Documente Academic
Documente Profesional
Documente Cultură
A.
LAW
The first two of these articles relate to gambling contracts, while article 1305
treats of the nullity of contracts proceeding from a vicious or illicit consideration. Taking
all these provisions together, it must be apparent that the obligation to return money lost
at play has a decided affinity to contractual obligation; and the Court believes that it
could, without violence to the doctrines of the civil law, be held that such obligations is
an innominate quasi-contract.
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6.
SOURCES OF OBLIGATIONS
FACTS:
On November 23, 1906, Arturo Pelayo, a physician, filed a complaint against
Marcelo and Juana Abella. He alleged that on October 13, 1906 at night, Pelayo was
called to the house of the defendants to assist their daughter-in-law who was about to
give birth to a child. Unfortunately, the daughter-in-law died as a consequence of said
childbirth. Thus, the defendant refuses to pay. The defendants argue that their daughterin-law lived with her husband independently and in a separate house without any
relation, that her stay there was accidental and due to fortuitous event.
ISSUE:
Whether or not the detention of the alleged chicks valid and recognized under the
law?
Whether or not the defendants should be held liable for the fees demanded by
the plaintiff upon rendering medical assistance to the defendants daughter-in-law.
RULING:
No. The Court held that the rendering of medical assistance is one of the
obligations to which spouses are bound by mutual support, expressly determined by law
and readily demanded. Therefore, there was no obligation on the part of the in-laws but
rather on the part of the husband who is not a party.
RULING:
No, because ASJ Corporation must give due to the Evangelista Spouses in paying
the installment, thus, it must not delay the delivery of the chicks. Thus, under the law,
they are obliged to pay damages with each other for the breach of the obligation.
Therefore, in a contract of service, each party must be in good faith in the
performance of their obligation, thus when the petitioner had detained the hatched eggs
of the respondents spouses, it is an implication of putting prejudice to the business of the
spouses due to the delay of paying installment to the petitioner.
FACTS:
Quiamco has amicably settled with Davalan, Gabutero and Generoso for the crime
of robbery and that in return, the three had surrendered to Quiamco a motorcycle with its
registration. However, Atty. Ramas has sold to Gabutero the motorcycle in installment
but when the latter did not able to pay the installment, Davalon continued the payment
but when he became insolvent, he said that the motorcycle was taken by Quiamcos
men. However, after several years, the petitioner Ramas together with policemen took
the motorcycle without the respondents permit and shouted that the respondent
Quiamco is a thief of motorcycle. Respondent then filed an action for damages against
petitioner alleging that petitioner is liable for unlawful taking of the motorcycle and
utterance of a defamatory remark and filing a baseless complaint. Also, petitioners claim
that they should not be held liable for petitioners exercise of its right as sellermortgagee to recover the mortgaged motorcycle preliminary to the enforcement of its
right to foreclose on the mortgage in case of default.
ISSUE:
Whether or not the act of the petitioner is correct.
invited by Dr. Filart, who was herself a guest. Not long after, a Makati policeman
approached him and escorted him out of her party.
Ms. Lim admitted having asked respondent to leave the party but not under the
ignominious circumstances painted by Mr. Reyes, that she did the act politely and
discreetly. Mindful of the wish of the celebrant to keep the party intimate and exclusive,
she spoke to the respondent herself when she saw him by the buffet table with no other
guests in the immediate vicinity. She asked him to leave the party after he finished
eating. After she had turned to leave, the latter screamed and made a big scene.
Dr. Filart testified that she did not want the celebrant to think that she invited Mr.
Reyes to the party.
Respondent filed an action for actual, moral and/or exemplary damages and
attorneys fees. The lower court dismissed the complaint. On appeal, the Court of
Appeals reversed the ruling of the trial court, consequently imposing upon Hotel Nikko
moral and exemplary damages and attorneys fees. On motion for reconsideration, the
Court of Appeals affirmed its decision. Thus, this instant petition for review.
ISSUES:
Whether or not Ms. Ruby Lim is liable under Articles 19 and 21 of the Civil Code in
asking Mr. Reyes to leave the party as he was not invited by the celebrant thereof and
whether or not Hotel Nikko, as the employer of Ms. Lim, be solidarily liable with her.
RULING:
No. The petitioner being a lawyer must know the legal procedure for the recovery
of possession of the alleged mortgaged property in which said procedure must be
conducted through judicial action. Furthermore, the petitioner acted in malice and intent
to cause damage to the respondent when even without probable cause, he still instituted
an act against the law on mortgage.
RULING:
The Court found more credible the lower courts findings of facts. There was no
proof of motive on the part of Ms. Lim to humiliate Mr. Reyes and to expose him to
ridicule and shame. Mr. Reyes version of the story was unsupported, failing to present
any witness to back his story. Ms. Lim, not having abused her right to ask Mr. Reyes to
leave the party to which he was not invited, cannot be made liable for damages under
Articles 19 and 21 of the Civil Code. Necessarily, neither can her employer, Hotel Nikko,
be held liable as its liability springs from that of its employees.
When a right is exercised in a manner which does not conform with the norms
enshrined in Article 19 and results in damage to another, a legal wrong is thereby
committed for which the wrongdoer must be responsible. Article 21 states that any
person who willfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy shall compensate the latter for the damage.
Without proof of any ill-motive on her part, Ms. Lims act cannot amount to
abusive conduct.
The maxim Volenti Non Fit Injuria (self-inflicted injury) was upheld by the Court,
that is, to which a person assents is not esteemed in law as injury, that consent to injury
precludes the recovery of damages by one who has knowingly and voluntarily exposed
himself to danger.
Respondents Daniel spouses and Villanueva admitted that the immediate cause
of the accident was not the negligence of petitioner or the reckless driving of James
Daniel II, but the detachment of the steering wheel guide of the jeep.
LAW AS A SOURCE OF OBLIGATION
ST. MARYS ACADEMY, petitioner,
VS. WILLIAM CARPITANOS and LUCIA S. CARPITANOS, GUADA DANIEL, JAMES
DANIEL II, JAMES DANIEL, SR., and VIVENCIO VILLANUEVA, respondents
February 6, 2002
FACTS:
From February 13 to 20, 1995, defendant-appellant St. Marys Academy of Dipolog
City conducted an enrollment drive for the school year 1995-1996. As a student of St.
Marys Academy, Sherwin Carpitanos was part of the campaigning group. Accordingly,
Sherwin, along with other high school students were riding in a Mitsubishi jeep owned by
defendant Vivencio Villanueva on their way to Larayan Elementary School, Larayan,
Dapitan City. The jeep was driven by James Daniel II then 15 years old and a student of
the same school. Allegedly, the latter drove the jeep in a reckless manner and as a
result the jeep turned turtle. Sherwin Carpitanos died as a result of the injuries he
sustained from the accident.
The trial court ordered the defendants, St. Marys Academy principally liable and
the parents of James Daniel as subsidiarily liable for damages.
The Court of Appeals affirmed the decision of the trial court. The Court of Appeals
held petitioner St. Marys Academy liable for the death of Sherwin Carpitanos under
Articles 218 and 219 of the Family Code, pointing out that petitioner was negligent in
allowing a minor to drive and in not having a teacher accompany the minor students in
the jeep.
Hence, liability for the accident, whether caused by the negligence of the minor
driver or mechanical detachment of the steering wheel guide of the jeep, must be pinned
on the minors parents primarily. The negligence of petitioner St. Marys Academy was
only a remote cause of the accident. Between the remote cause and the injury, there
intervened the negligence of the minors parents or the detachment of the steering
wheel guide of the jeep. Considering that the negligence of the minor driver or the
detachment of the steering wheel guide of the jeep owned by respondent Villanueva was
an event over which petitioner St. Marys Academy had no control, and which was the
proximate cause of the accident, petitioner may not be held liable for the death resulting
from such accident.
SOURCES OF OBLIGATIONS
a. CONTRACTS
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ISSUE:
Whether or not the appellant St. Marys Academy is principally liable for damages
for the death of Sherwin.
RULING:
No. Under Article 219 of the Family Code, if the person under custody is a minor,
those exercising special parental authority are principally and solidarily liable for
damages caused by the acts or omissions of the unemancipated minor while under their
supervision, instruction, or custody.
However, for petitioner to be liable, there must be a finding that the act or
omission considered as negligent was the proximate cause of the injury caused because
the negligence must have a causal connection to the accident.
FACTS:
TSPI Corporation entered into a Collective Bargaining Agreement with the
corporation Union for the increase of salary for the latters members for the year 2000 to
2002 starting from January 2000. thus, the increased in salary was materialized on
January 1, 2000. However, on October 6, 2000, the Regional Tripartite Wage and
production Board raised daily minimum wage from P 223.50 to P 250.00 starting
November 1, 2000. Conformably, the wages of the 17 probationary employees were
increased to P250.00 and became regular employees therefore receiving another 10%
increase in salary. In January 2001, TSPIC implemented the new wage rates as mandated
by the CBA. As a result, the nine employees who were senior to the 17 recently
regularized employees, received less wages. On January 19, 2001, TSPICs HRD notified
the 24 employees who are private respondents, that due to an error in the automated
payroll system, they were overpaid and the overpayment would be deducted from their
salaries starting February 2001. The Union on the other hand, asserted that there was no
error and the deduction of the alleged overpayment constituted diminution of pay.
ISSUE:
valid?
Was the refusal of the university to allow Regino to take the final examination
RULING:
ISSUE:
Union.
RULING:
Yes, because it is considered that Collective Bargaining Agreement entered into
by unions and their employers are binding upon the parties and be acted in strict
compliance therewith. Thus, the CBA in this case is the law between the employers and
their employees.
Therefore, there was no overpayment when there was an increase of salary for
the members of the union simultaneous with the increasing of minimum wage for
workers in the National Capital Region. The CBA should be followed thus, the senior
employees who were first promoted as regular employees shall be entitled for the
increase in their salaries and the same with lower rank workers.
No, the Supreme Court declared that the act of PCST was not valid, though, it can
impose its administrative policies, necessarily, the amount of tickets or payment shall be
included or expressed in the student handbooks given to every student before the start
of the regular classes of the semester. In this case, the fund raising project was not
included in the activities to be undertaken by the university during the semester. The
petitioner is entitled for damages due to her traumatic experience on the acts of the
university causing her to stop studying sand later transfer to another school.
FACTS:
Petitioner Kristine Regino was a poor student enrolled at the Pangasinan College
of Science and Technology. Thus, a fund raising project pertaining to a dance party was
organized by PCST, requiring all its students to purchase two tickets in consideration as a
prerequisite for the final exam.
20 August 2004
The defendants filed a motion to dismiss, claiming that the compliant states no
cause of action against them based on quasi-delicts, as the said rule does not cover
academic institutions. The trial court denied the motion to dismiss. Their motion for
reconsideration was likewise dismissed, and was affirmed by the appellate court. Hence,
the case was forwarded to the Supreme Court.
ISSUE:
Whether or not PSBA is liable for the death of the student.
RULING:
Because the circumstances of the present case evince a contractual relation
between the PSBA and Carlitos Bautista, the rules on quasi-delict do not really govern. A
perusal of Article 2176 shows that obligations arising from quasi-delicts or tort, also
known as extra-contractual obligations, arise only between parties not otherwise bound
by contract, whether express or implied. However, this impression has not prevented
this Court from determining the existence of a tort even when there obtains a contract.
Article 2180, in conjunction with Article 2176 of the Civil Code, establishes the
rule in in loco parentis. Article 2180 provides that the damage should have been caused
or inflicted by pupils or students of the educational institution sought to be held liable for
the acts of its pupils or students while in its custody. However, this material situation
does not exist in the present case for, as earlier indicated, the assailants of Carlitos were
not students of the PSBA, for whose acts the school could be made liable. But it does not
necessarily follow that PSBA is absolved form liability.
When an academic institution accepts students for enrollment, there is
established a contract between them, resulting in bilateral obligations which both parties
is bound to comply with. For its part, the school undertakes to provide the student with
an education that would presumably suffice to equip him with the necessary tools and
skills to pursue higher education or a profession. This includes ensuring the safety of the
students while in the school premises. On the other hand, the student covenants to
abide by the school's academic requirements and observe its rules and regulations.
Failing on its contractual and implied duty to ensure the safety of their student,
PSBA is therefore held liable for his death.
Petition denied.
FACTS:
The respondent, La Ville Commercial Corporation, is the registered owner of a
parcel of land covered by Transfer Certificate of Title (TCT) No. 174250 of the Registry of
Deeds of Makati City together with the commercial building thereon situated at the
corner of Kalayaan and Neptune Streets in Makati City. On March 17, 1993, it entered
into a Contract of Lease with petitioner Cosmo Entertainment Management, Inc. over the
subject property for a period of seven years with a monthly rental of P250 per square
meter of the floor area of the building and a security deposit equivalent to three monthly
rentals in the amount of P447,000 to guarantee the faithful compliance of the terms and
conditions of the lease agreement. Upon execution of the contract, the petitioner took
possession of the subject property.
The petitioner, however, suffered business reverses and was constrained to stop
operations in September 1996.
Thereafter, the petitioner defaulted in its rental
payments. Consequently, on February 1, 1997, the respondent made a demand on the
petitioner to vacate the premises as well as to pay the accrued rentals plus interests
which, as of January 31, 1997, amounted to P740,478.91. In reply to the demand, the
petitioner averred that its unpaid rentals amounted to P698,500 only and since it made a
security deposit of P419,100 with the respondent, the said amount should be applied to
the unpaid rentals; hence, the outstanding accounts payable would only be P279,400.
The respondent requested that the interest charges be waived and it be given time to
find a solution to its financial problems.
After negotiations between the parties failed, the respondent, on May 27, 1997,
reiterated its demand on the petitioner to pay the unpaid rentals as well as to vacate and
surrender the premises to the respondent. When the petitioner refused to comply with
its demand, the respondent filed with the Metropolitan Trial Court (MeTC) of Makati City.
The petitioner, in its answer to the complaint, raised the defense that, under the
contract, it had the right to sublease the premises upon prior written consent by the
respondent and payment of transfer fees. However, the respondent, without any
justifiable reason, refused to allow the petitioner to sublease the premises.
After due proceedings, the MeTC rendered judgment in favor of the respondent.
ISSUE:
Whether or not the contention of the petitioner is tenable.
RULING:
While petitioner pleads that a liberal, not literal, interpretation of the rules should
be our policy guidance, nevertheless procedural rules are not to be disdained as mere
technicalities. They may not be ignored to suit the convenience of a party. Adjective law
ensures the effective enforcement of substantive rights through the orderly and speedy
administration of justice. Rules are not intended to hamper litigants or complicate
litigation. But they help provide for a vital system of justice where suitors may be heard
in the correct form and manner, at the prescribed time in a peaceful though adversarial
confrontation before a judge whose authority litigants acknowledge. Public order and our
system of justice are well served by a conscientious observance of the rules of
procedure.
In any case, the Court is convinced that the findings and conclusions of the court
a quo and the RTC are in order. These courts uniformly found that, under the terms of
the contract of lease, the respondent, as the owner-lessor of the premises, had reserved
its right to approve the sublease of the same. The petitioner, having voluntarily given its
consent thereto, was bound by this stipulation. And, having failed to pay the monthly
rentals, the petitioner is deemed to have violated the terms of the contract, warranting
its ejectment from the leased premises. The Court finds no cogent reason to depart from
this factual disquisition of the courts below in view of the rule that findings of facts of the
trial courts are, as a general rule, binding on this Court. The petition is DENIED.
CONTRACT AS A SOURCE OF OBLIGATION
AYALA CORPORATION
VS. ROSA DIANA REALTY
346 SCRA 633
FACTS:
In April 1976, appellant-petitioner entered into a transaction with Manuel Sy and
Sy Ka Kieng where former sold a lot in Salcedo Village in Makati. The deed of sale had
some encumbrances contained in the Special Conditions of Sale (SCS) and Deed of
Restrictions (DR), which should be followed by the vendees. The stipulations in the SCS
are:
The trial court ruled in favor of the respondent and thus, Rosa Diana was able to
complete the construction of The Peak. Undeterred, Ayala filed before the Register of
Deeds (RD) of Makati a cause of annotation lis pendens. RD refused to grant Ayala such
registration for in the lower court; the case is of personal action for a specific
performance and/or rescission. However, the Land Registration Authority (LRA) reversed
RDs ruling. The appellate court upheld the RDs ruling stating that the case before the
trial court is a personal action for the cause of action arises from the alleged violation of
the DR. The trial court sustained the respondents point saying that Ayala was guilty of
abandonment and/or estoppels due to its failure to enforce the terms of the DR and SCS
against Sy and Kieng. Ayala discriminately chose which obligor would be made to follow
certain conditions, which is not fair and legal. On appeal, the CA affirmed the lower
courts ruling. Hence, this petition.
ISSUE:
Whether or not Rosa Diana committed a breach of contract.
RULING:
Yes, the Supreme Court ruled that Rosa Diana committed a breach of contract by
submitting a building plan to Ayala complying with the DR and submitting a different
building plan to the building administrator of Makati, which did not comply with the
stipulations in the DR.
Contractual Obligations between parties have the force of law between them and
absent any allegation that the same are contrary to law, morals, good customs, public
order or public policy, they must complied with in good faith.
Thus, the assailed decision of the Court of Appeals is reversed and set aside.
2) a building proposal must be submitted to Ayala which must be in accordance with the
DR,
3) the construction of the building must be completed on or before 1979, and
4) that there will be no resale of the lot.
The DR specified the limits in height and floor area of the building to be
constructed. However, Sy and Kieng, failed to build a building but nonetheless with the
permission of Ayala, the vendees sold the said lot to the respondent, Rosa Diana Realty.
Respondent Company agreed to abode by the SCS and the DR stipulations. Prior to the
construction, Rosa Diana submitted a building plan to Ayala complying with the DR but it
also passed a different building plan to the building administrator of Makati, which did
not comply with the stipulations in the DR. While the building, The Peak, was being
constructed, Ayala filed a case praying that: 1) Rosa Diana, be compelled to comply with
the DR and build the building in accordance with the building plan submitted to Ayala; or
2) on the alternative, the rescission of the deed of sale.
Bricktown Development Corporation, represented by its President and copetitioner Mariano Z. Velarde, executed two Contracts to Sell in favor of Amor Tierra
Development Corporation, represented in these acts by its Vice-President, Moises G.
Petilla, covering a total of 96 residential lots at the Multinational Village Subdivision, La
Huerta, Paraaque, Metro Manila.
The total price of P21,639,875.00 was stipulated to be paid by private respondent
in such amounts and maturity dates, as follows: P2,200,000.00 on 31 March 1981;
P3,209,968.75 on 30 June 1981; P4,729,906.25 on 31 December 1981; and the balance
of P11,500,000.00 to be paid by means of an assumption by private respondent of
petitioner corporation's mortgage liability to the Philippine Savings Bank or, alternately,
to be made payable in cash. On date, March 31, 1981, the parties executed a
Supplemental Agreement, providing that private respondent would additionally pay to
petitioner corporation the amounts of P55,364.68, or 21% interest on the balance of
down payment for the period from 31 March to 30 June 1981, and of P390,369.37
representing interest paid by petitioner corporation to the Philippine Savings Bank in
updating the bank loan for the period from 01 February to 31 March 1981.
Private respondent was only able to pay petitioner corporation the sum of
P1,334,443.21. However, the parties continued to negotiate for a possible modification of
their agreement, but nothing conclusive happened.
And on October 12, 1981,
petitioners counsel sent private respondent a Notice of Cancellation of Contract
because of the latters failure to pay the agreed amount.
Several months later, private respondents counsel, demanded the refund of
private respondent's various payments to petitioner corporation, allegedly "amounting to
P2,455,497.71," with interest within fifteen days from receipt of said letter, or, in lieu of a
cash payment, to assign to private respondent an equivalent number of unencumbered
lots at the same price fixed in the contracts. When the demand was not heeded, Amor
Tierra filed an action with the court a quo which rendered a decion in its favor. The
decision of the lower court was affirmed in toto by the Court of Appeals. Hence, this
petition.
ISSUE:
Whether or not the contract was properly rescinded.
Whether or not Bricktown properly forfeited the payments of Amor Tierra.
RULING:
The contract between Bricktown and Amor Tierra was validly rescinded because
of the failure of the latter to pay the agreed amounts stipulated in the contract on the
proper date even after the sixty-days grace period. Furthermore, the records showed
that private respondent corporation paid less than the amount agreed upon. The
Supreme Court also added that such cancellation must be respected. It may also be
noteworthy to add that in a contract to sell, the non-payment of the purchase price can
prevent the obligation to convey title from acquiring any obligatory force.
On the second issue, the Supreme Court ruled that since the private respondent
did not actually possessed the property under the contract, the petitioner is then ordered
to return to private respondent the amount remitted. However, to adjudge any interest
payment by petitioners on the amount to be thus refunded, private respondent should
not be allowed to totally free itself from its own breach.
deducing the interest due from third to sixth installments, inclusive. From the amount of
P7,050,000.00 due to be returned to the petitioner, respondents deducted P924,000.00
as interest and P220,000.00 as rent for the period from February 15 to March 15, 1991,
returning to the petitioner the amount of P5,906,000.00 only.
2.
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4.
5.
After trial, the lower court rendered judgment stating that the petitioner has no
cause of action to demand the return of the balance of the deposits in the amount
P140,000.00 and the respondents have the legal right to demand accrued interest on the
unpaid installments in the amount of P924,00.00. The Court of Appeals affirmed the
decision of the trial court. Hence, this petition.
ISSUE:
Whether or not the petitioner is entitled to demand the balance of the deposits in
the amount of P140,000.00 and to the return of the amount of P924,000.00.
RULING:
The Supreme Court held that the petitioner failed to prove his first cause of action
that the damages to the leased property amounted to more than P60,000.00. In
contrast, respondents were able to prove their counterclaim that the damage to the
leased property amounted to P338,732.50, as testified by their witness who is an
experienced contractor. The trial court did not hold petitioner liable for the whole
amount of P384,732.50, but only for the amount of P200,000.00.
On the other hand, the Supreme Court held that both lower and appellate court
failed to consider paragraph 9 contained in the same memorandum of agreement
entered into by the parties. Said paragraphs provides in very clear terms that when the
owner exercise their option to forfeit the down payment, they shall return to the buyer
any amount paid by the buyer in excess of the down payment with no obligation to pay
interest thereon. The private respondents withholding of the amount corresponding to
the interest violated the specific and clear stipulation in paragraph 9 of the said
memorandum. The parties are bound by their agreement.
Hence, the decision of the Court of Appeals is modified in that private respondent
is ordered to return to the petitioner the amount of P924,000.00 representing the
accrued interest for the unpaid installments and the decision appealed is affirmed in all
other respects.
FACTS:
The respondent Primetown Property Corporation entered into contract weith the
petitioner Titan-Ikeda Construction Corporation for the structural works of a 32-storey
prime tower. After the construction of the tower, respondent again awarded to the
petitioner the amount of P 130,000,000.00 for the towers architectural design and
structure. Howevere, in 1994, the respondent entered inot a contract of sale of the tower
in favor of the petitioner in a manner called full-swapping. Since the respondent had
allegedly constructed almost one third of the project as weel as selling some units to
third persons unknown to the petitioner. Integrated Inc. took over the project, thus the
petitioner is demanding for the return of its advanced payment in the amount of P2,
000,000.00 as weel as the keys of the unit.
ISSUE:
RULING:
No, because in a contract necessarily that there is a meeting of the minds of the
parties in which this will be the binding law upon them. Thus, in a reciprocal obligation.
Both parties are obliged to perform their obligation simultaneously and in good faith. In
this case, petitioner, Titan-Ikeda can not recover damages because it was found out
there was no solutio indebiti or mistake in payment in this case since the latter is just
entitled to the actual services it rendered to the respondent and thus it is ordered to
return the condominium units to the respondent.
QUASI-CONTRACT AS A SOURCE OF OBLIGATION
a. QUASI CONTRACTS
1.
FACTS:
Petitioner PADCOM CONDOMINIUM CORPORATION (PADCOM) bought a land from
Tierra Development Corporation with terms and conditions among which is that the
transferee and its successor-in-interest must become members of an Association for
realty owners and long-term lessees at Ortigas Center. The Ortigas Center Association
(OCA) which was subsequently formed levies membership dues of P2,700.00 per month
to all members. Petitioner refused to pay the membership dues on the ground that it did
not become automatic member of the Association when it bought the land. Herein
respondent OCA filed a civil case for recovery of the amounts due, which was dismissed
by the Regional Trial Court and reversed on appeal. Petitioner PADCOM appealed for
review on certiorari at the Supreme Court.
ISSUE:
Whether or not petitioner PADCOM can be compelled to become a member of the
OCA and thus pay the membership dues based on the condition of the Deed of Sale.
RULING:
PADCOM became automatically a member of the OCA by virtue of the conditions
of the Deed of Sale attached to its Title of the property. By voluntarily buying the land
with the conditions, it subscribed to such conditions which gave rise to a quasi-contract
between it and the OCA. Therefore, it could not avoid payment of the membership dues
without violating the underlying principles of quasi-contract which provides that certain
lawful, unilateral, and voluntary act gives rise to a juridical relation between the parties
to the end that no one shall be unjustly enriched of benefited at the expense of others.
Petition denied for lack of merit.
between petitioner and respondent Gerent does not require petitioner to disclose to
Gerent any price increase in the main contract. The non-disclosure by petitioner of the
price increase cannot constitute fraud or breach of any obligation on the part of
petitioner.
Moreover, the record shows that the P139,720.30 representing final and full
payment of the subcontract price was paid by petitioner to respondent Gerent based on
the statement of account Gerent itself prepared and submitted to petitioner.
the services of herein plaintiff-appellee, Benjamin Pineda doing business under the name
and style "Pioneer Iron Works," to carry out repairs, fabrication and installation of
necessary parts in said vessels in order to make them seaworthy and in good working
operation. Accordingly, repairs on the vessels were made. Labor and materials supplied
in connection therewith, amounted to P84,522.70, P18,141.75 of which was advanced by
Interocean, thereby leaving a balance of P62,095.95. For this balance, Interocean issued
three checks and the third one for P 17,377.57. When these checks were however
presented to the drawee, Peoples Bank and Trust Company, they were dishonored as
defendant Interocean stopped payment thereon.
Meanwhile and by reason of the inability of SIP and/or Bacong to pay their
mortgage indebtedness which was past due since 1964, the mortgagee Peoples Bank
and Trust Company threatened to foreclose the mortgage on said vessels. In order to
avoid the inconvenience and expense of imminent foreclosure proceedings, SIP and/or
Bacong sold said vessels to Peoples Bank by way of dacion en pago.
On October 1, 1968, plaintiff instituted the present action (Civil Case No. 74379)
before the Court of First Instance of Manila, seeking to recover from SIP, GACET,
Interocean and the Peoples Bank and 'Trust Company the principal sum of P62,095.92
with interests thereon from the respective dates of each repair order until the same is
fully paid, which amount was allegedly the total unpaid balance of the cost of repairs,
fabrication and installation of necessary parts carried out by the said plaintiff on the a
forenamed vessels.
Answering the complaint, defendants Peoples Bank and Trust Co., now Bank of P.I.
and Southern Industrial Projects, Inc. (SIP) alleged that the abovementioned claim is the
personal responsibility of Interocean Shipping Corporation and/or Gacet, Inc. and deny
liability thereof Defendant Bacong Shipping Company, S.A.
The trial court rendered a decision dismissing the compliant against defendants
Interocean Shipping Corporation and Gacet, Inc.
Defendants Bank of P.I. and Southern Industrial Projects, Inc. appealed to the
Court of Appeals but the latter, finding the aforequoted decision to be in accordance with
law and the evidence, affirmed the same.
ISSUE:
Whether or not People's Bank, now Bank of P.I. being the purchaser of said
vessels, is jointly and severally liable for the outstanding balance of said repairs,
admittedly a lien on the properties in question.
RULING:
There is no question that at the time subject obligation was incurred, defendant
Southern industrial Projects, Inc. owned the vessels although mortgaged to People's Bank
and Trust Company. Hence, the former as owner is liable for the costs of repairs made on
the vessels. On the other hand, Interocean Shipping Corporation and S.A. Gacet
undeniably mere agents of the owner, a disclosed principal, cannot be held liable for
repairs made on the vessels to keep them in good running condition in order to earn
revenue, there being no showing that said agents exceeded their authority.
In view of the foregoing facts, it was aptly stated by the trial court and affirmed
by the Court of Appeals that when the parties executed the deed of "Confirmation of
Obligation" they really intended to confirm and acknowledge the existing obligations for
the purpose of the buyer assuming liability therefore and charging them to the seller
after proper accounting, verification and set offs have been made. Indeed, there is merit
in the trial court's view that if there was no intention on the part of People's Bank (now
Bank of P.I.) to assume responsibility y for these obligations at the time of the sale of the
vessels, there is no sense in executing said Deed of Confirmation together with the
deeds of sale and the stipulations there under would be pointless. Finally, it is
indisputable that the repairs made on the vessels ultimately redounded to the benefit of
the new owner for without said repairs, those vessels would not be seaworthy. Under
Art. 2142 of the Civil Code, such acts "give rise to the juridical relation of quasi-contract
to the end that no one shall be unjustly enriched or benefited at the expense of another."
On 29, June 1984, Atty. Rolando Salonga sent to respondent spouses a Notice of
Notarial Sale stating that upon request of State and by virtue of the pledge agreement,
he would sell at public auction the shares of stock pledged to State. This prompted
respondents to file a case before the Regional Trial Court of Quezon City alleging that the
intended foreclosure sale was illegal because from 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 of Jose and Marcelino Aquino,
which had not been secured by the pledge. It was further alleged that their failure to
pay their loan was excused because the Petitioner State itself had prevented the
satisfaction of the obligation.
On January 29, 1985, the trial court rendered a decision in favor of the plaintiff
ordering State to immediately release the pledge and to deliver to respondents the share
of stock upon payment of the loan. The CA affirmed in toto the decision of the trial court.
ISSUES:
Whether or not the phrase upon payment in the trial courts decision means
upon payment of spouses loan in the principal amount of P110,000.00 alone without
interest, penalties and other charges.
Whether or not the conditions to be complied with by the debtor desirous of being
released from his obligation in cases where the creditor unjustly refuses to accept
payment have been met by the spouses Aquino.
RULING:
Anent the 1st issue, NO. The phrase upon payment as held by the Supreme
Court means upon payment of the amount of P110,000.000 plus seventeen percent
(17%) per annum regular interest computed from the time of maturity of the plaintiffs
loan and until full payment of such principal and interest to defendants. For respondent
spouses to continue in possession of the principal of the loan amounting to P110,000.00
and to continue to use the same after maturity of the loan without payment of regular or
monetary interest, would constitute unjust enrichment on the part of the respondent
spouses at the expense of petitioner State even though the spouses had not been guilty
of mora.
With respect to the 2nd issue, NO. The conditions had not been complied with.
Article 1256 of the civil code states that: If the creditor to whom tender of payment has
been made refuses without just cause to accept it, the debtor shall be released from
responsibility by consignation of the thing or sum due. Where the creditor unjustly
refuses to accept payment, the debtor desirous of being released from his obligation
must comply with two (2) conditions, viz: (a) tender of payment; and (b) consignation of
the sum due. Tender of payment must be accompanied or followed by consignation in
order that the effects of payment may be produced. Thus, in Llamas v. Abaya, the
Supreme Court stressed that a written tender of payment alone, without consignation in
court of the sum due, does not suspend the accruing of regular or monetary interest. In
the instant case, respondent spouses Aquino, while they are properly regarded as having
made a written tender of payment to petitioner state, failed to consign in court the
amount due at the time of the maturity of the 2 nd Account No. It follows that their
obligation to pay principal-cum-regular or monetary interest under the terms and
conditions of the said Account was not extinguished by such tender of payment alone.
prosecution failed to do so. Since it is not included, four counts of simple rape should be
undertaken. The penalty imposed then should be reclusion perpetua. The appellate court
also correctly affirmed the award by the trial court of P200,000.00 for moral damages.
Moral damages are automatically granted to rape victim. However, the award of civil
indemnity is reduced to P200,000.00 in the amount of P50,000.00 for each count of
simple rape is automatically granted.
SOURCES OF OBLIGATIONS:
D.
DELICTS
1.
2.
3.
4.
5.
6.
7.
8.
Whether or not the trial court is correct in awarding the damages to the heirs of
the victim.
RULING:
The Court finds no reason to reverse the ruling of the court a quo insofar as the
crimes were committed. Anent the civil indemnity award, this Court finds the amount of
P50,000.00 as death indemnity proper, following prevailing jurisprudence and in line with
controlling policy. Award of civil indemnity may be granted without any need of proof
other than the death of the victim.
=
=
35.33 x 84,825.00
P2,996,867.20
Based on the foregoing computation, the award of the trial court with regard to
lost income is thus modified accordingly.
The victims heirs are likewise entitled to moral damages, pegged at P50,000.00
by controlling case law, taking into consideration the pain and anguish of the victims
family brought about by his death. However, the award of P200,000.00 as burial and
other expenses incurred in connection with the death of the victim must be deleted. The
records are bereft of any receipt or voucher to justify the trial courts award of burial and
other expenses incurred in connection with the victims death.
The trial court was correct in awarding damages for loss of earning capacity
despite the non-availability of documentary evidence.
Damages representing net
earning capacity have been awarded by the Court based on testimony in several cases.
However, the amount of the trial courts award needs to be recomputed and modified
accordingly.
FACTS:
On November 20, 1996 at around 7:00 in the evening, Vicente Ganongan Jr. and
Roderick Litorco went to their friends boarding house on Honeymoon Road, Baguio City.
Thereat, Vicente Ganongan, Roderick Litorco, Regie Daodaoan, Rex Tabanganay, Jeffrey
Alimani and Florencio Dagson agreed to drink gin in Sangatan Store. After two (2) hours,
the group decided to go home. They went down Honeymoon road towards Rimando road
to get a taxi for Litorco. Upon noticing that Litorco could not carry himself, they decided
to bring him to their boarding house. Dagson assisted Litorco and walked ahead of
Ganongan, Daodaoan, Tabanganay and Alimani. As the latter four neared the Garcia
store along Honeymoon road, Carlos Garcia, with three companions, told them to stop,
pointing a gun at them. Hearing the commotion, Dagson who was walking about 5 to 7
meters ahead with Litorco rushed to the boarding house and sought help. When Dagson
came back, he was with Oliver Alimani, Arman Alimani and Dexter Daggay. When they
arrived, they saw Garcia pointing a gun at the group of Ganongan, Daodaoan,
Tabanganay and Jeffrey Alimani. Oliver Alimani approached Garcia who in turn pointed
his gun at Oliver and identified himself as barangay kagawad. At this time, Carlos
Doctolero Sr. was standing at the edge of Honeymoon road. He then put his arm over
Daodaoans shoulder. Daoadaoan shoved Doctoleros hand and retreated. Doctolero
stepped back and fired twice at Daodaoan but missed. Tabanganay asked Daodaoan if
he was hit and upon answering that he was not, Tabanganay shouted at his friends to
run. When Ganongan turned around to run, Doctolero fired at him, hitting him twice.
Oliver Alimani came to Ganongans aid when the latter yelled that he was hit.
Thereafter, they hailed a taxi and rushed Ganongan to Saint Louis University Hospital
where he expired.
In determining the amount of lost income, the following must be taken into
account: (1) the number of years for which the victim would otherwise have lived; and
(2) the rate of the loss sustained by the heirs of the deceased. The second variable is
computed by multiplying the life expectancy by the net earnings of the deceased,
meaning total earnings less expenses necessary in the creation of such earnings or
income less living and other incidental expenses. Considering that there is no proof of
living expenses of the deceased, net earnings are computed at fifty percent (50%) of the
gross earnings. The formula used by this Court in computing loss of earning capacity is:
Net Earning Capacity = [2/3 x (80 age at time of death) x (gross annual income
reasonable and necessary living expenses)]
In this case, the Court notes that the victim was 27 years old at the time of his
death and his mother testified that as a driver of the Tamaraw FX taxi, he was earning
P650.00 a day. Hence, the damages payable for the loss of the victims earning capacity
is computed thus:
Gross Annual Earnings = P650 x 261 working days in a year
=
Net Earning Capacity
P169,650.00
accused to indemnify the heirs of Rebelyn Garcia, the sum of P75,000.00 damages, and
another sum of P20,000.00 for exemplary damages plus P6,425.00 as actual damages.
ISSUE:
Whether or not the accused was guilty of murder and the damages awarded to
the heirs were proper.
ISSUE:
Whether or not the court a quos award of civil liability is reasonable based on the
circumstances of the crime and whether circumstancial evidence is sufficient to warrant
a conviction.
RULING:
No. Since treachery was not proven to be resent in this case, the court deemed it
proper to convict the accused of the crime of homicide, instead of murder thus damages
were reduced to P112,413.40 representing funeral expenses, which were duly proven
and covered by receipts.
Expenses relating to the 9th day, 40th day and 1st year anniversaries cannot be
considered in the award of actual damages as these were incurred after a considerable
lapse of time from the burial of the victim. With respect to the award of moral damages,
the same is reduced to P50,000.00 in accordance with existing jurisprudence
RULING:
With regard to the civil indemnity, the trial court awarded only P75,000.00.
Current jurisprudence has fixed at P100,000.00 the civil indemnity in cases of rape with
homicide, which is fully justified and properly commensurate with the seriousness of that
special complex crime.
As regards to the sufficiency of circumstantial evidence to warrant conviction, the
Court held that the absence of direct evidence, however, does not preclude the
conviction of a person accused of the complex crime of rape with homicide.
Circumstantial evidence can be as potent as direct evidence to sustain a conviction
provided that there is a concurrence of all the requisites prescribed in Section 5, Rule
133 of the Revised Rules on Evidence, thus: Circumstantial Evidence, when sufficient.Circumstantial evidence is sufficient for conviction if: (a) There is more than one
circumstance; (b) The facts from which the inferences are derived are proven; and (c)
The combination of all the circumstances is such as to produce a conviction beyond a
reasonable doubt.
Likewise this Court has held that an accused can be convicted based on
circumstantial evidence if the circumstances proven constitute an unbroken chain which
leads to a fair and reasonable conclusion pointing to the accused, to the exclusion of all
others, as the guilty person.
Thus, the appealed decision convicting Rolly Abulencia of the crime of rape with
homicide and sentencing him to suffer the penalty of death, is affirmed with modification
insofar as the civil aspect is concerned. Appellant is thus ordered to pay the heirs of
Rebelyn Garcia P100,000.00 as civil indemnity; P50,000.00 as moral damages;
P25,000.00 as exemplary damages; and P6,425.00 as actual damages.
FACTS:
A cargo truck, driven by Domingo Pontino and owned by Cordova Ng Sun Kwan,
bumped a jeep on which Rogelio, a six-year old son of plaintiffs-appellants, was riding.
The boy sustained injuries which caused his death. As a result, Criminal Case No. 92944
for Homicide Through Reckless Imprudence was filed against Domingo Pontino.
Plaintiffs-appellants filed on July 27, 1969 in the said criminal case "A Reservation to File
Separate Civil Action."
On July 28, 1969, the plaintiffs-appellants filed a civil case for damages against
Domingo Pontino y Tacorda and Cordova Ng Sun Kwan.
Finding that the plaintiffs instituted the action "on the assumption that defendant
Pontino's negligence in the accident of May 10, 1969 constituted a quasi-delict," the trial
court stated that plaintiffs had already elected to treat the accident as a "crime" by
reserving in the criminal case their right to file a separate civil action. That being so, the
trial court decided to order the dismissal of the complaint against defendant Cordova Ng
Sun Kwan and to suspend the hearing of the case against Domingo Pontino until after the
criminal case for Homicide Through Reckless Imprudence is finally terminated.
ISSUE:
Whether or not the present action is based on quasi-delict under the Civil Code
and therefore could proceed independently of the criminal case for homicide thru
reckless imprudence.
RULING:
In cases of negligence, the injured party or his heirs has the choice between an
action to enforce the civil liability arising from crime under Article 100 of the Revised
Penal Code and an action for quasi-delict under Article 2176-2194 of the Civil Code.
If a party chooses the latter, he may hold the employer solidarily liable for the
negligent act of his employee, subject to the employer's defense of exercise of the
diligence of a good father of the family.
In the case at bar, the action filed by appellant was an action for damages based
on quasi-delict. The fact that appellants reserved their right in the criminal case to file
an independent civil action did not preclude them from choosing to file a civil action for
quasi-delict.
The appellant precisely made a reservation to file an independent civil action. In
fact, even without such a reservation, the Court allowed the injured party in the criminal
case which resulted in the acquittal of the accused to recover damages based on quasidelict.
It does not follow that a person who is not criminally liable is also free from civil
liability. While the guilt of the accused in a criminal prosecution must be established
Fourteen (14) days later, on 20 April 1976, the Acting City Fiscal of Batangas City
filed before the Court of First Instance of Batangas, Branch II, another information against
Manuel Opulencia, this time for theft of electric power under Article 308 in relation to
Article 309, paragraph (1), of the Revised Penal Code. Before he could be arraigned
thereon, Manuel Opulencia filed a Motion to Quash, dated 5 May 1976, alleging that he
had been previously acquitted of the offense charged in the second information and that
the filing thereof was violative of his constitutional right against double jeopardy. By
Order dated 16 August 1976, the respondent Judge granted the accused's Motion to
Quash and ordered the case dismissed.
ISSUES:
Whether or not Manuel Opulencia can be tried for violation of the Revised Penal
Code after acquittal from the violation of an ordinance due to prescription which were
based from the same act and whether or not he may still be held liable civilly.
RULING:
The Supreme Court held that the accused was placed in double jeopardy, hence,
could not be tried in the criminal case.
However, the civil liability aspects of this case are another matter. Because no
reservation of the right to file a separate civil action was made by the Batangas City
electric light system, the civil action for recovery of civil liability arising from the offense
charged was impliedly instituted with the criminal action both before the City Court of
Batangas City and the Court of First Instance of Batangas.
The extinction of criminal liability whether by prescription or by the bar of double
jeopardy does not carry with it the extinction of civil liability arising from the offense
charged.
In the present case, accused Manuel Opulencia freely admitted during the police
investigation having stolen electric current through the installation and use of
unauthorized electrical connections or devices. While the accused pleaded not guilty
before the City Court of Batangas City, he did not deny having appropriated electric
power. However, there is no evidence in the record as to the amount or value of the
electric power appropriated by Manuel Opulencia, the criminal informations having been
dismissed both by the City Court and by the Court of First Instance (from which
dismissals the Batangas City electric light system could not have appealed) before trial
could begin. Accordingly, the related civil action which has not been waived expressly or
impliedly, should be remanded to the Court of First Instance of Batangas City for
reception of evidence on the amount or value of the electric power appropriated and
converted by Manuel Opulencia and rendition of judgment conformably with such
evidence.
In the case at bar, the accuseds acquittal is based on reasonable doubt. The
decision of the trial court did not state in clear and equivocal terms that petitioner was
not recklessly imprudent or negligent. Hence, impliedly, the trial court acquitted him on
reasonable doubt. Since civil liability is not extinguished in criminal cases if the accused
acquittal is based on reasonable doubt, the decision of the Court of Appeals finding that
the defendant is civilly liable for his negligent and reckless act of driving his car which
was the proximate cause of the vehicular accident, and sentenced him to indemnify
plaintiff-appellants in the amount of P74,400.00 for the death of Ruben Nicolas.
Corollarily, the claim for civil liability survives notwithstanding the death of the accused,
if the same may also be predicted as one source of obligation other than delict.
Moreover, when a defendant dies before judgment becomes executory, 'there
cannot be any determination by final judgment whether or not the felony upon which the
civil action might arise exists,' for the simple reason that `there is no party defendant.'
The Rules of Court state that a judgment in a criminal case becomes final 'after the lapse
of the period for perfecting an appeal or when the sentence has been partially or totally
satisfied or served, or the defendant has expressly waived in writing his right to appeal.'
In addition, where the civil liability does not exist independently of the criminal
responsibility, the extinction of the latter by death, ipso facto extinguishes the former,
provided, of course, that death supervenes before final judgment. As in this case, the
right to institute a separate civil action is not reserved, the decision to be rendered must,
of necessity, cover 'both the criminal and the civil aspects of the case.' The accused
died before final judgment was rendered, thus, he is absolved of both his criminal and
civil liabilities based solely on delict or the crime committed.
Appeal dismissed.
SOURCES OF OBLIGATIONS
E.
QUASI-DELICTS
1.
2.
3.
4.
5.
6.
7.
8.
ISSUE:
Whether or not the death of the accused pending appeal of his conviction
extinguishes his civil liability.
RULING:
Yes, the death of the accused pending appeal of his conviction extinguishes his
civil liability because tire liability is based solely on the criminal act committed.
On May 3, 1936, there was a head-on collision between a taxi of the Malate Taxi
driven by Fontanilla and a carretela guided by Dimapilis. The carretela was overturned
and a passenger, 16-year-old boy Garcia, suffered injuries from which resulted to his
death. A criminal action was filed against Fontanilla, and he was convicted. The court in
the criminal case granted the petition to reserve the civil action against Barredo, the
proprietor of the Malate Taxi and the employer of Fontanilla, making him primarily and
directly responsible under culpa aquiliana. It was undisputed that Fontanillas negligence
was the cause of the accident as he was driving on the wrong side of the road at high
speed, and there was no showing that Barredo exercised the diligence of a good father of
a family.
Barredos theory of defense is that Fontanillas negligence being punishable by
the Revised Penal Code, that his liability as employer is only subsidiary liable but
Fontanilla was sued for civil liability, hence, Barredo claims that he can not be held liable.
ISSUE:
Whether or not complainants liability as employer of Fontanilla was only
subsidiary and not as primarily and directly responsible under Article 1903 of the Civil
Code.
RULING:
No, the Supreme Court ruled that complainants liability is not only subsidiary but
also primary liability. The Court affirmed the decision of the Court of Appeals which ruled
that the liability sought to be imposed upon Barredo in this action is not a civil obligation
arising from a felony, but an obligation imposed in Article 1903 of the Civil Code by
reason of his negligence in the selection or supervision of his servant or employee.
QUASI-DELICT OR CULPA AQUILIANA is a separate legal institution under the Civil
Code and is entirely distinct and independent from a delict or crime as punished under
the Revised Penal Code (RPC). In this jurisdiction, the same negligent act causing
damage may produce civil liability (subsidiary) arising from a crime under Art. 103 of the
RPC; or create an action for the quasi delict or culpa aquiliana (primary) and the parties
injured are free to choice which course to take.
In the instant case, the negligent act of Fontanilla produced two liabilities of
Barredo. First, a subsidiary one because of the civil liability of Fontanilla arising from the
latters criminal negligence; and second, Barredos primary and direct responsibility
arising from his presumed negligence as an employer in the selection of his employees
or their supervision, under Art. 1903 of the Civil Code.
The parties instituted an action for damages under Art. 1903 of the Civil Code.
Barredo was found guilty of negligence for carelessly employing Fontanilla, who had
been caught several times for violation of the Automobile Law and speeding violation.
Thus, the petition is denied. Barredo must indemnify plaintiffs under the provisions of
Art. 1903 of the Civil Code.
ISSUE:
Whether Safeguard Security can be held liable for the acts of its agent.
RULING:
Yes. The law presumes that any injury committed either by fault or omission of an
employee reflects the negligence of the employer. In quasi-delicts cases, in order to
overcome this presumption, the employer must prove that there was no negligence on
his part in the supervision of his employees.
It was declared that in the selection of employees and agents, employers are
required to examine them as to their qualifications, experience and service records.
Thus, due diligence on the supervision and operation of employees includes the
formulation of suitable rules and regulations for the guidance of employees and the
issuance of proper instructions intended for the protection of the public and persons with
whom the employer has relations through his employees. Thus, in this case, Safeguard
Security committed negligence in identifying the qualifications and ability of its agents.
RULING:
Under the Motor Vehicle law, it was declared that the registered owner of any
vehicle is primary land directly liable for any injury it incurs while it is being operated.
Thus, even the petitioner claimed that he was no longer the present owner of the car,
still the registry was under his name, thus it is presumed that he still possesses the car
and that the damages caused by the car be charge against him being the registered
owner. The primary function of Motor vehicle registration is to identify the owner so that
if any accident happens, or that any damage or injury is caused by the vehicle,
responsibility therefore can be fixed on a definite individual, the registered owner.
RULING:
Yes. The petitioner is liable for the injury suffered by Sunga. Under Article 1756 of
the New Civil Code, it provides that common carriers are presumed to have been at fault
or to have acted negligently unless they prove that they observed extraordinary
diligence as defined in Arts. 1733 and 1755 of the Code. This provision necessarily shifts
to the common carrier the burden of proof.
In this case, the law presumes that any injury suffered by a passenger of the jeep
is deemed to be due to the negligence of the driver. This is a case on Culpa Contractual
where there was pre-existing obligations and that the fault is incidental to the
performance of the obligation. Thus, it was clearly observed that the petitioner has
negligence in the conduct of his duty when he allowed Sunga to seat in the rear portion
of the jeep which is prone to accident.
QUASI-DELICT AS A SOURCE OF OBLIGATION
FACTS:
Private respondent Anselmo Olasiman, as captain, was maneuvering the ship MV
Miguela owned by respondent Gabisan Shipping lines, at the pier owned by petitioner
Ludo and Luym Corporation when it rammed the pile cluster damaging it and deforming
the cable wires wound around it.
In an action for recovery of damages filed by Petitioner, the Regional Trial Court
ruled against respondents for incompetence and negligence. In an appeal the Court of
Appeals reversed the lower courts decision, saying that the petitioners witness Naval
was incompetent to testify on the negligence of the crew and that petitioners evidence
did not positively identify that MV Miguela caused the damage.
Thus, petitioner filed this petition for review.
FACTS:
On May 10, 1992, at around 12:00 o'clock midnight, Eduardo Edem was driving a
"Luring Taxi" along Ortigas Avenue, near Rosario, Pasig, going towards Cainta. Prior to
the collision, the taxicab was parked along the right side of Ortigas Avenue, not far from
the Rosario Bridge, to unload a passenger. Thereafter, the driver executed a U-turn to
traverse the same road, going to the direction of EDSA. At this point, the Nissan
Pathfinder traveling along the same road going to the direction of Cainta collided with
the taxicab. The point of impact was so great that the taxicab was hit in the middle
portion and was pushed sideward, causing the driver to lose control of the vehicle. The
taxicab was then dragged into the nearby Question Tailoring Shop, thus, causing damage
to the said tailoring shop, and its driver, Eduardo Eden, sustained injuries as a result of
the incident.
Private respondent, as owner of the taxi, filed a damage suit against petitioner,
Thermochem Incorporated, as the owner of the Nissan Pathfinder, and its driver,
petitioner Jerome Castro.
ISSUE:
Whether or not the private respondents are responsible for the damage done to
the pier by the ship based on the doctrine of RES IPSA LOQUITOR.
After trial, the lower court adjudged petitioner Castro negligent and ordered
petitioners, jointly and severally, to pay private respondent actual, compensatory and
exemplary damages plus attorney's fees and costs of suit.
RULING:
The Supreme Court sustained the Regional Trial Court decision partly on the
ground that the incompetence of eyewitness Naval was not an assigned error at the
appellate court.
On appeal, the Court of Appeals affirmed the judgment of the court a quo. Hence,
this petition for review on certiorari.
The doctrine of RES IPSA LOQUITOR says that when the thing that causes the
damage is in the control and management of the respondent, and in the ordinary course
of things the accident does not happen if those who have the management use proper
care, it affords reasonable evidence, in the absence of explanation, that the accident
arose from want of care. The principle applies here. The MV Miguela was in the
exclusive control of respondent Olasiman, and aside from petitioners witness testimony
that the vessel rammed the pile cluster, respondent did not show persuasively other
possible causes of the damage.
Therefore, respondents were responsible for the damage.
granted and the decision of the Regional Trial Court reinstated.
QUASI-DELICT AS A SOURCE OF OBLIGATION
Petition
is
ISSUE:
RULING:
Yes. The Court held that the driver of the oncoming Nissan Pathfinder vehicle was
liable and the driver of the U-turning taxicab was contributorily liable.
From petitioner Castro's testimonial admissions, it is established that he was
driving at a speed faster than 50 kilometers per hour. But as he allegedly stepped on the
brake, it locked causing his Nissan Pathfinder to skid to the left and consequently hit the
taxicab. The sudden malfunction of the vehicle's brake system is the usual excuse of
drivers involved in collisions which are the result of speedy driving. Malfunction or loss
of brake is not a fortuitous event. The owner and his driver are presumed to know about
the conditions of the vehicle and is duty bound to take care thereof with the diligence of
a good father of the family. A mechanically defective vehicle should avoid the streets.
Moreover, the record shows that the Nissan Pathfinder was on the wrong lane
when the collision occurred. This was a disregard of traffic safety rules. The law
considers what would be reckless, blameworthy or negligent in a man of ordinary
diligence and prudence and determines liability by that.
As mentioned earlier, the driver of the taxi is contributorily liable. U-turns are not
generally advisable particularly on major streets. The driver of the taxi ought to have
known that vehicles coming from the Rosario bridge are on a downhill slope. Obviously,
there was lack of foresight on his part, making him contributorily liable.
Considering the contributory negligence of the driver of private respondent's taxi,
the award of P47,850.00, for the repair of the taxi, should be reduced in half. All other
awards for damages are deleted for lack of merit.
this, the defendant ran straight on until he was almost upon the horse. When the
defendant exposed the horse and rider to this danger he was negligent in the eye of the
law.
Conduct is said to be negligent when a prudent man in the position of the
tortfeasor would have foreseen that an effect harmful to another was sufficiently
probable to warrant his foregoing the conduct or guarding against its consequences.
Applying this test to the conduct of the defendant, it is clear that negligence is
established. A prudent man, laced in the position o the defendant, would have
recognized that the course which he was pursuing was fraught with risk, and would
therefore have foreseen harm to the horse and rider as a reasonable consequence of
that course. Under these circumstances the law imposed on the defendant the duty to
guard against the threatened harm.
The plaintiff on the other hand was guilty of antecedent negligence in planting
himself on the wrong side o the road. The negligent acts of the two arties were not
contemporaneous, since the negligence of the defendant succeeded the negligence of
the plaintiff by an appreciable interval. Under these circumstances, the law is that the
person who has the last fair chance to avoid the impending harm and fails to do is
chargeable wit the consequences, without reference to the prior negligence of the other
party.
In sum, though the plaintiff was guilty of negligence or being on the wrong side of
the bridge, the defendant was civilly liable as he had fair chance to avoid the accident.
On 3 February 1984, the spouses Lorenzo and Lorenza Francisco and Engineer
Bienvenido C. Mercado entered into a Contract of Development for the development into
a subdivision of several parcels of land in Pampanga.
ISSUE:
Whether or not the respondent incurred delay in not finishing the work in the
stipulated time.
RULING:
The Supreme Court finds no merit in petitioners claim that respondent incurred
delay in the performance of his obligation under the Contract. At that time, the law
authorized HSRC to grant extensions of time for completion of subdivision projects.
The law provides that delay may exist when the obligor fails to fulfill his obligation
within the time expressly stipulated. In this case, the HSRC extended the period for
respondent to finish the development work until 30 July 1987. Respondent did not incur
delay since the period granted him to fulfill his obligation had not expired at the time
respondent filed the action for rescission on 27 February 1987.
Moreover petitioners hampered and interfered with respondents development
work. Petitioners also stopped respondent from selling lots and collecting payments from
lot buyers, which was the primary source of development funds. In effect, petitioners
rendered respondent incapable, or at least made it difficult for him, to develop the
subdivision within the allotted period. In reciprocal obligations, neither party incurs in
delay if the other does not comply or is not ready to comply with what is incumbent upon
him. It is only when one of the parties fulfills his obligation that delay by the other
begins.
Respondents failure to submit the monthly report cannot serve as sufficient basis
for the cancellation of the Contract. The cancellation of a contract will not be permitted
for a slight or casual breach. Only a substantial and fundamental breach, which defeats
the very object of the parties in making the contract, will justify a cancellation. In the
instant case, the development work continued for more than two years despite the lack
of a monthly report.
"strong wind." But a strong wind in this case cannot be fortuitous, unforeseeable or
unavoidable. On the contrary, a strong wind should be present in places where windmills
are constructed, otherwise the windmills will not turn.
findings. The finding of the Trial Court as to the existence of fraud is final and cannot be
reviewed save only when the finding is clearly shown to be erroneous.
On appeal, the then Intermediate Appellate Court annulled and rescinded the
Assignment of Hereditary Rights. A motion for reconsideration was denied for lack of
merit.
Anent the 3rd issue, YES. It cannot be denied that a compromise agreement was
entered into by the parties in that case in order to end the suit already filed in court. The
same was approved by the court, cannot and should not be disturbed except for vices of
consent or forgery, it being the obvious purpose of such compromise agreement to
settle, once and for all, the claims of the parties, and bar all future disputes and
controversies thereon.
ISSUES:
Whether or not the CA erred in disregarding and ignoring the trial courts strong
and substantial findings of fact that no fraud, deception, gross misrepresentation or
undue influence attended the execution and signing of the Deed of Assignment of
Hereditary Rights.
Whether or not the Intermediate Appellate Court erred in disregarding the trial
courts strong and substantial findings of fact that no fraud, deception, gross
misrepresentation or undue influence attended the execution and signing of the deed of
Assignment.
Whether or not the Intermediate Appellate Court erred in disturbing and setting
aside the Compromise Agreement.
RULING:
Anent the 1st issue, YES. No fraud was employed by herein petitioner.
Felix Francisco could not be considered to have been deceived into signing the
subject deed of assignment. The kind of fraud that will vitiate a contract refers to those
insidious words or machinations resorted to by one of 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 influence on the consent of the victim. The will of the victim, in
effect, is maliciously vitiated by means of a false appearance of reality.
In the case at bench, manifestations of fraud are non-existent. Resultantly, the
Assignment of Hereditary Rights executed by Felix Francisco in favor of herein petitioner
is valid and effective.
Furthermore, the allegations of fraud, deception, gross
misrepresentation, or undue influence were not established by full, clear and convincing
evidence. The finding of the trial court as to its existence or non-existence is final and
cannot be reviewed save only when the finding id clearly shown to be erroneous.
Anent the 2nd issue, YES. The fraud that vitiates a contract refers to those
insidious words or machinations resorted to by one of the contracting parties to induce
the other to enter into a contract which without them he would not have agreed to. In
the case at bench, no such fraud was employed by herein petitioner. Clearly, Felix
Francisco executed the document voluntarily and freely basing it on the Trial Courts
of the contract, the balance to be purchased at open market and the price differential to
be charged against appellant. On October 22, 1976, since there was still no compliance,
appellee exercised its option under the contract and purchased the undelivered balance
from the open market at the prevailing price of P168.00 per 100 kilos, or a price
differential of P86.00 per 100 kilos, a net loss of P46,152.76 chargeable against
appellant.
The petitioner then filed a complaint against private respondent for breach of a
contract and for damages. The trial court held Oseraos liable for damages amounting to
P48,152.76. The Appellate Court ordered the dismissal of the case on appeal. Hence,
the instant petition for review on certiorari.
ISSUE:
Whether or not private respondent Oseraos is liable for damages arising from
fraud or bad faith in deliberately breaching the contract of sale entered into by the
parties.
RULING:
Yes. The private respondent is guilty of fraud in the performance of his obligation
under the sales contract whereunder he bound himself to deliver to petitioner 100 metric
tons of copra within twenty (20) days from March 8, 1976. However within the delivery
period, Oseraos delivered only 46,334 kilograms of copra to petitioner, leaving an
undelivered thus a balance of 53,666 kilograms. Petitioner made repeated demands
upon private respondent to comply with his contractual undertaking to deliver the
balance of 53,666 kilograms but private respondent elected to ignore the same.
In a letter dated October 6, 1976, petitioner made a final demand with a warning
that, should private respondent fail to complete delivery of the balance of 53,666
kilograms of copra, petitioner would purchase the balance at the open market and
charge the price differential to private respondent. Still private respondent failed to fulfill
his contractual obligation to deliver the remaining 53,666 kilograms of copra. On
October 22, 1976, since there was still no compliance by private respondent, petitioner
exercised its right under the contract and purchased 53,666 kilograms of copra, the
undelivered balance, at the open market at the then prevailing price of P168.00 per 100
kilograms, a price differential of P86.00 per 100 kilograms or a total price differential of
P46,152.76.
In general, fraud may be defined as the voluntary execution of a wrongful act, or
a wilfull omission, knowing and intending the effects which naturally and necessarily
arise from such act or omission; the fraud referred to in Article 1170 of the Civil Code of
the Philippines is the deliberate and intentional evasion of the normal fulfillment of
obligation; it is distinguished from negligence by the presence of deliberate intent, which
is lacking in the latter. The conduct of private respondent clearly manifests his
deliberate fraudulent intent to evade his contractual obligation for the price of copra had
in the meantime more than doubled from P82.00 to P168 per 100 kilograms.
Under Article 1170 of the Civil Code of the Philippines, those who in the
performance of their obligation are guilty of fraud, negligence, or delay, and those who in
any manner contravene the tenor thereof, are liable for damages. Pursuant to said
article, private respondent is liable for damages.
In case of fraud, bad faith, malice, or wanton attitude, the guilty party is liable for
all damages, which may be reasonably attributed to the non-performance of the
obligation. On account of private respondent's deliberate breach of his contractual
obligation, petitioner was compelled to buy the balance of 53,666 kilos of copra in the
open market at the then prevailing price of P168 per 100 kilograms thereby paying
P46,152.76 more than he would have paid had private respondent completed delivery of
the copra as agreed upon.
Thus, private respondent is liable to pay respondent the amount of P46,152.76 as
damages. Thus, petition granted. The trial court ruling reinstated.
BREACH OF OBLIGATIIONS: DEFAULT (Mora) (Art. 1169, CC)
TITAN-IKEDA CONSTRUCTION VS. PRIMETOWN PROPERTY
544 S 466
FACTS:
In 1992, respondent Primetown Property Group, Inc. awarded the contract
for the structural works of its 32-storey Makati Prime Tower (MPT) to petitioner TitanIkeda Construction and Development Corporation. In September 1995, respondent
engaged the services of Integratech, Inc. (ITI), an engineering consultancy firm, to
evaluate the progress of the project. In its report, ITI informed respondent that petitioner,
at that point, had only accomplished 31.89% of the project (or was 11 months and six
days behind schedule). Meanwhile, petitioner and respondent were discussing the
possibility of the latters take over of the projects supervision. Despite ongoing
negotiations, respondent did not obtain petitioners consent in hiring ITI as the projects
construction manager. Neither did it inform petitioner of ITIs September 7, 1995 report.
Subsequently, both parties agreed that Primetown will take over the project.
Petitioner then demanded for the payment due him in relation to its partial performance
of its obligation. For failure of Primetown to pay despite repeated demands, petitioner
filed a case for specific performance against Primetown. Meanwhile, Primetown
demanded reimbursement for the amount it spent in having the project completed.
ISSUE:
Whether or not Titan-Ikeda is responsible for the projects delay.
RULING:
It was found that because respondent modified the MPT's architectural design,
petitioner had to adjust the scope of work. Moreover, respondent belatedly informed
petitioner of those modifications. It also failed to deliver the concrete mix and rebars
according to schedule. For this reason, petitioner was not responsible for the project's
delay. Mora or delay is the failure to perform the obligation in due time because of dolo
(malice) or culpa (negligence). A debtor is deemed to have violated his obligation to the
creditor from the time the latter makes a demand. Once the creditor makes a demand,
the debtor incurs mora or delay. Respondent never sent petitioner a written demand
asking it to accelerate work on the project and reduce, if not eliminate, slippage. In view
of the foregoing, we hold that petitioner did not incur delay in the performance of its
obligation.
on the specified date and time which resulted to the delay in the construction of the
niche and consequently to the delay in the internment of petitioners wife. The delay
caused the inability of the petitioner to accede to the dying wishes of his wife that she be
buried on the 24th of the month. She was buried 2 and days later, after Christmas.
ISSUE:
Whether or not the respondent is liable for damages due to his non-performance
of his obligation to deliver the materials on the specified date and time.
RULING:
Yes, private respondent is liable for damages. Respondents contention in the
appellate court that he did not incur delay in the performance of his obligation to deliver
the thing sold to petitioner since the time of delivery was not indicated in the invoice
receipt covering the sale could not be sustained in view of the positive verbal
commitment of the respondents employee. It was no longer necessary to indicate the
time of delivery. Respondent was negligent and incurred delay in the performance of his
contractual obligations. Respondent had no right to manipulate petitioners timetable
and substitute it with his own.
Therefore, he is liable for moral damage for causing further anguish and pain, and
suffering to the family of petitioner especially during Christmas day, and for exemplary
damages for not performing his obligation under the business contract.
that assuming he owed petitioner a balance of P15,000.00, this should be offset by the
defects in the windmill which caused the structure to collapse after a strong wind hit
hteir place.
Tanguilig denied that the construction of a deep well was included in the
agreement to build the windmill sytem, for the contract price of P60,000.00 was solely
for the windmill assembly and its installation, exclusive of other incidental materials
needed for the project. Tanguilig also disowned any obligation to repair or reconstruct
the system and insisted that he delivered it in good and working condition to respondent
who accepted the same without protest. He also contended that the collapse was
attributable to a typhoon, a force majeure, which relieved him of any liability.
ISSUE:
Whether or not the petitioner is under obligation to reconstruct the windmill after
it collapsed
RULING:
The Supreme Court held that when the windmill failed to function properly, it
becomes incumbent upon the petitioner to institute the proper repairs in accordance
with the guaranty stated in the contract. Hence, respondent cannot be said to have
incurred in delay; instead it is the petitioner who should bear the expenses for the
reconstruction of the windmill. Thus, the Supreme Court ruled that respondent Herce, Jr.
should pay petitioner Tanguilig the balance of P15,000.00 and likewise ordered petitioner
Tanguilig to reconstruct subject defective windmill system, in accordance with the oneyear guaranty.
The court of origin which tried the suit for specific performance filed by private
respondent on account of the herein petitioners reluctance to abide by the covenant,
ruled in favor of the vendee while respondent court practically agreed with the trial court
except as to the amount to be paid to petitioners and the refund to private respondent
are concerned.
There is no dispute that the sum of P3,000.00 listed as first installment was
received by Juan Galicia, Sr. According to petitioners, of the P10,000.00 to be paid within
ten days from execution of the instrument, only P9,707.00 was tendered to, and received
by, them on numerous occasions from May 29, 1975, up to November 3, 1979.
Concerning private respondents assumption of the vendors obligation to the Philippine
Veterans Bank, the vendee paid only the sum of P6,926.41 while the difference of the
indebtedness came from Celerina Labuguin. Moreover, petitioners asserted that not a
single centavo of the P27,000.00 representing the remaining balance was paid to them.
Because of the apprehension that the heirs of Juan Galicia, Sr. are disavowing the
contract inked by their predecessor, private respondent filed the complaint for specific
performance.
ISSUE:
Whether or not private respondent correctly anchored on estopped or waiver by
acceptance of delayed payments.
RULING:
Both the trial and appellate courts were correct in sustaining the claim of private
respondent anchored on estopped or waiver by acceptance of delayed payments under
Article 1235 of the Civil Code in that:
When the obligee accepts the performance, knowing its incompleteness or irregularity,
and without expressing any protest or objection, the obligation is deemed fully complied
with.
considering that the heirs of Juan Galicia, Sr. accommodated private respondently by
accepting the latters delayed payments not only beyond the grace periods but also
during the pendency of the case for specific performance. Indeed, the right to rescind is
not absolute and will not be granted where there has been substantial compliance by
partial payments.
By and large, petitioners actuation is susceptible of but one
construction-that they are now estopped from reneging from their commitment on
account of acceptance of benefits arising from overdue accounts of private respondent.
Now, as to the issue of whether payments had in fact been made, there is no
doubt that the second installment was actually paid to the heirs of Juan Galicia, Sr. due to
Josefina Tayags admission in judicio that the sum of P10,000.00 was fully liquidated. It is
thus erroneous for petitioners to suppose that the evidence in the records do not
support this conclusion. A contrario, when the court of origin, as well as the appellate
court, emphasized the frank representation along this line of Josefina Tayag before the
trial court, petitioners chose to remain completely mute even at this stage despite the
On March 20, 1966, Fernando Periquet died. He left a will wherein he named his
wife Petra as his universal heir. Accordingly, Petra instituted a Special Proceeding for
probate of her deceased spouses will. Unfortunately, Petra died after only four months
and eighteen days later. Prior to her untimely death, she asked her lawyer to prepare
her last will and testament. Petra left her estate to petitioner and provided for certain
legacies to her brother, sister and children of her deceased siblings. However, she died
before she could sign it.
On August 3,1966, Felix Francisco executed a document of Assignment of
Hereditary Rights in favor of Periquet Jr. other intestate heirs also executed a Deed of
assignment of Hereditary Rights except Florentino Zaragoza and Alberta ZaragozaMorgan.
On December 13, 1969, petitioner entered into a compromise agreement with the
Zaragozas and Periquets. The trial court approved the compromise agreement. Also, an
order for adjudication and transfer of the residue of the estate to petitioner was issued.
On May 16, 1970, Felix Francisco filed an action to annul the Assignment of
Hereditary Rights he executed in favor of petitioner. The action for annulment was based
on gross misrepresentation and fraud, grave abuse of confidence, mistake and undue
influence and lack of cause and/or consideration in the execution of the challenged Deed
of Assignment.
The trial court declared the Assignment of Hereditary Rights executed by
Francisco in favor of Periquet Jr. valid and binding.
On appeal, the then Intermediate Appellate Court annulled and rescinded the
Assignment of Hereditary Rights. A motion for reconsideration was denied for lack of
merit.
ISSUE:
Whether or not the findings of the Court of Appeals that the assignment of
hereditary rights executed by Felix Francisco in favor of petitioner is void due to fraud,
deception, gross misrepresentation, or undue influence should be sustained.
RULING:
The decision of the Court of Appeals was reversed and set aside for the kind of
fraud that will vitiate a contract refers to those insidious words or machinations resorted
to by one of the contracting parties to induce the other to enter into a contract which
without them he would not have agreed to.
In the case at bench, no such fraud was employed by herein petitioner.
Resultantly, the assignment of hereditary rights executed by Felix Francisco in favor of
herein petitioner is valid and effective.
for replevin and damages before the Pasay City Regional Trial Court (RTC).
respondent, in his Answer, interposed a counterclaim for damages.
Private
The RTC dismissed the petition. Likewise, the petition for appeal was denied by
the Court of Appeals. The Court of Appeals stated that the "default" was not a case of
failure to pay.
ISSUE:
Whether or not petitioners claim is meritorious.
RULING:
No. Petitioner's conduct, in the light of the circumstances of this case, can only
be described as mercenary. Petitioner had already debited the value of the unsigned
check from private respondent's account only to re-credit it much later to him.
Thereafter, petitioner encashed checks subsequently dated, and then abruptly refused to
encash the last two. More than a year after the date of the unsigned check, petitioner,
claiming delay, demanded from private respondent payment of the value of said check
and that of the last two checks, including liquidated damages. As pointed out by the trial
court, this whole controversy could have been avoided if only petitioner bothered to call
up private respondent and ask him to sign the check. Good faith, not only in compliance
with its contractual obligations, but also in observance of the standard in human
relations, for every person "to act with justice, give everyone his due, and observe
honesty and good faith." behooved the bank to do so. Failing thus, petitioner is liable for
damages caused to private respondent. These include moral damages for the mental
anguish, serious anxiety, besmirched reputation, wounded feelings and social humiliation
suffered by the latter.
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.
On 29, June 1984, Atty. Rolando Salonga sent to respondent spouses a Notice of
Notarial Sale stating that upon request of State and by virtue of the pledge agreement,
he would sell at public auction the shares of stock pledged to State. This prompted
respondents to file a case before the Regional Trial Court of Quezon City alleging that the
intended foreclosure sale was illegal because from 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 of Jose and Marcelino Aquino,
which had not been secured by the pledge. It was further alleged that their failure to
pay their loan was excused because the Petitioner State itself had prevented the
satisfaction of the obligation.
On January 29, 1985, the trial court rendered a decision in favor of the plaintiff
ordering State to immediately release the pledge and to deliver to respondents the share
of stock upon payment of the loan. The CA affirmed in toto the decision of the trial court.
ISSUE:
Whether or not the conditions to be complied with by the debtor desirous of being
released from his obligation in cases where the creditor unjustly refuses to accept
payment have been met by the spouses Aquino.
RULING:
NO. The conditions had not been complied with. Article 1256 of the civil code
states that: If the creditor to whom tender of payment has been made refuses without
just cause to accept it, the debtor shall be released from responsibility by consignation
of the thing or sum due. Where the creditor unjustly refuses to accept payment, the
debtor desirous of being released from his obligation must comply with two (2)
conditions, viz: (a) tender of payment; and (b) consignation of the sum due. Tender of
payment must be accompanied or followed by consignation in order that the effects of
payment may be produced. Thus, in Llamas v. Abaya, the Supreme Court stressed that a
written tender of payment alone, without consignation in court of the sum due, does not
suspend the accruing of regular or monetary interest. In the instant case, respondent
spouses Aquino, while they are properly regarded as having made a written tender of
payment to petitioner state, failed to consign in court the amount due at the time of the
maturity of the 2nd Account No. It follows that their obligation to pay principal-cumregular or monetary interest under the terms and conditions of the said Account was not
extinguished by such tender of payment alone.
1.
2.
3.
4.
5.
recognition of their rights which were violated by BPIIC. For this purpose, the amount of
P25,000 is sufficient. Lastly, we sustain the award of P50,000 in favor of private
respondents as attorneys fees since they were compelled to litigate.
contrary with the intentions of RA 6552 regarding the protection of buyers of lots on
installments. She further deposited the amount of P18,000.00 with the clerk of court to
cover the balance of the total cost of the contested lot. She also posted a cash bond of
P50,000.00 and on November 4, 1993, the trial court issued a writ of preliminary
injunction on the assailed decision of the municipal trial court.
On February 6, 1995, the trial court rendered a decision favoring the petitioner,
making the preliminary injunction permanent, ordering the plaintiff to pay the defendant
P103,090.70 corresponding to the outstanding obligation under the contract executed
which consists of the principal together with interest and surcharges, plus interest
thereon at the rate of 18% per annum in accordance with the contracts provision,
ordering the defendant to pay the plaintiff P10,000.00 by way of attorneys fees and
costs of suit.
On February 21, 1995, Fernando filed a motion for reconsideration and the
supplement thereto.
According to the trial court, the transaction was an absolute sale, making the
petitioner the owner of the contested lot upon actual and constructive delivery thereof.
Therefore, Fernando was divested of ownership and cannot recover the same unless the
contract is rescinded pursuant to Article 1592 of the Civil Code which requires a judicial
or notarial demand. Since there had been no rescission, petitioner cannot be evicted.
Regarding the issue of delay, the trial court pointed out that the plaintiff defaulted
in the payment of the amortization due and therefore she should be liable for the
payment of the interest and penalties.
The trial court disregarded the petitioners claim that she gave a down payment
of P10,000.00 at the time of the execution of the contract. The trial court relied on the
statement of account and the summary prepared by the respondent to determine the
liability of the petitioner for the payment of the liabilities and penalties. The trial court
held that the petitioners consignation on the amount of P18,000.00 did not produce a
legal effect since it was not undertaken in accordance with Articles 1176, 1177 and 1178
of the Civil Code. The Court of Appeals affirmed in toto the trial courts decision; hence,
this petition.
ISSUES:
1. Whether or not the transaction was an absolute and not a conditional sale.
2. Whether or not there was proper cancellation of the contract to sell.
3. Whether or not there was delay on the petitioners part in the payment of the
monthly amortization.
RULING:
1. NO, the transaction was not an absolute sale; rather, it was a conditional sale.
The very intention of the parties was to reserve the ownership of the land in the seller
(Fernando) until the buyer has paid the total purchase price. First, the contract to sell
makes the sale, cession and conveyance subject to conditions set forth on the
contract. Second, what was transferred was possession and not ownership. Finally, the
land is covered by the Torrens title, the act of registration of the deed of sale was the
operative act that could transfer ownership over the lot. No deed could be registered in
the case at bar since as stipulated in the contract, such deed shall be executed upon
completion of payment by Leao.
In a contract to sell real property on installments, full payment of the purchase
price is a positive suspensive condition and the failure of the payment is not a breach but
rather shall be an event that will prevent the obligation of the seller to convey the title
from acquiring any obligatory force. The transfer of ownership and title would occur
after full payment of the price.
In the case at bar, Leao did not pay the installments after April 1, 1989, which
prevented the obligation of Fernando to convey the property. It brought into effect the
cancellation provision of the contract. Article 1592 of the Civil Code is inapplicable in the
case at bar. But the provisions of RA 6552 (The Realty Installment Buyer Protection Act)
governs the case at bar which recognizes the right of the seller to cancel the contract
upon non-payment of an installment by the buyer.
2. NO, there was no proper cancellation of the contract to sell.
Leao did not pay the installments after April 1, 1989, which prevented the obligation
of Fernando to convey the property. It brought into effect the cancellation provision of the
contract. Nevertheless, what is controlling is not Article 1592 of the Civil Code but the
provisions of RA 6552 (The Realty Installment Buyer Protection Act) which recognizes not
only the right of the seller to cancel the contract upon non-payment off an installment by
the buyer but also rights of the buyer in case of cancellation.
Although the ejectment case operated as the notice of cancellation required under
the provisions of RA 6552, petitioner was not given the cash surrender value of the
payments that she made; hence, there was no actual cancellation of the contract.
Consequently, petitioner Leao may still reinstate the contract by updating the
account during the grace p[period and before actual cancellation.
3. YES, there was delay on the petitioners part to pay the monthly amortizations.
Article 1169 of the Civil Code provides that in reciprocal obligations, neither party incurs
in delay if the other does not comply or is not ready to comply in a proper manner with
what is incumbent upon him. From the moment one of the parties fulfills his obligation,
delay by the other begins.
Since respondent Fernando performed his part of the obligation by allowing Leao
to have possession over the property and the latter not having paid the monthly
amortization in accordance with the terms of the contract, the petitioner incurred delay
and therefore is liable for damages.
The Court affirmed the decision of the appellate court, in toto.
ISSUES:
1.
Whether or not when the respondents opted to buy the property, were they
already required to deliver the money or consign it in court before the execution of the
deed of transfer.
2.
Whether or not the private respondents incurred in delay when they did not
deliver the purchase price or consign it in court or before the expiration of the contract.
RULING:
1.
NO, the petitioners were not required to deliver the money or consign it in court.
Obligations under an option to buy are reciprocal obligations. The performance of one
obligation is conditioned on the simultaneous fulfillment of the other obligation. In an
option to buy, the payment of the purchase price by the creditor is contingent upon the
execution and delivery of a deed of 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 of the purchase price was not yet
required.
2.
NO, the private respondents did not incur delay when they did not deliver the
purchase price or consign it in court or before the expiration of the contract.
Consignation is the act of depositing the thing due with the court or judicial authorities
whenever the creditor cannot accept or refuses to accept payment and it requires a prior
tender of payment. Petitioners contention that private respondents failed to comply
with their obligation under the option to buy because they failed to actually deliver the
purchase price or consign it in court before 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 before the expiration of the contract. In reciprocal obligations,
neither party incurs delay if the other does not comply or is not ready to comply in a
proper manner with what is incumbent upon him. Only from the moment one of the
parties fulfills his obligation, does delay by the other begins.
In the case at bar, as early as March 15, 1990, respondents communicated with
the petitioners that they intended to exercise their exclusive right to buy the parcel of
land stipulated in the contract but which was not given due course by the petitioners
unless there is delivery of the sum of 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 cashiers check was issued even after the contract expired.
The instant petition is denied and the Court of Appeals decision is affirmed.
Eventually, the lower court rendered its judgment after due hearing and trial. It
ordered Integrated to pay P763,101.70 while it also ordered Fil-Anchor to pay Integrated
moral damages and compensatory damages of P790,324.30 for the unrealized income of
Integrated when Fil-Anchor failed to deliver the reams of papers it needed for the printing
of books. However, the CA affirmed the decision of the lower court with respect only to
Integrated liabilities and not with Fil-Anchors liability to pay moral and compensatory
damages.
ISSUES:
Whether or not private respondent violated the order agreement.
Whether or not private respondent is liable for petitioners breach of contract with
Philacor.
RULING:
Anent the 1st issue, NO. The transaction between the parties is a contract of sale
whereby Fil-Anchor obligates itself to deliver printing paper to Integrated which, in turn,
binds itself to pay a sum of money. Both parties conceded that the order agreement
gives rise to reciprocal obligations such that the obligation of one is dependent upon the
obligation of the other. Reciprocal obligations are to be performed simultaneously, so
that the performance of one is conditioned upon the simultaneous fulfillment of the
other. Fil-Anchor undertakes to deliver printing paper of various quantities subject to
petitioners corresponding obligation to pay, on a maximum 90-day credit, for the
materials. Petitioner Integrated did not fulfill its side of the contract as its last payment
in August 1981 could only cover materials covered by delivery invoices dated September
and October of 1980. Consequently, Fil-Anchors suspension of its deliveries to petitioner
whenever the latter failed to pay on time is legally justified. Fil-Anchor has the right to
cease making further delivery; hence, it did not violate the order agreement. On the
contrary, it was Integrated which breached the agreement as it failed to pay on time the
materials delivered by private respondent.
Anent the 2nd issue, NO. Fil-Anchor cannot be held 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 affect third persons like private
respondent because of the basic civil law principle of relativity of contracts which
provides that contracts can only bind the parties who entered into it, and it cannot favor
or prejudice a third person, even if he is aware of such contract and has acted with
knowledge thereof.
The issuance of the new certificate of title in the name of the late Francisco
Laforteza and the execution of an extrajudicial settlement of his estate was not a
condition which determined the perfection of the contract of sale. Petitioners contention
that since the condition was not met, they no longer had an obligation to proceed with
the sale of the house and lot is unconvincing. The petitioners fail to distinguish between
a condition imposed upon the perfection of the contract and a condition imposed on the
performance of an obligation. Failure to comply with the first condition results in the
failure of a contract, while the failure to comply with the second condition only gives the
other party the option either to refuse to proceed with the sale or to waive the condition.
Thus, Art. 1545 of the Civil Code states: "Art. 1545. Where the obligation of either party
to a contract of sale is subject to any condition which is not performed, such party may
refuse to proceed with the contract or he may waive performance of the condition. If the
other party has promised that the condition should happen or be performed, such first
mentioned party may also treat the nonperformance of the condition as a breach of
warranty. Where the ownership in the things has not passed, the buyer may treat the
fulfillment by the seller of his obligation to deliver the same as described and as
warranted expressly or by implication in the contract of sale as a condition of the
obligation of the buyer to perform his promise to accept and pay for the thing."
In the case at bar, there was already a perfected contract. The condition was
imposed only on the performance of the obligations contained therein. Considering
however that the title was eventually "reconstituted" and that the petitioners admit their
ability to execute the extrajudicial settlement of their fathers estate, the respondent had
a right to demand fulfillment of the petitioners obligation to deliver and transfer
ownership of the house and lot.
The Supreme Court did not subscribe to the petitioners view that the
Memorandum Agreement was a contract to sell. There is nothing contained in the MOA
from 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
transfer of title to the prospective buyer, meaning, the prospective seller does not as yet
agree or consent to transfer ownership of the property subject of the contract to sell until
the full payment of the price, such payment being a positive suspensive condition, the
failure of which is not considered a breach, casual or serious, but simply an event which
prevented the obligation from acquiring any obligatory force.
There is clearly no express reservation of title made by the petitioners over the
property, or any provision which would impose non-payment of the price as a condition
for the contracts entering into force. Although the memorandum agreement was also
denominated as a "Contract to Sell", it held that the parties contemplated a contract of
sale. A deed of sale is absolute in nature although denominated a conditional sale in the
absence of a stipulation reserving title in the petitioners until full payment of the
purchase price. In such cases, ownership of the thing sold passes to the vendee upon
actual or constructive delivery thereof. The mere fact that the obligation of the
respondent to pay the balance of the purchase price was made subject to the condition
that the petitioners first deliver the reconstituted title of the house and lot does not
make the contract a contract to sell for such condition is not inconsistent with a contract
of sale.
The property in dispute, being an immovable property, is governed by Article
1592 of the NCC, which needs the judicial or notarial act for its rescission. It is not
disputed that the petitioners did not make a judicial or notarial demand for rescission.
The November 20, 1989 letter of the petitioners informing the respondent of the
automatic rescission of the agreement did not amount to a demand for rescission, as it
was not notarized. It was also made five days after the respondents attempt to make
the payment of the purchase price. This offer to pay prior to the demand for rescission is
sufficient to defeat the petitioners right under article 1592 of the Civil Code.
Besides, the Memorandum Agreement between the parties did not contain a
clause expressly authorizing the automatic cancellation of the contract without court
intervention in the event that the terms thereof were violated.
A seller cannot
unilaterally and extrajudicially rescind a contract of sale where there is no express
stipulation authorizing him to extrajudicially rescind. Neither was there a judicial
demand for the rescission thereof.
Thus, when the respondent filed his complaint for specific performance, the
agreement was still in force inasmuch as the contract was not yet rescinded.
At any rate, considering that the six-month period was merely an approximation
of the time it would take to reconstitute the lost title and was not a condition imposed on
the perfection of the contract and considering further that the delay in payment was only
thirty days which was caused by the respondents justified but mistaken belief that an
extension to pay was granted to him, the Court agreed with the CAs ruling that the
delay of one month in payment was a mere casual breach that would not entitle the
respondents to rescind the contract. RESCISSION of a contract will not be permitted for a
slight or casual breach, but only such substantial and fundamental breach as would
defeat the very object of the parties in making the agreement.
FACTS:
Respondents Gueco Spouses obtained a loan form petitioner International
Corporate Bank (now Union Bank of the Philippines) to obtain a car. In consideration
thereof, the Spouses executed promissory notes which were payable in monthly
installments and chattel mortgage over the car to serve as security for the notes.
The Spouses defaulted in the payment of the installments and consequently, the
petitioner filed on August 7, 1995 a civil action for Sum of Money with Prayer for a Writ
of Replivin.
On August 25, 1995, Dr. Gueco was served summons and was fetched by the
sheriff and representative of the bank for a meeting in the bank premises. The bank
demanded payment of the amount of P184,000.00 which represents the unpaid balance
for the car loan which was lowered to P154,000.00 after negotiations and
recomputations. As a result of the non-payment of the reduced amount on that date, the
car was detained within the banks compound.
On August 28, 1995, Dr. Gueco further renegotiated for the reduction of the
outstanding loan to P150,000.00.
On August 29, 1995, Dr. Gueco delivered a managers check in the amount of
P150,000.00 but the car was not released because of his refusal to sign the JOINT Motion
to Dismiss.
After several demand letters and meetings with bank representatives, the
respondents initiated a civil action for damages which was dismissed for lack of merit.
On appeal, the RTC ruled in favor of the Spouses, pointing out that there was a
meeting of the minds between the petitioner and the respondents as to the reduction of
the amount of indebtedness and the release of the car but said agreement did not
include the signing of the Joint Motion to Dismiss as a condition sine qua non for the
effectivity of the compromise.
On appeal, the Court of Appeals affirmed in toto the lower courts decision.
Whether or not the Court of Appeals erred in holding that the petitioner return the
subject car to the respondents, without making any provision for the issuance of the new
managers/ cashiers check by the respondents in favor of the petitioner in lieu of the
original cashiers check that already became stale.
RULING:
1. NO, there was no agreement with respect to the execution of the Joint Motion to
Dismiss as a condition for the compromise agreement.
Petitioner has the burden of proof that the oral compromise entered into by the
parties included the stipulation that the parties would joint file a motion to dismiss.
Factual findings of the lower court and the appellate court found no evidence to
acknowledge the contestation of the petitioner bank that there was indeed such an
agreement. Further, the only findings was that the
agreement between the parties was merely regarding the lowering of the price and not
anent the Joint Motion to Dismiss.
2. NO, the respondents are not entitled to the damages awarded by the Court of
Appeals. In awarding the damages, both the trial and appellate courts found out that
there was fraud, when in the findings of the Supreme Court, there was none. Fraud is the
deliberate intention to cause damage or prejudice. It is the voluntary execution of a
wrongful act, or the willful omission. Knowing and intending the effects which naturally
and necessarily arise from such act or omission. There was no fraud on the part of the
petitioner bank in requiring the respondent to sign the joint motion to dismiss.
3. YES, the Court of Appeals committed the error anent the 3 rd issue. Respondents
contend that the petitioner should return the car or its value and that the latter, due to
its own negligence, should suffer the loss occasioned of the fact that the check had
become stale. Respondents aver that the delivery of the managers check produced the
effect of payment; thus, petitioner was negligent in opting not to deposit or use said
check. The Court is not persuaded.
A stale check is one which has not been presented for payment within a
reasonable time after its issue. It is valueless, and should not be paid.
In the case at bar, the check involved is not an ordinary bill of exchange but a
managers check which is drawn by the bank manager upon the bank itself. In this case,
the Gueco spouses have not alleged or shown that they or the bank which issued the
managers check has suffered damage or loss by the delay or non-presentment. There is
no doubt that the petitioner bank held on the check and refused to encash the same
because of the controversy surrounding the signing of the joint motion to dismiss.
Hence, the Court is of the opinion that there is no bad faith or negligence.
Premises considered, the decision of the Court of appeals affirming the Trial
courts decision is set aside. Respondents are further ordered to pay the original
obligation amounting to P150,000 to the petitioner upon surrender or cancellation of the
managers check in the latters possession, afterwhich, petitioner is to return the subject
motor vehicle in good working condition.
DOLO INCIDENTE EFFECTS:
REPUBLIC OF THE PHILIPPINES,
represented by the COMMISSIONER OF CUSTOMS, petitioner,
VS. THE COURT OF TAX APPEALS and AGFHA, INCORPORATED, respondents
Oct 23, 2000
G.R. No. 139050
FACTS:
FIL-JAPAN, a shipping agent, requested for an amendment of the Inward Foreign
Manifest so as to correct the name of the consignee from that of GQ GARMENTS, Inc., to
that of AGFHA, Inc. when its shipments Inward Foreign Manifest stated that the bales of
cloth were consigned to GQ GARMENTS, Inc., while the Clean Report of Findings issued
by the Societe Generale de Surveilance mention AGFHA, Incorporated, to be the
consignee.
FIL-JAPAN forwarded to AGFHA, Inc., the amended Inward Foreign Manifest 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 hold on the ground that GQ GARMENTS, Inc., could not be located in its
given address and was thus suspected to be a fictitious firm. Forfeiture proceedings
under the Tariff and Customs Code were initiated.
AGFHA, Inc.s motion for intervention contending that it is the lawful owner and
actual consignee of the subject shipment was granted. After hearing, the Collector of
Customs came up with a draft decision ordering the lifting of the warrant of seizure and
detention on the basis of its findings that GQ GARMENTS, Inc., was not a fictitious
corporation and that there was a valid waiver of rights over the bales of cloth by GQ
GARMENTS, Inc., in favor of AGFHA, Inc. The draft decision was submitted to the Deputy
Commissioner for clearance and approval, who, in turn, transmitted it to the CIIS for
comment. The CIIS opposed the draft decision, insisting that GQ GARMENTS, Inc., was a
fictitious corporation and that even if it did exist, its president, John Barlin, had no
authority to waive the right over the subject shipment in favor of AGFHA, Inc. The
Deputy Commissioner then rejected the draft decision of the Collector of Customs.
GQ GARMENTS, Inc., and AGFHA, Inc., filed a joint motion for reconsideration.
Convinced that the evidence presented established the legal existence of GQ
GARMENTS, Inc., and finding that a resolution passed by the Board of Directors of GQ
GARMENTS, Inc., ratified the waiver of its president, the Collector of Customs in another
draft decision granted the joint motion. The Office of the Commissioner of Customs,
however, disapproved the new draft decision and denied the release of the goods. In
deference to the directive of the Commissioner, the District Collector of Customs ordered
the forfeiture of the shipment. AGFHA, Inc., interposed an appeal to the Office of the
Commissioner of Customs but was dismissed.
AGFHA, Inc., therefore, filed a petition for review with the Court of Tax Appeals
questioning the forfeiture of the bales of textile cloth. Finding merit in the plea of
appellants, the Court of Tax Appeals granted the petition and ordered the release of the
goods to AGFHA, Inc., however, the Commissioner of Customs then challenged before
the Court of Appeals the decision of the tax court but was dismissed for lack of merit.
The appellate court ruled that the Bureau of Customs has failed to satisfy its burden of
proving fraud on the part of the importer or consignee. The Court of Appeals attributed
the error in indicating GQ GARMENTS, Inc., instead of AGFHA, Inc., in the Inward Foreign
Manifest as being the consignee of the subject shipment to the shipping agent. It also
noted the finding of the tax court that GQ GARMENTS, Inc., was, in fact, a registered
importer. The BOC instituted the instant petition for review under Rule 45 of the Revised
Rules of Court assailing the affirmance by the Court of Appeals of the tax court's
decision.
ISSUE:
Whether or not AGFHA, Inc. committed fraud in the importation of bales of cloth.
RULING:
The requisites for the forfeiture of goods under the Tariff and Customs Code are:
(a) the wrongful making by the owner, importer, exporter or consignee of any declaration
or affidavit, or the wrongful making or delivery by the same person of any invoice, letter
or paper - all touching on the importation or exportation of merchandise; (b) the falsity of
such declaration, affidavit, invoice, letter
or paper; and (c) an intention on the part of the importer/consignee to evade the
payment of the duties due.
Petitioner asserts that all of these requisites are present in this case. It contends
that it did not presume fraud, rather the events positively point to the existence of fraud.
On the other hand, AGFHA, Inc. maintains that there has only been an inadvertent error
and not an intentional wrongful declaration by the shipper to evade payment of any tax
due.
Fraud must be proved to justify forfeiture. It must be actual, amounting to
intentional wrong-doing with the clear purpose of avoiding the tax. Mere negligence is
not equivalent to the fraud contemplated by law. What is here involved is an honest
mistake, not even directly attributable to private respondent, which will not deprive the
government of its right to collect the proper tax. The Collector of Customs, Court of Tax
Appeals and the Court of Appeals are unanimous in concluding that no fraud has been
committed by AGFHA, Inc. in the importation of the bales of cloth. Therefore, the
forfeiture cannot be justified.
Petition denied. Decision affirmed.
father of a family in the selection and supervision of her employees. The law governing
petitioners liability, as the employer of bus driver Venturina is Article 2180 of the Civil
Code. The diligence of a good father means diligence in the selection and supervision
of employees. Thus, when an employee, while performing 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 of the employee or in the
supervision over him after the selection. The presumption juris tantum that there was
negligence in the selection of her bus driver remains unrebutted.
Having failed to rebut the legal presumption of negligence in the selection and
supervision of her driver is responsible for damages, the basis of the liability being the
relationship of pater familias or on the employers own negligence.
NEGLIGENCE AS A QUESTION OF FACT
SMITH BELL DODWELL SHIPPING AGENCY CORPORATION
VS. CATALINO BORJA and INTERNATIONAL TO WAGE AND TRANSPORT
CORPORATION
G.R. No. 143008
June 10, 2002
383 SCRA 341
FACTS:
On September 23, 1987, Smith Bell filed a written request with the Bureau of
Customs for the attendance of the latters inspection team on vessel M/T King Family
which was due to arrive at the port of Manila on September 24, 1987. The vessel
contained 750 metric tons of alkyl benzene and methyl methacrylate monomer.
On the same day, Supervising Customs Inspector Manuel Ma. D. Nalgan
instructed respondent Catalino Borja to board said vessel and perform his duties as
inspector upon the vessels arrival until its departure. At that time, Borja was a customs
inspector of the Bureau of Customs.
At about 11 oclock 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 afire. 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 fire and fearing for his life, he hurriedly jumped
over board to save himself. However, the water was likewise on fire due mainly to the
spilled chemicals. Despite the tremendous heat, Borja swam his way for one hour until
he was rescued by the people living in the squatters area and sent to San Juan De Dios
Hospital.
After weeks of intensive care at the hospital, his attending physician diagnosed
Borja was diagnosed to be permanently disabled due to the incident. Thus, he made
demands against Smith Bell and ITTC for the damages caused by the explosion.
However, both denied liabilities and attributed to each other negligence.
After hearing, the trial court ruled in favor of respondent Borja and held petitioner
liable for damages and loss of income. On appeal, the same ruling was also upheld.
Hence this petition.
ISSUE:
Whether or not the RTC and the Court of Appeals
misapprehension of facts regarding the negligence committed.
labored
under
RULING:
Petitioner avers that both lower courts labored under a misapprehension of the
facts. It claims that the documents adduced in the RTC conclusively revealed that the
explosion that caused the fire on M/T King Family had originated from the barge ITTC101. However, the Supreme Court find no cogent reason to overturn factual findings of
the RTC and the Court of Appeals since such findings were supported by substantial
evidences.
Negligence is a conduct that creates undue risk of harm to another. It is the
failure to observe that degree of care, precaution and vigilance that the circumstances
justly demand, whereby that other person suffers injury. Petitioners vessel was carrying
chemical cargo -- alkyl benzene and methyl methacrylate monomer. While knowing that
their vessel was carrying dangerous inflammable chemicals, its officers and crew failed
to take all the necessary precautions to prevent an accident. Petitioner was, therefore,
negligent.
The three elements of QUASI-DELICT are:
1.
damages suffered by the plaintiff,
2.
fault or negligence of the defendant, and
3.
the connection of cause and effect between the fault or negligence of
the defendant and the damages inflicted on the plaintiff.
All these elements were established in this case.
As a result of the fire and the explosion during the unloading of the chemicals
from petitioners vessel, Respondent Borja suffered the following damage: and injuries:
(1) chemical burns of the face and arms; (2) inhalation of fumes from burning chemicals;
(3) exposure to the elements while floating in sea water for about three (3) hours; (4)
homonymous hemianopsia or blurring of the right eye [which was of] possible toxic
origin; and (5) cerebral infract with neo-vascularization, left occipital region with right
sided headache and the blurring of vision of right eye.
Wherefore, the Petition is partly granted. The assailed Decision is AFFIRMED with
the following MODIFICATIONS: petitioner is ordered to pay the heirs of the victim
damages in the amount of P320,240 as loss of earning capacity, moral damages in the
amount of P100,000, plus another P50,000 as attorneys fees.
The Supreme Court held that it was the 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 of human affairs, would
do, or the doing of something which a prudent and reasonable man would do. In the
present case, it appears that petitioner accorded his secretary unusual degree of trust
and unrestricted access to his credit cards, passbooks, check books, bank statements,
including custody and possession of cancelled checks and reconciliation of accounts.
Site with terrific impact as a result of which the latters stockpile of materials and
supplies, camp facilities and permanent structures and accessories were either washed
away, lost or destroyed.
Petitioners denied there was cheating. Immediately thereafter, petitioners were notified,
in writing, of hearings and of their immediate suspension. Thereafter, petitioners were
dismissed.
ISSUE:
Whether or not NAPOCOR is exempt from liability because the lost or
deterioration of ECIs facilities was due to fortuitous event.
ISSUE:
Is the respondent guilty of illegal suspension and dismissal in the case at bench?
RULING:
It is clear from the CAS ruling that the petitioner NPC was undoubtedly negligent
because it opened the spillway gates of the Angat Dam only at the height of typhoon
Welming when it knew very well that it was safer to have opened the same gradually
and earlier, as it was also undeniable that NPC knew of the coming typhoon at least four
days before it actually struck. And even though the typhoon was an act of God or what
we may call force majeure, NPC cannot escape liability because its negligence was the
proximate cause of the loss and damage.
Petitions dismissed. Decision affirmed.
CULPA CONTRACTUAL
1.
2.
3.
4.
5.
6.
7.
8.
FACTS:
Petitioners Annabelle M. Tuazon and Almer R. Abing worked as branch managers of the
Wendy's food chains. In Wendys Biggie Size It! Crew Challenge" promotion contest,
branches managed by petitioners won first and second places, respectively. Because of
its success, respondent had a second run of the contest from April 26 to July 4, 1999. The
Meycauayan branch won again. The MCU Caloocan branch failed to make it among the
winners. Before the announcement of the third round winners, management received
reports that as early as the first round of the contest, the Meycauayan, MCU Caloocan,
Tandang Sora and Fairview branches cheated. An internal investigation ensued.
Petitioners were summoned to the main office regarding the reported anomaly.
RULING:
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 office.Article 212 (m) of the Labor Code defines a managerial employee as one
who is vested with powers or prerogatives to lay down and execute management policies
and/or hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees.
Consequently, as managerial employees, in the case of petitioners, the mere existence
of grounds for the loss of trust and confidence justify 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 for
the purported misconduct, or the nature of his participation renders him unworthy of the
trust and confidence 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 of
respondeat superior or command responsibility alone, petitioners may be held liable for
negligence in the performance of their managerial duties, unless petitioners can
positively show that they were not involved. Their position requires a high degree of
responsibility that necessarily includes unearthing of fraudulent and irregular activities.
Their bare, unsubstantiated and uncorroborated denial of any participation in the
cheating does not prove their innocence nor disprove their alleged guilt. Additionally,
some employees declared in their affidavits that the cheating was actually the idea of
the petitioners.
CULPA CONTRACTUAL
RCPI vs. VERCHEZ
G.R. No. 164349. JANUARY 31, 2006
FACTS:
Editha Hebron Verchez (Editha) was confined in the hospital due to an ailment.
Her daughter Grace immediately went to the Sorsogon Branch of RCPI whose services
she engaged to send a telegram to her sister Zenaida. As three days after RCPI was
engaged to send the telegram to Zenaida no response was received from her, Grace sent
a letter to Zenaida, this time thru JRS Delivery Service, reprimanding her for not sending
any financial aid. Immediately after she received Graces letter, Zenaida, along with her
husband left for Sorsogon. On her arrival at Sorsogon, she disclaimed having received
any telegram.
The telegram was finally delivered to Zenaida 25 days later. On inquiry from RCPI why it
took that long to deliver it, RCPI claimed that delivery was not immediately effected due
to the occurrence of circumstances which were beyond the control and foresight of RCPI.
ISSUE:
Whether or not RCPI is negligent in the performance of its obligation.
RULING:
Article 1170 of the Civil Code provides: Those who in the performance of their
obligations are guilty of fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable for damages. In culpa contractual, the mere
proof of the existence of the contract and the failure of its compliance justify, prima
facie, a corresponding right of relief. The law, recognizing the obligatory force of
contracts, will not permit a party to be set free from liability for any kind of
misperformance of the contractual undertaking or a contravention of the tenor thereof.
Considering the public utility of RCPIs business and its contractual obligation to transmit
messages, it should exercise due diligence to ascertain that messages are delivered to
the persons at the given address and should provide a system whereby in cases of
undelivered messages the sender is given notice of non-delivery. Messages sent by cable
or wireless means are usually more important and urgent than those which can wait for
the mail. RCPI argues, however, against the presence of urgency in the delivery of the
telegram, as well as the basis for the award of moral damages. RCPIs arguments fail. For
it is its breach of contract upon which its liability is, it bears repeating, anchored. Since
RCPI breached its contract, the presumption is that it was at fault or negligent. It,
however, failed to rebut this presumption. For breach of contract then, RCPI is liable to
Grace for damages. RCPIs liability as an employer could of course be avoided if it could
prove that it observed the diligence of a good father of a family to prevent damage.
RULING:
Petitioner was correctly found liable for breach of contract of carriage. A common
carrier is bound to carry its passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with due regard to all the
circumstances. In a contract of carriage, it is presumed that the common carrier was at
fault or was negligent when a passenger dies or is injured. Unless the presumption is
rebutted, the court need not even make an express finding of fault or negligence on the
part of 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 of Marie Graces death was the negligence of petitioner. Hence, the
courts below correctly ruled that petitioner was guilty of breach of contract of carriage.
CULPA CONTRACTUAL
FGU INSURANCE CORP. vs. G.P. SARMIENTO TRUCKING CORPORATION
G.R. No. 141910. AUGUST 6, 2002
CULPA CONTRACTUAL
FACTS:
VICTORY LINER, INC. vs. GAMMAD
G.R. No. 159636. NOVEMBER 25, 2004
FACTS:
shipment, paid to Concepcion Industries, Inc., the value of the covered cargoes. FGU, in
turn, being the subrogee of the rights and interests of Concepcion Industries, Inc., sought
reimbursement of the amount it had paid to the latter from GPS. Since the trucking
company failed to heed the claim, FGU filed a complaint for damages and breach of
contract of carriage against GPS and its driver Lambert Eroles. Respondents asserted
that that the cause of damage was purely accidental.
ISSUE:
Whether or not GPS is liable for damages arising from negligence.
RULING:
In culpa contractual, upon which the action of petitioner rests as being the
subrogee of Concepcion Industries, Inc., the mere proof of the existence of the contract
and the failure of its compliance justify, prima facie, a corresponding right of relief.
Respondent trucking corporation recognizes the existence of a contract of carriage
between it and petitioner and admits that the cargoes it has assumed to deliver have
been lost or damaged while in its custody. In such a situation, a default on, or failure of
compliance with, the obligation in this case, the delivery of the goods in its custody to
the place of destination - gives rise to a presumption of lack of care and corresponding
liability on the part of the contractual obligor the burden being on him to establish
otherwise. GPS has failed to do so.
Respondent driver, without concrete proof of his negligence or fault, may not
himself be ordered to pay petitioner. The driver, not being a party to the contract of
carriage between petitioner and defendant, may not be held liable under the agreement.
A contract can only bind the parties who have entered into it or their successors who
have assumed their personality or their juridical position. Petitioners civil action against
the driver can only be based on culpa aquiliana, which, unlike culpa contractual, would
require the claimant for damages to prove negligence or fault on the part of the
defendant.
CULPA CONTRACTUAL
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 fist
fight. No evidence, however, was adduced to indicate how the fight started or who,
between the two, delivered the first blow or how Navidad later fell on the LRT tracks. At
the exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo Roman,
was coming in.
Navidad was struck by the moving train, and he was killed
instantaneously. The widow of Nicanor, along with her children, filed a complaint for
damages against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit
Organization, Inc. (Metro Transit), and Prudent for the death of her husband. LRTA and
Roman filed 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 of its security guards.
ISSUE:
RULING:
The foundation of LRTAs liability is the contract of carriage and its obligation to
indemnify the victim arises from the breach of that contract by reason of its failure to
exercise the high diligence required of the common carrier. In the discharge of its
commitment to ensure the safety of passengers, a carrier may choose to hire its own
employees or avail itself of the services of an outsider or an independent firm to
undertake the task.
In either case, the common carrier is not relieved of its
responsibilities under the contract of carriage.
Regrettably for LRTA, as well as perhaps the surviving spouse and heirs of the late
Nicanor Navidad, this Court is concluded by the factual finding of the Court of Appeals
that there is nothing to link Prudent to the death of Navidad, for the reason that the
negligence of its employee, Escartin, has not been duly proven. There being, similarly, no
showing that petitioner Rodolfo Roman himself is guilty of any culpable act or omission,
he must also be absolved from liability.
CULPA CONTRACTUAL
LRTA vs. NAVIDAD
G.R. No. 145804. FEBRUARY 6, 2003
FACTS:
On 14 October 1993, in the evening, Nicanor Navidad, then drunk, entered the
EDSA LRT station. While Navidad was standing on the platform near the LRT tracks,
RODZSSEN SUPPLY CO. INC. VS. FAR EAST BANK & TRUST CO.
GR No. 109087
May 9, 2001
357 SCRA 618
FACTS:
Petitioner Rodzssen Supply opened a letter of credit with respondent Far East
Bank for the payment of 5 loaders bought by petitioner from Ekman and Co. The letter
of credit had a validity of 30 days to expire February 15, 1979 but was subsequently
extended to October 16, 1979. Three of the loaders were delivered to the petitioner and
was paid by respondent. The two remaining loaders were delivered to the petitioner
belatedly but were still accepted by petitioner on the ground that it was bound to do so
under the trust receipt arrangement with respondent bank.
The bank paid the two remaining loaders five months after the expiration of the
credit on March 1980. Petitioner refused to pay the P76,000 for the two loaders since the
bank paid for them beyond the expiration of the letter of credit. Both the RTC and the
CA ruled for the respondent. Thus, this petition for review.
ISSUE:
Is the petitioner liable to pay respondent bank when the bank paid Ekman only
after 5 months beyond the expiration of the letter of credit?
RULING:
Yes. While respondent bank was negligent in paying the P76,000 to Ekman within
the validity of the letter of credit, petitioner voluntarily accepted the late delivery of the
equipment and used it for 3 years before respondent demanded payment, without
verifying the status of ownership or possession of the loaders. By acknowledging receipt
of the loaders, petitioner impliedly accepted its obligation to pay the respondent bank
even when the bank paid for the delivery by Ekman after the expiration of the letter of
credit.
When both parties are equally negligent in the performance of their obligations
under a contract, the fault of one cancels the negligent of the other. Their rights and
obligations may then be determined equally under the law proscribing the unjust
enrichment.
CULPA CONTRACTUAL
UNIVERSITY OF THE EAST, VS. ROMEO A. JADER,
2000 Feb 17
G.R. No. 132344
FACTS:
Plaintiff was enrolled in the defendants' College of Law from 1984 up to 1988. In
the first semester of his last year (School year 1987-1988), he failed to take the regular
final examination in Practice Court I for which he was given an incomplete grade. He
enrolled for the second semester as fourth year law student and on February 1, 1988 he
filed an application for the removal of the incomplete grade given him by Professor
Carlos Ortega which was approved by Dean Celedonio Tiongson after payment of the
required fee. He took the examination on March 28, 1988. On May 30, 1988, Professor
Carlos Ortega submitted his grade. It was a grade of five (5).
The plaintiff's name appeared in the Tentative List of Candidates for graduation
for the Degree of Bachelor of Laws (LL.B) as of Second Semester (1987-1988) with the
following annotation:
"JADER ROMEO A.
Def. Conflict of Laws - x-1-87-88, Practice Court I - Inc., 1-87-88. C-1 to submit transcript
with S.O.
In the invitation for graduation the name of the plaintiff appeared as one of the
candidates. At the foot of the list of the names of the candidates there appeared
however the following annotation:
This is a tentative list. Degrees will be conferred upon these candidates who
satisfactorily complete requirements as stated in the University Bulletin and as approved
of the Department of Education, Culture and Sports.
The plaintiff attended the investiture ceremonies during the program of which he
went up the stage when his name was called. He tendered a blow-out that evening. And
there were pictures taken too during the blow-out.
He thereafter prepared himself for the bar examination. He took a leave of
absence without pay from his job from April 20, 1988 to September 30, 1988 and
enrolled at the pre-bar review class in Far Eastern University. Having learned of the
deficiency, he dropped his review class and was not able to take the bar examination.
Consequently, respondent sued petitioner for damages alleging that he suffered
moral shock, mental anguish, serious anxiety, besmirched reputation, wounded feelings
and sleepless nights when he was not able to take the 1988 bar examinations arising
from the latter's negligence. He prayed for an award of moral and exemplary damages,
unrealized income, attorney's fees, and costs of suit.
ISSUE:
Whether or not respondent can claim damages from petitioner school.
RULING:
It is the contractual obligation of the school to timely inform and furnish sufficient
notice and information to each and every student as to whether he or she had already
complied with all the requirements for the conferment of a degree or whether they would
be included among those who will graduate. Although commencement exercises are but
a formal ceremony, it nonetheless is not an ordinary occasion, since such ceremony is
the educational institution's way of announcing to the whole world that the students
included in the list of those who will be conferred a degree during the baccalaureate
ceremony have satisfied all the requirements for such degree. Prior or subsequent to the
ceremony, the school has the obligation to promptly inform the student of any problem
involving the latter's grades and performance and also most importantly, of the
procedures for remedying the same.
The college dean is the senior officer responsible for the operation of an academic
program, enforcement of rules and regulations, and the supervision of faculty and
student services. He must see to it that his own professors and teachers, regardless of
their status or position outside of the university, must comply with the rules set by the
latter. The negligent act of a professor who fails to observe the rules of the school, for
instance by not promptly submitting a student's grade, is not only imputable to the
professor but is an act of the school, being his employer.
The University should have practiced what it inculcates in its students, more
specifically the principle of good dealings enshrined in Articles 19 and 20 of the Civil
Code. Educational institutions are duty-bound to inform the students of their academic
status and not wait for the latter to inquire from the former. The conscious indifference
of a person to the rights or welfare of the person/persons who may be affected by his act
or omission can support a claim for damages.
CULPA CONTRACTUAL
BAYNE ADJUSTERS AND SURVEYORS, INC. VS. COURT OF APPEALS AND
INSURANCE COMPANY OF NORTH AMERICA
323 SCRA 231
FACTS:
On May 1987, Colgate Palmolive Philippines imported alkyl benzene from Japan
valued at US $255,802.88. It is insured with private respondent Insurance Company of
North America. Petitioner was contracted by the consignee to supervise the proper
handling and discharge of the cargo from the chemical tanker to the receiving barge until
the cargo is pumped into the consignees shore tank. When the cargo arrived, the
pumping operation commenced at 2020 hours of June 27, 1987. Nevertheless, the
pumping was interrupted for several times due to mechanical problems with the pump.
When the pump broke down once again at about 1300 hours, the petitioners surveyors
left the premises without leaving any instruction with the barge foremen what to do in
event that the pump becomes operational again. No other surveyor was left in the
premises and the assigned surveyor did not seal the valves to the tank to avoid
unsupervised pumping of the cargo. Consignee asked petitioner to send surveyor to
conduct tank sounding. Thus, the petitioner sent Armando Fontilla, a cargo surveyor, not
a liquid bulk surveyor. Then after, it was agreed that operation would resume the
following day at 1030 hours. Fontanilla tried to inform bargemen and surveyor about the
agreement but he could not find them so he left the premises. When the bargemen
arrived, they found that the valves of the tank are open and resumed pumping operation
in the absence of any instruction from the surveyor.
The following morning,
undetermined amount of alkyl benzene was lost due to overflow.
Consignee filed a claim with the insurance company. A conference transpired
which the petitioner, consignee and Claimsmen Adjustment Company attended. The
compromise quantity of the alkyl benzene, which was lost, was 67.649 MT. The
insurance company agreed to pay consignee the net amount of P84, 609.53.
Consequently, the insurance company instituted action for collection of money as
subrogee of the consignee after failure to extra judicially settles the manner with Bayne
Adjusters. Both the trial and appellate court rendered a decision adverse to the
petitioner for its failure to comply Standard Operating Procedure for Handling Liquid Bulk
Cargo.
ISSUE:
Whether or not the petitioner is liable for the loss of a certain amount of alkyl
benzene.
RULING:
Yes. The negligence of the obligor in the performance of the obligation renders
him liable for damages for the resulting loss suffered by the obligee. The Supreme Court
did not find that the trial court erred in holding the petitioner liable because of its failure
to exercise due diligence which is governed by the Standard Operation Procedure in
Handling Liquid Bulk Survey. Although the cessation of the pumping operation in this
case was not voluntarily requested by the pumping operation in this case was not
voluntarily requested by the pumping operation 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 SOP. The petitioner assigned surveyor disregarded
SOP and left the pump site without leaving any instruction or directive with the barge
pump operators.
The petition was dismissed.
CULPA CONTRACTUAL
CULPA ACQUILIANA
1.
2.
3.
deciding to transfer the vessel only at 8:35 in the morning of October 21, 1994.
DELSAN TRANSPORT LINES, INC., petitioner,
VS. C & A CONSTRUCTION, INC., respondent
G.R. No. 156034
October 1, 2003
FACTS:
Respondent C & A Construction, Inc. was engaged by the National Housing
Authority (NHA) to construct a deflector wall at the Vitas Reclamation Area in Vitas,
Tondo, Manila. The project was completed in 1994 but it was not formally turned over to
NHA.
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 for the purpose of
installing a cargo pump and clearing the cargo oil tank. At around 12:00 midnight of
October 20, 1994, Captain Demetrio T. Jusep of M/V Delsan Express received a report
from 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 of October 21, 1994, Capt. Jusep
tried to seek shelter at the North Harbor 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 of
Vitas mouth, 4 miles away from a Napocor power barge. At that time, the waves were
already reaching 8 to 10 feet high. Capt. Jusep ordered his crew to go full ahead to
counter the wind which was dragging the ship towards the Napocor power barge. To
avoid collision, Capt. Jusep ordered a full stop of the vessel. He succeeded in avoiding
the power barge, but when the engine was re-started and the ship was maneuvered full
astern, it hit the deflector wall constructed by respondent.
The trial court ruled that petitioner was not guilty of negligence because it had
taken all the necessary precautions to avoid the accident. Applying the emergency
rule, it absolved petitioner of liability because the latter had no opportunity to
adequately weigh the best solution to a threatening situation. It further held that even if
the maneuver chosen by petitioner was a wrong move, it cannot be held liable as the
cause of the damage sustained by respondent was typhoon Katring, which is an act of
God.
On appeal to the Court of Appeals, the decision of the trial court was reversed and
set aside. It found Capt. Jusep guilty of negligence in deciding to transfer the vessel to
the North Harbor only at 8:35 a.m. of October 21, 1994 and thus held petitioner liable for
damages.
ISSUE:
Whether or not petitioner is solidarily liable under Article 2180 of the Civil Code for
the quasi-delict committed by Capt. Jusep.
RULING:
The Court of Appeals was correct in holding that Capt. Jusep was negligent in
As early as 12:00 midnight of October 20, 1994, he received a report from his radio
head operator in Japan that a typhoon was going to hit Manila after 8 hours. This,
notwithstanding, he did nothing, until 8:35 in the morning of October 21, 1994, when he
decided to seek shelter at the North Harbor, which unfortunately was already congested.
The finding of negligence cannot be rebutted upon proof that the ship could not have
sought refuge at the North Harbor even if the transfer was done earlier. It is not the
speculative success or failure of a decision that determines the existence of negligence
in the present case, but the failure to take immediate and appropriate action under the
circumstances. Capt. Jusep, despite knowledge that the typhoon was to hit Manila in 8
hours, complacently waited for the lapse of more than 8 hours thinking that the typhoon
might change direction. He cannot claim that he waited for the sun to rise instead of
moving the vessel at midnight immediately after receiving the report because of the
difficulty of traveling at night. The hour of 8:35 a.m. is way past sunrise. Furthermore,
he did not transfer as soon as the sun rose because, according to him, it was not very
cloudy and there was no weather disturbance yet.
vs. Citibank, N.A. and Insular Bank of Asia and America (now Philippine Commercial
International Bank), and the August 8, 1995 Resolution ordering the collecting bank,
Philippine Commercial International Bank, to pay the amount of Citibank Check No. SN04867.
In G.R. No. 128604, petitioner Ford Philippines assails the October 15, 1996
Decision of the Court of Appeals and its March 5, 1997 Resolution in CA-G.R. No. 28430
entitled "Ford Philippines, Inc. vs. Citibank, N.A. and Philippine Commercial International
Bank," affirming in toto the judgment of the trial court holding the defendant drawee
bank, Citibank, N.A., solely liable to pay the amount of P12,163,298.10 as damages for
the misapplied proceeds of the plaintiffs Citibank Check Numbers SN-10597 and 16508.
ISSUE:
Whether or not the petitioner Ford has the right to recover from the collecting
bank (PCIBank) and the drawee bank (Citibank) the value of the checks intended as
payment to the Commissioner of Internal Revenue.
RULING:
In G.R. Nos. 121413 and 121479, the Court held that banking business requires
that the one who first cashes and negotiates the check must take some precautions to
learn whether or not it is genuine. And if the one cashing the check through indifference
or other circumstance assists the forger in committing the fraud, he should not be
permitted to retain the proceeds of the check from the drawee whose sole fault was that
it did not discover the forgery or the defect in the title of the person negotiating the
instrument before paying the check. For this reason, a bank which cashes a check drawn
upon another bank, without requiring proof as to the identity of persons presenting it, or
making inquiries with regard to them, cannot hold the proceeds against the drawee when
the proceeds of the checks were afterwards diverted to the hands of a third party.
In such cases the drawee bank has a right to believe that the cashing bank (or the
collecting bank) had, by the usual proper investigation, satisfied itself of the authenticity
of the negotiation of the checks. Thus, one who encashed a check which had been
forged or diverted and in turn received payment thereon from the drawee, is guilty of
negligence which proximately contributed to the success of the fraud practiced on the
drawee bank. The latter may recover from the holder the money paid on the check.
Having established that the collecting banks negligence is the proximate cause of the
loss,
the Court concludes that PCIBank is liable in the amount corresponding to the proceeds
of Citibank Check No. SN-04867.
In G.R. No. 128604, the pro-manager of San Andres Branch of PCIBank, Remberto
Castro, received Citibank Check Numbers SN 10597 and 16508. He passed the checks to
a co-conspirator, an Assistant Manager of PCIBanks Meralco Branch, who helped Castro
open a Checking account of a fictitious person named "Reynaldo Reyes." Castro
deposited a worthless Bank of America Check in exactly the same amount of Ford
checks.
The syndicate tampered with the checks and succeeded in replacing the
worthless checks and the eventual encashment of Citibank Check Nos. SN 10597 and
16508. The PCIBank Pro-manager, Castro, and his co-conspirator Assistant Manager
apparently performed their activities using facilities in their official capacity or authority
but for their personal and private gain or benefit. A bank holding out its officers and
agents as worthy of confidence will not be permitted to profit by the frauds these officers
or agents were enabled to perpetrate in the apparent course of their employment; nor
will it be permitted to shirk its responsibility for such frauds, even though no benefit may
accrue to the bank therefrom.
For the general rule is that a bank is liable for the fraudulent acts or
representations of an officer or agent acting within the course and apparent scope of his
employment or authority. And if an officer or employee of a bank, in his official capacity,
receives money to satisfy an evidence of indebtedness lodged with his bank for
collection, the bank is liable for his misappropriation of such sum. But in this case,
responsibility for negligence does not lie on PCIBanks shoulders alone. The evidence on
record shows that Citibank as drawee bank was likewise negligent in the performance of
its duties. Citibank failed to establish that its payment of Fords checks were made in
due course and legally in order. Citibank should have scrutinized Citibank Check
Numbers SN 10597 and 16508 before paying the amount of the proceeds thereof to the
collecting bank of the BIR. One thing is clear from the record: the clearing stamps at the
back of Citibank Check Nos. SN 10597 and 16508 do not bear any initials. Citibank failed
to notice and verify the absence of the clearing stamps. Had this been duly examined,
the switching of the worthless checks to Citibank Check Nos. 10597 and 16508 would
have been discovered in time. For this reason, Citibank had indeed failed to perform
what was incumbent upon it, which is to ensure that the amount of the checks should be
paid only to its designated payee. The fact that the drawee bank did not discover the
irregularity seasonably, in our view, constitutes negligence in carrying out the banks
duty to its depositors. The point is that as a business affected with public interest and
because of the nature of its functions, the bank is under obligation to treat the accounts
of its depositors with meticulous care, always having in mind the fiduciary nature of their
relationship.
Thus, invoking the doctrine of comparative negligence, the Court is of the view
that both PCIBank and Citibank failed in their respective obligations and both were
negligent in the selection and supervision of their employees resulting in the
encashment of Citibank Check Nos. SN 10597 and 16508. Thus, the Court is constrained
to hold them equally liable for the loss of the proceeds of said checks issued by Ford in
favor of the CIR.Time and again, the Court has stressed that banking business is so
impressed with public interest where the trust and confidence of the public in general is
of paramount importance such that the appropriate standard of diligence must be very
high, if not the highest, degree of diligence.
A banks liability as obligor is not merely vicarious but primary, wherein the
defense of exercise of due diligence in the selection and supervision of its employees is
of no moment. Banks handle daily transactions involving millions of pesos. By the very
nature of their work the degree of responsibility, care and trustworthiness expected of
their employees and officials is far greater than those of ordinary clerks and employees.
Banks are expected to exercise the highest degree of diligence in the selection and
supervision of their employees.
Thus the Decision and Resolution of the Court of Appeals in CA-G.R. CV No.
25017, are affirmed. PCIBank, is declared solely responsible for the loss of the proceeds
of Citibank Check No. SN 04867 in the amount P4,746,114.41, which shall be paid
together with six percent (6%) interest thereon to Ford Philippines Inc. from the date
when the original complaint was filed until said amount is fully paid. However, the
Decision and Resolution of the Court of Appeals in CA-G.R. No. 28430 are MODIFIED as
follows: PCIBank and Citibank are adjudged liable for and must share the loss,
(concerning the proceeds of Citibank Check Numbers SN 10597 and 16508 totalling
P12,163,298.10) on a fifty-fifty ratio, and each bank is ORDERED to pay Ford Philippines
Inc. P6,081,649.05, with six percent (6%) interest thereon, from the date the complaint
was filed until full payment of said amount.
CULPA ACQUILIANA
incompetence and/or negligence of, and/or the failure to observe the required extraordinary diligence by the crew.
On November 11, 1990, SMC issued sailing orders to the Master of the MN Doa
Roberta, Captain Inguito. Inguito obtained the necessary sailing clearance from the
Philippine Coast Guard. The vessel left Mandaue City at 6:00 a.rn. of November 12. At
4:00 a.m., typhoon Ruping was spotted. At 7:00 a.m., SMC Radio Operator Moreno
contacted Inguito through the radio and advised him to take shelter. Inguito replied that
they will proceed since the typhoon was far away from them, and that the winds were in
their favor. At 2:00 p.m., Moreno again communicated with Inguito and advised him to
take shelter. The captain responded that they can manage. Moreno again contacted
Inguito at 4:00 p.m. and reiterated the advice that it will be difficult to take shelter after
passing Balicasag Island because they were approaching an open sea. Still, the captain
refused to heed his advice.
At 11:40 p.m, Moreno made a series of calls to the M/V Doa Roberta but he failed
to get in touch with anyone in the vessel. At 1:15 a.m. of November 13, Inguito called
Moreno over the radio and requested him to contact the son of Julius Ouano because
they needed a helicopter to rescue them. At 2:30 a.m. of November 13, 1990, the M/V
Doa Roberta sank. Out of the 25 officers and crew on board the vessel, only five
survived.
On November 24, 1990, Julius Ouano, in lieu of the captain who perished in the
sea tragedy, filed a Marine Protest. The heirs of the deceased captain and crew, as well
as the survivors, of the ill-fated M/V Doa Roberta filed a complaint for tort against SMC
and Julius Ouano before the RTC. Julius Ouano alleged that the proximate cause of the
loss of the vessel and its officers and crew was the fault and negligence of SMC, which
had complete control and disposal of the vessel as charterer and which issued the sailing
order for its departure despite being forewarned of the impending typhoon. Thus, he
prayed that SMC indemnify him for the cost of the vessel and the unrealized rentals and
earnings thereof. SMC argued that the proximate cause of the sinking was Ouanos
breach of his obligation to provide SMC with a seaworthy vessel duly manned by
competent crew. SMC interposed counterclaims against Ouano for the value of the cargo
lost in the sea tragedy.
The trial court ruled that the proximate cause of the loss of the M/V Doa Roberta
was attributable to SMC and was ordered and sentenced to pay to the heirs of the
deceased crew. The CA modified the decision appealed from, declaring defendantappellants SMC and Julian C. Ouano jointly and severally liable to plaintiffs-appellees,
except to the heirs of Capt. Inguito.
ISSUE:
Whether or not the finding of the appellate court was in order.
RULING:
Under the terms of the TCPA between the parties, the charterer, SMC, should be
free from liability for any loss or damage sustained during the voyage, unless it be shown
that the same was due
to its fault or negligence. The evidence does not show that SMC or its employees were
amiss in their duties. SMCs Radio Operator Moreno, who was tasked to monitor every
shipment of its cargo, zealously contacted and advised Capt. Inguito to take shelter from
typhoon Ruping.
In contrast to the care exercised by Moreno, Rico Ouano tried to communicate
with the captain only after receiving the S.O.S. message. Neither Ouano nor his son was
available during the entire time that the vessel set out and encountered foul weather.
Considering that the charter was a contract of affreightment, the shipowner had the
clear duty to ensure the safe carriage and arrival of goods transported on board its
vessels. More specifically, Ouano expressly warranted in the TCPA that his vessel was
seaworthy. For a vessel to be seaworthy, it must be adequately equipped for the voyage
and manned with a sufficient number of competent officers and crew.
The proximate cause of the sinking of the vessel was the gross failure of the
captain of the vessel to observe due care and to heed SMCs advice to take shelter.
Gilbert Gonsaga, Chief Engineer of Doa Roberta, testified that the ship sank at 2:30 in
the early morning of November 13th. On the other hand, from the time the vessel left
the port of Mandaue at six oclock in the morning, Captain Sabiniano Inguito was able to
contact the radio operator of SMC. He was fully apprised of typhoon "Ruping" and its
strength. Due diligence dictated that at any time before the vessel was in distress, he
should have taken shelter in order to safeguard the vessel and its crew.
Ouano is vicariously liable for the negligent acts of his employee, Capt. Inguito.
Under Articles 2176 and 2180 of the Civil Code, owners and managers are responsible
for damages caused by the negligence of a servant or an employee, the master or
employer is presumed to be negligent either in the selection or in the supervision of that
employee. This presumption may be overcome only by satisfactorily showing that the
employer exercised the care and the diligence of a good father of a family in the
selection and the supervision of its employee. Ouano miserably failed to overcome the
presumption of his negligence. He failed to present proof that he exercised the due
diligence of a bonus paterfamilias in the selection and supervision of the captain of the
M/V Doa Roberta. Hence, he is vicariously liable for the loss of lives and property
occasioned by the lack of care and negligence of his employee.
SMC is not liable for the losses. The contention that it was the issuance of the
sailing order by SMC which was the proximate cause of the sinking is untenable. The
fact that there was an approaching typhoon is of no moment. It appears that on one
previous occasion, SMC issued a sailing order to the captain of the M/V Doa Roberta,
but the vessel cancelled its voyage due to typhoon. Likewise, it appears from the
records that SMC issued the sailing order on November 11, 1990, before typhoon
"Ruping" was first spotted at 4:00 a.m. of November 12, 1990.
Consequently, Ouano should answer for the loss of lives and damages suffered by
the heirs of the officers and crew who perished on board the M/V Doa Roberta, except
Captain Sabiniano Inguito. The award of damages granted by the CA is affirmed only
against Ouano, who should also indemnify SMC for the cost of the lost cargo, in the total
amount of P10,278,542.40.
Macasasas negligence. It further held that since petitioner failed to present evidenced to
the contrary and conformably with Article 2180 of the Civil Code, the presumption of
negligence of the employer in the selection and supervision of employees stood.
The records show that Macasasa violated two traffic rules under the Land
Transportation and Office Code. Under Article 2185 of the Civil Code, a person driving a
motor vehicle is presumed negligent if at the time of the mishap, he was violating traffic
regulations.
Further, under Article 2180, employers are liable for the damages caused by their
employees acting within the scope of their assigned tasks. The liability arises due to the
presumed negligence of the employers in supervising their employees unless they prove
that they observed all the diligence of a good father of a family to prevent the damage.
In this case petitioner is held primarily and solidarily liable for the damages caused by
Macasasa.
However, Article 2179 states that when the plaintiffs own negligence was the
immediate and proximate cause of his injury, he cannot recover damages. But if his
negligence was only contributory, the immediate and proximate cause of the injury being
the defendants lack of due care, the plaintiff may recover damages, but the court shall
mitigate the damages awarded.
Ruling that Soriano was guilty of contributory negligence for not using the
pedestrian overpass, 20% reduction of the amount of the damages awarded was
awarded to petitioner.
RULING:
Contrary to Mrs. Cerezos assertion, Foronda is not an indispensable party to the
case. An indispensable party is one whose interest is affected by the courts action in
the litigation, and without whom no final resolution of the case is possible. However,
Mrs. Cerezos liability as an employer in an action for a quasi-delict is not only solidary, it
is also primary and direct. Foronda is not an indispensable party to the final resolution of
Tuazons action for damages against Mrs. Cerezo.
The responsibility of two or more persons who are liable for a quasi-delict is
solidary. Where there is a solidary obligation on the part of debtors, as in this case, each
debtor is liable for the entire obligation. Hence, each debtor is liable to pay for the entire
obligation in full. There is no merger or renunciation of rights, but only mutual
representation. Where the obligation of the parties is solidary, either of the parties is
indispensable, and the other is not even a necessary party because complete relief is
available from either. Therefore, jurisdiction over Foronda is not even necessary as
Tuazon may collect damages from Mrs. Cerezo alone.
Moreover, an employers liability based on a quasi-delict is primary and direct,
while the employers liability based on a delict is merely subsidiary. The words primary
and direct, as contrasted with subsidiary, refer to the remedy provided by law for
enforcing the obligation rather than to the character and limits of the obligation.
Although liability under Article 2180 originates from the negligent act of the employee,
the aggrieved party may sue the employer directly.
When an employee causes damage, the law presumes that the employer has
himself committed an act of negligence in not preventing or avoiding the damage. This
is the fault that the law condemns. While the employer is civilly liable in a subsidiary
capacity for the employees criminal negligence, the employer is also civilly liable
directly and separately for his own civil negligence in failing to exercise due diligence in
selecting and supervising his employee. The idea that the employers liability is solely
subsidiary is wrong.
To hold the employer liable in a subsidiary capacity under a delict, the aggrieved
party must initiate a criminal action where the employees delict and corresponding
primary liability are established. If the present action proceeds from a delict, then the
trial courts jurisdiction over Foronda is necessary.
However, the present action is clearly for the quasi-delict of Mrs. Cerezo and not
for the delict of Foronda.
Thus, the petition was denied ordering the defendant Hermana Cerezo to pay the
plaintiff.
FACTS:
Defendant Alberto delos Santos was the driver of defendant Rudy Samidan
of the latters vehicle, a Forward Cargo Truck. At about 12:30 in the afternoon, he
was driving said truck along the National Highway within the vicinity of Gerona,
Tarlac. The Viron Bus, driven by Wilfredo Villanueva, tried to overtake his truck,
and he swerved to the right shoulder of the highway, but as soon as he occupied
the right lane of the road, the cargo truck which he was driving was hit by the
Viron bus on its left front side, as the bus swerved to his lane to avoid an
incoming bus on its opposite direction. With the driver of another truck dealing
likewise in vegetables, Dulnuan, the two of them and the driver of the Viron bus
proceeded to report the incident to the Police Station.
Both the RTC and the CA rendered its decision in favor of the private
respondents.
ISSUE:
Whether the employer is liable to the negligence of his employee.
RULING:
As employers of the bus driver, the petitioner is, under Article 2180 of the
Civil Code, directly and primarily liable for the resulting damages.
The
presumption that they are negligent flows from the negligence of their employee.
That presumption, however, is only jusris tantum, not juris et de jure. Their only
possible defense is that they exercised all the diligence of a good father of a
family to prevent the damage.
In fine, when the employee causes damage due to his own negligence
while performing his own duties, there arises the juris tantum presumption that
the employer is negligent, rebuttable only by proof of observance of the diligence
of a good father of a family.
Petitioner, through its witnesses, failed to rebut such legal presumption of
negligence in the selection and supervision of employees, thus, petitioner as the
employer is responsible for damages, the basis of the liability being the
relationship of pater familias or on the employers own negligence. Hence, with
the allegations and subsequent proof of negligence against the bus driver of
petitioner, petitioner (employer) is liable for damages.
It is thus clear that the employer of a negligent employee is liable for the
damages caused by the latter. When an injury is caused by the negligence of an
employee, there instantly arises a presumption of the law that there has been negligence
on the part of the employer either in the selection of the employee or the supervision
over him, after such selection. The presumption, however, may be rebutted by a clear
showing on the part of the employer that he has exercised the care and diligence of a
good father of a family in the selection and supervision of his employee.
In this case, petitioner failed to prove such exercised of due diligence of a good
father of a family in the selection and supervision of employee, thus making the
petitioner solidarily liable for the damages.
2. Whether Safeguard should be held solidarily liable for the damages awarded to
respondents.
RULING:
ARTICLE 2176. Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties is called a
quasi-delict and is governed by the provisions of this Chapter.
Safeguard contends that it cannot be jointly held liable since it had adequately
shown that it had exercised the diligence required in the selection and supervision of its
employees. It claims that it had required the guards to undergo the necessary training
and to submit the requisite qualifications and credentials which even the
RTC found
to have been complied with; that the RTC erroneously found that it did not exercise the
diligence required in the supervision of its employee. Safeguard further claims that it
conducts monitoring of the activities of its personnel, wherein supervisors are assigned
to routinely check the activities of the security guards which include among others,
whether or not they are in their proper post and with proper equipment, as well as
regular evaluations of the employees' performances; that the fact that Pajarillo loaded
his firearm contrary to Safeguard's operating procedure is not sufficient basis to say that
Safeguard had failed its duty of proper supervision; that it was likewise error to say that
Safeguard was negligent in seeing to it that the procedures and policies were not
properly implemented by reason of one unfortunate event. The Supreme Court was not
convinced.
Article 2180 of the Civil Code provides: The obligation imposed by Article
2176 is demandable not only for one's own acts or omissions, but also for those of
persons for whom one is responsible.
As the employer of Pajarillo, Safeguard is primarily and solidarily liable for the
quasi-delict committed by the former. Safeguard is presumed to be negligent in the
selection and supervision of his employee by operation of law. This presumption may be
overcome only by satisfactorily showing that the employer exercised the care and the
diligence of a good father of a family in the selection and the supervision of its
employee. In the selection of prospective employees, employers are required to
examine them as to their qualifications, experience, and service records. On the other
hand, due diligence in the supervision of employees includes the formulation of suitable
rules and regulations for the guidance of employees and the issuance of proper
instructions intended for the protection of the public and persons with whom the
employer has relations through his or its employees and the imposition of necessary
disciplinary measures upon employees in case of breach or as may be warranted to
ensure the performance of acts indispensable to the business of and beneficial to their
employer. To this, we add that actual implementation and monitoring of consistent
compliance with said rules should be the constant concern of the employer, acting
through dependable supervisors who should regularly report on their supervisory
functions. To establish these factors in a trial involving the issue of vicarious liability,
employers must submit concrete proof, including documentary evidence.
car coming from the opposite direction were duly established by the evidence.
The speed at which the bus traveled, inappropriate in the light of the
aforementioned circumstances, is evident from the fact despite the application of the
brakes, the bus still bumped the tricycle, and then proceeded to collide with the
incoming car with such force that the car was pushed beyond the edge of the road to the
ricefield.
In the present case, petitioners presented several documents in evidence to show
the various tests and pre-qualification requirements imposed upon petitioner Pleyto
before his hiring as a driver by PRBL. However, no documentary evidence was presented
to prove that petitioner PRBL exercised due diligence in the supervision of its employees,
including Pleyto. Citing precedents, the Court of Appeals opined,
In order that the defense of due diligence in the selection and supervision of
employees may be deemed sufficient and plausible, it is not enough for the employer to
emptily invoke the existence of company guidelines and policies on hiring and
supervision. As the negligence of the employee gives rise to the presumption of
negligence on the part of the employer, the latter has the burden of proving that it has
been diligent not only in the selection of employees but also in the actual supervision of
their work. The mere allegation of the existence of hiring procedures and supervisory
policies without anything more is decidedly not sufficient to overcome such presumption.
ISSUE:
Whether the employer is liable to the negligence of his employee.
RULING:
As employers of the bus driver, the petitioner is, under Article 2180 of the
Civil Code, directly and primarily liable for the resulting damages.
The
presumption that they are negligent flows from the negligence of their employee.
That presumption, however, is only jusris tantum, not juris et de jure. Their only
possible defense is that they exercised all the diligence of a good father of a
family to prevent the damage.
In fine, when the employee causes damage due to his own negligence
while performing his own duties, there arises the juris tantum presumption that
the employer is negligent, rebuttable only by proof of observance of the diligence
of a good father of a family.
Petitioner, through its witnesses, failed to rebut such legal presumption of
negligence in the selection and supervision of employees, thus, petitioner as the
employer is responsible for damages, the basis of the liability being the
relationship of pater familias or on the employers own negligence. Hence, with
the allegations and subsequent proof of negligence against the bus driver of
petitioner, petitioner (employer) is liable for damages.
FACTS:
Defendant Alberto delos Santos was the driver of defendant Rudy Samidan
of the latters vehicle, a Forward Cargo Truck. At about 12:30 in the afternoon, he
was driving said truck along the National Highway within the vicinity of Gerona,
Tarlac. The Viron Bus, driven by Wilfredo Villanueva, tried to overtake his truck,
and he swerved to the right shoulder of the highway, but as soon as he occupied
the right lane of the road, the cargo truck which he was driving was hit by the
Viron bus on its left front side, as the bus swerved to his lane to avoid an
incoming bus on its opposite direction. With the driver of another truck dealing
likewise in vegetables, Dulnuan, the two of them and the driver of the Viron bus
proceeded to report the incident to the Police Station.
Both the RTC and the CA rendered its decision in favor of the private
respondents.
FACTS:
Respondent Salvador Begasa and his three companions flagged down a
passenger jeepney driven by Joaquin Espina and owned by Aurora Pisuena. While
respondent was boarding the passenger jeepney (his right foot already inside while his
left foot still on the boarding step of the passenger jeepney), a truck driven by Elizalde
Sablayan and owned by petitioner Ernesto Syki bumped the rear end of the passenger
jeepney. Respondent fell and fractured his left thigh bone.
Respondent filed a complaint for damages for breach of common carriers
contractual obligations and quasi-delict against Aurora Pisuena, the owner of the
passenger jeepney;, herein petitioner Ernesto Syki, the owner of the truck;, and Elizalde
Sablayan, the driver of the truck.
After hearing, the trial court dismissed the complaint against Aurora Pisuena, the
owner and operator of the passenger jeepney, but ordered petitioner Ernesto Syki and
his truck driver, Elizalde Sablayan, to pay respondent Salvador Begasa, jointly and
severally
ISSUE:
1. Whether or not petitioner is liable for the act of his employee.
2. Whether he exercised the diligence of a good father of a family.
RULING:
1. Article 2180 of the Civil Code provides:
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the
former are not engaged in any business or industry.
From the above provision, when an injury is caused by the negligence of an
employee, a legal presumption instantly arises that the employer was negligent, either
or both, in the selection and/or supervision of his said employee duties. The said
presumption may be rebutted only by a clear showing on the part of the employer that
he had exercised the diligence of a good father of a family in the selection and
supervision of his employee. If the employer successfully overcomes the legal
presumption of negligence, he is relieved of liability. In other words, the burden of proof
is on the employer.
2. The question is: how does an employer prove that he had indeed exercised the
diligence of a good father of a family in the selection and supervision of his employee.
Making proof in its or his case, it is paramount that the best and most complete evidence
is formally entered.
In the case at bar, while there is no rule which requires that testimonial evidence,
to hold sway, must be corroborated by documentary evidence, inasmuch as the
witnesses testimonies dwelt on mere generalities, we cannot consider the same as
sufficiently persuasive proof that there was observance of due diligence in the selection
and supervision of employees. Petitioners attempt to prove its deligentissimi patris
familias in the selection and supervision of employees through oral evidence must fail
as it was unable to buttress the same with any other evidence, object or documentary,
which might obviate the apparent biased nature of the testimony.
In the selection of prospective employees, employers are required to examine
them as to their qualifications, experience, and service records. On the other hand, with
respect to the supervision of employees, employers should formulate standard operating
procedures, monitor their implementation, and impose disciplinary measures for
breaches thereof. To establish these factors in a trial involving the issue of vicarious
liability, employers must submit concrete proof, including documentary evidence.
The employer must not merely present testimonial evidence to prove that he had
observed the diligence of a good father of a family in the selection and supervision of his
employee, but he must also support such testimonial evidence with concrete or
documentary evidence. The reason for this is to obviate the biased nature of the
employers testimony or that of his witnesses.
In this case, petitioners evidence consisted entirely of testimonial evidence. He
testified that before he hired Elizalde Sablayan, he required him to submit a police
clearance in order to determine if he was ever involved in any vehicular accident. He also
required Sablayan to undergo a driving test with conducted by his mechanic, Esteban
Jaca. Petitioner claimed that he, in fact, accompanied Sablayan during the driving test
and that during the test, Sablayan was taught to read and understand traffic signs like
Do Not Enter, One Way, Left Turn, and Right Turn.
Petitioners mechanic, Esteban Jaca, on the other hand, testified that Sablayan
passed the driving test and had never figured in any vehicular accident except the one in
question. He also testified that he maintained in good condition all the trucks of
petitioner by checking the brakes, horns and tires thereof before leaving for providing
hauling services.
Petitioner, however, never presented the alleged police clearance given to him by
Sablayan, nor the results of Sablayans driving test. Petitioner also did not present
records of the regular inspections that his mechanic allegedly conducted.
In sum, the sole and proximate cause of the accident was the negligence of
petitioners driver who, as found by the lower courts, did not slow down even when he
was already approaching a busy intersection within the city proper. The passenger
jeepney had long stopped to pick up respondent and his three companions and, in fact,
respondent was already partly inside the jeepney, when petitioners driver bumped the
rear end ofrear-ended it.
Since the negligence of petitioners driver was the sole and proximate cause of
the accident, in the present case, petitioner is liable, under Article 2180 of the Civil Code,
to pay damages to respondent Begasa for the injuries sustained by latter.
Herminigildo Zuiga, a pedestrian. Such was the force of the impact that the left side of
the front windshield of the bus was cracked. Zuiga was rushed to the Quezon City
General Hospital where he was given medical attention, but due to the massive injuries
sustained, he succumbed shortly thereafter.
Private respondents, as heirs of the victim, filed a Complaint against petitioner
and her driver, Venturina, for damages. The complaint essentially alleged that Venturina
drove the bus in a reckless, careless and imprudent manner, in violation of traffic rules
and regulations, without due regard to public safety, thus resulting in the victims
premature death.
The petitioner vehemently denied the material allegations of the complaint. She
tried to shift the blame for the accident upon the victim, theorizing that Herminigildo
bumped into her bus, while avoiding an unidentified woman who was chasing him. She
further alleged that she was not liable for any damages because as an employer, she
exercised the proper diligence of a good father of a family, both in the selection and
supervision of her bus driver.
ISSUE:
Whether or not petitioner observed the diligence of a good father of a family, so
as not to be liable for the act committed by her employee?
RULING:
It held that this was a case of quasi-delict, there being no pre-existing contractual
relationship between the parties. The court a quo then found the petitioner directly and
primarily liable as Venturinas employer pursuant to Article 2180 of the Civil Code as she
failed to present evidence to prove that she has observed the diligence of a good father
of a family in the selection and supervision of her employees.
Art. 2180 states that the obligation imposed by Article 2176 is demandable not
only for ones own acts or omissions, but also for those of persons for whom one is
responsible
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the
former are not engaged in any business or industry.
Petitioner contends that as an employer, she observed the proper diligence of a
good father of a family, both in the selection and supervision of her driver and therefore,
is relieved from any liability for the latters misdeed. To support her claim, she points out
that when Venturina applied with her as a driver in January 1992, she required him to
produce not just his drivers license, but also clearances from the National Bureau of
Investigation (NBI), the Philippine National Police, and the barangay where he resides.
She also required him to present his Social Security System (SSS) Number prior to
accepting him for employment. She likewise stresses that she inquired from Venturinas
previous employer about his employment record, and only hired him after it was shown
to her satisfaction that he had no blot upon his record.
In sum, petitioners liability to private respondents for the negligent and
imprudent acts of her driver, Venturina, under Article 2180 of the Civil Code is both
manifest and clear. Petitioner, having failed to rebut the legal presumption of negligence
in the selection and supervision of her driver, is responsible for damages, the basis of the
liability being the relationship of pater familias or on the employers own negligence.
Quasi-delictual liability even in the existence of a contract between
parties
1. REGINO VS. PANGASINAN COLLEGES, supra
2. YHT VS CA, 451 S 638
REGINO VS. PANGASINAN COLLEGES
GR No. 156109 November 18, 2004
FACTS:
Petitioner Khristine Rea M. Regino was a first year computer science student at
Respondent Pangasinan Colleges of Science and Technology (PCST). In February 2002,
PCST held a fund raising campaign dubbed the Rave Party and Dance Revolution, the
proceeds of which were to go to the construction of the schools tennis and volleyball
courts. Each student was required to pay for two tickets at the price of P100 each. The
project was allegedly implemented by recompensing students who purchased tickets
with additional points in their test scores; those who refused to pay were denied the
opportunity to take the final examinations. Financially strapped and prohibited by her
religion from attending dance parties and celebrations, Regino refused to pay for the
tickets. On March 14 and March 15, 2002, the scheduled dates of the final examinations
in logic and statistics, her teachers -- Respondents Rachelle A. Gamurot and Elissa
Baladad -- allegedly disallowed her from taking the tests.
ISSUE:
Whether or not the purchased of the tickets are mandatory and are part of the
contract between school and student.
RULING:
Reciprocity of the School-Student Contract
The school-student relationship is also reciprocal. Thus, it has consequences
appurtenant to and inherent in all contracts of such kind -- it gives rise to bilateral or
reciprocal rights and obligations. The school undertakes to provide students with
education sufficient to enable them to pursue higher education or a profession. On the
other hand, the students agree to abide by the academic requirements of the school and
to observe its rules and regulations.
The terms of the school-student contract are defined at the moment of its
inception -- upon enrolment of the student. Standards of academic performance and the
code of behavior and discipline are usually set forth in manuals distributed to new
students at the start of every school year. Further, schools inform prospective enrollees
the amount of fees and the terms of payment.
In practice, students are normally required to make a down payment upon
enrollment, with the balance to be paid before every preliminary, midterm and final
examination. Their failure to pay their financial obligation is regarded as a valid ground
for the school to deny them the opportunity to take these examinations.
The foregoing practice does not merely ensure compliance with financial
obligations; it also underlines the importance of major examinations. Failure to take a
major examination is usually fatal to the students promotion to the next grade or to
graduation. Examination results form a significant basis for their final grades. These
tests are usually a primary and an indispensable requisite to their elevation to the next
educational level and, ultimately, to their completion of a course.
Thus, students expect that upon their payment of tuition fees, satisfaction of the
set academic standards, completion of academic requirements and observance of school
rules and regulations, the school would reward them by recognizing their completion of
the course enrolled in.
PCST imposed the assailed revenue-raising measure belatedly, in the middle of the
semester. It exacted the dance party fee as a condition for the students taking the final
examinations, and ultimately for its recognition of their ability to finish a course. The
fee, however, was not part of the school-student contract entered into at the start of the
school year. Hence, it could not be unilaterally imposed to the prejudice of the enrollees.
Quasi-delictual liability even in the existence of a contract between parties
RULING:
Under Article 1170 of the New Civil Code, those who, in the performance of their
obligations, are guilty of negligence, are liable for damages. Article 2180 provides that
the owners and managers of an establishment or enterprise are likewise responsible for
damages caused by their employees in the service of the branches in which the latter
are employed or on the occasion of their functions. Also, this Court has ruled that if an
employee is found negligent, it is presumed that the employer was negligent in selecting
and/or supervising him for it is hard for the victim to prove the negligence of such
employer.
Thus, given the fact that the loss of McLoughlins
money was
consummated through the negligence of Tropicanas employees in allowing Tan to open
the safety deposit box without the guests consent, both the assisting employees and
YHT Realty Corporation itself, as owner and operator of Tropicana, should be held
solidarily liable.
Art. 2003. The hotel-keeper cannot free himself from responsibility by posting
notices to the effect that he is not liable for the articles brought by the guest. Any
stipulation between the hotel-keeper and the guest whereby the responsibility of the
former as set forth in Articles 1998 to 2001 is suppressed or diminished shall be void.
The hotel business like the common carriers business is imbued with public
interest. The twin duty constitutes the essence of the business. The law in turn does not
allow such duty to the public to be negated or diluted by any contrary stipulation in socalled undertakings that ordinarily appear in prepared forms imposed by hotel keepers
on guests for their signature.
In the case at bar, the responsibility of securing the safety deposit box was
shared not only by the guest himself but also by the management since two keys are
necessary to open the safety deposit box. Without the assistance of hotel employees,
the loss would not have occurred.
Thus, Tropicana was guilty of concurrent negligence in allowing Tan, who was not
the registered guest, to open the safety deposit box of McLoughlin, even assuming that
the latter was also guilty of negligence in allowing another person to use his key. To rule
otherwise would result in undermining the safety of the safety deposit boxes in hotels for
the management will be given imprimatur to allow any person, under the pretense of
being a family member or a visitor of the guest, to have access to the safety deposit box
without fear of any liability that will attach thereafter in case such person turns out to be
a complete stranger. This will allow the hotel to evade responsibility for any liability
incurred by its employees in conspiracy with the guests relatives and visitors.
Medical Malpractice/ Medical Negligence Cases
1.
2.
3.
4.
5.
RAMOS VS. CA
GR No. 124354 December 29, 1999
FACTS:
Plaintiff Erlinda Ramos was a robust woman Except for occasional complaints of
discomfort due to pains allegedly caused by the presence of a stone in her gall bladder.
Because the discomforts somehow interfered with her normal ways, she sought
professional advice. She was advised to undergo an operation for the removal of a stone
in her gall bladder. Through the intercession of a mutual friend, Dr. Buenviaje she and
her husband Rogelio met for the first time Dr. Orlino one of the defendants in this case,
on June 10, 1985. They agreed that their date at the operating table at the DLSMC
(another defendant. Dr. Hosaka decided that she should undergo a "cholecystectomy"
operation after examining the documents (findings from the Capitol Medical Center, FEU
Hospital and DLSMC) presented to him. Rogelio E. Ramos, however, asked Dr. Hosaka to
look for a good anesthesiologist. Dr. Hosaka, in turn, assured Rogelio that he will get a
good anesthesiologist. Dr. Hosaka charged a fee of P16,000.00, which was to include the
anesthesiologist's fee and which was to be paid after the operation. A day before the
scheduled date of operation, she was admitted at one of the rooms of the DLSMC,
located along E. Rodriguez Avenue, Quezon City.
At around 7:30 A.M. of June 17, 1985 and while still in her room, she was prepared
for the operation by the hospital staff. Her sister-in-law, Herminda Cruz, who was the
Dean of the College of Nursing at the Capitol Medical Center, was also there for moral
support. Herminda was allowed to stay inside the operating room.
At around 9:30 A.M., Dr. Gutierrez reached a nearby phone to look for Dr. Hosaka
who was not yet in Dr. Gutierrez thereafter informed Herminda Cruz about the prospect
of a delay in the arrival of Dr. Hosaka. Herminda then went back to the patient who
asked, "Mindy, wala pa ba ang Doctor"? The former replied, "Huwag kang mag-alaala,
darating na iyon. Thereafter, Herminda went out of the operating room and informed the
patient's husband, Rogelio, that the doctor was not yet around.
At about 12:15 P.M., Herminda Cruz, who was inside the operating room with the
patient, heard somebody say that "Dr. Hosaka is already here." She then saw people
inside the operating room "moving, doing this and that, preparing the patient for the
operation" As she held the hand of Erlinda Ramos, she then saw Dr. Gutierrez intubating
the hapless patient. She thereafter heard Dr. Gutierrez say, "ang hirap ma-intubate nito,
mali yata ang pagkakapasok. O lumalaki ang tiyan", because of the remarks of Dra.
Gutierrez, she focused her attention on what Dr. Gutierrez was doing. She thereafter
noticed bluish discoloration of the nailbeds of the left hand of the hapless Erlinda even as
Dr. Hosaka approached her. She then heard Dr. Hosaka issue an order for someone to
call Dr. Calderon, another anesthesiologist. After Dr. Calderon arrived at the operating
room, she saw this anesthesiologist trying to intubate the patient. The patient's nailbed
became bluish and the patient was placed in a trendelenburg position - a position where
the head of the patient is placed in a position lower than her feet which is an indication
that there is a decrease of blood supply to the patient's brain. Immediately thereafter,
she went out of the operating room, and she told Rogelio E. Ramos "that something
wrong was happening". Dr. Calderon was then able to intubate the patient.
Meanwhile, Rogelio, who was outside the operating room, saw a respiratory
machine being rushed towards the door of the operating room. He also saw several
doctors rushing towards the operating room. When informed by Herminda Cruz that
something wrong was happening, he told her (Herminda) to be back with the patient
inside the operating room. Herminda immediately rushed back, and saw that the
patient was still in trendelenburg position. At almost 3:00 P.M. of that fateful day, she
saw the patient taken to the Intensive Care Unit (ICU). Doctors Gutierrez and Hosaka
were also asked by the hospital to explain what happened to the patient. The doctors
explained that the patient had bronchospasm. Erlinda Ramos stayed at the ICU for a
month. About four months thereafter the patient was released from the hospital.
ISSUE:
1. Whether the respondent doctors are negligent.
2. Whether the respondent doctors and the hospital are solidarily liable.
RULING:
Res ipsa loquitur is a Latin phrase which literally means "the thing or the
transaction speaks for itself." The phrase "res ipsa loquitur" is a maxim for the rule that
the fact of the occurrence of an injury, taken with the surrounding circumstances, may
permit an inference or raise a presumption of negligence, or make out a plaintiff's prima
facie case, and present a question of fact for defendant to meet with an explanation
At the time of submission, Erlinda was neurologically sound and, except for a few
minor discomforts, was likewise physically fit in mind and body. However, during the
administration of anesthesia and prior to the performance of cholecystectomy she
suffered irreparable damage to her brain. Thus, without undergoing surgery, she went
out of the operating room already decerebrate and totally incapacitated. Obviously,
brain damage, which Erlinda sustained, is an injury which does not normally occur in the
process of a gall bladder operation. In fact, this kind of situation does not happen in the
absence of negligence of someone in the administration of anesthesia and in the use of
endotracheal tube. Normally, a person being put under anesthesia is not rendered
decerebrate as a consequence of administering such anesthesia if the proper procedure
was followed. Furthermore, the instruments used in the administration of anesthesia,
including the endotracheal tube, were all under the exclusive control of private
respondents, who are the physicians-in-charge. Likewise, petitioner Erlinda could not
have been guilty of contributory negligence because she was under the influence of
anesthetics which rendered her unconscious.
With regard to Dra. Gutierrez, we find her negligent in the care of Erlinda during
the anesthesia phase. As borne by the records, respondent Dra. Gutierrez failed to
properly intubate the patient.
The Court finds that she omitted to exercise reasonable care in not only
intubating the patient, but also in not repeating the administration of atropine without
due regard to the fact that the patient was inside the operating room for almost three (3)
hours. For after she committed a mistake in intubating the patient, the patient's nailbed
became bluish and the patient, thereafter, was placed in trendelenburg position, because
of the decrease of blood supply to the patient's brain. The evidence further shows that
the hapless patient suffered brain damage because of the absence of oxygen in her
(patient's) brain for approximately four to five minutes which, in turn, caused the patient
to become comatose.
On the part of Dr. Orlino Hosaka, this Court finds that he is liable for the acts of
Dr. Perfecta Gutierrez whom he had chosen to administer anesthesia on the patient as
part of his obligation to provide the patient a `good anesthesiologist', and for arriving for
the scheduled operation almost three (3) hours late.
On the part of DLSMC (the hospital), this Court finds that it is liable for the acts of
negligence of the doctors in their `practice of medicine' in the operating room.
Moreover, the hospital is liable for failing through its responsible officials, to cancel the
scheduled operation after Dr. Hosaka inexcusably failed to arrive on time.
In having held thus, this Court rejects the defense raised by defendants that they
have acted with due care and prudence in rendering medical services to plaintiff-patient.
For if the patient was properly intubated as claimed by them, the patient would not have
become comatose. And, the fact that another anesthesiologist was called to try to
intubate the patient after her (the patient's) nailbed turned bluish, belie their claim.
Furthermore, the defendants should have rescheduled the operation to a later date.
This, they should have done, if defendants acted with due care and prudence as the
patient's case was an elective, not an emergency case.
Wherefore judgment is rendered in favor of the plaintiffs and against the
defendants. Accordingly, the latter are ordered to pay, jointly and severally.
Dr. Blanes also took the physical examination of Jorge. Antibiotics being the
accepted treatment for typhoid fever, she ordered that a compatibility test with the
antibiotic chloromycetin be done on Jorge. As she did not observe any adverse reaction,
she ordered the first 500 mg. of said antibiotic. At around 1:00 in the morning, Dr. Blanes
was called as Jorges temperature rose to 41 degrees and then valium was administered.
However, the patient did not respond to the treatment and slipped into cyanosis, a bluish
or purplish discoloration of the skin or mucous membrane due to deficient oxygenation
of the blood. At around 2:00 a.m. Jorge died.
ISSUES:
Whether the death of Jorge Reyes was due to or caused by the negligence,
carelessness, imprudence, and lack of skill or foresight on the part of the
defendants.
RULING:
Petitioners action is for medical malpractice. It is a form of negligence which
consists in the failure of the physician or surgeon to apply to his practice of medicine
that degree of care and skill which is ordinarily employed by the profession. Four
elements involve in medical negligence cases, namely: duty, breach, injury, and
proximate causation.
In this case, there is no doubt that physician-patient relationship existed between
respondent doctors and Jorge Reyes. It is breach of this duty which constitutes actionable
malpractice. As to this aspect of medical malpractice, the determination of reasonable
level of care and breach thereof, expert testimony is essential.
The petitioner presented Dr. Vacalares, Chief Pathologist of the Northern
Mindanao Training Hospital, Cagayan de Oro, who performed the autopsy of Jorge. He
testified that Jorge did not die of typhoid fever but of shock undetermined, which could
be due to allergic reaction or chloromycetin overdose. The court was not persuaded.
Although Dr. Vacalares may have had extensive experience in performing autopsies, he
admitted that he had yet to do one on the body of a typhoid victim at the time he
conducted the post mortem of Jorge. It is also plain from his testimony that he treated
only about three cases of typhoid fever.
On the other hand, the two doctors presented by respondents clearly were
experts on the subject. They vouched for the correctness of Dr. Ricos diagnosis. Dr.
Gotiong, a diplomate whose specialization is infectious diseases and microbiology and an
associate professor at the Southern University College of Medicine and the Gullas College
of Medicine, testified that he has already treated over a thousand cases of typhoid fever.
According to him a case of typhoid fever is suspected using the widal test, if the 1:320
results of the said test has been presented to him. As to the treatment of the disease, he
stated that chloromycetin was the drug of choice. He also explained that despite the
measures taken by respondents and the intravenous administration of the two doses of
chloromycetin, complications of the disease could not be discounted.
Dr. Marilyn did not depart from the reasonable standard recommended by the
experts as she in fact observed the due care required under the circumstances. Though
the widal test is not conclusive, it remains a standard diagnostic test for typhoid fever
and, in the present case, a greater accuracy through repeated testing was rendered
unobtainable by the early death of the patient. The results of the widal test and the
patients history of fever with chills for five days, taken with the fact that typhoid fever
was then prevalent, were sufficient to give upon any doctor of reasonable skill the
impression that the patient had typhoid fever.
weather, arrived about an hour late. he examined the patient but despite his efforts
Corazon died.
Petitioners filed a case against CMC personnel and physicians on the ground that
they were negligent in the treatment and management of Corazons condition and
charged CMC with negligence in the selection and supervision of defendant physicians
and hospital staff.
After more than 11 years the Trial Court rendered its judgment finding Dr. Estrada
solely liable for damages.
ISSUE:
Whether CMC is vicariously liable for the negligence of Dr. Estrada.
RULING:
In general, a hospital is not liable for the negligence of an independent contractorphysician. However, the hospital may be held liable if the physician is the ostensible
agent of the hospital. This exception is also known as the doctrine of apparent
authority.
Under the doctrine of apparent authority a hospital can be held vicariously liable
for the negligent act of a physician providing care at eh hospital, regardless of whether
the physician is an independent contractor, unless the patient knows, or should have
known, that the physician is an independent contractor.
The doctrine of apparent authority involves two factors to determine the liability
of an independent contractor-physician. First factor focuses on the hospitals
manifestations and is sometimes described as an inquiry whether the hospital acted in a
manner which would lead a responsible person to conclude that the individual who was
alleged to be negligent was an employee or agent of the hospital. The second factor
focuses on the patients reliance. It is sometimes characterized as an inquiry on whether
the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent
with ordinary care and prudence.
In this case, CMC impliedly held out Dr. Estrada as a member of its medical staff.
First, CMC granted staff privileges to Dr. Estrada when it extended its medical staff and
facilities. Upon request to admit Corazon, through its personnel, readily accommodated
the patient and updated Dr. Estrada of the patients condition. Second, CMC made
Rogelio sign a consent forms printed in CMC letterhead. And third, Dr. Estradas referral
to Dr. Espinola, who then was the Head of the Obstetrics and Gynecology Department of
CMC.
Wherefore the court finds respondent Capitol Medical Center vicariously liable for
the negligence of Dr. Oscar Estrada.
Medical Malpractice/ Medical Negligence Cases
PROFESSIONAL SERVICES VS. AGANA
GR No. 126467 February 11, 2008
FACTS:
On April 04, 1984, Natividad Agana was admitted at the Medical City General
Hospital because of difficulty of bowel movement and bloody anal discharge. Dr. Ampil
diagnosed her to be suffering from cancer of the sigmoid. Thus, Dr. Ampil, assisted by
the medical staff of Medical City, performed a surgery upon her. During the surgery, he
found that the malignancy in her sigmoid area had spread to her left ovary, necessitating
the removal of certain portions of it. Thus, Dr. Ampil obtained the consent of Natividads
husband to permit Dr. Fuentes to perform hysterectomy upon Natividad. Dr. Fuentes
performed and completed the hysterectomy. Afterwards, Dr. Ampil took over, completed
the operation and closed the incision. The operation, however, appeared to be flawed as
the attending nurses entered in the corresponding Record of Operation that there were 2
lacking sponge and announced that it was searched by the surgeon but to no avail.
After a couple of days, Natividad complained excruciating pain in her anal region.
She consulted both Dr. Ampil and Dr. Fuentes. They told her that the pain was the natural
consequence of the surgical operation performed upon her. Dr. Ampil recommended that
she consult an oncologist to treat the cancerous nodes which were not removed.
Natividad and her husband went to the US to seek further treatment. After 4 months she
was told that she was free of cancer. They then flew back to the Philippines. Two weeks
thereafter , Natividads daughter found a piece of gauze protruding from her vagina. Dr.
Ampil saw immediately informed. He proceeded to Natividads house where he extracted
by hand a piece of gauze. Natividad sought the treatment of Polymedic General Hospital
thereat Dr. Gutierrez detected a foreign object in her vagina - a foul-smelling gauze
which infected her vaginal vault. A recto-vaginal fistula had formed in her reproductive
organ which forced stool to excrete in her vagina. Another surgical operation was
performed upon her.
Spouses Agana filed a complaint against PSI (owner of Medical City), Dr. Ampil
and Dr. Fuentes. The Trial Court found the respondents jointly and severally liable. The
CA affirmed said decision with modification that Dr. Fuentes was dismissed.
ISSUE:
Whether the Court of Appeals erred in absolving Dr. Fuentes of any liability.
RULING:
It was duly established that Dr. Ampil was the lead surgeon during the operation
of Natividad. He requested the assistance of Dr. Fuentes only to perform hysterectomy
when he (Dr. Ampil) found that the malignancy in her sigmoid area had spread to her left
ovary. Dr. Fuentes performed the surgery and thereafter reported and showed his work to
Dr. Ampil. The latter examined it and finding everything to be in order, allowed Dr.
Fuentes to leave the operating room. Dr. Ampil then resumed operating on Natividad. He
was about to finish the procedure when the attending nurses informed him that two
pieces of gauze were missing. A "diligent search" was conducted, but the misplaced
gauzes were not found. Dr. Ampil then directed that the incision be closed. During this
entire period, Dr. Fuentes was no longer in the operating room and had, in fact, left the
hospital.
Under the "Captain of the Ship" rule, the operating surgeon is the person in
complete charge of the surgery room and all personnel connected with the operation.
Their duty is to obey his orders. As stated before, Dr. Ampil was the lead surgeon. In
other words, he was the "Captain of the Ship." That he discharged such role is evident
from his following conduct. Clearly, the control and management of the thing which
caused the injury was in the hands of Dr. Ampil, not Dr. Fuentes.
Here, the negligence was proven to have been committed by Dr. Ampil and not by
Dr. Fuentes.
Spouses Agana filed a complaint against PSI (owner of Medical City), Dr. Ampil
and Dr. Fuentes. The Trial Court found the respondents jointly and severally liable. The
CA affirmed said decision with modification that Dr. Fuentes was dismissed.
ISSUE:
DIAZ VS. DAVAO LIGHT
GR No. 160959 April 2, 2007
FACTS:
RULING:
PSI contends that the proximate cause of Natividads injury was Dr. Ampils
negligence and that there is no employee-employer relationship between them because
Dr. Ampil is only a consultant of the said hospital.
The court held that there is an employee-employer relationship between hospital
and their attending and visiting physician. After a physician is accepted, either as a
visiting or attending consultant, he is normally required to attend clinicopathological
conferences, conduct bedside rounds for clerks, interns and residents, moderate grand
rounds and patient audits and perform other tasks and responsibilities, for the privilege
of being able to maintain a clinic in the hospital, and/or privilege of admitting patients
into the hospital. The physicians performance is generally evaluated and if said
physician falls short of the minimum standards he is normally terminated. In the said
case, the hospital has a control over its attending or visiting physician.
In general, a hospital is not liable for the negligence of an independent contractorphysician. However, the hospital may be held liable if the physician is the ostensible
agent of the hospital. This exception is also known as the doctrine of apparent
authority.
The doctrine of apparent authority involves two factors to determine the liability
of an independent contractor-physician. First factor focuses on the hospitals
manifestations and is sometimes described as an inquiry whether the hospital acted in a
manner which would lead a responsible person to conclude that the individual who was
alleged to be negligent was an employee or agent of the hospital. The second factor
focuses on the patients reliance. It is sometimes characterized as an inquiry on whether
the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent
with ordinary care and prudence.
In this case, it has been proven that the two factors were present. The hospital
indeed made it appear that Dr. Ampil was its employee when they advertise and
displayed his name in the directory at the lobby of the said hospital and that Natividad
relied on such knowledge that Dr. Ampil was indeed an employee of the hospital.
Wherefore PSI and Dr. Ampil are liable jointly and severally.
Malicious Prosecution
matters that could necessarily arise Moreover, Diaz asserts that the evidence he
presented is sufficient to prove the damages he suffered by reason of the malicious
institution
of
the
criminal
cases.
The court does not agree. Article 2028 of the Civil Code defines a compromise as
a contract whereby the parties, by making reciprocal concessions, avoid litigation or put
an end to one already commenced. The purpose of compromise is to settle the claims of
the parties and bar all future disputes and controversies. However, criminal liability is not
affected by compromise for it is a public offense which must be prosecuted and punished
by the Government on its own motion, though complete reparation should have been
made of the damages suffered by the offended party. A criminal case is committed
against the People, and the offended party may not waive or extinguish the criminal
liability that the law imposes for the commission of the offense. Moreover, a compromise
is not one of the grounds prescribed by the Revised Penal Code for the extinction of
criminal liability.
On
the
other
hand,
malicious
prosecution has been defined as an action for damages brought by or against whom a
criminal prosecution, civil suit or other legal proceeding has been instituted maliciously
and without probable cause, after the termination of such prosecution, suit, or other
proceeding in favor of the defendant therein. It is an established rule that in order for
malicious prosecution to prosper, the following requisites must be proven by petitioner:
(1) the fact of prosecution and the further fact that the defendant (respondent) was
himself the prosecutor, and that the action finally terminated with an acquittal; (2) that
in bringing the action, the prosecutor acted without probable cause; and (3) that the
prosecutor was actuated or impelled by legal malice, that is, by improper or sinister
motive. The foregoing are necessary to preserve a persons right to litigate which may be
emasculated
by
the
undue
filing
of
malicious
prosecution
cases.
From the foregoing requirements, it can be inferred that malice and want of
probable cause must both be clearly established to justify an award of damages based
on malicious prosecution. DLPC was not motivated by malicious intent or by a sinister
design to unduly harass petitioner, but only by a well-founded anxiety to protect its
rights. Respondent DLPC cannot therefore be faulted in availing of the remedies provided
for by law.
Malicious Prosecution
YASOA VS. DE RAMOS
GR No. 156339 October 6, 2004
FACTS:
Aurea Yasoa and her son, Saturnino, went to the house of Jovencio de Ramos to
ask for financial assistance in paying their loans to Philippine National Bank (PNB),
otherwise their residential house and lot would be foreclosed. Inasmuch as Aurea was his
aunt, Jovencio acceded to the request. They agreed that, upon payment by Jovencio of
the loan to PNB, half of Yasoas subject property would be sold to him. Jovencio paid
Aureas bank loan. As agreed upon, Aurea executed a deed of absolute sale in favor of
Jovencio over half of the lot consisting of 123 square meters. Thereafter, the lot was
surveyed and separate titles were issued by the Register of Deeds of Sta. Cruz, Laguna in
the names of Aurea and Jovencio
Twenty-two years later, in August 1993, Aurea filed an estafa complaint against
brothers Jovencio and Rodencio de Ramos on the ground that she was deceived by them
when she asked for their assistance in 1971 concerning her mortgaged property. In her
complaint, Aurea alleged that Rodencio asked her to sign a blank paper on the pretext
that it would be used in the redemption of the mortgaged property
On February 21, 1994, Assistant Provincial Prosecutor Rodrigo B. Zayenis
dismissed the criminal complaint for estafa for lack of evidence. On account of this
dismissal, Jovencio and Rodencio filed a complaint for damages on the ground of
malicious prosecution. They alleged that the filing of the estafa complaint against them
was done with malice and it caused irreparable injury to their reputation, as Aurea knew
fully well that she had already sold half of the property to Jovencio.
ISSUE:
Whether or not the filing of the criminal complaint for estafa by petitioners
against respondents constituted malicious prosecution?
RULING:
To constitute malicious prosecution, there must be proof that the prosecution
was prompted by a sinister design to vex or humiliate a person, and that it was initiated
deliberately by the defendant knowing that his charges were false and groundless.
Concededly, the mere act of submitting a case to the authorities for prosecution does not
make one liable for malicious prosecution.
In this case, the records show that the sale of the property was evidenced by a
deed of sale duly notarized and registered with the local Register of Deeds. After the
execution of the deed of sale, the property was surveyed and divided into two portions.
Separate titles were then issued in the names of Yasoa and Jovencio. Since 1973,
Jovencio had been paying the realty taxes of the portion registered in his name. In 1974,
Aurea even requested Jovencio to use his portion as bond for the temporary release of
her son who was charged with malicious mischief. Also, when Aurea borrowed money
from the Rural Bank of Lumban in 1973 and the PNB in 1979, only her portion was
mortgaged.
All these pieces of evidence indicate that Aurea had long acknowledged Jovencios
ownership of half of the property. Furthermore, it was only in 1993 when petitioners
decided to file the estafa complaint against respondents. If petitioners had honestly
believed that they still owned the entire property, it would not have taken them 22 years
to question Jovencios ownership of half of the property.
Malicious prosecution, both in criminal and civil cases, requires the elements of (1)
malice and (2) absence of probable cause.These two elements are present in the present
controversy. The complaint for estafa was dismissed outright as the prosecutor did not
find any probable cause against respondents. A suit for malicious prosecution will
prosper where legal prosecution is carried out without probable cause.
ULPA CRIMINAL
PEOPLE VS. DE LOS SANTOS
G.R. No. 131588
March 27, 2001
355 SCRA 415
FACTS:
As part of the Special Counter Insurgency Operation Unit Training held at Camp
Damilag, Manolo Fortich, Bukidnon, several members of the Philippine National Police
were undergoing an endurance run on October 5, 1995 which started at 2:20 am. The
PNP trainees were divided into three columns and were wearing black t-shirts, bl;ack
short pants, and green and black combat shoes. There were two rear guards assigned to
each rear column. Their duty was to jog backwards facing the oncoming vehicles and
give hand signals for other vehicles. From Alae to Maitum Highway, Puerto, Cagayan de
Oro City, about 20 vehicles passed them, all of which slowed down and took the left
portion of the road when signaled to do so.
The Supreme Court held that the incident, tragic though it was in the light of the
number of persons killed and seriously injured, was an accident than of a malicious
intent on Glenns part. Glenn showed an inexcusable lack of precaution. Since the place
of the incident was foggy and dark, he should have observed due care in accordance
with the conduct of a reasonably prudent man, such as by slackening his speed, applying
his brakes, or turning to the left side even if it would mean entering the opposite lane.
Wherefore, the Supreme Court convicted Glenn de Los Santos of one complex
crime of reckless imprudence resulting in multiple homicide with serious physical injuries
and less serious physical injuries and sentenced him to suffer an indeterminate penalty
of four years of prision correccional, as minimum, to 10 years of prision mayor, as
maximum; and 10 counts of reckless imprudence resulting in slight physical injuries and
sentenced for each count, to the penalty of 2 months of arresto mayor. The awards of
death indemnity for each group of heirs of trainees are reduced to P50,000, and the
awards in favor of other victims are deleted.
While they were negotiating Maitum Highway, they saw an Isuzu Elf truck coming
at high speed towards them. The vehicle lights were in the high beam. At a distance of
100 meters, the rear security guards started waving their hands for the vehicle to take
the other side of the road, but the vehicle just kept its speed, apparently ignoring their
signals and coming closer and closer to them. The rear guards told their co-trainees to
retract. The guards jumped in different directions. They saw their co-trainees being hit
by the said vehicle, falling like dominoes one after the other. Some were thrown, and
others were overrun by the vehicle. The driver, Glenn de los Santos did not reduce his
speed even after hitting the first and second columns.
FACTS:
Sometime in September 1972, the defendant entered into a contract with the U.S.
Navy Exchange, Subic Bay, Philippines, for the operation of a fleet of taxicabs, each
taxicab to be provided with the necessary taximeter and a radio transceiver for receiving
and sending of messages from mobile taxicab to fixed base stations within the Naval
Base at Subic Bay, Philippines. Since herein petitioner is known of his good reputation as
a businessman, the defendant, through his agent, entered into a contract with the
former. In said contract, the defendant must open a letter of credit in favor of the
petitioner, since the latter would also engage a foreign company for such taximeter.
Defendant and his agent have repeatedly assured plaintiff herein of the
defendant's financial capabilities to pay for the goods ordered by him and in fact he
accomplished the necessary application for a letter of credit with his banker, but he
subsequently instructed his banker not to give due course to his application for a letter
of credit and that for reasons only known to the defendant, he fails and refuses to open
the necessary letter of credit to cover payment of the goods ordered by him. After some
time, herein defendant failed to comply with his obligation, and several demands were
made by petitioner so as to reinforce such contract, and even communicated if
defendant would like to rescind contract, but said defendant did not reply to such
demands. The defendant even used as a defense that the petitioner was delayed in
ISSUE:
Whether or not the incident was a product of a malicious intent on the part of
accused-appellant
RULING:
delivering the taximeters when the former was apprehended by U.S. Navy Exchange for
not complying with their agreement. As a consequence, petitioner filed a case against
the defendant but respondent judge dismissed such petition in a minute order for lack of
cause of action.
ISSUE:
Whether or not petitioner has a cause of action against the defendant for the
latters contravention of the terms of contract.
RULING:
Article 1170 of the Civil Code provides:
Those who in the performance of their obligation are guilty of fraud, negligence, or
delay, and those who in any manner contravene the tenor thereof are liable for
damages.
The phrase "in any manner contravene the tenor" of the obligation includes any
ilicit act or omission which impairs the strict and faithful fulfillment of the obligation and
every kind of defective performance. The damages which the obligor is liable for
includes not only the value of the loss suffered by the obligee [dao emergente] but also
the profits which the latter failed to obtain [lucro cesante]. If the obligor acted in good
faith, he shall be liable for those damages that are the natural and probable
consequences of the breach of the obligation and which the parties have foreseen or
could have reasonably foreseen at the time the obligation was constituted; and in case of
fraud, bad faith, malice or wanton attitude, he shall be liable for all damages which may
be reasonably attributed to the non-performance of the obligation.
The same is true with respect to moral and exemplary damages. The applicable
legal provisions on the matter, Articles 2220 and 2232 of the Civil Code, allow the award
of such damages in breaches of contract where the defendant acted in bad faith. To our
mind, the complaint sufficiently alleges bad faith on the part of the defendant. In fine,
the Supreme Court held that on the basis of the facts alleged in the complaint, the court
could render a valid judgment in accordance with the prayer thereof.
FACTS:
Eulalio Mistica, predecessor-in-interest of herein petitioner, is the owner of the
parcel of land which was leased to respondent Bernardinio Naguiat.
Mistica entered into a contract to sell with respondent over a portion of the
aforementioned lot containing an area of 200 square meters. This agreement was
reduced to writing in a document. Pursuant to said agreement, respondent gave a down
payment of P2,000. He made another partial payment of P1,000 on February 8, 1980.
He failed to make any payments thereafter. Mistica died sometime in October 1986.
On December 4,1991, petitioner filed a complaint for rescission alleging, among
others that the failure and refusal of respondent to pay the balance of the purchase price
constitute a violation of the contract which established her to rescind the same. That
respondent have been in possession of the subject matter, should be ordered to vacate
and surrender possession of the same.
ISSUE:
Whether or not the Court of Appeals erred in the application of Article 1191 of the
Civil Code, as it ruled that there is no breach of obligation in spite of the lapse of their
stipulated period and the failure of the respondent to pay.
RULING:
NO. The failure of respondent to pay the value of the purchase price within ten
(10) years from execution of the deed did not amount to a substantial breach.
In the agreement, it was stipulated that payment could be made even after ten
(10) years from execution provided that the vendee paid 12% interest. The stipulation of
the parties constitute the law between them, thus court have no alternative but to
enforce them as agreed upon and written. Thus, the Supreme Court ruled that the Court
of Appeals did not commit an error in deciding this issue.
P40,000.00 as earnest money, in order that the same may be reserved for her purchase,
said earnest money to be deducted from the total purchase price. The purchase price of
$100,000.00 is payable in two payments $40,000.00 on December 4, 1984 and the
balance of $60,000.00 on January 5, 1985. On January 25, 1985, although the period of
payment had already expired, she paid to the defendant Melody Co in the United States,
the sum of $30,000.00, as partial payment of the purchase price. Spouses Cos counsel,
Atty. Leopoldo Cotaco, wrote a letter to the plaintiff dated March 15, 1985, demanding
that she pay the balance of $70,000.00 and not receiving any response thereto, said
lawyer wrote another letter to plaintiff dated August 8, 1986, informing her that she has
lost her option to purchase the property subject of this case and offered to sell her
another property.
Atty. Estrella O. Laysa, counsel of Custodio, wrote a letter to Atty. Leopoldo Cotaco
informing him that Custodio is now ready to pay the remaining balance to complete the
sum of $100,000.00, the agreed amount as selling price and on October 24, 1986,
plaintiff filed the instant complaint.
The trial court ruled in favor of Custodio and ordered the spouses Co to refund
the amount of $30,000.00. Not satisfied with the decision, the spouses Co appealed to
the Court of Appeals, which affirmed the decision of the RTC. Hence, this appeal.
ISSUE:
Whether or not the Court of Appeals erred in ordering the Cos to return the
$30,000.00 paid by Custodio pursuant to the option granted to her.
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 from that which the
parties may enter into upon the consummation of the option. It must be supported by
consideration. However, the March 15, 1985 letter sent by the COS through their lawyer
to Custodio reveals that the parties entered into a perfected contract of sale and not an
option contract.
A contract of sale is a consensual contract and is perfected at the moment there
is a meeting of the minds upon the thing which is the object of the contract and upon the
price. From that moment the parties may reciprocally demand performance subject to
the provisions of the law governing the form of contracts.
The elements of a valid contract of sale under Article 1458 of the Civil Code are
(1) consent or meeting of 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 of a contract of sale are present in the transaction between the petitioners and
respondent. Custodios offer to purchase the Beata property, subject of the sale at a
price of $100,000.00 was accepted by the Cos. Even the manner of payment of the price
was set forth in the letter. Earnest money in the amounts of US$1,000.00 and
P40,000.00 was already received by the Cos. Under Article 1482 of the Civil Code,
earnest money given in a sale transaction is considered part of the purchase price and
proof of the perfection of the sale.
Despite the fact that Custodios failure to pay the amounts of US$40,000.00 and
US$60,000.00 on or before December 4, 1984 and January 5, 1985 respectively was a
breach of her obligation under Article 1191 of the Civil Code, the Cos did not sue for
either specific performance or rescission of the contract. The Cos were of the mistaken
belief that Custodio had lost her option over the Beata property when she failed to pay
the remaining balance of $70,000.00 pursuant to their August 8, 1986 letter. In the
absence of an express stipulation authorizing the sellers to extrajudicially rescind the
contract of sale, the Cos cannot unilaterally and extrajudicially rescind the contract of
sale.
Accordingly, Custodio acted well within her rights when she attempted to pay the
remaining balance of $70,000.00 to complete the sum owed of $100,000.00 as the
contract was still subsisting at that time. When the Cos refused to accept said payment
and to deliver the Beata property, Custodio immediately sued for the rescission of the
contract of sale and prayed for the return of the $30,000.00 she had initially paid.
Under Article 1385 of the Civil Code, rescission creates the obligation to return
the things, which were the object of 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 of reciprocal obligations under
Article 1191 of the Civil Code. The Court of Appeals therefore did not err in ordering the
Cos to return the amount of $30,000.00 to Custodio after ordering the rescission of the
contract of sale over the property.
Since it has been shown that the appellee who was not in default, was willing to
perform part of the contract while the appellants were not, rescission of the contract is in
order. The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him, (Article 1191, same Code).
Rescission creates the obligation to return the things which were the object of the
contract, together with their fruits, and the price with its interest x x x x (Article 1385,
same Code).
In the case at bar, the property involved has not been delivered to the appellee.
She has therefore nothing to return to the appellants. The price received by the
appellants has to be returned to the appellee as aptly ruled by the lower court, for such
is a consequence of rescission, which is to restore the parties in their former situations.
Petition denied. Decision affirmed.
was supposedly obligated to transfer and cede to the petitioner the formula for Mafran
sauce and not merely its use. For the said respondent allowed the petitioner to register
the trademark for purposes merely of the "marketing of said project."
FACTS:
The petitioner contends that (a) under the terms of the Bill of Assignment, exh. A,
the respondent Magdalo V. Francisco ceded and transferred to the petitioner not only the
right to the use of the formula for Mafran sauce but also the formula itself, because this,
allegedly, was the intention of the parties; (b) that on the basis of the entire evidence on
record and as found by the trial court, the petitioner did not dismiss the respondent
Francisco because he was, and still is, a member of the board of directors, a stockholder,
and an officer of the petitioner corporation, and that as such, had actual knowledge of
the resumption of production by the petitioner, but that despite such knowledge, he
refused to report back for work notwithstanding the petitioner's call for him to do so; (c)
that the private respondents are not entitled to rescind the Bill of Assignment; and (d)
that the evidence on record shows that the respondent Francisco was the one not ready,
willing and able to comply with his obligations under the Bill of Assignment, in the sense
that he not only irregularly reported for work but also failed to assign, transfer and
convey to the petitioner of the said deed of conveyance.
ISSUE:
Whether respondent Francisco ceded to the petitioner merely the use of the
formula for Mafran sauce and not the formula itself.
RULING:
The Court concluded that what was actually ceded and transferred was only the use of
the Mafran sauce formula. The fact that the trademark "Mafran" was duly registered in
the name of the petitioner pursuant to the Bill of Assignment, standing by itself alone, to
borrow the petitioner's language, is not sufficient proof that the respondent Francisco
FACTS:
UP and ALUMCO entered into a logging agreement under which the latter was
granted exclusive authority, for a period starting from the date of the agreement to 31
December 1965, extendible for a further period of five (5) years by mutual agreement, to
cut, collect and remove timber from the Land Grant, in consideration of payment to UP of
royalties, forest fees, etc.; that ALUMCO cut and removed timber therefrom but, as of 8
December 1964, it had incurred an unpaid account of P219,362.94, which, despite
repeated demands, it had failed to pay; that after it had received notice that UP would
rescind or terminate the logging agreement, ALUMCO executed an instrument, entitled
"Acknowledgment of Debt and Proposed Manner of Payments," dated 9 December 1964,
which was approved by the president of UP. ALUMCO continued its logging operations,
but again incurred an unpaid account, for the period from 9 December 1964 to 15 July
1965, in the amount of P61,133.74, in addition to the indebtedness that it had previously
acknowledged.
That on 19 July 1965, petitioner UP informed respondent ALUMCO that it had, as
of that date, considered as rescinded and of no further legal effect the logging
agreement that they had entered in 1960.
That before the issuance of the aforesaid preliminary injunction UP had taken
steps to have another concessionaire take over the logging operation, and the
concession was awarded to Sta. Clara Lumber Company, Inc.
ISSUE:
Whether petitioner U.P. can treat its contract with ALUMCO rescinded, and may
disregard the same before any judicial pronouncement to that effect.
RULING:
Respondent ALUMCO contended, and the lower court, in issuing the injunction
order of 25 February 1966. apparently sustained it (although the order expresses no
specific findings in this regard), that it is only after a final court decree declaring the
contract rescinded for violation of its terms that U.P. could disregard ALUMCO's rights
under the contract and treat the agreement as breached and of no force or effect.
UP and ALUMCO had expressly stipulated in the "Acknowledgment of Debt and
Proposed Manner of Payments" that, upon default by the debtor ALUMCO, the creditor
(UP) has "the right and the power to consider the Logging Agreement dated 2 December
1960 as rescinded without the necessity of any judicial suit." "There is nothing in the law
that prohibits the parties from entering into agreement that violation of the terms of the
contract would cause cancellation thereof, even without court intervention. In other
words, it is not always necessary for the injured party to resort to court for rescission of
the contract."
In other words, 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 final judgment of the corresponding court that will
conclusively and finally settle whether the action taken was or was not correct in law. But
the law definitely does not require that the contracting party who believes itself injured
must first file suit and wait for a judgment before 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 of the suit until the final judgment
of rescission is rendered when the law itself requires that he should exercise due
diligence to minimize its own damages.
Even prior to the execution of the contract, spouses Francisco had paid the
downpayment. However, the said construction commenced although DEAC had not yet
obtained the necessary building permit for the proposed construction and that the
contractor deviated from the approved plans.
Spouses Francisco demanded DEAC to comply with the approved plan, otherwise,
they would be compelled to invoke legal remedies. Work stoppage was issued against
Lino Francisco pursuant to the previous Notice of Violations. The plaintiffs then file civil
case for Rescission of Contract and Damages against DEAC.
ISSUE:
Whether or not spouses Francisco may rescind the contract.
RULING:
Article 1191 of the Civil Code provides that the power to rescind obligations is
implied in reciprocal ones, in case one of the obligors should not comply with what is
incumbent upon him. The rescission referred to in this article, more appropriately
referred to a resolution, is not predicated on injury to economic interests on the part of
the party plaintiff, but of breach of faith by the defendant which is violative of the
reciprocity between the parties.
Given the fact that the construction in this case is already 75% complete, that
trial court was correct in ordering partial rescission of the portion of the construction.
Equitable considerations justify rescission of the portion of the obligation which has not
been delivered
RIGHT TO RESOLVE/RESCIND: REQUISITES
SPS. FELIPE AND LETICIA CANNU versus SPS. GIL AND FERNANDINA GALANG
AND NATIONAL HOME MORTGAGE FINANCE CORPORATION
G.R. No. 139523 2005 May 26
FACTS:
Respondents-spouses Gil and Fernandina Galang obtained a loan from Fortune
Savings & Loan Association for P173,800.00 to purchase a house and lot located at
Pulang Lupa, Las Pias, in the names of respondents-spouses. To secure payment, a real
estate mortgage was constituted on the said house and lot in favor of Fortune Savings &
Loan Association. In early 1990, NHMFC purchased the mortgage loan of respondentsspouses from Fortune Savings & Loan Association for P173,800.00. Petitioner Leticia
Cannu agreed to buy the property for P120,000.00 and to assume the balance of the
mortgage obligations with the NHMFC and with CERF Realty (the Developer of the
property).
A Deed of Sale with Assumption of Mortgage Obligation dated 20 August 1990 was
made and entered into by and between spouses Fernandina and Gil Galang (vendors)
and spouses Leticia and Felipe Cannu (vendees) over the house and lot and petitioners
immediately took possession and occupied the house and lot. However, despite requests
from Adelina R. Timbang and Fernandina Galang to pay the balance of P45,000.00 or in
the alternative to vacate the property in question, petitioners refused to do so. Because
the Cannus failed to fully comply with their obligations, respondent Fernandina Galang,
on 21 May 1993, paid P233,957.64 as full payment of her remaining mortgage loan with
NHMFC.
From 1991 until the present, no other payments were made by plaintiffsappellants to defendants-appellees spouses Galang. Out of the P250,000.00 purchase
price which was supposed to be paid on the day of the execution of contract in July, 1990
plaintiffs-appellants have paid, in the span of eight (8) years, from 1990 to present, the
amount of only P75,000.00. Plaintiffs-appellants should have paid the P250,000.00 at
the time of the execution of contract in 1990. Eight (8) years have already lapsed and
plaintiffs-appellants have not yet complied with their obligation.
ISSUE:
Whether or not the action for rescission was subsidiary, and that there was a
substantial breach of the obligation.
RULING:
Rescission or, more accurately, resolution, of a party to an obligation under Article
1191 is predicated on a breach of faith by the other party that violates the reciprocity
between them.
Art. 1191 states that the power to rescind obligations is implied in reciprocal ones,
in case one of the obligors should not comply with what is incumbent upon him. The
injured party may choose between the fulfillment and the rescission of the obligation,
with the payment of damages in either case. He may also seek rescission, even after he
has chosen fulfillment, if the latter should become impossible. The court shall decree the
rescission claimed, unless there be just cause authorizing the fixing of a period.
Rescission will not be permitted for a slight or casual breach of the contract.
Rescission may be had only for such breaches that are substantial and fundamental as to
defeat the object of the parties in making the agreement. The question of whether a
breach of contract is substantial depends upon the attending circumstances and not
merely on the percentage of the amount not paid.
Thus, the petitioners failure to pay the remaining balance of P45,000.00 is
substantial. Even assuming arguendo that only said amount was left out of the supposed
consideration of P250,000.00, or eighteen percent thereof, this percentage is still
substantial. Their failure to fulfill their obligation gave the respondents-spouses Galang
the right to rescission.
Also, there was no waiver on the part of petitioners to demand the rescission of
the Deed of Sale with Assumption of Mortgage. The fact that respondents-spouses
accepted, through their attorney-in-fact, payments in installments does not constitute
waiver on their part to exercise their right to rescind the Deed of Sale with Assumption of
Mortgage. Adelina Timbang merely accepted the installment payments as an
accommodation to petitioners since they kept on promising they would pay. However,
after the lapse of considerable time (18 months from last payment) and the purchase
price was not yet fully paid, respondents-spouses exercised their right of rescission when
they paid the outstanding balance of the mortgage loan with NHMFC. It was only after
petitioners stopped paying that respondents-spouses moved to exercise their right of
rescission.
The subsidiary character of the action for rescission applies to contracts
enumerated in Articles 1381 of the Civil Code. However, the contract involved in the
case is not one of those mentioned therein. The provision that applies in the case at bar
is Article 1191. Rescission under Article 1191 is a principal action, while rescission under
Article 1383 is a subsidiary action. The former is based on breach by the other party that
violates the reciprocity between the parties, while the latter is not.
In the case at bar, the reciprocity between the parties was violated when
petitioners failed to fully pay the balance of P45,000.00 to respondents-spouses and
their failure to update their amortizations with the NHMFC. Therefore, the Spouses Gil
and Fernandina Galang are ordered to return the partial payments made by petitioners in
the amount of P165,312.47.
premises for the next milling season. Respondent refused on the ground that petitioners
cannot use the premises until full payment of the purchase price. Petitioners informed
respondent that their immediate use of the premises was absolutely necessary and that
any delay will cause them substantial damages. Respondent remained firm in her refusal,
and demanded that petitioners stop using the lots as a transloading station to service
the Victorias Milling Company unless they pay the full purchase price. In a letter-reply
dated April 5, 1991, petitioners assured respondent of their readiness to pay the balance
but reminded respondent of her obligation to redeem the lots from mortgage with the
Philippine National Bank (PNB). Petitioners gave respondent ten (10) days within which to
do so.
On April 10, 1991, respondent Administratrix wrote petitioners informing them
that the PNB had agreed to release the lots from mortgage. She demanded payment of
the balance of the purchase price. Enclosed with the demand letter was the PNBs letter
of approval dated April 8, 1991. Petitioners demanded that respondent show the clean
titles to the lots first before they pay the balance of the purchase price. Respondent
merely reiterated the demand for payment. Petitioners stood pat on their demand.
On May 28, 1991, respondent Administratrix executed a Deed of Rescission
rescinding the MOA. In their Letter dated June 13, 1991, petitioners, through counsel,
formally demanded the production of the titles to the lots before they pay the balance of
the purchase price. The demand was ignored. Consequently, on June 19, 1991,
petitioners filed a complaint against respondents for breach of contract, specific
performance and damages before the RTC-Bacolod City. The trial court decided the case
in favor of respondents. Petitioners filed a petition for review before the Court of Appeals.
The Court of Appeals affirmed the trial courts decision but deleted the award for moral
damages on the ground that petitioners were not guilty of bad faith in refusing to pay the
balance of the purchase price.
ISSUE:
non-payment of the price is a negative resolutory condition. The effects in law are not
identical. In a contract of sale, the vendor has lost ownership of the thing sold and
cannot recover it, unless the contract of sale is rescinded and set aside. In a contract to
sell, however, the vendor remains the owner for as long as the vendee has not complied
fully with the condition of paying the purchase price. If the vendor should eject the
vendee for failure to meet the condition precedent, he is enforcing the contract and not
rescinding it.
The MOA between petitioners and respondents is a conditional contract to sell.
Ownership over the lots is not to pass to the petitioners until full payment of the
purchase price. Petitioners obligation to pay, in turn, is conditioned upon the release of
the lots from mortgage with the PNB to be secured by the respondents. Although there
was no express provision regarding reserved ownership until full payment of the
purchase price, the intent of the parties in this regard is evident from the provision that a
deed of absolute sale shall be executed only when the lots have been released from
mortgage and the balance paid by petitioners. Since ownership has not been transferred,
no further legal action need have been taken by the respondents, except an action to
recover possession in case petitioners refuse to voluntarily surrender the lots.
The records show that the lots were finally released from mortgage in July
1991. Petitioners have always expressed readiness to pay the balance of the purchase
price once that is achieved. Hence, petitioners should be allowed to pay the balance
now, if they so desire, since it is established that respondents demand for them to pay
in April 1991 was premature. However, petitioners may not demand production by the
respondents of the titles to the lots as a condition for their payment. It was not required
under the MOA. The MOA merely states that petitioners shall pay the balance upon
approval by the PNB of the release of the lots from mortgage. Petitioners may not add
further conditions now. Obligations arising from contracts have the force of law between
the contracting parties and should be complied with in good faith.
Thus, the petiotion is GRANTED, an the assailed decision is REVERSED and
SET ASIDE.
Whether there is legal, or even a factual, ground for the rescission of the
Memorandum of Agreement.
RULING:
There is no legal basis for the rescission. The remedy of rescission under Art.
1191 of the Civil Code is predicated on a breach of faith by the other party that violates
the reciprocity between them. The court have held in numerous cases that the remedy
does not apply to contracts to sell.
In Santos v. Court of Appeals, in a contract to sell, title remains with the vendor
and does not pass on to the vendee until the purchase price is paid in full. Thus, in a
contract to sell, the payment of the purchase price is a positive suspensive condition.
Failure to pay the price agreed upon is not a mere breach, casual or serious, but a
situation that prevents the obligation of the vendor to convey title from acquiring an
obligatory force. This is entirely different from the situation in a contract of sale, where
Spouses Domingo Paguyo and Lourdes Paguyo, were the owners of a small fivestorey building known as the Paguyo Building located at Makati Avenue, corner Valdez
Street, Makati City. The lot on which the Paguyo Building stands was the subject of Civil
Case wherein the RTC of Makati City, Branch 57, rendered a decision on 20 January 1988
approving a Compromise Agreement made between the Armases and the petitioners.
The compromise agreement provided that in consideration of the total sum of One Million
Seven Hundred Thousand Pesos (P1,700,000.00), the Armases committed to execute in
favor of petitioners a deed of sale and/or conveyance assigning and transferring unto
said petitioners all their rights and interests over the parcel of land containing an area of
299 square meters. In order for the petitioners to complete their title and ownership over
the lot in question, there was an urgent need to make complete payment to the
Armases, which at that time stood at P917,470.00 considering that petitioners had
previously made partial payments to the Armases.
On 29 November 1988, in order to raise the much needed amount, petitioner
Lourdes Paguyo entered into an agreement captioned as Receipt of Earnest Money with
respondent Pierre Astorga, for the sale of the formers property consisting of the lot
which was to be purchased from the Armases, together with the improvements thereon,
particularly, the existing building known as the Paguyo Building. However, contrary to
their express representation with respect to the subject lot, petitioners failed to comply
with their obligation to acquire the lot from the Armas family despite the full financial
support of respondents. Nevertheless, the parties maintained their business relationship
under the terms and conditions of the above-mentioned Receipt of Earnest Money.
On 12 December 1988, petitioners asked for and were given by respondents an
additional P50,000.00 to meet the formers urgent need for money in connection with
their construction business. Thus, on 5 January 1989, the parties executed the four
documents in question namely, the Deed of Absolute Sale of the Paguyo Building, the
Mutual Undertaking, the Deed of Real Estate Mortgage, and the Deed of Assignment of
Rights and Interest. Simultaneously with the signing of the four documents, respondents
paid petitioners the additional amount of P500,000.00. Thereafter, the respondents
renamed the Paguyo Building into GINZA Bldg. and registered the same in the name of
respondent St. Andrew Realty, Inc. at the Makati Assessors Office after paying accrued
real estate taxes in the total amount of P169,174.95.
On 06 October 1989, petitioners filed a Complaint for the rescission of the Receipt
of Earnest Money with the undertaking to return the sum of P763,890.50. They also
sought the rescission of the Deed of Real Estate Mortgage, the Mutual Undertaking, the
Deed of Absolute Sale of Building, and the Deed of Assignment of Rights and Interest.
After trial, the RTC ruled in favor of respondents. The petition for preliminary injunction is
denied, and the court ordered the plaintiff spouses Domingo and Lourdes Paguyo to pay
the defendants Pierre Astorga and St. Andrew Realty, Inc. on their counterclaim. On
appeal, the Court of Appeals affirmed the decision of the trial court
ISSUE:
Did the Court of Appeals err in upholding the trial courts decision denying
petitioners complaint for rescission?
RULING:
No. The right to rescind a contract involving reciprocal obligations is provided for
in Article 1191 of the Civil Code. Article 1191 states: The power to rescind obligations is
implied in reciprocal ones, in case one of the obligors should not comply with what is
incumbent upon him. The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either case. He may also
seek rescission, even after he has chosen fulfillment, if the latter should become
impossible. The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.
Moreover, Articles 1355 and 1470 of the Civil Code state: Art. 1355. Except in
cases specified by law, lesion or inadequacy of cause shall not invalidate a contract,
unless there has been fraud, mistake or undue influence. Art. 1470. Gross inadequacy of
price does not affect a contract of sale, except as may indicate a defect in the consent,
or that the parties really intended a donation or some other act or contract.
Petitioners failed to prove any of the instances mentioned in Articles 1355 and
1470 of the Civil Code, which would invalidate, or even affect, the Deed of Sale of the
Building and the related documents. Indeed, there is no requirement that the price be
equal to the exact value of the subject matter of sale. In sum, petitioners pray for
rescission of the Deed of Sale of the building and offer to repay the purchase price after
their liquidity position would have improved and after respondents would have
refurbished the building, updated the real property taxes, and turned the building into a
profitable business venture. The court stated however that, it will not allow itself to be
an instrument to the dissolution of contract validly entered into, for a party should not,
after its opportunity to enjoy the benefits of an agreement, be allowed to later disown
the arrangement when the terms thereof ultimately would prove to operate against its
hopeful expectations.
WHEREFORE, the Decision of the Court of Appeals is AFFIRMED with MODIFICATION.
RIGHT TO RESOLVE/RESCIND: REQUISITES
RULING:
On October 2, 1991, respondent Octagon Realty Development Corporation, filed a
complaint for rescission of contract with damages against petitioner Bienvenido M.
Casio, Jr., owner and proprietor of the Casio Wood Parquet and Sanding Services,
relative to the parties agreement for the supply and installation by petitioner of narra
wood parquet ordered by respondent.
In its complaint, respondent alleges that on December 22, 1989, it entered into a
contract with petitioner for the supply and installation by the latter of narra wood
parquet (kiln dried) to the Manila Luxury Condominium Project, of which respondent is
the developer, for a total price of P1,158,487.00; that the contract stipulated that full
delivery by petitioner of labor and materials was in May 1990; that in accordance with
the terms of payment in the contract, respondent paid to petitioner the amount
P463,394.50, representing 40% of the total contract price; that after delivering only
26,727.02 sq. ft. of wood parquet materials, petitioner incurred in delay in the delivery
of the remainder of 34,245.98 sq. ft.; that petitioner misrepresented to respondent that
he is qualified to do the work contracted when in truth and in fact he was not and,
furthermore, he lacked the necessary funds to execute the work as he was
totally dependent on the funds advanced to him by respondent; that due to petitioners
unlawful and malicious refusal to comply with its obligations, respondent incurred actual
damages in the amount of P912,452.39 representing estimated loss on the new
price, unliquidated damages and cost of money; that in order to minimize losses, the
respondent contracted the services of Hilvano Quality Parquet and Sanding Services to
complete the petitioners unfinished work, respondent thereby agreeing to pay the latter
P1,198,609.30.
However, petitioner avers that the manner of payment, period of delivery and
completion of work and/or full delivery of labor and materials were modified; that the
delivery and completion of the work could not be done upon the request and/or
representations by the respondent because he failed to make available and/or to prepare
the area in a suitable manner for the work contracted, preventing the petitioner from
complying with the delivery schedule under the contract; that petitioner delivered the
required materials and performed the work despite these constraints; that the
respondent failed to pay the petitioners second and third billings for deliveries and work
performed in the sum of P105,425.68, which amount the petitioner demanded from the
respondent with the warning of suspension of deliveries or rescission for contract for
non-payment; that it was the respondent who failed to prepare the area suitable for the
delivery and installation of the wood parquet, respondent who advised or issued orders
to the petitioner to suspend the delivery and installation of the wood parquet, which
created a storage problem for the petitioner.
ISSUE:
Under the contract, petitioner and respondent had respective obligations, i.e., the
former to supply and deliver the contracted volume of narra wood parquet materials and
install the same at respondents condominium project by May, 1990, and the latter, to
pay for said materials in accordance with the terms of payment set out under the parties
agreement. But while respondent was able to fulfill that which is incumbent upon it by
making a downpayment representing 40% of the agreed price upon the signing of the
contract and even paid the first billing of petitioner, the latter failed to comply with his
contractual commitment. For, after delivering only less than one-half of the contracted
materials, petitioner failed, by the end of the agreed period, to deliver and install the
remainder despite demands for him to do so. Thus, it is petitioner who breached the
contract.
The petitioner therefore, has failed to comply with his prestations under his
contract with respondent, the latter is vested by law with the right to rescind the parties
agreement, conformably with Article 1191 of the Civil Code.
However, the right to rescind a contract for non-performance of its stipulations is
not absolute. The general rule is that rescission of a contract will not be permitted for a
slight or casual breach, but only for such substantial and fundamental violations as
would defeat the very object of the parties in making the agreement. Contrary to
petitioners asseveration, the breach he committed cannot, by any measure, be
considered as slight or casual. For petitioners failure to make complete delivery and
installation way beyond the time stipulated despite respondents demands, is doubtless
a substantial and fundamental breach, more so when viewed in the light of the large
amount of money respondent had to pay another contractor to complete petitioners
unfinished work.
Likewise, contrary to petitioners claim, it cannot be said that he had no inkling
whatsoever of respondents recourse to rescission. True, the act of a party in treating a
contract as cancelled or resolved on account of infractions by the other party must be
made known to the other. In the case, however, petitioner cannot feign ignorance of
respondents intention to rescind, fully aware, as he was, of his non-compliance with
what was incumbent upon him, not to mention the several letters respondent sent to
him demanding compliance with his obligation. It is thus proper that respondent acted
well within its rights in unilaterally terminating its contract with petitioner and in entering
into a new one with a third person in order to minimize its losses, without prior need of
resorting to judicial action.
WHEREFORE, the petition is DENIED and the assailed Decision and Resolution
of the appellate court AFFIRMED.
Whether or not the rescission of the contract by the private respondent is valid.
RIGHT TO RESOLVE/RESCIND: REQUISITES
T-6055 in the name of Carrascoso and the revival of TCT No. T-93 in the name of El
Dorado, free from any liens and encumbrances.
In the meantime, Carrascoso, as vendor and PLDT, as vendee forged on April 6,
1977 a Deed of Absolute Sale over the 1,000 hectare portion of the property subject of
their July 11, 1975 Agreement to Buy and Sell. In turn, PLDT, by Deed of Absolute Sale
conveyed the aforesaid 1,000 hectare portion of the property to its subsidiary, PLDT
Agricultural Corporation (PLDTAC), for a consideration of P3,000,000.00, the amount of
P2,620,000.00 of which was payable to PLDT upon signing of said Deed, and
P380,000.00 to Carrascoso upon issuance of title to PLDTAC.
On July 31, 1978, PLDT and PLDTAC filed an Urgent Motion for Intervention which
was granted by the trial court. PLDT and PLDTAC thereupon filed their Answer In
Intervention with Compulsory Counterclaim and Crossclaim against Carrascoso. The RTC
dismissed the complaint. Carrascoso, PLDT and PLDTAC filed their respective appeals to
the Court of Appeals. The appellate court reversed the decision of the trial court.
Thereafter, different motions and actions were done by both parties.
ISSUE:
Whether or not the rescission is valid.
RULING:
The right of rescission of a party to an obligation under Article 1191 is predicated
on a breach of faith by the other party who violates the reciprocity between them.
A contract of sale is a reciprocal obligation. The seller obligates itself to transfer
the ownership of and deliver a determinate thing, and the buyer obligates itself to pay
therefor a price certain in money or its equivalent. The non-payment of the price by the
buyer is a resolutory condition which extinguishes the transaction that for a time
existed, and discharges the obligations created thereunder. Such failure to pay the price
in the manner prescribed by the contract of sale entitles the unpaid seller to sue for
collection or to rescind the contract.
In the case at bar, El Dorado already performed its obligation through the
execution of the March 23, 1972 Deed of Sale of Real Property which effectively
transferred ownership of the property to Carrascoso. The latter, on the other hand, failed
to perform his correlative obligation of paying in full the contract price in the manner
and within the period agreed upon.
The terms of the Deed are clear and unequivocal: Carrascoso was to pay the
balance of the purchase price of the property amounting to P1,300,000.00 plus interest
thereon at the rate of 10% per annum within a period of three (3) years from the signing
of the contract on March 23, 1972. When Jose Leviste informed him that El Dorado was
seeking rescission of the contract by letter of February 21, 1977, the period given to him
within which to fully satisfy his obligation had long lapsed.
The El Dorado Board Resolution and the Affidavit of Jose Leviste interposing no
objection to Carrascosos mortgaging of the property to any bank did not have the effect
of suspending the period to fully pay the purchase price, as expressly stipulated in the
Deed, pending full payment of any mortgage obligation of Carrascoso.
PLDT cannot shield itself from the notice of lis pendens because all that it had at the
time of its inscription was an Agreement to Buy and Sell with Carrascoso, which in effect
is a mere contract to sell that did not pass to it the ownership of the property. Ownership
was retained by Carrascoso which El Dorado may very well recover through its action for
rescission.
The appellate courts decision ordering the rescission of the March 23, 1972 Deed of
Sale of Real Property between El Dorado and Carrascoso being in order, mutual
restitution follows to put back the parties to their original situation prior to the
consummation of the contract. Between Carrascoso and PLDT/PLDTAC, the former acted
in bad faith while the latter acted in good faith. This is so because it was Carrascosos
refusal to pay his just debt to El Dorado that caused PLDT/PLDTAC to suffer pecuniary
losses. Therefore, Carrascoso should return to PLDT/PLDTAC the P3,000,000.00 price of
the farm plus legal interest from receipt thereof until paid.
The exercise of the power to rescind extinguishes the obligatory relation as if it
had never been created, the extinction having a retroactive effect. The rescission is
equivalent to invalidating and unmaking the juridical tie, leaving things in their status
before the celebration of the contract.
Where a contract is rescinded, it is the duty of the court to require both parties to
surrender that which they have respectively received and to place each other as far as
practicable in his original situation, the rescission has the effect of abrogating the
contract in all parts.
The April 6, 1977 and May 30, 1977 Deeds of Absolute Sale being subject to the
notice of lis pendens, and as the Court affirms the declaration by the appellate court of
the rescission of the Deed of Sale executed by El Dorado in favor of Carrascoso,
possession of the 1,000 hectare portion of the property should be turned over by PLDT
to El Dorado.
As regards the improvements introduced by PLDT on the 1,000 hectare portion of
the property, a distinction should be made between those which it built prior to the
annotation of the notice of lis pendens and those which it introduced subsequent
thereto.
WHEREFORE, the petitions are DENIED.
property to ASIAWORLD for P24 million. Sometime after the said sale, Logarta again
wrote respondent Que demanding the return of the earnest money to GOLDENROD, but
to no avail. Petitioner then filed a complaint with the RTC of Manila against private
respondents for the return of the amount of P1 million and the payment of damages
including lost interests or profits.
ISSUE:
Whether or not the petitioner's extrajudicial rescission of its agreement with
private respondents was valid.
RULING:
Under Art. 1482 of the Civil Code, whenever earnest money is given in a contract
of sale, it shall be considered as part of the purchase price and as proof of the perfection
of the contract. Petitioner clearly stated without any objection from private respondents
that the earnest money was intended to form part of the purchase price. It was an
advance payment which must be deducted from the total price. Hence, the parties could
not have intended that the earnest money or advance payment would be forfeited when
the buyer should fail to pay the balance of the price, especially in the absence of a clear
and express agreement thereon. By reason of its failure to make payment petitioner,
through its agent, informed private respondents that it would no longer push through
with the sale. In other words, petitioner resorted to extrajudicial rescission of its
agreement with private respondents.
It was held in the case of University of the Philippines v. de los Angeles that the
right to rescind contracts is not absolute and is subject to scrutiny and review by the
proper court. It was held further that rescission of reciprocal contracts may be
extrajudicially rescinded unless successfully impugned in court. If the party does not
oppose the declaration of rescission of the other party, specifying the grounds therefor,
and it fails to reply or protest against it, its silence thereon suggests an admission of the
veracity and validity of the rescinding party's claim. A such, private respondents did not
interpose any objection to the rescission by petitioner of the agreement. As found by the
Court of Appeals, private respondent BARRETTO REALTY even sold Lot 2 of the subject
consolidated lots to another buyer, ASIAWORLD, one day after its President Anthony Que
received the broker's letter rescinding the sale. Subsequently, on 13 October 1988
respondent BARRETTO REALTY also conveyed ownership over Lot 1 to UCPB which, in
turn, sold the same to ASIAWORLD.
Article 1385 of the Civil Code provides that rescission creates the obligation to
return the things which were the object of the contract together with their fruits and
interest. Therefore, by virtue of the extrajudicial rescission of the contract to sell by
petitioner without opposition from private respondents who, in turn, sold the property to
other persons, private respondent BARRETTO REALTY, as the vendor, had the obligation
to return the earnest money of P1,000,000.00 plus legal interest from the date it
received notice of rescission from petitioner, i.e., 30 August 1988, up to the date of the
EFFECTS OF RESOLUTION/RESCISSION
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7.
8.
LORETA SERRANO vs. COURT OF APPEALS and LONG LIFE PAWNSHOP, INC.
G.R. No. 45125
1991 Apr 22
FACTS:
Sometime in early March 1968, petitioner Loreta Serrano bought some pieces of
jewelry for P48,500.00 from Niceta Ribaya. However, when petitioner was in need of
money, she instructed her private secretary, Josefina Rocco, to pawn the jewelry. Josefina
then went to private respondent Long Life Pawnshop, Inc. ("Long Life"), pledged the
jewelry for P22,000.00 with its principal owner and General Manager, Yu An Kiong, and
then absconded with said amount and the pawn ticket. The pawnshop ticket issued to
Josefina Rocco stipulated that it was redeemable "on presentation by the bearer."
Three months later, Gloria Duque and Amalia Celeste informed Niceta Ribaya that
a pawnshop ticket issued by private respondent was being offered for sale. They told
Niceta the ticket probably covered jewelry once owned by the latter which jewelry had
been pawned by one Josefina Rocco. Suspecting that it was the same jewelry she had
sold to petitioner, Niceta informed the latter of this offer and suggested that petitioner
go to the Long Life pawnshop to check the matter out. Petitioner claims she went to
private respondent pawnshop, verified that indeed her missing jewelry was pledged
there and told Yu An Kiong not to permit anyone to redeem the jewelry because she was
the lawful owner thereof. Petitioner claims that Yu An Kiong agreed.
On 9 July 1968, petitioner went to the Manila Police Department to report the loss,
and a complaint first for qualified theft and later changed to estafa was subsequently
filed against Josefina Rocco. Thereafter, a member of the Manila Police went to the
pawnshop, showed Yu An Kiong petitioner's report and left the latter a note asking him to
hold the jewelry and notify the police in case someone should redeem the same.
However, the next day, Yu An Kiong permitted one Tomasa de Leon, exhibiting the
appropriate pawnshop ticket, to redeem the jewelry.
On 4 October 1968, petitioner filed a complaint for damages against private
respondent Long Life for failure to hold the jewelry and for allowing its redemption
without first notifying petitioner or the police. Hon. Luis B. Reyes, rendered a decision in
favor of petitioner. The decision was however reversed on appeal and the complaint
dismissed by the public respondent Court of Appeals.
ISSUE:
Whether or not the Court of Appeals committed reversible error in rendering its
Decision.
RULING:
Having been notified by petitioner and the police that jewelry pawned to it was
either stolen or involved in an embezzlement of the proceeds of the pledge, private
respondent pawnbroker became duty bound to hold the things pledged and to give
notice to petitioner and the police of any effort to redeem them. Such a duty was
imposed by Article 21 of the Civil Code. The circumstance that the pawn ticket stated
that the pawn was redeemable by the bearer, did not dissolve that duty. The pawn ticket
was not a negotiable instrument under the Negotiable Instruments Law nor a negotiable
document of title under Articles 1507 et seq. of the Civil Code. If the third person Tomasa
de Leon, who redeemed the things pledged a day after petitioner and the police had
notified Long Life, claimed to be owner thereof, the prudent recourse of the pawnbroker
was to file an interpleader suit, impleading both petitioner and Tomasa de Leon. The
respondent pawnbroker was, of course, entitled to demand payment of the loan
extended on the security of the pledge before surrendering the jewelry, upon the
assumption that it had given the loan in good faith and was not a "fence" for stolen
articles and had not conspired with the faithless Josefina Rocco or with Tomasa de Leon.
Respondent pawnbroker acted in reckless disregard of that duty in the instant
case and must bear the consequences, without prejudice to its right to recover damages
from Josefina Rocco. Hence, the trial court correctly held that private respondent was
liable to petitioner for actual damages which corresponded to the difference in the value
of the jewelry and the amount of the loan, or the sum of P26,500.00. Petitioner is entitled
to collect the balance of the value of the jewelry, corresponding to the amount of the
loan, in an appropriate action against Josefina Rocco. Private respondent Long Life in turn
is entitled to seek reimbursement from Josefina Rocco of the amount of the damages it
must pay to petitioner.
EFFECTS OF RESOLUTION/RESCISSION
PERLA PALMA GIL, VICENTE HIZON, JR., and ANGEL PALMA GIL
VS. HON. COURT OF APPEALS, HEIRS OF EMILIO MATULAC, CONSTANCIO
MAGLANA, AGAPITO PACETES & The REGISTER OF DEEDS OF DAVAO CITY
G.R. No. 127206
September 12, 2003
411 SCRA 19
FACTS:
Concepcion Palma Gil, and her sister, Nieves Palma Gil, married to Angel Villarica,
were the co-owners of a parcel of commercial land with an area of 829 square meters in
Davao City. The spouses Angel and Nieves Villarica had constructed a two-storey
commercial building on the property.
On October 13, 1953, Concepcion filed a complaint against her sister Nieves with
the then Court of First Instance of Davao City for specific performance, to compel the
defendant to cede and deliver to her an undivided portion of the said property with an
area of 256.2 square meters. After due proceedings, the court rendered judgment on
April 7, 1954 in favor of Concepcion, ordering the defendant to deliver to the plaintiff an
undivided portion of the said property with an area of 256.2 square meters.
Nieves appealed to the Court of Appeals which affirmed the assailed decision.
The court issued a writ of execution. Nieves, however, refused to execute the requisite
deed in favor of her sister.
On April 27, 1956, the court issued an order authorizing ex-officio Sheriff Eriberto
Unson to execute the requisite deed of transfer to the plaintiff over an undivided portion
of the property with a total area of 256.2 square meters. Instead of doing so, the sheriff
had the property subdivided into four lots namely, Lot 59-C-1, with an area of 218 square
meters; Lot 59-C-2, with an area of 38 square meters; Lot 59-C-3, with an area of 14
square meters; and Lot 59-C-4, with an area of 560 square meters, all covered by a
subdivision plan. The sheriff thereafter executed a Deed of Transfer to Concepcion over
Lot 59-C-1 and Lot 59-C-2 with a total area of 256.2 square meters.
On October 24, 1956, Concepcion executed a deed of absolute sale over Lot 59-C1 in favor of Iluminada Pacetes for a purchase price of P21,600.00 upon which P7,500.00
is to be paid upon signing of the contract and the balance of P14,100.00 to be paid upon
delivery of the Title. On March 16, 1966, spouses Iluminada Pacetes and Agapito Pacetes
executed a deed of absolute sale over the disputed lots in favor Constancio Maglana.
And on April 22, 1980, Maglana ewecuted a deed of sale in favor of Emilio Matulac for
the purchase price of P150,000.00. And on August 4, 1959, Concepcion died, leaving all
her obligations to her heirs including the petitioners.
On June 11, 1993, the trial court rendered judgment in favor of the defendants.
The trial court ruled that this Court had affirmed, in G.R. No. 85538 and G.R. No. L-60690,
the sales of the property from Concepcion Palma Gil to Iluminada Pacetes, then to
Constancio Maglana and to Emilio Matulac; hence, the trial court was barred by the
rulings of the Court. The plaintiffs appealed to the Court of Appeals which affirmed the
latters decision.
ISSUE:
Whether or not the trial court erred in not declaring the sale of the properties in
question from Iluminada Pacetes to Constancio Maglana, thence, from Constancio
Maglana to Emilio Matulac NULL and VOID for there was delay incurred by Concepcion in
not delivering the Title of the subject lands to Pacetes.
RULING:
Article 1191 in tandem with Article 1592 of the New Civil Code are central to the
issues at bar. Under the last paragraph of Article 1169 of the New Civil Code, in
reciprocal obligations, neither party incurs in delay if the other does not comply or is not
ready to comply in a proper manner with what is incumbent upon him.
From the moment one of the parties fulfills his obligation, delay in the other
begins. Thus, reciprocal obligations are to be performed simultaneously so that the
performance of one is conditioned upon the simultaneous fulfillment of the other. The
right of rescission of a party to an obligation under Article 1191 of the New Civil Code is
predicated on a breach of faith by the other party that violates the reciprocity between
them.
The petitioners therefore, as successors-in-interest of the vendor, are not the
injured parties entitled to a rescission of the deed of absolute sale. It was Concepcions
heirs, including the petitioners, who were obliged to deliver to the vendee a certificate of
title over the property under the latters name, free from all liens and encumbrances
within 120 days from the execution of the deed of absolute sale on October 24, 1956, but
had failed to comply with the obligation. Furthermore, the consignation by the vendee of
the purchase price of the property is sufficient to defeat the right of the petitioners to
demand for a rescission of the said deed of absolute sale.
The petition for review was denied for lack of merit.
EFFECTS OF RESOLUTION/RESCISSION
SERRANO VS. COURT OF APPEALS
417 SCRA 415
FACTS
Petitioners spouses Arturo and Niceta Serrano are the owners of the parcel of land
and the house constructed thereon located in Quezon City and a parcel of land located in
Quezon City. The couple mortgaged said properties in favor of Government Service
Insurance System (GSIS) for a security loan of P50,000. They were able to pay P18,000
on 1969. On the same year, the spouses Serrano as vendors and respondents spouses
Emilio and Evelyn Geli as vendees executed a deed of absolute sale with partial
assumption of the mortgage for the price of P70,000. Spouses Geli paid the amount of
P38,000 and the balance of P32,000 to be paid to GSIS. Emilio Geli and his children,
respondents herein, failed to settle the amount to the GSIS.
Petitioners filed a complaint for the rescission of the deed of absolute sale with
partial assumption of mortgage on September 6, 1984. The trial court rendered a
decision ordering rescission of the deed. Emilio and petitioners appealed the decision to
the Court of Appeals (CA). The GSIS foreclosed the mortgage during the pendency of the
appeal. A certificate of sale over the property was issued in favor of the GSIS it being the
highest bidder.
In 1987, Emilio paid the redemption price of
GSIS executed a deed of transfer and turned over
(TCT) without informing Serrano and the CA. In
petitioners appeal for failure to pay the requisite
executory.
On February 15, 1994, the court granted the motion for execution of the trial
courts September 6, 1984 decision upon the motion of the petitioners which was not
implemented. Defendant filed a motion to quash on September 6, 1996 claming for the
first time that he had redeemed the said properties from GSIS in 1988 which was denied
by the court.
The trial court issued an alias writ of execution upon issuance of order granting
petitioners motion. The petitioners filed with the CA a petition for certiorari and/or
prohibition praying for the nullification of the trial court orders. CA issued an order
restraining the implementation of the alias writ of execution and the notice to vacate
issued by the trial court. CA on May 12, 1998 granted the respondents motion.
ISSUE:
Whether or not the trial courts September 6, 1984 judgment ordering the
rescission of the deed of absolute sale with partial assumption of mortgage executed by
petitioners and respondents is proper.
RULING:
YES. The payment by Emilio of the redemption price to the GSIS was made
pending appeal by the respondents from the trial courts order and concealed said
payment to petitioners. The respondents appealed the decision before the CA which
was subsequently dismissed for failure to pay the requisite docket fees. Neither did
respondents file any motion for reconsideration for the dismissal of the appeal.
Consequently, the trial courts decision became final and executory.
With the rescission of the deed of sale, the rights of 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 favor of GSIS since the payment of the
redemption price was made without the knowledge of the petitioners. The respondents,
however, are entitled to be reimbursed by the petitioners to the extent that the latter
were benefited.
P400,000.00 monthly penalty would have accumulated and equaled the unpaid purchase
price of P18,000,000.00.
Keng and Harrison Lumber denied that Lim had connived with them. Harrison
Lumber alleged that Reyes approved their request for an extension of time to vacate the
property and that as of March 1995, it had already started transferring some of its
merchandise to its new business location in Malabon.
In sum, respondents are obliged to vacate the subject property. The decision of
the CA is reversed and set aside. The petitioners are obliged to return the amount of
P67,701.04 to be deducted from the amount due the petitioners under said trial courts
decision.
On the other hand, Lim filed his Answer stating that he was ready and willing to
pay the balance of the purchase price on or before March 8, 1995. Lim requested a
meeting with Reyes through the latters daughter but Reyes kept postponing them. On
March 9, 1995, Reyes offered to return the P10 million down payment to Lim because
Reyes was having problems in removing the lessee from the property. Lim rejected
Reyes offer and proceeded to verify the status of Reyes title to the property. He learned
that Reyes had already sold the property to Line One Foods Corporation on March 1,
1995 for P16,782,480. Lim also denied conniving with Keng and Harrison Lumber.
EFFECTS OF RESOLUTION/RESCISSION
On November 2, 1995, Reyes filed a Motion for Leave to File Amended Complaint
due to the filing by Lim of a complaint for estafa against Reyes as well as an action for
specific performance and nullification of sale and title plus damages before another trial
court.
Meanwhile, Lim prayed for the cancellation of the Contract to Sell and for the
issuance of writ of preliminary attachment against Reyes but the court denied the writ.
Lim requested on March 6, 1997 in open court that Reyes be ordered to deposit the P10
million down payment with the cashier of the trial court and the court granted this
motion.
The trial court denied Reyes motion to set aside the order dated March 6, 1997.
On October 3, 1997, the court denied Reyes motion for reconsideration and ordered
Reyes to deposit the P10 million down payment on or before October 30, 1997. Reyes
file a petition for certiorari with the Court of Appeals but the appellate court dismissed
the petition for lack of merit.
ISSUE:
Whether or not the petitioner should deposit the P10 million down payment to the
custody of the trial court as an effect of rescission of the Contract to Sell
RULING:
The Supreme Court held that an action for rescission could prosper only if 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 of its equity jurisdiction may
validly order the deposit of P10 million down payment in court. The purpose of the
exercise of equity jurisdiction in this case is to prevent unjust enrichment and to ensure
restitution. Reyes is seeking rescission of the Contract to Sell.
To subscribe top Reyes contention will unjustly enrich Reyes at the expense of
Lim. Reyes sold to Line One Foods Corporation the property. Reyes cannot claim
ownership of the P10 million down payment because Reyes had already sold to another
buyer the property for which Lim made the down payment. The Supreme Court find the
equities weigh heavily in favor of Lim, who paid the P10 million down payment in good
faith only to discover later that Reyes had subsequently sold the property to another
buyer.
Hence, the appealed decision of the appellate court is affirmed and the petition is
dismissed.
EFFECTS OF RESOLUTION/RESCISSION
The controversy between the two parties arose when the Ongs refused to credit
the number of FLADC shares in the name of Masagana Telamart, Inc. commensurate to
its 1,902.30 square meter property contribution; also when they refused to credit the
number of FLADC shares in favor of the Tius commensurate to their 151 square meter
property contribution; and when David S. Tiu and Cely Y. Tiu were proscribed from
assuming and performing their duties as Vice-President and Treasurer, respectively of
FLADC. These became the basis of the Tius' unilateral rescission of the Pre-Subscription
Agreement on February.
ISSUE:
ONG YONG, JUANITA TAN ONG, WILSON T. ONG, ANNA L. ONG, WILLIAM T. ONG,
WILLIE T. ONG, And JULIE ONG ALONZO, petitioners, VS. DAVID S. TIU, CELY Y.
TIU, MOLY YU GAW, BELEN SEE YU, D. TERENCE Y. TIU, JOHN YU, LOURDES C.
TIU, INTRALAND RESOURCES DEVELOPMENT CORP., MASAGANA TELAMART,
INC., REGISTER OF DEEDS OF PASAY CITY, And the SECURITIES AND EXCHANGE
COMMISSION, respondents
G.R. No. 144476
February 1, 2002
FACTS:
The Masagana Citimall, a commercial complex owned and managed by the First
Landlink Asia Development Corporation (FLADC) was threatened with incompletion when
its owner found in its financial distress in the amount of P190M for being indebted to the
Philippine National Bank (PNB). FLADC was then fully owned by the Tiu Group composed
of David S. Tiu, Cely Y. Tiu, Moly Yu Gaw, Belen See Yu, D. Terence Y. Tiu, John Yu and
Lourdes C. Tiu. In order to recover from its floundering finances, the Ong Group
composed of Ong Yong, Juanita Tan Ong, Wilson T. Ong, Anna L. Ong, William T. Ong and
Julie Ong Alonzo, were invited by the Tius to invest in FLADC. Hence, the execution of a
Pre-Subscription Agreement by and between the Tiu and Ong Groups on August 15,
1994.
By the Pre-Subscription Agreement, both parties agreed to maintain equal
shareholdings in FLADC with the Ongs investing cash while the Tius contributing
property. Specifically, the Ongs were to subscribe to 1 million shares of FLADC at a par
value of P100.00 per share while the Tius were to subscribe to 549,800 shares more of
FLADC at a par value of P100.00 per share over and above their previous subscription of
450,200 shares in order to complete a subscription of 1 million shares.
Commensurate
P100,000,000.00 in cash, while the Tius were to contribute the properties by way of
separate Deeds of Assignments.
the
Ongs were
to pay
the case at bar, the correlative obligation of the Tius to let the Ongs have and exercise
the functions of the positions of President and Secretary is the obligation of the Ongs to
let the Tius have and exercise the functions of Vice-President and Treasurer. Moreover,
the Ongs are now estopped from denying the applicability of Art. 1191 to the present
controversy. the Ongs allege that rescission is applicable only to reciprocal obligations
and the "Pre-Subscription Agreement" does not provide for reciprocity, hence, the
remedy of rescission is not available.
The Ongs cited the case of Songcuan vs. IAC, to illustrate their point that "As in
the Songcuan case, there are here two (2) separate and distinct obligations each
independent of the other the obligation to subscribe to, and to pay, 50% of the increased
capital stock of FLADC; and the obligation to install the Ongs and the Tius as members of
the Board of Directors and to certain corporate positions, but only after the Ongs and the
Tius have subscribed each to 50% of the increased capital stock of FLADC." In this
petition, in lieu of Art. 1191, the Ongs invoke Articles 1156 and 1159 of the New Civil
Code which state
"Art. 1156.
"Art. 1159.
Obligations arising from contracts have the force of law between the
EFFECTS OF RESOLUTION/RESCISSION
EQUATORIAL REALTY DEVELOPMENT, INC. VS. MAYFAIR THEATER, INC.
GR No. 133879
November 21, 2001
FACTS:
In June 1967, Carmelo & Bauerman, Inc. entered into a Contract of Lease with
Mayfair Theater for a parcel of land with 2-storey building for 20 years. Two years later in
March, 1969, Carmelo entered into a second Contract with Mayfair for another portion of
the property also for 20 years. In both contracts, Mayfair was given the right-of-first
refusal to purchase the properties. However, on July 30, 1978, within the 20-year period,
Carmelo sold the same properties to Equatorial for P11,300,000. Mayfair sued Equatorial
for specific performance and annulment of the Deed of Absolute Sate with Carmelo. The
trial court ruled in favor of Mayfair but was reversed by the CA. The Supreme Court,
however, upheld the trial court, for which Mayfair filed a motion for execution. The Deed
of Absolute Sale was rescinded and the lot was registered in the name of Mayfair.
However, in September 1997, Equatorial filed a collection suit for a sum of money
against Mayfair claiming payment of rentals or reasonable compensation for the use of
the properties AFTER its lease contracts had expired. The trial court ruled in favor
Mayfair holding that the Deed of Absolute Sale in the mother case DID NOT confer on
Equatorial any vested or residual property rights. Hence, the present case.
ISSUES:
1.
Did Equatorial obtain rights to the property when it entered into Deed of
Absolute Sale with Carmelo and hence, entitled to the fruits thereof?
2.
Is the right of first refusal granted to Mayfair through the lease contracts with
Carmelo superior to that of Equatorial, and therefore a bar to the consummation
of the Deed of Absolute Sale between Carmelo and Equatorial?
RULING:
1.
No. Equatorial did not obtain right of ownership over the property when it
entered into the Deed of Absolute Sale. Ownership of the property which the buyer
acquires only upon the delivery of the thing to him. There is delivery if the thing sold is
placed in the control and possession of the vendee. While the execution of a public
instrument of sale is recognized by law as the equivalent of delivery of the thing sold,
such constructive or symbolic delivery, being only presumptive, is deemed negated by
the failure of the vendee to take actual possession of the property sold. Since Mayfair
was in actual possession of the property by virtue of the lease contract with Carmelo,
there was no consummation of the sale, and therefore, Equatorial did not get ownership
right (real right).
2.
The Deed of Absolute Sale entered into by Carmelo and Equatorial was a
violation of the right of first refusal granted by Carmelo to Mayfair. The execution of the
deed of absolute sale as a form of constructive delivery is a legal fiction. It holds true
only if there is no legal impediment that may prevent the passing of the property from
the vendor to the vendee. The right of first refusal held by Mayfair was such legal
impediment. Therefore, there was no transfer of ownership from Camelot to Equatorial.
Dissenting opinion:
The Deed of Absolute Sale was deemed a rescissible contract and should remain
valid until rescinded. Since the Deed was not actually rescinded in the decision of the
mother case, then it was valid until it is rescinded in a proper court decision. Since there
was no actual rescission of the contract, then Equatorial was deemed the own of the
property from the signing of the Deed to the time the property was legally transferred to
Mayfair.
EFFECTS OF RESOLUTION/RESCISSION
Spouses MARIANO Z. VELARDE and AVELINA D. VELARDE
VS. COURT OF APPEALS, DAVID A. RAYMUNDO and GEORGE RAYMUNDO
2001 Jul 11
title available and free from any liens and encumbrances; and (c) defendant must
execute an absolute deed of sale in plaintiffs favor free from any liens or encumbrances
not later than January 21, 1987.
On January 8, 1987, defendants sent plaintiffs a notarial notice of
cancellation/rescission of the intended sale of the subject property allegedly due to the
latters failure to comply with the terms and conditions of the Deed of Sale with
Assumption of Mortgage
ISSUE:
Whether or not rescission should be granted in the case at bar.
RULING:
The right of rescission of a party to an obligation under Article 1191 of the Civil
Code is predicated on a breach of faith by the other party who violates the reciprocity
between them. The breach contemplated in the said provision is the obligors failure 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 of any just cause
for the court to determine the period of compliance, the court shall decree the rescission.
In the present case, private respondents validly exercised their right to rescind
the contract, because of the failure of petitioners to comply with their obligation to pay
the balance of the purchase price. Indubitably, the latter violated the very essence of
reciprocity in the contract of 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 of the purchase
price one month after it became due; however, this was not equivalent to actual
payment as would constitute a faithful compliance of their reciprocal obligation.
Moreover, the offer to pay was conditioned on the performance by private respondents
of additional burdens that had not been agreed upon in the original contract. Thus, it
cannot be said that the breach committed by petitioners was merely slight or casual as
would preclude the exercise of the right to rescind.
In the instant case, the breach committed did not merely consist of a slight delay
in payment or an irregularity; such breach would not normally defeat the intention of the
parties to the contract. Here, petitioners not only failed to pay the P1.8 million balance,
but they also imposed upon private respondents new obligations as preconditions to the
performance of their own obligation. In effect, the qualified offer to pay was a
repudiation of an existing obligation, which was legally due and demandable under the
contract of sale. Hence, private respondents were left with the legal option of seeking
rescission to protect their own interest.
ISSUE:
Whether or not rescission of the MOA is a valid remedy for the petitioner.
EFFECTS OF RESOLUTION/RESCISSION
ASUNCION VS. EVANGELISTA
G.R. No. 133491
October 13, 1999
316 SCRA 848
FACTS:
Private respondent has been operating a piggery since 1970, which was under the
trade name of Embassy Farms. In 1981, private respondents wife, together with three
others, organized Embassy Farms, Inc. and registered it with the Securirties and
Exchange Commission.
Private respondent was the majority stockholder of the
corporation, president and chief executive officer. On September 9, 1980, he borrowed
P500,000.00 from Paluwagan ng Bayan Savings and Loan Association to use as working
capital for the farm. He executed a real estate mortgage on three of his properties as
security for the loan. On November 4, 1981, he mortgaged ten titles more in favor of
PAIC Savings and Mortgage Bank as security for another loan in the amount of
P1,712,000.00. On February 16, 1982, he obtained another loan in the amount of
P844,625.78 from Mercator Finance Corporation. It was secured by a real estate
mortgage on five other landholdings of private respondent, all situated in Bulacan.
However, he defaulted in his loan payments. By June 1984, private respondent
debt had ballooned to almost six million pesos in overdue principal payments, interests,
penalties and other financial charges. On August 2, 1984, petitioner and private
respondent executed a Memorandum of Agreement that states that petitioner will pay all
of the loans of respondent provided that the latter will transfer the title of the farm and
properties, which were mortgaged in favor of the petitioner.
The petitioner was able to pay partially the loans of respondent from the three
creditors as compliance to the MOA. For his part, private respondent was obligated
under the MOA to execute, sign, and deliver any and all documents necessary for the
transfer and conveyance of the mortgaged properties as well as of the farm. However,
more than a year after signing the MOA, the landholdings of the respondent still
remained titled in his name. Neither did he inform said mortgages of the transfer of his
lands.
On April 10, 1986, petitioner filed in the RTC a compliant for rescission of the MOA
with a prayer for damages. The trial court ruled in favor of the private respondent. On
July 12, 1994, a copy of the decision of the trial court was sent by registered mail to
petitioners counsel however, unknown to petitioner, his counsel died while the case was
pending. On February 2, 1998, CA affirmed the decision of the trial court and ordered its
immediate execution. Petitioners motion for reconsideration was likewise denied.
RULING:
Yes. Article 1191 of the Civil Code governs the situation where there is noncompliance by one party in case of reciprocal obligations.
The Supreme Court found that private respondent failed to perform his
substantial obligations under the MOA. Hence, petitioner sought the rescission of the
agreement and ceased infusing capital into the piggery business of private respondent.
He later justified his refusal to execute any deed of sale and deliver the certificates of
stock by accusing petitioner of having failed to assume his debts.
The Court holds that the respondents insistence that petitioner execute a formal
assumption of mortgage independent and separate from his own execution of a deed of
cases is legally untenable, considering that a recorded real estate mortgage is a lien
inseparable from the property mortgaged and until discharged, it follows the property.
The Court holds, in fine, that the MOA entered into by petitioner and private
respondent should indeed be rescinded. The respondent appellate court erred in
assessing damages against petitioner for his refusal to fully pay private respondents
overdue loans. Such refusal was justified, considering that private respondent was the
first to refuse to deliver to petitioner the lands and certificates of stock that were the
consideration for the almost 6M in debt that petitioner was to assume and pay.
The effect of rescission is also provided in Article 1385 of the Civil Code.
The instant petition was granted. Decisions of the lower and appellate courts
were reversed and set aside. The MOA entered into by the parties is declared rescinded.
EFFECTS OF RESOLUTION/RESCISSION
On February 14, 1989, NHA approved the acquisition of the said parcels of land
with an area of 31.8231 hectares at the cost of P23.867 million, pursuant to which the
parties executed a series of Deeds of Absolute Sale covering the subject lands. Of the
eight parcels of lands, however, only five were paid for by the NHA because of the report
it received from the Land Geosciences Bureau of the Department of Environment and
Natural Resources that the remaining area is located at an active landslide area and
therefore, not suitable for development into a housing project. NHA eventually cancelled
the sale over the remaining three (3) parcels of land.
On March 9, 1992, petitioners filed a complaint for damages. After trial, the RTC
of Quezon City rendered the cancellation of contract to be justified and awarded P1.255
million as damages in favor of petitioners.
Upon appeal by petitioners, the Court of Appeals reversed the decision and
entered a new one dismissing the complaint including the award of damages.
The motion for reconsideration having been denied, petitioners seek relief from
this court contending, inter alia, that the CA erred in declaring that NHA had any legal
basis to rescind the subject sale.
ISSUE:
Whether or not the contention of petitioner is correct.
RULING:
NO. Petitioners confuse the cancellation of the contract by the NHA as a
rescission of the contract under Article 1191 of the Civil Code. The right to rescission is
predicated on a breach of faith by the other party that violates the reciprocity between
them. The power to rescind is given to the injured party. In this case, the NHA did not
rescind the contract. Indeed, it did not have the right to do so for the other parties to the
contract, the vendors did not commit any breach of their obligation. The NHA did not
suffer any injury. The cancellation was not therefore a rescission under Article 1191.
Rather, it was based on the negation of the cause arising from the realization that the
lands, which were the objects of the sale, were not suitable for housing.
KINDS OF DAMAGES:
1.
2.
3.
2002 Dec 27
G.R. No. 154278
394 SCRA 520
FACTS:
Andres Malecdan was a 75 year-old farmer. On July 15, 1994, at around 7:00
p.m., while Andres was crossing the National Highway on his way home from the farm, a
Dalin Liner bus on the southbound lane stopped to allow him and his carabao to pass.
However, as Andres was crossing the highway, a bus of 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 off 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 Malecdans neighbor, Virgilio Lorena, who
was resting in a nearby waiting shed after working on his farm. Malecdan sustained a
wound on his left shoulder, from which bone fragments protruded. He was taken by
Lorena and another person to the district hospital where he died a few hours after arrival.
The carabao also died soon afterwards. Lorena executed a sworn statement before the
police authorities. Subsequently, a criminal complaint for reckless imprudence resulting
in homicide and damage to property was filed against the Victory Liner bus driver
Ricardo Joson, Jr.
Private respondents brought the suit for damages in the RTC which found the
driver guilty of gross negligence in the operation of his vehicle and Victory Liner, Inc. also
guilty of gross negligence in the selection and supervision of Joson, Jr. Petitioner and its
driver were held liable jointly and severally for damages as follows: a. P50,000.00 as
death indemnity; b. P88,339.00 for actual damages; c. P200,000.00 for moral damages;
d. P50,000.00 as exemplary damages; e. thirty percent (30%) as attorneys fees of
whatever amount that can be collected by the plaintiff; and f. the costs of the suit.
On appeal, the decision was affirmed by the Court of Appeals, with the
modification that the award of attorneys fees was fixed at P50,000.00.
ISSUES:
1. Whether or not the CA erred in affirming the appealed decision of the RTC
granting P200,000.00 as moral damages which is double the P100,000.00 as prayed for
by the private respondents in their complaint and in granting actual damages not
supported by official receipts and spent way beyond the burial of the deceased victim.
2. Whether or not the affirmation by the CA of the appealed decision of the RTC
granting the award of moral and exemplary damages and attorneys fees which were not
proved and considering that there is no finding of bad faith and gross negligence on the
part of the petitioner was not established, is in accord with law and jurisprudence.
RULING:
accounted for. In this case, the trial court awarded P88,339.00 as actual damages.
While these were duly supported by receipts, these included the amount of P5,900.00,
the cost of one pig which had been butchered for the 9th day death anniversary of the
deceased. The item cannot be allowed.
The award of P200,000.00 for moral damages was reduced. The trial court found
that the wife and children of the deceased underwent "intense moral suffering" as a
result of the latters death. Under Art. 2206 of the Civil Code, the spouse, legitimate
children and illegitimate descendants and ascendants of the deceased may demand
moral damages for mental anguish by reason of the death of the deceased. Under the
circumstances of this case an award of P100,000.00 would be in keeping with the
purpose of the law in allowing moral damages.
The award of P50,000.00 for indemnity is in accordance with current rulings of the
Court. Art. 2231 provides that exemplary damages may be recovered in cases involving
quasi-delicts if the defendant acted with gross negligence. Exemplary damages are
imposed not to enrich one party or impoverish another but to serve as a deterrent
against or as a negative incentive to curb socially deleterious actions. In this case,
petitioners driver Joson, Jr. was grossly negligent in driving at such a high speed along
the national highway and overtaking another vehicle which had stopped to allow a
pedestrian to cross. Worse, after the accident, Joson, Jr. did not stop the bus to help the
victim. Under the circumstances, the trial courts award of P50,000.00 as exemplary
damages was proper.
EFFECTS OF RESOLUTION/RESCISSION
GOVERNMENT SERVICE INSURANCE SYSTEM
VS. SPOUSES GONZALO and MATILDE LABUNG-DEANG
G.R. No. 135644
September 17, 2001
365 SCRA 341
FACTS:
Sometime in December 1969, the spouses Deang obtained a housing loan from
the GSIS in the amount of eight thousand five hundred pesos (P8,500.00). Under the
agreement, the loan was to mature on December 23, 1979. The loan was secured by a
real estate mortgage constituted over the spouses property. As required by the
mortgage deed, the spouses Daeng deposited the owners duplicate copy of the title
with the GSIS.
On January 19, 1979, eleven (11) months before the maturity of the loan, the
spouses Deang settled their debt with the GSIS and requested for the release of the
owners duplicate copy of the title since they intended to secure a loan from a private
lender and use the land covered by it as collateral security for the loan of fifty thousand
pesos (P50,000.00) which they applied for with one Milagros Runes. They would use the
proceeds of the loan applied for the renovation of the spouses residential house and for
business. However, personnel of the GSIS were not able to release the owners duplicate
of the title as it could not be found despite diligent search.
Satisfied that the owners duplicate copy of the title was really lost, in 1979, GSIS
commenced the reconstitution proceedings with the Court of First Instance of Pampanga
for the issuance of a new owners copy of the same.
On June 22, 1979, GSIS issued a certificate of release of mortgage. On June 26,
1979, after the completion of judicial proceedings, GSIS finally secured and released the
reconstituted copy of the owners duplicate of Transfer Certificate of Title No. 14926-R to
the spouses Deang.
On July 6, 1979, the spouses Deang filed with the Court of First Instance, Angeles
City a complaint against GSIS for damages, claiming that as result of the delay in
releasing the duplicate copy of the owners title, they were unable to secure a loan from
Milagros Runes, the proceeds of which could have been used in defraying the estimated
cost of the renovation of their residential house and which could have been invested in
some profitable business undertaking.
The trial court rendered decision in favor of the spouses Labung-Deang.
Court of Appeals also affirmed the decision of the lower court.
The
ISSUE:
Whether or not GSIS is liable for 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 owners duplicate copy of 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 for damages.
First, in a breach of contract, moral damages are not awarded if the defendant is
not shown to have acted fraudulently or with malice or bad faith. The fact that the
complainant suffered economic hardship or worries and mental anxiety is not enough.
Second, actual damages cannot be awarded as there is no factual basis for 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 fact and amount of
damages, but must depend on actual proof.
On the other hand, it is also apparent that the spouses Deang suffered financial
damage because of the loss of the owners duplicate copy of the title. Temperate
damages may be granted on the amount of P20, 000.00 as a reasonable amount
considering that GSIS spent for the reconstitution of the owners duplicate copy of the
title.
Wherefore the petition is denied.
EFFECTS OF RESOLUTION/RESCISSION
BPI INVESTMENT CORPORATION, petitioner,
VS. D. G. CARREON COMMERCIAL CORPORATION, DANIEL G. CARREON, AURORA
J. CARREON, AND JOSEFA M. JECIEL, respondents
2001 Nov 29
371 SCRA 58
FACTS:
Petitioner BPI Investment Corporation (BPI Investments), formerly known as
Ayala Investment and Development Corporation, was engaged in money market
operations. Respondent D. G. Commercial Corporation was a client of petitioner and
started its money market placements in September, 1978. The individual respondents,
spouses Daniel and Aurora Carreon and Josefa M. Jeceil also placed with BPI Investments
their personal money in money market placements.
On April 21, 1982, BPI Investments wrote respondents Daniel Carreon and Aurora
Carreon, demanding the return of the overpayment of P410,937.09. The respondents
asserted that there was no overpayment and asked for time to look for the papers. Upon
the request of BPI Investments, the spouses Daniel and Aurora Carreon sent to BPI
Investments a proposed memorandum of agreement, dated May 7, 1982.
The agreement provided that respondent company, in the spirit of goodwill,
agreed to temporarily reimburse BPI the amount of P410,937.09 while the said
controversy (transactions of the placement) would be checked within five years.
On May 10, 1982, BPI Investments, without responding to the memorandum and
proposal of D. G. Carreon filed with the Court of First Instance of Rizal, Branch 36, Makati,
a complaint for recovery of a sum of money against D. G. Carreon with preliminary
attachment. On May 14, 1982, the trial court issued an order for preliminary attachment
after submission of affidavit of merit to support the petition, and the posting of a bond in
the amount of P200,000.00. However, on October 8, 1982, the trial court lifted the writ
of attachment. On October 28, 1982, BPI Investments moved for reconsideration, but
the trial court denied the motion after finding the absence of double payment to the
defendants.
On July 30, 1982, respondents D. G. Carreon filed with the trial court an answer to
the complaint, with counterclaim. D.G. Carreon asked for compensatory damages in an
amount to be proven during the trial; spouses Daniel and Aurora Carreon asked for moral
damages of P1,000,000.00 because of the humiliation, great mental anguish, sleepless
nights and deterioration of health due to the filing of the complaint and indiscriminate
and wrongful attachment of their property, especially their residential house and
payment of their money market placement of P109,283.75. Josefa Jeceil asked for moral
damages of P500,000.00, because of sleepless nights and mental anguish, and payment
of her money market placement of P73,857.57; all defendants claimed for exemplary
damages and attorneys fees of P100,000.00.
On May 25, 1993, the trial court rendered a decision dismissing both the
complaint and the counterclaim. Both parties appealed. On July 19,1996, the Court of
Appeals affirmed the dismissal of the complaint but reversed and set aside the dismissal
of the counterclaim thereby awarding respondents damages amounting to more than
P5M in sum.
ISSUE:
Whether or not respondents are entitled to damages as awarded by Court of
Appeals.
RULING:
No. The Court found petitioner not guilty of gross negligence in the handling of
the money market placement of respondents.
Gross negligence implies a want or absence of or failure to exercise slight care or
diligence, or the entire absence of care.
It evinces a thoughtless disregard of
consequences without exerting any effort to avoid them.
However, while petitioner BPI Investments may not be guilty of gross negligence,
it failed to prove by clear and convincing evidence that D. G. Carreon indeed received
money in excess of what was due them. The alleged payments in the complaint were
admitted by plaintiff itself to be withdrawals from validly issued commercial papers, duly
verified and signed by at least two authorized high-ranking officers of BPI Investments.
The law on exemplary damages is found in Section 5, Chapter 3, Title XVIII, Book
IV of the Civil Code. These are imposed by way of example or correction for the public
good, in addition to moral, temperate, liquidated, or compensatory damages. They are
recoverable in criminal cases as part of the civil liability when the crime was committed
with one or more aggravating circumstances; in quasi-delicts, if the defendant acted with
gross negligence; and in contracts and quasi-contracts, if the defendant acted in a
wanton, fraudulent, reckless, oppressive, or malevolent manner.
been an accomplice in the fraud. All the above enumerated elements are presents in the
case at bar.
ROBERTO C. SICAM and AGENCIA de R.C. SICAM, INC. versus LULU V. JORGE and
CESAR JORGE
G.R. NO. 159617
August 8, 2007
FACTS:
On different dates from September to October 1987, Lulu V. Jorge pawned several
pieces of jewelry with Agencia de R. C. Sicam located at No. 17 Aguirre Ave., BF Homes
Paraaque, Metro Manila, to secure a loan in the total amount of P59,500.00.
On October 19, 1987, two armed men entered the pawnshop and took away
whatever cash and jewelry were found inside the pawnshop vault. Petitioner Sicam sent
respondent Lulu a letter dated October 19, 1987 informing her of the loss of her jewelry
due to the robbery incident in the pawnshop. On November 2, 1987, respondent Lulu
then wrote a letter to petitioner Sicam expressing disbelief stating that when the robbery
happened, all jewelry pawned were deposited with Far East Bank near the pawnshop
since it had been the practice that before they could withdraw, advance notice must be
given to the pawnshop so it could withdraw the jewelry from the bank. Respondent Lulu
then requested petitioner Sicam to prepare the pawned jewelry for withdrawal on
November 6, 1987 but petitioner Sicam failed to return the jewelry.
On September 28, 1988, respondent Lulu joined by her husband, Cesar Jorge,
filed a complaint against petitioner Sicam with the Regional Trial Court of Makati seeking
indemnification for the loss of pawned jewelry and payment of actual, moral and
exemplary damages as well as attorney's fees. However, petitioner Sicam contends that
he is not the real party-in-interest as the pawnshop was incorporated on April 20, 1987
and known as Agencia de R.C. Sicam, Inc; that petitioner corporation had exercised due
care and diligence in the safekeeping of the articles pledged with it and could not be
made liable for an event that is fortuitous.
After trial ,the RTC rendered its Decision dismissing respondents complaint as
well as petitioners counterclaim. The RTC held that robbery is a fortuitous event which
exempts the victim from liability for the loss and under Art. 1174 of the Civil Code. It
further held that the corresponding diligence required of a pawnshop is that it should
take steps to secure and protect the pledged items and should take steps to insure itself
against the loss of articles which are entrusted to its custody as it derives earnings from
the pawnshop trade which petitioners failed to do and that robberies and hold-ups are
foreseeable risks in that those engaged in the pawnshop business are expected to
foresee.
ISSUE:
Whether petitioners are liable for the loss of
possession.
RULING:
valuables but was discouraged by the Central Bank since pawned articles should only be
stored in a vault inside the pawnshop. The very measures which petitioners had
allegedly adopted show that to them the possibility of robbery was not only foreseeable,
but actually foreseen and anticipated. The testimony, in effect, contradicts petitioners
defense of fortuitous event. Moreover, petitioners failed to show that they were free from
any negligence by which the loss of the pawned jewelry may have been occasioned.
Robbery per se, just like carnapping, is not a fortuitous event. It does not
foreclose the possibility of negligence on the part of herein petitioners. The presentation
of the police report of the Paraaque Police Station on the robbery committed based on
the report of petitioners' employees is not sufficient to establish robbery. Such report
also does not prove that petitioners were not at fault. Also, the robbery in this case took
place in 1987 when robbery was already prevalent and petitioners in fact had already
foreseen it as they wanted to deposit the pawn with a nearby bank for safekeeping.
Thus, petitioners are negligent in securing their pawnshop.
The parties agreed that the lessee could let/sublease the building and/or its
spaces to interested parties under such terms and conditions as the lessee would
determine and that all amounts collected as rents or income from the property would
belong exclusively to the lessee. The lessee undertook to complete construction of the
building "within eight (8) months from the date of the execution of the contract of lease."
The parties also agreed that upon the termination of the lease, the ownership and title to
the building thus constructed on the said lots would automatically transfer to the lessor,
even without any implementing document therefor. Real estate taxes on the land would
be borne by the lessor while that on the building, by the lessee, but the latter was
authorized to advance the money needed to meet the lessors' obligations such as the
payment of real estate taxes on their lots. The lessors would deduct from the monthly
rental due all such advances made by the lessee.
The construction of the building was not met on the date agreed upon due to the
assassination of the then Senator Benigno Aquino Jr. It was claimed that increase in the
value of the materials was a fortuitous event, which the lower courts did not consider as
such.
ISSUE:
Whether or not the assassination of Senator Benigno Aquino Jr., which caused
inflation, was a fortuitous event.
RULING:
The Supreme Court found no merit in petitioners submission that the
assassination of the late Senator Benigno Aquino, Jr. was a fortuitous event that justified
a modification of the terms of the lease contract.
A fortuitous event is that which could not be foreseen, or which even if foreseen,
was inevitable. To exempt the obligor from liability for a breach of an obligation due to
an "act of God", the following requisites must concur: (a) the cause of the breach of the
obligation must be independent of the will of the debtor; (b) the event must be either
unforeseeable or unavoidable; (c) the event must be such as to render it impossible for
the debtor to fulfill his obligation in a normal manner; and (d) the debtor must be free
from any participation in, or aggravation of the injury to the creditor.
In the case under scrutiny, the assassination of Senator Aquino may indeed be
considered a fortuitous event. However, the said incident per se could not have caused
the delay in the construction of the building. What might have caused the delay was the
resulting escalation of prices of commodities including construction materials. Be that as
it may, there is no merit in Huibonhoa's argument that the inflation borne by the Filipinos
in 1983 justified the delayed accrual of monthly rental, the reduction of its amount and
the extension of the lease by three (3) years.
Inflation is the sharp increase of money or credit or both without a corresponding
increase in business transaction. There is inflation when there is an increase in the
volume of money and credit relative to available goods resulting in a substantial and
continuing rise in the general price level. While it is of judicial notice that there has been
a decline in the purchasing power of the Philippine peso, this downward fall of the
currency cannot be considered unforeseeable considering that since the 1970's we have
been experiencing inflation. It is simply a universal trend that has not spared our
country. Conformably, this Court upheld the petitioner's view in Occena v. Jabson that
even a worldwide increase in prices does not constitute a sufficient cause of action for
modification of an instrument. It is only when an extraordinary inflation supervenes that
the law affords the parties a relief in contractual obligations. In Filipino Pipe and Foundry
Corporation v. NAWASA, the Court explained extraordinary inflation thus:
"Extraordinary inflation exists when 'there is a decrease or increase in the purchasing
power of the Philippine currency which is unusual or beyond the common fluctuation in
the value of said currency, and such decrease or increase could not have been
reasonably foreseen or was manifestly beyond the contemplation of the parties at the
time of the establishment of the obligation.
No decrease in the peso value of such magnitude having occurred, Huibonhoa has
no valid ground to ask this Court to intervene and modify the lease agreement to suit her
purpose. As it is, Huibonhoa even failed to prove by evidence, documentary or
testimonial, that there was an extraordinary inflation from July 1983 to February 1984.
Although she repeatedly alleged that the cost of constructing the building doubled from
P6 million to P12 million, she failed to show by how much, for instance, the price index of
goods and services had risen during that intervening period. An extraordinary inflation
cannot be assumed.
Hence, for Huibonhoa to claim exemption from liability by reason of fortuitous
event under Art. 1174 of the Civil Code, she must prove that inflation was the sole and
proximate cause of the loss or destruction of the or, in this case, of the delay in the
construction of the building. Having failed to do so, Huibonhoa's contention is untenable.
Pathetically, if indeed a fortuitous event deterred the timely fulfillment of
Huibonhoa's obligation under the lease contract, she chose the wrong remedy in filing
the case for reformation of the contract. Instead, she should have availed of the remedy
of recission of contract in order that the court could release her from performing her
obligation under Arts. 1266 and 1267 of the Civil Code, so that the parties could be
restored to their status prior to the execution of the lease contract.
FACTS:
Petitioner Ace-Agro Development Corporation and private respondent Cosmos
Bottling Corporation entered into a service contract covering the period from January 1,
1990 to December 31, 1990. According to the agreement, the former shall clean soft
drink bottles and repair wooden shells for private respondent. The service contract was
suspended on account of a fire on April 25, 1990 which destroyed the area where
petitioner did its work.
Respondent terminated the service contract due to the fire. Petitioner sent
several letters for reconsideration, which the respondent willingly considered through its
letters dated August 29, 1990 and November 7, 1990 directing petitioner to resume its
work. Petitioner, however, refused to continue its work on two reasons. First, the August
29 letter did not allow them to resume their work on respondents premises which will be
quite costly for them. Second, petitioner requested for an extension of two (2) months
for their contract on account of the fire which the respondent did not heed into.
ISSUES:
1. Whether or not force majeure or fortuitous event is present in the case.
2. Whether or not the respondet was justified in unilaterally terminating the contract
due to a fortuitous event.
3. Whether or not the fortuitous event allows the extension of a contract.
RULING:
1. YES. Pursuant to Article 1174 of the Civil Code, Except in cases expressly specified
by law, or when it is otherwise declared by stipulation, or when the nature of the
obligation requires the assumption of risk, no person shall be responsible for those
events which could not be foreseen, or which though foreseen, were inevitable. The
requisites for an event to be considered a fortuitous event are as follows: First, the
cause of breach must be independent of the will of the obligor. Second, the event must
be unforeseeable or inevitable. Third, the event must be such as to render it impossible
for the debtor to fulfill his obligation in a normal manner. And fourth, the debtor must be
free from any participation in, or aggravation of, the injury to the creditor. In this case,
all the mentioned requisites are present.
2. NO. The fortuitous event that happened in this case could not warrant a termination
of the service contract; but rather, it only temporarily suspends the performance of the
obligation. The unilateral termination therefore shifted on petitioners part when it
unreasonably refused to continue its services.
3. NO. Fortuitous events do not automatically warrant an extension for the period of a
contract, especially that this case is one which has a resolutory condition. The fact is
that the contract was subject to a resolutory period which relieved the parties of their
respective obligations but did not stop the running of the period of their contract.
EFFECTS OF FORTUITOUS EVENT UPON OBLIGATIONS
1.
2.
3.
4.
5.
6.
7.
8.
Where the risk is quite evident such that the possibility of danger is not only
foreseeable, but also actually foreseen, then it could be said that the nature of the
obligation is such that a party could rightfully be deemed to have assumed it. It is not
enough therefore that the event should not have been foreseen or anticipated, but it
must be one impossible to foresee or to avoid in order that a party may be said to have
assumed the risk resulting from the nature of the obligation itself.
In the case, there is no assumption of risk by the borrower of a car to respond to
damages for the broken windshield caused by an accidental stone-throwing incident by
boys playing along the road. Decision reversed as to the liability of respondent.
EFFECTS OF FORTUITOUS EVENT UPON OBLIGATIONS
The sudden act o the passenger who stabbed another passenger in the bus is
within the context of force majeure. However, in order that a common carrier may be
absolved from liability in case of force majeure, it is not enough that the accident was
caused by force majeure. The common carrier must still proves that it was not negligent
in causing the injuries resulting from such accident. Considering the factual findings in
this case, it is clear that petitioner has failed to overcome the presumption of fault and
negligence found in the law governing common carriers. The argument that the
petitioners are not insurers of their passengers deserves no merit in view of the failure of
the petitioners to observe extraordinary diligence in transporting safely the passengers
to their destination as warranted by law.
EFFECTS OF FORTUITOUS EVENT UPON OBLIGATIONS
VASQUEZ VS. COURT OF APPEALS
138 SCRA 558
Bachelor Express vs CA
GR. NO. 85691, July 31, 1990
FACTS:
On 1 August 1980, Bus 800, owned by Bachelor Express, Inc. and driven by
Cresencio Rivera, came from Davao City on its way to Cagayan de Oro City passing
Butuan City. While at Tabon-Tabon, Butuan City, the bus picked up a passenger. About 15
minutes later, a passenger at the rear portion suddenly stabbed a PC soldier which
caused commotion and panic among the passengers. When the bus stopped, passengers
Ornominio Beter and Narcisa Rautraut were found lying down the road, the former
already dead as a result of head injuries and the latter also suffering from severe injuries
which caused her death later. The passenger-assailant alighted from the bus and ran
toward the bushes but was killed by the police.
Thereafter, the heirs of Ornomino Beter and Narcisa Rautraut (Ricardo Beter and
Sergia Beter are the parents of Ornominio while Teofilo Rautraut and Zotera Rautraut are
the parents of Narcisa) filed a complaint for sum of money against Bachelor Express,
its alleged owner Samson Yasay, and the driver Rivera. After due trial, the trial court
issued an order dated 8 August 1985 dismissing the complaint. The CA however reversed
the RTC decision.
ISSUES:
1. Whether or not the case at bar is within the context of force majeure.
2. Should the petitioner be absolved from liability for the death of its passengers?
RULING:
FACTS:
A vessel sailed from Manila to Cebu despite the knowledge by the captain and
officers that a typhoon was building up somewhere in Mindanao. When it passed
Tanguigui Island, the weather suddenly changed and the vessel struck a reef, sustained
leaks and eventually sunk. The ship sunk with the children of the petitioners who sued
for damages before the CFI of Manila, which was granted. Respondents defense of force
majeure to extinguish its liability were not entertained. On appeal, the judgment was
reversed.
ISSUE:
Whether or not the defense of force majeure is tenable.
RULING:
NO. A fortuitous event is constituted by the following: 1) The event must be
independent of the human will; 2) the occurrence must render it impossible for the
debtor to fulfill the obligation in a normal manner; and 3) the obligor must be free of
participation in the aggravation of the injury suffered by the obligee or if it could be
foreseen, it must have been impossible to avoid. There must be an entire exclusion of
human agency from the cause of the injury or loss. Such is not the case at bar. The
vessel still proceeded even though the captain already knew that they were within the
typhoon zone and despite the fact that they were kept posted about the weather
conditions. They failed to exercise that extraordinary diligence required from them,
explicitly mandated by the law, for the safety of the passengers.
EFFECTS OF FORTUITOUS EVENT UPON OBLIGATIONS
YOBIDO VS. COURT OF APPEALS
281 SCRA 01
G.R. No. 113003
Oct. 17, 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 Yobido Liner bus bound for
Davao City. Along Picop Road in Km. 17, Sta.Maria, Agusan del Sur, the left front tire of
the bus exploded. The bus fell into a ravine around three (3) feet from the road and
struck a tree. The incident resulted in the death of 28-year-old Tito Tumboy and physical
injuries to other passengers. On Nov. 21, 1988, a complaint for breach of contract of
carriage, damages and attorneys fees was filed by Leny and her children against Alberta
Yobido, the owner of the bus, and Cresencio Yobido, its driver, before the Regional Trial
Court of Davao City. When the defendants therein filed their answer to the complaint,
they raised the affirmative defense of caso fortuito. They also filed a third-party
complaint against Philippine Surety and Insurance, Inc. This third-party defendant filed
an answer with compulsory counterclaim. At the pre-trial conference, the parties agreed
to a stipulation of facts.
On August 29, 1991, the lower court rendered a decision dismissing the action for
lack of merit. On the issue of whether or not the tire blowout was a caso fortuito, it
found that the falling of the bus to the cliff was a result of no other outside factor than
the tire bolw-out. It held that the ruling in the La Mallorca and Pampanga Bus Co. v. De
Jesus that a tire blowout is a mechanical defect of the conveyance or a fault in its
equipment which was easily discoverable if the bus had been subjected to a more
thorough or rigid check-up before 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 found
that the blowout was caused by the established fact that the inner tube of the left front
tire was pressed between the inner circle of the left wheel and the rim which had
slipped out of the left wheel . In this case, however, the cause of 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 of the will
of the defendants who should be relieved of whatever liability the plaintiffs may have
suffered by reason of the explosion pursuant to Article 1174 of the Civil Code.
ISSUE:
Whether or not the Trial Court erred in their findings that the tire blowout was a
caso fortuito.
RULING:
On August 23, 1193, the Court of Appeals rendered the decision reversing the
decision of the trial court. Article 1755 provides that (a) common carrier is bound to
carry the passenger safely as far as human care and foresight can provide, using the
utmost diligence very cautious persons, with a due regard for all the circumstances.
Accordingly, in culpa contractual, once a passenger dies or is injured, the carrier is
presumed to have been at fault 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 of the Civil Code
or that the injury of the passenger was due to fortuitous event. Consequently, the court
need make an express finding of fault or negligence on the part of the carrier to hold it
responsible for damages sought by the passenger.
The decision of the Court of Appeals was affirmed subject to the modification that
petitioners shall, in addition to the monetary awards therein, be liable for the award of
exemplary damages in the amount of P20,000.00.
EFFECTS OF FORTUITOUS EVENT UPON OBLIGATIONS
ROBERTO JUNTILLA VS. CLEMENTE FONTANAR
136 SCRA 625
G.R. No. L-45637
FACTS:
The plaintiff was a passenger of the public utility jeepney on the course of the trip
from Danao City to Cebu City. The jeepney was driven by defendant Berfol Camoro. It
was registered under the franchise of defendant Clemente Fontanar but was actually
owned by defendant Fernando Banzon. When the jeepney reached Mandaue City, the
right rear tire exploded causing the vehicle to turn turtle. The plaintiff who was sitting at
the front seat was thrown out of the vehicle and momentarily lost consciousness. When
he came to his senses, he found that he had a lacerated wound on his right palm and
injuries on his left arm, right thigh and on his back. Because of his shock and injuries, he
went back to Danao City but on the way, he discovered that his "Omega" wrist watch
was lost. Upon his arrival in Danao City, he immediately entered the Danao City Hospital
to attend to his injuries, and also requested his father-in-law to proceed immediately to
the place of the accident and look for the watch. In spite of the efforts of his father-inlaw, the wrist watch could no longer be found.
ISSUE:
Whether or not the accident that happened was due to a fortuitous event,
thereby, absolving the respondents from any obligation.
RULING:
NO. The accident was not due to a fortuitous event. There are specific acts of
negligence on the part of the respondents. The passenger jeepney turned turtle and
jumped into a ditch immediately after its right rear tire exploded. It was running at a very
high speed before the accident and was overloaded. The petitioner stated that there
were three (3) passengers in the front seat and fourteen (14) passengers in the rear.
While the tire that blew-up was still good because the grooves were still visible,
this does not make the explosion of the tire a fortuitous 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 avert possible accidents. The blowingup of the tire, therefore, could have been caused by too much air pressure and
aggravated by the fact that the jeepney was overloaded and speeding at the time of the
accident.
The accident was caused either through the negligence of the driver or because
of mechanical defects in the tire. Common carriers are obliged to supervise their drivers
and ensure that they follow rules and regulations such as not to overload their vehicles,
not to exceed safe and legal speed limits, and to know the correct measures to take
when a tire blows up.
The source of a common carrier's legal liability is the contract of carriage, and by
entering into the said contract, it binds itself to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of a very cautious
person, with a due regard for all the circumstances.
The driver and the owner of the vehicle are liable for damages.
After having been cleared by the Coast Guard Station in Cebu the previous day,
the vessel left the port of Mandaue City for Bislig, Surigao del Sur on March 2, 1987. The
weather was calm when the vessel started its voyage.
The following day, March 3, 1987, M/V Peatheray Patrick-G listed and
subsequently sunk off Cawit Point, Cortes, Surigao del Sur. As a consequence thereof,
the cargo belonging to San Miguel Corporation was lost. Subsequently, San Miguel
Corporation claimed the amount of its loss from petitioner.
The Court of Appeals observed respondents from any liability because the cargo
was lost due to a fortuitous event; strong winds and huge waves caused the vessel to
sink.
ISSUE:
Whether the loss of the cargo was due to the occurrence of a natural disaster, and
if so, whether such natural disaster was the sole and proximate cause of the loss or
whether private respondents were partly to blame for failing to exercise due diligence to
prevent the loss of the cargo.
RULING:
Common carriers, from the nature of their business and for reasons of public
policy, are mandated to observe extraordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by them. Owing to this high degree of
diligence required of them, common carriers, as a general rule, are presumed to have
been at fault or negligent if the goods transported by them are lost, destroyed or if 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 from six to ten feet 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 before the M/V Peatheray PatrickG left the port of Mandaue City, the Captain confirmed with the Coast Guard that the
weather condition would permit the safe travel of the vessel to Bislig, Surigao del Sur.
Thus, he could not be expected to have foreseen the unfavorable weather condition that
awaited the vessel in Cortes, Surigao del Sur. It was the presence of 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 found that there was no
negligence on the part of the crew of the M/V Peatheray Patrick-G. Since the presence of
strong winds and enormous waves at Cortes, Surigao del Sur on March 3, 1987 was
shown to be the proximate and only cause of the sinking of the M/V Peatheray Patrick-G
and the loss of the cargo belonging to San Miguel Corporation, private respondents
cannot be held liable for the said loss.
ISSUE:
Whether or not the CA is correct in finding the petitioner liable due to negligence
and cannot be exonerated due to the defense of fortuitous event.
RULING:
YES. As stated by the Court of Appeals, the burning of the subject truck was
impossible to foresee, but not impossible to avoid. Mindex could have prevented the
incident by immediately towing the truck to a motor shop for repair.
In this case, petitioner was found negligent and thus liable for the loss or
destruction of the leased truck. Article 1174 of the Civil Code states that, No person
shall be responsible for a fortuitous event that could not be foreseen or, though foreseen,
was inevitable. In other words, there must be an exclusion of human intervention form
the cause of injury on loss. In this case, the petitioner is contributory negligent to the
incident.
Decision was denied.
decision.
thirtieth day after receipt of the Letter of Credit, as agreed upon by the parties in the July
contract, PHIBRO effected its first shipment only on November 17, 1987.
Consequently, in October 1987, NAPOCOR once more advertised for the delivery
of coal to its Calaca thermal plant. PHIBRO participated anew in this subsequent bidding
but its application was denied for not meeting the minimum requirements. However,
PHIBRO found that the real reason for the disapproval was its purported failure to satisfy
NAPOCORs demand for damages due to the delay in the delivery of the first coal
shipment. Thus, PHIBRO filed an action for damages with application for injunction
against NAPOCOR with the Regional Trial Court, Branch 57, Makati City. In its complaint,
PHIBRO alleged that NAPOCORs act of disqualifying it in the October 1987 bidding and in
all subsequent biddings was tainted with malice and bad faith. PHIBRO prayed for actual,
moral and exemplary damages and attorneys fees.
On the other hand NAPOCOR averred that the strikes in Australia could not be
invoked as reason for the delay in the delivery of coal because PHIBRO itself admitted
that as of July 28, 1987 those strikes had already ceased. Furthermore, NAPOCOR
claimed that due to PHIBROs failure to deliver the coal on time, it was compelled to
purchase coal from ASEA at a higher price. NAPOCOR claimed for actual damages in the
amount of P12,436,185.73, representing the increase in the price of coal, and a claim of
P500,000.00 as litigation expenses.
On January 16, 1992, the trial court rendered a decision in favor of PHIBRO.
Unsatisfied, NAPOCOR elevated the case to the Court of Appeals which affirmed in toto
the latters decision. Hence, this present petition.
ISSUE:
Whether or not the lower court erred in holding that PHIBROs delay in the
delivery of imported coal was due to force majeure.
RULING:
It was disclosed from the records of the case that what prevented PHIBRO from
complying with its obligation under the July 1987 contract was the industrial disputes
which besieged Australia during that time. The Civil Code provides that no person shall
be responsible for those events which could not be foreseeen, or which, though foreseen,
were inevitable. This means that when an obligor is unable to fulfill his obligation
because of a fortuitous event or force majeure, he cannot be held liable for damages for
non-performance.
In addition to the above legal precept, it is worthy to note that PHIBRO and
NAPOCOR explicitly agreed in Section XVII of the Bidding Terms and Specifications that
neither seller (PHIBRO) nor buyer (NAPOCOR) shall be liable for any delay in or failure of
the performance of its obligations, other than the payment of money due, if any such
delay or failure is due to Force
Majeure. Strikes then are undoubtedly included in the force majeure clause of the
Bidding Terms and Specifications.
3. Florence S. Ariola could not be held accountable for any liability incurred by her
late father. The documentary evidence presented, particularly the promissory notes and
the continuing guaranty agreement, were executed and signed only by the late Efraim
Santibaez and his son Edmund. As the petitioner failed to file its money claim with the
probate court, at most, it may only go after Edmund as co-maker of the decedent under
the said promissory notes and continuing guaranty, of course, subject to any defenses
Edmund may have as against the petitioner. However, the court had not acquired
jurisdiction over the person of Edmund. Also, the petitioner had not sufficiently shown
that it is the successor-in-interest of the Union Savings and Mortgage Bank to which the
FCCC assigned its assets and liabilities.
ISSUE:
Whether or not petitioner is bound by the contract entered into by his
predecessor-in-interest.
defaulted in the payment of the subject account, plaintiff foreclosed the mortgage and
plaintiff was the highest bidder in the amount of P3,500,000.00. The foreclosed property
was redeemed a year later but after application of the redemption payment, plaintiff
claims that there is still a deficiency in the amount of P1,323,053.08.
RULING:
Yes, petitioner is bound by contracts entered into by his predecessors-in-interest.
Heirs are bound by contracts entered into by their predecessors-in-interest. In this case,
the GSIS has not filed any action for the annulment of Deed of Absolute Sale of the lot
the latter sold to Caiquep, nor the forfeiture of the lot in question.
A collection suit was then filed by IFC against PBI. However, PBI denied liability
alleging that IFC has no case or right of action because the obligation is fully paid out of
the proceeds of foreclosure sale of its property. Further, it alleged that a proper
accounting of the transaction between the parties will show that it is the IFC who is liable
to PBI.
In the Courts view, the contract of sale remains valid between the parties, unless
and until annulled in the proper suit filed by the rightful party, the GSIS. For now, the
said contract of sale is binding upon the heirs of Macaria Vda de Caiquep., including
petitioner who alleges to be one of her heirs, in line with the rule that heirs are bound by
contracts entered into by their predecessors-in-interest.
The trial court dismissed the complaint but the Court of Appeals reversed it. It
ordered PBI to pay IFC the deficiency in the amount of P1,237,802.48 and the monetary
interests.
ISSUE:
Whether or not said Republic Act No. 5980 should govern the transaction between
petitioners and private respondent which in reality was bilateral, not trilateral, and
respondent financing company was not really subrogated in the place of the supposed
seller or assignor.
RULING:
The assignment of the contracts to sell falls within the purview of the Act. The
term credit has been defined to - "(c) x x x mean any loan, mortgage, deed of trust,
advance, or discount; any conditional sales contract, any contract to sell, or sale or
contract of sale of property or service, either for present or future delivery, under which,
part or all of the price is payable subsequent to the making of such sale or contract; any
rental-purchase contract; any option, demand, lien, pledge, or other claim against, or for
the delivery of, property or money, any purchase, or other acquisition of or any credit
upon the security of, any obligation or claim arising out of the foregoing; and any
transaction or series of transactions having a similar purpose or effect.
An assignment of credit is an act of transferring, either onerously or gratuitously,
the right of an assignor to an assignee who would then be capable of proceeding against
the debtor for enforcement or satisfaction of the credit. The transfer of rights takes
place upon perfection of the contract, and ownership of the right, including all
appurtenant accessory rights, is thereupon acquired by the assignee. The assignment
binds the debtor only upon acquiring knowledge of the assignment but he is entitled,
even then, to raise against the assignee the same defenses he could set up against the
assignor. Where the assignment is on account of pure liberality on the part of the
assignor, the rules on donation would likewise be pertinent; where valuable
consideration is involved, the assignment partakes of the nature of a contract of sale or
purchase.
hectares, it is then within the jurisdiction of the Department of Agrarian Reform (DAR) to
determine whether or not the property can be subjected to agrarian reform. But this
necessitates an entirely differently proceeding.
While DBP committed egregious error in interpreting Sec. 6 of RA 6657, the same
is not equivalent to gross and evident bad faith when it refused to execute the deed of
sale in favor of private respondents.
The petition was DENIED, and the decision of the CA was AFFIRMED with the
MODIFICATION that attorney's fees and nominal damages awarded to private respondent
were DELETED.
SUSPENSIVE CONDITIONS MEANING
1.
2.
3.
'2.......The LESSEE shall pay by way of annual rental an amount equivalent to Two
Thousand Five Hundred (P2,500.00) Pesos per hectare, upon the signing of this contract
on Dec. 1, 1983.
'9.......The LESSORS hereby commit themselves and shall undertake to obtain a
separate and distinct T.C.T. over the herein leased portion to the LESSEE within a
reasonable period of time which shall not in any case exceed four (4) years, after which a
new Contract shall be executed by the herein parties which shall be the same in all
respects with this Contract of Lease/Purchase insofar as the terms and conditions are
concerned.
The defendant Gonzales paid the P2,500.00 per hectare or P15,000.00 annual
rental on the half-portion of the property in accordance with the second provision of the
Contract of Lease/Purchase and thereafter took possession of the property, installing
thereon the defendant Jesus Sambrano as his caretaker. The defendant Gonzales did not,
however, exercise his option to purchase the property immediately after the expiration of
the one-year lease on November 30, 1984. He remained in possession of the property
without paying the purchase price provided for in the Contract of Lease/Purchase and
without paying any further rentals thereon.
A letter was sent by one of the plaintiffs-heirs Ricardo Cruz to the defendant
Gonzales informing him of the lessors' decision to rescind the Contract of Lease/Purchase
due to a breach thereof committed by the defendant. The letter also served as a demand
on the defendant to vacate the premises within 10 days from receipt of said letter.
The defendant Gonzales refused to vacate the property and continued possession
thereof.
The property subject of the Contract of Lease/Purchase is currently the subject of
an Extra-Judicial Partition. Title to the property remains in the name of the plaintiffs'
predecessors-in-interest, Bernardina Calixto and Severo Cruz.
Alleging breach of the provisions of the Contract of Lease/Purchase, the plaintiffs
filed a complaint for recovery of possession of the property - subject of the contract with
damages, both moral and compensatory and attorney's fees and litigation expenses.
ISSUE:
Whether or not the trial court gravely erred in holding that plaintiffs-appellants
could not validly rescind and terminate the lease/purchase contract and thereafter to
take possession of the land in question and eject therefrom defendants-appellees.
RULING:
Alleging that petitioner has not purchased the property after the lapse of 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. He contends that paragraph nine was
a condition precedent to the purchase of the property.
Both the trial court and the Court of Appeals (CA) interpreted this provision to
mean that the respondents had obliged themselves to obtain a TCT in the name of
petitioner-lessee. The trial court held that this obligation was a condition precedent to
petitioner's purchase of the property. Since respondents had not performed their
obligation, they could not compel petitioner to buy the parcel of land. The CA took the
opposite view, holding that the property should be purchased first before respondents
may be obliged to obtain a TCT in the name of petitioner-lessee-buyer.
As earlier noted, petitioner disagrees with the interpretation of the two courts and
maintains that respondents were obligated to procure a TCT in their names before he
could be obliged to purchase the property in question.
Basic is the rule in the interpretation of contracts that if some stipulation therein
should admit of several meanings, it shall be understood as bearing that import most
adequate to render it effectual. Considering the antecedents of the ownership of the
disputed lot, it appears that petitioner's interpretation renders clause nine most
effectual.
The record shows that at the time the contract was executed, the land in question
was still registered in the name of Bernardina Calixto and Severo Cruz, respondents'
predecessors-in-interest. There is no showing whether respondents were the only heirs of
Severo Cruz or whether the other half of the land in the name of Bernardina Calixto was
adjudicated to them by any means. In fact, they admit that extrajudicial proceedings
were still ongoing. Hence, when the Contract of Lease/Purchase was executed, there was
no assurance that the respondents were indeed the owners of the specific portion of the
lot that petitioner wanted to buy, and if so, in what concept and to what extent.
Thus, the clear intent of the ninth paragraph was for respondents to obtain a
separate and distinct TCT in their names. This was necessary to enable them to show
their ownership of the stipulated portion of the land and their concomitant right to
dispose of it. Absent any title in their names, they could not have sold the disputed
parcel of land.
SUSPENSIVE CONDITIONS: MEANING
INSULAR LIFE ASSURANCE COMPANY, LTD., INSULAR SAVINGS BANK and
JACINTO D. JIMENEZ
VS. ROBERT YOUNG, GABRIEL LA'O II, ARTHUR TAN, LOPE JUBAN, JR., MARIA
LOURDES ONGPIN, ANTONIO ONGPIN, ELSIE DIZON, YOLANDA BAYER, CECILIA
VIRAY, MANUEL VIRAY and JOSE VITO BORROMEO
2002 Jan 16
G.R. No. 140964
FACTS:
In December, 1987, respondent Robert Young, together with his associates and
co-respondents, acquired by purchase Home Bankers Savings and Trust Co., now
petitioner Insular Savings Bank ("the Bank," for brevity), from the Licaros family for
P65,000,000.00. Young and his group obtained 55% equity in the Bank, while Jorge Go
and his group owned the remaining 45%.
However, Araneta backed out from the intended sale and demanded the return of
his downpayment.
On October 1, 1991, Insular Life and Insular Life Pension Fund formally informed
Young of their intention to acquire 30% and 12%, respectively, of the Bank's outstanding
shares, subject to due diligence audit and proper documentation. On October 9, 1991,
Insular Life and Young, authorized to represent the other stockholders, entered into a
Memorandum of Agreement (MOA), wherein Insular Life and its Pension Fund agreed to
purchase 830,860 common shares and 311,572 common shares, respectively, for a total
consideration of P198,000,000.00.
Under its terms, the MOA is subject to Young's
representations and warranties that, as of September 30, 1991, the Bank has (a) a total
outstanding paid-in capital of P157,714,900.00,
(b) a total net worth of
P114,801,539.00, and (c) total
loans with doubtful recovery of P60,000,000.00.
The MOA is also subject to these
"condition precedents": (1) Young shall infuse additional capital of P50,000,000.00 into
the Bank, and (2) Insular Life and its Pension Fund shall undertake a due diligence audit
on the Bank to determine whether the provision for P60,000,000.00 doubtful account
made by Young is sufficient.
On October 21, 1991, Young signed a letter prepared by Atty. Jacinto Jimenez,
counsel of Insular Life, addressed to Mr. Vicente R. Ayllon, Chairman of the Bank's Board
of Directors, stating that due to business reverses, he shall not be able to pay his
obligations under the Credit Agreement between him and Insular Life. Consequently,
Young "unconditionally and irrevocably waive(s) the benefit of the period" of the loan (up
to December 26, 1991) and Insular "may consider (his) obligations thereunder as
defaulted." He likewise interposes no objection to Insular Life's exercise of its rights
under the said agreement.
Forthwith, Insular Life instructed its counsel to foreclose the pledge constituted
upon the shares. The latter then sent Young a notice informing him of the sale of the
shares in a public auction scheduled on October 28, 1991, and in the event that the
shares are not sold, a second auction sale shall be held the next day, October 29.
From October 31, 1991 to December 27, 1991, Insular Life invested a total of
P325,000,000.00 in the Bank. Meanwhile, on November 27, 1991, its Board of Directors,
during its meeting, accepted the resignation of Young as President. On January 7, 1992,
Young and his associates filed with the Regional Trial Court (RTC), Branch 142, Makati
City, a complaint against the Bank, Insular Life and its counsel, Atty. Jacinto Jimenez,
petitioners, for annulment of notarial sale, specific performance and damages, docketed
as Civil Case No. 92-049.
The complaint alleges, inter alia, that the notarial sale
conducted by petitioner Atty. Jacinto Jimenez is void as it does not comply with the
requirement of notice of the second auction sale; that Young was forced by the officers of
Insular Life to sign letters to enable them to have control of the Bank; that under the
MOA, Insular Life should apply the purchase price of P198,000,000.00 (corresponding to
the 55% of the outstanding capital stock of the Bank) to Young's loan of P200,000,000.00
and pay the latter P162,000,000.00, representing the remaining 45% of its outstanding
capital stock, which must be set-off against the loans of the other respondents.
ISSUE:
Whether or not the respondent court erred in declaring the MOA dated October 9,
1991 valid and enforceable between the parties despite respondent Young's failure to
comply with the terms and conditions thereof.
RULING:
Contrary to the findings of the Court of Appeals, the foregoing provisions of the
MOA negate the existence of a perfected contract of sale. The MOA is merely a contract
to sell since the parties therein specifically undertook to enter into a contract of sale if
the stipulated conditions are met and the representation and warranties given by Young
prove to be true. The obligation of petitioner Insular Life to purchase, as well as the
concomitant obligation of Young to convey to it the shares, are subject to the
fulfillment of the conditions contained in the MOA. Once the conditions, representation
and warranties are satisfied, then it is incumbent upon the parties to perform their
respective obligations under the contract. Conversely, in the event that these conditions
are not met or complied with, no obligation on the part of either party arises. This is in
accord with Article 1181 of the Civil Code which provides that "(i)n conditional
obligations, the acquisition of rights, as well as the extinguishment or loss of those
already acquired, shall depend upon the happening of the event which constitutes the
condition." And when the obligation assumed by a party to a contract is expressly
subjected to a condition, the obligation cannot be enforced against him unless the
condition is complied with.
Here, the MOA provides that Young shall infuse additional capital of
P50,000,000.00 into the Bank. It likewise specifies the warranty given by Young that the
doubtful accounts of petitioner Bank amounted to P60,000,000.00 only. However,
records show that Young failed to infuse the required additional capital. Moreover, the
due diligence audit shows that Young was involved in fraudulent schemes like checkkiting which amounted to a staggering P344,000,000.00. This belies his representation
that the doubtful accounts of petitioner Bank amounted only to P60,000,000.00. As a
result of these anomalous transactions, the reserves of the Bank were depleted and it
had to undergo a ten-year rehabilitation plan under the supervision of the Central Bank.
and supplemental motion to dismiss and the very urgent motion for reconsideration on
February 16, 1998.
On May 29, 1998, the motion for inhibition and the motion to dissolve the writ of
preliminary injunction were also denied. On August 5, 1998, petitioner filed with the
Court of Appeals a petition for certiorari and prohibition assailing the trial courts
issuance of a writ of preliminary injunction. On September 28, 1999, the Court of Appeals
promulgated a decision dismissing the petition ruling that the trial court had jurisdiction
to issue the injunction that did not interfere with the writ of possession of a coordinate
court. On October 19, 1999, petitioner filed with the Court of Appeals a motion for
reconsideration of the decision. On February 2, 2000, the Court of Appeals denied
petitioners motion stating that the arguments advanced were mere reiteration and
restatements of those contained in their pleadings. Hence, this appeal to the Supreme
Court.
ISSUE:
Who between petitioner and respondent Kambiak Y. Chan, Jr. has a better right to
the possession of the subject property?
RULING:
The Supreme Court ruled in favor of petitioner. It found that the conditional sale
agreement is officious and ineffectual. First, it was not consummated. Second, it was
not registered and duly annotated on the Transfer Certificate of Title (No. 12357)
covering the subject property. Third, it was executed about eight (8) years after the
execution of the real estate mortgage over the subject property.
To emphasize, the mortgagee (United Savings Bank) did not give its consent to
the change of debtor. It is a fundamental axiom in the law on contracts that a person not
a party to an agreement cannot be affected thereby. Worse, not only was the conditional
sale agreement executed without the consent of the mortgagee-creditor, United Savings
Bank, the same was also a material breach of the stipulations of the real estate
mortgage over the subject property. The conditions of the conditional sale agreement
were not fulfilled, hence, respondents claim to the subject property was as heretofore
stated ineffectual. Article 1181 of the Civil Code reads:
Art. 1181. In conditional obligations, the acquisition of rights, as well as the
extinguishments or loss of those already acquired, shall depend upon the happening of
the event which constitutes the condition.
heirs of the petitioner the balance of the purchase price and reconveyance of the extra
area of 58 square meters from the land in question.
FIDELA DEL CASTILLO Vda. DE MISTICA, petitioner,
VS. Spouses BERNARDINO NAGUIAT and
MARIA PAULINA GERONA-NAGUIAT, respondents
December 11, 2003
G.R. No. 137909
418 SCRA 73
FACTS:
Eulalio Mistica, predecessor-in-interest of herein petitioner, is the owner of a
parcel of land, and a portion thereof was leased to Bernardino sometime in 1970. On
April 5, 1979, Eulalio Mistica entered into a contract to sell with Bernardino over a portion
of the aforementioned lot containing an area of 200 square meters. This agreement was
reduced to writing in a Kasulatan. Pursuant to said agreement, Bernardino gave a
downpayment of P2,000.00 and another partial payment of P1,000.00 on February 7,
1980. However, he failed to make any payments thereafter. Eulalio Mistica died
sometime in October 1986.
On December 4, 1991, petitioner filed a complaint for rescission alleging that the
failure and refusal of respondents to pay the balance of the purchase price constitutes a
violation of the contract which entitles her to rescind the same; that respondents have
been in possession of the subject portion and they should be ordered to vacate and
surrender possession of the same to petitioner; that the reasonable amount of rental for
the subject land is P200.00 a month; that on account of the unjustified actuations of
respondents, petitioner has been constrained to litigate where she incurred expenses for
attorneys fees and litigation expenses.
On the other hand, respondents contended that the contract couldnt be
rescinded on the ground that it clearly stipulates that in case of failure to pay the
balance as stipulated, a yearly interest of 12% is to be paid. Bernardino likewise alleged
that sometime in October 1986, during the wake of the late Eulalio Mistica, he offered to
pay the remaining balance to petitioner but the latter refused and hence, there is no
breach or violation committed by them and no damages could yet be incurred by the late
Eulalio Mistica, his heirs or assigns pursuant to the said document; that he is presently
the owner in fee simple of the subject lot having acquired the same by virtue of a Free
Patent Title duly awarded to him by the Bureau of Lands; and that his title and ownership
had already become indefeasible and incontrovertible. As counterclaim, respondents
pray for moral damages in the amount of P50,000.00; exemplary damages in the amount
of P30,000.00; attorneys fees in the amount of P10,000.00 and other litigation
expenses.
The trial court dismissed the complaint and ordered the petitioner to pay the
respondents attorneys fee and the cost of suit while ordering the respondents to pay the
Disallowing rescission, the Court of Appeals held that respondents did not breach
the Contract of Sale. It explained that the conclusion of the ten-year period was not a
resolutory term, because the Contract had stipulated that payment, with interest of 12
percent, could still be made if respondents failed to pay within the period. Petitioner did
not disprove the allegation of respondents that they had tendered payment of the
balance of the purchase price during her husbands funeral, which was well within the
ten-year period. Moreover, rescission would be unjust to respondents, because they had
already transferred the land title to their names. The proper recourse, the CA held, was
to order them to pay the balance of the purchase price, with 12 percent interest. As to
the matter of the extra 58 square meters, the CA held that its reconveyance was no
longer feasible, because it had been included in the title issued to them. The appellate
court ruled that the only remedy available was to order them to pay petitioner the fair
market value of the usurped portion.
ISSUE:
Whether or not there is a potestative suspensive condition in the Kasulatan.
RULING:
The failure of respondents to pay the balance of the purchase price within ten
years from the execution of the Deed did not amount to a substantial breach. It was
stipulated that payment could be made even after ten years from the execution of the
Contract, provided the vendee paid 12 percent interest.
Moreover, it is undisputed that during the ten-year period, petitioner and her
deceased husband never made any demand for the balance of the purchase price.
Petitioner even refused the payment tendered by respondents during her husbands
funeral, thus showing that she was not exactly blameless for the lapse of the ten-year
period. Had she accepted the tender, payment would have been made well within the
agreed period.
If petitioner would like to impress upon the Court that the parties intended
otherwise, she has to show competent proof to support her contention. Instead, she
argues that the period cannot be extended beyond ten years, because to do so would
convert the buyers obligation to a purely potestative obligation that would annul the
contract under Article 1182 of the Civil Code.
The Code prohibits purely potestative, suspensive, conditional obligations that
depend on the whims of the debtor, because such obligations are usually not meant to
be fulfilled. Indeed, to allow the fulfillment of conditions to depend exclusively on the
debtors will would be to sanction illusory obligations. The Kasulatan does not allow such
thing. First, nowhere is it stated in the Deed that payment of the purchase price is
dependent upon whether respondents want to pay it or not. Second, the fact that they
already made partial payment thereof only shows that the parties intended to be bound
by the Kasulatan.
Affirmed with the modification that the payment for the extra 58-square meter lot
included in respondents title is deleted.
POTESTATIVE SUSPENSIVE CONDITIONS (Art. 1182, CC)
HERMOSA VS. LONGARA
93 PHIL 971
FACTS:
Intestate Fernando Hermosa, Sr. asked for three (3) credit advances from
respondent Epifanio M. Longara. Two (2) of said credit advances were made during his
lifetime and in his favor and in his son while the last credit was made after his death and
in favor of his grandson. Evidences show that said credits were asked by the intestate
on condition that their payment should be made by him, as soon as he receives funds
derived from the sale of his property in Spain.
After the intestates death and upon authorization of the probate court, the
administration of the intestates property, his wife, sold the property and the same was
paid for subsequently. As a consequence, respondent filed an action for the payment of
the aforesaid credits which was upheld by the lower court and by the Court of Appeals.
However, the same was contested by herein petitioners, heirs of the intestate, on
the ground that the obligation contracted by the intestate was subject to a condition
exclusively dependent upon the will of the debtor condicion potestiva and therefore null
and void, in accordance with article 1115 of the Old Civil Code.
ISSUE:
Whether or not the condition made in the obligation is a purely suspensive
condition dependent or potestative upon the exclusive will of the debtor.
RULING:
NO, the condition of the obligation was that the payment was to be made as
soon as he (obligor) receives funds from the sale of his property in Spain. The will to
sell on the part of the debtor (intestate) was present in fact or presumed legally to exist
although the price and other condition thereof were still within his discretion and final
approval. But in addition to this acceptability of the sale to him (obligor), there were still
other conditions that had to concur to effect the sale, mainly that of the presence of a
buyer, ready, able and willing to purchase the property under the condition demanded
by the vendor.
POTESTATIVE SUSPENSIVE CONDITIONS (Art. 1182, CC)
FACTS:
On June 1, 1948, Damasa Crisostomo applied for 200 shares of stock worth
PhP100.00 each at Quezon Colleges, Inc. Within her letter of application, she stipulated,
You will find (Babayaran kong lahat pagkatapos na ako ay makapag-pahuli ng isda)
pesos as my initial payment and the balance payable in accordance with law and the
rules and regulations of the Quezon College. Damasa died on October 26, 1948. Since
no payment was rendered on the subscription made in the foregoing letter, Quezon
College presented a claim of PhP20,000.00 on her intestate proceedings. The petitioner
administrator of the estate then contests the validity of said proceedings?
ISSUE:
Is the condition laid down by Damasa Crisostomo valid?
RULING:
There is nothing in the record to show that the Quezon College, Inc. accepted the
term of payment suggested by Damasa Crisostomo, or that if there was any acceptance
the same came to her knowledge during her lifetime. As the application of Damasa
Crisostomo is obviously at variance with the terms evidenced in the form letter issued by
the Quezon College, Inc., there was absolute necessity on the part of the College to
express its agreement to Damasa's offer in order to bind the latter. Conversely, said
acceptance was essential, because it would be unfair to immediately obligate the
Quezon College, Inc. under Damasa's promise to pay the price of the subscription after
she had caused fish to be caught. Thus, it cannot be said that the letter ripened into a
contract.
Indeed, the need for express acceptance on the part of the Quezon College, Inc.
becomes the more imperative, in view of the proposal of Damasa Crisostomo to pay the
value of the subscription after she has harvested fish, a condition obviously dependent
upon her sole will and, therefore, facultative in nature, rendering the obligation void.
Under the Civil Code it is provided that if the fulfillment of the condition should depend
upon the exclusive will of the debtor, the conditional obligation shall be void.
POSITIVE SUSPENSIVE CONDITIONS
1.
2.
non-compliance
with
essential
RULING:
The Supreme Court held that the nature of the transaction between the petitioner
company and the private respondent is a mere contract to sell, and not a contract of
sale. The petitioner companys obligation is subject to a positive suspensive condition,
which is the private respondents opening, making or indorsing of an irrevocable and
unconditional letter of credit. The failure of the private respondent to comply with the
positive suspensive condition cannot even be considered a breach but simply an event
that prevented the obligation of petitioner company to convey title from acquiring
binding force. Hence, the petition is granted and the assailed decision is reversed.
Whether or not the petitioner was in delay the payment of the monthly
amortizations.
assigns, to sell forever and absolutely and in their entirety parcels of land which formed
part of the estate.
RULING:
While the contract provided that the total purchase price shall be paid in monthly
installments by claiming that the ten-year period, the same contract specified that the
purchase price shall be paid in monthly installments for which the corresponding penalty
shall be imposed in case of default. Petitioner Leano cannot ignore the provision on
payment of monthly installments by claiming that the ten-year period within which to
pay has not elapsed.
Article 1169 of the Civil Code provides that in reciprocal obligations, neither party
incurs in delay if 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 of
the parties fulfills his obligation, delay by the other begins.
In the case at bar, respondent Fernando performed his part of the obligation by
allowing petitioner Leano to continue in possession and use of the property. Clearly,
when petitioner Leano did not pay the monthly amortization in accordance with the
terms and conditions of the contract, she was in delay and liable for damages. However,
the default committed by the petitioner Leano in respect of the obligation could be
compensated by the interest and surcharges imposed upon her under the contract in
question. Petition denied, judgment affirmed in toto.
The lower court issued an Order directing the counsel for the four heirs and other
heirs of Teresita R. Sandejas to move for the appointment of a new administrator within
fifteen (15) days from receipt of this Order.
Heirs Sixto, Roberto, Antonio and Benjamin, all surnamed Sandejas, filed a Motion
for Reconsideration and the appointment of another administrator, Mr. Sixto Sandejas in
lieu of respondent Lina stating that it was only lately that Mr. Sixto Sandejas, a son and
heir, expressed his willingness to act as a new administrator. Thereafter, respondent
Lina filed his Manifestation and Counter Motion alleging that he had no objection to the
appointment of Sixto Sandejas as administrator provided that Sixto Sandejas be also
appointed as administrator of the intestate estate of his father, Eliodoro P. Sandejas, Sr.
The lower court granted the said Motion and substituted Alex Lina with Sixto Sandejas as
petitioner in the said Petitions. After the payment of the administrator's bond and
approval thereof by the court, Administrator Sixto Sandejas took his oath as
administrator of the estate of the deceased Remedios R. Sandejas and Eliodoro P.
Sandejas and was likewise issued Letters of Administration on the same.
On November 29, 1993, Intervenor filed an Omnibus Motion to approve the deed
of conditional sale executed between Plaintiff-in-lntervention Lina and Elidioro Sandejas,
Sr. on June 7, 1982; to compel the heirs of Remedios Sandejas and Eliodoro Sandejas, Sr.
thru their administrator, to execute a deed of absolute sale in favor of Intervenor Lina
pursuant to said conditional deed of sale to which the administrator filed a Motion to
Dismiss and/or Opposition to said omnibus motion.
The lower court granted intervenor's Motion but was overturned by the Court of
Appeals.
ISSUE:
Whether or not Eliodoro P. Sandejas Sr. is legally obligated to convey title to the
property referred to in the subject document which was found to be in the nature of a
contract to sell - where the suspensive condition set forth therein, was not complied with.
RULING:
Petitioners argue that the CA erred in ordering the conveyance of the disputed 3/5
of the parcels of land, despite the nonfulfillment of the suspensive condition -- court
approval of the sale. They assert that because this condition had not been satisfied, their
obligation to deliver the disputed parcels of 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 which case the payment of the purchase price
is a positive suspensive condition. The vendor's obligation to convey the title does not
become effective in case of failure to pay. On the other hand, the agreement between
Eliodoro Sr. and respondent is subject to a suspensive condition -- the procurement of a
court approval, not full payment. There was no reservation of ownership in the
agreement. Petitioners were supposed to deed the disputed lots over to respondent.
They could do this upon the court's approval, even before full payment. Hence, their
contract was a conditional sale, rather than a contract to sell. When a contract is subject
to a suspensive condition, its birth or effectivity can take place only if and when the
condition happens or is fulfilled. Thus, the intestate court's grant of the Motion for
Approval of the sale filed by respondent resulted in petitioners' obligation to execute the
Deed of Sale of the disputed lots in his favor. The condition having been satisfied, the
contract was perfected. Henceforth, the parties were bound to fulfill what they had
expressly agreed upon.
beyond the two-year prescriptive period for filing a judicial claim for tax refund or tax
credit. Respondents now assail that decision for dismissal of the CTA.
ISSUE:
What is the expiration period for the filing of the action?
RULING:
Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the
Administrative Code of 1987 deal with the same subject matter the computation of
legal periods. Under the Civil Code, a year is equivalent to 365 days whether it be a
regular year or a leap year. Under the Administrative Code of 1987, however, a year is
composed of 12 calendar months. Needless to state, under the Administrative Code of
1987, the number of days is irrelevant.
There obviously exists a manifest incompatibility in the manner of computing
legal periods under the Civil Code and the Administrative Code of 1987. For this reason,
we hold that Section 31, Chapter VIII, Book I of the Administrative Code of 1987, being
the more recent law, governs the computation of legal periods. Lex posteriori derogat
priori.
Following this formula, respondents petition (filed on April 14, 2000) was filed on
the last day of the 24th calendar month from the day respondent filed its final adjusted
return. Hence, it was filed within the reglementary period.
PERIOD OR TERM, MEANING AND DEFINITION
compared to
NAMARCO vs Tecson
GR No. L-29131.
August 27, 1969
FACTS:
On a previous court case, the CFI rendered judgment:
(a) Ordering the defendants Miguel D. Tecson and Alto Surety Insurance Co., Inc.
to pay jointly and severally plaintiff PRATRA the sum of P7,200.00 plus 7% interest from
May 25, 1960 until the amount is fully paid, plus P500.00 for attorney's fees, and plus
costs;
(b) ordering defendant Miguel D. Tecson to indemnify his co-defendant Alto Surety
& Insurance Co., Inc. on the cross-claim for all the amounts it would be made to pay in
this decision, in case defendant Alto Surety & Insurance Co., Inc. pay the amount
adjudged to plaintiff in this decision. From the date of such payment defendant Miguel D.
Tecson would pay the Alto Surety & Insurance Co., Inc., interest at 12% per annum until
Miguel D. Tecson has fully reimbursed plaintiff of the said amount.
Defendant Miguel Tecson seeks the dismissal of the complaint on the ground of
lack of jurisdiction and prescription. This case was filed exactly on December 21, 1965
but more than ten years have passed a year is a period of 365 days (Art. 13, CCP).
Plaintiff forgot that 1960, 1964 were both leap years so that when this present case was
filed it was filed two days too late.
ISSUE:
Should the complaint be dismissed on the grounds of prescription?
RULING:
In the language of this Court, in People vs. Del Rosario, with the approval of the
Civil Code of the Philippines (Republic Act 386) ... we have reverted to the provisions of
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
of three hundred sixty-five days."
The decision was affirmed.
expire on May 31, 1947. Defendant claims that in spite of its acceptance of the offer,
plaintiff refused to accept the payment of the price, and for this refusal defendant
suffered damages in the amount of P100,000. For these reasons, defendant asks for
specific performance.
ISSUE:
Whether or not the obligation is one subject to a term.
RULING:
NO, rather, the obligation is rather subject to a condition. Under Article 1125 of
the old Civil Code, obligations with a term, for the fulfillment of which a day certain has
been fixed, 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, therefore, necessary that it should arrive, sooner
or later; otherwise, if its arrival is uncertain, the obligation is conditional.
Viewing in this light the clause on which defendant relies for the enforcement of
its right to buy the property, it would seem that it is not a term, but a condition.
Considering the first alternative, that is, until defendant shall have obtained a loan from
the National City Bank of New York, it is clear that the granting of such loan is not
definite and cannot be held to come within the terms day certain. And if it is
considered that the period given was until such time as defendant could raise money
from other sources, then it is also to be indefinite and contingent, and so it is also a
condition and not a term within the meaning of the law. In any event, it is apparent that
the fulfillment of the condition contained in this second alternative is made to depend
upon defendants exclusive will, and viewed in this light, the plaintiffs obligation to sell
did not arise, for, under article 1115 of the old Civil Code, when the fulfillment of the
condition depends upon the exclusive will of the debtor the conditional obligation shall
be void.
FACTS:
This is an action for partition of the property known as Crystal Arcade situated in
the City of Manila.
The complaint avers that plaintiff and defendant are co-owners of
said property, the former being the owner of one-third interest and the latter of the
remaining two-thirds. The division is asked because plaintiff and defendant are unable to
agree upon the management of the property and upon the partition thereof.
Defendant answered setting up a special defense and counterclaim. As a special
defense, defendant claims that on September 22, 1943, it sold to plaintiff one-third of
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 first an irrevocable option to purchase the same at the sellers price. It avers that
in January 1946, plaintiff fixed the sum of P200,000 as the price of said share and offered
to sell it to defendant, which offer was accepted and for the payment of said price
plaintiff gave defendant a period of time which, including the extensions granted would
LIRAG TEXTILE MILLS, INC. and FELIX K. LIRAG vs.COURT OF APPEALS and
CRISTAN ALCANTARA
G.R. No. L-30736
April 14, 1975
FACTS:
On May 11, 1960 and for sometime prior and subsequent thereto, defendant Felix
Lirag was a member of the Board of Directors of the Philippine Chamber of Industries;
and for about two months, more or less, prior to May 11, 1960, plaintiff Cristina Alcantara
worked in a temporary capacity with defendant Lirag Textile Mills, Inc. During this same
period of time, defendant Felix Lirag was a director and Chairman of the Board of
Directors of defendant Lirag Textile Mills, Inc. On May 9, 1960, defendant Lirag Textile
Mills, Inc. wrote a letter to plaintiff (Alcantara) advising him that, effective May 11, 1960,
his temporary designation as Technical Assistant to the Administrative Officer was made
permanent and as Assistant to the Administrative Officer of the Lirag Textile Mills, Inc. As
of May 11, 1960, plaintiff received a salary of P400.00 and allowance of P100.00 per
month.
Plaintiff's tenure of employment, per defendant Lirag Textile Mills, Inc.'s above
letter of May 9, 1960 was to be 'for an indefinite period, unless sooner terminated by
reason of voluntary resignation or by virtue of a valid cause or causes'.
On March 4, 1960, per letter of defendant Lirag Textile Mills, Inc. of that date,
signed by its Executive Vice President and General Manager, plaintiff was advised that
effective November 15, 1960 he (Alcantara) was promoted to the position of Assistant
Administrative Officer. Subsequently, on July 22, 1961, defendant Lirag Textile Mills, Inc.
wrote plaintiff (Alcantara) a letter advising him that because the company 'has suffered
some serious reverses, both in terms of pecuniary loss and in market opportunities,' the
company was terminating his services and effecting his separation from defendant
corporation effective at the close of working hours of August 22, 1961.
Because of this, plaintiff Alcantara filed a complaint before the Regional Trial
Court against defendant Lirag Textile Mills Inc. for illegal dismissal as in accordance with
the employment contract between herein then plaintiff and then defendant.
Respondent Court of Appeals affirmed the decision of the lower court in Civil Case
No. 6884 principally its conclusion that the trial court did not commit any error in its
evaluation of the evidence when it found that it was not true that petitioner Lirag Textile
Mills (then defendant) suffered pecuniary loss and in market opportunities which it used
as a justification to terminate the services of plaintiff Alcantara; that it was not also true
that the latter suffered from lack of skill; that, therefore, there was a violation of the
written contract of employment executed by and between petitioners and private
respondent Alcantara; that petitioner (then defendant) Felix Lirag was responsible for
inducing private respondent Alcantara to leave his employment with the Philippine
Chamber of Industries where he was holding a permanent position and to accept
employment with petitioner (then defendant) Lirag Textile Mills; and that appellee
Alcantara was correctly awarded moral damages and attorney's fees.
ISSUE:
Whether or not there has been a violation of the written contract for a period of
employment between petitioner and private respondent.
RULING:
The contract of employment was for an indefinite period as it shall continue
without ending, subject to a resolutory period, unless sooner terminated by reason of
voluntary resignation or by virtue of a valid cause or causes (the resolutory period).
There is an indefinite period of time for 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 of employment, namely voluntary resignation
on the part of private respondent Alcantara or termination of employment at the option
of petitioner Lirag Textile Mills, but for a "valid cause or causes". It necessarily follows
that if the petitioner-employer Lirag Textile Mills terminates the employment without a
"valid cause or causes", as it admittedly did, it committed a breach of the contract of
employment executed by and between the parties. The measure of an employer's
liability provided for in Republic Act 1052, as amended by R. A. 1787, is solely intended
for contracts of 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 of
contract by violating an indefinite period of employment expressly agreed upon through
his wrongful act of terminating said employment without any valid cause or causes,
which act may even amount to bad faith on the employer's part.
The "indefinite period" of 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 future "day certain" such as the employee's resignation or employer's
termination of employment upon a valid cause or causes, like death of the employee or
termination of employer's corporate existence, although it may not be known when.
It is clear that petitioner Lirag Textile Mills, Inc. violated the contract of
employment with private respondent Alcantara when the former terminated his services
without a valid cause. The act was attended with bad faith and deceit because said
petitioner made false allegations of a supposed valid cause knowing them to be false,
thus making itself liable for payment of actual, moral and exemplary damages, plus
attorneys fees to private respondent Alcantara. Petitioner Lirag Textile Mills, Inc. cannot
with impunity be allowed the absolute and unilateral power to terminate without valid
cause a contract of employment with a definite period it voluntarily entered into merely
on the basis of its whim or caprice and under the false pretense of financial distress.
DISTINCTIONS: CONDITION VS. PERIOD/TERM
DAGUHOY ENTERPRISES, INC. VS. PONCE
96 Phil 15
FACTS:
In the year 1950, defendant-appellant Domingo Ponce was chairman and
manager and his son Buhay M. Ponce was secretary-treasurer of the plaintiff corporation
Daguhoy Enterprises, Inc. On June 24, Rita L. Ponce, wife of Domingo, executed in favor
of plaintiff corporation a deed of mortgage over a parcel of land including the
improvements thereon to secure the payment of a loan of P5, 000 granted to her by said
corporation, payable within six years with interests at 12% annum. On March 10, 1951,
Rita L. Ponce with the consent of her husband Domingo executed another mortgage
deed amending the first one, whereby the loan was increased from P5,000 to P6,190, the
terms and conditions of the mortgage remaining the same. Rita and Domingo presented
the two mortgage deeds for registration in the office of the register of deeds for
registrations in the office of the register of deeds, but the said register advised the two to
cure the defects and furnish the necessary data. Instead of complying with the
suggestion and requirements, the two withdrew the two mortgage deeds and then
mortgaged the same parcel of land in favor of the Rehabilitation Finance Corporation
(RFC) to secure a loan.
Potenciano Gapol, the majority stockholder in the corporation, upon learning that
the deeds of mortgage were not registered and that they were withdrawn from the office
of the register of deeds and the land covered by the two deeds was again mortgaged to
RFC, he filed a civil case against the respondents, not only for the amount of the loan of
P6,190 but for other sums, possibly on the theory that the loan in question was granted
by Domingo and Buhay as officers of the corporation.
From 1917 to 1934, the sugar cane planters Manapla and Cadiz, Negros
Occidental, executed identical milling contracts, under which the sugar central "North
Negros Sugar Co. Inc." would mill the sugar produced by the sugar cane planters of the
Manapla and Cadiz districts.
To account for the amount of the loan, Domingo and his son filed in court a check
of RFC in the amount of P6,190 and an interesr of P266.10 in favor of the company.
Thereafter, Gapol petitioned the court for permission to withdraw the amounts as
payment of the loan. But because the defendants opposed said petition, the court
denied it. Gapol, agreeing to the cancellation of the mortgage as soon as the amounts
are withdrawn and deposited with the Bank of America, in the name of the company,
filed a second petition for withdrawal. However, the defendants failed to agree, thus it
was again denied.
The sugar cane planters of Manapla and Cadiz, Negros Occidental had executed
with Miguel J. Ossorio, a contract whereby Ossorio was given a period up to December
31, 1916 within which to make a study of and decide whether he would construct a sugar
central or mill with a capacity of milling 300 tons of sugar cane every 24 hours and
setting forth the mutual obligations and undertakings of such central and the planters
and the terms and conditions under which the sugar cane produced by said planters
would be milled in the event of the construction of such sugar central by Ossorio. Such
central was in fact constructed by said Ossorio in Manapla, Negros Occidental, through
the North Negros Sugar Co., Inc., where after the standard form of milling contracts were
executed.
ISSUE:
Whether or not the sum in the form of an RFC check and some interest deposited
in the civil case may be withdrawn to satisfy the judgment and to pay the loan of P6,190
and part of the interest due.
RULING:
Yes. Although the original loan of P5,000 including the increase of P1,190 was
payable within six years from June 1950 and so did not become due and payable until
1956, the trial court held that under article 1198 of the Civil Code, the debtor lost the
benefit of the period by reason of her failure to give the security in the form of the two
deeds of mortgage and register them, including defendants act in withdrawing said two
deeds from the office of the register of deeds and then mortgaging the same property in
favor of the RFC; and so the obligation became pure and without any condition and
consequently, the loan became due and immediately demandable. Likewise, even if the
defendants had already deposited a certain amount in favor of the corporation, they are
not yet relieved from the payment of interests from the time of the deposit because the
loan is not yet paid.
The parties cannot stipulate as to the milling contracts executed by the planters
by Victorias, Negros Occidental, other than as follows: 1) a number of them executed
such milling contracts with the North Negros Sugar Co., Inc.; 2) while a number of them
executed milling contracts with the Victorias Milling Co., Inc., which was likewise
organized by Miguel J. Ossorio and which had constructed another Central at Victorias,
Negros Occidental. The North Negros Sugar Co., Inc. had its first milling during the 19181919 crop years, and the Victorias Milling Co., had its first milling during the 1921-1922
crop year. Subsequent millings took place every successive crop year thereafter, except
the 6-year period, comprising 4 years of the last World War II and 2 years of post-war
reconstruction of respondent's central at Victorias, Negros Occidental.
After 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. for said respondent corporation to mill the sugar cane produced
by the planters of Manapla and Cadiz holding milling contracts with it. Thus, after the
war, all the sugar cane produced by the planters of petitioner associations, in Manapla,
Cadiz, as well as in Victorias, who held milling contracts, were milled in only one central,
that of the respondent corporation at Victorias. Beginning with the year 1948, and in the
following years, when the planters-members of the North Negros Planters Association,
Inc. considered that the stipulated 30-year period of their milling contracts executed in
the year 1918 had already expired and terminated in the crop year 1947-1948, and the
planters-members of the Victorias Planters Association, Inc. likewise considered the
stipulated 30-year period of their milling contracts, as having likewise expired and
terminated in the crop year 1948-1949, under the pertinent provisions of the standard
milling contract. Notwithstanding the repeated representations made by the herein
petitioners with the respondent corporation, the herein respondent has refused and still
refuses to accede to the same, contending that under the provisions of the milling
contract.
ISSUE:
Whether or not the trial court erred in rendering its disputed decision, favoring
the petitioner.
RULING:
POTESTATIVE PERIOD
1.
2.
3.
NO. Fortuitous event relieves the obligor from fulfilling a contractual obligation.
The fact that the contracts make reference to "first milling" does not make the
period of thirty (30) years one of thirty (30) milling years. The term "first milling" used in
the contracts under consideration was for the purpose of reckoning the thirty-year period
stipulated therein. Even if the thirty-year period provided for in the contracts be
construed as milling years, the deduction or extension of six (6) years would not be
justified. At most on the last year of the thirty-year period stipulated in the contracts the
delivery of sugar cane could be extended up to a time when all the amount of 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 of flood, typhoon, earthquake, or
other force majeure, war, insurrection, civil commotion, organized strike, etc., the
contract shall be deemed suspended during said period, does not mean that the
happening of any of those events stops the running of the period agreed upon. It only
relieves the parties from the fulfillment of their respective obligations during that time
the planters from delivering sugar cane and the central from milling it.
In order that the central, the herein appellant, may be entitled to demand from
the other parties the fulfillment of their part in the contracts, the latter must have been
able to perform it but failed or refused to do so and not when they were prevented by
force majeure such as war. To require the planters to deliver the sugar cane which they
failed to deliver during the four (4) years of the Japanese occupation and the two (2)
years after liberation when the mill was being rebuilt is to demand from the obligors the
demanded that the lessees vacate the premises and pay the amount of P7,000.00
corresponding to the months of February and March, 1990.
The lessees exerted effort to pay the rentals due for the months of February and
March 1990 at the monthly rate stipulated in the contract but was refused by the lessor
so that on May 2, 1990, they instituted before the Metropolitan Trial Court of Manila,
Branch 16 a case for consignation.
The trial judge in the consignation case issued an order allowing the plaintiffs
therein to deposit with the City Treasurer of Manila the amount of P33,480.28 for Co Tong
and the amount of P32,710.32 for Tan Te Gutierrez representing their respective rentals
for thirteen (13) months from February, 1990 to January, 1991.
More than six (6) months from the filing of the case for consignation, the lessor
instituted an ejectment suit against the lessees before the Metropolitan Trial Court of
Manila Branch 20. The court in its decision dismissed the ejectment suit for lack of merit.
Regional Trial Court is constrained to reverse the appealed decision and ordered another
judgment to be entered in favor of appellant. This was, however, reversed by the Court
of Appeals
ISSUE:
Whether or not the subject contract of lease did not provide for a definite period
hence it falls under the ambit of Art. 1687 of the NCC, making the agreement effective
on a month-to-month basis since rental payments are made monthly
RULING:
No. The Court held that Art. 1687 finds no application in the case at bar.
The lease contract between petitioner and respondents is with a period subject to
a resolutory condition. Art. 1687 provides that if the period for the lease has not been
fixed, it is understood to be from year to year, if the rent agreed upon is annual; from
month to month, if it is monthly; from week to week, if the rent is weekly; and from day
to day, if the rent is to be paid daily. However, even though a monthly rent is paid, and
no period for the lease has been set, the courts may fix a longer term for the lease after
the lessee has occupied the premises for over one year.
If the rent is weekly, the courts may likewise determine a longer period after the
lessee has been in possession for over six months. In case of daily rent, the courts may
also fix a longer period after the lessee has stayed in the place for over one month. The
wording of the agreement is unequivocal: The lease period shall continue for an
indefinite period provided the lessee is up-to-date in the payment of his monthly
rentals. The condition imposed in order that the contract shall remain effective 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 of 20% annually.
The agreement between the lessor and the lessees are therefore 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.
POTESTATIVE PERIOD
BORROMEO VS. CA
47 SCRA 65
FACTS:
Before the year 1933, Jose A. Villamor was a distributor of lumber belonging to Mr.
Miller who was the agent of the Insular Lumber Company in Cebu City. Defendant being
a friend and former classmate of plaintiff, Borromeo, used to borrow from the latter
certain amounts from time to time. On one occasion with some pressing obligation to
settle with Mr. Miller, defendant borrowed from plaintiff a large sum of money for which
he mortgaged his land and house in Cebu City. Mr. Miller filed civil action against the
defendant and attached his properties including those mortgaged to plaintiff, inasmuch
as the deed of mortgage in favor of plaintiff could not be registered because it was not
properly drawn up. Plaintiff then pressed the defendant for the settlement of his
obligation, but defendant instead offered to execute a document promising to pay his
indebtedness even after the lapse of ten (10) years.
Liquidation was made and defendant was found to be indebted to plaintiff in the
sum of P7,220, for which defendant signed a promissory note on November 29, 1933
with interest at the rate of 12% per annum, agreeing to pay-as soon as I have money.
The note further stipulates that defendant hereby relinquish, renounce, or otherwise
waive my rights to the prescriptions established by our Code of Civil Procedure for the
collection or recovery of the above sum of P7,220.
ISSUE:
Whether or not prescription extinguished the obligation.
RULING:
NO. The obligation in this case is one which is subject to a potestative condition,
one which is dependent solely on the will of the debtor. The statement as soon as I
have money is the condition which is dependent on the debtors will. Although this
condition is void, it has been relied upon by the creditor resulting to the delayed filing of
the action.
Prescription in this case cannot be applied strictly for it will result to grave
injustice on the part of the creditor. For as was also made clear therein, there had been
since then verbal requests on the part of the creditor made to the debtor for the
settlement of the loan. Furthermore, plaintiff did not file any complaint against the
defendant within ten (10) years from the execution of the document as there was no
property registered in defendants name who furthermore assured him that he could
collect even after the lapse of ten years. The debtor is therefore liable for the amount of
the obligation plus interests.
1.
2.
3.
4.
5.
6.
7.
8.
9.
BALUYUT VS POBLETE
GR No. 144435.
February 6, 2007
FACTS:
On July 20, 1981, Guillermina Baluyut, mortgaged her house to secure a loan in
the amount of PhP850,000.00 from the spouses Eulogio and Salud Poblete. The load was
set to mature in one month. After a month had passed, she was unable to pay her
indebtedness which led the spouses to extrajudicially foreclose the mortgage. The
property was then sold on Auction to the Poblete spouses who asked Baluyut to vacate
the premises. Baluyut instead filed an action for annulment of mortgage. His claim was
rejected by the RTC and the CA. Petitioner claims that based on the testimony of Atty.
Edwina Mendoza that the maturity of the loan which she incurred is only for one year.
ISSUE:
Is petitioners contention tenable?
RULING:
Evidence of a prior or contemporaneous verbal agreement is generally not
admissible to vary, contradict or defeat the operation of a valid contract. In the instant
case, aside from the testimony of Atty. Mendoza, no other evidence was presented to
prove that the real date of maturity is one year.
The terms that were thusly reduced to writing is deemed to contain all the terms
agreed upon and no evidence of such terms can be admitted other than the contents of
the agreement itself. The promissory note is the law between petitioner and private
respondents and it clearly states that the loan shall mature in one month from date of
the said Promissory Note.
GR No. 163763.
FACTS:
Malayan Realty, Inc. (Malayan), is the owner of an apartment unit known as 3013
Interior No. 90 (the property), located at Nagtahan Street, Sampaloc, Manila. In 1958,
Malayan entered into a verbal lease contract with Uy Han Yong (Uy) over the property at
a monthly rental of P262.00. The monthly rental was increased yearly starting 1989, and
by 2001, the monthly rental was P4,671.65.
On July 17, 2001, Malayan sent Uy a written notice informing him that the lease
contract would no longer be renewed or extended upon its expiration on August 31,
2001, and asking him to vacate and turn over the possession of the property within five
days from August 31, 2001, or on September 5, 2001. Despite Uys receipt of the notice
on June 18, 2001, he refused to vacate the property, prompting Malayan to file before
the Metropolitan Trial Court (MeTC) of Manila a complaint for ejectment, docketed as Civil
Case No. 171256, and was raffled to Branch 3 thereof. The Court ruled in favor of Uy and
granted an extension period of five years.
ISSUE:
Is respondent Uy entitled to a grant of extension by the Court?
RULING:
The 2nd paragraph of Article 1687 provides that in the event that the lessee has
occupied the leased premises for over a year, the courts may fix a longer term for the
lease.
The power of the courts to establish a grace period is potestative or discretionary,
depending on the particular circumstances of the case. Thus, a longer term may be
granted where equities come into play, and may be denied where none appears, always
with due deference to the parties freedom to contract.
In the present case, respondent has remained in possession of the property from
the time the complaint for ejectment was filed on September 18, 2001 up to the present
time. Effectively, respondents lease has been extended for more than five years, which
time is, under the circumstances, deemed sufficient as an extension and for him to find
another place to stay.
FACTS:
Ernesto V. Santos and Santos Ventura Hocorma Foundation, Inc. (SVHFI) were the
plaintiff and defendant, respectively, in several civil cases filed in different courts in the
Philippines. On October 26, 1990, the parties executed a Compromise Agreement which
amicably ended all their pending litigations. The pertinent portions of the Agreement
read as follows:
1.
Defendant Foundation shall pay Plaintiff Santos P14.5 Million in the following
manner:
a) P1.5 Million immediately upon the execution of this agreement; and, b) the balance of
P13 Million shall be paid, whether in one lump sum or in installments, at the discretion of
the Foundation, within a period of not more than two (2) years from the execution of this
agreement; provided, however, that in the event that the Foundation does not pay the
whole or any part of such balance, the same shall be paid with the corresponding portion
of the land or real properties subject of the aforesaid cases and previously covered by
the notices of lis pendens, under such terms and conditions as to area, valuation, and
location mutually acceptable to both parties; but in no case shall the payment of such
balance be later than two (2) years from the date of this agreement; otherwise, payment
of any unpaid portion shall only be in the form of land aforesaid;
2. Immediately upon the execution of this agreement (and [the] receipt of the
P1.5 Million), plaintiff Santos shall cause the dismissal with prejudice of Civil Cases Nos.
88-743, 1413OR, TC-1024, 45366 and 18166 and voluntarily withdraw the appeals in
Civil Cases Nos. 4968 (C.A.-G.R. No. 26598) and 88-45366 (C.A.-G.R. No. 24304)
respectively and for the immediate lifting of the aforesaid various notices of lis pendens
on the real properties aforementioned (by signing herein attached corresponding
documents, for such lifting); provided, however, that in the event that defendant
Foundation shall sell or dispose of any of the lands previously subject of lis pendens, the
proceeds of any such sale, or any part thereof as may be required, shall be partially
devoted to the payment of the Foundations obligations under this agreement as may
still be subsisting and payable at the time of any such sale or sales;
XXX
On October 28, 1992, respondent Santos sent another letter to petitioner inquiring
when it would pay the balance of P13 million. There was no response from petitioner.
Consequently, respondent Santos applied with the Regional Trial Court of Makati City,
Branch 62, for the issuance of a writ of execution of its compromise judgment dated
September 30, 1991. The RTC granted the writ. Thus, on March 10, 1993, the Sheriff
levied on the real properties of petitioner, which were formerly subjects of the lis
pendens. Petitioner, however, filed numerous motions to block the enforcement of the
said writ. The challenge of the execution of the aforesaid compromise judgment even
reached the Supreme Court. All these efforts, however, were futile.
On November 22, 1994, petitioners real properties located in Mabalacat,
Pampanga were auctioned. In the said auction, Riverland, Inc. was the highest bidder for
P12 million and it was issued a Certificate of Sale covering the real properties subject of
the auction sale. Subsequently, another auction sale was held on February 8, 1995, for
the sale of real properties of petitioner in Bacolod City. Again, Riverland, Inc. was the
highest bidder. The Certificates of Sale issued for both properties provided for the right
of redemption within one year from the date of registration of the said properties.
On June 2, 1995, Santos and Riverland Inc. filed a Complaint for Declaratory Relief
and Damages alleging that there was delay on the part of petitioner in paying the
balance of P13 million. They further alleged that under the Compromise Agreement, the
obligation became due on October 26, 1992, but payment of the remaining P12 million
was effected only on November 22, 1994. Thus, respondents prayed that petitioner be
ordered to pay legal interest on the obligation, penalty, attorneys fees and costs of
litigation. Furthermore, they prayed that the aforesaid sales be declared final and not
subject to legal redemption.
5. Failure of compliance of any of the foregoing terms and conditions by either or both
parties to this agreement shall ipso facto and ipso jure automatically entitle the
aggrieved party to a writ of execution for the enforcement of this agreement.
In compliance with the Compromise Agreement, respondent Santos moved for the
dismissal of the aforesaid civil cases. He also caused the lifting of the notices of lis
pendens on the real properties involved. For its part, petitioner SVHFI, paid P1.5 million
to respondent Santos, leaving a balance of P13 million.
ISSUE:
Whether or not the Court of Appeals was correct in its decision, reversing the trial
courts decision, regarding the legal interest of herein respondents on aforementioned
properties.
RULING:
The Supreme Court held the decision of the Court of Appeals correct. 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, for preventing or putting an end to a lawsuit, adjust their difficulties
by mutual consent in the manner which they agree on, and which everyone of them
prefers in the hope of gaining, balanced by the danger of losing. The general rule is that
a compromise has upon the parties the effect and authority of res judicata, with respect
to the matter definitely stated therein, or which by implication from its terms should be
deemed to have been included therein. This holds true even if the agreement has not
been judicially approved.
In the case at bar, the Compromise Agreement was entered into by the parties on
October 26, 1990. It was judicially approved on September 30, 1991. Applying existing
jurisprudence, the compromise agreement as a consensual contract became binding
between the parties upon its execution and not upon its court approval. From the time a
compromise is validly entered into, it becomes the source of the rights and obligations of
the parties thereto. The purpose of the compromise is precisely to replace and terminate
controverted claims. In accordance with the compromise agreement, the respondents
asked for the dismissal of the pending civil cases. The petitioner, on the other hand,
paid the initial P1.5 million upon the execution of the agreement.
This act of the
petitioner showed that it acknowledges that the agreement was immediately executory
and enforceable upon its execution. As to the remaining P13 million, the terms and
conditions of the compromise agreement are clear and unambiguous.
The two-year period must be counted from October 26, 1990, the date of
execution of the compromise agreement, and not on the judicial approval of the
compromise agreement on September 30, 1991. When respondents wrote a demand
letter to petitioner on October 28, 1992, the obligation was already due and
demandable. When the petitioner failed to pay its due obligation after the demand was
made, it incurred delay. Article 1169 of the New Civil Code provides:
Those obliged to deliver or to do something incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their obligation.
Delay as used in this article is synonymous to default or mora which means delay
in the fulfillment of obligations. It is the non-fulfillment of the obligation with respect to
time. In order for the debtor to be in default, it is necessary that the following requisites
be present: (1) that the obligation be demandable and already liquidated; (2) that the
debtor delays performance; and (3) that the creditor requires the performance judicially
or extrajudicially.
In the case at bar, the obligation was already due and demandable after the lapse
of the two-year period from the execution of the contract. The two-year period ended on
October 26, 1992. When the respondents gave a demand letter on October 28, 1992, to
the petitioner, the obligation was already due and demandable. Furthermore, the
obligation is liquidated because the debtor knows precisely how much he owes and when
he should pay the amount due.
The second requisite is also present. Petitioner delayed in the performance. It
was able to fully settle its outstanding balance only on February 8, 1995, which is more
than two years after the extra-judicial demand. Moreover, it filed several motions and
elevated adverse resolutions to the appellate court to hinder the execution of a final and
executory judgment, and further delay the fulfillment of its obligation.
Third, the demand letter sent to the petitioner on October 28, 1992, was in
accordance with an extra-judicial demand contemplated by law.
Verily, the petitioner is liable for damages for the delay in the performance of its
obligation. This is provided for in Article 1170 of the New Civil Code. When the debtor
knows the amount and period when he is to pay, interest as damages is generally
allowed as a matter of right. The complaining party has been deprived of funds to which
he is entitled by virtue of their compromise agreement. The goal of compensation
requires that the complainant be compensated for the loss of use of those funds. This
compensation is in the form of interest. In the absence of agreement, the legal rate of
interest shall prevail. The legal interest for loan as forbearance of money is 12% per
annum to be computed from default, i.e., from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil Code.
could use the house during her regular medical check-up in Manila. For two (2) years
nothing came out of the demand to vacate, hence, in 1997 respondent insisted upon
raising the rental fee once again.
On 1 June 1998 respondent asked petitioner to restore the premises to him for
some essential repairs of its dilapidated structure. This time he did not offer petitioner
anymore the option to pay higher rentals. The renovation of the house was commenced
but had to stop midway because petitioner refused to vacate the portion he was
occupying and worse he neglected to pay for the lease for four (4) months from May to
August 1998. Hence for the second time, or on 19 October 1998, respondent demanded
the payment of the rental arrears as well as the restoration of the house to him. On 3
February 1999, since petitioner was insisting on keeping possession of the house but did
not pay the rental for January 1999, although he had settled the arrears of four (4)
months, respondent was compelled to file a complaint for ejectment.
The MeTC of Manila decided the ejectment complaint in favor of respondent and
ordered petitioner to vacate the leased premises and to pay rental arrears in the amount
of P60,000.00 as of December 1998 and P6,000.00 for every month thereafter until he
finally restored possession thereof to respondent plus attorneys fees of P15,000.00 and
the costs of suit. The RTC of Manila upheld in toto the MeTC Decision and denied the
subsequent motion for reconsideration for failure to set the date of hearing thereof not
later than ten (10) days from its filing. Petitioners recourse to the Court of Appeals by
petition for review was also unsuccessful since the assailed Decision was affirmed in its
entirety as the ensuing motion for reconsideration thereof was denied for late filling, i.e.,
the motion was filed only on 30 October 2000 beyond the fifteen (15) day period from
his receipt of the CA Decision on 9 October 2000 as shown by the registry return receipt.
ISSUE:
Whether or not the lower courts erred in their rulings.
RULING:
It is not only the evidence on record but petitioners pleadings themselves that
confirm his default in paying the rental fees for more than three (3) months in 1999 and
1998 prior to the filing of the ejectment complaint. There is also sufficient basis for the
courts a quo to conclude that respondent desperately needed the property in good faith
for his own family and for the repair and renovation of the house standing thereon.
These facts represent legal grounds to eject a tenant.
The Petition for Review is DENIED for lack of merit.
In the case, the Contract of Lease provided for a fixed period of five (5) years -specifically from September 16, 1991 to September 15, 1996. Because the lease
period was for a determinate time, it ceased, by express provision of Article 1669 of the
Civil Code, on the day fixed, without need of a demand. Here, the five-year period
expired on September 15, 1996, whereas the Complaint for ejectment was filed on
October 6, 1996. Because there was no longer any lease that could be extended, the
MeTC, in effect, made a new contract for the parties, a power it did not have.
As stated in Bacolod-Murcia Milling v. Banco Nacional Filipino, It is not the
province of the court to alter a contract by construction or to make a new contract for
the parties; its duty is confined to the interpretation of the one which they have made for
themselves, without regard to its wisdom or folly, as the court cannot supply material
stipulations or read into contract words which it does not contain.
Furthermore, the extension of a lease contract must be made before the term of
the agreement expires, not after. Upon the lapse of the stipulated period, courts cannot
belatedly extend or make a new lease for the parties, even on the basis of equity.
Because the Lease Contract ended on September
15, 1996, without the parties reaching any agreement for renewal, respondents can be
ejected from the premises.
On the other hand, respondents and the lower courts argue that the Contract of
Lease provided for an automatic renewal of the lease period. Citing Koh v. Ongsiaco and
Cruz v. Alberto, the MeTC -- upheld by the RTC and the CA -- ruled that the stipulation in
the Contract of Lease providing an option to renew should be construed in favor of and
for the benefit of the lessee. This ruling has however, been expressly reversed in
Fernandez v. CA and was recently reiterated in Heirs of Amando Dalisay v. Court of
Appeals. Thus, pursuant to Fernandez, Dalisay and Article 1196 of the Civil Code, the
period of the lease contract is deemed to have been set for the benefit of both parties.
Its renewal may be authorized only upon their mutual agreement or at their joint will. Its
continuance, effectivity or fulfillment cannot be made to depend exclusively upon the
free and uncontrolled choice of just one party. While the lessee has the option to
continue or to stop paying the rentals, the lessor cannot be completely deprived of any
say on the matter. Absent any contrary stipulation in a reciprocal contract, the period of
lease is deemed to be for the benefit of both parties.
In the instant case, there was nothing in the aforesaid stipulation or in the
actuation of the parties that showed that they intended an automatic renewal or
extension of the term of the contract. First, demonstrating petitioners disinterest in
renewing the contract was its letter dated August 23, 1996, demanding that respondents
vacate the premises for failure to pay rentals since 1993. As a rule, the owner-lessor has
the prerogative to terminate the lease upon its expiration. Second, in the present case,
the disagreement of the parties over the increased rental rate and private respondents
failure to pay it precluded the possibility of a mutual renewal. Third, the fact that the
lessor allowed the lessee to introduce improvements on the property was indicative, not
of the formers intention to extend the contract automatically, but merely of its
obedience to its express terms allowing the improvements. After all, at the expiration of
the lease, those improvements were to become its property.
As to the contention that it is not fair to eject respondents from the premises after
only five years, considering the value of the improvements they introduced therein,
suffice it to say that they did so with the knowledge of the risk -- the contract had plainly
provided for a five-year lease period.
Parties are free to enter into any contractual stipulation, provided it is not illegal
or contrary to public morals. When such agreement, freely and voluntarily entered into,
turns out to be disadvantageous to a party, the courts cannot rescue it without crossing
the constitutional right to contract. They are not authorized to extricate parties from the
necessary consequences of their acts, and the fact that the contractual stipulations may
turn out to be financially disadvantageous will not relieve the latter of their obligations.
Petition granted.
Decision set aside.
Respondents ordered to vacate the
premises, to restore peaceful possession thereof to petitioner, and to pay accrued
rentals.
employment had lasted for five (5) years, he had acquired the status of a regular
employee and could not be removed except for valid cause.
ISSUE:
Whether or not Alegres contention is tenable.
RULING:
NO. The provisions of the Labor Code recognize the existence and legality of term
employments. The case at bar is one which involves term employment. Therefore,
Alegres employment was terminated upon the expiration of his last contract with Brent
School on July 16, 1976 without the necessity of any notice. The advance written advice
given the Department of Labor with copy to said petitioner was a mere reminder of the
impending expiration of his contract, not a letter of termination, nor an application for
clearance to terminate which needed the approval of the Department of Labor to make
the termination of his services effective. In any case, such clearance should properly
have been given, not denied.
Whether or not the Article 1197 of the Civil Code can be applied in this case
RULING:
NO. It is clear in the agreement that the proceeds of the sale of 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 of. Hence,
Article 1197 of the New Civil Code, which provides that the courts may fix the duration of
the obligation if it does not fix 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 if the goods were sold, the fact 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 transfer of ownership of the
goods to the petitioner. The agreement constituted her as an agent with the obligation
to return the tobacco if the same was not sold.
demand payment for the initial July 1957 installment nor of the entire obligation, but
instead opted for more collateral in addition to the guaranty of Clarkin. As the business
further deteriorated, Hart agreed to Clarkins proposal that all Insular Farms shares of
stocks be pledged to petitioner bank in lieu of additional collateral and to insure and
extension of the period to pay the July 1957 installment. On March 3, 1958, Pacific
Farms, Inc. was organized to engage in the same business as Insular Farms, Inc. The
next day, Pacific Banking Corporation, through petitioner Chester Babst wrote Insular
Farms, Inc. giving the latter 48 hours to pay its entire obligation.
On March 7, 1958, Hart received a notice that the pledged shared of stocks of
Insular Farms, Inc. would be sold at public auction on March 10, 1958 to satisfy Insular
Farms obligation. Hart filed a complaint for reconveyance and damages with prayer for a
writ of preliminary injunction and the Court of First Instance granted the writ. However,
upon petitions for dissolution of preliminary injunction filed by the petitioners PBC and
Babst, the court lifted the writ of preliminary injunction. On March 20, 1958, respondent
Hart received a notice from PBC signed by Babst that the shares of stocks on Insular
Farms Inc. will be sold at public auction on March 21, 1958. On March 21, 1958, PBC sold
the 1, 000 shares of stocks of Insular Farms to Pacific Farms. The latter then sold its
shares of stocks to its own stockholders, who constituted themselves as stockholders of
Insular Farms and then resold back to Pacific Farms Inc. all of Insular Farms assets except
for a certificate of public convenience to operate an ice plant. On September 28, 1959,
Hart filed another case for recovery of sum of money comprising his investments and
earnings.
The trial court rendered a decision ordering Pacific Farms Inc. to pay Joseph Hart
for unpaid salaries and for loans made by private respondents to Insular Farms, Inc. the
private respondents, dissatisfied with the decision, appealed to the Court of Appeals.
The appellate court modified the lower courts decision, directing Pacific Banking
Corporation to pay Joseph Hart P100,000.00, subject to reimbursement from Babst.
ISSUES:
Whether or not the sale by the petitioner bank of the shares of stocks of private
respondent on March 21, 1958 is valid since the shares of stocks had been pledged to
insure an extension of the period to pay the July installment.
Whether or not the Court may fix a period in the parties agreement to extend the
payment of the loan, including the installment which was due on or before July 1957 it
being imprecise.
RULING:
The Supreme Court held that since there was an agreement to extend indefinitely
the payment of the installment of P50,000.00 in July 1957 as provided in the promissory
note, consequently, petitioner Pacific Banking Corporation was precluded form enforcing
the payment of the said installment of July 1957, before the expiration of the indefinite
period of extension, which period had to be fixed by the court as provided in Article 1197
of the Civil Code. Hence, the disputed foreclosure and subsequent sale was premature.
Wherefore, the petition is dismissed.
YES. In case the period of extension is not precise, the provisions of Article 1197
of the Civil Code should apply. The pledge executed as collateral security no longer
contained a provision on installment due on or before July 1957. The pledge constituted
on February 19, 1958 on the shares of stocks of Insular was sufficient consideration for
the extension, considering that pledge was additional collateral required by the Pacific in
addition to the continuing guaranty of Carkin. Even the ledge did not provide for dates
of payment of installments; or any fixed date for maturity of the whole indebtedness.
Accordingly, the date of maturity of the indebtedness should be as may be determined
by the court under Article 1197 of the Civil Code.
ALTERNATIVE OBLIGATION: MEANING AND DEFINITION
1.
2.
FACTS:
On February 27 1904, Anastasio Alano, Jlose Alano and Florencio Alano executed
in favor of the plaintiff, Dra. Marcela Marino a document stipulating that the Alanos as
testamentary heirs of deceased Rev. Anastacio Cruz, would pay the sum of P2,730.50
within one (1) year with interest of 12 percent per annum representing the amount of
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 of failure to pay the debt in
money at its maturity.
No part of interest or principal due has been paid except the sum of P200 paid in
1908 by Anastacio Alano. In 1912, Anastasio died intestate. On August 8, 1914, CFI of
Batangas appointed Crisanto Javier as administrator of Anastasios estate. On March 17,
1916, the plaintiffs filed the complaint against Florencio, Jose and Crisanto praying that
unless defendants pay the debt for the recovery of which the action was brought, they
be required to convey to plaintiffs the house and lot described in the agreement, that the
property be appraised and if its value is found to be less than the amount of the debt,
with accrued interest at the stipulation rate, judgment be rendered in favor of the
plaintiffs for the balance.
ISSUE:
FACTS:
A building of plaintiff Ong Guan Cuan was insured with defendant Century
Insurance Company (Century) against fire for P30,000 as well as the merchandise therein
for P15,000. On February 28 1923, the building and the merchandise were burned while
the policies issued were in force. Under the conditions of the policies, the defendant may
at its option reinstate or replace the destroyed property instead of paying for the amount
of the loss and that it is not bound to reinstate exactly or completely the damaged
property.
Century proposed reconstruction of the house destroyed but plaintiff denied that
the new house which will be constructed would be smaller and of materials of lower kind
than those employed in the construction of the house which was destroyed. Plaintiff filed
a complaint compelling defendant to pay the sum of P45,000, the value of the insurance
of the building and the merchandise. On April 19, 1924, the CFI of Iloilo City rendered
judgment in favor of the plaintiff.
Hence the defendant appealed from the judgment and prayed that it be
permitted to rebuild the house as provided in the conditions of the insurance policies.
ISSUE:
Whether or not defendant Century may be allowed to rebuild the house as its
option instead of payment of the insured value as stipulated in the insurance policies.
RULING:
NO. The conditions in the insurance policies that the parties entered into allowed
Century to either pay the insured value of the house, or rebuild it making the obligation
of the company an alternative one. In alternative obligations, the debtor, Century, must
notify the creditor of his election stating which of the two prestations it is disposed to
fulfill. The objective is to give the creditor opportunity to give consent or deny the
election of the debtor. Only after said notice shall election take legal effect when
consented by the creditor (Article 120 Civil Code) or if impugned by the latter when
declared proper by a competent court. In the instant case, appellant company did not
give formal notice of its election to rebuild the house and the proposed reconstruction of
the house was rejected by the creditor.
In alternative obligations, the value of the prestations must be equivalent or
similar in value to each other. The proposed rebuilding of the house by the insurance
company would be of lesser value than the other prestation. The petitioner would build a
smaller house and of materials of lower kind than those employed in the construction of
the burned house.
The other prestation is payment of the amount of P45,000
corresponding to the value of the burned building (P30, 000) and the value of the
merchandise burned (P15,000). Therefore, the only recourse of the insurer is to pay the
stipulated value of the insurance policy.
55 Phil 493
FACTS:
Estanislao Reyes filed an action before the Court of First Instance of Laguna
against the Martinez heirs upon four several causes of action in which the plaintiff seeks
to recover five parcels of land, containing proximately one thousand coconut trees, and
to obtain a declaration of ownership in his favor as against the defendants with respect
to said parcels; to recover from the defendants the sum of P9,377.50, being the alleged
proceeds of some coconut trees; to recover from the defendants the sum of P43,000, as
alleged value of the proceeds of the lands involved in the receivership in the case of
Martinez vs. Grano, to which the plaintiff supposes himself to be entitled, but which have
gone, so he claims, to the benefit of the defendants in said receivership and lastly, to
recover the sum of the P10,000 from the defendants as damages resulting from their
improper meddling in the administration of the receivership property.
The plaintiff has been laboring along for several years in an unsuccessful legal
battle with the defendants, springing from his claim to be the owner of the property
involved in the receivership. This cause of action is founded upon the contract and the
claim put forth by the plaintiff is to have the five parcels adjudge to him in lieu of another
parcel formerly supposed to contain one thousand trees between him and certain of the
Martinez heirs. By this contract, Reyes was to be given the parcel described in clause 8,
but in a proviso to said clause, the parties contracting with Reyes agreed to assure to
him certain other land containing an equivalent number of trees in case he should so
elect. The litigation shows that the plaintiff elected to take and hold the parcel described
in clause 8, and his right thereto has all along been recognized in the dispositions made
by the court with respect to said land. Thus, Reyes must be taken to have elected to
take that particular parcel and he is now estopped from asserting a contrary election to
take the five parcels of land described in his complaint.
However, the title of the parcel is in the heirs of Inocente Martinez and it does not
appear that they have transferred said title to Reyes.
ISSUE:
Whether or not Reyes is entitled to the damages against the partys signatory to
the contract of March 5, 1921 for the value of the said property.
RULING:
Yes. The claim of the defendants to the interest of P8,000 from July 31, 1926
cannot be conceded as the judgment itself bears interest at the lawful rate from the date
the same was rendered. The Martinez heirs are ordered to procure the sufficient deed
conveying to appellant Estanislao Reyes the parcels of land mentioned in paragraph 8 of
the contract. The judgment against Reyes in favor of the Martinez heirs is enjoined.
ALTERNATIVE VS. FACULTATIVE OBLIGATION
QUIZANA VS. REDUGERIO
94 PHIL. 922
FACTS:
This is an appeal to the Court from a decision rendered by the Court of the First
Instance of Marinduque, wherein the defendant Gaudencio Redugerio was to pay the
plaintiff Martina Quizana the sum of P550 with the interest from the time of the filing of
the complaint and from an order of the same court denying a motion of the defendant for
the reconsideration of the judgment on the ground that they were deprived of their day
in court.
There were actionable documents attached to the complaint signed by the
defendant-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 of failure, they will
mortgage the coconut plantation in Sta. Cruz, Marinduque. The defendants admitted
that they offered the transfer of possession but was eventually refused by the petitioner.
So eventually, the defendants appealed in the CFI which set the hearing on
August 16, 1951.
However, the counsel for defendants presented an urgent motion for
continuance for the date of hearing coincides with his appearance in two (2) criminal
cases previously set for trial before hearing on the aforesaid date.
The motion was not acted upon until the day of the trial.
The CFI denied the motion for continuance, and in the absence of defendants,
rendered its questioned decision.
ISSUE:
Whether or not the trial court was correct in ignoring the 2 nd part of the written
obligation and solely basing its decision on the last part of the 1st part; i.e., that payment
should have been made on January 21, 1949.
RULING:
YES, the acceptance of plaintiff of the written obligation without objection and
protest and the fact that he kept and based his action therein, are concrete and positive
proof that he agreed and consented to all the terms, including the paragraph on the
constitution of 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 defendant-appellant shall present a duly executed deed of mortgage over the
property in the written obligation, with a period of payment to be agreed upon by the
parties with the approval of the court.
deceased spouse. If both spouses have died, the conjugal partnership shall be liquidated
in the testate or intestate proceeding of either.
2. The redemption period after the auction sale of the properties had long lapsed so
much [so] that the purchaser therein became the absolute owner thereof. Thus,
respondent Judge allegedly abused his discretion in setting aside the auction sale after
the redemption period had expired.
3. Respondent Judge erred in applying the presumption of a joint obligation in the face
of the conclusion of fact and law contained in the decision showing that the obligation is
solidary.
The Court of Appeals affirmed the trial courts ruling declaring null and void (a)
the auction sale of Respondent Ferrales real property and (b) the Writ of Possession
issued in consequence thereof. It held that, pursuant to the January 31, 1984 Decision of
the trial court, the liability of Farrales was merely joint and not solidary. Consequently,
there was no legal basis for levying and selling Farrales real and personal properties in
order to satisfy the whole obligation.
ISSUE:
Whether or not the Court of Appeals erred when it disregarded the body of the
decision and concluded that the obligation was merely a joint obligation due to the
failure of the dispositive portion of the decision dated 31 January 1984 to state that the
obligation was joint and solidary.
RULING:
No. A solidary obligation is one in which each of the debtors is liable for the entire
obligation, and each of the creditors is entitled to demand the satisfaction of the whole
obligation from any or all of the debtors. On the other hand, a joint obligation is one in
which each debtors is liable only for a proportionate part of the debt, and the creditor is
entitled to demand only a proportionate part of the credit from each debtor. The wellentrenched rule is that solidary obligations cannot be inferred 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 of the obligation so requires.
In the dispositive portion of the January 31, 1984 Decision of the trial court, the
word solidary neither appears nor can it be inferred therefrom. The fallo merely stated
that the following respondents were liable: Pacific Lloyd Corporation, Thomas H. Van
Sebille, Carlos M. Farrales and Federico C. Lim. Under the circumstances, the liability is
joint, as provided by the Civil Code, which we quote: Art. 1208. If from the law, or the
nature or the wording of the obligations to which the preceding article refers[,] the
contrary does not appear, the credit or debt shall be presumed to be divided into as
many equal shares as there are creditors or debtors x x x. Hence the execution must
conform with that which is ordained or decreed in the dispositive portion of the decision.
Petitioner maintains that the Court of Appeals improperly and incorrectly
disregarded the body of the trial courts Decision, which clearly stated as follows: To
support the Promissory Note, a Continuing Suretyship Agreement was executed by the
defendants, Federico C. Lim, Carlos M. Farrales and Thomas H. Van Sebille, in favor of the
plaintiff corporation, to the effect that if Pacific Lloyd Corporation cannot pay the amount
loaned by plaintiff to said corporation, then Federico C. Lim, Carlos M. Farrales and
Thomas H. Van Sebille will hold themselves jointly and severally together with defendant
Pacific Lloyd Corporation to answer for the payment of said obligation.
The only exception when the body of a decision prevails over the fallo is when the
inevitable conclusion from the former is that there was a glaring error in the latter, in
which case the body of the decision will prevail. In this instance, there was no clear
declaration in the body of the January 31, 1984 Decision to warrant a conclusion that
there was an error in the fallo. Nowhere in the former can we find a definite declaration
of the trial court that, indeed, respondents liability was solidary. If petitioner had
doubted this point, it should have filed a motion for reconsideration before the finality of
the Decision of the trial court.
SOLIDARY OBLIGATIONS: HOW CREATED
1.
2.
3.
4.
CDCP VS ESTRELLA
GR No. 147791.
September 8, 2006
FACTS:
On December 29, 1978, respondents Rebecca G. Estrella and her granddaughter,
Rachel E. Fletcher, boarded in San Pablo City, a BLTB bus bound for Pasay City. However,
they never reached their destination because their bus was rammed from behind by a
tractor-truck of CDCP in the South Expressway. The strong impact pushed forward their
seats and pinned their knees to the seats in front of them. They regained consciousness
only when rescuers created a hole in the bus and extricated their legs from under the
seats. They suffered physical injuries as a result. Thereafter, respondents filed a
Complaint for damages against CDCP, BLTB, Espiridion Payunan, Jr. and Wilfredo
Datinguinoo before the Regional Trial Court of Manila, Branch 13.
ISSUE:
Are the accused jointly or solidarily liable?
RULING:
The case filed by respondents against petitioner is an action for culpa
aquiliana or quasi-delict under Article 2176 of the Civil Code. The liability for the
negligent conduct of the subordinate is direct and primary, but is subject to the defense
of due diligence in the selection and supervision of the employee. In the instant case, the
trial court found that petitioner failed to prove that it exercised the diligence of a good
father of a family in the selection and supervision of Payunan, Jr.
It is well-settled in Fabre, Jr. v. Court of Appeals, that the owner of the
other vehicle which collided with a common carrier is solidarily liable to the injured
passenger of the same. The Peitition was thusly DENIED.
SOLIDARY OBLIGATIONS: HOW CREATED
There is solidary liability only when the obligation expressly so states, when the
law so provides or when the nature of the obligation so required. When it is not provided
in a judgment that the defendant are liable to pay jointly and severally a certain sum of
money, none of them may be compelled to satisfy in full said judgment.
SOLIDARY OBLIGATIONS: HOW CREATED
decision by holding MMTC solidarily liable with the other defendants for the damages
awarded by the trial court because of their concurrent negligence, hence, this appeal.
ISSUE:
Whether or not the appellate court erred in holding that MMTC should be solidary
liable with the other defendants.
RULING:
No, the appellate court did not err in its decision. Whether or not the diligence of
a good father of a family has been observed by petitioner is a matter of proof which
under the circumstances in the case at bar has not been clearly established. It is not felt
by the Court that there is enough evidence on record as would overturn the presumption
of negligence, and for failure to submit all evidence within its control, assuming the
putative existence thereof; petitioner MMTC must suffer the consequences of its own
inaction and indifference.
The mere formulation of various company policies on safety without showing that
they were being complied with is not sufficient to exempt petitioner from liability arising
from negligence of its employees. It is incumbent upon petitioner to show that in
recruiting and employing the erring driver the recruitment procedures and company
policies on efficiency and safety were followed. As joint tortfeasors, all defendants,
including MMTC will be solidarily liable for damages awarded by the trial court. Decision
affirmed.
ACTIVE SOLIDARITY OR MUTUAL AGENCY: EFFECTS
1.
2.
The promissors failed to fulfill their obligations despite demand by the bank. As a
consequence, an action to collect was filed with the court but was dismissed due to
failure to prosecute. Said dismissal was reconsidered by the trial court and later ordered
the sheriff to serve the summons. On January 27, 1987, the lower court dismissed the
case against defendant Pantanosas as prayed for by the private respondent herein.
Meanwhile, only the summons addressed to petitioner was served as the sheriff learned
that defendant Naybe had gone to Saudi Arabia.
Petitioner argued that said promissory note has vitiated his consent through fraud
and deceit which was later corroborated by Pantanosas for he only signed for the amount
of P5,000 on one of the copies of the promissory note, and not the alleged amount, to
buy chainsaw. He also claimed that since the liabilities of Pantanosas and Naybe, his copromissors, had extinguished, his should also be extinguished, as provided for by Article
2080 of the Civil Code on guarantors. The Regional Trial Court and the Court of Appeals
rejected his petitions and so a petition for review on certiorari was filed with the Supreme
Court.
ISSUE:
Whether or not the petitioner is solidary co-maker of the promissory note in issue
and not merely a guarantor.
RULING:
The Supreme Court held that the petitioner signed the promissory note as a
solidary co-maker and not as a guarantor. A solidary or joint and several obligation is
one in which each debtor is liable for the entire obligation, and each creditor is entitled
to demand the whole obligation. On the other hand, Article 2047 of the Civil Code
states:
By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the
obligation of the principal debtor in case the latter should fail to do so.
If a person binds himself solidarily with the principal debtor, the provisions of
Section 4, Chapter 3, Title I of this Book shall be observed. In such a case the contract is
called a suretyship. While a guarantor may bind himself solidarily with the principal
debtor, the liability of a guarantor is different from that of a solidary debtor. Thus,
Tolentino explains:
A guarantor who binds himself in solidum with the principal debtor under the provisions
of the second paragraph does not become a solidary co-debtor to all intents and
purposes. There is a difference between a solidary co-debtor and a fiador in solidum
(surety). The latter, outside of the liability he assumes to pay the debt before the
property of the principal debtor has been exhausted, retains all the other rights, actions
and benefits which pertain to him by reason of the fiansa; while a solidary co-debtor has
no other rights than those bestowed upon him in Section 4, Chapter 3, Title I, Book IV of
the Civil Code.
Section 4, Chapter 3, Title I, Book IV of the Civil Code states the law on joint and several
obligations. Under Art. 1207 thereof, when there are two or more debtors in one and the
same obligation, the presumption is that the obligation is joint so that each of the
debtors is liable only for a proportionate
part of the debt. There is a solidary liability only when the obligation expressly so states,
when the law so provides or when the nature of the obligation so requires.
Because the promissory note involved in this case expressly states that the three
signatories therein are jointly and severally liable, any one, some or all of them may be
proceeded against for the entire obligation. The choice is left to the solidary creditor to
determine against whom he will enforce collection. Consequently, the dismissal of the
case against Judge Pontanosas may not be deemed as having discharged petitioner from
liability as well.
As regards Naybe, suffice it to say that the court never acquired
jurisdiction over him. Petitioner, therefore, may only have recourse against his comakers, as provided by law.
ACTIVE SOLIDARITY OR MUTUAL AGENCY: EFFECTS
On 1 April 1982, PBM and Ching filed a petition for suspension of payments with
the Securities and Exchange Commission (SEC). The petition sought to suspend
payment of PBMs obligations and prayed that the SEC allow PBM to continue its normal
business operations free from the interference of its creditors. One of the listed creditors
of PBM was TRB.
On 9 July 1982, the SEC placed all of PBMs assets, liabilities, and obligations
under the rehabilitation receivership of Kalaw, Escaler and Associates.
On 13 May 1983, ten months after the SEC placed PBM under rehabilitation
receivership, TRB filed with the trial court a complaint for collection against PBM and
Ching. TRB asked the trial court to order defendants to pay solidarily the indebtedness
of PBM.
On 25 May 1983, TRB moved to withdraw the complaint against PBM on the
ground that the SEC had already placed PBM under receivership. The trial court thus
dismissed the complaint against PBM.
On 23 July 1983, PBM and Ching also moved to dismiss the complaint on the
ground that the trial court had no jurisdiction over the subject matter of the case. PBM
and Ching invoked the assumption of jurisdiction by the SEC over all of PBMs assets and
liabilities.
FACTS:
Alfredo Ching (Ching) was the Senior Vice President of Philippine Blooming Mills,
Inc. (PBM). In his personal capacity and not as a corporate officer, Ching signed a Deed
of Suretyship dated 21 July 1977 binding himself solidarily liable together with the debtor
PBM.
The trial court denied the motion to dismiss with respect to Ching and affirmed its
dismissal of the case with respect to PBM. The trial court stressed that TRB was holding
Ching liable under the Deed of Suretyship. As Chings obligation was solidary, the trial
court ruled that TRB could proceed against Ching as surety upon default of the principal
debtor PBM.
On March 24 and August 6 1980, Traders Royal Bank (TRB) granted PBM letters of
Credit on application of Ching in his capacity as Senior Vice President of PBM. Ching later
accomplished and delivered to TRB trust receipts, which acknowledged receipt in trust
for TRB of the merchandise subject of the letters of credit. Under the trust receipts, PBM
had the right to sell the merchandise for cash with the obligation to turn over the entire
proceeds of the sale to TRB as payment of PBMs indebtedness.
Upon the trial courts denial of his Motion for Reconsideration, Ching filed a
Petition for Certiorari and Prohibition before the Court of Appeals. The appellate court
granted Chings petition and ordered the dismissal of the case. The appellate court ruled
that SEC assumed jurisdiction over Ching and PBM to the exclusion of courts or tribunals
of coordinate rank.
Ching further executed an Undertaking for each trust receipt, which uniformly
granted the TRB the right to take possession of the goods at any time to protect the
TRBs interests.
TRB assailed the Court of Appeals decision before the Supreme Court. In Traders
Royal Bank v. Court of Appeals, the highest tribunal upheld the TRB and ruled that Ching
was merely a nominal party in the SEC case. Creditors may sue individual sureties of
debtor corporations, like Ching, in a separate proceeding before regular courts despite
the pendency of a case before the SEC involving the debtor corporation.
On 27 April 1981, PBM obtained a P3, 500,000 trust loan from TRB. Ching signed
as co-maker in the notarized Promissory Note evidencing said loan.
PBM defaulted in its payment of the two (2) trust receipts as well as the trust
loan.
In his Answer dated 6 November 1989, Ching denied liability as surety and
accommodation co-maker of PBM. He claimed that the SEC had already issued a
decision approving a revised rehabilitation plan for PBMs creditors. He further claimed
that even as a surety, he has the right to the defenses personal to PBM. Thus, his
liability as surety would attach only if, after the rehabilitation of payments scheduled
under the rehabilitation plan, there would remain a balance of PBMs debt to TRB.
The trial court ruled that Ching is liable to TB under the Deed of Suretyship. On
appeal, the Court of Appeals affirmed the decision of the lower court. The Court of
Appeals denied Chings Motion for Reconsideration for lack of merit.
ISSUES:
Whether or not Ching is liable for obligations PBM contracted after the execution
of the Deed of Suretyship.
Whether or not Chings liability is limited to the amount stated in PBMs
rehabilitation plan.
RULING:
Ching is liable for credit obligations contracted by PBM against TRB before and
after the execution of the 21 July 1977 Deed of Suretyship. This is evident from the tenor
of the deed itself, referring to amounts PBM may now be indebted or may hereafter
become indebted to TRB. The law expressly allows a suretyship for future debts as
provided for in Article 2053 of the Civil Code. Under the Civil Code, a guaranty may be
given to secure even future debts; the amount of which may not be known at the time
the guaranty is executed. A continuing guaranty is one which is not limited to a single
transaction, but which contemplates a future course of dealing, covering a series of
transactions, generally for an indefinite time or until revoked.
Anent the second issue, in granting the loan to PBM, TRB required Chings surety
precisely to insure full recovery of the loan in case PBM becomes insolvent or fails to pay
in full. Ching cannot invoke Article 1222 of the Civil Code. Thus, Ching cannot use PBMs
failure to pay in full as justification for his own reduced liability to TRB. TRB, as creditor,
has the right under the surety to proceed against Ching for the entire amount of PBMs
loan. This is clear from Article 1216 of the Civil Code, which states that: the creditor
may proceed against any one of the solidary debtors or some or all of them
simultaneously. The demand made against one of them shall not be an obstacle to
those which may subsequently be directed against the others, so long as the debt has
not been fully collected.
FACTS:
Petitioner is the defendant-appellant in a case for collection of sum of money
against whom the decision was rendered by the trial court on May 28, 1974. Plaintiff,
who is now the respondent in the instant petition, is a banking institution and is the
creditor of petitioner.
On February 6, 1962, petitioner borrowed from the plaintiff the sum of P10,000.00
as evidenced by a promissory note executed and signed by Pedro Tanjuatco and Carlos
Dimayuga. The indebtedness was to be paid on May 7, 1962 with interest at the rate of
10% per annum in case of non-payment at maturity as evidenced by and in accordance
with the terms and conditions of the promissory note executed jointly and severally by
defendants. Carlos Dimayuga bound himself to pay jointly and severally with Pedro
Tanjuatco interest at the rate of 10% per annum on the said amount of P10,000.00 until
fully paid. Moreover, both undertook to "jointly and severally authorize the respondent
Philippine Commercial and Industrial Bank, at its option to apply to the payment of this
note any and all funds, securities or other real or personal property of value which hands
(sic) on deposit or otherwise belonging to anyone or all of us."
Upon the default of the promissors to pay, bank filed a complaint for the
collection of a sum of money. Defendant Carlos Dimayuga, now petitioner, however, had
remitted to the respondent the P4,000.00 by way of partial payments made from August
1, 1969 to May 7, 1970 as evidenced by corresponding receipts thereto. These
payments were nevertheless applied to past interests, charges and partly on the
principal.
The trial court held the defendants jointly and severally liable to pay the plaintiff
the sum of P9,139.60 with interest at 10% per annum until fully paid plus P913.96 as
attorneys' fees and costs against defendants. Petitioner then filed a motion alleging that
since Pedro Tanjuatco died on December 23, 1973, the money claim of the respondents
should be dismissed and prosecuted against the estate of the late Pedro Tanjuatco as
provided in Sec. 5, Rule 86, New Rules of Court. The trial court denied the motion for
lack of merit. On appeal, the Court of Appeals dismissed the appeal for failure of the
Record on Appeal to show on its face that the appeal was timely perfected.
ISSUE:
Whether or not the money claim of PCIB should be dismissed and prosecuted
against the estate of the late Tanjuatco.
RULING:
From the evidence presented, there can be no dispute that Carlos Dimayuga
bound himself jointly and severally with Pedro C. Tanjuatco, now deceased, to pay the
obligation with PCIB in the amount of P10,000.00 plus 10% interest per annum. In
addition, as above stated, in case of non-payment, they undertook among others to
jointly and severally authorize respondent bank, at its option to apply to the payment of
this note, any and all funds, securities, real or personal properties, etc. belonging to
anyone or all of them. Otherwise stated, the promissory note in question provides in
unmistakable language that the obligation of petitioner Dimayuga is joint and several
with Pedro C. Tanjuatco.
with the Court of Appeals. The respondent court dismissed the petition. The respondent
court hold petitioner and Delgado were solidary debtors.
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 of the Civil Code, the creditor may
proceed against any one of the solidary debtors or some or all of them simultaneously.
"Hence, there is nothing improper in the creditor's filing of an action against the
surviving solidary debtors alone, instead of instituting a proceeding for the settlement of
the estate of the deceased debtor wherein his claim could be filed." The notice is
undoubtedly left to the solidary creditor to determine against whom he will enforce
collection.
ISSUE:
Whether or not petitioner is a co-debtor of Delgado; hence, liable to pay the loan
contracted by Delgado.
Court of Appeals decision reversed and set aside. Trial court decision affirmed.
EFFECTS OF PASSIVE SOLIDARITY/MUTUAL GUARANTY
CERNA VS. COURT OF APPEALS
220 SCRA 517
MARCH 30, 1993
FACTS:
Celerino Delgado and Conrad Leviste entered into a loan agreement on or about
October 16, 1972, which was 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-fact of 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 file
a collection suit against Delgado and petitioner as solidary debtors. Petitioner filed a
motion to dismiss. The grounds cited in the Motion were lack of cause of action and the
death of Delgado. Anent the latter, petitioner claimed that the claim should be filed in
the proceedings for the settlement of the estate of Delgado as the action did not survive
Delgados death. Moreover, he also stated that since Leviste already opted to collect on
the note, he could no longer foreclose the mortgage. The trial court denied the motion
to dismiss.
The petitioner then filed a special civil action for certiorari, mandamus, and
prohibition with preliminary injunction on the ground that the respondent judge
committed grave abuse of discretion. However, the Court of Appeals denied the petition
because herein petitioner failed to prove the death of Delgado and the consequent
settlement of the latters estate.
On February 18, 1977, petitioner filed his second motion to dismiss. The trial
court again denied the said motion. Petitioner filed a motion to reconsider the said order
but this was denied. Then, petitioner filed another petition for certiorari and prohibition
RULING:
NO, petitioner is not a co-debtor of Delgado. Nowhere did it appear in the
promissory note that petitioner was a co-debtor. Article 1311 of the Civil Code is clear
that contracts take effect only between the parties Moreover, Article 1207 of the
Civil Code states that there is solidary liability only when the obligation expressly so
states, or when the law or nature of 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 from the agreement that petitioner was
solidarily bound with Delgado for the payment of the loan.
There is also no legal provision nor jurisprudence in our jurisdiction which makes a
third person who secures the fulfillment of anothers obligation by mortgaging his own
property solidarily bound with the principal obligor. A chattel mortgage may be an
accessory contract to a contract of loan, but that fact alone does not make a thirdparty mortgagor solidarily bound with the principal debtor in the fulfilling of the principal
obligation that is, to pay the loan. The signatory of the principal contract remains to be
primarily bound. It is only upon the default of the latter that the creditor may have
recourse on the mortgagors by foreclosing the mortgaged properties in lieu of an action
for recovery of the amount of the loan. And the liability of the third-party mortgagors
extends only to the property mortgaged. Should there be any deficiency, the creditor
has recourse on the principal debtor.
INDIVISIBLE OBLIGATIONS:
CONVENTIONAL
KINDS
OF
INDIVISIBILITY:
NATURAL,
LEGAL
OR
reorganization of the courts in 1983, the case was transferred to the RTC of Naic, Cavite.
Romeo was appointed administrator of his fathers estate. In the course of the intestate
proceedings, Romeo discovered that his parents had executed several deeds of sale
conveying a number of real properties in favor of his sister, Natividad. One of the deeds
involved six lots in Quezon City which were allegedly sold by Maximino, Sr., with the
consent of Aurea, to Natividad on January 29, 1970 for the total amount of P47,800.00.
Among the lots covered by the above Deed of Sale is Lot 3-B which is registered
under TCT No. 140946. This lot had been occupied by Romeo, his wife Eliza, and by
Maximino, Jr. since 1969. Unknown to Romeo, Natividad sold Lot 3-B on July 31, 1982 to
Maximino, Jr., for which reason the latter was issued TCT No. 293701 by the Register of
Deeds of Quezon City. When Romeo found out about the sale to Maximino, Jr., he and his
wife Eliza locked Maximino, Jr. out of the house. On August 4, 1983, Maximino, Jr.
brought an action for recovery of possession and damages with prayer for writs of
preliminary injunction and mandatory injunction with the RTC of Quezon City. On
December 12, 1986, the trial court ruled in favor of Maximino, Jr. In CA-G.R. CV No.
12932, the CA affirmed the decision of the trial court. On June 15, 1988, Romeo in turn
filed, on behalf of the estate of Maximino, Sr., the present case for annulment of sale
with damages against Natividad and Maximino, Jr. The case was filed in the RTC of
Quezon City. Romeo sought the declaration of nullity of the sale made on January 29,
1970 to Natividad and that made on July 31, 1982 to Maximino, Jr. on the ground that
both sales were void for lack of consideration. On March 1, 1990, Natividad and
Maximino, Jr. filed a third-party complaint against the spouses Romeo and Eliza. They
alleged that Lot 3, which was included in the Deed of Absolute Sale of January 29, 1970
to Natividad, had been surreptitiously appropriated by Romeo by securing for himself a
new title in his name. They alleged that Lot 3 is being leased by the spouses Romeo and
Eliza to third persons.
In the trial court, it rendered a decision declaring the nullity of the Deed of Sale
dated January 29, 1970 except as to lots 3, 3-b, 13 and 14 which had passed on to third
persons. On motion for reconsideration, the trial court modified its decision. On appeal
to the Court of Appelas, the decision of the trial court was modified in the sense that the
titles to Lot 3 (in the name of Romeo Nazareno) and Lot 3-B ( in the name of Maximino
Nazareno, Jr.), as well as to Lots 10 and 11 were cancelled and ordered restored to the
estate of Maximino, Sr.
ISSUE:
Whether or not the the Deed of Absolute Sale on January 29, 1970 is an indivisible
contract founded on an indivisible obligation
RULING:
An obligation is indivisible when it cannot be validly performed in parts, whatever
may be the nature of the thing which is the object thereof. The indivisibility refers to the
prestation and not to the object thereof. In the present case, the Deed of Sale of January
29, 1970 supposedly conveyed the six lots to Natividad. The obligation is clearly
indivisible because the performance of the contract cannot be done in parts; otherwise
KINDS OF PENALTIES:
1.
2.
FACTS:
Petitioners Alonzo and Sison alleged that they are the registered owners of a
parcel of land located at Lot 3, Block 11, M. Agoncillo St., Novaliches, Quezon City,
evidenced by TCT No. 152153. At around June 1996, petitioners discovered that a
portion on the left side of the parcel of land was occupied by the respondents San Juan,
without their knowledge or consent. A demand letter was sent to the respondents
requiring them to vacate the said premises, but they refused to comply. Petitioners then
filed a complaint against the respondents. During the pendency of the case, the parties
agreed to enter into a Compromise Agreement which the trial court approved in a
judgment by compromise dated May 7, 1997. In the Compromise Agreement, it was
expressly stipulated that should any two of the installments of the purchase price be not
paid by the respondents, the said agreement shall be considered null and void. Alleging
that the respondents failed to abide by the provisions of the Compromise Agreement by
their failure to pay the amounts due thereon, petitioners then filed an Amended Motion
for Execution. Petitioners alleged that the respondents failed to pay the installments for
July 31, 1997 and August 31, 1997 on their due dates, thus the Compromise Agreement
submitted by the parties became null and void. With this, the trial court found no reason
to direct the issuance of the writ of execution and denied the petitioners Amended
Motion for Execution. Petitioners filed their motion for reconsideration to which the
respondents opposed. The trial court likewise denied the petitioners motion for
reconsideration.
ISSUE:
Whether or not the petitioners have a right to enforce the provision on
Compromise Agreement by asking for the issuance of a writ of execution because of the
failure of the respondents to pay.
RULING:
The Supreme Court held that the items 11 and 12 of the Compromise Agreement
provided, in clear terms, that in case of failure to pay on the part of the respondents,
they shall vacate and surrender possession of the land that they are occupying and the
petitioners shall be entitled to obtain immediately from the trial court the corresponding
writ of execution for the ejectment of the respondents. This provision must be upheld,
because the Agreement supplanted the complaint itself. When the parties entered into a
Compromise Agreement, the original action for recovery of possession was set aside and
the action was changed to a monetary obligation. Once approved judicially, the
Compromise Agreement cannot and must not be disturbed except for vices of consent or
forgery. For failure of the respondents to abide by the judicial compromise, petitioners
are vested with the absolute right under the law and the agreement to enforce it by
asking for the issuance of the writ of execution. Doctrinally, a Compromise Agreement is
immediately final and executory. Petitioners course of action, asking for the issuance of
a writ of execution was in accordance with the very stipulation in the agreement that the
lower court could not change. Hence, the petition is granted.
FACTS:
On two separate occasions, particularly on 30 July 1995 and 16 October 1995,
petitioner Theresa Macalalag obtained loans from Grace Estrella (Estrella), each in the
amount of P100,000.00, each bearing an interest of 10% per month. Macalalag
consistently paid the interests. Finding the interest rates so burdensome, Macalalag
requested Estrella for a reduction of the same to which the latter agreed. On 16 April
1996 and 1 May 1996, Macalalag executed Acknowledgment/Affirmation Receipts
promising to pay Estrella the face value of the loans in the total amount of P200,000.00
within two months from the date of its execution plus 6% interest per month for each
loan. Under the two Acknowledgment/Affirmation Receipts, she further obligated herself
to pay for the two (2) loans the total sum of P100,000.00 as liquidated damages and
attorney's fees in the total sum of P40,000.00 as stipulated by the parties the moment
she breaches the terms and conditions thereof.
As security for the payment of the aforesaid loans, Macalalag issued two
Philippine National Bank (PNB) Checks on 30 June 1996, each in the amount of
P100,000.00, in favor of Estrella. However, the said checks were dishonored for the
reason that the account against which the same was drawn was already closed. Estrella
sent a notice of dishonor and demand to make good the said checks to Macalalag, but
the latter failed to do so. Hence, Estrella filed two criminal complaints for Violation of
Batas Pambansa Blg. 22 before the Municipal Trial Court in Cities (MTCC) of Bacolod
City.The MTCC found the accused Theresa Macalalag guilty beyond reasonable doubt of
the crime charged and is likewise ordered to pay as civil indemnity the total amount of
P200,000.00 with interest at the legal rate from the time of the filing of the informations
until the amount is fully paid; less whatever amount was thus far paid and validly
deducted from the principal sum originally claimed. On appealed, the Court of Appeals,
affirmed the RTC and the MTCC decisions with modification to the effect that accused
was convicted only of one (1) count of Violation of Batas Pambansa Blg. 22.
ISSUE:
Whether petitioner`s payments over and above the value of the said checks
would free her from criminal liability.
RULING:
The Court argued that, Even if we agree with petitioner Macalalag that the
interests on her loans should not be imputed to the face value of the checks she issued,
petitioner Macalalag is still liable for Violation of Batas Pambansa Blg. 22. Petitioner
Macalalag herself declares that before the institution of the two cases against her, she
has made a total payment of P156,000.00. Applying this amount to the first check (No.
C-889835), what will be left is P56,000.00, an amount insufficient to cover her obligation
with respect to the second check. As stated above, when Estrella presented the checks
for payment, the same were dishonored on the ground that they were drawn against a
closed account. Despite notice of dishonor, petitioner Macalalag failed to pay the full
face value of the second check issued.
Only a full payment of the face value of the second check at the time of its presentment
or during the five-day grace period15 could have exonerated her from criminal liability. A
contrary interpretation would defeat the purpose of Batas Pambansa Blg. 22, that of
safeguarding the interest of the banking system and the legitimate public checking
account user,16 as the drawer could very well have himself exonerated by the mere
expediency of paying a minimal fraction of the face value of the check. Hence, the
Petition is denied.
OBLIGATIONS WITH A PENAL CLAUSE: PENALTIES VS. INTEREST
TAN VS. COURT OF APPEALS
367 SCRA 571
GR NO. 116285
FACTS:
On May 14, 1978, petitioner Antonio Tan obtained two loans in the total amount of
four million pesos from respondent Cultural Center of the Philippines (CCP), evidenced by
2 promissory notes with maturity dates on May 14, 1979 and July 6, 1979, respectively.
Petitioner defaulted but later he had the loans restructured by respondent CCP.
Petitioner accordingly executed a promissory note on August 31, 1979 in the amount of
P3,411,421.32 payable in five (5) installments. Petitioner however, failed to pay any of
the supposed installments and again offered another mode of paying restructured loan
which respondent CCP refused to consent.
On May 30, 1984, respondent wrote petitioner demanding the full payment,
within ten (10) days, from receipt of the letter, of the latters restructured loan which as
of April 30, 1984 amounted to P6, 088,735. On August 29, 1984, respondent CCP filed
with the RTC of Manila a complaint for a collection of a sum of money. Eventually,
petitioner was ordered to pay said amount, with 25% thereof as attorneys fees and
P500, 000.00 as exemplary damages. On appeal, the Court of Appeals, reduced the
attorneys fees to 5% of the principal amount to be collected from petitioner and deleted
the exemplary damages.
Still unsatisfied with the decision, petitioner seeks for the deletion of the
attorneys fees and the reduction of the penalties.
ISSUE:
Whether or not interests and penalties may be both awarded.
RULING:
YES. Article 1226 of the New Civil Code provides that in obligations with a penal
clause, the penalty shall substitute the indemnity for damages and the payment of
interests in case of non-compliance, if there is no stipulation to the contrary.
Nevertheless, damages shall be paid if the obligor refuses to pay the penalty or is guilty
of fraud in the fulfillment of the obligation. The penalty may be enforced only when it is
demandable in accordance with the provisions.
In the case at bar, the promissory note expressly provides for the imposition of
both interest and penalties in case of default on the part of the petitioner in the payment
of the subject restructured loan. Since the said stipulation has the force of law between
the parties and does not appear to be inequitable or unjust, it must be respected.
OBLIGATIONS WITH A PENAL CLAUSE: PENALTIES VS. INTEREST
EASTERN SHIPPING INES, INC vs. HON. COURT OF APPEALS
G.R. No. 97412 Jul 12, 1994
FACTS:
On December 4, 1981, two fiber drums of riboflavin were shipped from Yokohama,
Japan for delivery vessel `SS EASTERN COMET' owned by defendant Eastern Shipping
Lines under Bill of Lading No. YMA-8 (The shipment was insured under plaintiff's Marine
Insurance Policy No. 81/01177 for P36,382,466.38.
Upon arrival of the shipment in Manila on December 12, 1981, it was discharged
unto the custody of defendant Metro Port Services, Inc. The latter excepted to one drum,
said to be in bad order, which damage was unknown to plaintiff. On January 7, 1982
defendant Allied Brokerage Corporation received the shipment from defendant Metro
Port Service, Inc., one drum opened and without. On January 8 and 14, 1982, defendant
Allied Brokerage Corporation made deliveries of the shipment to the consignees'
warehouse. The latter excepted to one drum which contained spillages, while the rest of
the contents was adulterated/fake Plaintiff contended that due to the losses/damage
sustained by said drum, the consignee suffered losses totaling P19,032.95, due to the
fault and negligence of defendants. Claims were presented against defendants who
failed and refused to pay the same "As a consequence of the losses sustained, plaintiff
was compelled to pay the consignee P19,032.95 under the aforestated marine insurance
policy, so that it became subrogated to all the rights of action of said consignee against
defendants.
ISSUE:
a.)Whether the payment of legal interest on an award for loss or damage is to be
computed from the time the complaint is filed or form the date the decision appealed
from is rendered; and b)Whether the applicable rate of interest is twelve percent or six
percent.
HELD:
Petitioners nevertheless failed to pay their loan obligations within the time frame
given them and as a result, Respondent PNB filed with the Provincial Sheriff of
Pangasinan at Lingayen a Petition for Sale. The sheriff foreclosed the real estate
mortgage and sold at public auction the mortgaged properties of petitioner-spouses, with
Respondent PNB being declared the highest bidder for the amount of P10,334,000.00.
Petitioners refused to pay the above deficiency claim which compelled Respondent PNB
to institute the instant Complaint for the collection of its deficiency claim.
ISSUE:
Whether or not the escalation clause is valid and whether or not it is violative of
the principle of mutuality of contracts.
RULING:
In each drawdown, the Promissory Notes specified the interest rate to be charged:
19.5 percent in the first, and 21.5 percent in the second and again in the third. However,
a uniform 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 future 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 freedom 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 of farcicality to specify and agree
upon rates that could be subsequently upgraded at whim by only one party to the
agreement.
The unilateral determination and imposition of increased rates is violative of
the principle of mutuality of contracts ordained in Article 1308 of the Civil Code. Onesided impositions do not have the force of law between the parties, because such
impositions are not based on the parties essential equality.
Although escalation clauses are valid in maintaining fiscal stability and retaining
the value of money on long-term contracts, giving respondent an unbridled right to
adjust the interest independently and upwardly would completely take away from
petitioners the right to assent to an important modification in their agreement and
would also negate the element of mutuality in their contracts. The clause cited earlier
made the fulfillment of the contracts dependent exclusively upon the uncontrolled will
of respondent and was therefore void. Besides, the pro forma promissory notes have the
character of a contract dadhsion, where the parties do not bargain on equal footing,
the weaker partys the debtors participation being reduced to the alternative to take it
or leave it.
POLOTAN VS CA
GR No. 119379.
September 25, 1998
FACTS:
Private respondent Security Diners International Corporation (Diners Club), a
credit card company, extends credit accomodations to its cardholders for the purchase of
goods and other services from member establishments. Said goods and services are
reimbursed later on by cardholders upon proper billing. Petitioner Rodelo G. Polotan, Sr.
applied for membership and credit accmodations with Diners Club in October 1985. The
application form contained terms and conditions governing the use and availment of the
Diners Club card, among which is for the cardholder to pay all charges made through the
use of said card within the period indicated in the statement of account and any
remaining unpaid balance to earn 3% interest per annum plus prime rate of Security
Bank & Trust Company. Notably, in the application form submitted by petitioner,
Ofricano Canlas obligated himself to pay jointly and severally with petitioner the latters
obligation to private respondent.
Upon acceptance of his application, petitioner was issued Diners Club card No.
3651-212766-3005. As of May 8, 1987, petitioner incurred credit charges plus
appropriate interest and service charges in the aggregate amount of P33,819.84 which
had become due and demandable. Demands for payment made against petitioner
proved futile. Hence, private respondent filed a Complaint for Collection of Sum of
Money against petitioner before the lower court.
ISSUE:
Is petitioner liable for payment of credit charges plus interest and service
charges?
RULING:
A contract of adhesion is one in which one of the contracting parties imposes a
ready-made form of contract which the other party may accept or reject, but cannot
modify. One party prepares the stipulation in the contract, while the other party merely
affixes his signature or his adhesion thereto, giving no room for negotiation and
depriving the latter of the opportunity to bargain on equal footing. Nevertheless, these
types of contracts have been declared as binding as ordinary contracts, the reason being
that the party who adheres to the contract is free to reject it entirely.
In this case, petitioner, in effect, claims that the subject contract is one-sided in
that the contract allows for the escalation of interests, but does not provide for a
downward adjustment of the same in violation of Central Bank Circular 905. Admittedly,
the second paragraph of the questioned proviso which provides that the Cardholder
hereby authorizes Security Diners to correspondingly increase the rate of such interest in
the event of changes in prevailing market rates x x x is an escalation clause. However,
it cannot be said to be dependent solely on the will of 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 fluctuation in the market rates is beyond the control of private respondent.
range of judicial notice which courts are bound to take into account. After all, the
fundamental tenet is that the law is deemed part of the contract. Thus, the trial court
was correct in ruling that the second cause of action was without basis.
REDUCTION OF CONVENTIONAL PENALTIES
IMPERIAL VS. JAUCIAN
427 SCRA 517
2004 Apr 14
FACTS:
The present controversy arose from a case for collection of money, filed by Alex
A. Jaucian against Restituta Imperial, on October 26, 1989. The complaint alleges, inter
alia, that defendant obtained from plaintiff six (6) separate loans for which the former
executed in favor of the latter six (6) separate promissory notes and issued several
checks as guarantee for payment. When the said loans became overdue and unpaid,
especially when the defendants checks were dishonored, plaintiff made repeated oral
and written demands for payment.
The loans were covered by six (6) separate promissory notes executed by
defendant. The face value of each promissory notes is bigger [than] the amount
released to defendant because said face value already included the interest from date of
note to date of maturity. Said promissory notes indicate the interest of 16% per month,
date of issue, due date, the corresponding guarantee checks issued by defendant,
penalties and attorneys fees. The trial courts clear and detailed computation of
petitioners outstanding obligation to respondent was affirmed by the CA for being
convincing and satisfactory. However, the CA held that without judicial inquiry, it was
improper for the RTC to rule on the constitutionality of Section 1, Central Bank Circular
No. 905, Series of 1982.
ISSUES:
Whether or not the penalties charged per month is in the guise of hidden interest.
FACTS:
Teddy G. Pabugais, agreed to sell to Dave P. Sahijwani a lot located at North
Forbes Park, Makati. Dave paid Teddy the amount of P600,000.00 as option/reservation
fee and the balance of P14,887,500.00 to be paid within 60 days from the execution of
the contract, simultaneous with delivery of the owners duplicate TCT in Daves name
and other required documents. Teddy failed to deliver the required documents, and
returned to Dave the option/reservation fee by way of check, which was, however,
dishonored. On August11, 1994, Teddy wrote to Dave saying that he is consigning the
mount tendered with the RTC of Makati City. On August 15, 1994, Teddy filed a complaint
for consignation, alleging that he twice rendered to Dave, through his counsel, the
amount of P672,900.00 in the form of managers check, but was refused. Daves
counsel, on the other hand, admitted that his office received petitioners letter, but
claimed that no check was appended thereto. He averred that there was no valid tender
of payment because no check was tendered and the computation of the amount to be
tendered was insufficient. The trial court declared the consignation invalid for failure to
prove that there was a prior tender of payment and was refused by Dave. Teddy
appealed the decision to the Court of Appeals. Thereafter, he filed an Ex Parte Motion to
Withdraw Consigned Money, which was denied by the CA.
On a motion for
reconsideration, the CA declared the consignation as valid, and thus held that Teddy
cannot withdraw his consignation. Unfazed, Teddy filed the present petition upon the
contention that he can withdraw the amount deposited with the trial court as a matter of
right since at the time he moved for the withdrawal, the CA has yet to rule on its validity
and Dave had not yet accepted the same.
ISSUES:
(1) Whether or not there was a valid consignation; and (2) Whether or not
petitioner can withdraw the amount consigned as a matter of right?
RULING:
The petition for review is denied. Petitioners tender of payment is valid. The
amount consigned however can no longer be withdrawn because respondents prayer in
his answer that the amount consigned be awarded to him is equivalent to an acceptance
of the consignation, which has the effect of extinguishing petitioners obligation. The
amount consigned with the trial court can no longer be withdrawn by petitioner because
respondents prayer in his answer that the amount consigned be awarded to him is
equivalent to an acceptance of the consignation, which has the effect of extinguishing
petitioners obligation. Moreover, petitioner failed to manifest his intention to comply
with the Agreement And Undertaking by delivering the necessary documents and the
lot subject of the sale to respondent in exchange for the amount deposited. Withdrawal
of the money consigned would enrich petitioner and unjustly prejudice respondent.
the Land Bank of the Philippines (Land Bank). Private respondent National Onion
Growers Cooperative Marketing Association, Inc., an agricultural cooperative, was the
occupant of the disputed parcels of land under a subsisting contract of lease with Land
Bank. The lease was valid until December 31, 1995. Upon the expiration of the lease
contract, petitioner demanded that private respondent vacate the leased premises and
surrender its possession to him. Private respondent refused on the ground that it was, at
the time, contesting petitioners acquisition of the parcels of land in question in an action
for annulment of sale, redemption and damages.
Petitioner filed an action for ejectment before the MTC. He asked, inter alia, for
the imposition of the contractually stipulated penalty of P5,000 per day of delay in
surrendering the possession of the property to him. On September 3, 1996, the trial
court decided the case in favor of petitioner. On appeal to the RTC, the MTC decision was
affirmed in toto. The CA rendered its assailed decision affirming the decision of the trial
court, with the modification that the penalty imposed upon private respondent for the
delay in turning over the leased property to petitioner was reduced from P 5,000 to P
1000 per day.
ISSUE:
Whether or not the Court of Appeals erred in reducing the penalty awarded by the
trial court, the same having been stipulated by the parties.
RULING:
No. Generally, courts are not at liberty to ignore the freedom of the parties to
agree on such terms and conditions as they see fit 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 if it is iniquitous or unconscionable,
or if the principal obligation has been partly or irregularly complied with. This power of
the courts is explicitly sanctioned by Article 1229 of 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 if there has been no
performance, the penalty may also be reduced by the courts if it is iniquitous or
unconscionable.
The question of whether a penalty is reasonable or iniquitous is addressed to the
sound discretion of the court and depends on several factors, including, but not limited
to, the following: the type, extent and purpose of the penalty, the nature of the
obligation, the mode of breach and its consequences, the supervening realities, the
standing and relationship of the parties.
In this case, the stipulated penalty was reduced by the appellate court for being
unconscionable and iniquitous. Petition denied; CA decision affirmed.
NO, the penalty is not unreasonable. The Court held that the question of whether
a penalty is reasonable or iniquitous can be partly subjective and partly objective. Its
resolution would depend on such factors as, but not necessarily confide to, the type,
extent and purpose of the penalty, the nature of the obligation, the mode of breach and
its consequences, the supervening realities, the standing and relationship of the parties,
and the like, the application of which, by and large, is addressed to the sound discretion
of the court. In Rizal Commercial Banking Corp. v. Court of Appeals, for example, the
Court has tempered the penalty charges after taking into account the debtors pitiful
situation and its offer to settle the entire obligation with the creditor bank. The
stipulated penalty might likewise be reduced when a partial or irregular payment is made
by the payment. The stipulated penalty might even be deleted such as when there has
been substantial performance in good faith by the obligor, when the penalty clause itself
suffers from fatal infirmity, and when exceptional circumstances so exist as to warrant it.
In the case at bar, given the circumstances, not to mention the repeated acts of breach
by petitioners of their contractual obligation, this Court sees no cogent ground to change
the ruling of the appellate court.
REDUCTION OF CONVENTIONAL PENALTIES
PASCUAL VS. RAMOS
384 S 105
FACTS:
Ramos alleged that on 3 June 1987, for and in consideration of P150,000, the
Spouses Pascual executed in his favor a Deed of Absolute Sale with Right to Repurchase
over two parcels of land and the improvements thereon located in Bambang, Bulacan,
Bulacan. This document was annotated at the back of 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 of land and
improvements thereon be consolidated in his favor.
In their Answer, the Pascuals admitted having signed the Deed of Absolute Sale
with Right to Repurchase for a consideration of P150, 000 but averred that what the
parties had actually agreed upon and entered into was a real estate mortgage. They
further 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 found
that the transaction between the parties was actually a loan in the amount of P150,000,
the payment of which was secured by a mortgage of the property covered by TCT No.
305626. It also found that the Pascuals had made payments in the total sum of
P344,000, and that with interest at 7% per annum, they had overpaid the loan by
P141,500. Accordingly, in its Decision of 15 March 1995 the trial court ruled in favor of
the defendants. The Pascuals interposed the following defenses: (a) the trial court had no
jurisdiction over the subject or nature of the petition; (b) Ramos had no legal capacity to
sue; (c) the cause of action, if any, was barred by the statute of limitations; (d) the
petition stated no cause of action; (e) the claim or demand set forth in Ramoss pleading
had been paid, waived, abandoned, or otherwise extinguished; and (f) Ramos has not
complied with the required confrontation and conciliation before the barangay.
The Court of Appeals affirmed in toto the trial courts Orders of 5 June 1995 and 7
September 1995.
conditions which they deem convenient provided they are not contrary to law, morals,
good customs, public order, or public policy.
The interest rate of 7% per month was voluntarily agreed upon by Ramos and the
Pascuals. There is nothing from the records and, in fact, there is no allegation showing
that petitioners were victims of fraud 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 of their moral dependence, ignorance, mental
weakness, tender age or other handicap, which would entitle them to the vigilant
protection of the courts as mandated by Article 24 of the Civil Code.
ISSUE:
Whether or not the contract entered into is a contract of loan.
RULING:
The Pascuals are actually raising as issue the validity of the stipulated interest
rate. It must be stressed that they never raised as a defense or as basis for their
counterclaim the nullity of the stipulated interest. While overpayment was alleged in the
Answer, no ultimate facts which constituted the basis of the overpayment was alleged.
In their pre-trial brief, the Pascuals made a long list of issues, but not one of them
touched on the validity of the stipulated interest rate. Their own evidence clearly shows
that they have agreed on, and have in fact paid interest at, the rate of 7% per month.
After 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 of 7% per
month. The Pascuals should accept not only the favorable aspect of the courts
declaration that the document is actually an equitable mortgage but also the necessary
consequence of 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 for a
reconsideration of the 15 March 1995 Decision of the trial court pointing out that the
interest rate to be used should be 7% per month, the Pascuals never lifted a finger to
oppose the claim. Admittedly, in their Motion for Reconsideration of the Order of 5 June
1995, the Pascuals argued that the interest rate, whether it be 5% or 7%, is exorbitant,
unconscionable, unreasonable, usurious and inequitable. However, in their Appellants
Brief, the only argument raised by the Pascuals was that Ramoss petition did not contain
a prayer for general relief and, hence, the trial court had no basis for ordering them to
pay Ramos P511,000 representing the principal and unpaid interest. It was only in their
motion for the reconsideration of the decision of the Court of Appeals that the Pascuals
made an issue of the interest rate and prayed for 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 free to stipulate terms and
The Underwriting Agreement also provided that for supervising the public offering
of the shares, respondent Este del Sol shall pay petitioner FMIC an annual supervision fee
of 200,000.00 per annum for a period of four consecutive years. The Underwriting
Agreement also stipulated for the payment by respondent Este del Sol to petitioner FMIC
a consultancy fee of P332,500.00 per annum for a period of four consecutive years.
Simultaneous with the execution of and in accordance with the terms of the Underwriting
Agreement, a Consultancy Agreement was also executed on January 31, 1978 whereby
respondent Este del Sol engaged the services of petitioner FMIC for a fee as consultant
to render general consultancy services. Since respondent Este del Sol failed to meet the
schedule of repayment in accordance with a revised Schedule of Amortization, it
appeared to have incurred a total obligation of P12,679,630.98 per the petitioners
Statement of Account dated June 23, 1980. Accordingly, petitioner FMIC caused the
extrajudicial foreclosure of the real estate mortgage on June 23, 1980. At the public
auction, petitioner FMIC was the highest bidder of the mortgaged properties for
P9,000,000.00. Failing to secure from the individual respondents, the payment of the
alleged deficiency balance, petitioner instituted the instant collection suit to collect the
alleged deficiency balance of P6,863,297.73 plus interest thereon at 21% percent per
annum from June 24, 1980 until fully paid, and 25% percent thereof as and for attorneys
fees and costs.
The trial court rendered its decision in favor of petitioner FMIC. CA reversed the
challenged decision of the trial court.
ISSUE:
Whether or not the appellate court erred in reversing the decision of the trial
court as regards to the payment of penalties.
RULING:
No. First, Central Bank Circular No. 905 did not repeal nor in any way amend the
Usury Law but simply suspended the latters effectivity. Thus, retroactive application of a
Central Bank Circular cannot, and should not, be presumed. Second, several facts and
circumstances taken altogether show that the Underwriting and Consultancy Agreements
were simply cloaks or devices to cover an illegal scheme employed by petitioner FMIC to
conceal and collect excessively usurious interest. The Underwriting and Consultancy
Agreements which were executed and delivered contemporaneously with the Loan
Agreement on January 31, 1978 were exacted by petitioner FMIC as essential conditions
for the grant of the loan. An apparently lawful loan is usurious when it is intended that
additional compensation for the loan be disguised by an ostensibly unrelated contract
providing for payment by
the borrower for the lenders services which are of little value or which are not in fact to
be rendered, such as in the instant case. In this connection, Article 1957 of the New Civil
Code clearly provides that: Art. 1957. Contracts and stipulations, under any cloak or
device whatever, intended to circumvent the laws against usury shall be void. The
borrower may recover in accordance with the laws on usury. In usurious loans, the
entire obligation does not become void because of an agreement for 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.
Thus, the Court agrees with the factual findings and conclusion of the appellate
court, wherein it held that the stipulated penalties, liquidated damages and attorneys
fees, excessive, iniquitous and unconscionable. Accordingly, the 20% penalty on the
amount due and 10% of the proceeds of the foreclosure sale as attorneys fees would
suffice to compensate the appellee, especially so because there is no clear showing that
the appellee hired the services of counsel to effect the foreclosure; it engaged counsel
only when it was seeking the recovery of the alleged deficiency.
Attorneys fees as provided in penal clauses are in the nature of 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 of attorneys fees if the same is iniquitous or unconscionable.[46] Articles
1229 and 2227 of the New Civil Code provide that: Art. 1229. The judge 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. Art. 2227. Liquidated
damages, whether intended as an indemnity or a penalty, shall be equitably reduced if
they are iniquitous or unconscionable.
In the case at bar, the amount of Three Million One Hundred Eighty-Eight
Thousand Six Hundred Thirty Pesos and Seventy-Five Centavos (P3,188,630.75) for the
stipulated attorneys fees equivalent to twenty-five (25%) percent of the alleged amount
due, as of the date of the auction sale on June 23, 1980, is manifestly exorbitant and
unconscionable. Accordingly, we agree with the appellate court that a reduction of the
attorneys fees to ten (10%) percent is appropriate and reasonable under the facts and
circumstances of this case.
of the opening of a letter of credit. On June 4, 1981, private respondent again ordered
300,000 pieces of rattan poles at P9.65 per piece for a total price of P2,895,000.00, also
to be delivered within 60 days from the date of the opening of a letter of credit. The
specifications and provisions of both transactions, which served as their agreement, were
printed in two separate purchase orders.
In accordance with their agreement, NNRMC, on July 9, 1981, opened a letter of
credit with Philippine National Bank (PNB) in favor of DOMEL in the amount of
P1,997,000.00 to cover its order for 206,943 pieces of rattan poles. On July 13, 1981,
NNRMC opened another letter of credit in favor of DOMEL in the amount of
P1,236,000.00 to cover the price of 93,057 pieces of rattan poles and 22,000 bundles of
buri midribs.
In violation of their agreement, DOMEL failed to deliver the buri midribs and
rattan poles within the stipulated period. Thus, on September 23, 1981, DOMEL and
NNRMC agreed to restructure the latters purchase orders in a Memorandum of
Agreement. Under the agreement, NNRMC extended the expiry date of its two letters of
credit to November 5, 1981. It also reduced the quantity of the rattan poles from
300,000 to only 100,000 pieces while the quantity of buri midribs remained at 22,000
bundles. Further, DOMEL undertook to deliver the goods on or before October 31, 1981.
However, no deliveries were again made on the said date. Consequently, demands were
made by NNRMC on January 19, 1982 for the payment of damages, which demands were
ignored by DOMEL. Hence, NNRMC filed a complaint for damages before the Regional
Trial Court of Pasig. After trial, judgment was rendered in favor of plaintiff and against
defendant.
Both DOMEL and NNRMC assail the above-quoted decision in separate petitions
which have been consolidated before this Court. Based on the pleadings submitted by
the parties, this Court has resolved to give due course to the petition and decides the
same. DOMEL submits it has not breached its contractual obligation to NNRMC inasmuch
as it was the fault of the latter for not inspecting and examining the rattan poles as well
as the buri midribs already shipped by the suppliers and stored in the formers
warehouse. In short, DOMEL claims that NNRMC must first inspect the ordered items
before delivery could be made.
ISSUE:
Whether or not the decision of the Court of Appeals in CA-G.R. CV No. 08952
which modified the decision of the lower court granting private respondents prayer for
damages, was correct.
RULING:
While the Supreme Court did not agree with the Court of Appeals that the failure
of NNRMC to conduct the inspection mitigated DOMELs liability for liquidated damages,
nevertheless, it agreed in the reduction of the amount of liquidated damages to only
P150,000.00. The amount of P2,000.00 as penalty for every day of delay is excessive
and unconscionable.
Article 1229 of the Civil Code states, thus:The judge 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.
Article 2227 of the Civil Code likewise states, thus: Liquidated damages, whether
intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous
or unconscionable.
unspecified to induce faith and reliance. Absent the needed quantum of proof, We are of
the sense that, apart from the aforestated amount of liquidated damages and
reimbursement of the charges paid by appellee for the unutilized letters of credit, no
other damages can be granted.
parties, this Court has resolved to give due course to the petition and decides the same.
DOMEL submits it has not breached its contractual obligation to NNRMC inasmuch as it
was the fault of the latter for not inspecting and examining the rattan poles as well as
the buri midribs already shipped by the suppliers and stored in the formers warehouse.
In short, DOMEL claims that NNRMC must first inspect the ordered items before delivery
could be made.
ISSUE:
Whether or not the decision of the Court of Appeals in CA-G.R. CV No. 08952
which modified the decision of the lower court granting private respondents prayer for
damages, was correct.
RULING:
While the Supreme Court did not agree with the Court of Appeals that the failure
of NNRMC to conduct the inspection mitigated DOMELs liability for liquidated damages,
nevertheless, it agreed in the reduction of the amount of liquidated damages to only
P150,000.00. The amount of P2,000.00 as penalty for every day of delay is excessive
and unconscionable.
Article 1229 of the Civil Code states, thus:The judge 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.
Article 2227 of the Civil Code likewise states, thus: Liquidated damages, whether
intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous
or unconscionable.
In determining 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 defaulting debtor, which actual damages would include the interest
and penalties the creditor may have had to pay on its own from its funding source. In
this case, NNRMC was only able to prove that it incurred the amounts of P5,995.83 as
opening charges on the two Letters of Credit and an additional P1,911.85 as amendment
charges on the same Letters of Credit. Other than that, NNRMC failed to prove it had
suffered actual damages resulting from the nondelivery of the specified buri midribs and
rattan poles. In fact, what it allegedly suffered are what it calls Foregone Interest
Income and Foregone Profit from the two Letters of Credit. Such could not be
considered as actual damages.
MEDEL VS CA
G.R. No. 131622 November 27, 1998
FACTS:
The Medel spouses obtained several loans of which they were unable to pay in full. On
July 23, 1986, Servando and Leticia with the latter's husband, Dr. Rafael Medel,
consolidated all their previous unpaid loans totaling P440,000.00, and sought from
Veronica another loan in the amount of P60,000.00, bringing their indebtedness to a total
of P500,000.00, payable on August 23, 1986. They executed a promissory note indicating
payment for the balance.
On maturity of the loan, the borrowers failed to pay the indebtedness of
P500,000.00, plus interests and penalties, evidenced by the above-quoted promissory
note. On February 20, 1990, Veronica R. Gonzales, joined by her husband Danilo G.
Gonzales, filed with the Regional Trial Court of Bulacan, Branch 16, at Malolos, Bulacan, a
complaint for collection of the full amount of the loan including interests and other
charges.
ISSUE:
What is the interest that must be collected on the instant case?
RULING:
Basically, the issue revolves on the validity of the interest rate stipulated upon.
Thus, the question presented is whether or not the stipulated rate of interest at 5.5% per
month on the loan in the sum of P500,000.00, that plaintiffs extended to the defendants
is usurious. In other words, is the Usury Law still effective, or has it been repealed by
Central Bank Circular No. 905, adopted on December 22, 1982, pursuant to its powers
under P.D. No. 116, as amended by P.D. No. 1684?
We agree with petitioners that the stipulated rate of interest at 5.5% per month
on the P500,000.00 loan is excessive, iniquitous, unconscionable and exorbitant.
However, we can not consider the rate "usurious" because this Court has consistently
held that Circular No. 905 of 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".
Nevertheless, we find 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"), if not against the law. 20 The
stipulation is void. The courts shall reduce equitably liquidated damages, whether
intended as an indemnity or a penalty if they are iniquitous or unconscionable.
Consequently, the Court of Appeals erred in upholding the stipulation of
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.
Monetary Board may not tread on forbidden grounds. It cannot rewrite other laws. That
function is vested solely with the legislative authority.
It is axiomatic in legal
hermeneutics that statutes should be construed as a whole and not as a series of
disconnected articles and phrases. In the absence of a clear contrary intention, words
and phrases in statutes should not be interpreted in isolation from one another. A word
or phrase in a statute is always used in association with other words or phrases and its
meaning may thus be modified or restricted by the latter.
The instant petition is without merit, the same is DISMISSED with costs against
petitioners.
MEANING OF PAYMENT / PERFORMANCE (ART. 1232-1261, CC)
SONNY LO, petitioner, vs. KJS ECO-FORMWORK SYSTEM PHIL., INC., respondent
2003 Oct 8
G.R. No. 149420
413 SCRA 182
FACTS:
Respondent KJS ECO-FORMWORK System Phil., Inc. is a corporation engaged in
the sale of steel scaffoldings, while petitioner Sonny L. Lo, doing business under the
name and style Sans Enterprises, is a building contractor. On February 22, 1990,
petitioner ordered scaffolding equipments from respondent worth P540,425.80. He paid
a downpayment in the amount of P150,000.00. The balance was made payable in ten
monthly installments.
Respondent delivered the scaffoldings to petitioner. Petitioner was able to pay
the first two monthly installments.
His business, however, encountered financial
difficulties 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 of Assignment,
whereby petitioner assigned to respondent his receivables in the amount of P335,462.14
from Jomero Realty Corporation.
However, when respondent tried to collect the said credit from Jomero Realty
Corporation, the latter refused to honor the Deed of Assignment because it claimed that
petitioner was also indebted to it. On November 26, 1990, respondent sent a letter to
petitioner demanding payment of his obligation, but petitioner refused to pay claiming
that his obligation had been extinguished when they executed the Deed of Assignment.
Consequently, on January 10, 1991, respondent filed an action for recovery of a
sum of money against the petitioner before the Regional Trial Court of Makati, Branch
147, which was docketed as Civil Case No. 91-074. During the trial, petitioner argued
that his obligation was extinguished with the execution of the Deed of Assignment of
credit. Respondent, for its part, presented the testimony of its employee, Almeda
Baaga, who testified that Jomero Realty refused to honor the assignment of credit
because it claimed that petitioner had an outstanding indebtedness to it.
On August 25, 1994, the trial court rendered a decision dismissing the complaint
on the ground that the assignment of credit extinguished the obligation. Respondent
appealed the decision to the Court of Appeals. On April 19, 2001, the appellate court
rendered a decision reversing the appealed Decision and enters judgment ordering
defendant-appellee Sonny Lo to pay the plaintiff-appellant KJS ECO-FORMWORK SYSTEM
PHILIPPINES, INC. Three Hundred Thirty Five Thousand Four Hundred Sixty-Two and
14/100 (P335,462.14) with legal interest of 6% per annum from January 10, 1991 (filing
of the Complaint) until fully paid and attorneys fees equivalent to 10% of the amount
due and costs of the suit.
In finding that the Deed of Assignment did not extinguish the obligation of the
petitioner to the respondent, the Court of Appeals held that (1) petitioner failed to
comply with his warranty under the Deed; (2) the object of the Deed did not exist at the
time of the transaction, rendering it void pursuant to Article 1409 of the Civil Code; and
(3) petitioner violated the terms of the Deed of Assignment when he failed to execute
and do all acts and deeds as shall be necessary to effectually enable the respondent to
recover the collectibles.
Petitioner filed a motion for reconsideration of the said decision, which was
denied by the Court of Appeals. Hence, this petition for review.
ISSUE:
Whether or not the Court Of Appeals erred in holding that the deed of assignment
did not extinguish petitioners obligation on the wrong notion that petitioner failed to
comply with his warranty thereunder.
RULING:
The petition is without merit.
An assignment of credit is an agreement by virtue of which the owner of a credit,
known as the assignor, by a legal cause, such as sale, dacion en pago, exchange or
donation, and without the consent of the debtor, transfers his credit and accessory rights
to another, known as the assignee, who acquires the power to enforce it to the same
extent as the assignor could enforce it against the debtor.
Corollary thereto, in dacion en pago, as a special mode of payment, the debtor
offers another thing to the creditor who accepts it as equivalent of payment of an
outstanding debt. In order that there be a valid dation in payment, the following are the
requisites: (1) There must be the performance of the prestation in lieu of payment
(animo solvendi) which may consist in the delivery of a corporeal thing or a real right or a
credit against the third person; (2) There must be some difference 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 of the performance of a prestation different from that due. The
undertaking really partakes in one sense of the nature of sale, that is, the creditor is
really buying the thing or property of the debtor, payment for which is to be charged
against the debtors debt. As such, the vendor in good faith shall be responsible, for the
existence and legality of the credit at the time of the sale but not for the solvency of the
debtor, in specified circumstances.
Hence, it may well be that the assignment of credit, which is in the nature of a
sale of personal property, produced the effects of a dation in payment which may
extinguish the obligation. However, as in any other contract of sale, the vendor or
assignor is bound by certain warranties. More specifically, the first paragraph of Article
1628 of the Civil Code provides:
The vendor in good faith shall be responsible for the existence and legality of the credit
at the time of the sale, unless it should have been sold as doubtful; but not for the
solvency of the debtor, unless it has been so expressly stipulated or unless the
insolvency was prior to the sale and of common knowledge.
From the above provision, petitioner, as vendor or assignor, is bound to warrant
the existence and legality of the credit at the time of 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. In other words, respondent alleged the non-existence of
the credit and asserted its claim to petitioners warranty under the assignment.
Therefore, it behooved on petitioner to make good its warranty and paid the obligation.
Furthermore, the Court found that petitioner breached his obligation under the
Deed of Assignment, to wit:
And the ASSIGNOR further agrees and stipulates as aforesaid that the said ASSIGNOR,
his heirs, executors, administrators, or assigns, shall and will at times hereafter, at the
request of said ASSIGNEE, its successors or assigns, at his cost and expense, execute
and do all such further acts and deeds as shall be reasonably necessary to effectually
enable said ASSIGNEE to recover whatever collectibles said ASSIGNOR has in accordance
with the true intent and meaning of these presents.
The decision of the Court of Appeals was affirmed with modification that upon
finality of the Decision, the rate of legal interest shall be 12% per annum, inasmuch as
the obligation shall thereafter become equivalent to a forbearance of credit. The award
of attorneys fees is DELETED for lack of evidentiary basis.
REQUISITES OF PAYMENT/PERFORMANCE
The trial court rendered judgment ordering petitioner and Tagamolila to pay
private respondent jointly and severally the amount of P32,480.00 with legal interest,
damages and attorney's fees. Both petitioner and Tagamolila appealed the case to the
Court of Appeals. However, the appellate court dismissed Tagamolila's appeal for failure
to pay the docket fee within the reglementary period. The appellate court subsequently
affirmed the trial courts decision.
2.
3.
4.
5.
6.
ISSUE:
Whether or not payment was made to Loreto Tan.
RULING:
There is no question that no payment had ever been made to private respondent
as the check was never delivered to him. When the court ordered petitioner to pay
private respondent the amount of P32,480.00, it had the obligation to deliver the same
to him. Under Art. 1233 of 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 may be.
The burden of proof of such payment lies with the debtor. In the instant case,
neither the SPA nor the check issued by petitioner was ever presented in court. The
testimonies of petitioner's own witnesses regarding the check were conflicting.
Tagamolila testified that the check was issued to
the order of "Sonia Gonzaga as attorney-in-fact of Loreto Tan," while Elvira Tibon,
assistant cashier of PNB, stated that the check was issued to the order of "Loreto Tan."
Furthermore, contrary to petitioner's contention that all that is needed to be
proved is the existence of the SPA, it is also necessary for evidence to be presented
regarding the nature and extent of the alleged powers and authority granted to Sonia
Gonzaga; more specifically, to determine whether the document indeed authorized her
to receive payment intended for private respondent.
Considering that the contents of the SPA are also in issue here, the best evidence
rule applies. Hence, only the original document, which has not been presented at all, is
the best evidence of the fact as to whether or not private respondent indeed authorized
Sonia Gonzaga to receive the check from petitioner. In the absence of such document,
petitioner's arguments regarding due payment must fail.
Decision affirmed with the modification that the award by the trial court of
P5,000.00 as attorney's fees is reinstated.
OBLIGATIONS TO PAY MONEY: EFFECTS OF INFLATION
1.
FACTS:
CITIBANK
vs. SABENIANO
G.R.No. 156132, October 16, 2006
ALBERT R. PADILLA
VS. SPOUSES FLORESCO PAREDES and ADELINA PAREDES, and THE
HONORABLE COURT OF APPEALS
G.R. No. 124874
March 17, 2000
328 SCRA 434
FACTS:
On October 20, 1988, petitioner Albert R. Padilla and private respondents Floresco
and Adelina Paredes entered into a contract to sell involving a parcel of land in San Juan,
La Union. At that time, the land was untitled although private respondents were paying
taxes thereon. Under the contract, petitioner undertook to secure title to the property in
private respondents' names. Of the P312,840.00 purchase price, petitioner was to pay a
downpayment of P50,000.00 upon signing of the contract, and the balance was to be
paid within ten days from the issuance of a court order directing issuance of a decree of
registration for the property.
On December 27, 1989, the court ordered the issuance of a decree of land
registration for the subject property. The property was titled in the name of private
respondent Adelina Paredes. Private respondents then demanded payment of the
balance of the purchase price.
Petitioner then made several payments to private respondents, some even before
the court issued an order for the issuance of a decree of registration and they also
offered to pay the land through a check. Still, petitioner failed to pay the full purchase
price even after the expiration of the period set. In a letter dated February 14, 1990,
private respondents, through counsel, demanded payment of the remaining balance,
with interest and attorney's fees, within five days from receipt of the letter. Otherwise,
private respondents stated they would consider the contract rescinded.
On February 28, 1990, petitioner made a payment of P100,000.00 to private
respondents, still insufficient to cover the full purchase price. Shortly thereafter, in a
letter dated April 17, 1990 private respondents offered to sell to petitioner one-half of
the property for all the payments the latter had made, instead of rescinding the contract.
If petitioner did not agree with the proposal, private respondents said they would take
steps to enforce the automatic rescission of the contract. Petitioner did not accept
private respondents' proposal. Instead, in a letter dated May 2, 1990, he offered to pay
the balance in full for the entire property, plus interest and attorney's fees. Private
respondents refused the offer.
On May 14, 1990, petitioner instituted an action for specific performance against
private respondents, alleging that he had already substantially complied with his
obligation under the contract to sell. He also averred that he had already spent
P190,000.00 in obtaining title to the property, subdividing it, and improving its right-of-
way. The lower court decided in favor of the petitioners stating that the breach
committed was only casual and slight but the Court of Appeals reversed the ruling and
favored respondents rescission of the contract to sell.
ISSUE:
Whether or not the payment made by petitioner is one which is contemplated on
the contract.
RULING:
Petitioners offer 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 of payment is not sufficient.
Consignation is essential to extinguish petitioner's obligation to pay the purchase price.
The Supreme Court also affirmed the decision of the Court of Appeals where the
respondents have the right to rescind the contract on the ground that there is failure on
the part of the petitioners to pay the balance within ten days upon the conveyance of the
Court of the Title of Land to respondents. Thus, private respondents are under no
obligation, and may not be compelled, to convey title to petitioner and receive the full
purchase price.
The ruling applies the statutory provisions which lay down the rule that a check is
not legal tender and that a creditor may validly refuse payment by check, whether it be a
managers check, cashiers or personal check. The decision of the court of Appeals is
affirmed.
OBLIGATIONS TO PAY MONEY
DEVELOPMENT BANK OF THE PHILIPPINES
v. COURT OF APEEALS
G.R.No. 138703,June 30, 2006
FACTS:
In March 1968, DBP granted to private respondents an industrial loan in the
amount of P2,500,000 P500,000 n cash and P2,000,000 in DBP Progress Bank. It was
evidenced by a promissory note and secured by a mortgage executed by respondents
over their present and future properties. Another loan was granted by DBP in the for of a
5-year revolving guarantee to P1,700,000. In 1975, the outstanding accounts wth DBP
was restructured in view of failure to pay. Amounting to P4,655,992.35 were consolidated
into a single account. On the other hand, all accrued interest and charges due amounting
to P3,074,672.21 were denominated as Notes Taken for Interests and evidenced by a
separate promissory note. For failure to comply with its obligation, DBP initiated
foreclosure proceedings upon its computation that respondents loans were arrears by
P62,954,473.68. Respondents contended that the collection was unconscionable if not
unlawful or usurious . RTC, as affirmed by the CA, ruled in favor of the respondents.
ISSUE:
Whether the prestation to collect by the DBP is unconscionable or usurious
FACTS:
Respondent Cabilzo was one of the Metrobanks client who maintained a current
account. On November 12, 199, Cabilzo issued a Metrobank check payable to cash in
the amount of P1,000 and was paid to a certain Mr. Marquez. The check was oresented to
Westmont Bank or payment and in turn indorsed to etrobank for appropriate clearing. It
was discovered that the amount withdrawn wa P91,000, thus, the check was altered.
Cabilzo re-credit the amount of P91,000 to his account but Metrobank refused to comply
despite demands. RTC ordered Metrobank to pay the sum of P90,000 to Cabilzo. Court of
Appeals affirmed the decision with modification.
ISSUE:
Whether holding Metrobank, as drawee bank, liable for the alternations on the
subject check bearing the authentic signature of the drawer thereof
RULING:
The degree of diligence in the exercise of his tasks and the performance of his
duties have been faithfully complied with by Cabilzo. It is obvious that Metrobank was
remiss in the duty and violated that fiduciary relationship with its clients as it appeared
that there are material alterations on the check that are visble to the naked eye but the
bank failed to detect such.
Petition is denied. Court of Appeals decision is affirmed with modification that
exemplary damages in the amount of P50,000 be awarded.
OBLIGATIONS TO PAY MONEY: EFFECTS OF INFLATION
1. ALMEDA VS. BATHALA MKTNG., 542 S 470
2. PCI VS. NG SHEUNG NGOR, 541 S 223
RULING:
It cannot be determined whether DBP in fact applied an interest rate higher than
what is prescribed under the law. Assuming it did exceed 12% in addition to the other
penalties stipulated in the note, this should be stricken out for being usurious.
The petition is partly granted. Decision of the court of Appeals is reversed and
set aside. The case is remanded o the trial court for the determination of the total
amount of the respondents obligation based on the promissory notes, according to the
interest rate agreed upon by the parties on the interest rate of 12% per annum,
whichever is lower.
INSTRUMENTS/EVIDENCES OF CREDIT
METROBANK v. CABLZO
G.R. No. 154469
December 6, 2006
Respondent refused to pay the VAT and adjusted rentals as demanded by the petitioners
but continually paid the stipulated amount. RTC ruled in favor of the respondent and
declared that plaintiff is not liable for the payment of VAT and the adjustment rental,
there being no extraordinary inflation or devaluation. CA affirmed the decision deleting
the amounts representing 10% VAT and rental adjustment.
ISSUE:
Whether the amount of rentals due the petitioners should be adjusted by reason
of extraordinary inflation or devaluation
was beyond the contemplation of the parties at the time of the obligation. Deflation is an
inverse situation.
Despite the devaluation of the peso, BSP never declared a situation of
extraordinary inflation. Respondents should pay their dollar denominated loans at the
exchange rate fixed by the BSP on the date of maturity.
Decision of lower courts are reversed and set aside.
RULING:
Petitioners are stopped from shifting to respondent the burden of paying the VAT.
6th Condition states that respondent can only be held liable for new taxes imposed after
the effectivity of the contract of lease, after 1977, VAT cannot be considered a new tax.
Neither can petitioners legitimately demand rental adjustment because of extraordinary
inflation or devaluation. Absent an official pronouncement or declaration by competent
authorities of its existence, its effects are not to be applied.
Petition is denied. CA decision is affirmed.
OBLIGATIONS TO PAY MONEY: EFFECTS OF INFLATION
EQUITABLE PCI BANK, YU and APAS
v. NG SHEUNG NGOR
G.R.NO. 171545, December 19, 2007
FACTS:
On October 7, 2001, respondents Ngor and Go filed an action for
amendment and/or reformation of documents and contracts against Equitable and its
employees. They claimed that they were induced by the bank to avail of its peso and
dollar credit facilities by offering low interests so they accepted and signed Equitables
proposal. They alleged that they were unaware that the documents contained escalation
clauses granting Equitable authority to increase interest without their consent. These
were rebutted by the bank. RTC ordered the use of the 1996 dollar exchange rate in
computing respondents dollar-denominated loans. CA granted the Banks application for
injunction but the properties were sold to public auction.
ISSUE:
Whether or not there was an extraordinary deflation
RULING:
Extraordinary inflation exists when there is an unusual decrease in the
purchasing power of currency and such decrease could not be reasonably foreseen or
SIMPLICIO PALANCA
VS. ULYSSIS GUIDES joined by her husband LORENZO GUIDES
February 28, 2005
452 SCRA 461
FACTS:
On August 23, 1983, Simplicio Palanca executed a Contract to Sell a parcel of land
on installment with a certain Josefa Jopson for P11, 250.00. Jopson paid the petitioner in
the amount of P1, 650 as her down payment, leaving a balance of P9, 600.00. Sometime
in December 1983, Jopson assigned and transferred all her rights and interests over the
property in question in favor of the respondent Ulyssis Guides.
In the deed of transfer, respondent undertook to assume the balance of Jopsons
account and to pay the same in accordance with the terms and conditions of the
Contract to Sell. After reimbursing Jopson P1,650.00, respondent acquired possession of
the lot and paid petitioner the stipulated amortizations which were in turn acknowledged
by petitioner through receipts issued in the name of respondent. Believing that she had
fully paid the purchase price of the lot, respondent verified the status of the lot with the
Register of Deeds, only to find out that title thereto was not in the name of the petitioner
as it was covered by Transfer Certificate of Title No. 105742 issued on 26 September
1978 in the name of a certain Carissa T. de Leon. Respondent went to petitioners office
to secure the title to the lot, but petitioner informed her that she could not as she still
had unpaid accounts. Thereafter, respondent, through a lawyer, sent a letter to
petitioner demanding compliance with his obligation and the release of the title in her
name.
As petitioner did not heed her demands, respondent, joined by her husband, filed
a Complaint for specific performance with damages. Petitioner sought the dismissal of
the complaint on the ground of respondents alleged failure to comply with the
mandatory requirement of Presidential Decree (P.D.) No. 1508. Respondent alleged that
she paid petitioner P14,880.00, which not only fully settled her obligation to him, but in
fact overpaid it by P3,620.00. In addition, she claimed that petitioner charged her
devaluation charges and illegal interest. At the pre-trial in 1989, both parties admitted
that Jopson assigned her rights over the property in favor of respondent and respondent
PCIB and MBC were joint bidders in a foreclosure sale held of assorted mining
machinery and equipment previously mortgaged to them by Philippine Iron Mines. Atlas
agreed to purchase some of these properties and the sale was evidenced by a Deed of
Sale with a downpayment of P12,000,000 and the balance of P18,000,000 payable in 6
monthly installments. In compliance with the contract, Atlas issued HongKong and
shanghai Bank check amounting to P12,000,000. Atlas paid to NAMAWU the amount of
P4,298,307.77 in compliance with the writ of garnishment issued against Atlas to satisfy
the judgment in favor of NAMAWU. Atlas alleged that there was overpayment, hence the
suit against PCIB to obtain reimbursement. PCIB contended that Atlas still owed
P908,398.75 because NAAWU had been partially paid in the amount of P601,260.00. RTC
ruled against Atlas to pay P908,398.75 to PCIB. CA reversed the decision.
ISSUE:
Whether atlas had complied with its obligation to PCIB
RULING:
While the original amount sought to be garnished was P4,298,307,77, the partial
payment of P601,260 naturally reduced it to P3,697,047.77 Atlas overpaid NAMAWU,
thus the remedy if Atlas would be to proceed against NAAWU nut not against PCIB in
relation to article 1236 of the Civil Code
The petition is partly granted.CA decision is reversed and set aside and in lieu
thereof Atlas is ordered to pay PCIB the sum of P146,058.96, with the legal interest
commencing from the time of first demand on August 22, 1985.
agreed to sell and install various aluminum materials in Lagons commercial building in
Tacurong, Sultan Kudarat. Upon execution of the contracts, Lagon paid HOOVEN
P48,000.00 in advance.
Lagon, in his answer, denied liability and averred that HOOVEN was the party
guilty of breach of contract by failing to deliver and install some of the materials
specified in the proposals; that as a consequence he was compelled to procure the
undelivered materials from other sources; that as regards the materials duly delivered
and installed by HOOVEN, they were fully paid. He counterclaimed for actual, moral,
exemplary, temperate and nominal damages, as well as for attorneys fees and expenses
of litigation.
ISSUE:
Whether or not all the materials specified in the contracts had been delivered and
installed by respondent in petitioners commercial building in Tacurong, Sultan Kudarat.
RULING:
Firstly, the quantity of materials and the amounts sated in the delivery receipts do
not tally with those in the invoices covering them, notwithstanding that, according to
HOOVEN OIC Alberto Villanueva, the invoices were based merely on the delivery receipts.
Secondly, the total value of the materials as reflected in all the invoices is P117,
329.00 while under the delivery receipts it is only P112, 870.50, or a difference of
P4,458.00
Even more strange is the fact that HOOVEN instituted the present action for
collection of sum of money against Lagon only on 24 February 1987, or more than five
(5) years after the supposed completion of the project. Indeed, it is contrary to common
experience that a creditor would take its own sweet time in collecting its credit, more so
in this case when the amount involved is not miniscule but substantial.
All the delivery receipts did not appear to have been signed by petitioner or his
duly authorized representative acknowledging receipt of the materials listed therein. A
closer examination of the receipts clearly showed that the deliveries were made to a
certain Jose Rubin, claimed to be petitioners driver, Armando Lagon, and a certain
bookkeeper. Unfortunately for HOOVEN, the identities of these persons were never been
established, and there is no way of determining now whether they were indeed
authorized representatives of petitioner.
WHEREFORE, the assailed Decision of the Court of Appeals dated 28 April 1997 is
MODIFIED. Petitioner Jose V. Lagon is ordered to pay respondent Hooven Comalco
Industries, Inc., P6, 377.66 representing the value of the unpaid materials admittedly
delivered to him. On the other hand, respondent is ordered to pay petitioner P50,000.00
as moral damages, P30,000.00 as attorneys fees and P46,554.50 as actual damages
and litigation expenses.
to collect payment based on the promissory note, and disregarded its option under the
Holdout Agreement. Therefore, its demand was in the correct order.
Regarding the second issue, BPI was the debtor and Eastern was the creditor with
respect to the joint checking account. Therefore, BPI was obliged to return the amount of
the said account only to the creditor. When it allowed the withdrawal of the balance of
the account by the heirs of Velasco, it made the payment to the wrong party. The law
provides that payment made by the debtor to the wrong party does not extinguish its
obligation to the creditor who is without fault or negligence. Therefore, BPI was still
liable to the true creditor, Eastern.
RULING:
Respondents assigning complainant to its various projects did not make
complainant a project worker.
As found by the Labor Arbiter, it appears that
complainant was employed by respondent as fabricator and or projects as helper
electrician, stockman and timekeeper. Simply put, complainant was a regular nonproject worker.
Private respondents employment status was established by the Certification of
Employment dated April 10, 1989 issued by petitioner which certified that private
respondent is a bonafide employee of the petitioner from June 30, 1976 up to the time
the certification was issued on April 10, 1989. The same certificate of employment
showed that private respondents exposure to their field of operation was as fabricator,
helper/electrician, stockman/timekeeper.
This proves that private respondent was
regularly and continuously employed by petitioner in various job assignments from 1976
to 1989, for a total of 13 years. The alleged gap in employment service cited by
petitioner does not defeat private respondents regular status as he was rehired for
many more projects without interruption and performed functions which are vital,
necessary and indispensable to the usual business of petitioner.
Petitioner failed to present such employment contract for a specific project signed
by private respondent that would show that his employment with the petitioner was for
the duration of a particular project.
Moreover, notwithstanding petitioners claim in its reply that in taking interest in
the welfare of its workers, petitioner would strive to provide them with more continuous
work by successively employing its workers, in this case, private respondent, petitioner
failed to present any report of termination. Petitioner should have submitted or filed as
many reports of termination as there were construction projects actually finished,
considering that private respondent had been hired since 1976. The failure of petitioner
to submit reports of termination supports the claim of private respondent that he was
indeed a regular employee.
The Court finds no grave abuse of discretion committed by NLRC in finding that
private respondent was not a project employee.
Private respondent clearly specified in his affidavit the specific dates in which he
was not paid overtime pay, that is, from the period March 16, 1989 to April 3, 1989
amounting to P765.63, project allowance from April 16, 1989 to July 31, 1989 in the total
amount of P255.00, wage adjustment for the period from August 1, 1989 to August 14,
1989 in the amount of P256.50 and the proportionate 13th month pay for the period
covering January to May 1988, November-December 1988, and from January to August
1989. This same affidavit was confirmed by private respondent in one of the scheduled
hearings where he moved that he be allowed to present his evidence ex-parte for failure
of petitioner or any of his representative to appear thereat. On the other hand,
petitioner submitted its unverified Comment to private respondents complaint stating
that he had already satisfied the unpaid wages and 13th month pay claimed by private
respondent, but this was not considered by the Labor Arbiter for being unverified.
Petitioner failed to rebut the claims of private respondent. It failed to show proof
by means of payroll or other evidence to disprove the claim of private respondent.
Petitioner was given the opportunity to cross-examine private respondent yet petitioner
forfeited such chance when it did not attend the hearing, and failed to rebut the claims
of private respondent.
However, the award of moral and exemplary damages must be deleted for being
devoid of legal basis. Moral and exemplary damages are recoverable only where the
dismissal of an employee was attended by bad faith or fraud, or constituted an act
oppressive to labor, or was done in a manner contrary to morals, good customs or public
policy. The person claiming moral damages must prove the existence of bad faith by
clear and convincing evidence for the law always presumes good faith. It is not enough
that one merely suffered sleepless nights, mental anguish, serious anxiety as the result
of the actuations of the other party. Invariably, such action must be shown to have been
willfully done in bad faith or with ill-motive, and bad faith or ill motive under the law
cannot be presumed but must be established with clear and convincing evidence.
Private respondent predicated his claim for such damages on his own allegations of
sleepless nights and mental anguish, without establishing bad faith, fraud or ill motive as
legal basis therefor.
Private respondent not being entitled to award of moral damages, an award of
exemplary damages is likewise baseless. Where the award of moral and exemplary
damages is eliminated, so must the award for attorneys fees be deleted.
Private
respondent has not shown that he is entitled thereto pursuant to Art. 2208 of the Civil
Code.
WHEREFORE, the challenged resolutions of the respondent NLRC are hereby
AFFIRMED with the MODIFICATION that the awards of moral and exemplary damages and
attorneys fees are DELETED.
1.
2.
3.
4.
FACTS:
barangay for the collection of P773,000.00. There was no settlement. RTC favored
Agrifina. Court of Appeals affirmed the decision with modification ordering
defendant to pay the balance of total indebtedness in the amount of P51,341,00
plus 6% per month.
ISSUE:
RULING:
Substitution of the person of the debtor ay be affected by delegacion.
Meaning, the debtor offers, the creditor accepts a third person who consent of the
substitution and assumes the obligation. It is necessary that the old debtor be
released fro the obligation and the third person or new debtor takes his place in
the relation . Without such release, there is no novation. Court of Appeals
correctly found that the respondents obligation to pay the balance of their
account with petitioner was extinguished pro tanto by the deeds of credit. CA
decision is affirmed with the modification that the principal amount of the
respondents is P33,841.
SPECIAL FORMS OF PAYMENT: DATION EN PAGO/ DATION IN PAYMENT
secure the payment of a loan obtained by Asiancars from the bank. Meeting financial
difficulties and incurring an outstanding balance on the loan, Asiancars conveyed
ownership of the building on the leased premises to MBTC, by way of "dacion en pago."
The building was valued at P980,000 and the amount was applied as partial payment for
the loan. There still remained a balance of P2,942,449.66, which Asiancars failed to pay.
Eventually, MBTC extrajudicially foreclosed the mortgage.
A public auction was held on February 4, 1981. MBTC was the highest bidder for
P1,067,344.35. A certificate of sale was issued and was registered with the Register of
Deeds on February 23, 1981. Meanwhile, Graciano Jayme died, survived by his widow
Mamerta and their children. As a result of the foreclosure, Gracianos heirs filed a civil
complaint, in January of 1982, for Annulment of Contract with Damages with Prayer for
Issuance of Preliminary Injunction, against respondent Asiancars, its officers and
incorporators and MBTC. Later, in 1999, Mamerta Jayme also passed away.
The trial court ruled that the REM is valid and binding upon the Jaymes. The CA
affirmed with modifications. Both the trial and appellate courts found that no fraud
attended the execution of the deed of mortgage. The Motion for Reconsideration was
denied.
ISSUE:
Whether or not the dacion en pago by Asiancars in favor of MBTC is valid and
binding despite the stipulation in the lease contract that ownership of the building will
vest on the Jaymes at the termination of the lease.
RULING:
YES. The alienation of the building by Asiancars in favor of MBTC for the partial
satisfaction of its indebtedness is valid.
The ownership of the building had been effectively in the name of the lesseemortgagor (Asiancars), though with the provision that said ownership be transferred to
the Jaymes upon termination of the lease or the voluntary surrender of the premises.
The lease was constituted on January 8, 1973 and was to expire 20 years thereafter, or
on January 8, 1993. The alienation via dacion en pago was made by Asiancars to MBTC
on December 18, 1980, during the subsistence of the lease. At this point, the mortgagor,
Asiancars, could validly exercise rights of ownership, including the right to alienate it, as
it did to MBTC.
Dacion en pago is the delivery and transmission of ownership of a thing by the
debtor to the creditor as an accepted equivalent of the performance of the obligation. It
is a special mode of payment where the debtor offers another thing to the creditor who
accepts it as equivalent of payment of an outstanding debt. The undertaking really
partakes in one sense of the nature of sale, that is the creditor is really buying the thing
or property of the debtor, payment for which is to be charged against
the debtors debt. As such, the essential elements of a contract of sale, namely,
consent, object certain, and cause or consideration must be present. In its modern
concept, what actually takes place in dacion en pago is an objective novation of the
obligation where the thing offered as an accepted equivalent of the performance of an
obligation is considered as the object of the contract of 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 effect of totally extinguishing the debt or obligation.
Private respondent MBTC is ordered to pay petitioners rentals in the total amount of
P602,083.33, with six (6) percent interest per annum until fully paid.
per annum on the unpaid and overdue account of respondent from June 1, 1980 to July
31, 1981.
equivalent to the obligation. In the instant case, the then Intermediate Appellate Court
failed to take into account the express recitals of the Deed of Assignment.
Petitioner (defendant in the trial court) filed its answer, reiterating that the
amount not returned represented interest and service charges on the unpaid and
overdue account at the rate of 18% per annum. It was further alleged that the collection
of said interest and service charges is sanctioned by law, and is in accordance with the
terms and conditions of the sale of petroleum products to respondent, which was made
with the conformity of said private respondent who had accepted the validity of said
interest and service charges.
On November 7, 1983, the trial court rendered its decision dismissing the
complaint, as well as the counterclaim filed by defendant therein. Private respondent
(plaintiff) appealed to the Intermediate Appellate Court (IAC). On August 27, 1985, a
decision was rendered by the said appellate court reversing the decision of the trial
court, and ordering petitioner to return the amount of P510,550.63 to private
respondent.
ISSUE:
Whether or not there is a valid dation in payment in this case.
Hence, it could easily be seen that the Deed of Assignment speaks of three (3)
obligations (1) the outstanding obligation of P4,072,682.13 as of June 30, 1980; (2) the
applicable interest charges on overdue accounts; and (3) the other avturbo fuel lifting
and deliveries that assignor (private respondent) may from time to time receive from
assignee (Petitioner). As aptly argued by petitioner, if it were the intention of the parties
to limit or fix respondent's obligation to P4,072.682.13, they should have so stated and
there would have been no need for them to qualify the statement of said amount with
the clause "as of June 30, 1980 plus any applicable interest charges on overdue account"
and the clause "and other avturbo fuel lifting and deliveries that ASSIGNOR may from
time to time receive from the ASSIGNEE".
RULING:
The Supreme Court ruled that the Deed of 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 terms of the Deed of Assignment being clear, the literal meaning of its
stipulations should control. In the construction of an instrument where there are several
provisions or particulars, such a construction is, if possible, to be adopted as will give
effect to all.
The then Intermediate Appellate Court ruled that the three (3) requisites of dacion
en pago are all present in the instant case, and concluded that the Deed of Assignment
of July 31, 1980) constitutes a dacion in payment provided for in Article 1245 of the Civil
Code which has the effect of extinguishing the obligation, thus supporting the claim of
private respondent for the return of the amount retained by petitioner.
Likewise, the then Intermediate Appellate Court failed to take into consideration
the subsequent acts of the parties which clearly show that they did not intend the Deed
of Assignment to totally extinguish the obligation: (1) After the execution of the Deed of
Assignment on July 31, 1980, petitioner continued to charge respondent with interest on
its overdue account up to January 31, 1981. This was pursuant to the Deed of
Assignment which provides for respondent's obligation for "applicable interest charges
on overdue account". The charges for interest were made every month and not once did
respondent question or take exception to the interest; and (2) In its letter of February 16,
1981, respondent addressed the following request to petitioner:
The Supreme Court, speaking of the concept of dation in payment, in the case of
Lopez vs. Court of Appeals, among others, stated: "'The dation in payment extinguishes
the obligation to the extent of the value of 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 of the obligation. The obligation is totally extinguished only when
the parties, by agreement, express or implied, or by their silence, consider the thing as
At the core of the present controversy are two parcels of land measuring a total
of 2,147 square meters, with an office building constructed thereon. Petitioner acquired
the subject parcels of land in an auction sale on November 9, 1995 for P20,170,000 from
the Land Bank of the Philippines (Land Bank). Private respondent National Onion
Growers Cooperative Marketing Association, Inc., an agricultural cooperative, was the
occupant of the disputed parcels of land under a subsisting contract of lease with Land
Bank. The lease was valid until December 31, 1995. Upon the expiration of the lease
contract, petitioner demanded that private respondent vacate the leased premises and
surrender its possession to him. Private respondent refused on the ground that it was, at
the time, contesting petitioners acquisition of the parcels of land in question in an action
for annulment of sale, redemption and damages.
Petitioner filed an action for ejectment before the MTC. He asked, inter alia, for
the imposition of the contractually stipulated penalty of P5,000 per day of delay in
surrendering the possession of the property to him. On September 3, 1996, the trial
court decided the case in favor of petitioner. On appeal to the RTC, the MTC decision was
affirmed in toto. The CA rendered its assailed decision affirming the decision of the trial
court, with the modification that the penalty imposed upon private respondent for the
delay in turning over the leased property to petitioner was reduced from P 5,000 to P
1000 per day.
ISSUE:
Whether or not the Court of Appeals erred in reducing the penalty awarded by the
trial court, the same having been stipulated by the parties.
RULING:
No. Generally, courts are not at liberty to ignore the freedom of the parties to
agree on such terms and conditions as they see fit 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 if it is iniquitous or unconscionable,
or if the principal obligation has been partly or irregularly complied with. This power of
the courts is explicitly sanctioned by Article 1229 of 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 if there has been no
performance, the penalty may also be reduced by the courts if it is iniquitous or
unconscionable.
The question of whether a penalty is reasonable or iniquitous is addressed to the
sound discretion of the court and depends on several factors, including, but not limited
to, the following: the type, extent and purpose of the penalty, the nature of the
obligation, the mode of breach and its consequences, the supervening realities, the
standing and relationship of the parties.
In this case, the stipulated penalty was reduced by the appellate court for being
unconscionable and iniquitous. Petition denied; CA decision affirmed.
APPLICATION OF PAYMENTS
1.
2.
3.
4.
FACTS:
Respondents are engaged in the large-scale business of buying broiler
eggs, hatching and selling them and egg by-products. For incubation and hatchings,
respondents availed of the hatching services of ASJ Corp. They agreed o service fees of
80 centavos per egg. Service fees were paid upon release. Fro consecutive times the
respondents failed to pay the fee until such time that ASJ retained the chicks demanding
full payment from the respondent. ASJ received P15,000 for partial payment but the
chicks were still not released. RTC ruling, which was affirmed by the Court of Appeals
holding that ASJ Corp and Antonio San Juan be solidarily liable to the respondents.
ISSUE:
Was petitioners retention of the chicks and by-products, on account of
respondents failure to pay the corresponding fees unjustified?
RULING:
Respondents offer to partially satisfy their accounts is not enough to
extinguish their obligation. Respondents cannot substitute or apply as their payment the
value of the chicks and by-products they expect to derive because it is necessary that all
the debts be paid for the same kind. The petition is partly granted. The Court of Appeals
decision is modified.
APPLICATION OF PAYMENTS
PACULDO VS. REGALADO
345 SCRA 134
FACTS:
On December 27, 1990, petitioner Nereo Paculdo and respondent Bonifacio
Regalado entered into a contract of lease over a parcel of land with a wet market
building, located at Fairview Park, Quezon City. The contract was for twenty five (25)
years, commencing on January 1, 1991 and ending on December 27, 2015. For the first
five (5) years of the contract beginning December 27, 1990, Nereo would pay a monthly
rental of P450,000, payable within the first five (5) days of each month with a 2% penalty
for every month of late payment.
Aside from the above lease, petitioner leased eleven (11) other property from the
respondent, ten (10) of which were located within the Fairview compound, while the
eleventh was located along Quirino Highway Quezon City. Petitioner also purchased from
respondent eight (8) units of heavy equipment and vehicles in the aggregate amount of
Php 1, 020,000.
On account of petitioners failure to pay P361, 895.55 in rental for the month of
May, 1992, and the monthly rental of P450, 000.00 for the months of June and July 1992,
the respondent sent two demand letters to petitioner demanding payment of the back
rentals, and if no payment was made within fifteen (15) days from the receipt of the
letter, it would cause the cancellation of the lease contract.
Without the knowledge of petitioner, on August 3, 1992, respondent mortgaged
the land subject of 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 for a loan.
On August 12, 1992, and the subsequent dates thereafter, respondent refused to
accept petitioners daily rental payments.
RULING:
NO, the petitioner was not in arrears in the payment of rentals on the subject
property at the time of the filing of the complaint for ejectment.
As found by the lower court there was a letter sent by respondent to herein
petitioner, dated November 19, 1991, which states that petitioners security deposit for
the Quirino lot, be applied as partial payment for 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 signifying his conformity thereto.
Meanwhile, in an earlier letter, dated July 15, 1991, respondent informed
petitioner that the payment was to be applied not only to petitioners accounts under the
subject land and the Quirino lot but also to heavy equipment bought by the latter from
respondent. Unlike in the November letter, the July letter did not contain the signature of
petitioner.
Petitioner submits that his silence is not consent but is in fact a rejection.
As provided in Article 1252 of the Civil Code, the right to specify which among his
various obligations to the same creditor is to be satisfied first 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. However, respondent applied
a big portion of the amount paid by petitioner to the satisfaction of an obligation which
was not yet due and demandable- the payment of the eight heavy equipments.
Under the law, if the debtor did not declare at the time he made the payment to
which of 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 first 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.
APPLICATION OF PAYMENTS
CHINA BANKING CORPORATION, ATTYS. REYNALDO M. CABUSORA and RENATO
C. TAGUIAM, petitioners,
VS. COURT OF APPEALS, HON. PEDRO T. SANTIAGO, SPS. SO CHING and
CRISTINA SO, and NATIVE WEST INTERNATIONAL TRADING CORP., respondents
1996 December 05
G.R. No. 121158
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 turn executed promissory notes in favor of China Bank. So Ching, with the
marital consent of his wife, Cristina So, additionally executed two mortgages over their
properties, viz., a real estate mortgage executed on July 27, 1989 covering a parcel of
land situated in Cubao, Quezon City, under TCT No. 277797, and another executed on
August 10, 1989 covering a parcel of land located in Mandaluyong, under TCT No. 5363.
The promissory notes matured and despite due demands by China Bank neither private
respondents Native West nor So Ching paid. Pursuant to a provision embodied in the two
mortgage contracts, China Bank filed petitions for the extra-judicial foreclosure of the
mortgaged properties before Notary Public Atty. Renato E. Taguiam for TCT No. 277797,
and Notary Public Atty. Reynaldo M. Cabusora for TCT No. 5363, copies of which were
given to the spouses So Ching and Cristina So. After due notice and publication, the
notaries public scheduled the foreclosure sale of the spouses' real estate properties on
April 13, 1993. Eight days before the foreclosure sale, however, private respondents
filed a complaint with the Regional Trial Court for accounting with damages and with
temporary restraining order against petitioners alleging several grounds, including
Violation of Article 1308 of the Civil Code. On April 7, 1993, the trial court issued a
temporary restraining order to enjoin the foreclosure sale.
Petitioners moved for reconsideration, but it was denied in an Order dated
September 23, 1993. To annul the trial court's Orders of April 28, 1993 and September
23, 1993, petitioners elevated the case through certiorari and prohibition before public
respondent Court of Appeals. In a decision dated January 17, 1995, respondent Court of
Appeals held that Administrative Circular No. 3 is the governing rule in extra-judicial
foreclosure of mortgage, which circular petitioners however failed to follow, and with
respect to the publication of the notice of the auction sale, the provisions of P.D. No.
1079 is the applicable statute, which decree petitioners similarly failed to obey.
Respondent Court of Appeals did not pass upon the other issues and confined its
additional lengthy discussion on the validity of the trial court's issuance of the
preliminary injunction, finding the same neither capricious nor whimsical exercise of
judgment that could amount to grave abuse of discretion. The Court of Appeals
accordingly dismissed the petition, as well as petitioners' subsequent motion for
reconsideration. Hence, the instant petition under Rule 45 of the Rules of Court
reiterating the grounds raised before respondent court.
ISSUE:
Whether or not there was a correct application of payment in this case.
RULING:
An important task in contract interpretation is the ascertainment of the intention
of the contracting parties which is accomplished by looking at the words they used to
project that intention in their contract, i.e., all the words, not just a particular word or
two, and words in context, not words standing alone. Indeed, Article 1374 of the Civil
Code, states the various stipulations of a contract shall be interpreted together,
attributing to the doubtful ones that sense which may result from all of them taken
jointly." Applying the rule, we find that the parties intent is to constitute the real estate
properties as continuing securities liable for future obligations beyond the amounts of
P6.5 million and P3.5 million respectively stipulated in the July 27, 1989 and August 10,
1989 mortgage contracts. Thus, while the "whereas" clause initially provides that "the
mortgagee has granted, and may from time to time hereafter grant to the
mortgagors . . . credit facilities not exceeding six million five hundred thousand pesos
only (P6,500,000.00)" yet in the same clause it provides that "the mortgagee had
required the mortgagor(s) to give collateral security for the payment of any and all
obligations
heretofore
contracted/incurred
and
which
may
thereafter
be
contracted/incurred by the mortgagor(s) and/or debtor(s), or any one of them, in favor of
the mortgagee" which qualifies the initial part and shows that the collaterals or real
estate properties serve as securities for future obligations. The first paragraph which
ends with the clause, "the idea being to make this deed a comprehensive and all
embracing security that it is" supports this qualification.
Similarly, the second paragraph provides that "the mortgagee may take further
advances and all sums whatsoever advanced by the mortgagee shall be secured by this
mortgagee . . ." And although it was stated that "[t]he said credit shall extend to any
account which shall, within the said limit of P6,500,000.00 exclusive of interest", this part
of the second sentence is again qualified by its succeeding portion which provides that
"this mortgage shall stand as security for all indebtedness of the mortgagor(s) and/or
debtor(s), or any one of them, at any and all times outstanding . . ." Again, under the
third paragraph, it is provided that "the mortgagee may from time to time grant the
mortgagor(s)/debtor(s) credit facilities exceeding the amount secured by this
mortgage . . ." The fourth paragraph, in addition, states that ". . . all such withdrawals,
and payments, whether evidenced by promissory notes or otherwise, shall be secured by
this mortgage" which manifestly shows that the parties principally intended to constitute
the real estate properties as continuing securities for additional advancements which the
mortgagee may, upon application, extend. It is well settled that mortgages given to
secure future advancements or loans are valid and legal contracts, and that the amounts
named as consideration in said contracts do not limit the amount for which the mortgage
may stand as security if from the four corners of the instrument the intent to secure
future and other indebtedness can be gathered.
The allegations stated are a clear admission that they were unable to settle to the
fullest their obligation. Foreclosure is valid where the debtors, as in this case, are in
default in the payment of their obligation. The essence of a contract of mortgage
indebtedness is that a property has been identified or set apart from the mass of the
property of the debtor-mortgagor as security for the payment of money or the fulfillment
of an obligation to answer the amount of indebtedness, in case of default of payment. It
is a settled rule that in a real estate mortgage when the obligation is not paid when due,
the mortgagee has the right to foreclose the mortgage and to have the property seized
and sold in view of applying the proceeds to the payment of the obligation. In fact, aside
from the mortgage contracts, the promissory notes executed to evidence the loans also
authorize the mortgagee to foreclose on the mortgages. Thus: . . . CHINA BANKING
CORPORATION is hereby authorized to sell at public or private sales such securities or
things of value for the purpose of applying their proceeds to such payments.
And while private respondents aver that they have already paid ten million pesos,
an allegation which has still to be settled before the trial court, the same cannot be
utilized as a shield to enjoin the foreclosure sale. A mortgage given to secure
advancements, is a continuing security and is not discharged by repayment of the
amount named in the mortgage, until the full amount of the advancements are paid.
APPLICATION OF PAYMENTS
MOBIL OIL PHILIPPINES, INC., and CALTEX (PHILS.), INC., petitioners
VS. HON. COURT OF APPEALS and
CONTINENTAL CEMENT CORPORATION, respondents
G.R. No. 103052
23 May 2003
FACTS:
The petition for review on certiorari in the case at bar seeks the reversal of the
decision of the Court of Appeals, affirming that 2 of the Regional Trial Court (RTC),
Branch 101, of Quezon City, which found herein petitioners Mobil Oil Philippines, Inc., and
Caltex Philippines, Inc., jointly and severally liable to private respondent Continental
Cement Corporation in the amount of eight million pesos (P8,000,000.00) for actual
damages, plus ten percent (10%) thereof by way of attorneys fees, for having delivered
water-contaminated bunker fuel oil to the serious prejudice and damage of the cement
firm.
Sometime in May 1982, petitioner Mobil Oil Philippines, Inc. (MOPI), a firm
engaged in the marketing of petroleum products to industrial users, entered into a
supply agreement with private respondent Continental Cement Corporation (CCC), a
cement producer, under which the former would supply the latters industrial fuel oil
(IFO) or bunker fuel oil (BFO) requirements. MOPI extended to CCC an unsecured credit
line of P2,000,000.00 against which CCCs purchases of oil could initially be charged.
MOPI had a hauling contract with Century Freight Services (CFS) whereby CFS
undertook the delivery of Mobil products to designated consignees of MOPI. During the
period starting from 12 July to 07 October 1982, MOPI made a total of sixty-seven
deliveries of BFO, each delivery consisting of 20,000 liters, to CCCs cement factory in
Norzagaray, Bulacan. On 08 October 1982, CCC discovered that what should have been
MOPIs 20,000 BFO delivery to CCCs Norzagaray plant, through CFSs lorry truck, was, in
fact, pure water. CCC at once informed MOPI of this anomaly and of 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 MOPIs storage tank in the Norzagaray
plant be likewise investigated for possible contamination.
Alleging in the complaint it ultimately filed with the RTC that its factory equipment
broke down from 19 to 22 September 1982 due to the utilization of the watercontaminated BFO supplied by MOPI; that on 23 September 1982, its plant operations
had to be stopped completely; and that it was able to resume operations only after
essential repairs had been undertaken on 02 October 1982; CCC sought to recover
consequential damages from MOPI. In answer, MOPI averred that CCC had accepted each
delivery of BFO in accordance with the procedure for testing and acceptance of BFO
deliveries; that it was only on 08 October 1982 that CCC brought to its attention the
alleged anomalous delivery of 20,000 liters of BFO under invoice No. 47587 through
Mariano Riveras lorry truck; that when the delivery was being inspected by CCCs
representatives, the truck driver and helper fled; that Rivera acknowledged full liability
for such delivery; that Rivera promised to pay the amount of P42,730.00 for the 20,000
liters of BFO delivered; and that MOPI agreed to the water draining activity solely for the
purpose of maintaining good business relations with CCC but not to admit any liability
therefore. In its compulsory counterclaim, MOPI claimed that CCC had an outstanding
obligation to it, as of 30 November 1982, in the amount of P1,096,238.51, and that as a
consequence of the frivolous and malicious suit: which besmirched MOPIs reputation, it
suffered moral damages of not less than P10,000,000.00, exemplary damages of the
same amount, and the incurrence of attorneys fees.
ISSUES:
Whether or not Petitioner Mobil is stopped from claiming that no Mobil BFO
remained unused by Continental on 22 October 1982; and that the deliveries of BFO
made by Mobil to Continental before 8 October 1982 were not contaminated with water.
Whether or not Petitioners can be held liable for the contaminated BFO delivered
on 8 October 1982 on the ground that Country Freight Service, as carrier-hauler, was an
agent of Mobil.
RULING:
The claim that the Court of Appeals conveniently made an inference 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 facts, is unacceptable. The factual finding 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 of both MOPUI
and CCC, clearly showed that a detailed verification of water contained on all BFO
delivered by MOBIL OIL PHILS., INC., except those that have already been used in cement
operation by CCC,: was undertaken. Implicit from this statement was that there still was
at the time an availability of BFO in the storage tank designated by CCC for past Mobil
deliveries. The same could be said of the second water draining process, evidence by
the second joint undertaking. Although done without the participation of MOPI, the
latter, nonetheless, was notified of the counting thrice, the last of which had indicated
that failure on MOPIs part to send a representative would be tantamount to a waiver of
its right to participate therein.
The appellate court may not thus be faulted for holding that petitioners and
barred from questioning the results of water draining processes conducted on the MOPI
tank in the CCC plant site, in the same manner that MOPI may not belatedly question the
testing procedure theretofore adopted. MOPI cannot be allowed to turn its back to its
own acts (or inactions) to the prejudice of CCC, which, in good faith, relied upon MOPIs
conduct.
CFS was the contractor of MOPI, not CCC, and the contracted price of the BFO
that CCC paid to MOPI included hauling charges. The presumption laid down under
Article 1523 of the Civil Code that delivery to the carrier should be deemed to be delivery
to the buyer would have no application where, such as in this case, the sale itself
specifically called for delivery by the seller to the buyer at the latters place of business.
WHEREFORE, the herein questioned decision of the Court of Appeals in AFFIRMED
in toto. Costs against petitioners.
1.
2.
3.
4.
5.
6.
contract bears the date of October 11, 1983 but neither of the parties signed it.
Thereafter, Tomas Siatianum issued the checks in the total amount of P37,642.72 to
private respondent.
TENDER OF PAYMENT OR CONSIGNATION
PEOPLE'S INDUSTRIAL AND COMMERCIAL CORPORATION, petitioner
VS. COURT OF APPEALS and MAR-ICK INVESTMENT CORPORATION,
respondents.
Oct 24, 1997
G.R. No. 112733
FACTS:
Private respondent Mar-ick Investment Corporation is the exclusive and registered
owner of Mar-ick Subdivision in Barrio Buli, Cainta, Rizal. On May 29, 1961, private
respondent entered into six agreements with petitioner People's Industrial and
Commercial Corporation sell to petitioner six subdivision lots. Five of the agreements,
involving similarly stipulate that the petitioner agreed to pay private respondent for each
lot, the amount of P7,333.20 with a down payment of P480.00. The balance of P6,853.20
shall be payable in 120 equal monthly installments of P57.11 every 30th of the month,
for a period of ten years. With respect to Lot No. 8, the parties agreed to the purchase
price of P7,730.00 with a down payment of P506.00 and equal monthly installments of
P60.20.
After ten years, however, petitioner still had not fully paid for the six lots; it had
paid only the down payment and eight installments, even after private respondent had
given petitioner a grace period of four months to pay the arrears. As of May 1, 1980, the
total amount due to private respondent under the contract was P214,418.00.
In his letter of March 30, 1980 to Mr. Tomas Siatianum, who signed the
agreements for petitioner, private respondent's counsel protested petitioner's
encroachment upon a portion of its subdivision. It added that petitioner had failed to
abide by its promise to remove the encroachment, or to purchase the lots involved "at
the current price or pay the rentals on the basis of the total area occupied, all within a
short period of time." It also demanded the removal of the illegal constructions on the
property that had prejudiced the subdivision and its neighbors.
After a series of negotiations between the parties, they agreed to enter into a new
contract to sell 8 involving seven lots. The contract stipulates that the previous
contracts involving the same lots "have been cancelled due to the failure of the
purchaser to pay the stipulated installments." It states further that the new contract was
entered into "to avoid litigation, considering that the purchaser has already made use of
the premises since 1981 to the present without paying the stipulated installments." The
parties agreed that the contract price would be P423,250.00 with a down payment of
P42,325.00 payable upon the signing of the contract and the balance of P380,925.00
payable in forty-eight equal monthly amortization payments of P7,935.94. The new
Private respondent received but did not encash those checks. Instead filed in the
trial court a complaint for accion publiciana de posesion against petitioner and Tomas
Siatianum, as president and majority stockholder of petitioner.
The lower court rendered a decision finding that the original agreements of the
parties were validly cancelled in accordance with provision No. 9 of each agreement.
The parties did not enter into a new they did not sign the draft contract. Receipt by
private respondent of the five checks could not amount to perfection of the contract
because private respondent never encashed and benefited from those checks, they
represented the deposit under the new contract because petitioner failed to prove that
those were monthly installments that private respondent refused to accept. Thus, the
fact that the parties tried to negotiate a new Contract indicated that they considered the
first contract as "already cancelled." This decision was affirmed by the Court of Appeals.
ISSUE:
Whether there was a tender of payment and consignation in the case.
RULING:
The parties' failure to agree on a fundamental provision of the contract was
aggravated by petitioner's failure to deposit the installments agreed upon. Neither did it
attempt to make a consignation of the installments. As held in the Adelfa Properties
case:
"The mere sending of a letter by the vendee expressing the intention to pay, without the
accompanying payment, is not considered a valid tender of payment. Besides, a mere
tender of payment is not sufficient to compel private respondents to deliver the property
and execute the deed of absolute sale. It is consignation which is essential in order to
extinguish petitioner's obligation to pay the balance of the purchase price. The rule is
different in case of an option contract or in legal redemption or in a sale with right to
repurchase, wherein consignation is not necessary because these cases involve an
exercise of a right or privilege (to buy, redeem or repurchase) rather than the discharge
of an obligation, hence tender of payment would be sufficient to preserve the right or
privilege. This is because the provisions on consignation are not applicable when there is
no obligation to pay. A contract to sell, as in the case before us, involves the
performance of an obligation, not merely the exercise of a privilege or a right.
Consequently, performance or payment may be effected not by tender of payment alone
but by both tender and consignation."
In the case, petitioner did not lift a finger towards the performance of the contract
other than the tender of down payment. There is no record that it even bothered to
tender payment of the installments or to amend the contract to reflect the true intention
of the parties as regards the number of lots to be sold. Indeed, by petitioner's inaction,
private respondent may not be judicially enjoined to validate a contract that the former
appeared to have taken for granted. As in the earlier agreements, petitioner ignored
opportunities to resuscitate a contract to sell that were rendered moribund and
inoperative by its inaction.
Petition denied. Decision affirmed.
TENDER OF PAYMENT OR CONSIGNATION
ETERNAL GARDENS MEMORIAL PARK CORPORATION
VS. COURT OF APPEALS and NORTH PHILIPPINE UNION MISSION OF THE
SEVENTH DAY ADVENTIST
1997 Dec 9
G.R. No. 124554
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 of land owned by NPUM into a memorial park subdivided into lots. The parties
further agreed that EGMPC had the obligation to remit monthly to NPUM forty percent
(40%) of its net gross collection from the development of a memorial park on property
owned by NPUM. It also provides for the designation of a depository/trustee bank to act
as the depository/trustee for all funds collected by EGMPC.
Later, two claimants of the parcel of land surfaced Maysilo Estate and the heirs of
a certain Vicente Singson Encarnacion. EGMPC thus filed an action for interpleader
against Maysilo Estate and NPUM. The Singson heirs in turn filed an action for quieting of
title against EGMPC and NPUM.
From these two cases, several proceedings ensued. One such case, from the
interpleader action, EGMPC assailed the appellate court's resolution requiring "petitioner
Eternal Gardens [to] deposit whatever amounts are due from it under the Land
Development Agreement with a reputable bank to be designated by the respondent
court."
The trial court dismissed the cases and the appellate court affirmed insofar as it
dismissed the claims of the intervenors, including the Maysilo Estate, and the titles of
NPUM to the subject parcel of land were declared valid; and the trial court's decision
favor of the Singson heirs was reversed and set aside. Through the resolution issued by
the Supreme Court resolution, the Court of Appeals proceeded with the disposition of the
case and required the parties to appear at a scheduled hearing on June 16, 1994, "with
counsel and accountants, as well as books of accounts and related records,' to determine
the remaining accrued rights and liabilities of said parties."
The accounting of the parties' respective obligations was referred to the Court's
Accountant, Mrs. Carmencita Angelo, with the concurrence of the parties, to whom the
documents were to be submitted. NPUM prepared and submitted a Summary of Sales
and Total Amounts Due based on the following documents it likewise submitted to the
court. However, EGMPC did not submit any document whatsoever to aid the appellate
court in its mandated task. Thus, the appellate court declared that EGMPC has waived
its right to present the records and documents necessarily for accounting, and that it will
now proceed "to the mutual accounting required to determine the remaining accrued
rights and liabilities of the said partiesand that the Court will proceed to do what it is
required to do on the basis of the documents submitted by the NPUMC. Ms. Angelo
submitted her Report dated January 31, 1995, to which the appellate court required the
parties to comment on. EGMPC took exception to the appellate court's having considered
it to have waived its right to present documents. Considering EGMPC's arguments, the
court set a hearing date where NPUM would present its documents "according to the
Rules [of Court], and giving the private respondent [EGMPC] the opportunity to object
thereto."
ISSUE:
Whether or not EGMPC is liable for interest because there was still the unresolved
issue of ownership over the property subject of the Land Development Agreement of
October 6, 1976.
RULING:
The Supreme Court held that the argument is without merit. EGMPC under the
agreement had the obligation to remit monthly to NPUM forty percent (40%) of its net
gross collection from the development of a memorial park on property owned by NPUM.
It also provides for the designation of a depository/trustee bank to act as the
depository/trustee for all funds collected by EGMPC. There was no obstacle, legal or
otherwise, to the compliance by EGMPC of this provision in the contract, even on the
affectation that it did not know to whom payment was to be made.
Even disregarding the agreement, EGMPC cannot "suspend" payment on the
pretext that it did not know who among the subject property's claimants was the rightful
owner. It had a remedy under the New Civil Code of the Philippines to give in
consignation the amounts due, as these fell due.
Consignation produces the effect of payment. The rationale for consignation is to
avoid the performance of an obligation becoming more onerous to the debtor by reason
of causes not imputable to him. For its failure to consign the amounts due, EGMPCs
obligation to NPUM necessarily became more onerous as it became liable for interest on
the amounts it failed to remit.
Thus, the Court of Appeals correctly held Eternal Gardens liable for interest at the
rate of twelve percent (12%). The withholding of the amounts due under the agreement
was tantamount to a forbearance of money.
reconveyance in his favor. Defendant denied plaintiffs allegations and maintained that
their contract was a sale with right of repurchase that had long expired.
TENDER OF PAYMENT OR CONSIGNATION
SPOUSES TEOFILO and SIMEONA RAYOS, and GEORGE RAYOS
VS. DONATO REYES, SATURNINO REYES, TOMASA R. BUSTAMANTE and TORIBIA
R. CAMELO
G.R. No. 150913
February 20, 2003
398 SCRA 25
FACTS:
At stake in this petition for review is the ownership of 3 parcels of unregistered
land with an area of approximately 130,947 square meters situated in Brgy. Sapa,
Burgos, Pangasinan, the identities of which are not disputed.
The 3 parcels were formerly owned by the spouses Francisco and Asuncion Tazal
who on 1 September 1957 sold them for P724.00 to respondents predecessor-ininterest, one Mamerto Reyes, with right to repurchase within 2 years from date thereof
by paying to the vendee the purchase price and all expenses incident to their
reconveyance. After the sale the vendee a retro took physical possession of the
properties and paid the taxes thereon.
The otherwise inconsequential sale became controversial when 2 of the 3 parcels
were again sold on 24 December 1958 by Francisco Tazal for P420.00 in favor of
petitioners predecessor-in-interest Blas Rayos without first availing of his right to
repurchase the properties.
In the meantime, on 1 September 1959 the conventional right of redemption in
favor of spouses Francisco and Asuncion Tazal expired without the right being exercised
by either the Tazal spouses or the vendee Blas Rayos.
After the expiration of the redemption period, Francisco Tazal attempted to
repurchase the properties from Mamerto Reyes by asserting that the 1 September 1957
deed of sale with right of repurchase was actually an equitable mortgage and offering
the amount of P724.00 to pay for the alleged debt. But Mamerto Reyes refused the
tender of payment and vigorously claimed that their agreement was not an equitable
mortgage.
On 9 May 1960 Francisco Tazal filed a complaint with the Court of First Instance of
Pangasinan against Mamerto Reyes for the declaration of the 1 September 1957
transaction as a contract of equitable mortgage. He also prayed for an order requiring
defendant Mamerto Reyes to accept the amount of P724.00 which he had deposited on
31 May 1960 with the trial court as full payment for his debt, and canceling the supposed
mortgage on the 3 parcels of land with the execution of the corresponding documents of
On 22 June 1961 Francisco Tazal again sold the third parcel of land previously
purchased by Mamerto Reyes to petitioner-spouses Teofilo and Simeona Rayos for
P400.00. On 1 July 1961 petitioner-spouses bought from Blas Rayos for P400.00 the 2
lots that Tazal had sold at the first instance to Mamerto Reyes and thereafter to Blas
Rayos. Curiously, these contracts of sale in favor of petitioner-spouses were perfected
while the aforementioned case was pending before the trial court.
ISSUE:
Whether or not the consignation made by the petitioners is valid.
RULING:
In order that consignation may be effective the debtor must show that (a) there
was a debt due; (b) the consignation of the obligation had been made because the
creditor to whom a valid tender of payment was made refused to accept it; (c) previous
notice of the consignation had been given to the person interested in the performance of
the obligation; (d) the amount due was placed at the disposal of the court; and, (e) after
the consignation had been made the person interested was notified thereof.
In the instant case, petitioners failed, first, to offer a valid and unconditional
tender of payment; second, to notify respondents of the intention to deposit the amount
with the court; and third, to show the acceptance by the creditor of the amount
deposited as full settlement of the obligation, or in the alternative, a declaration by the
court of the validity of the consignation. The failure of petitioners to comply with any of
these requirements rendered the consignation ineffective.
Mamerto Reyes was therefore within his right to refuse the tender of payment
offered by petitioners because it was conditional upon his waiver of the two (2)-year
redemption period stipulated in the deed of sale with right to repurchase.
Wherefore, the petition for review is denied.
constitute valid tender of payment. In effect, CIFC has not yet tendered a valid payment
of its obligation to the private respondent. Tender of payment involves a positive and
unconditional act by the obligor of offering legal tender currency as payment to the
obligee for the formers obligation and demanding that the latter accept the same.
Tender of payment cannot be presumed by a mere inference from surrounding
circumstances. Hence, CIFC is still liable for the payment of the check.
Wherefore, the assailed decision is affirmed and the petition is denied.
TENDER OF PAYMENT OR CONSIGNATION
DOLORES LIGAYA DE MESA, petitioner, vs. THE COURT OF APPEALS, OSSA
HOUSE, INC. AND DEVELOPMENT BANK OF THE PHILIPPINES,respondents
G.R. No. 106467-68
October 19, 1999
FACTS:
Petitioner Dolores Ligaya de Mesa owns several parcels of land in Makati, Pasay
City, Cavite, and General Santos City which were mortgaged to the Development Bank of
the Philippines (DBP) as security for a loan she obtained from the bank. Failing to pay
her mortgage debt, all her mortgaged properties were foreclosed and sold at public
auction held on different days.
On April 30, 1977, the Makar property was sold and the corresponding certificate
of sale inscribed on March 10, 1978. On August 25, 1977, the Naic, Cavite property was
sold and the certificate of sale registered on the same day. On August 30, 1977, the two
(2) parcels of land in Makati were sold at public auction and the certificate of sale was
inscribed on November 25, 1977. And on January 12, 1978, the three (3) parcels of land
in Pasay City were also sold and the certificate of sale was recorded on the same date.
In all the said auction sales, DBP was the winning bidder.
On October 23, 1978, Mrs. de Mesa, under a Deed of Sale with Assumption of
Mortgage, sold the foreclosed properties to private respondent OSSA under the
condition that the latter was to assume the payment of the mortgage debt by the
repurchase of all the properties mortgaged on installment basis, with an initial payment
of P90,000.00 representing 20% of the total obligation.
On March 11, 1981, petitioner de Mesa notified private respondent OSSA that she
was rescinding the Deed of Sale with Assumption of Mortgage she executed in favor of
the latter on the ground that OSSA failed to comply with the terms and conditions of
their agreement, particularly the payment of installments to the Development Bank of
the Philippines, the discharge and cancellation of the mortgage on the property listed in
item IV of the first whereas clause, and the payment of the balance of more or less
P45,000.00 to petitioner, representing the difference between the purchase price of
subject properties and the actual obligation to the DBP.
On August 5, 1981, DBP refused to accept the 9th quarterly installment paid by
OSSA, prompting the latter to file against DBP and the petitioner, on August 11, 1981,
Civil Case No. 42381 for specific performance and consignation, with the then Court of
First Instance of Pasig, Rizal, depositing in said case the amount of P15,824.92.
After trial, the lower court came out with a Decision for the private respondent OSSA.
The petitioner appealed to the Court of Appeals which handed down on March 31, 1992,
its decision modifying the challenged decision.
ISSUE:
Whether or not the Court erred in ruling that the mandatory requirements of the
Civil Code on consignation can be waived by the trial court or whether or not the
requirements of Articles 1256 to 1261 can be 'relaxed' or 'substantially complied with'.
RULING:
Petitioner argues that there was no notice to her regarding OSSA's consignation of
the amounts corresponding to the 12th up to the 20th quarterly installments. The
records, however, show that several tenders of payment were consistently turned down
by the petitioner, so much so that the respondent OSSA found it pointless to keep on
making formal tenders of payment and serving notices of consignation to petitioner.
Moreover, in a motion dated May 7, 1987, OSSA prayed before the lower court that it be
allowed to deposit by way of consignation all the quarterly installments, without
making formal tenders of payment and serving notice of consignation, which prayer was
granted by the trial court in the Order dated July 3, 1982. The motion and the
subsequent court order served on the petitioner in the consignation proceedings
sufficiently served as notice to petitioner of OSSA's willingness to pay the quarterly
installments and the consignation of such payments with the court. For reasons of
equity, the procedural requirements of consignation are deemed substantially complied
with in the present case.
Petitioner also insists that there was no valid tender of payment because the
amount tendered was P34,363.08, not P51,243.26, and assuming ex gratia argumenti
that it was the correct amount, the tender thereof was still not valid, the same having
been made by check. This claim, however, does not accord with the records on hand.
Thus, the Court of Appeals ratiocinated:
"The 'Deed of Sale with Assumption of Mortgage', was for a consideration of
P500,000.00, from which shall be deducted de Mesas's outstanding obligation, with the
DBP pegged as of May 10, 1978, by the parties themselves, at P455,636.92. This
amount of P455,636.92 owing DBP, is what OSSA agreed to assume. What remained to
be paid de Mesa was P44,636.08, but OSSA made an advance payment of P10,000.00,
hence the remaining amount payable to de Mesa is P34,363.08, which OSSA tendered in
cash. It is thus beyond cavil that the respondent OSSA tendered the correct amount, the
tender of which was in cash and not by check, as theorized by petitioner.
The Court of Appeals erred not in affirming the decision of the trial court of origin.
The petition is DENIED and the assailed Decision of the Court of Appeals in CAG.R. Nos. 19145 and 19156 dated March 31, 1992 AFFIRMED.
Defendant-appellee, upon the other hand, maintains that the area along the
western part of EDSA from Shaw Boulevard to Pasig River, has been declared a
commercial and industrial zone, per Resolution No. 27, dated February 4, 1960 of the
Municipal Council of Mandaluyong, Rizal. It alleges that plaintiff-appellant 'completely
sold and transferred to third persons all lots in said subdivision facing EDSA" and the
subject lots thereunder were acquired by it "only on July 23, 1962 or more than two (2)
years after the area ... had been declared a commercial and industrial zone. On or about
May 5, 1963, defendant-appellee began laying the foundation and commenced the
construction of a building on Lots Nos. 5 and 6, to be devoted to banking purposes, but
which defendant-appellee claims could also be devoted to, and used exclusively for,
residential purposes. The following day, plaintiff-appellant demanded in writing that
defendant-appellee stop the construction of the commerical building on the said lots.
The latter refused to comply with the demand, contending that the building was being
constructed in accordance with the zoning regulations, defendant-appellee having filed
building and planning permit applications with the Municipality of Mandaluyong, and it
had accordingly obtained building and planning permits to proceed with the construction.
ISSUE:
Whether or not Resolution No. 27 s-1960 is a valid exercise of police power; and
whether or not the said Resolution can nullify or supersede the contractual obligations
assumed by defendant-appellee.
RULING:
The validity of the resolution was admitted at least impliedly, in the stipulation of
facts below when plaintiff-appellant did not dispute the same. Granting that Resolution
No. 27 is not an ordinance, it certainly is a regulatory measure within the intendment or
ambit of the word "regulation" under the provision. As a matter of fact the same section
declares that the power exists "(A)ny provision of law to the contrary notwithstanding ...
"
With regard to the contention that said resolution cannot nullify the contractual
obligations assumed by the defendant-appellee referring to the restrictions incorporated
in the deeds of sale and later in the corresponding Transfer Certificates of Title issued to
defendant-appellee, it should be stressed, that while non-impairment of contracts is
constitutionally guaranteed, the rule is not absolute, since it has to be reconciled with
the legitimate exercise of police power.
Resolution No. 27, s-1960 declaring the western part of highway , now EDSA, from
Shaw Boulevard to the Pasig River as an industrial and commercial zone, was obviously
passed by the Municipal Council of Mandaluyong, Rizal in the exercise of police power to
safeguard or promote the health, safety, peace, good order and general welfare of the
people in the locality. Judicial notice may be taken of the conditions prevailing in the
area, especially where lots Nos. 5 and 6 are located. The lots themselves not only front
the highway; industrial and commercial complexes have flourished about the place.
EDSA, a main traffic artery which runs through several cities and municipalities in the
Metro Manila area, supports an endless stream of traffic and the resulting activity, noise
and pollution are hardly conducive to the health, safety or welfare of the residents in its
route. Having been expressly granted the power to adopt zoning and subdivision
ordinances or regulations, the municipality of Mandaluyong, through its Municipal
'council, was reasonably, if not perfectly, justified under the circumstances, in passing
the subject resolution.
The motives behind the passage of the questioned resolution being reasonable,
and it being a " legitimate response to a felt public need," not whimsical or oppressive,
the non-impairment of contracts clause of the Constitution will not bar the municipality's
proper exercise of the power.
It is, therefore, clear that even if the subject building restrictions were assumed
by the defendant-appellee as vendee of Lots Nos. 5 and 6, in the corresponding deeds of
sale, and later, in Transfer Certificates of Title Nos. 101613 and 106092, the contractual
obligations so assumed cannot prevail over Resolution No. 27, of the Municipality of
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 enforced.
FACTS:
Private respondent Santiago A. Guerrero was President and Chairman of "Guerrero
Transport Services", a single proprietorship. Sometime in 1972, Guerrero Transport
Services won a bid for the operation of a fleet of taxicabs within the Subic Naval Base, in
Olongapo. As highest bidder, Guerrero was to "provide radio-controlled taxi service
within the U.S. Naval Base, Subic Bay, utilizing as demand requires . . . 160 operational
taxis consisting of four wheel, four-door, four passenger, radio controlled, meter
controlled, sedans, not more than one year . . . "
On September 22, 1972, with the advent of martial law, President Ferdinand E.
Marcos issued Letter of Instruction No. 1.
PNCC VS. CA
272 SCRA 183
FACTS:
On 18 November 1985, private respondents and petitioner entered into a contract
of lease of a parcel of land owned by the former. The terms and conditions of said
contract of lease are as follows: a) the lease shall be for a period of five (5) years which
begins upon the issuance of permit by the Ministry of Human Settlement and renewable
at the option of the lessee under the terms and conditions, b) the monthly rent is P20,
000.00 which shall be increased yearly by 5% based on the monthly rate, c) the rent
shall be paid yearly in advance, and d) the property shall be used as premises of a rock
crushing plan.
On January 7, 1986, petitioner obtained permit from the Ministry which was to be
valid for two (2) years unless revoked by the Ministry. Later, respondent requested the
payment of the first annual rental. But petitioner alleged that the payment of rental
should commence on the date of the issuance of the industrial clearance not on the date
of signing of the contract. It then expressed its intention to terminate the contract and
decided to cancel the project due to financial and technical difficulties. However,
petitioner refused to accede to respondents request and reiterated their demand for the
payment of the first annual rental. But the petitioner argued that it was only obligated to
pay P20, 000.00 as rental for one month prompting private respondent to file an action
against the petitioner for specific performance with damages before the RTC of Pasig.
The trial court rendered decision in favor of private respondent. Petitioner then appealed
the decision of the trial court to the Court of Appeals but the later affirmed the decision
of the trial court and denied the motion for reconsideration.
ISSUE:
Whether or not petitioner can avail of the benefit of Article 1267 of the New Civil
Code.
RULING:
NO. The petitioner cannot take refuge of the said article. Article 1267 of the New
Civil Code provides that when the service has become so difficult as to manifestly
beyond the contemplation of the parties, the obligor may also be released therefrom, in
whole or in part. This article, which enunciates the doctrine of unforeseen events, is not,
however an absolute application of the principle of rebus sic stantibus, which would
endanger the security of contractual relations. The parties to the contract must be
presumed to have assumed the risks of unfavorable developments. It is therefore only in
absolutely exceptional chances of circumstances that equity demands assistance for the
debtor. The principle of rebus sic stantibus neither fits in with the facts of the case.
Under this theory, the parties stipulate in the light of certain prevailing conditions, and
once these conditions cease to exist, the contract also ceases to exist.
In this case, petitioner averred that three (3) abrupt change in the political
climate of the country after the EDSA Revolution and its poor financial condition
rendered the performance of the lease contract impractical and inimical to the corporate
survival of the petitioner. However, as held in Central Bank v. CA, mere pecuniary
inability to fulfill an engagement does not discharge a contractual obligation, nor does it
constitute a defense of an action for specific performance.
REBUS SIC STANTIBUS
NAGA TELEPHONE CO., INC. (NATELCO) AND LUCIANO M. MAGGAY, petitioners,
VS. THE COURT OF APPEALS AND CAMARINES SUR II ELECTRIC COOPERATIVE,
INC. (CASURECO II), respondents
1994 Feb 24
230 SCRA 351
FACTS:
Petitioner Naga Telephone Co., Inc. (NATELCO) is a telephone company rendering
local as well as long distance service in Naga City while private respondent Camarines
Sur II Electric Cooperative, Inc. (CASURECO II) is a private corporation established for the
purpose of operating an electric power service in the same city.
On November 1, 1977, the parties entered into a contract for the use by
petitioners in the operation of its telephone service the electric light posts of private
respondent in Naga City. In consideration therefor, petitioners agreed to install, free of
charge, ten (10) telephone connections for the use by private respondent. After the
contract had been enforced for over ten (10) years, private respondent filed with the
Regional Trial Court against petitioners for reformation of the contract with damages, on
the ground that it is too one-sided in favor of petitioners; that it is not in conformity with
the guidelines of the National Electrification Administration (NEA); that after eleven (11)
years of petitioners' use of the posts, the telephone cables strung by them thereon have
become much heavier with the increase in the volume of their subscribers; that a post
now costs as much as P2,630.00; so that justice and equity demand that the contract be
reformed to abolish the inequities thereon.
As second cause of action, private respondent alleged that starting with the year
1981, petitioners have used 319 posts outside Naga City, without any contract with it;
that at the rate of P10.00 per post, petitioners should pay private respondent for the use
thereof the total amount of P267,960.00 from 1981 up to the filing of its complaint; and
that petitioners had refused to pay private respondent said amount despite demands.
And as third cause of action, private respondent complained about the poor servicing by
petitioners.
The trial court ruled, as regards private respondents first cause of action, that
the contract should be reformed by ordering petitioners to pay private respondent
compensation for the use of their posts in Naga City, while private respondent should
also be ordered to pay the monthly bills for the use of the telephones also in Naga City.
And taking into consideration the guidelines of the NEA on the rental of posts by
telephone companies and the increase in the costs of such posts, the trial court opined
that a monthly rental of P10.00 for each post of private respondent used by petitioners is
reasonable, which rental it should pay from the filing of the complaint in this case on
January 2, 1989. And in like manner, private respondent should pay petitioners from the
same date its monthly bills for the use and transfers of its telephones in Naga City at the
same rate that the public are paying.
On private respondent's second cause of action, the trial court found that the
contract does not mention anything about the use by petitioners of private respondent's
posts outside Naga City. Therefore, the trial court held that for reason of equity, the
contract should be reformed by including therein the provision that for the use of private
respondent's posts outside Naga City, petitioners should pay a monthly rental of P10.00
per post, the payment to start on the date this case was filed, 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 of action, the trial court found the claim not sufficiently
proved.
The Court of Appeals affirmed the decision of the trial court, but based on
different grounds to wit: (1) that Article 1267 of the New Civil Code is applicable and (2)
that the contract was subject to a potestative condition which rendered said condition
void.
ISSUE:
Whether or not the principle of Rebus Sic Stantibus is applicable in the case at
bar.
RULING:
No. Article 1267 speaks of "service" which has become so difficult. Taking into
consideration the rationale behind this provision, the term "service" should be
understood as referring to the "performance" of the obligation.
In the present case, the obligation of private respondent consists in allowing
petitioners to use its posts in Naga City, which is the service contemplated in said article.
Furthermore, a bare reading of this article reveals that it is not a requirement thereunder
that the contract be for future service with future unusual change. According to Senator
Arturo M. Tolentino, Article 1267 states in our law the doctrine of unforseen events. This
is said to be based on the discredited theory of rebus sic stantibus in public international
law; under this theory, the parties stipulate in the light of certain prevailing conditions,
and once these conditions cease to exist the contract also ceases to exist. Considering
practical needs and the demands of equity and good faith, the disappearance of the
basis of a contract gives rise to a right to relief in favor of the party prejudiced.
In the case at bar, the Court finds sufficient justification to overthrow the
presumption of payment generated by the delivery of the documents evidencing
petitioners indebtedness.
FACTS:
Sometime in 1979, petitioner applied for and was granted several financial
accommodations amounting to P1,300,000.00 by respondent Associated Bank. The
loans were evidence and secured by four (4) promissory notes, a real estate mortgage
covering three parcels of land and a chattel mortgage over petitioner's stock and
inventories. Unable to settle its obligation in full, petitioner requested for, and was
It may not be amiss to add that Article 1271 of the Civil Code raises a
presumption, not of payment, but of the renunciation of the credit where more
convincing evidence would be required than what normally would be called for to prove
payment. The rationale for allowing the presumption of renunciation in the delivery of a
private instrument is that, unlike that of a public instrument, there could be just one
copy of the evidence of credit. Where several originals are made out of a private
document, the intendment of the law would thus be to refer to the delivery only of the
original rather than to the original duplicate of which the debtor would normally retain a
copy.
belonging to the conjugal partnership which was ordered by the court upon the joint
petition of the spouses in order that they may have funds with which to defray their
living and other similar expenses. One-half of the proceeds was given to Mrs. Harden.
The sheriff attempted to garnish these two (2) checks acting upon the writ of execution
secured by the plaintiff, but the receivership court quashed the writ, stating however in
the order that it will be without prejudice to the right of Francisco Dalupan to attach the
money of the defendant Fred M. Harden, after the same has been delivered to the latter.
When said checks were delivered to the latter.
1.
2.
ISSUE:
Whether or not the proffer made by the plaintiff to the defendant is binding.
Petition denied
FACTS:
The case is an appeal taken from an order of the First Instance of Manila dated
May 19, 1950, setting aside the writs of execution and garnishment issued to the sheriff
of Manila commanding him to levy on two (2) checks, one for P9,028.50, and another for
P24,546.00, payable to Fred M. Harden which were then in possession of the receiver
appointed in case involving the liquidation of the conjugal partnership of the spouses
Fred M. Harden and Esperanza P. de Harden.
On August 26, 1948, plaintiff filed an action against the defendant for the
collection of P113,837.17, with interest thereon from the filing of the complaint, which
represents fifty (50) per cent of the reduction plaintiff was able to secure from the
Collector of Internal Revenue in the amount of unpaid taxes claimed to be due from the
defendant. Defendant acknowledged this claim and prayed that judgment be rendered
accordingly. The receiver in the liquidation of case No. R-59634 and the wife of the
defendant, Esperanza P. de Harden, filed an answer in intervention claiming that the
amount sought by the plaintiff was exorbitant and prayed that it be reduced to 10 per
cent of the rebate. By reason of the acquiescence of the defendant to the claim on one
hand, and the opposition of the receiver and of the wife on the other, an amicable
settlement was concluded by the plaintiff and the intervenor whereby it was agreed that
the sum of P22,767.43 be paid to the plaintiff from the funds under the control of the
receiver "and the balance of P91,069.74 shall be charged exclusively against the
defendant Fred M. Harden from whatever share he may still have in the conjugal
partnership between him and Esperanza P. de Harden after the final liquidation and
partition thereof, without pronouncement as to costs and interests." The court rendered
judgment in accordance with this stipulation.
Almost one year thereafter, plaintiff filed a motion for the issuance of a writ of
execution to satisfy the balance of P91, 069.74, which was favorably acted upon. At that
time the receiver had in his possession two (2) checks payable to Fred M. Harden
amounting to P33,574.50, representing part of the proceeds of the sale of two (2) lots
RULING:
YES, the proffer made by the plaintiff to the defendant to the effect that in the
event you lose your case with your wife, Mrs. Esperanza P. de Harden, and that after
adjudication of the conjugal property what is left with you will not be sufficient for your
livelihood. I shall be pleased to write off as bad debt the balance of your account in the
sum of P42, 069.74. This proffer was contained in a letter sent by the plaintiff to the
defendant on March 23, 1949, which was accepted expressly by Fred M. Harden. Harden
regarded this proffer as a binding obligation and acted accordingly, and for plaintiff to
say now that proffer is but a mere gesture of generosity or an act of Christian charity
without any binding legal effect is unfair to say at least. This is an added circumstance,
which confirms the Courts view that the understanding between the plaintiff and the
defendant is really to defer payment of the balance of the claim until after the final
liquidation of the conjugal partnership.
IMPLIED CONDONATION PRESUMPTION OF DELIVERY
LEONIDES LOPEZ LISO, plaintiff-appellee,
VS. MANUEL TAMBUNTING, defendant-appellant
1916 January 19
G.R. No. 9806
33 PHIL 226
FACTS:
These proceedings were brought to recover from the defendant the sum of
P2,000, amount of the fees, which, according to the complaint, are owing for professional
medical services rendered by the plaintiff to a daughter of the defendant from March 10
to July 15, 1913, which fees the defendant refused to pay, notwithstanding the demands
therefor made upon him by the plaintiff. The defendant denied the allegations of the
complaint, and furthermore alleged that the obligation which the plaintiff endeavored to
compel him to fulfill was already extinguished.
The Court of First Instance of Manila, after hearing the evidence introduced by
both parties, rendered judgment on December 17, 1913, ordering the defendant to pay
to the plaintiff the sum of P700, without express finding as to costs. The defendant, after
entering a motion for a new trial, which was denied, appealed from said judgment and
forwarded to this court the proper bill of exceptions.
ISSUE:
Whether or not the obligation alleged in the complaint has already been
extinguished.
RULING:
No, the Supreme Court ruled that the obligation has not been extinguished. The
receipt signed by the plaintiff, for P700, the amount of his fees he endeavored to collect
from the defendant after he had finished rendering the services in question was in the
latter's possession, and this fact was alleged by him as proof that he had already paid
said fees to the plaintiff. The court, after hearing the testimony, reached the conclusion
that, notwithstanding that the defendant was in possession of the receipt, the said P700
had not been paid to the plaintiff.
Number 8 of section 334 of the Code of Civil Procedure provides as a legal
presumption "that an obligation delivered up to the debtor has been paid." Article 1188
of the Civil Code also provides that the voluntary surrender by a creditor to his debtor, of
a private instrument proving a credit, implies the renunciation of the right of action
against the debtor; and article 1189 prescribes that whenever the private instrument
which evidences the debt is in the possession of the debtor, it will be presumed that the
creditor delivered it of his own free will, unless the contrary is proven.
But the legal presumption established by the foregoing provisions of law cannot
stand if sufficient proof is adduced against it. In the case at bar the trial court correctly
held that there was sufficient evidence to the contrary, in view of the preponderance
thereof in favor of the plaintiff and of the circumstances connected with the defendant's
possession of said receipt. Furthermore, in order that such a presumption may be taken
into account, it is necessary, as stated in the laws cited, that the evidence of the
obligation be delivered up to the debtor and that the delivery of 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, inasmuch as when the plaintiff sent
the receipt to the defendant for the purpose of collecting his fee, it was not his intention
that that document should remain in the possession of the defendant if the latter did not
forthwith pay the amount specified therein.
By reason of the foregoing, the Court affirmed the judgment appealed from, with
the costs of this instance against the appellant.
1.
2.
FACTS:
On February 1, 1919, plaintiffs and defendant entered into a contract of
partnership, for the construction and exploitation of a railroad line from the "San Isidro"
and "Palma" centrals to the place known as "Nandong." The original capital stipulated
was P150, 000. It was covenanted that the parties should pay this amount in equal parts
and the plaintiffs were entrusted with the administration of the partnership. The agreed
capital of P150,000, however, did not prove sufficient, as the expenses up to May 15,
1920, had reached the amount of P226,092.92, presented by the administrator and
O.K.'d by the defendant.
January 29, 1920, the defendant entered into a contract of sale with Venancio
Concepcion, Phil. C. Whitaker, and Eusebio R. de Luzuriaga, whereby he sold to the latter
the estate and central known as "Palma" with its running business, as well as all the
improvements, machineries and buildings, real and personal properties, rights, choices in
action and interests, including the sugar plantation of the harvest year of 1920 to 1921,
covering all the property of the vendor. This contract was executed before a notary
public of Iloilo.
Before the delivery to the purchasers of the hacienda thus sold, Eusebio R. de
Luzuriaga renounced all his rights under the contract of January 29, 1920, in favor of
Messrs. Venancio Concepcion and Phil. C. Whitaker. This gave rise to the fact that on July
17, 1920, Venancio Concepcion and Phil. C. Whitaker and the herein defendant executed
before Mr. Antonio Sanz, a notary public in and for the City of Manila, another deed of
absolute sale of the said "Palma" Estate for the amount of P1,695,961.90, of which the
vendor received at the time of executing the deed the amount of P945,861.90, and the
balance was payable by installments in the form and manner stipulated in the contract.
The purchasers guaranteed the unpaid balance of the purchase price by a first and
special mortgage in favor of the vendor upon the hacienda and the central with all the
improvements, buildings, machineries, and appurtenances then existing on the said
hacienda.
Afterwards, on January 8, 1921, Venancio Concepcion and Phil. C. Whitaker
bought from the plaintiffs the one-half of the railroad line pertaining to the latter,
executing therefore the document. The price of this sale was P237,722.15, excluding
any amount which the defendant might be owing to the plaintiffs. Of the purchase price,
Venancio Concepcion and Phil. C. Whitaker paid the sum of P47,544.43 only. In the Deed,
the plaintiffs and Concepcion and Whitaker agreed, among other things, that the
partnership "Palma" and "San Isidro," formed by the agreement of February 1, 1919,
between Serra, Lazaro Mota, now deceased, and Juan J. Vidaurrazaga for himself and in
behalf of his brother, Felix and Dionisio Vidaurrazaga, should be dissolved upon the
execution of this contract, and that the said partnership agreement should be totally
cancelled and of no force and effect whatever.
one may be made without the knowledge of the latter, but not without the consent of the
creditor.
Since the defendant Salvador Serra failed to pay one-half of the amount
expended by the plaintiffs upon the construction of the railroad line, that is, P113,046.46,
as well as Phil. C. Whitaker and Venancio Concepcion, the plaintiffs instituted the present
action praying: 1) that the deed of February 1, 1919, be declared valid and binding; 2)
that after the execution of the said document the defendant improved economically so
as to be able to pay the plaintiffs the amount owed, but that he refused to pay either in
part or in whole the said amount notwithstanding the several demands made on him for
the purpose; and 3) that the defendant be sentenced to pay plaintiffs the aforesaid sum
of
P113, 046.46, with the stipulated interest at 10 per cent per annum beginning June 4,
1920, until full payment thereof, with the costs of the present action.
2.
NO, there was no merger of Rights. Another defense urged by the defendant is
the merger of the rights of debtor and creditor, whereby under Article 1192 of the Civil
Code, the obligation, the fulfillment of which is demanded in the complaint, became
extinguished. It is maintained in appellee's brief that the debt of the defendant was
transferred to Phil. C. Whitaker and Venancio Concepcion by the document. These in
turn acquired the credit of the plaintiffs by virtue of the debt; thus, the rights of the
debtor and creditor were merged in one person. The argument would at first seem to be
incontrovertible, but if we bear in mind that the rights and titles which the plaintiffs sold
to Phil. C. Whitaker and Venancio Concepcion refer only to one-half of the railroad line in
question, it will be seen that the credit which they had against the defendant for the
amount of one-half of the cost of construction of the said line was not included in the
sale. That the plaintiffs sold their rights and titles over one-half of the line. The
purchasers, Phil. C. Whitaker and Venancio Concepcion, to secure the payment of the
price, executed a mortgage in favor of the plaintiffs on the same rights and titles that
they had bought and also upon what they had purchased from Mr. Salvador Serra. In
other words, Phil. C. Whitaker and Venancio Concepcion mortgaged unto the plaintiffs
what they had bought from the plaintiffs and also what they had bought from Salvador
Serra. If Messrs. Phil. C. Whitaker and Venancio Concepcion had purchased something
from Mr. Salvador Serra, the herein defendant, regarding the railroad line, it was
undoubtedly the one-half thereof pertaining to Mr. Salvador Serra. This clearly shows
that the rights and titles transferred by the plaintiffs to Phil. C. Whitaker and Venancio
Concepcion were only those they had over the other half of the railroad line. Therefore,
as already stated, since there was no novation of the contract between the plaintiffs and
the defendant, as regards the obligation of the latter to pay the former one-half of the
cost of the construction of the said railroad line, and since the plaintiffs did not include in
the sale, the credit that they had against the defendant, the allegation that the
obligation of the defendant became extinguished by the merger of the rights of creditor
and debtor by the purchase of Messrs. Phil. C. Whitaker and Venancio Concepcion is
wholly untenable.
Defendant set up three special defenses: 1) the novation of the contract by the
substitution of the debtor with the conformity of the creditors; 2) the confusion of the
rights of the creditor and debtor; and 3) the extinguishment of the contract.
The court a quo in its decision held that there was a novation of the contract by
the substitution of the debtor, and therefore absolved the defendant from the complaint
with costs against the plaintiffs. With regard to the prayer that the said contract be
declared valid and binding, the court held that there was no way of reviving the contract
which the parties themselves in interest had spontaneously and voluntarily extinguished.
ISSUES:
Whether or not there was a novation of the contract by the substitution of the
debtor with the consent of the creditor, as required by Article 1205 of the Civil Code; and
Whether or not there was a merger of rights of debtor and creditor under Article
1192 of the Civil Code.
RULING:
1.
NO, there was no novation of the contract. It should be noted that in order to
give novation its legal effect, the law requires that the creditor should consent to the
substitution of a new debtor. This consent must be given expressly for the reason that,
since novation extinguishes the personality of the first debtor who is to be substituted by
new one, it implies on the part of the creditor a waiver of the right that he had before the
novation which waiver must be express under the principle that renuntiatio non
praesumitur, recognized by the law in declaring that a waiver of right may not be
performed unless the will to waive is indisputably shown by him who holds the right. The
fact that Phil. C. Whitaker and Venancio Concepcion were willing to assume the
defendant's obligation to the plaintiffs is of no avail, if the latter have not expressly
consented to the substitution of the first debtor. As has been said, in all contracts of
novation consisting in the change of the debtor, the consent of the creditor is
indispensable, pursuant to Article 1205 of the Civil Code which reads as follows:
Novation which consists in the substitution of a new debtor in the place of the original
that said plaintiff might pay in the name of the defendant on account of a promissory
note for P45, 000 executed by it.
One year and some months later, or in February, 1930, and in April, 1931, the
steamship Yusingco needed some repairs which were made by the Earnshaw Docks &
Honolulu Iron Works upon petition of A. Yusingco Hermanos which, according to
documentary evidence of record, was co-owner of Pelagio Yusingco. The repairs were
made upon the guaranty of the defendant and appellant Vicente Madrigal at a cost of
P8,244.66.
When neither A. Yusingco Hermanos nor Pelagio Yusingco could pay said sum to
the Earnshaw Docks & Honolulu Iron Works, the defendant and appellant Vicente
Madrigal had to make payment thereof with the stipulated interest thereon, which was at
the rate of 9 per cent per annum, on March 9, 1932, because he was bound thereto by
reason of the bond filed by him, the payment then made by him having amounted to
P8,777.60. Some days later, when said defendant discovered that he was not to be
reimbursed for the repairs made on the steamship Yusingco, he brought an action
against his co-defendant Pelagio Yusingco and A. Yusingco Hermanos to compel them to
reimburse him, which resulted in a judgment favorable to him and adverse to the
Yusingcos, as the latter were ordered to pay him the sum of P3,269.66 plus interest
thereon at said rate of 9 per cent per annum from May 6, 1931, with the costs of the suit.
It was provided in the judgment that upon failure of the Yusingcos to pay the abovestated amounts to Vicente Madrigal, a writ of execution would be issued in order to have
the steamship Yusingco sold at public auction for the purpose of satisfying said amounts
with the proceeds thereof.
Inasmuch as neither the defendant Pelagio Yusingco nor A. Yusingco Hermanos
paid the amount of the judgment rendered in civil case No. 41654, in favor of the
defendant and appellant Vicente Madrigal, the latter sought and obtained from the Court
of First Instance, which tried the case, the issuance of the corresponding writ of
execution. However, before the sale of the steamship Yusingco, by virtue of the writ of
execution so issued, was carried out, the plaintiff and appellant filed with the defendant
sheriff a third party claim demanding said ship for himself, alleging that it had been
mortgaged to him long before the issuance of said writ and, therefore, he was entitled to
the possession thereof.
The defendant sheriff then informed the defendant and
appellant Vicente Madrigal that if he wished to have the execution sought by him carried
out, he should file the indemnity bond required by section 451 of Act No. 190. This was
done by Vicente Madrigal, but in order to prevent him and the sheriff from proceeding
with the execution, the plaintiff and appellant instituted this case in the court of origin
and asked for the issuance of a writ of preliminary injunction addressed to said two
defendants to restrain them from selling the steamship Yusingco at public auction. The
writ of preliminary injunction, which was issued on August 19, 1932, was later dissolved,
the defendant and appellant Vicente Madrigal having filed a bond of P5,000. This left the
preliminary injunction unimpaired and valid for the sale of the steamship Yusingco at
public auction. For this reason, said ship was sold at public auction on September 19,
1932, and was purchased, under the circumstances, by the plaintiff and appellant itself,
which was the highest bidder, having made the highest bid of P12,000. Of said amount,
the defendant sheriff turned over P10,195 to Vicente Madrigal in payment of his
judgment credit. It is said sum of P10,195 which the lower court ordered Vicente
Madrigal to turn over to the plaintiff.
ISSUE:
Whether or not the credit of the plaintiff, as mortgaged creditor of Pedagio
Yusingco, is superior to that of Vicente Madrigal, as judgment creditor of said Pelagio
Yusingco and A. Yusingco Hermones.
RULING:
NO, the defendant and appellant Vicente Madrigal enjoy preference in the
payment of his judgment credit.
After the steamship Yusingco had been sold by virtue of the judicial writ issued in
civil case No. 41654 for the execution of the judgment rendered in favor of Vicente
Madrigal, the only right left to the plaintiff was to collect its mortgage credit from the
purchaser thereof at public auction, inasmuch as the rule is that a mortgage directly and
immediately subjects the property on which it is imposed, whoever its possessor may be,
to the fulfillment of the obligation for the security of which it was created (Article 1876,
Civil Code); but it so happens that it can not take such steps now because it was the
purchaser of the steamship Yusingco at public auction, and it was so with full knowledge
that it had a mortgage credit on said vessel. Obligations are extinguished by the merger
of the rights of the creditor and debtor (Articles 1156 and 1192, Civil Code).
COMPENSATION REQUISITES
1.
2.
3.
FACTS
Petitioner E.G.V. Realty Development Corporation is the owner/developer of a
seven-storey condominium building known as Cristina Condominium. Cristina
Condominium Corporation holds title to all common areas of Cristina Condominium and
is in charge of managing, maintaining and administering the condominiums common
areas and providing for the buildings security. Respondent Unisphere International, Inc.
(hereinafter referred to as Unisphere) is the owner/occupant of Unit 301 of said
condominium. On November 28, 1981, respondent Unispheres Unit 301 was allegedly
robbed of various items valued at P6,165.00. The incident was reported to petitioner
CCC. On July 25, 1982, another robbery allegedly occurred at Unit 301 where the items
carted away were valued at P6,130.00, bringing the total value of items lost to
P12,295.00. This incident was likewise reported to petitioner CCC. On October 5, 1982,
respondent Unisphere demanded compensation and reimbursement from petitioner CCC
for the losses incurred as a result of the robbery. On January 28, 1987, petitioners E.G.V.
Realty and CCC jointly filed a petition with the Securities and Exchange Commission
(SEC) for the collection of the unpaid monthly dues in the amount of P13,142.67 against
respondent Unisphere.
ISSUE
Whether or not set-off or compensation has taken place in the instant case.
RULING
Compensation or offset under the New Civil Code takes place only when two
persons or entities in their own rights, are creditors and debtors of each other. (Art.
1278).
A distinction must be made between a debt and a mere claim. A debt is an
amount actually ascertained. It is a claim which has been formally passed upon by the
courts or 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 of a
debt and must pass thru the process prescribed by law before it develops into what is
properly called a debt. Absent, however, any such categorical admission by an obligor or
final adjudication, no compensation or off-set can take place. Unless admitted by a
debtor himself, the conclusion that he is in truth indebted to another cannot be definitely
and finally pronounced, no matter how convinced he may be from the examination of the
pertinent records of the validity of that conclusion the indebtedness must be one that is
admitted by the alleged debtor or pronounced by final judgment of a competent court or
in this case by the Commission.
There can be no doubt that Unisphere is indebted to the Corporation for its unpaid
monthly dues in the amount of P13,142.67. This is admitted.
COMPENSATION REQUISITES
AEROSPACE CHEMICAL V CA
g.r.no. 108129 september 23, 1999
FACTS
Should expenses for the storage and preservation of the purchased fungible
goods, namely sulfuric acid, be on seller's account pursuant to Article 1504 of the Civil
Code?
RULING
Petitioner tries to exempt itself from paying rental expenses and other damages
by arguing that expenses for the preservation of fungible goods must be assumed by the
seller. Rental expenses of storing sulfuric acid should be at private respondent's account
until ownership is transferred, according to petitioner. However, the general rule that
before delivery, the risk of loss is borne by the seller who is still the owner, is not
applicable in this case because petitioner had incurred delay in the performance of its
obligation. Article 1504 of the Civil Code clearly states: "Unless otherwise agreed, the
goods remain at the seller's risk until the ownership therein is transferred to the buyer,
but when the ownership therein is transferred to the buyer the goods are at the buyer's
risk whether actual delivery has been made or not, except that: (2) Where actual
delivery has been delayed through the fault of either the buyer or seller the goods are at
the risk of the party at fault."
On this score, we quote with approval the findings of the appellate court, thus:
The defendant [herein private respondent] was not remiss in reminding the plaintiff that
it would have to bear the said expenses for failure to lift the commodity for an
unreasonable length of time.But even assuming that the plaintiff did not consent to be so
bound, the provisions of Civil Code come in to make it liable for the damages sought by
the defendant.
COMPENSATION REQUISITES
APODACA V NLRC
G.R.No. 80039 April1 8, 1989
FACTS
ISSUE:
Whether or not the Court of Appeals erred when it ruled that the requisites for
legal compensation as set forth under articles 1277 and 1278 of the civil code do not
concur in the case at bar.
RULING:
NO. Legal compensation could not have occurred because of the absence of one
requisite in this case - that both debts must be due and demandable.
As observed by the Court of Appeals, under the terms of the promissory note,
failure on the part of NAREDECO (PNB MADECOR) to pay the value of the instrument
after due notice has been made by PNEI would entitle PNEI to collect an 18% interest
per annum from date of notice of demand. Petitioner makes a similar assertion in its
petition. Petitioners obligation to PNEI appears to be payable on demand. Petitioner is
obligated to pay the amount stated in the promissory note upon receipt of a notice to
pay from PNEI. If petitioner fails to pay after such notice, the obligation will earn an
interest of 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 informed petitioner of (1) the conveyance of a certain portion of its
obligation to PNEI per a dacion en pago arrangement between PNEI and PNB, and (2) the
unpaid balance of its obligation after deducting the amount conveyed to PNB. The
import of this letter is not that PNEI was demanding payment, but that PNEI was advising
petitioner to settle the matter of implementing the earlier arrangement with PNB.
The answer admitted the allegations of the complaint insofar as the invoices were
concerned but presented as affirmative defenses; [a] a debit memo for P22,200.00 as
unrealized profit for a supposed commission that Silahis should have received from de
Leon for the sale of sprockets in the amount of P111,000.00 made directly to Dole
Philippines, Incorporated by the latter sometime in August 1975; and [b] Silahis' claim
that it is entitled to return the stainless steel screen which was found defective by its
client, Borden International, Davao City, and to have the corresponding amount
cancelled from its account with de Leon.
ISSUE:
Whether or not private respondent is liable to the petitioner for the commission or
margin for the direct sale which the former concluded and consummated with Dole
Philippines, Incorporated without coursing the same through herein petitioner.
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 Chief Legal
Counsel of PNB, and signed by Manuel Vijungco, chairman of the Board of Directors of
PNEI. In said letter, PNEI requested offsetting of accounts between petitioner and PNEI.
However, PNEIs own Assistant General Manager for Finance at that time, Atty. Loreto N.
Tang, testified that the letter was not a demand letter. THUS, Petition denied. Decision
affirmed
RULING:
It must be remembered that compensation takes place when two persons, in their
own right, are creditors and debtors to each other. Article 1279 of the Civil Code provides
that: "In order that compensation may be proper, it is necessary: [1] that each one of the
obligors be bound principally, and that he be at the same time a principal creditor of the
other; [2] that both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the latter has been
stated; [3] that the two debts be due; [4] that they be liquidated and demandable; [5]
that over neither of them there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor."
Undoubtedly, petitioner admits the validity of its outstanding accounts with
private respondent in the amount of P22,213.75 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 from taking place.
The Court agrees with respondent appellate court that there is no evidence on
record from which it can be inferred that there was any agreement between the
petitioner and private respondent prohibiting the latter from selling directly to Dole
Philippines, Incorporated. Definitely, it cannot be asserted that the debit memo was a
contract binding between the parties considering that the same, as correctly found by
the appellate court, was not signed by private respondent nor was there any mention
therein of any commitment by the latter to pay any commission to the former involving
the sale of sprockets to Dole Philippines, Inc. in the amount of P111,000.00.
Indeed, such document can be taken as self-serving with no probative value
absent a showing or at the very least an inference, that the party sought to be bound
assented to its contents or showed conformity thereto. Thus the questioned decision of
respondent appellate court is hereby affirmed.
COMPENSATION LEGAL; WHEN PROHIBITED
ENGRACIO FRANCIA
VS. INTERMEDIATE APPELLATE COURT and HO FERNANDEZ
G.R. No. L-67649
June 28, 1988
162 SCRA 753
FACTS:
Engracio Francia is the registered owner of a residential lot, 328 square meters,
and a two-story house built upon it situated at Barrio San Isidro, now District of Sta.
Clara, Pasay City, Metro Manila. On October 15, 1977, a 125 square meter portion of
Francia's property was expropriated by the Republic of the Philippines for the sum of
P4,116.00 representing the estimated amount equivalent to the assessed value of the
aforesaid portion. Since 1963 up to 1977 inclusive, Francia failed to pay his real estate
taxes. Thus, on December 5, 1977, his property was sold at public auction pursuant to
Section 73 of Presidential Decree No. 464 known as the Real Property Tax Code in order
to satisfy a tax delinquency of P2,400.00. Ho Fernandez was the highest bidder for the
property. On March 20, 1979, Francia filed a complaint to annul the auction sale. He
later amended his complaint on January 24, 1980. The petitioner seeks to set aside the
auction sale of his property which took place on December 5, 1977, and to allow him to
recover a 203 square meter lot which was sold at public auction to Ho Fernandez and
ordered titled in the latter's name. He further averred that his tax delinquency of
P2,400.00 has been extinguished by legal compensation since the government owed him
P4, 116.00 when a portion of his land was expropriated.
The lower court rendered a decision in favor Fernandez which was affirmed by the
Intermediate Appellate Court . Hence, this petition for review.
ISSUE:
Whether or not the tax delinquency of Francia has been extinguished by legal
compensation.
RULING:
There is no legal basis for the contention. By legal compensation, obligations of
persons, who in their own right are reciprocally debtors and creditors of each other, are
extinguished (Art. 1278, Civil Code). The circumstances of the case do not satisfy the
requirements provided by Article 1279, to wit: (1) that each one of the obligors be
bound principally and that he be at the same time a principal creditor of the other; (2)
that the two debts be due.
The Court had consistently ruled that there can be no off-setting of taxes against
the claims that the taxpayer may have against the government. A person cannot refuse
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 of a tax cannot await the results of a lawsuit
against the government. In addition, a taxpayer cannot refuse to pay his tax when called
upon by the collector because he has a claim against the governmental body not
included in the tax levy.
There are also other factors which compelled the Court to rule against the
petitioner. The tax was due to the city government while the expropriation was effected
by the national government. Moreover, the amount of P4,116.00 paid by the national
government for the 125 square meter portion of his lot was deposited with the Philippine
National Bank long before the sale at public auction of his remaining property. Notice of
the deposit dated September 28, 1977 was received by the petitioner on September 30,
1977. The petitioner admitted in his testimony that he knew about the P4,116.00
deposited with the bank but he did not withdraw it. It would have been an easy matter
to withdraw P2,400.00 from the deposit so that he could pay the tax obligation thus
aborting the sale at public auction.
The petition for review was dismissed.
COMPENSATION REQUISITES
TRINIDAD V ACAPULCO
G.R.No. 147477 June 27, 2006
FACTS
On May 6, 1991, respondent Estrella Acapulco filed a Complaint before the RTC
seeking the nullification of a sale she made in favor of petitioner Hermenegildo M.
Trinidad. She alleged: Sometime in February 1991, a certain Primitivo Caete requested
her to sell a Mercedes Benz for P580,000.00. Caete also said that if respondent herself
will buy the car, Caete was willing to sell it for P500,000.00. Petitioner borrowed the car
from respondent for two days but instead of returning the car as promised, petitioner
told respondent to buy the car from Caete for P500,000.00 and that petitioner would
pay respondent after petitioner returns from Davao. Following petitioners instructions,
respondent requested Caete to execute a deed of sale covering the car in respondents
favor for P500,000.00 for which respondent issued three checks in favor of Caete.
Respondent thereafter executed a deed of sale in favor of petitioner even though
petitioner did not pay her any consideration for the sale. When petitioner returned from
Davao, he refused to pay respondent the amount of P500,000.00 saying that said
amount would just be deducted from whatever outstanding obligation respondent had
with petitioner. Due to petitioners failure to pay respondent, the checks that respondent
issued in favor of Caete bounced, thus criminal charges were filed against her.[3]
Respondent then prayed that the deed of sale between her and petitioner be declared
null and void; that the car be returned to her; and that petitioner be ordered to pay
damages.
ISSUE
Whether or not petitioners claim for legal compensation was already too late
RULING
The court ruled in favor of the petitioner. Compensation takes effect by operation
of law even without the consent or knowledge of the parties concerned when all the
requisites mentioned in Article 1279 of the Civil Code are present.[26] This is in
consonance with Article 1290 of the Civil Code which provides that: Article 1290. When
all the requisites mentioned in article 1279 are present, compensation takes effect by
operation of law, and extinguishes both debts to the concurrent amount, even though
the creditors and debtors are not aware of the compensation. Since it takes place ipso
jure,[27] when used as a defense, it retroacts to the date when all its requisites are
fulfilled.
Petitioners stance is that legal compensation has taken place and operates even
against the will of the parties because: (a) respondent and petitioner were personally
both creditor and debtor of each other; (b) the monetary obligation of respondent was
P566,000.00 and that of the petitioner was P500,000.00 showing that both indebtedness
were monetary obligations the amount of which were also both known and liquidated; (c)
both monetary obligations had become due and demandablepetitioners obligation as
shown in the deed of sale and respondents indebtedness as shown in the dishonored
checks; and (d) neither of the debts or obligations are subject of a controversy
commenced by a third person.
NOVATION: SUBJECTIVE NOVATION; SUBSTITUION OF DEBTOR (Art. 1293) (EXPROMISION
VS. DELEGACION)
AQUINTEY V. TIBONG
1.
2.
3.
4.
5.
6.
7.
FACTS
Sometime in 1996 and 1997, petitioner Swagman Hotels and Travel, Inc., through Atty.
Leonor L. Infante and Rodney David Hegerty, its president and vice-president,
respectively, obtained from private respondent Neal B. Christian loans evidenced by
three promissory notes dated 7 August 1996, 14 March 1997, and 14 July 1997. Each of
the promissory notes is in the amount of US$50,000 payable after three years from its
date with an interest of 15% per annum payable every three months. In a letter dated
16 December 1998, Christian informed the petitioner corporation that he was
terminating the loans and demanded from the latter payment in the total amount of
US$150,000 plus unpaid interests in the total amount of US$13,500. On 2 February 1999,
private respondent Christian filed with the Regional Trial Court of Baguio City, Branch 59,
a complaint for a sum of money and damages against the petitioner corporation,
Hegerty, and Atty. Infante. The petitioner corporation, together with its president and
vice-president, filed an Answer raising as defenses lack of cause of action and novation
of the principal obligations. According to them, Christian had no cause of action because
the three promissory notes were not yet due and demandable.
ISSUE
Where there is a valid novation, may the original terms of contract which has been
novated still prevail?
HELD
The receipts, as well as private respondents summary of payments, lend credence to
petitioners claim that the payments were for the principal loans and that the interests
on the three consolidated loans were waived by the private respondent during the
undisputed renegotiation of the loans on account of the business reverses suffered by
the petitioner at the time.
There was therefore a novation of the terms of the three promissory notes in that the
interest was waived and the principal was payable in monthly installments of US$750.
Alterations of the terms and conditions of the obligation would generally result only in
modificatory novation unless such terms and conditions are considered to be the
essence of the obligation itself.[25] The resulting novation in this case was, therefore, of
the modificatory type, not the extinctive type, since the obligation to pay a sum of
money remains in force.
Thus, since the petitioner did not renege on its obligation to pay the monthly
installments conformably with their new agreement and even continued paying during
the pendency of the case, the private respondent had no cause of action to file the
complaint.
It is only upon petitioners default in the payment of the monthly
amortizations that a cause of action would arise and give the private respondent a right
to maintain an action against the petitioner.
NOVATION: SUBJECTIVE NOVATION; SUBROGATION OF THE RIGHTS OF THE CREDITOR
(LEGAL VS. CONVENTIONAL)
AZOLLA FARMS V CA
G.R.No. 138085 November 11, 2004
FACTS
Petitioner Francis R. Yuseco, Jr., is the Chairman, President and Chief Operating
Officer of petitioner Azolla Farms International Philippines. In 1982, Azolla Farms
undertook to participate in the National Azolla Production Program wherein it will
purchase all the Azolla produced by the Azolla beneficiaries in the amount not exceeding
the peso value of all the inputs provided to them. The project also involves the then
Ministry of Agriculture, the Kilusang Kabuhayan at Kaunlaran, and the Kiwanis. To
finance its participation, petitioners applied for a loan with Credit Manila, Inc., which the
latter endorsed to its sister company, respondent Savings Bank of Manila (Savings Bank).
The Board of Directors of Azolla Farms, meanwhile, passed a board resolution on August
31, 1982, authorizing Yuseco to borrow from Savings Bank in an amount not exceeding
P2,200,000.00.
The loan having been approved, Yuseco executed a promissory note on
September 13, 1982, promising to pay Savings Bank the sum of P1,400,000.00 on or
before September 13, 1983. the Azolla Farms project collapsed. Blaming Savings Bank,
petitioners Yuseco and Azolla Farms filed on October 3, 1983 with the Regional Trial Court
of Manila (Branch 25), a complaint for damages. In essence, their complaint alleges that
Savings Bank unjustifiably refused to promptly release the remaining P300,000.00 which
impaired the timetable of the project and inevitably affected the viability of the project
resulting in its collapse, and resulted in their failure to pay off the loan. Thus, petitioners
pray for P1,000,000.00 as actual damages, among others.
ISSUE
Whether the trial court erred in admitting petitioners amended complaint
RULING
SEC. 5. Amendment to conform to or authorize presentation of evidence .When
issues not raised by the pleadings are tried by express or implied consent of the parties,
they shall be treated in all respects, as if they had been raised in the pleadings. Such
amendment of the pleadings as may be necessary to cause them to conform to the
evidence and to raise these issues may be made upon motion of any party at any time,
even after judgment; but failure so to amend does not affect the result of the trial of
these issues. If evidence is objected to at the trial on the ground that it is not within the
issues made by the pleadings, the court may allow the pleadings to be amended and
shall do so freely when the presentation of the merits of the action will be subserved
thereby and the objecting party fails to satisfy the court that the admission of such
evidence would prejudice him in maintaining his action or defense upon the merits.
As can be gleaned from the records, it was petitioners belief that respondents
evidence justified the amendment of their complaint. The trial court agreed thereto and
admitted the amended complaint. On this score, it should be noted that courts are given
the discretion to allow amendments of pleadings to conform to the evidence presented
during the trial.
NOVATION: SUBJECTIVE NOVATION; SUBROGATION OF THE RIGHTS OF THE CREDITOR
(LEGAL VS. CONVENTIONAL)
CALIFORNIA BUS LINES V STATE INVESMENTS
G.R.No. 147950 December 11, 2003
FACTS
Sometime in 1979, Delta Motors CorporationM.A.N. Division (Delta) applied for
financial assistance from respondent State Investment House, Inc.
SIHI agreed to extend a credit line to Delta for P25,000,000.00 in three separate credit
agreements dated May 11, June 19, and August 22, 1979. Delta eventually became
indebted to SIHI to the tune of P24,010,269.32
From April 1979 to May 1980, petitioner California Bus Lines, Inc. (hereafter CBLI),
purchased on installment basis 35 units of M.A.N. Diesel Buses and two (2) units of
M.A.N. Diesel Conversion Engines from Delta. To secure the payment of the purchase
price of the 35 buses, CBLI and its president, Mr. Dionisio O. Llamas, executed sixteen
(16) promissory notes in favor of Delta on January 23 and April 25, 1980.[5] In each
promissory note, CBLI promised to pay Delta or order, P2,314,000 payable in 60 monthly
installments starting August 31, 1980, with interest at 14% per annum. CBLI further
promised to pay the holder of the said notes 25% of the amount due on the same as
attorneys fees and expenses of collection, whether actually incurred or not, in case of
judicial proceedings to enforce collection. In addition to the notes, CBLI executed chattel
mortgages over the 35 buses in Deltas favor. When CBLI defaulted on all payments due,
it entered into a restructuring agreement with Delta on October 7, 1981, to cover its
overdue obligations under the promissory notes.CBLI continued having trouble meeting
its obligations to Delta. This prompted Delta to threaten CBLI with the enforcement of
the management takeover clause.
ISSUE
Whether the Restructuring Agreement dated October 7, 1981, between petitioner
CBLI and Delta Motors, Corp. novated the five promissory notes Delta Motors, Corp.
assigned to respondent SIHI.
RULING
Novation has been defined as the extinguishment of an obligation by the
substitution or change of the obligation by a subsequent one which terminates the first,
either by changing the object or principal conditions, or by substituting the person of the
debtor, or subrogating a third person in the rights of the creditor.For novation to take
place, four essential requisites have to be met, namely, (1) a previous valid obligation;
(2) an agreement of all parties concerned to a new contract; (3) the extinguishment of
the old obligation; and (4) the birth of a valid new obligation.
In this case, the attendant facts do not make out a case of novation. The
restructuring agreement between Delta and CBLI executed on October 7, 1981, shows
that the parties did not expressly stipulate that the restructuring agreement novated the
promissory notes. Absent an unequivocal declaration of extinguishment of the preexisting obligation, only a showing of complete incompatibility between the old and the
new obligation would sustain a finding of novation by implication.
NOVATION: SUBJECTIVE NOVATION; SUBROGATION OF THE RIGHTS OF THE CREDITOR
(LEGAL VS. CONVENTIONAL)
OCAMPO-PAULE V CA
G.R.No. 145872 February 4, 2002
FACTS
During the period August, 1991 to April, 1993, petitioner received from private
complainant Felicitas M. Calilung several pieces of jewelry with a total value of 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 thereafter turn over and account for the proceeds of the
sale, or otherwise return to private complainant the unsold pieces of jewelry within two
months from receipt thereof. Since private complainant and petitioner are relatives, the
former no longer required petitioner to issue a receipt acknowledging her receipt of the
jewelry.When petitioner failed to remit the proceeds of the sale of the jewelry or to return
the unsold pieces to private complainant, the latter sent petitioner a demand letter.
Notwithstanding receipt of the demand letter, petitioner failed to turn over the proceeds
of the sale or to return the unsold pieces of jewelry. Private complainant was constrained
to refer the matter to the barangay captain of Sta. Monica, Lubao, Pampanga.
ISSUE
Whether or not there was a novation of petitioners criminal liability when she and
private complainant executed the Kasunduan sa Bayaran.
RULING
It is well-settled that the following requisites must be present for novation to take
place: (1) a previous valid obligation; (2) agreement of all the parties to the new
contract; (3) extinguishment of the old contract; and (4) validity of the new one.
Novation, in its broad concept, may either be extinctive or modificatory. It is extinctive
when an old obligation is terminated by the creation of a new obligation that takes the
place of the former; it is merely modificatory when the old obligation subsists to the
extent it remains compatible with the amendatory agreement.
The execution of the Kasunduan sa Bayaran does not constitute a novation of the
original agreement between petitioner and private complainant. Said Kasunduan did not
change the object or principal conditions of the contract between them. The change in
manner of payment of petitioners obligation did not render the Kasunduan incompatible
with the original agreement, and hence, did not extinguish petitioners liability to remit
the proceeds of the sale of the jewelry or to return the same to private complainant.
An obligation to pay a sum of money is not novated, in a new instrument wherein
the old is ratified, by changing only the terms of payment and adding other obligations
not incompatible with the old one, or wherein the old contract is merely supplemented
by the new one.
In any case, novation is not one of the grounds prescribed by the Revised Penal
Code for the extinguishment of criminal liability.
NOVATION: SUBJECTIVE NOVATION; SUBROGATION OF THE RIGHTS OF THE CREDITOR
(LEGAL VS. CONVENTIONAL)
In their Answer petitioners admitted their loan from respondent but averred that there
was a novation so that the amount loaned was actually converted into respondent's
contribution to a partnership formed between them on 23 March 1990.
ISSUE
Whether or not there was novation in the instant case?
RULING
For novation to take place, the following requisites must concur: (a) there must be
a previous valid obligation; (b) there must be an agreement of the parties concerned to a
new contract; (c) there must be the extinguishment of the old contract; and, (d) there
must be the validity of 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.
Significantly, novation is never presumed. It must appear by express agreement
of the parties, or by their acts that are too clear and unequivocal to be mistaken for
anything else. An obligation to pay a sum of money is not novated in a new instrument
wherein the old is ratified by changing only the terms of payment and adding other
obligations not incompatible with the old one, or wherein the old contract is merely
supplemented by the new one.
NOVATION: SUBJECTIVE NOVATION; SUBROGATION OF THE RIGHTS OF THE CREDITOR
(LEGAL VS. CONVENTIONAL)
FACTS
In 1978, petitioner spouses Florante and Laarni Bautista purchased a house and
lot in Pilar Village, Las Pinas, Metro Manila. To partially finance the purchase, they
obtained from the Apex Mortgage & Loan Corporation a loan in the amount of
P100,180.00. They executed a promissory note on December 22, 1978 obligating
themselves, jointly and severally, to pay the "principal sum of P100,180.00 with interest
rate of 12% and service charge of 3%" for a period of 240 months, or twenty years, from
date, in monthly installments of P1,378.83. Late payments were to be charged a penalty
of one and one-half per cent (1 1/2%) of the amount due. In the same promissory note,
petitioners authorized Apex to "increase the rate of interest and/or service charges"
without notice to them in the event that a law, Presidential Decree or any Central Bank
regulation should be enacted increasing the lawful rate of interest and service charges
on the loan. Payment of the promissory note was secured by a second mortgage on the
house and lot purchased by petitioners.Petitioner spouses failed to pay several
installments. On September 20, 1982, they executed another promissory note in favor of
Apex. This note was in the amount of P142,326.43 at the increased interest rate of
twenty-one per cent (21%) per annum with no provision for service charge but with
penalty charge of 1 1/2% for late payments.
ISSUE
ISSUE
RULING
Novation has four (4) essential requisites: (1) the existence of a previous valid
obligation; (2) the agreement of all parties to the new contract; (3) the extinguishment of
the old contract; and (4) the validity of the new one. In the instant case, all four
requisites have been complied with. The first promissory note was a valid and subsisting
contract when petitioner spouses and Apex executed the second promissory note. The
second promissory note absorbed the unpaid principal and interest of P142,326.43 in the
first note which amount became the principal debt therein, payable at a higher interest
rate of 21% per annum. Thus, the terms of the second promissory note provided for a
higher principal, a higher interest rate, and a higher monthly amortization, all to be paid
within a shorter period of 16.33 years. These changes are substantial and constitute the
principal conditions of the obligation. Both parties voluntarily accepted the terms of the
second note; and also in the same note, they unequivocally stipulated to extinguish the
first note. Clearly, there was animus novandi, an express intention to novate. The first
promissory note was cancelled and replaced by the second note. This second note
became the new contract governing the parties' obligations.
NOVATION: SUBJECTIVE NOVATION; SUBROGATION OF THE RIGHTS OF THE CREDITOR
(LEGAL VS. CONVENTIONAL)
RULING
Petitioner's claim that there was a novation of contract because there was a
"second" agreement between the parties due to the encroachment made by the national
road on the property subject of the contract by 1,647 square meters, is unavailing.
Novation, one of the modes of extinguishing an obligation, requires the concurrence of
the following: (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 an obligation may be extinguished by
another which substitutes the same, 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. We quote with approval the following findings of the trial court: Since the
alleged agreement between the plaintiffs [herein respondents] and defendant [herein
petitioner] is not in writing and the alleged agreement pertains to the novation of the
conditions of the contract to sell of the parcel of land subject of the instant litigation, ipso
facto, novation is not applicable in this case since, as stated above, novation must be
clearly proven by the proponent thereof and the defendant in this case is clearly barred
by the Statute of Frauds from proving its claim.
Consorcia L. Venegas was the owner of a parcel of land located in Barrio BagongIlog in Pasig, Rizal and covered by TCT No. 247434. She delivered said title to, and
executed a simulated deed of sale in favor of, Datuin for purposes of obtaining a loan
with the RCBC. Datuin claimed that he had connections with the management of RCBC
and offered his assistance to Venegas in obtaining a loan from the bank. He issued a
receipt to the Venegases, acknowledging that the lot was to be used as a collateral for
bank financing and that the deed of sale was executed only as a device to obtain the
loan. However, Datuin prepared a deed of absolute sale and, through forgery, made it
appear that the spouses Venegas executed the document in his favor. Venegas learned
of Datuin's fraudulent scheme when she sold the lot to herein respondents for P160,000
in a deed of conditional sale. She, along with her husband, instituted a complaint against
Datuin in the then Court of First Instance CFI of Rizal, Branch 11, docketed as Civil Case
No. 188893, for recovery of property and nullification of TCT No. 377734, with damages.
However, when the case was called for pre-trial, the Venegases' counsel failed to appear
and the complaint was eventually dismissed without prejudice.
ISSUE
Whether or not filing of Civil Case No. 36852 by the Venegases had the effect of
interrupting the prescriptive period for the filing of the complaint for judicial foreclosure
of mortgage?
RULING
We agree with the CA's ruling that Civil Case No. 36852 did not have the effect of
interrupting the prescription of the action for foreclosure of mortgage as it was not an
action for foreclosure but one for annulment of title and nullification of the deed of
mortgage and the deed of sale. It was not at all the action contemplated in Article 1155
of the Civil Code which explicitly provides that the prescription of an action is interrupted
only when the action itself is filed in court. Petitioner could have protected its right over
the property by filing a cross-claim for judicial foreclosure of mortgage against
respondents in Civil Case No. 36852. The filing of a cross-claim would have been proper
there. All the issues pertaining to the mortgage validity of the mortgage and the
propriety of foreclosure would have been passed upon concurrently and not on a
piecemeal basis. This should be the case as the issue of foreclosure of the subject
mortgage was connected with, or dependent on, the subject of annulment of mortgage
in Civil Case No. 36852. The actuations clearly manifested that petitioner knew its rights
under the law but chose to sleep on the same.
EXTINCTIVE PRESCRIPTION: INTERRUPTION
MESINA V. GARCIA
G.R. No. 168035 November 30, 2006
FACTS
Atty. Honorio Valisno Garcia and Felicisima Mesina, during their lifetime, enstered
into a Contract to Sell over a lot consisting of 235 square meters, situated at Diversion
Road, Sangitan, Cabanatuan City, covered and embraced by TCT No. T-31643 in the
name of Felicisima Mesina which title was eventually cancelled and TCT No. T-78881 was
issued in the name of herein petitioners. The Contract to Sell provides that the cost of
the lot is P70.00 per square meter for a total amount of P16,450.00; payable within a
period not to exceed 7 years at an interest rate of 12% per annum, in successive
monthly installments of P260.85 per month, starting May 1977. Thereafter, the
succeeding monthly installments are to be paid within the first week of every month, at
the residence of the vendor at Quezon City, with all unpaid monthly installments earning
an interest of 1% per month. Instituting this case at bar, respondent asserts that
despite the full
payment made on 7 February 1984 for the consideration of the
subject lot, petitioners refused to issue the necessary Deed of Sale to effect the transfer
of the property to her.
ISSUE
RULING
Article 1155 of the Civil Code is explicit that the prescriptive period is interrupted
when an action has been filed in court; when there is a written extrajudicial demand
made by the creditors; and when there is any written acknowledgment of the debt by the
debtor.
The records reveal that starting 19 April 1986 until 2 January 1997 respondent
continuously demanded from the petitioners the execution of the said Deed of Absolute
Sale but the latter conjured many reasons and excuses not to execute the same.
Respondent even filed a Complaint before the Housing and Land Use Regulatory Board
way back in June, 1986, to enforce her rights and to compel the mother of herein
petitioners, who was still alive at that time, to execute the necessary Deed of Absolute
Sale for the transfer of title in her name. On 2 January 1997, respondent, through her
counsel, sent a final demand letter to the petitioners for the execution of the Deed of
Absolute Sale, but still to no avail. Consequently, because of utter frustration of the
respondent, she finally lodged a formal Complaint for Specific Performance with
Damages before the trial court on 20 January 1997.
Hence, from the series of written extrajudicial demands made by respondent to
have the execution of the Deed of Absolute Sale in her favor, the prescriptive period of
10 years has been interrupted. Therefore, it cannot be said that the cause of action of
the respondent has already been prescribed.
EXTINCTIVE PRESCRIPTION: INTERRUPTION
HEIRS OF GAUDIANE V CA
G.R.No. 119879 March 11, 2004
FACTS
The lot in controversy is Lot 4389 located at Dumaguete City and covered by
Original Certificate of Title No. 2986-A (OCT 2986-A) in the names of co-owners Felix and
Juana Gaudiane. Felix died in 1943 while his sister Juana died in 1939. Herein
respondents are the descendants of Felix while petitioners are the descendants of Juana.
On November 4, 1927, Felix executed a document entitled Escritura de Compra-Venta
(Escritura, for brevity) whereby he sold to his sister Juana his one-half share in Lot No.
4156 covered by Transfer Certificate of Title No. 3317-A.
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 filed a pleading in the trial court seeking to direct the Register of
Deeds of Dumaguete City to cancel OCT 2986-A covering Lot 4389 and to issue a new
title in favor of the Isos. This was later withdrawn after respondents predecessors-ininterest, Procopio Gaudiane and Segundo Gaudiane, opposed it on the ground that the
Isos falsified their copy of the Escritura by erasing Lot 4156 and intercalating in its
place Lot 4389.
ISSUE
LAUREANO V CA
G.R.No. 114776 February 2, 2000
FACTS;
Petitioner was employed in the singapore airlines limited as the pilot captain of B707. Sometime in 1982, defendant, hit by a recession, initiated cost-cutting measures.
Seventeen
expatriate captains in the Airbus fleet were found in excess of the
defendant's requirement. Consequently, defendant informed its expatriate pilots
including plaintiff of the situation and advised them to take advance leaves. Realizing
that the recession would not be for a short time, defendant decided to terminate its
excess personnel. It did not, however, immediately terminate it's A-300 pilots. It
reviewed their qualifications for possible promotion to the B-747 fleet. Among the 17
excess Airbus pilots reviewed, twelve were found qualified. Unfortunately, plaintiff was
not one of the twelve. Aggrieved, plaintiff on June 29, 1983, instituted a case for illegal
dismissal before the Labor Arbiter. Defendant moved to dismiss on jurisdictional grounds.
Before said motion was resolved, the complaint was withdrawn.
ISSUE ;
What is the prescriptive period for money claims arising from employer-employee
relationship?
Whether the court gravely erred in not giving due course to the claim of
petitioners and legal effect of prescription and laches adverted by defendants-appellants
in their answer and affirmative defenses proven during the hearing by documentary and
testimonial evidence.
RULING;
Article 291. Money claims. - All money claims arising from employee-employer
relations accruing during the effectivity of this Code shall be filed within three (3) years
from the time the cause of action accrued; otherwise they shall be forever barred.
RULING
As a general rule, ownership over titled property cannot be lost through
prescription.[12] Petitioners, however, invoke our ruling in Tambot vs. Court of
Appeals[13] which held that titled property may be acquired through prescription by a
person who possessed the same for 36 years without any objection from the registered
owner who was obviously guilty of laches.
It should be noted further that Article 291 of the Labor Code is a special law
applicable to money claims arising from employer-employee relations; thus, it
necessarily prevails over Article 1144 of the Civil Code, a general law. Basic is the rule in
statutory construction that 'where two statutes are of equal theoretical application to a
particular case, the one designed therefore should prevail.'
Petitioners claim is already rendered moot by our ruling barring petitioners from
raising the defense of 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.
As explained earlier, only Lot No. 4156 was sold. It was through this
misrepresentation that appellees predecessor-in-interest succeeded in withholding
possession of appellees share in Lot No. 4389. Appellees cannot, by their own fraudulent
act, benefit therefrom by alleging prescription and laches.
EXTINCTIVE PRESCRIPTION: INTERRUPTION
In the instant case, the action for damages due to illegal termination was filed by
plaintiff-appellee only on January 8, 1987 or more than four (4) years after the effectivity
date of his dismissal on November 1, 1982. Clearly, plaintiff-appellee's action has already
prescribed.
Carlos Delgado was the absolute owner of a parcel of land with an area of
692,549 square meter situated in the Municipality of Catarman Samar. Carlos Delgado
granted and conveyed by way of donation with quitclaim all rights, title, interest claim
and demand over a portion of land with an area of 165,000 square meter in favor of the
Commonwealth of the Philippines. The acceptance was then made to President Quezon
in his capacity as Commander-in-Chief. The Deed of Donation was executed with a
condition that the said land will be used for the formation of the National Defense of the
Philippines. The said parcel of land then covered by the Torrens System of the
Philippines and was registered in the name of Commonwealth of the Philippines for a
period of 40 years. The land was registered under TCT 0-2539-160 in favor of the
Commonwealth however without any annotation.
Upon declaration of independence, the Commonwealth was replaced by Republic
of the Philippines which took over the subject land and turned over to Civil Aeronautics
Administration, later named Bureau of Air Transportation Office. The said agency utilizes
the said land a domestic airport.
Jose Delgado filed a petition for reconveyance for a violation of the condition. The
RTC ruled in favor of the plaintiff Delgado. But the CA reversed the said decision because
of prescription. The petitioner filed only before 24 years o discovery which the law only
requires 10 years of filing.
ISSUE:
Whether or not the petitioners action for reconveyance is already barred by
prescription.
RULING:
The Supreme Court denied the petition and affirmed the decision of the Court of
Appeals because the time of filing has been prescribed. Under Article 1144 of the Civil
Code on Prescription based on written contracts, the filing of action for reconveyance is
within 10 years from the time the condition in the Deed of Donation was violated. The
petitioner herein filed only 24 years in the first action and 43 years in the second filing of
the 2nd action.
The action for reconveyance on the alleged excess of 33, 607 square meter
mistakenly included in the title was also prescribed Article 1456 of the Civil Code states,
if property is acquired through mistake or fraud, the person obtaining it is, by force of
law, considered a trustee of an implied trust for the benefits of the person from whom
the property comes, if within 10 years such action for reconveyance has not been
executed.
EXTINCTIVE PRESCRIPTION: INTERRUPTION
MAESTRADO vs. COURT OF APPEALS
327 SCRA 678
FACTS:
These consolidated cases involve Lot No. 5872 and the rights of the contending
parties thereto. The lot has an area of 57.601 sq.m. and is registered in the name of 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 of said spouse,
Angel Chaves, one of the heirs, initiated intestate proceedings and was appointed
administrator of said estates in the process. An inventory of the estates was made and
thereafter, the heirs agreed on a project partition. The court approved the partition but a
copy of said decision was missing. Nonetheless, the estate was divided among the heirs.
Subsequently, in 1956, the partition case effected and the respective shares of the heirs
were delivered to them.
Significantly, Lot No.5872 was not included in a number of documents. Parties
offered different explanations as to the omission of said lot in the documents. Petitioners
maintain the existence of an oral partition agreement entered into by all heirs after the
death of their parents. To set things right, petitioners then prepared a quitclaim to
confirm the alleged oral agreement. Respondents dispute voluntariness of their consent
to the quitclaims.
Six years after the execution of the quitclaims, respondents discovered that indeed
subject lot was still a common property in the name of the deceased spouses.
Eventually, an action for Quieting of Title was filed by petitioners on December 22, 1983.
The trial court considered Lot No. 5872 as still a common property and therefore
must be divided into six parts, there being six heirs. Petitioners appealed to the Court of
Appeals which sustained the decision of the trial court.
ISSUE:
Whether or not the action for quieting of title had already prescribed.
RULING:
The Supreme Court ruled that an action for quieting of title is imprescriptible
especially if the plaintiff is in possession of the property being litigated. One who is in
actual possession of a land, claiming to be the owner thereof may wait until his
possession is disturbed or his title is attacked before making steps to vindicate his right
because his undisturbed possession gives him a continuing right to seek the aid of the
courts to ascertain the nature of the adverse claim and its effect on his title. Moreover,
the Court held that laches is inapplicable in this case. This is because, as mentioned
earlier, petitioners possession of the subject lot has rendered their right to bring an
action for quieting of title imprescriptible.
ESTOPPEL (ART. 143-1439)
1.) DEFINITION AND MEANING
1.
2.
3.
FACTS:
Petitioner Tanay Recreation Center and Development Corp. (TRCDC) is the lessee
of a 3,090-square meter property located in Sitio Gayas, Tanay, Rizal, owned by Catalina
Matienzo Fausto, under a Contract of Lease. On this property stands the Tanay Coliseum
Cockpit operated by petitioner. The lease contract provided for 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 informing her of its intention to renew
the lease. However, it was Faustos daughter, respondent Anunciacion F. Pacunayen, who
replied, asking that petitioner remove the improvements built thereon, as she is now the
absolute owner of the property. It appears that Fausto had earlier sold the property to
Pacunayen and title has already been transferred in her name. Petitioner filed an
Amended Complaint for Annulment of Deed of Sale, Specific Performance with Damages,
and Injunction
In her Answer, respondent claimed that petitioner is estopped from assailing the
validity of the deed of sale as the latter acknowledged her ownership when it merely
asked for a renewal of the lease. According to respondent, when they met to discuss the
matter, petitioner did not demand for the exercise of its option to purchase the property,
and it even asked for grace period to vacate the premises.
ISSUE:
The contention in this case refers to petitioners priority right to purchase, also
referred to as the right of first refusal.
RULING:
When a lease contract contains a right of first refusal, the lessor is under a legal
duty to the lessee not to sell to anybody at any price until after he has made an offer to
sell to the latter at a certain price and the lessee has failed to accept it. The lessee has a
right that the lessor's first offer shall be in his favor. Petitioners right of first refusal is an
integral and indivisible part of the contract of lease and is inseparable from the whole
contract. The consideration for the lease includes the consideration for the right of first
refusal and is built into the reciprocal obligations of the parties.
It was erroneous for the CA to rule that the right of first refusal does not apply
when the property is sold to Faustos relative. When the terms of an agreement have
been reduced to writing, it is considered as containing all the terms agreed upon. As
such, there can be, between the parties and their successors in interest, no evidence of
such terms other than the contents of the written agreement, except when it fails to
express the true intent and agreement of the parties. In this case, the wording of the
stipulation giving petitioner the right of first refusal is plain and unambiguous, and leaves
no room for interpretation. It simply means that should Fausto decide to sell the leased
property during the term of the lease, such sale should first be offered to petitioner. The
stipulation does not provide for the qualification that such right may be exercised only
when the sale is made to strangers or persons other than Faustos kin. Thus, under the
terms of petitioners right of first refusal, Fausto has the legal duty to petitioner not to
sell the property to anybody, even her relatives, at any price until after she has made an
offer to sell to petitioner at a certain price and said offer was rejected by petitioner.
unpaid rentals from 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 fifteen (15) days from receipt of the demand letter; that despite receipt
of the letter and after the expiration of the 15-day period, the Mendozas refused 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 thereof to Manotok, and to pay the unpaid rentals from 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 finally vacates the premise.
ISSUE:
Whether or not the Honorable Court of Appeals committed error in giving efficacy
to a lease contract signed in 1988 when the alleged signatory was already dead since
1986.
RULING:
This is a case for unlawful detainer. It appears that respondent corporation leased
the property subject of this case to petitioners father. After expiration of the lease,
petitioner continued to occupy the property but failed 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 for unlawful detainer may be filed when possession by a landlord,
vendor, vendee or other person of any land or building is unlawfully withheld after the
expiration or termination of the right to hold possession by virtue of a contract, express
or implied. The only issue to be resolved in an unlawful detainer case is physical or
material possession of the property involved, independent of any claim of ownership by
any of 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 refute the existence of the lease contract because of his prior admissions in
his pleadings regarding his status as tenant on the subject property.
FACTS:
Manotok was the administrator of a parcel of land which it leased to Benjamin
Mendoza; that the contract of lease expired on December 31, 1988; that even after the
expiration of the lease contract, Benjamin Mendoza, and after his demise, his son,
Romeo, continued to occupy the premises and thus incurred a total of P44,011.25 as
was introduced to petitioner Jefferson Lim by Marissa Bontia, one of his employees.
Marissas father was a former employee of Lims father. 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.
Before investing, Lim requested Shia for proof that the foreign exchange was
really lucrative. They conducted mock tradings without money involved. As the mock
trading showed profitability, Lim decided to invest with a marginal deposit of US$5,000 in
managers check. The marginal deposit represented the advance capital for his future
tradings. It was made to apply to any authorized future transactions, and answered for
any trading account against which the deposit was made, for any loss of whatever
nature, and for all obligations, which the investor would incur with the broker.
Petitioner Lim was then allowed to trade with respondent company which was
coursed through Shia by virtue of blank order forms all signed by Lim. Respondent
furnished Lim with the daily market report and statements of transactions as evidenced
by the receiving forms, some of which were received by Lim.
Meanwhile, on October 22, 1992, respondent learned that it would take seventeen
(17) days to clear the managers check given by petitioner. Shia returned the check to
petitioner who informed Shia that petitioner would rather replace the managers check
with a travelers check. Shia noticed that the travelers check was not indorsed but Lim
told Shia that Queensland could sign the endorsee portion. Because Shia trusted the
latters good credit rating, and out of ignorance, he brought the check back to the office
unsigned. Inasmuch as that was a busy Friday, the check was kept in the drawer of
respondents consultant. Later, the travelers check was deposited with Citibank.
On October 27, 1992, Citibank informed respondent that the travelers check
could not be cleared unless it was duly signed by Lim, the original purchaser of the
travelers check. A Miss Arajo, from the accounting staff of Queensland, returned the
check to Lim for his signature, but the latter, aware of his P44,465 loss, demanded for a
liquidation of his account and said he would get back what was left of his investment.
ISSUE:
Whether or not the CA erred in reversing the decision of the RTC which
dismissed the respondents complaint
RULING:
The essential elements of estoppel are: (1) conduct of a party amounting to false
representation or concealment of material facts or at least calculated to convey the
impression that the facts 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 influence, the other party; and (3) knowledge,
actual or constructive, of the real facts. ere, it is uncontested that petitioner had in fact
signed the Customers Agreement in the morning of October 22, 1992, knowing fully well
the nature of the contract he was entering into. The Customers Agreement was duly
notarized and as a public document it is evidence of the fact, which gave rise to its
execution and of the date of the latter.
Next, petitioner paid his investment deposit to respondent in the form of a
managers check in the amount of US$5,000 as evidenced by PCI Bank Managers Check
No. 69007, dated October 22, 1992. All these are indicia that petitioner treated the
Customers Agreement as a valid and binding contract.
Training Institute building, Pagasa Village, San Francisco School, Quezon City Hospital,
portions of Project 7, Mindanao Avenue subdivision, part of Bago Bantay resettlement
project, SM City North EDSA, part of Phil-Am Life Homes compound and four-fifths of
North Triangle. This large estate was the subject of a petition for judicial reconstitution
originally filed by Eulalio Ragua in 1964, which gave rise to protracted legal battles
between the affected parties, lasting more than thirty-five (35) years.
ISSUE:
Whether estoppel by laches exists on the part of petitioner
HELD:
Petitioners filed the petition for reconstitution of OCT 632 nineteen (19) years
after the title was allegedly lost or destroyed. We thus consider petitioners guilty of
laches. Laches is negligence or omission to assert a right within a reasonable time,
warranting the presumption that the party entitled to assert it either has abandoned or
declined to assert it.
3.) ESTOPPEL BY DEED
1. METROBANK VS. CA, 8 JUNE 2000
2. SPS. MANUEL VS. CA, 1 FEBRUARY 2001
In the instant case, respondent filed his claim within the three-year prescriptive
period for the filing of money claims set forth in Article 291 of the Labor Code from the
time the cause of action accrued. Thus, we find that the doctrine of laches finds no
application in this case.
KINDS OF ESTOPPEL
HEIRS OF RAGUA vs. COURT OF APPEALS
G.R. Nos. 88521-22
FACTS:
These consolidated cases involve a prime lot consisting of 4,399,322 square
meters, known as the Diliman Estate, situated in Quezon City. On this 439 hectares of
prime land now stand the following: the Quezon City Hall, Philippine Science High School,
Quezon Memorial Circle, Visayas Avenue, Ninoy Aquino Parks and Wildlife, portions of UP
Village and East Triangle, the entire Project 6 and Vasha Village, Veterans Memorial
Hospital and golf course, Department of Agriculture, Department of Environment and
Natural Resources, Sugar Regulatory Administration, Philippine Tobacco Administration,
Land Registration Authority, Philcoa Building, Bureau of Telecommunications, Agricultural
property despite repeated requests from Atty. Atienza, thus prompting respondent GTP to
file an action for specific performance against petitioner METROBANK and Mr. Chia.
ISSUE:
Whether or not the CA erred in reversing the decision of the lower court.
4, 1951, Simplicio Distajo, heir of Soledad Daynolo who had since died, paid the
mortgage debt and redeemed the mortgaged portion of Lot 162 from Jose Regalado, Sr.
The latter, in turn, executed a Deed of Discharge of Mortgage in favor of Soledads heirs,
namely: Simplicio Distajo, Rafael Distajo and Teresita Distajo-Regalado. On same date,
the said heirs sold the redeemed portion of Lot 162 for P1,500.00 to herein petitioners,
the spouses Manuel Del Campo and Salvacion Quiachon.
RULING:
ISSUE:
The Court found no compelling reasons to disturb the assailed decision. All things
studiedly viewed in proper perspective, the Court are of the opinion, and so rule, that
whatever debts or loans mortgagor Chia contracted with Metrobank after September 4,
1980, without the conformity of plaintiff-appellee, could not be adjudged as part of the
mortgage debt the latter so assumed. We are persuaded that the contrary ruling on this
point in Our October 24, 1994 decision would be unfair and unjust to plaintiff-appellee
because, before buying subject property and assuming the mortgage debt thereon, the
latter inquired from Metrobank about the exact amount of the mortgage debt involved.
Whether or not the sale of the subject portion constitutes a sale of a concrete or
definite portion of land owned in common does not absolutely deprive herein petitioners
of any right or title thereto.
Petitioner METROBANK is estopped from refusing the discharge of the real estate
mortgage on the claim that the subject property still secures "other unliquidated past
due loans."
ESTOPPEL BY DEED
RULING:
There can be no doubt that the transaction entered into by Salome and Soledad
could be legally recognized in its entirety since the object of the sale did not even exceed
the ideal shares held by the former in the co-ownership. As a matter of fact, the deed of
sale executed between the parties expressly stipulated that the portion of Lot 162 sold to
Soledad would be taken from Salomes 4/16 undivided interest in said lot, which the
latter could validly transfer in whole or in part even without the consent of the other coowners. Salomes right to sell part of her undivided interest in the co-owned property is
absolute in accordance with the well-settled doctrine that a co-owner has full ownership
of his pro-indiviso share and has the right to alienate, assign or mortgage it, and
substitute another person in its enjoyment.
1.
2.
3.
4.
5.
6.
On September 19, 1970, the [respondent] filed the initiatory complaint herein for
specific performance against her uncle [Petitioner] Miguel Cuenco which averred, inter
alia that her father, the late Don Mariano Jesus Cuenco (who became Senator) and said
[petitioner] formed the Cuenco and Cuenco Law Offices; that on or around August 4,
1931, the Cuenco and Cuenco Law Offices served as lawyers in two (2) cases entitled
Valeriano Solon versus Zoilo Solon (Civil Case 9037) and Valeriano Solon versus
Apolonia Solon (Civil Case 9040) involving a dispute among relatives over ownership of
lot 903 of the Banilad Estate which is near the Cebu Provincial Capitol; that records of
said cases indicate the name of the [petitioner] alone as counsel of record, but in truth
and in fact, the real lawyer behind the success of said cases was the influential Don
Mariano Jesus Cuenco; that after winning said cases, the awardees of Lot 903 subdivided
said lot into three (3) parts as follows:
Lot 903-A: 5,000 [square meters]: Mariano Cuencos attorneys fees
FACTS:
Petitioner Salvador H. Laurel moves for a reconsideration of this Courts decision
declaring him, as Chair of the National Centennial Commission (NCC), a public officer.
Petitioner also prays that the case be referred to the Court En Banc.
ISSUE:
Whether or not Laurel is a public officer as Chair of the NCC
RULING:
The issue in this case is whether petitioner, as Chair of the NCC, is a public officer
under the jurisdiction of the Ombudsman. Assuming, as petitioner proposes, that the
designation of other members to the NCC runs counter to the Constitution, it does not
make petitioner, as NCC Chair, less a public officer. Such serious constitutional
repercussions do not reduce the force of the rationale behind this Courts decision.
Second, petitioner invokes estoppel. He claims that the official acts of the President,
the Senate President, the Speaker of the House of Representatives, and the Supreme
Court, in designating Cabinet members, Senators, Congressmen and Justices to the NCC,
led him to believe that the NCC is not a public office.
The contention has no merit. In estoppel, the party representing material facts must
have the intention that the other party would act upon the representation. It is
preposterous to suppose that the President, the Senate President, the Speaker and the
Supreme Court, by the designation of such officials to the NCC, intended to mislead
petitioner just so he would accept the position of NCC Chair. Estoppel must be
unequivocal and intentional. Moreover, petitioner himself admits that the principle of
estoppel does not operate against the Government in the exercise of its sovereign
powers.
Third, as ground for the referral of the case to the Court En Banc, petitioner submits
that our decision in this case modified or reversed doctrines rendered by this Court,
which can only be done by the Court En Banc.It is argued that by designating three of
its then incumbent members to the NCC, the Court took the position that the NCC was
not a public office. The argument is a bit of a stretch. Section 4 (3), Article VIII of the
Constitution provides that no doctrine or principle of law laid down by the court in a
decision rendered en banc or in division may be modified or reversed except by the court
sitting en banc. In designating three of its incumbent members to the NCC, the Court
did not render a decision, in the context of said constitutional provision, which
contemplates an actual case. Much less did the Court, by such designation, articulate
any doctrine or principle of law. Invoking the same provision, petitioner asserts that the
decision in this case reversed or modified Macalino vs. Sandiganbayan, holding that the
Assistant Manager of the Treasury Division and the Head of the Loans Administration &
Insurance Section of the Philippine National Construction Corporation (PNCC) is not a
public officer under Republic Act No. 3019. This contention also has no merit. The
rationale for the ruling in Macalino is that the PNCC has no original charter as it was
incorporated under the general law on corporations. However, as we pointed out in our
decision, a conclusion that EXPOCORP is a government-owned or controlled corporation
would not alter the outcome of this case because petitioners position and functions as
Chief Executive Officer of EXPOCORP are by virtue of his being Chairman of the NCC. The
other issues raised by petitioner are mere reiterations of his earlier arguments. The
Court, however, remains unswayed thereby.
ESTOPPEL IN PAIS
SPOUSES HANOPOL vs. SHOEMART INCORPORATED
October 4, 2002
FACTS:
Shoemart, Inc., is a corporation duly organized and existing under the laws of the
Philippines engaged in the operation of department stores. On December 4, 1985,
Shoemart, through its Executive Vice-President, Senen T. Mendiola, and spouses Manuel
R. Hanopol and Beatriz T. Hanopol executed a Contract of Purchase on Credit.
Under the terms of the contract, Shoemart extended credit accommodations, in
the amount of Three Hundred Thousand Pesos (P300,000.00), for purchases on credit
made by holders of SM Credit Card issued by spouses Hanopol for one year, renewable
yearly thereafter. Spouses Hanopol were given a five percent (5%) discount on all
purchases made by their cardholders, deductible from the semi-monthly payments to be
made to Shoemart by spouses Hanopol.
For failure of spouses Hanopol to pay the principal amount of One Hundred
Twenty-Four Thousand Five Hundred Seventy-One Pesos and Eighty-Nine Centavos
(P124,571.89) as of October 6, 1987, Shoemart instituted extrajudicial foreclosure
proceedings against the mortgaged properties.
Spouses Hanopol alleged that Shoemart breached the contract when the latter
failed to furnish the former with the requisite documents by which the formers liability
shall be determined, namely: charge invoices, purchase booklets and purchase journal,
as provided in their contract; that without the requisite documents, spouses Hanopol had
no way of knowing that, in fact, they had already paid, even overpaid, whatever they
owed to Shoemart; that despite said breach, Shoemart even had the audacity to apply
for extrajudicial foreclosure with the Sheriff.
ISSUE:
Whether or not Shoemart acted with manifest bad faith in pursuing with the
foreclosure and auction sale of the property of spouses Hanopol, and, accordingly, should
be held liable for damages.
RULING:
All the three (3) elements for litis pendentia as a ground for dismissal of an action
are present, namely: (a) identity of parties, or at least such parties who represent the
same interest in both actions; (b) identity of rights asserted and relief prayed for, the
relief being founded on the same facts; and (c) the identity, with respect to the two (2)
preceding particulars in the two (2) cases, in such that any judgment that may be
rendered in the pending case, regardless of which party is successful, would amount to
res judicata in the other.
In the case at bench, the parties are the same; the relief sought in the case
before the Court of Appeals and the trial court are the same, that is, to permanently
enjoin the foreclosure of the real estate mortgage executed by spouses Hanopol in favor
of Shoemart; and, both are premised on the same facts. The judgment of the Court of
Appeals would constitute a bar to the suit before the trial court.
ESTOPPEL IN PAIS
TERMINAL FACILITIES vs. PPA
378 SCRA 82
FACTS:
Before us are two (2) consolidated petitions for review, one filed by the Terminal
Facilities and Services Corporation (TEFASCO) and the other by the Philippine Ports
Authority (PPA). TEFASCO is a domestic corporation organized and existing under the
laws of the Philippines with principal place of business at Barrio Ilang, Davao City. It is
engaged in the business of providing port and terminal facilities as well as arrastre,
stevedoring and other port-related services at its own private port at Barrio Ilang.
Sometime in 1975 TEFASCO submitted to PPA a proposal for the construction of a
specialized terminal complex with port facilities and a provision for port services in
Davao City. To ease the acute congestion in the government ports at Sasa and Sta. Ana,
Davao City, PPA welcomed the proposal and organized an inter-agency committee to
study the plan. The committee recommended approval.
On April 21, 1976 the PPA Board of Directors passed Resolution No. 7 accepting
and approving TEFASCO's project proposal.
Long after TEFASCO broke round with massive infrastructure work, the PPA Board
curiously passed on October 1, 1976 Resolution No. 50 under which TEFASCO, without
asking for one, was compelled to submit an application for construction permit. Without
the consent of TEFASCO, the application imposed additional significant conditions.
The series of PPA impositions did not stop there. Two (2) years after the
completion of the port facilities and the commencement of TEFASCO's port operations, or
on June 10, 1978, PPA again issued to TEFASCO another permit, under which more
onerous conditions were foisted on TEFASCO's port operations. In the purported permit
appeared for the first time the contentious provisions for ten percent (10%) government
share out of arrastre and stevedoring gross income and one hundred percent (100%)
wharfage and berthing charges.
On February 10, 1984 TEFASCO and PPA executed a Memorandum of Agreement
(MOA) providing among others for (a) acknowledgment of TEFASCO's arrears in
government share at Three Million Eight Hundred Seven Thousand Five Hundred SixtyThree Pesos and Seventy-Five Centavos (P3,807,563.75) payable monthly, with default
penalized by automatic withdrawal of its commercial private port permit and permit to
operate cargo handling services; (b) reduction of government share from ten percent
(10%) to six percent (6%) on all cargo handling and related revenue (or arrastre and
stevedoring gross income); (c) opening of its pier facilities to all commercial and thirdparty cargoes and vessels for a period coterminous with its foreshore lease contract with
the National Government; and, (d) tenure of five (5) years extendible by five (5) more
years for TEFASCO's permit to operate cargo handling in its private port facilities. In
return PPA promised to issue the necessary permits for TEFASCO's port activities.
TEFASCO complied with the MOA and paid the accrued and current government share.
On August 30, 1988 TEFASCO sued PPA and PPA Port Manager, and Port Officer in
Davao City for refund of government share it had paid and for damages as a result of
alleged illegal exaction from its clients of one hundred percent (100%) berthing and
wharfage fees. The complaint also sought to nullify the February 10, 1984 MOA and all
other PPA issuances modifying the terms and conditions of the April 21, 1976 Resolution
No. 7 above-mentioned.
PPA appealed the decision of the trial court to the Court of Appeals. The appellate
court in its original decision recognized the validity of the impositions and reversed in
toto the decision of the trial court. TEFASCO moved for reconsideration which the Court
of Appeals found partly meritorious. Thus the Court of Appeals in its Amended Decision
partially affirmed the RTC decision only in the sense that PPA was directed to pay
TEFASCO (1) the amounts of Fifteen Million Eight Hundred Ten Thousand Thirty-Two Pesos
and Seven Centavos (P15,810,032.07) representing fifty percent (50%) wharfage fees
and Three Million Nine Hundred Sixty-One Thousand Nine Hundred Sixty-Four Pesos and
Six Centavos (P3,961,964.06) representing thirty percent (30%) berthing fees which
TEFASCO could have earned as private port usage fee from 1977 to 1991. The Court of
Appeals held that the one hundred percent (100%) berthing and wharfage fees were
unenforceable because they had not been approved by the President under P.D. No. 857,
and discriminatory since much lower rates were charged in other private ports as shown
by PPA issuances effective 1995 to 1997. Both PPA and TEFASCO were unsatisfied with
this disposition hence these petitions.
ISSUE:
Whether or not the collection by PPA of one hundred percent (100%) wharfage
fees and berthing charges; (c) the propriety of the award of fifty percent (50%) wharfage
fees and thirty percent (30%) berthing charges as actual damages in favor of TEFASCO
for the period from 1977 to 1991 is valid.
RULING:
The imposition by PPA of ten percent (10%), later reduced to six percent (6%),
government share out of arrastre and stevedoring gross income of TEFASCO is void. This
exaction was never mentioned in the contract, much less is it a binding prestation,
between TEFASCO and PPA. What was clearly stated in the terms and conditions
appended to PPA Resolution No. 7 was for TEFASCO to pay and/or secure from the proper
authorities "all fees and/or permits pertinent to the construction and operation of the
proposed project." The government share demanded and collected from the gross
income of TEFASCO from its arrastre and stevedoring activities in TEFASCO's wholly
owned port is certainly not a fee or in any event a proper condition in a regulatory
his business, petitioner failed to pay to respondent bank his LC/TR accounts as they
became due and demandable.
Ceferino D. Cura, Branch Manager of PNB Mandaluyong replied on behalf of the
respondent bank and required petitioner to submit the following documents before the
bank would act on his request: 1) Audited Financial Statements for 1979 and 1980; 2)
Projected cash flow (cash in - cash out) for five (5) years detailed yearly; and 3) List of
additional machinery and equipment and proof of ownership thereof.
Cura also
suggested that petitioner reduce his total loan obligations to Three Million Pesos
(P3,000,000.00).
FACTS:
Petitioner Danilo D. Mendoza is engaged in the domestic and international trading
of raw materials and chemicals. He operates under the business name Atlantic
Exchange Philippines (Atlantic), a single proprietorship registered with the Department of
Trade and Industry (DTI). Sometime in 1978 he was granted by respondent Philippine
National Bank (PNB) a Five Hundred Thousand Pesos (P500,000.00) credit line and a One
Million Pesos (P1,000,000.00) Letter of Credit/Trust Receipt (LC/TR) line.
As security for the credit accommodations and for those which may thereinafter
be granted, petitioner mortgaged to respondent PNB the following: 1) three (3) parcels
of land with improvements in F. Pasco Avenue, Santolan, Pasig; 2) his house and lot in
Quezon City; and 3) several pieces of machinery and equipment in his Pasig cocochemical plant.
Petitioner executed in favor of respondent PNB three (3) promissory notes
covering the Five Hundred Thousand Pesos (P500,000.00) credit line, one dated March 8,
1979 for Three Hundred Ten Thousand Pesos (P310,000.00); another dated March 30,
1979 for Forty Thousand Pesos (P40,000.00); and the last dated September 27, 1979 for
One Hundred Fifty Thousand Pesos (P150,000.00).
Petitioner made use of his LC/TR line to purchase raw materials from foreign
importers. He signed a total of eleven (11) documents denominated as "Application and
Agreement for Commercial Letter of Credit," on various dates
In a letter dated January 3, 1980 and signed by Branch Manager Fil S. Carreon Jr.,
respondent PNB advised petitioner Mendoza that effective December 1, 1979, the bank
raised its interest rates to 14% per annum, in line with Central Bank's Monetary Board
Resolution No. 2126 dated November 29, 1979.
On March 9, 1981, he wrote a letter to respondent PNB requesting for the
restructuring of his past due accounts into a five-year term loan and for an additional
LC/TR line of Two Million Pesos (P2,000,000.00). According to the letter, because of the
shut-down of his end-user companies and the huge amount spent for the expansion of
On September 25, 1981, petitioner sent another letter addressed to PNB VicePresident Jose Salvador, regarding his request for restructuring of his loans. He offered
respondent PNB the following proposals: 1) the disposal of some of the mortgaged
properties, more particularly, his house and lot and a vacant lot in order to pay the
overdue trust receipts; 2) capitalization and conversion of the balance into a 5-year term
loan payable semi-annually or on annual installments; 3) a new Two Million Pesos
(P2,000,000.00) LC/TR line in order to enable Atlantic Exchange Philippines to operate at
full capacity; 4) assignment of all his receivables to PNB from all domestic and export
sales generated by the LC/TR line; and 5) maintenance of the existing Five Hundred
Thousand Pesos (P500,000.00) credit line.
The petitioner testified that respondent PNB Mandaluyong Branch found his
proposal favorable and recommended the implementation of the agreement. However,
Fernando Maramag, PNB Executive Vice-President, disapproved the proposed release of
the mortgaged properties and reduced the proposed new LC/TR line to One Million Pesos
(P1,000,000.00). Petitioner claimed he was forced to agree to these changes and that he
was required to submit a new formal proposal and to sign two (2) blank promissory
notes.
In a letter dated July 2, 1982, petitioner offered the following revised proposals to
respondent bank: 1) the restructuring of past due accounts including interests and
penalties into a 5-year term loan, payable semi-annually with one year grace period on
the principal; 2) payment of Four Hundred Thousand Pesos (P400,000.00) upon the
approval of the proposal; 3) reduction of penalty from 3% to 1%; 4) capitalization of the
interest component with interest rate at 16% per annum; 5) establishment of a One
Million Pesos (P1,000,000.00) LC/TR line against the mortgaged properties; 6)
assignment of all his export proceeds to respondent bank to guarantee payment of his
Petitioner failed to pay the subject two (2) Promissory Notes Nos. 127/82 and
128/82 as they fell due. Respondent PNB extra-judicially foreclosed the real and chattel
mortgages, and the mortgaged properties were sold at public auction to respondent PNB,
as highest bidder, for a total of Three Million Seven Hundred Ninety Eight Thousand
Seven Hundred Nineteen Pesos and Fifty Centavos (P3,798,719.50).
The petitioner filed a complaint for specific performance, nullification of the extrajudicial foreclosure and damages against respondents PNB. He alleged that the
Extrajudicial Foreclosure Sale of the mortgaged properties was null and void since his
loans were restructured to a five-year term loan; hence, it was not yet due and
demandable. On March 16, 1992, the trial court rendered judgment in favor of the
petitioner and ordered the nullification of the extrajudicial foreclosure of the real estate
mortgage, the Sheriffs sale of the mortgaged real properties by virtue of consolidation
thereof and the cancellation of the new titles issued to PNB; that PNB vacate the subject
premises in Pasig and turn the same over to the petitioner; and also the nullification of
the extrajudicial foreclosure and sheriff's sale of the mortgaged chattels, and that the
chattels be returned to petitioner Mendoza if they were removed from his Pasig premises
or be paid for if they were lost or rendered unserviceable.
The trial court decided for the petitioner. Upon appeal, the Court of Appeals
reversed the decision of the trial court and dismissed the complaint.
ISSUE:
(2) such promise did in fact induce such action or forebearance, and (3) the party
suffered detriment as a result.
It is clear from the forgoing that the doctrine of promissory estoppel presupposes
the existence of a promise on the part of one against whom estoppel is claimed. The
promise must be plain and unambiguous and sufficiently specific so that the Judiciary
can understand the obligation assumed and enforce the promise according to its terms.
For petitioner to claim that respondent PNB is estopped to deny the five-year
restructuring plan, he must first prove that respondent PNB had promised to approve the
plan in exchange for the submission of the proposal. As discussed earlier, no such
promise was proven, therefore, the doctrine does not apply to the case at bar. A cause
of action for 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.
ESTOPPEL IN PAIS
RULING:
No. Respondent Court of Appeals held that there is no evidence of a promise from
respondent PNB, admittedly a banking corporation, that it had accepted the proposals of
the petitioner to have a five-year restructuring of his overdue loan obligations. It found
and held, on the basis of the evidence adduced, that "appellee's (Mendoza)
communications were mere proposals while the bank's responses were not categorical
that the appellee's request had been favorably accepted by the bank."
Nowhere in those letters presented by the petitioner is there a categorical
statement that respondent PNB had approved the petitioners proposed five-year
restructuring plan. It is stretching the imagination to construe them as evidence that his
proposed five-year restructuring plan has been approved by the respondent PNB which is
admittedly a banking corporation. Only an absolute and unqualified acceptance of a
definite offer manifests the consent necessary to perfect a contract. If anything, those
correspondences only prove that the parties had not gone beyond the preparation stage,
which is the period from the start of the negotiations until the moment just before the
agreement of the parties.
The doctrine of promissory estoppel is an exception to the general rule that a
promise of future conduct does not constitute an estoppel. In some jurisdictions, in order
to make out a claim of promissory estoppel, a party bears the burden of establishing the
following elements: (1) a promise reasonably expected to induce action or forebearance;
FACTS:
On 23 September 1986 respondent Contractors Equipment Corporation (CEC)
instituted an action for a sum of money against petitioner Roblett Industrial Construction
Corporation (RICC) 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. As a
result RICC incurred unpaid accounts amounting to P342,909.38.
On 19 December 1985 RICC through its Assistant Vice President for Finance
Candelario S. Aller Jr. entered into an Agreement with CEC where it confirmed petitioner's
account. As an off-setting arrangement respondent received from petitioner construction
materials worth P115,000.00 thus reducing petitioner's balance to P227,909.38.
A day before the execution of their Agreement, or on 18 December 1985, RICC
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 24 July 1986 Mariano R. 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 31 July
1986. In reply, petitioner requested for thirty (30) days to have enough time to look for
funds to substantially settle its account.
5.)ESTOPPEL BY LACHES
1.
2.
3.
4.
5.
6.
7.
RULING:
Yes. It must be emphasized that the same agreement was used by plaintiff as the
basis for claiming defendant's obligation of P237,909.38 and also used by defendant as
the same basis for its alleged payment in full of its obligation to plaintiff. But while
plaintiff treats the entire agreement as valid, defendant wants the court to treat that
portion which treats of the offsetting of P115,000.00 as valid, whereas it considers the
other terms and conditions as "onerous, illegal and want of prior consent and Board
approval." This Court cannot agree to defendant's contention. It must be stressed that
defendant's answer was not made under oath, and therefore, the genuineness and due
execution of the agreement which was the basis for plaintiff's claim is deemed admitted
(Section 8, Rule 8, Rules of Court). Such admission, under the principle of estoppel, is
rendered conclusive upon defendant and cannot be denied or disproved as against
plaintiff (Art. 1431, Civil Code). Either the agreement is valid or void. It must be treated
as a whole and not to be divided into parts and consider only those provisions which
favor one party (in this case the defendant). Contracts must bind both contracting
parties, its validity or compliance cannot be left to the will of one of them (Art. 1308,
New Civil Code).
FACTS:
On 12 November 1994, Cabilzo issued a Metrobank Check No. 985988, payable to
CASH and postdated on 24 November 1994 in the amount of One Thousand Pesos (P1,
000.00). The check was drawn against Cabilzos 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 for payment. Westmont Bank, in turn, indorsed the check to Metrobank for
appropriate clearing. After the entries thereon were examined, including the availability
of funds and the authenticity of the signature of the drawer, Metrobank cleared the
check for encashment in accordance with the Philippine Clearing House Corporation
(PCHC) Rules.
On 16 November 1994, Cabilzos representative was at Metrobank Pasong Tamo
Branch to make some transaction when he was asked by bank personnel if Cabilzo had
issued a check in the amount of P91, 000.00 to which the former replied in the negative.
On the afternoon of the same date, Cabilzo himself called Metrobank to reiterate that he
did not issue a check in the amount of P91, 000.00 and requested that the questioned
check be returned to him for verification, to which Metrobank complied. Upon receipt of
the check, Cabilzo discovered that Metrobank Check No. 985988 which he issued on 12
November 1994 in the amount of P1, 000.00 was altered to P91, 000.00 and the date 24
November 1994 was changed to 14 November 1994.Hence, Cabilzo demanded that
Metrobank re-credit the amount of P91, 000.00 to his account. Metrobank, however,
refused reasoning that it has to refer the matter first to its Legal Division for appropriate
action. Repeated verbal demands followed but Metrobank still failed to re-credit the
amount of P91, 000.00 to Cabilzos account
On 30 June 1995, Cabilzo, thru counsel, finally sent a letter-demand to Metrobank
for the payment of P90, 000.00, after deducting the original value of the check in the
amount of P1, 000.00. Such written demand notwithstanding, Metrobank still failed or
refused to comply with its obligation. Consequently, Cabilzo instituted a civil action for
damages against Metrobank before the RTC of Manila, Branch 13. In his Complaint
docketed as Civil Case No. 95-75651, Renato D. Cabilzo v. Metropolitan Bank and Trust
Company, Cabilzo prayed that in addition to his claim for reimbursement, actual and
moral damages plus costs of the suit be awarded in his favor.
ISSUE:
Whether equitable estoppel can be appreciated in favor of petitioner
HELD:
The degree of diligence required of a reasonable man in the exercise of his tasks
and the performance of his duties has been faithfully complied with by Cabilzo. In fact,
he was wary enough that he filled with asterisks the spaces between and after the
amounts, not only those stated in words, but also those in numerical figures, in order to
prevent any fraudulent insertion, but unfortunately, the check was still successfully
altered, indorsed by the collecting bank, and cleared by the drawee bank, and encashed
by the perpetrator of the fraud, to the damage and prejudice of Cabilzo.
Metrobank cannot lightly impute that Cabilzo was negligent and is therefore
prevented from asserting his rights under the doctrine of equitable estoppel when the
facts on record are bare of evidence to support such conclusion. The doctrine of
equitable estoppel states that when one of the two innocent persons, each guiltless of
any intentional or moral wrong, must suffer a loss, it must be borne by the one whose
erroneous conduct, either by omission or commission, was the cause of injury.
Metrobanks reliance on this dictum is misplaced. For one, Metrobanks representation
that it is an innocent party is flimsy and evidently, misleading. At the same time,
Metrobank cannot asseverate that Cabilzo was negligent and this negligence was the
proximate cause of the loss in the absence of even a scintilla proof to buttress such
claim. Negligence is not presumed but must be proven by the one who alleges it, which
petitioner failed to.
cancelled and TCT No. T-78881 was issued in the name of herein petitioners. Atty.
Honorio Valisno Garcia is the deceased husband of [herein respondent Gloria C. Garcia]
while the late Felicisima Mesina is the mother of Danilo, Simeon, and Melanie, all
surnamed Mesina.
The Contract to sell provides that the cost of the lot is P70.00 per square
meter for a total amount of P16, 450.00; payable within a period not to exceed seven (7)
years at an interest rate of 12% per annum, in successive monthly installments of
P260.85 per month, starting May 1977. Thereafter, the succeeding monthly installments
are to be paid within the first week of every month, at the residence of the vendor at
Quezon City, with all unpaid monthly installments earning an interest of one percent
(1%) per month.
The Contract also stipulated, among others, that: Should the spouses Garcia fail
to pay five (5) successive monthly installments, Felicisima Mesina shall have a right to
rescind the Contract to Sell. All paid installments to be recomputed as rental for usage
of lot shall be at the rate of P100.00 a month and that Felicisima Mesina shall have the
further option to return the downpayment plus whatever balance spouses Garcia paid,
thereby rescinding the Contract to Sell. Upon rescission of the Contract to sell,
spouses Garcia agree to remove all the improvements built on the lot within three (3)
months from rescission of this contract, spouses Garcia shouldering all expenses of said
removal.
Instituting this case at bar, respondent asserts that despite the full payment
made on February 7, 1984 for the consideration of the subject lot, petitioners refused to
issue the necessary Deed of Sale to effect the transfer of the property to her
ISSUES:
Whether respondents cause of action had already prescribed
Whether petitioners are in estoppel
ESTOPPEL BY LACHES
HELD:
In the case at bar, as pointed out by the Court of Appeals, the right of action of
the respondent accrued on the date that the full and final payment of the contract price
was made. Accordingly, as the full payment of the purchase price on the subject
Contract to Sell had been effected on 7 February 1984 thus, respondent had from said
date until February 7, 1994 within which to bring an action to enforce the written
contract, the Contract to Sell. It was then the contention of the petitioners that when the
respondent instituted her Complaint for Specific Performance with Damages on 20
January 1997, the same had already been barred by prescription. The contention of the
petitioners is untenable. Article 1155 of the Civil Code is explicit that the prescriptive
period is interrupted when an action has been filed in court; when there is a written
extrajudicial demand made by the creditors; and when there is any written
acknowledgment of the debt by the debtor. Hence the action has not yet prescribed.
With respect to the issue on estoppel, this Court, upon reviewing the records of
the case at bar, finds no reason to overturn the findings of the appellate court that,
indeed, petitioners are estopped from avowing that they never had knowledge as to the
acceptance of the delayed payments made by the respondent, and that they never
induced respondent to believe that she had validly effected full payment. Evidence on
record show that petitioners can no longer deny having accepted the late payments
made by the respondent because in a letter dated April 10, 1986 sent to petitioner
Simeon Mesina by Engineer Danilo Angeles, who is the husband of petitioners
authorized collection agent Angelina Angeles, he told petitioner Simeon Mesina that the
title and the Deed of Sale were both ready for their signature, and respondent was willing
and ready to pay for the excess area. Hence, if petitioners did not accept the late
payments of the respondent, and if they did not consider such as full payment of the
purchase price on the subject property as they claimed it to be, the title as well as the
Deed of Sale could not have been prepared for their signature. In the same way,
respondent could not have sent a demand letter to ask for the execution of those
documents had they not been induced to believe that the late payments were validly
accepted and that the purchase price had already been paid in full. There were
statements, which were made under oath, which made it crystal clear that the late
payments were accepted by the petitioners, and that the payments corresponded to the
purchase value of the subject property; therefore, petitioners cannot deny the fact that
the full payment of the purchase value of the lot in question had in fact been made by
the respondent.
ESTOPPEL BY LACHES
PAHAMOTANG VS. PNB
G.R. No. 156403, March 21, 2005
The late Agustin then executed several mortgages and later sale of the properties
with the PNB and Arguna respectively. The heirs later questioned the validity of the
transactions prejudicial to them. The trial court declared the real estate mortgage and
the sale void but both were valid with respect to the other parties. The decision was
reversed by the Court of Appeals; to the appellate court, petitioners committed a fatal
error of mounting a collateral attack on the foregoing orders instead of initiating a direct
action to annul them.
ISSUE:
Whether the Court of Appeals erred in reversing the decision of the trial court
RULING:
In the present case, the appellate court erred in appreciating laches against
petitioners. The element of delay in questioning the subject orders of the intestate court
is sorely lacking. Petitioners were totally unaware of the plan of Agustin to mortgage and
sell the estate properties. There is no indication that mortgagor PNB and vendee Arguna
had notified petitioners of the contracts they had executed with Agustin. Although
petitioners finally obtained knowledge of the subject petitions filed by their father,
and eventually challenged the July 18, 1973, October 19, 1974, February 25, 1980 and
January 7, 1981 orders of the intestate court, it is not clear from the challenged
decision of the appellate court when they (petitioners) actually learned of the
existence of said orders of the intestate court. Absent any indication of the point in
time
when
petitioners acquired knowledge of those orders, their alleged delay in
impugning the validity thereof certainly cannot be established. And the Court of Appeals
cannot simply impute laches against them.
ESTOPPEL BY LACHES
FACTS:
On July 1, 1972, Melitona Pahamotang died. She was survived by her husband
Agustin Pahamotang, and their eight (8) children, namely: Ana, Genoveva, Isabelita,
Corazon, Susana, Concepcion and herein petitioners Josephine and Eleonor, all surnamed
Pahamotang. On September 15, 1972, Agustin filed with the then Court of First Instance
of Davao City a petition for issuance of letters administration over the estate of his
deceased wife. The petition, docketed as Special Case No. 1792, was raffled to Branch VI
of said court, hereinafter referred to as the intestate court. In his petition, Agustin
identified petitioners Josephine and Eleonor as among the heirs of his deceased spouse.
It appears that Agustin was appointed petitioners' judicial guardian in an earlier case Special Civil Case No. 1785 also of the CFI of Davao City, Branch VI. On December 7,
1972, the intestate court issued an order granting Agustins petition.
to surrender TCT No. 109754 to the Register of Deeds of Quezon City for the annotation
of the questioned Contract of Lease and Memorandum of Agreement.
On appeal, the Court of Appeals reversed the decision of the trial court and held
to be invalid the Contract of Lease and Memorandum of Agreement. While it shared the
view expressed by the trial court that a deed of 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 faith having had prior knowledge of the donation in favor of
respondent, and that such actual knowledge had the effect of registration insofar as
petitioner was concerned. The appellate court based its findings largely on the testimony
of Veredigno Atienza during cross-examination.
ISSUE:
Whether or not the respondent is barred by laches and estoppel from denying the
contracts.
RULING:
The Court cannot accept petitioner's argument that respondent is guilty of laches.
Laches, in its real sense, is the failure or neglect, for an unreasonable and unexplained
length of 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. Respondent learned of the contracts only in February 1994 after the
death of his father, and in the same year, during November, he assailed the validity of
the agreements. Hardly, could respondent then be said to have neglected to assert his
case for an unreasonable length of time.
Neither is respondent estopped from repudiating the contracts. The essential
elements of estoppel in pais, in relation to the party sought to be estopped, are: 1) a
clear conduct amounting to false representation or concealment of material facts or, at
least, calculated to convey the impression that the facts 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 influence, or be acted upon by, the other
party; and 3) the knowledge, actual or constructive, by him of the real facts. With respect
to the party claiming the estoppel, the conditions he must satisfy are: 1) lack of
knowledge or of the means of knowledge of the truth as to the facts in question; 2)
reliance, in good faith, upon the conduct or statements of the party to be estopped; and
3) action or inaction based thereon of such character as to change his position or status
calculated to cause him injury or prejudice. 12 It has not been shown that respondent
intended to conceal the actual facts concerning the property; more importantly,
petitioner has been shown not to be totally unaware of the real ownership of the subject
property. Altogether, there is no cogent reason to reverse the Court of Appeals in its
assailed decision.
ESTOPPEL BY LACHES
RULING:
Yes. It is well-established that the payment of docket fees within the prescribed
period is mandatory for the perfection of an appeal. This is so because a court acquires
jurisdiction over the subject matter of the action only upon the payment of the correct
amount of docket fees regardless of the actual date of filing of the case in court. The
payment of the full amount of the docket fee is a sine qua non requirement for the
perfection of an appeal. The court acquires jurisdiction over the case only upon the
payment of the prescribed docket fees.
In the case at bar, the respondent seasonably filed the notice of appeal but it paid the
docket fees one (1) month after the lapse of the appeal period. As admitted by the
respondent, the last day for filing the notice of appeal was on March 29, 1999, but it paid
the docket fees only on April 30, 1999 because of oversight. Obviously, at the time the
said docket fees were paid, the decision appealed from has long attained finality and no
longer appealable.
Respondents contention that the petitioner is now estopped from raising the
issue of late payment of the docket fee because of his failure to assail promptly the trial
courts order approving the notice of appeal and accepting the appeal fee, is untenable.
Estoppel by laches arises from 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 first
instance the non-payment of the docket fee in its motion for reconsideration before the
trial court. Petitioner reiterated its objection in the motion to dismiss before the appellate
court and finally, in the instant petition. Plainly, petitioner cannot be faulted for being
remiss in asserting its rights considering that it vigorously registered a persistent and
consistent objection to the Court of Appeals assumption of jurisdiction at all stages of
the proceedings.
ESTOPPEL BY LACHES
CA set aside the decision of the trial court and directed petitioner to pay
respondent the amount of P1,863,081.53. Petitioners motion for reconsideration was
denied Hence, the instant petition.
FACTS:
ISSUE:
Whether or not the Court of Appeals erred in entertaining the appeal of
respondent despite the finality of the trial courts decision.
Respondent spouses Pablo and Antonia Ricafort instituted an action for annulment
of Transfer of Certificate of Title in the name of spouses Renato and Teresita Villareal
covering a 299 sq.m. lot. The Ricaforts alleged that they are co-owners of said property
together with Abelardo, the father and predecessor of Renato as evidenced by an
agreement whereby Abelardo recognized their ownership of portion of the lot.
Respondents also claim that, in violation of the agreement, Abelardo obtained during his
lifetime Original Certificate of Title over the lot without their knowledge and consent.
When Abelardo died in 1993, Renato and Teresita transferred the title over the land in
their name and were issued a TCT.
In the course of the proceedings, parties entered into a compromise settlement
wherein the Villareals admitted the genuineness and due execution of the agreement
between respondents and Abelardo. Hence, they agreed to physically divide the lot into
half. They also agreed to cause a relocation survey and the expenses will be borne
equally by them.
The trial court approved the compromise agreement but not long thereafter,
respondents filed a motion to cite the Villareals in contempt of court for refusing to
comply with the terms of the agreement. Eventually, herein petitioners who are all
siblings of Renato filed a motion for intervention and substitution of parties alleging that
spouses Renato and Teresita have waived their interest in the disputed lot in their favor.
Petitioners availed of various remedies only to pursue the endeavor for the annulment of
the compromise judgment. Most of them were denied until they resorted to this review
before the Supreme Court.
ISSUE:
FACTS:
Hipolito Mapili during his lifetime owned a parcel of unregistered land declared for
taxation purposes in his name. The property had descended by succession from Hipolito
to his only son Magno and on to the latters own widow and children. These heirs, the
herein respondents, took possession of the property up to the outbreak of World War II
when they evacuated to the hinterlands.
On the other hand, petitioner Aquilina Larena took possession of the property in
the1970s alleging that she had purchased it from her aunt (Filomena Larena) on
February 17, 1968. Filomena Larena in turn claimed to have bought it from Hipolito on
October 28, 1949, as evidence by the Affidavit of Transfer of Real Property executed on
the same date. The Regional Trial Court, however, declared the said affidavit as spurious
because Hipolito was already dead when the alleged transfer was made to Filomena
Larena.
On appeal, the Court of Appeals declared that respondents had never lost their
right to the land in question as they were the heirs to whom the property had descended
upon the death of the original claimant and possessor.
ISSUE:
Whether or not the petitioners are estopped from seeking the annulment of the
compromise judgment.
RULING:
Whether or not Filomena Larena acquired the subject property by means of sale,
prescription, and/or laches.
RULING:
ESTOPPEL BY LACHES
LARENA vs. MAPILI
408 SCRA 484
No, Filomena did not acquire said property by means of sale, prescription and/or
laches. First, the tax declarations are not a conclusive evidence of ownership, but a proof
that the holder has a claim of title over the property. It is good indicia of possession in
the concept of owner. It may strengthen Aquilinas bona fide claim of acquisition of
ownership. However, petitioners failed to present the evidence needed to tack the date
of possession on the property in question.
Second, acquisitive prescription is a mode of acquiring ownership by a possessor
through the requisite lapse of time. Since the claims of purchase were unsubstantiated,
petitioners acts of possessory character have been merely tolerated by the owner.
Hence, it did not constitute possession. Moreover, there is lack of just title on the part of
Aquilina and therefore, ordinary acquisitive prescription of ten (10) years as provided
under Article 1134 of the Civil Code cannot be applied. Under Article 1137 of the Civil
Code, the lapse of time required for extra-ordinary acquisitive prescription is thirty (30)
years, and records show that the lapse of time was only twenty-seven (27) yearsa
period that was short of three (3) years, when the complaint was filed.
STOPPEL BY LACHES
The trial court decided in favor of private respondents in as much as the deeds of
sale were fictitious, the action to assail the same does not prescribe.
Upon appeal, the Court of Appeals affirmed the trial courts decision. It held that
the subject deeds of sale did not confer upon Salvador the ownership over the subject
property, because even after the sale, the original vendors remained in dominion,
control, and possession thereof.
ISSUE:
Whether or not the cause of action of the respondents had prescribed and/or
barred by laches.
FACTS:
RULING:
laches.
The spouses Jesus and Rosalia were the parents of the respondents and the
husband of the petitioner. The spouses owned a parcel of registered land with a four-door
apartment administered by Rosalia who rented them out. On January 19, 1959, the
spouses executed a deed of sale of the properties in favor of their children Salvador and
Rosa. Rosa in turn sold her share to Salvador on November 20, 1973, which resulted in
the issuance of new TCT. Despite the transfer of the property to Salvador, Rosalia
continued to lease and receive rentals from the apartment units.
On January 9, 1985, Salvador died, followed by Rosalia who died the following
month. Shortly after, petitioner Zenaida, claiming to be Salvadors heir, demanded the
rent from Antonio Hombrebueno, a tenant of Rosalia. When the latter refused to pay,
Zenaida filed an ejectment suit against him with the Metropolitan Trial Court of Manila,
which eventually decided in Zenaidas favor.
On January 5, 1989, private respondent instituted an action for reconveyance of
property with preliminary injunction against petitioner in the Regional Trial Court of
Manila, where they alleged that the two deeds of sale were simulated for lack of
consideration. The petitioner on the other hand denied the material allegations in the
complaint and that she further alleged that the respondents right to reconveyance was
already barred by prescription and laches considering the fact that from the date of sale
from Rosa to Salvador up to his death, more or less twelve (12) years had lapsed, and
from his death up to the filing of the case for reconveyance, four (4) years has elapsed.
In other words, it took respondents about sixteen (16) years to file the case. Moreover,
petitioner argues that an action to annul a contract for lack of consideration prescribes in
ten (10) years and even assuming that the cause of action has not prescribed,
respondents are guilty of laches for their inaction for a long period of time.
No, the cause of action by the respondents had not prescribed nor is it barred by
First, the right to file an action for the reconveyance of the subject property to the
estate of Rosalia has not prescribed since deeds of sale were simulated and fictitious.
The complaint amounts to a declaration of nullity of a void contract, which is
imprescriptible. Hence, respondents cause of action has not prescribed.
Second, neither is their action barred by laches. The elements of laches are: 1)
conduct on the part of the defendant, or of one under whom he claims, giving rise to the
situation of which the complainant seeks a remedy; 2) delay in asserting the
complainants rights, the complainant having knowledge or notice of the defendants
conduct as having been afforded an opportunity to institute a suit; 3) lack of knowledge
or notice on the part of the defendant that the complainant would assert the right in
which he bases his suit; and 4) injury or prejudice to the defendant in the event relief is
accorded to the complainant, or the suit is not held barred. These elements must all be
proved positively. The lapse of four (4) years is not an unreasonable delay sufficient to
bar respondents action. Moreover, the fourth (4th) element is lacking in this case. The
concept of laches is not concerned with the lapse of time but only with the effect of
unreasonable lapse. The alleged sixteen (16) years of respondents inaction has no
adverse effect on the petitioner to make respondents guilty of laches.
ESTOPPEL BY LACHES
FACTS:
Felipe Villanueva left a 15,336-square-meter parcel of land in Kalibo, Capiz to his
eight children: Simplicio, Benito, Leon, Eustaquio, Camila, Fausta and Pedro. In 1952,
Pedro declared under his name 1/6 portion of the property (1,905 sq. m.). He held the
remaining properties in trust for his co-heirs who demanded the subdivision of the
property but to no avail. After Leons death in 1972, private respondents discovered that
the shares of Simplicio, Nicolasa, Fausta and Maria Baltazar had been purchased by Leon
through a deed of sale dated August 25, 1946 but registered only in 1971. In July 1970,
Leon also sold and partitioned the property in favor of petitioners, his children, who
thereafter secured separate and independent titles over their respective pro- indiviso
shares.
Private respondents, who are also descendants of Felipe, filed an action for
partition with annulment of documents and/or reconveyance and damages against
petitioners. They contended that Leon fraudulently obtained the sale in his favor through
machinations and false pretenses. The RTC declared that private respondents action had
been barred by res judicata and that petitioners are the legal owners of the property in
question in accordance with the individual titles issued to them.
ISSUE:
Whether or not laches apply against the minors property that was held in trust.
RULING:
No. At the time of the signing of the Deed of Sale of August 26,1948, private
respondents Procerfina, Prosperedad, Ramon and Rosa were minors. They could not be
faulted for their failure to file a case to recover their inheritance from their uncle Leon,
since up to the age of majority, they believed and considered Leon their co-heir
administrator. It was only in 1975, not in 1948, that they became aware of the actionable
betrayal by their uncle. Upon learning of their uncles actions, they filed for recovery.
Hence, the doctrine of stale demands formulated in Tijam cannot be applied here. They
did not sleep on their rights, contrary to petitioners assertion.
Furthermore, when Felipe Villanueva died, an implied trust was created by
operation of law between Felipes children and Leon, their uncle, as far as the 1/6 share
of Felipe. Leons fraudulent titling of Felipes 1/6 share was a betrayal of that implied
trust.
AUTONOMY OF CONTRACTS
1.
2.
3.
4.
5.
6.
7.
8.
ARTURO M. TOLENTINO
VS. THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL
REVENUE
1994 Aug 25
G.R. No. 115455
235 SCRA 630
FACTS:
The valued-added tax (VAT) is levied on the sale, barter or exchange of goods and
properties as well as on the sale or exchange of services. It is equivalent to 10% of the
gross selling price or gross value in money of goods or properties sold, bartered or
exchanged or of the gross receipts from the sale or exchange of services. Republic Act
No. 7716 seeks to widen the tax base of the existing VAT system and enhance its
administration by amending the National Internal Revenue Code.
The Chamber of Real Estate and Builders Association (CREBA) contends that the
imposition of VAT on sales and leases by virtue of contracts entered into prior to the
effectivity of the law would violate the constitutional provision of non-impairment of
contracts.
ISSUE:
Whether R.A. No. 7716 is unconstitutional on ground that it violates the contract
clause under Art. III, sec 10 of the Bill of Rights.
RULING:
No. The Supreme Court the contention of CREBA, that the imposition of the VAT
on the sales and leases of real estate by virtue of contracts entered into prior to the
effectivity of the law would violate the constitutional provision of non-impairment of
contracts, is only slightly less abstract but nonetheless hypothetical. It is enough to say
that the parties to a contract cannot, through the exercise of prophetic discernment,
fetter the exercise of the taxing power of the State. For not only are existing laws read
into contracts in order to fix obligations as between parties, but the reservation of
essential attributes of sovereign power is also read into contracts as a basic postulate of
the legal order. The policy of protecting contracts against impairment presupposes the
maintenance of a government which retains adequate authority to secure the peace and
good order of society. In truth, the Contract Clause has never been thought as a
limitation on the exercise of the State's power of taxation save only where a tax
exemption has been granted for a valid consideration.
Such is not the case of PAL in G.R. No. 115852, and the Court does not
understand it to make this claim. Rather, its position, as discussed above, is that the
removal of its tax exemption cannot be made by a general, but only by a specific, law.
Further, the Supreme Court held the validity of Republic Act No. 7716 in its formal
and substantive aspects as this has been raised in the various cases before it. To sum up,
the Court holds:
(1) That the procedural requirements of the Constitution have been complied with
by Congress in the enactment of the statute;
(2) That judicial inquiry whether the formal requirements for the enactment of
statutes - beyond those prescribed by the Constitution - have been observed is
precluded by the principle of separation of powers;
(3) That the law does not abridge freedom of speech, expression or the press, nor
interfere with the free exercise of religion, nor deny to any of the parties the right
to an education; and
(4) That, in view of the absence of a factual foundation of record, claims that the
law is regressive, oppressive and confiscatory and that it violates vested rights
protected under the Contract Clause are prematurely raised and do not justify the
grant of prospective relief by writ of prohibition.
WHEREFORE, the petitions are DISMISSED.
AUTONOMY OF CONTRACTS
DUNCAN ASSOCIATION OF DETAILMAN PTGW vs. GLAXOWELLCOM PHILIPPINES
G.R. No. 162994, September 17, 2004
FACTS:
Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome
Philippines, Inc. (Glaxo) as medical representative on October 24, 1995, after Tecson had
undergone training and orientation. Thereafter, Tecson signed a contract of employment
which stipulates, among others, that he agrees to study and abide by existing company
rules; to disclose to management any existing or future relationship by consanguinity or
affinity with co-employees or employees of competing drug companies and should
management find that such relationship poses a possible conflict of interest, to resign
from the company.
AUTONOMY OF CONTRACTS
ISSUE:
TIU vs. PLATINUM PLANS PHILIPPINES
G.R. No. 163512, February 28, 2007
FACTS:
Respondent Platinum Plans Philippines, Inc. is a domestic corporation engaged in
the pre-need industry. From 1987 to 1989, petitioner Daisy B. Tiu was its Division
Marketing Director. On January 1, 1993, respondent re-hired petitioner as Senior
Assistant Vice-President and Territorial Operations Head in charge of its Hong Kong and
Asean operations. The parties executed a contract of employment valid for five years.
On September 16, 1995, petitioner stopped reporting for work. In November 1995, she
became the Vice-President for Sales of Professional Pension Plans, Inc., a corporation
engaged also in the pre-need industry.
Consequently, respondent sued petitioner for damages before the RTC of Pasig
City, Branch 261. Respondent alleged, among others, that petitioners employment with
Professional Pension Plans, Inc. violated the non-involvement clause in her contract of
employment. In upholding the validity of the non-involvement clause, the trial court
ruled that a contract in restraint of trade is valid provided that there is a limitation upon
either time or place. In the case of the pre-need industry, the trial court found the twoyear restriction to be valid and reasonable. On appeal, the Court of Appeals affirmed the
trial courts ruling. It reasoned that petitioner entered into the contract on her own will
and volition. Thus, she bound herself to fulfill not only what was expressly stipulated in
the contract, but also all its consequences that were not against good faith, usage, and
law. The appellate court also ruled that the stipulation prohibiting non-employment for
two years was valid and enforceable considering the nature of respondents business.
ISSUE:
Whether the Court of Appeals erred in sustaining the validity of the noninvolvement clause
HELD:
In this case, the non-involvement clause has a time limit: two years from the time
petitioners employment with respondent ends. It is also limited as to trade, since it only
prohibits petitioner from engaging in any pre-need business akin to respondents. More
significantly, since petitioner was the Senior Assistant Vice-President and Territorial
Operations Head in charge of respondents Hongkong and Asean operations, she had
been privy to confidential and highly sensitive marketing strategies of respondents
business. To allow her to engage in a rival business soon after she leaves would make
respondents trade secrets vulnerable especially in a highly competitive marketing
environment. In sum, The Court finds the non-involvement clause not contrary to public
welfare and not greater than is necessary to afford a fair and reasonable protection to
respondent. Hence the restraint is valid and such stipulation prevails.
AUTONOMY OF CONTRACTS
AVON COSMETICS vs. LUNA
511 SCRA 376
FACTS:
The present petition stemmed from a complaint[3] dated 1 December 1988, filed
by herein respondent Luna alleging, inter alia that she began working for Beautifont,
Inc. in 1972, first as a franchise dealer and then a year later, as a Supervisor. Sometime
in 1978, Avon Cosmetics, Inc. (Avon), herein petitioner, acquired and took over the
2)
That the Supervisor is an independent retailer/dealer insofar as the Company is
concerned, and shall have the sole discretion to determine where and how products
purchased from the Company will be sold. However, the Supervisor shall not sell such
products to stores, supermarkets or to any entity or person who sells things at a fixed
place of business.
3)
That this agreement supersedes any agreement/s between the Company and the
Supervisor.
4)
That the Supervisor shall sell or offer to sell, display or promote only and
exclusively products sold by the Company.
5)
Either party may terminate this agreement at will, with or without cause, at any
time upon notice to the other.
Later, respondent Luna entered into the sales force of Sandre Philippines which
caused her termination for the alleged violation of the terms of the contract. The trial
court ruled in favor of Luna that the contract was contrary to public policy thus the
dismissal was not proper. The Court of Appeals affirmed the decision, hence this petition.
ISSUE:
Whether the Court of Appeals erred in ruling that the Supervisors Agreement was
invalid for being contrary to public policy
Whether there was subversion of the autonomy of contracts by the lower courts
HELD:
Agreements in violation of orden pblico must be considered as those which
conflict with law, whether properly, strictly and wholly a public law (derecho) or whether
a law of the person, but law which in certain respects affects the interest of society.
Plainly put, public policy is that principle of the law which holds that no subject or citizen
can lawfully do that which has a tendency to be injurious to the public or against the
public good. As applied to contracts, in the absence of express legislation or
constitutional prohibition, a court, in order to declare a contract void as against public
policy, must find that the contract as to the consideration or thing to be done, has a
tendency to injure the public, is against the public good, or contravenes some
established interests of society, or is inconsistent with sound policy and good morals, or
tends clearly to undermine the security of individual rights, whether of personal liability
or of private property.
From another perspective, the main objection to exclusive dealing is its tendency
to foreclose existing competitors or new entrants from competition in the covered
portion of the relevant market during the term of the agreement. Only those
arrangements whose probable effect is to foreclose competition in a substantial share of
the line of commerce affected can be considered as void for being against public policy.
The foreclosure effect, if any, depends on the market share involved. The relevant
market for this purpose includes the full range of selling opportunities reasonably open
to rivals, namely, all the product and geographic sales they may readily compete for,
using easily convertible plants and marketing organizations.
Applying the preceding principles to the case at bar, there is nothing invalid or
contrary to public policy either in the objectives sought to be attained by paragraph 5,
i.e., the exclusivity clause, in prohibiting respondent Luna, and all other Avon
supervisors, from selling products other than those manufactured by petitioner Avon.
Having held that the exclusivity clause as embodied in paragraph 5 of the
Supervisors Agreement is valid and not against public policy, we now pass to a
consideration of respondent Lunas objections to the validity of her termination as
provided for under paragraph 6 of the Supervisors Agreement giving petitioner Avon the
right to terminate or cancel such contract. The paragraph 6 or the termination clause
therein expressly provides that:
exclude the other. The contract provided that it can be terminated or cancelled for cause,
it also stated that it can be terminated without cause, both at any time and after written
notice. Thus, whether or not the termination or cancellation of the Supervisors
Agreement was for cause, is immaterial. The only requirement is that of notice to the
other party. When petitioner Avon chose to terminate the contract, for cause, respondent
Luna was duly notified thereof.
Worth stressing is that the right to unilaterally terminate or cancel the
Supervisors Agreement with or without cause is equally available to respondent Luna,
subject to the same notice requirement. Obviously, no advantage is taken against each
other by the contracting parties.
Hence, the petition was granted.
AUTONOMY OF CONTRACTS
DEL CASTILLO vs. RICHMOND
45 PHIL. REPORTS 679
FACTS:
The plaintiff alleges that the provisions and conditions contained in the third
paragraph of their contract constitute an illegal and unreasonable restriction upon his
liberty to contract, are contrary to public policy, and are unnecessary in order to
constitute a just and reasonable protection to the defendant; and asked that the same be
declared null and void and of no effect. The defendant interposed a general and special
defense. In his special defense he alleges that during the time the plaintiff was in the
defendant's employ he obtained knowledge of his trade and professional secrets and
came to know and became acquainted and established friendly relations with his
customers so that to now annul the contract and permit plaintiff to establish a competing
drugstore in the town of Legaspi, as plaintiff has announced his intention to do, would be
extremely prejudicial to defendant's interest." The defendant further, in an amended
answer, alleges that this action not having been brought within four years from the time
the contract referred to in the complaint was executed, the same has prescribed.
ISSUE:
Whether the contract is valid and the autonomy of contracts be upheld
HELD:
6)
Either party may terminate this agreement at will, with or without cause, at any
time upon notice to the other.
In the case at bar, the termination clause of the Supervisors Agreement clearly
provides for two ways of terminating and/or canceling the contract. One mode does not
respondent the second option, as the condominium project was in fact already
completed. The payment of 2% then cannot be rejected.
AUTONOMY OF CONTRACTS
ARWOOD INDUSTRIES, INC. VS. D.M. CONSUNJI, INC.
G.R No. 142277
December 11, 2002
394 SCRA 11
FACTS:
Petitioner Arwood Industries and resppndent DM
contractor, respectively, entered into a Civil, Structural
Agreement on February 6, 1989 for the construction
Condominium at No. 23 Eisenhower St. Greenhills, San Juan,
price for the project aggregated to P20,800,000.00
Therefore, since the Agreement stands as the law between the parties, the Court
cannot ignore the existence of such provision providing for a penalty for every months
delay. Neither can petitioner impugn the Agreement to which it willingly gave its consent.
Wherefore the petition is denied.
AUTONOMY OF CONTRACTS
SPOUSES SILVESTRE and CELIA PASCUAL VS. RODRIGO RAMOS
G. R. No. 144712
FACTS:
On June 3, 1987, spouses Silvestre and Celia Pascual executed in favor of Rodrigo
Ramos a Deed of Absolute Sale with Right to Repurchase over two parcels of land located
in Bambang, Bulacan, Bulacan for and in consideration of P150,000.00. The Pascuals did
not exercixe their right to repurchase the property within the stipulated one-year period;
thus, Ramos filed with the trial court a petition that the title or ownership over the
subject parcels and improvements thereon be consolidated in his favor. In their answer,
the Pascuals averred that what the parties had actually agreed upon and entered into
was a real estate mortgage and that they had even overpaid Ramos. The Pascuals
prayed that Ramos be ordered to execute a Deed of Cancellation, Release or Discharge
of the Absolute Sale with Right to Repurchase or a Deed of Real Estate Mortgage and for
the award of damages. Among the documents offered in evidence by Ramos during the
trial was a document denominated as Sinumpaang Salaysay signed by Ramos and
Silvestre Pascual, but not notarized. On the other hand, the Pascuals presented
documentary evidence consisting of acknowledgement receipts to prove the payments
they had made. The trial court found that the transaction was actually a loan in the
amount of P150, 000, the payment of which was secured by a mortgage of the property.
It also found that the Pascuals had made payments in the total sum of P344,000, and
that with interest at 7% per annum, the Pascuals had overpaid the loan by P141,500.
The trial court rendered its decision dismissing Ramos petition and awarding the
Pascuals the sum of P141,500 as overpayments on the loan and interests.
Ramos moved for the reconsideration of the decision, alleging that the trial court
erred in using an interest rate of 7% pert annum in the computation of the total amount
of obligation since what was expressly stipulated in the Sinumpaang Salaysay was 7%
per month. Thus the total interest due was P643,000 was still due as interest. Adding
the latter to the principal sum of P150,000, the total amount due from the Pascuals as of
April 3, 1995, was P793,000.
Finding merit in Ramos motion for reconsideration, which was not opposed by the
Pascuals, the trial court issued an order modifying its decision. It deleted the award of
P141,500 to the Pascuals and ordered them to pay Ramos P511,000. The trial court
noted that during the trial, the Pascuals never disputed the stipulated interest which is
7% per month. However, the court declared it is too burdensome and onerous, thus
reducing the interest rate at 5% per month.
The Pascuals filed a motion to reconsider the Order of June 5, 1995 and Ramos
opposed the motion of the Pascuals. The Pascuals appealed to the Court of Appeals but
the appellate court affirmed in toto the trial courts orders. Hence, this petition.
ISSUE:
Whether or not the Pascuals are liable for 5% interest per month from June 3,
1987 to April 3, 1995.
RULING:
The Supreme Court held that parties are bound by the stipulation in the contracts
voluntarily entered into by them. Parties are free 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 of 7% per month was voluntarily agreed
upon by Ramos and the Pascuals. There is nothing from the records and no allegation
showing that petitioners were victims of fraud when they entered into the agreement
with Ramos. With the suspension of the Usury Law and the removal of interest ceiling,
the parties are free to stipulate the interest to be imposed on loans. Absent any
evidence of fraud, undue influence, or any vice of consent exercised by Ramos on the
Pascuals, the interest agreed upon them is binding upon them. The Court is not in a
position to impose upon parties contractual stipulations different from what they have
agreed upon. The Court cannot supplant the interest rate, which was reduced to 5% per
month without opposition on the part of Ramos.
Hence, the Pascuals are liable for 5% interest per month from June 3, 1987 to
April 3, 1995. The assailed decision is therefore affirmed and the petition is denied.
OBLIGATORY FORCE OF CONTRACTS
MAXIMA HEMEDES, petitioner,
VS. THE HONORABLE COURT OF APPEALS, DOMINIUM REALTY AND
CONSTRUCTION CORPORATION, ENRIQUE D. HEMEDES, and R & B INSURANCE
CORPORATION, respondents
G.R. No. 108472
October 8, 1999
FACTS:
The instant controversy involves a question of ownership over an unregistered
parcel of land, identified as Lot No. 6, plan Psu-111331, with an area of 21,773 square
meters, situated in Sala, Cabuyao, Laguna. It was originally owned by the late Jose
Hemedes, father of Maxima Hemedes and Enrique D. Hemedes. On March 22, 1947 Jose
Hemedes executed a document entitled Donation Inter Vivos With Resolutory
Conditions whereby he conveyed ownership over the subject land, together with all its
improvements, in favor of his third wife, Justa Kausapin. Maxima Hemedes, through her
counsel, filed an application for registration and confirmation of title over the subject
unregistered land. Subsequently, Original Certificate of Title (OCT) No. (0-941) 0-198
was issued in the name of Maxima Hemedes married to Raul Rodriguez by the Registry of
Deeds of Laguna on June 8, 1962, with the annotation that Justa Kausapin shall have the
usufructuary rights over the parcel of land herein described during her lifetime or
widowhood.
On February 28, 1979, Enrique D. Hemedes sold the property to Dominium Realty
and Construction Corporation (Dominium). On April 10, 1981, Justa Kausapin executed
an affidavit affirming the conveyance of the subject property in favor of Enrique D.
Hemedes as embodied in the Kasunduan dated May 27, 1971, and at the same time
denying the conveyance made to Maxima Hemedes.
On August 27, 1981, Dominium and Enrique D. Hemedes filed a complaint with
the Court of First Instance of Binan, Laguna for the annulment of TCT No. 41985 issued in
favor of R & b Insurance and/or the reconveyance to Dominium of the subject property.
Specifically, the complaint alleged that Dominium was the absolute owner of the subject
property by virtue of the February 28, 1979 deed of sale executed by Enrique D.
Hemedes, who in turn obtained ownership of the land from Justa Kausapin, as evidenced
by the Kasunduan dated May 27, 1971. The Plaintiffs asserted that Justa Kausapin
never transferred the land to Maxima Hemedes and that Enrique D. Hemedes had no
knowledge of the registration proceedings initiated by Maxima Hemedes.
After considering the merits of the case, the trial court rendered judgment on
February 22, 1989 in favor of plaintiffs Dominium and Enrique D. Hemedes. Both R & B
Insurance and Maxima Hemedes appealed from the trial courts decision. On September
11, 1992 the Court of Appeals affirmed the assailed decision in toto and on December
29, 1992, it denied R & Insurances motion for reconsideration. Thus, Maxima Hemedes
and R & B Insurance filed their respective petitions for review with this Court on
November 3, 1992 and February 22, 1993, respectively.
ISSUE:
Which of the two conveyances by Justa Kausapin, the first in favor of Maxima
Hemedes and the second in favor of Enrique D. Hemedes, effectively transferred
ownership over the subject land?
RULING:
Public respondents finding that the Deed of Conveyance of Unregistered Real
Property By Reversion executed by Justa Kausapin in favor of Maxima Hemedes is
spurious is not supported by the factual findings in this case. It is grounded upon the
mere denial of the same by Justa Kausapin.
September 6, 1973, Andres and Caigas, with the consent of their respective spouses,
Anita Barrientos and Consolacion Tobias, sold the land to Fortune Tobacco Corporation for
P60,000.00. Simultaneously, they executed a joint affidavit declaring that they had no
tenants on said lot. On the same date, the sale was registered in the Office of the
Register of Deeds of Isabela. TCT No. 68641 was cancelled and TCT No. T-68737 was
issued in Fortunes name. On August 6, 1976, Andres and Caigas executed a Deed of
Reconveyance of the same lot in favor of Filomena Domingo, the mother of Joselito
Villegas, defendant in the case before the trial court. Although no title was mentioned in
this deed, Domingo succeeded in registering this document in the Office of the Register
of Deeds on August 6, 1976, causing the latter to issue TCT No. T-91864 in her name. It
appears in this title that the same was a transfer from TCT No. T-68641. On April 13,
1981, Domingo declared the lot for real estate taxation under Tax Declaration No. 105633. On December 4, 1976, the Office of the Register of Deeds of Isabela was burned
together with all titles in the office. On December 17, 1976, the original of TCT No. T91864 was administratively reconstituted by the Register of Deeds. On June 2, 1979, a
Deed of Absolute Sale of a portion of 20,000 square meters of Lot B-3-A was executed by
Filomena Domingo in favor of Villegas for a consideration of P1,000.00. This document
was registered on June 3, 1981 and as a result TCT No. T-131807 was issued by the
Register of Deeds to Villegas. On the same date, the technical description of Lot B-3-A-2
was registered and TCT No. T-131808 was issued in the name of Domingo. On January
22, 1991, this document was registered and TCT No. 154962 was issued to the
defendant, Joselito Villegas.
On April 10, 1991, the trial court upon a petition filed by Fortune ordered the
reconstitution of the original of TCT No. T-68737. After trial on the merits, the trial court
rendered its assailed decision in favor of Fortune Tobacco, declaring it to be entitled to
the property. Petitioners thus appealed this decision to the Court of Appeals, which
affirmed the trial courts decision.
ISSUES:
Whether or not the Court of Appeals was correct in affirming the trial courts
decision.
VILLEGAS VS. CA
EQUATORIAL REALTY VS. CARMELO
PUP VS. CA
LITONJUA VS. L &R
RULING:
Even if Fortune had validly acquired the subject property, it would still be barred
from asserting title because of laches. The failure or neglect, for an unreasonable length
of time to do that which by exercising due diligence could or should have been done
earlier constitutes laches. It is negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party entitled to assert it has either
abandoned it or declined to assert it. While it is by express provision of law that no title
to registered land in derogation of that of the registered owner shall be acquired by
prescription or adverse possession, it is likewise an enshrined rule that even a registered
owner may be barred from recovering possession of property by virtue of laches.
Hence, petition was GRANTED and the Decision of the Court of Appeals was
REVERSED.
EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INC vs.
MAYFAIR THEATER, INC
G.R. No. 106063 1996 Nov 21 264 SCRA 483
FACTS:
Carmelo owned a parcel of land, together with two 2-storey buildings constructed
thereon. On June 1, 1967 Carmelo entered into a contract of lease with Mayfair for the
latters lease of a portion of Carmelos property. Two years later, on March 31, 1969,
Mayfair entered into a second contract of lease with Carmelo for the lease of another
portion of Carmelos property.
Both contracts of lease provide identically worded paragraph 8, which reads:
That if the LESSOR should desire to sell the leased premises, the LESSEE shall be
given 30-days exclusive option to purchase the same.
In the event, however, that the leased premises is sold to someone other than the
LESSEE, the LESSOR is bound and obligated, as it hereby binds and obligates itself, to
stipulate in the Deed of Sale thereof that the purchaser shall recognize this lease and be
bound by all the terms and conditions thereof.
Mr. Henry Pascal of Carmelo informed Mr. Henry Yang, President of Mayfair, through a
telephone conversation that Carmelo was desirous of selling the entire Claro M. Recto
property. Mr. Pascal told Mr. Yang that a certain Jose Araneta was offering to buy the
whole property for US Dollars 1,200,000, and Mr. Pascal asked Mr. Yang if the latter was
willing to buy the property for Six to Seven Million Pesos.
Under your companys two lease contracts with our client, it is uniformly provided:
8. That if the LESSOR should desire to sell the leased premises the LESSEE shall be
given 30-days exclusive option to purchase the same. In the event, however, that the
leased premises is sold to someone other than the LESSEE, the LESSOR is bound and
obligated, as it here binds and obligates itself, to stipulate in the Deed of Sale thereof
that the purchaser shall recognize this lease and be bound by all the terms and
conditions hereof.
Carmelo did not reply to this letter.
On September 18, 1974, Mayfair sent another letter to Carmelo purporting to
express interest in acquiring not only the leased premises but the entire building and
other improvements if the price is reasonable. However, both Carmelo and Equatorial
questioned the authenticity of the second letter.
Four years later, on July 30, 1978, Carmelo sold its entire C.M. Recto Avenue land
and building, which included the leased premises housing the Maxim and Miramar
theatres, to Equatorial by virtue of a Deed of Absolute Sale, for the total sum of
P11,300,000.00.
In September 1978, Mayfair instituted the action a quo for specific performance
and annulment of the sale of the leased premises to Equatorial. It dismissed the
complaint with costs against the plaintiff. The Court of Appeals reversed the decision of
the trial court.
RULING:
Whether or not the decision of the Court of Appeals decision was correct.
RULING:
The Court agrees with the Court of Appeals that the aforecited contractual
stipulation provides for a right of first refusal in favor of Mayfair. It is not an option clause
or an option contract. It is a contract of a right of first refusal.
As early as 1916, in the case of Beaumont vs. Prieto, unequivocal was our
characterization of an option contract as one necessarily involving the choice granted to
another for a distinct and separate consideration as to whether or not to purchase a
determinate thing at a predetermined fixed price.
Further, what Carmelo and Mayfair agreed to, by executing the two lease
contracts, was that Mayfair will have the right of first refusal in the event Carmelo sells
the leased premises. It is undisputed that Carmelo did recognize this right of Mayfair, for
it informed the latter of its intention to sell the said property in 1974. There was an
exchange of letters evidencing the offer and counter-offers made by both parties.
Carmelo, however, did not pursue the exercise to its logical end. While it initially
recognized Mayfairs right of first refusal, Carmelo violated such right when without
affording its negotiations with Mayfair the full process to ripen to at least an interface of
a definite offer and a possible corresponding acceptance within the 30-day exclusive
option time granted Mayfair, Carmelo abandoned negotiations, kept a low profile for
some time, and then sold, without prior notice to Mayfair, the entire Claro M. Recto
property to Equatorial.
Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the
property in question rescissible. We agree with respondent Appellate Court that the
records bear out the fact that Equatorial was aware of the lease contracts because its
lawyers had, prior to the sale, studied the said contracts. As such, Equatorial cannot
tenably claim to be a purchaser in good faith, and, therefore, rescission lies.
lease over the property. While its letter of 17 March 1988 was answered by Antonio A.
Henson, General Manager of NDC, who promised immediate action on the matter, the
rest of its communications remained unacknowledged. FIRESTONE's predicament
worsened when rumors of NDC's supposed plans to dispose of the subject property in
favor of petitioner Polytechnic University of the Philippines came to its knowledge.
Forthwith, FIRESTONE served notice on NDC conveying its desire to purchase the
property in the exercise of its contractual right of first refusal. Apprehensive that its
interest in the property would be disregarded, FIRESTONE instituted an action for specific
performance to compel NDC to sell the leased property in its favor. Following the denial
of its petition, FIRESTONE amended its complaint to include PUP and Executive Secretary
Catalino Macaraeg, Jr., as party-defendants, and sought the annulment of Memorandum
Order No. 214.
After trial, judgment was rendered declaring the contracts of lease executed
between FIRESTONE and NDC covering the 2.60-hectare property and the warehouses
constructed thereon valid and existing until 2 June 1999. The Court of Appeals affirmed
the decision of the trial court ordering the sale of the property in favor of FIRESTONE.
ISSUE:
Whether or not the Court of Appeals decided a question of substance in a way
definitely not in accord with law or jurisprudence.
RULING:
The courts a quo did not hypothesize, much less conjure, the sale of the disputed
property by NDC in favor of petitioner PUP. Aside from the fact that the intention of NDC
and PUP to enter into a contract of sale was clearly expressed in the Memorandum Order
No. 214, a close perusal of the circumstances of this case strengthens the theory that
the conveyance of the property from NDC to PUP was one of absolute sale, for a valuable
consideration, and not a mere paper transfer as argued by petitioners.
A contract of sale, as defined in the Civil Code, is a contract where one of the
parties obligates himself to transfer the ownership of and to deliver a determinate thing
to the other or others who shall pay therefore a sum certain in money or its equivalent. It
is therefore a general requisite for the existence of a valid and enforceable contract of
sale that it be mutually obligatory, i.e., there should be a concurrence of the promise of
the vendor to sell a determinate thing and the promise of the vendee to receive and pay
for the property so delivered and transferred. The Civil Code provision is, in effect, a
"catch-all" provision which effectively brings within its grasp a whole gamut of transfers
whereby ownership of a thing is ceded for a consideration.
Contrary to what petitioners PUP and NDC propose, there is not just one party involved in
the questioned transaction. Petitioners NDC and PUP have their respective charters and
therefore each possesses a separate and distinct individual personality.
Hence, the petition was denied.
SPS. LITONJUA vs. L & R CORPORATION
G.R. No. 130722. December 9, 1999
320 SCRA 405
FACTS:
This stems from loans obtained by the spouses Litonjua from L&R Corporation in
the aggregate sum of P400,000.00; P200,000.00 of which was obtained on August 6,
1974 and the remaining P200,000.00 obtained on March 27, 1978. The loans were
secured by a mortgage constituted by the spouses upon their two parcels of land and the
improvements thereon The mortgage was duly registered with the Register of Deeds.
Spouses Litonjua sold to Philippine White House Auto Supply, Inc. (PWHAS) the
parcels of land they had previously mortgaged to L & R Corporation for the sum of
P430,000.00. Meanwhile, with the spouses Litonjua having defaulted in the payment of
their loans, L & R Corporation initiated extrajudicial foreclosure proceedings with the ExOficio Sheriff of Quezon City. The mortgaged properties were sold at public auction to L
& R Corporation as the only bidder for the amount of P221,624.58.
The Deputy Sheriff informed L & R Corporation of the payment by PWHAS of the
full redemption price and advised it that it can claim the payment upon surrender of its
owners duplicate certificates of title. The spouses Litonjua presented for registration the
Certificate of Redemption issued in their favor to the Register of Deeds of Quezon City.
The Certificate also informed L & R Corporation of the fact of redemption and directed
the latter to surrender the owners duplicate certificates of title within five days.
On April 22, 1981, L & R Corporation wrote a letter to the Sheriff, copy furnished to the
Register of Deeds, stating: (1) that the sale of the mortgaged properties to PWHAS was
without its consent, in contravention of paragraphs 8 and 9 of their Deed of Real Estate
Mortgage; and (2) that it was not the spouses Litonjua, but PWHAS, who was seeking to
redeem the foreclosed properties, when under Articles 1236 and 1237 of the New Civil
Code, the latter had no legal personality or capacity to redeem the same.
On the other hand, the spouses Litonjua asked the Register of Deeds to annotate
their Certificate of Redemption as an adverse claim on the titles of the subject properties
on account of the refusal of L & R Corporation to surrender the owners duplicate copies
of the titles to the subject properties. With the refusal of the Register of Deeds to
annotate their Certificate of Redemption, the Litonjua spouses filed a Petition on July 17,
1981 against L & R Corporation for the surrender of the owners duplicate of Transfer
Certificates of Title No. 197232 and 197233 before the then CFI.
While the said case was pending, L & R Corporation executed an Affidavit of
Consolidation of Ownership. The Register of Deeds cancelled Transfer Certificates of Title
No. 197232 and 197233 and in lieu thereof, issued Transfer Certificates of Title No.
280054 and 28055 in favor of L & R Corporation, free of any lien or encumbrance. A
complaint for Quieting of Title, Annulment of Title and Damages with preliminary
injunction was filed by the spouses Litonjua and PWHAS against herein respondents
before the then CFI.
ISSUE:
Whether or not the Court of Appeals erred in its decision.
RULING:
In the case at bar, PWHAS cannot claim ignorance of the right of first refusal
granted to L & R Corporation over the subject properties since the Deed of Real Estate
Mortgage containing such a provision was duly registered with the Register of Deeds. As
such, PWHAS is presumed to have been notified thereof by registration, which equates to
notice to the whole world. Thus, the Decision appealed from was AFFIRMED with the
following MODIFICATIONS.
MUTUALITY OF CONTRACT
Contracts take effect only between the parties, their successors in interest, heirs,
and assigns. When there is no privity of contract, there is likewise no obligation or
liability and thus, no cause of action arises. Petitioner, being not privy to the transaction
between Tan and respondent, should not be made liable for the failure of Tan to deliver
the payment to respondent.
Therefore, respondent should recover the payment from Tan.
FACTS:
Complainant EPCIB is the defendant in Civil Case No. CEB-26983 before the
Regional Trial Court (RTC), Branch 16, Cebu City, entitled, Ng Sheung Ngor, doing
business under the name and style Ken Marketing, Ken Appliance Division, Inc. and
Benjamin Go, Plaintiffs, vs. Equitable PCI Bank, Aimee Yu and Ben Apas, Defendants for
Annulment and/or Reformation of Documents and Contracts.
Respondents Antonio A. Bellones and Generoso B. Regalado are the sheriffs in
Branches 9 and 16, respectively, of the RTC of Cebu City.
For garnishing accounts maintained by Equitable PCI Bank, Inc. (EPCIB) at
Citibank, N.A., and Hongkong and Shanghai Bank Corporation (HSBC), allegedly in
violation of Section 9(b) of Rule 39 of the Rules of Court, a complaint for grave abuse of
authority was filed by Atty. Paulino L. Yusi against Sheriffs Antonio A. Bellones and
Generoso B. Regalado. There was an offer of other real property by petitioner.
ISSUE:
Did respondents violate the Rules of Court?
RULING:
By serving notices of garnishment on Citibank, N.A., HSBC and PNB, Sheriff
Regalado violated EPCIBs right to choose which property may be levied upon to be sold
at auction for the satisfaction of the judgment debt. Thus, it is clear that when EPCIB
offered its real properties, it exercised its option because it cannot immediately pay the
full amount stated in the writ of execution and all lawful fees in cash, certified bank
check or any other mode of payment acceptable to the judgment obligee.
In the case at bar, EPCIB cannot immediately pay by way of Managers Check so it
exercised its option to choose and offered its real properties. With the exercise of the
option, Sheriff Regalado should have ceased serving notices of garnishment and
discontinued their implementation. This is not true in the instant case. Sheriff Regalado
was adamant in his posture even if real properties have been offered which were
sufficient to satisfy the judgment debt.
of the mausoleum was unconscionable and oppressive. She prayed that, after trial,
judgment be rendered in her favor, granting a final injunction perpetually restraining
defendants from enforcing the invalid Rule 69 of SFMPIs Rules for Memorial Work in the
Mausoleum of the Park or from refusing or preventing the construction of any
improvement upon her property in the park. The court issued a cease and desist order
against defendants.
The trial court rendered judgment in favor of defendants. On appeal, the CA
affirmed the decision of the trial court.
ISSUE:
Whether or not petitioner had knowledge of Rule 69 of SFMPI Rules and
Regulations for memorial works in the mausoleum areas of the park when the Pre-Need
Purchase Agreement and the Deed of Sale was executed and whether the said rule is
valid and binding upon petitioner.
RULING:
Plaintiffs allegation that she was not aware of the said Rules and Regulations
lacks credence. Admittedly, in her Complaint and during the trial, plaintiff testified that
she informed the defendants of her intention to construct a mausoleum. Even counsel for
the plaintiff, who is the son of the plaintiff, informed the Court during the trial in this case
that her mother, the plaintiff herein, informed the defendants of her plan to construct
and erect a mausoleum. This act of the plaintiff clearly shows that she was fully aware of
the said rules and regulations otherwise she should not consult, inform and seek
permission from the defendants of her intention to build a mausoleum if she is not barred
by the rules and regulations to do the same. When she signed the contract with the
defendants, she was estopped to question and attack the legality of said contract later
on.
Further, a contract of adhesion, wherein one party imposes a readymade form of
contract on the other, is not strictly against the law. A contract of adhesion is as binding
as ordinary contracts, the reason being that the party who adheres to the contract is free
to reject it entirely. Contrary to petitioners contention, not every contract of adhesion is
an invalid agreement.
Thus, the petition was denied.
PRINCIPLE OF EQUALITY / CONTRACTS OF ADHESION
PILIPINO TELEPHONE CORPORATION vs. DELFINO TECSON
G.R. No. 156966. May 7, 2004
FACTS:
On various dates in 1996, Delfino C. Tecson applied for 6 cellular phone
subscriptions with petitioner Pilipino Telephone Corporation (PILTEL), a company engaged
a settlement of their claim in sight, they consulted a lawyer who demanded from
defendant on August 13, 1990.
Respondent appellate court approved said findings of the trial court in this
manner: We cannot agree with defendant-appellant's above contention. Under our
jurisprudence, the Air Waybill is a contract of adhesion considering that all the provisions
thereof are prepared and drafted only by the carrier. The only participation left of the
other party is to affix his signature thereto. In the earlier case of Angeles v. Calasanz, the
Supreme Court ruled that the terms of a contract of adhesion must be interpreted
against the party who drafted the same.
PRINCIPLE OF EQUALITY / CONTRACTS OF ADHESION
ERMITAO VS. COURT OF APPEALS
306 SCRA 218
FACTS:
Petitioner Luis Ermitao applied for a credit card from private respondent BPI
Express Card Corp. (BECC) on October 8, 1986 with his wife, Manuelita, as extension card
holder. The spouses were given credit limit of P10, 000.00. They often exceeded this
credit limit without protest from BCC.
On August 9, 1989, Manuelitas bag was snatched from 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 informed, by telephone, BECC of the loss. The
call was received by BECC offices through a certain Gina Banzon. This was followed by a
letter dated August 30, 1989. She also surrendered Luis credit card and requested for
replacement cards. In her letter, Manuelita stated that she shall not be responsible for
any and all charges incurred [through the use of the lost card] After August 29, 1989.
However, when Luis received his monthly billing statement from BECC dated
September 20,1989, the charges included amounts for 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 of
P3,197.70 covering the same (unauthorized) purchases. Manuelita wrote again BECC
disclaiming responsibility for those charges, which were made after she had served BECC
with notice of loss of her card.
However, BECC, in a letter dated July 13, 1990, pointed to Luis the following
stipulation in their contract:
In his reply dated July 18, 1990, Luis stressed that the contract BECC was
referring to was a contract of adhesion and warned that if BECC insisted on charging him
and his wife for the unauthorized purchases, they will sue BECC continued to bill the
spouses for said purchases.
FACTS:
The trial court only opined that the only purpose for the suspension of the
spouses credit privileges was to compel them to pay for the unauthorized purchases.
The trial court ruled that the latter portion of the condition in the parties contract, which
states the liability for purchases made after a card is lost or stolen shall be for the
account of the cardholder until after notice of the lost or theft has been given to BECC
and after the latter has informed its member establishments, is void for being contrary to
public policy and for being dependent upon the sole will of the debtor.
ISSUE:
Whether or not the Court of Appeals gravely erred in relying on the case of Serra
v. Court of 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 drafted
entirely by private respondent, thus, a clear contract of adhesion.
RULING:
At the outset, we note that the contract between the parties in this case is indeed
a contract of adhesion, so-called because its terms are prepared by only one party while
the other party merely affixes his signature signifying 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 free to reject the stipulations entirely.
In this case, the cardholder, Manuelita, has complied with what was required of
her under the contract with BECC, She immediately notified BECC of loss of her card on
the same day it was lost and, the following day, she sent a written notice of the loss to
BECC.
PROJECT 3. The parties executed the third agreement in May 1992. In a written
Construction Contract, Titan undertook to construct the Uniwide Sales Department
Store Building in Kalookan City for the price of P118,000,000.00 payable in progress
billings to be certified to by Uniwides representative. 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.
Clearly, what happened in this case was that BECC failed to notify promptly the
establishment in which the unauthorized purchases were made with the use of
Manuelitas lost card. Thus, Manuelita was being liable for those purchases, even if there
is no showing that Manuelita herself had signed for said purchases, and after notice by
her concerning her cards loss was already given to BECC.
Uniwide asserted in its petition that: (a) it overpaid Titan for unauthorized
additional works in Project 1 and Project 3; (b) it is not liable to pay the Value-Added Tax
for Project 1; (c) it is entitled to liquidated damages for the delay incurred in constructing
Project 1 and Project 3; and (d) it should not have been found liable for deficiencies in
the defectively constructed Project 2.
The decision:
On Project 1 Libis: Uniwide is absolved of any liability for the claims made by
[Titan] on this Project.
Project 2 Edsa Central: Uniwide is absolved of any liability for VAT payment
on this project, the same being for the account of Titan. On the other hand, Titan is
absolved of any liability on the counterclaim for defective construction of this project.
Uniwide is held liable for the unpaid balance in the amount of P6,301,075.77 which is
ordered to be paid to the Titan with 12% interest per annum commencing from 19
December 1992 until the date of payment.
On Project 3 Kalookan: Uniwide is held liable for the unpaid balance in the
amount of P5,158,364.63 which is ordered to be paid to Titan with 12% interest per
annum commencing from 08 September 1993 until the date of payment. Uniwide is held
liable to pay in full the VAT on this project, in such amount as may be computed by the
Bureau of Internal Revenue to be paid directly thereto. The BIR is hereby notified that
Uniwide Sales Realty and Resources Corporation has assumed responsibility and is held
liable for VAT payment on this project. This accordingly exempts Claimant Titan-Ikeda
Construction and Development Corporation from this obligation.
ISSUE:
Whether or not the decision rendered is correct.
RULING:
The petition is DENIED and the Decision of the Court of Appeals was AFFIRMED.
NON-BINDING TO THIRD PARTIES
and respondent Dacillo filed a Joint Answer with Counterclaim and Crossclaim praying for
dismissal of petitioners Complaint for the same reason.
The trial court issued an Order dismissing petitioners Complaint for noncompliance with the arbitration clause.
ISSUE:
Whether or not the trial court erred in dismissing the complaint.
RULING:
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 they. Petitioners, as heirs of Salas, Jr., and respondent Laperal Realty are certainly
bound by the Agreement. If respondent Laperal Realty, had assigned its rights under the
Agreement to a third party, making the former, the assignor, and the latter, the
assignee, such assignee would also be bound by the arbitration provision since
assignment involves such transfer of rights as to vest in the assignee the power to
enforce them to the same extent as the assignor could have enforced them against the
debtor or in this case, against the heirs of the original party to the Agreement. However,
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 not assignees of the rights of
respondent Laperal Realty under the Agreement to develop Salas, Jr.s land and sell the
same. They are, rather, buyers of the land that respondent Laperal Realty was given the
authority to develop and sell under the Agreement. As such, they are not assigns
contemplated in Art. 1311 of the New Civil Code which provides that contracts take
effect only between the parties, their assigns and heirs.
Laperal Realty, as a contracting party to the Agreement, has the right to compel
petitioners to first arbitrate before seeking judicial relief. However, to split the
proceedings into arbitration for respondent Laperal Realty and trial for the respondent lot
buyers, or to hold trial in abeyance pending arbitration between petitioners and
respondent Laperal Realty, would in effect result in multiplicity of suits, duplicitous
procedure and unnecessary delay. On the other hand, it would be in the interest of
justice if the trial court hears the complaint against all herein respondents and
adjudicates petitioners rights as against theirs in a single and complete proceeding.
Hence, the trial courts decision was nullified and set aside. Said court was
ordered to proceed with the hearing.
NON-BINDING TO THIRD PARTIES
BIENVENIDO R. MEDRANO and IBAAN RURAL BANK vs. CA, PACITA G. BORBON,
JOSEFINA E. ANTONIO and ESTELA A. FLOR
G.R. No. 150678. February 18, 2005
FACTS:
Bienvenido R. Medrano was the Vice-Chairman of Ibaan Rural Bank, a bank owned
by the Medrano family. In 1986, Mr. Medrano asked Mrs. Estela Flor, a cousin-in-law, to
look for a buyer of a foreclosed asset of the bank, a 17-hectare mango plantation priced
at P2,200,000.00. Mr. Dominador Lee, a businessman from Makati City, was a client of
respondent Mrs. Pacita G. Borbon, a licensed real estate broker. Borbon relayed to her
business associates and friends that she had a ready buyer for a mango orchard. Flor
then advised her that her cousin-in-law owned a mango plantation which was up for
sale. She told Flor to confer with Medrano and to give them a written authority to
negotiate the sale of the property. Thus, Medrano issued the Letter of Authority in favor
of Pacita G. Borbon and Josefina E. Antonio.
A Deed of Sale was eventually executed between the bank, represented by its
President/General Manager Teresa M. Ganzon (as Vendor) and KGB Farms, Inc.,
represented by Dominador Lee (as Vendee), for the purchase price of P1,200,000.00.
Since the sale of the property was consummated, the respondents asked from the
petitioners their commission, or 5% of the purchase price. The petitioners refused to pay
and offered a measly sum of P5,000.00 each. Hence, the respondents were constrained
to file an action against herein petitioners.
The trial court rendered a Decision in favor of the respondents. It found that the
letter of authority was valid and binding as against Medrano and the Ibaan Rural bank.
Medrano signed the said letter for and in behalf of the bank, and as owner of the
property, promising to pay the respondents a 5% commission for their efforts in looking
for a purchaser of the property. He is, therefore, estopped from denying liability on the
basis of the letter of authority he issued in favor of the respondents. The trial court
further stated that the sale of the property could not have been possible without the
representation and intervention of the respondents. As such, they are entitled to the
brokers commission of 5% of the selling price of P1,200,000.00 as evidenced by the
deed of sale. On appeal, the CA affirmed the trial courts decision.
ISSUE:
Whether or not the Court of Appeals erred in affirming the trial courts decision.
RULING:
There can be no other conclusion than the respondents are indeed the procuring
cause of the sale. If not for the respondents, Lee would not have known about the mango
plantation being sold by the petitioners. The sale was consummated. The bank had
profited from such transaction. It would certainly be iniquitous if the respondents would
not be rewarded their commission pursuant to the letter of authority. Hence, the Court of
Appeals decision is affirmed.
whom petitioners introduced to them. They further pointed out that the deed of sale was
undervalued obviously to evade payment of the correct amount of capital gains tax,
documentary stamps and other internal revenue taxes.
In their answer, private respondents countered that, contrary to petitioners claim, they
were not the efficient procuring cause in bringing about the consummation of the sale
because another broker, Roberto Pacana, introduced the property to the Sisters of Mary
ahead of the petitioners. Private respondents maintained that when petitioners
introduced the buyers to private respondent Eduardo Gullas, the former were already
decided in buying the property through Pacana, who had been paid his commission.
Private respondent Eduardo Gullas admitted that petitioners were in his office on July 3,
1992, but only to ask for the reimbursement of their cellular phone expenses.
After trial, the lower court rendered judgment in favor of petitioners. Eduardo and
Norma Gullas were ordered to pay jointly and severally plaintiffs Manuel Tan, Gregg
Tecson and Alexander Saldaa the sum of P624,684.00 as brokers fee with legal interest
at the rate of 6% per annum from the date of filing of the complaint; and the sum of
P50,000.00 as attorneys fees and costs of litigation.
The Court of Appeals reversed and set aside the lower courts decision and
rendered another judgment dismissing the complaint.
ISSUE:
Whether or not the Court of Appeals erred in dismissing the complaint.
RULING:
It is readily apparent that private respondents are trying to evade payment of the
commission which rightfully belongs to petitioners as brokers with respect to the sale.
There was no dispute as to the role that petitioners played in the transaction. At the very
least, petitioners set the sale in motion. They were not able to participate in its
consummation only because they were prevented from doing so by the acts of the
private respondents. In the case of Alfred Hahn v. Court of Appeals and Bayerische
Motoren Werke Aktiengesellschaft (BMW) the SC ruled that, An agent receives a
commission upon the successful conclusion of a sale. On the other hand, a broker earns
his pay merely by bringing the buyer and the seller together, even if no sale is eventually
made. Clearly, therefore, petitioners, as brokers, should be entitled to the commission
whether or not the sale of the property subject matter of the contract was concluded
through their efforts.
ENFORCEABILITY
JESUS M. GOZUN vs. JOSE TEOFILO T. MERCADO
G.R. No. 167812 December 19, 2006
FACTS:
In the local elections of 1995, respondent vied for the gubernatorial post in
Pampanga. Upon respondents request, petitioner, owner of JMG Publishing House, a
printing shop, submitted to respondent draft samples and price quotation of campaign
materials.
By petitioners claim, respondents wife 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. Given the urgency and limited time to do the job
order, petitioner availed of the services and facilities of Metro Angeles Printing and of St.
Joseph Printing Press, owned by his daughter Jennifer Gozun and mother Epifania
Macalino Gozun, respectively.
Petitioner delivered the campaign materials to respondents headquarters.
On March 31, 1995, respondents sister-in-law, Lilian Soriano obtained from
petitioner cash advance of P253,000 allegedly for the allowances of poll watchers who
were attending a seminar and for other related expenses. Lilian acknowledged on
petitioners 1995 diary receipt of the amount.
Petitioner later sent respondent a Statement of Account in the total amount of
P2,177,906 itemized as follows: P640,310 for JMG Publishing House; P837,696 for Metro
Angeles Printing; P446,900 for St. Joseph Printing Press; and P253,000, the cash
advance obtained by Lilian. Respondents wife partially paid P1,000,000 to petitioner
who issued a receipt therefor. Despite repeated demands and respondents promise to
pay, respondent failed to settle the balance of his account to petitioner.
Petitioner thus filed with the RTC a complaint against respondent to collect the
remaining amount of P1,177,906 plus inflationary adjustment and attorneys fees. The
trial court rendered judgment in favor of the petitioner. The CA however, reversed the
trial courts decision and dismissed the complaint for lack of cause of action.
ISSUE:
Whether or not the Court of Appeals erred in reversing the trial courts decision.
RULING:
Petitioner is the real party in interest in this case. The trial courts findings on the
matter were affirmed by the appellate court. It erred, however, in not declaring petitioner
as a real party in interest insofar as recovery of the cost of campaign materials made by
petitioners mother and sister are concerned, upon the wrong notion that they should
have been, but were not, impleaded as plaintiffs.
RELATIVITY: PRIVITY: EXCEPTIONS (Art. 1311, CC)
JOSEPH CHAN, WILSON CHAN and LILY CHAN VS. BONIFACIO S. MACEDA,JR
2003 Apr 30
G.R. No. 142591
402 SCRA 352
FACTS:
On July 28, 1976, Bonifacio S. Maceda, Jr., herein respondent, obtained a P7.3
million loan from the Development Bank of the Philippines for the construction of his New
Gran Hotel Project in Tacloban City. Thereafter, on September 29, 1976, respondent
entered into a building construction contract with Moreman Builders Co., Inc. They
agreed that the construction would be finished not later than December 22, 1977.
Respondent purchased various construction materials and equipment in Manila.
Moreman, in turn, deposited them in the warehouse of Wilson and Lily Chan, herein
petitioners. The deposit was free of charge. Unfortunately, Moreman failed to finish the
construction of the hotel at the stipulated time. Hence, on February 1, 1978, respondent
filed with the then CFI an action for rescission and damages against Moreman. On
November 28, 1978, the CFI rendered its Decision rescinding the contract between
Moreman and respondent and awarding to the latter P445,000.00 as actual, moral and
liquidated damages; P20,000.00 representing the increase in the construction materials;
and P35,000.00 as attorneys fees. Moreman interposed an appeal to the Court of
Appeals but the same was dismissed on March 7, 1989 for being dilatory. He elevated
the case to this Court via a petition for review on certiorari. In a Decision dated February
21, 1990, the Court denied the petition. On April 23, 1990 an Entry of Judgment was
issued.
Meanwhile, during the pendency of 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. Hence, on December 11, 1985, respondent filed with the
RTC an action for damages with an application for a writ of preliminary attachment
against petitioners.
ISSUE:
Whether or not respondent have the right to demand the release of the said
materials and equipment or claim for damages.
RULING:
At the outset, the case should have been dismissed outright by the trial court
because of patent procedural infirmities. Even without such serious procedural flaw, the
case should also be dismissed for utter lack of merit. Under Article 1311 of the Civil
Code, contracts are binding upon the parties (and their assigns and heirs) who execute
them. When there is no privity of contract, there is likewise no obligation or liability to
speak about and thus no cause of action arises. Specifically, in an action against the
depositary, the burden is on the plaintiff to prove the bailment or deposit and the
performance of conditions precedent to the right of 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 bereft of any contract of deposit, oral or written,
between petitioners and respondent. If at all, it was only between petitioners and
Moreman. And granting arguendo that there was indeed a contract of deposit between
petitioners and Moreman, it is still incumbent upon respondent to prove its existence and
that it was executed in his favor. However, respondent miserably failed to do so. The
only pieces of evidence respondent presented to prove the contract of deposit were the
delivery receipts. Significantly, they are unsigned and not duly received or authenticated
by either Moreman, petitioners or respondent or any of their authorized representatives.
Hence, those delivery receipts have no probative value at all. While our laws grant a
person the remedial right to prosecute or institute a civil action against another for the
enforcement or protection of a right, or the prevention or redress of a wrong, every
cause of action ex-contractu must be founded upon a contract, oral or written, express or
implied.
Moreover, respondent also failed to prove that there were construction
materials and equipment in petitioners warehouse at the time he made a demand for
their return. Considering that respondent failed to prove (1) the existence of any
contract of deposit between him and petitioners, nor between the latter and Moreman in
his favor, and (2) that there were construction materials in petitioners warehouse at the
time of respondents demand to return the same, we hold that petitioners have no
corresponding obligation or liability to respondent with respect to those construction
materials.
STIPULATION pour autrui
that plaintiffs and their ascendants are owners since memory can no longer recall
of that parcel of riceland known Sitio Libis, Barrio Cruz-na-Ligas, Quezon City (now
Diliman, Quezon City), while the members of the plaintiff Association and their
ascendants have possessed since time immemorial openly, adversely, continuously and
also in the concept of an owner, the rest of the area embraced by and within the Barrio
Cruz-na-Ligas, Diliman, Quezon City;
that since October 1972, the claims of the plaintiffs and/or members of plaintiff
Association have been the subject of quasi-judicial proceedings and administrative
investigations in the different branches of the government penultimately resulting in the
issuance of that Indorsement dated May 7, 1975 by the Bureau of Lands, and ultimately,
in the issuance of the Indorsement of February 12, 1985, by the office of the President of
the Rep. of the Philippines confirming the rights of the bonafide residents of Barrio Cruzna-Ligas to the parcel of land they have been possessing or occupying;
that defendant UP, pursuant to the said Indorsement from the Office of the
President of the Rep. of the Philippines, issued that Reply Indorsement wherein it
approved the donation of about 9.2 hectares of the site, directly to the residents of Brgy.
Krus Na Ligas. After several negotiations with the residents, the area was increased to
15.8 hectares (158,379 square meters);
that, however, defendant UP backed-out from the arrangement to donate directly
to the plaintiff Association for the benefit of the qualified residents and high-handedly
resumed to negotiate the donation thru the defendant Quezon City Government under
the terms disadvantageous or contrary to the rights of the bonafide residents of the
Barrio; that plaintiff Association forthwith amended its petition and prayed for a writ of
preliminary injunction to restrain defendant UP from donating the area to the defendant
Quezon City Government which was granted;
that in the hearing of the Motion for Reconsideration filed by defendant UP,
plaintiff Association finally agreed to the lifting of the said Order granting the injunction
after defendant UP made an assurance in their said Motion that the donation to the
defendant Quezon City Government will be for the benefit of the residents of Cruz-NaLigas;
that, however, defendant UP took exception to the aforesaid Order lifting the
Order of Injunction and insisted on the dismissal of the case;
that plaintiff manifested its willingness to the dismissal of the case, provided, that
the area to be donated thru the defendant Quezon City government be subdivided into
lots to be given to the qualified residents together with the certificate of titles, without
cost;
that defendant UP failed to deliver the certificate of title covering the property to
be donated thus the defendant Quezon City Government was not able to register the
ownership so that the defendant Quezon City Government can legally and fully comply
with their obligations under the said deed of donation;that upon expiration of the period
of eighteen (18) months, for alleged non-compliance of the defendant Quezon City
Government with terms and conditions quoted in par. 16 hereof, defendant UP thru its
President, Mr. Jose Abueva, unilaterally, capriciously, whimsically and unlawfully issued
that Administrative Order No. 21 declaring the deed of donation revoked and the
donated property be reverted to defendant UP.
The petitioners, then, prayed that a writ of preliminary injunction or at least a
temporary restraining order be issued, ordering defendant UP to observe status quo;
thereafter, after due notice and hearing, a writ of preliminary injunction be issued; (a) to
restrain defendant UP or to their representative from ejecting the plaintiffs from and
demolishing their improvements on the riceland or farmland situated at Sitio Libis; (b) to
order defendant UP to refrain from executing another deed of donation in favor another
person or entity and in favor of non-bonafide residents of Barrio Cruz-na-Ligas different
from the Deed of Donation, and after trial on the merits, judgment be rendered:declaring
the Deed of Donation as valid and subsisting and ordering the defendant UP to abide by
the terms and conditions thereof.
The Court of Appeals reversed the decision of the trial court.
ISSUE:
Whether or not defendant UP could execute another deed of donation in favor of
third person.
RULING:
The Court found all the elements of a cause of action contained in the amended
complaint of petitioners. While, admittedly, petitioners were not parties to the deed of
donation, they anchor their right to seek its enforcement upon their allegation that they
are intended beneficiaries of the donation to the Quezon City government. Art. 1311,
second paragraph, of the Civil Code provides:
If a contract should contain some stipulation in favor of a third person, he may demand
its fulfillment provided he communicated his acceptance to the obligor before its
revocation. A mere incidental benefit or interest of a person is not sufficient. The
contracting parties must have clearly and deliberately conferred a favor upon a third
person.
Under this provision of the Civil Code, the following requisites must be present in
order to have a stipulation pour autrui:(1) there must be a stipulation in favor of a third
person; (2) the stipulation must be a part, not the whole of the contract;(3) the
contracting parties must have clearly and deliberately conferred a favor upon a third
person, not a mere incidental benefit or interest; (4) the third person must have
communicated his acceptance to the obligor before its revocation; and (5) neither of the
contracting parties bears the legal representation or authorization of the third party.
tentative, without prejudice to the final resolution of the question after the presentation
by the parties of their evidence.
The decision of the Court of Appeals is reversed and the case is remanded to the
RTC of Quezon City for trial on the merits.
CONTRACTS CREATING REAL RIGHTS
SPOUSES ADELINA S. CUYCO and FELICIANO U. CUYCO
vs.
SPOUSES RENATO CUYCO and FILIPINA CUYCO
G.R. No. 168736 April 19, 2006
2. The same paragraph, that this stipulation is part of conditions and obligations
imposed by UP, as donor, upon the Quezon City government, as donee;
3. Paragraphs 15 and 16, that the intent of the parties to the deed of donation was to
confer a favor upon petitioners by transferring to the latter the lots occupied by them;
FACTS:
4. Paragraph 19, that conferences were held between the parties to convince UP to
surrender the certificates of title to the city government, implying that the donation had
been accepted by petitioners by demanding fulfillment thereof and that private
respondents were aware of such acceptance; and
5. All the allegations considered together from which it can be fairly inferred that neither
of private respondents acted in representation of the other; each of the private
respondents had its own obligations, in view of conferring a favor upon petitioners.
P1,500,000.00 loan and the subsequent loans of P150,000.00 and P500,000.00 obtained
on July 1, 1992 and September 5, 1992, respectively. As regards the loans obtained on
May 31, 1992, October 29, 1992 and January 13, 1993 in the amounts of P150,000.00,
P200,000.00 and P250,000.00, respectively, the appellate tribunal held that the parties
never intended the same to be secured by the real estate mortgage.
Hence, this petition.
ISSUE:
Whether or not petitioners must pay respondents legal interest of 12% per annum
on the stipulated interest of 18% per annum, computed from the filing of the complaint
until fully paid.
RULING:
Applying the rules in the computation of interest, the principal amount of loans
subject of the real estate mortgage must earn the stipulated interest of 18% per annum,
which interest, as long as unpaid, also earns legal interest of 12% per annum, computed
from the date of the filing of the complaint on September 10, 1997 until finality of the
Courts Decision. Such interest is not due to stipulation but due to the mandate of the
law as embodied in Article 2212 of the Civil Code. From such date of finality, the total
amount due shall earn interest of 12% per annum until satisfied
Certainly, the computed interest from the filing of the complaint on September
10, 1997 would no longer be true upon the finality of this Courts decision. In accordance
with the rules laid down in Eastern Shipping Lines, Inc. v. Court of Appeals, the SC
derived the following formula for the RTCs guidance:
TOTAL AMOUNT DUE = [principal + interest + interest on interest] - partial
payments made
Interest = principal x 18 % per annum x no. of years from due date until finality of
judgment
Interest on interest = Interest computed as of the filing of the complaint
(September 10, 1997) x 12% x no. of years until finality of judgment
Total amount due as of the date of finality of judgment will earn an interest of
12% per annum until fully paid.
Hence, the SC affirmed the CA decision with modifications. It ordered petitioners
to pay the respondents (1) the total amount due, as computed by the RTC in accordance
with the formula specified above, (2) the legal interest of 12% per annum on the total
amount due from such finality until fully paid, (3) the reasonable amount of P25,000.00
as attorneys fees, and (4) the costs of suit, within a period of not less than 90 days nor
more than 120 days from the entry of judgment, and in case of default of such payment
the property shall be sold at public auction to satisfy the judgment.
TORTIOUS INTERFERENCE
1.
2.
RULING:
In the instant case, it is clear that petitioner So Ping Bun prevailed upon DCCSI to
lease the warehouse to his enterprise at the expense of respondent corporation. Though
petitioner took interest in the property of respondent corporation and benefited from it,
nothing on record imputes deliberate wrongful motives or malice on him.
of the conditions of the deed. Contained in the deed were stipulations regarding the
payment and settlement of the purchase price of the land. The respondent however did
not strictly comply this with. Despite the posterior payments however, petitioners
accepted them. Respondent, on the contention that he fulfilled his obligation to pay filed
this case for specific performance by the petitioners.
A duty which the law of torts is concerned with is respect for the property of
others, and cause of action ex delicto may be predicated upon an unlawful interference
by one person of the enjoyment by the other of 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 before us, petitioners Trendsetter Marketing asked DCCSI
to execute lease contracts in its favor, and as a result petitioner deprived respondent
corporation of the latters property right. Clearly, and as correctly viewed by the
appellate court, the three elements of tort interference above mentioned are present in
the instant case.
The court of origin which tried the suit for specific performance on account of the
herein petitioners reluctance to abide by the covenant, ruled in favor of the vendee
while respondent court practically agreed with the trial court except as to the amount to
be paid to petitioners and the refund to private respondent are concerned.
ISSUE:
The issue is whether or not petitioners prayer for the rescission of the deed can
prosper.
RULING:
The Supreme Court affirmed the decision of the lower courts.
The suggestion of petitioners that the covenant must be cancelled in the light of
private respondents so-called breach seems to overlook petitioners demeanor who,
instead of immediately filing the case precisely to rescind the instrument because of
non-compliance, allowed private respondent to effect numerous payments posterior to
the grace periods provided in the contract. This apathy of petitioners, who even
permitted private respondent to take the initiative in filing the suit for specific
performance against them, is akin to waiver of abandonment of the right to rescind.
STAGES IN THE EXECUTION OF A CONTRACT CONSUMMATION/TERMINATION
of said contract. The Philippine Government, through the MMDA Chairman, declared said
contract inexistent for several reasons. Herein respondent filed a suit against petitioner.
The Regional Trial Court ruled in favor of the respondent. Instead of filing an appeal to
the decision, petitioner filed a writ of certiorari on the Court of Appeals, which the latter
granted. The Regional Trial Court declared its decision final and executory, for which the
petitioner appealed to the CA, which the CA denied such appeal and affirming RTCs
decision.
ISSUE:
Whether or not a valid contract is existing between herein petitioner and
respondent.
RULING:
Under Article 1305 of the Civil Code, a contract is a meeting of minds between
two persons whereby one binds himself, with respect to the other, to give something or
to render some service. A contract undergoes three distinct stages - preparation or
negotiation, its perfection, and finally, its consummation. Negotiation begins from the
time the prospective contracting parties manifest their interest in the contract and ends
at the moment of agreement of the parties. The perfection or birth of the contract takes
place when the parties agree upon the essential elements of the contract. The last stage
is the consummation of the contract wherein the parties fulfill or perform the terms
agreed upon in the contract, culminating in the extinguishment thereof. Article 1315 of
the Civil Code, provides that a contract is perfected by mere consent. Consent, on the
other hand, is manifested by the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract. In the case at bar, the signing and
execution of the contract by the parties clearly show that, as between the parties, there
was a concurrence of offer and acceptance with respect to the material details of the
contract, thereby giving rise to the perfection of the contract. The execution and signing
of the contract is not disputed by the parties. As the Court of Appeals aptly held:
Contrary to petitioners insistence that there was no perfected contract, the meeting of
the offer and acceptance upon the thing and the cause, which are to constitute the
contract (Arts. 1315 and 1319, New Civil Code), is borne out by the records.
Admittedly, when petitioners accepted private respondents bid proposal (offer),
there was, in effect, a meeting of the minds upon the object (waste management project)
and the cause (BOT scheme). Hence, the perfection of the contract. In City of Cebu vs.
Heirs of Candido Rubi, the Supreme Court held that the effect of an unqualified
acceptance of the offer or proposal of the bidder is to perfect a contract, upon notice of
the award to the bidder.
In fact, in asserting that there is no valid and binding contract between the
parties, MMDA can only allege that there was no valid notice of award; that the contract
does not bear the signature of the President of the Philippines; and that the conditions
precedent specified in the contract were not complied with.
In asserting that the notice of award to JANCOM is not a proper notice of award,
MMDA points to the Implementing Rules and Regulations of Republic Act No. 6957,
otherwise known as the BOT Law, which require that i) prior to the notice of award, an
Investment Coordinating Committee clearance must first be obtained; and ii) the notice
of award indicate the time within which the awardee shall submit the prescribed
performance security, proof of commitment of equity contributions and indications of
financing resources.
Admittedly, the notice of award has not complied with these requirements.
However, the defect was cured by the subsequent execution of the contract entered into
and signed by authorized representatives of the parties; hence, it may not be gainsaid
that there is a perfected contract existing between the parties giving to them certain
rights and obligations (conditions precedents) in accordance with the terms and
conditions thereof. We borrow the words of the Court of Appeals:
Petitioners belabor the point that there was no valid notice of award as to
constitute acceptance of private respondents offer. They maintain that former MMDA
Chairman Oretas letter to JANCOM EC dated February 27, 1997 cannot be considered as
a valid notice of award as it does not comply with the rules implementing Rep. Act No.
6957, as amended. The argument is untenable.
ELEMENTS OF CONSENT: OFFER AND ACCEPTANCE
1.
2.
3.
4.
5.
6.
No. 2930050168 for P1 million as a sign of its good faith and readiness to enter into the
lease agreement under the certain terms and conditions stipulated in the letter. MidPasig received this letter on July 28, 2000.
In a subsequent follow-up letter dated February 2, 2001, Rockland then said that it
presumed that Mid-Pasig had accepted its offer because the P1 million check it issued
had been credited to Mid-Pasigs account on December 5, 2000.
Mid-Pasig, however, denied it accepted Rocklands offer and claimed that no
check was attached to the said letter. It also vehemently denied receiving the P1 million
check, much less depositing it in its account.
In its letter dated February 6, 2001, Mid-Pasig replied to Rockland that it was only
upon receipt of the latters February 2 letter that the former came to know where the
check came from and what it was for. Nevertheless, it categorically informed Rockland
that it could not entertain the latters lease application. Mid-Pasig reiterated its refusal of
Rocklands offer in a letter dated February 13, 2001.
Rockland then filed an action for specific performance. Rockland sought to compel
Mid-Pasig to execute in Rocklands favor, a contract of lease over a 3.1-hectare portion of
Mid-Pasigs property in Pasig City.
The RTCs decision:
1. the plaintiff and the defendant have duly agreed upon a valid and enforceable
lease agreement of subject portions of defendants properties comprising an area
of 5,000 square meters, 11,000 square meters and 15,000 square meters, or a
total of 31,000 square meters;
2. the principal terms and conditions of the aforesaid lease agreement are as stated
in plaintiffs June 8, 2000 letter;
3. defendant to execute a written lease contract in favor of the plaintiff containing
the principal terms and conditions mentioned in the next-preceding paragraph,
within sixty (60) days from finality of this judgment, and likewise ordering the
plaintiff to pay rent to the defendant as specified in said terms and conditions;
4. defendant to keep and maintain the plaintiff in the peaceful possession and
enjoyment of the leased premises during the term of said contract;
5. defendant to pay plaintiff attorneys fees in the sum of One Million Pesos
(P1,000,000.00), plus P2,000.00 for every appearance made by counsel in court;
6. The temporary restraining order dated April 2, 2001 is made PERMANENT;
7. Dismissed defendants counterclaim.
The Court of Appeals reversed the trial courts decision.
ISSUES:
1. Was there a perfected contract of lease?
2. Had estoppel in pais set in?
RULING:
1.
A close review of the events in this case, in the light of the parties
evidence, shows that there was no perfected contract of lease between the parties. MidPasig was not aware that Rockland deposited the P1 million check in its account. It only
learned of Rocklands check when it received Rocklands February 2, 2001 letter. MidPasig, upon investigation, also learned that the check was deposited at the Philippine
National Bank San Juan Branch, instead of PNB Ortigas Branch where Mid-Pasig
maintains its account. Immediately, Mid-Pasig wrote Rockland on February 6, 2001
rejecting the offer, and proposed that Rockland apply the P1 million to its other existing
lease instead. These circumstances clearly show that there was no concurrence of
Rocklands offer and Mid-Pasigs acceptance.
2.
Mid-Pasig is also not in estoppel in pais. The doctrine of estoppel is based
on the grounds of public policy, fair dealing, good faith and justice, and its purpose is to
forbid one to speak against his own act, representations, or commitments to the injury of
one to whom they were directed and who reasonably relied thereon. Since estoppel is
based on equity and justice, it is essential that before a person can be barred from
asserting a fact contrary to his act or conduct, it must be shown that such act or conduct
has been intended and would unjustly cause harm to those who are misled if the
principle were not applied against him.
Hence, the petition was denied.
ELEMENTS OF CONSENT: OFFER AND ACCEPTANCE
METROPOLITAN MANILA DEVELOPMENT AUTHORITY, VS. JANCOM
ENVIRONMENTAL CORPORATION
G.R. No. 147465 January 30, 2002
FACTS:
The Philippine Government under the Ramos Administration, and through the
Metro Manila Development Authority (MMDA) Chairman, and the Cabinet Officer for
Regional Development-National Capital Region (CORD-NCR), entered into a contract with
respondent JANCOM, on waste-to-energy projects for the waste disposal sites in San
Mateo, Rizal and Carmona, Cavite under the build-operate-transfer (BOT) scheme.
However, before President Ramos could have signed the said contract, there was
a change in the Administration and EXECOM. Said change caused the passage of the law,
the Clean Air Act, prohibiting the incineration of garbage and thus, against the contents
of said contract. The Philippine Government, through the MMDA Chairman, declared said
contract inexistent for several reasons. Herein respondent filed a suit against petitioner.
The Regional Trial Court ruled in favor of the respondent. Instead of filing an appeal to
the decision, petitioner filed a writ of certiorari on the Court of Appeals, which the latter
granted. The Regional Trial Court declared its decision final and executory, for which the
petitioner appealed to the CA, which the CA denied such appeal and affirming RTCs
decision.
ISSUE:
Whether or not a valid contract is existing between herein petitioner and
respondent.
RULING:
Under Article 1305 of the Civil Code, a contract is a meeting of minds between
two persons whereby one binds himself, with respect to the other, to give something or
to render some service. A contract undergoes three distinct stages- preparation or
negotiation, its perfection, and finally, its consummation. Negotiation begins from the
time the prospective contracting parties manifest their interest in the contract and ends
at the moment of agreement of the parties. The perfection or birth of the contract takes
place when the parties agree upon the essential elements of the contract. The last stage
is the consummation of the contract wherein the parties fulfill or perform the terms
agreed upon in the contract, culminating in the extinguishment thereof. Article 1315 of
the Civil Code, provides that a contract is perfected by mere consent. Consent, on the
other hand, is manifested by the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract. In the case at bar, the signing and
execution of the contract by the parties clearly show that, as between the parties, there
was a concurrence of offer and acceptance with respect to the material details of the
contract, thereby giving rise to the perfection of the contract. The execution and signing
of the contract is not disputed by the parties. As the Court of Appeals aptly held:
Contrary to petitioners insistence that there was no perfected contract, the meeting of
the offer and acceptance upon the thing and the cause, which are to constitute the
contract (Arts. 1315 and 1319, New Civil Code), is borne out by the records.
Admittedly, when petitioners accepted private respondents bid proposal (offer),
there was, in effect, a meeting of the minds upon the object (waste management project)
and the cause (BOT scheme). Hence, the perfection of the contract. In City of Cebu vs.
Heirs of Candido Rubi, the Supreme Court held that the effect of an unqualified
acceptance of the offer or proposal of the bidder is to perfect a contract, upon notice of
the award to the bidder.
In fact, in asserting that there is no valid and binding contract between the
parties, MMDA can only allege that there was no valid notice of award; that the contract
does not bear the signature of the President of the Philippines; and that the conditions
precedent specified in the contract were not complied with.
In asserting that the notice of award to JANCOM is not a proper notice of award,
MMDA points to the Implementing Rules and Regulations of Republic Act No. 6957,
otherwise known as the BOT Law, which require that i) prior to the notice of award, an
Investment Coordinating Committee clearance must first be obtained; and ii) the notice
of award indicate the time within which the awardee shall submit the prescribed
Reynes and the Abucay Spouses alleged that on June 18, 1984 they received
information that the Register of Deeds of Cebu City issued Certificate of Title No. 90805
in the name of Montecillo for the Mabolo Lot.
Reynes and the Abucay Spouses argued that for lack for consideration there
(was) no meeting of the minds) between Reynes and Montecillo. Thus, the trial court
should declare null and void ab initio Monticellos Deed of sale, and order the
cancellation of certificates of title No. 90805 in the name of Montecillo.
In his Answer, Montecillo a bank executive with a BS Commerce degree, claimed
he was a buyer in good faith and had actually paid the P47,000.00 consideration stated
on his Deed of Sale. Montecillo however admitted he still owned Reynes a balance of
P10,000.00. He also alleged that he paid P50,000.00 for the release of the chattel
mortgage which he argued constituted a lien on the Mabolo Lot. He further alleged that
he paid for the real property tax as well as the capital gains tax on the sale of the Mabolo
Lot.
In their reply, Reynes and the Abucay Spouses contended that Montecillo did not
have authority to discharge the chattel mortgage especially after Reynes revoked
Montecillos Deed of Sale and gave the mortgagee a copy of the document of
revocation. Reynes and the Abucay Spouses claimed that Montecillo secured the release
of the chattel mortgage through machination. They further asserted that Montecillo took
advantage of the real property taxes paid by the Abucay Spouses and surreptitiously
caused the transfer of the title to the Mabolo Lot in his name.
During pre-trial Montecillo claimed that the consideration for the sale of the
Mabolo Lot was the amount he paid to Cebu Iced and Cold Storage Corporation for the
mortgage debt. Of Bienvenido Jayag. Montecillo argued that the release of the
mortgage was necessary since the mortgage constituted a lien on the Mabolo Lot.
Reynes, however stated that she had nothing to do with Jayags mortgage debt
except that the house mortgaged by Jayag stood on a portion of the Mabolo Lot. Reynes
further stated that the payment by Montecillo to release the mortgage on Jayags house
is a matter between Montecillo and
Jayag. The mortgage on the house being a chattel mortgage could not be interpreted in
any way as an encumbrance on the Mabolo Lot. Reynes further claimed that the
mortgage debt had long prescribed since the P47,000.00 mortgage debt was due for
payment on January 30,1967.
ISSUE:
Whether or not there was a valid consent in the case at bar to have a valid contract.
RULING:
One of the three essential requisites of a valid contract is consent of the parties
on the object and cause of the contract. In a contract of sale, the parities must agree not
only on the p[rice, but also on the manner of payment of the price. An agreement on the
price but a disagreement on the manner of its payment will not result in consent, thus
preventing the existence of a valid contract for a lack of consent. This lack of consent is
separate and distinct for lack of consideration where the contract states that the price
has been paid when in fact it has never been paid.
Reynes expected Montecillo to pay him directly the P47, 000.00 purchase price
within one month after the signing of the Deed of Sale. On the other hand, Montecillo
thought that his agreement with Reynes required him to pay the P47, 000.00-purchase
price to Cebu Ice Storage to settle Jayags mortgage debt. Montecillo also acknowledged
a balance of P10, 000.00 in favor of Reynes although this amount is not stated in
Montecillos Deed of Sale. Thus, there was no consent or meeting of the minds, between
Reynes and Montecillo on the manner of payment. This prevented the existence of a
valid contract because of lack of consent.
In summary, Montecillos Deed of Sale is null and void ab initio not only for lack of
consideration, but also for lack of consent. The cancellation of TCT No. 90805 in the
name of Montecillo is in order as there was no valid contract transferring ownership of
the Mabolo Lot from Reynes to Montecillo.
ELEMENTS OF CONSENT: OFFER AND ACCEPTANCE
JASMIN SOLER, petitioner,
VS. COURT OF APPEALS, COMMERCIAL BANK OF MANILA, and
NIDA LOPEZ, respondents
May 2, 2001
G.R. No. 123892
FACTS:
Petitioner is a professional interior designer. In November 1986, her friend Rosario
Pardo asked her to talk to Nida Lopez, who was manager of the COMBANK Ermita Branch
for they were planning to renovate the branch offices. Even prior to November 1986,
petitioner and Nida Lopez knew each other because of Rosario Pardo, the latters sister.
During their meeting, petitioner was hesitant to accept the job because of her many out
of 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 for renovation. Petitioner
acceded to the request. Ms. Lopez assured her that she would be compensated for her
services. Petitioner even told Ms. Lopez that her professional fee was P10,000.00, to
which Ms. Lopez acceded.
During the November 1986 meeting between petitioner and Ms. Lopez, there
were discussions as to what was to be renovated. Ms. Lopez again assured petitioner
that the bank would pay her fees. After a few days, petitioner requested for the blueprint
of the building so that the proper design, plans and specifications could be given to Ms.
Lopez in time for the board meeting in December 1986. Petitioner then asked her
draftsman Jackie Barcelon to go to the jobsite to make the proper measurements using
the blue print. Petitioner also did her research on the designs and individual drawings of
what the bank wanted. Petitioner hired Engineer Ortanez to make the electrical layout,
architects Frison Cruz and De Mesa to do the drafting. For the services rendered by these
individuals, petitioner paid their professional fees. Petitioner also contacted the suppliers
of the wallpaper and the sash makers for their quotation. 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 for her services but Ms.
Lopez just ignored the demands. In February 1987, by chance petitioner and Ms. Lopez
saw each other in a concert at the Cultural Center of the Philippines. Petitioner inquired
about the payment for her services, Ms. Lopez curtly replied that she was not entitled to
it because her designs did not conform to the banks policy of having a standard design,
and that there was no agreement between her and the bank.
Petitioner, through her lawyers, who wrote Ms. Lopez, demanding payment for her
professional fees in the amount of P10,000.00 which Ms. Lopez ignored. The lawyers
wrote Ms. Lopez once again demanding the return of the blueprint copies petitioner
submitted which Ms. Lopez refused to return. The petitioner then filed at the trial court a
complaint against COMBANK and Ms. Lopez for collection of professional fees and
damages.
In its answer, COMBANK stated that there was no contract between COMBANK
and petitioner; that Ms. Lopez merely invited petitioner to participate in a bid for the
renovation of the COMBANK Ermita Branch; that any proposal was still subject to the
approval of the COMBANKs head office.
The trial court rendered judgment in favor of plaintiff. On appeal, the Court of
Appeals reversed the decision. Hence, this petition.
ISSUE:
Whether or not the Court of Appeals erred in ruling that there was no contract
between petitioner and respondents, in the absence of the element of consent.
RULING:
A contract is a meeting of the minds between two persons whereby one binds
himself to give something or to render some service to bind himself to give something to
render some service to another for consideration. There is no contract unless the
following requisites concur: 1. Consent of the contracting parties; 2. Object certain which
is the subject matter of the contract; and 3. Cause of the obligation which is established.
In the case at bar, there was a perfected oral contract. When Ms. Lopez and
petitioner met in November 1986, and discussed the details of the work, the first stage
of the contract commenced. When they agreed to the payment of the P10,000.00 as
professional fees of petitioner and that she should give the designs before the December
1986 board meeting of the bank, the second stage of the contract proceeded, and when
finally petitioner gave the designs to Ms. Lopez, the contract was consummated.
Petitioner believed that once she submitted the designs she would be paid her
professional fees. Ms. Lopez assured petitioner that she would be paid.
It is familiar doctrine that if a corporation knowingly permits one of its officers, or
any other agent, to act within the scope of 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 faith dealt with it through such agent, be estopped from
denying the agents authority.
Also, petitioner may be paid on the basis of quantum meruit. "It is essential for
the proper operation of the principle that there is an acceptance of the benefits by one
sought to be charged for the services rendered under circumstances as reasonably to
notify him that the lawyer performing the task was expecting to be paid compensation
therefor. The doctrine of quantum meruit is a device to prevent undue enrichment based
on the equitable postulate that it is unjust for a person to retain benefit without paying
for it."
The designs petitioner submitted to Ms. Lopez were not returned. Ms. Lopez, an
officer of the bank as branch manager used such designs for presentation to the board of
the bank. Thus, the designs were in fact useful to Ms. Lopez for she did not appear to the
board without any designs at the time of the deadline set by the board.
Decision reversed and set aside. Decision of the trial court affirmed.
ELEMENTS OF CONSENT: OFFER AND ACCEPTANCE
PALATTAO VS. COURT OF APPEALS
381 SCRA 681
MAY 7, 2002
FACTS:
Petitioner Yolanda Palattao interred into a lease contract whereby she leased to
private respondent a house and a 490-square-meter lot located in 101 Caimito Road,
Caloocan City, covered by Transfer Certificate of Title No. 247536 and registered in the
name of petitioner. The duration of the lease contract was for three years, commencing
from January 1, 1991, to December 31, 1993, renewable at the option of the parties. The
agreed monthly rental was P7,500.00 for the first year; P 8,000.00 for the second year:
and P8,500.l00 for the third year. The contract gave respondent lessee the first option to
purchase the leased property.
During the last year of the contract, the parties began negotiations for the sale of
the leased premises to private respondent. In a letter dated April 2, 1993, petitioner
offered to sell to private respondents 413.28 square meters of the leased lot at P
7,800.00 per square meter, or for the total amount of P3,223,548.00. private
respondents replied on April 15, 1993 wherein he informed petitioner that he shall
definitely exercise his option to buy the leased property. Private respondent, however,
manifested his desire to buy the whole 490-square meters inquired from petitioner the
reason why only 413.28 square meters of the leased lot were being offered for sale. In a
letter dated November 6, 1993, petitioner made a final offer to sell the lot at P 7,500.00
per square meter with a down payment of 50% upon the signing of the contract of
conditional sale, the balance payable in one year with a monthly lease/interest payment
P 14,000.00 which must be paid on or before the fifth day every month that the balance
is still outstanding. On November 7, 1993, private respondents accepted petitioners offer
and reiterated his request for respondent accepted petitioners offers and reiterated his
request for clarification as to the size of the lot for sale. Petitioner acknowledged private
respondents acceptance of the offer in his letter dated November 10, 1993.
Petitioner gave private respondent on or before November 24, 1993, within which
to pay the 50% downpayment in cash or managers check. Petitioner stressed that
failure to pay the downpayment on the stipulated period will enable petitioner to freely
sell her property to others. Petitioner likewise notified 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 were
there any documents of sale nor payment by private respondent of the required
downpayment. Private respondent wrote a letter to petitioner on November 29, 1993
manifesting his intention to exercise his option to renew their lease contract for 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 refused.
Letters reveal that private respondent did not give his consent to buy only 413.28
square meters of the leased lot, as he desired to purchase the whole 490 square-meterleased premises which, however, was not what was exactly proposed in petitioners offer.
Clearly, therefore, private respondents acceptance of petitioners offer was not absolute,
and will consequently not generate consent that would perfect a contract.
Hence, private respondent filed with the Regional Trial Court of Caloocan, Branch
127, a case for specified performance, docketed as Civil Case No, 16287, seeking to
compel petitioner to sell to him the leased property. Private respondent further prayed
for the issuance of a writ preliminary injunction to prevent petitioner from filing an
ejectment case upon the expiration of the lease contract on December 31, 1993.
During the proceedings in the specific performance case, the parties agreed to
maintain the status quo. After they failed to reach an amicable settlement, petitioner
filed the instant ejectment case before the Metropolitan Trial Court of Caloocan City,
Branch 53. In his answer, private respondent alleged that he refused to vacate the
leased premises because there was a perfected contract of sale of the leased property
between him and petitioner. Private respondent argued that he did not abandon his
option to buy the leased property and that his proposal to renew the lease was but an
alternative proposal to the sale. He further contended that the filing of the ejectment
case violated their agreement to maintain the status quo.
ISSUE:
list. The titles ticked off by Mrs. Concio are not the subject of the case at bar except the
film "Maging Sino Ka Man."
On February 27, 1992, defendant Del Rosario approached ABS-CBNs Ms. Concio,
with a list consisting of 52 original movie titles (i.e., not yet aired on television) including
the 14 titles subject of the present case, as well as 104 re-runs (previously aired on
television) from which ABS-CBN may choose another 52 titles, as a total of 156 titles,
proposing to sell to ABS-CBN airing rights over this package of 52 originals and 52 reruns for P60,000,000.00 of which P30,000,000.00 will be in cash and P30,000,000.00
worth of television spots.
On April 2, 1992, defendant Del Rosario and ABS-CBNs general manager, Eugenio
Lopez III, met at the Tamarind Grill Restaurant in Quezon City to discuss the package
proposal of VIVA. Mr. Lopez testified that he and Mr. Del Rosario allegedly agreed that
ABS-CBN was granted exclusive film rights to fourteen (14) films for a total consideration
of P36 million; that he allegedly put this agreement as to the price and number of films
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 films; denied the
existence of a napkin in which Lopez wrote something; and insisted that what he and
Lopez discussed at the lunch meeting was Vivas film package offer of 104 films (52
originals and 52 re-runs) for a total price of P60 million.
On April 06, 1992, Del Rosario and Mr. Graciano Gozon of RBS Senior vicepresident for Finance discussed the terms and conditions of Vivas offer to sell the 104
films, after the rejection of the same package by ABS-CBN. On the following day, Del
Rosario received a draft contract from Ms. Concio which contains a counter-proposal of
ABS-CBN on the offer made by VIVA including the right of first refusal to 1992 Viva Films.
However, the proposal was rejected by the Board of Directors of VIVA and such was
relayed to Ms. Concio.
On April 29, 1992, after the rejection of ABS-CBN and following several
negotiations and meetings defendant Del Rosario and Vivas President Teresita Cruz, in
consideration of P60 million, signed a letter of agreement dated April 24, 1992, granting
RBS the exclusive right to air 104 Viva-produced and/or acquired films including the
fourteen (14) films subject of the present case.
On 27 May 1992, ABS-CBN filed before the RTC a complaint for specific
performance with a prayer for a writ of preliminary injunction and/or temporary
restraining order against private respondents Republic Broadcasting System (now GMA
Network Inc.) On 28 May 1992, the RTC issued a temporary restraining order.
The RTC then rendered decision in favor of RBS and against ABS-CBN. On appeal,
the same decision was affirmed. Hence, this decision.
ISSUE:
Whether or not there exists a perfected contract between ABS-CBN and VIVA.
RULING:
A contract is a meeting of minds between two persons whereby one binds
himself to give something or render some service to another [Art. 1305, Civil Code.] for a
consideration. There is no contract unless the following requisites concur:
(1)
(2)
(3)
Whether or not the agreement between petitioner and respondent spouses was a
mere option or a contract to sell.
REQUISITES OF OFFER AS DISTINGUISHED FROM OPTION
LOURDES ONG LIMSON VS. COURT of APPEALS, et al
G. R. No. 135929
April 20, 2001
357 SCRA 209
FACTS:
In July 1978, respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera,
through their agent Marcosa Sanchez, offered to sell to petitioner Lourdes Ong Limson a
parcel of land situated in Barrio San Dionisio, Paranaque, Metro Manila. The respondent
spouses were the owners of the subject property.
On July 31, 1978, she agreed to but the property at the price of P34. 00 per
square meter and gave P20, 000.00 as earnest money. The respondent spouses
signed a receipt thereafter and gave her a 10-day option period to purchase the property.
Respondent spouses informed petitioner that the subject property was mortgaged to
Emilio Ramos and Isidro Ramos. Petitioner was asked to pay the balance of the purchase
price to enable the respondent spouses to settle their obligation with the Ramoses.
Petitioner agreed to meet respondent spouses and the Ramoses on August 5, 1978, to
consummate the transaction; however, the respondent spouses and the Ramoses did not
appear, same with their second meeting.
On August 23, 1978, petitioner allegedly gave respondent spouses three checks
for the settlement the back taxes of property. On September 5, 1978, the agent of the
respondent spouses informed petitioner that the property was the subject of a
negotiation for the sale to respondent Sunvar Realty Development Corporation.
Petitioner alleged that it was only on September 15, 1978, that TCT No. S-72946
covering the property was issued to respondent spouses. On the same day, petitioner
filed and Affidavit of Adverse Claim with the Office of the Registry of Deeds of Makati,
Metro Manila. The Deed of Sale between respondent spouses and respondent Sunvar was
executed on September 15, 1978 and TCT No. S-72377 was issued in favor of Sunvar on
September 26, 1978 with the Adverse Claim of petitioner annotated thereon.
Respondent spouses and Sunvar filed their Answers and Answers to Cross-Claim,
respectively. On appeal, the Court of Appeals completely reversed the decision of the
trial court and ordered the Register of Deeds of Makati City to lift the Adverse Claim and
ordered petitioner to pay respondent Sunvar and respondent spouses exemplary and
nominal damages and attorneys fees. Hence, this petition.
ISSUE:
RULING:
The Supreme Court held that the agreement between the parties was a contract
of option and not a contract to sell. An option is continuing offer or contract by which the
owner stipulates with another that the latter shall have the right to buy the property at a
fixed price within a time certain, or under, or in compliance with, certain terms and
conditions, or which gives the owner of the property the right to sell or demand a sale. It
is also sometimes called an unaccepted offer. An option is not of itself a purchase, but
merely secures the privilege to buy. It is not a sale of property but a sale of the right to
purchase. Its distinguishing characteristic is that it imposes no binding obligation on the
person holding the option, aside from the consideration for the offer.
Hence, the assailed decision is affirmed, with the modification that the award of
nominal and exemplary damages as well as attorneys fees is deleted. The petition is
denied.
VICES OF CONSENT
1.
2.
3.
4.
5.
6.
7.
FACTS:
On October 20, 1948, FELICIANO CATALAN Feliciano was discharged from active
military service. The Board of Medical Officers of the Department of Veteran Affairs
found that he was unfit to render military service due to his schizophrenic reaction,
catatonic type, which incapacitates him because of flattening of mood and affect,
preoccupation with worries, withdrawal, and sparse and pointless speech.
On September 28, 1949, Feliciano married Corazon Cerezo.
On June 16, 1951, a document was executed, titled Absolute Deed of Donation,
wherein Feliciano allegedly donated to his sister MERCEDES CATALAN one-half of the real
property described, viz:
A parcel of land located at Barangay Basing, Binmaley, Pangasinan. Bounded on
the North by heirs of Felipe Basa; on the South by Barrio Road; On the East by heirs of
Segundo Catalan; and on the West by Roman Basa. Containing an area of Eight Hundred
One (801) square meters, more or less. The donation was registered with the Register of
Deeds.
On December 11, 1953, Peoples Bank and Trust Company filed a Special
Proceedings before the Court of First Instance to declare Feliciano incompetent. On
December 22, 1953, the trial court issued its Order for Adjudication of Incompetency for
Appointing Guardian for the Estate and Fixing Allowance of Feliciano. The following day,
the trial court appointed Peoples Bank and Trust Company as Felicianos guardian.
Peoples Bank and Trust Company has been subsequently renamed, and is presently
known as the Bank of the Philippine Islands (BPI).
On November 22, 1978, Feliciano and Corazon Cerezo donated Lots 1 and 3 of
their property, registered under Original Certificate of Title (OCT) No. 18920, to their son
Eulogio Catalan.
Mercedes sold the property in issue in favor of her children Delia and Jesus Basa.
The Deed of Absolute Sale was registered with the Register of Deeds and a Tax
Declaration was issued in the name of respondents.
Feliciano and Corazon Cerezo donated Lot 2 of the aforementioned property
registered under OCT No. 18920 to their children Alex Catalan, Librada Catalan and
Zenaida Catalan. On February 14, 1983, Feliciano and Corazon Cerezo donated Lot 4
(Plan Psu-215956) of the same OCT No. 18920 to Eulogio and Florida Catalan.
BPI, acting as Felicianos guardian, filed a case for Declaration of Nullity of
Documents, Recovery of Possession and Ownership, as well as damages against the
herein respondents. BPI alleged that the Deed of Absolute Donation to Mercedes was
void ab initio, as Feliciano never donated the property to Mercedes. In addition, BPI
averred that even if Feliciano had truly intended to give the property to her, the donation
would still be void, as he was not of sound mind and was therefore incapable of giving
valid consent. Thus, it claimed that if the Deed of Absolute Donation was void ab initio,
the subsequent Deed of Absolute Sale to Delia and Jesus Basa should likewise be
nullified, for Mercedes Catalan had no right to sell the property to anyone. BPI raised
doubts about the authenticity of the deed of sale, saying that its registration long after
the death of Mercedes Catalan indicated fraud. Thus, BPI sought remuneration for
incurred damages and litigation expenses.
On August 14, 1997, Feliciano passed away. The original complaint was amended
to substitute his heirs in lieu of BPI as complainants in Civil Case No. 17666.
The trial court found that the evidence presented by the complainants was
insufficient to overcome the presumption that Feliciano was sane and competent at the
time he executed the deed of donation in favor of Mercedes Catalan. Thus, the court
declared, the presumption of sanity or competency not having been duly impugned, the
presumption of due execution of the donation in question must be upheld. The Court of
Appeals upheld the trial courts decision.
ISSUE:
Whether said decision of the lower courts is correct.
RULING:
VICES OF CONSENT
DOMINGO V. COURT OF APPEALS
G.R. No. 127540. October 17, 2001
FACTS:
Paulina Rigonan owned three parcels of land 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, petitioners who claim to be
her closest surviving relatives, allegedly took possession of the properties by means of
stealth, force and intimidation, and refused to vacate the same. According to defendants,
the alleged deed of absolute sale was void for 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 fifth degree of consanguinity, they inherited the
three lots and the permanent improvements thereon when Paulina died. They said they
had been in possession of the contested properties for more than 10 years.
ISSUE:
1.) Whether or not the consideration in Deed of Sale can be used to impugn the validity
of the Contract of Sale.
2.) Whether or not the alleged Deed of Sale executed by Paulina Rigonan in favor of the
private respondents is valid.
RULING:
1.) Consideration is the why of a contract, the essential reason which moves the
contracting parties to enter into the contract. The Court had seen no apparent and
compelling reason for her to sell the subject 9 parcels of land with a house and
warehouse at a meager price of P850 only. On record, there is unrebutted testimony that
Paulina as landowner was financially well off. She loaned money to several people.
Undisputably, the P850.00 consideration for the nine (9) parcels of land including the
house and bodega is grossly and shockingly inadequate, and the sale is null and void ab
initio.
2.) The Curt ruled in the negative. Private respondents presented only a carbon copy of
this deed. When the Register of Deeds was subpoenaed to produce the deed, no original
typewritten deed but only a carbon copy was presented to the trial court. None of the
witnesses directly testified to prove positively and convincingly Paulinas execution of the
original deed of sale. The carbon copy did not bear her signature, but only her alleged
thumbprint.
Juan Franco testified during the direct examination that he was an
instrumental witness to the deed. However, when cross-examined and shown a copy of
the subject deed, he retracted and said that said deed of sale was not the document he
signed as witness.
VICES OF CONSENT
ownership of the said property was acquired in bad faith and without value inasmuch as
the consideration for the sale is grossly inadequate and unconscionable. Respondents
further alleged that at the time of the sale as alleged, Carmen Ozamiz was already ailing
and not in full possession of her mental faculties; and that her properties having been
placed in administration, she was in effect incapacitated to contract with petitioners.
They argue that the Deed of Absolute sale is a simulated contract.
ISSUE:
Whether or not the Deed of Absolute Sale in the case at bar was simulated.
RULING:
The Court ruled that the Deed in the case at bar is not a simulated contract.
Simulation is defined as the declaration of a fictitious will, deliberately made by
agreement of the parties, in order to produce, for the purposes of deception, the
appearances of a juridical act which does not exist or is different from what that which
was really executed. The requisites of simulation are:
(a) an outward declaration of will different from the will of the parties; (b) the false
appearance must have been intended by mutual agreement; and (c) the purpose is to
deceive third persons.
None of these were clearly shown to exist in the case at bar. The Deed of Absolute Sale is
a notarized document duly acknowledged before a notary public. As such, it has in its
favor the presumption of regularity, and it carries the evidentiary weight conferred upon
it with respect to its due execution. It is admissible in evidence without further proof of
its authenticity and is entitled to full faith and credit upon its face. 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.
VICES OF CONSENT
FACTS:
The case involves the partition of the properties of the deceased spouses Tan
Quico and Josefa Oraa. The former died on May 11, 1932 and the latter on August 6,
1932. Both died intestate. They left some ninety six hectares of land located in the
municipality of Guinobatan and Camalig, Albay. The late spouses were survived by four
children; Cresencia, Lorenzo, Hermogenes and Elias. Elias died on May 2, 1935, without
issue. Cresencia died on December 20, 1967. She was survived by her husband, Lim
Chay Sing, and children, Mariano, Jaime, Jose Jovita, Anacoreta, Antonietta, Ruben,
Benjamin and Rogelio. They are the petitioners in the case at bench. The sad spectacle
of the heirs squabbling over the properties of their deceased parents was again replayed
in the case at bench. The protagonists were the widower and children of Cresencia on
one side, and Lorenzo and Hermogenes on the other side.
The late Cresencia and Lorenzo had contrasting educational background.
Cresencia only reached the second grade of elementary school. She could not read or
write in English. On the other hand, Lorenzo is a lawyer and a CPA. Heirs of Cresencia
alleged that since the demise of the spouses Tan Quico and Josefa Oraa, the subject
properties had been administered by respondent Lorenzo. They claimed that before her
death, Cresencia had demanded their partition from Lorenzo. After Cresencias death,
they likewise clamored for their partition. Their effort proved fruitless.
Respondents Lorenzo and Hermogenes adamant stance against partition is based
on various contentions. Principally, they urge: 1) that the properties had already been
partitioned, albeit, orally; and 2) during her lifetime, the late Cresencia had sold and
conveyed all her interests in said properties to respondent Lorenzo. They cited as
evidence the Deed of Confirmation of Extra Judicial Settlement of the Estate of Tan
Quico and Josefa Oraa and a receipt of payment.
ISSUE:
Whether or not there is error in the signing of the Deed.
RULING:
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 of the
Deed. Considering these circumstances, the burden was on private respondents to prove
that the content of the Deed was explained to the illiterate Cresencia before she signed
it. In this regard, the evidence adduced by the respondents failed to discharge their
burden.
The conclusion drawn by the Honorable of Appeals that there was no undue
influence exerted on Cresencia O. Tan by her (Lawyer-CPA) brother Lorenzo O. Tan based
on facts stated in the questioned judgment is clearly incorrect. As it is contrary to the
provision of Art. 1337, Civil Code.
This substantive law came into being due to the finding of the Code Commission
that there is still a fairly large number of illiterates in this country, and documents are
usually drawn up in English or Spanish. It is also in accord with our state policy of
promoting social justice. It also supplements Article 24 of the Civil Code which calls on
court to be vigilant in the protection of the rights of those who are disadvantaged in life.
In the petition at bench, the questioned Deed is written in English, a language not
understood by the late Cresencia an illiterate.
VICES OF CONSENT:
FACTS:
Petitioner Corazon Ruiz is engaged in the business of buying and selling jewelry.
She obtained loans from private respondent Consuelo Torres on different occasions and
in different amounts. Prior to their maturity, the loans were consolidated under 1
promissory note dated March 22, 1995.
The consolidated loan of P750, 000.00 was secured by a real estate mortgage on
a lot in Quezon City, covered by Transfer of Certificate of Title No. RT-96686, and
registered in the name of petitioner. The mortgage was signed by petitioner for herself
and as attorney-in-fact of her husband Rogelio. It was executed on 20 March 1995, or 2
days before the execution of the subject promissory note.
Thereafter, petitioner obtained 3 more loans from private respondent, under the
following promissory notes: 1) promissory note dated 21 April 1995, in the amount of
P100,000.00; 2) promissory note dated 23 May !995 in the amount of P100,000.00, and
3) promissory note dated 21 December 1995, in the amount of P100,000.00. These
combined loans of P300,000.00 were secured by P571,000.00 worth of jewelry pledged
by petitioner to private respondent.
The respondent court, reversing the trial court, held that the evidence failed to
establish that it was signed by the late Cresencia as a result of fraud, mistake or undue
influence. The Court upheld this ruling erroneous.
From April 1995 to March 1996, petitioner paid the stipulated 3% monthly interest
on the P750,000.00 loan, amounting to P270,000. After March 1996, petitioner was
unable to make interest payments as she had difficulties collecting from her clients in her
jewelry business.
In calibrating the credibility of the witnesses on this issue, we take our mandate
from Article 1332 of the Civil Code which provides: When one of the parties is unable to
read, or if the contract is in a language not understood by him, and mistake or fraud is
alleged, the person enforcing the contract must show that the terms thereof have been
fully explained to the former.
Whether or not there is undue influence in the signing of the promissory note,
which determines if foreclosure proceedings could proceed.
RULING:
The promissory note in question did not contain any fine print provision which
could have escaped the attention of the petitioner. Petitioner had all the time to go over
and study the stipulations embodied in the promissory note. Aside from the March 22,
1995 promissory note for P750,000.00, three other promissory notes of different dates
and amounts were executed by petitioner in favor of private respondent. These
promissory notes contain similar terms and conditions, with a little variance in the terms
of interests and surcharges. The fact 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 filed with the trial court, never
claimed that she was forced to sign the subject note. Therefore, the foreclosure
proceedings may now proceed.
her into signing the Deed of Sale, by inserting the deed among the documents she
signed pertaining to the transfer of her residential land, house and camarin, in favor of
Demetrio, her foster child and the brother of Eduardo.
Respondents, spouses Eduardo and Eufemia Sison (Spouses Sison), denied that
they employed fraud or trickery in the execution of the Deed of Sale. They claimed that
they purchased the property from Epifania for P20,000.00. They averred that Epifania
could not have been deceived into signing the Deed of Absolute Sale because it was duly
notarized before Notary Public Maximo V. Cuesta, Jr.; and they have complied with all
requisites for its registration, as evidenced by the Investigation Report by the
Department of Agrarian Reform (DAR), Affidavit of Seller/Transferor, Affidavit of
Buyer/Transferee, Certification issued by the Provincial Agrarian Reform Officer (PARO),
Letter for the Secretary of Agrarian Reform, Certificate Authorizing Payment of Capital
Gains Tax, and the payment of the registration fees. Some of these documents even
bore the signature of Epifania, proof that she agreed to the transfer of the property.
ISSUES:
Whether the deed of absolute sale is valid.
Whether fraud attended the execution of a contract.
RULING:
VICES OF CONSENT
EPIFANIA DELA CRUZ, substituted by LAUREANA V. ALBERTO
VS. SPS. EDUARDO C. SISON and EUFEMIA S. SISON
G.R. No. 163770
February 17, 2005
FACTS:
Initially, the complainant in this case was Epifania S. Dela Cruz (Epifania), but she
died on November 1, 1996, while the case was pending in the Court of Appeals. Upon
her demise, she was substituted by her niece, Laureana V. Alberto.
Epifania claimed that sometime in 1992, she discovered that her rice land in
Salomague Sur, Bugallon, Pangasinan, has been transferred and registered in the name
of her nephew, Eduardo C. Sison, without her knowledge and consent, purportedly on the
strength of a Deed of Sale she executed on November 24, 1989.
Epifania thus filed a complaint before the Regional Trial Court of Lingayen,
Pangasinan, to declare the deed of sale null and void. She alleged that Eduardo tricked
Indeed, if the intention was to deceive, both deeds of sale should have been
mirror images as to mislead Epifania into thinking that she was signing what appeared to
be the same document.
In addition, the questioned deed of sale was duly notarized. It is a settled rule
that one who denies the due execution of a deed where ones signature appears has the
burden of proving that, contrary to the recital in the jurat, one never appeared before the
notary public and acknowledged the deed to be a voluntary act. Epifania never claimed
her signatures as forgeries. In fact, Epifania never questioned the deed of sale in favor
of Demetrio, accepting it as a valid and binding document. It is only with respect to the
deed of sale in favor of Eduardo that she denies knowledge of affixing her signature.
Unfortunately, for both parties, the notary public, Atty. Maximo V. Cuesta, Jr. before whom
they appeared, died prior to the filing of the case.
The bank discontinued to comply with the Memorandum of Agreement due to the
appearance of Christina Behis, Manuels wife and a co-signatory in the mortgaged land,
who claimed that her signature was forged. For this reason, the bank considered the MA
as void.
On January 7, 1986, plaintiffs demanded in a letter that the bank comply with its
obligation under the Memorandum of Agreement to which the latter denied. Petitioner
bank argued that the Memorandum of Agreement is voidable on the ground that its
consent to enter said agreement was vitiated by fraud because private respondents
withheld from petitioner bank the material information that the real consideration for the
sale with assumption of mortgage of 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 for the real consideration for the sale, i.e. P2.4
million, it would not have consented into entering the Memorandum of Agreement with
Rayandayan and Arceo as it was put in the dark as to the real capacity and financial
standing of private respondents to assume the mortgage from 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 of the land.
ISSUE:
Whether or not there existed a fraud in the case at bar.
RULING:
NO. The kind of fraud that will vitiate a contract refers to those insidious words or
machinations resorted to by one of 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
fraud must be determining cause of the contract, or must have caused the consent to be
given. It is believed that the non-disclosure to the bank of the purchase price of the sale
of the land between private respondents and Manuel Behis cannot be the fraud
contemplated by Article 1338 of the Civil Code. From the sole reason submitted by the
petitioner bank that it was kept in the dark as to the financial capacity of private
respondents, we cannot see how the omission or concealment of 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 of the real purchase price.
Pursuant to Art. 1339 of the Code, silence or concealment, by itself, does not
constitute fraud unless there is a special duty to disclose certain facts. In the case at
bar, private respondents had no duty to do such.
First, the subject of the sale was a submerged land; i.e., 78% of the total area sold
by PEA to Amari is still submerged land. Submerged lands, like foreshore lands, is of the
public domain and cannot be alienated. As unequivocally stated in Article XII, Section 2
of the Constitution, all lands of the public domain, waters, minerals, coals, petroleum,
forces which are potential energies, fisheries, forests or timber, wildlife, flora and fauna,
and other natural resources, with the exception of agricultural lands, are inalienable.
Submerged lands fall within the scope of such provision.
Second, in the Ponce case, the irrevocable option to purchase portions of the
foreshore lands shall be enforceable only upon reclamation, not prior to reclamation. In
the case at bar, even without actual reclamation, the submerged lands were immediately
transferred and sold to Amari.
Third, the Ponce doctrine has been superseded by the provisions of the
Government Auditing Code, which has been bolstered by the provisions of the Local
Government Code, which states that any sale of the public land must be made only thru
a public bidding. There being no public bidding in the subject sale of land; the amended
JVA is a negotiated contract in patent violation of such law.
Fourth, the Ponce doctrine which involved the validity to reclaim foreshore lands
based on RA 1899 (authorizing municipalities and chartered cities to reclaim foreshore
lands) is not applicable in the instant case because what is involved in the case at bar
are submerged lands.
Fifth, in the Ponce case, the City of Cebu was sanctioned to reclaim foreshore
lands under RA 1899 for it is a qualified end user government agency; therefore, can sell
patrimonial property to private parties. But PEA is not an end user agency with respect to
reclaimed lands under the amended JVA for reclaimed lands are public and therefore are
inalienable.
Finally, the Ponce case was decided under the 1935 Constitution (1965-66), which
allowed private corporations to acquire alienable lands of the public domain. The case at
bar falls within the ambit of the 1987 Constitution which prohibits corporations from
acquiring alienable lands of the public domain.
Ergo, the submerged lands, being inalienable and outside the commerce of man,
could not be the subject of the commercial transactions specified in the Amended JVA.
Hence, the contract between Amari and the PEA is void.
REQUISITE OF CONTRACT DETERMINATE OBJECT
MELLIZA VS. CITY OF ILOILO
23 SCRA 477
FACTS:
Juliana Melliza during her lifetime owned three parcels of residential land in Iloilo
City. On 1932, she donated to the then Municipality of Iloilo a certain lot to serve as site
for the municipal hall. The donation was however revoked by the parties for the reason
that area was found inadequate to meet the requirements of 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 transferred the rights to said portion of land
to Pio Sian Melliza. The transfer Certificate of title in Mellizas name bears on annotation
stating that a portion of said lot belongs to the Municipality of Iloilo.
Later the City of Iloilo, which succeeds to the Municipality of Iloilo, donated the
city hall sit to the University of the Philippines, Iloilo Branch. On 1952, the University of
the Philippines enclosed the site donated with a wire fence.
Pio Sian Melliza then filed action in the Court of First Instance of Iloilo against Iloilo
City and the University of the Philippines for recovery of the parcel of land or of its value
specifically 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 of Iloilo and to say he would render the
Deed of Sale invalid because the law requires as an essential element of sale,
determinate object.
ISSUE:
Whether or not IF Lot 1214 B is included in the Deed of Sale, it would render the
contract invalid because the object would allegedly not be determinate as required by
law.
RULING:
NO. The requirement of the law specifically Article 1460 of the Civil Code, that
the sale must have for its object a determinate thing, is fulfilled as long as, at the time
the contract is entered into, the object of the sale is cable of being determinate without
the necessity of a new or further agreement between the parties.
The specific mention of some of the lots plus the statement that the lots object of
the sale are the ones needed for city hall site sufficient provides a basis, as of the time,
of the execution of the contract, for rendering determinate said lots without the need of
a new further agreement of the parties.
mining recorder. The notary public, Nicanor Sison, and one of the attesting witnesses,
Apolonio Ramos, testified to the effect that in the presence of the plaintiff and the
defendant and of the notary public and the subscribing witnesses, the deed of sale was
interpreted to the plaintiff and that thereupon he placed his thumb mark on the
document. Two finger print experts, Dr. Charles S. Banks and A. Simkus, have declared in
depositions that the thumb mark on exhibit is that of Askay. No less than four other
witnesses testified that at various times Askay had admitted to them that he had sold
the Pet Kel Mine to Fernando A. Cosalan.
Having in mind of these circumstances, how can the plaintiff expect the courts to
nullify the deed of sale on mere suspicion? Having waited nine years from the date when
the deed was executed, nine years from the time Fernando A. Cosalan started developing
the mine, nine years from the time Askay himself had been deprived of the possession of
the mine, and nine years permitting of a third party to obtain a contract of lease from
Cosalan, how can the court overlook plaintiff's silent acquiescence in the legal rights of
the defendant? On the facts of record, the trial judge could have done nothing less than
dismiss the action.
The Court concludes, therefore, that the complaint was properly dismissed. As a
result, judgment is affirmed
CAUSE: TRUE/REAL: SIMULATION OF CONTRACTS
HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE VS. LIM
446 SCRA 57
FACTS:
The spouses Aurelio and Esperanza Balite were the owners of a parcel of land at
Catarman, Northern Samar. When Aurelio died intestate, his wife Esperanza and their
children inherited the subject property and became co-owners thereof. In the meantime,
Esperanza became ill and was in dire need of money fro her hospital expenses. She,
through her daughter, Cristeta, offered to sell to Rodrigo Lim, her undivided share for the
price of P1,000,000.00. Esperaza and Rodrigo agreed that under the Deed of Absolute
Sale, it will be made to appear that the purchase price of the property would be
P150,000.00 although the actual price agreed upon by them for the property was
P1,000,000.00. On April 16, 1996, Esperanza executed a Deed of Absolute Sale in favor
of Rodrigo. They also executed on the same day a Joint Affidavit under which they
declared that the real price of the property was P1,000,000.00 payable to Esperanza by
installments. Only Esperanza and two of her children Antonio and Cristeta knew about
the said transaction. When the rest of the children knew of the sale, they wrote to the
Register of Deeds saying that their mother did not inform them of the sale of a portion of
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 of
Attorney.
In a letter, dated August 14, 1969, Federico, through his new counsel, Agrava &
Agrava, requested that Rafael deliver his copy of TCT No. T-36714 so that Federico could
have the counter deed of sale in his favor registered in his name. The request having
been obviously turned down, Agrava & Agrava filed a petition with the Court of First
Instance of Bulacan asking Rafael to surrender his owner's duplicate certificate of TCT
No. T-36714. In opposition thereto, Rafael chronicled the discrepancy in the notarization
of the second deed of sale upon which said petition was premised and ultimately
concluded that said deed was a counterfeit or "at least not a public document which is
sufficient to transfer real rights according to law." On September 8, 1969, Agrava &
Agrava filed a motion to withdraw said petition, and, on September 13, 1969, the Court
granted the same.
On July 8, 1970, Federico filed a complaint for reconveyance and damages against
Rafael. In his answer, Rafael scoffed at the attack against the validity and genuineness
of the sale to him of Federico's land and rice mill. Rafael insisted that said property was
"absolutely sold and conveyed . . . for a consideration of P20,000.00, Philippine currency,
and for other valuable consideration".
While the trial court upheld the validity and genuineness of the deed of sale
executed by Federico in favor of Rafael, which deed is referred to above as Exhibit A, it
ruled that the counter-deed, referred to as Exhibit B, executed by Rafael in favor of
Federico, was simulated and without consideration, hence, null and void ab initio.
Moreover, while the trial court adjudged Rafael as the owner of the property in
dispute, it did not go to the extent of ordering Federico to pay back rentals for the use of
the property as the court made the evidential finding that Rafael simply allowed his
uncle to have continuous possession of the property because or their understanding that
Federico would subsequently repurchase the same.
From the aforecited decision of the trial court, both Federico and Rafael appealed.
The Court of Appeals rendered judgment affirming the trial court's decision, with a
modification that Federico was ordered to surrender the possession of the disputed
property to Rafael. Counsel of Federico filed a motion for reconsideration of the
aforecited decision. While the motion was pending resolution, Atty. Ricardo M. Fojas
entered his appearance in behalf of the heirs of Rafael who had passed away on
November 23, 1988. Atty. Fojas prayed that said heirs be substituted as defendantsappellants in the case. The prayer for substitution was duly noted by the court in a
resolution dated April 6, 1993. Thereafter, Atty. Fojas filed in behalf of the heirs an
opposition to the motion for reconsideration. The parties to the case were heard on oral
argument on October 12, 1993. On December 15, 1993, the Court of Appeals reversed
itself and rendered an amended judgment.
ISSUE:
Whether or not the deed of sale executed by Federico in favor of Rafael is
simulated and fictitious and, hence, null and void.
RULING:
On March 9, 1992, petitioners filed a complaint for damages. After trial, the RTC of
Quezon City rendered the cancellation of contract to be justified and awarded P1.255
million as damages in favor of petitioners.
Upon appeal by petitioners, the Court of Appeals reversed the decision and
entered a new one dismissing the complaint including the award of damages.
The motion for reconsideration having been denied, petitioners seek relief from
this court contending, inter alia, that the CA erred in declaring that NHA had any legal
basis to rescind the subject sale.
ISSUE:
Whether or not the contention of petitioner is correct.
Whether or not a partys entry into a contract affects the validity of the contract.
RULING:
Anent the 1st issue, NO. Petitioners confuse the cancellation of the contract by
the NHA as a rescission of the contract under Article 1191 of the Civil Code. The right to
rescission is predicated on a breach of faith by the other party that violates the
reciprocity between them. The power to rescind is given to the injured party. In this
case, the NHA did not rescind the contract. Indeed, it did not have the right to do so for
the other parties to the contract, the vendors did not commit any breach, much less a
substantial breach, of their obligation. The NHA did not suffer any injury. The
cancellation was not therefore a rescission under Article 1191. Rather, it was based on
the negation of the cause arising from the realization that the lands, which were the
objects of the sale, were not suitable for housing.
Anent the 2nd issue, as a general rule, a partys motives for entering into a
contract do not affect the contract. However, when the motive predetermines the cause,
the motive may be regarded as the cause. As held in Liguez v. CA, ... It is well to note,
however, that Manresa himself, while maintaining the distinction and upholding the
inoperativess of the motives of the parties to determine the validity of the contract,
expressly excepts from the rule those contracts that are conditioned upon the
attainment of the motives of either party. The same view is held by the Supreme Court
of Spain, in its decisions of Fevruary 4, 1941 and December 4, 1946, holdinmg that the
motive may be regarded as causa when it predermones the purpose of the contract.
GRATUITOUS CAUSE
1.
2.
law in 1943, when the donation was executed), "in contracts of pure beneficence the
consideration is the liberality of the donor", and that liberality per se can never be illegal,
since it is neither against law or morals or public policy.
ISSUE:
Whether or not the deed of donation made by Lopez in favor of Liguez was valid.
RULING:
Under Article 1274, liberality of the donor is deemed causa only in those contracts
that are of "pure" beneficence; that is to say, contracts designed solely and exclusively
to procure the welfare of the beneficiary, without any intent of producing any satisfaction
for the donor; contracts, in other words, in which the idea of self-interest is totally absent
on the part of the transferor.
For this very reason, the same Article 1274 provides that in remuneratory
contracts, the consideration is the service or benefit for which the remuneration is given;
causa is not liberality in these cases because the contract or conveyance is not made out
of pure beneficence, 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 of Spain in its decision of 16 Feb. 1899, has ruled that bonuses granted to
employees to excite their zeal and efficiency, with consequent benefit for the employer,
do not constitute donation having liberality for a consideration.
Here the facts as found by the Court of 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 benefit appellant Conchita Liguez, but also to
secure her cohabiting with him, so that he could gratify his sexual impulses. This is clear
from the confession of 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, therefore, the donation was but one part of 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 differentiate between the alleged liberality of Lopez, as causa
for the donation in her favor, and his desire for cohabiting with appellant, as motives that
impelled him to make the donation, and quotes from Manresa and the jurisprudence of
this Court on the distinction that must be maintained between causa and motives. It is
well to note, however, that Manresa himself, while maintaining the distinction and
upholding the inoperativeness of the motives of the parties to determine the validity of
the contract, expressly excepts from the rule those contracts that are conditioned upon
the attainment of the motives of either party.
Appellees, as successors of the late donor, being thus precluded from pleading
the defense of immorality or illegal causa of the donation, the total or partial
ineffectiveness of the same must be decided by different legal principles. In this regard,
the Court of Appeals correctly held that Lopez could not donate the entirety of the
property in litigation, to the prejudice of his wife Maria Ngo, because said property was
conjugal in character, and the right of the husband to donate community property is
strictly limited by law.
1957, Justina became the owner of the entire property as her sister died with no other
heir.
The situation of the children and forced heirs of Lopez approximates that of the
widow. As privies of their parent, they are barred from invoking the illegality of the
donation. But their right to a legitime out of his estate is not thereby affected, since the
legitime is granted them by the law itself, over and above the wishes of the deceased.
Hence, the forced heirs are entitled to have the donation set aside in so far as inofficious:
i.e., in excess of the portion of free disposal , computed as provided in Articles 818 and
819, and bearing in mind that "collationable gifts" under Article 818 should include gifts
made not only in favor of the forced heirs, but even those made in favor of strangers, as
decided by the Supreme Court of Spain in its decisions of 4 May 1899 and 16 June 1902.
So that in computing the legitimes, the value of the property donated to herein
appellant, Conchita Liguez, should be considered part of the donor's estate. Only the
court of origin has the requisite date to determine whether the donation is inofficious or
not. With regard to the improvements in the land in question, the same should be
governed by the rules of accession and possession in good faith, it being undisputed that
the widow and heirs of Lopez were unaware of the donation in favor of the appellant
when the improvements were made.
On December 1, she executed another contract giving Wong the option to buy the
leased premises for P120,000 payable within 10 years at monthly installment of P1,000.
The option was conditioned on his obtaining Philippine citizenship, which was then
pending. His application for naturalization was withdrawn when it was discovered that
he was a resident of Rizal.
Appellant Conchita Liguez was declared by the Supreme Court entitled to so much
of the donated property as may be found, upon proper liquidation, not to prejudice the
share of the widow Maria Ngo in the conjugal partnership with Salvador P. Lopez or the
legitimes of the forced heirs of the latter.
GRATUITOUS CAUSE
PHILIPPINE BANKING CORPORATION, representing the estate of JUSTINA
SANTOS Y CANON FAUSTINO, deceased, plaintiff-appellant,
VS. LUI SHE, in her own behalf and as administratrix of the intestate of
Wong Heng, deceased, defendant-appellant
21 SCRA 52
FACTS:
Justina Santos and her sister Lorenza were the owners in common of a piece of
land in Manila. In it are two residential houses. The sisters lived in one of the houses,
while Wong Heng, a Chinese, lived with his family in the restaurant. Wong had been a
long time lessee of a portion of the property, paying monthly rentals. On September 22,
On November 18,1958, she executed two other contracts one extending the term
to 99 years and the term fixing the term of the option of 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 of heart in a codicil. Claiming that the various contracts were made
because of her machinations and inducements practiced by him, she now directed her
executor to secure the annulment of the contracts.
On November 18, the action was filed in the CFI of Manila. The complaint alleged
that Wong obtained the contracts through fraud. Wong denied having taken advantage
of her trust in order to secure the execution of the contracts on question. He insisted
that the various contracts were freely and voluntarily entered into by the parties.
The lower court declared all the contracts null and void with the exception of the
first, which is the contract of lease of November 15, 1957. From this decision, both
parties appealed directly to the Court. After the case were submitted for decision, both
parties died, Wong on 1962, and Justina on 1964. Wong as substituted by his wife Lui She
while Justina by the Philippine Banking Corporation.
ISSUE:
Whether or not the contracts entered into by the parties are void being in
violation of the Constitutional prohibition on transfer of lands to aliens or those who are
not citizens of the Philippines.
RULING:
YES. The Court held the lease and the rest of the contracts were obtained with
the consent of Justina freely given and voluntarily. However the contacts are not
necessarily valid on the ground that it circumvents the Constitutional prohibition against
the transfer of lands to aliens. The illicit purpose then becomes the illegal causa,
rendering the contracts void.
It does not follow from what has been said that because the parties are in pari
delicto they will be left where they are, without relief. For one thing, the original parties
who were guilty of violation of fundamental 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 of 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 of the law
is designed for the protection of the plaintiff, he may recover what he has paid or
delivered.
FORM AS ESSENTIAL ELEMENT OF CONTRACTS
SONIA F. LONDRES, ARMANDO V. FUENTES, CHI-CHITA FUENTES QUINTIA,
ROBERTO V. FUENTES, LEOPOLDO V. FUENTES, OSCAR V. FUENTES and
MARILOU FUENTES ESPLANA petitioners, vs. THE COURT OF APPEALS, THE
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, THE DEPARTMENT OF
TRANSPORTATION AND COMMUNICATIONS, ELENA ALOVERA SANTOS and
CONSOLACION ALIVIO ALOVERA, respondents
Dec 17, 2002
G.R. No. 136427
FACTS:
The present case stemmed from a battle of ownership over Lots 1320 and 1333
both located in Barrio Baybay, Roxas City, Capiz. Paulina originally owned these two
parcels of land. After Paulinas death, ownership of the lots passed to her daughter,
Filomena. The surviving children of 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 of
ownership over Lots 1320 and 1333 on the Absolute Sale executed by Filomena on April
24, 1959. Filomena sold the two lots in favor of Consolacion and her husband, Julian.
Elena is the daughter of Consolacion and Julian.
On March 30, 1989, petitioners filed a complaint for the declaration of nullity of
contract, damages and just compensation. Petitioners sought to nullify the Absolute Sale
conveying Lots 1320 and 1333 and to recover just compensation from public
respondents DPWH and DOTC. Petitioners claimed that as the surviving children of
Filomena, they are the owners of Lots 1320 and 1333. Petitioners claimed that these two
lots were never sold to Julian. Petitioners doubt the validity of the Absolute Sale because
it was tampered. The cadastral lot number of 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 of the claim of
private respondents when Consolacion filed a petition for the judicial reconstitution of the
original certificates of title of Lots 1320 and 1333 with the Capiz Cadastre. Upon further
inquiry, petitioners discovered that there exists a notarized Absolute Sale executed on
April 24, 1959 registered only on September 22, 1982 in the Office of the Register of
Deeds of Roxas City. The private respondents copy of the Absolute Sale was tampered
so that the second parcel of lot sold, Lot 2034 would read as Lot 1333. However, the
Records Management and Archives Office kept an unaltered copy of the Absolute Sale.
This other copy shows that the objects of the sale were Lots 1320 and 2034.
Private respondents maintained that they are the legal owners of Lots 1333 and
1320. Julian purchased the lots from Filomena in good faith and for a valid consideration.
Private respondents explained that Julian was deaf and dumb and as such, was placed in
a disadvantageous position compared to Filomena. Julian had to rely on the
representation of other persons in his business transactions. After the sale, Julian and
Consolacion took possession of the lots. Up to now, the spouses successors-in-interest
are in possession of the lots in the concept owners. Private respondents claimed that the
alteration in the Absolute Sale was made by Filomena to make it conform to the
description of the lot in the Absolute Sale. Private respondents filed a counterclaim with
damages.
The cross-claim of petitioners against public respondents was for the recovery of
just compensation. Petitioners claimed that during the lifetime of Paulina, public
respondents took a 3,200-square meter portion of Lot 1320. The land was used as part of
the Arnaldo Boulevard in Roxas City without any payment of just compensation. In 1988,
public respondents also appropriated a 1,786-square meter portion of Lot 1333 as a
vehicular parking area for the Roxas City Airport. Sonia, one of the petitioners, executed
a deed of absolute sale in favor of the Republic of the Philippines over this portion of Lot
1333. According to petitioners, the vendee agreed to pay petitioners P214,320.00.
Despite demands, the vendee failed to pay the stipulated amount.
The trial court issued its decision upholding the validity of the Absolute Sale. This
was affirmed by the Court of Appeals.
ISSUE
RULING
Among others, petitioners harp on the fact that the notarized and registered copy
of the Absolute Sale should have, been correspondingly corrected. Petitioners believe
that the notarized and archived copy should prevail. We disagree. A contract of sale is
perfected at the moment there is a meeting of the minds upon the thing which is the
object of the contract and upon the price. Being consensual, a contract of sale has the
force of law between the contracting parties and they are expected to abide in good faith
with their respective contractual commitments. Article 1358 of the Civil Code, which
requires certain contracts to be embodied in a public instrument, is only for convenience,
and registration of the instrument is needed only to adversely affect third parties. Formal
requirements are, therefore, for the purpose of binding or informing third parties. Noncompliance with formal requirements does not adversely affect the validity of the
contract or the contractual rights and obligations of the parties.
Decision affirmed with the modification that the cross-claim against public
respondents is dismissed.
CLARA M. BALATBAT
VS. COURT OF APPEALS and Spouses JOSE REPUYAN and AURORA REPUYAN
G.R. No. 109410
August 28, 1996
261 SCRA 128
FACTS:
The lot in question covered by Transfer Certificate of Title No. 51330 was acquired
by plaintiff Aurelio Roque and Maria Mesina during their conjugal union and the house
constructed thereon was likewise built during their marital union. Out of their union,
plaintiff and Maria Mesina had four children. When Maria Mesina died on August 28,
1966, the only conjugal properties left are the house and lot above stated of which
plaintiff herein, as the legal spouse, is entitled to one-half share pro-indiviso thereof. With
respect to the one-half share pro-indiviso now forming the estate of Maria Mesina,
plaintiff and the four children, the defendants here, are each entitled to one-fifth (1/5)
share pro-indiviso.
Aurelio Roque then entered into a contract of Absolute Sale with the spouses
Aurora and Jose Repuyan. However, on August 20, 1980, Aurelio filed a complaint for
Rescission of Contract against Spouses Repuyan for the latters failure to pay the balance
of the purchase price. A deed of 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 filed a motion for the issuance of a writ of possession which was granted by the
trial court on September 14, 1982 "subject, however, to valid rights and interest of third
persons over the same portion thereof, other than vendor or any other person or persons
privy to or claiming any rights or interests under it." The corresponding writ of
possession was issued on September 20, 1982.
The lower court then rendered judgment in favor of the Spouses Repuyan and
declared the Deed of Absolute Sale as valid. On appeal by petitioner Balatbat, the Court
of Appeals affirmed the lower courts decision.
ISSUE:
Whether or not the delivery of the owners certificate of title to spouses Repuyan
by Aurelio Roque is for convenience or for validity or enforceability.
RULING:
The Supreme Court found that the sale between Aurelio and the Spouses Repuyan
is not merely for the reason that there was no delivery of the subject property and that
consideration/price was not fully paid but the sale as consummated, hence, valid and
enforceable.
The non-delivery of the possession of the subject property to the private
respondent, suffice it to say that ownership of the thing sold is acquired only from the
time of delivery thereof, either actual or constructive. Article 1498 of the Civil Code
provides that when the sale is made through a public instrument, the execution thereof
shall be equivalent to the delivery of the thing which is the object of the contract, if from
the deed the contrary does not appear or cannot be inferred. The execution of the public
instrument, without actual delivery of the thing, transfers the ownership from the vendor
to the vendee, who may thereafter exercise the rights of an owner over the same. In the
instant case, vendor Roque delivered the owner's certificate of title to herein private
respondent. It is not necessary that vendee be physically present at every square inch of
the land bought by him, possession of the public instrument of the land is sufficient to
accord him the rights of ownership. Thus, delivery of a parcel of land may be done by
placing the vendee in control and possession of the land (real) or by embodying the sale
in a public instrument (constructive). The provision of Article 1358 on the necessity of a
public document is only for convenience, not for validity or enforceability. It is not a
requirement for the validity of a contract of sale of a parcel of land that this be
embodied in a public instrument.
A contract of sale being consensual, it is perfected by the mere consent of the
parties. Delivery of the thing bought or payment of the price is not necessary for the
perfection of the contract; and failure of the vendee to pay the price after the execution
of the contract does not make the sale null and void for lack of consideration but results
at most in default on the part of the vendee, for which the vendor may exercise his legal
remedies. Tthe petition for review is hereby dismissed for lack of merit.
third party has acquired the land in good faith and for value and has registered the
subsequent deed; that the list of properties acquired by URSUMCO from the PNB does
not include the disputed lot and, therefore, was not among those conveyed by UPSUMCO
to URSUMCO.
On appeal by URSUMCO, the Court of Appeals affirmed the RTC decision, holding
that the transaction between Angel Teves and Andres Abanto's heirs is a contract of sale,
not one to sell, because ownership was immediately conveyed to the purchaser upon
payment of P115,000.00. On October 29, 1996, URSUMCO filed a motion for
reconsideration but was denied by the Appellate Court. Hence, the instant petition for
review on certiorari.
ISSUE:
Whether or not the respondents have established a cause of action against
petitioner.
RULING:
No. Petitioner URSUMCO contends that respondents have no cause of action
because the "Extrajudicial Settlement of the Estate of the Deceased Andres Abanto and
Simultaneous Sale" is merely a promise to sell and not an absolute deed of sale, hence,
did not transfer ownership of the disputed lot to Angel Teves. Assuming that the
document is a contract of sale, the same is void for lack of consideration because the
total price of P115,000.00 does not specifically refer to the registered lot making the
price uncertain. Furthermore, the transaction, being unregistered, does not bind third
parties.
Petitioner's contentions lack merit. As held by the RTC and the Court of Appeals,
the transaction is not merely a contract to sell but a contract of sale. In a contract of
sale, title to the property passes to the vendee upon delivery of 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 full payment of 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. H-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 transferred to Teves
is further shown by his acts subsequent to the execution of the contract. As found by the
trial court, it was Teves, not Andres Abanto's heirs, who allowed UPSUMCO to construct
pier facilities and guesthouse on the land. When the property was erroneously included
among UPSUMCO's properties that were transferred to petitioner URSUMCO, it was Teves,
not the heirs of Andres Abanto, who informed petitioner that he owns the same and
negotiated for an arrangement regarding its use. Teves even furnished petitioner
documents and letters showing his ownership of the lot, such as a copy of the
"Extrajudicial Settlement of the Estate of the Deceased Andres Abanto and Simultaneous
Sale" and a certified true copy of TCT No. H-37 covering the disputed lot. Indeed, the
trial court and the Court of Appeals correctly ruled that Teves purchased the lot from the
Abanto heirs.
That the contract of sale was not registered does not affect its validity. Being
consensual in nature, it is binding between the parties, the Abanto heirs and Teves.
Article 1358 of the New Civil Code, which requires the embodiment of certain contracts
in a public instrument, is only for convenience, and the registration of the instrument
would merely affect third persons. Formalities intended for greater efficacy or
convenience or to bind third persons, if not done, would not adversely affect the validity
or enforceability of the contract between the contracting parties themselves. Thus, by
virtue of the valid sale, Angel Teves stepped into the shoes of the heirs of Andres Abanto
and acquired all their rights to the property.
Thus, petition is denied.
CC)
Atty. Deogracias Pinili, Alejandras lawyer then prepared the document of sale. In
the preparation of 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 of the mistake committed, Alejandra immediately took possession of Lot
4163 and introduced improvements on the said lot.
Two years later, when Alejandra Delfino purchased the adjoinin portion of 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 filed for the feformation of the
Deed of Sale.
ISSUE:
Whether or not reformation is proper in this case.
Jose entered into a contract with plaintiff Alejandra Delfino, for the sale of their one-half
share of Lot 4163 after offering the same to their co-owner, Silveria, who declined for
lack of money. Silveria did not object to the sale of said portion to Alejandra.
SARMING VS. DY
383 SCRA 131
JUNE 6, 2002
FACTS:
Petitioners are the succesors-in-interest of original defendant Silveria Flores, while
respondents Cresencio Dy and Ludivina Dy-Chan are the succesors-in-interest of the
original plaintiff Alejandra Delfino, the buyer of one of the lots subject of this case. They
were joined in this petition by the successors-in-interest of Isabel, Juan, Hilario, Ruperto,
Tomasa, and Luisa and Trinidad themselves, all surnamed Flores, who were also the
original plaintiffs in the lower court. They are the descendants of Venancio and Jose, the
brothers of the original defendant Silveria Flores.
A controversy arose regarding the sale of Lot 4163 which was half-owned by the
original defendant, Silveria Flores, although it was solely registered under her name. The
other half was originally owned by Silverias brother, Jose. On January 1956, the heirs of
RULING:
YES.
Reformation is that remedy in equity by means of which a written
instrument is made or construed so as to express or inform to the real intention of the
parties.
An action for reformation of instrument under this provision of law may prosper
only upon the concurrence of the following requisites: (1) there must have been a
meeting of the minds of the parties to the contract; (2) the instrument does not express
the true intention of the parties; and (3) the failure of the instrument to express the true
intention of the parties is due to mistake, fraud, inequitable conduct or accident.
All of these requesites are present in this case. There was a meeting of the minds
between the parties to the contract but the deed did not express the true intention ot the
parties due to the designation of the lot subject of the deed. There is no dispute as to
the intention of the parties to sell the land to Alejandra Delfino but there was a mistake
as to the designation of the lot intended to be sold as stated in the Settlement of Estate
and Sale.
REFORMATION OF INSTRUMENTS: WHEN PROHIBITED (Art. 1366-1367, CC)
CEBU CONTRACTORS CONSORTIUM CO., petitioner,
VS. COURT OF APPEALS and
MAKATI LEASING & FINANCE CORPORATION, respondents
G.R. No. 107199
July 22, 2003
FACTS:
The instant Petition for Review on Certiorari stems from a complaint for collection
of a sum of money with replevin filed by respondent Makati Leasing and Finance
Corporation (MLFC) against petitioner Cebu Contractors Consortium Company (CCCC)
before the Regional Trial Court of 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 of the lease were defined in said agreement and in two lease schedules of
payment.
To secure the lease rentals, a chattel mortgage, and a subsequent
amendment thereto, were executed in favor of MLFC over other various equipment
owned by CCCC.
On June 30, 1977, CCCC began defaulting on the lease rentals, prompting MLFC to
send demand letters. When the demand letters were not heeded, MLFC filed a complaint
for the payment of the rentals due and prayed that a writ of replevin be issued in order
to obtain possession of the equipment leased and to foreclose on the equipment
mortgaged.
CCCs position is that it is no longer indebted to MLFC because the total amounts
collected by the latter from the Ministry of Public Highways, by virtue of the deed of
assignment, and from the proceeds of the foreclosed chattels were more than enough to
cover CCCs liabilities. CCC submits that in any event, the deed of assignment itself
already freed CCC from its obligation to MLFC.
The trial court rendered decision upholding the lease agreement and finding CCC
liable to MLFC in lease rentals. On appeal, the appellate court affirmed the trial courts
decision.
ISSUE:
Whether or not respondent court erred in upholding the so- called sale-lease
back scheme of the private respondent when the same is in reality nothing but an
equitable mortgage.
RULING:
The Court finds in favor of CCC.
MLFCs own evidence discloses that it offers two types of financing 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
of financing lease.CCC argues that the sale and lease back scheme is nothing more than
an equitable mortgage and consequently, asks for its reformation. The right of action for
reformation accrued from the date of execution of the contract of lease in 1976. This
was properly exercised by CCC when it filed its answer with counterclaim to MLFCs
complaint in 1978 and asked for the reformation of the lease contract.
date. Considering that the subject contract contains the foregoing express provisions,
the parties have no other recourse but to apply the literal meaning of the stipulations.
The cardinal rule is that when the terms of the contract are clear, leaving no doubt as to
the intention of the parties, the literal meaning of its stipulations is controlling.
Pursuant to the provision of Art 1191 of the Civil Code, the power to rescind
obligations is implied in reciprocal ones in case one of the obligors should not comply
with what is incumbent upon him, and the injured party may rescind the obligation, with
payment of damages. In this case the private respondent is entitled to the return of his
down payment, subject to a legal interest of 6 percent per annum, and to the payment of
damages.
INTERPRETATION OF CONTRACTS: IN CASE OF DOUBT
1.
2.
3.
4.
5.
6.
RULING:
The deduction of the alleged overpayment from the salaries of the respondents is
a valid act.
The CBA provided in its provision in the computation for the increase in TSPICs
employees, hence, the intention therein must be pursued basing on the principle that
littera necat spiritus vivificate. The fundamental doctrine in labor law that the CBA is the
law between the parties and they are obliged to comply with its provisions. Therefore,
the error found by TSPIC in pursuance to the terms in the CBA must be sustained.
The Court also agrees that TSPIC in charging the overpayments made to the
respondents through staggered deductions from their salaries does not constitute
diminution of benefits. Any amount given to the employees in excess of what they were
entitled to, as computed above, may be legally deducted by TSPIC from the employees
salaries because on the first place that excess was not vested in them legally as a right
because that will amount to unjust enrichment.
FACTS:
Spouses Rafael and Zenaida Estanislao obtained a loan from East West Banking
Corporation videnced by a promissory note and secured by two deeds of chattel
mortgage of two dump trucks and a bulldozer for the first and bulldozer and a wheel
loader for the other. Spouses defaulted in the amortizations and the entire obligation
became due and demandable. The bank filed a suit for replevin with damages but
subsequently, the bank moved for suspension of the proceedings on account of an
earnest attempt to arrive at an amicable settlement of the case. Both parties executed a
Deed of Assignment, drafted by the bank, where it provides that the two dump trucks
and the bulldozer shall be transferred, assigned and conveyed for the full payment of the
debt. But the bank, for an unknown reason failed to sign on the deed, but it accepted the
three heavy vehicles freely and voluntarily upon delivery made by the petitioner. After
some time, the bank file a petition in court praying for the deliver of the other heavy
vehicles mortgaged in the second chattel mortgage. The regional trial court dismissed
the complaint for lack of merit but it was reversed and set aside by the court of appeals.
ISSUE:
Whether or not the Deed of Assignment, unsigned by private respondent, extinguishes
the whole and full obligation of the petitioner.
RULING:
The deed of assignment was a perfected agreement which extinguished
petitioners total outstanding obligation to the respondent. The deed explicitly provides
that the assignor (petitioners), in full payment of its obligation, shall deliver the three
units of heavy equipment to the assignee (respondent), which accepts the assignment in
full payment of the above-mentioned debt. This could only mean that should petitioners
complete the delivery of the three units of heavy equipment covered by the deed,
respondents credit would have been satisfied in full, and petitioners aggregate
indebtedness would then be considered to have been paid in full as well.
The nature of the assignment was a dation in payment, whereby property is
alienated to the creditor in satisfaction of a debt in money. Such transaction is governed
by the law on sales. Even if we were to consider the agreement as a compromise
agreement, there was no need for respondents signature on the same, because with the
delivery of the heavy equipment which the latter accepted, the agreement was
consummated. Respondents approval may be inferred from its unqualified acceptance of
the heavy equipment.
Subsequently, the same parties to the Deed of Partition agreed in writing to share
equally in the proceeds of the sale of the properties although they have been subdivided
and individually titled in the names of the former co-owners pursuant to the Deed of
Partition. This arrangement was embodied in a Memorandum of Agreement executed on
August 23, 1977 or a day after the partition. The tenor of the Memorandum of
Agreement was annotated at the back of the TCT No. 495225 on September 1, 1977.
evidence. Thus, the deed is accorded its legal dire effect. Since a partition legally made
confers upon each heir their exclusive ownership of the property adjudicated to him, it
follows that Arnel Cruz acquired absolute ownership over the specific parcels of land
assigned to him in the Deed of Partial Partition, including the property subject of this
case. As the absolute owner thereof then, Arnel Cruz had the right to enjoy and dispose
of the property, as well as the right to constitute a real estate mortgage over the same
without securing the consent of the petitioners.
Sometime in January 1983, petitioner Thelma Cruz discovered that TCT No.
514477 was issued on October 18, 1982 in the name of Summit. Upon investigation,
petitioners learned that Arnel Cruz had executed a Special Power of Attorney on May 16,
1980 in favor of one Nelson Tamayo, husband of petitioner Nerissa Cruz Tamayo,
authorizing him to obtain a loan in the amount of One Hundred Four Thousand Pesos
from respondent Summit, to be secured by a real estate mortgage on the subject parcel
of land.
In their complaint before the RTC, petitioners asserted that they co-owned the
properties with Arnel Cruz, as evidenced by the Memorandum of Agreement. Hence, 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 of Arnel
Cruz when it was mortgaged.
RULING:
A reading of the provisions of the Deed of Partition, no other meaning can be
gathered other than that petitioners and Arnel Cruz had put an end to the co-ownership.
In the aforesaid deed, the shares of petitioners and Arnel Cruzs in the mass of co-owned
properties were concretely determined and distributed to each of them. In particular, to
Arnel Cruz was assigned the disputed property. There is nothing from the words of 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 of the properties for
that matter.
Petitioners do not question the validity or efficacy of the Deed of Partial Partition.
In fact, they admitted its existence in their pleadings and submitted it as a part of their
As correctly held by the Court of Appeals, the parties only bound themselves to
share in the proceeds of the sale of the properties. The agreement does not direct
reconveyance of the properties to reinstate the common ownership of the properties.
The real estate mortgage on the disputed property is valid and does not
contravene the agreement of the parties.
INTERPRETATION OF CONTRACTS: IN CASE OF DOUBT
GONZALES VS. COURT OF APPEALS
354 SCRA 8
FACTS:
Private respondents, Mr. and Mrs. Gabriel Caballero, are the registered owneres of
two parcels of land situated in Cubao, Quezon City described in Transfer Certificate fo
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 from the Cavite Development Bank in the
amount of P225,000.00. The two lots were mortgaged to secure their loan. The loan
matured in 1984. To pay the loan they offered Lot 1 for sale. The offer was advertised in
On October 24, 1985, a certain Mrs. Lagrimas approached the spouses offering 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 H. Gonzales, who turned out to be Mrs. Lagrimas
relative.
Petitioner offered to buy the vacant lot for P470,000.00. Initially, respondents
refused to reduce their asking price. Petitioner bargained for 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 of Internal Revenue. The spouses agreed to sell at
P470.000.00. Petitioners paid the bank P375,000.00, to be deducted from the purchase
price. After the mortgage was cancelled and upon release of the two titles, Gonzales
asked for the deeds of sale of the two lots and delivery of the titles to him. Defendants
signed the deed of sale covering only Lot 1 but refused to deliver its title until petitioner
paid the remaining balance of P70,000.00
This prompted petitioner to file a complaint for specific performance and
damages.
ISSUE:
Whether or not the sale involved only Lot 1 and not both Lots.
RULING:
YES. Principally, the issue here is whether the contract of 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 conflicting claims on the intent of the
parties, as in this instance, judicial determination of the parties intention is mandated.
Contemporaneous and subsequent acts of the parties material to the case are to be
considered.
Petitioner admits he himself caused the preparation of the deed of sale presented
before the lower court. Yet he could not explain why I referred only to the sale of Lot 1
and not to the two lots, if the intention of the parties was really to cover the sale of two
lots. As the courts a quo observed, even if it were true that two lots were mortgaged and
were about to be foreclosed, the ads private respondents placed in the Bulletin Today
offered only Lot 1 and was strong indication that they did not intend to sell Lot 2. The
501 sq.m. lot was offered for P1,150.00 per sq.m. It alone would have fetched
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 for less than the price of one lot. Contrary to what
petitioner would make us believe, the sale of Lot 1 valued at P576,150.00 for
P470,000.00, with petitioner assuming the bank loan of P375,000.00 as well as payment
of the capital gains tax, appears more plausible.
NO, the right of the parties are governed by the terms ands the nature of the
contract they entered. Hence, although the nature of 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 of Sale. Although both parties have consistency referred to the
Kasunduan as a contract to Sell, a careful reading of the provision of the Kasunduan
reveals that it is a contract of Sale. A deed of sale is absolute in nature in the absence of
an any stipulation reserving title to the vendor until full payment of the purchase price.
The delivery of a separation title in the name of Julio Garcia was a condition imposed on
respondents obligation to pay the balance of the purchase price. It was not a condition
imposed in the perfection of the contract of 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 faithfully fulfilled 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 of Julio Garcia to respondent therefore,
thy are not in a position to ask for rescission. Failure to comply with a condition imposed
on the performance of an obligation gives the other party the option either to refuse to
proceed with the sale or to waive the condition under Art 1545 of the civil code. Hence it
is the respondent who has the option.
DOCTRINE OF COMPLEMENTARY CONTRACTS CONSTRUED TOGETHER
1.
2.
3.
venue in Makati City where it had its main office. After it opened a branch office in
Dagupan City, private respondent made corrections in the deed of chattel mortgage, but
due to oversight, failed to make the corresponding corrections in the promissory notes.
Petitioners affixed their signatures in both contracts. The presumption is applied that a
person takes ordinary care of his concerns. It is presumed that petitioners did not sign
the deed of chattel mortgage without informing themselves of its contents. As aptly
stated in a case, they being of age and businessmen of experience, it must be presumed
that they acted with due care and have signed the documents in question with full
knowledge of their import and the obligation they were assuming thereby. In any event,
petitioners did not contest the deed of chattel mortgage under Section 8, Rule 8 of the
Revised Rules of Civil Procedure.
As held in Velasquez, this omission effectively eliminated any defense relating to
the authenticity and due execution of the deed, e.g. that the document was spurious,
counterfeit, or of different import on its face as the one executed by the parties; or that
the signatures appearing thereon were forgeries; or that the signatures were
unauthorized. Clearly, the Court of Appeals did not err in ruling that venue was properly
laid in Dagupan City as provided in the deed of chattel mortgage. The Court holds that
private respondent is not barred from filing its case against petitioners in Dagupan City
where private respondent has a branch office as provided for in the deed of chattel
mortgage.
Petition denied.
DOCTRINE OF COMPLEMENTARY CONTRACTS CONSTRUED TOGETHER
RODOLFO P. VELASQUEZ, petitioner,
VS. COURT OF APPEALS, and PHILIPPINE COMMERCIAL INTERNATIONAL BANK,
INC., respondents
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 International Bank (PCIB) against petitioner Rodolfo P. Velasquez together
with Mariano N. Canilao Jr., Inigo A. Nebrida, Cesar R. Dean and Artemio L. Raymundo.
Sometime in December 1994 the Pick-up Fresh Farms, Inc. (PUFFI), of which
petitioner Velasquez was an officer and stockholder, filed an application for a loan of
P7,500,000.00 with PCIB 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 Inigo A. Nebrida and Mariano N. Canilao, Jr. as officers of and for both PUFFI and
Aircon and Refrigeration Industries, Inc. (ARII). A chattel mortgage was also executed by
ARII over its equipment and machineries in favor of PCIB. Petitioner along with Nebrida
and Canilao, Jr. also executed deeds of suretyship in favor of PCIB. Separate deeds of
suretyship were further executed by Cesar R. Dean and Artemio L. Raymundo. When
PUFFI defaulted in the payment of its obligations PCIB foreclosed the chattel mortgage.
The proceeds of the sale amounted to P678,000.00.
Thus, PCIB filed an action to recover the remaining balance of the entire
obligation including interests, penalties and other charges. Exemplary damages and
attorneys 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 PCIB holding petitioner and Canilao
solidarily liable to pay P7,227,624.48 plus annual interest of 17%, and P700,000.00 as
attorneys 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.
Petitioners motion for reconsideration was thereafter denied. Hence this petition.
ISSUE:
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.
RULING:
The more appropriate doctrine in this case is that of 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 of a contract shall be interpreted
together, attributing to the doubtful ones that sense which may result from all of
them taken jointly.
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 Ind. Inc. shall each execute a
suretyship agreement in favor of the LENDER in form and substance acceptable to the
LENDER.
WHEREFORE, the petition is DENIED. The Decision of 28 September 1995 of the
Court of Appeals affirming the 20 June 1990 judgment of the RTC- Br. 61, Makati City,
ordering petitioner Rodolfo P. Velasquez and Mariano N. Canilao, Jr. to solidarily pay
respondent Philippine Commercial and Industrial Bank (PCIB) the amount of
P7,227,624.48 with annual interest of 17% and attorneys fees of P700,000.00 plus costs
of suit as well as its Resolution of 19 February 1995 denying reconsideration, is
AFFIRMED.
FACTS:
Carmelo & Bauermann, Inc. (Carmelo) used to own a parcel of land, together with
two two-storey buildings constructed thereon. On June 1, 1967, Carmelo entered into a
lease with Mayfair Theater, Inc. (Mayfair) for a period of 20 years. The lease covered a
portion of the second floor and mezzanine. Two (2) years later, Mayfair entered into a
second lease with Carmelo for the lease of another property, a part of the second floor
and two spaces on the ground floor. The lease was also for a period of twenty (20) years.
Both leases contained a provision granting Mayfair a right of first refusal to purchase the
said properties. However, on July 30, 1978, within the 20-year-lease term, Carmelo sold
the subject properties to Equatorial Realty Development, Inc. (Equatorial) for the sum of
P11.3M without their first being offered to Mayfair.
As a result, Mayfair filed a complaint for specific performance and damages. After
trial, the court ruled in favor of Equatorial. On appeal, the Court of Appeals (CA)
reversed and set aside the judgment of the lower court. On November 21, 1996, the
Supreme Court denied Equatorials petition for review and declared the contract between
Carmelo and Equatorial rescinded. The decision became final and executory and Mayfair
filed a motion for its execution, which the court granted on April 25, 1997. However,
Carmelo could no longer be located thus Mayfair deposited with the court its payment to
Carmelo. The lower court issued a deed of reconveyance in favor of Carmelo and issued
new certificates in the name of Mayfair.
On September 18, 1997, Equatorial filed an action for the collection of sum of
money against Mayfair claiming payment of rentals or reasonable compensation for the
defendants use of the premises after its lease contracts had expired. The lower court
debunked the claim of the petitioner for unpaid rentals, holding that the rescission of the
Deed of Absolute Sale in the mother case did not confer on Equatorial any vested or
residual proprietary rights, even in expectancy.
ISSUE:
Whether or not Equatorial may collect rentals or reasonable compensation for
Mayfairs use of subject premises after its lease contracts had expired.
RULING:
NO. Rent is a civil fruit that belongs to the owner of the property producing it by
right of accession. Consequently and ordinarily, the rentals that fell due from the time of
the perfection of the sale to petitioner until its rescission by final judgment should belong
to the owner of the property during that period.
Petitioner never took actual control and possession of the property sold, in view of
the respondents timely objection to the sale and continued actual possession of the
property. The objection took the form of a court action impugning the sale that was
rescinded by a judgment rendered by the Court in the mother case. It has been held
that the execution of a contract of sale as a form of constructive delivery is a legal
fiction. It holds true only when there is no impediment that may prevent the passing of
the property from the hands of the vendor into those of the vendee. When there is such
impediment, fiction yields to reality; the delivery has not been effected. Hence,
respondents opposition to the transfer of property by way of sale to Equatorial was a
legally sufficient impediment that effectively prevented the passing of the property into
the latters hands.
Article 1386 of the Civil Code provides rescission, which creates the obligation to
return the things, which were the object of the contract, together with their fruits, and
the price with its interest, but also the rentals paid, if any, had to be returned by the
buyer.
RESCISSIBLE CONTRACTS-NATURE AND EFFECTS-MUTUAL RESTITUTION
MARIA ANTONIA SIGUAN, petitioner,
VS. ROSA LIM, LINDE LIM, INGRID LIM and NEIL LIM, respondents
1999 Nov 19
G.R. No. 134685
FACTS:
On 25 and 26 August 1990, Lim issued two Metrobank checks in the sums of
P300,000 and P241,668, respectively, payable to "cash."
Upon presentment by
petitioner with the drawee bank, the checks were dishonored for the reason "account
closed." Demands to make good the checks proved futile. As a consequence, a criminal
case for violation of Batas Pambansa Blg. 22, docketed as Criminal Cases Nos. 22127-28,
were filed by petitioner against LIM with Branch 23 of the Regional Trial Court (RTC) of
Cebu City.
In its decision dated 29 December 1992, the court a quo convicted Lim as
charged. The case is pending before this Court for review and docketed as G.R. No.
134685. It also appears that on 31 July 1990, Lim was convicted of estafa by the RTC of
Quezon City in Criminal Case No. Q-89-22162 filed by a certain Victoria Suarez. This
decision was affirmed by the Court of Appeals. On appeal, however, the Supreme Court,
in a decision promulgated on 7 April 1997, acquitted Lim but held her civilly liable in the
amount of P169,000, as actual damages, plus legal interest.
Meanwhile, on 2 July 1991, a Deed of Donation conveying parcels of land and
purportedly executed by Lim on 10 August 1989 in favor of her children, Linde, Ingrid
and Neil, was registered with the Office of the Register of Deeds of Cebu City. New
transfer certificates of title were thereafter issued in the names of the donees.
On 23 June 1993, petitioner filed an accion pauliana against Lim and her children
before Branch 18 of the RTC of Cebu City to rescind the questioned Deed of Donation and
to declare as null and void the new transfer certificates of title issued for the lots covered
by the questioned Deed. The complaint was docketed as Civil Case No. CEB-14181.
Petitioner claimed therein that sometime in July 1991, Lim, through a Deed of Donation,
fraudulently transferred all her real property to her children in bad faith and in fraud of
creditors, including her; that Lim conspired and confederated with her children in
antedating the questioned Deed of Donation, to petitioner's and other creditors'
prejudice; and that Lim, at the time of the fraudulent conveyance, left no sufficient
properties to pay her obligations.
On the other hand, Lim denied any liability to petitioner. She claimed that her
convictions in Criminal Cases Nos. 22127-28 were erroneous, which was the reason why
she appealed said decision to the Court of Appeals. As regards the questioned Deed of
Donation, she maintained that it was not antedated but was made in good faith at a time
when she had sufficient property. Finally, she alleged that the Deed of Donation was
registered only on 2 July 1991 because she was seriously ill.
In its decision of 31 December 1994 the trial court ordered the rescission of the
questioned deed of donation; (2) declared null and void the transfer certificates of title
issued in the names of private respondents Linde, Ingrid and Neil Lim; (3) ordered the
Register of Deeds of Cebu City to cancel said titles and to reinstate the previous titles in
the name of Rosa Lim; and (4) directed the LIMs to pay the petitioner, jointly and
severally, the sum of P10,000 as moral damages; P10,000 as attorney's fees; and P5,000
as expenses of litigation.
judicial pronouncement setting aside the contract. Without any prior existing debt, there
can neither be injury nor fraud. While it is necessary that the credit of the plaintiff in the
accion pauliana must exist prior to the fraudulent alienation, the date of the judgment
enforcing it is immaterial. Even if the judgment be subsequent to the alienation, it is
merely declaratory, with retroactive effect to the date when the credit was constituted.
In the instant case, the alleged debt of Lim in favor of petitioner was incurred in
August 1990, while the deed of donation was purportedly executed on 10 August 1989.
The Supreme Court is not convinced with the allegation of the petitioner that the
questioned deed was antedated to make it appear that it was made prior to petitioner's
credit. Notably, that deed is a public document, it having been acknowledged before a
notary public. As such, it is evidence of the fact which gave rise to its execution and of
its date, pursuant to Section 23, Rule 132 of the Rules of Court.
In the present case, the fact that the questioned Deed was registered only on 2
July 1991 is not enough to overcome the presumption as to the truthfulness of the
statement of the date in the questioned deed, which is 10 August 1989. Petitioner's
claim against Lim was constituted only in August 1990, or a year after the questioned
alienation. Thus, the first two requisites for the rescission of contracts are absent.
Even assuming arguendo that petitioner became a creditor of Lim prior to the
celebration of the contract of donation, still her action for rescission would not fare well
because the third requisite was not met. Under Article 1381 of the Civil Code, contracts
entered into in fraud of creditors may be rescinded only when the creditors cannot in any
manner collect the claims due them. Also, Article 1383 of the same Code provides that
the action for rescission is but a subsidiary remedy which cannot be instituted except
when the party suffering damage has no other legal means to obtain reparation for the
same. The term "subsidiary remedy" has been defined as "the exhaustion of all
remedies by the prejudiced creditor to collect claims due him before rescission is
resorted to." It is, therefore, essential that the party asking for rescission prove that he
has exhausted all other legal means to obtain satisfaction of his claim. Petitioner neither
alleged nor proved that she did so. On this score, her action for the rescission of the
questioned deed is not maintainable even if the fraud charged actually did exist." The
fourth requisite for an accion pauliana to prosper is not present either.
FACTS:
Respondent Federico Suntay was the registered owner of a parcel of land with an
area in Bulacan. On the land may be found: a rice mill, a warehouse, and other
improvements. A rice miller, Federico, in a letter, dated September 30, 1960, applied as
a miller-contractor of the then National Rice and Corn Corporation (NARIC). He informed
the NARIC that he had a daily rice mill output of 400 cavans of palay and warehouse
storage capacity of 150,000 cavans of palay. His application, although prepared by his
nephew-lawyer, petitioner Rafael Suntay, was disapproved, obviously because at that
time he was tied up with several unpaid loans.
For purposes of circumvention, he had thought of allowing Rafael to make the
application for him. Rafael prepared an absolute deed of sale whereby Federico, for and
in consideration of P20,000.00 conveyed to Rafael said parcel of land with all its existing
structures. Said deed was notarized as Document No. 57 and recorded on Page 13 of
Book 1, Series of 1962, of the Notarial Register of Atty. Herminio V. Flores. Less than
three months after this conveyance, a counter sale was prepared and signed by Rafael
who also caused its delivery to Federico. Through this counter conveyance, the same
parcel of land with all its existing structures was sold by Rafael back to Federico for the
same consideration of P20,000.00. Although on its face, this second deed appears to
have been notarized as Document No. 56 and recorded on Page 15 of Book 1, Series of
1962, of the notarial register of Atty. Herminio V. Flores, an examination thereof will show
that, recorded as Document No. 56 on Page 13, is not the said deed of sale but a certain
"real estate mortgage on a parcel of land with TCT No. 16157 to secure a loan of
P3,500.00 in favor of the Hagonoy Rural Bank."
Nowhere on page 13 of the same notarial register could be found any entry
pertaining to Rafael's deed of sale. Testifying on this irregularity, Atty. Flores admitted
that he failed to submit to the Clerk of Court a copy of the second deed. Neither was he
able to enter the same in his notarial register. Even Federico himself alleged in his
Complaint that, when Rafael delivered the second deed to him, it was neither dated nor
notarized.
Upon the execution and registration of the first deed, Certificate of Title No. 02015 in the name of Federico was cancelled and in lieu thereof, TCT No. T-36714 was
issued in the name of Rafael. Even after the execution of the deed, Federico remained in
possession of the property sold in concept of owner. Significantly, notwithstanding the
fact that Rafael became the titled owner of said land and rice mill, he never made any
attempt to take possession thereof at any time, while Federico continued to exercise
rights of absolute ownership over the property.
In a letter, dated August 14, 1969, Federico, through his new counsel, Agrava &
Agrava, requested that Rafael deliver his copy of TCT No. T-36714 so that Federico could
have the counter deed of sale in his favor registered in his name. The request having
been obviously turned down, Agrava & Agrava filed a petition with the Court of First
Instance of Bulacan asking Rafael to surrender his owner's duplicate certificate of TCT
No. T-36714. In opposition thereto, Rafael chronicled the discrepancy in the notarization
of the second deed of sale upon which said petition was premised and ultimately
concluded that said deed was a counterfeit or "at least not a public document which is
sufficient to transfer real rights according to law." On September 8, 1969, Agrava &
Agrava filed a motion to withdraw said petition, and, on September 13, 1969, the Court
granted the same.
On July 8, 1970, Federico filed a complaint for reconveyance and damages against
Rafael. In his answer, Rafael scoffed at the attack against the validity and genuineness
of the sale to him of Federico's land and rice mill. Rafael insisted that said property was
"absolutely sold and conveyed . . . for a consideration of P20,000.00, Philippine currency,
and for other valuable consideration".
While the trial court upheld the validity and genuineness of the deed of sale
executed by Federico in favor of Rafael, which deed is referred to above as Exhibit A, it
ruled that the counter-deed, referred to as Exhibit B, executed by Rafael in favor of
Federico, was simulated and without consideration, hence, null and void ab initio.
Moreover, while the trial court adjudged Rafael as the owner of the property in
dispute, it did not go to the extent of ordering Federico to pay back rentals for the use of
the property as the court made the evidential finding that Rafael simply allowed his
uncle to have continuous possession of the property because or their understanding that
Federico would subsequently repurchase the same.
From the aforecited decision of the trial court, both Federico and Rafael appealed.
The Court of Appeals rendered judgment affirming the trial court's decision, with a
modification that Federico was ordered to surrender the possession of the disputed
property to Rafael. Counsel of Federico filed a motion for reconsideration of the
aforecited decision. While the motion was pending resolution, Atty. Ricardo M. Fojas
entered his appearance in behalf of the heirs of Rafael who had passed away on
November 23, 1988. Atty. Fojas prayed that said heirs be substituted as defendantsappellants in the case. The prayer for substitution was duly noted by the court in a
resolution dated April 6, 1993. Thereafter, Atty. Fojas filed in behalf of the heirs an
opposition to the motion for reconsideration. The parties to the case were heard on oral
argument on October 12, 1993. On December 15, 1993, the Court of Appeals reversed
itself and rendered an amended judgment.
ISSUE:
Whether or not the deed of sale executed by Federico in favor of Rafael is
simulated and fictitious and, hence, null and void.
RULING:
In the aggregate, the evidence on record demonstrate a combination of
circumstances from which may be reasonably inferred certain badges of simulation that
attach themselves to the deed of sale in question. The complete absence of an attempt
on the part of the buyer to assert his rights of ownership over the land and rice mill in
question is the most protuberant index of simulation.
The deed of sale executed by Federico in favor of his now deceased nephew,
Rafael, is absolutely simulated and fictitious and, hence, null and void, said parties
having entered into a sale transaction to which they did not intend to be legally bound.
As no property was validly conveyed under the deed, the second deed of sale executed
by the late Rafael in favor of his uncle, should be considered ineffective and unavailing.
The allegation of Rafael that the lapse of seven years before Federico sought the
issuance of a new title in his name necessarily makes Federico's claim stale and
unenforceable does not hold water. Federico's title was not in the hands of a stranger or
mere acquaintance; it was in the possession of his nephew who, being his lawyer, had
served him faithfully for many years. Federico had been all the while in possession of
the land covered by his title and so there was no pressing reason for Federico to have a
title in his name issued. Even when the relationship between the late Rafael and
Federico deteriorated, and eventually ended, it is not at all strange for Federico to have
been complacent and unconcerned about the status of his title over the disputed
property since he has been possessing the same actually, openly, and adversely, to the
exclusion of Rafael. It was only when Federico needed the title in order to obtain a
collaterized loan that Federico began to attend to the task of obtaining a title in his name
over the subject land and rice mill.
Decision affirmed. Petitioners, the heirs of Rafael G. Suntay, were ordered to
reconvey to private respondent Federico G. Suntay the property described in paragraph
2.1 of the complaint, within 10 days from the finality of the Decision, and to surrender to
him within the same period the owner's duplicate copy of Transfer Certificate of Title No.
T-36714 of the Registry of Deeds of the Province of Bulacan. In the event that the
petitioners fail or refuse to execute the necessary deed of reconveyance as herein
directed, the Clerk of Court of the Regional Trial Court of Bulacan was ordered to execute
the same at the expense of the aforesaid heirs.
RESCISSIBLE CONTRACTS-NATURE AND EFFECTS-MUTUAL RESTITUTION
KHE HONG CHENG, alias FELIX KHE, SANDRA JOY KHE and
RAY STEVEN KHE, petitioners,
VS. COURT OF APPEALS, HON. TEOFILO GUADIZ, RTC 147, MAKATI CITY and
PHILAM INSURANCE CO., INC., respondents
G.R. No. 144169
28 March 2001
355 SCRA 701
FACTS:
Petitioner Khe Hong Cheng, alias Felix Khe, is the owner of Butuan Shipping Lines
to which the Philippine Agricultural Trading Corporation used its vessel M/V Prince Eric
Corporation to ship 3,400 bags of Copra at Masbate for delivery to Dipolog. Such
shipping of 3, 400 bags was covered by a marine insurance policy issued by American
Home Insurance Company (eventually Philam). However, M/V Prince Eric sank
somewhere between Negros Island and Northern Mindanao which resulted to the total
loss of the shipment. Insurer Philam paid the amount of P 354, 000.00, which is the value
of the copra, to Philippine Agricultural Trading Corporation. American Home was thereby
subrogated unto the rights of the consignee and filed a case to recover money paid to
the latter, based on breach of common carriage.
While the case was pending, Khe Hong Cheng executed deeds of donations of
parcels of land in favor of his children. As a consequence of a favorable judgment for
American Home, a writ of execution to garnish Khe Hong Chengs property was issued
but the sheriff failed to implement the same for Chengs property were already
transferred to his children. Consequently, American home filed a case for the rescission
of the deeds of donation executed by petitioner in favor of children for such were made
in fraud of his creditors. Petitioner answered saying that the action should be dismissed
for it already prescribed. Petitioner posited that the registration of the donation was on
December 27, 1989 and such constituted constructive notice. And since the complaint
was filed only in 1997, more than four (4) years after registration, the action is thereby
barred by prescription.
ISSUE:
Whether or not the action for the rescission of the deed of donation has
prescribed.
RULING:
An accion pauliana accrues only when the creditor discovers that he has no other
legal remedy for the satisfaction of his claim against the debtor other than an accion
pauliana. The accion pauliana is an action of a last resort. For as long as the creditor
still has a remedy at law for the enforcement of his claim against the debtor, the creditor
will not have any cause of action against the creditor for rescission of the contracts
entered into by and between the debtor and another person or persons. Indeed, an
accion pauliana presupposes a judgment and the issuance by the trial court of a writ of
execution for the satisfaction of the judgment and the failure of the Sheriff to enforce
and satisfy the judgment of the court. It presupposes that the creditor has exhausted
the property of the debtor. The date of the decision of the trial court against the debtor
is immaterial. What is important is that the credit of the plaintiff antedates that of the
fraudulent alienation by the debtor of his property. After all, the decision of the trial
court against the debtor will retroact to the time when the debtor became indebted to
the creditor.
Although Article 1389 of the Civil Code provides that The action to claim
rescission must be commenced within four (4) years is silent as to where the
prescriptive period would commence, the general rule is such shall be reckoned from the
moment the cause of action accrues; i.e., the legal possibility of bringing the action.
Since accion pauliana is an action of last resort after all other legal remedies have been
exhausted and have been proven futile, in the case at bar, it was only in February 25,
1997, barely a month from discovering that petitioner Khe Hong Cheng had no other
property to satisfy the judgment award against him that the action for rescission
accrued. So the contention of Khe Hong Cheng that the action accrued from the time of
the constructive notice; i.e., December 27, 1989, the date that the deed of donation was
registered, is untenable.
EFFECTS OF ANNULMENT OF VOIDABLE CONTRACTS
1.
2.
3.
4.
5.
6.
Fortunato and petitioner denied the material allegations of 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 forged. By way of
counterclaim, the defendants below maintained having entered into a contract of lease
with respondent involving Fortunatos portion of Lot No. 2319.
In their reply, the private respondent and her husband alleged that they had
purchased from Fortunatos co-owners, as evidenced by various written instruments,
their respective portions of Lot No. 2319. By virtue of these sales, they insisted that
Fortunato was no longer a co-owner of Lot No. 2319 thus, his right of 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 of an adverse claim on the certificate of title of 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 of said piece of land. Significantly, private
respondent alleged that Fortunato was present when the survey was conducted.
After due trial, the court a quo rendered a decision dismissing both the complaint
and the counterclaim. The Court of Appeals, reversed and set aside the trial courts
dismissal of the private respondents complaint but upheld the portion of the court a
quos decision ordering the dismissal of petitioner and her childrens counterclaim. It
upheld private respondents position that Exhibit G which is the receipt of partial
payment had all the earmarks of a valid contract of sale.
ISSUE:
Whether the receipt signed by Fortunato proves the existence of a contract of
sale between him and private respondent.
RULING:
No, the Court ruled that the records of this case betray the stance of private
respondent that Fortunato Ape entered into such an agreement with her.
A contract of sale is a consensual contract, thus, it is perfected by mere consent
of the parties. Upon its perfection, the parties may reciprocally demand performance,
that is, the vendee may compel the transfer of the ownership and to deliver the object of
the sale while the vendor may demand the vendee to pay the thing sold. For there to be
a perfected contract of sale, however, the following elements must be present: consent,
object, and price in money or its equivalent.
To be valid, consent: (a) should be intelligent; (b) should be free and (c) should be
spontaneous. Intelligence in consent is vitiated by error; freedom by violence,
intimidation or undue influence; spontaneity by fraud.
In this jurisdiction, the general rule is that he who alleges fraud or mistake in a
transaction must substantiate his allegation as the presumption is that a person takes
ordinary care for his concerns and that private dealings have been entered into fairly and
regularly. The exception to this rule is provided for under Article 1332 of the Civil Code
which provides that when one of the parties is unable to read, or if the contract is in a
language not understood by him, and mistake or fraud is alleged, the person enforcing
the contract must show that the terms thereof have been fully explained to the former.
In this case, as private respondent is the one seeking to enforce the claimed
contract of sale, she bears the burden of proving that the terms of the agreement were
fully explained to Fortunato Ape who was an illiterate. This she failed to do. While she
claimed in her testimony that the contents of the receipt were made clear to Fortunato,
such allegation was debunked by Andres Flores himself when the latter took the witness
stand.
Flores testified that, while he was very much aware of Fortunatos inability to read
and write in the English language, he did not bother to fully explain to the latter the
substance of the receipt (Exhibit G). He even dismissed the idea of asking somebody
else to assist Fortunato considering that a measly sum of thirty pesos was involved.
Evidently, it did not occur to Flores that the document he himself prepared pertains to
the transfer altogether of Fortunatos property to his mother-in-law. It is precisely in
situations such as this when the wisdom of Article 1332 of 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 of sale between Fortunato and private respondent on the ground of vitiated
consent.
FACTS:
Respondent Mapalad was the registered owner of four (4) parcels of land located
along Roxas Boulevard, Baclaran, Paraaque
The PCGG issued writs of sequestration for Mapalad and all its properties.
Josef, Vice president/treasurer and General Manager of Mapalad discovered that the 4
TCTs were missing, however the four missing tcts turned out to be in possession of
Nordelak Development Corporation. Nordelak came into possession of the 4 TCTs by
deed of sale purportedly executed by Miguel Magsaysay in his capacity as President and
Board Chairman of Mapalad.
Mapalad filed an action for annulment of deed of sale and reconveyance of title with
damages against Nordelak.
RTC ruled in favour of Nordelak. The Ca reversed the decision of RTC.
ISSUE:
Whether or not there was a valid sale between Mapalad and Nordelak.
RULING:
In the present case, consent was purportedly given by Miguel Magsaysay, the person
who signed for and in behalf of Mapalad in the deed of absolute sale dated November 2,
1989. However, as he categorically stated on the witness stand during trial, he was no
longer connected with Mapalad on the said date because he already divested all his
interests in said corporation as early as 1982. Even assuming, for the sake of argument,
that the signatures purporting to be his were genuine, it would still be voidable for lack of
authority resulting in his incapacity to give consent for and in behalf of the corporation.
Lack of consideration makes a contract of sale fictitious. A fictitious sale is void ab initio.
The alleged deed of absolute sale dated November 2, 1989 notwithstanding, the contract
of sale between Mapalad and Nordelak is not only voidable on account of lack of valid
consent on the part of the purported seller, but also void ab initio for being fictitious on
account of lack of consideration.
WHEREFORE, the petition is hereby DENIED and the appealed Court of Appeals decision
AFFIRMED in toto.
OESMER, Petitioners,
vs PARAISO DEVELOPMENT CORPORATION, Respondent.
G.R. No. 157493
February 5, 2007
FACTS:
Petitioner Ernesto to meet with a certain Sotero Lee, President of respondent Paraiso
Development Corporation, at Otani Hotel in Manila. The said meeting was for the
purpose of brokering the sale of petitioners properties to respondent corporation.
A Contract to Sell was drafted. A check in the amount of P100,000.00, payable to
Ernesto, was given as option money. Sometime thereafter, Rizalino, Leonora, Bibiano, Jr.,
and Librado also signed the said Contract to Sell. However, two of the brothers, Adolfo
and Jesus, did not sign the document. However petitioners informed respondent
corporation about their intention to rescind the Contract to Sell and to return the amount
of Php 100,000.00. respondent did not respond to the aforesaid letter. Petitioners,
therefore, filed a complaint for Declaration of Nullity or for Annulment of Option
Agreement or Contract to Sell with damages.
The RTC rendered its decision in favor to respondent. CA affirmed the decision of RTC
with modification.
ISSUE:
Whether ot not Contract to Sell is void considering that on of the heirs did not
sign it as to indicate its consent to be bound by its terms.
RUKING:
It is well-settled that contracts are perfected by mere consent, upon the acceptance by
the offeree of the offer made by the offeror. From that moment, the parties are bound not
only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage
and law. To produce a contract, the acceptance must not qualify the terms of the offer.
However, the acceptance may be express or implied. For a contract to arise, the
acceptance must be made known to the offeror. Accordingly, the acceptance can be
withdrawn or revoked before it is made known to the offeror.13
In the case at bar, the Contract to Sell was perfected when the petitioners consented to
the sale to the respondent of their shares in the subject parcels of land by affixing their
signatures on the said contract. Such signatures show their acceptance of what has been
stipulated in the Contract to Sell and such acceptance was made known to respondent
corporation when the duplicate copy of the Contract to Sell was returned to the latter
bearing petitioners signatures.
EFFECTS OF ANNULMENT OF VOIDABLE CONTRACTS
Article 1318 of the Civil Code states that no contract exists unless there is a
concurrence of consent of the parties, object certain as subject matter, and cause of the
obligation established. Article 1327 provides that insane or demented persons cannot
give consent to a contract. But, if an insane or demented person does enter into a
contract, the legal effect is that the contract is voidable or annullable as specifically
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 formers capacity to consent was vitiated by
senile dementia. Hence, 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 filed in court seasonably.
An annullable contract may be rendered perfectly valid by ratification, which can
be express or implied. Implied ratification may take the form of accepting and retaining
the benefits of a contract. This is what happened in this case. As found by the trial court
and the Court of Appeals, upon learning of the sale, respondent negotiated for the
increase of the purchase price while receiving the installment payments. It was only
when respondent failed to convince petitioner to increase the price that the former
instituted the complaint for reconveyance of 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 offer to do so. This bolsters the view
that indeed there was ratification.
One cannot negotiate for an increase in the price in one breath and in the same
breath contend that the contract of sale is void.
WHEREFORE, the instant petition is GRANTED. The two contracts of sale covering
lots under TD No. 01-00495 and No. 01-00497 are hereby declared VALID.
Because of no payment had been made, Abrille sued them on March 1949. In
their answer, defendants claimed to have received P40, 000 only instead of P70, 000 as
plaintiff asserted. Also they raised the defense of minority because at the time they
signed the promissory notes, Rodolfo and Guillermo were only 16 and 18 yrs. of age. The
lower court rendered judgment whereby the defendants were required solidarily to pay
Abrille the sum of P10, 000 plus 2% interest from October 30, 1944, which was affirmed
by the CA.
ISSUE:
Whether or not petitioners are excused from complying with their monetary
obligation on account of minority of the two consigners.
RULING:
NO. Petitioners are not absolved from monetary responsibility. In accordance
with the provisions of the Civil Code, even if the contract is unenforceable because of
non-age, they shall make restitution to the extent that they may have profited by the
money they received. There is testimony that the funds delivered to them by Abrille
were used for their support during the Japanese occupation. Such being the case, it is
but fair to hold that they had profited to the extent of the value of 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 of current Philippine
money.
The Court of Appeals ruled that petitioners action had prescribed. A suit to annul
a voidable contract may be filed within four (4) years from the time the defect ceases.
The CA also ruled that Article 1155 of the Civil Code, according to which a written
extrajudicial demand by the creditors would interrupt prescription, referred only to a
creditor-debtor relationship, which is not the case here.
ISSUE:
Whether or not the action for the annulment of the Contract of Sale has
prescribed.
RULING:
CA correctly set aside the Order of the trial court.
The records in this case indubitably show the lapse of the prescriptive period,
thus warranting the immediate dismissal of the Complaint.
The suit before the trial court was an action for the annulment on the Contract of
Sale on the alleged ground of vitiation of consent by intimidation. The reconveyance of
the three parcels of land, which the petitioner half-heatedly espouses as the real nature
of the action, can prosper only if and when the Contract of Sale covering the subject lots
is annulled. Thus, the reckoning period for prescription would be that pertaining to an
action for the annulment of contract; that is, four years from the time the defect in the
consent ceases.
There is as yet no obligation in existence. Respondent has no obligation to
reconvey the subject lots because of the existing Contract of Sale. Although allegedly
voidable, it is binding unless annulled by a proper action in court. Not binding a
determinate conduct that can be extra judicially demanded, it cannot be considered as
an obligation either. Since Article 1390 of the Civil Code states that voidable contracts
are binding, unless they are annulled by a proper action in court, it is clear that the
defendant were not obligated to accede to any extra judicial demand to annul the
Contract of Sale.
EFFECTS OF ANNULMENT OF VOIDABLE CONTRACTS
KATIPUNAN VS. KATIPUNAN
375 SCRA 199
FACTS:
Respondent is the owner of a lot and a five-door apartment constructed thereon
occupied by lessees. On December 29, 1985, respondent, assisted by his brother,
petitioner, entered into a Deed of Absolute Sale with their other brothers (co-petitioners,
represented by their father, Atty. Balguma involving the subject property for P187, 000.
00. Consequently, respondents title to the property was cancelled and in lieu thereof, a
new TCT was issued in favor of petitioners.
Thereafter, respondent filed with the RTC a complaint for annulment of the above
Deed of Absolute Sale on the ground that petitioners, with evident bad faith, conspired
with one another in taking advantage of his ignorance, he being only a third grader and
through insidious words and machinations, they made him sign a document purportedly
a contract of employment, which turned out to be a Deed of Absolute Sale.
The lower court dismissed the complaint holding that respondent failed to prove
his causes of action since he admitted that: 1.) He obtained loans from the Balgumas; 2.)
He signed the Deed of Absolute Sale; and 3.) He acknowledged selling the property and
that he stopped collecting the rentals.
The said decision was however reversed by the Court of Appeals.
effect of annulment is to restore the parties to the status quo ante in so far as legally and
equitably possible. As an exception, however, to the principle of mutual restitution,
Article 1399 provides that when the defect of the contract consists in the incapacity of
one of the parties, the incapacitated person is not obliged to make restitution, except
when he has been benefited by the things or price received by him. Since the Deed of
Absolute Sale between Respondent and the Balguma brothers is voidable, and hereby
annulled, then the restitution of the property and its fruits to respondent is just and
proper.
Therefore, the petitioners are hereby ordered to turn over to respondent Braulio
Katipunan, Jr. the rentals they received for the five-door apartment corresponding to the
period from January, 1986 up to the time the property shall have been returned to him,
with interest at the legal rate.
ISSUE:
Whether or not the subject contract is void ab initio or voidable on the ground
that one of the parties is incapable of giving consent or where consent is vitiated by
mistake, fraud, or intimidation.
RULING:
A contract of sale is born from the moment there is meeting of minds upon the
thing which is the object of the contract and upon the price. This meeting of minds
speaks of the intent of the parties in entering into the contract respecting the subject
matter and the consideration thereof. Thus, the elements of a contract of sale are
consent, object, and price in money or its equivalent. Under Article 1330 of the Civil
Code, consent may be vitiated by any of the following: 1.) mistake, 2.) violence, 3.)
intimidation, 4.) undue influence, and 5.) fraud. The presence of any of these vices
renders the contract voidable.
A contract where one of the parties is incapable of giving consent or where the
consent is vitiated by mistake, fraud, or intimidation, is not void ab initio but only
voidable and is binding upon the parties unless annulled by proper court action. The
Absolute Deed of Sale on the ground of fraud. HLURB rendered decision in favor of
complainant which was upheld by the Court of Appeals, hence this petition.
ISSUE:
Whether or not there was fraud on the part of petitioner as to warrant the
rescission of the Conditional Sales Agreement and of the Absolute Deed of Sale.
RULING:
RUKING:
The legal guardian only has the plenary power of administration of the minors
property. It does not include the power to alienation which needs judicial authority. Thus
when Saturnina, as legal guardian of petitioner Rito, sold the latters pro indiviso share in
subject land, she did not have the legal authority to do so. The contarct of sale as to the
pro indiviso share of Petitioner Rito was unenforceable. However when he acknowledged
receipt of the proceeds of the sale on July24, 1986, petitioner Rito effectively ratified it.
This act of ratification rendered the sale valid and binding as to him.
NECESSITY OF WRITING
The Supreme Court found the petition without merit for it involved questions of
fact which is not reviewable unless it is within the ambit of exceptions.
Nonetheless, SC agrees with the Court of Appeals that respondent de Leon was
entitled to annul the sale. There was fraud in the sale of the subject house. It is not
safely habitable. It is built in a subdivision area where there is an existing 30-meter right
of way of the Manila Electric Company (Meralco) with high-tension wires over the
property, posing a danger to life and property. The construction of houses underneath
the high tension wires is prohibited as hazardous to life and property because the line
carries 115,000 volts of electricity, generates tremendous static electricity and produces
electric sparks whenever it rained.
FACTS:
Saturnina and her children Bonifacio, Albino, Francisco, Leonara, Alberto and
petitioner Rito inherited a parcel of land. They sold such property to Dr. Cayetano
Corrompido with a right to repurchase within 8 years.
Alberto secured a note from Dr. Corrompido in the amount of Php 300.00.
Alberto died leaving a wife and son, petitioner Nelson.
Within the 8-year redemption period, Bonifacio and Albino tendered their
payment to Dr. Corrompido. But Dr. Corrompido only released the document of sale with
pacto de retro after Saturnina paid the share of her deceased son, Alberto, plus the note.
Saturnina and her children executed an affidavit to the effect that petitioner
Nelson would only receive the amount of Php 176.34 from respondents-spouses when he
reaches the age if 21 considering that Saturnina paid Dr. Corrompido Php 966.66 for the
obligation of petitioner Nelsons late father Alberto.
ISSUE:
RUKING:
When in an oral contract which by its terms, is not to be performed within 1 year
from the execution thereof, one of the contracting parties has complied within the year
with the obligations imposed on him said contract, the other party cannot avoid the
fulfillment of what is incumbent on him under the same contract by invoking the statute
of frauds because the latter aims to prevent and not to protect fraud.
EXECUTORY VS. EXECUTED
FACTS:
Respondent Carmelito Villapaz
issued a Philippine Bank of Communications
(PBCom) crossed check in the amount of P250,000.00, payable to the order of petitioner
Tony Tan.
The Malita, Davao del Sur Police issued an invitation-request to petitioner Antonio
Tan inviting him to appear before the Deputy Chief of Police Office on June 27, 1994 at
9:00 oclock in the morning in connection with the request of [herein respondent]
Carmelito Villapaz, for conference of vital importance.
The invitation-request was received by petitioner Antonio Tan on June 22, 1994 but
on the advice of his lawyer, he did not show up at the Malita, Davao del Sur Police Office.
Respondent filed a Complaint for sum of money against petitioners-spouses, alleging
that, , his issuance of the February 6, 1992 PBCom crossed check which loan was to be
settled interest-free in six (6) months; on the maturity date of the loan or on August 6,
1992, petitioner Antonio Tan failed to settle the same, and despite repeated demands,
petitioners never did.
Petitioners alleged that they never received from respondent any demand for payment,
be it verbal or written, respecting the alleged loan; since the alleged loan was one with a
period payable in six months, it should have been expressly stipulated upon in writing
by the parties but it was not.
ISSUE:
Whether or not Honorable Court of Appeals erred in concluding that the
transaction in dispute was a contract of loan and not a mere matter of check
encashment as found by the trial court.
RUKING:
At all events, a check, the entries of which are no doubt in writing, could prove a
loan transaction.
That petitioner Antonio Tan had, on February 6, 1992, an outstanding balance of
more than P950,000.00 in his account at PBCom Monteverde branch where he was later
to deposit respondents check did not rule out petitioners securing a loan. It is pure
naivete to believe that if a businessman has such an outstanding balance in his bank
account, he would have no need to borrow a lesser amount.
In fine, as petitioners side of the case is incredible as it is inconsistent with the
principles by which men similarly situated are governed, whereas respondents claim
that the proceeds of the check, which were admittedly received by petitioners,
represented a loan extended to petitioner Antonio Tan is credible, the preponderance of
evidence inclines on respondent.
During the lifetime, Felipe, owned real property, a parcel of land situated at
Estancia, Kalibo, Capiz. Upong Felipes death, ownership of the land was passed on to his
children. Pedro, on of the children, got his share. The remaining undivided portion of the
land was held in trust by leon. His co-heirs made several seasonable and lawful demands
upon him to subdivide the partition the property, but no subdivision took place.
After the death of Leon, private respondents discovered that the shares of four of
the heirs of Felipe was purchased by Leon as evidenced by Deed of Sale.
ISSUE:
Whether or not the appellate court erred in declaring the Deed of Sale
unenforceable against the private respondent fro being unauthorized contract.
RUKING:
The court has ruled that the nullity of the unenforceable contract is of a
permanent nature and it will exist as long the unenforceable contract is not duly ratifired.
The mere lapse of time cannot igve efficacy to such a contract. The defect is such that it
cannot be cured except by the subsequent ratification of the unenforceable contract by
the person in whose name the contract was executed. In the instant case, there is no
showing of any express or implied ratification of the assailed Deed of Sale by the private
respondents Procerfina, Ramon,. Prosperidad, and Rosa. Thus, the said Deed of Sale
must remain unenforceable as to them.
REMEDIES
ROSENCOR DEVELOPMENT CORPORATION and RENE JOAQUIN, petitioners,
vs.PATERNO INQUING, IRENE GUILLERMO, FEDERICO BANTUGAN, FERNANDO
MAGBANUA and LIZZA TIANGCO, respondents.
G.R. No. 140479 March 8, 2000
FACTS:
Plaintiffs and plaintiffs-intervenors averred that they are the lessess since 1971 of a twostory residential apartment and owned by spouses Faustino and Cresencia Tiangco. The
lease was nocovered by any contract. The lesses were renting the premises then for Php
150.00 a month and were allegedly verbally granted by the lessors the pre-emptive right
to purchase the property if ever they decide to sell the same.
Upon the death of the spouses Tiangco, the management of the property was
adjudicated to their heirs who were represented by Eufrocina deLeon.
The lessees received a letter from de Leon advising them that the heirs of the late
spouses have already sold the property to Resencor.
The lessees filed an action f\before th RTC praying for the following: a) rescission of the
Deed of Absolute Sale between de Leon and Rocencor, b) the defendants Rosencor/Rene
Joaquin be ordered to reconvey the property to de Leon, c) de Leon be ordered to
reimburse the plaintiffs for the repair of the property or apply the said amount as part of
the purchase of the property.
The RTC dismissed the complaint while the Ca reversed the decision of the RTC.
ISSUE:
Whether or not a right of first refusal is indeed covered by the provisions of the
NCC on the Statute of Frauds.
RUKING:
A right of first refusal is not among those listed as unenforceable under the
statute of frauds. Furthermore, the application of Article 1403, par. 2(e) of the NCC,
presupposes the existence of a perfected, albeit unwritten, contract of sale. A right of
first refusal, such as the one involved in the instant case, is not by any means a
perfected contract of sale of real property. At best, it is a contractual grant, not of the
sale of the real property involed byt of the right of first refusal over the property sought
to be sold.
It is thus evident that the statute of frauds does not contemplate cases involving
a right of right of first refusal. As such, a right of first refusal need not be written to be
enforceable and may be proven by oral evidence.
REMEDIES
FACTS:
FACTS:
Petitioner Spouses Firme are the registered owner of a parcel of land located on
Dahlia Avenue, Fairview Park, Quezon City.
Bukal Enterprises filed a complaint for specific performance and damges with the
trial court, aleeging 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 of sale and to delover the title of the property to Bukal Enterpises upon payment of
the agreed purchase price.
The RTC rendered its decision against Bukal. The CA reversed and set aside the
decision of the RTC.
ISSUE:
Petitioners are the heirs of Maralino Doronio, while respondents are the heirs of
Fortunato Doronio.
The property in dispute is one of a private deed of donation propter nuptias who
was executed by Spouses Simeon Doronio and Cornelia Gante in facor of Maralino
Doronio and his wife Veronica Pico.
The heirs of Fortuanto Doronio contended that only the half of the property was
actually incorporated in the deed of donation because it stated that Fortunato is the
owner of the adjacent property. Eager to obtain the entire property, the heirs of
Marcelino filed a petition For the Registration of a Private Deed of Donation. The RTC
granted the petition.
The heirs of Fortunato files a pleading in the form of petition. In the petition, they
prayed that an order be issued declaring null and void the registration of the private
deed of donation.
The RTC ruled in favor of the heirs of Marcelino. The CA reversed the decision of
RTC>
ISSUE:
RUKING:
RUKING:
The CA held that partial performance of the contract of sale takes the oral
contract out of the scope of Statute of Frauds. This conclusion arose from the appellate
courts erronoues finding that there was a perfected contract of sale. The recors shoe
that there was no perfected contract of sale. There is therefore no basis for the
application of the Stature of Frauds. The application of the Statute of Frauds presupposes
the existence of a perfected contract.
VOID/ INEXISTENT CONTRACTS:
DECLARATION OF NULLITY
1.
2.
3.
4.
5.
6.
7.
8.
WHO
MAY
BRING
ACTION
FOR
Article 633 of the OCC provides that figts of real property , in order to be valid,
must appear in a public document. It is settled that a donation of real estate propter
nuptias is void unless made by public instrument.
In the instant case, the donation propter nuptias did not become valid. Neither did
it create any right because it was not made in a public instrument. Hence, it conveyed no
title to the land in question to petitioners predecessors.
FACTS:
Alfred Frenzel and Ederlina Catito had an amorous relationship which started in
Kings Cross, a night spot in Sydney.
During their relationship Alfred bought properties in the Philippines in the name of
Ederlina. Their relationship started to deteriorate when the husband of Ederlina
threatened Ederlina that he would file a bigamy case against her for having an illicit
affair with Alfred, who was also married.
Alfred filed a complaint against Ederlina for specific performance, declaration of
real and personal properties, sum of money and damages.
ISSUE:
Whether or not acquisition of a parcel of land is valid.
RUKING:
The sales of three parcels of land in favor of the petitioner who is a foreigner is illegal per
se. The transactions are void ab initio because they were entered into in violation of the
Constitution. Thus, to allow the petitioner to recover the properties or the money used in
the purchase of the parcels of land would be subversive of public policy.
An action for recovery of what has been paid without just cause has been designated as
an accion in rem verso. This provision does not apply if, as in this case, the action is
proscribed by the Constitution or by the application of the pari delicto doctrine. 68 It may
be unfair and unjust to bar the petitioner from filing an accion in rem verso over the
subject properties, or from recovering the money he paid for the said properties, but, as
Lord Mansfield stated in the early case of Holman vs. Johnson:69 "The objection that a
contract is immoral or illegal as between the plaintiff and the defendant, sounds at all
times very ill in the mouth of the defendant. It is not for his sake, however, that the
objection is ever allowed; but it is founded in general principles of policy, which the
defendant has the advantage of, contrary to the real justice, as between him and the
plaintiff."
The spouses Aurelio and Esperanza Balite were the owners of a parcel of land,
located at Poblacion Barangay Molave, Catarman, Northern Samar, with an area of
17,551 square meters. When Aurelio died intestate in 1985, his wife, Esperanza Balite,
and their children, petitioner Antonio Balite, Flor Balite-Zamar, Visitacion BaliteDifuntorum, Pedro Balite, Pablo Balite, Gaspar Balite, Cristeta Balite and Aurelio Balite,
Jr., inherited the subject property and became co-owners thereof, with Esperanza
inheriting an undivided share of 9,751 square meters.
In the meantime, Esperanza became ill and was in dire need of money for her
hospital expenses. She, through her daughter, Cristeta, offered to sell to Rodrigo Lim,
her undivided share for the price of P1,000,000.00. Esperanza and Rodrigo agreed that,
under the Deed of Absolute Sale, to be executed by Esperanza over the property, it will
be made to appear that the purchase price of the property would be P150,000.00,
although the actual price agreed upon by them for the property was P1,000,000.00.
Gaspar, Visitacion, Flor, Pedro and Aurelio, Jr. learned of the sale, and on August
21, 1996, they wrote a letter to the Register of Deeds [RD] of Northern Samar, saying
that they were not informed of the sale of a portion of the said property by their mother
nor did they give their consent thereto, and requested the RD to hold the approval of any
application for the registration of title of ownership in the name of the buyer of said lot
which has not yet been partitioned judicially or extrajudicially, until the issue of the
legality/validity of the above sale has been cleared.
On October 23, 1996, Esperanza signed a letter addressed to Rodrigo informing
the latter that her children did not agree to the sale of the property to him and that she
was withdrawing all her commitments until the validity of the sale is finally resolved. On
October 31, 1996, Esperanza died intestate and was survived by her children.
On June 27, 1997, petitioners filed a complaint against Rodrigo with the Regional
Trial Court of Northern Samar for Annulment of Sale, Quieting of Title, Injunction and
Damages.
The trial court dismissed the Complaint. The Court of Appeals held that the sale
was valid and binding insofar as Ezperanza Balites undivided share of the property was
concerned.
Hence, this Petition.
ISSUE:
Whether or not the heirs of Esperanza has the right to question the said contract.
RULING:
The Supreme Court held that the petitioners cannot be permitted to unmake the
Contract voluntarily entered into by their predecessor, even if the stated consideration
included therein was for an unlawful purpose. The binding force of a contract must be
recognized as far as it is legally possible to do so.
Article 1345 of the Civil Code provides that the simulation of 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 from each other what
they may have given under the contract. On the other hand, if the parties state a false
cause in the contract to conceal their real agreement, such a contract is relatively
simulated. Here, the parties real agreement binds them.
In the present case, the parties intended to be bound by the Contract, even if it
did not reflect the actual purchase price of the property. That the parties intended the
agreement to produce legal effect is revealed by the letter of Esperanza Balite to
respondent dated October 23, 1996 and petitioners admission that there was a partial
payment of P320,000 made on the basis of the Deed of Absolute Sale. There was an
intention to transfer the ownership of over 10,000 square meters of the property. The
Deed of Absolute Sale was merely relatively simulated, it remains valid and enforceable
between the parties and their successors in interest since all the essential requisites
prescribed by law for the validity and perfection of contracts are present.
VOID/ INEXISTENT CONTRACTS: WHO MAY BRING ACTION FOR DECLARATION OF
NULLITY
ALEJANDRIA PINEDA and SPOUSES ADEODATO DUQUE, JR., and EVANGELINE
MARY JANE DUQUE, petitioners,
VS. COURT OF APPEALS and SPOUSES NELSON BAEZ and
MERCEDES BAEZ, respondents
2002 Feb 6
FACTS:
ISSUE:
Whether petitioners validly acquired the subject property.
RULING:
No. The Court denies the petition. It appears that the Baez spouses were the
original owners of the parcel of 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. However, the exchange did
not materialize. Petitioner Pinedas "sale" of the property to petitioners Duque was not
authorized by the real owners of the land, respondent Baez. The Civil Code provides
that in a sale of a parcel of land or any interest therein made through an agent, a special
power of attorney is essential. This authority must be in writing; otherwise the sale shall
be void. In his testimony, petitioner Adeodato Duque confirmed that at the time he
"purchased" respondents property from Pineda, the latter had no Special Power of
Authority to sell the property.
A special power of attorney is necessary to enter into any contract by which the
ownership of an immovable is transmitted or acquired for a valuable consideration.
Without an authority in writing, petitioner Pineda could not validly sell the subject
property to petitioners Duque. Hence, any "sale" in favor of petitioners Duque is void.
Further, Article 1318 of the Civil Code lists the requisites of a valid and perfected
contract, namely: (1) consent of the contracting parties; (2) object certain which the
subject matter of the contract; (3) cause of the obligation which is established. Pineda
was not authorized to enter into a contract to sell the property. As the consent of the
real owner of the property was not obtained, no contract was perfected. Consequently,
petitioner Duque failed to validly acquire the subject property.
VOID/ INEXISTENT CONTRACTS: WHO MAY BRING ACTION FOR DECLARATION OF
NULLITY
LA BUGAL-BLAAN TRIBAL ASSOCIATION, INC. et al VS. RAMOS
G.R. No. 127882
December 1, 2004
445 SCRA 1
FACTS:
Petitioners challenged constitutionality of Republic Act No. 7942 (The Philippine
Mining Act of 1995) and its Implementing Rules and Regulations and the Financial and
Technical Assistance Agreement dated March 30, 1995, executed by the government
with Western Mining Corporation (Philippines), Inc. On January 27, 2004, the Supreme
Court en banc promulgated its decision declaring the unconstitutionality of certain
provisions of RA 7942 as well as of the entire FTAA executed between the government
and WMCP, mainly on the finding that FTAAs are service contracts prohibited by the 1987
Constitution. Subsequently, respondents filed separate Motions for Reconsideration.
Among the assailed provisions of the Mining Law were Section 80 and the colatilla
in Section 84, as well as Section 112. The petitioners alleged that these sections limit the
States share in a mineral production-sharing agreement to just the excise tax on the
mineral product and the WMCP FTAA contains a provision which grants the contractor
unbridled and automatic authority to convert the FTAA into MPSA (mineral productionsharing agreements. However, the Court ruled that these were not argued upon by the
parties in their respective pleadings. Also, the Court stated that these particular
provisions do not come within issues that were defined and delineated by during the Oral
Argument, particularly the third issue, which pertained exclusively to FTAAs.
Later, WMCP submitted its Reply Memorandum, while the OSG, in compliance to
the order of the Supreme Court, filed a Compliance submitting copies of more FTAAs
entered into by the government.
ISSUE:
Whether or not petitioners have a right to assail the statutory provisions (Sections
80, 84 and 112) for its unconstitutionality.
RULING:
The Supreme Court held that it cannot rule on mere surmises and hypothetical
assumptions, without firm factual anchor, in relation to the assailed provisions. Stated
in Article 1421, The defense of illegality of contracts is not available to third persons
whose interests are not directly affected. The Court thus held that due process requires
hearing the parties who have a real legal interests in the MPSAs (i.e. the parties who
executed them) before the MPSAs can be reviewed, or worse, struck down by the Court.
On September 9, 1999, the COMELEC issued invitations to pre-qualify and bid for
the supply and installations of information technology equipment and ancillary services
for its VRIS Project. Private respondent Photokina Marketing Corporation (PHOTOKINA)
pre-qualified and was allowed to participate as one of the bidders, and eventually won. A
contract was perfected between the parties, but COMELEC failed to comply with the
contract due to insufficiency of funds. Respondent filed a suit against petitioner, of which
respondent judge granted the writ of prohibitory injunction to private respondent. Upon
motion for reconsideration of both parties, respondent judge granted the writ of
mandatory injunction of respondent and denying the Omnibus Motion of petitioner.
Hence, the instant petition for certiorari filed by the Office of the Solicitor General (OSG)
in behalf of then COMELEC. PHOTOKINA filed a Comment with Motion to Dismiss, the
present petition, on two procedural grounds. First, the petition violates the doctrine of
hierarchy of courts. And second, the OSG has no authority and/or standing to file the
petition considering that the petitioners have not been authorized by the COMELEC en
banc to take such action. Without the concurrence of at least a majority of the members
of the COMELEC, neither petitioners nor the OSG could file the petition in behalf of the
COMELEC.
ISSUE:
Whether or not the Office of the Solicitor-General has no authority and/or standing
to file the petition considering that the petitioners have not been authorized by the
COMELEC en banc to take such action.
RULING:
The OSG is an independent office. Its hands are not shackled to the cause of its
client agency. In the discharge of its task, the primordial concern of the OSG is to see to
it that the best interest of the government is upheld. This is regardless of the fact that
what it perceived as the "best interest of the government" runs counter to its client
agencys position. Endowed with a broad perspective that spans the legal interest of
virtually the entire government officialdom, the OSG may transcend the parochial
concerns of a particular client agency and instead, promote and protect the public
wealth. The Supreme Courts ruling in Orbos vs. Civil Service Commission, is relevant,
thus:
"x x x It is incumbent upon him (Solicitor General) to present to the court what he
considers would legally uphold the best interest of the government although it may run
counter to a clients position. x x x."
In the present case, it appears that after the Solicitor General studied the issues
he found merit in the cause of the petitioner based on the applicable law and
jurisprudence. Thus, it is his duty to represent the petitioner as he did by filing this
petition. He cannot be disqualified from appearing for the petitioner even if in so doing
his representation runs against the interests of the CSC.
This is not the first time that the Office of the Solicitor General has taken a
position adverse to his clients like the CSC, the National Labor Relations Commission,
among others, and even the People of the Philippines. x x x"
Hence, while petitioners stand is contrary to that of the majority of the
Commissioners, still, the OSG may represent the COMELEC as long as in its assessment,
such would be for the best interest of the government. For, indeed, in the final analysis,
the client of the OSG is not the agency but no less than the Republic of the Philippines in
whom the plenum of sovereignty resides.
Moreover, it must be emphasized that petitioners are also public officials entitled
to be represented by the OSG. Under Executive Order No. 292 and Presidential Decree
No. 478, the OSG is the lawyer of the government, its agencies and instrumentalities,
and its officials or agents. Surely, this mandate includes the three petitioners who have
been impleaded as public respondents in Special Civil Action No. Q-01-45405.
Anent the alleged breach of the doctrine of hierarchy of courts, suffice it to say
that it is not an iron-clad dictum. On several instances where this Court was confronted
with cases of national interest and of serious implications, it never hesitated to set aside
the rule and proceed with the judicial determination of the case. The case at bar is of
similar import. It is in the interest of the State that questions relating to government
contracts be settled without delay. This is more so when the contract, as in this case,
involves the disbursement of public funds and the modernization of our countrys
election process, a project that has long been overdue.
VOID/ INEXISTENT CONTRACTS: WHO MAY BRING ACTION FOR DECLARATION OF
NULLITY
MANSUETO CUATON, petitioner,
VS. REBECCA SALUD and
COURT OF APPEALS (Special Fourteenth Division), respondents
G.R. No. 158382
January 27, 2004
FACTS:
On January 5, 1993, respondent Rebecca Salud, joined by her husband Rolando
Salud, instituted a suit for foreclosure of 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 favor of Rebecca Salud without
expressly stating that he was merely acting as a representative of 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 of P1,000,000 plus a
total P610,000.00 representing interests of 10% and 8% per month for the period
February 1992 to August 1992.
Both parties filed their respective notices of appeal.
The Court of Appeals affirmed the judgment of the trial court. Petitioner filed a
motion for partial reconsideration of the trial courts decision with respect to the award of
interest in the amount of P610,000.00, arguing that the same was iniquitous and
exorbitant. This was denied by the Court of Appeals.
ISSUE:
Whether or not the excessive interest rates cannot be considered as an issue
presented for the first time on appeal.
RULING:
The contention regarding the excessive interest rates cannot be considered as an
issue presented for the first time on appeal. The records show that petitioner raised the
validity of the 10% monthly interest in his answer filed with the trial court. To deprive
him of his right to assail the imposition of excessive interests would be to sacrifice justice
to technicality. Furthermore, an appellate court is clothed with ample authority to review
rulings even if they are not assigned as errors. This is especially so if the court finds that
their consideration is necessary in arriving at a just decision of the case before it. The
Court has consistently held that an unassigned error closely related to an error properly
assigned, or upon which a determination of the question raised by the error properly
assigned is dependent, will be considered by the appellate court notwithstanding the
failure to assign it as an error. Since respondents pointed out the matter of interest in
their Appellants Brief before the Court of Appeals, the fairness of the imposition thereof
was opened to further evaluation. The Court therefore is empowered to review the
same.
Petition granted. Decision modified. The interest rates of 10% and 8% per month
imposed by the trial court is reduced to 12% per annum, computed from the date of the
execution of the loan on October 31, 1991 until finality of this decision. After the
judgment becomes final and executory until the obligation is satisfied, the amount due
shall further earn interest at 12% per year.
of 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
modifications from the original contract. A series of 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 referred to as the PIATCO
Contracts).On September 17, 2002, various petitions were filed before this Court to
annul the 1997 Concession Agreement, the ARCA and the Supplements and to
prohibit the public respondents DOTC and MIAA from implementing them.
In a decision dated May 5, 2003, this Court granted the said petitions and
declared the 1997 Concession Agreement, the ARCA and the Supplements null and
void.Respondent PIATCO, respondent-Congressmen and respondents-intervenors now
seek the reversal of the May 5, 2003 decision and pray that the petitions be dismissed.
In the alternative, PIATCO prays that the Court should not strike down the entire 1997
Concession Agreement, the ARCA and its supplements in light of their separability
clause.
Respondent-Congressmen and NMTAI also pray that in the alternative, the cases
at bar should be referred to arbitration pursuant to the provisions of the ARCA. PIATCOEmployees pray that the petitions be dismissed and remanded to the trial courts for trial
on the merits or in the alternative that the 1997 Concession Agreement, the ARCA and
the Supplements be declared valid and binding.
ISSUE:
Whether or not that petitioners lack legal personality to file the cases at bar as
they are not real parties in interest who are bound principally or subsidiarily to the
PIATCO Contracts.
RULING:
The determination of whether a person may institute an action or become a party
to a suit brings to fore the concepts of real party in interest, capacity to sue and standing
to sue. To the legally discerning, these three concepts are different although commonly
directed towards ensuring that only certain parties can maintain an action. As defined in
the Rules of Court, a real party in interest is the party who stands to be benefited or
injured by the judgment in the suit or the party entitled to the avails of the suit.Capacity
to sue deals with a situation where a person who may have a cause of action is
disqualified from bringing a suit under applicable law or is incompetent to bring a suit or
is under some legal disability that would prevent him from maintaining an action unless
represented by a guardian ad litem.
Legal standing is relevant in the realm of public law. In certain instances, courts
have allowed private parties to institute actions challenging the validity of governmental
action for violation of private rights or constitutional principles. In these cases, courts
apply the doctrine of legal standing by determining whether the party has a direct and
personal interest in the controversy and whether such party has sustained or is in
imminent danger of sustaining an injury as a result of the act complained of, a standard
which is distinct from the concept of real party in interest. Measured by this yardstick,
the application of the doctrine on legal standing necessarily involves a preliminary
consideration of the merits of the case and is not purely a procedural issue.
Considering the nature of the controversy and the issues raised in the cases at
bar, this Court affirms its ruling that the petitioners have the requisite legal standing.
The petitioners in G.R. Nos. 155001 and 155661 are employees of service providers
operating at the existing international airports and employees of MIAA while petitionersintervenors are service providers with existing contracts with MIAA and they will all
sustain direct injury upon the implementation of the PIATCO Contracts. The 1997
Concession Agreement and the ARCA both provide that upon the commencement of
operations at the NAIA IPT III, NAIA Passenger Terminals I and II will cease to be used as
international passenger terminals. Further, the ARCA provides:
(d)
For the purpose of an orderly transition, MIAA shall not renew
any expired concession agreement relative to any service or operation currently
being undertaken at the Ninoy Aquino International Airport Passenger Terminal I,
or extend any concession agreement which may expire subsequent hereto,
except to the extent that the continuation of the existing services and
operations shall lapse on or before the In-Service Date.
Beyond iota of doubt, the implementation of the PIATCO Contracts, which the
petitioners and petitioners-intervenors denounce as unconstitutional and illegal, would
deprive them of their sources of livelihood.
Under settled jurisprudence, one's employment, profession, trade, or calling is a
property right and is protected from wrongful interference. It is also self evident that the
petitioning service providers stand in imminent danger of losing legitimate business
investments in the event the PIATCO Contracts are upheld.
Over and above all these, constitutional and other legal issues with far-reaching
economic and social implications are embedded in the cases at bar, hence, this Court
liberally granted legal standing to the petitioning members of the House of
RepresentativesFirst, at stake is the build-operate-andtransfer contract of the countrys
premier international airport with a projected capacity of 10 million passengers a year.
Second, the huge amount of investment to complete the project is estimated to be
P13,000,000,000.00. Third, the primary issues posed in the cases at bar demand a
discussion and interpretation of the Constitution, the BOT Law and its implementing rules
which have not been passed upon by this Court in previous cases. They can chart the
future inflow of investment under the BOT Law.
The Court notes the bid of new parties to participate in the cases at bar as
respondents-intervenors, namely, (1) the PIATCO Employees and (2) NMTAI (collectively,
the New Respondents-Intervenors). After the Courts Decision, the New Respondents-
transcends the territorial jurisdiction of the Philippines, and the grant to SAGE of
authority to operate internet gambling contravenes the limitation in PAGCORs franchise,
under Section 14 of P.D. No. 1869. According to petitioner, internet gambling does not
fall under any of the categories of the authorized gambling activities enumerated under
Section 10 of P.D. No. 1869 which grants PAGCOR the right, privilege and authority to
operate and maintain gambling casinos, clubs, and other recreation or amusement
places, sports gaming pools, within the territorial jurisdiction of the Republic of the
Philippines.
Respondents argue that petitioner does not have the requisite personal and
substantial interest to impugn the validity of PAGCORs grant of authority to SAGE.
ISSUE:
Whether or not the petitioner has legal standing to file the instant petition as a
concerned citizen or as a member of the Philippine Senate.
RULING:
Objections to the legal standing of a member of the Senate or House of
Representative to maintain a suit and assail the constitutionality or validity of laws, acts,
decisions, rulings, or orders of various government agencies or instrumentalities are not
without precedent. Ordinarily, before a member of Congress may properly challenge the
validity of an official act of any department of the government there must be an
unmistakable showing that the challenged official act affects or impairs his rights and
prerogatives as legislator. However in a number of cases, the Court clarified that where
a case involves an issue of utmost importance, or one of overreaching significance to
society, the Court, in its discretion, can brush aside procedural technicalities and take
cognizance of the petition. Considering that the instant petition involves legal questions
that may have serious implications on public interests, petitioner has the requisite legal
standing to file this petition.
8.
1.
2.
3.
4.
5.
6.
7.
On January 28, 2003, the Commission issued an Invitation to Apply for Eligibility
and to Bid.
On February 17, 2003, the poll body released the Request for Proposal (RFP) to
procure the election automation machines. The Bids and Awards Committee (BAC) of
Comelec convened a pre-bid conference on February 18, 2003 and gave prospective
bidders until March 10, 2003 to submit their respective bids.
Among others, the RFP provided that bids from manufacturers, suppliers and/or
distributors forming themselves into a joint venture may be entertained, provided that
the Philippine ownership thereof shall be at least 60 percent. Joint venture is defined in
the RFP as a group of two or more manufacturers, suppliers and/or distributors that
intend to be jointly and severally responsible or liable for a particular contract. Basically,
the public bidding was to be conducted under a two-envelope/two stage system. The
bidders first envelope or the Eligibility Envelope should establish the bidders eligibility
to bid and its qualifications to perform the acts if accepted. On the other hand, the
second envelope would be the Bid Envelope itself.
Out of the 57 bidders, the BAC found MPC and the Total Information Management
Corporation (TIMC) eligible. For technical evaluation, they were referred to the BACs
Technical Working Group (TWG) and the Department of Science and Technology (DOST).
In its Report on the Evaluation of the Technical Proposals on Phase II, DOST said
that both MPC and TIMC had obtained a number of failed marks in the technical
evaluation. Notwithstanding these failures, Comelec en banc, on April 15, 2003,
promulgated Resolution No. 6074 awarding the project to MPC. The Commission
publicized this Resolution and the award of the project to MPC on May 16, 2003.
On May 29, 2003, five individuals and entities (including the herein Petitioners
Information Technology Foundation of the Philippines, represented by its president,
Alfredo M. Torres; and Ma. Corazon Akol) wrote a letter to Comelec Chairman Benjamin
Abalos Sr. They protested the award of 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 of which have been discussed at length in the Petition), they sought
a re-bidding. However, 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.
Hence, 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 of its administrative functions, it awarded to MPC the contract for
the second phase of the comprehensive Automated Election System.
RULING:
Yes. There is grave abuse of discretion (1) when an act is done contrary to the
Constitution, the law or jurisprudence; or (2) when it is executed whimsically,
capriciously or arbitrarily out of malice, ill will or personal bias. In the present case, the
Commission on Elections approved the assailed Resolution and awarded the subject
Contract not only in clear violation of law and jurisprudence, but also in reckless
disregard of its own bidding rules and procedure.
For the automation of the counting and canvassing of the ballots in the 2004
elections, Comelec awarded the Contract to Mega Pacific Consortium an entity that
had not participated in the bidding. Despite this grant, the poll body signed the actual
automation Contract with Mega Pacific eSolutions, Inc., a company that joined the
bidding but had not met the eligibility requirements.
Comelec awarded this billion-peso undertaking with inexplicable haste, without
adequately checking and observing mandatory financial, technical and legal
requirements. It also accepted the proferred computer hardware and software even if, at
the time of the award, they had undeniably failed to pass eight critical requirements
designed to safeguard the integrity of elections, especially the following three items: (a)
They failed to achieve the accuracy rating criteria of 99.9995 percent set-up by the
Comelec itself, (b) They were not able to detect previously downloaded results at various
canvassing or consolidation levels and to prevent these from being inputted again and
(c) They were unable to print the statutorily required audit trails of the count/canvass at
different levels without any loss of data
Because of the foregoing violations of law and the glaring grave abuse of
discretion committed by Comelec, the Court declared null and void the assailed
Resolution and the subject Contract. The illegal, imprudent and hasty actions of the
Commission have not only desecrated legal and jurisprudential norms, but have also cast
serious doubts upon the poll bodys ability and capacity to conduct automated elections.
Truly, the pith and soul of democracy -- credible, orderly, and peaceful elections -- has
been put in jeopardy by the illegal and gravely abusive acts of Comelec.
The letter-protest is sufficient compliance with the requirement to exhaust
administrative remedies particularly because it hews closely to the procedure outlined in
Section 55 of RA 9184. And even without that May 29, 2003 letter-protest, the Court still
holds that petitioners need not exhaust administrative remedies in the light of Paat v.
Court of Appeals. Paat enumerates the instances when the rule on exhaustion of
administrative remedies may be disregarded, as follows: (1) when there is a violation of
due process, (2) when the issue involved is purely a legal question, (3) when the
administrative action is patently illegal amounting to lack or excess of jurisdiction, (4)
when there is estoppel on the part of the administrative agency concerned, (5) when
there is irreparable injury, (6) when the respondent is a department secretary whose acts
as an alter ego of the President bears the implied and assumed approval of the latter, (7)
when to require exhaustion of administrative remedies would be unreasonable, (8) when
it would amount to a nullification of a claim, (9) when the subject matter is a private land
in land case proceedings, (10) when the rule does not provide a plain, speedy and
adequate remedy, and (11) when there are circumstances indicating the urgency of
judicial intervention.
The present controversy precisely falls within the exceptions listed as Nos. (7)
when to require exhaustion of administrative remedies would be unreasonable; (10)
when the rule does not provide a plain, speedy and adequate remedy, and (11) when
there are circumstances indicating the urgency of judicial intervention. As already
stated, Comelec itself made the exhaustion of administrative remedies legally impossible
or, at the very least, unreasonable.
Respondents counsel, on the other hand, admitted that his office received
petitioners letter dated August 5, 1994, but claimed that no check was appended
thereto. He averred that there was no valid tender of payment because no check was
tendered and the computation of the amount to be tendered was insufficient, because
petitioner verbally promised to pay 3% monthly interest and 25% attorneys fees as
penalty for default, in addition to the interest of 18% per annum on the P600,000.00
option/reservation fee.
On November 29, 1996, the trial court rendered a decision declaring the
consignation invalid for failure to prove that petitioner tendered payment to respondent
and that the latter refused to receive the same. Petitioner appealed the decision to the
Court of Appeals. Petitioners motion to withdraw the amount consigned was denied by
the Court of Appeals and the decision of the trial court was affirmed.
On a motion for reconsideration, the Court of Appeals declared the consignation
as valid in an Amended Decision dated January 16, 2003. It held that the validity of the
consignation had the effect of extinguishing petitioners obligation to return the
option/reservation fee to respondent. Hence, petitioner can no longer withdraw the
same.
Unfazed, petitioner filed the instant petition for review contending that he can
withdraw the amount deposited with the trial court as a matter of right because at the
time he moved for the withdrawal thereof, the Court of Appeals has yet to rule on the
consignations validity and the respondent had not yet accepted the same.
ISSUE:
Whether or not assigning the amount of P672, 900.00 to Atty. De Guzman is
prohibited.
RULING:
The amount consigned with the trial court can no longer be withdrawn by
petitioner because respondents prayer in his answer that the amount consigned be
awarded to him is equivalent to an acceptance of the consignation, which has the effect
of extinguishing petitioners obligation.
Moreover, petitioner failed to manifest his intention to comply with the
Agreement And Undertaking by delivering the necessary documents and the lot subject
of the sale to respondent in exchange for the amount deposited. Withdrawal of the
money consigned would enrich petitioner and unjustly prejudice respondent.
The withdrawal of the amount deposited in order to pay attorneys fees to
petitioners counsel, Atty. De Guzman, Jr., violates Article 1491 of the Civil Code which
forbids lawyers from acquiring by assignment, property and rights which are the object
of any litigation in which they may take part by virtue of their profession. Furthermore,
Rule 10 of the Canons of Professional Ethics provides that the lawyer should not
purchase any interest in the subject matter of the litigation which he is conducting. The
assailed transaction falls within the prohibition because the Deed assigning the amount
of P672,900.00 to Atty. De Guzman, Jr., as part of his attorneys fees was executed
during the pendency of this case with the Court of Appeals. In his 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 of
the prohibitory provisions. To grant the withdrawal would be to sanction a void contract.
WHEREFORE, in view of all the foregoing, the instant petition for review is
DENIED.
the desire to benefit the petitioner but also to secure her cohabiting with him. Petitioner
seeks to differentiate between the liberality of Lopez as cause and his desire as a motive.
However, motive may be regarded as cause when it predetermined the purpose of the
contract. The Court of Appeals rejected the claim of petitioner on the ground on the rule
on pari delicto embodied in Article 1912 of the Civil Code. However, this rule cannot be
applied in the case because it cannot be said that both parties had equal guilt where
petitioner was a mere minor when the donation was made and that it was not shown that
she was fully aware of the terms of the said donation.
PROHIBITED CONTRACTS: EFFECTS AND REMEDIES IN CASE ONE PARTY IS
INNOCENT / DISADVANTAGED
FACTS:
Justinia Santos was the owner of the property where a restaurant owned by Weng
Heng is located. Being 90 years of age, without any surviving relatives, delivered to
Weng being closed to her then, various sum of money for safekeeping. Subsequently,
she executed a contract of lease in favor of Weng for a period of 50 years. However, the
lessee was given the right to withdraw at any time from the agreement. Subsequently,
she again executed another contract giving Weng the option to buy the premises. The
option was conditioned on Wengs obtaining a Filipino citizenship, which however, Weng
failed to obtain. After which, Justinia again executed two other contracts, extending the
term of the lease to 99 years and another fixing the term of the option to 50 years.
However, a year later, she filed a complaint before the trial court alleging that the
various contracts were executed by her because of machination, and inducement
practiced by Weng, thereby she directed her executor to secure the annulment of the
contract.
FACTS:
Petitioner filed a complaint for the recovery of parcel of land against the widow
and heirs of Salvador Lopez. Petitioner averred that he is the owner of the
aforementioned parcel of land pursuant to a Deed of Donation executed in her favor by
the late owner, Salvador Lopez. The defense interposed that the donation was null and
void for having illicit cause or consideration which was the petitioners entering into a
marital relations with Salvador, a married man, and that the property had been
adjudicated to the appellees as heirs of Salvador Lopez by the Court of First Instance.
Meanwhile, the Court of Appeals found that the Deed of Donation was prepared
by a Justice of Peace and was ratified and signed when petitioner Liquez was still a
minor, 16 years of age. It was the ascertainment of the Court of Appeals that the
donated land belonged to the conjugal partnership of Salvador and his wife and that the
Deed of Donation was never recorded. Hence, the Court of Appeals held that the Deed of
Donation was inoperative and null and void because the donation was tainted with illegal
cause or consideration.
ISSUE:
Whether or not the Deed of Donation is void for having illicit cause or
consideration.
RULING:
NO. Under Article 1279 of the Civil Code of 1989, which was the governing law
during the execution of the Deed of Donation, the liberality of the donor is deemed cover
only in those contracts that are pure beneficence. In these contracts, the idea of self
interest is totally absent in the part of the transferee. Here, the facts as found
demonstrated that in making the donation, Salvador Lopez was not moved exclusively by
ISSUE:
Whether or not the various contracts were void.
RULING:
Article 1308 of the Civil Code creates no impediment to the insertion in a contract
of a resolutory condition permitting the cancellation of the contract by one of the parties.
Such a stipulation does not make either the validity or the fulfillment of the contract
dependent upon the will of the party to whom It conceded the privilege of the
cancellation.
In the case, the lease for an alien for a reasonable period is valid. So is the option
giving the alien the right to buy the real property subject to the condition that he must
obtain Filipino citizenship. Since aliens residence in the Philippines is temporary, they
may be grated temporary rights such as a lease contract which is not forbidden.
However, if the alien is given not only the lease of, but also the option to buy a piece of
land by virtue of which the Filipino owner cannot sell, or otherwise dispose of his
property, this to last for 50 years, then it becomes clear that the arrangement is a virtual
transfer of ownership. As such, the constitutional ban against alien landholding is in
grave peril.
However, it does not follow that because the parties are in pari delicto, they will
be left where they are without relief. Article 1416 of the Civil Code provides an exception
when the agreement is not illegal per se but is merely prohibited, and the prohibition by
law is designed for the protection of the plaintiff, he may, if public policy is thereby
enhanced, recover what he had paid on delivery.
for the additional construction, despite the illegality and void nature of the implied
contracts forged between the MPWH and petitioners. In this matter, it is bear stressing
that, the illegality of the subject contracts proceeds from the express declaration or
prohibition of the law, and not for any intrinsic illegality. Stated differently, the subject
contracts are not illegal per se.
The Court cannot sanction an injustice so patent on its face and allow itself to be
an instrument in the perpetration thereof. Justice and equity demands that the States
cloak of invincibility against suit be shred in this particular case and that the petitionerscontractors be duly compensated, on the basis of quantum meruit, for the construction
done on the public housing project.
Petition is granted. Accordingly, the Commission on Audit is hereby directed to
determine as ascertain with dispatch the total compensation due petitioners for the
additional constructions on the housing project and to allow payment thereof.
ISSUE:
Whether or not the spouses Uy have personality to file the suit before the
Security and Exchange Commission.
RULING:
YES, the spouses have the personality. As a general rule, the jurisdiction of a
court or tribunal over the subject matter is determined by the allegation in the
complaint. The spouse averment in the complaint that the purchase of her stocks by the
corporation was null and void ab initio was deemed admitted. It is elementary that a
void contract produces no effect either against or in favor of anyone; it cannot create,
modify or extinguish the juridical relations to where it attaches. Thus, Cecilia remains a
stockholder of the corporation in view of the nullity of the contract of sale. Although she
was no longer registered as a stock holder in the corporate record, the admitted
allegation in the complaint made her still a bona fide stock holder of the corporation.
On November 14, 1994, the trial court declared the Deeds of Sale null and void.
Francisco was ordered to return the lots in question including all improvements.
Concomitantly, Herrera was ordered to return the purchase price of the lots sold.
ISSUE:
Whether or not the assailed contracts of sale are void or merely voidable and
hence capable of being ratified.
RULING:
YES, the Supreme Court ruled that the contracts are merely voidable or
annullable. Note that Article 1390 of the Civil Code specifically provides that when an
insane or demented person enters into a contract, the legal effect is that the contract is
voidable, not void or inexistent per se. Therefore, the contracts of sale entered into by
Eligio Sr. are valid and binding unless annulled through a proper action filed in court
seasonably. Furthermore, the questioned annullable contract was rendered perfectly
valid in this case because of respondents acts of ratification. He actually received the
payments on behalf of his father further manifesting that he was agreeable to the
contracts. Similarly, respondents previous negotiation for an increase in the price
bolster that indeed there was ratification of what he himself questions as a void contract.
In the course of 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
of Carmen Ozamiz while petitioner Mendezona, respondents Roberto J. Montalvan and
Julio H. Ozamiz were designated as joint guardians over the properties of the said ward.
The respondents opposed the petitioners claim of ownership of the Lahug
property and alleged that the titles issued in the petitioners names are defective and
illegal, and the ownership of the said property was acquired in bad faith and without
value inasmuch as the consideration for the sale is grossly inadequate and
unconscionable. Respondents further alleged that at the time of the sale on April 28,
1989 Carmen Ozamiz was already ailing and not in full possession of her mental
faculties; and that her properties having been placed in administration, she was in effect
incapacitated to contract with petitioners.
Trial on the merits ensued and the lower court ruled in favor of petitioners. The
appellate court reversed the factual findings of the trial court and ruled that the Deed of
Absolute Sale dated April 28, 1989 was a simulated contract since the petitioners failed
to prove that the consideration was actually paid, and, furthermore, that at the time of
the execution of the contract the mental faculties of Carmen Ozamiz were already
seriously impaired. Thus, the appellate court declared that the Deed of Absolute Sale of
April 28, 1989 is null and void. It ordered the cancellation of the certificates of title
issued in the petitioners names and directed the issuance of new certificates of title in
favor of Carmen Ozamiz or her estate. The motion for reconsideration was denied.
ISSUE:
Whether or not the CA erred in ruling that the Deed of Absolute Sale dated on
April 28, 1989 was a Simulated Contract.
RULING:
YES. Simulation is defined as "the declaration of a fictitious will, deliberately
made by agreement of the parties, in order to produce, for the purposes of deception,
the appearances of a juridical act which does not exist or is different from what that
which was really executed." The requisites of simulation are: (a) an outward declaration
of will different from the will of the parties; (b) the false appearance must have been
intended by mutual agreement; and (c) the purpose is to deceive third persons. None of
these were clearly shown to exist in the case at bar.
Contrary to the erroneous conclusions of the appellate court, a simulated contract
cannot be inferred from the mere non-production of the checks. It was not the burden of
the petitioners to prove so. It is significant to note that the Deed of Absolute Sale dated
April 28, 1989 is a notarized document duly acknowledged before a notary public. As
such, it has in its favor the presumption of regularity, and it carries the evidentiary
weight conferred upon it with respect to its due execution.
Whether or not petitioners are under any legal duty to reconvey the undivided
one-half portion of the property to private respondent Justina Campo.
RULING:
NO, there may be a moral duty on the part of petitioners to convey the one-half
portion of the property previously sold to private respondent. However, they are under
no legal obligation to do so. Hence, the action to quiet title filed by private respondent
must fail.
NATURAL OBLIGATIONS: KINDS (1424-1430)
RURAL BANK OF PARAAQUE, INC., petitioner,
VS. ISIDRA REMOLADO and COURT OF APPEALS, respondents
1985 March 18
FACTS:
This case is about the repurchase of mortgaged property after the period of
redemption had expired. Isidra Remolado, 64, a widow, and resident of Makati, Rizal,
owned a lot with an area of 308 square meters, with a bungalow thereon, which was
leased to Beatriz Cabagnot. In 1966 she mortgaged it to the Rural Bank of Paraaque,
Inc. as security for a loan of P15,000. She paid the loan. On April 17, 1971 she
mortgaged it again to the bank. She eventually secured loans totalling P18,000. The
loans become overdue. The bank foreclosed the mortgage on July 21, 1972 and bought
the property at the foreclosure sale for P22,192.70. The one-year, period of redemption
was to expire on August 21, 1973. On August 8, 1973 the bank advised Remolado that
she had until August 23 to redeem the property. On August 9, 1973 or 14 days before
the expiration of the one-year redemption period, the bank gave her a statement
showing that she should pay P25,491.96 for the redemption of the property on August
23. No redemption was made on that date. On September 3, 1973 the bank
consolidated its ownership over the property. Remolado's title was cancelled. A new
title, TCT No. 418737, was issued to the bank on September 5. On September 24, 1973,
the bank gave Remolado up to ten o'clock in the morning of October 31, 1973, or 37
days, within which to repurchase (not redeem since the period of redemption had
expired) the property. The bank did not specify the price.
On October 26, 1973 Remolado and her daughter, Patrocinio Gomez, promised to
pay the bank P33,000 on October 31 for the repurchase of the property. Contrary to her
promise, Remolado did not repurchase the property on October 31. Five days later, or on
November 5, Remolado and her daughter delivered P33,000 cash to the bank's assistant
manager as repurchase price. The amount was returned to them the next day,
November 6, 1973. At that time, the bank was no longer willing to allow the repurchase.
Remolado filed an action to compel the bank to reconvey the property to her for
P25,491.96 plus interest and other charges and to pay P35,000 as damages. The
repurchase price was not consigned. A notice of lis pendens was registered. On
November 15, the bank sold the property to Pilar Aysip for P50,000. A new title was
issued to Aysip with an annotation of lis pendens
The trial court ordered the bank to return the property to Remolado upon
payment of the redemption price of P25,491.96 plus interest and other bank charges and
to pay her P15,000 as damages. The Appellate Court affirmed the judgment.
ISSUE:
Whether or not the appellate court erred in reconveying the disputed property to
Remolado.
RULING:
Yes. We hold that the trial court and the Appellate Court erred in ordering the
reconveyance of the property. There was no binding agreement for its repurchase. Even
on the assumption that the bank should be bound by its commitment to allow
repurchase on or before October 31, 1973, still Remolado had no cause of action because
she did not repurchase the property on that date.
Justice is done according to law. As a rule, equity follows the law. There may be a
moral obligation, often regarded as an equitable consideration (meaning compassion),
but if there is no enforceable legal duty, the action must fail 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, is explained by Justice
Moreland in Vales vs. Villa, 35 Phil. 769, 788 where he said: "Courts operate not because
one person has been defeated or overcome by another, but because he has been
defeated or overcome illegally. Men may do foolish things, make ridiculous contracts,
use miserable judgment, and lose money by them - indeed, all they have in the world;
but not for that alone can the law intervene and restore. There must be, in addition, a
violation of law, the commission of what the law knows as an actionable wrong before
the courts are authorized to lay hold of the situation and remedy it."
In the instant case, the bank acted within its legal rights when it refused to give
Remolado any extension to repurchase after October 31, 1973. It had given her about
two years to liquidate her obligation. She failed to do so. Thus, the Appellate Court's
judgment is reversed and set aside.
KINDS OF TRUSTS: EXPRESS TRUST VS. IMPLIED TRUST
1.
2.
3.
4.
5.
cannot claim ownership of the property even when it was registered in his name. Thus,
petition is denied. The decision of the trial court as sustained by the Court of Appeals is
affirmed, with costs against petitioners.
KINDS OF TRUSTS: EXPRESS TRUST VS. IMPLIED TRUST
CATALINA BUAN VDA. DE ESCONDE, CONSTANCIA ESCONDE VDA. DE PERALTA,
ELENITA ESCONDE and BENJAMIN ESCONDE, petitioners,
VS. HONORABLE COURT OF APPEALS and PEDRO ESCONDE, respondents
1996 February 01
G.R. No. 103635
FACTS:
Petitioners Constancia, Benjamin and Elenita, and private respondent Pedro, are
the children of the late Eulogio Esconde and petitioner Catalina Buan. Eulogio Esconde
was one of the children and heirs of Andres Esconde. Andres is the brother of Estanislao
Esconde, the original owner of the disputed lot who died without issue on April 1942.
Survived by his only brother, Andres, Estanislao left an estate consisting of four (4)
parcels of 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 of the late Estanislao Esconde.
On December 5, 1946, the heirs of Lazara, Ciriaca and Eulogio executed a deed of
extrajudicial partition, with the heirs of Lazara identified therein as the Party of the First
Part, that of Ciriaca, the Party of the Second Part and that of Eulogio, the Party of the
Third Part. Since the children of Eulogio, with the exception of 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 usufructuary rights over the
parcels of land in favor of her children in the same deed. The deed bears the thumbmark
of Catalina Buan and the signature of Constancia Esconde, as well as the approval and
signature of Judge Basilio Bautista.
Pursuant to the same deed, transfer certificates of title were issued to the new
owners of the properties. Transfer Certificate of Title No. 394 for Lot No. 1700 was issued
on February 11, 1947 in the name of 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 family home on Lot No. 1698-B which is
adjacent to Lot No. 1700. A portion of the house occupied an area of twenty (20) square
meters, more or less, of Lot No. 1700. Benjamin also built a concrete fence 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 of his brother, private respondent. Believing that the lot was coowned by all the children of Eulogio Esconde, Benjamin demanded his share of the lot
from private respondent. However, private respondent asserted exclusive ownership
thereof pursuant to the deed of extrajudicial partition and, in 1985 constructed a "buho"
fence to segregate Lot No. 1700 from Lot No. 1698-B.
Hence, on June 29, 1987, petitioners herein filed a complaint before the Regional
Trial Court of Bataan against private respondent for the annulment of TCT No. 394. They
further prayed that private respondent be directed to enter into a partition agreement
with them, and for damages (Civil Case No. 5552).
In its decision of July 31, 1989, the lower court dismissed the complaint and the
counterclaims. It found that the deed of extrajudicial partition was an unenforceable
contract as far as Lot No. 1700 was concerned because petitioner Catalina Buan vda. de
Esconde, as mother and judicial guardian of her children, exceeded her authority as such
in "donating" the lot to private respondent or waiving the rights thereto of Benjamin and
Elenita in favor of private respondent. Because of the unenforceability of the deed, a
trust relationship was created with private respondent as trustee and Benjamin and
Elenita as beneficiaries
However, the lower court ruled that the action had been barred by both
prescription and laches. Lot No. 1700 having been registered in the name of 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 before the action was
filed on June 29, 1987.
Thus, even if Art. 1963 of the old Civil Code providing for a 30-year prescriptive
period for real actions over immovable properties were to be applied, still, the action
would have prescribed on February 11, 1977. Hence, petitioners elevated the case to
the Court of Appeals which affirmed the lower court's decision. The appellate court held
that the deed of extrajudicial partition established "an implied trust arising from the
mistake of the judicial guardian in favoring one heir by giving him a bigger share in the
hereditary property." It stressed that "an action for reconveyance based on implied or
constructive trust" prescribes in ten (10) years "counted from the registration of the
property in the sole name of the co-heir."
ISSUE:
Whether or not the action was already barred with laches and prescription.
RULING:
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 of the former entitling him to the performance of certain duties and the
exercise of certain powers by the latter. Trusts are either express or implied. An express
trust is created by the direct and positive acts of the parties, by some writing or deed or
will or by words evidencing an intention to create a trust. No particular words are
required for the creation of an express trust, it being sufficient that a trust is clearly
intended.
On the other hand, implied trusts are those which, without being expressed, are
deducible from the nature of the transaction as matters of intent or which are
superinduced on the transaction by operation of law as matters of equity, independently
of the particular intention of the parties. In turn, implied trusts are either resulting or
constructive trusts. These two are differentiated from each other as follows:
Resulting trusts are based on the equitable doctrine that valuable consideration
and not legal title determines the equitable title or interest and are presumed always to
have been contemplated by the parties. They arise from the nature or circumstances of
the consideration involved in a transaction whereby one person thereby becomes
invested with legal title but is obligated in equity to hold his legal title for the benefit of
another. On the other hand, constructive trusts are created by the construction of equity
in order to satisfy the demands of justice and prevent unjust enrichment. They arise
contrary to intention against one who, by fraud, duress or abuse of confidence, obtains
or holds the legal right to property which he ought not, in equity and good conscience, to
hold.
While the deed of extrajudicial partition and the registration of Lot No. 1700
occurred in 1947 when the Code of Civil Procedure or Act No. 190 was yet in force, the
Supreme Court held that the trial court correctly applied Article 1456.
A deeper analysis of Article 1456 reveals that it is not a trust in the technical
sense for in a typical trust, confidence is reposed in one person who is named a trustee
for the benefit of another who is called the cestui que trust, respecting property which is
held by the trustee for the benefit of the cestui que trust. A constructive trust, unlike an
express trust, does not emanate from, or generate a fiduciary relation. While in an
express trust, a beneficiary and a trustee are linked by confidential or fiduciary relations,
in a constructive trust, there is neither a promise nor any fiduciary relation to speak of
and the so-called trustee neither accepts any trust nor intends holding the property for
the beneficiary.
In the case at bench, petitioner Catalina Buan vda. de Esconde, as mother and
legal guardian of her children, appears to have favored her elder son, private
respondent, in allowing that he be given Lot No. 1700 in its entirety in the extrajudicial
partition of the Esconde estate to the prejudice of her other children. Although it does
not appear on record whether Catalina intentionally granted private respondent that
privileged bestowal, the fact is that, said lot was registered in private respondent's
name. After TCT No. 394 was handed to him by his mother, private respondent exercised
exclusive rights of ownership therein to the extent of even mortgaging the lot when he
needed money.
If, 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. However, private respondent never considered himself a trustee. If he
allowed his brother Benjamin to construct or make improvements thereon, it appears to
have been out of tolerance to a brother.
respondent give him and his sisters their share in Lot No. 1700. He even reported the
matter to the barangay authorities for which three conferences were held. Unfortunately,
his efforts droved fruitless. Even the action he brought before the court was filed too late.
On the other hand, private respondent should not be unjustly enriched by the
improvements introduced by his brother on Lot No. 1700 which he himself had tolerated.
He is obliged by law to indemnify his brother, petitioner Benjamin Esconde, for whatever
expenses the latter had incurred.
KINDS OF TRUSTS: EXPRESS TRUST VS. IMPLIED TRUST
JOVITA YAP ANCOG, and GREGORIO YAP, JR., petitioners,
VS. COURT OF APPEALS, ROSARIO DIEZ, and CARIDAD YAP, respondents
G.R. No. 112260
June 30, 1997
FACTS:
The land, with improvements thereon, was formerly the conjugal property of the
spouses Gregorio Yap and Rosario Diez. In 1946, Gregorio Yap died, leaving his wife,
private respondent Rosario Diez, and children, petitioners Jovita Yap Ancog and Gregorio
Yap, Jr., and private respondent Caridad Yap as his heirs. In 1954 and again 1958, Rosario
Diez obtained loans from the Bank of Calape, secured by a mortgage on the disputed
land, which was annotated on its Original Certificate of Title No. 622. When Rosario Diez
applied again for a loan to the bank, offering the land in question as security, the banks
lawyer, Atty. Narciso de la Serna, suggested that she submit an extrajudicial settlement
covering the disputed land as a means of facilitating the approval of 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 of petitioner Gregorio Yap,
Jr., then only 15 years old, signed. As a result, OCT No. 622 was cancelled and Transfer
Certificate of Title No. 3447 (T-2411) was issued on April 13, 1961. On April 14, 1961,
upon the execution of a real estate mortgage on the land, the loan was approved by the
bank. Rosario Diez exercised rights of ownership over the land. In 1985, she brought an
ejectment suit against petitioner Jovita Yap Ancogs husband and son to evict them from
the ground floor of the house built on the land for failure to pay rent. Shortly thereafter,
petitioner Jovita Ancog learned that private respondent Rosario Diez had offered the land
for sale.Petitioner Ancog immediately informed her younger brother, petitioner Gregorio
Yap, Jr., who was living in Davao, of their mothers plan to sell the land. On June 6, 1985,
they filed this action for partition in the Regional Trial Court of Bohol where it was
docketed as Civil Case No. 3094. As private respondent Caridad Yap was unwilling to join
in the action against their mother, Caridad was impleaded as a defendant.
Petitioners alleged that the extrajudicial instrument was simulated and therefore
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 of the land to cover expenses for Caridads school fees and for 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 of 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 for the
purpose of enabling her to obtain another loan. Petitioners failed to overcome the
presumptive validity of the extrajudicial settlement as a public instrument.
The court instead found that petitioner Ancog had waived her right to the land, as
shown by the fact that on February 28, 1975, petitioners husband, Ildefonso Ancog,
leased the property from private respondent Diez. Furthermore, when the spouses
Ancog applied for a loan to the Development Bank of the Philippines using the land in
question as collateral, they accepted an appointment from Rosario Diez as the latters
attorney-in-fact.
The court also found that the action for partition had already
prescribed.On appeal, the Court of Appeals upheld the validity of the extrajudicial
settlement and sustained the trial courts dismissal of 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 Yap Ancogs educational attainment (Master of Arts and
Bachelor of Laws), it was improbable that she would sign the settlement if she did not
mean it to be such. Hence, this petition.
ISSUE:
Whether or not the appellate court erred in ruling that petitioner Gregorio Yap, Jr.,
one of the co-owners of the litigated property, had lost his rights to the property through
prescription or laches.
RULING:
In this case, the trial court and the Court of Appeals found no evidence to show
that the extrajudicial settlement was required to enable private respondent Rosario Diez
to obtain a loan from the Bank of Calape. Petitioners merely claimed that the
extrajudicial settlement was demanded by the bank.To the contrary, that the heirs (Jovita
Yap Ancog and Caridad Yap) meant the extrajudicial settlement to be fully effective is
shown by the fact that Rosario Diez performed acts of dominion over the entire land,
beginning with its registration, without any objection from them. Instead, petitioner
Jovita Ancog agreed to lease the land from her mother, private respondent Rosario Diez,
and accepted from her a special power of attorney to use the land in question as
collateral for a loan she was applying from the DBP. Indeed, it was private respondent
Diez who paid the loan of the Ancogs in order to secure the release of the property from
mortgage Petitioner Jovita Yap Ancog contends that she could not have waived her share
in the land because she is landless. For that matter, private respondent Caridad Yap is
also landless, but she signed the agreement. She testified that she did so out of filial
devotion to her mother. Thus, what the record of this case reveals is the intention of
Jovita Ancog and Caridad Yap to cede their interest in the land to their mother Rosario
Diez. It is immaterial that they had been initially motivated by a desire to acquire a
loan. Under Art. 1082 of the Civil Code, every act which is intended to put an end to
indivision among co-heirs is deemed to be a partition even though it should purport to be
a sale, an exchange, or any other transaction.
The Supreme Court held that the Court of Appeals erred in ruling that the claim of
petitioner Gregorio Yap, Jr. was barred by laches. In accordance with Rule 74, 1 of the
Rules of Court, as he did not take part in the partition, he is not bound by the
settlement. It is uncontroverted that, at the time the extrajudicial settlement was
executed, Gregorio Yap, Jr. was a minor. For this reason, he was not included or even
informed of the partition. Instead, the registration of the land in Rosario Diezs name
created an implied trust in his favor by analogy to Art. 1451 of the Civil Code, which
provides: When land passes by succession to any person and he causes the legal title to
be put in the name of another, a trust is established by implication of law for the benefit
of the true owner. In the case of OLaco v. Co Cho Chit, Art. 1451 was held as creating a
resulting trust, which is founded on the presumed intention of the parties. As a general
rule, it arises where such may be reasonably presumed to be the intention of the parties,
as determined from the facts and circumstances existing at the time of the transaction
out of which it is sought to be established. In this case, the records disclose that the
intention of the parties to the extrajudicial settlement was to establish a trust in favor of
petitioner Yap, Jr. to the extent of his share. Rosario Diez testified that she did not claim
the entire property, while Atty. de la Serna added that the partition only involved the
shares of the three participants.
A cestui que trust may make a claim under a resulting trust within 10 years from
the time the trust is repudiated. Although the registration of the land in private
respondent Diezs name operated as a constructive notice of her claim of ownership, it
cannot be taken as an act of repudiation adverse to petitioner Gregorio Yap, 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 informed of her exclusive claim over
the entire property before 1985 when he was notified by petitioner Jovita Yap Ancog of
their mothers plan to sell the property.This Court has ruled that for prescription to run in
favor of 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 from the date of issuance of the Torrens
certificate of title applies only to the remedy of reconveyance under the Property
Registration Decree. Since the action brought by petitioner Yap to claim his share was
brought shortly after he was informed by Jovita Ancog of their mothers effort to sell the
property, Gregorio Yap, Jr.s claim cannot be considered barred either by prescription or
by laches.
have been contemplated by the parties. They arise from the nature or circumstances of
the consideration involved in a transaction whereby one person thereby becomes
invested with legal title but is obligated in equity to hold his legal title for the benefit of
another.
On the other hand, constructive trusts are created by the construction of equity in
order to satisfy the demands of justice and prevent unjust enrichment. They arise
contrary to intention against one who, by fraud, duress or abuse of confidence, obtains
or holds the legal right to property which he ought not, in equity and good conscience, to
hold.
In the instant case, petitioners' theory is that Rosendo Avelino owned the money
for the purchase of the property and he requested Celso, his son, to buy the property
allegedly in trust for the former. The fact remains, however, that title to the property
was conveyed to Celso. Accordingly, the situation is governed by or falls within the
exception under the third sentence of Article 1448, However, if the person to whom the
title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the
sale, no trust is implied by law, it being disputably presumed that there is a gift in favor
of the child.
The preponderance of evidence, as found by the trial court and affirmed by the
Court of Appeals, established positive acts of Celso Avelino indicating, without doubt,
that he considered the property he purchased from the Mendiolas as his exclusive
property. He had its tax declaration transferred in his name, caused the property
surveyed for him by the Bureau of Lands, and faithfully paid the realty taxes. Finally, he
sold the property to private respondents. The theory of implied trust with Celso Avelino
as the trustor and his parents Rosendo Avelino and Juan Ricaforte as trustees is not even
alleged, expressly or impliedly. Decision affirmed.
KINDS OF TRUSTS: EXPRESS TRUST VS. IMPLIED TRUST
TALA REALTY SERVICES CORPORATION, petitioner,
VS. BANCO FILIPINO SAVINGS AND MORTGAGE BANK, respondent
2004 Jan 29
G.R. No. 143263
FACTS:
In 1979, Banco Filipino, respondent, had to unload some of its branch sites since it
has reached its allowable limit under Section 25(a) and 34 of Republic Act 337, as
amended, otherwise known as the General Banking Act.
The major stockholders of Banco Filipino formed a corporation known as TALA
Realty Services Corporation, herein petitioner. TALA stands for the names of Banco
Filipinos four major stockholders, namely, Antonio Tiu, Tomas Aguirre, Nancy Lim and
Pedro Aguirre.
On August 25, 1981, respondent bank executed in favor of petitioner TALA eleven
deeds of sale transferring to the latter its branch sites. In turn, petitioner leased these
branch sites to respondent through separate contracts of lease for a period of twenty
years, renewable for another twenty years, at the option of respondent, with a monthly
rental of 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 for a period of eleven years, renewable for another nine years at
the option of respondent. And respondent bank was required to pay P602,500.00 as
security deposit for the performance of the terms and conditions of the contract.
In August 1992, petitioner wrote respondent informing it of the expiration of the
11-year lease contract. They failed to reach an agreement. Thus, on April 14, 1994,
petitioner notified 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 file civil case for illegal
detainer.
On February 5, 1998, the RTC rendered its Decision dismissing petitioners
complaint for ejectment for lack of merit. On appeal via a petition for review, the Court
of 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 from the leased premises for non-payment
of rent.
RULING:
No, the Supreme Court ruled that the parties deliberately circumvented the real
estate investment limit under Sections 25(a) and 34 of the General Banking Act. Being
in pari delicto, they should suffer the consequences of their deception by denying them
any affirmative relief. Equity dictates that Tala should not be allowed to collect rent from
the Bank. Both the Bank and Tala participated in the deceptive creation of a trust to
circumvent the real estate investment limit under Sections 25(a) and 34 of the General
Banking Act. Upholding Talas right to collect rent from the period during which the Bank
was arbitrarily closed would allow Tala to benefit from the illegal warehousing
agreement. This would result in the application of the Banks advance rentals covering
the eleventh to the twentieth years of the lease, to the rentals due for the period during
which the Bank was arbitrarily closed. With the advance rentals already used up, and
the Bank having stopped payment of the rent on the thirteenth year of the lease or in
April 1994, rentals would be due Tala from the time the Bank stopped paying rent in April
1994 up to the expiration of the lease period. The Bank should not be allowed to dispute
the sale of its lands to Tala nor should Tala be allowed to further collect rent from the
Bank. The clean hands doctrine will not allow the creation or the use of 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 relief from the court as one who
seeks equity and justice must come to court with clean hands
Thus, the petition is DENIED. The challenged Decision of the Court of Appeals
dated July 23, 1999 and its Resolution dated May 16, 2000, are REVERSED and SET
ASIDE.
After the hearing on 3 December 1996 the trial court dismissed the complaint on
the ground that the cause of action of private respondents was truly for reversion so that
only the Director of Lands could have filed the complaint. On 23 December 1996 private
respondents moved for reconsideration of the order of dismissal but on 3 June 1997 the
motion was denied by the trial court.
IMPLIED TRUSTS:
PRESCRIPTIVE PERIODS OF ACTION TO ENFORCE
IMPLIED TRUSTS: IN ACTIONS TO QUIET TITLE
1.
2.
3.
4.
5.
6.
On 7 June 1997 private respondents appealed the order of dismissal to the Court
of Appeals. On 15 February 2000 the appellate court promulgated its assailed Decision
reversing the order of dismissal. On 7 March 2000 petitioners moved for reconsideration
of the CA Decision. On 22 January 2001 the appellate court denied the motion for lack of
merit, hence this petition for review.
ISSUE:
Whether or not the action for nullity of free patents and certificates of title of Lot
1015 and Lot 1017 or the action for reconveyance based on implied trust of the same
lots has prescribed.
RULING:
The Supreme Court ruled that neither the action for declaration of nullity of free
patents and certificates of title of Lot 1015 and Lot 1017 nor the action for reconveyance
based on an implied trust of the same lots has prescribed. It ruled that a free patent
issued over private land is null and void, and produces no legal effects whatsoever.
Moreover, private respondents claim of open, public, peaceful, continuous and adverse
possession of the 2 parcels of land and its illegal inclusion in the free patents of
petitioners and in their original certificates of title also amounts to an action for quieting
of title which is imprescriptible.
The action for reconveyance based on implied trust, on the other hand, prescribes
only after 10 years from 1990 and 1991 when the free patents and the certificates of title
over Lot 1017 and Lot 1015, respectively, were registered.
Obviously the action had not prescribed when private respondents filed their
complaint against petitioners on 19 December 1995. At any rate, the action for
reconveyance in the case at bar is also significantly deemed to be an action to quiet title
for purposes of determining the prescriptive period on account of private respondents
allegations of actual possession of the disputed lots. In such a case, the cause of action
is truly imprescriptible.
Wherefore, the instant petition for review is denied.
YES, there was inexcusable delay thereby making the plaintiffs action
unquestionably barred by prescription and laches and also by res judicata. Inextricably
interwoven with the questions of prescription and res judicata is the question on the
existence of a trust. It is noteworthy that the main thrust of plaintiffs action is the
alleged holding of their shares in trust by defendants. Emanating from such, the
Supreme Court elucidated on the nature of trusts and the availability of prescription and
laches to bar the action for reconveyance of property allegedly held in trust. It is said
that trust is the right, enforceable solely in equity to the beneficial enjoyment of
property, the legal title to which is vested in another. It may either be express or implied.
The latter ids further subdivided into resulting and constructive trusts. Applying it now to
the case at bar, the plaintiffs did not prove any express trust. Neither did they specify the
kind of implied trust contemplated in their action. Therefore, its enforcement maybe
barred by laches and prescription whether they contemplate a resulting or a constructive
trust.
IMPLIED TRUSTS: PRESCRIPTIVE PERIODS OF ACTION TO ENFORCE IMPLIED
TRUSTS: IN ACTIONS TO QUIET TITLE
THE INTESTATE ESTATE OF ALEXANDER T. TY, represented by the
Administratrix, SYLVIA S. TE, petitioner,
VS. COURT OF APPEALS, HON. ILDEFONSO E. GASCON,
and ALEJANDRO B. TY, respondents
G.R. No. 112872
April 19, 2001
FACTS:
Petitioner Sylvia S. Tywas married to Alexander T. Ty, son of private respondent
Alejandro b. ty, on January 11, 1981. Alexander died of leukemia on May 19, 1988 and
was survived by his wife, petitioner Silvia, and only child, Krizia Katrina. In the
settlement of his estate, petitioner was appointed administratrix of her late husbands
intestate estate.
On November 4, 1992, petitioner filed a motion for leave to sell or mortgage
estate property in order to generate funds for the payment of deficiency estate taxes in
the sum of P4,714,560.00.
Privite respondent Alejandro Ty then filed two complaints for the recovery of the
above-mentioned property, praying for the declaration of nullity of the deed of absolute
sale of the shares of stock executed by private respondent in favor of the deceased
Alexander, praying for the recovery of the pieces of property that were placed in the
name of deceased Alexander, they were acquired through private-respondents money,
without any cause or consideration from deceased Alexander.
The motions to dismiss were denied. Petitioner then filed petitions for certiorari in
the Courts of Appeals, which were also dismissed for lack of merit. Thus, the present
petitions now before the Court.
ISSUE:
Whether or not an express trust was created by private respondent when he
transferred the property to his son.
RULING:
Private respondent contends that the pieces of property were transferred in the
name of the deceased Alexander for the purpose of taking care of the property for him
and his siblings. Such transfer having been effected without cause of consideration, a
resulting trust was created.
WHEREFORE, the petition for certiorari in G.R. No. 112872 is DISMISSED, having
failed to show that grave abuse of discretion was committed in declaring that the
regional trial court had jurisdiction over the case. The petition for review on certiorari in
G.R. 114672 is DENIED, having found no reversible error was committed.
IMPLIED TRUSTS: PRESCRIPTIVE PERIODS OF ACTION TO ENFORCE IMPLIED
TRUSTS: IN ACTIONS TO QUIET TITLE
VDA. DE RETUERTO VS. BARZ
372 SCRA 712
FACTS:
Petitioners are the heirs of Panfilo Retuerto, while respondents are the heirs of
Pedro Barz who is the sole heir of Juana Perez Barz. Juana Perez Barz was the original
owner of Lot No. 896 having an area of 13,160 square meters. Before her death on April
16, 1929, Juana Perez executed a Deed of Absolute Sale in favor of Panfilo Retuerto over
a parcel of land, identified as Lot No. 896-A, a subdivision of Lot No. 896, with an
approximate area of 2,505 square meters. On July 22, 1940, the Court issued an Order
directing the Land Registration Commission for the issuance of the appropriate Decree in
favor of Panfilo Retuerto over the said parcel of land. However, no such Decree was
issued as directed by the Court because, by December 8, 1941, the Second World War
ensued in the Pacific. However, Panfilo failed to secure the appropriate decree after the
war.
Sometime in 1966, Pedro Barz, as the sole heir of Juana Perez, filed and
application, with the then CFI of Cebu for the confirmation of his title over Lot 896 which
included the Lot sold to Panfilo Retuerto. The Court ruled in his favor declaring him the
lawful owner of the said property, and thus Original Certificate of Title No. 521 was
issued. Lot No. 896-A however was continuously occupied by the petitioners. Thus, a
confrontation arose and as a result respondents filed an action on September 5, 1989 for
Quieting of Title, Damages and Attorneys Fees. In their answer, petitioners claimed
that they were the owners of a portion of the lot which was registered under the name of
Pedro Barz and therefore the issuance of the Original Certificate of Title in Pedro Barzs
name did not vest ownership but rather it merely constituted him as a trustee under a
constructive trust. Petitioners further contend that Pedro Barz misrepresented with the
land registration court that he inherited the whole lot thereby constituting fraud on his
part.
ISSUE:
Whether or not petitioners defense is tenable.
RULING:
NO, the contention is bereft of merit. Constructive trusts are created in equity to
prevent unjust enrichment, arising against one who, by fraud, duress or abuse of
confidence, obtains or holds the legal right to property which he ought not, in equity and
good conscience, to hold. Petitioners failed to substantiate their allegation that their
predecessor-in-interest had acquired any legal right to the property subject of the
present controversy. Nor had they adduced evidence to show that the certificate of title
of Pedro Barz was obtained through fraud.
Even assuming arguendo that Pedro Barz acquired title to the property through
mistake or fraud, petitioners are nonetheless barred from filing their claim of ownership.
An action for reconveyance based on an implied or constructive trust prescribes within
ten years from the time of its creation or upon the alleged fraudulent registration of the
property. Since registration of real property is considered a constructive notice to all
persons, then the ten-year prescriptive period is reckoned from the time of such
registering, filing or entering.
Thus, petitioners should have filed an action for
reconveyance within ten years from the issuance of OCT No. 521 in November 16, 1968.
This, they failed to do so.
vehicle; that he allowed his brother to use the van because the latter was working for his
company, the CLT Industries; and that his brother later refused to return the van to him
and appropriated the same for himself.
On the other hand, private respondent testified that CLT Industries is a family
business that was placed in petitioners name because at that time he was then leaving
for the United Stated and petitioner remaining Filipino in the family residing in the
Philippines. When the family business needed a vehicle in 1987 for use in the deliver of
machinery to its customers, he asked petitioner to look for a vehicle and gave him the
amount of P5,000.00 to be deposited as down payment for the van, which would be
available in about a month. After a month, he himself paid the whole price out of a loan
of P140, 000.00 from his friend Tan Pit Sin. Nevertheless, respondent allowed the
registration of the vehicle in petitioners name. It was also their understanding that he
would keep the van for himself because CLT Industries was not in a position to pay him.
Hence, from the time of the purchase, he had been in possession of the vehicle including
the original registration papers thereof, but allowing petitioner from time to time to use
the van for deliveries of machinery.
After hearing, the trial court found for the private respondent. Finding no merit in
the appeal, the Court of Appeals affirmed the decision of the trail court.
ISSUE:
Whether or not the petitioner-appellant established proof of ownership over the
subject motor vehicle.
ISSUE:
Whether a resulting trust was intended by them in the acquisition of the property;
Whether Prescription has set in.
RULING:
No. Petitioner did not have in his possession the Certificate of Registration of the
motor vehicle and the official receipt of payment for the same, thereby lending credence
to the claim of private respondent who has possession thereof, that he owns the subject
motor vehicle. A certificate of registration of a motor vehicle in ones name indeed
creates a strong presumption of ownership. For all practical purposes, the person in
whose favor it has been issued is virtually the owner thereof unless proved otherwise. In
other words, such presumption is rebuttable by competent proof.
HELD:
The New Civil Code recognizes cases of implied trusts other than those
enumerated therein. Thus, although no specific provision could be cited to apply to the
parties herein, it is undeniable that an implied trust was created when the certificate of
registration of the motor vehicle was placed in the name of the petitioner although the
price thereof was not paid by him but by private respondent. The principle that a trustee
who puts a certificate of registration in his name cannot repudiate the trust relying on
the registration is one of the well-known limitations upon a title. A trust, which derives
its strength from the confidence one reposes on another especially between brothers,
does not lose that character simply because of what appears in a legal document.
WHEREFORE, the instant petition for review is hereby DENIED for lack of merit.
I.
Express trusts are those which are created by the direct and positive acts of 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 from the
nature of the transaction as matters of intent, or which are superinduced on the
transaction by operation of law as matters of equity, independently of the particular
intention of the parties. Implied trusts may either be resulting or constructive trusts,
both coming into being by operation of law.
A resulting trust was indeed intended by the parties under Art. 1448 of 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 . . ."
II.
As differentiated from constructive trusts, where the settled rule is that
prescription may supervene, in resulting trust, the rule of imprescriptibility may apply for
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.
THE
END
A resulting trust is repudiated if the following requisites concur: (a) the trustee
has performed unequivocal acts of repudiation amounting to an ouster of the cestui qui
trust; (b) such positive acts of 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 for
reconveyance based on an implied or constructive trust must perforce prescribe in ten
(10) years, and not otherwise, thereby modifying previous decisions holding that the
prescriptive period was four (4) years.
Neither the registration of the Oroquieta property in the name of petitioner Emilia
O'Laco nor the issuance of a new Torrens title in 1944 in her name in lieu of the alleged
loss of the original may be made the basis for the commencement of the prescriptive
period. For, the issuance of the Torrens title in the name of Emilia O'Laco could not be
considered adverse, much less fraudulent. Precisely, although the property was bought
by respondent-spouses, the legal title was placed in the name of Emilia O'Laco. The
transfer of the Torrens title in her name was only in consonance with the deed of sale in
her favor. Consequently, there was no cause for any alarm on the part of respondentspouses. As late as 1959, or just before she got married, Emilia continued to recognize
the ownership of respondent-spouses over the Oroquieta property.
Thus, until that point, respondent-spouses were not aware of any act of Emilia
which would convey to them the idea that she was repudiating the resulting trust. The
second requisite is therefore absent. Hence, prescription did not begin to run until the
sale of the Oroquieta property, which was clearly an act of repudiation. But immediately
after Emilia sold the Oroquieta property which is obviously a disavowal of the resulting
trust, respondent-spouses instituted the present suit for breach of trust.
Correspondingly, laches cannot lie against them.
After all, so long as the trustee recognizes the trust, the beneficiary may rely
upon the recognition, and ordinarily will not be in fault for omitting to bring an action to
enforce his rights. There is no running of the prescriptive period if the trustee expressly
recognizes the resulting trust. Since the complaint for breach of trust was filed by
respondent-spouses two (2) months after acquiring knowledge of the sale, the action
therefore has not yet prescribed.
WHEREFORE, the Petition for Review on Certiorari is DENIED. The Decision of the
Court of Appeals of 9 April 1981, which reversed the trial court, is AFFIRMED. Costs
against petitioners.
started operating a school on the property from 1967 when the titles and possession of
the lots were transferred to it.
It appears that there was a pending case, Civil Case No. 7435 of Regional Trial
Court stationed at Himamaylan, Negros Occidental. In this pending case the intestate
estate of the late Luis B. Puentevella, thru Judicial Administratrix, Angelina L. Puentevella
sold said aforementioned lots to Raul Javellana with the condition that the vendeepromisee would not transfer his rights to said lots without the express consent of
Puentevella and that in case of the cancellation of the contract by reason of the violation
of any of the terms thereof, all payments therefor made and all improvements
introduced on the property shall pertain to the promissor and shall be considered as
rentals for the use and occupation thereof.
Javellana having failed to pay the installments for a period of five years, Civil Case
No. 7435 was filed by defendant Puentevella against Raul Javellana and the Southern
Negros Colleges which was impleaded as a party defendant it being in actual possession
thereof, for the rescission of their contract to sell and the recovery of possession of the
lots and buildings with damages.
Consequently, in 1982 the judgment in Civil Case No. 7435 was finally executed and
enforced, and petitioner was restored to the possession of the subdivision lots an May
31, 1982. It will be noted that petitioner was not in possession of the lots from 1974 to
May 31, 1982.
After petitioner Binalbagan was again placed in possession of the subdivision lots,
private respondent Angelina Echaus demanded payment from petitioner Binalbagan for
the subdivision lots, enclosing in the letter of demand a statement of account as of
September 1982 showing a total amount due of P367,509.93, representing the price of
the land and accrued interest as of that date.
As petitioner Binalbagan failed to effect payment, private respondent Angelina P.
Echaus filed on October 8, 1982 Civil Case No. 1354 of the Regional Trial Court of the
Sixth Judicial Region stationed in Himamaylan, Negros Occidental against petitioners for
recovery of title and damages. Private respondent Angelina P. Echaus filed an amended
complaint by including her mother, brothers, and sisters as co-plaintiffs, which was
admitted by the trial court on March 18, 1983.
Upon the filing of the instant case for injunction and damages on January 3, 1966,
an ex-parte writ of preliminary injunction was issued by the Honorable Presiding Judge
Carlos Abiera, which order, however, was elevated to the Honorable Court of Appeals
which issued a writ of preliminary injunction ordering Judge Carlos Abiera or any other
person or persons in his behalf to refrain from further enforcing the injunction issued by
him in this case and from further issuing any other writs or prohibitions which would in
any manner affect the enforcement of the judgment rendered in Civil Case 7435,
pending the finality of the decision of the Honorable Court of Appeals in the latter case.
Thus, defendant Puentevella was restored to the possession of the lots and buildings
subject of this case. However, plaintiffs filed a petition for review with the Supreme
Court which issued a restraining order against the sale of the properties claimed by the
spouses-plaintiffs.
RULING:
No. A party to a contract cannot demand performance of 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 if a party thereto is ready, willing and
able to comply with his own obligations there under (Art. 1191, Civil Code).
In a contract of sale, the vendor is bound to transfer the ownership of and deliver,
as well as warrant, the thing which is the object of the sale (Art. 1495, Civil Code); he
warrants that the buyer shall, from the time ownership is passed, have and enjoy the
legal and peaceful possession of the thing. As afore-stated, petitioner was evicted from
the subject subdivision lots in 1974 by virtue of a court order in Civil Case No. 293 and
reinstated to the possession thereof only in 1982. During the period, therefore, from
1974 to 1982, seller private respondent Angelina Echaus' warranty against eviction given
to buyer petitioner was breached though, admittedly, through no fault of her own. It
follows that during that period, 1974 to 1982, private respondent Echaus was not in a
legal position to demand compliance of the prestation of petitioner to pay the price of
said subdivision lots. In short, her right to demand payment was suspended during that
period, 1974-1982.
When the Supreme Court dissolved the aforesaid injunction issued by the Court of
Appeals, possession of the building and other property was taken from petitioner
Binalbagan and given to the third-party claimants, the de la Cruz spouses. Petitioner
Binalbagan transferred its school to another location. In the meantime, the defendants
in Civil Case No. 293 with the Court of Appeals interposed an appeal. On October 30,
1978, the Court of 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 of the case was remanded to the court of origin on December 22, 1981.
ISSUE:
Whether or not the petition is with merit.
The prescriptive period within which to institute an action upon a written contract
is ten years (Art. 1144, Civil Code). The cause of action of private respondent Echaus is
based on the deed of sale afore-mentioned.
The deed of sale whereby private
respondent Echaus transferred ownership of the subdivision lots was executed on May
11, 1967. She filed Civil Case No. 1354 for recovery of title and damages only on
October 8, 1982. From May 11, 1967 to October 8, 1982, more than fifteen (15) years
elapsed. Seemingly, the 10-year prescriptive period had expired before she brought her
action to recover title. However, the period 1974 to 1982 should be deducted in
computing the prescriptive period for the reason that, as above discussed, from 1974 to
1982, private respondent Echaus was not in a legal position to initiate action against
petitioner since as afore-stated, through no fault of hers, her warranty against eviction
was breached. In the case of it was held that a court order deferring action on the
execution of judgment suspended the running of the 5-year period for execution of a
judgment. Here the execution of the judgment in Civil Case No. 7435 was stopped by the
writ of preliminary injunction issued in Civil Case No. 293. It was only when Civil Case
No. 293 was dismissed that the writ of execution in Civil Case No. 7435 could be
implemented and petitioner Binalbagan restored to the possession of the subject lots.
Deducting eight years (1974 to 1982) from the period 1967 to 1982, only seven
years elapsed. Consequently, Civil Case No. 1354 was filed within the 10-year
prescriptive period. Working against petitioner's position too is the principle against
unjust enrichment, which would certainly be the result if petitioner were allowed to own
the 42 lots without full payment thereof.
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals in
CA-G.R. CV No. 24635 is AFFIRMED.