J Plus Asia Development Corporation vs. Utility Assurance Corporation

G.R # 199650

June 26, 2013

Facts: Martin Mabunay entered into a construction agreement with petitioner J Plus Corporation

to build a 72-room condominium/hotel. Respondent Utility Assurance Corporation acted as a

surety by providing a Performance Bond equivalent to 20% down payment.

However, upon inspection, only 31.39 % of the project was completed from this, Chairman Lee

of J Plus Corporation terminated the contract and filed for arbitration with damages. Mabunay

contended however that the delay was caused by the retrofitting and other works ordered by Mr.

Lee.

The Construction Industry Arbitrary Commission held respondent and Mabunay joint and

severally liable. The CA overturned said decision holding that Mabunay has not at all incurred

delay, pointing out that the obligation to perform or complete the project was not yet demandable

when petitioner terminated the contract on the account that the agreed completion date was still

more than one month away. Since the parties contemplated delay in the completion of the entire

project, the CA concluded that the failure of the contractor to catch up with the schedule of work

activities did not constitute delay giving rise to the contractor’s liability for damages.

Issues:

1. Whether or not Mabunay was in delay when Mr. Lee terminated the contract.

2. Whether or not Respondent Utility Assurance Corporation can be made liable for

Mabunay’s delay.

Held:

1.Yes. Mabunay was already in delay when Mr. Lee terminated the contract. The Court did not

sustain the CA’s interpretation as it is inconsistent with the terms of the Construction Agreement.

Article 1374 of the Civil Code requires that the various stipulations of a contract shall be

interpreted together, attributing to the doubtful ones that sense which may result from all of them

taken jointly.

2.Yes. Respondent Utility Assurance Corporation is liable for the delay caused by Mabunay. As

ruled, the Performance Bond guaranteed the full and faithful compliance of Mabunay’s

obligations under the Construction Agreement, and that nowhere in law or jurisprudence does it

state that the obligation or undertaking by a surety may be apportioned.

Fil-Estate Properties, Inc. and Fil-Estate Network, Inc. vs. Sps. Conrado and Maria Ronquillo

G.R # 185798January 13, 2014

Facts: Petitioner Fil-Estate Properties, Inc. is the owner and developer of the Central park Place

Tower while co-petitioner Fil-Estate Network, Inc is its authorized marketing agent. Respondent

spouses Ronquillo purchased from petitioners a condominium unit at Central Park Place Tower

for a preselling contract price of about 5 million pesos. As agreed upon, respondents paid the full

downpayment of about 1.5 million pesos and had been paying the P63,363.33 monthly

amortizations until September 1998.

Upon learning that construction works had stopped, respondents likewise stopped paying their

monthly amortization. Claiming to have paid a total of P2,198,949.96 to petitioners, respondents

through two(2) successive letters, demanded a full refund of their payment with interest. When

their demands went unheeded, respondents filed a complaint for refund and damages before the

Housing and Land Use Regulatory Board (HLURB).

Both the HLURB and the CA ruled in favor of respondent spouses for two reasons. First,

petitioners’ failure to develop the condominium project is a substantial breach of their obligation.

Second, Asian financial crisis does not constitute a fortuitous event which could excuse

petitioners from the performance of their obligations.

Issue: Does Asian financial crisis constitute a fortuitous event that would excuse petitioners

from performing their obligations?

Held: No. The Asian financial crisis is not a fortuitous event that would excuse petitioners from

performing their contractual obligation.

The court cited the previous rulings of Asian Construction and Development Corporation v. Phil.

Commercial International Bank and Mondragon Leisure and Resorts Corp. v. CA holding that

the 1997 Asian financial crisis did not constitute a justification to renege on obligations. The

Court added that a real estate enterprise engaged in the pre-selling of condomium units is

concededly a master in projections on commodities and currency movements and business risks.

The fluctuating movement of the Philippine peso in the foreign exchange market is an everyday

occurrence and fluctuations in currency exchange rates happen everyday, thus, not an instance of

caso fortuito. As a result of the breach committed by petitioners, respondents are entitled to

rescind the contract and to be refunded the amount of amortizations paid including interests and

damages.

Eds Manufacturing, Inc. vs. Healthcheck International Inc.G.R # 162802

October 9, 2013

Facts: Respondent Healthcheck International Inc.(HCI) is engaged in the business of providing

prepaid health and medical insurance coverage to its clients through its accredited hospitals and

medical clinics, which includes De La Salle Universal Medical Center (DLSUMC). Petitioner

Eds Manufacturing,Inc., (EMI) entered into a contract with HCI to provide the former’s

employees of the medical insurance.

HCI notified EMI that its accreditation with DLSUMC was suspended and advised to EMI to

avail of the services of nearby accredited institutions. EMI workers complained that DLSUMC

and even other hospitals and clinics were not honoring their medical cards. This prompted EMI

to formally offer the rescission of the contract with HCI through a letter. However, EMI failed to

collect all the medical cards from their employees and surrender them to HCI. Consequently,

some of the workers continued to utilize the cards.

HCI pre-empted EMI’s threat of legal action by filing a case before the RTC for unlawful

pretermination of contracts. EMI contended that they cannot be held liable because it already

validly rescinded the contract.

Issue: Was there a valid rescission of contract?

Held: No. There was no valid rescission. Under the third paragraph of Article 1191 of the Civil

Code, “The court shall decree the rescission claimed, unless there be just cause authorizing the

fixing of a period.” The party entitled to rescind should apply to the court for a decree of

rescission. The right cannot be exercised solely on a party’s own judgment that the other

committed a breach of the obligation. The operative act which produces the resolution of the

contract is the decree of the court and not the mere act of the vendor. Since a judicial or notarial

act is required by law for a valid rescission to take place, the letter written by respondent

declaring his intention to rescind did not operate to validly rescind the contract.

Moreover, it is evident that EMI had not rescinded the contract at all. Despite EMI’s

pronouncement, it failed to surrender the HMO cards of its employees although this was required

by the Agreement, and allowed them to continue using them beyond the date of the rescission.

The continued use by them of their privileges under the contract, with the apparent consent of

EMI, belies any intention to cancel or rescind it, even as they felt that they ought to have

received more than what they got.

Hence, although a ground exists to validly rescind the contract between the parties, it appears

that EMI failed to judicially rescind the same.

Sps. Namael and Lourdes Bonrostro vs. Sps. Juan and Constancia LunaG.R # 172346July 24, 2013

Facts: Petitioners Sps. Namael and Lourdes Bonrostro were vendees in a Contract to sell with

vendor respondent Constancia Luna. Sps. Luna filed a complaint for Rescission of Contract and

Damages against the spouses Bonrostro praying for the rescission of the contract and delivery of

possession of the subject property but was denied. On appeal, CA affirmed the decision but

modified the amounts to be paid by petitioners. Petitioners then filed a Partial Motion for

Reconsideration questioning said modifications but it was denied, hence, this Petition for Review

on Certiorari.

Buyer respondent Constancia entered into a Contract to Sell with Bliss Development Corp.

involving a house and Lot. A year later, Constancia, this time as the seller, entered into another

Contract to Sell with petitioner Lourdes Bonrostro of the same property with the stipulation that

if vendee fails to pay the second installment, she will pay a 2 % interest and if she fails to pay the

two installments, the contract shall be rescinded. Lourdes failed to pay any of the stipulated

subsequent amortization payments, except for the downpayment. Spouses Bonrostro, on the

other hand, averred they were willing to settle the obligation and even asked for a 60-day

extension but Constancia did not show up at their rendezvous.

Issue: Is there a tender payment to warrant the suspension of interest?

Held: No. Tender of payment “is the manifestation by the debtor of a desire to comply with or

pay an obligation” while consignation is the deposit of the proper amount with a judicial

authority in accordance with rules prescribed by law, after the tender of payment has been

refused or because of circumstances which render direct payment to the creditor impossible or

inadvisable. When the tender of payment is not accompanied by the means of payment, and the

debtor did not take any immediate step to make a consignation, then interest is not suspended

from the time of such tender.

Petitioner did not resort to consignation of the payment with the proper court despite knowledge

that under the contract, non-payment of the installments on the agreed date would make them

liable for interest thereon. They erroneously assumed that their notice to pay would make them

liable for interest. Their claimed tender of payment did not produce any effect whatsoever

because it was not accompanied by actual payment of followed consignation. Hence, it did not

suspend the running of interest.

Adelaida Soriano vs. People of the PhilippinesG.R # 181692

August 14, 2013

Facts: Evelyn Alagao, daughter of private complainant Consolacion Alagao, as borrower-

mortgagor, executed a “Contract of Loan Secured by Real Estate Mortgage with Special Power

to Sell Mortgage Property without Judicial Proceedings” in favor of petitioner, Adelaida Soriano,

as lender-mortgagee. The instrument provides for a P40,000 loan secured by a parcel of land

located in Don Carlos, Bukidnon, registered in Evelyn’s name. It likewise provides that the loan

was to be paid in two years from the date of execution of the contract, or on February 18,1996,

and that Evelyn agrees to give petitioner ¼ of every harvest from her cornland until the full

amount of the loan has been paid starting from the first harvest. Based on Alagao’s testimony,

the first harvest was made only in September 1994. Petitioner, on the other hand, claims that

from the time the loan was obtained until September 1994, there were already four harvests.

During pre-trial, it was admitted by Consolacion that she received P51,730 instead of only

P40,000 as stipulated in the contract of loan in the form of fertilizers and cash advances.

Subsequently, Consolacion delivered 398 sacks of corn grains to petitioner. Petitioner prepared a

voucher indicating that Consolacion had received the amount of P85,607 as full payment.

Consolacion signed said voucher even if she only received P3,000. According to Consolacion, 64

of the 398 sacks will serve as partial payment of her P40,000 loan with petitioner while the

remaining balance will come from the P85,607 cash she was supposed to receive as payment for

the corn grains delivered so she can redeem her daughter’s land title.

Consolacion file a criminal case against petitioner Soriano for the crime of estafa before the

Regional Trial Court of Misamis Oriental. The RTC rendered a decision finding petitioner guilty

beyond reasonable doubt of the crime of estafa. However, the petitioner’s conviction was set

aside by the CA. The CA held in the absence of deceit, petitioner’s liability is only civil.

In determining petitioner’s civil liability, the CA deducted from P85,607 – the total value of the

398 sacks of corn grains delivered to petitioner – P3,000 petitioner had paid Alagao and the

P7,800 which the CA considered as the value of the 64 sacks of corn grains which Alagao

intended as partial payment for the P40,000 loan, thus leaving the balance of P74,807.

Dissatisfied, petitioner is now before this court questioning her civil liability.

Issue: Is the principle of set-off or compensation applicable?

Held: Yes. Compensation is a mode of extinguishing to the concurrent amount, the debts of

persons who in their own right are creditors and debtors of each other. The object of

compensation is the prevention of unnecessary suits and payments through the mutual extinction

by operation of law of concurring debts. Article 1279 of the civil code provides for the requisites

for compensation to take effect. This court rules that all the above requisites for compensation

are present in the instant case, to wit: (1)petitioner and Alagao are debtors and creditors of each

other; (2) both debts consist in a sum of money; (3)both debts are due; (4) both debts are

liquidated and demandable; and (5) neither of the debts are subject of a controversy commenced

by a third person. With the presence of all the requisites mentioned in Article 1279, legal

compensation took effect by operation of law as provided in Article 1290 of the civil code.

Narciso Deganos vs. People of the PhilippinesG.R # 162826

October 14, 2013

Facts: Brigada Luz and Narciso Deganos were charged with Estafa under Art. 315, par.1(b) of

the RPC. The accused allegedly received from Sps. Atty. Jose Bordador and Lydia Bordador

gold and pieces of jewelry worth P438,702.00, under express obligation to sell the same on

commission and remit the proceeds thereof or return the unsold gold and pieces of jewelry.

Prior to the institution of the instant case, a separate civil action for the recovery of sum of

money was filed by private complainants where the RTC found both of the accused liable. CA

and SC affirmed the lower court’s decision. Sometime in 1994, while the said civil case was

pending, the private complainants instituted the present case against the accused.

Lydia Bordador testified that she delivered the said jewelry starting sometime in 1986 as

evidenced by several documents entitled “Katibayan at Kasunduan”. Everytime Deganos got

jewelry from her, he signed the receipts in her presence. However, receipts nos. 616 to 745 were

no longer paid and the accused failed to return the jewelry covered by such receipts.

Deganos admitted that he is the only one who was indebted to private complainants and out of

his indebtedness, he already made partial payments in the amount of P53, 307.00. He now claims

that such payments novated his contract with private complainants from agency to loan, thereby

converting his liability from criminal to civil.

Issue: Was there novation?

Held: No. The partial payments made by Deganos and his purported agreement to pay the

remaining obligations did not equate to a novation of the original contractual relationship of

agency to one of sale.

In order that an obligation may be extinguished by another that substitutes the former, it is

imperative that the extinguishment be so declared in unequivocal terms, or that the old and the

new obligation be on every point incompatible with each other. The changes alluded to by

petitioner consists only in the manner of payment. There was really no substitution of debtors

since private complainant merely acquiesced to the payment but did not give her consent to enter

into a new contract.

The novation theory may perhaps apply prior to the filing of the criminal information in court by

the state prosecutors because up to that time the original trust relation may be converted by the

parties into an ordinary creditor-debtor situation, thereby placing the complainant in estoppel to

insist on the original trust. But after the justice authorities have taken cognizance of the crime

and instituted action in court, the offended party may no longer divest the prosecution of its

power to exact the criminal liability, as distinguished from the civil. The crime being an offense

against the state, only the latter can renounce it. Hence, the role of novation may only be to either

prevent the rise of criminal liability or to cast doubt on the true nature of the original basic

transaction.

S.C Megaworld Construction and Development Corporation vs. Engr. Luis U. ParadaG.R # 183804

September 11, 2013

Facts: S.C Megaworld Construction and Development Corp.(Petitioner) bought electrical

lighting materials from the Gentile Industries, a sole proprietorship owned by Engr. Luis U.

Parada(Respondent), for its Read-Rite project. The petitioner was unable to pay for the above

purchase on dued date, but blamed it on its failure to collect under its sub-contract with the

Enviro Kleen Technologies, Inc.(Enviro Kleen). It was however able to persuade Enviro Kleen

to agree to settle its above purchases, but after partially paying the respondent, Enviro Kleen

stopped making further payments. Respondent filed a suit in the RTC to collect from the

petitioner the said balance, plus damages, costs and expenses.

The petitioner in its answer denied liability, claiming that it was released from its indebtedness to

the respondent by reason of the novation of their contract, which, it reasoned, took place when

the latter accepted the partial payment of Enviro Kleen in its behalf, and thereby acquiesced to

the substitution of Enviro Kleen as the new debtor in the petitioner;s place. The RTC rendered

judgment in favor of respondent. The CA concurred with the decision of the RTC.

Issue: Was there a novation of the contract between the parties through substitution of the

debtor, which resulted in the release of the petitioner from its obligation to pay the respondent?

Held: No. In order to change the person of the debtor, the former debtor must be expressly

released from the obligation, and the third person or new debtor must assume the former’s place

in the contractual relation. Article 1293 speaks of substitution of the debtor, which may either be

in the form of expromission or delegacion, as seems to be the case here. In both cases, the old

debtor must be released from the obligation, otherwise, there is no valid novation.

From the circumstances of this case, no clear and unequivocal consent by the respondent to the

release of the petitioner from the obligation to pay the cost of the lighting materials. In fact, from

the letters of the respondent to Enviro Kleen, it can be said that he retained his option to go after

the petitioner if Enviro Kleen failed to settle the petitioner’s debt.

The fact that Enviro Kleen Technologies, Inc. made payments to the respondent and the latter

accepted it does not ipso facto result in novation. Novation to be given its legal effect requires

that the creditor should consent to the substitution of a new debtor and the old debtor be released

from its obligation.

Philippine Reclamation Authority vs. Romago, IncorporatedG.R # 174665

September 18, 2013

Facts: Congress enacted R.A. 7227, creating the Bases Conversion and Development

Authority(BCDA). Pursuant to this law, portions of Fort Bonifacio were set aside for the

Heritage Park Project, aimed at converting a 105 hectare land into a world class memorial park

in order to generate funds for the BCDA.

BCDA entered into a Memorandum of Agreement(MOA) with the Philippine Reclamation

Authority(PRA), designating it as the Project Manager. Subsequently, the BCDA, PRA and the

Philippine National Bank(PNB) executed a Pool Formation Trust Agreement(PFTA). After

public bidding, the PRA awarded the outdoor electrical and lighting works for the park to

respondent Romago, Inc.(Romago) with which it entered into a Construction Agreement.

Meanwhile, the parties to the PFTA organized the Heritage Park Management

Corporation(HPMC) to take over the management of the project. The PRA immediately

informed Romago of the consequent termination of its services because the HPMC refused to

recognize the PRA’s contract with it, Romago filed with the Construction Industry Arbitration

Commission (CIAC) a complaint seeking to collect its claims plus interest from the PRA,

HPMC, and Rosehills Memorial Management Inc.(RMMI).

Issue: Is PRA liable to Romago under the Construction Agreement despite the subsequent

turnover of the Heritage Park Project to the HPMC?

Held: Yes. PRA’s liability under its contract with Romago had not been extinguished by

novation. In novation, a subsequent obligation extinguishes a previous one through substitution

either by changing the object or principal conditions, by substituting another in place of debtor,

or by subrogating a third person into the rights of the creditor. Novation requires (1)the existence

of a previous valid obligation; (2) the agreement of all parties to the new contract; (3) the

extinguishment of the old contract; and (4) the validity of the new one.

There is no novation in this case since the proposed substituted parties did not agree to the

PRA’s supposed assignment of its obligation under the contract for the electrical and light works

at Heritage Park to HPMC. The latter definitely and clearly rejected the PRA’s assignment of its

liability under that contract to the HPMC. Romago tried to follow up its claims with the HPMC,

not because of any new contract it entered into with the latter, but simply because the PRA told it

that HPMC would henceforth assume the PRA’s liability under its contract with Romago.

Hence, PRA is still liable to Romago under the Construction Agreement despite the subsequent

turnover of the Heritage Park Project to the HPMC.

Manlar Rice Mill, Inc. vs. Lourdes L. DeytoG.R # 191189

January 29, 2014

Facts: Petitioner Manlar Rice Mills, Inc.(Manlar), is engaged in the business of rice milling and

selling of grains. Respondent Lourdes L. Deyto (Deyto) does business under the tradename “JD

Grains Center” and is likewise engaged in the business of milling and selling of grains.

Respondent Jennelita Deyto Ang or Janet Ang (Ang) is Deyto’s daughter and, prior to her

alleged absconding, operated her own rice trading business through her own store, “Janet

Commercial Store”. Ang entered into a rice supply contract with Manlar, with the former

purchasing rice from the latter amounting to P3,843,220.00. The transaction was covered by nine

postdated checks issued by Ang from her personal bank/chacking account. All the checks were

dishonored for having been drawn against insufficient funds and for being drawn against a closed

account. Manlar made oral and written demands upon both Deyto and Ang, which went

unheeded.

Manlar filed a Complaint for sum of money against Deyto and Ang before the Regional Trial

Court (RTC) of Quezon City. The Complaint essentially sought to hold Deyto and Ang solidarily

liable on the rice supply contract.

The trial court ruled that both defendants should be held solidarily liable for the unpaid and

outstanding Manlar account. Upon appeal to the CA, the CA concluded that there is no legal

basis to hold Deyto solidarily liable with Ang for what the latter may owe Manlar. The CA

conceded that if Ang indeed contracted with Manlar, she did so in her own; the evidence failed to

indicate that Deyto had any participation in the supposed transactions between her daughter and

Manlar. Petitioner thus filed a Petition for Review on Certiorari to the Supreme Court.

Issue: Is the CA correct in concluding that there is no legal basis to hold Deyto solidarily liable

with Ang for what the latter may owe Manlar?

Held:Yes. The CA is correct in concluding that there is no legal basis to hold Deyto solidarily

liable with Ang for what the latter may owe Manlar. The evidence does not support Manlar’s

view that both Deyto and Ang contracted with Manlar for the delivery of rice on credit; quite the

contrary, the preponderance of evidence indicates that it was Ang alone who entered into the rice

supply agreement with Manlar. The documentary evidence, on the other hand, shows that the

subject checks were issued from a bank account in China bank del Monte branch belonging to

Ang alone.

What the court sees is an attempt to implicate Deyto in a transaction between Manlar and Ang so

that the former may recover its losses, since it could no longer recover them from Ang as a result

of her absconding; this conclusion is indeed consistent with what the totality of the evidence on

record appears to show. This, however, may not be allowed. As a general rule, a contract affects

only the parties to it, and cannot be enforced by or against a person who is not a party thereto. “It

is a basic principle in law that contracts can bind only the parties who had entered into it; it

cannot favor or prejudice a third person. “Under Article 1311 of the civil code, contracts take

effect only between the parties, their assigns and heirs. Thus, Manlar may sue Ang, but not

Deyto, who the court finds to be not a party to the rice supply contract.

Privatization and Management Office vs. Strategic Alliance Development Corporation and/or Philippine Estate Corporation

G.R # 20042June 13, 2013

Facts: Asset Privatization Trust (APT) announced the holding of a public bidding involving the

“as is, where is basis” package sale of stock, receivables, and securities owned by the National

Government in the Philippine National Construction Corporation (PNCC). Dong-A Consortium,

which was formed by respondent Strategic Alliance Development Corporation(STRADEC) and

Dong-A Pharmaceuticals, signified its intention to bid.

When the term of APT expired, petitioner was organized to implement the disposition of the

government-acquired assets, including the PNCC shares.

STRADEC then filed a Complaint for Declaration of Right to a Notice of Award and/or

Damages on behalf of Dong-A Consortium against PMO and PNCC. It Contested the high

indicative price that caused it to lose the bid. STRADEC also pushed for the reduction of the

indicative price and demanded that a Notice of Award of the PNCC properties be issued in its

favor.

Issue: Is Dong-A Consortium entitled to the Notice of Award?

Held: No. The submission of the highest bid and the contract of due diligence, among others, do

not justify an award to Dong-A Consortium. Obligations arising from agreements have the force

of law between the contracting parties and ahould be complied with in good faith. Here, the

Asset Specific Bidding Rules(ASBR) sets forth the terms and conditions under which an awrd

will be given. During the pre-trial, both parties agreed that a bidder wins only after satisfying and

complying with all the terms and conditions of the ASBR, including matching the indicative

price. Since Dong-A Consortium failed to match the indicative price, it could not have been

considered a winner, and, is not entitled to a Notice of Award.

In the present case, Section 4.3 of the ASBR explicitly states that APT reserves the right to reject

any or all bids, including the highest bid. Undoubtedly, APT has a legal right to reject the offer

of Dong-A Consortium, notwithstanding that it submitted the highest bid.

Heirs of Fausto C. Ignacio vs. Home Bankers Savings and Trust CompanyG.R # 177783

January 23, 2013

Facts:Petitioner Ignacio mortgaged two parcels of land with respondent bank. Upon failure to

pay the loan, the mortgage was foreclose and the same was awarded in favor the bank as the

highest bidder. Despite the lapse of the redemption period and consolidation of title in

respondent bank, petitioner offered to repurchase the properties. While the respondent bank

considered petitioner’s offer to repurchase, there was no repurchase contract executed.

A compromise agreement was proposed by respondent bank to repurchase the foreclosed

property in the amount of P950,000.00 dated March 22, 1984. In a letter addressed to respondent

bank, petitioner expressed his willingness to pay the amount of P600,000.00 in full, as balance of

the repurchase price, and requested respondent bank to release to him the remaining parcels of

land. Respondent bank however, turned down his request. This prompted petitioner to file this

instant case arguing that a perfected contract of sale was entered due to the acceptance of the

bank.

Issue: Is there a perfected contract of sale?

Held: No. Contracts are perfected by mere consent, which is manifested by the meeting of the

offer and the acceptance upon the thing and the cause which are to constitute the contract. The

requisite acceptance of the offer is expressed in Article 1319 of the civil code.

By modifying the terms of the offer contained in March 22, 1984 letter of respondent bank,

petitioner effectively rejected the original offer with his counter-offer. There was also no written

conformity by respondent bank’s officers to the amended conditions for repurchase which were

unilaterally inserted by petitioner. Consequently, no contract of repurchase was perfected and

respondent bank.

Alejandro Tankeh vs. Development Bank of the PhilippinesG.R # 171428

November 11, 2013

Facts: Respondent Ruperto Tankeh, president of Sterling Shipping Lines, Inc. obtained loan

from Development Bank of the Philippines(DBP) to finance the vessel M/V Sterling Ace.

Petitioner Dr. Alejandro Tankeh together with other signatories executed a promissory note

binding himself liable to pay the said loan. Sterling Shipping Lines, Inc. through respondent

Ruperto V. Tankeh executed a Deed of Assignment in favor of DBP.

Thereafter, petitioner wrote a letter to respondent Ruperto Tankeh saying that he was severing all

ties and terminating his involvement with Sterling Shipping Lines, Inc.. Petitioner alleged that

respondent Tankeh had exercised deceit and fraud in causing petitioner to bind himself jointly

and severally to pay respondent DBP the amount of the mortgage loan. Although he had been

made a stockholder and director of the respondent corporation Sterling Shipping Lines, Inc.,

petitioner alleged that he had never invested any amount in the corporation and that he had never

been an actual member of the board of directors. He alleged that all the money he head

supposedly invested was provided by respondent Ruperto Tankeh.

Issue: Did respondent Tankeh commit fraud in obtaining the petitioner’s consent to enter into the

contract as to warrant nullity of the contract?

Held: No. There are two types of fraud contemplated in the performance of contracts: dolo

incidente or dolo causante. Dolo causante determines or is the essential cause of the consent,

while dolo incidente refers only to some particular or accident of the obligation. The effects of

dolo causante are the nullity of the contract and the indemnification of damages, and dolo

incidente also obliges the person employing it to pay damages.

There was no dolo causante or fraud used to obtain the petitioner’s consent to enter into the

contract. Petitioner had the opportunity to become aware of the facts that attended the signing of

the promissory note. He even admitted that he has a lawyer-son who the petitioner had hoped

would assist him in the administration of Sterling Lines, Inc. The totality of the facts on record

belies petitioner’s claim that fraud was used to obtain his consent to the contract given his

personal circumstances and the applicable law.

Planters Development Bank vs. Sps. Ernesto and Florentina LopezG.R# 186332

October 23, 2013

Facts: Sometime in 1983, the spouses Emesto and Florentina Lopez applied for and obtained a

real estate loan in the amount of 3,000,000.00 from Planters Bank. The loan was intended to

finance the construction of a four-story concrete dormitory building.

Meanwhile, the Philippine economy deteriorated as the political developments in the country

worsened. The value of the peso plunged. The price of the materials and the cost of labor

escalated.8 Eager to finish the project, the spouses Lopez obtained an additional loan in the

amount of P1,200,000.00 from Planters Bank.

On April 25, 1984, they entered into a third amendment to the loan agreement. The amount of

the loan and the interest rate were increased to P4,200,000.00 and twenty-seven percent (27%)

p.a., respectively. Furthermore, the term of the loan was shortened to one year. The contract also

provided that the remaining loan shall only be available to the spouses Lopez until June 30,

1984.9 On the same date, the spouses Lopez increased the amount secured by the mortgage

to P4,200,000.00.

In defense, Planters Bank argued that the spouses Lopez had no cause of action. It pointed out

that its refusal to release the loan was the result of the spouses Lopez’s violations of the loan

agreement, namely: (1) non-submission of the accomplishment reports; and (2) construction of a

six-story building. As a counterclaim, Planters Bank prayed for the payment of the overdue

released loan in the amount of P3,500,000.00, with interest and damages.13

Issue: Is Planters Bank liable for a substantial breach in the loan agreement, which would lead to

its rescission?

Held: No. Planters Bank refusal to release the remaining balance, was merely a slight or casual

breach. In other words, its breach was not sufficiently fundamental to defeat the object of the

parties in entering into the loan agreement. The well-settled rule is that rescission will not be

permitted for a slight or casual breach of the contract.

Even assuming that Planters Bank substantially breached its obligation, article 1385 of the civil

code states that rescission cannot take place when the things which are object of the contract are

legally in the possession of third persons who did not act in bad faith. In the present case, the

mortgaged properties had already been foreclosed. They were already sold to the highest bidder

at a public auction. Hence, action for rescission is improper.

Land bank of the Philippines vs. Eduardo M. CacayuranG.R # 191667April 17, 2013

Facts: From 2005 to 2006, the Municipality’s Sangguniang Bayan (SB) passed certain

resolutions to implement a multi-phased plan (Redevelopment Plan) to redevelop the Agoo

Public Plaza (Agoo Plaza) where the Imelda Garden and Jose Rizal Monument were situated.

To finance phase 1 of the said plan, the SB initially passed Resolution No. 68-20054 on April 19,

2005, authorizing then Mayor Eufranio Eriguel (Mayor Eriguel) to obtain a loan from Land Bank

and incidental thereto, mortgage a 2,323.75 square meter lot situated at the southeastern portion

of the Agoo Plaza (Plaza Lot) as collateral.

On March 7, 2006, the SB passed Resolution No. 58-2006,9 approving the construction of a

commercial center on the Plaza Lot as part of phase II of the Redevelopment Plan. To finance the

project, Mayor Eriguel was again authorized to obtain a loan from Land Bank, posting as well

the same securities as that of the First Loan. All previous representations and warranties of

Mayor Eriguel related to the negotiation and obtention of the new loan10 were ratified on

September 5, 2006 through Resolution No. 128-2006.11 In consequence, Land Bank granted a

second loan in favor of the Municipality on October 20, 2006 in the principal amount

of P28,000,000.00 (Second Loan).12

Unlike phase 1 of the Redevelopment Plan, the construction of the commercial center at the

Agoo Plaza was vehemently objected to by some residents of the Municipality. Led by

respondent Eduardo Cacayuran (Cacayuran), these residents claimed that the conversion of the

Agoo Plaza into a commercial center, as funded by the proceeds from the First and Second

Loans (Subject Loans), were "highly irregular, violative of the law, and detrimental to public

interests, and will result to wanton desecration of the said historical and public park."13 The

foregoing was embodied in a Manifesto,14 launched through a signature campaign conducted by

the residents and Cacayuran.

Issue:Are the subject loan agreements ultra vires?

Held: Yes. Generally an ultra vires act is one committed outside the object for which a

corporation is created as defined by the law of its organization and therefore beyond the powers

conferred upon it by law. An act which is outside of the municipality’s jurisdiction is considered

as a void ultra vires act, while an act attended only by an irregularity but remains within the

municipality’s power is considered as an ultra vires act subject to ratification and/or validation.

Records disclose that the said loans were executed by the municipality for the purpose of funding

the conversion of Agoo Plaza into a commercial center. However, the conversion of the said

plaza is beyond the Municipality’s jurisdiction considering the property’s nature as one for

public use and thereby, forming part of the dominion. It cannot be the subject of appropriation

either by the State or by private persons.

Domingo Gonzalo vs. John Tarnate, Jr.G.R # 160600

January 15, 2014

Facts: After the Department of Public Works and Highways (DPWH) had awarded on July 22,

1997 the contract for the improvement of the Sadsadan-Maba-ay Section of the Mountain

Province-Benguet Road in the total amount of 7 014 963 33 to his company, Gonzalo

Construction,1 petitioner Domingo Gonzalo (Gonzalo) subcontracted to respondent John Tarnate,

Jr. (Tarnate) on October 15, 1997, the supply of materials and labor for the project under the

latter s business known as JNT Aggregates. Their agreement stipulated, among others, that

Tarnate would pay to Gonzalo eight percent and four percent of the contract price, respectively,

upon Tarnate s first and second billing in the project.2

In furtherance of their agreement, Gonzalo executed on April 6, 1999 a deed of assignment

whereby he, as the contractor, was assigning to Tarnate an amount equivalent to 10% of the total

collection from the DPWH for the project. This 10% retention fee (equivalent to P233,526.13)

was the rent for Tarnate’s equipment that had been utilized in the project. In the deed of

assignment, Gonzalo further authorized Tarnate to use the official receipt of Gonzalo

Construction in the processing of the documents relative to the collection of the 10% retention

fee and in encashing the check to be issued by the DPWH for that purpose. 3 The deed of

assignment was submitted to the DPWH on April 15, 1999. During the processing of the

documents for the retention fee, however, Tarnate learned that Gonzalo had unilaterally

rescinded the deed of assignment by means of an affidavit of cancellation of deed of assignment

dated April 19, 1999 filed in the DPWH on April 22, 1999;4 and that the disbursement voucher

for the 10% retention fee had then been issued in the name of Gonzalo, and the retention fee

released to him.5

Tarnate demanded the payment of the retention fee from Gonzalo, but to no avail. Thus, he

brought this suit against Gonzalo on September 13, 1999 in the Regional Trial Court (RTC) in

Mountain Province to recover the retention fee of P233,526.13, moral and exemplary damages

for breach of contract, and attorney’s fees.6

Issue: Is the petitioner liable for the 10 % fee notwithstanding that both parties were pari

delicto?

Held: Yes. Petitioner Domingo Gonzalo is liable for 10 % fee notwithstanding that both parties

were in pari delicto.

Gonzalo subcontracted the implementation of the project to Tarnate in violation of the statutory

prohibition provided in PD 1594. Their subcontract was illegal because it did no bear the

approval of the DPWH Secretary. Necessarily, the deed of assignment was also illegal, because

it sprung from the subcontract.

The doctrine of pari in delicto is a universal doctrine that holds that no action arises, in equity or

at law, from an illegal contract; no suit can be maintained for its specific performance, or to

recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages

for its violation; and where the parties are in pari delicto, no affirmative relief of any kind will be

given to one against the other.

Oscar Constantino vs. Heirs of Pedro Constantino, Jr.G.R # 181508

October 2, 2013

Facts: Pedro Constantino, Sr., (Pedro Sr.) ancestors of the petitioners and respondents, owned

several parcels of land, one of which is an unregistered parcel of land declared for taxation

purposes under Tax Declaration 208143consisting of 240 square meters situated at Sta. Monica,

Hagonoy, Bulacan. Pedro, Sr., upon his death, was survived by his six (6) children.

In the said complaint, respondents alleged that sometime in October 1998, petitioners asserted

their claim of ownership over the whole parcel of land (240 sq m) owned by the late Pedro Sr., to

the exclusion of respondents who are occupying a portion thereof. Upon verification,

respondents learned that a Tax Declaration No. 02010-2170-33235 in the name of petitioner

Oscar Constantino and his cousin Maxima Constantino was unlawfully issued, which in effect

canceled Tax Declaration No. 20814 in the name of their ancestor Pedro Sr. The issuance of the

new tax declaration was allegedly due to the execution of a simulated, fabricated and fictitious

document denominated as "Pagmamana sa Labas ng Hukuman," wherein the petitioners

misrepresented themselves as the sole and only heirs of Pedro Sr. It was further alleged that

subsequently, the subject land was divided equally between petitioners Oscar and Maxima

resulting in the issuance of Tax Declaration No. 96-10022-0265310 in the name of Oscar, with an

area of 120sq m and the other half in the name of Maxima covered by Tax Declaration No. 96-

10022-02652.11 The share of Maxima was eventually conveyed to her sister, petitioner Casimira

in whose name a new Tax Declaration No. 96-10022-0265512 was issued.

The petitioners, on the other hand, averred in their Answer With Counterclaim13 that Pedro Sr.,

upon his death, left several parcels of land, namely: 1) a lot with an area of 240 sq m covered by

Tax Declaration No.20814; 2) a lot with an area of 192 sq m also situated at Sta.

Monica,Hagonoy, Bulacan, previously covered by Tax Declaration No. 9534; and 3)an

agricultural land with an area of Four (4) hectares, more or less. The petitioners claimed that the

document "Pagmamana sa Labas ng Hukuman" pertaining to the 240 sq m lot was perfectly valid

and legal, as it was a product of mutual and voluntary agreement between and among the

descendants of the deceased Pedro Sr.

Issue: Are both parties in pari delicto for misrepresentation in both deeds?

Held: No. In this case, there are two Deeds of Extrajudicial assignments unto the signatories of

the portions of the estate of an ancestor common to them and another set of signatories likewise

assigning unto themselves portions of the same estate. The separate Deeds came into being out of

an identical intention of the signatories in both to exclude their co-heirs of their rightful share in

the entire estate of Pedro, Sr. It was, in reality, an assignment of specific portions of the estate of

Pedro Sr., without resorting to a lawful partition of estate as both sets of heirs intended to

exclude the other heirs.

The inapplicability is dictated not only by the fact that two deeds, not one contract, are involved,

but because such an application would result in the validation of both deeds instead of their

nullification as necessitated by their illegality. It must be emphasized that the underlying

agreement resulting in the execution of the deeds is nothing but a void agreement.

Accordingly, in order not to put a premium to the circumvention or the laws as contemplated by

the parties in the instant case, we must declare both contracts as void. Indeed, any circumvention

of the law cannot be countenanced.

Land Bank of the Philippines vs. Heirs of Spouses Jorja Rigor-Soriano and Magin SorianoG.R # 178312

January 30, 2013

Facts: The respondents are the children of the late Spouses Jorja Rigor-Soriano and Magin

Soriano, the owners of the two parcels of land covered by TCT No. NT 146092 (2839) and TCT

NO. NT-61608, both of the Registry of Deeds of Nueva Ecija, containing an area of 10.9635

hectares located in Poblacion/Talabutab, Gen. Natividad, Nueva Ecija and 4.1224 hectares

located in Macabucod, Aliaga, Nueva Ecija, respectively.

The properties became subject to Operation Land Transfer (OLT) and were valued by the Land

Bank and the Department of Agrarian Reform (DAR) at P10,000.00/hectare. Contending,

however, that such valuation was too low compared to existing valuations of agricultural lands,

the respondents commenced this action for just compensation, claiming that the properties were

irrigated lands that usually yielded 150 cavans per hectare per season at a minimum of two

seasons per year. They asked that a final valuation of the properties be pegged atP1,800,000.00,

based on Administrative Order No. 61, Series of 1992 and Republic Act No. 6657.2

Land Bank disagreed, insisting that Presidential Decree No. 27 and Executive Order No. 228

governed the fixing of just compensation for the properties; that the Government, through the

DAR as the lead agency in the implementation of all agrarian laws, had taken the properties in

1972 pursuant to Presidential Decree No. 27, and had since then redistributed the properties to

farmer-beneficiaries; and that in all cases under Presidential Decree No. 27 and Executive Order

No. 228, its participation was only to pay the landowners accepting the valuations fixed by the

DAR, upon the latter’s direction and in the amounts the DAR determined.

Issue: Is the Agreement dated November 29, 2012 valid and binding on the parties?

Held: Yes. There is no question that the foregoing Agreement was a compromise that the parties

freely and voluntarily entered into for the purpose of finally settling their dispute in this case.

Under Article 2028 of the Civil Code, a compromise is a contract whereby the parties, by making

reciprocal concessions, avoid litigation or put an end to one already commenced. Accordingly, a

compromise is either judicial, if the objective is to put an end to a pending litigation, or

extrajudicial, if the objective is to avoid a litigation. As a contract, a compromise is perfected by

mutual consent. However, a judicial compromise, while immediately binding between the parties

upon its execution, is not executory until it is approved by the court and reduced to a judgment.

The validity of a compromise is dependent upon its compliance with the requisites and principles

of contracts dictated by law. Also, the terms and conditions of a compromise must not be

contrary to law, morals, good customs, public policy and public order.

Finding the Agreement to have been validly and voluntarily executed by the parties in

compliance with the requirements of law, the court hereby approves it.

Aquiles Riosa vs. Tabaco La Suerte CorporationG.R # 203786

October 23, 2013

Facts: On February 26, 2002, petitioner Aquiles Riosa (Aquiles) filed his Complaint for

Annulment/Declaration of Nullity of Deed of Absolute Sale and Transfer Certificate of Title,

Reconveyance and Damages against respondent Tabaco La Suerte Corporation (La Suerte)

before the RTC.

In his complaint, Aquiles alleged that he was the owner and in actual possession of a 52-square

meter commercial lot situated in Barangay Quinale, Tabaco City, Albay; that he acquired the

said property through a deed of cession and quitclaim executed by his parents, Pablo Riosa, Sr.

and Sabiniana Biron; that he declared the property in his name and had been religiously paying

the realty tax on the said property; that thereafter, his daughter, Annie Lyn Riosa Zampelis,

renovated the commercial building on the lot and introduced improvements costing no less

than P300,000.00; that subsequently, on three (3) occasions, he obtained loans from Sia Ko Pio

in the total amount of P50,000.00; that as a security for the payment of loans, Sia Ko Pio

requested from him a photocopy of the deed of cession and quitclaim; that Sia Ko Pio presented

to him a document purportedly a receipt for the P50,000.00 loan with an undertaking to pay the

total amount of P52,000.00 including the P2,000.00 attorney’s fees; that without reading the

document, he affixed his signature thereon; and that in September 2001, to his surprise, he

received a letter from La Suerte informing him that the subject lot was already registered in its

name.

Aquiles claimed that by means of fraud, misrepresentation and deceit employed by Sia Ko Pio,

he was made to sign the document which he thought was a receipt and undertaking to pay the

loan, only to find out later that it was a document of sale. Aquiles averred that he did not appear

before the notary public to acknowledge the sale, and that the notary public, a municipal judge,

was not authorized to notarize a deed of conveyance. He further claimed that he could not have

sold the commercial building on the lot as he had no transmissible right over it, as it was not

included in the deed of cession and quitclaim. He, thus, prayed for the nullification of the deed of

sale and certificate of title in the name of La Suerte and the reconveyance of the subject property

to him.4

Issue: Was there a perfected and valid contract of sale between petitioner and respondent?

Held: No. The elements of a contract of sale are: (1) consent or meeting of the minds, that is,

consent to transfer ownership in exchange for the price; (2) determinate subject matter; and (3)

price certain in money or its equivalent. The transactions were between petitioner, as borrower,

and Sia Ko Pio, as lender, not a sale between petitioner and respondent.

The court also took note that the element of consent is wanting. Under Article 1475 of the Civil

Code, the contract of sale is perfected at the moment there is a meeting of minds on the thing

which is the object of the contract and on the price. Petitioner acknowledged that he signed the

receipt for a loan. There is however, no proof that it came from respondent as signifying a

consideration for a contract of sale. Accordingly, there is no basis for a holding that the personal

loan of petitioner from the respondent was the consideration for the sale of his property in favor

of the latter. Therefore, there is no perfected and valid contract of sale.

Dr. Lorna C. Formaran vs. Dr. Glenda B. Ong and Solomon S. OngG.R # 186264July 8, 2013

Facts: defendant Glenda insisted on her ownership over the land in question on account of a

Deed of Absolute Sale executed by the plaintiff in her favor; and that plaintiff’s claim of

ownership therefore was virtually rejected by the Municipal Circuit Trial Court of Ibaja-Nabas,

Ibajay, Aklan, when it decided in her favor the unlawful detainer case she filed against the

plaintiff, docketed therein as Civil Case No. 183. Defendants are also claiming moral damages

and attorney’s fees in view of the filing of the present case against them.

Plaintiff’s testimony tends to show that the land in question is part of the land donated to her on

June 25, 1967 by spouses Melquiades Barraca and Praxedes Casidsid, plaintiff’s uncle and aunt,

respectively. As owner thereof, she declared the land for taxation purposes (Exhibits A-1 to A-5,

inclusive). She religiously paid its realty taxes (Exhibit A-6). She mortgaged the land to Aklan

Development Bank to secure payment of a loan.

In 1967, defendant Glenda and her father, Melquiades Barraca came to her residence asking for

help. They were borrowing one-half of land donated to her so that defendant Glenda could obtain

a loan from the bank to buy a dental chair. They proposed that she signs an alleged sale over the

said portion of land.

Acceding to their request, she signed on August 12, 1967 a prepared Deed of Absolute Sale

(Exhibit C) which they brought along with them (TSN, p. 22, Ibid), covering the land in question

without any money involved. There was no monetary consideration in exchange for executing

Exhibit C. She did not also appear before the Notary Public Edilberto Miralles when Exhibit C

was allegedly acknowledged by her on November 9, 1967.

A month thereafter, plaintiff inquired from her uncle, Melquiades Barracca if they have obtained

the loan. The latter informed her that they did not push through with the loan because the bank’s

interest therefore was high. With her uncle’s answer, plaintiff inquired about Exhibit C. Her

uncle replied that they crampled (kinumos) the Deed of Absolute Sale (Exhibit C) and threw it

away. Knowing that Exhibit C was already thrown away, plaintiff did not bother anymore about

the document she thought that there was no more transaction. Besides, she is also in actual

possession of the land and have even mortgaged the same.

In 1974, plaintiff transferred her residence from Nabas, Aklan, to Antipolo City where she has

been residing up to the present time. From the time she signed the Deed of Absolute Sale

(Exhibit C) in August, 1967 up to the present time of her change of residence to Antipolo City,

defendant Glenda never demanded actual possession of the land in question, except when the

latter filed on May 30, 1996 a case for unlawful detainer against her. Following the filing of the

ejectment case, she learned for the first time that the Deed of Absolute Sale was registered on

May 25, 1991 and was not thrown away contrary to what Melquiades Barraca told her.

Moreover, she and Melquiades Barraca did not talk anymore about Exhibit C. That was also the

first time she learned that the land in question is now declared for taxation purposes in the name

of defendant Glenda.

Issue: Is the sale between petitioner and respondents valid?

Held: No. The Supreme Court ruled that the Deed of Sale is simulated for it is devoid of any

consideration. It was executed less than two(2) months from the time the subject land was

donated to petitioner by the parents of respondent. Several years after the donation, petitioner

mortgaged the land to Aklan Development Bank. Also, from the time of the alleged sale,

petitioner has been in actual possession of the subject land. The SC also noted that the sale was

registered twenty-four (24) years after the execution of the Deed of Sale. Respondents did not

introduce any improvement on the subject land, and petitioner’s house was erected on part of the

subject land. If the sale was legitimate, defendant Glenda should have immediately taken

possession of the land, declared it in her name for taxation purposes, registered the sale, paid

realty taxes, introduced improvements therein and should not have allowed plaintiff to mortgage

the land. These omissions properly militated against respondents submission that the sale was

legitimate and the consideration was paid.

Ace Foods, Inc. vs. Micro Pacific Technologies Co., Ltd.G.R # 200602

December 11, 2013

Facts: On October 29, 2001, ACE Foods accepted MTCL’s proposal and accordingly issued

Purchase Order No. 100023 (Purchase Order) for the subject products amounting to P646,464.00

(purchase price). Thereafter, or on March 4, 2002, MTCL delivered the said products to ACE

Foods as reflected in Invoice No. 7733  (Invoice Receipt).

Eventually, or on October 16, 2002, ACE Foods lodged a Complaint against MTCL before the

RTC, praying that the latter pull out from its premises the subject products since MTCL breached

its "after delivery services" obligations to it, particularly, to: (a) install and configure the subject

products; (b) submit a cost benefit study to justify the purchase of the subject products; and (c)

train ACE Foods’s technicians on how to use and maintain the subject products.  ACE Foods

likewise claimed that the subject products MTCL delivered are defective and not working.

For its part, MTCL, in its Answer with Counterclaim, maintained that it had duly complied with

its obligations to ACE Foods and that the subject products were in good working condition when

they were delivered, installed and configured in ACE Foods’s premises.

Issue: Is the contract between ACE and MTCL a contract of sale?

Held: Yes. A contract of sale had been perfected the precise moment ACE Foods sent MTCL the

purchase order and accepted the latter’s proposal to sell the subject products in consideration of

the purchase price. Thereafter, the reciprocal obligations of the parties – i.e., on the other hand,

of MTCL to deliver the said products to ACE Foods, and, on the other hand, of ACE Foods to

pay the purchase price therefor within thirty (30) days from delivery – already arose and

consequently may be demanded.

The stipulation concerning MTCL’s reservation of ownership of the subject products as reflected

in the Invoice receipt did not change the complexion of the transaction from a contract of sale

into a contract to sell. Thus, absent any clear indication that the title reservation stipulation was

actually agreed upon, the same is deemed to be a mere unilateral imposition on the part of MTCL

and which has no effect on the nature of the parties’ original agreement as a contract of sale.

Perforce, the obligations arising thereto, among others, ACE Food’s obligation to pay the

purchase price as well as to accept the delivery of the goods, remain enforceable and subsisting.

San Fernando Regala Trading vs. Cargill Philippines, Inc.G.R # 178008

October 9, 2013

Facts: Cargill Philippines, Inc. (Cargill) and San Fernando Regala Trading, Inc. (San Fernando)

were cane molasses traders that did business with each other for sometime.

Cargill alleged that on July 15, 1996 it entered into Contract 5026 covering its sale to San

Fernando of 4,000 metric tons (mt) of molasses at the price of P3,950.00 per mt. Cargill agreed

to deliver the molasses within the months of "April to May 1997" at the wharf of Union

Ajinomoto, Inc.(Ajinomoto) along the Pasig River, Metro Manila. This was a risk-taking forward

sale in that its execution was to take place about 10 months later when the parties did not yet

know what the trading price of molasses would be.

Shortly after, Cargill also entered into Contract 50472 covering another sale to San Fernando of

5,000 mt of molasses at P2,750.00 per mt. The delivery period under this contract was within

"October-November-December 1996," sooner than the delivery period under Contract 5026.

Apparently, San Fernando had a deal with Ajinomoto for the supply of these molasses.

Cargill further alleged that it offered to deliver the 4,000 mt of molasses as required by Contract

5026 within the months of April and May1997 but San Fernando accepted only 951 mt, refusing

to accept the rest. On April 2, 1997 Dolman V, the barge carrying Cargill’s 1,174 mt of

molasses, arrived at the Ajinomoto wharf but San Fernando refused to accept the same. The

barge stayed at the wharf for 71 days, waiting for San Fernando’s unloading order. Because of

the delay, the owner of the barges lapped Cargill with demurrage amounting toP920,000.00.

Cargill also suffered P3,480,000.00 in damages by way of unrealized profits because it had to

sell the cargo to another buyer at a loss.

Issue: Did both parties commit shortcomings in complying with their contractual obligations?

Held: Yes. The court stated that the thing sold could only be understood as delivered to the

buyer when it is placed in the buyer’s control and possession at the agreed place of delivery. In

Contract 5026, Cargill presented no evidence that it attempted to make additional deliveries to

fully comply with its obligation. Contract 5026 required Cargill to deliver 4,000 mt. of molasses

during the period “April to May 1997”. Anything less than that quantity constitutes breach of the

agreement. Since Cargill only delivered a total of 2,125 mt. of molasses during the agreed

period, Cargill should be regarded as having violated Contract 5026 with respect to the

undelivered balance.

Ali Akang vs. Municipality of Isulan, Sultan Kudarat ProvinceG.R # 186014June 26, 2013

Facts: Ali Akang (petitioner) is a member of the national and cultural community belonging to

the Maguindanaon tribe of Isulan, Province of Sultan Kudarat and the registered owner of Lot 5-

B-2-B-14-F (LRC) Psd 1100183 located at Kalawag III, Isulan, Sultan Kudarat, covered by

Transfer Certificate of Title (TCT) No. T-3653, with an area of 20,030 square meters.

The respondent immediately took possession of the property and began construction of the

municipal building. Thirty-nine (39) years later or on October 26, 2001, the petitioner, together

with his wife, Patao Talipasan, filed a civil action for Recovery of Possession of Subject

Property and/or Quieting of Title thereon and Damages against the respondent, represented by its

Municipal Mayor, et al.

As regards the payment of the purchase price, the RTC found the same to have not been made by

the respondent. According to the RTC, the Municipal Voucher is not a competent documentary

proof of payment but is merely evidence of admission by the respondent that on the date of the

execution of the Deed of Sale, the consideration stipulated therein had not yet been paid. The

RTC also ruled that the Municipal Voucher’s validity and evidentiary value is in question as it

suffers infirmities, that is, it was neither duly recorded, numbered, signed by the Municipal

Treasurer nor was it pre-audited.

Issue: Is petitioner entitled to recover ownership and possession of the property in dispute?

Held: No. In a contract of sale, the title to the property passes to the buyer upon the delivery of

the thing sold, whereas in a contract to sell, the ownership is, by agreement, retained by the seller

and is not to pass to the vendee until full payment of the purchase price. The Deed of Sale

executed by the petitioner and the respondent is a perfected contract of sale, all its elements

being present. There was mutual agreement between them to enter into the sale, as shown by

their free and voluntary signing of the contract.

Non-payment of the purchase price merely gives rise to a right in favor of petitioner to either

demand specific performance or rescission of the contract. Therefore, petitioner is not entitled to

recover ownership and possession of the property.

Sps. Delfin and Aurora Tumibay vs. Sps. Melvin and Rowena LopezG.R # 171692June 3, 2013

Facts: On March 23, 1998, petitioners filed a Complaint7 for declaration of nullity ab initio of

sale, and recovery of ownership and possession of land with the RTC of Malaybalay City. The

case was raffled to Branch 9 and docketed as Civil Case No. 2759-98.

In their Complaint, petitioners alleged that they are the owners of a parcel of land located in

Sumpong, Malaybalay, Bukidnon covered by Transfer Certificate of Title (TCT) No. T-

253348 (subject land) in the name of petitioner Aurora; that they are natural born Filipino citizens

but petitioner Delfin acquired American citizenship while his wife, petitioner Aurora, remained a

Filipino citizen; that petitioner Aurora is the sister of Reynalda Visitacion (Reynalda);9 that on

July 23, 1997, Reynalda sold the subject land to her daughter, Rowena Gay T. Visitacion Lopez

(respondent Rowena), through a deed of sale10 for an unconscionable amount of P95,000.00

although said property had a market value of more than P2,000,000.00; that the subject sale was

done without the knowledge and consent of petitioners; and that, for these fraudulent acts,

respondents should be held liable for damages. Petitioners prayed that (1) the deed of sale dated

July 23, 1997 be declared void ab initio, (2) the subject land be reconveyed to petitioners, and (3)

respondents be ordered to pay damages.

On May 25, 1998, petitioners filed an Answer to Counterclaim. Petitioners admitted the

existence of the SPA but claimed that Reynalda violated the terms thereof when she (Reynalda)

sold the subject land without seeking the approval of petitioners as to the selling price.

Petitioners also claimed that the monthly payments from 1995 to 1997 were mere deposits as

requested by respondent Rowena so that she (Rowena) would not spend the same pending their

agreement as to the purchase price; and that Reynalda, acting with evident bad faith, executed

the deed of sale in her favor but placed it in the name of her daughter, respondent Rowena, which

sale is null and void because an agent cannot purchase for herself the property subject of the

agency.

Issue:Whether or not there is breach in the contract between petitioner and respondent, Is

petitioner entitled to rescind the contract?

Held: Yes. Art. 1191 of the Civil Code provides that Rescission will not be permitted for a slight

or casual breach of the contract but only for a fundamental breach thereof. The courts finds that

respondent’s act of transferring the title to the subject land in her name without the knowledge

and consent of petitioners and despite non-payment of the full purchase price is a substantial

breach, thus rescission can be availed by petitioners.

Heirs of Deceased Dolores C. Ventura vs. Heirs of Sps. Eustacio and Trinidad EndayaG.R # 190016

October 2, 2013

Facts: On June 29, 1981, Dolores Ventura (Dolores) entered into a Contract to Sell  (contract to

sell) with spouses Eustacio and Trinidad Endaya (Sps. Endaya) for the purchase of two parcels of

land covered by Transfer Certificates of Title (TCT) Nos. 3922256 and (343392) S-

679757 (subject properties), denominated as Lots 8 and 9, Block 3, situated in Marian Road II,

Marian Park8 (now Barangay San Martin de Porres),9 Parañaque City, Metro Manila.

The contract to sell provides that the purchase price of P347,760.00shall be paid by Dolores in

the following manner: (a) down payment of P103,284.00 upon execution of the contract; and (b)

the balance of P244,476.00 within a 15-year period (payment period), plus 12% interest per

annum (p.a.) on the outstanding balance and 12% interest p.a. on arrearages. It further provides

that all payments made shall be applied in the following order: first, to the reimbursement of real

estate taxes and other charges; second, to the interest accrued to the date of payment; third, to the

amortization of the principal obligation; and fourth, to the payment of any other accessory

obligation subsequently incurred by the owner in favor of the buyer. It likewise imposed upon

Dolores the obligation to pay the real property taxes over the subject properties, or to reimburse

Sps. Endaya for any tax payments made by them, plus 1% interest per month. Upon full payment

of the stipulated consideration, Sps. Endaya undertook to execute a final deed of sale and transfer

ownership over the same in favor of Dolores.10

On November 28, 1996, Dolores’ children, Frederick Ventura, Marites Ventura-Roxas, and

Philip Ventura (petitioners), filed before the RTC a Complaint13 and, thereafter, an Amended

Complaint14 for specific performance, seeking to compel Sps. Endaya to execute a deed of sale

over the subject properties. In this regard, they averred that due to the close friendship between

their parents and Sps. Endaya, the latter did not require the then widowed Dolores to pay the

down payment stated in the contract to sell and, instead, allowed her to pay amounts as her

means would permit. The payments were made in cash as well as in kind, and the same were

recorded by respondent Trinidad herself in a passbook  given to Dolores to evidence the receipt

of said payments. As of June 15, 1996, the total payments made by Dolores and petitioners

amounted to P952,152.00, which is more than the agreed purchase price of P347,760.00,

including the 12%interest p.a. thereon computed on the outstanding balance.

However, when petitioners demanded  the execution of the corresponding deed of sale, Sps.

Endaya refused.

Issue: Should the respondents be compelled to execute the final deed of sale over the two parcels

of land in favor of petitioners?

Held: No. A contract to sell is defined as a bilateral contract whereby the prospective seller,

while expressly reserving the ownership of the subject property despite delivery thereof to the

prospective buyer, binds himself to sell the said property exclusively to the latter upon his

fulfillment of the conditions agreed upon, i.e., the full payment of the purchase price and/or

compliance with the other obligations stated in the contract to sell. The failure of the prospective

buyer to make full payment and/or abide by his commitments stated in the contract to sell

prevents the obligation of the prospective seller to execute the corresponding deed of sale from

arising.

Oriental Petroleum and Mineral Corporation vs. Tuscan Realty, Inc.G.R # 195481July 10, 2013

Facts: On June 9, 1999 respondent Tuscan Realty, Inc. (Tuscan Realty) filed a complaint for

sum of money with application for preliminary attachment against petitioner Oriental Petroleum

and Minerals Corporation (Oriental Petroleum) before the Makati Regional Trial Court (RTC).

Oriental Petroleum owned two condominium units at Corinthian Plaza in Makati City. On

August 13, 1996 it gave Tuscan Realty a "non-exclusive authority to offer" these units for sale.

On August 14, 1996 Tuscan Realty submitted an initial list of its prospective client-buyers that

included Gateway Holdings Corporation (Gateway). Tuscan Realty updated this list on

September 18, 1996. Subsequently, Oriental Petroleum advised Tuscan Realty that it would

undertake direct negotiation with a certain Gene de los Reyes of Gateway for the sale of the

units. This resulted in a contract to sell between Oriental Petroleum and Gateway on August 1,

1997.

Meantime, Gateway apparently turned around nearly two months later on September 29, 1997

and assigned its rights as buyer of the units to Alonzo Ancheta in whose favor Oriental

Petroleum executed a deed of absolute sale on December 10, 1997 for the price

of P69,595,400.00. Prompted by this development, Tuscan Realty demanded payment of its

broker’s commission of P2,087,862.00 by Oriental Petroleum. The latter refused to pay,

however, claiming that Tuscan Realty did nothing to close its deal with Gateway and Ancheta.

On August 11, 2010 the CA granted the appeal and set aside the RTC decision. The CA ordered

Oriental Petroleum to pay Tuscan Realty its broker’s commission of P2,087,862.00, which is 3%

of the final purchase price, plus 6% interest from the finality of its decision until actual payment.

Hence, the present petition.

Issue: Whether or not Tuscan Realty is entitled to a broker’s commission for the sale of Oriental

Petroleum’s condominium units to Ancheta.

Held: Yes. The CA invoked the principle of "procuring cause" in ordering the payment of

broker’s commission to Tuscan Realty. The term "procuring cause" refers to a cause which starts

a series of events and results, without break in their continuity, in the accomplishment of a

broker’s prime objective of producing a purchaser who is ready, willing, and able to buy on the

owner’s terms.1 This is similar to the concept of proximate cause in Torts, without which the

injury would not have occurred. To be regarded as the procuring cause of a sale, a broker’s

efforts must have been the foundation of the negotiations which subsequently resulted in a sale.

The evidence shows that on August 14, 1996 Tuscan Realty submitted an initial list4 of

prospective buyers with contact details. It twice updated this list5 with Gateway always on top of

the lists. Clearly then, it was on account of Tuscan Realty’s effort that Oriental Petroleum got

connected to Gateway, the prospective buyer, resulting in the latter two entering into a contract

to sell involving the two condominium units. Although Gateway turned around and sold the

condominium units to Ancheta, the fact is that such ultimate sale could not have happened

without Gateway’s indispensable intervention as intermediate buyer. Applying the principle of

procuring cause, therefore, Tuscan Realty should be given its broker’s commission.

Heirs of Manuel Uy Ek Liong vs. Mauricia Meer Castilio, Heirs of Buenaflor UmaliG.R # 176425June 5, 2013

Facts: Alongside her husband, Felipe Castillo, respondent Mauricia Meer Castillo was the owner

of four parcels of land with an aggregate area of 53,307 square meters, situated in Silangan

Mayao, Lucena City and registered in their names under Transfer Certificate of Title (TCT) Nos.

T-42104, T-32227, T-31752 and T-42103. With the death of Felipe, a deed of extrajudicial

partition over his estate was executed by his heirs, namely, Mauricia, Buenaflor Umali and

respondents Victoria Castillo, Bertilla Rada, Marietta Cavanez, Leovina Jalbuena and Philip

Castillo. Utilized as security for the payment of a tractor purchased by Mauricia’s nephew,

Santiago Rivera, from Bormaheco, Inc., it appears, however, that the subject properties were

subsequently sold at a public auction where Insurance Corporation of the Philippines (ICP)

tendered the highest bid. Having consolidated its title, ICP likewise sold said parcels in favor of

Philippine Machinery Parts Manufacturing Co., Inc. (PMPMCI) which, in turn, caused the same

to be titled in its name.4

On 29 September 1976, respondents and Buenaflor instituted Civil Case No. 8085 before the

then Court of First Instance (CFI) of Quezon, for the purpose of seeking the annulment of the

transactions and/or proceedings involving the subject parcels, as well as the TCTs procured by

PMPMCI.5 Encountering financial difficulties in the prosecution of Civil Case No. 8085,

respondents and Buenaflor entered into an Agreement dated 20 September 1978 whereby they

procured the legal services of Atty. Edmundo Zepeda and the assistance of Manuel Uy Ek Liong

who, as financier, agreed to underwrite the litigation expenses entailed by the case. In exchange,

it was stipulated in the notarized Agreement that, in the event of a favorable decision in Civil

Case No. 8085, Atty. Zepeda and Manuel would be entitled to "a share of forty (40%) percent of

all the realties and/or monetary benefits, gratuities or damages" which may be adjudicated in

favor of respondents.

Issue: Is the Agreement entered with Atty. Zepeda Valid?

Held: Yes. Article 1491(5) of the Civil Code prohibits lawyers from acquiring by purchase or

assignment the property or rights involved which are objects of litigation in which they

intervene by virtue of their profession. However, the prohibition applies only during the

pendency of a suit and generally does not cover contracts for contingent fees where the transfer

takes effect only after the finality of a favorable judgment. As the Agreement, is a contract for

contingent fees, then such agreement does not fall within the prohibition under Article 1491(5)

of the code. Hence, it is valid.

Bigna vs. Ex-IM Phils, Inc.G.R # 171590

February 12, 2014

Facts: In 1984, Alfonso de Leon (Alfonso) mortgaged in favor of Union Bank of the Philippines

(Union Bank) real property situated at Esteban Abada, Loyola Heights, Quezon City, which was

registered in his and his wife Rosario’s name and covered by Transfer Certificate of Title (TCT)

No. 286130 (TCT 286130).

The property was foreclosed and sold at auction to Union Bank. After the redemption period

expired, the bank consolidated its ownership, whereupon TCT 362405 was issued in its name in

1987.

In 1988, Rosario filed against Alfonso and Union Bank, Civil Case No. Q-52702 for annulment

of the 1984 mortgage, claiming that Alfonso mortgaged the property without her consent, and for

reconveyance.

On December 27, 1989, Bignay mortgaged the property to Union Bank, presumably to secure a

loan obtained from the latter.

Issue: Is Bignay’s eviction valid?

Held: No. Eviction shall take place whenever by a final judgment based on a right prior to the

sale or an act imputable to the vendor, the vendee is deprived of the whole or of a part of the

thing purchased. In case eviction occurs, the vendee shall have the right to demand of the

vendor, among others, the return of the value which the thing sold had at the time of the eviction,

be it greater or less than the price of the sale; the expenses of the contract, if the vendee has paid

them; and the damages and interests, and ornamental expenses, if the sale was made in bad faith.

In the case at bar, Bignay purchased the property without knowledge of the pending civil case

concerning the subject property. Union Bank is therefore answerable for its express undertaking

under the deed of sale to “defend its title to the Parcels of land with improvement thereon against

the claims of any person whatsoever”.

G.R. No. 164985               January 15, 2014FIRST UNITED CONSTRUCTORS CORPORATION and BLUE STAR

CONSTRUCTION CORPORATIONvs.

BAYANIHAN AUTOMOTIVE CORPORATION

Facts: Petitioner First United Constructors Corporation (FUCC) and petitioner Blue Star

Construction Corporation (Blue Star) were associate construction firms sharing financial

resources, equipment and technical personnel on a case-to-case basis. From May 27, 1992 to July

8, 1992, they ordered six units of dump trucks from the respondent, a domestic corporation

engaged in the business of importing and reconditioning used Japan-made trucks, and of selling

the trucks to interested buyers who were mostly engaged in the construction business, to wit:

Due to the refusal to pay, the respondent commenced this action for collection on April 29, 1993,

seeking payment of the unpaid balance in the amount of P735,000.00 represented by the two

checks.

It was the position of the respondent that the petitioners were not legally justified in withholding

payment of the unpaid balance of the purchase price of the Hino Prime Mover and the Isuzu

Transit Mixer due the alleged defects in second dump truck because the purchase of the two units

was an entirely different transaction from the sale of the dump trucks, the warranties for which

having long expired.

Issue: Did petitioner validly exercised his right of recoupment in withholding payment of the

trucks mentioned?

Held: No. Article 1599 (1) of the Civil Code states that were there is a breach of warranty by the

seller, the buyer may, at his election accept or keep the goods and set up against the seller, the

breach of warranty by way of recoupment in diminution or extinction of the price.

G.R. No. 179594               September 11, 2013MANUEL UY & SONS, INC. 

vs.VALBUECO, INCORPORATED

Facts:Petitioner Manuel Uy & Sons, Inc. is the registered owner of parcels of land located in

Teresa, Rizal covered by Transfer Certificate of Title(TCT) No. 59534, covering an area of about

6,119 square meters; TCT No.59445, covering an area of about 6,838 square meters; TCT No.

59446,covering an area of about 12,389 square meters; and TCT No. 59444,covering an area of

about 32,047 square meters.

On November 29, 1973, two Conditional Deeds of Sale were executed by petitioner, as vendor,

in favor of respondent Valbueco, Incorporated, as vendee.

Respondent was able to pay petitioner the amount of P275,055.558 as partial payment for the two

properties corresponding to the initial payments and the first installments of the said properties.

However, respondent suspended further payment as it was not satisfied with the manner

petitioner complied with its obligations under the conditional deeds of sale. Consequently, on

March 17, 1978, petitioner sent respondent a letter 11 informing respondent of its intention to

rescind the conditional deeds of sale and attaching therewith the original copy of the respective

notarial rescission.

Five years later, or on March 16, 2001, respondent again filed with the RTC of Manila, Branch 1

(trial court) a Complaint14 for specific performance and damages, seeking to compel petitioner to

accept the balance of the purchase price for the two conditional deeds of sale and to execute the

corresponding deeds of absolute sale. Respondent contended that its non-payment of the

installments was due to the following reasons:(1) Petitioner refused to receive the balance of the

purchase price as the properties were mortgaged and had to be redeemed first before a deed of

absolute sale could be executed; (2) Petitioner assured that the existing mortgages on the

properties would be discharged on or before May 20,1974, or that petitioner did not inform it

(respondent) that the mortgages on the properties were already released; and (3) Petitioner failed

to fully eject the unlawful occupants in the area.

Issue: Was respondent given notice of the notarial rescission?

Held: No. The Court noted that in the complaint initially filed by the respondent, petitioner filed

an answer with an attached copy of the notarial acts of rescission. Respondent received a copy of

that answer with all its attachments. By receipt thereof, respondent already received notices of

the notarial rescission. Moreover, respondent admitted the same when it attached those notices to

its reply.

G.R. No. 202358               November 27, 2013GATCHALIAN REALTY, INC.

vs.EVELYN M. ANGELES

Facts:On 28 December 1994, [Angeles] purchased a house (under Contract to Sell No. 2272)

and lot (under Contract to Sell No. 2271) from [GRI] valued at Seven Hundred Fifty Thousand

Pesos (Php 750,000.00) and Four Hundred Fifty Thousand Pesos (Php 450,000.00), respectively,

with twenty-four percent (24%) interest per annum to be paid by installment within a period of

ten years.

After sometime, [Angeles] failed to satisfy her monthly installments with [GRI]. [Angeles] was

only able to pay thirty-five (35) installments for Contract to Sell No. 2271 and forty-eight (48)

installments for Contract to Sell No. 2272. According to [GRI], [Angeles] was given at least

twelve (12) notices for payment in a span of three (3) years but she still failed to settle her

account despite receipt of said notices and without any valid reason. [Angeles] was again given

more time to pay her dues and likewise furnished with three (3) notices reminding her to pay her

outstanding balance with warning of impending legal action and/or rescission of the contracts,

but to no avail. After giving a total of fifty-one (51) months grace period for both contracts and

in consideration of the continued disregard of the demands of [GRI], [Angeles] was served with

a notice of notarial rescission dated 11 September 2003 by registered mail which she allegedly

received on 19 September 2003 as evidenced by a registry return receipt.

Consequently [Angeles] was furnished by [GRI] with a demand letter dated 26 September 2003

demanding her to pay the amount of One Hundred Twelve Thousand Three Hundred Four Pesos

and Forty Two Centavos (Php 112,304.42) as outstanding reasonable rentals for her use and

occupation of the house and lot as of August 2003 and to vacate the same. She was informed in

said letter that the fifty percent (50%) refundable amount that she is entitled to has already been

deducted with the reasonable value for the use of the properties or the reasonable rentals she

incurred during such period that she was not able to pay the installments due her. After deducting

the rentals from the refundable amount, she still had a balance of One Hundred Twelve

Thousand Three Hundred Four Pesos and Forty Two Centavos (Php 112,304.42) which she was

required to settle within fifteen (15) days from receipt of the letter.

Issue: Was the contract between petitioner and respondent properly cancelled?

Held: No. Although a notarized notice of cancellation was given to respondent, petitioner failed

to pay the proper cash surrender value in accordance with the Maceda Law.

The Court stated that for a valid and effective cancellation of the contract under the Maceda

Law, the mandatory twin requirements of a notarized notice of cancellation and refund of the

cash surrender value must be complied with. Since petitioner failed to pay the proper cash

surrender value to respondent, the contract between petitioner and respondent was not properly

cancelled.

G.R. No. 171464               November 27, 2013SPOUSES ELISEO R. BAUTISTA AND EMPERA TRIZ C. BAUTISTA

vs.SPOUSES MILA JALANDONI AND ANTONIO JALANDONI AND MANILA CREDIT

CORPORATION

Fact: Spouses Jalandoni were the registered owners of two (2) parcels of land, covered by

Transfer Certificate of Title (TCT) Nos. 2010485 and 201049.6 The two lots were located in

Muntinlupa City, each parcel of land containing an area of Six Hundred (600) square meters,

more or less, amounting to P1,320,000.00 per lot.

In May 1997, the Spouses Jalandoni applied for a loan with a commercial bank and, as a security

thereof, they offered to constitute a real estate mortgage over their two lots. After a routine credit

investigation, it was discovered that their titles over the two lots had been cancelled and new

TCT Nos. 206091 and 205624 were issued in the names of Spouses Baustista. Upon further

investigation, they found out that the bases for the cancellation of their titles were two deeds of

absolute sale,7 dated April 4, 1996 and May 4, 1996, purportedly executed and signed by them in

favor of Spouses Baustista.

In their answer,8 Spouses Bautista claimed that in March 1996, a certain Teresita Nasino

(Nasino) offered to Eliseo Baustista (Eliseo) two parcels of land located in Muntinlupa City; that

the parcels of land were sold at a bargain price because the owners were in dire need of money;

that upon their request, Nasino showed them the photocopies of the titles covering the subject

lands; that Nasino told them that she would negotiate with the Spouses Jalandoni, prepare the

necessary documents and cause the registration of the sale with the Register of Deeds; and that

since Nasino was a wife of a friend, Spouses Baustista trusted her and gave her the authority to

negotiate with Spouses Jalandoni on their behalf.

Issue:Are Spouses Bautista buyers in good faith?

Held: No.The requisites of purchasers in good faith are as follows: (a) the seller is the registered

owner of the land; (b) the owner is in possession thereof; and (c) at the time of sale, the buyer

was not aware of any claim or interest of some other person in the property, or of any defect or

restriction in the title of the seller or in his capacity to convey title to the property. In the absence

of any of these requisites, the buyer is obliged to exercised extraordinary diligence by

scrutinizing the certificates of titles and examining all factual circumstances so as to ascertain the

seller’s title and capacity to transfer any interest in the property. Their failure to determine the

status of the subject lots and the extent of nasino’s authority negates good faith.

G.R. No. 189477               February 26, 2014HOMEOWNERS SAVINGS AND LOAN BANK

vs.ASUNCION P. FELONIA and LYDIA C. DE GUZMAN

Facts: Felonia and De Guzman were the registered owners of a parcel of land consisting of 532

square meters with a five-bedroom house, covered by Transfer of Certificate of Title (TCT) No.

T-402 issued by the register of deeds of Las Piñas City.

Sometime in June 1990, Felonia and De Guzman mortgaged the property to Delgado to secure

the loan in the amount of P1,655,000.00. However, instead of a real estate mortgage, the parties

executed a Deed of Absolute Sale with an Option to Repurchase.4

On 20 December 1991, Felonia and De Guzman filed an action for Reformation of Contract

(Reformation case), docketed as Civil Case No. 91-59654, before the RTC of Manila. On the

findings that it is "very apparent that the transaction had between the parties is one of a mortgage

and not a deed of sale with right to repurchase,"5 the RTC, on 21 March 1995 rendered a

judgment favorable to Felonia and De Guzman.

Aggrieved, Felonia and De Guzman elevated the case to the CA through a Petition for

Annulment of Judgment.

Meanwhile, on 2 June 1995, Delgado mortgaged the subject property to Homeowners Savings

and Loan Bank (HSLB) using her newly registered title. Three (3) days later, or on 5 June 1995,

HSLB caused the annotation of the mortgage.

Issue:Is the carrying over of the mortgage lien in favor of the petititioner proper, even after the

title has been reinstated in the name of respondents?

Held: No. HSLB was initially a mortgagee in good faith. When the property was mortgaged to

HSLB, the registered owner of the subject property was Delgado. Thus, HSLB cannot be faulted

in relying on the face of Delgado’s title. Delgado was at the time of the mortgage in possession

of the subject property and Delgado’s title did not contain any annotation that would arose

HSLB’s suspicion. HSLB, as a mortgagee, had a right to rely in good faith on Delgado’s title,

and in the absence of any sign that might arose suspicion, HSLB had no obligation to undertake

further investigation. This is consistent with the doctrine of mortgagee in good faith wherein

persons dealing with property covered by the Torrens System are not required to inquire beyond

the title of the property.

G.R. No. 162365               January 15, 2014ROBERTO R. DAVID

vs.EDUARDO C. DAVID

Facts: Respondent Eduardo C. David (Eduardo) initiated this replevin suit against Roberto R.

David (Roberto), his first cousin and former business partner, to recover the possession of one

unit of International CO 9670 Truck Tractor and Mi-Bed Trailer.

In April 1997, Roberto and Edwin executed a memorandum of agreement (MOA)5 with the

Spouses Marquez and Soledad Go (Spouses Go), by which they agreed to sell the Baguio City

lot to the latter for a consideration ofP10,000,000.00. The MOA stipulated that "in order to save

payment of high and multiple taxes considering that the x x x subject matter of this sale is

mortgaged with DBP, Baguio City, and sold [to Roberto], Edwin will execute the necessary

Deed of Absolute Sale in favor of [the Spouses Go], in lieu of [Roberto]."6 The Spouses Go then

deposited the amount of P10,000,000.00 to Roberto’s account.7

After the execution of the MOA, Roberto gave Eduardo P2,800,000.00 and returned to him one

of the truck tractors and trailers subject of the deed of sale. Eduardo demanded for the return of

the other truck tractor and trailer, but Roberto refused to heed the demand.

Thus, Eduardo initiated this replevin suit against Roberto, alleging that he was exercising the

right to repurchase under the deed of sale; and that he was entitled to the possession of the other

motor vehicle and trailer.

In his answer, Roberto denied that Eduardo could repurchase the properties in question; and

insisted that the MOA had extinguished their deed of sale by novation.

Issue:Does the respondent have the right to repurchase the properties?

Held: Yes. A sale with right to repurchase is governed by Article 1601 of the Civil Code, which

provides that: “Conventional redemption shall take place when the vendor reserves the right to

repurchase the thing sold, with the obligation to comply with the provisions of Article 1616 and

other stipulations which may have agreed upon. “Conformably with Article 1616, the seller may

exercise his right of redemption by paying the buyer: (1) the price of the sale, (2) the expenses of

the contract, (3) legitimate payments made by reason of the sale, and (4) the necessary and useful

expenses made on the thing sold.

G.R. No. 201787               September 25, 2013ANALITA P. INOCENCIO, substituting for RAMON INOCENCIO (Deceased)

vs.HOSPICIO DE SAN JOSE

Facts: On 1 March 1946, Hospicio de San Jose (HDSJ) leased a parcel of land located in Pasay

City to German Inocencio (German).4 The lease contract was effective for a period of one year,

and was renewed for one-year periods several times.

Ramon then sent a letter to HDSJ dated 12 March 2001, suggesting that the lease contract be

renegotiated for the welfare of the sublessees occupying the parcel of land.11 On 3 April 2001,

HDSJ notified Ramon that the lease contract shall not be renewed because Ramon has

"continually subleased the subject premises to about 20 families (in addition to a commercial

establishment) x x x without the knowledge and consent of the essor, [HDSJ]."12 Thereafter,

HDSJ refused to accept Ramon’s tender of payment of rentals.13

On 3 March 2005, HDSJ sent a letter to Ramon: (1) reiterating its stand that the lease contract

was terminated effective 31 March 2001;(2) demanding payment of P756,449.26 as unrealized

fruits; and (3) giving him 30 days to vacate the property.14 The sublessees were given written

notices to vacate within 30 days.15 HDSJ also posted a Patalastas stating that it is willing to work

out an amicable arrangement with the sublessees, although the latter are not considered as legal

occupants or tenants of the property.16 Because of this, some of the sublessees refused to pay

rentals to Ramon.

Issue: Are the sublease contracts executed by Ramon valid?

Held: Yes. A lease contract is not personal in character, hence it survives the death of the parties

and continues to bind the heirs. Thus, the death of German did not terminate the lease contract

executed with the respondent, but instead continued with Ramon as the lessee. Ramon had a

right to sublease the premises since the lease contract did not contain any stipulation forbidding

subleasing.

G.R. No. 198075               September 4, 2013KOPPEL, INC. (formerly known as KPL AIRCON, INC.)

vs.MAKATI ROTARY CLUB FOUNDATION, INC.

Facts: Fedders Koppel, Incorporated (FKI), a manufacturer of air-conditioning products, was the

registered owner of a parcel of land located at Km. 16, South Superhighway, Parañaque City

(subject land).3 Within the subject land are buildings and other improvements dedicated to the

business of FKI.4

In 1975, FKI5 bequeathed the subject land (exclusive of the improvements thereon) in favor of

herein respondent Makati Rotary Club Foundation, Incorporated by way of a conditional

donation.6 The respondent accepted the donation with all of its conditions.7 On 26 May1975, FKI

and the respondent executed a Deed of Donation8evidencing their consensus.

The Deed of Donation also stipulated that the lease over the subject property is renewable for

another period of twenty-five (25) years " upon mutual agreement" of FKI and the respondent.

In October 1976, FKI and the respondent executed an Amended Deed of Donation14 that

reiterated the provisions of the Deed of Donation , including those relating to the lease of the

subject land.

Verily, by virtue of the lease agreement contained in the Deed of Donation and Amended Deed

of Donation , FKI was able to continue in its possession and use of the subject land.

According to petitioner, the Deed of Donation and Amended Deed of Donation actually

established not only one but two (2) lease agreements between FKI and respondent, i.e. , one

lease for the first twenty-five (25)years or from 1975 to 2000, and another lease for the next

twenty-five (25)years thereafter or from 2000 to 2025. 27 Both leases are material conditions of

the donation of the subject land.

Issue: Can petitioner invoke the arbitration clause in the 2005 lease agreement, and at the same

time assail its validity?

Held: Yes. The court noted that the dispute between petitioner and respondent stemmed from the

application of the 2005 Lease Contract, thereby under the arbitration clause of the same contract.

While it may be conceded that in arbitration of such disagreement, the validity of the 2005 Lease

Contract, or at least, of such contract’s rental stipulation would have to be determined, the same

would not render such disagreement non-arbitable. Petitioner may still invoke the arbitration

clause of 2005 Lease Contract notwithstanding the fact that it assails the validity of such

contract. This is due to the doctrine of separability. Under this doctrine, an arbitration agreement

is considered as independent of the main contract. Being a separate contract in itself, the

arbitration agreement may thus be invoked regardless of the possible nullity of the main contract.

Based from these reasons, the arbitration clause may still be invoked.

Purificacion and Ruperto Estanislao vs. Sps. Norma and Damiano GuditoG.R # 173166

March 13, 2013

Facts: Respondents are the owners of a residential lot being leased by petitioners on a month-to-

month basis. Petitioners had been renting and occupying the subject lot since 1934 and were the

ones who built the house on the subject lot in accordance with their lease agreement with one

Gaspar Vasquez. When Gaspar Vasquez died, the portion of the lot on which petitioners’ house

was erected was inherited by his son Victorino Vasquez, married to Ester Vasquez (Vasquez

couple).

In the 1980’s, the Vasquez couple wanted the Estanislao family and the other tenants to vacate

the said property, but the tenants refused because of laws allegedly prohibiting their ejectment

therefrom. Resultantly, the Vasquez couple refused to accept their rental payments. Thus,

petitioner Purificacion Estanislao, with due notice to Ester Vasquez, deposited the amount of her

monthly rentals at Allied Banking Corporation under a savings account in the name of Ester

Vasquez as lessor.

In the interim, a Deed of Donation was executed by the Vasquez couple in favor of respondent

Norma Vasquez Gudito. Hence, in October 1994, respondents notified petitioners to remove

their house and vacate the premises within three months or up to January 31, 1995, because of

their urgent need of the residential lot. In a letter dated March 5, 1995, respondents reiterated the

demand and gave petitioners another three months or up to June 30, 1995, within which to

remove their house, vacate the subject lot and pay the rental arrearages. However, petitioners

failed to comply.

Issue: Do petitioners have a right of first refusal over the subject property under P.D 1517, in

relation to P.D. 2016?

Held: No. The right of first refusal is applied only where the owner of the property intends to

sell it to a third party. If the owner of the leased premises do not intend to sell the property in

question but seeks to eject the tenant on the ground that the former needs the premises for

residential purposes, the tenant cannot invoke the land reform law. Thus, the right of first refusal

cannot be accorded to the petitioners.

Gersip Association Inc. vs. GSISG.R # 189827

October 16, 2013

Facts: Petitioners initially filed a civil suit before the Regional Trial Court (RTC) of Quezon

City (Civil Case No. Q-01-45533) but on motion of respondent said case was dismissed on the

ground that it is the GSIS Board which has jurisdiction over the controversy.

On October 30, 2002, petitioners filed a Petition12 with the GSIS Board alleging that they have

not been paid their portion of the GRF upon their retirement, to which they are entitled as "co-

owners" of the Fund. They thus prayed for a judgment: (1) ordering respondent to render and/or

submit a report of accounting of the Fund and the GRF and to furnish copies thereof to

petitioners, pursuant to Section 5, Article VIII of the PFRR; (2) directing respondent to partition,

settle, release and pay to the members of petitioner GERSIP their proportionate share of the

GRF, or their corresponding share of the accumulated earnings thereon, and in addition, 100% of

respondent’s contributions to the Fund, plus the proportionate earnings thereon, all with interests

at the legal rate computed from the retirement dates of each individual member until fully paid,

conformably with Section 1(b), Article V of the PFRR; and (3) holding respondent liable for

reasonable attorney’s fees equivalent to 15% of the total amount claimed, appearance fee

of P3,000 per appearance and cost of suit.

On October 27, 2004, the GSIS Board denied the petition for lack of merit. It held that the

execution of the Trust Agreement14 between respondent and the Committee is a clear indication

that the parties intended to establish an express trust, not a co-ownership, with respondent as

Trustor, the Committee as Trustee of the Fund and the members as Beneficiaries. As to the GRF,

the Board said that it answers only for the contingent claims mentioned in Section 8, Article IV

and there is no requirement in the PFRR for the accounting and partition of GRF.15

Issue: Are petitioners co-owners of the GRF?

Held: No. The GSIS Provident Fund is a trust fund established by respondent from the

employees’ contributions (5% of monthly salary) and its own contributions (45% of each

member’s monthly salary and all unremitted employees welfare contributions). The execution of

the Trust Agreement between respondent and the Committee is a clear indication that the parties

intended to establish an express trust, not a co-ownership, with respondent a Trustor, the

Committee as trustee of the fund and the members of beneficiaries. As to the GRF, the Board

said that it answers only for the contingent claims mentioned in Section 8, Article VI and there is

no requirement in the PFRR for the accounting and partition of GRF.

Joseph Goyanko, Jr. vs. United Coconut Planters Bank, Mango Avenue BranchG.R # 179096

February 06, 2013

Facts: In 1995, the late Joseph Goyanko, Sr. (Goyanko) invested Two Million Pesos

(P2,000,000.00) with Philippine Asia Lending Investors, Inc. family, represented by the

petitioner, and his illegitimate family presented conflicting claims to PALII for the release of the

investment. Pending the investigation of the conflicting claims, PALII deposited the proceeds of

the investment with UCPB on October 29, 19965 under the name "Phil Asia: ITF (In Trust For)

The Heirs of Joseph Goyanko, Sr." (ACCOUNT). On September 27, 1997, the deposit under the

ACCOUNT was P1,509,318.76.

On December 11, 1997, UCPB allowed PALII to withdraw One Million Five Hundred Thousand

Pesos (P1,500,000.00) from the Account, leaving a balance of only P9,318.76. When UCPB

refused the demand to restore the amount withdrawn plus legal interest from December 11, 1997,

the petitioner filed a complaint before the RTC. In its answer to the complaint, UCPB admitted,

among others, the opening of the ACCOUNT under the name "ITF (In Trust For) The Heirs of

Joseph Goyanko, Sr.," (ITF HEIRS) and the withdrawal on December 11, 1997.

Issue: Is the contract an express trust?

Held: No.The requirements before an express trust will be recognized are: (1) there must be a

competent trustor and trustee, an ascertainable trust res, and sufficiently certain beneficiaries, (2)

there must be a present and complete disposition of the trust property, notwithstanding that the

enjoyment in the beneficiary will take place in the future, (3) there must be some power of

administration other than a mere duty to perform a contract although the contract is for a third

party beneficiary, and (4) a declaration of terms is essential, and these must be stated with

reasonable certainty in order that the trustee may administer. None of the requirements were

present in the case.

Dario Nacar vs. Gallery Frames and/or Felipe Bordey, Jr.G.R # 189871

August 13, 2013

Facts: Petitioner Dario Nacar filed a complaint for constructive dismissal before the Arbitration

Branch of the National Labor Relations Commission (NLRC) against respondents Gallery

Frames (GF) and/or Felipe Bordey, Jr., docketed as NLRC NCR Case No. 01-00519-97.

On October 15, 1998, the Labor Arbiter rendered a Decision3 in favor of petitioner and found

that he was dismissed from employment without a valid or just cause. Thus, petitioner was

awarded backwages and separation pay in lieu of reinstatement in the amount of P158,919.92.

Respondents appealed to the NLRC, but it was dismissed for lack of merit in the

Resolution5 dated February 29, 2000. Accordingly, the NLRC sustained the decision of the

Labor Arbiter. Respondents filed a motion for reconsideration, but it was denied.6

Dissatisfied, respondents filed a Petition for Review on Certiorari before the CA. On August 24,

2000, the CA issued a Resolution dismissing the petition. Respondents filed a Motion for

Reconsideration, but it was likewise denied in a Resolution dated May 8, 2001.7

An Entry of Judgment was later issued certifying that the resolution became final and executory

on May 27, 2002.9 The case was, thereafter, referred back to the Labor Arbiter. A pre-execution

conference was consequently scheduled, but respondents failed to appear.10

Respondents again appealed before the NLRC, which on June 30, 2003 issued a

Resolution17 granting the appeal in favor of the respondents and ordered the recomputation of the

judgment award.

On May 10, 2005, the Labor Arbiter issued an Order20 granting the motion, but only up to the

amount ofP11,459.73. The Labor Arbiter reasoned that it is the October 15, 1998 Decision that

should be enforced considering that it was the one that became final and executory. However, the

Labor Arbiter reasoned that since the decision states that the separation pay and backwages are

computed only up to the promulgation of the said decision, it is the amount of P158,919.92 that

should be executed. Thus, since petitioner already receivedP147,560.19, he is only entitled to the

balance of P11,459.73.

Issue: Are respondents liable for legal interest?

Held: Yes. The guidelines laid down in the case of Eastern Shipping Lines are accordingly

modified to embody BSP-MB Circular No. 799, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan

or forbearance of money, the interest due should be that which may have been stipulated in

writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially

demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be

computed from default, i.e., from judicial or extrajudicial demand under and subject to the

provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest

on the amount of damages awarded may be imposed at the discretion of the court at the rate of

6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages

except when or until the demand can be established with reasonable certainty. Accordingly,

where the demand is established with reasonable certainty, the interest shall begin to run from

the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such

certainty cannot be so reasonably established at the time the demand is made, the interest shall

begin to run only from the date the judgment of the court is made (at which time the

quantification of damages may be deemed to have been reasonably ascertained). The actual base

for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the

rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be

12% per annum from such finality until its satisfaction, this interim period being deemed to be

by then an equivalent to a forbearance of credit

Hence, Respondents are Ordered to Pay petitioner the following:

(1) backwages computed from the time petitioner was illegally dismissed on January 24,

1997 up to May 27, 2002, when the Resolution of this Court in G.R. No. 151332 became

final and executory;

(2) separation pay computed from August 1990 up to May 27, 2002 at the rate of one

month pay per year of service; and

(3) interest of twelve percent (12%) per annum of the total monetary awards, computed

from May 27, 2002 to June 30, 2013 and six percent (6%) per annum from July 1, 2013

until their full satisfaction.

Sps. Bayani and Gracia Andal vs. PNB and Register of Deeds of Batangas CityG.R # 194201

November 27, 2013

Facts: Petitioners-spouses obtained a loan from [respondent bank] in the amount

ofP21,805,000.00, for which they executed twelve (12) promissory notes x x x [undertaking] to

pay [respondent bank] the principal loan with varying interest rates of 17.5% to 27% per interest

period. It was agreed upon by the parties that the rate of interest may be increased or decreased

for the subsequent interest periods, with prior notice to [petitioners-spouses], in the event of

changes in interest rates prescribed by law or the Monetary Board x x x, or in the bank’s overall

cost of funds.

To secure the payment of the said loan, [petitioners-spouses] executed in favor of [respondent

bank] a real estate mortgage using as collateral five (5) parcels of land including all

improvements therein, all situated in Batangas City and covered by Transfer Certificate of Title

(TCT) Nos. T-641, T-32037, T-16730, T-31193 and RT 363 (3351) of the Registry of Deeds of

Batangas City, in the name of [petitioners-spouses].

Subsequently, [respondent bank] advised [petitioners-spouses] to pay their loan obligation,

otherwise the former will declare the latter’s loan due and demandable. On July 17, 2001,

[petitioners-spouses] paid P14,800,000.00 to [respondent bank] to avoid foreclosure of the

properties subject of the real estate mortgage. Accordingly, [respondent bank] executed a release

of real estate mortgage over the parcels of land covered by TCT Nos. T-31193 and RT-363

(3351). However, despite payment x x x, [respondent bank] proceeded to foreclose the real estate

mortgage, particularly with respect to the three (3) parcels of land covered by TCT Nos. T-641,

T-32037 and T-16730 x x x.

In their amended complaint, [petitioners-spouses] alleged that they tried to religiously pay their

loan obligation to [respondent bank], but the exorbitant rate of interest unilaterally determined

and imposed by the latter prevented the former from paying their obligation. [Petitioners-

spouses] also alleged that they signed the promissory notes in blank, relying on the

representation of [respondent bank] that they were merely proforma [sic] bank requirements.

Further, [petitioners-spouses] alleged that the unilateral increase of interest rates and exorbitant

penalty charges are akin to unjust enrichment at their expense, giving [respondent bank] no right

to foreclose their mortgaged properties.

Issue: Are the petitioners Bayani and Andal liable for interest?

Held: Yes. It is clear from the contract of loan between petitioners-spouses and respondent bank

that petitioners-spouses, as borrowers, agreed to the payment of interest on their loan obligation.

That the rate of interest was subsequently declared illegal and unconscionable does not entitle

petitioners-spouses to stop payment of interest.1âwphi1 It should be emphasized that only the

rate of interest was declared void. The stipulation requiring petitioners-spouses to pay interest on

their loan remains valid and binding. They are, therefore, liable to pay interest from the time they

defaulted in payment until their loan is fully paid.

In addition, pursuant to Circular No. 799, series of 2013, issued by the Office of the Governor of

the Bangko Sentral ng Pilipinas on 21 June 2013, and in accordance with the ruling of the

Supreme Court in the recent case of Dario Nacar v. Gallery Frames and/or Felipe Bordey,

Jr.,20 effective 1 July 2013, the rate of interest for the loan or forbearance of any money, goods or

credits and the rate allowed in judgments, in the absence of an express contract as to such rate of

interest, shall be six percent (6%) per annum. Accordingly, the rate of interest of 12% per annum

on petitioners-spouses’ obligation shall apply from 20 May 2011 – the date of default – until 30

June 2013 only. From 1 July 2013 until fully paid, the legal rate of 6% per annum shall be

applied to petitioners-spouses’ unpaid obligation.

The Metropolitan Bank and Trust Company vs. Ana Grace Rosales and Yo Yuk ToG.R # 183204

January 13, 2014

Facts: Petitioner Metropolitan Bank and Trust Company is a domestic banking corporation duly

organized and existing under the laws of the Philippines.6 Respondent Ana Grace Rosales

(Rosales) is the owner of China Golden Bridge Travel Services,7 a travel agency.8 Respondent

Yo Yuk To is the mother of respondent Rosales.9

In 2000, respondents opened a Joint Peso Account10 with petitioner’s Pritil-Tondo Branch.11 As

of August 4, 2004, respondents’ Joint Peso Account showed a balance of P2,515,693.52.12

In May 2002, respondent Rosales accompanied her client Liu Chiu Fang, a Taiwanese National

applying for a retiree’s visa from the Philippine Leisure and Retirement Authority (PLRA), to

petitioner’s branch in Escolta to open a savings account, as required by the PLRA.13 Since Liu

Chiu Fang could speak only in Mandarin, respondent Rosales acted as an interpreter for her.14

On March 3, 2003, respondents opened with petitioner’s Pritil-Tondo Branch a Joint Dollar

Account15 with an initial deposit of US$14,000.00.16

On July 31, 2003, petitioner issued a "Hold Out" order against respondents’ accounts.17

On September 3, 2003, petitioner, through its Special Audit Department Head Antonio Ivan

Aguirre, filed before the Office of the Prosecutor of Manila a criminal case for Estafa through

False Pretences, Misrepresentation, Deceit, and Use of Falsified Documents, docketed as I.S. No.

03I-25014,18 against respondent Rosales.19Petitioner accused respondent Rosales and an

unidentified woman as the ones responsible for the unauthorized and fraudulent withdrawal of

US$75,000.00 from Liu Chiu Fang’s dollar account with petitioner’s Escolta Branch.20Petitioner

alleged that on February 5, 2003, its branch in Escolta received from the PLRA a Withdrawal

Clearance for the dollar account of Liu Chiu Fang;21 that in the afternoon of the same day,

respondent Rosales went to petitioner’s Escolta Branch to inform its Branch Head, Celia A.

Gutierrez (Gutierrez), that Liu Chiu Fang was going to withdraw her dollar deposits in

cash;22 that Gutierrez told respondent Rosales to come back the following day because the bank

did not have enough dollars;23 that on February 6, 2003, respondent Rosales accompanied an

unidentified impostor of Liu Chiu Fang to the bank;24 that the impostor was able to withdraw Liu

Chiu Fang’s dollar deposit in the amount of US$75,000.00;25 that on March 3, 2003, respondents

opened a dollar account with petitioner; and that the bank later discovered that the serial numbers

of the dollar notes deposited by respondents in the amount of US$11,800.00 were the same as

those withdrawn by the impostor.

Issue: Did petitioner Metrobank breached its duty to respondents Yuk?

Held: Yes. The "Hold Out" clause applies only if there is a valid and existing obligation arising

from any of the sources of obligation enumerated in Article 115779 of the Civil Code, to wit: law,

contracts, quasi-contracts, delict, and quasi-delict. In this case, petitioner failed to show that

respondents have an obligation to it under any law, contract, quasi-contract, delict, or quasi-

delict. And although a criminal case was filed by petitioner against respondent Rosales, this is

not enough reason for petitioner to issue a "Hold Out" order as the case is still pending and no

final judgment of conviction has been rendered against respondent Rosales. In fact, it is

significant to note that at the time petitioner issued the "Hold Out" order, the criminal complaint

had not yet been filed. Thus, considering that respondent Rosales is not liable under any of the

five sources of obligation, there was no legal basis for petitioner to issue the "Hold Out" order.

Accordingly, we agree with the findings of the RTC and the CA that the "Hold Out" clause does

not apply in the instant case.

Having breached its contract with respondents,petitioner is liable for damages.Respondents are

entitled to moral and exemplary damages and attorney’s fees.

Mariano Lim vs. Security Bank CorporationG.R # 188539

March 12, 2014

Facts: Petitioner executed a Continuing Suretyship in favor of respondent to secure "any and all

types of credit accommodation that may be granted by the bank hereinto and hereinafter" in

favor of Raul Arroyo for the amount of P2,000,000.00 which is covered by a Credit

Agreement/Promissory Note.3 Said promissory note stated that the interest on the loan shall be

19% per annum, compounded monthly, for the first 30 days from the date thereof, and if the note

is not fully paid when due, an additional penalty of 2% per month of the total outstanding

principal and interest due and unpaid, shall be imposed.

The debtor, Raul Arroyo, defaulted on his loan obligation. Thereafter, petitioner received a

Notice of Final Demand dated August 2, 2001, informing him that he was liable to pay the loan

obtained by Raul and Edwina Arroyo, including the interests and penalty fees amounting

to P7,703,185.54, and demanding payment thereof. For failure of petitioner to comply with said

demand, respondent filed a complaint for collection of sum of money against him and the Arroyo

spouses. Since the Arroyo spouses can no longer be located, summons was not served on them,

hence, only petitioner actively participated in the case.

Petitioner appealed to the CA, but the appellate court, in its Decision dated July 30, 2008,

affirmed the RTC judgment with the modification that interest be computed from August 1,

1997; the penalty should start only from August 28, 1997; the award of attorney's fees is set at

10% of the total amount due; and the award for litigation expenses increased to P92,321.10.9

Issue: Is petitioner liable for the principal debtor’s loan obtained six months after the execution

of the Continuing Suretyship?

Held: Yes. A contract of suretyship is an agreement whereby a party, called the surety,

guarantees the performance by another party, called the principal or obligor, of an obligation or

undertaking in favor of another party, called the obligee. Although the contract of a surety is

secondary only to a valid principal obligation, the surety becomes liable for the debt or duty of

another although it possesses no direct or personal interest over the obligations nor does it

receive any benefit therefrom. This was explained in the case of Stronghold Insurance Company,

Inc. v. Republic-Asahi Glass Corporation, where it was written:

The surety's obligation is not an original and direct one for the performance of his own act, but

merely accessory or collateral to the obligation contracted by the principal. Nevertheless,

although the contract of a surety is in essence secondary only to a valid principal obligation, his

liability to the creditor or promisee of the principal is said to be direct, primary and absolute; in

other words, he is directly and equally bound with the principal.

Sps. Nilo and Eliadora Ramos vs. Raul Obispo and Far East Bank and Trust CompanyG.R # 193804

February 27, 2013

Facts: Petitioner Nilo Ramos and respondent Raul Obispo met each other and became best

friends while they were working in Saudi Arabia as contract workers. After both had returned to

the Philippines, Ramos continued to visit Obispo who has a hardware store. Sometime in August

1996, petitioners executed a Real Estate Mortgage (REM) in favor of respondent Far East Bank

and Trust Company (FEBTC)-Fairview Branch, over their property covered by Transfer

Certificate of Title (TCT) No. RT-64422 (369370) of the Registry of Deeds of Quezon City. The

notarized REM secured credit accommodations extended to Obispo in the amount

of P1,159,096.00. On even date, the REM was registered and annotated on the aforesaid title.3

On September 17, 1999, FEBTC received a letter from petitioners informing that Obispo, to

whom they entrusted their property to be used as collateral for a P250,000.00 loan in their behalf,

had instead secured a loan forP1,159,096.00, and had failed to return their title despite full

payment by petitioners of P250,000.00. Petitioners likewise demanded that FEBTC furnish them

with documents and papers pertinent to the mortgage failing which they will be constrained to

refer the matter to their lawyer for the filing of appropriate legal action against Obispo and

FEBTC.4

There being no action taken by FEBTC, petitioners filed on October 12, 1999 a complaint for

annulment of real estate mortgage with damages against FEBTC and Obispo. Petitioners alleged

that they signed the blank REM form given by Obispo who facilitated the loan with FEBTC, and

that they subsequently received the loan proceeds of P250,000.00 which they paid in full through

Obispo. With their loan fully settled, they demanded the release of their title but Obispo refused

to talk or see them, as he is now hiding from them. Upon verification with the Registry of Deeds

of Quezon City, petitioners said they were surprised to learn that their property was in fact

mortgaged for P1,159,096.00. Petitioners thus prayed that the REM be declared void and

cancelled; that FEBTC be ordered to deliver to them all documents pertaining to the loan and

mortgage of Obispo; and that FEBTC and Obispo be ordered to pay moral damages and

attorney’s fees.5

Issue: Are petitioners Ramos valid accommodation mortgagors of respondent Obispo?

Held: Yes. The validity of an accommodation mortgage is allowed under Article 2085 of the

Civil Code which provides that "[t]hird persons who are not parties to the principal obligation

may secure the latter by pledging or mortgaging their own property." An accommodation

mortgagor, ordinarily, is not himself a recipient of the loan, otherwise that would be contrary to

his designation as such.

In this case, petitioners denied having executed an accommodation mortgage and claimed to

have executed the REM to secure only their P250,000.00 loan and not the P1,159,096.00

personal indebtedness of Obispo. They claimed it was Obispo who filled up the REM form

contrary to their instructions and faulted FEBTC for being negligent in not ascertaining the

authority of Obispo and failing to furnish petitioners with copies of mortgage documents. Obispo

initially gave them P100,000.00 and the balance was given a few months later. After supposedly

completing payment of the amount of P250,000.00 to Obispo, petitioners discovered that the

REM secured a bigger amount. Because of the alleged fraud committed upon them by Obispo

who made them sign the REM form in blank, petitioners sought to have the REM annulled and

their title over the mortgaged property released by FEBTC. In other words, since their consent to

the REM was vitiated, judicial declaration of its nullity is in order

Macaria Arguelles and heirs of Petronio Arguelles vs. Malarayat Rural Bank, IncG.R # 200468

March 19, 2014

Facts: The late Fermina M. Guia was the registered owner of Lot 3, a parcel of agricultural land

in Barrio Pinagkurusan, Alitagtag, Batangas, with an area of 4,560 square meters, as evidenced

by Original Certificate of Title (OCT) No. P-129304 of the Register of Deeds of Batangas. On

December 1, 1990, Fermina M. Guia sold the south portion of the land with an approximate area

of 1,350 square meters to the spouses Petronio and Macaria Arguelles.

On August 18, 1997, the spouses Guia obtained a loan in the amount of P240,000 from the

respondent Malarayat Rural Banlc and secured the loan with a Deed of Real Estate

Mortgage7 over Lot 3-C. The loan and Real Estate Mortgage were made pursuant to the Special

Power of Attorney8 purportedly executed by the registered owner of Lot 3-C, Fermina M. Guia,

in favor of the mortgagors, spouses Guia. Moreover, the Real Estate

On July 22, 1999, the spouses Arguelles filed a complaint10 for Annulment of Mortgage and

Cancellation of Mortgage Lien with Damages against the respondent Malarayat Rural Banlc with

the RTC, Branch 86, of Taal, Batangas. In asserting the nullity of the mortgage lien, the spouses

Arguelles alleged ownership over the land that had been mortgaged in favor of the respondent

Malarayat Rural Bank. On August 16, 1999, the respondent Malarayat Rural Bank filed an

Answer with Counterclaim and Cross-claim11 against cross-claim-defendant spouses Gui a

wherein it argued that the failure of the spouses Arguelles to register the Deed of Sale dated

December 1, 1990 was fatal to their claim of ownership.

Issue: Is Malarayat Rural Bank a mortgagee in good faith?

Held: No. Petitioners imputed negligence on the part of respondent Malarayat Rural Bank when

it approved the loan application of the spouses Guia. They pointed out that the bank failed to

conduct a thorough ocular inspection of the land mortgaged and an extensive investigation of the

title of the registered owner. And since the respondent Malarayat Rural Bank cannot be

considered a mortgagee in good faith, petitioners argued that the unregistered sale in their favor

takes precedence over the duly registered mortgage lien. On the other hand, respondent

Malarayat Rural Bank claimed that it exercised the required degree of diligence before granting

the loan application. In particular, it asserted the absence of any facts or circumstances that can

reasonably arouse suspicion in a prudent person. Thus, the respondent Malarayat Rural Bank

argued that it is a mortgagee in good faith with a better right to the mortgaged land as compared

to the vendees to the unregistered sale.

Philippine National Bank vs. Sps. Bernard and Cresencia MaranonG.R # 189316July 1, 2013

Facts: The controversy at bar involves a 152-square meter parcel of land located at Cuadra-

Smith Streets, Downtown, Bacolod (subject lot) erected with a building leased by various

tenants. The subject lot was among the properties mortgaged by Spouses Rodolfo and Emilie

Montealegre (Spouses Montealegre) to PNB as a security for a loan. In their transactions with

PNB, Spouses Montealegre used Transfer Certificate of Title (TCT) No. T-156512 over the

subject lot purportedly registered in the name of Emilie Montealegre (Emilie).6

When Spouses Montealegre failed to pay the loan, PNB initiated foreclosure proceedings on the

mortgaged properties, including the subject lot. In the auction sale held on August 16, 1991,

PNB emerged as the highest bidder. It was issued the corresponding Certificate of Sale dated

December 17, 19917 which was subsequently registered on February 4, 1992.8

Before the expiration of the redemption period or on July 29, 1992, Spouses Marañon filed

before the RTC a complaint for Annulment of Title, Reconveyance and Damages9 against

Spouses Montealegre, PNB, the Register of Deeds of Bacolod City and the Ex-Officio Provincial

Sheriff of Negros Occidental. The complaint, docketed as Civil Case No. 7213, alleged that

Spouses Marañon are the true registered owners of the subject lot by virtue of TCT No. T-

129577 which was illegally cancelled by TCT No. T-156512 under the name of Emilie who used

a falsified Deed of Sale bearing the forged signatures of Spouse Marañon10 to effect the transfer

of title to the property in her name.

In its Answer,11 PNB averred that it is a mortgagee in good faith and for value and that its

mortgage lien on the property was registered thus valid and binding against the whole world.

Issue: Does the mortgage extends or includes the fruits of the mortgaged property?

Held:No. It is readily apparent from the facts at hand that the status of PNB’s lien on the subject

lot has already been settled by the RTC in its Decision dated June 2, 2006 where it was adjudged

as a mortgagee in good faith whose lien shall subsist and be respected. The decision lapsed into

finality when neither of the parties moved for its reconsideration or appealed.

Rent, as an accessory follow the principal.37 In fact, when the principal property is mortgaged,

the mortgage shall include all natural or civil fruits and improvements found thereon when the

secured obligation becomes due as provided in Article 2127 of the Civil Code.

It is beyond question that PNB’s mortgagors, Spouses Montealegre, are not the true owners of

the subject lot much less of the building which produced the disputed rent. The foreclosure

proceedings on August 16, 1991 caused by PNB could not have, thus, included the building

found on the subject lot and the rent it yields. PNB’s lien as a mortgagee in good faith pertains to

the subject lot alone because the rule that improvements shall follow the principal in a mortgage

under Article 2127 of the Civil Code does not apply under the premises. Accordingly, since the

building was not foreclosed, it remains a property of Spouses Marañon; it is not affected by non-

redemption and is excluded from any consolidation of title made by PNB over the subject lot.

Thus, PNB’s claim for the rent paid by Tolete has no basis.

Sps. Pio Dato and Sonia Y. Sia vs. Bank of the PhilippinesG.R # 181873

November 27, 2013

Facts: On May 23, 1990, petitioners Spouses Pio Dato (Pio) and Sonia Y. Sia (Spouses Sia)

applied for a P240,000.00 loan which was granted by the Bank of the Philippine Islands (BPI)

with a term of six months and secured by a real estate mortgage over a parcel of land owned by

Spouses Sia denominated as Lot 1, situated in Labangon, Cebu, covered by Transfer Certificate

of Title (TCT) No. 102434. Subsequently, on August 8, 1990, Spouses Sia availed of a P4

Million Revolving Promissory Note Line with a term of one year, secured by the same real estate

mortgage over TCT No. 102434.5

Spouses Sia alleged that their loan was "precipitated by the representation of the [BPI] that the

same will be indorsed to [Industrial Guarantee and Loan Fund] (IGLF) [in order] for the spouses

to be able to avail of a much lower interest rate and longer payment terms."6

Before the P240,000.00 and P4 Million loans matured, Spouses Sia approached BPI through

Mona Padilla (Padilla), account officer of BPI for additional loans. One was for P2 Million, and

another was for P2.8 Million. After some discussion with Padilla, Spouses Sia agreed to obtain a

Credit Facility of P5.7 Million using the same collaterals offered in their previous loans and four

additional parcels of land, namely, TCT Nos. 87010, 102435, 102436 and 102437.7

On February 13, 1991, Padilla sent a written reminder to Spouses Sia to settle all unpaid interest

before February 22, 1991. Yet the spouses failed to pay the same. Their principal loans

of P240,000.00 and P4 Million loan also remained unsettled. BPI, through Padilla and Assistant

Vice President, Danilo A. Quinto sent another demand letter to them requesting payment of the

outstanding loan.9

Spouses Sia still failed to pay the principal amount of P4,240,000.00 exclusive of interest,

penalties and other charges. But the amount of P800,000.00 from the P5.7 Million Credit Facility

was paid through a Letter of Credit. As the P240,000.00 and P4 Million loans of Spouses Sia

were not yet settled, BPI cancelled the P5.7 Million Credit facility. To facilitate and assist

Spouses Sia in paying off their loans, the four lots which secured the P5.7 Million Credit Line

Facility were released. Spouses Sia agreed to sell the lots and use the proceeds thereof to make

partial payments of their loans. Consequently, BPI issued a cancellation of the real estate

mortgage over the four lots which secured the P5.7 Million Credit Line Facility.10

Issue: Is the extra-judicial foreclosure valid?

Held: Yes. It is a settled rule of law that foreclosure is proper when the debtors are in default of

the payment of their obligation.

The facts show that petitioner mortgaged the subject property to respondent bank. Upon maturity

of the loan, petitioner failed to pay the loan despite demand. The property was foreclosed and

sold in a public auction where respondent bank was the highest bidder.1âwphi1 

Petitioner failed to redeem the property within the one-year redemption period. Respondent bank

consolidated its ownership over the property and a new title was issued in its favor. Hence, it

became the ministerial duty of the court to issue the writ of possession applied for by respondent

bank.

Despite the pending suit for annulment of the mortgage and Notice of Sheriff’s Sale, respondent

bank is entitled to a writ of possession, without prejudice to the eventual outcome of the said

case