In the case below, the suing guests of a big hotel initially won before the trial court but later lost before the appellate court and the Supreme Court. The issue was damages based on breach of contract. The SC awarded a very small sum of 50,000 Pesos by way of nominal damages in favor of the plaintiffs, notwithstanding the inadequate service rendered by the hotel waiters and their supervisors and the inconvenience faced by the guests. The grounds cited by the SC were the unexpected number of additional guests and the failure of the plaintiffs to inform the hotel in advance of such increase in number. The fine prints of the contract of adhesion prevailed as is usually the case when big corporations are sued in court. I do not totally agree with the common-sense aspect of the SC decision. I am nonetheless reproducing it in full for legal research purpose in re: tort and damages in relation to contractual breach.

SPOUSES LUIGI M. GUANIO andANNA HERNANDEZ-GUANIO,Petitioners,G.R. No. 190601- versus -Present:CARPIO MORALES,Chairperson, J.,BRION,BERSAMIN,VILLARAMA, JR., andSERENO, JJ.MAKATI SHANGRI-LA HOTEL and RESORT, INC., also doingbusiness under the name ofPromulgated:SHANGRI-LA HOTEL MANILA,Respondent.February 7, 2011

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D E C I S I O N

CARPIO MORALES, J.

For their wedding reception on July 28, 2001, spouses Luigi M. Guanio and Anna Hernandez-Guanio (petitioners) booked at the Shangri-la Hotel Makati (the hotel).Prior to the event, Makati Shangri-La Hotel & Resort, Inc. (respondent) scheduled an initial food tasting. Petitioners claim that they requested the hotel to prepare for seven persons the two of them, their respective parents, and the wedding coordinator. At the scheduled food tasting, however, respondent prepared for only six.Petitioners initially chose a set menu which included black cod, king prawns and angel hair pasta with wild mushroom sauce for the main course which cost P1,000.00 per person. They were, however, given an option in which salmon, instead of king prawns, would be in the menu at P950.00 per person. They in fact partook of the salmon.

Three days before the event, a final food tasting took place. Petitioners aver that the salmon served was half the size of what they were served during the initial food tasting; and when queried about it, the hotel quoted a much higher price (P1,200.00) for the size that was initially served to them. The parties eventually agreed on a final price P1,150 per person.A day before the event or on July 27, 2001, the parties finalized and forged their contract.[1]

Petitioners claim that during the reception, respondents representatives, Catering Director Bea Marquez and Sales Manager Tessa Alvarez, did not show up despite their assurance that they would; their guests complained of the delay in the service of the dinner; certain items listed in the published menu were unavailable; the hotels waiters were rude and unapologetic when confronted about the delay; and despite Alvarezs promise that there would be no charge for the extension of the reception beyond 12:00 midnight, they were billed and paid P8,000 per hour for the three-hour extension of the event up to 4:00 A.M. the next day.Petitioners further claim that they brought wine and liquor in accordance with their open bar arrangement, but these were not served to the guests who were forced to pay for their drinks.Petitioners thus sent a letter-complaint to the Makati Shangri-la Hotel and Resort, Inc. (respondent) and received an apologetic reply from Krister Svensson, the hotels Executive Assistant Manager in charge of Food and Beverage. They nevertheless filed a complaint for breach of contract and damages before the Regional Trial Court (RTC) of Makati City.

In its Answer, respondent claimed that petitioners requested a combination of king prawns and salmon, hence, the price was increased to P1,200.00 per person, but discounted at P1,150.00; that contrary to petitioners claim, Marquez and Alvarez were present during the event, albeit they were not permanently stationed thereat as there were three other hotel functions; that while there was a delay in the service of the meals, the same was occasioned by the sudden increase of guests to 470 from the guaranteed expected minimum number of guests of 350 to a maximum of 380, as stated in the Banquet Event Order (BEO);[2] and that Isaac Albacea, Banquet Service Director, in fact relayed the delay in the service of the meals to petitioner Luigis father, Gil Guanio. Respecting the belated service of meals to some guests, respondent attributed it to the insistence of petitioners wedding coordinator that certain guests be served first.On Svenssons letter, respondent, denying it as an admission of liability, claimed that it was meant to maintain goodwill to its customers.By Decision of August 17, 2006, Branch 148 of the Makati RTC rendered judgment in favor of petitioners, disposing as follows: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendant ordering the defendants to pay the plaintiff the following:

1) The amount of P350,000.00 by way of actual damages;2) The amount of P250,000.00 for and as moral damages;3) The amount of P100,000.00 as exemplary damages;4) The amount of P100,000.00 for and as attorneys fees.With costs against the defendant.SO ORDERED.[3] In finding for petitioners, the trial court relied heavily on the letter of Svensson which is partly quoted below:

Upon receiving your comments on our service rendered during your reception here with us, we are in fact, very distressed. Right from minor issues pappadums served in the soup instead of the creutons, lack of valet parkers, hard rolls being too hard till a major one slow service, rude and arrogant waiters, we have disappointed you in all means.

Indeed, we feel as strongly as you do that the services you received wereunacceptable and definitely not up to our standards. We understand that it is our job to provide excellent service and in this instance, we have fallen short of your expectations. We ask you please to accept our profound apologies for causing such discomfort and annoyance. [4] (underscoring supplied) The trial court observed that from the tenor of the letter . . . the defendant[-herein respondent] admits that the services the plaintiff[-herein petitioners] received were unacceptable and definitely not up to their standards.[5] On appeal, the Court of Appeals, by Decision of July 27, 2009,[6] reversed the trial courts decision, it holding that the proximate cause of petitioners injury was an unexpected increase in their guests:

x x x Hence, the alleged damage or injury brought about by the confusion, inconvenience and disarray during the wedding reception may not be attributed to defendant-appellant Shangri-la.We find that the said proximate cause, which is entirely attributable to plaintiffs-appellants, set the chain of events which resulted in the alleged inconveniences, to the plaintiffs-appellants. Given the circumstances that obtained, only the Sps. Guanio may bear whatever consequential damages that they may have allegedly suffered.[7] (underscoring supplied) Petitioners motion for reconsideration having been denied by Resolution of November 19, 2009, the present petition for review was filed. The Court finds that since petitioners complaint arose from a contract, the doctrine of proximate cause finds no application to it:

The doctrine of proximate cause is applicable only in actions for quasi-delicts, not in actions involving breach of contract. x x x The doctrine is a device for imputing liability to a person where there is no relation between him and another party. In such a case, the obligation is created by law itself. But, where there is a pre-existing contractual relation between the parties, it is the parties themselves who create the obligation, and the function of the law is merely to regulate the relation thus created.[8] (emphasis and underscoring supplied)What applies in the present case is Article 1170 of the Civil Code which reads:Art. 1170. 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.RCPI v. Verchez, et al. [9] enlightens:In culpa contractual x x x the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief. The law, recognizing the obligatory force of contracts, will not permit a party to be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof. A breach upon the contract confers upon the injured party a valid cause for recovering that which may have been lost or suffered. The remedy serves to preserve the interests of the promissee that may include his expectation interest, which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed, or his reliance interest, which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made; or his restitution interest, which is his interest in having restored to him any benefit that he has conferred on the other party. Indeed, agreements can accomplish little, either for their makers or for society, unless they are made the basis for action. The effect of every infraction is to create a new duty, that is, to make RECOMPENSE to the one who has been injured by the failure of another to observe his contractual obligation unless he can show extenuating circumstances, like proof of his exercise of due diligence x x x or of the attendance of fortuitous event, to excuse him from his ensuing liability. (emphasis and underscoring in the original; capitalization supplied)The pertinent provisions of the Banquet and Meeting Services Contract between the parties read:

4.3 The ENGAGER shall be billed in accordance with the prescribed rate for the minimum guaranteed number of persons contracted for, regardless of under attendance or non-appearance of the expected number of guests, except where the ENGAGER cancels the Function in accordance with its Letter of Confirmation with the HOTEL. Should the attendance exceed the minimum guaranteed attendance, the ENGAGER shall also be billed at the actual rate per cover in excess of the minimum guaranteed attendance.x x x x4.5. The ENGAGER must inform the HOTEL at least forty eight (48) hours before the scheduled date and time of the Function of any change in the minimum guaranteed covers. In the absence of such notice, paragraph 4.3 shall apply in the event of under attendance. In case the actual number of attendees exceed the minimum guaranteed number by ten percent (10%), the HOTEL shall not in any way be held liable for any damage or inconvenience which may be caused thereby. The ENGAGER shall also undertake to advise the guests of the situation and take positive steps to remedy the same.[10] (emphasis, italics and underscoring supplied)

Breach of contract is defined as the failure without legal reason to comply with the terms of a contract. It is also defined as the [f]ailure, without legal excuse, to perform any promise which forms the whole or part of the contract.[11]

The appellate court, and even the trial court, observed that petitioners were remiss in their obligation to inform respondent of the change in the expected number of guests. The observation is reflected in the records of the case. Petitioners failure to discharge such obligation thus excused, as the above-quoted paragraph 4.5 of the parties contract provide, respondent from liability for any damage or inconvenience occasioned thereby.As for petitioners claim that respondent departed from its verbal agreement with petitioners, the same fails, given that the written contract which the parties entered into the day before the event, being the law between them.Respecting the letter of Svensson on which the trial court heavily relied as admission of respondents liability but which the appellate court brushed aside, the Court finds the appellate courts stance in order. It is not uncommon in the hotel industry to receive comments, criticisms or feedback on the service it delivers. It is also customary for hotel management to try to smooth ruffled feathers to preserve goodwill among its clientele.

Kalalo v. Luz holds:[12]

Statements which are not estoppels nor judicial admissions have no quality of conclusiveness, and an opponent whose admissions have been offered against him may offer any evidence which serves as an explanation for his former assertion of what he now denies as a fact.

Respondents Catering Director, Bea Marquez, explained the hotels procedure on receiving and processing complaints, viz:

ATTY. CALMA:Q You mentioned that the letter indicates an acknowledgement of the concern and that there was-the first letter there was an acknowledgment of the concern and an apology, not necessarily indicating that such or admitting fault?A Yes.Q Is this the letter that you are referring to?If I may, Your Honor, that was the letter dated August 4, 2001, previously marked as plaintiffs exhibits, Your Honor. What is the procedure of the hotel with respect to customer concern?A Upon receipt of the concern from the guest or client, we acknowledge receipt of such concern, and as part of procedure in service industry particularly Makati Shangri-la we apologize for whatever inconvenience but at the same time saying, that of course, we would go through certain investigation and get back to them for the feedback with whatever concern they may have.Q Your Honor, I just like at this point mark the exhibits, Your Honor, the letter dated August 4, 2001 identified by the witness, Your Honor, to be marked as Exhibit 14 and the signature of Mr. Krister Svensson be marked as Exhibit 14-A.[13]x x x xQ In your opinion, you just mentioned that there is a procedure that the hotel follows with respect to the complaint, in your opinion was this procedure followed in this particular concern?A Yes, maam.Q What makes you say that this procedure was followed?A As I mentioned earlier, we proved that we did acknowledge the concern of the client in this case and we did emphatize from the client and apologized, and at the same time got back to them in whatever investigation we have.Q You said that you apologized, what did you apologize for?A Well, first of all it is a standard that we apologize, right? Being in the service industry, it is a practice that we apologize if there is any inconvenience, so the purpose for apologizing is mainly to show empathy and to ensure the client that we are hearing them out and that we will do a better investigation and it is not in any way that we are admitting any fault.[14] (underscoring supplied)

To the Court, the foregoing explanation of the hotels Banquet Director overcomes any presumption of admission of breach which Svenssons letter might have conveyed.The exculpatory clause notwithstanding, the Court notes that respondent could have managed the situation better, it being held in high esteem in the hotel and service industry. Given respondents vast experience, it is safe to presume that this is not its first encounter with booked events exceeding the guaranteed cover. It is not audacious to expect that certain measures have been placed in case this predicament crops up. That regardless of these measures, respondent still received complaints as in the present case, does not amuse.Respondent admitted that three hotel functions coincided with petitioners reception. To the Court, the delay in service might have been avoided or minimized if respondent exercised prescience in scheduling events. No less than quality service should be delivered especially in events which possibility of repetition is close to nil. Petitioners are not expected to get married twice in their lifetimes.In the present petition, under considerations of equity, the Court deems it just to award the amount of P50,000.00 by way of nominal damages to petitioners, for the discomfiture that they were subjected to during to the event.[15] The Court recognizes that every person is entitled to respect of his dignity, personality, privacy and peace of mind.[16] Respondents lack of prudence is an affront to this right.

WHEREFORE, the Court of Appeals Decision dated July 28, 2009 is PARTIALLY REVERSED. Respondent is, in light of the foregoing discussion, ORDERED to pay the amount of P50,000.00 to petitioners by way of nominal damages.SO ORDERED.

Civil CodeContract; damages arising from breach of contract. The Court finds that since petitioners complaint arose from a contract, the doctrine of proximate cause, which is relevant only in actions for quasi-delicts, finds no application to it. What applies in the present case is Article 1170 of the Civil Code which reads: [T]hose 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. Breach of contract is defined as the failure without legal reason to comply with the terms of a contract. It is also defined as the failure, without legal excuse, to perform any promise which forms the whole or part of the contract. As for petitioners claim that respondent departed from itsverbalagreement with petitioners, the same fails, given that the written contract which the parties entered into the day before the event, being the law between them.Spouses Luigi Guanio and Anna Guanio v. Makati Shangri-la Hotel and Resort, Inc.;G.R. No. 190601.February 7, 2011.Contract; novation. There are two ways which could indicate, in fine, the presence of novation and thereby produce the effect of extinguishing an obligation by another which substitutes the same. The first is when novation has been explicitly stated and declared in unequivocal terms. The second is when the old and the new obligations are incompatible on every point. The test of incompatibility is whether the two obligations can stand together, each one having its independent existence. If they cannot, they are incompatible, and the latter obligation novates the first. Corollarily, changes that breed incompatibility must be essential in nature and not merely accidental. The incompatibility must take place in any of the essential elements of the obligation such as its object, cause or principal conditions thereof; otherwise, the change would be merely modificatory in nature and insufficient to extinguish the original obligation.Carolina Hernandez-Nievera, et al. v. Wilfredo Hernandez, et al.;G.R. No. 171165.February 14, 2011.Contracts; rescissible; presumption of fraud in sale by debtor; application to mortgage of property. The presumption of fraud established under Art. 1387 does not apply to registered lands IF the judgment or attachmentmade is not also registered. In this case, prior to the annotation of the REM on February 23, 1998, SBC was able to successfully acquire a writ of preliminary attachment in its favor against the spouses Lee on January 30, 1998 in a case for a sum of money for nonpayment of its obligation. Bangkok Bank alleges that because of this, the presumption of fraud under Art. 1387 of the Civil Code applies. But while a judgment was made against the spouses Lee in favor of SBC on January 30, 1998, this, however, was not annotated on the titles of the subject properties. In fact, there is no showing that the judgment has ever been annotated on the titles of the subject properties. Considering that the earlier SBC judgment or attachment was not, and in fact never was, annotated on the titles of the subject Antipolo properties, prior to the execution of the REM, the presumption of fraud under Art. 1387 of the Code clearly cannot apply.Also, even assuming Article 1387 of the Civil Code applies, fraud is presumed only in alienationsby onerous title of a person against whom a judgment or attachment has been issued. The term, alienation, connotes the transfer of the property and possession of lands, tenements, or other things, from one person to another. This term is particularly applied to absolute conveyancesof real property and must involve a complete transfer from one person to another. A mortgage does not contemplate a transfer or an absolute conveyance of a real property. It is an interest in land created by a written instrument providing security for the performance of a duty or the payment of a debt. When a debtor mortgages his property, he merely subjects it to a lienbut ownership thereof is not parted with. It is merely a lien that neither creates a title nor an estate. It is, therefore, certainly not the alienation by onerous title that is contemplated in Art. 1387 where fraud is to be presumed.Finally, a careful reading of Art. 1387 of the Code vis--vis its Art. 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, and against whom some judgment has been rendered in any instance or some writ of attachment has been issued. A third person is not and should not be automatically presumed to be in fraud or in collusion with the judgment debtor. In allowing rescission in case of an alienation by onerous title, the third person who received the property conveyed should likewise be a party to the fraud. As clarified by Art. 1385(2) of the Code, so long as the person who is in legal possession of the property did not act in bad faith, rescission cannot take place. Thus, in all instances, as to the third person in legal possession of the questioned property, good faith is presumed. Accordingly, it is upon the person who alleges bad faith or fraud that rests the burden of proof. Asiatrust, being a third person in good faith, should not be automatically presumed to have acted fraudulently by the mere execution of the REM over the subject Antipolo properties, there being no evidence of fraud or bad faith.Samuel U. Lee, et al. v. Bangkok Bank Public Company, Limited;G.R. No. 173349.February 9, 2011.Contract; validity of bidding rules. In joining the bid for sugar importation, the sugar corporations are deemed to have assented to the Bidding Rules, including the forfeiture provision under paragraph G.1. The Bidding Rules bind the sugar corporations. The latter cannot rely on the lame excuse that they are not aware of the forfeiture provision. At the trial, Teresita Tan testified that the Bidding Rules were duly published in a newspaper of general circulation. Vicente Cenzon, a sugar importer who participated in the bidding for the 3rdtranche, testified that he attended the pre-bid conference where the Bidding Rules were discussed and copies of the same were distributed to all the bidders.The Bidding Rules passed through a consultative process actively participated by various government agencies and their counterpart in the private sector: the Department of Agriculture, the National Economic Development Authority, the Department of Trade and Industry, the Department of Finance, the Sugar Regulatory Administration, and a representative each from the sugar planters group and the sugar millers group.We find nothing in the forfeiture provision of the Bidding Rules that is contrary to law, morals, good customs, public order, or public policy. On the contrary, the forfeiture provision fully supports government efforts to aid the countrys ailing sugar industry. Conversion fees, including those that are forfeited under paragraph G.1 of the Bidding Rules, are automatically remitted to the Bureau of Treasury and go directly to the Agricultural Competitiveness Enhancement Fund.South Pacific Sugar Corporation, et al. v. Court of Appeals and Sugar Regulatory AdministrationG.R. No. 180462.February 9, 2011.Damages; attorneys fees. 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 attorneys fees. Indeed, before the effectivity of the newCivil Code, such fees could not be recovered in the absence of a stipulation. It was only with the advent of the newCivil Codethat the right to collect attorneys fees in the instances mentioned in Article 2208 was recognized, and such fees are now included in the concept of actual damages. One such instance is where the defendant is guilty of gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and demandable claim. This is a corollary of the general principle expressed in Article 19 of theCivil Codethat everyone must, in the performance of his duties, 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.But, as noted by the Court inMorales v. Court of Appeals, the award of attorneys fees is the exception rather than the rule. The power of a court to award attorneys fees under Article 2208 of theCivil Codedemands factual, legal, and equitable justification; its basis cannot be left to speculation and conjecture. The general rule is that attorneys fees cannot be recovered as part of damages because of the policy that no premium should be placed on the right to litigate.Herein, the element of bad faith on the part of Pilhino in commencing and prosecuting Civil Case No. 21,898-93, which was necessary to predicate the lawful grant of attorneys fees based on Article 2208 (4) of theCivil Code, was not established. Accordingly, the petitioners demand for attorneys fees must fail.Spouses Moises and Clemencia Andrada v. Pilhino Sales Corporation, represented by its Branch Manager, Jojo S. Saet;G.R. No. 156448.February 23, 2011.

Dishonor of check. This case involved certain loans for which petitioner was an accommodation party. The borrowers under the loans had defaulted triggering the solidary liability of the accommodation party, and the cancellation of the petitioners credit line with that bank under a certain agreement. Consequently, one of the petitioners checks was dishonored. The Supreme Court held that the bank improperly dishonored the check of the petitioner since it had failed to formally notify the petitioner as accommodation party of the default under the loan.Eusebio Gonzales v. Philippine Commercial & International Bank, et al.;G.R. No. 180257.February 23, 2011.Easement. An easement or servitude is an encumbrance imposed upon an immovable for the benefit of another immovable belonging to a different owner. There are two kinds of easements according to source. An easement is established either by law or by will of the owners. The courts cannot impose or constitute any servitude where none existed. They can only declare its existence if in reality it exists by law or by the will of the owners. There are therefore no judicial easements.Article 684 of the Civil Code provides that no proprietor shall make such excavations upon his land as to deprive any adjacent land or building of sufficient lateral or subjacent support. An owner, by virtue of his surface right, may make excavations on his land, but his right is subject to the limitation that he shall not deprive any adjacent land or building of sufficient lateral or subjacent support. Between two adjacent landowners, each has an absolute property right to have his land laterally supported by the soil of his neighbor, and if either, in excavating on his own premises, he so disturbs the lateral support of his neighbors land as to cause it, or, in its natural state, by the pressure of its own weight, to fall away or slide from its position, the one so excavating is liable.]In the instant case, an easement of subjacent and lateral support exists in favor of respondent. It was established that the properties of petitioner and respondent adjoin each other. The residential house and lot of respondent is located on an elevated plateau of fifteen (15) feet above the level of petitioners property. The embankment and the riprapped stones have been in existence even before petitioner became the owner of the property. It was proven that petitioner has been making excavations and diggings on the subject embankment and, unless restrained, the continued excavation of the embankment could cause the foundation of the rear portion of the house of respondent to collapse, resulting in the destruction of a huge part of the family dwelling.Margarita F. Castro v. Napoleon A. Monsod;G.R. No. 183719.February 2, 2011.Estoppel. Estoppel, an equitable principle rooted in natural justice, prevents persons from going back on their own acts and representations, to the prejudice of others who have relied on them. The principle is codified in Article 1431 of the Civil Code. Estoppel can also be found in Rule 131, Section 2 (a) of the Rules of Court. The elements of estoppel are:first, the actor who usually must have knowledge, notice or suspicion of the true facts, communicates something to another in a misleading way, either by words, conduct or silence;second, the other in fact relies, and relies reasonably or justifiably, upon that communication;third, the other would be harmed materially if the actor is later permitted to assert any claim inconsistent with his earlier conduct; andfourth, the actor knows, expects or foresees that the other would act upon the information given or that a reasonable person in the actors position would expect or foresee such action.F.A.T. Kee Computer Systems, Inc. v. Online Networks International, Inc.;G.R. No. 171238.February 2, 2011.Estoppel. The inequity resulting from the abrogation of the whole proceedings at the late stage when the decision subsequently rendered was adverse to the persons raising the issue of inadequacy of docket fee payment is the evil being avoided by the equitable principle of estoppel.David Lu v. Paterno Lu Ym, Sr., et al./Paterno Lu Ym, Sr., et al. v. David Lu/John Lu Ym, et al. v. The Hon. Court of Appeals of Ceby City, et al.;G.R. No. 153690/G.R. No. 157381/G.R. No. 170889.February 15, 2011.Laches. The essence of laches or stale demands is the failure or neglect for an unreasonable and unexplained length of time to do that which, by exercising due diligence, could or should have been done earlier, thus, giving rise to a presumption that the party entitled to assert it either has abandoned or declined to assert it. It is not concerned with mere lapse of time; the fact of delay, standing alone, being insufficient to constitute laches.In addition, it is a rule of equity and applied not to penalize neglect or sleeping on ones rights, but rather to avoid recognizing a right when to do so would result in a clearly unfair situation. There is no absolute rule as to what constitutes laches or staleness of demand; each case is to be determined according to its particular circumstances. Ultimately, the question of laches is addressed to the sound discretion of the court and, being an equitable doctrine, its application is controlled by equitable considerations. It cannot be used to defeat justice or perpetrate fraud and injustice.It is the better rule that courts, under the principle of equity, will not be guided or bound strictly by the statute of limitations or the doctrine of laches when to be so, a manifest wrong or injustice would result.It is significant to point out at this juncture that the overriding consideration in the instant case is that petitioner was deprived of the subject properties which it should have rightly owned were it not for the fraud committed by respondents. Hence, it would be the height of injustice if respondents would be allowed to go scot-free simply because petitioner relied in good faith on the formers false representations. Besides, as earlier discussed, even in the exercise of due diligence, petitioner could not have been expected to immediately discover respondents fraudulent scheme.Insurance of the Philippine Islands Corporation v. Spouses Vidal S. Gregorio and Julita Gregorio;G.R. No. 174104.February 14, 2011.Lease. True, the quoted provision of the lease contract requires ICA to undertake major repairs affecting the structural condition of the building and those due to fortuitous events. But AMAs outright rescission of the lease contract and demand that ICA return the deposit and advance rentals it got within 24 hours from such demand precluded ICA,first, from contesting the findings of the local building official or getting some structural specialists to verify such findings or,second, from making the required repair. Clearly, AMAs hasty rescission of the contract gave ICA no chance to exercise its options.AMA belatedly invokes Article 1660 of the Civil Code which reads:Art. 1660. If a dwelling place or any other building intended for human habitation is in such a condition that its use brings imminent and serious danger to life or health, the lessee may terminate the lease at once by notifying the lessor, even if at the time the contract was perfected the former knew of the dangerous condition or waived the right to rescind the lease on account of this condition.AMA is actually changing its theory of the case. It claimed in its complaint that it was entitled to rescind the contract of lease because ICA fraudulently hid from it the structural defects of its building. The CA did not agree with this theory but held that AMA was nonetheless entitled to rescind the contract for failure of ICA to make the repairs mentioned in the contract. Now, AMA claims that it has a statutory right to rescind the lease contract on the ground mentioned in Article 1660, even if it may be deemed to have initially waived such right.Article 1660 is evidently intended to protect human lives. If ICAs building was structurally defective and in danger of crashing down during an earthquake or after it is made to bear the load of a crowd of students, AMA had no right to waive those defects. It can rescind the lease contract under Article 1660. But this assumes that the defects were irremediable and that the parties had no agreement for rectifying them. As pointed out above, the lease contract implicitly gave ICA the option to repair structural defects at its expense. If that had been done as the contract provides, the risk to human lives would have been removed and the right to rescind, rendered irrelevant.In any event, the fact is that the local building official found ICAs building structurally defective and unsafe. Such finding is presumably true. For this reason, ICA has no justification for keeping AMAs deposit and advance rentals. Still, the Court holds that AMA is not entitled to recover more than the return of its deposit and advance rental considering that, contrary to AMAs claim, ICA acted in good faith and did not mislead it about the condition of the building.Immaculate Conception Academy, et al. v. AMA Computer College, Inc.;G.R. No. 173575.February 2, 2011.Legitimacy; change in status cannot be done through change of name.The present petition must be differentiated fromAlfon v. Republic of the Philippines.InAlfon, the Court allowed the therein petitioner, Estrella Alfon, to use the name that she had been known since childhood in order to avoid confusion. Alfondid not deny her legitimacy, however. She merely sought to use the surname of her mother which she had been using since childhood. Ruling in her favor, the Court held that she was lawfully entitled to use her mothers surname, adding that the avoidance of confusion was justification enough to allow her to do so. In the present case, however, respondentdenies his legitimacy.The change being sought in respondents petition goes so far as to affect hislegal status in relation to his parents. It seeks to change his legitimacy to that of illegitimacy. Rule 103 then would not suffice to grant respondents supplication.Labayo-Rowe v. Republiccategorically holds that changes which mayaffect the civil status from legitimate to illegitimate. . . aresubstantial and controversial alterationswhich can only be allowed after appropriate adversary proceedings . . .Republic of the Philippines v. Julian Edward Emerson Coseteng-Magpayo;G.R. No. 189476.February 2, 2011.Loan; accommodation party. The fact that the loans were undertaken by Gonzales when he signed as borrower or co-borrower for the benefit of the spouses Panlilioas shown by the fact that the proceeds went to the spouses Panlilio who were servicing or paying the monthly duesis beside the point. For signing as borrower and co-borrower on the promissory notes with the proceeds of the loans going to the spouses Panlilio, Gonzales has extended an accommodation to said spouses.As an accommodation party, Gonzales is solidarily liable with the spouses Panlilio for the loans. InAng v. Associated Bank, quoting the definition of an accommodation party under Section 29 of the Negotiable Instruments Law, the Court cited that an accommodation party is a person who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. The Court further explained:[A]n accommodation party is one who meets all the three requisites,viz: (1) he must be a party to the instrument, signing as maker, drawer, acceptor, or indorser; (2) he must not receive value therefor; and (3) he must sign for the purpose of lending his name or credit to some other person. An accommodation party lends his name to enable the accommodated party to obtain credit or to raise money; he receives no part of the consideration for the instrument but assumes liability to the other party/ies thereto. The accommodation party is liable on the instrument to a holder for value even though the holder, at the time of taking the instrument, knew him or her to be merely an accommodation party, as if the contract was not for accommodation.As petitioner acknowledged it to be, the relation between an accommodation party and the accommodated party is one of principal and suretythe accommodation party being the surety. As such, he is deemed an original promisor and debtor from the beginning; he is considered in law as the same party as the debtor in relation to whatever is adjudged touching the obligation of the latter since their liabilities are interwoven as to be inseparable. Although a contract of suretyship is in essence accessory or collateral to a valid principal obligation, the suretys liability to the creditor isimmediate,primaryandabsolute; he isdirectlyandequallybound with the principal. As an equivalent of a regular party to the undertaking, a surety becomes liable to the debt and duty of the principal obligor even without possessing a direct or personal interest in the obligations nor does he receive any benefit therefrom.Thus, the knowledge, acquiescence, or even demand by Ocampo for an accommodation by Gonzales in order to extend the credit or loan of PhP 1,800,000 to the spouses Panlilio does not exonerate Gonzales from liability on the three promissory notes.Eusebio Gonzales v. Philippine Commercial & International Bank, et al.;G.R. No. 180257.February 23, 2011.Mortgage; Redemption price; should not include CGT. Considering that herein petitioners-mortgagors exercised their right of redemption before the expiration of the statutory one-year period, petitioner bank is not liable to pay the capital gains tax due on the extrajudicial foreclosure sale. There was no actual transfer of title from the owners-mortgagors to the foreclosing bank. Hence, the inclusion of the said charge in the total redemption price was unwarranted and the corresponding amount paid by the petitioners-mortgagors should be returned to them.Supreme Transliner, Inc., Moises C. Alvarez and Paulita S. Alvarez v. BPI Family Savings Bank, Inc./BPI Family Savings Bank, Inc. v. Supreme Transliner Inc., Moises C. Alvarez and Paulita S. Alvares;G.R. No. 165617/G.R. No. 165837.February 25, 2011;Obligation; write-off not an extinguishment of obligation. The Court rules that writing-off a loan does not equate to a condonation or release of a debt by the creditor. As an accounting strategy, the use of write-off is a task that can help a company maintain a more accurate inventory of the worth of its current assets. In general banking practice, the write-off method is used when an account is determined to be uncollectible and an uncollectible expense is recorded in the books of account. If in the future, the debt appears to be collectible, as when the debtor becomes solvent, then the books will be adjusted to reflect the amount to be collected as an asset. In turn, income will be credited by the same amount of increase in the accounts receivable.Write-off is not one of the legal grounds for extinguishing an obligation under the Civil Code. It is not a compromise of liability. Neither is it a condonation, since in condonation gratuity on the part of the obligee and acceptance by the obligor are required. In making the write-off, only the creditor takes action by removing the uncollectible account from its books even without the approval or participation of the debtor.Furthermore, write-off cannot be likened to a novation, since the obligations of both parties have not been modified. When a write-off occurs, the actual worth of the asset is reflected in the books of accounts of the creditor, but the legal relationship between the creditor and the debtor still remains the same the debtor continues to be liable to the creditor for the full extent of the unpaid debt.Ruben Reyna, et al. v. Commission on Audit;G.R. No. 167219.February 8, 2011.Prescription; discovery of fraud. Petitioner filed an action for damages on the ground of fraud committed against it by respondents. Under the provisions of Article 1146 of the Civil Code, actions upon an injury to the rights of the plaintiff or upon a quasi-delict must be instituted within four years from the time the cause of action accrued, which is when plaintiff discovered the alleged fraud committed by respondents. However, the Court does not agree with the CA in its ruling that the discovery of the fraud should be reckoned from the time of registration of the titles covering the subject properties.The Court notes that what has been given by respondents to petitioner as evidence of their ownership of the subject properties at the time that they mortgaged the same are not certificates of title but tax declarations, in the guise that the said properties are unregistered. On the basis of the tax declarations alone and by reason of respondents misrepresentations, petitioner could not have been reasonably expected to acquire knowledge of the fact that the said properties were already titled. As a consequence, petitioner may not be charged with any knowledge of any subsequent entry of an encumbrance which may have been annotated on the said titles, much less any change of ownership of the properties covered thereby. As such, the Court agrees with petitioner that the reckoning period for prescription of petitioners action should be from the time of actual discovery of the fraud in 1995. Hence, petitioners suit for damages, filed on February 20, 1996, is well within the four-year prescriptive period.Insurance of the Philippine Islands Corporation v. Spouses Vidal S. Gregorio and Julita Gregorio;G.R. No. 174104.February 14, 2011.Sale; lack of consideration. It is a well-entrenched rule that where the deed of sale states that the purchase price has been paid but in fact has never been paid, the deed of sale is null and voidab initiofor lack of consideration. Moreover, Article 1471 of the Civil Code, provides that if the price is simulated, the sale is void, which applies to the instant case, since the price purportedly paid as indicated in the contract of sale was simulated for no payment was actually made.Manuel Catindig, represented by his legal representative Emiliano Cantidig-Rodrigo v. Aurora Irene Vda. De Meneses/Silvino Roxas, Sr., represented by Felicisima Villafuerte Roxas v. Court of Appeals, et al.;G.R. No. 165851/G.R. No. 168875.February 2, 2011.Sale; double sale. The present controversy is a clear case of double sale, where the seller sold one property to different buyers, first to petitioner and later to respondent. In determining who has a better right, the guidelines set forth in Article 1544 of the Civil Code apply. Article 1544 states:Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property.Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.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.Petitioner insists that, upon the execution of the public instrument (the notarized deed of sale), she already acquired possession thereof, and thus, considering that the execution thereof took place ahead of the actual possession by respondent of the subject property, she has a better right. This is incorrect. 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 aprima faciepresumption of delivery. It is deemed negated by the failure of the vendee to take actual possession of the land sold.Dolorita C. Beatingo v. Lilia Bu Gasis;G.R. No. 179641.February 9, 2011.Sale; perfection of contract. As a rule, a contract is perfected upon the meeting of the minds of the two parties. Under Article 1475 of theCivil Code,a contract of sale is perfected the moment there is a meeting of the minds on the thing which is the object of the contract and on the price. In the present case, Medranos offer to sell the shares of the minority stockholders at the price of 65% of the par value wasnotabsolutely and unconditionally accepted by DBP. DBP imposed several conditions to its acceptance and it is clear that Medrano indeed tried in good faith to comply with the conditions given by DBP but unfortunately failed to do so. Hence, there was no birth of a perfected contract of sale between the parties.Development Bank of the Philippines v. Ben P. Medrano and Privatization Management Office;G.R. No. 167004.February 7, 2011.Statute of Frauds. Under the rule on the Statute of Frauds, as expressed in Article 1403 of the Civil Code, a contract for the sale or acquisition of real property shall be unenforceable unless the same or some note of the contract be in writing and subscribed by the party charged. Subject to defined exceptions, evidence of the agreement cannot be received without the writing, or secondary evidence of its contents.MCIAAs invocation of the Statute of Frauds is misplaced primarily because the statute applies only to executory and not to completed, executed, or partially consummated contracts.Analyzing the situation of the cases at bar, there can be no serious objection to the proposition that the agreement package between the government and the private lot owners was already partially performed by the government through the acquisition of the lots for the expansion of the Lahug airport. The parties, however, failed to accomplish the more important condition in the CFI decision decreeing the expropriation of the lots litigated upon: the expansion of the Lahug Airport. The projectthe public purpose behind the forced property takingwas, in fact, never pursued and, as a consequence, the lots expropriated were abandoned. Be that as it may, the two groups of landowners can, in an action to compel MCIAA to make good its oral undertaking to allow repurchase, adduce parol evidence to prove the transaction.At any rate, the objection on the admissibility of evidence on the basis of the Statute of Frauds may be waived if not timely raised. Records tend to support the conclusion that MCIAA did not, as the Ouanos and the Inocians posit, object to the introduction of parol evidence to prove its commitment to allow the former landowners to repurchase their respective properties upon the occurrence of certain events.Anunciacion Vda. De Ouano, et al. v. Republic of the Philippines, et al./Mactan-Cebu International Airport [MCIAA] v. Ricardo L. Inocian, in his personal capacity and as Attorney-in-Fact of Olympia E. Esteves, et al. and Aletha Suico Magat in her personal capacity and as Attorney-in-Fact of Philip M. Suico, et al.;G.R. Nos. 168770 & 168812.February 9, 2011.Special LawsCondominium Act; responsibility to repair common property. In a multi-occupancy dwelling such as apartments, limitations are imposed under R.A. 4726 in accordance with the common interest and safety of the occupants therein which at times may curtail the exercise of ownership. To maintain safe, harmonious and secured living conditions, certain stipulations are embodied in the duly registered deed of restrictions, in this case the Master Deed, and in house rules which the condominium corporation, like respondent, is mandated to implement. Upon acquisition of a unit, the owner not only affixes his conformity to the sale; he also binds himself to a contract with other unit owners.Unquestionably, the fuse box controls the supply of electricity into the unit. Power is sourced through jumper cables attached to the main switch which connects the units electrical line to the Apartments common electrical line.It is an integral component of a power utility installation. Respondent cannot disclaim responsibility for the maintenance of the Apartments electrical supply system solely because a component thereof is placed inside a unit.As earlier stated, both the law and the Master Deed refer to utility installations as forming part of the common areas, which reference is justified by practical considerations. Repairs to correct any defects in the electrical wiring should be under the control and supervision of respondent to ensure safety and compliance with the Philippine Electrical Code, not to mention security and peace of mind of the unit owners.Revelina Limson v. Wack Wack Condominium Corporation;G.R. No. 188802.February 14, 2011.Public Land Act. Under Section 48(b) of thePublic Land Act,as amended by P.D. 1073, in order that petitioners application for registration of title may be granted, they must first establish the following: (1) that the subject land forms part of the disposable and alienable lands of the public domain and (2) that they have been in open, continuous, exclusive and notorious possession and occupation of the same under abona fideclaim of ownership, since June 12, 1945, or earlier.Applicants must overcome the presumption that the land they are applying for is part of the public domain and that they have an interest therein sufficient to warrant registration in their names arising from an imperfect title.Vicente Yu Chang and Soledad Yu Chang v. Republic of the Philippines;G.R. No. 171726.February 23, 2011.Reconstitution of title, Republic Act No. 26. The reconstitution of a certificate of title denotes restoration in the original form and condition of a lost or destroyed instrument attesting the title of a person to a piece of land. The purpose of the reconstitution of title is to have, after observing the procedures prescribed by law, the title reproduced in exactly the same way it has been when the loss or destruction occurred.The lost or destroyed document referred to is the one that is in the custody of the Register of Deeds. When reconstitution is ordered, this document is replaced with a new onethe reconstituted titlethat basically reproduces the original. After the reconstitution, the owner is issued a duplicate copy of thereconstitutedtitle. This is specifically provided under Section 16 of Republic Act No. 26,An Act Providing a Special Procedure for the Reconstitution of Torrens Certificates of Title Lost or Destroyed, which states:Sec. 16. After the reconstitution of a certificate of title under the provisions of this Act, the register of deeds shall issue the corresponding owners duplicate and the additional copies of said certificates of title, if any had been previously issued, where such owners duplicate and/or additional copies have been destroyed or lost. This fact shall be noted on the reconstituted certificate of title.Petitioner went to great lengths to convince the CA that the order for the issuance of a duplicate title to respondents was included in its appeal. We find such exercise unnecessary. The CA should not have been quick in declaring that such order had already become final and executory.It really does not matter if petitioner did not specifically question the order for the issuance of a new owners duplicate title. The fact that petitioner prayed for the dismissal of the petition for reconstitution meant that it was questioning the order for reconstitution and all orders corollary thereto. The trial courts order for the Register of Deeds to issue a new duplicate certificate of title was only an offshoot of its having granted the petition for reconstitution of title. Without the order for reconstitution, the order to issue a new owners duplicate title had no leg to stand on.More importantly, it would have been impossible for the Register of Deeds to comply with such order. The Register of Deeds cannot issue a duplicate of a document that it does not have. The original copy of the certificate of title was burned, and the Register of Deeds does not have a reconstituted title. Thus, it does not have a certificate of title that it can reproduce as the new owners duplicate title.Republic of the Philippines v. Candido Vergel de Dios, et al.;G.R. No. 170459.February 9, 2011.