Arellano University School of Law: Civil Law Review Ii

ARELLANO UNIVERSITY SCHOOL OF LAW
CIVIL LAW REVIEW II
ATTY. CRISOSTOMO A. URIBE
CASE DIGESTS
Class No. 28
BERGAVERA, Phamela Rhose

Sunday 8:00-12:00PM
13 November 2017
Table of Contents
I. OBLIGATIONS
Ocampo v. Ocampo, Sr., G.R. No. 227894 [05 July 2017] ………………... 5
Land Bank of the Philippines v. Dalauta, G.R. No. 190004
[08 August 2017] ……............................................................................ 7
Ubas, Sr. v. Chan, G.R. No. 215910 [06 February 2017] ………………….. 8
Bartolata v. Republic, G.R. No. 223334 [07 June 2017] …………………... 9
People v. Culas y Raga, G.R. No. 211168 [05 June 2017] ………………… 11
Our Lady of Lourdes Hospital v. Spouses Capanzana, G.R. No. 189218
[22 March 2017] ……………………………………………………..... 13
Cu v. Small Business Guarantee and Finance Corp., G.R. No. 211222
[07 August 2017] …………………………………………………….... 15
Spouses Ibañez v. Harper, G.R. No. 194272 [15 February 2017] …………. 16
Chiquita Brands, Inc. v. Omelio, G.R. No. 189102 [07 June 2017] ……….. 17
Spouses Pajares v. Remarkable Laundry and Dry Cleaning,
G.R. No. 212690 [20 February 2017] ………………………………..... 19
Philippine Stock Exchange, Inc. v. Litonjua, G.R. No. 204014
[05 December 2016] …………………………………………………... 20
Osmeña-Jalandoni v. Encomienda, G.R. No. 205578 [01 March 2017] …... 21
Spouses Villaluz v. Land Bank of the Philippines, G.R. No. 192602
[01 January 2017] ……………………………………………………... 22
Philippine National Bank v. Chan, G.R. No. 206037 [13 March 2017] …… 24
Iloilo Jar Corp. v. Comglasco Corp., G.R. No. 219509 [18 January 2017] ... 26
California Manufacturing Co., Inc. v. Advanced Technology System, Inc.,
G.R. No. 202454 [25 April 2017] …………………………………....... 27
SM Systems Corp. v. Camerino, G.R. No. 178591 [29 March 2017] ……... 29
Paradigm Development Corp. of the Philippines v. Bank of the Philippine
Islands, G.R. No. 191174 [07 June 2017] ….…………………………. 31
II. CONTRACTS
Philippine Stock Exchange, Inc. v. Litonjua, G.R. No. 204014

[05 December 2016] ….……………………………………………….. 33
Paradigm Development Corp. of the Philippines v. Bank of the Philippine
Islands, G.R. No. 191174 [07 June 2017] …………………………….. 34
KT Construction Supply, Inc. v. Philippine Savings Bank,
G.R. No. 228435 [21 June 2017] .……………………………………... 35
Province of Camarines Sur v. Bodega Glassware, G.R. No. 194199
[22 March 2017] ………………………………………………………. 36
United Alloy Philippines Corp. v. United Coconut Planters Bank,
G.R. No. 175949 [30 January 2017] …………………………………... 38
Kabisig Real Wealth Dev., v. Young Builders Corp., G.R. No. 212375
[25 January 2017] ….………………………………………………….. 39
Federal Builders, Inc. v. Power Factors, Inc., G.R. No. 211504
[08 March 2017] ………………………………………………………. 40
Ubas, Sr. v. Chan, G.R. No. 215910 [06 February 2017] ………………….. 41
Geromo v. La Paz Housing and Development Corp., G.R. No. 211175
[18 January 2017]…………………………………………………….... 42
Abenion v. Pilipinas Shell Petroleum Corp., G.R. No. 200749
[06 February 2017] ................................................................................. 44
Grande v. Philippine Nautical Training College, G.R. No. 213137
[01March 2017] ...................................................................................... 45
2
Pioneer Insurance and Surety Corp. v. APL Co. Pte. Ltd., G.R. No. 226345
[02 August 2017] ….…………………………………………………… 46
Cathay Land, Inc. v. Ayala Land, Inc., G.R. No. 210209 [09 August 2017] 48
Spouses Yu Hwa Ping v. Ayala Land, Inc., G.R. No. 173120
[26 July 2017] ……………………………………………….………… 49
Heirs of Donton v. Stier, G.R. No. 216491 [23 August 2017] ...…………... 51
III. SPECIAL CONTRACTS
A. SALES
Gonzalez, Jr. v. Peña, G.R. No. 214303 [30 January 2017] …………… 52
Arcaina v. Ingram, G.R. No. 196444 [15 February 2017] ……………... 53
Geromo v. La Paz Housing and Development Corp., G.R. No. 211175
[18 January 2017] ……………………………...………………….. 54
Pilipinas Makro, Inc. v. Coco Charcoal Philippines, Inc.,
G.R. No. 196419 [04 October 2017]
………………………………… 56
Felix Plazo Urban Poor Settlers Community Association, Inc. v. Lipat,
Sr., G.R. No. 182409 [20 March 2017] ……...………………......... 58
Dy v. Aldea, G.R. No. 219500 [09 August 2017] ……………………... 60
Spring Homes Subdivision Co., Inc. v. Spouses Tablada, Jr.,
G.R. No. 200009 [23 January 2017] ………………………………. 62
B. BARTER or EXCHANGE
C. LEASE
Hilltop Market Fish Vendors' Association, Inc. v. Yaranon,

G.R. No. 188057 [12 July 2017] ………………………………….. 63
Peralta v. Raval, G.R. No. 188467 [29 March 2017] …………………... 65
D. AGENCY
International Exchange Bank v. Spouses Briones, G.R. No. 205657

[29 March 2017] …………………………………………………... 67
E. PARTNERSHIP
Orbe v. Miaral, G.R. No. 217777 [16 August 2017] …………………... 69
F. TRUSTS
Ocampo v. Ocampo, Sr., G.R. No. 227894 [05 July 2017] ……………. 70
IV. CREDIT TRANSACTIONS
A. LOAN
Osmeña-Jalandoni v. Encomienda, G.R. No. 205578 [01 March 2017] . 71
B. DEPOSIT
C. GUARANTY & SURETYSHIP
3
D. PLEDGE
E. MORTGAGE
Mahinay v. Dura Tire & Rubber Industries, Inc., G.R. No. 194152
[05 June 2017] …………………….…………………………….… 73
Paradigm Development Corp. of the Philippines v. Bank of the
Philippine Islands, G.R. No. 191174 [07 June 2017] ……………... 75
Chua v. United Coconut Planters Bank, G.R. No. 215999
[16 August 2017] ..………………………………………………… 77
F. ANTICHRESIS
V. TORTS & DAMAGES
Reyes v. Doctolero, G.R. No. 185597 [02 August 2017] ………………….. 79

Pryce Properties Corp. v. Spouses Octobre, Jr., G.R. No. 186976
[07 December 2016] ............................................................................... 80
Abrogar v. Cosmos Bottling Co., G.R. No. 164749 [15 March 2017] …….. 82
Peralta v. Raval, G.R. No. 188467 [29 March 2017] ………………………. 84
Darines v. Quiñones, G.R. No. 206468 [02 August 2017] ………………… 85
Fuentes v. People, G.R. No. 186421 [17 April 2017] ……………………… 86
Kabisig Real Wealth Development, Inc. v. Young Builders Corp.,
G.R. No. 212375 [25 January 2017] ….……………………………….. 87
Pilipinas Makro, Inc. v. Coco Charcoal Philippines, Inc., G.R. No. 196419
[04 October 2017] ….………………………………………………….. 88
4
I. OBLIGATIONS
JOSE S. OCAMPO vs. RICARDO S. OCAMPO, SR.

G.R. No. 227894 [05 July 2017]
Ponente: Justice Velasco, Jr.
Third Division
Nature of Action: Partition and annulment of title
Facts: Petitioner Jose S. Ocampo and respondent Ricardo S. Ocampo are full-blooded
brothers being sons of the late Basilio Ocampo and Juliana Sunglao. The present case arose
from a complaint filed by respondent against petitioner for partition and annulment of TCT
No. 102822.
In the complaint, respondent alleged that he and petitioner are co-owners of the Subject
Property, which was a conjugal property left by their parents. The Subject Property was
originally registered in their parents' names. Respondent claimed that petitioner and his
wife conspired in falsifying his signature on a notarized Extra-Judicial Settlement with
Waiver dated September 1970, and effecting the transfer of the property in the name of
petitioner which was issued on November 24, 1970. Based on a finding by the NBI that
respondent's signature was forged, an Information was filed against petitioner, the notary
public, and two others. Respondent requested for partition of the property, but petitioner
refused to do so and secretly mortgaged the property.
Petitioner and his wife and argued that title became indefeasible one year after its issuance
on November 24, 1971, and that the action to annul title had prescribed since it was filed
only on June 29, 1992, or 21 years and 7 months from the issuance of the title.
The RTC ruled in favor of the defendant. Petitioner filed an appeal but the CA affirmed
the findings of RTC that action assails the validity of petitioner's title on the ground that it
is based on a forged document and that the action to annul the ESW is imprescriptible since
it is a void or inexistent contract. Thus, the petitioner filed a petition and argued that Even
assuming that the ESW is void or inexistent, the action filed by respondent is barred by the
doctrine of estoppel by laches. The ESW was executed and notarized on September 30,
1970. However, it was only on July 1, 1992 that respondent filed the present case for
partition and annulment of title, claiming that the ESW was forged.
Issue: Whether or not an action for annulment of title and partition of property filed
21 years and 7 months from the issuance of said title has already prescribed.
Ruling: No, the action for annulment and partition has not yet prescribed.
An action for reconveyance of a parcel of land based on implied or constructive trust

prescribes in ten (10) years, the point of reference being the date of registration of the deed
or the date of the issuance of the certificate of title over the property. By way of additional
exception, the Court, in a catena of cases, has permitted the filing of an action for
reconveyance despite the lapse of more than ten (10) years from the issuance of title. The
common denominator of these cases is that the plaintiffs therein were in actual possession
of the disputed land, converting the action from reconveyance of property into one for
quieting of title. Imprescriptibility is accorded to cases for quieting of title since the
plaintiff has the right to wait until his possession is disturbed or his title is questioned before
initiating an action to vindicate his right.
5
In the case before us, the certificate of title over the subject property was issued on
November 24, 1970. Yet, the complaint for partition and annulment of the title was only
filed on July 1, 1992, more than twenty (20) years since the assailed title was issued.
Respondent's complaint before the RTC would have been barred by prescription. However,
based on respondent's submission before the trial court, both petitioner and respondent
were residing at the subject property at the time the complaint was filed.
6
LAND BANK OF THE PHILIPPINES vs. EUGENIO DALAUTA
G.R. No. 190004 [08 August 2017]
Ponente: Justice Mendoza
En Banc
Nature of the Action: Petition for Review on Certiorari (Rule 45)

Original Case: Petition for Determination of Just Compensation
Facts: Respondent Eugenio Dalauta (Dalauta) was the registered owner of an agricultural
land in Florida, Butuan City. The land was placed by the Department of Agrarian Reform
(DAR) under compulsory acquisition of the Comprehensive Agrarian Reform Program
(CARP) as reflected in the Notice of Coverage, which Dalauta received on February 7,
1994. The compensation offered by Land Bank of the Philippines (LBP) was not
acceptable, thus Dalauta rejected the valuation for being too low. The case was referred to
the DAR Adjudication Board (DARAB) through the Provincial Agrarian Reform
Adjudicator (PARAD). The PARAD, through its resolution dated December 4, 1995,
sustained the LBP valuation. On February 28, 2000, Dalauta filed a petition for
determination of just compensation with the RTC, sitting as Special Agrarian Court (SAC).
He alleged that LBP's valuation of the land was inconsistent with the DAR rules and
regulations. The LBP argues that the PARAD resolution already attained finality when
Dalauta filed the petition for determination of just compensation before the RTC sitting as
SAC. The petition was filed beyond the 15-day prescriptive period or, specifically, more
than five (5) years after the issuance of the PARAD Resolution, as provided by DARAB
Rules of Procedure. Dalauta contended that the action is imprescriptible.
Issue: Whether or not the action filed before the SAC already prescribed.
Ruling: No. Prescriptive period is ten (10) years from the time of the taking; and that at
the time of the filing of judicial determination, there should be no pending administrative
action for the determination of just compensation.
While R.A. No. 6657 itself does not provide for a period within which a landowner can file
a petition for the determination of just compensation before the SAC, it cannot be
imprescriptible because the parties cannot be placed in limbo indefinitely. The Civil Code
settles such conundrum. Considering that the payment of just compensation is an obligation
created by law, it should only be ten (10) years from the time the landowner received the
notice of coverage. The Constitution itself provides for the payment of just compensation
in eminent domain cases. Under Article 1144, such actions must be brought within ten (10)
years from the time the right of action accrues.
In this case, Dalauta received the Notice of Coverage on February 7, 1994. He then filed a
petition for determination of just compensation on February 28, 2000. Clearly, the filing
date was well within the ten year prescriptive period under Article 1141.
7
MANUEL C. UBAS, SR. vs. WILSON CHAN
G.R. No. 215910 [06 February 2017]
Ponente: Justice Perlas-Bernabe
First Division
Nature of the Action: Collection for Sum of Money
Facts: Petitioner Manuel Ubas Sr. alleged that respondent Wilson Chan, doing business
under the name and style of UNIMASTER, was indebted to him in the amount of
P1,500,000.00 representing the purchased amount of the boulders, sand, gravel, and other
construction materials petitioner delivered to respondent. Three bank checks under the
account of Unimaster Conglomeration, Inc. amounting P500,000.00 each, payable to
“CASH”, were issued by respondent to petitioner but the same were dishonored because
of a stop payment order. Respondent admitted to having issued the subject checks but
claimed that they were not issued to Manuel, but to a certain Engr. Merelos for purposes
of replenishing the project's revolving fund. Respondent also claimed that petitioner was
not among their suppliers, and Manuel never submitted any bill attaching purchase orders
and delivery receipts for payments.
Issue: Whether or not there is an obligation arising from a verbal contract between
petitioner and respondent if the evidence presented is payment by the latter
using corporate checks.
Ruling: Yes, an obligation is presumed from the presentation of check as proof of thereof.
In Pacheco v. CA, the Court has expressly recognized that a check "constitutes an evidence
of indebtedness" and is a veritable "proof of an obligation." Hence, petitioner may rely on
the same as proof of respondent's personal obligation to him. Although the checks were
under the account name of Unimaster’s, it should be emphasized that the manner or mode
of payment does not alter the nature of the obligation. The source of obligation, as claimed
by petitioner in this case, stems from his contract with respondent. When they agreed upon
the purchase of the construction materials on credit for the amount of P1,500,000,00, the
contract between them was perfected. Therefore, even if corporate checks were issued for
the payment of the obligation, the fact remains that the juridical tie between the two (2)
parties was already established during the contract's perfection stage and, thus, does not
preclude the creditor from proceeding against the debtor during the contract's
consummation stage.
8
DANILO BARTOLATA, represented by his Attorney-in-Fact REBECCA R.
PILOT and/or DIONISIO P. PILOT vs. REPUBLIC OF THE PHILIPPINES,
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, DEPARTMENT OF
TRANSPORTATION AND COMMUNICATIONS, and TOLL REGULATORY
BOARD
G.R. No. 223334 [07 June 2017]
Third Division
Nature of the action: Complaint for collection of sum of money
Facts: Petitioner owned a parcel of in Taguig by virtue of an Order of Award from the
Bureau of Lands. RP acquired a portion of petitioner’s property for the development of the
Metro Manila Skyway Project. The parties agreed that in exchange for the acquisition,
petitioner would be paid just compensation. Subsequently, respondents appropriated
P1,480,000 in favor of petitioner as partial payment.
Since the date of initial payment, petitioner had, on numerous occasions, demanded from
respondents the balance but the latter refused to settle their outstanding obligation. This
prompted petitioner to file complaint for a sum of money.
RP argued that the land was be subject to the easement and servitudes provided for in
CA No. 141, as amended. The government also argued that it was entitled to an easement
of right of way without need of payment for just compensation, save for the value of
improvements existing
RTC ruled in favor of RP, however, found that petitioner is not under obligation to return
the initial payment made, the RTC considered the fact that respondents effectively entered
into a contract of sale with petitioner for the acquisition of the piece of land to be used for
the Metro Manila Skyway Project, which contract of sale was consummated by
respondents’ partial payment. By virtue of this consummated contract of sale, so the RTC
further ratiocinated, petitioner never opposed the taking of his property. He was made to
believe, as he did in fact believe, that he will be paid just compensation as agreed upon by
the parties. It cannot then be said that petitioner was illegally paid when he transacted with
the government in good faith and when he relied on respondents’ representations that he is
entitled to just compensation.
CA held that petitioner is not entitled to any form of compensation. Consequently, the CA
ordered Bartolata to return the partial payment made, lest he be unjustly enriched by
respondents’ use of the legal easement that under the law should have been free of charge
Issue: Whether or not the erroneous partial payment made to Bartolata by the RP is
governed by the provisions on solution indebiti.
Ruling: Yes. Sec. 112 of CA 141 precludes petitioner from claiming just compensation
for the government’s enforcement of its right of way. The contract allegedly entered by the
parties for the government’s acquisition of the affected portion of the property in exchange
for just compensation is then void ab initio for being contrary to law. Consequently,
petitioner has no right to collect just compensation for the government’s use of the 223
square meter lot. Anent the P1,480,000 partial payment already made by respondents, such
amount paid shall be governed by the provisions on solutio indebiti or unjust enrichment.
“Solutio indebiti” arises when something is delivered through mistake to a person who has
no right to demand it. It obligates the latter to return what has been received through
mistake.
9
As defined in Article 2154 of the Civil Code, the concept has two indispensable
requisites: first, that something has been unduly delivered through mistake; and second,
that something was received when there was no right to demand it.
As discussed above, petitioner was never entitled to collect and receive just compensation
for the government’s enforcement of its right of way, including the P1,480,000 payment
made by respondents. For its part, the government erroneously made payment to petitioner
because of its failure to discover earlier on that the portion of the property acquired was
subject to a statutory lien in its favor, which it could have easily learned of upon perusal of
petitioner’s Order of Award. These circumstances satisfy the requirements for solutio
indebiti to apply.
Regardless, respondents’ action to compel petitioner to return what was mistakenly

delivered is now barred by the doctrine of estoppel. The doctrine is based upon 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. The doctrine of estoppel springs
from equitable principles and the equities in the case.
In this case, petitioner was erroneously paid P1,480,000 on August 14, 1997 when
respondents appropriated the amount in his favor. However, because of respondents’
representation that the amount was a mere downpayment for just compensation, petitioner
never objected to the taking of his land and peacefully parted with his property, expecting
to be paid in full for the value of the taken property thereafter. As the events unfolded,
respondents did not make good their guarantee. Instead, they would claim for the recovery
of the wrongful payment after almost twelve (12) years, on July 9, 2009, as a counterclaim
in their Supplemental Answer. Indubitably, respondents are barred by estoppel from
recovering from petitioner the amount initially paid. A modification of the assailed CA
ruling is, therefore, in order.
10
PEOPLE OF THE PHILIPPINES vs. PORFERIO CULAS y RAGA
G.R. No. 211166 [05 June 2017]
First Division
Nature of the Action: Violation of Statutory Rape
Facts: The court finding Porferio Culas y Raga guilty beyond reasonable doubt of the
crime of Statutory Rape, the pertinent portion of which reads:
WHEREFORE, the Court ADOPTS the findings of fact and conclusions

of law in the July 25, 2013 Decision of the CA in CA-G.R. CEB-CR HC
No. 00380 and AFFIRMS said Decision finding accused appellant Porferio
Culas y Raga GUILTY beyond reasonable doubt of Statutory Rape under
paragraph 1 (d), Article 266-A in relation to Article 266-B (1) of the
Revised Penal Code, sentencing him to suffer the penalty of reclusion
perpetua without eligibility for parole, with MODIFICATIONS as to the
amounts of civil indemnity and damages awarded.
Thus, accused-appellant is ordered to pay the following amounts: (a)

P100,000.00 as civil indemnity; (b) P100,000.00 as moral damages; and (c)
P100,000.00 as exemplary damages, plus legal interest at the rate of six
percent (6%) per annum on the monetary awards from the dated of the
finality of this judgment until fully paid.
However, before an Entry of Judgment could be issued in the instant case, the Court
received a Letter from the Bureau of Corrections informing the Court of accused-
appellant's death. Under prevailing law and jurisprudence, accused-appellant's death prior
to his final conviction by the Court renders dismissible the criminal case against him.
Article 89 (1) of the Revised Penal Code provides that criminal liability is totally
extinguished by the death of the accused.
Issue: Whether or not the civil liability of Culas based solely on the offense committed
is extinguished upon his death pending appeal.
Ruling: Yes. In People v. Layag, the Court thoroughly explained the effects of the death
of an accused pending appeal on his liabilities, as follows:
1. Death of the accused pending appeal of his conviction extinguishes his criminal liability,
as well as the civil liability, based solely thereon. As opined by Justice Regalado, in this
regard, "the death of the accused prior to final judgment terminates his criminal liability
and only the civil liability directly arising from and based solely on the offense committed,
i.e., civil liability ex delicto in senso strictiore."
2. Corollarily, the claim for civil liability survives notwithstanding the death of accused, if
the same may also be predicated on a source of obligation other than delict. Article 1157
of the Civil Code enumerates these other sources of obligation from which the civil liability
may arise as a result of the same act or omission:
a) Law
b) Contracts
c) Quasi-contracts
d) x x x
e) Quasi-delicts
11
Thus, upon accused-appellant's death pending appeal of his conviction, the criminal action
is extinguished inasmuch as there is no longer a defendant to stand as the accused; the civil
action instituted therein for the recovery of the civil liability ex delicto is ipso facto
extinguished, grounded as it is on the criminal action. However, it is well to clarity that
accused-appellant's civil liability in connection with his acts against the victim, AAA, may
be based on sources other than delicts; in which case, AAA may file a separate civil action
against the estate of accused-appellant, as may be warranted by law and procedural rules.
12
OUR LADY OF LOURDES HOSPITAL vs. SPOUSES ROMEO AND REGINA
CAPANZANA
G.R. No. 189218 [22 March 2017]
Ponente: Chief Justice Sereno
First Division
Nature of the Action: Complaint for damages
Facts: Regina Capanzana, a 40-year-old nurse and clinical instructor pregnant with her
third child, was scheduled for her third caesarean section (C-section) on 2 January 1998.
However, a week earlier, she went into active labor and was brought to petitioner hospital
for an emergency C-section. She first underwent a pre-operative physical examination by
Dr. Ramos and Dr. Santos the same attending physicians in her prior childbirths. She was
found fit for anesthesia after she responded negatively to questions about tuberculosis,
rheumatic fever, and cardiac diseases. On that same day, she gave birth to a baby boy.
When her condition stabilized, she was discharged from the recovery room and transferred
to a regular hospital room. On the following day, or Regina complained of a headache, a
chilly sensation, restlessness, and shortness of breath. She asked for oxygen and later
became cyanotic. After undergoing an x-ray, she was found to be suffering from pulmonary
edema. She was eventually transferred to the Intensive Care Unit, where she was hooked
to a mechanical ventilator. The impression then was that she was showing signs of amniotic
fluid embolism. When her condition still showed no improvement, Regina was transferred
to the Cardinal Santos Hospital. The doctors thereat found that she was suffering from
rheumatic heart disease (pulmonary edema). This development resulted in cardio-
pulmonary arrest and, subsequently, brain damage. Regina lost the use of her speech,
eyesight, hearing and limbs. She was discharged, still in a vegetative state. Spouses
Capanzana filed a complaint for damages against petitioner hospital, along with co-
defendants: Dr. Miriam Ramos, an obstetrician/gynecologist; Dr. Milagros Joyce Santos,
an anesthesiologist; and Jane Does, the nurses on duty stationed on the second floor of
petitioner hospital on when Regina gave birth.
RTC rendered judgment, finding no negligence on the part of Dr. Ramos or Dr. Santos and
of the respondent hospital, however, the trial court ruled that there was negligence on the
part of the nurses which contributed to the injury of Regina since they failed to respond
immediately when Regina was experiencing shortness of breath.
CA found that nurses were negligent and the hospitable was liable. Accordingly, the CA
awarded to respondents exactly the same amounts decreed by the RTC. This time petitioner
hospital was deemed directly liable to pay for those amounts.
Issue: Whether or not the hospital may be held liable for the negligence of its
employees.
Ruling: Yes, the hospital is liable for the negligence of its employees.
For the negligence of its nurses, petitioner is thus liable under Article 2180 in relation to
Article 2176 of the Civil Code. Under Article 2180, an employer like petitioner hospital
may be held liable for the negligence of its employees based on its responsibility under a
relationship of patria potestas. The liability of the employer under this provision is "direct
and immediate; it is not conditioned upon a prior recourse against the negligent employee
or a prior showing of the insolvency of that employee. The employer may only be relieved
of responsibility upon a showing that it exercised the diligence of a good father of a family
in the selection and supervision of its employees. The rule is that once negligence of the
employee is shown, the burden is on the employer to overcome the presumption of
negligence on the latter's part by proving observance of the required diligence.
13
In the instant case, there is no dispute that petitioner was the employer of the nurses who
have been found to be negligent in the performance of their duties. This fact has never been
in issue. Hence, petitioner had the burden of showing that it exercised the diligence of a
good father of a family not only in the selection of the negligent nurses, but also in their
supervision.
On this point, the rulings of the RTC and the CA diverge. While the trial court found due
diligence in both the selection and the supervision of the nurses, the appellate court found
that petitioner proved due diligence only in the selection, but not in the supervision, of the
nurses. After a careful review of the records, we find that the preponderance of evidence
supports the finding of the CA that the hospital failed to discharge its burden of proving
due diligence in the supervision of its nurses and is therefore liable for their negligence. It
must be emphasized that even though it proved due diligence in the selection of its nurses,
the hospital was able to dispose of only half the burden it must overcome.
14
ALLAN S. CU vs. SMALL BUSINESS GUARANTEE AND FINANCE
CORPORATION THROUGH MR. HECTOR M. OLMEDILLO
G.R. No. 211222 [07 August 2017]
Ponente: Justice Caguioa
First Division
Nature of the Action: Petition for Review on Certiorari (Rule 45)

Original Case: Violation of B.P. 22
Facts: G7 bank and SB Corp. had an Omnibus Credit Line Agreement. Five postdated
checks were issued by G7 Bank through Cu and a co-signatory as payment to the credit
line. Prior to the maturity of postdated checks, G7 Bank was placed under receivership by
Philippine Deposit and Insurance Corporation (PDIC) and the latter closed all of the
former’s deposit accounts with other banks. Upon maturity, SB Corp. presented the checks
but all were dishonored for reason of “Account Closed”. SB Corp filed criminal cases for
violation of BP 22 against Cu and the co-signatory. The cases were dismissed.
Issue: Whether or not G7 Bank’s placement under receivership is a suspensive

condition that prevented its obligation from being due and demandable.
Ruling: No. What is suspended here is not the birth of the loan obligation since the debtor
had availed of the loan proceeds. What is subject to a suspensive condition is the right of
the creditor to demand the payment or performance of the loan - the exact amount due not
having been determined or liquidated as the same is subject to PDIC's distribution plan. In
the same vein, until then the debtor's obligation to pay or perform is likewise suspended.
After the closure of G7 Bank, its obligations to SB Corp., including those which the subject
checks were supposed to pay, are subject to the outcome of the bank's liquidation. The
exact consideration of the subject checks is, thus, contingent and any demand for the
payment of the obligation for which those checks were issued after closure and pending
liquidation of the bank is premature. Furthermore, there was no way for Cu to pay SB Corp.
the amount due on the subject checks or make arrangements for its payment in full within
five banking days from after receiving notice that such checks had been dishonored
pursuant to Section 2 of B.P. 22 because as of that time, the exact amount due on the subject
checks was not known or uncertain. Needless to add, the right of SB Corp. to pursue its
civil or monetary claim against G7 Bank before the liquidation court exists and is
undiminished.
15
SPOUSES AMADO O. IBAÑEZ and ESTHER R. IBAÑEZ vs. JAMES HARPER
as Representative of the Heirs of FRANCISCO MUÑOZ, SR., the REGISTER OF
DEEDS OF MANILA and the SHERIFF OF MANILA
G.R. No. 194272 [15 February 2017]
Ponente: Justice Jardeleza
Third Division
Nature of the Action: Injunction and Damages
Facts: The spouses Ibañez agreed to pay Francisco, Ma. Consuelo and Consuelo the total
amount of P3,000,000, with the initial payment of P2,000,000 to be sourced from the
proceeds of a GSIS loan and secured by the spouses Ibañez while the remaining balance of
P1,000,000 to be paid one year from the date of the Amended Compromise Agreement
adopted by the court as Hatol. The spouses Ibañez assigned the proceeds of the GSIS loan
and executed a real estate mortgage over their Puerto Azul property only in Ma. Consuelo
and Consuelo's favor, and claimed that the Amended Compromise Agreement had been
fully complied and the obligation is already extinguished.
Issue: Whether or not the contention of spouses Ibañez that their obligation is
extinguished by their assignment to co-creditors premised on a solidary
obligation tenable.
Ruling: No, the contention of spouses Ibañez is untenable.
There is nothing in the Hatol, and the Amended Compromise Agreement it is based on,
which shows a declaration that the obligation created was solidary. In any case, solidary
obligations cannot be inferred lightly. They must be positively and clearly expressed.
In this case, given that solidarity could not be inferred from the agreement, the presumption
under the law applies — the obligation is joint. As defined in Article 1208, a joint
obligation is one where there is a concurrence of several creditors, or of several debtors, or
of several debtors, or of several creditors and debtors, by virtue of which each of the
creditors has a right to demand, and each of the debtors is bound to render
compliance with his proportionate part of the prestation which constitutes the object
of the obligation. Each debtor answers only for a part of the whole liability and to each
obligee belongs only a part of the correlative rights as it is only in solidary obligations
that payment made to any one of the solidary creditors extinguishes the entire
obligation. This means that Francisco, Ma. Consuelo and Consuelo are each entitled to
equal shares in the P3,000,000 agreed upon in the Amended Compromise Agreement and
that payment to Consuelo and Ma. Consuelo will not have the effect of discharging the
obligation with respect to Francisco.
16
CHIQUITA BRANDS, INC. and CHIQUITA BRANDS INTERNATIONAL, INC.
vs. HON. GEORGE E. OMELIO, REGIONAL TRIAL COURT, DAVAO CITY,
BRANCH 14, SHERIFF ROBERTO C. ESGUERRA, CECILIO G. ABENION, and
1,842 OTHER PLAINTIFFS IN CIVIL CASE NO. 95-45
G.R. No. 189102 [07 June 2017]
Ponente: Justice Leonen
Second Division
Nature of the Action: Class suit for damages
Facts: Thousands of banana plantation workers from over 14 class suit for damages in the
United States against 11 foreign corporations, namely:
(1) Shell Oil Company;
(2) Dow Chemical Company;
(3) Occidental Chemical Corporation;
(4) Standard Fruit Company;
(5) Standard Fruit and Steamship Co.;
(6) Dole Food Company, Inc.;
(7) Dole Fresh Fruit Company;
(8) Chiquita Brands, Inc.;
(9) Chiquita Brands International, Inc.;
(10) Del Monte Fresh Produce, N.A.; and
(11) Del Monte Tropical Fruit Co.
They claimed to have been exposed to dibromochloropropane (DBCP) in the 1970s up to

the 1990s while working in plantations that utilized it. As a result, these workers suffered
serious and permanent injuries to their reproductive systems. The United States courts
dismissed the actions on the ground of forum non conveniens and directed the claimants to
file actions in their respective home countries.
Filipino banana plantation workers filed a complaint for damages against foreign
corporations: Chiquita Brands, Dow Chemical Company (Dow), Occidental Chemical
Corporation (Occidental), Shell Oil Company (Shell), Del Monte Fresh Produce, N.A., and
Del Monte Tropical Fruit Co. (collectively, Del Monte). Before pre-trial, Chiquita Brands,
Inc., Chiquita, Dow, Occidental, Shell, Del Monte entered into a worldwide settlement in
the United States with all the banana plantation workers. The parties executed a document
denominated as the “Compromise Settlement, Indemnity, and Hold Harmless Agreement”.
The Compromise Agreement provided, among others, that the settlement amount should
be deposited in an escrow account, which should be administered by a mediator.
The claimants moved for the execution of the judgment on compromise. Chiquita, Dow,
Occidental, Shell, and Del Monte opposed the execution and argued that they had already
complied with their obligation under the Compromise Agreement by depositing the
settlement amounts into an escrow account, which was administered by the designated
mediator Mr. Mills. Hence, there was nothing left for the court to execute. The claimants
moved to amend the Writ of Execution to include the subsidiaries of Chiquita, Dow,
Occidental, Shell, and Del Monte. The court directed the implementation of the Writ of
Execution. In the same Order, included Chiquita's subsidiaries and affiliates in the Writ of
Execution
Petitioners assail the validity of the following orders and writs on the ground that they were
issued with grave abuse of discretion: which modified the terms of the Writ of Execution
to include petitioners' subsidiaries, affiliates, controlled and related entities, successors,
and assigns doing business in the Philippines.
17
Petitioners further argue that the trial courts gravely abused their discretion in ordering
them to directly pay each of the claimants anew and in imposing solidary liability on their
"subsidiaries, affiliates, controlled and related entities, successors, and assigns."
Petitioners' obligation under the Compromise Agreement consisted of depositing the
settlement amount in an escrow fund. They were not required to release and to directly give
the settlement amount to each claimant since this duty was delegated to the mediator, Mr.
Mills. Therefore, it is unnecessary to prove that each claimant has received his or her
respective share in the settlement amount to determine whether the Compromise
Agreement has been satisfied. In addition, petitioners' subsidiaries and affiliates cannot be
held liable under Clause 25 of the Compromise Agreement. Their subsidiaries and affiliates
were not privy to the Compromise Agreement.
Issue: Whether or not petitioner’s subsidiaries and affiliates can be held solidarily
liable under the Clause 25 of the Compromise Agreement.
Ruling: No. Solidary liability under Philippine law is not to be inferred lightly but must
be clearly expressed. Under Article 1207 of the Civil Code, there is solidary liability when
"the obligation expressly so states, or when the law or the nature of the obligation requires
solidarity." The Compromise Agreement provided:
25. Affiliates and Successors. This Agreement and the rights, obligations,
and covenants contained herein shall inure to the benefit of and be binding
upon the Plaintiffs and Settling Defendants and their respective subsidiaries,
affiliates, controlled and related entities, successors, and assigns.
Clearly, the Compromise Agreement did not impose solidary liability on the parties'
subsidiaries, affiliates, controlled, and related entities, successors, and assigns but merely
allowed them to benefit from its effects
18
SPOUSES ROMEO PAJARES and IDA T. PAJARES vs. REMARKABLE
LAUNDRY AND DRY CLEANING, represented by ARCHEMEDES G. SOLIS
G.R. No. 212690 [20 February 2017]
Ponente: Justice Del Castillo
First Division
Nature of the Action: Breach of Contract and Damages
Facts: In a case filed by Respondent Remarkable Laundry and Dry Cleaning filed against
petitioners spouses Pajares in the RTC, the former prayed that the latter pay him the
incidental and consequential damages in the amount of P200,000 plus legal interest,
P30,000 as legal expenses, P30,000 as exemplary damages, P20,000 as cost of suit, and
other reliefs as just and equitable. The RTC considered the Complaint as one for damages
instead on one capable of pecuniary estimation. On certiorari, the Court of Appeals (CA)
concluded that the Complaint is incapable of pecuniary estimation and remanded the case
back to the RTC. According to CA, since the cause of action is breach of contract, the case
would only either be specific performance or rescission of contract.
Issue: Whether or not a case for breach of contract would only be either specific
performance or rescission of contract.
Ruling: No, breach of contract may also result in an action for damages.
True, breach of contract may give rise to a complaint for specific performance or rescission
of contract. In which case, the subject matter is incapable of pecuniary estimation and,
therefore, jurisdiction is lodged with the RTC. However, breach of contract may also be
the cause of action in a complaint for damages. Thus, it is not correct to immediately
conclude, as the CA erroneously did, that since the cause of action is breach of contract,
the case would only either be specific performance or rescission of contract because it may
happen, as in this case, that the complaint is one for damages.
19
PHILIPPINE STOCK EXCHANGE, INC. vs. ANTONIO K. LITONJUA AND
AURELIO K. LITONJUA, JR.
G.R. No. 204014 [05 December 2016]
Ponente: Justice Perez
Third Division
Nature of the Action: Collection of Sum of Money with Damages
Facts: The Litonjua Group confirmed the letter-agreement for the acquisition of the 85%
majority equity of Trendline's membership seat in PSE, a domestic stock corporation
licensed by the Securities and Exchange Commission (SEC) to engage in the business of
operating a market for the buying and selling of securities. The Litonjua Group paid PSE
the amount of P19,000,000 representing the advance payment for full settlement of
Trendline's outstanding obligation to PSE but PSE failed to lift the suspension imposed on
Trendline. The Litonjua Group requested PSE to reimburse the P19,000,000 it had paid
with interest, upon knowledge that the specific performance by PSE of transferring the
membership seat under the agreement will no longer be possible. PSE, despite demands by
the Litonjua Group, continuously refused to return the money received. PSE maintains that
it is not a party to the letter agreement and the proper recourse of Litonjua Group is to
demand reimbursement from Trendline following the provision of Article 1236.
Issue: Whether or not the proper recourse of Litonjua Group is to demand

reimbursement from Trendline following the provision of Article 1236.
Ruling: No. Reiterating Article 1236, the Creditor is not bound to accept the payment or
performance by a third person who has no interest in the fulfillment of the obligation unless
there is a stipulation to the contrary. Whoever pays for another may demand from the debtor
what he has paid, except that if he paid without the knowledge or against the will of the
debtor, he can recover only insofar as the payment has been beneficial to the debtor.
Contrary to the argument of PSE, we find inapplicable the provision of Article 1236
allowing the demand by the payor from the debtor of what was paid. It is correct that PSE
is not bound to accept the payment of a third person who has no interest in the fulfillment
of the obligation. However, the Litonjua Group is not a disinterested party. Since the
inception of the initial meeting between the Litonjua Group, PSE and Trendline, there was
already a clear understanding that the Litonjua Group has the intention to settle the
outstanding obligation of Trendline in consideration of its acquisition of 85% seat
ownership and PSE's lifting of suspension of trading seat.
20
GEORGIA OSMEÑA-JALANDONI vs. CARMEN A. ENCOMIENDA
G.R. No. 205578 [01 March 2017]
Ponente: Justice Peralta
Second Division
Nature of the Action: Collection for sum of money
Facts: Encomienda and Jalandoni were close friends. Jalandoni called Encomienda to ask
if she could borrow money for the search and rescue operation of her children in Manila.
Encomienda then went to Jalandoni's house and handed the money to the latter’s security.
Jalandoni again borrowed money to pay some of her bills and promised that she would pay
the same when her money in the bank matured. Thereafter, Encomienda went to Manila
and Jalandoni was requested for more money. When Jalandoni came back to Cebu, she
never informed Encomienda. Encomienda then later gave Jalandoni six (6) weeks to settle
her debts. Despite several demands, no payment was made. Jalandoni insisted that the
amounts given were not in the form of loans. Hence, Encomienda filed a complaint.
For her defense, Jalandoni claimed that there was never a discussion or even just an allusion
about a loan. She confirmed that Encomienda would indeed deposit money in her bank
account and pay her bills in Cebu. But when asked, Encomienda would tell her that she
just wanted to extend some help and that it was not a loan.
RTC dismissed the case. On appeal, CA reversed the decision of RTC and ordered
Jalandoni to pay Encomienda.
Issue: Whether or not Encomienda is entitled to be reimbursed for the amounts she
defrayed for Jalandoni.
Ruling: Yes. The second paragraph of Article 1236 of the Civil Code provides:
xxx Whoever pays for another may demand from the debtor what he has
paid, except that if he paid without the knowledge or against the will of
the debtor, he can recover only insofar as the payment has been
beneficial to the debtor.
Clearly, Jalandoni greatly benefited from the purportedly unauthorized payments. Thus,
even if she asseverates that Encomienda’s payment of her household bills was without her
knowledge or against her will, she cannot deny the fact that the same still inured to her
benefit and Encomienda must therefore be consequently reimbursed for it. Also, when
Jalandoni learned about the payments, she did nothing to express her objection to or
repudiation of the same, within a reasonable time. Even when she claimed that she was
prepared with her own money, she still accepted the financial assistance and actually made
use of it. While she asserts to have been upset because of Encomienda's supposedly
intrusive actions, she failed to protest and, in fact, repeatedly accepted money from her and
further allowed her to pay her driver, security guard, househelp, and bills for her cellular
phone, cable television, pager, gasoline, food, and other utilities. She cannot, therefore,
deny the benefits she reaped from said acts now that the time for restitution has come. The
debtor who knows that another has paid his obligation for him and who does not repudiate
it at any time, must corollarily pay the amount advanced by such third person.
21
SPOUSES MAY S. VILLALUZ and JOHNNY VILLALUZ, JR. vs. LAND BANK
OF THE PHILIPPINES and the REGISTER OF DEEDS FOR DAVAO CITY
G.R. No. 192602 [18 January 2017]
Third Division
Nature of the Action: Annulment for the Foreclosure Sale
Facts: Paula Agbisit (Agbisit), mother of petitioner May S. Villaluz (May), requested the
latter to provide her with collateral for a loan. At the time, Agbisit was the chairperson of
Milflores Cooperative and she needed P600,000 to P650,000 for the expansion of her
backyard cut flowers business. May convinced her husband, Johnny Villaluz (collectively,
the Spouses Villaluz), to allow Agbisit to use their land as collateral. The Spouses Villaluz
executed a Special Power of Attorney in favor of Agbisit authorizing her to, among others,
“negotiate for the sale, mortgage, or other forms of disposition a parcel of land” and “sign
in our behalf all documents relating to the sale, loan or mortgage, or other disposition of
the property.” The one-page power of attorney neither specified the conditions under
which the special powers may be exercised nor stated the amounts for which the subject
land may be sold or mortgaged.
Agbisit executed her own Special Power of Attorney, appointing Milflores Cooperative as
attorney-in-fact in obtaining a loan from and executing a real mortgage in favor of Land
Bank of the Philippines. On June 21, 1996, Milflores Cooperative, in a representative
capacity, executed a Real Estate Mortgage in favor of Land Bank in consideration of the
P3,000,000 loan to be extended by the latter. On June 24, 1996, Milflores Cooperative also
executed a Deed of Assignment of the Produce/Inventory as additional collateral for the
loan. Land Bank partially released one-third of the total loan amount to Milflores
Cooperative. On the same day, Agbisit borrowed the amount of P604,750 from Milflores
Cooperative. Land Bank released the remaining loan amount of P2,000,500 to Milflores
Cooperative.
Unfortunately, Milflores Cooperative was unable to pay its obligations to Land Bank. Thus,
Land Bank filed a petition for extra-judicial foreclosure sale with the Office of the Clerk
of Court of Davao City. Sometime in August, 2003, the Spouses Villaluz learned that an
auction sale covering their land had been set for October 2, 2003. Land Bank won the
auction sale as the sole bidder.
The Spouses Villaluz claim that the Special Power of Attorney they issued was mooted by
the execution of the Deed of Assignment of the Produce/Inventory by Milflores
Cooperative in favor of Land Bank. Their theory is that the additional security on the same
loan extinguished the agency because the Deed of Assignment "served as payment of the
loan of the Milflores Cooperative.
Issue: Whether or not the Deed of Assignment served as payment of the loan for the
satisfaction of indebtedness.
Ruling: No. The assignment, being intended to be a mere security rather than a satisfaction
of indebtedness, is not a dation in payment under Article 1245 and did not extinguish the
loan obligation. 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. As stated in the
second condition of the Deed of Assignment, the "Assignment shall in no way release the
ASSIGNOR from liability to pay the Line/Loan and other obligations, except only up to
the extent of any amount actually collected and paid to ASSIGNEE by virtue of or under
this Assignment. Clearly, the assignment was not intended to substitute the payment of
22
sums of money. It is the delivery of cash proceeds, not the execution of the Deed of
Assignment that is considered as payment. Absent any proof of delivery of such proceeds
to Land Bank, the Spouses Villaluz's claim of payment is without basis.
Neither could the assignment have constituted payment by cession under Article 1255 for
the plain and simple reason that there was only one creditor, Land Bank. Article 1255
contemplates the existence of two or more creditors and involves the assignment of all the
debtors’ property.
23
PHILIPPINE NATIONAL BANK vs. LILIBETH S. CHAN
G.R. No. 206037 [13 March 2017]
First Division
Nature of the Action: Petition for review on Certiorari

Original action: Unlawful detainer
Facts: Lilibeth S. Chan leased her commercial building to PNB for a period of five years
from. When the lease expired, PNB continued to occupy the property on a month-to month
basis. Meanwhile, Chan obtained loan from PNB which was secured by a REM constituted
over the leased property. In addition, respondent executed a Deed of Assignment over the
rental payments in favor of PNB. Consequently, PNB and Chan executed an "Amendment
to the REM by Substitution of Collateral" where the mortgage over the leased property was
released and substituted by a mortgage over a parcel of land located in Paco, Manila.
Chan filed a Complaint for Unlawful Detainer against PNB, alleging that the latter failed
to pay its monthly rentals. In its defense, PNB claimed that it applied the rental proceeds
as payment for respondent's outstanding loan which became due and demandable and PNB
explained that it received a demand letter from a certain Chua who claimed to be the new
owner of the leased property and requested that the rentals be paid directly to him until
PNB decides to vacate the premises or a new lease contract with Chua is executed. PNB
thus deposited the rentals in a separate non drawing savings account for the benefit of the
rightful party.
The MeTC ruled in favor of Chan and ordered PNB to pay the accrued rentals with interest
until PNB finally vacated the leased property.
The RTC affirmed the MeTC ruling and it found that Chan’s obligation to PNB "has
already been paid, notwithstanding the belated claim of the latter that there remains a
deficiency. In addition, the RTC held that PNB incurred delay "when despite demand, it
refused to pay and vacate the premises. As such, the RTC ruled that the respondent is
entitled to legal interest at 6% per annum and attorney's fees for having been compelled to
litigate to protect her interests.
Issue: Whether or not PNB properly consigned the disputed rental payments with
the Office of the Clerk of Court of MeTC Manila.
Ruling: No, PNB did not properly consigned the disputed rental payments with the Office
of the Clerk of Court of MeTC Manila. Consignation is the act of depositing the thing due
with the court or judicial authorities whenever the creditor cannot accept or refuses accept
payment. It generally requires a prior tender of payment. Under Article 1256 of the Civil
Code, consignation alone is sufficient even without a prior tender of payment a) when the
creditor is absent or unknown or does not appear at the place of payment; b) when he is
incapacitated to receive the payment at the time it is due; c) when, without just cause, he
refuses to give a receipt; d) when two or more persons claim the same right to collect; and
e) when the title of the obligation has been lost. For consignation to be valid, the debtor
must comply with the following requirements under the law:
1. there was a debt due

2. valid prior tender of payment, unless the consignation was made because of
some legal cause provided in Article 1256;
3. previous notice of the consignation has been given to the persons interested in
the performance of the obligation;
4. the amount or thing due was placed at the disposal of the court; and
5. after the consignation had been made, the persons interested were notified
thereof.
24
Failure in any of these requirements is enough ground to render a consignation ineffective.
In the present case, the records show that: first, PNB had the obligation to pay respondent
a monthly rental of P116,788.44, amounting to P1,348,643.92, from January 16, 2005 to
March 23, 2006; second, PNB had the option to pay the monthly rentals to respondent or
to apply the same as payment for respondent's loan with the bank, but PNB did neither;
third, PNB instead opened a non-drawing savings account at its Paco Branch under
Account No. 202- 565327-3, where it deposited the subject monthly rentals, due to the
claim of Chua of the same right to collect the rent; and fourth, PNB consigned the amount
of P1,348,643.92 with the Office of the Clerk of Court of the MeTC of Manila on May 31,
2006. Note that PNB's deposit of the subject monthly rentals in a non-drawing savings
account is not the consignation contemplated by law, precisely because it does not place
the same at the disposal of the court. Consignation is necessarily judicial; it is not allowed
in venues other than the courts. Consequently, PNB's obligation to pay rent for the period
of January 16, 2005 up to March 23, 2006 remained subsisting, as the deposit of the rentals
cannot be considered to have the effect of payment.
It is important to point out that PNB's obligation to pay the subject monthly rentals had
already fallen due and demandable before PNB consigned the rental proceeds with the
MeTC on May 31, 2006. Although it is true that consignment has a retroactive effect, such
payment is deemed to have been made only at the time of the deposit of the thing in court
or when it was placed at the disposal of the judicial authority. Based on these premises,
PNB's payment of the monthly rentals can only be considered to have been made no earlier
than May 31, 2006.
25
ILOILO JAR CORPORATION vs. COMGLASCO CORPORATION/AGUILA
GLASS
G.R. No. 219509 [18 January 2017]
Second Division
Nature of the Action: Civil action for breach of contract and damages
Facts: Petitioner Iloilo Jar Corporation, as lessor, and respondent Comglasco

Corporation/Aguila Glass, as lessee, entered into a lease contract over a portion of a
warehouse building. The term of the lease was for a period of three (3) years or until August
15, 2003.
On December 1, 2001, Comglasco requested for the pre-termination of the lease effective
on the same date. Iloilo Jar, however, rejected the request on the ground that the pre-
termination of the lease contract was not stipulated therein. Despite the denial of the request
for pre-termination, Comglasco still removed all its stock, merchandise and equipment
from the leased premises on January 15, 2002. From the time of the withdrawal of the
equipment, and notwithstanding several demand letters, Comglasco no longer paid all
rentals accruing from the said date
On September 14, 2003, Iloilo Jar sent a final demand letter to Comglasco, but it was again
ignored. Consequently, Iloilo Jar filed a civil action for breach of contract and damages
before the RTC on October 10, 2003.
Comglasco filed its Answer and raised an affirmative defense, arguing that by virtue of
Article 1267 of the Civil Code (Article 1267), it was released from its obligation from the
lease contract. It explained that the consideration thereof had become so difficult due to the
global and regional economic crisis that had plagued the economy. Likewise, Comglasco
admitted that it had removed its stocks and merchandise but it did not refuse to pay the
rentals because the lease contract was already deemed terminated. Further, it averred that
though it received the demand letters, it did not amount to a refusal to pay the rent because
the lease contract had been pre-terminated in the first place.
Issue: Whether or not Comglasco can rightfully invoke Article 1267 of the Civil Code
due to global and regional economic crisis that had plagued the economy.
Ruling: No, Comglasco's position fails to impress because Article 1267 applies only to
obligations to do and not to obligations to give. Thus, in Philippine National Construction
Corporation v. Court of Appeals, the Court expounded: Petitioner cannot, however,
successfully take refuge in the said article, since it is applicable only to obligations
"to do," and not to obligations "to give." An obligation "to do" includes all kinds of
work or service; while an obligation "to give" is a prestation which consists in the delivery
of a movable or an immovable thing in order to create a real right, or for the use of the
recipient, or for its simple possession, or in order to return it to its owner. The obligation
to pay rentals or deliver the thing in a contract of lease falls within the prestation "to
give". Considering that Comglasco's obligation of paying rent is not an obligation to do, it
could not rightfully invoke Article 1267 of the Civil Code. Even so, its position is still
without merit as financial struggles due to an economic crisis is not enough reason for the
courts to grant reprieve from contractual obligations. In COMGLASCO
Corporation/Aguila Glass v. Santos Car Check Center Corporation, the Court ruled that
the economic crisis which may have caused therein petitioner's financial problems is not
an absolute exceptional change of circumstances that equity demands assistance for the
debtor. It is noteworthy that Comglasco was also the petitioner in the above-mentioned
case, where it also involved Article 1267 to pre-terminate the lease contract.
26
CALIFORNIA MANUFACTURING COMPANY, INC. vs. ADVANCED
TECHNOLOGY SYSTEM, INC.
G.R. No. 202454 [25 April 2017]
First Division
Nature of the Action: Complaint for sum of money
Facts: CMCI leased from ATSI a Prodopak machine which was used to pack products in
20-ml. pouches. ATSI filed a Complaint for Sum of Money against CMCI to collect unpaid
rentals for the months of June, July, August, and September 2003. ATSI alleged that CMCI
was consistently paying the rents until June 2003 when the latter defaulted on its obligation
without just cause. CMCI moved for the dismissal of the complaint on the ground of
extinguishment of obligation through legal compensation
CMCI averred that ATSI was one and the same with Processing Partners and Packaging
Corporation (PPPC), which was a toll packer of CMCI products. CMCI alleged that PPPC
agreed to transfer the processing of CMCI's product line from its factory. CMCI advanced
a mobilization fund. PPPC allegedly committed to pay the amount in 12 equal instalments
deductible from PPPC's monthly invoice to CMCI. CMCI likewise claims that in a letter
Felicisima proposed to set off PPPC's obligation to pay the mobilization fund with the
rentals for the Prodopak machine. CMCI argued that the proposal was binding on both
PPPC and ATSI because Felicisima was an officer and a majority stockholder of the two
she allegedly represented to the new management of CMCI that she was authorized to
request the offsetting of PPPC's obligation with ATSI's receivable from CMCI.
Based on the above, CMCl argued that legal compensation had set in and that ATSI was
even liable for the balance of PPPC's unpaid obligation after deducting the rentals for the
Prodopak machine.
The trial court ruled that legal compensation did not apply because PPPC had a separate
legal personality from its individual stockholders, the Spouses Celones, and ATSI.
Moreover, there was no board resolution or any other proof showing that Felicisima's
proposal to set-off the unpaid mobilization fund with CMCI's rentals to ATSI for the
Prodopak Machine had been authorized by the two corporations. Consequently, the RTC
ruled that CMCI's financial obligation to pay the rentals for the Prodopak machine stood
and that its claim against PPPC could be properly ventilated in the proper proceeding upon
payment of the required docket fees.
On appeal by CMCI, the CA affirmed the trial court's ruling that legal compensation had
not set in because the element of mutuality of parties was lacking. Felicisima's proposal to
effect the offsetting of debts was limited to the obligation of PPPC.
Issue: Whether or not CMCI’s obligation to pay rental fee was extinguished through
legal compensation.
Ruling: No. CMCI’s obligation to pay rental fee is not extinguished through legal
compensation.
27
Article 1279 of the Civil Code provides: “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.”
The law, therefore, requires that the debts be liquidated and demandable. Liquidated debts
are those whose exact amounts have already been determine.
CMCI has not presented any credible proof, or even just an exact computation, of the
supposed debt of PPPC. It claims that the mobilization fund that it had advanced to PPPC
was in the amount of P4 million. Yet, Felicisima's proposal to conduct offsetting in her
letter pertained to a P3.2 million debt of PPPC to CMCI. Meanwhile, in its Answer to
ATSI's complaint, CMCI sought to set off its unpaid rentals against the alleged P l0 million
debt of PPPC. The uncertainty in the supposed debt of PPPC to CMCI negates the latter's
invocation of legal compensation as justification for its non-payment of the rentals for the
subject Prodopak machine.
28
SM SYSTEMS CORPORATION (formerly SPRINGSUN MANAGEMENT
SYSTEMS CORPORATION) vs. OSCAR CAMERINO, EFREN CAMERINO,
CORNELIO MANTILE, DOMINGO ENRIQUEZ AND HEIRS OF NOLASCO
DEL ROSARIO
G.R. No. 178591 [29 March 2017]
Ponente: Justice Reyes
Third Division
Nature of the Action: Action for redemption
Facts: Victoria Homes was the registered owner the subject lots. Since 1967, respondents
Oscar, Efren, Cornelio, Domingo and Nolasco herein represented by his heirs were
farmers-tenants of Victoria Homes, cultivating and planting rice and corn on the lots.
Victoria Homes, without notifying the farmers, sold the subject lots to Springsun, the
predecessor-in-interest of SMS and TCTs were issued in the name of Springsun, the latter
subsequently mortgaged the subject lots to Banco Filipino as security for its various loans.
When Springsun failed to pay its loans, the mortgage was foreclosed extra-judicially. At
the public auction sale, the lots were sold to Banco Filipino, being the highest bidder, but
they were eventually redeemed by Springsun.
The farmers filed an action for redemption complaint against Springsun and Banco
Filipino. The RTC rendered a decision in favor of the farmers authorizing them to redeem
the subject lots from Springsun. SMS refused to accept the redemption amount.
Later on, SMS and the farmers except Oscar executed a document, denominated as
Kasunduan, wherein the latter agreed to receive P300,000.00 each from the former, as
compromise settlement. However, SMS then filed a Motion to Hold Execution in
Abeyance on the Ground of Supervening Event.
The RTC denied SM System Management’s motion. On appeal. CA held that the
compromise agreement could not novate the Court's earlier decision because only four out
of five parties executed the agreement.
Issue: Whether or not the Kasunduan entered into by SM System Management and
the farmers effectively novated the court’s earlier judgment.
Ruling: No. In Heirs of Servando Franco v. Spouses Gonzales, he Court discussed

novation in this wise: A novation arises when there is a substitution of an obligation by a
subsequent one that extinguishes the first, either by changing the object or the principal
conditions, or by substituting the person of the debtor, or by subrogating a third person in
the rights of the creditor. For a valid novation to take place, there must be:
(a) a previous valid obligation;

(b) an agreement of the parties to make a new contract;
(c) an extinguishment of the old contract; and
(d) a valid new contract.
In short, the new obligation extinguishes the prior agreement only when the substitution is
unequivocally declared, or the old and the new obligations are incompatible on every point.
A compromise of a final judgment operates as a novation of the judgment obligation upon
compliance with either of these two conditions.
29
In the case at bar, SMS' obligation to allow redemption of the three parcels of land was
superseded by the terms of the compromise agreements executed with the four farmers.
SMS' new obligation consisted of the payment of P300,000.00 each to the four farmers
who, in turn, waived their redemption rights. Novation, thus, arose as the old obligation
became incompatible with the new.
30
PARADIGM DEVELOPMENT CORPORATION OF THE
PHILIPPINES vs. BANK OF THE PHILIPPINE ISLANDS
G.R. No. 191174 [07 June 2017]
Third Division
Nature of the Action: Complaint for Annulment of Mortgage and Damages
Facts: Sengkon Trading obtained loan from FEBTC. Two real estate mortgage (REM)
contracts were executed by PDCP to partially secure both Sengkon's obligations. FEBTC
approved the conversion of Sengkon's Omnibus Line to LC-TR Line and the change of the
account name to SENGKON TRADING, INC. (STI). Sengkon defaulted in the payment
of its loan obligations. Thus, FEBTC demanded payment from PDCP.
PDCP proposed to pay the obligations secured by its property, for the release of its
properties but FEBTC pressed for a comprehensive repayment scheme for the entirety of
Sengkon's obligations. Meanwhile, the negotiations were put on hold because BPI acquired
FEBTC and assumed the rights and obligations of the latter.
Upon verification with the Registry of Deeds, PDCP discovered that FEBTC extra-
judicially foreclosed the first and second mortgage without notice to it as mortgagor and
sold the mortgaged properties to FEBTC as the lone bidder. PDCP filed a Complaint for
Annulment of Mortgage and Damages against BPI, successor-in-interest of FEBTC.
The RTC agreed with PDCP that novation took place in this case, which resulted in
discharging the latter from its obligations as third-party mortgagor. It also nullified the
foreclosure proceedings because the original copies of the promissory notes (PNs) were
not presented in court and no notice of the extrajudicial foreclosure sale was given to PDCP
The CA reversed RTC’s decision and ruled that novation could not have taken place from
FEBTC's mere act of approving Sengkon's request to change account name from Sengkon
to STI. Hence, this petition
Issue: Whether or not novation took place when FEBTC approved Sengkon’s
request to change account name from Sengkon to Sengkon Trading Inc.
Ruling: No. The Court agrees with the CA that no novation took place in the present case.
Novation is a mode of extinguishing an obligation by changing its objects or principal
obligations, by substituting a new debtor in place of the old one, or by subrogating a third
person to the rights of the creditor. Article 1293 of the Civil Code defines novation as
"consists in substituting a new debtor in the place of the original one, [which] may be made
even without the knowledge or against the will of the latter, but not without the consent of
the creditor." However, while the consent of the creditor need not be expressed but may be
inferred from the creditor's clear and unmistakable acts, to change the person of the debtor,
the former debtor must be expressly released from the obligation, and the third person
or new debtor must assume the former's place in the contractual relation.
Thus, in Ajax Marketing and Development Corporation v. CA, the Court had already ruled
that:
The well-settled rule is that novation is never presumed. Novation will not
be allowed unless it is clearly shown by express agreement, or by acts of
equal import. Thus, to effect an objective novation it is imperative that the
new obligation expressly declare that the old obligation is thereby
extinguished, or that the new obligation be on every point incompatible with
the new one. In the same vein, to effect a subjective novation by a change
in the person of the debtor it is necessary that the old debtor be released
31
expressly from the obligation, and the third person or new debtor
assumes his place in the relation. There is no novation without such
release as the third person who has assumed the debtor's obligation becomes
merely a co-debtor or surety. (Emphasis ours)
In the present case, PDCP failed to prove by preponderance of evidence that Sengkon was
already expressly released from the obligation and that STI assumed the former's
obligation. Again, as correctly pointed out by the CA, the Deed of Assumption of
Line/Loan with Mortgage (Deed of Assumption) which was supposed to embody STI's
assumption of all the obligations of Sengkon under the line, including but not necessarily
limited to the repayment of all the outstanding availments thereon, as well as all applicable
interests and other charges, was not signed by the parties.
32
II. CONTRACTS
PHILIPPINE STOCK EXCHANGE, INC. vs. ANTONIO K. LITONJUA AND

AURELIO K. LITONJUA, JR.
G.R. No. 204014 [05 December 2016]
Ponente: Justice Perez
Third Division
Nature of the Action: Collection of Sum of Money with Damages
Facts: The Litonjua Group confirmed the letter-agreement for the acquisition of the 85%
majority equity of Trendline's membership seat in PSE, a domestic stock corporation
licensed by the Securities and Exchange Commission (SEC) to engage in the business of
operating a market for the buying and selling of securities. The Litonjua Group paid PSE
the amount of P19,000,000 representing the advance payment for full settlement of
Trendline's outstanding obligation to PSE but PSE failed to lift the suspension imposed on
Trendline. The Litonjua Group requested PSE to reimburse the P19,000,000 it had paid
with interest, upon knowledge that the specific performance by PSE of transferring the
membership seat under the agreement will no longer be possible. PSE, despite demands by
the Litonjua Group, continuously refused to return the money received.
Issue: Whether or not PSE is considered a party to the letter-agreement, which is a

contract between Litonjua Group and Trendline.
Ruling: No, PSE is not a party to the letter-agreement.
According to Article 1305 of the Civil Code, "a contract is a meeting of minds between
two persons whereby one binds himself, with respect to the other, to give something or
render some service." For a contract to be binding: there must be consent of the contracting
parties; the subject matter of the contract must be certain; and the cause of the obligation
must be established. Consent, as a requisite to have a valid contract, is manifested by the
meeting of the offer and the acceptance upon the thing and the cause which are to constitute
the contract. The offer must be certain and acceptance absolute. In corporations, consent is
manifested through a board resolution since powers are exercised through its board of
directors. The mandate of Section 23 of the Corporation Code is clear that unless otherwise
provided in the Code, "the corporate powers of all corporations shall be exercised, all
business conducted and all property of such corporations controlled and held by the board
of directors or trustees. . ."
There was no record of any board resolution authorizing PSE to bind itself to the said
obligations under the letter-agreement or to lift the suspension over Trendline's PSE seat
in accordance with the terms and conditions of the said letter-agreement. PSE was never
authorized by the Board to be bound by the obligations stated therein. From the foregoing,
PSE is not considered as a party to the letter-agreement.
33
G.R. No. 191174 [07 June 2017]
Third Division
contracts were executed by PDCP to partially secure both Sengkon's obligations. FEBTC
approved the conversion of Sengkon's Omnibus Line to LC-TR Line and the change of the
account name to SENGKON TRADING, INC. (STI). Sengkon defaulted in the payment
of its loan obligations. Thus, FEBTC demanded payment from PDCP.
Annulment of Mortgage and Damages against BPI, successor-in-interest of FEBTC. PDCP
alleged that FEBTC assured it that the mortgaged properties will only secure the Credit
Line sub-facility of the Omnibus Line. With this understanding, PDCP President Go
allegedly agreed to sign on two separate dates a pro-forma and blank REM, securing the
loan. PDCP, however, claimed that it had no intent to be bound under the second REM,
which was not intended to be a separate contract, but only a means to reduce registration
expenses. Moreover, PDCP averred that FEBTC allegedly requested it to sign a document
which would effectively extend the liability of the properties covered by the mortgage
beyond the Credit Line. Because of its refusal to sign said document, it surmised that this
must have been the reason why, as it later discovered, FEBTC registered not only the first
but also the second REM, contrary to the parties' agreement.
Issue: Whether or not FEBTC employed fraud when it gave the assurance that the
REMs would not be registered.
Ruling: No. Fraud refers to all kinds of deception - whether through insidious
machination, manipulation, concealment or misrepresentation that would lead an ordinarily
prudent person into error after taking the circumstances into account. In contracts, a fraud
known as dolo causante or causal fraud is basically a deception used by one party prior to
or simultaneous with the contract, in order to secure the consent of the other. Needless to
say, the deceit employed must be serious. In contradistinction, only some particular or
accident of the obligation is referred to by incidental fraud or dolo incidente, or that which
is not serious in character and without which the other party would have entered into the
contract anyway.
Under Article 1344 of the Civil Code, the fraud must be serious to annul or avoid a contract
and render it voidable. This fraud or deception must be so material that had it not been
present, the defrauded party would not have entered into the contract.
In the present case, even if FEBTC represented that it will not register one of the REMs,
PDCP cannot disown the REMs it executed after FEBTC reneged on its alleged promise.
As earlier stated, with or without the registration of the REMs, as between the parties
thereto, the same is valid and PDCP is already bound thereby. The signature of PDCP's
President coupled with its act of surrendering the titles to the four properties to FEBTC is
proof that no fraud existed in the execution of the contract. Arguably at most, FEBTC's act
of registering the mortgage only amounted to dolo incidente which is not the kind of fraud
that avoids a contract
34
KT CONSTRUCTION SUPPLY, INC., represented by WILLIAM
GO vs. PHILIPPINE SAVINGS BANK
G.R. No. 228435 [21 June 2017]
Second Division
Facts: KT Construction Supply, Inc. obtained a loan from respondent PS Bank. The loan
was evidenced by a Promissory Note. The note was signed by William K. Go (Go) and
Nancy Go-Tan (Go-Tan) as Vice-President/General Manager and Secretary/Treasurer of
KT Construction, respectively. In addition, both Go and Go-Tan signed the note in their
personal capacities.
The promissory note stipulated that the loan was payable within a period of sixty (60)
months from November 12, 2006 to October 12, 2011. PS Bank sent a demand letter to KT
Construction asking the latter to pay its outstanding obligation for its failure to pay despite
demand, PS Bank filed a complaint for sum of money against KT Construction.
The RTC ruled in favor of PS Bank. It opined that the promissory note expressly declared
that the entire obligation shall immediately become due and payable upon default in
payment of any installment and declared KT Construction, Go and Go-Tan solidary liable
and it ordered them to pay PS Bank the loan.
KT Construction appealed before the CA. The CA affirmed the RTC decision. It explained
that due to the acceleration clause, the loan became due and demandable upon KT
Construction's failure to pay an installment. In addition, the CA disagreed that the
promissory note was a contract of adhesion because KT Construction was not in any way
compelled to accept the terms of the promissory note.
Issues:
(1) Whether or not the promissory note is null and void because it was a contract
of adhesion.
(2) Whether or not the promissory note expressly declared that the entire
obligation shall immediately become due and demandable upon default in
payment of any installment.
Rulings:
(1) No. It may be true that KT Construction had no hand in its preparation. Still, it has
been ruled in a plethora of cases that a contract of adhesion is not invalid per se.
Contracts of adhesion, where one party imposes a ready-made form of contract on
the other, are not entirely prohibited. The one who adheres to the contract is, in
reality, free to reject it entirely; if he adheres, he gives his consent.
(2) Yes. It has long been settled that an acceleration clause is valid and produces legal
effects. In the case at bench, the promissory note explicitly stated that default in
any of the installments shall make the entire obligation due and demandable even
without notice or demand. Thus, KT Construction was erroneous in saying that PS
Bank’s complaint was premature on the ground that the loan was due only on
October 12, 2011. KT Construction's entire loan obligation became due and
demandable when it failed to pay an installment pursuant to the acceleration clause.
35
PROVINCE OF CAMARINES SUR, represented by GOVERNOR LUIS
RAYMUND F. VILLAFUERTE, JR. vs. BODEGA GLASSWARE, represented by
its owner JOSEPH D. CABRAL
G.R. No. 194199 [22 March 2017]
Third Division
Nature of the Action: Action for unlawful detainer
Facts: Petitioner donated around a parcel of land to the Camarines Sur Teachers'
Association, Inc. (CASTEA). The Deed of Donation included an automatic revocation
clause which states:
That the condition of this donation is that the DONEE shall use the above-
described portion of land subject of the present donation for no other
purpose except the construction of its building to be owned and to be
constructed by the above-named DONEE to house its offices to be used by
the said Camarines Sur Teachers' Association, Inc., in connection with its
functions under its charter and by-laws and the Naga City Teachers'
Association as well as the Camarines Sur High School Alumni Association,
PROVIDED FURTHERMORE, that the DONEE shall not sell, mortgage
or encumber the property herein donated including any and all
improvements thereon in favor of any party and provided, lastly, that the
construction of the building or buildings referred to above shall be
commenced within a period of one (1) year from and after the execution of
this donation, otherwise, this donation shall be deemed automatically
revoked and voided and of no further force and effect.
CASTEA accepted the donation in accordance with the formalities of law and complied
with the conditions stated in the deed. However, CASTEA entered into a Contract of Lease
with Bodega over the donated property.
Petitioner, revoked its donation, it asserted that CASTEA violated the conditions in the
Deed of Donation when it leased the property to Bodega. Thus, invoking the automatic
revocation clause in the Deed of Donation, petitioner revoked, annulled and declared void
the Deed of Donation. It appears from the record that CASTEA never challenged this
revocation.
Petitioner filed an action for unlawful detainer against Bodega. MTC ruled in favor of the
petitioner. On appeal, RTC reversed the MTC’s decision.
Petitioner went to CA but it disposed of the appeal on the ground that the petitioner cannot
demand that Bodega vacate the property. The CA explained that Bodega 's possession of
the property is based on its Contract of Lease with CASTEA. CASTEA, in sum, claims
ownership of the property by virtue of the Deed of Donation. According to the CA, while
petitioner alleges that CASTEA violated the conditions of the donation and thus, the
automatic revocation clause applies, it should have first filed an action for re-conveyance
of the property against CASTEA. The CA theorized that judicial intervention is necessary
to ascertain if the automatic revocation clause suffices to declare the donation revoked.
Issue: Whether or not the automatic revocation clause applies when CASTEA leased
the donated property to Bodega Glass.
Ruling: Yes, the automatic revocation of clause applies when CASTEA leased the donated
property to Bodega Glass.
36
This Court has affirmed the validity of an automatic revocation clause in donations in the
case of De Luna v. Abrigo promulgated in 1990. We explained the nature of automatic
revocation clauses by first identifying the three categories of donation. In De Luna, we said
that a donation may be simple, remuneratory or onerous. A donation is simple when the
cause is the donor's pure liberality. It is remuneratory when the donor "gives something to
reward past or future services or because of future charges or burdens, when the value of
said services, burdens or charges is less than the value of the donation." A donation is
onerous when it is "subject to burdens, charges, or future services equal (or more) in value
than that of the thing donated x x x." This Court found that the donation in De Luna was
onerous as it required the donee to build a chapel, a nursery, and a kindergarten. We then
went on to explain that an onerous donation is governed by the law on contracts and not by
the law on donations. It is within this context that this Court found an automatic revocation
clause as valid.
We explained in De Luna that Article 1306 of the Civil Code allows the parties "to establish
such stipulations, clauses, terms and conditions as they may deem convenient, provided
they are not contrary to law, morals, good customs, public order or public policy." In
contracts law, parties may agree to give one or both of them the right to rescind a contract
unilaterally. This is akin to an automatic revocation clause in an onerous donation. The
jurisprudence on automatic rescission in the field of contracts law therefore applies in an
automatic revocation clause. Hence, in De Luna, we applied our rulings in University of
the Philippines v. De los Angeles and Angeles v. Calasanz where we held that an automatic
rescission clause effectively rescinds the contract upon breach without need of any judicial
declaration.
37
UNITED ALLOY PHILIPPINES CORPORATION, SPOUSES DAVID C. CHUA
and LUTEN CHUA vs. UNITED COCONUT PLANTERS BANK
G.R. No. 175949 [30 January 2017]
Second Division
Nature of the Action: Sum of Money with Preliminary Attachment
Facts: The interest rates imposed on the subject promissory notes were made subject to
review and adjustment at the sole discretion and under the exclusive will of UCPB.
Moreover, aside from the Consolidated Statement of Account attached to the demand
letters addressed to petitioner spouses Chua and their co-defendants, no other competent
evidence was shown to prove the total amount of interest due on the above promissory
notes. Based on the attached Consolidated Statement of Account, UCPB has already
imposed a 24% interest rate on the total amount due on respondents' peso obligation for a
short period of six months.
Issue: Whether or not the stipulation of unilateral authority of UCPB to fix interest
rates in a contract is void.
Ruling: Yes, the stipulation is void.
Settled is the rule that any contract which appears to be heavily weighed in favor of one of
the parties so as to lead to an unconscionable result is void. Any stipulation regarding the
validity or compliance of the contract which is left solely to the will of one of the parties,
is likewise, invalid.
Moreover, courts have the authority to strike down or to modify provisions in promissory
notes that grant the lenders unrestrained power to increase interest rates, penalties and other
charges at the latter's sole discretion and without giving prior notice to and securing the
consent of the borrowers. This unilateral authority is anathema to the mutuality of contracts
and enable lenders to take undue advantage of borrowers. Although the Usury Law has
been effectively repealed, courts may still reduce iniquitous or unconscionable rates
charged for the use of money. Furthermore, excessive interests, penalties and other charges
not revealed in disclosure statements issued by banks, even if stipulated in the promissory
notes, cannot be given effect under the Truth in Lending Act.
38
KABISIG REAL WEALTH DEV., INC. and FERNANDO C. TIO vs. YOUNG
BUILDERS CORPORATION
G.R. No. 212375 [25 January 2017]
Second Division
Nature of the Action: Collection of Sum of Money
Facts: Kabisig Real Wealth Dev., Inc. (Kabisig), through Ferdinand Tio (Tio), contracted
the services of Young Builders Corporation (Young Builders) to supply labor, tools,
equipment, and materials for the renovation of its building in Cebu City. Young Builders
then finished the work and billed Kabisig for P4,123,320.95. However, despite numerous
demands, Kabisig failed to pay. It contended that no written contract was ever entered into
between the parties and it was never informed of the estimated cost of the renovation. Thus,
Young Builders filed an action for Collection of Sum of Money against Kabisig.
Issue: Whether or not the claim of Kabisig, that there is no basis to hold them liable
for damages because there is no written contract, holds water.
Ruling: No, Kabisig's claim as to the absence of a written contract between it and Young
Builders simply does not hold water. It is settled that once perfected, a contract is generally
binding in whatever form, whether written or oral, it may have been entered into, provided
the aforementioned essential requisites for its validity are present. Article 1356 of the Civil
Code provides:
Art. 1356. Contracts shall be obligatory in whatever form they may have
been entered into, provided all the essential requisites for their validity are
present. X X X
There is nothing in the law that requires a written contract for the agreement in question to
be valid and enforceable. Also, the Court notes that neither Kabisig nor Tio had objected
to the renovation work, until it was already time to settle the bill.
39
FEDERAL BUILDERS, INC. vs. POWER FACTORS, INC.
G.R. No. 211504 [08 March 2017]
Ponente: Justice Bersamin
Third Division
Nature of the Action: Request for arbitration in CIAC
Facts: Federal was the general contractor of the Bullion Mall under a construction
agreement with Bullion Investment and Development Corporation (BIDC). In 2004,
Federal engaged respondent Power Factors Inc. (Power) as its subcontractor for the electric
works at the Bullion Mall and the Precinct Building. On February 19, 2008, Power sent a
demand letter to Federal claiming the unpaid amount of P11,444,658.97 for work done by
Power for the Bullion Mall and the Precinct Building. Federal replied that its outstanding
balance under the original contract only amounted to P1,641,513.94, and that the demand
for payment for work done by Power after June 21, 2005 should be addressed directly to
BIDC. Nonetheless, Power made several demands on Federal to no avail.
Power filed a request for arbitration in the CIAC invoking the arbitration clause of the
Contract of Service. Federal moved to dismiss the case on the ground that CIAC had no
jurisdiction over the case inasmuch as the Contract of Service between Federal and Power
had been a mere draft that was never finalized or signed by the parties. Federal contended
that in the absence of the agreement for arbitration, the CIAC had no jurisdiction to hear
and decide the case
CIAC ordered Federal to pay Power. On appeal CA affirmed the CIAC’s decision. Federal
filed a petition and contended that there was no mutual consent and no meeting of the minds
between it and Power as to the operation and binding of the arbitration clause because they
rejected the draft service contract.
Issue: Whether or not the Contract of Service is binding between Federal and Power
despite being just a mere draft which was never finalized and signed by them.
Ruling: Yes. Under Article 1318 of the Civil Code, a valid contract should have the
following essential elements, namely:
(a) consent of the contracting parties;

(b) object certain that is the subject matter of the contract; and
(c) cause or consideration.
Moreover, a contract does not need to be in writing in order to be obligatory and effective
unless the law specifically requires so. Pursuant to Article 1356 and Article 1357 of the
Civil Code, contracts shall be obligatory in whatever form they may have been entered
into, provided that all the essential requisites for their validity are present. Indeed, there
was a contract between Federal and Power even if the Contract of Service was unsigned.
Such contract was obligatory and binding between them by virtue of all the essential
elements for a valid contract being present.
It clearly appears that the works promised to be done by Power were already executed
albeit still incomplete; that Federal paid Power P1,000,000.00 representing the originally
proposed downpayment , and the latter accepted the payment; and that the subject of their
dispute concerned only the amounts still due to Power.
40
MANUEL C. UBAS, SR. vs. WILSON CHAN
G.R. No. 215910 [06 February 2017]
First Division
Nature of Action: Collection for Sum of Money
Facts: In a Complaint for Sum of Money, petitioner Manuel Ubas Sr. alleged that
respondent Wilson Chan, doing business under the name and style of UNIMASTER, was
indebted to him in the amount of P1,500,000.00 representing the purchased amount of the
boulders, sand, gravel, and other construction materials petitioner delivered to respondent;
that three bank checks under the account of Unimaster Conglomeration, Inc. amounting
P500,000.00 each, payable to “CASH”, were issued by respondent to petitioner but the
same were dishonored because of a stop payment order; that petitioner sent respondent a
demand letter; that petitioner testify before the RTC that there was no written contract
between him and the respondent because of his trust on the latter. Respondent argues that
there is no privity of contract between them because the checks were under the account of
Unimaster.
Issue: Whether or not there was privity of contract between petitioner and
respondent even if the check issued as payment is under the account name of
another.
Ruling: Yes. That a privity of contract exists between petitioner and respondent is a
conclusion amply supported by the averments and evidence on record in this case. First,
the Court observes that petitioner was consistent in his account that he directly dealt with
respondent in his personal and not merely his representative capacity. In his Complaint,
petitioner alleged that "[Chan, doing business under the name and style of Unimaster] is
indebted to [him] in the amount [P1,500,000.00] xxx." Moreover, the demand letter, which
was admitted by respondent, was personally addressed to respondent and not to
Unimaster’s as represented by the latter. Also, it deserves mentioning that in his testimony
before the RTC, petitioner explained that he delivered the construction materials to
respondent absent any written agreement due to his trust on the latter.
41
ATTY. REYES G. GEROMO, FLORENCIO BUENTIPO, JR., ERNALDO
YAMBOT and LYDIA BUSTAMANTE vs. LA PAZ HOUSING AND
DEVELOPMENT CORPORATION and GOVERNMENT SERVICE
INSURANCE SYSTEM
G.R. No. 211175 [18 January 2017]
Second Division
Nature of the Action: Complaint for breach of contract
Facts: Petitioners acquired individual housing units of Adelina from La Paz, through GSIS
financing, as evidenced by their deeds of conditional sale. The properties were all situated
along the old Litlit Creek. In 1987, Geromo, Bustamante and Yambot started occupying
their respective residential dwellings. Buentipo, on the other hand, opted to demolish the
turned-over unit and build a new structure thereon. After more than two (2) years of
occupation, cracks started to appear on the floor and walls of their houses. The petitioners,
through the President of the Adelina 1-A Homeowners Association, requested La Paz to
take remedial action. They collectively decided to construct a riprap/retaining wall along
the old creek believing that water could be seeping underneath the soil and weakening the
foundation of their houses. The petitioners claimed that despite the retaining wall, the
condition of their housing units worsened as the years passed. When they asked La Paz to
shoulder the repairs, it denied their request, explaining that the structural defects could have
been caused by the 1990 earthquake and the renovations/improvements introduced to the
units that overloaded the foundation of the original structures.
The petitioners decided to leave their housing units in Adelina. Upon the request of the
petitioners, the Municipal Engineer of San Pedro and the Mines and Geosciences Bureau
of DENR conducted an ocular inspection of the subject properties. They found that there
was "differential settlement of the area where the affected units were constructed."
On the basis thereof, petitioners filed a complaint for breach of contract with damages
against La Paz and GSIS they all asserted that La Paz was liable for implied warranty
against hidden defects and that it was negligent in building their houses on unstable land.
GSIS asserted that the deeds of conditional sale were executed between La Paz and the
petitioners only and that its only participation in the transactions was to grant loans to the
petitioners for the purchase of their respective properties.
The HLURB Arbiter found La Paz liable for the structural damage on the petitioners'
housing units, explaining that the damage was caused by its failure to properly fill and
compact the soil on which the houses were built and to maintain a three (3) meter easement
from the edge of the creek as required by law. As to GSIS, the HLURB ruled that there
was no cogent reason to find it liable for the structural defects as it merely facilitated the
financing of the affected units.
HLURB Board of Commissioners set aside the decision and affirmed by the Office of the
President.
CA affirmed the ruling of the OP and found that the petitioners had no cause of action
against La Paz for breach of warranty against hidden defects as their contracts were merely
contracts to sell, the titles not having been legally passed on to the petitioners. It likewise
ruled that La Paz could not be held liable for damages as there was not enough evidence
on record to prove that it acted fraudulently and maliciously against the petitioners.
42
Issue: Whether or not GSIS, who merely facilitated the financing, is liable for the
structural defects.
Ruling: No, GSIS not liable. As to the petitioners' prayer to make GSIS jointly and
severally liable with La Paz, the Court finds that there is no legal basis to juridically bind
GSIS because it was never a party in the contracts between La Paz and the petitioners. The
housing loan agreements that the petitioners entered into with GSIS were separate and
distinct from the purchase contracts they executed with La Paz. GSIS merely agreed to pay
the purchase price of the housing unit that each petitioner purchased from La Paz. It was
merely the lender, not the developer.
43
CECILIO ABENION, et al. vs. PILIPINAS SHELL PETROLEUM
CORPORATION
G.R. Nos. 200749 & 208725 [06 February 2017]
Third Division
Nature of the Action: Damages
Facts: Section 28 of the Compromise Agreement between petitioners Abenion, et al., and
Shell Oil Company is worded as follows:
28. Affiliates and Successors

This agreement and the rights[,] obligations, and covenants contained,
herein shall inure to the benefit and be binding upon the plaintiffs and
settling defendants and their respective parent corporation, subsidiaries,
affiliates, controlled and related entities, successor and assigns.”
Respondent Pilipinas Shell Petroleum Corp. (PSPC) was brought into the case when
petitioners filed an ex parte motion alleging that PSPC was one of Shell Oil’s
“subsidiaries, affiliates, controlled and related entities, successor and assigns.” Petitioner
sought to enforce and satisfy judgment on compromise against PSPC, among others.
Issue: Whether or not the cited provision, which will work against and not in favor
of a third party, is nonetheless considered a stipulation pour autri.
Ruling: No, the cited provision is not a stipulation pour autri which could not be made to
work against the interest of others, in this case the perceived subsidiaries and affiliates.
Stipulation pour autri as explained by the Supreme Court in the case of Bonifacio Bros.,
Inc. et al. vs. Mora[, et al., is a provision in favor of a third person not a party to the
contract. x x x[.] Clearly, the circumstances rendered baseless the petitioners' pursuit
against the funds of PSPC, if only to enforce a judgment claim that they had against Shell
Oil.
44
FLORDALIZA LLANES GRANDE vs. PHILIPPINE NAUTICAL TRAINING
COLLEGE
G.R. No. 213137 [01 March 2017]
Second Division
Nature of the Action: Illegal Dismissal (Labor Case)
Facts: Petitioner Flor Grande alleged that the President of PNTC, through its Vice
President (VP), forced her to resign. Grande recalled the VP’s utterance in their
conversation as follows:
Kaya nga Flor eh, there is no point of staying. Mabait pa nga ako say o
[sic] eh, coz I believe in you, kaya lang Flor, utos ng Management eh. Alam
mo naman na okay naman tayo, maski ako, di ko gusto itong sinasabi ko
say o [sic], kaso I have to obey. I just want to carry out the order.
Because of this, the Labor Arbiter (LA) as affirmed by the NLRC ruled that Flor’s
subsequent resignation with the PNTC is not voluntary. However, when the case reached
the Court of Appeals (CA), the CA found no undue influence, there being no employment
of force from the language used by the VP.
Issue: Whether or not there was undue influence considering the words used in the
facts.
Ruling: Yes, there is undue influence.
We are not persuaded by the reasoning of the CA. While indeed there was no employment
of force from the language used by Pios, We are convinced that there was the presence of
undue influence exerted on petitioner for her to leave her employment. The conversation
showed that respondent wanted to terminate petitioner's employment but would want it to
appear that she voluntarily resigned. Undue influence is defined under Article 1337 of
the Civil Code, thus:
Art. 1337. There is undue influence when a person takes improper

advantage of his power over the will of another, depriving the latter of a
reasonable freedom of choice. The following circumstances shall be
considered: the confidential, family, spiritual, and other relations between
the parties, or the fact that the person alleged to have been unduly
influenced was suffering from mental weakness, or was ignorant or in
financial distress.
As correctly observed by the LA, petitioner's resignation immediately tendered after the
conversation is not voluntary. With an order coming from the President of PNTC, no less,
undue influence and pressure was exerted upon petitioner.
45
PIONEER INSURANCE and SURETY CORPORATION vs. APL CO. PTE. LTD.
G.R. No. 226345 [02 August 2017]
Second Division
Facts: Chillies Export House Limited, turned over to respondent APL 250 bags of chili
pepper for transport. The shipment was loaded on board M/V Wan Hai. In turn, BSFIL, as
consignee, insured the cargo with petitioner Pioneer Insurance. The shipment arrived at the
port of Manila and was temporarily stored at North Harbor. Later on, the bags of chili were
withdrawn and delivered to BSFIL. Upon receipt thereof, it discovered that 76 bags were
wet and heavily infested with molds. The shipment was declared unfit for human. As a
result, BSFIL made a formal claim against APL and Pioneer Insurance. Pioneer Insurance
paid BSFIL after evaluating the claim. Having been subrogated to all the rights and cause
of action of BSFIL, Pioneer Insurance sought payment from APL, but the latter refused.
This prompted Pioneer Insurance to file a complaint for sum of money against APL.
The lower court ruled in favor of Pioneer insurance. On appeal, CA reversed the decisions
of the trial court.
Pioneer Insurance filed a petition and insisted that the action filed within the one year
prescriptive period under the COGSA after BSFIL received the goods. It argues that the
nine-month period provided under the Bill of Lading was inapplicable because the Bill of
Lading itself states that in the event that such time period is found to be contrary to any
law compulsorily applicable, then the period prescribed by such law shall then apply.
Pioneer Insurance is of the view that the stipulation in the Bill of Lading is subordinate to
the COGSA. It asserts that while parties are free to stipulate the terms and conditions of
their contract, the same should not be contrary to law, morals, good customs, public order,
or public policy.
Issue: Whether or not the nine-month period provided under the Bill of Lading is
inapplicable because the Bill of Lading is contrary to law and subordinate to
the COGSA.
Ruling: Yes. It is elementary that a contract is the law between the parties and the
obligations it carries must be complied with in good faith. In Norton Resources and
Development Corporation v. All Asia Bank Corporation, the Court reiterated that when the
terms of the contract are clear, its literal meaning shall control, to wit:
The cardinal rule in the interpretation of contracts is embodied in the first

paragraph of Article 1370 of the Civil Code: if the terms of a contract are
clear and leave no doubt upon the intention of the contracting parties, the
literal meaning of its stipulations shall control.
After a closer perusal of the Bill of Lading, the Court finds that its provisions are clear and
unequivocal leaving no room for interpretation. In the Bill of Lading, it was categorically
stated that the carrier shall in any event be discharged from all liability whatsoever in
respect of the goods, unless suit is brought in the proper forum within nine (9) months after
delivery of the goods or the date when they should have been delivered. The same,
however, is qualified in that when the said nine-month period is contrary to any law
compulsory applicable, the period prescribed by the said law shall apply.
46
The present case involves lost or damaged cargo. It has long been settled that in case of
loss or damage of cargoes, the one-year prescriptive period under the COGSA applies. It
is at this juncture where the parties are at odds, with Pioneer Insurance claiming that the
one-year prescriptive period under the COGSA governs; whereas APL insists that the nine-
month prescriptive period under the Bill of lading applies.
A reading of the Bill of Lading between the parties reveals that the nine-month prescriptive
period is not applicable in all actions or claims. As an exception, the nine-month period is
inapplicable when there is a different period provided by a law for a particular claim or
action—unlike in Philippine American where the Bill of Lading stipulated a prescriptive
period for actions without exceptions. Thus, it is readily apparent that the exception under
the Bill of Lading became operative because there was a compulsory law applicable which
provides for a different prescriptive period. Hence, strictly applying the terms of the Bill
of Lading, the one-year prescriptive period under the COGSA should govern because the
present case involves loss of goods or cargo.
In finding so, the Court does not construe the Bill of Lading any further but merely applies
its terms according to its plain and literal meaning.
47
CATHAY LAND, INC. and CATHAY METAL CORPORATION vs. AYALA
LAND, INC., AVIDA LAND CORPORATION and LAGUNA TECHNOPARK,
INC.
G.R. No. 210209 [09 August 2017]
First Division
Nature of Action: Petition for Review on Certiorari (Rule 45)

Original Action: Complaint for Easement of Right of Way
Facts: The parties executed a Compromise Agreement where they "mutually agreed to
amicably settle all their claims as well as other claims and causes of action that they may
have against each other in relation to the [Complaint]." Specifically, the Ayala Group
granted a pedestrian, vehicular and utility easement of right of way in favor of the Cathay
Group in consideration of and subject to the latter's faithful compliance of its undertakings
in the Compromise Agreement. This included an undertaking, among others, that the
Cathay Group undertakes that it will not develop and will not allow the development
of one or more of high-rise buildings.
Ayala Group insisted on the definition of a "high-rise building," i.e., one which is at least
15 meters high, in the IRR of the Fire Code, while the Cathay Group sought the adoption
of prevailing industry standards and practices in determining what a "high-rise building"
is. The Cathay Group later on cited the definition of the term as found in the IRR of the
NBC and insisted that "as long as [it] does not construct any building beyond the twelve
(12) storey building height limit, or thirty-six (36) meters above the highest grade level,
there would be no violation of the Compromise Agreement x x x." The matter, however,
was never resolved.
Issue: Whether or not the parties to the Compromise Agreement can be bound by
the definition of “high-rise buildings” as provided by Fire Code and its
regulations.
Ruling: No. There is no clear definition in the Compromise Agreement as to what

constitutes a "high-rise building." A review of the records shows that the parties never
agreed on the definition of the term "high-rise buildings" when they entered into the
Compromise Agreement xxx
In this case, the records are bereft of proof to show that the parties had agreed to adopt the
definition of the term "high-rise building" found in the IRR of the Fire Code. The
Compromise Agreement, too, does not contain any provision that points to a reference to
the Fire Code as to the usage of the term.
Besides, the IRR of the Fire Code itself limits its scope to matters dealing with "life safety
from fires and similar emergencies in high-rise buildings," covering ''fire safety features in
construction and protection of exits and passageways and provisions for fire protection."
Consequently, the definition of the term "high-rise building" found therein is inapplicable
to this case, precisely because it is not in keeping with the nature and object of the
Compromise Agreement.
48
SPOUSES YU HWA PING and MARY GAW vs. AYALA LAND, INC.
G.R. Nos. 173120 & 173141 [26 July 2017]
Second Division
Nature of the Action: Annulment of title and surveys, recovery of possession and judicial
confirmation of title
Facts: Spouses Diaz submitted to the Land Registration Office a survey plan designated
as Psu-25909, which covered a parcel of land located Las Piñas. On October 21, 1925,
another survey plan was done covering the same parcel of land designated as Psu-47035
for a certain Mayuga. Then, on July 28, 1930, another survey was undertaken designated
as Psu-80886 for a certain Guico. Again, the survey indicated a different address but
covering the same lot. Finally, on March 6, 1931, an additional survey plan was executed
over the similar parcel of land designated as Psu-80886/SWO-20609 for a certain
Yaptinchay of the same land. OCT No. 242 and OCT No. 244 were issued in favor of
Yaptinchay pursuant to Psu-80886/SWO-20609. OCT No. 1609 covering lots pursuant to
Psu-47035 was issued in favor of Mayuga. Some of properties were sold to CPJ
Corporation resulting in the issuance of TCT No. 190713 in its name.
Andres Diaz filed a petition for original registration lot of Psu-25909, judgment was
rendered by the CFI for the original registration of Psu-25909. OCT No. 8510 was issued
in the name of Spouses Diaz. The Spouses Diaz subdivided their property covered by OCT
No. 8510 and conveyed to different third parties.
CPJ Corporation, then owner of the land covered by TCT No. 190713, which originated
from OCT No. 242, filed Land Registration Case against Spouses Diaz (Diaz Case) and
other respondents. It sought to review OCT No. 8510 in the names of Spouses Diaz on the
ground that title was issued through fraud because interested persons were not notified of
the application. Andres Diaz sold to Cabautan parcels of land, which originated from OCT
No. 8510. Later on, Spouses Yu acquired ownership over undivided half-portion of lot
originating from OCT No. 8510 of Spouses Diaz. The said property was co-owned by
Spouses Diaz with Cabautan resulting from civil cases decided by the CFI. Pursuant to the
transfers of land to Spouses Yu, TCT Nos. 39408 and 64549 were issued in their names.
On the other hand, CPJ Corporation transferred their interest in the subject properties to
third persons. Later, Ayala Corporation Inc. (ALI) obtained the subject properties from
Goldenrod, Inc. and PESALA. Pursuant to the merger of respondent Ayala Land, Inc. and
Las Piñas Ventures, Inc., ALI acquired all the subject properties.
Spouses Yu filed a complaint before the RTC against ALI for declaration of nullity of the
TCTs issued in the name of the latter (Yu case). Spouses Yu principally alleged that the
titles of ALI originated from OCT Nos. 242, 244, and 1609, which were covered by Psu-
80886 and Psu-47035. The said surveys were merely copied from Psu-25909, which was
prepared at an earlier date over the same parcel of land.
In Diaz Case, the RTC rendered against Spouses Diaz. It held that OCT No. 8510 and all
the transfer certificates issued thereunder must be cancelled. The court opined that Spouses
Diaz committed fraud when they filed their application for original registration of land
without informing the interested parties. It also held that Spouses Diaz knew that CPJ
Corporation had an appropriate interest over the subject properties.
In Yu Case. The RTC rule in favor of the Spouses Yu. The RTC also pointed out, and that
Psu-80886 and Psu-47035, which were the bases of OCT Nos. 242, 244, and 1609, were
marred with numerous and blatant errors. Thus, the court concluded that the titles of ALI
were void ab initio because their original titles were secured through fraudulent surveys.
49
CA ruled in favor of ALI and likewise held that Spouses Yu could no longer assert that the
titles of ALI were invalid because the one-year period to contest the title had prescribed.
Hence, ALI's titles were incontestable.
Issue: Whether or not the rule on prescriptibility apply on actions for reconveyance
based on void deed or contract.
Ruling: No. When the action for reconveyance is based on a void contract, as when there
was no consent on the part of the alleged vendor, the action is imprescriptible. The property
may be reconveyed to the true owner, notwithstanding the TCTs already issued in another's
name. The issuance of a certificate of title in the latter's favor could not vest upon him or
her ownership of the property; neither could it validate the purchase thereof which is null
nor void. Moreover, Spouses Yu's seek to declare void ab initio the titles of ALI and their
predecessors-in-interest as these were based on spurious, manipulated and void surveys. If
successful, the original titles of ALI's predecessors-in-interest shall be declared void and,
hence, they had no valid object to convey. It would result to a void contract or deed because
the subject properties did not belong to the said predecessors-in-interest. Accordingly, the
Yu case involves an action for reconveyance based on a void deed or contract which is
imprescriptible under Article 1410 of the New Civil Code.
50
THE HEIRS OF PETER DONTON, through their legal representative, FELIPE G.
CAPULONG vs. DUANE STIER and EMILY MAGGAY
G.R. No. 216491 [23 August 2017]
Second Division

Original Action: Complaint for Annulment of Title and Reconveyance of Property with
Damages
Facts: While Donton was in the United States, he discovered that herein respondents took
possession and control of the subject property. Donton was forced to return to the
Philippines, where he learned that respondents Stier (American citizen) and Maggay,
through alleged fraudulent means, were able to transfer the ownership of the subject
property in their names and TCT No. N-225996 was issued to that effect. He filed the
instant complaint for annulment of title and reconveyance of property with damages against
respondents and the Register of Deeds of Quezon City, alleging that the signature on the
Deed of Absolute Sale by virtue of which he purportedly sold the subject property to
respondents, was a forgery. However, forgery was not sufficiently proved. The issue of
Stier’s citizenship was also brushed aside because it only appears in the pleadings signed
by Stier and not by any other proof.
Issue: Whether or not a Deed of Sale whose forgery has not been proven may
nonetheless be declared void.
Ruling: Yes. The courts a quo erred in ruling that Stier' s American citizenship was not
established in this case, effectively rendering the sale of the subject property as to him void
ab initio, in light of the clear proscription under Section 7, Article XII of the Constitution
against foreigners acquiring real property in the Philippines xxx
Even if petitioners failed to prove that Donton's signature on the Deed of Absolute Sale
was a forgery, the sale of the subject property to Stier is in violation of the Constitution;
hence, null and void ab initio. A contract that violates the Constitution and the law is null
and void and vests no rights and creates no obligations. It produces no legal effect at all.
Furthermore, Stier is barred from recovering any amount that he paid for the subject
property, the action being proscribed by the Constitution.
Nevertheless, considering that petitioners failed to prove their allegation that Maggay, the
other vendee, had no capacity to purchase the subject property, the sale to her remains valid
but only up to the extent of her undivided one-half share therein. Meanwhile, the other
undivided one-half share, which pertained to Stier, shall revert to Donton, the original
owner, for being the subject of a transaction void ab initio. Consequently, the Deed of
Absolute Sale, together with TCT No. N-225996 issued in respondents' favor, must be
annulled only insofar as Stier is concerned, without prejudice, however, to the rights of any
subsequent purchasers for value of the subject property.
51
III. SPECIAL CONTRACTS
A. SALES
DELFIN C. GONZALEZ, JR. vs. MAGDALENO M. PEÑA, ALABANG

COUNTRY CLUB, INC., and MS. ARSENIA VERA
G.R. No. 214303, [30 January 2017]
First Division
Nature of Action: Payment of Agency Fees and Damages
Facts: Peña obtained the shares issued by Alabang Country Club, Inc. (ACCI) at a public
auction that has been declared void with finality. In a restitution proceeding, Gonzales
moved for execution, seeking restoration of his actual ACCI shares. The ACCI countered
that the club shares petitioner was claiming could no longer be returned to Gonzales,
because they had already been transferred by Peña to a third person, named Vera. The RTC
declared that there is impossibility of the actual restitution of the shares because the subject
property has been transferred to a third person, its return to petitioner is no longer possible.
Issue: Whether or not the RTC is correct in declaring the legal impossibility of the
actual restitution of sales.
Ruling: No, the RTC is incorrect.
Article 1505 of the Civil Code instructs that "x x x where goods are sold by a person who
is not the owner thereof, and who does not sell them under authority or with the consent of
the owner, the buyer acquires no better title to the goods than the seller had, unless the
owner of the goods is by his conduct precluded from denying the seller's authority to sell.
x x x." The Court itself settled that Peña acquired the properties by virtue of a null and void
execution sale. In effect, his buyers acquired no better title to the goods than he had.
Therefore, the RTC erred in appreciating the existence of legal impossibility in this case
on the mere pretext that the properties had already been transferred to third parties. By
virtue of Article 1505, the true owners of the goods are definitely not legally precluded
from claiming the ownership of their actual properties.
52
DASMARIÑAS T. ARCAINA and MAGNANI T. BANTA vs. NOEMI L. INGRAM,
represented by MA. NENETTE L. ARCHINUE
G.R. No. 196444 [15 February 2017]
Third Division
Nature of Action: Recovery of Ownership and Title to Real Property, Possession and
Damages
Facts: Arcaina is the owner of Lot No. 3230 (property). Arcaina’s attorney-in-fact, Banta,
entered into a contract with Ingram for the sale of the property. Banta showed Ingram and
the latter's attorney-in-fact the metes and bounds of the property and represented that Lot
No. 3230 has an area of more or less 6,200 square meters (sq. m.) per the tax declaration
covering it. The contract price was P1,860,000.00, with Ingram making installment
payments for the property. They also separately executed deeds of absolute sale over the
property in Ingram's favor, dated March 21, 2005 by Banta, and April 13, 2005 by Arcaina.
Subsequently, Ingram caused the property to be surveyed and discovered that Lot No. 3230
has an area of 12,000 sq. m. Upon learning of the actual area of the property, Banta
allegedly insisted that the difference of 5,800 sq. m. remains unsold. This was opposed by
Ingram who claims that she owns the whole lot by virtue of the sale.
Issue: Whether or not Lot 3230 was sold for a lump sum or for a unit price contract.
Ruling: Lot No. 3230 was sold for a lump sum. Ingram is entitled only to 6,200 square
meters.
In sales involving real estate, the parties may choose between two types of pricing
agreement: a unit price contract wherein the purchase price is determined by way of
reference to a stated rate per unit area (e.g., P1,000.00 per sq. m.) or a lump sum
contract which states a full purchase price for an immovable the area of which may be
declared based on an estimate or where both the area and boundaries are stated (e.g., P1
million for 1,000 sq. m., etc.). Here, the Deed of Sale executed by Banta on March 21,
2005 and the Deed of Sale executed by Arcaina on April 13, 2005 both show that the
property was conveyed to Ingram at the predetermined price of P1,860,000.00. There was
no indication that it was bought on a per-square-meter basis. Thus, Article 1542 of the Civil
Code governs the sale.
In a lump sum contract, a vendor is generally obligated to deliver all the land covered
within the boundaries, regardless of whether the real area should be greater or smaller than
that recited in the deed. However, in case there is conflict between the area actually covered
by the boundaries and the estimated area stated in the contract of sale, he/she shall do so
only when the excess or deficiency between the former and the latter is reasonable.
Applying Del Prado to the case before us, we find that the difference of 5,800 sq. m. is too
substantial to be considered reasonable. We note that only 6,200 sq. m. was agreed upon
between petitioners and Ingram. Declaring Ingram as the owner of the whole 12,000 sq. m.
on the premise that this is the actual area included in the boundaries would be ordering the
delivery of almost twice the area stated in the deeds of sale. Surely, Article 1542 does not
contemplate such an unfair situation to befall a vendor — that he/she would be compelled
to deliver double the amount that he/she originally sold without a corresponding increase
in price. In Asiain v. Jalandoni, we explained that "[a] vendee of a land when it is sold in
gross or with the description 'more or less' does not thereby ipso facto take all risk of
quantity in the land. The use of 'more or less' or similar words in designating quantity
covers only a reasonable excess or deficiency." Therefore, we rule that Ingram is entitled
only to 6,200 sq. m. of the property. An area of 5,800 sq. m. more than the area intended
to be sold is not a reasonable excess that can be deemed included in the sale.
53
ATTY. REYES G. GEROMO, FLORENCIO BUENTIPO, JR., ERNALDO
YAMBOT and LYDIA BUSTAMANTE vs. LA PAZ HOUSING AND
DEVELOPMENT CORPORATION and GOVERNMENT SERVICE
INSURANCE SYSTEM
G.R. No. 211175 [18 January 2017]
Second Division
Nature of the Action: Complaint for breach of contract
Facts: Petitioners Atty. Reyes G. Geromo (Geromo), Florencio Buentipo, Jr. (Buentipo),
Ernaldo Yambot (Yambot), and Lydia Bustamante (Bustamante) acquired individual
housing units of Adelina 1-A Subdivision from La Paz, through GSIS financing, as
evidenced by their deeds of conditional sale. The properties were all situated along the old
Litlit Creek. In 1987, Geromo, Bustamante and Yambot started occupying their respective
residential dwellings. Buentipo, on the other hand, opted to demolish the turned-over unit
and build a new structure thereon. After more than two (2) years of occupation, cracks
started to appear on the floor and walls of their houses. The petitioners, through the
President of the Adelina 1-A Homeowners Association, requested La Paz to take remedial
action. They collectively decided to construct a riprap/retaining wall along the old creek
believing that water could be seeping underneath the soil and weakening the foundation of
their houses. The petitioners claimed that despite the retaining wall, the condition of their
housing units worsened as the years passed. When they asked La Paz to shoulder the
repairs, it denied their request, explaining that the structural defects could have been caused
by the 1990 earthquake and the renovations/improvements introduced to the units that
overloaded the foundation of the original structures.
The petitioners decided to leave their housing units in Adelina. Upon the request of the
petitioners, the Municipal Engineer of San Pedro and the Mines and Geosciences Bureau
of DENR conducted an ocular inspection of the subject properties. They found that there
was "differential settlement of the area where the affected units were constructed."
On the basis thereof, petitioners filed a complaint for breach of contract with damages
against La Paz and GSIS they all asserted that La Paz was liable for implied warranty
against hidden defects and that it was negligent in building their houses on unstable land.
The HLURB Arbiter found La Paz liable for the structural damage on the petitioners'
housing units, explaining that the damage was caused by its failure to properly fill and
compact the soil on which the houses were built and to maintain a three (3) meter easement
from the edge of the creek as required by law. As to GSIS, the HLURB ruled that there
was no cogent reason to find it liable for the structural defects as it merely facilitated the
financing of the affected units.
HLURB Board of Commissioners set aside the decision and affirmed by the Office of the
President.
CA affirmed the ruling of the OP and found that the petitioners had no cause of action
against La Paz for breach of warranty against hidden defects as their contracts were merely
contracts to sell, the titles not having been legally passed on to the petitioners. It likewise
ruled that La Paz could not be held liable for damages as there was not enough evidence
on record to prove that it acted fraudulently and maliciously against the petitioners.
54
Issue: Whether or not La Paz should be held liable for the structural defects on its
implied warranty against hidden defects when it sold to petitioners the housing
units declared unfit for human habitation.
Ruling: Yes. Under the Civil Code, the vendor shall be answerable for warranty against
hidden defects on the thing sold under the following circumstances: Art. 1561. The vendor
shall be responsible for warranty against the hidden defects which the thing sold may have,
should they render it unfit for the use for which it is intended, or should they diminish its
fitness for such use to such an extent that, had the vendee been aware thereof, he would not
have acquired it or would have given a lower price for it; but said vendor shall not be
answerable for patent defects or those which may be visible, or for those which are not
visible if the vendee is an expert who, by reason of this trade or profession, should have
known them. Art. 1566. The vendor is responsible to the vendee for any hidden faults or
defects in the thing sold, even though he was not aware thereof. This provision shall not
apply if the contrary has been stipulated and the vendor was not aware of the hidden faults
or defects in the thing sold. For the implied warranty against hidden defects to be
applicable, the following conditions must be met:
a. Defect is Important or Serious

i. The thing sold is unfit for the use which it is intended
ii. Diminishes its fitness for such use or to such an extent that the buyer
would not have acquired it had he been aware thereof
b. Defect is Hidden
c. Defect Exists at the time of the sale
d. Buyer gives Notice of the defect to the seller within reasonable time
Here, the petitioners observed big cracks on the walls and floors of their dwellings within
two years from the time they purchased the units. The damage in their respective houses
was substantial and serious. They reported the condition of their houses to La Paz, but the
latter did not present a concrete plan of action to remedy their predicament. They also
brought up the issue of water seeping through their houses during heavy rainfall, but again
La Paz failed to properly address their concerns. The structural cracks and water seepage
were evident indications that the soil underneath the said structures could be unstable.
Verily, the condition of the soil would not be in the checklist that a potential buyer would
normally inquire about from the developer considering that it is the latter's prime obligation
to ensure suitability and stability of the ground.
55
PILIPINAS MAKRO, INC. vs. COCO CHARCOAL PHILIPPINES, INC. and LIM
KIM SAN
G.R. No. 196419 [04 October 2017]
Ponente: Justice Martires
Third Division
Nature of the Action: Complaint to collect the refund of the value of the encroached portion
of land
Facts: Makro bought a parcel of land owned by the respondent Coco Charcoal. On the
same date, Makro also purchased a land from Lim.
Coco Charcoal and Lim's parcels of land are contiguous and parallel to each other. Makro
engaged service a geodetic engineer, to conduct a resurvey and relocation of the two
adjacent lots. As a result of the resurvey, it was discovered that 131 square meters of the
lot purchased from Coco Charcoal had been encroached upon by the DPWH for its road
widening project and construction of a drainage canal to develop and expand the Davao-
Cotabato National Highway. On the other hand, 130 square meters of the land bought from
Lim had been encroached upon by the same DPWH project.
After several demands, Makro filed complaints against Coco Charcoal and Lim to collect
the refund of the purchased price.
RTC ruled in favor of Makro. On appeal, CA reversed the RTC decision. While the
appellate court agreed that the DPWH project encroached upon the frontal portions of the
properties, it ruled that Makro was not entitled to a refund. It explained that the warranty
expressed in Section (i) of the deeds of sale is similar to the warranty against eviction set
forth under Article 1548 of the Civil Code. As such, the CA posited that only a buyer in
good faith may sue to a breach of warranty against eviction. It averred that Makro could
not feign ignorance of the ongoing road widening project. The appellate court noted
Makro's actual knowledge of the encroachment before the execution of the sale constitutes
its recognition that Coco Charcoal and Lim's warranty against liens, easements, and
encumbrances does not include the respective 131 and 130 square meters affected by the
DPWH project, but covers only the remainder of the property
Issue: Whether or not the warrant expressed under the deed of sale is similar to the
warranty against eviction set forth under Art. 1548 of the Civil Code.
Ruling: No. A warranty is a collateral undertaking in a sale of either real or personal

property, express or implied; that if the property sold does not possess certain incidents or
qualities, the purchaser may either consider the sale void or claim damages for breach of
warranty. Thus, a warranty may either be express or implied.
An express warranty pertains to any affirmation of fact or any promise by the seller relating
to the thing, the natural tendency of which is to induce the buyer to purchase the same. It
includes all warranties derived from the language of the contract, so long as the language
is express-it may take the form of an affirmation, a promise or a representation. On the
other hand, an implied warranty is one which the law derives by application or inference
from the nature of transaction or the relative situation or circumstances of the parties,
irrespective of any intention of the seller to create it.  words, an express warranty is
different from an implied warranty in that the former is found within the very language of
the contract while the latter is by operation of law.
56
Thus, the CA erred in treating Section 4(i) of the deeds of sale as akin  to an implied
warranty against eviction. First, the deeds of sale categorically  state that the sellers assure
that the properties sold were free from any encumbrances which may prevent Makro from
fully and absolutely possessing the properties in question. Second, in order for the implied
warranty against eviction to be enforceable, the following requisites must concur: (a) there
must be a final judgment; (b) the purchaser has been deprived of the whole or part of the
thing sold; (c) said deprivation was by virtue of prior right to the sale made by the vendor;
and (d) the vendor has been summoned and made co-defendant in the suit for eviction at
the instance of the vendee. Evidently, there was no final judgment and no opportunity for
the vendors to have been summoned precisely because no judicial action was instituted
57
FELIX PLAZO URBAN POOR SETTLERS COMMUNITY ASSOCIATION,
INC. vs. ALFREDO LIPAT, SR. and ALFREDO LIPAT, JR.
G.R. No. 182409 [20 March 2017]
Third Division
Nature of the Action: Specific performance and damages
Facts: Lipat Sr., as represented by Lipat Jr., executed a Contract to Sell (CTS) in favor of
the petitioner, whereby the former agreed to sell to the latter two parcels of land. As
stipulated in the CTS, the petitioner had 90 days to pay in full the purchase price of the
subject properties; otherwise, the CTS shall automatically expire. The period, however,
elapsed without payment of the full consideration by the petitioner. According to the
petitioner, the 90-day period provided in the CTS was subject to the condition that the
subject properties be cleared of all claims from third persons considering that there were
pending litigations involving the same.
Upon the expiry of the 90-day period, and despite the failure to clear the subject properties
from the claims of third persons, the petitioner contributed financial assistance for the
expenses of litigation involving the subject properties with the assurance that the CTS will
still be enforced once the cases are settled.
After the termination of the cases involving the subject properties, however, the
respondents refused to enforce the CTS on the ground that the same had expired and
averred that there was no agreement to extend its term. Consequently, the petitioner filed
a case for Specific Performance and Damages with Prayer for the Issuance of Preliminary
Injunction against the respondents.
Issue: Whether or not petitioner can exact fulfillment from respondents without itself
having first complied with what is incumbent upon it to pay the full purchase
price in 90 days under the CTS.
Ruling: No. Indeed, the contract executed by the parties is the law between them.
Consequently, from the time the contract is perfected, all parties privy to it are bound not
only to the fulfillment of what has been expressly stipulated but likewise to all
consequences which, according to their nature, may be in keeping with good faith, usage
and law. Here, the pertinent provisions of the CTS, denominated as Contract/Agreement,
between the parties read:
1. The Parties hereby agree that for and in consideration of the amount of
TWO HUNDRED (P200.00) Pesos, [Philippine] Currency per square
meter, the VENDOR shall sell, cede, convey and transfer unto the
VENDEE, its assigns, or representative the above mentioned property; xxx
3. The registration fee for the mortgage to secure the loan to be obtained by
the vendee to finance the acquisition of the land shall be for the account of
the VENDEE; [and]
4. This Contract/Agreement shall automatically expire on the Ninetyth [sic]

(90) th [sic] day commencing from the aforesaid date.
58
Concededly, it is undisputed that the abovementioned contract is in the nature of a CTS.
As such, the obligation of the seller to sell becomes demandable only upon the occurrence
of the suspensive condition. In the present case, as correctly observed by the CA, the
suspensive condition is the payment in full of the purchase price by the petitioner prior to
the expiration of the 90-day period stipulated in their CTS, which the latter failed to do so.
The relevant portion of the CA's decision reads:
As shown in the case at bar, the [petitioner] did not pay the full purchase
price which is its obligation under the [CTS]. As the payment of the full
purchase price is a positive suspensive condition the non-fulfillment of
which prevents the perfection of a [CTS], it is indubitable that the subject
[CTS] is ineffective and without force and effect. x x x
In Spouses Garcia, et al. v. Court of Appeals, et al., the Court emphasized that in a CTS,
payment of the full purchase price is a positive suspensive condition, failure of which is
not considered a breach of the same but an occurrence that prevents the obligation of the
seller to transfer title from becoming effective. Here, there is no dispute that the petitioner
failed to pay the full purchase price stipulated in the CTS on the date fixed therein. Thus,
the respondents are within their rights to refuse to enforce the same.
59
MAMERTO DY vs. MARIA LOURDES ROSELL ALDEA
G.R. No. 219500 [09 August 2017]
Second Division
Nature of the Action: Complaint for declaration of nullity of deed of sale and transfer
certificate of title
Facts: Mamerto Dy is the owner of Lot covered by Transfer Certificate of Title (TCT) No.
T-24849. Nelson Dy the brother of Mamerto found out that the subject land had gone
through a series of anomalous transactions. The owner's duplicate copy of TCT No. T-
24849 was declared lost. As a result, a new owner's duplicate copy of the same TCT was
issued and the subject land was subsequently mortgaged. Mamerto, through his lawyer,
sent a letter to the Register of Deeds of informing the said office that his owner's duplicate
copy of TCT No. T-24849 was never lost and that he never mortgaged his property to
anyone.
Then Mamerto immediately filed a complaint against the Lourdes before

the barangay office. Lourdes, however, failed to attend the hearing. A certificate to file
action was subsequently issued.
Atty. Manolo D. Rubi, Deputy Register of Deeds, informed Nelson that TCT No. T-134753
covering the subject land was issued in Lourdes' name. Mamerto insisted that he never
executed any deed of sale in favor of Lourdes and that the signature appearing on the
purported deed of sale was not his authentic signature.
Lourdes alleged that she met the person impersonating Mamerto. She gave the impostor
the payment for the subject land. Thereafter, they signed the Deed of Sales. Thereafter,
Lourdes was informed that the impostor was dead and he had not given any money to
process the transfer of the subject land. So, she went to the Office of the Provincial Assessor
to process the payment and the transfer of title in her name. Eventually, the Register of
Deeds issued TCT No. T-134753 under her name. Consequently, Mamerto filed a
complaint for declaration of nullity of deed of sale and TCT No. T-134753, and recovery
of real property with injunction and damages.
RTC rule in favor of Mamerto. On appeal CA reversed the RTC’s decision. It declared that
Lourdes was an innocent purchaser for value and that a person dealing with registered land
is only charged with notice of the burdens on the property which are noted on the face of
the register or the certificate of title. It observed that the only annotation at the back of the
title was that it was mortgaged to Audie C. Uy.
Issue: Whether or not Lourdes is an innocent purchaser for value who is entitled to
the application of the Mirror Doctrine.
Ruling: No. Only an innocent purchaser for value may invoke the mirror doctrine. The
real purpose of the Torrens system of registration is to quiet title to land and to put a stop
to any question of legality of the title except claims which have been recorded in the
certificate of title at the time of registration or which may arise subsequent thereto. As a
consequence, the mirror doctrine provides that every person dealing with registered land
may safely rely on the correctness of the certificate of title issued therefor and is in no way
obliged to go beyond the certificate to determine the condition of the property. Every
registered owner and every subsequent purchaser for value in good faith holds the title to
the property free from all encumbrances except those noted in the certificate. As such, a
defective title, or one the procurement of which is tainted with fraud and misrepresentation
may be the source of a completely legal and valid title, provided that the buyer is an
innocent third person who, in good faith, relied on the correctness of the certificate of title,
or an innocent purchaser for value.
60
Thus, in order to resolve whether Lourdes holds an indefeasible title to the subject land, it
becomes necessary to determine whether she is an innocent purchaser for value.
Lourdes is not an innocent purchaser for value. In Nobleza v. Nuega, the Court defined an
innocent purchaser for value, to wit: An innocent purchaser for value is one who buys the
property of another, without notice that some other person has a right or interest in the
property, for which a full and fair price is paid by the buyer at the time of the purchase or
before receipt of any notice of claims or interest of some other person in the property. It is
the party who claims to be an innocent purchaser for value who has the burden of proving
such assertion, and it is not enough to invoke the ordinary presumption of good
faith. To successfully invoke and be considered as a buyer in good faith, the presumption
is that first and foremost, the "buyer in good faith" must have shown prudence and due
diligence in the exercise of his/her rights. It presupposes that the buyer did everything
that an ordinary person would do for the protection and defense of his/her rights and
interests against prejudicial or injurious concerns when placed in such a situation. The
prudence required of a buyer in good faith is not that of a person with training in law,
but rather that of an average man who 'weighs facts and circumstances without
resorting to the calibration of our technical rules of evidence of which his knowledge
is nil.' A buyer in good faith does his homework and verifies that the particulars are in
order — such as the title, the parties, the mode of transfer and the provisions in the
deed/contract of sale, to name a few. To be more specific, such prudence can be shown by
making an ocular inspection of the property, checking the title/ownership with the proper
Register of Deeds alongside the payment of taxes therefor, or inquiring into the minutiae
such as the parameters or lot area, the type of ownership, and the capacity of the seller to
dispose of the property, which capacity necessarily includes an inquiry into the civil status
of the seller to ensure that if married, marital consent is secured when necessary. In fine,
for a purchaser of a property in the possession of another to be in good faith, he must
exercise due diligence, conduct an investigation, and weigh the surrounding facts and
circumstances like what any prudent man in a similar situation would do.
In the case at bench, Lourdes was deficient in her vigilance as buyer of the subject land.
61
SPRING HOMES SUBDIVISION CO., INC., SPOUSES PEDRO L. LUMBRES
and REBECCA T. ROARING vs. SPOUSES PEDRO TABLADA, JR. and
ZENAIDA TABLADA
G.R. No. 200009 [23 January 2017]
Second Division
Nature of Action: Sum of Money, Specific Performance and Damages
Facts: Spouses Lumbres entered into a Joint Venture Agreement with Spring Homes
Subdivision Co., Inc., for the development of several parcels of land. Spring Homes
thereafter entered into a Contract to Sell with respondents, Spouses Tablada for the sale of
one of the parcels of land subject of the Joint Venture. Due to default, Spouses Lumbres
filed a collection suit against Spring Homes. Spouses Tablada on the other hand
constructed a house over the disputed parcel of land and occupied the same. In 1996, Spring
Homes and Spouses Tablada executed a Deed of Absolute Sale. Spouses Tablada later
discovered that the subject property was mortgaged to Premier Development Bank by
Spring Homes. Spouses Lumbres and Spring Homes entered into Compromise Agreement
approved by the RTC, whereby the subject property was conveyed by the latter to the
former. Exercising the powers by virtue of the approved Compromise Agreement, sent
demand letters to Spouses Tablada. In 2000, the Spouses Lumbres and Spring Homes
executed a Deed of Absolute Sale over the subject property, and as a result, a new title was
issued in the name of the Spouses Lumbres. In 2001, Spouses Tablada filed a Complaint
for Nullification of Title, Reconveyance and Damages against Spring Homes and Spouses
Lumbres.
Issue: Whether or not the Spouses Tablada should be considered as the true owner
or the subject real property
Ruling: Yes, the Spouses Tablada are the true owners.
The principle of primus tempore, potior jure (first in time, stronger in right) gains greater
significance in case of a double sale of immovable property. Thus, the Court has
consistently ruled that ownership of an immovable property which is the subject of a double
sale shall be transferred: (1) to the person acquiring it who in good faith first recorded it in
the Registry of Property; (2) in default thereof, to the person who in good faith was first in
possession; and (3) in default thereof, to the person who presents the oldest title, provided
there is good faith. The requirement of the law then is two-fold: acquisition in good faith
and registration in good faith. Good faith must concur with the registration -that is, the
registrant must have no knowledge of the defect or lack of title of his vendor or must not
have been aware of facts which should have put him upon such inquiry and investigation
as might be necessary to acquaint him with the defects in the title of his vendor. If it is
shown that a buyer was in bad faith, the alleged registration they have made amounted to
no registration at all.
Accordingly, in order for the Spouses Lumbres to obtain priority over the Spouses Tablada,
the law requires a continuing good faith and innocence or lack of knowledge of the first
sale that would enable their contract to ripen into full ownership through prior registration.
But from the very beginning, the Spouses Lumbres had already known of the fact that the
subject property had previously been sold to the Spouses Tablada, by virtue of a valid Deed
of Absolute Sale. In fact, the Spouses Tablada were already in possession of said property
and had even constructed a house thereon. Clearly then, the Spouses Lumbres were in bad
faith the moment they entered into the second Deed of Absolute Sale and thereafter
registered the subject property in their names. For this reason, the Court cannot, therefore,
consider them as the true and valid owners of the disputed property and permit them to
retain title thereto.
62
B. BARTER OR EXCHANGE
C. LEASE
HILLTOP MARKET FISH VENDORS' ASSOCIATION, INC. vs. HON.

BRAULIO YARANON, City Mayor, Baguio City, HON. GALO WEYGAN, City
Councilor and Chairman Anti-Vice Coordinating Task Force, and the CITY
GOVERNMENT OF BAGUIO
G.R. No. 188057 [12 July 2017]
Ponente: Justice Carpio
Second Division
Nature of the Action: Complaint for temporary restraining order
Facts: Hilltop and respondent City of Baguio, entered into a Contract of Lease over a lot
owned by the City of Baguio. The contract provided that the period of lease is 25 years,
renewable for the same period at the option of both parties and the annual lease rental is
P25,000, with the first payment commencing upon the issuance by the City Engineer's
Office of the Certificate of full occupancy of the building to be constructed by Hilltop on
the lot. Sometime in 1975, Hilltop constructed the building even though the City Engineer's
Office did not issue a Certificate, Hilltop's members occupied the Rillera building and
conducted business in it.
The City Council of Baguio issued a resolution rescinding the contract of lease with
Hilltop, for its continued failure to comply with its obligation to complete the Rillera
building and ordered the closure of the two upper floors of the Rillera building based on
the City Council's Resolution that the Rillera building failed to comply with the minimum
sanitary standards.
City Mayor Yaranon issued AO No. 30 to immediately close the Rillera building to have
it cleaned, sanitized and enclosed; to prevent illegal activities in it; and for its completion
and preparation for commercial use.
Hilltop filed with the RTC a complaint and praying the concerned office to issue the
Certificate to make the contract of lease effective.
Yaranon and respondent Galo Weygan alleged that the Certificate was not issued to Hilltop
because the Rillera building was not completed, and there were no provisions for electrical
and plumbing systems or facilities for conduct of regular business. In any case, they argued
that the issuance of the Certificate shall only signal the start of payment of annual lease
rental and not the effectivity of the contract.
The RTC found that the contract of lease automatically expired on 22 June 1999, because
the lease period of 25 years was expressly provided in the contract of lease dated 22 June
1974. The RTC did not give weight to Hilltop's contention that the Certificate authorized
it to occupy the lot because even without the Certificate, Hilltop already occupied the lot
as early as 22 June 1974 up to the present, which is beyond the 25-year period provided in
the contract of lease. The RTC further found the Rillera building unsanitary and dangerous
to those occupying it.
The CA affirmed the decision of the RTC and ruled that there was already a perfected
contract of lease: the issuance of the Certificate was imposed only on the performance of
the obligations contained in it. The CA held that Hilltop is estopped from claiming that the
period of lease has not begun, since it already occupied the Rillera building and conducted
business in it even without the Certificate.
63
Issue: Whether or not the issuance of certificate of full occupancy by the City
Engineer’s Office makes the contract of lease effective.
Ruling: No, in a contract of lease, one of the parties binds himself to give to another the
enjoyment or use of a thing for a price certain, and for a period which may be definite or
indefinite. Being a consensual contract, a lease is perfected at the moment there is a meeting
of the minds upon the thing and the cause or consideration which are to constitute the
contract. Thereafter, the lessor is obliged to deliver the thing which is the object of the
contract in such a condition as to render it fit for the use intended, and the lessee is obliged
to use the thing leased as a diligent father of a family, devoting it to the use stipulated or
that which may be inferred from the nature of the thing leased.
In a contract of lease, the cause or essential purpose is the use and enjoyment of the thing.
The thing or subject matter of the contract in this case was clearly identified and agreed
upon as the lot where the building would be constructed by Hilltop. The consideration were
the annual lease rental and the ownership of the building upon the termination of the lease
period. Considering that Hilltop and the City of Baguio agreed upon the essential elements
of the contract, the contract of lease had been perfected.
From the moment that the contract is perfected, the parties are bound to fulfill what they
have expressly stipulated. Thus, the City of Baguio gave the use and enjoyment of its lot
to Hilltop. Both the RTC and the CA found that upon the execution of the contract on 22
June 1974, Hilltop took possession of the lot and constructed the Rillera building on it.
Thereafter, Hilltop's members occupied the Rillera building and conducted business in it
up to the present. The findings of fact of the RTC and the CA are final and conclusive and
cannot be reviewed on appeal by this Court.
Since Hilltop exercised its right as lessee based on the contract of lease and the law, it has
no basis in claiming that the contract of lease did not commence.
64
RENATO MA. R. PERALTA vs. JOSE ROY RAVAL
G.R. Nos. 188467 & 188764 [29 March 2017]
Third Division
Nature of the Action: Complaint for rescission of contract of lease
Facts: Spouses Arzaga, as lessors, entered into a Contract of Lease with Peralta, as lessee,
over the subject lots and the improvements. Spouses Arzaga and Peralta agreed on a lease
term of 40 years. Raval came into the picture after Flaviano Jr. being an adopted son of
Spouses Arzaga assigned to him via a Deed of Assignment all his interests, rights and
participation in the subject properties. Peralta refused to recognize the validity of the
assignment to Raval, prompting him to still deposit his rental payments for the account of
Flaviano Jr.
Raval filed a complaint for the rescission of the lease agreement, an order upon Peralta to
vacate the subject properties, payment of back rentals, and award of moral, exemplary and
nominal damages, plus attorney's fees and costs of suit.
Peralta opposed the complaint and sought its dismissal, as he insisted that Raval was not
his lessor, and thus was not a real party-in-interest to the case. The supposed assignment
between Flaviano Jr. and Raval was allegedly void considering that he was not consulted
thereon and his prior approval thereto was not obtained. Moreover, notwithstanding an
assignment, Raval did not have the right, power and authority to seek the rescission of the
contract of lease that was executed 24 years prior to the filing of the complaint. Peralta had
also faithfully complied with his obligations under the lease.
RTC ruled that rescission should be denied because Peralta had been, depositing his
monthly rentals in the bank accounts of Raval’s wife. Peralta, then, was not remiss in the
payment of rentals. Neither was there any other substantial breach nor a "blatant refusal"
on Peralta's part to comply with his obligations as lessee.
Raval's appeal was granted in part and orders to pay Raval rental fee and moral damages.
Although the appellate court still denied Raval's plea for rescission. The CA sustained the
validity of the deed of assignment between Flaviano Jr. and Rava, however, the latter did
not appear to be capable of returning to Peralta the rental payments that were paid prior to
the assignment of rights, the CA declared a rescission unfeasible. Rescission creates the
obligation to return the object of the contract; thus, it can be carried out only when the one
who demands rescission can return whatever he may be obliged to restore. It would also be
unjust to Peralta if rescission were allowed, considering that he had complied with his
obligations as a lessee for more than 20 years.
Issue: Whether or not Raval may ask for the rescission of the contract of lease.
Ruling: No, Raval cannot ask for the rescission of the contract of lease. Considering that
the subject contract of lease provided for a 40-year term and was executed in 1974, the
agreement had already terminated in 2014. The issue of whether or not the lease should be
ordered rescinded at this point in time, to the end that it would be declared of no further
effect, is thus already moot and academic. "A moot and academic case is one that ceases
to present a justiciable controversy by virtue of supervening events, so that a declaration
thereon would be of no practical value. As a rule, courts decline jurisdiction over such case,
or dismiss it on ground of mootness." The Court, nonetheless, still finds it needed to address
other matters that are intertwined with the issue of rescission, especially as the termination
of the lease is not the only necessary consequence of rescission. These other issues include
the allegations of prescription, the award of unpaid rentals plus moral damages, and
Peralta's counterclaim against Raval.
65
There are various provisions under the NCC that apply to rescissions of contracts. Among
these are Article 119 on the power to rescind in reciprocal obligations, Article 1380 on
contracts validly agreed upon by parties to be rescissible, Article 1381on rescissible
contracts under the law, Article 1389 on prescription of actions for rescission, and Article
1592 on rescission in sale of immovable property. It must be emphasized though that
specifically on the matter of rescission of lease agreements, Article 1659 of the NCC
applies as a rule. It reads: Article 1659. If the lessor or the lessee should not comply with
the obligations set forth in Articles 1654 and 1657, the aggrieved party may ask for the
rescission of the contract and indemnification for damages, or only the latter, allowing the
contract to remain in force. Article 1654 referred to in Article 1659 pertains to the
obligations of a lessor in a lease agreement. Article 1657, on the other hand, enumerates
the obligations of a lessee, as it provides:
Article 1657. The lessee is obliged:
(1) To pay the price of the lease according to the terms stipulated;
(2) To use the thing leased as a diligent father of a family, devoting it to the use
stipulated; and in the absence of stipulation, to that which may be inferred
from the nature of the thing leased, according to the custom of the place;
(3) To pay expenses for the deed of lease.
Given the rules that exclusively apply to leases, the other provisions of the NCC that deal
with the issue of rescission may not be applicable to contracts of lease.
66
D. AGENCY
INTERNATIONAL EXCHANGE BANK now UNION BANK OF THE

PHILIPPINES vs. SPOUSES JEROME and QUINNIE BRIONES, and JOHN DOE
G.R. No. 205657 [29 March 2017]
Second Division
Nature of the Action: Complaint for replevin and sum of money
Facts: Spouses Briones took out a loan from iBank to purchase a BMW Z4 Roadster. The
Spouses Briones executed a promissory note with chattel mortgage that required them to
take out an insurance policy on the vehicle. The promissory note also gave iBank, as the
Spouses Briones' attorney-in-fact, irrevocable authority to file an insurance claim in case
of loss or damage to the vehicle. The insurance proceeds were to be made payable to iBank.
The mortgaged BMW Z4 Roadster was carnapped and the Spouses Briones declared the
loss to iBank, which instructed them to continue paying the next three monthly installments
"as a sign of good faith," a directive they complied with. After the Spouses Briones finished
paying the three month installment, iBank sent them a letter demanding full payment of
the lost vehicle. The Spouses Briones submitted a notice of claim with their insurance
company, which denied the claim due to the delayed reporting of the lost vehicle.
RTC dismissed iBank’s complaint for replevin and/or sum of money against the
respondents.
The Court of Appeals affirmed RTC’s decision and stated that as the Spouses Briones'
agent, iBank was bound by its acceptance to carry out the agency. However, instead of
filing an insurance claim, iBank opted to collect the balance of Spouses Briones' loan. By
not looking after the interests of its principal, the Court of Appeals ruled that iBank should
be held liable for the damages suffered by Spouses Briones. The Court of Appeals likewise
RTC’s ruling that "the denial of the insurance claim for delayed filing was a direct
consequence of the bank's inaction in not filing the insurance claim.
Petitioner appealed and claimed that it is entitled to recover the mortgaged vehicle or, in
the alternative, to collect a sum of money from respondents because of the clear wording
of the promissory note with chattel mortgage executed by respondents and insist that it is
entitled to the award of damages. Likewise maintained that the insurance coverage taken
on the vehicle is "only an aleatory alternative that respondents are entitled to if their claim
is granted by the insurance company. Petitioner asserts that it was the duty of the
respondents to file a claim with the insurance company. Thus, they should not be allowed
to pass on that responsibility to petitioner and they should be held accountable for the loan
taken out on the carnapped vehicle. Moreover, petitioner posits that respondent Jerome's
direct dealing with the insurance company was a revocation of the agency relationship
between petitioner and respondents.
Issues:
(1) Whether or not the appointment of iBank by the Spouses Briones as their
attorney-in-fact, authorizing it to file a claim with the insurance company if
the mortgaged vehicle is lost or damaged, created an agency relationship
between them.
(2) Whether or not the Spouses Briones effectively revoked or terminated the
agency granted under the promissory note when they filed a claim with the
insurance company.
67
Rulings:
(1) Yes. In a contract of agency, a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority
of the latter. Furthermore, Article 1884 of the Civil Code provides that "the agent
is bound by his acceptance to carry out the agency, and is liable for the damages
which, through his non-performance, the principal may suffer. Rallos v. Felix Go
Chan & Sons Realty Corporation lays down the elements of agency: Out of the
above given principles, sprung the creation an acceptance of the relationship of
agency whereby one party, called the principal (mandante), authorizes another,
called the agent (mandatario), to act for and in his behalf in transactions with third
persons. The essential elements of agency are:
(a) there is consent, express or implied, of the parties to establish the

relationship;
(b) the object is the execution of a juridical act in relation to a third person;
(c) the agent acts as a representative and not for himself; and
(d) the agent acts within the scope of his authority.
All the elements of agency exist in this case. Under the promissory note with chattel
mortgage, Spouses Briones appointed iBank as their attorney-in-fact, authorizing it
to file a claim with the insurance company if the mortgaged vehicle was lost or
damaged. Petitioner was also authorized to collect the insurance proceeds as the
beneficiary of the insurance policy.
(2) No. Revocation as a form of extinguishing an agency under Article 1924 of the
Civil Code only applies in cases of incompatibility, such as when the principal
disregards or bypasses the agent in order to deal with a third person in a way that
excludes the agent.
In the case at bar, the mortgaged vehicle was carnapped on November 5, 2003 and
the Spouses Briones immediately informed petitioner about the loss. The Spouses
Briones continued paying the monthly installment for the next three (3) months
following the vehicle's loss to show their good faith. However, on March 26, 2004,
petitioner demanded full payment from Spouses Briones for the lost vehicle The
Spouses Briones were thus constrained to file a claim for loss with the insurance
company on April 30, 2004, precisely because petitioner failed to do so despite
being their agent and being authorized to file a claim under the insurance policy
Not surprisingly, the insurance company declined the claim for belated filing.
The Spouses Briones' claim for loss cannot be seen as an implied revocation of the
agency or their way of excluding petitioner. They did not disregard or bypass
petitioner when they made an insurance claim; rather, they had no choice but to
personally do it because of their agent's negligence. This is not the implied
termination or revocation of an agency provided for under Article 1924 of the Civil
Code.
68
E. PARTNERSHIP
PRISCILLA Z. ORBE vs. LEONORA O. MIARAL

G.R. No. 217777 [16 August 2017]
Ponente: Justice Carpio
Second Division

Original Action: Complaint for Estafa
Facts: Leonora 0. Miaral (respondent) agreed to engage in the garment exportation

business with her sister, Priscilla Z. Orbe (petitioner). They executed a partnership
agreement where they agreed to contribute Two Hundred Fifty Thousand Pesos
(P250,000.00) each to Toppy Co., Inc. and Miaral Enterprises, and to equally divide the
profits they may earn. Respondent issued three (3) checks drawn in a bank in the United
States as payment. However, one of the checks was dishonored for having been drawn
against insufficient funds. Petitioner likewise discovered that there was no exportation of
garments to the United States or any other transactions in the United States that took place.
Petitioner demanded from respondent the return and Anne Kristine the total payment of
Two Hundred Three Thousand Nine Hundred Ninety-Nine Pesos (P203,999.00) and One
Thousand Dollars (US$1,000.00). Despite demands, respondent and Anne Kristine failed
to return the money. Petitioner filed a complaint for estafa against respondent and Anne
Kristine before the Office of the City Prosecutor (OCP) of Quezon City. After an
information had been filed with the RTC, the OCP filed a Motion to Withdraw Information
on the ground that criminal liability is negated by the existence of partnership agreement
which will only produce civil liability.
Issue: Whether or not the OCP was correct in withdrawing the criminal complaint
for estafa because of the existence of partnership agreement.
Ruling: No. In this case, the OCP erred gravely when it based its conclusion on the Clarin
case. Liwanag applies to the partnership agreement executed between petitioner and
respondent. Petitioner's initial contributions of Pl83,999.00 and P20,000.00 were all for
specific purposes: for the buying and selling of garments and for the salaries of the factory
workers, respectively. When respondent failed to account for these amounts or to return
these amounts to petitioner upon demand, there is probable cause to hold that respondent
misappropriated the amounts and had not used them for their intended purposes. The
Information for estafa should thus proceed.
In Liwanag, this Court held:
Thus, even assuming that a contract of partnership was indeed entered into
by and between the parties, we have ruled that when money or property
[had] been received by a partner for a specific purpose (such as that
obtaining in the instant case) and he later misappropriated it, such
partner is guilty of estafa. (Emphasis supplied)
69
F. TRUSTS
JOSE S. OCAMPO vs. RICARDO S. OCAMPO, SR.

G.R. No. 227894 [05 July 2017]
Third Division
Nature of Action: Partition and annulment of title
Facts: In the complaint, respondent alleged that he and petitioner are co-owners of the
Subject Property, which was a conjugal property left by their parents. The Subject Property
was originally registered in their parents' names. Respondent claimed that petitioner and
his wife conspired in falsifying his signature on a notarized Extra-Judicial Settlement with
Waiver dated September 1970, and effecting the transfer of the property in the name of
petitioner which was issued on November 24, 1970. Based on a finding by the NBI that
respondent's signature was forged, an Information was filed against petitioner, the notary
public, and two others. Respondent requested for partition of the property, but petitioner
refused to do so and secretly mortgaged the property for P200,000.00.
Petitioner and his wife argued that TCT No. 102822 became indefeasible one year after its
issuance on November 24, 1971, and that the action to annul TCT No. 102822 had
prescribed since it was filed only on June 29, 1992, or 21 years and 7 months from the
issuance of the title.
The RTC ruled in favor of the defendant. Petitioner filed an appeal but the CA affirmed
the findings of RTC that action assails the validity of petitioner's title on the ground that it
is based on a forged document and that the action to annul the ESW is imprescriptible since
it is a void or inexistent contract. Thus, the petitioner filed a petition and argued that Even
assuming that the ESW is void or inexistent, the action filed by respondent is barred by the
doctrine of estoppel by laches. The ESW was executed and notarized on September 30,
1970. However, it was only on July 1, 1992 that respondent filed the present case for
partition and annulment of title, claiming that the ESW was forged.
Issue: Whether or not the wrongful registration and transfer of the property in the
name of petitioner created an implied or constructive trust.
Ruling: Yes, the wrongful registration and transfer of the property in the name of petitioner
creates an implied or constructive trust.
Given the falsity of the ESW, it becomes apparent that petitioner obtained the registration
through fraud. This wrongful registration gives occasion to the creation of an implied or
constructive trust under Article 1456 of the New Civil Code. An action for reconveyance
based on an implied trust generally prescribes in ten years. However, if the plaintiff remains
in possession of the property, the prescriptive period to recover title of possession does not
run against him. In such case, his action is deemed in the nature of a quieting of title, an
action that is imprescriptible.
70
IV. CREDIT TRANSACTIONS
A. LOANS
GEORGIA OSMEÑA-JALANDONI vs. CARMEN A. ENCOMIENDA

G.R. No. 205578 [01 March 2017]
Second Division
Nature of the Action: Collection for sum of money
Facts: Encomienda and Jalandoni were close friends. Jalandoni called Encomienda to ask
if she could borrow money for the search and rescue operation of her children in Manila.
Encomienda then went to Jalandoni's house and handed the money to the latter’s security.
Jalandoni again borrowed money to pay some of her bills and promised that she would pay
the same when her money in the bank matured. Thereafter, Encomienda went to Manila
and Jalandoni was requested for more money. When Jalandoni came back to Cebu, she
never informed Encomienda. Encomienda then later gave Jalandoni six (6) weeks to settle
her debts. Despite several demands, no payment was made. Jalandoni insisted that the
amounts given were not in the form of loans. When they had to appear before the Barangay
for conciliation, no settlement was reached. But a member of the Lupong Tagapamayapa
of Barangay Kasambagan, Laureano Rogero, attested that Jalandoni admitted having
borrowed money from Encomienda and that she was willing to return it. Jalandoni said she
would talk to her lawyer first, but she never came back. Hence, Encomienda filed a
complaint.
For her defense, Jalandoni claimed that there was never a discussion or even just an allusion
about a loan. She confirmed that Encomienda would indeed deposit money in her bank
account and pay her bills in Cebu. But when asked, Encomienda would tell her that she
just wanted to extend some help and that it was not a loan. When Jalandoni returned to
Cebu, Encomienda wanted to fetch her at the airport but the former refused. This allegedly
made Encomienda upset, causing her to eventually demand payment for the amounts
originally intended to be gratuitous.
RTC dismissed the case on the ground that if Encomienda really intended the amounts to
be a loan, normal human behavior would have prompted at least a handwritten
acknowledgment or a promissory note the moment she parted with her money for the
purpose of granting a loan.
Issue: Whether or not there a contract of loan existed between Jalandoni and
Encomienda notwithstanding the lack of acknowledgment receipt or
promissory note.
Ruling: Yes. The RTC harped on the fact that if Encomienda really intended the amounts
to be a loan, normal human behavior would have prompted at least a handwritten
acknowledgment or a promissory note the moment she parted with her money for the
purpose of granting a loan.
This would be particularly true if the loan obtained was part of a business dealing and not
one extended to a close friend who suddenly needed monetary aid. In fact, in case of loans
between friends and relatives, the absence of acknowledgment receipts or promissory notes
is more natural and real. In a similar case, the Court upheld the CA's pronouncement that
the existence of a contract of loan cannot be denied merely because it was not reduced in
71
writing. Surely, there can be a verbal loan. Contracts are binding between the parties,
whether oral or written. The law is explicit that contracts shall be obligatory in whatever
form they may have been entered into, provided all the essential requisites for their validity
are present.
A simple loan or mutuum exists when a person receives a loan of money or any other
fungible thing and acquires its ownership. He is bound to pay to the creditor the equal
amount of the same kind and quality.
Jalandoni posits that the more logical reason behind the disbursements would be what
Encomienda candidly told the trial court, that her acts were plainly an "unselfish display of
Christian help" and done out of "genuine concern for Georgia's children." However, the
"display of Christian help" is not inconsistent with the existence of a loan. Encomienda
immediately offered a helping hand when a friend asked for it. But this does not mean that
she had already waived her right to collect in the future. Indeed, when Encomienda felt that
Jalandonli was beginning to avoid her, that was when she realized that she had to protect
her right to demand payment. The fact that Encomienda kept the receipts even for the
smallest amounts she had advanced, repeatedly sent demand letters, and immediately filed
the instant case when Jalandoni stubbornly refused to heed her demands sufficiently
disproves the latter's belief that all the sums of money she received were merely given out
of charity.
72
B. DEPOSIT
C. GUARANTY AND SURETYSHIP
D. PLEDGE
E. MORTGAGE
MAKILITO B. MAHINAY vs. DURA TIRE & RUBBER INDUSTRIES, INC.

G.R. No. 194152 [05 June 2017]
Second Division
Nature of the Action: Complaint for specific performance and annulment of auction.
Facts: The parcel of land owned by A&A Swiss International Commercial, Inc. (A&A
Swiss) was mortgaged to Dura Tire as security for credit purchases to be made by Move
Overland. A&A Swiss sold the property to Mahinay. Mahinay wrote Dura Tire, requesting
a statement of account of Move Overland's credit purchases. Mahinay sought to pay Move
Overland's obligation to release the property from the mortgage. Dura Tire, however,
ignored Mahinay's request. For Move Overland's failure to pay its credit purchases, Dura
Tire applied for extrajudicial foreclosure of the property. Mahinay protested the impending
sale. Despite the protest, Sheriff proceeded with the sale and issued a Certificate of Sale in
favor of Dura Tire. The Certificate of Sale was registered on February 20, 1995.
Mahinay filed a complaint. The RTC dismissed Mahinay’s complaint. On June 16, 2006,
Mahinay’s appeal was dismissed and the Court of Appeals held that Mahinay has no right
to question the foreclosure of property. Mahinay, as "substitute mortgagor," was fully
aware that the property he purchased from A&A Swiss was previously mortgaged to Dura
Tire to answer for Move Overland's obligation. Considering that Move Overland failed to
pay for its credit purchases, Dura Tire had every right to foreclose the property.
Relying on the Court of Appeals' finding that he was a "substitute mortgagor," Mahinay
filed a Complaint for judicial declaration of right to redeem on August 24, 2007. "As the
admitted owner of the [property] at the time of the foreclosure," Mahinay argued that he
"must have possessed and still continues to possess the absolute right to redeem the
[property]. Mahinay having acquired the property from A&A Swiss before Dura Tire
foreclosed the property, the trial court ruled that Mahinay became a "successor-in-interest"
to the property even before the foreclosure sale. Therefore, by operation of law, Mahinay
was legally entitled to redeem the property. However, considering that one (1) year period
of redemption had already lapsed, Mahinay could no longer exercise his right of
redemption.
Issue: Whether or not the one year period of redemption was tolled when Mahinay
filed his complaint for annulment of foreclosure sale.
Ruling: No, the one year period of redemption is not tolled when Mahinay filed his
complaint for annulment of foreclosure.
73
Contrary to Mahinay's claim, his right to redeem the mortgaged property did not arise from
the Court of Appeals' "judicial declaration" that he was a "substitute mortgagor" of A&A
Swiss. By force of law, specifically, Section 6 of Act No. 3135, Mahinay's right to redeem
arose when the mortgaged property was extrajudicially foreclosed and sold at public
auction. There is no dispute that Mahinay had a lien on the property subsequent to the
mortgage. Consequently, he had the right to buy it back from the purchaser at the sale,
Dura Tire in this case, "from and at any time within the term of one year from and after the
date of the sale." Section 6 of Act No. 3135 provides:
Section 6. In all cases in which an extrajudicial sale is made under the

special power hereinbefore referred to, the debtor, his successors in interest
or any judicial creditor or judgment creditor of said debtor, or any person
having a lien on the property subsequent to the mortgage or deed of trust
under which the property is sold, may redeem the same at any time within
the term of one year from and after the date of the sale; and such redemption
shall be governed by the provisions of sections four hundred and sixty-four
to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in
so far as these are not inconsistent with the provisions of this Act.
The "date of the sale" referred to in Section 6 is the date the certificate of sale is registered
with the Register of Deeds. This is because the sale of registered land does not "'take effect
as a conveyance, or bind the land' until it is registered."
The right of redemption being statutory, the mortgagor may compel the purchaser to sell
back the property within the one (1)-year period under Act No. 3135. If the purchaser
refuses to sell back the property, the mortgagor may tender payment to the Sheriff who
conducted the foreclosure sale. Here, Mahinay should have tendered payment to Sheriff
Laurel instead of insisting on directly paying Move Overland's unpaid credit purchases to
Dura Tire.
Here, the Certificate of Sale in favor of Dura Tire was registered on February 20, 1995.
Mahinay, as the successor-in-interest of previous owner A&A Swiss, had one (1) year from
February 20, 1995, or on February 20, 1996, to exercise his right of redemption and buy
back the property from Dura Tire at the bid price of P950,000.00.
74
G.R. No. 191174 [07 June 2017]
Third Division
contracts were executed by PDCP to partially secure both Sengkon's obligations. Sengkon
defaulted in the payment of its loan obligations. Thus, FEBTC demanded payment from
PDCP.
PDCP proposed to pay the obligations secured by its property, for the release of its
properties but FEBTC pressed for a comprehensive repayment scheme for the entirety of
Sengkon's obligations. Meanwhile, the negotiations were put on hold because BPI acquired
FEBTC and assumed the rights and obligations of the latter.
Annulment of Mortgage and Damages against BPI, successor-in-interest of FEBTC. PDCP
alleged that FEBTC assured it that the mortgaged properties will only secure the Credit
Line sub-facility of the Omnibus Line. With this understanding, PDCP President Go
allegedly agreed to sign on two separate dates a pro-forma and blank REM, securing the
amount of loan. PDCP, however, claimed that it had no intent to be bound under the second
REM, which was not intended to be a separate contract, but only a means to reduce
registration expenses and their foreclosure were null and void.
The RTC nullified the REMs and the foreclosure proceedings. The CA reversed the RTC's
ruling and ruled that since the REMs contain a dragnet clause, the other obligations not
under the Credit Line were still covered by PDCP's REMs. Lastly, the failure to send a
notice of extrajudicial foreclosure sale to PDCP did not affect the validity of the foreclosure
sale because personal notice to the mortgagor is not even generally required. Hence, this
petition
Issue: Whether or not the registration of the Real Estate Mortgage, even if contrary
to the supposed intent of the parties, affects the validity of the mortgage
contracts.
Ruling: No, the registration of the Real Estate Mortgage, even if contrary to the supposed
intent of the parties, did not affect the validity of the mortgage contracts.
According to PDCP, when FEBTC registered both REMs, even if the intent was only to
register one, the validity of both REMs was vitiated by lack of consent. PDCP claims that
said intent is supported by the fact that the REMs were constituted merely as "partial
security" for Sengkon's obligations and therefore there was really no intent to be bound
under both - but only in one - REM.
The Court cannot see its way clear through PDCP's argument. To begin with, the
registration of the REM contract is not essential to its validity. Article 2085 of the Civil
Code provides:
75
Art. 2085. The following requisites are essential to the contracts of pledge
and mortgage:
(1) That they be constituted to secure the fulfillment of a principal

obligation;
(2) That the pledgor or mortgagor be the absolute owner of the thing pledged
or mortgaged;
(3) That the persons constituting the pledge or mortgage have the free
disposal of their property, and in the absence thereof, that they be legally
authorized for the purpose.
Third persons who are not parties to the principal obligation may secure the
latter by pledging or mortgaging their own property.
In relation thereto, Article 2125 of the Civil Code reads:
Article 2125. In addition to the requisites stated in Article 2085, it is

indispensable, in order that a mortgage may be validly constituted, that the
document in which it appears be recorded in the Registry of Property. If the
instrument is not recorded, the mortgage is nevertheless binding
between the parties. x x x (Emphasis ours)
76
SPS. FELIX A. CHUA and CARMEN L. CHUA, JAMES B. HERRERA,
EDUARDO L. ALMENDRAS, MILA NG ROXAS, EUGENE C. LEE, EDICER H.
ALMENDRAS, BENEDICT C. LEE, LOURDES C. NG, LUCENA INDUSTRIAL
CORPORATION, LUCENA GRAND CENTRAL TERMINAL, INC., represented
by FELIX A. CRUA vs. UNITED COCONUT PLANTERS BANK, ASSET POOL
A (SPV-AMC), REVERE REALTY AND DEVELOPMENT CORPORATION,
JOSE C. GO and the REGISTRAR OF DEEDS OF LUCENA CITY
G.R. No. 215999 [16 August 2017]
Third Division

Original Action: Complaint for Reconveyance with Damages
Facts: It is undisputed that petitioners Spouses Chua and LGCTI as well as respondents
Jose Go, had existing loan obligations with UCPB prior to the March 1997 JVA. As an
offshoot of the JVA, two deeds of trust were executed by the parties involving petitioners'
44-hectare property covered by 32 titles. The deeds of trust were neither expressly
cancelled not rescinded despite the fact that the project under the JVA never came to
fruition. On March 21, 2000, UCPB and petitioners entered into the MOA consolidating
the outstanding obligations of the Spouses Chua and LGCTI.
Petitioners exchanged their 30 parcels of land to effectively reduce their total unpaid
obligations to only P68,000,000.00. To settle the balance, they agreed to convert it into
equity in LGCTI in case they would default in their payment. To implement the MOA, they
signed the REM drafted by UCPB, which included the properties listed in the MOA as
security for the credit accommodation of P404,597,177.04. Unknown to them, however,
Jose Go, acting in behalf of Revere, likewise executed another REM covering the
properties that Revere was holding in trust for them. When UCPB foreclosed the
mortgages, it applied about P75.09 million out of the P227,700,000.00 proceeds of the
foreclosure sale to the obligations of Revere and Jose Go. Moreover, UCPB pursued
petitioners for their supposed deficiency amounting to P68,000,000.00, which was
meanwhile assigned to respondent Asset Pool A by UCPB.
Issues:
(1) Whether or not the REM subsists even after the foreclosure sale of the subject
properties.
(2) Whether or not the deed of assignment covering the deficiency in petitioner’s
obligations to UPCB was valid.
Rulings:
(1) No. A review of the MOA dated March 21, 2000 would reveal that petitioners'
outstanding obligation referred to, after deducting the amount of the thirty
properties, was reduced to only P68,000,000.00. To settle this balance, petitioners
agreed to convert this into equity in LGCTI in case they defaulted in their payment.
In this case, what prompted the foreclosure sale of the mortgaged properties was
petitioners' failure to pay their obligations. When the proceeds of the foreclosure
sale were applied to their outstanding obligations, the payment of the balance of the
P68,000,000.00 was deliberately left out, and the proceeds were conveniently
applied to settle P75,000,000.00 of Revere and/or Jose Go's unpaid obligations with
UCPB. This application was in blatant contravention of the agreement that Revere's
or Jose Go's obligations would be paid only if there were excess in the application
of the foreclosure proceeds. Accordingly, the CA should have applied the proceeds
to the entire outstanding obligations of petitioners, and only the excess, if any,
should have been applied to pay off Revere and/or Jose Go's obligations.
77
(2) No. Based on the foregoing, therefore, we conclude that the deed of assignment of
liabilities covering the deficiency in its obligation to UCPB in the amount of
P68,000,000.00 was null and void. According to the apportionment of bid price
executed by UCPB 's account officer, the bid amounting to P227,700,000.00 far
exceeded the indebtedness of the Spouses Chua and LGCTI in the amount of
P204,597,177.04, which was inclusive of the P68,000,000.00 subject of the deed of
assignment of liabilities as well as the P32,703,893,450.00 corresponding to the
interests and penalties that UCPB waived in favor of petitioners.
It can be further concluded that UCPB could not have validly assigned to Asset
Pool A any right or interest in the P68,000,000.00 balance because the proper
application of the proceeds of the foreclosure sale would have necessarily resulted
in the full extinguishment of petitioners' entire obligation. Otherwise, unjust
enrichment would ensue at the expense of petitioners. There is unjust enrichment
when a person unjustly retains a benefit to the loss of another, or when a person
retains money or property of another against the fundamental principles of justice,
equity and good conscience. The principle of unjust enrichment requires the
concurrence of two conditions, namely: (1) that a person is benefited without a valid
basis or justification; and (2) that such benefit is derived at the expense of another.
The main objective of the principle against unjust enrichment is to prevent a person
from enriching himself at the expense of another without just cause or
consideration. This principle against unjust enrichment would be infringed if we
were to uphold the decision of the CA despite its having no basis in law and in
equity.
78
F. ANTICHRESIS
V. TORTS AND DAMAGES
JOHN E.R. REYES and MERWIN JOSEPH REYES vs. ORICO DOCTOLERO,
ROMEO AVILA, GRANDEUR SECURITY AND SERVICES CORPORATION,
and MAKATI CINEMA SQUARE
G.R. No. 185597 [02 August 2017]
Third Division
Action: Petition for Review on Certiorari (Rule 45)

Original Case: Complaint for Damages
Facts: In an altercation which happened in parking premises of Makati Cinema Square

(MCS), Doctolero and Avila, security guards of Grandeur Security and Services
Corporation (Grandeur), shot and injured petitioners John and Mervin, both surnamed
Reyes. Petitioners filed a complaint for damages against Doctolero and Avila, and
impleaded likewise MCS and Grandeur. Petitioner contends that MCS should be held liable
for the negligence of respondents Avila and Doctolero. According to petitioners, since the
act or omission complained of took place in the vicinity of MCS, it is liable for all damages
which are the natural and probable consequences of the act or omission complained of.
They reasoned that MCS hired the services of Grandeur, whose employees (the security
guards), in turn, committed harmful acts that caused the damages suffered by petitioners.
MCS should thus be declared as a joint tortfeasor with Grandeur and respondent security
guards.
Issue: Whether or not MCS and Grandeur may be held vicariously liable for the
damages caused by respondents Doctolero and Avila to petitioners John and
Mervin Reyes.
Ruling: No. As a general rule, one is only responsible for his own act or omission. The
law, however, provides for exceptions when it makes certain persons liable for the act or
omission of another. One exception is an employer who is made vicariously liable for the
tort committed by his employee under paragraph 5 of Article 2180. Here, although the
employer is not the actual tortfeasor, the law makes him vicariously liable on the basis of
the civil law principle of paterfamilias for failure to exercise due care and vigilance over
the acts of one's subordinates to prevent damage to another. It must be stressed, however,
that the above rule is applicable only if there is an employer-employee relationship. This
employer-employee relationship cannot be presumed but must be sufficiently proven by
the plaintiff. The plaintiff must also show that the employee was acting within the scope
of his assigned task when the tort complained of was committed. It is only then that the
defendant, as employer, may find it necessary to interpose the defense of due diligence in
the selection and supervision of employees. Neither can it be said that a principal-agency
relationship existed between MCS and Grandeur.
Here, Grandeur's HRD head, Ungui, likewise testified on Grandeur's standard operational
procedures, showing the means by which Grandeur conducts close and regular supervision
over the security guards assigned to their various clients. Grandeur also submitted as
evidence certificates of attendance to various seminars and the memoranda both those
commending respondents for their good works and reprimanding them for violations of
various company policies. We agree with the CA that these may be considered, as they are
related to the documents and testimonies adduced during trial to show Grandeur's diligence
in the supervision of the actual work performance of its employees.
79
PRYCE PROPERTIES CORPORATION vs. SPOUSES SOTERO OCTOBRE,
JR. and HENRISSA A. OCTOBRE, and CHINA BANKING CORPORATION
G.R. No. 186976 [07 December 2016]
Third Division
Nature of Action: Specific Performance, Revocation of Certificate of Registration

(Complaint for Refund of Payments, Damages and Attorney's Fees)
Facts: On July 22, 1997, respondent Sps. Octobre signed a Reservation Agreement with
petitioner Pryce Properties Corporation (Pryce) for the purchase of 2 lots with a total of
742 sq.m. located in Puerto Heights Village, Puerto Heights, CDO City. The parties
subsequently executed a Contract to Sell over the lot for the price of P2,897,510.00 on
January 7, 1998.
On February 4, 2004, Pryce issued a certification that Sps. Octobre had fully paid the
purchase price and amortization interests, as well as the transfer fees and other charges in
relation to the property. But Pryce had yet to deliver the certificates of title, which
prompted Sps. Octobre to formally demand its delivery. Despite repeated demands, Pryce
failed to comply. Thus, Sps. Octobre filed a complaint before the HLURB Regional Office
No. 10 for specific performance, revocation of certificate of registration, refund of
payments, damages and attorney's fees.
It appears that the reason why Pryce was unable to deliver the titles to Sps. Octobre is
because it had previously transferred custody of the titles, along with others pertaining to
the same development project, to China Bank as part of the Deed of Assignment executed
on June 27, 1996. The titles to the lots purchased by Sps. Octobre were among those held
in custody by China Bank. When Pryce defaulted in its loan obligations to China Bank
sometime in May 2002, China Bank refused to return the titles to Pryce. For this reason,
China Bank was also impleaded in the HLURB complaint.
The HLURB Arbiter rendered a Decision finding that Sps. Octobre had no cause of action
against China Bank and rescinding the contract between Pryce and Sps. Octobre. It ordered
Pryce to refund the payments made by the spouses with legal interest and to pay the latter
compensatory damages amounting to P30,000.00, attorney's fees and costs of suit.
On appeal, the HLURB Board of Commissioners modified the Decision by ordering Pryce
to pay the redemption value to China Bank so that the latter may release the titles covering
the lots purchased by Sps. Octobre. In default thereof, Pryce shall refund the payments with
legal interest. The HLURB Board upheld the grant of compensatory damages, attorney's
fees and costs to Sps. Octobre. Pryce moved for reconsideration and to stay the proceedings
on account of Pryce's ongoing corporate rehabilitation. The HLURB Board, however,
denied Pryce's motion considering that the stay order of the rehabilitation court had already
been reversed by the CA.
Thereafter, Pryce appealed the case to the OP, which affirmed in full the HLURB Board's
Decision. Undeterred, Pryce elevated the case to the CA which denied the petition for
review and affirmed the OP's Decision. The CA found that Pryce acted in bad faith because
it "did not disclose [that the titles were in the custody of China Bank] to Sps. Octobre until
the latter demanded delivery of the titles." The CA held that Pryce's contractual breach
justified the award of compensatory damages as well as the payment of attorney's fees and
costs of suit.
Pryce is now before the SC primarily arguing that the CA erred in upholding the award of
compensatory damages because Sps. Octobre failed to present competent proof of the
actual amount of loss. It also questions the award of attorney's fees and litigation costs
80
because there was allegedly no finding of bad faith. Additionally, as side issues, Pryce
questions the CA's finding that the stay order had been reversed and its decision to uphold
the finding by the HLURB Board and OP that the subject properties were mortgaged to
China Bank.
Issue: Whether or not a breach of contract automatically triggers the award of

actual or compensatory damages.
Ruling: No. Art. 2199 of the Civil Code defines actual or compensatory damages:
Art. 2199. Except as provided by law or by stipulation, one is entitled to an

adequate compensation only for such pecuniary loss suffered by him as he
has duly proved. Such compensation is referred to as actual or
compensatory damages.
To be entitled to compensatory damages, the amount of loss must therefore be capable of

proof and must be actually proven with a reasonable degree of certainty, premised upon
competent proof or the best evidence obtainable. The burden of proof of the damage
suffered is imposed on the party claiming the same, who should adduce the best evidence
available in support thereof. Its award must be based on the evidence presented, not on
the personal knowledge of the court; and certainly not on flimsy, remote, speculative and
non-substantial proof.
It is clear that the amount paid by Sps. Octobre to Pryce as purchase price for the lots has
been adequately proved. There is no dispute that Sps. Octobre are entitled to such amount
with legal interest. The issue being raised by Pryce is only with respect to the P30,000.00
awarded as compensatory damages.
The records of this case are bereft of any evidentiary basis for the award of P30,000.00 as
compensatory damages. In the absence of adequate proof, compensatory damages should
not have been awarded. Nonetheless, the Court found that nominal damages, in lieu of
compensatory damages, are proper in this case. Under Art. 2221, nominal damages may
be awarded in order that the plaintiff's right, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered. Nominal damages are "recoverable where a legal right is
technically violated and must be vindicated against an invasion that has produced no actual
present loss of any kind or where there has been a breach of contract and no substantial
injury or actual damages whatsoever have been or can be shown." So long as there is a
violation of the right of the plaintiff — whether based on law, contract, or other sources of
obligations — an award of nominal damages is proper. Proof of bad faith is not required.
In fine, contractual breach is sufficient to justify an award for nominal damages but not
compensatory damages.
81
ROMULO ABROGAR and ERLINDA ABROGAR vs. COSMOS BOTTLING
COMPANY and INTERGAMES, INC.
G.R. No. 164749 [15 March 2017]
Third Division
Nature of the Action: Action for recovery of various damages
Facts: Cosmos, jointly with Intergames, organized an endurance running contest. The
organizers plotted a 10-kilometer course starting from the premises of the IBP Lane,
through public roads and streets, to end at the Quezon Memorial Circle. Plaintiffs' son
Rommel participated in the contest. Consequently, Rommel joined the other participants
and ran the course plotted by the defendants. As it turned out, the plaintiffs' further alleged,
the defendants failed to provide adequate safety and precautionary measures and to
exercise the diligence required of them by the nature of their undertaking, in that they failed
to insulate and protect the participants of the marathon from the vehicular and other dangers
along the marathon route. Rommel was bumped by a jeepney and in spite of medical
treatment, he died later that same day due to severe head injuries. The petitioners sued the
respondents to recover various damages for the untimely death of Rommel (i.e., actual and
compensatory damages, loss of earning capacity, moral damages, exemplary damages,
attorney's fees and expenses of litigation).
Cosmos denied liability, insisting that it had not been the organizer of the marathon, but
only its sponsor; that its participation had been limited to providing financial assistance to
Intergames; While Intergames asserted that Rommel's death had been an accident
exclusively caused by the negligence of the jeepney driver; that it was not responsible for
the accident; that as the marathon organizer, it did not assume the responsibilities of an
insurer of the safety of the participants; that it exercised due diligence in the conduct of the
race including the adoption and implementation of all known and possible safety and
precautionary measures in order to protect the participants from injuries arising from
vehicular and other forms of accidents.
The RTC ruled in favor of Abrogar. On appeal, CA ruled that both defendants are not liable
for the death of Rommel Abrogar, the Spouses Abrogar are not entitled to actual, moral,
exemplary damages as well as for the "loss of earning capacity" of their son.
Issue: Whether or not petitioners are not entitled to actual, moral, exemplary
damages as well as for the “loss of earning capacity” of their son.
Ruling: No, petitioners are entitled to actual, moral, exemplary damages as well as for the
loss of earning capacity of their son.
The Supreme Court ruled that Article 2202 of the Civil Code lists the damages that the
plaintiffs in a suit upon crimes and quasi-delicts can recover from the defendant, viz.: Art.
2202. In crimes and quasi-delicts, the defendant shall be liable for all damages which are
the natural and probable consequences of the act or omission complained of. It is not
necessary that such damages have been foreseen or could have reasonably been foreseen
by the defendant. Accordingly, Intergames was liable for all damages that were the natural
and probable consequences of its negligence. In its judgment, the RTC explained the award
of damages in favor of the petitioners, as follows: As borne by the evidence on record, the
plaintiffs incurred medical, hospitalization and burial expenses for their son in this
aggregate amount of P28,061.65 (Exhibits "D", ''D-1" and "D-2"). In instituting this case,
they have paid their lawyer P5,000 as initial deposit, their arrangement being that they
would pay attorney's fees to the extent of 10% of whatever amount would be awarded to
them in this case.
82
For the loss of a son, it is unquestionable that plaintiffs suffered untold grief which should
entitle them to recover moral damages, and this Court believes that if only to assuage
somehow their untold grief but not necessarily to compensate them to the fullest, the
nominal amount of P100,000.00 should be paid by the defendants. For failure to adopt
elementary and basic precautionary measure to insure the safety of the participants so that
sponsors and organizers of sports events should exercise utmost diligence in preventing
injury to the participants and the public as well, exemplary damages should also be paid by
the defendants and this Court considers the amount of P50,000.00 as reasonable.
Although we will not disturb the foregoing findings and determinations, we need to add to
the justification for the grant of exemplary damages. Article 2231 of the Civil Code
stipulates that exemplary damages are to be awarded in cases of quasi-delict if the
defendant acted with gross negligence. The foregoing characterization by the RTC
indicated that Intergames' negligence was gross. The Supreme Court with the
characterization. Gross negligence, according to Mendoza v. Spouses Gomez, is the absence
of care or diligence as to amount to a reckless disregard of the safety of persons or property;
it evinces a thoughtless disregard of consequences without exerting any effort to avoid
them. Indeed, the failure of Intergames to adopt the basic precautionary measures for the
safety of the minor participants like Rommel was in reckless disregard of their safety.
Conduct is reckless when it is an extreme departure from ordinary care, in a situation in
which a high degree of danger is apparent; it must be more than any mere mistake resulting
from inexperience, excitement, or confusion, and more than mere thoughtlessness or
inadvertence, or simple inattention.
The RTC did not recognize the right of the petitioners to recover the loss of earning
capacity of Rommel. It should have, for doing so would have conformed to jurisprudence
whereby the Court has unhesitatingly allowed such recovery in respect of children, students
and other non-working or still unemployed victims. The legal basis for doing so is Article
2206 (1) of the Civil Code, which stipulates that the defendant "shall be liable for the loss
of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the
latter; such indemnity shall in every case be assessed and awarded by the court, unless the
deceased on account of permanent physical disability not caused by the defendant, had no
earning capacity at the time of his death." Indeed, damages for loss of earning capacity
may be awarded to the heirs of a deceased non-working victim simply because earning
capacity, not necessarily actual earning, may be lost. In Metro Manila Transit Corporation
v. Court of Appeals, damages for loss of earning capacity were granted to the heirs of a
third-year high school student of the University of the Philippines Integrated School who
had been killed when she was hit and run over by the petitioner's passenger bus as she
crossed Katipunan Avenue in Quezon City.
83
RENATO MA. R. PERALTA vs. JOSE ROY RAVAL
G.R. Nos. 188467 & 188764 [29 March 2017]
Third Division
Nature of the Action: Complaint for rescission of lease of contract
Facts: Spouses Arzaga, as lessors, entered into a Contract of Lease with Peralta, as lessee,
over the subject lots and the improvements. Spouses Arzaga and Peralta agreed on a lease
term of 40 years. Raval came into the picture after Flaviano Jr., being an adopted son of
Spouses Argaza, assigned to him via a Deed of Assignment all his interests, rights and
participation in the subject properties. Peralta refused to recognize the validity of the
assignment to Raval, prompting him to still deposit his rental payments for the account of
Flaviano Jr.
Raval filed a complaint for the rescission of the lease agreement, an order upon Peralta to
vacate the subject properties, payment of back rentals, and award of moral, exemplary and
nominal damages, plus attorney's fees and costs of suit. Peralta opposed the complaint and
sought its dismissal, as he insisted that Raval was not his lessor, and thus was not a real
party-in-interest to the case. The supposed assignment between Flaviano Jr. and Raval was
allegedly void considering that he was not consulted thereon and his prior approval thereto
was not obtained. Moreover, notwithstanding an assignment, Raval did not have the right,
power and authority to seek the rescission of the contract of lease that was executed 24
years prior to the filing of the complaint. Peralta had also faithfully complied with his
obligations under the lease.
RTC ruled that rescission should be denied because Peralta had been, depositing his
monthly rentals in the bank accounts of Raval’s wife. Peralta, then, was not remiss in the
payment of rentals. Neither was there any other substantial breach nor a "blatant refusal"
on Peralta's part to comply with his obligations as lessee.
Raval's appeal was granted in part and orders to pay Raval rental fee and moral damages.
Although the appellate court still denied Raval's plea for rescission. The CA sustained the
validity of the deed of assignment between Flaviano Jr. and Rava, however, the latter did
not appear to be capable of returning to Peralta the rental payments that were paid prior to
the assignment of rights, the CA declared a rescission unfeasible. Rescission creates the
obligation to return the object of the contract; thus, it can be carried out only when the one
who demands rescission can return whatever he may be obliged to restore. It would also be
unjust to Peralta if rescission were allowed, considering that he had complied with his
obligations as a lessee for more than 20 years.
Issue: Whether or not Raval is entitled to moral damages.
Ruling: No, Raval is not entitled to moral damages. "Moral damages are not recoverable
simply because a contract has been breached. They are recoverable only if the party from
whom it is claimed acted fraudulently or in bad faith or in wanton disregard of his
contractual obligations. The breach must be wanton, reckless, malicious or in bad faith,
and oppressive or abusive." It has been explained by the Court that Peralta did not appear
to have acted in this manner.
84
JUDITH D. DARINES and JOYCE D. DARINES vs. EDUARDO QUIÑONES and
ROLANDO QUITAN
G.R. No. 206468 [02 August 2017]
First Division

Original Action: Breach of Contract of Carriage
Facts: Judith D. Darines (Judith) and her daughter, Joyce D. Darines (Joyce) (petitioners)
were paying passengers of enroute from Carmen, Rosales, Pangasinan to Baguio City.
Respondent Rolando M. Quitan (Quitan) was driving the bus at that time. The bus crashed
and as a result, two passengers of the bus died; and the other passengers, including
petitioners, were injured. In particular, Joyce suffered cerebral concussion while Judith had
an eye wound which required an operation.
Petitioners argued that Quitan and respondent Eduardo Quiñones (Quiñones), the operator
of the bus, breached their contract of carriage as they failed to bring them safely to their
destination. They also contended that Quitan's reckless and negligent driving caused the
collision. Consequently, they prayed for actual, moral, exemplary and temperate damages,
and costs of suit.
Issue: Whether or not petitioners are entitled to moral damages arising from breach
of the contract of carriage.
Ruling: No. Unless it its fully established (and not just lightly inferred) that negligence in
an action for breach of contract is so gross to amount to malice then the claim of moral
damages is without merit.
To stress, this case is one for breach of contract of carriage (culpa contractual) where it is
necessary to show the existence of the contract between the parties, and the failure of the
common carrier to transport its passenger safely to his or her destination. An action for
breach of contract differs from quasi-delicts (also referred as culpa aquiliana or culpa extra
contractual) as the latter emanate from the negligence of the tortfeasor including such
instance where a person is injured in a vehicular accident by a party other than the carrier
where he is a passenger.
The aforesaid concepts of fraud or bad faith and negligence are basic as they are distinctly
differentiated by law. Specifically, fraud or bad faith connotes "deliberate or wanton wrong
doing" or such deliberate disregard of obligations while negligence amounts to sheer
carelessness.
Here, petitioners impute negligence on the part of respondents when, as paying passengers,
they sustained injuries when the bus owned and operated by respondent Quiñones, and
driven by respondent Quitan, collided with another vehicle. Petitioners propounded on the
negligence of respondents, but did not discuss or impute fraud or bad faith, or such gross
negligence which would amount to bad faith, against respondents. There being neither
allegation nor proof that respondents acted in fraud or in bad faith in performing their duties
arising from their contract of carriage, they are then not liable for moral damages.
85
ROBERTO P. FUENTES vs. PEOPLE OF THE PHILIPPINES
G.R. No. 186421 [17 April 2017]
First Division
Nature of the Action: Petition for review on certiorari
Facts: An Information charging Fuentes of violation of Article 3 (e) of RA 3019. The

prosecution alleged that Valenzuela is the sole proprietor of Triple A, which was operating
in the Port of Isabel, Leyte since 1993 until 2001 through the Business Permits issued by
the LGU during the said period. However, in 2002, Fuentes, then Mayor of Isabel, refused
to sign Triple A's Business Permit. Triple A's operations were shut down when the BOC
issued a Cease and Desist Order after receiving Fuentes's unnumbered Memorandum
alleging that Valenzuela was involved in smuggling and drug trading. This caused the BOC
to require Valenzuela to secure a Business Permit from the LGU in order to resume Triple
A's operations. After securing the Memorandum, Valenzuela wrote to Fuentes pleading
that she be issued a Business Permit, but the latter's security refused to receive the same.
Valenzuela likewise obtained certifications and clearances from proper government
agencies stating that she is of good moral character, a law abiding citizen, and has not been
charged nor convicted of any crime as per verification from the records of the locality.
Despite the foregoing, no Business Permit was issued for Triple A, causing: (a) the spoilage
of its goods bought in early 2002 for M/V Ace Dragon as it was prohibited from boarding
the said goods to the vessel due to lack of Business Permit; and ( b) the suspension of its
operations from 2002 to 2006. In 2007, a business permit was finally issued in Triple A's
favor.
The Sandiganbayan found Fuentes guilty beyond reasonable doubt of the crime charged
and ordered to pay Valenzuela the amount of P200,000.00 as nominal damages as a result
of Fuentes' acts, Valenzuela was unable to operate her ship chandling business through
Triple A, thus, causing her undue injury.
Issue: Whether or not the nominal damages awarded to Valenzuela occasioned by

Fuentes’ non-issuance of a business permit to Triple A is proper.
Ruling: No. The Court deems it proper to modify the award of damages in Valenzuela's
favor. To recapitulate, the Sandiganbayan awarded her P200,000.00 as nominal damages
occasioned by Fuentes's non-issuance of a Business Permit to Triple A. As defined under
Article 2221of the Civil Code, nominal damages are "recoverable where a legal right is
technically violated and must be vindicated against an invasion that has produced no actual
present loss of any kind or where there has been a breach of contract and no substantial
injury or actual damages whatsoever have been or can be shown. In this case, however, it
is clear that Valenzuela suffered some sort of pecuniary loss due to the suspension of Triple
A's ship chandling operations, albeit the amount thereof was not proven with certainty.
Thus, the award of temperate, and not nominal, damages, is proper. The Court's
pronouncement in Evangelista v. Spouses Andolong is relevant on this matter: In contrast,
under Article 2224 of the Civil Code, temperate or moderate damages may be recovered
when the court finds that some pecuniary loss has been suffered but its amount cannot,
from the nature of the case, be provided with certainty.
86
KABISIG REAL WEALTH DEV., INC. and FERNANDO C. TIO vs. YOUNG
BUILDERS CORPORATION
G.R. No. 212375 [25 January 2017]
Second Division
Nature of Action: Collection of Sum of Money
Facts: Sometime in April 2001, Kabisig Real Wealth Dev., Inc. (Kabisig), through
Ferdinand Tio (Tio), contracted the services of Young Builders Corporation (Young
Builders) to supply labor, tools, equipment, and materials for the renovation of its building
in Cebu City. Young Builders then finished the work in September 2001 and billed Kabisig
for P4,123,320.95. However, despite numerous demands, Kabisig failed to pay. It
contended that no written contract was ever entered into between the parties and it was
never informed of the estimated cost of the renovation. Thus, Young Builders filed an
action for Collection of Sum of Money against Kabisig. The RTC rendered a Decision
finding for Young Builders by way of actual damages in the amount of P4,123,320.95. On
appeal, the CA affirmed the RTC decision with modification deleting actual damages but
holding Tio and Kabisig jointly liable for P2,400,000 as temperate damages.
Issue: Whether or not Young Builders is entitled to compensation based on the

principle of quantum meruit.
Ruling: Yes. To determine the compensation due and to avoid unjust enrichment from
resulting out of a fulfilled contract, the principle of quantum meruit may be used. Under
this principle, a contractor is allowed to recover the reasonable value of the services
rendered despite the lack of a written contract. The measure of recovery under the principle
should relate to the reasonable value of the services performed. The principle prevents
undue enrichment based on the equitable postulate that it is unjust for a person to retain
any benefit without paying for it. Being predicated on equity, said principle should only be
applied if no express contract was entered into, and no specific statutory provision was
applicable.
The principle of quantum meruit justifies the payment of the reasonable value of the
services rendered and should apply in the absence of an express agreement on the fees. It
is notable that the issue revolves around the parties' inability to agree on the fees that Young
Builders should receive. Considering the absence of an agreement, and in view of the
completion of the renovation, the Court has to apply the principle of quantum meruit in
determining how much is due to Young Builders. Under the established circumstances, the
total amount of P2,400,000.00 which the CA awarded is deemed to be a reasonable
compensation under the principle of quantum meruit since the renovation of Kabisig's
building had already been completed in 2001.
87
PILIPINAS MAKRO, INC. vs. COCO CHARCOAL PHILIPPINES, INC. and LIM
KIM SAN
G.R. No. 196419 [04 October 2017]
Ponente: Justice Martires
Third Division
Nature of the Action: Complaint to collect the refund of the value of the encroached portion
of land
Facts: Makro bought a parcel of land owned by the respondent Coco Charcoal. On the
same date, Makro also purchased a land from Lim. Coco Charcoal and Lim's parcels of
land are contiguous and parallel to each other. Makro engaged service a geodetic engineer,
to conduct a resurvey and relocation of the two adjacent lots. As a result of the resurvey, it
was discovered that 131 square meters of the lot purchased from Coco Charcoal had been
encroached upon by the DPWH for its road widening project and construction of a drainage
canal to develop and expand the Davao-Cotabato National Highway. On the other hand,
130 square meters of the land bought from Lim had been encroached upon by the same
DPWH project.
After several demands, Makro filed complaints against Coco Charcoal and Lim to collect
the refund of the purchased price.
RTC ruled in favor of Makro and grant of exemplary damages in order because respondents
were in bad faith for concealing from Makro the fact that the DPWH had already
dispossessed a portion of the lots purchased.
On appeal, CA reversed the RTC decision. While the appellate court agreed that the DPWH
project encroached upon the frontal portions of the properties, it ruled that Makro was not
entitled to a refund. It explained that the warranty expressed in Section (i) of the deeds of
sale is similar to the warranty against eviction set forth under Article 1548 of the Civil
Code. As such, the CA posited that only a buyer in good faith may sue to a breach of
warranty against eviction. It averred that Makro could not feign ignorance of the ongoing
road widening project. The appellate court noted Makro's actual knowledge of the
encroachment before the execution of the sale constitutes its recognition that Coco
Charcoal and Lim's warranty against liens, easements, and encumbrances does not include
the respective 131 and 130 square meters affected by the DPWH project, but covers only
the remainder of the property.
Issue: Whether or not Makro is entitled to exemplary damages.
Ruling: No. Exemplary damages may be awarded if the defendant had acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner. The RTC found the award of
exemplary damages warranted because respondents allegedly concealed the fact the
DPWH had already taken possession of a portion of the land they had sold to Makro. Bad
faith, however, involves a state of mind dominated by ill will or motive implying a
conscious and intentional design to do a wrongful act for a dishonest purpose or moral
obliquity.
Here, there is insufficient evidence to definitively ascertain that respondents' omission to

mention the ongoing DPWH projects was impelled by a conscious desire to defraud Makro.
This is especially true since the road widening project was already in progress even before
the time of the sale, and which would have been noticeable when Makro conducted its
ocular inspection.
88

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ARELLANO UNIVERSITY SCHOOL OF LAW

CIVIL LAW REVIEW II

ATTY. CRISOSTOMO A. URIBE

BERGAVERA, Phamela Rhose

Philippine Stock Exchange, Inc. v. Litonjua, G.R. No. 204014

III. SPECIAL CONTRACTS

Hilltop Market Fish Vendors' Association, Inc. v. Yaranon,

International Exchange Bank v. Spouses Briones, G.R. No. 205657

Orbe v. Miaral, G.R. No. 217777 [16 August 2017] …………………... 69

IV. CREDIT TRANSACTIONS

Osmeña-Jalandoni v. Encomienda, G.R. No. 205578 [01 March 2017] . 71

C. GUARANTY & SURETYSHIP

V. TORTS & DAMAGES

Reyes v. Doctolero, G.R. No. 185597 [02 August 2017] ………………….. 79

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

Nature of Action: Partition and annulment of title

An action for reconveyance of a parcel of land based on implied or constructive trust

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

Nature of the Action: Collection for Sum of Money

Nature of the action: Complaint for collection of sum of money

Regardless, respondents’ action to compel petitioner to return what was mistakenly

Nature of the Action: Violation of Statutory Rape

WHEREFORE, the Court ADOPTS the findings of fact and conclusions

Thus, accused-appellant is ordered to pay the following amounts: (a)

Nature of the Action: Complaint for damages

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

Issue: Whether or not G7 Bank’s placement under receivership is a suspensive

Nature of the Action: Injunction and Damages

Ruling: No, the contention of spouses Ibañez is untenable.

Nature of the Action: Class suit for damages

They claimed to have been exposed to dibromochloropropane (DBCP) in the 1970s up to

Nature of the Action: Breach of Contract and Damages

Nature of the Action: Collection of Sum of Money with Damages

Issue: Whether or not the proper recourse of Litonjua Group is to demand

Nature of the Action: Collection for sum of money

Nature of the Action: Annulment for the Foreclosure Sale

Nature of the Action: Petition for review on Certiorari

1. there was a debt due

Facts: Petitioner Iloilo Jar Corporation, as lessor, and respondent Comglasco

Nature of the Action: Complaint for sum of money

Nature of the Action: Action for redemption

Ruling: No. In Heirs of Servando Franco v. Spouses Gonzales, he Court discussed

(a) a previous valid obligation;

Nature of the Action: Complaint for Annulment of Mortgage and Damages

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

Nature of the Action: Collection of Sum of Money with Damages

Issue: Whether or not PSE is considered a party to the letter-agreement, which is a

Ruling: No, PSE is not a party to the letter-agreement.

Nature of the Action: Complaint for Annulment of Mortgage and Damages

Nature of the Action: Complaint for sum of money

Nature of the Action: Action for unlawful detainer

Nature of the Action: Sum of Money with Preliminary Attachment

Ruling: Yes, the stipulation is void.

Nature of the Action: Collection of Sum of Money

Nature of the Action: Request for arbitration in CIAC

(a) consent of the contracting parties;

Nature of Action: Collection for Sum of Money

Nature of the Action: Complaint for breach of contract

Nature of the Action: Damages

28. Affiliates and Successors

Nature of the Action: Illegal Dismissal (Labor Case)

Ruling: Yes, there is undue influence.

Art. 1337. There is undue influence when a person takes improper