CASES DECIDED BY

JUSTICE MARIANO C. DEL CASTILLO

IN CIVIL LAW

Prepared by:
Judge Emily L. San Gaspar-Gito
RTC, Branch 5, Manila

PERSONS AND FAMILY RELATIONS

1
Heirs of Jose Ochoa vs. G & S Transport Corporation
G.R. No. 170071, July 16, 2012

(Civil obligation not arising from a felony. The acquittal of the taxi
driver in the criminal case is immaterial to the case of breach of
contract.)

FACTS:

In 1995, Jose Marcial K. Ochoa boarded a taxicab operated by G & S

Transport and driven by Bibiano Padilla, Jr. While going up the Santolan fly-
over, he overtook another vehicle which was trying to overtake another
vehicle, a ten-wheeler cargo truck. Because of the narrow space between the
left side railing of the fly-over and the ten-wheeler truck, Bibiano was unable
to pass and because of his speed, he was unable to control it.

To avoid colliding with the truck, Bibiano turned the wheel to the left
causing his taxicab to ram the railing throwing itself off the fly-over and
falling in the middle of EDSA. The forceful drop of the vehicle broke and split
it into two parts. Ochoa was declared dead on arrival from the accident.
Bibiano was acquitted in the reckless imprudence case but the heirs of Ochoa
filed the present Breach of Contract case.

ISSUE:

Does the acquittal of driver Bibiano material to the present breach of

contract filed by Ochoa’s heirs?

HELD:

No. The acquittal of Padilla in the criminal case is immaterial to the

instant case for breach of contract. Article 31 of the Civil Code provides,
“when the civil action is based on an obligation not arising from the act or
omission complained of as a felony, such civil action may proceed
 2

independently of the criminal proceedings and regardless of the result of the

latter.

As a common carrier, G & S "is bound to carry Ochoa safely as far as

human care and foresight can provide, using the utmost diligence of very
cautious persons, with due regard for all the circumstances." "In a contract of
carriage, it is presumed that the common carrier is at fault or is negligent
when a passenger dies or is injured. This statutory presumption may only be
overcome by evidence that the carrier exercised extraordinary diligence."
Unfortunately, G & S miserably failed to overcome this presumption.

2
Lontoc-Cruz v. Cruz
G.R. No. 201988, October 11, 2017

(Article 36 contemplates “incapacity or inability,” not merely “difficulty,

refusal or neglect.”)

FACTS:

Maria Victoria Socorro Lontoc-Cruz and Nilo Cruz are husband and
wife. After almost two (2) decades of being together and with two (2)
children, Maria filed for nullification of their marriage on the ground that
Nilo is psychologically incapacitated. She cited as grounds: his infidelity and
his acting like a bachelor, lack of oneness in their marriage, treatment of her
like a mayordoma, keeping from her his whereabouts, lack of sexual contact,
preference towards the company of friends and even preference for anal sex.

Nilo retaliated by claiming that Maria was jealous of his friends, has
volatile temperament, impulsive in making decisions, lacks respect towards
him and accuses him of being gay. She even talks about their sexual problem
with her family.

ISSUE:

Whether or not their marriage should be declared a nullity pursuant to

Article 36 of the Family Code.

HELD:

No, the marriage should not be declared a nullity. Mere showing of

irreconcilable differences and conflicting personalities do not constitute
psychological incapacity. Article 36 contemplates “incapacity or inability,” not
merely “difficulty, refusal or neglect.”

Nilo’s failure to sexually perform appears to be “selective impotency”

caused by his being turned-off by Maria’s disclosure of their sexual problems.
Nilo has no unresolved oedipal complex; he just got a very demanding and
 3

taxing job. Maria also failed to substantiate Nilo’s alleged womanizing

activities.

As to Maria, she appeared for have a well-functioning, supportive and

emotionally healthy family environment. Nilo himself attested that she is a
good wife and good mother. Nilo admitted that her demand for attention,
time and fidelity is normal for a wife.

3
Matudan vs. Republic
G.R. No. 203284, November 14, 2016

(Abandonment of spouse is not psychological incapacity. It is only a

ground for legal separation.)

FACTS:

Nicolas and Marilyn were married on October 26, 1976. They have four
children. In 1985, Marilyn left to work abroad and since then, she had not
been seen nor heard from by her husband and children. On June 20, 2008,
Nicolas filed a Petition for Declaration of Nullity on the ground of
psychological incapacity. The evidence presented consists of Nicolas’ Judicial
Affidavit, their daughter Maricel’s Judicial Affidavit and Dr. Nedy Tayag Sworn
Affidavit. The RTC dismissed the Petition for insufficiency of evidence.

ISSUES:

(a)Whether or not Marilyn is psychologically incapacitated.

(b) Whether or not the totality of evidence is sufficient.

HELD:

Psychological incapacity refers to no less than mental- not physical–

incapacity that causes a party to be truly incognitive of the basic marital
covenants that concomitantly must be assumed and discharged by the parties
to the marriage, as expressed in Article 68.

Abandonment of spouse is not psychological incapacity. It is

only a ground for legal separation.

Here, the evidence failed to sufficiently establish such psychological

incapacity. Maricel’s testimony could not be of help as she was only two (2)
years old when her mother left. She could not have witnessed her alleged
psychological incapacity. Dr. Tayag’s finding is also based on one-sided
account. There was really no in-depth study.

4
 4

Republic vs. Sareñogon, Jr.

G.R. No. 199194, February 10, 2016

(The “well-founded belief” means that “sincere honest to goodness

efforts” to ascertain whether the absent spouse is still alive or is
already dead.)

FACTS:

Jose Sareñongon filed a Petition for the Declaration of Presumptive

Death of her wife Netchie. He alleged that a month after they got married, he
left to work as a seaman while Netchie went to Hongkong as a domestic
helper. For three (3) months he did not receive any communication with her.

He did not know her whereabouts. He tried to contact her parents but
they were no longer residing in Clarin, Misamis Occidental. Her relatives and
friends did not also know where she was. He filed the Petition as he wanted to
contract another marriage pursuant to Article 41 of the Family Code.

ISSUE:

Whether or not Jose’s effort to locate his wife Netchie sufficiently

support a well-founded belief that she is probably dead.

HELD:

The “well-founded belief” requisite under Article 41 of the Family Code

is complied with only upon a showing that “sincere honest to goodness
efforts” had indeed been made to ascertain whether the absent spouse is still
alive or is already dead.

Here, Jose failed to comply. His efforts are notches below the strict
requirement. For, aside from his bare claims that he had inquired from
alleged friends and relatives as to Netchie's whereabouts, Jose did not call to
the witness stand specific individuals or persons whom he allegedly saw or
met in the course of his search or quest for the allegedly missing Netchie.
Neither did he prove that he sought the assistance of the pertinent
government agencies as well as the media.

5
Juliano-Llave vs. Republic, et al.
G.R. No. 169766, March 30, 2011

(A.M. No. 02-11-10-SC, which limits to only the husband or the wife the
filing of a petition for nullity, is prospective in application and does
not shut out the prior spouse from filing suit if the ground is a
bigamous subsequent marriage.)
 5

FACTS:

Around 11 months before his death, Senator Tamano married Estrellita

twice — initially under the Islamic laws and, subsequently, under a civil
ceremony. In their marriage contracts, Sen. Tamano's civil status was
indicated as 'divorced.‘ Since then, Estrellita has been representing herself to
the whole world as Sen. Tamano's wife, and upon his death, his widow.

In 1994, Haja Putri Zorayda A. Tamano (Zorayda) and her son Adib
Ahmad A. Tamano (Adib), in their own behalf and in behalf of the rest of
Sen. Tamano's legitimate children with Zorayda, filed a complaint with the
RTC of Quezon City for the declaration of nullity of marriage between
Estrellita and Sen. Tamano for being bigamous. The complaint alleged that
Sen. Tamano married Zorayda on May 31, 1958 under civil rites, and that this
marriage remained subsisting when he married Estrellita in 1993.

ISSUE:

Shall P.D. No. 1083 apply to Sen. Tamayo’s marriage? Can the Muslim
Code be applied retroactively as to affect certain marriages? Did Zorayda and
Adib have legal personalities to file the Petition?

HELD:

P.D. No. 1083 cannot benefit Estrellita. Firstly, Article 13 (1) thereof
provides that the law applies to "marriage and divorce wherein both parties
are Muslims or wherein only the male party is a Muslim and the marriage is
solemnized in accordance with Muslim law or this Code in any part of the
Philippines." Article 13 of PD 1083 does not provide for a situation where the
parties were married both in civil and Muslim rites."

Moreover, the Muslim Code took effect only on February 4, 1977, and
this law cannot retroactively override the Civil Code which already bestowed
certain rights on the marriage of Sen. Tamano and Zorayda.

In view of Sen. Tamano's prior marriage which subsisted at the time

Estrellita married him, their subsequent marriage is correctly adjudged by
the CA as void ab initio.

Zorayda and Adib, as the injured parties, have the legal personalities to
file the declaration of nullity of marriage. A.M. No. 02-11-10-SC, which limits
to only the husband or the wife the filing of a petition for nullity is
prospective in application and does not shut out the prior spouse from filing
suit if the ground is a bigamous subsequent marriage.

6
Titan Construction Corporation, vs. Spouses David
G.R. No. 169548, March 15, 2010
 6

(Any disposition or encumbrance of conjugal property must have the

written consent of the other spouse, otherwise, such disposition is
void.)

FACTS:

Manuel and Martha got married in 1957. They acquired a

602- meter lot in White Plains in 1970. It was registered in the name of
Martha, married to Manuel. In 1976, they separated and lost communication.

In 1995, Manuel was surprised to learn that Martha sold to Titan

Construction Corporation the above-mentioned lot.

Manuel filed a complaint for Annulment of Contract and

Reconveyance. He alleged that the sale was without his knowledge. Titan
Construction Corporation claimed it is a buyer in good faith.

ISSUE:

Is the Deed of Sale null and void?

HELD:

Article 116 of the Family Code is unequivocal in that "all property

acquired during the marriage, whether the acquisition appears to have been
made, contracted or registered in the name of one or both spouses, is
presumed to be conjugal unless the contrary is proved.” The presumption
being in favor of the conjugal nature of the property, the burden to prove
otherwise rested with Titan Construction Corporation.

In the absence of Manuel's consent, the Deed of Sale is void.

Article 165 of the Civil Code expressly provides that "the husband is the
administrator of the conjugal partnership." Article 172 of the Civil Code
ordains that "(t)he wife cannot bind the conjugal partnership without the
husband's consent, except in cases provided by law".

Similarly, Article 124 of the Family Code requires that any disposition
or encumbrance of conjugal property must have the written consent of
the other spouse, otherwise, such disposition is void.

7
Rodolfo S. Aguilar vs. Edna G. Siasat
G.R. No. 200169, January 28, 2015
 7

(Under Article 172 of the Family Code, the SSS Form E-1 by itself,
constitutes an "admission of legitimate filiation in a public document
or a private handwritten instrument and signed by the parent
concerned.")

FACTS:

Spouses Alfredo Aguilar and Candelaria Siasat-Aguilar died, intestate

and without debts. Included in their estate are two (2) parcels of land.
Petitioner Rodolfo, claiming that he is the sole surviving heir of the Spouses
Aguilar, filed a civil case for mandatory injunction with damages against
respondent Edna, alleging that the titles over the said two (2) parcels of land
were missing, and he suspected that someone from the Siasat Clan stole the
same.

Respondent Edna claimed that petitioner Rodolfo in not the son and
sole surviving heir of the Aguilar spouses. She alleged that he is but a mere
stranger who was raised by the Aguilar spouses out of generosity and
kindness. She stressed that since Alfredo Aguilar predeceased Candelaria
Siasat, the latter inherited the conjugal share of the former and that upon the
death of Candelaria, her brothers and sisters inherited her estate as she had
no issue. She admitted that the subject titles were not stolen, but entrusted to
her for safe keeping by her Aunt.

ISSUE:

Whether petitioner Rodolfo was able to can prove his filiation by

presenting his father’s SSS Form E-1.

HELD:

In the instant case, it must be concluded that petitioner Rodolfo —

who was born on March 5, 1945, or during the marriage of Alfredo Aguilar
and Candelaria Siasat-Aguilar and before their respective deaths — has
sufficiently proved that he is the legitimate issue of the Aguilar spouses.
As petitioner Rodolfo correctly argues, Alfredo Aguilar's SSS Form E-1
declaring him as his son under oath, satisfies the requirement for proof of
filiation and relationship to the Aguilar spouses under Article 172 of the
Family Code. By itself, the said document constitutes an "admission of
legitimate filiation in a public document or a private handwritten instrument
and signed by the parent concerned."

It was erroneous for the CA to treat said document as mere proof of

open and continuous possession of the status of a legitimate child under the
second paragraph of Article 172 of the Family Code; it is evidence of
filiation under the first paragraph thereof, the same being an express
recognition in a public instrument.
 8

PROPERTY

8
Pen Development Corp, et al., v. Martinez Leyba, Inc.
G.R. No. 211845, August 9, 2017

(Obstinate refusal to abide with repeated demands to cease and desist

from encroaching in the area makes one a builder in bad faith.)

FACTS:

Martinez Leyba, Inc. is the owner of 3 contiguous lands. Pen

Development Corp. and Las Brisas Resorts Corp., which merged into one
corporate entity is also the owner of a land adjacent to that of the former.

In 1967, Las Brisas occupied put a fence on its land. The fence
encroached with that of Martinez. Surveyors confirmed the encroachment.
In 1968, Martinez sent letter to Las Brisas informing it of the encroachment
and requested it to refrain. It did the same thing twice in the year 1970. In
1971, Las Brisas wrote back stating it could not trace the origin of Martinez’s
land. Martinez sent two more letters. Despite notices, Las Brisas continued
on developing the property.

In 1997, Martinez filed a Complaint for Quieting of Title, Cancellation

of Title and Recovery of Ownership with Damages. Las Brisas denied the
encroachment.

ISSUES:

(a) Whether or not Las Brisas is a possessor/builder in good faith.

(b) Whether or not Martinez incurred laches in enforcing its putative

rights.

HELD:

Las Brisas is a builder in bad faith because of its obstinate refusal to

abide with Martinez’s repeated demands to cease and desist from
encroaching on their area.

As a builder in bad faith, Las Brisas is not entitled to indemnity and

Martinez may demand the demolition of the developments in the property.
Martinez also has the right to recover damages.

The Civil Code provides:

 9

Art. 449. He who builds, plants or sows in bad faith on

the land of another, loses what is built, planted or sown without
right to indemnity.

Art. 450. The owner of the land on which anything has

been built, planted or sown in bad faith may demand the
demolition of the work, or that the planting or sowing be
removed, in order to replace things in their former condition at
the expense of the person who built, planted or sowed; or he
may compel the builder or planter to pay the price of the land,
and the sower the proper rent.

Art. 451. In the cases of the two preceding articles, the

landowner is entitled to damages from the builder, planter or
sower.

Martinez is not guilty of laches because as owner of the land, it has an

imprescriptible right to recover possession thereof from any person
illegally occupying its lands. “prescription and laches cannot apply to
registered land covered by the Torrens system” pursuant to Section 47 of the
Property Registration Decree 1529, which states that “no title to registered
land in derogation of the title of the registered owner shall be acquired by
prescription or adverse possession.”

9
Andres et. Al. v. Sta. Lucia Realty and Development Inc.
G.R. No. 201405, August 24, 2015

FACTS:

Petitioners are demanding from respondent an easement of right of

way. They alleged that they are co-owners and possessors for more than 50
years of three (3) parcels of unregistered agricultural land in Pag-asa,
Binangonan, Rizal with a total area of more or less 10,500 square meters.

When respondent acquired the lands surrounding the subject property

and developed it into a residential subdivision, it also built a concrete
perimeter fence around it such that petitioners were denied access from
subject property to the nearest public road and vice versa. They thus prayed
for a right-of-way.

It was established however that the 10,500 square meter claimed by

petitioners through extraordinary and ordinary acquisitive prescription
remained to be a public agricultural land.

ISSUE:
 10

Whether petitioners are entitled to demand an easement of right-of-

way from respondent despite the fact that they have not acquired ownership
over the supposed dominant estate.

HELD:

Under Article 649 of the Civil Code, an easement of right-of-way may

be demanded by the owner of an immovable or by any person who by virtue
of a real right may cultivate or use the same.

Sifting through petitioners' allegations, it appears that the subject

property is an unregistered public agricultural land. Thus, being a land of the
public domain, petitioners, in order to validly claim acquisition thereof
through prescription, must first be able to show that the State has -expressly
declared through either a law enacted by Congress or a proclamation issued
by the President that the subject [property] is no longer retained for public
service or the development of the national wealth or that the property has
been converted into patrimonial. Consequently, without an express
declaration by the State, the land remains to be a property of public
dominion and hence, not susceptible to acquisition by virtue of prescription.

In the absence of such proof of declaration in this case, petitioners'

claim of ownership over the subject property based on prescription
necessarily crumbles. Conversely, they cannot demand an easement of
right-of-way from respondent for lack of personality.

DONATION

9
Republic vs. Daclan, et al.
G.R. No. 197115/197267, March 23, 2015

(The rights and obligations derived from contracts, in this case a

donation, are transmissible. Even if the agency operating the breeding
station had turned defunct, the donation remains effective as its
functions devolved to the LGU.)

FACTS:

Federico Daclan, et al. donated 13 hectares of land to the Republic,

subject to the condition that it would be used as a breeding station and shall
not be used for any purpose except with the prior consent of the donors or
their heirs.

In 1972, the Agoo Breeding station was established by the Department

of Agriculture (DA), through the Bureau of Animal Industry (BAI), which
 11

later became defunct. In 1991, the powers and functions of the DA devolved to
the Province of La Union.

In 2003, Daclan et. al. demanded for the return of the land on the
ground that the breeding station ceased operation and that the land has been
abandoned, since the BAI turned defunct.

ISSUE:

Whether or not the deed of donation should be nullified as the BAI,

the one operating the breeding station became defunct.

HELD:

Evidence, particularly the testimonies of public officers, were given

credence insofar as they established that the breeding station is still
operational.

Also, the fact that BAI ceased to exists and its functions were devolved
to the LGU, the Province of La Union, should not result to the nullification of
the Deed of Donation. As a general rule, rights and obligations derived
from contract are TRANSMISSIBLE.

CO-OWNERSHIP

10
Antipolo Ining, et. al v. Leonardo Vega, et al.
G.R. No. 174727, August 12, 2013

(One who is merely related by affinity to the decedent does not inherit
from the latter and cannot become a co-owner of the decedent's
property. Consequently, he cannot effect a repudiation of the co-
ownership of the estate that was formed among the decedent's heirs.)

FACTS:

Romana and Gregoria are siblings. In 1997, Leonardo, the grandson of

Romana, filed an Action for Partition claiming that he was entitled to one-
half of the property, being Romana’s heir. Gregoria’s heirs claimed that he has
no cause of action as they have become the land’s sole owners through
Lucimo Sr. who executed an Affidavit of Ownership of the Land in 1979,
having acquired it through sale as early as 1943. From then on, Lucimo Sr.
enjoyed possession of the property. This allegedly resulted to the
repudiation of the co-ownership. Lucimo Sr. appeared to be the husband
of Teodora, Antipolo’s daughter. Antipolo is one of the children of Gregoria.

ISSUE:
 12

Whether or not Leonardo’s right prescribed because 30 years had

already lapsed.

HELD:

NO, Leonardo’s right did not prescribe.

Lucimo cannot be considered as a co-owner as he was just the son-in

law of Antipolo, being married to his daughter Teodora. Lucimo is NOT AN
HEIR of Gregoria hence not a co-owner.

A family relation under Article 150 of the Family Code is confined to

husband and wife, parents and children, ascendants and descendants and
brothers and sisters. It was Teodora who is the co-owner, not Lucimo as he is
merely related by affinity to the decedent.

OBLIGATIONS AND CONTRACT

11
Mackay v. Spouses Caswell et. al.
G.R. No. 183872, November 17, 2014

(If the work of a contractor has defects which destroy or lessen its value
or fitness for its ordinary or stipulated use, he may be required to
remove the defect or execute another work. The demand under this
provision need not be in particular form.)

FACTS:

Spouses Caswell hired Owen Mackay to provide electrical installation

service in their newly-built house in the amount of P250,000.00.

Thereafter, Owen claimed that the installation was completed and

ready for power service connection.

When Zambales Electrical Cooperative inspected the installation and

tested power distribution, the same shows defect leading the Spouses Caswell
to spend around P50,000.00 to rectify the mistake.

The Spouses Caswell required Owen to secure a permit and to subject

the transformer to testing. Owen could not be found thereafter so the
Spouses Caswell were constrained to file criminal case against him.

ISSUE:
 13

Whether or not Owen may be held liable for the reconstruction and
repair of the electrical installations.

Whether or not the required prior demand has been complied with by
Spouses Caswell.

HELD:

YES, under Article 1715 of the Civil Code, if the work of a contractor has
defects which destroy or lessen its value or fitness for its ordinary or
stipulated use, he may be required to remove the defect or execute another
work. If he fails to do so, he shall be liable for the expenses by the employer
for the correction of the work. The demand required of the employer
under the subject provision need not be in a particular form.

The initial demand of the Spouses Caswell for Owen to secure permit
and subject the transformer to testing by the Zambales Electrical Cooperative
can be considered as sufficient compliance with the demand requirement.
Besides, since Owen could not be found after the installation, the Spouses
Caswell were constrained to undergo the rigors of filing a criminal complaint
and testifying therein. Without doubt, the Caswells exercised due diligence
when they demanded from Owen the proper rectification of his work.

To require the Spouses Caswell to first file an action for specific

performance will not only deprive the Spouses Caswell of the right to have
the work rectify but also defeat the very purpose of the contracted work.

12
Luzon Development Bank vs. Enriquez
G.R. NO. 168646, January 12, 2011

(The protection afforded to a subdivision lot buyer under Presidential

Decree (PD) No. 957 or The Subdivision and Condominium Buyer's
Protective Decree will not be defeated by someone who is not an
innocent purchaser for value.)

FACTS:

Delta, a real estate developer, obtained a loan from Luzon

Development Bank for the purpose of developing its subdivision project. To
secure the loan, it executed a Real Estate Mortgage (REM) in favor the bank.
Included among the properties made as collateral was Lot 4.

Prior thereto, Delta had already executed a Contract to Sell in favor of

Angeles Catherine Enriquez (Enriquez) over the said Lot 4. When Delta
defaulted, the bank instead of foreclosing the REM, agreed to a dacion en
pago.
 14

The bank argued that it has become impossible for Delta to comply
with the terms of the Contract to Sell and to deliver Lot 4's title to Enriquez
given that Delta had already relinquished all its rights to Lot 4 in favor of the
bank via the dation in payment. It argued that if the bank would be required
to deliver to Enriquez, Delta should pay it the amount corresponding to Lot
4, meaning the dacion en pago should not be treated as to have extinguished
the entire obligation.

ISSUE:

Whether or not the REM is valid.

Whether or not the bank is a purchaser in good faith.

Whether the dacion en pago extinguished the loan obligation, such

that Delta has no more obligations to the bank.

HELD:

The violation of Section 18 of P.D. No. 957 renders the mortgage

executed by Delta void. It has been held that "a mortgage contract executed
in breach of Section 18 of [PD 957] is null and void." Considering that "PD
957 aims to protect innocent subdivision lot and condominium unit buyers
against fraudulent real estate practices," it has been construed that Section 18
is "prohibitory” and acts committed contrary to it are void. No rights and
obligations could validly arise from the REM.

Despite the non-registration of the Contract to Sell with the Registry of

Deeds, the Bank cannot be considered, under the circumstances, an innocent
purchaser for value of Lot 4 when it accepted the latter (together with other
assigned properties) as payment for Delta's obligation. The bank was well
aware that the assigned properties, including Lot 4, were subdivision lots and
therefore within the purview of PD 957. It knew that the loaned amounts
were to be used for the development of Delta's subdivision project, for this
was indicated in the corresponding promissory notes. The technical
description of Lot 4 indicates its location, which can easily be determined as
included within the subdivision development. Under these circumstances,
the bank knew or should have known of the possibility and risk that the
assigned properties were already covered by existing contracts to sell in favor
of subdivision lot buyers.

"The dation in payment 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.”
 15

In the case at bar, the dacion en pago executed by Delta and the Bank
indicates a clear intention by the parties that the assigned properties would
serve as full payment for Delta’s entire obligation. The Agreement reads:
“THAT, the ASSIGNEE does hereby accept this ASSIGNMENT IN
PAYMENT OF THE TOTAL OBLIGATION owing to him by the
ASSIGNOR as above-stated”

The bank cannot complain if, as it turned out, some of those assigned
properties (such as Lot 4) are covered by existing Contracts to Sell. As noted
earlier, the bank knew that the assigned properties were subdivision lots and
covered by PD 957.

A dacion en pago is governed by the law of sales. Contracts of sale

come with warranties, either express (if explicitly stipulated by the parties) or
implied (under Article 1547 et seq. of the Civil Code). In this case, however,
the bank does not even point to any breach of warranty by Delta in
connection with the Dation in Payment. To be sure, the Dation in Payment
has no express warranties relating to existing contracts to sell over the
assigned properties. As to the implied warranty in case of eviction, it is
waivable and cannot be invoked if the buyer knew of the risks or danger of
eviction and assumed its consequences. As it has been noted earlier, the
Bank, in accepting the assigned properties as full payment of Delta's "total
obligation," has assumed the risk that some of the assigned properties are
covered by contracts to sell which must be honored under PD 957.

SALES

13
Spouses Domingo vs. Spouses Manzano
G.R. No. 201883, Nov. 16, 2016

(In a contract to sell, the full payment of the purchase price partakes of
a suspensive condition, the non-fulfilment of which prevents that
obligation to sell from arising and thus ownership is retained by the
seller. Without full payment there could be no sale and without the
sale, Article 1544 shall not apply as there is no case of double sale.)

FACTS:

Spouses Manzano and Spouses Domingo entered into a Contract

whereby the latter would pay in installments a land belonging to the former.
After paying the reservation fee and some of the installments, Spouses
Domingo failed to pay the balance. The land remained in possession of the
Spouses Manzano.

It took Spouses Domingo a while to pay the balance and by that time,
Spouses Manzano no longer accepted their payment. Spouses Domingo
caused the annotation of an affidavit of adverse claim.
 16

Later, they found out that Spouses Manzano sold the property to a
certain Carmelita Aquino. Spouses Domingo file a Complaint for Specific
Performance and Damages, with prayer that the new titled issued to
Carmelita be cancelled.

ISSUES:

(a)Whether or not Spouses Domingo have a better right than

Carmelita.

(b) Whether Article 1544 is applicable.

HELD:

NO, Spouses Domingo has no better right than Carmelita and Article
1544 is not applicable.

In a contract to sell, the full payment of the purchase price partakes of

a suspensive condition, the non-fulfilment of which prevents that obligation
to sell from arising and thus ownership is retained by the seller.

Without that sale, Article 1544 shall not apply as there is no case of
double sale. There is here only one sale and that is to Carmelita.

Spouses Manzano must however reimburse Spouses Domingo of the

amount they paid in installments plus nominal damages and interests.

14
Nicolas v. Mariano
G.R. No. 201070, August 1, 2016

(Since the mortgagor/seller who is an NHA-grantee, has not yet

completely paid the value to the land, she could not validly mortgage
or sell it. However, since both parties are in pari delicto or in equal
fault, none of them may expect positive relief from the courts; instead,
they shall be left as they were at the time the case was filed.)

FACTS:

Leonora Mariano is an NHA-grantee of a parcel of land over which she

built a five-unit apartment. She mortgaged half of the land to Luz Nicolas for
a loan of P100,000.

When she could not pay the loan, she mortgaged the entire land and
the house for the amount of around P500,000.

When Mariano again defaulted, she executed an Absolute Sale in favor

of Nicolas for the purchase price of P600,000.00. Realizing that her tenants
 17

actually paid to Nicolas a total of P600,000, Mariano filed an action for her
release form the second mortgage claiming she had paid her loan in full
through the said rentals.

Nicolas claimed that she did not receive payment from the tenants and
that the property was already sold to her.

ISSUE:

Whether or not the mortgage and the sale are valid and binding.

HELD:

While the title is in the name of Mariano, she has not yet completed
the payment thereof to the NHA, thus she never really became the owner of
the property. She could not therefore validly mortgage or sell the same.

Ownership is different from a Certificate of Title. The TCT is the best

evidence but it cannot always be considered as conclusive. Here, the TCT was
not a clean title and had Nicolas exercise diligence; she would have
discovered that the property has not yet been paid with NHA.

Mariano cannot also recover damages on her alleged losses because she
is as guilty as Nicolas for mortgaging and selling the property knowing that it
was not hers. Both parties are in pari delicto. Therefore, neither one may
expect positive relief from courts. The court will leave them as they were at
the time the case was filed.

15
Bignay EX-IM Phils. Inc. v. Union Bank of the Phil.
G.R. No. 171590, February 12, 2014

(The gross negligence of the seller in defending its title to the property
subject matter of the sale — thereby contravening the express
undertaking under the deed of sale to protect its title against the
claims of third persons resulting in the buyer's eviction from the
property — amounts to bad faith, and the buyer is entitled to the
remedies afforded under Article 1555 of the Civil Code.)

FACTS:

Union Bank sold to Bignay a foreclosed property subject of a pending

case. The sale was made despite the fact that the original mortgagor of the
foreclosed property, Rosario De Leon, had filed an action for annulment of
mortgage as the foreclosed property was mortgaged by her husband without
her consent. The mortgage was indeed annulled and Rosario was declared to
be the owner of the undivided half of the property.
 18

Bignay filed a case against Union Bank for breach of warranty against
eviction under Article 1547 and 1548 of the Civil Code. The RTC held that
Union Bank was in bad faith in selling the property to Bignay. The CA made
UnionBank liable for the amount of the land and building constructed on it.

ISSUE:

Whether or not Union Bank is liable to pay Bignay the cost of the land
and the amount of the building constructed.

HELD:

YES. Union Bank is liable to Bignay. It appears that Bignay bought the
property without knowledge of the pending case between Union Bank and
Rosario. Under the law, in case of eviction, the vendee (Bignay) shall have the
right to demand of the vendor (Union Bank) the return of the value which
the thing sold had at the time of the eviction, be it greater or less than the
price of the sale; the expenses of the contract, if the vendee has paid them;
and the damages and interests, and ornamental expenses, if the same was
made in bad faith.

16
Spouses Bonrostro v. Spouses Luna
G.R. No. 172346, July 24, 2013

(In a Contract to Sell, payment of the price is a positive suspensive

condition. Failure of which is not a breach of contract warranting
rescission under Article 1191 of the Civil Code, but rather just an event
that prevents the supposed seller from being bound to convey the title
to the supposed buyer.)

FACTS:

Constancia Luna entered into a Contract to Sell with Bliss Dev. Corp.
over a house. A year after, Constancia sold to Spouses Bonrostro the house
for the price of P1,250,000, payable on four (4) instalments. It was stipulated
that should Spouses Bonrostro fail to pay, the Contract to Sell shall be
deemed cancelled and rescinded and 5% of the total price shall be forfeited.
After the execution of the contract, Spouses Bonrostro took possession of the
property but failed to pay the three (3) other installments. Constancia was
compelled to pay to Bliss so that her Contract to Sell would not be cancelled
and she would not be liable for interest.

Constancia then filed a Complaint for Rescission against Spouses

Bonrostro. Constancia instructed Bliss not to receive payment from the
Spouses anymore. Meanwhile, the Spouses claimed that they made a tender
of payment.
 19

ISSUES:

Whether or not rescission is the proper remedy for failure to pay the
instalments in a Contract to Sell real property.

Whether or not there was a valid tender of payment.

Whether or not Spouses Bonrostro should be liable for the interest

paid by Constancia.

HELD:

NO, rescission is not the proper remedy.

In a Contract to Sell, payment of the price is a positive suspensive

condition. Failure of which is not a breach of contract warranting rescission
under Article 1191 of the Civil Code, but rather just an event that prevents the
supposed seller from being bound to convey the title to the supposed buyer.

Maceda law shall apply. Section 4 thereof provides that “in case where
less than two years of installment were paid, the seller shall give the buyer a
grace period of not less than sixty days from the date the installment became
due. If the buyer fails to pay the installments due at the expiration of the
grace period, the seller may cancel the contract after thirty days from receipt
by the buyer of the notice of cancellation or the demand for rescission of the
contract by a notarial act.”

NO, there is no valid tender of payment. Tender of payment, without

more, produces no effect. To have the effect of payment and the consequent
extinguishment of the obligation to pay, the law requires the companion acts
of tender of payment and consignation.

YES, Spouses Bonrostro are liable for the payment of interest.

Contancia and her spouse suffered damages brought about by the failure of
the Spouses Bonrostro to comply with their obligation on time. " Under
Article 2209 of the Civil Code, "[i]f the obligation consists in the payment of a
sum of money, and the debtor incurs in delay, the indemnity for damages,
there being no stipulation to the contrary, shall be the payment of the
interest agreed upon, and in the absence of stipulation, the legal interest.

That Contancia instructed Bliss not to receive payment is not

sufficient. The mere intention to prevent the happening of the condition or
the mere placing of ineffective obstacles to its compliance, without actually
preventing fulfilment is not sufficient for the application of Art. 1186,
which provides that that "the condition shall be deemed fulfilled when the
obligor voluntarily prevents its fulfillment." Constancia’s directive to Bliss not
to receive provided no effective obstacle.
 20

17
Spouses Tumibay v. Spouses Lopez
G.R. No. 171692, June 3, 2013

(A buyer who caused the title to be transferred in her name prior to the
full payment of the purchase price is in breach of the contract and the
seller is entitled to rescission because the breach is substantial and
fundamental as it defeats the very object of the parties in entering into
the contract to sell.)

FACTS:

Spouses Tumibay are the owners of a parcel of land. They issued a SPA
in favor of Reynalda authorizing her to sell the land. Reynalda sold the land
to her daughter Rowena. Rowena then deposits 22 monthly installments to
the account of Spouses Tumibay and was able to pay around 32% of the
purchase price of P800,000.00.

However, despite the fact that the price has not yet been paid in full,
Reynalda, without the consent of Spouses Tumibay, executed a Deed of Sale
in favor of Rowena. This resulted to the transfer of title in her name.

ISSUE:

Whether or not the Contract to Sell may be rescinded.

HELD:

YES, the Contract may be rescinded.

As a general rule, "rescission will not be permitted for a slight or casual

breach of the contract, but only for such breaches as are substantial and
fundamental as to defeat the object of the parties in making the agreement."

In the case at bar, Rowena's act of transferring the title to the subject
land in her name, without the knowledge and consent of petitioners and
despite non-payment of the full price thereof, constitutes a substantial and
fundamental breach of the contract to sell.

As a consequence, Spouses Tumibay are entitled to moral damages and

attorney's fees while Rowena is entitled to the reimbursement of the monthly
installments with legal interest.

18
Moldex Realty Inc. v. Flora Saberon
G.R. No. 176289, April 8, 2013
 21

(The lack of a license to sell or the failure on the part of a subdivision

developer to register the contract to sell or deed of conveyance with the
Register of Deeds does not result to the nullification or invalidation of
the contract to sell it entered into with a buyer. The contract to sell
remains valid and subsisting.)

FACTS:

Flora Saberon reserved with Moldex a lot in Dasmarinas, as shown by a

Reservation Application. The price, if payment is made on installment basis,
is P583,498.20 at monthly amortizations of P8,140.97, payable in five years
and she opted to pay in installments. For failure to pay, Moldex then sent
Flora a Notarized Notice of Cancellation of Reservation Application and/or
Contract to Sell.

Flora filed a Complaint for the Annulment of the Contract to Sell,

Recovery of all her payments with interests, damages, and the cancellation of
Moldex's license to sell.

She imputed bad faith on the part of Moldex in bloating her unpaid
balance and when it sold the subject lot to her in April 1992 or even before it
was issued a license to sell in September 1992.

Flora likewise claimed that Moldex failed to register the contract to sell
in the Registry of Deeds.

ISSUES:

(a) Will the lack of a certificate of registration and a license to sell

result to the nullification of the contract to sell?

(b) How about the developer’s failure to register the contract?

HELD:

NO. The lack of a certificate of registration and a license to sell on the

part of a subdivision developer does not result to the nullification or
invalidation of the Contract to Sell it entered into with a buyer. The Contract
to Sell remains valid and subsisting.

The same is true with the developer’s failure to register the contract to
sell/document of conveyance with the Register of Deeds, in violation of
Section 17 of PD 957. The Contract to Sell remains valid.

Flora is entitled to a 50% per cent refund pursuant to the Maceda Law.
It provides:

Section 3. In all transactions or contracts involving the

sale or financing of real estate on instalment payments,
 22

including residential condominium apartments but excluding

industrial lots, commercial buildings and sales to tenants under
Republic Act Numbered Thirty-eight Hundred Forty-four
(3844), as amended by Republic Act Numbered Sixty-three
Hundred Eighty-nine (6389), where the buyer has paid at least
two years of instalments, the buyer is entitled to the following
rights in case he defaults in the payment of succeeding
instalments:

(a) To pay, without additional interest, the unpaid

instalments due within the total grace period earned by him
which is hereby fixed at the rate of one month grace period for
every one year of instalment payments made: Provided, That
this right shall be exercised by the buyer only once in every five
years of the life of the contract and its extensions, if any.

(b) If the contract is cancelled, the seller shall refund to

the buyer the cash surrender value of the payments on the
property equivalent to fifty per cent of the total payments made,
and, after five years of instalments, an additional five per cent
every year but not to exceed ninety per cent of the total
payments made: Provided, That the actual cancellation of the
contract shall take place after thirty days from receipt by the
buyer of the notice of cancellation or the demand for rescission
of the contract by a notarial act and upon full payment of the
cash surrender value to the buyer.

Down payments, deposits or options on the contract shall

be included in the computation of the total number of
installment payments made.

19
First Optima Realty Corp. v. Securitron Security Services, Inc.,
G.R. No. 199648, January 28, 2015

“In a potential sale transaction, the prior payment of earnest money

even before the property owner can agree to sell his property is
irregular. Earnest money presupposes a perfected contract of sale.)

FACTS:

Securitron looking to expand business, through its GM, Antonio

Eleazar, sent a letter to First Optima offering to purchase a property. A series
of telephone negotiations ensued between Eleazar and First Optima’s
employees. Eleazar also went to the office of First Optima and offered to pay
in cash but its EVP, Carolina Young, refused to accept it saying she had to
 23

speak with her sister and get prior approval from the Board of Directors.
Eleazar agreed to wait.

Securitron then sent a letter, accompanied by a check in the amount of

P100,000. The check was deposited and credited to First Optima. Securitron
then demanded to proceed with the sale.

When First Optima refused, Securitron filed a complaint for specific

performance with damages. First Optima claimed that it did not agree to sell
the property. It happened that the P100,000 was coursed through a mere clerk
who was forced to accept it.

ISSUES:

(a)Whether or not there was a perfected contract of sale between First

Optima and Securitron.

(b) Whether or not the P100,000 constitutes an earnest money.

HELD:

(a) NO, there is no perfected contract of sale.

(b) NO, earnest money presupposes a perfected contract of sale.

Here, the parties never got past the negotiation stage. Nothing shows
that the parties had agreed on any final arrangement containing the essential
elements of a contract of sale, namely (1) consent or the meeting of the
minds; (2) object or subject matter of the contract; and (3) the price or
consideration of the sale.

Earnest money applies to a perfected sale. Article 1482 states that

“there must be first a perfected contract of sale before we can speak of earnest
money.”

20
Tuazon v. Del Rosario-Suarez
G.R. No. 168325, December 8, 2010

(In a situation where the lessor makes an offer to sell to the lessee a
certain property at a fixed price within a certain period, and the lessee
fails to accept the offer or to purchase on time, then the lessee loses his
right to buy the property and the owner can validly offer it to another.)

FACTS:

Lourdes Q. del Rosario-Suarez was leasing her land to Roberto D.

Tuazon. During the effectivity of the lease, Lourdes sent a letter to Roberto
 24

where she offered to sell to the latter subject parcel of land. She pegged the
price at P37,541,000.00 and gave him two years from January 2, 1995 to decide
on the said offer.

More than four (4) months after the expiration of the Contract of
Lease, Lourdes sold subject parcel of land to her only child, Catalina Suarez-
de Leon, her son-in-law Wilfredo de Leon, and her two grandsons, Miguel
Luis S. de Leon and Rommel S. de Leon (the de Leons), for a total
consideration of only P2,750,000.00 as evidenced by a Deed of Absolute Sale.
TCT was thereafter issued.

The de Leons filed a complaint for Unlawful Detainer against Roberto

when he refused to vacate the sold property.

ISSUE:

Whether or not the letter sent by Lourdes to Roberto is an Option

Contract or a grant of the right of first refusal.

HELD:

Option Contract is an agreement in writing to give a person the

'option' to purchase lands within a given time at a named price. It is neither a
sale nor an agreement to sell.

In a right of first refusal, while the object might be made determinate,

the exercise of the right, however, would be dependent not only on the
grantor's eventual intention to enter into a binding juridical relation with
another but also on terms, including the price, that obviously are yet to be
later firmed up.

It is clear that in this case, the letter sent by Lourdes embodies an

option contract as it grants Roberto a fixed period of only two (2) years to buy
the subject property at a price certain of P37,541,000.00.

Article 1324 of the Civil Code reads:

Art. 1324. When the offerer has allowed the offeree a

certain period to accept, the offer may be withdrawn at any time
before acceptance by communicating such withdrawal, except
when the option is founded upon a consideration, as something
paid or promised.

It is clear from the provision of Article 1324 that there is a great

difference between the effects of an option which is without a consideration
from one which is founded upon a consideration. If the option is without any
consideration, the offeror may withdraw his offer by communicating such
withdrawal to the offeree at any time before acceptance; if it is founded upon
 25

a consideration, the offeror cannot withdraw his offer before the lapse of the
period agreed upon.

MORTGAGE

21
Ruiz v. Dimailig
G.R. No. 204280, November 9, 2016

(In order for a mortgagee to invoke the doctrine of mortgagee in good

faith, the impostor must have succeeded in obtaining a Torrens title in
his name and thereafter in mortgaging the property.)

FACTS:

Bernardo Dimailig was the registered owner of a land, who entrusted

the TCT to his brother Jovanie who in turn gave it to a broker, for its intended
sale.

In 1998, the land was mortgaged to Evelyn Ruiz by a certain Editha

without the knowledge and consent of Bernardo. Thus, Bernardo filed an
action for the Annulment of the Deed of Real Estate Mortgage (REM). Evelyn
claimed that she was a mortgagee in good faith. It turned out that the Deed
of REM was forged.

ISSUE:

Whether or not Evelyn is a mortgagee in good faith.

HELD:

Evelyn is not a mortgagee in good faith.

First, the Deed of REM was established to be a forged instrument, its

nullity conveys no title.

Second, the TCT remained to be registered in the name of Bernardo. It

was not transferred to the impostor’s name when Evelyn transacted with the
latter.

Third, even if the impostor has caused the property to be titled in his
name, Evelyn would still not be deemed a mortgagee in good faith because
she did not take the necessary steps to determine any defect in the title of the
alleged owner. She ignored pertinent facts that should have aroused her
suspicion.

22
Bucton v. Rural Bank of El Salvador, et al.
 26

G.R. No. 179625, February 24, 2014

(A mortgage executed by an authorized agent who signed in his own

name without indicating that he acted for and on behalf of his
principal binds only the agent and not the principal.)

FACTS:

Nicanora Bucton is the owner of a house and lot. Erlinda Concepcion

borrowed it to show it to an interested buyer. However, Erlinda mortgaged it
with the Rural Bank for a loan of P30,000.00. Erlinda failed to pay the loan so
the house and lot was foreclosed.

Bucton filed an action for annulment of mortgage, foreclosure and

SPA.

ISSUE:

Whether or not Bucton is liable on the litigated mortgage when she

did not execute either in person or by attorney-in-fact the subject mortgage.

HELD:

NO, Bucton cannot be held liable under the mortgage.

In order to bind the principal by a deed executed by an agent, the deed

must upon its face purport to be made, signed and sealed in the name of the
principal. The mere fact that the agent was authorized to mortgage the
property is not sufficient to bind the principal, unless the deed was executed
and signed by the agent “for and on behalf of his principal.”

The REM is void and unenforceable against Bucton.

The bank has no one to blame but itself. Not only did it act with undue
haste when it granted and released the loan in less than three days, it also
acted negligently in preparing the Real Estate Mortgage as it failed to indicate
that Concepcion was signing it for and on behalf of Bucton. The words "as
attorney-in-fact of," "as agent of," or "for and on behalf of," are vital in order
for the principal to be bound by the acts of his agent. Without these words,
any mortgage, although signed by the agent, cannot bind the principal as it is
considered to have been signed by the agent in his personal capacity.

MUTUUM

23
Bankard v. Alarte
G.R. No. 202573, April 19, 2017
 27

(A credit card transaction involves three (3) contracts.)

FACTS:

Petitioner Bankard, a credit card provider, extended credit

accommodations to its member cardholders for the purchase of goods and
services.

ISSUE:

What is the nature of a credit card transaction?

HELD:

Credit card transactions are simple loan arrangements between the

card issuer and the card holder. It actually involves three (3) contracts
(a) the sales contract between the credit card holder and the merchant;
(b) the loan agreement between the credit card issuer and the credit card
holder; and (c) the promise to pay between the credit card issuer and the
merchant.

24
The MetroBank vs. Rosales and Yo Yuk To
G.R. No. 183204, January 13, 2014

(Bank deposits are in the nature of a simple loan or mutuum and

therefore must be paid upon demand by the depositor.)

FACTS:

In 2000, Rosales and Yo Yuk To opened a Joint Peso Account with

Metrobank, Pritil Branch. In May 2002, Rosales accompanied Liu Chiu Fang,
a Taiwanese, in opening an account with Metrobank, Escolta Branch. In
March 2003, Rosales and Yo Tuk To opened a Joint Dollar Account with
Metrobank, Pritil Branch.

In July 2003, Metrobank issued a “Hold-out Order” against Rosales and

Yo Yuk To’s account. A case of Estafa was filed against respondent Rosales
and an unidentified woman for unauthorized and fraudulent withdrawal of
US$75,000 from Liu Chiu Fang’s Account.
Rosales and Yo Yuk To filed a complaint for Breach of Obligation and
Contract with Damages.

ISSUE:

Whether Metrobank committed a breach of contract and is liable for

damages.
 28

HELD:

YES, Metrobank committed breach of contract and is liable for

damages.

Bank deposits are in the nature of a simple loan or mutuum and

therefore must be paid upon demand by the depositor.

Also, the “Hold-out” clause in the Application and Agreement for

Deposit Account applies only if there is a valid and existing obligation
arising from any of the sources of obligation enumerated under Article
1157 of the Civil Code, such as law, contracts, quasi-contracts, delict and
quasi-delict.

In this case, even the criminal case has not yet even been filed in court.

QUASI-DELICT

25
Greenstar Express, Inc. et al. v. Universal Robina Corp., et al.
G.R. No. 205090, October 17, 2016

(A vehicle owner is not liable for accident involving a driver who is not
performing his work at the time of the accident.)

FACTS:

Petitioner Greenstar is engaged in public transportation while Fruto

Sayson is one of its drivers. Respondents were Universal Robina Corporation
(Robina), the registered owner of a Mitsubishi Van, and its subsidiary Nissin
URC (Nissin URC), the employer of Renante Bicomong.

On February 25, 2003, a declared national holiday, the bus owned by

Greenstar and driven by Fruto collided with Robina’s Mitsubishi van, then
driven by Bicomong. Bicomong died on the spot while both vehicles suffered
damage.

Greenstar filed a complaint for damages against Robina and Nissin

URC. They claimed that Bicomong was negligent and therefore his employer
should be held liable.

ISSUE:

Whether or not Robina and Nissin URC are liable for the negligence of
their driver Bicomong.

HELD:
 29

NO, Robina et al. are not liable.

When by evidence the ownership of the Mitsubishi Van and Bicomong’

employment was proved, the presumption of negligence on the part of
Robina, et al. attaches as the registered owner and as an employer. The
burden to prove absence of liability rests on Robina, et al. This, Robina et al.,
may do so by proving:

1) That they have no employment relationship with Bicomong;

2) That Bicomong acted outside the scope of his assigned task;

3) That they exercised the diligence of a good father of a family

in the selection and supervision of Bicomong.

Robina et al. succeeded as it was proved that (a) Bicomong was not in
the performance of his work but on his way home to spend holiday with his
family, (b) that the Mitsubishi Van does not belong to his employer Nissin
URC but to Robina; and (b) the vehicle was not assigned to him but to
another driver.

Here, it was established that Sayson could have avoided the accident.
Rather than exhibit concern for the welfare of his passengers and the driver of
the oncoming vehicle, who might have fallen asleep or suddenly fallen ill at
the wheel, Sayson coldly and uncaringly stood his ground, closed his eyes,
and left everything to fate, without due regard for the consequences. To add
insult to injury, Sayson hastily fled the scene of the collision. Such cannot be
tolerated.

DAMAGES

26
Datumanong et.al. vs. Malaga
G.R. No. 204906, June 05, 2017

(The mere submission of the lowest bid does not automatically entitle
the bidder to the award of the contract. The bid must still undergo
 30

evaluation and post qualification in order to be declared the lowest

responsive bid and thereafter be awarded the contract.)

FACTS:

Maria Elena L. Malaga owns B.E. Construction, a private contractor

and the lowest bidder for two (2) concreting projects of the DPWH. Only one
of the projects was awarded to her. It happened that DPWH Secretary
Datumanong directed that one of the projects be undertaken by the
government in view of the impassable condition of the road that necessitated
immediate repairs. Maria Elena filed for damages.

ISSUE:

Whether or not Ma. Elena is entitled for damages.

HELD:

NO, Maria Elena is not entitled to damages.

Before a government project is awarded to the lowest calculated bidder,

his bid must undergo a mandatory post-qualification procedure whereby the
procuring entity verifies, validates and ascertains all statements made and
documents submitted by the bidder with the lowest calculated or highest
rated bid using non-discretionary criteria as stated in the bidding
documents.

Since Ma. Elena’s lowest calculated bid for the subject project did not
undergo the required post-qualification process, then she cannot claim that
the project was awarded to her. And if the project was never awarded to her,
then she has no right to undertake the same. If she has no right to the
project, then she cannot demand indemnity for lost profits or actual damages
suffered in the event of failure to carry out the same. Without a formal award
of the project in her favor, such a demand would be premature.

It may be argued that respondent's claim for damages is likewise

potentially premised on Article 27 of the Civil Code, which provides that —

Art. 27. Any person suffering material or moral loss

because a public servant or employee refuses or neglects,
without just cause, to perform his official duty may file an action
for damages and other relief against the latter, without prejudice
to any disciplinary administrative action that may be taken.

The Court still finds that respondent has no cause of action. The
project could not be awarded to her precisely for the reason that her bid still
had to undergo a post-qualification procedure required under the law.
 31

27
Darines v. Quinoñes
G.R. No. 206468, August 2, 2017

(In an action for breach of contract of carriage, moral damages may be

awarded only in case (1) an accident results in the death of a passenger;
or (2) the carrier is guilty of fraud or bad faith.)

FACTS:

Judith Darines and her daughter Joyce boarded Amianan Bus Line
driven by Rolando Quitan and operated by Eduardo Quiñones. It crashed
into a truck parked on the shoulder of Kennon Road. As a result both vehicles
were damages and two (2) passengers of the bus died. Judith and Joyce were
injured.

They filed a complaint for breach of contract of carriage and damages.

The CA deleted the award for moral and exemplary damages given by the
RTC.

ISSUE:

Whether or not Judith and Joyce were entitled to moral and exemplary
damages.

HELD:

NO, they are not entitled.

This case is one for breach of contract of carriage (culpa contractual)

where it is necessary to show the existence of the contract between the
parties, and the failure of the common carrier to transport its passenger safely
to his or her destination. An action for breach of contract differs from quasi-
delicts (also referred as culpa aquiliana or culpa extra contractual) as the
latter emanate from the negligence of the tort feasor including such instance
where a person is injured in a vehicular accident by a party other than the
carrier where he is a passenger.

The principle that, in an action for breach of contract of carriage,

moral damages may be awarded only in case (1) an accident results in
the death of a passenger; or (2) the carrier is guilty of fraud or bad
faith, pursuant to Article 1764, in relation to Article 2206 of the Civil
Code, and Article 2220 thereof.

Neither of these circumstances was present. Since no moral damages

were awarded, there is no basis for exemplary damages and attorney’s fees.

28
 32

Spouses Estrada et al. v. Philippine Rabbit Bus Line Inc.

G.R. No. 203902, July 19, 2017

(First, moral damages, as a general rule, are not recoverable in an

action for damages predicated on breach of contract. Second,
temperate damages in lieu of actual damages for loss of earning
capacity may be awarded where earning capacity is plainly established
but no evidence was presented as to the injured party's actual income.)

FACTS:

Spouses Dionisio and Jovita Estrada boarded a Philippine Rabbit Bus,

driven by Eduardo Saylan. Eduardo was tailgating a jeepney ahead of him
when it suddenly stopping prompting him to swerve to the other lane and
collide with an Isuzu truck. As a result, Dionisio’s arm was amputated. The
RTC awarded moral damages, in addition to actual damages, attorney’s fees
and the cost of suit. The CA deleted the award of moral damages and
attorney’s fees.

ISSUES:

(a) Whether or not Dionisio is entitled to moral damages.

(b) Should Dionisio be compensated for loss of earning capacity

because of the amputation of arm?

(c) Should he be entitled to some other form of damages?

HELD:

NO, Dionisio is not entitled to moral damages. Since breach of

contract is not one of the items enumerated under Article 2219, moral
damages, as a general rule, are not recoverable in actions for damages
predicated on breach of contract, EXCEPT (1) in cases in which the mishap
results in the death of a passenger, as provided in Article 1764, in relation to
Article 2206(3) 35 of the Civil Code; and (2) in cases in which the carrier is
guilty of fraud or bad faith, as provided in Article 2220.

Here, Dionisio did not die but merely suffered an injury, an amputated
arm. Also, fraud or bad faith has not been proved.

NO, Dionisio is not entitled to loss of earning capacity because it is in

the nature of actual damages for which proof must be presented. Here, no
proof was presented.

YES, Dionisio is entitled to temperate or moderate damages. Article

2224 states that “temperate or moderate damages, which are more than
nominal but less than compensatory damages, may be recovered when the
 33

court finds that some pecuniary loss has been suffered but its amount
cannot, form the nature of the case, be proved with certainty.”

29
Spouses Castro vs. Amparo Palenzuela et. al.
G.R. No. 184698, January 21, 2013

(By refusing to honor their solemn obligations under the lease, and
instead unduly profiting from these violations, petitioners are guilty
of bad faith. Moral damages and exemplary damages may be
awarded.)

FACTS:

Respondents own several fishponds in Bulacan. In 1994, respondents,

through their duly appointed attorney-in-fact and co-respondents Palenzuela
leased out these fishponds to petitioners. The lease was for five years. When
the lease expired, the petitioners did not vacate and continued to occupy and
operate the fishponds. Respondents then sent a letter to petitioners
declaring them as trespassers and demanding the settlement of the latter’s
outstanding obligations. Subsequently, respondents instituted a civil case for
collection of sum of money with damages before the RTC. Respondents
obtained favorable judgment both in the RTC and the CA.

ISSUE:

Whether or not petitioners are liable to pay moral and exemplary

damages to the respondents for their alleged breach of the contract of lease.

HELD:

The court finds no reason to disturb the trial and appellate courts’
award in this regard. Petitioners have not been exactly above-board in
dealing with respondents. They have been guilty of several violations of the
agreement, and not just one. They incurred delay in their payments, and
their check payments bounced, for one; for another, they subleased the
premises to another, in blatant disregard of the express prohibition in the
lease agreement; thirdly, they refused to honor their obligation as stipulated
under the lease agreement, to pay the fishpond license and other permit fees;
and finally, they refused to vacate the premises after the expiration of the
lease.

Even though respondents received payments directly from the sub-

lessee this could not erase the fact that petitioners are guilty of sub-leasing
the fishponds to her. Respondents may have been compelled to accept
payment from the sublessee only because petitioners have been remiss in
honoring their obligation to pay rent.
 34

Bad faith means breach of a known duty through some motive or

interest or ill will. By refusing to honor their solemn obligations under the
lease, and instead unduly profiting from these violations, petitioners are
guilty of bad faith. Moral damages may be awarded when the breach of
contract is attended with bad faith. Exemplary damages may also be awarded
when a wrongful act is accompanied by bad faith or when the defendant
acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.
And since the award of exemplary damages is proper in this case, attorney’s
fees and costs of the suit may also be recovered, as stipulated in the lease
agreement.

30
People v. Villar
G.R. No. 202708, April 13, 2015

(The formula for loss of earning capacity has limited recovery to “net
earning capacity,” meaning less the necessary expense for his own
living.)

FACTS:

Victoriano Villar was convicted for the murder of Jesus Ylarde.

Damages, including loss of earning capacity were awarded to Ylarde’s heirs.
The widow testified that Ylarde has a net income of P16,000.00 a year as
farmer, sari -sari store owner, driver and operator of two (2) tricycles and a
caretaker of Hacienda Bancod. Following the computation “2/3 x (80-49) =
life expectancy of 20 years multiplied by the annual net income of
P16,000.00, the heirs were awarded P320,000.00

ISSUE:

Whether or not the computation of the award for loss of earning

capacity is correct.

HELD:

The computation is wrong because “the formula that has gained

acceptance overtime has limited recovery to “net earning capacity” meaning
LESS THE NECESSARY EXPENSE FOR HIS OWN LIVING.”

Here, the computation for lost income of P16,000.00 did not take into
account the deceased’s necessary expenses.

Loss of earning capacity is in the form of actual damages, as such it

must be proved by competent proof, not merely by the self-serving testimony
of the widow. EXCEPT when:
 35

(1) The victim was self-employed and receiving less than the
minimum wage under the current laws and no documentary
evidence is available in the deceased’s line of business; and

(2) The deceased was employed as a daily wage worker and receiving
less than the minimum wage.

Here, the award for loss of earning capacity lacks basis. For one, the
widow of the deceased gave conflicting testimonies. At first, she testified that
her husband "has a net income of P16,000.00 a year as farmer, sari-sari store
owner, driver and operator of two tricycles and caretaker of Hacienda
Bancod." Next, she claimed that "before his death, her husband earns P50.00
a day as tricycle driver and P150.00 from their sari-sari store and had a net
income of P4,000.00 a month. Aside from giving inconsistent statements, the
amounts mentioned were arbitrary and were not proved to be below the
prescribed minimum wage.

Plainly, this case does not fall under any of the exceptions exempting
the submission of documentary proof. To reiterate, "actual damages, to be
recoverable, must not only be capable of proof, but must actually be proved
with a reasonable degree of certainty.”

INTEREST

31
IBM Phil. Inc. V. Prime Systems Plus Inc.
G.R. No. 203192, August 15, 2016

(For interest to become due and demandable, two (2) requisites

must be present: (1) there must be an express stipulation for the
payment of interest; and (2) the agreement to pay interest is reduced in
writing.)

FACTS:

IBM entered into an agreement with Prime for the former (IBM) to
deliver 45 automated teller machines (ATMs) and several computer hardware
to the latter’s (Prime’s) customers for the total price of around P24 Million.

In 202, IBM filed a complaint for sum of money in the amount of

around P45 million in view of Prime’s failure to pay the purchase price for the
ATMs with 3% per cent monthly interest.

The RTC ordered Prime to pay there being insufficient proof of

payment and it was found out that the checks were all dishonored.
 36

The CA partly granted Prime’s appeal but the CA found that there was
no showing that the parties actually agreed on the 3% per cent monthly
interest for invoices which remained unpaid 30 days from its delivery.

ISSUE:

Whether or not the IBM’s imposition of 3% monthly interest for

delayed payment is proper.

HELD:

No. IBM’s imposition of 3% monthly interest for delayed payment is

improper.

For interest to become due and demandable, two (2) requisites must be
present:

(1) there must be an express stipulation for the payment of

interest; and

(2) the agreement to pay interest is reduced in writing.

Here, there was no express agreement as Prime only requested for a

lower interest and did not assent to the letter imposing the 3%. That Prime
still ordered for ATMs despite receipt of the letter imposing 3% interest does
not imply assent to such interest. Agreement ought to be express and in
writing. Since there is no clear rate, the legal rate 6% annual interest shall
apply.

32
Spouses Silos v. PNB
G.R. No. 181045, July 2, 2014

(Any modification in the contract, such as the interest rate, must be

made with the consent of the contracting parties. The rate of interest is
a principal condition in a contract of loan if not the most important
component.)

FACTS:
 37

Spouses Silos, to secure a revolving credit line, constituted a Real

Estate Mortgage (REM) over their two lots. They executed Promissory Notes
and Credit Agreement. The loan was subject to 19.5% interest.

The Credit Agreement however contained a stipulation that “the

borrower agrees that the bank may modify the interest rate in the loan
depending on whatever policy the Bank may adopt in the future, etc.”

The Promissory Notes contained a stipulation granting PNB the right

to increase or reduce interest rate “within the limits allowed by law or by the
Monetary Board.” The REM agreement provided the same right to increase or
reduce interest “at any time depending on whatever policy PNB may adopt in
the future.”

ISSUE:

Whether or not PNB is entitled to the increased interest.

HELD:

Any modification in the contract, such as the interest rate, must be

made with the consent of the contracting parties. The rate of interest is a
principal condition in a contract of loan if not the most important
component. Article 1956 of the Civil Code provides that no interest shall be
due unless it has been expressly stipulated in writing.

Spouses Silos’ assent to the increases cannot be implied from their

lack of response to the letter sent by PNB informing them of the increases.
NO ONE RECEIVING A PROPOSAL TO CHANGE A CONTRACT IS
OBLIGED TO ANSWER THE PROPOSAL. Legal rate applies.

COMPROMISE AGREEMENT

33
Sonley v. Anchor Savings Bank/Equicom Savings Bank
G.R. No. 205623, august 10, 2016

(If a party fails or refuse to comply with the terms, the other party
could either enforce the compromise by a Writ of Execution or regard it
as rescinded and so insist upon his or her original demand.)

FACTS:
 38

Conchita Sonley entered into a Contract to Sell with Anchor for the
purchase of the foreclosed property. Sonley defaulted hence Anchor
rescinded the Contract. Sonley filed an action for the court to declare the
rescission as null and void. They however entered into a Compromise
Agreement.

The court rendered a Judgment based on the Compromise Agreement

whereby it was agreed that Sonley would repurchase the property from
Anchor. Sonley again defaulted prompting Anchor to move for execution.
It prayed that (a) the Compromise Agreement be rescinded; (b) it be allowed
to apply the payments as rentals; and (c) Sonley be evicted from the property.

ISSUE:

(a) Whether or not the trial court has the power to issue a writ of
execution although it was not provided in the Judgment based on
Compromise Agreement.

(b) Whether or not there is still a need to file an action for rescission.

HELD:

(a)YES, the trial court has the power to issue a writ of execution.

(b) NO, there is no need to file a separate action for rescission.

A compromise agreement is the law between the parties. Its purpose is

to put an end to litigation because of the uncertainty that may arise from it.
Once the compromise is perfected, the parties are bound to abide by it in
good faith. Should a party fail or refuse to comply with the terms, the other
party could either enforce the compromise by a WRIT OF EXECUTION or
regard it as RESCINDED and so insist upon his or her original demand.

34
Cathay Land, Inc. et al. v. Ayala Land, Inc.,
G.R. No. 210209, August 9, 2017

(Injunction not provided for under the compromise agreement, hence

inappropriate remedy. Notice of breach should have been made first
hence execution is premature.)

FACTS:
 39

Cathay filed a Complaint for easement of right of way against Ayala,

claiming it denied passage to its personnel. Before trial ensued, parties
entered into a Compromise Agreement.

Ayala granted easement of right of way in favor of Cathay, subject to

faithful compliance with its undertaking under the Compromise, such as not
to develop “high-rise buildings.”

It was further agreed that Ayala has the right “to withdraw or suspend
the grant of easement of right of way” from Cathay if it “would fail to rectify
its breach within a period of 30 days from receipt of a notice.” Such right may
be enforced by writ of execution, according to the Compromise.

The Compromise was approved in 2003.

In 2005, Ayala noticed from Cathay’s flyers that it intended to

construct high rise building. Ayala made verbal and written demand to
Cathay to abide with the Compromise.

In 2008, Ayala filed a Motion for Execution with Prayer for Injunction
and TRO.

ISSUE:

Whether or not the writ of execution is void for giving the Sheriff
unbridled authority to halt any of Cathay’s construction projects which in his
personal view constitutes a high-rise structure.

HELD:

Courts cannot modify, impose terms different from the term of the
agreement or set aside the compromise and reciprocal concessions made in
good faith by the parties without gravely abusing their discretion.

Under the Compromise, the remedies of Ayala are: first to notify

Cathay of the breach and second to withdraw or suspend the easement if
Cathay failed to rectify such breach within 30 days.

Ayala has no right to seek injunctive relief. Ayala also

prematurely moved for the execution.

THE END

Goodluck everyone!