2011 CIV 2 Case Digests

OBLIGATIONSGONZALES vs. PCIB G.R. No. 180257 February 23, 2011 FACTS: Eusebio Gonzales was a client of PCIB to which it granted a credit line to Gonzales. Gonzales drew from said credit line through the issuance of check. At the institution of the instant case, Gonzales had a Foreign Currency Deposit (FCD) with PCIB. Gonzales and his wife obtained a loan for P500,000 and subsequently spouses Panlilo and Gonzales obtained two additional loans in the amounts of P1,000,000 and P300,000, respectively. These three loans amounting to P1,800,000 were covered by three promissory notes. An REM over a parcel of land was executed by Gonzales and the spouses Panlilio to secure the loans. Notably, the promissory notes specified, among others, the solidary liability of Gonzales and the spouses Panlilio for the payment of the loans. However, it was the spouses Panlilio who received the loan proceeds. PCIB allegedly called the attention of Gonzales but to no avail when spouses Panlilio defaulted in paying the monthly interest dues of the loans. thus In the meantime, Gonzales issued a check for P250,000 drawn against the credit line but said check was dishonored by PCIB due to the termination by PCIB of the credit line for the unpaid periodic interest dues from the loans of Gonzales and Panlilio. PCIB likewise froze the FCD account of Gonzales. Thereafter, several demand letters were sent to Gonzales with the threat of legal action. With his FCD account that PCIB froze, Gonzales was forced to source out and pay the P250,000 he owed to Unson in cash. Gonzales thru his counsel, wrote PCIB reminding that it knew well that the actual borrowers were the spouses Panlilio and he never benefited from the proceeds of the loans, which were serviced by the PCIB account of the spouses Panlilio. The RTC found Gonzales solidarily liable with the spouses Panlilio on the three promissory notes relative to the outstanding REM loan. The CA affirmed the RTC’s decision. ISSUE: WoN Gonzales is solidarily liable for the three promissory notes he made with spouses Panlilio even though the proceeds was received solely by spouses Panlilio? HELD: Clearly, Gonzales is liable for the loans covered by the above promissory notes. Gonzales admitted that he is an accommodation party which PCIB did not dispute. In his testimony, Gonzales admitted that he merely accommodated the spouses Panlilio at the suggestion of Ocampo, who was then handling his accounts, in order to facilitate the fast release of the loan. The solidary liability of Gonzales is clearly stipulated in the promissory notes which uniformly begin, "For value received, the undersigned (the "BORROWER") jointly and severally promise to pay x x x." Solidary liability cannot be presumed but must be established by law or contract. Article 1207 of the Civil Code pertinently states that "there is solidary liability only when the obligation expressly so states, or when the obligation requires solidarity." This is true in the instant case where Gonzales, as accommodation party, is immediately, equally, and absolutely bound with the spouses Panlilio on the 1 promissory notes which indubitably stipulated solidary liability for all the borrowers. x x x 2 HERNANDEZ-NIEVERA ET AL vs. HERNANDEZ ET AL G.R. No. 171165 February 14, 2011 FACTS: PMRDC entered into various agreements with co-respondents HIGC and LBP in 1995 in connection with the construction of the Isabel Homes housing project in Batangas and of the Monumento Plaza commercial and recreation complex in Caloocan City. PMRDC conveyed to HIGC the constituent assets of the two projects in its Asset Pool Formation Agreement, whereas LBP agreed to act as trustee of the resulting Asset Pool for a consideration. In 1997, PMRDC entered into MOA whereby it was given the option to buy pieces of land owned by petitioners under authority of SPA to sell or mortgage, signed the MOA also in behalf of his co-owners. It stated that PMRDC shall have the option to purchase the parcels of land within 12 months from the date of the instrument and that PMRDC shall pay the vendor option money. Additionally, should the PMRDC fail to exercise its option to purchase the parcels of land within the stipulated period, the option money shall be forfeited in favor of the vendor and that the vendee shall return to the vendor all TCTs covering the described parcels of land within a period of 30 days from the stipulated period, free from all liens and encumbrances. PMRDC entered with LBP and Demetrio into a Deed of Assignment and Conveyance (DAC) in 1998 whereby the lands were transferred and assigned to the Asset Pool in exchange for a number of shares of stock which supposedly had already been issued in the name and in favor of Demetrio. PMRDC did not avail of its option to purchase the lands within 12 months. The checks representing the option money that were delivered by PMRDC, allegedly bounced which prompted petitioners to demand the corresponding TCTs. PMRDC refused to deliver the TCTs and stated that the covered properties had already been conveyed and assigned to the Asset Pool pursuant to the DAC. Petitioners, on the other hand, alleged that the signature of Demetrio in the DAC was a mere forgery because its power of attorney was limited only to selling or mortgaging the properties not conveying the same to Asset Pool, thus the DAC must be nullify. Thereafter, in view of petitioners’ complaint, the trial court declared the MOA to be an option contract and ordered its rescission and the DAC declared null and void. The CA reversed and set aside the trial court’s decision. ISSUE: WoN novation is present by declaring the Deed of Assignment and Conveyance valid which therefore extinguished the PMRDC’s obligation in the Memorandum of Agreement? HELD: It becomes clear that Demetrio’s special power of attorney to sell is sufficient to enable him to make a binding commitment under the DAC in behalf of Carolina and Margarita. In particular, it does include the authority to extinguish PMRDC’s obligation under the MOA to deliver option money and agree to a more flexible term by agreeing instead to receive shares of stock in lieu thereof and in consideration of the assignment and conveyance of the properties to the Asset Pool. Indeed, the terms of his special power of attorney allow much leeway to accommodate not only the terms of the MOA but also those of the subsequent agreement in the DAC which, in this case, necessarily and consequently has resulted in a novation of PMRDC’s integral obligations. On this score, we quote with approval the decision of the Court of 3 The second is when the old and the new obligations are incompatible on every point.G. 4 . The first is when novation has been explicitly stated and declared in unequivocal terms. Corollarily. the presence of novation and thereby produce the effect of extinguishing an obligation by another which substitutes the same. in CA. Inc. the change would be merely modificatory in nature and insufficient to extinguish the original obligation.Appeals. The October 19. The incompatibility must take place in any of the essential elements of the obligation such as its object. The Petition is DENIED.R. 2006 Resolution of the Court of Appeals. Inc. v. CV No. otherwise.: There are two ways which could indicate. The test of incompatibility is whether the two obligations can stand together. they are incompatible. If they cannot. 83852. are hereby AFFIRMED. cause or principal conditions thereof. in fine. aptly citing the case of California Bus Lines. State Investment House. each one having its independent existence. changes that breed incompatibility must be essential in nature and not merely accidental. 2005 Decision and January 11. and the latter obligation novates the first. . and (5) the person interested in the performance of the obligation was given notice after the consignation was made. The RTC dismissed the complaint and ordered Dalton to vacate the property. Dayrit and FGR withdrew the rental payments and reserved the right to question the validity of the consignation. In order that the consignation of the thing due may release the obligor. The Court of Appeals affirmed the RTC.R. Ltd. et al. (4) the amount was placed at the disposal of the court. Court of Appeals. Petitioners Dalton and Sasam et al leased portions of the property. Failure to comply strictly with any of the requisites will render the consignation void. Dayrit and FGR expressly reserved the right to question the validity of the consignation. Toyota Bel-Air. 172577 January 19. Thus. In Insular Life Assurance Company.DALTON vs. unknown or incapacitated. or several persons claimed the same right to collect. They failed to notify Dayrit and FGR about the consignation. 1985. No. FGR REALTY and DEVELOPMENT CORPORATION ET AL G. consigned the rental payments with the RTC. reserving his right to the balance. First. The same factual milieu obtains here because the respondent creditor accepted with reservation the amount consigned in court by the petitioner-debtor. (2) the creditor to whom tender of payment was made refused without just cause to accept the payment. 1257. he is not deemed to have waived the claims he reserved against his debtor.811-square meter parcel of land located at the corner of Rama Avenue and Velez Street in Cebu City is owned by Flora R. Dayrit sold the property to respondent FGR. respectively: Art. entered into compromise agreements and they agreed to abandon all claims against each other. Dayrit. or the title of the obligation was lost. Second. v. Dalton did not enter into a compromise agreement with Dayrit and FGR. In June 1985. Dalton and Sasam. Dayrit. et al. Therefore. the Court held that: A sensu contrario. It is found that there is no valid consignation. in withdrawing the amounts consigned. it must first be announced to the persons interested in the 5 . when the creditor’s acceptance of the money consigned is conditional and with reservations. Dayrit and FGR stopped accepting rental payments because they wanted to terminate the lease agreements with Dalton and Sasam. In August 1985. when the amount consigned does not cover the entire obligation. the creditor is not barred from raising his other claims. In Riesenbeck v. the Court enumerated the requisites of a valid consignation: (1) a debt due. Inc. ISSUE: WoN the consignation is valid in case there is only substantial compliance as to the requisites? HELD: The consignation is void. et al. 2011 FACTS: A 1. In a complaint dated September 11. The Court was not impressed. or the creditor was absent. (3) the person interested in the performance of the obligation was given notice before consignation was made. FGR and Sasam. Substantial compliance is not enough. the creditor may accept it. compliance with the requisites of a valid consignation is mandatory. Articles 1257 and 1258 of the Civil Code state. The court denies the petition. The giving of notice to the persons interested in the performance of the obligation is mandatory. 1258. Consignation shall be made by depositing the things due at the disposal of judicial authority. The consignation shall be ineffectual if it is not made strictly in consonance with the provisions which regulate payment. Art. Failure to notify the persons interested in the performance of the obligation will render the consignation void. the interested parties shall also be notified thereof.fulfilment of the obligation. in a proper case. before whom the tender of payment shall be proved. and the announcement of the consignation in other cases. 6 . The consignation having been made. 1387 does not apply to registered lands IF “the judgment or attachment made is not also registered. MDEC and MHI are owned and controlled by the Lee family. 1387 of the Civil Code does not apply in the present case The presumption of fraud established under Art. MDEC had defaulted in the payment of its loan with Asiatrust thus the latter executed a REM over the properties of Samuel in Cupang. 1996. Even assuming that Art. consequently the TCTs covering the subject properties were consolidated in the name of Asiatrust without the annotation of the writs of preliminary attachment. prior to the annotation of the REM on February 23. respectively. and that the REM had previously been annotated on the titles. 1998 in a case for a sum of money for nonpayment of its obligation. Believing the REM and the foreclosure sale to be fraudulent. and. 1998. which were deemed canceled. and annotated at the back of the titles which were delivered to Asiatrust. SBC. 173349 February 9. thereafter foreclosed the subject mortgaged Antipolo properties and won as the highest bidder at the auction sale. x x x x the presumption of fraud under Art. Bangkok Bank filed a case before the RTC for the rescission of the REM over the subject properties among others. the execution of a mortgage is not contemplated within the meaning of alienation by onerous title under the said provision. Bangkok Bank discovered that the spouses Lee had executed a REM over the subject Antipolo properties in favor of Asiatrust. SBC was able to successfully acquire a writ of preliminary attachment in its favor against the spouses Lee on January 30. 1387 of the Code applies. (MHI) entered into two separate Credit Line Agreements (CLAs) with Respondent Bangkok Bank Public Company. as a consequence of such fraud. Bangkok Bank did not redeem the subject properties. 2011 FACTS: Midas Diversified Export Corporation (MDEC) and Manila Home Textile. No. x x x x But while a judgment was made against the spouses Lee in favor of SBC on January 30. Bangkok Bank instituted an action to recover the loans extended to MDEC and MHI under the guarantees. 1998. as one of the creditors of Lee corporations. it was only on that date that the said mortgage was actually notarized. Inc. 7 . however. and. was not annotated on the titles of the subject properties. 1387 of the Code clearly cannot apply. Antipolo. be rescinded? HELD: The presumption of fraud under Art. therefore. purchasing the said properties. the questioned mortgage could. registered. this. BANGKOK BANK PUBLIC COMPANY. filed a case against the Lee family for a sum of money for non-payment of obligation.” In this case. Eventually. Limited (Bangkok Bank) on November 29. Asiatrust. thus.LEE ET AL vs. ISSUE: WoN the REM executed over the subject Antipolo properties and the foreclosure sale were committed in fraud of petitioners’ other creditors.R. A new deed of mortgage was signed by spouses Samuel and Pauline Lee. 1995 and April 17. Subsequently. LIMITED G. the CA’s March 15. therefore. in favor of which the REM was executed. and which subsequently foreclosed the subject properties—acted in good faith and without any badge of fraud. what comes to mind first is the question of whether the conveyance was a bona fide transaction or a trick and contrivance to defeat creditors. Asiatrust. Contracts in fraud of creditors are those executed with the intention to prejudice the rights of creditors. In allowing rescission in case of an alienation by onerous title. the REM cannot be rescinded and shall. the third person who received the property conveyed should likewise be a party to the fraud. More so it is. A careful reading of Art. As clarified by Art. therefore. in all instances. an action for rescission cannot prosper. so long as the third person who is in legal possession of the property in question did not act with fraud and in bad faith. 1387 of the Code. A third person is not and should not be automatically presumed to be in fraud or in collusion with the judgment debtor. but also that of another creditor. 2006 Decision and June 29. a creditor may suffer some damage. The alleged fraud on the part of the spouses Lee was not proved and substantiated Even pushing further to say that the REM was executed by the spouses Lee to defraud creditors. 1387 where fraud is to be presumed. against whom a judgment was made or some writ of attachment was issued. good faith is presumed. 2006 Resolution in CA-G. certainly not the alienation by onerous title that is contemplated in Art. whether the person. as Asiatrust—the third party. as a direct consequence. Thus. 8 . fraud is presumed only in alienations by onerous title of a person against whom a judgment or attachment has been issued. Accordingly. In determining whether or not a certain conveying contract is fraudulent. The petition is hereby GRANTED. as to the third person in legal possession of the questioned property. even if. 79362 are REVERSED and SET ASIDE. 1387 of the Code vis-à-vis its Art. x x x x Considering that the totality of circumstances clearly manifests the want of fraud and bad faith on the part of the parties to the REM in question. and against whom some judgment has been rendered in any instance or some writ of attachment has been issued. the REM cannot be rescinded. consequently. rescission cannot take place. stand. there being no evidence of fraud or bad faith. so long as the person who is in legal possession of the property did not act in bad faith. 99-5388 is hereby REINSTATED. Art. when the allegation involves not only fraud on the part of the debtor. 1385 would plainly show that the presumption of fraud in case of alienations by onerous title only applies to the person who made such alienation. being a third person in good faith. 1385 of the Civil Code explicitly states this.Under Art. acted with or without fraud. 1385(2) of the Code. They should not be confused with those entered into without such mal-intent. should not be automatically presumed to have acted fraudulently by the mere execution of the REM over the subject Antipolo properties. CV No. The RTC’s April 21. x x x x It is. 2003 Decision in Civil Case No.R. As a general rule. As such. But since R. ISSUE: WoN AGFHA is entitled to recover the value of its lost shipment based on the acquisition cost at the time of payment? HELD: The Court agrees with the ruling of the CTA that AGFHA is entitled to recover the value of its lost shipment based on the acquisition cost at the time of payment. the Court of Appeals cited the case of Zagala v. the Court ruled that the rate of exchange for the conversion in the peso equivalent should be the prevailing rate at the time of payment: In ruling that the applicable conversion rate of petitioner's liability is the rate at the time of payment. shall be discharged in the currency which is the legal tender in the Philippines. AGFHA filed a motion for execution. Northwest Airlines. interpreting the provisions of Republic Act No. Inc. v. The CTA-Second Division issued the writ of execution directing the Commissioner and his authorized representative to effect the immediate release of the subject shipment. The CTA-Second Division reversed the Commissioner’s decision and ordered the immediate release of the subject shipment to AGFHA. AGFHA INC.COMMISSIONER OF CUSTOMS vs. as amended by R. However.A.F. No.A. UNIMEX Micro-Electronics GmBH. AGFHA intervened and alleged that it was the owner and actual consignee of the subject shipment. 1993. The CTA-Second Division issued an entry of judgment declaring the above-mentioned decision final and executory. Sharp and Co. 2011 FACTS: A shipment containing bales of textile grey cloth arrived at the MICP on December 12. 529. subject to certain exceptions. G. however. Inc. Under this law. in the case of Republic of the Philippines represented by the Commissioner of Customs v. In the case of C. the Court upheld the decision of the CA holding that petitioner’s liability may be paid in 9 . MICP ordered the forfeiture of the subject shipment in favor of the government after the seizure and forfeiture proceeding. The Commissioner. stipulations on the satisfaction of obligations in foreign currency are void. the Commissioner filed a petition for review on certiorari and its MR was dismissed. The Commissioner dismissed the appeal filed by AGFHA. Likewise. The CA denied due course to the Commissioner’s appeal for lack of merit. held the subject shipment because its owner/consignee was allegedly fictitious. Payments of monetary obligations. No. Thereafter. the Court held in a number of cases that the rate of exchange for the conversion in the peso equivalent should be the prevailing rate at the time of payment. 187425 March 28.. Jimenez. which involved the seizure and detention of a shipment of computer game items which disappeared while in the custody of the Bureau of Customs. it was returned unsatisfied. 529 does not provide for the rate of exchange for the payment of foreign currency obligations incurred after its enactment. No. 4100. the Commissioner was adjudged liable to AGFHA. The CTA-Second Division held in abeyance its action on AGFHA’s motion for execution in view of the Commissioner’s appeal with the Court of Appeals .R. is AFFIRMED.08. The Commissioner of Customs is hereby ordered to pay. petitioner's "payment shall be taken from the sale or sales of goods or properties seized or forfeited by the Bureau of Customs. we agree with the lower courts' directive that. 2009 Decision of the Court of Tax Appeals En Banc. 10 ." The February 25. in accordance with law. computed at the exchange rate prevailing at the time of actual payment. in CTA EB Case No. upon payment of the necessary customs duties by AGFHA. 136. Accordingly. the value of the subject lost shipment in the amount of US$160.348.Philippine currency. computed at the exchange rate prevailing at the time of actual payment after payment of the necessary customs duties. 11 . with the merchandise serving as collateral. As a result. with modifications that the interest shall be at the rate of 6% per annum to run from the time of demand. FEBTC G. plus interest of 12% per annum from filing of Complaint until fully paid. The foregoing importation was covered by a trust receipt document signed by Marques on behalf of Maxilite. and Makati Insurance Company countered that Maxilite and Marques have no cause of action against them and essentially denied the allegations in the complaint. which Maxilite claimed against the fire insurance policy with Makati Insurance Company. FEBIBI. No. The Court of Appeals affirmed the trial court’s decision. 2011 FACTS: A trust receipt transaction is entered into by Maxilite and Marques with FEBTC for shipment of various high-technology equipments from the United States. 171419 January 10. as litigation expenses. No. 1994 to June 24 1995 was released to cover the trust receipted merchandise. Insurance Policy covering the period June 24.R. vs. FEBIBI. FEBTC. FEBTC and FEBIBI disclaimed any responsibility for the denial of the claim. March 9. FEBTC would debit Maxilite’s account for the premium payments. Maxilite and Marques sued FEBTC. upon the advice of FEBTC. The premiums for these policies were paid by Maxilite through debit arrangement. filing fees. ISSUE: WoN FEBIBI and Makati Insurance Company are jointly and severally liable to pay respondents the full coverage of the subject insurance policy despite (a) their separate juridical personalities. Maxilite suffered losses. to both plaintiffs exemplary damages. 1995. and Makati Insurance Company for damages. FEBIBI sent written reminders to FEBTC to debit Maxilite’s account. a fire gutted the Aboitiz Sea Transport Building where Maxilite’s office and warehouse were located.MARQUES and MAXILITE TECHNOLOGIES INC. Makati Insurance Company denied the fire loss claim on the ground of non-payment of premium. FEBIBI. (b) the absence of any fault or negligence on their part. Moral and exemplary damages were reduced. When Maxilite failed to pay the insurance premium.R. Maxilite fully settled its trust receipt account. and to pay the costs. attorney’s fees. as reflected in statements of accounts sent by FEBTC to Maxilite. and (c) respondents’ failure to prove the extent of the alleged loss? HELD: Both trial and appellate courts basically agree that FEBTC is estopped from claiming that the insurance premium has been unpaid. facilitated the procurement and processing from Makati Insurance Company of 4 separate and independent fire insurance policies over the trust receipted merchandise. to the plaintiff moral damages. 171379 / G. RTC ruled in favor of Maxilite and Marques ordering the defendants to pay jointly and severally to Maxilite the sum representing the full coverage of Insurance Policy as actual damages. a subsidiary’s separate existence shall be respected. Inc. Maxilite’s fire loss claim would have been approved. as found by the trial court. WHEREFORE. and Makati Insurance Company are independent and separate juridical entities. Suffice it to state that FEBTC. there being fault or negligence. or Makati Insurance Company. FEBIBI. (2) FEBTC had insurable interest over the property prior to the settlement of the trust receipt account. Only Far East Bank and Trust Company. CV No. Hence. FEBTC must be held liable for damages pursuant to Article 2176 of the Civil Code which states "whoever by act or omission causes damage to another. through the automatic debit arrangement with FEBTC. FEBTC should have debited Maxilite’s account as what it had repeatedly done. we AFFIRM with MODIFICATION the 31 May 2005 Decision and the 26 January 2006 Resolution of the Court of Appeals-Cebu City in CA-G. FEBTC failed to debit and instead disregarded the written reminder from FEBIBI to debit Maxilite’s account. and the liability of the parent corporation as well as the subsidiary shall be confined to those arising in their respective business.R. and not Far East Bank Insurance Brokers. Maxilite suffered damage to the extent of the face value of the insurance policy or the sum of P2. Contrary to Maxilite’s and Marques’ view. Besides.Prior the full settlement of the trust receipt account on 24 and 26 October 1994. Absent any showing of its illegitimate or illegal functions. even if FEBIBI and Makati Insurance Company are subsidiaries of FEBTC.1 million. was sent by FEBIBI to FEBTC to debit Maxilite’s account for the payment of the insurance premium. FEBTC’s conduct clearly constitutes negligence in handling Maxilite’s and Marques’ accounts." Indisputably. dated 19 October 1994. As a consequence of its negligence. is obliged to pay for the damage done. 62105. FEBTC is solely liable for the payment of the face value of the insurance policy and the monetary awards stated in the Court of Appeals’ decision. FEBTC had insurable interest over the merchandise. and Makati Insurance Company as a single entity. FEBIBI. and (3) Maxilite’s bank account had sufficient funds to pay the insurance premium prior to the settlement of the trust receipt account. Likewise. as an established practice. However. with respect to the previous insurance policies. Maxilite had sufficient funds at the time the first reminder. there is no evidence showing FEBIBI’s and Makati Insurance Company’s negligence as regards the non-payment of the insurance premium. had the insurance premium been paid. is ORDERED to PAY the face value of the subject insurance policy and the monetary awards stated in the Court of Appeals’ decision. 12 . Since (1) FEBTC committed to debit Maxilite’s account corresponding to the insurance premium. and thus had greater reason to debit Maxilite’s account. Further. the records are bereft of any evidence warranting the piercing of corporate veil in order to treat FEBTC. The promissory note it executed provided that Lotto would pay DBS a monthly amortization of P35. penalties. Lotto filed against BPI with the RTC of Manila in Civil Case 02-105415an action for reformation or annulment of real estate mortgage with prayer for TRO and preliminary injunction.990. BPI foreclosed the mortgage on Lotto’s condominium unit to satisfy its unpaid claim of P5.470.045. it followed that it also authorize her to provide the security that the loan required. 1999 to December 24. BPI FAMILY SAVINGS BANK. Lotto paid its monthly amortizations for 12 months from December 24. INC.5% to 19% per annum. finding that DBS breached the stipulations in the promissory note when it unilaterally increased the interest rate on its loan from 11. and estimated foreclosure expenses. Lotto.7% per annum.00 from the DBS Bank (DBS) at an interest rate of 11. BPI's computation applied an interest rate of 19% per annum for the period December 24. represented by Suat Kim Go (Go). Inc. less the amortizations that it already paid.000. Lotto tried to negotiate with BPI for reduction of interest but the latter agreed to reduce it to only 14. 2001 to October 10. 2005 the RTC rendered decision in Lotto’s favor.000. No. BPI appealed to the CA. To stop the foreclosure. To secure payment of the loan. 177260. Lotto contested the increase and stopped paying the loan. 2000 to November 24. and 14.69 a month. the RTC held that the mortgage on the condominium unit was void since the Lotto Board of Directors did not authorize Go to sign the document.LOTTO RESTAURANT CORPORATION. having authorized Go take out the loan from the bank. 2002. 2011 FACTS: On December 23.045.69 for 180 months. G.00 at P35. 1999 petitioner Lotto Restaurant Corporation (Lotto) got a loan of P3. fire insurance premium. which was still unacceptable to Lotto. After respondent BPI Family Savings Bank. On October 21.832. which reversed the RTC decision.R. 13 . On January 11.283. The CA held that Lotto was estopped from questioning the validity of the promissory note and the real estate mortgage since. 2001.7% per annum for the period December 24. But in January 2001. The RTC directed the Register of Deeds to cancel the encumbrance on Lotto's title and ordered Lotto to pay BPI its loan of P2. 2000. 2002. after DBS increased the interest to 19% per annum. mortgaged to DBS a condominium unit that belonged to it.26.5% per annum. which included interest. its General Manager. attorney's fees. REPRESENTED BY SUAT KIM GO vs. (BPI) acquired DBS. Further. March 30. there is no question that BPI had a clear right to foreclose on Lotto’s collateral. But Lotto admitted in its complaint below that Go had obtained a loan from DBS on its behalf. with the condominium unit as collateral. Taken together.5% per annum interest was to apply to the period December 24. various stipulations in a contract must be read together and given effect as their meanings warrant. paragraphs 7 and 8 intended the 11. They form but one statement of the stipulated interest rate and the period to which such interest rate applied.24.5% interest rate to apply only to the first year of the loan.ISSUE: Whether or not BPI. Lotto should be deemed estopped from assailing the validity and due execution of that mortgage deed. which footnoted the information that "[t]hereafter interest to be based on prevailing market rate. Petition is denied.00").24. Consequently." This means that the rate of interest would be adjusted to the prevailing market rate after December 24.99-12. 2000 and whether BPI has the right to foreclose the mortgage. 1999 to December 24. This may result to either an increase or a decrease in the interest.24. Additionally. 2000. As held in Manila International Airport Authority v. the statement of applicable interest rate bears an asterisk sign.9912. validly adjust the rate of interest on Lotto’s loan from 11. As to BPI’s right to foreclose.5% per annum interest was to apply only to the period December 24. The Court has previously upheld as valid the proviso in loans that the interest rate would be made to depend on the prevailing market rate. Lotto claims that the real estate mortgage that Go executed was void since it did not authorize her to execute the same and since DBS did not sign it.5% to 19% per annum beginning on December 24. the records show that Lotto defaulted in its obligation when unjustifiably stopped paying aits amortizations after the first year. 14 .00"). Judge Gingoyon. 1999 to December 24. HELD: It is plainly clear from paragraph 7 above that the 11.24. With this admission. 2000 ("12. Besides such interpretation would directly contravene the clear provision of paragraph 7 that the 11. Such provision does not signify an automatic increase in the interest. 2000 ("12. It simply means that the bank may adjust the interest according to the prevailing market rate. 15 . the amount of which shall be fixed by the NFA Administrator at not less than thirty-three and one third percent (33 1/3%) of the market value of the maximum quantity of rice to be received.COUNTRY BANKERS INSURANCE CORPORATION vs. No. the following requisites must concur: 1) There must be a previous valid obligation. and renders no force and effect the 1989 Bonds. ISSUE: Whether or not the 1990 Bond supersedes. the approval for said license was conditioned upon posting of a cash bond. Lagman alleged that the 1989 Bonds were valid only for 1 year from the date of their issuance. 165487 July 13. In his Answer. and 4) There must be a valid new contract. or by substituting another in place of the debtor. 16 .000 sacks of palay in his warehouse at Barangay Malacampa. 2) The parties concerned must agree to a new contract. as evidenced by receipts. a bond secured by real estate. and that the 1990 Bond supersedes. there can be no novation to speak of.37. Country Bankers filed a complaint for a sum of money docketed as Civil Case No. Santos defaulted in his payment. Tarlac. Antonio Lagman (Lagman). Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first. The sacks of palay covered by the warehouse receipts were no longer found in the bonded warehouse.925. 03515 (1990 Bond) which was also valid for one year and that no Indemnity Agreement was executed for the purpose. 02355 for P749. Country Bankers was compelled to pay P1. and renders no force and effect the 1989 bonds thus constituting novation HELD: Having discounted the existence and/or validity of the 1990 Bond. ANTONIO LAGMAN G.00 on 5 November 1989 and Warehouse Bond No.825. Accordingly. For novation to take place. 3893 or the General Bonded Warehouse Act.166. as amended. that the bonds were never renewed and revived by payment of premiums. 2011 FACTS: Nelson Santos (Santos) applied for a license with the National Food Authority (NFA) to engage in the business of storing not more than 30.00 on 13 December 1989 (1989 Bonds) through its agent. Country Bankers Insurance Corporation (Country Bankers) issued Warehouse Bond No. 03304forP1. 3) The old contract must be extinguished. Country Bankers issued Warehouse Bond No.When the loan matured.749. Santos then secured a loan using his warehouse receipts as collateral.R. or by subrogating a third person in the rights of the creditor.750. either by changing the object or principal conditions. cancels. Camiling. Consequently. or a bond signed by a duly authorized bonding company. By virtue of the surety bonds. cancels. Under Act No. 95-73048 before the Regional Trial Court (RTC) of Manila. that on 5 November 1990. only the first element of novation exists. There is however neither a valid new contract nor a clear agreement between the parties to a new contract since the very existence of the 1990 Bond has been rendered dubious. Without the new contract. neither can there be implied novation.. 17 . there is a previous valid obligation.In this case. i. the 1989 Bonds. Implied novation necessitates a new obligation with which the old is in total incompatibility such that the old obligation is completely superseded by the new one. In this case. there is no new obligation.Quite obviously. the old contract is not extinguished. Indeed.e. On August 10.000.JESUS M. ARTICLE 1278.000. Jesus made several demands for Vicente to settle his obligation but to no avail. In order that compensation may be proper.R.000. the interest rate was increased to 3. This was the last payment Vicente made. Millora (Vicente) obtained a loan of P400.5% or P10. HELD: Yes.00. 1993.00 as interest but was able to pay only P24. in their own right. ARTICLE 1279. they be of the same kind. quoted below. Compensation shall take place when two persons.00 as well as the P8.00 from petitioner Dr. the parties executed a loan contract wherein it was provided that the loan has a stipulated monthly interest of 2% and that Vicente had already paid the amount of P100. 1990. Q-93-17255. Subsequently and with Vicente’s consent. 18 . (3) That the two debts be due. MONTEMAYOR vs. 168251 July 27. For legal compensation to take place. or if the things due are consumable. MILLORA G. Vicente claimed that he handled several cases for Jesus but he was summarily dismissed from handling them when the instant complaint for sum of money was filed. on August 17. Vicente D. the requirements set forth in Articles 1278 and 1279 of the Civil Code. are creditors and debtors of each other. Thus.500. 1993. Montemayor (Jesus) as evidenced by a promissory note executed by Vicente. and also of the same quality if the latter has been stated.00. 1991. VICENTE D. ISSUE: Whether compensation can properly be applied despite the absence of a specific amount in the decision representing respondent’s counterclaim against the specific amount of award mentioned in the decision in favor of the petitioner. 1991 to July 23. 1990. On October 19. it is necessary: (1) That each one of the obligors be bound principally. and that he be at the same time a principal creditor of the other. 1990. Jesus filed before the RTC of Quezon City a Complaint for Sum of Money against Vicente which was docketed as Civil Case No.000. From March 24.000. or for a period of four months. (2) That both debts consist in a sum of money. Vicente filed his Answer interposing a counterclaim for attorney’s fees of not less than P500. Vicente was supposed to pay P42. Jesus M. No. 2011 FACTS: On July 24.00 representing the interest for the period July 24 to August 23.00 a month. respondent Atty. must be present.000. (4) That they be liquidated and demandable. it is enough that its exact amount is known. 1993 until fully paid. on the other hand. In the instant case. 19 . "A debt is liquidated when its existence and amount are determined." When the defendant. Nor is it necessary that the credit appear in a final judgment in order that it can be considered as liquidated. sets it up by way of counterclaim. We have restated this in Solinap v. but also when the determination of the exact amount depends only on a simple arithmetical operation x xx. commenced by third persons and communicated in due time to the debtor. it can be compensated against the plaintiff’s claim from the moment it is liquidated by judgment. who has an unliquidated claim. (5) That over neither of them there be any retention or controversy. It is not necessary that it be admitted by the debtor. Del Rosario where we held that compensation takes place only if both obligations are liquidated. And a debt is considered liquidated. The said attorney’s fees were awarded by the RTC on the counterclaim of Vicente on the basis of "quantum meruit" for the legal services he previously rendered to Jesus. Vicente has the obligation to pay his debt due to Jesus in the amount of P300. Jesus. Hon. and a judgment is rendered liquidating such claim.00 with interest at the rate of 12% per annum counted from the filing of the instant complaint on August 17. not only when it is expressed already in definite figures which do not require verification.000. both obligations are liquidated. has the obligation to pay attorney’s fees which the RTC had already determined to be equivalent to whatever amount recoverable from Vicente. hence. Smartnet later requested Piltel for the return of the remaining P130 million but the latter failed to do so.known as the Valgoson Property. G. if Smartnet fails to pay the full price of the land within the stipulated period and within five days after receipt of a notice of delinquency. a portion of the P180 million down payment that it received. 2011 FACTS: Piltel agreed to sell to Smartnet a 3. among other things. RADIOMARINE NETWORK (SMARTNET) PHILIPPINES. Piltel cannot avoid rescission since it in fact partially abided 20 .PILIPINO TELEPHONE CORPORATION vs. On December 19. Smartnet failed to pay the P380 million balance of the purchase price on or about the date it fell due. 1997. ISSUE: Whether Smartnet can rescind the contract to sell HELD: Smartnet’s allegations respecting fraud and breach of contract referred to what appears to be Piltel’s non-binding promise to buy cellular phones and accessories from Smartnet. automatic rescission set in and this placed Piltel under an obligation to return the down payment it received. that it withheld payment of the balance of the purchase price of the subject property because Piltel reneged on its commitment to purchase from Smartnet 300. Smartnet filed a complaint against Piltel for rescission of their contract to sell involving the Valgoson Property or its partial specific performance before the Regional Trial Court (RTC) of Makati. cannot invoke that contract’s rescission and forfeiture clause.000 units of cellular phones and accessories. it would automatically forfeit to Piltel 10% of the P180 million down payment or P18 million and the contract shall be without force and effect. 1997 Piltel returned P50 million to Smartnet.The parties also agreed on a rescission and forfeiture clause which provided that. less the portion that it forfeited due to Smartnet’s default. For this reason. in Makati City for P560 million. Smartnet alleged. All that matters is that since Smartnet failed to pay the balance of the purchase price. Smartnet agreed to settle any unpaid portion of the purchase price of the land after the set off on or about April 30. Consequently. Smartnet agreed to pay Piltel P180 million as down payment with the balance of P380 million to be partly set off against the obligations that Piltel was to incur from its projected purchase of cellular phones and accessories from Smartnet.R. Smartnet did not have the power to rescind the contract to sell the Valgoson Property and. 160322 August 24. it is but proper for Piltel to fully abide by such obligation. Piltel pointed out. INC. Piltel claimed that the agreement to purchase cellular phones and accessories was not part of its contract with Smartnet for the sale of the Valgoson Property and that Piltel committed to buy equipment from Smartnet only on a best effort basis. These are matters independent of the parties’ agreement concerning Piltel’s sale of the Valgoson Property to Smartnet.500-square meter lot. No. it is clear that Piltel recognized that the contract to sell the Valgoson Property had reached the point of automatic rescission. It was but an event that rendered the contract to sell without force and effect. the payment in full of the purchase price. 21 . the seller is then released from his obligation to sell. as a defaulting buyer. If this condition is not fulfilled.by rescission’s consequences when it returned to Smartnet on December 19. the prospective seller binds himself to part with his property only upon fulfillment of the condition agreed. 1997 a P50 million portion of the down payment it received. But. rescind the contract to sell between them by the simple act of refusing to pay. in this case. Smartnet’s nonpayment of the full price of the property was not an act of rescission. In a contract to sell. By returning part of the down payment. Piltel argues that Smartnet cannot. CONTRACTS HEIRS OF RAMON C. GAITE, ET AL vs. THE PLAZA, INC. ET AL G.R. No. 177685 January 26, 2011 FACTS: The Plaza, Inc. (The Plaza) is a corporation engaged in the restaurant business. The Plaza entered into a contract with Rhogen Builders represented by Ramon C. Gaite, for the construction of a restaurant building located in Greenbelt, Makati on July 16, 1980. Gaite and FGU Insurance Coroparation (FGU) executed a surety bond in the amount of P1,155,000 in favor of The Plaza to secure Rhogen’s compliance with its obligation under the contract. The Plaza paid the surety bond less withholding taxes as a downpayment to Gaite. The construction of the restaurant building is thereafter commenced by Rhoegen. Gaite received a letter on September 10, 1980 from the acting building official of Makati ordering the former to cease and desist from continuing with the construction for violation of the provisions of National Building Code. The Plaza’s Project Manager, in his Construction memo stated that the actual jobsite assessment showed that the finished works fall short of Rhogen’s claimed percentage of accomplishment and Rhogen was entitled to only P32,684.16 and not P260,649.91 as demanded by Rhogen. Further the said amount payable to Rhogen be withheld due to stoppage of work by the Municipal Engineer’s Office of Makati among others. Gaite wrote to The Plaza on October 7, 1980 regarding his actions/observations on the stoppage order issued. On the same day, Gaite notified The Plaza that he is suspending all construction works until The Plaza and the Project Manager cooperate to resolve the issue he had raised to address the problem. The Plaza asserted that the corporation is not the one to initiate a solution to the situation, especially after The Plaza already paid the agreed down payment of P1,155,000.00, which compensation so far exceeds the work completed by Rhogen before the municipal authorities stopped the construction for several violations. The Plaza made it clear that the corporation has no obligation to help Rhogen get out of the situation arising from non-performance of its own contractual undertakings, and that The Plaza has its rights and remedies to protect its interest. Gaite informed The Plaza on January 9, 1981 that he is terminating their contract based on the Contractor’s Right to Stop Work or Terminate Contracts as provided for in the General Conditions of the Contract. Gaite accused The Plaza of not cooperating with Rhogen in solving the problem concerning the revocation of the building permits, which he described as a “minor problem.” Additionally, Gaite demanded the payment of P63,058.50 from The Plaza representing the work that has already been completed by Rhogen On January 13, 1981, The Plaza countered that it will hold Gaite and Rhogen fully responsible for failure to comply with the terms of the contract and to 22 deliver the finished structure on the stipulated date. The Plaza also argued that the down payment made was more than enough to cover Rhogen’s expenses. The Plaza filed a complaint for breach of contract, sum of money and damages against Gaite, Rhogen and FGU and for nullification of the project development contract against Gaite and Rhogen. The trial court granted the claims of The Plaza on withholding payment on the progress billing submitted by Rhogen based on the evaluation of Tayzon and the non-lifting of the stoppage order among the other valid grounds. Instead of readily rectifying the violations, Rhogen continued with the construction works thereby causing more damage. Having failed to complete the project within the stipulated period and comply with its obligations, Rhogen was thus declared guilty of breaching the Construction Contract and is liable for damages under Articles 1170 and 1167 of the Civil Code. The CA affirmed the trial court’s decision. ISSUE: WoN the contract between Rhogen and The Plaza provides for reciprocal obligation which gives Rhogen valid legal grounds to terminate the contract pursuant to Art. 1191 of the Civil Code? HELD: Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other. The Plaza predicated its action on Article 1191of the Civil Code, which provides for the remedy of “rescission” or more properly resolution, a principal action based on breach of faith by the other party who violates the reciprocity between them. The breach contemplated in the provision is the obligor’s failure to comply with an existing obligation. Thus, the power to rescind is given only to the injured party. The injured party is the party who has faithfully fulfilled his obligation or is ready and willing to perform his obligation. The construction contract between Rhogen and The Plaza provides for reciprocal obligations whereby the latter’s obligation to pay the contract price or progress billing is conditioned on the former’s performance of its undertaking to complete the works within the stipulated period and in accordance with approved plans and other specifications by the owner. Pursuant to its contractual obligation, The Plaza furnished materials and paid the agreed down payment. It also exercised the option of furnishing and delivering construction materials at the jobsite pursuant to Article III of the Construction Contract. However, just two months after commencement of the project, construction works were ordered stopped by the local building official and the building permit subsequently revoked on account of several violations of the National Building Code and other regulations of the municipal authorities. Non-observance of laws and regulations of the local authorities affecting the construction project constitutes a substantial violation of the Construction Contract which entitles The Plaza to terminate the same, without obligation to make further payment to Rhogen until the work is finished or subject to refund of payment exceeding the expenses of completing the works. Upon the facts duly established, the CA therefore did not err in holding that Rhogen committed a serious breach of its contract with The Plaza, which justified the latter in terminating the contract. Petitioners are thus liable for 23 damages for having breached their contract with respondent The Plaza. Article 1170 of the Civil Code provides that those who in the performance of their obligations are guilty of fraud, negligence or delay and those who in any manner contravene the tenor thereof are liable for damages. Rhogen failed to finish even a substantial portion of the works due to the stoppage order issued just two months from the start of construction. Despite the down payment received from The Plaza, Rhogen, upon evaluation of the Project Manager, was able to complete a meager percentage much lower than that claimed by it under the first progress billing between July and September 1980. Moreover, after it relinquished the project in January 1981, the site inspection appraisal jointly conducted x x x x Rhogen was found to have executed the works not in accordance with the approved plans or failed to seek prior approval of the Municipal Engineer. Article 1167 of the Civil Code is explicit on this point that if a person obliged to do something fails to do it, the same shall be executed at his cost. The petition is DENIED. The Decision dated June 27, 2006 and the Resolution dated April 20, 2007 of the Court of Appeals in CA-G.R. CV No. 58790 are AFFIRMED. PHILIPPINE REALTY AND HOLDINGS CORPORATION vs. LEY CONSTRUCTION AND DEVELOPMENT CORPORATION G. R. No. 165548, June 13, 2011 FACTS: Ley Construction and Development Corporation (LCDC) was the project contractor for the construction of several buildings for Philippine Realty & Holdings Corporation (PRHC), the project owner. Engineer Dennis Abcede (Abcede) was the project construction manager of PRHC, while Joselito Santos (Santos) was its general manager and vice-president for operations. Sometime between April 1988 and October 1989, the two corporations entered into four major construction projects, as evidenced by four duly notarized “construction agreements.” LCDC committed itself to the construction of the buildings needed by PRHC, which in turn committed itself to pay the contract price agreed upon. These were the four construction projects the parties entered into involving a Project 1, Project 2, Project 3 (all of which involve the Alexandra buildings) and a Tektite Building. The agreement covering the construction of the Tektite Building was signed by a Mr. Campos under the words “Phil. Realty & Holdings Corp.” and by Santos as a witness. Manuel Ley, the president of LCDC, signed under the words “Ley Const. & Dev. Corp.” The terms embodied in the afore-listed construction agreements were almost identical. Each agreement provided for a fixed price to be paid by PRHC for every project. In the course of the construction of the Tektite Building, it became evident to both parties that LCDC would not be able to finish the project within the agreed period. Thus, through its president, LCDC met with Abcede to discuss the cause of the delay. LCDC explained that the unanticipated delay in construction was due mainly to the sudden, unexpected hike in the prices of cement and other construction materials. It claimed that, without a corresponding increase in the fixed prices found in the agreements, it would 24 PRHC did not reply.326. Consequently. on the absolute condition that it be allowed to escalate the contract price. the escalation agreement entered into by LCDC and Abcede is a valid agreement that PRHC is obligated to comply with.43% of Tektite Building had been completed. through counsel. both parties conducted another reconciliation of their respective records.15 as liquidated damages. negotiate and sign documents on behalf of PRHC. We find that Abcede’s role as construction manager. In their analysis of the project plans for the building and of all the external factors affecting the completion of the project. Its president acceded. During the course of the proceedings. PRHC denied any liability. but after the construction of the building was completed. asking for its conformity. and 3. It wanted PRHC to allow the escalation and to disregard the prohibition contained in Article VII of the agreements. with regard to the construction projects. LCDC countered that there were many times when its requests for time extension – although due to reasonable causes sanctioned by the construction agreement such as power failures. to the effect that should it infuse P36 million into the project. 2. This 25 . LCDC. In a letter dated 8 September 1992. in the form of liquidated damages. In the same letter. This claim was set forth in PRHC’s earlier 7 December 1992 letter. the collected amount would still be insufficient to purchase all the materials needed to complete the construction of the building. a contract price escalation for the same amount would be granted in its favor by PRHC. HELD: We rule that Santos and Abcede held themselves out as possessing the authority to act. to what amount. it conveyed its decision in a letter on 7 December 1992. and scarcity of construction materials – were unreasonably reduced to shorter periods by PRHC. In a letter dated 18 January 1993. On 9 August 1991 Abcede sent a formal letter to LCDC.be impossible for it to finish the construction of the Tektite Building. It would be the height of incongruity to now allow PRHC to deny the extent of the authority with which it had clothed both individuals. Thereafter. LCDC demanded payment of the agreed total balance for Projects 1. they entered into another agreement. Abcede asked LCDC to advance the amount necessary to complete construction. demanded payment of the agreed escalation price of P 36 million. To achieve this goal. when 96. was akin to that of a general manager with regard to the general operations of the corporation he or she is representing. The reconciliation showed the following balances in favor of LCDC ISSUE: Whether or not a valid escalation agreement was entered into by the parties and. it claimed that LCDC had incurred 111 days of delay in the construction of the Tektite Building and demanded that the latter pay P 39. its claim to the supposed liability of LCDC. Through a reply letter dated 16 February 1993. LCDC requested the release of the P 36 million escalation price. in a letter dated 18 January 1993. and that PRHC sanctioned these acts. PRHC suddenly denied any liability for the escalation price. That decision was to set off. if so. In its reply on 16 February 1993. the parties discovered that even if LCDC were able to collect the entire balance from the contract. Both parties agreed that their foremost objective should be to ensure that the Tektite Building project would be completed.817. water supply interruption. R. Reyes (petitioner) filed a complaint for Rescission of Contract with Damages against Victoria T. Valenzuela City and on that property. petitioner mortgaged the subject real properties to the Farmers Savings Bank and Loan Bank. she put up a three-storey commercial building known as RBJ Building and a residential apartment building. In December 1989. J. MILA A.000. 2011.00. 1988. REYES vs.00 so she could liquidate her bank loan and finance her businesses. On November 15. petitioner alleged that she was the registered owner of a 1.500. (FSL Bank) to secure a loan of P2. 1992. 1990. through novation.00 payable in installments. On June 20. TUPARAN G. Inc.: Subject: Contracts (Rescission) FACTS: On September 10. 188064.000.278. Respondent verbally 26 . Petitioner then decided to sell her real properties for at least P6. In her Complaint. the prohibition contained in the Tektite Building Agreement. Tuparan (respondent) before the RTC.274 square meter residential and commercial lot located in Karuhatan. Mila A. VICTORIA T.escalation agreement – whether written or verbal – has lifted. respondent leased from petitioner a space on the ground floor of the RBJ Building for her pawnshop business for a monthly rental of P4. 1990 to May 27. June 1.000. A close friendship developed between the two which led to the respondent investing thousands of pesos in petitioner’s financing/lending business from February 7.000. No. petitioner’s outstanding account on the mortgage reached P2. Mendoza. 1990. with interest at the rate of 6% a month.13.078. ISSUE: Whether or not the respondent’s default in the payment of her obligation would give the petitioner the right to rescind the contract.200.2 million pesos without interest as part of the purchase price in three (3) fixed instalments. she (respondent) had not collected any rentals from the petitioner for the space occupied by her drugstore and cosmetics store. respondent offered the amount of P751. the parties and FSL Bank executed the corresponding Deed of Conditional Sale of Real Properties with Assumption of Mortgage. Nonetheless. respondent had only paid P395. 1992. Due to their close personal friendship and business relationship.000. leaving a balance of P805.000. HELD: 27 . respondent paid petitioner in small amounts from time to time.000.893. 1992. both parties worked together to obtain FSL Bank’s approval for respondent to assume her (petitioner’s) outstanding bank account. As of August 31. Court of Appeals affirmed with modifications the decision of the trial court. Since December 1990. On November 26. FSL Bank approved their proposal on the condition that petitioner would sign or remain as co-maker for the mortgage obligation assumed by respondent.00 as principal on the unpaid installments and P466. 1992.25 as unpaid accumulated interest.offered to conditionally buy petitioner’s real properties for P4. as full payment of the purchase price of the subject real properties and demanded the simultaneous execution of the corresponding deed of absolute sale. respondent agreed to pay petitioner an interest of 6% a month. The assumption would be part of respondent’s purchase price for petitioner’s mortgaged real properties.00. Under the Deed of Conditional Sale of Real Properties with Assumption of Mortgage. On March 19.000. Respondent neglected to renew the fire insurance policy on the subject buildings. respondent was bound to pay the petitioner a lump sum of P1. she consented because respondent repeatedly professed friendship and assured her that all their verbal side agreement would be honored as shown by the fact that since December 1990. 1992. however. Instead of paying the amounts due in lump sum on their respective maturity dates. On September 2. defaulted in the payment of her obligations on their due dates. respondent had taken possession of the subject real properties and had been continuously collecting and receiving monthly rental income from the tenants of the buildings and vendors of the sidewalk fronting the RBJ building without sharing it with petitioner.00 only payable on September 7. the residential building was gutted by fire which caused the petitioner to lose rental income in the amount of P8. After petitioner’s verbal acceptance of all the conditions/concessions.00 payable on installment basis without interest and to assume the bank loan.000. Petitioner further averred that despite her success in finding a prospective buyer for the subject real properties within the 3-month period agreed upon.00 a month since April 1992. Respondent. respondent reneged on her promise to allow the cancellation of their deed of conditional sale. both parties chose not to reduce into writing the other terms of their agreement. To compensate for her delayed payments. RTC ruled in favor of the respondent. 1990. 00.00. the Court still cannot allow it for the reason that. Considering that out of the total purchase price of P4. the Court fully agrees with the CA when it resolved: “Considering. VIGILAR. Thereafter. the title and ownership of the subject properties remains with the petitioner until the respondent fully pays the balance of the purchase price and the assumed mortgage obligation. the remaining unpaid balance of Tuparan (respondent) is only P805.R. Unless the parties stipulated it.00.200. more or less.The subject Deed of Conditional Sale with Assumption of Mortgage entered into by and among the two parties and FSL Bank on November 26. No. Thus. It is only right and just to allow Tuparan to pay the said unpaid balance of the purchase price to Reyes. petitioner Angelito M. Accordingly.000.400. FSL Bank shall then issue the corresponding deed of cancellation of mortgage and the petitioner shall execute the corresponding deed of absolute sale in favor of the respondent. 1990 is a contract to sell and not a contract of sale.00.200. there can be no breach of contract to speak of because petitioner has no obligation yet to turn over the title. rescission is allowed only when the breach of the contract is substantial and fundamental to the fulfillment of the obligation. Based on the provisions of the contract. GREGORIO R. that the Deed of Conditional Sale was not cancelled by Vendor Reyes (petitioner) and that out of the total purchase price of the subject property in the amount of P4. however. a substantial amount of the purchase price has already been paid. SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS (DPWH). ARNULFO D. the balance of the unpaid purchase price.00.000. Respondent’s failure to pay in full the purchase price is not the breach of contract contemplated under Article 1191 of the New Civil Code but rather just an event that prevents the petitioner from being bound to convey title to the respondent. Without respondent’s full payment.000. respondent has already paid the substantial amount of P3. considering the circumstances. then OIC-District Engineer of the DPWH 2nd Engineering District of Pampanga sent an Invitation to Bid to 28 . 2011 FACTS: On 19 June 1992. 180388 January 18. Twaño. leaving an unpaid balance of only P805. et al vs. AQUINO G.” Granting that a rescission can be permitted under Article 1191. within a reasonable period of time. which is the respondent’s full payment of the purchase price.000. it is right and just to allow her to settle. the petitioner’s obligation to sell the subject properties becomes demandable only upon the happening of the positive suspensive condition.000. there was only a slight or casual breach in the fulfillment of the obligation. Melchor v. budget appropriations. the Court of Appeals reversed and set aside the Decision of the lower court. this Court has held that the contracts were void for failing to meet the requirements mandated by 29 . C. In line with the pronouncement the Commission on Audit (COA) is hereby ordered to determine and ascertain with dispatch. HELD: Petition is without merit. the project was awarded to respondent. Lower Court ruled in favor of respondent. however. and to allow payment thereof. The bidding was for the construction of a dike by bulldozing a part of the Porac River at Barangay Ascomo-Pulungmasle. The certificate was signed by Romeo M. absent the proper appropriation and the Certificate of Availability of Funds. These are questions purely of law and clearly beyond the expertise of the COA or the DPWH. the CA correctly relied on Royal Trust Corporation v. Secondly. the project was duly completed by respondent. COA. More importantly. All these cases involved government projects undertaken in violation of the relevant laws. the total obligation due to the plaintiff-appellee for his undertaking in implementing the subject contract of public works. on a quantum meruit basis. the Project Engineer. Consistently in these cases. and a "Contract of Agreement" was thereafter executed between him and concerned petitioners for the amount of PhP1. COA.873. this appeal. By 9 July 1992. Hence. He thus filed a Complaint for the collection of sum of money with damages before the RTC. who was then issued a Certificate of Project Completion dated 16 July 1992. Petitioners. to cover the project cost. that respondent failed to exhaust administrative remedies.790. COA. for their part. Yumul. claimed that PhP1. Vigilar. Subsequently.696. Respondent Aquino. but petitioners refused to pay the amount. Eslao v. ISSUE: Whether or not the CA erred in ordering the COA to allow payment to respondent an o quantum meruit basis despite the latter’s failure to comply with the requirements of PD 1445.respondent Arnulfo D.69. upon the completion of the said determination.20 was still due him. in ordering the payment of the obligation due respondent on a quantum meruit basis. as well as petitioner Romeo N. On appeal. However. Firstly. Supan.D. Canchela & Associates. Chief of the Construction Section. and that the "Contract of Agreement" covering the project was void for violating Presidential Decree No. The government project contracted out to respondent was completed almost two decades ago. Aquino. Aquino Construction and Supplies. the issues in the present case involve the validity and the enforceability of the "Contract of Agreement" entered into by the parties. and by petitioner Twaño. and release of funds for the projects. set up the defense that the Complaint was a suit against the state. subject to COA Rules and Regulations. petitioners claim that the Complaint filed by respondent before the RTC was done without exhausting administrative remedies.V. To delay the proceedings by remanding the case to the relevant government office or agency will definitely prejudice respondent. it has been established that the doctrine of exhaustion of administrative remedies and the doctrine of primary jurisdiction are not ironclad rules.262. the owner of A. rules and regulations covering public bidding. Pampanga. 1445. Petitioners aver that respondent should have first filed a claim before the COA before going to the courts. EPG Construction Company v. Architects. and Department of Health v. Guagua. law. 30 . public interest and equity. however. dictate that the contractor should be compensated for services rendered and work done. the shipper Inchcape Shipping Services.ASIAN TERMINALS. Manila. On April 19. ISSUE: Whether or not Malayan Insurance Co. 1995. 1996. Inc. However.. 1996. and the cargo broker MEC Customs Brokerage. respondent is not entitled to any reimbursement. South Harbor.000 bags of soda ash dense from the vessel and brought them to the open storage area of petitioner for temporary storage and safekeeping. vs. RN-0001-21430. was insured with respondent Malayan Insurance Company. INC. On November 21.000 plastic bags of soda ash dense (each bag weighing 50 kilograms) from China to Manila. as subrogee of the consignee. and covered by a Bill of Lading issued by Tianjin Navigation Company with Philippine Banking Corporation as the consignee and Chemphil Albright and Wilson Corporation as the notify party. Hence.702 bags were found to be in bad order condition. with an invoice value of US$456. Inc. G. unloaded the 60. paid the value of the lost/ damaged cargoes to the consignee in the amount of P643. The shipment. respondent. after all the bags were unloaded in the warehouses of the consignee. No. Branch 35. 171406 April 4. 1995.25. as insurer. and hardening of the contents. pending clearance from the Bureau of Customs and delivery to the consignee. upon arrival of the vessel at Pier 9. 1995. Shandong Weifang Soda Ash Plant shipped on board the vessel MV "Jinlian I" 60. under Marine Risk Note No..600. MALAYAN INSURANCE CO. filed before the Regional Trial Court (RTC) of Manila. 1995.881 bags were in bad order condition due to spillage. the stevedores of petitioner began loading the bags in the trucks of MEC Customs Brokerage for transport and delivery to the consignee. caking. Petitioner argues that the Subrogation Receipt presented by respondent is not sufficient to prove that the subject shipment was insured and that respondent was validly subrogated to the rights of the consignee. petitioner contends that respondent has no cause of action because it failed to present the insurance contract or policy covering the subject shipment. a duly registered domestic corporation engaged in providing arrastre and stevedoring services.00. 2. petitioner submits that without proof of a valid subrogation.000.R. INC. 2011 FACTS: On November 14. Thus. When the unloading of the bags was completed on November 28. On December 28. respondent. a Complaint for damages against petitioner. the stevedores of petitioner Asian Terminals.. 1995. on November 20. has a right of sobrogation nothwithstanding its failure to present the insurance contract or policy? HELD: 31 . Inc. On November 29. a total of 2. Since there was no issue regarding the validity of the insurance contract or policy. v. it still can be considered by the court as long as they have been properly identified by testimony duly recorded and they have themselves been incorporated in the records of the case. Moreover. not to mention that its existence was already admitted by petitioner in open court. we ruled that: The presentation in evidence of the marine insurance policy is not indispensable in this case before the insurer may recover from the common carrier the insured value of the lost cargo in the exercise of its subrogatory right. by itself. Inc. or any provision thereof. there is no doubt that the loss of the cargo in the present case occurred while in petitioner’s custody. but also the amount paid to settle the insurance claim. 32 . Court of Appeals. there is no issue as regards the provisions of Marine Open Policy No. As in Delsan. as the assured shipper of the lost cargo of industrial fuel oil. In Delsan Transport Lines. is sufficient to establish not only the relationship of herein private respondent as insurer and Caltex. MOP-12763. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim. respondent had no reason to present the insurance contract or policy as evidence during the trial. The subrogation receipt. And even though it was not offered in evidence. such that the presentation of the contract itself is necessary for perusal. Similarly.Non-presentation of the insurance contract or policy is not fatal. in this case. the presentation of the insurance contract or policy was not necessary. — No contract involving the expenditure of public funds shall be entered into unless there is an appropriation therefor.41. 2011 FACTS: In July 1990.40. In a letter dated 12 July 1994.547. The total cost of the three projects was P6.72 and the retention money in the amount of P334.07. Kanlaon alleged that it had already completed the three projects. Book V of the Administrative Code of 1987 provide: SECTION 46.44.63. PNR denied Kanlaon’s demand because of the 24 January 1994 Notices of Suspension issued by the Commission on Audit (COA). G.R. and 48. 2) Biñan Station for P2.. PNR admitted the existence of the three contracts but alleged that Kanlaon did not comply with the conditions of the contract.PHILIPPINE NATIONAL RAILWAYS vs. Subtitle B. Appropriation Before Entering into Contract.254.820. ISSUE: Whether or not the contracts entered into by PNR and Kanlaon are valid? HELD: The Court notes that one of the reasons the COA issued the Notices of Suspension was because the contracts did not contain a Certificate of Availability of Funds as required under Sections 85 and 86 of Presidential Decree No. Kanlaon filed a complaint for collection of sum of money plus damages against PNR. Kanlaon sought to recover from PNR a total of P865. In its amended complaint dated 17 August 1995.685. In its answer. namely: 1) College Station for P2. 182967 April 6. On 30 June 1994. PNR and Kanlaon entered into contracts for the repair of three PNR station buildings and passenger shelters. Kanlaon sent a demand letter to PNR requesting for the release of the retention money in the amount of P333.978.894.081. By November 1990. a more recent law. Kanlaon does not dispute the absence of a Certificate of Availability of Funds. No. Chapter 8.07.316. Title I. KANLAON CONSTRUCTION ENTERPRISES CO. 33 . PNR also alleged that Kanlaon did not complete the projects and that PNR did not have any unpaid balance. On 8 November 1994. 47.79 consisting of the remaining balance of the three projects in the amount of P531. 1445.534. INC. also contains the same provisions. The Administrative Code of 1987. PNR added that it had a valid ground to refuse the release of the retention money because of the COA orders suspending the release of payment to Kanlaon.652.906. Sections 46. and 3) Buendia Station for P1. Kanlaon impleaded the COA.568. 34 . SECTION 47. — xxx no contract involving the expenditure of public funds by any government agency shall be entered into or authorized unless the proper accounting official of the agency concerned shall have certified to the officer entering into the obligation that funds have been duly appropriated for the purpose and that the amount necessary to cover the proposed contract for the current calendar year is available for expenditure on account thereof xxx. Void Contract and Liability of Officer. — Any contract entered into contrary to the requirements of the two (2) immediately preceding sections shall be void xxx. Failure to comply with any of these two requirements renders the contract void. SECTION 48. Certificate Showing Appropriation to Meet Contract. is sufficient to cover the proposed expenditure. the Administrative Code of 1987 expressly prohibits the entering into contracts involving the expenditure of public funds unless two prior requirements are satisfied. there must be an appropriation law authorizing the expenditure required in the contract. Thus. there must be attached to the contract a certification by the proper accounting official and auditor that funds have been appropriated by law and such funds are available. free of other obligations. First. Second.the unexpended balance of which. CASTILLO. Manila. The properties were sold to petitioner as the only bidder.500.00 as redemption price. SPOUSES ALFREDO M. Capati and Aquilina M. Respondents failed to redeem the property within the one-year redemption period. The RTC granted the petition of the respondents. LOBO G. penalty charges. respondents’ outstanding balance was P2. Thus. with a plea for the issuance of a temporary restraining order (TRO) and/or writ of preliminary prohibitory injunction. and Damages. and partial payment of the mortgaged debt. However.R. when they defaulted due to financial constraints.00.798. Petitioner sent them demand letters. Per petitioner’s table of application of payment.PHILIPPINE SAVINGS BANK vs. with real estate mortgage over the said properties. petitioner initiated an extrajudicial foreclosure sale of the mortgaged properties. Respondents were notified in writing of these changes in the interest rate. but respondents still failed to redeem the properties. The RTC issued the TRO and eventually issued the writ of preliminary injunction. Castillo and Elizabeth Capati-Castillo were the registered owners of a lot located in Tondo. Petitioner conceded to Alfredo Castillo’s request. Respondents failed to pay. Declaration of Nullity of Notarial Foreclosure Proceedings and Certificate of Sale. Cancellation of Annotations on TCT Nos. Petitioner filed a motion for reconsideration. Respondent spouses Romeo B. respondent Alfredo Castillo sent several letters to petitioner requesting for the reduction of the interest rates.000. 2011 FACTS: Respondent spouses Alfredo M. Lobo were the registered owners of another lot. Manila. from petitioner Philippine Savings Bank. Respondents obtained a loan. located also in Tondo. with the RTC. They neither gave their confirmation thereto nor did they formally question the changes. all legal fees and expenses incidental to the foreclosure and sale. No. However. and SPOUSES ROMEO B. ISSUES: 35 . 193178 May 30.231. 233242 and 227858. past due interest. CASTILLO AND ELIZABETH C. The CA modified the decision of the RTC.11.000. Respondents regularly paid their amortizations until December 1999.000. Being the mortgagee. Petitioner appealed to the CA. attorney’s fees. as evidenced by a Promissory Note with a face value of P2. offering P3. Respondents filed a case for Reformation of Instruments. petitioner no longer paid the said amount but rather credited it to the loan amortizations and arrears. CAPATI and AQUILINA M. The RTC partially granted the motion modifying the interest rate from 17% to 24% per annum. Alfredo Castillo sent a letter to petitioner requesting for an extension of 60 days before consolidation of its title so that they could redeem the properties. Whether or not the CA erred in declaring that the modifications in the interest rates are unreasonable; and Whether or not the CA erred in sustaining the award of damages and attorney’s fees. HELD: The SC partially grants the petition. The unilateral determination and imposition of the increased rates is violative of the principle of mutuality of contracts under Article 1308 of the Civil Code, which provides that “[t]he contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.” A perusal of the Promissory Note will readily show that the increase or decrease of interest rates hinges solely on the discretion of petitioner. It does not require the conformity of the maker before a new interest rate could be enforced. Any contract which appears to be heavily weighed in favor of one of the parties so as to lead to an unconscionable result, thus partaking of the nature of a contract of adhesion, is void. Any stipulation regarding the validity or compliance of the contract left solely to the will of one of the parties is likewise invalid. Basic is the rule that there can be no contract in its true sense without the mutual assent of the parties. If this consent is absent on the part of one who contracts, the act has no more efficacy than if it had been done under duress or by a person of unsound mind. Similarly, contract changes must be made with the consent of the contracting parties. The minds of all the parties must meet as to the proposed modification, especially when it affects an important aspect of the agreement. In the case of loan contracts, the interest rate is undeniably always a vital component, for it can make or break a capital venture. Thus, any change must be mutually agreed upon, otherwise, it produces no binding effect. Escalation clauses are generally valid and do not contravene public policy. They are common in credit agreements as means of maintaining fiscal stability and retaining the value of money on long-term contracts. To prevent any one-sidedness that these clauses may cause, we have held in Banco Filipino Savings and Mortgage Bank v. Judge Navarro that there should be a corresponding de-escalation clause that would authorize a reduction in the interest rates corresponding to downward changes made by law or by the Monetary Board. As can be gleaned from the parties’ loan agreement, a deescalation clause is provided, by virtue of which, petitioner had lowered its interest rates. Nevertheless, the validity of the escalation clause did not give petitioner the unbridled right to unilaterally adjust interest rates. The adjustment should have still been subjected to the mutual agreement of the contracting parties. In light of the absence of consent on the part of respondents to the modifications in the interest rates, the adjusted rates cannot bind them notwithstanding the inclusion of a de-escalation clause in the loan agreement. 36 SALES BEATINGO VS. GASIS G.R. No. 179641 February 9, 2011 FACTS: Petitioner bought a piece of land from respondent, which was registered in the name of Flora’s predecessor-in-interest. In order to register the DOS at the Register of Deeds, she filed a petition for the issuance of the owner’s duplicate TCT but was opposed by respondent, claiming that she was in possession of the OCT, and that she purchased the subject property from Flora without knowledge of the prior sale of the same property to the petitioner, which makes her an innocent purchaser for value. Furthermore, respondent declared that, upon payment of the purchase price, she immediately occupied the subject property and enjoyed its produce. ISSUE: Whether or not there was double sale, which would give a better right to possessor of the property. HELD: Yes. (T)his is a clear case of double sale, where the seller sold one property to different buyers, first to petitioner and later to respondent. Admittedly, the two sales were not registered with the Registry of Property. Since there was no inscription, the next question is who, between petitioner and respondent, first took possession of the subject property in good faith. As aptly held by the trial court, it was respondent who took possession of the subject property and, therefore, has a better right. Indeed, the execution of a public instrument shall be equivalent to the delivery of the thing that is the object of the contract. However, the Court has held that the execution of a public instrument gives rise only to a prima facie presumption of delivery. It is deemed negated by the failure of the vendee to take actual possession of the land sold. In this case, though the sale was evidenced by a notarized deed of sale, petitioner admitted that she refused to make full payment on the subject property and take actual possession thereof because of the presence of tenants on the subject property. Clearly, petitioner had not taken possession 37 of the subject property or exercised acts of dominion over it despite her assertion that she was the lawful owner thereof. Respondent, on the other hand, showed that she purchased the subject property without knowledge that it had been earlier sold by Flora to petitioner. She had reason to believe that there was no defect in her title since the owner’s duplicate copy of the OCT was delivered to her by the seller upon full payment of the purchase price. She then took possession of the subject property and exercised acts of ownership by collecting rentals from the tenants who were occupying it. CARABEO VS. SPS NORBERTO AND DINGCO G.R. No. 190823, April 4, 2011 FACTS: On July 10, 1990, petitioner entered into a contract denominated as "Kasunduan sa Bilihan ng Karapatan sa Lupa" (kasunduan) with respondents whereby petitioner agreed to sell his rights over a 648 square meter parcel of unregistered land situated at Orani, Bataan for P38,000. Respondents tendered their initial payment of P10,000 upon signing of the contract, the remaining balance to be paid on September 1990. Respondents were later to claim that when they were about to hand in the balance of the purchase price, petitioner requested them to keep it first as he was yet to settle an ongoing "squabble" over the land. Nevertheless, respondents gave petitioner small sums of money from time to time which totaled P9,100. Despite the alleged problem over the land, they insisted on petitioner’s acceptance of the remaining balance of P18,900 but petitioner continued to refuse and said he would register the land first. In 1994, respondents learned that the alleged problem over the land had been settled and that petitioner had caused its registration in his name. They thereupon offered to pay the balance but petitioner declined, drawing them to file a complaint before RTC. Petitioner countered in his Answer to the Complaint that the sale was void for lack of object certain, the kasunduan not having specified the metes and bounds of the land. In any event, petitioner alleged that if the validity of the kasunduan is upheld, respondents’ failure to comply with their reciprocal obligation to pay the balance of the purchase price would render the action premature. For, contrary to respondents’ claim, petitioner maintained that they failed to pay the balance of P28,000 on September 1990 to thus constrain him to accept installment payments totaling P9,100.After the case was submitted for decision, petitioner died. ISSUE: Whether or not the sale was void for lack of object certain, the kasunduan not having specified the metes and bounds of the land 38 R.139 square meters.. as evidenced by a Deed of Absolute Sale. and since the action involves property rights.HELD: In the present case. whereas petitioner is invoking nullity of the kasunduan to protect his proprietary interest. No.R. undue influence and intimidation. DE MENESES G. 165851 February 2. respondent filed a suit against the petitioners to recover the property and demanded payment of unearned income. hereinafter referred to as the Masusuwi Fishpond. VDA. titled in the name of the late Rosendo Meneses. petitioner who is the first cousin of her husband. that the kasunduan is deemed void. respondents are pursuing a property right arising from the kasunduan. Catindig claimed that he bought from respondent and her children in January 1978. 2011 ROXAS. Catindig further 39 . VDA. DE MENESES G. SR. Respondent verbally demanded that petitioners vacate but all were futile. However. Since then Catindig unlawfully leased the property to Roxas. however. Sum of Money and Damages against petitioners before the RTC. 2011 FACTS: The property subject of this controversy pertains to a parcel of land situated in Malolos. thus. through fraud. Sr. in her capacity as administratrix. No. Assuming arguendo. Respondent alleged that in September 1975. deprived her of the possession over the Masusuwi Fishpond.. 168875 February 2. attorney's fees and costs of suit. petitioners still ignored said demands. Bulacan. forcing respondent to send demand letters to petitioners Roxas and Catindig. damages. with an area of 49. She was issued Letters of Administration over the estate of her late husband's estate in Special Proceedings case pending before the CFI. Hence. filed a Complaint for Recovery of Possession. CATINDIG VS. there is a corollary obligation of petitioner to return the money paid by respondents. VS. Respondent. Tuparan leased a space on the ground floor for her pawnshop business. asserted that respondent has no cause of action against him.13. Besides.m. the subject Deed of Sale is not only unregistered. Reyes was the registered owner of a 1. it is the former who has a better right to possess. Petitioner then decided to sell her real properties for at least 6. Valenzuela City where she put up a threestorey commercial building (RBJ Building) and a residential apartment building. On the other hand. because Catindig is the lawful owner of the Masusuwi Fishpond. this would still not help petitioners' case as the subject property is covered by TCT No. No. 188064 June 1. Petitioner's outstanding account on the mortgage reached 2. it is undated and unnotarized.078.00 payable in installments. registered in the name of respondent's husband. The parties and FSL Bank executed the corresponding Deed of Conditional Sale of Real Properties with Assumption of Mortgage. the Court held that as against the registered owners and the holder of an unregistered deed of sale. Bank approved their proposal on the condition that petitioner would sign or remain as co-maker for the mortgage obligation assumed by respondent.argued that even assuming that respondent was indeed divested of her possession by fraud.200. Petitioner mortgaged the subject real properties to the FSL Bank to secure a loan of 2. Both parties chose not to reduce into writing the other terms of their agreement. Furthermore.00 payable on instalments basis without interest and to assume the bank loan.000.500. Bank did not want to incorporate in the Deed of Conditional Sale any other side agreement between petitioner and respondent.274 sq. her cause of action had already prescribed considering the lapse of about 20 years from 1975. It is a fundamental principle in land registration that the certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein. TUPARAN G.00. A close friendship developed between the two which led to the respondent investing thousands of pesos in petitioner's financing/lending business.000. Petitioner Roxas.R.000. petitioner Catindig's claim of ownership is based on a Deed of Sale. both parties worked together to obtain Bank's approval. In Pascual v.278. on the other hand. T-1749. After petitioner's verbal acceptance of all the conditions/concessions. Coronel. 2011 FACTS: Mila A. residential and commercial lot in Karuhatan. Even if the Court will sustain petitioner Catindig's arguments and rule that the Deed of Sale is valid. to whom he had paid his rentals in advance until the year 2001. Victoria T. 40 . ISSUES: Whether or not Catindig owner has a better right to possess on the strength of the alleged Deed of Sale. HELD: No. Respondent verbally offered to conditionally buy petitioner's real properties for 4. REYES VS.000. FSL Bank shall then issue the corresponding deed of cancellation of mortgage and the petitioner shall execute the corresponding deed of absolute sale in favor of the respondent. which is the respondent’s full payment of the purchase price. thus. On appeal. The RTC also considered the Deed of Conditional Sale of Real Property with Assumption of Mortgage executed by and among the two parties and FSL Bank a contract to sell. and not a contract of sale.000. Respondent.000. Thereafter.2 million total purchase price of the subject real properties. Respondent had only paid 395. respondent agreed to pay petitioner an interest of 6% a month. which for present purposes we shall take as the full payment of the purchase price. defaulted in the payment of her obligations. respondent was bound to pay the petitioner a lump sum of 1.2 million pesos without interest as part of the purchase price in three (3) fixed installments. Respondent offered the amount of 751. The residential building was gutted by fire which caused the petitioner to lose rental income.000. as full payment of the purchase price of the subject real properties and demanded the simultaneous execution of the corresponding deed of absolute sale. the non-fulfilment of which prevents the obligation to sell from arising and. meaning. Without respondent’s full payment. Petitioner filed a complaint asking for the rescission of the contract. ownership is retained by the prospective seller without further remedies by the prospective buyer. the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the happening of an event. Respondent neglected to renew the fire insurance policy on the subject buildings. there can be no breach of contract to speak of because petitioner has no obligation yet to turn over the title. In other words. ISSUE: Whether or not the Contract entered is a contract to sell.25 as unpaid accumulated interest.00. the petitioner’s obligation to sell the subject properties becomes demandable only upon the happening of the positive suspensive condition. xxx xxx xxx 41 . the full payment of the purchase price partakes of a suspensive condition.Under the Deed of Conditional Sale. RTC render its decision finding that respondent failed to pay in full the 4. the prospective seller explicitly reserves the transfer of title to the prospective buyer. the CA agreed with the RTC.00 only. leaving a balance of 805. however. To compensate for her delayed payments. Respondent’s failure to pay in full the purchase price is not the breach of contract contemplated under Article 1191 of the New Civil Code but rather just an event that prevents the petitioner from being bound to convey title to the respondent.00 as principal on the unpaid installments and 466. HELD: The Court agrees with the ruling of the courts below that the subject Deed of Conditional Sale with Assumption of Mortgage entered into by and among the two parties and FSL Bank is a contract to sell and not a contract of sale.893. In a contract to sell. Accordingly. Respondent had taken possession of the subject real properties and had been continuously collecting and receiving monthly rental income from the tenants without sharing it with petitioner. What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him. x x x (T)he title and ownership of the subject properties remains with the petitioner until the respondent fully pays the balance of the purchase price and the assumed mortgage obligation. 1976. ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. Veterans Bank emerged as the 42 . Veterans Bank granted petitioner spouses Fernando and Angelina Edralin (Edralins) a loan in the amount of P270. full payment of the purchase price. may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the property subject of the sale until the fulfilment of a suspensive condition. petitioners executed a Real Estate Mortgage in favor of Veterans Bank over a real property situated in the Municipality of Parañaque and registered in the name of petitioner Fernando Edralin. In a contract to sell. binds himself to sell the said property exclusively to the prospective buyer upon fulfilment of the condition agreed upon. However. if the suspensive condition is fulfilled. 2011 FACTS: On February 5. SPOUSES FERNANDO and EDRALIN vs. the foreclosure sale was held. A contract to sell as defined hereinabove. the first element of consent is present. such that if there had already been previous delivery of the property subject of the sale to the buyer.PHILIPPINE VETERANS BANK G. that is. As security thereof. although it is conditioned upon the happening of a contingent event which may or may not occur.R. The Edralins failed to pay their obligation to Veterans Bank. upon the fulfilment of the suspensive condition which is the full payment of the purchase price. 168523 March 9. upon the fulfilment of the suspensive condition which is the full payment of the purchase price.Stated positively. No. Thus. the perfection of the contract of sale is completely abated. If the suspensive condition is not fulfilled. because in a conditional contract of sale. the contract of sale is thereby perfected.00. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale. A contract to sell may thus be defined as a bilateral contract whereby the prospective seller. Veterans Bank filed a Petition for Extrajudicial Foreclosure of the REM and in due course.000. the prospective seller’s obligation to sell the subject property by entering into a contract of sale with the prospective buyer becomes demandable as provided in Article 1479 of the Civil Code. ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer. "The elements of pactum commissorium. and (2) there should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of non-payment of the principal obligation within the stipulated period.highest bidder at the said foreclosure sale and was issued the corresponding certificate of sale. It was dismissed for Veterans Bank’s failure to prosecute. Veterans Bank did not. such as foreclosure proceedings. They maintain that the Deed of Sale executed by the Veterans Bank in the bank’s own favor during the consolidation of title constitutes a pactum commissorium. Veterans Bank acquired absolute ownership of the subject property. was dismissed. without further formality. Thus. Veterans Bank filed an ExParte Petition for the Issuance of a Writ of Possession. The Edralins moved to dismiss the petition on the ground that the dismissal constituted res judicata and further argue that Veterans Bank is not entitled to a writ of possession because it failed to properly consolidate its title over the subject property. Veterans Bank again re-filed this time docketed as Land Registration Case. Despite the foregoing. Upon the Edralins’ failure to redeem the property during the one-year period. automatically acquire or appropriate the mortgaged property for itself. are: (1) there should be a property mortgaged by way of security for the payment of the principal obligation. Veterans Bank divulged in its Certification against Forum-Shopping that the earlier case. in the name of Veterans Bank. involving the same subject matter and parties." The second element is missing to characterize the Deed of Sale as a form of pactum commissorium. which is prohibited under Article 2088 of the Civil Code. the Veterans Bank resorted to extrajudicial foreclosure and was issued a Certificate of Sale by the sheriff as proof of its purchase of the 43 . The Register of Deeds of Parañaque. cancelled TCT under the name of Fernando Edralin and replaced it with a new TCT. Veterans Bank caused the consolidation of ownership of the subject property in its name. On the contrary. upon the petitioners’ default. the Edralins failed to vacate and surrender possession of the subject property to Veterans Bank. and a public sale. which enable the mortgagee to acquire ownership of the mortgaged property without the need of any foreclosure proceedings. Consequently. ISSUE: Whether the consolidation of ownership of the extrajudicially foreclosed property through a Deed of Sale is in accordance with law HELD: Pactum commissorium is "a stipulation empowering the creditor to appropriate the thing given as guaranty for the fulfillment of the obligation in the event the obligor fails to live up to his undertakings. HERNANDEZ ET AL G.subject property during the foreclosure sale. No. PMRDC entered into various agreements with corespondents HIGC and LBP. That Veterans Bank went through all the stages of extrajudicial foreclosure indicates that there was no pactum commissorium. February 14.R. HERNANDEZ-NIEVERA ET AL VS. in connection with the construction of the Isabel Homes housing project in Batangas and of the Monumento Plaza commercial 44 . 2011 FACTS: In 1995. 171165. however. It stated that PMRDC shall have the option to purchase the parcels of land within twelve months from the date of the instrument and that PMRDC shall pay the vendor option money.e. In 1997. alleged that the signature of Demetrio in the DAC was a mere forgery because its power of attorney was limited only to selling or mortgaging the properties not conveying the same to Asset Pool. whereas LBP agreed to act as trustee of the resulting Asset Pool for a consideration. The powers conferred on Demetrio were exclusive only to selling and mortgaging the properties. Petitioners. in view of petitioners’ complaint. the option money shall be forfeited in favor of the vendor and that the vendee shall return to the vendor all TCTs covering the described parcels of land within a period of thirty days from the stipulated period. respondents had relied on Demetrio’s special power of attorney and also on his supposed agreement to be paid in kind.. In fact. ISSUE: Whether or not the powers conferred were exclusive only to selling and mortgaging the properties. the checks representing the option money that were delivered by PMRDC. as consideration for the assignment and conveyance of the subject properties to the Asset Pool. What petitioners miss. PMRDC conveyed to HIGC the constituent assets of the two projects. free from all liens and encumbrances. is that the power conferred on Demetrio to sell “for such price 45 . HELD: Yes. PMRDC entered into a MOA whereby it was given the option to buy pieces of land owned by petitioners under authority of a SPA to Sell or Mortgage. thus the DAC must be nullify. In its Asset Pool Formation Agreement. In 1998. the power to sell is quite controversial because it is the sale transaction which bears close resemblance to the deal contemplated in the DAC. in shares of stock. PMRDC entered with LBP and Demetrio into a Deed of Assignment and Conveyance (DAC) whereby the lands were transferred and assigned to the Asset Pool in exchange for a number of shares of stock which supposedly had already been issued in the name and in favor of Demetrio. Thereafter. PMRDC.and recreation complex in Caloocan City. counsel for respondent HIGC x x x is that in the execution of the DAC. In addition. Between these two specific powers. Danilo Javier. should the PMRDC fail to exercise its option to purchase the parcels of land within the stipulated period. the trial court declared the MOA to be an option contract and ordered its rescission and the DAC declared null and void. PMRDC did not avail of its option to purchase the lands within twelve months. part of the testimony of Atty. allegedly bounced which prompted petitioners to demand the corresponding TCTs. on the other hand. signed the MOA also in behalf of his co-owners. i. The CA reversed and set aside the trial court’s decision. refused to deliver the TCTs and stated that the covered properties had already been conveyed and assigned to the Asset Pool pursuant to the DAC. In particular. it does include the authority to extinguish PMRDC’s obligation under the MOA to deliver option money and agree to a more flexible term by agreeing instead to receive shares of stock in lieu thereof and in consideration of the assignment and conveyance of the properties to the Asset Pool. with the latter replacing the cash equivalent of the option money initially agreed to be paid by PMRDC under the MOA. ENRIQUEZ 46 . LUZON DEVELOPMENT BANK VS. x x x Thus. it becomes clear that Demetrio’s special power of attorney to sell is sufficient to enable him to make a binding commitment under the DAC in behalf of Carolina and Margarita.or amount” is broad enough to cover the exchange contemplated in the DAC between the properties and the corresponding corporate shares in PMRDC. ” Unknown to Enriquez. the LDB instead of foreclosing the REM. Both Enriquez and the BANK appealed to the Office of the President.R. owner of a parcel of land which corresponds to Lot 4 of Delta Homes I. Both petitioner and LDB moved for a reconsideration of the CA’s Decision.950. agreed to a dacion en pago. The Deed of Assignment in Payment of Debt was executed and stated that petitioner “assigns. but ordered petitioner to accept payment of the balance from Enriquez. De Leon and his spouse obtained a P4 million loan from the LDB for the purpose of developing Delta Homes I. 168646 January 12. award of damages. however. but both were denied.950. A contract to sell is one where the prospective seller reserves the transfer of title to the prospective buyer until the happening of an event. which it affirmed in toto. Petitioner appealed and the Board upheld the validity of the contract to sell between the petitioner and Enriquez despite the alleged violation of the price ceilings in BP 220. Petitioner executed a Contract to Sell with respondent Angeles Catherine Enriquez (Enriquez) over the house and lot in Lot 4 for the purchase price of P614. this REM was amended by increasing the amount of the secured loan fromP4 million to P8 million. such as full payment of the purchase price. including Lot 4. this petition. a domestic corporation engaged in the business of developing and selling real estate properties. When petitioner defaulted on its loan obligation. The spouses executed a REM on several of their properties. Contract to sell does not transfer ownership. Both parties are correct in arguing that the Contract to Sell executed by DELTA in favor of Enriquez did not transfer ownership over Lot 4 to Enriquez.G. and conveys and sets over [to] the assignee that real estate with the building and improvements existing thereon x x x in payment of the total obligation owing to [the Bank] x x x. Enriquez filed a complaint against petitioner and the LDB before HLURB alleging that petitioner violated the terms of its License to Sell. that the dacion en pago was not annotated. What the seller obliges himself to do is to sell the subject property only when the entire amount of the purchase price has already been delivered to him. and the imposition of administrative fines on petitioner and the LDB. Only the BANK appealed the OP’s Decision to the CA. the full payment of the purchase price partakes of a suspensive condition. among the properties assigned was the house and lot of Lot 4. transfers. nriquez made a downpayment of P114. the non-fulfillment of which prevents the obligation to sell from arising and thus.00. Subsequently. The records do not bear out and the parties are silent on whether the BANK was able to transfer title to its name. The CA ruled against the validity of the dacion en pago executed in favor of the LDB. “In other words. and (upon such payment) to deliver to Enriquez the title to the house and lot free from liens and encumbrances. It appears. is owned by Ricardo De Leon. No. ISSUE: Whether the Contract to Sell conveys ownership HELD: No. Hence.00. HLURB upheld the validity of the purchase price. ownership is retained by the 47 . 2011 FACTS: Petitioner DELTA. Enriquez sought a full refund of what she had already paid. and anyone who wishes to deal with the said property will be held bound by such prior right. This is because the Contract to Sell. 48 . the transferee BANK is bound by the Contract to Sell and has to respect Enriquez’s rights thereunder. is covered and protected by PD 957. there is nothing in the provisions of the contract entered into by DELTA and Enriquez that would exempt it from the general definition of a contract to sell. failed to register Enriquez’s Contract to Sell with the Register of Deeds. While DELTA. Since the Contract to Sell did not transfer ownership of Lot 4 to Enriquez. by itself. DELTA could then validly transfer such ownership (as it did) to another person (the BANK). xxx Further. under the circumstances. such that DELTA even reserved the right to unilaterally void the contract should Enriquez fail to pay three successive monthly amortizations. the BANK cannot be considered. for this was indicated in the corresponding promissory notes. It In the instant case. this failure will not prejudice Enriquez or relieve the BANK from its obligation to respect Enriquez’s Contract to Sell. in the instant case. including Lot 4. said ownership remained with DELTA. it serves as a notice to the whole world that the property is subject to the prior right of the buyer of the property (under a contract to sell or an absolute sale). The terms thereof provide for the reservation of DELTA’s ownership until full payment of the purchase price. as an entity engaged in the banking business. which can easily be determined as included within the subdivision development.” does not. Under these circumstances. Registration of the sale or contract to sell makes it binding on third parties. were subdivision lots and therefore within the purview of PD 957. One of the protections afforded by PD 957 to buyers such as Enriquez is the right to have her contract to sell registered with the Register of Deeds in order to make it binding on third parties. The purpose of registration is to protect the buyers from any future unscrupulous transactions involving the object of the sale or contract to sell. It knew that the loaned amounts were to be used for the development of DELTA’s subdivision project. Despite the non-registration. an innocent purchaser for value of Lot 4 when it accepted the latter (together with other assigned properties) as payment for DELTA’s obligation. However. involving a subdivision lot.prospective seller without further remedies by the prospective buyer. the BANK is required to observe more care and prudence when dealing with registered properties. The technical description of Lot 4 indicates its location. whether the purchase price therefor has been fully paid or not. transfer ownership to the buyer. The BANK was well aware that the assigned properties. the BANK knew or should have known of the possibility and risk that the assigned properties were already covered by existing contracts to sell in favor of subdivision lot buyers. ROBERTO LIM. to deliver to Enriquez a clean title over the subject property. the BANK is obliged to respect the same and honor the payments already made by Enriquez for the purchase price of Lot 4. neither did defendant offer to repurchase the same upon the expiration of said period. VS. and that after notifying the defendant that she may still repurchase said properties three months after the expiration of said period. 2011 FACTS: The instant petition arose from a Complaint for Consolidation of Ownership of Real Properties filed by herein respondents against herein petitioner. the defendant. upon full payment. RESPONDENTS. erected on the above-described commercial lot x x x.00). 152659. A DWELLING HOUSE with a ground area of 108 square meters. 1976.000. alleging as follows: That sometime on December 3. the purchase price of the building and house indicated in the deed justly represents the fair market value of said properties. G. That the condition of said sale is that the defendant reserved the right to repurchase. the defendant is under obligation to give plaintiffs written notice that she is in a position to repurchase said properties before the expiration of said period.I. 6. the BANK can only collect the balance of the purchase price from Enriquez and has the obligation. more or less.00 stipulated in the Deed. 49 . That the consideration of the sale is TWO HUNDRED FIFTY THOUSAND PESOS (P250. xxx Bound by the terms of the Contract to Sell. she failed to repurchase the same. 5. constructed with wooden materials and with G. That defendant never gave written notice to plaintiffs that she was in a position to repurchase said commercial lot and dwelling house as described above.R. that within [six] (6) months before the expiration of the date of repurchase. within two (2) years from said date. RICARDO LIM. the plaintiffs who are vendees-a-retro shall automatically become the absolute owners thereof upon the expiration of said period. roofing. with the marital consent of her husband.000. That considering that the dwelling house is already an old house and has depreciated a lot. Thus. No. to wit: A COMMERCIAL LOT located in the Centro of Ilagan. said commercial lot and dwelling house by paying and returning unto the plaintiffs the purchase [price] of P250.The Court cannot accept that the BANK was unaware of the Contract to Sell existing in favor of Enriquez. 7. Philippine Currency paid by the plaintiffs to the defendant. and for failure to give such notice. executed a DEED OF SALE WITH THE RIGHT OF REPURCHASE SELLING AND CONVEYING unto the plaintiffs the following described properties. LORETO CLARAVALL. 4. VICTORIA CLARAVALL. a copy of which is hereto attached and made part hereof marked Annex "A". PETITIONER. AND ROGELIO LIM. July 25. ASSISTED BY HER HUSBAND. Isabela x x x. but accompanied by a reservation to the vendor of the right to repurchase the property and there are no circumstances that may reasonably be accepted as generating some honest doubt as to the parties' intention. Sr.000.00. or resurrect an expired right of repurchase. honestly and sincerely entertained. judgment is hereby rendered in favor of plaintiffs and against the defendant: 1. The reason is quite obvious. 3. HELD: Article 1606 is intended to cover suits where the seller claims that the real intention was a loan with equitable mortgage but decides otherwise.. that the agreement was in reality a mortgage. in view of the foregoing. If the rule were otherwise. et al. v. and 4. Declaring the defendant to have waived her right to repurchase said properties. it would be within the power of every vendor a retro to set at naught a pacto de retro.8. xxx On August 5. Orias. ISSUE: Whether or not a vendor a retro be allowed to repurchase the property sold within 30 days from rendition of final judgment declaring the contract to be a true sale with right to repurchase. the plaintiffs are now entitled to the consolidation of their ownership of the same. That considering that the defendant failed to repurchase the dwelling house and commercial lot described in paragraph 3 hereof on or before December 3. the proviso is inapplicable. the RTC rendered a Decision. Ordering the defendant to pay attorney's fees of P2. et al. the application of the rule is meet and proper: that the vendor a retro be allowed to repurchase the property sold within 30 days from rendition of final judgment declaring the contract to be a true sale with right to repurchase. In Felicen. 3 of the Complaint. one not intended to affect the title to the property ostensibly sold. the Court explained: The application of the third paragraph of Article 1606 is predicated upon the bona fides of the vendor a retro. It must appear that there was a belief on his part. must entertain a good faith belief that the contract is an equitable mortgage. 1976. Declaring the plaintiffs to be the absolute owners of the commercial lot and dwelling house described in par. but merely to give it as security for a loan or obligation. the dispositive portion of which reads: WHEREFORE. The seller. In that event. by simply instituting an action to 50 . 1991. Ordering the defendant to pay costs of this suit. cited by petitioner. however.. Conversely. if it should appear that the parties' agreement was really one of sale transferring ownership to the vendee. 2. if the matter of the real nature of the contract is submitted for judicial resolution. founded on facts attendant upon the execution of the sale with pacto de retro. would in effect alter or modify the stipulation in the contract as to the definite and specific limitation of the period for repurchase (2 years from the date of sale or only until June 25. protect and even reward fraud and bad faith. 1958) thereby not simply increasing but in reality resuscitating the expired right to repurchase x x x and likewise the already terminated and extinguished obligation to resell by herein petitioner. "to allow herein private respondent to repurchase the property by applying said paragraph x x x to the case at bar despite the fact that the stipulated redemption period had already long expired when they instituted the present action. a situation surely never contemplated or intended by the law. This court has already had occasion to rule on the proper interpretation of the provision in question. Inacala. where the proofs established that there could be no honest doubt as to the parties' intention. that the transaction was clearly and definitely a sale with pacto de retro.reform the contract known to him to be in truth a sale with pacto de retro into an equitable mortgage." The rule would thus be made a tool to spawn. As postulated by the petitioner. 51 . In Adorable v. the Court adjudged the vendor a retro not to be entitled to the benefit of the third paragraph of Article 1606. Subsequently. that the jurisdiction belonged to the Department of Agrarian Reform Adjudication Board (DARAB). CDC and China Bank executed a deed of absolute sale over the property. and that CDC's title was invalid. more or less.. In 1962. Therein. S-91738 in the name of Pe. In the end. Thus. who in turn constituted a mortgage on the property in favor of China Banking Corporation (China Bank) as security for a loan. To repay the loan to Bacoor Bank and secure the release of the mortgage. Thus. leading to the issuance of TCT No.R. Rosauro (son of Perfecta who had predeceased Isaias in 1920). July 27. (99527) T-11749-A was issued in the name of China Bank. the respondent's maternal grandfather. 2011 FACTS: The subject of this case is a registered parcel of land (property) with an area of 6. 1993. namely: Cesar. In due course. VS. and consolidated its ownership of the property in 1985 after Pe failed to redeem. the property passed on to his children. located in Barrio Pulang Lupa. namely: Miguela. PETITIONER. the property now covered by OCT No. China Bank foreclosed the mortgage. ISSUE: Whether or not a buyer be considered in bad faith if he did not go beyond the certificate of title and instead just relied on the same. Jr. Upon the death of Isaias Lara in 1930. the defendants maintained that the MeTC did not have jurisdiction over the action because the land was classified as agricultural. On March 4.693 square meters. Candido. RENATO L. OCT No. on March 29. RESPONDENT. Laura recovered the property by repaying the obligation with the proceeds of another loan obtained from Rodolfo Pe (Pe).CASIMIRO DEVELOPMENT CORPORATION. and the other occupants of the property. CDC and China Bank negotiated and eventually came to terms on the purchase of the property. Resultantly. 1991. that was originally owned by Isaias Lara. Laura borrowed funds from Parmenas Perez (Perez). The first loan was obtained from Bacoor Rural Bank (Bacoor Bank). No. 438595. 1993. the co-heirs effected the transfer of the full and exclusive ownership to Felicidad (whose married surname was Lara-Mateo) under an agreement denominated as Pagaayos Na Gawa Sa Labas Ng Hukuman. Perfecta and Felicidad. and Leonardo. CDC brought an action for unlawful detainer in the Metropolitan Trial Court (MeTC) in Las Piñas City against the respondent's siblings. and a grandson. On June 6. S-91595 in Laura's name. however. and in the issuance of TCT No. required that the title be meanwhile transferred to his name. 438959 was issued in the name of Perez. G. In 1988. Las Piñas City. CDC was issued TCT No. She later executed a deed of sale in favor of Pe. that they had been in continuous and open possession of the land even before World War II and had presumed themselves entitled to a government grant of the land. resulting in the cancellation of TCT No. 52 . 6386 was cancelled and Transfer Certificate of Title (TCT) No. 175485. TCT No. with China Bank executing a deed of conditional sale for the purpose. MATEO. 6386 was used as collateral to secure a succession of loans. considering that the land had been registered before its being declared alienable. who. T-34640 in its own name. 99527 was a clean title. when it purchased the property. shall hold the same free from all encumbrances except those noted on said certificate and any of the following encumbrances which may be subsisting. Fourth. Second. that is. 27 or any other law or regulations on agrarian reform. 53 . but only has to rely on the certificate of title. CDC had the right to rely. solely upon the face of the certificate of title in the name of China Bank.Every registered owner receiving a certificate of title in pursuance of a decree of registration. The pertinent law on the matter of burdens and claims is Section 44 of the Property Registration Decree. Presidential Decree No. if the certificate of title does not state that the boundaries of such highway or irrigation canal or lateral thereof have been determined.HELD: The court held that one who deals with property registered under the Torrens system need not go beyond the certificate of title. without prejudice to the right of the government to collect taxes payable before that period from the delinquent taxpayer alone.Statutory liens affecting title . claims or rights arising or existing under the laws and Constitution of the Philippines which are not by law required to appear of record in the Registry of Deeds in order to be valid against subsequent purchasers or encumbrances of record. considering that China Bank's TCT No. Any public highway or private way established or recognized by law.Any disposition of the property or limitation on the use thereof by virtue of. it was free from any lien or encumbrance . or any government irrigation canal or lateral thereof. Liens. which provides: Section 44. He is charged with notice only of such burdens and claims as are annotated on the title. -. In short. namely: First. or pursuant to. and every subsequent purchaser of registered land taking a certificate of title for value and in good faith. Unpaid real estate taxes levied and assessed within two years immediately preceding the acquisition of any right over the land by an innocent purchaser for value. Third. agreed to the offer of Medina. On 17 March 1997. the heirs of Bañas learned about the sale and went to the house of Medina to inquire about it. No. ISSUE: Whether or not notice was properly made for the exercise of the right of legal pre-emption. It was opposed by Barcellano insisting that he complied with the provisions of Art. Medina sold the property to herein petitioner Armando Barcellano for P60. the Bañas heirs failed to tender the P60. On 15 March 2000. Medina offered his lot for sale to the adjoining owners of the property. Adjoining the said lot is the property of Vicente Medina (Medina). Medina confirmed that the lot was sold to Barcellano. 1623 of the New Civil Code. with an area of 1.00. Also. The following day.R.000. the heirs of Bartolome Bañas. On 3 April 1997. PLS-722-D situated in Hindi.000. Dolores Bañas. including herein respondent Dolores Bañas. as represented by Bermillo.ARMANDO BARCELLANO vs. VH-9094. HELD: The requirement of notice under Art. filed action for Legal Redemption. The heirs conveyed their intention to redeem the property but Medina replied that there was already a deed of sale executed between the parties. 2011 FACTS: Respondent Bañas is an heir of Bartolome Bañas who owns in fee simple Lot 4485. Bacacay. represented by her son and Attorney-in-fact CRISPINO BERMILLO G. Albay. Crispino Bermillo (Bermillo) and Isabela Bermillo-Beruela (Beruela) Crispino Bermillo. 165287 September 14.00 redemption amount to Medina.877 square meters. On 11 March 1998. Trial ensued. the trial court dismissed the complaint of the Bañas heirs for their failure to comply with the condition precedent of making a formal offer to redeem and for failure to file an action in court together with the consignation of the redemption price within the reglementary period of 30 days. covered by Original Certificate of Title No. DOLORES BAÑAS. which provides that: The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in writing by the prospective vendor. 1623 of the New Civil Code but Bañas failed to exercise her right within the period provided by law. as the representative of his family. or by 54 . Nothing in the records and pleadings submitted by the parties shows that there was a written notice sent to the respondents.the vendor. 55 . as the case may be. The deed of sale shall not be recorded in the Registry of Property. unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners. Without a written notice. does not start. the period of thirty days within which the right of legal pre-emption may be exercised. O.R. 2011 FACTS: Petitioner IFTI ordered a shipment of Toblerone chocolates and assorted confectioneries from Jacobs Suchard Tobler Ltd.B. and 2) submit a bank guarantee inasmuch as the shipment was consigned to China Banking Corporation to assure Danzas that it will be compensated for freight and other charges. Colombo Merchants Phils. In its another letter faxed to Danzas. IFTI countered that it had no liability to Danzas since IFTI was not privy to the hiring of Danzas. OOCL issued a non-negotiable master bill of lading.. Jacobs dealt with Danmar which issued to Jacobs negotiable house bills of lading signed by its agent. respondent Danzas. 181833 . Ex-Works. Danzas claimed that IFTI engaged its services to process the release of the goods from the port and deliver it to IFTI at Clark but the latter ignored the demand compelling Danzas to file a complaint for the sum of money against IFTI.” To ship the goods. Danmar contracted Orient Overseas Container Line (OOCL) to ship the goods from Switzerland. In its demand letter to IFTI. DANZAS INTERCONTINENTAL INC. Ultimately. IFTI did not provide Danzas with the original bills of lading and the bank guarantee. of Switzerland (Jacobs) through its Philippine agent. Upon learning from Danmar that the goods had been arrived at the port of Manila.LEASE INTERNATIONAL FREEPORT TRADERS VS. Danzas immediately informed IFTI of its arrival and the latter prepared the necessary documents for the release of the goods. January 26. Danzas secured the release of the goods and delivered the same to IFTI at Clark. Danzas got the import permit and asked IFTI to 1) surrender the original bills of lading to secure the release of the goods. 56 . The shipment was to be delivered at the Clark Special Economic Zone with Manila as the port of discharge. thus the latter withheld the processing of the release of the goods. IFTI reiterating its request that the goods be released pending payment of whatever charges Danzas had incurred for the release and delivery of the goods to Clark and promised to pay Danzas any charges within five days upon delivery of the goods. stating that OOCL confirmed that it had been paid an arbitrary fee. IFTI faxed a letter to Danzas. IFTI yielded to the request and applied for a bank guarantee. Inc. No. under the delivery term “F. G.. IFTI advised Danzas to pick up the documents. IFTI agreed to give Danzas another opportunity to service its account. stating that the freight was prepaid with Danmar as the shipper and Danzas as the consignee and party to be notified. In turn. Danzas reiterated to IFTI that it could secure the release of the goods only if IFTI submitted a bank guarantee. Here. Hence. The bank guarantee IFTI gave Danzas assured the latter that it would eventually be paid all freight and other charges arising from the release and delivery of the goods to it. culminating in its extinguishment. (2) perfection. ISSUE: Whether or not a contract of lease of service exists between IFTI and Danzas. A contract is perfected by mere consent. and (3) consummation.B. Ex-Works) and the house bills of lading (F. the RTC dismissed the complaint. there is no other conclusion than that the parties entered into a contract of lease of service for the clearing and delivery of the imported goods. The CA reversed the RTC ruling . What is clear to the Court is that. x x x Every contract has the elements of (1) consent of the contracting parties. x x x x In all these transactions. the latter insisted that it was entitled to collect a separate fee following the terms of the sale (F. and freight payable at destination). this petition. HELD: The facts show the existence of several contracts. The last stage is the consummation of the contract where the parties fulfill or perform the terms they agreed on. 57 . by acceding to all the documentary requirements that Danzas imposed on it. The perfection or birth of the contract takes place when the parties agree upon the essential elements of the contract. Danzas acted as an agent of Danmar who signed the house bills of lading in favor of Jacobs.O. Another indication that IFTI recognized its contract with Danzas is when IFTI requested Danzas to have the goods released pending payment of whatever expenses the latter would incur in obtaining the release and delivery of the goods at Clark. Negotiation begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of agreement of the parties. on appeal however.O.B. which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. and (3) cause of the obligation which is established.MeTC favored Danzas. IFTI voluntarily accepted its services. x x x x Since the last leg of the delivery of the goods to IFTI at Clark devolved on Danzas. Generally. (2) object certain which is the subject matter of the contract. contracts undergo three distinct stages: (1) preparation or negotiation. The property has been used as a security for the contract of loan contracted by the petitioner. Subsequently. As the area leased by respondent was not sufficient for its use. petitioner sent respondent a formal demand to pay and vacate the property. NATIONAL STATISTICS OFFICE G. Subsequently. Due to failure of the petitioner to pay his obligation. the parties agreed to renew the lease for a period of one year. ISSUE: Whether or not the lessee can resist ejectment by the lessor on the ground that the leased property has already been foreclosed and is now owned by a third person. respondent still refused to pay and to vacate the property. The petitioner failed to redeem the property. HELD: 58 .SANTOS VS. the bank advised respondent that as the new and absolute owner of the subject property. the property became a subject of a foreclosure sale to which the bank emerged as the highest bidder. 2011 FACTS: Petitioner Enrico Santos entered into a Contract of Lease with respondent NSO for the lease of 945 sq m of the first floor of the structure on said property for a monthly rental. No. Notwithstanding receipt. For failing to pay despite demand the rentals for two months.R. covering a bigger area of the same floor for an increased monthly rental. The petitioner sues for unlawful detainer. petitioner and respondent again entered into another contract which covered an additional space for a monthly rental. Respondent alleged that petitioner misrepresented himself as still the absolute owner of the subject property and entered into the second and third contracts of lease with respondent. and for its refusal to vacate the property even after the termination of the lease contracts. 171129 April 6. it is entitled to the rental payments for the use and occupancy of the leased premises from the date of consolidation. to whom it pays rents for its use. "[i]n cases where defendant raises the question of ownership in the pleadings and the question of possession cannot be resolved without deciding the issue of ownership. we note that petitioner. the disposition of the issue of ownership is not final. the court may proceed and resolve the issue of ownership but only for the purpose of determining the issue of possession. may show that the landlord’s title has been conveyed to another." However. China Bank. it is not difficult to see that the question of possession is so intertwined with the question of ownership to the effect that the question of possession cannot be resolved without resolving the question of ownership. the only issue for resolution is the physical or material possession of the property involved. independent of any claim of ownership by any of the party litigants. as it may be the subject of separate proceeding[s] specifically brought to settle the issue. In order to do this. respondent has satisfactorily shown that title to the property has already been conveyed to China Bank. failed to discharge his burden of showing that he indeed owned the property. 59 . the tenant must essentially assert that title to the leased premises already belongs to a third person who need not be a party to the ejectment case. Hence. xxx On the other hand. as plaintiff in the complaint for unlawful detainer. [Nevertheless]. petitioner’s action for unlawful detainer must fail. xxx From the above discussion." However.A tenant in proper cases such as this. "It bears emphasizing that in ejectment suits. xxx Not being the registered titleholder. we hold that petitioner does not have a better right of possession over the property as against respondent who is in actual possession thereof and who claims to derive its right of possession from the titleholder. . INC.SIME DARBY PILIPINAS. any advertising service it intended to get from them would have to wait until after the expiration or valid pre-termination of the lease then existing with Sime Darby. one of which was a 35’ x 70’ neon billboard located at the Magallanes Interchange in Makati City.R. due to budget constraints. The Magallanes billboard was leased by Macgraphics to Sime Darby for a term of four years with a ten-month deposit to be applied to the last ten months of the lease. Goodyear. whereby it agreed to sell its tire manufacturing plants and other assets to the latter including the assignment by Sime Darby of the receivables in connection with its billboard advertising in Makati City and Pulilan. Sime Darby executed a Memorandum of Agreement with Goodyear. 183210 June 8. Macgraphics then informed Sime Darby that it could not give its consent to the assignment of lease to Goodyear explaining that the transfer would necessitate drastic changes to the design and the structure of the neon display of the billboard and would entail manpower and resources that it did not foresee at the inception of the lease. it could not accept the offer. As such. 2011 FACTS: Macgraphics owned several billboards across Metro Manila and other surrounding municipalities. 60 . No. INC. Macgraphics informed Goodyear that the monthly rental of the billboard increased in consideration of the provisions and technical aspects of the submitted design. GOODYEAR PHILIPPINES. Bulacan and its leasehold rights and deposits made to Macgraphics pursuant to its lease contract over the Magallanes billboard. VS. Sime Darby then notified Macgraphics of the assignment. and MACGRAPHICS CARRANZ INTERNATIONAL CORPORATION G. The lessee cannot assign the lease without the consent of the lessor. there is a novation by the substitution of the person of one of the parties – the lessee. The personality of the lessee. however. be clearly given. Thereafter. the petition of Sime Darby remains bereft of any merit. 1649. ISSUE: Whether or not Sime Darby should have secured the consent of Macgraphics to the assignment of the lease before it could be effective. it cannot be said that Macgraphics gave its implied consent to the assignment of lease. HELD: Whether Macgraphics gave its consent to the assignment of leasehold rights of Sime Darby is a question of fact. Neither is it required to be in any specific or particular form. unless there is a stipulation to the contrary. It need not be given simultaneously with that of the lessee and of the assignee. On this score alone. In sum. a new juridical relation arises between the two persons who remain – the lessor and the assignee who is converted into the new lessee. it is clear that by its failure to secure the consent of Macgraphics to the assignment of lease. Goodyear demanding partial rescission of the Deed of Assignment and the refund of the pro-rata value of Sime Darby’s leasehold rights over the billboard. The objective of the law in prohibiting the assignment of the lease without the lessor’s consent is to protect the owner or lessor of the leased property. justified. In this case. the petition of Sime Darby fails. 61 . It is not reviewable. A review of the lease contract between Sime Darby and Macgraphics discloses no stipulation that Sime Darby could assign the lease without the consent of Macgraphics. It must. The rescission of the Deed of Assignment pursuant to Article 1191 of the New Civil Code is. disappears. xxx The consent of the lessor to an assignment of lease may indeed be given expressly or impliedly. thus.Even if the Court should sidestep this otherwise fatal miscue. Sime Darby refused to accede to the demand for partial rescission. Sime Darby failed to perform what was incumbent upon it under the Deed of Assignment.Due to Macgraphics’ refusal to honor the Deed of Assignment. (n) In an assignment of a lease. Article 1649 of the New Civil Code provides xxx Art. who dissociates from the lease. the respondents would charge them P3. AMELIA C. MAR vs. 1995. the petitioners agreed to pay monthly rents. P840. 62 .000. for Amelia Mar. 1995 three distinct complaints for ejectment against the petitioners in the Metropolitan Trial Court (MeTC) of Manila.EMILIANA G. Based on the parties’ oral lease agreements. 1995 until they would actually vacate. informing that they were terminating the respective monthto-month lease contracts effective September 15. 1995 at the following rates. PEŇA.P480.00. the respondents filed on October 9.00.R. 1995 and demanding that the petitioners vacate and remove their houses from their respective premises. pegged as of October 9. On August 15. Both parties appealed by petition for review. and for Emiliana Peña. The Regional Trial Court (RTC) modified the MeTC’s decision.00/month each as reasonable compensation for the use and occupancy of the premises from October 1. The MeTC ruled in favor of the respondents. the respondents wrote a demand letter to each of the petitioners. P570. No. with warning that should they not heed the demand. namely: for Carmen Reyes. SPOUSES ARMANDO TOLENTINO AND LETICIA TOLENTINO G. 2011 FACTS: The petitioners are lessees of three distinct and separate parcels of land owned by the respondents. After the petitioners refused to vacate within the period allowed. 155227-28 February 9.00. The CA rendered judgment setting aside the decision of the RTC with modification. 20 suspended only Article 1673.P. Civil Code that under Article 1687. particularly as a demand to that effect was made. which suspended paragraph 1 of Article 1673. No.P. 877 was the controlling rental law when the complaints against the petitioners were filed on October 9. Article 1673 of the Civil Code was that. its Section 10 provided for the suspension of paragraph 1 of Article 1673 of the Civil Code. independently of the grounds for ejectment enumerated in B. a lease on a month-to-month basis was a lease with a definite period and that the petitioners could be ejected from the leased premises upon the expiration of the definite period. 877 did not suspend the effects of Article 1687 of the Civil Code and that the only effect of the suspension of paragraph 1. therefore. In refutation. the determination of the period of the lease could still be made in accordance with Article 1687. 9161 took effect. Also. The petitioners’ contention is erroneous. 877.D. Blg. We note that on January 1. that B. Blg. the Court held that Section 6 of B.D. the owner/lessor could not eject the tenant by reason of the expiration of the period of lease as fixed or determined under Article 1687 of the Civil Code.A. HELD: The petitioners contend that their lease contracts were covered by P. not Article 1687. It’s Section 7(e) provided that the expiration of the period of the lease contract was still one of the grounds for judicial ejectment. the expiration of the period of their leases was no longer a valid ground to eject them and that their leases should be deemed to be for an indefinite period. No. It is clear. In several rulings. Consequently. 63 . the respondents argue that P. 2002. ISSUE: Whether or not the contracts of lease were for an indefinite period.P. Civil Code that as a result. 1995. 20. R. Blg. Herein respondents. Macario’s wife Mercedes R. (2) Lot 1108-A-2. Samson (Pastor) owned a 1. executed a Joint Motion and Manifestation wherein Macario promised to surrender possession of the property to Chan on or before November 30. Respondents filed an action for maintenance of peaceful possession with prayer for the issuance of a restraining order/preliminary injunction and for the redemption of the subject landholding against Pastor and Chan before the Department of Agrarian Reform Adjudication Board (DARAB). Pastor subdivided Lot 1108 into three portions Lot 1108-A. recognizing that Chan is a buyer in good faith. 1992. and (3) Lot 1108-A-3. Aggrieved. 1993. 179024 May 30. As a result of the sale. SUSANO and NORBERTO R. In 1979. or Lots 1108-A-1 and 64 .MERCEDES R. 2011 FACTS: Pastor M. SAMSON.ESTATE OF PASTOR M. Susano. Meanwhile. Susano and their son Norberto R. Macario and his wife Mercedes executed a notarized document entitled. “ Kusang-Loob na Pagtatalaga” (Deed of Undertaking) wherein Macario. it appears that Chan and Macario tried to settle amicably the dispute as between them. assisted by their respective counsels. Lots 1108-A-1 and 1108-C remained occupied and cultivated by Macario and his family. Macario received a letter from Pastor’s lawyer demanding that he vacate the property within twenty (20) days. acknowledged the latter’s ownership over the said landholding. which rent was reduced by Pastor in 1986 to 8 cavans of palay per agricultural year. represented by his heir ROLANDO B. Macario died and was succeeded by respondents in the possession and cultivation of the subject landholding. Chan and Macario. No. In 1973. Macario filed a complaint against Pastor before the Municipal Agrarian Reform Office (MARO) of Valenzuela. Lot 1108B. Lot 1108-A was further subdivided into three portions: (1) Lot 1108-A-1 in Pastor’s name. Pastor was approached by his friend Macario Susano (Macario) who asked for permission to occupy a portion of Lot 1108 to build a house for his family. The last two parcels are registered in the name of spouses Felix Pacheco and Juanita Clamor. Pastor sold Lot 1108-C to petitioner Julian Chan.0138-hectare parcel of land in Caloocan City. The first and last parcels remained registered in Pastor’s name while the other lot was sold to Jimena Novera in 1973 without Macario’s knowledge. Lot 1108-C.R. Macario and his family occupied 620 square meters of Lot 1108 and devoted the rest of the land to palay cultivation. allegedly also without Macario’s knowledge and consent. Macario religiously paid 15 cavans of palay per agricultural year to Pastor. insist that while no agricultural leasehold contract was executed by Pastor and Macario. Pastor sold Lot 1108-A to spouses Felix Pacheco and Juanita Clamor. SAMSON vs. SUSANO G. On February 9. the complaint prayed for the inclusion of the 7.316-square meter portion of said landholding. It has been repeatedly held that occupancy and cultivation of an agricultural land will not ipso facto make one a de jure tenant. within the Coverage of the Operation Land Transfer (OLT) Program under Presidential Decree (P. or consent of the landowner.) No. sharing of harvest. Contrary to what is required by law. The presence of all of these elements must be proved by substantial evidence. no specific evidence was cited to support such conclusion other than their observation that Pastor failed to protest Macario’s possession and cultivation over the subject land for more than 30 years. or paying the landholder a price certain or ascertainable in produce or in money or both. another. no independent and concrete evidence were adduced by respondents to prove that there was indeed consent and sharing of harvests between Pastor and Macario. (2) the subject matter is agricultural land. being a legal relationship. (3) there is consent between the parties. (4) the purpose is agricultural production. defines a tenant as a person who. For a tenancy relationship to exist between the parties. In the case at bar. ISSUE: Whether or not Macario is a de jure tenant in the subject landholding entitled to security of tenure. there must be concrete evidence on record adequate to prove the element of sharing. (5) there is personal cultivation by the tenant. DARAB and the CA are unanimous in their conclusion that an implied tenancy relationship existed between Pastor Samson and Macario Susano. himself and with the aid available from within his immediate farm household. sharing the produce with the landholder under the share tenancy system. however. the following essential elements must be shown: (1) the parties are the landowner and the tenant. For implied tenancy to arise it is necessary that all the essential requisites of tenancy must be present. while the RARAD. or possessed by. under a leasehold tenancy system. Substantial evidence necessary to establish the fact of sharing cannot be satisfied by a mere scintilla of evidence. Independent and concrete evidence is necessary to prove personal cultivation. and (6) there is sharing of the harvests between the parties. Tenancy relationship cannot be presumed. the elements for its existence are explicit in law and cannot be done away with by conjectures.1108-C. because self-serving statements are inadequate. To prove sharing of harvests. 65 . HELD: The Agricultural Tenancy Act of the Philippines. cultivates the land belonging to. with the latter’s consent for purposes of production. a receipt or any other credible evidence must be presented.D. the mutual will of the parties to that relationship should be primordial. Leasehold relationship is not brought about by the mere congruence of facts but. 27 or The Tenant Emancipation Decree. R. There was a reconciliation of accounts between the two corporations with respect to the balances due which resulted in PRHC owing LCDC the sum of P 20.862. Each agreement provided for a fixed price to be paid by PRHC for every project. and that forms the basis for PRHC’s liability to LCDC for the said amount." LCDC committed itself to the construction of the buildings needed by PRHC. LCDC requested the release of the P36M escalation price. as evidenced by four duly notarized "construction agreements.41. in the form of liquidated damages.326. L CONSTRUCTION AND DEVELOPMENT CORPORATION G. acknowledged that it was in debt to LCDC in the amount of P 36 million. ownership of the P 36 million was never transferred to PRHC. No.92. ISSUE: Whether or not PRHC treated the P 36 million as a loan deductible from the liquidated damages for which LCDC is supposedly liable. As previously mentioned. LCDC wrote a letter addressed to Santos stating that it had already complied with its commitment and was requesting the release of P 2. but after the construction of the building was completed.LOAN EYPHILIPPINE REALTY AND HOLDINGS CORPORATION VS.248. only 256 days or not even half the number of days originally requested were considered. LCDC claimed that in a period of over two years. Parenthetically. It claimed that LCDC had incurred 111 days of delay in the construction of the Tektite Building and demanded that the latter pay P 39. which in turn committed itself to pay the contract price agreed upon.817.15 as liquidated damages. its claim to the supposed liability of LCDC. In this case.43% of Tektite Building had been completed. When 96. LCDC countered that there were many times when its requests for time extension although due to reasonable causes. That decision was to set off. HELD: No. In a contract of loan.546. it conveyed its decision in a letter. 165548. June 13.463. out of the 618 days of extension it requested. ownership of the money is transferred from the lender to the borrower. PRHC. We disagree with this analysis. PRHC did not reply. LCDC demanded payment of the agreed escalation price and PRHC suddenly denied any liability for the escalation price. 2011 FACTS: The two corporations entered into four major construction projects. we note that the CA had ruled xxx that when PRHC informed LCDC that it would apply the P 36 million to the liquidated damages. PRHC never replied to this letter. such amount was paid directly 66 . in effect. The RTC held Durban solely liable to petitioner for the loss of the property. Respondent is the insurer for loss and damage of Jeffrey S.000. The CA affirmed the decision of the trial court.to the suppliers. filed with the RTC of Makati City a Complaint for Recovery of Damages against petitioner Durban Apartments Corporation. See was awakened in his room by a telephone call from the Hotel Chief Security Officer who informed him that his Vitara was carnapped while it was parked unattended at the parking area of Equitable PCI Bank along Makati Avenue between the hours of 12:00 – 1:00 am. See arrived and checked in at the City Garden Hotel in Makati before midnight.00. The Makati City Police Anti-Carnapping Unit investigated Hotel Security Officer Horlador. and a flash alarm was issued. No. and defendant Vicente Justimbaste. and defendant Justimbaste. We find that arrangement between PRHC and LCDC cannot be construed as a loan agreement but rather. 67 . by right of subrogation. On May 1. 179419.R. See thereafter reported the incident to the Operations Division of the Makati City Police Anti-Carnapping Unit. Inc. doing business under the name and style of City Garden Hotel. Jr. as indemnity for the loss of the Vitara. at about 1:00 am. The Vitara was lost due to the negligence of petitioner Durban and defendant Justimbaste because it was discovered during the investigation that this was the second time that a similar incident of carnapping happened in the valet parking service of petitioner and no necessary precautions were taken to prevent its repetition. and its parking attendant. it was an agreement to advance the costs of construction. See’s 2001 Suzuki Grand Vitara in the amount of P1. The Vitara has not yet been recovered. PIONEER INSURANCE AND SURETY CORPORATION G. defendant Justimbaste got the key to said Vitara from See to park it. 2011 FACTS: Respondent Pioneer Insurance and Surety Corporation. 2002.175. It paid the money claim of See and mortgagee ABN AMRO Savings Bank. DEPOSIT DURBAN APARTMENTS CORPORATION VS. January 12. with the obligation of safely keeping it and returning the same. we find no error in the following disquisition of the appellate court: [The] records also reveal that upon arrival at the City Garden Hotel. 1998. x x x Justimbaste. they take the precautions which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects. the lower courts did not err in holding petitioner liable for the loss of See’s vehicle. the 68 . Article 1962. on the part of the latter.ISSUEE: Whether or not petitioner is liable to respondent for the loss of See’s vehicle. from the facts found by the lower courts. On this score. While the petitioner was in default for failure to appear at the pre-trial conference and to file a pre-trial brief. x x x Justimbaste issued a valet parking customer claim stub to See. respondent substantiated the allegations in its complaint. and placed the ignition key inside a safety key box while See proceeded to the hotel lobby to check in. The deposit of effects made by travelers in hotels or inns shall also be regarded as necessary.. of the effects brought by the guests and that. provided that notice was given to them. Justimbaste. Art. HELD: No. 1962. A deposit is constituted from the moment a person receives a thing belonging to another. and thus. The Equitable PCI Bank parking area became an annex of City Garden Hotel when the management of the said bank allowed the parking of the vehicles of hotel guests thereat in the evening after banking hours. Justimbaste issued a claim stub to See. a contract of necessary deposit existed between the insured See and petitioner. or to their employees. parked the Vitara at the Equitable PCI Bank parking area. i. the insured See deposited his vehicle for safekeeping with petitioner. of the Civil Code defines a contract of deposit and a necessary deposit made by persons in hotels or inns: Art. Thus. In turn. in relation to Article 1998. about his Vitara when he entrusted its ignition key to the latter. In this case. If the safekeeping of the thing delivered is not the principal purpose of the contract. The keepers of hotels or inns shall be responsible for them as depositaries. through the latter’s employee. there is no deposit but some other contract. Plainly. allowed respondent to present evidence ex-parte.e. See gave notice to the doorman and parking attendant of the said hotel. Moreover. which Justimbaste received with the obligation of safely keeping and returning it. vs. RTC ordered the immediate discharge of the attachment issued against Ko and See Ko but denied the motion to dismiss. On February 6. respondents Howard Ko. Jimmy Ong. with a limited liability of P50 M. Howard Ko and Min Min See Ko filed a Motion to Discharge Preliminary Attachment for having been improperly or irregularly issued. Jianshe failed to pay its obligations. MIN MIN SEE KO. 185454. 2006. HOWARD KO. or otherwise extinguished. The case was raffled to Branch 132 and docketed as Civil Case No.R. The RTC granted the 69 . To secure the goods imported by Jianshe. abandoned. petitioner is liable for the loss of See’s vehicle. and Grace Ng Ong executed a Comprehensive Surety Agreement dated September 3. Despite demand. when he handed over to Justimbaste the keys to his vehicle. Ultimately. before the Regional Trial Court (RTC) of Makati City on December 27. March 23. Min Min See Ko adopted Howard Ko's motion. 2005. INC. however. Howard Ko filed a Motion to Dismiss on the ground that RCBC's claim had already been paid. RCBC required it to execute trust receipts over these goods. RCBC thus filed a Complaint for Specific Perfomance with Prayer for a Writ of Preliminary Attachment against Jianshe as principal and respondents as sureties. to secure payment of all existing and future obligations of Jianshe to RCBC. No. On March 17. 2002. RCBC. Min Min See Ko. JIMMY ONG and GRACE NG ONG G. 2011 FACTS: Jianshe Motorcycle Industries Philippines Corporation (Jianshe) obtained various credit facilities or loan accommodations from Rizal Commercial Banking Corporation (RCBC) from 2003-2004 to finance its importation of motorcycles. opposed the motion. waived. motorcycle parts. 2006. GUARANTY STAR TWO (SPV – AMC). and other related goods.contract of deposit was perfected from See’s delivery. 05-1146. motorcycle accessories. The issuance of the receipts does not erase the fact that various amounts were debited from the accounts of Howard Ko.Ko’s motion and dismissed the case against the respondents. the debited amounts from Howard Ko's accounts were made to satisfy his obligation as surety. primarily. and passbooks. ISSUE: Whether or not the surety’s liability could be greater than that of the principal. which owed RCBC. leaving Jianshe as the only defendant. Undoubtedly. A contract of suretyship is an agreement whereby a party. primarily by debiting the subject amounts from respondents' accounts with the bank. such as official receipts. both as regards the amount and the onerous nature of the conditions. and equally bound with the principal as the original promissor although the former possesses no direct or personal interest over the latter's obligations and does not receive any benefit therefrom. and assigned all its rights and interests in the present case to Star Two. considering that it had sold. In dismissing the case. The Court notes that the pieces of evidence presented by respondents were documents. the issuance of the receipts in the name of Jianshe was done only to indicate that it was the principal obligor. called the obligee. RCBC move for Substitution of parties. and certificates of time deposit in the name of Howard Ko were applied as payment for Jianshe's obligations. Pursuant to Article 2054 of the Civil Code that "a guarantor [or surety] may bind himself for less. the case was elevated to the CA but the same was denied. it was Jianshe. trust debit advices. transferred. Inc. Petitioner cannot now claim that the payments were made by Jianshe as principal and not by respondents as sureties simply because the receipts were issued in the name of Jianshe. HELD: Respondents acted as sureties under the Comprehensive Surety Agreement to secure the obligations of Jianshe to RCBC." respondents limited their liability to P50 M. called the surety. of an obligation or undertaking in favor of another party. the trial court stated that there was sufficient evidence to prove that Ko paid the amount mote than the limit provided under the Comprehensive Surety Agreement. Hence this petition. and the surety becomes directly. Howard Ko complied with his obligations and made payments to RCBC. but not for more than the principal debtor. The surety agreement is an accessory contract. Nowhere in petitioner's pleadings was it claimed that respondents also owed the bank aside from their obligation as surety to secure the principal obligation of Jianshe. as the principal. called the principal or obligor. guarantees the performance by another party. Admittedly. which is less than Jianshe's liability to RCBC. issued by no less than petitioner itself. Payments were made by respondents through the active participation of RCBC. 70 . As aptly observed by the CA. PNB.PLEDGE THE ESTATE OF LUIS RAMOS vs.00 Philippine Currency and to secure the payment of the same and those others that the Mortgagee may extend to the Mortgagor. 178218.000. DEC. On March 31. the parties executed a Real Estate Mortgage on October 23. 1989. Luis Ramos would renew the loan every year after paying the amounts falling due therein. the relevant provisions of which stated: That for and in consideration of certain loans. The agreement pertinently provided thus: 71 . which is hereby fixed at P83.00. 14.000.000. x x x. Luis Ramos obtained a credit line under an agricultural loan account from the Philippine National Bank (PNB) for P83. 1973. 2011 FACTS: In 1973. overdrafts and other credit accommodations obtained from the Mortgagee. G.000. Luis Ramos and PNB entered into a Credit Line Agreement in the amount of P50. To secure the loan. NO.00 under the bank’s sugar quedan financing program.R. the spouses Ramos fully settled the agricultural loan of P160. 1990.000. ISSUE: Should the general terms of the real estate mortgage executed by borrower Luis T. 1989.00 agricultural loan but also the other loans the spouses obtained from the bank. The said loan was secured by the real estate mortgage previously executed by the parties on October 23. 1998 in Philippine National Bank v. which they could have acquired by mortgaging or disposing of the said properties.000.000. They alleged that they lost business opportunities since they could not raise enough capital. PNB alleged that the spouses’ sugar quedan financing loan of P15.For and in consideration of the Bank agreeing to extend to the Borrower a Revolving Credit Line (the “Line”) in an amount not to exceed PESOS: FIFTY MILLION ONLY (P50. In its Answer. The spouses Ramos prayed for the trial court to order PNB to release the real estate mortgage on their properties and to return to the spouses the TCTs of the properties subject of the mortgage. 1973. On February 28. As PNB was still unable to collect on the quedans. the spouses Luis Ramos and Ramona Ramos (spouses Ramos) also obtained an agricultural loan of P160.00 remained unpaid as the quedans were dishonored by the warehouseman Noah’s Ark.00 from PNB.600. Meanwhile. the spouses Ramos filed a complaint for Specific Performance against the PNB. Specifically. however. On November 2. Thus. refused to heed the spouses’ demand. PNB. PNB argued that it could not release the real estate mortgage in favor of the spouses.00. Jr. Said loan was evidenced by a promissory note issued by the spouses on even date. The status of PNB as a pledgee of the sugar quedans involved in this case had long been confirmed by the Court in its Decision dated July 9. under the Bank’s Sugar Quedan Financing Program for Crop Year 88/89.000. We reiterate our ruling in Sayo that: 72 . on August 7. and the same is neither disputed in the instant case.000. 1996. PNB averred that it filed a civil action for specific performance against Noah’s Ark involving the quedans and the case was still pending at that time. The spouses claimed that the actions of PNB impaired their rights in the properties included in the real estate mortgage. PNB countered that the spouses Ramos had no cause of action against it since the latter knew that the real estate mortgage secured not only their P160. Sayo.000. Ramos in favor of lender PNB be understood to include in its coverage the borrower’s sugar quedan financing loan that is different from his agricultural crop loan undisputedly agreed upon by the parties to be covered by the collateral? HELD: There is no reason to overturn the assailed ruling of the Court of Appeals that the contract of pledge between petitioners and PNB was not terminated by the Authorization letter issued by Luis Ramos in favor of PNB.00). They then demanded from PNB the release of the real estate mortgage. it claimed that the spouses Ramos’ loan obligations were yet to be fully satisfied. the things in which the pledge or mortgage consists may be alienated for the payment to the creditor. with more reason that PNB cannot be compelled to release the real estate mortgage and the titles involved therein since the issue of whether the sugar quedan financing loan will be fully paid through the pledged sugar receipts remains the subject of pending litigation. is the owner of the goods. Article 2115 of the Civil Code expressly provides that the sale of the thing pledged shall extinguish the principal obligation. Thus. the said grant of authority on the part of PNB is a standard condition in a contract of pledge. termed pactum commissorio. interest and expenses in a proper case. As we adverted to in Sayo. As held by the Court of Appeals. Any stipulation to the contrary. the sugar quedan financing loan in this case is yet to be settled. like pledge. x x x. prior to the actual foreclosure of the thing pleged. it is the foreclosure of the thing pledged that results in the satisfaction of the loan liabilities to the pledgee of the pledgors. whether or not the proceeds of the sale are equal to the amount of the principal obligation. A close reading of the Authorization executed by Luis Ramos reveals that it was nothing more than a letter that gave PNB the authority to dispose of and sell the sugar quedans after the maturity date thereof. in a contract of real security.” More importantly. and before any such foreclosure.The creditor. in accordance with the provisions of Article 2087 of the Civil Code that “it is also of the essence of these contracts that when the principal obligation becomes due. not the pledgee. the pledgor. is null and void. The law requires foreclosure in order to allow a transfer of title of the good given by way of security from its pledgor. As matters stand. 73 . cannot appropriate without foreclosure the things given by way of pledge. the pledge executed by Juniat in favor of Nonwoven cannot bind petitioner. 1992 clearly shows that the sewing machines. 2011 FACTS: Petitioner filed with the Regional Trial Court (RTC) of Makati. HELD: A perusal of the Agreement dated May 9." Hence. in case of doubt as to whether a transaction is one of pledge or dacion en pago.The writs were served by the Sheriff upon Nonwoven as it was in possession of the motorized sewing machines and equipment. 74 . just like the chattel mortgage executed in favor of petitioner.Petitioner alleged that Juniat. It bears stressing that there can be no transfer of ownership if the delivery of the property to the creditor is by way of security. Also. Winwood. ALAIN JUNIAT G. Juniat executed a Continuing Surety Agreement in favor of petitioner that the loan remains unpaid and that the mortgaged motorized sewing machines are insufficient to answer for the obligation. Wingyan. snap machines and boilers were ceded to Nonwoven as payment for the Wingyan’s and Winwood’s obligation. In fact. 171569. a Complaint with prayer for the issuance of ex-parte writs of preliminary attachment and replevin against Juniat. The RTC issued writs of preliminary attachment and replevin in favor of petitioner. snap machines and boilers were pledged to Nonwoven by Juniat to guarantee his obligation. 1992. and the person in possession of the mortgaged motorized sewing machines and equipment.R. there is nothing in the Agreement dated May 9. the presumption is that it is a pledge as this involves a lesser transmission of rights and interests. snap machines and boilers were pledged to Nonwoven. "[a] pledge shall not take effect against third persons if a description of the thing pledged and the date of the pledge do not appear in a public instrument. However. 1992 to indicate that the motorized sewing machines.UNION BANK OF THE PHILIPPINES vs. acting for and in behalf of Winwood and Wingyan. ISSUE: Whether the unnotarized mortgage executed in favor of petitioner may also indicate that the sewing machines. executed a promissory note and a Chattel Mortgage dated over several motorized sewing machines and other allied equipment to secure their obligation arising from export bills transactions to petitioner that as additional security for the obligation.contending that the unnotarized Chattel Mortgage executed in favor of petitioner has no binding effect on Nonwoven and that it has a better title over the motorized sewing machines and equipment because these were assigned to it by Juniat pursuant to their Agreement dated May 9. August 1. No.Nonwoven filed an Answer. under Article 2096 of the Civil Code. Branch 57. granted a P31. 2011 FACTS: On June 25. included the TCT No. 164693. a bank officer told them that such is no longer possible as the land has already been bought by Abalos. In 1984. however. T-7746 originally TCT No. No.1. The bank assured them of the return of the land. as amended.R.00 loan to respondent spouses Lomantong Darapa and Sinab Dimakuta (spouses) who exceuted therefore a real and chattel mortgage contract which covered a warehouse to house the rice and corn mill. daughter of the then provincial governor.1962. The aforesaid equity rights.997 as additional collateral. which. 75 . When the spouses failed to pay their loan.MORTGAGE JOSEFA ABALOS AND DEVELOPMENT BANK OF THE PHILIPPINES vs. 1. however. Lanao Del Norte. unknown to the spouses. 1994. the spouses discovered all these and they immediately consulted a lawyer who forthwith sent a demand letter to the bank for the reconveyance of the land. T-16-280 was issued in Abalos’ name. In 1994. T. the spouses applied for the renewal and increase of their loan using Sinab Dimakuta’s (Dimakuta) Transfer Certificate of title (TCT) No. Ozamis Branch. DBP extrajudicially foreclosed the mortgages on September 16. The spouses failed to redeem the land under TCT NO. A-148 in DBP's favor was embedded in the Deed of Assignment of Rights and Interests which the spouses executed simultaneous with the real and chattel mortgage contract. which led to its cancellation.petitioner Josefa Abalos. Recovery of Possession and Damages against DBP and Abalos. constructed on a 357 square meter lot situated at Poblacion. and the eventual issuance of TCT no. participation and interest of the mortgagors in the said parcel of land are not registered under the Spanish Mortgage Law nor under Act 496 and the parties hereby agree that this instrument shall be registered under Act 3344. 1971.997. T-1997 was cancelled and on July 6.7746 in DBP’s name. 1994. The DBP disapproved the loan application without returning. SPOUSES LOMANTONG DARAPA and SINAB DIMAKUTA G. The assignment of the spouses’ equity rights over the land covered by Tax Declaration No. T-1. On August 20. petitioner DBP. On May 12. the DBP sold the land to its co. the spouses filed with the RTC of Iligan City a complaint for annulment of Title. March 23. Dimakuta’s TCT. The TCT No.997.1994. T.000. In 1970. Linamon. T-1. further.reconveyed). thus its foreclosure by DBP and its eventual sale to Abalos was null and void. however. ISSUE: Whether or not the action of the spouses had already prescribed. Abalos. thus. was ordered by the RTC to return to the spouses the land she bought from DBP. The DBP contends that the prescriptive period for the reconveyance of fraudulently registered real property is ten (10) years reckoned from the date of the issuance of the certificate of title. the Court notes that Abalos. The Court of Appeals denied the petition of the petitioner . T-1." grounded on the theory that the DBP foreclosed their land covered by TCT No. The Court also disagrees with DBP’s contention that for failure to institute the action within ten years from the accrual of the right thereof. HELD: Thus. T1. and.997 was not one of the mortgaged properties. T-1. By abandoning her appeal.997 without any legal right to do so. the 10. she was subsequently dropped as party-petitioner. it not having been mortgaged. Recovery of Possession and Damages. the RTC decision with respect to her. Article 1410of the Civil Code categorically states that an action for the declaration of the inexistence of a contract does not prescribe. resulting in its dismissal. laches and prescription. While the above disquisition of DBP is true. rendering the sale and the subsequent issuance of TCT in DBP's name void ab initio and subject to attack at any time conformably to the rule in Article 1410 of the Civil Code. as in the present petition. 76 . we find no reversible error in the RTC and the CA’s findings that DBP’s foreclosure sale of the land under TCT no.997 and its sale to Abalos. The RTC annulled the DBP’s foreclosure sale of the land under TCT No.year prescriptive period applies only when the reconveyance is based on fraud which makes a contract voidable (and that the aggrieved party is not in possession of the land whose title is to be actually. the RTC also ordered the cancellation of Abalos' title. DBP's co-defendant. The spouses’ action is an action for "Annulment of Title. In finis. In this Court's Resolution dated 13 February 2006. T-1. barring the spouses from vindicating their transgressed rights.997. became final. It does not apply to an action to nullify a contract which is void ab initio. it ratiocinated that DBP had no right to foreclose the land under TCT No.The spouses averred that TCT no. it declared Dimakuta as the land’s lawful owner. The court also finds unmeritorious the DBP’s contention that spouses’ cause of action is barred by estoppels.997 was null and void. abandoned her appeal then pending before the Court of Appeals. prescription has set in. After the lapse of one (1) year without the property being redeemed.00 from PNB Laoag Branch on October 14. spouses Jose A. Ros obtained a loan of P115. the property was consolidated and registered in the name of PNB. a Certificate of Sale was issued in favor of PNB. As a result. 9161 of the Cadastral Survey of Laoag. Upon maturity. The averments in the complaint disclosed that plaintiff-appellee Joe A.000. PHILIPPINE NATIONAL BANK – Laoag Branch G. T-9646. Laoag Branch on August 10. plaintiff-appellee Ros executed a real estate mortgage involving a parcel of land – Lot No. 2011 FACTS: On January 13. ISSUE: Whether or not the real estate mortgage is valid. Laoag as the highest bidder. with all the improvements thereon described under Transfer Certificate of Title No. No. 1974 and as security for the loan.JOE ROS vs. 1978. Ros and Estrella Aguete filed a complaint for the annulment of the Real Estate Mortgage and all legal proceedings taken thereunder against PNB. PNB instituted extrajudicial foreclosure proceedings on the mortgaged property. the loan remained outstanding. After the extrajudicial sale thereof. Ilocos Norte. 170166 April 6. 1983. sale and consolidation of the property – interposing the defense that her signatures affixed on the documents were forged and that the loan did not redound to the benefit of the family. Laoag Branch before the Court of First Instance. HELD: 77 .R. Claiming that she (plaintiff-appellee Estrella Aguete) has no knowledge of the loan obtained by her husband nor she consented to the mortgage instituted on the conjugal property – a complaint was filed to annul the proceedings pertaining to the mortgage. However. Aguete denies ever having consented to the loan and also denies affixing her signature to the mortgage and loan documents. In the present case. Annulment will be declared only upon a finding that the wife did not give her consent. when such consent is required.00 on 23 October 1974. Article 173 of the Civil Code allows Aguete to question Ros’ encumbrance of the subject property. Petitioners did not present any corroborating witness.” There is no doubt that the subject property was acquired during Ros and Aguete’s marriage. and whoever alleges it has the burden of proving the same. during the marriage. A notarized document carries the evidentiary weight conferred upon it with respect to its due execution. the same article does not guarantee that the courts will declare the annulment of the contract. 166 provides: “Unless the wife has been declared a non compos mentis or a spendthrift. for 78 . we follow the conclusion of the appellate court and rule that Aguete gave her consent to Ros’ encumbrance of the subject property. the husband cannot alienate or encumber any real property of the conjugal partnership without the wife’s consent.The Civil Code was the applicable law at the time of the mortgage. The subject property is thus considered part of the conjugal partnership of gains. express or implied. PNB Laoag does not doubt that Aguete. ask the courts for the annulment of any contract of the husband entered into without her consent. who could authoritatively declare that Aguete’s signatures were really forged.” Furthermore. 173 provides: “The wife may. then the contract is voidable. If she refuses unreasonably to give her consent. The burden of proof to overcome the presumption of due execution of a notarial document lies on the one contesting the same. Every instrument duly acknowledged and certified as provided by law may be presented in evidence without further proof. Absent such. The execution of a document that has been ratified before a notary public cannot be disproved by the mere denial of the alleged signer. strong and convincing as to exclude all controversy as to the falsity of the certificate. an allegation of forgery must be proved by clear and convincing evidence. Ros himself cannot bring action against PNB. and within ten years from the transaction questioned. Art. The husband cannot alienate or encumber any conjugal real property without the consent. such as a handwriting expert. On the other hand. while the subject property was acquired in 1968. of the wife. The documents disavowed by Aguete are acknowledged before a notary public. or any act or contract of the husband which tends to defraud her or impair her interest in the conjugal partnership property. Art. Furthermore. hence they are public documents. the presumption must be upheld. There is also no doubt that Ros encumbered the subject property when he mortgaged it for P115. the court may compel her to grant the same. or is under civil interdiction or is confined in a leprosarium. PNB was correct when it stated that petitioners’ omission to present other positive evidence to substantiate their claim of forgery was fatal to petitioners’ cause. Ros and Aguete were married on 16 January 1954. consented to Ros’ mortgage to PNB of the subject property. the certificate of acknowledgment being prima facie evidence of the execution of the instrument or document involved. and it has in its favor the presumption of regularity which may only be rebutted by evidence so clear. Should the wife fail to exercise this right.000. Should the husband do so. she or her heirs after the dissolution of the marriage may demand the value of the property fraudulently alienated by the husband. as evidenced by her signature. Rodney. Using the SPA. After paying only P14.068. INC. Agtoto failed to pay her loan with the Bank. No. he secured the remaining P69.no one can come before the courts with unclean hands.432. 175697. Inc.500. the sheriff foreclosed the mortgage on the land on September 12.R. on August 20. On the following day. pegging her debt at P130. (UCPB SAVINGS BANK). 79 . 1989 plus the stipulated interest of 14% per annum from the date of default until full payment and liquidated damages. After notice and publication.00 of the loan with a chattel mortgage over two service boats and one Yanmar Marine engine.00 "as of December 31. JEAN VENIEGAS AGTOTO G. to secure a loan on her behalf and mortgage a registered land that she owned. 1989" plus stipulated interest of 14% per annum. (the Bank). 2011 FACTS: On August 18.00 as of December 31. on August 6.000. The sheriff subsequently issued a certificate of sale in the Bank's favor.00.00 from the Rural Bank of Toboso.00 portion secured by a real estate mortgage on his wife's land. After several unheeded demands to pay. March 23. petitioners themselves admitted that Ros forged Aguete’s signatures. 1981 Jean Veniegas Agtoto executed a special power of attorney (SPA) authorizing her husband. RURAL BANK OF TOBOSCO. 1avvphi1 In their memorandum before the trial court.500. vs. 1990 the Bank extrajudicially foreclosed the mortgage on her land. with the P61. which made the highest bid of P305.500. 1981 Rodney got a loan of P130. 1990 and sold it at public auction to the Bank. 432. and deliver contracts. amending the dispositive portion of its decision to include an award of 6% interest per annum on the amount of the award. The Court finds no reason to deviate from the CA’s ruling that the proceeds of the foreclosure sale should be applied to satisfy only the debt and related charges that the foreclosed land secured. which was its bid for her land. The foreclosure sale was likewise valid.500. otherwise. Rodney.00. On July 15. On November 26. however. 1992 or the date of judicial demand until full payment. even assuming that Rodney exceeded his powers under the SPA.497. her previous payment of P14. surcharges. however. ordering the Bank to pay Agtoto P305. notwithstanding the chattel mortgage that covered the P69. Agtoto appealed to the Court of Appeals. upon such terms and conditions as were acceptable to him as attorney-in-fact. the grant to him of the power to enter into a mortgage contract would have been incomplete in the usual course. counted from the date of the auction sale on September 13. the same being a legitimate exercise of his powers under the SPA. agreements. 1996 the RTC rendered a decision. What is more. with any person or persons. Since the Bank collected the entire amount of the loan from the proceeds of the foreclosure 80 . and injunction with prayer for the issuance of temporary restraining order.068.000. HELD: Agtoto contends that the foreclosure sale was void since she did not authorize her husband. execute.068. since this was charged against the interests. The Court of Appeals affirmed the trial court’s decision with the modification in that it awarded to Agtoto P189. to act as her attorney-in-fact for purposes of the foreclosure proceedings.10 plus 12% interest per annum from January 29. ISSUE: Whether or not the Bank validly foreclosed on Agtoto’s mortgaged land.00. As the appellate court correctly ruled.00 due from her loan.Agtoto filed a complaint with the RTC of Bacolod City against the Bank for the annulment of the sale of her land. the Bank had no right to include in the foreclosure of the land the portion of the loan separately secured by the chattel mortgage. The chattel mortgage was a contract distinct from the real estate mortgage. The constitution of the Bank as attorney-in-fact for purposes of extrajudicial foreclosure was a condition that Rodney accepted and it bound Agtoto as principal. and penalties due on her loan.00 portion of the loan of P130.500. less the P61. which latter mortgage covered the separate amount of P61. documents. sign.00 could not be deducted from the principal loan. 1997 the RTC issued an order. The SPA authorized Rodney to make.00. the powers she vested in Rodney as her attorney-in-fact in connection with the mortgage of her land included the power to constitute the mortgagee bank as Rodney's attorney-in-fact for foreclosure purposes for. damages. and other writings of whatever nature or kind. Thus. 1990 until Agtoto would have been fully paid. Agtoto should be deemed to have ratified the same when she herself signed the mortgage document. 1997. which amounted to P189. given that it charged the borrower interest for the same. including the portion that was not covered by the real estate mortgage. Such interest should. spouses Wilfredo and Brigida Palada. 2005 when it determined with reasonable certainty the amount of the surplus proceeds from the Bank has to return to Agtoto.R. at least. be computed only from the time the CA rendered its decision on October 27.502.sale. 81 . petitioners received from the bank the amount of P1 million as additional working capital evidenced by a promissory note and secured by a real estate mortgage in favor of the bank covering several real properties situated in Santiago City. petitioners. Due to the failure of petitioners to pay the obligation. 172227 June 29.000. applied for a P3 million loan broken down as follows: P1 million as additional working capital under the bills discounting line. No.10 (P305.000. it must return such to Agtoto. forbearance of money refers to the obligation of the creditor to desist for a fixed period from requiring the debtor to repay the debt then due and for which 12% per annum is imposed as interest rate. P500. and P1.5 million under the time loan from respondent Solidbank Corporation (bank). 2011 FACTS: In February or March 1997. Since the excess amount that the Bank withheld may be regarded in equity as the equivalent of a forbearance of money. however.00 under the bills purchase line. SOLIDBANK CORPORATION and SHERIFF MAYO DELA CRUZ G.90 portion covered by the real estate mortgage.) The Court cannot simply ignore the importance of surplus foreclosure sale proceeds because they stand in the place of the land itself and are constructively. On March 17.497. Lastly. SPOUSES WILFREDO PALADA vs.00 less the P115. the Bank should be made to pay 12% interest on it until fully paid. the bank foreclosed the mortgage and sold the properties at public auction. real property that belongs to the mortgagor. T-237695. included their properties covered by Transfer Certificate of Title (TCT) Nos. petitioners filed a Complaint for nullity of real estate mortgage and sheriff’s certificate of sale with prayer for damages. The RTC rendered a Decision declaring the real estate mortgage void for lack of sufficient consideration. the loan contract was perfected on March 17. Hence. T-143729. although petitioners applied for a P3 million loan. T-237698. only the amount of P1 million was released by the bank to petitioners. that it was only when they received the notice of sale from the sheriff in August 1998 that they found out about the inclusion of the said properties. 1997. against the bank and respondent Sheriff Mayo dela Cruz (sheriff) before the Regional Trial Court (RTC) of Santiago City. they offered TCT Nos. in its Answer. HELD: Under Article 1934 of the Civil Code. T-143683. 1997. The bank. T237695. on March 17. T-227331 which had an appraised value of P1.On August 19. In this case. contrary to the findings of the RTC. Except for the bare denials of petitioner. 1999. Clearly. no other evidence was presented to show that the signatures appearing on the dorsal portion of the real estate mortgage contract are forgeries. denied the material allegations of the Complaint and averred that since petitioners were collaterally deficient. that although the said properties were at that time mortgaged to the Philippine National Bank (PNB). and that when petitioners’ obligation to PNB was extinguished.00. only the amount of P1 million was approved by the bank because petitioners became collaterally deficient when they failed to purchase TCT No. without their knowledge and consent. 1997 when petitioners received the P1 million loan. There is nothing on the face of the real estate mortgage contract to arouse any suspicion of insertion or forgery. T-225131 and T-225132 as additional collateral. ISSUE: Whether or not the real estate mortgage and the auction sale are valid. docketed as Civil Case No. T-237696. petitioners on the same day executed in favor of the bank a real estate mortgage over the properties covered by TCT Nos. that despite their objection.. Petitioners claim that there was fraud and bad faith on the part of the bank in the execution and notarization of the real estate mortgage contract. T-237696. the sheriff proceeded with the auction sale. T-225131 and T-225132. T-225131 and T-225132 among the list of properties mortgaged. T-225131 and T-225132 could not have been included in the list of properties mortgaged as these were still 82 . 35-2779. Petitioners alleged that the bank.944. the bank accepted the offer and caused the annotation of the mortgage in the original copies with the Register of Deeds with the knowledge and consent of petitioners. Likewise flawed is petitioners’ reasoning that TCT Nos. petitioners executed a promissory note for the amount of P1 million. and that the auction sale was done in Santiago City in violation of the stipulation on venue in the real estate mortgage. they delivered the titles of the four properties to the bank.000. As security for the P1 million loan. which was the object of both the promissory note and the real estate mortgage executed by petitioners in favor of the bank. Upon receipt of the approved loan on March 17. a loan contract is perfected only upon the delivery of the object of the contract. 171569 August 1. we find no error on the part of the CA in sustaining the validity of the real estate mortgage as well as the certificate of sale. And the mere fact that the date of execution was left blank does not prove bad faith. Under our laws.R. the same day that it was notarized. as the date of execution of the real estate mortgage contract was left blank. WINWOOD APPAREL. ALAIN* JUNIAT. A careful perusal of the real estate mortgage contract would show that the bank did not make it appear that the real estate mortgage was executed on June 16. 1997. No. INC.mortgaged with the PNB at that time. UNION BANK OF THE PHILIPPINES. INC.” we find the same without basis. the [petitioners] executed said mortgage sometime in March. a Complaint with prayer for the issuance of ex-parte writs of preliminary 83 . 2011 FACTS: Petitioner filed with the Regional Trial Court (RTC) of Makati. NONWOVEN FABRIC PHILIPPINES. when the document was acknowledged before Atty. Absent any clear and convincing proof to the contrary. Besides. WINGYAN APPAREL. As to the RTC’s finding that “the x x x bank acted in bad faith when it made it appear that the mortgage was executed by the [petitioners] on June 16. G. German. a mortgagor is allowed to take a second or subsequent mortgage on a property already mortgaged. vs.. x x x when in truth and in fact. any irregularity in the notarization or even the lack of notarization does not affect the validity of the document. subject to the prior rights of the previous mortgages. 1997 x x x. All told.. a notarized document enjoys the presumption of regularity and is conclusive as to the truthfulness of its contents. 1997. Branch 57.Respondents. . 1992. 175816. ARLYN T. under Article 2096 of the Civil Code. Wingyan. In fact. BPI FAMILY SAVINGS BANK. No. 1992 to indicate that the motorized sewing machines.The writs were served by the Sheriff upon Nonwoven as it was in possession of the motorized sewing machines and equipment. the presumption is that it is a pledge as this involves a lesser transmission of rights and interests. 2011 84 . The RTC issued writs of preliminary attachment and replevin in favor of petitioner. December 7.Nonwoven filed an Answer. snap machines and boilers were ceded to Nonwoven as payment for the Wingyan’s and Winwood’s obligation. executed a promissory note and a Chattel Mortgage dated over several motorized sewing machines and other allied equipment to secure their obligation arising from export bills transactions to petitioner that as additional security for the obligation. 1992 clearly shows that the sewing machines. ISSUE: Whether the unnotarized mortgage executed in favor of petitioner has no binding effect. "[a] pledge shall not take effect against third persons if a description of the thing pledged and the date of the pledge do not appear in a public instrument. It bears stressing that there can be no transfer of ownership if the delivery of the property to the creditor is by way of security. the pledge executed by Juniat in favor of Nonwoven cannot bind petitioner. in case of doubt as to whether a transaction is one of pledge or dacion en pago. vs. G. AVENIDO." Hence. HELD: A perusal of the Agreement dated May 9. AVENIDO & PACIFICO A.attachment and replevin against Juniat.R. Also. acting for and in behalf of Winwood and Wingyan. and the person in possession of the mortgaged motorized sewing machines and equipment. Winwood. Juniat executed a Continuing Surety Agreement in favor of petitioner that the loan remains unpaid and that the mortgaged motorized sewing machines are insufficient to answer for the obligation. However. just like the chattel mortgage executed in favor of petitioner. MA.Petitioner alleged that Juniat. snap machines and boilers were pledged to Nonwoven by Juniat to guarantee his obligation. INC.contending that the unnotarized Chattel Mortgage executed in favor of petitioner has no binding effect on Nonwoven and that it has a better title over the motorized sewing machines and equipment because these were assigned to it by Juniat pursuant to their Agreement dated May 9. there is nothing in the Agreement dated May 9. The spouses Avenido averred therein that they had already paid a substantial amount to BPI Family.142.000. the law would expressly so provide.” 85 .43. It is settled that if “the proceeds of the sale are insufficient to cover the debt in an extrajudicial foreclosure of mortgage. as amended. does not discuss the mortgagee’s right to recover the deficiency. 2000. and such amount was already fully covered when the foreclosed property was sold at the public auction for P2. BPI Family prayed that the RTC order the spouses Avenido to pay the deficiency of their mortgage obligation amounting to P794.616. the creditor is not precluded from taking action to recover any unpaid balance on the principal obligation simply because he chose to extrajudicially foreclose the real estate mortgage.765. but due to the imposition by BPI Family of unreasonable charges and penalties on their principal obligation. 3135. HELD: The Court answered in the affirmative. which could not be less than P1.00 of BPI Family was applied as partial payment of the mortgage obligation of the spouses Avenido. Per the Notice of Extrajudicial Sale dated February 4. plus interest.00. 1999.000. as amended. the spouses Avenido’s indebtedness to BPI Family only amounted to less than P2. BPI Family filed a Complaint for Collection of Deficiency of Mortgage Obligation with Damages against the spouses Avenido. their payments seemed insignificant.00.000. 3135.917. which had amounted to P2. ISSUE: Whether or not BPI Family is still entitled to collect the deficiency mortgage obligation from the spouses Avenido in the amount of P455.836. prompting BPI Family to institute extrajudicial foreclosure proceedings over the mortgaged property. The spouses Avenido failed to pay their loan obligation despite demand.616. Absent such a provision in Act No. BPI Family alleged in its Complaint that pursuant to a Mortgage Loan Agreement.00. The spouses Avenido sought the dismissal of the Complaint for lack of merit. plus legal interest thereon from the date of the filing of the Complaint until full payment. The bid price of P2.381.142.000.000. the mortgagee is entitled to claim the deficiency from the debtor.43 on the date of the public auction sale.00. neither does it contain any provision expressly or impliedly prohibiting recovery.FACTS: On September 20. the spouses Avenido obtained from the bank a loan in the amount of P2. BPI Family was the highest bidder for the foreclosed property.000.80. secured by a real estate mortgage on a parcel of land (mortgaged/foreclosed property).765. still leaving an unpaid amount of P794. If the legislature had intended to deny the creditor the right to sue for any deficiency resulting from the foreclosure of a security given to guarantee an obligation. thus.43. At the public auction sale. While Act No. 142. a mortgagor stands to gain with a reduced price because he possesses the right of redemption. 1999 in the sum of P2.80. When there is the right to redeem. The Couty refuse to consider the question of sufficiency of the winning bid price of BPI Family for the foreclosed property. Generally. inadequacy of the price at a forced sale is immaterial and does not nullify the sale. On the contrary. in forced sales. We fail to see any disadvantage going for the mortgagor.616. BPI Family may still collect the said deficiency without violating the principle of unjust enrichment.836. 86 . inadequacy of price should not be material. leaving a deficiency of P455. because the judgment debtor may reacquire the property or also sell his right to redeem and thus recover the loss he claims to have suffered by the reason of the price obtained at the auction sale. in a forced sale. In fact. and affirm the application of said winning bid in the amount of P2.598. thus. a low price is more beneficial to the mortgage debtor for it makes redemption of the property easier.00 against the total outstanding loan obligation of the spouses Avenido by March 8.452.80. a better price can be obtained. The fact that the mortgaged property is sold at an amount less than its actual market value should not militate against the right to such recovery. low prices are usually offered and the mere inadequacy of the price obtained at the sheriff’s sale unless shocking to the conscience will not be sufficient to set aside a sale if there is no showing that in the event of a regular sale.We have consistently held in previous cases that unlike in an ordinary sale. The CA considered that Loadmaster is an agent of appellant Glodel. G. Glodel. as erroneously found by the CA. in turn.” The elements of a contract of agency are: (1) consent. (3) the agent acts as a representative and not for himself. express or implied. GLODEL BROKERAGE CORP. On November 19. The Court clarifies that there exists no principal-agent relationship between Glodel and Loadmasters. 87 . R&B Insurance paid Columbia after which. January 10. a complaint for damages against both Loadmasters and Glodel was filed by the insurance company. One truck loaded with 232 pieces of copper cathodes destined to Balagtas. ISSUE: Whether or not petitioner Loadmaster can be legally considered as an Agent of respondent Glodel. Columbia filed with R&B Insurance a claim for insurance indemnity. INC. with the consent or authority of the latter. 2001. Bulacan. The goods were loaded on board twelve trucks owned by Loadmasters. (2) the object is the execution of a juridical act in relation to a third person.R. 2003. (4) the agent acts within the scope of his authority. Bulacan while the other six truckloads were destined for Lawang Bato. Article 1868 of the Civil Code provides: “By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another. Columbia insured with R&B Insurance the shipment of 132 bundles of electric copper cathodes against All Risks and on the same day said shipment arrived in Manila from Leyte. HELD: No. Said truck was later on recovered but without the copper cathodes. Six truckloads of copper cathodes were to be delivered to Balagtas. the RTC rendered a decision holding Glodel liable for damages for the loss of the subject cargo.AGENCY LOADMASTERS CUSTOMS SERVICES. VS. Columbia engaged the services of Glodel for the release and withdrawal of the cargoes from the pier and the subsequent delivery to its warehouses/plants. Valenzuela City in Columbia’s warehouse. No. 2011 FACTS: On August 28. engaged the services of Loadmasters for the use of its delivery trucks to transport the cargoes to Columbia’s warehouses/plants in Bulacan and Valenzuela City. thus whatever liability the latter owes R&B Insurance Corporation as insurance indemnity must likewise be the amount it shall be paid by Loadmaster. failed to deliver its cargo. of the parties to establish the relationship. Thereafter. 179446 . while on the part of the agent. On the part of the principal. 88 . there must be an intention to accept the appointment and act on it. that is.Accordingly. Neither was it ever authorized to make such representation. the agent acts for and on behalf of the principal on matters within the scope of his authority and said acts have the same legal effect as if they were personally executed by the principal. there must be an actual intention to appoint or an intention naturally inferable from his words or actions. It is a settled rule that the basis for agency is representation. there can be no contract of agency between the parties. Loadmasters never represented Glodel. Such mutual intent is not obtaining in this case. being the lone and highest bidder of the three (3) parcels of land. as stockholders. titles were issued in the name of RISCO. PNB on the other hand countered that plaintiffs have no right of action for quieting of title since the order of the court directing the issuance of titles to PNB had already become final and executory and their validity cannot be attacked except in a direct proceeding for their annulment.. which ruled against PNB on the basis that there was an express trust created over the subject properties whereby RISCO was the trustee and the stockholders. in its Decision. et al. 2011 FACTS: In 1958.. In plaintiffs desire to rehabilitate RISCO. a Final Deed of Sale in favor of PNB was also issued and TCT was cancelled and a new certificate of title. including the Notice of Attachment and Writ of Execution in favor of defendant PNB. The trial court rendered a Decision. various subsequent annotations were made on the same titles. TCT was issued in the name of PNB. ISSUE: Whether or not the CA erred in concluding that the contributions made by the stockholders of RISCO were merely a loan secured by their lien over the properties. After the purchase of the lots.R.00 which was used in the purchase of the three (3) parcels of land. The CA opined that the monetary contributions made by Aznar. Thereafter. as mere stockholders of RISCO do not have any legal or equitable right over the properties of the corporation. rather than an express trust. PNB appealed to the Court of Appeals which. PNB posited that even if plaintiff's monetary lien had not expired. 171805 May 30. They argued that the Final Deed of Sale and TCT No. et al. A Certificate of Sale was issued in favor of PNB. it directed PNB to pay Aznar. et al. Thus. they contributed a total amount of P212. rather than an express trust. Plaintiffs further contended that the subsequent writs and processes annotated on the titles are all null and void for want of valid service upon RISCO and on them. 119848 are null and void as these were issued only after 28 years and that any right which PNB may have over the properties had long become stale. RISCO ceased operation due to business reverses. Such annotation was made pursuant to the Minutes of the Special Meeting of the Board of Directors of RISCO. Thereafter. Defendant further asserted that plaintiffs. This prompted plaintiffs-appellees to file the complaint seeking the quieting of their supposed title to the subject properties. the amount of their contributions plus legal interest from the time of acquisition of the property until finality of judgment. The amount contributed by plaintiffs constituted as liens and encumbrances on the properties as annotated in the titles of said lots. AZNAR G. Aznar. HELD: 89 . to RISCO can only be characterized as a loan secured by a lien on the subject lots. No. Plaintiffs alleged that the subsequent annotations on the titles are subject to the prior annotation of their liens and encumbrances. set aside the judgment of the trial court.TRUSTS PNB VS. were the beneficiaries or the cestui que trust. subject to reimbursement or refund.720.. their only recourse was to require the reimbursement or refund of their contribution. It is a fiduciary relationship that obliges the trustee to deal with the property for the benefit of the beneficiary. In fact. et al. Express trusts.." Aznar. or will or oral declaration. et al. have no right to ask for the quieting of title of the properties at issue because they have no legal and/or equitable rights over the properties that are derived from the previous registered owner which is RISCO. the creation of an express trust must be manifested with reasonable certainty and cannot be inferred from loose and vague declarations or from ambiguous circumstances susceptible of other interpretations. Unfortunately. who are stockholders of RISCO. Trust is the right to the beneficial enjoyment of property..) We are not persuaded by the contention of Aznar. is merely evidence of a loan agreement between them and the company. are intentionally created by the direct and positive acts of the settlor or the trustor . An implied trust comes into being by operation of law. as a collateral or security for the payment of some debt or obligation. There is no indication or even a suggestion that the ownership of said properties were transferred to them which would require no less that the said properties be registered under their names. it being sufficient that a trust is clearly intended. et al. a careful scrutiny of the plain and ordinary meaning of the terms used in the Minutes does not offer any indication that the parties thereto intended that Aznar. attributes and properties expressly authorized by law or incident to its existence. We find that the money contributed by plaintiffs-appellees was in the nature of a loan. but by the direct and positive acts of the parties. the right to seek repayment or reimbursement of their contributions used to purchase the subject properties 90 . have no cause to seek a quieting of title over the subject properties. from the use of the word "lien" in the Minutes. The annotation of their lien serves only as collateral and does not in any way vest ownership of property to plaintiffs." In other words. had was merely a right to be repaid the amount loaned to RISCO. Indeed. become beneficiaries under an express trust and that RISCO serve as trustor. et al. whether real or personal. It is created not necessarily by some written words. sometimes referred to as direct trusts. (Emphases supplied.. An express trust is created by the intention of the trustor or of the parties. 68).. which states that "[a] corporation is an artificial being created by operation of law." Hence. et al.by some writing.. It is a right which the law gives to have a debt satisfied out of a particular thing. what Aznar. secured by their liens and interests duly annotated on the titles. No such reasonable certitude in the creation of an express trust obtains in the case at bar. the pertinent provision of the law is Section 2 of the Corporation Code (Batas Pambansa Blg.. Trust relations between parties may either be express or implied. It signifies a legal claim or charge on property. that the language of the subject Minutes created an express trust. A lien is a qualified right or a proprietary interest which may be exercised over the property of another. at most. For this reason. deed. the legal title to which is vested in another.The term lien as used in the Minutes is defined as "a discharge on property usually for the payment of some debt or obligation. the complaint should be dismissed since Aznar. This is in consonance with Article 1444 of the Civil Code. we find that Aznar. At most. having the right of succession and the powers. cannot claim ownership over the properties at issue in this case on the strength of the Minutes which. et al. which states that "[n]o particular words are required for the creation of an express trust. HELD: An implied trust arising from mortgage contracts is not among the trust relationships the Civil Code enumerates. the respondent as trustor of petitioner vis a vis the Contract. YAP. petitioner sought the extrajudicial foreclosure of the mortgage.6M. No. the spouses Caneda mortgaged to petitioner Juan. The trial court ruled in favor of the petitioner declaring that he is the “true and real” mortgagee. ISSUE: Whether an implied trust arose between petitioner and respondent. equity converts the holder of property right as trustee for the benefit of another if the circumstances of its acquisition makes the holder ineligible "in x x x good conscience [to] hold and enjoy [it]. both petitioner and respondent participated but the properties were sold to petitioner for tendering the highest bid. On February 15. Sr. Cebu to secure a loan of P1. binding petitioner to hold the beneficial title over the mortgaged properties in trust for respondent. x x x The Caneda spouses and the respondent sued petitioner to declare among others.is already barred by prescription. SR. Respondent appealed to the Court of Appeals (CA).. however. 2011 FACTS: On July 31." Under the general principles on trust. the "only problem of great importance in the field of constructive trusts is whether in the numerous and varying factual situations presented x x x there 91 . imputing error in the trial court’s refusal to recognize a resulting trust between him and petitioner. respondent and the Caneda spouses executed a memorandum of agreement where (1) the Cañeda spouses acknowledged respondent as their "real mortgagee-creditor x x x while Richard Juan [petitioner] is merely a trustee" of respondent. two parcels of land in Talisay. 182177. March 30."As implied trusts are remedies against unjust enrichment. JUAN VS. 1999.R. The CA granted the petition. that such listing "does not exclude others established by the general law on trust x x x. petitioner insisted on his rights over the mortgaged properties. 1995. In auction sale. nephew and employee of herein respondent Gabriel Yap. no certificate of sale was issued to petitioner. payable within one year. On June 30. 1998. G. In his Answer. For failure to pay the sale’s commission. The Code itself provides. The demands of equity and justice mandate the creation of an implied trust between the two. QUASI-DELICTS VALLACAR TRANSIT. petitioner holds title over the mortgaged properties only because respondent allowed him to do so. based on 92 . Catubig was the one driving the motorcycle. Catubig tried to overtake a slow moving ten-wheeler cargo truck by crossing-over to the opposite lane. Quintin Catubig. barring petitioner from asserting proprietary claims antagonistic to his duties to hold the mortgaged properties in trust for respondent. Quirino C.R. while Emperado died while being rushed to the hospital. seeking actual. the MCTC issued a Resolution dismissing the criminal charge against Cabanilla. Catubig.is a wrongful holding of property and hence. because there was no negligence. who shouldered the payment of the foreclosure expenses. Catubig and Emperado were thrown from the motorcycle. (Catubig). which was then being traversed by the Ceres Bulilit bus driven by Cabanilla. respondent filed before the RTC a Complaint for Damages against petitioner. We see no reason to bar the recognition of the same obligation in a mortgage contract meeting the standards for the creation of an implied trust. It found that Cabanilla was not criminally liable for the deaths of Catubig and Emperado. Jr. in the total amount of P484. a threatened unjust enrichment of the defendant. not petitioner. Cabanilla was charged with reckless imprudence resulting in double homicide. After preliminary investigation. T-0604-1348. JOCELYN CATUBIG G. 2011 FACTS: Petitioner is engaged in the business of transportation and the franchise owner of a Ceres Bulilit bus with Plate No. headed for the opposite direction.000. Petitioner’s failure to explain this oddity. was on his way home from Dumaguete City riding in tandem on a motorcycle with his employee. the very evil the fiction of implied trust was devised to remedy. INC. Catubig died on the spot where he was thrown. vs. not even contributory." The formal holders of title were deemed trustees obliged to transfer title to the beneficiaries in whose favor the trusts were deemed created. It was respondent. Respondent’s husband. moral. on Cabanilla’s part. Clearly then. While approaching a curve at kilometers 59 and 60. Thereafter. Teddy Emperado (Emperado). for the death of her husband. To arrive at a contrary ruling is to tolerate unjust enrichment. When the two vehicles collided. coupled with the fact that no certificate of sale was issued to him (despite tendering the highest bid) for his non-payment of the commission. Cabanilla (Cabanilla) is employed as a regular bus driver of petitioner. undercuts his posturing as the real mortgagor. 175512 May 30.00. No. and exemplary damages. is obliged to pay for the damage done. was reckless and negligent in driving the bus which collided with Catubig’s motorcycle. 2176. There is merit in the argument of the petitioner that Article 2180 of the Civil Code – imputing fault or negligence on the part of the employer for the fault or negligence of its employee – does not apply to petitioner since the fault or negligence of its employee driver. xxxx The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage. 2180. of the Civil Code. HELD: The petition is meritorious. which read: Art. in its Answer with Counterclaim. Catubig. but also for those persons for whom one is responsible. as there was no allegation that petitioner was negligent in the selection or supervision of its employee driver. Whoever by act or omission causes damage to another. Respondent alleged that petitioner is civilly liable because the latter’s employee driver. even though the former are not engaged in any business or industry. The obligation imposed by Article 2176 is demandable not only for one’s own acts or omissions. Such fault or negligence. in relation to Article 2176. failed to use reasonable care for his own safety and ignored the hazard when he tried to overtake a truck at a curve. was running his vehicle at a high speed of 100 kilometers per hour. Cabanilla. Petitioner. there being fault or negligence. on one hand.Article 2180. ISSUE: Whether or not petitioner is liable to pay damages. The Court of Appeals also brushed aside the defense of petitioner that it exercised the degree of diligence exacted by law in the conduct of its business. To 93 . which resulted in the deaths of Catubig and Emperado. contended that the proximate cause of the vehicular collision. The CA held that both Catubig and Cabanilla were negligent in driving their respective vehicles. Cabanilla. which would have made the latter liable for quasi-delict under Article 2176 of the Civil Code. is called a quasi-delict and is governed by the provisions of this Chapter. if there is no pre-existing contractual relation between the parties. The RTC promulgated its Decision favoring petitioner. xxxx Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks. As a special and affirmative defense. Art. in relation to Article 2176. of the Civil Code. Cabanilla. was the sole negligence of Catubig when he imprudently overtook another vehicle at a curve and traversed the opposite lane of the road. on the other hand. petitioner asked for the dismissal of respondent’s complaint for not being verified and/or for failure to state a cause of action. Respondent based her claim for damages on Article 2180. The Court agreed with petitioner that respondent was unable to prove imputable negligence on the part of petitioner. has never been established by respondent. 1995. all constituting a natural and continuous chain of events. Having adjudged that the immediate and proximate cause of the collision resulting in Catubig’s death was his own negligence. in natural and continuous sequence. No. Felipe on March 18. applications for cashier’s and manager’s checks bearing Felipe’s signature were presented to and both 94 . 173259 July 25. was driving his vehicle along the proper lane. CRUZ and CO. Inc. and there was no fault or negligence on Cabanilla’s part. had overtaken a vehicle ahead of him as he was approaching a curvature on the road. which. as an ordinary prudent and intelligent person. Thus. 1995 while Angelita followed him on March 29. 1995 until June 10. Cabanilla. either immediately or by setting other events in motion. 2011 FACTS: Respondent F. the proximate legal cause is that acting first and producing the injury. the totality of the evidence presented during trial shows that the proximate cause of the collision of the bus and motorcycle is attributable solely to the negligence of the driver of the motorcycle. in disregard of the provision of the law on reckless driving. INC G. The evidence shows that the driver of the bus.F..the contrary. does not even arise. Cruz & Co. each having a close causal connection with its immediate predecessor. under such circumstances that the person responsible for the first event should. 0219-0502-458-6 with [petitioner Philippine National Bank] (hereinafter PNB) at its Timog Avenue Branch. The said signatories on separate but coeval dates left for and returned from the Unites States of America. produces the injury. The presumption that employers are negligent under Article 2180 of the Civil Code flows from the negligence of their employees. And more comprehensively. PHILIPPINE NATIONAL BANK vs. Emperado.R. (hereinafter FFCCI) opened savings/current or so-called combo account No. at the risk of his life and that of his employee. While they were thus out of the country. Catubig. have reasonable ground to expect at the moment of his act or default that an injury to some person might probably result therefrom. Its President Felipe Cruz (or Felipe) and Secretary-Treasurer Angelita A. as Cabanilla’s employer. Proximate cause is defined as that cause. then such presumption of fault or negligence on the part of petitioner. the final event in the chain immediately effecting the injury as a natural and probable result of the cause which first acted. F. 0219-830-146 and dollar savings account No. Catubig. Cruz (or Angelita) were the named signatories for the said accounts.F. unbroken by any efficient intervening cause. and without which the result would not have occurred. it is not even necessary to delve into the defense of petitioner that it exercised due diligence in the selection and supervision of Cabanilla as its employee driver. while the driver of the motorcycle. 1995 and returned ahead on May 9.. Claiming that these were unauthorized and fraudulently made.260.approved by the PNB. 1995 for P3. The first was on March 27. The amounts of these checks were then debited by the PNB against the combo account of FFCCI.260. When Angelita returned to the country. 95 . we allocated the damages between the bank and the depositor on a 60-40 ratio.500.00 and P3. PNB’s negligence is the proximate cause of the loss. where the bank’s negligence is the proximate cause of the loss and the depositor is guilty of contributory negligence? HELD: As we have often ruled. PNB refused. Court of Appeals. FFCCI requested PNB to credit back and restore to its account the value of the checks.000. In the case at bar.31.31 payable to one Paul Bautista. where the bank’s negligence is the proximate cause of the loss and the depositor is guilty of contributory negligence. she had occasion to examine the PNB statements of account of FFCCI for the months of February to August 1995 and she noticed the deductions of P9. 1995 for P9. PNB failed to meet the high standard of diligence required by the circumstances to prevent the fraud. the banking business is impressed with public trust. and thus constrained FFCCI filed the instant suit for damages against the PNB and its own accountant AureaCaparas. A higher degree of diligence is imposed on banks relative to the handling of their affairs than that of an ordinary business enterprise.950.Thus.500. as shown above.000.950. In Philippine Bank of Commerce v. Sangalang and the other one was on April 24. We apply the same ruling in this case considering that.00 payable to a certain Gene B. ISSUE: Who bears the loss between a bank and its depositor. care and trustworthiness expected of their officials and employees is far greater than those of ordinary officers and employees in other enterprises. the degree of responsibility. Court of Appeals and The Consolidated Bank & Trust Corporation v. Article 2180 of the Civil Code. The Mitsubishi Lancer GLX with Plate No. La Union. PHU-185 driven by Rodel Chua. Mangoba. there arises the juristantum presumption that the employer is negligent. For failure to rebut such legal presumption of negligence in the selection and supervision of employees. and its driver. NYG-363. the Toyota Corolla stopped on its tracks.RCJ BUS LINES. was ten meters away from the Mitsubishi Lancer before the collision and was driving 60 to 75 kilometers per hour when the speed limit was 50 kilometers per hour. When the employee causes damage due to his own negligence while performing his own duties. STANDARD reimbursed to the former the amount she expended for the repairs of her vehicle. owner of the Mitsubishi Lancer. No.151. Rodelene then executed a Release of Claim and Subrogation Receipt. HELD: RCJ. ISSUE: Whether petitioner RCJ is vicariously liable for the claim of supposed actual damages incurred by respondent Standard Insurance.The presumption under Article 2185 of the Civil Code was thus proven true: Mangoba. heading towards the general direction of Bauan. a Toyota Corolla with Plate No. INCORPORATED vs. driven by Flor Bola Mangoba and owned by RCJ Bus Lines. As a result of the incident. as driver of the 96 .22. TAJ-796. At this point. and owned by Rodelene Valentino. The Toyota Corolla travelled at a speed of 50 kilometers per hour as it traversed the downward slope of the road. which curved towards the right. subrogating STANDARD to all rights. was then following the Toyota Corolla along the said highway.R. cruised along the National Highway at Barangay Amlang. the Mitsubishi Lancer sustained damages amounting to P162. Flor Bola Mangoba. Rosario. 193629 August 17. La Union. Under the comprehensive insurance policy secured by Rodelene Valentino. in relation to Article 2176. the employer is likewise responsible for damages. The Mitsubishi Lancer followed suit and also halted. STANDARD INSURANCE COMPANY. at around 7:00 o’clock. Inc. Inc. representing the costs of its repairs. by presenting witnesses to testify on its exercise of diligence of a good father of a family in the selection and supervision of its bus drivers. driven by Teodoro Goki. per testimony of his conductor. claims and actions she may have against RCJ Bus Lines.Upon seeing a pile of gravel and sand on the road. rebuttable only by proof of observance of the diligence of a good father of a family. the basis of the liability being the relationship of pater familias or on the employer’s own negligence. Behind the Mitsubishi Lancer GLX was the passenger bus with Plate No. the bus hit and bumped the rear portion of the Mitsubishi Lancer causing it to move forward and hit the Toyota Corolla in front of it. The bus followed the Mitsubishi Lancer GLX at a distance of ten (10) meters and traveled at the speed of 60 to 75 kilometers per hour. 2011 FACTS: In the evening of 19 June 1994.makes the employer vicariously liable for the acts of its employees. admitted that Mangoba is its employee. INCORPORATED G. To avoid collision. No. it should also be considered that the logic will hold only if the two are similarly circumstanced. it would not have hit and bumped the Mitsubishi Lancer in front of it. a tractor-trailer and a jitney.bus which collided with the Mitsubishi Lancer. Multiple death and injuries to those in the jitney resulted. in turn. The jitney was hit by the tractor-trailer and it was dragged further causing death and injuries to its passengers. so that. figured in a vehicular mishap along Maharlika Highway in Albay.To be sure. CYNTHIA POMASIN. 173180 August 24. ALBERT TISON and CLAUDIO L. Unfortunately. he saw a tractor-trailer coming from the opposite direction and encroaching on the jitney’s lane. and REYNALDO SESISTA. He testified that while the jitney was passing through a curve going downward. petitioners countered that it was Laarni’s negligence which proximately caused the accident. was negligent since he violated a traffic regulation at the time of the mishap. and only as a general rule. In their Answer. ISSUE: Who is the negligent party or the party at fault? HELD: While it is logical that a driver’s attention to the road travelled is keener than that of a mere passenger. the former is more credible. The tractor-trailer was likewise damaged. Petitioners counterclaimed for damages.R. Gregorio Pomasin (Gregorio). petitioners complained that respondents filed the instant complaint to harass them and profit from the recklessness of Laarni. SONIA PEROL. Notwithstanding the affidavit. GREGORIO POMASIN and CONSORCIA PONCE POMASIN. DIANNE POMASIN PAGUNSAN. causing the latter vehicle to move forward and hit and bump. 97 . The factual setting of the event testified on must certainly be considered. it began running in a zigzag manner and heading towards the direction of the truck. 2011 FACTS: Two vehicles. Jabon recounted that while he was driving the tractortrailer. On the other hand. Respondents. taking into account that the distance between the two vehicles was ten (10) meters. had not the passenger bus been speeding while traversing the downward sloping road. ANTONIO SESISTA. the Toyota Corolla. G. Jabon immediately swerved the tractor-trailer to the right where it hit a tree and sacks of palay. Had the bus been moving at a reasonable speed. it does not necessarily follow that between the opposing testimonies of a driver and a passenger. They further claimed that Cynthia was authorized by Spouses Pomasin to enter into an amicable settlement by executing an Affidavit of Desistance. it could have avoided hitting and bumping the Mitsubishi Lancer upon spotting the same. JABON vs. was on board the jitney and seated on the passenger’s side. SPS. he noticed a jitney on the opposite lane falling off the shoulder of the road. Thereafter. Respondents filed a complaint for damages against petitioners. Laarni’s father. the jitney still hit the left fender of the tractor-trailer before it was thrown a few meters away. GINA SESISTA. But the doctrine should not be rendered inflexible so as to deny relief when in fact there is no causal relation between the statutory violation and the injury sustained. for it seeks to impute culpability arising from the failure of the actor to perform up to a standard established by a legal fiat. and. Notably. Accidents. understandably in this case. the negligence of Gregorio’s daughter. Clearly. tort law is remunerative in spirit. he saw the incoming truck running very fast and encroaching the jitney’s lane. while convenient. After all. aiming to provide compensation for the harm suffered by those whose interests have been invaded owing to the conduct of other. happen in an instant. Contrary to the observation of the Court of Appeals. Presumptions in law. In hindsight. though. however.The trial court did just that in the instant case. The appellate court. it can be argued that Jabon should have swerved to the right upon seeing the jitney zigzagging before it collided with the tractor-trailer. Neither can it be inferred that Jabon was negligent. for that matter) is undeniably useful as a judicial guide in adjudging liability. Jabon was able to sufficiently explain that the Land Transportation Office merely erred in not including restriction code 8 in his license. are not intractable so as to forbid rebuttal rooted in fact. the jitney was running on the "curving and downward" portion of the highway. no causal connection was established between the tractor-trailer driver’s restrictions on his license to the vehicular collision. the relative positions of a driver and a passenger in a vehicle was not the only basis of analysis of the trial court. Furthermore. aside from Jabon’s alleged vantage point to clearly observe the incident. In the instant case. took into account the other and opposite testimony of Gregorio that it was their jitney that was going uphill and when it was about to reach a curve. the trial court also took into consideration Gregorio’s admission that prior to the accident. The rule on negligence per se must admit qualifications that may arise from the logical consequences of the facts leading to the mishap. leaving the driver without sufficient time and space to maneuver a vehicle the size of a tractortrailer uphill and away from collision with the jitney oncoming downhill. Laarni was the proximate cause of the accident. 98 . The doctrine (and Article 2185. Maxilite and Marques entered into a trust receipt transaction with FEBTC. Accordingly. for the shipment of various hightechnology equipment from the United States. FEBTC would debit Maxilite’s account for the premium payments. FEBIBI sent written reminders to FEBTC. FEBTC financed Maxilite’s capital and operational requirements through loans secured with properties of Marques under the latter’s name. facilitated the procurement and processing from Makati Insurance Company of four separate and independent fire insurance policies over the trust receipted merchandise. The foregoing importation was covered by a trust receipt document signed by Marques on behalf of Maxilite. On 19 August 1994. Insurance Policy No. 171379 January 10.R.265. Inc. covering the period 24 June 1994 to 24 June 1995. is a domestic corporation engaged in the importation and trading of equipment for energy-efficiency systems. FAR EAST BANK AND TRUST COMPANY. No. 1024439. upon the advice of FEBTC. FEBIBI. Far East Bank Insurance Brokers. On 24 and 26 October 1994. Marques and Maxilite maintained accounts with FEBTC. Marques (Marques) is the President and controlling stockholder of Maxilite. 1024439 covering the period 24 June 1994 to 24 June 1995. Sometime in August 1993. Both companies are subsidiaries of FEBTC. was released to cover the trust receipted merchandise. On 9 March 99 . and MAKATI INSURANCE COMPANY G. Far East Bank and Trust Co. 2011 FACTS: Maxilite Technologies. to debit Maxilite’s account. shall be deemed invalid and of no effect. (FEBIBI) is a local insurance brokerage corporation while Makati Insurance Company is a local insurance company. Inc. Maxilite fully settled its trust receipt account. FAR EAST BANK INSURANCE BROKERS. Maxilite paid the premiums for these policies through debit arrangement. (FEBTC) is a local bank which handled the financing and related requirements of Marques and Maxilite. INC.JOSE MARQUES and MAXILITE TECHNOLOGIES. Any supplementary agreement seeking to amend this condition prepared by agent. Jose N.. with the merchandise serving as collateral. On 17 June 1993. vs.60 for Insurance Policy No. as reflected in statements of accounts sent by FEBTC to Maxilite. INC. broker or Company official. Finding that Maxilite failed to pay the insurance premium in the sum of P8. FEBTC must be held liable for damages pursuant to Article 2176 of the Civil Code which states "whoever by act or omission causes damage to another. HELD: Prior to the full settlement of the trust receipt account on 24 and 26 October 1994. FEBIBI and Makati Insurance Company. FEBTC failed to debit and instead disregarded the written reminder from FEBIBI to debit Maxilite’s account. attorney’s fees. as found by the trial court. through the automatic debit arrangement with FEBTC. there being fault or negligence. On the other hand. in accordance with Article 1589 of the Civil Code." As a consequence of its negligence. Since (1) FEBTC committed to debit Maxilite’s account corresponding to the insurance premium. (2) foreclosing the real estate mortage securing their straight loan accounts. and Makati Insurance Company. Hence. and apparently undisputed by FEBTC. and (3) initiating actions to collect their obligations. Maxilite had sufficient funds at the time the first reminder. FEBTC and FEBIBI disclaimed any responsibility for the denial of the claim. these petitions. a fire gutted the Aboitiz Sea Transport Building. Negligence is defined as "the omission to do something which a reasonable man. until the finality of this decision. As a result." Indisputably. (2) FEBTC had insurable interest over the property prior to the settlement of the trust receipt account. moral and exemplary damages. with modifications that the interest shall be at the rate of six percent (6%) per annum to run from the time of demand on April 11. FEBTC should have debited Maxilite’s account as what it had repeatedly done. Maxilite and Marques also sought the issuance of a preliminary injunction or a temporary restraining to enjoin FEBTC from (1) imposing penalties on their obligations. is obliged to pay for the damage done. and litigation expenses. Maxilite and Marques sued FEBTC. and thus had greater reason to debit Maxilite’s account. where Maxilite’s office and warehouse were located. FEBTC’s conduct clearly constitutes negligence in handling Maxilite’s and Marques’ accounts. as an established practice. or the doing of something which a prudent man and reasonable man could not do. ISSUE: Whether or not the CA erred in affirming the decision of the RTC. 1995. the moral and exemplary damages is reduced. However. Further. Maxilite’s fire loss claim would have been approved. Trial court ruled in favor of Maxilite and Marques. which Maxilite claimed against the fire insurance policy with Makati Insurance Company. with respect to the previous insurance policies. Makati Insurance Company denied the fire loss claim on the ground of non-payment of premium. Maxilite suffered 100 . FEBIBI. FEBTC had insurable interest over the merchandise. Marques sought payment of actual. Maxilite suffered losses. was sent by FEBIBI to FEBTC to debit Maxilite’s account for the payment of the insurance premium. and (3) Maxilite’s bank account had sufficient funds to pay the insurance premium prior to the settlement of the trust receipt account. guided upon those considerations which ordinarily regulate the conduct of human affairs. dated 19 October 1994. and the writ of preliminary injunction previously issued lifted and set aside. The Court of Appeals affirmed the trial court’s decision. had the insurance premium been paid. would do.1995. Hence. there is no evidence showing FEBIBI’s and Makati Insurance Company’s negligence as regards the non-payment of the insurance premium. in the Regional Trial Court in Davao City (RTC) to recover the principal sum of P240. with BA Finance as the highest bidder. The Court agrees with the Court of Appeals in reducing the interest rate from 12% to 6% as the obligation to pay does not arise from a loan or forbearance of money. Likewise.489-90). Contrary to Maxilite’s and Marques’ view. 2011 FACTS: On December 28. FEBTC is solely liable for the payment of the face value of the insurance policy and the monetary awards stated in the Court of Appeals’ decision. 5117). the records are bereft of any evidence warranting the piercing of corporate veil in order to treat FEBTC.R. and Makati Insurance Company are independent and separate juridical entities. MOISES and CLEMENCIA ANDRADA vs. FEBIBI. Upon Pilhino’s application. 1990. and the liability of the parent corporation as well as the subsidiary shall be confined to those arising in their respective business. PILHINO SALES CORPORATION G. Maxima. 20.863. 156448 February 23. Suffice it to state that FEBTC. BA Finance sued Moises Andrada for his failure to pay the loan (Civil Case No. DAMAGES SPS. No. 101 . After a decision was rendered in the action in favor of BA Finance. Jr. and his wife. and Makati Insurance Company as a single entity. plus interest and incidental charges (Civil Case No. which came to be implemented against a Hino truck and a Fuso truck both owned by Jose Andrada. by which the sheriff levied upon and seized the Hino truck while it was in the possession of Pilhino and sold it at public auction.00. FEBIBI. the RTC issued a writ of preliminary attachment. Absent any showing of its illegitimate or illegal functions. a writ of execution issued.1 million. a subsidiary’s separate existence shall be respected. RTC rendered a decision against spouses. respondent Pilhino Sales Corporation (Pilhino) sued Jose Andrada. Besides. even if FEBIBI and Makati Insurance Company are subsidiaries of FEBTC. Jr.damage to the extent of the face value of the insurance policy or the sum of P2. " The petitioners are not entitled to attorney’s fees. before the effectivity of the new Civil Code. As earlier indicated. This is a corollary of the general principle expressed in Article 19 of the Civil Code that everyone must.R. observe honesty and good faith and the rule embodied in Article 1170 that anyone guilty of fraud (bad faith) in the performance of his obligation shall be liable for damages. No. RODOLFO REGALA vs.Judgment is rendered dismissing this case insofar as the spouses Moises Andrada and Clemencia Andrada. One such instance is where the defendant is guilty of gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid. such fees could not be recovered in the absence of a stipulation. and BA Finance Corporation. other than judicial costs. As petitioner failed to address the problem to 102 . to which respondent verbally consented on condition that petitioner would clean the area affected by the work. except xxx (4) in cases of clearly unfounded civil action or proceeding against the plaintiff xxx. It is well accepted in this jurisdiction that no premium should be placed on the right to litigate and that not every winning party is entitled to an automatic grant of attorney’s fees. Spouses Moises and Clemencia Andrada appealed the decision. which provides that "in the absence of stipulation. just and demandable claim. ISSUE: Whether or not Pilhino should be held liable for the damages the petitioners sustained from Pilhino’s levy on execution upon the Hino truck. It was only with the advent of the new Civil Code that the right to collect attorney’s fees in the instances mentioned in Article 2208 was recognized and such fees are now included in the concept of actual damages. In the course of the construction of the second floor. When petitioner decided to renovate his one storey residence by constructing a second floor. in the performance of his duties. Las Piñas City. subject to the rights of BA Finance as mortgagee and highest bidder. Jr. BF Resort Village. Sr. 188715 April 6. 2011 FACTS: Petitioner and respondent are adjacent neighbors at Spirig Street. petitioner’s real intention was to build a second floor. cannot be recovered. in favor of defendant-appellant Moises Andrada is declared valid. FEDERICO CARIN G. approached respondent sometime in May 1998 for permission to bore a hole through a perimeter wall shared by both their respective properties. The Court of Appeals (CA) promulgated its decision by affirming the decision with the modification that the sale of the Hino truck by defendant Jose Andrada. in fact with a terrace atop the dividing wall. Indeed. he under the guise of merely building an extension to his residence. respondent and his wife Marietta suffered from the dust and dirt which fell on their property. including the counterclaims. HELD: The petitioners further seek attorney’s fees based on Article 2208 (4) of the Civil Code. Jose Andrada. now accordingly BA Savings Bank. attorney’s fees and expenses of litigation. 1998. To be entitled to such an award. the damages must be shown to be the proximate result of a wrongful act or omission. and petitioner having continued the construction work despite issuance of several stop-work notices from the City Engineer’s Office for lack of building permit. It did not help the cause of the defendant that he made a lot of misrepresentations regarding the renovations on his house and he did not initially have a building permit for the same. and similar harm unjustly caused to a person. 103 . were duly established. As no satisfactory agreement was reached at the last barangay conciliation proceedings in December 1998. mental anguish. rampant invasion of privacy and damages arising from the construction. as well as the absence of devices or safety measures to prevent the same from falling inside plaintiff’s property. In fact.respondent’s satisfaction. besmirched reputation. respondent related that. and for illegal construction of scaffoldings inside his (respondent’s) property. moral shock. ISSUE: Whether or not respondent is entitled to moral damages? HELD: The trial court’s award of moral and exemplary damages. failed to clean the debris falling therefrom. Thus the trial court explained: Indeed. wounded feelings. recovery is more an exception rather than the rule. despite the lack of a building permit for the construction of a second floor. The claimant must thus establish the factual basis of the damages and its causal tie with the acts of the defendant. serious anxiety. The evidence presented by the plaintiff regarding the dirt or debris. it was only after the construction works were completed that the said permit was issued and upon payment of an administrative fine by the defendant. was premised on the damage and suffering sustained by respondent arising from quasi-delict under Article 2176 of the Civil Code. fright. social humiliation. Several "sumbongs" (complaints) were soon lodged by respondent before the Office of Barangay Talon Dos against petitioner for encroachment. respondent filed a letter-complaint with the Office of the City Engineer and Building Official of Las Piñas City on June 9. allowed his laborers to come in and out of his (respondent’s) property without permission by simply jumping over the wall. the claimant must satisfactorily prove that he has suffered damages and that the injury causing it has sprung from any of the cases listed in Articles 2219 and 2220 of the Civil Code. and that despite his protestations. petitioner persisted in proceeding with the construction. there was fault or negligence on the part of the defendant when he did not provide sufficient safety measures to prevent causing a lot of inconvenience and disturbance to the plaintiff and his family. Moreover. as affirmed by the appellate court. he claiming to be the owner of the perimeter wall. petitioner had demolished the dividing wall. In his letter-complaint. and trampled on his vegetable garden. however. Moral damages are not meant to be punitive but are designed to compensate and alleviate the physical suffering. respondent filed on March 1999 a complaint for damages against petitioner before the RTC of Las Piñas City. In prayers for moral damages. It thus becomes necessary to instead look into the manner by which petitioner carried out his renovations to determine whether this was directly responsible for any distress respondent may have suffered since the law requires that a wrongful or illegal act or omission must have preceded the damages sustained by the claimant. 104 . mental or psychological suffering sustained by the claimant. respondent failed to establish by clear and convincing evidence that the injuries he sustained were the proximate effect of petitioner’s act or omission. 3) proof that the wrongful act or omission of the defendant is the proximate cause of the damages sustained by the claimant.In fine. 2) a culpable act or omission factually established. an award of moral damages calls for the presentation of 1) evidence of besmirched reputation or physical. In the present case. and 4) the proof that the act is predicated on any of the instances expressed or envisioned by Article 2219 and Article 2220 of the Civil Code. Hermes Frias (Dr. April 13. April 13. their coworkers June Matias and Joel Edrene fetched Bladimir’s parents from Tarlac. viz: (1) duty (2) breach (3) injury and proximate causation. vs. He was then confined. is liable to damages. a primary-care hospital around one kilometer away from the office of the company. Hao gave Bladimir P1. To successfully prosecute an action anchored on torts. 1995. The hospital did not allow Bladimir to leave the hospital. however. April 14. No. 1995. was afflifcted with chicken pox.000. he asked a co-worker. Later in the afternoon. a doctor of the hospital informed Narding that they needed to talk to Bladimir’s parents. on Silangga’s request. 1995.R. hence. Bladimir’s parents-herein respondents later filed on August 17. Frias). employee of petitioner Ocean Builders Construction Corp. alleging that Hao was guilty of negligence which resulted in the deterioration of Bladimir’s condition leading to his death. Silangga thus brought Bladimir to the Caybiga Community Hospital (Caybiga Hospital). to rest for three days which he did at the company’s "barracks" where he lives free of charge. Bladimir Cubacub (Bladimir). Informed by Silangga of Bladimir’s intention. as maintenance. 1995 before the Tarlac Regional Trial Court (RTC) at Capas a complaint for damages against petitioners. SPOUSES ANTONIO AND ANICIA CUBACUB G. The death certificate issued by the QCGH recorded Bladimir’s immediate cause of death as cardio-respiratory arrest and the antecedent cause as pneumonia. ISSUE: Whether or not petitioner Ocean Builders Construction Corp. Three days later or on April 12. The next day. 1995. arrived at the Caybiga Hospital and transferred Bladimir to the Quezon City General Hospital (QCGH) where he was placed in the intensive care unit and died the following day. On the other hand. the Court notes that the present case is one for damages based on torts. He was thus advised by petitioner Dennis Hao (Hao). Bladimir’s parents-respondent spouses Cubacub. 150898 April 13. Ignacio Silangga (Silangga). Bladimir went about his usual chores of manning the gate of the company premises and even cleaned the company vehicles. with their friend Dr. Along with co-workers Narding and Tito Vergado. Frias recorded the causes of death as cardiac arrest. the death certificate issued by Dr. septicemia and chicken pox. to accompany him to his house in Capas. The assailed decision of the appellate court held that it was the duty of 105 . 2011 FACTS: On April 9. three elements must be present. the employer-employee relationship being merely incidental. HELD: At the onset.OCEAN BUILDERS CONSTRUCTION CORP.00 and ordered Silangga to instead bring Bladimir to the nearest hospital. multiple organ system failure. the company’s general manager. with Narding keeping watch over him. At about 8 o’clock in the evening of the same day. Tarlac so he could rest. 1995. 161 of the Labor Code. the issue in this case is essentially factual in nature. Chicken pox is self-limiting. As found by the trial court and borne by the records. without reference. At best. whenever it appears from the evidence in the case that the act or omission played a substantial part in bringing about or actually causing the injury or damage. unbroken by an efficient intervening cause. under Art. and without which. however. as he did. however. as to when it happened. finds that Bladimir contracted chicken pox from a co-worker and Hao was negligent in not bringing that co-worker to the nearest physician. Hao does not appear to have a medical background. and that the injury or damage was either a direct result or a reasonably probable consequence of the act or omission. the alleged negligence of Hao cannot be considered as the proximate cause of the death of Bladimir. apart from adopting the appellate court’s findings. 106 . An injury or damage is proximately caused by an act or failure to act. in natural and continuous sequence. He may not be thus expected to have known that Bladimir needed to be brought to a hospital with better facilities than the Caybiga Hospital. the only allusion to another employee being afflicted with chicken pox was when Hao testified that he knew it to heal within three days as was the case of another worker.petitioners to provide adequate medical assistance to the employees under Art. produces injury. to provide to a sick employee in an emergency. The dissent. take a 3-day rest and to later have him brought to the nearest hospital constituted "adequate and immediate medical" attendance that he is mandated. failing which a breach is committed. At all events. or isolating him as well. borne by the records. the result would not have occurred. This finding is not. petitioner Hao’s advice for Bladimir to. Verily. 161. Nowhere in the appellate court’s or even the trial court’s decision is there any such definite finding that Bladimir contracted chicken pox from a co-worker. contrary to appellate court’s ruling. Proximate cause is that which. Contrary to Espino’s allegation. T-279982 to a certain Beauregard E. the trial court did not adjudge respondents as the owners of the properties. When respondents tried to register the properties in their name. The trial court granted respondents’ petition for relief from judgment and declared the writ of preliminary injunction permanent. While the trial court did restrain the Register of Deeds from accepting or registering any document executed by Espino and any person authorized by her that will in any way encumber or cause the transfer of the properties. and Whether the trial court erred in awarding damages to respondents.R. May 30. Espino (spouses Espino) are the registered owners of eleven adjacent lots. The trial court granted the petition. Espino reported the loss to the Register of Deeds and also filed a petition for issuance of new owner’s copies of the eleven TCTs before the trial court. New copies of the eleven TCTs were issued to Espino under Section 109 of the Land Registration Act. Espino lost the owner’s duplicate copies of the eleven TCTs. In this case. Respondent spouses Sharon Sampani Bulut and Celebi Bulut filed with the trial court a petition for relief from judgment. Thereafter. Respondents claimed that they had actual possession of the owner’s copies of the eleven TCTs which had been declared lost and cancelled by the trial court. Respondents explained that spouses Espino sold a parcel of land covered by TCT No. 183811 FACTS: Spouses Rosalia and Alfredo C. Moreover. G. 2011 ISSUES: Whether the trial court erred in recognizing and defending the alleged ownership rights of respondents as possessors of the eleven TCTs as against Espino. HELD: The petition is partly meritorious. No. the registered owner of the properties. they discovered the trial court’s Decision and this prompted them to file the petition for relief from judgment.ROSALIA N. Lim. the trial court’s decision and the writ of preliminary injunction did not declare respondents as the “new owners” of the properties. SPOUSES SHARON SAMPANI BULUT and CELEBI BULUT. ESPINO vs. Lim sold the eleven lots to respondents and gave them the eleven owner’s copies of the TCTs. respondents’ possession of the eleven TCTs is not necessarily equivalent to ownership of the lands covered by the 107 . the trial court does not have jurisdiction to declare respondents as the “new owners” of the properties because this is not an issue in a petition for relief from judgment. Lim allegedly subdivided the property into eleven lots but the title remained in the name of spouses Espino because Lim lacked the funds to transfer the titles in his name. laborers and skilled workers. Again. by itself. the issue of ownership of the eleven properties must be litigated in the appropriate proceedings. besmirched reputation. Mere allegations do not suffice. Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid. As to the award of attorney’s fees. social humiliation. wounded feelings. there must be pleading and proof of moral suffering. cannot be recovered. fright. the trial court made no reference to any testimony of the respondents on their alleged physical suffering. 10. An award of attorney’s fees is an exception and there must be some compelling legal reason to bring the case within the exception and justify the award. In a separate civil action to recover civil liability arising from a crime. it is merely an evidence of title over a particular property. 8. 7. While respondents alleged sleepless nights and mental anguish in their petition for relief. They must be substantiated. respondents are also not entitled to exemplary damages. In any other case where the court deems it just and equitable that attorney’s fees and expenses of litigation should be recovered. 3.TCTs. When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest. does not vest ownership. When at least double judicial costs are awarded. In this case. In case of a clearly unfounded civil action or proceeding against the plaintiff. 6. 4. In actions for the recovery of wages of household helpers. In the absence of stipulation. moral shock. we 108 . mental anguish. In all cases. When exemplary damages are awarded. 2234. 2. and similar injury as would entitle them to moral damages. attorney’s fees and expenses of litigation. Article 2208 of the Civil Code provides: ART. the attorney’s fees and expenses of litigation must be reasonable. since respondents failed to satisfactorily establish their claim for moral damages. Article 2234 of the Civil Code provides: ART. The certificate of title. In actions for indemnity under workmen’s compensation and employer’s liability laws. In criminal cases of malicious prosecution against the plaintiff. serious anxiety. they failed to prove them during the trial. Furthermore. The Court deleted the award of moral and exemplary damages and attorney’s fees for lack of factual and legal basis. In actions for legal support. In order that moral damages may be awarded. There is nothing in the records that supports an award of moral damages. 11. Likewise. mental anguish. fright and the like. Moreover. just and demandable claim. 5. none of the exceptions applies. the plaintiff must show that he is entitled to moral. While the amount of the exemplary damages need not be proved. other than judicial costs. 9. except: 1. 2208. temperate or compensatory damages before the court may consider the question of whether or not exemplary damages should be awarded. already deleted the trial court’s award of exemplary damages which might have served as its basis for awarding attorney’s fees. 109 . 1984. The owner (Concepcion) shall pay 50% downpayment for the dry-docking and repair of the vessel and the balance shall be paid every month in the amount of P10.000. 1984.00 per month effective May 1. [Underscoring Supplied] On June 20. PHILIPPINE TRIGON SHIPYARD CORPORATION. In the event that a THIRD PARTY is interested to purchase the said vessel.P20. l. entered into a "Contract of Agreement. to be deducted from the rental amount of the vessel. If the SECOND PARTY (PTSC/Roland) refuses the offer of the FIRST PARTY (Concepcion). m. 110 . a vessel registered with the Philippine Coast Guard. the SECOND PARTY (PTSC/ Roland) has the option for first priority to purchase the vessel. represented by Roland. (Underscoring Supplied] On August 1. THE HONORABLE COURT OF APPEALS. Concepcion entered into a "Preliminary Agreement" with Roland de la Torre for the dry-docking and repairs of the said vessel as well as for its charter afterwards. under the following conditions: a. k. 160088 July 13. it "should" be chartered for P10. DELA TORRE G." wherein the latter would charter LCT-Josephine retroactive to May 1. AND ROLAND G.00. j. 1984. owned LCT-Josephine. No. shall give the SECOND PARTY (PTSC/Roland) enough time to turn over the vessel so as not to disrupt previous commitments.00 per month with the following conditions: The CHARTERER will be the one to pay the insurance premium of the vessel The vessel will be used once every three (3) months for a maximum period of two (2) weeks The SECOND PARTY (referring to Concepcion) agreed that LCT-Josephine should be used by the FIRST PARTY (referring to Roland) for the maximum period of two (2) years The FIRST PARTY (Roland) will take charge[x] of maintenance cost of the said vessel. Agustin de la Torre (Agustin) The following are the terms and conditions of that "Contract of Agreement:" The SECOND PARTY (TSL/Agustin) undertakes to shoulder the maintenance cost for the duration of the usage. On February 1. PTSC/Roland sub-chartered LCT-Josephine to Trigon Shipping Lines (TSL).DELA TORRE v. Concepcion agreed that after the dry-docking and repair of LCTJosephine.R. Next x x year of dry-docking and repair of vessel shall be shouldered by the SECOND PARTY (PTSC/Roland). a single proprietorship owned by Roland's father. 1984. Concepcion and the Philippine Trigon Shipyard Corporation (PTSC). CRISOSTOMO G. 1984. n. Chartered amount of the vessel .000. Under this agreement. 2011 FACTS: Respondent. RAMON "BOY" LARRAZABAL. That the SECOND PARTY (PTSC/Roland) has the option to terminate the contract in the event of the SECOND PARTY (PTSC/Roland) decide to stop operating. The SECOND PARTY (PTSC/Roland) shall give 90 days noticeof such termination of contract. CONCEPCION.000. Wherein. the unloading of the vessel's cargo began with the use of Larrazabal's payloader. of the part of the vessel belonging to him. Shortly thereafter. The latter assured Concepcion that negotiations were underway for the refloating of his vessel. Unfortunately. In this jurisdiction. this rule is provided in three articles of the Code of Commerce. sub-chartered LCT-Josephine to Ramon Larrazabal (Larrazabal) for the transport of cargo consisting of sand and gravel to Leyte. 837. While the payloader was on the deck of the LCT-Josephine scooping a load of the cargo. Concepcion demanded that PTSC/ Roland refloat LCT-Josephine. 1984. the vessel tilted and sea water rushed in. Leyte. 590. Isabel. ISSUE: Whether or not the shipowner or ship agent’s liability is merely coextensive with his interest in the vessel such that a total loss thereof results in its extinction. With the vessel's ramp already lowered. the shipowner or ship agent's liability is held as merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. Henceforth. Each co-owner may exempt himself from this liability by the abandonment. The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel. xxx Art. On November 23. TSL. the vessel's ramp started to move downward. this time represented by Roland per Agustin's Special Power of Attorney. the LCT-Josephine with its cargo of sand and gravel arrived at Philpos. The co-owners of the vessel shall be civilly liable in the proportion of their interests in the common fund for the results of the acts of the captain referred to in Art. Concepcion was constrained to institute a complaint for "Sum of Money and Damages" against PTSC and Roland before the RTC. this did not materialize. PTSC and Roland filed their answer together with a third-party complaint against Agustin. before a notary. The civil liability incurred by shipowners in the case prescribed in this section. 587.On November 22. These are: Art. LCT-Josephine sank. shall be understood as limited to the value of the vessel with all its appurtenances and freightage served during the voyage. xxx Art. 111 . HELD: The Court held that the real and hypothecary doctrine in maritime law is applicable. but he may exempt himself therefrom by abandoning the vessel with all her equipment and the freight it may have earned during the voyage. The vessel was beached near the NDC Wharf. 1984. 587. ISSUE: 112 . the front portion of the truck hit the left middle side portion of the passenger jeepney. at that time. Obviously. Rodriguez Avenue was under repair and a wooden barricade was placed in the middle thereof. while the truck was owned by Jose Guballa (Guballa) and driven by Mariano Geronimo (Geronimo). The passenger jeepney was owned by PoncianoTapales (Tapales) and driven by Alejandro Santos (Santos). heading towards Santolan Street. Guballa filed a third party complaint against Filwriters Guaranty Assurance Corporation (FGAC) under Policy Number OV-09527. 1979. No. The truck driver should have been more careful. PONCIANO TAPALES.COURT OF APPEALS. causing damage to both vehicles and injuries to the driver and passengers of the jeepney. while the passenger jeepney was coming from the opposite direction. Similarly. Quezon City. the agent or even the charterer in case of demise or bareboat charter. (Reinoso).Article 837 specifically applies to cases involving collision which is a necessary consequence of the right to abandon the vessel given to the shipowner or ship agent under the first provision . J9-450. The evidentiary records disclosed that the truck was speeding along E. The petitioners cannot invoke this as a defense. what is contemplated is the liability to third persons who may have dealt with the shipowner. the heirs of Reinoso (petitioners) filed a complaint for damages against Tapales and Guballa. The only person who could avail of this is the shipowner. a portion of E. only this time the situation is that the vessel is co-owned by several persons. Concepcion. On March 22. the RTC rendered a decision in favor of the petitioners and against Guballa. As a result. Rodriguez Avenue. In turn. On November 7. the latter is quite clear on which indemnities may be confined or restricted to the value of the vessel pursuant to the said Rule. vs. was killed. 1988. because. When the truck reached a certain point near the Meralco Post No. Now. and FILWRITERS GUARANTY ASSURANCE CORPORATION G. 116121 July 18." Thus. and these are the . Rodriguez. 2011 FACTS: The complaint for damages arose from the collision of a passenger jeepney and a truck at around 7:00 o’clock in the evening of June 14. 1979 along E. JOSE GUBALLA.Article 587."indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel.R. Sr. Ruben Reinoso. He is the very person whom the Limited Liability Rule has been conceived to protect.. SR. the forerunner of the Limited Liability Rule under the Code of Commerce is Article 587. a passenger of the jeepney. THE HEIRS OF THE LATE RUBEN REINOSO. Article 590 is a reiteration of Article 587. and impose disciplinary measures for breaches thereof. monitor their implementation. 2176. provides: Art. employers must formulate standard operating procedures. in relation to Article 2180 of the Civil Code. failed to rebut the presumption of negligence in the hiring and supervision of his employee. 2176 is demandable not only for one’s own acts or omissions but also for those of persons for whom one is responsible. is called a quasi-delict and is governed by the provisions of this Chapter. experience and service record. With respect to the supervision of employees. including documentary evidence. Whenever an employee’s negligence causes damage or injury to another. there being fault or negligence is obliged to pay for the damage done. there instantly arises a presumption juristantum that the employer failed to exercise diligentissimipatris families in the selection or supervision of his employee. 2180. employers are required to examine them as to their qualification. Thus. in the selection of prospective employees. xxxx The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage. The obligation imposed by Art. xxxx Employers shall be liable for the damage caused by their employees and household helpers acting within the scope of their assigned tasks even though the former are not engaged in any business or industry. HELD: The truck owner. Such fault or negligence. 113 . Whoever by act or omission causes damage to another. These facts must be shown by concrete proof. Article 2176.Whether or not the respondent is guilty of negligence. xxxx Art. if there is no pre-existing contractual relation between the parties. Guballa. for the Contractor to make an offer of a certain amount by way of compensation for the damages she sustained." a portion of the perimeter fence collapsed and other portions tilted. De Guzman. or in the alternative. however. Tumolva Engineering Works (the Contractor). Cavite.982. No. made deviations from the agreed plan with respect to the perimeter fence of the orphanage. demanded the repair of the fence. ISSUE: Whether not the Contractor is liable for the actual.EMERITA M. Incorporated in the Agreement was the plan and specifications of the perimeter fence. De Guzman issued a Certificate of Acceptance. DE GUZMAN vs. The CIAC issued the Award in favor of De Guzman. reiterated her demand for the restoration of the wall without additional cost on her part. In her Letter dated. Purok 4. the CA modified the Award rendered by CIAC. De Guzman.R. but awarding temperate damages in the amount of P 100. temperate and moral damages that she suffered from the collapse of the perimeter fence because of a typhoon. For his part.00 for reconstructing the collapsed and damaged perimeter fence. The Contractor. TUMOLVA G. Lourdes Rivera and Dhonna Chan. the Contractor issued a quitclaim acknowledging the termination of the contract and the full compliance therewith by De Guzman.39.000.150. however. Her demand was not heeded. Actual damages: 114 . PulongBunga. During typhoon "Milenyo. represented by her attorneys-infact. the Contractor claimed that the destruction of the fence was an act of God and expressed willingness to discuss the matter to avoid unnecessary litigation. 2011 FACTS: Petitioner Emerita De Guzman (De Guzman). ANTONIO M. Silang. for a contract price of P 15. De Guzman then filed a Request for Arbitration of the dispute before the Construction Industry Arbitration Commission (CIAC). entered into a Construction Agreement (Agreement) for the construction of an orphanage located in Brgy. moral and exemplary damages. deleting the award of actual. and respondent Antonio Tumolva. After the completion of the project. doing business under the name and style A. In response. HELD: 1.M. 188072 October 19. On appeal to the Cour of Appeals. Temperate damages xxx De Guzman is indeed entitled to temperate damages as provided under Article 2224 of the Civil Code for the loss she suffered. Contrary to her assertion.Article 2199 of the New Civil Code defines actual or compensatory damages as follows: Art. 2199. xxx 2. Moral damages xxx This Court is one with the CA that De Guzman is not entitled to such an award. from the nature of the case. The record is bereft of any proof that she actually suffered moral damages as contemplated in Article 2217 of the Code. De Guzman suffered pecuniary loss brought about by the collapse of the perimeter fence by reason of the Contractor's negligence and failure to comply with the specifications. When pecuniary loss has been suffered but the amount cannot. in lieu of actual damages. Xxx Undoubtedly. the handwritten calculation of reconstruction costs made by Engineer Santos and attached to his affidavit cannot be given any probative value because he never took the witness stand to affirm the veracity of his allegations in his affidavit and be cross-examined on them. Such compensation is referred to as actual or compensatory damages.xxx 115 . Unfortunately. one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. the CA was correct in awarding temperate damages. As she failed to prove the exact amount of damage with certainty as required by law. De Guzman failed to adduce evidence to satisfactorily prove the amount of actual damage incurred. Except as provided by law or by stipulation. be proven with certainty. temperate damages may be recovered.