence. Another Iact is the inadequacy oI the consideration Ior the transIer
which, according to the conveyance, consisted oI P1 and other valuable consideration, and
which, according to the oral testimony, in reality consisted oI P107 in cash, a bill-Iold, one sheet,
one cow, and two carabaos. Gross inadequacy naturally suggest Iraud is some evidence thereoI,
so that it may be suIIicient to show it when taken in connection with other circumstances, such as
ignorance or the Iact that one oI the parties has an advantage over the other. But the Iact that the
bargain was a hard one, coupled with mere inadequacy oI price when both parties are in a
position to Iorm an independent judgment concerning the transaction, is not a suIIicient ground
Ior the cancellation oI a contract. Against the plaintiII and in Iavor oI the deIendant, the Court
had the document itselI executed in the presence oI witnesses and beIore a notary public and
Iiled with the mining recorder. The notary public, Nicanor Sison, and one oI the attesting
witnesses, Apolonio Ramos, testiIied to the eIIect that in the presence oI the plaintiII and the
deIendant and oI the notary public and the subscribing witnesses, the deed oI sale was interpreted
to the plaintiII and that thereupon he placed his thumb mark on the document. Two Iinger print
experts, Dr. Charles S. Banks and A. Simkus, have declared in depositions that the thumb mark
on exhibit is that oI Askay. No less than Iour other witnesses testiIied that at various times
Askay had admitted to them that he had sold the Pet Kel Mine to Fernando A. Cosalan.


















































EIRS OF BALITE VS. LIM, 446 SCRA 57
Facts:
The spouses Aurelio and Esperanza Balite were the owners oI a parcel oI land at
Catarman, Northern Samar. When Aurelio died intestate, his wiIe Esperanza and their children
inherited the subject property and became co-owners thereoI. In the meantime, Esperanza
became ill and was in dire need oI money Iro her hospital expenses. She, through her daughter,
Cristeta, oIIered to sell to Rodrigo Lim, her undivided share Ior the price oI P1,000,000.00.
Esperaza and Rodrigo agreed that under the Deed oI Absolute Sale, it will be made to appear that
the purchase price oI the property would be P150,000.00 although the actual price agreed upon
by them Ior the property was P1,000,000.00. On April 16, 1996, Esperanza executed a Deed oI
Absolute Sale in Iavor oI Rodrigo. They also executed on the same day a Joint AIIidavit under
which they declared that the real price oI the property was P1,000,000.00 payable to Esperanza
by installments. Only Esperanza and two oI her children Antonio and Cristeta knew about the
said transaction. When the rest oI the children knew oI the sale, they wrote to the Register oI
Deeds saying that their mother did not inIorm them oI the sale oI a portion oI the said property
nor did they give consent thereto. Nonetheless, Rodrigo made partial payments to Antonio who
is authorized by his mother through a Special Power oI Attorney.
On October 23, 1996, Esperanza signed a letter addressed to Rodrigo inIorming the latter
that her children did not agree to the sale oI the property to him and that she was withdrawing all
her commitments until the validity oI the sale is Iinally resolved. On October 31, 1996,
Esperanza died intestate and was survived by her children. Meanwhile, Rodrigo caused to be
published in the Samar Reporter the Deed oI Absolute Sale.
On June 27, 1997, petitioners Iiled a complaint against Rodrigo with the Regional Trial
Court Ior the annulment oI sale, quieting oI title, injunction and damages. Subsequently,
Rodrigo secured a loan Irom the Rizal Commercial Banking Corporation in the amount oI
P2,000,000.00 and executed a Real Estate Mortgage over the property as security thereoI. On
motion oI the petitioners, they were granted leave to Iile an amended complaint impleading the
bank as additional party deIendant. On March 30, 1998, the court Issued an order rejecting the
amended complaint oI the petitioners. Likewise, the trial court dismissed the complaint. It eld
that pursuant to Article 493 oI the Civil Code, a co-owner is not invalidated by the absence oI the
consent oI the other co-owners. ence, the sale by Esperanza oI the property was valid; the
excess Irom her undivided share should be taken Irom the undivided shares oI Cristeta and
Antonio, who expressly agreed to and beneIit Irom the sale. The Court oI Appeals likewise eld
that the sale was valid and binding insoIar as Esperanza Balite`s undivided share oI the property
was concerned. It aIIirmed the trial court`s ruling that the lack oI consent oI the co-owners did
not nulliIy the sale.
Issue: Whether or not the Deed oI Absolute Sale is null and void on the ground that it is
IalsiIied; it has an unlawIul cause; and it is contrary to law and/or public policy.

eld: The contract is an example oI a simulated contract. Article 1345 oI the Civil Code
provides that the simulation oI a contract may either be absolute or relative. In absolute
simulation, there is a colorable contract but without any substance, because the parties have no
intention to be bound by it. An absolutely simulated contract is void, and the parties may
recover Irom each other what they may have given under the 'contract. On the other hand, iI
the parties state a Ialse cause is relatively simulated. ere, the parties` real agreement binds
them. In the present case, the parties intended to be bound by the Contract, even iI it did not
reIlect the actual purchase price oI the property. The letter oI Esperanza to respondent and
petitioner`s admission that there was partial payment made on the basis oI the Absolute Sale
reveals that the parties intended the agreement to produce legal eIIect.
Since the Deed oI Absolute Sale was merely relatively simulated, it remains valid and
enIorceable. All the essential requisites prescribed by law Ior the validity and perIection oI
contracts is present. owever, the parties shall be bound by their real agreement Ior a
consideration oI P1,000,000 as reIlected by their Joint AIIidavit.
The petition is DENIED and the assailed decision AFFIRMED.






































SUNTA VS. COURT OF APPEALS, 252 SCRA 430
Facts:
Petitioners and private respondent were buyers oI condominium units Irom BayIront
Development Corporation . Petitioners paid in advance the Iull amount Ior their units. BayIront,
however, Iailed to deliver them despite the due date stated in their contract to sell. Failing to get
a reimbursement Irom BayIront, petitioners Iiled an action against it in the ousing and Land
Use Regulatory Board Ior violation oI PD 957 and PD 1344, rescission oI contract, sum oI
money and damages.
The case, was decided in Iavor oI petitioners. BayIront`s titled properties, including the
subject condominium Unit G and two parking slots in its name with Condominium CertiIicate oI
Title were levied on by the sheriIIs oI the Regional Trial Court oI Manila. At the subsequent
public auction oI BayIront`s properties, petitioners were the highest bidders.The sheriII`s Iinal
deed oI sale was executed on April 16, 1996.
On the other hand, private respondent Eugenia Gocolay, chairperson and president oI
Keyser Mercantile Co., Inc. (Keyser), claims that she entered into a contract to sell with BayIront
Ior the purchase on installment basis oI the same Unit G, among others. She completed her
payments in 1991 but BayIront executed the deed oI absolute sale and delivered CCT No. 15802
only on November 9, 1995.
Gocolay was about to transIer CCT No. 15802 to Keyser when she discovered the
annotations oI notice oI levy and certiIicate oI sale at the back oI the said title. She was
nevertheless Issued CCT No. 26474 in the name oI Keyser on March 12, 1996 with the
annotations in Iavor oI petitioners being carried over.
Gocolay Iiled beIore the Expanded National Capital Regional Field OIIice oI the
LURB a complaint Ior annulment oI auction sale and cancellation oI notice oI levy Irom her
title.

Issue:
Whether or not the LURB, a quasi-judicial agency, have jurisdiction over an action
seeking the annulment oI an auction sale, cancellation oI notice oI levy and damages with prayer
Ior the issuance oI a preliminary injunction and/or temporary restraining order.

eld:
The LURB had no jurisdiction over the spouses Suntay. Section 1 oI PD 1344 states the
jurisdiction oI the LURB:
SECTION 1. In the exercise oI its Iunction to regulate the real estate trade and
business and in addition to its power provided Ior in Presidential Decree No. 957,
the |LURB| shall have exclusive jurisdiction to hear and decide cases oI
the Iollowing nature:
A. Unsound real estate business practices;
B. Claims involving reIund and any other claims Iiled by subdivision lot or
condominium unit buyers against the project owner, developer, dealer,
broker or salesman; and
C. Cases involving speciIic perIormance oI contractual and statutory
obligation Iiled by buyers oI subdivision lot/condominium units against the
owner, developer, dealer, broker or salesman.
Petitioners were condominium buyers, not project/condominium owners, developers,
dealers, brokers or salesmen against whom a case cognizable by the LURB could be brought.
Obviously the cause oI action (unsound business practice) could not have reIerred to them since
they were mere buyers oI a condominium unit, but only to BayIront as developer oI the project.
It was thereIore error Ior Gocolay to include petitioners in LRB Case No. REM-032196-9152
and Ior the LURB to take cognizance oI the complaint.
The LURB had no jurisdiction over the Issue oI ownership, possession or interest in
the disputed condominium unit. BP 129 vests jurisdiction over these matters on the RTC which
exercises exclusive original jurisdiction:
(1) in all civil actions in which the subject oI the litigation is incapable oI pecuniary
estimation;
(2) in all civil actions which involve the titles to, or possession oI, real property, or any
interest therein. except actions Ior Iorcible entry into and unlawIul detainer oI lands or
buildings, original jurisdiction over which is conIerred upon the Metropolitan Trial
Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts;
(3) in all cases not within the exclusive jurisdiction oI any court, tribunal, person or
body exercising jurisdiction oI any court, tribunal, person or body exercising judicial or
quasi-judicial Iunctions.
The decision in LRB Case No. REM-032196-9152 was in eIIect a determination oI the
ownership oI the condominium unit because it directed the annulment oI the execution sale in
LRB Case No. REM-102193-5625 on which petitioner`s title was based. This was clearly
incorrect.







































































U VS. COURT OF APPEALS, 314 SCRA 69
Facts:
Petitioners William Uy and Rodel Roxas are agents authorized to sell eight (8) parcels oI
land by the owners thereoI. By virtue oI such authority, petitioners oIIered to sell the lands,
located in Tuba, Tadiangan, Benguet to respondent National ousing Authority (NA) to be
utilized and developed as a housing project.
On February 14, 1989, NA approved the acquisition oI the said parcels oI land with an
area oI 31.8231 hectares at the cost oI P23.867 million, pursuant to which the parties executed a
series oI Deeds oI Absolute Sale covering the subject lands. OI the eight parcels oI lands,
however, only Iive were paid Ior by the NA because oI the report it received Irom the Land
Geosciences Bureau oI the Department oI Environment and Natural Resources that the
remaining area is located at an active landslide area and thereIore, not suitable Ior development
into a housing project. NA eventually cancelled the sale over the remaining three (3) parcels oI
land.
On March 9, 1992, petitioners Iiled a complaint Ior damages. AIter trial, the RTC oI
Quezon City rendered the cancellation oI contract to be justiIied and awarded P1.255 million as
damages in Iavor oI petitioners.
Upon appeal by petitioners, the Court oI Appeals reversed the decision and entered a new
one dismissing the complaint including the award oI damages.
The motion Ior reconsideration having been denied, petitioners seek relieI Irom this court
contending, inter alia, that the CA erred in declaring that NA had any legal basis to rescind the
subject sale.

Issue: Whether or not a party`s entry into a contract aIIects the validity oI the contract.

eld: Petitioners conIuse the cancellation oI the contract by the NA as a rescission oI the
contract under Article 1191 oI the Civil Code. The right to rescission is predicated on a breach
oI Iaith by the other party that violates the reciprocity between them. The power to rescind is
given to the injured party. In this case, the NA did not rescind the contract. Indeed, it did not
have the right to do so Ior the other parties to the contract, the vendors did not commit any
breach, much less a substantial breach, oI their obligation. The NA did not suIIer any injury.
The cancellation was not thereIore a rescission under Article 1191. Rather, it was based on the
negation oI the cause arising Irom the realization that the lands, which were the objects oI the
sale, were not suitable Ior housing.
As a general rule, a party`s motives Ior entering into a contract do not aIIect the contract.
owever, when the motive predetermines the cause, the motive may be regarded as the cause.
As eld in Liguez v. CA, ... It is well to note, however, that Manresa himselI, while maintaining
the distinction and upholding the inoperativess oI the motives oI the parties to determine the
validity oI the contract, expressly excepts Irom the rule those contracts that are conditioned upon
the attainment oI the motives oI either party. The same view is eld by the Supreme Court oI
Spain, in its decisions oI Fevruary 4, 1941 and December 4, 1946, holdinmg that the motive may
be regarded as causa when it predermones the purpose oI the contract.

















































LIGUEZ, VS. COURT OF APPEALS, 102 Phil 577
Facts:
The case began upon complaint Iiled by petitioner-appellant against the widow and heirs
oI the late Salvador P. Lopez to recover a parcel oI 51.84 hectares oI land, situated in Barrio
Bogac-Linot, oI the municipality oI Mati, Province oI Davao. PlaintiII averred to be its legal
owner, pursuant to a deed oI donation oI said land, executed in her Iavor by the late owner,
Salvador P. Lopez, on 18 May 1943. The deIense interposed was that the donation was null and
void Ior having an illicit causa or consideration, which was plaintiII's entering into marital
relations with Salvador P. Lopez, a married man; and that the property had been adjudicated to
the appellees as heirs oI Lopez by the Court oI First Instance, since 1949. The Court oI Appeals
Iound that the deed oI donation was prepared by the Justice oI the Peace oI Mati, Davao, beIore
whom it was signed and ratiIied on the date aIoresaid. At the time, appellant Liguez was a
minor, only 16 years oI age. Salvador donated it to Liguez out oI his love and aIIection to her.
The Court oI Appeals Iound that when the donation was made, Lopez had been living with the
parents oI appellant Ior barely a month; that the donation was made in view oI the desire oI
Salvador P. Lopez, a man oI mature years to have sexual relations with appellant Conchita
Liguez; that Lopez had conIessed to his love Ior appellant to the instrumental witnesses, with the
remark that her parents would not allow Lopez to live with her unless he Iirst donated the land in
question; that aIter the donation, Conchita Liguez and Salvador P. Lopez lived together in the
house that was built upon the latter's orders, until Lopez was killed on July 1st, 1943, by some
guerrillas who believed him to be pro-Japanese. It was also ascertained by the Court oI Appeals
that the donated land originally belonged to the conjugal partnership oI Salvador P. Lopez and
his wiIe, Maria Ngo; that the latter had met and berated Conchita Ior living maritally with her
husband, sometime during June oI 1943; that the widow and children oI Lopez were in
possession oI the land and made improvements thereon; that the land was assessed in the tax
rolls Iirst in the name oI Lopez and later in that oI his widow; and that the need oI donation was
never recorded.
Upon these Facts, the Court oI Appeals eld that the deed oI donation was inoperative,
and null and void (1) because the husband, Lopez, had no right to donate conjugal property to the
plaintiII appellant; and (2) because the donation was tainted with illegal causa or consideration,
oI which donor and donee were participants.

Issue:
Whether or not the deed oI donation made by Lopez in Iavor oI Liguez was valid.

eld:
Under Article 1274, liberality oI the donor is deemed causa only in those contracts that
are oI "pure" beneIicence; that is to say, contracts designed solely and exclusively to procure the
welIare oI the beneIiciary, without any intent oI producing any satisIaction Ior the donor;
contracts, in other words, in which the idea oI selI-interest is totally absent on the part oI the
transIeror.
For this very reason, the same Article 1274 provides that in remuneratory contracts, the
consideration is the service or beneIit Ior which the remuneration is given; causa is not liberality
in these cases because the contract or conveyance is not made out oI pure beneIicence, but
"solvendi animo." In consonance with this view, the Court in Philippine Long Distance Co. vs.
Jeturian* G. R. L-7756, July 30, 1955, like the Supreme Court oI Spain in its decision oI 16 Feb.
1899, has ruled that bonuses granted to employees to excite their zeal and eIIiciency, with
consequent beneIit Ior the employer, do not constitute donation having liberality Ior a
consideration.
ere the Facts as Iound by the Court oI Appeals, which the Supreme Court could not
vary, demonstrate that in making the donation in question, the late Salvador P. Lopez was not
moved exclusively by the desire to beneIit appellant Conchita Liguez, but also to secure her
cohabiting with him, so that he could gratiIy his sexual impulses. This is clear Irom the
conIession oI Lopez to the witnesses Rodriguez and Ragay, that he was in love with appellant,
but her parents would not agree unless he donated the land in question to her. Actually,
thereIore, the donation was but one part oI an onerous transaction (at least with appellant's
parents) that must be viewed in its totality. Thus considered, the conveyance was clearly
predicated upon an illicit causa.
Appellant seeks to diIIerentiate between the alleged liberality oI Lopez, as causa Ior the
donation in her Iavor, and his desire Ior cohabiting with appellant, as motives that impelled him
to make the donation, and quotes Irom Manresa and the jurisprudence oI this Court on the
distinction that must be maintained between causa and motives. It is well to note, however, that
Manresa himselI, while maintaining the distinction and upholding the inoperativeness oI the
motives oI the parties to determine the validity oI the contract, expressly excepts Irom the rule
those contracts that are conditioned upon the attainment oI the motives oI either party.
Appellees, as successors oI the late donor, being thus precluded Irom pleading the
deIense oI immorality or illegal causa oI the donation, the total or partial ineIIectiveness oI the
same must be decided by diIIerent legal principles. In this regard, the Court oI Appeals correctly
eld that Lopez could not donate the entirety oI the property in litigation, to the prejudice oI his
wiIe Maria Ngo, because said property was conjugal in character, and the right oI the husband to
donate community property is strictly limited by law.
The situation oI the children and Iorced heirs oI Lopez approximates that oI the widow.
As privies oI their parent, they are barred Irom invoking the illegality oI the donation. But their
right to a legitime out oI his estate is not thereby aIIected, since the legitime is granted them by
the law itselI, over and above the wishes oI the deceased. ence, the Iorced heirs are entitled to
have the donation set aside in so Iar as inoIIicious: i.e., in excess oI the portion oI Iree disposal ,
computed as provided in Articles 818 and 819, and bearing in mind that "collationable giIts"
under Article 818 should include giIts made not only in Iavor oI the Iorced heirs, but even those
made in Iavor oI strangers, as decided by the Supreme Court oI Spain in its decisions oI 4 May
1899 and 16 June 1902. So that in computing the legitimes, the value oI the property donated to
herein appellant, Conchita Liguez, should be considered part oI the donor's estate. Only the
court oI origin has the requisite date to determine whether the donation is inoIIicious or not.
With regard to the improvements in the land in question, the same should be governed by the
rules oI accession and possession in good Iaith, it being undisputed that the widow and heirs oI
Lopez were unaware oI the donation in Iavor oI the appellant when the improvements were
made.
Appellant Conchita Liguez was declared by the Supreme Court entitled to so much oI the
donated property as may be Iound, upon proper liquidation, not to prejudice the share oI the
widow Maria Ngo in the conjugal partnership with Salvador P. Lopez or the legitimes oI the
Iorced heirs oI the latter.


PILIPPINE BANKING CORPORATION VS. LUI SE, 21 SCRA 52

Facts:
Justina Santos and her sister Lorenza were the owners in common oI a piece oI land in
Manila. In it are two residential houses. The sisters lived in one oI the houses, while Wong
eng, a Chinese, lived with his Iamily in the restaurant. Wong had been a long time lessee oI a
portion oI the property, paying monthly rentals. On September 22, 1957, Justina became the
owner oI the entire property as her sister died with no other heir. On November 1, 1957, Justina
executed a contract oI lease in Iavor oI Wong, covering a portion already leased to him and
another portion oI the property. The lease was Ior 50 years, although the lessee was give the
right to withdraw at anytime Irom the agreement with a stipulated monthly rental. On December
1, she executed another contract giving Wong the option to buy the leased premises Ior P120,000
payable within 10 years at monthly installment oI P1,000. The option was conditioned on his
obtaining Philippine citizenship, which was then pending. is application Ior naturalization was
withdrawn when it was discovered that he was a resident oI Rizal.
On November 18,1958, she executed two other contracts one extending the term to 99
years and the term Iixing the term oI the option oI 50 years. In the two wills, she bade her
legatees to respect the contract she had entered into with Wong, but it appears to have a change
oI heart in a codicil. Claiming that the various contracts were made because oI her machinations
and inducements practiced by him, she now directed her executor to secure the annulment oI the
contracts. On November 18, the action was Iiled in the CFI oI Manila. The complaint alleged
that Wong obtained the contracts through Iraud. Wong denied having taken advantage oI her
trust in order to secure the execution oI the contracts on question. e insisted that the various
contracts were Ireely and voluntarily entered into by the parties. The lower court declared all the
contracts null and void with the exception oI the Iirst. From this decision, both parties appealed
directly to the Court. AIter the case were submitted Ior decision, both parties died, Wong on
1962, and Justina on 1964. Wong as substituted by his wiIe Lui She while Justina by the
Philippine Banking Corporation.

Issue Whether or not the contracts entered into by the parties are void

eld:The Court eld the lease and the rest oI the contracts were obtained with the consent oI
Justina Ireely given and voluntarily. owever the contacts are not necessarily valid on the
ground that it circumvents the Constitutional prohibition against the transIer oI lands to aliens.
The illicit purpose then becomes the illegal causa, rendering the contracts void.
It does not Iollow Irom what has been said that because the parties are in pari delicto they
will be leIt where they are, without relieI. For one thing, the original parties who were guilty oI
violation oI Iundamental charter have died and have since substituted by their administrators to
whom it would e unjust to impute their guilt. For another thing, Article 1416 oI the Civil Code
provides an exception to the pari de licto, that when the agreement is not illegal per se but is
merely prohibited, and the prohibition oI the law is designed Ior the protection oI the plaintiII, he
may recover what he has paid or delivered.



















































SONIA F. LONDRES VS. TE COURT OF APPEALS, 394 SCRA 133

Facts:
The present case stemmed Irom a battle oI ownership over Lots 1320 and 1333 both
located in Barrio Baybay, Roxas City, Capiz. Paulina originally owned these two parcels oI land.
AIter Paulina`s death, ownership oI the lots passed to her daughter, Filomena. The surviving
children oI Filomena, namely, Sonia Fuentes Londres, Armando V. Fuentes, Chi-Chita Fuentes
Quintia, Roberto V. Fuentes, Leopoldo V. Fuentes and Marilou Fuentes Esplana, herein
petitioners, now claim ownership over Lots 1320 and 1333. On the other hand, private
respondents Consolacion and Elena anchor their right oI ownership over Lots 1320 and 1333 on
the Absolute Sale executed by Filomena on April 24, 1959. Filomena sold the two lots in Iavor
oI Consolacion and her husband, Julian. Elena is the daughter oI Consolacion and Julian.
On March 30, 1989, petitioners Iiled a complaint Ior the declaration oI nullity oI contract,
damages and just compensation. Petitioners sought to nulliIy the Absolute Sale conveying Lots
1320 and 1333 and to recover just compensation Irom public respondents DPW and DOTC.
Petitioners claimed that as the surviving children oI Filomena, they are the owners oI Lots 1320
and 1333. Petitioners claimed that these two lots were never sold to Julian. Petitioners doubt the
validity oI the Absolute Sale because it was tampered. The cadastral lot number oI the second lot
mentioned in the Absolute Sale was altered to read Lot 1333 when it was originally written as
Lot 2034. Petitioners pointed out that Lot 2034, situated in Barrio Culasi, Roxas City, Capiz, was
also owned by their grandmother, Paulina. And that it was only recently that they learned oI the
claim oI private respondents when Consolacion Iiled a petition Ior the judicial reconstitution oI
the original certiIicates oI title oI Lots 1320 and 1333 with the Capiz Cadastre. Upon Iurther
inquiry, petitioners discovered that there exists a notarized Absolute Sale executed on April 24,
1959 registered only on September 22, 1982 in the OIIice oI the Register oI Deeds oI Roxas
City. The private respondents` copy oI the Absolute Sale was tampered so that the second parcel
oI lot sold, Lot 2034 would read as Lot 1333. owever, the Records Management and Archives
OIIice kept an unaltered copy oI the Absolute Sale. This other copy shows that the objects oI the
sale were Lots 1320 and 2034.
Private respondents maintained that they are the legal owners oI Lots 1333 and 1320.
Julian purchased the lots Irom Filomena in good Iaith and Ior a valid consideration. Private
respondents explained that Julian was deaI and dumb and as such, was placed in a
disadvantageous position compared to Filomena. Julian had to rely on the representation oI other
persons in his business transactions. AIter the sale, Julian and Consolacion took possession oI the
lots. Up to now, the spouses` successors-in-interest are in possession oI the lots in the concept
owners. Private respondents claimed that the alteration in the Absolute Sale was made by
Filomena to make it conIorm to the description oI the lot in the Absolute Sale. Private
respondents Iiled a counterclaim with damages.
The cross-claim oI petitioners against public respondents was Ior the recovery oI just
compensation. Petitioners claimed that during the liIetime oI Paulina, public respondents took a
3,200-square meter portion oI Lot 1320. The land was used as part oI the Arnaldo Boulevard in
Roxas City without any payment oI just compensation. In 1988, public respondents also
appropriated a 1,786-square meter portion oI Lot 1333 as a vehicular parking area Ior the Roxas
City Airport. Sonia, one oI the petitioners, executed a deed oI absolute sale in Iavor oI the
Republic oI the Philippines over this portion oI Lot 1333. According to petitioners, the vendee
agreed to pay petitioners P214,320.00. Despite demands, the vendee Iailed to pay the stipulated
amount.
The trial court issued its decision upholding the validity oI the Absolute Sale. This was
aIIirmed by the Court oI Appeals.

Issue: Whether or not the notarized copy should prevail.

eld:
Among others, petitioners harp on the Iact that the notarized and registered copy oI the
Absolute Sale should have, been correspondingly corrected. Petitioners believe that the notarized
and archived copy should prevail. We disagree. A contract oI sale is perIected at the moment
there is a meeting oI the minds upon the thing which is the object oI the contract and upon the
price. Being consensual, a contract oI sale has the Iorce oI law between the contracting parties
and they are expected to abide in good Iaith with their respective contractual commitments.
Article 1358 oI the Civil Code, which requires certain contracts to be embodied in a public
instrument, is only Ior convenience, and registration oI the instrument is needed only to
adversely aIIect third parties. Formal requirements are, thereIore, Ior the purpose oI binding or
inIorming third parties. Non-compliance with Iormal requirements does not adversely aIIect the
validity oI the contract or the contractual rights and obligations oI the parties.









































































CLARA M. BALATBAT VS. COURT OF APPEALS , 261 SCRA 128

Facts:
The lot in question covered by TransIer CertiIicate oI Title No. 51330 was acquired by
plaintiII Aurelio Roque and Maria Mesina during their conjugal union and the house constructed
thereon was likewise built during their marital union. Out oI their union, plaintiII and Maria
Mesina had Iour children. When Maria Mesina died on August 28, 1966, the only conjugal
properties leIt are the house and lot above stated oI which plaintiII herein, as the legal spouse, is
entitled to one-halI share pro-indiviso thereoI. With respect to the one-halI share pro-indiviso
now Iorming the estate oI Maria Mesina, plaintiII and the Iour children, the deIendants here, are
each entitled to one-IiIth (1/5) share pro-indiviso. Aurelio Roque then entered into a contract oI
Absolute Sale with the spouses Aurora and Jose Repuyan. owever, on August 20, 1980,
Aurelio Iiled a complaint Ior Rescission oI Contract against Spouses Repuyan Ior the latter`s
Iailure to pay the balance oI the purchase price. A deed oI absolute sale was then executed on
February 4, 1982 between Aurelio S. Roque, Corazon Roque, Feliciano Roque, Severa Roque
and Osmundo Roque and Clara Balatbat, married to Alejandro Balatbat. On April 14, 1982,
Clara Balatbat Iiled a motion Ior the issuance oI a writ oI possession which was granted by the
trial court on September 14, 1982 "subject, however, to valid rights and interest oI third persons
over the same portion thereoI, other than vendor or any other person or persons privy to or
claiming any rights or interests under it." The corresponding writ oI possession was issued on
September 20, 1982. The lower courts then rendered judgment in Iavor oI the Spouses Repuyan
and declared the Deed oI Absolute Sale as valid.

Issue: Whether or not the delivery oI the owner`s certiIicate oI title is Ior convenience or Ior
validity or enIorceability.

eld: The Supreme Court Iound that the sale between Aurelio and the Spouses Repuyan is not
merely Ior the reason that there was no delivery oI the subject property and that
consideration/price was not Iully paid but the sale as consummated, hence, valid and enIorceable.
The non-delivery oI the possession oI the subject property to the private respondent, suIIice it to
say that ownership oI the thing sold is acquired only Irom the time oI delivery thereoI, either
actual or constructive. Article 1498 oI the Civil Code provides that when the sale is made
through a public instrument, the execution thereoI shall be equivalent to the delivery oI the thing
which is the object oI the contract, iI Irom the deed the contrary does not appear or cannot be
inIerred. The execution oI the public instrument, without actual delivery oI the thing, transIers
the ownership Irom the vendor to the vendee, who may thereaIter exercise the rights oI an owner
over the same. In the instant case, vendor Roque delivered the owner's certiIicate oI title to
herein private respondent. It is not necessary that vendee be physically present at every square
inch oI the land bought by him, possession oI the public instrument oI the land is suIIicient to
accord him the rights oI ownership.





UNIVERSAL ROBINA SUGAR MILLING CORPORATION VS. EIRS OF ANGEL TEVES,
389 SCRA 316

Facts:
Andres Abanto owned two parcels oI land situated in Campuyo, Manjuyod, Negros
Oriental. One lot is registered in his name and the other lot is unregistered. When he died, his
heirs executed an "Extrajudicial Settlement oI the Estate oI the Deceased and Simultaneous
Sale." In this document, Abanto's heirs adjudicated unto themselves the two lots and sold the
unregistered lot to the United Planters Sugar Milling Company, Inc. (UPSUMCO), and the
registered lot to Angel M. Teves, Ior a total sum oI P115,000.00. The sale was not registered.
Out oI respect Ior his uncle Montenegro, who was UPSUMCO's Iounder and president,
Teves verbally allowed UPSUMCO to use the registered lot Ior pier and loading Iacilities, Iree oI
charge, subject to the condition that UPSUMCO shall shoulder the payment oI real property
taxes and that its occupation shall be co-terminus with its corporate existence. UPSUMCO then
built a guesthouse and pier Iacilities on the property. ears later, UPSUMCO`s properties were
acquired by the Philippine National Bank (PNB). Later, PNB transIerred the same properties to
the Asset Privatization Trust (APT) which, in turn, sold the same to the Universal Robina Sugar
Milling Corporation (URSUMCO). URSUMCO then took possession oI UPSUMCO`s
properties, including Teves' lot.
Upon learning oI the acquisition oI his lot, Teves Iormally asked the corporation to turn
over to him possession thereoI or the corresponding rentals. e stated in his demand letters that
he merely allowed UPSUMCO to use his property until its corporate dissolution; and that it was
not mortgaged by UPSUMCO with the PNB and, thereIore, not included among the Ioreclosed
properties acquired by URSUMCO.
URSUMCO reIused to heed Teves' demand, claiming that it acquired the right to occupy
the property Irom UPSUMCO which purchased it Irom Andres Abanto; and that it was merely
placed in the name oI Angel Teves, as shown by the "Deed oI TransIer and Waiver oI Rights and
Possession" dated November 26, 1987. Under this document, UPSUMCO transIerred to
URSUMCO its application Ior agricultural and Ioreshore lease. The same document partly states
that the lands subject oI the Ioreshore and agricultural lease applications are bounded on the
north by the "titled property oI Andres Abanto bought by the transIeror (UPSUMCO) but placed
in the name oI Angel Teves". URSUMCO Iurther claimed that it was UPSUMCO, not Teves,
which has been paying the corresponding realty taxes.
Consequently, Teves Iiled a complaint Ior recovery oI possession oI real property with
damages against URSUMCO. owever, on September 4, 1992, Teves died and was substituted
by his heirs. On April 6, 1994, the RTC eld that URSUMCO has no personality to question the
validity oI the sale oI the property between the heirs oI Andres Abanto and Angel Teves since it
is not a party thereto; that Teves' Iailure to have the sale registered with the Registry oI Deeds
would not vitiate his right oI ownership, unless a third party has acquired the land in good Iaith
and Ior value and has registered the subsequent deed; that the list oI properties acquired by
URSUMCO Irom the PNB does not include the disputed lot and, thereIore, was not among those
conveyed by UPSUMCO to URSUMCO.
On appeal by URSUMCO, the Court oI Appeals aIIirmed the RTC decision, holding that
the transaction between Angel Teves and Andres Abanto's heirs is a contract oI sale, not one to
sell, because ownership was immediately conveyed to the purchaser upon payment oI
P115,000.00. On October 29, 1996, URSUMCO Iiled a motion Ior reconsideration but was
denied by the Appellate Court. ence, the instant petition Ior review on certiorari.

Issue: Whether or not the respondents have established a cause oI action against petitioner.

eld: Petitioner URSUMCO contends that respondents have no cause oI action because the
"Extrajudicial Settlement oI the Estate oI the Deceased Andres Abanto and Simultaneous Sale" is
merely a promise to sell and not an absolute deed oI sale, hence, did not transIer ownership oI
the disputed lot to Angel Teves. Assuming that the document is a contract oI sale, the same is
void Ior lack oI consideration because the total price oI P115,000.00 does not speciIically reIer
to the registered lot making the price uncertain. Furthermore, the transaction, being unregistered,
does not bind third parties.
Petitioner's contentions lack merit. As eld by the RTC and the Court oI Appeals, the
transaction is not merely a contract to sell but a contract oI sale. In a contract oI sale, title to the
property passes to the vendee upon delivery oI the thing sold; while in a contract to sell,
ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until Iull
payment oI the purchase price. In the case at bar, the subject contract, duly notarized, provides
that the Abanto heirs sold to Teves the lot covered by TCT No. -37. There is no showing that
the Abanto heirs merely promised to sell the said lot to Teves.
The absolute ownership over the registered land was indeed transIerred to Teves is
Iurther shown by his acts subsequent to the execution oI the contract. As Iound by the trial court,
it was Teves, not Andres Abanto's heirs, who allowed UPSUMCO to construct pier Iacilities and
guesthouse on the land. When the property was erroneously included among UPSUMCO's
properties that were transIerred to petitioner URSUMCO, it was Teves, not the heirs oI Andres
Abanto, who inIormed petitioner that he owns the same and negotiated Ior an arrangement
regarding its use. Teves even Iurnished petitioner documents and letters showing his ownership
oI the lot, such as a copy oI the "Extrajudicial Settlement oI the Estate oI the Deceased Andres
Abanto and Simultaneous Sale" and a certiIied true copy oI TCT No. -37 covering the disputed
lot. Indeed, the trial court and the Court oI Appeals correctly ruled that Teves purchased the lot
Irom the Abanto heirs.
That the contract oI sale was not registered does not aIIect its validity. Being consensual
in nature, it is binding between the parties, the Abanto heirs and Teves. Article 1358 oI the New
Civil Code, which requires the embodiment oI certain contracts in a public instrument, is only
Ior convenience, and the registration oI the instrument would merely aIIect third persons.
Formalities intended Ior greater eIIicacy or convenience or to bind third persons, iI not done,
would not adversely aIIect the validity or enIorceability oI the contract between the contracting
parties themselves. Thus, by virtue oI the valid sale, Angel Teves stepped into the shoes oI the
heirs oI Andres Abanto and acquired all their rights to the property.
REFORMATION OF INSTRUMENTS
When Prohibited






SARMING VS. D, 383 SCRA 131

Facts:
Petitioners are the succesors-in-interest oI original deIendant Silveria Flores, while
respondents Cresencio Dy and Ludivina Dy-Chan are the succesors-in-interest oI the original
plaintiII Alejandra DelIino, the buyer oI one oI the lots subject oI this case. They were joined in
this petition by the successors-in-interest oI Isabel, Juan, ilario, Ruperto, Tomasa, and Luisa
and Trinidad themselves, all surnamed Flores, who were also the original plaintiIIs in the lower
court. They are the descendants oI Venancio and Jose, the brothers oI the original deIendant
Silveria Flores.
A controversy arose regarding the sale oI Lot 4163 which was halI-owned by the original
deIendant, Silveria Flores, although it was solely registered under her name. The other halI was
originally owned by Silveria`s brother, Jose. On January 1956, the heirs oI Jose entered into a
contract with plaintiII Alejandra DelIino, Ior the sale oI their one-halI share oI Lot 4163 aIter
oIIering the same to their co-owner, Silveria, who declined Ior lack oI money. Silveria did not
object to the sale oI said portion to Alejandra.
Atty. Deogracias Pinili, Alejandra`s lawyer then prepared the document oI sale. In the
preparation oI the document however, OCT no. 4918-A, covering Lot 5734, and not the correct
title covering Lot 4163 was the one delivered to Pinili.
Unaware oI the mistake committed, Alejandra immediately took possession oI Lot 4163
and introduced improvements on the said lot.
Two years later, when Alejandra DelIino purchased the adjoinin portion oI the lot she had
been occupying, she discovered that what was designated in the deed, Lot 5734, was the wrong
lot. Thus, Alejandra and the vendors Iiled Ior the IeIormation oI the Deed oI Sale.

Issue: Whether or not reIormation is proper in this case.

eld:ReIormation is that remedy in equity by means oI which a written instrument is made or
construed so as to express or inIorm to the real intention oI the parties.
An action Ior reIormation oI instrument under this provision oI law may prosper only
upon the concurrence oI the Iollowing requisites: (1) there must have been a meeting oI the
minds oI the parties to the contract; (2) the instrument does not express the true intention oI the
parties; and (3) the Iailure oI the instrument to express the true intention oI the parties is due to
mistake, Iraud, inequitable conduct or accident.
All oI these requesites are present in this case. There was a meeting oI the minds
between the parties to the contract but the deed did not express the true intention ot the parties
due to the designation oI the lot subject oI the deed. There is no dispute as to the intention oI the
parties to sell the land to Alejandra DelIino but there was a mistake as to the designation oI the
lot intended to be sold as stated in the Settlement oI Estate and Sale.







CEBU CONTRACTORS CONSORTIUM CO. VS. COURT OF APPEALS,
407 SCRA 154

Facts:
The instant Petition Ior Review on Certiorari stems Irom a complaint Ior collection oI a
sum oI money with replevin Iiled by respondent Makati Leasing and Finance Corporation
(MLFC) against petitioner Cebu Contractors Consortium Company (CCCC) beIore the Regional
Trial Court oI Makati.
MLFC alleges that on August 25, 1976 a lease agreement relating to various equipment
was entered into between MLFC, as lessor, and CCCC, as lessee. The terms and conditions oI
the lease were deIined in said agreement and in two lease schedules oI payment. To secure the
lease rentals, a chattel mortgage, and a subsequent amendment thereto, were executed in Iavor oI
MLFC over other various equipment owned by CCCC.
On June 30, 1977, CCCC began deIaulting on the lease rentals, prompting MLFC to send
demand letters. When the demand letters were not heeded, MLFC Iiled a complaint Ior the
payment oI the rentals due and prayed that a writ oI replevin be Issued in order to obtain
possession oI the equipment leased and to Ioreclose on the equipment mortgaged.
CCC`s position is that it is no longer indebted to MLFC because the total amounts
collected by the latter Irom the Ministry oI Public ighways, by virtue oI the deed oI
assignment, and Irom the proceeds oI the Ioreclosed chattels were more than enough to cover
CCC`s liabilities. CCC submits that in any event, the deed oI assignment itselI already Ireed
CCC Irom its obligation to MLFC.
The trial court rendered decision upholding the lease agreement and Iinding CCC liable
to MLFC in lease rentals. On appeal, the appellate court aIIirmed the trial court`s decision.

Issue:
Whether or not respondent court erred in upholding the so- called sale-lease back scheme
oI the private respondent when the same is in reality nothing but an equitable mortgage.

eld:
The Court Iinds in Iavor oI CCC.
MLFC`s own evidence discloses that it oIIers two types oI Iinancing lease: a direct lease
and a sale- lease back. The client sells to MLFC equipment that it owns, which will be leased
back to him. The transaction between CCC and MLFC involved the second type oI Iinancing
lease.CCC argues that the sale and lease back scheme is nothing more than an equitable
mortgage and consequently, asks Ior its reIormation. The right oI action Ior reIormation accrued
Irom the date oI execution oI the contract oI lease in 1976. This was properly exercised by CCC
when it Iiled its answer with counterclaim to MLFC`s complaint in 1978 and asked Ior the
reIormation oI the lease contract.





















































ADR SIPPING SERVICESS, INC. VS. GALLARDO, 389 SCRA 82

Facts:
Petitioner ADR Shipping Services, Inc. entered into a contract with private respondent
Gallardo Ior the use oI the Iormer`s vessel MV PaciIic Breeze to transport logs to Taiwan. The
logs were the subject oI a sales agreement between private respondent as seller being a timber
concessionaire and log dealer, and Stywood Philippines, as buyer. Private respondent paid an
advance charter Iee oI P242,000 representing ten percent oI the agreed charter Iee. Under the
charter agreement, the boat should be ready to load by February 5, 1988.
The boat Iailed to arrive on time, prompting private respondent to notiIy petitioner oI its
cancellation oI the charter contract and the withdrawal oI the advance payment deposited to the
account oI ADR shipping. ADR Shipping reIused to return the advance payment to Gallardo
claiming that the agreement on the date oI February 5, 1988 was just the 'reIerence commencing
date and the true loading date was February 16, 1988. This prompted the latter to Iile a case Ior
sum oI money and damages. The Regional Trial Court ordered ADR Shipping to pay Gallardo
the advance payment with 6 percent interest per annum and attorney`s Iees. The decision oI the
trial court was aIIirmed by the Court oI Appeals. ence, this petition.

Issue: Whether or not private respondent is entitled to the reIund oI the advance payment
representing his deposit Ior the charter oI the ship provided by petitioner.

eld: Private respondent is entitled to the reIund oI the advance payment it made to petitioner.
There was ambiguity in the interpretation oI the contract provisions as to the date oI the loading
oI the ship. Ambiguities in a contract are interpreted strictly, albeit not unreasonably, against the
draIter thereoI when justiIied in light oI the operative Facts and surrounding circumstances. In
this case, ambiguity must be construed strictly against ADR which draIted and caused the
inclusion oI the ambiguous provisions.
The charter agreement explicitly states that February 5, 1988 is the intended date when
the ship is expected ready to load while February 16, 1988 is merely the canceling date.
Considering that the subject contract contains the Ioregoing express provisions, the parties have
no other recourse but to apply the literal meaning oI the stipulations. The cardinal rule is that
when the terms oI the contract are clear, leaving no doubt as to the intention oI the parties, the
literal meaning oI its stipulations is controlling.
Pursuant to the provision oI Art 1191 oI the Civil Code, the power to rescind obligations
is implied in reciprocal ones in case one oI the obligors should not comply with what is
incumbent upon him, and the injured party may rescind the obligation, with payment oI
damages. In this case the private respondent is entitled to the return oI his down payment,
subject to a legal interest oI 6 percent per annum, and to the payment oI damages.























































Aquintey v. Tibong, 511 S 414

Fact: On May 6, 1999, petitioner AgriIina Aquintey Iiled beIore the RTC a complaint Ior sum oI
money and damages against the respondents, spouses Felicidad and Rico Tibong. AgriIina
alleged that Felicidad had secured loans Irom her on several occasions, at monthly interest rates
oI 6 to 7. Despite demands, the spouses Tibong Iailed to pay their outstanding loan,
amounting to P773,000.00 exclusive oI interests. AgriIina appended a copy oI the Counter-
AIIidavit executed by Felicidad in I.S. No. 93-334, as well as copies oI the promissory notes and
acknowledgment receipts executed by Felicidad covering the loaned amounts. In their Answer
with Counterclaim, spouses Tibong admitted that they had secured loans Irom AgriIina. The
proceeds oI the loan were then re-lent to other borrowers at higher interest rates. They, likewise,
alleged that they had executed deeds oI assignment in Iavor oI AgriIina, and that their debtors
had executed promissory notes in AgriIina`s Iavor. According to the spouses Tibong, this
resulted in a novation oI the original obligation to AgriIina. They insisted that by virtue oI these
documents, AgriIina became the new collector oI their debtors; and the obligation to pay the
balance oI their loans had been extinguished.

Issue: Whether respondent Felicidad Tibong borrowed P773,000.00 Irom petitioner.

eld: In the present case, petitioner and respondent Felicidad agreed that the amounts due Irom
respondents` debtors were intended to 'make good in part the account oI respondents. Case law
is that, an assignment will, ordinarily, be interpreted or construed in accordance with the rules oI
construction governing contracts generally, the primary object being always to ascertain and
carry out the intention oI the parties. This intention is to be derived Irom a consideration oI the
whole instrument, all parts oI which should be given eIIect, and is to be sought in the words and
language employed.
Indeed, the Court must not go beyond the rational scope oI the words used in construing an
assignment, words should be construed according to their ordinary meaning, unless something in
the assignment indicates that they are being used in a special sense. So, iI the words are Iree
Irom ambiguity and expressed plainly the purpose oI the instrument, there is no occasion Ior
interpretation; but where necessary, words must be interpreted in the light oI the particular
subject matter. And surrounding circumstances may be considered in order to understand more
perIectly the intention oI the parties. Thus, the object to be accomplished through the
assignment, and the relations and conduct oI the parties may be considered in construing the
document.

Although it has been said that an ambiguous or uncertain assignment should be construed
most strictly against the assignor, the general rule is that any ambiguity or uncertainty in the
meaning oI an assignment will be resolved against the party who prepared it; hence, iI the
assignment was prepared by the assignee, it will be construed most strictly against him or her.
One who chooses the words by which a right is given ought to be held to the strict interpretation
oI them, rather than the other who only accepts them.




CRUZ VS. COURT OF APPEALS, 456 SCRA 165

Facts:
erein petitioner is the mother oI her co petitioners Thelma Cruz, Gerry Cruz and
Nerissa Cruz-Tamayo, as well as Arnel Cruz, who was one oI the deIendants in Civil Case No.
49466. Petitioners Iiles said case on February 11, 1983 against Arnel Cruz and herein private
respondents Summit Financing Corporation ('Summit), Victor S. Sta. Ana and Maximo C.
Contreras, the last two in their capacity as deputy sheriII and ex-oIIicio sheriII oI Rizal,
respectively, and Ramon G. Manalastas in his capacity as Acting Register oI Deeds oI Rizal.
The Complaint alleged that petitioners and Arnel Cruz were co-owners oI a parcel oI land
situated in Taytay, Rizal. et the property, which was then covered by TransIer CertiIicate oI
Title (TCT) No. 495225, was registered only in the name oI Arnel Cruz. According to
petitioners, the property was among the properties they and Arnel Cruz inherited upon the death
oI DelIin Cruz, husband oI Adoracion Cruz.
On August 22, 1977, petitioners and Arnel Cruz executed a Deed oI Partial Partition,
distributing to each oI them their shares consisting oI several lots previously eld by them in
common. Among the properties adjudicated to deIendant Cruz was the parcel oI land covered at
the time by TCT No. 495225. It is the subject oI this case.
Subsequently, the same parties to the Deed oI Partition agreed in writing to share equally
in the proceeds oI the sale oI the properties although they have been subdivided and individually
titled in the names oI the Iormer co-owners pursuant to the Deed oI Partition. This arrangement
was embodied in a Memorandum oI Agreement executed on August 23, 1977 or a day aIter the
partition. The tenor oI the Memorandum oI Agreement was annotated at the back oI the TCT No.
495225 on September 1, 1977.
Sometime in January 1983, petitioner Thelma Cruz discovered that TCT No. 514477 was
issued on October 18, 1982 in the name oI Summit. Upon investigation, petitioners learned that
Arnel Cruz had executed a Special Power oI Attorney on May 16, 1980 in Iavor oI one Nelson
Tamayo, husband oI petitioner Nerissa Cruz Tamayo, authorizing him to obtain a loan in the
amount oI One undred Four Thousand Pesos Irom respondent Summit, to be secured by a real
estate mortgage on the subject parcel oI land.
Since the loan remained outstanding on maturity, Summit instituted extra-judicial
Ioreclosure proceedings, and at the Ioreclosure sale, it was declared the highest bidder.
Consequently, SheriII Sta. Ana Issued a CertiIicate oI Sale to respondent Summit which more
than a year later consolidated its ownership oI the Ioreclosed property. Upon presentation oI the
aIIidavit oI consolidation oI ownership, the Acting Register oI Deeds oI Rizal cancelled TCT
No. 495225 and Issued and in lieu thereoI, TCT No. 514477 in the name oI respondent Summit.
In their complaint beIore the RTC, petitioners asserted that they co-owned the properties
with Arnel Cruz, as evidenced by the Memorandum oI Agreement. ence, they argued that the
mortgage was void since they did not consent to it.

Issue:
Whether or not the real estate mortgage on the property then covered by TCT No. 495225
is valid and whether the mortgaged property was the exclusive property oI Arnel Cruz when it
was mortgaged.

eld:
A reading oI the provisions oI the Deed oI Partition, no other meaning can be gathered
other than that petitioners and Arnel Cruz had put an end to the co-ownership. In the aIoresaid
deed, the shares oI petitioners and Arnel Cruz`s in the mass oI co-owned properties were
concretely determined and distributed to each oI them. In particular, to Arnel Cruz was assigned
the disputed property. There is nothing Irom the words oI said deed which expressly or impliedly
stated that petitioners and Arnel Cruz intended to remain as co-owners with respect to the
disputed property or to any oI the properties Ior that matter.
Petitioners do not question the validity or eIIicacy oI the Deed oI Partial Partition. In
Iact, they admitted its existence in their pleadings and submitted it as a part oI their evidence.
Thus, the deed is accorded its legal dire eIIect. Since a partition legally made conIers upon each
heir their exclusive ownership oI the property adjudicated to him, it Iollows that Arnel Cruz
acquired absolute ownership over the speciIic parcels oI land assigned to him in the Deed oI
Partial Partition, including the property subject oI this case. As the absolute owner thereoI then,
Arnel Cruz had the right to enjoy and dispose oI the property, as well as the right to constitute a
real estate mortgage over the same without securing the consent oI the petitioners.
On the other hand, there is absolutely nothing in the Memorandum oI Agreement which
diminishes the right oI Arnel Cruz to alienate or encumber the properties allotted to him in the
deed oI partition.
As correctly held by the Court oI Appeals, the parties only bound themselves to share in
the proceeds oI the sale oI the properties. The agreement does not direct reconveyance oI the
properties to reinstate the common ownership oI the properties.
Moreover, to ascertain the intent oI the parties in a contractual relationship, it is
imperative that the various stipulations provided Ior in the contracts be construed together,
consistent with the parties contemporaneous and subsequent acts as regards the execution oI the
contract. Subsequent to the execution oI the Deed oI Partition and Memorandum oI Agreement,
the properties were titled individually in the names oI the co-owners to which they were
respectively adjudicated, to the exclusion oI the other co-owners. Petitioners Adoracion Cruz
and Thelma Cruz separately sold the properties distributed to them as absolute owners thereoI.
Being clear maniIestations oI sole and exclusive dominion over the properties aIIected, the acts
signiIy total incongruence with the state oI co-ownership claimed by the petitioners.
The real estate mortgage on the disputed property is valid and does not contravene the
agreement oI the parties.















GONZALES VS. COURT OF APPEALS, 354 SCRA 8
Facts:
Private respondents, Mr. and Mrs. Gabriel Caballero, are the registered owneres oI two
parcels oI land situated in Cubao, Quezon City described in TransIer CertiIicate Io Title No.
247309 (Lot 1) and TCT No. 247310 (Lot 2). The spouses` residence stood in Lot 2.
Sometime in 1979, they obtained a loan Irom the Cavite Development Bank in the
amount oI P225,000.00. The two lots were mortgaged to secure their loan. The loan matured in
1984. To pay the loan they oIIered Lot 1 Ior sale. The oIIer was advertised in the Bulletin
Today. owever, oIIers to purchase Irom prospective buyers did not materialize.
On October 24, 1985, a certain Mrs. Lagrimas approached the spouses oIIering to broker
the sale to an interested buyer. Initially, the spouses told the broker that they were selling only to
direct buyers. Nonetheless, Mrs. Lagrimas brought to the spouses her buyer, herein petitioner
Napoleon . Gonzales, who turned out to be Mrs. Lagrimas` relative.
Petitioner oIIered to buy the vacant lot Ior P470,000.00. Initially, respondents reIused to
reduce their asking price. Petitioner bargained Ior a lower price with the suggestion that on
paper the price will be markedly lower so the spouses would pay lower capital gains tax.
Petitioner assured the spouses this could be done since he had connections with the Bureau oI
Internal Revenue. The spouses agreed to sell at P470.000.00. Petitioners paid the bank
P375,000.00, to be deducted Irom the purchase price. AIter the mortgage was cancelled and
upon release oI the two titles, Gonzales asked Ior the deeds oI sale oI the two lots and delivery oI
the titles to him. DeIendants signed the deed oI sale covering only Lot 1 but reIused to deliver
its title until petitioner paid the remaining balance oI P70,000.00
This prompted petitioner to Iile a complaint Ior speciIic perIormance and damages.

Issue: Whether or not the sale involved only Lot 1 and not both Lots.

eld: Principally, the issue here is whether the contract oI sale between the parties involved Lot
1 and 2 as claimed by petitioner or only Lot 1 as private respondents contend. In a case where
we have to judge conIlicting claims on the intent oI the parties, as in this instance, judicial
determination oI the parties` intention is mandated. Contemporaneous and subsequent acts oI the
parties material to the case are to be considered.
Petitioner admits he himselI caused the preparation oI the deed oI sale presented beIore the lower
court. et he could not explain why I reIerred only to the sale oI Lot 1 and not to the two lots, iI
the intention oI the parties was really to cover the sale oI two lots. As the courts a quo observed,
even iI it were true that two lots were mortgaged and were about to be Ioreclosed, the ads private
respondents placed in the Bulletin Today oIIered only Lot 1 and was strong indication that they
did not intend to sell Lot 2. The 501 sq.m. lot was oIIered Ior P1,150.00 per sq.m. It alone
would have Ietched P576,150.00. The loan still to be paid the bank was only P375,000.00 which
was what petitioner actually paid the bank. As the trial court observed, it was incomprehensible
why the spouses would part with two lots, one with a 2-storey house, and both situated at a prime
commercial district Ior less than the price oI one lot. Contrary to what petitioner would make us
believe, the sale oI Lot 1 valued at P576,150.00 Ior P470,000.00, with petitioner assuming the
bank loan oI P375,000.00 as well as payment oI the capital gains tax, appears more plausible.

ALMIRA VS. COURT OF APPEALS, 399 SCRA 351
Facts:
Petitioners are the wiIe and the children oI the late Julio Garcia who inherited Irom his
mother, Ma. Alibudbud, a portion oI a 90,655 square meter property denominated as lot 1642 oI
the Sta. Rosa Estate in Brgy. Caingin Sta. Rosa Laguna. The lot was co-owned and registered in
the names oI three persons with the Iollowing shares: Vicente de Guzman (1/2), Enrique
emedes (1/4) and Francisco Alibudbud, the Iather oI Ma. Alibudbud (1/4). Although there wad
no separate title in the name oI Julio Garcia, there were tax declaration in his name to the intent
oI his grandIather`s share covering the area oI 21460 square meter.
On July 5, 1984, petitioner as heirs oI Julio Garcia, and respondent Federico Brines
entered a Kasunduan ng Pagbibilihan (Kasunduan Ior Brevity) over the 21460 square meter
portion Ior the sum oI P150.000.00. Respondent paid P65, 000.00 upon execution oI the contract
while the balance oI P85, 000.00 was made payable within six (6) months Irom the date oI the
execution oI the instrument. The time oI the execution oI the kasunduan, petitioners allegedly
inIormed respondent that TCT No. RT-1076 was in the possession oI their cousin, Conchila
Alibudbud, who having bought Vicente de Guzman`s shares, owned the bigger portion oI lot
1642. This standing notwithstanding, respondent willingly entered into the Kasunduan provided
that the Iull payment oI the purchase price will be made upon delivery to him oI the title.
Respondent took possession oI the property subject oI the Kasunduan and made various
payments to petitioiners amountiong to P58500.00. owever upon Iailure oI petitionere to
deliver to him a separate title to the property in the name oI Julio Garcia he reIused to make
Iurther payments, prompting petitioner to Iile a civil action beIore the RTC Ior a rescission oI the
Kasunduan, return by respondent to petitioner oI the possession oI the subject parcel oI land, and
payment by respondent oI damages in Iavour oI petitioners.

Issue: Whether or not the petitioner may rescind the Kasunduan pursuant to Article 1191 oI the
Civil Code Ior the Iailure oI respondent to give Iull payment oI the balance oI the purchase price.

eld:
The right oI the parties are governed by the terms ands the nature oI the contract they
entered. ence, although the nature oI the Kasunduan was never places in dispute by both
parties, it is necessary to ascertain whether the Kasunduan is a contract to sell or a contract oI
Sale. Although both parties have consistency reIerred to the Kasunduan as a contract to Sell, a
careIul reading oI the provision oI the Kasunduan reveals that it is a contract oI Sale. A deed oI
sale is absolute in nature in the absence oI an any stipulation reserving title to the vendor until
Iull payment oI the purchase price. The delivery oI a separation title in the name oI Julio Garcia
was a condition imposed on respondent`s obligation to pay the balance oI the purchase price. It
was not a condition imposed in the perIection oI the contract oI Sale.
The rescission will not prosper since the power to rescind is only given to the injured
party. The injured party is the party who has IaithIully IulIilled his obligation. In the case at bar,
the petitioners were not ready, willing and able to comply with their obligation to deliver a
separate title in the name oI Julio Garcia to respondent thereIore, they are not in a position to ask
Ior rescission. Failure to comply with a condition imposed on the perIormance oI an obligation
gives the other party the option either to reIuse to proceed with the sale or to waive the condition
under Art 1545 oI the civil code. ence it is the respondent who has the option.
















































PILBANK OF COMMUNICATIONS VS. ELENA LIM, 455 SCRA 436
Facts:
On September 3, 1999, petitioner Iiled a complaint against respondents Io0r the
collection oI a deIiciency amounting to P4,014,297.23 exclusive oI interest. Petitioner alleged
that respondents obtained a loan Irom it and executed a continuing surety agreement dated
November 16, 1995 in Iavor oI petitioner Ior all loans, credits, etc., that were extended or may be
extended in the Iuture to respondents. Petitioner granted a renewal oI said loan upon
respondent`s request, the most recent being on January 21, 1998 as evidenced by a promissory
note renewal BD-Variable No. 8298021001 on the amount oI P3,000,000.00. it was expressly
stipulated therein that the venue Ior any legal action that may arise out oI said promissory note
shall be Makati City 'to the excklusion oI all other courts. Respondent allegedly Iailed to pay
said obligation upon maturity. Thus petitioner Ioreclosed the real estate mortgage executed by
the respondents valued at P1,081,600.00 leaving a deIiciency balance oI P4,014,297.23 as oI
August 31, 1999. Respondents moved to dismiss the complaint on the ground oI improper venue,
invoking the stipulation contained in the last paragraph oI the promissory note with respect to the
restriction/exclusive venue. The trial court denied said motion asseverating that petitioners had
separate causes oI action arising Irom the promissory note and the continuing surety agreement.
Thus, under Rule 4, Section 2 oI the 1997 Rules oI Civil Procedure, as amended, venue was
properly laid in Manila. The trial court supported its order with cases where venue was eld to
be permissive. A motion Ior reconsideration oI said order was likewise denied.

Issue: Whether or not the 'complementary-contracts-construed together principle is applicable
in the case at bar.

eld: According to this principle, an accessory contract must be read in its entirety and together
with the principal agreement. This principle is used in construing contractual stipulations in
order to arrive at their true meaning; certain stipulations cannot be segregated and then made to
control. This no-segregation principle is based on Article 1374 oI the Civil Code. The
Iorementioned doctrine is applicable to the present case. In capable oI standing by itselI, the
surety agreement can be enIorced only in conjuction with the promissory note. The latter
documents the debt that is sought to be collected in the action against the sureties. The Iactual
milieu oI the present case shows that the surety agreement was entered into to Iacilitate existing
and Iuture loan agreements. Petitioner approved the loan covered by the promissory note, partly
because oI the surety agreement that assured the payment oI the principal obligation. The
circumstances that relate to the issuance oI the promissory note and the surety agreement are so
intertwined that neither one could be separated Irom the other. It makes no sense to argue that
the parties to the surety agreement were not bound by the stipulations in the promissory note.
Notably, the promissory note was a contract oI adhesion that petitioner required the principal
debtor to execute as a condition oI the approval oI the loan. It was made in the Iorm and
language prepared by the bank. By inserting the provision oI that Makati City would be the
'venue Ior any legal action that may arise out oI the promissory note, petitioner also restricted
the venue oI actions against the sureties. The legal action against the sureties arose not only
Irom the security agreement but also Irom the promissory note.


RIGOR VS. CONSOLIDATED ORIX LEASING and FINANCE CORPORATION,
387 SCRA 437
Facts:
Petitioners obtained a loan Irom private respondent Consolidated Orix Leasing and
Finance Corporation in the amount oI P1,630,320.00. Petitioners executed a promissory note on
July 31, 1996 promising to pay the loan in 24 equal monthly installments oI P67,930.00 every
IiIth day oI the month commencing on September 5, 1996. The promissory note also provides
that deIault in paying any installment renders the entire unpaid amount due and payable. To
secure payment oI the loan, petitioners executed in Iavor oI private respondent a deed oI chattel
mortgage over two dump trucks.
Petitioners Iailed to pay several installments despite demand Irom private respondent.
On January 5, 1998, private respondent sought to Ioreclose the chattel mortgage by Iiling
a complaint Ior Replevin with Damages against petitioners beIore the Regional Trial Court oI
Dagupan City.AIter service oI summons, petitioners moved to dismiss the complaint on the
ground oI improper venue based on a provision in the promissory note which states that, x x x all
legal actions arising out oI this note or in connection with the chattels subject hereoI shall only
be brought in or submitted to the proper court in Makati City, Philippines. Private respondent
opposed the motion to dismiss and argued that venue was properly laid in Dagupan City where it
has a branch oIIice based on a provision in the deed oI chattel mortgage which states that, x x x
in case oI litigation arising out oI the transaction that gave rise to this contract, complete
jurisdiction is given the proper court oI the city oI Makati or any proper court within the
province oI Rizal, or any court in the city, or province where the holder/mortgagee has a branch
oIIice, waiving Ior this purpose any proper venue. AIter a Iurther exchange oI pleadings, the
Dagupan trial court denied petitioners` motion to dismiss Not satisIied with the orders,
petitioners Iiled a petition Ior certiorari beIore the Court oI Appeals imputing grave abuse oI
discretion by the Dagupan trial court in denying the motion to dismiss which was denied.

Issue:
Whether or not venue was properly laid under the provisions oI the chattel mortgage
contract in the light oI Article 1374 oI the Civil Code.

eld:
Art. 1374 provides that the various stipulations oI a contract shall be interpreted together,
attributing to the doubtIul ones that sense which may result Irom all oI them taken jointly.
Applying the doctrine to the instant case, we cannot sustain petitioners` contentions. The
promissory note and the deed oI chattel mortgage must be construed together. Private
respondent explained that its older standard promissory notes conIined venue in Makati City
where it had its main oIIice. AIter it opened a branch oIIice in Dagupan City, private respondent
made corrections in the deed oI chattel mortgage, but due to oversight, Iailed to make the
corresponding corrections in the promissory notes. Petitioners aIIixed their signatures in both
contracts. The presumption is applied that a person takes ordinary care oI his concerns. It is
presumed that petitioners did not sign the deed oI chattel mortgage without inIorming themselves
oI its contents. As aptly stated in a case, they being oI age and businessmen oI experience, it
must be presumed that they acted with due care and have signed the documents in question with
Iull knowledge oI their import and the obligation they were assuming thereby. In any event,
petitioners did not contest the deed oI chattel mortgage under Section 8, Rule 8 oI the Revised
Rules oI Civil Procedure.
As held in Velasquez, this omission eIIectively eliminated any deIense relating to the
authenticity and due execution oI the deed. Clearly, the Court oI Appeals did not err in ruling
that venue was properly laid in Dagupan City as provided in the deed oI chattel mortgage. The
Court holds that private respondent is not barred Irom Iiling its case against petitioners in
Dagupan City where private respondent has a branch oIIice as provided Ior in the deed oI chattel
mortgage.






































RODOLFO P. VELASQUEZ VS. COURT OF APPEALS, G.R. No. 124049,
June 30, 1999

Facts:
The case arose from a complaint for a sum of money with preliminary attachment
filed with the Regional Trial Court of Makati City by private respondent Philippine
Commercial nternational Bank (PCB) against petitioner Rodolfo P. Velasquez together
with Mariano N. Canilao Jr., nigo A. Nebrida, Cesar R. Dean and Artemio L.
Raymundo.
Sometime in December 1994 the Pick-up Fresh Farms, nc. (PUFF), of which
petitioner Velasquez was an officer and stockholder, filed an application for a loan of
P7,500,000.00 with PCB under the government's Guarantee Fund for Small and
Medium Enterprises (GFSME). On 16 April 1985 the parties executed the
corresponding loan agreement. As security for the loan, promissory notes numbered TL
121231 and TL 121258 for the amounts of P4,000,000.00 and P3,500,000.00,
respectively, were signed by nigo A. Nebrida and Mariano N. Canilao, Jr. as officers of
and for both PUFF and Aircon and Refrigeration ndustries, nc. (AR). A chattel
mortgage was also executed by AR over its equipment and machineries in favor of
PCB. Petitioner along with Nebrida and Canilao, Jr. also executed deeds of suretyship
in favor of PCB. Separate deeds of suretyship were further executed by Cesar R.
Dean and Artemio L. Raymundo. When PUFF defaulted in the payment of its
obligations PCB foreclosed the chattel mortgage. The proceeds of the sale amounted
to P678,000.00.
Thus, PCB filed an action to recover the remaining balance of the entire
obligation including interests, penalties and other charges. Exemplary damages and
attorney's fees of 25% of the total amount due were also sought. On 9 October 1989 a
writ of preliminary attachment was granted by the trial court. On 20 June 1990 the trial
court rendered a summary judgment in favor of PCB holding petitioner and Canilao
solidarily liable to pay P7,227,624.48 plus annual interest of 17%, and P700,000.00 as
attorney's fees and the costs of suit. The case was dismissed without prejudice with
regard to the other defendants as they were not properly served with summons. On
appeal, the Court of Appeals on 28 September 1995 affirmed in toto the RTC judgment.
Petitioner's motion for reconsideration was thereafter denied. Hence this petition.

ssue:
Whether or not the appellate court committed reversible error in sustaining or
affirming the summary judgment despite the existence of genuine triable issues of facts
and in refusing to set aside the default order against petitioner.

Held:
The more appropriate doctrine in this case is that oI the 'complementary contracts
construed together doctrine. The surety bond must be read in its entirety and together with the
contract between the NPC and the contractors. The provisions must be construed together to
arrive at their true meaning. Certain stipulations cannot be segregated and then made to control.
That the "complementary contracts construed together doctrine applies in this
case finds support in the principle that the surety contract is merely an accessory
contract and must be interpreted with its principal contract, which in this case was the
loan agreement. This doctrine closely adheres to the spirit of Art. 1374 of the Civil Code
which states that
Art. 1374. The various stipulations oI a contract shall be interpreted together,
attributing to the doubtIul ones that sense which may result Irom all oI them taken
jointly.
Applying the "complementary contracts construed together doctrine leaves no
doubt that it was the intention of the parties that petitioner would be personally liable in
the deed of suretyship because the loan agreement, among others, provided to further
secure the obligations of the BORROWER to the LENDER, Messrs. Nebrida,
Raymundo, Canilao, Dean and Velasquez and Aircon and Refrigeration nd. nc. shall
each execute a suretyship agreement in favor of the LENDER in form and substance
acceptable to the LENDER.





















































































EQUATORIAL REALT VS. MAFAIR TEATER, G.R. No. 136221. June 25, 2001

Facts:
This is a promethean case involving the exe which has been long Iinal, ordering the (1)
rescission oI sale oI parcels oI land between Carmelo & Bauermann and Equatorial Realty
Development, Inc., and (2) thereaIter, the sale by Carmelo & Bauermann oI the property to
MayIair Theater, Inc., the party with the right oI Iirst reIusal to acquire the same.cution oI a
Supreme Court decision
However, the landowner (Carmelo & Bauermann) could no longer be located.
Hence, there was literally no one to restitute the amount of the purchase price. And so
no one could "sell the property to Mayfair Theater, nc. Thus, Mayfair Theater, nc.
deposited the amount of the purchase price with the trial court.
Nevertheless, in view oI the absence oI the vendor Carmelo & Bauermann, the Clerk oI
Court, as sheriII, executed the deed oI sale, on the basis oI which the Registry oI Deeds issued
new certiIicates oI title in Iavor oI respondent MayIair Theater, Inc.

Issue:
Whether or not the title issues to MayIair theater should be considered validated.

eld:
With respect to the transfer certificates of title issued in the name of Mayfair, the
presumption of regularity of the issuance applies that is, the Registry of Deeds complied
with his duty to see that all taxes and registration fees have been paid and that the titles
were issued after compliance with all the legal requirements. Considering the present
situation of Mayfair Theater, nc., it is the duty of the lower court in the execution of the
decision to effectuate the ultimate result of the suit, with Mayfair Theater, nc. as the
prevailing party. Thus, the titles issued in favor of Mayfair Theater shall have to be
validated. The question is, "How will the execution of the decision be carried out when
the supposed vendor of the property (Carmelo & Bauermann) can no longer be
located?
To allow this stratagem would make a travesty of a duly promulgated decision of the
Supreme Court that has become final and executory. This is where the courts must
again exercise its power of execution in order to put an end to the dispute that was
settled years ago.
Litigation must at some time be terminated, for public policy dictates that once a
judgment becomes final, executory and unappealable, the prevailing party shall not be
deprived of the fruits of victory by some subterfuge devised by the losing party.
Wherefore, the case was remanded to the trial court.




SIGUAN VS. LIM, G.R. No. 134685, November 19, 1999

Facts:
On 25 and 26 August 1990, Lim issued two Metrobank checks in the sums oI P300, 000
and P241, 668 respectively payable to cash`. Upon presentment by petitioner with the drawee
bank, the checks were dishonored Ior the reason account closed`. Petitioner Ma. Antonia Siquan
Iiled a criminal case against respondent Lim. It also appears that Lim was convicted oI estaIa by
the RTC Iiled by Certain Victoria Suarez. Meanwhile on July 2, 1991 a deed oI donation
conveying the Iollowing parcels oI lands and purportedly executed by Lim on August 10, 1989
in the Iavor oI her children, Lindre, Ingris and Neil was registered with the oIIice oI the Register
oI Deeds oI Cebu City. New transIer certiIicates oI the title were thereaIter issued in the name oI
donees. On July 23, 1993, petitioner Iiled an accion pauliana against Lim and her children to
rescind the questioned Deed oI Donation and to declare as null and void the new transIer
certiIicates oI title issued Ior the lots covered by the questioned Deed. Petitioner alleged that Lim
through a Deed oI Donation, Iraudulently transIerred all her real property to her children in bad
Iaith and in Iraud oI creditor, including her; that Lim conspired and conIederated with her
children in antedating the questioned Deed oI Donation, to petitioner`s and other creditors`
prejudice; and that Lim, at the time oI the Iraudulent conveyance, leIt no suIIicient properties to
pay her obligation. As regards the questioned Deed oI Donation, she maintains that it was not
antedated but was made in good Iaith at a time when she had suIIicient property. Finally she
alleged that the Deed oI Donation was registered only on July 2, 1991 because she was seriously
ill. The RTC rendered in Iavor oI the petitioner. The Court oI Appeals reversed the decision ands
dismissed the petitioner`s accion pauliana.

Issue: Whether or not the Deed oI Donation was entered into in Iraud oI creditors oI respondent
Rosa Lim.

eld: The Deed oI Donation was not entered into in Iraud oI creditors. Petitioner reiterated her
arguments and adds that another Iact Iound by the RTC and admitted by the parties but was
untouched by the Court oI Appeals is the existence oI a prior Iinal judgment against Lim in
declaring Victoria Suarez as Lim`s judgment creditor beIore the execution oI the Deed oI
Donation, avers that Lim made no reservation oI suIIicient property to pay her creditor`s prior to
the execution oI the Deed oI Donation (Art.759 oI the New Civil Code).
Article 1387 provides All contracts by virtue oI which the debtor alienates property by
gratuitous title are presumed to have been entered into in Iraud oI creditors when the donor did
not reserve suIIicient property to pay all debts contracted beIore the donation.
For this presumption oI Iraud to apply, it must be established that the donor did not leave
adequate properties which creditors might have recourse Ior the collection oI their credits
existing between the Deed oI Donation. Petitioner`s alleged credit existed only a year aIter the
Deed oI Donation was executed. She cannot thereIore be said to have been depraved by such
alienation. Besides, the evidence disclosed that when the Deed oI Donation was executed Lim
has the properties amounting P800,000 to P900,000.




KE KONG VS. COURT OF APPEALS, G.R. No. 144169

Facts:
Petitioner Khe ong Cheng, alias Felix Khe, is the owner oI Butuan Shipping Lines. It
appears that on or about October 4, 1985, the Philippine Agricultural Trading Corporation
shipped on board the vessel M/V PRINCE ERIC, owned by petitioner Khe ong Cheng, 3,400
bags oI copra at Masbate, Masbate, Ior delivery to Dipolog City, Zamboanga del Norte. The said
shipment oI copra was covered by a marine insurance policy issued by American ome
Insurance Company (respondent Philam's assured). M/V PRINCE ERlC, however, sank
somewhere between Negros Island and Northeastern Mindanao, resulting in the total loss oI the
shipment. Because oI the loss, the insurer, American ome, paid the amount oI P354,000.00 (the
value oI the copra) to the consignee.
aving been subrogated into the rights oI the consignee, American ome instituted a
civil case in the Regional Trial Court (RTC) oI Makati to recover the money paid to the
consignee, based on breach oI contract oI carriage. While the case was still pending, or on
December 20, 1989, petitioner Khe ong Cheng executed deeds oI donations oI parcels oI land
in Iavor oI his children, herein co-petitioners Sandra Joy and Ray Steven. The parcel oI land with
an area oI 1,000 square meters covered by TransIer CertiIicate oI Title (TCT) No. T-3816 was
donated to Ray Steven. Petitioner Khe ong Cheng likewise donated in Iavor oI Sandra Joy two
(2) parcels oI land located in Butuan City, covered by TCT No. RT-12838. On the basis oI said
deeds, TCT No. T-3816 was cancelled and in lieu thereoI, TCT No. T-5072 was issued in Iavor
oI Ray Steven and TCT No. RT-12838 was cancelled and in lieu thereoI, TCT No. RT-21054
was issued in the name oI Sandra Joy. The trial court rendered judgment against petitioner Khe
ong Cheng in Civil Case No.13357 on December 29, 1993, Iour years aIter the donations were
made and the TCTs were registered in the donees' names.
AIter the said decision became Iinal and executory, a writ oI execution was Iorthwith'
issued on September 14, 1995. Said writ oI execution however, was not served. On February 25,
1997, respondent Philam Iiled a complaint with the Regional Trial Court oI Makati City, Branch
147, Ior the rescission oI the deeds oI donation executed by petitioner Khe ong Cheng in Iavor
oI his children and Ior the nulliIication oI their titles (Civil Case No.97-415). Respondent Philam
alleged, inter alia, that petitioner Khe ong Cheng executed the aIoresaid deeds in Iraud oI his
creditors, including respondent Philam.

Issue:
Whether or not the action Ior the declaration Ior the nullity oI the donation has already
prescribed.

eld:
Article 1389 oI the Civil Code simply provides that, "The action to claim rescission must
be commenced within Iour years." Since this provision oI law is silent as to when the
prescriptive period would commence, the general rule, i.e., Irom the moment the cause oI action
accrues, thereIore, applies. Article 1150 oI the Civil Code is particularly instructive:
Art. 1150. The time Ior prescription Ior all kinds oI actions, when there is no special
provision which ordains otherwise, shall be counted Irom the day they may be brought.
Indeed, the Supreme Court enunciated the principle that it is the legal possibility oI bringing the
action which determines the starting point Ior the computation oI the prescriptive period Ior the
action.
7
Article 1383 oI the Civil Code provides as Iollows:
Art. 1383. An action Ior rescission is subsidiary; it cannot be instituted except when
the party suIIering damage has no other legal means to obtain reparation Ior the same.
It is thus apparent that an action to rescind or an accion pauliana must be oI last resort, availed oI
only aIter all other legal remedies have been exhausted and have been proven Iutile.
An accion pauliana thus presupposes the Iollowing: 1) A judgment; 2) the issuance by the
trial court oI a writ oI execution Ior the satisIaction oI the judgment, and 3) the Iailure oI the
sheriII to enIorce and satisIy the judgment oI the court. It requires that the creditor has exhausted
the property oI the debtor: The date oI the decision oI the trial court is immaterial. What is
important is that the credit oI the plaintiII antedates that oI the Iraudulent alienation by the debtor
oI his property. AIter all, the decision oI the trial court against the debtor will retroact to the time
when the debtor became indebted to the creditor.
Even iI respondent Philam was aware, as oI December 27, 1989, that petitioner Khe
ong Cheng had executed the deeds oI donation in Iavor oI his children, the complaint against
Butuan Shipping Lines and/or petitioner Khe ong Cheng was still pending beIore the trial
court. Respondent Philam had no inkling, at the time, that the trial court`s judgment would be in
its Iavor and Iurther, that such judgment would not be satisIied due to the deeds oI donation
executed by petitioner Khe ong Cheng during the pendency oI the case. ad respondent Philam
Iiled his complaint on December 27, 1989, such complaint would have been dismissed Ior being
premature. Not only were all other legal remedies Ior the enIorcement oI respondent Philam's
claims not yet exhausted at the time the needs oI donation were executed and registered.
Respondent Philam would also not have been able to prove then that petitioner Khe ong Cheng
had no more property other than those covered by the subject deeds to satisIy a Iavorable
judgment by the trial court.




















SUNTA VS. COURT OF APPEALS, G.R. No. 114950, December 19, 1995

Facts:
Federico Suntay was the registered owner oI a parcel oI land with a rice mill, a
warehouse and other improvements. When he applied as a mill contractor in a milling
corporation, his application was disapproved because oI many unpaid debts. e then allowed his
nephew-lawyer RaIael Suntay to make the application Ior him aIter which a deed oI sale was
executed and was entered into by Federico and RaIael Ior a measly sum oI P20,000.00. Less than
three months aIter the conveyances, aRaIael prepared a counter-sale. Through this, he sold back
the same property and all its structures to Federico Ior the same consideration.
UnIortunately, irregularities arose as to the notarization oI the second deed (the counter-
sale) was leIt unentered and likewise unnotarized. owever, by virtue oI the Iirst deed, a title
was issued in the name oI RaIael.
The problem arose when Federico requested RaIael to execute the second deed so that it
may be registered again in his name. The request was turned down and Federico Iiled a
complaint Ior reconveyance and damages against RaIael.
The trial court upheld the validity and genuineness oI the deed oI sale executed by
Federico in Iavor oI RaIael. It ruled that the counter deed executed by RaIael in Iavor oI Federico
was simulated and without consideration, hence, null and void ab inito.
When the case was elevated to the Court oI Appeals, the latter aIIirmed the decision oI
the trial court, with modiIication. Federico was ordered to surrender the possession oI the
disputed property to RaIael.

Issue:
Whether or not the deed oI sale executed by Federico Suntay in Iavor oI RaIael Suntay
was simulated and without consideration.

eld:
The Court held in the negative. It has been observed that Iraud is generally accompanied
by trust. It was held that it was inconsistent with practical experience, that Federico would
almost naively lend his title to RaIael, his nephew, when he was well aware oI his power over
RaIael.
One point also that was taken into consideration was that, RaIael never attempted to
assert his rights oI ownership over the land and the rice mill in question. This Iact was already a
prooI oI the badge Ior Iraud.
A contract oI purchase and sale is void and produces no eIIect whatsoever when the same
is without cause or reconsideration in that the purchase price, which appears thereon as paid, has
in Iact never been paid by the purchaser to the vendor. It was only when Federico needed the
title in order to obtain a collaterized loan that Federico begun to attend to the task oI obtaining a
title in his name over the subject land and rice mill.
The deed oI sale executed by Federico in Iavor oI his deceased nephew, RaIael Suntay is
absolutely simulated and Iictitious and, hence, null and void, said parties having entered into a
sale transaction to which they did not intend to be legally bound. The second deed oI sale
executed by the late RaIael in Iavor oI his uncle should be considered ineIIective and unwanting.
















































Oesmer vs Paraiso Development Corporation.(PDC), 514 S 228

Facts: Petitioners Rizalino, Ernesto, Leonora, Bibiano jr, Librado and Enrique, all surnamed
Oesmer together with their brothers Jesus and AlIonso were co-owners oI an undivided parcel oI
agricultural and tenanted lands with an area oI 40, 507 sq. m. and 14, 769 sq. m. respectively.
Both lands were unregistered but were originally belonging to their late parents. In the mean
time, herein respondent was known to be engaged in a real estate business. Sometime in march
1989, petitioner was approached by Rogelio Paular, who arranged a meeting between Ernesto
and respondent`s president Sotero Lee. The meeting was Ior the brokering oI the properties oI
petitioners. Subsequently, a contract to sell was initiated where by a check worth P100, 000. 00
was given and payable to Ernesto as option money. ThereaIter, the other petitioners signed the
document whereas a copy oI which was Iorwarded to respondent and such was notarized. Later,
the petitioners, through a letter, inIormed respondent oI their express intent to rescind the
contract and the return oI the option money. The letter was ignored so the other brothers who did
no sign Iile a petition to annul the sale. The trail court however, decided in Iavor oI respondent
but only with regard to the proportionate share oI Ernesto. On appeal however, the court
modiIied the decision thereby binding the properties oI the other assignatories therein. ence,
this petition.

Issue: Whether or not the contract entered into between the parties is viod.

eld: Accordingly, the other petitioners contend that aIIixing their signatures on the said
document does not conIer a right to Ernesto to dispose oI their property. Because in an agency, a
written authorization must have been given to the agent otherwise the agency is void. owever,
the court stressed that the mere signing oI the instrument connotes that the assignatories were
selling their respective shares not by an agent but in their own right and capacity thereoI. The
petitioners` contention that they did not know oI the consequences and importance oI their action
is untenable in this case simply because oI the same reason, aIIixing their signatures. The
contract was deemed perIected by virtue oI the meeting oI minds oI the parties as implied by the
signed instrument. Accordingly, a contract must be interpreted literally, when the contract did
not mention any condition that all the parties must sign the instrument beIore it would be
eIIective, it implies that such was not the intention oI the parties in entering into the contract.
Thus, the court oI appeals did not err in ruling that the contract is valid and binding between
petitioners who signed the document and the respondent.












PERPETUA VDA. DE APE VS. TE ONORABLE COURT OF APPEALS,
G.R. No. 133638, April 15, 2005
Facts:
Cleopas Ape was the registered owner oI a parcel oI land which is covered by Original
CertiIicate oI Title (OCT). Upon Cleopas Ape`s death sometime in 1950, the property passed on
to his wiIe, Maria Ondoy, and their eleven (11) children, namely: Fortunato, Cornelio, Bernalda,
Bienvenido, Encarnacion, Loreta, Lourdes, Felicidad, Adela, Dominador, and Angelina. On 15
March 1973, private respondent, joined by her husband, Braulio, instituted a case Ior 'SpeciIic
PerIormance oI a Deed oI Sale with Damages against Fortunato and his wiIe Perpetua
(petitioner herein). It was alleged in the complaint that on 11 April 1971, private respondent and
Fortunato entered into a contract oI sale oI land under which Ior a consideration oI P5,000.00,
Fortunato agreed to sell his share in Lot No. 2319 to private respondent. The agreement was
contained in a receipt prepared by private respondent`s son-in-law, Andres Flores, at her behest.
As private respondent wanted to register the claimed sale transaction, she supposedly
demanded that Fortunato execute the corresponding deed oI sale and to receive the balance oI the
consideration. owever, Fortunato unjustiIiably reIused to heed her demands. Private
respondent, thereIore, prayed that Fortunato be ordered to execute and deliver to her 'a suIIicient
and registrable deed oI sale involving his one-eleventh (1/11) share; to pay P5,000.00 in
damages; P500.00 reimbursement Ior litigation expenses as well as additional P500.00 Ior every
appeal made; P2,000.00 Ior attorney`s Iees; and to pay the costs.
Fortunato and petitioner denied the material allegations oI the complaint and claimed that
Fortunato never sold his share in Lot No. 2319 to private respondent and that his signature
appearing on the purported receipt was Iorged. By way oI counterclaim, the deIendants below
maintained having entered into a contract oI lease with respondent involving Fortunato`s portion
oI Lot No. 2319.
In their reply, the private respondent and her husband alleged that they had purchased
Irom Fortunato`s co-owners, as evidenced by various written instruments, their respective
portions oI Lot No. 2319. By virtue oI these sales, they insisted that Fortunato was no longer a
co-owner oI Lot No. 2319 thus, his right oI redemption no longer existed.
At the trial court level, Fortunato died and was substituted by his children named
Salodada, Clarita, Narciso, Romeo, Rodrigo, Marieta, Furtunato, Jr., and Salvador, all surnamed
Ape.
During the trial, private respondent contended that her husband caused the annotation oI
an adverse claim on the certiIicate oI title oI Lot No. 2319. In addition, she and her husband had
the whole Lot No. 2319 surveyed by a certain Oscar Mascada who came up with a technical
description oI said piece oI land. SigniIicantly, private respondent alleged that Fortunato was
present when the survey was conducted.
AIter due trial, the court a quo rendered a decision dismissing both the complaint and the
counterclaim. The Court oI Appeals reversed and set aside the trial court`s dismissal oI the
private respondent`s complaint but upheld the portion oI the court a quo`s decision ordering the
dismissal oI petitioner and her children`s counterclaim. It upheld private respondent`s position
that the receipt oI partial payment had all the earmarks oI a valid contract oI sale.

Issue:
Whether the receipt signed by Fortunato proves the existence oI a contract oI sale
between him and private respondent.

eld:
The Court ruled that the records oI this case betray the stance oI private respondent that
Fortunato Ape entered into such an agreement with her.
A contract oI sale is a consensual contract, thus, it is perIected by mere consent oI the
parties. Upon its perIection, the parties may reciprocally demand perIormance, that is, the vendee
may compel the transIer oI the ownership and to deliver the object oI the sale while the vendor
may demand the vendee to pay the thing sold. For there to be a perIected contract oI sale,
however, the Iollowing elements must be present: consent, object, and price in money or its
equivalent.
To be valid, consent: (a) should be intelligent; (b) should be Iree and (c) should be
spontaneous. Intelligence in consent is vitiated by error; Ireedom by violence, intimidation or
undue inIluence; spontaneity by Iraud.
In this jurisdiction, the general rule is that he who alleges Iraud or mistake in a
transaction must substantiate his allegation as the presumption is that a person takes ordinary
care Ior his concerns and that private dealings have been entered into Iairly and regularly. The
exception to this rule is provided Ior under Article 1332 oI the Civil Code which provides that
'when one oI the parties is unable to read, or iI the contract is in a language not understood by
him, and mistake or Iraud is alleged, the person enIorcing the contract must show that the terms
thereoI have been Iully explained to the Iormer.
In this case, as private respondent is the one seeking to enIorce the claimed contract oI
sale, she bears the burden oI proving that the terms oI the agreement were Iully explained to
Fortunato Ape who was an illiterate. This she Iailed to do. While she claimed in her testimony
that the contents oI the receipt were made clear to Fortunato, such allegation was debunked by
Andres Flores himselI when the latter took the witness stand.
Flores testiIied that, while he was very much aware oI Fortunato`s inability to read and
write in the English language, he did not bother to Iully explain to the latter the substance oI the
receipt. e even dismissed the idea oI asking somebody else to assist Fortunato considering that
a measly sum oI thirty pesos was involved. Evidently, it did not occur to Flores that the
document he himselI prepared pertains to the transIer altogether oI Fortunato`s property to his
mother-in-law. It is precisely in situations such as this when the wisdom oI Article 1332 oI the
Civil Code readily becomes apparent which is 'to protect a party to a contract disadvantaged by
illiteracy, ignorance, mental weakness or some other handicap.
Thus, the Court annuls the contract oI sale between Fortunato and private respondent on
the ground oI vitiated consent.











JULIAN FRANCISCO VS. PASTOR ERRERA
G.R. No. 139982, November 21, 2002


Facts:
Eligio errera, Sr., the Iather oI respondent, was the owner oI two parcels oI land, one
consisting oI 500 sq. m. and another consisting oI 451 sq. m., covered by Tax Declaration (TD)
Nos. 01-00495 and 01-00497, respectively. Both lands were located at Barangay San Andres,
Cainta, Rizal. On January 3, 1991, petitioner bought Irom said landowner the Iirst parcel,
covered by TD No. 01-00495, Ior the price oI P1,000,000, paid in installments Irom November
30, 1990 to August 10, 1991. On March 12, 1991, petitioner bought the second parcel covered
by TD No. 01-00497, Ior P750,000.
Contending that the contract price Ior the two parcels oI land was grossly inadequate, the
children oI Eligio, Sr., namely, JoseIina Cavestany, Eligio errera, Jr., and respondent Pastor
errera, tried to negotiate with petitioner to increase the purchase price. When petitioner reIused,
herein respondent then Iiled a complaint Ior annulment oI sale, with the RTC oI Antipolo City,
docketed as Civil Case No. 92-2267. In his complaint, respondent claimed ownership over the
second parcel, which is the lot covered by TD No. 01-00497, allegedly by virtue oI a sale in his
Iavor since 1973. e likewise claimed that the Iirst parcel, the lot covered by TD No. 01-00495,
was subject to the co-ownership oI the surviving heirs oI Francisca A. errera, the wiIe oI
Eligio, Sr., considering that she died intestate on April 2, 1990, beIore the alleged sale to
petitioner. Finally, respondent also alleged that the sale oI the two lots was null and void on the
ground that at the time oI sale, Eligio, Sr. was already incapacitated to give consent to a contract
because he was already aIIlicted with senile dementia, characterized by deteriorating mental and
physical condition including loss oI memory.

Issue:
Whether or not the assailed contracts oI sale void or merely voidable and hence capable
oI being ratiIied.

eld:
Article 1318 oI the Civil Code states that no contract exists unless there is a concurrence
oI consent oI the parties, object certain as subject matter, and cause oI the obligation established.
Article 1327 provides that insane or demented persons cannot give consent to a contract. But, iI
an insane or demented person does enter into a contract, the legal eIIect is that the contract is
voidable or annullable as speciIically provided in Article 1390.
In the present case, it was established that the vendor Eligio, Sr. entered into an
agreement with petitioner, but that the Iormer`s capacity to consent was vitiated by senile
dementia. ence, we must rule that the assailed contracts are not void or inexistent per se; rather,
these are contracts that are valid and binding unless annulled through a proper action Iiled in
court seasonably.





Braganza vs. Villa Abrille, G.R. No. L-12471, April 13, 1959

Facts:
Petitioners Braganza and her two sons, RodolIo and Guillermo appears to have received
Irom Villa Abrille, as a loan, on October 30, 1944 P70, 000 in Japanese war note and in
consideration thereoI, promised in writing to pay him P10, 000 in legal currency on the P.I. two
years aIter the cessation oI the present hostilities or as soon as International Exchange has been
established in the Philippines, plus 2 per annum.
Because oI no payment had been made, Abrille sued them on March 1949. In their
answer, deIendants claimed to have received P40, 000 only instead oI P70, 000 as plaintiII
asserted. Also they raised the deIense oI minority because at the time they signed the promissory
notes, RodolIo and Guillermo were only 16 and 18 yrs. oI age. The lower court rendered
judgment whereby the deIendants were required solidarily to pay Abrille the sum oI P10, 000
plus 2 interest Irom October 30, 1944, which was aIIirmed by the Court oI Appeals.

Issue:
Whether or not petitioners are excused Irom complying with their monetary obligation on
account oI minority oI the two consigners.

eld:
Petitioners are not absolved Irom monetary responsibility. In accordance with the
provisions oI the Civil Code, even iI the contract is unenIorceable because oI non-age, they shall
make restitution to the extent that they may have proIited by the money they received. There is
testimony that the Iunds delivered to them by Abrille were used Ior their support during the
Japanese occupation. Such being the case, it is but Iair to hold that they had proIited to the
extent oI the value oI such money, which value has been authoritatively established in the so-
called Ballantine Schedule: in October 1944, P40.00 Japanese notes were equivalent to P1.00 oI
current Philippine money.


















Miailhe vs. Court oI AppealsG.R. No. 108991, March 20, 2001

Facts:
On March 23, 1990, petitioner William Miailhe, on his own behalI and on behalI oI
Victoria Desbarats- Miailhe, Monique Miailhe- Sichere and Elaine Miailhe- Lencquesaing Iiled a
complaint Ior annulment oI sale, reconveyance, and damages against respondent Republic oI the
Philippines and deIendant Development Bank oI the Philippines beIore the trial court. It was
alleged among others that; plaintiIIs were the Iormer registered owners oI three parcels oI land
located at J.P laurel St., San Miguel, Manila and they possessed them over 100 yrs. un til August
1, 1976. That on August 1, 1976, respondent through its armed Iorces, Iorcibly and unlawIully
took possession oI the properties without paying rentals despite plaintiII`s demands. The oIIice
oI the President directed DBP to acquire Ior the government the subject properties. About 19,
1977, through treats and intimidation, plaintiII were coerced in selling the properties to DBP Ior
the low price oI P2, 376, 805 and in turn DBP sold the properties to the Republic oI the
Philippines in 1982. AIter the late President Marcos leIt the Philippines on February 24, 1986
aIter EDSA revolution, plaintiIIs made repeated extrajudicial demands upon dependants Ior the
return and reconveyance oI the subject properties to them but was unjustiIiable Iailed and reIused
by the deIendants.
On May 25, 1990, respondent Iiled its answer denying their allegation and raised as
deIenses that there was no Iorcible take over, the amount paid was Iair, and petitioner`s action
had already prescribed. Pre-trial was set by the trial court but was motioned to dismissed by the
deIendants RP and DBP on the ground oI prescription but was denied. Thus, respondent Iiled a
petition Ior certirari with the CA. The CA ruled that petitioner`s action had prescribed. And also
ruled that Art. 1155 oI the Civil Code, 'a written extrajudicial demand by the creditors woul
interrupt prescription, reIerred only to creditor-debtor relationship, which is not the case here.

Issue:
Whether or not the extrajudicial demands made by the petitioner interrupted the
prescriptive period Ior the annulment oI a voidable contract.

eld:
Extrajudicial demand cannot interrupt the prescriptive period Ior the annulment oI a
voidable contract. Article 1390 oI the Civil Code states that voidable contracts are binding
unless they are annulled by a proper action in court. In the present case, there is as yet no
obligation in existence. Respondent has no obligation to reconvey the subject lots because oI the
existing contract oI sale. Although allegedly voidable, it is binding unless annulled by a proper
action in court. Not being a determinate conduct that can be extrajudicially demanded, it cannot
be considered as an obligation either. It is clear that the deIendants were not obligated to accede
to any extrajudicial demand to annul the contract oI sale.







Katipunan vs. Katipunan, G.R. No. 132415, January 30, 2002

Facts:
Respondent is the owner oI a lot and a Iive-door apartment constructed thereon occupied
by lessees. On December 29, 1985, respondent, assisted by his brother, petitioner, entered into a
Deed oI Absolute Sale with their other brothers (co-petitioners, represented by their Iather, Atty.
Balguma involving the subject property Ior P187, 000. 00. Consequently, respondent`s title to
the property was cancelled and in lieu thereoI, a new TCT was issued in Iavor oI petitioners.
ThereaIter, respondent Iiled with the Regional Trial Court a complaint Ior annulment oI
the above Deed oI Absolute Sale on the ground that petitioners, with evident bad Iaith, conspired
with one another in taking advantage oI his ignorance, he being only a third grader and through
insidious words and machinations, they made him sign a document purportedly a contract oI
employment, which turned out to be a Deed oI Absolute Sale.
The lower court dismissed the complaint holding that respondent Iailed to prove his
causes oI action since he admitted that: 1.) e obtained loans Irom the Balgumas; 2.) e signed
the Deed oI Absolute Sale; and 3.) e acknowledged selling the property and that he stopped
collecting the rentals.
The said decision was however reversed by the Court oI Appeals.

Issue:
Whether or not the subject contract is void ab initio or voidable on the ground that one oI
the parties is incapable oI giving consent or where consent is vitiated by mistake, Iraud, or
intimidation.

eld:
A contract oI sale is born Irom the moment there is meeting oI minds upon the thing
which is the object oI the contract and upon the price. This meeting oI minds speaks oI the intent
oI the parties in entering into the contract respecting the subject matter and the consideration
thereoI. Thus, the elements oI a contract oI sale are consent, object, and price in money or its
equivalent. Under Article 1330 oI the Civil Code, consent may be vitiated by any oI the
Iollowing: 1.) mistake, 2.) violence, 3.) intimidation, 4.) undue inIluence, and 5.) Iraud. The
presence oI any oI these vices renders the contract voidable.














JUMALON VS. COURT OF APPEALS, G.R. No. 127767, January 30, 2002


Facts:
On 16 July 1991, complainant De Leon and herein petitioner, Nilo R. Jumalon, executed
a Conditional Sales Agreement whereby the Iormer purchased Irom the latter a house and lot
located at Block 20, Lot 24-A, Bathaluman St., Dona Amanda Subdivision, Rosario Pasig,
consisting oI 102 square meters at a price oI P500,000. On 24 July 1991, Jumalon executed in
Iavor oI De Leon a Deed oI Absolute Sale. Title was transIerred to DE Leon on July 29,1991.
Meanwhile, De Leon learned Irom neighboring residents that the presence oI high-
tension wires generate tremendous static electricity and produce electric sparks whenever it
rains. Through the inquiries to the LURB EnIorcement Center, De Leon prohibited within the
right oI way the transmission line. De Leon Iiled a case Ior declaration oI nullity or annulment oI
sale oI real property beIore the Regional Trial Court. The complaint alleged that vendor Jumalon
with Iraud and evident bad Iaith misrepresented: a) that the property is Iree Irom all liens and
encumbrances when the same lies within the 30-meter tight oI way oI the Manila Electric
Company (MERALCO); b) that the existence or the high-tension wires posed no serious risks in
the property and/or its occupants when Meralco itselI certiIied the same is hazardous to liIe
property; and, c) that Jumalon had the necessary license to sell Irom the LURB when in Iact he
had none.

Issue:
Whether or not the vendee was entitled to annul the sale.

eld:
There was Iraud in the sale oI the subject house. It is built in a subdivision area where
there is an existing 30-meter right oI way MERALCO with igh-tension wires over the property,
posing danger to liIe and property. The construction oI houses underneath the high tension wires
is prohibited as hazardous to liIe and property because the line carries 115.000 volts oI
electricity, generates tremendous static electricity and produces electric sparks whenever it
rained thereIore, the vendee was entitled to annul the sale.
WhereIore, the petition is hereby denied Ior lack oI merit. The decision oI the Court oI
Appeals is aIIirmed in toto.



























































ARR IVES SOEMAKER vs.LA TONDENA, INC., G.R. No. L-45667, May 9, 1939

Facts:
On January 19, 1937 plaintiII arry Ives Shoemaker Iiled a second amended complaint
against La Tondena Inc., in which, he prayed that judgment be rendered against said deIendant,
sentencing it to pay him the sum oI P11,000 with legal interest Irom the date oI the Iiling oI the
complaint, plus the costs. To said amended complaint the deIendant company, La Tondena Inc.,
interposed a demurrer base on the ground that the Iacts therein alleged do not constitute a cause
oI action, since it is not averred that the alleged mutual agreement modiIying the contract oI
lease oI services, has been put in writing, whereas it states that its terms and conditions may only
be modiIied upon the written consent oI both interested parties. AIter hearing on the demurrer
and plaintiII's answer thereto, as well as the reply oI the deIendant company to said answer, the
court a quo, in an order dated February 11, 1937, sustained the demurrer and ordered plaintiII to
amend his second amended complaint dated January 19, 1937 within the period oI IiIteen days.
When plaintiII accepted the order sustaining the demurrer and to that denying his motion Ior
reconsideration oI said order and chose not to amend his second amended complaint in so Iar as
it reIerred to his claim oI P11, 000 the lower court issued on March 19, 1937 an order dismissing
the aIoresaid claim, with costs against plaintiII.
ISSUE: Whether or not the Iacts alleged do not constitute a cause oI action.
eld:
The purpose oI the statute is to prevent Iraud and perjury in the enIorcement oI
obligations depending Ior their evidence upon the unassisted memory oI witnesses by requiring
certain enumerated contracts and transactions to be evidenced by a writing signed by the party to
be charged.
In the present case, it is hypothetically admitted that plaintiII complied, within the year,
that is, Irom March 1 to December 31, 1933, with all the obligations he had bound himselI to
IulIill under the modiIied oral contract. It is also hypothetically admitted that the deIendant
corporation beneIited Irom the IulIillment oI said obligations by the plaintiII; hence, it cannot, in
equity and justice, avoid its own obligations assumed under the same modiIied oral contract, Ior
to allow it to do so under the protection oI the statute oI Irauds would make oI the latter a shield
oI and not a protection against Irauds.
Thus, in an oral contract which, by its terms, is not to be perIormed within one year Irom
the execution thereoI, one oI the contracting parties has complied within the year with the
obligations imposed on him by said contract, the other party cannot avoid the IulIillment oI those
incumbent on him under the same contract by invoking the statute oI Irauds, because the latter
aims to prevent and not to protect Iraud. ence, the Iacts alleged in the second amended
complaint constitute a cause oI action.







PNB VS. PILIPPINE VEGETABLE OIL COMPAN, G.R. No. L-25400, January 14, 1927

Facts:
In 1920, the Philippine Vegetable Oil Co., Inc., which will hereaIter be called the
Vegetable Oil Company, Iound itselI in Iinancial straits. It was in debt to the extent oI
approximately P30,000,000. The Philippine National Bank was the largest creditor. The
Vegetable Oil Company owed the bank P17,000,000. Over P13,000,000 were due the other
creditors. The Philippine National Bank was secured principally by a real and chattel mortgage
Ior P3,500,000. On January 10, 1921, the Vegetable Oil Company executed another chattel
mortgage in Iavor oI the bank on its vessels Tankerville and . S. Everett to guarantee the
payment oI sums not to exceed P4,000,000.
This was the precarious situation which in the latter part oI 1920 and the early part oI
1921 conIronted the Vegetable Oil Company, its General Manager Phil. C. Whitaker, the
Philippine National Bank, and the various creditors oI the Vegetable Oil Company. Bankruptcy
was imminent. On January 1, 1921, Mr. Whitaker made his Iirst oIIer to pledge certain private
properties to secure the creditors oI the Oil Company
In February oI the same year, a creditors' meeting was held. At the instance oI Mr.
Whitaker but inspired to such action by the bank, a receiver Ior the Vegetable Oil Company was
appointed by the Court oI First Instance oI Manila on March 11, 1921. During the period when a
receiver was in control oI the property oI the Vegetable Oil Company, a number oI events
occurred. The Iirst was the agreement perIected by the Vegetable Oil Company, Mr. Whitaker,
and some oI the creditors oI the Oil Company on June 27, 1921, the creditors transIerred to Mr.
Whitaker a part oI their claims against the Vegetable Oil Company in consideration oI the
execution by Mr. Whitaker oI a trust deed oI his property. The Philippine National Bank was not
a direct party to the agreement although the oIIicials oI the bank had Iull knowledge oI its
accomplishment and the general manager oI the bank placed his O. K. at the end oI the Iinal
draIt. The next move oI the bank was to obtain a new mortgage Irom the Vegetable Oil Company
on February 20, 1922. Shortly thereaIter, on February 28, 1922, the receivership Ior the
Vegetable Oil Company was terminated. The bank suspended the operation oI the Vegetable Oil
Company in May, 1922, and deIinitely closed the Oil Company's plant on August 14, 1922.

Issue:
Whether or not the mortagage is valid.

eld:
It has been said that the mortgage was executed on February 20, 1922. That is
undeniable. The allegation oI the plaintiII's complaint is "That the deIendant, on the 20th day oI
February, 1922, duly executed to the plaintiII a mortgage." The mortgage in question recites:
"This mortgage, executed at the City oI Manila, Philippine Islands, this twentieth day oI
February, nineteen hundred and twenty-two." owever, the mortgage was not ratiIied beIore a
notary public until March 8, 1922, and was not recorded in the registry oI property until March
21, 1922.
To add one more date, it will be recalled that the receivership ended on February 28,
1922. In other words, as partially interpretative oI the situation, the mortgage was executed by
the Philippine National Bank, through its General Manager, and another corporation beIore the
termination oI the receivership oI the said corporation, but was not acknowledged or recorded
until aIter the termination oI the receivership.
In the complaint oI Phil. C. Whitaker Iiled in the Court oI First Instance oI Manila in
which it was prayed that a receiver be appointed to take charge oI the Philippine Vegetable Oil
Co., Inc., it was alleged "that the largest individual creditor oI said corporation is the Philippine
National Bank, the indebtedness to which amounts to approximately P16,000,000, a portion oI
which indebtedness is secured by mortgage on the major part oI the assets oI the corporation."
The order oI the court appointing a receiver contained a similar recital. The Philippine National
Bank held the mortgage mentioned, and possibly two others not mentioned, when the
receivership proceedings were initiated.
It must be evident to all that the Philippine National Bank could legally secure no new
mortgage by the accomplishment oI documents between its oIIicials and the oIIicials oI the
Vegetable Oil Company while the property oI the latter company was in custodia legis . The
Vegetable Oil Company was then inhibited absolutely Irom giving a mortgage on its property.
The receiver was not a party to the mortgage. The court had not authorized the receiver to
consent to the execution oI a new mortgage. Whether the court could have done so is doubtIul,
but that it would have thus consented is hardly debatable, considering that it would desire to
protect the rights oI all the creditors and not the rights oI one particular creditor. The legal
conclusion is axiomatic.









































































SPOUSES TAN VS. VILLAPAZ, G.R. No. 160892, November 22, 2005
Facts:
On February 6, 1992, respondent issued a Philippine Bank oI Communications (PBCom)
crossed checkOn February 6, 1992, respondent issued a Philippine Bank oI Communications
(PBCom) crossed check.
The Malita, Davao del Sur Police, by letter oI June 22, 1994 issued an invitation-request
to petitioner Antonio Tan at his address at Malatibas Plaza, Lolita`s Rendezvous, BoniIacio St.,
Davao City inviting him to appear beIore the Deputy ChieI oI Police OIIice on June 27, 1994 at
9:00 o`clock in the morning 'in connection with the request oI |herein respondent| Carmelito
Villapaz, Ior conIerence oI vital importance. The invitation-request was received by petitioner
Antonio Tan on June 22, 1994 but on the advice oI his lawyer, he did not show up at the Malita,
Davao del Sur Police OIIice.

Issue:
Whether or not the contract should be in writing.

eld:
Petitioner Antonio Tan`s Ioregoing tale hardly inspires credence. For it is contrary to
common experience. II indeed respondent, who came all the way Irom Malita to Davao City,
arriving at petitioner Antonio Tan`s workplace at Golden arvest at 10:30 in the morning,
needed cash oI P250,000.00, and the drawee bank PBCom Davao City, Monteverde branch
where respondent maintained a current account could even be reached by Ioot Irom the Golden
arvest in just a Iew minutes (albeit by petitioner Antonio Tan`s own inIormation respondent
brought his truck with him) it being about 300 meters away respondent could just have gone
there and drew cash Irom his current account via over the counter transaction. AIter all, his
account had suIIicient Iunds. In other words, he did not have to encash his check Irom
petitioners.
Even assuming that, as claimed by petitioner Antonio Tan, at the time respondent needed
to have his check encashed, it was already close to 3:00 o`clock in the aIternoon, why could not
have PBCom Monteverde branch also accommodated him and allow him to encash his check
that same time when he, like petitioners, was also a client-depositor and the bank was still open
Ior business?
Petitioners` version was thus correctly denied credit by the appellate













SPOUSES DAVID VS. TIONGSON, G.R. No. 108169, August 25, 1999

Facts:
On February 23, 1989, three sets oI plaintiIIs, namely, spouses Feliciano and Macaria
Ventura, spouses Venancio and Patricia David and Florencia Ventura Vda. de Basco, Iiled with
the Regional Trial Court, San Fernando, Pampanga, a complaint Ior speciIic perIormance with
damages, against private respondents spouses Alejandro and Guadalupe Tiongson, alleging that
the latter sold to them lots located in Cabalantian, Bacolor, Pampanga.
The parties expressly agreed that as soon as the plaintiIIs Iully paid the purchase price on
their respective lots, respondents would execute an individual deed oI absolute sale and cause the
issuance oI the corresponding certiIicate oI title in plaintiIIs' Iavor.
Spouses Ventura immediately took possession oI the lot, erected their house thereon and Ienced
the perimeters. As oI October 28, 1985, the Venturas had Iully paid the price oI their lot,
evidenced by a certiIication issued by Alejandro Tiongson. Sometime in November 1985, the
Venturas demanded the execution oI a deed oI sale and the issuance oI the corresponding
certiIicate oI title, but the latter reIused to issue the same.
Spouses David claimed that, as agreed by the parties, the P15,000.00 purchase price
would be paid as Iollows: P3,800.00, as downpayment and a monthly amortization oI P365.00,
starting on March 8, 1983, until Iully paid. On October 31, 1985, the Davids had paid a total oI
P15,050.00, evidenced by the receipts issued by Alejandro Tiongson. On the Iirst week oI
November 1985, the Davids demanded the execution oI a deed oI sale and the issuance oI the
corresponding certiIicate oI title, but respondents reIused. Unlike the Venturas, they were not
able to take possession oI the property.
PlaintiII Florencia Ventura Vda. de Basco averred that she bought two parcels oI land, a 109 sq.
m. lot and a 60 sq. m. lot, Ior P6,425.00 and P6,500.00, respectively. As oI February 6, 1984,
Florencia had paid P12,945.00 Ior the two lots, evidenced by receipts issued by Alejandro
Tiongson. Sometime in March 1984, she demanded the execution oI the deeds oI sale and
issuance oI the corresponding certiIicates oI title over the lots. owever, respondents Iailed to
comply with their obligation.

Issue: Whether or not there was implied agreement on the purchase price and the manner oI
installments on payment.

eld: We disagree with the Iinding oI the Court oI Appeals that there was no agreement as to the
price oI the lots. The Court oI Appeals relied heavily on the receipts issued by Alejandro
Tiongson. owever, Patricia David testiIied that there was an agreement to purchase the lot Ior
P15, 000.00, payable as Iollows: P3,800.00 as down payment, with P385.00 monthly
installments thereaIter. The respondents Iailed to rebut such declaration, as the deIault order
rendered them without personality to adduce evidence in their behalIAt any rate, we rule that
there was a perIected contract. owever, the statute oI Irauds is inapplicable. The rule is settled
that the statute oI Irauds applies only to executory and not to completed, executed, or partially
executed contracts. In the case oI spouses David, the payments made rendered the sales contract
beyond the ambit oI the statute oI Irauds. The Court oI Appeals erred in concluding that there
was no perIected contract oI sale. owever, in view oI the stipulation oI the parties that the deed
oI sale and corresponding certiIicate oI title would be issued aIter Iull payment, then, they had
entered into a contract to sell and not a contract oI sale.

CORDIAL VS. MIRANDA, G.R. No. 135495 , December 14, 2000

Facts:
Respondent David Miranda, a businessman Irom Angeles City, was engaged in rattan
business since 1980. e buys large quantit|ies| oI rattan poles Irom suppliers coming Irom
Palawan, Isabela, Ilocos Sur, Baler, Quezon and Cagayan de Oro City. Among his many regular
suppliers, oI particular interest in this case, were Roberto Savilla, er Villanueva, Roberto
Santiago, and in 1990 one Gener Buelva.
Gener Buelva was an employee oI one Mike Samaya, who was also a supplier oI rattan to
Respondent Miranda. Gener Buelva, wanting to become an independent rattan supplier in
January 1990, was recommended by his employer Samaya to Miranda who readily accepted him,
thus, started such business relationship.
In the business relations between Buelva and Miranda, the Iormer was given cash
advances by the latter, to buy rattan in Palawan, shipping said purchased rattan by boat to
Manila, paid ex-Manila, aIter liquidating cash advances. Buelva also paid Iorest royalties to the
concessionaire, thru Roberto Savilla. The business transactions, however, did not last long
because Buelva then in Manila met an accident and died on June 19, 1990
Buelva`s widow, Cecilla Buelva, resided in the Municipality oI Lagonoy, Camarines
Sur. Sometime in early April 1992, she had a conversation with Genaro Cordial in her barrio,
San Isidro. They conversed about business prospects in Palawan province and the rattan
business. Cordial became interested and asked Cecillia Buelva to introduce him to David
Miranda, the businessman to whom her husband supplied rattan, to which she agreed
In the last week oI April 1992, Cecilia Buelva accompanied Genaro Cordial to David
Miranda in the latter`s residence at Belen omes Subdivision, MacArthur ighway, Angeles
City where Cecilia Buelva introduced Cordial to Miranda, and to deliver rattan to Miranda. to
which proposal Miranda allegedly agreed to be supplied with rattan poles
On October 29, 1992, Cordial shipped the 50,540 pieces oI rattan poles to Manila, loaded
in M/V Mana`, and on November 2, 1992 the vessel docked |in| Malabon, Metro Manila.
Immediately aIter the vessel M/V Mana` docked, Cordial personally notiIied David Miranda at
his house in Belen omes Subdivision, MacArthur ighway, Angeles City oI the arrival oI the
rattan poles, with Miranda promising that a truck would Iollow to load the unloaded rattan poles
Irom the vessel. True enough, a truck was sent to carry the rattan poles to Angeles City and had
to make seven trips to haul the shipped rattan poles. On the last trip, Cordial went with the truck
and the rattan poles were allegedly personally received by David Miranda in his Angeles City
residence
The rattan poles were scaled` and a scale report was issued, however, in the name oI
Roberto Savilla.
'Cordial allegedly protested to Miranda regarding the total volume (number oI pieces)
and the amount Ex-Manila` oI rattan poles reIlected in the scale report as well as why the scale
report was in the name oI Roberto Savilla, but said protest was brushed aside, saying: not to
worry because that would be settled.
'Cordial waited at Miranda`s house the whole day to be paid, but Miranda, who leIt that
morning, did not return. Repeated trips to Angeles City resulted in no payment.
'A letter oI demand dated January 5, 1993 Ior payment oI P375,000.00, representing cost oI the
rattan poles delivered was sent by |petitioner| thru counsel.
'In a reply, dated January 12, 1993 Miranda stressed that there exist no privity oI contract
between Miranda and Cordial

Issue:
Whether or not there was privity oI contract between the parties and whether or not the
statute oI Irauds is applicable.

eld:
We agree with the RTC that there was prooI oI privity oI contract between petitioner and
respondent. The Civil Code upholds the spirit over the Iorm, and an agreement will be deemed to
exist provided the essential requisites are present A contract will be upheld as long as there is
prooI oI consent, subject matter and cause. Moreover, it is generally obligatory in whatever Iorm
it may have been entered into. From the moment there is a meeting oI minds between the parties,
it is perIected. In the present case, the perIection oI a valid contract between respondent and
petitioner is evident in the latter`s testimony.
The Statute oI Frauds applies only to executory and not to completed, executed, or
partially executed contracts. Thus, where one party has perIormed one`s obligation, oral
evidence will be admitted to prove the agreement. In the present case, it has clearly been
established that petitioner had delivered the rattan poles to respondent on November 3,
1992. Because the contract was partially executed, the Statute oI Frauds does not apply.


























VILLANUEVA MIJARES VS. CA, G.R. No. 108921, April 12, 2000

Facts:
During his liIetime, Felipe, owned real property situated at Estancia, Kalibo, Capiz.
Felipe begot the Iollowing legitimate children: Simplicio, Benito, Leon, Nicolasa, Eustaqio,
Camila, Fausta, and Pedro. Upon Felipe's death, ownership oI the land was passed on to his
children. In 1952, Pedro, one oI the children oI Felipe got his share equivalent to one-sixth (1/6)
oI the property with an area oI one thousand nine hundred Iive (1,905) square meters and had it
declared under his name pursuant to Tax Declaration No. 8085. The remaining undivided portion
oI the land was held in trust by Leon Ior his co-heirs. During Leon's liIetime, his co-heirs made
several seasonable and lawIul demands upon him to subdivide and partition the property, but Ior
one reason or another, no subdivision took place. AIter the death oI Leon in August 1972, private
respondents discovered that the shares oI Iour oI the heirs oI Felipe, namely, Simplicio, Nicolasa,
Fausta and Maria Baltazar, spouse oI Benito, was purchased by Leon as evidenced by a Deed oI
Sale executed on August 25, 1946 but registered only in 1971. It also came to light that Leon
had, sometime in July 1970, executed a sale and partition oI the property in Iavor oI his own
children, herein petitioners. By virtue oI such Deed oI Partition, private respondents had
succeeded in obtaining Original CertiIicate oI Title. On April 25, 1975, petitioners managed to
secure separate and independent titles over their pro-indiviso shares in their respective names.
Private respondents then Iiled a case Ior partition with annulment oI documents and/or
reconveyance and damages with the Regional Trial Court oI Kalibo, Aklan. Private respondents
contended that the sale in Iavor oI Leon was Iraudulently obtained through machinations and
Ialse pretenses. Thus, the subsequent sale oI the lot by Leon to his children was null and void
despite the OCT in his Iavor.

Issue: Whether or not the deed oI absolute sale is unenIorceable against private respondents Ior
being an unauthorized contract.

eld: There was no question as to the sale oI the shares oI Simplicio, Nicolasa, and Fausta, to
their brother Leon. But not so with Maria Baltazar concerning the share oI her late husband,
Benito, to Leon. Under the law then prevailing at the time oI the demise oI her spouse, her
husband's share in the common inheritance pertained to her minor children who were her late
husband's heirs and successors-in-interest. While it is true that the Court oI Appeals upheld the
validity oI the Deed oI Sale, it nevertheless correctly ruled that the sale by Maria Baltazar oI her
children's share was invalid. From its execution up to the time that an action Ior reconveyance
was instituted below by the private respondents and to the present, the Deed oI Sale oI August
26, 1948, remained unenIorceable as to private respondents ProcerIina, Ramon, Prosperidad, and
Rosa. Article 1529 oI the old Civil Code, which was the prevailing law in 1948 and thus
governed the questioned Deed oI Sale, clearly provided that a contract is unenIorceable when
there is an absence oI authority on the part oI one oI the contracting parties. Interpreting Article
1529 oI the old Civil Code, the Court has ruled that the nullity oI the unenIorceable contract is oI
a permanent nature and it will exist as long the unenIorceable contract is not duly ratiIied. The
mere lapse oI time cannot give eIIicacy to such a contract. In the instant case, there is no
showing oI any express or implied ratiIication oI the assailed Deed oI Sale by the private
respondents ProcerIina, Ramon, Prosperidad, and Rosa. Thus, the said Deed oI Sale must remain
unenIorceable as to them.















































ROSENCOR VS. INQUING, G.R. No. 140479, March 8, 2001
Facts:
The case was originally Iiled on December 10, 1993 by Paterno Inquing, Irene Guillermo
and Federico Bantugan, herein respondents, against Rosencor Development Corporation
(hereinaIter "Rosencor"), Rene Joaquin, and EuIrocina de Leon. Originally, the complaint was
one Ior annulment oI absolute deed oI sale but was later amended to one Ior rescission oI
absolute deed oI sale. A complaint-Ior intervention was thereaIter Iiled by respondents Fernando
Magbanua and Danna Lizza Tiangco. The complaint-in-intervention was admitted by the trial
court in an Order dated May 4, 1994.
PlaintiIIs and plaintiIIs-intervenors averred that they are the lessees since 1971 oI a two-
story residential apartment located at No. 150 Tomas Morato Ave., Quezon City covered by TCT
No. 96161 and owned by spouses Faustino and Cresencia Tiangco. The lease was not covered by
any contract. The lessees were renting the premises then Ior P150.00 a month and were allegedly
verbally granted by the lessors the pre-emptive right to purchase the property iI ever they decide
to sell the same.
Upon the death oI the spouses Tiangcos in 1975, the management oI the property was
adjudicated to their heirs who were represented by EuIrocina de Leon. The lessees were
allegedly promised the same pre-emptive right by the heirs oI Tiangcos since the latter had
knowledge that this right was extended to the Iormer by the late spouses Tiangcos. The lessees
continued to stay in the premises and allegedly spent their own money amounting Irom
P50,000.00 to P100,000.00 Ior its upkeep. These expenses were never deducted Irom the rentals
which already increased to P1,000.00.
The lessees oIIered to reimburse de Leon the selling price oI P726,000.00 plus an additional
P274,000.00 to complete their P1,000.000.00 earlier oIIer. When their oIIer was reIused, they
Iiled the present action praying Ior the Iollowing: a) rescission oI the Deed oI Absolute Sale
between de Leon and Rosencor dated September 4, 1990; b) the deIendants Rosencor/Rene
Joaquin be ordered to reconvey the property to de Leon; and c) de Leon be ordered to reimburse
the plaintiIIs Ior the repairs oI the property, or apply the said amount as part oI the price Ior the
purchase oI the property in the sum oI P100,000.00."

Issue:
Whether or not respondents have established their right oI Iirst reIusal despite their
reliance on their deIense based on the statute iI Irauds.

eld:
The term "statute oI Irauds" is descriptive oI statutes which require certain classes oI
contracts to be in writing. This statute does not deprive the parties oI the right to contract with
respect to the matters therein involved, but merely regulates the Iormalities oI the contract
necessary to render it enIorceable. Thus, they are included in the provisions oI the New Civil
Code regarding unenIorceable contracts, more particularly Art. 1403, paragraph 2
The purpose oI the statute is to prevent Iraud and perjury in the enIorcement oI
obligations depending Ior their evidence on the unassisted memory oI witnesses by requiring
certain enumerated contracts and transactions to be evidenced by a writing signed by the party to
be charged. Moreover, the statute oI Irauds reIers to speciIic kinds oI transactions and cannot
apply to any other transaction that is not enumerated therein. The application oI such statute
presupposes the existence oI a perIected contract.
The question now is whether a "right oI Iirst reIusal" is among those enumerated in the
list oI contracts covered by the Statute oI Frauds. More speciIically, is a right oI Iirst reIusal akin
to "an agreement Ior the leasing oI a longer period than one year, or Ior the sale oI real property
or oI an interest therein" as contemplated by Article 1403, par. 2(e) oI the New Civil Code.
Not all agreements "aIIecting land" must be put into writing to attain enIorceability. the
oral partition oI real property and an agreement creating a right oI way are not covered by the
provisions oI the statute oI Irauds. The reason simply is that these agreements are not among
those enumerated in Article 1403 oI the New Civil Code.
A right oI Iirst reIusal is not among those listed as unenIorceable under the statute oI
Irauds. Furthermore, the application oI Article 1403, par. 2(e) oI the New Civil Code
presupposes the existence oI a perIected, albeit unwritten, contract oI sale.
A right oI Iirst reIusal, such as the one involved in the instant case, is not by any means a
perIected contract oI sale oI real property. At best, it is a contractual grant, not oI the sale oI the
real property involved, but oI the right oI Iirst reIusal over the property sought to be sold. It is
thus evident that the statute oI Irauds does not contemplate cases involving a right oI Iirst reIusal.
As such, a right oI Iirst reIusal need not be written to be enIorceable and may be proven by oral
evidence.



























FIRME VS. BUKAL ENTERPRISES, G.R. No. 146608, October 23, 2003

Facts:
Petitioner Spouses Constante and Azucena Firme ('Spouses Firme) are the registered
owners oI a parcel oI land. located on Dahlia Avenue, Fairview Park, Quezon City. Renato de
Castro ('De Castro), the vice president oI Bukal Enterprises and Development Corporation
('Bukal Enterprises) authorized his Iriend, Teodoro Aviles ('Aviles), a broker, to negotiate
with the Spouses Firme Ior the purchase oI the Property.
On 28 March 1995, Bukal Enterprises Iiled a complaint Ior speciIic perIormance and
damages with the trial court, alleging that the Spouses Firme reneged on their agreement to sell
the Property. The complaint asked the trial court to order the Spouses Firme to execute the deed
oI sale and to deliver the title to the Property to Bukal Enterprises upon payment oI the agreed
purchase price.
The Spouses Firme rejected this First DraIt because oI several objectionable conditions,
including the payment oI capital gains and other government taxes by the seller and the
relocation oI the squatters at the seller`s expense. During their second meeting, Aviles presented
to the Spouses Firme another draIt deed oI sale. The Spouses Firme allegedly accepted the
Second DraIt in view oI the deletion oI the objectionable conditions contained in the First DraIt.
According to Aviles, the Spouses Firme were willing to sell the Property at P4,000 per square
meter. They then agreed that payment would be made at the Far East Bank and Trust Company
('FEBTC), Padre Faura Branch, Manila. owever, the scheduled payment had to be postponed
due to problems in the transIer oI Iunds.
The Spouses Firme later inIormed Aviles that they were no longer interested in selling
the Property.

Issue: Whether or no the alleged contract oI sale is unenIorceable.

eld: The Court oI Appeals held that partial perIormance oI the contract oI sale takes the oral
contract out oI the scope oI the Statute oI Frauds. This conclusion arose Irom the appellate
court`s erroneous Iinding that there was a perIected contract oI sale. The records show that there
was no perIected contract oI sale. There is thereIore no basis Ior the application oI the Statute oI
Frauds. The application oI the Statute oI Frauds presupposes the existence oI a perIected
contract. Article 1403 oI the Civil Code provides:
Art. 1403. The Iollowing contracts are unenIorceable, unless they are ratiIied:
(1) Those entered into in the name oI another person by one who has been given
no authority or legal representation, or who has acted beyond his powers;
(2) Those that do not comply with the Statute oI Frauds as set Iorth in this
number. In the Iollowing cases an agreement hereaIter made shall be unenIorceable by
action, unless the same, or some note or memorandum thereoI, be in writing and
subscribed by the party charged or by his agent; evidence, thereIore, oI the agreement
cannot be received without the writing, or a secondary evidence oI its contents. An
agreement Ior the leasing Ior a longer period than one year, or Ior the sale oI real
property or oI an interest therein.

















































GURREA VS. SUPPLICO, 488 SCRA 332, April 26, 2006

Facts:
The lot in question situated at 245 Marne Street, San Juan, Metro Manila was originally
owned by one oI herein plaintiIIs` Attorney-in-Fact, Rosalina Gurrea. Sometime in 1958,
Rosalina Gurrea transIerred the ownership oI said lot to Adelina Gurrea, whose ownership was
evidenced by TCT No. 58253. Adelina Gurrea continued to be the owner oI the lot until her
death. ThereaIter, Special Proceedings No. 7185 was instituted to have the will she executed
during her liIetime probated and to settle her estate. Under the said will, the San Juan lot was
bequeathed to Pilar and Luis Gurrea, while 700,000 pesetas, / oI the lot in Baguio City and a
one-hectare piece oI land in Pontevedra, Negros Occidental were given to Ricardo Gurrea.
Ricardo Gurrea, represented by and through his counsel Atty. Enrique Suplico (the
deIendant), Iiled an Opposition in Special Proc. No. 7185. In consideration oI said
representation, Ricardo Gurrea agreed to pay Atty. Suplico 'a contingent Iee oI twenty (20) oI
whatever is due me, either real or personal property.
During the pendency oI the proceedings and upon the oral instructions oI Ricardo Gurrea,
Atty. Suplico negotiated with the other heirs oI Adelina Gurrea regarding the transIer oI the piso
(apartment building) in Spain to Ricardo Gurrea`s daughter, Juliet Gurrea de Melendres. Ricardo
Gurrea Iurther instructed Atty. Suplico not to enter into any settlement with the heirs unless the
piso is transIerred to his daughter. Finally, the transIer oI the piso worth P64,000.00 was
executed and the heirs arrived at an amicable settlement regarding the estate oI Adelina
Gurrea. ence, Ricardo Gurrea withdrew his Opposition and the heirs then drew up a project oI
partition which was eventually approved by the probate court. Pursuant to the project oI
partition, the Iollowing properties were adjudicated to Ricardo Gurrea: (1) the whole oI the
Baguio lot (with assessed value oI P26,350.00); (2) the whole oI the San Juan lot (with assessed
value oI P9,630.00); and (3) a parcel oI land in Pontevedra, Negros Occidental (with assessed
value oI P300.00).
As payment oI his attorney`s Iees, Ricardo Gurrea oIIered the San Juan lot to Atty.
Suplico who was initially hesitant to accept the same as the property is occupied by
squatters. owever, in order not to antagonize his client, Atty. Suplico agreed to Ricardo
Gurrea`s proposal with the Iurther understanding that he will receive an additional commission
oI 5 iI he sells the Baguio property. ThereaIter, the deed oI TransIer oI Rights and Interest was
draIted. The said deed was presented to Ricardo Gurrea Ior his signature. That beIore signing the
same, the contents oI the deed were Iirst explained to Ricardo Gurrea by Atty. Suplico and Atty.
Manuel Pama, the notary public. On August 20, 1975, the deed was Iinally signed by Ricardo
Gurrea at the oIIice oI Atty. Pama, in the presence oI the latter, Atty. Suplico, Victor Tupas and
another person, the last two acting as witnesses. Later, on October 7, 1980, Atty. Suplico
registered the deed and obtained a title/TCT to the San Juan property under his name. Ricardo
Gurrea died on October 22, 1980. AIter his death, his heirs instituted Special Pro. No. 2722 Ior
the settlement oI Ricardo Gurrea`s estate

Issue:
Whether or no the contract oI attorney`s Iess between deIendant-appellant and Ricardo is
valid.

eld:
aving been established that the subject property was still the object oI litigation at the
time the subject deed oI TransIer oI Rights and Interest was executed, the assignment oI rights
and interest over the subject property in Iavor oI respondent is null and void Ior being violative
oI the provisions oI Article 1491 oI the Civil Code which expressly prohibits lawyers Irom
acquiring property or rights which may be the object oI any litigation in which they may take
part by virtue oI their proIession.
Article 1409 oI the same Code provides, among others, that contracts which are expressly
prohibited or declared void by law are considered inexistent and void Irom the beginning.






































FRENZEL VS. CATITO, 406 SCRA 55, July 11, 2003

Facts:
Petitioner AlIred Fritz Frenzel is an Australian citizen oI German descent. e is an
electrical engineer by proIession, but worked as a pilot with the New Guinea Airlines. e arrived
in the Philippines in 1974, started engaging in business in the country two years thereaIter, and
married Teresita Santos, a Filipino citizen. In 1981, AlIred and Teresita separated Irom bed and
board without obtaining a divorce.
Sometime in February 1983, AlIred arrived in Sydney, Australia Ior a vacation. e went
to King`s Cross, a night spot in Sydney, Ior a massage where he met Ederlina Catito, a Filipina
and a native oI Bajada, Davao City. Unknown to AlIred, she resided Ior a time in Germany and
was married to Klaus Muller, a German national. She leIt Germany and tried her luck in Sydney,
Australia, where she Iound employment as a masseuse in the King`s Cross nightclub. She was
Iluent in German, and AlIred enjoyed talking with her. The two saw each other again; this
time Ederlina ended up staying in AlIred`s hotel Ior three days. AlIred gave Ederlina sums oI
money Ior her services. AlIred was so enamored with Ederlina that he persuaded her to stop
working at King`s Cross, return to the Philippines, and engage in a wholesome business oI her
own. e also proposed that they meet in Manila, to which she assented. AlIred gave her money
Ior her plane Iare to the Philippines. Within two weeks oI Ederlina`s arrival in Manila, AlIred
joined her. AlIred reiterated his proposal Ior Ederlina to stay in the Philippines and engage in
business, even oIIering to Iinance her business venture. Ederlina was delighted at the idea and
proposed to put up a beauty parlor. AlIred happily agreed.
AlIred told Ederlina that he was married but that he was eager to divorce his wiIe in
Australia. AlIred proposed marriage to Ederlina, but she replied that they should wait a little bit
longer.
Ederlina Iound a building at No. 444 M.. del Pilar corner Arquiza Street, Ermita,
Manila, owned by one Atty. Jose idalgo who oIIered to convey his rights over the property Ior
P18,000.00. AlIred and Ederlina accepted the oIIer. Ederlina put up a beauty parlor on the
property under the business name Edorial Beauty Salon, and had it registered with the
Department oI Trade and Industry under her name. AlIred paid Atty. idalgo P20,000.00 Ior his
right over the property and gave P300,000.00 to Ederlina Ior the purchase oI equipment and
Iurnitures Ior the parlor. As Ederlina was going to Germany, she executed a special power oI
attorney on December 13, 1983
1
appointing her brother, Aser Catito, as her attorney-in-Iact in
managing the beauty parlor business. She stated in the said deed that she was married to Klaus
Muller. AlIred went back to Papua New Guinea to resume his work as a pilot.
When AlIred returned to the Philippines, he visited Ederlina in her Manila residence and
Iound it unsuitable Ior her. e decided to purchase a house and lot owned by Victoria Binuya
Steckel in San Francisco del Monte, Quezon City, covered by TransIer CertiIicate oI Title No.
218429 Ior US$20,000.00. Since AlIred knew that as an alien he was disqualiIied Irom owning
lands in the Philippines, he agreed that only Ederlina`s name would appear in the deed oI sale as
the buyer oI the property, as well as in the title covering the same. AIter all, he was planning to
marry Ederlina and he believed that aIter their marriage, the two oI them would jointly own the
property. On January 23, 1984, a Contract to Sell was entered into between Victoria Binuya
Steckel as the vendor and Ederlina as the sole vendee. AlIred signed therein as a witness.
Victoria received Irom AlIred, Ior and in behalI oI Ederlina, the amount oI US$10,000.00 as
partial payment, Ior which Victoria issued a receipt When Victoria executed the deed oI absolute
sale over the property on March 6, 1984, she received Irom AlIred, Ior and in behalI oI Ederlina,
the amount oI US$10,000.00 as Iinal and Iull payment. Victoria likewise issued a receipt Ior the
said amount. AIter Victoria had vacated the property, Ederlina moved into her new house. When
she leIt Ior Germany to visit Klaus, she had her Iather Narciso Catito and her two sisters occupy
the property.

Issue:
Whether or not the sale transactions are in violation oI the 1973 Constitution and hence
void ab initio.

eld:
Said transactions are in violation oI the Constitution; hence, are null and void ab initio. A
contract that violates the Constitution and the law, is null and void and vests no rights and creates
no obligations. It produces no legal eIIect at all. The petitioner, being a party to an illegal
contract, cannot come into a court oI law and ask to have his illegal objective carried out. One
who loses his money or property by knowingly engaging in a contract or transaction which
involves his own moral turpitude may not maintain an action Ior his losses. To him who moves
in deliberation and premeditation, the law is unyielding. The law will not aid either party to an
illegal contract or agreement; it leaves the parties where it Iinds them. Under Article 1412 oI the
New Civil Code, the petitioner cannot have the subject properties deeded to him or allow him to
recover the money he had spent Ior the purchase thereoI. Equity as a rule will Iollow the law and
will not permit that to be done indirectly which, because oI public policy, cannot be done
directly. Where the wrong oI one party equals that oI the other, the deIendant is in the stronger
position ... it signiIies that in such a situation, neither a court oI equity nor a court oI law will
administer a remedy. The rule is expressed in the maxims: EX DOLO MALO NON ORITUR
ACTIO and IN PARI DELICTO POTIOR EST CONDITIO DEFENDENTIS.
The petitioner cannot Ieign ignorance oI the constitutional proscription, nor claim that he
acted in good Iaith, let alone assert that he is less guilty than the respondent. The petitioner is
charged with knowledge oI the constitutional prohibition. As can be gleaned Irom the decision oI
the trial court, the petitioner was Iully aware that he was disqualiIied Irom acquiring and owning
lands under Philippine law even beIore he purchased the properties in question; and, to skirt the
constitutional prohibition, the petitioner had the deed oI sale placed under the respondent`s name
as the sole vendee thereoI.
The petitioner cannot Iind solace in Article 1416 oI the New Civil Code. The provision
applies only to those contracts which are merely prohibited, in order to beneIit private interests.
It does not apply to contracts void ab initio. The sales oI three parcels oI land in Iavor oI the
petitioner who is a Ioreigner is illegal per se. The transactions are void ab initio because they
were entered into in violation oI the Constitution. Thus, to allow the petitioner to recover the
properties or the money used in the purchase oI the parcels oI land would be subversive oI public
policy.






LA BUGA`AL-BLAAN VS. RAMOS, G.R. No. 127882, December 1, 2004
Facts:
The Petition Ior Prohibition and Mandamus beIore the Court challenges the
constitutionality oI (1) Republic Act No. |RA| 7942 (The Philippine Mining Act oI 1995); (2) its
Implementing Rules and Regulations (DENR Administrative Order No. |DAO| 96-40); and (3)
the FTAA dated March 30, 1995 executed by the government with Western Mining Corporation
(Philippines), Inc. (WMCP).
On January 27, 2004, the Court en banc promulgated its Decision granting the Petition and
declaring the unconstitutionality oI certain provisions oI RA 7942, DAO 96-40, as well as oI the entire
FTAA executed between the government and WMCP, mainly on the Iinding that FTAAs are service
contracts prohibited by the 1987 Constitution.
The Decision struck down the subject FTAA Ior being similar to service contracts which,
though permitted under the 1973 Constitution, were subsequently denounced Ior being antithetical to
the principle oI sovereignty over our natural resources, because they allowed Ioreign control over the
exploitation oI our natural resources, to the prejudice oI the Filipino nation.

Issue:
Whether or not the case been rendered moot by the sale oI WMC shares in WMCP to
Sagittarius.

eld:
Petitioners claim, Iirst, that the alleged invalidity oI the transIer oI the WMCP shares to
Sagittarius violates the Iourth paragraph oI Section 2 oI Article XII oI the Constitution; second,
that it is contrary to the provisions oI the WMCP FTAA itselI; and third, that the sale oI the
shares is suspect and should thereIore be the subject oI a case in which its validity may properly
be litigated.
On the Iirst ground, petitioners assert that paragraph 4 oI Section 2 oI Article XII permits
the government to enter into FTAAs only with Ioreign-owned corporations. Petitioners insist
that the Iirst paragraph oI this constitutional provision limits the participation oI Filipino
corporations in the exploration, development and utilization oI natural resources to only three
species oI contracts -- production sharing, co-production and joint venture -- to the exclusion oI
all other arrangements or variations thereoI, and the WMCP FTAA may thereIore not be validly
assumed and implemented by Sagittarius. In short, petitioners claim that a Filipino corporation
is not allowed by the Constitution to enter into an FTAA with the government.
owever, a textual analysis oI the Iirst paragraph oI Section 2 oI Article XII does not
support petitioners` argument. The pertinent part oI the said provision states: 'Sec. 2. x x x The
exploration, development and utilization oI natural resources shall be under the Iull control and
supervision oI the State. The State may directly undertake such activities, or it may enter into
co-production, joint venture, or production-sharing agreements with Filipino citizens, or
corporations or associations at least sixty per centum oI whose capital is owned by such citizens.
x x x. Nowhere in the provision is there any express limitation or restriction insoIar as
arrangements other than the three aIorementioned contractual schemes are concerned.
Neither can one reasonably discern any implied stricture to that eIIect. Besides, there is
no basis to believe that the Iramers oI the Constitution, a majority oI whom were obviously
concerned with Iurthering the development and utilization oI the country`s natural resources,
could have wanted to restrict Filipino participation in that area. This point is clear, especially in
the light oI the overarching constitutional principle oI giving preIerence and priority to Filipinos
and Filipino corporations in the development oI our natural resources.
Besides, even assuming (purely Ior argument`s sake) that a constitutional limitation
barring Filipino corporations Irom holding and implementing an FTAA actually exists,
nevertheless, such provision would apply only to the transIer oI the FTAA to Sagittarius, but
deIinitely not to the sale oI WMC`s equity stake in WMCP to Sagittarius. Otherwise, an
unreasonable curtailment oI property rights without due process oI law would ensue. Petitioners`
argument must thereIore Iail.






































AGAN VS. PIATCO, G.R. No. 155001, January 21, 2004
Facts:
On October 5, 1994, Asia`s Emerging Dragon Corp. (AEDC) submitted an unsolicited
proposal to the Philippine Government through the Department oI Transportation and
Communication (DOTC) and Manila International Airport Authority (MIAA) Ior the
construction and development oI the NAIA IPT III under a build-operate-and-transIer
arrangement pursuant to R.A. No. 6957, as amended by R.A. No. 7718 (BOT Law).
4
In
accordance with the BOT Law and its Implementing Rules and Regulations (Implementing
Rules), the DOTC/MIAA invited the public Ior submission oI competitive and comparative
proposals to the unsolicited proposal oI AEDC. On September 20, 1996 a consortium composed
oI the People`s Air Cargo and Warehousing Co., Inc. (Paircargo), Phil. Air and Grounds
Services, Inc. (PAGS) and Security Bank Corp. (Security Bank) (collectively, Paircargo
Consortium), submitted their competitive proposal to the PrequaliIication Bids and Awards
Committee (PBAC).
AIter Iinding that the Paircargo Consortium submitted a bid superior to the unsolicited
proposal oI AEDC and aIter Iailure by AEDC to match the said bid, the DOTC issued the notice
oI award Ior the NAIA IPT III project to the Paircargo Consortium, which later organized into
herein respondent PIATCO. ence, on July 12, 1997, the Government, through then DOTC
Secretary Arturo T. Enrile, and PIATCO, through its President, enry T. Go, signed the
"Concession Agreement Ior the Build-Operate-and-TransIer Arrangement oI the Ninoy Aquino
International Airport Passenger Terminal III" (1997 Concession Agreement). On November 26,
1998, the 1997 Concession Agreement was superseded by the Amended and Restated
Concession Agreement (ARCA) containing certain revisions and modiIications Irom the original
contract. A series oI supplemental agreements was also entered into by the Government and
PIATCO. The First Supplement was signed on August 27, 1999, the Second Supplement on
September 4, 2000, and the Third Supplement on June 22, 2001 (collectively, Supplements) (the
1997 Concession Agreement, ARCA and the Supplements collectively reIerred to as the
PIATCO Contracts). On September 17, 2002, various petitions were Iiled beIore the Court to
annul the 1997 Concession Agreement, the ARCA and the Supplements and to prohibit the
public respondents DOTC and MIAA Irom implementing them.

Issue: Whether or not the Court should strike down the entire 1997 Concession Agreement, the
ARCA and its supplements in light oI their separability clause.

eld: In public bidding, bids are submitted in accord with the prescribed terms, conditions and
parameters laid down by government and pursuant to the requirements oI the project bidded
upon. In light oI these parameters, bidders Iormulate competing proposals which are evaluated to
determine the bid most Iavorable to the government. Once the contract based on the bid most
Iavorable to the government is awarded, all that is leIt to be done by the parties is to execute the
necessary agreements and implement them. There can be no substantial or material change to the
parameters oI the project, including the essential terms and conditions oI the contract bidded
upon, aIter the contract award. II there were changes and the contracts end up unIavorable to
government, the public bidding becomes a mockery and the modiIied contracts must be struck
down.


COMELEC VS. QUIJANO-PADILLA, G. R. No. 151992, September 18, 2002
Facts:
In 1996, the Philippine Congress passed Republic Act No. 8189, otherwise known as the
"Voter's Registration Act oI 1996," providing Ior the modernization and computerization oI the
voters' registration list and the appropriate oI Iunds thereIor "in order to establish a clean,
complete, permanent and updated list oI voters. Pursuant thereto, the Commission on Elections
(COMELEC) promulgated Resolution No. 00-0315 approving in principle the Voter's
Registration and IdentiIication System Project (VRIS) Project Ior brevity). The VRIS Project
envisions a computerized database system Ior the May 2004 Elections. The idea is to have a
national registration oI voters whereby each registrant's Iingerprints will be digitally entered into
the system and upon completion oI registration, compared and matched with other entries to
eliminate double entries. A tamper-prooI and counterIeit-resistant voter's identiIication card will
then be issues to each registrant as a visual record oI the registration.
On September 9, 1999, the COMELEC issued invitations to pre-qualiIy and bid Ior the
supply and installations oI inIormation technology equipment and ancillary services Ior its VRIS
Project. Private respondent Photokina Marketing Corporation (POTOKINA) pre-qualiIied and
was allowed to participate as one oI the bidders. AIter the public bidding was conducted,
POTOKINA's bid in the amount oI P6.588 Billion Pesos garnered the highest total weighted
score and was declared the winning bidder. Thus, on September 28, 2000, the COMELEC
issued Resolution No. 3252 approving the Notice oI Award to POTOKINA, which, in turn,
immediately accepted the same. The parties then proceeded to Iormalize the contract, with
Commissioner Mehol K. Sadain and Atty. Rodrigo D. Sta. Ana, acting as negotiators Ior the
COMELEC and POTOKINA, respectively.

Issue:
Whether or not the contract is void.

eld: Enshrined in the 1987 Philippine Constitution is the mandate that "no money shall be paid
out oI the Treasury except in pursuance oI an appropriation made by law. Thus, in the execution
oI government contracts, the precise import oI this constitutional restriction is to require the
various agencies to limit their expenditures within the appropriations made by law Ior each Iiscal
year.
Complementary to the Ioregoing constitutional injunction are pertinent provisions oI law
and administrative issuances that are designed to eIIectuate the above mandate in a detailed
manner. It is quite evident Irom the tenor oI the language oI the law that the existence oI
appropriations and the availability oI Iunds are indispensable pre-requisites to or conditions sine
qua non Ior the execution oI government contracts. The obvious intent is to impose such
conditions as a priori requisites to the validity oI the proposed contract. The eIIect oI an
unqualiIied acceptance oI the oIIer or proposal oI the bidder is to perIect a contract, upon notice
oI the award to the bidder," however, such statement would be inconsequential in a government
where the acceptance reIerred to is yet to meet certain conditions. To hold otherwise is to allow a
public oIIicer to execute a binding contract that would obligate the government in an amount in
excess oI the appropriations Ior the purpose Ior which the contract was attempted to be made.




JAWORSKI VS. PAGCOR, G.R. No. 144463, January 14, 2004

Facts:
PAGCOR is a government owned and controlled corporation existing under
Presidential Decree No. 1869 issued on July 11, 1983 by then President Ferdinand
Marcos. On March 31, 1998, PAGCOR's board of directors approved an instrument
denominated as "Grant of Authority and Agreement for the Operation of Sports Betting
and nternet Gaming, which granted SAGE the authority to operate and maintain
Sports Betting station in PAGCOR's casino locations, and nternet Gaming facilities to
service local and international bettors, provided that to the satisfaction of PAGCOR,
appropriate safeguards and procedures are established to ensure the integrity and
fairness of the games.
On September 1, 1998, PAGCOR, represented by its Chairperson, Alicia Ll. Reyes, and
SAGE, represented by its Chairman oI the Board, enry Sy, Jr., and its President, Antonio D.
Lacdao, executed the above-named document.
Pursuant to the authority granted by PAGCOR, SAGE commenced its operations by
conducting gambling on the Internet on a trial-run basis, making pre-paid cards and redemption
oI winnings available at various Bingo Bonanza outlets.
Petitioner, in his capacity as member oI the Senate and Chairman oI the Senate
Committee on Games, Amusement and Sports, Iiles the instant petition, praying that the grant oI
authority by PAGCOR in Iavor oI SAGE be nulliIied. e maintains that PAGCOR committed
grave abuse oI discretion amounting to lack or excess oI jurisdiction when it authorized SAGE to
operate gambling on the internet.

Issue:
Whether or not the gambling activities in the internet are void.

eld:
t is well settled that averments in the complaint, and not the nomenclature given
by the parties, determine the nature of the action. A legislative franchise is a special
privilege granted by the state to corporations. t is a privilege of public concern which
cannot be exercised at will and pleasure, but should be reserved for public control and
administration, either by the government directly, or by public agents, under such
conditions and regulations as the government may impose on them in the interest of the
public. t is Congress that prescribes the conditions on which the grant of the franchise
may be made. Thus the manner of granting the franchise, to whom it may be granted,
the mode of conducting the business, the charter and the quality of the service to be
rendered and the duty of the grantee to the public in exercising the franchise are almost
always defined in clear and unequivocal language. After a circumspect consideration of
the foregoing discussion and the contending positions of the parties, we hold that
PAGCOR has acted beyond the limits of its authority when it passed on or shared its
franchise to SAGE.





Oesmer vs Paraiso Development Corporation.(PDC) 514 S 228

Facts: Petitioners Rizalino, Ernesto, Leonora, Bibiano jr, Librado and Enrique, all surnamed
Oesmer together with their brothers Jesus and AlIonso were co-owners oI an undivided parcel oI
agricultural and tenanted lands with an area oI 40, 507 sq. m. and 14, 769 sq. m. respectively.
Both lands were unregistered but were originally belonging to their late parents. In the mean
time, herein respondent was known to be engaged in a real estate business. Sometime in march
1989, petitioner was approached by Rogelio Paular, who arranged a meeting between Ernesto
and respondent`s president Sotero Lee. The meeting was Ior the brokering oI the properties oI
petitioners. Subsequently, a contract to sell was initiated where by a check worth P100, 000. 00
was given and payable to Ernesto as option money. ThereaIter, the other petitioners signed the
document whereas a copy oI which was Iorwarded to respondent and such was notarized. Later,
the petitioners, through a letter, inIormed respondent oI their express intent to rescind the
contract and the return oI the option money. The letter was ignored so the other brothers who did
no sign Iile a petition to annul the sale. The trail court however, decided in Iavor oI respondent
but only with regard to the proportionate share oI Ernesto. On appeal however, the court
modiIied the decision thereby binding the properties oI the other assignatories therein. ence,
this petition.

Issue: Whether or not the contract entered into between the parties is viod.

eld: Accordingly, the other petitioners contend that aIIixing their signatures on the said
document does not conIer a right to Ernesto to dispose oI their property. Because in an agency, a
written authorization must have been given to the agent otherwise the agency is void. owever,
the court stressed that the mere signing oI the instrument connotes that the assignatories were
selling their respective shares not by an agent but in their own right and capacity thereoI. The
petitioners` contention that they did not know oI the consequences and importance oI their action
is untenable in this case simply because oI the same reason, aIIixing their signatures. The
contract was deemed perIected by virtue oI the meeting oI minds oI the parties as implied by the
signed instrument. Accordingly, a contract must be interpreted literally, when the contract did
not mention any condition that all the parties must sign the instrument beIore it would be
eIIective, it implies that such was not the intention oI the parties in entering into the contract.
Thus, the court oI appeals did not err in ruling that the contract is valid and binding between
petitioners who signed the document and the respondent.



























































EIRS OF BALITE VS. LIM, G.R. No. 152168, December 10, 2004

Facts:
The spouses Aurelio and Esperanza Balite were the owners oI a parcel oI land, located
|at| Poblacion (Barangay Molave), Catarman, Northern Samar, with an area oI seventeen
thousand Iive hundred IiIty-one (17,551) square meters, and covered by Original CertiIicate oI
Title. When Aurelio died intestate in 1985, his wiIe, Esperanza Balite, and their children
inherited the subject property and became co-owners thereoI, with Esperanza inheriting an
undivided share oI 9,751 square meters. On April 16, 1996, Esperanza executed a 'Deed oI
Absolute Sale in Iavor oI Rodrigo N. Lim over a portion oI the property, covered by |OCT| No.
10824, with an area oI 10,000 square meters, Ior the price oI P150,000.00. They also executed,
on the same day, a 'Joint AIIidavit under which they declared that the real price oI the property
was P1,000,000.00, payable to Esperanza by installments. Only Esperanza and two oI her
children, namely, Antonio and Cristeta knew about the said transaction.

Issue: Whether or not the deed oI absolute sale can be declared null and void.

eld: Article 1345 oI the Civil Code provides that the simulation oI a contract may either be
absolute or relative. In absolute simulation, there is a colorable contract but without any
substance, because the parties have no intention to be bound by it. An absolutely simulated
contract is void, and the parties may recover Irom each other what they may have given under
the 'contract. On the other hand, iI the parties state a Ialse cause in the contract to conceal their
real agreement, such a contract is relatively simulated. ere, the parties` real agreement binds
them. In the present case, the parties intended to be bound by the Contract, even iI it did not
reIlect the actual purchase price oI the property. That the parties intended the agreement to
produce legal eIIect is revealed by the letter oI Esperanza Balite to respondent dated October 23,
1996. and petitioners` admission that there was a partial payment oI P320,000 made on the basis
oI the Deed oI Absolute Sale. There was an intention to transIer the ownership oI over 10,000
square meters oI the property . Clear Irom the letter is the Iact that the objections oI her children
prompted Esperanza to unilaterally withdraw Irom the transaction.
Since the Deed oI Absolute Sale was merely relatively simulated, it remains valid and
enIorceable. All the essential requisites prescribed by law Ior the validity and perIection oI
contracts are present. owever, the parties shall be bound by their real agreement Ior a
consideration oI P1,000,000 as reIlected in their Joint AIIidavit. The juridical nature oI the
Contract remained the same. What was concealed was merely the actual price. Where the
essential requisites are present and the simulation reIers only to the content or terms oI the
contract, the agreement is absolutely binding and enIorceable between the parties and their
successors in interest.
Petitioners cannot be permitted to unmake the Contract voluntarily entered into by their
predecessor, even iI the stated consideration was included therein Ior an unlawIul purpose. 'The
binding Iorce oI a contract must be recognized as Iar as it is legally possible to do so.


PINEDA VS. CA, G. R. No. 127094, February 6, 2002

Facts:
Appellees Nelson Baez and Mercedes Baez are the original owners oI a parcel oI land
together with its improvements located at 32 Sarangaya St., White Plains, Quezon City while
Ms. Alejandria Pineda is the owner oI a house located at 5224 Buchanan St., Los Angeles,
CaliIornia.
'On January 11, 1983, the appellees and Alejandria Pineda, together with the latter`s
spouse AlIredo Caldona, executed an Agreement to Exchange Real Properties`
In the agreement, the parties agreed to: 1) exchange their respective properties; 2) Pineda
to pay an earnest money in the total amount oI $12,000.00 on or beIore the Iirst week oI
February 1983; and 3) to consummate the exchange oI properties not later than June 1983. It
appears that the parties undertook to clear the mortgages over their respective properties. At the
time oI the execution oI the exchange agreement, the White Plains property was mortgaged with
the Government Service Insurance System (GSIS) while the CaliIornia property had a total
mortgage obligation oI $84,000.00 In the meantime, the appellees were allowed to occupy or
lease to a tenant Pineda`s CaliIornia property (Exh. 'A-1, p. 17, Ibid) and Pineda was
authorized to occupy appellees` White Plains property. Pursuant to the exchange agreement,
Alejandria Pineda paid the appellees the total amount oI $12,000.00 broken down as Iollows: 1)
$5,000.00, on January 1983; 2) $4,000.00 on April 1983; 3) $3,000.00 on January 1985.
On December 18, 1984, unknown to the appellees, Alejandria Pineda and the appellants
Adeodato C. Duque, Jr. and Evangeline Mary Jane Duque executed an Agreement to Sell` over
the White Plains property whereby Pineda sold the property to the appellants Ior the amount oI
P1,600,000.00. The contract provides that: 1) upon signing oI the agreement, the purchaser shall
pay P450,000.00 and the seller shall cause the release oI the property Irom any encumbrance and
deliver to the purchaser the title to the property; 2) balance shall be paid by the purchaser to the
seller on or beIore the end oI January 1985; 3) upon Iull payment, the seller shall deliver to the
purchaser a deed oI absolute sale duly signed by its registered owner, the appellees. On the same
date, Pineda, out oI the downpayment received Irom the appellants, paid the appellees` mortgage
obligation with the GSIS in the sum oI P112,690.75.

Issue:
Whether or not petitioners validly acquired the said properties.

eld: It appears that the Baez spouses were the original owners oI the parcel oI land and
improvements located at 32 Sarangaya St., White Plains, Quezon City. On January 11, 1983, the
Baez spouses and petitioner Pineda executed an agreement to exchange real properties.
owever, the exchange did not materialize.
Petitioner Pineda`s 'sale oI the property to petitioners Duque was not authorized by the real
owners oI the land, respondent Baez. The Civil Code provides that in a sale oI a parcel oI land
or any interest therein made through an agent, a special power oI attorney is essential. This
authority must be in writing, otherwise the sale shall be void. A special power oI attorney is
necessary to enter into any contract by which the ownership oI an immovable is transmitted or
acquired Ior a valuable consideration. Without an authority in writing, petitioner Pineda could
not validly sell the subject property to petitioners Duque. ence, any 'sale in Iavor oI
petitioners Duque is void.
CRUZ vs. BANCOM FINANCE CORPORATION (NOW UNION BANK OF TE
PILIPPINES, G.R. No. 147788. March 19, 2002

Facts:
Brothers Rev. Fr. Edilberto Cruz and Simplicio Cruz, plaintiIIs herein, were the
registered owners oI a 339,335 square meter or 33.9335 hectare parcel oI agricultural land
together with improvements located in Barangay Pulang antoc, Angat, Bulacan covered by
TCT No. 19587. Sometime in May 1978, deIendant Norma Sulit, aIter being introduced by
Candelaria Sanchez to Fr. Cruz, oIIered to purchase the land. PlaintiIIs` asking price Ior the land
was P700,000.00, but Norma only had P25,000.00 which Fr. Cruz accepted as earnest money
with the agreement that titles would be transIerred to Norma upon payment oI the balance oI
P675,000.00. Norma Iailed to pay the balance and proposed |to| Fr. Cruz to transIer the property
to her but the latter reIused, obviously because he had no reason to trust Norma. But capitalizing
on the close relationship oI Candelaria Sanchez with the plaintiIIs, Norma succeeded in having
the plaintiIIs execute a document oI sale oI the land in Iavor oI Candelaria who would then
obtain a bank loan in her name using the plaintiIIs` land as collateral. On the same day,
Candelaria executed another Deed oI Absolute Sale over the land in Iavor oI Norma. In both
documents, it appeared that the consideration Ior the sale oI the land was only P150,000.00.
Pursuant to the sale, Norma was able to eIIect the transIer oI the title to the land in her name.
Aside Irom the P150,000.00, Candelaria undertook to pay the plaintiIIs the amount oI
P655,000.00 representing the balance oI the actual price oI the land. In a Special Agreement
dated September 1, 1978, Norma assumed Candelaria`s obligation, stipulating to pay the
plaintiIIs the said amount within six months on pain oI Iine or penalty in case oI non-IulIillment.
Unknown to the plaintiIIs, Norma managed to obtain a loan Irom Bancom in the amount oI
P569,000.00 secured by a mortgage over the land now titled in her name.
On account oI Norma`s Iailure to pay the amount stipulated in the Special Agreement and
her subsequent disappearance Irom her usual address, plaintiIIs were prompted to Iile the herein
complaint Ior the reconveyance oI the land.

ISSUE
Whether or not the Deeds oI Sale and Mortgage is valid.

ELD

As a general rule, when the terms oI a contract are clear and unambiguous about the
intention oI the contracting parties, the literal meaning oI its stipulations shall control. But iI the
words appear to contravene the evident intention oI the parties, the latter shall prevail over the
Iormer. The real nature oI a contract may be determined Irom the express terms oI the
agreement, as well as Irom the contemporaneous and subsequent acts oI the parties thereto.
On the other hand, simulation takes place when the parties do not really want the contract
they have executed to produce the legal eIIects expressed by its wordings. Simulation or vices oI
declaration may be either absolute or relative. Article 1345 oI the Civil Code distinguishes an
absolute simulation Irom a relative one while Article 1346 discusses their eIIects, as Iollows:

'Art. 1345. Simulation oI a contract may be absolute or relative. The Iormer takes place when
the parties do not intend to be bound at all; the latter when the parties conceal their true
agreement.

'Art. 1346. An absolutely simulated contract is void. A relative simulation, when it does not
prejudice a third person and is not intended Ior any purpose contrary to law, morals, good
customs, public order or public policy binds the parties to their agreement.


The Court Iound that the Deeds oI Sale were executed merely to Iacilitate the use oI the
property as collateral to secure a loan Irom a bank. Being merely a subterIuge, these agreements
could not have been the source oI any consideration Ior the supposed sales. Indeed, the execution
oI the two documents on the same day sustains the position oI petitioners that the Contracts oI
Sale were absolutely simulated, and that they received no consideration thereIor.
Moreover the Iailure oI Sulit to take possession oI the property purportedly sold to her
was a clear badge oI simulation that rendered the whole transaction void and without Iorce and
eIIect, pursuant to Article 1409 oI the Civil Code. The Iact that she was able to secure a
CertiIicate oI Title to the subject property in her name did not vest her with ownership over it. A
simulated deed oI sale has no legal eIIect; consequently any transIer certiIicate oI title (TCT)
issued in consequence thereoI should be cancelled. A simulated contract is not a recognized
mode oI acquiring ownership

On the question oI who has a preIerential right over the property, the long-standing rule,
as provided by Article 2085 oI the Civil Code, is that only the absolute owner oI the property can
constitute a valid mortgage on it. In case oI Ioreclosure, a sale would result in the transmission
only oI whatever rights the seller had over oI the thing sold.
In the instant case, the two Deeds oI Sale were absolutely simulated; hence, null and
void.|58| Thus, they did not convey any rights that could ripen into valid titles. Necessarily, the
subsequent real estate mortgage constituted by Sulit in Iavor oI respondent was also null and
void, because the Iormer was not the owner thereoI. There being no valid real estate mortgage,
there could also be no valid Ioreclosure or valid auction sale, either. At bottom, respondent
cannot be considered either as a mortgagee or as a purchaser in good Iaith. This being so,
petitioners would be in the same position as they were beIore they executed the simulated Deed
oI Sale in Iavor oI Sanchez. They are still the owners oI the property.












CUATON VS. SALUD, G.R. No. 158382, January 27, 2004
Facts.
On January 5, 1993, respondent Rebecca Salud, joined by her husband Rolando Salud,
instituted a suit Ior Ioreclosure oI real estate mortgage with damages against petitioner Mansueto
Cuaton and his mother, Conchita Cuaton, with the trial court. The trial court rendered a decision
declaring the mortgage constituted on October 31, 1991 as void, because it was executed by
Mansueto Cuaton in Iavor oI Rebecca Salud without expressly stating that he was merely acting
as a representative oI Conchita Cuaton, in whose name the mortgaged lot was titled. The court
ordered petitioner to pay Rebecca Salud, inter alia, the loan secured by the mortgage in the
amount oI P1,000,000 plus a total P610,000.00 representing interests oI 10 and 8 per month
Ior the period February 1992 to August 1992.
Both parties Iiled their respective notices oI appeal.
The Court oI Appeals aIIirmed the judgment oI the trial court. Petitioner Iiled a motion
Ior partial reconsideration oI the trial court`s decision with respect to the award oI interest in the
amount oI P610,000.00, arguing that the same was iniquitous and exorbitant. This was denied
by the Court oI Appeals.

Issue.
Whether or not the excessive interest rates cannot be considered as an issue presented Ior
the Iirst time on appeal.

Held.
Stipulations authorizing iniquitous or unconscionable interests are contrary to morals
(contra bonos mores`), iI not against the law. Under Article 1409 oI the Civil Code, these
contracts are inexistent and void Irom the beginning. They cannot be ratiIied nor the right to set
up their illegality as a deIense be waived.
Moreover, the contention regarding the excessive interest rates cannot be considered as
an issue presented Ior the Iirst time on appeal. The records show that petitioner raised the
validity oI the 10 monthly interest in his answer Iiled with the trial court.

To deprive him oI his
right to assail the imposition oI excessive interests would be to sacriIice justice to technicality.
Furthermore, an appellate court is clothed with ample authority to review rulings even iI they are
not assigned as errors. This is especially so iI the court Iinds that their consideration is necessary
in arriving at a just decision oI the case beIore it. We have consistently held that an unassigned
error closely related to an error properly assigned, or upon which a determination oI the question
raised by the error properly assigned is dependent, will be considered by the appellate court
notwithstanding the Iailure to assign it as an error. Since respondents pointed out the matter oI
interest in their Appellants` BrieI. beIore the Court oI Appeals, the Iairness oI the imposition
thereoI was opened to Iurther evaluation. The Court thereIore is empowered to review the same.






















































INFOTEC VS. COMELEC, G.R. No. 159139, January 13, 2004

Facts:
On June 7, 1995, Congress passed Republic Act 8046, which authorized Comelec to
conduct a nationwide demonstration oI a computerized election system and allowed the poll
body to pilot-test the system in the March 1996 elections in the Autonomous Region in Muslim
Mindanao (ARMM). On December 22, 1997, Congress enacted Republic Act 8436authorizing
Comelec to use an automated election system (AES) Ior the process oI voting, counting votes
and canvassing/consolidating the results oI the national and local elections. It also mandated the
poll body to acquire automated counting machines (ACMs), computer equipment, devices and
materials; and to adopt new electoral Iorms and printing materials.
Initially intending to implement the automation during the May 11, 1998 presidential
elections, Comelec eventually decided against Iull national implementation and limited the
automation to the Autonomous Region in Muslim Mindanao (ARMM). owever, due to the
Iailure oI the machines to read correctly some automated ballots in one town, the poll body later
ordered their manual count Ior the entire Province oI Sulu.
In the May 2001 elections, the counting and canvassing oI votes Ior both national and
local positions were also done manually, as no additional ACMs had been acquired Ior that
electoral exercise allegedly because oI time constraints.
On October 29, 2002, Comelec adopted in its Resolution 02-0170 a modernization
program Ior the 2004 elections. It resolved to conduct biddings Ior the three (3) phases oI its
Automated Election System; namely, Phase I -Voter Registration and Validation System; Phase
II - Automated Counting and Canvassing System; and Phase III - Electronic Transmission.
On January 24, 2003, President Macapagal-Arroyo issued EO No. 172, which allocated
the sum oI P2.5 billion to Iund the AES Ior the May 10, 2004 elections. Upon the request oI
Comelec, she authorized the release oI an additional P500 million.
On January 28, 2003, the Commission issued an 'Invitation to Apply Ior Eligibility and
to Bid.
On February 17, 2003, the poll body released the Request Ior Proposal (RFP) to procure
the election automation machines. The Bids and Awards Committee (BAC) oI Comelec
convened a pre-bid conIerence on February 18, 2003 and gave prospective bidders until March
10, 2003 to submit their respective bids.
Among others, the RFP provided that bids Irom manuIacturers, suppliers and/or
distributors Iorming themselves into a joint venture may be entertained, provided that the
Philippine ownership thereoI shall be at least 60 percent. Joint venture is deIined in the RFP as
'a group oI two or more manuIacturers, suppliers and/or distributors that intend to be jointly and
severally responsible or liable Ior a particular contract. Basically, the public bidding was to be
conducted under a two-envelope/two stage system. The bidder`s Iirst envelope or the Eligibility
Envelope should establish the bidder`s eligibility to bid and its qualiIications to perIorm the acts
iI accepted. On the other hand, the second envelope would be the Bid Envelope itselI.
Out oI the 57 bidders, the BAC Iound MPC and the Total InIormation Management
Corporation (TIMC) eligible. For technical evaluation, they were reIerred to the BAC`s
Technical Working Group (TWG) and the Department oI Science and Technology (DOST).
In its Report on the Evaluation oI the Technical Proposals on Phase II, DOST said that
both MPC and TIMC had obtained a number oI Iailed marks in the technical evaluation.
Notwithstanding these Iailures, Comelec en banc, on April 15, 2003, promulgated Resolution
No. 6074 awarding the project to MPC. The Commission publicized this Resolution and the
award oI the project to MPC on May 16, 2003.
On May 29, 2003, Iive individuals and entities (including the herein Petitioners
InIormation Technology Foundation oI the Philippines, represented by its president, AlIredo M.
Torres; and Ma. Corazon Akol) wrote a letter to Comelec Chairman Benjamin Abalos Sr. They
protested the award oI the Contract to Respondent MPC 'due to glaring irregularities in the
manner in which the bidding process had been conducted. Citing therein the noncompliance
with eligibility as well as technical and procedural requirements (many oI which have been
discussed at length in the Petition), they sought a re-bidding. owever, the Comelec chairman
speaking through Atty. Jaime Paz, his head executive assistant -- rejected the protest and
declared that the award 'would stand up to the strictest scrutiny. ence, the present Petition.

Issue.
Whether or not the Commission on Elections, the agency vested with the exclusive
constitutional mandate to oversee elections, gravely abused its discretion when, in the exercise oI
its administrative Iunctions, it awarded to MPC the contract Ior the second phase oI the
comprehensive Automated Election System.

Held.
The March 7, 2003 letter, signed by only one signatory 'Willy U. u, President, Mega
PaciIic Solutions, Inc., (Lead Company/ Proponent) For: Mega PaciIic Consortium -- and
without any Iurther prooI, does not by itselI prove the existence oI the consortium. It does not
show that MPEI or its president have been duly pre-authorized by the other members oI the
putative consortium to represent them, to bid on their collective behalI and, more important, to
commit them jointly and severally to the bid undertakings. The letter is purely selI-serving and
uncorroborated.
Neither does an oIIicial receipt issued to MPC, acknowledging payment Ior the bidding
documents, constitute prooI that it was the purported consortium that participated in the bidding.
Such receipts are issued by cashiers without any legally suIIicient inquiry as to the real identity
or existence oI the supposed payor.
To assure itselI properly oI the due existence (as well as eligibility and qualiIication) oI
the putative consortium, Comelec`s BAC should have examined the bidding documents
submitted on behalI oI MPC. They would have easily discovered the Iatal Ilaws.













PABUGAIS VS. SAIJWANI, 423 SCRA 596, February 23. 2004
Facts.
Pursuant to an 'Agreement And Undertaking dated December 3, 1993, petitioner Teddy
G. Pabugais, in consideration oI the amount oI FiIteen Million Four undred Eighty Seven
Thousand Five undred Pesos (P15,487,500.00), agreed to sell to respondent Dave P. Sahijwani
a lot containing 1,239 square meters located at Jacaranda Street, North Forbes Park, Makati,
Metro Manila. Respondent paid petitioner the amount oI P600,000.00 as option/reservation Iee
and the balance oI P14,887,500.00 to be paid within 60 days Irom the execution oI the contract,
simultaneous with delivery oI the owner`s duplicate TransIer CertiIicate oI Title in respondent`s
name the Deed oI Absolute Sale; the CertiIicate oI Non-Tax Delinquency on real estate taxes and
Clearance on Payment oI Association Dues. The parties Iurther agreed that Iailure on the part oI
respondent to pay the balance oI the purchase price entitles petitioner to IorIeit the P600,000.00
option/reservation Iee; while non-delivery by the latter oI the necessary documents obliges him
to return to respondent the said option/reservation Iee with interest at 18 per annum.
Petitioner Iailed to deliver the required documents. In compliance with their agreement,
he returned to respondent the latter`s P600,000.00 option/reservation Iee by way oI Far East
Bank & Trust Company Check No. 25AO54252P, which was, however, dishonored.

Issue. Whether or not there was valid consignation

Held. Consignation is the act oI depositing the thing due with the court or judicial authorities
whenever the creditor cannot accept or reIuses to accept payment and it generally requires a prior
tender oI payment. In order that consignation may be eIIective, the debtor must show that: (1)
there was a debt due; (2) the consignation oI the obligation had been made because the creditor
to whom tender of payment was made reIused to accept it, or because he was absent or
incapacitated, or because several persons claimed to be entitled to receive the amount due or
because the title to the obligation has been lost; (3) previous notice oI the consignation had been
given to the person interested in the perIormance oI the obligation; (4) the amount due was
placed at the disposal oI the court; and (5) aIter the consignation had been made the person
interested was notiIied thereoI. Failure in any oI these requirements is enough ground to render a
consignation ineIIective.
The issues to be resolved in the instant case concerns one oI the important requisites oI
consignation, i.e, the existence oI a valid tender oI payment. As testiIied by the counsel Ior
respondent, the reasons why his client did not accept petitioner`s tender oI payment were (1)
the check mentioned in the August 5, 1994 letter oI petitioner maniIesting that he is settling the
obligation was not attached to the said letter; and (2) the amount tendered was insuIIicient to
cover the obligation. It is obvious that the reason Ior respondent`s non-acceptance oI the tender
oI payment was the alleged insuIIiciency thereoI and not because the said check was not
tendered to respondent, or because it was in the Iorm oI manager`s check. While it is true that in
general, a manager`s check is not legal tender, the creditor has the option oI reIusing or accepting
it. Payment in check by the debtor may be acceptable as valid, iI no prompt objection to said
payment is made. Consequently, petitioner`s tender oI payment in the Iorm oI manager`s check
is valid.
Anent the suIIiciency oI the amount tendered, it appears that only the interest oI 18 per
annum on the P600,000.00 option/reservation Iee stated in the deIault clause oI the 'Agreement
And Undertaking was agreed upon by the parties.
LIGUEZ VS. COURT OF APPEALS, G.R. No. L-11240, December 18, 1957
Facts.
The case began upon complaint Iiled by petitioner-appellant against the widow and heirs
oI the late Salvador P. Lopez to recover a parcel oI 51.84 hectares oI land, situated in barrio
Bogac-Linot, oI the municipality oI Mati, Province oI Davao. PlaintiII averred to be its legal
owner, pursuant to a deed oI donation oI said land, executed in her Iavor by the late owner,
Salvador P. Lopez, on 18 May 1943. The deIense interposed was that the donation was null and
void Ior having an illicit causa or consideration, which was the plaintiII's entering into marital
relations with Salvador P. Lopez, a married man; and that the property had been adjudicated to
the appellees as heirs oI Lopez by the court oI First Instance, since 1949.
The Court oI Appeals Iound that the deed oI donation was prepared by the Justice oI the
Peace oI Mati, Davao, beIore whom it was signed and ratiIied on the date aIoresaid. At the time,
the appellant Liguez was a minor, only 16 years oI age
The Court oI Appeals Iound that when the donation was made, Lopez had been living
with the parents oI appellant Ior barely a month; that the donation was made in view oI the desire
oI Salvador P. Lopez, a man oI mature years, to have sexual relations with appellant Conchita
Liguez; that Lopez had conIessed to his love Ior appellant to the instrumental witnesses, with the
remark that her parents would not allow Lopez to live with her unless he Iirst donated the land in
question; that aIter the donation, Conchita Liguez and Salvador P. Lopez lived together in the
house that was built upon the latter's orders, until Lopez was killed on July 1st, 1943, by some
guerrillas who believed him to be pro-Japanese.
It was also ascertained by the Court oI Appeals that the donated land originally belonged
to the conjugal partnership oI Salvador P. Lopez and his wiIe, Maria Ngo; that the latter had met
and berated Conchita Ior living maritally with her husband, sometime during June oI 1943; that
the widow and children oI Lopez were in possession oI the land and made improvements
thereon; that the land was assessed in the tax rolls Iirst in the name oI Lopez and later in that oI
his widow.; and that the deed oI donation was never recorded.
Upon these Iacts, the Court oI Appeals held that the deed oI donation was inoperative,
and null and void (1) because the husband, Lopez, had no right to donate conjugal property to the
plaintiII appellant; and (2) because the donation was tainted with illegal cause or consideration,
oI which donor and donee were participants.

Issue.
Whether or not the contract oI donation is valid and enIorceable.

Held.
To determine the prejudice to the widow, it must be shown that the value oI her share in
the property donated can not be paid out oI the husband's share oI the community proIits. The
requisite data, however, are not available to us and necessitate a remand oI the records to the
court oI origin that settled the estate oI the late Salvador P. Lopez.
The situation oI the children and Iorced heirs oI Lopez approximates that oI the widow.
As privies oI their parent, they are barred Irom invoking the illegality oI the donation. But their
right to a legitime out oI his estate is not thereby aIIected, since the legitime is granted them by
the law itselI, over and above the wishes oI the deceased. ence, the Iorced heirs are entitled to
have the donation set aside in so Iar as in oIIicious: i.e., in excess oI the portion oI Iree disposal
(Civil Code oI 1889, Articles 636, 654) computed as provided in Articles 818 and 819, and
bearing in mind that "collationable giIts" under Article 818 should include giIts made not only in
Iavor oI the Iorced heirs, but even those made in Iavor oI strangers, as decided by the Supreme
Court oI Spain in its decisions oI 4 May 1899 and 16 June 1902. So that in computing the
legitimes, the value oI the property to herein appellant, Conchita Liguez, should be considered
part oI the donor's estate. Once again, only the court oI origin has the requisite date to determine
whether the donation is inoIIicious or not.
With regard to the improvements in the land in question, the same should be governed by
the rules oI accession and possession in good Iaith, it being undisputed that the widow and heirs
oI Lopez were unaware oI the donation in Iavor oI the appellant when the improvements were
made.
The appellees, relying on Galion vs. Garayes, 53 Phil. 43, contend that by her Iailure to
appear at the liquidation proceedings oI the estate oI Salvador P. Lopez in July 1943, the
appellant has IorIeited her right to uphold the donation iI the prejudice to the widow Maria Ngo
resulting Irom the donation could be made good out oI the husband's share in the conjugal
proIits. It is also argued that appellant was guilty oI laches in Iailing to enIorce her rights as
donee until 1951. This line oI argument overlooks the capital Iact that in 1943, appellant was






























Philbank vs. Lui She, G.R. No. L-17587, September 12, 1967, 21 SCRA 52

FACTS:
Out oI grateIulness to Wong eng, Justina Santos executed on November 15, 1957 a
contract oI lease in Iavor oI Iormer. The lease was Ior 50 years. Ten days later, the contract was
amended so as to make it cover the entire property, including the portion on which the house oI
Justina Santos stood at an additional rate. On December 21, she executed another contract
giving Wong the option to buy the leased premises Ior P120,000.00 payable within ten years.
The option was conditioned on his obtaining Philippine citizenship, a petition Ior which was then
pending in the Court oI First Instance oI Rizal but nevertheless did not materialize. On
November 18, 1958 she executed two other contracts, one extending the term oI the lease to 99
years, and another Iixing the term oI the option oI 50 years.
Claiming that the various contracts were made by her because oI machinations and
inducements practiced by him, she now directed her executor to secure the annulment oI the Iirst
which is the lease contract oI November 15, 1957, are declared null and void. From this
judgment both parties appealed directly to the court. Wong was substituted by his wiIe, Lui She,
the other deIendant in this case, while Justina Santos was substituted by the Philippine Banking
Corporation.

ISSUE:
Whether or not the contract executed by between the parties is valid.

ELD:
II an alien is given not only a lease oI, but also an option to buy, a piece oI land, by virtue
oI which the Filipino owner cannot sell or otherwise dispose oI his property, this to last Ior 50
years, then it becomes clear that the arrangement is a virtual transIer oI ownership whereby the
owner divests himselI in stages not only oI the right to enjoy the land (jus possidendi, jus utendi,
jus Iruendi and jus abutendi) but also oI the right to dispose oI it (jus disponendi) rights the
sum total oI which make up ownership which the use, the next day, the dispostion, and so on,
until ultimately all the rights oI which parties in this case did within the space oI one year, with
the result that Justina Santos` ownership oI her property is reduced to a hollow concept. II this
can be done, then the Constitutional ban against alien landholding in the Philippines, as
announced in Krivenko vs. Register of Deed, is indeed in grave peril.
ACCORDINGL, the contracts in question are annulled and set aside; the land subject-matter oI
the contracts is ordered returned to the estate oI Justina Santos as represented by the Philippine
Banking Corporation; Wong eng (as substituted by the deIendant-appellant Lui She) is ordered
to pay the Philippine Banking Corporation the sum oI P56,564.35, with legal interest Irom the
date oI the Iiling oI the amended complaint; and the amounts consigned in court by Wong eng
shall be applied to the payment oI rental Irom November 15, 1959 until the premises shall have
been vacated by his heirs. Costs against the deIendant-appellant






EPG CONSTRUCTION VS. VIGILAR, G.R. No. 131544, March 16, 2001

Facts:
In 1989, the Ministry oI uman Settlement through the BLISS Development
Corporation, initiated a housing project on a government property. For this purpose, the MS
entered into a Memorandum oI Agreement (MOA) with the Ministry oI Public Works (MPW)
and ighway where the latter undertook to develop the housing site and construct therein 145
housing units. By virtue oI the MOA, the MPW Iorged individual contracts with petitioners Ior
the construction oI the housing units. Under the contracts, the scope oI construction covered only
2/3 oI each housing unit. AIter complying, the MPW undersecretary made a verbal request Ior
the additional construction, Ior the completion oI the housing units, which the petitioner agreed.
Subsequently, petitioner received payment Ior the construction work duly covered by the
individual contracts, however, the amount covering the additional contracts were unpaid. The
petitioner then sent a demand letter. The MPW assistant secretary averred that the money claim
should be based on quantum meruit to be Iorwarded to the COA. The amount oI money was
Iinally released, however, the MPW secretary denied the subject money claim, which prompted
the petitioner to Iile a case beIore the RTC. owever, the trial court dismissed the case.

Issue.
Whether or not the petitioner has the right to be compensated Ior the public works
housing project by virtue oI the implied contract which was verbally executed.

Held.
Although the Court agrees with respondent's postulation that the "implied contracts",
which covered the additional constructions, are void, in view oI violation oI applicable laws,
auditing rules and lack oI legal requirements,
11
we nonetheless Iind the instant petition laden
with merit and uphold, in the interest of substantial fustice, petitioners-contractors' right to be
compensated Ior the "additional constructions" on the public works housing project, applying the
principle of quantum meruit.
Interestingly, this case is not oI Iirst impression. Notably, the peculiar circumstances
present in the instant case buttress petitioners' claim Ior compensation Ior the additional
constructions, despite the illegality and void nature oI the "implied contracts" Iorged between the
DPW and petitioners-contractors. On this matter, it bears stressing that the illegality oI the
subject contracts proceeds Irom an express declaration or prohibition by law, and not Irom any
intrinsic illegality. Stated diIIerently, the subject contracts are not illegal per se.
OI equal signiIicance are circumstances attendant and peculiar in this case which
necessitate allowance oI petitioners' money claims on the basis of quantum meruit Ior
work accomplished on the government housing project








GOCAN VS. OUNG, G.R. No. 131889, March 12, 2001
Facts:
Gochan Realty was registered with the Security and Exchange Commission with Felix
Gochan Sr., Maria Tiong, Pedro Gochan, Tomasa Gochan, Esteban Gochan and Crispo Gochan
as its incorporators. Later, Felix Gochan Sr.`s daughter, Alice, mother oI herein respondents,
inherited 50 shares oI stocks in Gochan Realty Irom the Iormer. Alice subsequently died leaving
the 50 shares to her husband, John oung Sr. Sometime in 1962, the RTC adjudicated 6/14 oI
these shares to her children. When her children, herein respondents, reached the age oI majority,
their Iather requested Gochan Realty to partition the shares oI his late wiIe by canceling the stock
certiIicate in his name and issuing, in lieu thereoI, a new stock certiIicate in Iavor oI his children.
The Realty however, reIused.
Meanwhile, IiIteen years later, Cecilia Uy and Miguel Uy Iiled a complaint with the SEC
Ior issuance oI shares oI stocks to the rightIul owners, nulliIication oI shares oI stock,
reconveyance oI the property impressed with trust and damages. The petitioners moved to
dismiss the complaint. The SEC thereaIter held that the oungs were not shown to have been
stockholders stock holders oI Gochan Realty to conIer them with the legal capacity to bring and
maintain their action. That is why the case cannot be considered as an intra-corporate
controversy within the jurisdiction oI the Commission. The Court oI Appeals, on appeal, held
that the SEC had no jurisdiction over the case as Iar as the heirs oI Alice Gochan were
concerned; however, it upheld the capacity oI Cecilia Gochan Uy and her spouse, Miguel Uy.

Issue.
Whether or not the spouses Uy have personality to Iile the suit beIore the Security and
Exchange Commission.

Held.
As a general rule, the jurisdiction oI a court or tribunal over the subject matter is
determined by the allegations in the complaint.
8
For purposes oI resolving a motion to dismiss,
Cecilia Uy's averment in the Complaint -that the purchase oI her stocks by the corporation was
null and void ab initio - is deemed admitted. It is elementary that a void contract produces no
eIIect either against or in Iavor oI anyone; it cannot create, modiIy or extinguish the juridical
relation to which it reIers.
9
Thus, Cecilia remains a stockholder oI the corporation in view oI the
nullity oI the Contract oI Sale. Although she was no longer registered as a stockholder in the
corporate records as oI the Iiling oI the case beIore the SEC, the admitted allegations in the
Complaint made her still a bona Iide stockholder oI Felix Gochan & Sons Realty Corporation
(FGSRC), as between said parties.
In any event, the present controversy, whether intra-corporate or not, is no longer cognizable by
the SEC, in view oI RA 8799, which transIerred to regional trial courts the Iormer's jurisdiction
over cases involving intra-corporate disputes.







FRANCISCO VS. ERRERA, G.R. No. 139982, November 21, 2002
Facts:
Eligio errera Sr. was the owner oI 2 parcels oI land located in Cainta, Rizal. On January
3, 1991, petitioner Julian Francisco bought Irom errera the Iirst parcel oI land covered by tax
Declaration No. 01-00495 Ior P1M pain in installments Irom November 30, 1990 to August 10,
1991. Eventually, Francisco bought the second parcel oI land covered by TD No. 01-00497 Ior
P750T.
ThereaIter, the children oI Eligio Sr. tried to negotiate with petitioner to increase the
purchase price contending that it was grossly inadequate. When petitioner reIused, respondent
Pastor errera, son oI Eligio, Iiled a complaint Ior annulment oI sale. e claimed ownership
over the second parcel oI land allegedly by virtue oI a sale in his Iavor since 1973. Moreover, he
claimed that the Iirst lot was subject to co-ownership oI the surviving heirs oI his parents beIore
the alleged sale to Francisco. Ultimately, Pastor alleged that the sale oI the 2 parcels oI land was
null and void on the ground that at the time oI sale, Eligio Sr. was already incapacitated to give
consent to a contract because oI Senile Dementia which is characterized by deteriorating mental
and physical condition including loss oI memory.
At variance, Francisco alleged that respondent was estopped Irom assailing the sale oI the
lots because respondent had eIIectively ratiIied both sales by receiving the consideration oIIered
in each transaction.
On November 14, 1994, the trial court declared the Deeds oI Sale null and void.
Francisco was ordered to return the lots in question including all improvements. Concomitantly,
errera was ordered to return the purchase price oI the lots sold.

Issue.
Whether or not the assailed contracts oI sale are void or merely voidable and hence
capable oI being ratiIied.

Held.
A void or inexistent contract is one which has no Iorce and eIIect Irom the very
beginning. ence, it is as iI it has never been entered into and cannot be validated either by the
passage oI time or by ratiIication. There are two types oI void contracts: (1) those where one oI
the essential requisites oI a valid contract as provided Ior by Article 1318 oI the Civil Code is
totally wanting; and (2) those declared to be so under Article 1409
11
oI the Civil Code. By
contrast, a voidable or annullable contract is one in which the essential requisites Ior validity
under Article 1318 are present, but vitiated by want oI capacity, error, violence, intimidation,
undue inIluence, or deceit.
Article 1318 oI the Civil Code states that no contract exists unless there is a concurrence
oI consent oI the parties, object certain as subject matter, and cause oI the obligation established.
Article 1327 provides that insane or demented persons cannot give consent to a contract. But, iI
an insane or demented person does enter into a contract, the legal eIIect is that the contract is
voidable or annullable as speciIically provided in Article 1390. the present case, it was
established that the vendor Eligio, Sr. entered into an agreement with petitioner, but that the
Iormer`s capacity to consent was vitiated by senile dementia. ence, we must rule that the
assailed contracts are not void or inexistent per se; rather, these are contracts that are valid and
binding unless annulled through a proper action Iiled in court seasonably.
An annullable contract may be rendered perIectly valid by ratiIication, which can be
express or implied. Implied ratiIication may take the Iorm oI accepting and retaining the beneIits
oI a contract.
This is what happened in this case. Respondent`s contention that he merely received
payments on behalI oI his Iather merely to avoid their misuse and that he did not intend to concur
with the contracts is unconvincing. II he was not agreeable with the contracts, he could have
prevented petitioner Irom delivering the payments, or iI this was impossible, he could have
immediately instituted the action Ior reconveyance and have the payments consigned with the
court. None oI these happened. As Iound by the trial court and the Court oI Appeals, upon
learning oI the sale, respondent negotiated Ior the increase oI the purchase price while receiving
the installment payments. It was only when respondent Iailed to convince petitioner to increase
the price that the Iormer instituted the complaint Ior reconveyance oI the properties. Clearly,
respondent was agreeable to the contracts, only he wanted to get more. Further, there is no
showing that respondent returned the payments or made an oIIer to do so. This bolsters the view
that indeed there was ratiIication. One cannot negotiate Ior an increase in the price in one breath
and in the same breath contend that the contract oI sale is void.






























MENDEZONA VS. OZAMIZ, G.R. No. 143370, February 6, 2002

Facts:
A civil case Ior quieting oI title was instituted on September 25, 1991 by petitioner
spouses Mendezona as plaintiIIs.
In their complaint, the petitioners, as plaintiIIs therein, alleged that petitioner spouses
own a parcel oI land each with almost similar areas covered and described in TransIer
CertiIicates oI Title (TCT). The petitioners ultimately traced their titles oI ownership over their
respective properties Irom a notarized Deed oI Absolute Sale dated April 28, 1989 executed in
their Iavor by Carmen Ozamiz Ior and in consideration oI the sum oI One Million Forty
Thousand Pesos (P1,040,000.00).
The petitioners initiated the suit to remove a cloud on their said respective titles caused
by the inscription thereon oI a notice oI lis pendens, which came about as a result oI an incident
in a Special Proceeding oI the RTC. This Special Proceeding is a proceeding Ior guardianship
over the person and properties oI Carmen Ozamiz.
In the course oI the guardianship proceeding, the petitioners and the oppositors thereto
agreed that Carmen Ozamiz needed a guardian over her person and her properties, and thus
respondent Montalvan was designated as guardian over the person oI Carmen Ozamiz while
petitioner Mendezona, respondents Roberto J. Montalvan and Julio . Ozamiz were designated
as joint guardians over the properties oI the said ward.
The respondents opposed the petitioners` claim oI ownership oI the Lahug property and
alleged that the titles issued in the petitioners` names are deIective and illegal, and the ownership
oI the said property was acquired in bad Iaith and without value inasmuch as the consideration
Ior the sale is grossly inadequate and unconscionable. Respondents Iurther alleged that at the
time oI the sale on April 28, 1989 Carmen Ozamiz was already ailing and not in Iull possession
oI her mental Iaculties; and that her properties having been placed in administration, she was in
eIIect incapacitated to contract with petitioners.
Trial on the merits ensued and the lower court ruled in Iavor oI petitioners. The appellate
court reversed the Iactual Iindings oI the trial court and ruled that the Deed oI Absolute Sale
dated April 28, 1989 was a simulated contract since the petitioners Iailed to prove that the
consideration was actually paid, and, Iurthermore, that at the time oI the execution oI the contract
the mental Iaculties oI Carmen Ozamiz were already seriously impaired. Thus, the appellate
court declared that the Deed oI Absolute Sale oI April 28, 1989 is null and void. It ordered the
cancellation oI the certiIicates oI title issued in the petitioners` names and directed the issuance
oI new certiIicates oI title in Iavor oI Carmen Ozamiz or her estate. The motion Ior
reconsideration was denied.

Issue.
Whether or not the Court oI Appeals erred in ruling that the Deed oI Absolute Sale dated
on April 28, 1989 was a Simulated Contract.

Held.
Payment is not merely presumed Irom the Iact that the notarized Deed oI Absolute Sale
dated April 28, 1989 has gone through the regular procedure as evidenced by the transIer
certiIicates oI title issued in petitioners` names by the Register oI Deeds. In other words,
whosoever alleges the Iraud or invalidity oI a notarized document has the burden oI proving the
same by evidence that is clear, convincing, and more than merely preponderant.
Therefore, with this well-recognized statutory presumption, the burden fell upon
the respondents to prove their allegations attacking the validity and due execution of the
said Deed of Absolute Sale. Respondents failed to discharge that burden; hence, the
presumption in favor of the said deed stands. But more importantly, that notarized deed
shows on its face that the consideration of One Million Forty Thousand Pesos
(P1,040,000.00) was acknowledged to have been received by Carmen Ozamiz.
Simulation cannot be inIerred Irom the alleged absence oI payment based on the
testimonies oI Concepcion Agac-ac, assistant oI Carmen Ozamiz, and NelIa Perdido, part-time
bookkeeper oI Carmen Ozamiz. The testimonies oI these two (2) witnesses are unreliable and
inconsistent.
While Concepcion Agac-ac testiIied that she was aware oI all the transactions oI Carmen
Ozamiz, she also admitted that not all income oI Carmen Ozamiz passed through her since
Antonio Mendezona, as appointed administrator, directly reported to Carmen Ozamiz
With respect to NelIa Perdido, she testiIied that most oI the transactions that she recorded
reIer only to rental income and expenses, and the amounts thereoI were reported to her by
Concepcion Agac-ac only, not by Carmen Ozamiz. She does not record deposits or withdrawals
in the bank accounts oI Carmen Ozamiz. Their testimonies hardly deserve any credit and, hence,
the appellate court misplaced reliance thereon.








































































MANZANILLA VS. COURT OF APPEALS, G.R. No. L-75342, March 15, 1990


Facts.
In 1963, spouses Celedonio and Dolores Manzanilla sold on installment an undivided
one-halI portion oI their residential house and lot. At the time oI the sale, the said property was
mortgaged to the Government Service Insurance System (GSIS), which Iact was known to the
vendees, spouses Magdaleno and Justina Campo. The Campo spouses took possession oI the
premises upon payment oI the Iirst installment. Some payments were made to petitioners while
some were made directly to GSIS.
On May 17, 1965, the GSIS Iiled its application to Ioreclose the mortgage on the property
Ior Iailure oI the Manzanilla spouses to pay their monthly amortizations.
On October 11, 1965, the property was sold at public auction where GSIS was the highest
bidder.
Two months beIore the expiration oI the period to redeem or on August 31, 1966, the
Manzanilla spouses executed a Deed oI Absolute Sale oI the undivided one halI portion oI their
property in Iavor oI the Campo spouses.
Upon the expiration oI the period to redeem without the Manzanilla spouses exercising
their right oI redemption, title to the property was consolidated in Iavor oI the GSIS and a new
title issued in its name.
In January 1969, the Manzanilla spouses made representations and succeeded in re-
acquiring the property Iorm the GSIS. Upon Iull payment oI the purchase price, an Absolute
Deed OI Sale was executed by GSIS in Iavor oI the Manzanilla spouses.
On May 14, 1973, the Manzanilla spouses mortgaged the property to the Bian Rural
Bank. On September 7, 1973, petitioner Ines Carpio purchased the property Irom the Manzanilla
spouses and agreed to assume the mortgage in Iavor oI Bian Rural Bank.
On November 12, 1973, private respondent Justina Campo registered her adverse claim
over the said lot.
On October 3, 1977, petitioner Carpio Iiled an ejectment case against private respondent
Justina Campo.
On July 31, 1979, private respondent Justina Campo (already a widow) Iiled a complaint
Ior quieting oI title against the Manzanilla spouses and Ines Carpio praying among others, Ior the
issuance to her oI a certiIicate oI title over the undivided one-halI portion oI the property.
The trial court rendered its decision in Iavor oI Campo. The decision was appealed by
petitioners to the Court oI Appeals; however it only aIIirmed the decision oI the trial court.
Petitioners` Motion Ior reconsideration was denied.

Issue.
Whether or not petitioners are under any legal duty to reconvey the undivided one-halI
portion oI the property to private respondent Justina Campo.

Held.
There is no suIIicient basis Ior the trial court to conclude that herein petitioners acted in
bad Iaith in their dealings with the Campo spouses. The latter had Iull knowledge oI the existing
mortgage oI the whole property in Iavor oI GSIS prior to the sale oI the one-halI portion to them.
There is also no showing that as one oI the considerations oI the sale, herein petitioners
undertook to release the property Irom the mortgage at all costs. With this condition oI the
property at the time oI the sale, private respondents were Iorewarned oI the consequences oI their
transaction with the petitioners.
There is also no basis to conclude that petitioners deliberately allowed the loan to lapse
and the mortgage to be Ioreclosed. No speciIic act or series oI acts were presented and proven
Irom which it could be saIely concluded that the Iailure oI petitioners to pay oII their loan was
deliberate. They explained that their Iinancial condition prevented them Irom dutiIully
complying with their obligations to the GSIS. In a display oI their good Iaith and Iair dealing
aIter the property was Ioreclosed, the petitioners, realizing the imminent loss oI the said
property, even granted the private respondent the right to redeem it Irom the GSIS. This right
was granted in the Deed oI Absolute Sale executed by petitioners in Iavor oI the Campo spouses.
Moreover, it was also stipulated that private respondent recognized the superior lien oI GSIS on
the property and agreed to be bound by the terms and conditions oI the mortgage.
In view oI the Iailure oI either the Manzanilla spouses or the Campo spouses to redeem
the property Irom GSIS, title to the property was consolidated in the name oI GSIS. The new title
cancelled the old title in the name oI the Manzanilla spouses. GSIS at this point had a clean title
Iree Irom any lien in Iavor oI any person including that oI the Campo spouses.
II it were true that petitioners deliberately allowed the loan to lapse and the mortgage to
be Ioreclosed, We do not see how these circumstances can be utilized by them to their advantage.
There was no guarantee that petitioners would be able to redeem the property in the event the
mortgage thereon was Ioreclosed as in Iact they Iailed to redeem because they had no money. On
the other hand, had they opted to eventually exercise their right oI redemption aIter Ioreclosure,
they would be under a legal duty to convey one-halI portion thereoI sold to the Campo spouses
because by then, title to the property would still be in their name. Either way, petitioners were
bound to lose either the entire property in case oI Iailure to redeem or the one-halI portion
thereoI sold to private respondent in the case oI redemption. Further, should petitioners let the
period oI redemption lapse without exercising the right oI redemption, as what happened in this
case, there was no guarantee that the same could be re-acquired by them Irom GSIS nor would
GSIS be under any legal duty to resell the property to them.
There may be a moral duty on the part oI petitioners to convey the one-halI portion oI the
property previously sold to private respondents. owever, they are under no legal obligation to
do so. ence, the action to quiet title Iiled by private respondent must Iail.














RURAL BANK OF PARAAQUE INC. VS. ISIDRA REMOLADO AND
Court oI Appeals, G.R. No. L-62051, March 18, 1985
Facts.
Isidra Remolado mortgaged her property with an area oI 308 sq. meters with bungalow to
the Rural Bank oI Paranaque Inc. She was not able to pay her loans thus the said loans became
overdue. As a result thereoI, the bank Ioreclosed the said property and bought it at Ioreclosure
sale Ior P22, 192.70 Isidra had one-year period within which would expire on August 21, 1973.
She was given the notice oI redemption by the bank but she Iailed to avail oI her right. As a
consequence thereoI, the bank consolidated its ownership over her property. Still the bank
oIIered Isidra to repurchase the property. She did not do so within the period or repurchase set by
the bank. The bank sold the property to Pilar Aysip Ior P50, 000.00. A new title was issued to
Aysip with an annotation oI lis pendens.
The trial court ordered the bank to return the property to Remolado upon payment oI the
redemption price oI P25,491.96 plus interest and other bank charges and to pay her P15, 000.00
as damages. The CA aIIirmed the judgment.

Issue.
Whether or not Remolado is entitled to the reconveyance oI her property.

Held.
The Supreme Court hold that the trial court and the Appellate Court erred in ordering the
reconveyance oI the property, There was no binding agreement Ior its repurchase. Even on the
assumption that the bank should be bound by its commitment to allow repurchase on or beIore
October 31, 1973, still Remolado had no cause oI action because she did not repurchase the
property on that date.
Justice is done according to law. As a rule, equity Iollows the law. There may be a moral
obligation, oIten regarded as an equitable consideration (meaning compassion), but iI there is no
enIorceable legal duty, the action must Iail although the disadvantaged party deserves
commiseration or sympathy.
The choice between what is legally just and what is morally just, when these two options
do not coincide






























































SPS. RICARDO AND MILAGROS UANG VS. COURT OF APPEALS, ET. AL.
G.R. No. 108525, September 13, 1994


Facts.
Private respondents Dolores and Aniceto Sandoval wanted to buy two lots in Dasmarinas
Village, Makati but were allowed to buy only one lot per policy oI the subdivision owner.
Private respondents bought Lot 21 and registered it in their name. Respondents also bought Lot
20 but the deed oI sale was in the name oI petitioner Ricardo uang and registered in his name.
Respondents constructed a house on Lot 21 while petitioners were allowed by respondents to
build a house on Lot 20. Petitioners were also allowed to mortgage the Lot 20 to the SSS to
secure a loan. Respondents actually Iinanced the construction oI the house, the swimming pool,
and the Ience surrounding the properties on the understanding that the petitioners would merely
hold title in trust Ior the respondents` beneIicial interest.
Petitioner uangs leased the property to Deltron Corporation Ior its oIIicial quarters
without the permission oI the respondents. But later, the lessees prohibited the use oI the
swimming pool by the respondents, and the uangs began challenging the respondents`
ownership oI the property. Thus, respondents Iiled a complaint beIore the trial court Ior the
nulliIication oI the deed oI sale to the petitioners and the quieting oI title oI Lot 20.
The trial court Iound that the respondents were the real owners oI the Lot 20 and
thereIore ordered the petitioners to vacate the property and to remit to the respondents the rentals
earned Irom Lot 20. The Court oI Appeals aIIirmed the lower court`s decision.

Issue.
Whether or not petitioners can claim ownership oI the property registered in their name
but Ior which was paid by the respondents.

Held.
Petitioners raise the issue oI prescription. But the action to compel the trustee to convey
the property registered in his name Ior the beneIits oI the cestui que trust does not prescribe.
II at all, it is only when the trustee repudiates the trust that the period oI prescription
commences to run. The prescriptive period is ten (10) years Irom the repudiation oI the trust. It is
ten (10) years because just as a resulting trust is an oIIspring oI the law, so is the corresponding
obligation to convey the property and the title thereto to the true owner. In this context, and vis-
a-vis prescription, Art. 1144 oI the New Civil Code, which is the law applicable, provides: "The
Iollowing actions must be brought within ten years Irom the time the right oI action accrues: (a)
Upon a written contract; (b) Upon an obligation created by law; (c) Upon a
judgment.
Thus, the reckoning point is repudiation oI the trust by the trustee because Irom that
moment his possession becomes adverse, which in the present case gave rise to a cause oI action
by Dolores against the uang spouses.
owever, beIore the period oI prescription may start, it must be shown that:
(a) the trustee has perIormed unequivocal acts oI repudiation amounting to an ouster oI the cestui
que trust; (b) such positive acts oI repudiation have been made known to the cestui que trust;
and, (c) the evidence thereon is clear and conclusive.
CATALINA BUAN VDA. DE ESCONDE VS. ONORABLE COURT OF APPEALS,
G.R. No. 103635, February 01, 1996
Facts.
Petitioners Constancia, Benjamin and Elenita, and private respondent Pedro, are the
children oI the late Eulogio Esconde and petitioner Catalina Buan. Eulogio Esconde was one oI
the children and heirs oI Andres Esconde. Andres is the brother oI Estanislao Esconde, the
original owner oI the disputed lot who died without issue on April 1942. Survived by his only
brother, Andres, Estanislao leIt an estate consisting oI Iour (4) parcels oI land in Samal, Bataan.
Eulogio died in April, 1944 survived by petitioners and private respondent. At that time,
Lazara and Ciriaca, Eulogio's sisters, had already died without having partitioned the estate oI
the late Estanislao Esconde. On December 5, 1946, the heirs oI Lazara, Ciriaca and Eulogio
executed a deed oI extrajudicial partition, with the heirs oI Lazara identiIied therein as the Party
oI the First Part, that oI Ciriaca, the Party oI the Second Part and that oI Eulogio, the Party oI the
Third Part. Since the children oI Eulogio, with the exception oI Constancia, were then all minors,
they were represented by their mother and judicial guardian, petitioner Catalina Buan vda. de
Esconde who renounced and waived her usuIructuary rights over the parcels oI land in Iavor oI
her children in the same deed. The deed bears the thumbmark oI Catalina Buan and the signature
oI Constancia Esconde, as well as the approval and signature oI Judge Basilio Bautista.
Pursuant to the same deed, transIer certiIicates oI title were issued to the new owners oI
the properties. TransIer CertiIicate oI Title was issued on February 11, 1947 in the name oI
private respondent but Catalina kept it in her possession until she delivered it to him in 1949
when private respondent got married. Meanwhile, Benjamin constructed the Iamily home on Lot
No. 1698-B which is adjacent to Lot No. 1700. A portion oI the house occupied an area oI
twenty (20) square meters, more or less, oI Lot No. 1700. Benjamin also built a concrete Ience
and a common gate enclosing the two (2) lots, as well as an artesian well within Lot No. 1700.
Sometime in December, 1982, Benjamin discovered that Lot No. 1700 was registered in
the name oI his brother, private respondent. Believing that the lot was co-owned by all the
children oI Eulogio Esconde, Benjamin demanded his share oI the lot Irom private respondent.
owever, private respondent asserted exclusive ownership thereoI pursuant to the deed oI
extrajudicial partition and, in 1985 constructed a "buho" Ience to segregate Lot No. 1700 Irom
Lot No. 1698-B. ence, on June 29, 1987, petitioners herein Iiled a complaint beIore the
Regional Trial Court oI Bataan against private respondent Ior the annulment oI TCT No. 394.
They Iurther prayed that private respondent be directed to enter into a partition agreement with
them, and Ior damages (Civil Case No. 5552).
In its decision oI July 31, 1989, the lower court dismissed the complaint and the
counterclaims. owever, the lower court ruled that the action had been barred by both
prescription and laches. Lot No. 1700 having been registered in the name oI private respondent
on February 11, 1947, the action to annul such title prescribed within ten (10) years on February
11, 1957 or more than thirty (30) years beIore the action was Iiled on June 29, 1987. Court oI
Appeals aIIirmed the lower court's decision. The appellate court held that the deed oI
extrajudicial partition established "an implied trust arising Irom the mistake oI the judicial
guardian in Iavoring one heir by giving him a bigger share in the hereditary property." It
stressed that "an action Ior reconveyance based on implied or constructive trust" prescribes in ten
(10) years "counted Irom the registration oI the property in the sole name oI the co-heir."

Issue. Whether or not the action was already barred with laches and prescription.
Held.
Trust is the legal relationship between one person having an equitable ownership in
property and another person owning the legal title to such property, the equitable ownership oI
the Iormer entitling him to the perIormance oI certain duties and the exercise oI certain powers
by the latter. Trusts are either express or implied. An express trust is created by the direct and
positive acts oI the parties, by some writing or deed or will or by words evidencing an intention
to create a trust. No particular words are required Ior the creation oI an express trust, it being
suIIicient that a trust is clearly intended. On the other hand, implied trusts are those which,
without being expressed, are deducible Irom the nature oI the transaction as matters oI intent or
which are superinduced on the transaction by operation oI law as matters oI equity,
independently oI the particular intention oI the parties. In turn, implied trusts are either resulting
or constructive trusts.
While the deed oI extrajudicial partition and the registration oI Lot No. 1700 occurred in
1947 when the Code oI Civil Procedure or Act No. 190 was yet in Iorce, the Supreme Court held
that the trial court correctly applied Article 1456. A deeper analysis oI Article 1456 reveals that
it is not a trust in the technical sense Ior in a typical trust, conIidence is reposed in one person
who is named a trustee Ior the beneIit oI another who is called the cestui que trust, respecting
property which is held by the trustee Ior the beneIit oI the cestui que trust. A constructive trust,
unlike an express trust, does not emanate Irom, or generate a Iiduciary relation. While in an
express trust, a beneIiciary and a trustee are linked by conIidential or Iiduciary relations, in a
constructive trust, there is neither a promise nor any Iiduciary relation to speak oI and the so-
called trustee neither accepts any trust nor intends holding the property Ior the beneIiciary.
In the case, petitioner Catalina Buan vda. de Esconde, as mother and legal guardian oI her
children, appears to have Iavored her elder son, private respondent, in allowing that he be given
Lot No. 1700 in its entirety in the extrajudicial partition oI the Esconde estate to the prejudice oI
her other children. Although it does not appear on record whether Catalina intentionally granted
private respondent that privileged bestowal, the Iact is that, said lot was registered in private
respondent's name. AIter TCT No. 394 was handed to him by his mother, private respondent
exercised exclusive rights oI ownership therein to the extent oI even mortgaging the lot when he
needed money.
II, as petitioners insist, a mistake was committed in allotting Lot No. 1700 to private
respondent, then a trust relationship was created between them and private respondent. owever,
private respondent never considered himselI a trustee. II he allowed his brother Benjamin to
construct or make improvements thereon, it appears to have been out oI tolerance to a brother.
Consequently, iI indeed, by mistake, private respondent was given the entirety oI Lot No.
1700, the trust relationship between him and petitioners was a constructive, not resulting, implied
trust. Petitioners, thereIore, correctly questioned private respondent's exercise oI absolute
ownership over the property. UnIortunately, however, petitioners assailed it long aIter their right
to do so had prescribed.
The rule that a trustee cannot acquire by prescription ownership over property entrusted
to him until and unless he repudiates the trust, applies to express trusts and resulting implied
trusts. owever, in constructive implied trusts, prescription may supervene even iI the trustee
does not repudiate the relationship. Necessarily, repudiation oI the said trust is not a condition
precedent to the running oI the prescriptive period.


JOVITA AP ANCOG VS. COURT OF APPEALS, G.R. No. 112260, June 30, 1997

Facts.
The land, with improvements thereon, was Iormerly the conjugal property oI the spouses
Gregorio ap and Rosario Diez. In 1946, Gregorio ap died, leaving his wiIe, private
respondent Rosario Diez, and children, petitioners Jovita ap Ancog and Gregorio ap, Jr., and
private respondent Caridad ap as his heirs. In 1954 and again 1958, Rosario Diez obtained
loans Irom the Bank oI Calape, secured by a mortgage on the disputed land, which was annotated
on its Original CertiIicate oI Title No. 622. When Rosario Diez applied again Ior a loan to the
bank, oIIering the land in question as security, the bank`s lawyer, Atty. Narciso de la Serna,
suggested that she submit an extrajudicial settlement covering the disputed land as a means oI
Iacilitating the approval oI her application. The suggestion was accepted and on April 4, 1961,
Atty. de la Serna prepared an extrajudicial settlement, which the heirs, with the exception oI
petitioner Gregorio ap, Jr., then only 15 years old, signed. As a result, OCT No. 622 was
cancelled and TransIer CertiIicate oI Title No. 3447 (T-2411) was issued on April 13, 1961. On
April 14, 1961, upon the execution oI a real estate mortgage on the land, the loan was approved
by the bank. Rosario Diez exercised rights oI ownership over the land. In 1985, she brought an
ejectment suit against petitioner Jovita ap Ancog`s husband and son to evict them Irom the
ground Iloor oI the house built on the land Ior Iailure to pay rent. Shortly thereaIter, petitioner
Jovita Ancog learned that private respondent Rosario Diez had oIIered the land Ior
sale.Petitioner Ancog immediately inIormed her younger brother, petitioner Gregorio ap, Jr.,
who was living in Davao, oI their mother`s plan to sell the land. On June 6, 1985, they Iiled this
action Ior partition in the Regional Trial Court oI Bohol where it was docketed as Civil Case No.
3094. As private respondent Caridad ap was unwilling to join in the action against their
mother, Caridad was impleaded as a deIendant.
Petitioners alleged that the extrajudicial instrument was simulated and thereIore void.
They claimed that in signing the instrument they did not really intend to convey their interests in
the property to their mother, but only to enable her to obtain a loan on the security oI the land to
cover expenses Ior Caridad`s school Iees and Ior household repairs. The trial court rendered
judgment dismissing petitioners` action. It dismissed petitioners` claim that the extrajudicial
settlement was simulated and held it was voluntarily signed by the parties. Observing that even
without the need oI having title in her name Rosario Diez was able to obtain a loan using the
land in question as collateral, the court held that the extrajudicial settlement could not have been
simulated Ior the purpose oI enabling her to obtain another loan. Petitioners Iailed to overcome
the presumptive validity oI the extrajudicial settlement as a public instrument.
The court instead Iound that petitioner Ancog had waived her right to the land, as shown
by the Iact that on February 28, 1975, petitioner`s husband, IldeIonso Ancog, leased the property
Irom private respondent Diez. Furthermore, when the spouses Ancog applied Ior a loan to the
Development Bank oI the Philippines using the land in question as collateral, they accepted an
appointment Irom Rosario Diez as the latter`s attorney-in-Iact. The court also Iound that the
action Ior partition had already prescribed.On appeal, the Court oI Appeals upheld the validity oI
the extrajudicial settlement and sustained the trial court`s dismissal oI the case. The appellate
court emphasized that the extrajudicial settlement could not have been simulated in order to
obtain a loan, as the new loan was merely 'in addition to a previous one which private
respondent Diez had been able to obtain even without an extrajudicial settlement. Neither did
petitioners adduce evidence to prove that an extrajudicial settlement was indeed required in order
to obtain the additional loan. The appellate court held that considering petitioner Jovita ap
Ancog`s educational attainment (Master oI Arts and Bachelor oI Laws), it was improbable that
she would sign the settlement iI she did not mean it to be such. ence, this petition.

Issue.
Whether or not the appellate court erred in ruling that petitioner Gregorio ap, Jr., one oI
the co-owners oI the litigated property, had lost his rights to the property through prescription or
laches.

Held.
A cestui que trust may make a claim under a resulting trust within 10 years Irom the time
the trust is repudiated. Although the registration oI the land in private respondent Diez's name
operated as a constructive notice oI her claim oI ownership, it cannot be taken as an act oI
repudiation adverse to petitioner Gregorio ap, Jr.'s claim, whose share in the property was
precisely not included by the parties in the partition. Indeed, it has not been shown whether he
had been inIormed oI her exclusive claim over the entire property beIore 1985 when he was
notiIied by petitioner Jovita ap Ancog oI their mother's plan to sell the property.
The Court has ruled that Ior prescription to run in Iavor oI the trustee, the trust must be
repudiated by unequivocal acts made known to the cestui que trust and proved by clear and
conclusive evidence. Furthermore, the rule that the prescriptive period should be counted Irom
the date oI issuance oI the Torrens certiIicate oI title applies only to the remedy oI reconveyance
under the Property Registration Decree.
Since the action brought by petitioner ap to claim his share was brought shortly aIter he
was inIormed by Jovita Ancog oI their mother's eIIort to sell the property, Gregorio ap, Jr.'s
claim cannot be considered barred either by prescription or by laches.





















RodolIo Morales vs. Court oI Appeals, G.R. No. 117228, June 19, 1997
Facts.
This is an action Ior recovery oI possession oI land and damages with a prayer Ior a writ
oI preliminary mandatory injunction Iiled by private respondents herein, spouses RanulIo Ortiz,
Jr. and Erlinda Ortiz, against RodolIo Morales. The complaint prayed that private respondents
be declared the lawIul owners oI a parcel oI land and the two-storey residential building standing
thereon, and that Morales be ordered to remove whatever improvements he constructed thereon,
vacate the premises, and pay actual and moral damages, litigation expenses, attorney's Iees and
costs oI the suit.
Priscila Morales, one oI the daughters oI late Rosendo Avelino and Juana RicaIorte, Iiled
a motion to intervene in the case. No opposition thereto having been Iiled, the motion was
granted on March 4, 1988. On November 30, 1988 RodolIo Morales passed away. The trial
court allowed his substitution by his heirs, Roda, Rosalia, Cesar and Priscila, all surnamed
Morales. The trial court rendered its decision in Iavor oI plaintiIIs, private respondents herein.
DissatisIied with the trial court's decision, the heirs oI RodolIo Morales and intervenor Priscila
Morales, petitioners herein, appealed to the Court oI Appeals which in turn aIIirmed the
decision.

Issue.
Whether or not Celso Avelino purchase the land in question Irom the Mendiolas as a
mere trustee Ior his parents and siblings.

Held.
The rule is settled that the burden oI proving the existence oI a trust is on
the party asserting its existence and that such prooI must be clear and satisIactory. As to that,
petitioners relied principally on testimonial evidence. It is, oI course, doctrinally entrenched that
the evaluation oI the testimony oI witnesses by the trial court is received on appeal with the
highest respect, because it is the trial court that has the direct opportunity to observe them on the
stand and detect iI they are telling the truth or lying through their teeth. The assessment is
accepted as correct by the appellate court and binds it, absent a clear showing that it was reached
arbitrarily. In this case, petitioners Iailed to assail, much less overcome, the observations oI the
trial court.
Priscila's justiIication Ior her and her sisters' Iailure to assert co-ownership oI the property
based on the theory oI implied trust is, to say the least, Ilimsy. In light oI their assertion that
Celso Avelino did not have actual possession oI the property because he "was away Irom
Calbayog continuously Ior more than 30 years until he died on October 31, 1987, and the
established Iact that the tax declarations oI the property were in Celso's name and the latter paid
the realty taxes thereon, there existed no valid and cogent reason why Priscila and her sisters did
not do anything to have their respective shares in the property conveyed to them aIter the death
oI Rosendo Avelino in 1980. Neither is there any evidence that during his liIetime Rosendo
demanded Irom Celso that the latter convey the land to the Iormer, which Rosendo could have
done aIter Juana's death on 31 May 1965. This omission was mute and eloquent prooI oI
Rosendo's recognition that Celso was the real buyer oI the property in 1948 and the absolute and
exclusive owner thereoI.


TALA REALT SERVICES CORPORATION VS. BANCO FILIPINO SAVINGS AND
MORTGAGE BANK, G.R. No. 143263 January 29, 2004
Facts.
In 1979, Banco Filipino, respondent, had to unload some oI its branch sites since it has
reached its allowable limit under Section 25(a) and 34 oI Republic Act 337, as amended,
otherwise known as the General Banking Act.
The major stockholders oI Banco Filipino Iormed a corporation known as TALA Realty
Services Corporation, herein petitioner. TALA stands Ior the names oI Banco Filipino`s Iour
major stockholders, namely, Antonio Tiu, Tomas Aguirre, Nancy Lim and Pedro Aguirre.
On August 25, 1981, respondent bank executed in Iavor oI petitioner TALA eleven deeds
oI sale transIerring to the latter its branch sites. In turn, petitioner leased these branch sites to
respondent through separate contracts oI lease Ior a period oI twenty years, renewable Ior
another twenty years, at the option oI respondent, with a monthly rental oI P12,000.00 and
require respondent bank to pay petitioner P602,500.00 as advance rentals.
That day, another lease contract was executed by the parties covering each branch site
providing Ior a period oI eleven years, renewable Ior another nine years at the option oI
respondent. And respondent bank was required to pay P602,500.00 as security deposit Ior the
perIormance oI the terms and conditions oI the contract.
In August 1992, petitioner wrote respondent inIorming it oI the expiration oI the 11-year
lease contract. They Iailed to reach an agreement. Thus, on April 14, 1994, petitioner notiIied
respondent that the lease shall no longer be renewed and demanded that it vacate the premises
and pay the rents in arrears amounting to P2,057,600.00. Respondent did not heed such demand,
prompting petitioner to Iile civil case Ior illegal detainer.
On February 5, 1998, the RTC rendered its Decision dismissing petitioner`s complaint Ior
ejectment Ior lack oI merit. On appeal via a petition Ior review, the Court oI Appeals, on July
23, 1999, had dismissed the petition and upholding the 20-year lease contract between the
parties.

Issue.
Whether respondent may be ejected Irom the leased premises Ior non-payment oI rent.

Held.
The Supreme Court ruled that the parties deliberately circumvented the real estate
investment limit under Sections 25(a) and 34 oI the General Banking Act. Being in pari delicto,
they should suIIer the consequences oI their deception by denying them any aIIirmative relieI.
Equity dictates that Tala should not be allowed to collect rent Irom the Bank. Both the Bank and
Tala participated in the deceptive creation oI a trust to circumvent the real estate investment limit
under Sections 25(a) and 34 oI the General Banking Act. Upholding Tala`s right to collect rent
Irom the period during which the Bank was arbitrarily closed would allow Tala to beneIit Irom
the illegal warehousing agreement.` This would result in the application oI the Bank`s advance
rentals covering the eleventh to the twentieth years oI the lease, to the rentals due Ior the period
during which the Bank was arbitrarily closed. With the advance rentals already used up, and the
Bank having stopped payment oI the rent on the thirteenth year oI the lease or in April 1994,
rentals would be due Tala Irom the time the Bank stopped paying rent in April 1994 up to the
expiration oI the lease period. The Bank should not be allowed to dispute the sale oI its lands to
Tala nor should Tala be allowed to Iurther collect rent Irom the Bank. The clean hands doctrine
will not allow the creation or the use oI a juridical relation such as a trust to subvert, directly or
indirectly, the law. Neither the Bank nor Tala came to court with clean hands; neither will obtain
relieI Irom the court as one who seeks equity and justice must come to court with clean hands
Thus, the petition is denied. The challenged Decision oI the Court oI Appeals dated July
23, 1999 and its Resolution dated May 16, 2000, are reversed
























































































EIRS OF AMBROCIO KIONISALA VS. EIRS OF ONORIO DACUT, G.R. No. 147379,
February 27, 2002
Facts.
On 19 December 1995 private respondents Iiled a complaint Ior declaration oI nullity oI
titles, reconveyance and damages against petitioners in the Regional Trial Court oI Manolo
Fortich, Bukidnon. This complaint involved 2 parcels oI land known as Lot No. 1017 and Lot
No. 1015 with areas oI 117,744 square meters and 69,974 square meters respectively, located in
Pongol, Libona, Bukidnon. On 7 September 1990 Lot No. 1017 was granted a Iree patent to
petitioners eirs oI Ambrocio Kionisala under Free Patent No. 603393, and on 13 November
1991 Lot 1015 was bestowed upon Isabel Kionisala, one oI the impleaded heirs oI Ambrocio
Kionisala under Free Patent No. 101311-91-904. ThereaIter, on 19 November 1990 Lot 1017
was registered under the Torrens system and was issued Original CertiIicate oI Title No. P-
19819 in petitioners` name, while on 5 December 1991 Lot No. 1015 was registered in the name
oI Isabel Kionisala under Original CertiIicate oI Title No. P-20229. In support oI their causes oI
action Ior declaration oI nullity oI titles and reconveyance, private respondents claimed absolute
ownership oI Lot 1015 and 1017 even prior to the issuance oI the corresponding Iree patents and
certiIicates oI title. AIter the hearing on 3 December 1996 the trial court dismissed the
complaint on the ground that the cause oI action oI private respondents was truly Ior reversion so
that only the Director oI Lands could have Iiled the complaint. On 23 December 1996 private
respondents moved Ior reconsideration oI the order oI dismissal but on 3 June 1997 the motion
was denied by the trial court. On 7 June 1997 private respondents appealed the order oI dismissal
to the Court oI Appeals. On 15 February 2000 the appellate court promulgated its assailed
Decision reversing the order oI dismissal. On 7 March 2000 petitioners moved Ior
reconsideration oI the CA Decision. On 22 January 2001 the appellate court denied the motion
Ior lack oI merit, hence this petition Ior review.

Issue. Whether or not the action Ior reconveyance based on implied trust.

Held. The Court rule that neither the action Ior declaration oI nullity oI Iree patents and
certiIicates oI title oI Lot 1015 and Lot 1017 nor the action Ior reconveyance based on an
implied trust oI the same lots has prescribed. We have ruled that 'a Iree patent issued over
private land is null and void, and produces no legal eIIects whatsoever. Quos nullum est, nullum
producit effectum.` Moreover, private respondents` claim oI open, public, peaceIul, continuous
and adverse possession oI the two (2) parcels oI land and its illegal inclusion in the Iree patents
oI petitioners and in their original certiIicates oI title, also amounts to an action Ior quieting oI
title which is imprescriptible.
The action Ior reconveyance based on implied trust, on the other hand, prescribes only
aIter ten (10) years Irom 1990 and 1991 when the Iree patents and the certiIicates oI title over
Lot 1017 and Lot 1015, respectively, were registered. Obviously the action had not prescribed
when private respondents Iiled their complaint against petitioners on 19 December 1995. At any
rate, the action Ior reconveyance in the case at bar is also signiIicantly deemed to be an action to
quiet title Ior purposes oI determining the prescriptive period on account oI private respondents`
allegations oI actual possession oI the disputed lots.
In such a case, the cause oI action is truly imprescriptible.

RAMOS VS. RAMOS, G.R. No. 144294, March 11, 2003
Facts.
Spouses Martin Ramos and Candida Tanate died on October 4, 1906 and October 26,
1880, respectively. They were survived by their 3 children. Moreover, Martin was survived by
his 7 natural children. In December 1906, a special proceeding Ior the settlement oI the intestate
estate oI said spouses was conducted. RaIael Ramos, a brother oI Martin, administered the estate
Ior more than 6 years. Eventually, a partition project was submitted which was signed by the 3
legitimate children and 2 oI the 7 natural children. A certain Timoteo Zayco signed in
representation oI the other 5 natural children who were minors. The partition was sworn to
beIore a justice oI peace. The conjugal hereditary estate was appraised at P74, 984.93, consisting
oI 18 parcels oI land, some head oI cattle and the advances to the legitimate children. thereoI
represented the estate oI Martin. 1/3 thereoI was the Iree portion or P12, 497.98. The shares oI
the 7 natural children were to be taken Irom that 1/3 Iree portion. Indeed, the partition was made
in accordance with the Old Civil code. ThereaIter, Judge Richard Campbell approved the
partition project. The court declared that the proceeding will be considered closed and the record
should be archived as soon as prooI was submitted that each he3ir had received the portion
adjudicated to him. On February 3, 1914, Judge Nepumoceno asked the administrator to
submit a report showing that the shares oI the heirs had been delivered to them as required by the
previous decision. Nevertheless, the maniIestation was not in strict conIormity with the terms oI
the judge`s order and with the partition project itselI. 8 lots oI the imamaylan Cadastre were
registered in equal shares in the names oI Gregoria (widow oI Jose Ramos) and her daughter,
when in Iact the administrator was supposed to pay the cash adjudications to each oI them as
enshrined in the partition project. PlaintiIIs were then constrained to bring the suit beIore the
court seeking Ior the reconveyance in their Iavor their corresponding participations in said
parcels oI land in accordance with Article 840 oI the old Civil Code. Note that 1/6 oI the subject
lots represents the 1/3 Iree portion oI martin`s shares which will eventually redound to the shares
oI his 7 legally acknowledged natural children. The petitioners` action was predicated on the
theory that their shares were merely held in trust by deIendants. Nonetheless, no Deed oI Trust
was alleged and proven. Ultimately, the lower court dismissed the complaint on the grounds oI
res judicata, prescription and laches.

Issue. Whether or not the plaintiIIs` action was barred by prescription, laches and res fudicata
to the eIIect that they were denied oI their right to share in their Iather`s estate.

Held. It is well settled that a decision that has acquired Iinality becomes immutable and
unalterable. A Iinal judgment may no longer be modiIied in any respect, even iI the modiIication
is meant to correct erroneous conclusions oI Iact or law; and whether it will be made by the court
that rendered it or by the highest court in the land.
|12|
The only exceptions to this rule are the
correction oI (1) clerical errors, (2) the so-called nunc pro tunc entries which cause no prejudice
to any party, and (3) void judgments. Clearly, petitioners were not the registered owners oI the
land, but represented merely an inchoate interest thereto as heirs oI Paulino. They had no
standing in court with respect to actions over a property oI the estate, because the latter was
represented by an executor or administrator. Thus, there was no need to implead them as
deIendants in the case, inasmuch as the estates oI the deceased co-owners had already been made
parties.

INTESTATE ESTATE OF T VS. COURT OF APPEALS, G.R. No. 112872, April 19, 2001

Facts.
Petitioner Sylvia S. Ty is the wiIe oI the deceased Alexander T. Ty, while private
respondent, Alejandro Ty, is the Iather. In the settlement oI Alexander`s estate, petitioner was
appointed as administratrix.
On November 4, 1992, petitioner Iiled a motion Ior leave to sell or mortgage estate
property in order to generate Iunds Ior the payment oI deIiciency estate taxes. Included in the
inventory oI property were various shares oI stocks and a parcel oI land.
This prompted private respondent Alejandro Ty to Iile two complaints Ior the recovery oI
the properties. One complaint was Ior the declaration oI nullity oI the deed oI absolute sale oI
the shares oI stock executed by private respondent in Iavor oI the deceased, and another
complaint was Ior the recovery oI the pieces oI property that were placed in the name oI the
deceased by private respondent. Private respondent claimed in both cases that even iI said
property were placed in the name oI deceased Alexander, they were acquired through private
respondent`s money, without any cause or consideration Irom deceased Alexander.
Motions to dismiss were Iiled by petitioner on the grounds oI lack oI jurisdiction oI the
trial court, bar by statute oI limitations, and bar by laches. The motions however were denied by
the RTC. Subsequent appeals to the CA were also denied.

Issue.
Whether or not petitioner`s contentions are tenable

Held.
In the cases at hand, private respondent contends that the pieces oI property were
transIerred in the name oI the deceased Alexander Ior the purpose oI taking care oI the property
Ior him and his siblings. Such transIer having been eIIected without cause or consideration, a
resulting trust was created. A resulting trust arises in Iavor oI one who pays the purchase money
oI an estate and places the title in the name oI another, because oI the presumption that he who
pays Ior a thing intends a beneIicial interest therein Ior himselI. II a trust was then created, it
was an implied, not an express trust, which may be proven by oral evidence, and it matters not
whether property is real or personal.
Petitioner`s assertion that private respondent`s action is barred by the statute oI
limitations is erroneous. The statute oI limitations cannot apply in this case. Resulting trusts
generally do not prescribe, except when the trustee repudiates the trust. Further, an action to
reconvey will not prescribe so long as the property stands in the name oI the trustee. To allow
prescription would be to permit a trustee to acquire title against his principal and the true owner.









VDA. DE RETUERTO VS. BARZ, G.R. No. 148180, December 19, 2001

Facts.
Petitioners are the heirs oI PanIilo Retuerto, while respondents are the heirs oI Pedro
Barz who is the sole heir oI Juana Perez Barz. Juana Perez Barz was the original owner oI Lot
No. 896 having an area oI 13,160 square meters. BeIore her death on April 16, 1929, Juana
Perez executed a Deed oI Absolute Sale in Iavor oI PanIilo Retuerto over a parcel oI land,
identiIied as Lot No. 896-A, a subdivision oI Lot No. 896, with an approximate area oI 2,505
square meters. On July 22, 1940, the Court issued an Order directing the Land Registration
Commission Ior the issuance oI the appropriate Decree in Iavor oI PanIilo Retuerto over the said
parcel oI land. owever, no such Decree was issued as directed by the Court because, by
December 8, 1941, the Second World War ensued in the PaciIic. owever, PanIilo Iailed to
secure the appropriate decree aIter the war.
Sometime in 1966, Pedro Barz, as the sole heir oI Juana Perez, Iiled and application, with
the then CFI oI Cebu Ior the conIirmation oI his title over Lot 896 which included the Lot sold to
PanIilo Retuerto. The Court ruled in his Iavor declaring him the lawIul owner oI the said
property, and thus Original CertiIicate oI Title No. 521 was issued. Lot No. 896-A however was
continuously occupied by the petitioners. Thus, a conIrontation arose and as a result respondents
Iiled an action on September 5, 1989 Ior 'Quieting oI Title, Damages and Attorney`s Fees. In
their answer, petitioners claimed that they were the owners oI a portion oI the lot which was
registered under the name oI Pedro Barz and thereIore the issuance oI the Original CertiIicate oI
Title in Pedro Barz`s name did not vest ownership but rather it merely constituted him as a
trustee under a constructive trust. Petitioners Iurther contend that Pedro Barz misrepresented
with the land registration court that he inherited the whole lot thereby constituting Iraud on his
part.

Issue.
Whether or not petitioners` deIense is tenable.

Held.
The contention is bereIt oI merit. Constructive trusts are created in equity to prevent
unjust enrichment, arising against one who, by Iraud, duress or abuse oI conIidence, obtains or
holds the legal right to property which he ought not, in equity and good conscience, to hold.
Petitioners Iailed to substantiate their allegation that their predecessor-in-interest had acquired
any legal right to the property subject oI the present controversy. Nor had they adduced
evidence to show that the certiIicate oI title oI Pedro Barz was obtained through Iraud.
Even assuming arguendo that Pedro Barz acquired title to the property through mistake
or Iraud, petitioners are nonetheless barred Irom Iiling their claim oI ownership. An action Ior
reconveyance based on an implied or constructive trust prescribes within ten years Irom the time
oI its creation or upon the alleged Iraudulent registration oI the property. Since registration oI
real property is considered a constructive notice to all persons, then the ten-year prescriptive
period is reckoned Irom the time oI such registering, Iiling or entering. Thus, petitioners should
have Iiled an action Ior reconveyance within ten years Irom the issuance oI OCT No. 521 in
November 16, 1968. This, they Iailed to do so.


CIAO LIONG TAN VS. COURT OF APPEALS, G.R. No. 106251, November 19, 1993

Facts.
Petitioner Chiao Liong Tan claims to be the owner oI a motor vehicle, particularly
described as Isuzu ElI van, 1976 Model that he purchased in March 1987. As owner thereoI,
petitioner says he has been in possession, enjoyment and utilization oI the said motor vehicle
until his older brother, Tan Ban ong, the private respondent, took it Irom him. Petitioner relies
principally on the Iact that the van is registered in his name under CertiIicate oI Registration. e
claims in his testimony beIore the trial court that the said motor vehicle was purchased Irom
Balintawak Isuzu Motor Center Ior a price oI over P100, 000. 00; that he sent his brother to pay
Ior the van and the receipt Iro payment was placed in his name because it was his money that
was used to pay Ior the vehicle; that he allowed his brother to use the van because the latter was
working Ior his company, the CLT Industries; and that his brother later reIused to return the van
to him and appropriated the same Ior himselI. On the other hand, private respondent testiIied that
CLT Industries is a Iamily business that was placed in petitioner`s name because at that time he
was then leaving Ior the United Stated and petitioner remaining Filipino in the Iamily residing in
the Philippines. When the Iamily business needed a vehicle in 1987 Ior use in the deliver oI
machinery to its customers, he asked petitioner to look Ior a vehicle and gave him the amount oI
P5,000.00 to be deposited as down payment Ior the van, which would be available in about a
month. AIter a month, he himselI paid the whole price out oI a loan oI P140, 000.00 Irom his
Iriend Tan Pit Sin. Nevertheless, respondent allowed the registration oI the vehicle in
petitioner`s name. It was also their understanding that he would keep the van Ior himselI
because CLT Industries was not in a position to pay him. ence, Irom the time oI the purchase,
he had been in possession oI the vehicle including the original registration papers thereoI, but
allowing petitioner Irom time to time to use the van Ior deliveries oI machinery.
AIter hearing, the trial court Iound Ior the private respondent. Finding no merit in the
appeal, the Court oI Appeals aIIirmed the decision oI the trail court.

Issue. Whether or not the petitioner-appellant established prooI oI ownership over the subject
motor vehicle.

Held. A certiIicate oI registration oI a motor vehicle in one's name indeed creates a strong
presumption oI ownership. For all practical purposes, the person in whose Iavor it has been
issued is virtually the owner thereoI unless proved otherwise. In other words, such presumption
is rebuttable by competent prooI. The New Civil Code recognizes cases oI implied trust other
than those enumerated therein. Thus, although no speciIic provision could be cited to apply to
the parties herein, it is undeniable that an implied trust was created when the certiIicate oI
registration oI the motor vehicle was placed in the name oI the petitioner although the price
thereoI was not paid by him but by private respondent. The principle that a trustee who puts a
certiIicate oI registration in his name cannot repudiate the trust by relying on the registration is
one oI the well-known limitations upon a title. A trust, which derives its strength Irom the
conIidence one reposes on another especially between brothers, does not lose that character
simply because oI what appears in a legal document.
Even under the Torrens System oI land registration, this Court in some instances did
away with the irrevocability or indeIeasibility oI a certiIicate oI title to prevent injustice against
the rightIul owner oI the property.

EMILIA O'LACO VS. VALENTIN CO CO CIT, G.R. No. L-58010, March 31, 1993

Facts.
This Case involves halI-sisters each claiming ownership over a parcel oI land. While
petitioner Emilia O'Laco asserts that she merely leIt the certiIicate oI title covering the property
with private respondent O Lay Kia Ior saIekeeping, the latter who is the Iormer's older sister
insists that the title was in her possession because she and her husband bought the property Irom
their conjugal Iunds.
The trial court declared that there was no trust relation oI any sort between the sisters.
The Court oI Appeals ruled otherwise. ence, the instant petition Ior review on certiorari oI the
decision oI the appellate court together with its resolution denying reconsideration.

Issue.
Whether a resulting trust was intended by them in the acquisition oI the property;
Whether Prescription has set in.

Held.
By deIinition, trust relations between parties may either be express or implied. Express
trusts are those which are created by the direct and positive acts oI the parties, by some writing
or deed, or will, or by words evincing an intention to create a trust. Implied trusts are those
which, without being express, are deducible Irom the nature oI the transaction as matters oI
intent, or which are superinduced on the transaction by operation oI law as matters oI equity,
independently oI the particular intention oI the parties. Implied trusts may either be resulting or
constructive trusts, both coming into being by operation oI law. A resulting trust was indeed
intended by the parties under Art. 1448 oI the New Civil Code which states:
"Art. 1448. There is an implied trust when property is sold, and the legal estate is
granted to one party but the price is paid by another for the purpose of having the
beneficial interest of the property. The former is the trustee, while the latter is the
beneficiary . . ."
As diIIerentiated Irom constructive trusts, where the settled rule is that prescription may
supervene, in resulting trust, the rule oI imprescriptibility may apply Ior as long as the trustee has
not repudiated the trust. Once the resulting trust is repudiated, however, it is converted into a
constructive trust and is subject to prescription.
A resulting trust is repudiated iI the Iollowing requisites concur: (a) the trustee has
perIormed unequivocal acts oI repudiation amounting to an ouster oI the cestui qui trust; (b) such
positive acts oI repudiation have been made known to the cestui qui trust; and, (c) the evidence
thereon is clear and convincing.
In Tale v. Court of Appeals, the Court categorically ruled that an action Ior reconveyance
based on an implied or constructive trust must perIorce prescribe in ten (10) years, and not
otherwise, thereby modiIying previous decisions holding that the prescriptive period was Iour (4)
years.
Neither the registration oI the Oroquieta property in the name oI petitioner Emilia O'Laco
nor the issuance oI a new Torrens title in 1944 in her name in lieu oI the alleged loss oI the
original may be made the basis Ior the commencement oI the prescriptive period. For, the
issuance oI the Torrens title in the name oI Emilia O'Laco could not be considered adverse, much
less Iraudulent. Precisely, although the property was bought by respondent-spouses, the legal
title was placed in the name oI Emilia O'Laco. The transIer oI the Torrens title in her name was
only in consonance with the deed oI sale in her Iavor. Consequently, there was no cause Ior any
alarm on the part oI respondent-spouses. As late as 1959, or just beIore she got married, Emilia
continued to recognize the ownership oI respondent-spouses over the Oroquieta property.
Thus, until that point, respondent-spouses were not aware oI any act oI Emilia which
would convey to them the idea that she was repudiating the resulting trust. The second requisite
is thereIore absent. ence, prescription did not begin to run until the sale oI the Oroquieta
property, which was clearly an act oI repudiation. But immediately aIter Emilia sold the
Oroquieta property which is obviously a disavowal oI the resulting trust, respondent-spouses
instituted the present suit Ior breach oI trust. Correspondingly, laches cannot lie against them.
AIter all, so long as the trustee recognizes the trust, the beneIiciary may rely upon the
recognition, and ordinarily will not be in Iault Ior omitting to bring an action to enIorce his
rights. There is no running oI the prescriptive period iI the trustee expressly recognizes the
resulting trust. Since the complaint Ior breach oI trust was Iiled by respondent-spouses two (2)
months aIter acquiring knowledge oI the sale, the action thereIore has not yet prescribed.
WhereIore, the Petition Ior Review on Certiorari is denied. The Decision oI the Court oI
Appeals oI 9 April 1981, which reversed the trial court, is aIIirmed.
Costs against petitioners.