Civ2-Digest Final-Source

1
Obligation
SECOND DIVISION
G.R. No. 221845, MAR 21 2022
SPS. GEMA 0. TORRECAMPO and JAIME B. TORRECAMPO substituted by his heirs namely: GAIE MARIE
T. OUANO, GAIE ANNAH MARIE T. ARZADON, JEE JASPER 0. TORRECAMPO, ELSBETH GAIE MARIE 0.
TORRECAMPO, and JEE EDSEL 0. TORRECAMPO,VS WEALTH DEVELOPMENT BANK CORP
JUSTICE HERNANDO
Petition for review on certiorari1 seeks the reversal of the Decision and Resolution of the Court of
Appeals (CA) in CA-G.R. CV. No. 04839. The CA Decision affirmed the Order of the Regional Trial Court
(RTC), Branch 5 of Cebu City which dismissed petitioners motion to set aside the extra-judicial
foreclosure sale and cancel the writ of possession with prayer for damages for properties covered by
Transfer Certificate ofTitle_(TCT) No. 187864, in the name of Gema Ouano Torrecampo, married to
Jaime Torrecampo.
Facts
On December 12, 2008, the spouses Gemma and Jaime Torrecampo (spouses Torrecampo) entered into
a housing loan agreement with Wealth Development Bank Corp. (respondent bank} The housing loan
agreement was secured by a real estate mortgage over a property owned by the spouses Torrecampo
known as Lot No. 5 of the consolidated subdivision plan PCS-07-005237, covered by TCT No. 187864.
The aggregate amount of the loan is Pl0,500,000.00, evidenced by promissory notes signed by the
spouses Gaie Marie and Daryl Ouano and spouses Richel and Faustino Masong. Subsequently, the
spouses Torrecampo defaulted on the payment of their loan obligation.
Thus, respondent bank commenced an action to foreclose the real estate mortgage extra-judicially
under the provisions of Act No. 3135,9 or an Act to Regulate the Sale of Property under Special Powers
Inserted in or Annexed to Real-Estate Mortgages, as amended. A certificate of sale was issued on June
11, 2010 and was duly registered with the Register of Deeds of Cebu City on June 24, 2010. After the
lapse of the one-year redemption period without any attempt on the part of the spouses Torrecampo to
redeem the mortgaged property, the ownership of the lot was then consolidated in favor of respondent
bank as the purchaser in the auction sale.
On September 1, 2011, TCT No. 187864 in the name of the spouses Torrecampo was cancelled and a
new one, TCTNo. 107-2011003690, was issued by the Register of Deeds of Cebu City in the name of
respondent bank. When petitioners refused to vacate the property upon respondent bank's demand,
the latter filed an ex-parte petition for the issuance of a writ of possession, 10 which was granted by the
RTC in an Orderdated August 25, 2011. On September 30, 2011, a notice to vacate was issued by the
sheriff.
On March 8, 2012, the petitioners filed a motion to set aside the extra-judicial foreclosure sale and
cancel the writ of possession with prayer for damages on the ground that there was no violation of the
mortgage contract. Petitioners argued that: the agreed maturity date of the loan has not yet arrived; (2)
the term loan agreement, the real estate mortgage contract, the promissory notes and the disclosure
statement of loan/credit transaction did not provide for the amount of the monthly amortizations; and
(3) no demand
Respondent bank countered in its comment and/or opposition18 that there was no violation of the real
estate mortgage contract. The contract contains an acceleration clause to the effect that in any event of
default, the entire obligation immediately becomes due and payable. Thus, as a consequence of such
default, the mortgagee has the right to foreclose the mortgage, to have the property seized and sold,
and to apply the proceeds to the obligation. They followed the requirements on posting and publication
of the notice of extra-judicial foreclosure under Act No. 3135. Finally, whatever damages petitioners
may have suffered were due to their own acts.
The RTC issued an Order denying petitioners' motion to set aside the extra-judicial foreclosure sale and
cancel the writ of possession. RTC ruled that proceedings for the issuance of the writ of possession are
non-litigious in nature such that the court will not delve into the merits of the petition.
2
CA denied the petitioners' appeal on the ground that the provisions of Act No. 3135, particularly Section
8, are only applicable until the period of redemption. Once redemption lapses and consolidation of the
purchaser's title ensues, Act No. 3135 is not applicable anymore.
Issue
Did the CA err in not applying the provisions of Act No. 3135 to the case at bar.
Ruling
The Court answers in the negative. The CA did not err in not applying the provisions of Act No. 3135 in
its Decision.
Act No. 3135 only applies when the one-year redemption period has not yet lapsed. The general rule is
that in extra-judicial foreclosures, a writ of possession may be issued to the purchaser in two different
instances, and based on two different sources: (1) within the redemption period, in accordance with Act
No. 3135, particularly Section 7, as amended; and (2) after the lapse of the redemption period, based on
the purchaser's right of ownership
In the first instance, Section 725 of Act No. 3135 provides that the purchaser in a foreclosure sale may
apply for a writ of possession by filing an ex parte motion under oath. The provision also requires that a
bond be furnished and approved, and no third person is involved.26 On the other hand, Section 8 of the
same Act, as amended, provides the remedy available to the debtor, that is, the opportunity to contest
the transfer of possession but only within the period of redemption, to wit: Sec. 8. The debtor may, in
the proceedings in which possession was requested, but not later than thirty days after the purchaser
was given possession, petition that the sale be set aside and the writ of possession cancelled, specifying
the damages suffered by him, because the mortgage was not violated or the sale was not made in
accordance with the provisions hereof, and the court shall take cognizance of this petition in accordance
with the summary procedure provided for in section one hundred and twelve of Act Numbered Four
hundred and ninety-six; and if it finds the complaint of the debtor justified, it shall dispose in his favor of
all or part of the bond furnished by the person who obtained possession. Either of the parties may
appeal from the order of the judge in accordance with section fourteen of Act Numbered Four hundred
and ninety-six; but the order of possession shall continue in effect during the pendency of the appeal.
(Emphasis supplied) Under the second instance, which is what happened in the case at bar, a writ of
possession may also be issued after consolidation of ownership of the property in the name of the
purchaser or, in this case, the respondent bank. The purchaser becomes the absolute owner of the
property purchased in the foreclosure sale, if it is not redeemed during the one-year period after the
registration of the sale
After consolidation of ownership in the purchaser's name and issuance of a new TCT, possession of the
land too becomes an absolute right of the purchaser. Thus, the issuance of the writ of possession to the
purchaser, upon proper application and proof of title, merely becomes a ministerial duty of the court
which cannot be enjoined or restrained, even by the filing of a civil case for the declaration of nullity of
the foreclosure and consequent auction sale.
Any question regarding the regularity or validity of the mortgage or its foreclosure cannot be raised as a
justification for opposing the issuance of the writ. In the case at bar, the respondent bank registered the
foreclosure sale on June 24, 2010. After the lapse of one year or after June 24, 2011, the provisions of
Act No. 3135 no longer applied to the parties. The respondent bank became the absolute owner of the
subject property as a matter of right. In line with this, the writ of possession was issued as a ministerial
duty of the trial court. It was issued to the respondent bank as a matter of right, a mere incident of the
bank's ownership, and not in accordance with the remedy provided under Section 8.
The CA was correct when it ruled that: The petitioners failed to redeem the mortgaged property within
the period of redemption and consequently, the ownership over the property was consolidated in favor
of the bank. Afterwards, a corresponding writ of possession was issued by the trial court after the
redemption period. However, the petitioners still availed of the remedy under Section 8 of Act No. 3135
which is misplaced. The provisions of Act No. 3135, particularly the remedy provided under Section 8
thereof, apply only during the period of redemption. After the lapse of the redemption period and the
title of the purchaser is consolidated, Act No. 3135 finds no application.
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1. Compensatory or actual damages in the form of unrealized income in the total amount of One
Million Six Hundred Thousand Pesos (P1,600,000.00) with legal interest from date of filing of the
Complaint on November 16, 1994;
2. Moral damages in the amount of P200,000.00;
3. Attorney's fees and costs of suit in the amount of P150,000.00; and
4. 6% per annum interest on the total of the monetary awards from the finality of this Decision until
full payment thereof
Contract
THIRD DIVISION
G.R. No. 249247, March 15, 2021
Heirs of Mary Lane R. Kim, represented by KIM SUNG II, JANICE KIM and BILLIELYN SHAFER,
versus JASPER JASON M. QUICHO, joined by his wife,
JUSTICE LOPEZ
a Petition for Review1 challenging the Decision2 dated December 27, 2018 and the Resolution3 dated
August 23, 2019 of the Court Appeals (CA) in CA-G.R. CV No. 108254. The assailed Decision affirmed with
modification the Decision4 dated July 11, 2016 and the Order' dated October 14, 2016 of the Regional
Trial Court (RTC) ofOlongapo City, Branch 75, in Civil Case No. 87-0-14. The challenged Resolution, on
the other hand, denied petitioners' Motion for Partial Reconsideration
Mary Lane R. Kim (Kim) owned a 250-ton Portable Crusher and a five ( 5)-hectare parcel ofland situated
at Sitio Sapang Bayabas, Pabanlag, Floridablanca (subject lot), where the same portable crusher is
installed.6 Sometime in 2011, Jasper Jayson M. Quicho (Quicho) approached Kim and proposed to buy
her portable crusher with all its accessories, which he will need to start a crushing plant business.7 In
line with this venture, Kim and Quicho executed a Deed of Conditional Sale dated August 4, 2011, where
the former agreed to sell her portable crusher with all its accessories to the latter, for P18,000,000.00,
payable in the following terms: f>5,000,000.00 upon the execution of the contract, P5,000,000.00 within
one (1) month from the signing of the contract, and the balance of P8,000,000.00 within a period of one
(1) year from the commencement of his business operation. 8 The parties also stipulated in the Deed of
Conditional Sale that the same shall be rescinded without need of a court action whereby the partial
payments made shall be forfeited and considered as rentals in case of breach. 9
executed a Contract ofLease on August 15, 2011, for the use of the subject lot where the crusher would
be operated. 11 On the first week of October 2012, Kim successfully turned over the portable crusher
and the subject lot to Quicho who accepted the same. 12 Quicho then paid a total of !'9,000,000.00, but
he, however failed to settle the succeeding installments despite several written demands, which
prompted Kim to send a Notice of Rescission of Contracts dated October 31, 2013.13 This
notwithstanding, Quicho continuously refused to pay his outstanding balance which led Kim to file a
complaint for the rescission of their contracts before the RTC. 14 For failing to file his Answer, Quicho
was initially declared in default, but the said order was eventually lifted by the RTC in its Order dated
September 14, 2015 . 15 In his Answer, Quicho claimed, among others, that the rescission of the
contracts entitled him for the return of his !'9,000,000.00 which he already paid to Kim, plus interest,
since restitution is one of the effects thereof 16
4
RTC, in its Decision dated July 11, 2016, ruled in favor of petitioner Kim, convinced that she had already
performed her obligations under the contracts when she delivered her crusher and subject lot to
Quicho. 17 In return, full payment of the purchase price, among others, is expected from Quicho, but he
failed to pay which entitled Kim to rescind their contracts. 18 Thus, the RTC in its assailed Decision,
decreed:
Ruling of the CA In its assailed Decision, the CA held that Kim had the right to rescind the contract under
Article 1191 of the Civil Code because Quicho failed to comply with his obligation to pay the balance of
the purchase price, the labor cost for setting up an operating crushing processing plant, and the monthly
rental on the subject lot.23 Nonetheless, the CA ordered petitioners, as heirs of the late Kim, to return
the money paid by Quicho since rescission requires a mutual restitution of the benefits received.24 H
Issue
Whether or not partial payments from respondent Quicho should be forfeited in their favor.
Ruling
The Court answers in the affirmative.
Rescission on account of breach of reciprocal obligations is provided under Article 1191 of the Civil
Code,3 which states: The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him. The injured party may choose between
the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may
also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The
court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing, in
accordance with articles 1385 and 1388 and the Mortgage Law.
This provision refers to rescission applicable to reciprocal obligations. It is invoked when there is
noncompliance by one (1) 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 fulfillment of the other.
Rescission under Article 1191 will be ordered when a party to a contract fails to comply with his or her
obligation. Rescission "is a principal action that is immediately available to the party at the time that the
reciprocal [obligation] was breached.
Here, both parties have reciprocal obligations. Kim bound herself to turn over the portable crusher and
the subject land to Quicho, while the latter obligated himself to pay a total of Pl 9,500,000.00, which
includes the price of the portable crusher (Pl 8,000,000.00) and labor costs to set up an operating
crushing processing plant (1,500,000). Regrettably, Quicho failed to comply with his undertaking, which
prompted Kim to have their contract rescinded.
Rescission of the obligation under Article 1191 is a declaration that a contract is void at its inception. Its
effect is to restore the parties to their original position, insofar as practicable. Mutual restitution is
required in cases involving rescission under Article 1191. Where a contract is rescinded, it is the duty of
the court to require both parties to surrender that which they have respectively received and to place
each other as far as practicable in his original situation[;] the rescission has the effect of abrogating the
contract in all parts.
Supreme Court, in Spouses Godinez v. Spouses Norman (Godinez), held that "partial payments may be
retained and considered as rentals by the seller if the buyer was given possession or was able to use the
property prior to transfer of title." In Godinez, the Court ruled that it is only proper that respondents
reciprocate their use of the premises with the payment of rentals while full payment on their contract
was still pending, to compensate petitioners' inability to enjoy or use their own property.
Here, the records show that petitioners were unable to use the property during the duration of their
contract with respondents, for at least eight (8) years. Thus, this Court finds that the partial payments
made by respondents may be converted into rentals. The conversion of partial payments into rentals is
also consistent with Article 1378 of the Civil Code, which teaches that doubts in the interpretation of
onerous contracts "should be settled in favor of the greatest reciprocity of interests. Construction of the
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terms of a contract, which would amount to impairment or loss of right, is not favored. Conservation
and preservation, not waiver, abandonment or forfeiture of a right, is the rule.
In order to harmonize the pertinent jurisprudence on the matter, the Court so holds that as a general
rule, the rescission of a contract under Article 1191 of the Civil Code will result in the mutual restitution
of the benefits which the parties received, except in the following instances: 1) when there is an express
stipulation to the contrary by way of a forfeiture or penalty clause in recognition of the parties'
autonomy to contract; or 2) if the buyer was given possession or was able to use the property prior to
transfer of title, where in such case, partial payments may be retained and considered as rentals by the
seller to avoid unjust enrichment.
Over time, courts have recognized with almost pedantic adherence that what is inconvenient or contrary
to reason is not allowed in law. Thus, the injured party should be afforded recompense in the exceptions
enumerated in order to give life and meaning to the purpose of the law.
WHEREFORE, the Petition for Review on Certiorari is GRANTED. The Court of Appeals' Decision dated
December 27, 2018 and its Resolution dated on August 23, 2019 in CA-G.R. CV No. 108254 are hereby
AFFIRMED with MODIFICATION in that the ORDER for the heirs of Mary Lane R. Kim TO PAY Jasper
Jason M. Quicho and his wife,
FIRST DIVISION
G.R. No. 206667, June 23, 2021
GUILLERMA S. SILVA, PETITIONER, VS. CONCHITA S. LO, RESPONDENT.
JUSTICE HERNANDO
Petition for review on certiorari are the Decision and April Resolution of the Court of Appeals (CA)
which annulled and set aside the Orders of the Regional Trial Court (RTC), Branch 82, Quezon City in Civil
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Case No. Q-89-3137, an action for partition, accounting, delivery of shares and damages among the
compulsory heirs of decedent Carlos Sandico, Jr. (Carlos Jr.).
Facts
Carlos, Jr. died intestate leaving behind a sizeable estate to his compulsory heirs: The heirs of Carlos Jr.
executed an Extrajudicial Settlement of Estate which provided that all properties of the decedent shall
be owned in common, pro indiviso, by his heirs. In September 1988, Carlos, Jr.'s heirs executed a
Memorandum of Agreement for the physical division of the estate.However, both agreements were
never implemented and the heirs remained pro indiviso co-owners of the estate's properties.
Enrica, one of the heirs, filed Civil Case before the RTC impleading all the other heirs, her mother and
siblings, as defendants. Eventually, Teodoro withdrew as defendant and joined suit as plaintiff-in-
intervention.Opposing the physical division of the properties, defendants therein primarily asserted
Concepcion's usufructuary rights over the estate's real properties. They further alleged a diminished
value and use of the properties should these be physically divided. Given the unanimity of their defense
against the complaint, Conchita and two other heirs residing abroad, Lily and Pamela, executed a Special
Power of Attorney (SPA) in favor of their mother Concepcion and their sister, Guillerma, respectively.
RTC issued an Order of Partition held that the defendants are legally bound by their previous acts and
admissions and by the previous Orders of this Court as above-enumerated, and that the final
Compromise Agreement already signed by the plaintiff and the plaintiff-in-intervention is sufficient
evidence of the extent and composition of the estate of the late Carlos Sandico, Jr. and constitutes a
valid and proper project for its partition.
Appellate court annulled and set aside the Orders of the RTC. In its November 8, 2012 Decision, the CA
invalidated the 2006 Kasunduan because it lacked the signature of all the heirs: Enrica's, Teodoro's and
Conchita's who now repudiates her mother's, Concepcion's, signature on her behalf. The appellate court
ruled that the 2006 Kasunduan did not conform with the procedure laid down in Rule 69 of the Rules of
Court on Partition. It concluded that a void agreement could not have validly partitioned the subject
property nor could it have validly transferred subsequent title over half of the land to the tenants.
Only Guillerma filed a motion for reconsideration which was denied by the appellate court in its April 11,
2013 Resolution.Hence, this appeal by certiorari under Rule 45 of the Rules of Court impugning grave
error in the CA's ruling.
Issue
Whether the 2006 Kasunduan is unenforceable as against Conchita.
Ruling
In annulling the RTC's February 9 and August 27, 2010 Orders, the CA ruled that these emanated from
the trial court's April 13, 2007 Order which, in tum, was based on a void partition agreement-the 2006
Kasunduan. The CA makes much of the fact that not all the heirs signed the 2006 Kasunduan in violation
of Rule 69 of the Rules of Court, buttressed by our holding in Dadizon v. Bernadas that the partition of
property should be agreed upon by all parties who signified their assent by signing the partition
agreement.
We do not agree. Despite the lack of signatures of specifically three (3) heirs of the decedent, Enrica,
Teodoro and respondent Conchita, the 2006 Kasunduan is a valid partition of the subject property which
was correctly confirmed by the RTC in its April 13, 2007 Order. Even without going into the finality of the
April 13, 2007 Order, the antecedents herein which we have painstakingly outlined will bear out that all
the heirs have assented to the partition of the subject property.
First. We sustain the RTC's confirmation of the 2006 Kasunduan. As correctly ruled by the trial court,
albeit plaintiffs Enrica and Teodoro did not sign the Kasunduan, they acquiesced to the partition and
distribution of the subject property, the qualified tenants receiving half thereof. In fact, Enrica filed a
Manifestation dated December 18, 2006 that she and Teodoro will not object to the 2006 Kasunduan as
long as they will be given their preferred portion of the subject property. Truly indicative of Enrica's and
Teodoro's acquiescence to the 2006 Kasunduan is the fact that neither of them have questioned it nor
have they intervened in CA-G.R. SP No. 116979 and in this appeal.
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As regards the absence of Conchita's signature to the 2006 Kasunduan after she has purportedly
repudiated the agency relationship with her mother in 2000, we rule that the 2006 Kasunduan is
effective as against Conchita.
Even without going into the validity of Concepcion signing the 2006 Kasunduan on Conchita's behalf, the
appellate court could not void the sale and transfer of half of the subject property to its qualified
beneficiaries under a voluntary transfer arrangement provided in the CARL.
THIRD DIVISION
G.R. No. 244542, June 28, 2021
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MA. CONCEPCION ALFEREZ, ANTONIO S. ALFEREZ, AND ESPERANZA ALFEREZ EVANS, PETITIONERS, VS.
SPOUSES EXEQUIEL AND CELESTINA CANENCIA, NORMA A. ALFORQUE, AND TERESA A. ALFORQUE,
RESPONDENTS.
LOPEZ, J., J.:
Petition for review on certiorari filed by petitioners Ma. Concepcion Alferez (Ma. Conception), Antonio
Alferez (Antonio), and Esperanza Alferez Evans (Esperanza) assailing the June 29, 2018 Decision and
January 16, 2019 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 04491-MIN, which declared
the May 17, 2016 Judgment of the Regional Trial Court (RTC), Branch 19, Davao del Sur, in Civil Case No.
4805 void for lack of jurisdiction and the validity of deed of sale with assumption of mortgage.
Facts
Federico J. Alferez (Federico) died on September 23, 1980 without leaving any will. He was survived by
his spouse, Teodora, and their children, namely: Ma. Concepcion, Antonio, and Esperanza (petitioners).
Respondents Canencia allege that they first met Ma. Concepcion sometime in 1985. She approached
respondents Canencia offering the sale of three (3) parcels of land owned by her parents in Goma,
Digos, Davao del Sur. Initially, respondents Canencia rejected her offer, as they did not have the
resources to buy the said parcels of land. However, Ma. Concepcion was persistent and practically
begged them to buy the land, as she needed the money to settle her father's debts with Philippine
National Bank (PNB) and Bank of Philippine Islands (BPI). She also intimated that such lands were subject
to foreclosure as the lands were mortgaged with the banks.
After much convincing, respondents Canencia decided to help Ma. Concepcion by agreeing to buy the
lands she was offering to sell. Anent payment terms, it was agreed that Ma. Concepcion would receive
Five Hundred Thousand Pesos (P500,000.00) in cash, which respondents Canencia would pay by
installments and in addition, they would also assume the mortgage debt of the estate with the banks
amounting to more or less Three Hundred Thousand Pesos (P300,000.00).
Being in agreement, the parties reduced the same in writing by executing a Deed of Sale with
Assumption of Mortgage dated October 8, 1985. The contract was signed by Ma. Concepcion as vendor,
and respondents as vendees. At the request of Ma. Concepcion, the contract reflected a different
amount of consideration at Three Hundred Thousand Pesos (P300,000.00), as she wanted to save some
money for herself and her siblings.The true amount of the compensation was thereafter reflected in a
Memorandum of Agreement between the parties.
After fully paying the consideration of the sale on July 27, 1990, respondents requested petitioner to
facilitate the transfer of titles to them. To their surprise, Ma. Concepcion refused to accede to their
request Instead, she filed an action before the RTC for Annulment of Deed of Sale and Recovery of
Possession.
RTC rendered a Judgmentin favor of respondents. RTC found that the Deed of Sale with Assumption of
Mortgage possesses all the elements of a valid contract
CA issued a Decision which declared void the Judgment of the RTC for lack of jurisdiction. In finding the
assailed RTC Judgment to be suffering from jurisdictional infirmity, the CA cites Rule 73, Section 1 of the
Rules of Court, which provides that "the court first taking cognizance of the settlement of the estate of a
decedent shall exercise jurisdiction to the exclusion of all other courts.
Issue
Whether the Deed of Sale with Assumption of Mortgage is valid only insofar as the one-half share of
the estate of Federico is concerned.
Ruling
We rule for the respondents.
A cursory examination of the Deed affirmingly shows that petitioners, without qualification, sold,
transferred, and conveyed to respondents the parcels of land, without any mention of their alleged
intention to only offer half of the said property, with the other half belonging to Teodora, to wit:
That for and on consideration of the sum of PESOS: THREE HUNDRED THOUSAND PESOS ONLY
(P300,000.00), Philippine Currency, to the FIRST PARTY [petitioners] in hand paid by jointly and severally
by the other parties hereto, the FIRST PARTY does by these presents hereby SELL, TRANSFER, and
CONVEY, in a manner absolute and irrevocable, the above-described three (3) parcels of land with all the
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improvements found thereon, unto the following persons:TO MR. EXEQUIEL CANENCIA (SECOND
PARTY)That parcel of land covered by ORIGINAL CERTIFICATE OF TITLE P-6029-1518;TO NORMA A.
ALFORQUE (THIRD PARTY) That parcel of land covered by ORIGINAL CERTIFICATE OF TITLE P-
6028;TO TERESA A. ALFORQUE (FOURTH PARTY) That parcel of land covered by TRANSFER CERTIFICATE
OF TITLE T-(173)-29or their assigns, free from any liens and encumbrances.
The provisions thereof are categorical and admits of no other interpretation; the sale, transfer, and
conveyance of the parcels of land covered by the aforementioned titles appear absolute, there being no
reservation of ownership of half of the lots therein described, nor a stipulation making mention of
Teodora' specific share of the said properties. As mandated by Article 1370 of the Civil Code, if the terms
of the contract are clear and leave no doubt, the literal meaning of its stipulations shall control. The
Deed, as the agreement between the parties, is the formal expression of the parties' rights, duties, and
obligations. It is the best evidence of the intention of the parties. Thus, when the terms of an agreement
have been reduced to writing, it is considered as containing all the terms agreed upon and there can be
no evidence of such terms other than the contents of the written agreement between the parties and
their successors in interest.
Section 9, Rule 130 of the Revised Rules of Court is on point:
SEC. 9. Evidence of written agreements. - When the terms of an agreement have been reduced in
writing, it is considered as containing all the terms agreed upon and there can be, between the parties
and their successors in interest, no evidence of such terms other than the contents of the written
agreement. However, a party may present evidence to modify, explain, or add to the terms of the
written agreement if he puts in issue in his pleading:
(a) An intrinsic ambiguity, mistake, or imperfection in the written agreement;
(b) The failure of the written agreement to express the true intent and agreement of the parties
thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their successors in interest after the
execution of the written agreement.
None of the above-cited exceptions finds application to the instant case, more particularly, the alleged
failure of the contract to express the true intent and agreement of the parties. By reason of the glaring
lack of evidence, the Court cannot subscribe to petitioner's contention that respondents had acted in
bad faith and had taken advantage of their financial difficulties to settle Federico's indebtedness. The
Court cannot anchor its conclusions on mere allegations, without more, that the subject Deed was only
a temporary document to serve only as a security and that Ma. Concepcion requested that it remain
unnotarized to protect her interest; neither did petitioners proffer the alleged Memorandum of
Agreement, which includes a provision that the terms of sale of the portion belonging to Teodora would
be drafted upon respondents Canencia's payment for the sale of Federico's portion.
Finally, neither can petitioners find succor in their defense that Ma. Concepcion's authority as
administratrix does not extend to the exclusive properties of Teodora. Records prove that when
petitioners entered into the Deed with respondents, they were the absolute owners of the subject
parcels of land. Hence, their right to sell the properties flows from their right as owners thereof and not
from their right as heirs and as administratrix of Federico.All facts considered, the Court is inclined to
sustain that Ma. Concepcion, in her interest as owner of the land covered by OCT No. P-6029- 1518, and
having been capacitated to sell the lands covered by OCT No. P- 6028, and TCT No. T-173-29 by virtue of
a SPA, validly entered in a contract of sale with respondents; verily, absent any proof, petitioners cannot
now belatedly insist that the Deed failed to reflect their true intention.
WHEREFORE, in view of the foregoing, the June 29, 2018 Decision and January 16,2019 Resolution of
the Court of Appeals in CA-G.R. CV No. 04491-MEN, which found that the Regional Trial Court, Branch
19, Digos City, Davao del Sur has no jurisdiction over Civil Case No. 4805 are REVERSED and SET ASIDE.
10
THIRD DIVISION
G.R. No. 208140, July 12, 2021
CARLOS J. VALDES, GABRIEL A.S. VALDES, FATIMA DELA CONCEPTION AND ASUNCION V. MERCADO,*
VS. LA COLINA DEVELOPMENT CORPORATION (LCDC), PHILIPPINE COMMUNICATION SATELLITE, INC.
(PHILCOMSAT), LA COLINA RESORTS CORPORATION (LCRC), MONTEMAR RESORTS AND
HERNANDO, J.:
Petition for Review on Certiorari seeks to reverse and set aside the decision and Resolution of the Court
of Appeals that reversed and set aside the Decision of the Regional Trial Court (RTC), Branch 2, Balanga
City, Bataan in Civil Case No. 6134.The RTC declared as null and void the Memorandum of Agreement
and the Consolidated Deed of Sale executed by LCRC and LCDC in favor of Montemar Resort and
Development Corporation (MRDC).
Facts
Carlos Valdes (Carlos, Sr.) and his children are the stockholders of Bataan Resorts Corporation
(BARECO), which owned a large tract of land in Bagac, Bataan.Carlos, Sr. invited Francisco Cacho
(Francisco) and his son, Jose Mari Cacho (Jose Mari), to visit and assess the property's suitability for a
beach resort project (Montemar Project). Having received a favorable response from Francisco, both
Carlos, Sr. and Francisco proceeded to carry out the Montemar Project, which included the development
and improvement of the beach basin as a beach resort (Montemar Beach Club), and the conversion of
the remaining land area into a residential subdivision (Montemar Villas)
To implement the project, the Valdeses transferred and conveyed their shares of stock in BARECO in
favor of LCDC, a fully-owned corporation of the Cacho family, through a Deed of Sale for a consideration
of P20 Million. LCDC then made a partial payment thereof in the amount of P2.5 Million from February
1975 to December 1979,while the remaining balance amounting to P17.5 Million was covered by
promissory notes.
The P17.5 Million was to be paid by way of an Assignment of Rights dated October 30, 1975, wherein
LCDC: (1) assigned to the Valdeses three million worth of shares in LCRC, the corporation established by
LCDC to market and sell the shares of the beach resort; and (2) undertook to pay the Valdeses (50%) of
the net proceeds (later reduced 40%) from the sale of the Montemar Villas lots inside BARECO, as
previously acquired by LCDC.
Meanwhile, LCDC, as sole shareholder of BARECO, amended BARECO's Articles of Incorporation and
dissolved BARECO by shortening its term of existence up to June 30, 1975. Thereafter, MBCI, a non-
stock, non-profit club, was organized to develop the Montemar Project. Proprietary shares in MBCI were
later sold by LCRC to the general public. Meanwhile, LCDC obtained loans to finance the construction
and development of the Montemar Villas, including the building and facilities in the Montemar Beach
Club. The loans were obtained from the Development Bank of the Philippines (DBP) – subsequently the
Asset Privatization Trust (APT), Metrobank, and General Credit Corporation (GCC), formerly the
Commercial Credit Corporation.LCDC and LCRC initiated negotiations with Philcomsat, a prospective
investor of the Montemar Project. Philcomsat vowed to settle the outstanding loans of LCDC, LCRC, and
MBCI with APT, GCC, and Philcomsat. In consideration thereof, the ownership over the properties of
LCDC and LCRC, including their shares in MBCI, would be transferred to MRDC. MRDC would then
proceed with the improvement of the facilities and services of MBCI and development of the properties
conveyed to it by LCDC and LCRC into a sports or recreation complex, which includes a gold course and a
country club.
Meanwhile, to obtain from APT an extension of the period to pay the outstanding obligation of LCDC
and LCRC, Philcomsat paid APT the amount of P4 Million. During the extension period, Philcomsat
eventually decided to invest in the new project, subject to conditions, particularly, that the Valdeses: (1)
give their conformity to the new project; and (2) forego their claim to the proceeds of the sale of the
Montemar Villas lots. Thereafter, pursuant to the Memorandum of Intent dated August 18, 1992 and
the letter-conformity dated August 27, 1992, Philcomsat, together with LCDC, LCRC, and MBCI executed
a Memorandum of Agreement dated September 3, 1992 essentially identical to the Memorandum of
Intent dated August 18, 1992 executed by and between LCDC, LCRC, MBCI, and Philcomsat. Meanwhile,
on August 31, 1992, LCRC and LCDC, through a Consolidated Deed of Absolute Sale, conveyed and sold
to MRDC all their real and personal properties situated in Bagac, Bataan.
The trial court rendered a decision declaring the Memorandum of Agreement dated September 3, 1992
and the Consolidated Deed of Absolute Sale null and void. RTC found that the Valdeses and LCDC
11
entered into a joint venture agreement, whereby the former would contribute to the joint venture the
BARECO properties in Bagac, Bataan, and in return, LCDC would develop and improve them into a
residential subdivision or the Montemar Villas. The proceeds of the sale of the Montemar Villas lots
would then be divided between them in the following manner: 60% to LCDC, and 40% to the Valdeses.
RTC held that the two (2) agreements are null and void. It considered the lack of consent on the part of
the Valdeses to the said contracts and the evident bad faith, which attended their execution. CA
rendered its assailed Decision, reversed and set aside the RTC ruling
Issue
Whether or not petitioner can avail of the remedy of rescission of the September 3, 1992
Memorandum of Agreement and the August 31, 1992 Consolidated Deed of Sale.
Ruling
Petitioners cannot avail of the remedy of rescission under the Civil Code.
Petitioners ask this Court to have the September 3, 1992 Memorandum of Agreement and August 31,
1992 Consolidated Deed of Sale rescinded as both these contracts caused damage to the interests and
participation of the Valdeses of their 40% share in the proceeds of the sale of the Montemar Villas lots.
"Rescission is a remedy granted by law to the contracting parties, and even to third persons, to secure
the reparation of damages caused to them by a contract, even if it should be valid" by reason of external
causes resulting in a pecuniary prejudice to one of the contracting parties or their creditors, the result of
which, is the "restoration of things to their condition at the moment prior to celebration of said
contract. The kinds of rescissible contracts are the following: first, those rescissible because of lesion or
prejudice; second, those rescissible on account of fraud or bad faith; and third, those which, by special
provisions of law, are susceptible to rescission.
None of the above circumstances are present in this case. As discussed above, the records of the case
are replete with evidence that the Valdeses, through Gabriel, gave their express conformity to the new
concept of the Montemar Project and the entrance of Philcomsat as new investor for the said project.
Having expressed their consent to the changes brought about by these new contracts, and having been
made aware of the effects thereof, the Valdeses cannot now feign ignorance and assert that they were
prejudiced in their rights and interests. While they feel shorthanded as they will cease receiving their
40% income share from the sale of the Montemar Villas lots, the fact of the matter is that they would
have maintained a share or interest in the new Montemar Project, which, however, the Valdeses opted
to sell to respondent Philcomsat. Notably, it appears that nothing has materialized from their
negotiations.
In this regard, we have held that "court cannot follow one every step of his life and extricate him from
bad bargains, protect him from unwise investments, relieve him from one-sided contracts, or annul the
effects of foolish acts. Courts cannot constitute themselves guardians of persons who are not legally
incompetent. Courts operate not because one person has been defeated or overcome by another, but
because he has been defeated or overcome illegally. Men may do foolish things, make ridiculous
contracts, use miserable judgment, and lose money by them – indeed, all they have in the world; but not
for that alone can the law intervene and restore. There must be, in addition, a violation of the law, the
commission of what the law knows as an actionable wrong, before the courts are authorized to lay hold
of the situation and remedy it.
As there was a valid consent on the part of petitioners and good faith on the part of respondents, no
reversible error was committed by the CA in reversing the RTC's Decision that declared as null and void
the September 3, 1992 Memorandum of Agreement and August 31, 1992 Consolidated Deed of Sale.
WHEREFORE, the petition for review on certiorari is DENIED for lack of merit. The October 31, 2012
Decision and July 16, 2013 Resolution of the Court of Appeals in CA-G.R. CV No. 94713 are hereby
AFFIRMED. Costs on petitioners
12
THIRD DIVISION
G.R. No. 208140, July 12, 2021
DEVELOPMENT
HERNANDO, J.:
Facts
promissory notes.
Meanwhile, LCDC, as sole shareholder of BARECO, amended BARECO's Articles of Incorporation and
dissolved BARECO by shortening its term of existence up to June 30, 1975. Thereafter, MBCI, a non-
stock, non-profit club, was organized to develop the Montemar Project. Proprietary shares in MBCI were
later sold by LCRC to the general public. Meanwhile, LCDC obtained loans to finance the construction
and development of the Montemar Villas, including the building and facilities in the Montemar Beach
Club. The loans were obtained from the Development Bank of the Philippines (DBP) – subsequently the
Asset Privatization Trust (APT), Metrobank, and General Credit Corporation (GCC), formerly the
Commercial Credit Corporation.
LCDC and LCRC initiated negotiations with Philcomsat, a prospective investor of the Montemar Project.
Philcomsat vowed to settle the outstanding loans of LCDC, LCRC, and MBCI with APT, GCC, and
Philcomsat. In consideration thereof, the ownership over the properties of LCDC and LCRC, including
their shares in MBCI, would be transferred to MRDC. MRDC would then proceed with the improvement
of the facilities and services of MBCI and development of the properties conveyed to it by LCDC and
LCRC into a sports or recreation complex, which includes a gold course and a country club.
13
the Valdeses to the said contracts and the evident bad faith, which attended their execution.
CA rendered its assailed Decision, reversed and set aside the RTC ruling
Issue
Whether or not Philcomsat and MRDC are purchasers in good faith and for value of the subject
properties in Bataan;
Ruling
Respondents Philcomsat and MRDC were not in bad faith in executing the the September 3, 1992
Memorandum of Agreement and the August 31, 1992 Consolidated Deed of Sale.
Petitioners insist that the September 3, 1992 Memorandum of Agreement and the August 31, 1992
Consolidated Deed of Sale are null and void for having been executed in bad faith and for the purpose of
defrauding the Valdeses.
We disagree. Jurisprudence has shown that in order to constitute :fraud that provides basis to annul
contracts, it must fulfill two conditions: First, the fraud must be dolo causante or it must be fraud in
obtaining the consent of the party," and "[s]econd, the fraud must be proven by clear and convincing
evidence and not merely by a preponderance thereof."
It bears noting that prior to its entry as investor of the Montemar Project, Philcomsat required the: (1)
written approval of the stockholders and board members of LCDC, LCRC and MBCI of all the provisions in
the September 3, 1992 Memorandum of Agreement; and (2) consent of the Valdeses to the new
Montemar Project as embodied in the August 27, 1992 letter-conformity signed by Carlos, Sr. himself.
Clearly, Philcomsat had to make sure that LCDC and LCRC are able to procure the assent of the Valdeses
to the new concept of the Montemar Project. It was for this reason that Gabriel executed and signed the
August 27, 1992 letter-conformity, which bore his written approval to the entry of Philcomsat as an
investor. Moreover, the Memorandum of Intent dated August 18, 1992 stated that:
“1. MBCI, LCRC and LCDC shall first secure the explicit approval by their respective stockholders and/or
members (owning at least 2/3 of the outstanding shares) of all the provisions hereinafter enumerated
on or before the middle of August 1992”
Clearly, the above-quoted provision also proves that Philcomsat would not have agreed to invest in the
Montemar Project without first securing the consent and written approval of LCRC, LCDC, and MBCI
stockholders, which included the Valdeses.
In all the foregoing circumstances, it must be stressed that petitioners have not presented to this Court
how respondent Philcomsat employed fraudulent acts to deceive the Valdeses, or any of the
stockholders of LCRC, LCDC, and MBCI to consent to the implementation and execution of the
September 3, 1992 Memorandum of Agreement and the August 31, 1992 Consolidated Deed of Sale.
On the other hand, Philcomsat was able to state the steps it undertook to ensure utmost consideration
of the Valdeses' rights before it decided to invest in the Monetemar Project, and, pursuant thereto,
execute the September 3, 1992 Memorandum of Agreement and the August 31, 1992 Consolidated
Deed of Sale. There is simply no fraud or bad faith to speak of.
AFFIRMED. Costs on petitioners.
14
THIRD DIVISION
G.R. No. 208140, July 12, 2021
HERNANDO, J.:
Facts
promissory notes.
Carlos, Sr. did not intend to use all BARECO real properties for the Montemar Project, he prepared a
Deed of Partition, whereby only the real properties intended to be part of the project were transferred
to LCDC. These properties, now owned by LCDC through its purchase of the BARECO shares were, in
turn, transferred by LCDC to LCRC in exchange for fifty thousand LCRC shares issued in favor of LCDC.By
virtue of the aforementioned Assignment of Rights, LCDC and Carlos, Sr. became seventy percent (70%)
and thirty (30%) shareholders of LCRC, respectively.
LCDC and LCRC initiated negotiations with Philcomsat, a prospective investor of the Montemar Project.
Philcomsat vowed to settle the outstanding loans of LCDC, LCRC, and MBCI with APT, GCC, and
Philcomsat. In consideration thereof, the ownership over the properties of LCDC and LCRC, including
their shares in MBCI, would be transferred to MRDC. MRDC would then proceed with the improvement
of the facilities and services of MBCI and development of the properties conveyed to it by LCDC and
LCRC into a sports or recreation complex, which includes a gold course and a country club.
15
the Valdeses to the said contracts and the evident bad faith, which attended their execution.
CA rendered its assailed Decision, reversed and set aside the RTC ruling
Petitioners sought reconsideration of the October 31, 2012 Decision of the CA, which was, however,
denied by the appellate court in its July, 16 2013 Resolution
Issue
Whether or not there was a novation of the May 24, 1975 Deed of Sale between LCDC and the
Valdeses that would result in the extinguishment of LCDC's liability to the Valdeses
Ruling
For a valid novation to take place, the following requisites must concur: (1) a previous valid obligation;
(2) the agreement of all the parties to the new contract; (3) the extinguishment of the old contract; and
(4) validity of the new one. There must be consent of all the parties to the substitution, resulting in the
extinction of the old obligation and the creation of a valid new one.
There is no question that the new concept of the Montemar Project, as intimated in the September 3,
1992 Memorandum of Agreement and the August 31, 1992 Consolidated Deed of Sale, was wholly
incompatible with its original concept earlier agreed upon by the Valdeses and LCDC. At that point, what
was required for the validity of the new concept was Valdeses' express conformity thereto, with full
knowledge that its implementation will denote that their rights to the 40% share of the proceeds
derived from the sale of the Montemar Villa lots will be novated and converted into a 7.5% equity in
MRDC.
In light of the foregoing facts, this Court finds that Gabriel, as the representative of the Valdeses, had
knowledge of the new concept of the Montemar Project, and consented to the entry of Philcomsat as a
new investor, this finding is based on the following established facts: (1) the August 27, 1992 letter-
conformity which bore Gabriel's signature on the conforme portion thereof; (2) several minutes of the
board meetings of MBCI, where MBCI directors, including Gabriel, discussed the entry of Philcomsat as a
possible investor of the Montemar Project; and (3) the notices sent to the LCRC stockholders and
directors of scheduled meetings for the purpose of discussing the proposed new concept of the said
project. We agree with the findings of the CA that the wordings in the notices sent to Gabriel sufficiently
apprised him of the changes in the Montemar Project.
It cannot be overemphasized that Gabriel, being a director of the MBCI board, never questioned the
proposed new concept of the Montemar Project and the entry of Philcomsat as a new investor. More
importantly, his signature in the conforme portion of the August 27, 1992 letter shows his explicit
acknowledgment and recognition of the novation by the parties (Valdeses and LCDC) of their earlier
agreement of selling the Montemar Villas lots to the public. His authorization to the Cachos to sell their
shareholdings in LCDC also confirms this recognition. Notably, it was only after Philcomsat failed to offer
an agreeable purchase price for Carlos, Sr.'s shareholdings in LCRC and the Valdeses' other real
properties that the Valdeses filed the instant complaint against respondents.
With the express conformity of Gabriel to the new concept of the Montemar Project, the obligation of
LCDC to sell the Montemar Villas lots, and remit the proceeds to the Valdeses has been extinguished.
AFFIRMED. Costs on petitioners.
16
SECOND DIVISION
G.R. No. 210423, July 05, 2021
CHANELAY DEVELOPMENT CORPORATION, PETITIONER, VS. GOVERNMENT SERVICE INSURANCE
SYSTEM, RESPONDENT.
Assailing the decision dated October 23, 2012 affirming with modification the ruling of the trial court
which, inter alia, upheld the termination of the Joint Venture Agreement (JVA) betweenCDC and the
Government Service Insurance System (GSIS);
Facts
GSIS was the owner of Kanlaon Tower II (now Chanelay Towers) situated at Roxas Blvd., Pasay City. It
invited interested parties to submit proposals for the property's renovation, improvement and eventual
sale of its 108 unsold units. After public bidding and evaluation of proposals, GSIS awarded the contract
to CDC. Thus, on June 16, 1995, GSIS entered into a JVA with CDC. Under the JVA, CDC shall renovate the
building and sell the unsold units at its own expense. Under paragraph 4.02 of the JVA, CDC would pay
P180,300,000.00 to GSIS regardless of actual sales receipt, plus 71% of the proceeds in the sale of units
in the building.
Renovations began in late 1995. Though not covered by the JVA, CDC caused the construction of 21
additional units on the ground, 10th and 11th floors, and reapportioned 50 parking slots at the
basement parking. These additional improvements were titled in CDC's name. CDC completed its
renovation and started marketing the condominium units in early 1997.
Meanwhile, CDC requested extension on its payment of P180,300,000.00 under paragraph 4.02 of the
JVA due to the ongoing renovations of Chanelay Towers. GSIS granted several extensions but CDC
nevertheless failed to remit any payment. Thus, GSIS sent two demand letters reminding CDC of its
obligation. Thereafter, through letter dated November 9, 1998, GSIS terminated the JVA in accordance
with paragraph 7.01 thereof.
The termination of the JVA prompted CDC to file a complaint before the Regional Trial Court-Branch
231, Pasay City against GSIS for reformation of contract, injunction, and damages. It claimed that the
parties' intention was to pursue a regular business in the form of a partnership. It sought to delete the
guaranteed payment clause under Article 4.02 of the JVA, and compel GSIS to accept units in Chanelay
Towers as full satisfaction of its 71% share in profits.
GSIS countered that the terms of the JVA were clear and unequivocal. Despite their agreement,
however, CDC did not report any sale nor remit its share in the profits. More, CDC unlawfully
constructed additional units, reapportioned parking lots in its name, and rented out several units, all
without its prior consent.
By way of counterclaim, it prayed that the trial court nullify CDC's certificates of titles over the building's
units and parking spaces, as well as the contracts to sell or memorandum of agreements and lease
contracts which CDC entered into with third parties. It also sought payment of actual and exemplary
damages and attorney's fees.
During the proceedings, the trial court allowed the intervention of Goldesc Property & Development
Corporation (Goldesc) and Equipment Technical Services (ETS), both unit holders in Chanelay
Regional Trial Court dismissed the complaint. The trial court ruled that there was no valid reason to
reform the JVA. The requisites under Article 1359 of the Civil Code on reformation of contracts were
simply not present. The JYA clearly stipulated that CDC shall renovate the building and sell the units at
its own expense. Regardless of actual sales receipt, CDC also agreed to pay P180,300,000.00, plus 71% in
the proceeds of sale. Court of Appeals affirmed with modification.
Issue
Whether or not GSIS is required to reimburse CDC for the latter's expenses in the renovation and
rehabilitation of the tower.
Ruling
17
The forfeiture of the improvements without reimbursement was the necessary consequence of the valid
terminationof the Joint Venture Agreement
It is basic that a contract is the law between the parties. Obligations arising from contracts have the
force of law between the contracting parties and should be complied with in good faith.
Here, CDC and GSIS entered into a JVA wherein CDC assumed the obligation to renovate Chanelay
Towers and sell the unsold units at its own expense. Under paragraph 4.02 of the JVA, CDC further
undertook to pay P180,300,000.00 to GSIS regardless of actual sales receipt, plus 71% of the proceeds in
the sale of units in the building. As it was, however, CDC, in utter bad faith, did not report any sale nor
remit its share in the profits to GSIS. Worse, CDC unlawfully constructed additional units, reapportioned
parking lots in its name, and rented out several units, all without the prior consent of GSIS.
For these reasons, GSIS was compelled to exercise its right under paragraph 7.01 of the JVA and
terminate said agreement, thus:
Article VII – Cancellation and Penalty
7.01. Should CDC fail to start the construction works or at any time abandon the same or otherwise
commit any breach of its obligations and commitments under this Agreement, this Joint Venture
arrangement shall be deemed terminated and cancelled without need of judicial action by giving thirty
(30) days written notice to that effect to the CDC who hereby agrees to abide by the decision of the
GSIS.
All constructions or improvements existing at the time of said cancellation shall automatically become
the property of GSIS without any right on the part of CDC for reimbursement for the value thereof, but
GSIS may opt to require CDC to remove the same at its expense. (emphasis added)
Verily, the effect of termination was specifically stated in the JVA – forfeiture of property rights sans
reimbursement. CDC agreed to this term without reservation. It must therefore abide by its bond.
CDC nevertheless argues anew that its supposed infractions were no infractions at all as they were
authorized under the "partnership agreement" it had with GSIS.
Preliminarily, the Court notes that the posturing of CDC changes depending on the arguments it is
confronted with.
In G.R. No. 210423, it impliedly admits that reformation of instrument is indeed inapplicable as it merely
questioned the forfeiture of the improvements it introduced to the building, as well as the nullity of its
contracts with third parties CDC no longer questioned the validity of the termination of the JVA with the
GSIS.[24] But in complete turnabout, in G.R. No. 210539, it resurrects its original claim for reformation
of instrument.[25] In Rivera v. Court of Appeals,[26] the Court stated that fair-play or due process bars
flip-flopping. The prohibition guarantees fairness in the proceedings.
In any event, the Court agrees with the courts below that CDC filed the complaint for reformation as a
ruse to evade its obligations under the JVA. As it was, CDC failed to adduce evidence to corroborate its
claim that the agreement with GSIS was simply to form a partnership. On the other hand, the terms and
conditions under the JVA were clear and unequivocal. There is therefore no reason to modify the same
just to suit the whims and caprices of CDC. As the Court of Appeals aptly held, one cannot simply ask for
reformation if it finds itself at the shorter end of an unwise bargain.
ACCORDINGLY, the twin petitions are DENIED. The Decision dated October 23, 2012 and Resolution
dated December 2, 2013 of the Eleventh Division of the Court of Appeals in CA-G.R. CV No. 92142, are
AFFIRMED.
18
SECOND DIVISION
G.R. No. 210539], July 5, 2021
GOVERNMENT SERVICE INSURANCE SYSTEM, PETITIONER, VS. CHANELAY DEVELOPMENT
CORPORATION, RESPONDENT.
Justice Lazaro-Javier
Facts
GSIS was the owner of Kanlaon Tower II (now Chanelay Towers) situated at Roxas Blvd., Pasay City. It
invited interested parties to submit proposals for the property's renovation, improvement and eventual
sale of its 108 unsold units. After public bidding and evaluation of proposals, GSIS awarded the contract
to CDC. Thus, on June 16, 1995, GSIS entered into a JVA with CDC. Under the JVA, CDC shall renovate the
building and sell the unsold units at its own expense. Under paragraph 4.02 of the JVA, CDC would pay
P180,300,000.00 to GSIS regardless of actual sales receipt, plus 71% of the proceeds in the sale of units
in the building.
Renovations began in late 1995. Though not covered by the JVA, CDC caused the construction of 21
additional units on the ground, 10th and 11th floors, and reapportioned 50 parking slots at the
basement parking. These additional improvements were titled in CDC's name. CDC completed its
renovation and started marketing the condominium units in early 1997.
19
Meanwhile, CDC requested extension on its payment of P180,300,000.00 under paragraph 4.02 of the
JVA[4] due to the ongoing renovations of Chanelay Towers. GSIS granted several extensions but CDC
nevertheless failed to remit any payment. Thus, GSIS sent two demand letters reminding CDC of its
obligation. Thereafter, through letter dated November 9, 1998, GSIS terminated the JVA in accordance
with paragraph 7.01 thereof.
The termination of the JVA prompted CDC to file a complaint before the Regional Trial Court-Branch
231, Pasay City against GSIS for reformation of contract, injunction, and damages. It claimed that the
parties' intention was to pursue a regular business in the form of a partnership. It sought to delete the
guaranteed payment clause under Article 4.02 of the JVA, and compel GSIS to accept units in Chanelay
Towers as full satisfaction of its 71% share in profits.
GSIS countered that the terms of the JVA were clear and unequivocal. Despite their agreement,
however, CDC did not report any sale nor remit its share in the profits. More, CDC unlawfully
constructed additional units, reapportioned parking lots in its name, and rented out several units, all
without its prior consent.
By way of counterclaim, it prayed that the trial court nullify CDC's certificates of titles over the building's
units and parking spaces, as well as the contracts to sell or memorandum of agreements and lease
contracts which CDC entered into with third parties. It also sought payment of actual and exemplary
damages and attorney's fees.
Regional Trial Court dismissed the complaint. The trial court ruled that there was no valid reason to
reform the JVA. The requisites under Article 1359 of the Civil Code on reformation of contracts were
simply not present. The JYA clearly stipulated that CDC shall renovate the building and sell the units at
its own expense. Regardless of actual sales receipt, CDC also agreed to pay P180,300,000.00, plus 71% in
the proceeds of sale. Court of Appeals affirmed with modification.
Issue
Whether or not GSIS entitled to receive payment from CDC in the amount of P180,300,000.00
pursuant to paragraph 4.02 of the JVA?
Ruling
We are not convinced.
Rescission and Specific Performance are alternative remedies.Jurisprudence teaches that breach of
contract may give rise to an action for either specific performance or rescission of contract. Sps. Pajares
v. Remarkable Laundry and Dry Cleaning distinguished these two remedies, thus:
Specific performance is "[t]he remedy of requiring exact performance of a contract in the specific form
in which it was made, or according to the precise terms agreed upon. [It is t]he actual accomplishment
of a contract by a party bound to fulfill it." Rescission of contract under Article 1191 of the Civil Code, on
the other hand, is a remedy available to the obligee when the obligor cannot comply with what is
incumbent upon him. It is predicated on a breach of faith by the other party who violates the reciprocity
between them. Rescission may also refer to a remedy granted by law to the contracting parties and
sometimes even to third persons in order to secure reparation of damages caused them by a valid
contract; by means of restoration of things to their condition in which they were prior to the celebration
of the contract.
Here, paragraph 4.02 of the JVA required CDC to pay GSIS P180,300,000.00. For GSIS to insist payment
of this amount would be tantamount to requiring specific performance. If the JVA is to be pursued to its
conclusion, this amount should be complied with as part of exacting performance under the JVA. On the
other hand, if rescission is chosen, GSIS may no longer claim this amount. It could not have its cake and
eat it, too.
Indubitably, GSIS chose rescission rather than specific performance. It opted to invoke 7.01 of the JVA
and terminated the agreement due to CDC's countless violations thereof rather than collect payment.
Consequently, the P180,300,000.00 monetary award is no longer available to GSIS. As correctly ruled by
the Court of Appeals, such award could have only been given to GSIS had it chosen to continue with the
JVA.
20
In Asuncion v. Evangelista,the Court reiterated the rule that persons prejudiced may elect between
exacting fulfillment of the obligation (specific performance) and its resolution, but they are not entitled
to pursue both of these mutually exclusive, nay inconsistent remedies.
Let us be clear, however, that GSIS resorted to rescission under Article 1191 of the Civil Code, not under
Article 1381 as the CDC would have us believe. Congregation of the Religious of the Virgin Mary v. Orola,
is apropos: At the outset, we must distinguish between an action for rescission as mapped out in Article
1191 of the Civil Code and that provided by Article 1381 of the same Code. The articles read:
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him.The injured party may choose between the
fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also
seek rescission, even after he has chosen fulfillment, if the latter should become impossible.The court
shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.This is
understood to be without prejudice to the rights of third persons who have acquired the thing, in
accordance with articles 1385 and 1388 and the Mortgage Law.
Art. 1381. The following contracts are rescissible: Those which are entered into by guardians whenever
the wards whom they represent suffer lesion by more than one fourth of the value of the things which
are the object thereof; Those agreed upon in representation of absentees, if the latter suffer the lesion
state in the preceding number; Those undertaken in fraud of creditors when the latter cannot in any
other manner collect the claims due them; Those which refer to things under litigation if they have been
entered into by the defendant without the knowledge and approval of the litigants or of competent
judicial authority;
All other contracts specially declared by law to be subject to rescission.
Article 1191, as presently worded, speaks of the remedy of rescission in reciprocal obligations within the
context of Article 1124 of the Old Civil Code which uses the term "resolution". The remedy of resolution
applies only to reciprocal obligations such that a party's breach thereof partakes of a tacit resolutory
condition which entitles the injured party to rescission. The present article, as in the Old Civil Code,
contemplates alternative remedies for the injured party who is granted the option to pursue, as
principal actions, either a rescission or specific performance of the obligation, with payment of damages
in each case. On the other hand, rescission under Article 1381 of the Civil Code, taken from Article 1291
of the Old Civil Code, is a subsidiary action, and is not based on a party's breach of obligation.
Here, the JVA involved reciprocal obligations wherein CDC was obligated, inter alia, to renovate the
Chanelay Towers, market its unsold units, and remit payment to GSIS. In exchange, GSIS was to transfer
possession of the property to CDC. GSIS complied with its obligation; CDC did not. Thus, GSIS invoked its
right to rescission under Article 1191 of the Civil Code as embodied in paragraph 7.01 of the JVA.
In Laperal v. Solid Homes, Inc. the Court recognized the right of parties to stipulate on extrajudicial
rescission under Article 1191, allowing parties to freely determine and stipulate under what terms and
conditions the rescission may be invoked and its effect. In this case, such terms and conditions are
embodied in paragraph 7.01 of the JVA. The provision clearly did not provide for the application of
Article 1385 of the Civil Code on the mutual restitution of things received by the parties
21
Sale
THIRD DIVISION
G.R. No. 234384, April 26, 2021
ELISEO N. JOSEPH, PETITIONER, VS. SPOUSES JOSEFINA JOSEPH AND DANILO JOSEPH, RESPONDENTS.
JUSTICE LOPEZ
This is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court seeking the
reversal of the Decision of the Court of Appeals which affirmed with modification the Decision rendered
by the Regional Trial Court (RTC) Branch 172 of Valenzuela City in Civil Case No. 44-V-05, with the CA
decreeing that the unpaid purchase price of the subject property in the amount of P30,000.00 shall earn
interest at the rate of 12% per annum from May 20, 2005 until June 30, 2013, and 6% per annum from
July 1, 2013, until its full satisfaction.
Facts
Spouses Josefina and Danilo Joseph are the registered owners of a parcel of land (subject property)
situated in the Barrio of Balangcas, Valenzuela City, and measuring Two Hundred Twenty Five square
meters (225 sq. m.) more or less. Respondents and petitioner Eliseo Joseph entered into an Agreement
to Sell of the subject property in consideration of the sum of Two Hundred Twenty Five Thousand Pesos
(P225,000.00), with petitioner making a downpayment of One Hundred Thousand Pesos (P100,000.00)
upon the signing of the contract and the balance of One Hundred Twenty Five Thousand Pesos
(P125,000.00) shall be paid by petitioner within one year from and after the execution of the contract.
22
Petitioner was able to fully pay the agreed consideration of the subject property. Consequently, he
demanded from respondents the execution of a deed of absolute sale in his favor, which was however
signed only by respondent Josefina Joseph while respondent Danilo Joseph refused to sign the same
unless petitioner pays an additional sum of money which is beyond the price agreed upon by the parties
in their contract to sell. After exerting earnest efforts for amicable settlement, which proved futile,
petitioner filed a complaint for specific performance and damages dated February 23, 2005 against
respondents praying that they be ordered to execute a final deed of absolute sale concerning the
subject property, in his favor.
Respondents claimed that in addition to the purchase price of P225,000.00, the parties also agreed for
petitioner to pay them an additional amount of Eighty Thousand Pesos (P80,000.00), representing the
value of the fence constructed by respondents around the subject property and the filling materials
therein, before a Deed of Absolute Sale may be executed in favor of petitioner. After some negotiations,
respondents agreed that petitioner will only pay an additional sum of Thirty Thousand Pesos
(P30,000.00) thus increasing the purchase price of the property to P255,000.00, from the original
contract price of P225,000.00. As such, a Deed of Absolute Sale for the price of P255,000.00 was drafted
with the agreement that the balance of P30,000.00 will be paid by petitioner upon signing of the
agreement. Respondents, however, claimed that with the refusal of petitioner to pay the amount of
P30,000.00 despite repeated demands, their refusal to sign the Deed of Absolute Sale is justified.
RTC ruled in favor of respondents’ plaintiff is ordered to pay the defendants the unpaid additional
purchase price of Php30,000.00 within ten (10) days upon finality of this decision and for the defendants
to execute the deed of absolute sale immediately thereafter in favor of the plaintiff.
The CA found that the consideration of the sale of the subject property in the amount of P225,000.00
was increased by the parties to P255,000.00.
Issue
Whether the Court of Appeals gravely erred in ruling that there was a subsequent agreement between
the parties increasing the consideration by Thirty Thousand Pesos, thus making him liable therefor
Ruling
The petition lacks merit.
In this case, petitioner is the debtor who pleads full payment of the purchase price of the subject
property. As such, it is he who carries the burden to prove his allegation of full payment. Whether the
increase of P30,000.00 was due to the improvements introduced by the respondents or due to the
payment of mortgage on the subject property, the trial court, as affirmed by the CA, already found,
based on the evidence presented by the parties that the total amount of the consideration in the sale of
the subject property is P255,000.00. Thus, it is the full payment of this amount which petitioner must
show, not the purpose for which the increase was attributed. This, petitioner failed to do.
It bears noting that the Agreement to Sell dated January 15, 2002 which was entered into by the parties,
with an agreed price of P225,000.00 already amounted to a binding contract between them. It is in the
nature of a contract to sell, which is defined as "a bilateral contract whereby the prospective seller,
while expressly reserving the ownership of the subject property despite delivery thereof to the
prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon
fulfillment of the condition agreed upon, that is, full payment of the purchase price." In a contract to
sell, "ownership is retained by the seller and is not to pass until the full payment of the price . It is
"commonly entered into so as to protect the seller against a buyer who intends to buy the property in
installments by withholding ownership over the property until the buyer effects full payment therefor.
While a contract to sell operates as a preparatory contract to the execution of a written contract of sale
because of the condition for which the parties may agree on, it is already a contract in itself for which a
meeting of the minds already exists. The consent, object and consideration of the contract are already
present. Thus, the obligatory nature of a contract, which stresses the binding effect of the terms agreed
upon by the parties as having the force of law between them, which should be complied with in good
faith already becomes applicable. Nonetheless, considering the nature of a contract to sell, which
creates a period for the other party to comply with his/her obligation, there still remains a room for
negotiation with respect to the terms already agreed upon. Any change in the terms of the agreement
cannot however be unilaterally imposed by a single party; the same must be mutually agreed upon by
the parties. This is consistent with the characteristic of autonomy of contracts, which allows the parties
to establish such stipulations, clauses, terms and conditions as they may deem appropriate provided
only that they are not contrary to law, morals, good customs, public order or public policy. The standard
norm in the performance of their respective covenants in the contract, as well as in the exercise of their
23
rights thereunder, is expressed in the cardinal principle that the parties in that juridical relation must act
with justice, honesty and good faith.
Maintaining the essence of a contract, which is the meeting of the minds of the parties, agreements
which may be subsequently entered into by the parties must be consensually agreed upon. As in this
case, the purchase price originally agreed upon at P225,000.00 was increased to P255,000.00 as stated
in the Deed of Absolute Sale. The Rules of Court recognizes the possibility that an agreement already
entered into by the parties may still undergo changes. The Parol Evidence Rule provides an exception to
the existence of other agreements entered into by the parties, to wit:
3. Parol Evidence Rule
Section 10. Evidence of written agreements. – When the terms of an agreement have been reduced to
writing, it is considered as containing all the terms agreed upon and there can be, as between the
parties and their successors in interest, no evidence of such terms other than the contents of the written
agreement.
However, a party may present evidence to modify, explain or add to the terms of the written agreement
if he or she puts in issue in a verified pleading:
(a) An intrinsic ambiguity, mistake or imperfection in the written agreement;
(b) The failure of the written agreement to express the true intent and agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their successors in interest after the
execution of the written agreement.
The term "agreement" includes wills. (9a)
In this case, while the Deed of Absolute Sale did not specifically indicate that it amends the Agreement
to Sell that was first agreed upon by the parties, the same subject property, which is the object of the
two contracts were alluded to. Neither petitioner nor respondent even assailed the purchase price that
was in the Deed of Absolute Sale. As found by the Court of Appeals, the evidence of petitioner,
specifically the Deed of Sale and the demand letter indicates that the amount of the subject property is
P255,000.00.
It was, therefore, incumbent for petitioner to show proof that he fully paid this amount as subsequently
agreed upon by the parties, before asking the respondents to execute a Deed of Absolute Sale and the
delivery of the subject property to him. A contract of sale gives rise to a reciprocal obligation of the
parties. Reciprocal obligations are those which arise from the same cause, and wherein 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, so that the performance of one is conditioned
upon the simultaneous fulfillment of the other. With his failure to perform his obligation, petitioner
cannot compel the respondents to comply with their obligation.
FIRST DIVISION
G.R. No. 228999, April 28, 2021
ANA DE JOYA AND CIRIACO DE JOYA, LERMA R. CASTILLO AND MARIO CASTILLO, SPOUSES DOMINGO
CORDERO AND LEONCIA CORDERO, AND RICARDO VILLALOBOS, AS THE SURVIVING HEIRS OF
SPOUSES EUFRONIO CORDERO AND TARCILA C. CORDERO, VS. FRANCISCO P. MADLANGBAYAN,
SUBSTITUTED BY RODESINDA F. MADLANGBAYAN AND MARIA LOURDES M. MONTALBO.
JUDTICE GAERLAN
Petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and set aside the
Decision of the Court of Appeals (CA) in CA-G.R. CV No. 105049, and its Resolution dated December 28,
24
2016, denying the motion for reconsideration thereof. The assailed issuances granted the appeal and
reversed and set aside the Judgment dated December 10, 2014, of the Regional Tried Court (RTC) of
Batangas City, Branch 84.
Facts
Ana de Joya and Ciriaco de Joya, Lerma R. Castillo and Mario Castillo, Spouses Domingo Cordero and
Leoncia Cordero, and Eufronio Cordero and Tarcila Cordero (petitioners) are the registered owners of
two parcels of agricultural land - Lot Nos. 5 and 6, consisting of an area of 140,327 square meters and
31,465 square meters, respectively (subject properties). Both are located at Barrio Concordia, Alitagtag,
Batangas.
By virtue of a Special Power of Attorney and a Pangkalahatang Gawad ng Kapangyarihang Hindi
Natitinag dated February 5, 1996, petitoners granted respondent Francisco P. Madlangbayan
(respondent Madlangbayan) the authority to sell the subject properties. Madlangbayan received a
counter-offer from respondents Spouses Ma. Florita and Roiando Dalida, Spouses Guillermo and
Rosalinda Cano, and spouses Rosendo and Isabelita Ramos (respondents Dalida, et al.). The counter-
offer was rejected by the petitioners in a letter
Subsequent thereto, petitioners alleged that former Mayor Rod A. Macalintal in a meeting with
petitioner Eufronio Cordero (petitioner Eufronio), agreed to accept their offer to sell the subject
properties at the price of P100.00 per square meter. The agreement however did not push thru due to a
conflict in respondent Madlangbayan's commission. The latter supposedly claimed a share of
P13,600,000.00 commission out of the P17,000,000.00 purchase price.Due to the disagreement, the
petitioners executed a Revocation of Special Power of Attorney and General Power of Attorney on May
3, 1996, rescinding respondent Madlangbayan's authority over the subject properties.
Petitioners sent a letter to respondent Madlangbayan, demanding, in view of the revocation of the
power of attorney, for the latter to surrender the owner's duplicate certificate of title. As the demand
remained unheeded, the petitioners filed an Affidavit of Adverse Claim on TCT No. 64767 before the
Registry of Deeds of Batangas on July 1, 1997.
A complaint for revocation of authority was filed by the petitioners against respondent Madlangbayan.
In response, the latter replied that the authority could no longer be revoked as he had already sold the
property pursuant to the power of attorney given him.
Petitioners presented evidence which tend to prove that they had rejected the initial proposal
submitted to them for the sale of the subject properties and that respondent Madlangbayan's authority
to sell the subject properties had been revoked due to a misunderstanding in the latter's commission.
For their part, respondents Dalida, et al. claim that sometime in 1995, respondent Madlangbayan,
armed with a special power of attorney, offered the subject properties to them for the amount of
P17,000,000.00. Respondents Dalida, et al. made a counter offer of P10,000 000.00 which was accepted.
The RTC found that the price of the sale was simulated and unpaid; and that the records are bereft of
evidence to prove good faith on the part of respondents Dalida, et al. Thus, the RTC upheld the rights of
the petitioners over the subject properties. CA held that the Deed of Absolute Sale dated April 8, 1996, is
valid as all the elements of a valid contract of sale is present. Having been executed by respondent
Madlangbayan prior to the revocation of the power of attorney, the CA held that his act of conveying
the property is a valid source of obligation to bind the petitioners, thus, the element of consent is
satisfied\ Resolution dated December 28, 2016, the petitioners filed the instant Petition for review on
certiorari.
Issue
Whether or not a valid contract of sale was entered into involving the subject properties.
Ruling
The petition is meritorious.
On its face, the Deed of Absolute Sale dated April 8, 1996, involving the subject properties appears to be
valid and supported by an adequate consideration, but the attendant circumstances indicate otherwise.
After a careful scrutiny of the records of the case at bar, the Court finds that the petitioners, as plaintiffs,
were able to discharge this burden. The petitioners were able to establish by preponderance of evidence
that no contract of sale involving the subject properties has been perfected and that the Deed of
Absolute Sale dated April 8, 1996 is absolutely simulated.
On its face, Deed of Absolute Sale dated April 8, 1996 states that it was notarized by Notary Public Atty.
Henry Adasa on the same date it was executed, with the following notarial details: Doc. No. 350, Page
25
No. 70, Book No. XII, Series of 1996. However, it is not disputed that the same does not appear in Atty.
Adasa's Notarial Registry for the year 1996. Atty. Adasa claims that the failure is by mere inadvertence.
Regardless of the reason for such omission, the failure of Atty. Adasa to register the subject Deed of
Absolute Sale casts doubt on the authenticity of the document. Registration of the notarized document
in the notarial registry is basic requirement in the notarial process. The notarial registry is a record of the
notary public's official acts. Acknowledged documents and instruments recorded in it are considered
public documents.
The notarial registry is a record of the notary public's official acts. Acknowledged documents and
instruments recorded in it are considered public documents. A document or instrument which does not
appear in the notarial records or without a copy of it therein, suggests that the document or instrument
was not really notarized. Without registration, a document or instrument while signed by the Notary
Public cannot be treated as duly notarized. It cannot be treated as a public document and as such, is not
entitled to the presumption of regularity. The document or instrument does not have for its benefit that
which is due to public documents, that is that genuineness and due execution need not be proved.
Irregular notarization reduces the evidentiary value of a document to a private document which requires
proof of its due execution and authenticity to be admissible as evidence.While, on its own, the absence
of registration does not invalidate the Deed of Sale, considering however the presence of the letter
dated April 10, 1996 rejecting respondent Dalida, et al.'s counter offer, the case yields in favor of the
petitioner.
Interestingly, it was only in response to the Complaint for revocation filed on July 14, 1997, that
respondent Madlangbayan brought to the attention of the petitioner's that the property had been sold
and as a result, the power of attorney could no longer be revoked. Relevant to the sale of the subject
properties, a Deed of Absolute Sale dated April 8, 1996, for the amount of P10,000,000.00 was
presented by respondents Dalida, et al.
A contract of agency is extinguished by its revocation. As agency is a personal contract of representation
that is based on the trust and confidence reposed by the principal upon the agent, it may be revoked by
the principal at will. The withdrawal of such authority by the principal may either be express or implied.
From the revocation of the agency on May 3, 1996, therefore, respondent Madlangbayan no longer had
any authority over the subject properties. Had there really been a perfected contract of sale, respondent
Madlangbayan should have informed the petitioners at this point. That respondent Madlangbayan failed
to inform the petitioners of the supposed sale of the subject properties to respondents Dalida, et al.
lends further doubts to the contentious Deed of Sale.
Likewise, the gist of the letter dated April 10, 1996, tells us that while respondent Madlangbayan is
vested with the authority to sell the property, he may only do so for the amount approved by the
petitioners, that is P17,000,000.00. Any amount below the asking price would have to be consulted with
and approved by the petitioners. Respondent Madlangbayan, on his own, cannot enter in a contract
below the initial price set by the petitioners. In this regard, the Court cannot help but doubt why in the
case at bar, no prior and timely information was given to the petitioners regarding the sale. For one, the
Deed of Absolute Sale was for P10,000,000.00, an amount below the ceiling set by the petitioners. As
aforestated, respondent Madlangbayan also had every opportunity to notify the petitioners that he had
successfully negotiated a sale. In particular, in the natural course of things, the immediate reaction
would be to inform the petitioners of the supposed sale of the subject properties after being informed
of the revocation of his power of attorneys effective May 3, 1996, if indeed one has been entered into.
Nonetheless, in this case, the sale was brought to the attention of the petitioners in respondent
Madlangbayan's Answer. Even so, at that point, respondent Madlangbayan did not present a copy of the
supposed Deed of Absolute Sale he had executed with respondents Dalida, et al. He, instead, presented
two documents denominated as Memorandum of Agreement, both of which are undated and are not
notarized, stating as consideration an amount lower than that indicated in the Deed of Absolute Sale,
i.e., P7,000,000.00. The respondents failed to provide the reason for the inconsistency between these
instruments.
In view of the foregoing, therefore, it is of no moment that the petitioners made an admission of the
existence of two escrow agreements. The fact remains that there is no valid and perfected contract of
sale involving the subject properties in this case.
FIRST DIVISION
G.R. No. 228999, April 28, 2021
ANA DE JOYA AND CIRIACO DE JOYA, LERMA R. CASTILLO AND MARIO CASTILLO, SPOUSES DOMINGO
CORDERO AND LEONCIA CORDERO, AND RICARDO VILLALOBOS, AS THE SURVIVING HEIRS OF
26
SPOUSES EUFRONIO CORDERO AND TARCILA C. CORDERO, VS. FRANCISCO P. MADLANGBAYAN,

SUBSTITUTED BY RODESINDA F. MADLANGBAYAN AND MARIA LOURDES M. MONTALBO.
JUDTICE GAERLAN
Petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and set aside the
Decision of the Court of Appeals (CA) in CA-G.R. CV No. 105049, and its Resolution dated December 28,
2016, denying the motion for reconsideration thereof. The assailed issuances granted the appeal and
reversed and set aside the Judgment dated December 10, 2014, of the Regional Tried Court (RTC) of
Batangas City, Branch 84.
Facts
Ana de Joya and Ciriaco de Joya, Lerma R. Castillo and Mario Castillo, Spouses Domingo Cordero and
Leoncia Cordero, and Eufronio Cordero and Tarcila Cordero (petitioners) are the registered owners of
two parcels of agricultural land - Lot Nos. 5 and 6, consisting of an area of 140,327 square meters and
31,465 square meters, respectively (subject properties). Both are located at Barrio Concordia, Alitagtag,
Batangas.
By virtue of a Special Power of Attorney dated January 23, 1992, and a Pangkalahatang Gawad ng
Kapangyarihang Hindi Natitinag dated February 5, 1996, petitoners granted respondent Francisco P.
Madlangbayan (respondent Madlangbayan) the authority to sell the subject properties.
Madlangbayan received a counter-offer from respondents Spouses Ma. Florita and Roiando Dalida,
Spouses Guillermo and Rosalinda Cano, and spouses Rosendo and Isabelita Ramos (respondents Dalida,
et al.). The counter-offer was rejected by the petitioners in a letter
Subsequent thereto, petitioners alleged that former Mayor Rod A. Macalintal in a meeting with
petitioner Eufronio Cordero (petitioner Eufronio), agreed to accept their offer to sell the subject
properties at the price of P100.00 per square meter. The agreement however did not push thru due to a
conflict in respondent Madlangbayan's commission. The latter supposedly claimed a share of
P13,600,000.00 commission out of the P17,000,000.00 purchase price.
Due to the disagreement, the petitioners executed a Revocation of Special Power of Attorney and
General Power of Attorney on May 3, 1996, rescinding respondent Madlangbayan's authority over the
subject properties.
Petitioners sent a letter to respondent Madlangbayan, demanding, in view of the revocation of the
power of attorney, for the latter to surrender the owner's duplicate certificate of title. As the demand
remained unheeded, the petitioners filed an Affidavit of Adverse Claim on TCT No. 64767 before the
Registry of Deeds of Batangas on July 1, 1997.
A complaint for revocation of authority was filed by the petitioners against respondent Madlangbayan.
In response, the latter replied that the authority could no longer be revoked as he had already sold the
property pursuant to the power of attorney given him.
Petitioners presented evidence which tend to prove that they had rejected the initial proposal
submitted to them for the sale of the subject properties and that respondent Madlangbayan's authority
to sell the subject properties had been revoked due to a misunderstanding in the latter's commission.
Further, petitioners averred that on a separate occasion, on November 8, 1998, petitioner Eufronio
discovered a letter dated April 10, 1996, addressed to respondent Rolando Dalida in which the subject
properties were offered to the latter for a non-negotiable amount of P17,000,000.00. Thereafter,
petitioner Eufronio was surprised to learn that the subject properties were sold to respondent spouses
Dalida for the amount of P10,000,000.00 by virtue of a Deed of Absolute Sale dated April 8, 1996.
For their part, respondents Dalida, et al. claim that sometime in 1995, respondent Madlangbayan,
armed with a special power of attorney, offered the subject properties to them for the amount of
P17,000,000.00. Respondents Dalida, et al. made a counter offer of P10,000 000.00 which was accepted.
The RTC found that the price of the sale was simulated and unpaid; and that the records are bereft of
evidence to prove good faith on the part of respondents Dalida, et al. Thus, the RTC upheld the rights of
the petitioners over the subject properties.
CA held that the Deed of Absolute Sale dated April 8, 1996, is valid as all the elements of a valid contract
of sale is present. Having been executed by respondent Madlangbayan prior to the revocation of the
power of attorney, the CA held that his act of conveying the property is a valid source of obligation to
bind the petitioners, thus, the element of consent is satisfied. With respect to the subject matter, the CA
noted that the Deed of Absolute Sale dated April 8, 1996 describes in sufficient detail the subject
properties. Finally, as to the purchase price, the CA found that the Deed is supported by a purchase price
27
of P10,000,000.00, paid in full to respondent Madlangbayan through CTD No. 7290 dated April 10, 1996
and placed in escrow with Bauan Rural Bank
Motion for Reconsideration of the said Decision having been similarly denied by the CA in its Resolution
dated December 28, 2016, the petitioners filed the instant Petition for review on certiorari
Issue
Whether or not respondents Dalida and Go are buyer in good faith.
Ruling
In the same vein, respondents Dalida, et al. cannot be considered as buyers in good faith. Primarily, they
were aware that they were dealing with respondent Madlangbayan as an agent of the petitioners.
Therefore, they were bound at their peril, in that in dealing with the agent, it was incumbent upon them
to ascertain the nature and extent of such agent's authority. Moreover, they were privy to and did not
controvert the contents of respondent Madlangbayan's letter dated April 10, 1996. Respondents also
failed to directly address why the letter rejecting their counter-offer was dated later than the Deed of
Sale; instead they merely deflected the issue by saying that respondent Madlangbayan never admitted
that the "rejection of the offer for P17,000,000.00" happened after the Deed of Absolute Sale had been
executed. Remarkably, no explanation was offered to rationalize the situation.
Finally, the Court sustains the findings of the CA that respondents Go, et al. cannot, as well, be
considered as buyers in good faith considering that at the time the Deed of Sale was executed in their
favor, there was an existing Notice of Lis Pendens dated July 14, 1997, on the TCT of the subject
properties. Furthermore, respondents Go, et al. were likewise aware of the existence of Kasunduan sa
Pag-upa ng Lupa dated June 5, 2003, over the subject properties executed between the petitioners and
one Diosdado Andal.
Moreover, a simulated sale and all transactions subsequent thereto are void and conveys no title.
Consequently, the Deed of Sale between respondents Go, et al. and respondents Dalida, et al. is void.
In addition, as successors-in-interest, respondents Go, et al. stand exactly in the shoes of their
predecessor-in-interest, respondents Dalida, et al. The latter, as buyers in a simulated sale acquired no
right of ownership over the subject properties and had nothing to transfer to respondents Go, et al.
There being no valid transfer of the subject properties, the petitioners remained to be the owners
thereof.
As a final note, with the admission of Atty. Adasa that out of inadvertence he failed to register the
subject Deed of Absolute Sale, the Court deems it appropriate to issue him a stern warning that a
repetition of the same or similar acts shall be dealt with more severely. Time and again, the Court has
constantly reminded Notaries Public that their solemn duties are imbued with public interest and are
not to be taken lightly. Hence, they must "observe with utmost care and fidelity the basic requirements
in the performance of their duties; otherwise, the confidence of the public in the integrity of the
notarized deeds will be undermined.
WHEREFORE, in consideration of the foregoing disquisitions, the instant petition for review on
certiorari is GRANTED. The Decision dated September 26, 2016 of the Court of Appeals in CA-G.R. CV
No. 105049, and its Resolution dated December 28, 2016, are REVERSED and SET ASIDE. The Judgment
dated December 10, 2014 of the Regional Trial Court of Batangas City, Branch 84, is hereby
REINSTATED.
SECOND DIVISION
28
G.R. No. 246096, January 13, 2021

SPOUSES BENNY AND NORMITA ROL, PETITIONERS, VS. ISABEL URDAS RACHO,* RESPONDENT.
PERLAS-BERNABE, J.:
NATURE OF THE ACTION: SALE BY A CO-OWNER
Facts
Respondent Isabel alleged that her brother, Loreto, was the registered owner of a parcel of land. Loreto
died without an issue, thus, leaving his siblings, namely, Fausto, Chita, Maria, and Isabel as his intestate
heirs to the said lot. Isabel discovered that: (a) Lot No. 1559 was subdivided into
2 portions, (h) despite Loreto's death in 1963, petitioners made it appear that Loreto sold to them the
subdivided lots through a Deed of Absolute Sale of Portion of Registered and (c) in light of
the execution of said deeds, new titles were issued in petitioners' names. As such, Isabel was
constrained to file a complaint for reivindicacion and damages before the RTC. In their Answer
with Counterclaim petitioners were able to meet Fausto's wife and son, namely, Leoncia, and
Allan, who offered to sell them one-half of Lot for P25,000.00, to which they agreed. Thus, Fausto, Chita,
Maria, and Allan executed an Extra-Judicial Settlement with concerning the subject lot.
RTC ruled in Isabel's favor. The RTC found the Deeds of Sale void for being forgeries, pointing out that
there was no way Loreto could have signed those instruments as he died in 1963. It also declared void
the EJSS as it was executed without the knowledge and consent of one of Loreto's intestate heirs, i.e.,
Isabel, and consequently, the Deed of Sale of a Portion of Land for being a subsequent transfer that
emanated from the EJSS. Nonetheless, the RTC found petitioners to be purchasers in good faith, opining
that they acquired Lot No. 1559 for valuable consideration, not knowing beforehand that their title
thereto was a product of fraud. As such, they are only required to reconvey to Isabel an area of 312.25-
sq. m. out of the total area of 1,249-sq. m. of Lot No.
1559, in order to satisfy the latter's share in Loreto's intestate estate.
CA affirmed the RTC ruling with modifications, in that: (a) the sale by Fausto, Chita, and Maria to
petitioners are valid and binding but only insofar as their respective undivided interests in the half of Lot
No. 1559 is concerned. CA declared void the EJSS, considering that, inter alia, Isabel, a legal heir to
Loreto's intestate estate, was excluded therefrom. As such, the CA rendered void the adjudication of Lot
No. 1559-B to Allan as he is not a legal heir to Loreto's intestate estate; and consequently, Allan's
transfer of the same to petitioners through the Deed of Sale of a Portion of Land is likewise void,
pursuant to the maxim nemo dat quod non habet. Nonetheless, the CA deemed valid the sale of Lot No.
1559-A to petitioners, but only insofar as Fausto, Chita, and Maria's respective aliquot shares therein,
i.e., a total area of 468.375-sq. m., are concerned. Relatedly, the CA ruled that petitioners are buyers in
bad faith due to their failure to further inquire as to the capacity of Allan and Leoncia to sell Lot No.
1559 and investigate the whereabouts of Loreto, the registered owner thereof.
Issue
Whether or not the CA correctly ruled that the conveyance of Lot No. 1559 to petitioners is null and
void, except as to the portion in Lot No. 1559-A pertaining to Fausto, Chita, and Maria which is
deemed valid.
Ruling
As for the documents pointed out by Isabel, suffice it to say that they are null and void for being
forgeries, as it is simply impossible that Loreto, who died in 1963, could have executed said documents
in 2006 and 2012, respectively. It is settled that forged deeds of sale are null and void and convey no
title.As for the EJSS, the CA correctly declared the same to be null and void, considering that it was
executed without the knowledge and consent of Isabel, a co-heir of Fausto, Chita, and Maria, to the
estate of their deceased brother, Loreto. In a catena of cases, the Court had consistently ruled that a
deed of extrajudicial partition executed to the total exclusion of any of the legal heirs, who had no
knowledge of and consent to the execution of the same, is fraudulent, vicious, and a total nullity, as in
this case. As such, it produced no effect whatsoever either against or in favor of anyone.
At this juncture, it is well to reiterate that the subdivision of Lot No. 1559 into two (2) equal halves, i.e.,
Lot Nos. 1559-A and 1 559-B, as well as the attempted conveyance of these definite portions to
29
petitioners and Allan, resulted from the execution of the EJSS - which again, was without the knowledge
and consent of Isabel. In Cabrera v. Ysaac,32 the Court held that a sale of a definite portion of a co-
owned property requires the consent of all the co-owners. Without such unanimous consent, a co-
owner can only convey his undivided, aliquot interest over a co-owned property; he/she has no right to
divide, and thereafter, convey definite portions thereof, viz.:
If the alienation precedes the partition, the co-owner cannot sell a definite portion of the land without
consent from his or her co-owners. He or she could only sell the undivided interest of the co-owned
property. As summarized in Lopez v. Illustre, "[i]f he is the owner of an undivided half of a tract of land,
he has a right to sell and convey an undivided half, but he has no right to divide the lot into two parts,
and convey the whole of one part by metes and bounds."
Hence, prior to partition, a sale of a definite portion of common property requires the consent of all co-
owners because it operates to partition the land with respect to the co-owner selling his or her share.
The co-owner or seller is already marking which portion should redound to his or her autonomous
ownership upon future partition.
In this case, when Loreto died, his siblings, namely, Fausto, Chitn, Maria, and Isabel all became co-
owners of Loreto's intestate estate, i.e., Lot No. 1559, pursuant to Article 1078 of the Civil Code, with all
of them having equal interest therein, i.e., 1/4 of the property. Thus, for the alienation of definite
portions of Lot No. 1559 to be valid, it must be with the consent of all of them. However, the alienations
of definite portions made in the EJSS was without the knowledge and consent of Isabel, and hence, are
null and void. Nonetheless, as co-owners of Lot No. 1559, Fausto, Chita, Maria, and Isabel are free to
dispose of their undivided aliquot shares therein, which shall be limited to the portion that may be
allotted to them upon partition.35 Otherwise stated, before an actual partition of an estate, an heir can
only alienate his successional rights or undivided interest thereto, and not specific portions thereof.
THIRD DIVISION
G.R. No. 225438, January 20, 2021
30
VOLTAIRE HANS N. BONGCAYAO, DOING BUSINESS UNDER THE NAME AND STYLE OF VHB BIOPRO
ENTERPRISES, AND PETE NICOMEDES PRADO, PETITIONERS, VS. CONFEDERATION OF SUGAR
PRODUCERS COOPERATIVES (CONFED), JOSE J. JISON AND PRUDE GUARANTEE AND ASSURANCE, INC.,
Justice Inting
Topic: Sales and Purchase Ageement
Facts
The Confederation of Sugar Producers Cooperatives (CONFED) solicited the services of VHB Biopro
Enterprises (VHB Biopro) and Voltaire Hans N. Bongcayao, through a Letter of Intent signed by the Chief
Operating Officer and General Manager of CONFED, Mr. Jose J. Jison (Jison), regarding its intention to
purchase urea fertilizers.
VHB Biopro and CONFED executed a Sales and Purchase Agreement.In the agreement, VHB Biopro
committed to supply and deliver to CONFED 250,000 bags of urea agricultural grade fertilizer in Bredco
Port, Bacolod City after CONFED's opening of domestic letter of credit. Likewise, the parties agreed that
VHB Biopro shall procure in favor of CONFED, a Performance Bond,through Prudential Guarantee and
Assurance, Inc. (PGAI) amounting to P5,000,000.00, to guarantee the performance of VHB Biopro's
contractual obligations.
VHB Biopro, represented by Prado, procured a Performance Bond from PGAI in the amount of
P5,000,000.00 and secured its payment with a real estate mortgage. On the other hand CONFED
opened and secured Irrevocable Transferrable Documentary Credit from the Land Bank of the
Philippines in the amount of P177,500,000.00 in favor of VHB Biopro. However, VHB Biopro reneged on
its obligation to deliver urea fertilizers to CONFED. As a result, CONFED, through its Chairman Roberto J.
Cuenca, demanded from PGAI to pay the amount of P5,000,000.00 in accordance with the Performance
Bond, PGAI paid CONFED the amount of the Performance Bond as evidenced by a release and quitclaim
and an Official Receipt12 dated April 2, 2008.When VHB Biopro and Prado received a notice from PGAI
that CONFED made a claim on the Performance Bond, they immediately filed a Complaint (with
Application for the Issuance of Temporary Restraining Order (TRO) and/or Writ of Preliminary
Injunction) RTC. VHB Biopro and Prado prayed for the nullification of the Sales and Purchase Agreement
they executed with CONFED on the ground that the period within which CONFED shall confirm its
acceptance of the delivery of the urea fertilizers and the period within which the balance of the
purchase price may be collected were not clearly reflected in the Sales and Purchase Agreement. Also,
they wanted to enjoin PGAI from foreclosing, processing, and/or collecting on any claim involving the
Performance Bond that it issued in favor of CONFED.
CONFED denied that Jison assured VHB Biopro that the balance of the purchase price shall be payable
within seven days from the physical delivery of urea fertilizers. CONFED maintained that based on Article
09 of the Sales and Purchase Agreement, CONFED shall pay: "First is 50% of the total shipment value
upon submission of all documents specified in Article 12 covering the 50% of the Total Shipment Value,
Quantity and Quality. Second payment is the balance of Fifty (50%) of the Total Shipment Value as Full
Payment upon completion of delivery and final acceptance by the buyer of the Total Shipment
Quantity."
For PGAI, it claimed that it had faithfully complied with its obligation to pay CONFED, as a surety,
pursuant to the Performance Bond. PGAI emphasized that VHB Biopro and Prado executed an indemnity
agreement wherein they bound themselves to unconditionally pay or reimburse the former the
P5,000,000.00 that it had paid.
RTC rendered judgment in favor of the plaintiffs Voltaire Hans Boncayao and Pete Nicomedes Prado and
against defendants Confederation of Sugar Producers Cooperatives and Prudential Guarantee and
Assurance Inc., However , CA reversed and set aside the RTC. Aggrieved, petitioners come before the
Court raising the following grounds, to wit:
Issue
Whether the Sales and Purchase Agreement entered into by the parties is clear.
Ruling
It is well settled that when the terms of a contract are clear and leave no room for interpretation, the
literal meaning of its stipulations shall therefore control. Thus, once a contract is perfected, it binds both
parties and the stipulations therein shall be respected. Considering that the parties entered into a clear
31
and unambiguous Sales and Purchase Agreement, it constituted the law between them. It is the formal
expression of their rights, duties, and obligations.
Here, the Court finds that the provisions of the subject Sales and Purchase Agreement are clear. A
careful scrutiny of the parties' agreement would reveal that they agreed on the following terms:
(a) Within 7 days after the signing of the sales agreement, VHB shall procure a performance bond from
PGAI in favor of CONFED;
(b) CONFED shall open a Letter of Credit within 10 days from the acceptance of the performance bond;
(c) VHB will deliver the urea within 45 days after the opening of the letter of credit;
(d) Both parties will execute and issue certain documents corresponding to the sale of urea;
(e) 50% of the total shipment value will be paid by CONFED to VHB after submission of all documents
required under Article 12 of the Agreement; and
(f) Upon completion of the delivery and final acceptance of CONFED of the delivery, the remaining 50%
of the total shipment value shall be paid by CONFED.
There is no room for interpretation especially as regards the terms of payment and the corresponding
obligations of the parties. Based on the Sales and Purchase Agreement, VHB Biopro undertook to deliver
the fertilizer within 45 days from the opening of the Letter of Credit. VHB Biopro cannot be permitted to
renege on its obligations by claiming that there are ambiguities in the Sales and Purchase Agreement
which it entered with respondents.Reciprocal obligations are those which arise from the same cause,
and in which each party is a debtor and creditor of the other, such that the obligation of one is
dependent upon the obligation of the other. They are to be performed simultaneously, so that the
performance of one is conditioned upon the simultaneous fulfillment of the other. In reciprocal
obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a
proper manner with what is incumbent upon them. From the moment one of the parties fulfills their
obligation, delay by the other begins.
In this case, it is clear that the parties agreed to undertake reciprocal obligations as provided in the Sales
and Purchase Agreement. VHB Biopro has the obligation to deliver the urea within 45 days after CONFED
opens the letter of credit. The first half of the total shipment value will be paid by CONFED to VHB
Biopro after submission of all documents, while the other half will be paid upon completion of the
delivery by VHB Biopro and final acceptance of CONFED of the delivery. However, despite VHB Biopro's
receipt of a copy of the Domestic Letter of Credit on January 18, 2008, it failed to comply with its
undertaking to deliver the agreed urea fertilizers. This failure on the part of VHB Biopro justified
CONFED's claim against the Performance Bond.Here, the Domestic Letter of Credit No. BCD2008-01D
issued by Land Bank of the Philippines, states:
We hereby authorize you to value on LAND BANK OF THE PHILIPPINES your draft on CONFEDERATION
OF SUGAR PRODUCERS COOPERATIVES (CONFED) xxx xxx xxx or sums not exceeding PESOS: ONE
HUNDRED SEVENTY SEVEN MILLION FIVE HUNDRED THOUSAND ONLY (Php177,500,000.00) to be
accompanied by the following documents:
All terms and conditions must be in accordance with the Sales and Purchase Agreement duly signed and
dated December 11, 2007. Despite VHB Biopro's receipt of a copy of the Domestic Letter of Credit on
January 18, 2008, it failed to perform its obligation to deliver the agreed urea fertilizers to CONFED.
Simply stated, despite the bank's assurance to VHB Biopro that it will be paid the amount covered in the
letter of credit, the latter failed to initiate the delivery of the fertilizers to CONFED. In view of VHB
Biopro's default, the Court finds that the amount corresponding to the performance bond was properly
paid by PGAI to CONFED. Considering that there was a clear failure of VHB Biopro to deliver the urea
fertilizers to CONFED under the terms of the Sales and Purchase Agreement, the amount corresponding
to the Performance Bond was properly paid by PGAI to CONFED. The Performance Bond was executed
for the purpose of ensuring VHB Biopro's faithful compliance with the terms of the Sales and Purchase
Agreement.
WHEREFORE, the petition is DENIED. The Decision dated January 19, 2016 and the Resolution dated
June 28, 2016 of the Court of Appeals in CA-G.R. CV No. 102712 are AFFIRMED with MODIFICATIO
32
THIRD DIVISION
G.R. No. 225438, January 20, 2021
VOLTAIRE HANS N. BONGCAYAO, DOING BUSINESS UNDER THE NAME AND STYLE OF VHB BIOPRO
ENTERPRISES, AND PETE NICOMEDES PRADO, PETITIONERS, VS. CONFEDERATION OF SUGAR
PRODUCERS COOPERATIVES (CONFED), JOSE J. JISON AND PRUDE GUARANTEE AND ASSURANCE, INC.,
Justice Inting
Topic: Breach of Sales Contract
Facts
VHB Biopro and CONFED executed a Sales and Purchase Agreement. In the agreement, VHB Biopro
committed to supply and deliver to CONFED 250,000 bags of urea agricultural grade fertilizer in Bredco
Port, Bacolod City after CONFED's opening of domestic letter of credit. Likewise, the parties agreed that
VHB Biopro shall procure in favor of CONFED, a Performance Bond,through Prudential Guarantee and
Assurance, Inc. (PGAI) amounting to P5,000,000.00, to guarantee the performance of VHB Biopro's
contractual obligations.
VHB Biopro, represented by Prado, procured a Performance Bond from PGAI in the amount of
P5,000,000.00 and secured its payment with a real estate mortgage. On the other hand CONFED
opened and secured Irrevocable Transferrable Documentary Credit from the Land Bank of the
Philippines in the amount of P177,500,000.00 in favor of VHB Biopro. However, VHB Biopro reneged on
its obligation to deliver urea fertilizers to CONFED. As a result, CONFED, through its Chairman Roberto J.
Cuenca, demanded from PGAI to pay the amount of P5,000,000.00 in accordance with the Performance
Bond, PGAI paid CONFED the amount of the Performance Bond as evidenced by a release and quitclaim
and an Official Receipt12 dated April 2, 2008.
When VHB Biopro and Prado received a notice from PGAI that CONFED made a claim on the
Performance Bond, they immediately filed a Complaint (with Application for the Issuance of Temporary
Restraining Order (TRO) and/or Writ of Preliminary Injunction) RTC. VHB Biopro and Prado prayed for
the nullification of the Sales and Purchase Agreement they executed with CONFED on the ground that
the period within which CONFED shall confirm its acceptance of the delivery of the urea fertilizers and
the period within which the balance of the purchase price may be collected were not clearly reflected in
the Sales and Purchase Agreement.
CONFED denied that Jison assured VHB Biopro that the balance of the purchase price shall be payable
within seven days from the physical delivery of urea fertilizers. CONFED maintained that based on Article
09 of the Sales and Purchase Agreement, CONFED shall pay: "First is 50% of the total shipment value
upon submission of all documents specified in Article 12 covering the 50% of the Total Shipment Value,
Quantity and Quality. Second payment is the balance of Fifty (50%) of the Total Shipment Value as Full
Payment upon completion of delivery and final acceptance by the buyer of the Total Shipment
Quantity."
For PGAI, it claimed that it had faithfully complied with its obligation to pay CONFED, as a surety,
pursuant to the Performance Bond. PGAI emphasized that VHB Biopro and Prado executed an indemnity
agreement wherein they bound themselves to unconditionally pay or reimburse the former the
P5,000,000.00 that it had paid.
RTC rendered judgment in favor of the plaintiffs Voltaire Hans Boncayao and Pete Nicomedes Prado and
against defendants Confederation of Sugar Producers Cooperatives and Prudential Guarantee and
Assurance Inc., However , CA reversed and set aside the RTC. Aggrieved, petitioners come before the
Court raising the following grounds, to wit:
Issue
Whether or not petitioners breached it making CONFED's resort to the Performance Bond proper.
Ruling
Article 11 thereof provides:
"ARTICLE 11: Performance Bond:
To guarantee the performance of the SELLER'S contractual obligations, the SELLER shall issue to the
Buyer through Prudential Guarantee and Assurance Corporation a Performance Bond amounting to Five
33
Million Pesos (P5,000,000.00). The Performance Bond will be submitted to the BUYER within seven (7)
days after the signing of this Sales and Purchase Agreement. The BUYER's letter of credit will be opened
within ten (10) days after the receipt and acceptance of the Performance Bond by the BUYER."
Having established VHB Biopro's default, the Court finds proper CONFED's claim and PGAI's payment of
the Performance Bond's value. The rule is that when the principal obligor defaults in its obligation, the
liability of the surety attaches. Article 2047 of the Civil Code is clear:
ARTICLE 2047. By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the
obligation of the principal debtor in case the latter should fail to do so.
If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, Title I
of this Book shall be observed. In such case the contract is called a suretyship. (1822a)
Through a contract of suretyship, one party called the surety, guarantees the performance by another
party, called the principal or obligor, of an obligation or undertaking in favor of another party, called the
obligee.50 As a result, the surety is considered in law as being the same party as the debtor in relation to
whatever is adjudged touching upon the obligation of the latter, and their liabilities are interwoven as to
be inseparable.51
In this case, it is evident in Article 11 of the Sales and Purchase Agreement that the purpose of the
Performance Bond is to guarantee the performance of VHB Biopro's contractual obligations. As surety,
PGAI rightfully paid the amount of the Performance Bond upon demand from CONFED and foreclosed
the mortgage executed by VHB Biopro. Notably, VHB Biopro executed a real estate mortgage in order to
secure payment corresponding to the Performance Bond. Likewise, VHB Biopro executed an indemnity
agreement binding it and Mr. Prado to reimburse PGAI in the event that the latter pays CONFED the
value of the Performance Bond. Based on the real estate mortgage and the Indemnity Agreement, it is
apparent that PGAI has the right to be reimbursed upon payment to CONFED. Records reveal that VHB
Biopro failed to redeem the foreclosed property; thus, there is no obstacle for PGAI to transfer the
ownership of the property to its name.
WHEREFORE, the petition is DENIED. The Decision dated January 19, 2016 and the Resolution dated
June 28, 2016 of the Court of Appeals in CA-G.R. CV No. 102712 are AFFIRMED with MODIFICATIO
34
THIRD DIVISION
G.R. No. 202820, January 13, 2021
HOME GUARANTY CORPORATION, PETITIONER, VS. ELVIRA S. MANLAPAZ, RESPONDENT.*
Justice Hernando
Topic: Deed of Absolute Sale and certificate of title
Facts
Vive Eagle Land, Inc. (VELI), Planters Development Bank (Bank), and petitioner HGC entered into the VELI
Asset Pool Formation and Trust Agreement (Asset Pool) for the development of the lots in Eagle Crest
Village (Village) in Baguio City which included the property in dispute, a parcel of land with an area of
166 square meters located at Lot 2, Block 5, Phase III of the Village.
Housing and Development Participation Certificates backed up VELI's properties and were floated and
sold to investors. HGC extended a P130 Million guaranty on the Participation Certificates in the event
the Asset Pool fails to service the interest due to the investors or to redeem the said Certificates upon
maturity. Meanwhile, the Bank acted as trustee and held the titles to the lots covered by the Asset Pool.
Due to the delay in the project's development, the Asset Pool was declared in default. Consequently, the
investors, through the Bank, called on HGC's guaranty. On August 19, 1998, after HGC's payment of the
guaranty call in the amount of P135,691,506.85, the Bank assigned and transferred the possession and
ownership of the assets of the Asset Pool to HGC through a Deed of Assignment and Conveyance.
Prior thereto, VELI entered into a Contract to Sell with First La Paloma Properties, Inc. (FLPPI) involving
the bulk of the properties in the Village which included the property in question. On June 22, 1998,
FLPPI, through its President, Marcelino Yumol (Yumol), entered into a Contract to Sell with respondent
Manlapaz over the disputed property for P913,000.00.
Given that a substantial part of the properties which were assigned to HGC was apparently sold by VELI
to FLPPI, VELI, FLPPI and HGC entered into a Memorandum of Agreement (superseding the Contract to
Sell dated January 8, 1998 and other agreements between FLPPI and VELI) in which FLPPI assumed to
pay HGC the value of the properties in the total amount of P153,029,200.00. Accordingly, HGC and FLPPI
executed a Contract to Sell dated October 15, 1998 over the real properties.When FLPPI failed to pay,
HGC informed FLPPI on November 15, 2000 in a letter addressed to Yumol that it is invoking its right to
cancel their contract.
Manlapaz filed a Complaint for delivery of title with prayer for damages with the Legal Services Group
(LSG) of the Housing and Land Use Regulatory Board (HLURB). Manlapaz claimed that despite full
payment and demands for delivery, FLPPI failed to execute the final deed of sale and to deliver the title
of the lot in her favor. She alleged that she was deprived of her title and ownership to the contested
property and prayed for the award of moral and exemplary damages as well as attorney's fees.
The Bank contended that Manlapaz has no cause of action against it and that it was not privy to her
contract with FLPPI. The property in question, along with the properties of the Asset Pool, had already
been the subject of the Deed of Assignment and Conveyance between the Bank and HGC.
HGC averred that Manlapaz has no cause of action against it because it is also an unpaid seller based on
the Contract to Sell it entered into with FLPPI. HGC argued that it was not privy to the Contract to Sell
dated June 22, 1998 which Manlapaz executed with FLPPI and that the said contract violated its (HGC's)
Contract to Sell dated October 15, 1998 with FLPPI which prohibited the disposition of the properties
without full payment and the written consent of HGC.
LSG-HLURB held that as the subdivision owner or developer, FLPPI has the obligation to deliver the title
to Manlapaz upon full payment pursuant to Section 25 of Presidential Decree (PD) No. 957. Insofar as
the Bank is concerned, the LSG-HLURB noted that pursuant to the Deed of Assignment and Conveyance
dated August 19, 1998, it already transferred the possession and ownership of the properties of the
Asset Pool, including the lot claimed by Manlapaz, to HGC. The trusteeship agreement had been
35
terminated and possession of the Transfer Certificate of Title (TCT) for the contested lot was transferred
to HGC. Thus, Manlapaz has no cause of action against the Bank.
Likewise, Manlapaz has no cause of action against VELI as the latter was not privy to the contract
between Manlapaz and FLPPI. Before the execution of said contract, VELI had already finalized the
Contract to Sell with FLPPI. After Manlapaz transacted with FLPPI through a Contract to Sell, VELI, HGC
and FLPPI then entered into a Memorandum of Agreement which caused the execution of another
Contract to Sell between FLPPI and HGC involving the same properties.30
However, the LSG-HLURB found that Manlapaz has a cause of action against HGC. When HGC entered
into a Memorandum of Agreement with FLPPI and VELI, and the Contract to Sell with FLPPI, HGC
became aware of the Contract to Sell between VELI and FLPPI.
BOC-HLURB dismissed the complaint filed by Manlapaz. It ruled that "[u]nder the contract to sell
executed between HGC and FLPPI, the latter was not authorized to sell the properties covered thereby
without the purchase price first being fully paid to the HGC. Thus, HGC is not under any obligation to
honor the contract between FLPPI and [Manlapaz]. Under the circumstances, only FLPPI is liable to the
[Manlapaz]." It ordered FLPPI to refund the purchase price paid by Manlapaz with interest. The
dispositive portion of the BOC-HLURB's Decision .
The CA ruled that Manlapaz's full payment of the contract price justifies the execution of the deed of
absolute sale in her favor and the transfer in her name of the certificate of title covering the subject
property pursuant to Section 2555 of PD No. 957.56It held that the ruling of the LSG-HLURB was correct
and that Manlapaz, as an innocent purchaser for value, should be protected from the effects of the
transactions entered into by HGC, VELI and FLPPI in which Manlapaz had no participation. Moreover, the
appellate court ordered FLPPI to turn over the amounts which Manlapaz paid, to HGC, plus legal
interest.59 The dispositive portion of the CA's assailed Decision states:
Issue
Whether or not HGC should execute a deed of absolute sale and cause the transfer of the certificate
of title to the contested lot in favor of Manlapaz.
Ruling
Since Manlapaz already fully paid the purchase price, she is entitled to the issuance of the deed of
absolute sale and the transfer certificate of title in her favor, even if the disputed property has already
been transferred to HGC's name due to FLPPI's default in the third contract. By virtue of the
Memorandum of Agreement and the third contract, HGC not only acquired the rights to the assets, but
also the obligations attached thereto. Since Manlapaz paid the full price, FLPPI, as the seller when the
second contract was executed, should issue the title in her favor.
However, given that the assets were already transferred to HGC, it is now HGC's obligation to tum over
the disputed property to Manlapaz and then issue the corresponding deed of absolute sale and
certificate of title in her name. As found by the CA, "[Manlapaz], who had fully paid the purchase price
of the property, should not be made to suffer the consequences of the default of the Asset Pool,
including the failure of [FLPPI] to comply with its obligation to [HGC] under their contract to
sell 3rd contract].
Considering the foregoing observations, and given that Manlapaz had fully paid the purchase price of
the contested lot, the property should now be transferred in her name. It is settled that "the seller's
obligation to deliver the corresponding certificates of title is simultaneous and reciprocal to the buyer's
full payment of the purchase price." Relevantly, Section 25 of P.D. No. 957 states:
SEC. 25. Issuance of Title. – The owner or developer shall deliver the title of the lot or unit to the buyer
upon full payment of the lot or unit. No fee, except those required for the registration of the deed of
sale in the Registry of Deeds, shall be collected for the issuance of such title. In the event a mortgage
over the lot or writ is outstanding at the time of the issuance of the title to the buyer, the owner or
developer shall redeem the mortgage or the corresponding portion thereof within six months from such
issuance in order that the title over any fully paid lot or unit may be secured and delivered to the buyer
in accordance herewith. (Emphasis supplied)
Indeed, "[o]ne of the purposes of P.D. No. 957 is to discourage and prevent unscrupulous owners,
developers, agents and sellers from reneging on their obligations and representations to the detriment
of innocent purchasers." Manlapaz should be treated fairly, as she fulfilled her end of the
36
bargain.ℒαwρhi ৷ As she claimed, she already erected a house in the contested lot and it would be
unwarranted to deprive her of the use of the said property in spite of full payment.
WHEREFORE, the Petition for Certiorari is hereby DISMISSED. The assailed April 20, 2012 Decision and
June 14, 2012 Resolution of the Court of Appeals in CA-G.R. SP No. 112466
are AFFIRMED with MODIFICATIONS,
THIRD DIVISION
G.R. No. 202820, January 13, 2021
HOME GUARANTY CORPORATION, PETITIONER, VS. ELVIRA S. MANLAPAZ, RESPONDENT.*
JUDTICE HERNANDO
Topic: Interest
Facts
Vive Eagle Land, Inc. (VELI), Planters Development Bank (Bank), and petitioner HGC entered into the VELI
Asset Pool Formation and Trust Agreement (Asset Pool) for the development of the lots in Eagle Crest
Village (Village) in Baguio City which included the property in dispute, a parcel of land with an area of
166 square meters located at Lot 2, Block 5, Phase III of the Village.
Housing and Development Participation Certificates backed up VELI's properties and were floated and
sold to investors. HGC extended a P130 Million guaranty on the Participation Certificates in the event
the Asset Pool fails to service the interest due to the investors or to redeem the said Certificates upon
maturity. Meanwhile, the Bank acted as trustee and held the titles to the lots covered by the Asset Pool.
Due to the delay in the project's development, the Asset Pool was declared in default. Consequently, the
investors, through the Bank, called on HGC's guaranty. On August 19, 1998, after HGC's payment of the
guaranty call in the amount of P135,691,506.85, the Bank assigned and transferred the possession and
ownership of the assets of the Asset Pool to HGC through a Deed of Assignment and Conveyance.
Prior thereto, VELI entered into a Contract to Sell with First La Paloma Properties, Inc. (FLPPI) involving
the bulk of the properties in the Village which included the property in question. On June 22, 1998,
FLPPI, through its President, Marcelino Yumol (Yumol), entered into a Contract to Sell with respondent
Manlapaz over the disputed property for P913,000.00.
Given that a substantial part of the properties which were assigned to HGC was apparently sold by VELI
to FLPPI, VELI, FLPPI and HGC entered into a Memorandum of Agreement (superseding the Contract to
Sell dated January 8, 1998 and other agreements between FLPPI and VELI) in which FLPPI assumed to
pay HGC the value of the properties in the total amount of P153,029,200.00. Accordingly, HGC and FLPPI
executed a Contract to Sell dated October 15, 1998 over the real properties.When FLPPI failed to pay,
HGC informed FLPPI on November 15, 2000 in a letter addressed to Yumol that it is invoking its right to
cancel their contract.
Manlapaz filed a Complaint for delivery of title with prayer for damages with the Legal Services Group
(LSG) of the Housing and Land Use Regulatory Board (HLURB). Manlapaz claimed that despite full
payment and demands for delivery, FLPPI failed to execute the final deed of sale and to deliver the title
of the lot in her favor. She alleged that she was deprived of her title and ownership to the contested
property and prayed for the award of moral and exemplary damages as well as attorney's fees.
The Bank contended that Manlapaz has no cause of action against it and that it was not privy to her
contract with FLPPI. The property in question, along with the properties of the Asset Pool, had already
been the subject of the Deed of Assignment and Conveyance between the Bank and HGC.
HGC averred that Manlapaz has no cause of action against it because it is also an unpaid seller based on
the Contract to Sell it entered into with FLPPI. HGC argued that it was not privy to the Contract to Sell
dated June 22, 1998 which Manlapaz executed with FLPPI and that the said contract violated its (HGC's)
Contract to Sell dated October 15, 1998 with FLPPI which prohibited the disposition of the properties
without full payment and the written consent of HGC.
Issue
Whether or not the petitioner is entitled to the interest.
Ruling
37
Nevertheless, HGC is not without recourse. In order to prevent unjust enrichment and to abide by the
intent of the Memorandum of Agreement and the third contract, FLPPI should turn over Manlapaz's full
payment to HGC, with legal interest in accordance with Nacar v. Gallery Frames,98 viz.:
[I]n the absence of an express stipulation as to the rate of interest that would govern the parties, the
rate of legal interest for loans or forbearance of any money, goods or credits and the rate allowed in
judgments shall no longer be twelve percent (12%) per annum as reflected in the case of Eastern
Shipping Lines and Subsection X305.1 of the Manual of Regulations for Banks and Sections 4305Q.1,
4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions, before its
amendment by BSP-MB Circular No. 799 but will now be six percent (6%) per annum effective July 1,
2013. It should be noted, nonetheless, that the new rate could only be applied prospectively and not
retroactively. Consequently, the twelve percent (12%) per annum legal interest shall apply only until
June 30, 2013. Come July 1, 2013 the new rate of six percent (6%) per annum shall be the prevailing rate
of interest when applicable.
Nonetheless, with regard to those judgments that have become final and executory prior to July 1, 2013,
said judgments shall not be disturbed and shall continue to be implemented applying the rate of interest
fixed therein.
To recapitulate and for future guidance, the guidelines laid down in the case of Eastern Shipping
Lines are accordingly modified to embody BSP-MB Circular No. 799, as follows:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi contracts, delicts or quasi-
delicts is breached, the contravener can be held liable for damages. The provisions under Title XVIII on
"Damages" of the Civil Code govern in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and compensatory damages,
the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or
until the demand can be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be
on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per annum
from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.
And, in addition to the above, judgments that have become final and executory prior to July 1, 2013,
shall not be disturbed and shall continue to be implemented applying the rate of interest fixed therein.
Based on the foregoing, the amount of P913,000.00 representing Manlapaz's full payment and which
FLPPI should turn over to HGC, shall be subject to interest at the rate of twelve (12%) per annum from
the date of the filing of the Complaint or on July 11, 2002100 until June 30, 2013, and thereafter, six
percent (6%) per annum from July 1, 2013 until finality of this judgment. Moreover, once the judgment
in the case at bench becomes final and executory, the awarded monetary amounts shall be subject to
legal interest at the rate of six percent (6%) per annum from such finality until its satisfaction.
38
WHEREFORE, the Petition for Certiorari is hereby DISMISSED. The assailed April 20, 2012 Decision and
June 14, 2012 Resolution of the Court of Appeals in CA-G.R. SP No. 112466
are AFFIRMED with MODIFICATIONS
THIRD DIVISION
G.R. No. 215006, January 11, 2021
ARAKOR CONSTRUCTION AND DEVELOPMENT CORPORATION, PETITIONER, VS. TERESITA G. STA.
MARIA, ALFREDO N. GADDI, FERNANDO N. GADDI
JUSTICE HERNANDO
This Petition for Review on annulment of Deeds of Absolute Sale and Transfer Certificates of Title filed
by herein respondents.
Facts
The Spouses Fernando Gaddi, Sr. (Fernando Sr.) and Felicidad Nicdao Gaddi (Felicidad) (collectively
Spouses Gaddi) owned the five contested parcels of land located in Hermosa, Bataan.
Felicidad died intestate on November 18, 1985, and was survived by Fernando Sr. and her eight
children, the herein respondents.
Fernando Sr. passed away, followed by Efren on May 8, 1998. After the deaths of Fernando, Sr. and
Efren, Atty. Greli Legaspi (Atty. Legaspi), the president of petitioner Arakor Construction and
Development Corporation (Arakor), informed the Gaddis that their parents had already sold the
contested five parcels of land to Arakor for P400,000.00 as evidenced by two undated Deeds of Absolute
Sale and that the titles to the properties have already been transferred to Arakor's name.
Gaddis filed a Complaint for Annulment of Deed[s] of Absolute Sale and Transfer Certificates of Title
against Arakor. They alleged that the two contracts of sale were forged and the conveyance of the
properties was fraudulent since Felicidad could not have signed the documents and given her consent
thereon since she has been dead for seven years before the alleged execution of the said contracts.
Arakor denied employing fraud. It contended that the Deeds of Absolute Sale were already signed and
notarized when Fernando Sr. and Efren delivered them to the office of Atty. Legaspi on September 8,
1992. Atty. Legaspi also disclaimed any knowledge about the death of Felicidad.
In addition, Arakor alleged that Teresita, Evangeline, Marilyn and Lilibeth had already assigned their
rights to Fernando Sr. through the two Joint Waiver of Claim and/or Right15 dated February 1992. Efren,
Alfredo, Lilian and Fernando Jr. likewise executed a Joint Waiver of Claims and/or Right16 on October
28, 1992. Thus, full ownership and title over the contested properties had been consolidated in favor of
Fernando Sr. at the time of the sale. Thus, the signature of Felicidad in the Deeds of Absolute Sale is no
longer material in determining the sale's validity.Moreover, Arakor averred that the Gaddis' claims are
barred by prescription since the company has been in open, continuous and lawful possession of the
properties as the owner thereof since September 1992.
During trial, Atty. Legaspi recounted that after giving the payment to Fernando Sr. and Efren, he (Atty.
Legaspi) took possession of the properties and even hired two watchers but he still allowed Fernando Sr.
and Efren to harvest the crops therein. Sometime in the early part of 1993, Fernando Sr. and Efren gave
him copies of the waivers of the Gaddis21 which they executed purportedly for taxation purposes. He
insisted that he had no idea about the demise of Felicidad passing and that he only found out about her
death when the waivers were delivered to him.
On rebuttal, Fernando Jr. insisted that during the lifetime of Felicidad, the Gaddis formed a family
corporation in order to consolidate the properties under the said company through the waivers.
However, only one property was transferred since Efren sold all the others. He maintained that the
family company did not authorize Fernando Sr. and Efren to sell the properties.
39
RTC declared the Deeds of Absolute Sale as void for being fictitious because Felicidad had already passed
away when the documents were executed. Additionally, it ruled that Arakor, represented by Atty.
Legaspi, was not a buyer in good faith. It thus ordered the Gaddis to return to Arakor the amount of
P400,000.00 with interest, chargeable to Fernando Sr.'s estate.
The CA, affirmed the RTC's ruling that the Deeds of Absolute Sale were null and void for being simulated
and forged.
Issue
Whether or not the appellate court correctly affirmed the findings of the trial court that the Deeds of
Absolute Sale are null and void for being forged and fictitious.
Ruling
As regards the validity of the Deeds of Absolute Sale, We note that Arakor acknowledged Gaddis'
allegation that Felicidad's signatures in the Deeds of Absolute Sale were forged since her death occurred
prior to the execution of the said contracts. In fact, Arakor alleged that Fernando Sr. and Efren also sold
a property to Matulac69 in spite of Felicidad's death, stressing that It was also a victim of fraud.
Case law provides that "forgery cannot be presumed and must be proved by clear, positive and
convincing evidence by the party alleging the same." In this case, the Gaddis satisfactorily discharged
this burden by submitting in evidence the Certificate of Death of Felicidad to prove that her demise
preceded the execution of the contracts of sale. This is in addition to Arakor's admission that Felicidad's
death occurred before the sale transpired. Obviously, she could not have signed any document which
leads to no other conclusion than that her signatures in the deeds were forged.
More importantly, "[i]f any one party to a supposed contract was already dead at the time of Its
execution, such contract is undoubtedly simulated and false, and, therefore, null and void by reason of
its having been made after the death of the party who appears as one of the contracting parties
therein." Indeed, "no one can give what one does not have; nemo dat quod non habet. One can sell only
what one owns or is authorized to sell, and the buyer can acquire no more right than what the seller can
transfer legally." Considering that Felicidad's signatures were forged, the Deeds of Absolute Sale are null
and void and convey no title to Arakor. Thus, the TCTs which were issued in favor of Arakor "by virtue of
the said spurious and forged document are also null and void." In fact, "all the transactions subsequent
to the alleged sale are likewise void."
WHEREFORE, the Petition for Review is DENIED. The assailed January 13, 2014 Decision and October 17,
2014 Resolution of the Court of Appeals in CA-G.R. CV No. 98704
are AFFIRMED with MODIFICATIONS, viz.:
40
THIRD DIVISION
G.R. No. 215006, January 11, 2021
Justice Hernando
This Petition for Review on annulment of Deeds of Absolute Sale and Transfer Certificates of Title filed
by herein respondents.
Facts
41
away when the documents were executed.Additionally, it ruled that Arakor, represented by Atty.
and forged.
Issue
Whether or not Arakor is an innocent purchaser for value.
Ruling
In the case at bench, Arakor cannot claim to be an innocent purchaser for value since Atty. Legaspi did
not diligently ascertain the genuineness of the signatures of the owners, Spouses Gaddi, especially that
of Felicidad's. He merely relied on Fernando Sr.'s representations that Felicidad's signature was genuine.
As aptly pointed out by the trial court, Atty. Legaspi, being a lawyer, should have been more circumspect
to determine if Spouses Gaddi both had the capacity to sell and if they voluntarily and validly signed the
deeds of sale. Atty. Legaspi could have requested or even demanded to personally talk to Felicidad in
order to affirm if she consented to the disposition of the properties. He could have investigated further,
considering Fernando Sr.'s age and the seeming enthusiastic attitude of Fernando Sr. and Efren in
delivering the contracts and causing its notarization even without Atty. Legaspi's presence. If only Atty.
Legaspi did his due diligence, he would have discovered that Felicidad was already dead, if his claim that
he had no idea about her death prior to the sale is to be believed.
WHEREFORE, the Petition for Review is DENIED. The assailed January 13, 2014 Decision and October
17, 2014 Resolution of the Court of Appeals in CA-G.R. CV No. 98704
are AFFIRMED with MODIFICATIONS.
42
THIRD DIVISION
G.R. No. 215006, January 11, 2021
Justice Hernando
Topic: Due execution of Deed of absolute sale
Facts
43
and forged.
Issue
Whether or not the there is due execution of Deeds of Absolute Sale.
Ruling
In the same way, Arakor cannot insist on the due execution of the Deeds of Absolute Sale simply
because these were notarized. "Time and again, we have ruled that 'while it is true that a notarized
document carries the evidentiary weight conferred upon it with respect to its due execution, and has in
its favor the presumption of regularity, this presumption, however, is not absolute.' It may be rebutted
by clear and convincing evidence to the contrary."
A reading of the acknowledgment portion of the deeds shows that Felicidad's name was not even
written correctly, as it indicated "Felicitas." Moreover, Arakor did not present the notary public as a
witness to affirm that the deeds were executed in accordance with the law, precisely because Felicidad
cannot possibly be physically present to confirm with the notary public that she voluntarily signed. It is
evident that the presumption of regularity as regards the due execution of the contracts cannot stand in
this instance.
44
THIRD DIVISION
G.R. No. 215006, January 11, 2021
ARAKOR CONSTRUCTION AND DEVELOPMENT CORPORATION, PETITIONER, VS. TERESITA G.
STA. MARIA, ALFREDO N. GADDI, FERNANDO N. GADDI
Justice Hernando
Topic: Declaration of inexistence of contract
Facts
45
and forged.
Issue
Whether or not the declaration of the inexistence of contract prescribe.
Ruling
Also, it is apt to mention that Article 1410 of the Civil Code states that "[t]he action or defense for the
declaration of the inexistence of a contract does not prescribe." Simply put, "an action that is predicated
on the fact that the conveyance complained of was null and void ab initio is imprescriptible." Hence, the
Gaddis could assail the validity of the Deeds of Absolute Sale and they rightly did so, in spite of Arakor's
claim that they failed to question the sale several years after Arakor secured the titles to the properties.
Lack of immediate challenge on the part of the Gaddis did not negate the fact that the contracts were
null and void and assailable anytime due to the imprescriptibility of the action. Similarly, Arakor cannot
invoke laches as a defense given that the action is imprescriptible.81 The Gaddis cannot be estopped
from assailing the validity of the deeds precisely because Felicidad's signatures were forged and
therefore produced no legal effect.
Arakor maintains that the Gaddis were in pari delicto, hence, their prayer should not be granted. Yet,
Arakor was not able to prove that the Gaddis had knowledge of the fraud committed by Fernando Sr.
and Efren, especially when a few of them are living in the United States as shown by their waivers.
Similarly, Arakor did not prove that the waivers were executed for the purpose of evading payment of
estate taxes, as this was contrary to the Gaddis' allegation that the properties were intended to be
transferred under the name of the family corporation. In any case, "[t]he doctrine of in pari delicto,
which stipulates that the guilty parties to an illegal contract are not entitled to any relief, cannot prevent
a recovery if doing so violates the public policy against unjust enrichment." To allow Arakor to retain
ownership over the properties notwithstanding the void nature of the contracts of sale would amount to
unjust enrichment as the petitioner would continue to benefit from the lands to the detriment of the
Gaddis.
Jurisprudence teaches that "the declaration of nullity of a contract which is void ab initio operated to
restore things to the state and condition in which they were found before the execution thereof." As
such, the trial court and the CA ordered the return of the certificates of title to the name of the Spouses
Gaddi. Moreover, to prevent unjust enrichment,85 the Gaddis should return the amount of P400,000.00
with legal interest to Arakor, although the total amount should be deducted from the estate of
Fernando Sr. as there is an assumption that he received the consideration as the remaining living owner
of the properties at the time. There was no sufficient proof offered to show that Efren also received part
of the money, amidst the Gaddis' allegation that he procured a loan from Atty. Legaspi. In other words,
"the restitution of what each party has given is a consequence of a void and inexistent contract.
46
SECOND DIVISION
G.R. No. 246096, January 13, 2021
PERLAS-BERNABE, J.:
Petition for review on that the sale of Lot No. 1559 to petitioners Spouses Benny and Normita Rol
(petitioners) is valid only insofar as half of the aggregate undivided interest of Fausto Urdas, Sr. (Fausto),
Chita Urdas (Chita), and Maria Urdas Baclig (Maria) therein are concerned.
Facts
Respondent Isabel Urdas Racho (Isabel) alleged that her brother, Loreto Urdas (Loreto), was the
registered owner of a 1,249-square meter (sq. m.) parcel of land located in the Municipality of Gonzaga,
Cagayan.Loreto died without an issue, thus, leaving his siblings, namely, Fausto, Chita, Maria, and Isabel
as his intestate heirs to the said lot. Sometime before the filing of the complaint, Isabel discovered that:
(a) Lot No. 1559 was subdivided into equal 624.50-sq. m. portions, denominated as Lot Nos. 1559-A and
1559-B; (h) despite Loreto's death in 1963, petitioners made it appear that Loreto sold to them the
subdivided lots through a Deed of Absolute Sale of Portion of Registered Land (c) in light of the
execution of said deeds, new titles covering the subdivided lots, namely, Transfer Certificates of Title
(TCT) Nos. T-1569929 and 032-201200456610 were issued in petitioners' names.
As such, Isabel was constrained to file a complaint for reivindicacion and damages before the RTC
against, petitioners.
In their Answer with Counterclaim, petitioners asserted that sometime in 1993, they were looking to
purchase a parcel of land. Coincidentally, petitioners were able to meet Fausto's wife and son, namely,
Leoncia, and Allan, who offered to sell them one-half of Lot No. 1559 for P25,000.00, to which they
agreed. Thus, on September 13, 1993 Fausto, Chita, Maria, and Allan executed an Extra-Judicial
Settlement with Sale (EJSS) concerning the subject lot .
According to petitioners, they have been in open, continuous, and peaceful possession of Lot No. 1559-A
since 1993 and Lot No. 1559-B since 2010, until Isabel disturbed the same by filing the instant complaint
in June 2013.17
RTC ruled in Isabel's favor, and accordingly, declared null and void .The RTC found the Deeds of Sale
dated September 1, 2006 and June 19, 2012 void for being forgeries, pointing out that there was no way
Loreto could have signed those instruments as he died in 1963. It also declared void the EJSS as it was
executed without the knowledge and consent of one of Loreto's intestate heirs, i.e., Isabel, and
consequently, the Deed of Sale of a Portion of Land dated September 26, 2011 for being a subsequent
transfer that emanated from the EJSS. Nonetheless, the RTC found petitioners to be purchasers in good
faith, opining that they acquired Lot No. 1559 for valuable consideration, not knowing beforehand that
their title thereto was a product of fraud. As such, they are only required to reconvey to Isabel an area
47
of 312.25-sq. m. out of the total area of 1,249-sq. m. of Lot No. 1559, in order to satisfy the latter's share
in Loreto's intestate estate.
Petitioners filed a motion for reconsideration which was, however, denied in a Resolution dated
September 3, 2015. Aggrieved, petitioners appealed to the CA.
No. 1559 is concerned; and (b) the award of actual damages to Isabel was deleted.
Echoing the RTC, the CA declared void the EJSS, considering that, inter alia, Isabel, a legal heir to Loreto's
intestate estate, was excluded therefrom. As such, the CA rendered void the adjudication of Lot No.
1559-B to Allan as he is not a legal heir to Loreto's intestate estate; and consequently, Allan's transfer of
the same to petitioners through the Deed of Sale of a Portion of Land dated September 26, 2011 is
likewise void, pursuant to the maxim nemo dat quod non habet. Nonetheless, the CA deemed valid the
sale of Lot No. 1559-A to petitioners, but only insofar as Fausto, Chita, and Maria's respective aliquot
shares therein, i.e., a total area of 468.375-sq. m., are concerned. Relatedly, the CA ruled that
petitioners are buyers in bad faith due to their failure to further inquire as to the capacity of Allan and
Leoncia to sell Lot No. 1559 and investigate the whereabouts of Loreto, the registered owner thereof.
Further, the CA held that Isabel is not guilty of laches because she was deprived of her hereditary share
without her knowledge and consent; and as such, she is not barred from invoking her right to her
inheritance in Loreto's estate.25
Finally, the CA deleted the award of actual damages in Isabel's favor for her failure to show her
entitlement thereto; but upheld the award of attorney's fees and costs of suit in her favor as she was
forced to litigate in order to assert her rights over Lot No. 1559.26
Undaunted, petitioners moved for reconsideration but the same was denied in a Resolution27 dated
February 13, 2019; hence, the instant petition.
Issue
Whether or not the CA correctly ruled that the conveyance of Lot No. 1559 to petitioners is null and
void.
Ruling
The petition is without merit.
Records show that there are a total of four (4) documents which supposedly transferred the two (2)
subdivided portions of Lot No. 1559, namely, Lot Nos. 1559-A and 1559-B, to petitioners. On the one
hand, Isabel alleged that the documents were the Deed of Absolute Sale of Portion of Registered Land
dated September 1, 2006 covering Lot No. 1559-A and the Deed of Sale of a Portion of Land dated June
19, 2012 covering Lot No. 1559- B, both purportedly executed by Loreto in favor of petitioners. On the
other hand, petitioners anchor their claim of ownership on: (a) the EJSS dated September 13, 1993
executed by Fausto, Chita, Maria, and Allan - which adjudicated a half portion of Lot No. 1559, i.e., Lot
No. 1559-A, to Fausto, Chita, and Maria who thereafter sold it to petitioners, and adjudicated the other
half, i.e., Lot No. 1559-B to Allan; and (b) the Deed of Sale of a Port1on of Land dated September 26,
2011 executed by Allan in favor of petitioners.
As for the documents pointed out by Isabel, suffice it to say that they are null and void for being
forgeries, as it is simply impossible that Loreto, who died in 1963, could have executed said documents
in 2006 and 2012, respectively. It is settled that forged deeds of sale are null and void and convey no
title.
As for the EJSS dated September 13, 1993, the CA correctly declared the same to be null and void,
considering that it was executed without the knowledge and consent of Isabel, a co-heir of Fausto,
Chita, and Maria, to the estate of their deceased brother, Loreto.29 In a catena of cases, the Court had
consistently ruled that a deed of extrajudicial partition executed to the total exclusion of any of the legal
heirs, who had no knowledge of and consent to the execution of the same, is fraudulent, vicious, and a
total nullity,30 as in this case. As such, it produced no effect whatsoever either against or in favor of
anyone.31 Therefore, the contents of the EJSS, namely: (a) the subdivision of Lot No. 1559 to two (2)
equal halves, namely Lot Nos. 1559-A and 1559-B and (b) alienation of the aforementioned halves, first,
48
to petitioners with consideration and second, to Allan gratuitously, are null and void and cannot be
given any legal effect as well.
SECOND DIVISION
G.R. No. 246096, January 13, 2021
PERLAS-BERNABE, J.:
Facts
in June 2013.17
49
Petitioners filed a motion for reconsideration which was, however, denied in a Resolution21 dated
inheritance in Loreto's estate.
forced to litigate in order to assert her rights over Lot No. 1559.26
Undaunted, petitioners moved for reconsideration but the same was denied in a Resolution27 dated
Issue
Whether or not portion in Lot No. 1559-A pertaining to Fausto, Chita, and Maria which is deemed
valid.
Ruling
In this case, when Loreto died, his siblings, namely, Fausto, Chitn, Maria, and Isabel all became co-
owners of Loreto's intestate estate, i.e., Lot No. 1559, pursuant to Article 107834 of the Civil Code, with
all of them having equal interest therein, i.e., 1/4 of the property. Thus, for the alienation of definite
portions of Lot No. 1559 to be valid, it must be with the consent of all of them. However, the alienations
of definite portions made in the EJSS was without the knowledge and consent of Isabel, and hence, are
null and void.
Nonetheless, as co-owners of Lot No. 1559, Fausto, Chita, Maria, and Isabel are free to dispose of their
undivided aliquot shares therein, which shall be limited to the portion that may be allotted to them
upon partition.3Otherwise stated, before an actual partition of an estate, an heir can only alienate his
successional rights or undivided interest thereto, and not specific portions thereof.
Thus, Fausto, Chita, and Maria could not sell a definite portion of an undivided property, i.e., one half of
Lot No. 1559 (which formerly pertained to Lot No. 1559-A), to petitioners. However, the Court
nevertheless recognizes their intent to sell one-half (1/2) of their inchoate interest over Lot No. 1559 to
the latter - not through the EJSS but via an oral contract of sale as in fact, they were able to do so as they
received proper compensation therefor from petitioners. Thus, petitioners were able to validly acquire
one half(1/2) of Fausto, Chita, and Maria's aggregate three-fourths (3/4) interest, or a total of 3/8
interest, over Lot No. 1559.
In the same vein, Fausto, Chita, and Maria could also not gratuitously convey a definite portion of the
same undivided property, i.e., one half of Lot No. 1559 (which formerly pertained to Lot No. 1559-8) to
Allan. In contrast, however, to petitioner's case, the Court could not give life to the three (3) siblings'
intent to convey one-half (1/2) of their inchoate interest over Lot No. 1559 to Allan, absent compliance
with the requirements of the law. To reiterate, the foregoing conveyance to Allan was made
gratuitously, and hence, essentially partakes of a donation of a real property. As such, it is required,
inter alia, that the donation must be made in a public instrument, and that the acceptance is made
either in the same deed or in a separate instrument.Since the only document of record showing
compliance with the foregoing requirements is the EJSS - which is, as discussed, null and void - Fausto,
Chita, and Maria's donation over such portion to Allan is void as well. Consequently, Allan and Leoncia's
sale of the same portion of land to petitioners had no legal effect whatsoever, following the maxim
nemo dat quod non habet.39 Hence, Fausto, Chita, and Maria are deemed to have retained their
remaining inchoate interest, i.e., 1/8 each, over Lot No. 1559.
50
Finally, since Isabel had no knowledge of, and thus, did not give her consent to, the foregoing, she
retains her 1/4 inchoate interest over Lot No. 1559.
WHEREFORE, the petition is DENIED. The Decision dated September 13, 2018 and the Resolution dated
February 13, 2019 of the Court of Appeals m CA-G.R. CV No. 105722 are AFFlRMED
with MODIFICATIONS,
Lease
FIRST DIVISION
G.R. No. 224552, March 3, 2021
Bermon Marketing Communication Corporation vs SPOUSES LILIA YACO and NEMESIO YACO
JUSTICE CARANDANG
Petition for Review on Certiorari the Decision of the Court of Appeals (CA) in CA-G.R. SP No. 126732
affi1ming with modification the Decision dated March 30, 2012 of the Regional Trial Court (RTC) which
affirmed the Decision dated August 8, 2011 of the Metropolitan Trial Court (MeTC) in ordering Berman
Marketing Communications Corporation (petitioner) to vacate the leased premises and to pay
reasonable compensation as rental of the property until the same is fully vacated, as well as to pay
atton1ey's fees.
Facts
Spouses Lilia M. Yaco and Nemesio Yaco (spouses Yaco) are the registered owners of a parcel of land at
No. 72 Apo St., Mandaluyong City containing an area of 393 square meters with a one-storey building,
an old residential house and an open space between the two buildings. Spouses Yaco and petitioner
entered into a Contract of Lease for a period of 6 years for 50,000 per month for the first two years and
will be subjects to 10% increase every 2 years.
It provided in the contract that the petitioner shall construct, at its own expense, a second floor on the
existing office, which upon termination of the lease will automatically become the property of the
spouses Yaco. Petitioner incurred expenses of PS00,000.00 for the construction of the same. Then,
sometime March 2001, petitioner constructed a new building on the open space in the property to be
used for its advertisement business. Petitioner claimed that the construction was with the knowledge
and consent of the spouses Yaco. Petitioner incurred an expense of Pl,135,282.41 on the material and
Pl,049,219.00 on labor.
According to the petitioner, the construction of the building was made with the understanding that the
lease contract will be extended for another four years. However, on January 12, 2007, the lease expired
without the same being renewed. Thereafter, the lease was converted into a month-to-month basis. On
December 14, 2007, spouses Yaco sent petitioner a Demand Letter to vacate the premises and to pay
the rent arrears. Petitioner claimed that the spouses Yaco went to its office and left a handwritten
proposal for the rent to be increased to P90,000.00 per month. Petitioner did not accept the proposed
increase and made a counter-proposal of 70,000.00 per month. Spouses Yaco promised to return but
51
they never did. 13 Then, on June 12, 2008, petitioner was surprised when they received a demand letter
for the unpaid rentals and to vacate the premises.
Spouses Yaco filed a Complaint for ejectment praying that the court order petitioner to vacate the
premises and to pay the amount of P242,000.00, P540,000.00 as payment for the use of improvements
from Janurary 12, 2007 up to June 12, 2008, and Pl 00,000.00 a month for the use of the entire premises
from June 13, 2008 until fullyvacated. 16 In its Answer with Counterclaim, petitioner claimed that the
parties agreed that the lease will be extended to 10 years and that petitioner may construct a building
on the open space. Petitioner spent more or less P2,000,000.00 for the construction of the new building.
Further, for the construction of the second-floor building, petitioner spent P500,000.00. Petitioner
claimed that it should be reimbursed of the following amounts, since the same was incurred in
improving the property, thereby increasing the value of the land.
Spouses Yaco alleged that they were not liable to reimburse petitioner for the construction cost because
the lease provided that the construction of the second floor will be at petitioner's own expense without
right of reimbursement, the ownership of the building belonging to spouses Yaco upon expiration of the
lease. Further, the construction of the new building on the open space was without consent or
knowledge of spouses Yaco.
MeTC rendered a judgment20 in favor of the spouses Yaco. RTC affirmed in toto the ruling of the MeTC.
CA partially granted the appeal of petitioner. The CA ruled that Article 448 of the Civil Code applies only
to a builder in good faith, meaning one who builds on a land in the honest belief that he is the owner
thereof. Article 448 of the Civil Code does not apply to a lessee who builds on the leased premises
because the lessee knows that he is not the owner of the leased premises. The law that governs
improvements introduced by a lessee on the leased premises is Article 1678 of the Civil Code. The lessor
has the option to pay the lessee one-half of the value of the useful improvements. Should the lessor
refuse to pay the improvements, the lessee may remove the improvements even though the principal
thing may suffer damage.
the spouses Yaco are not liable to pay one-half of the amount of the improvements to petitioner since it
cannot be said that the latter was in good faith when it introduced the improvements since it did not
present evidence that the respondents consented to such construction. Thus, where the lessee
introduced improvements and made repairs on the leased property in violation of the prohibition
stipulated in the verbal agreement with the lessor, he cannot claim good faith and is not entitled to a
reimbursement of the improvement.
Issue
Whether Article 1678 of the Civil Code is applicable in the present case.
Ruling
Article 1678 of the Civil Code is not applicable in the present case. Petitioner has effectively waived its
right of reimbursement under the Contract of Lease.
Article 1678. If the lessee makes, in good faith, useful improvements which are suitable to the use for
which the lease is intended, without altering the form or substance of the property leased, the lessor
upon the termination of the lease shall pay the lessee one-half of the value of the improvements at the
time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements,
even though the principal thing may suffer damage thereby. He shall not, however, cause any more
impairment upon the property leased than is necessary. With regard to ornamental expenses, the lessee
shall not be entitled to any reimbursement, but he may remove the ornamental objects, provided no
damage is caused to the principal thing, and the lessor does not choose. to retain them by paying their
value at the time the lease is extinguished.
By express provision of the law, Article 1678 of the Civil Code governs as to the improvements
introduced by the lessee on the leased premises during the term of the lease. Article 1678 gives the
lessor the sole option to choose whether to appropriate the improvements and to pay one-half of the
cost of the improvements or to exercise the option to have the lessee remove the improvements even if
the principal thing suffers damage. The payment of one-half of the value of the improvements was
intended to prevent unjust enrichment on the part of the lessor which now has to pay one-half of the
value of the improvements at the time the lease terminates because the lessee has already enjoyed ,
whereas the lessor could enjoy them indefinitely thereafter.
52
Nevertheless, under Article 1306 of the Civil Code, it is provided that "the contracting parties may
establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they
are not contrary to law, morals, good customs, public order, or public policy." Thus, parties are free to
enter into agreements and stipulate on the tem1S and conditions of the contract and waive their rights,
so long as the same are not contrary to law, morals, good customs, public order or public policy. In the
present case, Spouses Yaco and petitioner stipulated that any improvements shall be constructed at the
expense of the lessee which shall automatically become the exclusive property of the lessor at the end
of the lease without any reimbursement.
In the case of Lhuillier v. Court of Appeals,38 the agreement of the parties in the contract of lease to the
effect that improvements introduced by the lessee shall become the property of the lessor without
reimbursement is not contrary to law, morals, public order or public policy.
Therefore, the lessee is not prohibited from waiving his right to reimbursement. Petitioner waived his
right to reimbursement of one-half of the amount of the improvements he introduced. Thus, in the
absence of any allegation that it did not freely or knowingly waived its right to reimbursement as
stipulated in the contract of lease, Bermon is bound by the same. As such, spouses Yaco is not entitled
to reimburse petitioner.
WHEREFORE, the petition is DENIED. The Decision dated October 23, 2015 of the Court of Appeals in
CA-G.R. SP No. 126732 is AFFIRMED in toto.
SECOND DIVISION
G.R. No. 246096, January 13, 2021
PERLAS-BERNABE, J.:
Facts
53
in June 2013.17
Petitioners filed a motion for reconsideration which was, however, denied in a Resolution dated
Echoing the RTC, the CA declared void the EJSS, considering that, inter alia, Isabel, a legal heir to Loreto's
intestate estate, was excluded therefrom. As such, the CA rendered void the adjudication of Lot No.
1559-B to Allan as he is not a legal heir to Loreto's intestate estate; and consequently, Allan's transfer of
the same to petitioners through the Deed of Sale of a Portion of Land dated September 26, 2011 is
likewise void, pursuant to the maxim nemo dat quod non habet. Nonetheless, the CA deemed valid the
sale of Lot No. 1559-A to petitioners, but only insofar as Fausto, Chita, and Maria's respective aliquot
shares therein, i.e., a total area of 468.375-sq. m., are concerned. Relatedly, the CA ruled that
petitioners are buyers in bad faith due to their failure to further inquire as to the capacity of Allan and
Leoncia to sell Lot No. 1559 and investigate the whereabouts of Loreto, the registered owner thereof
inheritance in Loreto's estate.
forced to litigate in order to assert her rights over Lot No. 1559.
Undaunted, petitioners moved for reconsideration but the same was denied in a Resolution dated
Issue
Whether or not petitioners are innocent purchaser for value.
Ruling
On a related matter, petitioners cannot claim to be innocent purchasers for value. According to
jurisprudence, "An innocent purchaser for value refers to someone who 'buys the property of another
without notice that some other person has a right to or interest in it, and who pays a full and fair price at
the time of the purchase or before receiving any notice of another person's claim.'"40 Here, the CA
correctly pointed out that petitioners should have already been put on guard as to the true ownership of
the property when they learned that it was registered in the name of another person with whom they
were not dealing. Their failure to question the authority of the sellers thus negated their claim that they
were innocent purchasers for value.
Furthermore, petitioners' contention that Isabel is guilty of laches is unavailing. "Laches is defined as the
failure or neglect for an unreasonable and unexplained length of time to do that which, by exercising
due diligence, could or should have been done earlier; it is negligence or omission to assert a right
within a reasonable time, warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it."41 In this case, petitioners' self-serving allegation that Isabel knew
of the sale of Lot Nos. 1559-A and 1559-B to them for more than twenty (20) years was not
54
substantiated by evidence on record. Absent any clear and convincing proof, Isabel's claim cannot be
said to be barred by laches.
To summarize the foregoing discussions, in view of the nullity of the EJSS, the subdivision of Lot No.
1559 equally to Lot Nos. 1559-A and 1559-B should be invalidated as well. Furthermore, the following
have an interest over the said lot, namely: petitioners, with 3/8 interest Isabel, with 1/4 interest; and
Fausto, Chita, and Maria, with 1/8 interest each.
As a final point, however, it is equally important to point out that since the EJSS is invalidated, it is as if
Loreto's intestate, which includes Lot No. 1559, has yet to undergo proper settlement proceedings in
accordance with prevailing law. Thus, while Loreto's heirs, namely, Fausto, Chita, Maria, and Isabel, have
indeed acquired rights over Lot No. 1559 at the exact moment of Loreto's death42 - and consequently,
may convey such rights to third parties, such as what happened in this case when Fausto, Chita, and
Maria sold their rights over the property to petitioners - what they have are only inchoate rights over
the said lot. Otherwise stated, absent any proper settlement proceeding for Loreto's estate due to the
nullity of the EJSS, the ownership of Lot No. 1559 remains in the said estate, with the aforementioned
parties only having inchoate interests therein.
Accordingly, Lot No. 1559 should revert back to Loreto's estate, and only the parties' respective inchoate
interests should be recognized in this case. In particular, these inchoate interests over Lot No. 1559 are
as follows: petitioners, with 3/8 interest Isabel, with 1/4 interest and Fausto, Chita, and Maria, with 1/8
interest each. It goes without saying that each of them are free to resort to the available remedies in
order to settle Loreto's intestate estate, and subsequently, distribute/partition the property under
prevailing laws, rules, and jurisprudence.
WHEREFORE, the petition is DENIED. The Decision dated September 13, 2018 and the Resolution
dated February 13, 2019 of the Court of Appeals m CA-G.R. CV No. 105722 are AFFlRMED
with MODIFICATIONS,
THIRD DIVISION
G.R. No. 230599, January 20, 2021
ALFREDO SULIT, JULITA SULIT, AND THE HEIRS OF ARSENIO SULIT, REPRESENTED BY ALFREDO SULIT,
PETITIONERS, VS. SPOUSES EUGENIO AND ZENAIDA ALFONSO, ET.AL
JUSTICE INTING
Facts
The 4,086-square meter (sq.m.) property situated in Inaon, Pulilan, Bulacan owned by the Spouses
Arsenio and Julita Sulit (Julita) (collectively, Spouses Sulit). Arsenio is now deceased.Spouses Sulit begot
six children namely: Alfredo, Rufino, Rodolfo, Juan, Efren, married to Eugenia (Spouses Efren Sulit), and
Zenaida, married to Eugenio Alfonso (Spouses Alfonso).Alfredo, Rufino, Rodolfo, and Juan (collectively,
heirs of Arsenio) are herein petitioners; whereas Spouses Efren Sulit and Spouses Alfonso are among the
herein private respondents.
Deed of Absolute Sale was executed by Spouses Sulit which conveyed their 4,086-sq.m. property in favor
of their two children: Efren and Zenaida for a consideration of P3,000.00. Upon registration of the sale,
Transfer Certificate of Title (TCT) No. T-257536 was issued to Spouses Efren Sulit and Spouses
Alfonso.Two months later, or on December 6, 1979, a counter Deed of Sale was executed by Spouses
Efren Sulit and Spouses Alfonso which reconveyed the subject property to their parents, Spouses Sulit.
Despite the foregoing, Spouses Efren Sulit and Spouses Alfonso caused the subdivision of the subject
property and sold portions thereof .
The conveyaces prompted the filing of a Complaint for Annulment of Sale and/or Declaration of Nullity
of Title, Reconveyance and Damages with Prayer for the Issuance of a Writ of Preliminary IJliunction
and/or Temporary Restraining Order by petitioners against the following herein private respondents: (1)
Spouses Efren Sulit and Spouses Alfonso; and (2) Spouses Dizon, Magtalas, Elita, Edwin, Eiselle, Spouses
Esguerra, Spouses Manalili, and Leonilo Danilo Disor (Disor) (collectively, private respondents-
purchasers). Petitioners likewise impleaded public respondent Register of Deeds of Bulacan as
55
defendant. Aside from the aforementioned conveyances, petitioners added that Spouses Efren Sulit and
Spouses Alfonso likewise sold 718 sq.m. to Spouses Maximo S. Dinong and Priscilla S. Dinong (Spouses
Dinong), who in turn, sold it to Disor.
Petitioners argued that Spouses Efren Sulit and Spouses Alfonso had no authority to convey the subject
property as they were merely holding them in trust for Spouses Sulit. While petitioners admitted the
execution of the Deed of Sale, they posited that Spouses Sulit, during their lifetime, entrusted the
subject property and merely accommodated the request of their children, Efren and Zenaida, for capital
for a business transaction. In addition, petitioners alluded that Spouses Sulit never divested themselves
of ownership over the subject property due to the execution of a counter Deed of Sale to protect their
interests.
Private respondents then filed their Answer with Counterclaim30 wherein they countered that Spouses
Sulit intended to donate the subject property to Spouses Efren Sulit and Spouses Alfonso with a
condition for its return in case the sellers needed financial assistance. They alluded that they resorted to
executing a Deed of Sale for the purpose of convenience in registration Private respondents also
admitted that the counter Deed of Sale dated December 6, 1979 was executed without monetary
consideration, or otherwise; thus, they asserted that the subsequent conveyances of the subject
property by Spouses Efren Sulit and Spouses Alfonso were a valid exercise of their ownership rights
which were made in good faith and for value.
Spouses Efren Sulit and Spouses Alfonso filed a complaint against their own parents, Spouses Sulit, for
the declaration of nullity of the counter Deed of Sale dated December 6, 1979, but this was dismissed by
Branch 8, RTC, Malolos City, Bulacan in its Order dated August 5, 2002 in Civil Case No. 948-M-99;37 it
ruled that both Deeds of Sale dated October 15, 1979 and December 6, 1979 were invalid for lack of
consideration.38 The Decision was affirmed by the CAin its Decision dated April 30, 2004 docketed as
CA-G.R. CV No. 77496 which already attained finality.
On this ground, petitioners moved for summary judgment.40 However, the RTC denied it in an
Order41 dated June 5, 2007 as it found genuine factual issues that can be resolved only after the parties
have presented their respective evidence.
RTC rendered dismissing the complaint for lack of merit. The RTC ruled that the action for reconveyance
and annulment of title has already prescribed because the original complaint was filed on July 7, 2005
which was more than 10 years from the execution of the questioned sale transactions and their
subsequent registration that caused the issuance of certificates of title on the subject property.
CA denied the appeal and affirmed the dismissal of the complaint by the RTC, but ruled against the
prescription of the action. Contrary to the RTC, the CA ruled against prescription and explained that the
prior ruling of the RTC, Malolos City, Bulacan in Civil Case No. 948-M-99 which declared the Deeds of
Sale dated October 15, 1979 and December 6, 1979 as null and void made the subject action for
reconveyance based on a void contract imprescriptible.
Issue
Whether or not petitioners are barred from recovering the subject property on the ground that
private respondents purchasers were innocent purchasers for value and in good faith.
Ruling
The petition is impressed with merit
The Court recognizes that the issue of whether one is an innocent purchaser for value is a question of
fact which, as a rule, is beyond the ambit of the Court.Nevertheless, when the findings of the CA are
contrary to that of the RTC, an inquiry into the facts of the case is imperative as in this case where the
RTC did not dwell into the merits and dismissed the complaint on the ground of prescription which the
CA found inapplicable in view of the possession of petitioners.
A purchaser in good faith and for value is one who buys the property of another without notice that
some other person has a right to or interest in that same property and who pays a full and fair price at
the time of the purchase or before receiving any notice of another person's claim. Purchasers cannot
close their eyes to known facts that should put a reasonable person on guard and subsequently claim to
have acted in good faith in the belief that there was no defect in the vendor's certificate of title.Their
mere refusal to face up to that possibility will not make them innocent purchasers for value if it later
56
becomes apparent that the title was indeed defective and that they would have discovered the fact had
they acted with the measure of precaution required of a prudent person in a similar situation.
Initially, the burden of proving the status of a purchaser in good faith lies upon one who asserts that
status and this onus probandi cannot be discharged by mere invocation of the legal presumption of
good faith.81 Although private respondents theorize that there is no allegation in the Second Amended
Complaint82 that the subject property was purchased in bad faith,83 their Answer with
Counterclaim84 evinced otherwise when they asserted that private respondents-purchasers were
transferees/buyers in good faith.85 Private respondents would do well to remember that in civil cases,
the specific rule as to the burden of proof is that the plaintiffs have the burden of proving the material
allegations of the complaint which are denied by the answer, and defendants have the burden of
proving the material allegations in their answer which sets up a new matter as a defense.86 It should be
mentioned that this rule does not involve a shifting of the burden of proof but merely that each party
must establish his/her own case.
Despite private respondents' assertion that private respondents purchasers were irnocent purchasers
for value,. they only presented Juliana, wife of Ma,1olito Esguerra, who testified on the basis of a
Judicial Affidavit. Guillermo Manalili likewise executed a Judicial Affidavit but nothing in the records
indicated that he personally testified in open court, or that his Judicial Affidavit was offered in evidence.
Section 6 of the Judicial Affidavit Rule90 under "Offer of and Objections to Testimony in Judicial
Affidavit" states that, [t]he party presenting the judicial affidavit of his witness in place of direct
testimony shall state the purpose of such testimony at the start of the presentation of the witness.
Without the presentation of the person who executed the Judicial Affidavit, which in this case was
Guillermo Manalili, his Judicial Affidavit cannot be considered by the Court.
From the foregoing, private respondents are left with the lone testimony of Juliana to establish that all
of the private respondent purchasers are innocent purchasers for value. It is worth stressing that good
faith, or the lack of it is a question of intention which could be ascertained only from the acts of one
claiming its presence, for it is a condition of the mind which can be judged by actual or fancied token or
signs. It is not a visible, tangible fact that can be seen or touched, but rather a state or condition of mind
manifested by the acts of the individual concemed.92 Good faith being a state of mind, only private
respondents-purchasers themselves could personally attest as to how the observed the required
diligence in the purchase of real property. Juliana's testimony alone is insufficient to establish that all
the private respondents-purchasers herein were equally purchasers in good faith. As a matter of fact,
even the offer of Juliana's testimony merely covered her own alleged status as a purchaser in good faith
and for value. Without evidence to establish good faith, the Court finds that Spouses Dizon, Spouses
Manalili, Disor, Eiselle, Elita, Edwin, and Magtalas have failed to discharge the burden of proving that
they were innocent purchasers for value.
WHEREFORE, the petition is GRANTED. The Decision dated December 28, 2016 and the Resolution dated
March 16, 2017 rendered by the Court of Appeals in CA-G.R. CV No. 103462 are
hereby REVERSED and SET ASIDE.
57
FIRST DIVISION
G.R. No. 210976, January 12, 2021
UCPB LEASING AND FINANCE CORPORATION, PETITIONER, VS. HEIRS OF FLORENCIO LEPORGO, SR.,
REPRESENTED BY FLORENCIO LEPORGO, JR., RESPONDENTS.
JUSTICE CARANDANG
Facts
ULFC is the registered owner of an International Harvester Trailer Truck (trailer truck) with plate no.
CMZ-501. ULFC entered into a Lease Agreement with Subic Bay Movers, Inc. (SBMI) over the trailer
truck and other equipment. On the same date, SBMI received the trailer truck together with other
leased equipment. On November 13, 2000, at about 12:45 p.m., Florencio Leporgo, Sr. (Leporgo) was
driving his Nissan Sentra car bearing plate number UGA-280 along the national road in Barangay Real,
Calamba, Laguna. He had just left his office at the Bureau of Customs and was headed for the grocery.
While Leporgo's car was in full stop together with other vehicles waiting for traffic to move, the trailer
truck driven by Miguelito Almazan (Almazan) recklessly moved its way towards the road despite the
presence of stalled vehicles. The trailer truck hit all vehicles positioned along its way and hit several
persons and structures in the area until it halted on top of the car of Leporgo. The car driven by Leporgo
exploded, causing his death. Thereafter, the heirs of Leporgo filed a complaint for damages.
Almazan filed his Answer with Counterclaim containing general denial of the allegations in the complaint
and praying for the award of moral and exemplary damages, attorney's fees, and litigation expenses.
ULFC filed its Answer Ad Cautelam denying the material allegations in the complaint. ULFC set up the
following defenses that: (1) it is doing business as a finance company extending credit facilities to
consumers and to industrial, commercial, and agricultural enterprises; (2) on August 21, 1998, a Lease
Agreement was entered into wherein various vehicles owned by ULFC, including the subject vehicle,
were leased to SBMI; and (3) summons was not properly served to the responsible officers of ULFC as
58
provided by the Rules which is a ground for dismissing the complaint. ULFC also prayed for the payment
of moral damages in the sum of P500,000.00 and attorney's fees in the amount of P200,000.00.1
In the Amended Complaint, SBMI was impleaded as defendant. Acting on the heirs of Leporgo's Motion
for Leave to Serve Summons by Publication, the RTC ordered the service of summons by publication
upon SBMI, which has since moved out of its last known address. Upon motion, SBMI was declared in
default in an Order dated April 25, 2003. Thereafter, trial on the merits ensued.
RTC rendered its Decision finding ULFC and Almazan jointly and severally liable for the death of Leporgo.
The RTC held that there was substantial compliance with the rule on service of summons when it was
served on an employee of ULFC's Collection and Compliance Department. The RTC opined that the
subsequent service of summons by publication rectified whatever lapses the server committed. The RTC
acknowledged that ULFC received the summons, the complaint and its annexes, and actively
participated in the proceedings.The RTC also ruled that the heirs of Leporgo have a cause of action
against ULFC as the registered owner of the trailer truck and that it cannot be exempted from liability.
Although there was a lease agreement between ULFC and SBMI, it failed to meet the requirements of
the financial lease contemplated in Sections 3(d) and 12 of Republic Act No. (R.A.) 8556.The RTC found
Almazan to have been grossly negligent in driving the trailer truck which was the proximate cause of the
untimely death of Leporgo. Thus, he was declared jointly and severally liable with ULFC to pay actual
damages, moral damages, civil indemnity, expected income loss, attorney's fees, litigation expenses, and
exemplary damages.
The CA concurred with the computation of the RTC of Leporgo's loss of income, stating that his annual
income and probable life expectancy were duly considered. The claim for actual damages in the amount
of P482,533.04 was also duly supported with receipts. The civil indemnity of P50,000.00 was found to be
in accordance with recent jurisprudence. The CA also considered the award of moral damages in the
amount of P1,000,000.00, exemplary damages in the amount of P50,000.00, and attorney's fees in the
amount of P20,000.00 plus appearance fees of P2,000.00 per hearing fair and justified.
Issue
Whether the lower courts properly computed the monetary award in favor of the heirs of Leporgo.
Ruling
The computation of the RTC of Leporgo's Net Earning Capacity of Leporgo that the CA affirmed is
erroneous. In its Decision, the RTC computed the Net Earning Capacity of Leporgo as follows:
[Heirs of Leporgo] are entitled to be indemnified of the loss of earning capacity of their father who was
then earning as annual income of P173,520.00 (Exh. "BB"), income from conduction service (Exh. KK,
inclusive) at the average of P180,000.00 annually, multiplied for the rest of his life expectancy of 23
years more, plus 57 years which is the age of Mr. Leporgo at the time of his death, would be equivalent
to eighty (80) years, thus:
P173,520.00 --- annual income
P180,000.00 --- income from condition services per annum
P353,520.00 --- 23 years more
P8,127,960.0 --- total loss earnings59 (Emphasis and underscoring in the original)

0
There is a need to re-compute the Net Earning Capacity of Leporgo as it is not consistent with the
formula adopted in prevailing jurisprudence.
The prevailing formula for the computation of net earning capacity is as follows:
Net earning = Life Expectancy x [Gross Annual Income

capacity (GAI)- Living Expenses (50% of GAI)],
= [2/3 (80 - the age of the deceased)] x [GAI

- (50% of GAI)]60
59
ULFC posits that the factor of life expectancy should be adjusted to eight years instead of 23 years to be
consistent with the retirement age of 65 years old for government officers.61 In effect, ULFC wants the
Court to ignore the formula in computing life expectancy (2/3 x [80 – age at death]) that has been
adopted in recent cases. The Court cannot restrict the computation of Leporgo's life expectancy to (2/3 x
[65 – age at death]) simply because the deceased was a government employee whose mandatory age of
retirement is 65 years old. The formula for the computation of loss of earning capacity is meant to be
uniformly applied to all, regardless of the industry or sector they work in. Productivity and potential
earnings of the deceased cannot be measured only during the period between his untimely death and
the mandatory age of retirement in government service. The Court cannot disregard the possibility that
the deceased could have chosen to continue working or making profit through other means had he not
been prevented by his sudden death.
Here, Leporgo's annual income of P173,520.00 as an employee of the Bureau of Customs was
established by documentary evidence while the conduction services he rendered amounting to
P180,000.00 a year had been proven through testimonies of witnesses of the heirs of Leporgo. Applying
the cited formula, the correct computation in determining Leporgo's net earning capacity is as follows:
Net earning = [2/3(80-57)] x [(P353,520.00) –

capacity (P353,520.00 50%)]
= [2/3(23)] x (P353,520.00 – P176,760.00)
= 15.33 x P176,760.00
= P2,710,319.99
Therefore, the amount of loss of earning capacity awarded by the lower courts should be reduced to
P2,710,319.99.
WHEREFORE, the Decision dated August 15, 2013 and the Resolution dated January 21, 2014 of the
Court of Appeals in CA-G.R. CV No. 93743 are SET ASIDE.
FIRST DIVISION
G.R. No. 210976, January 12, 2021
UCPB LEASING AND FINANCE CORPORATION, VS. HEIRS OF FLORENCIO LEPORGO, SR., REPRESENTED
BY FLORENCIO LEPORGO, JR.
JUSTICE CARANDANG
Facts
60
exemplary damages.
Issue
Whether or not the co-judgement debtors shall be solidary liable.
Ruling
Solidary liability of co-judgment debtors
Lastly, the Court deems it proper to clarify that:
A reversal of a judgment on appeal is binding on the parties to the suit, but shall not benefit the parties
against whom the judgment was rendered in the court a quo. but who did not join in the appeal, unless
their rights and liabilities and those of the parties appealing are so interwoven and dependent as to be
inseparable, in which case a reversal as to one operates as a reversal as to all.
As a rule, a reversal of a judgment is binding only on the parties in the suit but does not control the
interest of the parties who did not join nor were made parties to the appeal. A recognized exception is
where the rights and liabilities of those who did not appeal and those of the parties appealing are so
interwoven and dependent on each other as to be inseparable, a reversal of the judgment as to one
would operate as a reversal to all.
While the cited cases do not share the same factual milieu as the present case, the legal principle
adopted by the Court in resolving the implication of an appeal by one of several judgment debtors is
applicable in the present case. ULFC, as the registered owner of the vehicle, is jointly and severally liable
with Almazan, the driver of the vehicle. The liability of ULFC hinges on the finding of negligence on the
part of Almazan his use of the vehicle. Although Almazan already lost their personality to appear in the
present petition due to their failure to appeal the decision of the RTC, the respective liabilities of the co-
judgment debtors are so interwoven that a later judgment adjusting the monetary award in favor of the
heirs of Leporgo would necessarily be incompatible with the judgment earlier rendered by the RTC.
Therefore, the resulting adjustment in the monetary award, at this stage of the proceedings, should
inure to the benefit of its co-judgment debtor Almazan.
61
THIRD DIVISION
G.R. No. 227095, January 18, 2021
TRANS INDUSTRIAL UTILITIES, INC., SPOUSES RODOLFO and VICTORIA TIU, and JUANITA T. TIU,
Present: Petitioners, v. METROPOLITAN. BANK & TRUST COMPANY, substituted by MERIDIAN
Promulgated: (SPV-AMC) CORPORATION, Respondent.
JUSTICE INTING
Facts
Trans Industrial Utilities Inc., (Trans Industrial) is a domestic corporation located at P. Burgos Street,
Mandaue City; Cebu. On the other hand, Metropolitan Bank & Trust Company (Metrobank) is a universal
banking institution duly organized and existing under the laws of the Philippines with principal place of
business in Makati City. In the course of the trial, it was substituted by Meridian Corporation (Meridian).
By virtue of board resolutions, Trans Industrial President, Rodolfo T. Tiu (Rodolfo) applied and was
granted loans by Metrobank on several occasions. ℒαwρhi ৷ As security for the loans, Trans Industrial,
through its authorized officers and with the consent of Mandaue Realty and Resources Corporation,
assigned its rights and title over a parcel of land covered by Transfer Certificate of Title (TCT) No.
38486.Considering that the property subject of the deed of assignment was insufficient to secure Trans
Industrial's obligations, Trans Industrial, Spouses Rodolfo and Victoria N. Tiu (Spouses Tiu), and Juanita T.
Tiu (collectively, petitioners) executed a Continuing Surety Agreerment in favor of Metrobank to secure
the loans in the amount of P16,343,800.00 for the Philippine Peso loan plus interest and charges.
Likewise, petitioners executed another Continuing Surety Agreement dated July 3, 1998 to secure the
loan in the amount of US$626,000.00 for the US Dollar loan.
Petitioners defaulted in the payment of the obligations at their respective maturity dates. Metrobank
made a demand, but petitioners still failed to pay their obligations. Petitioners then requested for the
restructuring of their loan obligations which Metrobank approved on the condition that petitioners will
62
partially settle the loans. Consequently, the parties executed a Debt Settlement Agreement9 on
September 25, 2000.
In compliance with the terms and conditions of the Debt Settlement Agreement, Trans Industrial
executed a Deed of Dacion En Pago on September 26, 2000 over its parcel of land covered by TCT No.
45993 with all its improvements. In order to secure the restructured loan obligation, petitioners
executed a continuing surety agreement on September 28, 2000. In the new surety agreement,
petitioners undertook to secure and pay the loan in the amount of P34,565,524.98 plus interest and
charges. Again, petitioners failed to pay the monthly amortizations starting November 30, 2001 to date.
When petitioners failed to pay despite demand, Metrobank filed an action for collection of sum of
money against petitioners.
After the presentation of evidence for Metrobank, petitioners filed a Demurrer to Evidence and argued
therein that the aggregate amount that the Trans Industrial was authorized by the Board of Directors to
borrow was only P15,000,000.00; and that the authority to borrow was limited in loans in Philippine
Pesos, but the bank allowed Trans Industrial to borrow in US Dollars; hence, Rodolfo exceeded his
authority in borrowing the amounts.
RTC issued an Order denying petitioners' demurrer to evidence. Petitioners filed a motion for
reconsideration, but the RTC denied it in an Order dated October 10, 2008. During the course of the
trial, Metrobank was substituted by Meridian. RTC rendered in favor of the plaintiff, MERIDIAN (SPV-
AMC) CORPORATION, and against the defendants TRANS INDUSTRIAL UTILITIES, INC., SPS. RODOLFO and
VICTORIA TIU and JUANITA T. TIU, sentencing said defendants to pay solidarily, jointly and severally the
plaintiff the sum of P37,985,078.49 plus 12% interest and 18% penalties per annum based on the
principal obligation of P34,565,524.98, from October 1, 2002 Willfully paid, and the costs.
CA denied petitioners' appeal and affirmed the decision of the RTC .The CA found that petitioners failed
to deny under oath the Secretary's Certificate2 confirming the Stockholders' Resolution dated July 24,
2000, and the Debt Settlement Agreement dated September 25, 2000. It held that the genuineness and
due execution of the Secretary's Certificate and Debt Settlement Agreement were already deemed
admitted by petitioners when they failed to deny these actionable documents under oath. It clarified
that petitioners freely and voluntarily entered into the Debt Settlement Agreement and there was no
evidence of any fraud on the part of Metrobank that would affect the validity of the Agreement;
Issue
Whether or not the resolution passed by the Board of Directors of Trans Industrial is null and void
because there was no quorum at the meeting held for such purpose.
Ruling
Still, after a judicious review of the records of the case, the Court concludes that petitioners failed to
show that the lower courts committed errors in appreciating the pieces of evidence presented by the
parties.
First, petitioners already admitted the genuineness and due execution of the Secretary's Certificate and
the Debt Settlement Agreement when they failed to specifically deny under oath their genuineness and
due execution. Their argument that the stockholders resolution is null and void because of a lack of
quorum has no legal basis because the Secretary's Certificate speaks otherwise. The Secretary's
Certificate confirming the stockholders resolution dated July 24, 2000, and the Debt Settlement
Agreement dated September 25, 2000 are actionable documents set forth by respondent against
petitioners in the amended complaint. "When an action or defense is based upon a written instrument
or document, the substance of such instrument or document shall be set forth in the pleading, and the
original or a copy thereof shall be attached to the pleading as an exhibit which shall be deemed to be
part of the pleading, or said copy may with like effect be set forth in the pleading." In order to contest an
actionable document, Section 8, Rule 8 of the Rules of Court provides:
SECTION 8. How to Contest Such Documents. - When an action or defense is founded upon a written
instrument, copied in or attached to the corresponding pleading as provided in the preceding section,
the genuineness and due execution of the instrument shall be deemed admitted unless the adverse
party, under oath, specifically denies them, and sets forth what he claims to be the facts; but the
63
requirement of an oath does not apply when the adverse party does not appear to be a party to the
instrument or when compliance with an order for an inspection of the original instrument is refused.
Records show that petitioners failed to specifically deny under oath the documents (Secretary's
Certificate and Debt Settlement Agreement) attached in the amended complaint. As established in the
proceedings below, petitioners' Amended Answer was not verified as noted in the Pre-Trial Order dated
January 19, 2004. Failure to verify the pleading is tantamount to failure to specifically deny under oath
the documents upon which the amended complaint was based. There is no doubt that petitioners
admitted the genuineness and due execution of these documents.
Having failed to specifically deny under oath the genuineness and due execution of the Secretary's
Certificate, and thus admitted its genuineness, due execution and authenticity, petitioners cannot
successfully interpose the statement of Rosalie T. Tiu, the Corporate Secretary who signed the
Secretary's Certificate, that there was no quorum when the Stockholders' Resolution dated July 24, 2000
and the Debt Settlement Agreement dated September 25, 2000 were passed and approved.
Significantly, the Secretary's Certificate itself provides that the resolution was "unanimously approved, a
legal quorum being present and voting." The Secretary's Certificate confirmed the July 4, 2000 resolution
that a meeting was held with a quorum and that the resolution was approved authorizing Trans
Industrial's negotiation and request for the restructuring of the loan with Metrobank. This resulted in
the execution of the Debt Settlement Agreement, the genuineness and due execution of 'which were
likewise admitted by petitioners. Accordingly, both the lower courts correctly upheld the validity of the
Secretary's Certificate and the Debt Settlement Agreement.
WHEREFORE, the petition is DENIED. The Decision dated October 30,2015 and the Resolution dated
August17, 2016 of the Court of Appeals in CA-G.R. CV No. 03923 are AFFIRMED in toto.
THIRD DIVISION
G.R. No. 227095, January 18, 2021
TRANS INDUSTRIAL UTILITIES, INC., SPOUSES RODOLFO and VICTORIA TIU, and JUANITA T. TIU,
Present: Petitioners, v. METROPOLITAN. BANK & TRUST COMPANY, substituted by MERIDIAN
Promulgated: (SPV-AMC) CORPORATION, Respondent.
JUSTICE INTING
Facts
Trans Industrial Utilities Inc., (Trans Industrial) is a domestic corporation located at P. Burgos Street,
Mandaue City; Cebu. On the other hand, Metropolitan Bank & Trust Company (Metrobank) is a universal
banking institution duly organized and existing under the laws of the Philippines with principal place of
business in Makati City. In the course of the trial, it was substituted by Meridian Corporation (Meridian).
By virtue of board resolutions, Trans Industrial President, Rodolfo T. Tiu (Rodolfo) applied and was
granted loans by Metrobank on several occasions. ℒαwρhi ৷ As security for the loans, Trans Industrial,
through its authorized officers and with the consent of Mandaue Realty and Resources Corporation,
assigned its rights and title over a parcel of land covered by Transfer Certificate of Title (TCT) No.
38486.Considering that the property subject of the deed of assignment was insufficient to secure Trans
Industrial's obligations, Trans Industrial, Spouses Rodolfo and Victoria N. Tiu (Spouses Tiu), and Juanita T.
Tiu (collectively, petitioners) executed a Continuing Surety Agreerment in favor of Metrobank to secure
the loans in the amount of P16,343,800.00 for the Philippine Peso loan plus interest and charges.
64
Likewise, petitioners executed another Continuing Surety Agreement dated July 3, 1998 to secure the
loan in the amount of US$626,000.00 for the US Dollar loan.
Petitioners defaulted in the payment of the obligations at their respective maturity dates. Metrobank
made a demand, but petitioners still failed to pay their obligations. Petitioners then requested for the
restructuring of their loan obligations which Metrobank approved on the condition that petitioners will
partially settle the loans. Consequently, the parties executed a Debt Settlement Agreement9 on
September 25, 2000.
In compliance with the terms and conditions of the Debt Settlement Agreement, Trans Industrial
executed a Deed of Dacion En Pago on September 26, 2000 over its parcel of land covered by TCT No.
45993 with all its improvements. In order to secure the restructured loan obligation, petitioners
executed a continuing surety agreement on September 28, 2000. In the new surety agreement,
petitioners undertook to secure and pay the loan in the amount of P34,565,524.98 plus interest and
charges. Again, petitioners failed to pay the monthly amortizations starting November 30, 2001 to date.
When petitioners failed to pay despite demand, Metrobank filed an action for collection of sum of
money against petitioners.
After the presentation of evidence for Metrobank, petitioners filed a Demurrer to Evidence and argued
therein that the aggregate amount that the Trans Industrial was authorized by the Board of Directors to
borrow was only P15,000,000.00; and that the authority to borrow was limited in loans in Philippine
Pesos, but the bank allowed Trans Industrial to borrow in US Dollars; hence, Rodolfo exceeded his
authority in borrowing the amounts.
RTC issued an Order denying petitioners' demurrer to evidence. Petitioners filed a motion for
reconsideration, but the RTC denied it in an Order dated October 10, 2008. During the course of the
trial, Metrobank was substituted by Meridian. RTC rendered in favor of the plaintiff, MERIDIAN (SPV-
AMC) CORPORATION, and against the defendants TRANS INDUSTRIAL UTILITIES, INC., SPS. RODOLFO and
VICTORIA TIU and JUANITA T. TIU, sentencing said defendants to pay solidarily, jointly and severally the
plaintiff the sum of P37,985,078.49 plus 12% interest and 18% penalties per annum based on the
principal obligation of P34,565,524.98, from October 1, 2002 Willfully paid, and the costs.
CA denied petitioners' appeal and affirmed the decision of the RTC .The CA found that petitioners failed
to deny under oath the Secretary's Certificate2 confirming the Stockholders' Resolution dated July 24,
2000, and the Debt Settlement Agreement dated September 25, 2000. It held that the genuineness and
due execution of the Secretary's Certificate and Debt Settlement Agreement were already deemed
admitted by petitioners when they failed to deny these actionable documents under oath. It clarified
that petitioners freely and voluntarily entered into the Debt Settlement Agreement and there was no
evidence of any fraud on the part of Metrobank that would affect the validity of the Agreement;
Issue
Whether or not CA erred in Not Holding That Petitioner TIUI Exceeded Its Authority Because It Was
Authorized To Borrow Money In Philippine Currency, Not Dollars And That Metrobank Is Estopped
From Converting The Dollar Loans Into Pesos For The Second Time At A Higher Rate Of Exchange
Ruling
Second, the Debt Settlement Agreement was freely and voluntarily entered into by the parties. There
was no proof of any fraud on the part of Metrobank that would affect the validity of the agreement. The
Debt Settlement Agreement showed that Trans Industrial acknowledged the credit accommodations
granted to it by the bank; that the obligations have become due and demandable. but the borrower and
sureties requested that the bank defer the filing of legal actions and settle the obligations; that
Metrobank agreed that there will be a new principal amount which will be the balance of the obligations
after the waiver of the penalty charges, the adjustment of due interest rates, the conversion of the US
Dollar den0minated loan together with the due interest thereon to Philippine Pesos, and after partial
payment of P22,000,000.00 by way of a dacion en pago, plus the necessary expenses of the dacion en
pago advanced by the tank; and that in case of failure to pay three consecutive monthly amortizations,
the bank may claim against the sureties Spouses Tiu, and Juanita T. Tiu. Notably, it can be deduced from
the Debt Settlement Agreement that petitioners acknowledged the new agreement and the
corresponding obligations thereon.
65
Petitioners themselves initiated the restructuring of the loan obligations. They were neither deceived
nor forced to enter into such an agreement. Factual evidence shows that petitioners voluntarily and
freely entered into the contract after taking all the necessary corporate acts to authorize and approve
the execution of the Debt Settlement Agreement. They were also aware of the contents of the
documents, i.e., the principal amount, interests imposed, the due dates and the conversion of US Dollar
denominated loans to Philippine Pesos. In the absence of proof of fraud or any circumstances vitiating
consent, the Debt Settlement Agreement shall be upheld as valid and binding upon the parties.
Petitioners likewise admitted the validity and enforceability of the loan agreements when they insisted
in their Amended Answer that the Trans Industrial has paid the interest under the loans and executed
the Deed of Dacion en Pago over the property covered by TCT No. 45993 in favor of Metrobank. and
their claim of overpayment of the obligations. Logically, it would be incredible for petitioners to pay the
interest and claim overpayment and later on argue that the contract embodying the obligation is null
and void. A claim of payment and overpayment is an admission of the existence and enforceability of
the loan obligations. Hence, petitioners a;e estopped in belatedly claiming that it is null and void or that
the stipulations thereon are different from what actually appears in the agreement itself.
FIRST DIVISION
G.R. No. 210976, January 12, 2021
UCPB LEASING AND FINANCE CORPORATION, VS. HEIRS OF FLORENCIO LEPORGO, SR., REPRESENTED
BY FLORENCIO LEPORGO, JR., RESPONDENTS.
JUSTICE CARANDANG
Facts
66
exemplary damages.
The CA ruled that ULFC, as the registered owner of the truck, is liable for damages incurred when its
wayward trailer truck driven by Almazan caused Leporgo's death.23 The fact that the vehicle was leased
to and was actually in the possession of a third party does not exempt the registered owner from
liability. Citing PCI Leasing and Finance, Inc. v. UCPB General Insurance Co. Inc.,24 the C A emphasized
that, as to third persons, ULFC is the owner of the vehicle despite its lease to SBMI. The non-registration
of the lease agreement between ULFC and SBMI precludes ULFC from invoking the exemption under
Section 12 of R.A. 8556.25
Issue
Whether ULFC, as registered owner of the trailer truck which collided with Leporgo's vehicle, may be
held liable, jointly and severally, with the driver of its lessee for the resulting damages.
Ruling
ULFC, a financing company and the registered owner of the vehicle that collided with Leporgo's vehicle,
may be held solidarily liable for the instantaneous death of Leporgo.
ULFC argues that it is expressly absolved from liability under Section 12 of R.A. 8556, otherwise known
as the "Financing Company Act of 1998," which provides:
Section 12. Liability of lessors. – Financing companies shall not be liable for loss, damage or injury
caused by a motor vehicle, aircraft, vessel, equipment, machinery or other property leased to a third
person or entity except when the motor vehicle, aircraft, vessel, equipment or other property is
operated by the financing company, its employees or agents at the time of the loss, damage or injury.
However, ULFC is mistaken in its interpretation of the cited provision.
In PCI Leasing and Finance, Inc. v. UCPB General Insurance Co., Inc.,51 the Court already settled that R.A.
8556 does not supersede nor repeal the law on compulsory motor vehicle registration. The Court
explained:
R.A. No. 4136, as amended, otherwise known as the Land Transportation and Traffic Code, to wit:
Section 5. Compulsory registration of motor vehicles. – (a) All motor vehicles and trailer of any type used
or operated on or upon any highway of the Philippines must be registered with the Bureau of Land
Transportation (now the Land Transportation Office, per Executive Order No. 125, January 30, 1987, and
Executive Order No. 125-A, April 13, 1987) for the current year in accordance with the provisions of this
Act.
(e) Encumbrances of motor vehicles. – Mortgages, attachments, and other encumbrances of motor
vehicles, in order to be valid against third parties must be recorded in the Bureau (now the Land
Transportation Office). Voluntary transactions or voluntary encumbrances shall likewise be properly
recorded on the face of all outstanding copies of the certificates of registration of the vehicle concerned.
Cancellation or foreclosure of such mortgages, attachments, and other encumbrances shall likewise be
recorded, and in the absence of such cancellation, no certificate of registration shall be issued without
the corresponding notation of mortgage, attachment and/or other encumbrances.
67
Neither is there an implied repeal of R.A. No. 4136. As a rule, repeal by implication is frowned upon,
unless there is clear showing that the later statute is so irreconcilably inconsistent and repugnant to the
existing law that they cannot be reconciled and made to stand together. There is nothing in R.A. No.
4136 that is inconsistent and incapable of reconciliation.
Thus, the rule remains the same: a sale, lease, or financial lease, for that matter, that is not registered
with the Land Transportation Office, still does not bind third persons who are aggrieved in tortious
incidents, for the latter need only to rely on the public registration of a motor vehicle as conclusive
evidence of ownership. A lease such as the one involved in the instant case is an encumbrance in
contemplation of law, which needs to be registered in order for it to bind third parties. Under this policy,
the evil sought to be avoided is the exacerbation of the suffering of victims of tragic vehicular accidents
in not being able to identify a guilty party. A contrary ruling will not serve the ends of justice. The failure
to register a lease, sale, transfer or encumbrance, should not benefit the parties responsible, to the
prejudice of innocent victims.
The non-registration of the lease contract between petitioner and its lessee precludes the former from
enjoying the benefits under Section 12 of R.A. No. 8556.52 (Emphasis supplied; citations omitted)
In this case, it is undisputed that the Lease Agreement53 between ULFC and SBMI was not registered
with the Land Transportation Office. Considering the non-registration of the lease agreement between
the parties, ULFC cannot invoke Section 12 of R.A. 8556 to excuse itself from liability for the
instantaneous death of Leporgo. Its liability remains even if the vehicle was under the control and
possession of SBMI at the time of the accident.
FIRST DIVISION
G.R. No. 224552, March 3, 2021
Bermon Marketing Communication Corporation vs SPOUSES LILIA YACO and NEMESIO YACO
JUSTICE CARANDANG
Petition for Review on Certiorari the Decision of the Court of Appeals (CA) in CA-G.R. SP No. 126732
affi1ming with modification the Decision dated March 30, 2012 of the Regional Trial Court (RTC) which
affirmed the Decision dated August 8, 2011 of the Metropolitan Trial Court (MeTC) to pay reasonable
compensation as rental of the property until the same is fully vacated, as well as to pay atton1ey's fees.
Facts
Spouses Lilia M. Yaco and Nemesio Yaco (spouses Yaco) are the registered owners of a parcel of land at
No. 72 Apo St., Mandaluyong City containing an area of 393 square meters with a one-storey building,
an old residential house and an open space between the two buildings. Spouses Yaco and petitioner
entered into a Contract of Lease for a period of 6 years for 50,000 per month for the first two years and
will be subjects to 10% increase every 2 years.
It provided in the contract that the petitioner shall construct, at its own expense, a second floor on the
existing office, which upon termination of the lease will automatically become the property of the
spouses Yaco. Petitioner incurred expenses of PS00,000.00 for the construction of the same. Then,
sometime March 2001, petitioner constructed a new building on the open space in the property to be
68
used for its advertisement business. Petitioner claimed that the construction was with the knowledge
and consent of the spouses Yaco. Petitioner incurred an expense of Pl,135,282.41 on the material and
Pl,049,219.00 on labor.
According to the petitioner, the construction of the building was made with the understanding that the
lease contract will be extended for another four years. However, on January 12, 2007, the lease expired
without the same being renewed. Thereafter, the lease was converted into a month-to-month basis. On
December 14, 2007, spouses Yaco sent petitioner a Demand Letter to vacate the premises and to pay
the rent arrears. Petitioner claimed that the spouses Yaco went to its office and left a handwritten
proposal for the rent to be increased to P90,000.00 per month. Petitioner did not accept the proposed
increase and made a counter-proposal of 70,000.00 per month. Spouses Yaco promised to return but
they never did. 13 Then, on June 12, 2008, petitioner was surprised when they received a demand letter
for the unpaid rentals and to vacate the premises.
Spouses Yaco filed a Complaint for ejectment praying that the court order petitioner to vacate the
premises and to pay the amount of P242,000.00, P540,000.00 as payment for the use of improvements
from Janurary 12, 2007 up to June 12, 2008, and Pl 00,000.00 a month for the use of the entire premises
from June 13, 2008 until fullyvacated. 16 In its Answer with Counterclaim, petitioner claimed that the
parties agreed that the lease will be extended to 10 years and that petitioner may construct a building
on the open space. Petitioner spent more or less P2,000,000.00 for the construction of the new building.
Further, for the construction of the second-floor building, petitioner spent P500,000.00. Petitioner
claimed that it should be reimbursed of the following amounts, since the same was incurred in
improving the property, thereby increasing the value of the land.
Spouses Yaco alleged that they were not liable to reimburse petitioner for the construction cost because
the lease provided that the construction of the second floor will be at petitioner's own expense without
right of reimbursement, the ownership of the building belonging to spouses Yaco upon expiration of the
lease. Further, the construction of the new building on the open space was without consent or
knowledge of spouses Yaco.
MeTC rendered a judgment20 in favor of the spouses Yaco. RTC affirmed in toto the ruling of the MeTC.
CA partially granted the appeal of petitioner. The CA ruled that Article 448 of the Civil Code applies only
to a builder in good faith, meaning one who builds on a land in the honest belief that he is the owner
thereof. Article 448 of the Civil Code does not apply to a lessee who builds on the leased premises
because the lessee knows that he is not the owner of the leased premises. The law that governs
improvements introduced by a lessee on the leased premises is Article 1678 of the Civil Code. The lessor
has the option to pay the lessee one-half of the value of the useful improvements. Should the lessor
refuse to pay the improvements, the lessee may remove the improvements even though the principal
thing may suffer damage.
the spouses Yaco are not liable to pay one-half of the amount of the improvements to petitioner since it
cannot be said that the latter was in good faith when it introduced the improvements since it did not
present evidence that the respondents consented to such construction. Thus, where the lessee
introduced improvements and made repairs on the leased property in violation of the prohibition
stipulated in the verbal agreement with the lessor, he cannot claim good faith and is not entitled to a
reimbursement of the improvement.
Issue
Whether spouses Yaco is liable to pay one-half of the amount of the improvements to petitioner.
Ruling
While, this Court is aware that in the recent case of CJH Development Corporation v. Aniceto, it held
that a provision in the contract which grants the lessor right to appropriate the improvement without
any obligation to reimburse directly contradicts Article 1678 of the Civil Code and that the lessor cannot
own the improvement without paying the lessee, the same is simply an obiter dictum since the right of
reimbursement was not even put into issue since CJH Development Corporation did not appropriate and
used the improvements used by Aniceto. It is settled that "an obiter dictum is a remark made, or opinion
expressed, by a judge, in his decision upon a cause by the way, that is, incidentally or collaterally, and
not directly upon the question before him, or upon a point not necessarily involved in the determination
of the cause, or introduced by way of illustration, or analogy or argument. It does not embody the
resolution or determination of the court, and is made without argument, or full consideration of the
point. It lacks the force of an adjudication, being a mere expression of an opinion with no binding force
69
for purposes of res judicata." Thus, it cannot be used as a guiding principle in this case to uphold
petitioner's right of reimbursement.
WHEREFORE, the petition is DENIED. The Decision dated October 23, 2015 of the Court of Appeals in
CA-G.R. SP No. 126732 is AFFIRMED in toto.
SECOND DIVISION
G.R. No. 241699, August 04, 2021
DENNIS T. UY TUAZON, WORLD WISER INTERNATIONAL, INC., AND JERZON MANPOWER AND
TRADING, INC., VS. MYRA V. FUENTES,
JUSTICE INTING
The case involves a complaint for declaration of nullity/annulment of contracts of lease executed by a
husband without the written consent of his wife.
Facts
Dennis T. Uy Tuazon (Tuazon) and Myra V. Fuentes (Fuentes) are the registered co-owners of two
parcels of land covered by Transfer Certificates of Title Nos. 146276 and 146277 located at 2004 F.B.
Harrison corner San Juan Streets, Pasay City where a building is constructed thereon known as DM
Building (subject property).Pending the proceedings for the declaration of nullity of marriage between
Tuazon and Fuentes lodged as well in Branch 260, RTC, Parañaque City, the RTC, in a Decision,
authorized Fuentes to sell the subject property, along with the other common properties of the
estranged spouses, in order to pay for the support pendente lite of Fuentes and their adoptive daughter.
The subject property was then sold to Philippine Coast Guard Savings and Loan Association, Inc.
(PCGSLAI) pursuant to the court order.
70
After the judgment declaring their marriage null and void attained finality on October 31, 2012, the
liquidation of the subject property was included. The subject property was occupied by two companies
owned by Tuazon and his family: World Wiser International, Inc. (World Wiser) and Jerzon Manpower
and Trading, Inc. (Jerzon).
Fuentes sent a notice to vacate the subject property to World Wiser. At that time, Jerzon was already
ordered closed by the Philippine Overseas Employment Administration, and thus, no longer in the
subject property
RTC approved the contract to sell between Fuentes and PCGSLAI and further directed the execution of a
contract of sale.Subsequently, Fuentes was compelled to file an unlawful detainer suit against World
Wiser for its refusal to vacate the subject property. In its defense, World Wiser presented the contracts
of lease executed by Tuazon in its favor for the period of July 1, 2012 to July 1, 2022. World Wiser
further presented contracts of lease between Tuazon and Jerzon.
On account of the presentation of the contracts of lease executed by Tuazon in favor of World Wiser
and Jerzon, Fuentes filed a complaint for declaration of nullity/annulment of contract. Tuazon, World
Wiser, and Jerzon (collectively, petitioners) raised the affirmative defense that the contracts were validly
executed even without the consent of Fuentes. They countered that because Fuentes no longer resided
in the conjugal home and failed to participate in the administration of their common properties, the
decision of Tuazon, as the husband and co-administrator, should prevail.
RTC rendered a Decision in favor of Fuentes which declared the contracts of lease as null and void. The
CA denied the appeal and affirmed the findings of the RTC.It ruled that Fuentes had always maintained
that she did not enter into any contract of lease with petitioners. The CA noted that the exclusive
administration and possession of the subject property was awarded to Fuentes by the RTC in the nullity
of marriage proceeding on September 8, 2014, and that prior thereto, Fuentes already filed an unlawful
detainer suit against World Wiser.
Issue
The main issue in this case is whether the CA committed reversible error in declaring the questioned
contracts of lease as void.
Ruling
The petition is devoid of merit.
The law requires that the disposition of common property by the husband as an administrator in
appropriate cases requires the written consent of the wife, otherwise, the disposition is void.
Article 124 of the Family Code provides:
Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both
spouses jointly. In case of disagreement, the husband's decision shall prevail, subject to recourse to the
court by the wife for a proper remedy, which must be availed of within five years from the date of the
contract implementing such decision.
In the event that one spouse is incapacitated or otherwise unable to participate in the administration of
the conjugal properties, the other spouse may assume sole powers of administration. These powers do
not include the powers of disposition or encumbrance which must have the authority of the court or the
written consent of the other spouse. In the absence of such authority or consent the disposition or
encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the
part of the consenting spouse and the third person, and may be perfected as a binding contract upon
the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either
or both offerors.
The law requires written consent of the other spouse, otherwise, the disposition of common property is
void. The requirement under the law is clear, categorical, unambiguous, and makes no room for
interpretation. Under the rules on statutory construction, where the law is clear and unambiguous, it
must be taken to mean exactly what it says, and courts have no choice but to see to it that the mandate
is obeyed.
71
In the case of Jader-Manalo v. Camaisa, the Court declared the sale of common property as void on the
ground that the written consent of the other spouse must concur regardless of his/her active
participation in the negotiations for being aware of the transaction is not consent.
Similarly, in Alejo v. Sps. Cortez, et al. Where the husband demanded compliance with the contract of
sale and required payment of the balance of the purchase price from the seller, despite his lack of
written consent thereof nor knowledge of the transaction entered into by the wife, the Court
maintained that the conveyance is void. The Court pronounced that the law is unequivocal when it
states that the disposition of conjugal property of one spouse sans the written consent of the other is
void.
As applied in this case, the lower courts aptly declared the lease contracts executed without the written
consent of Fuentes as void. The subject of the contracts of lease involved common property; hence, for
the contracts to be effective, the consent of both husband and wife must concur. It is immaterial
whether Fuentes had knowledge of the questioned transactions as the latter admittedly did not give her
written consent to the contracts. Significantly, Tuazon himself admitted that Fuentes did not participate
nor sign the contracts of lease. Unfortunately for petitioners, knowledge or being merely aware of a
transaction is not consent.
While it may be true that in a number of cases, the Court refrained from applying the literal import of a
particular provision of law if doing so would lead to unjust, unfair, and absurd results, the Court does not
see how applying Article 124 of the Family Code in the instant case would lead to injustice or absurdity.
Notably, Article 124 of the Family Code protects the community or conjugal property from unlawful
dissipation by any of the spouses which could inevitably prejudice the family. The law already outline,
the necessary safeguards and the straightforward procedure for every possible scenario in the
disposition or encumbrance of common properties in keeping with the special nature of ownership and
property regime governing marriage.
Here, petitioners were well aware that the subject property is a common property of Tuazon and
Fuentes, given Tuazon's proprietary rights over World Wiser and Jerzon. Tuazon even claimed that he
merely acted as the sole administrator of the common property on account of Fuentes' absence from
the conjugal home. However, the procedure before a spouse could convey common property without
the written consent of the other spouse in case of the latter's incapacity or inability to participate in the
administration is already laid out in Article 124 of the Family Code. It is compelling that there was no
showing that Tuazon obtained the authority of the court pursuant to the aforecited provision
considering that the transaction involved a disposition or encumbrance of common property.
WHEREFORE, the petition is DENIED. The Decision dated April 6, 2018 and the Resolution dated
August 1, 2018 of the Court of Appeals in CA-G.R. CV No. 107826 are hereby AFFIRMED.
Torts and damages \

THIRD DIVISION
G.R. No. 223635, June 14, 2021
MAUREEN ANN ORETA-FERRER, VS. RIGHT EIGHT SECURITY AGENCY, INC.,
JUSTICE LOPEZ
Petition for Review on Certiorari assailing the Decision and the Resolution of the Court of Appeals (CA)
in CA-G.R. CV No. 102157. The assailed Decision reversed and set aside the Decision dated January 28,
2013 of the Regional Trial Court (RTC) of Makati City, Branch 62 in Civil Case No. 08- 498.
Facts
Right Eight Security Agency, Inc., (respondent) is the security provider of Casa Verde Townhomes (Casa
Verde), where Maureen Ann Oreta-Ferrer (petitioner) is a resident. To ensure the safety of the
residents, Casa Verde required respondent to observe the standard operating procedure stated in its
1994 Revised Rules & Regulations as follows: Check all articles brought in & out of the compound.
Prevent the delivery & taking out of goods & other articles by workers, contractors, drivers, domestic
helpers without the permission of the unit owner.
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On the other hand, Casa Verde imposes on the unit owner the following responsibilities as regards the
conduct of their helpers: Unit owner and/or lawful occupants shall be responsible for the behavior and
conduct of their maids, helpers and drivers, and their compliance with these Rules.
To this end, Casa Verde and respondent executed a Contract of Security Services which Stipulates that
the latter shall be liable, in case of any loss or damage due to the fault or negligence of its security
guard/s, in
If after investigation it is established by substantial evidence that the loss/damage Incurred by Client is
attributed directly to the negligence of the guard/s without any contributory negligence on the part of
the Client, the Agency, agrees to restore, indemnify, & pay for-such loss or damage.
In the afternoon of April 15, 2008, another househelper named Elsie Matibad (Matibad), together with
Mio, accompanied Perez to the guard house and told the guard-on-duty, Richard Almine (SG Almine)
that petitioner will meet Perez in Makati City to get some personal belongings which the latter prepared
in a red shopping bag. SG Almine asked for Perez's gate pass, but she had none. It was at this point that
Mio told SG Almine, "My mommy already knows about that She called me already;" When SG Almine
asked for further confirmation, Mio replied, "Ako na nga ang nagsasabi sayo na okey na."
SG Almine checked the contents of Perez's paper bag and saw plastic sachets of hair gel, after which he
heeded Mio's instructions since it has been a normal practice for petitioner and her family to send him
to the guard house to confirm the authorized egress of Perez without a gate pass.SG Almine did not
bodily, frisk Perez because this is not allowed by the Casa Verde's Homeowner's Association, but he
logged her exit in the security logbook afterwards.When petitioner arrived home, and she was informed
by Mio and Matibad that Perez left to meet with her in Makati.Alarmed since, this was not the case;
petitioner immediately checked the master's bedroom where she discovered that her drawer had been
forcibly opened and several pieces of jewelry consisting of: a) one (1) pair of mini diamond earrings and
necklace, b) one (1) piece of silver bracelet, c)" one (1) pair of diamond earrings with silver white gold
border frame, d) one (1) pair of heart diamond earrings-with white mini diamonds, e) one (1) pair of
blue diamond earrings with white mini diamonds, f) one (1) piece of Rolex solid gold watch, g) one (1)
piece Rolex two-toned colored watch, h) one (1) piece silver bracelet, i) one (1) piece silver bangles, and
j) one (1) pair of pearl earrings. plus cash, amounting to P60,000.00, with an aggregate value of
P6,020,000.00, were missing.
Petitioner, through her lawyer, sent respondent a demand letter holding them liable for the loss of her
valuables on the ground that its security guard on-duty failed to accost Perez. Acting on the complaint,
respondent conducted its own investigation and concluded that SG Almine undertook all routine
security measures on Perez," and thus refused to heed petitioner's demand. This notwithstanding,
respondent submitted an Investigation Report, prepared by its investigator, Allan Capones (Capones),
who recommended that "Casa Verde gate guards should be equipped with metal defectors," among
others.Discontented, petitioner filed a complaint for damages against respondent on June 27, 2008.
RTC, in its Decision dated January 28, 2013, found merit in petitioner's complaint, but held her equally
liable for contributory negligence, which led the RTC to disallow her claim for exemplary damages and
reduce her claim for. moral damages
CA found that respondent performed the functions required of it under the contract with Casa Verde,
hence, it should not be made liable for petitioner's losses. CA reversed and set aside the ruling of the
RTC in its assailed Decision, the dispositive portion of which states;
Issue
Whether or not CA erred in reversing the findings of RTC that respondent is not grossly negligent.
Ruling
The Court answers in the negative. Respondent followed the protocol on security inspection which
belied negligence on its part.
A circumspect reading of Casa Verde's 1994 Rules and Regulations indicate that respondent was tasked
to observe the following security protocol in dealing with the ingress and egress of people in the village:
1) check all articles brought in and out of the compound; and 2) prevent the delivery and taking out of
goods and other articles by workers, contractors, drivers, domestic helpers without the permission of
the unit owner. In this regard, respondent is Subject to the restriction that it cannot bodily frisk the
people-who will leave CaSa Verde's premises.
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Pertinent thereto, the Contract of Security Services executed by the parties expressly stipulated that
"[w]hen the lost or damaged property is pocketable or easily transported or concealed or which cannot
be considered as bulky such as, but not limited to, pocket calculator, Jewelries & cash" respondent shall
not be liable, for any loss or damage.
The real nature of a contract may be determined from the express terms of the written agreement and
from the contemporaneous and subsequent acts of the contracting parties. In the construction or
interpretation of an instrument, the intention of the parties is primordial and is to be pursued. If the
terms of the contract are clear and leave no doubt upon the intention of the contracting parties, the
literal meaning of its stipulations shall control.
Casa Verde's 1994 Rules and Regulations, when read together with, the Contract of Security Services,
indicates that Casa Verde only expect respondent to do a visual search or inspection of the people who
will enter and leave the premises. This is why Casa Verde agreed that respondent cannot be held liable
for the loss of any item which cannot be considered as bulky, such as cash and jewelry, because the said
items can. be easily concealed underneath one's clothing; which would make it difficult to detect by
mere visual inspection.
Guided by these parameters, no breach can be attributed to respondent, since SG Almine observed the
following protocols when Perez arrived at the guard house: (1) he asked for her gate pass; (2) when she
cannot present one, he asked for further confirmation, w7hich petitioner's son guaranteed, (3) he
checked Perez's paper bag which contained hair gel products;and (4) after finding nothing suspicious, he
allowed her to leave and logged her exit on the logbook. To the mind of the Court, he followed the
routine procedure on security inspection set by Casa Verde, which belied negligence on the part of
respondent.
While respondent's investigator, Capones, recommended that the security guards should be equipped
with metal detectors, it was essential for petitioner to establish that this is a common practice among
security agencies, and that respondent's conduct falls below such standard. These conditions are
necessary since "[n]egligence is defined as the failure to observe for the protection of the interests of
smother person that degree of care, precaution, and vigilance that the circumstances justly demand,
whereby such other person suffers injury." Conformably with this understanding of negligence, the
diligence the law requires of an individual to observe and exercise varies according to the nature of. the
situation in which [he/she] happens to be, and the importance of the act that [he/she] has to perform.
Negligence is, therefore, a relative or comparative concept.The law here, in effect, adopts the standard
supposed to be supplied by the imaginary conduct of the discreet paterfamilias of the Roman law.The
existence of negligence in a given case is not determined by reference to the personal judgment of the
actor in the situation before him.The-law considers what would be reckless, blameworthy, or negligent
in the man of ordinary intelligence and prudence and determines liability by that. Hence, petitioner
should first establish what a prudent and reasonable person should do as required by the circumstances
and measure respondent's efforts against it, to ultimately determine whether breach of duty took place.
WHEREFORE, premised considered, the Petition for Review is DENIED. The September 17, 2015
Decision and the March 16, 2016 Resolution of the Court of Appeals in CA-G.R. CV No. 102157, are
hereby AFFIRMED.
74
Mortgage
SECOND DIVISION
G.R. No. 203946, August 04, 2021
ARTURO A. DACQUEL, VS. SPOUSES ERNESTO SOTELO AND FLORA DACQUELSOTELO, REPRESENTED BY
THEIR ATTORNEY-IN-FACT, IMELDA SOTELO,
JUSTICE HERNANDO
This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails Decision and the
October 10, 2012 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 93939.
Facts
The a parcel of land located in Malabon City formerly covered by Transfer Certificate of Title (TCT) No.
738in the names of respondents-spouses Ernesto and Flora Sotelo (the Sotelos), which later registered
under the name of petitioner Arturo Dacquel (Dacquel). Record shows that in 1994, the Sotelos began
the construction of a 7-door apartment on the subject land. Due to budget constraints, the Sotelos had
to borrow the amount of P140,000.00 from Dacquel, who was Flora Sotelo's (Flora) brother. The
construction of the apartment was completed in 1997.
The Sotelos claimed that the debt of P140,000.00 was agreed to be payable in double the said amount
or P280,000.00, to be collected from the rental income of four out of the seven apartment units. There
was no agreed period within which to pay the loan and the interests. Dacquel also required the Sotelos
to cede to him the subject land as security for the loan.
The parties executed a Deed of Sale in consideration of the amount of P140,000.00. TCT No. 738 in the
names of the Sotelos was thereafter cancelled and TCT No. M-10649 was issued, constituting Dacquel as
the new registered owner of the subject land. In March 2000, when Dacquel had collected the full
amount of P280,000.00 in rental income from the four apartment units, the Sotelos asked for the return
of the subject lot. Dacquel, however, allegedly held on to the title and refused to yield the subject lot to
the Sotelos.
Sotelos filed a Complaint for annulment of title and reconveyance against Dacquel before the Regional
Trial Court (RTC), Branch 74 of Malabon City. The Sotelos alleged in their Complaint that Dacquel held
the title to the subject land only as security for the loan and in trust for the Sotelos, who remained the
beneficial owners of the subject lot. Upon Dacquel's receipt of more than the amount he had loaned to
the Sotelos, the former was legally obligated to reconvey the property to the latter. The building permits
for the 7-door apartment, as well as the original registration of the electric and water meters of all seven
units, were issued in Ernesto Sotelo's (Ernesto) name and that the construction expenses were paid for
by Ernesto's checks.
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Dacquel, on the other hand, asserted that the Sotelos's debts to him totaled P1,000,000.00, which he
had recorded in a black diary. As payment for their debts, the Sotelos had actually offered to sell to him
the subject land and he had accepted their offer. They reduced the said agreement into writing as a
Deed of Sale on September 1, 1994 for the true consideration of P1,000,000.00, and the amount of
P140,000.00 was indicated on the Deed of Sale only for the purpose of reducing the tax liabilities for the
transaction.
The Sotelos were allegedly estopped from questioning the validity of the Deed of Sale because of their
acquiescence to the subject property's transfer unto Dacquel's name. Also, Dacquel caused the
construction of the apartment using the sum he inherited from one Richmond Lloyd Wilcox. He did not
authorize the Sotelos to lease and collect rental payments from the three apartment units. By way of
counterclaim, Dacquel sought moral and exemplary damages against the Sotelos, as well as
reimbursement of attorney's fees.
The RTC ruled in favor of Dacquel. It held that there was no evidence that Dacquel was of foreign
citizenship who was disqualified to own lands in the Philippines as of the date of sale. It also discounted
the checks issued and presented by Ernesto, since there was nothing on the face of the said checks to
show that these were intended to finance the construction of the apartment, more so that these were
issued to pay to the order of "Cash". The RTC also ruled that the registration of property in one's name
for billing purposes, when in reality the same property is owned by another, is common practice in the
country In its May 27, 2009 Decision,the RTC dismissed the Sotelos' Complaint as follows:
The CA reversed the RTC and decided in favor of the Sotelos. Applying the provisions of Articles 1602
and 1604 of the Civil
Issue
Whether or not the transaction between the parties is equitable equitable mortgage
Ruling
The Petition is meritorious in part.
The transaction between petitioner and respondents-spouses was an equitable mortgage.The CA
correctly declared the subject transaction between petitioner and respondents-spouses as an equitable
mortgage.
Decisive for the proper determination of the true nature of the transaction between the parties is their
intent, shown not merely by the contract's terminology but by the totality of the surrounding
circumstances, such as the relative situations of the parties at that time; the attitudes, acts, conduct, and
declarations of the parties; the negotiations between them leading to the deed; and generally, all
pertinent facts having a tendency to fix and determine the real nature of their design and
understanding.When in doubt, courts are generally inclined to construe a transaction purporting to be a
sale as an equitable mortgage, which involves a lesser transmission of rights and interests over the
property in controversy.
Here, the CA applied these principles and aptly found two badges of fraud against petitioner - gross
inadequacy of price in the Deed of Sale and continued possession of the subject property by
respondents-spouses as debtors of petitioner. The court a quo discussed its own findings of fact at
length, which this Court deems already sufficient and persuasive, viz.:
First, there was gross inadequacy in the purchase price. The Deed of Absolute Sale shows that the
consideration for the subject property was only Php140,000.00. While no evidence definitely establishes
this as the market value of the property for 1994, both parties agree that the proper consideration for
the same should be in the amount of at least Php 1 Million: [respondents- spouses] averred that the
price per square meter of the 350 square meter was Php5,000.00, while [petitioner] stressed that the
property was transferred to him in satisfaction of [respondents-spouses] debts to him amounting to
more that Php 1 Million. It is also noteworthy that the property was mortgaged for the amount of
Php500,000.00, which [petitioner] did not contest, and for which an annotation has been made on
[respondents-spouses'] title. Furthermore, We observed that the stated Php140,000.00 included the
improvements already constructed at the time. Thus, in light of these, that only Php140,000.00 was the
agreed upon consideration for the subject property strikes Us as suspect and grossly inadequate.
Relevantly, [petitioner's] version that the [respondents-spouses] owed him debts amounting to more
than Php 1 Million, with the amount only being stated in the Deed of Sale as a tax evasion device, fails to
inspire belief. The alleged debts have not been duly proved. [Petitioner's] only evidence of such
obligations were statements in a diary which he himself made. There are several reasons why We find
such statements inadequate to prove the supposed indebtedness. First, there exists no proof that these
amounts were actually sent to and received by [respondents-spouses]. Second, [petitioner] never even
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detailed how he transmitted these to [respondents-spouses], which could have lent his testimony some
credibility. Third, there is also no proof that these diary entries were even indeed made on the dates
these loans were purportedly contracted, so as to show that these diary entries were not merely
fabricated or made at a later date to conform to [petitioner's] position. Without such crucial proof,
these entries are thus merely self-serving, and consequently, have no probative value to show that
[respondents-spouses] were indeed indebted to [petitioner] in those amounts.
As a consequence, petitioner's failure to prove [respondents-spouses] indebtedness of more than Php 1
Million eliminates the construction that the Deed of Sale was one of dacion en pago for such a
substantial obligation However, it bears stressing that the non-existence of the debt does not prevent
Us from noting that [petitioner] likewise agreed that the P140,000.00 expressed in the Deed was too low
to correspond to the actual market value of the property.
Moreover, even granting that the respondents-spouses were indeed indebted to [petitioner] in the
amount insisted by the latter, a reading of the Deed shows that the subject property was clearly
conveyed to [petitioner] for only Php140,000.00. Nothing in the Deed shows that the property was
conveyed for a consideration other than the amount appearing thereon.
SECOND DIVISION
G.R. No. 203946, August 04, 2021
ARTURO A. DACQUEL, VS. SPOUSES ERNESTO SOTELO AND FLORA DACQUELSOTELO, REPRESENTED BY
THEIR ATTORNEY-IN-FACT, IMELDA SOTELO,
JUSTICE HERNANDO
Facts
the Sotelos.
77
transaction.
and 1604 of the Civil Code.
Issue
Whether or not the agreement entered by the petioner with the respondent is dacion and pago
Ruling
Also, petitioner cannot correctly argue that his agreement with respondents-spouses constituted dation
in payment or dacion en pago. The case of Filinvest Credit Corporation v. Philippine Acetylene Co. Inc.
defined this contract, viz.:
Dacion en pago, according to Manresa, is the transmission of the ownership of a thing by the debtor to
the creditor as an accepted equivalent of the performance of obligation. In dacion en pago, as a special
mode of payment, the debtor offers another thing to the creditor who accepts it as equivalent of
payment of an outstanding debt. The undertaking really partakes in one sense of the nature of sale, that
is, the creditor is really buying the thing or property of the debtor, payment for which is to be charged
against the debtor's debt. As such, the essential elements of a contract of sale, namely, consent, object
certain, and cause or consideration must be present. In its modem concept, what actually takes place in
dacion en pago is an objective novation of the obligation where the thing offered as an accepted
equivalent of the performance of an obligation is considered as the object of the contract of sale, while
the debt is considered as the purchase price.
Glaring legal and factual reasons debunk petitioner's claim of dacion en pago.
First, the March 1999 Dacion en Pago ubmitted by petitioner apparently pertains to another debt that
was not proven to have transpired. The relevant stipulations in the Dacion en Pago are hereafter
reproduced:
WHEREAS, I, ARTURO A. DACQUEL xxx am the registered owner of the parcel of residential lot with
improvement situated in Malabon, Metro Manila, more particularly described [under TCT No. M-10649];
WHEREAS, I acquired by purchase, the above parcel of land from the spouses ERNESTO SOTELO and
FLORA DACQUEL for a consideration of ONE MILLION FOUR HUNDRED FIFTY THOUSAND PESOS
(P1,450,000.00), of which amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00) remains as
balance which I have not yet paid to the spouses;
WHEREAS, I have constructed a seven-door apartment building on the said parcel of land, each door or
unit designated as "37-A", "37-B", "37-C", "37-D", "3 7-E", "37-F", and "37-G" xxx;
WHEREAS, in full payment of the purchase price of the aforesaid lot from the Sotelo-spouses, I, as the
Vendee of the said Sotelo spouses, as the Vendors thereof, have agreed that three (3) of the apartment
units designated as 37-A, 3 7-B and 37-C which are all successive and adjoining apartments xxx shall be
78
ceded, conveyed, and transferred unto the said spouses xxx, together with land on which the said
apartment doors are erected;
NOW THEREFORE, for and in consideration of the foregoing premises, and by way of my full payment of
the unpaid balance for the lot equivalent to the amount of FIVE HUNDRED THOUSAND PESOS
(P500,000.00), I, ARTURO F. DACQUEL, hereby cede, convey, transfer by way of DACION EN PAGO, in
favor of the spouses ERNESTO SOTELO and FLORA DACQUEL, their heirs, assigns, and successors-in-
interest, THREE (3) apartment units designated as 37-A, 37-B, and 37-C xxx, together with land on which
the said apartment doors are erected thereon, including the ground space surrounding the 3-door
apartments, in full liquidation of any indebtedness to said spouses by way of the unpaid purchase price
of the above-described land.
This Dacion en Pago constituted petitioner Dacquel as the buyer of the subject lot and the respondents-
spouses Sotelo as the vendors, whereby Dacquel allegedly owed to the Sotelos the remaining amount of
P500,000.00 out of the purported P1,450,000.00 purchase price. These stipulations were not at all
shown to actually exist, or to be the same, or at least connected to the parties' original transaction.
While petitioner claims that this dation in payment stemmed from the P140,000.00 he had loaned to
respondents-spouses, no reference to the said established debt was made in petitioner's Dacion en
Pago. If anything, the existence of the Dacion en Pago relied on the truth of the September 1, 1994 Deed
of Sale, which, unfortunately for petitioner, turned out to be not a sale but only an equitable mortgage.
Petitioner failed to adduce acceptable evidence that this sale actually transpired, more so as
respondents-spouses consistently denied that they sold the subject property to petitioner
Second, even if the truth of this second transaction would be sustained, both parties still must be shown
to have mutually agreed to the dation in payment. Records, however, fail to disclose any such consent
on the part of respondents-spouses. Instead of an agreement, the said Dacion en Pago appears to be a
mere unilateral affidavit executed by petitioner. That both petitioner and respondents-spouses left this
document unsigned and unnotarized does not help the present appeal. No witnesses even attested to
the alleged Dacion En Pago. This Dacion En Pago rests on claims that are too self-serving to be
considered, and bare allegations have no probative value in court.
SECOND DIVISION
G.R. No. 203946, August 04, 2021
ARTURO A. DACQUEL, PETITIONER, VS. SPOUSES ERNESTO SOTELO AND FLORA DACQUELSOTELO,
REPRESENTED BY THEIR ATTORNEY-IN-FACT, IMELDA SOTELO,
JUSTICE HERNANDO
Facts
the Sotelos.
79
transaction.
and 1604 of the Civil Code.
Issue
Whether or not title may be nullified and real property reconveyed in case of equitable mortgage
Ruling
Title may be nullified and real property may be reconveyed in case of equitable mortgage.
As the transaction between the parties herein was demonstrated to be one of equitable mortgage,
petitioner did not become owner of the subject property but a mere mortgagee thereof. As such,
petitioner was bound by the prohibition against pactum commissorium as embodied in Article 2088 of
the Civil Code:
Art. 2088. The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of
them. Any stipulation to the contrary is null and void.
The mortgagee's consolidation of ownership over the mortgaged property upon the mortgagor's mere
failure to pay the obligation is the essence of pactum commissorium.[36] The mortgagor's default does
not operate to automatically vest on the mortgagee the ownership of the encumbered property. This
Court has repeatedly declared such arrangements as contrary to morals and public policy and thus void.
If a mortgagee in equity desires to obtain title to a mortgaged property, the mortgagee's proper remedy
is to cause the foreclosure of the mortgage in equity and buy it at a foreclosure sale.
Having proceeded to cause the cancellation of respondents-spouses title to the mortgaged property and
its transfer to his name without availing of the remedy of foreclosure, petitioner can be concluded to
have dabbled in the prohibited practice of pactum commissorium. The transaction is consequently
rendered void, and title to the subject property should be reverted to respondents-spouses.
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SECOND DIVISION
G.R. No. 203946, August 04, 2021
ARTURO A. DACQUEL, PETITIONER, VS. SPOUSES ERNESTO SOTELO AND FLORA DACQUELSOTELO,
REPRESENTED BY THEIR ATTORNEY-IN-FACT, IMELDA SOTELO,
JUSTICE HERNANDO
Facts
the Sotelos.
81
transaction.
and 1604 of the Civil Code, the CA declared the September 1, 1994 Deed of Sale to be one of equitable
mortgage.
Issue
Whether or not respondents-spouses are entitled to attorney's fees.
Ruling
The Petition is meritorious in part.
Attorney's fees are awarded only on factual and legal grounds under Article 2208 of the Civil Code.
Article 2208 of the Civil Code provides the guidelines on recovery of attorney's fees:
Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial
costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to
incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly
valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmen's compensation and employer's liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorney's fees and expenses of
litigation should be recovered.
In all cases, the attorney's fees and expenses of litigation must be reasonable.
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The Court explained the duality of attorney's fees in Benedicto v. Villaflores:

Attorney's fees, as part of damages, are not necessarily equated to the amount paid by a litigant to a
lawyer. In the ordinary sense, attorney's fees represent the reasonable compensation paid to a lawyer
by his client for the legal services he has rendered to the latter; while in its extraordinary concept, they
may be awarded by the court as indemnity for damages to be paid by the losing party to the prevailing
party. Attorney's fees as part of damages are awarded only in the instances specified in Article 2208 of
the Civil Code. As such, it is necessary for the court to make findings of fact and law that would bring the
case within the ambit of these enumerated instances to justify the grant of such award, and in all cases
it must be reasonable.
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.They are not to be awarded every time a party
wins a suit. Being the exception rather than the rule, an award of attorney's fees requires compelling
reason before it may be granted. Parties still are allowed to stipulate on it beforehand. In the absence of
any agreement, however, factual, legal, and equitable justification must be established to avoid
speculation and conjecture surrounding the grant of attorney's fees by the courts.
While the CA declared that petitioner's acts forced respondents-spouses to litigate, records show scant
reason to consider the case within the said exception cited under Article 2208. Even when a claimant is
compelled to bring his cause to court or incur expenses to protect his rights, attorney's fees still may not
be awarded as part of damages where no sufficient showing of bad faith could be reflected in a party's
persistence in a case other than an erroneous conviction of the righteousness of his cause.No such bad
faith was proven against petitioner. On the contrary, both parties were impelled by the honest belief
that their respective actions were justified. The entire legal ruckus was sparked by a series of
undocumented transactions over the subject property, driving both parties into deeper
misunderstandings that ended up too complicated and far too late to be clarified. Yet, in the records,
both petitioner and respondents-spouses appeared to be merely in pursuit of their own interests.
Respondents-spouses' victory should not earn petitioner an automatic label of bad faith and a
correlative award of attorney's fees.
WHEREFORE, the Petition is GRANTED IN PART. The July 12, 2012 Decision and the October 10, 2012
Resolution of the Court of Appeals in CA-G.R. CV No. 93939 are AFFIRMED with MODIFICATION in that
the award for attorney's fees in favor of respondents-spouses Ernesto and Flora Sotelo is DELETED.
AGENCY
THIRD DIVISION
G.R. No. 206667, June 23, 2021
GUILLERMA S. SILVA, PETITIONER, VS. CONCHITA S. LO, RESPONDENT.
Justice Hernando
Petition for review on certiorari are the Decisionand April Resolutionof the Court of Appeals (CA) which
annulled and set aside the Orders of the Regional Trial Court (RTC), Branch 82, Quezon City in Civil Case
No. Q-89-3137, an action for partition, accounting, delivery of shares and damages among the
compulsory heirs of decedent Carlos Sandico, Jr. (Carlos Jr.).
Facts
Carlos, Jr. died intestate leaving behind a sizeable estate to his compulsory heirs: The heirs of Carlos Jr.
executed an Extrajudicial Settlement of Estate which provided that all properties of the decedent shall
be owned in common, pro indiviso, by his heirs. In September 1988, Carlos, Jr.'s heirs executed a
Memorandum of Agreement for the physical division of the estate.However, both agreements were
never implemented and the heirs remained pro indiviso co-owners of the estate's properties.
Enrica, one of the heirs, filed Civil Case before the RTC impleading all the other heirs, her mother and
siblings, as defendants. Eventually, Teodoro withdrew as defendant and joined suit as plaintiff-in-
intervention.Opposing the physical division of the properties, defendants therein primarily asserted
Concepcion's usufructuary rights over the estate's real properties. They further alleged a diminished
value and use of the properties should these be physically divided. Given the unanimity of their defense
against the complaint, Conchita and two other heirs residing abroad, Lily and Pamela, executed a Special
Power of Attorney (SPA) in favor of their mother Concepcion and their sister, Guillerma, respectively.
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RTC issued an Order of Partition held that the defendants are legally bound by their previous acts and
admissions and by the previous Orders of this Court as above-enumerated, and that the final
Compromise Agreement already signed by the plaintiff and the plaintiff-in-intervention is sufficient
evidence of the extent and composition of the estate of the late Carlos Sandico, Jr. and constitutes a
valid and proper project for its partition.
Appellate court annulled and set aside the Orders of the RTC. In its November 8, 2012 Decision, the CA
invalidated the 2006 Kasunduan because it lacked the signature of all the heirs: Enrica's, Teodoro's and
Conchita's who now repudiates her mother's, Concepcion's, signature on her behalf. The appellate court
ruled that the 2006 Kasunduan did not conform with the procedure laid down in Rule 69 of the Rules of
Court on Partition. It concluded that a void agreement could not have validly partitioned the subject
property nor could it have validly transferred subsequent title over half of the land to the tenants.
Only Guillerma filed a motion for reconsideration which was denied by the appellate court in its April 11,
2013 Resolution.Hence, this appeal by certiorari under Rule 45 of the Rules of Court impugning grave
error in the CA's ruling.
Issue
1. Whether the Orders of the RTC issued on April 13, 2007, February 9 and August 27, 2010 are void, in
violation of Rule 69 of the Rules of Court;
Ruling
We do not agree. Despite the lack of signatures of specifically three (3) heirs of the decedent, Enrica,
Teodoro and respondent Conchita, the 2006 Kasunduan is a valid partition of the subject property which
was correctly confirmed by the RTC in its April 13, 2007 Order. Even without going into the finality of the
April 13, 2007 Order, the antecedents herein which we have painstakingly outlined will bear out that all
the heirs have assented to the partition of the subject property.
First. We sustain the RTC's confirmation of the 2006 Kasunduan. As correctly ruled by the trial court,
albeit plaintiffs Enrica and Teodoro did not sign the Kasunduan, they acquiesced to the partition and
distribution of the subject property, the qualified tenants receiving half thereof. In fact, Enrica filed a
Manifestation dated December 18, 2006 that she and Teodoro will not object to the 2006 Kasunduan as
long as they will be given their preferred portion of the subject property. Truly indicative of Enrica's and
Teodoro's acquiescence to the 2006 Kasunduan is the fact that neither of them have questioned it nor
have they intervened in CA-G.R. SP No. 116979 and in this appeal.
As regards the absence of Conchita's signature to the 2006 Kasunduan after she has purportedly
repudiated the agency relationship with her mother in 2000, we rule that the 2006 Kasunduan is
effective as against Conchita.
Even without going into the validity of Concepcion signing the 2006 Kasunduan on Conchita's behalf, the
appellate court could not void the sale and transfer of half of the sbject property to its qualified
beneficiaries under a voluntary transfer arrangement provided in the CARL. We reproduce herein the
pertinent provisions of the law:
1.1 Corollary thereto, whether the RTC effectively distributed the estate to persons who are not heirs of
the decedent by approving the transfer of, and title to, half of the subject property to the tenants;
2. Whether the 2006 Kasunduan partitioning the subject property is void because it was not signed by all
the heirs of the decedent;
2.1 In the alternative, whether the 2006 Kasunduan is unenforceable as against Conchita.
At the outset, we note that the CA glossed over significant factual antecedents in the proceedings
before the RTC. The matter on appeal, the questioned incident which reaches us, involves the partition
of a specific property (the subject property) forming part of the decedent's estate-the main subject
matter of the action for partition before the trial court. We emphasize that Civil Case No. Q-89-3137 is
already at the second stage¬partition of the estate's properties by agreement of the parties. In fact, the
RTC has long terminated the first stage in its January 11, 2000 Order for Partition.
We find no equivocation in the requirements listed above. The transfer of half of the subject property
was under the aegis of the Department of Agrarian Reform (DAR) pursuant to the law which the heirs
cannot ignore or circumvent by their claim that the 2006 Kasunduan was not validly executed. Given the
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compulsory requirement of the law, there is no validity to respondent's assertion which was sustained
by the CA, that property of the decedent was distributed to non-heirs. Plainly, the partition of the
subject property, and the consequent transfer and titling of half thereof to qualified beneficiaries, is
valid, just and binding on all the heirs of the decedent, including Conchita.
Second. The transfer and distribution of half of the subject property can be considered as the share of
Concepcion in the conjugal partnership property regime during her marriage to the decedent. The
legitimate children's share in the subject property pertains to only 7/8th of 1/2 thereof, the half
covering Carlos, Jr.'s share in the property regime. From that, Conchita's share is 1/8th of 1/2,
amounting to 1/16th of the entire property as opposed to her mother whose total share is 9/16th.
Conchita's right to the subject property is by virtue of succession, but even that pertains to only to a
portion of one half thereof. Conchita's full rights as co-owner does not pertain to Concepcion's half of
the subject property.
Third. The CA mistakenly annulled the entire partition, and sale of half, of the subject property to the
tenants contrary to Articles 493-495 and 498 of the Civil Code which, in sum, allow for alienation by a
co-owner of his or her share in the co-owned property, termination of the co-ownership, and partition
of the property.
SECOND DIVISION
G.R. No. 199565, G.R. NO. 199635 June 30, 2021
HONGKONG AND SHANGHAI BANKING CORP. (HSBC), LTD. STAFF RETIREMENT PLAN.) AND MANUEL
FSTACION, PETITIONERS, VS. SPOUSES JUAN I. GALANG AND MA. THERESA OFELIA G. GALANG,
RESPONDENTS.
LAZARO-JAVIER, J.:
These consolidated petitions seek to reverse and set aside the following dispositions of the Court of
Appeals in CA-G.R. CV No. 90491 entitled Spouses Juan I. Galang and Ma. Theresa Ofelia G. Galang v.
Hongkong and Shanghai Banking Corporation, Ltd., Manuel S. Estacion, as rep. by Atty. Manuel
Montecillo, Stuart Milne, and Alejandro Custodio, Atty. Grace S. Belvis and Sofronio M. Villarin, in their
capacity as Clerk of Court/Ex-Officio Sheriff and Sheriff in Charge of the Regional Trial Court of Pasig,
Defendants., Hongkong and Shanghai Banking Corporation, Ltd., and HSBC Staff Retirement Fund, Inc.
(Formerly Hongkong and Shanghai Banking Corp., Ltd. Staff Retirement Plan):
Facts
Ma. Theresa Ofelia G. Galang was a regular employee of Hongkong and Shanghai Banking Corporation,
Ltd. (HSBC), a foreign banking institution duly licensed to do business in the Philippines. HSBC offered
benefit plans for its employees, including housing loans, administered and managed by Hongkong and
Shanghai Banking Corporation, Ltd. Staff Retirement Plan (HSBC-SRP).
Ma. Theresa applied for a P400,000.00 housing loan, payable monthly for twenty-five (25) years at six
percent (6%) interest per annum. HSBC-SRP approved the loan. The monthly amortizations were then
paid through deductions from Ma. Theresa's payroll account. The loan was secured by a mortgage she
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and her husband petitioner Juan I. Galang executed on their property in Mandaluyong City in favor of
HSBC-SRP. The property is covered by TCT No. 3340.
A labor dispute broke out between HSBC and Hongkong and Shanghai Baking Corporation Employees
Union (HSBC-EU), the union of rank-and-file employees of which Ma. Theresa was a member. The
tension continued into a full-blown strike, prompting HSBC to dismiss ninety percent (90%) of its rank-
and-file employees, including Ma. Theresa. Dropped from the payroll, Ma. Theresa was unable to pay
the monthly loan amortizations from January to November 1994.
HSBC-SRP sent Spouses Galang a formal demand for full payment of the loan. Spouses Galang, however,
paid only their arrears and resumed remitting their monthly amortizations in December 1994 when they
were able to raise enough money. They had since religiously paid their monthly amortizations until
October 1996. HSBC-SRP sent them Installment Overdue Reminders dated December 13, 1994,
informing them of their total outstanding balance of F338,636.00, which includes their overdue amounts
of interest, monthly amortizations, and the interest on the arrears.HSBC-SRP, too, sent demand letters
on September 25 1995 and July 19, 1996 for payment of the entire balance, which allegedly amounted
to P313,290.00 and P347,367.02, respectively. It also threatened to foreclose the mortgaged property
unless the loan is paid in full.
Ma. Theresa sent HSBC-SRP a letter dated September 2, 1996, explaining that her account was up-to-
date as she and her husband had paid the arrears and since December 1994, and they had been paying
their monthly amortizations regularly.HSBC-SRP, however, sent Spouses Galang yet another Installment
Overdue Reminders on September 11, 1996 regarding their overdue account which then totaled
P295,948,000.
A month later, HSBC- SRP extrajudicially foreclosed the mortgage for P324,119.59 which covered the
outstanding balance of the housing loan then at P294,614.00. That prompted spouses Galang sued HSBC
and HSBC-SRP for Annulment of Sale with Damages and Preliminary Injunction before the Regional Trial
Court (RTC)-Pasig City.
HSBC-SRP asserted that the complaint stated no cause of action. For based on the HSBC Retirement Plan
Rules and Regulations, upon termination of Ma. Theresa's employment with HSBC, her loan balance
automatically became due and demandable. Since she failed to settle this amount in full upon demand,
foreclosure of her mortgage logically followed. It also sought to dismiss the case on the ground that it
was not a privy to the real estate mortgage contract between Spouses Galang and HSBC-SRP, a different
and separate entity from HSBC itself.
The trial court resolves to dismiss this case for reason of prematurity. However, in the interest ot justice
and fair play, the Court resolves not to dissolve the Temporary Restraining Order until the issues
between the parties shall have been finally decided.
Court of Appeals ruled in favor of Spouses Galang, the extrajudicial foreclosure of the mortgage is
declared void and the claims for damages and attorney's fees by the parties are denied
Issue
Whether or not Sposes galang is entitled for damages.
Ruling
Spouses Galang are not entitled to damages
Spouses Estrada v. Philippine Bus Rabbit Lines, Inc. elucidates:
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 compulation, moral damages may be recovered if they arc the proximate result of the
defendant's wrongful act or omission.
Under Article 2219 of the Civil Code, moral damages are recoverable in Lhe following and analogous
eases: (1) a criminal offense resulting in physical injuries; (2) quasi-delicts causing physical injuries: (3)
seduction, abduction, rape or other lascivious acts: (4) adultery or concubinage; (5) illegal or arbitrary
detention or arrest; (6) illegal search; (7) libel, slander, or any other form of defamation; (8) malicious
prosecution: (9) acts mentioned in Article 309; 22 and (1) acts and actions referred to in Articles 21. 26,
27 . 29. 30, 32. 34. and 35.
In Case law establishes the following requisites for the award of moral damages: (1) there must be an
injury clearly sustained by the claimant, whether physical, mental or psychological; (2) there must be a
culpable act or omission factually established; (3 ) the wrongful act or omission of the defendant is the
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proximate cause of the injury sustained by the claimant; and (4) the award for damages is predicated on
any of the cases stated in Article 2219 of the Civil Code. (Emphases added; citations omitted)
While Spouses Galang alleged bad faith, grave abuse, and illegality on part of petitioners, they utterly
failed to substantiate the same. In any event, HSBC-SRP had basis to foreclose the mortgage in
accordance with the Mortgage Agreement were it not for its actions which placed it on estoppel
SECOND DIVISION
G.R. No. 199565, G.R. NO. 199635 June 30, 2021
HONGKONG AND SHANGHAI BANKING CORP. (HSBC), LTD. STAFF RETIREMENT PLAN.) AND MANUEL
FSTACION, PETITIONERS, VS. SPOUSES JUAN I. GALANG AND MA. THERESA OFELIA G. GALANG,
LAZARO-JAVIER, J.:
These consolidated petitions seek to reverse and set aside the following dispositions of the Court of
Appeals in CA-G.R. CV No. 90491 entitled Spouses Juan I. Galang and Ma. Theresa Ofelia G. Galang v.
Hongkong and Shanghai Banking Corporation, Ltd., Manuel S. Estacion, as rep. by Atty. Manuel
Montecillo, Stuart Milne, and Alejandro Custodio, Atty. Grace S. Belvis and Sofronio M. Villarin, in their
capacity as Clerk of Court/Ex-Officio Sheriff and Sheriff in Charge of the Regional Trial Court of Pasig,
Defendants., Hongkong and Shanghai Banking Corporation, Ltd., and HSBC Staff Retirement Fund, Inc.
(Formerly Hongkong and Shanghai Banking Corp., Ltd. Staff Retirement Plan):
Facts
Ma. Theresa Ofelia G. Galang was a regular employee of Hongkong and Shanghai Banking Corporation,
Ltd. (HSBC), a foreign banking institution duly licensed to do business in the Philippines. HSBC offered
benefit plans for its employees, including housing loans, administered and managed by Hongkong and
Shanghai Banking Corporation, Ltd. Staff Retirement Plan (HSBC-SRP).
Ma. Theresa applied for a P400,000.00 housing loan, payable monthly for twenty-five (25) years at six
percent (6%) interest per annum. HSBC-SRP approved the loan. The monthly amortizations were then
paid through deductions from Ma. Theresa's payroll account. The loan was secured by a mortgage she
and her husband petitioner Juan I. Galang executed on their property in Mandaluyong City in favor of
HSBC-SRP. The property is covered by TCT No. 3340.
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A labor dispute broke out between HSBC and Hongkong and Shanghai Baking Corporation Employees
Union (HSBC-EU), the union of rank-and-file employees of which Ma. Theresa was a member. The
tension continued into a full-blown strike, prompting HSBC to dismiss ninety percent (90%) of its rank-
and-file employees, including Ma. Theresa. Dropped from the payroll, Ma. Theresa was unable to pay
the monthly loan amortizations from January to November 1994.
HSBC-SRP sent Spouses Galang a formal demand for full payment of the loan. Spouses Galang, however,
paid only their arrears and resumed remitting their monthly amortizations in December 1994 when they
were able to raise enough money. They had since religiously paid their monthly amortizations until
October 1996. HSBC-SRP sent them Installment Overdue Reminders dated December 13, 1994,
informing them of their total outstanding balance of F338,636.00, which includes their overdue amounts
of interest, monthly amortizations, and the interest on the arrears.HSBC-SRP, too, sent demand letters
on September 25 1995 and July 19, 1996 for payment of the entire balance, which allegedly amounted
to P313,290.00 and P347,367.02, respectively. It also threatened to foreclose the mortgaged property
unless the loan is paid in full.
Ma. Theresa sent HSBC-SRP a letter dated September 2, 1996, explaining that her account was up-to-
date as she and her husband had paid the arrears and since December 1994, and they had been paying
their monthly amortizations regularly.HSBC-SRP, however, sent Spouses Galang yet another Installment
Overdue Reminders on September 11, 1996 regarding their overdue account which then totaled
P295,948,000.
A month later, HSBC- SRP extrajudicially foreclosed the mortgage for P324,119.59 which covered the
outstanding balance of the housing loan then at P294,614.00. That prompted spouses Galang sued HSBC
and HSBC-SRP for Annulment of Sale with Damages and Preliminary Injunction before the Regional Trial
Court (RTC)-Pasig City.
HSBC-SRP asserted that the complaint stated no cause of action. For based on the HSBC Retirement Plan
Rules and Regulations, upon termination of Ma. Theresa's employment with HSBC, her loan balance
automatically became due and demandable. Since she failed to settle this amount in full upon demand,
foreclosure of her mortgage logically followed. It also sought to dismiss the case on the ground that it
was not a privy to the real estate mortgage contract between Spouses Galang and HSBC-SRP, a different
and separate entity from HSBC itself.
The trial court resolves to dismiss this case for reason of prematurity. However, in the interest ot justice
and fair play, the Court resolves not to dissolve the Temporary Restraining Order until the issues
between the parties shall have been finally decided.
Court of Appeals ruled in favor of Spouses Galang, the extrajudicial foreclosure of the mortgage is
declared void and the claims for damages and attorney's fees by the parties are denied
Issue
Whether or not HSBC-SRP estopped from demanding full payment of the obligation from Spouses
Galang and from subsequently foreclosing the mortgage on their property?
Ruling
We agree with Spouses Galang.
Article 143 I of the Civil Code defines estoppel, thus:
Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person
making it. and cannot be denied or disproved as against the person relying thereon.
Spouses Loquellano v. HSBC, HSBC-SRP, and Manuel Estacion. is apropos:
Estoppel is a doctrine that prevents a person from adopting an inconsistent position, attitude, or action
if it will result in injury to another. One who. by his acts, representations or admissions, or by his own
silence when he ought to speak out. intentionally or through culpable negligence, induces another to
believe certain facts to exist and such other rightfully relies and acts on such belief, can no longer deny
the existence of such fact as it will prcjudiec the latter. The doctrine of estoppel is based upon the
grounds of public policy, fair dealing, good faith and justice. It springs from equitable principles and the
equities in the case. It is designed to aid the law in the administration of justice where, without its aid,
injustice might result. (Emphases and underscoring supplied)
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To stress, respondent HSBC-SRP continuously sent out monthly Installment Due Reminders to petitioner
Rosalina despite its demand letter dated September 25. 1995 to pay the full amount of the loan
obligation within 3 days from receipt of the letter. It, likewise, continuously accepted petitioner
Rosalina's subsequent monthly amortization payments until June 1996: thus, making their default
immaterial. Moreover, there was no more demand for the payment of the full obligation afterwards.
Consequently, petitioners were made to believe that respondent HSBC-SRP was applying their payments
to their monthly loan obligations as it had done before. It is now estopped from enforcing its right to
foreclose by reason of its acceptance of the delayed payments.
Also, Article 1235 of the Civil Code provides that when the creditor accepts performance, knowing its
incompleteness and irregularity without protest or objection, the obligation is deemed complied with.
Respondent HSBC-SRP accepted Rosalina's payment of her housing loan account for almost one year
without any objection. (Emphases and underscoring supplied)
Conspicuously, the Court acknowledged that Spouses Loquellano were already in default, as with
Spouses Galang here, albeit it had become immaterial due to estoppel. The Court considered the
following circumstances: first, HSBC-SRP sent updated accounts through the monthly Installment Due
Reminders; second, it continuously accepted Rosalina's monthly amortizations; and third, HSBC-SRP no
longer demanded payment of the full obligation. Taken together, these acts induced Rosalina to believe
that her default had become immaterial and relied on such belief that HSBC- SRP can no longer deny the
same, as it would greatly prejudice Rosalina.
Here, too, HSBC-SRP sent Spouses Galang Installment Due Reminders, particularly in December 13, 1994
and September 11, 1996; this, despite the fact that it earlier sent Spouses Galang demand letters in
November 28, 1994, September 25 1995 and July 19, 1996. Interestingly, the final Installment Due
Reminder was sent two (2) months after the last demand letter was sent by HSBC-SRP The Court is
therefore convinced that by sending the Instalment Due Reminder after accepting unconditionally
twenty-two (22) monthly amortizations and after the last demand, HSBC-SRP made Spouses Galang
believe that they were up-to-date with their account and that their default with HSBC-SRP had become
immaterial. Indeed, to rule otherwise would greatly prejudice Spouses Galang who, in good faith,
believed that their payments had stalled the foreclosure. Hence, as in Loquellano , the HSBC- SRP's
foreclosure of Spouses Galang's property must be nullified.
Torts
THIRD DIVISION
G.R. No. 209538, July 07, 2021
PACALNA SANGGACALA, ALI MACARAYA MATO, MUALAM DIMATINGCAL, AND CASIMRA SULTAN,
PETITIONERS, VS. NATIONAL POWER CORPORATION,
LEONEN, J.
Petition for Review on Certiorari assailing the Decision and Resolution of the Court of Appeals, which
reversed the Joint Judgment of the Regional Trial Court.
Facts
National Power Corporation, a government-owned and controlled corporation created under
Commonwealth Act No. 120, as amended, is tasked "to undertake the development of hydroelectric
generation of power and the production of electricity from nuclear, geothermal and other sources, as
well as the transmission of electric power on a nationwide basis.
Office of the President issued Memorandum Order No. 398 "prescribing measures to preserve the Lake
Lanao Watershed, [and] to enforce the reservation of areas around the lake below [702] meters
elevation. National Power Corporation was then mandated to "place in every town around the lake, at
the normal maximum lake elevation of seven hundred and two meters, benchmarks warning that
cultivation of land below said elevation is prohibited."
In 1978, National Power Corporation constructed the Agus Regulation Dam at Saduc, Marawi City for the
control and management over Lake Lanao's water outflow and "to run the turbine machines for power
production of their Hydro Electric Power Plant along the Agus River such as Agus I, II, IV, VI, VII and VIII.
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Pacalna Sanggacala, Ali Macaraya Mato, Mualam Dimatingcal and Casimra Sultan (collectively,
Sanggacala, et al.) are members of Ranao-National Power Corporation Affected Organization — a group
of farmers, farmland, and fishpond owners along the Lake Lanao shore.
In separate complaints for damages, Sanggacala, et al. claimed that the National Power Corporation's
refusal to open the floodgates of Agus Regulation Dam whenever flooding occurred damaged their
farmlands and crops for the years 1979, 1984, 1986, 1989, 1993, 1994, 1995, and 1996.[ According to
Sanggacala, et al., the National Power Corporation admitted that damages were due to claimants, by
paying the affected residents because of the high water surface elevation of Lake Lanao in 1993 and
1994.
Furthermore, Letter of Instruction No. 1310, which set the minimum lake elevation at 697 meters and
the maximum at 702, allegedly enabled the National Power Corporation to illegally expropriate all the
farmlands, fishponds, and fish cages around the lakeshore within the five-meter elevation difference,
which included Sanggacala, et al.'s properties.Sanggacala, et al. alleged that based on the research study
conducted by one Lindy Washburn, the normal water elevation of Lake Lanao should be at 700.09
meters, and that any level above or below it affects and damages the aquatic resources, farmlands, and
fishponds along the lakeshore.
National Power Corporation alleged that Sanggacala, et al.'s properties were not among those damaged
by Lake Lanao's rise in water level, and assuming that they were affected, the damage was not an
actionable wrong, being a damnum absque injuria. Furthermore, it claimed that the improvements were
introduced by Sanggacala, et al. on the lake shore area below the 702-meter water mark, in violation of
Memorandum Order No. 398.
Regional Trial Court ruled in favor of Sanggacala, et al., and ordered the National Power Corporation to
pay them actual damages, moral damages, exemplary damages, attorney's fees, just compensation,
rental, and interest.
The Regional Trial Court found that Sanggacala et al.'s properties were damaged by the National Power
Corporation's refusal to open its Agus Regulation Dam whenever there was overflooding. Furthermore,
the trial court held that Sanggacala, et al. should be awarded damages, applying similarly decided cases
and the rule on conclusiveness of judgment.Thus, the trial court found legal and factual basis in
awarding Sanggacala, et al. actual damages, moral damages, exemplary damages, attorney's fees, just
compensation, rental payments, and interest.
Court of Appeals reversed the trial court's decision and held that Sanggacala, et al. failed to establish a
prima facie case for recovery of damages against the National Power Corporation.The Court of Appeals
found that the research study conducted by Lindy Washburn, which Sanggacala et al. relied upon, was
not only insufficient to prove their claim, but also lacked evidentiary value for not being formally offered
as evidence, and for being hearsay. The Court of Appeals found as mere conclusion without supporting
evidence the allegation that the construction of Agus Regulation Dam caused the destructive flood.
Issue
Whether or not respondent National Power Corporation committed environmental tort based on
negligence;
Ruling
In the case at bar, both the appellate court and the trial court uniformly found that it was such
negligence on the part of NPC which directly caused the damage to the fishponds of private
respondents. The degree of damages suffered by the latter remains unrebutted and there exists
adequate documentary evidence that the private respondents did have fishponds in their respective
locations and that these were inundated and damaged when the water level escalated in October 1986.
Considering that the 1992 National Power Corporation case has been applied in the 1993 National
Power Corporation cases involving the private respondents who were similarly situated, the ruling in the
2005 National Power Corporation case that National Power Corporation was negligent in performing its
duty under Memorandum Order No. 398, and such negligence caused damage to the properties of
petitioners along the shore of Lake Lanao is likewise binding on us.
It is to be noted that the [petitioners] are illiterate farmers who cannot be expected to know of
[respondent's] operations unless otherwise informed properly. Respondent likewise failed to present
any evidence that the alleged benchmarks were actually erected by them along the lakeshore clearly
showing the 702 m. a. s. l. which would in effect serve as a stern warning to one and all including the
[petitioners].
The doctrine of res ipsa loquitur, the thing speaks for itself, also finds application, such that:
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. . .Where the thing which causes injury is shown to be under the management of the defendant, and
the accident is such as in the ordinary course of things does not happen if those who have the
management use proper care, it affords reasonable evidence, in the absence of an explanation by the
defendant, that the accident arose from want of care.
Accordingly, the essential elements of an environmental tort action based on negligence are present.
The environmental harm in a well-defined area or specific person or class of persons is the damage to
the farmlands and other properties of petitioners sited along the shore of Lake Lanao.
Further, the finding of respondent's negligence in operating the Agus Regulation Dam caused inundation
and damage to petitioners' properties shows a general and specific causation, and closely fits the
traditional elements of a tort cause of action.
WHEREFORE, the Petition is GRANTED. The March 26, 2013 Decision and September 16, 2013
Resolution of the Court of Appeals in CA-G.R. CV No. 01114-MIN are hereby REVERSED and SET ASIDE.
THIRD DIVISION
G.R. No. 224235, June 28, 2021
RICHARDSON STEEL CORPORATION, AYALA INTEGRATED STEEL MANUFACTURING, CO., INC., ASIAN
FOOTWEAR AND RUBBER CORP., AND SPOUSES RICARDO O. CHENG AND ELEANOR S. CHENG,
PETITIONERS, VS. UNION BANK OF THE PHILIPPINES, RESPONDENT.
DELOS SANTOS, J.:
Petition for Review on Certiorari seeking the reversal of the Decision and the Resolution of the Court of
Appeals (CA) in CA-G.R. CV No. 100331, which reversed and set aside the Decision dated June 4, 2012 of
the Regional Trial Court (RTC) of Makati City
Facts
Petitioner corporations are sister companies and the spouses Cheng are their principal stockholders and
officers .Petitioners alleged that in January 1996, UBP proposed a special financing arrangement to fund
petitioner RSC's business venture, which was the construction and operation of the Continuous
Galvanizing Line (CGL) under the wholesale lending program of the Development Bank of the Philippines
(DBP) of the JEXIM 2 Program. Petitioners accepted the offer and ended their established banking
relationship with the Philippine Commercial International Bank.
UBP's proposal includes the following features: (a) a credit accommodation for P240,000,000.00 to
finance the construction of a new plant and the acquisition of a continuous galvanizing machine; and (b)
a working capital of P600,000,000.00 to sustain its operations.
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Petitioners contended that while the credit accommodation was released, the promised working capital
never came into fruition. Despite lack of funds, petitioners were able to complete the construction of
the CGL Plant. However, RSC remained incapable of commencing full operation of the CGL due to
insufficiency of funds. Thus, RSC sent a letter to UBP for the release of the promised credit line facility
for its working capital requirement. However, the anticipated credit line was still not provided by UBP.[
On December 3, 1999, with mounting debts and without capacity to pay due to the failure to fully
operate its new CGL venture, petitioners negotiated for the restructuring of its loan with UBP and
applied for an additional loan or credit line of P150,000,000.00 for petitioner RSC and P30,000,000.00
for petitioner AISMC. Thereafter, Memorandum of Agreements (MOAs) and Credit Line Agreements
(CLAs) for working capital purposes were entered into by petitioners RSC and AISMC and UBP. Despite
the restructuring agreement, petitioner AFRC was not granted a credit line.
Petitioners alleged that from December 1999 to November 2000, they had been requesting for the
availment of the agreed credit line to plump up their working capital. However, despite the execution of
the required Promissory Notes and other pertinent documents, UBP failed and refused to release the
amounts indicated in the Promissory Notes of petitioner corporations. Instead, UBP unilaterally, without
the consent of petitioners, applied the proceeds of the credit line to the payment of the monthly
interests of the restructured loans of petitioners under the Restructuring Agreements (RAs).
Thus, petitioners filed a Complaint for Specific Performance and Damages with a Prayer for Preliminary
Mandatory and Prohibitory Injunctions in April 2001.
During the pendency of the proceedings before the RTC, UBP filed its Petition dated October 17, 2003
for the Extrajudicial Foreclosure of the Real Estate Mortgages (REMs). On April 13, 2004, petitioners filed
a Joint Motion for Leave to Admit Supplemental Complaint with attached Supplemental Complaint
asserting that UBP had no right to foreclose the REMs considering that they were not yet in default.
Petitioners likewise contended that UBP failed to send any written communication declaring them in
default and informing them of the foreclosure of the mortgaged properties after the execution of the
RAs. Thereafter, on November 24, 2003, the properties covered by the REMs were sold at a public
auction with UBP as the highest bidder.
The RTC ruled in favor of petitioners and held that while the CLA and the MOA are interrelated and
complementary and the same holds true for the RAs and the MOAs, it is undeniable that the CLAs and
the RAs are independent from one another. The RAs pertain to the payment of the restructured loan
obligations of petitioners, while the CLAs pertain to the available funds that petitioners may draw from
UBP and utilize the proceeds thereof for working capital purposes.
CA reversed and set aside the ruling of the RTC.
Issue
Whether or not CA failed to consider that UBP acted not in accord with the law in dealing with
petitioners and thereby causing the latter irreparable damage and injury.
Ruling
As regards the propriety in the award of damages, there is no legal and sufficient basis to award actual
or compensatory and moral damages. Actual or compensatory damages must be with a reasonable
degree of certainty, premised upon competent proof and on the best evidence obtainable. The grant of
actual damages in the amount of P5,000,000.00 by the RTC on account of the stoppage of operations is
purely based on estimate of unrealized profits or opportunity loss, thus, is deleted for lack of legal and
evidentiary basis. Anent the award of moral damages, notably, the RTC failed to discuss the basis of
awarding the same to the spouses Cheng. After a perusal of the records, there is lack of sufficient basis
to grant the award of moral damages.
With respect to the award of exemplary damages, such has been granted to set an example for the
public good. Considering that a banking institution is expected to uphold a higher standard of integrity
and that its transactions are imbued with public interest, it is imperative upon UBP to stand guard
against injury attributable to its negligence or bad faith.Thus, the Court finds it proper to award
exemplary damages in the amount of P5,000,000.00. This serves as an example and warning to banks to
observe the requisite care and diligence in all of their affairs.
The award of attorney's fees in the amount of P500,000.00 is found to be excessive, and thus, reduced
to P300,000.00.
92
WHEREFORE, the present Petition for Review on Certiorari is PARTLY GRANTED. Accordingly, the
Decision dated June 29, 2015 and the Resolution dated April 20, 2016 of the Court of Appeals in CA-
G.R. CV No. 100331 are REVERSED and SET ASIDE and the Decision dated June 4, 2012 of the Regional
Trial Court of Makati City, Branch 62, in Civil Case No. 01-575 is REINSTATED with MODIFICATIONS in
that:
THIRD DIVISION
G.R. No. 209538, July 07, 2021
LEONEN, J.
Facts
production of their Hydro Electric Power Plant along the Agus River such as Agus I, II, IV, VI, VII and VIII."
93
1994.
Issue
Whether or not petitioners Sanngacala, et al. are entitled to the damages awarded by the trial court.
Ruling
The basis for an award of tort damages is a legal injury to an individual, thus:
. . .To warrant the recovery of damages, there must be both a right of action for a legal wrong inflicted
by the defendant, and damage resulting to the plaintiff therefrom. Wrong without damage, or damage
without wrong, does not constitute a cause of action, since damages are merely part of the remedy
allowed for the injury caused by a breach or wrong.
There is a material distinction between damages and injury. Injury is the illegal invasion of a legal right;
damage is the loss, hurt, or harm which results from the injury, and damages are the recompense or
compensation awarded for the damage suffered. Thus, there can be damage without injury in those
instances in which the loss or harm was not the result of a violation of a legal duty. These situations are
often called damnum absque injuria.
In order that a plaintiff may maintain an action for the injuries of which he complains, he must establish
that such injuries resulted from a breach of duty which the defendant owed to the plaintiff a
concurrence of injury to the plaintiff and legal responsibility by the person causing it. The underlying
basis for the award of tort damages is the premise that an individual was injured in contemplation of
law. Thus, there must first be the breach of some duty and the imposition of liability for that breach
before damages may be awarded; it is not sufficient to state that there should be tort liability merely
because the plaintiff suffered some pain and suffering.
94
All the facts and circumstances of the case, the witnesses' manner of testifying, their intelligence, their
means and opportunity of knowing the facts to which they are testifying, the nature of the facts to
which they testify, the probability or improbability of their testimony, their interest or want of interest,
and also their personal credibility so far as the same may legitimately appear upon the trial.
Whether or not a party proved its claim for damages through preponderant evidence, and whether it is
entitled to damages, are both questions of fact which are generally not within the province of a petition
for review.[Questions of fact would involve the correctness of the lower courts' appreciation of the
evidence presented by the parties.Factual findings by the lower courts are generally binding and
conclusive this Court, save upon certain exceptions, which were not alleged in this case. However,
because of the finding of negligence and the Court of Appeals' failure to award damages, this Court
reviews the issue of damages.
In crimes and quasi-delicts, the defendant shall be liable for all damages which are the natural and
probable consequences of the act or omission complained of. It is not necessary that such damages have
been foreseen or could have reasonably been foreseen by the defendant.
Here, the trial court awarded actual or compensatory damages based on petitioners' testimonies as to
their actual harvest of palay crops annually, which were destroyed by the flood for the years 1979, 1984,
1986, 1989, 1993, 1994, 1995 and 1996. In awarding these damages, the trial court considered as
documentary evidence the respective tax declaration of petitioners' properties, pictures of petitioners'
flooded land, court decisions on monetary claims of parties' similarly situated, and petitioners'
testimonial evidence.
Further, the evaluation of the witnesses' testimonies by the trial court is received with the highest
respect on appeal, because the trial court has the direct opportunity to observe them on the stand and
assess their credibility by detecting the truthfulness or falsity of their statements.Moreover, respondent
failed to rebut these damages. Accordingly, this Court affirms the award of actual or compensatory
damages to petitioners.
WHEREFORE, the Petition is GRANTED. The March 26, 2013 Decision and September 16, 2013
Resolution of the Court of Appeals in CA-G.R. CV No. 01114-MIN are hereby REVERSED and SET ASIDE.
THIRD DIVISION
G.R. No. 209538, July 07, 2021
LEONEN, J.
Facts
95
production of their Hydro Electric Power Plant along the Agus River such as Agus I, II, IV, VI, VII and VIII."
1994.
Issue
Whether or not the principle of damnum absque injuria finds application here.
Ruling
In order that a plaintiff may maintain an action for the injuries of which he complains, he must establish
that such injuries resulted from a breach of duty which the defendant owed to the plaintiff — a
concurrence of injury to the plaintiff and legal responsibility by the person causing it. The underlying
basis for the award of tort damages is the premise that an individual was injured in contemplation of
law. Thus, there must first be the breach of some duty and the imposition of liability for that breach
before damages may be awarded; it is not sufficient to state that there should be tort liability merely
because the plaintiff suffered some pain and suffering.
Many accidents occur and many injuries are inflicted by acts or omissions which cause damage or loss to
another but which violate no legal duty to such other person, and consequently create no cause of
action in his favor. In such cases, the consequences must be borne by the injured person alone. The law
affords no remedy for damages resulting from an act which does not amount to a legal injury or wrong.
In other words, in order that the law will give redress for an act causing damage, that act must be not
only hurtful, but wrongful. There must be damnum et injuria. If, as may happen in many cases, a person
sustains actual damage, that is, harm or loss to his person/
96
Damnum absque injuria, or damage without injury, arises when the loss or harm was not the result of a
violation of a legal duty. When this occurs, the consequences must be borne by the injured person
alone, since there is no remedy for damages resulting from an act which does not amount to a legal
injury or wrong.In the 2005 National Power Corporation, case, this Court already found the principle of
damnum absque injuria inapplicable, because National Power Corporation's negligence due to its
inability to maintain the level of water in its dams was satisfactorily and extensively established.
Similarly, having established respondent's negligence in its failure to observe its legal mandate, the
principle of damnum absque injuria finds no application here.
Estoppel
FIRST DIVISION
G.R. No. 252716, MARCH 3, 2021
PATRICIA ZAMORA RIINGEN, Petitioner, vs WESTERN UNION FINANCIAL SERVICES (HONG KONG)
LIMITED, PHILIPPINES REPRESENTATIVE OFFICE,
CARANDANG
This Petition for Review on Certiorari1 under Rule 45 of the Rules of Court assails the Decision2 dated
July 11, 2019 and the Resolution3 dated June 9, 2020 of the Court of Appeals in CA-G.R. SP No. 153585
which overturned the rulings of the Labor Arbiter (LA) and the National Labor Relations Commission
(NLRC) and held that the monetary claim of petitioner Patricia Zamora Riingen (Riingen) is without basis.
Facts
Riingen alleged that she joined Western Union as Marketing Director in 2005. She retired from Western
Union on August 31, 2016. On June 24, 2016, Riingen informally expressed her interest in availing of the
97
early retirement package under the Employees' Retirement Plan through an e-mail sent to Jocelyn
Flordeliza (Flordeliza), Western Union's Manager for Human Relations in the Philippines. According to
the Employees' Retirement Plan, the employees of Western Union are given the option to retire upon
reaching the age of 50 with at least 10 years of service. 6 On August 5, 2016, Flordeliza replied to
Riingen's query and forwarded '1 computation of the latter's retirement benefits prepared by Laura l\
1anganotti (Manganotti), Western Union's Senior Manager for Compensation and Benefits. In the said
reply, Flordeliza confirmed that the retirement benefits ofRiingen is free from tax.7 Through another
email dated August 8, 2016, Riingen formalized her intent to retire by August 31, 2016. On August 11, 20
I 6, Flordeliza sent to Riingen a revised computation of the latter's retirement package reiterating that
"As the age [ of Riingen] is not more than 50, the lump sum is not taxable." However, on August 24,
2016, Manganotti informed Riingen that her retirement benefits are not tax-free. Manganotti explained
that Western Union's Retirement Plan does not match certain requirements that would grant the tax
exemption to qualified retirees.
On the day of her retirement, Western Union's external auditor infomied Riingen that Western Union
failed to register its Employees' Retirement Plan in accordance with the requirements of the Bureau of
Internal Revenue (BIR). Further, in an e-mail dated September I, 2016, Tim Cinalli, Western Union's Vice
President for Global Benefits, Payroll, and Mobility, insisted that the Employees' Retirement Plan was
never intended for registration because registration is time-consuming and complicated. Western Union
withheld from Riingen the amount as tax liability. According to Riingen, the employees of Western
Union are entitled to a tax-free retirement package and the failure of Western Union to register the Plan
shall not deprive them of the benefits promised to them.
ikewise insisted that assuming Western Union intentionally failed to register the Plan with the BIR,
Western Union misled its employees by not informing them of its failure to register. Riingen claimed
that such failure reeks of bad faith. 11 Hence, Riingen prayed that the amount withheld by Western
Union corresponding to the tax should be returned to her. In addition, she asked the LA to award moral
damages, exemplary damages, and attorney's fees. 12 For its part, Western Union countered that
Riingen's early retirement benefit is subject to withholding tax in accordance with the provisions of the
National Internal Revenue Code since the Employees' Retirement Plan did not meet the requirements
for tax exemption under Revenue Regulations (RR) No. 1-68, as amended. 13 Western Union insisted
that it was not even obliged by law to put up a retirement plan. There is also nothing under the Labor
Code that requires Western Union to register its Employees' Retirement Plan to the BIR. 14 Upon
submission of the parties' other pleadings, the case was submitted for decision.
LA rendered its Decision ordering Western Union to pay to Riingen the following: P4,243,292.85
representing the tax withheld from her; PS00,000.00 as moral damages; P250,000.00 as exemplary
damages; 6% legal interest in the amount of P254,597.57; and P524,789.04 as 10% attorney's fees. 16
The LA based its decision to grant the monetary claims of Riingen on the doctrine of abuse of rights.
According to the LA, Western Union has the option to register its Employees' Retirement Plan. Western
Union's failure to register the Retirement Plan, which could have made the retirement benefits of its
retirees non-taxable, is its exclusive fault. The LA ruled that Western Union's acts violated the rights of
Riingen under Articles 19, 20, and 21 of the Civil Code, 18 Aggrieved, Western Union elevated the case
to the NLRC.
NLRC found Western Union accountable pursuant to promissory estoppel brought by its negligence.24
The NLRC discussed that the requisites of promissory estoppel, such as: (I) a promise reasonably
expected to induce action or forbearance; (2) such promise did in fact induce such action or
forbearance; and (3) the party suffered detriment as a result, are present in this case. According to the
NLRC, Western Union's conduct made Riingen expect and believe that she shall receive her retirement
benefits free of tax. Western Union failed to inform Riingen or any of its employees that the early
retirement plan is taxable. The NLRC likewise noted Western Union's representatives' apparent lack of
knowledge of the taxability of retirement benefits as shown by the initial e-mail of Flordeliza and
Manganotti informing Riingen that the benefits she would receive are tax-free.
CA granted the petition filed by Western Union and held that there was no basis for the grant of
P4,243,292.85 representing the withheld taxes of Riingen's retirement benefit.
Issue
Whether or not doctrine of promissory estoppel is applicable in this case.
Ruling
98
The NLRC based its decision in favor of Riingen on the existence of promissory estoppel. Promissory
estoppel may arise from the making of a promise, even though without consideration, if it was intended
that the promise should be relied upon, as in fact it was relied upon, and if a refusal to enforce it would
virtually sanction the perpetration of fraud or would result in other injustice.
Promissory estoppel presupposes the existence of a promise on the part of one against whom estoppel
is claimed. The promise must be plain and unambiguous and sufficiently specific so that the court can
understand the obligation assumed and enforce the promise according to its terms. To make out a claim
of promissory estoppel, a party bears the burden of establishing the following elements: (1) a promise
was reasonably expected to induce action or forbearance; (2) such promise did, in fact, induce such
action or forbearance; and (3) the party suffered detriment as a result. According to Article 1431 of the
Civil Code, "through estoppel, an admission or representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as against the person relying thereon".
There are three kinds of estoppels, to wit: (1) estoppel in pais; (2) estoppel by deed; and (3) estoppel by
laches. Under estoppel in pais, a person is considered in estoppel if by his conduct, representations,
admissions or silence when he ought to speak out, whether intentionally or through culpable
negligence, "causes another to believe certain facts to exist and such other rightfully relies and acts on
such belief, as a consequence of which he would be prejudiced if the former is permitted to deny the
existence of such facts.
In this case; although Western Union, in the strict sense, did not make any promise to Riingen and the
other employees that the early retirement benefit under the Employees' Retirement Plan is tax-free so
as to fall under the doctrine of promissory estoppel, nevertheless, the conduct, representations, and
silence of Western Union and its responsible officers, before, during, and subsequent to Riingen's
application to avail of the early retirement option under the Plan led her to believe that the benefit she
will receive under the Plan is free of tax.
Lastly, it should be noted that Riingen will be prejudiced if Western Union can deny the non-taxability of
the retirement benefits under the Plan. Due to Riingen's belief, reinforced by Western Union's conduct
and representations that her early retirement benefit is tax-free, she chose to avail of the early
retirement option under the Plan. Western Union's belated confirmation that the early retirement
package is taxable precluded Riingen from exercising her options. As pointed out by Riingen, had
Western Union made known to her and the employees that the Plan is taxable, she could either have
negotiated for a termination through involuntary separation which grants a higher benefit than the early
retirement benefit, or she could have left much earlier considering that the early retirement benefit was
not as lucrative as presented, or she could have stayed with Western Unionn
Court is convinced that the NLRC committed no grave abuse of discretion in rendering its judgment in
favor of Riingen that would justify the reversal of its decision by the CA through a certiorari petition.
WHEREFORE, the Petition for Review on Certiorari is GRANTED. The Decision dated June 29, 2017 and
the Resolution dated September 19, 2017 of the National Labor Relations Commission are
REINSTATED.
99
Credit
THIRD DIVISION
G.R. No. 224235, June 28, 2021
DELOS SANTOS, J.:
Facts
100
CA reversed and set aside the ruling of the RTC.

Issue
Whether or not MOA referred to both restructuring agreement and Credit Line are Complimentary Contract.
Ruling
Herein respondent UBP attempts to persuade the Court that the CLA is akin to an accessory or a
complement to the RA. As such, UBP asserts that the provisions in the CLAs and the RAs must be
construed together. In its assailed Decision, the CA agreed with UBP's stance and applied by analogy the
"comp lementary-contracts-construed-together'' doctrine. This application is premised on the fact that
the three contracts were executed contemporaneously and that the spouses Cheng issued promissory
notes and checks as payment for the interests accruing from the restructured loans and those checks
were drawn from the credit line. The CA concluded that the issuance of the promissory notes and checks
by the spouses Cheng shows that petitioners had full knowledge, awareness, and conformity with the
arrangement — that is the proceeds of the credit line is used to pay the interest of the restructured
loans as it comes due.
101
The application of the "complementary-contracts-construed-together" doctrine is clearly misplaced. The

aforesaid doctrine requires that the stipulations, terms, and conditions of both the principal and
accessory contracts must be construed together in order to arrive at the true intention of the parties.
Here, it is indubitable that there is no principal-accessory relationship between the RAs and the CLAs.
The RAs and the CLAs are able to stand on their own and are not dependent on each other for their
existence and validity. Likewise, the RAs and the CLAs have distinct and separate purposes, which are
apparent on the face of the documents. The RAs show that the purpose of which is to modify the terms
of an existing loan in order to help the petitioners recuperate and make their obligation up-to-date. On
the other hand, the CLAs clearly indicate therein the purpose of its execution — to finance the working
capital of the petitioners.
Furthermore, notwithstanding the findings of the CA that the promissory notes and the checks were
issued to pay the interest payments under the restructured loan and were drawn against the credit line,
the primary purpose as indicated in the CLAs still remains and should be applied — that is to finance the
working capital of petitioners.
that
THIRD DIVISION
G.R. No. 224235, June 28, 2021
DELOS SANTOS, J.:
Facts
102
CA reversed and set aside the ruling of the RTC. The CA opined that even if the RAs have a different
subject than the CLAs, this does not mean that the contracts should be interpreted separately especially
since it is shown that the latter arose as a reasonable consequence of the former or that the contracts
complement each other.
Issue
Whether or not the validity of the foreclosure proceedings on the properties covered by the REMs.
loans.
Ruling
The foreclosure proceedings is premature.
The law is very specific when an obligor or a debtor is considered in default. Article 1169 of the Civil
Code provides that:
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.
103
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 declare; or
(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.
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to
comply in a proper manner with what is incumbent upon him. From the moment one of the parties
fulfills his obligation, delay by the other begins. (Emphasis supplied)
Here, it is extant in the records and duly established that petitioners availed of the CLA in order to
finance its ailing operations. By automatically applying the proceeds of the CLA to the accruing interest
on the restructured loans under the RA, the accounts were made up-to-date or in good standing. It was
only during the pendency of the case that petitioners were declared in default due to failure of
payments on the loan. With the refusal of UBP to release the loan proceeds under the CLA to the
petitioners, it can be deemed that UBP reneged on its obligation under the CLA and failed to comply in
the proper manner with what is incumbent upon it under contemplation of Article 1169 of the Civil
Code.
The ruling of the Court in Spouses Ong v. BPI Family Savings Bank, Inc. is instructive on this particular
issue. The spouses Ong executed REMs in favor of Bank of Southeast Asia (BSA) as security for a term
loan and credit line. When BSA refused to release the full amount of the credit line, the spouses Ong
refused to pay the amortization of the term loans. When the Bank of the Philippine Islands (BPI) merged
with BSA, BPI filed an extrajudicial foreclosure of the REMs for the spouses Ong's default on the term
loan. The Court nullified the foreclosure proceedings on the ground of prematurity since the spouses
Ong cannot be considered in default. The acquisition of the loan was based on BSA's promise to provide
the spouses Ong with working capital for the expansion of their business. As a consequence of BSA's
refusal to release the credit line, the spouses Ong were not able to purchase machineries and
equipment that were essential to their business resulting to the cancellation of purchase orders of
clients. Hence, no default can be attributed to the spouses Ong due to the failure of BSA/BPI to release
the whole amount of the loans under the credit line.
Under the circumstances, the foreclosure of the REMs is deemed premature, and therefore, void and
ineffectual.
that:
104

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1

The Court answers in the affirmative.

Whether the 2006 Kasunduan is unenforceable as against Conchita.

We rule for the respondents.

Section 9, Rule 130 of the Revised Rules of Court is on point:

(a) An intrinsic ambiguity, mistake, or imperfection in the written agreement;

(c) The validity of the written agreement; or

Article VII – Cancellation and Penalty

We are not convinced.

All other contracts specially declared by law to be subject to rescission.

SPOUSES EUFRONIO CORDERO AND TARCILA C. CORDERO, VS. FRANCISCO P. MADLANGBAYAN,

G.R. No. 246096, January 13, 2021

1559, in order to satisfy the latter's share in Loreto's intestate estate.

Article 11 thereof provides:

"ARTICLE 11: Performance Bond:

Topic: Deed of Absolute Sale and certificate of title

Whether or not the petitioner is entitled to the interest.

Whether or not Arakor is an innocent purchaser for value.

Topic: Due execution of Deed of absolute sale

Whether or not the there is due execution of Deeds of Absolute Sale.

Topic: Declaration of inexistence of contract

Whether or not the declaration of the inexistence of contract prescribe.

The petition is without merit.

Whether or not petitioners are innocent purchaser for value.

The petition is impressed with merit

P173,520.00 --- annual income

P180,000.00 --- income from condition services per annum

P353,520.00 --- 23 years more

P8,127,960.0 --- total loss earnings59 (Emphasis and underscoring in the original)

Net earning = Life Expectancy x [Gross Annual Income

= [2/3 (80 - the age of the deceased)] x [GAI

Net earning = [2/3(80-57)] x [(P353,520.00) –

= [2/3(23)] x (P353,520.00 – P176,760.00)

Whether or not the co-judgement debtors shall be solidary liable.

Solidary liability of co-judgment debtors

Lastly, the Court deems it proper to clarify that:

The petition is without merit.

The petition is without merit.

The petition is devoid of merit.

Article 124 of the Family Code provides:

Torts and damages \

The Court explained the duality of attorney's fees in Benedicto v. Villaflores:

Whether or not Sposes galang is entitled for damages.

Spouses Galang are not entitled to damages

Spouses Estrada v. Philippine Bus Rabbit Lines, Inc. elucidates:

We agree with Spouses Galang.

Article 143 I of the Civil Code defines estoppel, thus:

Spouses Loquellano v. HSBC, HSBC-SRP, and Manuel Estacion. is apropos:

CA reversed and set aside the ruling of the RTC.

Whether or not doctrine of promissory estoppel is applicable in this case.

CA reversed and set aside the ruling of the RTC.

The application of the "complementary-contracts-construed-together" doctrine is clearly misplaced. The

The foreclosure proceedings is premature.

(1) When the obligation or the law expressly so declare; or

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