Documente Academic
Documente Profesional
Documente Cultură
LAW REVIEW 2
CASES
(Obligations and Contracts, Sales and Lease, Credit Transactions,
Agency, Partnership and Trusts, Torts and Damages)
2018 – 2019 cases with few from late 2017
CIVIL LAW REVIEW 2 (2018 – 2019)
SAN BEDA COLLEGE ALABANG
SCHOOL OF LAW
CIVIL LAW REVIEW 2 CASES
TABLE OF CONTENTS
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OBLIGATIONS AND CONTRACTS
Heirs of Arao v. Heirs of Eclipse
G.R. No. 211425. November 19, 2018
J.C. REYES, JR.
DOCTRINE: Article 1410 states that an "action to declare the inexistence of a void
contract does not prescribe.” An action that is predicated on the fact that the
conveyance complained of was null and void ab initio is imprescriptible. And if the
action is imprescriptible, it follows then that the defense of laches cannot be
invoked.
FACTS:
Subject of the controversy is a parcel of land originally owned by spouses
Eclipse. In 1994, respondents (spouses Eclipse's successors-in-interest) discovered
that the land in question had been subject of a Deed of Absolute Sale in favor of
Tomas Arao married to Tomasa.
Subsequently, Tomas executed a Deed of Absolute Sale of the subject land in
favor of his children Eulalia, Proceso and Felipa Arao, whose heirs are herein
petitioners. Eventually, Eulalia and Felipa registered the land in their names.
Respondents filed the present action for Nullity of a Deed of Absolute Sale
and Reconveyance of the land by contending that the said Deed of was a forgery
because at the time of its execution, spouses Eclipse were already dead. Petitioners
moved for the dismissal of the complaint and argued that argued that respondents
are barred by laches from pursuing their cause of action against the petitioners
given their inaction for more than 30 years, despite being fully aware of the
petitioners' adverse possession and claim over the subject property
The trial court ruled that the Deed of Sale was a forgery hence, it conferred
no right in favor of Tomas' heirs. But despite the findings of nullity, the RTC still
dismissed the complaint as laches had set in.
The CA ruled that the doctrine of laches is not applicable since respondents'
cause of action is imprescriptible pursuant to Article 1410 of the Civil Code. But
nonetheless, the CA upheld the RTC's findings that there was forgery and
irregularities in the execution of the deed. |||
ISSUE:
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Mayor Imperial opposed the award, arguing that he and not the BPW had the
authority to initiate the public bidding for the project.
The BPW, however, asserted its authority to bid out and award the contract on the
ground that national funds would be used for the project.
Mayor Imperial and Sabaria litigated the issue, with the former losing before the
trial court and subsequently withdrawing his appeal before the CA.
Afterwards, the Municipal Board adopted Resolution No. 11 authorizing the City
Mayor to enter into a contract with Sabaria for the construction of the City Hall.
Petitioners claimed that Macario and officers of the Subdivision met with Mayor
Imperial to demand the return of the five-hectare lot as the condition for the
donation was not complied with.
Mayor Imperial purportedly assured them that the City would buy the property
from them.
The purchase, however, did not materialize.
Petitioners alleged that ten years later, Macario wrote to Lopez Jr., instructing him
to make a follow-up on the City's payment for the subject lot.
Macario died without receiving payment from the City.
A certain Tirso Mariano filed an action for partition of Macario's estate. The action
was opposed by Macario's widow, Irene, and their adopted children, Jose and
Erlinda Mariano.
As an offshoot of this action, a petition to annul Jose and Erlinda's adoption was
instituted.
Irene died in 1988. Jose died the following year which was also when his and
Erlinda's adoption was declared valid and legal by the appellate court.
In 1994, Irene's marriage to one Reluccio was declared bigamous and void ab
initio. And after a protracted litigation, Jose, then represented by his heirs, and
Erlinda were declared as Irene's heirs to the exclusion of Reluccio who was also
declared to be without right to represent Irene in Macario's estate.
The probate court issued letters of administration to one of the petitioners herein,
Danilo David S. Mariano (Danilo), for the administration of Irene's estate.
Danilo demanded upon then City Mayor of Naga, Robredo, to vacate and return the
subject property.
When the City did not comply, petitioners, as heirs of Jose and Erlinda, filed a
Complaint for unlawful detainer against the City.
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void because the agent did not have the written authority of the
owner to sell the subject land.
Similarly, in Roberts v. Papio, a case of unlawful detainer, the Court
declared that the defense of ownership by the respondent therein
was untenable. The contract of sale invoked by the latter was void
because the agent did not have the written authority of the owner.
A void contract produces no effect either against or in favor of
anyone.
In Ballesteros v. Abion, which also involves an action for unlawful
detainer, the Court disallowed the defense of ownership of the
respondent therein because the seller in their contract of sale was
not the owner of the subject property. For lacking an object, the
said contract of sale was void ab initio.
Since void contracts cannot be the source of rights, the City has no possessory
right over the subject property. In this light, to resolve whether to admit the
copy of the purported Deed of Donation as secondary evidence will be futile as
the instrument in any case produces no legal effect.
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Since NHMFC was intent on retaining Strickland's services despite his separation
from EYLLP and/or EYAPFS, the parties entered into negotiations to define
Strickland's possible continued participation in the UHLP Project. PA, NHMFC, and
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On August 20, 2004, PA wrote a letter, signed by its President/Chairman & CEO,
Benjamin R. Punongbayan, to NHMFC to initiate discussions on a "mutual
voluntary termination of the NHMFC Agreement."
On November 18, 2003, PA and NHMFC executed an addendum to the March 26,
2002 original engagement letter covering additional terms of the financial
advisory services.
By May 23, 2005, counsel for Strickland wrote PA asking for "equitable
compensation for professional services" rendered to NHMFC on the UHLP Project
from the time of his separation from EYLLP and/or EYAPFS in July 2004 "up and
through the recent Signing and Closing Ceremony held on 22 April 2004 and his
continued provision of] services as the final closing approaches."
Strickland filed a Complaint, dated May 17, 2005, which included EYAPFS,
PA and NHMFC among the defendants.
Issue:
Whether the dispute between Strickland and EYLLP based on Strickland's
complaint is arbitrable.
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Held: Yes.
In this case, EYLLP initially only quoted the provision of the Partnership
Agreement on Dispute Resolution, including a section on Arbitration, in its
answer dated February 15, 2006. Eventually, it submitted a copy of the
Partnership Agreement in a manifestation dated March 15, 2006. Thus, we agree
with the holding of the CA that EYLLP substantially, and ultimately, complied
with the provision given that Strickland himself did, and does not even deny, the
Partnership Agreement nor the arbitration clause. ATICcS
In so ruling that the validity of the contract containing the arbitration agreement
does not affect the applicability of the arbitration clause itself, we then applied the
doctrine of separability, thus:
"The doctrine of separability, or severability as other writers call it, enunciates that
an arbitration agreement is independent of the main, contract. The arbitration
agreement is to be treated as a separate agreement and the arbitration agreement
does not automatically terminate when the contract of which it is a part comes to an
end.
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Plainly, considering that the arbitration clause is in itself a contract, the setting
forth of its provisions in EYLLP's answer and in its motion to refer to arbitration,
coupled with the actual submission by EYLLP of the Partnership Agreement,
complies with the requirements of Section 7, Rule 8 of the Rules of Court which
Strickland should have specifically denied.
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The RTC rendered judgment nullifying the REM. Petitioner appealed, but the CA
affirmed the RTC. Petitioner moved for reconsideration but the CA denied its
motion. Hence, this appeal.
ISSUE:
Whether or not the CA was correct in finding that there was no consent to the REM
by the Spouses Villaluz despite the clear showing that they had admitted having
signed the REM for the purpose of obtaining a joint loan from the petitioner?
HELD:
No. A valid contract requires the concurrence of the following essential elements:
(1) consent or meeting of the minds, that is, consent to transfer ownership in
exchange for the price; (2) determinate subject matter; and (3) price certain in
money or its equivalent. All these elements must be present to constitute a valid
contract. Consent is essential to the existence of a contract, and where it is wanting,
the contract is non-existent. In a contract of sale, its perfection is consummated at
the moment there is a meeting of the minds upon the thing that is the subject of the
contract and upon the price. Consent is manifested by the meeting of the offer and
the acceptance of the thing and the cause, which are to constitute the contract.
In this case, petitioner correctly argues that the consent of the parties to the REM
was primarily evidenced by their signatures thereon; and that such consent, when
coupled with their act of delivering the owner's duplicate copy of their TCT to the
petitioner as the mortgagee for the purpose of the annotation of the REM, affirmed
their participation in the transaction. Indeed, even if they signed the form for the
REM in blank, they voluntarily extended the freedom to Remegio, Jr. as the person to
whom the signed blank document was given to fill in the details. Once signed, the
form for the REM came under the assumption that it had been read, understood and
agreed to by the persons affixing their signatures thereon. The contents of the
document became binding thereafter, especially upon its notarization, for a
notarized document is executed to lend truth to the statements contained therein
and to certify to the authenticity of the signatures. This is the reason why a
notarized document enjoys the presumption of regularity which can be overturned
only by clear and convincing evidence to the contrary. The evidence to overthrow
such presumption of regularity must be clear, convincing and more than merely
preponderant. Nonetheless, an examination of the REM attached to the petition for
review on certiorari displayed apparent irregularities that cannot be ignored. The
REM thereby appeared to consist of four pages but the notarial acknowledgment
thereof stated that the document consisted of only two pages. It can only signify that
two additional pages were inserted in the REM after it had been actually
acknowledged before the notary public. The insertion is an index of bad faith on the
part of the petitioner as the party annexing the four-paged copy of the REM to its
petition. Moreover, the first page of the REM bears only the signatures of the
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mortgagors but the second page carries only the signatures of the witnesses. Worth
underscoring is that the requirement for the signatures of the parties and of their
witnesses to appear on each and every page of the notarially acknowledged
document safeguards that each and every page thereof was validated by them in the
presence of the witnesses. Thus, the REM was likely altered in a manner that
actually rendered it null and void. As a consequence, the presumption of regularity
cannot be drawn, and the lower courts' uniform conclusion about the nullity of the
REM itself becomes unavoidably warranted.
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ISSUE:
Whether the extrajudicial foreclosure and auction sale of petitioners' property by
respondent HSBC-SRP was valid?
HELD:
We find that respondent HSBC-SRP's filing of the extrajudicial foreclosure
proceedings on May 20, 1996 has no basis and, therefore, invalid.
Respondent HSBC-SRP is now estopped from foreclosing the mortgage property.
Article 1431 of the Civil Code defines estoppel as follows:
Art. 1431. Through estoppel an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved as
against the person relying thereon.
And Section 2 (a), Rule 131 of the Rules of Court provides:
SEC. 2. Conclusive presumptions. — The following are instances of conclusive
presumptions:
(a) Whenever a party has, by his own declaration, act, or omission,
intentionally and deliberately led another to believe a particular thing
is true, and to act upon such belief, he cannot, in any litigation arising
out of such declaration, act or omission, be permitted to falsify it.
To stress, respondent HSBC-SRP continuously sent out monthly Installment Due
Reminders to petitioner Rosalina despite its demand letter dated September 25,
1995 to pay the full amount of the loan obligation within 3 days from receipt of the
letter. It, likewise, continuously accepted petitioner Rosalina's subsequent monthly
amortization payments until June 1996; thus, making their default immaterial.
Moreover, there was no more demand for the payment of the full obligation
afterwards. Consequently, petitioners were made to believe that respondent HSBC-
SRP was applying their payments to their monthly loan obligations as it had done
before. It is now estopped from enforcing its right to foreclose by reason of its
acceptance of the delayed payments.
Also, Article 1235 of the Civil Code provides that when the creditor accepts
performance, knowing its incompleteness and irregularity without protest or
objection, the obligation is deemed complied with. Respondent HSBC-SRP accepted
Rosalina's payment of her housing loan account for almost one year without any
objection.
Respondent HSBC-SRP argues that estoppel is not applicable since the payments
upon which petitioners rely were made without its knowledge and consent; that the
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ISSUES:
WON there was novation of the prior conditional notice (CNAR) upon execution of
the latter memorandum (MOA)?
HELD:
NO. 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. In order that an obligation
may be extinguished by another which substitute the same, it is imperative that it be
so declared in unequivocal terms, or that the old and the new obligations be on
every point incompatible with each other. Thus, "[n]ovation must be stated in clear
and unequivocal terms to extinguish an obligation. It cannot be presumed and may
be implied only if the old and new contracts are incompatible on every point."
Examination of the MOA showed no express stipulation as to the novation or
extinction of the CNAR. Thus, for implied novation to exist, it is necessary to
determine whether the CNAR and the MOA are incompatible on every point such
that they cannot be reconciled and stand together.
After careful scrutiny of the records, we find that the CNAR only deals with the
redemption right of Spouses Celones while the MOA deals with the assignment of
credit of Metrobank to Atty. Dionido. As such, the CNAR and the MOA can be
reconciled and can both stand together.
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1.) Yes, there was a perfected contract. As a rule, a contract is perfected upon the
meeting of the minds of the parties. In the case of Spouses Palada v. Solidbank
Corporation, et al., this Court held that under Article 1934 of the Civil Code, a
loan contract is perfected only upon the delivery of the object of the contract.
Applying this to the case at bench, there is no iota of doubt that when BSA
approved and released the P3,000,000.00 out of the original P5,000,000.00
credit facility, the contract was perfected.
2.) No, BSA did not incur delay. Loan is a reciprocal obligation, as it arises from the
same cause where one party is the creditor and the other the debtor. The
obligation of one party in a reciprocal obligation is dependent upon the
obligation of the other, and the performance should ideally be simultaneous.
This means that in a loan, the creditor should release the full loan amount and
the debtor repays it when it becomes due and demandable. In this case, BSA did
not only incur delay in releasing the pre-agreed credit line of P5,000,000.00 but
likewise violated the terms of its agreement with petitioners when it
deliberately failed to release the amount of P2,000,000.00 after petitioners
complied with their terms and paid the first P3,000,000.00 in full. The default
attributed to petitioners when they stopped paying their amortizations on the
term loan cannot be sustained by this Court because long before they sent a
Letter to BSA informing the latter of their refusal to continue paying
amortizations, BSA had already reneged on its obligation to release the amount
previously agreed upon, i.e., the P5,000,000.00 covered by the credit line.
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CA RULING: held that TPC and Cuales sufficiently proved that the IFA and its
addendums were simulated and did not reflect the true intention of the parties. It
considered PITC and ASPAI's acts contemporaneous and subsequent to the
aforementioned loan documents: (i) PITC required ASPAI, not TPC, to issue the
required post-dated checks and execute real estate mortgages to secure the loan;
TPC and Cuales were mere agents of ASPAI and should not be held liable for their
principal's default in the loan payments.
ISSUE:
1.) Whether or not the transaction was indeed between PITC and TPC?
2.) Whether or not the import financing agreement the parties executed on 5 July
1993 and its addenda are simulated?
HELD:
1.) It is undisputed that TPC and Cuales entered into and executed the IFA and its
addendums with PITC. What is at issue then is the true nature of TPC's liability
under the loan agreement, as embodied in the IFA and its addendums.
The settled rule is that the contracting parties have the autonomy to establish
such terms and conditions as they deem fit, provided these are not contrary to
law, morals, good customs, public order, or public policy. Once there is a
meeting of the minds between the parties, the contract constitutes the law
between them.
2.) TPC and Cuales mainly argue that the stipulations contained in the loan
documents do not express the parties' real intention: that ASPAI is petitioner
PITC's actual client and respondent TPC is merely ASPAI's agent.
Respondents TPC and Cuales presented documentary evidence i.e., ASPAI's
postdated checks and real estate mortgages executed to secure the loan,
reimbursements made by PITC to TPC for storage and delivery expenses
incurred by the latter, LandBank Letter of Credit issued directly in the name of
ASPAI's supplier, ASPAI's certification acknowledging its receipt of the loan
proceeds, receipts of fertilizer purchases submitted by ASPAI to PITC, PITC
demand letters directly sent to ASPAI, criminal complaint for the violation of
Batas Pambansa Blg. 22 filed by PITC against ASPAI to show that ASPAI is the
real client and TPC is merely its agent. However, none of these demonstrate an
express and direct order from ASPAI authorizing respondents TPC and Cuales to
enter into the loan. For the purpose of borrowing money, the agent's authority
must be direct, categorical, and cannot be lightly implied.
After careful examination, the totality of respondents TPC and Cuales' evidence
is not preponderant to sufficiently dispute the legal presumptions of fairness,
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complainant discovered the transaction, her insurance policies had already lapsed.
She was trapped in a difficult situation where she could potentially lose another
investment. Thus, she had no other choice but to agree to the placement. The lack of
genuine consent is further evidenced by private complainant's repeated requests for
a refund of her initial investment even after she received the first tranche of interest
income.
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the promissory notes and acceptance of the loan. RTC ruled in favor of E-PCIB
holding that the loan contracts between the parties were supported by several
promissory notes, a fact admitted by no less than the petitioner's own President,
Cresencio Tiu. Tiu himself testified that the documents included a rider dealing with
the monthly repricing of the interest rates and that they even paid the adjusted
interest rates. The CA affirmed the RTC's ruling.
ISSUE:
Whether or not the monthly repricing of the interest rates on the loans, which is
claimed to have been unilaterally imposed by E-PCIB was valid?
HELD:
Yes, the escalation clause was valid. The promissory note, which was voluntarily
signed by the appellant contains a provision which states: "the interest rate shall be
determined by the Lender without need of prior notice to the Borrower.. Where the
rate is subject to periodic adjustment, the Borrower disagrees with the new rate, he
shall prepay within five (5) days from the notice of the new rate the outstanding
balance of the Loan with interest at the last applicable rate." The agreement
between the parties on the imposition of increasing interest rates on the loan is
commonly known as the escalation clause - a stipulation allowing increases in the
interest rates agreed upon by the contracting parties. The escalation clause is not
void per se. But the escalation clause that "grants the creditor an unbridled right to
adjust the interest independently and upwardly, completely depriving the debtor of
the right to assent to an important modification in the agreement" is void. Such
escalation clause violates the principle of mutuality of contracts, and should be
annulled.
To prevent any one-sidedness that the escalation clause may cause in favor of· the
creditor, PD No. 1684 was promulgated, requiring the inclusion of a de-escalation
clause. As held in PNB vs CA.: "the unilateral action of the PNB in increasing the
interest rate on the private respondent's loan, violated the mutuality of contracts
ordained in Article 1308 of the Civil Code: The contract must bind both contracting
parties; its validity or compliance cannot be left to the will of one of them. In order
that obligations arising from contracts may have the force of law between the
parties, there must be mutuality between the parties based on their essential
equality. A contract containing a condition which makes its fulfilment dependent
exclusively upon the uncontrolled will of one of the contracting parties, is void."
Although no express de-escalation clause was stipulated in the promissory notes
signed by the petitioner, such did not invalidate the repricing of the interest rates.
The repricing notices issued to the petitioner by E-PCIB indicated that on some
occasions, the bank had reduced or adjusted the interest rates downward. The
actual grant by the respondent of the decreases in the interest rates imposed on the
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loans extended to the petitioner rendered inexistent the evil of inequality sought to
be thwarted by the enactment and application of Presidential Decree No. 1684.
The binding effect on the parties of any agreement is premised on two settled
principles, namely: (1) that any obligation arising from contract has the force of law
between the parties; and (2) that there must be mutuality between the parties
based on their essential equality. Any contract that appears to be heavily weighed in
favor of only one of the parties so as to lead to an unconscionable result is void.
The significance of Article 1308 cannot be doubted. It is elementary that there can
be no contract in the absence of the mutual assent of the parties. When the assent of
either party is wanting, the act of the non-assenting party has no efficacy for his act
is as if it was done under duress or by an incapacitated person. Naturally, any
modification made in the contract must still be with or upon the consent of the
contracting parties. There must still be a meeting of the minds of all the parties on
the modification, especially when the modification relates to an important or
material aspect of the agreement.
Contrary to the petitioner's position, there was mutuality of contracts between itself
and the respondent. Tiu, the petitioner's President, who signed the promissory
notes in behalf of the petitioner, was aware of the provision in the documents
pertaining to the monthly repricing of the interest rates. Although the promissory
notes succinctly stipulated that the loans were subject to interest without need of
prior notice to the borrower, the respondent sent notices to the petitioner each and
every time it increased the interest rate. Also, there was no showing by the
petitioner herein that it had been placed at any disadvantage in dealing with the
respondent was decisive. On the contrary, it appeared that mutuality always
pervaded the relationship between the parties.
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with the Bank as well as maintain substantial deposit ADB levels. In a letter dated
September 22, 1997, the Bank demanded that GTI update all its unpaid
amortizations on the outstanding restructured loan with a principal balance of
P11,376,666.25 not later than September 30, 1997 and to settle all its other past due
obligations to avert any legal action. On October 29, 1997, Yujuico and GTI filed
against the Bank a Complaint for Specific Performance with Preliminary Injunction
with the Regional Trial Court of Makati City. Yujuico and GTI alleged that during the
signing of the loan restructuring agreement, they were assured by the officers of the
Bank, namely: Paul Regondola and Jacqueline Fernandez, that after a few payments
on its obligation, appellee GTI's peso loan would be converted to US dollars. Also,
sometime in October 1996, Paul Regondola confirmed by phone that the conversion
of GTI's loan from peso to US Dollars had been approved by the Bank. This
prompted appellee GTFs financial consultant Bermundo to send the Bank a letter
dated October 31, 1996 acknowledging appellant bank's alleged confirmation of the
approval of the conversion of the restructured loan. This letter was not denied by
the Bank until December 18, 1996 when it informed Yujuico and GTI that the
conversion of the restructured loan to US dollars was not deemed workable because
of certain considerations. These considerations, however, were not conveyed to
Yujuico and GTI beforehand. Yujuico and GTI averred further that under the US
dollar-denominated loan, appellee GTI would be paying lower interest and would
save the total amount of P2, 844, 228.00. Hence, they prayed that the Bank be
directed to convert GTI's loan to US dollars retroactively effective October 1, 1996
and that the Bank be directed to pay appellees P2, 844, 228.00 representing savings
that could have accrued in favor of Yujuico and GTI in terms of the difference in
interest payments.
In a Decision dated October 6, 2004, the court a quo ruled that the Bank indeed
agreed to convert to US dollar GTI's peso loan obligation. The conversion also
resulted in the novation of GTI's loan obligation. As a result, Yujuico was accordingly
released from his obligations as surety pursuant to Article 1215 of the New Civil
Code in conjunction with paragraph 1 of Article 1291 of the same Code. The CA
partially granted the appeal. The CA no longer delved on the issue of whether or not
the parties perfected a contract on the conversion of the restructured loan to US
dollars in view of the Bank's acknowledgment and confirmation of its obligation to
convert the restructured loan to US dollars in its Motion for Reconsideration dated
November 2, 2004. The lone issue left for determination as far as the CA was
concerned was whether or not the conversion of the peso-denominated loan is
tantamount to novation warranting the extinguishment of Yujuico's obligations as a
surety. On the said issue, the CA ruled that the Omnibus Credit Line and the Loan
Restructuring Agreement between GTI Sportswear Corporation (GTI) and the Bank
were not novated and Yujuico remained to be liable as a surety under the
Comprehensive Surety Agreement.
ISSUES:
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1.) Whether or not the CA has legal basis to resolve and declare that there was no
novation between GTI and the Bank?
2.) Whether or not the CA has legal basis to resolve and declare that Yujuico
remains liable as surety of the obligation of GTI?
HELD:
1.) The Court agrees with the finding of the CA that "[t]he attendant facts do not
make out a case of novation" in the sense of a total or extinctive novation. At
best, the agreement to convert the Peso-denominated restructured loan into a
US Dollar-denominated one is an implied or tacit, partial, modificatory novation.
There was merely a change in the method of payment.
2.) Without a total or extinctive novation, the surety agreement subsists. While
Article 1215 of the Civil Code provides that novation, compensation or
remission of the debt, made by any of the solidary creditors or with any of the
solidary debtors, shall extinguish the obligation, the novation contemplated
therein is a total or extinctive novation of the old obligation. Also, the
Comprehensive Surety Agreement that petitioner Yujuico executed in favor of
the Bank is so worded that it covers "any and all other indebtedness of every
kind which is now or may hereafter become due or owing to [the Bank] by the
Borrower."
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ISSUE:
Whether or not there was an impairment of contract?
HELD:
Anent the alleged impairment of contract, basic is the principle that the law is
deemed written into every contract, such that while a contract is the law between
the parties, the provisions of positive law which regulate contracts shall limit and
govern their relations. At the time the Trust Receipt Agreement was entered into by
ABC and SCP, the law expressly allowed corporations to be declared in a state of
suspension of payments under specific instances. Consequently, said law and its
implementing rules are deemed incorporated in the Trust Receipt Agreement,
thereby limiting ABC's right to enforce its claim against SCP once a stay or
suspension order is issued. Clearly, the principle on inviolability of contracts was
not violated.
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the CA. Vive then filed a Motion for Reconsideration praying that the court take a
second look at the circumstances
ISSUE:
Whether or not the Motion for Reconsideration should be granted as a Deed of Sale
is a valid contract of sale since there is no requirement for NHMFC to execute a Deed
of Absolute Sale to transfer ownership to Vive, then there is no intention to reserve
ownership by NHMFC.
RULING:
WHEREFORE, PREMISES CONSIDERED, the Court resolves to GRANT the motion for
reconsideration giving due course to the petition and REQUIRE the respondents to
file comment on the petition within ten (10) days. SO ORDERED SO ORDERED.
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unless the contrary appears; respondent had the right to reject bids, and it cannot
be compelled to accept a bidder's proposal, and execute a contract in its favor.
Indeed, under Article 1326 of the Civil Code, ''advertisements for bidders are simply
invitations to make proposals, and the advertiser is not bound to accept the highest
or lowest bidder, unless the contrary appears." "[A]s the discretion to accept or
reject bids and award contracts is of such wide latitude, courts will not interfere,
unless it is apparent that such discretion is exercised arbitrarily, or used as a shield
to a fraudulent award. The exercise of that discretion is a policy decision that
necessitates prior inquiry, investigation, comparison, evaluation, and deliberation."
Article 1326 of the Civil Code, which specifically tackles offer and acceptance of bids,
provides that advertisements for bidders are simply invitations to make proposals,
and that an advertiser is not bound to accept the highest bidder unless the contrary
appears. In the present case, Section 4.3 of the ASBR explicitly states that APT
reserves the right to reject any or all bids, including the highest bid. Undoubtedly,
APT has a legal right to reject the offer of Dong-A Consortium, notwithstanding that
it submitted the highest bid.
In Leoquinco v. The Postal Savings Bank and C & C Commercial Corporation v.
Menor, we explained that this right to reject bids signifies that the participants of
the bidding process cannot compel the party who called for bids to
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The lower courts ruled in favor of the plaintiff stating that the condition with
respect to judicial approval of the sale had become irrelevant when ownership over
the subject property was consolidated in favor of petitioner; thus, at that time,
respondent-spouses were bound to comply with their undertaking to pay the
balance of the purchase price which they failed to do. The lower courts concluded
that respondent-spouses had no intention to pay the balance of the purchase price
and that they had become lessees of the subject property for twenty (20) years with
their down payment being treated as rentals.
The CA reversed and set aside the decision of the RTC. The appellate court declared
that the agreement between the parties was a contract to sell involving the subject
property because the vendors reserved ownership and it was subject to a
suspensive condition, i.e., submission of the sellers of lacking documents or court
approval of the sale of the shares of the minor owners. While the appellate court
agreed with the lower courts' disquisition that the court's approval for the minor
children to be represented in the sale would no longer be necessary as the
ownership and title in the subject property were already consolidated to petitioner,
it ruled that the same would not operate like a magic wand to automatically make
respondent-spouses perform what was required of them in the subject agreement.
On the contrary, the sellers had the positive duty to make known to the buyers that
they were ready to comply with what was mandated upon them, which act
petitioner failed to prove by any evidence. Thus, the CA concluded that respondent-
spouses had more right to possess the subject property pending consummation of
the agreement or any outcome thereof.
ISSUES:
Whether the failure to file a judicial authorization for the minors would affect the
cause of action of the plaintiff to recover possession of the parcel of land.
RULING:
Article 1186 of the Civil Code reads:
Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily
prevents its fulfillment.
This provision refers to the constructive fulfillment of a suspensive condition, whose
application calls for two requisites, namely: (a) the intent of the obligor to prevent
the fulfillment of the condition, and (b) the actual prevention of the fulfillment. Mere
intention of the debtor to prevent the happening of the condition, or to place
ineffective obstacles to its compliance, without actually preventing the fulfillment, is
insufficient.
Petitioner and her then co-owners undertook, upon receipt of the down payment
from respondent-spouses, the filing of a petition in court, after which they promised
the latter to execute the deed of absolute sale whereupon the latter shall, in turn,
pay the entire balance of the purchase price. The balance of the consideration shall
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be paid only upon grant of the court's approval and upon execution of the deed of
absolute sale.
Here, there is no doubt that petitioner prevented the fulfillment of the suspensive
condition. She herself admitted that they did not file any petition to seek approval of
the court as regards the sale of the shares of the minor owners. In addition, the
other co-owners sold their shares to petitioner such that she was able to consolidate
the title in her name. Thus, the condition is deemed constructively fulfilled, as the
intent to prevent fulfillment of the condition and actual prevention thereof were
definitely present. Consequently, it was incumbent upon the sellers to enter into a
contract with respondent-spouses for the purchase of the subject property.
Petitioner cannot invoke the non-fulfillment of the condition in the contract to sell
when she and her then co-owners themselves are guilty of preventing the fulfillment
of such condition. When it has become evident that the condition would no longer
be fulfilled, it was incumbent upon petitioner to inform respondent--spouses of such
circumstance because the choice whether to waive the condition or continue with
the agreement clearly belongs to the latter.
Inasmuch as petitioner has not yet complied with her obligation to execute a deed of
sale after the condition has been deemed fulfilled, respondent-spouses are still
entitled to possess the subject property. Petitioner cannot anchor her claim on the
supposed conversion of their agreement from a contract to sell into a contract of
lease as provided in the third paragraph of the agreement which provides that
should the court disapprove the sale of the shares of the minor owners, the down
payment would be treated as rentals for twenty (20) years. The agreement,
however, could not have been converted into a contract of lease for the simple
reason that there was no petition filed before any court seeking the approval of the
sale as regards the shares of the minor owners. Hence, the court did not have any
occasion to approve much less disapprove the sale of such shares. As a result, there
was no reason for the contract to sell to be converted into a contract of lease.
Respondent-spouses did not become lessees. They remained to be prospective
buyers of the subject property who, up to now, are awaiting fulfillment of the
obligation of the prospective sellers to execute a deed of sale. Hence, inasmuch as
the sellers allowed them to have the subject property in their possession pending
the execution of a deed of sale, respondent-spouses are entitled to possession
pending the outcome of the contract to sell.
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investment. Thus, she had no other choice but to agree to the placement. The lack of
genuine consent is further evidenced by private complainant's repeated requests for
a refund of her initial investment even after she received the first tranche of interest
income.
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In order to enjoin the foreclosure, petitioners instituted an action for damages with
Temporary Restraining Order and Preliminary Injunction against BPI praying for
P23,570,881.32 as actual damages; P1,000,000.00 as moral damages; P500,000.00
as attorney's fees, litigation expenses and costs of suit.
ISSUES
1. WHETHER OR NOT THERE WAS ALREADY AN EXISTING AND BINDING
CONTRACT BETWEEN PETITIONERS AND BSA WITH REGARD TO THE
OMNIBUS CREDIT LINE;
2. WHETHER OR NOT BSA INCURRED DELAY IN THE PERFORMANCE OF TS
OBLIGATIONS;
RULING:
1. Yes. In the case of Spouses Palada v. Solidbank Corporation, et al., this Court
held that under Article 1934 of the Civil Code, a loan contract is perfected
only upon the delivery of the object of the contract. In that case, although
therein petitioners applied for a P3,000,000.00 loan, only the amount of
P1,000,000.00 was approved by therein respondent bank because
petitioners became collaterally deficient. Nonetheless, the loan contract was
deemed perfected on March 17, 1997, the date when petitioners received the
P1,000,000.00 loan, which was the object of the contract and the date
whenthe REM was constituted over the property. Applying this to the case at
bench, there is no iota of doubt that when BSA approved and released the
P3,000,000.00 out of the original P5,000,000.00 credit facility, the contract
was perfected.
2. No. In this case, BSA did not only incur delay in releasing the pre-agreed
credit line of P5,000,000.00 but likewise violated the terms of its agreement
with petitioners when it deliberately failed to release the amount of
P2,000,000.00 after petitioners complied with their terms and paid the first
P3,000,000.00 in full. The default attributed to petitioners when they
stopped paying their amortizations on the term loan cannot be sustained by
this Court because long before they sent a Letter to BSA informing the latter
of their refusal to continue paying amortizations, BSA had already reneged
on its obligation to release the amount previously agreed upon, i.e., the
P5,000,000.00 covered by the credit line.
WHEREFORE, in light of the foregoing, the petition is hereby GRANTED. The
Decision dated January 31, 2013 of the Court of Appeals in CA-G.R. CV No. 92348 is
hereby REVERSED and SET ASIDE. The questioned extrajudicial foreclosure of real
estate mortgage is likewise declared VOID. Respondent BPI Family Savings Bank,
Inc. is hereby ORDERED to pay petitioners Spouses Francisco Ong and Betty Lim
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Ong and Spouses Joseph Ong Chuan and Esperanza Ong Chuan the amount of
P2,772,000.00 as actual or compensatory damages; P100,000.00 as exemplary
damages; P300,000.00 as attorney's fees; and interest of six percent (6%) per
annum on all the amounts of damages reckoned from the finality of this decision.
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ROYAL PLAINS VIEW, INC. AND/OR RENATO PADILLO VS. NESTOR C. MEJIA
Gr.230832
Reyes,J
DOCTRINE:
This only lends credence to the rule that rescission in its technical sense is not
proper in a contract to sell. Such that failure to pay the price agreed upon is not a
mere breach, casual or serious, rather, nonpayment is a condition that prevents the
obligation from acquiring an obligatory force. This is entirely different from the
situation in a contract of sale, where nonpayment of the price is a negative
resolutory condition. The effects in law are not identical. In a contract of sale, the
vendor has lost ownership of the thing sold and cannot recover it, unless the
contract of sale is rescinded and set aside. In a contract to sell, however, the vendor
remains the owner for as long as the vendee has not complied fully with the
condition ofpaying the purchase price. Strictly speaking, in a contract to sell, there
can be no rescission or resolution of an obligation that is still non-existent due to the
non-happening ofthe suspensive condition.
FACTS:
On March 23, 2005, Nestor and petitioner Corporation, represented by Renato's
wife, Rosemarie Padillo, entered into a contract denominated as Deed of Conditional
Sale involving that said parcel of land covered by TCT No. T-225549 and registered
in the name of Dominador.17 Under that contract, petitioner Corporation bound
itself to pay Nestor the sum of P8,000,000.00 of which P500,000.00 was for down
payment. The balance was to be paid in 36 equal monthly installments of
P208,333.30.
The March 23, 2005 Deed ofConditional Sale was later revoked and a new deed was
executed on April 11, 2007 between Nestor and petitioner Corporation, represented
by Renato.19 The new Deed of Conditional Sale20 stated that petitioner Corporation
had paid respondent the amount of Pl,972,000.00 and the remaining balance was to
be paid in 40 equal monthly of P150,000.00 starting on July 1, 2007 and ending in
June 2010.
One day, Nestor asked petitioner Renato to give him the original owner's duplicate
copy ofTCT No. T-225549.23 Petitioner Renato found out that Nestor had sold the
whole property to the spouses Harris and Caroline Egina (spouses Egina) for the
sum of Pl2,000,000.00.24 As a consequence, eight TCTs were issued by the Register
of Deeds of Davao del Norte in the name of the spouses Egina.25 These eight TCTs
were later on cancelled and the Court reinstated the derivative titles which are TCT
Nos. T-225549 and T-225550. Because of legal controversies besetting TCT No. T-
225549, it is now in the custody of the Registry of Deeds of Tagum City.
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Renato attempted several times to contact Nestor, but the latter did not reply and
simply vanished. Instead, Renato received a document entitled "Rescission of Deed
of Conditional Sale"28 dated February 5, 2010 from Nestor whereby the latter
rescinded the April 11, 2007 Deed of Conditional Sale alleging that petitioners
(Renato and the Corporation) had defaulted in their installments.
On October 12, 2011, petitioners filed a Complaint for Declaration of Nullity of the
Instrument denominated as Rescission of Conditional Sale, Specific Performance,
Sums of Money, etc. against respondent Nestor.
ISSUE:
The propriety of the rescission and cancellation of the conditional sale executed by
the parties.
HELD:
In order to fully pass upon the validity and propriety of the Rescission of the Deed of
Conditional Sale executed by respondent Nestor, it is vital to characterize the nature
of the agreement between the parties - whether the same is a contract of sale or a
contract to sell. The courts have repeatedly recognized the distinction between the
two concepts.
The rule that rescission in its technical sense is not proper in a contract to sell. Such
that failure to pay the price agreed upon is not a mere breach, casual or serious,
rather, nonpayment is a condition that prevents the obligation from acquiring an
obligatory force. This is entirely different from the situation in a contract of sale,
where nonpayment of the price is a negative resolutory condition. The effects in law
are not identical. In a contract of sale, the vendor has lost ownership of the thing
sold and cannot recover it, unless the contract of sale is rescinded and set aside. In a
contract to sell, however, the vendor remains the owner for as long as the vendee
has not complied fully with the condition ofpaying the purchase price. Strictly
speaking, in a contract to sell, there can be no rescission or resolution of an
obligation that is still non-existent due to the non-happening of the suspensive
condition.
Considering the foregoing, as well as the pronouncement by this Court in the Luzon
Brokerage case, it follows then that respondent Nestor's act of rescinding the Deed
of Conditional Sale, or, more correctly, canceling it, is theoretically valid and the
parties shall stand as if the obligation to sell never existed. The reason is not that
respondent Nestor has the power to rescind such contract, but because their
obligation thereunder did not arise.
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Salvador never consented to selling the 140-square meter lot to the spouses
Libardo. The petitioners additionally averred that Salvador could not have intended
to sell a portion of the provincial road to the spouses Libardo because, then, the
object of the contract would be beyond the commerce of man. Thus, to the
petitioners, the deed entitled "SALE OF A PORTION OF REGISTERED LAND" is void
ab initio. The argument deserves scant consideration.
Article 1318 of the New Civil Code enumerates the essential requisites of a valid
contract, thus:
Art. 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
Consent is an essential requisite of contracts. It pertains to the meeting of the offer
and the acceptance upon the thing and the cause that constitute the contract.
Let it be recalled that the spouses Libardo remained in undisturbed possession of
the disputed portion of Lot No. 2878-F for 35 years. They bought a house built
thereon in 1966, and later, in order to acquire ownership over the land and secure
their rights to the residence, they purchased a 140-square meter segment of the lot
from Salvador. It was only in July 2001 when the petitioners asked them to vacate
the land.
Taking this into consideration, it defies reason to conclude that the minds of
Salvador and Saturnino never met. Surely, Salvador knew that since the spouses
Libardo already owned a house built on Lot No. 2878-F, what they intended to
purchase was that particular portion of the lot on which their house stood.
Moreover, from the facts, it would be absurd to deduce that Salvador intended to
convey a stretch of provincial road to them. Clearly, therefore, it was a mere
afterthought on the part of the petitioners to contend that there was a mistake as to
the object of the contract in this case.
The CA ruled that the petitioners availed of the wrong remedy. Since the minds of
Saturnino and Salvador met as to the subject of the sale, the contract was held to be
valid, and therefore the petitioners improperly resorted to annulment of contract.
However, the appellate court stated that because the deed failed to reflect the
parties' true intent, the petitioners should have filed an action for reformation of
instrument instead.
Reformation of an instrument is a remedy by which a written instrument is made or
construed so as to express or conform to the real intention of the parties. Such
action presupposes a valid, existing contract, in which there had been a meeting of
the minds of the parties; however, the document, which embodies the agreement,
fails to reflect their true intent.
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VILLA CRISTA MONTE REALTY & DEV’T CORP V. EQUITABLE PCI BANK
BERSAMIN, J.
DOCTRINE: An escalation clause without a concomitant de-escalation clause is void
and ineffectual for violating Presidential Decree No. 1684, otherwise known as
Amending Further Act No. 2655, As Amended, Otherwise Known as "The Usury
Law," as well as the principle of mutuality of contracts unless the established facts
and circumstances, as well as the admissions of the parties, indicate that the lender
at times lowered the interest rates, or, at least, allowed the borrower the discretion
to continue with the repriced rates. Not all contracts of adhesion are invalid. Only a
contract of adhesion in which one of the parties is shown to be the weaker as to
have been imposed upon may be invalidated and set aside.
FACTS:
Sometime in 1994, plaintiff-appellant Villa Crista Monte Realty Corporation was
organized to engage in the business of real estate development. In order to fully
develop its subdivision project, appellant applied for and was granted a credit line of
P80 Million by then Equitable Philippine Commercial International Bank (E-PCIB),
now Banco De Oro. By way of security for the said credit line, appellant executed a
Real Estate Mortgage over the 80,000 square meters of its properties with all the
existing improvements thereon.Appellant subsequently applied for an additional
P50 Million credit accommodation from E-PCIB to which the latter readily acceded.
It being later established that the 41 lots, out of the 174 subdivided lots, would
already be sufficient securities for the credit accommodation, appellant then asked
for the release of the remaining 133 titles from the earlier mortgage. E-PCIB granted
appellant's request on the condition that the real estate mortgage contract be
amended to conform to the changes in the amount of the credit line and in the
properties subject of the mortgage, to which condition appellant readily agreed.
Under its approved P130 Million credit line, appellant separately obtained loans on
various occasions from March 20, 1997 to August 15, 1997.
Eventually, E-PCIB wrote several times to appellant apprising it of the increased
rates in the interest to be imposed on its loans covered by the promissory notes. The
increased rates ranged from 21% to 36% and were ostensibly anchored on the
uniform provision in the promissory notes on monthly repricing.
Appellant reneged on paying its loan obligations amounting to P129,700,00.00,
prompting E-PCIB to initiate foreclosure proceedings on the mortgaged properties.
This led to appellant's filing of the Supplemental Complaint with the RTC Quezon
City assailing the said auction sale and the amount claimed therein, as well as
praying for the nullification of the titles that were consolidated in the name of E-
PCIB.E-PCIB countered that appellant has no cause of action and that its complaint
does not state any such cause either. E-PCIB underscored that appellant voluntarily
and consciously agreed to the complained monthly re-pricing of interest as shown
by appellant's affixing of its signature in all the promissory notes in due course.
Accordingly, the said interest rates were than re-priced as agreed upon; and that the
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said re-pricing even started only on July 1997, although the original promissory
notes were executed in 1996, and were only renewed in early 1997. E-PCIB stressed
that appellant then not only accepted the stipulation on monthly re-pricing but also
the new interest rates, as re-priced, by its payment of the corresponding adjusted
interest rates until it later defaulted to pay even the interest rates to keep the loans
current. Inasmuch as the dispute lies only on the rates of interests and no longer on
the fact that appellant was already in default in its payment, E-PCIB argued that
appellant failed to prove its right to an injunction. E-PCIB maintained that it merely
complied with the provisions of the Promissory Notes.
ISSUE:
Whether the promissory notes and the corresponding repricing of interest rates
were valid
RULING:
YES. The agreement between the parties on the imposition of increasing interest
rates on the loan is commonly known as the escalation clause. Generally, the
escalation clause refers to the stipulation allowing increases in the interest rates
agreed upon by the contracting parties. There is nothing inherently wrong with the
escalation clause because it is validly stipulated in commercial contracts as one of
the means adopted to maintain fiscal stability and to retain the value of money in
long term contracts. In short, the escalation clause is not void per se. Yet, the
escalation clause that "grants the creditor an unbridled right to adjust the interest
independently and upwardly, completely depriving the debtor of the right to assent
to an important modification in the agreement" is void. Such escalation clause
violates the principle of mutuality of contracts, and should be annulled. To prevent
or forestall any one-sidedness that the escalation clause may cause in favor of the
creditor, therefore, Presidential Decree No. 1684 was promulgated. Accordingly, the
Court has ruled in Banco Filipino Savings and Mortgage Bank v. Judge Navarro that
there should be a corresponding de-escalation clause that authorizes a reduction in
the interest rates corresponding to downward changes made by law or by the
Monetary Board. Verily, the escalation clause, to be valid, should specifically
provide: (1) that there can be an increase in interest rates if allowed by law or by
the Monetary Board; and (2) that there must be a stipulation for the reduction of the
stipulated interest rates in the event that the applicable maximum rates of interest
are reduced by law or by the Monetary Board. The latter stipulation ensures the
mutuality of contracts, and is known as the de-escalation clause. Although it would
not necessarily prevent the lender from discriminatorily increasing the interest
rates, the de-escalation clause's main objective is to prevent the unwanted one-
sidedness in favor of the lender, a quality that is repugnant to the principle of
mutuality of contracts. The clause proposes to ensure that any unconsented increase
in interest rates is ineffective for transgressing the principle of mutuality of
contracts. Indeed, the clause creates a balance in the contractual relationship
between the lender and the borrower, and tempers the power of the stronger player
between the two, which is the former. No express de-escalation clause was
stipulated in the promissory notes signed by the petitioner. Yet, the absence of the
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clause did not invalidate the repricing of the interest rates. The repricing notices
issued to the petitioner by E-PCIB indicated that on some occasions, the bank had
reduced or adjusted the interest rates downward. Based on the dictum in Llorin Jr.,
such actual reduction or downward adjustment by the lender bank eliminated any
one-sidedness of its contracts with the borrower. It becomes inescapable for the
Court to uphold the validity and enforceability of the escalation clause involved
herein despite the absence of the de-escalation clause. The actual grant by the
respondent of the decreases in the interest rates imposed on the loans extended to
the petitioner rendered inexistent the evil of inequality sought to be thwarted by the
enactment and application of Presidential Decree No. 1684. We do not see here a
situation in which the petitioner did not stand on equality with the lender bank. The
binding effect on the parties of any agreement is premised on two settled principles,
namely: (1) that any obligation arising from contract has the force of law between
the parties; and (2) that there must be mutuality between the parties based on their
essential equality. Any contract that appears to be heavily weighed in favor of only
one of the parties so as to lead to an unconscionable result is void. Specifically, any
stipulation regarding the validity or compliance of the contract that is left solely to
the will of one of the parties is likewise invalid.
The significance of Article 1308 cannot be doubted. It is elementary that there can
be no contract in the absence of the mutual assent of the parties. When the assent of
either party is wanting, the act of the non-assenting party has no efficacy for his act
is as if it was done under duress or by an incapacitated person. Naturally, any
modification made in the contract must still be with or upon the consent of the
contracting parties. There must still be a meeting of the minds of all the parties on
the modification especially when the modification relates to an important or
material aspect of the agreement. In loan contracts, the rate of interest is always
important or material because it can make or break the capital ventures. Contrary to
the petitioner's position, there was mutuality of contracts between itself and the
respondent. Tio, the petitioner's President, who signed the promissory notes in
behalf of the petitioner, was aware of the provision in the documents pertaining to
the monthly repricing of the interest rates. Although the promissory notes
succinctly stipulated that the loans were subject to interest without need of prior
notice to the borrower, the respondent sent notices to the petitioner each and every
time it increased the interest rate. Equally of significance was that the respondent
allowed the petitioner the sufficient time and opportunity either to reject the
imposition of the increased interest rates by paying the outstanding obligations or
by accepting the same through payment of whatever amounts were due. The
sufficient time and opportunity negated the petitioner's insistence about the
respondent having unilaterally determined the interest rates in violation of the
principle of mutuality of contracts embodied in Article 1308. There is no question,
therefore, that the respondent accorded the petitioner the notice of any repricing of
the interest rates. Although there have been occasions in which the Court struck
down the escalation clauses in loan agreements for violating the mutuality of
contracts, this case will not be one of them. This is because the respondent either
has given notice to the petitioner whenever it repriced the interest rates in order to
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give the latter the option to reject the repricing, or has implemented the downward
repricing of the interest rates. The respondent thereby served both the letter and
the spirit of Presidential Decree No. 1684.
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PHILIPPINE NATIONAL BANK vs BACANI, ET AL
REYES, JR., J.
CASE DOCTRINE:
Considering that the reacquisition of the subject property involves a contract, there
should be a meeting of the minds as to its terms and conditions. When the offer is
not accepted by either party, the contract is not perfected and there is no binding
juridical relation between the parties. Article 1318 provides that there is no contract
unless the following requisites concur: (1) Consent of the contracting parties; (2)
Object certain which is the subject matter of the contract; (3) Cause of the obligation
which is established.
FACTS:
Spouses Bacani obtained a loan (Php 80, 000) from PNB. To secure the loan, they
mortgaged a land property registered in their name. When the Spouses Bacani failed
to pay the loan, PNB extrajudicially foreclosed the subject property, which was then
awarded to PNB as the highest bidder. The Spouses failed to redeem the property,
hence a TCT was issued in the name of PNB. 9 years later, PNB issued a circular
revising its policy on the disposition of acquired assets. Subject to certain
conditions, former owners or their heirs were given priority in the re-acquisition of
their foreclosed assets “on negotiated basis without public bidding.” Spouses Bacani
initiated negotiations with PNB and sent written offers to purchase. In their final
letter, they offered to buy back the property at Php 350, 000. PNB rejected the
request for repurchase because of the low offer, which amounted less than the fair
market value. Later on, the Spouses Bacani received a notice from PNB that it had
begun to accept offers for the purchase of various properties, including the subject
property. They were provided with a copy of the Invitation to Bid. PNB then sold the
property through a negotiated sale to Renato de Leon for Php 1.5M. The Spouses
filed a complaint for the annulment of the sale alleging that PNB’s refusal to accept
their offer, and the subsequent sale of the subject property to Renato, were all
badges of bad faith on the part PNB that warrant the annulment of the sale and the
award of damages in their favor. PNB refuted that as the registered owner of the
property, PNB may dispose of the subject property with its own terms and
conditions. The RTC ruled in favor of the Spouses Bacani; such decision was
affirmed by the CA. The CA relied on the supposed time deposit account of the
Spouses Bacani with PNB. According to the CA, PNB should have considered this
deposit as a manifestation of the Spouses Bacani's willingness and ability to pay for
the reacquisition of the subject property.
ISSUE:
Whether or not the time deposit account was meant as an option money intended to
secure the privilege of buying the subject property within a given period of time
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RULING:
No. Bank deposits are in the nature of a simple loan or mutuum, which must be paid
upon demand by the depositor. As such, the deposit of whatever amount to PNB
creates a debtor-creditor relationship between the bank and the depositor. PNB, as
the recipient of the deposit, is duty-bound to pay or release the amount deposited
whenever the depositor so requires.
By the very nature of the deposit, PNB could not have assumed that the Spouses
Bacani's alleged time deposit account was meant as an option money intended to
secure the privilege of buying the subject property within a given period of time,
especially since there was no option contract between them. Neither may PNB
consider the deposit as a down payment on the price of the subject property
because there was no perfected contract of sale.
Evidently, as far as PNB was concerned, it cannot use the money in the time deposit
to satisfy the purchase price for the subject property, without violating its obligation
to return the amount upon the demand of the depositors. In other words, the time
deposit with PNB did not create a contract of sale, or at the very least, an option
contract, between PNB and the Spouses Bacani. Furthermore, considering that the
reacquisition of the subject property involves a contract, there should be a meeting
of the minds as to its terms and conditions. When the offer is not accepted by either
party, the contract is not perfected and there is no binding juridical relation
between the parties. The Spouses Bacani, therefore, cannot demand to repurchase
the property, in the absence of PNBs consent to the offer. At most, the PNB circular
grants a privilege to the Spouses Bacani as the former owners, to be given priority in
the disposition of the subject property. It does not confer an enforceable and
absolute right to reacquire the property, to the prejudice of PNB as the absolute
owner.
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payment is made, or when then loan becomes due and demandable in cases where
demand is unnecessary, viz:
An action to enforce a right arising from a mortgage should be enforced within ten
(10) years from the time the right of action accrues, i.e., when the mortgagor
defaults in the payment of his obligation to the mortgagee; otherwise, it will be
barred by prescription and the mortgagee will lose his rights under the mortgage.
However, mere delinquency in payment does not necessarily mean delay in the legal
concept. To be in default is different from mere delay in the grammatical sense,
because it involves the beginning of a special condition or status which has its own
peculiar effects or results.
In order that the debtor may be in default, it is necessary that: (a) the obligation be
demandable and already liquidated; (b) the debtor delays performance; and (c) the
creditor requires the performance judicially or extrajudicially, unless demand is not
necessary - i.e., when there is an express stipulation to that effect; where the law so
provides; when the period is the controlling motive or the principal inducement for
the creation of the obligation; and where demand would be useless. Moreover, it is
not sufficient that the law or obligation fixes a date for performance; it must further
state expressly that after the period lapses, default will commence. Thus, it is only
when demand to pay is unnecessary in case of the aforementioned circumstances, or
when required, such demand is made and subsequently refused that the mortgagor
can be considered in default and the mortgagee obtains the right to file an action to
collect the debt or foreclose the mortgage.
Therefore, the Supreme Court finds that the CA did not err in concluding that
Mercene's complaint failed to state a cause of action. It is undisputed that his
complaint merely stated the dates when the loan was contracted and when the
mortgages were annotated on the title of the lot used as a security. Conspicuously
lacking were allegations concerning: the maturity date of the loan contracted and
whether demand was necessary under the terms and conditions of the loan.
As such, the RTC erred in ruling that GSIS' right to foreclose had prescribed because
the allegations in Mercene's complaint were insufficient to establish prescription
against GSIS. The only information the trial court had were the dates of the
execution of the loan, and the annotation of the mortgages on the title. As elucidated
in the above-mentioned decisions, prescription of the right to foreclose mortgages is
not reckoned from the date of execution of the contract. Rather, prescription
commences from the time the cause of action accrues; in other words, from the time
the obligation becomes due and demandable, or upon demand by the
creditor/mortgagor, as the case may be.
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Sustaining the Bank's position, RTC-Davao rendered an Order on April 15, 2016
dismissing the petitioners' Complaint. Petitioners interposed a Motion for
Reconsideration but were soon denied by the RTC-Davao, prompting them to
elevate the matter to the CA on appeal.
Before the CA, petitioners argued that the Bank is estopped from asserting the
stipulation on the exclusive venue as stated in the PN and the REM considering
that the petition for extrajudicial foreclosure as well as the loan mortgage
documents were executed in Davao City.
The appellate court denied the appeal and affirmed the dismissal of the
petitioners' Complaint by the RTC-DAVAO. The CA held that the venue stipulation
in the PN and then REM, is indeed restrictive in nature, considering that it
effectively limits the venue arising therefrom to the courts of Makati City. Thus,
RTC-Davao correctly declared that the venue was improperly laid in the instant
case. Petitioners moved for, but was denied, reconsideration by the CA in the
assailed Resolution. Hence, the present petition.
ISSUE:
Whether the Planters Development Bank is estopped from asserting the
stipulation on the exclusive venue as stated in the promissory note and Deed of
Real Estate Mortgage.
HELD:
No. The petitioners' contention that the Bank has waived the exclusive venue by
instituting the foreclosure in Davao is without merit. It fails to consider that
petitions for extrajudicial foreclosure sale are, strictly speaking, not judicial
proceedings, actions or suits. An extrajudicial foreclosure of real estate mortgage
is initiated by filing a petition not with any court of justice but with the office of
the sheriff of the province where the sale is to be made. By no stretch of the
imagination can the office of the sheriff come under the category of a court of
justice.
As such, extrajudicial foreclosures are not covered by Rule 4 of the Rules of Court,
or by the parties' stipulation in this case. Rather, Section 2 of Act No. 3135
governs. It states:
Sec. 2. Said sale cannot be made legally outside of the province in
which the property sold is situated; and in case the place within
said province in which the sale is to be made is subject to
stipulation, such sale shall be made in said place or in the
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Villa Crista Monte Realty & Development Corporation vs. Equitable PCI Bank
G.R. No. 208336, November 21, 2018
BERSAMIN, J.
CASE DOCTRINE: The principle of mutuality of contracts is embodied in Article
1308 of the Civil Code which provides that, “the contract must bind both contracting
parties; its validity or compliance cannot be left to the will of one of them.”
FACTS: Plaintiff-appellant was organized to engage in the business of real estate
development. Appellant acquired from a certain Alfonso Lim the 80,000 square
meters (8 hectares) parcel of land to which appellant intended to develop it into a
residential subdivision. After successfully putting up its clubhouse, known as the
"Tivoli Royale Country Clubhouse," appellant Corporation later negotiated and
eventually succeeded in purchasing the adjoining 13.5 hectares land, thereby
consolidating its ownership over the 21.5 hectares of lands. In order to fully develop
its subdivision project, appellant applied for and was granted a credit line of P80
Million by then E-PCIB, now Banco De Oro. By way of security for the said credit line,
appellant executed a Real Estate Mortgage over the 80,000 square meters of its
properties with all the existing improvements thereon. Thereafter, appellant
subdivided the parcel of land into 174 lots, each with an average area of 340 square
meters and each covered by a separate certificate of title. Appellant subsequently
applied for an additional P50 Million credit accommodation from E-PCIB to which
the latter readily acceded. It being later established that the 41 lots, out of the 174
subdivided lots, would already be sufficient securities for the credit accommodation,
appellant then asked for the release of the remaining 133 titles from the earlier
mortgage. E-PCIB granted appellant's request on the condition that the real estate
mortgage contract be amended to conform to the changes in the amount of the
credit line and in the properties subject of the mortgage, to which condition
appellant readily agreed. Under its approved P130 Million credit line, appellant
separately obtained the following amounts on various occasions from March 20,
1997 to August 15, 1997. Each of the aforesaid amount was covered by a promissory
note in the prescribed form of the E-PCIB. Eventually, E-PCIB wrote several times to
appellant apprising it of the increased rates in the interest to be imposed on its
loans covered by the promissory notes. The increased rates ranged from 21 % to
36% and were ostensibly anchored on the uniform provision in the promissory
notes on monthly repricing. Appellant reneged on paying its loan obligations,
prompting E-PCIB to initiate foreclosure proceedings on the mortgaged properties.
Thereafter, the auction sale proceeded where E-PCIB emerged as the highest bidder.
ISSUE: Whether or not the monthly repricing of the interest rates on the loans,
which the petitioner claimed to have been unilaterally imposed by E-, PCIB, was
valid.
RULING: Based on their stipulation in the promissory notes, it was provided that
the interest rate shall be determined by the Lender without need of prior notice to
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the Borrower and in case that the latter disagrees with the new rate, he shall prepay
within five (5) days from the notice of the new rate the outstanding balance of the
Loan. The agreement between the parties on the imposition of increasing interest
rates on the loan is commonly known as the escalation clause. Generally, the
escalation clause refers to the stipulation allowing increases in the interest rates
agreed upon by the contracting parties. There is nothing inherently wrong with the
escalation clause because it is validly stipulated in commercial contracts as one of
the means adopted to maintain fiscal stability and to retain the value of money in
long term contracts. In short, the escalation clause is not void per se. Yet, the
escalation clause that "grants the creditor an unbridled right to adjust the interest
independently and upwardly, completely depriving the debtor of the right to assent
to an important modification in the agreement" is void. Such escalation clause
violates the principle of mutuality of contracts, and should be annulled. To prevent
or forestall any one-sidedness that the escalation clause may cause in favor of· the
creditor, therefore, PD No. 1684 was promulgated. Accordingly, in Banco Filipino
Savings and Mortgage Bank v. Judge Navarro, the escalation clause, to be valid,
should specifically provide: (1) that there can be an increase in interest rates if
allowed by law or by the Monetary Board; and (2) that there must be a stipulation
for the reduction of the stipulated interest rates in the event that the applicable
maximum rates of interest are reduced by law or by the Monetary Board. The latter
stipulation ensures the mutuality of contracts, and is known as the de-escalation
clause. Although it would not necessarily prevent the lender from discriminatorily
increasing the interest rates, the de-escalation clause's main objective is to prevent
the unwanted one-sidedness in favor of the lender, a quality that is repugnant to the
principle of mutuality of contracts. The clause proposes to ensure that any
unconsented increase in interest rates is ineffective for transgressing the principle
of mutuality of contracts. However, no express de-escalation clause was stipulated
in the promissory notes signed by the petitioner. Yet, the absence of the clause did
not invalidate the repricing of the interest rates. The repricing notices issued to the
petitioner by E-PCIB indicated that on some occasions, the bank had reduced or
adjusted the interest rates downward. Based on the dictum in Llorin Jr., such actual
reduction or downward adjustment by the lender bank eliminated any one-
sidedness of its contracts with the borrower. The actual grant by the respondent of
the decreases in the interest rates imposed on the loans extended to the petitioner
rendered inexistent the evil of inequality sought to be thwarted by the enactment
and application of PD No. 1684. The binding effect on the parties of any
agreement is premised on two settled principles, namely: (1) that any obligation
arising from contract has the force of law between the parties; and (2) that there
must be mutuality between the parties based on their essential equality. Any
contract that appears to be heavily weighed in favor of only one of the parties so as
to lead to an unconscionable result is void. Specifically, any stipulation regarding the
validity or compliance of the contract that is left solely to the will of one of the
parties is likewise invalid.
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Spouses Francis N. Celones and Felicisima Vs. Metropolitan Bank and Trust
Company and Atty. Crisolito O. Dionido
Tijam, J.
DOCTRINE:
Art. 1291. Obligations may be modified by:
(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the creditor.
Art. 1292. In order that an obligation may be extinguished by another which
substitute the same, it is imperative that it be so declared in unequivocal terms, or
that the old and the new obligations be on every point incompatible with each other.
Extinctive novation is never presumed; there must be an express intention to
novate; in cases where it is implied, the acts of the parties must clearly demonstrate
their intent to dissolve the old obligation as the moving consideration for the
emergence of the new one. Implied novation necessitates that the incompatibility
between the old and new obligation be total on every point such that the old
obligation is completely superseded by the new one. The test of incompatibility is
whether they can stand together, each one having an independent existence; if they
cannot and are irreconcilable, the subsequent obligation would also extinguish the
first.
FACTS:
Spouses Francis and Felicisima Celones, along with their Processing Partners and
Packaging Corporation (PPPC), obtained a loan from Metrobank amounting to
P64,474,058.73 which was secured by several of their properties.
Upon defaulting, Metrobank foreclosed all the mortgaged properties and was
declared the winning bidders. Metrobank filed several petitions for the issuance of
writs of possession.
The Spouses offered to redeem the said properties for P55 million within the one
year period for redemption. Metrobank accepted the offer and issued a Conditional
Notice of Approval for Redemption (CNAR). The Spouses sought to obtain a loan
amounting to P55 million from Atty. Crisolito Deonido to pay for the amount of
redemption.
In lieu of executing a loan agreement, Spouses Celones, PPPC, Metrobank and Atty.
Dionido executed a MOA, wherein the parties agreed for the subrogation of Atty.
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Dionido to all the rights, interests of Metro bank over the loan obligation of Spouses
Celones and the foreclosed properties.
Atty. Dionido issued two manager’s checks amount to P55 million. It was paid to
Metrobank who then issued Payment slips to the Spouses Celones. Metrobank also
caused the dismissal of their petitions for writs of possession on ground that the
Spouses already redeemed the properties.
However, when the Spouses demanded the issuance of the Certificate of
Redemption from Metrobank, the bank refused saying that it should be Atty.
Dionido to issue said certificates on ground that all their rights and interests had
been transferred to him. Atty. Dionido then demanded that the Spouses vacate the
properties on ground that the redemption period was expiring.
The spouses contend that the transaction between them and Atty. Dionido was a
loan. Furthermore, between them and Metrobank, they had already redeemed the
properties pursuant to the CNAR.
On the other hand, Atty. Dionido and Metrobank contend that the CNAR had been
novated by the MOA. As a result, Atty. Dionido should be the one to issue the
Certificate of Redemption.
ISSUE: W.O.N there was novation of the CNAR
RULING:
No. There was no novation so the CNAR and MOA can be reconciled and stand
together.
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.
Extinctive novation is never presumed; there must be an express intention to
novate; in cases where it is implied, the acts of the parties must clearly demonstrate
their intent to dissolve the old obligation as the moving consideration for the
emergence of the new one. Implied novation necessitates that the incompatibility
between the old and new obligation be total on every point such that the old
obligation is completely superseded by the new one. The test of incompatibility is
whether they can stand together, each one having an independent existence; if they
cannot and are irreconcilable, the subsequent obligation would also extinguish the
first.
This kind of novation presupposes a confluence of four essential requisites: (1) a
previous valid obligation, (2) an agreement of all parties concerned to a new
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contract, (3) the extinguishment of the old obligation, and ( 4) the birth of a valid
new obligation.
In this case, the MOA showed no express stipulation as to the novation or extinction
of the CNAR. There is also no implied novation because under the MOA, Metrobank
assigned all its rights and interests over the foreclosed properties to Atty. Dionido.
He merely acquired what right Metrobank has, as of the date of the signing of the
MOA, which was the issuance of a Certificate of Redemption, because as of that date,
the foreclosed properties have already been redeemed by Spouses Celones from
Metrobank.
Therefore, there was no novation. However, Atty. Dionido has the right to demand
payment of the amount of P55 Million from Spouses Celones since it is undisputed
that such amount came from Atty. Dionido. It is unjust enrichment on the part of
Spouses Celones to acquire the amount of P55 Million and not be required to pay the
same.
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Benedicto V. Yujuico VS. Far East and Trust Company (now Bank of the
Philippine Islands)
Caguioa, J.
CASE DOCTRINE: While Article 1215 of the Civil Code provides that novation,
compensation or remission of the debt, made by any of the solidary creditors or
with any of the solidary debtors, shall extinguish the obligation, the novation
contemplated therein is a total or extinctive novation of the old obligation.
FACTS: Far East Bank and Trust Company approved the renewal of GTI Sportswear
Corporation's Omnibus Credit Line (OCL). This was secured by a Comprehensive
Surety Agreement (CSA) executed by Yujuico in his personal capacity. He was
also the president of GTI. GTI made known to appellant bank its request for the
conversion of its peso loan to US dollar-denominated loan. An exchange of
communications concerning the conversion transpired but no definite agreement on
the said conversion was put into writing. Yujuico, in behalf of appellee GTI and in his
personal capacity as surety, and appellant's First Vice President Ricardo G. Lazatin,
in behalf of appellant bank, signed a Loan Restructuring Agreement (LRA), the
subject of which was GTI's outstanding balance on its OCL. The agreement expressly
stated that the restructured loan continues to be secured by the CSA previously
executed by Yujuico in favor of the Bank. After the signing of the restructuring
agreement, GTI reiterated its request for the re-denomination of its loan
obligation to US dollars. The Bank, however, denied the request and informed
appellees that the conversion was not deemed workable. The Bank demanded that
GTI update all its unpaid amortizations on the outstanding restructured loan and to
settle all its other past due obligations. This prompted Yujuico and GTI to file a case
against the Bank a Complaint for Specific Performance with Preliminary
Injunction with the RTC. The trial court ruled that the Bank indeed agreed to
convert to US dollar GTI's peso loan obligation. The conversion also resulted in the
novation of GTI's loan obligation. As a result, Yujuico was accordingly released from
his obligations as surety pursuant to Article 1215 of the New Civil Code in
conjunction with paragraph 1 of Article 1291 of the same Code. The CA partially
granted the appeal. The CA ruled that there was no novation and Yujuico remained
to be liable as a surety under the Comprehensive Surety Agreement.
ISSUE: Whether or not the CA has legal basis to resolve and declare that there was
no novation between GTI and the Bank.
RULING: YES. The Court agrees with the finding of the CA that the attendant facts do
not make out a case of novation in the sense of a total or extinctive novation. A
perusal of the records reveals that there is no document that states in unequivocal
terms that the agreement to convert the loan from peso to US dollar would abrogate
the Loan Restructuring Agreement (LRA) or the Omnibus Credit Line (OCL). Instead
what is readily apparent from the exchange of communications concerning the
request for conversion is that the parties recognize the subsistence of the LRA. In
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fact, in the letter sent by GTI to respondent reiterating the former's request to re-
dominate its loan obligation from peso to US dollar, GTI even assured respondent
that the other terms of the LRA would be complied with. Verily, where the parties
to the new obligation expressly recognize the continuing existence and validity of
the old one, there can be no novation. The only modification that the conversion
agreement introduced was that GTI's and petitioner Yujuico's loan obligation would
be payable in US dollars instead of Philippine pesos. Incidentally, the applicable
interest rate is lower on account of the change in currency. These alterations,
however, do not suffice to constitute novation. The well-settled rule is that, with
respect to obligations to pay a sum of money, the obligation is not novated by an
instrument that expressly recognizes the old, changes only the terms of
payment, adds other obligations not incompatible with the old ones, or the new
contract merely supplements the old one. At most, the changes introduced by the
conversion of the loan obligation amount merely to modificatory novation, which
results from the alteration of the terms and conditions of an obligation without
altering its essence. While Article 1215 of the Civil Code provides that novation,
compensation or remission of the debt, made by any of the solidary creditors or
with any of the solidary debtors, shall extinguish the obligation, the novation
contemplated therein is a total or extinctive novation of the old obligation. Also, the
comprehensive characteristic of the surety is evident in the CSA by which Yujuico
guaranteed in joint and several capacity, the punctual payment at maturity of any
and all indebtedness of every kind which, at the time of execution was or may
thereafter become due or owing to respondent by the Borrower, GTI. Indubitably,
these provisions are broad enough to include the loan obligation under the LRA
even after its conversion to US dollar. Without a total or extinctive novation, the
surety agreement subsists.
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D.M. RAGASA ENTERPRISES, INC., petitioner, vs. BANCO DE ORO, INC. (formerly
Equitable PCI Bank, Inc.), respondent
CAGUIOA, J.
CASE DOCTRINE:
• A penal clause (Article 1226 NCC) is an accessory obligation which the
parties attach to a principal obligation for the purpose of insuring the
performance thereof by imposing on the debtor a special prestation
(generally consisting in the payment of a sum of money) in case the
obligation is not fulfilled or is irregularly or inadequately fulfilled. Quite
common in lease contracts, this clause functions to strengthen the coercive
force of the obligation and to provide, in effect, for what would be the
liquidated damages resulting from a breach.
FACTS:
Ragasa and then Equitable Banking Corporation (Equitable Bank) executed a
Contract of Lease (Lease Contract), as lessor and lessee, respectively, over the
ground and second floors of a commercial building located at 175 Tomas Morato
Avenue corner Scout Castor, Quezon City (subject premises), for a period of five
years, commencing on February 1, 1998 up to January 31, 2003, with a monthly
rental of P122,607.00
Meanwhile, Equitable Bank entered into a merger with Philippine Commercial
International Bank (PCI Bank) thereby forming Equitable PCI Bank, Inc. The latter
would eventually, pending the present case, merge with Banco de Oro, Inc. to form
the respondent bank.
The bank sent a notice dated May 28, 2001, informing Ragasa that the former was
pre-terminating their Lease Contract effective June 30, 2001 (Notice of Pre-
termination).
Ragasa responded with a demand letter dated June 20, 2001 for payment of
monthly rentals for the remaining term of the Lease Contract from July 1, 2001 to
January 31, 2003 totaling P3,146,596.42, inasmuch as there is no express provision
in the Lease Contract allowing pre-termination. The bank countered, through a
letter dated June 26, 2001, that its only liability for pre-terminating the contract is
the forfeiture of its security deposit pursuant to item 8 (m) of the Lease Contract.
Ragasa filed with the RTC the Complaint for Collection of Sum of Money
(amounting to P3,146,596.42 representing the monthly rentals under the Lease
Contract for the period July 1, 2001 to January 31, 2003) and Damages. Ragasa
argued that under the Lease Contract, the forfeiture of the bank's security
deposit does not exempt it from payment of the rentals for the remaining term of
the lease because the bank's act of pre-terminating the contract was a major
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breach of its terms. Moreover, item 8 (m) expressly provides that the security
deposit shall not be applied to the rentals.
In its Answer, the bank argued, in gist, that item 8 (m) of the Lease Contract is
actually a penalty clause which, in line with Article 1226 of the Civil Code,
takes the place of damages and interests in case of breach. Hence, for breaching
the Lease Contract by pre-terminating the same, the bank is liable to forfeit its
security deposit in favor of Ragasa but would not be liable for rentals
corresponding to the remaining life of the Contract.
The RTC ruled in Ragasa’s favor and it ordered the bank to pay the plaintiff the
following:
The amount of Php3,146,596.42 Philippine Currency,
representing the monthly rentals from July 1, 2001 to
January 31, 2003;
2. A penalty of 3% of the monthly rental for every month of
delay;
3. An interest of 14% per annum on the full amount due until
fully paid;
4. Attorney's fees in the amount of Php30,000.00; and
5. Costs of litigation.
The bank filed a Motion for Reconsideration but was denied by the RTC. The bank
then filed a Notice of Appeal to the CA which granted the bank’s appeal and reversed
and set aside the RTC’s ruling.
The CA ruled that the bank's failure to continue the Lease Contract until its
expiration constituted a breach of its provision. As such, the Lease Contract was
automatically terminated by virtue of item 8 (p) thereof providing for its outright
termination in case of breach of any of its provisions. Hence, there is no legal basis
to hold the bank liable for payment of rentals for the unexpired period of the
contract. However, the bank is liable to forfeit its security deposit pursuant to the
penalty clause under item 8 (m) of the contract. The CA ruled that to allow Ragasa to
collect the value of the unexpired term of the lease plus penalty would constitute
unjust enrichment.
Ragasa filed a Motion for Reconsideration which the CA denied. Hence, this petition.
ISSUE:
Whether or not the Court of Appeals seriously erred in law in ruling that the Penalty
Clause applicable in the case is Item No. 8(m) of the contract and not item 8 (n) of
the same contract.
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RULING:
NO. The the provision or clause that is applicable in case of non-compliance of the
Term or period of the Lease Contract is item 8 (m) which mandates that the full
deposit of P367,821.00 or the equivalent of three months rentals shall be forfeited
with the proviso that the deposit cannot be applied to rental.
The Court believes and so holds that item No. 8 (m) is a penalty or penal clause.
A penal clause is an accessory obligation which the parties attach to a principal
obligation for the purpose of insuring the performance thereof by imposing on the
debtor a special prestation (generally consisting in the payment of a sum of money)
in case the obligation is not fulfilled or is irregularly or inadequately fulfilled. Quite
common in lease contracts, this clause functions to strengthen the coercive force of
the obligation and to provide, in effect, for what would be the liquidated damages
resulting from a breach.
As defined, liquidated damages are those agreed upon by the parties to a contract, to
be paid in case of breach thereof. The amount of the liquidated damages is purely
contractual between the parties; and the courts will intervene only to equitably
reduce the liquidated damages, whether intended as an indemnity or a penalty, if
they are iniquitous or unconscionable, pursuant to Articles 2227 and 1229 of the
Civil Code.
Also, proof of actual damages suffered by the creditor is not necessary in order
that the penalty may be demanded.
Item 8 (m) seeks to insure or guarantee the completion of the lease period since
its non-compliance shall be met with a penalty. The degree of the coercive effect
or impact of the penalty to insure or guarantee the performance of the principal
obligation depends largely on the stipulated amount of the liquidated damages.
If the amount is substantial, then the compulsion to perform may be greater. The
obligor may not, however, be willing to accept a very stiff penalty. As expressed
earlier, the amount is purely discretionary on the parties provided that it will
pass the test of unconscionability or excessiveness. Since the herein parties have
agreed on a specific amount of penalty, P367,821.00 or the full deposit, the Court
will not even second guess whether it is substantial enough to insure the
compliance of the lease period. The Court will simply rule that it is reasonable.
Being provisions on default, item 8 (m) and item 10 must be applied jointly and
simultaneously. Thus, aside from the forfeiture of the full deposit, the party at fault
or in default is liable, pursuant to item 10 of the Lease Contract, for the payment of
attorney's fees in an amount which is not less than P15,000.00, other damages that
the court may allow, cost of litigation, and 14% interest per annum on unpaid
accounts and obligations.
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However, Ragasa cannot insist on the performance of the lease, i.e. for the lease to
continue until expiration of its term, because the lease has been automatically
terminated when the bank breached it by pre-termination terms. Thus, Ragasa is
entitled to damages.
But Ragasa, as the injured party, is nonetheless required to prove the "other
damages" that it actually suffered before it can be entitled thereto. However,
a review of the records shows that Ragasa presented nothing. Ragasa simply
insisted that the bank should be liable for the amount representing the monthly
rentals from July 1, 2001 up to January 31, 2003 or the unexpired term of the
Lease Contract, equivalent to P3,146,596.42. Ragasa did not adduce any evidence
to support its claim that it actually suffered damages of such amount in terms of
lost income.
In conclusion, the Court ruled that Ragasa is not entitled to the rental for the
unexpired period of the Lease Contract, and it is only entitled to the forfeiture of
the full deposit pursuant to item 8 (m) and P15,000.00 as attorney's fees pursuant
to item 10.
Wherefore, the resolution of the CA is Affirmed with Modification, awarding
attorney’s fees in the amount of P15, 000.00 in favour of petitioner D.M. Ragasa
Enterprise, Inc.
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ISSUE; Whether Excellent Essentials', who is a third party to the contract, may be
held liable for damages caused to Excel Philippines
RULING: YES. A corporation, who is a third party to a contract, may be held liable for
damages if used as a means to breach the obligations between the contracting
parties. Prior to the revocation of its exclusive distributorship, Excel International
had an existing contract with Bright Vision wherein they agreed to set up a
corporation to exclusively distribute E. Excel products within the Philippines. This
corporation, eventually, turned out to be Excel Philippines who was given the
irrevocable and exclusive right to distribute, market, and/or sell. Under its
agreement with Bright Vision, Excel Philippines' exclusive distributorship right was
irrevocable and may only be modified, transferred, or terminated upon the mutual
consent of both parties. This agreement was effective from 22 May 1995 until 21
May 2005.
Excel International had already breached its contractual obligations by unilaterally
revoking Excel Philippines' exclusive distributorship even if it was prohibited from
doing so under the 22 May 1995 agreement. Stewart could not have done what she
did during her temporary control over Excel International because, under clause 8.5
of the agreement, any change in the management of Excel International shall not
affect the validity and continuity of the rights and obligations of both parties. In
other words, Stewart, as Excel International's interim president, was bound by the
company's grant of exclusive distributorship to Excel Philippines and the conditions
that came with it.
Having established the first element of tortuous interference, we now have to
determine if Excellent Essentials had knowledge of Excel Philippines' exclusive
right. On this score, we note that the exclusive distributorship right was granted to
Excellent Essentials before it existed. This circumstance suggests that even before
Excellent Essentials was organized, its incorporators had the preconceived plan to
maneuver around Excel Philippines. Worse, after going over the records, there is
evidence showing that Excellent Essentials' incorporators were officers of and/or
affiliated with Excel Philippines. In fact, these incorporators remained at work with
Excel Philippines during this time and started to pirate its supervisors, employees,
and agents to join Excellent Essentials' multi-level marketing system.
Under these circumstances, we can conclude that those behind Excellent Essentials
not only had knowledge that Excel International had the obligation to honor Excel
Philippines' exclusive right, but also conspired with Stewart to undermine Excel
Philippines. Thus, we agree with the CA when it said: It does not escape this Court's
attention the stealthy maneuverings that [Excellent Essentials'] incorporators did
while still working for [Excel Philippines]. As narrated above, they anticipated the
revocation of [Excel Philippines'] exclusive right contract and the award to
[Excellent Essentials] of the same gratuity while the latter has yet to be organized.
With this expectation comes not a foreknowledge of divine origin but a conspiracy
to rig existing contractual obligations so they could swaddle themselves with the
benefits that go along with such maneuverings. The Utah Court made same
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observations as this Court now does because the coincidence of the revocation of
the exclusive rights contract and its conferment later appears so surreal if they were
not planned at all. It is in this sequence of events that this Court finds bad faith in
[Excellent Essentials'] actuations. Contrary to its assertions, it did not just stand as
an innocent bystander but a conspirator in the manner by which [Excel
International's] corporate structure and contracts were skewed to fit the best
interests of some.
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Diampoc v. Buenaventura
G.R. No. 200383, March 19, 2018
DEL CASTILLO, J.
CASE DOCTRINE: Article 1358 of the Civil Code requires that the form of a contract
that transmits or extinguishes real rights over immovable property should be in a
public document, yet the failure to observe the proper form does not render the
transaction invalid. The necessity of a public document for said contracts is only for
convenience; it is not essential for validity or enforceability. Even a sale of real
property, though not contained in a public instrument or formal writing, is
nevertheless valid and binding, for even a verbal contract of sale or real estate
produces legal effects between the parties. Consequently, when there is a defect in
the notarization of a document, the clear and convincing evidentiary standard
originally attached to a duly-notarized document is dispensed with, and the
measure to test the validity of such document is preponderance of evidence.
FACTS:
The Diampocs alleged in their Complaint that they owned a 174-square meter parcel
of land (subject property) in Signal Village, Taguig City; that Buenaventura became
their friend; that Buenaventura asked to borrow the owner's copy of TCT to be used
as security for a P1 million loan she wished to secure; that they acceded, on the
condition that Buenaventura should not sell the subject property; that
Buenaventura promised to give them P300,000.00 out of the P1 million loan
proceeds; that on July 2, 2000, Buenaventura caused them to sign a folded document
without giving them the opportunity to read its contents; that Buenaventura failed
to give them a copy of the document which they signed; that they discovered later
on that Buenaventura became the owner of a one-half portion (87 square meters) of
the subject property by virtue of a supposed deed of sale in her favor; that they
immediately proceeded to the notary public who notarized the said purported deed
of sale, and discovered that the said 87-square meter portion was purportedly sold
to Buenaventura for P200,000.00; that barangay conciliation proceedings were
commenced, but proved futile; that the purported deed of sale is spurious; and that
the deed was secured through fraud and deceit, and thus null and void. The
Diampocs thus prayed that the purported deed of sale be annulled and the
annotation thereof on TCT 25044 be canceled; that the owner's duplicate copy of
TCT 25044 be returned to them; and that attorney's fees and costs of suit be
awarded to them.
RTC dismissed the case after evaluating the evidence on hand. The Court finds that
plaintiffs fall short of the required evidence to substantiate their allegations that
subject Deed of Sale x x x is illegal and spurious. Citing the pertinent provision of the
New Civil Code which reads:'Art. 1159. Obligations arising from contracts have the
force of law between the contracting parties and should be complied with in good
faith.
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Respondents filed an appeal before the CA, which denied the same. The CA ruled
that notarized documents, like the deed in question, enjoy the presumption of
regularity which can be overturned only by clear, convincing and more than merely
preponderant evidence. It also ruled that as borne out by the notarized deed, a
perfected contract of sale was forged between the parties. Appellants received in full
the payment of P200,000.00, having sold to appellee a portion of their lot. If the
terms of the deed were not in consonance with their expectations, they should have
objected to it and insisted on the provisions they wanted. Courts are not authorized
to extricate parties from the necessary consequences of their acts, and the fact that
the contractual stipulations may turn out to be financially disadvantageous will not
relieve parties thereto of their obligations.
ISSUE:
WHETHER OR NOT THE COURT OF APPEALS ERRED ERRED IN APPLYING THE
PRIMA FACIE PRESUMPTION OF REGULARITY OF NOTARIZED DOCUMENTS AND
UPHOLDING THE VALIDITY OF THE NOTARIZED DEED OF SALE
NOTWITHSTANDING THE UNDISPUTED FACT THAT THERE WERE
IRREGULARITIES IN THE EXECUTION AND NOTARIZATION OF THE DEED OF SALE
RULING:
NO.
x x x Article 1358 of the Civil Code requires that the form of a contract that transmits
or extinguishes real rights over immovable property should be in a public
document, yet the failure to observe the proper form does not render the
transaction invalid. The necessity of a public document for said contracts is only for
convenience; it is not essential for validity or enforceability. Even a sale of real
property, though not contained in a public instrument or formal writing, is
nevertheless valid and binding, for even a verbal contract of sale or real estate
produces legal effects between the parties. Consequently, when there is a defect in
the notarization of a document, the clear and convincing evidentiary standard
originally attached to a duly-notarized document is dispensed with, and the
measure to test the validity of such document is preponderance of evidence.
x x x Nevertheless, the defective notarization of the deed does not affect the validity
of the sale of the house. Although Article 1358 of the Civil Code states that the sale of
real property must appear in a public instrument, the formalities required by this
article is not essential for the validity of the contract but is simply for its greater
efficacy or convenience, or to bind third persons, and is merely a coercive means
granted to the contracting parties to enable them to reciprocally compel the
observance of the prescribed form. Consequently, the private conveyance of the
house is valid between the parties.
The rule that one who signs a contract is presumed to know its contents has been
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applied even to contracts of illiterate persons on the ground that if such persons are
unable to read, they are negligent if they fail to have the contract read to them. If a
person cannot read the instrument, it is as much his duty to procure some reliable
persons to read and explain it to him, before he signs it, as it would be to read it
before he signed it if he were able to do so and his failure to obtain a reading and
explanation of it is such gross negligence as will estop him from avoiding it on the
ground that he was ignorant of its contents.
It is also a well-settled principle that "the law will not relieve parties from the effects
of an unwise, foolish or disastrous agreement they entered into with all the required
formalities and with full awareness of what they were doing. Courts have no power
to relieve them from obligations they voluntarily assumed, simply because their
contracts turn out to be disastrous deals or unwise investments. Neither the law nor
the courts will extricate them from an unwise or undesirable contract which they
entered into with all the required formalities and with full knowledge of its
consequences."
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LANECO vs PGLM
G.R. No. 185420, August 29, 2017
Velasco, J.
CASE DOCTRINE: LANECO failed to establish how the administrative remedy of levy
on real properties will impair the rights of NEA and PSALM. Instead, it merely
reiterated its argument that R.A. No. 9136 prohibits the disposition of its assets and
properties during the period of rehabilitation and modernization program. In fact, it
failed to differentiate how exclusive resort to judicial action as opposed to the
administrative remedy of levy would be a better option to preserve the rights of
NEA and PSALM. It is the option of the LGU to choose which remedy to avail
Section 10, Article III of the Constitution, which provides that no law impairing the
obligation of contracts shall be passed.
FACTS:
LANECO contracted several loans from respondent National Electrification
Administration (NEA) from 1972 until 1991, secured by real estate mortgage
contracts over its properties.3 The NEA also gave LANECO grants and subsidies
from 1996 to 2006 to fund its various rural electrification programs in the
countryside.4 LANECO's total loans from the NEA amounted to P117,645,358.00, a
substantial portion of which, however, had already been paid.
Local Government Code of 1991 (LGC), which conferred power to local government
units (LGUs) to impose taxes on real properties located within their territories.8
LANECO received a letter from respondent Provincial Treasurer of the PGLN,
demanding payment of P22,841,842.60 representing real property taxes assessed
against the cooperative for the municipalities of Bacolod, Baroy, Kolambugan, Balo-i,
Kapatagan, Magsaysay, Maigo, and Tubod for the period of 1995 to 2005
LANECO learned that the PGLN, through its Provincial Treasurer, issued a
Memorandum dated March 30, 2009, directing the Municipal Treasurers of Baroy,
Kolambugan, Bacolod, Kapatagan, Magsaysay, Maigo, Lala, and Tubod to issue
warrants of levy on its properties thereat.25 Consequently, on April 7, 2009,
LANECO received the warrants of levy from the Municipality of Tubod for deficient
real property tax amounting to P10,066,234.48. LANECO thereafter received
warrants of levy of its real property from the Municipality of Baroy on April 17,
2009 for deficient real property tax amounting to P3,260,452.58.
ISSUE; Whether or not the PGLN gravely abused its discretion when it levied on the
real properties of LANECO to enforce payment of unpaid real property taxes, in
violation of Section 60 of R.A. No. 9136 and EO 119
RULING:
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Provincial Government of Lanao del Norte did not commit grave abuse of discretion
in levying on the real properties of LANECO
LANECO failed to establish how the administrative remedy of levy on real properties
will impair the rights of NEA and PSALM. Instead, it merely reiterated its argument
that R.A. No. 9136 prohibits the disposition of its assets and properties during the
period of rehabilitation and modernization program. In fact, it failed to differentiate
how exclusive resort to judicial action as opposed to the administrative remedy of
levy would be a better option to preserve the rights of NEA and PSALM. It is the
option of the LGU to choose which remedy to avail
The court do not find merit in LANECO's argument that the levy caused by the PGLN
upon its real properties impairs the government contracts entered into by NEA and
PSALM and violates the constitutional right of national agencies to enter into a
contract
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to further agreement between the owner and the contractor. Evident from the
foregoing facts, there being a clear breach of contract on the part of the respondents
when they failed to fully comply with their obligation under the contract, having
accomplished only 90% of the waterproofing works within the time agreed upon,
and failing to perform the necessary repairs, they are liable for damages and are
bound to refund the excess in payment made by the petitioner.
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The Court likewise 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.
3. FEBTC's failure to send personalnotice to the mortgagor is fatal to the validity of
the foreclosure proceedings|||
General rule is that personal notice to the mortgagor in extrajudicial foreclosure
proceedings is not necessary, and posting and publication will suffice. Sec. 3 of Act
3135 governing extra-judicial foreclosure of [REMs], as amended by Act 4118,
requires only posting of the notice of sale in three public places and the publication
of that notice in a newspaper of general circulation. The exception is when the
parties stipulate that personal notice is additionally required to be given the
mortgagor. Failure to abide by the general rule, or its exception, renders the
foreclosure proceedings null and void.
Personal notice is necessary if the parties so agreed in their mortgage
contract. In the present case, the parties provided in their REMs that:
cHECAS
12. All correspondence relative to this mortgage, including
demand letters, summonses, subpoenas, or notifications of any
judicial or extrajudicial action shall be sent to the [PDCP] at
___________________ or at the address that may hereafter be given in
writing by the [PDCP] to the [FEBTC].
This provision clearly establishes the agreement between the parties that
personal notice is required before FEBTC may proceed with the foreclosure of
the property and thus, FEBTC's act of proceeding with the foreclosure despite
the absence of personal notice to the mortgagor was its own lookout.
That the portion on the mortgagor's address was left in blank cannot be
simply swept under the rug as "an expression of general intent" that cannot
prevail of the parties' specific intent not to require personal notice. The CA
ruling completely ignored the fact that the mortgage contract containing said
stipulation was a standard contract prepared by FEBTC itself. If the latter did not
intend to require personal notice, on top of the statutory requirements of
posting and publication, then said provision should not have at all been included
in the mortgage contract. In other words, the REMs in this case are contracts of
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adhesion, and in case of doubt, the doubt should be resolved against the party
who prepared it.
The fact that FEBTC caused the sending of a notice, albeit at a wrong
address, to PDCP is itself a clear proof that the parties did intend to impose a
contractual requirement of personal notice, FEBTC's undisputed breach of which
sufficiently nullifies the foreclosure proceeding.
RUTCHER T. DAGASDAS vs. GRAND PLACEMENT AND GENERAL SERVICES
CORPORATION
G.R. No. 205727, January 18, 2017
DEL CASTILLO, J.
CASE DOCTRINE:
While our Civil Code recognizes that parties may stipulate in their contracts such
terms and conditions as they may deem convenient, these terms and conditions
must not be contrary to law, morals, good customs, public order or policy. (Article
1306 of the New Civil Code)
FACTS: Respondent (GPGS) is a licensed recruitment or placement agency in the
Philippines while Saudi Aramco (Aramco) is its counterpart in Saudi Arabia. On the
other hand, Industrial & Management Technology Methods Co. Ltd. (ITM) is the
principal of GPGS, a company existing in Saudi Arabia.
GPGS, for and on behalf of ITM, employed Dagasdas as Network Technician.
Dagasdas contended that although his position under his contract was as a Network
Technician, he actually applied for and was engaged as a Civil Engineer. When
Dagasdas arrived in Saudi Arabia, he signed with ITM a new employment contract
which stipulated that the latter contracted him as Superintendent or in any capacity
within the scope of his abilities. Under this contract, Dagasdas shall be placed under
a three-month probationary period.
When Dagasdas reported at ITM's worksite, he was allegedly given tasks suited for a
Mechanical Engineer. After raising his concern to his Supervisor, he was transferred
to the Civil Engineering Department. Later, Dagasdas averred that the Site
Coordinator Manager severed his employment with ITM. He was informed that he
was dismissed pursuant to clause 17.4.3 of his contract, which provided that ITM
reserved the right to terminate any employee within the three-month probationary
period without need of any notice to the employee. After returning to the
Philippines, he filed an illegal dismissal case against GPGS, ITM, and Aramco.
Dagasdas argued, among others, that although he was engaged as a project
employee, he was still entitled to security of tenure for the duration of his contract.
ISSUE: Whether or not the subsequent employment contract was valid.
RULING: No, the new contract which was used as basis for dismissing Dagasdas is
void. It is in clear violation of his right to security of tenure. ITM terminated him for
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violating clause 17.4.3 of his new contract which provided that the Company
reserves the right to terminate the agreement without serving any notice if the
termination is within the probation period of 3 months.
There is no clear justification for the dismissal of Dagasdas other than the exercise
of ITM's right to terminate him within the probationary period. While our Civil Code
recognizes that parties may stipulate in their contracts such terms and conditions as
they may deem convenient, these terms and conditions must not be contrary to law,
morals, good customs, public order or policy. The above-cited clause is contrary to
law because our Constitution guarantees that employees, local or overseas, are
entitled to security of tenure. To allow employers to reserve a right to terminate
employees without cause is violative of this guarantee of security of tenure.
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The obligation to pay rentals or deliver the thing in a contract of lease falls within
the prestation "to give"; xxx
The principle of rebus sic stantibus neither fits in with the facts of the case. Under
this theory, the parties stipulate in the light of certain prevailing conditions, and
once these conditions cease to exist, the contract also ceases to exist. xxx
This article, which enunciates the doctrine of unforeseen events, is not, however, an
absolute application of the principle of rebus sic stantibus, which would endanger
the security of contractual relations. The parties to the contract must be presumed
to have assumed the risks of unfavorable developments. It is therefore only in
absolutely exceptional changes of circumstances that equity demands assistance for
the debtor.
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.
Thus, the RTC was correct in ordering Comglasco to pay the unpaid rentals because
the affirmative defense raised by it was insufficient to free it from its obligations
under the lease contract. In addition, Iloilo Jar is entitled to attorney's fees because
it incurred expenses to protect its interest. The trial court, however, erred in
awarding exemplary damages and litigation expenses
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Virata v. Wee
G.R. 220926, July 5, 2017
Velasco, Jr., J.
CASE DOCTRINE:
Under Article 1170 of the New Civil Code, those who in the performance of their
obligations are guilty of fraud are liable for damages. The fraud referred to in this
Article is the deliberate and intentional evasion of the normal fulfillment of
obligation.
The vendor in good faith shall be responsible for the existence and legality of the
credit at the time of the sale, unless it should have been sold as doubtful; but not for
the solvency of the debtor, unless it has been so expressly stipulated or unless the
insolvency was prior to the sale and of common knowledge.
The vendor in bad faith shall always be answerable for the payment of all expenses,
and for damages.
FACTS:
Ng Wee was a valued client of Westmont Bank. Sometime in 1998, he was enticed by
the bank manager to make money placements with Westmont Investment
Corporation (Wincorp), a domestic corporation organized and licensed to operate as
an investment house, and one of the bank's affiliates. Offered to him were "sans
recourse" transactions.
Lured by representations that the "sans recourse" transactions are safe, stable, high-
yielding, and involve little to no risk, Ng Wee, placed investments thereon under
accounts in his own name, or in those of his trustees. In exchange, Wincorp issued
Ng Wee and his trustees Confirmation Advices informing them of the identity of the
borrower with whom they were matched, and the terms under which the said
borrower would repay them.
Ng Wee's initial investments were matched with Hottick Holdings Corporation
(Hottick), one of Wincorp's accredited borrowers, the majority shares of which was
owned by a Malaysian national by the name of Tan Sri Halim Saad (Halim Saad).
Halim Saad was then the controlling shareowner of UEM-MARA, which has
substantial interests in the Manila Cavite Express Tollway Project (Cavitex).
Hottick was extended a credit facility with a maximum drawdown of
₱l,500,908,026.87 in consideration of securities it issued in favor of Wincorp,
Hottick fully availed of the loan facility extended by Wincorp, but it defaulted in
paying its outstanding obligations when the Asian financial crisis struck. As a result,
Wincorp filed a collection suit against Hottick, Halim Saad, and NSC for the
repayment of the loan and related costs. A Writ of Preliminary Attachment was then
issued against Halim Saad's properties, which included the assets of UEM-MARA
Philippines Corporation (UEM-MARA). Virata was not impleaded as a party
defendant in the case.
To induce the parties to settle, petitioner Virata offered to guarantee the full
payment of the loan. The guarantee was embodied in the Memorandum of
Agreement between him and Wincorp. Virata was then able to broker a compromise
between Wincorp and Halim Saad that paved the way for the execution of a
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reveals that out of the ₱2,183,755,253.11 drawn by Power Merge, the aggregate
amount of ₱213,290,410.36 was sourced from Ng Wee's money placements under
the names of his trustees.
Unknown to Ng Wee, however, was that on the very same dates the Credit Line
Agreement and its subsequent Amendment were entered into by Wincorp and
Power Merge, additional contracts (Side Agreements) were likewise executed by the
two corporations absolving Power Merge of liability as regards the Promissory
Notes it issued.
Save for the amount, identical provisions were included in the Side Agreement. By
virtue of these contracts, Wincorp was able to assign its rights to the uncollected
Hottick obligations and hold Power Merge papers instead. However, this also meant
that if Power Merge subsequently defaults in the payment of its obligations, it would
refuse, as it did in fact refuse, payment to its investors.
Despite repeated demands, Ng Wee was not able to collect Power Merge's
outstanding obligation under the Confirmation Advices in the amount of
₱213,290,410.36. This prompted Ng Wee to institute a Complaint for Sum of Money
with Damages with prayer for the issuance of a Writ of Preliminary Attachment
(Complaint) before the Regional Trial Court (RTC), Branch 39 of Manila (R TC). Of
the seventeen (17) named defendants therein, only Virata, Power Merge, UPDI,
UEM-MARA, Wincorp, Ong, Reyes, Cua, Tankiansee, Santos-Tan, Vicente and Henry
Cualoping, and Estrella were duly served with summons.
In his Complaint, Ng Wee claimed that he fell prey to the intricate scheme of fraud
and deceit that was hatched by Wincorp and Power Merge. As he later discovered,
Power Merge's default was inevitable from the very start since it only had
subscribed capital in the amount of ₱37,500,000.00, of which only ₱9,375,000.00 is
actually paid up. He then attributed gross negligence, if not fraud and bad faith, on
the part of Wincorp and its directors for approving Power Merge's credit line
application and its subsequent increase to the amount of ₱2,500,000,000.00 despite
its glaring inability to pay.
Wincorp officers Ong and Reyes were likewise impleaded for signing the Side
Agreements that would allow Power Merge to avoid paying its obligations to the
investors.1âwphi1 Ng Wee also sought to pierce the separate juridical personality of
Power Merge since Virata owns almost all of the company's stocks. It was further
alleged that Virata acquired interest in UEM-MARA using the funds swindled from
the Wincorp investors.
As an annex to the Complaint, Ng Wee cited the Cease and Desist Order issued by the
Prosecution and Enforcement Department of the Securities and Exchange
Commission (SEC) in PED Case No. 20-2378 after its routine audit of the operations
of the investment house. Data gathered by the SEC showed that, as of December 31,
1999, Wincorp has sourced funds from 2,200 individuals with an average of
₱7,000,000,000.00 worth of commercial papers per month. In its subsequent
Resolution, the SEC found that the Confirmation Advices that Wincorp had been
issuing to its investors takes the form of a security that ought to have been
registered before being offered to the public, and that the investment house had also
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been advancing the payment of interest to the investors to cover up its borrowers'
insolvency.
The defendants moved for the dismissal of the case for failure to state a cause of
action, among other reasons, moored on the fact that the investments were not
recorded in the name of Ng Wee. These motions, however, were denied by the RTC,
which denial was elevated by way of certiorari to the CA, only for the trial court
ruling to be affirmed. The issue eventually made its way to this Court. The Court
however, found no reversible error on the part of the CA when the appellate court
sustained the denial of the motions to dismiss.
In their respective Answers, the Wincorp and Power Merge camps presented
opposing defenses.
Wincorp admitted that it brokered Power Merge Promissory Notes to investors
through "sans recourse" transactions. It contended, however, that its only role was to
match an investor with corporate borrowers and, hence, assumed no liability for the
monies that Ng Wee loaned to Power Merge. As proof thereof, Wincorp brought to
the attention of the R TC the language of the SP as executed by the investors.
"Sans recourse" transactions, Wincorp added, are perfectly legal under Presidential
Decree No. 129 (PD 129), otherwise known as the Investment Houses Law, and forms
part of the brokering functions of an investment house. As a duly licensed
investment house, it was authorized to offer the "sans recourse" transactions to the
public, even without a license to perform quasi-banking functions.
For their part, the Wincorp directors argued that they can only be held liable under
Section 31 of Batas Pambansa Big. (BP) 68, the Corporation Code, if they assented to
a patently unlawful act, or are guilty of either gross negligence or bad faith in
directing the affairs of the corporation. They explained that the provision is
inapplicable since the approval of Power Merge's credit line application was done in
good faith and that they merely relied on the vetting done by the various
departments of the company. Additionally, Estrella and Tankiansee argued that they
were not present during the special meetings when Power Merge's credit line
application was approved and even objected against the same when they came to
know of such fact.
Reyes meanwhile asseverated that the first paragraph of Sec. 31 cannot find
application to his case since he is not a director of Wincorp, but its officer. It is his
argument that he can only be held liable under the second paragraph of the
provision if he is guilty of conflict of interest, which he is not. He likewise claimed
that he was duly authorized to sign the side Credit Line Agreements and Side
Agreements on behalf of Wincorp.
The Wincorp camp reiterated that Ng Wee's Complaint failed to state a cause of
action because the money placements were not registered under his name. It was
their postulation then that the alleged trustees should have instituted the case in
their own names.
On the other hand, petitioners Virata and UEM-MARA harped on the underlying
arrangement between Hottick, Power Merge, and Wincorp. Under the framework,
Hottick will issue Promissory Notes to Wincorp, which will then transfer the same to
Power Merge. In exchange for the transfer, Power Merge will issue its own
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Promissory Notes to Wincorp. That way, Wincorp will be holding Power Merge
papers, instead of Hottick.
To implement this arrangement, Wincorp and Power Merge entered into a Credit
Line Agreement with the understanding that Power Merge and Virata's only
obligation thereunder would be to collect payments on the Hottick papers. The
Credit Line Agreement and the issuance of the promissory notes, according to
Virata, were mere accommodations to help Wincorp enforce the outstanding
obligations of Hottick. It was then contrary to their agreement for Wincorp to have
offered the Power Merge papers to investors since it was allegedly agreed upon that
Power Merge would incur no liability to pay the promissory notes it issued Wincorp.
The RTC rendered a in favor of Ng Wee. The CA promulgated the challenged ruling
substantially affirming the findings of the trial court.
ISSUE:
Whether or not Ng Wee was able to establish his cause/s of action against Wincorp
and Power Merge
RULING:
Yes. Only Wincorp is liable to Ng Wee for fraud; Power Merge is liable based on
contract.
That Wincorp defrauded Ng Wee is a finding of fact that is conclusive on this Court.
Jurisprudence defines "fraud" as the voluntary execution of a wrongful act, or a
willful omission, knowing and intending the effects which naturally and necessarily
arise from such act or omission. In its general sense, fraud is deemed to comprise
anything calculated to deceive, including all acts and omissions and concealment
involving a breach of legal or equitable duty, trust, or confidence justly reposed,
resulting in damage to another, or by which an undue and unconscientious
advantage is taken of another. Fraud is also described as embracing all multifarious
means which human ingenuity can device, and which are resorted to by one
individual to secure an advantage over another by false suggestions or by
suppression of truth and includes all surprise, trick, cunning, dissembling, and any
unfair way by which another is cheated.
Under Article 1170 of the New Civil Code, those who in the performance of their
obligations are guilty of fraud are liable for damages. The fraud referred to in this
Article is the deliberate and intentional evasion of the normal fulfillment of
obligation. Clearly, this provision is applicable in the case at bar. It is beyond quibble
that Wincorp foisted insidious machinations upon Ng Wee in order to inveigle the
latter into investing a significant amount of his wealth into a mere empty shell of a
corporation. And instead of guarding the investments of its clients, Wincorp
executed Side Agreements that virtually exonerated Power Merge of liability to
them; Side Agreements that the investors could not have been aware of, let alone
authorize.
The summation of Wincorp's actuations establishes the presence of actionable
fraud, for which the company can be held liable. In Jason vs. People, the Court upheld
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the ruling that where one states that the future profits or income of an enterprise
shall be a certain sum, but he actually knows that there will be none, or that they
will be substantially less than he represents, the statements constitute an actionable
fraud where the hearer believes him and relies on the statement to his injury.
Just as in Jason, it is abundantly clear in the present case that the profits which
Wincorp promised to the investors would not be realized by virtue of the Side
Agreements. The investors were kept in the dark as regards the existence of these
documents, and were instead presented with Confirmation Advices from Wincorp to
give the transactions a semblance of legitimacy, and to convince, if not deceive, the
investors to roll over their investments or to part with their money some more.
Power Merge is not guilty of fraud, but is liable under contract nonetheless.
The story, however, is different for Power Merge. The circumstances of this case
points to the conclusion that Power Merge and Virata were not active parties in
defrauding Ng Wee. Instead, the company was used as a mere conduit in order for
Wincorp to be able to conceal its act of directly borrowing funds for its own account.
This is made evident by one highly peculiar detail- the date of the Power Merge's
drawdowns.
It must be remembered that the special meeting of Wincorp's board of directors was
conducted on February 9 and March 11 of 1999, while the Credit Line Agreement
and its Amendment were entered into on February 15 and March 15 of 1999,
respectively. But as indicated in Power Merge's schedule of drawdowns, Wincorp
already released to Power Merge the sum of ₱l,133,399,958.45 as of February 12,
1999, before the Credit Line Agreement was executed. And as of March 12, 1999,
prior to the Amendment, ₱l,805,018,228.05 had already been released to Power
Merge.
The fact that the proceeds were released to Power Merge before the signing of the
Credit Line Agreement and the Amendment thereto lends credence to Virata's claim
that Wincorp did not intend for Power Merge to be strictly bound by the terms of
the credit facility; and that there had already· been an understanding between the
parties on what their respective obligations will be, although this agreement had not
yet been reduced into writing. The underlying transaction would later on be
revealed in black and white through the Side Agreements, the tenor of which
amounted to Wincorp's intentional cancellation of Power Merge and Virata's
obligation under their Promissory Notes. In exchange, Virata and Power Merge
assumed the obligation to transfer equity shares in UPDI and the tollway project in
favor of Wincorp. An arm's length transaction has indeed taken place, substituting
Virata and Power Merge's obligations under the Promissory Notes, in pursuance of
the Memorandum of Agreement and Waiver and Quitclaim executed by Virata and
Wincorp. Thus, as far as Wincorp, Power Merge, and Virata are concerned, the
Promissory Notes had already been discharged.
It was the understanding of the two companies that the Promissory Notes would not
be passed on to the hands of third persons and that, in any event, Wincorp
guaranteed Virata that he and Power Merge would not be held liable thereon. Driven
by the desire to completely settle his obligation as a surety under the Hottick
account, V irata took the deal and relied in good faith that Wincorp's officials would
honor their gentleman's agreement. But as events unfolded, it turned out that
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Wincorp was in evident bad faith when it subsequently assigned credits pertaining
to portions of the loan and the corresponding interests in the Promissory Notes to
the investors in the form of Confirmation Advices when it knew fully well of Power
Merge's discharge from liability.
Between Wincorp and Power Merge, it is Wincorp, as the assignor of the portions of
credit, that is under obligation to disclose to the investors the existence and
execution of the Side Agreements. Failure to do so, to Our mind, only goes to show
that the target of Wincorp' s fraud is not any particular individual, but the public at
large. On the other hand, it was not Power Merge's positive legal duty to forewarn
the investors of its discharge since the company did not deal with them directly.
Power Merge and Virata were agnostic as to the source of funds since they relied on
their underlying agreement with Wincorp that they would not be liable for the
Promissory Notes issued.
As far as it was concerned, Power Merge was merely laying the groundwork
prescribed by Wincorp towards fulfilling its obligations under the Waiver and
Quitclaim. Virata was not impelled by any Machiavellian mentality when he signed
the Side Agreements in Power Merge's behalf. Therefore, only Wincorp can be held
liable for fraud. Nevertheless, as will later on be discussed, Power Merge and Virata
can still be held liable under their contracts, but not for fraud.
Wincorp is liable as a vendor in bad faith and for breach of warranty.
Aside from its liability arising from its fraudulent transactions, Wincorp is also liable
to Ng Wee for breach of warranty. It cannot be emphasized enough that Wincorp is
not the mere agent that it claims to be; its operations ought not be reduced to the
mere matching of investors with corporate borrowers. Instead, it must be borne in
mind that it not only performed the functions of a financial intermediary duly
registered and licensed to perform the powers of an investment house, it is also
engaged in the selling of securities, albeit in violation of various commercial laws.
And just as in any other contracts of sale, the vendor of securities is likewise bound
by certain warranties, including those contained in Article 1628 of the New Civil
Code on assignment of credits, to wit:
Article 1628. The vendor in good faith shall be responsible for the existence and
legality of the credit at the time of the sale, unless it should have been sold as
doubtful; but not for the solvency of the debtor, unless it has been so expressly
stipulated or unless the insolvency was prior to the sale and of common knowledge.
x x x x
The vendor in bad faith shall always be answerable for the payment of all expenses,
and for damages. (emphasis added)
That the securities sold to Ng Wee turned out to be "with recourse," not "sans
recourse" as advertised, does not remove it from the coverage of the above article. In
fact, such circumstance would even classify Wincorp as a vendor in bad faith, within
the contemplation of the last paragraph of the provision. But other than the
fraudulent designation of the transaction as "sans recourse," Wincorp's bad faith was
also brought to the fore by the execution of the Side Agreements, which cast serious
suspicion over, if it did not effectively annul, the existence and legality of the credits
assigned to Ng Wee under the numerous Confirmation Advices in the name of his
trustees.
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Petitioner IPAMS and respondent Country Bankers in essence made a stipulation to
the effect that mere demand letters, affidavits, and statements of accounts are
enough proof of actual damages — that more direct and concrete proofs of
expenditures by the petitioner such as official receipts have been dispensed with in
order to prove actual losses.
As to why the parties agreed on the sufficiency of the listed requirements under the
MOA goes into the motives of the parties, which is not hard to understand,
considering that the covered transactions, i.e., the processing of applications of
nurses in the U.S., are generally not subject to the issuance of official receipts by the
U.S. government and its agencies.
Considering the foregoing, the question is crystallized: Can the parties stipulate on
the requirements that must be presented in order to claim against a surety bond?
And the answer is a definite YES, pursuant to the autonomy characteristic of
contracts, they can. In an insurance contract, founded on the autonomy of contracts,
the parties are generally not prevented from imposing the terms and conditions that
determine the contract's obligatory force.
Thus, the view posited by the CA that the Requirements for Claim Clause is contrary
to law because it is incongruent with Article 2199 of the Civil Code and, therefore, an
exception to the rule on autonomy of contracts is erroneous. A more thorough
examination of Article 2199 does not support the CA's view.
Article 2199 of the Civil Code states:
Article 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.
(Emphasis and underscoring supplied)
The law is clear and unequivocal when it states that one is entitled to adequate
compensation for pecuniary loss only for such losses as he has duly proved EXCEPT:
(1) when the law provides otherwise, or (2) by stipulation of the parties. Otherwise
stated, the amount of actual damages is limited to losses that were actually incurred
and proven, except when the law provides otherwise, or when the parties stipulate
that actual damages are not limited to the actual losses incurred or that actual
damages are to be proven by specific documents agreed upon.
Hence, it is crystal clear that the petitioner IPAMS and respondent Country Bankers,
by express stipulation, agreed that in order for the former to have a valid claim
under the surety bond, the only requirements that need to be submitted are the two
demand letters, an Affidavit stating reason of any violation to be executed by
responsible officer of the Recruitment Agency, a Statement of Account detailing the
expenses incurred, and the Transmittal Claim Letter. Evidently, the parties did not
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ills, sorrows, and griefs of life[.]"A corporation, not having a nervous system or a
human body, does not experience physical suffering, mental anguish,
embarrassment, or wounded feelings. Thus, a corporation cannot be awarded
moral damages.
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FACTS: Highlands Prime, Inc. (HPI) and Werr Corporation International (Werr) are
domestic corporations engaged in property development and construction,
respectively. For the construction of 54 residential units contained in three clusters
of five-storey condominium structures, known as "The Horizon-Westridge Project,"
in Tagaytay Midlands Complex, Talisay, Batangas.
The project, however, was not completed on the initial completion date of February
19, 2006, which led HPI to grant several extensions and a final extension until
October 15, 2006. On May 8, 2006, Werr sought the assistance of HPI to pay its
obligations with its suppliers under a "Direct Payment Scheme" totaling
P24,503,500.08, which the latter approved only up to the amount of
P18,762,541.67. The amount is to be charged against the accumulated retention
money. As of the last billing on October 25, 2006, HPI had already paid the amount
of P232,940,265.85 corresponding to 93.18% accomplishment rate of the project
and retained the amount of P25,738,258.01 as retention bond.
The project was not completed on the last extension given. Thus, HPI terminated its
contract with Werr on November 28, 2006, which the latter accepted on November
30, 2006.16 No progress billing was adduced for the period October 28, 2006 until
the termination of the contract.
Werr demanded the balance of the contract price while HPI demanded for
liquidated damages.
The CIAC ruled that since the agreement did not state when liquidated damages
should accrue it should follow industry practice, the liquidated damages will not
accrue after achieving substantial compliance.
ISSUE: Whether or not liquidated damages should be computed based on industry
practice.
RULING: Yes, However Werr cannot benefit from the application of such.
We reject this claim of Werr and find that while this industry practice may
supplement the Agreement, Werr cannot benefit from it.
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At the outset, we do not agree with the CA that industry practice be rejected because
liquidated damages are provided in the Agreement, autonomy of contracts prevails,
and industry practice is completely set aside. Contracting parties are free to
stipulate as to the terms and conditions of the contract for as long as they are not
contrary to law, morals, good customs, public order or public policy. Corollary to
this rule is that laws are deemed written in every contract.
Deemed incorporated into every contract are the general provisions on obligations
and interpretation of contracts found in the Civil Code. The Civil Code provides:
Art. 1234. If the obligation has been substantially performed in good faith, the
obligor may recover as though there had been a strict and complete fulfillment, less
damages suffered by the obligee.
Art. 1376. The usage or custom of the place shall be borne in mind in the
interpretation of the ambiguities of a contract, and shall fill the omission of
stipulations which are ordinarily established.
In previous cases, we applied these provisions in construction agreements to
determine whether the project owner is entitled to liquidated damages. We held
that substantial completion of the project equates to achievement of 95% project
completion which excuses the contractor from the payment of liquidated damages.
Considering the foregoing, it: was error for the CA to immediately dismiss the
application of industry practice on the sole ground that there is an existing
agreement as to liquidated damages. As expressly stated under Articles 1234 and
1376, and in jurisprudence, the construction industry’s prevailing practice may
supplement any ambiguities or omissions in the stipulations of the contract.
In this case, clause 41.5 of the Agreement is undoubtedly a valid stipulation.
However, while clause 41.5 requires payment of liquidated damages if there is
delay, it is silent as to the period until when liquidated damages shall run. The
Agreement does not state that liquidated damages is due until termination of the
project; neither does it completely reject that it is only due until substantial
completion of the project. This omission in the Agreement may be supplemented by
the provisions of the Civil Code, industry practice, and the CIAP Document No. 102.
Hence, the industry practice that substantial compliance excuses the contractor
from payment of liquidated damages applies to the Agreement.
Nonetheless, we find that Werr cannot benefit from the effects of substantial
compliance. Here, there is no dispute that Werr failed to prove that it completed
95% of the project before or at the time of the termination of the contract. As found
by CIAC, it failed to present evidence as to what accomplishment it achieved from
the time of the last billing until the termination of the contract. What was admitted
as accomplishment at the last billing is 93.18%.
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On July 21, 1981, President Marcos issued Letter of Instructions addressed to the
NDC, DBP, and the Maritime Industry Authority. To acquire 100% of the
shareholdings of Galleon Shipping Corporation from its present owners. For the
furtherance of the government’s policy to provide a reliable liner service between
the Philippines and its major trading partners
Sta. Ines, Cuenca, Tinio, Cuenca Investment, and Universal Holdings claimed that
“DBP can no longer go after them for any deficiency judgment since NDC had been
subrogated in their place as borrower[s], hence the Deed of Undertaking between
[Sta. Ines, Cuenca Investment, Universal Holdings, Cuenca, and Tinio and DBP] had
been extinguished and novated.”
ISSUE: Whether or not the Memorandum of Agreement novated the Deed of
Undertaking executed between DBP and the shareholders of Galleon.
RULING:
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The Supreme Court ruled that there exist no novation in the present case.
It should be noted that in order to give novation its legal effect, the law requires that
the creditor should consent to the substitution of a new debtor. This consent must
be given expressly for the reason that, since novation extinguishes the personality of
the first debtor who is to be substituted by new one, it implies on the part of the
creditor a waiver of the right that he had before the novation, which waiver must be
express under the principle that renuntiatio non prcesumitur, recognized by the law
in declaring that a waiver of right may not be performed unless the will to waive is
indisputably shown by him who holds the right. (Emphasis supplied)
The general rule is that, “[i]n the absence of an authority from the board of
directors, no person, not even the officers of the corporation, can validly bind the
corporation.” A corporation is a juridical person, separate and distinct from its
stockholders and members, having “powers, attributes and properties expressly
authorized by law or incident to its existence.”
Aside from Ongpin being the concurrent head of DBP and NDC at the time the
Memorandum of Agreement was executed, there was no proof presented that
Ongpin was duly authorized by the DBP to give consent to the substitution by NDC
as a co-guarantor of Galleon’s debts. Ongpin is not DBP, therefore, it is wrong to
assume that DBP impliedly gave its consent to the substitution simply by virtue of
the personality of its Governor.
Novation is never presumed. The animus novandi, whether partial or total, “must
appear by express agreement of the parties, or by their acts which are too clear and
unequivocal to be mistaken.”
There was no such animus novandi in the case at bar between DBP and respondents,
thus, respondents have not been discharged as Galleon’s co-guarantors under the
Deed of Undertaking and they remain liable to DBP.
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FACTS:
Petitioner is the registered owner of a parcel of land in Peñafrancia, Naga
City under Original Certificate of Title (OCT) No. 22. On September 28, 1966,
through then Provincial Governor Apolonio G. Maleniza, petitioner donated around
600 square meters of this parcel of land to the Camarines Sur Teachers' Association,
Inc. (CASTEA) through a Deed of Donation Inter Vivos
The Deed of Donation included a Automatic Revocation Clause which states
that hat 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 incumber 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.
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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
We, however, clarified that the other party may contest the extrajudicial
rescission in court in case of abuse or error by the rescinder. It is only in this case
where a judicial resolution of the issue becomes necessary.
We then reiterated in Roman Catholic Archbishop of Manila that where a
donation has an automatic revocation clause, the occurrence of the condition agreed
to by the parties as to cause the revocation, is sufficient for a party to consider the
donation revoked without need of any judicial action. A judicial finding that the
revocation is proper is only necessary when the other party actually goes to court
for the specific purpose of challenging the propriety of the revocation.
Thus, as petitioner validly considered the donation revoked and CASTEA
never contested it, the property donated effectively reverted back to it as owner. In
demanding the return of the property, petitioner sources its right of possession on
its ownership. Under Article 428 of the Civil Code, the owner has a right of action
against the holder and possessor of the thing in order to recover it.
This right of possession prevails over Bodega's claim which is anchored on
its Contract of Lease with CASTEA. CASTEA's act of leasing the property to Bodega,
in breach of the conditions stated in the Deed of Donation, is the very same act
which caused the automatic revocation of the donation. Thus, it had no right, either
as an owner or as an authorized administrator of the property to lease it to Bodega.
While a lessor need not be the owner of the property leased, he or she must, at the
very least, have the authority to lease it out. None exists in this case. Bodega finds no
basis for its continued possession of the property.
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restoration was completed but resulted in the delay of the performance of the
contract between KKCA and Colorite. Colorite demanded from KKCA to pay damages
pursuant to the contract. KKCA refused contending that: (a) the agreed completion
period was suspended when the City Government of Makati issued the Hold Order;
and (b) Colorite failed to pay the costs of soil protection, as well as the 70% of the
restoration cost of the Hontiveros property, which allegedly formed part of the
agreement.
The dispute impelled Colorite to file the instant claim before the CIAC. Colorite
prayed for payment of liquidated damages and payment of loss of rentals while
KKCA prayed for payment of expenses for restoring the Hontiveros property and
soil protection works. CIAC ruled that Colorite was entitled only to liquidated
damages only and KKCA was entitled only payment of the soil protection works and
design fee. Unsatisfied with the decision, the case was elevated to the CA.
The CA affirmed the decision of the CIAC. According to the CA, the construction
contract shows that Colorite was indeed liable for the payment of the design fee, it
being not really included in the summary of the bid proposal, which itemized all the
works that KKCA proposed to perform. On the other hand, soil protection and
excavation works were deemed included in the KKCA's scope of work; hence,
expenses for said items should be deemed as necessarily contained in the agreed
contract cost and no separate computation and payment for the same is necessary.
Nevertheless, the CA adjudged that KKCA is entitled to its claim for soil protection
works in the amount proved by the evidence presented, and the same shall be
deducted from the total down payment already made.
As further found by the CA, the original construction contract categorically states
that Colorite shall be held free from any liability arising from damages to third
parties; thereupon, only KKCA should be made to bear the costs of the restoration of
the Hontiveros property. However, the CA maintained that said stipulation was
deemed superseded when the parties agreed that Colorite will share in the cost of
restoration of the Hontiveros property (restoration agreement). Due to this fact, and
because of Colorite's contributory negligence owing to its failure to deliver the share
it promised, it is partly to blame for the protracted delay of the project
ISSUE:
Whether or not Soil Protection Works, though not stated in the contract was part of
the obligation of KKCA.
RULING:
The Court ruled that Soil Protection Works is a part of the contract between Colorite
and KKCA. When the parties met on December 15, 2003 for the signing of the
contract, Colorite presented Addendum #01 and Addendum #02. Paragraph 21 of
Addendum #01 included all excavation works within the scope of works of the
general contractor, while paragraph 33 of Addendum #01 stipulates that the general
contractor shall be responsible for soil protection works, i.e., provide, erect and
maintain all necessary bracing, shoring, planking, etc., as required to protect the
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adjoining property against settlement and damages, and to make sure that the
methodology to be used will protect the adjacent properties against erosion and
settlement.
The provisions of paragraphs 21 and 33 of Addendum #01 are clear and
unambiguous:
21. All excavation works as required for, should be included on the scope of works of
the Contractor. Disregard Pre-Bid Minutes Item II-G at Page 3.
NOTE: Corresponding cost to be paid to the contractor based on sub-contractor's cost.
33. The Contractor to provide, erect and maintain all necessary bracing, shoring,
planking, etc. as required to protect the adjoining property against settlement and
damages. Adequate dewatering equipments (sic) and pumps to be provided. The
Contractor has the prerogative to choose what type of methodology that he would use
for the project but he have (sic) to make sure that they will protect the adjacent
properties against erosion and settlement.
Article 1370 of the Civil Code in part states that "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."
As worded, paragraph 21 is only concerned with excavation works, and no other.
Paragraph 21 provides that all excavation works are within the scope of works of
KKCA but it does not oblige KKCA to directly perform the same as it admits the
employment of excavation sub-contractors, albeit for the account of Colorite. On the
other hand, paragraph 33 explicitly makes soil protection works, and the installation
of adequate dewatering equipment and pumps as KKCA's direct contractual
obligation. While soil protection works and adequate dewatering system have
distinct purposes, they are similar since both are continuing necessities while the
foundation and the basement are not yet secured. It was thus logical that both items
were placed under the general contractor's direct responsibilities under paragraph
33.
In Rizal Commercial Banking Corporation v. Teodoro G. Bernardino, the Court is
emphatic that:
The rule is that where the language of a contract is plain and unambiguous, its
meaning should be determined without reference to extrinsic facts or aids. The
intention of the parties must be gathered from that language, and from that
language alone. Stated differently, where the language of a written contract is clear
and unambiguous, the contract must be taken to mean that which, on its face, it
purports to mean, unless some good reason can be assigned to show that the words
used should be understood in a different sense. Courts cannot make for the parties
better or more equitable agreements than they themselves have been satisfied to
make, or rewrite contracts because they operate harshly or inequitably as to one of
the parties, or alter them for the benefit of one party and to the detriment of the
other, or by construction, relieve one of the parties from terms which he voluntarily
consented to, or impose on him those which he did not
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In a facsimile transmission dated September 12, 1997, Parsons confirmed "the
temporary suspension of all [the] requirements under the contract except the re-
design of the project floor slabs and the site de-watering and clean up."
MRT argues that the return of the contract documents occurred after it had already
revoked its offer, i.e., after it sent its September 8, 1997 Letter. It reiterates that no
contract was perfected because it withdrew its offer to Gammon before Gammon
returned the contract documents. Thus, Gammon's acceptance only came after the
offer had been withdrawn and nothing that could have been accepted remained.
Gammon maintains that there was a perfected contract between the parties. It
insists that MRT did not withdraw or modify its offer before Gammon signed and
returned the First Notice to Proceed and the contract documents. It claims that the
contract was not cancelled and was only temporarily and partially suspended, and
this did not affect its perfection.
ISSUE:
Whether or not there is a perfected contract between petitioner Metro Rail Transit
Development Corporation and respondent Gammon Philippines, Inc.
RULING:
This Court rules that there is a perfected contract between MRT and Gammon.
The contract is perfected when both parties have consented to the object and cause
of the contract. There is consent when the offer of one party is absolutely accepted
by the other party. The acceptance of the other party may be express or implied.
However, the offering party may impose the time, place, and manner of acceptance
by the other party, and the other party must comply.
Thus, there are three (3) stages in a contract: negotiation, perfection, and
consummation.
Negotiation refers to the time the parties signify interest in the contract up until the
time the parties agree on its terms and conditions. The perfection of the contract
occurs when there is a meeting of the minds of the parties such that there is a
concurrence of offer and acceptance, and all the essential elements of the contract—
consent, object and cause—are present. The consummation of the contract covers
the period when the parties perform their obligations in the contract until it is
finished or extinguished.
To determine when the contract was perfected, the acceptance of the offer must be
unqualified, unconditional, and made known to the offeror. Before knowing of the
acceptance, the offeror may withdraw the offer. Moreover, if the offeror imposes the
manner of acceptance to be done by the offerree, the offerree must accept it in that
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manner for the contract to be binding. If the offeree accepts the offer in a different
manner, it is not effective, but constitutes a counter-offer, which the offeror may
accept or reject.
In bidding contracts, this Court has ruled that the award of the contract to the
bidder is an acceptance of the bidder's offer. Its effect is to perfect a contract
between the bidder and the contractor upon notice of the award to the bidder.
Failure to sign the physical contract does not affect the contract's existence or the
obligations arising from it.
Applying this principle to the case at bar, this Court finds that there is a perfected
contract between the parties. MRT has already awarded the contract to Gammon,
and Gammon's acceptance of the award was communicated to MRT before MRT
rescinded the contract.
This Court has ruled that the meeting of the minds need not always be put in
writing, and the fact that the documents have not yet been signed or notarized does
not mean that the contract has not been perfected. A binding contract may exist
even if the signatures have not yet been affixed because acceptance may be express
or implied.
Thus, the parties have become bound to consummate the contract such that the
failure by one party to comply with its obligations under the contract entitles the
other party to damages. Clearly, Gammon was expected to comply with the award
when it signified its concurrence. Thus, it is not just or equitable for the perfection of
the contract to be one (1)-sided such that the contract only binds Gammon but not
MRT just because the contract documents were not yet returned before MRT
suspended the contract.
The usage of the words "temporary suspension" is clear. It is a settled rule that
when the words in a contract are clear and leave no doubt on the parties' intentions,
the literal meaning shall control. Thus, the above communications cannot be
interpreted to mean that the contract has been cancelled or rescinded.
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PAL contends that the reduction of its workforce had resulted from a
confluence of several events, like the flight expansion; the 1997 Asian financial
crisis; and the ALPAP pilots' strike. PAL explains that when the pilots struck in June
1998, it had to decide quickly as it was then facing closure in 18 days due to serious
financial hemorrhage; hence, the strike came as the final blow.
PAL posits that its business decision to downsize was far from being a hasty,
knee-jerk reaction; that the reduction of cabin crew personnel was an integral part
of its corporate rehabilitation, and, such being a management decision, the Court
could not supplant the decision with its own judgment' and that the inaccurate
depiction of the strike as a temporary disturbance was lamentable in light of its
imminent financial collapse due to the concerted action.
Issue: ASSUMING THAT PAL VALIDLY IMPLEMENTED ITS RETRENCHMENT
PROGRAM, DID THE RETRENCHED EMPLOYEES SIGN VALID QUITCLAIMS?
Held: YES.
In order to prevent disputes on the validity and enforceability of quitclaims
and waivers of employees under Philippine laws, said agreements should contain
the following:
1. A fixed amount as full and final compromise settlement; 2. The benefits of
the employees if possible with the corresponding amounts, which the employees are
giving up in consideration of the fixed compromise amount; 3. A statement that the
employer has clearly explained to the employee in English, Filipino, or in the dialect
known to the employees — that by signing the waiver or quitclaim, they are
forfeiting or relinquishing their right to receive the benefits which are due them
under the law; and 4. A statement that the employees signed and executed the
document voluntarily, and had fully understood the contents of the document and
that their consent was freely given without any threat, violence, duress,
intimidation, or undue influence exerted on their person.
The release and quitclaim signed by the affected employees substantially
satisfied the aforestated requirements. The consideration was clearly indicated in
the document in the English language, including the benefits that the employees
would be relinquishing in exchange for the amounts to be received. There is no
question that the employees who had occupied the position of flight crew knew and
understood the English language. Hence, they fully comprehended the terms used in
the release and quitclaim that they signed.
Indeed, not all quitclaims are per se invalid or against public policy. A
quitclaim is invalid or contrary to public policy only: (1) where there is clear proof
that the waiver was wrangled from an unsuspecting or gullible person; or (2) where
the terms of settlement are unconscionable on their face. Based on these standards,
we uphold the release and quitclaims signed by the retrenched employees herein.
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creditors. On February 28, 1985, BFSMB filed before the Court a petition for
certiorari and mandamus under Rule 65 of the Rules of Court seeking to annul MB
Resolution No. 75 "as made without or in excess of jurisdiction or with grave abuse
of discretion x x."The petition was docketed as G.R. No. 70054 entitled, "Banco
Filipino Savings and Mortgage Bank v. The Monetary Board, Central Bank of the
Philippines, Jose B. Fernandez, Carlota P. Valenzuela, Arnulfo B. Aurellano and
Ramon V. Tiaoqui," which was later consolidated with eight other cases. In a
consolidated Decision dated December 11, 1991, the Court, among others, annulled
and set aside MB Resolution No. 75, and ordered the CB-MB to allow BFSMB to
resume business.
Less than two years thereafter, or on July 6, 1993, Republic Act No. 7653, otherwise
known as The New Central Bank Act of 1993, took effect. This new law abolished the
CB and a new central monetary authority was established known as Bangko Sentral
ng Pilipinas. But also under the said law, the CB will continue to exist under the
name Central Bank-Board of Liquidators (CB-BOL) for the sole purpose of
administering and liquidating the assets and liabilities of the CB that were not
transferred to the BSP.
During meeting held on November 6, 1993, the BSP-MB, resolved
4. To allow the Banco Filipino Savings and Mortgage Bank (BFSMB) to reopen,
subject to submission of its proposed organization including the list of officers and
its plan of operations;
2. To instruct Management to write BFSMB officially, advising them of this decision
and to ask the bank to collateralize its advances from the Bangko Sentral ng
Pilipinas (BSP); and
3. To authorize Management to file a case in Court for the recovery of its advances
including interest thereon and look for private a counsel to (a) advise the Monetary
Board on the ancillary legal issues and (b) to act as counsel for the BSP Monetary
Board in the filing of a civil case against the BFSMB for recovery of money.
Thus, on July 1, 1994, BFSMB reopened and resumed business under the
comptrollership of the BSP.
Sometime in December 2002, BFSMB experienced massive withdrawals. Thus,
BFSMB applied for emergency financial assistance from the BSP to maintain
liquidity.
However, such assistance appeared to have been insufficient to stem the effects of
the massive withdrawals. Thus, in letter dated October 9, 2003, BFSMB further
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requested BSP for financial assistance "similar [to] arrangements" that had been
extended to other banks similarly situated.
In response thereto, the BSP, through a letter dated November 21, 2003 by Director
Candon B. Guerrero, Supervision and Examination Department III, and Director
Rolando Alejandro Q. Agustin, Department of Loans and Credit, advised BFSMB that
because of "strict requirements imposed by [Republic Act No. 7653], BSP is not in a
position to assist BFSMB at this time." But they added that, "should BFSMB be able
to comply with all the legal requirements [relative to its requests], ESP would not
hesitate to extend its support and assistance." One such requirement is "BSP-
approved rehabilitation program."
Taking its cue from the above-narrated letter, on April 14, 2004, BFSMB transmitted
a long term business plan23 (business plan) for consideration of the BSP-MB.
BFSMB's business plan was premised on the assertion that, having "stepped into the
shoes of the old Central Bank," the BSP was obligated to "reorganize" it (BFSMB)
through the following: (i) restoring its 89 branches that used to operate prior to its
closure in 1985; and (ii) extending financial support that are not subjected to
stringent requirements.
In reply thereto, however, BSP-MB stated that it had no basis to act on the business
plan considering that the latter appeared to have been taken up and approved by
BFSMB's Executive Committee, and not by its Board of Directors, and because of
BFSMB's insistence that BSP-MB are the successors-in-interest of CB-MB, "an
allegation that [BSP-MB] have consistently denied in x x x previous communications
x x x [and which issue] is still subject to contest in pending [court] proceedings."
Hence, on July 14, 2004, BFSMB filed Petition for Revival of Judgment to enforce the
Decision of the Court in G.R. No. 70054 that became final and executory on February
4, 1992. Said petition was filed against the CB-MB, represented by the CB-BOL, and
the BSP-MB.
Among other things, BFSMB alleged in said petition that:
5.1. Under the judgment herein sought to be revived, the respondents, having
allowed Petitioner to resume business in the Philippines, are under mandate to
reorganize Petitioner and place it in such a condition or footing that it can continue
in business with safety to its depositors, creditors and the general public.
BSP-MB moved to dismiss the petition with one of its grounds being that:
(ii) The cause of action is barred by prescription - the petition for revival of
judgment was filed only on July 15, 2004, or more than 12 years from the time the
Court's Decision in G.R. No. 70054 became final and executory;
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ISSUE: Whether or not the action by Banco Filipino has already been barred by
prescription under the Civil Code.
RULING: Yes. Section Rule 39 of the Rules of Court, as amended, provides the two
ways of executing a final and executory judgment, viz.
Sec. 6. Execution by motion or by independent action. - A final and executory
judgment or order may be executed on motion within five (5) years from the date of
its entry. After the lapse of such time, and before it is barred by the statute of
limitations, a judgment may be enforced by action x x x.
The foregoing provision, however, must be read in conjunction with Articles 1144
(paragraph 3) and 1152, both of the Civil Code, which provide:
Article 1144. The following actions must be brought within ten years from the time
the right of action accrues:
xxxx
(3)Upon judgment.
Article 1152. The period for prescription of actions to demand the fulfilment of
obligation declared by a judgment commences from the time the judgment became
final. (Emphases supplied.)
Accordingly, the prevailing party may move for the execution of a final and
executory judgment as a matter of right within five years from the entry of
judgment. If no motion is filed within this period, the judgment is converted to a
mere right of action and can only be enforced by instituting a complaint for the
revival of judgment in regular court within 10 years from finality of judgment.
In this case, our Decision in G.R. No. 70054 attained finality and was entered in the
Book of Entries of Judgment on February 4, 1992. Hence, with respect to its right of
action, BFSMB only had ten years from February 4, 1992 within which to file its
petition for revival of judgment. That it only filed the said petition on July 14, 2004,
or more than 12 years from February 4, 1992, it is evident that the subject action
was filed out of time.
BFSMB insists that the passage of RA No. 7653 tolled the period of prescription
because it rendered the enforceability of the judgment sought to be revived
uncertain, i.e., when the enforceability of a final judgment becomes uncertain, the
period for such purpose is tolled and prescription does not operate. Further, it
asserts that the partial performance by BSP of the subject judgment obligation
further tolled the running period.
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We disagree.
As correctly held by the Court of Appeals in CA-G.R. SP No. 96280 -
First of all, contrary to BF's proposal, there was no vacuum created with the passage
of R.A. 7653 that would render BF uncertain as against whom it can enforce its
rights. All powers, duties and functions vested by law in the Central Bank of the
Philippines were deemed transferred to the BSP. The law provides that all
references to the Central Bank of the Philippines in any law or special charters shall
be deemed to refer to the BSP. Further, R.A. 7653 states that any asset or liability of
the Central Bank not transferred to the Bangko Sentral shall be retained and
administered, disposed of and liquidated by the Central Bank itself which shall
continue to exist as the CB Board of Liquidators or CB-BOL. In other words, the
entities where the assets and liabilities of the Central Bank have been transferred
are readily identifiable. There is, thus, no reason for BF to use, as an excuse for its
delay to file an action to revive judgment, the creation of the BSP as the new central
monetary authority. It is apparent that there has been merely transfer of interest
between the two entities, with the organization made more efficient by the creation
of a body known as the CB-BOL.
And worth noting is the fact that when BFSMB finally filed the petition for revival of
judgment in 2004, it filed it against both the BSP-MB and CB-BOL. BFSMB could have
done the same and filed the action against both entities anytime within the ten year
prescriptive period if it was really unsure which of the two to go against.
Therefore, the petition for revival of judgment filed on July 14, 2004 should be
dismissed for having been filed beyond the prescriptive period of ten years from the
finality of our judgment in G.R. No. 70054 on February 4, 1992, or more than 12
years later.
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The Court now holds that KKCA is under the obligation to secure the quitclaim from
the Hontiveros family and to work for the lifting of the Hold Order. This obligation is
deemed written in Article XIII of the construction contract, which reads:
The owner shall be held free and harmless from any liability arising from
claims of third parties arising from the construction such as but not limited to
wages, pay, compensation for injury or death to laborers, SSS premiums, adjoining
property settlement, etc. all of which shall be for the account of the CONTRACTOR.
By express provision of Article 1315 of the Civil Code, the parties are bound not only
to the fulfilment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith,
usage and law.
Without a doubt, Article XIII was stipulated to secure Colorite from any liability
arising from third-party claims. Needless to say, the security under contemplation is
necessarily anchored on Colorite's interest in the completion of the project. In
expressly anticipating the probability of causing damages to adjacent properties, the
stipulation comprehends as well as the resolution of legal issues, which may arise
incidental to the construction project.
The records show that KKCA was remiss in its obligation to secure the quitclaim
from the Hontiveros family and work for the lifting of the City Government of
Makati's Hold Order. In spite of the fact that the Hontiveros property has already
been restored, it appears that KKCA did not bother to secure the needed quitclaim
or even a certificate of completion from the contractor of the subject rehabilitation.
WHEREFORE, the Decision and Resolution of the Court of Appeals, dated July 28,
2009 and October 4, 2010, respectively, in CA-G.R. SP Nos. 103892 and 103899, are
AFFIRMED with MODIFICATIONS.
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agreement on the first loan. Rosemarie Rey once again issued postdated checks to
cover the interest payments on the amended first loan, the latest of which was dated
August 23, 2004, and another postdated check for P200,000.00 for the principal
amount. Rosemarie Rey was able to make good on her interest payments, but
thereafter failed to pay the principal amount of P200,000.00. Anent the second loan
of P350,000.00, Rosemarie Rey failed to faithfully pay monthly interest thereon and
she was unable to pay the principal amount thereof when it became due on
December 26, 2002. Rosemarie Rey appealed to Cesar Anson not to foreclose the
mortgage securing the same or to impose the penalty charges, but instead to extend
the terms thereof. Cesar Anson agreed, and the parties executed anew a Deed of Real
Estate Mortgage" dated January 19, 2003 wherein Rosemarie Rey acknowledged her
indebtedness to Cesar Anson in the amount of P611,340.00, payable within four
months from the execution of the Deed of Real Estate Mortgage, and subject to 7%
interest per month. Four months thereafter, Rosemarie Rey again failed to fulfill her
obligation on the second loan. The same was extended once more in a Deed of Real
Estate Mortgage" dated June 19, 2003 wherein Rosemarie Rey acknowledged
indebtedness to Cesar Anson in the amount of P761,450.00, payable within six
months from the execution of the Deed of Real Estate Mortgage, and subject to the
same 7% interest per month. On February 24, 2004, Rosemarie Rey obtained a third
loan from Cesar Anson in the amount of Pl 00,000.00. The third loan was not put in
writing, but the parties verbally agreed that the same would be subject to 3%
monthly interest. A week later or on March 2, 2004, Rosemarie Rey obtained a
fourth loan from Cesar Anson for P100,000.00. It was also not put in writing, but
there was an oral agreement of 4% monthly interest. On February 25, 2005, Cesar
Anson sent Rosemarie Rey a Statement of Account" seeking full payment of all four
loans amounting to P2,214,587.50. Instead of paying her loan obligations,
Rosemarie Rey, through counsel, sent Cesar Anson a letter dated August 8, 2005,
stating that the interest rates imposed on the four loans were irregular, if not
contrary to law. The 7.5% and 7% monthly interest rates imposed on the first and
second loans, respectively, were excessive and unconscionable and should be
adjusted to the legal rate. Moreover, no interest should have been imposed on the
third and fourth loans in the absence of any written agreement imposing interest.
Per Rosemarie Rey's computation using the legal rate of interest, all four loans were
already fully paid, as well as the interests thereon. Rey contended that she had
overpaid the amount of P283,434.19. She demanded from Cesar Anson the return of
the excess payment; otherwise, she would be compelled to seek redress in court. On
August 16, 2005, the Spouses Rey and Isabel Quinto filed a Complaint for
Recomputation of Loans and Recovery of Excess Payments and Cancellation of Real
Estate Mortgages and Checks against Cesar Anson with the RTC of Legazpi City. RTC
ruled for Spouses Rey. CA reversed.
ISSUES:
1. WON the interest rates on the first and second loans are unconscionable and
contrary to morals
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2. WON the interest rates on the third and fourth loans are valid
RULING:
1. YES. As case law instructs, the imposition of an unconscionable rate of interest on
a money debt, even if knowingly and voluntarily assumed, is immoral and unjust.
In this case, the first loan had a 7.5% monthly interest rate or 90% interest
per annum, while the second loan had a 7% monthly interest rate or 84% interest
per annum, which rates are very much higher than the 3% monthly interest rate
imposed in Ruiz v. Court of Appeals and the 5% monthly interest rate imposed in
Sps. Albos v. Sps. Embisan, et al. Based on the ruling of the
Spouses Albos case, the Court holds that the interest rates of 7.5% and 7% are
excessive, unconscionable, iniquitous, and contrary to law and morals; and,
therefore, void ab initio. Hence, the Court of Appeals erred in sustaining the
imposition of the said interest rates, while the RTC correctly imposed the legal
interest of 12% per annum in place of the said interest rates.
2. NO. Anent the third and fourth loans both in the amount of P100,000.00, the Court
of Appeals correctly held that as the agreement of 3% monthly interest on the third
loan and 4% monthly interest on the fourth loan was merely verbal and not put in
writing, no interest was due on the third and fourth loans.
This is in accordance with Article 1956 of the Civil Code which provides that
" [n]o interest shall be due unless it has been stipulated in writing."
Hence, the payments made as of March 18, 2005 in the third loan amounting to
P141,360.00 resulted in the overpayment of P41,360.00. Moreover, the payments
made as of February 2, 2005 in the fourth loan amounting to P117,960.00 resulted
in an overpayment of P17,960.00. Consequently, as found by the Court of Appeals,
there was a total overpayment of P59,320.00 for the third and fourth loans.
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Project would be increased to five years; that it would assign all its housing loan
proceeds from its other projects to HDMF to cover any unpaid obligations from the
Xevera Project; and that the OWG borrowers, to be eligible for Pag-Ibig Membership,
would be required to present their Income Tax Returns (ITRs) and affidavits
ofincome.
On July 13, 2009, the parties executed a MOA granting Globe Asiatique an additional
P5 Billion funding commitment line for its Xevera Projects in Pampanga on the
condition that Globe Asiatique would maintain a 95% PAR, and that the housing
loan take-outs would be covered by a buy-back guaranty of five years. More FCAs
were executed between the parties. According to HDMF, the aggregate amount of
P7Billion was released to Globe Asiatique in a span of two years from 2008 to
September 24, 2010, representing a total of 9 ,951 accounts. In the course of its
regular validation of buyers' membership eligibilities for taking out loans for the
Xevera Project, HDMF allegedly discovered some fraudulent transactions and false
representations purportedly committed by Globe Asiatique, its owners, officers,
directors, employees, and agents/representatives, in conspiracy with HDMF
employees. HDMF invited the attention of Delfin Lee regarding some 351 buyers
who surrendered or withdrew their loans and were no longer interested in pursuing
the same, and requested Globe Asiatique to validate the 351 buyers. Delfin Lee
replied that Globe Asiatique was actually monitoring about 1,000 suspicious buyers'
accounts. Subsequently, HDMF ostensibly found out about an additional 350 buyers
who either denied knowledge of having availed of loans or manifested their
intention to terminate their account. As a result, HDMF revoked the authority of
Globe Asiatique under the FCA; suspended all take-outs for new housing loans;
required the buyback of the 701 fraudulent accounts; and cancelled the release of
funds to Globe Asiatique in August 2010. About a month later, Globe Asiatique
discontinued remitting the monthly amortization collections from all borrowers of
Xevera.
Finally, HDMF terminated the CSA with Globe Asiatique on August 31,2010.
Meanwhile, HDMF continued its post take-out validation of the borrowers, and
discovered that at least 644 supposed borrowers under the OWG Membership
Program who were processed and approved by Globe Asiatique for the take-out by
HDMF were not aware of the loans they had supposedly signed in relation to the
Xevera Project; and assuming they were aware of the loan agreements, they had
merely signed the same in consideration of money given to them by Globe Asiatique;
that some borrowers were neither members of HDMF nor qualified to take out a
housing loan from HDMF because they had insufficient or no income at all or they
did not have the minimum number of contributions in HDMF; and that some of the
borrowers did not live in the units they purchased. HDMF alleged that at least 805
borrowers could not be located or were unknown in the addresses they had
provided in the loan agreements, or had indicated non-existent addresses therein;
and that it incurred damages totalling Pl.04 billion covering the loans of 644
fraudulent and 805 fake borrowers attributed to the fraudulent and criminal
misrepresentations of Delfin Lee and Globe Asiatique's officials and employees.
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Various criminal and civil complaints were filed by both parties against each other.
Among which is a civil complaint filed by Globe Asiatique against HDMF for alleged
breach of contract and a prayer for specific performance and damages.
The Civil Case (Proceedings before the Makati RTC)
Globe Asiatique and Delfin Lee initiated the complaint for specific performance and
damages against HDMF on November 15, 2010. Docketed as Civil Case No. 10-1120,
the case was assigned to Branch 58 of the Makati RTC. Globe Asiatique and Delfin
Lee thereby sought to compel HDMF to accept the proposed replacements of the
buyers/borrowers who had become delinquent in their amortizations, asserting
that HDMF's inaction to accept the replacements had forced Globe Asiatique to
default on its obligations under the MOA and FCAs Globe Asiatique and Delfin Lee
filed a Motion for Summary Judgment, which the Makati RTC, after due proceedings,
resolved on January 30, 2012, disposing thusly:
WHEREFORE, premises considered, a Summary Judgment is hereby rendered
declaring that:
1. Plaintiff (sic) have proven their case by preponderance of evidence. As such, they
are entitled to specific performance and right to damages as prayed for in the
Complaint, except that the exact amount of damages will have to be determined
during trial proper.
2. Pursuant to the provisions of their MOA amending the continuing FCAs and CSAs,
defendant HDMF is hereby ordered to comply faithfully and religiously with its
obligation under the said contracts, including but not limited to the release of loan
take-out proceeds of those accounts whose Deed [ s] of Assignment with Special
Power of Attorney have already been annotated in the corresponding Transfer
Certificate of Title covering the houses and lots purchased by the PagIBIG member-
borrowers from plaintiff GARHC as well as the evaluation of the loan applications of
those who underwent or will undergo plaintiff GARHC's loan counselling and are
qualified or PAG-IBIG FUND loans under the MOA and continuing FCAs and process
the approval thereof only if qualified, under the Window 1 Facility as provided for in
the MOA and continuing FCAs;
3. The unilateral cancellation by defendant HDMF of the continuing FCAs specifically
the latest FCAs of December 15, 2009, January 5 and March 17, 2010 and CSA dated
10 February 2009, is hereby SET ASIDE[;]
4. Defendants are ordered to automatically off-set the balance of those listed in
Annex "E" of the Motion for Summary Judgment against the retention money,
escrow money, funding commitment fees, loan takeout proceeds and other
receivables of plaintiff GARHC which are still in the control and possession of
defendant HDMF;
5. Defendants are ordered to accept the replacement-buyers listed in Annex "F" of
the Motion for Summary Judgment, which list is unopposed by defendants, without
interest or penalty from the time of defendant HDMF's cancellation of the Collection
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Servicing Agreement (CSA) resulting to the refusal to accept the same up to the time
that these replacement buyers are actually accepted by defendant HDMF;
6. Defendants are ordered to release the corresponding Transfer Certificate of
Title[s] (TCTs) of those accounts which are fully paid or subjected to automatic off-
setting starting from the list in Annex "E" of the Motion for Summary Judgment and
thereafter from those listed in Annex "F" thereof and cause the corresponding
cancellation of the annotations in the titles thereof. Let this case be set for the
presentation of evidence on the exact amount of damages that plaintiffs are entitled
to on March 12, 2012 at 8:30 in the morning.
Decision of the Court of Appeals
On October 7, 2013, the CA promulgated its decision dismissing the HDMF petition
in C.A.-G.R. SP No. 128262, to wit:
WHEREFORE, there being no grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of public respondent in rendering the assailed Resolution
dated January 30, 2012 containing the Summary Judgment and the Resolution dated
December 11, 2012 denying HDMF, Faria and Atty. Berberabe's Motion for
Reconsideration, the instant petition is hereby DISMISSED.
Issue settled by the Court: Whether or not a certiorari is proper.
The January 30, 2012 summary judgment was an interlocutory order
RULING OF THE SUPREME COURT
In Civil Case No. 10-1120, Globe Asiatique and Delfin Lee specifically averred
separate causes of action against the HDMF, including that for damages.
Considering that the January 30, 2012 partial summary judgment was interlocutory,
the remedy could not be an appeal, for only a final judgment or order could be
appealed.
Consequently, the interlocutory January 30, 2012 summary judgment could be
assailed only through certiorari under Rule 65 of the Rules of Court. Thus, the HDMF
properly instituted the special civil action for certiorari to assail and set aside the
resolutions dated January 30, 2012 and December 11, 2012 of the Makati RTC.
Thus, the petitions for review on certiorari in G.R. No. 209424 and, accordingly,
ANNULS and SETS ASIDE the decision promulgated on October 7, 2013 by the Court
of Appeals in C.A.-G.R. No. SP No. 128262; REVERSES the resolution of December 11,
2012 issued in Civil Case No. 10-1120 by the Regional Trial Court, Branch 58, in
Makati City declaring the partial summary judgment rendered on January 30, 2012
final and executory; PRONOUNCES that the partial summary judgment rendered on
January 30, 2012 may still be appealed by the aggrieved party upon rendition of the
final judgment in Civil Case No. 10-1120; and DIRECTS the Regional Trial Court,
Branch 58, in Makati City to conduct further proceedings in Civil Case No. 10-1120
with dispatch.
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Chemicals' President, Ramon Garcia, during the negotiation of the sale. While the
subject lien was not mentioned in the purchase agreement, Ramon Garcia, however,
was wholly apprised of the status of the encumbrance who went to the extent of
inserting the "reimbursement clause" and "the obligation to defend the sale clause" in
the agreement in order to protect Ferro Chemicals' rights in the event that prior
lienholders will exercise their right over the subject properties.
The RTC rendered a Decision in favor of Ferro Chemicals and found Chemical
Industries, Antonio Garcia, Jaime Gonzales and Rolando Navarro solidarily liable for
the total amount of P269,355,537.41, representing the value of the lost shares, costs
of litigation, attorney's fees and exemplary damages. The CA rendered a Decision
affirming with modification the RTC Decision. Finding no sufficient evidence on
record that Rolando Navarro actively participated in the fraud perpetrated by
Antonio Garcia against Ferro Chemicals, the CA discharged him from liability.
ISSUE: Whether Antonio Garcia is liable for fraud and breach of obligation?
RULING: NO. There are two clearly crucial evidentiary matters that were without
warrant overlooked by the lower tribunals: (1) the execution by Ferro Chemicals
and Antonio Garcia of the Deed of Right to Repurchase on 3 March 1989; and (2) that
on two separate occasions, Antonio Garcia conveyed in writing his intent to buy
back the shares in accordance with the terms of the repurchase deed. These pieces
of evidence, if appreciated in light of the allegation of fraud, would overthrow the
very foundation upon which the Ferro Chemicals rested its case.
Fraud, in its general sense, is deemed to comprise anything calculated to deceive,
including all acts, omissions, and concealment involving a breach of legal or
equitable duty, trust or confidence justly reposed, resulting in the damage to
another, or by which an undue and unconscionable advantage is taken of another. It
is a question of fact and the circumstances constituting it must be alleged and
proved in the court below.
There are two types of fraud contemplated in the performance of contracts: dolo
incidente or incidental fraud and dolo causante or fraud serious enough to render a
contract voidable. In Geraldez v. Court of Appeals, this Court held that: This fraud or
dolo which is present or employed at the time of birth or perfection of a contract
may either be dolo causante or dolo incidente. The first, or causal fraud referred to in
Article 1338, are those deceptions or misrepresentations of a serious character
employed by one party and without which the other party would not have entered
into the contract. Dolo incidente, or incidental fraud which is referred to in Article
1344, are those which are not serious in character and without which the other
party would still have entered into the contract. Dolo causante determines or is the
essential cause of the consent, while dolo incidente refers only to some particular or
accident of the obligation. The effects of dolo causante are the nullity of the contract
and the indemnification of damages, and dolo incidente also obliges the person
employing it to pay damages.
Under Article 1344, 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
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present, the defrauded party would not have entered into the contract. Article 1344
also provides that if fraud is incidental, it follows that this type of fraud is not
serious enough so as to render the original contract voidable.
To summarize, if there is fraud in the performance of the contract, then this fraud
will give rise to damages. If the fraud did not compel the imputing party to give his
or her consent, it may not serve as the basis to annul the contract; which exhibits
dolo causante. However, the party alleging the existence of fraud may prove the
existence of dolo incidente. This may make the party against whom fraud is alleged
liable for damages."
Applying the foregoing precepts in this case, we find it hard to believe that Antonio
Garcia, in view of his impassioned efforts to buy back the disputed shares way
before the Second Consortium Case commenced and even after the shares were
assigned already to Chemphil Export, could be motivated by his fraudulent desire to
extract money and then ease out Ferro Chemicals from its ownership of the subject
shares. The flagrancy of the Deed of the Right to Repurchase ought to have caused the
lower courts to delve into the repurchase issue since this could have very well
dispelled the fraud alleged to have attended the acts of Antonio Garcia. By
disregarding the repurchase contract and Antonio Garcia's intent in good faith to
buy back the shares, the lower tribunals fell prey into the skewed representations of
Ferro Chemicals of the factual incidents of this case. Indeed, both the contractual
agreement on Antonio Garcia's right to repurchase and Antonio Garcia's actual
earnest attempts at repurchase were central to the cause of Antonio Garcia in the
proceedings below.
Though it fashioned itself as the vulnerable party, who was lured into buying shares
of stocks that later turned out to be overburdened by liens, the fact is that Ramon
Garcia is the President of Ferro Chemicals and the brother of Antonio Garcia of
Chemical Industries which, like Ferro Chemicals, is into initiated business ventures.
The transactions that Ramon and Antonio Garcia had with each other were between
brothers about their businesses. Ramon Garcia, both in buying the subject shares
from Antonio Garcia, and later on, in refusing to sell back the shares to Antonio
Garcia did so in furtherance of his interests. It would be rash judgment to say it was
not so and hold that business dealings in multimillions were done without
conducting due diligence on the subject of the contract.
Indeed, the allegation that Antonio Garcia employed fraudulent machinations to
hide the subject lien to facilitate the disposal of his shares and to lure Ferro
Chemicals to part with its money is diametrically opposed to Antonio Garcia's
subsequent offers to repurchase the shares and tender of the repurchase price. On
the other hand, Ferro Chemicals' explanation that the reason why it did not agree to
the reacquisition was because the repurchase price tendered did not include the
amount of taxes and interest due, is flimsy and unacceptable under the
circumstances. It must be pointed out that no negotiation in good faith between the
parties as to the correct amount of taxes and interests should be paid took place
since Ferro Chemicals at the outset flatly refused the offer to buy. As a matter of fact,
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Antonio Garcia was constrained to initiate two repurchase cases in his effort to
reacquire the property.
The succession of events shows that Ferro Chemical's refusal to sell back the shares
to Antonio Garcia was a calculated move by Ramon Garcia who measured the risk of
losing the subject shares to the Consortium Banks against the visible returns on the
shares during the pendency of the Consortium Bank Case. Between the time of the
initial offer of Antonio Garcia to buy back the shares on 31 July 1989 up to the
finality of the Court's decision in the Second Consortium Case on 12 December 1995,
Ferro Chemicals thru Chemphil Export, profited from the Chemical Industries'
shares. It was only after it had lost the shares to the Consortium Banks by the
decision of the Court that Ferro Chemicals went back to Antonio Garcia and his co-
defendants for the enforcement of the sale contract asking for the reimbursement of
the amount of the shares that was lost. The buying and selling of stocks and the
subsequent agreement on reversed activities were in the exercise of business
judgment.
Fraud has been defined to include an inducement through insidious machination.
Insidious machination refers to a deceitful scheme or plot with an evil or devious
purpose. Deceit exists where the party, with intent to deceive, conceals or omits to
state material facts and, by reason of such omission or concealment, the other party
was induced to give consent that would not otherwise have been given. These are
allegations of fact that demand clear and convincing proof. They are serious
accusations that can be so conveniently and casually invoked, and that is why they
are never presumed. Applying the doctrines to the case at bar, a judgment on fraud
requires allegation and proof of facts and circumstances by which undue and
unconscionable advantage is taken by Antonio Garcia. Ramon Garcia failed in this
regard. In contrast, the succession of transaction between Antonio and Ramon
Garcia indicated that Ramon Garcia wanted to have a way out of his failed business
decision of holding on to his shares instead of selling it back to Antonio Garcia when
he had the opportunity to do so. He saw that it was better to hold on to the shares he
bought from Antonio Garcia. The Court cannot save him from the fall that came from
his own choice.
On the liability of Rolando Navarro and Jaime Gonzales for tortious interference
The basic principle of relativity of contracts is that contracts can only bind the
parties who entered into it, and cannot favor or prejudice a third person, even if he
is aware of such contract and has acted with knowledge thereof. Where there is no
privity of contract, there is likewise no obligation or liability to speak about.
The Court, in the case of So Ping Bun v. Court of Appeals, et al., laid down the
elements of tortious interference with contractual relations: (1) existence of a valid
contract; (2) knowledge on the part of the third person of the existence of the
contract and (3) interference on the part of the third person without legal
justification or excuse.
A duty which the law of torts is concerned with is respect for property of others, and
cause of action ex delicto may be predicated by an unlawful interference by any
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person of the enjoyment of the other of his private property. This may pertain to a
situation where a third person induces a person to renege on or violate his
undertaking under a contract.
A perusal of the allegations proffered against Rolando Navarro would show that
none of his conduct prior or even subsequent to the execution of the subject deed,
which was primarily done in furtherance of his duties as corporate secretary,
constitutes tortious interference. To imply that by preparing a draft of a contract,
signing as instrumental witness of the deed and recording of transfer of shares on
the corporate books, Rolando Navarro can now be held liable for tortious
interference, is incredulous. Nothing from his acts as found by the trial court, which
were clearly carried out within the bounds of his office devoid of malice and bad
faith, would suggest involvement in the sinister design to deprive Ferro Chemicals
of its property right over the disputed shares.
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Ms. Helen Dabao in Room Nos. 512 and 516. In the Articles of Incorporation
submitted to this office, Ms. Helen Dabao is listed as one of the incorporators of
Artes International. Is Ms. Dabao a participant to the said event? Is (sic) so, please
attach copy of memo circular of those who are authorized to attend the Global
Conference showing the inclusion of Ms. Dabao in the said list. (Emphasis supplied)
17
In her responding Memorandum dated February 28, 2007, PMO Financial
Management Analyst Paula Cheryl Dumlao expressed that because the hotel
accommodations for Ms. Dabao were being questioned, the expenses therefore
should be treated as a "disputed item" that could be excluded from the bill to avoid
further delays in the settlement of the obligations to Makati Shangri-La Hotel.
Thereafter, Chief Accountant Ulgado referred the matter to Judicial Staff Head Midas
P. Marquez of the Office of Chief Justice Reynato Puno to resolve whether the
"remaining balance" of P651,000.00 for the conduct of the Global Forum could be
charged to JR-FA GOP Counterpart Funds.
The transactions between the PMO and Artes continued even after the holding of the
National Forum and Global Forum.
Ms. Dumdum then requested authority from Chief Justice Panganiban to fund
certain activities. Chief Justice Panganiban then approved the same. Ms. Dumdum
then entered into another contract with Artes.
Throughout the services rendered by Artes, OCAt has observed several
discrepancies in its transactions and the budget breakdowns and reports submitted.
Upon the conclusion of the Global Forum, the PMO forwarded to the FMBO pertinent
documents relative to the items supplied by Artes in order to facilitate payment to
the latter. The FMBO declined to process the payment for lack of the necessary
purchase orders (POs) as required by law.
Considering that no payment could be processed without the requisite POs, the PMO
requested the Property Division of the Office of Administrative Services (OAS) to
issue the POs for the supplies delivered by Artes. Being responsible for the
determination of the reasonableness of the prices of supplies, the Property Division
surveyed suppliers of the conference bags, the ID holders, and ball pens, but not the
jewelry boxes which Artes claimed to have been sourced from Cebu. Based on its
survey, the Property Division concluded that the following items were overpriced
and excessive.
Puno, SC Judicial Staff Head Felicitas D. Caunca (Ms. Caunca) of the Property
Division declared that the PMO had itself conducted the canvassing for the supplies
on the ground that it had already been pressed for time; that such canvassing could
have been done through the Philippine Government Electronic Procurement System
(Phil-GEPS) by the Property Division in no time at all; that if the amounts involved
were within the Property Division's authority to canvass, it would have issued the
requested POs regardless of whether the canvassing had been done by the proper
bids committee or by the Property Division itself; and that because the PMO did not
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observe the proper procurement procedure, what had resulted were "advance
deliveries," which were disallowed by law.
ISSUES:
1. Whether or not Artes is entitled for payment for the services it rendered in
the contract it entered with the PMO -No
2. Whether or not such contract was valid. -No
3. Whether or not Ms. Dumdum committed splitting of contracts -Yes
HELD:
The Court, albeit fiscally autonomous, could not simply authorize and justify the
release of funds to pay Artes' demand in view of the many questions that were
raised against the contracts entered into with Artes by Ms. Dumdum as the PMO
Administrator. To decide on whether to pay or not, the Court had to be guided by
the law on the proper disbursement of public funds, whether emanating from the
National Treasury or sourced from loans or credits extended by foreign funding
partners.
Re: Validity of the Contract
Considering that the National Forum and the Global Forum were projects
conceptualized under the aegis of the JRSP, SC Administrative Circular No. 60-2003
governed the procurement of goods, works and services. AHCETa
By resorting to national shopping, however, the PMO ignored the last sentence of
the IBRD Guidelines on such alternative method of procurement that required a
purchase order (PO) in which the accepted offer should be indicated. The PO was
akin to a "contract between the parties as it requires inputs showing the requisites
of a contract of consent, object certain, and cause of obligation." Instead of the PO,
the PMO used and relied on letter-quotations to reflect and contain the agreements
between the parties. All that Ms. Dumdum as the Program Director had to do was to
affix her signature on the letter-quotations beneath the word Conforme to indicate
conformity to the terms stated therein. This manner of contracting was yet again a
clear violation of the IBRD Guidelines and the Standard Bidding Documents,
Procurement of Goods.
What were to be contained in the contracts was quite clearly stated in the law. In the
1999 version of the IBRD Guidelines, the following parameters were expressly
written, to wit:
Conditions of Contract
2.37 The contract documents shall clearly define the scope of work to be performed,
the goods to be supplied, the rights and obligations of the Borrower and of the
supplier or contractor, and the functions and authority of the engineer, architect, or
construction manager, if one is employed by the Borrower, in the supervision and
administration of the contract. In addition to the general conditions of contract, any
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special conditions particular to the specific goods or works to be procured and the
location of the project shall be included.
Moreover, as the OCAt has correctly observed, the IBRD Guidelines mentioned of
contract documents instead of a single document. This observation is consistent
with the Generic Procurement Manual (GPM) that synchronized the provisions of
R.A. No. 9184 with the procurement rules of the Asian Development Bank, Japan
Bank for International Cooperation, and the World Bank itself by requiring that
contracts resulting from procurement activities for goods should be supported not
only by a contract document but by a number of documents, including the bid
documents. Yet, based on the detailed study made by the OCAt, no proper bidding
procedure pursuant to the guidelines of SC Administrative Circular No. 60-2003 was
followed by the JRSP-BAC in choosing Artes as the service provider for the National
Forum and the Global Forum. Consequently, the patent nullity of the contracts with
Artes became the only legal consequence to be reached from the failure to comply
with the proper procurement procedure.
We are not also prepared to find that the PMO conducted the canvassing for the
supplies for having been already pressed for time. Such explanation was a feeble
and implausible excuse in the face of the statement by Caunca of the Property
Division to the effect that the Property Division could have done the canvassing in
time through the Phil-GEPS despite time constraints. Indeed, the records revealed
no immediate or compelling justification for dispensing with the requirement of
public bidding in choosing the service provider for the procurement of the goods
involved thereon. To insist that a public bidding would have unnecessarily delayed
the implementation of the program was truly unacceptable. By conducting the
canvass without prior coordination with the Property Division, Ms. Dumdum and
the PMO ignored the proper procurement procedure, and unavoidably caused the
making of "advance deliveries" in contravention of the law. ScHADI
The assertion by the JRP Administrator that Artes had itself conducted the
canvassing of suppliers, and that the PMO had only facilitated the process was
fundamentally discredited by the documents reviewed by the OCAt. The records
disclosed that Ms. Dumdum as the JRP Administrator had approved the
recommended award of contracts to Artes as the winning bidder despite Artes
having itself conducted the bidding. We advert to the points cogently made by the
OCAt thereon, viz.:
If indeed it is true that the PMO merely facilitated the process as an overseer, and Artes
was the actual canvasser, then a lot of questions are raised by the fact that Artes itself
emerged the winner in the canvasses "facilitated" by the PMO, as evidenced by the
undated Abstracts of Bids approved by the JRP Administrator. Notably, Artes emerged
the firm with the "lowest quotation" for jewelry boxes and ball pens even though the
JRP Administrator conformed to its quotation and Artes delivered the said goods
days before OfficeMAN and Chateau offered their quotations for the same goods.
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At the very least, the resulting situation of the canvasser later emerging as the
winning bidder was highly irregular because of the plainly obvious conflict of
interest.
Considering that most of the expenditures whose payments were sought by Ms.
Dumdum as the authorized approving official came within the threshold allowed in
SC Administrative Circular No. 60-2003 n (i.e., P1,000,000.00 and below), the
payment of contracts on the goods, works, and services procured under the JRSP
would have been presumed to have initially complied with the proper procurement
procedure conducted by the JRSP-BAC. Yet, we cannot even presume regularity
simply because of several indicia of non-compliance with the proper procurement
procedure. The presumption of regularity vanished with the appearance of even just
one irregularity. We agree with the OCAt that it was doubtful if the actual canvass
had been conducted in view of the abstracts of canvass, particularly with respect to
the jewelry boxes and the ball pens, being undated.
It is also true that a contract that has all the essential requisites for its validity is
binding between the parties regardless of its form. But when the law requires that a
contract be in some form in order that it may be valid or be enforceable, or demands
that a contract be proved in a certain way, the requirement of a particular form or
manner is absolute and indispensable. Once the formal requirement for the contract
is absolute and indispensable, any procurement contract that does not adhere to the
requirement can only be deemed invalid and unenforceable. As such, every letter-
quotation signed by an unauthorized purchaser in behalf of a government agency in
a manner contrary to the loan agreement with the foreign lender and contrary to the
local procurement law can only be a mere scrap of paper that cannot by any means
be accorded any validity or enforceability.
We cannot but notice that the records do not show that the PMO had secured the
CAF for each of the contracts. According to the OCAt, the CAFs were still required
because the Government Auditing Code of the Philippines, the Administrative Code of
1987, and the General Provisions of the relevant General Appropriations Act
uniformly required expenditures of appropriated funds to be supported by CAFs.
We hold that the loan proceeds were undoubtedly appropriated funds. In addition,
R.A. No. 9184, which was definitely applicable, has specified "confirming the
certification of availability of funds, as well as reviewing all relevant documents in
relation to their adherence to law" as parts of the assessment of the readiness of the
procurement during the pre-procurement conference. With the requirement for the
CAFs being sine qua non in government procurement and contracts, every contract
without the corresponding CAF should be characterized as null and void.
Re: Splitting of contracts
That Ms. Dumdum committed splitting of contracts was undeniable.
Splitting of contracts means the breaking up of contracts into smaller quantities and
amounts, or dividing contract implementation into artificial phases or subcontracts,
for the purpose of making them fall below the threshold for shopping or small value
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Had the PMO engaged Artes as the events organizer of the two events, Ms. Dumdum
should have executed with Artes a lump sum contract that covered all the details
and incidentals of the events instead of the several letter-contracts and quotation-
contracts for each and every phase of the events. That the value of each of the letter-
contracts and quotation-contracts entered into by Ms. Dumdum was within her
authority to approve (i.e., P1 million and below) was another strong manifestation
of splitting of contracts.
Splitting of contracts is a serious transgression of the procurement rules of the
Government. Section 65 (4) of R.A. No. 9184 penalizes public officers who commit
"splitting of contracts which exceed procedural purchase limits and competitive
bidding" with "imprisonment of not less than six (6) years and one (1) day but not
more than fifteen years."
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Issue: Whether or not the contracts entered by the parties contain an arbitration
agreement which is a condition for the CIAC to have jurisdiction.
Held: Yes. The CIAC shall have original and exclusive jurisdiction over disputes
arising from, or connected with, contracts entered into by parties involved in
construction in the Philippines, whether the dispute arises before or after the
completion of the contract, or after the abandonment or breach thereof. For the
CIAC to acquire jurisdiction, the parties to a dispute must be bound by an arbitration
agreement in their contract or subsequently agree to submit the same to voluntary
arbitration. Such submission may be an exchange of communication between the
parties or some other form showing that the parties have agreed to submit their
dispute to arbitration. Section 4.1 of the CIAC Law provides that “An arbitration
clause in a construction contract or a submission to arbitration of a construction
dispute shall be deemed an agreement to submit an existing or future controversy to
CIAC jurisdiction, notwithstanding the reference to a different arbitration institution
or arbitral body in such contract or submission. “(Emphasis supplied)
From the foregoing, it is evident that for CIAC to acquire jurisdiction over a
construction controversy, the parties to a dispute must be bound by an arbitration
agreement in their contract or subsequently agree to submit the same to voluntary
arbitration, and that an arbitration clause in a construction contract or a submission
to arbitration of a construction dispute shall be deemed an agreement to submit an
existing or future controversy to CIAC's jurisdiction.
In this case, the Court found that there was an agreement to arbitrate in the General
Conditions of Contract, particularly in Clause 20.2 thereof, which formed part of the
MOAs dated September 6, 2007 which provides “20.2. Any and all disputes arising
from the implementation of this Contract covered by x x x R.A. 9184 and its IRR-A shall
be submitted to arbitration in the Philippines according to the provisions of [R]epublic
Act 9285, otherwise known as the "Alternative Dispute Resolution Act 2004.”
Undoubtedly, Clause 20.2 of the General Conditions of Contract is an arbitration
clause that clearly provides that all disputes arising from the implementation of the
contract covered by R.A. No. 9184 shall be submitted to arbitration in the Philippines.
In accordance with Section 4.1 of the CIAC Rules, the existence of the arbitration
clause in the General Conditions of Contract that formed part of the said MOAs shall
be deemed an agreement of the parties to submit existing or future controversies to
CIAC's jurisdiction.
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Sps. Pamplona vs. Cueto
G.R. No. 204735; February 19, 2018
BERSAMIN, J.
Case Doctrine: A contract to sell is akin to a conditional sale where the efficacy
or obligatory force of the vendor's obligation to transfer title is subordinated
to the happening of a future and uncertain event, so that if the suspensive
condition does not take place, the parties would stand as if the conditional
obligation had never existed. The suspensive condition is commonly full
payment of the purchase price.
Facts:
Defendants are the registered owners of the disputed lot in Batangas. Plaintiff and
defendants mutually agreed for the sale of the property, verbally, with a total
amount of USD25,000 payable on a monthly installment of USD300. Though verbal,
a notebook evidencing their agreement was produced and sent to the plaintiff at her
residence in Italy. The plaintiff’s son occupied the property during her absence, who,
however, was evicted after failing to attend hearings for the unlawful detainer case
filed by the defendants. Petitioner, upon return to the Philippines, heard the
incident and filed an Adverse Claim. The defendants alleged that the stay of the
plaintiff’s son was by mere tolerance only, and as such, the unlawful detainer case
was proper. The RTC ruled in favor of respondents, due to failure of the plaintiff to
present preponderance of evidence. The CA reversed the decision of the RTC,
holding that by virtue of Lilia's partial payments to Bibiana, it removed the contract
from the application of the Statute of Frauds.
Issues:
Whether or not there was sufficient evidence to show the existence of a partially
executed contract to sell.
Held:
Petition is denied. The existence of the partially executed contract to sell between
Bibiana and Lilia was sufficiently established. It is uncontested that Lilia sent money
to Bibiana. The latter did not deny her receipt of the money. Moreover, the records
showed that the parties further agreed for Vedasto and Roilan to occupy the
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property during the period when Lilia was remitting money to Bibiana; and that
Lilia immediately took steps to protect her interests in the property once the
petitioners started to deny the existence of the oral contract to sell by annotating
her adverse claim on the petitioners' title and instituting this action against the
latter.
Also, in the context of the norms set by jurisprudence for the application of the rule
on admission by silence, Lilia could not be properly held to have admitted by her
silence her lack of interest in the property. On the contrary, the records reveal
otherwise. Upon her return to the country, she communicated with Bibiana on the
terms of payment, and immediately took steps to preserve her interest in the
property by annotating the adverse claim in the land records, and by commencing
this suit against the petitioners. Such affirmative acts definitively belied any claim of
her being silent in the face of the assault to her interest.
The rule on admission by silence applies to adverse statements in writing only when
the party to be thereby bound was carrying on a mutual correspondence with the
declarant. Without such mutual correspondence, the rule is relaxed on the theory
that although the party would have immediately reacted had the statements been
orally made in his presence, such prompt response can generally not be expected if
the party still has to resort to a written reply.
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DIONELLA A. GOPIO, DOING BUSINESS UNDER THE NAME AND STYLE, JOB ASIA
MANAGEMENT SERVICES, Petitioner, v. SALVADOR B. BAUTISTA, Respondents
G.R. No. 205953; June 06, 2018
Jardeleza, J.:
CASE DOCTRINE: The liability of the principal/employer and the
recruitment/placement agency for any and all claims under this section shall
be joint
and several.
FACTS: On September 26, 2008, respondent Salvador A. Bautista (Bautista) was
hired as a Project Manager for Shorncliffe (PNG) Limited (Shorncliffe) in Papua New
Guinea through Job Asia Management Services (Job Asia), a single proprietorship
owned by petitioner Dionella A. Gopio (Gopio), which is engaged in the business of
recruitment, processing, and deployment of land¬-based manpower for overseas
work. just nine months after his deployment in Papua New Guinea, Bautista was
served a notice of termination effective July 10, 2009 on the alleged grounds of
unsatisfactory performance and failure to meet the standards of the company. He
was paid his salary for the period July 1 to 10, 2009, annual leave credits, and one-
month pay net of taxes. Thereafter, he was repatriated on July 11, 2009. Bautista
lodged a complaint with the arbitration branch of the NLRC against Job Asia, Gopio,
and Shorncliffe for illegal dismissal and monetary claims. Petitioner argued that she
should not be held jointly and severally liable with Shorncliffe for the payment of
monetary awards to Bautista as she had no control over the manner of
implementation of the employment contract, she had no hand whatsoever in
Bautista's dismissal, and that her agency was extinguished as soon as the employee
was deployed to and have worked in Shorncliffe's construction project in Papua
New Guinea.
ISSUE: Whether or not Gopio is jointly and severally liable with Shorncliffe
HELD: Yes. In the first place, such joint and solidary liability is required prior to the
issuance of a license to petitioner to operate a recruitment agency. Thus, Section
1(f)(3), Rule II, Part II of the 2002 POEA Rules and Regulations Governing the
Recruitment and Employment of Land-Based Overseas Workers provides:
RULE II
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ISSUANCE OF LICENSE
Sec. 1. Requirements for Licensing. Every applicant for license to operate a private
employment agency shall submit a written application together with the following
requirements:
x x x x
f. A verified undertaking stating that the applicant:
x x x x
3) Shall assume joint and solidary liability with the employer for all claims and
liabilities which may arise in connection with the implementation of the contract,
including but not limited to payment of wages, death and disability compensation
and repatriations[.] (Emphasis supplied.)
Furthermore, Section 10 of R.A. No. 8042 provides:
Sec. 10. Money Claims. x x x
The liability of the principal/employer and the recruitment/placement agency for
any and all claims under this section shall be joint and several. This provision shall
be incorporated in the contract for overseas employment and shall be a condition
precedent for its approval. The performance bond to be filed by the
recruitment/placement agency, as provided by law, shall be answerable for all
money claims or damages that may be awarded to the workers.If the
recruitment/placement agency is a juridical being, the corporate officers and
directors and partners as the case may be, shall themselves be jointly and solidarily
liable with the corporation or partnership for the aforesaid claims and damages.
(Emphasis supplied.)
Petitioner thus cannot evade liability by claiming that she did not have any control
over the foreign employer and had nothing to do with Bautista's dismissal, because
her liability is defined by law and contract.
We have held that the burden devolves not only upon the foreign-based employer
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wherein a private party may free itself from liability arising from a contract of
service, by merely invoking that the BOC has constructive possession over its
shipment by the issuance of a Hold-Order.
In this case, the ultimate relief sought by ATI in its complaint for a sum of money
with damages, is the recovery of the storage fees from Padoson, which arose from
the contract of service which they have validly entered into. BOC, as explained
earlier, was never privy to this contract. It was Padoson who engaged ATI's
storage services. It was Padoson who benefited from ATI's storage services. It was
Padoson who subsequently sold the shipments and suffered losses.
Recall too, that ATI was not a party to the Customs case filed by BOC against
Padoson for the latter's tax delinquency. BOC's interest over the shipment which is
the subject matter of the Customs case is merely to collect from Padoson its tax
dues; it is separate and distinct from the claim of ATI in its complaint for a sum of
money — which is to demand from Padoson the payment of storage fees based on
their contract of service. The BOC's Hold-Order did not have the effect of relieving
Padoson from its contractual obligation with ATI.
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demand the return of their property at any time as long as the possession was only
through mere tolerance. The same precept holds true even if the tolerance resulted
from a promise that the possessor will pay for the reasonable value of the land.
As correctly ruled by the Court of Appeals, respondents may exercise their rights
under Article 448, in relation to Article 546 of the New Civil Code. Said provision
provides them with the option of either: (1) appropriating the improvements, after
payment of indemnity representing the value of the improvements introduced and
the necessary and useful expenses defrayed on the subject lots; or (2) obliging the
petitioner to pay the price of the land. However, petitioner cannot be obliged to buy
the land if its value is considerably more than that of the improvements and
buildings it built. In such a scenario, the petitioner may instead enter into a lease
agreement with respondent heirs and pay them reasonable rent. In case of
disagreement, the Court shall fix the terms thereof.
Nonetheless, considering that the subject lot is now being used as school premises
by the Caritan Norte Elementary School and permanent structures have already
been erected thereon, respondent's exercise of their rights under Article 448 and
payment of indemnity pursuant to Article 546 would undoubtedly hinder the
Department of Education's prerogative of providing basic education to said locality.
In consonance with previous rulings by the Court, the petitioner's remedy to
address such inconvenience is to file an action for expropriation over said land.
WHEREFORE, given the foregoing disquisition, the Petition for Review on Certiorari,
dated April 26, 2017 of the Department of Education, represented by its Regional
Director, is hereby DENIED. Accordingly, the Decision dated February 24, 2017 of
the Court of Appeals in CA-G.R. CV No. 100288, reversing and setting aside the
Decision dated September 11, 2012 of the Regional Trial Court of Tuguegarao City,
Cagayan, Branch 2 is hereby AFFIRMED in toto.
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HELD (CA RULING ONLY): YES. Vive's failure to pay the purchase price is an event
of default giving NHMFC the right to annul/cancel the contract and forfeiting
whatever right Vive have acquired thereunder pursuant to Section 5 thereof.
Second, it is clear from Section 7 1 of the Deed of Sale that the parties intended their
agreement to be a contract to sell or a conditional sale. The title to the property was
not immediately transferred, through a formal deed of conveyance, in the name of
Vive prior to or at the time of the first payment. Thus, since the title and ownership
remains with NHMFC until Vive fully pays the balance, the Deed of Sale was merely a
contract to sell. Failure to pay is not a mere breach, casual or serious which prevents
the obligation of the vendor to convey the title from acquiring obligatory force. The
non-fulfillment by Vive of its obligation to pay, which is a suspensive condition for
the obligation of NHMFC to sell and deliver the title to the property, rendered the
Deed of Sale ineffective and without force and effect. Thus, since the Deed of Sale
was validly annulled/cancelled, the subsequent sale entered into by NHMFC and
Cavacon is valid.
In a Resolution the Supreme Court denied Vive's petition for review on
certiorari for failure to sufficiently show any reversible error in the assailed
judgment of the CA to warrant the exercise of discretionary appellate jurisdiction.
On July 19, 2017, Vive filed the instant Motion for Reconsideration praying that
the Court take a second look at the circumstances of the case. This was a
notice approving such motion.
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HBILU vigorously objected to the proposed amendments, claiming that their
insertions would curtail its members' availment of salary loans. This, according to
the Union, violates the existing exceptions set forth in BSP Circular. In view of
HBILU's objection, HSBC withdrew its proposed amendments and, consequently, the
remained unchanged.
Despite the withdrawal of the proposal, HSBC sent an e-mail to its employees on
April 20, 2012 concerning the enforcement of the Plan, including the Credit
Checking provisions thereof.
With the strict implementation of these provisions, adverse credit findings may
result to disapproval of loan or credit card applications.
Thereafter, in September 2012, HBILU member Vince Mananghaya (Mananghaya)
applied for a loan under the provisions of Article XI of the CBA. His first loan
application in March 2012 was approved, but adverse findings from the external
checks on his credit background resulted in the denial of his September application.
HBILU then raised the denial as a grievance issue with the National Conciliation
Mediation Board (NCMB).
Issue:
Whether or not HSBC could validly enforce the credit-checking requirement under
its BSP-approved Plan in processing the salary loan applications of covered
employees even when the said requirement is not recognized under the CBA.
Ruling:
No. If the terms of a CBA are clear and [leave] no doubt upon the intention of the
contracting parties, the literal meaning of its stipulation shall prevail.
However, if, in a CBA, the parties stipulate that the hirees must be presumed of
employment qualification standards but fail to state such qualification standards in
said CBA, the VA may resort to evidence extrinsic of the CBA to determine the full
agreement intended by the parties. When a CBA may be expected to speak on a
matter, but does not, its sentence imports ambiguity on that subject. The VA is not
merely to rely on the cold and cryptic words on the face of the CBA but is mandated
to discover the intention of the parties. Recognizing the inability of the parties to
anticipate or address all future problems, gaps may be left to be filled in by
reference to the practices of the industry, and the step which is equally a part of the
CBA although not expressed in it. In order to ascertain the intention of the
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We also cannot agree that the presumption of fraud in Article 1387 of the Civil Code
relative to property conveyances, when there was already a judgment rendered or a
writ of attachment issued, authorizes piercing the veil of corporate identity in this
case. We find that Article 1387 finds less application to an involuntary alienation
such as the foreclosure of mortgage made before any final judgment of a court. We
thus hold that when the alienation is involuntary, and the foreclosure is not
fraudulent because the mortgage deed has been previously executed in accordance
with formalities of law, and the foreclosure is resorted to in order to liquidate a
bona fide debt, it is not the alienation by onerous title contemplated in Article 1387
of the Civil Code wherein fraud is presumed.
Since the tactual antecedents of this case do not warrant a finding that the mortgage
and loan agreements between Maricalum Mining and G Holdings were simulated,
then their separate personalities must be recognized. To pierce the veil of corporate
fiction would require that their personalities as creditor and debtor be conjoined,
resulting in a merger of the personalities of the creditor. G Holdings, and the debtor,
Maricalum Mining, in one person, such that the debt of one to the other is thereby
extinguished. But the debt embodied in the 1992 Financial Notes has been
established, and even made subject of court litigation. This can only mean that G
Holdings and Maricalum Mining have separate corporate personalities.
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be reference in the Certificate of Entry and Acceptance of M/V Princess of the World
is valid and binding upon Sulpicio.
ISSUE:
Whether or not there is a valid and binding arbitration agreement between
Steamship and Sulpicio Lines.
HELD:
Yes. The Supreme Court ruled that under the freedom of contract principle,
parties to a contract may stipulate on a particular method of settling any conflict
between them. Artbitration and other alternative dispute resolution methods are
favored over court action. Arbitration as a mode of settling disputes, was already
recognized in the Civil Code.
The contract between Sulpicio and Steamship is more than a contract of
insurance between a marine insurer and shipowner. By entering its vessels in
Steamship, Sulpicio not only obtains insurance coverage for its vessels but also
becomes a member of steamship.
The Club Rules contains the terms and condition of the relationship between
the Steamships and its members. Sulpicio’s acceptance of the Certificate of Entry
and Acceptance manifests its acquiescence to all its provisions. There was no
showing in the records or in Sulpicio’s contentions that it objected to any of the
terms in this Certificate. Its acceptance, likewise, operated as an acceptance of the
entire provisions of the Club Rules.
The Supreme Court reasoned that when a contract is embodied in two (2) or
more writings, the writings of the parties should be read and interpreted together in
such a way as to render their intention effective.
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SALES AND LEASE
HEIRS OF THE LATE ATTY. EDILBERTO C. PAMA, SR., AND EMMA T. PAMA vs.
HEIRS OF THE LATE ARNALDO AND IRENE BAUTISTA, ET AL.
G.R. No. 226534. January 31, 2018
Ponente: Notice (by the Division Clerk of Court)
Doctrine: When doubt exists as to the true nature of the parties' transaction, courts
must construe such transaction purporting to be a sale as an equitable mortgage, as
the latter involves a lesser transmission of rights and interests over the property in
controversy.
FACTS:
Sometime in August 2003, the respondents instituted with the RTC an action for
Redemption, Recovering of Possession, Declaration of Deed of Absolute Sale as Null
and Void, Damages and Attorney's Fees as well as Cancellation of Entries of the
subject property from Edilberto Pama, Sr., which was registered under the names of
their late parents, Arnaldo and Irene. Respondents alleged that Arnaldo and Irene
passed away on December 13, 1971 and November 13, 1999, respectively.
Sometime in 1975, Irene mortgaged the subject property with right of usufruct to
Emma, wife of Edilberto, for a consideration of P17,000.00. Seven years thereafter,
Irene sought to pay her debt and recover the land but Edilberto, whose wife Emma
had already died, demanded the payment of additional amounts as interest. For
Irene, the demand was contrary to her agreement with Emma. Their arrangement
was that Emma would no longer charge any interest on the loan as she already
exercised her rights as usufructuary over the land. Irene then failed to recover the
mortgaged land from Edilberto. On several instances thereafter, Irene still sought to
recover the property from Edilberto but failed in her attempts. Irene died in 1999
without effecting payment and recovery of the land, but her heirs still sought to later
redeem the property from Edilberto. Besides their assertions on Irene's mortgage to
Emma and the failed attempts to pay and recover the land, the respondents alleged
in their complaint that sometime in July 2003, they discovered that Edilberto caused
the annotation on the subject certificate of title of a Deed of Absolute Sale that was
purportedly executed by Arnaldo and Irene on February 19, 1972. Petitioners
claimed that the deed was falsified, as they pointed out that: (1) the supposed
signatures of Arnaldo and Irene on the deed were forged, as they were not similar to
their real signatures; (2) their father Arnaldo had already died in 1971; (3)
Edilberto misrepresented that he was already a widower at the time the deed was
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allegedly executed; and (4) the signature of Restituta Bautista, a supposed witness
to the deed's execution, was likewise forged. After trial, the RTC rendered its
decision that favored the respondents. The CA affirmed with modifications the RTC
decision. The CA cited Edilberto's failure to refute the respondents' claim that at
most, the transaction that transpired among the parties was only an equitable
mortgage. Respondents were also able to successfully impeach the genuineness and
due execution of the 1975 Deed of Sale, upon proof that the supposed signatures of
Irene and the alleged witnesses to its execution were forgeries. Since the contract
was spurious, no rights could accrue therefrom. It was a void contract, such that an
action based thereon could not prescribe under Article 1410 of the NCC. Hence, the
present petition for review.
ISSUE: Can the transaction between the late Irene Bautista and Emma Pama be
considered as sale?
RULING: No. The Court denies the petition and held that the records support the
finding that the transaction between Irene and Emma was merely a mortgage. There
was no valid sale to speak of. The authenticity of the two deeds of sale dated 1972
and 1975 were satisfactorily negated by the respondents. It was established that the
signatures appearing thereon were mere forgeries. The original mortgage, on the
other hand, between Irene and Emma was not disputed. Petitioners failed to present
persuasive reasons for the Court to now deviate from the factual findings of both the
trial and appellate courts. The following considerations upon which the CA based its
ruling that favored the respondents are also material:
[T]he records disclosed that Atty. Pama never exercised
dominion and ownership over the property. It is worthy to
restate that the [respondents'] effort to redeem the property
in the years 1982 and 1983 proved unsuccessful only because
of the unreasonable demands set by Atty. Pama and not by
any bona fide claim of title on his part. Equally important,
the records reveal that the tax declarations covering the
property is still in the name of Arnaldo Bautista and the
[respondents] had been paying the taxes on the property in
the years 1988, 1991, 1992, 1997, 1998 and 1999.
xxx xxx xxx
In any event, when doubt exists as to the true nature of the
parties' transaction, courts must construe such transaction
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Petitioners argue that rentals may be awarded to respondent only from the
time of the latest demand and not prior ones; that prior to said latest demand, PNB
had no right to collect rent, since it is only after receipt thereof that they may be
considered illegal occupants of the bank's property and thus obligated to pay rent;
and that prior to said latest or last demand, their possession of the subject
properties may be said to have been tolerated by PNB, and as such, they were "not
required to pay the rent within the period prior to their receipt of the latest demand
to vacate." Such arguments are, however, fundamentally logically flawed, because if
they were to be believed, then no lessor would be compensated under a lease; the
lessee's outstanding rental obligations would simply be condoned. Any lessee would
simply withhold the payment of rent and wait until the lessor makes a demand to
vacate - at which point the former will simply vacate the premises, with no
obligation to pay rent at all.
Under Article 1670 of the Civil Code, "If at the end of the contract the lessee
should continue enjoying the thing leased for fifteen days with the acquiescence of
the lessor, and unless a notice to the contrary by either party has previously been
given, it is understood that there is an implied new lease, not for the period of the
original contract, but for the time established in Articles 1682 and 1687. The other
terms of the original contract shall be revived." Thus, when petitioners' written
lease agreement with respondent expired on June 1, 1987 and they did not vacate
the subject properties, the terms of the written lease, other than that covering the
period thereof, were revived. The lease thus continued. In this sense, the
prescriptive periods cited by petitioners - as provided for in Articles 1144 and 1145
of the Civil Code - are inapplicable. As far as the parties are concerned, the lease
between them subsisted and prescription did not even begin to set in.
Even then, it can be said that so long as petitioners continued to occupy the
subject properties - with or without PNB's consent - there was a lease agreement
between them. They cannot escape the payment of rent, by any manner whatsoever.
First of all, given the circumstances where liberality is obviously not present and
was never a consideration for the lease contract, petitioners cannot be allowed to
enjoy PNB's properties without paying compensation therefor; this would be
contrary to fundamental rules of fair play, equity, and law. Basically, Article 19 of the
Civil Code states that "Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith," and Article 20 provides that "Every person who, contrary
to law, wilfully or negligently causes damage to another, shall indemnify the latter
for the same."
Secondly, even when the parties' lease agreement ended and petitioners
failed or refused to vacate the premises, it may be said that a forced lease was thus
created where petitioners were still obligated to pay rent to respondent as
reasonable compensation for the use and occupation of the subject properties.
Indeed, even when there is no lease agreement between the parties, or even when
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the parties - occupant and property owner - are strangers as against each other, still
the occupant is liable to pay rent to the property owner by virtue of the forced lease
that is created by the former's use and occupation of the latter's property.
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Issues:
1. Whether or not the subsequent buyers are in bad faith and that the petitioner has
the better right to possess the land.
2. Whether or not the registered owner's action to recover possession is not barred
by prescription or by laches.
Held:
1. INNOCENT PURCHASER FOR VALUE
Yes.
Respondent's possession as a lessee was based on a contract of lease executed in its
favor by the alleged subsequent buyers of the subject properties, namely Ringor and
later, by Gonzales and Cabuñas. These buyers only had unregistered deeds of sale in
their favor.
Since 1981 when Segundo allegedly sold the subject property to Advento, two
subsequent transfers have been made, the last buyers being Gonzales and Cabuñas.
Yet, the certificates of title of the parcels of land undisputedly remain under the
name of Segundo and have never been transferred to any of the subsequent buyers
up to the present.
Thus, when Ringor purchased the lands from Advento, and was later purchased by
Gonzales and Cabuñas from Ringor, they did not directly deal with the registered
owner of the land. The fact that the lands were not in the name of their sellers
should have put them on guard and should have prompted them to inquire on the
status of the properties being sold to them.
Clearly, Ringor, Gonzales and Cabuñas cannot be considered buyers in good faith
because of their failure to exercise due diligence as regards their respective sale
transactions. While this Court protects the right of the innocent purchaser for value
and does not require him to look beyond the certificate of title, this protection is not
extended to a purchaser who is not dealing with the registered owner of the land. In
case the buyer does not deal with the registered owner of the real property, the law
requires that a higher degree of prudence be exercised by the purchaser.
While registration is not necessary to transfer ownership, it is, however, the
operative act to convey or affect the land insofar as third persons are
concerned.Since Advento did not register the deed of sale and no transfer certificate
was issued in his name, it did not bind the land insofar as Ringor, Gonzales and
Cabuñas, as subsequent buyers, are concerned.
Moreover, the Court observes that Gonzales and Cabuñas represented themselves as
the registered owners of the subject property in the Contract of Lease they
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issue on redemption, the PARAD observed that as vendee, J.V. Lagon failed to give
Leocadia a written notice of the sale. Nevertheless, it resolved to deny the claim for
redemption on the finding that Leocadia had actual knowledge of the sale as early as
1988 when she confronted J.V. Lagon about the scale house. As to whether there was
tenancy, the PARAD held that Leocadia failed to establish her status as a de jure
tenant.
Leocadia filed an appeal before the DARAB, which reversed and set aside the
PARAD's ruling. It held that Leocadia's action was not barred by prescription
because the filing of the complaint with the BARC on 7 May 1991 tolled the running
of the prescriptive period. It concluded that tenancy existed, as evinced by the fact
that Leocadia's house was erected inside the subject landholding, and that Pedral’s
affidavit declaring that he installed the Spouses Terre as share tenants sufficiently
proved the existence of tenancy relationship. Citing Section 10 of R.A. No. 3844, it
held that tenancy is attached to the land regardless of whoever may have become
the owner thereof. Thus, Leocadia's status as a tenant was not extinguished by the
successive transfers of ownership from Pedral to Abis, and then to Gonzales, and
finally to J.V. Lagon, as the latter assumed the rights and obligations of the preceding
transferors. It further ruled that Leocadia was entitled to redeem the land from J.V.
Lagon citing Section 12 of R.A. No. 3844, which provides that the right of
redemption may be exercised within 180 days from notice in writing which shall be
served by the vendee on all lessees affected and on the DAR upon registration of the
sale.
J.V. Lagon filed a petition for review before the CA, which was denied. Meanwhile,
Leocadia died, prompting her heirs to file a manifestation with motion for
substitution before the CA. CA affirmed in toto the DARAB's ruling. Considering that
there was tenancy between Pedral and Leocadia, the CA decreed that there was
subrogation of rights to Abis, then to Gonzales, and finally to J.V. Lagon, as
landowners. The tenancy relationship was not terminated by changes of ownership
pursuant to Section 10 of R.A. No. 3844. As a tenant, Leocadia was entitled to
redeem the land consequent to the lack of written notice of the sale.
Hence, this petition for review on certiorari. - Granted
ISSUE: W/N there is a tenancy relationship between J.V. Lagon Realty and Leocadia.
HELD: NO.
There is a tenancy relationship if the following essential elements concur: 1) the
parties are the landowner and the tenant or agricultural lessee; 2) the subject
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installments and that he sent a notice to the petitioners that he was already
cancelling the contract. Considering that the Deed of Conditional Sale was not
validly cancelled, it follows that the same subsists and remains effective. Thus the
petition is partially granted and the petitioners are hereby ordered to pay the
balance of the unpaid purchase price within a reasonable period of time.
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redemption did not commence. Thus, she prayed that judgment be rendered
declaring her entitled to redeem the said lot, at the price of ₱60,000.00.
Respondents further claimed that Editha was well-informed in writing regarding the
sale of Lot 2429. They alleged that Felisa Aga-in and Teresita Gardose, acting in
behalf of the other heirs of Rosario, executed a notice, dated 16 March 1998,
informing Editha that respondents were interested in buying Lot 2429; and that if
she so desired, she could still repurchase the property from respondents. Finally,
respondents averred that they sent Editha a written demand for payment of rentals
reckoned from 1998. Instead of complying, Editha instituted the complaint for
redemption. Accordingly, respondents prayed for collection of back rentals,
termination of the agricultural leasehold agreement, moral damages, attorney's fees,
and litigation expenses.
In its 30 June 2003 decision, the PARAD found that Editha was not properly notified
of the sale. It observed that the 16 March 1998 notice which respondents presented
failed to indicate the terms and particulars of the sale. As such, it ruled that Editha's
right of redemption did not prescribe for want of a valid written notice.
While the PARAD sustained Editha's right of redemption, it nevertheless resolved to
dismiss her complaint after finding that only ₱216,000.00 was consigned as
redemption price. Citing jurisprudence on the matter, the PARAD opined that tender
of payment must be for the full amount of the repurchase price; otherwise, the offer
to redeem would be held ineffectual. It noted that in the extrajudicial settlement and
deed of sale which Editha herself procured, the purchase price stated was
₱600,000.00, and that such price was never disputed. Hence, absent evidence to the
contrary, there can be no doubt that ₱600,000.00 was the actual amount that
respondents paid for Lot 2429. The decretal portion of the PARAD's decision reads.
Aggrieved, Editha filed an appeal before the DARAB. On 25 November 2008, Editha
filed before the CA a motion for extension of time to file a Rule 43 petition for
review. She prayed for an additional fifteen (15) days, or from 25 November 2008
until 10 December 2008. On 9 December 2008, Editha's new counsel filed with the
CA a notice of appearance and at the same time moved for an extension of thirty
(30) days, or from 10 December 2008 until 9 January 2009, within which to file the
petition for review. The second motion for extension of time was grounded on heavy
workload and the need for more time to study the case. Eventually, Editha's petition
for review was filed on 5 January 2009.
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Issue:
WHETHER OR NOT THE CA ERRED IN DISMISSING EDITHA'S PETITION FOR
REVIEW FOR HAVING BEEN FILED OUT OF TIME.
Held:
Editha's petition fails. Editha availed of the wrong mode of appeal in bringing her
case before this Court.
The proper remedy of a party aggrieved by a decision of the CA is a petition for
review under Rule 45; and such is not similar to a petition for certiorari under Rule
65 of the Rules of Court. As provided in Rule 45 of the Rules of Court, decisions, final
orders or resolutions of the CA in any case, i.e., regardless of the nature of the action
or proceedings involved, may be appealed to this Court by filing a petition for
review, which in essence is a continuation of the appellate process over the original
case.
On the other hand, a special civil action under Rule 65 is a limited form of review
and is a remedy of last recourse. It is an independent action that lies only where
there is no appeal nor plain, speedy and adequate remedy in the ordinary course of
law. Certiorari will issue only to correct errors of jurisdiction, not errors of
procedure or mistakes in the findings or conclusions of the lower court. As long as
the court a quo acts within its jurisdiction, any alleged errors committed in the
exercise of its discretion will amount to nothing more than mere errors of judgment,
correctible by an appeal or a petition for review under Rule 45 of the Rules of Court.
WHEREFORE, the petition for certiorari is DISMISSED. The assailed CA Resolutions
in CA-G.R. SP No. 03895 are hereby AFFIRMED.
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of the mortgaged properties when it filed its Complaint; hence, it never expressly or
impliedly sought recovery of their ownership or possession.
Lapitan v. Scandia instructed that to determine whether the subject matter of an
action is incapable of pecuniary estimation, the nature of the principal action or
remedy sought must first be established. This finds support in this Court's repeated
pronouncement that jurisdiction over the subject matter is determined by
examining the material allegations of the complaint and the relief sought.
Heirs of Dela Cruz v. Heirs of Cruz stated, thus: “It is axiomatic that the jurisdiction of
a tribunal, including a quasi-judicial officer or government agency, over the nature
and subject matter of a petition or complaint is determined by the material
allegations therein and the character of the relief prayed for, irrespective of whether
the petitioner or complainant is entitled to any or all such reliefs.
However, Lapitan stressed that where the money claim is only a consequence of the
remedy sought, the action is said to be one incapable of pecuniary estimation:
“A review of the jurisprudence of this Court indicates that in
determining whether an action is one the subject matter of which is
not capable of pecuniary estimation, this Court has adopted the
criterion of first ascertaining the nature of the principal action or
remedy sought. If it is primarily for the recovery of a sum of money,
the claim is considered capable of pecuniary estimation, and
whether jurisdiction is in the municipal courts or in the courts of
first instance would depend on the amount of the claim. However,
where the basic issue is something other than the right to recover a
sum of money, or where the money claim is purely incidental to, or
a consequence of, the principal relief sought like in suits to have the
defendant perform his part of the contract (specific performance)
and in actions for support, or for annulment of a judgment or to
foreclose a mortgage, this Court has considered such actions as
cases where the subject of the litigation may not be estimated in
terms of money, and are cognizable exclusively by courts of first
instance. The rationale of the rule is plainly that the second class
cases, besides the determination of damages, demand an inquiry
into other factors which the law has deemed to be more within the
competence of courts of first instance, which were the lowest courts
of record at the time that the first organic laws of the Judiciary were
enacted allocating jurisdiction.”
Heirs of Sebe v. Heirs of Sevilla likewise stressed that if the primary cause of action is
based on a claim of ownership or a claim of legal right to control, possess, dispose,
or enjoy such property, the action is a real action involving title to real property.
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the reconveyance of or asserted its ownership over the mortgaged properties when
it filed its Complaint since it still enjoyed ownership and possession over them.
Considering that petitioner paid the docket fees as computed by the clerk of court,
upon the direction of the Executive Judge, this Court is convinced that the Regional
Trial Court acquired jurisdiction over the Complaint for annulment of real estate
mortgage.
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children, who then agreed that the land be registered solely in the name of
Reynaldo, in deference to his being the eldest. The siblings acknowledged that they
were co-owners of the land, and that they would partition it in the future.
The spouses alleges that the mortgage to the bank was without their and the
Avelina’s siblings' prior knowledge. After the RTC issued the aforementioned writ of
possession, the bank had the entire property fenced and forthwith denied Avelina
entry. She and her workers were thus prevented from tending to their palay crop
which by April 2008, was ready for harvest. Avelina's counsel wrote respondent
bank, requesting that she be allowed entry so she may conduct the necessary
harvest. The bank verbally responded that it would agree, on the condition that
Avelina and her husband renounce their tenancy rights over the property.
Issue: Whether petitioner spouses' averment of co-ownership of the land subject of
the complaint sufficiently negates their claim of tenancy.
Held: The theory on the co-existence of agricultural tenancy and co-ownership
merits a closer look.
In this case, we are presently ill persuaded that co-ownership ipso facto, or at the
very least the mere averment thereof, should be enough to thwart a co-owner's suit
for recognition as tenant. While the appellate court's aphorism on the mutual
exclusivity between land ownership and tenancy may hold true when the ownership
involved is reposed in a single entity, should the same be deemed as automatically
true for coownerships, as well?
Without prejudice to the eventual findings of the administrative agency concerned,
we deem petitioner spouses' proposition to be within the realm of possibility. It is
thus worthy of examination by the DARAB and its adjudicators, which has the
expertise to undertake such an examination.
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of the disputed property. Neither GSIS Family Bank nor Sebastian exercised any
right of retention within 60 days from this notice of coverage.
On November 10, 2000, the government compulsorily acquired from GSIS
Family Bank the land covered Title. The bank's land title was cancelled, and Title
was issued in the name of the Republic of the Philippines. The Department of
Agrarian Reform put a portion of what is now the property under agrarian
reform.
On November 27, 2000, the Department of Agrarian Reform issued an
emancipation patent or Certificate of Land Ownership Award to Villanoza. The
Certificate of Land Ownership Award title was generated but not yet released as
of February 23, 2005.
During the pendency of his complaint to annul the extrajudicial foreclosure sale,
Sebastian died and his heirs substituted him.
On August 9, 2002, the Regional Trial Court found that GSIS Family Bank's cause
of action had prescribed. Therefore, the proceedings for extrajudicial
foreclosure of real estate mortgages [against Sebastian, as substituted by his
heirs,] were null and void."
Issue
Whether petitioners have a right of retention over the land measuring "more or
less" 2.833 hectares awarded to farmer beneficiary Gabino T. Villanoza.|||
Held
Assuming that Sebastian could properly exercise his retention right, this could
not cover the land awarded to Villanoza.
Petitioners cite Santiago, et al. v. Ortiz-Luiz to claim that an emancipation grant
cannot "defeat the right of the heirs of the deceased landowner to retain the
[land]." However, in that case, this Court denied the landowner's retention right
for exceeding what the law provides. There is no cogent reason why this Court
should rule differently in this case.
Section 6 of Republic Act No. 6657 gives the landowner the option to choose the
area to be retained only if it is compact or contiguous. The Department of
Agrarian Reform, the Office of the President, and the Court of Appeals have
consistently found that the land subject of the dispute is neither compact nor
contiguous.
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Section 6 also provides that if the area selected for retention is tenanted, it is for
the tenant to choose whether to remain in the area or be a beneficiary in the
same or a comparable agricultural land. Petitioners' Application for Retention
stated that Villanoza occupied the property as a tenant and farmer beneficiary.
Thus, the option to remain in the same land was for Villanoza to make.
The landowner's retention right is subject to another condition. Under Section
3.3 of Administrative Order No. 02-03, the heirs of a deceased landowner may
exercise the retention right only if the landowner signified his or her intention to
exercise the right of retention before August 23, 1990. Section 3.3 states:
3.3. The right of retention of a deceased landowner may be
exercised by his heirs provided that the heirs must first
show proof that the decedent landowner had
manifested during his lifetime his intention to exercise
his right of retention prior to 23 August 1990 (finality
of the Supreme Court ruling in the case of Association of
Small Landowners in the Philippines Incorporated
versus the Honorable Secretary of Agrarian Reform).
Petitioners cannot claim the right of retention through "Leonilo Sebastian" or
"Leonilo P. Nuñez, Sr." when the alleged predecessor-in-interest himself failed to
do so. The Court of Appeals correctly ruled that during his lifetime, Sebastian did
nothing to signify his intent to retain the property being tilled by Villanoza. It
was only two (2) years after his death that petitioners started to take interest
over it.
Neither was any right of retention exercised within 60 days from the notice of
Comprehensive Agrarian Reform Program coverage. The Court of Appeals
properly considered this as a waiver of the right of retention pursuant to Section
6.1 of Administrative Order No. 02-03.
Section 6.1 provides that the landowner's "[f]ailure to manifest an intention to
exercise his right to retain within sixty (60) calendar days from receipt of notice
of CARP coverage" is a ground for losing his or her right of retention.
The Department of Agrarian Reform sent a notice of Comprehensive Agrarian
Reform Program coverage to GSIS Family Bank, which was then landowner of
the disputed property. Neither GSIS Family Bank nor Sebastian exercised any
right of retention within 60 days from this notice of coverage.
While all agrarian reform programs have always accommodated some forms of
retention for the landowner, all rights of retention have always been subject to
conditions. Unfortunately in this case, the landowner has miserably failed to
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invoke his right at the right time and in the right moment. The farmer
beneficiary should not, in equity, be made to suffer the landowner's negligence.
Finally, the issuance of the title to Villanoza could no longer be revoked or set
aside by Secretary Pangandaman. Acquiring the lot in good faith, Villanoza
registered his Certificate of Land Ownership Award title under the Torrens
system. He was issued a new and regular title, in fee simple; that is to say, it is
an absolute title, without qualification or restriction.
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not guilty of laches, since they were allegedly in possession of the property in
question (Whether or not the respondents were barred by laches.)
RULING: No. An action for reconveyance is a recognized remedy available to a
person whose property has been wrongfully registered under the Torrens System in
the name of another.
The Civil Code provides that an action for the reconveyance of a fraudulently
registered property is 10 years reckoned from the date of the issuance of the
certificate of title. However, where the party seeking reconveyance on the ground of
fraud is in actual, continuous, and peaceful possession of the property involved,
prescription does not run as the action partakes of the nature of a suit for quieting of
title, which is imprescriptible.
Likewise, an action for reconveyance based on a void contract, as in this controversy
where it is alleged that there was no consent on the part of the real owner of the
property, the action does not prescribe.
In the instant controversy therefore, the one-year prescriptive period within which
to file an action for reconveyance does not apply as the respondent spouses were in
actual possession of the property
Also, contrary to petitioners' understanding of the RTC's decision, what vested
ownership in favor of the respondent spouses is not the fact that laches has already
set in. Respondent spouses' right of ownership over the property has been acquired
and vested by virtue of the contract of sale they have executed with the Heirs of
Isidro Loyola on November 16, 1971.
It is settled that the act of registration of a piece of land under the Torrens System is
not a mode of acquiring ownership, as such it does not create or vest title.
A certificate of title is merely an evidence of ownership or title over the particular
property described therein. It cannot be used to protect a usurper from the true
owner; nor can it be used as a shield for the commission of fraud; neither does it
permit one to enrich himself at the expense of others. Its issuance in favor of a
particular person does not foreclose the possibility that the real property may be co-
owned with persons not named in the certificate, or that it may be held in trust for
another person by the registered owner.
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be remembered that the contract is the law between the parties and they are bound
by its stipulations. The CA erred in relying on the pronouncements in Apo because
in the said case, there was no consensual contract between the parties as the
landowner disagreed with the valuation done by the DAR on its property. In sum,
the award of legal interest in cases where the government acquires private property
through voluntary sale is not a matter of law. Unlike in cases where the state
exercises its power of eminent domain or a party initiates expropriation
proceedings and other similar actions, in negotiated sale, there is an existing
contract that governs the relations of the parties and determines their respective
rights and obligations. In tum, these contractual stipulations should be complied
with in good faith, unless they are contrary to law, morals, good customs, public
order or public policies. Hence, the laws relating to contracts should govern in case
of controversy in their application.
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The existence of the partially executed contract to sell between Bibiana and Lilia
was sufficiently established. It is uncontested that Lilia sent money to Bibiana. The
latter did not deny her receipt of the money. Moreover, the records showed that the
parties further agreed for Vedasto and Roilan to occupy the property during the
period when Lilia was remitting money to Bibiana; and that Lilia immediately took
steps to protect her interests in the property once the petitioners started to deny
the existence of the oral contract to sell by annotating her adverse claim on the
petitioners' title and instituting this action against the latter.
Also, in the context of the norms set by jurisprudence for the application of the rule
on admission by silence, Lilia could not be properly held to have admitted by her
silence her lack of interest in the property. On the contrary, the records reveal
otherwise. Upon her return to the country, she communicated with Bibiana on the
terms of payment, and immediately took steps to preserve her interest in the
property by annotating the adverse claim in the land records, and by commencing
this suit against the petitioners. Such affirmative acts definitively belied any claim of
her being silent in the face of the assault to her interest.
The rule on admission by silence applies to adverse statements in writing only when
the party to be thereby bound was carrying on a mutual correspondence with the
declarant. Without such mutual correspondence, the rule is relaxed on the theory
that although the party would have immediately reacted had the statements been
orally made in his presence, such prompt response can generally not be expected if
the party still has to resort to a written reply.
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SPOUSES BELTRAN VS. SPOUSES CANGAYDA
G.R. No. 225033; August 15, 2018
CAGUIOA, J.
CASE DOCTRINES:
• In a contract of sale, title passes to the vendee upon the delivery of the thing sold;
whereas in a contract to sell, by agreement the ownership is reserved in the
vendor and is not to pass until the full payment of the price. In a contract of sale,
the vendor has lost and cannot recover ownership until and unless the contract is
resolved or rescinded; whereas in a contract to sell, title is retained by the vendor
until the full payment of the price.
• Article 1592 extends to the vendee in a sale of immovable property the right to
effect payment even after expiration of the period agreed upon, as long as no
demand for rescission has been made upon him by the vendor.
FACTS:
Sometime in August 1989, respondents verbally agreed to sell the disputed property
to petitioners for P35,000.00. After making an initial payment, petitioners took
possession of the disputed property and built their family home thereon. Petitioners
subsequently made additional payments, which, together with their initial payment,
collectively amounted to P29,690.00.
However, despite respondents' repeated demands, petitioners failed to pay their
remaining balance of P5,310.00. This prompted respondents to refer the matter to
the Office of the Barangay Chairman of Barangay Magugpo, Tagum City (OBC).
Petitioners failed to pay within the period set forth in the Amicable Settlement.
On January 14, 2009, or nearly 17 years after the expiration of petitioners' period to
pay their remaining balance, respondents served upon petitioners a "Last and Final
Demand" to vacate the disputed property within 30 days from notice. This demand
was left unheeded.
Consequently, on March 12, 2009, respondents filed a complaint for recovery of
possession and damages (Complaint) before the RTC. Respondents alleged, among
others, that petitioners had been occupying the disputed property without
authority, and without payment of rental fees.
In their Answer, petitioners admitted that they failed to settle their unpaid balance
of P5,310.00 within the period set in the Amicable Settlement. However, petitioners
alleged that when they later attempted to tender payment two days after said
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Contrary to the CA's findings, neither respondent Loreta's testimony nor clause
6 of the Amicable Settlement supports the conclusion that the parties'
agreement is not contract of sale, but only a contract to sell — the reason being
that it is not evident from said testimony and clause 6 that there was an express
agreement to reserve ownership despite delivery of the disputed property.
A plain reading of respondent Loreta's testimony shows that the parties' oral
agreement constitutes a meeting of the minds as to the sale of the disputed
property and its purchase price. Respondent Loreta's statements do not in any
way suggest that the parties intended to enter into a contract of sale at a later
time. Such statements only pertain to the time at which petitioners expected, or
at least hoped, to acquire the sufficient means to pay the purchase price agreed
upon.
3.) A reading of Article 1592 in conjunction with Article 1191 thus suggests that in
the absence of any stipulation to the contrary, the vendor's failure to pay within
the period agreed upon shall not constitute a breach of faith, so long as payment
is made before the vendor demands for rescission, either judicially, or by
notarial act.
In Taguba v. Peralta, (Taguba) the Court held that slight delay in the payment of
the purchase price does not serve as a sufficient ground for the rescission of a
sale of real property:
Despite the denomination of the deed as a "Deed of Conditional Sale" a reading
of the conditions x x x therein set forth reveals the contrary. Nowhere in the
said contract in question could we find a proviso or stipulation to the effect that
title to the property sold is reserved in the vendor until full payment of the
purchase price. There is also no stipulation giving the vendor (petitioner
Taguba) the right to unilaterally rescind the contract the moment the vendee
(private respondent de Leon) fails to pay within a fixed period x x x.
Considering, therefore, the nature of the transaction between petitioner Taguba
and private respondent, which We affirm and sustain to be a contract of sale,
absolute in nature the applicable provision is Article 1592 of the New Civil Code
x x x.
Here, petitioners acknowledge that they failed to settle the purchase price of the
disputed property in full within the deadline set by the Amicable Settlement.
Nevertheless, the Court does not lose sight of the fact that petitioners have
already paid more than three-fourths of the purchase price agreed upon.
Further, petitioners have constituted their family home on the disputed
property in good faith, and have lived thereon for 17 years without protest.
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amount of which, in addition to the guaranty deposit by the respondent, the amount
in excess should be returned to the respondents.
ISSUE:
Whether the sale with lease agreement the parties entered into was a financial lease
or a loan secured by chattel mortgage; and whether PCILF should pay TMI, by way
of refund, the amount in excess of the guaranty deposit and the proceed of sale?
HELD:
The petition lacks merit.
PCILF contends that the transaction between the parties was a sale and leaseback
financing arrangement where the client sells movable property to a financing
company, which then leases the same back to the client. PCILF insists the
transaction is not financial leasing, which contemplates extension of credit to assist
a buyer in acquiring movable property which the buyer can use and eventually own.
PCILF claims that the sale and leaseback financing arrangement is not contrary to
law, morals, good customs, public order, or public policy. PCILF stresses that the
guaranty deposit should be forfeited in its favor, as provided in the lease agreement.
PCILF points out that this case does not involve mere failure to pay rentals, it deals
with a flagrant violation of the lease agreement.
Respondents counter that from the very beginning, transfer to PCILF of ownership
over the subject equipment was never the intention of the parties. Respondents
claim that under the lease agreement, the guaranty deposit would be forfeited if TMI
returned the leased equipment to PCILF before the expiration of the lease
agreement; thus, since TMI never returned the leased equipment voluntarily, but
through a writ of replevin ordered by the RTC, the guaranty deposit should not be
forfeited. In the present case, since the transaction between PCILF and TMI involved
equipment already owned by TMI, it cannot be considered as one of financial
leasing, as defined by law, but simply a loan secured by the various equipment
owned by TMI.
Therefore, PCILF is hereby ordered to pay respondent Trojan Metal Industries, Inc.,
by way of refund, the excess amount to be computed by the Regional Trial Court
based on the formula specified in the decision, with interest at 12% per annum from
finality of this Decision until fully paid.
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Chartered Bank specifically waived its right to claim for deficiency and to settle fee
case or anything arising from it; that as a successor-in-interest, her right cannot rise
above the rights of Standard Chartered Bank which specifically waived its right to
claim for deficiency of anything arising from it. RTC denied the same. Petitioners
filed for reconsideration but was also denied.
RTC ruled that the respondent is entitled to the monthly rentals of the subject
property which were collected by the petitioners who are shown to have no more
right over the same after the period for them to redeem die subject property had
already lapsed.
The petitioner having no more right to collect the rentals upon the lapse of the
period for them to redeem the property without redeeming the same, which gave
way to the auction sale in the foreclosure proceeding of the subject property
wherein the highest and winning bidder was the herein petitioner Integrated Credit
& Corporate Services (ICCS for brevity). As such highest and winning bidder, the
respondent is entitled to the possession of the subject property and to collect the
subject monthly rentals from the respondents. The essence of a writ of possession is
the right of petitioner to possess the subject property which has been duly
established.
The Compromise Agreement executed by and between the parties in the Makati case
cannot bind the herein petitioner, now by Ms. Carol Aqui as substituting petitioner,
not being a party to the said case.
ISSUE:
Whether or not collection of back rentals can be awarded in an ex parte application
for writ of possession?
HELD:
Yes. In China Banking Corporation v. Spouses Lozada, the Court held that:
In IFC Service Leasing and Acceptance Corporation v. Nera, the Court reasoned that if
under Section 7 of Act No. 3135, as amended, the RTC has the power during the
period of redemption to issue a writ of possession on the ex parte application of the
purchaser, there is no reason why it should not also have the same power after the
expiration of the redemption period, especially where a new title has already been
issued in the name of the purchaser. Hence, the procedure under Section 7 of Act No.
3135, as amended, may be availed of by a purchaser seeking possession of the
foreclosed property he bought at the public auction sale after the redemption period
has expired without redemption having been made.
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annotated in Jorge Vargas Ill's title. The counsel for IVQ said that they were so
annotated. Upon inquiry of the trial court judge, the counsel for IVQ clarified that the
transfers or assignment of rights were done at the time that the subject property
was mortgaged with PNB. The property was then redeemed by IVQ on behalf of
Jorge Vargas III. Petitioner further contends that respondent did not have the
Absolute deed of sale notarized and thus defective.
ISSUE: Whether or not the lack of notarization of the deed of absolute sale between
Barbosa and Vargas is a substantial defect
RULING: The court ruled that the alleged defects in the notarization of the Deed of
Absolute Sale dated September 11, 1970 between Kawilihan Corporation and
Therese Vargas and the Deed of Absolute Sale dated October 4, 1978 between
Therese Vargas and Barbosa are by no means trivial. As the Court stressed in V da.
De Rosales v. Ramos:
“The importance attached to the act of notarization cannot be overemphasized.
Notarization is not an empty, meaningless, routinary act. It is invested with
substantive public interest, such that only those who are qualified or authorized
may act as notaries public. Notarization converts a private document into a public
document thus making that document admissible in evidence without further proof
of its authenticity. A notarial document is by law entitled to full faith and credit upon
its face. Courts, administrative agencies and the public at large must be able to rely
upon the acknowledgment executed by a notary public and appended to a private
instrument.”
x x x x
Furthermore, in Bitte v. Jonas, the Court had occasion to discuss the consequence of
an improperly notarized deed of absolute sale. Thus –
Article 1358 of the New Civil Code requires that the form of a contract transmitting
or extinguishing real rights over immovable property should be in a public
document. x x x.
x x x x
Not having been properly and validly notarized, the deed of sale cannot be
considered a public document. It is an accepted rule, however, that the failure to
observe the proper form does not render the transaction invalid. It has been settled
that a sale of real property, though not consigned in a public instrument or formal
writing is, nevertheless, valid and binding among the parties, for the time-honored
rule is that even a verbal contract of sale or real estate produces legal effects
between the parties.
Accordingly, the party invoking the validity of the deed of absolute sale had the
burden of proving its authenticity and due execution.x x x.
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In the instant case, should the Deeds of Absolute Sale in favor of Therese Vargas and
Barbosa, respectively, be found to be indeed improperly notarized, the trial court
would have erred in admitting the same in evidence without proof of their
authenticity and in relying on the presumption regarding the regularity of their
execution. Barbosa would then have the additional burden of proving the
authenticity and due execution of both deeds before he can invoke their validity in
establishing his claim of ownership. Therefore, IVQ should be allowed to formally
offer in evidence the documents it belatedly submitted to this Court and that
Barbosa should equally be given all the opportunity to refute the same or to submit
controverting evidence.
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the property was an admission against interest that likewise belied the contract to
sell between Lilia and Bibiana.
The contentions of the petitioners are factually and legally unwarranted.
To start with, it was incumbent upon Bibiana to prove her allegation in the answer
that the money sent to her by Lilia was in payment of past debts. This conforms to
the principle that each party must prove her affirmative allegations. Yet, the
petitioners presented nothing to establish the allegation. They ought to be reminded
that allegations could not substitute for evidence. Without proof of the allegation,
therefore, the inference to be properly drawn from Bibiana's receipt of the sums of
money was that the sums of money were for the purchase of the property, as
claimed by the respondents.
Secondly, the admissions by Roilan and Vedasto of the petitioners' ownership of the
property could not be appreciated in favor of the petitioners. That Bibiana and Lilia
had entered into a contract to sell instead of a contract of sale must be well-noted.
The distinctions between these kinds of contracts are settled. In Serrano v. Caguiat,
the Court has explained:
A contract to sell is akin to a conditional sale where the efficacy or obligatory
force of the vendor's obligation to transfer title is subordinated to the
happening of a future and uncertain event, so that if the suspensive condition
does not take place, the parties would stand as if the conditional obligation
had never existed. The suspensive condition is commonly full payment of the
purchase price.
The differences between a contract to sell and a contract of sale are well-settled in
jurisprudence. As early as 1951, in Sing Yee v. Santos, we held that:
x x x [a] distinction must be made between a contract of sale in which title passes
to the buyer upon delivery of the thing sold and a contract to sell x x x where by
agreement the ownership is reserved in the seller and is not to pass until the full
payment, of the purchase price is made. In the first case, non-payment of the price is
a negative resolutory condition; in the second case, full payment is a positive
suspensive condition. Being contraries, their effect in law cannot be identical. In the
first case, the vendor has lost and cannot recover the ownership of the land sold
until and unless the contract of sale is itself resolved and set aside. In the second
case, however, the title remains in the vendor if the vendee does not comply with
the condition precedent of making payment at the time specified in the contract.
In other words, in a contract to sell, ownership is retained by the seller and is not to
pass to the buyer until full payment of the price. x x x
Under the oral contract to sell, the ownership had yet to pass to Lilia, and Bibiana
retained ownership pending the full payment of the purchase price agreed upon.
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Both the PARAD and the DARAB found that Editha only consigned the amount of
₱216,000.00 as redemption price for Lot 2429. As aptly observed in the PARAD's
decision, it was Editha herself who secured a copy of the extrajudicial settlement
and deed of sale from the Clerk of Court of the RTC in Roxas City. The purchase price
stated in the deed of conveyance was ₱600,000.00, and the administrative tribunals
correctly held that absent sufficient evidence to the contrary, it must be accepted
the reasonable price of the land as purchased by the respondents.The full amount of
the redemption price should be consigned m court.
As explained in Quiño v. CA:Only by such means can the buyer become certain that
the offer to redeem is one made seriously and in good faith. A buyer cannot be
expected to entertain an offer of redemption without the attendant evidence that
the redemptioner can, and is willing to accomplish the repurchase immediately. A
different rule would leave the buyer open to harassment by speculators or
crackpots, as well as to unnecessary prolongation of the redemption period,
contrary to the policy of the law in fixing a definite term to avoid prolonged and
anti-economic uncertainty as to ownership of the thing sold. Consignation of the
entire price would remove all controversies as to the redemptioner's ability to pay
at the proper time.The redemption price Editha consigned falls short of the
requirement of the law, leaving the Court with no choice but to rule against her
claim.In fine, there is an abundance of reasons, both procedural and substantive,
which has proved fatal to Editha's cause.
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2. Whether or not the 78,000 can be offset for the accrued rent
HELD:
1. NO. The failure to maintain the lessee in the peaceful and adequate enjoyment
of the property leased does not contemplate all acts of disturbance. Lessees may
suspend the payment of rent under Article 1658 of the Civil Code only if their legal
possession is disrupted.
In this case, the disconnection of electrical service over the leased premises on May
14, 2004 was not just an act of physical disturbance but one that is meant to remove
respondents from the leased premises and disturb their legal possession as lessees.
However, this rule will not apply in the present case because the lease had already
expired when petitioner requested for the temporary disconnection of electrical
service. Petitioner demanded respondents to vacate the premises by May 30, 2004.
Instead of surrendering the premises to petitioner, respondents unlawfully withheld
possession of the property. Respondents continued to stay in the premises until
they moved to their new residence on September 26, 2004. At that point, petitioner
was no longer obligated to maintain respondents in the "peaceful and adequate
enjoyment of the lease for the entire duration of the contract." Therefore,
respondents cannot use the disconnection of electrical service as justification to
suspend the payment of rent.
2. NO. The P78,000.00 initial payment cannot be characterized as advanced rent.
First,
records show that respondents continued to pay monthly rent until February 2004
despite having delivered the P78,000.00 to petitioner on separate dates in 2003.
Second, as observed by the Metropolitan Trial Court, respondents indicated in the
receipt that the P78,000.00 was initial payment or goodwill money. They could have
easily stated in the receipt that the P78,000.00 was advanced rent instead of
denominating it as "initial payment or goodwill money." Respondents even
proposed that the initial payment be used to offset their accrued rent.
In this case, since respondents failed to deliver the purchase price at the end of
2003, the contract to sell was deemed cancelled. The contract's cancellation entitles
petitioner to retain the earnest money given by respondents.
Earnest money, under Article 1482 of the Civil Code, is ordinarily given in a
perfected contract of sale. However, earnest money may also be given in a contract
to sell.
In a contract to sell, earnest money is generally intended to compensate the seller
for the opportunity cost of not looking for any other buyers. It is a show of
commitment on the part of the party who intimates his or her willingness to go
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through with the sale after a specified period or upon compliance with the
conditions stated in the contract to sell.
Earnest money, therefore, is paid for the seller's benefit. It is part of the purchase
price while at the same time proof of commitment by the potential buyer. Absent
proof of a clear agreement to the contrary, it is intended to be forfeited if the sale
does not happen without the seller's fault. The potential buyer bears the burden of
proving that the earnest money was intended other than as part of the purchase
price and to be forfeited if the sale does not occur without the fault of the seller.
Respondents were unable to discharge this burden.
There is no unjust enrichment on the part of the seller should the initial payment be
deemed forfeited. After all, the owner could have found other offers or a better deal.
The earnest money given by respondents is the cost of holding this search in
abeyance.
Respondents Spouses Germil and Rebecca Javier are ordered to pay petitioner
Vanessa N. Racelis the sum of P54,000.00, representing accrued rentals, with
interest at the rate of six percent (6%) per annum from the date of the finality of this
judgment until fully paid.
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RTC ruled that the evidence presented by Mac Graphics initially showed that there
was a breach of the lease contract with respect to the period of its existence, and
that the lease contract was pre-terminated by Makro without giving Mac Graphics a
chance to remedy any violation that Makro alleged to have been committed by Mac
Graphics. SMIC and Prime MetroEstate, Inc. (amended name of Makro) filed their
respective Rule 65 Petitions for Certiorari52 with the CA (CA Petitions) alleging
grave abuse of discretion but the Court of Appeals denied the petitions and affirmed
the RTC Orders, stating that the rule is well-entrenched that the issuance of a WPMI
rests upon the sound discretion of the trial court.
ISSUE
Whether or not the grant of a Writ of Preliminary Mandatory Injunction (WPMI) is
valid
RULING
No. Mac Graphics has failed to establish prima facie a right in esse or a clear and
unmistakable right, rendering the issuance of the WPMI improper. The CA
committed grave error for upholding the grant of the WPMI by the RTC in favor of
Mac Graphics given the patent absence of a clear and unmistakable right of Mac
Graphics and its injury, if any, that is easily quantifiable and reparable.
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The RTC rendered a judgment in favor of Jerome K. Solco ordering Megaworld and
any other person withholding the CCTs to surrender the same to the Register of
Deeds and directed it to issue new CCTs in favor of Solco.
On appeal, the Court of Appeals found merit on Megaworld’s arguments as to the
irregularities which attended the entire delinquency proceedings. The CA found that
Solco failed to present proof of compliance to the applicable provisions of RA 7160.
Thus, the appeal was granted.
ISSUES:
1. Whether or not the Tax Sale subject of this case was valid due to irregularities in
the proceedings?
2. Assuming the Tax Sale was invalid, may Solco be considered as a purchaser in
good faith to uphold the sale of the subject property in his favor?
HELD:
1. No. The Supreme Court had previously held that “The auction sale of land to
satisfy alleged delinquencies in the payment of real estate taxes derogates or
impinges on property rights and due process. Thus, the steps prescribed by law for
the sale, particularly the notices of delinquency and sale, must be followed strictly.
Failure to observe those steps invalidates the sale.”
A careful review of the records of the case would show that the CA correctly ruled
that Solco utterly failed to present evidence to show compliance with the rules on
tax delinquency sale. Clearly, as correctly found by the CA, nothing in the said
evidence presented and formally offered would sufficiently show that the tax sale,
from which Solco’s claim upon the subject property is based, was properly
conducted in accordance with the rules governing the same.
For these reasons, we are constrained to affirm the CA’s ruling, which is to strike
down the tax sale as null and void. We cannot deny that there is insufficiency of
evidence to prove compliance with the mandatory requirements under RA 7160 for
a valid tax delinquency sale.
2. No. In arguing that he was a buyer in good faith, Solco merely relied upon the
presumption of good faith and also averred that he merely relied on the
presumption of regularity of the acts of public officials in the conducts of the tax
sale. However, well-established is the rule that the presumption of regularity in the
performance of a duty enjoyed by public officials, cannot be applied to those
involved in the conduct of a tax sale.
Secondly, good faith is a question of intention, determined by outward acts and
proven conduct. The circumstances of the case restrain us from ruling that Solco
was a buyer in good faith. Records show that the subject property had been in
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Dimaporo’s possession since 1999. This fact has never been refuted by Solco in the
entire proceedings. Settled is the rule that one who purchases a real property which
is in possession of another should at least make some inquiry beyond the face of the
title. A purchaser cannot close his eyes to the facts which should put a reasonable
man upon his guard, and then claim that he acted in good faith under the belief that
there was no defect in the title of the vendor. Admittedly, in this case, Solco never
made any inquiry to such a significant fact.
WHEREFORE, premises considered, the instant petition is DENIED. Accordingly, the
Decision and Resolution of the Court of Appeals are hereby AFFIRMED. In view
hereof, Respondent Megaworld Corporation is ORDERED to deposit with the trial
court the amount to be paid to petitioner Jerome Solco, pursuant to Republic Act No.
7160, as the buyer in the tax delinquency sale adjudged to be null and void in this
case.
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LIM V. PEOPLE
G.R. NO. 226590, APRIL 23, 2018
REYES, JR., J.
DOCTRINE:
Whether the party to the sale of a real property is a natural or a juridical person, as
long as it is entered into by someone other than its registered owner, the written
authority of the party's representative is an explicit requirement to the validity of
the sale itself.
FACTS:
Petitioners Shirley, Mary and Jimmy Lim were charged with falsification of public
document. Information showed that the Lim siblings conspired to falsify a board
resolution of Pentel Merchandising, Co., Inc. by signing the name of their father
Quintin in it, which was then attached to the secretary’s certificate, then notarized.
In truth, Quintin already died three years ago. Through the falsified secretary's
certificate and board resolution, Pentel, Inc., through Jimmy, was able to sell a lot
owned by the corporation to Spouses Emerson and Dorris Lee. The sale was then
registered at the Registry of Deeds, then, a transfer title was issued to the Spouses
Lee. The Regional Trial Court convicted the Lims. On appeal, the Court of Appeals
affirmed the RTC ruling. Hence, the petition.
ISSUE:
Whether or not the falsified board resolution has legal effect on the sale and
registration of the lot
HELD
YES. When the sale of a piece of land, or any interest therein, is made through an
agent (such as Jimmy in this case), the grant of authority must be in writing,
otherwise, the sale itself is void. The grant of power to the agent must also be
expressly stated in clear and unmistakable language; otherwise, only acts of
administration are deemed conferred. As previously mentioned, a corporation
grants authority to its representative through its board of directors, which issues a
board resolution relative to the appointment of an agent. The corporate secretary
then certifies this board resolution under oath, pursuant to Article 1358(1) of the
Civil Code.
Whether the party to the sale of a real property is a natural or a juridical person, as
long as it is entered into by someone other than its registered owner, the written
authority of the party's representative is an explicit requirement to the validity of
the sale itself. While the Register of Deeds is not required to inquire into the
intrinsic validity of the transaction and should, as a matter of course, record the
instrument presented for registration, this ministerial duty is subject to the
condition that all the requisites for registration are present. In the absence of a
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dismissed the case since it was barred by res judicata. Petitioner appealed to the CA.
CA dismissed the appeal. CA observed that during Segundo’s lifetime, he did not take
any act to impugn the validity of the sale or the lease.
ISSUES
Whether the CA erred when it did not rule that petitioner has the better right to
possess the subject parcels of land, and whether the CA erred when it ruled that the
plaintiff’s action has already prescribed.
HELD
Respondent argues that petitioner and her predecessors-in-interest’s inaction for
almost twenty three years from the time of execution of the lease contract in 1972,
and fourteen years in the case of the Deed of Absolute Sale executed in 1981 barred
them from seeking the nullification of the said agreements. Said agreements were
not resolved in the first case which was dismissed allegedly by motion of the
plaintiff heirs. Parenthetically, the SC cannot simply ignore the fact that the second
case, an action for declaration of nullity of Deed of Sale and Quieting of Titles where
the trial court declared the Deed of Absolute Sale executed by Segundo in favor of
Advento as null and void, and removal of cloud, had long attained finality. Such
decision was annotated at the back of the certificates of title. When Ringor
purchased the lands from Advento, and was later purchased by Gonzales and
Cabunas from Ringor, they did not directly deal with the registered owner of the
land. The fact that the lands were not in the name of their sellers should have put
them on guard and should have prompted them to inquire on the status of the
properties being sold to them.
Clearly, Ringor, Gonzales and Cabunas cannot be considered buyers in good faith
because of their failure to exercise due diligence as regards their sale transactions.
While the SC protects the right of the innocent purchaser for value and does not
require him to look beyond the certificate of title, this protection is not extended to a
purchaser who is not dealing with the registered owner of the land. In case the
buyer does not deal with the registered owner of the real property, the law requires
that a higher degree of prudence be exercised by the purchaser. Hence, subsequent
buyers are buyers in bad faith; petitioner has the better right to possess the land.
With regard to prescription, an action to recover possession of a registered land
never prescribes in view of the provision of Section 44 of Act. No. 496 to the effect
that no title to registered land in derogation of that of a registered owner shall be
acquired by prescription or adverse possession. An action by the registered owner
to recover a real property registered under the Torrens System does not prescribe.
The rule on imprescriptibility of registered lands not only applies to the registered
owner but extends to the heirs of the registered owner as well. Petitioner’s right to
recover possession did not prescribe.
Likewise, laches did not bar petitioner’s right of recovery. An action to recover
registered land covered by the Torrens System may not generally be barred by
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Petitioners also raised, for the first time on appeal, that the sale of the disputed
property constitutes a sale on installment covered by Republic Act (R.A.) No. 6552,
otherwise known as the Maceda Law. Corollarily, petitioners argued that
respondents should not be granted relief, since they failed to comply with the
specific procedure for rescission of sales of real estate on installment basis set forth
under the statute.
On October 19, 2015, The CA affirmed the findings of the RTC anent the nature of
the contract entered into by the parties. In addition, it rejected petitioners'
invocation of the Maceda Law. According to the CA, to allow petitioners to seek
protection under said law for the first time on appeal would violate the tenets of due
process and fair play. Petitioners led a Motion for Reconsideration which was later
denied through the assailed Resolution.Thus, the present Petition now prays that
the Court: (i) reverse the judgment of the CA and RTC; and (ii) direct respondents to
allow them to settle their remaining balance of P5,310.00 and, subsequently, convey
the disputed property in their favor.
Petitioners maintain, as they did before the CA, that the oral agreement they entered
into with respondents is a contract of sale, and that, as a necessary incident of such
contract, ownership over the disputed property had been transferred in their favor
when they took possession and built improvements thereon.
ISSUES:
Whether the CA erred when it affirmed the RTC Decision characterizing the oral
agreement between the parties as a contract to sell;
COURT'S RULING:
The Petition is meritorious. The agreement between the parties is an oral contract of
sale. As a consequence, ownership of the disputed property passed to petitioners
upon its delivery. The CA's finding is erroneous. Article 1458 of the Civil Code
defines a contract of sale: By the contract of sale one of the contracting parties
obligates himself to transfer the ownership of and to deliver a determinate thing,
and the other to pay therefor a price certain in money or its equivalent. "[A] contract
to sell, [on the other hand], is defined as a bilateral contract whereby the
prospective seller, while expressly reserving the ownership of the subject property
despite its delivery to the prospective buyer, commits to sell the property
exclusively to the prospective buyer" upon full payment of the purchase price.
Jurisprudence defines the distinctions between a contract of sale and a contract to
sell to be as follows:
In a contract of sale, title passes to the vendee upon the delivery of the thing sold;
whereas in a contract to sell, by agreement the ownership is reserved in the vendor
and is not to pass until the full payment of the price. In a contract of sale, the vendor
has lost and cannot recover ownership until and unless the contract is resolved or
rescinded; whereas in a contract to sell, title is retained by the vendor until the full
payment of the price, x x x.
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The MTCC and CA erred when they concluded that a lease contract is always
necessary to establish a cause of action for an unlawful detainer case.
An action for unlawful detainer pertains to specific circumstances of dispossession.
It refers to a situation where the current occupant's initially lawful possession
became unlawful due to the expiration of the right to possess, which may be sourced
from a contract, express or implied, or by mere tolerance. Thus, a lease contract is
not at all times necessary for a successful unlawful detainer action. An ejectment
complaint based on possession by tolerance of the owner is a category of unlawful
detainer cases, which may also succeed after establishing the key jurisdictional
facts. For an unlawful detainer action to be successful, the plaintiff must allege and
establish the following key jurisdictional facts: (1) initially, possession of property
by the defendant was by contract with, or by tolerance of, the plaintiff; (2)
eventually, such possession became illegal upon notice by the plaintiff to the
defendant of the termination of the latter's right of possession; (3) thereafter, the
defendant remained in possession of the property and deprived the plaintiff of the
enjoyment thereof; and (4) within one year from the last demand on the defendant
to vacate the property, the plaintiff instituted the complaint for ejectment. If
successful, the plaintiff in an unlawful detainer case is entitled to the following
reliefs: (1) restitution of the premises; (2) rental arrears or reasonable
compensation for the use and occupation of the premises; and (3) attorney's fees
and costs.
The finding that Crescini did not have a lease contract with Aspe is incorrect. When
Crescini bought the land and building covered by TCT No. 1521, he was subrogated
to the rights and obligations of Lee as lessor in the 1999 lease over the property as
the latter's successor-in-interest. Thereafter, upon expiration of the lease in 2006,
Aspe's possession and occupation of the property was converted into one by mere
tolerance or permission of Crescini. This was evident in Crescini's letters to Aspe,
allowing the latter to occupy the property with the view that they will eventually
enter into a formal lease contract. Later, this tolerance ceased upon Crescini's
written notice to vacate to Aspe, making Aspe's possession unlawful.
In this case, a declaration on the issue of possession still has practical value. Here,
Crescini asked for three reliefs: (1) restitution of the premises; (2) rental arrears or
reasonable compensation for the use and occupation of the premises; and (3) moral
damages, attorney's fees and costs. We note that the turnover of the possession of
the property rendered only the first relief moot and fait accompli, but the second
and third reliefs remain available. It recognized that while the issue of possession de
facto was rendered moot, there is still value in determining the issues on the
propriety of: (1) reasonable compensation for the use and occupation of the
property for that period; and (2) damages, attorney's fees and costs. Unfortunately,
the MTCC incorrectly ruled that there is no lease contract between Aspe and
Crescini, and that Aspe's possession finds its legitimacy under the invalid lease
contract with Lee.
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compensation for the use and occupation of the subject properties. Indeed, even
when there is no lease agreement between the parties, or even when the parties
occupant and property owner - are strangers as against each other, still the
occupant is liable to pay rent to the property owner by virtue of the forced lease that
is created by the former's use and occupation of the latter's property.
Petition is denied. Therefore, petitioners are ordered to pay PNB at 6% interest per
annum.
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The CA affirmed the findings of the RTC anent the nature of the contract
entered into by the parties. In addition, it rejected petitioners' invocation of the
Maceda Law. According to the CA, to allow petitioners to seek protection under
said law for the first time on appeal would violate the tenets of due process and
fair play.
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ISSUE: Whether the CA erred when it affirmed the RTC Decision characterizing
the oral agreement between the parties as a contract to sell|||
RULING:
The Petition is meritorious. The agreement between the parties is an oral
contract of sale. As a consequence, ownership of the disputed property passed to
petitioners upon its delivery.
The CA's finding is erroneous.
Article 1458 of the Civil Code defines a contract of sale:
By the contract of sale one of the contracting parties obligates
himself to transfer the ownership of and to deliver a determinate
thing, and the other to pay therefor a price certain in money or its
equivalent. "[A] contract to sell, [on the other hand], is defined as a
bilateral contract whereby the prospective seller, while expressly
reserving the ownership of the subject property despite its
delivery to the prospective buyer, commits to sell the property
exclusively to the prospective buyer" upon full payment of the
purchase price.
Jurisprudence defines the distinctions between a contract of sale and a contract
to sell to be as follows:
In a contract of sale, title passes to the vendee upon the delivery of
the thing sold; whereas in a contract to sell, by agreement the
ownership is reserved in the vendor and is not to pass until the full
payment of the price. In a contract of sale, the vendor has lost and
cannot recover ownership until and unless the contract is resolved
or rescinded; whereas in a contract to sell, title is retained by the
vendor until the full payment of the price, x x x. (Emphasis
supplied)
Based on the foregoing distinctions, the Court finds, and so holds, that the
oral agreement entered into by the parties constitutes a contract of sale and not
a contract to sell.
A plain reading of respondent Loreta's testimony shows that the parties'
oral agreement constitutes a meeting of the minds as to the sale of the disputed
property and its purchase price. Respondent Loreta's statements do not in any
way suggest that the parties intended to enter into a contract of sale at a later
time. Such statements only pertain to the time at which petitioners expected, or
at least hoped, to acquire the sufficient means to pay the purchase price agreed
upon. In a contract of sale, ownership of a thing sold shall pass to the buyer upon
actual or constructive delivery thereof in the absence of any stipulation to the
contrary. Reference to Articles 1477 and 1478 of the Civil Code is in order.
Ownership of the disputed property passed to petitioners when its possession
was transferred in their favor, as no reservation to the contrary had been made.
In a contract of sale, the vendor's failure to pay the price agreed upon generally
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constitutes breach, and extends to the vendor the right to demand the contract's
fulfillment or rescission.
Petitioners acknowledge that they failed to settle the purchase price of
the disputed property in full within the deadline set by the Amicable Settlement.
Nevertheless, the Court does not lose sight of the fact that petitioners have
already paid more than three-fourths of the purchase price agreed upon.
Further, petitioners have constituted their family home on the disputed property
in good faith, and have lived thereon for 17 years without protest.
In addition, respondents do not dispute that petitioners offered to settle
their outstanding balance of P5,310.00 "two (2) days after the deadline [set by
the Amicable Settlement] and a few times thereafter," which offers respondents
refused to accept. Respondents also do not claim to have made a demand for
rescission at any time before petitioners made such offers to pay, either through
judicial or extra-judicial means, such as through a notarial act.
Respondents' Complaint was filed 17 years after the expiration of the
payment period stipulated in the Amicable Settlement. Assuming that
petitioners' failure to pay within said period constitutes sufficient breach which
gives rise to a cause of action, such action has clearly prescribed.
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UCPB V SPS UY
GR 204039, JANUARY 10, 2018
MARTIRES, J.
CASE DOCTRINE: Assignment of credit - an agreement by virtue of which the owner
of a credit, known as the assignor, by a legal cause - such as sale, dation in payment
or exchange or donation - and without need of the debtor's consent, transfers that
credit and its accessory rights to another, known as the assignee, who acquires the
power to enforce it to the same extent as the assignor could have enforced it against
the debtor. In every case, the obligations between assignor and assignee will depend
upon the judicial relation which is the basis of the assignment. An assignment will
be construed in accordance with the rules of construction governing contracts
generally, the primary object being always to ascertain and carry out the intention
of the parties. This intention is to be derived from a consideration of the whole
instrument, all parts of which should be given effect, and is to be sought in the
words and language employed.
FACTS: Prime Town Property Group, Inc. (PPGI) and E. Ganzon Inc. were the
joint developers of the Kiener Hills Mactan Condominium Project. Sps Uy bought a
unit in Kiener Hills from PPGI amounting to ₱1, 151,718. 7 5 to be payed in
installments. On 23 April 1998, PPGI and petitioner UCPB executed the following:
Memorandum of Agreement (MOA), and Sale of Receivables and Assignment of
Rights and Interests. By virtue of the said agreements, PPGI transferred the right to
collect the receivables of the buyers, which included respondents, of units in Kiener
Hills. The parties entered into the said agreement as PPGI's partial settlement of its
loan with UCPB. PPGI failed to complete the construction and development of Kiener
Hills Mactan Condominium Project. Sps Uy filed a complaint in HLURB for sum of
money and damages against PPGI and UCPB. They claimed that in spite of their full
payment of the purchase price, PPGI failed to complete the construction of their
units. HLURB ruled that Sps Uy are entitled for reimbursement and that UCPB is
solidarily liable with PPGI based on their Memorandum of agreement. On appeal CA
ruled that UCPB is not solidarily liable with PPGI, and as such cannot be held liable
for the full satisfaction of respondents' payments. It limited UCPB's liability to the
amount respondents have paid upon the former's assumption as the party entitled
to receive payments when the MOA was made between UCPB and PPGI.
ISSUE; WON under the Memorandum of Agreement UCPB assumed the liabilities
and obligations of PPGI under its contract to sell with Spouses Uy.
RULING: No, UCPB did not assume the liabilities and obligations of PPGI. An
assignment of credit has been defined as an agreement by virtue of which the owner
of a credit, known as the assignor, by a legal cause - such as sale, dation in payment
or exchange or donation - and without need of the debtor's consent, transfers that
credit and its accessory rights to another, known as the assignee, who acquires the
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power to enforce it to the same extent as the assignor could have enforced it against
the debtor. In every case, the obligations between assignor and assignee will depend
upon the judicial relation which is the basis of the assignment. An assignment will
be construed in accordance with the rules of construction governing contracts
generally, the primary object being always to ascertain and carry out the intention
of the parties. This intention is to be derived from a consideration of the whole
instrument, all parts of which should be given effect, and is to be sought in the
words and language employed.
The Agreement conveys the straightforward intention of Primetown to "sell,
assign, transfer, convey and set over" to UCPB the receivables, rights, titles, interests
and participation over the units covered by the contracts to sell. It explicitly
excluded any and all liabilities and obligations, which Primetown assumed
under the contracts to sell. The intention to exclude Primetown's liabilities
and obligations is further shown by Primetown's subsequent letters to the
buyers, which stated that "this payment arrangement shall in no way cause
any amendment of the other terms and conditions, nor the cancellation of the
Contract to Sell you have executed with [Primetown]."
While respondents alleged that they had paid in full the purchase price of the
condominium units, only ₱157,757.82 was sufficiently substantiated to have been
actually received by UCPB. Thus, UCPB should only be held liable for ₱157,757.82
because it was the only amount which was unequivocally shown it had received.
This is especially true considering that one who pleads payment has the burden of
proving the fact of payment.30
Thus, it was incumbent upon respondents to prove the actual amount UCPB had
unquestionably received.
WHEREFORE, the 23 May 2012 Decision of the Court of Appeals m CA-G.R. SP No.
118534 is AFFIRMED with MODIFICATION. Petitioner United Coconut Planters
Bank shall pay the amount of ₱157,757.82 to Spouses Walter and Lily Uy, with legal
interest at six percent (6%) per annum, without prejudice to any action which the
parties may have against Prime Town Property Group, Inc.
SO ORDERED.
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sale. By the terms of the original agreement, Tomas clearly retained his title to and
ownership of the subject properties, only with the undertaking that he "shall sell,
cede, convey and transfer" unto NMVAI the subject properties upon the payment of
the agreed consideration. There was no immediate transfer or conveyance of the
lots subject of the agreement. "[I]n a contract to sell, the prospective seller agrees to
transfer ownership of the property to the buyer upon the happening of an event,
which normally is the full payment of the purchase price." These were the same
conditions indicated in the parties' Contract and the Amended Contract/Agreement
that extended it until April 30, 1993. Clearly, upon the lapse of the agreed period,
Tomas was relieved of the obligation to sell, cede and transfer the lots considering
that NMVAI failed to pay the purchase price.
The Court underscores the inapplicability of the provisions on rescission, and the
requirements for the validity thereof, in contracts to sell. When Tomas sent to
NMVAI the notices of cancellation, he did not seek the Contract's rescission but an
enforcement of an express stipulation that limited the agreement's effectivity.
The remedy of rescission is not available in contracts to sell. As explained in
Spouses Santos v. Court of Appeals:
x x x In a contract to sell, x x x the vendor remains the owner for as long as the
vendee has not complied fully with the condition of paying the purchase price. If the
vendor should eject the vendee for failure to meet the condition precedent, he
is enforcing the contract and not rescinding it. x x x As petitioners correctly point
out, the [CA] erred when it ruled that petitioners should have judicially rescinded
the contract pursuant to Articles 1592 and 1191 of the Civil Code. Article 1592
speaks of non-payment of the purchase price as a resolutory condition. It does not
apply to a contract to sell. As to Article 1191, it is subordinated to the provisions of
Article 1592 when applied to sales of immovable property. Neither provision is
applicable in the present case.
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1. No. There are various provisions under the NCC that apply to rescissions of
contracts. 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. 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. The
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2. Yes, it is valid. On this matter, the Court refers to the outcome of a separate
petition for the registration of the deed of assignment and cancellation of TCT Nos.
T-3538 and T-240p that was filed by respondent. The ruling in Cad. Case No. 51
resulted in an acknowledgment of respondent’s rights over the property, his interest
in the court action and entitlement to monthly rentals from petitioner. New TCTs
were· issued by virtue of the decision. When later called upon to rule on the petition
for rescission of lease, the RTC then correctly rejected petitioner’s claim against the
agreement's legality, as it cited the prohibition against a collateral attack on the land
titles. By being the assignee under the deed, respondent obtained the rights,
interests and privileges of his predecessors-in-interest over the property, including
the right to seek the rescission of the agreement, should valid grounds exist to
support it. Moreover, Section 48 of Presidential Decree No. 1529, otherwise known
as the Property Registration Decree, provides that "[a] certificate of title shall not be
subject to collateral attack. It cannot be altered, modified, or cancelled except in a
direct proceeding in accordance with law."
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FACTS: On November 24, 1969, the Ballado Spouses entered into Contract nos. 5
and 6 with owner and developer St. joseph Realty, Ltd to buy on installment parcels
of land, which were designated as Lot Nos. 1 and 2.
The Ballado Spouses initially paid a total of P500.00 for the lots, and had to pay
P107.13 and P97.15 per month for Lot Nos. 1 and 2, respectively, both for 180
months starting on December 30, 1969.|||
St. Joseph Realty characterized the contracts as contracts to sell and provided for
automatic rescission and cancellation.
The Ballado Spouses amortized until 1979 when Crisanto Pinili (Pinili), St. Joseph
Realty's collector, refused to receive their payments. They erected a small house
made of light materials for their caretaker. Pinili informed them that it was an
eyesore and was against the rules of the subdivision. He advised to suspend the
payment for the lots, and directed the Ballado Spouses to remove the small house
before payments could continue. He also promised to return and collect after he had
put their records in order, but he never did. Francisco informed St. Joseph Realty
that the small house had already been taken down, but Pinili still did not come to
collect
Later on, the Ballado Spouses discovered that St. Joseph Realty rescinded their
contracts.|||They found out that St. Joseph Realty had sent written demands to pay
to the address of Lot Nos. 1 and 2, and not to their residence as declared in the
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contracts. They were only able to receive the last letter dated December 31, 1986 in
January 1987 as it had their home address handwritten beside the typewritten
address of the lots.
Meanwhile, on February 9, 1987, St. Joseph Realty sold Lot Nos. 1 and 2 to Epifanio
Amoguis, father of Gregorio Amoguis (Gregorio) and Tito Amoguis (Tito)
(collectively, the Amoguis Brothers). The Amoguis Brothers then occupied the lots
and titles were issued in the Amoguis Brothers' names.
Francisco Ballado confronted the Amoguis Brothers when he saw that the barbed
fences, which he had installed around the lots, were taken down. Epifanio told him
that he bought the lots from St. Joseph Realty. Thereafter, the Amoguis Brothers
took down Francisco's mango and chico trees.||| Compelling private respondents to
file a case to court.
ISSUE: Whether or not petitioners Gregorio Amoguis and Tito Amoguis are buyers
in good faith and have preferential right to Lot Nos. 1 and 2.
RULING: No. A buyer in good faith is one who purchases and pays fair price for a
property without notice that another has an interest over or right to it. If a land is
registered and is covered by a certificate of title, any person may rely on the
correctness of the certificate of title, and he or she is not obliged to go beyond the
four (4) corners of the certificate to determine the condition of the property.||| This
rule does not apply, however, when the party has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such inquiry or
when the purchaser has knowledge of a defect or the lack of title in his vendor or of
sufficient facts to induce a reasonably prudent man to inquire into the status of the
title of the property in litigation.
It is incumbent upon a buyer to prove good faith should he or she assert this status.
This burden cannot be discharged by merely invoking the legal presumption of good
faith.|||
This Court rules that based on the evidence on record, petitioners failed to discharge
this burden. Though they were informed by Francisco on his claim to the properties
only after their purchase, it is undisputed from the records that mango and chico
trees were planted on the properties, and that they were cordoned off by barbed
wires.
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Atty. Reyes G. Geromo, Florencio Buentipo, Jr., Ernaldo Yambot and Lydia
Bustamante, petitioners Vs. La Paz Housing and Development Corporation and
Government Service Insurance System, respondents
G.R. No. 211175, January 18, 2017
J. Mendoza
CASE DOCTRINE: 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.
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
FACTS: Atty. Geromo, Bustamante and Yambot started occupying their respective
residential units from Adelina 1−A subdivision in San Pedro, Laguna from La Paz,
through GSIS financing. The properties were all situated along the old Litlit
Creek. After more than two (2) years of occupation, cracks started to appear on the
floor and walls on their houses. The petitioners requested La Paz, being the
owner/developer to take remedial action. They collectively decided to construct a
riprap/retaining wall in which La Paz contributed p3,000 for each but petitioners
claimed that despite of this retaining wall, the condition of their housing units
worsened as the years passed. La Paz alleged that the structural defects could have
been caused by the 1990 earthquake. Year 1998, the petitioners decided to leave
their housing units.
On May 2002, the DENR found that there was “differential settlement of the area
where the affected units were constructed”. On the basis thereof, Atty. Geromo filed
a complaint for breach of contract with damages against La Paz and GSIS before
Housing and Land Regulatory Board (HLURB) on May 3, 2003, Buentipo, Yambot
and Bustamante filed a similar complaint against La Paz and GSIS. They asserted
that La Paz was liable for implied warranty against hidden defects and it was
negligent in building their houses on unstable land. La Paz averred that it had
secured the necessary permits and licenses for the subdivision project. The GSIS
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moved for the dismissal of the complaint for its only participation in the transaction
was to grant loans to the petitioners for the purchase of their respective properties.
ISSUE: Whether La Paz should be held liable for the structural defects on its implied
warranty against hidden defects
RULING: Yes. After a judicious review of the records of this case, the Court finds
merit in the petition.
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.
(Emphasis supplied)
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.
Furthermore, on June 11, 2002, HLURB Director Belen G. Ceniza, after confirming
the cracks on the walls and floors of their houses, requested MGB-DENR and the
Office of the Municipal Mayor to conduct a geological/geohazard assessment and
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FACTS:
Racelis administers her deceased father’s estate. Among the properties is a
residential house in Marikina City which she was tasked to sell. Spouses Javier
offered to buy the property, but asked to be given time to come up with the
purchase amount of Php 3.5 million. In the meantime, the parties agreed to enter
into month-to-month lease for Php 10,000 per month. After a year of such
arrangement, Racelis asked the spouses if they were still interested to buy the
property. To reiterate their interest, the spouses promised to advance Php100,000
of the purchase price but tendered only a total of Php 78,000 in irregular
installment. Meanwhile, the spouses continued leasing the property until they fall
behind in their dues. Realizing that the spouses had no genuine intention of buying
the property, Racelis terminated the lease and demanded that the spouses vacate
the property by May 30, 2004. The spouses continued to occupy the property
beyond the given date, and refused to pay rent which prompted Racelis to have the
power and water supply disconnected. She instituted an ejectment case with a
demand that the Javier spouses pay the unpaid rent. She also forfeited the Php
78,000 earnest money.
The spouses on the other hand insisted that the earnest money they earlier
tendered must be set-off from the unpaid rent, the amount being advance rental;
that they were only liable for the unpaid rents until May 30, 2004 since Racelis
failed to maintain for them the peaceful and adequate enjoyment of the property by
cutting the power and water supply lines that justified their refusal to pay rent.
ISSUE:
1. Whether the Php78,000 tendered be properly treated as earnest money
or advance rental payment?
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2. Whether the cutting of the power and water supply lines an act of
disturbance which gave the spouses Javier the right to postpone
payment as may be properly invoked in Article 1658 of the Civil Code.
RULING:
1. The amount tendered is earnest money.
Earnest money, under Article 1482 of the Civil Code is ordinarily given in a
perfected contract of sale.However, earnest money may also be given in a contract
to sell. In a contract to sell, earnest money is generally intended to compensate the
seller for the opportunity cost--"the cost of the foregone alternative.” The seller
reserves the property for a potential buyer and foregoes the alternative of searching
for other offers which may even be more lucrative. It is a show of commitment on
the part of the party who intimates his or her willingness to go through with the sale
after a specified period or upon compliance with the conditions stated in the
contract to sell. Absent proof of a clear agreement to the contrary, it is intended to
be forfeited if the sale does not happen without the seller's fault. Raceli’s act of
forfeiture is therefore proper.
2. The disconnection was not just an act of physical disturbance but one that is
meant to remove respondents from the leased premises and disturb their legal
possession as lessees.
Ordinarily, this would have entitled respondents to invoke the right accorded by
Article 1658. However, this rule will not apply in the present case because the lease
had already expired on May 30, 2004. The spouses unlawfully withheld possession
of the property and Racelis was no longer obligated to maintain them in the
"peaceful and adequate enjoyment of the lease. Therefore, respondents cannot use
the disconnection of electrical service as justification to suspend the payment of
rent.
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PHILIPPINE STEEL COATING CORP. vs EDUARD QUINONES
GR NO. 194533, APRIL 19, 2017
PONENTE: SERENO, CJ;
CASE DOCTRINE:
Art. 1546, NCC: Any affirmation of fact or any promise by the seller relating to the
thing is an express warranty if the natural tendency of such affirmation or promise
is to induce the buyer to purchase the same, and if the buyer purchases the thing
relying thereon. No affirmation of the value of the thing, nor any statement
purporting to be a statement of the seller's opinion only, shall be construed as a
warranty, unless the seller made such affirmation or statement as an expert and it
was relied upon by the buyer.
In case of breach of warranty, the applicable prescription period is therefore that
which is specified in the contract; in its absence, that period shall be based on the
general rule on the rescission of contracts: four years.
ART. 1599, NCC
Where there is a breach of warranty by the seller, the buyer may, at his election:
(l) Accept or keep the goods and set up against the seller, the breach of warranty by
way of recoupment in diminution or extinction of the price;
(2) Accept or keep the goods and maintain an action against the seller for damages
for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action against the seller for damages
for the breach of warranty;
(4) Rescind the contract of sale and refuse to receive the goods or if the goods have
already been received, return them or offer to return them to the seller and recover
the price or any part thereof which has been paid.
When the buyer has claimed and been granted a remedy in anyone of these ways, no
other remedy can thereafter be granted, without prejudice to the provisions of the
second paragraph of article 1191.
Where the goods have been delivered to the buyer, he cannot rescind the sale if he
knew of the breach of warranty when he accepted the goods without protest, or if he
fails to notify the seller within a reasonable time of the election to rescind, or if he
fails to return or to offer to return the goods to the seller in substantially as good
condition as they were in at the time the ownership was transferred to the buyer.
But if deterioration or injury of the goods is due to the breach or warranty, such
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deterioration or injury shall not prevent the buyer from returning or offering to
return the goods to the seller and rescinding the sale.
Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to
be liable for the price upon returning or offering to return the goods. If the price or
any part thereof has already been paid, the seller shall be liable to repay so much
thereof as has been paid, concurrently with the return of the goods, or immediately
after an offer to return the goods in exchange for repayment of the price.
Where the buyer is entitled to rescind the sale and elects to do so, if the seller
refuses to accept an offer of the buyer to return the goods, the buyer shall thereafter
be deemed to hold the goods as bailee for the seller, but subject to a lien to secure
the payment of any portion of the price which has been paid, and with the remedies
for the enforcement of such lien allowed to an unpaid seller by article 1526.
(5) In the case of breach of warranty of quality, such loss, in the absence of special
circumstances showing proximate damage of a greater amount, is the difference
between the value of the goods at the time of delivery to the buyer and the value
they would have had if they had answered to the warranty.
FACTS:
Richard Lopez, a sales engineer of PhilSteel, offered Quinones (owner of Amianan
Motors) their new product: primer-coated, long-span, rolled galvanized iron (G.I.)
sheets. The latter showed interest, but asked Lopez if the primer-coated sheets were
compatible with the Guilder acrylic paint process used by Amianan Motors in the
finishing of its assembled buses. Uncertain, Lopez referred the query to his
immediate superior, Ferdinand Angbengco, PhilSteel's sales manager.
Angbengco assured Quinones that the quality of their new product was superior to
that of the non-primer coated G.l. sheets being used by the latter in his business.
Quinones expressed reservations, as the new product might not be compatible with
the paint process used by Amianan Motors.
Angbengco further guaranteed that a laboratory test had in fact been conducted by
PhilSteel, and that the results proved that the two products were compatible; hence,
Quinones was induced to purchase the product and use it in the manufacture of bus
units.
However, sometime later, Quinones received several complaints from customers
who had bought bus units, claiming that the paint or finish used on the purchased
vehicles was breaking and peeling off. Quinones then sent a letter-complaint to
PhilSteel invoking the warranties given by the latter. According to respondent, the
damage to the vehicles was attributable to the hidden defects of the primer-coated
sheets and/or their incompatibility with the Guilder acrylic paint process used by
Amianan Motors, contrary to the prior evaluations and assurances of PhilSteel.
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Because of the barrage of complaints, Quinones was forced to repair the damaged
buses.
Thus the present complaint for damages filed by respondent Quinones against
petitioner PhilSteel.
PhilSteel counters that Quinones himself offered to purchase the subject product
directly from the former without being induced by any of PhilSteel's
representatives. According to its own investigation, PhilSteel discovered that the
breaking and peeling off of the paint was caused by the erroneous painting
application done by Quinones.
Both the RTC and the CA ruled in Quinones' favor and found that the assurance
made by Angbengco constituted an express warranty under Article 1546 of the Civil
Code.
ISSUES:
1. Whether Angbengco's statements were mere vague oral statements made by
seller on the characteristics of a generic good
2. Whether general warranties on the suitability of products sold prescribe in six (6)
months under Article 1571 of the Civil Code;
3. Whether non-payment of price is justified on allegations of breach of warranty.
RULING:
1. NO, ANGBENGCO's STATEMENTS ARE CONSIDERED AS AN EXPRESS WARRANTY
Art. 1546 of the New Civil Code provides that:
Any affirmation of fact or any promise by the seller relating to the thing is an
express warranty if the natural tendency of such affirmation or promise is to induce
the buyer to purchase the same, and if the buyer purchases the thing relying
thereon. No affirmation of the value of the thing, nor any statement purporting to be
a statement of the seller's opinion only, shall be construed as a warranty, unless the
seller made such affirmation or statement as an expert and it was relied upon by the
buyer.
As held in Carrascoso, Jr. v. CA, the following requisites must be established in order
to prove that there is an express warranty in a contract of sale: (1) the express
warranty must be an affirmation of fact or any promise by the seller relating to the
subject matter of the sale; (2) the natural effect of the affirmation or promise is to
induce the buyer to purchase the thing; and (3) the buyer purchases the thing
relying on that affirmation or promise.
Contrary to the assertions of petitioner, the finding of the CA was that the former,
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through Angbengco, did not simply make vague oral statements on purported
warranties. Petitioner expressly represented to respondent that the primer-coated
G.I. sheets were compatible with the acrylic paint process used by the latter on his
bus units. This representation was made in the face of respondent's express
concerns regarding incompatibility. Petitioner also claimed that the use of their
product by Quinones would cut costs. Angbengco was so certain of the compatibility
that he suggested to respondent to assemble a bus using the primer-coated sheet
and have it painted with the acrylic paint used in Amianan Motors.
Quinones had reservations about the compatibility of his acrylic paint primer with
the primer-coated G.I. sheets of PhilSteel. Only after several meetings was Quinones
persuaded to buy their G.I. sheets. Later, he placed an initial order for petitioner's
product and, following Angbengco's instructions, had a bus painted with acrylic
paint. The results of the painting test turned out to be successful. Satisfied with the
initial success of that test, respondent made subsequent orders of the primer-coated
product and used it in Amianan Motors' mass production of bus bodies.
Taken together, the oral statements of Angbengco created an express warranty.
They were positive affirmations of fact that the buyer relied on, and that induced
him to buy petitioner's primer-coated G.I. sheets.
Also, petitioner was an expert in the eyes of the buyer Quinones. Former employee,
Lopez, testified that he had to refer Quinones to the former's immediate supervisor,
Angbengco, to answer that question. As the sales manager of PhilSteel, Angbengco
made repeated assurances and affirmations and even invoked laboratory tests that
showed compatibility. In the eyes of the buyer Quinones, PhilSteel - through its
representative, Angbengco - was an expert whose word could be relied upon.
The so-called dealer's or trader's talk cannot be treated as mere exaggeration in
trade as defined in Article 1340 of the Civil Code. Quinones did not talk to an
ordinary sales clerk such as can be found in a department store or even a sari-sari
store. If Lopez, a sales agent, had made the assertions of Angbengco without true
knowledge about the compatibility or the authority to warrant it, then his would be
considered dealer's talk. But sensing that a person of greater competence and
knowledge of the product had to answer Quinones' concerns, Lopez wisely deferred
to his boss, Angbengco. Angbengco undisputedly assured Quinones that laboratory
tests had been undertaken, and that those tests showed that the acrylic paint used
by Quinones was compatible with the primer-coated G.I. sheets of Philsteel. Thus,
Angbengco was no longer giving a mere seller's opinion or making an exaggeration
in trade. Rather, he was making it appear to Quinones that Phil Steel had already
subjected the latter's primed G.I. sheets to product testing.
2. THIS IS A CASE OF A BREACH OF EXPRESS WARRANTY.
The applicable prescription period is therefore that which is specified in the
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contract; in its absence, that period shall be based on the general rule on the
rescission of contracts: four years.
3. YES, NON-PAYMENT OF THE PURCHASE PRICE MAY BE JUSTIFIED IN CASE OF
BREACH OF WARRANTY.
ART. 1599 of the NCC provides:
Where there is a breach of warranty by the seller, the buyer may, at his election:
(l) Accept or keep the goods and set up against the seller, the breach of warranty by
way of recoupment in diminution or extinction of the price;
(2) Accept or keep the goods and maintain an action against the seller for damages
for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action against the seller for damages
for the breach of warranty;
(4) Rescind the contract of sale and refuse to receive the goods or if the goods have
already been received, return them or offer to return them to the seller and recover
the price or any part thereof which has been paid.
When the buyer has claimed and been granted a remedy in anyone of these ways, no
other remedy can thereafter be granted, without prejudice to the provisions of the
second paragraph of article 1191.
Where the goods have been delivered to the buyer, he cannot rescind the sale if he
knew of the breach of warranty when he accepted the goods without protest, or if he
fails to notify the seller within a reasonable time of the election to rescind, or if he
fails to return or to offer to return the goods to the seller in substantially as good
condition as they were in at the time the ownership was transferred to the buyer.
But if deterioration or injury of the goods is due to the breach or warranty, such
deterioration or injury shall not prevent the buyer from returning or offering to
return the goods to the seller and rescinding the sale.
Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to
be liable for the price upon returning or offering to return the goods. If the price or
any part thereof has already been paid, the seller shall be liable to repay so much
thereof as has been paid, concurrently with the return of the goods, or immediately
after an offer to return the goods in exchange for repayment of the price.
Where the buyer is entitled to rescind the sale and elects to do so, if the seller
refuses to accept an offer of the buyer to return the goods, the buyer shall thereafter
be deemed to hold the goods as bailee for the seller, but subject to a lien to secure
the payment of any portion of the price which has been paid, and with the remedies
for the enforcement of such lien allowed to an unpaid seller by article 1526.
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(5) In the case of breach of warranty of quality, such loss, in the absence of special
circumstances showing proximate damage of a greater amount, is the difference
between the value of the goods at the time of delivery to the buyer and the value
they would have had if they had answered to the warranty.
The nonpayment of the balance cannot be premised on a mere allegation of
nonexisting warranties. This Court has consistently ruled that whenever a breach of
warranty is not proven, buyers who refuse to pay the purchase price - or even the
unpaid balance of the goods they ordered - must be held liable therefor.
However, we uphold the finding of both the CA and the RTC that petitioner's breach
of warranty was proven by respondent.
Since what was proven was express warranty, the remedy for implied warranties
under Article 1567 of the Civil Code does not apply to the instant case.
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MARIBELLE Z. NERI, petitioner, vs. RYAN ROY YU, respondent. G.R. No. 231111.
October 17, 2018
PERALTA, J.
DOCTRINE:
It is clear from the testimonies that Yu's group, of whom only Lao is known to Neri,
directly went to her and transacted directly with her for the purchase of their
respective Toyota vehicles, and she was the one who ordered these vehicles for
them online. Add this to the undisputed fact that Neri received their payments in her
bank account and issued an acknowledgment receipt without qualification that such
acknowledgment of payment was only for Insoy. The conclusion becomes
inescapable that Neri transacted as a seller, not as a mere conduit or middleman or
agent.
FACTS:
Yu filed a Complaint before the Regional Trial Court (RTC), for "Sum of Money,
Damages, Attorney's Fees, Etc." against Maribelle Z. Neri and Bridgette "Gigi" Insoy
(Insoy) to recover his payment of PHP 1,200,000.00 for the purchase of a Toyota
Grandia. Yu and his friends went on a leisure trip to Cebu City on June 24, 2007 and
checked out an SUV at a Toyota yard. At said yard, petitioner introduced
respondent's group to Insoy, petitioner's supposed business partner in Cebu.
Thereafter, respondent's group was shown different models of Toyota vehicles that
the two women claimed they were authorized to sell. Since the Toyota Prado that
Matalam wanted to see was not there and he was not interested in other vehicles,
the group left the yard. Petitioner joined respondent's group for lunch at Café
Laguna in the Ayala Mall, during which, she convinced respondent and Lao to
consider buying Toyota vehicles from her, saying they can get a big discount if they
buy from her as a group, because it would be considered a bulk purchase.
Respondent further alleged that while preparing for their trip to Davao City later
that same day, petitioner convinced and accompanied them back to the Toyota yard
for a second look at the vehicles there. Respondent test-drove a Toyota Grandia
which petitioner claimed that she can sell to him at a discounted price of P1.2
Million under bulk purchase as Lao and Matalam already committed to purchase
their respective Toyota vehicles from her. Petitioner assured respondent that her
transaction is legitimate and aboveboard, and that she can immediately cause the
delivery of the vehicle within a week after her receipt of the payment. Petitioner
then gave respondent her personal bank account number for fund transfer in case
he decides to proceed with the sales transaction. Yu's group returned to Davao City
convinced by petitioner's representations. On June 26, 2007, respondent alleged
that he transferred the amount of P1.2 Million from his Account (No. 1187097203)
in Equitable PCI Bank (EPCIB) to petitioner's Account (No. 0254022012) in said
bank. Thereafter, respondent went to see and inform petitioner of the fund transfer
and after the bank's confirmation of the same, she issued respondent a receipt
acknowledging payment for a Toyota Super Grandia. Petitioner then assured
respondent that the vehicle will be delivered after a week. However, a week after,
petitioner told respondent that the delivery of his vehicle will be delayed without
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giving any reason and she asked for a week's extension. After several extensions and
despite repeated demands, no vehicle was delivered to respondent and petitioner
started avoiding him and ignoring his calls. Consequently, respondent sought legal
counsel and a demand letter was sent to petitioner. Instead of complying with her
commitment, the latter denied any liability and passed on the blame to Insoy saying
that respondent directly transacted with the latter. Thus, respondent filed a
complaint with the RTC.
The RTC ruled in favor of respondent Yu awarding him P1,200,000.00 as actual
damages for reimbursement of the amount paid, moral damages, exemplary
damages, attorney’s fees and costs of the suit. Petitioner elevated the case to the CA,
and the CA partially granted petitioner's appeal awarding him the same amount as
actual damages and deleting awards of moral and exemplary damages, as well as
attorney's fees.
ISSUE:
WON the petitioner is engaged in the business of selling cars and that respondent's
group directly transacted with her for the purchase of their vehicle
HELD:
YES. It is clear from the testimonies that Yu's group, of whom only Lao is known to
Neri, directly went to her and transacted directly with her for the purchase of their
respective Toyota vehicles, and she was the one who ordered these vehicles for
them online. Add this to the undisputed fact that Neri received their payments in her
bank account and issued an acknowledgment receipt without qualification that such
acknowledgment of payment was only for Insoy. The conclusion becomes
inescapable that Neri transacted as a seller, not as a mere conduit or middleman or
agent.
It is apparent that the participation of Neri here cannot be discounted as merely
accommodating Yu because in the first place Yu had no intention to buy the subject
vehicle when he visited Cebu. It was through the sales talk of Neri plus the discount
that she gave to YU and his group that Yu was enticed to purchase the subject
vehicle. In this regard, how can Neri offer such discounts if she were not the seller?
The testimonies of Yu's witnesses point to Neri as representing herself as a seller. Yu
and Hsipin Liu never spoke to Insoy. In fact, when the two Avanzas ordered by
Hsipin Liu (known as Steven Lao) were not delivered a week after payments were
made to them, Hsipin Liu talked to Neri regarding the status of the vehicles
purchased. Neri did not reveal the cause of the delay and merely requested for an
extension of another week. Neri gave assurance that she paid for the units which
Lao ordered. Why would Neri go to all these trouble if she has absolutely no
obligation as a seller?
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WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of
Court, dated March 8, 2017, of petitioner Maribelle Z. Neri is DENIED for lack of
merit. Consequently, the Decision dated August 19, 2016 and the Resolution dated
January 25, 2017 of the Court of Appeals in CA-G.R. CV No. 03495-MIN are
AFFIRMED. Consequently, the amount of P1,200,000.00 due to respondent Ryan
Roy Yu shall be paid with legal interest of twelve percent (12%) per annum of the
said amount from March 12, 2009 to June 30, 2013 and six percent (6%) per annum
from July 1, 2013 until fully satisfied.
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further stated that Whessoe UK had already paid in full its contractual obligations to
Petrotech.
For its part, Petrotech alleged that upon Noell Whessoe's approval, Independent
Testing Consultants was chosen to conduct the non-destructive testing on Liquigaz's
liquefied petroleum gas storage vessel under the supervision of OIS, an inspection
firm from the United Kingdom, and of Nick Stephenson (Stephenson). However, it
averred that it later received a letter from Noell Whessoe withdrawing its approval
for Independent Testing Consultants' continued services. Independent Testing
Consultants' services allegedly failed to satisfy the standards set by the OIS and
Stephenson. Petrotech further claimed that due to Independent Testing Consultants'
poor performance, it incurred additional costs. Thus, it prayed that Independent
Testing Consultants be ordered to pay the additional costs as actual damages.
The Regional Trial Court later declared Petrotech in default for failure to appear
during the pre-trial conference.
In its March 7, 2005 Decision, the Regional Trial Court found Liquigaz, Noell
Whessoe, and Petrotech solidarily liable to Independent Testing Consultants. It
ruled that Liquigaz was liable considering that it was the entity which directly
benefited from Independent Testing Consultants' services. It likewise held that Noell
Whessoe, as the main contractor of the project, could not escape liability. Petrotech,
as the subcontractor of the project, was also held liable. The dispositive portion of
the Regional Trial Court March 7, 2005 Decision read:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiff and against the defendants Liquigaz Philippine Corp., Noell Whessoe, Inc.
and Petrotech Systems, Inc.
1) Ordering all defendants to pay plaintiff jointly and severally the amount of
Php1,063,465.70 plus legal rate of interest from December 1, 1998 until it is fully
paid;
2) Ordering the defendants to pay attorney's fees equivalent to 25% of the principal
amount of claim; and, the costs of suit.
SO ORDERED.
Only Noell Whessoe and Liquigaz appealed to the Court of Appeals. Thus, the
Regional Trial Court March 7, 2005 Decision became final as to Petrotech.
Court of Appeals affirmed the Regional Trial Court March 7, 2005 Decision and
found that Noell Whessoe, Petrotech, and Liquigaz were liable to Independent
Testing Consultants. It found that Whessoe UK, as contractor, assigned construction
management to Noell Whessoe, effectively stepping into the shoes of Whessoe UK.
Hence, Noell Whessoe could not disclaim knowledge that Petrotech engaged the
services of Independent Testing Consultants, considering its admission that it later
sent a letter to Petrotech withdrawing its approval of the engagement. The Court of
Appeals, however, held that Noell Whessoe's liability did not preclude it from
demanding reimbursement from Petrotech for any amount paid.
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The Court of Appeals likewise found that Liquigaz had knowledge, as early as
January 1999, that one of its subcontractors, Petrotech, failed to fulfill its contractual
obligations in the amount of P1,063,465.70 to another subcontractor, Independent
Testing Consultants. It likewise found that Liquigaz still owed Noell Whessoe the
amount of US$9,000.00, which it could have withheld subject to Petrotech's
fulfillment of its contractual obligations. Thus, Liquigaz was liable to Independent
Testing Consultants, but only up to the amount of US$9,000.00, which it could also
demand from Petrotech.
Noell Whessoe filed a Motion for Reconsideration, which was denied by the Court of
Appeals in its December 7, 2011 Resolution. Hence, it filed this Petition before this
Court. etitioner asserts that it should not have been made solidarily liable to
respondent Independent Testing Consultants since it had no privity of contract with
the latter. It maintains that the Contract Agreement for the Mariveles Terminal
Expansion Project was between Liquigaz and Whessoe UK, an entity separate and
distinct from petitioner. It likewise asserts that the Pipework and Mechanical
Equipment Installation Subcontract for the testing and delivery of subcontracting
works was between Whessoe UK and Petrotech. It explained that the Conditions of
Contract for Supply of Professional, Technical and Management Services between
Whessoe UK and petitioner was not intended to be a deed of assignment where
petitioner would step into Whessoe UK's shoes as contractor but was rather merely
an undertaking to supply professional, technical, and management services.
Petitioner maintains that it cannot be bound by the contract between Whessoe UK
and Petrotech simply because it sent a letter to Petrotech expressing dissatisfaction
or disapproval of respondent Independent Testing Consultants' services. It likewise
points out that even assuming that there was privity of contract, Whessoe UK had
already paid in full its contractual obligations to Petrotech. Thus, it asserts that it
was entitled to moral damages of P1,000,000.00 since "the filing of this baseless and
unfounded case . . . has tarnished its good business name and standing by giving the
erroneous and false impression to the public that it is a company that reneges on its
obligations."
ISSUE:
Whether petitioner is solidarily liable with Liquigaz and Petrotech
RULING
No. "[A] contract is law between the parties[.]" Generally, contracts only take effect
between the parties, and their assigns and heirs. Thus, subject to certain exceptions,
those not privy to the contract would not be bound by any of its provisions.
Considering this stipulation, petitioner cannot be considered as a mere
subcontractor of Whessoe UK. Otherwise, Whessoe UK would be in breach of its
Contract with Liquigaz.
There was insufficient evidence proving that Whessoe UK and petitioner were two
(2) separate and distinct entities. As with Pioneer International, prior acts by
Liquigaz and Petrotech indicate that they were contracting with the same entity,
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albeit with different names. Thus, petitioner failed to prove that for the Mariveles
Terminal Expansion Project, it was a separate and distinct entity from Whessoe UK.
Therefore, it cannot set up the defense of privity of contract to escape liability.
Article 1729 of the Civil Code provides:
Article 1729. Those who put their labor upon or furnish materials for a piece of
work undertaken by the contractor have an action against the owner up to the
amount owing from the latter to the contractor at the time the claim is made.
However, the following shall not prejudice the laborers, employees and furnishers of
materials:
1. Payments made by the owner to the contractor before they are due;
2. Renunciation by the contractor of any amount due him from the owner.
This article is subject to the provisions of special laws.
In JL Investment and Development, Inc. v. Tendon Philippines, Inc., this Court
explained that Article 1729 of the Civil Code is an exception to the general rule on
the privity of contracts:
This provision imposes a direct liability on an owner of a piece of work in favor of
suppliers of materials (and laborers) hired by the contractor "up to the amount
owing from the [owner] to the contractor at the time the claim is made." Thus, to
this extent, the owner's liability is solidary with the contractor, if both are sued
together. By creating a constructive vinculum between suppliers of materials (and
laborers), on the one hand, and the owner of a piece of work, on the other hand, as an
exception to the rule on privity of contracts, Article 1729 protects suppliers of
materials (and laborers) from unscrupulous contractors and possible connivance
between owners and contractors. As the Court of Appeals correctly ruled, the
supplier's cause of action under this provision, reckoned from the time of judicial or
extra-judicial demand, subsists so long as any amount remains owing from the
owner to the contractor. Only full payment of the agreed contract price serves as a
defense against the supplier's claim.
Article 1729 talks of three (3) different parties: the owner, the contractor, and the
supplier. In certain situations, the supplier may also be referred to as a
subcontractor to provide materials or services. There are also situations where, as
in this case, the subcontractor further subcontracts some materials and services to
another subcontractor. This sub-subcontractor would be considered the supplier of
materials and services. In this case, the owner is Liquigaz, the contractor is
petitioner, the subcontractor is Petrotech, and the supplier/sub-subcontractor is
respondent Independent Testing Consultants.
Considering that the rationale behind the provision is to protect suppliers from
possible connivance between the owners and the contractors, there would be no
reason to apply the same rationale when it was the subcontractor that hired the
supplier. The liability will extend from the owner to the contractor to the
subcontractor.
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CREDIT TRANSACTIONS
Coca-Cola Bottlers Phils., Inc. v. Spouses Soriano,
G.R. No. 211232 , [April 11, 2018]
Tijam, J:
Case Doctrine: 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.
Facts: Plaintiffs-appellees spouses Efren and Lolita Soriano are engaged in the
business of selling defendant-appellant Coca-Cola products in Tuguegarao City,
Cagayan. Sometime in 1999, defendant-appellant thru Cipriano informed plaintiffs-
appellees that the former required security for the continuation of their business.
Plaintiffs-appellees were convinced to hand over two (2) certificates of titles over
their property and were made to sign a document. Defendant Cipriano assured
plaintiffs-appellees that it will be a mere formality and will never be notarized.
Subsequently, plaintiffs-appellees informed defendant-appellant Coca-Cola of their
intention to stop selling Coca-Cola products due to their advanced age. Thus,
plaintiffs-appellees verbally demanded from defendant-appellant the return of their
certificates of titles. However, the titles were not given back to them.
When plaintiffs-appellees were contemplating on filing a petition for the issuance of
new titles, they discovered for the first time that their land was mortgaged in favor
of defendant-appellant Coca-Cola. Worse, the mortgage land was already foreclosed.
Hence, plaintiffs-appellees filed a complaint for annulment of sheriff's foreclosure
sale. They alleged that they never signed a mortgaged document and that they were
never notified of the foreclosure sale. In addition, plaintiffs-appellees aver that they
never had monetary obligations or debts with defendant-appellant. They always
paid their product deliveries in cash.
Furthermore, plaintiffs-appellees claimed that they merely signed a document in
Tuguegarao. They never signed any document in Ilagan, Isabela nor did they appear
before a certain Atty. Reymundo Ilagan on 06 January 2000 for the notarization of
the said mortgage document.
On their part, defendant-appellant alleged that plaintiffs-appellees are indebted to
them. Plaintiffs-appellees' admission that they signed the real estate mortgage
document in Tuguegarao, Cagayan indicates that the mortgage agreement was duly
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executed. The failure of the parties to appear before the notary public for the
execution of the document does not render the same null and void or unenforceable.
Issue:
Ultimately, the question posed before Us is the validity of a REM, the deed of which
was: (1) admittedly signed by the mortgagors, albeit in a place other than that stated
in the document, on the belief that the same would not be notarized; and (2)
notarized without authority and compliance with the prescribed form under Section
112 of P.D. 1529.
Held:
At the outset, We stress that the registration of a REM deed is not essential to its
validity. The law is clear on the requisites for the validity of a mortgage, to wit:
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 provides:
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.
(Emphasis supplied)
Thus, as between the parties to a mortgage, the non-registration of a REM deed
is immaterial to its validity.
Nonetheless, the defective notarization of the REM agreement merely strips it
of its public character and reduces it to a private document. Although Article
1358 of the New Civil Code requires that the form of a contract transmitting or
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ISSUE:
Whether or not the subject documents were null and void?
HELD:
YES. The evidence indicates that these documents were indeed simulated; as far as
petitioners were concerned, they merely entrusted the title to the subject property
to Biag for the purpose of reconstituting the same as he claimed that the title on file
with the Registrar of Deeds of Quezon City may have been lost by fire. Petitioners
did not intend for Biag to mortgage the subject property in 1991 to secure a loan;
yet the latter, without petitioners' knowledge and consent, proceeded to do just
that, and in the process, he falsified the loan and mortgage documents and the
accompanying promissory note by securing Conchita's signatures thereon through
fraud and misrepresentation and taking advantage of her advanced age and naivete
and forged Juan's signature and made it appear that the latter was still alive at the
time, when in truth and in fact, he had passed away in 1987.
Under the Civil Code:
Art. 1346. An absolutely simulated or fictitious contract is void. x x x
Art. 1409. The following contracts are in existent and void from the
beginning:
(2) Those which are absolutely simulated or fictitious;
As a consequence of Biag's fraud and forgery of the loan and mortgage documents,
the same were rendered null and void. This proceeds from the fact that Biag was not
the owner of the subject property and may not thus validly mortgage it, as well as
the well-entrenched rule that a forged or fraudulent deed is a nullity and conveys no
title. "In a real estate mortgage contract, it is essential that the mortgagor be the
absolute owner of the property to be mortgaged; otherwise, the mortgage is void."
And "when the instrument presented for registration is forged, even if accompanied
by the owner's duplicate certificate of title, the registered owner does not thereby
lose his title, and neither does the mortgagee acquire any right or title to the
property. In such a case, the mortgagee under the forged instrument is not a
mortgagee protected by Law." Lastly, when "the person applying for the loan is
other than the registered owner of the real property being mortgaged, it should
have already raised a red flag and x x x should have induced the mortgagee to make
inquiries into and confirm the authority of the mortgagor."
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CA: Reversed and set aside ruling of RTC. Petitioners moved for reconsideration but
CA denied.
ISSUE:
1.) Whether or not real estate mortgage was null and void?
2.) Whether or not respondent Spouses Certeza were mortgagees in good faith?
HELD:
1.) Under Article 2085 of the Civil Code, a mortgage, to be valid, must have the
following requisites, namely: (a) that it be constituted to secure the fulfillment
of a principal obligation; (b) that the mortgagor be the absolute owner of the
thing mortgaged; and (c) that the person constituting the mortgage has free
disposal of the property, and in the absence of the right of free disposal, that the
person be legally authorized for the purpose.
It is uncontested that the late Loreta Tabuada had died in 1990, or four years
before the mortgage was constituted; and that Eleanor Tabuada and Trabuco
admitted to petitioner Sofia Tabuada that they had mortgaged the property to
the Spouses Certezas. Accordingly, the RTC was fully justified in declaring the
nullity of the mortgage based on its finding that Eleanor Tabuada had
fraudulently represented herself to the Spouses Certeza as the late Loreta
Tabuada, the titleholder. That the titleholder had been dead when the mortgage
was constituted on the property by Eleanor Tabuada was not even contested by
Eleanor Tabuada and Tabuco. In any event, Eleanor Tabuada had not been
legally authorized to mortgage the lot to the Spouses Certeza.
2.) The Spouses Certeza contend that they were mortgagees in good faith
considering that they had no notice prior to the filing of Civil Case No. 05- 28420
that the real owner of the property had died several years before the execution
of the mortgage; and that they had believed in good faith in the representations
made by Eleanor Tabuada that she had been Loreta Tabuada, the titleholder.
The contentions of the Spouses Certeza lack persuasion. The Spouses Certeza
admitted that the petitioners were the relatives by blood or affinity of their co-
defendants Eleanor Tabuada, et al.; and that Sofia Tabuada, et al. and the
petitioners had been living in their respective residences built on the property
subject of the mortgage. Such admissions belied the Spouses Certeza's
contention of being mortgagees in good faith. At the very least, they should have
been prudent and cautious enough as to have inquired about Eleanor Tabuada's
assertion of her capacity and authority to mortgage in view of the actual
presence of other persons like the petitioners herein on the property. Such
prudence and caution were demanded of persons like them who are about to
deal with realty; they should not close their eyes to facts that should put a
reasonable man on his guard and still claim he acted in good faith. Indeed, the
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status of a mortgagee in good faith does not apply where the title is still in the
name of the rightful owner and the mortgagor is a different person pretending
to be the owner. In such a case, the mortgagee is not an innocent mortgagee for
value and the registered owner will generally not lose his title.
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The RTC found PNB guilty of malice and bad faith in not pursuing its duty in helping
the Aguilars avail of the benefits of RA 7202 and, pursuant to Articles 19 and 21 of
the Civil Code, justified the award of moral and exemplary damages as well as
attorney's fees and litigation expenses in favor of the Aguilars.
Aggrieved by the RTC Decision, PNB appealed to the CA. The CA granted the appeal
and reversed the RTC Decision. The Aguilars filed a Motion for Reconsideration,
which was denied by the CA in its Resolution. Hence, The Aguilars filed their Petition
with the Court.
ISSUE:
Whether the CA erred in not including the sums and amounts which accrued to PNB
from DAR's payment on account of the properties of the Aguilars?
HELD:
NO. To this Court, this position of the Aguilars cannot be justified under RA 7202
and its IRR. To recall, Section 6 of the IRR, in part, provides that:
where sugar producers have no outstanding loan balance with said financial
institutions as of the date of effectivity of RA No. 7202 (i.e., sugar producers who
have fully paid their loans x x x through x x x foreclosure of collateral x x x), said
producers shall be entitled to the benefits of recomputation in accordance with
Sections 3 and 4 of RA No. 7202, but the said financial institutions, instead of
refunding the interest in excess of twelve (12%) per cent per annum, interests,
penalties and surcharges, apply the excess payment as an offset and/or as payment
for the producers' outstanding loan obligations. x x x
And, based on PNB's recomputation which the CA upheld, there is no excess
payment made by the late spouses Aguilar that has to be restituted to the Aguilars.
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On March 19, 1997, the respondents filed a complaint for the annulment of the sale
and Renato's title over the subject property, together with a prayer for the payment
of damages. 21 The respondents alleged that PNB schemed to prevent the Spouses
Bacani from buying back the subject property. They also claimed that PNB's refusal
to accept their offer, and the subsequent sale of the subject property to Renato
despite its earlier scheduled auction sale, were all badges of bad faith on the part of
PNB that warrant the annulment of Renato's title and the award of damages in their
favor.
ISSUE:
1.) WON Sps. Bacani has Right to Repurchase?
2.) WON the PNB committed fraud in the invitation to bid?
HELD:
1.) It is thus settled that the buyer in a foreclosure sale becomes the absolute
owner of the property purchased if it is not redeemed during the period of one
year after the registration of the sale. As such, he is entitled to the possession of
the said property and can demand it at any time following the consolidation of
ownership in his name and the issuance to him of a new transfer certificate of
title. The buyer can in fact demand possession of the land even during the
redemption period except that he has to post a bond in accordance with Section
7 of Act No. 3135, as amended. No such bond is required after the redemption
period of the property is not redeemed. Possession of the land then becomes an
absolute right of the purchaser as confirmed owner. Upon proper application
and proof of title, the issuance of the writ of possession becomes a ministerial
duty of the court.
2.) With respect to the allegation of fraud, it is settled that fraud is never presumed
— it must be proven by clear and convincing evidence. 68 In this case, the
Spouses Bacani were unable to establish that PNB and Renato committed fraud
in the disposition of the subject property. There was no showing that PNB
assured the sale of the subject property to the Spouses Bacani during the
auction. As a matter of fact, the Spouses Bacani did not even attend the
scheduled auction sale to make an offer on the subject property. e publication
of the Invitation to Bid, which included the subject property, was not a binding
obligation on the part of PNB. Article 1326 of the Civil Code clearly provides
Advertisements for bidders are simply invitations to make proposals, and the
advertiser is not bound to accept the highest or lowest bidder, unless the
contrary appears.
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Abacus is the creditor and not the IFSC. Purportedly in keeping with its nature as an
investment house, Abacus claims to have facilitated Tabujara's purchase of debt
instruments issued by IFSC. According to Abacus, it merely purchased a unit of
participation in Loan Agreement No. 0003 issued by IFSC for Tabujara's account,
using the latter's money in the amount of P3,000,000.00.
As it turns out, Abacus had an existing Loan Agreement with IFSC whereby it agreed
to grant the latter a credit line facility in the amount of P700,000,000.00. By
testimonial evidence, it was established that the moneys used to fund the
P700,000,000.00 credit line facility were gathered from various sources.
That Tabujara's investment in the amount of P3,000,000.00 was used as part of the
pool of funds made available to IFSC is confirmed by the facts that it is Abacus, and
not Tabujara, which was actually regarded as IFSC's creditor in the rehabilitation
plan and that Abacus even proposed to assign all its rights and privileges in
accordance with the rehabilitation plan to its "funders" in proportion to their
participation.
As such, in a letter dated November 6, 2000, Abacus proposed passing on and
assigning to Tabujara all the proceeds and rights which it has under the
rehabilitation plan in proportion to Tabujara's principal participation in the amount
of P3,000,000.00. In other words, it was really Abacus who was the creditor entitled
to the proceeds of IFSC's rehabilitation plan - thus necessitating the assignment by
Abacus of said proceeds to the actual source of funds, Tabujara included.
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CA affirmed RTC’s decision in toto. It held that the 2% penalty per month on top of the 20%
on the peso obligation and 7.5% interest per annum on the dollar obligation was iniquitous.
It held that a straight 12% per annum interest on the total amount due would be fair and
equitable.
ISSUE: Whether the CA and RTC erred in finding that the petitioners are liable to pay
Security Bank the amounts of ₱17,995,314.47 and USD 289,730.10 inclusive of interests and
penalty charge plus legal interest 12% per annum?
RULING: No. The court find no cogent reason to disturb the sums of ₱17,995,214.47 and
USD289,730.10 adjudged against the petitioners in favor of Security Bank. Factual
determinations of the RTC, especially when adopted and confirmed by the CA, are final and
conclusive barring a showing that the findings were devoid of support or that a substantial
matter had been overlooked by the lower courts, which would have materially affected the
result if considered.
RTC did not delete altogether the 2% monthly penalty charges and stipulated interests of
7.5% on the dollar obligations and 20% on peso obligations. RTC adjudged the said amount
on the basis of Art 1308 of the Civil Code and jurisprudential pronouncements on the
obligatory force of contracts – not otherwise contrary to law, morals, good customs or
public policy – between contracting parties. The 7.5% or 21% per annum interests
constitutes monetary or conventional interest for borrowing money and is allowed under
Art. 1956 of the New Civil Code. The penalty of 2% is penalty or compensatory interest for
the delay in the payment of a fixed sum of money, which is separate and distinct from
conventional interest on the principal of the loan.
Art 1959 of the Civil Code states that “Without prejudice to the provisions of Art. 2212,
interest due and unpaid shall not earn interest. However, the contracting parties may by
stipulation capitalize the interest due and unpaid, which as added principal, shall earn new
interest.”
The RTC, as affirmed by the CA, acted in accordance with Art 1229 of the Civil Code, which
allows judges to equitably reduce the penalty when there is partial or irregular compliance
with the principal obligation, or when the penalty is iniquitous or unconscionable. Whether
a penalty is reasonable or iniquitous is addressed to the sound discretion of the courts and
determined according to the circumstances of the case. The reasonableness or
unreasonableness of a penalty would depend on such factors as the type, extent and
purpose of the penalty, the nature of the obligation, the mode of breach and its
consequences, the supervening realities, the standing and relationship of parties.
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Court holds that the interest rates of 7.5% and 7% are excessive, unconscionable,
iniquitous, and contrary to law and morals; and, therefore, void ab initio. Hence, the
Court of Appeals erred in sustaining the imposition of the said interest rates, while
the RTC correctly imposed the legal interest of 12% per annum in place of the said
interest rates.
2.) NO. Anent the third and fourth loans both in the amount of P100,000.00, the
Court of Appeals correctly held that as the agreement of 3% monthly interest on the
third loan and 4% monthly interest on the fourth loan was merely verbal and not
put in writing, no interest was due on the third and fourth loans. This is in
accordance with Article 1956 of the Civil Code which provides that " [n]o interest
shall be due unless it has been stipulated in writing." Hence, the payments made as
of March 18, 2005 in the third loan amounting to P141,360.00 resulted in the
overpayment of P41,360.00. Moreover, the payments made as of February 2, 2005
in the fourth loan amounting to P117,960.00 resulted in an overpayment of
P17,960.00. Consequently, as found by the Court of Appeals, there was a total
overpayment of P59,320.00 for the third and fourth loans.
3.) YES. Rey contends that the manner by which the RTC recomputed the four loans
after the reduction of the interest rates to 12% per annum was erroneous and
contrary to law. It did not take into consideration the principle that each particular
payment should be applied and credited on the precise time it is made, to be applied
first on the interest and thereafter on the principal of the loan, pursuant to Article
1253 of the Civil Code. Thus, Rey contends that she has made excess payments for
the four loans in the total sum of P269,700.68, which ought to be returned by Cesar
Anson in accordance with the principle of solutio indebiti under Article 2154 of the
Civil Code. The Court agrees with Rey that Articles 1253 and 2154 of the Civil Code
apply to this case, and Cesar Anson is obliged to return to Rey excess payments
received by him. Article 1253 of the Civil Code states that “[i]f the debt produces
interest, payment of the principal shall not be deemed to have been made until the
interests have been covered.” The Court reviewed the computation above made by
Rey for Loan 1 and Loan 2, and found the computation to be correct. The Court finds
that in Loan 1, Rey already paid in full the principal amount of P200,000.00
and monthly interest thereon on November 8, 2003, leaving an excess payment of
P1,759.64. Further payments made by Rey from November 23, 2003 to August 23,
2004 resulted in overpayment amounting to P144,259.64. The excess payment of
P9,259.64 as of November 23, 2003 plus excess payments made from December 23,
2003 to April 23, 2004 amounting to P84,259.64 in Loan 1 may be applied to Loan 2,
leaving a final excess payment of P60,000.00 for Loan 1. As regards Loan 2, Rey fully
paid the principal amount of P350,000.00 and monthly interest thereon on May 26,
2004, leaving an excess payment of P31,856.68. Payments made thereafter, from
June 26, 2004 to September 26, 2004, resulted in excess payments amounting to
Pl50,380.68 for Loan 2. Rey also made excess payments of P41,360.00 in Loan 3, and
P17,960.00 in Loan 4. Hence, the total excess payments made by Rey in the four
loans amounted to P269,700.68 Since Cesar Anson received a total overpayment of
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P269,700.68 from Rey, he is obliged to return the amount in accordance with the
principle of solutio indebiti under Article 2154 of the Civil Code, to wit:
Article 2154. If something is received when there is no right to demand it, and it was
unduly delivered through mistake, the obligation to return it arises.
4.) YES. In this case, the excess payments made by Rey were also borne out of a
mistake that they were due; hence, the Court deems it in the better interest of equity
not to hold Cesar Anson liable for interest on the excess payments. Nevertheless, an
interest at the rate of 6% per annum is imposable on the total judgment award
pursuant to Nacar v. Gallery Frames, et al., which held that "[w]hen the judgment of
the court awarding a sum of money becomes final and executory, the rate of legal
interest x xx shall be 6% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a forbearance of credit.
Decision of CA REVERSED AND SET ASIDE.
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the Register of Deeds of Marikina Cityissued TCT No. 452198 in the name of
Premiere Bank.
RTC rendered judgment dismissing the petitioners; complaint. In upholding the
extrajudicial foreclosure sale despite the lack of publication and posting of the
notice of the public sale.
CA promulgated the assailed decision, affirming the validity of the February 18,
2002
foreclosure sale despite the non-posting and non-publication of the notice of the
rescheduled sale.
ISSUE:
Whether or not the CA erred in declaring that the extrajudicial foreclosure sale was
valid
despite the failure to publish and post the notice of the rescheduled foreclosure sale.
RULING:
The extrajudicial foreclosure sale held on February 18, 2002 was void ab initio.
Act No. 3135 prescribes the requirements of posting and publication of the notice
for the
extrajudicial foreclosure sale. The law specifically mandates the publication of the
notice in a newspaper of general circulation for at least three consecutive weeks if
the value of the property is more than P400,000.00.
The sale set on January 15, 2002 did not push through because the representative of
Premiere Bank did not appear, and was rescheduled to February 18, 2002.
Thereafter, the notice for the rescheduled foreclosure sale was not posted and
published as required by Act No. 3135.
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Prior to the filing of the complaint, it appears that the property was the subject of a
Dacion En Pago Con Pacto de Retro agreement between TMBC and the Central Bank
Board of Liquidators ("CB-BOL"). Pursuant to a revised repayment plan, TMBC
delivered several properties in settlement of the balance of its debt to CB-BOL
amounting to ₱2,265,953,378.83. Then CB-BOL assigned all its rights and interests
under the Dacion agreement in favor of the BSP. Thus, BSP sought the release of
100% of the value of the property based on the current zonal valuation of the
Bureau of Internal Revenue ("BIR"), in accordance with Section 2, Rule 67 of the
1997 Rules of Procedure. TMBC opposed the motion and the issue was submitted
for resolution at the trial during the pre-trial conference.
Records also reveal that a Final Offer to Buy was sent by BCDA to TMBC, whereby
BCDA offered the price of P75 per square meter for the subject property.
BCDA deposited the amount of Five Million Five Hundred Ninety Thousand and Six
Hundred Fifty Pesos (₱5,590,650) before the Office of the Clerk of Court of Angeles,
Pampanga. This amount was equivalent to the value of the actual affected area of the
subject property based on the then current zonal valuation provided by the BIR.
The trial court issued a writ of possession and the subject property was placed in
the possession of BCDA.
Ruling of the Court of Appeals: ruling in favor of respondent BCDA.
#The dispositive portion:
Just compensation for the portions of the property of The Manila Banking
Corporation consisting of 173,059 square meters, expropriated by BCDA for the
SCTEX Project, is hereby fixed at Php75.00 per square meter, or a total of Twelve
Million Nine Hundred Seventy Nine Thousand Four Hundred Twenty Five Pesos
(Php12,979,425.00). Since BCDA already deposited the amount of Five Million Three
Hundred Sixty Six Thousand and Ten Pesos (Php5,366,010.00), BCDA is DIRECTED
to pay to TMBC the balance of Seven Million Six Hundred Thirteen Thousand Four
Hundred Fifteen Pesos (Php7,613,415.00), which shall earn interest at the rate of
12% per annum from November 21, 2003 up to June 30, 2013, and 6% per annum
from July 1, 2013 until fully paid. Said amount shall further earn interest at 6% per
annum from the date of the finality of this Decision until full payment.
Issue:
Whether the Court of Appeals was correct in imposing an interest rate of 12% per
annum from November 21, 2003 up to June 30, 2013, and 6% per annum from July
1, 2013 until full payment.
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Held: YES
The Court of Appeals committed no reversible error in modifying the interest rates
to be imposed on the just compensation
For the final issue raised by petitioner, it argues that the award of interest of 6% per
annum as imposed under the BSP - Monetary Board (BSP-MB) Circular No. 799,
Series of 2013, should only be reckoned from the date of finality of judgment and
not from July 1, 2013 as ruled by the CA.
Petitioner is mistaken.
In the landmark case of Eastern Shipping Lines, Inc. v. Court of Appeals, the Court
laid down the guidelines regarding the manner of computing legal interest,
particularly declaring that when judgments of the court awarding a sum of money
become final and executory, the rate of legal interest shall be 12% per annum from
such finality until its satisfaction, since this interim period is deemed to be by then
an equivalent to a forbearance of credit.
With the issuance of BSP-MB Circular No. 799, Series of 2013, however, which
became effective on July 1, 2013, in the absence of an express stipulation as to the
rate of interest that would govern the parties, the rate of legal interest for loans or
forbearance of any money, goods or credits and the rate allowed in judgments shall
no longer be twelve percent (12%) per annum but shall now be six percent (6%)
per annum effective July 1, 2013. Consequently, the twelve percent (12%) per
annum legal interest shall apply only until June 30, 2013, and from July 1, 2013 the
new rate of six percent (6%) per annum shall be the prevailing rate of interest when
applicable.
In the recent case of Secretary of the Department of Public Works and Highways v.
Spouses Tecson, the Court explained:
Lastly, from finality of the Court's Resolution on reconsideration until full payment,
the total amount due to respondents-movants shall earn a straight six percent (6%)
legal interest, pursuant to Circular No. 799 and the case of Nacar. Such interest is
imposed by reason of the Court's decision and takes the nature of a judicial debt.
Clearly, the award of interest on the value of the land at the time of taking in 1940
until full payment is adequate compensation to respondents movants for the
deprivation of their property without the benefit of expropriation proceedings. Such
interest, however meager or enormous it may be, cannot be inequitable and
unconscionable because it resulted directly from the application of law and
jurisprdence-standards that have taken into account fairness and equity in setting
the interest rates due for the use or forbearance of money. Thus, adding the interest
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computed to the market value of the property at the time of taking signifies the real,
substantial, full and ample value of the property. Verily, the same constitutes due
compliance with the constitutional mandate on eminent domain and serves as a
basic measure of fairness.
From the foregoing, it is clear that the CA was correct in imposing an interest on the
just compensation at the rate of 12% per annum from November 21, 2003 up to
June 30, 2013, and 6% per annum from July 1, 2013 until full payment.
WHEREFORE, the petition is DENIED. The Decision dated October 26, 2016 and the
Resolution dated February 22, 2017 of the Court of Appeals in CA-G.R. CV No.
104234 are hereby AFFIRMED.
SO ORDERED.
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Yes.
Section 10 of R.A. No. 8042 provides:
Sec. 10. Money Claims. x x x
The liability of the principal/employer and the recruitment/placement agency for
any and all claims under this section shall be joint and several. Xxx
WHEREFORE, the petition is DENIED. Petitioner is ordered to pay respondent:
1 Reimbursement of respondent's placement fee with interest at the rate of 12%
per annum;
2
3 Two Million Five Hundred Forty-Eight Thousand Seven Hundred Pesos
(P2,548,700.00) representing Bautista's salaries for the unexpired portion of his
contract;
4
5 Moral damages in the amount of One Hundred Fifty Thousand Pesos
(P150,000.00);
6
7 Exemplary damages in the amount of One Hundred Fifty Thousand Pesos
(P150,000.00); and
8
9 Attorney's fees at the rate of 10% of the monetary award exclusive of damages
and reimbursement of placement fee in the amount of Two Hundred Fifty-Four
Thousand Eight Hundred Seventy Pesos (P254,870.00).
All monetary awards and damages (except reimbursement of placement fee) shall
earn 6% interest from finality of this judgment until fully paid
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Shortly thereafter, Aparra maneuvered the truck to the right side of the road
to avoid hitting a parked bicycle. But as he turned, Aparra had to swerve to the left
to avoid hitting Marcelo Subiano, who was allegedly standing on the side of the road.
Because the road was only four (4) meters and 24 inches wide, rough, and full of
potholes, Aparra lost control of the truck and they fell off the wharf. Consequently,
Rodolfo and Monalisa died while Johanna and Abellana were injured. On April 3,
1990, Vivian and Abellana filed a criminal complaint for Reckless Imprudence
resulting to Double Homicide, Multiple Serious Physical Injuries and Damage to
Property against Aparra and Caballes
On January 4, 1991, Vivian and Abellana filed a separate complaint for
damages against Simolde, Caballes, and Aparra.
Regional Trial Court: Caballes and Aparra committed acts constituting a
quasi-delict. Since these acts were the proximate cause of the deaths of Rodolfo and
Monalisa and the injuries sustained by Abellana and Johanna, Simolde, Caballes, and
Aparra were held liable for damages
Court of Appeals: Simolde is solidarity liable with Caballes and Aparra.
According to the Court of Appeals, Caballes and Aparra were clearly negligent in
transporting the passengers. Given that the road was narrow and fall of pot holes, it
was apparent that an experienced driver was needed to safely navigate the vehicle
out of the wharf. In allowing Aparra to drive the truck despite having only a student
driver's permit, Caballes risked the lives of the passengers on board the truck. The
Court of Appeals also held Simolde solidarity liable with his employees for failing to
exercise due diligence in supervising them. However, the Court of Appeals deleted
the award of actual damages for Rodolfo's loss of earning capacity. According to the
Court of Appeals, documentary evidence should be presented to substantiate a claim
for loss of earning capacity.
Petitioner Vivian argues that the Court of Appeals gravely erred in deleting
the compensatory damages awarded for Rodolfo's loss of earning capacity. She
posits that Abellana's testimony is enough to prove Rodolfo's income. As Rodolfo's
employer, Abellana had direct and personal knowledge of the compensation that he
was receiving prior to his death; thus, she is qualified to testify on his income.
Petitioner Vivian cites Philippine Airlines, Inc. v. Court of Appeals to point out that
the Court of Appeals gravely erred in concluding that Abellana's testimony, without
any documentary evidence, did not suffice to claim damages for lack of earning
capacity. Based on Abellana's testimony, Rodolfo had an estimated gross monthly
income of P15,000.00 or an annual gross income of P195,000.00. Using the formula
laid down in Negros Navigation Co., Inc. v. Court of Appeals, Rodolfo's lost earnings
would amount to P2,079,675.00.
ISSUE:
Whether or not actual damages for loss of earning capacity should be
awarded to petitioner Vivian B. Torreon.
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RULLING:
YES.
Instead of helping his defense, Simolde's testimony proves his failure to
supervise his employees. Simolde should have been more diligent in ensuring that
his employees acted within the parameters of their jobs. He should have taken steps
to ensure that his instructions were followed. His failure to control the behavior of
his employees makes him liable for the consequences of their actions. Thus, Simolde
is solidarity liable with Caballes and Aparra for the payment of the damages granted
by law. The Civil Code holds Simolde liable for the damages that his actions have
caused. Article 2206 specifically applies when a death occurs as a result of a crime
or a quasi-delict: Article 2206. The amount of damages for death caused by a crime
or quasi-delict shall be at least Three thousand pesos, even though there may have
been mitigating circumstances. In addition: (1) 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; Civil or
death indemnity is mandatory and granted to the heirs of the victim without need of
proof other than the commission of the crime.
Initially fixed by the Civil Code at P3,000.00, the amount of the indemnity is
currently fixed at P50,000.00. Thus, respondents are liable to pay Rodolfo's heirs
P50,000.00. They are liable to pay another P50,000.00 to answer for the death of
Monalisa. In Pestaño v. Spouses Sumayang, this Court applied Article 2206 of the
Civil Code and awarded compensation for the deceased's lost earning capacity in
addition to the award of civil indemnity. The indemnity for the deceased's lost
earning capacity is meant to compensate the heirs for the income they would have
received had the deceased continued to live. It is well-settled in jurisprudence that
the factors that should be taken into account in determining the compensable
amount of lost earnings are: (1) the number of years for which the victim would
otherwise have lived; and (2) the rate of loss sustained by the heirs of the deceased.
Jurisprudence provides that the first factor, i.e., life expectancy, is computed by
applying the formula (2/3 x [80 - age at death]) adopted in the American Expectancy
Table of Mortality or the Actuarial Combined Experience Table of Mortality. As to
the second factor, it is computed by multiplying the life expectancy by the net
earnings of the deceased, i.e., the total earnings less expenses necessary in the
creation of such earnings or income and less living and other incidental expenses.
The net earning is ordinarily computed at fifty percent (50%) of the gross earnings.
Thus, the formula used by this Court in computing loss of earning capacity is: Net
Earning Capacity = [2/3 x (80 - age at time of death) x (gross annual income -
reasonable and necessary living expenses)].[64] (Emphasis supplied, citations
omitted). It has been consistently held that earning capacity, as an element of
damages to one's estate for his death by wrongful act is necessarily his net earning
capacity or his capacity to acquire money, "less the necessary expense for his own
living." Stated otherwise, the amount recoverable is not loss of the entire earning,
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but rather the loss of that portion of the earnings which the beneficiary would have
received. In other words, only net earnings, not gross earning, are to be considered
that is, the total of the earnings less expenses necessary in creation of such earnings
or income and less living and other incidental expenses. The formula provided in
these cases is presumptive, i.e., it should be applied in the absence of proof in terms
of statistics and actuarial presented by the plaintiff. The Court of Appeals deleted
the award of actual damages granted to petitioner for Rodolfo's lost earnings.
According to the Court of Appeals, documentary evidence should be presented to
substantiate a claim for the deceased's lost income. The Court disagrees. In civil
cases, Vivian is only required to establish her claim by a preponderance of evidence.
Allowing testimonial evidence to prove loss of earning capacity is consistent with
the nature of civil actions.
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On January 19, 1999, or a little over two (2) years after the incident, Sister Mary Ann
Abuna (Sister Mary Ann), CCC's sister and a nun, visited her family in Cebu. That
same day, AAA told Sister Mary Ann that she wanted to stop her schooling and
begged to go with her back to Manila because she did not want to see her father
anymore. Sister Mary Ann asked the sisters to leave Cebu and go back with her to
Manila to prevent their father from further molesting them. She brought AAA, BBB,
their other sister, and CCC back with her to Manila. A few days later they all went to
Pampanga where Sister Mary Ann was a missionary.
While in Pampanga, their mother came to fetch her daughters. AAA then went to
Sister Mary Ann and declared that if CCC would return to Cebu, she would not go
back with her. It was at this point that AAA opened up to Sister Mary Ann about the
sexual abuse she suffered from her father. Sister Mary Ann brought AAA to the
Hospital Ning in Angeles City to be examined by a doctor. After examining AAA, Dr.
Lauro C. Biag (Dr. Biag) issued a medical certificate, a portion of which read:
Genitalia: labia majora/minora - well coaptated.
Hymen: orifice 0.7 cm old healed complete laceration on 11, 8, 2 o'clock.
old healed incomplete laceration 5 & 10 o'clock.
(-) abrasion, (-) hematoma, (-) discharge[26]
Sister Mary Ann helped the girls file their respective complaints against their father.
At first, BBB was hesitant to file a complaint but she finally agreed because AAA
would not stop crying and was always afraid.
Regional Trial Court’s Decision: Guilty beyond reasonable doubt of rape and acts of
lasciviousness
Court of Appeal’s Decision: Appeal was denied and affirmed in toto the decision of
the Regional Trial Court
Issue: Whether or not the private complainants should be awarded civil indemnities
Ruling: Yes
Civil indemnity ex delicto, as a form of monetary restitution or compensation to the
victim, attaches upon a finding of criminal liability because "[e]very person
criminally liable for a felony is also civilly liable."
On the other hand, moral damages are treated as "compensatory damages awarded
for mental pain and suffering or mental anguish resulting from a wrong." The award
of moral damages is meant to restore the status quo ante; thus, it must be
commensurate to the suffering and anguish experienced by the victim.
Finally, exemplary or corrective damages are imposed as an example to the public,
serving as a deterrent to the commission of similar acts. Exemplary damages are
also awarded as a part of the civil liability may be imposed when the crime was
committed with one or more aggravating circumstances.
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ABROGAR V. COSMOS BOTTLING AND INTERGA
PONENTE: BERSAMIN
DOCTRINE:
A. The test by which to determine the existence of negligence in a particular
case may be stated as follows: Did the defendant in doing the alleged negligent act
use that reasonable care and caution which an ordinarily prudent person would
have used in the same situation? If not, then he is guilty of negligence
B. In order to establish his right to a recovery, must establish by competent
evidence:
(1) Damages to the plaintiff.
(2) Negligence by act or omission of which defendant personally or some person
for whose acts it must respond, was guilty.
(3) The connection of cause and effect between the negligence and the damage.
To be considered the proximate cause of the injury, the negligence need not be the
event closest in time to the injury; a cause is still proximate, although farther in time
in relation to the injury, if the happening of it set other foreseeable events into
motion resulting ultimately in the damage
C. As a defense in negligence cases, therefore, the assumption of risk doctrine
requires the concurrence of three elements, namely: (1) the plaintiff must know that
the risk is present; (2) he must further understand its nature; and (3) his choice to
incur it must be free and voluntary.
D. Compensation of this nature is awarded not for loss of earnings but for loss of
capacity to earn money. Evidence must be presented that the victim, if not yet
employed at the time of death, was reasonably certain to complete training for a
specific profession. Compensation should be allowed for loss of earning capacity
resulting from the death of a minor who has not yet commenced employment or
training for a specific profession if sufficient evidence is presented to establish the
amount thereof.
FACTS:
This case involves a claim for damages arising from the negligence causing the death
of a participant in an organized marathon bumped by a passenger jeepney on the
route of the race.
To promote the sales of "Pop Cola", defendant Cosmos, jointly with Intergames,
organized an endurance running contest billed as the "1st Pop Cola Junior
Marathon”. The organizers plotted a 10-kilometer course starting from the premises
of the Interim Batasang Pambansa (IBP for brevity), through public roads and
streets, to end at the Quezon Memorial Circle. Plaintiffs' son Rommel applied with
the defendants to be allowed to participate in the contest and after complying with
defendants' requirements, his application was accepted and he was given an official
number. Rommel joined the other participants and ran the course plotted by the
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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 hey 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 that was then running
along the route of the marathon on Don Mariano Marcos Avenue (DMMA for
brevity), and in spite of medical treatment given to him at the Ospital ng Bagong
Lipunan, he died later that same day due to severe head injuries. The petitioners
sued the respondents in the then Court of First Instance of Rizal (Quezon City) 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;
ISSUES: 1. Whether the organizer and the sponsor of the marathon were guilty of
negligence, and if so, was their negligence the proximate cause of the death of the
participant; - Yes
2. Whether the doctrine of assumption of risk was applicable to the fatality; - No
3. Whether Cosmos can held solidary liable - No
4. Whether the heirs of the fatality can recover damages for loss of earning
capacity of the latter who, being then a minor, had no gainful employment. - Yes
HELD:
1. To determine the existence of negligence, the following time-honored test has
been set in Picart v. Smith:
The test by which to determine the existence of negligence in a particular case may
be stated as follows: Did the defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent person would have used in
the same situation? If not, then he is guilty of negligence
A careful review of the evidence presented, particularly the testimonies of the
relevant witnesses, in accordance with the foregoing guidelines reasonably leads to
the conclusion that the safety and precautionary measures undertaken by
Intergames were short of the diligence demanded by the circumstances of persons,
time and place under consideration. Hence, Intergames as the organizer was guilty
of negligence.
The race organized by Intergames was a junior marathon participated in by young
persons aged 14 to 18 years. It was plotted to cover a distance of 10 kilometers,
starting from the IBP Lane, then going towards the Batasang Pambansa, and on to
the circular route towards the Don Mariano Marcos Highway, and then all the way
back to the Quezon City Hall compound where the finish line had been set. In staging
the event, Intergames had no employees of its own to man the race, and relied only
on the "cooperating agencies" and volunteers who had worked with it in previous
races.
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The consider the "safeguards" employed and adopted by Intergames not adequate
to meet the requirement of due diligence.
The negligence of Intergames as the organizer was the proximate cause of the death
of Rommel
In order for liability from negligence to arise, there must be not only proof of
damage and negligence, but also proof that the damage was the consequence of the
negligence.
In order to establish his right to a recovery, must establish by competent evidence:
(1) Damages to the plaintiff.
(2) Negligence by act or omission of which defendant personally or some person
for whose acts it must respond, was guilty.
(3) The connection of cause and effect between the negligence and the damage.
SC hold that the negligence of Intergames was the proximate cause despite the
intervening negligence of the jeepney driver. Proximate cause is "that which, in
natural and continuous sequence, unbroken by any new cause, produces an event,
and without which the event would not have occurred."
To be considered the proximate cause of the injury, the negligence need not be the
event closest in time to the injury; a cause is still proximate, although farther in time
in relation to the injury, if the happening of it set other foreseeable events into
motion resulting ultimately in the damage
An examination of the records in accordance with the foregoing concepts supports
the conclusions that the negligence of Intergames was the proximate cause of the
death of Rommel; and that the negligence of the jeepney driver was not an efficient
intervening cause.
First of all, Intergames' negligence in not conducting the race in a road blocked off
from vehicular traffic, and in not properly coordinating the volunteer personnel
manning the marathon route effectively set the stage for the injury complained of.
The submission that Intergames had previously conducted numerous safe races did
not persuasively demonstrate that it had exercised due diligence because, as the
trial court pointedly observed, "they were only lucky that no accident occurred
during the previous marathon races but still the danger was there.
Secondly, injury to the participants arising from an unfortunate vehicular accident
on the route was an event known to and foreseeable by Intergames, which could
then have been avoided if only Intergames had acted with due diligence by
undertaking the race on a blocked-off road, and if only Intergames had enforced and
adopted more efficient supervision of the race through its volunteers.
And, thirdly, the negligence of the jeepney driver, albeit an intervening cause, was
not efficient enough to break the chain of connection between the negligence of
Intergames and the injurious consequence suffered by Rommel. An intervening
cause, to be considered efficient, must be "one not produced by a wrongful act or
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omission, but independent of it, and adequate to bring the injurious results. Any
cause intervening between the first wrongful cause and the final injury which might
reasonably have been foreseen or anticipated by the original wrongdoer is not such
an efficient intervening cause as will relieve the original wrong of its character as
the proximate cause of the final injury.
In fine, it was the duty of Intergames to guard Rommel against the foreseen risk, but
it failed to do so.
2. Unlike the RTC, the CA ruled that the doctrine of assumption of risk applied
herein; hence, it declared Intergames and Cosmos not liable.
As a defense in negligence cases, therefore, the doctrine requires the concurrence of
three elements, namely: (1) the plaintiff must know that the risk is present; (2) he
must further understand its nature; and (3) his choice to incur it must be free and
voluntary.
The concurrence of the three elements was not shown to exist. Rommel could not
have assumed the risk of death when he participated in the race because death was
neither a known nor normal risk incident to running a race. Although he had
surveyed the route prior to the race and should be presumed to know that he would
be running the race alongside moving vehicular traffic, such knowledge of the
general danger was not enough, for some authorities have required that the
knowledge must be of the specific risk that caused the harm to him.
Neither was the waiver by Rommel, then a minor, an effective form of express or
implied consent in the context of the doctrine of assumption of risk. Clearly, the
doctrine of assumption of risk does not apply to bar recovery by the petitioners.
3. The sponsorship of the marathon by Cosmos was limited to financing the race.
Cosmos did nothing beyond that, and did not involve itself at all in the preparations
for the actual conduct of the race.
SC uphold the finding by the CA that the role of Cosmos was to pursue its corporate
commitment to sports development of the youth as well as to serve the need for
advertising its business. In the absence of evidence showing that Cosmos had a hand
in the organization of the race, and took part in the determination of the route for
the race and the adoption of the action plan, including the safety and security
measures for the benefit of the runners, we cannot but conclude that the
requirement for the direct or immediate causal connection between the financial
sponsorship of Cosmos and the death of Rommel simply did not exist. Indeed,
Cosmos' mere sponsorship of the race was, legally speaking, too remote to be the
efficient and proximate cause of the injurious consequences.
4. 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. . We agree with the
characterization. Gross negligence, according to Mendoza v. Spouses Gomez, is the
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ISSUES:
1.
Whether or not Bankcom and Metrobank should be held liable to JMC, on a ⅔ to ⅓
ratio, respectively, for the amount of subject checks plus interest in view of the
comparative negligence of Bankcom and Metrobank.
2.
Whether or not legal interest should be imposed upon the respective principal
liabilities of Metrobank and Bankcom.
Ruling on the first issue:
Doctrine of Comparative Negligence Does Not Apply to the Instant Case
Metrobank, though guilty of the unauthorized check payments, only acted upon the
guarantees deemed made by Bankcom under prevailing banking practices. While
Metrobank's reliance upon the guarantees of Bankcom did not excuse it from being
answerable to JMC, such reliance does enable Metrobank to seek reimbursement
from Bankcom on the ground of the breach in the latter's warranties as a collecting
bank.
Under such circumstances, we cannot deny Metrobank's right to seek
reimbursement from Bankcom.
We find that the doctrine of comparative negligence cannot be applied so as to
apportion
the respective liabilities of Metrobank and Bankcom. The liabilities of Metrobank
and Bankcom must be governed by the rule on sequential recovery.
Ruling on the second issue:
When an obligation, regardless of its source, i.e., law, contracts, quasi¬contracts,
delicts or quasi-delicts is breached, the contravener can be held liable for damages.
The provisions under Title XVIII on "Damages" of the Civil Code govern in
determining the measure of recoverable damages.
With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is
imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of stipulation,
the rate of interest shall be 6% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169
of the Civil Code.
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carry out their orders. It did not assign Hipol to be petitioners' agent. Hipol was the
one who approached petitioners and offered to be their agent. Petitioners were
highly educated and were already knowledgeable in playing in this foreign exchange
trading. They would have been aware of the extent of authority they granted to
Hipol when they handed to him 10 pre-signed blank purchase order forms. Under
Article 1900 of the Civil Code:
Article 1900. So far as third persons are concerned, an act is deemed to have been
performed within the scope of the agent's authority, if such act is within the terms of
the power of attorney, as written, even if the agent has in fact exceeded the limits of
his authority according to an understanding between the principal and the agent.
WHEREFORE, the Petition is DENIED. The January 31, 2008 Decision and March 31,
2008 Resolution of the Court of Appeals in CA-G.R. CV No. 88439 are AFFIRMED.
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unless any of the circumstances provided for under Article 193 0 or Article 1931
obtains; in which case, notwithstanding the death of either principal or agent, the
contract of agency continues to exist.
The want of authority in favor of Atty. Angeles was aggravated by the fact that he did
not disclose the death of the late Marcelino Lopez to the Court. His omission
reflected the height of unprofessionalism on his part, for it engendered the suspicion
that he thereby tried to pass off the Compromise Agreement as genuine and valid
despite his authority under the special power of attorney having terminated for all
legal purposes.
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1.) Was the deed of assignment covering the deficiency in petitioner’s obligations to
UPCB valid?
2.) Are the deeds of trust binding?
HELD:
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.
The deeds of trust expressly provided that: "The TRUSTEE hereby acknowledges
and obliges itself not to dispose of, sell, transfer, convey, lease or mortgage the said
twelve (12) parcels of land without the written consent of the TRUSTORS first
obtained." By entering into the Revere REM, therefore, Revere openly breached its
undertakings under the deeds of trust in contravention of the express prohibition
therein against the disposition or mortgage of the properties. It is also worth
mentioning that the records are bereft of any allegation that Revere had obtained
the approval of petitioners or that the latter had acquiesced to the mortgage of the
properties in favor of UCPB. Absent proof showing that petitioners had transferred
the ownership of some or all of the properties covered by the deeds of trust in favor
or Revere or Jose Go, the deeds of trust remained as the controlling documents as to
the parcels of land therein covered.
Additionally, UCPB could not now feign ignorance of the deeds of trust. As the RTC
aptly pointed out, UCPB's own Vice President expressly mentioned in writing that
UCPB would secure from Jose Go the titles necessary for the execution of the
mortgages. As such, UCPB's actual knowledge of the deeds of trust became
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Only Wincorp is liable to Ng Wee for fraud; Power Merge is liable based on contract.
Ng Wee would not have placed funds or invested [in] the "sans recourse"
transactions under the Power Merge borrower account had he not been deceived
into believing that Power Merge is financially capable of paying the returns of his
investments/money placements. The intent to defraud and deceive [Ng Wee] of his
investments/money placements was manifest from the very start.
Jurisprudence defines "fraud" as the voluntary execution of a wrongful act, or a
willful omission, knowing and intending the effects which naturally and necessarily
arise from such act or omission. In its general sense, fraud is deemed to comprise
anything calculated to deceive, including all acts and omissions and concealment
involving a breach of legal or equitable duty, trust, or confidence justly reposed,
resulting in damage to another, or by which an undue and unconscientious
advantage is taken of another. Fraud is also described as embracing all multifarious
means which human ingenuity can device, and which are resorted to by one
individual to secure an advantage over another by false suggestions or by
suppression of truth and includes all surprise, trick, cunning, dissembling, and any
unfair way by which another is cheated. Under Article 1170 of the New Civil Code,
those who in the performance of their obligations are guilty of fraud are liable for
damages.
Aside from its liability arising from its fraudulent transactions, Wincorp is also liable
to Ng Wee for breach of warranty. It cannot be emphasized enough that Wincorp is
not the mere agent that it claims to be; its operations ought not be reduced to the
mere matching of investors with corporate borrowers. Instead, it must be borne in
mind that it not only performed the functions of a financial intermediary duly
registered and licensed to perform the powers of an investment house, it is also
engaged in the selling of securities, albeit in violation of various commercial laws.
And just as in any other contracts of sale, the vendor of securities is likewise bound
by certain warranties, including those contained in Article 1628 of the New Civil
Code on assignment of credits, to wit:
Article 1628. The vendor in good faith shall be responsible for the existence and
legality of the credit at the time of the sale, unless it should have been sold as
doubtful; but not for the solvency of the debtor, unless it has been so expressly
stipulated or unless the insolvency was prior to the sale and of common knowledge.
The vendor in bad faith shall always be answerable for the payment of all expenses,
and for damages. That the securities sold toNg Wee turned out to be "with recourse,"
not "sans recourse" as advertised, does not remove it from the coverage of the above
article. In fact, such circumstance would even classify Wincorp as a vendor in bad
faith, within the contemplation of the last paragraph of the provision.
Even as an agent, Wincorp can still be held liable. The argument that Wincorp is a
mere agent that could not be held liable for Power Merge's unpaid loan is equally
unavailing. For even if the Court were to accede to the argument and undercut the
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UCPB executed another REM (Revere REM) involving the properties held in trust by
Revere for petitioners.
Enforcing petitioners' REM as well as the Revere REM, UCPB foreclosed the
mortgages, and the properties were sold for a total bid price of ₱227,700,000.00. On
November 11, 2003, Spouses Chua wrote UCPB to request an accounting of Jose Go's
liabilities that had been mistakenly secured by the mortgage of petitioners'
properties, as well as to obtain a list of all the properties subject of their REM as well
as of the Revere REM for reappraisal by an independent appraiser. The Spouses
Chua further requested that the proceeds of the foreclosure sale of the properties be
applied only to petitioners' obligation of ₱204,597, l 77.04; and that the rest of the
properties or any excess of their obligations should be returned to them.13
However, UCPB did not heed petitioners' requests.
Thus, on February 3, 2004, petitioners filed their complaint against UCPB, Revere,
Jose Go, and the Register of Deeds of Lucena City in the RTC in Lucena City.14 The
RTC issued a writ of preliminary injunction at the instance of petitioners.
RTC rule in favor with the petitioner declaring that Deeds of Trust dated April 30,
1998 as legal and binding and holding the properties held in trust for plaintiff by
defendants REVERE and GO. And also rule that REVERE and GO are not the owners
of the properties covered by the deeds of trust and did not have any authority to
constitute a mortgage over them to secure their personal and corporate obligations,
for which they should be liable.
Meanwhile, Asset Pool A moved to be substituted for UCPB as a party-defendant on
February 15, 2006 on the basis that UCPB had assigned to it the rights over
petitioners’ ₱68,000,000.00 obligation.
On appeal, the CA reversed RTC decision. It opined that the first REM remained
outstanding and was not extinguished as claimed by petitioners; that the Revere
REM was valid based on the application of the complementary contracts construed
together doctrine whereby the accessory contract must be read in its entirety and
together with the principal contract between the parties; that it was the intention of
the parties to extend the benefits of the two REMs under the first MOA in favor of
Jose Go and/or his group of companies; and that petitioners' obligations with UCPB
under the first MOA had not been fully settled.
Hence this petition.
ISSUES:
1. WON REVERE and GO have the authority to constitute a mortgage over properties
covered by the deeds of trust to secure their personal and corporate obligations?
2. WON the parties had intended to extend the benefits of the two REMs under the
first MOA to Jose Go and/or his group of companies? “It cited the Spouses Chua's
conformity to UCPB's letter dated November 10, 1999 to the effect that should there
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be any excess or residual value after the settlement of the Spouses Chua and LGCTI's
obligations, said excess would be applied to any outstanding obligations that Jose Go
might have with UCPB.”
3. WON the deed of assignment over 680, 000 equity shares of LGCTI by UCPB to
Asset Pool A is valid?
HELD:
1. No. The deeds of trust expressly provided that: "The TRUSTEE hereby
acknowledges and obliges itself not to dispose of, sell, transfer, convey, lease or
mortgage the said twelve (12) parcels of land without the written consent of the
TRUSTORS first obtained." By entering into the Revere REM, therefore, Revere
openly breached its undertakings under the deeds of trust in contravention of the
express prohibition therein against the disposition or mortgage of the properties. It
is also worth mentioning that the records are bereft of any allegation that Revere
had obtained the approval of petitioners or that the latter had acquiesced to the
mortgage of the properties in favor of UCPB. Absent proof showing that petitioners
had transferred the ownership of some or all of the properties covered by the deeds
of trust in favor or Revere or Jose Go, the deeds of trust remained as the controlling
documents as to the parcels of land therein covered.
Additionally, UCPB could not now feign ignorance of the deeds of trust. As the RTC
aptly pointed out, UCPB's own Vice President expressly mentioned in writing that
UCPB would secure from Jose Go the titles necessary for the execution of the
mortgages. As such, UCPB's actual knowledge of the deeds of trust became
undeniable. In addition, UCPB, being a banking institution whose business was
imbued with public interest, was expected to exercise much greater care and due
diligence in its dealings with the public. Any failure on its part to exercise such
degree of caution and diligence would invariably stigmatize its dealings with bad
faith. It should be customary and prudent for UCPB, therefore, to adopt certain
standard operating procedures to ascertain and verify the genuineness of the titles
to determine the real ownership of real properties involved in its dealings,
particularly in scrutinizing and approving loan applications. By approving the loan
application of Revere obviously without making prior verification of the mortgaged
properties' real owners, UCPB became a mortgagee in bad faith.
2. 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 ₱68,000,000.00. 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
₱68,000,000.00 was deliberately left out, and the proceeds were conveniently
applied to settle ₱75,000,000.00 of Revere and/or Jose Go's unpaid obligations with
UCPB. This application was in blatant contravention of the agreement that Revere's
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or Jose Go's obligations would be paid only if there were excess in the application of
the foreclosure proceeds.
3. No. According to the apportionment of bid price executed by UCPB's account
officer, the bid amounting to ₱227,700,000.00 far exceeded the indebtedness of the
Spouses Chua and LGCTI in the amount of ₱204,597,177.04, which was inclusive of
the ₱68,000,000.00 subject of the deed of assignment of liabilities as well as the
₱32,703,893,450.00 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 ₱68,000,000.00 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.
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Petitioner argues that the obligation to return money is demandable only upon sale
of the Parañaque and Manila properties, thus, the principle of unjust enrichment
was not applicable in their case; and that no interest was due because petitioner did
not enter into a contract of loan with the respondent-spouses and there were no
agreement for payment of interest. Also, payment of monetary interest is allowed
only if there were express stipulation for the payment of interest and if it be reduced
in writing.
Respondent-spouses counter that recovery of money is proper even if the contract
between parties is not a contract of loan; and that legal interest must be imposed on
the amount due from petitioner because she already incurred delay.
REGIONAL TRIAL COURT:
It ruled in favor of petitioner for respondent-spouses’ failure to present
preponderance of evidence to support their allegations in the Complaint. It said that
the acknowledgment receipt or promissory note allegedly executed by petitioner
was inadmissible because it was a private document executed without the
intervention of a notary public and no witness was presented to prove that
petitioner signed the document.
COURT OF APPEALS:
It ruled in favor of the respondent-spouses. It stated that petitioner’s admission that
Php3M pesos was transmitted to her bank account could be treated as judicial
admission sufficient to prove that she received money from respondent-spouses
even without the documents presented by the latter. It added that petitioner is
legally bound to return the money she received considering that the purchase of the
Las Piñas property did not materialize.
ISSUES:
1. Whether or not the principle of unjust enrichment is applicable.
2. Whether or not there should be liability for payment of interest in the case at
bar.
RULING:
1. The principle of unjust enrichment is applicable. More so, there is an implied
agency between parties. By the contract of agency, a person binds himself to render
some service or to do something in representation or on behalf of another, with the
consent or authority of the latter. Agency may be express or implied from the acts of
the principal, from his silence or lack of action, or his failure to repudiate the agency,
knowing that another person is acting on his behalf without authority. Acceptance
by agent of the contract of agency may also be express or implied from his acts
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which carry out the agency, or from his silence or inaction according to the
circumstances.
In the case at bar, it can be inferred that a contract of agency exists between parties.
Petitioner, however, acted beyond the scope of her authority since the parties never
agreed on a substitute property to be purchased in case the bidding of the Las Piñas
property failed to materialize. It was also only after sale that petitioner informed the
respondent-spouses that she settled for the Parañaque and Manila properties.
Hence, petitioner’s failure to fulfill her obligation entitles respondent-spouses the
return of the money they remitted to petitioner.
2. Petitioner is liable for interest incurred by the Php3M at the rate of 6% per
annum from date of filing of the Complaint until the Decision becomes final and
executory. Also, an interest of 6% per annum shall be further imposed on the
amount from the finality of the Decision until its satisfaction.
The Court held that there are instances in which an interest may be imposed even in
the absence of express stipulation, verbal or written. Art. 2209 of the Civil Code
states that if the obligation consists in the payment of a sum of money, and the
debtor incurs delay, a legal interest may be imposed as indemnity for damages if no
stipulation of payment of interest was agreed upon. Likewise, Art 2212 of the Civil
Code provides that interest due shall earn legal interest from the time it is judicially
demanded although the obligation may be silent. The interest under these two
instances may be imposed only as penalty or damages for breach of contractual
obligations. It cannot be charged as a compensation for the use of forbearance of
money. As a form of damages, compensatory interest is due only if the obligor is
proven to have failed to comply with his obligation such as in the case at bar.
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UCPB wrote a letter to the Spouses Chua and LGCTI regarding the transfer of LGCTI
shares of stock to its favor pursuant to the deed of assignment of liabilities.
Spouses Chua wrote UCPB to request an accounting of Jose Go's liabilities that had
been mistakenly secured by the mortgage of petitioners' properties, as well as to
obtain a list of all the properties subject of their REM as well as of the Revere REM
for reappraisal by an independent appraiser. The Spouses Chua further requested
that the proceeds of the foreclosure sale of the properties be applied only to
petitioners' obligation of ₱204,597, 1 77.04; and that the rest of the properties or
any excess of their obligations should be returned to them.
UCPB did not heed petitioners' requests.
Petitioners filed their complaint against UCPB, Revere, Jose Go, and the Register of
Deeds of Lucena City in the RTC in Lucena City. The RTC declared Jose Go and
Revere in default. On February 22, 2005, the RTC denied the motion for
reconsideration of Jose Go and Revere.
RTC: Decided in favor of petitioners and declared as legal and binding the Deeds of
Trust and holding the properties held in trust for plaintiff by defendants REVERE
and GO. The RTC also nullified the Deed of Real Estate Mortgage executed by
defendants REVERE and GO in favor of co-defendant UNITED COCONUT PLANTERS
BANK, without the knowledge by the petitioners. The RTC later declared that the
loan obligations of plaintiffs to defendant UNITED COCONUT PLANTERS BANK
under the Memorandum of Agreement have been fully paid. It also ordered UNITED
COCONUT PLANTERS BANK to return so much of the plaintiff’s titles, of their choice,
equivalent to Php200,000,000.00 after applying so much of the mortgaged
properties, including those presently or formerly in the name of REVERE, to the
payment of plaintiffs' consolidated obligation to the bank in the amount of
Php204,597,177.04.
CA: Reversed and set aside the decision of the RTC. The CA declared the REM of Jose
Go and Rivere in favor of UCPB valid. It also applied the proceeds of the foreclosure
partly to the obligation of Rivere and Jose Go and partly to the obligations of the
petitioners. The CA decided that the first REM remained outstanding and was not
extinguished as claimed by petitioners; that the Revere REM was valid based on the
application of the complementary contracts construed together doctrine whereby
the accessory contract must be read in its entirety and together with the principal
contract between the parties; that it was the intention of the parties to extend the
benefits of the two REMs under the first MOA in favor of Jose Go and/or his group of
companies; and that petitioners' obligations with UCPB under the first MOA had not
been fully settled.
ISSUES:
I. Whether or not the MOA constitutes novation of the prior obligations of the
Petitioners -YES
II. Whether or not the Rivere REM is void by reason of the Deed of Trust -YES
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III. Whether or not the proceeds of the foreclosure should have been applied to Jose
Go and Rivere’s obligations instead of applying them to the petitioners’ obligations
and delivering the excess to them -NO
RULING:
I. We cannot subscribe to the CA's declaration that the 1997 REM still subsisted
separately from the consolidated obligations of petitioners as stated in the March
21, 2000 MOA. As early as the latter part of 1999, correspondence and negotiation
on the matter were already occurring between UCPB, on one hand, and the Spouses
Chua and LGCTI, on the other. Specifically, in its November 10, 1999 letter to
petitioners, UCPB wrote: "This will formalize our earlier discussions on the manner
of settlement of your personal and that of LGCTI's outstanding obligations. " The
outstanding obligations adverted to referred to the Spouses Chua's unsettled,
unpaid and remaining debt with UCPB. In discussing how the Spouses Chua could
settle their obligations, there was no distinction whatsoever between the loans
obtained in 1997 and those made in subsequent years. To be readily inferred from
the tenor of the correspondence was that the Spouses Chua's obligations were
already consolidated.
The MOA referred to the outstanding obligations of LGCTI and the Spouses Chua as
being in the amount of ₱204,597,177.04 as of November 30, 1999. This meant that
all of the Spouses Chua's obligations with UCPB on or prior to November 30, 1999
had already been combined. It was plain enough to see that the MOA constituted the
entire, complete and exclusive agreement between the parties. Its Section 5 .4 of the
MOA expressly stipulated that: "xxxx No statement or agreement, oral or written,
made prior to the signing hereof and no prior conduct or practice by either party
shall vary or modify the written terms embodied hereof, and neither party shall
claim any modification of any provision set forth herein unless such modification is
in writing and signed by both parties. " Furthermore, the REM executed by
petitioners in support of the MOA indicated that the mortgage would secure the
payment of all loans, overdrafts, credit lines and other credit facilities or
accommodations obtained or hereinafter to be obtained by the mortgagors. In light
of the pertinent provisions of the MOA, the only rational interpretation was that the
parties agreed to consolidate the Spouses Chua's past and future obligations, which
would be secured by the REM executed between the parties.
II. There is no question about the validity of the March 21, 2000 MOA as well as the
REM executed by petitioners in support of this MOA. However, much controversy
attended the Revere REM.
The Court affirms the nullity of the Revere REM. We have to note that the REM was
executed by Revere through Jose Go purportedly in connection with the March 21,
2000 MOA on the very same day that petitioners' REM were executed. Yet,
petitioners disclaimed any knowledge or conformity to the Revere REM. With the
two deeds of trust executed in favor of Revere not having been expressly cancelled
or rescinded, the properties mortgaged by Revere to UCPB were still owned by
petitioners for all intents and purposes.
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The deeds of trust expressly provided that: "The TRUSTEE hereby acknowledges
and obliges itself not to dispose of, sell, transfer, convey, lease or mortgage the said
twelve (12) parcels of land without the written consent of the TRUSTORS first
obtained." By entering into the Revere REM, therefore, Revere openly breached its
undertakings under the deeds of trust in contravention of the express prohibition
therein against the disposition or mortgage of the properties. It is also worth
mentioning that the records are bereft of any allegation that Revere had obtained
the approval of petitioners or that the latter had acquiesced to the mortgage of the
properties in favor of UCPB. Absent proof showing that petitioners had transferred
the ownership of some or all of the properties covered by the deeds of trust in favor
or Revere or Jose Go, the deeds of trust remained as the controlling documents as to
the parcels of land therein covered.
III. Additionally, UCPB could not now feign ignorance of the deeds of trust. As the
RTC aptly pointed out, UCPB's own Vice President expressly mentioned in writing
that UCPB would secure from Jose Go the titles necessary for the execution of the
mortgages. As such, UCPB's actual knowledge of the deeds of trust became
undeniable. In addition, UCPB, being a banking institution, whose business was
imbued with public interest, was expected to exercise much greater care and due
diligence in its dealings with the public. Any failure on its part to exercise such
degree of caution and diligence would invariably stigmatize its dealings with bad
faith. It should be customary and prudent for UCPB, therefore, to adopt certain
standard operating procedures to ascertain and verify the genuineness of the titles
to determine the real ownership of real properties involved in its dealings,
particularly in scrutinizing and approving loan applications. By approving the loan
application of Revere obviously without making prior verification of the mortgaged
properties' real owners, UCPB became a mortgagee in bad faith.
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 ₱68,000,000.00. 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
₱68,000,000.00 was deliberately left out, and the proceeds were conveniently
applied to settle ₱75,000,000.00 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.
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
₱68,000,000.00 was null and void. According to the apportionment of bid price
executed by UCPB's account officer, the bid amounting to ₱227,700,000.00 far
exceeded the indebtedness of the Spouses Chua and LGCTI in the amount of
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We, thus, sustain the findings of the CA and the RTC that Northwest committed a
breach of contract "in failing to provide the spouses with the proper assistance to
avoid any inconvenience" and that the actuations of Northwest in both subject
incidents "fall short of the utmost diligence of a very cautious person expected of it."
Both ruled that considering that the Fernandos are not just ordinary passengers but,
in fact, frequent flyers of Northwest, the latter should have been more courteous
and accommodating to their needs so that the delay and inconveniences they
suffered could have been avoided. Northwest was remiss in its duty to provide the
proper and adequate assistance to them.
Nonetheless, We are not in accord with the common nding of the CA and the RTC
when both ruled out bad faith on the part of Northwest. While We agree that the
discrepancy between the date of actual travel and the date appearing on the tickets
of the Fernandos called for some veri cation, however, the Northwest personnel
failed to exercise the utmost diligence in assisting the Fernandos. The actuations of
Northwest personnel in both subject incidents are constitutive of bad faith.
On the first incident, Jesus Fernando even gave the Northwest personnel the
number of his Elite Platinum World Perks Card for the latter to access the ticket
control record with the airline's computer for her to see that the ticket is still valid.
But Linda Puntawongdaycha refused to check the validity of the ticket in the
computer. As a result, the Immigration Of cer brought Jesus Fernando to the
interrogation room of the INS where he was interrogated for more than two (2)
hours. When he was finally cleared by the Immigration Of cer, he was granted only a
twelve (12)-day stay in the United States (US), instead of the usual six (6) months.
As in fact, the RTC awarded actual or compensatory damages because of the
testimony of Jesus Fernando that he had to go back to Manila and then return again
to LA, USA, two (2) days after requiring him to purchase another round trip ticket
from Northwest in the amount of $2,000.00 which was not disputed by
Northwest.41 In ignoring Jesus Fernando's pleas to check the validity of the tickets
in the computer, the Northwest personnel exhibited an indifferent attitude without
due regard for the inconvenience and anxiety Jesus Fernando might have
experienced.
Passengers do not contract merely for transportation. They have a right to be
treated by the carrier's employees with kindness, respect, courtesy and due
consideration. They are entitled to be protected against personal misconduct,
injurious language, indignities and abuses from such employees. So it is, that any
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personnel Jeanne Meyer who retrieved their control number from her computer and
was able to ascertain that the Fernandos' electronic tickets were valid, and they
were con rmed passengers on both NW Flight No. 001 for Narita Japan and NW 029
for Manila on that day.
In Ortigas, Jr. v. Lufthansa German Airlines, this Court declared that "(i)ncontracts of
common carriage, in attention and lack of care on the part of the carrier resulting in
the failure of the passenger to be accommodated in the class contracted for amounts
to bad faith or fraud which entitles the passengers to the award of moral damages in
accordance with Article 2220 of the Civil Code."
In Pan American World Airways, Inc. v. Intermediate Appellate Court, where a
would-be passenger had the necessary ticket, baggage claim and clearance from
immigration, all clearly and unmistakably showing that she was, in fact, included in
the passenger manifest of said right, and yet was denied accommodation in said
ight, this Court did not hesitate to af rm the lower court's finding awarding her
damages on the ground that the breach of contract of carriage amounted to bad
faith. For the indignity and inconvenience of being refused a con rmed seat on the
last minute, said passenger is entitled to an award of moral damages.
In this case, We need to stress that the personnel who assisted the Fernandos even
printed coupon tickets for them and advised them to rush back to the boarding
gates since the plane was about to depart. But when the Fernandos reached the
boarding gate, the plane had already departed. They were able to depart, instead,
the day after, or on January 30, 2002.
In Japan Airlines v. Jesus Simangan, this Court held that the acts committed by Japan
Airlines against Jesus Simangan amounted to bad faith, thus: x x x JAL did not allow
respondent to y. It informed respondent that there was a need to rst check the
authenticity of his travel documents with the U.S. Embassy. As admitted by JAL, "the
right could not wait for Mr. Simangan because it was ready to depart."Since JAL
definitely declared that the right could not wait for respondent, it gave respondent
no choice but to be left behind. The latter was unceremoniously bumped off despite
his protestations and valid travel documents and notwithstanding his contract of
carriage with JAL.Damage had already been done when respondent was offered to
fly the next day on July 30, 1992. Said offer did not cure JAL's default.
Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals, where private respondent
was not allowed to board the plane because her seat had already been given to
another passenger even before the allowable period for passengers to check in had
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lapsed despite the fact that she had a con rmed ticket and she had arrived on time,
this Court held that petitioner airline acted in bad faith in violating private
respondent's rights under their contract of carriage and is, therefore, liable for the
injuries she has sustained as a result. Under Article 2220 53 of the Civil Code of the
Philippines, an award of moral damages, in breaches of contract, is in order upon a
showing that the defendant acted fraudulently or in bad faith. Clearly, in this case,
the Fernandos are entitled to an award of moral damages. The purpose of awarding
moral damages is to enable the injured party to obtain means, diversion or
amusement that will serve to alleviate the moral suffering he has undergone by
reason of defendant's culpable action.
WHEREFORE, the Decision dated August 30, 2013 and the Resolution dated March
31, 2014 of the Court of Appeals, in CA-G.R. CV No. 93496 are hereby AFFIRMED
WITH MODIFICATION. The award of moral damages and attorney's fees are hereby
increased to P3,000,000.00 and ten percent (10%) of the damages awarded,
respectively. Exemplary damages in the amount of P2,000,000.00 is also awarded.
Costs against Northwest Airlines.
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respondents, promised that he would return the money by installments and pleaded
that they do not report the incident to the petitioner. Robles however reneged on his
promise. Petitioner also refused to make arrangements for the return of
respondents' money despite several demands. On January 8, 2007, respondents filed
a Complaint for sum of money and damages. against Robles and the petitioner. In
their Complaint, respondents alleged that Robles committed fraud in the
performance of his duties as branch manager when he lured Tobias in signing
several pieces of blank documents, under the assurance as bank manager of
petitioner, everything was in order.
ISSUE:
Whether or not Citystate is jointly and solidarily liable with robles to pay for the
damage supposedly suffered by respondents?
HELD:
The business of banking is one imbued with public interest. As such, banking
institutions are obliged to exercise the highest degree of diligence as well as high
standards of integrity and performance in all its transactions. The law expressly
imposes upon the banks a fiduciary duty towards its clients and to treat in this
regard the accounts of its depositors with meticulous care.
The contract between the bank and its depositor is governed by the provisions of
the Civil Code on simple loan or mutuum, with the bank as the debtor and the
depositor as the creditor. In light of these, banking institutions may be held liable for
damages for failure to exercise the diligence required of it resulting to contractual
breach or where the act or omission complained of constitutes an actionable tort.
Nonetheless, while it is clear that the proximate cause of respondents' loss is the
misappropriation of Robles, petitioner is still liable under Article 1911 of the Civil
Code, to wit: Art. 1911. Even when the agent has exceeded his authority, the
principal is solidarity liable with the agent if the former allowed the latter to act as
though he had full powers.
Then, applying the doctrine of comparative negligence, this Court adjudged PCIB
and Citibank equally liable for the proceeds of Citibank Check Nos. SN 10597 and
16508.
It is without question that when the action against the bank is premised on breach
of contractual obligations, a bank's liability as debtor is not merely vicarious but
primary, in that the defense of exercise of due diligence in the selection and
supervision of its employees is not available. Liability of banks is also primary and
sole when the loss or damage to its depositors is directly attributable to its acts,
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finding that the proximate cause of the loss was due to the bank's negligence or
breach.
The bank, in its capacity as principal, may also be adjudged liable under the doctrine
of apparent authority. The principal's liability in this case however, is solidary with
that of his employee.
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inspection, Sheriff Romeo V. Diaz discovered that the shipments were found in an
open area and were in a deteriorating state; (5) due to this, Padoson was compelled
to file a Manifestation and Motion dated January 27, 2004 praying for the release of
the shipments, which was in turn, granted by the RTC on June 25, 2004; (6) on April
17, 2006, the RTC issued a Resolution, granting Padoson's Motion for Issuance of
Writ of Execution and accordingly issued the Writ of Execution, allowing Padoson to
take possession of the shipment; (7) Sheriff Diaz in his Sheriffs Partial Return on
Execution dated August 8, 2006, stated that one of the nine steel coils which were
part of the shipments, were missing; and (8) That due to the deterioration of the 72
hot-rolled steel coils, their value depreciated and when Padoson sold the same, he
incurred a loss of P13.8 Million in lost profits. As to the stainless steel coils, he
incurred a total loss of P2,992,000.00 corresponding to the value of the one steel coil
lost (P882,000.00) and the lost profits for the sale of the remaining steel coils
(P2,110,000.00).
In its Answer to Compulsory Counterclaim, ATI countered that it exercise due
diligence in the storage of the shipments and that the same were withdrawn from its
custody in the same condition and quantity as when they were unloaded from the
vessel.
During the trial, Padoson presented a certain Mr. Gregory Ventura, who allegedly
took pictures of the shipments. The pictures, however, were not pre-marked during
the pre-trial. Consequently, the RTC issued an Order dated September 8, 2011,
disallowing the marking of the said pictures and Ventura's testimony thereon. To
assail the said order, Padoson filed a Petition for Certiorari before the CA but the
same was denied in the CA Decision dated July 1, 2013, which became final and
executory on July 24, 2013.
ATI called to the witness stand its Cash Billing Supervisor, Mr. Samuel Goutana to
explain how ATI computed the amount of storage fees prayed for in its Complaint
against Padoson.
On July 16, 2012, the RTC rendered its Decision, dismissing ATI's complaint and
Padoson's counterclaim. The RTC held that although the computation of storage fees
to be paid by Padoson as prayed for in ATI's complaint to the tune of P8,914,535.28
plus legal interest, were "clear and unmistakable" and which Padoson never denied,
the liability to pay the same should be borne by the BOC. RTC reasoned out that by
virtue of the Hold-Order over Padoson's shipments, the BOC has acquired
constructive possession over the same. Consequently, the BOC should be the one
liable to ATI's money claims. The RTC, however, pointed out that since ATI did not
implead the BOC in its complaint, the BOC cannot be held to answer for the payment
of the storage fees.
ATI appealed the RTC decision, but the same was denied by the CA in its Decision
dated July 23, 2013. The CA ruled that the RTC did not err in holding that Padoson's
shipments were under the BOC's constructive possession upon its issuance of the
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Hold-Order. The CA, likewise, ruled that there is substantial evidence to prove that
the shipments suffered loss and deterioration or damage while they were stored in
ATI's premises. But since the BOC had acquired constructive possession over the
shipments, the CA ruled that neither ATI could be held liable for damages nor
Padoson be held liable for the storage fees. Lastly, the CA pronounced that the RTC
was correct in holding that no relief may be given to both ATI and Padoson since the
BOC was not impleaded in ATI's complaint.
ATI filed a Motion for Reconsideration, stating among others, that: (1) the
documents attached to Padoson's Answer are inadmissible and insufficient to prove
that the shipments were damaged while in ATI's premises; (2) those documents
were related to the Customs case in which ATI was not impleaded as a party, and
thus, was not given an opportunity to contest them; (3) with respect to the
photographs over the shipments allegedly taken on January 16, 2004, the same
should be inadmissible for lack of authentication; (4) that Padoson's witness, a
certain Mary Jane Lorenzo, was not competent to testify on the photographs since
she admitted that she was not the one who took the photographs and that the same
do not indicate that they pertain to Padoson's shipment; (5) Sheriff Dizon's
declaration in his Report on Ocular Inspection that the shipments, were "already in a
deteriorating condition," were merely conclusory; and (6) Sheriff Dizon who
prepared the Partial Return on Execution dated August 8, 2006, was not called to the
witness stand to testify on the contents of the said Return.
On March 26, 2014, the CA issued a Resolution denying ATI's motion for
reconsideration. Hence, this petition for review on certiorari.
ISSUE:
Whether or not ATI is entitled to an award of damages?
HELD:
ATI is not entitled to exemplary damages and attorney’s fees. Pursuant to Articles
2229 and 2234 of the Civil Code, exemplary damages may be awarded only in
addition to moral, temperate, liquidated, or compensatory damages. Since ATI is not
entitled to either moral, temperate, liquidated, or compensatory damages, then their
claim for exemplary damages is bereft of merit. It has been held that as a requisite
for the award of exemplary damages, the act must be accompanied by bad faith or
done in wanton, fraudulent or malevolent manner — circumstances which are
absent in this case.
Finally, considering the absence of any of the circumstances under Article 2208 of
the Civil Code where attorney's fees may be awarded, the same cannot be granted to
ATI.
387
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CIVIL LAW REVIEW 2 CASES
388
SBCA School of Law (Batch 2018 – 2019)