University of Negros Occidental – Recoletos

School of Law

CASE DIGEST

SUBMITTED TO:
ATTY. Marvin J. Tanada, CPA.

IN PARTIAL FULFILLMENT FOR THE COURSE

OBLIGATIONS AND CONTRACTS
2nd Semester, S.Y. 2021-2022

SUBMITTED BY:
Joshua Jireh C. Ringor, L02
CASE DIGEST:
DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner
vs.
STA. INES MELALE FOREST PRODUCTS CORPORATION, RODOLFO CUENCA,
MANUEL TINIO, CUENCA INVESTMENT CORPORATION and UNIVERSAL
HOLDINGS CORPORATION, Respondents
G.R. No. 193068
Ponente: MARVIC M.V.F. LEONEN

FACTS:
In 1977 Galleon, "formerly known as Galleon Shipping Corporation, was made to
operate a liner service between the Philippines and its trading partners." Galleon's major
stockholders were the respondents. Galleon experienced financial difficulties and had to take out
several loans from different sources such as foreign financial institutions, its shareholders who
are the respondents. Development Bank of the Philippines (DBP) guaranteed Galleon's foreign
loans. In return, Galleon and its stockholders executed a Deed of Undertaking on October 10,
1979 and obligated themselves to guarantee DBP's potential liabilities. However, despite the
loans extended to it, "Galleon's financial condition did not improve."
Cuenca, Galleon's president wrote then President Ferdinand Marcos and asked for
assistance. On July 21, 1981, President Marcos issued Letter of Instructions No. 1155 addressed
to the NDC, DBP, and the Maritime Industry Authority. On August 10, 1981, pursuant to Letter
of Instructions No. 1155, Galleon's stockholders, entered into a Memorandum of
Agreement, where NDC and Galleon undertook to prepare and sign a share purchase agreement.
Acting as Galleon's guarantor, DBP paid off Galleon's debts to its foreign bank creditor
and, on January 25, 1982, pursuant to the Deed of Undertaking. Despite NDC's takeover, the
share purchase agreement was never formally executed. Barely seven months from the issuance
of Letter of Instructions No. 1155, President Marcos issued Letter of Instructions No. 1195 this
letter ultimately rescinded the letter of instructions No. 1155.
On April 22, 1985, the respondents filed a Complaint with Application for the Issuance of
a Writ of Preliminary Injunction. They alleged that (national development company) NDC,
"without paying a single centavo, took over the complete, total, and absolute ownership,
management, control, and operation of defendant (Galleon) and all its assets, even prior to the
formality of signing a share purchase agreement. For DBP, the respondents claimed that "DBP
can no longer go after them for any deficiency judgment NDC had been subrogated as
borrowers, hence the Deed of Undertaking between respondents and DBP had been extinguished
and novated.
RTC RULING:
On September 16, 2003, the Regional Trial Court upheld the validity of Letter of
Instructions No. 1155 and the Memorandum of Agreement executed by NDC and Galleon's
stockholders, pursuant to Letter of Instructions No. 1155. The RTC also held that Letter of
Instructions No. 1195 did not supersede or impliedly repeal Letter of Instructions No. 1155, and
assuming that it did impliedly repeal Letter of Instructions No. 1155, it would be void and
unconstitutional for violating the non-impairment clause.
The Regional Trial Court also ruled that the respondents liability to DBP under the Deed
of Undertaking had been extinguished due to novation, with NDC replacing them and PNCC as
debtors.
On March 9, 2004 and March 16, 2004, DBP and NDC filed their respective notices of
appeal to the Court of Appeals.
CA RULING:
The Court of Appeals likewise affirmed the Regional Trial Court's ruling that novation
took place when NDC agreed to be substituted in place of the respondents in the counter-
guarantees they issued in favor of DBP
On September 13, 2010, DBP filed its Petition for Review the Supreme Court.
DBP insisted that novation did not take place because:
(a) there was no second binding contract designed to replace the Deed of Undertaking;
(b) it did not give its consent to the substitution of debtors under the Memorandum of
Agreement;
(c) there was no agreement that unequivocally declared novation by substitution of debtors.

ISSUE:
Whether the Memorandum of Agreement novated the Deed of Undertaking executed
between DBP and respondents.
HELD:
No, The Court of Appeals erred when it ruled that DBP was privy to the
Memorandum of Agreement since Ongpin was concurrently Governor of DBP and
chairman of NDC Board of Directors at the time the Memorandum of Agreement was
signed.
Novation is never presumed. The animus novandi, whether partial or total, "must appear
by express agreement of the parties, or by their acts which are too clear and unequivocal to be
mistaken." There was no such animus novandi in the case at bar between DBP and respondents,
thus, respondents have not been discharged as Galleon's co-guarantors under the Deed of
Undertaking and they remain liable to DBP.
Doctrine:
animus novandi - intention of the original parties to an obligation to replace an existing
obligation or party to an obligation with a new one (novación).
The general rule is that "in the absence of an authority from the board of directors, no
person, not even the officers of the corporation, can validly bind the corporation." A corporation
is a juridical person, separate and distinct from its stockholders and members, having "powers,
attributes and properties expressly authorized by law or incident to its existence.
CASE DIGEST:

KABISIG REAL WEALTH DEV., INC. and FERNANDO C. TIO,, Petitioners

vs.
YOUNG BUILDERS CORPORATION, Respondent

G.R. No. 212375

Ponente: DIOSDADO M. PERALTA

FACTS:
In April 2001, KABISIG (PETITIONER) through Ferdinand Tio (Tio), contracted the
services of Young Builders Corporation (RESPONDENT). Young Builders then finished the
work and billed Kabisig. But despite demands, Kabisig failed to pay. KABISIG contended that
no written contract was ever entered into between the parties and it was never informed of the
estimated cost of the renovation.
Thus, Young Builders filed an action for Collection of Sum of Money against Kabisig.
RTC RULING:
The RTC ruled in favor of the Young Builders corporation (respondents). It also ordered
KABISIG to pay the young builders.
Hence, Kabisig elevated the case to the CA.
CA RULING:
The appellate court affirmed the RTC Decision, with modification. Kabisig and Ferdinand Tio
are ordered to jointly pay the plaintiff Young Builders Corporation ₱2,400,000.00 Pesos as
temperate damages.
Hence, Kabisig filed the instant petition to the Supreme Court.

ISSUE:
Whether or not Kabisig is liable to Young Builders for the damages claimed.
HELD:
YES, according to Art. 1318 for a contract to be valid, it must have the following
essential elements: (1) consent of the contracting parties; (2) object certain, which is the
subject matter of the contract; and (3) cause of the obligation which is established.
Consent must exist, otherwise, the contract is nonexistent. Consent is manifested by the
meeting of the offer and the acceptance of the thing and the cause, which are to constitute the
contract. By law, a contract of sale, is perfected at the moment there is a meeting of the minds
upon the thing that is the object of the contract and upon the price. Indeed, it is a consensual
contract which is perfected by mere consent.
Through the testimonies of both Young Builders' and Kabisig's witnesses, Tio
commissioned the company of his friend, Nelson Yu, to supply labor, tools, equipment, and
materials for the renovation of Kabisig's building into a restaurant. It is settled that once
perfected, a contract is generally binding in whatever form, whether written or oral, it may have
been entered into, provided the aforementioned essential requisites for its validity are present.
Article 1356 of the Civil Code provides:
Art. 1356. Contracts shall be obligatory in whatever form they may have been entered
into, provided all the essential requisites for their validity are present.
CASE DIGEST:

KT CONSTRUCTION SUPPLY, INC., represented by WILLIAM GO, Petitioner

vs.
PHILIPPINE SAVINGS BANK, Respondent
G.R. No. 228435

FACTS:
Petitioner KTConstruction On October 12, 2006, got a loan from respondent PSBank  in
the amount of ₱2.5 million. The said loan was evidenced by a Promissory Note executed on the
same date. both Go and Go-Tan signed the note in their personal capacities. It is stipulated in the
promissory note that it is payable within 60 months and that the note provided the payment of
attorney’s fees in case of litigation.
PSBank sent a demand letter to KT Construction asking the latter to pay its outstanding
obligation.
For its failure to pay despite demand, PSBank filed a complaint for sum of money against
KT Construction.
RTC RULING:
RTC ruled in favor of PSBank. It concluded that the promissory note expressly declared
that the entire obligation shall immediately become due and payable upon default in payment of
any installment. It declared KT Construction, Go and Go-Tan solidary liable and it ordered them
to pay PSBank the loan.
Hence, KT Construction appealed before the CA.
CA RULING:
The CA affirmed the RTC decision. It explained that due to the acceleration clause, the
loan became due and demandable upon KT Construction's failure to pay an installment.
Hence, KT Construction appealed before the Supreme Court.

ISSUE:
THE COURT OF APPEALS ERRED, AS DID THE LOWER COURT, IN FAILING
TO DECLARE THE PROMISSORY NOTE IN QUESTION AS NULL AND VOID FOR
BEING A CONTRACT OF ADHESION.
HELD:
NO, It has long been settled that an acceleration clause is valid and produces legal
effects. In the case at bench, the promissory note explicitly stated that default in any of the
installments shall make the entire obligation due and demandable notice even without or
demand. 
KT Construction was erroneous in saying that PSBank's complaint was premature on the
ground that the loan was due only on October 12, 2011. KT Construction's entire loan obligation
became due and demandable when it failed to pay an installment pursuant to the acceleration
clause.
CASE DIGEST:
UNITED ALLOY PHILIPINES CORPORATION, SPOUSES DAVID C. CHUA and
LUTEN CHUA, Petitioners
vs.
UNITED COCONUT PLANTERS BANK, Respondent.

PONENTE: DIOSDADO M. PERALTA

FACTS:
Petitioner corporation United Alloy Philippines Corporation (UNIALLOY) On December
18, 2000, applied for and was granted a credit accommodation by herein respondent United
Coconut Planters Bank. UNIALLOY failed to pay its loan obligations. As a result, UCPB filed
against UNIALLOY, the spouses Chua, Yang and Van Der Sluis an action for Sum of Money
with Prayer for Preliminary Attachment6 on August 27, 2001. On the other hand, on even date,
UNIALLOY filed against UCPB, UCPB Vice-President Robert Chua and Van Der Sluis a
complaint for Annulment and/or Reformation of Contract with Damages, with Prayer for a Writ
of Preliminary Injunction or Temporary Restraining Order.
In the meantime, UCPB and its co-defendants also filed a Motion to Dismiss
UNIALLOY's complaint for annulment of contract on the grounds of improper venue, forum
shopping, litis pendentia, and harassment or nuisance suit. On September 13, 2001, the RTC of
CDO issued an Order dismissing UNIALLOY's complaint for annulment of contract. On
February 18, 2002, the CA promulgated a Resolution granting UNIALLOY's prayer for the
issuance of a writ of preliminary injunction. UCPB questioned the above CA Resolution by
filing a petition for certiorari with this Court, this Court issued a Resolution which restrained the
CA from enforcing its February 18, 2002, Resolution.
Meanwhile, on March 15, 2002, UNIALLOY filed with the RTC of Makati an omnibus
motion praying for the suspension of the proceedings of the collection case in the said court on
the ground of pendency of the certiorari petition it filed with this Court.

RTC MAKATI RULING:

RTC of Makati rendered Judgment in the collection case in favor of UCPB.
HENCE, UNIALLOY(PETITIONERS) APPEALED TO THE CA.
CA RULING:
CA rendered its assailed judgment denying UNIALLOY's appeal and affirming the
questioned RTC Decision.
Hence, Unialloy (petitioners) appealed before the Supreme Court.

ISSUE:
Whether or not herein petitioners, together with their co-defendants Van Der Sluis and
Yang, are liable to pay respondent the amounts awarded by the RTC of Makati City in its June
17, 2003 Decision.

HELD:
YES, they are liable to pay the respondents, UNIALLOY failed to pay its obligations
under the above promissory notes and that herein petitioner Spouses Chua, together with
their co-defendants Van Der Sluis and Yang freely executed a Surety Agreement whereby
they bound themselves jointly and severally with UNIALLOY, to pay the latter's loan
obligations with UCPB.
CASE DIGEST:
RAFAEL ALMEDA, EMERLINA ALMEDA-LIRIO, ALODIA ALMEDA-TAN,
LETICIA ALMEDA-MAGNO, NORMA ALMEDA-MATIAS AND PUBLIO
TIBI, Petitioners, v. HEIRS OF PONCIANO ALMEDA IN SUBSTITUTION OF
ORIGINAL DEFENDANT PONCIANO ALMEDA, INTESTATE ESTATE OF SPOUSES
PONCIANO AND EUFEMIA PEREZ-ALMEDA AND THE REGISTER OF DEEDS OF
TAGAYTAY CITY, Respondent.

Ponente: Sereno, C.J

FACTS:
On May 19, 1976, a Power of Attorney was executed by Venancio and Leonila, who
were then 80 and 81 years old respectively, granting Ponciano, among others, the authority to
sell the parcels of land covered by Original Certificate of Title (OCT) Nos. O-197 and O-443 of
the Office of the Register of Deeds for Tagaytay City, which Leonila inherited8 from her parents.
On October 10, 1996, a Complaint for Nullity of Contracts, Partition of Properties and
Reconveyance of Titles with Damages,14 docketed as Civil Case No. TG-1643, was filed before
the RTC of Tagaytay City by the petitioners against Ponciano and his wife Eufemia Perez
Almeda (Eufemia) and the Register of Deeds of Tagaytay City, with Severina's surviving spouse,
Cesar Santos and children, Rosana, Norman and Ferdinand, as unwilling plaintiffs. Petitioners
alleged that the parties were the only heirs of the late spouses Venancio and Leonila who died
without leaving any will and without any legal obligation.
In support of their Complaint, petitioners claimed that Ponciano, taking advantage of his
being the eldest child and his close relationship with their parents, caused the simulation and
forgery of the following documents.

RTC RULING:
On September 2, 2004, the RTC issued an Order  dismissing petitioners' complaint.
The RTC held that the questioned documents, having been notarized and executed in the
presence of two instrumental witnesses, enjoy the presumption of regularity, and petitioners
failed to overcome this presumption by clear and convincing evidence. It stressed that petitioners
failed to present any proof of simulation or forgery of the subject documents.
Hence, the petitioners appealed to the CA.
CA RULING:
The CA denied the petition and affirmed RTC’S ruling.
The CA held that petitioners failed to discharge their burden of proving the purported
forgery with clear and convincing evidence. The CA stressed that such evidence was especially
needed in this case given that the assailed documents, being notarized, enjoy the presumption of
regularity and of due execution and authenticity. The CA noted that petitioners merely relied on
Emerlina's testimony that the questioned signatures were forged.
Hence, the petitioners appealed to the Supreme Court.
ISSUE:
Whether or not the appellate court erred in its decision.

HELD:
No,
In Spouses Villaceran, et al. v. De Guzman,46 the Court held that:
The issue of the genuineness of a deed of sale is essentially a question of fact. It is settled
that this Court is not duty-bound to analyze and weigh again the evidence considered in the
proceedings below. This is especially true where the trial court's factual findings are adopted
and affirmed by the CA as in the present case. Factual findings of the trial court, affirmed by the
CA, are final and conclusive and may not be reviewed on appeal.
"The law presumes that every person is fully competent to enter into a contract until
satisfactory proof to the contrary is presented." The party claiming absence of capacity to
contract has the burden of proof and discharging this burden requires that clear and convincing
evidence be adduced.
Petitioners have not satisfactorily shown that their parents' mental faculties were impaired
as to deprive them of reason or hinder them from freely exercising their own will or from
comprehending the provisions of the sale in favor of Ponciano.
Petitioners assert that their parents were "uliyanin" or forgetful, of advanced age and "at
times" sickly during the time of the execution of the 1978 Deed in favor of Ponciano. 71

Mere forgetfulness, however, without evidence that the same has removed from a person
the ability to intelligently and firmly protect his property rights, will not by itself incapacitate a
person from entering into contracts.