Arellano University School of Law

2019–2020

CIVIL LAW REVIEW 2

Case Digest for Years 2019-2020

Submitted to:

ATTY. CRISOSTOMO A. URIBE

Submitted by:

#38 Loyola, Paula Bianca A.

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 TABLE OF CONTENTS

I. Obligations
A. In General
1. Definition
2. Kinds of obligations as to basis and enforceability
3. Prescription of Actions
 FLORO MERCENE, petitioner vs. GOVERNMENT
SERVICES INSURANCE SYSTEM respondent (G.R No. 10
192971; 10 January 2018)
 Amparo S. Cruz, et. al. vs Angelito S. Cruz, et. al. (G.R 12
211153; 28 February 2018)
 Land Bank of the Philippines vs. Herederos de Ciriaco 13
Chunaco Distileria Inc (G.R. 206992; 11 June 2018)
4. Elements of Obligations
B. Sources of Civil Obligations
1. Law
 Astrid A. Van de Brug et. al vs Philippine National Bank
15
(G.R No. 207004; 6 June 2018)

2. Contracts
3. Quasi-contracts
4. Acts or omissions punished by law
5. Quasi-delicts
C. Compliance with Obligations
D. Kinds of Civil Obligations
1. As to Perfection and Extinguishment
a. Pure
b. Conditional
 Federal Express Corporation vs Luwalhati R. Antonio et. al 16
(G.R No. 199455; 27 June 2018)
c. With a term or period
2. As to Plurality of Prestation
a. Conjunctive
b. Alternative
c. Facultative
3. As to rights and obligations of multiple parties
a. Joint

b. Solidary
c. Disjunctive
4. As to performance of prestation
a. Divisible
b. Indivisible
c. Joint indivisible
d. Solidary indivisible
5. As to the presence of an accessory undertaking in case of breach
a. With a Penal Clause
Distinguished from liquidated damages
E. Breach of Obligations
Manner of Breach
1. Fraud
2. Negligence
3. Delay
 Spouses Francisco Ong and Betty Lim Ong et. al vs. BPI
18
Family Savings Bank Inc. (G.R No. 208638; 24 January
2018 )
4. Any other manner of contravention
 Bank of the Philippine Islands and Ana C. Gonzales vs. 19
Spouses Fernando Quiaot and Nora Quiaot (G.R No.

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 199562; 16 January 2019)

Excuses for non-performance

1. Fortuitous Event
2. Act of Creditor
F. Remedies for Breach of Obligations
1. Extra-judicial remedies
a. Expressly granted by law
b. Stipulated
2. Judicial remedies
a. Principal remedies
b. Subsidiary remedies

c. Ancillary remedies
G. Modes of Extinguishment of Obligations
1. Payment or performance
 Demosthenes R. Arbilon vs Sofronio Manlangit (G.R 21
197290; 22 January 2018)
 Jose T. Ong Bun vs Bank of the Philippine Islands (G.R No. 22
212362; 14 March 2018)
 Spouse Gildardo and Juliet Loquellano vs Hongkong
Shanghai Banking Corporation et. al. (G.R 200553; 10 24
December 2018)
Special Forms of Payment
a. Dation in Payment

b. Application of Payments
c. Payment by Cession or assignment
d. Tender of Payment and Consignation
2. Loss of the thing due or Impossibility of Performance
3. Condonation or remission of the debt
4. Confusion or Merger of Rights
5. Compensation
Kinds of Compensation
a. Legal
b. Conventional
c. Facultative
d. Judicial
6. Novation

Kinds of Novation
a. As to its nature
i. Subjective or personal
ii. Objective or real
iii. Mixed
b. As to its form
i. Express
ii. Implied
II. Contracts
A. In General
1. Definition
Auto-contract
2. Elements of Contracts
a. Essential
b. Natural
c. Accidental
B. Fundamental Characteristics/Principles of Contracts
1. Consensuality of Contracts 25
 Republic of the Philippines, represented by the Secretary of
DPWH vs Jose – Gamir Consuelo Dia Heirs Association (G.R

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 No. 218723; 12 November 2018)
Contract of Adhesion

2. Autonomy of Contracts
 D.M Ragasa Enterprise Inc. vs Banco de Oro (G.R No. 27
190512; 20 June 2018)
3. Mutuality of Contracts
Acceleration Clause
Escalation Clause
4. Obligatory Force of Contracts
5. Relativity of Contracts

Privity of Contracts
C. Classification of Contracts
1. According to degree of dependence
a. Preparatory
b. Principal
c. Accessory
2. According to perfection
a. Consensual
b. Real
c. Formal
3. According to solemnity or form
a. Any form
b. Special form
4. According to purpose
a. Transfer of ownership
b. Conveyance of use
c. Rendition of service
5. According to nature of obligation produced
a. Bilateral
b. Unilateral
6. According to cause
a. Onerous
b. Gratuitous or lucrative
c. Remuneratory
7. According to risk
a. Commutative
b. Aleatory
8. According to name
a. Nominate
b. Innominate
9. According to subject matter
a. Thing
b. Right
c. Service
D. Stages of Contracts
 Desiderio Dalisay Investments Inc. vs Social Security System 29
(G.R No. 231053; 4 April 2018)
1. Negotiation

Contract of Option
2. Perfection
3. Performance
4. Consummation
E. Essential Elements of Contracts
1. Consent of the contracting parties
 Northern Mindanao Industrial Port and Services Corporation vs
31
Ilagan Cement Corporation (G.R No. 215387; 23 April 2018)
2. Object certain which is the subject matter of the contract
3. Cause of the obligation

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4. Delivery
5. Due observance of prescribed formalities
F. Form of Contracts
 Norma M. Diampoc vs Jessie Buenaventura and The Registry
33
of Deeds from the city of Taguig (G.R No. 200383; 19 March
2018)
1. Any form – oral
2. Special form
a. Validity
b. Enforceability
c. Greater efficacy or convenience
G. Reformation of Instruments

H. Interpretation of Contracts

I. Kinds of Contracts as to Validity

1. Valid and binding
2. Valid but defective
a. Rescissible Contracts
b. Voidable Contracts
c. Unenforceable Contracts
3. Void or Inexistent
Rescissible Contracts
Voidable Contracts
Unenforceable Contracts
Void or Inexistent
 Asian Transmission Corporation vs Commissioner of Internal
35
Revenue (G.R No. 230861; 19 September 2018)
Special Contracts
A. Sales
1. In General

a. Definition
b. Characteristics
c. Kinds of Sale
 Lily S. Villamil substituted by her heirs Rudy E. Villamil et. al
36
vs. Spouses Juanito Erguiza and Mila Erquiza (G.R No.
195999; 20 June 2018)
d. Distinguished from other transactions
2. Elements of a Contract of Sale
a. Essential Elements

b. Natural Elements
c. Accidental Elements
3. Perfection of the Contract
a. Contract of Option
b. Formalities of Contract of Sale
4. Rights and Obligations of the Vendor
a. To transfer ownership
b. To deliver the object
c. Warranties
5. Rights and Obligations of the Vendee
a. Payment of Price
b. Right of Inspection
c. Acceptance

Maceda Law
6. Remedies for Breach of Contract
a. Remedies of Unpaid Seller
b. Remedies of the Buyer

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 Recto Law
7. Extinguishment of Sale
a. Causes
b. Redemption
B. Barter or Exchange
C. Lease
1. Nature
a. Kinds of Lease
 Perfecto M. Pascua vs Bank Wise and Philippine Veterans 37
Bank (G.R No. 191460;31 January 2018)
b. Definitions
c. Characteristics
d. Distinguished from other contracts/legal relations
2. Essential Elements
a. Consent
b. Object/purpose
c. Cause
Formalities
3. Rights and Obligations of Lessor/Lessee
a. Necessary repairs
 Victoria N Racelis vs Spouses Javier (G.R No. 189609; 29 39
January 2018)
b. Improvements
c. Collapse of a building
d. Reduction of the Rent
e. Extension of the Lease
f. Right of First Refusal
g. Sublease and Assignment of the Lease
4. Rights and Obligations of Third Persons
a. Suppliers
b. Buyers
5. Termination of Lease
a. Loss of the thing
b. Death of either party
c. Expiration of the period
d. Implied new lease
D. Agency
1. In General: Nature
a. Definition
b. Characteristics
 Shirley T. Lim et. al. vs People of the Philippines ( G.R No. 40
226590; 23 April 2018)
c. Distinguished from/compared with other relations
Features of a contract of agency
2. Kinds of Agency
 Donabellle V. Gonzales et. al., vs Spouses Gordon R. 43
Niamatali et. al., (G.R No. 226587; 21 November 2018)
a. Actual Agency
 Belina Cancio et. al., vs. Performance Foreign Exchange 44
Corporation (GR No. 182307; 6 June 2018)
b. Apparent or Ostensible Agency
c. Agency by Estoppel
3. Essential Elements of a Contract of Agency
a. Consent of the contracting parties principal and agent only
b. Object: Execution of a juridical act
c. Cause: Presumed to be for compensation
Form: 1869, 1874, 1878
4. Obligations of the Agent
a. To carry out the agency

b. To render an accounting of his transactions and to deliver

c. To be responsible for the acts of the substitute

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 d. Rules applicatble to a commission agent
Rules applicable to a guarantee commission agent: Del
credere agent
5. Rights and obligations of the Principal
a. To comply with all the obligations which the agent may have
contracted within the scope and in representation of the
principal
b. To advance to the agent the sums necessary
c. To reimburse the agent the sums advanced
Liability when there are two or more principals: solidary
Rights of Third persons in Incompatible contracts with agent
and principal
6. Modes of Extinguishment
E. Partnership
1. In General
a. Definition
b. Characteristics of Partnership as a Contract
 Aniceto G. Saludo vs Philippine National Bank (G.R No. 46
193138; 20 August 2018)
c. Distinguished from other combination and relations
2. Essential Requisites
a. Consent of the contracting parties
b. Object certain: to engage in lawful activity
c. Cause
Formal requisites
3. Classes of Partnerships
a. As to its Object: Universal and Particular Partnership
b. As to liability of partners: General and Limited Partnership
c. As to term: Fixed term, Particular Undertaking and Partnership at Will
4. Classes of Partners
a. According to their liability: General and Limited Partners
b. According to their contribution: Capitalist Partner and Industrial
Partner
c. According to the time they join the partnership: Incoming
d. According to Special Duties: Managing
5. The property rights of a partner are:
a. His rights in specific partnership property
b. His interest in the partnership
c. His right to participate in the management
6. Obligations of Partners among themselves
a. To make in specific partnership property
b. Fiduciary Duty
c. To participate in the losses
Nature of Liability of individual partners: Pro-rata, Subsidiary, Joint
or Solidary
7. Obligations of Partners with regard to third persons
8. Dissolution, Winding up and Termination
a. Nature and Effect of Dissolution
b. Causes of Dissolution
c. Distribution of Assets
9. Limited Partnership
F. Trusts
1. In General
2. Kinds of Trusts
a. Express
b. Implied
Credit Transactions: Loan, Deposit, Guaranty, and Suretyship
G. Nature of Credit Transactions
1. Definition
2. Scope
3. Distinguished from Bailments
H. Loan

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 1. Definition
2. Kinds of Loan
a. Commodatum
b. Mutuum
3. Characteristics
4. Essential Elements: Consent, Object and Cause
5. Rights and Obligations of Bailor and Bailee in Commodatum
6. Rights and Obligations of Bailor and Bailee in Mutuum
 Republic of the Philippines represented by DPWH vs. Leonor
Macabagdal et. al (G.R No. 227215; 10 January 2018) 48
 Lucila Yared and Heirs of late Ernesto Yared vs Land Bank of
the Philippines (G.R No. 213945; 31 January 2018) 49
 Paz E. Rebadulla et. al vs Republic of the Philippines, the
Secretary of DPWH and Engr. Tomas L. Buen et. al. (G.R No.
222159; 31 January 2018) 50
 Apo Fruits Corporation vs The Land Bank of the Philippines
(G.R No. 217985-86; 21 March 2018) 51
 Arch, Eusebio Bernal doing business under the name and style
Contemporary builders vs Dr. Vivencio Villafor et. al. (G.R No.
213617; 18 April 2018) 52
 Security Bank Corporation vs Spouses Rodridog and Erlinda
Mercado (G.R No. 192934; 27 June 2018) 53
 Asian Terminals Inc. vs Padason Stainless Steel Corporation
55
(G.R No. 211876; 25 June 2018)
7. Modes of Extinguishment
I. Deposit
1. Nature: Definition: Purpose
2. Kinds of Deposit
a. Judicial
b. Extra-judicial
i. Voluntary
ii. Necessary
3. Characteristics
4. Essential Element - Subject Matter
5. Rights and Obligations of Depositor and Depositary
6. Modes of Extinguishment
J. Aleatory Contracts – Insurance, Gambling, Life Annuity
K. Guaranty and Suretyship
1. Nature: Definition: Purpose
2. Characteristics
3. Effects of Guaranty
a. Between the Guarantor and the Creditor
b. Between the Guarantor and the Debtor
c. Between Co-Guarantors
4. Modes of Extinguishment
L. Provisions common to Pledge and Mortgage
1. Nature: Definition: Purpose
2. Essential Elements
3. Indivisibility of the Contract
4. Pactum Commissorium
5. Right to recover deficiency: Who is entitled to excess?
6. Equity & Right of Redemption
M. Pledge
1. In general
a. Kinds of Pledge
b. Characteristics of Pledge
c. Extent/Coverage of the Pledge
2. Rights and Oobligations of the Pledgor
3. Rights and Obligations of the Pledgee
4. Modes of Extinguishment
N. Chattel and Real Estate Mortgage
1. In general: Characteristics, Subject Matter and Extent/coverage of
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 the Mortgage
2. Essential Requisites

3. Rights and Obligations of the Mortgagor

4. Rights and Obligations of the Mortgagee

5. Modes of Extinguishment
O. Antichresis
1. Nature and Characteristics
2. Rights and Obligations of the Debtor and Creditor
P. Concurrence and Preference of Credit
1. General Principles
2. Classification of Credit
3. Order of Preference of Credit
Torts and Damages
Q. Introduction
1. Nature of Quasi-delict
2. Quasi-delict distinguished from tort, Crime and Contract
3. Scope/Sources of Law
R. Elements of Quasi-Delict
1. Act or omission, there being Fault or Negligence
a. Concept of Negligence
b. Standard of Care: Degree of Diligence
c. Proof of Negligence: Burden of Proof
2. Damage or Injury
3. Casual Connection between the Act or Omission and the Damage
S. Person liable
1. The Tortfeasor

2. Vicarious Liability: Person liable for Tortuous Acts of Another

3. Nature of Liability
4. Defenses
a. Absence of an element
b. Fortuituous Event
c. Contributory Negligence

d. Prescription
e. Doctrine of Last Clear Chance
f. Double Recovery
g. Lack of Jurisdiction
Liability for Torts: Damages
T. In General

U. Kind of Damages
1. Actual or Compensatory
2. Moral

3. Nominal
4. Temperate or Moderate

5. Liquidated
6. Exemplary or corrective

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PRESCRIPTION OF ACTIONS

FLOR MERCEN vs. GOVERNMENT SERVICE INSURANCE SYTEM

G.R 192971; 10 January, 2018

Martires, J.;

This petition for review on certiorari seeks to reverse and set aside the 29 April 2010
Decision and 20 July 2010 resolution of the Court of Appeals (CA) in CA-G.R. CV No.
86615 which reversed the 15 September 2005 decision of the Regional Trial Court,
Branch 220, Quezon City (RTC).

Facts:
Floro Mercen obtained a loan from GSIS, as a security a real estate mortgage was executed
over Mercene’s property in Quezon City and the mortgage is registered and annotation is made
on 24th of March 1965. Another loan was contracted by Mercene and the same was likewise
secured by real estate mortgage on the same parcel of land and the same was registered and
duly annotated in the title. Mercene opted to file a quieting of title against GSIS alleging that
GSIS failed to exercise its rights as mortgagee and therefore the failure to exercise constitutes
cloud to the title of the property. GSIS countered alleging that the petitioner has no cause of
action and that the prescription does not run against them being a government entity. The RTC
ruled in favor of Mercene and ordered the cancellation of the annotations in the title providing
that the annotations are valid but was ineffective. GSIS appealed to the CA. The court of
appeals rendered reversal of the RTC decision. It erred in its decision on prescription and that
Mercene failed to state the maturity date of the mortgage contract. Hence this petition.

Issue:
Whether the court of appeals erred in ruling that the real estate mortgage has yet to prescribed
and it is material in determination of the cause of action.

Held:
The petition is without merit.
In order for cause of action to arise, the following elements must be present: (1) a right in favor
of the plaintiff by whatever means and under whatever law it arises or is created; (2) an
obligation on the part of the named defendant to respect or not to violate such right; and (3) an
act or omission on the part of such defendant violative of the right of the plaintiff or constituting a
breach of obligation of the defendant to the plaintiff. In University of Mindanao, Inc. v. Bangko
Sentral ng Pilipinas, et al., the Court clarified that prescription runs in mortgage contract from
the time the cause of action arose and not from the time of its execution, to wit: The prescriptive
period neither runs from the date of the execution of a contract nor does the prescriptive period
necessarily run on the date when the loan becomes due and demandable. Prescriptive period
runs from the date of demand, subject to certain exceptions. In other words, ten (10) years may
lapse from the date of the execution of contract, without barring a cause of action on the
mortgage when there is a gap between the period of execution of the contract and the due date
or between the due date and the demand date in cases when demand is necessary. The
mortgage contracts in this case were executed by Saturnino Petalcorin in 1982. The maturity
dates of FISLAI's loans were repeatedly extended until the loans became due and demandable
only in 1990. Respondent informed petitioner of its decision to foreclose its properties and
demanded payment in 1999. The running of the prescriptive period of respondent's action on
the mortgages did not start when it executed the mortgage contracts with Saturnino Petalcorin
in 1982.1âwphi1 The prescriptive period for filing an action may run either (1) from 1990 when
the loan became due, if the obligation was covered by the exceptions under Article 1169 of the
Civil Code; (2) or from 1999 when respondent demanded payment, if the obligation was not
covered by the exceptions under Article 1169 of the Civil Code. [emphasis supplied] In
Maybank Philippines, Inc. v. Spouses Tarrosa, the Court explained that the right to foreclose
prescribes after ten (10) years from the time a demand for payment is made, or when then loan
becomes due and demandable in cases where demand is unnecessary, viz: An action to
enforce a right arising from a mortgage should be enforced within ten (10) years from the time
the right of action accrues, i.e., when the mortgagor defaults in the payment of his obligation to
the mortgagee; otherwise, it will be barred by prescription and the mortgagee will lose his rights
under the mortgage. However, mere delinquency in payment does not necessarily mean delay
in the legal concept. To be in default is different from mere delay in the grammatical sense,
because it involves the beginning of a special condition or status which has its own peculiar
effects or results. In order that the debtor may be in default, it is necessary that: (a) the
obligation be demandable and already liquidated; (b) the debtor delays performance; and (c) the
creditor requires the performance judicially or extrajudicially, unless demand is not necessary -
i.e., when there is an express stipulation to that effect; where the law so provides; when the
period is the controlling motive or the principal inducement for the creation of the obligation; and

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where demand would be useless. Moreover, it is not sufficient that the law or obligation fixes a
date for performance; it must further state expressly that after the period lapses, default will
commence. Thus, it is only when demand to pay is unnecessary in case of the aforementioned
circumstances, or when required, such demand is made and subsequently refused that the
mortgagor can be considered in default and the mortgagee obtains the right to file an action to
collect the debt or foreclose the mortgage. Thus, applying the pronouncements of the Court
regarding prescription on the right to foreclose mortgages, the Court finds that the CA did not err
in concluding that Mercene's complaint failed to state a cause of action. It is undisputed that his
complaint merely stated the dates when the loan was contracted and when the mortgages were
annotated on the title of the lot used as a security. Conspicuously lacking were allegations
concerning: the maturity date of the loan contracted and whether demand was necessary under
the terms and conditions of the loan. As such, the RTC erred in ruling that GSIS' right to
foreclose had prescribed because the allegations in Mercene's complaint were insufficient to
establish prescription against GSIS. The only information the trial court had were the dates of
the execution of the loan, and the annotation of the mortgages on the title. As elucidated in the
abovementioned decisions, prescription of the right to foreclose mortgages is not reckoned from
the date of execution of the contract. Rather, prescription commences from the time the cause
of action accrues; in other words, from the time the obligation becomes due and demandable, or
upon demand by the creditor/mortgagor, as the case may be. In addition, there was no judicial
admission on the part of GSIS with regard to prescription because treating the obligation as
prescribed, was merely a conclusion of law. It would have been different if Mercene's complaint
alleged details necessary to determine when GSIS' right to foreclose arose, i.e., date of maturity
and whether demand was necessary.

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 AMPARO S. CRUZ, ERNESTO HALILI, ALICIA H. FLORENCIO et.al vs. ANGELITO S.
CRUZ, CONCEPCION S. CRUZ, et.al
G.R 21153; 28 February 2018

Del Castillo, J.;

This Petition for Review on Certiorari1 seeks to set aside the June 25, 2013 Decision2
and January 29, 2014 Resolution of the Court of Appeals (CA) in CAG. R. CV. No. 96345
which, respectively, granted herein respondents' appeal and reversed the June 1, 2010
Decision4 of the Regional Trial Court of San Mateo, Rizal, Branch 75 (RTC) in Civil Case
No. 1380-98 SM, and denied petitioners' motion for reconsideration thereto.

Facts:
Respondents are co-owners of parcel of land which they inherited from their deceased parents.
The parties executed an Extra-Judicial Settlement on the agreement that each heir was to
receive an equal portion of the parcel of land. When the subject property was being subdivided,
they discovered that Antonia allocated two lots, as against one each for the respondents, that
the allocation contravened the agreement among the heirs. That they perpetrate Concepcion,
illiterate, to sign the deed of Extra-Judicial Settlement. Antonia passed away, leaving the
petitioners who are in possession of the subject land. The RTC ruled in favor of the Petitioners
on the allegation that the Extra-Judicial Settlement is valid and that the same is not made under
undue influence or deceit. The respondents filed an appeal with the CA which the CA decided
setting aside and reversing the decision of the RTC, providing that the cause of action for
Annulment has already prescribed. Hence the petition.

Issue:
Whether the Court of Appeals Erred in ruling that the respondent’s cause of action for
Annulment has not prescribed and ignored contemporaneous and subsequent act of
respondents indicating the absence of fraud and intimidation in the Extra-Judicial Settlement.

Held:
The petition is without merit.
The present action involves a situation where one heir was able through the expedient of an
extrajudicial settlement that was written in a language that is not understood by one of her co-
heirs - to secure a share in the estate of her parents that was greater than that of her siblings, in
violation of the principle in succession that heirs should inherit in equal shares. Thus, Antonia
represented in this case by her sibling heirs received two lots as against her siblings, including
respondent Concepcion, who respectively received only one lot each in the subject 940-square-
meter property. This she was able to achieve through the subject 1986 deed of extrajudicial
settlement which was written in English, a language that was not known to and understood by
Concepcion given that she finished only Grade 3 elementary education. With the help of
Amparo, Antonia was able to secure Concepcion' s consent and signature without the benefit of
explaining the contents of the subject deed of extrajudicial settlement. For this reason,
Concepcion did not have adequate knowledge of the contents and ramifications of the subject
deed of extrajudicial settlement; she was left unaware of the sharing arrangement contained
therein, and realized it only when Antonia attempted to subdivide the subject property in 1998,
and the plan of subdivision survey was shown to Concepcion ~ which revealed that Antonia
obtained two lots. Consequently, Concepcion filed Civil Case No. 1380-98 SM on August 17,
1998. Jn short, this is a simple case of exc1usion in legal succession, where coheirs were
effectively deprived of their rightful share to the estate of their parents - who died without a will-·
by virtue of a defective deed of extrajudicial settlement or prescription which granted a bigger
share to one of the heirs and was prepared in such a way that the other heirs would be
effectively deprived of discovering and knowing its contents. Under the law, "[t]he children of the
deceased shall always inherit from him in their own right, dividing the inheritance in equal
shares." In this case, two of Concepcion's coheirs renounced their shares in the subject
property; their shares therefore accrued to the remaining coheirs, in equal shares as well. Thus,
while the CA was correct in ruling in favor of Concepcion and setting aside the subject deed of
extrajudicial settlement, it erred in appreciating and ruling that the case involved fraud - thus
applying the four-year prescriptive period - when it should have simply held that the action for
the declaration of nullity of the defective deed of extrajudicial settlement does not prescribe,
under the circumstances, given that the same was a total nullity. Clearly, the issue of literacy is
relevant to the extent that Concepcion was effectively deprived of her true inheritance, and not
so much that she was defrauded.

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LAND BANK OF THE PHILIPPINES vs. HEREDEROS DE CIRIACO CHUNACO DISTILERIA,
INC
G.R. 206992; 11 June 2018

Gesmundo, J.;

This is an appeal by certiorari seeking to reverse and set aside the April 26, 2013
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 98113. The CA denied the
petition for certiorari seeking to annul and set aside the Resolutions2 dated July 7, 2005
and December 19, 2006, respectively, of the Department of Agrarian Reform Adjudication
Board (DARAB) in DSCA No. 03 83, a case for preliminary determination of just
compensation.

Facts:
Herederos voluntary offered for the sale of subject lots to the Republic of the Philippines by
virtue of the Comprehensive Agrarian Reform Program. Landbank, by virtue of its mandate,
cape up with the CARP compensation for the subject land. Upon receipt of the valuation,
Herederos rejected the offer. Hence a case for preliminary determination of just compensation
for the said land is conducted by PARAD. The PARAD ruled in favor of the Herederos that the
valuation of the property is the compensation they insisted. Petitioners filed a Motion for
Reconsideration to PARAD and the same was denied. Petitioner filed an Extra-Judicial of just
compensation PARAD issued an order declaring the first decision to be final and executory. The
petitioner filed a Certiorari. DARAB ruled denying the petition for lack of merit The judicial
determination must be done within the reglementary period of 15 days. The petitioner filed a
motion for reconsideration and was denied and filed with the court of appeals and also denied
the motion. Hence this petion.

Issue:
Whether the petition was filed on time and that they are entitled to the fresh 15 day period
despite denial of their motion, as regard prescription under the New Civil Code.

Held:
Yes, the petition is filed on time and that they have 15 days fresh period.
The valuation of property in eminent domain is essentially a judicial function which cannot be
vested in administrative agencies. The executive department or the legislature may make the
initial determination, but when a party claims a violation of the guarantee in the Bill of Rights that
private property may not be taken for public use without just compensation, no statute, decree,
or executive order can mandate that its own determination shall prevail over the court's findings.
Much less can the courts be precluded from looking into the "just-ness" of the decreed
compensation. Fittingly, as the taking of property under R.A. No. 6657 is an exercise of the
power of eminent domain by the State, the valuation of property or determination of just
compensation in eminent domain proceedings is essentially a judicial function, which is vested
with the courts and not with administrative agencies. 19 Consequently, the SAC can properly
take cognizance of any petition for determination of just compensation. Nevertheless, the
DARAB Rules restrict the period wherein a party may avail of the judicial determination of just
compensation before the RTC-SAC. Section 11 of the DARAB Rules states the remedy and the
period to assail the preliminary determination of just compensation by P ARAD. In the recent
case of Land Bank of the Philippines v. Dalauta (Dalauta), the 15-day prescriptive period under
Section 11 of the DARAB Rules was struck down because it undermined and unnecessarily
impeded the original and exclusive jurisdiction of the RTC-SAC to determine just compensation
under Section 57 of R.A. No. 6656. Further, it finally settled once and for all the period within
which to file a petition for judicial determination of just compensation before the R TC-SAC. In
Dalauta, the preliminary determination of just compensation was referred to the PARAD. In its
resolution dated December 4, 1995, the PARAD affirmed the valuation of the petitioner therein.
On February 28, 2000, or four ( 4) years and three (3) months later, the respondent filed a
petition for judicial determination of just compensation before the RTC-SAC. One of the issues
that had to be resolved by the Court was whether a petition for judicial determination of just
compensation in the RTC-SAC proscribes if not filed within the 15-day period under the DARAB
Rules. Here, when the P ARAD denied its motion for reconsideration on the preliminary
determination of just compensation, petitioner did not anymore appeal before the DARAB.
Instead, it timely filed a petition for judicial determination of just compensation before the RTC-
SAC. Thus, the administrative proceedings on the determination of just compensation were
terminated. It was only when the P ARAD ordered the execution of its decision and issued the
writ of execution, even though there was a timely petition for judicial determination of just
compensation before the RTC-SAC, that petitioner sought refuge from the DARAB. Evidently,
petitioner's cause of action is essentially to stop the enforcement of the decision of the P ARAD

14 | P a g e
because of a pending petition before the RTC-SAC. In fine, the PARAD cannot enforce its
February 17, 2004 decision because there is still a pending judicial determination of just
compensation before the courts. It is only when the said judicial determination attains finality
that the award of just compensation may be executed.

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SOURCES OF OBLIGATION: Law

ASTRID A VAN DE BRUG, et. al. vs. PHILIPPINE NATIONAL BANK

G.R NO. 207004; 06 June 2018

Caguioa, J.;

Before the Court is a petition for review (Petition) under Rule 45 of the Rules of Court
assailing the Decision  of the Court of Appeals (CA) dated March 23, 2012 in CA-G.R. CV
No. 00708, which granted the appeal of the respondent Philippine National Bank (PNB)
and reversed the Decision dated December 10, 2004 of the Regional Trial Court,
6th Judicial Region, Branch 58, San Carlos City, Negros Occidental (RTC) in Civil Case
No. RTC-725 in favor of the petitioners. Likewise, the Resolution of the CA dated April 1,
2013, denying the petitioners' motion for reconsideration, is being assailed.

Facts:
Spouses Romulus and Evelyn Aguilar are borrowing clients of PNB. One of their loan from PNB
is secured by a real estate mortgage over parcel of land. However, for the failure of the late
spouses to pay their obligation, the property is foreclosed, and the ownership of the subject land
was consolidated under the name of PNB. Romulus wrote a letter to PNB and the responses
was received by Evelyn, PNB admits that they are covered by said special law, the spouses
need to comply first with its requirements. The heirs of Aguilar alleged that they complied with
the stated requirements. PNB then wrote a letter to the Aguilar and it alleged that since they are
the owners of the parcel of land, they can now exercise the rights of an owner and that includes,
but not limited to conveyance of the subject lot to DAR. Hence, a petition for implementation of
the Special Law (RA 7207) was filed and prayer for grant of damages. The PNB maintains the
contention that the heirs failed to comply with the requirements making it having no cause of
action. RTC rendered decision in favor of the Aguilars, ordering PNB to implement the said law
and accord the rights entitled under said law. PNB filed an appeal to the CA and the CA
rendered decision reversing the RTC ruling. Hence this petition.

Issue:
Whether the CA erred in the implementation of the RA 7207 and that the Aguilars are entitled to
restitution.

Held:
No, the Aguilars are not entitled to restitution and that the CA correctly ruled on implementation
of the RA 7207.
Based on the foregoing, the entitlement of the Aguilars to the benefits of RA 7202 has been
correctly recognized by the CA, viz.: In essence, the issue that [the CA] needs to resolve is
whether or not [the Aguilars] were entitled to the benefits of RA 7202. Nevertheless, [the CA]
finds it vital to primarily establish whether the account of [the Aguilars'] predecessors-in-interest,
the late spouses Aguilar, was qualified under RA 7202. The Aguilars further implore the Court,
as they did unsuccessfully with the CA, to compel PNB to extend to them the accommodation
that PNB made with spouses Frederick and Mildred Pfleider (the spouses Pfleider) wherein in
the Restructuring and Compromise Agreement (Compromise Agreement) that PNB entered into
with the spouses Pfleider in Civil Case No. 7212 before Branch 45 of the RTC ofBacolod
City, PNB credited in favor of the spouses Pfleider the value of their agricultural lots that PNB
had also foreclosed and transferred via VOS to DAR. The Aguilars argue that "[they] are
similarly circumstanced as the Pfleiders[,] [and] [t]here was no reason for PNB to treat [them]
differently." PNB counters that RA 7202 "does not provide for the reconveyance of the
foreclosed propertylies to the qualified sugar producers" and "[w]hat the qualified sugar
producers with foreclosed property/ies were entitled to under R.A. No. 7202 was for
the recomputation of their loan account and if there were any excess payment/s, to claim with
the x x x BSP x x x for restitution." PNB also posits that the foreclosure of the subject
agricultural lots was done before the effectivity of RA 7202 and when they were subjected to the
CARP, PNB, being then the landowner/claimant, had the right to claim and receive the CARP
proceeds thereof. The sources of obligations under Article 1157 of the Civil Code are: (1) law;
(2) contracts; (3) quasi-contracts; (4) acts or omissions punished by law; and (5) quasi-delicts.
Immediately, sources (2), (3) and (4) are inapplicable in this case. The Aguilars are not privies
to the Compromise Agreement between PNB and the spouses Pfleider. Regarding law, as
PNB's source of obligation, the CA correctly ruled that the Aguilars are not entitled to restitution
under RA 7202. Thus, RA 7202 cannot be invoked as the statutory basis to compel PNB to treat
the Aguilars similarly with the spouses Pfleider.

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OBLIGATION; Kinds of Civil Obligation; Conditional

FEDERAL CORPORATION vs. LUWALHATI R. ANTONIO and ELLIZA BETTINA RICAZA

ANTONIO
G.R No. 199455; 27 June 2018

Leonen, J.:

This resolves a Petition for Review on Ceit1iorari under Rule 45 of the 1997 Rules of Civil
Procedure praying that the assailed Court of Appeals Augusit 31, 2011 Decision and
November 21, 2p 11 Resolution in CA-G .R. CV No. 91216 be reversed and set aside and
that Luwalhati R. Antonino (Luwalhati) and Eliza Bettina Ricasa Antonin6 (Eliza) be held
liable on Federal Express Corporation's (FedEx) counterclaim.

Facts:
The unit charges of Eliza in a unit in New York has become due, Luwalhati and Eliza are both in
the Philippines when the charges has become due, they decided to send several checks to
Sison for the payment of the rent unit and some for the taxes due. The parcel is addressed to
Sison to deliver it to Maxwell Kates and to New York Department of Finance. Sison allegedly did
not receive the package resulting to Non-Payment of the respondents. It was then informed that
checks were delivered to her neighbor. Eliza and Luwalhati sent demand letter to FedEx for the
damages but refused to comply with the same. FedEx alleges that they have no cause of action
because they failed to comply with condition precedent and that they shipped prohibited items
and misdeclared the parcel. RTC ruled in favor of Eliza and Luwalhati, ordering FedEx to pay
damages and attorney’s fees. FedEx filed an appeal and the same was sustained by the Court
of Appeals. A motion for reconsideration was filed but was denied hence the petion.

Issue:
Whether Federal Corporation is liable for damages on account of its failure to deliver the checks
to the consignee.

Held:
Yes, Federal Corporation is liable for damages.
A provision in a contract of carriage requiring the filing of a formal claim within a specified period
is a valid stipulation. Jurisprudence maintains that compliance with this provision is a legitimate
condition precedent to an action for damages arising from loss of the shipment: More
particularly, where the contract of shipment contains a reasonable requirement of giving notice
of loss of or injury to the goods, the giving of sue notice is a condition precedent to the action for
loss or injury or the right to enforce the carrier's liability. Such requirement is not an empty
formalism. The fundamental reason or purpose of such a stipulation is not to relieve the carrier
from just liability, but reasonably to inform it that the: shipment has been damaged and that it is
charged with liability therefor: and to give it an opportunity to examine the nature and extent of
the injury. This protects the carrier by affording it an opportunity to make an investigation of a
claim while the matter is fresh and easily investigated so as to safeguard itself from false and
fraudulent claims. (Citation omitted). In Philippine Airlines, Inc. v. Court of Appeals, Philippine
Airlines alleged that shipper Gilda Mejia (Mejia) failed to file a formal claim within the period
stated in the Air Waybill. This Court ruled that there was substantial compliance with the period
because of the zealous efforts demonstrated by Mejia in following up her claim. These efforts
coupled with Philippine Airlines' "tossing around the claim and leaving it unresolved for an
indefinite period of time" led this Court to deem the requisite period satisfied. This is pursuant to
Article 1186 of the New Civil Code which provides that "[t]he condition shall be deemed fulfilled
when the obligor voluntarily prevents its fulfillment": Considering the abovementioned incident
and private respondent Mejia's own zealous efforts in following up the claim, it was clearly not
her fault that the letter of demand for damages could only be filed, after months of exasperating
follow-up of the claim, on August 13, 1990. If there was any failure at all to file the formal claim
within the prescriptive period contemplated in the air waybill, this was largely because of PAL's
own doing, the consequences of which cannot, in all fairness, be attributed to private
respondent. Even if the claim for damages was conditioned on the timely filing of a formal claim,
'under Article 1186 of the Civil Code that condition was deemed fulfilled, considering that the
collective action of PAL's personnel in tossing around the claim and leaving it unresolved for an
indefinite period of time was tantamount to "voluntarily preventing its fulfillment." On grounds of
equity, the filing of the baggage freight claim, which sufficiently informed PAL of the damage
sustained by private respondent's cargo, constituted substantial compliance with the
requirement in the contract for the filing of a formal claim. (Citations omitted). Here, the Court of
Appeals detailed the efforts made by respondent Luwalhati and consignee Sison. It also noted
petitioner's ambiguous and evasive responses, nonchalant handling of respondents' concerns,
and how these bogged down respondents' actions and impaired their compliance with the
required 45-day period. Anent the issues concerning lack of cause of action and their so-called

17 | P a g e
"run-around" matter, We uphold the lower court's finding that the herein appellees complied with
the requirement for the immediate filing of a formal claim for damages as required in the Air
Waybill or, at least, We find that there was substantial compliance therewith. Luwalhati testified
that the addressee, Veronica Z. Sison promptly traced the whereabouts of the said package, but
to no avail.

18 | P a g e
MANNER OF BREACH: DELAY

SPOUSES FRANCISCO ONG and BETTY LIM ONG et. al. vs. BPI FAMILY SAVINGS BANK
G.R No. 208638; 24 January 2018

Reyes, Jr.,J.:

This is a Petition for Review under Rule 45 of the Rules of Court, as amended, seeking to
reverse and set aside the Decision dated January 3 1, 2013 and Resolution dated August
16, 2013 of the Court of Appeals (CA) in CA-G.R. CV No. 92348

Facts:
Petitioners are owner of a printing company under the name MELBROS Printing. Bank of
Southeast Asia’s managers visited petitioner’s office and discussed their loan facilities. Due to
the planned expansion of the corporation, they applied for credit facilities offered by the latter.
They executed a real estate mortgage over their property located in Paco Manila, in favor of
BSA as a security for the loan applied. The remaining credit line was not released yet without
payment of the initial released to the petitioner. Petitioner acceded but respondent failed to
release the same. BPI and BSA merged and acquired all rights and assume its obligation. BPI
filed an extrajudicial foreclosure of the mortgage. Petitioners instituted an action for damages
and TRO for the foreclosure. The RTC ruled in favor of the petitioner ordering the respondent
bank to pay the damages to the petitioner. BPI filed an appeal with the CA, the CA reversed the
decision. The Petitioners filed a motion for reconsideration but the same was denied, hence the
petition.

Issue:
Whether BSA incurred delay in the performance of its obligation.

Held:
Yes, BSA incurred delay on their performance.
Loan is a reciprocal obligation, as it arises from the same cause where one party is the creditor
and the other the debtor. The obligation of one party in a reciprocal obligation is dependent
upon the obligation of the other, and the performance should ideally be simultaneous. This
means that in a loan, the creditor should release the full loan amount and the debtor repays it
when it becomes due and demandable. In this case, BSA did not only incur delay in releasing
the pre-agreed credit line of PS,000,000.00 but likewise violated the terms of its agreement with
petitioners when it deliberately failed to release the amount of P2,000,000.00 after petitioners
complied with their terms and paid the first P3,000,000.00 in full. The default attributed to
petitioners when they stopped paying their amortizations on the term loan cannot be sustained
by this Court because long before they sent a Letter to BSA informing the latter of their refusal
to continue paying amortizations, BSA had already reneged on its obligation to release the
amount previously agreed upon, i.e., the P5,000,000.00 covered by the credit line. Article 1170
of the Civil Code enumerates the instances when parties to a contract may be held liable for
damages, viz.: Article 1170. Those who in the performance of their obligations are guilty of
fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are
liable for damages.
It bears stressing that petitioners entered into a credit agreement with BSA to enable them to
buy machineries and equipment for their printing business. On its face, it can be gleaned that
the purpose of the credit agreement with BSA was indeed to assist and finance petitioner's
business by way of providing additional funds as working capital or revolving fund. The direct
consequences therefore of the acts of BSA are: the machinery and equipment that were
essential to petitioners' business and requisite for its operations had to be procured so late in
time and had crippled the printing of school supplies, hence, petitioners were constrained to
cancel purchase orders of their clients to petitioners' damage. BSA claims that the release of
the amount covered by the credit line was subject to the "availability of funds" thus only a part of
the proceeds of the entire omnibus line was released. Assuming for the sake of discussion that
the funds at the time were insufficient to cover the entire P5,000,000.00, BSA should have at
least informed petitioners in advance so that the latter could have resorted to other means to
secure the amount needed for their printing business. The omnibus line was approved and
became effective on January 1997 yet BSA did not allow petitioners to draw from the line until
November 1997. Moreover, BSA downgraded petitioners' drawdown to only P3,000,000.00
despite the clear wordings of their credit agreement whereby petitioners were allowed to draw
any portion or all of the omnibus line not to exceed P5,000,000.00. The almost 10 months delay
in releasing the amount applied for by petitioners negates good faith on the part of BSA.

19 | P a g e
BREACH OF OBLIGATION; ANY OTHER MANNER OF CONTRAVENTION

BANK OF THE PHILIPPINE ISLANDS and ANA C. GONZALES vs. SPOUSES FERNADO V.
QUIAOT and NORA L. QUIAOT
G.R. No. 199562; 16 January 2019

Carpio, J.:

Before the Court is a petition for review on certiorari assailing the 22 September 2011
Decision and the 29 November 2011 Resolution of the Court of Appeals in CA-G.R. CV
No. 94141. The Court of Appeals affirmed the 15 May 2009 Decision of the Regional Trial
Court of Quezon City, Branch 100 in Civil Case No. Q-00-42619.

Facts:
Fernando maintains a dollar account in BPI. He encashed a check through Merlyn Lambayong
in BPI greenhills. In a complaint filed by the spouses, Merlyn did not count the money before
leaving the premise as the same was placed in a large manila envelope. They also did not
inform Merlyn that the bills are marked with its chapa and the bank did not issue a receipt
containing the serial number of the bills. Spouses left the Philippines and during the tour, some
of the bills were refused to acknowledge by several bank in several countries because they are
alleged to be counterfeit. They ask their daughter to relay what happened to them but Ana C.
Gonzales, manager of BPI greenhills refused to resolve the same. The spouses alleged that the
bills that the bank issued to its clients has failed to ensure its genuineness BPI alleged that they
all mark their bills with “chapa”. The RTC ruled in favor of the Spouses, hence the BPI filed an
appeal where the CA ruled affirmed the RTC decision. BPI filed Motion for Reconsideration but
the same was denied hence the appeal.

Issue:
Whether BPI is liable for damages failing to exercise due diligence in handling the withdrawal of
US Dollar bills.

Held:
BPI is liable for damages for failing to exercise due diligence in handling the withdrawal of US
Dollar bill.
In this case, BPI failed to exercise the highest degree of diligence that is not only expected but
required of a banking institution. It was established that on 15 April 1999, Fernando informed
BPI to prepare US$20,000 that he would withdraw from his account. The withdrawal, through
encashment of BPI Greenhills Check No. 003434, was done five days later, or on 20 April 1999.
BPI had ample opportunity to prepare the dollar bills. Since the dollar bills were handed to
Lambayong inside an envelope and in bundles, Lambayong did not check them. However, as
pointed out by the Court of Appeals, BPI could have listed down the serial numbers of the dollar
bills and erased any doubt as to whether the counterfeit bills came from it. While BPI Greenhills
marked the dollar bills with "chapa" to identify that they came from that branch, Lambayong was
not informed of the markings and hence, she could not have checked if all the bills were
marked. BPI insists that there is no law requiring it to list down the serial numbers of the dollar
bills. However, it is well-settled that the diligence required of banks is more than that of a good
father of a family. Banks are required to exercise the highest degree of diligence in its banking
transactions. In releasing the dollar bills without listing down their serial numbers, BPI failed to
exercise the highest degree of care and diligence required of it. BPI exposed not only its client
but also itself to the situation that led to this case. Had BPI listed down the serial numbers, BPI's
presentation of a copy of such listed serial numbers would establish whether the returned dollar
bills came from BPI or not. We agree with the Court of Appeals that the action of BPI is the
proximate cause of the loss suffered by the spouses Quiaoit. Proximate cause is defined as the
cause which, in natural and continuous sequence, unbroken by any efficient intervening cause,
produces injury and without which the result would not have occurred. Granting that Lambayong
counted the two bundles of the US$ I 00 bills she received from the bank, there was no way for
her, or for the spouses Quiaoit, to determine whether the dollar bills were genuine or counterfeit.
They did not have the expertise to verify the genuineness of the bills, and they were not
informed about the "chapa" on the bills so that they could have checked the same. BPI cannot
pass the burden on the spouses Quiaoit to verify the genuineness of the bills, even if they did
not check or count the dollar bills in their possession while they were abroad. The Court has
also applied the doctrine of last clear chance in banking transactions. In Pilipinas Bank v. Court
of Appeals, the Court sustained the award of moral damages and explained that while the
bank's negligence may not have been attended with malice and bad faith, it caused serious
anxiety, embarrassment, and humiliation to respondents. We apply the same in this case. In this
case, it was established that the spouses Quiaoit suffered serious anxiety, embarrassment,
humiliation, and even threats of being taken to police authorities for using counterfeit bills.

20 | P a g e
Hence, they are entitled to the moral damages awarded by the trial court and the Court of
Appeals.

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MODE OF EXTUINGISHMENT; PAYMENT OF OBLIGATION

DEMOSTHENES R. ARBILON vs. SOFRONIO MANLANGIT

G.R. No. 197920; 22 January 2018.

Tijam, J.:

Before Us is a petition for review on certiorari under Rule 45 of the Rules of Court filed by
Demosthenes R. Arbilon (petitioner) assailing the Decision dated January 14, 2011 of the
Court of Appeals (CA) in CA-G.R. CV No. 00038, which reversed and set aside the
Decision dated May 5,. 2003 of the Regional Trial Court (RTC) of Davao City, Branch 33 in
Civil Case No. 27,498-99 dismissing the case filed by Sofronio Manlangit (respondent)
and ordering the return of the possession of the Atlas Copco Compressor (compressor)
to petitioner.

Facts:
Respondent purchase on credit one compressor and 1 unit of stainless pump. From Davao
Diamond, that the compressor had been in possession of the respondent and failed to return the
same despite the demand. Petitioner argues that the respondent don’t own the compressor,
since the ownership is not transferred for failure to pay the purchase price. RTC rendered
decision granting the replevin and ordering the respondent to deliver the compressor to the
petitioner. The CA ruled in favor of the respondent, in its decision, it was rendered that the
compressor is owned by the respondent. Hence the petition.

Issue:
Whether the money used by Leanillo to pay the compressor came from respondent’s
partnership share.

Held:
The petition is denied for lack of merit.
The issue of whether there is a partnership that is existing between petitioner, Leanillo and
respondent and whether the partnership share of respondent was used to pay the compressor
are not impliedly included or is inferable from the issues raised in the pre-trial order. As such,
the same cannot be considered during the trial. Even if We rule that the said issues were
included or inferable by necessary implication from the issues raised in the pre-trial order,
respondent still failed to present an iota of evidence to prove that the partnership exist or that
his partnership shares were used to pay off the compressor. Mere allegation without sufficient
proof is not evidence of the existence of a fact or of the truthfulness of an allegation.

Since respondent failed to prove that the money used to pay the compressor was respondent's
partnership share nor the existence of a partnership among them, the payment of Leanillo can
be considered as payment by a third party. Under Article 1236 of the Civil Code, it is provided
that:

Article 1236. The creditor is not bound to accept payment or performance by a third person
who has no interest in the fulfillment of the obligation, unless there is a stipulation to the
contrary.

Whoever pays for another may demand from the debtor what he has paid, except that if
he paid without the knowledge or against the will of the debtor, he can recover only
insofar as the payment has been beneficial to the debtor. (Emphasis ours)

Under the above-cited provision, Leanillo has the right to demand reimbursement from
respondent since it is undisputed that Leanillo was the one who paid for the compressor in
behalf of respondent. Nevertheless, since Leanillo was never impleaded as a party in this case,
this Court has not acquired any jurisdiction over her person, and as such, We cannot grant any
relief in her favor. "It is well-settled that courts cannot grant a relief not prayed for in the
pleadings or in excess of what is being sought by a party to a case." This however is without
prejudice to any action that may be brought by Leanillo to claim reimbursement from
respondent.

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MODES OF EXTINGUISHMENT OF OBLIGATION; PAYMENT OR PERFORMANCE

JOSE T. ONG BUN vs. BANK OF THE PHILIPPINE ISLANDS

G.R No. 212362; 14 March 2018

Peralta, J.:

This is to resolve the Petition for Review on Certiorari under Rule 45 of the Rules of
Court, dated May 22,2014, of petitioner Jose T. Ong Bun, that seeks to reverse and set
aside the Decision1 dated September 25, 2012 and Resolution2 dated March 19, 2014 of
the Court of Appeals (CA) in CA-G.R. CV No. 02715 dismissing petitioner's complaint for
collection of sum of money and damages against respondent Bank of the Philippine
Islands (BPI).

Facts:
Lourdes, wife of the petitioner purchased 3 silver custodian certificate from Far East Bank.
Thereafter, FEBTC merged with BPI 11 years after purchase of the said certificate. Upon death
of Lourdes, it was discovered that the certificates were still in her vault and it was not
surrendered to FEBTC. Jose wrote a letter to FEBTC to advise him on the claim of the said
certificate. BPI replied and said that upon merger, there are no Silver Certificate Deposit
outstanding, which means that the certificates are fully paid. BPI, after several communication
with Jose, refused to pay since the certificates are not outstanding. After three years, petitioner
filed a case for collection of sum of money and damages against BPI. BPI alleged that all of its
certificate are fully paid and that includes the certificate of Lourdes. RTC granted the petitioner
and ordered BPI to pay the amount indicated on its certificate as well as the damages. BPI filed
an appeal to the Court of Appeals and rendered a decision reversing the ruling of the RTC.
Hence the present petition.

Issue:
Whether the petitioner has already been paid and his deposits have already been returned.

Held:
No, the petitioner has not been paid, the obligation has not been extinguished.
It is undisputed that petitioner is in possession of three (3) CCs from FEBTC in the following
amounts: (a) Custodian Certificate of Silver Certificate of Deposit No. 131157 issued on June 9,
1989 in the amount of One Hundred Thousand Pesos (P100,000.00); (b) Custodian Certificate
of Silver Certificate of Deposit No. 131200 issued on July 25, 1989, in the amount of Five
Hundred Thousand Pesos (P500,000.00); (c) Custodian Certificate of Silver Certificate of
Deposit No. 224826 issued on November 8, 1989 in the amount of One Hundred Fifty Thousand
Pesos (P150,000.00). Simply put, the said CCs are proof that Silver Certificates of Deposits are
in the custody of a custodian, which is, in this case, FEBTC. The CA therefore, erred in
suggesting that the possession of petitioner of the same CCs does not prove an outstanding
deposit because the latter are not the certificates of deposit themselves. What proves the
deposits of the petitioner are the Silver Certificates of Deposits that have been admitted by the
Trust Investments Group of the FEBTC to be in its custody as clearly shown by the wordings
used in the subject CCs. Such an argument does not prove that petitioner has already been
paid or that his deposits have already
been returned. Likewise, there was no proof .or evidence that petitioner or his late wife withdrew
the said Silver Certificates of Deposit. When the existence of a debt is fully established by the
evidence contained in the record, the burden of proving that it has been extinguished by
payment devolves upon the debtor who offers such defense to the claim of the creditor. Even
where it is the plaintiff ([petitioner] herein) who alleges non payment, the general rule is that the
burden rests on the defendant ([respondent] herein) to prove payment, rather than on the
plaintiff to prove non-payment. Verily, an obligation may be extinguished by payment. However,
two requisites must concur: (1) identity of the prestation, and (2) its integrity. The first means
that the very thing due must be delivered or released; and the second, that the prestation be
fulfilled completely. In this case, no acknowledgment nor proof of full payment was presented by
respondent but merely a pronouncement that there are no longer apply outstanding Silver
Certificates of Deposits in its books of accounts. Thus, the RTC did not err in the following
findings: A promise had been obtained by plaintiff from defendant bank that the custodian
certificates would be paid upon maturity. Hence, the latter reneged on its promise when it
refused payment thereof after demands were made by plaintiff for such payment considering
that in 1989, his wife Ma. Lourdes Ong Bun acquired in their names three (3) certificates of
deposits from FEBTC in various amounts, to wit: (a) Custodian Certificate of Silver Certificate of
Deposit No. 131157 issued on June 9, 1989 in the amount of One Hundred Thousand Pesos
(P100,000.00), (Exhibit "A"); (b) Custodian Certificate of Silver Certificate of Deposit No. 131200
issued on July 25, 1989 in the amount of Five Hundred Thousand Pesos (P500,000.00) (Exhibit

23 | P a g e
"B"); (c) Custodian Certificate of Silver Certificate of Deposit No. 224826 issued on November 8,
1989 in the amount of One Hundred Fifty Thousand Pesos (P150,000.00), (Exhibit "C"). His wife
kept these certificates of deposits. The claim of defendant bank, through the Manager of its
Trust Department Asset Management, that the aforementioned certificates had been paid, is not
supported by credible evidence and, therefore, unsubstantiated. Its position that the Silver
Certificates of Time Deposits in question and in the names of Jose Ong Bun or Ma. Lourdes
Ong had been paid by the Far East Bank and Trust Company as early as the year 1991, when
the same matured considering that at the time of the merger between Far East Bank and Trust
Company and the Bank of Philippine Islands, no such Silver Certificates of Time Deposits were
outstanding on the books of Far East Bank and Trust Company, is simply unconvincing. The
fact that the plaintiff still has [a] copy of the Custodian Certificate of the Silver Certificates of
Time Deposit is material, contrary to the stance of defendant, as it is inconceivable that the bank
would make payment without requiring the surrender thereof.

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MODES OF EXTINGUISHMENT OF OBLIGATION; PAYMENT OF PERFORMANCE

SPOUSES GILDARDO C. LOQUELLANO and ROSALINA JULIET B. LOQUELLANO vs.

HONGKONG AND SHANGHAI BANKING CORPORATION LTD. AND SHANGHAI BANKING
CORPORATION STAFF RETIREMENT PLAN and MANUEL ESTACION
G.R No. 200553; 10 December 2018

Peralta, J.:

Assailed in this petition for review on certiorari are the Decision dated August 11, 2011
and the Resolution dated February 1, 2012 of the Court of Appeals in CA-G.R. CV No.
86805.

Facts:
Rosalina applied a housing loan to respondent HSBC-SRP. It was provided in the agreement
that retirement benefits will be set off and chattel mortgage. She executed a promissory note of
the said loan. The petitioners and Manuel Estacion entered into a contract of real estate
mortgage over their house to secure the housing loan. Subsequently a labor dispute arose that
caused the employees to strike, and that includes Rosalina, who is a member of the union
resulting to their dismissal. They filed a labor case to which the labor arbiter rendered a decision
stating that the strike is illegal and dismissed the complaint. The said decision reached supreme
court for the petition for review. Due to Rosalina’s termination from employment petitioners were
unable to make payments for the amortization due for Rosalina. Respondent sent a demand
letter to Rosalina and she offered to make partial payment of her housing loan which HSBC-
SRP rejected. In a letter sent by HSBC-SRP to Rosalina, HSBC-SRP is demanding the
payment of the entire housing loan Rosalina’s account were debited and the mortgage was
foreclosed. Petitioner filed with RTC Paranaque annulment of sale with damages and
preliminary injunction against HSBC-SRP. HSBC contends that the loan accelerated upon
termination of Rosalina. RTC ruled in favor of Rosalina. Respondent bank filed an appeal and
eventually a motion for reconsideration which was denied, hence the petition.

Issue:
Whether the extrajudicial foreclosure is valid and that petitioners are entitled to damages.

Held:
The extrajudicial is not valid and on account of invalid foreclosure, they are entitled to damages.
While respondent HSBC-SRP wrote petitioner Rosalina a letter dated September 25, 1995
demanding payment of the latter's entire· unpaid housing loan obligation, now with a reduced
balance in the amount of P289,945.00, however, petitioner Rosalina still received an Installment
Due Reminder dated September 27, 1995 reminding her of her monthly installment and interest
due, sans penalty charge, which she paid. Thereafter, petitioner Rosalina continuously received
Installment Due reminders for the housing loan, to wit: dated December 21, 1995, February 26,
1996, March 13, 1996 and April 11, 1996, which showed a diminishing loan balance by reason
of respondent HSBC-SRP's acceptance of payments of her monthly installments and interests
due from September 1995 up to June 1996. Therefore, respondent HSBC-SRP is now estopped
from foreclosing the mortgage property on May 20, 1996. To stress, respondent HSBC-SRP
continuously sent out monthly Installment Due Reminders to petitioner Rosalina despite its
demand letter dated September 25, 1995 to pay the full amount of the loan obligation within 3
days from receipt of the letter. It, likewise, continuously accepted petitioner Rosalina's
subsequent monthly amortization payments until June 1996; thus, making their default
immaterial. Moreover, there was no more demand for the payment of the full obligation
afterwards. Consequently, petitioners were made to believe that respondent HSBC-SRP was
applying their payments to their monthly loan obligations as it had done before. It is now
estopped from enforcing its right to foreclose by reason of its acceptance of the delayed
payments. Also, Article 1235 of the Civil Code provides that when the creditor accepts
performance, knowing its incompleteness and irregularity without protest or objection, the
obligation is deemed complied with. Respondent HSBC-SRP accepted Rosalina's payment of
her housing loan account for almost one year without any objection. We find that petitioners are
entitled to damages for the invalid foreclosure of their property. The RTC held respondent bank
HSBC-SRP and Estacion solidarily liable for the payment of damages. However, we only find
respondent HSBC-SRP liable as it was the one which illegally foreclosed petitioners' mortgaged
property. However, respondent HSBC, as correctly pointed out by the CA, was not a party to the
real estate mortgage executed between respondent HSBC-SRP and petitioners nor it had
participation in the foreclosure proceedings. On the other hand, Estacion was only a trustee of
respondent HSBC-SRP acting within the scope of its authority.

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CONSENSUALITY OF CONTRACT

REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE SECRETARY OF DPWH vs

JOSE GAMIR-CONSUELO DIAZ HEIRS ASSOCIATION INC.
G.R No. 218732; 12 November 2018

J. Reyes, Jr.,J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court
seeking to set aside the December 12, 2013 Decision and the June 9, 2015 Resolution of
the Court of Appeals (CA) in CA-G.R. CV No. 02251-MIN, which reversed the March 4,
2010 Decision3 of the Regional Trial Court, Branch 15, Davao City (RTC).

Facts:
Respondent Republic of the Philippines through DPWH executed a Deed of Absolute Sale on
the agreement that Jose Gamir would sell the subject property. The property was eventually
registered under the name of the petitioner after the receipt of the full consideration by the
respondent. Respondent filed a case against DPWH alleging that the compensation they paid is
the valuation of the property during 1957 and that DPWH owes the respondent an interest
starting from 1957 because DPWH failed to pay the just compensation. The RTC dismissed the
complaint for lack of merit. The respondent filed an appeal to the CA and the CA reversed the
decision of the RTC. Petitioner filed a motion for reconsideration in which the CA denied, hence
the petition.

Issue:
Whether respondent Jose Gamir is entitled to the interest even if it is not stipulated in the Deed
of Sale?

Held:
No, Jose Gamir is not entitled to interest, the petition is with merit.
The CA surmised that the execution of deed of sale did not amount to a waiver on the part of
respondent for the payment of interest. The rationale for the payment of interest in expropriation
cases is to compensate landowners for the income they would have made had they been
properly compensated for their properties at the time of taking. Nonetheless, the required
payment of interest is related to the computation of just compensation, which is judicially
determined in expropriation proceedings. Interest payment should be viewed in a different light
when there is a voluntary sale between the landowner and the government. As above-
mentioned, expropriation and voluntary sale have different legal effects, especially considering
that in the latter, the parties could freely negotiate the terms and conditions of the contract, i.e.,
they could include a stipulation concerning the payment of interest. In addition, in entering into a
voluntary purchase or sale, the state does not exercise its power of eminent domain. In the
present case, it is undisputed that the Deed of Absolute Sale between petitioner and respondent
does not contain any provision regarding the payment of interest. Petitioner agreed to convey its
property upon full payment of the purchase price without reservation for any claim of interest.
No parole evidence can be admitted to support respondent's claim of interest cause it never put
in issue in its complaint the ambiguity or validity of the Deed of Absolute Sale, or its failure to
reflect the parties' true intention. In addition, respondent cannot rely on its August 1, 2005 Letter
demanding payment of interest because the said correspondence was made prior to the
execution of the Deed of Absolute Sale. Thus, it could be reasonably concluded that respondent
had abandoned its demand for interest after it acquiesced with the contract notwithstanding the
lack of stipulation concerning payment of interest. Respondent freely agreed to enter into the
covenant knowing fully well that petitioner was not bound by its terms to pay interest. If it feels
shortchanged, the Court cannot offer any reprieve. After all, courts have no alternative but to
enforce contractual stipulations in the manner agreed upon by the parties, and they do not have
the power to modify contracts or save parties from disadvantageous provisions. Further, the
Court disagrees with the CA's observation that respondent was left with no choice but to sign
the Deed of Absolute Sale sans any provision on the payment of interest. In respondent's
complaint, there was no allegation that it was coerced into signing the document or that its
consent was vitiated in any manner. It was not compelled to sign the said deed should it find
itself placed in a disadvantageous position. In fact, respondent could have opted to initiate
expropriation proceedings if it was adamant in its claim for legal interest - or, at the very least,
included a clause in the perfected deed of sale that it was reserving the right to claim legal
interest. In the same vein, it did not protest or place any objection when it acknowledged receipt
of the full purchase price embodied in the Deed of Absolute Sale. It is noteworthy that the deed
of sale executed in National Power Corporation v. Court of Appeals contained a clause that it
was without prejudice to the landowner's pursuance for just compensation and interest.
Unfortunately in the said case, the National Power Corporation repudiated the deed resulting in

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judicial intervention for the determination of just compensation. Here, in accordance with the
Deed of Absolute Sale, respondent voluntarily agreed to convey its property to petitioner upon
full payment of the purchase price - without any other restrictions, limitations or conditions.

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AUTONOMY OF CONTRACT

D.M RAGASA ENTERPRISE INC., vs BANCO DE ORO

G.R No. 190512; 20 June 2018

Caguioa, J.:

Before the Court is a Petition for Review on Certiorari (Petition) under Rule 45 of the
Rules of Court (Rules) filed by petitioner D.M. Ragasa Enterprises, Inc., (Ragasa) against
respondent Banco de Oro, Inc., formerly Equitable PCI Bank, Inc. (bank), assailing the
Decision3 dated March 27, 2009 (questioned Decision) and Resolution4 dated November
25, 2009, both of the Court of Appeals (CA) Special Thirteenth (13th) Division and Former
Special Thirteenth Division, respectively, in CA G.R. CV. No. 88322.

Facts:
Ragasa and Equitable entered into a lease agreement of the building located in Tomas Morato,
Pursuant to lease, Equitable PCI Bank paid to Ragasa a rent representing 3mos advance and
three months as security deposit. Equitable merged with BDO and as a consequence of its
merger some of its branch has to close, among those are the branch located in Tomas Morato.
Equitable wrote a letter to ragasa informing them that they are pre-terminating their contract of
lease. Ragasa then demanded payment for the remaining of the contract. After sending several
demand, Ragasa filed a case against bank before RTC, for the collection of sum of money. The
RTC ruled in favor of Ragasa. The bank filed notice of appeal to the CA. The CA rendered
decision granting the appeal of the Bank. Hence the petition.

Issue:
Whether the contract is terminated.

Held:
Yes. The contract is terminated because the lease contract does not contain pre-termination
clause. Pursuant to the automatic termination clause of the Lease Contract, which is in
furtherance of the autonomy characteristic of contracts, the Lease Contract was terminated
upon its unauthorized pretermination by the bank on June 30, 2001. Ragasa is, thus, precluded
from availing of the second option which is to claim damages by reason of the breach and allow
the lease to remain in force. With the lease having been automatically resolved or terminated by
agreement of the parties, Ragasa is entitled only to indemnification for damages. To force either
party to continue with a contract that is automatically terminated in case of its breach by either
party (pursuant to its express provision) is not in furtherance of or sanctioned by the contract.
Rather, it is a contravention thereof and it negates the autonomy characteristic of contracts. Is
the claim of Ragasa that it is entitled to damages in the amount of P3,146,596.42, representing
the monthly rentals from July 1, 2001 to January 31, 2003, or the unexpired period of the lease,
valid? Entitlement to rentals after the termination of the lease pursuant to an automatic
rescission or termination clause is possible in the case where the lessor invokes the clause and
the lessee refuses to vacate the leased premises. The lessee will be liable for damages
equivalent to the rentals for the duration of its possession from the termination of the lease until
he vacates the premises. This was in effect the ruling of the Court in Manila Bay Club Corp.
when it affirmed the award of the monthly rental equivalent to P 250,000.00, which was the
valuation of the trial court as affirmed by the CA, viz.: Petitioner in its third assignment of error
assails the P250,000.00 monthly rental adjudged against it by the trial court and as affirmed by
respondent Court of Appeals, claiming that there was no basis for such finding. Again, we
disagree. In reaching that amount, the trial court took into consideration the following factors: 1)
prevailing rates in the vicinity; 2) location of the property; 3) use of the property; 4) inflation rate;
and 5) the testimony of private respondent Modesta Sabeniano that she was offered by a
Japanese-Filipino investor a monthly rental of P400,000.00 for the leased premises then
occupied by petitioner.52 Petitioner for its part should have presented its controverting evidence
below to support what it believes to be the fair rental value of the leased building since the
burden of proof to show that the rental demanded is unconscionable or exorbitant rests upon
the lessee.53 But petitioner failed to do so. Hence, the valuation by the trial court, as affirmed by
respondent Court of Appeals, stands. It is worth stressing at this juncture that the trial court had
the authority to fix the reasonable value for the continued use and occupancy of the leased
premises after the termination of the lease contract, and that it was not bound by the stipulated
rental in the contract of lease since it is equally settled that upon termination or expiration of the
contract of lease, the rental stipulated therein may no longer be the reasonable value for the use
and occupation of the premises as a result or by reason of the change or rise in values.
Moreover, the trial court can take judicial notice of the general increase in rentals of real estate
especially of business establishments55 like the leased building owned by private respondents.

28 | P a g e
That is, however, not the situation here. The bank did not continue to possess the Leased
Premises after its automatic termination, as it vacated the same on June 30, 2001. As explained
above, the provision or clause that is applicable in case of non-compliance of the Term or period
of the Lease Contract is item 8(m) which mandates that the full deposit of P367,821.00 or the
equivalent of three months rentals shall be forfeited with the proviso that the deposit cannot be
applied to rental. This proviso as to non-application to rental of the deposit means that the
forfeiture is without prejudice to the payment of any unpaid rental at the time of the non-
compliance or breach of the Term or period of the Lease Contract. Since the bank had no
unpaid rental as of June 30, 2001, the proviso finds no application in the present case.

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STAGES OF CONTRACT

DESIDERIO DALISAY INVESTMENT, INC. vs. SOCIAL SECURITY SYSTEM

G.R No. 231053; 4 April 2018

Velasco, Jr.,J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks the
reversal and setting aside of the August 12, 2016 Decision1 and March 10, 2017
Resolution of the Court of Appeals (CA) inCA-G.R. CV No. 03233-MIN.

Facts:
SSS filed a case to the SSC against Desidario Dalisay Investment for failure to remit SSS
premium contribution. Desidario Dalisay, president of the corporation, offered to SSS the parcel
of land to offset the corporation’s liability, however they failed to arrive at an agreement. Later,
Desiderio sent a letter further seeking negotiation to SSS and that the initial assessment be
done, but turned out the appraiser did not respond this prompt Desiderio to suggest another
appraiser and it was later approved. A special board provided that the subject land be sold to
SSS including its improvements and the same shall be transferred to SSS. A Dacion en Pago
was accepted by SSS. SSS then informed DDII’s dacion en pago is accepted. Desiderio,
pending the transfer of property passed away. PNB then executed an confirmatory sale in favor
of DDII property. Eddie Jara instituted an adverse claim to the property he then sent letter to
Dalisay-Tirol formally demanding certificates of the said land in which Dalisay-Tirol in her reply
could not accede. Despite demands of SSS to DDII. A complaint for quieting of title is filed. The
RTC rendered a decision in favor of DDII holding that there was no perfected Dacion in payment
between the parties. The SSS filed motion for reconsideration to the CA and rendered a
decision reversing the RTC judgment and ruled in favor of SSS stating that all requisites in
Dation is present. Hence the petion.

Issue:
Whether there was Dacion en payment and whether the title remains in the name of the
petitioner is an indication that the parties remains in the preparatory stage of contract.

Held:
Yes, there is a Dacion in payment, the sale is valid. Among other modes, an obligation is
extinguished by payment or performance. There is payment when there is delivery of money or
performance of an obligation. Corollary thereto, Article 1245 of the Civil Code provides for a
special mode of payment called dacion in payment (dacion en pago). In dacion en pago,
property is alienated to the creditor in satisfaction of a debt in money. The debtor delivers and
transmits to the creditor the former's ownership over a thing as an accepted equivalent of the
payment or performance of an outstanding debt. In such cases, Article 1245 provides that the
law on sales shall apply, since the undertaking really partakes—in one sense—of the nature of
sale; that is, the creditor is really buying the thing or property of the debtor, the payment for
which is to be charged against the debtor's obligation. As a mode of payment, dacion en pago
extinguishes the obligation to the extent of the value of the thing delivered, either as agreed
upon by the parties or as may be proved, unless the parties by agreement— express or implied,
or by their silence—consider the thing as equivalent to the obligation, in which case the
obligation is totally extinguished. It requires delivery and transmission of ownership of a thing
owned by the debtor to the creditor as an accepted equivalent of the performance of the
obligation. There is no dacion in payment when there is no transfer of ownership in the creditor's
favor, as when the possession of the thing is merely given to the creditor by way of security. In
the case at hand, in order to determine whether or not there was indeed a perfected, or even
consummated, dacion in payment, it is necessary to review and assess the evidence and
events that transpired and see whether these correspond to the three stages of a contract of
sale. This is so since, as previously mentioned, dacion en pago agreements are governed,
among others, by the law on sales. Briefly, the stages of a contract of sale are: (1) negotiation,
covering the period from the time the prospective contracting parties indicate interest in the
contract to the time the contract is perfected; (2) perfection, which takes place upon the
concurrence of the essential elements of the sale, which is the meeting of the minds of the
parties as to the object of the contract and upon the price; and (3) consummation, which begins
when the parties perform their respective undertakings under the contract of sale, culminating in
the extinguishment thereof. Here, DDII having divested itself of any claim over the property in
favor of SSS by means of sale via
dacion en pago, petitioner has lost its title over the property which would give it legal personality
to file said action. Thus, the CA did not err in dismissing the complaint for lack of merit. A
necessary consequence of this ruling is the recomputation of DDII's obligations to SSS as a
result of the application of the P2,000,000 amount agreed upon in the dacion. Thus, SSS shall

30 | P a g e
recompute said outstanding obligations by deducting from the total obligations as of June 17,
1982 the amount of P2,000,000, following the terms and conditions agreed upon. Said date
refers to SSS communication of its acceptance of the offer, resulting in the perfection of the
contract. At this point, it is well to remind DDII that it cannot escape its liability from SSS by
giving the latter possession over the property with the representation that it is doing so as partial
settlement of its unremitted SSS premiums and penalties due only to take the property back
decades thereafter, seek condonation of its obligations, and to make matters worse, claim
payment of back rentals from SSS. While it is true that the value of the property has definitely
significantly increased over the years compared to the P2,000,000 amount for which it was
offered to SSS, still, such is not sufficient justification for DDII to turn its back on its obligations
under the dacion en pago agreement. In fact, the turn of events convinces Us that DDII's
actions are tainted with bad faith. If We were to grant the reliefs prayed for by DDII, an injustice
will definitely be caused to SSS, which in good faith relied upon the company's representations.
Too, We find it proper to remind DDII that it would not have lost ownership over the property if,
in the first place, it diligently paid the SSS premiums due. With these, We need not belabor the
other assigned errors.

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ESSENTIAL ELEMENTS OF CONTRACT; CONSENT OF THE CONTRACTING PARTIES

NORTHERN MINDANAO INDUSTRIAL PORT and SERVICES COPRORATION vs. ILAGAN

CEMENT CORPORATION
G.R No. 215387; 23 April 2018

Del Castillo, J.:

Assailed in this Petition for Review on Certiorari are the March 18, 2014 Decision of the
Court of Appeals (CA) in CA-G.R. SP No. 03789. MIN, which set aside the August 6, 2009
Order of the Regional Trial Court of Iligan City, Branch 3 (RTC) in Civil Case No. 7201,
and the CA'S October 17, 2014 Resolution denying herein petitioner's motion for
reconsideration.

Facts:
ICC invited NOMIPSCO to a pre-bidding conference for a two year cargo handling contract.
Other contractor also joined. ICC required the participants to submit their technical proposals
NOMIPSCO submitted the same. The bid was awarded to Europort Logistics. NOMIPSCO filed
a complaint for damages and attorney’s fees alleging that an informant has told the corporation
that their folder was marked as “no bids submitted” NOMIPSCO contended that the acts of ICC
is an act of abuse of their authority that led to a great loss by the corporation. ICC countered the
petition alleging that they have no cause of action for failure to state cause of action and
requisites for abuse of authority to exist the following must be present: 1) an act which is legal;
2) but which is contrary to morals, good customs, public order, or public policy; and 3) it is done
with intent to injure.' ICC argued that in the instant controversy the last two requisites were
wanting. RTC ruled denying ICC’s affirmative defenses and that the dismissal for failure to state
cause of action is dismissed. ICC filed an appeal to the court of appeals and it rendered setting
aside the decision of the lower court. Hence the appeal.

Issue:
Whether NOMIPSCO has no cause of action against ICC as regards abuse of authority in
awarding the bidding.

Held:
Yes, NOMIPSCO has no cause of action.
Petitioner's cause of action in Civil Case No. 7201 rests on the theory that respondent, in bad
faith, used the bidding process for the cargo handling contract as a mere ruse to elicit the lowest
bid which it would use to set its contract price with Europort; that respondent made it appear
that petitioner did not submit a bid, when in fact it did; that respondent awarded the project on
the basis of criteria, parameters, and policies that were not disclosed to petitioner prior to the
bidding; and that respondent awarded the contract to Europort, which did not participate in the
bidding and had no corporate and legal personality when it executed the cargo handling
contract with respondent. A review of the record and the evidence, however, reveals that
petitioner's allegations do not reconcile with the facts and evidence on record; on the contrary, it
appears that petitioner is twisting and inventing facts, circumstances, and documents that did
not in fact take place nor exist. Contrary to what petitioner would have this Court believe, it
appears that there was a bona fide bidding process for respondent's designated cargo handling
contract, and the project or contract was awarded to one of the participating bidders, which - for
whatever reason - eventually changed its corporate name during the bidding process, prompting
the execution of the awarded cargo handling contract under its new corporate name instead of
the old one used during the submission of bids. Thus, it appears that one of the five bidders that
participated in the subject bidding, Oroport, was eventually chosen by respondent -- although it
did not necessarily submit the lowest bid. At or about the time that Oroport and respondent were
consummating the cargo handling contract, Oroport changed its corporate name to Europort
Logistics and Equipment Incorporated, or Europort. As a result, the cargo handling contract
executed was between respondent and Europort, the new name of Oroport. This is not
proscribed by law. The fact that the original bidder and winner was Oroport, and the resulting
cargo handling contract was between respondent and Europort-Oroport's derivative - has no
bearing; in legal contemplation, Oroport and Europort are one and the same. On the claim that it
became the policy of respondent to award the contract to a new contractor, the Court finds
nothing wrong with this. This is the prerogative of respondent, and petitioner had no right to
interfere in the exercise thereof. The CA is correct in saying that an advertisement to possible
bidders is simply an invitation to make proposals, and that an advertiser is not bound to accept
the lowest bidder unless the contrary appears; respondent had the right to reject bids, and it
cannot be compelled to accept a bidder's proposal and execute a contract in its favor. Indeed,
under Article 1326 of the Civil Code, "advertisements for bidders are simply invitations to make
proposals, and the advertiser is not bound to accept the highest or lowest bidder, unless the

32 | P a g e
contrary appears." "[A]s the discretion to accept or reject bids and award contracts is of such
wide latitude, courts will not interfere, unless it is apparent that such discretion is exercised
arbitrarily, or used as a shield to a fraudulent award. The exercise of that discretion is a policy
decision that necessitates prior inquiry, investigation, comparison, evaluation, and deliberation.
Finally, the insistence on Europort's ineligibility on account of its supposed non-participation in
the bidding process, despite petitioner's knowledge and admission of the fact that Europort
underwent a change of corporate name during the period material to this case - which explains
why the entity to which the cargo handling contract was awarded appears to be a total stranger
to the bidding process, is a clear attempt to muddle the issues and confuse this Court in the vain
hope of influencing its judgment - by stretching an irrelevant issue and capitalizing on a
perceived technicality that has no material bearing whatsoever in the resolution of the case.
Thus, far from having a cause of action upon which to base its claim for damages, petitioner's
complaint is based on false assumptions and nonexistent facts, tending to deceive and mislead
this Court to the belief that respondent committed a so-called 'abuse of rights against it, when in
fact there is none. This is certainly contemptible, and petitioner is warned that any more attempt
at stretching this case and manipulating the facts will be dealt with severely. It has wasted the
Court's time enough. Its claim is illusory, to say the least; this has become evident not only from
a reading of the allegations of the complaint and its annexes as well as the other pleadings, but
also from the testimonial and documentary evidence presented by petitioner itself during trial.

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FORM OF CONTRACTS

NORMA DIAMPOC vs JESSIE BUENAVENTURA and THE REGISTRY OF DEEDS FOR THE
CITY OF TAGUIG
G.R No. 200383; 19 March 2018

Del Castillo, J.:

This Petition for Review on Certiorari seeks to set aside the February 21, 2011 Decision
and May 6, 2011 Resolution of the Court of .Appeals (CA) in CA-G.R, CV No. 92453 which
denied herein petitioner's appeal and affirmed the December 20, 2007 Decision of the
Regional Trial Court of Pasig City, Branch 268 (RTC) in Civil Case No. 70076.

Facts:
Norma and Wilbur Diampoc filed an annulment of sale and recovery of duplicate original copy of
title with damages against respondent, Jessie Buenaventura. As alleged, Buenaventura is their
friend who borrowed the title of the property as a security for a loan. They acceded on the
condition that the property should not be sold by Buenaventura. That they are made to sign a
folded document and not giving them an opportunity to examine the same and such document
is a deed of sale in her favor. A Barangay conciliation did not come into agreement. This an
action to recover with prayer that the deed of sale be declared null and void as it was acquired
through deceit and fraud. The trial court rendered a decision in favor of respondent for lack of
evidence to support that the deed of sale was obtained through fraud and deceit. They filed an
appeal to the CA which sustained the lower court’s decision, and the motion for reconsideration
was likewise denied. Hence the petition.

Issue:
Whether the court of appeals erred in ruling that the contract of sale is valid.

Held:
The contract of sale is valid, as there is no showing of proof that it was obtained through fraud
and deceit.
It must be remembered, however, that "the absence of notarization of the deed of sale would
not invalidate the transaction evidenced therein"; it merely "reduces the evidentiary value of a
document to that of a private document, which requires proof of its due execution and
authenticity to be admissible as evidence." "A defective notarization will strip the document of its
public character and reduce it to a private instrument. Consequently, when there is a defect in
the notarization of a document, the clear and convincing evidentiary standard normally attached
to a duly notarized document is dispensed with, and the measure to test the validity of such
document is preponderance of evidence." Article 1358 of the Civil Code requires that the form of
a contract that transmits or extinguishes real rights over immovable property should be in a
public document, yet the failure to observe the proper form does not render the transaction
invalid. The necessity of a public document for said contracts is only for convenience; it is not
essential for validity or enforceability. Even a sale of real property, though not contained in a
public instrument or formal writing, is nevertheless valid and binding, for even a verbal contract
of sale or real estate; produces legal effects between the parties. Consequently, when there is a
defect in the notarization of a document, the clear and convincing evidentiary standard originally
attached to a duly-notarized document is dispensed with, and the measure to test the validity of
such document is preponderance of evidence. Nevertheless, the defective notarization of the
deed does not affect the validity of the sale of the house. Although Article 1358 of the Civil Code
states that the sale of real property must appear in a public instrument, the formalities required
by this article is not essential for the validity of the contract but is simply for its greater efficacy
or convenience, or to bind third persons, and is merely a coercive means granted to the
contracting parties to enab1e them to reciprocally compel the observance of the prescribed
form. Consequently, the private conveyance of the house is valid between the parties. Thus,
following the above pronouncements, the remaining judicial task, therefore, is to determine if the
deed of sale executed by and between the parties should be upheld. The RTC and the CA are
correct in declaring that the deed should be sustained on account of petitioner's failure to
discredit it with her evidence. The CA farther found that petitioner and her husband received in
full the consideration of ₱200,000.00 for the sale. As far as the lower courts are concerned, the
three requirements of cause, object, and consideration concurred. This Court is left with no
option but to respect the lower courts' findings, for its jurisdiction in a petition for review on
certiorari is limited to reviewing only errors of law since it is not a trier of facts. This is especially
so in view of the identical conclusions affirmed at by them. Indeed, petitioner and her husband
conceded that there was such a deed of sale, but only that they were induced to sign it without
being given the opportunity to read its contents -believing that the document they were signing

34 | P a g e
was a mere authorization to obtain a bank loan. According to petitioner, the document was
"folded" when she affixed her signature thereon; on the other hand, her husband added that at
the time he signed the same, it was "dark". These circumstances, however, did not prevent
them from discovering the true nature of the document; being high school graduates and thus
literate, they were not completely precluded from reading the contents thereof, as they should
have done if they were prudent enough, Petitioner's excuses are therefore flimsy and specious.
Petitioner and her husband's admission that they failed to exercise prudence can only be fatal to
their cause. They are not unlettered people possessed with a modicum of intelligence; they are
educated property owners capable of securing themselves and their property from unwarranted
intrusion when required. They knew the wherewithal of property ownership. Their failure to thus
observe the care and circumspect expected of them precludes the courts from lending a helping
hand, and so they must bear the consequences flowing from their own negligence. The rule that
one who signs a contract is presumed to know its contents has been applied even to contracts
of illiterate persons on the ground that if such persons are unable to read, they are negligent if
they fail to have the contract read to them. If a person cannot read the instrument, it is as much
his duty to procure some reliable persons to read and explain it to him, before he signs it, as it
would be to read it before he signed it if he were able to do so and his failure to obtain a reading
and explanation of it is such gross negligence as will estopped him from avoiding it on the
ground that he was ignorant of its contents. It is also a well-settled principle that "the law will not
relieve parties from the effects of an unwise, foolish or disastrous agreement they entered into
with all the required formalities and with full awareness of what they were doing. Courts have no
power to relieve them from obligations they voluntarily assumed, simply because their contracts
turn out to be disastrous deals or unwise investments. Neither the law nor the courts will
extricate them from an unwise or undesirable contract which they entered into with all the
required formalities and with full knowledge of its consequences.

35 | P a g e
VOID OR INEXISTENT

ASIAN TRANSMISSION CORPORATION vs COMMISSIONER OF INTERNAL REVENUE

G.R No. 230861; 19 September 2018

Bersamin, J.:

This appeal seeks the review and reversal of the decision promulgated on August 9,
2016, whereby the Court of Tax Appeals En Banc (CTA En Banc) reversed and set aside
the decision rendered by its Second Division (CTA in Division) holding that the waivers
executed by petitioner Asian Transmission Corporation (ATC) were invalid and did not
operate to extend the three-year period of prescription to assess deficiency taxes for the
calendar year 2002

Facts:
ATC filed its annual Information Return of Income, ATC received Letter of Authority where CIR
informed ATC that its revenue officer from large taxpayer audit investigation shall examine their
books. Thereafter, BIR issued PAN. ATC availed of the tax amnesty program. ATC then
received a formal letter of demand, ATC filed a protest thereto. They filed letter/request and
consideration which the CIR denied. The CTA division ruled in favor of ATC granting their
petition for review. Hence the petition.

Issue:
Whether CTA en banc acted with grave abuse of discretion with lack or excess of jurisdiction.

Held:
The appeal has no merit. The CTA has jurisdiction over the case. We agree with the holding of
the CTA En Banc that ATC's case was similar to the case of the taxpayer involved in
Commissioner of Internal Revenue v. Next Mobile Inc. The foregoing defects noted in the
waivers of ATC were not solely attributable to the CIR. Indeed, although RDAO 01-05 stated
that the waiver should not be accepted by the concerned BIR office or official unless duly
notarized, a careful reading of RDAO 01-05 indicates that the proper preparation of the waiver
was primarily the responsibility of the taxpayer or its authorized representative signing the
waiver. Such responsibility did not pertain to the BIR as the receiving party. Consequently, ATC
was not correct in insisting that the act or omission giving rise to the defects of the waivers
should be ascribed solely to the respondent CIR and her subordinates. Moreover, the principle
of estoppel was applicable. The execution of the waivers was to the advantage of ATC because
the waivers would provide to ATC the sufficient time to gather and produce voluminous records
for the audit. It would really be unfair, therefore, were ATC to be permitted to assail the waivers
only after the final assessment proved to be adverse. Indeed, the Court observed in
Commissioner of Internal Revenue v. Next Mobile Inc. that: In this case, respondent, after
deliberately executing defective waivers, raised the very same deficiencies it caused to avoid
the tax liability determined by the BIR during the extended assessment period. It must be
remembered that by virtue of these Waivers, respondent was given the opportunity to gather
and submit documents to substantiate its claims before the CIR during investigation. It was able
to postpone the payment of taxes, as well as contest and negotiate the assessment against it.
Yet, after enjoying these benefits, respondent challenged the validity of the Waivers when the
consequences thereof were not in its favor. In other words, respondent's act of impugning these
Waivers after benefiting therefrom and allowing petitioner to rely on the same is an act of bad
faith. Thus, the CTA En Banc did not err in ruling that ATC, after having benefitted from the
defective waivers, should not be allowed to assail them. In short, the CTA En Banc properly
applied the equitable principles of in pari delicto, unclean hands, and estoppel as enunciated in
Commissioner of Internal Revenue v. Next Mobile case.

36 | P a g e
SALES IN GENERAL; KINDS OF SALE

LILY S. VILLAMIL substituted by RUDY E. VILLAMIL, SOLOMON E. VILLAMI, et. al. vs.
SPOUSES JUANITO ERGUIZA and MILA ERGUEZA
G.R No. 195999; 20 June 2018

Martires, J.:

This is a petition for review on certiorari seeking to reverse and set aside the Decision,
dated 29 June 2010, and Resolution, dated 2 February 2011, of the Court of Appeals (CA)
in CA-G.R. SP No. 109813 which nullified the Decision, dated 2 October 2008, of the
Regional Trial Court, Dagupan City, Branch 44 (RTC), in Civil Case No. 2007-0014-D, an
action for recovery of possession.

Facts:
Lily Villamil filed a petition for recovery of possession and damages against the Spouses
Ergueza. They entered into an agreement to sell the property and that the consent of the minor
parties shall be obtained in order for the said property to be sold. The old TCT of the subject lot
was cancelled and it was issued a new one under the name of Villamil. The spouse occupied
the property, Villamil contends that they are occupying the property by their mere tolerance.
Spouses Ergueza denied the allegations. MTCC dismissed the action providing that they are not
the proper court with jurisdiction as the complaint is incabaple of pecuniary estimation, for the
subject of the complaint is the agreement, not the property. However RTC denied the same and
remanded it to MTCC which it rendered in favor of the plaintiffs. An appeal was filed to the RTC
and affirmed the ruling of the MTCC. They filed a motion for reconsideration to the Court of
Appeals and it reversed and set aside the ruling of the RTC and ruled in favor of spouses.
Hence the petition.

Issue:
Whether the contract entered by the parties is a contract of sale.

Held:
Yes, the contract entered into is one of contract of sale.
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. Given its contingent nature,
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 to effect the transfer of ownership to the buyer from arising. A
contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's
obligation to transfer title is subordinated to the happening of a future and uncertain event, so
that if the suspensive condition does not take place, the parties would stand as if the conditional
obligation had never existed. In a contract to sell, the fulfillment of the suspensive condition will
not automatically transfer ownership to the buyer although the property may have been
previously delivered to him. The prospective seller still has to convey title to the prospective
buyer by entering into a contract of absolute sale. On the other hand, in a conditional contract of
sale, the fulfillment of the suspensive condition renders the sale absolute and the previous
delivery of the property has the effect of automatically transferring the seller's ownership or title
to the property to the buyer. An examination of the agreement would reveal that the parties
entered into a contract to sell the subject property. First, petitioner and her siblings who were
then co-owners merely promised to sell the subject property, thus, signifying their intention to
reserve ownership. Second, the execution of a deed of absolute sale was made dependent
upon the proper court's approval of the sale of the shares of the minor owners. Third, the
agreement between the parties was not embodied in a deed of sale. The absence of a formal
deed of conveyance is a strong indication that the parties did not intend immediate transfer of
ownership. Fourth, petitioner retained possession of the certificate of title of the lot. This is an
additional indication that the agreement did not transfer to private respondents, either by actual
or constructive delivery, ownership of the property. Finally, respondent Juanito admitted during
trial that they have not finalized the sale in 1972 because there were minor owners40 such that
when they constructed their house thereon, they sought the permission of petitioner.

37 | P a g e
LEASE OF WORK OR SERVICE; CONTRACT OF LABOR (EMPLOYMENT CONTRACT)

PERFECTO M. PASCUA vs. BANK WISE INC, and PHILIPPINE VETERANS BANK
G.R No. 191460 ; 31 January 2018

Leonen, J.:

For resolution are two (2) separate Petitions for Review on Certiorari assailing the July
13, 2009 Decision and February 22, 2010 Resolution of the Court of Appeals in CA-G.R.
SP No. 103453. The Court of Appeals affirmed the Labor Arbiter and National Labor
Relations Commission's finding that Perfecto M. Pascua (Pascua) was constructively
dismissed. The Court of Appeals, however, absolved Philippine Veterans Bank from
liability and held only Bankwise, Inc. (Bankwise) liable for Pascua's money claims.

Facts:
Veterans and Bank Wise entered into a memorandum of agreement for the purchase of
Bankwise’s outstanding capital stock. Philippine Veterans allegedly assumed all control and full
management of Bankwise. Pascua was assigned to a new position but his duties, functions and
responsibilities were not clearly delineated. Pascua was informed that because of the merger,
he has to file his resignation and assured him that he will be paid all his money claims. He was
assured by Campa that upon tendering his resignation he is assured a continued service in
Veterans bank, to which he complied. Pascua reminded Campa of his money claims. Pascua
wrote a letter to Buhain as regards his continued service in bankwise, to which Veterans and
BankWise refused. Another demand was made by Pascua but to no avail. Thus Pascual filed
illegal dismissal case against the corporation to which the the Labor Arbiter rendered decision in
the negative, alleging that Pascua voluntarily resigned because he has relied on his resignation
letter. Pascua appealed to the NLRC in which it reversed the Labor Arbiter’s Decision. The Bank
filed a motion for reconsideration to NLRC and resolved to deny the said motions. Philippine
veterans bank filed for certiorari to the Court of Appeals to which the CA rendered a decision in
favor of Pascua, that he was constructively dismissed.

Issue:
Whether Pascua is illegally dismissed.

Held:
No, Pascua is not illegally dismissed.
The employer has the burden of proving, in illegal dismissal cases, that the employee was
dismissed for a just or authorized cause. Even if the employer claims that the employee
resigned, the employer still has the burden of proving that the resignation was voluntary. It is
constructive dismissal when resignation "was made under compulsion or under circumstances
approximating compulsion, such as when an employee's act of handing in his [or her]
resignation was a reaction to circumstances leaving him [or her] no alternative but to resign.”
"Resignation is the voluntary act of an employee who is in a situation where one believes that
personal reasons cannot be sacrificed in favor of the exigency of the service, and one has no
other choice but to dissociate oneself from employment." In order to prove that resignation is
voluntary, "the acts of the Employee before and after the alleged resignation must be
considered in determining whether he or she, in fact, intended to sever his or her employment."
Labor is a Constitutionally protected social class due to the perceived inequality between capital
and labor.78 Article 1700 of the Civil Code states: Article 1700. The relations between capital
and labor are not merely contractual. They are so impressed with public interest that labor
contracts must yield to the common good. Therefore, such contracts are subject to the special
laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working
conditions, hours of labor and similar subjects. The presumption is that the employer and the
employee are on unequal footing so the State has the responsibility to protect the employee.
This presumption, however, must be taken on a case-to-case basis. Pascua, as the Head of
Marketing with annual salary of P2,250,000.00, would have been in possession of the special
qualifications needed for his post. He would have supervised several employees in his long
years in service and might have even processed their resignation letters. He would have been
completely aware of the implications of signing a categorically worded resignation letter. If he
did not intend to resign, he would not have submitted a resignation letter. He would have
continued writing letters to Bankwise signifying his continued refusal to resign. Pascua's
resignation letter, however, was unconditional. It contained no reservations that it was premised
on his subsequent claim for severance pay and other benefits. His resignation was also
accepted by his employers. In this instance, Pascua is not considered to have been
constructively dismissed. Pascua's third letter likewise indicates that he has already accepted
the consequences of his voluntary resignation but that it would be subject to the payment of

38 | P a g e
severance pay. However, his claim for severance pay cannot be granted. An employee who
voluntarily resigns is not entitled to separation pay unless it was previously stipulated in the
employment contract or has become established company policy or practice. There is nothing in
Pascua's Contract of Employment84 that states that he would be receiving any monetary
compensation if he resigns.

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RIGHTS AND OBLIGATIONS OF THE LESSOR AND THE LESSEE; NECESSARY REPAIRS

VICTORIA N. RACELIS in her capacity as administrator vs. SPOUSES GERMIL JAVIER

and REBECCA JAVIER
G.R No. 189609; 29 January 2018

Leonen, J.:

Through this Petition for Review, petitioner Victoria N. Racelis (Racelis) challenges the
Court of Appeals January 13, 2009 Decision and September 17, 2009 Resolution, which
ordered her to reimburse the sum of P24,000.00 to respondents Spouses Germil Javier
and Rebecca Javier (the Spouses Javier).

Facts:
Pedro Nacu Sr appointed his daughter, Victoria Racelis to be an administrator of his property
and requested to sell the property first which she immediately advertised for sale. Spouses
Javier offered to buy the property but could not afford the price and offered instead to lease the
property. Parties agreed and the property was used as their residential and for their pre-school.
Racelis then inquired if the spouses are still interested in purchasing the property to which they
assured her. They paid a goodwill money until they complete the payment but they fall short.
Racelis realized that Javiers don’t have intention to purchase the property, she wrote them a
letter informing the termination of lease agreement between the spouses and that they should
vacate the premise. Spouses Javier refuse to accede and for failure to come into an agreement,
they brought the matter to Barangay still spouses refused to vacate the property, to which
Racelis filed a complaint for ejectment to the Marikina MTC. During the pendency, spouses
Javier left the premises and the only issue left is as regards the damages to which MTC
rendered a decision dismissing the complaint for damages. On an appeal to the RTC, the court
reversed the MTC decision and elevated to the court of appeals rendering decision in favor of
the Spouses Javier and ordering Racelis to return the earnest money which Racelis filed a
motion for reconsideration which was denied, hence the petition.

Issue:
Whether spouses Javier can invoke their right to suspend payment under Art. 1658 of the Civil
Code.

Held:
No, they are not entitled to the rights under 1658 because the lease contract has already
expired.
A contract of lease is a "consensual, bilateral, onerous and commutative contract by which the
owner temporarily grants the use of his property 1to another who undertakes to pay rent
therefor. Article 1658 of the Civil Code allows a lessee to postpone the payment I of rent if the
lessor fails to either (1) "make the necessary repairs" on the property or (2) "maintain the lessee
in peaceful and adequate enjoyment of the property leased." This provision implements the
obligation imposed on lessors under Article 1654(3) of the Civil Code. The failure to maintain the
lessee in the peaceful and adequate enjoyment of the property leased does not contemplate all
acts of disturbance. Lessees may suspend the payment of rent under Article 1658 of the Civil
Code only if their legal possession is disrupted. In this case, the disconnection of electrical
service over the leased premises on May 14, 2004 was not just an act of physical disturbance
but one that is meant to remove respondents from the leased premises and disturb their legal
possession as lessees. Ordinarily, this would have entitled respondents to invoke the right
accorded by Article 1658 of the Civil Code. However, this rule will not apply in the present case
because the lease had already expired when petitioner requested for the temporary
disconnection of electrical service. Petitioner demanded respondents to vacate the premises by
May 30, 2004. Instead of surrendering the premises to petitioner, respondents unlawfully
withheld possession of the property. Respondents continued to stay in the premises until they
moved to their new residence on September 26, 2004. At that point, petitioner was no longer
obligated to maintain respondents in the "peaceful and adequate enjoyment of the lease for the
entire duration of the contract." Therefore, respondents cannot use the disconnection of
electrical service as justification to suspend the payment of rent .

40 | P a g e
AGENCY; CHARACTERISTICS

SHIRLEY T. LIM, MARY T. LIMLEON, and JIMMY T. LIM vs. PEOPLE OF THE PHILIPPINES
G.R No. 226590; 23 April 2018

Reyes, Jr., J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing
the Decision dated April 22, 2016 and Resolution dated August 17, 2016 of the Court of
Appeals (CA) in CA-G.R. CR No. 37336. The CA affirmed with modification the Decision
dated November 27, 2014 of the Regional Trial Court of Manila (RTC) in Criminal Case No.
14-305915, which in turn, affirmed the Decision dated April 29, 2014 of the Metropolitan
Trial Court of Manila (MeTC).

Facts:
Lucy Lim is alleging a falsified Secretary’s Certificate that contains authorizing Jimmy Lim to
disposed of the parcel of land registered under Pentel’s name located in Pasay City. Through
the Sec Cert, Jimmy was able to enter into a Deed of Sale to the spouses Lee. According to
Lucy, the Sec Cert made it appear that it was signed by Quintin but the date provided un the
Sec Cert, Quintin is already deceased. An information was filed against Petitioners and the
Spouses Lee for falsification of public document. The MetC convicted the petitioners but
acquitted Spouses Lee for failure to prove their participation. Petitioners filed a notice of Appeal
to the RTC and it rendered affirming the MetC decision. The Petitioners filed an appeal to the
CA petition for review under rule 42. The CA dismissed the appeal and affirmed the decision of
the lower courts and modified the penalty in accordance with ISLAW. Hence the petition.

Issue:
Whether the petitioner is with merit and that they are guilty of Falsification of public document.

Held:
Yes, they are correctly charged with falsification. The sale was not valid, as they are not
authorized by the corporation to dispose of the same.
Upon review of the Information, it is apparent that the subject matter of the falsification is the
Secretary's Certificate dated February 29, 2000-a notarized document certifying that Pentel's
Board of Directors passed Board Resolution 2000-001 in the meeting held on February 25,
2000. Specifically, the Information accused the petitioners of conspiring with one another in
falsifying the Secretary's Certificate dated February 29, 2000 and Board Resolution 2000-001,
because Quintin, one of Pentel's directors, already died on September 16, 1996-long before the
documents were executed with his supposed approval. It was further alleged that the petitioners
falsified these documents through the following aces: (a) counterfeiting the signature of Quintin;
(b) causing it to appear that Quintin participated in the preparation of these documents; and (c)
by making an untruthful statement in a narration of facts. Thus, the prosecution offered the
Secretary's Certificate dated February 29, 2000 for two purposes: first, to prove its existence
and the fact that the petitioners falsified this public document by making an untruthful statement
in a narration of facts; and second, to prove the existence of Board Resolution 2000-001, and
that the petitioners made it appear that Quintin participated in its preparation by forging his
signature. While a board resolution is indeed not a public document within the contemplation of
Section 19(b), Rule 132 of the Revised Rules on Evidence, the Secretary's Certificate dated
February 29, 2000 squarely falls under this category. And, since the said Secretary's Certificate
specifically contained not only the supposed resolution passed by Pentel's Board of Directors,
but also the signatures of all the board members who approved such resolution, then it can be
concluded that all of the petitioners participated in the execution of the falsified Secretary's
Certificate. Article 90 of the RPC provides that the period for the prescription of offenses
commences from the day on which the crime is discovered by the offended party, the
authorities, or their agents. But if the offense is falsification of a public document punishable
under Article 172 of the RPC, as in this case, the period for prescription commences on the date
of registration of the forged or falsified document. For voluntary transactions such as sale,
registration is commenced upon the owner's presentation of the duplicate certificate to the
Register of Deeds, together with the voluntary instrument. The Register of Deeds then registers
the instrument in the primary entry book, and makes a corresponding memorandum on the
owner's duplicate and original certificate. If the property belongs to a corporation, such as the
subject property, the voluntary instrument should be accompanied by a secretary's certificate
showing the board of directors' resolution for the approval of the sale of the corporation's
property. It should be emphasized at this point that the corporation's real property may only be
sold through the agents expressly authorized by the board of directors to act on behalf of the
corporation. Since a corporation is a juridical entity, the physical act of executing the deed of
sale may be done only through the corporation's officers or agents, duly authorized for this

41 | P a g e
purpose by its board of directors. This authority should be reduced in writing as evidence that
such authority exists, and more importantly, because this involves the creation or conveyance of
real rights over immovable property. Thus, considering all these corporate requirements, the
board resolution for the sale of the corporation's real property, must reflect two important items,
i.e. (a) the board of directors' collective approval of the sale; and (b) the board of directors' grant
of authority to a natural person, who would act as the corporation's agent for such sale. The
evidence of such board resolution to the public is the secretary's certificate. In this document,
the corporate secretary certifies under oath, that on a particular date, the board of directors met
and resolved to approve the sale of the corporation's real property, and to authorize a specific
natural person to act on behalf of the corporation for this transaction.

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AGENCY: KINDS OF AGENCY

DONABELLE V. GONZALES-SALDANA vs SPOUSES NIAMATALI GORDON and AMY V.

NIAMATALI
G.R No. 226587; 21 November 2018

Reyes, J. Jr., J.:

This is a petition for certiorari on decisions of March 31, 2016 and August 10, 2016 which
reversed and set aside the decision of RTC in Kalibo, Aklan for the recovery of sum of
money.

Facts:
Respondent spouses Niamatali, residing in the United States, made know to the petitioner their
intention to acquire real properties in Metro Manila. They are informed by the respondent, who
is working with DOLE that time, that a parcel of land located in Las Pinas will be sold at a public
auction conducted by DOLE sheriff’s office. Thereafter, respondent-petitioner asked the
petitioner to participate in the public auction on their behalf and remitted money to petitioner’s
bank account. However, the spouses received TCT from petitioner covering the lots in Manila
and Property contrary to their agreement that the lot is located in Las Pinas. Petitioner explained
that auction sale of Las Pinas property did not push through because of a third party claim.
When the spouses returned to the Philippines, petitioner brought the respondents to the Las
Pinas property and it was locked up and with a sign board of its owner. The spouses informed
the petitioner that they are no longer interested in the purchase of lot and asked to return the
money remitted to her to which she acceded. She even sent an acknowledgement receipt and
promised to return the amount on or before September 14, 2002. She told them she would
return the money used in purchasing another lot upon selling the properties acquired located in
Manila and Paranaque. To which spouses filed a case for collection of sum of Money and
damages. The RTC ruled in favor of the petitioner, the spouses filed an appeal to the Court of
appeals to which it ruled reversing the order of the RTC and entered a new decision hence this
petition for certiorari.

Issue:
Whether there is an implied agency between the spouse and the petitioner?

Held:
Yes, there is an implied agency because respondent communicated with the petitioner as
regards the purchase of the Las Pinas property and the spouses remitted money for that
purpose. For her part, petitioner made inquiry with the DOLE Sherriff and even talked to the
judgment creditor for that purpose. Thus it is beyond dispute that an implied agency was
established by the spouses and petitioner.
By the contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter. Agency may be
express or implied for the acts of the principal, form his silence and lack of action thereof, or his
failure to repudiate the agency knowing that another person is acting on his behalf without
authority. Hence a contract of agency is inferred with the transactions entered into by the
petitioner on behalf of the spouse.

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AGENCY: ACTUAL AGENCY: AS TO SCOPE OF AUTHORITY

BELINA CANCIO and JEREMY PAMPOLINA vs. PERFORMANCE FOREIGN EXCHANGE

CORPORATION
G.R No. 182307; 6 June 2018

This is a Petition for Review on Certiorari1 assailing January 31, 2008 Decision2
and March 31, 2008 Resolution3 of the Court of Appeals, which overturned the
Regional Trial Court July 15, 2006 Decision.

Leonen, J.:

Facts:
Sometime in 2000, Cancio and Pampolina accepted Hipol’s invitation to open a joint
account with Performance Forex. Cancio and Pampolina deposited the required margin
account deposit of US$10,000.00 for trading. The parties executed an application for
the opening of a joint account, with a trust/trading facilities agreement between
Performance Forex, and Cancio and Pampolina. They likewise entered into an
agreement for appointment of an agent between Hipol, and Cancio and Pampolina.
They agreed that Cancio and Pampolina would make use of Performance Forex’s credit
line to trade in the forex market while Hipol would act as their commission agent and
would deal on their behalf in the forex market. All parties agreed that the trading would
only be executed by Cancio and Pampolina, or, upon instructions to their agent, Hipol.
The trading orders to Hipol would be coursed through phone calls from Cancio and
Pampolina. From March 9, 2000 to April 4, 2000, Cancio and Pampolina earned
US$7,223.98. They stopped trading for more or less two (2) weeks, after which,
however, Cancio again instructed Hipol to execute trading currency orders. When she
called to close her position, Hipol told her that he would talk to her personally. Cancio
later found out that Hipol never executed her orders. Hipol confessed to her that he
made unauthorized transactions using their joint account from April 5, 2000 to April 12,
2000. The unauthorized transactions resulted in the loss of all their money, leaving a
negative balance of US$35.72 in their Statement of Account. Cancio later informed
Pampolina about the problem. Pampolina met with two (2) Performance Forex officers,
Dave Almarinez and Al Reyes, to complain about Hipol’s unauthorized trading on their
account and to confront them about his past unauthorized trades with Performance
Forex’s other client, Justine Dela Rosa. The officers apologized for Hipol’s actions and
promised to settle their account. However, they stayed quiet about Hipol’s past
unauthorized trading. Performance Forex offered US$5,000.00 to settle the matter but
Cancio and Pampolina rejected this offer. Their demand letters to Hipol were also
unheeded. Thus, they filed a Complaint for damages against Performance Forex and
Hipol before the Regional Trial Court of Mandaluyong City. According to the Regional
Trial Court, Performance Forex should have disclosed to Cancio and Pampolina that
Hipol made similar unauthorized trading activities in the past, which could have affected
their consent to Hipol’s appointment as their agent. It also noted that innocent third
persons should not be prejudiced due to Performance Forex’s failure to adopt the
necessary measures to prevent unauthorized trading by its agents. Performance Forex
appealed this Decision to the Court of Appeals, arguing that it had adequate safeguards
concerning dealings with commission agents, and that it was Cancio and Pampolina
who vested Hipol with “broad powers to conduct trading on their behalf.” The court of
appeals granted the appeal and reversed the RTC decision. Pamplona et. al moved for
reconsideration but likewise denied hence the petion.

Issue:
Whether Performance Exchange Corporation should be held solidary with the
petitioner’s broker?

Held:
No. Even if this Court were to liberally review the factual findings of the Court of
Appeals, the Petition would still be denied. A principal who gives broad and unbridled
authorization to his or her agent cannot later hold third persons who relied on that
authorization liable for damages that may arise from the agent’s fraudulent acts.

44 | P a g e
Petitioners opened a joint account with respondent, through their broker, Hipol, to
engage in foreign currency exchange trading. Respondent had a leverage system of
trading, wherein clients may use its credit line to facilitate transactions. This means that
clients may actually trade more than what was actually in their accounts, signifying a
higher degree of risk. The contract between petitioners and respondent provided that
respondent was irrevocably authorized to follow bona fide instructions from petitioners
or their broker. Before a claimant can be entitled to damages, “the claimant should
satisfactorily show the existence of the factual basis of damages and its causal
connection to defendant’s acts.” The acts of petitioners’ agent, Hipol, were the direct
cause of their injury. There is no reason to hold respondent liable for actual and moral
damages. Since the basis for moral damages has not been established, there would
likewise be no basis to recover exemplary damages and attorney’s fees from
respondent. If there was any fault, the fault remains with petitioners’ agent and him
alone. The State has already taken notice of the high risks involved in foreign exchange
leverage trading. In the prior case of Securities and Exchange Commission v.
Performance Foreign Exchange Corporation, the Securities and Exchange Commission
tried to issue a cease-and-desist order against respondent for trading foreign currency
futures contracts without the proper license.

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PARTNERSHIP: DEFINITION; CHARACTERISTICS OF PARTNERSHIP AS A
CONTRACT

ANICETO G. SALUDO, JR. vs PHILIPPINE NATIONAL BANK

G.R No. 193138; 20 August 2018

This is a petition for certiorari filed by Saludo assailing the decisions and
resolution made by the court of appeals.

Jardeleza, J.,

Facts:
SAFA law office entered into a contract of lease with PNB for a period of three years (3)
the rent being payable monthly subjected to yearly escalation of 1%. SAFA law then
occupied the leased premise and paid advance rental fees and security deposits. On 1
August 2001, the contract of lease has expired but SAFA law office continued to occupy
the premises and stopped paying for the monthly rental fees. PNB then sent a demand
letter to SAFA law office for the payment of the rental fees. In a letter reply by the SAFA
law office, it stated its intention to negotiate, one of conditions offered by SAFA to PNB
among others is referral of cases of PNB to said law office and the rent will be paid out
of attorney’s fees. However not a single case was referred to the law office. SAFA law
office then asked to review the billing of PNB and asked for a 50% discount while
waiting for cases to be referred to the firm. SAFA law office on February 2005 vacated
the premise and PNB sent a demand letter for the payment of unpaid rentals. In
response, SAFA law office sent a letter for the settlement and provided for the range of
computation and deductions on the value of improvements introduced and 50%
discount promised by Dr. Lucio Tan, to which PNB declined and claimed that PNB
cannot assume the lialbilities of Macroasia Corporation to SAFA Law as PNB has a
personality distinct and separate from the bank. PNB then made a final demand to
SAFA law office to pay its unpaid rental fees. Saludo, in his capacity as managing
partner filed an amended complaint for accounting and/or recomputation in relation to
contract of lease. PNB then filed a motion to include indispensable party as plaintiff
praying that an order of amendment by Saludo should be done that he includes SAFA
law office as principal plaintiff. Saludo then filed a motion to dismiss. The RTC ruled
denying the motion of PNB as well as Saludo’s motion to dismiss was denied by the
same court. PNB filed a motion for reconsideration however RTC denied the motion,
then they file certiorari with which the court of appeals partially granted the assailed
decisions are affirmed with modification, hence the petition.

Issue:
Whether SAFA law is an indispensable party to the case and that Saludo is not sole
proprietor?

Held:
Yes, SAFA law is an indispensable party because there is a formed partnership. The
one who entered the transaction is SAFA law office not Saludo as a sole proprietor. a
partnership for the practice of law, constituted in accordance with the Civil Code
provisions on partnership, acquires juridical personality by operation of law. Having a
juridical personality distinct and separate from its partners, such partnership is the real
party-in-interest in a suit brought in connection with a contract entered into in its name
and by a person authorized to act on its behalf. SAFA Law Office is a partnership and
not a single proprietorship. Article 1767 of the Civil Code provides that by a contract of
partnership, two or more persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the profits among themselves.
Two or more persons may also form a partnership for the exercise of a profession.

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Under Article 1771, a partnership may be constituted in any form, except where
immovable property or real rights are contributed thereto, in which case a public
instrument shall be necessary. Article 1784, on the other hand, provides that a
partnership begins from the moment of the execution of the contract, unless it is
otherwise stipulated. Here, absent evidence of an earlier agreement, SAFA Law Office
was constituted as a partnership at the time its partners signed the Articles of
Partnership wherein they bound themselves to establish a partnership for the practice of
law, contribute capital and industry for the purpose, and receive compensation and
benefits in the course of its operation. The opening paragraph of the Articles of
Partnership reveals the unequivocal intention of its signatories to form a partnership.

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CREDIT TRANSACTIONS: RIGHTS AND OBLICATIONS OF BAILOR AND BAILEE
IN MUTUUM; TO PAY INTEREST; KINDS; RATE

REPUBLIC OF THE PHILIPPINES represented by the DEPARTMENT OF PUBLIC

WORKS AND HIGHWAYS vs. LENONOR MACABAGDAL represented by EULOGIA
MACABAGDAL PASCUAL
G.R No. 213945; 10 January 2018

This is a petition for review on certiorari involving the decision dated September
13, 2016 which affirmed the October 30, 2014 decision of the Regional Trial Court
of Valenzuela.

Perlas-Bernabe, J.,

Facts:
Republic through DPWH filed a complaint against an unknow owner for expropriation of
a lot located in Valenzuela for the construction of NLEX, DPWH thereafter applied for
and was granted a possession over the subject lot and required to deposit a security.
Leonora Macabagdal represented by Eulogia Macabagdal Pascual was substituted as
party defendant upon discovery that subject lot is registered under her name. The RTC
of Valenzuela appointed board of commissioners to determine the amount of just
compensation for the subject lot. RTC ruled that the determination of the just
compensation is proper. Dissatisfied, DPWH appealed before the CA questioning the
rates allowed. The CA ruled affirming the decision of the RTC, hence this petition as
regards the interest rate allowed.

Issue:
Whether the court of appeals erred in affirming the RTC decision as regards the interest
at 12% per annum on the unpaid balance?

Held:
No, the court is correct in affirming the 12% interest rate. The purpose of just
compensation is not to reward the owner for the property taken, but to compensate him
for the loss thereof. As such, the true measure of the property, as upheld in a plethora
of cases, is the market value at the time of the taking, when the loss resulted. Indeed,
the State is not obliged to pay premium to the property owner for appropriating the
latter’s property; it is only bound to make good the loss sustained by the landowner, with
due consideration to the circumstances availing at the time the property was taken. In
addition, the Court also recognizes that the owner’s loss is not only his property, but
also its income-generating potential. Thus, when property is taken, full compensation of
its value must be immediately paid to achieve a fair exchange for the property and the
potential income lost. The value of the landholdings should be equivalent to the principal
sum of the just compensation due, and interest is due and should be paid to
compensate for the unpaid balance of this principal sum after taking has been
completed. This shall comprise the real, substantial, full, and ample value of the
expropriated property, and constitutes due compliance with the constitutional mandate
of just compensation in eminent domain. In this case, from the date of the taking of the
subject lot on May 5, 2008 when the RTC issued a writ of possession28 in favor of
petitioner, until the just compensation therefor was finally fixed at P9,000.00/sq. m.,
petitioner had only paid a provisional deposit in the amount of P550,000.00 ( i.e., at
P2,750.00/sq. m.). Thus, this left an unpaid balance of the “principal sum of the just
compensation,” warranting the imposition of interest. It is settled that the delay in the
payment of just compensation amounts to an effective forbearance of money, entitling
the landowner to interest on the difference in the amount between the final amount as
adjudged by the court and the initial payment made by the government. However, as
aptly pointed out by petitioner,31 the twelve percent (12%) p.a. rate of legal interest is
only applicable until June 30, 2013. Thereafter, legal interest shall be at six percent
(6%) p.a. in line with BSP-MB Circular No. 799, Series of 2013.

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CREDIT TRANSACTIONS: RIGHTS AND OBLICATIONS OF BAILOR AND BAILEE
IN MUTUUM; TO PAY INTEREST; KINDS; RATE

LUCILA YARED and HEIRS OF THE LATE ERNESTO YARED SR., vs THE LAND
BANK OF THE PHILIPPINES
G.R No. 213945; 24 January 2018

This is a petition for review in certiorari filed by Lucila Yared and heirs of Ernesto
Yared seeking to set aside the decision dated April 20, 2012 of the Court of
Appeals with modifcations.

Reyes, JR., J.:

Facts:
Yared were the owners of parcel of land located in Bais, Negros oriental. The said
property was placed under the Comprehensive Agrarian Reform on the compulsory
acquisition of the government. Land Bank initially valued the property and deposited the
amount. Dissatisfied, Yared initiated a case before the DARAB, and DARAB directed
the Land Bank to recompute the amount. Land Bank upon compliance submitted the re-
evaluation of the property. After seven years, DARAB rejected the re-evaluation
provided by the Land Bank and reverted to the original amount. Dissatisfied, Yared filed
a petition with RTC-SAC on the determination of just compensation among other things.
The RTC ruled for the recomputation of the valuation provided by the Land Bank
including its interest in favor of the petitioner, the court of appeals ruled affirming the
decision of the RTC-SAC, hence this appeal.

Issue:
Whether the legal interest shall be imposed on the unpaid balance reckoned from the
time taking until full payment of just compensation?

Held:
Yes. The concept of just compensation has long been settled by the Court as the full
and fair equivalent of the property which must be paid to the owners of the land within a
reasonable time from its taking. This is because without prompt payment,
“compensation cannot be considered ‘just’ inasmuch as the property owner is being
made to suffer the consequences of being immediately deprived of his land while being
made to wait for a decade or more before actually receiving the amount necessary to
cope with his loss. The Court recognizes that the owner’s loss is not limited to his
property alone but includes its income-generating potential. The government, upon its
taking of the landholding, must properly compensate the landowner through its payment
of the full valuation of the property with imposition of legal interest. This is the only way
to achieve a fair exchange for the property and the potential income loss of the
landowner. From the foregoing, the Court agrees with the trial court that the petitioners
have been painstakingly waiting for a very long time for the payment of their property.
Land Bank could have expedited the proceedings had it considered all the relevant
factors mandated by law in its determination of just compensation. To make the matters
worse for the petitioners, DARAB ordered Land Bank to recompute the property
valuation only to revert back to the initial valuation of P7,067,426.91 after for more than
six years of inaction. Clearly, these factual circumstances fall within the purview of the
contemplated delay in just compensation. As to the rate of imposable interest and
reckoning period, the Court concurs with the recent jurisprudential doctrines imposing
legal interest on just compensation reckoned from the time of taking.

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CREDIT TRANSACTIONS: RIGHTS AND OBLICATIONS OF BAILOR AND BAILEE
IN MUTUUM; TO PAY INTEREST; KINDS; RATE

PAZ E. REBADULLA, PERRAIN E. REBADULLA et. al., vs REPUBLIC OF THE

PHILIPPINES, THE SECRETARY OF DPWH and ENGR. TOMAS L. BUEN
G.R No. 222159; 31 January 2018

This is a petition for review on certiorari of the decision of the Court of Appeals.

Tijam, J.:

Facts:
DPWH took parcels of lands belonging to Rebudalla for its small water impounding
facilities, in Catarman, Northern Samar. No expropriation proceeding were filed by the
DPWH. Rebudallas wrote to SWIM Manager for the reappraisal of the property. Engr.
Buen asked for reappraisal from PAC which the latter denied. Thereafter, Rebudallas
wrote to DOF-BLDF for the reappraisal of the same. In the letter sent by DOF-BLGF to
Rebudallas, DOF informed them that although there is a recommendation, PAC still
refused to change the initial valuation, this suggested that they pursue judicial remedies.
They wrote a letter for final demand, subsequently, they field a complaint for mandamus
and damages before the RTC against secretary of DPWH for the payment of just
compensation and as well prayed that they be paid legal interest.

Issue:
Whether DPWH should pay legal interest?

Held:
Yes. Ideally, just compensation should be immediately paid to the property owner so
that he may derive income from this compensation, in the same manner that he would
have derived income from his property. However, if full compensation is not paid, the
State must make up for the shortfall in the earning potential immediately lost due to the
taking. Interest on the unpaid compensation becomes due not only as compliance with
the constitutional mandate on eminent domain but also as a basic measure of fairness.
Interest in eminent domain cases, thus, accrues as a matter of law and follows as a
matter of course from the landowner’s right to be placed in as good a position as money
can accomplish, as of the date of taking. The just compensation due to the property
owner is effectively a forbearance of money. From the finality of the decision fixing the
just compensation until full payment, the total amount due to the Rebadullas shall earn
a straight 6% legal interest as the court’s decision takes the nature of a judicial debt.

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CREDIT TRANSACTIONS: RIGHTS AND OBLICATIONS OF BAILOR AND BAILEE
IN MUTUUM; TO PAY INTEREST; KINDS; RATE

APO FRUITS CORPORATION vs THE LAND BANK OF THE PHILIPPINES and

DEPARTMENT OF AGRARIAN REFORM.
G.R No. 217985-86; 21 March 2018

This is a separate petitions for review filed by Apo Fruits and Land Bank
assailing the decision and resolution of Court of Appeals.

Tijam, J.:

Facts:
Apo voluntarily sold the parcel of land to the government by virtue of the
Comprehensive Agrarian Reform. The subject land was forwarded to Land Bank for the
valuation. Apo received from DAR PARO of Davao City a notice of land valuation and
acquisition with the valuation. Apo finding the valuation law rejected the offer. LBP was
ordered to deposit the initial amount for payment, eventually a new TCT was issued and
several certificates of CLOAs. Not satisfied with the valuation of LBP, APO filed a
complaint for payment of just compensation with DARAB. Unfortunately, after six years,
the case remains pending. Apo then filed a case for the determination of just
compensation with the RTC of Tagum City. A commissioners were appointed and
evaluated the said parcel of land. The RTC ruled adopting the findings of the
commissioners as just compensation. LBP and DAR filed separate petitions for review
to the Court of Appeals thus CA rendered decision modifying the ruling of the RTC,
hence this appeal.

Issue:
Whether the interest of 12% must be counted from the time of taking from the moment
of completion of payment.

Held:
Yes. It must be from time of taking to completion of payment and LBP is liable to pay
the interest. The award of interest is intended to compensate the property owner for the
income it would have made had it been properly compensated for its property at the
time of the taking. “The need for prompt payment and the necessity of the payment of
interest is to compensate for any delay in the payment of compensation for property
already taken. “The award of interest is imposed in the nature of damages for delay in
payment which, in effect, makes the obligation on the part of the government one of
forbearance to ensure prompt payment of the value of the land and limit the opportunity
loss of the owner.” In the present case, LBP merely deposited the amount of
Php3,814,053.53 as initial payment of the just compensation. The RTC’s valuation in its
decision as just compensation for the subject property is Php149,783,000.27. There is a
staggering difference between the initial payment made by the LBP and the amount of
the just compensation due to Apo. It should be noted that the subject property has
already been taken by the government on December 9, 1996. Up to this date, the just
compensation has not been fully paid. During the interim, Apo is deprived of the income
it would have made had it been properly compensated for the properties at the time of
the taking. It is therefore necessary to hold LBP liable to pay for the legal interest due to
its delay in fully satisfying the payment of the just compensation. Thus, LBP is liable to
pay legal interest of 12% counted from December 9, 1996, the time of the taking until
June 30, 2013. Thereafter, or beginning July 1, 2013 until fully paid, the just
compensation shall earn 6% legal interest in accordance with Bangko Sentral ng
Pilipinas-Monetary Board Circular No. 799, Series of 2013. As to the award of attorney’s
fees, while the general rule is that attorney’s fees cannot be recovered as part of the
damages because no premium should be placed on the right to litigate, We deem it
proper to affirm the award of 10% attorney’s fees in favor of Apo.

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CREDIT TRANSACTIONS: RIGHTS AND OBLICATIONS OF BAILOR AND BAILEE
IN MUTUUM; TO PAY INTEREST; KINDS; RATE

ARCH. EUSEBIO B. BERNAL doing business and style CONTEMPORARY

BUILDERS vs. DR. VIVENCIO VILLAFOR AND DRA. GREGORIA VILLAFOR
G.R No. 213617; 18 April 2018

PETITION for review on certiorari of the decision and resolution of the Court of
Appeals.

Reyes, JR., J.:

Facts:
On January 28, 2009, the Regional Trial Court (RTC), Branch 41 of Dagupan City
rendered its Decision in Civil Case No. 98-02678-D, which was an action for sum of
money with damages instituted by the petitioner against the respondents. Petitioner
demanded from the respondents the payment of P3,241,800.00, representing sums
allegedly left unpaid in relation to the construction of the Medical Arts Building in
Caranglaan District, Dagupan City for which the respondents obtained the expertise and
services of the petitioner sometime in 1995. Dissatisfied, the respondents appealed the
RTC’s Decision to the CA via C.A.-G.R. CV No. 93172. On February 14, 2014, the CA
rendered its Decision that modified the RTC’s Decision by further reducing the total
award. For the CA, it was clear that the respondents had an unpaid obligation to the
petitioner for the construction of the Medical Arts Building and the 18 change orders that
were effected in relation thereto. Feeling aggrieved, petitioner filed the instant petition
for review, but limits his question on the manner by which the interest should be
determined. Petitioner argues that the interest should be computed at the rate of 6%
per annum from the time of either the last extrajudicial demand on July 5, 1998 or
judicial demand on November 16, 1998, plus 12% per annum interest from the date of
judgment until full payment.

Issue:
Whether they have obligation to pay legal interest?

Held:
Yes. In this case, the award of interest is discretionary on the part of the court. The
petitioner’s original demand does not equate to a loan or forbearance of money but
pertains to the cost of construction and services, the amount of which has not yet been
determined with certainty even up to the time of the complaint’s filing with the RTC.
Petitioner’s original claim was in fact thereafter limited by the RTC after a consideration
of the evidence presented during trial, and ultimately further reduced by the CA. The
uncertainty was brought about by the numerous change orders that happened while the
subject Medical Arts Building was being constructed. Clearly, at the time of the
petitioner’s judicial and extrajudicial demands, the amount of the respondents’ obligation
remained uncertain. It is material that the respondents’ liability was reasonably
ascertained only at the time the CA rendered its Decision on February 14, 2014. The
amount of the award, specifically P1,710,271.21, was no longer questioned in
petitioner’s motion for reconsideration with the CA, or in his petition for review before
this Court. In light of the pronouncement in Eastern Shipping that in such cases, interest
shall begin to run from the time the quantification of damages had been reasonably
ascertained, the CA’s Decision should then be modified, but only in that the interest of
6% per annum on the award of P1,710,271.21 shall be reckoned from the time of the
CA’s Decision promulgation on February 14, 2014. Once this judgment becomes final
and executory, the award equates to a loan or forbearance of money and from such
time, the legal rate of interest begins to apply. Petitioner’s insistence on an increase in
the interest rate from such time to 12% per annum is erroneous; his reference to
jurisprudence prior to 2013 is misplaced. In Circular No. 799 issued on June 21, 2013
by the Bangko Sentral ng Pilipinas, the legal rate of interest on loans and forbearance of

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money was reduced from 12% to 6% per annum from the time of the circular’s effectivity
on July 1, 2013.
CREDIT TRANSACTIONS: RIGHTS AND OBLICATIONS OF BAILOR AND BAILEE
IN MUTUUM; TO PAY INTEREST; KINDS; RATE

SECURITY BANK CORPORATION vs SPOUSES RODRIGO and ERLINDA

MERCADO
G.R No. 192934; 27 June 2018

This is a consolidated petition seeking to nullify the court of appeals decision

and resolution.

Jardeleza, J.:

Facts:
On September 13, 1996, Security Bank granted spouses Mercado a revolving credit line
in the amount of P1,000,000.00. To secure the credit line, the spouses Mercado
executed a Real Estate Mortgage in favor of Security Bank on July 3, 1996 over their
properties covered by Transfer Certificate of Title (TCT) No. T-103519 (located in Lipa
City, Batangas), and TCT No. T-89822 (located in San Jose, Batangas). On September
13, 1996, the spouses Mercado executed another Real Estate Mortgage11 in favor of
Security Bank this time over their properties located in Batangas City, Batangas
covered by TCT Nos. T-33150, T-34288, and T-34289 to secure an additional amount
of P7,000,000.00 under the same revolving credit agreement. Subsequently, the
spouses Mercado defaulted in their payment under the revolving credit line agreement.
Security Bank requested the spouses Mercado to update their account, and sent a final
demand letter on March 31, 1999. Thereafter, it filed a petition for extrajudicial
foreclosure pursuant to Act No. 3135,13 as amended, with the Office of the Clerk of
Court and Ex- Officio Sheriff of the RTC of Lipa City with respect to the parcel of land
situated in Lipa City. Security Bank likewise filed a similar petition with the Office of the
Clerk of Court and Ex Officio Sheriff of the RTC of Batangas City with respect to the
parcels of land located in San Jose, Batangas and Batangas City. The respective
notices of the foreclosure sales of the properties were published in newspapers of
general circulation once a week for three consecutive weeks as required by Act No.
3135, as amended. However, the properties in Batangas City and San Jose, Batangas
contained errors with respect to their technical description. Security Bank caused the
publication of an erratum in a newspaper to correct these errors. On October 19, 1999,
the foreclosure sale of the parcel of land in Lipa City, Batangas was held wherein
Security Bank was adjudged as the winning bidder. The Certificate of Sale over it was
issued on November 3, 1999. A similar foreclosure sale was conducted over the parcels
of land in Batangas City and San Jose, Batangas where Security Bank was likewise
adjudged as the winning bidder. The Certificate of Sale17 over these properties was
issued on October 29, 1999. Both Certificates of Sale were registered, respectively, with
the Registry of Deeds of Lipa City on November 11, 1999 and the Registry of Deeds of
Batangas City on November 17, 1999. On September 18, 2000, the spouses Mercado
offered to redeem the foreclosed properties for P10,000,000.00. However, Security
Bank allegedly refused the offer and made a counter-offer in the amount of
P15,000,000.00. On November 8, 2000, the spouses Mercado filed a complaint for
annulment of foreclosure sale, damages, injunction, specific performance, and
accounting with application for temporary restraining order and/or preliminary injunction
with the RTC of Batangas City, docketed as Civil Case No. 5808 and eventually
assigned to Branch 84. The RTC declared the foreclosure sales void because “[t]he act
of making only one corrective publication x x x is a fatal omission committed by the
mortgagee bank.” It also found merit in the spouses Mercado’s contention that the
parcel of land in San Jose, Batangas and the three parcels of land in Batangas City
should not be lumped together in a single foreclosure sale. Not only does it make the
redemption onerous, it further violates Sections 1 and 5 of Act No. 3135 which do not
envision and permit a single sale of more than one real estate mortgage separately
constituted. The notice of sale itself is also defective because the act of making only
one corrective publication is fatal. The RTC also ruled that the stipulation as to the
interest rate on the availments under the revolving credit line agreement “where the

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fixing of the interest rate is the sole prerogative of the creditor/mortgagee, belongs to
the class of potestative condition which is null and void under [Article] 1308 of the New
Civil [C]ode.” Security Bank moved for reconsideration of the RTC’s Decision. The CA,
on appeal, affirmed with modifications the RTC’s Amended Decision. It agreed that the
error in the technical description of the property rendered the notice of foreclosure sale
defective. Security Bank’s subsequent single publication of an erratum will not cure the
defective notice; it is as if no valid publication of the notice of the foreclosure sale was
made. Hence this petition.

Issue:
Whether the provisions on interest rate in the revolving credit line agreement and its
addendum are void for being violative of the principle of mutuality of contracts.
Whether interest and penalty are due and demandable from date of auction sale until
finality of the judgment declaring the foreclosure void under the doctrine of operative
facts.

Held:
The interest rate provisions in the parties’ agreement violate the principle of mutuality of
contracts. The principle of mutuality of contracts is found in Article 1308 of the New Civil
Code, which states that contracts must bind both contracting parties, and its validity or
compliance cannot be left to the will of one of them. The binding effect of any
agreement between parties to a contract is premised on two settled principles: (1) that
any obligation arising from contract has the force of law between the parties; and (2)
that there must be mutuality between the parties based on their essential equality. As
such, any contract which appears to be heavily weighed in favor of one of the parties so
as to lead to an unconscionable result is void. Likewise, any stipulation regarding the
validity or compliance of the contract that is potestative or is left solely to the will of one
of the parties is invalid. This holds true not only as to the original terms of the contract
but also to its modifications. Consequently, any change in a contract must be made with
the consent of the contracting parties, and must be mutually agreed upon. Otherwise, it
has no binding effect. The principle of mutuality of contracts is found in Article 1308 of
the New Civil Code, which states that contracts must bind both contracting parties, and
its validity or compliance cannot be left to the will of one of them. The binding effect of
any agreement between parties to a contract is premised on two settled principles: (1)
that any obligation arising from contract has the force of law between the parties; and
(2) that there must be mutuality between the parties based on their essential equality.
As such, any contract which appears to be heavily weighed in favor of one of the parties
so as to lead to an unconscionable result is void. Likewise, any stipulation regarding the
validity or compliance of the contract that is potestative or is left solely to the will of one
of the parties is invalid. This holds true not only as to the original terms of the contract
but also to its modifications. Consequently, any change in a contract must be made with
the consent of the contracting parties, and must be mutually agreed upon. Otherwise, it
has no binding effect.

They err. Andal is not squarely applicable to this case. In that case, there was a finding
by both the trial court and the CA that no default can be declared because of the
arbitrary, illegal, and unconscionable interest rates and penalty charges unilaterally
imposed by the bank. There, the debtors questioned the period of default in relation to
the interest imposed as it was an issue necessary for the determination of the validity of
the foreclosure sales therein. In contrast, here, the spouses Mercado never denied that
they defaulted in the payment of the principal obligation. They did not assert, from their
complaint or up to their petition before this Court, that they would not have been in
default were it not for the bank’s imposition of the interest rates. Theories raised for the
first time cannot be entertained in appeal. Moreover, for purposes of computing when
legal interest shall run, it is enough that the debtor be in default on the principal
obligation. To be considered in default under the revolving credit line agreement, the
borrower need not be in default for the whole amount, but for any amount due. We also
find no merit in their argument that penalty charges should not be imposed. While we
see no legal basis to strike down the penalty stipulation, however, we reduce the

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penalty of 2% per month or 24% per annum for being iniquitous and unconscionable as
allowed under Article 1229 of the Civil Code.

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CREDIT TRANSACTIONS: RIGHTS AND OBLICATIONS OF BAILOR AND BAILEE
IN MUTUUM; TO PAY INTEREST; KINDS; RATE

ASIAN TERMINALS INC. vs PADOSON STAINLESS STEEL CORPORATION

G.R No. 211876; 25 June 2018

This is a petition for certiorari filed by petitioner Asian Terminals Inc assailing the
decision and resolution of the Court of Appeals.

Tijam, J.:

Facts:
Padoson Stainless Steel Corporation (Padoson) hired ATI to provide arrastre, wharfage
and storage services at the South Harbor, Port of Manila. ATI rendered storage services
in relation to a shipment, consisting of nine stainless steel coils and 72 hot-rolled steel
coils which were imported on October 5, 2001 and October 30, 2001, respectively in
favor of Padoson, as consignee. The shipments were stored within ATI’s premises until
they were discharged on July 29, 2006. Meanwhile, the shipments became the subject
of a Hold Order issued by the Bureau of Customs (BOC) on September 7, 2001. This
was an offshoot of a Customs case filed by the BOC against Padoson due to the latter’s
tax liability over its own shipments. The Customs case, docketed as Civil Case No. 01-
102440, was pending with the RTC of Manila, Branch 173. For the storage services it
rendered, ATI made several demands from Padoson for the payment of arrastre,
wharfage and storage services (heretofore referred to as storage fees), in the following
amounts: P540,474.48 for the nine stainless steel coils which were stored at ATI’s
premises from October 12, 2001 to July 29, 2006; and P8,374,060.80 for the 72 hot-
rolled steel coils stored at ATI’s premises from November 8, 2001 to July 29, 2006. The
demands, however, went unheeded. Thus, on August 4, 2006, ATI filed a Complaint9
with the RTC of Manila, Branch 41 for a Sum of Money and Damages with Prayer for
the Issuance of Writ of Preliminary Attachment against Padoson, docketed as Civil
Case No. 06-115638. ATI ultimately prayed that Padoson be ordered to pay the
following amounts: P8,914,535.28 plus legal interest, representing the unpaid storage
fees; P100,000.00 as exemplary damages; and P100,000.00 as attorney’s fees. On July
16, 2012, the RTC rendered its Decision, dismissing ATI’s complaint and Padoson’s
counterclaim. The RTC held that although the computation of storage fees to be paid by
Padoson as prayed for in ATI’s complaint to the tune of P8,914,535.28 plus legal
interest, were “clear and unmistakable” and which Padoson never denied, the liability to
pay the same should be borne by the BOC. ATI appealed the RTC’s decision, but the
same was denied by the CA in its Decision24 dated July 23, 2013. Petitioner filed a
motion for reconsideration and the same was denied. Hence this case.

Issue:
Whether PADOSON and not BOC is liable to ATI for payment if storage fees for the
service rendered by ATI?

Held:
First, granting, without admitting, that the BOC has constructive possession over
Padoson’s shipment, this does not, in itself release Padoson from its obligation to pay
the storage fees due to ATI. It has been established that Padoson engaged ATI to
perform arrastre, wharfage and storage services over its shipments from October 12,
2001 and November 8, 2001, until it was discharged from ATI’s premises on July 29,
2006. Although Padoson’s shipments were the subject of BOC’s Hold Order dated
September 7, 2001, the fact remains that it was Padoson, and not BOC, that entered
into a contract of service with ATI and consequently was the one who was benefited
therefrom. The basic principle of relativity of contracts is that contracts can only bind the
parties who entered into it, and cannot favor or prejudice a third person, even if he is
aware of such contract and has acted with knowledge thereof. Indeed, “[w]here there is
no privity of contract, there is likewise no obligation or liability to speak about.” Guided
by this doctrine, Padoson, cannot shift the burden of paying the storage fees to BOC
since the latter has never been privy to the contract of service between Padoson and

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ATI. To rule otherwise would create an absurd situation wherein a private party may
free itself from liability arising from a contract of service, by merely invoking that the
BOC has constructive possession over its shipment by the issuance of a Hold Order.
Second, the BOC’s Hold Order is not in any way related to the contract of service
between ATI and Padoson. Rather, it is directed at Padoson’s shipment by reason of
Padoson’s tax liability and which triggered the filing of the Customs Case. The BOC’s
exclusive jurisdiction over the shipment is solely for the purpose of enforcing customs
laws against Padoson’s tax delinquency. The BOC’s interest over the shipment was
limited to discharging its duty to collect Padoson’s tax liability. Put a bit differently, the
BOC’s Hold Order is extraneous to Padoson’s obligation to pay the storage fees in favor
of ATI. Even Padoson admitted that the Hold Order was issued by the BOC merely as a
leverage to claim Padoson’s alleged unpaid duties. Clearly, Padoson has two monetary
obligations, albeit of different characters — one is its liability for storage fees with ATI
based on its contract of service, and the other is its tax liability with the BOC which is
the subject of the Customs case pending with the RTC. Third, the RTC’s
pronouncement which was affirmed by the CA, to the effect that the BOC, and not
Padoson, should have been held liable for the storage fees had it been impleaded in
ATI’s complaint, is erroneous. This presupposes that BOC is an indispensable party,
which it is not. In this case, the ultimate relief sought by ATI in its complaint for a sum of
money with damages, is the recovery of the storage fees from Padoson, which arose
from the contract of service which they have validly entered into. BOC, as explained
earlier, was never privy to this contract. It was Padoson who engaged ATI’s storage
services. It was Padoson who benefited from ATI’s storage services. It was Padoson
who subsequently sold the shipments and suffered losses. Recall too, that ATI was not
a party to the Customs case filed by BOC against Padoson for the latter’s tax
delinquency. BOC’s interest over the shipment which is the subject matter of the
Customs case is merely to collect from Padoson its tax dues; it is separate and distinct
from the claim of ATI in its complaint for a sum of money — which is to demand from
Padoson the payment of storage fees based on their contract of service. The BOC’s
Hold Order did not have the effect of relieving Padoson from its contractual obligation
with ATI. These facts reveal that BOC’s interest over the shipments is not inextricably
intertwined with ATI’s collection suit against Padoson, so as to require its legal presence
as a party to the proceeding. In other words, complete relief can still be afforded to ATI
without the presence of the BOC and the case can still be decided on the merits without
prejudicing BOC’s rights. Thus, the BOC is not an indispensable party to the complaint
for a sum of money filed by ATI against Padoson.

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