# 26 Vanguardia, Cedric F PDF

San Sebastian College-Recoletos, Manila
College of Law
Academic Year 201-2020
CIVIL LAW REVIEW 2

CASE DIGEST
(January 2019- July 2020)
Submitted to:
ATTY. CRISOSTOMO A. URIBE
Submitted by:
VANGUARDIA, CEDRIC F.
Class No. 26
2010106583
Saturday Class
5:30-9:30 pm
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TABLE OF CONTENTS
PAGE
OBLIGATIONS
Source of obligations; Quasi-contracts; Solutio Indebiti
1. DOMESTIC PETROLEUM RETAILER CORPORATION v. MANILA 5
INTERNATIONAL AIRPORT AUTHORITY
G.R. No. 210641, 27 March 2019, Second Division- Caguioa, J.
Source of obligations; Quasi-delict
2. VDM TRADING, INC. and SPOUSES DOMING v. LEONITA
CARUNGCONG and WACK WACK TOWERS CONDOMINIUM 7
ASSOCIATION INC.
G.R. No. 206709, 6 February 2019, Second Division- Caguioa, J.
Civil Obligations; Obligations with a term
3. CAMP JOHN HAY DEVELOPMENT CORPORATION v.
9
CHARTERCHEMICAL AND COATING CORPORATION
G.R. No. 198849, 7 August 2019, Third Division – Leonen, J.
Civil Obligations; Conditional obligations
4. SOCORRO T. CLEMENTE, as substituted by SALVADOR T.
11
CLEMENTE v. REPUBLIC OF THE PHILIPPINES
G.R. No. 220008, 20 Feb 2019, Second Division-Carpio, J.
Breach of obligations; delay
5. MA. LUISA A. PINEDA v. VIRGINIA ZUÑIGA vda. DE VEGA 13
G.R. No. 233774, 10 April 2019, Second Division- Caguioa, J.
Due Diligence required on banks
6. BANK OF THE PHILIPPINE ISLANDS AND ANA C.
15
GONZALES v. SPS FERNANDO QUIAOIT AND NORA QUIAOIT
G.R. No. 199562, 16 January 2019, Second Division- Carpio, J.
Excuses for non-performance; fortuitous event
7. KEIHIN-EVERETT FORWARDING CO., INC. v. TOKIO MARINE
MALAYAN INSURANCE CO., INC. AND SUNFREIGHT FORWARDERS 17
& CUSTOMS BROKERAGE, INC.
G.R. No. 21107, 28 January 2019, Second Division- Reyes, J. Jr., J.
Modes of extinguishment of obligation; payment or performance
8. BDO UNIBANK, INC. v. FRANCISCO PUA 19
G.R. No. 230923, 8 July 2019, Second Division- Carpio, J.
Modes of extinguishment of contracts; payment or performance;
special forms of payment; dacion en pago
9. KAREN NUNEZ VITO, LYNETTE NUNEZ MASINDA, WARREN 21
NUNEZ and ALDEN NUNEZ v. NORMA MOISES-PALMA
G.R. No. 224466, 27 March 2019, Second Division- Caguioa, J.
Modes of extinguishment of obligation; novation
10. JOCELYN MODOMO and DR. ROMY MODOMO v. SPOUSES
23
MOISES LAYUG, JR. and FELISARIN LAYUG et al.
G.R. No. 197722, 14 August 2019, Second Division- Caguioa, J.
11. FOOD FEST LAND, INC. and JOYFOODS CORPORATION v.
25
ROMUALDO C. SIAPNO et al.
G.R. No. 226088, 14 April 2019, Third Division- Peralta, J.
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12. VICENTE HENSON, JR. v. UCPB GENERAL INSURANCE 27
G.R. No. 223134, 14 April 2019, En Banc -Perlas-Bernabe, J.
CONTRACTS
Essential elements of contracts; cause
13. GENEROSO SEPE v. HEIRS OF ANASTACIA KILANG, represented 29
by her children MARIA, DONATA, FELICIANA, DOMINGA and
SEVERO all surnamed SOLIJON
Fundamental characteristics; autonomy of contracts; stipulation
which is void for being contrary to public morals
31
14. HYGIENIC PACKAGING CORPORATION v. NUTRI-ASIA, INC.
G.R. No. 201302, 23 January 2019, Third Division- Leonen, J.
Fundamental characteristics; autonomy of contracts; stipulation
which is void for being contrary to public morals
15. ATTY. LEONARDO FLORENTO BULATAO v. ZENAIDA C. 33
ESTONACTOC
G.R. NO. 235020, 10 December 2019, First Division- Caguioa, J.
Fundamental characteristics; autonomy of contracts
16. LARA'S GIFTS & DECORS, INC. v. MIDTOWN INDUSTRIAL
35
SALES, INC.
G.R. No. 225433, 8 August 2019, En Banc-Carpio, J.
Fundamental characteristics; mutuality of contracts
17. ROBERTO IGNACIO AND TERESA IGNACIO v. MYRNA RAGASA
36
and AZUCENA ROA
G.R. No. 227896, 29 January 2020, First Division- Peralta, CJ.
Fundamental characteristics; relativity of contracts
18. NAOAKI HIRAKAWA v. LOPZCOM REALTY CORPORATION and
38
ATTY. GARI TIONGCO
G.R. No. 213230, 5 December 2019, First Division- Lazaro-Javier, J.
Classification of contracts; according to perfection; consensual
19. SAN MIGUEL FOODS and JAMES A. VINOYA v. ERNESTO
40
RAOUL MAGTUTO
G.R. No. 225007, 24 July 2019, Second Division- Carpio, J.
SPECIAL CONTRACTS - SALES
In General; Contract of Sale 42
20. PABLO UY v. HEIRS OF JULIATA UY-RENALES
Rights and obligations of the vendor; to transfer ownership
21. SPOUSES ISIDRO R. SALITICO AND CONRADA C. SALITICO v.
44
HEIRS OF RESURRECCION MARTINEZ FELIX
Rights and obligations of the vendor; to transfer ownership; double
sales
22. MR. and MRS. ERNESTO MANLAN v. MR. and MRS. RICARDO 46
BELTRAN
G.R. No. 222530, 16 October 2019, Third Division- Inting, J.
Rights and obligations of the vendor; to transfer ownership;
48
delivery of less or more quantity agreed upon
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23. SPOUSES LUCIA A. OROZCO et al. v. FLORANTE G. LOZANO, SR.
et al.
G.R. No. 222616, 3 April 2019, Second Division- Carpio, J.
Extinguishment of sale; conventional redemption
24. SPOUSES JOHN SY AND LENY SY, AND VALENTINO SY v. MA.
LOURDES DE VERA-NAVARRO AND BENJAEMY HO TAN 50
LANDHOLDINGS, INC.
Extinguishment of sale; conventional redemption
25. MAXIMA SACLOLO and TERSITA OGATIA v. ROMEO
MARQUITO, MONICO MARQUITO, CLEMENTE MARQUITO,
52
ESTER LOYOLA, MARINA PRINCILLO, LOURDES MARQUITO
and LORNA MARQUITO
G.R. No. 229243, 26 June 2019, Second Division- Caguioa, J.
TORTS AND DAMAGES
Liability for torts and damages; kinds of damages; moral damages
26. HEIRS OF DOMINADOR ASIS, JR. LUZON STEAM LAUNDRY v. 53
G.G. SPORTSWEAR MANUFACTURING CORPORATION and NARI
GIDWANI
G.R. No. 225052, 27 March 2019, Second Division- Reyes, J. Jr. J.
27. BNL MANAGEMENT CORP. and ROMEO DAVID v.
REYNALDO UY, RODIEL BALOY, ATTY. LUALHATI CRUZ,
55
ALBERTO WONG, TERESITA PASIA, ROLAND INGEL, AND
MARISSA SEVILLA
G.R. No. 210297, 3 April 2019, Third Division- Leonen, J.
28. MICHAEL C. GUY v. RAFFY TULFO et al. 57
G.R. No. 213023, 10 April 2019, Third Division- Leonen, J.
29. MOISES G. CORO v. MONTANO B. NASAYAO 59
G.R. No. 235361, 16 October 2019, Third Division- Inting, J.
30. THELMA B. SIAN v. SPOUSES CAESAR and ANITA SOMOSO
61
G.R. No. 201812, 22 January 2022, Third Division- Carandang, J.
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OBLIGATIONS
In General
Sources of Obligations
Quasi-contracts
Solutio Indebiti
DOMESTIC PETROLEUM RETAILER CORPORATION v. MANILA

INTERNATIONAL AIRPORT AUTHORITY
G.R. No. 210641
March 27, 2019
Second Division- Caguioa, J.
Nature of the case: Collection for sum of money.
Facts: Petitioner and respondent entered into a contract of lease whereby the former leased from
a parcel of land and building both located at Domestic Road, Pasay City. Petitioner faithfully
complied with its obligation to pay the monthly rentals since the start of the lease contract.
Thereafter, respondent passed resolution increasing the rentals paid by its concessionaires and
lessees. Petitioner initially refused to pay the increased rentals which was decreed without prior
notice and hearing. Respondent demanded its payment as rental in arrears which was based on
the increase prescribed in the resolution with 2% interest compounded monthly.
Petitioner protested in writing to respondent the increased rentals and the computation.
However, it also signified its intention to comply in good faith with the terms and conditions of
the lease contract by paying the amount charged.
Meanwhile, the Court promulgated the case of Manila International Airport Authority v.
Airspan Corporation, et al. In the said case, the Court nullified a resolution issued by respondent
MIAA for non-observance of the notice and hearing requirements for the fixing rates required by
the Administrative Code.
Petitioner stopped paying the increased rental rate, but continued paying the original rental rate
prescribed in the lease contract.
Issue: Whether or not solutio indebiti is present in the instant case for the petitioner
to be entitled for refund computed from the time of extra-judicial demand.
Ruling: The quasi-contract of solutio indebiti harks back to the ancient principle that no one
shall enrich himself unjustly at the expense of another. Art. 2154 of the Civil Code provides:
If something is received when there is no right to demand it, and it was unduly delivered
through mistake, the obligation to return it arises.
In order to establish the application of solutio indebiti in a given situation, two conditions must
concur: (1) a payment is made when there exists no binding relation between the payor who has
no duty to pay, and the person who received the payment, and (2) the payment is made through
mistake, and not through liberality or some other cause. In the instant case, the Court finds that
the essential requisites of solutio indebiti are not present.
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First, it is undisputed by all parties that respondent and petitioner are mutually bound to each
other under a contract of lease. Hence, with respondent and petitioner having the juridical
relationship of a lessor-lessee, it cannot be said that, the overpayment of monthly rentals was
made when there existed no binding juridical tie or relation between them. In fact, respondent
itself acknowledged that there was a pre-existing contractual relation between itself and
petitioner.
With these provisions of law read into the parties' contract of lease, respondent argument that
there is no provision in the contract of lease that petitioner can rely on to claim for refund of
overpayment of monthly rentals is erroneous.
Petitioner made the overpayments in monthly rentals from December 11, 1998 to December 5,
2005 not due to any mistake, error, or omission as to any factual matter surrounding the payment
of rentals. Nor did petitioner DPRC make the overpayments due to any mistaken construction or
application of a doubtful question of law. Petitioner deliberately made the payments in accordance
with respondent resolution albeit under protest.
In the instant case, there was no payment by mistake. For the concept of solutio indebiti to apply,
the undue payment must have been made by reason of either an essential mistake of fact or a
mistake in the construction or application of a doubtful or difficult question of law. Mistake entails
an error, misconception, or misunderstanding.
Therefore, with the absence of the two essential requisites of solutio indebiti in the instant case,
petitioner's cause of action is not based on the quasi-contract of solutio indebiti
WHEREFORE, the instant Petition is hereby GRANTED. The Decision and Resolution
promulgated by the Court of Appeals are PARTIALLY REVERSED and SET ASIDE insofar
as the Court of Appeals reduced the total amount of liability of respondent Manila International
Airport Authority plus legal interest at 12% per annum computed from the time of the
extrajudicial demand. Accordingly, the Decision of the RTC-Pasay City is REINSTATED.
OBLIGATIONS
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In General
Source of Obligations
Quasi-Delict
VDM TRADING, INC. and SPOUSES LUIS and NENA DOMING v. LEONITA
CARUNGCONG and WACK WACK TWIN TOWERS CONDOMINIUM
ASSOCIATION INC.
G.R. No. 206709
February 6, 2019
Nature of the Case: Complaint for damages.
Facts: Petitioner VDM and the petitioners’ spouses Domingo filed before the RTC-Mandaluyong
City a Complaint for Damages against respondents Leonita Carungcong, Wack Wack Twin Towers
and Hack Yek Tan.
It was alleged that petitioner VDM is the owner of Unit 2208B-1 located at Wack Wack. Petitioner
Nena, the majority stockholder of petitioner VDM, and her husband, petitioner Luis are actual
occupants of the Unit.
Sometime in December 1998, while the petitioners’ spouses Domingo were in the United States,
petitioner Nena’s sister, Nancy, discovered that soapy water was heavily penetrating through the
ceiling of the Unit. With the leak persisting for several days, Nancy reported the matter with the
petitioner spouses Domingo’s counsel, Atty. Villareal, as well as respondent Wack Wack’s building
administrator.
Atty. Villareal allegedly met with respondent Wack Wack’s Acting Property Manager, Arlene Cruz,
who supposedly revealed that she previously condiucted an inspection on the Unit and found that
the strong leak apparently came from other unit, which was owned by respondent Carungcong
but was being leased by Tan at that time.
Atty. Villareal sent a letter demanding that respondents Wack Wack and Carungcong make
restoration works and/or pay for the damages caused upon the Unit. And when no action has been
made, Atty. Villareal sent another letter and demands that repairs be made, but to no avail.
Issue: (1) Whether quasi-delict is source by which the petitioner’s anchors their
cause of action
Ruling: (1) By alleging that damage was caused to their property by virtue of the respondents’
individual and collective fault and/or negligence, the petitioner’s cause of action is anchored on
quasi-delict.
According Article 2176 of the Civil Code, whoever by act or omission causes damage to another
there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the parties is called a quasi-delict.
A quasi-delict has the following elements:

a) The damage suffered by the plaintiff;
b) The act or omission of the defendant supposedly constituting fault or negligence;
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c) The casual connection between the act and the damaged sustained by the plaintiff, or
proximate cause.
A perusal of evidence on record shows that the foregoing elements of quasi-delict are absent
insofar as respondents Carungcong and Wack Wack are concerned.
First the full extent of damage caused to the petitioner’s Unit was not sufficiently proven. Aside
from self-serving testimony from Atty. Villareal, the sole witness of the petitioners who is also the
petitioners’ counsel, there was no sufficient evidence presented to show the extent of the damage
caused to the Unit.
As regards to the second element, a careful perusal shows that the petitioners failed to present
even a shred of evidence that there was fault or negligence on the part of the respondents
Carungcong and Wack Wack.
Lastly, the proximate cause between the supposed damage caused and the plumbing works
undertaken was not established. It must be proven that the supposed fault or negligence
committed by respondents, i.e., the undertaking of plumbing works was the cause of the damage
to the Unit.
WHEREFORE, the appeal is hereby DENIED. The Decision and Resolution rendered by the
Court of Appeals are affirmed.
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OBLIGATIONS
Kinds of civil obligations
As to perfection and extinguishment
Obligations with a term
CAMP JOHN HAY DEVELOPMENT CORPORATION v. CHARTER

CHEMICAL AND COATING CORPORATION
G.R. No. 198849
August 7, 2019
Third Division – Leonen, J.
Nature of the case: Payment of the monetary equivalent of two (2) units in Camp John Hay
Suites.
Facts: Camp John Hay Corp. (CJHC) is an investment arm of a consortium engaged in the
construction of the Camp John Hay Manor Baguio City. It entered into a contractor’s agreement
to complete the interior and exterior painting works with Charter Chemical. Although the
agreement contained no date of the unit’s turnover, it allowed Charter Chemical to choose the
units for offsetting under the offsetting scheme.
CJHC settled partially contract price; and the balance was ought to be settled by offsetting the
price of the unit. When Charter Chemical completed the painting works, it demanded the
execution of the deed of sale and delivery of the titled of the units. The parties executed a contract
to sell.
Thereafter, the CJHC issued certification to Charter Chemical that the two units were fully paid
under the offsetting scheme. However, the units were not delivered because the construction of
CJHC was not yet completed. CJHC estimated the construction would be completed by 2006.
Due to the subsisting delay, Charter Chemical demanded that it transfer the units or pay the value
of these units. And when it felt that further demands would be futile, it filed before CIAC a Request
for Arbitration under the arbitration clause in the agreement.
Issue: (1) Whether or not Charter Chemical correctly rescinded the obligation under
Article 1191 of the Civil Code; and (2) Whether or not a period should be fixed under
Article 1197 of the Civil Code.
Ruling: Article 1191 refers to rescission applicable to reciprocal obligations. It is invoked when
there is noncompliance by one of the contracting parties in case of reciprocal obligations.
Reciprocal obligations are those which arise from the same cause, and in which each party is a
debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation
of the other. They are to be performed simultaneously such that the performance of one is
conditioned upon the simultaneous fulfilment of the other.
Rescission of the contract is sanctioned here. Under the contract, petitioner and respondent have
reciprocal obligations. Respondent, for its part, was bound to render painting services for
petitioner's property. This was completed by respondent in 2003, after which it was belatedly
issued a clearance in 2005. Meanwhile, in accordance with the Contractor's Agreement, petitioner
paid part of the contract price with the remaining balance to be paid through offsetting of two (2)
Camp John Hay Suites units. However, despite incessant demands from respondent, petitioner
failed to deliver these units because their construction had yet to be completed. The law, then,
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gives respondent the right to seek rescission because petitioner could not comply with what is
incumbent upon it. Petitioner, however, claims that the fixing of the period under Article 1197 is
the proper remedy, not rescission under Article 1191.
Here, it is clear that only petitioner benefited from the contract. Respondent has already
performed the painting works in 2003, and it was accepted by petitioner as satisfactory. Since this
service cannot be undone and petitioner has already enjoyed the value of the painting services
over the years, respondent is entitled to the payment of the painting services with interest.
(2) This Court disagrees. We cannot cure the deficiency here by fixing the period of the obligation.
There is no just cause for this Court to fix the period for the benefit of petitioner.
Article 1197 applies when the obligation does not fix a period but from its nature and
circumstances it can be inferred that a period was intended. This provision allows the courts to
fix the duration because the fulfilment of the obligation itself cannot be demanded until after the
court has fixed the period for compliance therewith and such period has arrived.
There is no just cause for this Court to determine the period of compliance. As can be gleaned
from the records of this case, the obligation of petitioner to build the Camp John Hay Suites had
been dragging for years even before it entered into the Contractor's Agreement with respondent.
The MOA that petitioner executed with the Bases Conversion and Development Authority shows
that the construction of the Camp John Hay Suites began in 1996. When respondent demanded
the units' transfer in 2007, more than 10 years had lapsed; yet, within those years, petitioner was
still not able to complete the construction of the Camp John Hay Suites.
To tolerate petitioner's excuses would only cause more delay and burden to respondent. Petitioner
failed to forward any just cause to convince this Court to set a period. To belatedly fix the period
for petitioner's compliance would mean refusing immediate payment to respondent. Petitioner's
noncompliance with its obligation to deliver the two (2) units as payment to respondent can no
longer be excused.
The law and jurisprudence are clear. When the obligor cannot comply with its obligation, the
obligee may exercise its right to rescind the obligation, and this Court will order the rescission in
the absence of any just cause to fix the period. Here, lacking any reasonable explanation and just
cause for the fixing of the period for petitioner's noncompliance, the rescission of the obligation
is justified.
WHEREFORE, the Petition for Review on Certiorari is DENIED. The Court of Appeals
Decision and Resolution are AFFIRMED with MODIFICATION.Petitioner CJHC is ordered to
pay respondent Charter Chemical: (1) the balance of the contract price with interest at the rate of
12% per annum from August 3, 20071 until June 30, 2013, and 6% per annum from July 1, 2013
until its full satisfaction; and (2) attorney's fees.
1
Date of extrajudicial demand by Charter Chemical
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OBLIGATIONS
Kinds of Civil Obligations
As to Perfection and Extinguishment
Conditional
Kinds of Conditions
SOCORRO T. CLEMENTE, as substituted by SALVADOR T. CLEMENTE v.

REPUBLIC OF THE PHILIPPINES (DPWH Region IV-A)
G.R. No. 220008
February 20, 2019
Second Division-Carpio, J.
Nature of the case: Complaint, for Revocation of Donation, Reconveyance and Recovery of
Possession.
Facts: Clemente Siblings were the owners of a parcel of land. During their lifetime, they executed
a Deed of Donation over a one-hectare portion of their property in favor of the Republic of the
Philippines.
The Deed of Donation provided:
“The herein DONORS hereby voluntarily and freely give, transfer and convey, by way of
unconditional donation, unto said DONEE, his executors and administrators, all of the rights,
title and interest which the aforesaid DONORS have or which pertain to them and which they
owned exclusively in the above-described real property over a one-hectare portion of the same,
solely for hospital site only and for no other else, where a Government Hospital shall be
constructed, free from all liens and encumbrances whatsoever, which portion of the land had
been segregated in the attached subdivision plan xxx.”
DPWH Region IV-A accepted said donation and the subject property was issued in the name of
the Province of Quezon. In accordance with the Deed of Donation, the construction of a building
for a hospital was started in the following year. However, for reasons unknown, the construction
was never completed and only its foundation remains today.
Socorro and Rosario P. Clemente wrote to the District Engineer of Quezon asking for information
on the development of the government hospital. Socorro wrote again to the District Engineer
restating their inquiry. The District Engineer informed her that the DPWH no longer had a plan
to construct a hospital at the site and that the DPWH had no budget for the hospital construction.
In 2004, almost forty-one (41) years after the Deed of Donation was executed, Socorro, as heir
and successor-in-interest of Mayor Clemente, filed a Complaint for Revocation of Donation,
Reconveyance and Recovery of Possession alleging that the Republic of the Philippines failed to
comply with the condition imposed on the Deed of Donation, which was to use the property solely
for hospital site only and for no other else, where a government hospital shall be constructed.
Issue: Whether or not condition imposed is a resolutory one thereby the non-
fulfilment of the condition imposed may be a ground to revoke the donation.
Ruling: The petition is meritorious.
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The nature of the donation made by the Clemente Siblings is a donation subject to a condition –
the condition being the construction of a government hospital and the use of the subject property
solely for hospital purposes. Upon the non-fulfillment of the condition, the donation may be
revoked and all the rights already acquired by the donee shall be deemed lost and extinguished.
This is a resolutory condition because it is demandable at once by the done but the non-fulfillment
of the condition gives the donor the right to revoke the donation.
In this case, upon the execution of the Deed of Donation and the acceptance of such donation in
the same instrument, ownership was transferred to the Republic. Because the condition in the
Deed of Donation is a resolutory condition, until the donation is revoked, it remains
valid. However, for the donation to remain valid, the donee must comply with its obligation to
construct a government hospital and use the subject property as a hospital site. The failure to do
so gives the donor the right to revoke the donation as provided in Article 764 of the Civil Code.
In this case, the property donated shall be returned to the donor. It is clear from the records that
the donee failed to comply with its obligation to construct a government hospital and to use the
premises as a hospital site.
When the parties provided in the Deed of Donation that the donee should construct a government
hospital, their intention was to have such hospital built and completed, and to have a functioning
hospital on the subject property. The condition imposed upon the donee has two parts – first, to
construct a government hospital, and second, to use the subject property solely as a hospital site.
The argument of respondent that the mere construction of the foundation of a building complies
with the condition is specious. A foundation of a building is obviously not a government hospital.
The other condition in the Deed of Donation, which is to use the subject property solely as a
hospital site, is also not complied with when the subject property is left idle. The foundation of a
building cannot function as a hospital site. Thus, even if we are to consider, that the construction
of the foundation of a hospital building is enough to comply with the obligation to construct a
government hospital, the subsequent abandonment of the construction results in the non-
compliance with the second part of the donee's obligation – which is to use the subject property
solely as a hospital site.
Based on the foregoing, we find that the donee failed to comply with the resolutory condition
imposed in the Deed of Donation.
WHEREFORE, the petition is granted. The RTC-Mauban, Quezon is ordered to cause the
cancellation by the Register of Deeds of Quezon of TCT No. T-51745 and the issuance, in lieu
thereof, of the corresponding certificate of title in the name of the heirs of Amado A. Clemente,
Dr. Vicente A. Clemente, Judge Ramon A. Clemente, and Milagros A. Clemente.
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OBLIGATIONS
Breach of Obligations
Manner of Breach
Delay
MA. LUISA A. PINEDA v. VIRGINIA ZUÑIGA vda. DE VEGA

G.R. No. 233774
April 10, 2019
Nature of the case: Complaint for sum of money and interest or foreclosure of real estate
mortgage.
Facts: Petitioner filed a complaint against respondent, praying for the payment of the latter's
principal obligation and the interest thereon or, in default of such payment, the foreclosure of the
property subject of a real estate mortgage.
Respondent argued that the interest rate agreed upon was excessive and unconscionable. She
denied receiving the loaned amount and claimed that the said amount was the accumulated amount
of another obligation she earlier secured from petitioner.
Petitioner admitted that the ₱500,000.00 indicated in the 2003 Agreement referred to a
previously executed undated real estate mortgage (undated Agreement) between the parties
which secured respondent's loan of ₱200,000.00 from her.
RTC ordered that defendant pay plaintiff the loaned amount plus the interest the date the
defendant received the demand letter from the plaintiff, dated August 2004, until the finality of
the decision and the satisfaction of the amount due.
Issues: Whether a demand letter sent by petitioner to respondent constituted a valid

demand and from thereon interest begins to run on the said demand.
Ruling: It was, indeed, alleged in the complaint, as well as in her testimony, that demand was
sent to respondent by registered mail and was received on September 7, 2004. However, the
registry return card evidencing such receipt was not specifically and formally offered in evidence.
What she presented, instead, was a copy of the said demand letter with only a photocopy of the
face of a registry return card claimed to refer to the said letter.
Herein, petitioner seeks to enforce against respondent is a contract of loan, which is secured by a
real estate mortgage. Based on the sources of obligations enumerated under Article 1157 of the
Civil Code, the obligation that petitioner seeks to make respondent liable for is one which arises
from contract. Delay or mora is governed by Article 11692 of the Civil Code.
2
Article 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order that delay may exist:
(1) When the obligation or the law expressly so declares; or
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While delay on the part of respondent was not triggered by an extrajudicial demand because
petitioner had failed to so establish receipt of her demand letter, this delay was triggered when
petitioner judicially demanded the payment of respondent's loan from petitioner. While the CA
was correct in observing that default generally begins from the moment the creditor demands the
performance of the obligation, and without such demand, judicial or extrajudicial, the effects of
default will not arise, it failed to acknowledge that when petitioner filed her such filing constituted
the judicial demand upon respondent to pay the latter's principal obligation and the interest
thereon. Respondent, having thus incurred in delay (counted from the filing of the complaint), is
liable for damages pursuant to Article 1170 of the Civil Code.
WHEREFORE, the Petition is hereby partly GRANTED. The Decision of the Court of Appeals
and its Resolution are reversed and set aside. The Decision of the Regional Trial Court of Malolos
in is partly reinstated insofar as the order against respondent Virginia Zuñiga vda. de Vega to pay
petitioner Ma. Luisa A. Pineda the loaned amount is concerned.
(2) When from the nature and the circumstances of the obligation it appears that the designation of the time
when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment
of the contract; or
(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.
Page | 14
OBLIGATIONS
Breach of obligations
Due diligence required on banks
BANK OF THE PHILIPPINE ISLANDS AND ANA C. GONZALES v. SPOUSES

FERNANDO QUIAOIT AND NORA QUIAOIT
G.R. No. 199562
January 16, 2019
Second Division- Carpio, J.
Nature of the action: Complaint for sum of money with damages.
Facts: Fernando V. Quiaoit maintains peso and dollar accounts with the Bank of the Philippine
Islands-Greenhills. Fernando, through Merlyn Lambayong encashed BPI Greenhills Check for
US$20,000.
In a complaint filed by Fernando and his wife, Nora against BPI, they alleged that Lambayong did
not count the US$20,000 that she received because the money was placed in a large Manila
envelope. They also alleged that BPI did not inform Lambayong that the dollar bills were marked
with its "chapa" and the bank did not issue any receipt containing the serial number of the bills.
Lambayong delivered the dollar bills to the spouses Quiaoit in US$100 denomination in
US$10,000 per bundle. Nora then purchased plane tickets worth US$13,100 for their travel
abroad, using part of the US$20,000 bills withdrawn from BPI.
The spouses Quiaoit left the Philippines for Jerusalem and Europe. Nora handcarried US$6,900
during the tour. The spouses Quiaoit alleged that Nora was placed in a shameful and embarrassing
situation when several banks in Madrid, Spain refused to exchange some of the US$100 bills
because they were counterfeit. Nora was also threatened that she would be taken to the police
station when she tried to purchase an item in a shop with the dollar bills. The spouses Quiaoit
were also informed by their friends, a priest and a nun, that the US dollar bills they gave them
were refused by third persons for being counterfeit. Their aunt also returned, via DHL, the five
US$100 bills they gave her and advised them that they were not accepted for deposit by foreign
banks for being counterfeit.
And while the spouses Quiaoit were still abroad, they asked their daughter Maria Isabel to relay
their predicament to BPI Greenhills. However, Ana Gonzales Gonzales, branch manager of BPI
Greenhills, failed to resolve their concern or give them a return call.
The spouses Quiaoit alleged that BPI failed in its duty to ensure that the foreign currency bills it
furnishes its clients are genuine. According to them, they suffered public embarrassment,
humiliation, and possible imprisonment in a foreign country due to BPI's negligence and bad
faith.
Issue: (1) Whether BPI exercised due diligence in handling the withdrawal of the US
dollar bills and (2) Whether BPI is liable for damages.
Ruling: (1) The Court denied the petition and held that BPI failed to exercise due diligence in the
transaction.
Page | 15
In Spouses Carbonell v. Metropolitan Bank and Trust Company, the Court emphasized that the
General Banking Act of 2000 demands of banks the highest standards of integrity and
performance. The Court ruled that banks are under obligation to treat the accounts of their
depositors with meticulous care. The Court ruled that the bank's compliance with this degree of
diligence has to be determined in accordance with the particular circumstances of each case.
In this case, BPI failed to exercise the highest degree of diligence that is not only expected but
required of a banking institution.
(2) We sustain the award of moral damages to the spouses Quiaoit.
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. Hence, they are entitled to the moral damages awarded by the trial court and the
Court of Appeals.
The Court agrees with lower court’s decision imposing moral damages in the amount of
P200,000.00. It ruled that BPI did not follow the normal banking procedure of listing the serial
numbers of the dollar bills considering the reasonable length of time from the time Fernando
advised them of the withdrawal until Lambayong's actual encashment of the check.
Nevertheless, we delete the award of exemplary damages since it does not appear that BPI's
negligence was attended with malice and bad faith. We sustain the award of attorney's fees
because the spouses Quiaoit were forced to litigate to protect their rights.
WHEREFORE, we DENY the petition. We AFFIRM the Decision and the Resolution of the
Court of Appeals WITH MODIFICATION by deleting the award of exemplary damages.
Page | 16
OBLIGATIONS
Breach of obligations
Excuses for non-performance
Fortuitous event
KEIHIN-EVERETT FORWARDING CO., INC. v. TOKIO MARINE MALAYAN

INSURANCE CO., INC. AND SUNFREIGHT FORWARDERS & CUSTOMS
BROKERAGE, INC.
G.R. No. 212107
January 28, 2019
Second Division- Reyes, J. Jr., J.
Nature of the Case: Complaint for damages.
Facts: Honda Trading ordered 80 bundles of Aluminum Alloy Ingots from PT Molten. PT Molten
loaded the goods in two container vans which were, in turn, received in Jakarta, Indonesia by
Nippon Express Co., Ltd. for shipment to Manila.
Aside from insuring the entire shipment with Tokio Marine & Nichido Fire Insurance Co., Inc.,
Honda Trading also engaged the services of petitioner Keihin-Everett to clear and withdraw the
cargo from the pier and to transport and deliver the same to its warehouse at the Laguna
Technopark in Biñan, Laguna. Meanwhile, petitioner Keihin-Everett had an Accreditation
Agreement with respondent Sunfreight Forwarders whereby the latter undertook to render
common carrier services for the former and to transport inland goods within the Philippines.
The shipment arrived in Manila on November 3, 2005 and was, accordingly, offloaded from the
ocean liner and temporarily stored at the CY Area of the Manila International Port pending release
by the Customs Authority. On November 8, 2005, the shipment was caused to be released from
the pier by petitioner Keihin-Everett and turned over to respondent Sunfreight Forwarders for
delivery to Honda Trading. En route to the latter's warehouse, the truck carrying the containers
was hijacked and the container van was reportedly taken away. Although said container van was
subsequently found in the vicinity of the Manila North Cemetery and later towed to the compound
of the Metro Manila Development Authority (MMDA), it appears that the contents thereof were
no longer retrieved. Only one of the container vans reached the warehouse. As a consequence,
Honda Trading suffered losses in the total amount representing the value of the lost 40 bundles
of Aluminum Alloy Ingots.
Claiming to have paid Honda Trading's insurance claim for the loss it suffered, respondent Tokio
Marine commenced the instant suit with the filing of its complaint for damages against petitioner
Keihin-Everett. Respondent Tokio Marine maintained that it had been subrogated to all the rights
and causes of action pertaining to Honda Trading.
Petitioner Keihin-Everett denied liability for the lost shipment on the ground that the loss thereof
occurred while the same was in the possession of respondent Sunfreight Forwarders. Hence,
Keihin-Everett filed a third-party complaint against the latter, who, in turn, denied liability on the
ground that it was not privy to the contract between Keihin-Everett and Honda Trading.
Page | 17
Issue: Whether hijacking of a carrier’s truck is one of those included as exempting
circumstance under Art. 1374 of the Civil Code as to absolve Keihin-Everett of
liability.
Ruling: Keihin-Everett is not absolved from its liability as a common carrier. Keihin-Everett
seems to have overlooked that it was the one whose services were engaged by Honda Trading to
clear and withdraw the cargoes from the pier and to transport and deliver the same to its
warehouse. In turn, Keihin-Everett accredited Sunfreight Forwarders to render common carrier
service for it by transporting inland goods. As correctly held by the CA, there was no privity of
contract between Honda Trading (to whose rights Tokio Marine was subrogated) and Sunfreight
Forwarders. Hence, Keihin-Everett, as the common carrier, remained responsible to Honda
Trading for the lost cargoes.
In this light, Keihin-Everett, as a common carrier, is mandated to observe, under Article 1733 of
the Civil Code, extraordinary diligence in the vigilance over the goods it transports according to
all the circumstances of each case. In the event that the goods are lost, destroyed or deteriorated,
it is presumed to have been at fault or to have acted negligently, unless it proves that it observed
extraordinary diligence.
To be sure, under Article 1736 of the Civil Code, a common carrier's extraordinary responsibility
over the shipper's goods lasts from the time these goods are unconditionally placed in the
possession of, and received by, the carrier for transportation, until they are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to receive them.
Hence, at the time Keihin-Everett turned over the custody of the cargoes to Sunfreight Forwarders
for inland transportation, it is still required to observe extraordinary diligence in the vigilance of
the goods. Failure to successfully establish this carries with it the presumption of fault or
negligence, thus, rendering Keihin-Everett liable to Honda Trading for breach of contract.
It bears to stress that the hijacking of the goods is not considered a fortuitous event or a force
majeure. Nevertheless, a common carrier may absolve itself of liability for a resulting loss caused
by robbery or hijacked if it is proven that the robbery or hijacking was attended by grave or
irresistible threat, violence or force. In this case, Keihin-Everett failed to prove the existence of
the aforementioned instances.
WHEREFORE, the decision of the Court of Appeals in is AFFIRMED.
Page | 18
OBLIGATIONS
Modes of Extinguishment
Payment or performance
BDO UNIBANK, INC. v. FRANCISCO PUA

G.R. No. 230923
July 8, 2019
Nature of the case: Criminal case for Estafa by means of deceit.
Facts: Petitioner is a domestic commercial banking duly organized and authorized to perform
trust or agency functions and services as an investment manager through its Trust Department.
On the other hand, Francisco Pua (respondent) is a client of petitioner and is engaged in business
under trade name and style of “Trends & Innovation Marketing.”
Petitioner entered into an Investment Management Agreement (IMA) with Ernesto Ang. In the
MIA, petitioner is tasked to act as the agent and investment manager for the money of Ernesto.
Petitioner likewise executed an IMA with Edgard Ang, Trilogy Properties and Lucia and/or
Sharlene Po for the same purpose.
Thereafter, respondent, through petitioner, borrowed the sum of P41,500,000.00 from the funds
invested by Ernesto, Edgard, TPC, Lucia and Sharlene (Original Funders). Pursuant to the specific
directive and authority to lend and invest signed by the Original Funders, petitioner released the
amount to respondent.
Respondent then informed petitioner of his intention to change the Original Funders of the loan.
Two days thereafter, respondent delivered two checks in the aggregate sum of P41,500,000.00.
The aforesaid checks were drawn against the account name of 7-21450065-1 and payable to the
order of petitioner. On the same, respondent informed petitioner that Efrain de Mayo was the
new funder. Respondent renamed Efrain to R. Makmur as the new funder.
Unfortunately, the checks given by respondent to petitioner were dishonored when they presented
for payment, on account of the fact that they were drawn against a closed account. Hence,
petitioner demanded payment from respondent. However, despite repeated demands, no
payment was made by respondent.
Issue: Whether or not the payment made by petitioner for the benefit of respondent
is a valid payment.
Ruling: It bears stressing and it is not disputed that, in the present case, the Original Funders
are the creditors and respondent is the debtor. The Original Funders were paid by petitioner
which advanced the payment to the Original Funders of their investments, prior to the clearing of
the new funder's checks. This is a case of payment by a third party, petitioner, to the creditor,
Original Funders, for the benefit of respondent, who is the debtor. Hence, the Original Funders
assigned their credit to petitioner, when the latter paid the former.
Article 1236 of the Civil Code provides the following:
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.
Page | 19
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.
In the instant case, petitioner paid the Original Funders for the benefit of respondent, with the
knowledge of the latter. Accordingly, petitioner under the law possesses the rights of
reimbursement and subrogation, i.e., to recover what it has paid and to acquire all the rights of
the Original Funders. Article 13033 of the Civil Code particularly provides that the effect of legal
subrogation is to transfer to the new creditor the credit and all the rights and actions that could
have been exercised by the former creditor either against the debtor or against third persons.
Thus, petitioner has every right to proceed civilly against respondent.
WHEREFORE, the case is REMANDED to the Regional Trial Court, Manila, for the reception
of evidence relating to the civil aspect of the case. The petition for review filed by BDO Unibank,
Inc. is DISMISSED with respect to the criminal aspect of the case.
3
Article 1303. Subrogation transfers to the persons subrogated the credit with all the rights thereto appertaining, either
against the debtor or against third person, be they guarantors or possessors of mortgages, subject to stipulation in a
conventional subrogation.
Page | 20
OBLIGATIONS
Modes of Extinguishment of Obligations
Payment or performance
Special forms of payment
Dacion en pago
KAREN NUNEZ VITO, LYNETTE NUNEZ MASINDA, WARREN NUNEZ and

ALDEN NUNEZ v. NORMA MOISES-PALMA
G.R. No. 224466 (formerly UDK-15574)
March 27, 2019
Second Division – Caguioa, J.
Nature of the case: Declaration of Nullity of Deed of Adjudication and Sale, cancellation of
Transfer Certificate of Title, Partition, Reconveyance, and Recovery of Ownership and/or
Possession.
Facts: Petitioner’s father, Vicentico Nunez, was the original owner of lot. Sometime in May 1992,
Vicentico, who was then suffering from diabetes, borrowed P30,000.00 from Rosita Moises and
as security, executed a REM over his property. Since Rosita had no money, the funds came from
Norma Moises-Palma, Rosita’s daughter. According to petitioners, the P30,000.00 loan of
Vicentico was subsequently paid.
Upon Vicentico’s death, the subject lot was transmitted to his heirs, namely: petitioners Karen,
Warren, Lynette, Alden and Placida, spouse of Vicentico, all surnamed Nunez. Each heir had an
undivided 1/5 share in the subject lot. Placida died and her 1/5 share was inherited equally by her
heirs. Thus, petitioners each had a pro indiviso ¼ share in the subject lot.
Thereafter, Norma was able to have all petitioners, except Alden, sign a Deed of Adjudication and
Sale (DAS) wherein petitioners purportedly sold to Norma their respective pro indiviso shares in
the subject lot. After the execution, Norma immediately took possession of the lot.
Instead of paying cash, Norma executed a PN in favor of petitioners. Norma failed to pay, but
despite non-payment of the purchase price and the absence of Alden’s signature on the DAS,
Norma was able to cause the registration of the document with the Register of Deeds and TCT was
issued to her.
Alden instituted a case against respondent for Annulment of TCT, Declaring DAS null and void,
partition, reconveyance and recovery of possession before the MT. During the trial, Alden and
Norma entered into a Compromise Agreement, whereby Alden agreed to respect Norma’s
ownership and possession of the share being claimed by him.
A year later, Karen, Warren, and Lynette, represented by Alden, filed against Norma a case for
Declaration of Nullity of Deed of Adjudication and Sale, cancellation of TCT, before the MTC.
Issue: Whether the transaction between petitioners and Norma is dacion en pago.
Ruling: While the DAS seems to suggest a dation in payment, the subsequent actuations of the
parties, especially Norma, negate the same or the contemplated offset. If the DAS was intended
to be a dation in payment, the execution of the PN and AOD by Norma as well as the Compromise
Agreement by Alden and Norma, whereby Alden agreed, for an agreed consideration, to respect
Norma’s ownership and possession of the subject lot, the share being claimed by him, shows an
opposite direction, i.e. there was no dation in payment or offset.
Page | 21
Thus, there is a preponderant evidence that supports the finding that the DAS was not intended
by the parties to be a dation in payment. And, even assuming that the DAS was a dation in
payment, the documents that were subsequently executed had the effect of novating the same.
Given the foregoing, the CA erred in its finding that the transaction between the parties is a dation
in payment or dacion en pago. The MTC and RTC were, therefore, correct in considering the
transaction as a contract of sale.
WHEREFORE, the Petition is hereby GRANTED. The Court of Appeals Decision and Resolution
are hereby REVERSED and SET ASIDE.
Page | 22
OBLIGATIONS
Novation
JOCELYN MODOMO and DR. ROMY MODOMO v. SPOUSES MOISES

LAYUG, JR. and FELISARIN LAYUG et al.
G.R. No. 197722
August 14, 2019
Second Division-Caguioa, J.
Nature of the case: Complaint for payment of rentals, and to vacate the property.
Facts: Spouses Layug alleged that they are the registered owners and legal possessors of a parcel
of land located at Tejeros, Makati City. Aforesaid property was leased to Spouses Modomo for a
period of seven (7) years. Pursuant to the Contract of Lease, Spouses Modomo agreed to pay the
amount of P170,000.00 as monthly rentals subject to an escalation of 10% for the second and
third year, 15% on the fourth and fifth year and 20% on the sixth and seventh year. It was also
agreed by the parties that real estate taxes on the property shall be paid by Spouses Modomo.
In view of these stipulations, an Addendum to the Contract was executed by the parties regarding
the terms and conditions of payment of rentals. Subsequently, Spouses Modomo defaulted in the
payment of the escalation of rental fees. And it failed to pay the real estate taxes due on the
property. Spouses Layug sent a letter demanding that they settle their unpaid monthly rentals but
to no avail. To protect their interest, Spouses Layug instituted the present suit claiming that
Spouses Modomo should vacate the premises, pay Spouses Layug rental arrearages, attorney's
fees and costs of suit.
On the contrary, Spouses Modomo argued that the parties originally agreed that Spouses Modomo
would pay the amount of P170,000.00 subject to an escalation of 10%, 15% on the and 20%.
However, considering that Jocelyn Modomo had introduced improvements thereon, she asked
Spouses Layug to change certain provisions in the Contract of Lease. Based on their conversation,
Spouses Layug agreed to reduce the monthly rentals and the non-imposition of the escalation
clause and the real estate tax provision. Spouses Modomo religiously paid the rentals strictly in
accordance with their subsequent agreements.
Issue: Whether or not the provisions of the Contract of Lease governing rental fees,
escalation and real estate tax payment haven been partially novated by the parties’
alleged subsequent verbal agreement.
Ruling: Spouses Modomo adamantly insist that the terms of the Contract of Lease governing
rental fees, escalation and real estate tax payments have been modified through a subsequent
verbal agreement.
Spouses Modomo alludes to the existence of a partial novation, governed by Article 1291 of the
Civil Code which states:
Article. 1291. Obligations may be modified by:

(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the creditor.
Page | 23
Noted civilist Justice Eduardo P. Caguioa elucidated on the concept of modificatory novation as
follows:
Novation has been defined as the substitution or alteration of an obligation by a subsequent one
that cancels or modifies the preceding one. Unlike other modes of extinction of obligations,
novation is a juridical act of dual function, in that at the time it extinguishes an obligation, it
creates a new one in lieu of the old. This is not to say however, that in every case of novation the
old obligation is necessarily extinguished. Our Civil Code now admits of the so-called imperfect
or modificatory novation where the original obligation is not extinguished but modified or
changed in some of the principal conditions of the obligation. Thus, article 1291 provides that
obligations may be modified.
While the Civil Code permits the subsequent modification of existing obligations, these
obligations cannot be deemed modified in the absence of clear evidence to this effect. Novation is
never presumed, and the animus novandi, whether total or partial, must appear by express
agreement of the parties, or by their acts that are too clear and unequivocal to be mistaken.
Accordingly, the burden to show the existence of novation lies on the party alleging the same.
Applying the foregoing principles, the Court finds that while there has been a modificatory
novation of the Contract of Lease through the parties' subsequent verbal agreement, such
novation relates solely to the lowering of the monthly rental fee from P170,000.00 to
P150,000.00.
The provisions governing escalation and real estate tax payment, as set forth under the Contract
of Lease and modified by the subsequent written Addenda, stand.
WHEREFORE, premises considered, the Petition is GRANTED IN PART. The Decision

rendered by the Court of Appeals is AFFIRMED WITH MODIFICATION.
Page | 24
OBLIGATIONS
Novation
FOOD FEST LAND, INC. and JOYFOODS CORPORATION v. ROMUALDO

C. SIAPNO, TEODORO C. SIAPNO, JR. and FELIPE C. SIAPNO
G.R. No. 226088
April 14, 2019
Third Division-Peralta, J.
Nature of the case: Complaint for sum of money.
Facts: Respondents Romualdo Siapno, Teodoro Siapno and Felipe Siapno are the registered
owners of land in Dagupan City. Respondents entered into a Contract of Lease involving the
subject land with petitioner Food Fest Land, Inc. The contract has the following particulars —
1. The term of the lease shall be fifteen (15) years.

5. For the succeeding years, however, the rate of monthly rent shall escalate by 10% annually.
They are payable within the first ten (10) days of the following month.
In addition to the foregoing, the Contract of Lease also featured a non- waiver clause:
16. NON-WAIVER- The failure of the parties to insist upon a strict performance of any of the
terms, conditions and covenants hereof shall not be deemed a relinquishment or waiver of any
rights or remedy that said party may have, nor shall it be construed as a waiver of any subsequent
breach or default of the terms, conditions and covenants hereof which shall continue to be in full
force and effect. No waiver by the parties of any of their rights under this Contract of Lease shall
be deemed to have been made unless expressed in writing and signed by the party concerned.
Pursuant to the Contract, Food Fest proceeded to build and operate its restaurant. Food Fest
assigned all its rights and obligations unto one Tucky Foods, Inc. Tucky Foods assigned all the
said rights and obligations to petitioner Joyfoods Corporation.
From the 1st up to the 5th year of the lease, Food Fest and its assignees paid rent at the monthly
rate. The rental escalation clause in the said contract, which requires the annual escalation of
monthly rent by 10%, was consistently observed on the 2nd to the 5th year.
The rental escalation clause, however, was not observed during the 6th up to the 10th year of the
lease. Food Fest and Joyfoods, proposed that the same be reduced to only P80,000.00 per month.
The proposal was rejected by the respondents. Joyfoods proposed the amount of P85,000.00 as
monthly rental for the 11th and 12th years of the lease. But this too was met with rejection by the
respondents.
During the lease's 12th year, Joyfoods sent to respondents a letter conveying its intent to pre-
terminate the lease.
Issue: Whether or not the novation by substitution of Tucky, Inc. and Joyfoods
releases the Food fest land from the payment of arrears.
Ruling: Food Fest and Joyfoods' plea is, in substance, an invocation of the concept of novation -
particularly, novation of an obligation by the substitution of the person of the debtor. Their basic
assertion is that the assignment by Food Fest of its rights and obligations under the Contract of
Page | 25
Lease to Lucky Foods, and the assignment by Tucky Foods of the same rights and obligations to
Joyfoods, ought to have resulted in Food Fest's release from its obligations under the Contract of
Lease and its substitution therein by Joyfoods.
We do not agree.
As Article 1293 of the Civil Code provides:
Article 1293. Novation which consists in substituting a new debtor in the place of the original one,
may be made even without the knowledge or against the will of the latter, but not without the
consent of the creditor. Payment by the new debtor gives him the rights mentioned in articles 1236
and 1237.
Going back to the instant case, we find that the established facts do not permit the conclusion that
novation had taken place.
First. The settled facts do not show that respondents had expressly consented in writing to the
substitution of Food Fest by Joyfoods. The consent of respondents to such substitution has to be
in writing, in light of the non-waiver clause of the Contract of Lease.
Respondents' consent to the substitution of Food Fest falls within the ambit of the foregoing
clause, because a novation by the substitution of the person of the debtor implies a waiver on the
part of the creditor of his right to enforce the obligation as against the original debtor.
Verily, without the consent of the respondents — conveyed in the form required under the
Contract of Lease — there can be no substitution of Food Fest by Joyfoods.
Second. Yet, even if we are to set aside the non-waiver clause of the Contract of Lease, Food Fest
and Joyfoods' claim of novation is still doomed to fail. This is so because the consent of
respondents to the substitution of Food Fest, just the same, cannot be deduced or implied from
any of the established acts of the former. Indeed, under the settled facts, the respondents did
nothing in the way of releasing Food Fest from its obligations other than, perhaps, its acceptance
of rental payments from Joyfoods.
The consent of respondents to the substitution of Food Fest by Joyfoods, however, cannot be
presumed from the sole fact that they accepted payments from Joyfoods. It is well settled that
mere acceptance by a creditor of payments from a third person for the benefit of the debtor, sans
any agreement that the original debtor will also be released from his obligation, does not result in
novation but merely the addition of debtors.
Both Food Fest and Joyfoods liable for the unpaid balance. Under the limited facts of the instant
case, no novation by the substitution of the person of debtor can be appreciated. Accordingly,
Food Fest cannot be considered as released from its obligations under the Contract of Lease. And
Joyfoods' assumption of the debt of Food Fest only made the former a co-debtor of the latter.
WHEREFORE, premises considered, the instant appeal is DENIED. The Decision and the
Resolution of the Court of Appeals are AFFIRMED.
Page | 26
OBLIGATIONS
Novation
VICENTE HENSON, JR. v. UCPB GENERAL INSURANCE CO., INC.

G.R. No. 223134
April 14, 2019
En Banc-Perlas-Bernabe, J.
Nature of the case: Complaint for damages.
Facts: National Arts Studio and Color Lab6 (NASCL) leased the front portion of the ground floor
of a two (2)-storey building, then owned by petitioner. In 1999, NASCL gave up its initial lease
and instead, leased the right front portion of the ground floor and the entire second floor of the
said building, and made renovations with the building's piping assembly.
Meanwhile, Copylandia Office Systems Corp. moved in to the ground floor. On May 9, 2006, a
water leak occurred in the building and damaged Copylandia's various equipment, causing injury.
As the said equipment were insured with respondent, Copylandia filed a claim with the former.
Eventually, the two parties settled. This resulted in respondent's subrogation to the rights of
Copylandia over all claims and demands arising from the said incident.
On May 20, 2010, respondent, as subrogee to Copylandia' s rights, demanded from, inter alia,
NASCL for the payment of the aforesaid claim, but to no avail. Thus, it filed a complaint for
damages against NASCL, among others, before the RTC.
Meanwhile, sometime in 2010, petitioner transferred the ownership of the building to Citrinne
Holdings, Inc. (CHI), where he is a stockholder and the President.
Respondent filed an Amended Complaint impleading CHI as a party-defendant to the case, as the
new owner of the building. However, respondent filed a Motion to Admit Attached Amended
Complaint and Pre-Trial Brief praying that petitioner, instead of CHI, be impleaded as a party-
defendant to the case, considering that petitioner was then the owner of the building when the
water leak damage incident happened.
Issue: Whether or not there was a right of subrogation, hence, an obligation

created by law for the computation of prescriptive period.
Ruling: In this case, it is undisputed that the water leak damage incident, which gave rise to
Copylandia's cause of action against any possible defendants, including NASCL and petitioner,
happened on May 9, 2006. As this incident gave rise to an obligation classified as a quasi-delict,
Copylandia would have only had four (4) years, or until May 9, 2010, within which to file a suit to
recover damages. When Copylandia's rights were transferred to respondent by virtue of the
latter's payment of the former's insurance claim respondent was likewise bound by the same
prescriptive period. Since it was only on: (a) May 20, 2010 when respondent made an extrajudicial
demand to NASCL, and thereafter, filed its complaint; (b) October 6, 2011 when respondent
amended its complaint to implead CHI as party-defendant; and (c) April 21, 2014 when
respondent moved to further amend the complaint in order to implead petitioner as party-
defendant in lieu of CHI, prescription -if adjudged under the present parameters of legal
subrogation under this Decision -should have already set in.
Page | 27
However, it must be recognized that the prevailing rule applicable to the pertinent events of this
case is Vector. Specifically, under guideline 1 (a)4, the Vector doctrine -which was even relied upon
by the courts a quo -would then apply. Hence, as the amended complaint impleading petitioner
was filed on April 21, 2014, which is within ten (10) years from the time respondent indemnified
Copylandia for its injury/loss, i.e., on November 2, 2006, the case cannot be said to have
prescribed under Vector. As such, the Court is constrained to deny the instant petition.
WHEREFORE, the petition is DENIED. The Decision and the Resolution of the Court of
Appeals are hereby AFFIRMED with MODIFICATION based on the guidelines stated in this
Decision.
4
1. For actions of such nature that have already been filed and are currently pending before the courts at the time of
the finality of this Decision, the rules on prescription prevailing at the time the action is filed would apply. Particularly:
(a) For cases that were filed by the subrogee-insurer during the applicability of the Vector ruling (i.e., from
Vector's finality on August 15, 201360 up until the finality of this Decision), the prescriptive period is ten (10)
years from the time of payment by the insurer to the insured, which gave rise to an obligation created by law.
Page | 28
CONTRACTS
Essential Elements of Contracts
Cause of the Obligation
GENEROSO SEPE v. HEIRS OF ANASTACIA KILANG, represented by her

children MARIA, DONATA, FELICIANA, DOMINGA and SEVERO all
surnamed SOLIJON
G.R. No. 199766
April 10, 2019
Nature of the case: Complaint for recovery of title, possession and damages.
Facts: Respondents Heirs of Anastacia Kilang, represented by her children Maria, Donata,
Feliciana, Dominga and Severo Solijon, sought the nullification of Deed of Sale (DOS) of a
Registered Land executed by Anastacia Kilang with marital consent of Fabian Solijon in favor of
spouses Generoso and spouses Sepe.
The complaint alleged that the late Anastacia, who was then an 84-year old, illiterate, rheumatic
and bedridden mother, agreed to the offer of petitioner to undertake the subdivision of her land
in Tagbilaran City in consideration for one lot in the subdivision and a first preference to buy any
portion that might be for sale; but taking advantage of the ignorance of respondents' family,
petitioner managed to have the DOS executed and misled Feliciana and Donata into believing that
the document was the instrument of subdivision.
By the DOS, which was executed and notarized, Anastacia, with her husband's consent,
purportedly sold her paraphernal property — a lot located at Tagbilaran City) to spouses Sepe.
Issue: Whether there was no consideration for the sale.
Ruling: Petitioner's reliance on the DOS as proof that the sale contemplated therein was
supported by sufficient consideration is not without legal basis. The disputable presumption of
existence and legality of the cause or consideration inherent in every contract supports his stance.
Article 1354 of the Civil Code provides:
Although the cause is not stated in the contract, it is presumed that it exists and is lawful,
unless the debtor proves the contrary." Otherwise stated, the law presumes that even if the
contract does not state a cause, one exists and is lawful; and it is incumbent on the party
impugning the contract to prove the contrary.61 If the cause is stated in the contract and it
is shown to be false, then it is incumbent upon the party enforcing the contract to prove the
legality of the cause.
A contract is presumed to be supported by cause or consideration. The presumption that a

contract has sufficient consideration cannot be overthrown by a mere assertion that it has no
consideration. To overcome the presumption, the alleged lack of consideration must be shown by
preponderance of evidence. The burden to prove lack of consideration rests upon whoever alleges
it, which, in the present case, is respondent.
Aside from the presumption of sufficient consideration working in favor of petitioner, the
acknowledgment of the DOS before a notary public makes it a public document. Being a public
Page | 29
document, the evidence to be presented to contradict the facts stated in the DOS, which include
the payment of the consideration, must be more than merely preponderant
WHEREFORE, the Petition is hereby GRANTED. The Decision of the Court of Appeals and its
Resolution are REVERSED and SET ASIDE. The Order dismissing the complaint by reason of
the granting of petitioner's demurrer to evidence, and the Order denying respondents' motion for
reconsideration, of the RTC-City of Tagbilaran are reinstated and affirmed.
Page | 30
CONTRACTS
Fundamental characteristics
Autonomy of contracts
HYGIENIC PACKAGING CORPORATION v. NUTRI-ASIA, INC.

G.R. 201302
January 23, 2019
Nature of the Action: Complaint for sum of money.
Facts: Hygienic is a domestic corporation that manufactures, markets, and sells packaging
materials such as plastic bottles and ratchet cap. Meanwhile, Nutri-Asia is a domestic corporation
that manufactures, sells, and distributes food products such as banana-based and tomato-based
condiments, fish sauce, vinegar, soy sauce, and other sauces.
Hygienic supplied Nutri-Asia with plastic containers for its banana catsup products. Every
transaction was covered by a Purchase Order issued by Nutri-Asia. The Terms and Conditions on
the Purchase Order provided:
“Arbitration of all disputes arising in connection with this Contract shall be referred to an
Arbitration Committee, in accordance with the Philippine Arbitration Law.”
Nutri-Asia purchased from Hygienic plastic containers. Hygienic issued Sales Invoices and
Delivery Receipts to cover these transactions.
Hygienic filed a Complaint for sum of money against Nutri-Asia. It instituted the case before the
RTC-Manila pursuant to the stipulation of the parties as stated in the Sales Invoices submitting
themselves to the jurisdiction of the Courts of the City of Manila in any legal action arising out of
their transaction.
Nutri-Asia argued that the case should be dismissed as Hygienic failed to comply with a condition
precedent prior to its filing of the Complaint. It claimed that under the Terms and Conditions of
the Purchase Orders, Hygienic should have first referred the matter to the Arbitration Committee.
It also alleged that the venue was also improperly laid since the RTC-Manila was not the proper
venue for the institution of Hygienic's personal action. The Complaint should have been filed
either before the trial courts of San Pedro, Laguna or Pasig City, where the principal places of
business of Hygienic and Nutri-Asia are located. The venue of actions as stated in the Sales
Invoices could not bind Nutri-Asia since it did not give its express conformity to that stipulation.
Issue: Whether or not the Sales Invoices and the Purchase Orders contained a
stipulation on where to raise issues on any conflict regarding the sale of plastic
containers in case of dispute.
Ruling: Parties are allowed to constitute any stipulation on the venue or mode of dispute
resolution as part of their freedom to contract under Article 1306 of the Civil Code of the
Philippines.
Page | 31
Here, however, the records lack any written contract of sale containing the specific terms and
conditions agreed upon by the parties. The parties failed to provide evidence of any contract,
which could have contained stipulations on the venue of dispute resolution. Upon examination of
the Sales Invoices and the Purchase Orders, this Court cannot consider the documents as
contracts that would bind the parties as to the venue of dispute resolution.
A closer look at the Sales Invoices issued by Hygienic reveals that above the signature of
respondent's representative is the phrase, "Received the above goods in good order and
condition." Clearly, the purpose of Nutri-Asia's representative in signing the Sales Invoices is
merely to acknowledge that he has received the plastic containers in good condition. He did not
affix his or her signature in any other capacity except as the recipient of the goods. This Court,
then, cannot bind Nutri-Asia to the other stipulations in the Sales Invoices.
A scrutiny of the Purchase Orders also reveals that the signature of Hygienic's representative is
the phrase "Acknowledged By (Supplier)." The signatory merely affixed his signature to
acknowledge Nutri-Asia's order. It was limited to acknowledging Nutri-Asia's order. It did not
bind Nutri-Asia to the terms and conditions in the Purchase Orders, which included the
arbitration clause.
The parties may have entered into a contract of sale with respect to Hygienic's merchandise.
However, the case records do not show that they have a contract in relation to the venue of any
civil action arising from their business transaction.
In Cathay Metal v. Laguna West Multi-Purpose provides, "for there to be a contract, there must
be a meeting of the minds between the parties." Here, no evidence shows that petitioner and
respondent had a meeting of minds and agreed to submit any future issue either to the trial court
or to arbitration.
Since there is no contractual stipulation that can be enforced on the venue of dispute resolution,
the venue of petitioner's personal action will be governed by the Rule 4, Section 1 of 1997 Revised
Rules of Civil Procedure.
WHEREFORE, premises considered, the Court of Appeals Decision and Resolution are
AFFIRMED insofar as they reversed and set aside Order and Joint Order of the Regional Trial
Court-Manila.
Page | 32
CONTRACTS
Stipulation which is void for being contrary to public morals
ATTY. LEONARDO FLORENTO BULATAO v. ZENAIDA C. ESTONACTOC

G.R. No. 235020
December 10, 2019
First Division- Caguioa, J.
Nature of the case: Complaint for Injunction, Annulment of the Deed of Real Estate Mortgage.
Facts: On 3 June 2008, Zenaida executed a Deed of Mortgage of Real Property (DMRP) in favor
of Atty. Bulatao covering a parcel of land in La Union as a security for a loan. When Zenaida
defaulted in her obligation, Atty. Bulatao foreclosed the mortgaged and petitioned the court for
the sale of the subject property in a public action. The Notice of Sale on Extra Judicial Foreclosure
of Property was issued by the Office of the Clerk of Court of the trial court in Agoo, La Union.
By reason of the impending sale of the subject property, Zenaida filed a complaint for injunction,
annulment of the deed of real estate Mortgage against Atty. Bulatao, Atty. Disodado Doctolero as
Clerk of Court and Ex-Officio Sheriff of the Office of the Clerk of Court seeking to declare the
DMRP as illegal, inexistent and null and void. She asserted that Atty. Bulatao, in grave abuse of
her rights, took advantage of her financial distress and urgent financial needs by imposing DMRP
an interest of 5% per month which is excessive and iniquitous.
Issue: (1) Whether the interest rate of 5% per month is excessive, iniquitous,
unconscionable, hence, null and void
Ruling: (1) Atty. Bulatao’s argument of voluntariness in his and Zenaida’s agreement on the 5%
monthly interest cannot be sustained. The Court citing the case of Spouses Abella v. Spouses
Abella, viz:
Even if it can be shown that the parties have agreed to monthly interest at the rate of 2.5%, this is
unconscionable. As emphasized in Castro v. Tan, the willingness of the parties to enter into a
relation involving an unconscionable interest rate is inconsequential to the validity of stipulated
rate:
The imposition of an unconscionable interest rate of interest on money, debt, even if knowingly
and voluntarily assumed, is immoral and unjust. It is tantamount to a repugnant spoliation and
an iniquitous deprivation of property, repulsive to common sense of man. It has no support in law,
in principles of justice, or in the human conscience nor is there any reason whatsoever which may
justify such imposition as righteous and as one that may be sustained within the sphere of public
and private morals.
The imposition of an unconscionable interest rate is void for being contrary to morals and the law.
Given that the agreement on the 5% monthly interest is void for being unconscionable, the interest
rate prescribed by the BSP for loans or forbearances of money, credits or goods will be the
surrogate or substitute rate not only for the one-year interest period agreed upon but for the entire
period that the loan of Zenaida remains unpaid.
Page | 33
The distinction that Atty. Bulatao makes between “open-ended contracts” or contracts with
indefinite period and term contracts or contracts for a specific period is misguided as the
distinction has no legal basis as far as a loan, whether commodatum or mutuum, is concerned.
As provided in Article 1933 of the Civil Code, by contract of loan, one of the parties delivers to
another, either something not consumable thing so that the latter may use the same for a certain
time and return it, in which case the contract is called a commodatum; or money or other
consumable thing, upon the condition that the same amount of the same kind and quality shall
be paid, in which case the contract is simply called a loan or mutuum. Thus, a period is
contemplated in a contract of loan and it cannot be an “open-ended contract” or a contract with
an indefinite period.
WHEREFORE, the petition is partly granted. The Deed of Mortgage of Real Property is declared
valid. The monthly interest rate stipulated in the DMRP is declared void. The foreclosure sale and
the certificate of sale issued are declared void.
Page | 34
CONTRACTS
Stipulation which is void for being contrary to public morals
LARA'S GIFTS & DECORS, INC. v. MIDTOWN INDUSTRIAL SALES, INC.

G.R. No. 225433
August 8, 2019
En Banc-Carpio, J.
Nature of the case: Complaint for Sum of Money.
Facts: Petitioner Lara's Gifts & Decors, Inc. is engaged in the business of manufacturing, selling,
and exporting handicraft products. On the other hand, respondent Midtown Industrial Sales, Inc.
is engaged in the business of selling industrial and construction materials, and petitioner is one
of respondent's customers.
Respondent alleged that petitioner purchased from respondent various industrial and
construction materials in the total amount of P1,263,104.22. The purchases were on a sixty (60)-
day credit term, with the condition that 24% interest per annum would be charged on all accounts
overdue. Petitioner paid for its purchases by issuing several Chinabank postdated checks in favor
of respondent. However, when respondent deposited the Chinabank checks on their maturity
dates, the checks bounced. Petitioner replaced the bounced checks with new postdated Export
and Industry Bank checks. However, the checks were likewise dishonored for being "Drawn
Against Insufficient Funds," and subsequently, for "Account Closed."
Respondent sent a demand letter informing petitioner of the bounced checks and demanding that
petitioner settle its accounts. Still petitioner failed to pay, prompting respondent to file a
Complaint for Sum of Money.
Issue: Whether or not the interest rate fixed at 24% per annum is void.
Ruling: In Asian Construction and Development Corporation v. Cathay Pacific Steel

Corporation, the Court upheld the validity of interest rate fixed at 24% per annum that was
expressly stipulated in the sales invoices. The Court held that petitioner construction company is
presumed to have full knowledge of the terms and conditions of the contract and that by not
objecting to the stipulations in the sales invoice, it also bound itself to pay not only the stated
selling price but also the interest of 24% per annum on overdue accounts and the 25% of the
unpaid invoice for attorney's fees.
In the present case, petitioner, which has been doing business since 1990 and has been purchasing
various materials from respondent since 2004, cannot claim to have been misled into agreeing to
the 24% interest rate which was expressly stated in the sales invoices. Besides, this Court has
already ruled in several cases that an interest rate of 24% per annum agreed upon between the
parties is valid and binding and not excessive and unconscionable. Thus, the stipulated 24%
interest per annum is binding on petitioner.
Page | 35
CONTRACTS
Mutuality of contracts
ROBERTO IGNACIO AND TERESA IGNACIO doing business under the

name and style TERESA IGNACIO ENTERPRISES v. MYRNA RAGASA and
AZUCENA ROA
G.R. No. 227896
January 29, 2020
First Division – Peralta, CJ.
Nature of the case: Complaint for sum of money (broker’s fee) and damages.
Facts: Petitioners engaged, on an exclusive basis, the services of respondents, who are both
licensed real estate brokers, to look for and negotiate with a person or entity for a joint venture
project involving petitioners’ underdeveloped lands. It provided that the petitioners will pay the
respondents a commission equivalent to 5% of the price of the properties.
Woodridge sent respondents a formal proposal for a joint venture agreement with petitioner
covering the Teresa Park. Thereafter, the petitioners met with the representatives of Woodridge
to discuss the prices of the properties, and Woodridge likewise intimated that it would develop
both the Krause Park and Teresa Park.
Respondents met again with Woodridge’s broker, to discuss Woodridge’s proposal for the bulk
purchase covering the Teresa Park, including the terms of the payment. Respondents presented
Woodridge’s offer to petitioner Roberto Ignacio. They discussed the projected cash inflows and
the advantages of the scheme. Petitioner Ignacio said he wanted to sell the lots in batches at a
lower volume, instead of in bulk. Respondents communicated the offer to Woodridge and the
latter intimated that it will make a revised offer.
Woodridge, however, changed its offer from direct acquisition to joint venture, covering 200 lots
in Teresa Park, and sent the proposal to the respondents, who, in turn, relayed it to the petitioners.
In a meeting, petitioners and respondents discussed the proposal for joint venture. Petitioners
commented that Woodridge’s offer was low, but respondents reassured them that they could
negotiate for a better price. After the meeting, petitioners stopped communicating with the
respondents. Several attempts were made by the respondents to contact petitioners to follow up
on the proposal of Woodridge, but to no avail.
Sometime thereafter, respondents learned that the petitioners continued to negotiate with
Woodridge, and this led to the execution of joint agreements and several deed of sale between the
petitioners and Woodridge.
Respondents demanded payment for their commission from the petitioners, contending that the
joint agreements and the sales over the Krause Park and Teresa Park were products of their
successful negotiation with Woodridge. Petitioners refused to pay despite demand. Thus,
respondents filed a complaint for sum of money, damages before RTC-Paranaque.
Issue: (1) Whether or not respondents are entitled to broker’s fee; and (2) Whether
the interest rate should be at prevailing rate of 6% being an interest award in a
concept of compensatory damages.
Page | 36
Ruling: (1) In Medrano v. Court of Appeals, we held that “when there is a close, proximate, and
causal connection between the broker’s efforts and the principal’s sale of property or joint venture
agreement, in this case – the broker is entitled to a commission.”
Here, as aptly ruled by the CA, the proximity in time between the meetings held by the
respondents and Woodridge and the subsequent execution of the joint venture agreements leads
to a logical conclusion that it was the respondents who brokered it. Likewise, it is inconsequential
that the authority of the respondents as brokers had already expired when the joint venture
agreements over the subject properties were executed. The negotiation for these transactions
began during the effectivity of the authority of the respondents, and these were carried out
through their efforts. Thus, respondents are entitled to a commission.
(2) We, however, agree with the petitioners that he interest rate should be at the prevailing rate
of six percent (6%) per annum, and not twelve percent (12%) per annum.
The term forbearance within the context of usury law, has been described as a contractual
obligation of a lender or creditor to refrain, during a given period of time, from requiring the
borrower or debtor to repay the loan or debt then due and payable.
This case, however, does not involve an acquiescence to the temporary use of a party’s money but
the performance of a brokerage service. Thus, the matter of interest award arising from dispute
in this case falls under the paragraph II, subparagraph 2, of the modified guidelines, which
necessitates the imposition of 6%, instead of the 12% imposed by the courts below.
WHEREFORE, premises considered, the instant petition is DENIED. The Decision and the
Resolution of the Court of Appeals are AFFIRMED with MODIFICATION. The interest rate of six
percent (6%) per annum, instead of twelve percent (12%), is imposed on all the monetary awards
from the date of finality of this Decision until full payment.
Page | 37
CONTRACTS
Relativity of contracts
NAOAKI HIRAKAWA represented by ERICA M. SHIBAMURA v. LOPZCOM

REALTY CORPORATION and ATTY. GARI TIONGCO
G.R. No. 213230
December 5, 2019
First Division- Lazaro-Javier, J.
Nature of the case: Complaint for collection of sum of money with interest and damages.
Facts: Respondent Lopzcom is a domestic corporation in realty development while respondent

Atty. Tiongco is Lopzco’s President. Petitioner Naoaki is a Japanese national represented by his
agent Erica.
Naoaki alleged that Takezo Sakai, acting for and behalf of the stockholders and members of the
Board of Directors of several corporations sold to respondent Lopzcom a 92-hectare subdivision
project. As payment, Tiongco delivered to Sakai nine (9) Westmont Bank postdated checks all
payable to the latter. Sakai assigned, transferred and conveyed to Hirakawa, all his rights and
interest on the 4 out of 9 postdated checks. It represented Sakai’s share in the sale proceeds of
Windfields Subdivision. Lopzcom and Tiongco were informed of the assignment and agreed to be
bound by it.
Upon encashment of the first check, Hirakawa requested Lopzcom and Tiongco to replace the
remaining postdated checks with the new ones reflecting his name as payee. Respondent acceded
and replaced the remaining checks all payable to Hirakawa. The new checks were all drawn
against Tiongco’s personal account in PDCP.
When PDCP check became due, Tiongco requested Hirakawa not to deposit the same and asked
for additional time within which to pay the obligation. But other PDCP checks were dishonored
because Tiongco’s account was already closed.
Respondents proposed to assign to Hirakawa their shares of stocks in a golf course project which
they will develop through a joint venture with Sta. Lucia Realty, as full payment of their
outstanding obligation. Hirakawa agreed, hence, Lopzcom through Tiongco executed the Deed of
Assignment in favor of Hirakawa.
In 2002, Hirakawa discovered that the golf course was never developed and no certificates of stock
of the supposed golf course project were issued in his name. Hirakawa was compelled to demand
that Tiongco pay their outstanding obligation, but to no avail. Hirakawa sued respondents for
Breach of Contract and Attachment.
Issue: Whether Hirakawa is a party to the Deed of Sale.
Ruling: At the outset, the Court agrees with the Court of Appeals that Hirakawa is not a party in
the Deed of Sale. Under the civil law concept of relativity of contracts, contracts can only bind the
parties who entered into it, and it cannot favor or prejudice a third person even if he is aware of
such contract and has acted with knowledge thereof, viz:
Page | 38
Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case
where the rights and obligations arising from the contract are not transmissible by their nature,
or by stipulation or by provision of law. The heir is not liable beyond the value of the property
he received from the decedent.
For clarification, what Sakai assigned to Hirakawa were his rights and interests over four (4) PDCs
which respondents issued him (Sakai), and not his interest in the Deed of Sale involving
Windfields Subdivisions. Therefore, he cannot sue for breach of contract insofar as such deed of
sale is concern.
Based on the allegations of the complaint, the cause of action ultimately seeks payment of
respondent’s indebtedness and the corresponding claim for damages allegedly suffered by
Hirakawa by reason of respondent’s failure or refusal to settle their obligation.
Here, although the complaint was erroneously denominated as breach of contract, the allegations
and the reliefs sought are plainly for collection of sum of money. To repeat, whbat Hirakawa is
simply asking for is the payment of sum of the value of the checks assigned to him, its accrued
interest, and the damages he suffered by reason of respondent’s failure to fund the checks
assigned to him. He does not ask for rescission of contract or restoration of things or the parties’
respective situation. It does not at all seek that Windfields Subdivision which is the subject of the
Deed of Sale be delivered to him.
ACCORDINGLY, the Court GRANTS the petition, and REVERSES and SET ASIDE the
Decision and Resolution of the Court of Appeals. The case is REMANDED to Regional Trial
Court for resolution of the case on the merits with utmost dispatch.
Page | 39
CONTRACTS
Classification of contracts
According to perfection
Consensuality of contracts
SAN MIGUEL FOODS and JAMES A. VINOYA v. ERNESTO RAOUL

MAGTUTO
G.R. No. 225007
July 24, 2019
Nature of the case: Complaint for damages.
Facts: Respondent Ernesto Raoul V. Magtuto, a businessman engaged in growing broiler chicks
attended a gathering of broiler chick growers of Swift Foods, Inc. Petitioner Dr. James Vinoya,
SMFI's veterinarian and production supervisor attended the gathering representing SMFI. The
growers were there to know if they can do business with SMFI and successively, SMFI, as an
integrator, was looking into recruiting new growers or getting additional capacity for the
company's production program in the region. At the gathering, SMFI presented to the contract
growers SMFI' s chick growing scheme, payment system, and benefits.
Several months after the said gathering, Magtuto and Vinoya arrived at an agreement. Vinoya told
Magtuto that he can be accommodated as a broiler chick grower of SMFI only if excess chicks
would be available from the SMFI hatchery located in Laguna. They did not execute a written
contract. However, Vinoya showed Magtuto a copy of SMFI' s standard Broiler Chicken Contract
Growing Agreement and told Magtuto that he is bound by the same terms and conditions as their
regular contract growers and Magtuto agreed.
The agreement involved the delivery of 36,000 day-old chicks by SMFI which Magtuto would
grow for a period of about 30-35 days at his grow-out facility. SMFI would provide all the feeds,
medicines, materials, and technical support. After the 30-35 day period, the grown chickens, after
reaching the desired age and weight, would be harvested and hauled by SMFI. Then Magtuto
would be given a period of 15 days to clear, disinfect, and prepare his grow-out facility for the next
delivery.
SMFI delivered chicks to Magtuto four times consisting of 36,000 chicks per delivery. After every
harvest, SMFI paid Magtuto a grower's fee for his service of growing the chicks for the company.
Then sometime in June 2003, on the fifth delivery, the broiler chicks delivered by SMFI was short
of 4,000 heads. Instead of 36,000 broiler chicks, SMFI only delivered 32,000 chicks. Magtuto
reported this to Vinoya. Vinoya replied and told Magtuto that there were no more excess chicks
to give due to the low supply from the hatchery and the decline in the demand of chicken in the
market because of the influx of cheap chicken coming from other countries. Magtuto demanded
that Vinoya deliver more chicks in order to make use of his facility to the maximum capacity but
Vinoya said that he was only being accommodated and their priority would be the official contract
growers of SMFI.
Vinoya informed Magtuto that their arrangement was terminated due to "poor working
relationship." Magtuto was surprised claiming that the termination was prompted by the
complaint on unprofessional conduct he made against Vinoya. Thereafter, Magtuto filed a
complaint for damages against SMFI, Vinoya, and Ogilvie before the Regional Trial Court.
Page | 40
Issue: Whether or not there was a contract growing agreement between Maguto
and SMFI.
Ruling: Under the Civil Code, a contract is a meeting of the minds, with respect to the other, to
give something or to render some service. Article 1318 of the Civil Code provides:
Article 1318. There is no contract unless the following requisites concur:

(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
In the present case, all the essential elements - consent, object and cause - are present. Magtuto
entered into an agreement with Vinoya for the growing of broiler chicks. They agreed that SMFI
would provide the day-old chicks, feeds, medicines, materials and technical support, while
Magtuto would be given a certain period to grow the chicks and keep them healthy. Afterwards,
SMFI would harvest the chicks and Magtuto would be paid a grower's fee depending on the
number of chicks harvested. The chicks delivered by SMFI and grown by Magtuto constitutes the
object or subject matter of the contract and the grower's fee is the consideration.
Thus, a contract, once perfected, is generally binding in whatever form, whether written or oral,
it may have been entered into, provided the essential requisites for its validity are present. Article
1356 of the Civil Code provides:
Article 1356. Contracts shall be obligatory, in whatever form they may have been entered into,
provided all the essential requisites for their validity are present. However, when the law requires
that a contract be in some form in order that it may be valid or enforceable, or that a contract be
proved in a certain way, that requirement is absolute and indispensable. In such cases, the right
of the parties stated in the following article cannot be exercised.
SMFI cannot assail the unenforceability of the agreement entered into between Magtuto and
Vinoya on the ground that Vinoya had no authority to bind the corporation. The contract,
assuming that Vinoya had no authority to sign for SMFI, was impliedly ratified when the- broiler
chicks subject of the contract were delivered by SMFI, together with the feeds, medicines and
materials, until the grown chickens were harvested by SMFI. This occurred not only once but five
times over the course of nine months. In Prime White Cement Corp. v. IAC, we held that implied
ratification may take various forms - like silence or acquiescence; by acts showing approval or
adoption of the contract; or by acceptance and retention of benefits flowing therefrom.
WHEREFORE, we PARTIALLY GRANT the petition. The Decision and the Resolution of the
Court of Appeals are AFFIRMED with MODIFICATION that San Miguel Foods, Inc. is liable
for actual or compensatory damages, which shall earn legal interest at the rate of 6% per annum
from the date of finality of this Decision until full payment.
Page | 41
SPECIAL CONTRACTS – SALES
In General
Contract of Sale
PABLO UY, substituted by his heirs, namely: MYLENE D. UY, PAUL D. UY,
and PAMELA UY DACUMA v. HEIRS OF JULIATA UY-RENALES,
represented by: JESSICA ROSERO, JOSELITO RENALES and JANET
RENALES; JOVITO ROSERO and MARILYN RENALES
G.R. No. 227460
December 5, 2019
First Division- Caguioa, J.
Nature of the case: Complaint for the nullification of the Deed of Absolute Sale and
reconveyance of one-half portion of the subject property.
Facts: Labnao had two children, i.e., petitioner Uy and Julita Uy-Renales. Julita produced three
children, i.e., the respondents Heirs of Julita. Hence, petitioner Uy is the uncle of respondents
Heirs of Julita. Julita died intestate.
Petitioner Pablo Uy maintains that upon the death of Labnao, as the surviving offspring of Labnao
in 1995, he became the owner of one-half share of the subject of the subject land and building
owned by his deceased mother, with the other half pertaining to the respondents Heirs of Julita
as co-owners.
However, petitioner Uy discovered that the subject lot was allegedly fraudulently sold by Labnao
in favor of respondents Heirs of Julita purportedly executed by Labnao. Petitioner Uy asserted
that the signature of Labnao in the Deed of Absolute Sale is a patent forgery.
Upon discovery of falsification, petitioner Uy confronted his nieces and nephews before the
Barangay for a possible settlement, but to no avail. Having been deprived of his hereditary rights
and co-ownership over the subject lot and building through the fraudulent sale, he files a
complaint and prayed for the nullification of the Deed of Absolute Sale and reconveyance of one-
half portion of the subject property.
Issue: Whether there was a contract of sale that was entered into between the
parties’ predecessor-in-interest, Labnao, and the respondents Heirs of Julita,
transferring ownership over the subject lot in the latter’s favor.
Ruling: A contract is a meeting of minds between two persons whereby one binds
himself/herself, with respect to the other, to give something or render some service. Article 1458
of the Civil Code, in turn, defines a sale whereby one of the contracting parties i.e., seller, obligates
himself/herself to transfer ownership and to deliver a determinate thing, and the other party i.e.,
the buyer, obligates himself/herself to pay therefor a price certain in money or its equivalent.
Thus the elements of a contract of sale are: (1) consent; (2) object; and (3) price certain in money
or its equivalent. The absence of any of these essential elements negates the existence of a contract
of sale.
A contract of sale is a consensual contract. Under Article 1475 of the Civil Code, the contract of
sale is perfected at the moment there is a meeting of minds upon the thing which is the object of
Page | 42
the contract and upon the price. Because a contract of sale is a consensual contract, no particular
form is required for its validity.
Thus, even if there is a document that purports to be a contract of sale, if there is strong
countervailing evidence establishing the want of consent or meeting of minds, there is contract of
sale.
Citing the case of Spouses Salonga v. Spouses Conception, it was held that the notarization of a
document does not guarantee its validity because it is not the function of the notary public to
validate an instrument that was never intended by the parties to have any binding legal effect.
As made clear in the respondents Heirs of Julita’s Formal Offer of Evidence, there is no other
documentary evidence that had been offered to prove that a contract of sale was entered into by
the parties aside from the Deed of Absolute Sale. The only other evidence presented to prove the
existence of a contract of sale is the testimony of respondent Jessica.
Aside from the foregoing, it also does not escape the Court’s attention that the purported Deed of
Absolute Sale was never registered with the Registry of Deeds. Nor was the Deed annotated on
the subject TCT.
WHEREFORE, the instant Petition is granted. The assailed Decision and Resolution are
reversed and set aside. Necessarily, the Deed of Absolute Sale is declared null and void.
Page | 43
Rights and Obligations of the Vendor
To Transfer Ownership
SPOUSES ISIDRO R. SALITICO AND CONRADA C. SALITICO v. HEIRS OF

RESURRECCION MARTINEZ FELIX
G.R. No. 240199
April 10, 2019
Nature of the case: Complaint for the delivery and return of the owner’s duplicate copy and
the execution of the Deed of Absolute Sale.
Facts: Amanda is the registered owner of a parcel of land registered in her name. By virtue of a
document entitled Huling Habilin ni Amanda H. Burgos the subject property was inherited by
the niece of Amanda, Resurreccion, as a devisee. The pertinent provision of the Huling
Habilin provides:
Sa aking pamangkin nasi RESURRECCION MARTINEZ-FELIX, 'RESY', ay aking inaaboy

ang apat (4) na parselang lupang palayan na napapaloob sa mga titulong sumusunod: xxxx
The instant case stemmed from a Complaint for Specific Performance with Damages filed by the
petitioners’ spouses Salitico against the respondents Heirs of Resurreccion Martinez Felix.
Thereafter, Resurreccion, as the new owner of the subject property, executed a document entitled
Bilihang Tuluyan ng Lupa which transferred ownership over the parcel of land in favor of the
petitioners’ spouses Salitico. The latter then took physical possession of the subject property.
Subsequently, a proceeding for the probate of the Huling Habilin was undertaken before the RTC
acting as Probate Court. Respondent Recaredo was appointed as the executor of the Huling
Habilin. The latter then filed and presented the Huling Habilin before the Probate Court, which
later on approved it. The Probate Court likewise issued a Certificate of Allowance.
Petitioners spouses Salitico received a demand letter requiring them to vacate the subject property
and surrender possession over it to the respondents’ heirs. To protect their interest over the
subject property, the petitioners’ spouses Salitico executed an Affidavit of Adverse Claim, which
was however denied registration by the Register of Deeds.
Petitioners spouses Salitico sought the delivery and return in their favor of the owner's duplicate
copy and the execution of the corresponding Deed of Absolute Sale by way of confirming
the Bilihang Tuluyan ng Lupa. They likewise prayed that OCT be cancelled and a new one be
issued in their names.
Issue: Whether there was an existence of a valid sale between Resurrection and
spouses Salitico, which ordinarily would warrant the delivery of the owner’s
duplicate copy of OCT pending the final settlement of the estate of Amanda.
Ruling: Article 777 operates at the very moment of the decedent's death meaning that the
transmission by succession occurs at the precise moment of death and, therefore, at that precise
time, the heir is already legally deemed to have acquired ownership of his/her share in the
Page | 44
inheritance, and not at the time of declaration of heirs, or partition, or distribution. Thus, there is
no legal bar to an heir disposing of his/her hereditary share immediately after such death.
Upon the death of Amanda, Resurreccion became the absolute owner of the devised subject
property, subject to a resolutory condition that upon settlement of Amanda's Estate, the devise is
not declared inofficious or excessive. Hence, there was no legal bar preventing Resurreccion from
entering into a contract of sale with the petitioners’ spouses Salitico with respect to the former's
share or interest over the subject property.
In a contract of sale, the law obliges the vendor to transfer the ownership of and to deliver the
thing that is the object of sale to the vendee. Therefore, Resurreccion had the obligation to deliver
the subject property to the petitioners’ spouses Salitico.
Therefore, considering that a valid sale has been entered into, there is no reason for the
respondent’s heirs to withhold from the petitioner’s spouses Salitico the owner's duplicate copy
of OCT. Nevertheless, the existence of a valid sale in the instant case does not necessarily mean
that the RD may already be compelled to cancel OCT and issue a new title in the name of the
petitioners’ spouses Salitico.
Hence, under the applicable provisions of PD 15295 and the Rules of Court, it is only upon the
issuance by the testate or intestate court of the final order of distribution of the estate or the order
in anticipation of the final distribution that the certificate of title covering the subject property
may be issued in the name of the distributees.
Here, there is no showing that, in the pendency of the settlement of the Estate of Amanda, the
Probate Court had issued an order of final distribution or an order in anticipation of a final
distribution, both of which the law deems as requirements before the RD can issue a new
certificate of title in the name of the petitioners spouses Salitico.
Hence, reading Article 777 of the Civil Code together with the pertinent provisions of PD 1529 and
the Rules of Court, while an heir may dispose and transfer his/her hereditary share to another
person, before the transferee may compel the issuance of a new certificate of title covering specific
property in his/her name, a final order of distribution of the estate or the order in anticipation of
the final distribution issued by the testate or intestate court must first be had.
Therefore, despite the existence of a valid contract of sale between Resurreccion and the
petitioners spouses Salitico, which ordinarily would warrant the delivery of the owner's duplicate
copy of OCT in favor of the latter, pending the final settlement of the Estate of Amanda, and absent
any order of final distribution or an order in anticipation of a final distribution from the Probate
Court, the RD cannot be compelled at this time to cancel OCT and issue a new certificate of title
in favor of the petitioners spouse Salitico.
5
With respect to the transfer of properties subject of testate or intestate proceedings, a new certificate of title in the
name of the transferee shall be issued by the Register of Deeds only upon the submission of a certified copy of the
partition and distribution, together with the final judgment or order of the court approving the same or otherwise
making final distribution, supported by evidence of payment of estate tax or exemption therefrom, as the case may be.
(Property Registration Decree)
Page | 45
To transfer ownership
Double Sales
MR. and MRS. ERNESTO MANLAN v. MR. and MRS. RICARDO BELTRAN
G.R. No. 222530
October 16, 2019
Third Division- Inting, J.
Nature of the case: Recovery of possession.
Facts: This involves the conflicting claims of two sets of buyers over a parcel of land. One group
avers of having bought the property in good faith. Meanwhile, the other group claims of having
bought the same land from all the co-owners and registered in good faith.
Specifically, the subject matter is a 1,214m2 land forming part of Lot 1366-E and originally owned
in common by the Orbetas. Spouses Ernesto and Rosita Manlan bought a 500 m2 portion of the
subject property from Manuel Orbeta. After receiving the advance payment Manuel Orbeta
allowed petitioners to occupy it.
The Orbeta executed a Deed of Absolute Sale conveying the 714 m2 portion of the same property
to respondents spouses Beltran. Thereafter, respondents bought the remaining 500 m2 from the
Orbetas. Consequently, the subject property was registered in respondents’ name.
Thereafter, the respondents demanded from the petitioners to vacate the property in dispute, but
to no avail. Thus, they brought the matter to the Barangay Lupon. When conciliation failed,
respondents filed an action for quieting of title and recovery of possession of the 500m2 portion
of the subject property.
Issue: Whether there was a double sale and the rules on double sale is applicable.
Ruling: Petitioners reliance on Article 15446 of the Civil Code is misplaced. The Court citing
Cheng v. Genato, enumerated the requisites in order for Article 1544 to apply, viz:
(a) The two (or more) sales transactions in the issue must pertain to exactly the same
subject matter, and must be valid sales transactions.
(b) The two (or more) buyers at odds over the rightful ownership of the subject matter must
each represent conflicting interests; and
(c) The two (or more) buyers at odds over the rightful ownership of the subject matter must
each have bought from the very same seller.
In fine, there is no double sale when the same thing is sold to different vendees by a single vendor.
It only means that Article 1544 has no application in cases where the sales were initiated not just
by one vendor but by several vendors.
6
Article 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded
it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession;
and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.
Page | 46
Here, petitioners and respondents acquired the subject property from different transferors. The
DOAS shows that all the original co-owners sold the subject lot to respondents. On the other hand,
the receipt and PN reveal that only Manuel sold the lot to petitioners. Nothing on the records
shows that Manuel was duly authorized by the other co-owners to sell the subject property.
Evidently, there are two sets of vendors who sold the subject land to two different vendees. Thus,
this Court upholds the findings of the trial court and the CA that the rule on double sale is not
applicable in the instant case.
WHEREFORE, the petition is denied. The Decision and the Resolution of the Court of Appeals
are affirmed.
Page | 47
To deliver the object
Delivery of less or more quantity agreed upon
SPOUSES LUCIA A. OROZCO et al. v. FLORANTE G. LOZANO, SR. et al.

G.R. No. 222616
April 3, 2019
Nature of the case: Complaint for Recovery of Possession and Damages.
Facts: Spouses Orozco purchased from spouses Fuentes two residential lots. Half of Lot No. 3780
which was sold by spouses Orozco to Lozano was assigned as Lot No. 3780-A while the other half
retained by Spouses Orozco was designated as Lot No. 3780-B. At the time of the sale, Orozco
used a rope to measure Lot No. 3780, which Orozco thought had an area of 570 square meters.
Lozano constructed a building between Lot No. 3780-A and Lot No. 3780-B which Lozano used
as a boarding house.
Spouses Orozco did not prevent Lozano from building the boarding house because Spouses
Orozco thought that the said boarding house was constructed within the 285 m2 portion which
Spouses Orozco sold to Lozano. Allegedly, Spouses Orozco were surprised when Lozano asked
them to sign a piece of paper, purportedly an acknowledgment receipt of the payment for the
additional area on top of the 285 m2 principally sold.
Spouses Orozco claimed that they did not sign such acknowledgment receipt because according
to them there was no additional area sold to Lozano. On the other hand, Lozano claimed that
Spouses Orozco agreed to sell to him an additional 62 m2 of Spouses Orozco's portion and that
Lozano agreed to make an additional payment in consideration for the said added portion.
Lozano paid Spouses Orozco ₱700, leaving ₱300 as the remaining unpaid balance for the 62 m2
added portion. Without receiving the full payment, Spouses Orozco made repeated demands to
Lozano to vacate the portion of Spouses Orozco's lot that Lozano allegedly encroached upon but
the latter refused to vacate.
Issue: (1) Whether the contract of sale of Lot No. 3780 between Spouses Orozco and
Lozano included the disputed portion; and (2) Whether a sale of Lot No. 3780
between spouses Orozco and Lozano is a sale of land in a lump sum under Article
1542 of the Civil Code.
Ruling: (1) First, the contract of sale between Spouses Orozco and Lozano completely
transferred the title of ownership of half of Lot No. 3780. Considering that the object of the deed
of sale was half of Lot No. 3780, there is no encroachment on the part of Lozano because the sale
of Lot No. 3780 was a sale of land made for a lump sum under Article 1542 of the Civil Code.
Hence, Lozano owns half of 651 m2 of Lot No. 3780 which is 325.5 m2 assigned as Lot No. 3780-
A.
Second, there was a subsequent perfected contract of sale for an additional portion of 62 m2 of
Lot No. 3780-B from Spouses Orozco to Lozano. As evidenced by the acknowledgment receipt
Page | 48
dated 24 April 1981, Spouses Orozco agreed to sell to Lozano an additional 62 square meters of
Lot No. 3780-B. Spouses Orozco's defense of forgery was not proven with clear and convincing
evidence.
(2) Article 1542 of the Civil Code provides for the sale of land made for a lump sum. The same rule
shall be applied when two or more immovables are sold for a single price; but if, besides
mentioning the boundaries, which is indispensable in every conveyance of real estate, its area or
number should be designated in the contract, the vendor shall be bound to deliver all that is
included within said boundaries, even when it exceeds the area or number specified in the
contract; and, should he not be able to do so, he shall suffer a reduction in the price, in proportion
to what is lacking in the area or number, unless the contract is rescinded because the vendee does
not accede to the failure to deliver what has been stipulated.
On the other hand, Article 1539 of the Civil Code refers to a sale of real estate made with a
statement of the real estate's area at the rate of a certain price for a unit of measure or number.
The rescission, in this case, shall only take place at the will of the vendee, when the inferior value
of the thing sold exceeds one-tenth of the price agreed upon. Nevertheless, if the vendee would
not have bought the immovable had he known of its smaller area of inferior quality, he may
rescind the sale.
In the case where the area of the immovable is stated in the contract based on an estimate, the
actual area delivered may not measure up exactly with the area stated in the contract. According
to Article 1542 of the Civil Code, in the sale of real estate, made for a lump sum and not at the rate
of a certain sum for a unit of measure or number, there shall be no increase or decrease of the
price although there be a greater or lesser area or number than that stated in the
contract. However, the discrepancy must not be substantial. A vendee of land, when sold in gross
or with the description more or less with reference to its area, does not thereby ipso facto take all
risk of quantity in the land. The use of "more or less" or similar words in designating quantity
covers only a reasonable excess or deficiency.
In a contract of sale of real estate contained in a land mass under Article 1542, the specific
boundaries stated in the contract must control over any statement with respect to the area
contained in the said boundaries. Where both the area and the boundaries of the immovable are
declared, the area covered within the boundaries prevails over the stated area in the deed of sale.
In case of conflict between the area and boundaries, it is the latter which should prevail.
In Esguerra, this Court held that under Article 1542, what is controlling is the entire land included
within the boundaries, regardless of whether the real area should be greater or smaller than that
recited in the deed of sale. Notably, the Deed of Sale validly transferred the title of ownership over
half of Lot No. 3780 or 325.5 square meters from Spouses Orozco to Lozano.
WHEREFORE, the petition is DENIED. We AFFIRM the Decision and the Resolution of the
Court of Appeals, Cagayan de Oro City.
Page | 49
Extinguishment of Sale
Conventional Redemption
SPOUSES JOHN SY AND LENY SY, AND VALENTINO SY v. MA. LOURDES

DE VERA-NAVARRO AND BENJAEMY HO TAN LANDHOLDINGS, INC.
G.R. No. 239088
April 3, 2019
Nature of the case: Complaint for declaration of Nullity of Deed of Absolute Sale, Cancellation
of Transfer Certificate of Titles, Recovery of Ownership, and Damages.
Facts: This case stems from a complaint filed by petitioners’ spouses Sy against respondents Ma.
Lourdes De Vera-Navarro and Benjaemy Ho Tan Landholdings, Inc. before the RTC for
Declaration of Nullity of Deed of Absolute Sale, Cancellation of Transfer Certificate of Titles,
Recovery of Ownership, and Damages.
It is alleged that petitioner John was one of the co-owners of a parcel of land and the four-storey
building. The controversy arose when petitioner John, for himself and in representation of his
co-owners, borrowed ₱3,720,000.00 from respondent De Vera-Navarro, secured by a Real
Estate Mortgage Contract over the subject property. Petitioners alleged that immediately after
the execution of the Mortgage Contract, as per usual practice, respondent De Vera-Navarro
asked petitioner John to execute an undated Deed of Absolute Sale with a stated consideration,
supposedly for the purpose of providing additional security for the loan. Petitioners also claimed
that petitioner John and respondent De Vera-Navarro verbally agreed that the mode of payment
for the said loan would be from the collection of rental payments from the tenants of the subject
property.
To the surprise of petitioner John, he was informed by respondent BHTLI that the ownership of
the subject property had been transferred to respondent De Vera-Navarro; that a TCT was
issued in favor of respondent De Vera-Navarro; and that respondent BHTLI was demanding
that the petitioners vacate the subject property.
Issue: Whether or not the purported contract of sale between petitioner John and
respondent De Vera-Navarro is an equitable mortgage and not a contract of sale.
Ruling: An equitable mortgage is defined as one which although lacking in some formality, or
form or words, or other requisites demanded by a statute, nevertheless reveals the intention of
the parties to charge real property as security for a debt, and contains nothing impossible or
contrary to law. Its essential requisites are: (1) that the parties entered into a contract
denominated as a contract of sale; and (2) that their intention was to secure an existing debt by
way of a mortgage.
Article 1602 of the Civil Code states that a contract shall be presumed to be an equitable mortgage,
in any of the following cases:
Article 1602. The contract shall be presumed to be an equitable mortgage, in any of the following
cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
Page | 50
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase, another instrument extending
the period of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that
the transaction shall secure the payment of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as
rent or otherwise shall be considered as interest which shall be subject to the usury laws.
At this juncture, it must be stressed that the RTC, after an exhaustive trial and appreciation of the
evidence presented by the parties, concluded that the supposed contract of sale entered between
petitioner John and respondent De Vera-Navarro is in fact an equitable mortgage.
Upon examination of the records of the instant case, the Court finds that there was no reason for
the CA to reverse the R TC' s correct finding that an equitable mortgage exists in the instant case.
Jurisprudence consistently shows that the presence of even one of the circumstances enumerated
in Article 1602 suffices to convert a purported contract of sale into an equitable mortgage.
Applying the foregoing to the instant case, the Court finds that the presence of at least four badges
of an equitable mortgage creates a very strong presumption that the purported contract of sale
entered between petitioner John and respondent De Vera-Navarro is an equitable mortgage. First,
it is not disputed by any party that the supposed vendor of the subject property, petitioner John,
remains to be in possession of the subject property despite purportedly selling the latter to
respondent De Vera-Navarro. It is uncanny for a supposed buyer to desist from taking possession
over property which he/she has already purchased.
Second, the purchase price of the purported sale indicated in the undated Deed of Absolute Sale
is inadequate.
Third, respondent De Vera-Navarro retained for herself the supposed purchase price. Aside from
the testimony of petitioner John that no consideration was paid at all for the supposed contract
of sale, the RTC also noted that no proof was presented by respondent De Vera-Navarro that she
actually parted with the sum of P5,000,000.00 in favor of petitioner John pursuant to the
undated Deed of Absolute Sale.
Fourth, it is established that the real intention of the parties is for the purported contract of sale
to merely secure the payment of their debt owing to respondent De Vera Navarro.
WHEREFORE, the appeal is hereby GRANTED. The Decision and Resolution of the Court of
Appeals are REVERSED. Accordingly, the Decision issued by the Regional Trial Court of
is REINSTATED WITH MODIFICATIONS.
Page | 51
Extinguishment of Sale
Conventional Redemption
MAXIMA SACLOLO and TERSITA OGATIA v. ROMEO MARQUITO,

MONICO MARQUITO, CLEMENTE MARQUITO, ESTER LOYOLA,
MARINA PRINCILLO, LOURDES MARQUITO and LORNA MARQUITO
G.R. No. 229243
June 26, 2019
Nature of the case: Complaint for redemption of mortgaged properties, specific

performance with damages.
Facts: The dispute involved a co-owned parcel of coconut land, which Maxima P. Saclolo and
Teresita P. Ogatia inherited from their father.
Petitioners claimed they each obtained a loan of P3,500.00 from Felipe Marquito, the father of
respondents. Petitioners used their land as collateral for the loan obligation. On said date,
respondents' father began occupying the land. In 2003, petitioner Ogatia borrowed an additional
P6,000.00, and again used her aliquot share of the land as collateral for the loan. In 2004,
petitioner Saclolo also borrowed an additional amount of P10,000.00 from respondents, using
her aliquot share of the land as collateral.
Sometime in 2004, petitioners verbally informed respondents of their intention to redeem the
property. On Nov 2004, a written offer to redeem the property was made. Respondents, however,
refused. Thus, petitioners were constrained to file a Complaint for redemption of mortgaged
properties, specific performance with damages before the RTC. During the proceedings, they
manifested their willingness to deposit the amounts due on their loan obligation for the purpose
of redemption.
Respondents, on the other hand, alleged that in 1984, petitioners sold the subject property for
Pl,000.00 under a Memorandum of Deed of Sale with Right of Repurchase. Since then, they have
been in actual possession of the property in the concept of owner and even introduced
improvements thereon. They admitted that since 1984, petitioners, on numerous occasions,
borrowed money from them but explained that they extended said loans on the understanding
that petitioners would execute a deed of absolute sale in their favor.
Issue: Whether or not the subject Memorandum of Deed of Sale with Right of
Repurchase is sale with right of repurchase or an equitable mortgage.
Ruling: In Spouses Salonga v. Spouses Concepcion, the Court explained the nature of an
equitable mortgage, viz:
Article 1602 of the New Civil Code of the Philippines provides that a contract shall be presumed
to be an equitable mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase, another instrument extending
the period of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
Page | 52
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.
The provision shall apply to a contract purporting to be an absolute sale. In case of doubt, a
contract purporting to be a sale with right to repurchase shall be considered as an equitable
mortgage. In a contract of mortgage, the mortgagor merely subjects the property to a lien, but the
ownership and possession thereof are retained by him.
For the presumption in Article 1602 of the New Civil Code to arise, two requirements must concur:
(a) that the parties entered into a contract denominated as a contract of sale; and (b) that their
intention was to secure an existing debt by way of a mortgage. The existence of any of the
circumstances defined in Article 1602 of the New Civil Code, not the concurrence nor an
overwhelming number of such circumstances, is sufficient for a contract of sale to be presumed
an equitable mortgage.
In the instant case, the subject Memorandum of Deed of Sale with Right of Repurchase, while
purporting to be a sale with right to repurchase, was, in fact, an equitable mortgage.
An equitable mortgage, like any other mortgage, is a mere accessory contract "constituted to
secure the fulfillment of a principal obligation," i.e., the full payment of the loan.
Since the true transaction between the parties was an equitable mortgage and not a sale with right
of repurchase, there is no "redemption" or "repurchase" to speak of and the periods provided
under Article 1606 do not apply. Instead, the prescriptive period under Article 1144 of the Civil
Code is applicable. In other words, the parties had 10 years from the time the cause of action
accrued to file the appropriate action.
The release of additional loans on the basis of the same security, coupled with the fact that
respondents never filed an action to consolidate ownership over the subject property under Article
1607 , evidently shows that for 19 years, respondents expressly recognized: 1) that petitioners
continued to own the subject property and 2) that the loan and equitable mortgage subsisted.
Thus, petitioners' cause of action to recover the subject property can be said to have accrued only
in 2004, that is, when respondents rejected petitioners' offers to pay and extinguish the loan and
to recover the mortgaged property as it was only at this time that respondents manifested their
intention not to comply with the true agreement of the parties. Undoubtedly, the filing of the
complaint in 2005 was made well-within the 10-year prescriptive period.
WHEREFORE, the Petition is GRANTED. The Decision and the Resolution in Court of Appeals
are REVERSED. The instant case is REMANDED to Regional Trial Court to determine the
outstanding amount of the loan and the applicable interest, to fix a reasonable period for the
payment of the same, and to order the return of the subject property only upon full satisfaction
thereof.
Page | 53
TORTS AND DAMAGES
Liability for Torts and Damages
Kinds of damages
Actual Damages
HEIRS OF DOMINADOR ASIS, JR., LUZON STEAM LAUNDRY v. G.G.

SPORTSWEAR MANUFACTURING CORPORATION and NARI GIDWANI
G.R. No. 225052
March 27, 2019
Second Division- Reyes, J. Jr., J
Nature of the Case: Complaint for rescission of contract with damages
Facts: G.G. Sportswear and Nari Gidwani signified their intent to purchase Filipinas Washing
Comapany (FWC). After more than two (2) months of negotiations, the parties entered into an
agreement, whereby respondents undertook to purchase FWC under the terms and conditions set
forth in the Letter-Agreement.
Thereafter, respondents remitted a partial payment of FWC obligations to Westmont Bank.

Respondents also issued a check to be used as partial payment of FWC obligation to the said bank.
On the other hand, petitioners performed the following acts: (a) made representations with
Westmont Bank and Equitable Banking Corporation relative to the restructuring of FWC loan
obligations in preparation for respondents’ assumption thereof; (b) ceased FWC operations in
preparation for the turnover of facilities to respondents; (c) advised the FWC employees about
the sale of the company and gave their separation pay and other benefits.
Respondents however failed to assume the payment of FWC with Westmont Bank and Equitable
Banking Corp. This prompted petitioners to demand from respondents full compliance with their
contractual obligations.
In response thereto, respondents wrote a letter cancelling the Letter-Agreeement for the latter’s
failure to comply with their obligation to deliver the FWC shares of stocks to respondents.
Hence, petitioners filed a Complaint for rescission of contract with damages against respondents.
Issue: Whether an award for actual damages is proper in favor the petitioners.
Ruling: As correctly observed by the CA, however, this Court could not find any basis for the
grant of such amount for actual damages. This Court has, time and again, ruled in no certain terms
that actual or compensatory damages cannot be presumed but must be proved with reasonable
degree of certainty. A court cannot rely on speculations, conjectures or guesswork as to the fact of
damage but must depend upon competent proof that they have indeed been suffered by the
injured party and on the basis of the best evidence obtainable as to the actual amount thereof. It
must point out specific facts that could provide the gauge for measuring whatever compensatory
or actual damages were borne.
In this case, the exhibits that were presented before RTC-Branch 263 which based the award for
actual damages were not transmitted to Branch 263 for examination to aid its decision, which
leaves clouds of doubts to our minds as to how the RTC arrived at said figures.
Page | 54
Mutual restitution is required in cases involving rescission like in this case. This means bringing
the parties back to their original status prior to the inception of the contract. These loan
obligations are petitioners’ outstanding loan obligations prior to the Letter-Agreement. While
respondents undertook to assume said liabilities in the Letter-Agreement, they cannot be made
to answer therefor, by virtue of the rescission of the said agreement. Rescission is not merely to
terminate the contract and release the parties from further obligations to each other, but to
abrogate it from the beginning and restore the parties to their relative positions as if no contract
has been made. Hence, petitioners’ outstanding obligations with the banks cannot be made part
of consequential damages it suffered due to the rescission of Letter-Agreement.
Thus, the CA did not err in deleting the award of actual damages for lack of evidentiary basis.
Nonetheless, in the absence of competent proof on the amount of actual damages suffered,
petitioners correctly argued that they are entitled to temperate damages. Temperate damages may
be recovered when some pecuniary loss has been suffered but its amount cannot, from the nature
of the case, be proven with certainty. The amount thereof is usually left to the discretion of the
courts but the same should be reasonable, bearing in mind that temperate damages should be
nominal but less than compensatory.
There is no question that petitioners suffered damages due to the breach committed by the
respondents. The cessation of FWC’s operations, the termination of its employees, and the process
of re-operating the business due to the failed turn over to the respondents necessarily entailed
expenses.
WHEREFORE, premises considered, the Petition is partly GRANTED. Accordingly, the order
to delete the actual damages awarded to petitioners stands. In lieu thereof, respondents are
ordered to pay petitioners temperate damages.
Page | 55
TORTS AND DAMAGES
Kinds of damages
Moral Damages
BNL MANAGEMENT CORPORATION and ROMEO DAVID v. REYNALDO

UY, RODIEL BALOY, ATTY. LUALHATI CRUZ, ALBERTO WONG,
TERESITA PASIA, ROLAND INGEL, AND MARISSA SEVILLA
G.R. No. 210297
April 3, 2019
Third Division-Leonen, J.
Nature of the case: Complaint for damages and specific performance with preliminary
mandatory/prohibitory injunction.
Facts: BNL owned six (6) condominium units at the Imperial Bayfront Tower Condominium.
These units were leased to its client under separate contracts of lease. BNL also held exclusive
rights to three (3) parking spaces of Imperial Bayfront.
BNL wrote a letter to the building administrator of Imperial Bayfront, acknowledging receipt
of the November billing statement. In the letter, it brought up concerns over: ( 1) the general
cleanliness and maintenance of common areas; (2) security; (3) building insurance; (4)
encroachment on two (2) of the parking spaces; and ( 5) the annotation of the parking spaces
on the mother title.
In a follow-up letter, BNL declared that it would withhold paying monthly dues and instead
deposit them and its arrears in a bank as escrow.
BNL Management received a letter containing a breakdown of its arrears in the payment of
association dues from November 1996 to June 1999. The Second Notice also contained a
warning that after a third notice had been sent, the Association would terminate utility
services. Still, BNL Management did not pay the arrears. Thus, the Association's Board of
Directors resolved to disconnect the lighting and water facilities in the six (6) units owned by
BNL Management.
Since the Association refused to restore its electricity and water, BNL Management and David
filed before the Regional Trial Court a Complaint against Uy, et al. for damages and specific
performance with preliminary mandatory/prohibitory injunction.
Issue: Whether or not petitioner BNL Management is entitled to moral

damages.
Ruling: The Petition is denied.
First, as to the party first at fault, the common finding of the Regional Trial Court and the
Court of Appeals is that it was petitioners who failed to comply with their obligation to timely
pay association dues.
In the instant case, defendants are justified in cutting off plaintiffs' water and electric services
pursuant to paragraph 5 of the House Rules and Regulations of the IBTCA. It must be noted
Page | 56
that the cutting off of the utility services in plaintiffs' units was the last option that the
association has to compel plaintiff to pay its dues. It is rather unfair and ran counter to the
idea of fair play for plaintiff to demand enjoyment of the services without paying what is
required of him, thereby unjustly enriching itself at the expense of another.
Here, when petitioners bought the condominium units from Imperial Bayfront, they were
bound by the terms and conditions of the declaration of restrictions attached to the Master
Deed.
Finally, petitioners are not entitled to the damages they prayed for.
Moral damages are awarded in circumstances enumerated under Article 2217 of the Civil
Code:
Article 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury.
Though incapable of pecuniary computation, moral damages may be recovered if they are the
proximate result of the defendant's wrongful act or omission.
For moral damages to be awarded, the following requisites must be present: Such damages,
to be recoverable, must be the proximate result of a wrongful act or omission the factual basis
for which is satisfactorily established by the aggrieved party. An award of moral damages
would require certain conditions to be met; to wit: (1) First, there must be an injury, whether
physical, mental or psychological, clearly sustained by the claimant; (2) second, there must be
a culpable act or omission factually established; (3) third, the wrongful act or omission of the
defendant is the proximate cause of the injury sustained by the claimant; and (4) fourth, the
award of damages is predicated on any of the cases stated in Article 2219.
Here, respondents were not found to have committed any culpable act or omission that would
warrant an award of moral damages for petitioner David. Clearly, the injury he allegedly
sustained was caused by his own failure, as president of petitioner BNL Management, to
resolve the corporation's nonpayment of dues.
WHEREFORE, the Petition for Review on Certiorari is DENIED. The Decision and
Resolution of the Court of Appeals are AFFIRMED.
Page | 57
TORTS AND DAMAGES
Kinds of damages
Actual Damages. Moral Damages and Exemplary Damages
MICHAEL C. GUY v. RAFFY TULFO et al.

G.R. No. 213023
April 10, 2019
Nature of the Action: Complaint for damages.
Facts: An article entitled “Malinis ba talaga o naglilinis-linisan (Sino si Finance Sec. Juanita
Amatong)” was published in Abante Tonite, a newspaper of general circulation in the Philippines.
Written by Raffy Tulfo (Tulfo), the article reported that a certain Michael Guy, who was then being
investigated by the Revenue Integrity Protection Service (RIPS) of the Department of Finance for
tax fraud, went to former Department of Finance Sec. Juanita Amatong’s house to ask for help.
Sec. Amatong then purportedly called the head of the RIPS and directed that all documents that
the RIPS had obtained on Guy’s case be surrendered to her.
Claiming that the article had tainted his reputation, Guy filed a Complaint before Office of the City
Prosecutor; and eventually, an Information charging Tulfo et al. with the crime of libel.
RTC convicted Tulfo et al. of the crime of libel. It also ordered respondents to pay Guy 500K as
actual damages, 5M as moral damages and attorney’s fees.
Issue/s: (1) Whether or not there is sufficient basis for an award of actual damages;
(2) Whether or not petitioner Guy is entitled to moral damages; and (3) Whether or
not he is entitled to exemplary damages.
Ruling: (1) Actual damages are compensation for an injury that will put the injured party in the
position where it was before the injury. They pertain to such injuries or losses that are actually
sustained and susceptible of measurement. Actual damages constitute compensation for
sustained pecuniary loss. Nevertheless, a party may only be awarded actual damages when the
pecuniary loss he or she had suffered was duly proven.
Petitioner Guy failed to substantiate the loss he had allegedly sustained. Save for his testimony in
court, he presented no evidence to support his claim. His allegation of possibly earning
P50,000,000.00 in 10 years is a mere assumption without any foundation.
Notwithstanding the absence of any evidence on the amount of actual damages suffered, a party
may be awarded temperate damages should the court find that he or she has suffered some
pecuniary loss even if its amount cannot be determined with exact certainty.
Unfortunately, petitioner failed to prove that he has suffered any pecuniary loss. While he testified
that he lost clients as a result of libelous article, records reveal that he lost only 1 client. On cross-
examination, such client testified “that he was not immediately convinced by the article.”
(2) Moral damages are compensatory damages awarded for mental pain and suffering or mental
anguish from a wrong. They are awarded to the injured party to enable him to obtain means that
Page | 58
will ease the suffering he sustained from respondent’s reprehensible act. Moral damages are not
punitive in nature but are instead a type of award designed to compensate the claimant for actual
injury suffered.
Article 2218 of the Civil Code specifically states that moral damages may be recovered in cases of
libel, slander or defamation. The amount of moral damages that courts may award depends upon
the set of circumstances for each case. There is no fixed standard to determine the amount of
moral damages to be given. Courts are given the discretion to fix the amount to be awarded in
favor of the injured party, so long as there is sufficient basis for awarding such amount.
Here, other than his bare allegations of besmirched reputation and loss of clientele, petitioner
failed to present evidence supporting his assertions. He also failed to adduce proof to support his
claim that his reputation was tainted due to the business associates who allegedly lost faith in him.
Nonetheless, moral damages should still be awarded. As he had testified during trial, members of
his family were displeased with him for being accused of committing illegal and corrupt acts. He
was berated by his mother for having humiliated his family. His children were questioned at
school. As such, award of P500K as moral damages is an adequate recompense to the mental
anguish and wounded feelings that petitioner had endured.
(3) Exemplary damages may be awarded where the circumstances of the case show the highly
reprehensible or outrageous conduct of the offender. Exemplary or corrective damages are
imposed by way of example or correction for the public good. It is imposed as a punishment for
highly reprehensible conduct and serves as a notice to prevent the public from the repetition of
socially deleterious actions. Such damages are required by public policy for wanton acts must be
suppressed. They are an antidote so that the poison of wickedness may not run through the body
politic.
Here, respondents published the libelous article without verifying the truth of the allegations
against petitioner. As the CA found, the RIPS only investigates officials of the DoF and its attached
agencies who are accused of corruption. Petitioner, on the other hand, is not government official
and, therefore, beyond the RIPS’ jurisdiction. It only goes to shows that respondents did not verify
the information on which the article was based.
Thus, to ensure that such conduct will no longer be repeated, and considering their profession,
respondents are directed to pay petitioner exemplary damages in the amount of P1M.
Respondents, then, should have been more circumspect in what they published. They are not
media practitioners with a lack of social following: their words reverberate. This Court can only
hope that respondents appreciate the privilege their fame has brought them and, in the future,
become more circumspect in the exercise of their profession.
WHEREFORE, the Petition is partially granted. The June 13, 2014 Amended Decision of the
Court of Appeals in C.A.-G.R. No. 33256 is affirmed with modification.
Page | 59
TORTS AND DAMAGES
Kinds of damages
Moral Damages and Exemplary Damages
MOISES G. CORO v. MONTANO B. NASAYAO

G.R. No. 235361
October 16, 2019
Third Division- Inting, J.
Nature of the case: Complaint for annulment of the contract of sale, reconveyance, of the
property with damages.
Facts: Petitioner Coro’s alleged that he was the owner of a parcel of land in Numancia, Surigao
del Norte and covered by Tax Declaration. On July 2003, he found out that respondent Nasayao
acquired the subject property by way of a forged Deed of Absolute Sale. He denied having received
money in consideration of the sale nor having personally appeared before the notary public.
Respondent’s wife and children stated that petitioner sold the subject property to the respondent,
his stepbrother. They further alleged that respondent had title of the property transferred in his
name and thereafter, dutifully paid the corresponding taxes. On 10 Dec 1996, respondent was
awarded OCT. Seven years later on, petitioner approached respondent’s wife and son to buy back
the land, but his offer was refused. Taking advantage of respondents’ illness, petitioner
surreptitiously occupied the property.
Issue: (1) Whether the Deed of Absolute Sale is valid; and (2) Whether respondent
is entitled for an award of moral and exemplary damages in light of petitioner
alleged to have surreptitiously occupied the property.
Ruling: (1) This Court denies the petition. Forgery is never presumed; it must be proven by clear,
positive and convincing evidence, and the burden of proof lies on the party alleging forgery. In
any event, Section 1, Rule 131 of the Rules of Court provides that the burden of proof is the duty
of a party to prove the truth of his claim or defense, or any fact in issue by the amount of evidence
required by law.
Since the petitioner is assailing the 1963 Deed of Sale, he evidently has the burden of making out
a clear-cut case that the disputed document is bogus. Both RTC and CA concluded that petitioner
failed to discharge the burden.
(2) Finally, aside from the issue of forgery, petitioner contends that the award of moral and
exemplary damages to respondent was inappropriate under the circumstances. There was no
proof of respondent’s alleged moral suffering, mental anguish, and the like. In addition, the filing
of the subject complaint was not malicious to warrant the award of attorney’s fees and litigation
costs. According to petitioner, no premium should be placed on the right to litigate and not every
winning party is entitled to an automatic grant of attorney’s fees.
This Court agrees with petitioner.
First moral damages are compensatory damages for mental pain and suffering or mental anguish
from a wrong. The award of moral damages is not punitive in nature but are instead a type of
award designed to compensate the claimant for actual injury suffered. And although incapable of
Page | 60
pecuniary estimation, moral damages must somehow be proportional to an in approximation of
the suffering inflicted. This is because moral damages are in the category of award designed to
compensate the claimant for actual injury suffered and not, as stated just to impose as a penalty
on wrongdoer.
Here, respondent’s complaint alleged that due to fraud, bad faith, illegal manipulation of
petitioner, he sustained mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, and mental shock. Yet, other than his bare allegations, respondent failed to present
evidence to support his assertions. Well settled is the rule that moral damages cannot be awarded,
whether in a civil or criminal case, in the absence of proof of physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, or similar injury.
Second, respondent argued in his complaint that in order to avoid a repetition of similar acts and
as a correction for the public good, petitioner should be held liable for exemplary damages.
Exemplary and corrective damages are imposed by way of example or correction for the public
good, in addition to moral, temperate, liquidated, or compensatory damages. The award of
exemplary damages is allowed by law as a warning to the public and as a deterrent against the
repetition of socially deleterious actions.
And in light of the Court’s disquisition that respondent is not entitled to moral damages; the award
of exemplary damages must likewise be deleted for lack of legal basis.
WHEREFORE, the petition for review on certiorari is PARTIALLY GRANTED. The Decision
and Resolution of the Court of Appeals are AFFIRMED, with MODIFICATION in that awards
of moral damages, exemplary damages, and attorney’s fees are DELETED.
Page | 61
TORTS AND DAMAGES
Kinds of damages
Moral Damages
Exemplary Damages
THELMA SIAN, represented by ROMUALDO SIAN v. SPOUSES CAESAR

SOMOSO, the former being substituted by his surviving son, ANTHONY
VOLTAIRE SOMOSO, MACARIO DE GUZMAN, JR. in his capacity as
Sheriff III of RTC-Panabo, Davao
G.R. No. 201812
January 22, 2020
Third Division-Carandang, J.
Nature of the case: Petition for Review on Certiorari under Rule 45 assailing the award of
moral, exemplary, attorney’s fees and litigation expenses awarded to respondent by the Court of
Appeals.
Facts: Caesar Somoso filed with RTC-Tagum, Davao a collection suit with prayer for issuance of
writ of preliminary attachment against Spouses Illuminada and Quiblatin. RTC granted the prayer
for the issuance of writ of preliminary attachment on the properties of Quiblatin; provincial sheriff
attached the properties of Quiblatin which included a parcel of land issued in the name of
“Illuminada Quiblatin, married to Juanito Quiblatin.” The attachment on the subject property was
annotated.
RTC decided the case in favor of respondent. Spouses Quiblatin failed to appeal, hence, the
decision becomes final and executory. A Writ of Execution was issued. Among the properties
levied is the subject property.
Before the writ could be implemented, petitioner filed a third-party claim over the subject
property. They alleged that the subject property was sold to them by Illuminada and deed of sale
was registered. RTC dismissed the third-party claim.
On appeal, CA held that petitioner’s complaint was frivolous, it was in effect granting the award
of moral damages on the basis of Article 2219(8) of the Civil Code on malicious prosecution. CA
awarded damages to respondents after considering petitioner’s suit is frivolous. It explained that
petitioner’s main or essential cause of action is to annul or declare the attachment on the subject
property null and void. Thus, when the petitioner registered the sale, she was aware of the levy on
the subject property. Hence, she knew that her action to have the levy cancelled was frivolous.
Issue: Whether petitioner should pay respondents moral damages, exemplary

damages and attorney’s fees and litigation expenses for instituting a frivolous suit
against respondents.
Ruling: After judicious study of the case, the Court finds that the CA erred in awarding damages.
Petitioner’s complaint for annulment and cancellation of writ of attachment and notice of levy is
not frivolous, contrary to the CA’s conclusion.
The frivolous action is groundless lawsuit with little prospect of success. It is often brought merely
to harass, and cast groundless suspicions on the integrity and reputation of the defendant.
Page | 62
When the petitioner filed the third-party complaint, she was merely exercising her right to litigate,
claiming ownership over the subject property, submitting as evidence the Deed of Sale issued in
her name. Being the registered owner of the subject property, she has a remedy under the law to
assail the writ of attachment and notice of levy.
When the third-party complaint was denied by the RTC, petitioner’s remedy was to file an
independent judgment creditor – herein respondents. In fact, this was the directive of the RTC
when it denied petitioner’s third-party complaint. Hence, when petitioner filed the complaint for
annulment and cancellation of writ of attachment and notice of levy, injunction, damages, and
attorney’s fees, she did not act in bad faith nor was the complaint frivolous.
Besides, there was no showing that petitioner filed the case in bad faith or that the action vexatious
and baseless. Accordingly, since respondents are not entitled to moral damages, neither can they
be awarded with exemplary damages, so with attorney’s fees and cost of litigation.
The rule in this jurisdiction is that exemplary damages are awarded in addition to moral damages.
In the case of Mahinay v. Velasquez, Jr., the Court pronounced:
If the court has no proof or evidence upon which the claim for moral damages could be based, such
indemnity could not be outrightly awarded. The same holds true with respect to the award of
exemplary damages where it must be shown that the party acted in a wanton, oppressive or malevolent
manner." Furthermore, this specie of damages is allowed only in addition to moral damages such that
no exemplary damages can be awarded unless the claimant first establishes his clear right to moral
damages.
The award of attorney’s fees should be deleted as well. The general rule is that attorney’s fees
cannot be recovered as part of damages because of the policy that no premium should be placed
on the right to litigate.
WHEREFORE, premises considered, the instant petition is PARTLY granted. The Decision
and the Resolution of the Court of Appeals as to the award of damages are hereby REVERSED
and SET ASIDE.
Page | 63

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San Sebastian College-Recoletos, Manila

CIVIL LAW REVIEW 2

ATTY. CRISOSTOMO A. URIBE

DOMESTIC PETROLEUM RETAILER CORPORATION v. MANILA

Nature of the case: Collection for sum of money.

Nature of the Case: Complaint for damages.

A quasi-delict has the following elements:

CAMP JOHN HAY DEVELOPMENT CORPORATION v. CHARTER

SOCORRO T. CLEMENTE, as substituted by SALVADOR T. CLEMENTE v.

The Deed of Donation provided:

Ruling: The petition is meritorious.

MA. LUISA A. PINEDA v. VIRGINIA ZUÑIGA vda. DE VEGA

Issues: Whether a demand letter sent by petitioner to respondent constituted a valid

BANK OF THE PHILIPPINE ISLANDS AND ANA C. GONZALES v. SPOUSES

Nature of the action: Complaint for sum of money with damages.

(2) We sustain the award of moral damages to the spouses Quiaoit.

KEIHIN-EVERETT FORWARDING CO., INC. v. TOKIO MARINE MALAYAN

Nature of the Case: Complaint for damages.

WHEREFORE, the decision of the Court of Appeals in is AFFIRMED.

BDO UNIBANK, INC. v. FRANCISCO PUA

Nature of the case: Criminal case for Estafa by means of deceit.

Article 1236 of the Civil Code provides the following:

KAREN NUNEZ VITO, LYNETTE NUNEZ MASINDA, WARREN NUNEZ and

JOCELYN MODOMO and DR. ROMY MODOMO v. SPOUSES MOISES

Article. 1291. Obligations may be modified by:

WHEREFORE, premises considered, the Petition is GRANTED IN PART. The Decision

FOOD FEST LAND, INC. and JOYFOODS CORPORATION v. ROMUALDO

Nature of the case: Complaint for sum of money.

1. The term of the lease shall be fifteen (15) years.

As Article 1293 of the Civil Code provides:

VICENTE HENSON, JR. v. UCPB GENERAL INSURANCE CO., INC.

Nature of the case: Complaint for damages.

Issue: Whether or not there was a right of subrogation, hence, an obligation

GENEROSO SEPE v. HEIRS OF ANASTACIA KILANG, represented by her

Issue: Whether there was no consideration for the sale.

Article 1354 of the Civil Code provides:

A contract is presumed to be supported by cause or consideration. The presumption that a

HYGIENIC PACKAGING CORPORATION v. NUTRI-ASIA, INC.

Nature of the Action: Complaint for sum of money.

ATTY. LEONARDO FLORENTO BULATAO v. ZENAIDA C. ESTONACTOC

LARA'S GIFTS & DECORS, INC. v. MIDTOWN INDUSTRIAL SALES, INC.

Nature of the case: Complaint for Sum of Money.

Ruling: In Asian Construction and Development Corporation v. Cathay Pacific Steel

ROBERTO IGNACIO AND TERESA IGNACIO doing business under the

NAOAKI HIRAKAWA represented by ERICA M. SHIBAMURA v. LOPZCOM

Facts: Respondent Lopzcom is a domestic corporation in realty development while respondent

Issue: Whether Hirakawa is a party to the Deed of Sale.

SAN MIGUEL FOODS and JAMES A. VINOYA v. ERNESTO RAOUL

Nature of the case: Complaint for damages.

Article 1318. There is no contract unless the following requisites concur:

SPOUSES ISIDRO R. SALITICO AND CONRADA C. SALITICO v. HEIRS OF

Sa aking pamangkin nasi RESURRECCION MARTINEZ-FELIX, 'RESY', ay aking inaaboy

Nature of the case: Recovery of possession.

SPOUSES LUCIA A. OROZCO et al. v. FLORANTE G. LOZANO, SR. et al.

Nature of the case: Complaint for Recovery of Possession and Damages.

SPOUSES JOHN SY AND LENY SY, AND VALENTINO SY v. MA. LOURDES

MAXIMA SACLOLO and TERSITA OGATIA v. ROMEO MARQUITO,