Lex Doggos Oblicon Case Digest

University of San Carlos | OBLIGATIONS AND CONTRACTS | Atty. Daryl Bretch M.
Largo
LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024
ALVERO ARCAMO DONGHIL GABOD KHO LIM
OBLIGATIONS AND CONTRACTS

Atty. Daryl Bretch M. Largo
CASE DIGESTS ON THE CASES LISTED IN THE SYLLABUS
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University of San Carlos | OBLIGATIONS AND CONTRACTS | Atty. Daryl Bretch M. Largo
OBLIGATIONS - General Provisions (Arts. 1156-1162)

1. Concept and Birth of Obligation (1156)
2. Elements of Obligation
3. Kinds of Obligation according to subject matter
4. Sources of Obligations (1157)
i. Law (1158)
Bautista vs. F.O. Borromeo, Inc. (30 SCRA 119)
Bautista vs. Federico O. Borromeo, Inc.
G.R. No. L-26002. October 31, 1969.
Facts:
The case of Bautista v. Federico O. Borromeo, Inc. involves a traffic accident that occurred
on September 15, 1964. Quintin Delgado, an employee of Federico O. Borromeo, Inc., was
killed in the accident. The accident happened when a Ford truck driven by Abelardo
Bautista and owned by Roberto Tan Ting collided with Borromeo's Volkswagen delivery
panel truck along Epifanio de los Santos Avenue. As a result of the accident, Borromeo
had to pay compensation and funeral expenses to Delgado's widow, amounting to P4,444,
under the Workmen's Compensation Act. Borromeo then filed a lawsuit in the Municipal
Court of Mandaluyong, Rizal, on June 17, 1965, seeking to recover the compensation and
funeral expenses from Bautista and Tan Ting. However, at the scheduled hearing on July
23, 1965, neither the petitioners nor their counsel appeared. Borromeo was allowed to
present its evidence ex parte, and on the same day, the municipal court rendered a
judgment in favor of Borromeo. Petitioners learned of the municipal court's decision on
August 6, 1965, and on August 13, 1965, they moved to set aside the decision. However,
their motion was denied on August 14, 1965. Petitioners then filed a notice of appeal on
September 2, 1965, but they only paid the appellate docket fee and deposited their appeal
bond on September 28, 1965, which was eleven days late. As a result, their appeal was
rejected by the municipal court. On October 26, 1965, petitioners filed a petition for relief
from the municipal court's judgment in the Court of First Instance of Rizal. They claimed
excusable negligence for their counsel's failure to attend the July 23, 1965 hearing and
argued that there was no contractual relationship between the parties. They sought a new
trial on the merits and a preliminary injunction. The court initially issued a restraining order
but eventually denied the prayer for a preliminary injunction. The respondents argued that
the petition for relief was filed out of time, that the counsel's failure to attend the hearing
was not excusable negligence, and that the affidavits attached to the petition did not show
a good and substantial defense.
Issue:
The main issues raised in the case are as follows:
1. Whether the petitioners' failure to perfect their appeal within the reglementary
period bars them from seeking relief from the court.
2. Whether the counsel's failure to attend the hearing can be considered excusable
negligence.
3. Whether there is a need to establish a contractual relationship between the
petitioners and Delgado.
Ruling:
The Court ruled in favor of the respondents and dismissed the petition for relief. The Court
held that the petitioners could have appealed the municipal court's decision and that a
petition for relief is not a substitute for an appeal. The Court found that the petitioners
failed to perfect their appeal within the reglementary period, even though they claimed not
to have received the notice of denial of their motion to set aside the decision. The Court
also found that the petitioners failed to establish excusable negligence for their counsel's
non-attendance at the hearing. The counsel's reliance on his associate to attend the
hearing was not a valid excuse, and the excuse that the record of the case had been
misplaced was a stereotyped excuse often used to win a new trial. Lastly, the Court held
that there was no need to establish a contractual relationship between the petitioners and
Delgado. Borromeo, as Delgado's employer, had the right to claim compensation and
funeral expenses under the Workmen's Compensation Act and was subrogated to
Delgado's right to sue the guilty party. Therefore, Borromeo had a valid cause of action
against the petitioners.
Ratio:
The Court based its decision on the following grounds:
1. The petitioners could have appealed the municipal court's decision instead of filing
a petition for relief. A petition for relief is not a substitute for an appeal, and the
petitioners failed to perfect their appeal within the reglementary period.
2. The petitioners failed to establish excusable negligence for their counsel's non-
attendance at the hearing. The counsel's reliance on his associate to attend the
hearing was not a valid excuse, and the excuse that the record of the case had been
misplaced was a stereotyped excuse often used to win a new trial.
3. There was no need to establish a contractual relationship between the petitioners
and Delgado. Borromeo, as Delgado's employer, had the right to claim
compensation and funeral expenses under the Workmen's Compensation Act and
was subrogated to Delgado's right to sue the guilty party. Therefore, Borromeo had
a valid cause of action against the petitioners.
In conclusion, the Court reversed the lower court's decision and dismissed the petition for
relief. The petitioners were held responsible for their failure to timely appeal the municipal
court's decision, and their counsel's negligence was not excusable. Borromeo was
entitled to recover the compensation and funeral expenses it paid to Delgado's widow
under the Workmen's Compensation Act.
Pelayo vs. Lauron (12 Phil. 453)

Pelayo vs. Lauron
G.R. No. 4089. January 12, 1909.
Facts:
The case of Pelayo v. Lauron involves a dispute over the payment of medical services
rendered by the plaintiff, Arturo Pelayo, to the daughter-in-law of the defendants, Marcelo
Lauron and Juana Abella. Pelayo, a physician residing in Cebu, was called to the
defendants' house to provide medical assistance to their daughter-in-law during her
difficult childbirth. Pelayo performed an operation using forceps and provided subsequent
visits to the patient. He claimed that the value of his services amounted to P500, which
the defendants refused to pay without any valid reason. Pelayo filed a complaint seeking
payment from the defendants.
In response, the defendants denied the allegations and argued that their daughter-in-law
had died as a result of the childbirth. They further claimed that she lived separately from
them and had no relation with them. The defendants argued that if she happened to be in
their house during the childbirth, it was due to fortuitous circumstances. They requested
that the complaint be dismissed.
The court below sustained the plaintiff's demurrer and directed the defendants to amend
their answer. The defendants then presented an amended answer, denying all the
allegations in the complaint and requesting its dismissal with costs. After considering the
evidence presented by both parties, the court absolved the defendants from the
complaint due to the lack of sufficient evidence to establish a right of action against them.
The court ruled in favor of the defendants and ordered the plaintiff to pay the costs.
Issue:
The main issue in this case is who is responsible for paying the medical fees incurred by
the plaintiff.
Ruling:
The court ruled in favor of the defendants and ordered the plaintiff to pay the costs.
Ratio:
The court relied on the reciprocal obligation of support between spouses, which is
established by law. The court explained that when one spouse is in need of medical
assistance due to illness, the other spouse is obligated to provide the necessary services
of a physician. Therefore, the party bound to provide support is liable for all expenses,
including the fees of the medical expert.
In this case, the husband of the patient is the one obligated to pay the fees, not the
defendants who are the parents-in-law. The court emphasized that the defendants had no
legal obligation to pay the fees, as they were strangers with respect to the obligation of
support between spouses. Furthermore, there was no evidence of a contract between the
defendants and the plaintiff that would impose such an obligation.
Therefore, the court affirmed the judgment absolving the defendants from the complaint
and ordered the plaintiff to pay the costs.
Martinez vs. Martinez (1 Phil. 647)

Martinez vs. Martinez
G.R. No. 445 . March 31, 1902.
Facts:
The case of Martinez v. Martinez involves a dispute between Pedro Martinez and his father,
Francisco Martinez. Pedro Martinez filed a lawsuit against his father, alleging that
Francisco Martinez is squandering the family estate and taking actions to benefit his
second wife. Pedro Martinez claims that his father is making excessive donations to his
second wife and her parents, amounting to over $200,000. Pedro Martinez also accuses
his father of giving control of the estate to his wife and initiating groundless lawsuits
against Pedro in order to transfer the property to his wife and her relatives.
In response, Francisco Martinez denies the allegations and presents a different version of
events. He claims that he had given Pedro a general power of attorney to administer the
community estate, but Pedro mismanaged and misappropriated the property. Francisco
Martinez revoked the power of attorney when Pedro refused to provide an account of his
administration. Francisco Martinez argues that the lawsuit he filed against Pedro was a
result of Pedro's refusal to comply with the revocation of the power of attorney.
Issue:
The main issue in this case is whether Francisco Martinez is squandering the family estate
and taking actions to benefit his second wife, as alleged by Pedro Martinez.
Ruling:
The Court of First Instance ruled in favor of Francisco Martinez, finding Pedro's evidence
insufficient to support his claims of prodigality against his father. The court affirmed that
in order to declare a person legally unfit to administer their own affairs due to prodigality,
their acts must demonstrate a morbid state of mind and a disposition to spend or waste
the estate to the extent that it exposes the family to want or deprives forced heirs of their
inheritances. The court also emphasized that donations are considered acts of generosity
and affection, and individuals have the right to make donations as long as they do not
exceed the limits set by law. The court stated that public policy requires limitations on
donations, but imposing further restrictions would be unjust and discourage the
acquisition of property.
Ratio:
The court found that Pedro's evidence did not prove any transfers or misappropriation of
the estate's properties. There was no evidence of any money or personal property that
could not be easily traced. The court noted that Pedro had been in possession of a
significant portion of the estate and had collected revenue from the ships and rents from
the city property. Despite Pedro's claims of his stepmother's increased possessions,
there was no evidence of any significant decrease in Francisco's property. The court
concluded that Pedro's allegations were unfounded and that he himself had a propensity
for initiating lawsuits. Therefore, the Court of First Instance affirmed the judgment in
favor of Francisco Martinez and ordered Pedro to pay the costs of the lawsuit.
ii. Contracts (1159; 1305)

Perez vs. Palomar (2 Phil. 682)
Perez vs. Pomar
G.R. No. 1299. November 16, 1903.
Facts:
The case of Perez v. Pomar involves a dispute between Vicente Perez and Eugenio Pomar
over payment for Perez's services as an interpreter. The case was decided on November
16, 1903, by the judge of the Sixth Judicial District. In his complaint filed on August 27,
1902, Perez alleged that Pomar, as the general agent of the Compania General de Tabacos,
verbally requested his services as an interpreter between himself and the military
authorities. Perez claimed that he continued to render these services from December 8,
1901, to May 31, 1902. He further stated that he accompanied Pomar to various
conferences and meetings during this period. Perez argued that he had abandoned his
own business to render these services and suffered damages in the amount of $3,200.
Pomar, in his answer, denied the allegations made by Perez. He claimed that Perez had not
been at his disposal for interpreting services and that he had not made any offer of
employment to Perez. Pomar argued that any services rendered by Perez were done
voluntarily and without any expectation of payment.
Issue:
The main issue in this case is whether there was an implied contract between Perez and
Pomar for the payment of Perez's services as an interpreter.
Ruling:
The court ruled in favor of Perez and held that there was an implied contract between Perez
and Pomar for the payment of Perez's services as an interpreter.
Ratio:
The court based its decision on the principle that contracts resulting from an implied
consent of the parties are valid and enforceable. It stated that when one person renders
services to another and these services are accepted, there is an obligation to pay for the
reasonable worth of the services rendered. The court also noted that even if no fixed
amount was determined as the consideration for the contract, it is still valid if the amount
of implied compensation can be determined by custom or frequent use in the place where
the services were rendered.
Based on the evidence presented, the court found that Perez had indeed rendered
services as an interpreter to Pomar. It concluded that there was a tacit and mutual consent
between the parties regarding the rendition of these services. Therefore, an obligation
arose for Pomar to compensate Perez for his services. The court determined that the value
of the services rendered should be 200 Mexican pesos, from which 50 pesos owed by
Perez to Pomar would be deducted.
In dissent, Justice McDonough argued that there was no legal evidence to support the
court's conclusion that the recovery should be 200 Mexican pesos. He believed that the
judgment should be affirmed as there was insufficient evidence to determine the
appropriate amount of compensation.
Maritime Company of the Philippines vs. Reparations Commission (40 SCRA

170)
Maritime Company of the Philippines vs. Reparations Commission
G.R. No. L-29203. July 26, 1971.
Facts:
The case of Maritime Company of the Philippines v. Reparations Commission involves a
maritime company, the plaintiff, suing a reparations commission, the defendant, for
unpaid freight charges. The plaintiff alleges that it loaded shipments of reparations goods
onto its vessels and delivered them to the defendant as the consignee. However, the
defendant failed and refused to pay the freight charges despite repeated demands. The
plaintiff seeks to recover the amount of the freight charges plus interest and attorney's
fees.
Issue:
The main issue in this case is whether the defendant is liable for the freight charges as the
consignee of the reparations goods.
Ruling:
The court rules in favor of the defendant, stating that the defendant is exempt from
payment of the freight charges.
Ratio:
The court bases its decision on Section 11 of the Reparations Act, which states that the
end-user, not the agency, is responsible for paying the insurance, ocean freight, and other
expenses incident to importation. The court emphasizes that the explicit language of this
provision must be read into the shipping contracts between the plaintiff and the
defendant. The court further explains that the law forms part of and is read into every
contract, unless clearly excluded.
The court finds that the provision in question clearly states that the end-user is
responsible for paying the necessary costs, charges, and expenses incident to the goods
concerned. Therefore, the defendant, as the consignee, is exempt from payment of the
freight charges.
The court also rejects the plaintiff's argument that its previous collection of freight charges
from end-users does not affect the liability of the defendant. The court finds that the
plaintiff's conduct of collecting freight charges from end-users and applying a portion of it
to its outstanding obligations to the defendant indicates that the plaintiff has recognized
and accepted the set-up as envisioned by Section 11 of the Reparations Act.
In conclusion, the court affirms the decision of the lower court, dismissing the plaintiff's
complaint for the recovery of freight charges. The court holds that the defendant is exempt
from payment based on the explicit language of the Reparations Act. The court
emphasizes that the law forms part of and is read into every contract, and the plaintiff
cannot demand payment of freight charges from the defendant.
NHA vs. CA (GR No. 128064, March 1, 2004)

National Housing Authority vs. Court of Appeals
G.R. No. 148830. April 13, 2005.
Facts:
The case involves a dispute between the National Housing Authority (NHA) and Bulacan
Garden Corporation (BGC) over the demolition of facilities on a leased lot. The lot is
subject to Manila Seedling Bank Foundation's (MSBF) usufructuary rights. On October 24,
1968, Proclamation No. 481 was issued, setting aside a 120-hectare portion of land in
Quezon City owned by the NHA for the National Government Center (NGC). On September
19, 1977, President Marcos issued Proclamation No. 1670, which removed a seven-
hectare portion from the coverage of the NGC and granted MSBF usufructuary rights over
this segregated portion. MSBF occupied an area of approximately 16 hectares, exceeding
the seven-hectare area granted to it. On August 18, 1987, MSBF leased a portion of the
area it occupied to BGC. On November 11, 1987, President Aquino issued Memorandum
Order No. 127, revoking the reserved status of the remaining 50 hectares of the NHA
property and authorizing the NHA to commercialize and sell it. On August 15, 1988, the
NHA gave BGC ten days to vacate its occupied area, leading to BGC filing a complaint for
injunction against the NHA. The trial court dismissed the complaint, but the appellate
court reversed the decision and ordered a joint survey to determine the boundaries of the
seven-hectare area subject to MSBF's usufructuary rights.
Issue:
The main issue in this case is whether the premises leased by BGC from MSBF is within
the seven-hectare area that Proclamation No. 1670 granted to MSBF by way of usufruct.
Ruling:
The court ruled that a usufruct may be constituted for a specified term and under such
conditions as the parties may deem convenient, subject to the legal provisions on
usufruct. The NHA may not evict BGC if the leased portion is within the seven-hectare area
held in usufruct by MSBF. However, the NHA has the right to evict BGC if BGC occupied a
portion outside of the seven-hectare area covered by MSBF's usufructuary rights. The
court also emphasized that MSBF has the duty to protect the owner's interests and should
respect the limit of the beneficial use given to it. MSBF's rights begin and end within the
seven-hectare portion of its usufruct.
Ratio:
The court based its ruling on the legal provisions on usufruct. It explained that a usufruct
is a real right, which grants the usufructuary the right to enjoy and use the property of
another with the obligation to preserve its form and substance, unless the title constituting
it or the law otherwise provides. The court emphasized that a usufruct may be constituted
for a specified term and under such conditions as the parties may deem convenient, as
long as it complies with the legal provisions on usufruct.
In this case, the court found that the seven-hectare area granted to MSBF by way of
usufruct is the limit of its rights. MSBF cannot exceed this area and must respect the limit
of the beneficial use given to it. Therefore, if the premises leased by BGC from MSBF is
within the seven-hectare area, the NHA may not evict BGC. However, if BGC occupied a
portion outside of the seven-hectare area covered by MSBF's usufructuary rights, the NHA
has the right to evict BGC.
The court also addressed the issue of whether the petition is moot due to the demolition
of BGC's facilities. It ruled that the issue is not moot because it has a direct effect on
MSBF's usufructuary rights and there is a need to settle the issue to avoid future disputes.
As a result, the court remanded the case to the trial court for a joint survey to determine
the exact location of the seven-hectare area subject to MSBF's usufructuary rights. The
survey should consider existing structures of MSBF and should include as much as
possible all existing major improvements of MSBF within the seven-hectare portion. The
parties were given sixty days to submit the joint survey to the trial court for approval.
iii. Quasi-Contracts (1160; 2142; 2144; 2154)

Cruz vs. J.M. Tuason & Co., Inc. (76 SCRA 543)
Cruz vs. J. M. Tuason & Co., Inc.
G.R. No. L-23749. April 29, 1977.
Facts:
The case involves a complaint filed by Faustino Cruz against J.M. Tuason & Company, Inc.
and Gregorio Araneta, Inc. seeking reimbursement for improvements made on a piece of
land and the conveyance of land. Cruz alleged that he made permanent improvements on
the land at the request of the Deudors, incurring expenses of P30,400.00 and P7,781.74.
He argued that since the defendants are benefiting from these improvements, they should
reimburse him for the expenses. Cruz also claimed that the defendants promised to
convey 3,000 square meters of land to him as consideration for his services in settling a
civil case involving the land.
The defendants filed separate motions to dismiss, arguing that the complaint failed to
state a cause of action, the claim was unenforceable under the Statute of Frauds, and the
action had already prescribed. The trial court granted the motions to dismiss, ruling that
the defendants were not parties to the agreement for improvements made by Cruz and
that the alleged agreement for the conveyance of land fell under the Statute of Frauds. The
court also held that Cruz's action had already prescribed.
Cruz filed a motion for reconsideration, but the trial court denied it, stating that the
arguments raised were mere repetitions of those already resolved in the previous order.
Issue:
The main issues raised in the case are:
1. Whether the complaint stated a cause of action for reimbursement of expenses
and conveyance of land.
2. Whether the Statute of Frauds applies to the alleged agreement for the conveyance
of land.
3. Whether Cruz's action had already prescribed.
Ruling:
The Supreme Court held that:
1. The complaint failed to state a cause of action for reimbursement of expenses and
conveyance of land.
2. The Statute of Frauds does not apply to the alleged agreement for the conveyance
of land.
3. Cruz's action had already prescribed.
Ratio:
The court explained that the Statute of Frauds only applies to specific kinds of
transactions, and the alleged agreement for the conveyance of land did not fall under any
of the enumerated transactions. The court also noted that the agreement had already
been partially consummated, as Cruz had fulfilled his part of the bargain by mediating the
compromise agreement. Therefore, the Statute of Frauds did not apply.
The court further held that Cruz's complaint failed to state a cause of action under Article
2142 of the Civil Code. Article 2142 applies to situations where there is no contract
between the parties, but in this case, Cruz had a contract with the Deudors regarding the
improvements and expenditures made on the land. Therefore, Cruz's cause of action
should be against the Deudors, not the defendants.
Finally, the court noted that Cruz's motion for reconsideration was pro-forma, as it
contained the same arguments already raised in his previous oppositions and rejoinder.
The court held that the motion did not suspend the period for appeal, and since the appeal
was filed beyond the 30-day reglementary period, the order of dismissal was already final
and executory.
In conclusion, the Supreme Court dismissed Cruz's appeal, affirming the trial court's
dismissal of his complaint.
National Commercial Bank of Saudi Arabia vs. Court of Appeals, G. R. No.

124267, Jan. 31, 2003)
National Commercial Bank of Saudi Arabia vs. Court of Appeals
G.R. No. 124267. January 31, 2003.
Facts:
The case of National Commercial Bank of Saudi Arabia v. Court of Appeals involves a
dispute over a duplicated payment of a letter of credit. The petitioner, National
Commercial Bank of Saudi Arabia (NCBSA), filed a case against the respondent, Philippine
Banking Corporation (PBC), to recover the duplication in the payment of the proceeds of a
letter of credit that NCBSA had issued. The trial court rendered a decision in favor of
NCBSA. PBC filed a Motion for Reconsideration, but the motion did not contain a notice of
hearing. NCBSA filed a Motion for Writ of Execution of the decision, and PBC filed a Motion
to Set Motion for Reconsideration for Hearing. The trial court granted NCBSA's Motion for
Writ of Execution and denied PBC's Motion for Reconsideration. PBC appealed the trial
court's decision to the Court of Appeals (CA) via a petition for certiorari, but the CA
dismissed the petition. PBC filed a Motion for Reconsideration, and the CA granted PBC's
petition for certiorari. NCBSA appealed the CA's decision to the Supreme Court.
Issue:
The main issue in this case is whether the absence of a notice of hearing in PBC's Motion
for Reconsideration is fatal and whether it can be cured by a belated filing of a notice of
hearing.
Ruling:
The Supreme Court ruled in favor of NCBSA. The Court held that the requirement of notice
under the Revised Rules of Court is mandatory, and the absence of a notice of hearing is
fatal. In cases of motions to reconsider a decision, the running of the period to appeal is
not tolled by their filing or pendency. PBC's Motion for Reconsideration did not contain the
requisite notice of hearing, and its attempt to cure the defect by filing a Motion to Set the
Motion for Reconsideration for Hearing after the period for filing the Notice of Appeal had
expired was not valid. The Court also held that even if PBC had presented exceptional
reasons for its failure to comply with the notice requirement, the Motion for
Reconsideration would still be denied because it was pro forma. PBC's Motion for
Reconsideration was merely a reiteration of the reasons and arguments raised before the
trial court, which had already been considered and resolved against it on the merits. The
Court emphasized that the finality of the decision of the trial court cannot be set aside
purely on the basis of liberality, and only for the most persuasive of reasons should the
court allow a relaxation of its procedural rules.
Ratio:
The Supreme Court's decision was based on the mandatory requirement of notice under
the Revised Rules of Court. The absence of a notice of hearing in PBC's Motion for
Reconsideration was deemed fatal and could not be cured by a belated filing of a notice
of hearing. The Court emphasized that procedural rules should be strictly followed, and
the finality of a trial court's decision should not be set aside without the most persuasive
of reasons. PBC's Motion for Reconsideration was considered pro forma as it did not
present exceptional reasons to warrant a relaxation of the procedural rules. The Court held
that the running of the period to appeal is not tolled by the filing or pendency of motions
to reconsider a decision. Therefore, PBC's attempt to cure the defect by filing a Motion to
Set the Motion for Reconsideration for Hearing after the period for filing the Notice of
Appeal had expired was not valid.
Sebastian Siga-an vs. Alicia Villanueva, G.R. No. 173227, January 20, 2009
Siga-an vs. Villanueva
G.R. No. 173227. January 20, 2009.
Facts:
The case involves a dispute over a loan between petitioner Sebastian Siga-an and
respondent Alicia Villanueva. Villanueva filed a complaint for a sum of money against
Siga-an, alleging that he offered to loan her P540,000.00 in 1992 for her business
transactions with the Philippine Navy Office (PNO). Villanueva claimed that she paid a
total of P1,200,000.00 to Siga-an, including an excess amount of P660,000.00 that she
believed was applied as interest for the loan. However, there was no written agreement or
stipulation regarding the payment of interest. Villanueva demanded the return of the
excess amount, but Siga-an ignored her claim.
Issue:
The main issue in this case is whether Siga-an is entitled to collect interest on the loan
despite the absence of a written agreement.
Ruling:
The court ruled that Siga-an is not entitled to collect interest on the loan. Under Article
1956 of the Civil Code, no interest shall be due unless it has been expressly stipulated in
writing. Since there was no written agreement between Siga-an and Villanueva regarding
the payment of interest, Siga-an cannot collect interest on the loan. The court also applied
the principle of solutio indebiti, which states that if something is received when there is no
right to demand it, and it was unduly delivered through a mistake, the obligation to return
it arises. Since Villanueva made an overpayment of her loan obligation to Siga-an, Siga-an
is obligated to return the excess amount.
Ratio:
The court based its decision on Article 1956 of the Civil Code, which provides that no
interest shall be due unless it has been expressly stipulated in writing. Since there was no
written agreement between Siga-an and Villanueva regarding the payment of interest,
Siga-an cannot collect interest on the loan. The court also applied the principle of solutio
indebiti, which is a legal principle that states that if something is received when there is no
it arises. In this case, Villanueva made an overpayment of her loan obligation to Siga-an,
and therefore, Siga-an is obligated to return the excess amount.
Based on the court's ruling, Siga-an was ordered to pay Villanueva the amount of
P335,000.00 as a refundable amount of interest, reduced from the original amount of
P660,000.00. Siga-an was also ordered to pay Villanueva P150,000.00 as moral damages,
P50,000.00 as exemplary damages, and an amount equivalent to 25% of P335,000.00 as
attorney's fees. The court imposed a 6% per annum interest on the refundable amount,
damages, and attorney's fees from the time of the extra-judicial demand until the finality
of the decision, and a 12% per annum interest from the finality of the decision until its
satisfaction.
iv. Delict (1161; 2177; Art. 100, 104 of RPC)

DMPI Employees Credit Cooperative, Inc. vs. Velez, 371 SCRA 72
DMPI Employees Credit Cooperative, Inc. vs. Velez
G.R. No. 129282. November 29, 2001.
Facts:
This case involves a civil action for damages filed by Eriberta Villegas against DMPI
Employees Credit Cooperative, Inc. (DMPI-ECCI) and Carmen Mandawe. The complaint
was filed on March 29, 1994, alleging that Mandawe, an employee of DMPI-ECCI, failed to
account for the amount of P608,532.46 entrusted to her by Villegas for deposit with the
petitioner. The petitioner sought the dismissal of the civil case on the grounds that there
was a pending criminal case in RTC Branch 37 arising from the same facts, and that the
complaint failed to contain a certification against forum shopping as required by Supreme
Court Circular No. 28-91. On December 12, 1996, the trial court dismissed Civil Case No.
CV-94-214. However, respondent filed a motion for reconsideration, which was granted by
the trial court on February 21, 1997, thereby recalling the dismissal of the case.
Issue:
The main issues raised in this case are: (1) whether the failure to attach a certification
against forum shopping is a ground for dismissal of the case, and (2) whether the civil case
can proceed independently of the criminal case for estafa without a reservation.
Ruling:
The Supreme Court ruled that the failure to attach a certification against forum shopping
did not violate Supreme Court Circular No. 28-91, as the requirement at the time of filing
only applied to petitions filed with the Supreme Court and the Court of Appeals.
Additionally, Administrative Circular No. 04-94, which extended the requirement to all
initiatory pleadings filed in all courts, was not applicable as the complaint was filed before
its date of effectivity. On the second issue, the Court explained that as a general rule, an
offense causes two classes of injuries: the social injury produced by the criminal act,
which is repaired through the imposition of the corresponding penalty, and the personal
injury caused to the victim, which is compensated through indemnity. Every person
criminally liable for a felony is also civilly liable. The offended party may prove the civil
liability of an accused arising from the commission of the offense in the criminal case, as
the civil action is either deemed instituted with the criminal action or is separately
instituted.
Ratio:
Under the Revised Rules of Criminal Procedure, the civil liability arising from the offense
charged is deemed instituted with the criminal action unless the offended party waives
the civil action, reserves the right to institute it separately, or institutes the civil action prior
to the criminal action. However, for civil actions for recovery of civil liability under specific
articles of the Civil Code, such as Articles 32, 33, 34, and 2176, the civil action may
proceed independently of the criminal action and may be prosecuted separately even
without a reservation. In this case, Civil Case No. CV-94-214, which is an independent civil
action for damages under Article 33 of the Civil Code, may proceed independently even
without a reservation. The changes in the Revised Rules on Criminal Procedure pertaining
to independent civil actions, which became effective on December 1, 2000, are applicable
to this case. Therefore, the Supreme Court denied the petition and affirmed the order of
the trial court granting the motion for reconsideration and recalling the dismissal of the
civil case.
Secs. 1-3. Rule III, Revised Rules of Criminal Procedure

Section 1. Institution of criminal and civil actions. — (a) When a criminal action is
instituted, the civil action for the recovery of civil liability arising from the offense charged
shall be deemed instituted with the criminal action unless the offended party waives the
civil action, reserves the right to institute it separately or institutes the civil action prior to
the criminal action.
The reservation of the right to institute separately the civil action shall be made before the
prosecution starts presenting its evidence and under circumstances affording the
offended party a reasonable opportunity to make such reservation.
When the offended party seeks to enforce civil liability against the accused by way of
moral, nominal, temperate, or exemplary damages without specifying the amount thereof
in the complaint or information, the filing fees thereof shall constitute a first lien on the
judgment awarding such damages.
Where the amount of damages, other than actual, is specified in the complaint or
information, the corresponding filing fees shall be paid by the offended party upon the
filing thereof in court.
Except as otherwise provided in these Rules, no filing fees shall be required for actual
damages.
No counterclaim, cross-claim or third-party complaint may be filed by the accused in the

criminal case, but any cause of action which could have been the subject thereof may be
litigated in a separate civil action. (1a)
(b) The criminal action for violation of Batas Pambansa Blg. 22 shall be deemed to include
the corresponding civil action. No reservation to file such civil action separately shall be
allowed.
Upon filing of the aforesaid joint criminal and civil actions, the offended party shall pay in
full the filing fees based on the amount of the check involved, which shall be considered
as the actual damages claimed. Where the complaint or information also seeks to recover
liquidated, moral, nominal, temperate or exemplary damages, the offended party shall
pay additional filing fees based on the amounts alleged therein. If the amounts are not so
alleged but any of these damages are subsequently awarded by the court, the filing fees
based on the amount awarded shall constitute a first lien on the judgment.
Where the civil action has been filed separately and trial thereof has not yet commenced,
it may be consolidated with the criminal action upon application with the court trying the
latter case. If the application is granted, the trial of both actions shall proceed in
accordance with section 2 of this Rule governing consolidation of the civil and criminal
actions. (cir. 57-97)
Section 2. When separate civil action is suspended. — After the criminal action has been
commenced, the separate civil action arising therefrom cannot be instituted until final
judgment has been entered in the criminal action.
If the criminal action is filed after the said civil action has already been instituted, the latter
shall be suspended in whatever stage it may be found before judgment on the merits. The
suspension shall last until final judgment is rendered in the criminal action. Nevertheless,
before judgment on the merits is rendered in the civil action, the same may, upon motion
of the offended party, be consolidated with the criminal action in the court trying the
criminal action. In case of consolidation, the evidence already adduced in the civil action
shall be deemed automatically reproduced in the criminal action without prejudice to the
right of the prosecution to cross-examine the witnesses presented by the offended party
in the criminal case and of the parties to present additional evidence. The consolidated
criminal and civil actions shall be tried and decided jointly.
During the pendency of the criminal action, the running of the period of prescription of the
civil action which cannot be instituted separately or whose proceeding has been
suspended shall be tolled. (n)
The extinction of the penal action does not carry with it extinction of the civil action.
However, the civil action based on delict shall be deemed extinguished if there is a finding
in a final judgment in the criminal action that the act or omission from which the civil
liability may arise did not exist. (2a)
Section 3. When civil action may proceeded independently. — In the cases provided for
in Articles 32, 33, 34 and 2176 of the Civil Code of the Philippines, the independent civil
action may be brought by the offended party. It shall proceed independently of the criminal
action and shall require only a preponderance of evidence. In no case, however, may the
offended party recover damages twice for the same act or omission charged in the
criminal action. (3a)
Hun Hyung Park v. Eung Won Choi, G.R. No. 165496, 12 February 2007, 515
SCRA 502
Hun Hyung Park vs. Eung Won Choi
G.R. No. 165496. June 29, 2007.
Facts:
This case involves a motion for reconsideration filed by petitioner Hun Hyung Park against
respondent Eung Won Choi. The motion was denied by the court due to improper
verification, failure to attach necessary orders, and incorrect dismissal of the civil aspect
of the case. The petitioner claimed that the failure to include certain words in the
verification of the petition was an honest mistake.
Issue:
1. Whether the failure to include certain words in the verification of the petition was a
valid ground for denying the motion for reconsideration.
2. Whether the petitioner was required to attach the MeTC Orders even if he was not
questioning them.
3. Whether the granting of a demurrer in criminal cases is equivalent to an acquittal
and cannot be reversed on appeal.
4. Whether the dismissal of the civil aspect of the case was premature.
Ruling:
The court denied the motion for reconsideration.
Ratio:
The court found that the motion for reconsideration was properly denied due to the
petitioner's failure to comply with certain requirements. While the court acknowledged
that the failure to include certain words in the verification of the petition was an honest
mistake, it still deemed the motion to be without merit. The court explained that proper
verification is necessary to ensure the authenticity and truthfulness of the allegations in
the petition. Therefore, the failure to comply with the requirements of verification was a
valid ground for denying the motion.
The court also ruled that the petitioner was indeed required to attach the MeTC Orders,
even if he was not questioning them. Rule 42 explicitly mandates the attachment of lower
court judgments or final orders. The petitioner's failure to attach the MeTC Order, which
dismissed the entire case, was seen as a violation of the rules. The court emphasized the
importance of attaching necessary orders to provide a complete record of the case and to
enable the court to fully understand the issues involved.
Regarding the granting of a demurrer in criminal cases, the court explained that it is
equivalent to an acquittal and cannot be reversed on appeal. The petitioner's argument
that the respondent waived his right to present evidence was therefore not valid. The court
clarified that the granting of a demurrer in criminal cases is a final disposition of the case
and cannot be overturned on appeal.
Lastly, the court found that the dismissal of the civil aspect of the case was premature.
The RTC only decided the appeal in relation to the dismissal of the civil aspect of the case,
which was incorrect since there was no dispute about the existence of the act or omission
from which the civil liability may arise. The court concluded that the dismissal of the civil
aspect of the case was premature and denied the motion for reconsideration.
Jeffrey Reso Dayap vs. Sendiong, G.R. No. 177960, January 29, 2009
Dayap vs. Sendiong
G.R. No. 177960. January 29, 2009.
Facts:
The case of Dayap v. Sendiong involves a petition for review on certiorari of the decision
and resolution of the Court of Appeals in a case filed by Pretzy-Lou Sendiong, Genesa
Sendiong, Elvie Sy, and Dexie Duran against Jeffrey Reso Dayap. The case originated from
the filing of an Information by the Provincial Prosecutor's Office charging Dayap with the
crime of Reckless Imprudence resulting in Homicide, Less Serious Physical Injuries, and
Damage to Property. Dayap pleaded not guilty to the charge and the case proceeded to
trial. After the prosecution presented its evidence, Dayap filed a demurrer to evidence,
which was granted by the Municipal Trial Court (MTC), resulting in his acquittal. The MTC
found that the evidence presented by the prosecution failed to establish the allegations in
the Information. The MTC also noted that the prosecution did not prove that Dayap was
the one who committed the crime or establish the elements of the crime. The MTC
acquitted Dayap due to insufficiency of evidence. Respondents filed a petition for
certiorari with the Regional Trial Court (RTC), which affirmed Dayap's acquittal but ordered
the remand of the case to the MTC for further proceedings on the civil aspect. Both parties
filed motions for reconsideration, which were denied. Respondents then filed a petition
for review with the Court of Appeals, which ruled that the case falls under the jurisdiction
of the RTC due to the alleged damage to property. The Court of Appeals remanded the case
to the RTC for proper disposition. Dayap filed a motion for reconsideration, arguing that
the MTC had jurisdiction over the case based on Republic Act No. 7691. The Court of
Appeals denied the motion for reconsideration. In the present petition for review, Dayap
argues that the MTC had jurisdiction over the case and that the RTC and Court of Appeals
erred in their rulings.
Issue:
The main issue in this case is whether the Municipal Trial Court (MTC) or the Regional Trial
Court (RTC) has jurisdiction over the case filed against Jeffrey Reso Dayap for Reckless
Imprudence resulting in Homicide, Less Serious Physical Injuries, and Damage to
Property.
Ruling:
The Supreme Court granted the petition, ruling that the MTC had jurisdiction over the case
and that Dayap's acquittal extinguished his civil liability. The Court held that the MTC did
not abuse its discretion in dismissing the case and that there was no need to remand the
case for further proceedings on the civil aspect. The Court reinstated and affirmed the
MTC's order granting the demurrer to evidence and acquitting Dayap.
Ratio:
The Supreme Court based its ruling on Republic Act No. 7691, which provides that the MTC
has exclusive original jurisdiction over all offenses punishable with imprisonment not
exceeding six years, regardless of the amount of fine, and regardless of other imposable
accessory or other penalties, including the civil liability arising from such offenses or
predicated thereon, irrespective of kind, nature, value, or amount thereof. In this case, the
offense charged against Dayap is punishable by imprisonment not exceeding six years,
and therefore falls within the jurisdiction of the MTC. The Court emphasized that the
jurisdiction of the court is determined by the law in force at the time of the institution of
the action. Since the offense was committed prior to the amendment of the law, the MTC
has jurisdiction over the case. Furthermore, the Court held that Dayap's acquittal
extinguished his civil liability, as the acquittal was based on the insufficiency of evidence
presented by the prosecution. Therefore, there was no need for further proceedings on the
civil aspect of the case. The Court concluded that the MTC did not abuse its discretion in
granting the demurrer to evidence and acquitting Dayap, and that the RTC and Court of
Appeals erred in their rulings.
v. Quasi-delict (1162; 2176)

Lasam vs. Smith (45 Phil. 657)
Lasam vs. Smith, Jr.
G.R. No. 19495. February 2, 1924.
Facts:
In the case of Lasam v. Smith, Jr., the plaintiffs, Honrion Lasam and his wife, filed a lawsuit
against the defendant, Frank Smith Jr., for damages they sustained in a car accident. The
accident occurred while the defendant, who owned a public garage, was driving the
plaintiffs from San Fernando, La Union to Currimao, Ilocos Norte. During the journey, the
car experienced steering gear defects, causing it to veer off the road and down a steep
embankment. As a result, Mr. Lasam suffered minor injuries, while Mrs. Lasam sustained
serious injuries, including a compound fracture in her left wrist and a subsequent nervous
breakdown. The plaintiffs filed a complaint seeking P20,000 in damages, alleging that the
accident was due to defects in the car and the negligence of the defendant's employees.
The trial court ruled in favor of the plaintiffs, awarding them P1,254.10 in damages. Both
parties appealed the decision, with the plaintiffs arguing that the damages awarded were
insufficient, and the defendant denying any liability for damages.
Issue:
The main issue in the case was whether the defendant was liable for damages under a
breach of contract of carriage or under tort law.
Ruling:
The trial court held that the cause of action was based on the defendant's breach of the
contract of carriage, and therefore, articles 1101-1107 of the Civil Code, which govern
contractual liability, were applicable. The court found that the breach of the contract was
not due to fortuitous events and held the defendant liable for damages.
Ratio:
The court's ruling was based on the understanding that a carrier of passengers is not an
absolute insurer against all risks of travel. Under both American and Spanish law, a carrier
is only liable for damages if the passenger cannot protect themselves by exercising due
care and diligence. In this case, the accident was not caused by an act of God or adverse
road conditions but was likely due to defects in the car or the negligence of the driver.
Therefore, the court concluded that the defendant's liability was contractual, and he was
liable for damages.
Regarding the amount of damages awarded, the court exercised its discretionary power to
moderate the liability according to the circumstances. The plaintiffs claimed damages
amounting to P7,832.80, but the court found that the majority of the claimed damages
were a result of Mrs. Lasam's refusal to undergo a necessary operation for her fractured
wrist. The court affirmed the trial court's decision to award P1,254.10 in damages,
considering the expenses incurred by the plaintiffs.
In conclusion, the court affirmed the trial court's decision, holding the defendant liable for
damages under a breach of contract of carriage. The court clarified that a carrier of
passengers is not an absolute insurer against all risks and that liability can be moderated
based on the circumstances. The court found that the defendant's liability was not due to
fortuitous events and awarded damages accordingly.
Elcano vs. Hill (77 SCRA 98)

Elcano vs. Hill
G.R. No. L-24803. May 26, 1977.
Facts:
The case of Elcano v. Hill was decided by the Supreme Court of the Philippines on May 26,
1977. The case involved a civil action for damages brought by the parents of a deceased
child against a minor and his father. The events leading to the case began when the minor,
who was driving a motorcycle, collided with the child, resulting in the child's death. The
parents of the deceased child filed a criminal case against the minor for reckless
imprudence resulting in homicide. However, the minor was acquitted in the criminal case.
Issue:
The main issue raised in the case was whether the minor's acquittal in the criminal case
barred the parents from filing a civil action for damages against him. Additionally, the court
had to determine whether the minor's father could still be held liable for the damages,
despite the minor's emancipation by marriage.
Ruling:
The Supreme Court ruled in favor of the parents and held that the minor's acquittal in the
criminal case did not prevent them from pursuing a civil action for damages. The court
explained that the acquittal in the criminal case was based on the higher standard of proof
beyond reasonable doubt, while the civil action only required a preponderance of
evidence. Therefore, the minor's acquittal in the criminal case did not preclude the parents
from seeking civil damages.
Furthermore, the court held that the minor's father could still be held liable for the
damages, despite the minor's emancipation by marriage. The court reasoned that the
father, as the head of the family, had the legal duty to exercise parental authority and
control over his minor child. The minor's emancipation by marriage did not absolve the
father of this duty, and he could still be held responsible for the actions of his minor child.
Ratio:
The Supreme Court based its decision on the distinction between the standards of proof
in criminal and civil cases. The court explained that the minor's acquittal in the criminal
case was based on the higher standard of proof beyond reasonable doubt, which is
required to establish guilt in a criminal case. On the other hand, a civil action for damages
only requires a preponderance of evidence, which means that the evidence presented
must be more convincing than the evidence presented by the other party. Therefore, the
minor's acquittal in the criminal case did not preclude the parents from seeking civil
damages.
Additionally, the court emphasized the continuing responsibility of parents for the actions
of their minor children. The court held that the minor's father, despite the minor's
emancipation by marriage, still had the legal duty to exercise parental authority and
control over his minor child. This duty extended to being held liable for the damages
caused by the minor's actions.
In conclusion, the Supreme Court ruled that the minor's acquittal in the criminal case did
not bar the parents from filing a civil action for damages, and that the minor's father could
still be held liable for the damages, despite the minor's emancipation by marriage. The
court highlighted the distinction between the standards of proof in criminal and civil
cases, and the continuing responsibility of parents for the actions of their minor children.
Virata vs. Ochoa (81 SCRA 472)

Virata vs. Ochoa
G.R. No. L-46179. January 31, 1978.
Facts:
The case of Virata v. Ochoa involves the death of Arsenio Virata, who was hit by a passenger
jeepney driven by Maximo Borilla and registered in the name of Victorio Ochoa. A criminal
case for reckless imprudence was filed against Borilla. However, before the criminal case
could be decided, the heirs of the victim filed a separate civil action for damages against
both the owner and the driver of the jeepney based on quasi-delict. Borilla was
subsequently acquitted of the criminal charge, and the defendants in the civil case moved
to dismiss it. The trial court granted the motion to dismiss, which led to the appeal.
Issue:
The main issue before the Supreme Court was whether the heirs of the victim could pursue
an action for damages based on quasi-delict against the driver and owner of the jeepney.
Ruling:
The Supreme Court held that the acquittal of the driver in the criminal case does not bar
the prosecution of a civil case for damages based on quasi-delict. The court set aside the
order of dismissal and remanded the case to the lower court for further proceedings.
Ratio:
The court based its decision on Article 1157 of the Civil Code of the Philippines, which
recognizes quasi-delict and an act or omission punishable by law as two different sources
of obligation. The court emphasized that the source of obligation sought to be enforced in
the civil action is quasi-delict, not an act or omission punishable by law. Therefore, the
dismissal of the criminal case does not prevent the prosecution of the civil case.
The court also highlighted that the petitioners are not seeking to recover twice for the same
negligent act. They made it clear in the criminal case that they were filing a separate civil
action for damages based on quasi-delict. Thus, the dismissal of the criminal case does
not bar the prosecution of the civil case.
In conclusion, the Supreme Court ruled that the acquittal of the driver in a criminal case
does not prevent the prosecution of a separate civil case for damages based on quasi-
delict. The court recognized the distinction between quasi-delict and an act or omission
punishable by law, and held that the dismissal of the criminal case does not bar the pursuit
of the civil case. The court set aside the order of dismissal and remanded the case to the
lower court for further proceedings.
Neplum, Inc. vs. Orbeso, (G.R. No. 141986, July 11, 2002)
Neplum, Inc. vs. Orbeso
G.R. No. 141986. July 11, 2002.
Facts:
The case of Neplum, Inc. v. Orbeso involves the appeal of the civil aspect of a judgment in
a criminal case. The petitioner, Neplum, Inc., sought to appeal the civil aspect of a
judgment in Criminal Case No. 96-246, in which the accused was acquitted of the crime
of estafa based on reasonable doubt. The Regional Trial Court (RTC) of Makati City denied
the petitioner's Notice of Appeal and Amended Notice of Appeal, ruling that they were filed
beyond the reglementary period.
Issue:
The main issue in this case is the timeliness of the appeal by the private offended party.
Ruling:
The court denies the petition and affirms the RTC's order.
Ratio:
The court rules that the period for appeal should be counted from the time the offended
party had actual or constructive knowledge of the judgment, whether it be during its
promulgation or as a consequence of the service of the notice of the decision. The court
clarifies that the promulgation of judgment refers to the accused, while the notice of
judgment refers to the private offended party.
The court further explains that the appeal of the civil liability ex delicto of a judgment of
acquittal should be filed within 15 days from notice of the judgment or the final order
appealed from. In this case, the private prosecutor representing the petitioner was present
during the promulgation of the judgment and received a copy of the judgment, thus the
petitioner was already actually notified of the judgment and should have taken the
necessary steps to ensure that a timely appeal be filed.
The court emphasizes that the right to appeal is not a natural right or part of due process,
but a procedural remedy that must be strictly complied with. Therefore, the petitioner's
failure to file a timely notice of appeal renders the judgment final and executory.
OBLIGATIONS - Nature and Effects of Obligations (Arts.

1163-1178)
1. Compliance with Obligations (cf. 19)
i. In obligations to Give
a. Specific thing (1244; 1165; 1163; 1166; 1164)
Fidelity & Deposit Co. vs. Wilson (8 Phil. 51)
The Fidelity and Deposit Co. of Maryland vs. Wilson
G.R. No. L-2684. March 15, 1907.
Facts:
The case of The Fidelity and Deposit Co. of Maryland v. Wilson involves a dispute over the
ownership of funds found in the possession of a government employee named Wilson.
Wilson had defaulted on his bond, and the plaintiff, The Fidelity and Deposit Company of
Maryland, along with another company, The American Surety Company of New York,
became sureties on Wilson's bond. Wilson was captured in Canada and had a sum of
money amounting to $785 in gold on his person. The funds were turned over to the custody
of Mr. Branagan, the Insular Treasurer.
The plaintiff filed a complaint against Wilson and The American Surety Company, seeking
judgment against Wilson for the amount paid by the plaintiff to the government under the
surety bond. The plaintiff also requested that the funds found in Wilson's possession be
applied to the payment of the judgment and that the plaintiff be preferred in its right to the
money.
H.D. Terrell filed a complaint as an intervenor, claiming that Wilson had transferred his
rights to the funds to Terrell in payment for legal services. Terrell requested that the funds
be delivered to him as the legitimate owner. The plaintiff and The American Surety
Company filed a joint complaint, asserting their better right to the funds as sureties on
Wilson's bond. They requested that the funds be divided equally between them as part
payment for the amounts they had paid to the government as sureties.
The lower court rendered a judgment declaring Terrell as the owner of the funds and
ordering their delivery to him. The court also rendered judgment in favor of the plaintiff
against Wilson for the amount paid under the surety bond. The plaintiff appealed the part
of the judgment that awarded the funds to Terrell.
Issue:
The main issue in the case is the legal effect of the transfer made by Wilson to Terrell.
Ruling:
The court held that the transfer, by itself and the subsequent notification to the Insular
Treasurer, did not transfer ownership of the funds to Terrell. The court emphasized that
delivery of the funds is necessary to acquire ownership by virtue of a contract. Since there
was no proof of delivery to Terrell, he only acquired a right as a creditor, not ownership of
the funds.
The court also ruled that neither the plaintiff nor Terrell enjoyed preference over the other
as creditors. The credits of both parties did not fall under the privileged credits
enumerated in the Civil Code. Therefore, the court ordered that the funds be divided pro
rata between the plaintiff and Terrell, without consideration of the dates of their claims.
Ratio:
The court based its decision on the principle that ownership of funds can only be acquired
through delivery. In this case, there was no evidence of delivery of the funds to Terrell,
therefore he only had a right as a creditor. The court also considered the fact that neither
the plaintiff nor Terrell had privileged credits under the Civil Code, which would have given
them preference over each other. As a result, the court ordered the funds to be divided
equally between the plaintiff and Terrell, without regard to the dates of their claims.
In conclusion, the court reversed the part of the judgment that awarded the funds to Terrell
and ordered that the funds be divided pro rata between the plaintiff and Terrell.
Cruzado vs. Bustos (34 Phil. 17)

Cruzado vs. Bustos
G.R. No. 10244. February 29, 1916.
Facts:
The case of Cruzado v. Bustos involves a simulated contract of sale between the plaintiff's
father and the defendants. The purpose of this simulated sale was to create the
appearance that the plaintiff's father acquired a piece of real property in order to hold the
office of procurador. The contract of sale was considered valid and binding upon both
parties, but it was not consummated because the purchaser did not pay the price or take
possession of the property. As a result, the plaintiff was unable to claim ownership of the
property or bring an action for recovery of possession. It was also found that the defendant
had acquired ownership of the property through prescription.
Issue:
The main issue raised in this case is whether the simulated contract of sale between the
plaintiff's father and the defendants is valid and if the plaintiff has the right to claim
ownership of the property or bring an action for recovery of possession.
Ruling:
The court ruled that the simulated contract of sale between the plaintiff's father and the
defendants is not valid. The court also held that the plaintiff does not have the right to
claim ownership of the property or bring an action for recovery of possession. Additionally,
the court found that the defendant had acquired ownership of the property through
prescription.
Ratio:
The court based its decision on several legal principles. Firstly, the court explained that
the legal fiction of delivery through the execution of a public instrument does not have any
effect if the purchaser does not take possession of the property and pay the price. In this
case, since the purchaser did not fulfill these requirements, the contract of sale was not
consummated and the plaintiff cannot claim ownership of the property.
Furthermore, the court stated that the vendee of a simulated purchase cannot convey any
property right or title to successors in interest, but only the right to demand fulfillment of
the contract. This means that even if the plaintiff's father had acquired the property
through the simulated sale, he would not have been able to transfer ownership to the
plaintiff.
The court also addressed the issue of registration. It held that the registration of a second
copy of the simulated deed of sale does not affect the rights of the present owner of the
property. This means that even if the defendants had registered the simulated sale, it
would not have given them any legal rights over the property.
Finally, the court ruled that both the personal action and the real action for recovery of
possession had prescribed after 35 years. This means that the plaintiff's right to bring an
action for recovery of possession had expired due to the passage of time.
In conclusion, the court found that the simulated contract of sale was not valid and that
the plaintiff did not have the right to claim ownership of the property or bring an action for
recovery of possession. The defendant's acquisition of ownership through prescription

was also upheld.
Pornellosa vs. Land Tenure Administration (1 SCRA 375)

Pornellosa vs. Land Tenure Administration
G.R. No. L-14040. January 31, 1961.
Facts:
The case of Pornellosa v. Land Tenure Administration involves a petition filed by Segunda
Pornellosa and Jose Angeles to compel the Director of Lands to execute a deed of sale for
a residential lot. The petitioners claimed that they had acquired the rights of occupation
of the lot through a private document executed by the previous tenant, Vicenta San Jose.
However, the Court of Appeals found that the petitioners failed to prove that the lot in
question was included in the lot formerly occupied by San Jose.
Issue:
The main issue in this case is whether the petitioners have the right to compel the Director
of Lands to execute a deed of sale for the residential lot based on the private document
executed by the previous tenant.
Ruling:
The court ruled in favor of the Land Tenure Administration and affirmed the dismissal of
the petitioners' complaint.
Ratio:
The court based its decision on the fact that the petitioners failed to prove that the lot in
question was included in the lot formerly occupied by Vicenta San Jose. The court also
noted that the deed of sale presented by the petitioners was in a private document, which
cannot convey title or any right to the property. The court emphasized that acts and
contracts involving immovable property must appear in a public document in order to be
valid and enforceable. Therefore, the court held that the private document presented by
the petitioners was insufficient to convey title or any right to the property. As a result, the
court affirmed the dismissal of the petitioners' complaint as they failed to prove their right
to acquire the lot.
Caleon vs. Agus Development Corp. (207 SCRA 748)

Caleon vs. Agus Development Corp.
G.R. No. 77365. April 7, 1992.
Facts:
The case involves a dispute between Rita Caleon, the petitioner, and Agus Development
Corporation, the respondent. Agus Development Corporation owns a parcel of land in
Manila, which it leased to Caleon for a monthly rental fee. Caleon then constructed a 4-
door apartment building on the leased lot. However, without the consent of Agus
Development Corporation, Caleon subleased two of the doors of the apartment to other
individuals. Upon discovering this, Agus Development Corporation demanded that
Caleon vacate the premises, but Caleon failed to comply. As a result, Agus Development
Corporation filed a complaint for ejectment against Caleon.
Issue:
The main issue in this case is whether the lease of an apartment includes the sublease of
the lot on which it is constructed, which would constitute a ground for ejectment under
Batas Pambansa Blg. 25.
Ruling:
The court ruled in favor of Agus Development Corporation. Caleon's subleasing of the
apartment doors without the consent of Agus Development Corporation is a violation of
Batas Pambansa Blg. 25, which allows for ejectment in such cases.
Ratio:
The court explained that the lease of a building naturally includes the lease of the lot, as
established in previous cases. Therefore, Caleon's argument that she only leased the
apartment and not the lot is not valid. The court further stated that the lease of the
apartment includes the right to use the lot on which it is constructed. Thus, Caleon's
subleasing of the doors without the consent of Agus Development Corporation is a
violation of the lease agreement and grounds for ejectment under Batas Pambansa Blg.
25.
Caleon also argued that the application of Batas Pambansa Blg. 25 to her case is
unconstitutional as it impairs the obligation of contracts. However, the court explained
that the constitutional guaranty of non-impairment of contracts is limited by the exercise
of police power in the interest of public health, safety, morals, and general welfare. The
court further stated that legislation appropriate for safeguarding the interests of the
people may modify or abrogate existing contracts. In this case, Batas Pambansa Blg. 25 is
a police power legislation aimed at regulating rentals and is applicable to leases entered
into prior to its enactment.
Lastly, Caleon invoked the promotion of social justice policy in the Constitution. However,
the court emphasized that social justice cannot be used to trample on the rights of
property owners, who are also entitled to protection under the Constitution and laws. The
objective of Batas Pambansa Blg. 25 is to remedy the plight of lessees, but it should not
be exploited by lessees for their own benefit. Therefore, the court affirmed the decision of
the lower courts, ordering Caleon to vacate the premises and pay attorney's fees to Agus
Development Corporation.
b. Generic (1246; 1165)

ii. In obligations to Do (1244; 1167)
Chavez vs. Gonzales (32 SCRA 547)
Chaves vs. Gonzales
G.R. No. L-27454. April 30, 1970.
Facts:
The case of Chaves v. Gonzales involves a dispute over a breach of an oral contract to
repair a typewriter. The plaintiff, Rosendo O. Chaves, delivered the typewriter to the
defendant, Fructuoso Gonzales, for routine cleaning and servicing. However, despite
repeated reminders, Gonzales failed to complete the job and instead returned the
typewriter in a non-working condition with missing parts. Chaves demanded the return of
the missing parts and filed a lawsuit seeking damages.
Issue:
The main issue in the case is whether Gonzales should be held liable for breaching the oral
contract to repair the typewriter.
Ruling:
The court ruled in favor of Chaves and found Gonzales liable for breaching the contract.
Ratio:
The court held that the time for compliance had expired and there was a clear breach of
contract by non-performance. Therefore, it was unnecessary for Chaves to petition the
court to fix a period for performance before filing the complaint. The court also rejected
Gonzales' argument that Article 1197 of the Civil Code, which allows for the fixing of a
period, could be invoked. Since Gonzales admitted to non-performance by returning the
typewriter in a non-working condition, the fixing of a period would be a mere formality and
serve no purpose.
The court awarded damages to Chaves for the cost of labor and missing parts. Under
Article 1167 of the Civil Code, if a person fails to perform an obligation, the same shall be
executed at his cost. Therefore, Gonzales was ordered to pay the cost of labor or service
expended in the repair of the typewriter, amounting to P58.75. Additionally, Gonzales was
held liable under Article 1170 of the Code for the cost of the missing parts, amounting to
P31.10.
However, the court rejected Chaves' claims for moral and temperate damages and
attorney's fees. These claims were not alleged in the complaint and therefore could not be
awarded without a factual basis. The court emphasized that claims for damages and
attorney's fees must be pleaded and proved.
In conclusion, the court ruled in favor of Chaves, finding Gonzales liable for breaching the
oral contract to repair the typewriter. Gonzales was ordered to pay the cost of labor and
missing parts, but Chaves' claims for moral and temperate damages and attorney's fees
were rejected due to lack of pleading and proof.
Tanguilig vs. CA (266 SCRA 78)

Tanguilig vs. Court of Appeals
G.R. No. 117190. January 2, 1997.
Facts:
The case of Tanguilig v. Court of Appeals involves a dispute between a windmill contractor,
Jacinto Tanguilig, and his client, Vicente Herce Jr. In April 1987, Tanguilig proposed to
Herce to construct a windmill system for him for a price of P60,000. They agreed on a one-
year guarantee from the date of completion and acceptance by Herce. Herce made a
down payment of P30,000 and an installment payment of P15,000, leaving a balance of
P15,000. However, Herce refused to pay the balance, claiming that he had already paid it
to San Pedro General Merchandising Inc. (SPGMI), which constructed the deep well
connected to the windmill system. Herce argued that the payment to SPGMI should be
credited to his account with Tanguilig. He also claimed that the windmill system collapsed
due to inherent defects and that Tanguilig should be responsible for its reconstruction.
Issue:
1. Whether the construction of the deep well was included in the agreement between
Tanguilig and Herce.
2. Whether Tanguilig should be responsible for the reconstruction of the windmill
system.
Ruling:
The Supreme Court reversed the Court of Appeals on the first issue but upheld its ruling
on the second issue.
Ratio:
Regarding the first issue, the Court found that the installation of a deep well was not
included in the proposals submitted by Tanguilig to Herce. The contract prices fixed in the
proposals only covered the features specifically described and did not mention the
installation of a deep well. The Court emphasized that the intention of the parties should
be accorded primordial consideration, and the proposals clearly did not include a deep
well.
Regarding the second issue, the Court applied the principle of reciprocal obligations. It
held that Tanguilig was obligated to repair the windmill in accordance with the guarantee
stated in the contract. Therefore, Herce was not in delay, and Tanguilig should bear the
expenses for the reconstruction.
In conclusion, the Supreme Court modified the decision of the Court of Appeals. Herce
was ordered to pay Tanguilig the balance of P15,000 with interest, and Tanguilig was
directed to reconstruct the windmill system within three months.
Vil-Rey Planners and Builders vs. Lexber, Inc., G.R. No. 189401, June 15, 2016
Vil-Rey Planners and Builders vs. Lexber, Inc.
G.R. No. 189401. June 15, 2016.
Facts:
The case of Vil-Rey Planners and Builders v. Lexber, Inc. involves a construction contract
and a surety bond. In April 1996, Vil-Rey and Lexber entered into a Construction Contract
where Vil-Rey agreed to work on Lexber's property in Cabanatuan City. As part of the
agreement, Lexber released a mobilization downpayment of P500,000, which was
secured by a surety bond issued by Stronghold Insurance Company. Subsequently, Vil-Rey
and Lexber entered into a second and third contract for the completion of the remaining
works. However, Vil-Rey failed to complete the works on time, prompting Lexber to seek
damages from Vil-Rey and Stronghold. The Regional Trial Court (RTC) found Vil-Rey and
Stronghold jointly and severally liable to Lexber, holding Vil-Rey guilty of breach of contract
and ordering them to pay damages. The RTC also held Stronghold liable under the surety
bonds. Vil-Rey and Stronghold appealed to the Court of Appeals (CA), which modified the
RTC's decision and reduced the amount of damages. Dissatisfied with the CA's decision,
Vil-Rey and Stronghold filed petitions for review before the Supreme Court.
Issue:
1. Is Vil-Rey liable for breach of contract?
2. Is Stronghold liable under the surety bond?
3. Is Lexber entitled to attorney's fees?
Ruling:
The Supreme Court ruled as follows:
1. Vil-Rey is liable for breach of contract.
2. Stronghold is liable under the surety bond.
3. Lexber is entitled to attorney's fees, but the amount awarded is reduced.
Ratio:
In determining Vil-Rey's liability for breach of contract, the Supreme Court found that Vil-
Rey failed to complete the works on time, as stipulated in the Construction Contract. This
failure constituted a breach of their contractual obligations. As a result, Vil-Rey is held
liable for the damages suffered by Lexber.
Regarding Stronghold's liability under the surety bond, the Supreme Court held that the
extension of the contract did not extinguish Stronghold's liability. The surety bond
specifically covered Vil-Rey's obligations under the Construction Contract, and the
extension did not release Stronghold from its obligation to pay damages in case of Vil-
Rey's default.
With regard to Lexber's entitlement to attorney's fees, the Supreme Court affirmed the
RTC's decision. Attorney's fees may be awarded when the party seeking them is compelled
to litigate or incur expenses to protect their rights. In this case, Lexber was forced to file a
lawsuit to seek damages for Vil-Rey's breach of contract. Therefore, Lexber is entitled to
attorney's fees, although the amount awarded by the CA was reduced by the Supreme
Court.
In summary, the Supreme Court modified the CA's decision and ordered Vil-Rey and
Stronghold to pay damages to Lexber. Vil-Rey was also ordered to indemnify Stronghold
for any amount they would pay to Lexber. Additionally, Lexber was ordered to pay Vil-Rey
a certain amount, and the parties were allowed to compensate the amounts due to them.
iii. In obligations Not to Do (1168)

2. Breach of Obligations and Grounds for Liability (1170)
Areola vs. CA (236 SCRA 645)
Areola vs. Court of Appeals
G.R. No. 95641. September 22, 1994.
Facts:
The case involves Santos Areola, a lawyer who purchased a Personal Accident Insurance
Policy from Prudential Guarantee and Assurance, Inc. (Prudential). However, seven
months after the issuance of the policy, Prudential unilaterally cancelled it, claiming that
Areola failed to pay his premiums. Prudential later admitted that the cancellation was a
mistake and offered to reinstate the policy, even proposing to extend its lifetime. Areola
filed a lawsuit against Prudential, seeking damages for breach of contract.
Issue:
The main issues in this case are: (1) whether the erroneous cancellation of the insurance
policy entitles Areola to payment of damages, and (2) whether the subsequent
reinstatement of the policy by Prudential absolves it from liability for damages.
Ruling:
The Supreme Court ruled in favor of Areola and reversed the decision of the Court of
Appeals. The court held that Prudential is liable for damages due to the erroneous
cancellation of the insurance policy. The court also held that the subsequent
reinstatement of the policy does not absolve Prudential from liability.
Ratio:
The court held that the fraudulent act of Prudential's branch manager in misappropriating
the premiums paid by Areola is directly imputable to Prudential. The court emphasized
that a corporation acts through its employees, and their acts are considered as the acts of
the corporation. Therefore, Prudential is liable for the fraudulent acts committed by its
employee.
The court rejected Prudential's argument that the reinstatement of the policy absolves it
from liability. It held that the reinstatement does not remedy the injury inflicted on Areola
and that Prudential should be reminded of its obligations under the contract of insurance.
The court awarded nominal damages to Areola instead of the damages granted by the trial
court, as no actual or substantial damage was inflicted on Areola at the time of the
cancellation.
In conclusion, the Supreme Court held Prudential liable for damages due to the erroneous
cancellation of the insurance policy and rejected the argument that the subsequent
reinstatement absolves Prudential from liability. The court awarded nominal damages to
Areola and ordered Prudential to pay the legal rate of interest on the damages awarded.
i. Fraud (1171)
ii. Negligence (1172; 2201 (2); 1173)
Picart vs. Smith (37 Phil. 809)
Picart vs. Smith, Jr.
G.R. No. L-12219. March 15, 1918.
Facts:
The case of Picart v. Smith, Jr. involves a civil liability claim for damages caused by an
automobile driven by the defendant, Frank Smith, Jr. The incident occurred on December
12, 1912, on the Carlatan Bridge in San Fernando, La Union. The plaintiff, Amado Picart,
was riding his pony on the bridge when he saw the defendant's approaching car. Instead
of moving to the left side of the bridge, Picart pulled his pony closely to the right railing,
fearing that he did not have enough time to cross to the other side. The defendant, seeing
the plaintiff on the wrong side, assumed that the plaintiff would move to the other side and
continued driving towards him without slowing down. When the defendant was almost
upon the horse, he quickly turned his car to the right to avoid hitting it, but the car passed
so closely that the horse became frightened and turned its body across the bridge,
resulting in a collision that caused the horse's death and injuries to the plaintiff.
Issue:
The main issue in this case is whether the defendant's actions in maneuvering his car in
such a manner constitute negligence that gives rise to a civil obligation to repair the
damage done.
Ruling:
The court ruled that the defendant is indeed liable for negligence.
Ratio:
The court applied the test for determining negligence, which is whether a prudent person
in the defendant's position would have foreseen harm as a reasonable consequence of
the course of action taken. In this case, the defendant should have recognized the risk and
foreseen harm to the horse and rider. The defendant had a duty to guard against the
threatened harm but failed to do so.
Although the plaintiff was also negligent in being on the wrong side of the bridge, the court
held that the defendant was still civilly liable for the damages. The court applied the
principle of "last clear chance," which states that when both parties are negligent but the
negligent act of one succeeds that of the other by an appreciable interval of time, the party
who had the last reasonable opportunity to avoid the harm is responsible for the
consequences. In this case, the defendant had the last fair chance to avoid the accident
after realizing the situation created by the plaintiff's negligence but failed to do so. The
plaintiff, on the other hand, could not have placed himself in a position of greater safety at
that point.
The court also addressed a minor defense raised by the defendant, claiming that the
subject matter of the action had been previously adjudicated in a lower court. The court
clarified that the dismissal of the criminal proceedings against the defendant in a
preliminary hearing does not have a res judicata effect on the civil liability arising from
negligence.
In conclusion, the court reversed the judgment of the lower court and held the defendant
liable for damages. The court awarded the plaintiff the sum of two hundred pesos, which
includes the value of the horse, medical expenses, and damage to the plaintiff's apparel,
with costs of both instances. The court deemed the other damages claimed by the plaintiff
as remote or not recoverable.
Layugan vs. IAC (107 SCRA 363)

Layugan vs. Intermediate Appellate Court
G.R. No. 73998. November 14, 1988.
Facts:
The case involves a complaint for damages filed by Pedro T. Layugan against Godofredo
Isidro. Layugan alleged that on May 15, 1979, while he and a companion were repairing
their cargo truck along the right side of the National Highway in Baretbet, Bagabag, Nueva
Vizcaya, Isidro's truck driven by Daniel Serrano recklessly bumped Layugan, causing him
injuries. Layugan sought damages for his medical expenses, loss of income, and other
damages. The trial court declared Isidro in default and received Layugan's evidence ex-
parte. The trial court found Isidro liable for damages and ordered him to pay Layugan.
Isidro appealed to the Intermediate Appellate Court (IAC), which reversed the decision of
the trial court and dismissed the complaint. Layugan filed a petition for review on certiorari
before the Supreme Court.
Issue:
The main issues raised in the case are: 1) whether the IAC acted correctly in reversing and
dismissing Layugan's complaint; and 2) whether the IAC correctly applied the doctrine of
"res ipsa loquitur" in this case.
Ruling:
The Supreme Court ruled in favor of Layugan and held that the IAC committed reversible
error in dismissing the complaint. The Court found clear and convincing evidence of
negligence on the part of Isidro's driver, Serrano. The Court also held that the doctrine of
"res ipsa loquitur" was not applicable in this case. The Court emphasized that negligence
is the omission to do something which a reasonable person would do or the doing of
something which a reasonable person would not do. The Court found that Isidro failed to
prove that he exercised the diligence of a good father of a family in the selection and
supervision of his driver and mechanic. Therefore, Isidro was held liable for the damages
caused by his employee.
Ratio:
The Supreme Court based its decision on the principle of negligence. The Court explained
that negligence is the omission to do something which a reasonable person would do or
the doing of something which a reasonable person would not do. In this case, the Court
found clear and convincing evidence of negligence on the part of Isidro's driver, Serrano,
who recklessly bumped Layugan while he was repairing his truck. The Court also
emphasized that Isidro, as the employer, had the duty to exercise the diligence of a good
father of a family in the selection and supervision of his driver and mechanic. Isidro failed
to prove that he exercised such diligence, thus making him liable for the damages caused
by his employee.
The Court further explained that the doctrine of "res ipsa loquitur" was not applicable in
this case. The doctrine of "res ipsa loquitur" applies when the accident is of such a nature
that it can be inferred that the defendant was negligent, even without direct evidence of
his or her specific acts of negligence. However, in this case, the Court found that there was
sufficient evidence to establish the specific acts of negligence on the part of Isidro's driver,
Serrano. Therefore, the Court held that the doctrine of "res ipsa loquitur" was not
necessary in determining Isidro's liability.
In summary, the Supreme Court ruled that Isidro was liable for the damages caused by his
driver's negligence. The Court held that the IAC erred in dismissing the complaint and that
the doctrine of "res ipsa loquitur" was not applicable in this case. The Court emphasized
the importance of proving negligence based on the specific facts and circumstances of
the case.
PNB vs. CA (315 SCRA 309)

Philippine National Bank vs. Court of Appeals
G.R. No. 126152. September 28, 1999.
Facts:
The case involves a petition for review on certiorari filed by the Philippine National Bank
(PNB) against the decision of the Court of Appeals. The decision affirmed the award of
damages by the Regional Trial Court of Pasig City in favor of Lily S. Pujol. The petitioner
argued that the appellate court erred in holding that the petitioner was estopped from
denying the existence of a "Combo Account" and the fact that it was operational at the
time of the issuance of the checks. The petitioner claimed that the respondent was issued
a Savings Account passbook bearing the printed words "Combo Deposit Plan." The
petitioner also argued that the award of moral damages of P100,000.00 and attorney's fees
of P20,000.00 was inordinately disproportionate and unconscionable.
Issue:
The main issue raised in the case is whether the petitioner is estopped from denying the
existence of and perfection of the combination deposit agreement with respondent Pujol.
Ruling:
The Court ruled that the petition was devoid of merit. It held that the petitioner was
considered estopped to deny the existence of and perfection of the combination deposit
agreement with respondent Pujol. This is because the petitioner placed in the passbook
of the respondent, either by deliberate act or by its own negligence, the words "combo
deposit plan." The Court also held that while the petitioner's negligence may not have been
attended with malice and bad faith, it caused serious anxiety, embarrassment, and
humiliation to the private respondent. Therefore, the private respondent is entitled to
recover reasonable moral damages. The Court emphasized that damages are not
intended to enrich the complainant at the expense of the defendant, and there is no hard-
and-fast rule in determining the amount of moral damages. In this case, the award of
P100,000.00 is reasonable considering the reputation and social standing of the private
respondent. The Court also deemed the award of attorney's fees in the amount of
P20,000.00 to be proper as the respondent was compelled to litigate to protect her

interest.
Ratio:
The Court's decision was based on the principle of estoppel. The petitioner was
considered estopped from denying the existence of and perfection of the combination
deposit agreement with respondent Pujol because it placed in the passbook of the
respondent the words "combo deposit plan." This act, whether deliberate or negligent,
created a reasonable expectation on the part of the respondent that the "Combo Account"
existed and was operational. The Court also considered the petitioner's negligence in
causing serious anxiety, embarrassment, and humiliation to the private respondent. While
the petitioner's negligence may not have been attended with malice and bad faith, it still
caused harm to the respondent. Therefore, the respondent is entitled to recover
reasonable moral damages. The Court emphasized that the purpose of damages is not to
enrich the complainant at the expense of the defendant, but to compensate for the harm
suffered. In this case, the award of P100,000.00 for moral damages is reasonable
considering the reputation and social standing of the private respondent. The Court also
deemed the award of attorney's fees in the amount of P20,000.00 to be proper as the
respondent was compelled to litigate to protect her interest.
PNB vs. Pike (470 SCRA 328)

Philippine National Bank vs. Pike
G.R. No. 157845. September 20, 2005.
Facts:
The case involves a complaint filed by Norman Pike against the Philippine National Bank
(PNB) for damages resulting from unauthorized withdrawals from his U.S. Dollar Savings
Account. Pike alleged that before leaving for Japan, he kept his passbook inside a locked
cabinet in his home. Upon his return, he discovered that his passbook and other valuables
were missing. He also discovered that two unauthorized withdrawals had been made from
his account. Pike demanded that PNB credit back the amount stolen from his account,
but the bank refused. The trial court ruled in favor of Pike, holding PNB liable for the
unauthorized withdrawals due to their negligence.
Issue:
The main issue raised in the case is whether PNB should be held liable for the
unauthorized withdrawals from Pike's account.
Ruling:
The court ruled in favor of Pike and held PNB liable for the unauthorized withdrawals. The
court ordered PNB to pay Pike the amount stolen, plus interest, attorney's fees, and
damages.
Ratio:
The court based its decision on the principle that banks have a high degree of obligation
to treat their depositors' accounts with meticulous care. The court emphasized that
negligence by bank employees should not be countenanced. In this case, the court found
that PNB was negligent in allowing the unauthorized withdrawals to occur. The fact that
Pike's passbook and other valuables were missing from his locked cabinet indicated that
there was a breach in the bank's security measures. The court also noted that there was
no evidence of forgery, indicating that the withdrawals were indeed unauthorized.
The court further held that Pike did not waive his right to hold the bank responsible for the
unauthorized withdrawals. The fact that Pike demanded that PNB credit back the amount
stolen from his account showed that he did not authorize the withdrawals. The court
rejected PNB's argument that Pike had authorized the withdrawals, as there was no
evidence to support this claim.
In upholding the award of damages to Pike, the court emphasized the need to send a
warning to PNB and other banks to exercise the highest degree of diligence in serving their
depositors. The court awarded moral and exemplary damages to serve as a deterrent and
to ensure that banks take the necessary precautions to prevent unauthorized withdrawals
from their depositors' accounts.
Samson vs. CA (238 SCRA 309)

Samson vs. Court of Appeals
G.R. No. 108245. November 25, 1994.
Facts:
The case of Samson v. Court of Appeals involves a dispute between Manolo P. Samson
(petitioner) and Santos & Sons, Inc. and Angel Santos (respondents) regarding the sale of
a store and leasehold right. The subject of the case is a commercial unit at the Madrigal
Building in Manila, which was leased by Santos & Sons, Inc. from Susana Realty
Corporation. The lease contract was set to expire on July 31, 1984, but was extended until
December 31, 1984.
On February 5, 1985, Santos & Sons, Inc. received a letter from the lessor, informing them
of an increase in rentals and pending renewal of the lease contract. On February 9, 1985,
petitioner offered to buy the store and leasehold right from Angel Santos. On February 15,
1985, petitioner confirmed his offer and signed a letter-proposal from Santos, which
stated that the lease contract was impliedly renewed and would be formally renewed
when Tanya Madrigal arrives. They agreed on a sale price of P300,000.00.
On February 20, 1985, petitioner paid P150,000.00 as a downpayment, with the balance
to be paid upon the formal renewal of the lease contract. Petitioner began to occupy the
store in March 1985 but received a notice in July 1985 to vacate the premises. Petitioner
then filed a case against Santos & Sons, Inc. and Angel Santos, alleging fraud and bad faith
in the representation that the lease contract was renewed.
Issue:
The main issue in the case is whether the defendants committed fraud or bad faith in
representing the renewal of the lease contract.
Ruling:
The court found that there was no evidence of fraud or bad faith on the part of the
defendants. The representation made by Santos was based on a letter from the lessor, and
it was known to both parties that the renewal of the lease contract was dependent on the
arrival of Tanya Madrigal. The court also faulted petitioner for failing to exercise due
diligence in verifying the status of the lease contract.
Therefore, the court affirmed the decision of the Court of Appeals, ruling that the
defendants were not liable for damages and ordering the reimbursement of the
downpayment made by petitioner.
Ratio:
The court explained that bad faith involves a dishonest purpose or moral obliquity, and
there was no evidence to support such a claim. The court also emphasized the principle
of caveat emptor, which places the responsibility on the buyer to verify the status of the
property being purchased. In this case, petitioner had the opportunity to verify the lease
contract but failed to do so. The court held that the defendants' representation was based
on a letter from the lessor and that both parties were aware that the renewal of the lease
contract was dependent on the arrival of Tanya Madrigal. Therefore, the court concluded
that there was no fraud or bad faith on the part of the defendants and upheld the decision
of the Court of Appeals.
Dioquino vs. Laureano (33 SCRA 65)

Dioquino vs. Laureano
G.R. No. L-25906. May 28, 1970.
Facts:
The case of Dioquino v. Laureano involves Pedro D. Dioquino, the owner of a car, who
sought to hold Federico Laureano, a borrower of his car, responsible for damages caused
by a fortuitous event. The incident occurred when Laureano borrowed Dioquino's car and
while on the way to the P.C. Barracks at Masbate, mischievous boys stoned the car,
resulting in a broken windshield. Dioquino filed a complaint against Laureano, as well as
Laureano's wife and father, seeking damages for the loss.
Issue:
The main issue raised in the case is whether Laureano should be held liable for the
damages caused by the fortuitous event.
Ruling:
The court ruled in favor of Laureano, stating that he should not be held liable for the
damages.
Ratio:
The court based its decision on Article 1174 of the Civil Code, which states that no person
shall be responsible for events that could not be foreseen or were inevitable, unless
expressly specified by law or stipulation. The court emphasized that a fortuitous event is
an extraordinary circumstance independent of the will of the obligor, and if such
circumstances exist, liability is ruled out. In this case, the stoning of the car by
mischievous boys was clearly unforeseen and constituted a fortuitous event. Therefore,
the owner of the car, Dioquino, should bear the loss.
The court also addressed the issue of including Laureano's wife and father in the
complaint. While acknowledging that Dioquino made a mistake in including them, the
court did not award damages against Dioquino for this inclusion. The court stated that the
expenses and annoyance of litigation form part of the social burden of living in a society
that seeks to attain social control through law.
In summary, the court ruled that Laureano should not be held liable for the damages
caused by the fortuitous event, and Dioquino was not penalized for including Laureano's
wife and father in the complaint.
La Mallorca vs. CA (17 SCRA 739)

La Mallorca vs. Court of Appeals
G.R. No. L-20761. July 27, 1966.
Facts:
On December 20, 1953, Mariano Beltran, his wife, and their three minor daughters
boarded a bus owned and operated by La Mallorca. They were traveling from San
Fernando, Pampanga to Anao, Mexico, Pampanga. After about an hour's trip, the bus
reached Anao and stopped to allow the passengers to get off. Mariano Beltran, carrying
some of their baggage, was the first to get down the bus, followed by his wife and children.
Mariano returned to the bus to get his other bag, and his daughter Raquel followed him
unnoticed. While Mariano was on the running board of the bus waiting for the conductor
to hand him his bag, the bus suddenly started moving forward and ran over Raquel, killing
her.
Issue:
The main issue raised in the case is whether the carrier-passenger relationship between
the bus company and Raquel Beltran still existed at the time of the incident, and if the bus
company can be held liable for her death.
Ruling:
The court ruled that the carrier-passenger relationship does not cease at the moment the
passenger alights from the carrier's vehicle, but continues until the passenger has a
reasonable time to leave the carrier's premises. In this case, even though Raquel had
already been led by her father to a place away from the bus, the relation of passenger and
carrier between her and the bus company still persisted. The court found that the bus
company's agent had not exercised the utmost diligence required by law in ensuring the
safety of its passengers. The driver did not put off the engine and started to run the bus
even before receiving the signal to go, while there were still passengers near the bus.
Therefore, the bus company can be held liable for Raquel's death.
The court also ruled that the inclusion of the averment for quasi-delict in the complaint,
while incompatible with the claim under the contract of carriage, is permissible under the
rules of court. The plaintiffs sufficiently pleaded the negligence of the bus company and
its agent, and this allegation was proved during the trial.
However, the Court of Appeals erred in increasing the damages awarded without any
appeal or argument from the plaintiffs. Generally, the appellate court can only consider
questions or issues raised and argued in the appellant's brief. Since the plaintiffs did not
appeal from the portion of the trial court's judgment awarding them only P3,000.00 as
damages, the Court of Appeals should not have raised the amount of the award.
Ratio:
The court's decision was based on the principle that the carrier-passenger relationship
continues until the passenger has a reasonable time to leave the carrier's premises. In this
case, the bus company's agent failed to exercise the utmost diligence required by law in
ensuring the safety of its passengers. The court found that the driver's actions were
negligent, as he started to run the bus even before receiving the signal to go, while there
were still passengers near the bus. Therefore, the bus company can be held liable for
Raquel's death.
The court also clarified that the inclusion of a claim for quasi-delict in the complaint, even
if it is incompatible with the claim under the contract of carriage, is permissible under the
rules of court. As long as the plaintiffs sufficiently pleaded the negligence of the bus
company and its agent, and this allegation was proved during the trial, they can seek
damages under both theories.
However, the Court of Appeals erred in increasing the damages awarded without any
appeal or argument from the plaintiffs. The appellate court should have limited its
consideration to the issues raised and argued in the appellant's brief. Since the plaintiffs
did not appeal from the portion of the trial court's judgment awarding them only P3,000.00
as damages, the Court of Appeals should not have raised the amount of the award.
Therefore, the Court of Appeals' decision was modified to reflect the correct damages
awarded.
PAL vs. CA (106 SCRA 391)

Philippine Air Lines, Inc. vs. Court of Appeals
G.R. No. L-46558. July 31, 1981.
Facts:
The case involves a co-pilot named Jesus V. Samson who filed a lawsuit against Philippine
Air Lines (PAL) for damages. Samson suffered physical injuries in a crash landing that was
caused by the negligence of the commanding pilot, Captain Delfin Bustamante. Samson
alleged that PAL was grossly negligent in allowing Bustamante, who had a long-standing
tumor, to fly the plane as the commanding pilot. Additionally, Samson claimed that PAL
failed to provide him with proper medical treatment for his injuries, resulting in periodic
dizzy spells and headaches. The Court of First Instance of Albay denied PAL's motion to
dismiss and awarded Samson compensatory and moral damages, attorney's fees, and
costs. On appeal, the Court of Appeals affirmed the decision but modified the award of
damages by imposing legal interest on the unearned income from the filing of the
complaint.
Issue:
The main issue in this case is whether there is a causal connection between Samson's
injuries and subsequent ailments, and whether PAL can be held liable for damages.
Ruling:
The court ruled in favor of Samson and affirmed the award of damages. The court held that
PAL was grossly negligent in allowing Bustamante to fly the plane despite his medical
condition, and that there was a causal connection between Samson's injuries and
subsequent ailments. The court also found that PAL acted in bad faith by refusing to
provide Samson with proper medical treatment. Therefore, PAL was held liable for
compensatory and moral damages, attorney's fees, and costs.
Ratio:
The court based its ruling on the duty of common carriers, such as PAL, to exercise the
highest degree of care in the discharge of their duty and business of carriage and
transportation. The court cited relevant provisions of the New Civil Code that require
common carriers to exercise extraordinary diligence for the safety of passengers and crew
members. By allowing Bustamante, who had a known medical condition, to fly the plane,
PAL failed to meet this standard of care.
The court also applied the provisions of the New Civil Code on damages. It recognized that
Samson's injuries were a result of the gross negligence of his employer, PAL, and therefore,
he was entitled to compensatory damages. Additionally, the court acknowledged that
Samson suffered moral damages due to the physical and emotional pain he endured as a
result of the accident and PAL's negligence. The court further ruled that attorney's fees
should be awarded to Samson since he was forced to litigate to enforce a valid claim
against PAL.
In terms of the computation of damages, the court ruled that legal interest on the
unearned income should be computed from the date of judicial demand, which in this
case was the filing of the complaint. This decision was based on the principle that the
injured party should be compensated for the loss of income they would have earned if not
for the accident.
Overall, the court's ruling was based on the legal obligations of common carriers, the
provisions of the New Civil Code on damages, and the principle of compensating the
injured party for their losses.
Philippine National Construction Corporation vs. CA (467 SCRA 569)

Philippine National Construction Corp. vs. Court of Appeals
G.R. No. 159270. August 22, 2005.
Facts:
The case involves the Philippine National Construction Corporation (PNCC) and
Pampanga Sugar Development Company (PASUDECO) being held jointly and severally
liable for damages caused by their successive negligent acts, resulting in injuries to a
motorist on the North Luzon Expressway (NLEX). PASUDECO transports sugarcane from
Mabalacat and Magalang, Pampanga. After the Mount Pinatubo eruption in 1991, which
damaged the national bridges along Abacan-Angeles and Sapang Maragul via Magalang,
PASUDECO requested permission from the Toll Regulatory Board (TRB) for its trucks to
pass through the NLEX. The TRB forwarded the request to PNCC, the franchisee
responsible for operating and maintaining the toll facilities on the NLEX. On November 5,
1991, TRB and PASUDECO entered into a Memorandum of Agreement (MOA) allowing
PASUDECO trucks to pass through the NLEX under certain conditions. PASUDECO
provided PNCC with a copy of the MOA, and PNCC informed PASUDECO that it had no
objection to the agreement. On January 23, 1993, a PNCC security supervisor and his co-
employees were patrolling the NLEX when they discovered a pile of sugarcane obstructing
the road. They placed warning devices to alert motorists and requested assistance from
PASUDECO to clear the area. PASUDECO sent workers to clear the sugarcane, but they
left a few flattened sugarcanes scattered on the road. Later that morning, a motorist
driving along the NLEX ran over the scattered sugarcane, causing his car to flip over
multiple times and resulting in injuries.
Issue:
The main issue in this case is whether PNCC and PASUDECO should be held liable for the
injuries caused by their successive negligent acts.
Ruling:
The Supreme Court ruled that both PNCC and PASUDECO are jointly and severally liable
for the damages caused by their negligence.
Ratio:
The Court found that PNCC had failed to exercise the necessary diligence in maintaining
the NLEX safe for motorists. PNCC's negligence in removing the warning devices without
ensuring that the road was completely clear of sugarcane was a direct and proximate
cause of the injuries. Additionally, PASUDECO's negligence in spilling the sugarcane and
failing to properly clear the area contributed to the accident. The Court held that both
parties' negligence were the direct and proximate causes of the injuries, and therefore,
they should be held jointly and severally liable for the damages. The Court affirmed the
decision of the Court of Appeals, which ordered PASUDECO and PNCC to pay damages to
the motorist's sister.
Prudential Bank vs. Rapanot, et al., G.R. No. 191536, January 16, 2017
Prudential Bank vs. Rapanot
G.R. No. 191636. January 16, 2017.
Facts:
The case involves a dispute between Prudential Bank (now Bank of the Philippine
Islands) and Ronald Rapanot, with the Housing & Land Use Regulatory Board (HLURB) as
a respondent. The dispute revolves around a mortgage agreement between Prudential
Bank and Golden Dragon Real Estate Corporation. Golden Dragon mortgaged several
condominium units, including Unit 2308-B2, to secure a loan from the bank. However,
Ronald Rapanot, who had purchased Unit 2308-B2 from Golden Dragon, demanded the
delivery of the unit, claiming that the mortgage agreement was null and void. Rapanot
filed a complaint before the HLURB seeking specific performance and damages against
Golden Dragon and Prudential Bank. The HLURB Arbiter rendered a decision in favor of
Rapanot, declaring the mortgage agreement null and void and ordering the bank to
cancel the mortgage and release the title of the unit to Rapanot. The Arbiter also ordered
the bank to pay damages and an administrative fine. The bank appealed to the HLURB
Board of Commissioners, which modified the decision by reducing the damages
awarded. The bank further appealed to the Office of the President, but its appeal was
denied. The bank then filed a petition for review with the Court of Appeals (CA), which
affirmed the decisions of the HLURB and the Office of the President. The bank filed a
petition for review on certiorari with the Supreme Court, raising issues of due process
and its status as a mortgagee in good faith.
Issue:
1. Whether the bank was deprived of due process.
2. Whether the bank can be considered a mortgagee in good faith.
Ruling:
The Supreme Court denied the bank's petition and affirmed the decisions of the lower
courts. The court ruled that the bank was not deprived of due process and that it cannot
be considered a mortgagee in good faith. The court held that the mortgage agreement
was null and void as against Rapanot because the bank failed to comply with the
necessary requirements under the law. The court emphasized that banks are expected to
exercise a higher degree of diligence in their dealings, especially when dealing with real
estate developers. Therefore, the bank was held liable for damages and an administrative
fine.
Ratio:
The court reasoned that the bank was not deprived of due process because it was given
the opportunity to present its case before the HLURB, the Office of the President, and the
Court of Appeals. The bank had the chance to appeal the decisions of the lower courts
and present its arguments. Thus, there was no violation of the bank's right to due
process.
Regarding the bank's claim of being a mortgagee in good faith, the court held that the
bank failed to exercise the necessary diligence required in its dealings. The court
emphasized that banks, being financial institutions, are expected to exercise a higher
degree of diligence in their transactions, especially when dealing with real estate
developers. In this case, the bank failed to comply with the necessary requirements
under the law, rendering the mortgage agreement null and void. Therefore, the bank
cannot be considered a mortgagee in good faith.
a. Kinds of Negligence as ground for liability

a.1. Culpa Contractual
a.2. Culpa Aquiliana
a.3. Culpa Criminal
Lasam vs. Smith (45 Phil. 657)

G.R. No. 19495. February 2, 1924.
Facts:
Issue:
Ruling:
Ratio:
liable for damages.
Ramos vs. Pepsi Cola (L-22533, Feb. 9, 1967)

Ramos vs. Pepsi-Cola Bottling Co. of the Philippines
G.R. No. L-22533. Feb 9, 1967.
Facts:
On November 15, 1958, a delivery truck owned by Pepsi-Cola Bottling Co. of the P.I. and
driven by its employee, Francisco Ramos, collided with a passenger jeepney driven by
Marcelino Ramos. The collision resulted in injuries to several passengers of the jeepney
and the death of one passenger. The heirs of the deceased passenger and the injured
passengers filed a complaint for damages against Pepsi-Cola Bottling Co. of the P.I. and
its driver, Francisco Ramos. The case was heard in the lower court, where it was
established that the collision was caused by the negligence of Francisco Ramos.
Issue:
The main issue raised in the case was whether Pepsi-Cola Bottling Co. of the P.I. should
be held liable for the damages caused by its employee, Francisco Ramos.
Ruling:
The Supreme Court absolved Pepsi-Cola Bottling Co. of the P.I. from liability.
Ratio:
The Court's decision was based on the principle of respondeat superior, which holds that
an employer is liable for the acts of its employees committed within the scope of their
employment. However, the Court also recognized the exception to this principle, which is
when the employer can prove that it exercised due diligence in the selection and
supervision of its employees.
In this case, Pepsi-Cola Bottling Co. of the P.I. was able to prove that it exercised due
diligence in the selection of its driver, Francisco Ramos. The company presented evidence
showing that Ramos had undergone a thorough examination and had a clean driving
record prior to the accident. The Court found that the company had taken reasonable
steps to ensure that its drivers were competent and responsible.
Based on this evidence, the Court concluded that Pepsi-Cola Bottling Co. of the P.I. had
overcome the presumption of negligence and should not be held liable for the damages
caused by its employee. The Court emphasized that the burden of proof was on the
plaintiffs to establish that the company was negligent in the selection and supervision of
its employees, and in this case, they failed to do so.
In summary, the Supreme Court absolved Pepsi-Cola Bottling Co. of the P.I. from liability
in a collision case. The Court ruled that the company had exercised due diligence in the
selection of its driver, Francisco Ramos, and had overcome the presumption of
negligence. Therefore, the company should not be held liable for the damages caused by
its employee.
Vinluan vs. CA (L-21477-81, April 29, 1966)

Viluan vs. Court of Appeals
G.R. Nos. L-21477-81. April 29, 1966.
Facts:
The case of Viluan v. Court of Appeals involves a fatal bus accident that occurred in
Bangar, La Union on February 16, 1958. A passenger bus owned by petitioner Francisca
Viluan and driven by Hermenegildo Aquino collided with another bus owned by Patricio
Hufana and driven by Gregorio Hufana. The collision caused the Viluan bus to hit a post,
crash into a tree, and catch fire, resulting in the death of seven people and injuries to
thirteen others.
The heirs of the deceased passengers and one of the injured passengers filed separate
complaints for damages against Viluan and Aquino for breach of contract of carriage. In
their answer, Viluan and Aquino blamed Gregorio Hufana for the accident and filed third-
party complaints against him and his employer, Patricio Hufana.
Issue:
The main issue raised in the case is whether all parties involved should be held equally
liable for the damages or if there is a distinction in their liabilities based on their roles and
contracts.
Ruling:
The Supreme Court held that all parties involved should be held jointly and severally liable
for the damages awarded by the trial court. The Court also affirmed the disallowance of
moral damages.
Ratio:
The Court agreed with Viluan's contention that all parties involved should be held equally
liable for the damages. It held that the rule requiring an amendment of the complaint to
assert a claim against a third-party defendant only applies when the third-party defendant
is brought in on an allegation of liability to the defendants. In this case, the third-party
complaints charged the Hufanas with direct liability to the plaintiffs, so no amendment of
the complaint was necessary.
The Court also noted that the liability of the Hufanas arose from quasi-delict, while
Viluan's liability was based on contract. However, it held that both parties should be jointly
and severally liable for the damages awarded by the trial court. This means that the
plaintiffs can recover the entire amount of damages from either Viluan or the Hufanas,
regardless of their individual shares of fault.
The disallowance of moral damages was affirmed by the Court. This means that the
injured passenger who claimed moral damages was not entitled to such damages based
on the circumstances of the case.
Elcano vs. Hill (77 SCRA 98)

Elcano vs. Hill
G.R. No. L-24803. May 26, 1977.
Facts:
The case of Elcano v. Hill was decided by the Supreme Court of the Philippines on May 26,
1977. The case involved a civil action for damages brought by the parents of a deceased
child against a minor and his father. The events leading to the case began when the minor,
who was driving a motorcycle, collided with the child, resulting in the child's death. The
parents of the deceased child filed a criminal case against the minor for reckless
imprudence resulting in homicide. However, the minor was acquitted in the criminal case.
Issue:
The main issue raised in the case was whether the minor's acquittal in the criminal case
barred the parents from filing a civil action for damages against him. Additionally, the court
had to determine whether the minor's father could still be held liable for the damages,
despite the minor's emancipation by marriage.
Ruling:
The Supreme Court ruled in favor of the parents and held that the minor's acquittal in the
criminal case did not prevent them from pursuing a civil action for damages. The court
explained that the acquittal in the criminal case was based on the higher standard of proof
beyond reasonable doubt, while the civil action only required a preponderance of
evidence. Therefore, the minor's acquittal in the criminal case did not preclude the parents
from seeking civil damages.
Furthermore, the court held that the minor's father could still be held liable for the
damages, despite the minor's emancipation by marriage. The court reasoned that the
father, as the head of the family, had the legal duty to exercise parental authority and
control over his minor child. The minor's emancipation by marriage did not absolve the
father of this duty, and he could still be held responsible for the actions of his minor child.
Ratio:
The Supreme Court based its decision on the distinction between the standards of proof
in criminal and civil cases. The court explained that the minor's acquittal in the criminal
case was based on the higher standard of proof beyond reasonable doubt, which is
required to establish guilt in a criminal case. On the other hand, a civil action for damages
only requires a preponderance of evidence, which means that the evidence presented
must be more convincing than the evidence presented by the other party. Therefore, the
minor's acquittal in the criminal case did not preclude the parents from seeking civil
damages.
Additionally, the court emphasized the continuing responsibility of parents for the actions
of their minor children. The court held that the minor's father, despite the minor's
emancipation by marriage, still had the legal duty to exercise parental authority and
control over his minor child. This duty extended to being held liable for the damages
caused by the minor's actions.
In conclusion, the Supreme Court ruled that the minor's acquittal in the criminal case did
not bar the parents from filing a civil action for damages, and that the minor's father could
still be held liable for the damages, despite the minor's emancipation by marriage. The
court highlighted the distinction between the standards of proof in criminal and civil
cases, and the continuing responsibility of parents for the actions of their minor children.
Baliwag Transit vs. CA (262 SCRA 230)

Baliwag Transit, Inc. vs. Court of Appeals
G.R. No. 116624. September 20, 1996.
Facts:
The case of Baliwag Transit, Inc. v. Court of Appeals involves a fatal accident caused by
the negligence of an employee of Baliwag Transit, Inc. The incident occurred on November
2, 1990, when the company's bus, driven by Juanito Fidel, was brought to its terminal for
brake system repair. Fidel instructed mechanic Mario Dionisio to inform the headman
about the repair. Fidel then alighted from the bus to tell the gasman to fill up the gas tank.
When Fidel returned to the bus, he sat on the driver's seat and suddenly the bus moved,
hitting Dionisio who was repairing the brake system. Dionisio sustained serious injuries
and eventually died on November 6, 1990.
As a result, Divina Vda. de Dionisio, the wife of the deceased, filed a complaint for
damages against Baliwag Transit, Inc. and Juanito Fidel before the Regional Trial Court of
Quezon City. The trial court ruled in favor of the plaintiffs and ordered Baliwag Transit, Inc.
and Fidel to pay various amounts as compensation for the death of Dionisio. The
defendants appealed to the Court of Appeals, which modified the judgment and increased
the damages awarded. Dissatisfied with the decision, Baliwag Transit, Inc. filed a petition
before the Supreme Court.
Issue:
The main issue raised in the case is whether Baliwag Transit, Inc. should be held liable for
the damages caused by the negligence of its employee, Juanito Fidel.
Ruling:
The Supreme Court ruled in favor of the plaintiffs and affirmed the decision of the Court of
Appeals. The court held that Fidel's negligence was the proximate cause of Dionisio's
death, as he failed to take necessary precautions while repairing the brake system. The
court cited Article 2176 of the Civil Code, which states that whoever causes damage to
another through fault or negligence is obliged to pay for the damage done. Additionally,
Article 2180 imposes liability on employers for damages caused by their employees,
unless they can prove that they exercised due diligence in their selection and supervision.
Ratio:
In this case, Baliwag Transit, Inc. failed to prove that it exercised the necessary care and
diligence in selecting and supervising Fidel. Therefore, the company is held solidarily
liable with Fidel for the damages caused by his negligence. The court also found the
damages awarded by the Court of Appeals to be reasonable, considering factors such as
loss of earning capacity, pecuniary loss, and moral and mental sufferings. The court
modified the decision to reflect the correct computation of the loss of earning capacity
and ordered Baliwag Transit, Inc. and Fidel to pay the specified amounts as compensation
to the heirs of Dionisio.
Metro Manila Transit Corp. vs. CA (223 SCRA 521)

Metro Manila Transit Corp. vs. Court of Appeals
G.R. No. 104408. June 21, 1993.
Facts:
This case involves a vehicular collision between a public utility jeepney and a bus owned
by Metro Manila Transit Corporation (MMTC). Nenita Custodio, a passenger in the jeepney,
sustained serious injuries as a result of the collision. Custodio filed a complaint for
damages against MMTC and the drivers of both vehicles. MMTC denied liability and argued
that it had exercised due diligence in the selection and supervision of its employees. The
trial court absolved MMTC from liability, but the Court of Appeals held MMTC solidarily
liable with the other defendants due to their concurrent negligence. MMTC appealed to
the Supreme Court.
Issue:
The main issue in this case is whether MMTC can be held liable for damages resulting from
the vehicular collision.
Ruling:
The Supreme Court ruled that MMTC is indeed liable for damages.
Ratio:
The Court found that MMTC failed to provide sufficient evidence to prove that it had
exercised due diligence in the selection and supervision of its driver. While MMTC
presented testimonial evidence from its employees, the Court found that these
testimonies were mere generalities and lacked supporting documentary evidence. The
Court emphasized that the burden of proof is on the employer to show that it has been
diligent in the selection and supervision of its employees. Since MMTC failed to provide
such evidence, it cannot be absolved from liability.
The Court based its ruling on the legal principle that employers have an obligation to
observe due diligence in the selection and supervision of their employees. This obligation
is not merely a formality, but a requirement for the safety of the public. The Court
emphasized that the mere formulation of company policies on safety is not enough to
exempt an employer from liability. The employer must show that it has actually followed
these policies and procedures in the hiring and supervision of its employees. In this case,
MMTC failed to prove that it had followed its own guidelines and policies, and therefore, it
is liable for damages resulting from the negligence of its driver.
In conclusion, the Supreme Court affirmed the decision of the Court of Appeals holding
MMTC liable for damages. The Court emphasized the importance of employers ensuring
the safety of the public by exercising due diligence in the selection and supervision of their
employees. Employers must provide sufficient evidence to prove that they have followed
their own guidelines and policies in order to avoid liability for damages caused by their
employees.
Calalas vs. CA (332 SCRA 356)

Calalas vs. Court of Appeals
G.R. No. 122039. May 31, 2000.
Facts:
The case involves a complaint for damages filed by Eliza Jujeurche Sunga against Vicente
Calalas. Sunga alleges that Calalas violated the contract of carriage by failing to exercise
the required diligence as a common carrier. Calalas, in turn, filed a third-party complaint
against Francisco Salva, the owner of the truck that bumped their passenger jeepney. The
lower court absolved Calalas of liability and held Salva responsible for the accident.
However, on appeal, the Court of Appeals reversed the ruling, stating that Sunga's cause
of action was based on a contract of carriage and that Calalas failed to exercise the
required diligence. The appellate court dismissed the third-party complaint against Salva
and held Calalas liable for damages to Sunga.
Issue:
The main issue in this case is whether Calalas is liable for breaching the contract of
carriage.
Ruling:
The court ruled that Calalas is indeed liable for damages to Sunga.
Ratio:
The court explained that in cases of breach of contract, the action can be prosecuted by
proving the existence of the contract and the failure of the obligor to transport the
passenger safely. The court also emphasized that common carriers are presumed to have
been at fault or to have acted negligently in cases of death or injuries to passengers, unless
they can prove that they observed extraordinary diligence. In this case, the court found that
Calalas failed to overcome the presumption of negligence and was actually negligent in
transporting passengers.
The court also addressed the argument that the ruling in another case, where Salva and
his driver were held liable for quasi-delict, should be binding on Sunga. The court clarified
that the issues in the two cases are different, with the previous case involving quasi-delict
and the present case involving breach of contract. The court explained that the doctrine of
proximate cause, which is applicable in actions for quasi-delict, is not applicable in
actions involving breach of contract. The court further stated that the common carrier has
the burden of proving that they observed extraordinary diligence in the care of their
passengers.
Regarding the argument of caso fortuito, the court found that it does not apply in this case.
The court explained that a caso fortuito is an event that could not be foreseen or, if
foreseen, was inevitable. The court stated that the requirements for a caso fortuito are not
present in this case, as the danger of parking the jeepney in an improper manner could
have been foreseen by Calalas.
Lastly, the court addressed the award of moral damages to Sunga. The court agreed with
Calalas that the award is excessive and not supported by evidence. The court explained
that as a general rule, moral damages are not recoverable in actions for breach of contract,
unless the mishap results in the death of a passenger or the carrier is guilty of fraud or bad
faith. In this case, there was no finding of bad faith on the part of Calalas, so the award of
moral damages was deleted.
In summary, the court held that Calalas is liable for breaching the contract of carriage and
ordered him to pay damages to Sunga. The court emphasized that common carriers have
the burden of proving that they observed extraordinary diligence in ensuring passenger
safety. The court also clarified that the doctrine of proximate cause is not applicable in
actions involving breach of contract. The court further found that the argument of caso
fortuito does not apply in this case. Lastly, the court deleted the award of moral damages
to Sunga, as there was no finding of bad faith on the part of Calalas.
Air France vs. Carrascoso (18 SCRA 155)

Air France vs. Carrascoso
G.R. No. L-21438. September 28, 1966.
Facts:
The case of Air France v. Carrascoso involves a dispute between the petitioner, Air France,
and the respondent, Rafael Carrascoso. The case was decided by the Supreme Court of
the Philippines on September 28, 1966. Rafael Carrascoso, a civil engineer, was a member
of a group of Filipino pilgrims traveling from Manila to Lourdes. Carrascoso had purchased
a first-class round trip airplane ticket from Air France for the entire duration of his trip.
However, when the group reached Bangkok, the manager of Air France forced Carrascoso
to vacate his first-class seat and sit in the tourist class. Carrascoso refused to give up his
seat, but eventually relented after being pacified by other passengers. Carrascoso filed a
complaint against Air France, alleging breach of contract and seeking damages.
Issue:
The main issue raised in the case is whether Carrascoso was entitled to a first-class seat
as stated in his ticket.
Another issue raised in the case is whether Air France acted in bad faith.
Ruling:
The ruling of the Supreme Court affirms the decision of the Court of Appeals. The court
holds that Carrascoso was entitled to a first-class seat and that Air France breached its
contract with him. The court also upholds the award of moral damages, exemplary
damages, and attorney's fees, as it finds that Air France acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner.
Ratio:
The court found that Carrascoso had a confirmed reservation for a first-class seat and was
entitled to it. The court emphasized the importance of adhering to the terms of the ticket
to ensure stability in the relations between passengers and airlines. Air France's argument
that the ticket did not guarantee a first-class seat and that it depended on seat availability
was rejected by the court.
Regarding the issue of bad faith, the court found that Air France's manager in Bangkok
threatened Carrascoso and forcibly ejected him from his seat, which constituted bad
faith. The court awarded Carrascoso moral damages, exemplary damages, and attorney's
fees as a result.
The court emphasized the importance of treating passengers with kindness, respect,
courtesy, and due consideration. It held that any rude or discourteous conduct by airline
employees gives the passenger a right to damages. The court's decision serves as a
reminder to airlines to uphold their contractual obligations and treat passengers with
dignity and respect.
Barredo vs. Garcia (73 Phil. 607)

Barredo vs. Garcia
G.R. No. 48006. July 8, 1942.
Facts:
This case, Barredo v. Garcia, involves a fatal collision between a carretela and a taxi,
resulting in the death of a 16-year-old boy. The criminal action was filed against the taxi
driver, Pedro Fontanilla, who was convicted and sentenced accordingly. The court in the
criminal case granted the petition to reserve the right to bring a separate civil action. The
parents of the deceased then brought a suit for damages against the proprietor of the taxi,
Fausto Barredo, under article 1903 of the Civil Code. Barredo argued that his liability was
governed by the Revised Penal Code, which would make his responsibility only secondary.
However, the court ruled that a separate civil action lies, as the employer is primarily and
directly responsible for damages under articles 1902 and 1903 of the Civil Code.
Issue:
The main issue in this case is whether the plaintiffs can bring a separate civil action against
Barredo, making him primarily and directly responsible for the negligence of his employee,
Fontanilla. Barredo argues that his liability is only subsidiary, as Fontanilla has not been
sued in a civil action.
Ruling:
The court ruled in favor of the plaintiffs, stating that the separate civil action is allowed and
Barredo is primarily and directly responsible under articles 1902 and 1903 of the Civil
Code.
Ratio:
The court's ruling is based on the distinction between crimes under the Penal Code and
culpa aquiliana or quasi-delito under the Civil Code. The court explains that a quasi-delict
or culpa aquiliana is a separate legal institution under the Civil Code, with its own
substantivity and individuality. The primary and direct responsibility of employers can be
anchored on the wording and spirit of article 1903 of the Civil Code. The court also cites
opinions of jurists and decisions of the Supreme Tribunal of Spain that support the
separate existence of quasi-delicts and the primary liability of employers under article
1903 of the Civil Code.
The court further explains that the individuality of quasi-delicts is clear in the Civil Code,
and it is a legal institution with ancient lineage. The court cites provisions of the Civil Code
that exclusively devote to the legal institution of culpa aquiliana. The court also highlights
the differences between crimes under the Penal Code and culpa aquiliana under the Civil
Code, such as the public interest involved, the nature of punishment, and the scope of
liability.
The court emphasizes that the Revised Penal Code punishes not only reckless but also
simple negligence. If articles 1902-1910 of the Civil Code apply only to negligence not
punishable by law, culpa aquiliana would have very little application in actual life. The
court states that the literal meaning of the law should not be used to smother a principle
of such ancient origin and development as culpa aquiliana.
The court also addresses the degree of proof required in cases of criminal negligence that
cannot be shown beyond reasonable doubt but can be proved by a preponderance of
evidence. In such cases, the defendant can and should be held responsible in a civil action
under articles 1902-1910 of the Civil Code.
The court concludes that the primary and direct responsibility of employers under article
1903 of the Civil Code is more likely to facilitate a remedy for civil wrongs and protect
society. The court points out the harm done by relying solely on civil responsibility for a
crime and restores the principle of responsibility for fault or negligence under articles 1902
et seq. of the Civil Code to its full vigor.
Manalo, et al. vs. Robles Trans. Co., Inc. L-8171, August 16,1956)
Manalo vs. Robles Transportation Co., Inc.
G.R. No. L-8171. August 16, 1956.
Facts:
The case of Manalo v. Robles Transportation Co., Inc. involves a taxi company, Robles
Transportation Company, Inc., being held liable for the death of a child in a collision
caused by its driver. On August 9, 1947, a taxicab owned and operated by Robles
Transportation Company, Inc. collided with a passenger truck in Paraaque, Rizal. As a
result of the accident, the taxicab ran over Armando Manalo, an eleven-year-old child,
causing him physical injuries that led to his death several days later. The driver of the
taxicab, Edgardo Hernandez, was prosecuted for homicide through reckless imprudence
and was found guilty. He was sentenced to one year of prision correccional and ordered
to indemnify the heirs of the deceased in the amount of P3,000. However, Hernandez
failed to pay the indemnity, and two writs of execution were returned unsatisfied by the
sheriff, who certified that no property in Hernandez's name could be found.
The plaintiffs, Emilio Manalo and Clara Salvador, who are the parents of the deceased
child, filed a case against Robles Transportation Company, Inc. to enforce its subsidiary
liability under Articles 102 and 103 of the Revised Penal Code.
Issue:
(1) whether the judgment of conviction against the driver is binding upon the party
subsidiarily liable,
(2) whether the evidence presented, including the sheriff's return, is admissible,
(3) whether Articles 102 and 103 of the Revised Penal Code were repealed by the New Civil
Code, and
(4) whether the action is barred by prescription.
Ruling:
The court ruled in favor of the plaintiffs and affirmed the decision of the lower court.
Ratio:
The court held that the judgment of conviction against the driver is binding upon the party
subsidiarily liable, as long as there is no collusion between the defendant and the
offended party. This means that Robles Transportation Company, Inc. cannot escape
liability for the death of the child caused by its driver by claiming that they are not bound
by the judgment of conviction. The court also ruled that the evidence presented, including
the sheriff's return, is admissible as prima facie evidence of the facts stated therein. The
sheriff is not required to testify in court for the evidence to be considered.
Furthermore, the court held that Articles 102 and 103 of the Revised Penal Code were not
repealed by the New Civil Code. This means that the provisions of the Revised Penal Code,
which impose subsidiary liability on employers for the criminal acts of their employees,
still apply. Lastly, the court ruled that the action based on the judgment is not barred by
prescription. This means that the parents of the deceased child can still enforce the
subsidiary liability of Robles Transportation Company, Inc. even if some time has passed
since the accident occurred.
In summary, the court held that Robles Transportation Company, Inc. is liable for the death
of the child caused by its driver, and ordered them to pay damages to the parents based
on its subsidiary liability under the Revised Penal Code. The court also ruled that the
evidence presented, including the sheriff's return, is admissible, and that the action is not
barred by prescription.
Virata vs. Ochoa (81 SCRA 472)

Virata vs. Ochoa
G.R. No. L-46179. January 31, 1978.
Facts:
The case of Virata v. Ochoa involves the death of Arsenio Virata, who was hit by a passenger
jeepney driven by Maximo Borilla and registered in the name of Victorio Ochoa. A criminal
case for reckless imprudence was filed against Borilla. However, before the criminal case
could be decided, the heirs of the victim filed a separate civil action for damages against
both the owner and the driver of the jeepney based on quasi-delict. Borilla was
subsequently acquitted of the criminal charge, and the defendants in the civil case moved
to dismiss it. The trial court granted the motion to dismiss, which led to the appeal.
Issue:
The main issue before the Supreme Court was whether the heirs of the victim could pursue
an action for damages based on quasi-delict against the driver and owner of the jeepney.
Ruling:
The Supreme Court held that the acquittal of the driver in the criminal case does not bar
the prosecution of a civil case for damages based on quasi-delict. The court set aside the
order of dismissal and remanded the case to the lower court for further proceedings.
Ratio:
The court based its decision on Article 1157 of the Civil Code of the Philippines, which
recognizes quasi-delict and an act or omission punishable by law as two different sources
of obligation. The court emphasized that the source of obligation sought to be enforced in
the civil action is quasi-delict, not an act or omission punishable by law. Therefore, the
dismissal of the criminal case does not prevent the prosecution of the civil case.
The court also highlighted that the petitioners are not seeking to recover twice for the same
negligent act. They made it clear in the criminal case that they were filing a separate civil
action for damages based on quasi-delict. Thus, the dismissal of the criminal case does
not bar the prosecution of the civil case.
In conclusion, the Supreme Court ruled that the acquittal of the driver in a criminal case
does not prevent the prosecution of a separate civil case for damages based on quasi-
delict. The court recognized the distinction between quasi-delict and an act or omission
punishable by law, and held that the dismissal of the criminal case does not bar the pursuit
of the civil case. The court set aside the order of dismissal and remanded the case to the
lower court for further proceedings.
Philippine Rabbit Bus Lines, Inc. vs. IAC (189 SCRA 158)
Philippine Rabbit Bus Lines, Inc. vs. Intermediate Appellate Court
G.R. No. 66102-04. Aug 30, 1990.
Facts:
The case of Philippine Rabbit Bus Lines, Inc. v. Intermediate Appellate Court involves a
collision between a passenger jeepney and a bus owned by Philippine Rabbit Bus Lines,
Inc. The incident occurred on November 29, 1975, along EDSA, Quezon City. The
passenger jeepney, owned by defendants Jose and Maria Santos and driven by defendant
Romeo Santos, collided with the bus. As a result of the collision, several passengers of the
jeepney sustained injuries. The injured passengers filed a complaint for damages against
Philippine Rabbit Bus Lines, Inc., Jose and Maria Santos, and Romeo Santos. The lower
court ruled in favor of the plaintiffs and held all defendants solidarily liable for damages.
The defendants appealed the decision to the Intermediate Appellate Court.
Issue:
The main issue raised in the case is whether the defendants should be held solidarily liable
for damages. The defendants argued that they should not be held liable because the
collision was solely caused by the negligence of the bus driver. They contended that they
should only be held liable for their own negligence, if any.
Ruling:
The Supreme Court, through Justice Medialdea, affirmed the decision of the lower court
and held all defendants solidarily liable for damages.
Ratio:
The Court based its decision on the principle of culpa contractual, which imposes a high
standard of care on common carriers for the safety of their passengers. According to the
Court, common carriers are bound to carry their passengers safely as far as human care
and foresight can provide. Any injury suffered by the passengers is considered a breach of
the contract of carriage.
The Court clarified that the liability of the defendants is not based on the doctrine of
respondeat superior, which holds an employer liable for the negligence of its employees.
Instead, the liability is based on the principle of culpa contractual, which holds the
common carrier liable for the acts or omissions of its employees. In this case, the
defendants, as owners of the passenger jeepney, are considered common carriers and are
therefore held to the high standard of care imposed on them.
In conclusion, the Supreme Court held all defendants, including the driver and owners of
the passenger jeepney, solidarily liable for damages in the collision case. The decision was
based on the principle of culpa contractual and the high standard of care imposed on
common carriers for the safety of their passengers.
Macalinao vs. Ong (477 SCRA 740)

Macalinao vs. Ong
G.R. No. 146635. December 14, 2005.
Facts:
The case of Macalinao v. Ong involves a collision between a truck and a jeepney, resulting
in severe damages to both vehicles and physical injuries to the passengers. Marcelo
Macalinao, a passenger in the truck, sustained the most serious injuries and eventually
died. Macalinao's parents filed a complaint for damages against Eddie Medecielo Ong, the
driver of the truck, and Genovevo Sebastian, the owner of the truck and Macalinao's
employer.
Issue:
The main issue raised in the case is whether there is sufficient evidence to establish
negligence on the part of Ong, the driver of the truck, and whether Sebastian, the owner of
the truck and Macalinao's employer, can be held liable for failing to exercise the diligence
of a good father of a family in the selection and supervision of Ong.
Ruling:
The Supreme Court disagreed with the Court of Appeals and reinstated the trial court's
decision. The Court found Ong negligent in driving the truck and held Sebastian liable for
failing to exercise the diligence of a good father of a family in the selection and supervision
of Ong. Ong and Sebastian were held solidarily liable for damages.
Ratio:
The Court relied on photographs of the accident scene, which showed the position of the
vehicles after the collision, to establish Ong's negligence. The photographs indicated that
Ong's truck was on the wrong side of the road, suggesting that he was at fault for the
collision. The Court also applied the doctrine of res ipsa loquitur, which allows for a
presumption of negligence when the circumstances of an accident indicate that it would
not have occurred without someone's negligence.
Based on the evidence presented, the Court found that all the requisites for the
application of res ipsa loquitur were present, and therefore, a presumption of Ong's
negligence arose. The burden of proving due care then shifted to the defendants, but they
failed to provide convincing proof that they exercised the necessary diligence in the
selection and supervision of Ong. As a result, Ong and Sebastian were held solidarily liable
for damages.
The Court also rejected Sebastian's argument that the provisions of Article 2180 of the
Civil Code, which impose liability on employers for the acts of their employees, do not
apply to an employee like Macalinao. The Court held that the law makes no distinction
between employees and third parties in relation to the employer's liability.
Furthermore, the Court awarded moral damages to the plaintiffs, despite the argument
that Macalinao, who suffered physical injuries and died, was the one who experienced
pain, not his parents. The Court explained that the relatives of the victim in a quasi-delict
are not prohibited from recovering moral damages, and the intensity of their suffering is
proportionate to their affection for the victim.
Finally, the Court awarded exemplary damages to the plaintiffs, as Ong's gross negligence
in driving the truck warranted such an award. The Court increased the amount of both the
moral and exemplary damages awarded by the trial court to conform with prevailing
jurisprudence.
Santos vs. Pizarro (465 SCRA 232)

Spouses Santos vs. Pizardo
G.R. No. 151452. July 29, 2005.
Facts:
The case involves a complaint for damages filed by the petitioners, Spouses Antonio C.
Santos and Esperanza C. Santos, Nora Barnalo, Belinda Lumactad, Marienela Dy, Nikka
Santos, and Leonardo Ferrer, against Dionisio M. Sibayan and Viron Transportation
Company, Inc., represented by Virgilio Q. Rondaris. The incident occurred on April 25,
1994, when Sibayan, driving a Viron Transit bus, collided with a Lite Ace Van, resulting in
multiple deaths and injuries. Sibayan was charged with Reckless Imprudence Resulting to
Multiple Homicide and Multiple Physical Injuries and was eventually convicted. However,
as there was a reservation to file a separate civil action, no pronouncement of civil liability
was made in the criminal case.
Issue:
The main issue raised in the case is whether the complaint for damages filed by the
petitioners is barred by prescription and whether the proper remedy is a petition for
certiorari or an appeal.
Ruling:
The Court agrees with the petitioners and grants their petition. It explains that when a
criminal action is instituted, the civil liability arising from the offense is impliedly instituted
with the criminal action, subject to certain exceptions. One of these exceptions is when
the offended party reserves the right to have the civil damages determined in a separate
action. In this case, the petitioners made a reservation to file a separate civil action, and
therefore, the civil liability of the private respondents was not adjudged in the criminal
case.
The Court further clarifies that the complaint filed by the petitioners is not based on quasi
delict but on the final judgment of conviction in the criminal case. It states that the
prescription of the action based on quasi delict does not operate as a bar to an action to
enforce the civil liability arising from crime, especially when the latter action had been
expressly reserved. The Court cites a similar case, Mendoza v. La Mallorca Bus Company,
to support its interpretation.
Regarding the procedural issue of filing a petition for certiorari instead of appealing the
order of dismissal, the Court exempts the petitioners from the strict application of the
rules to promote substantial justice. It emphasizes that it is their duty to prevent an
injustice and to ensure that the petitioners receive the indemnity to which they are entitled
by law and by a final judgment of conviction. The Court sets aside the resolutions of the
Court of Appeals and remands the case to the trial court for further proceedings.
Ratio:
The Court's decision is based on the principle that when a criminal action is instituted, the
civil liability arising from the offense is impliedly instituted with the criminal action,
subject to certain exceptions. In this case, the petitioners reserved the right to file a
separate civil action, which means that the civil liability of the private respondents was not
adjudged in the criminal case. Therefore, the complaint filed by the petitioners is not
based on quasi delict but on the final judgment of conviction in the criminal case.
The Court also clarifies that the prescription of the action based on quasi delict does not
bar an action to enforce the civil liability arising from crime, especially when the latter
action had been expressly reserved. This interpretation is supported by the case of
Mendoza v. La Mallorca Bus Company.
Regarding the procedural issue, the Court exempts the petitioners from the strict
application of the rules to promote substantial justice. It emphasizes that it is their duty to
prevent an injustice and to ensure that the petitioners receive the indemnity to which they
are entitled by law and by a final judgment of conviction. Therefore, the proper remedy in
this case is a petition for certiorari, despite the availability of an appeal.
iii. Delay (1169; 1165; 1170)

Bayala vs. Silang Traffic Co. (73 Phil. 557)
Bayla vs. Silang Traffic Co., Inc.
G.R. Nos. 48195 & 48196. May 1, 1942.
Facts:
The case of Bayla v. Silang Traffic Co., Inc. involved an "agreement for installment sale" of
shares of stock between the respondent corporation, Silang Traffic Co., Inc., and various
individuals. The agreement stated that the purchasers would pay the purchase price in
installments. If the purchaser failed to pay any installment, the shares of stock would
revert to the seller and the payments already made would be forfeited in favor of the seller.
The board of directors of the corporation passed a resolution authorizing the refund of the
amounts paid and the reversion of the shares of stock to the corporation due to the default
in payment of the succeeding installment. The petitioners, who had paid several
installments, filed an action to recover the amounts they had paid.
Issue:
The main issue raised in the case was whether the resolution rescinding the sale and
declaring the forfeiture of payments was valid.
Ruling:
The court ruled that the resolution rescinding the sale and declaring the forfeiture of
payments was valid. However, the court clarified that failure to pay installments does not
automatically result in forfeiture without a demand from the seller.
Ratio:
The court explained that the contract between the parties was a contract of purchase and
sale, not a subscription to the capital stock. The court emphasized that the rules governing
subscriptions and sales of shares are different. The provisions of the Corporation Law
regarding calls for unpaid subscriptions and assessment of stock do not apply to a
purchase of stock. The court also clarified that the rule that a corporation has no legal
capacity to release an original subscriber to its capital stock from the obligation to pay for
his shares is inapplicable to a contract of purchase of shares.
Furthermore, the court ruled that the forfeiture of the payments already made and the
reversion of the shares of stock to the corporation was ineffective. The contract did not
expressly provide that the failure of the purchaser to pay any installment would give rise to
forfeiture and cancellation without the necessity of any demand from the seller. Under the
Civil Code, persons obliged to deliver or do something are not in default until the creditor
demands the fulfillment of their obligation, unless the obligation or the law expressly
provides that demand shall not be necessary or by reason of the nature and
circumstances of the obligation it shall appear that the designation of the time at which
the thing was to be delivered or the service rendered was the principal inducement to the
creation of the obligation.
Therefore, the court held that the resolution of rescinding the sale and declaring the
forfeiture of payments was valid. The court ordered the respondent corporation to pay the
petitioners the sums they had paid, with legal interest, and with costs. The court also
declared that the attempted revocation of the rescission by a subsequent resolution was
invalid.
Aerospace Chemical Industries, Inc. vs. CA (315 SCRA 309)

Aerospace Chemical Industries, Inc. vs. Court of Appeals
G.R. No. 108129. September 23, 1999.
Facts:
The case of Aerospace Chemical Industries, Inc. v. Court of Appeals involves a dispute
between Aerospace Chemical Industries, Inc. (petitioner) and Philippine Phosphate
Fertilizer Corporation (private respondent) over the delivery of sulfuric acid. In June 1986,
petitioner purchased 500 metric tons of sulfuric acid from private respondent and agreed
to arrange for the means of transport to pick up the sulfuric acid from private respondent's
loadports in Basay, Negros Oriental and Sangi, Cebu. Petitioner paid for the sulfuric acid
in October 1986 and chartered a vessel, M/T Sultan Kayumanggi, to carry the freight.
However, the vessel was only able to withdraw a partial amount of sulfuric acid before
tilting and sinking with a total of 227.51 MT of sulfuric acid on board. Petitioner demanded
the delivery of the remaining sulfuric acid from private respondent and filed a complaint
for specific performance and/or damages when private respondent refused. The trial court
ruled in favor of petitioner, but the Court of Appeals reversed the decision and found
petitioner guilty of delay and liable for damages.
Issue:
The main issue raised in the case is whether petitioner committed a breach of contract by
failing to lift the remaining sulfuric acid and whether petitioner is liable for damages.
Ruling:
The Court of Appeals ruled that private respondent had no obligation to agree to the
additional order of sulfuric acid and cannot be faulted for its inability to meet the
additional requirements of petitioner. The sinking of the vessel did not absolve petitioner
from its obligation to lift the remaining sulfuric acid. Petitioner was found guilty of delay
for failing to comply with its obligations under the contract. Petitioner is therefore liable for
proven damages.
Ratio:
The court's ruling is based on the finding that petitioner failed to provide sufficient
evidence to prove that the delay was due to force majeure. The survey reports conducted
by a third-party surveyor showed that the vessel was unstable and unseaworthy, which
was the cause of the delay. The court also found that petitioner's claim of an additional
order of sulfuric acid was not substantiated and that petitioner's default cannot be
excused.
The court also considered the extrajudicial demand made by private respondent for
petitioner to lift the sulfuric acid, which constituted a demand for performance. The court
ruled that delay begins from the time the obligee makes a demand for performance, and
petitioner's failure to comply with the demand made it liable for damages.
The court also addressed the issue of rental expenses for the storage of the sulfuric acid.
The general rule is that the seller bears the expenses for the storage and preservation of
fungible goods until ownership is transferred to the buyer. However, in this case,
petitioner's delay in performance exempted private respondent from bearing the
expenses. The court ordered the offsetting of private respondent's counterclaim for rental
expenses against petitioner's advance payment for the sulfuric acid, with the excess
amount to be returned to petitioner.
In summary, the court ruled that petitioner was guilty of delay in the performance of its
obligation to lift the sulfuric acid and is therefore liable for damages. The court also
ordered the offsetting of private respondent's counterclaim for rental expenses against
petitioner's advance payment, with the excess amount to be returned to petitioner.
Binalbaga Tech, Inc. vs. CA (219 SCRA 777)

Binalbagan Tech. Inc. vs. Court of Appeals
G.R. No. 100594. March 10, 1993.
Facts:
The case of Binalbagan Tech. Inc. v. Court of Appeals involves a contract dispute over the
ownership and possession of subdivision lots. On May 11, 1967, the private respondents
executed a Contract to Sell and a Deed of Sale, transferring ownership of the lots to
Binalbagan Tech. Inc. In turn, Binalbagan Tech. Inc. executed an Acknowledgment of Debt
with Mortgage Agreement, mortgaging the lots in favor of the estate of Luis B. Puentevella.
Binalbagan Tech. Inc. took possession of the lots and started operating a school on the
property. However, there was a pending case, Civil Case No. 7435, which resulted in the
eviction of Binalbagan Tech. Inc. from the lots in 1974.
Issue:
The main issue in this case is whether the private respondents' cause of action is barred
by prescription.
Ruling:
The Court of Appeals held that the prescriptive period was interrupted from 1974 to 1982
due to the eviction of Binalbagan Tech. Inc. from the lots. During this period, the private
respondents were not in a legal position to demand payment from Binalbagan Tech. Inc.
The prescriptive period to institute an action upon a written contract is ten years, and the
private respondents filed their case within this period. Therefore, the Court of Appeals
ruled in favor of the private respondents and ordered Binalbagan Tech. Inc. to transfer
ownership of the lots back to them.
Ratio:
The Court's ruling is based on the principle that a party to a contract cannot demand
performance of the other party's obligations unless they are in a position to comply with
their own obligations. In this case, Binalbagan Tech. Inc. was evicted from the lots and was
not in possession from 1974 to 1982. Therefore, the private respondents' right to demand
payment was suspended during this period. Deducting the eight years from the
prescriptive period, the private respondents filed their case within the ten-year period.
Additionally, the Court considered the principle against unjust enrichment, as allowing
Binalbagan Tech. Inc. to own the lots without full payment would result in unjust
enrichment. Therefore, the Court affirmed the decision of the Court of Appeals.
Agcaoili vs. GSIS (165 SCRA 1)

Agcaoili vs. Government Service Insurance System
G.R. No. L-30056. August 30, 1988.
Facts:
The case of Agcaoili v. Government Service Insurance System involves a buyer named
Marcelo Agcaoili who purchased a house and lot in the GSIS Housing Project at Nangka,
Marikina, Rizal from the defendant, Government Service Insurance System (GSIS). The
agreement between Agcaoili and GSIS stated that Agcaoili must occupy the house within
a specified period, and failure to do so would result in the cancellation of the sale.
However, when Agcaoili attempted to occupy the house, he found it to be uninhabitable,
consisting only of four walls, openings, and a roof. Agcaoili refused to make further
payments until GSIS completed the house, but GSIS opted to cancel the award and
demand that Agcaoili vacate the premises. Agcaoili then filed a lawsuit against GSIS for
specific performance with damages.
Issue:
1. Whether Agcaoili had the right to suspend payment of amortizations due to the
incompleteness of the housing unit.
2. Whether a valid contract of sale existed between GSIS and Agcaoili.
3. Whether Agcaoili's act of placing a friend in possession of the house without GSIS's
consent constituted a breach of the agreement.
Ruling:
The court ruled in favor of Agcaoili.
Ratio:
The court held that GSIS had breached its obligation to deliver a reasonably habitable
dwelling place to Agcaoili. The court interpreted the contract against GSIS, as it was
responsible for any ambiguity or imprecision in its terms. The court also exercised its
equity jurisdiction to adjust the contractual rights of the parties.
The court modified the contract by requiring GSIS to add the cost of the unfinished house
to the cost of the land, and correspondingly adjusting the amortizations to be paid by
Agcaoili. The court deemed it unfair to compel GSIS to complete the construction of the
house at present prices, as it would make the stipulated price disproportionate.
The court balanced the equities and provided a solution that would be just and equitable
for both parties.
In summary, the court held that GSIS breached its obligation to deliver a habitable house
to Agcaoili. It ruled that a valid contract of sale existed between the parties and that
Agcaoili's act of placing a friend in possession of the house did not constitute a breach of
the agreement. The court exercised its equity jurisdiction to modify the contract and
require GSIS to add the cost of the unfinished house to the cost of the land. The court
balanced the equities and provided a solution that would be fair to both parties.
Bricktown Development Corp. vs. Amor Tierra Development Corp. (239 SCRA
126)
Bricktown Development Corp. vs. Amor Tierra Development Corp.
G.R. No. 112182. December 12, 1994.
Facts:
The case of Bricktown Development Corp. v. Amor Tierra Development Corp. involves a
dispute over the cancellation of contracts to sell residential lots. Bricktown Development
Corporation (petitioner) entered into two Contracts to Sell with Amor Tierra Development
Corporation (respondent) for a total of 96 residential lots. The contracts stipulated the
payment of a total price of P21,639,875.00 by the respondent. However, the respondent
was only able to pay a total of P1,334,443.21. Petitioner eventually sent a notice of
cancellation to the respondent due to its failure to pay the installment and interest on the
balance. The respondent demanded a refund of its payments, but the petitioner refused.
The trial court ruled in favor of the respondent, declaring the contracts rescinded and
ordering the petitioner to refund the amount paid by the respondent with interest. The
appellate court affirmed the decision of the trial court.
Issue:
The main issues raised in the case are: (1) whether the contracts to sell were validly
rescinded or cancelled by the petitioner, and (2) whether the amounts already paid by the
respondent should be forfeited by the petitioner.
Ruling:
The court ruled that the contracts to sell were validly rescinded or cancelled by the
petitioner. The contracts provided for a sixty-day grace period for the respondent to pay
the due amounts. Since the respondent failed to pay within the grace period, the petitioner
had the right to cancel the contracts. The court emphasized that the grace period is a right
of the debtor and becomes operative automatically without the need for further demand.
The provisions of Article 1169 of the Civil Code on default and demand are not applicable
in this case.
However, the court also considered the negotiations and circumstances between the
parties during the period of their juridical relation. The trial court found that there were
negotiations for a possible modification of the agreement, although nothing conclusive
was reached. The appellate court agreed that the negotiations and the fact that the
respondent did not take possession of the properties and the petitioner did not dispose of
them during the negotiations led the respondent to believe that another agreement might
be entered into. Therefore, the court found it unconscionable to sanction the forfeiture of
the payments made by the respondent. The court ordered the petitioner to refund the
amount paid by the respondent with 12% interest per annum, starting from the date of
finality of the decision.
Ratio:
In summary, the court ruled that the contracts to sell were validly rescinded or cancelled
by the petitioner. However, the court also considered the negotiations and circumstances
between the parties and ordered the petitioner to refund the amount paid by the
respondent with interest. The court emphasized that the grace period provided in the
contracts is a right of the debtor and becomes operative automatically without the need
for further demand. The court also took into account the negotiations and the fact that the
respondent did not take possession of the properties and the petitioner did not dispose of
them during the negotiations, leading the respondent to believe that another agreement
might be entered into. Based on these circumstances, the court found it unconscionable
to forfeit the payments made by the respondent. Therefore, the court ordered the
petitioner to refund the amount paid by the respondent with 12% interest per annum,
starting from the date of finality of the decision.
Enriquez vs. Ramos (73 SCRA 116)

Enriquez vs. Ramos
G.R. No. L-23616. September 30, 1976.
Facts:
The case of Enriquez v. Ramos involves an action for foreclosure of real estate mortgage.
The plaintiffs-appellants, Rodrigo Enriquez, Aurea Soriano de Dizon, and Urbano Dizon,
Jr., sold 20 subdivision lots in Quezon City to the defendant-appellee, Socorro A. Ramos,
for the sum of P235,056. However, only P35,056 had been paid, and the balance of
P200,000 was to be paid within two years from the date of the execution of the deed of
sale. To secure the payment of the balance, a deed of mortgage was executed by the
defendant-appellee in favor of the plaintiffs-appellants on several parcels of land. The
plaintiffs-appellants alleged that the defendant-appellee violated the terms of their
agreement by refusing to pay the balance within the stipulated period, failing to register
the mortgage on the Bulacan property, and not paying the realty tax for 1959 on the
mortgaged lots.
Issue:
The main issue in this case is whether the defendant-appellee violated the terms of the
agreement by refusing to pay the balance within the stipulated period, failing to register
the mortgage on the Bulacan property, and not paying the realty tax for 1959 on the
mortgaged lots.
Ruling:
The court ruled in favor of the plaintiffs-appellants. The court held that the defendant-
appellee's continued violation of the express terms of the contract could no longer be
countenanced. The court also found that the construction of the roads had been
completed in accordance with the ordinances of Quezon City based on the testimonies of
witnesses and the absence of contradictory evidence. The court further ruled that the
planting of trees and installation of water facilities were not within the contemplation of
the parties and were not necessary for the completion of the roads.
Ratio:
The court based its decision on the fact that the defendant-appellee had violated the
terms of the agreement by refusing to pay the balance within the stipulated period, failing
to register the mortgage on the Bulacan property, and not paying the realty tax for 1959 on
the mortgaged lots. The court found the defendant-appellee's arguments regarding the
completion of the roads to be untenable. It held that the construction of the roads had
been completed in accordance with the ordinances of Quezon City based on the
testimonies of witnesses and the absence of contradictory evidence. The court further
ruled that the planting of trees and installation of water facilities were not necessary for
the completion of the roads and were not within the contemplation of the parties.
Therefore, the court ordered the defendant-appellee to pay the plaintiffs-appellants the
unpaid balance of P200,000 within 90 days, along with interest and attorney's fees. If the
defendant-appellee failed to pay within the given period, the mortgaged properties would
be sold at public auction to satisfy the judgment. The court also denied the motion of
Guillermo N. Pablo to join the defendant-appellee as a co-party.
Leaño vs. CA (369 SCRA 36)

Leaño vs. Court of Appeals
G.R. No. 129018. November 15, 2001.
Facts:
The case involves a dispute between Carmelita Leaño and Hermogenes Fernando over a
land purchase contract. On November 13, 1985, Leaño and Fernando entered into a
contract to sell a piece of land in Bulacan. The contract stipulated that Leaño would pay
Fernando a total purchase price of P107,750.00, with a down payment of P10,775.00 and
the remaining balance to be paid in monthly installments over a period of ten years. The
contract also included a grace period provision, stating that if the installments were not
paid within 90 days after the grace period, Fernando could cancel the contract and
consider the payments made as rents and liquidated damages. Leaño made several lump
sum payments and constructed a house on the lot but stopped making payments on April
1, 1989. As a result, Fernando filed an ejectment case against Leaño, which led to a
decision ordering her to vacate the premises and pay compensation for the use and
occupation of the property. Leaño then filed a complaint for specific performance with
preliminary injunction, challenging the validity of the judgment and depositing P18,000.00
to cover the balance of the total cost of the lot. The trial court ruled in favor of Fernando,
ordering Leaño to pay the outstanding obligations under the contract, with interest and
surcharges, attorney's fees, and costs. The Court of Appeals affirmed the decision of the
trial court.
Issue:
The main issues raised in this case are:
(1) whether the transaction between the parties is an absolute sale or a conditional sale;
(2) whether there was a proper cancellation of the contract to sell; and
(3) whether Leaño was in delay in the payment of the monthly amortizations.
Ruling and Ratio:

The Supreme Court ruled that the transaction between the parties was a conditional sale,
not an absolute sale. The Court based its decision on the intention of the parties, which
was to reserve the ownership of the land in the seller until the buyer has paid the total
purchase price. The Court emphasized that while possession of the property was
transferred, ownership would only be transferred upon full payment of the price. The Court
also held that the cancellation of the contract to sell would have to comply with the
provisions of Republic Act No. 6552, the "Realty Installment Buyer Protection Act." Since
Leaño was not given the cash surrender value of the payments she made, there was no
actual cancellation of the contract. Leaño still had the option to reinstate the contract by
updating her accounts during the grace period and before actual cancellation.
Regarding the issue of delay in payment, the Court ruled that Leaño was indeed in delay
and liable for damages. However, the default committed by Leaño could be compensated
by the interest and surcharges imposed under the contract. The Court emphasized that
the terms of the contract were clear and should be complied with.
In conclusion, the Supreme Court denied the petition and affirmed the decision of the
Court of Appeals in its entirety.
Lee vs. De Guzman, Jr. (187 SCRA 276)

Lee vs. De Guzman, Jr.
G.R. No. 90926. July 6, 1990.
Facts:
The case of Lee v. De Guzman, Jr. involves a dispute between petitioner Alex G. Lee and
respondent Motorcars, Incorporated regarding a contract of sale for a Toyota Corolla
Liftback. On November 8, 1983, a sales representative of Motorcars named Arsenio
Tumibay signed a price quotation and delivered it to Lee. Lee then signed a vehicle sales
order and made a deposit of P1,000. However, Motorcars later informed Lee that they had
decided to exercise an option in the sales order due to a sudden change in prices by the
car manufacturer. They offered to refund Lee's deposit. The trial court ruled in favor of
Motorcars, stating that there was no perfected contract of sale. Lee appealed to the Court
of Appeals, which reversed the decision and ordered Motorcars to deliver the vehicle to
Lee upon payment of the agreed price. Motorcars appealed to the Supreme Court, but
their petition was denied. When the case was remanded to the trial court, Lee filed a
motion for writ of execution, but Motorcars filed a motion to quash the writ, claiming that
the obligation had become impossible to comply with because the car manufacturer had
closed shop. Lee filed a motion for contempt of court, but the trial court ruled in favor of
Motorcars. Lee then filed a petition for certiorari with mandamus before the Supreme
Court.
Issue:
The main issues raised in the case were whether the decision of the Court of Appeals and
Supreme Court could be executed and whether the corporation officers were liable for
contempt.
Ruling:
The Supreme Court found that while it was not possible for Motorcars to comply with the
writ of execution, there was a perfected contract of sale between Lee and Motorcars.
Therefore, Motorcars was liable for damages due to the delay in delivering the vehicle. The
court awarded Lee a total of P50,000 in damages, with P20,000 as temperate damages
and P30,000 as exemplary damages. The petition for certiorari with mandamus was
dismissed, but Motorcars was ordered to pay the damages to Lee.
Ratio:
The court reasoned that a contract of sale was perfected between Lee and Motorcars
when Lee signed the vehicle sales order and made a deposit. The subsequent decision of
Motorcars to exercise an option in the sales order did not invalidate the contract.
Therefore, Motorcars was obligated to deliver the vehicle to Lee upon payment of the
agreed price. The court also held that the corporation officers were not personally liable
for contempt as they were acting on behalf of the corporation. However, Motorcars was
still liable for damages due to the delay in delivering the vehicle. The court awarded
temperate damages to compensate Lee for the loss he suffered as a result of the delay.
Additionally, exemplary damages were awarded to deter Motorcars from engaging in
similar conduct in the future. The court dismissed the petition for certiorari with
mandamus, as the main issue had already been resolved in favor of Lee. However,
Motorcars was ordered to pay the damages awarded to Lee.
Tanguilig vs. CA (G.R. No. 117190, January 2, 1997)

Tanguilig vs. Court of Appeals
G.R. No. 117190. January 2, 1997.
Facts:
The case of Tanguilig v. Court of Appeals involves a dispute between a windmill contractor,
Jacinto Tanguilig, and his client, Vicente Herce Jr. In April 1987, Tanguilig proposed to
Herce to construct a windmill system for him for a price of P60,000. They agreed on a one-
year guarantee from the date of completion and acceptance by Herce. Herce made a
down payment of P30,000 and an installment payment of P15,000, leaving a balance of
P15,000. However, Herce refused to pay the balance, claiming that he had already paid it
to San Pedro General Merchandising Inc. (SPGMI), which constructed the deep well
connected to the windmill system. Herce argued that the payment to SPGMI should be
credited to his account with Tanguilig. He also claimed that the windmill system collapsed
due to inherent defects and that Tanguilig should be responsible for its reconstruction.
Issue:
1. Whether the construction of the deep well was included in the agreement between
Tanguilig and Herce.
2. Whether Tanguilig should be responsible for the reconstruction of the windmill
system.
Ruling:
The Supreme Court reversed the Court of Appeals on the first issue but upheld its ruling
on the second issue.
Ratio:
Regarding the first issue, the Court found that the installation of a deep well was not
included in the proposals submitted by Tanguilig to Herce. The contract prices fixed in the
proposals only covered the features specifically described and did not mention the
installation of a deep well. The Court emphasized that the intention of the parties should
be accorded primordial consideration, and the proposals clearly did not include a deep
well.
Regarding the second issue, the Court applied the principle of reciprocal obligations. It
held that Tanguilig was obligated to repair the windmill in accordance with the guarantee
stated in the contract. Therefore, Herce was not in delay, and Tanguilig should bear the
expenses for the reconstruction.
In conclusion, the Supreme Court modified the decision of the Court of Appeals. Herce
was ordered to pay Tanguilig the balance of P15,000 with interest, and Tanguilig was
directed to reconstruct the windmill system within three months.
Vermen Realty vs. CA (224 SCRA 549)

Vermen Realty Development Corp. vs. Court of Appeals
G.R. No. 101762. July 6, 1993.
Facts:
The case of Vermen Realty Development Corp. v. Court of Appeals involves a dispute
between Vermen Realty Development Corporation (petitioner) and Seneca Hardware Co.,
Inc. (respondent). The dispute revolves around an agreement called the "Offsetting
Agreement" entered into by the parties. Under the agreement, the petitioner was obligated
to purchase construction materials from the respondent, while the respondent was
obligated to buy residential condominium units from the petitioner. However, the
petitioner failed to fulfill its obligations under the agreement, prompting the respondent to
file a complaint for rescission of the agreement with damages.
Issue:
The main issue in the case is whether the circumstances warrant the rescission of the
Offsetting Agreement as requested by the respondent.
Ruling:
The court ruled in favor of the respondent, granting the rescission of the agreement. The
court held that the petitioner's failure to fulfill its obligations under the agreement
constituted a substantial breach, justifying the remedy of rescission.
Ratio:
The court based its decision on Article 1191 of the Civil Code, which provides for the
remedy of rescission in cases of reciprocal obligations where one party fails to comply
with what is incumbent upon them. The court found that the petitioner had stopped
sending purchase orders to the respondent, resulting in the discontinuance of the delivery
of construction materials. The petitioner argued that it was the respondent who failed to
perform its obligations, but the court found that the discontinuance of delivery was due to
the petitioner's failure to send purchase orders.
Furthermore, the court noted that the construction of Phase II of the Vermen Pines
Condominiums, which was the subject of the agreement, had stopped. This made it
impossible for the petitioner to fulfill its obligation to give the respondent the option to
transfer to Phase II.
Based on these findings, the court concluded that the petitioner's failure to fulfill its
obligations warranted the rescission of the agreement. The court ordered the petitioner to
return a condominium unit to the respondent, pay damages and attorney's fees, and
denied the claim for unrealized profits. The court emphasized that the non-fulfillment of
the petitioner's obligation constituted a substantial breach of the agreement and that it
would be unjust to make the respondent wait for something that may never come.
Hrs. of Luis Bacus vs. CA (371 SCRA 295)

Heirs of Bacus vs. Court of Appeals
G.R. No. 127695. December 3, 2001.
Facts:
The case of Heirs of Bacus v. Court of Appeals involves a dispute over the exercise of an
option to buy a leased property. The petitioners, who are the heirs of Luis Bacus, entered
into a lease agreement with the respondents, the Duray spouses, which included an
option to buy clause. The lease was for a period of six years, ending on May 31, 1990. The
option to buy allowed the Duray spouses to purchase 2,000 square meters of the property
within five years from a year after the lease contract's effectivity, at a specified price per
square meter.
Before the lease contract expired, Luis Bacus, the lessor, passed away. The Duray spouses
then informed one of the heirs, Roque Bacus, of their intention to exercise their option to
buy and requested him to prepare the necessary documents. However, the petitioners
refused to sell the property, prompting the Duray spouses to file a complaint for specific
performance against them. The Duray spouses also had an adverse claim annotated on
the title of the property.
The Regional Trial Court ruled in favor of the Duray spouses, ordering the petitioners to
execute a deed of sale over the property upon payment of the purchase price. The
petitioners appealed to the Court of Appeals, but their appeal was denied. The Court of
Appeals held that the Duray spouses had validly exercised their option to buy the property
before the expiration of the lease contract.
Issue:
The main issues raised in the petition for review before the Supreme Court were:
(1) whether the Duray spouses were required to deliver the purchase price or consign it in
court before the execution of the deed of sale, and
(2) whether the Duray spouses incurred in delay by not delivering the purchase price
before the expiration of the lease contract.
Ruling:
The Supreme Court ruled in favor of the Duray spouses.
Ratio:
The Supreme Court held that under an option to buy, the payment of the purchase price is
contingent upon the execution and delivery of a deed of sale by the seller. In this case, the
Duray spouses were not yet obliged to make actual payment before the execution of the
deed of sale. Therefore, their failure to deliver the purchase price or consign it in court
before the expiration of the lease contract did not constitute a breach of their obligation.
The Supreme Court also held that the Duray spouses did not incur in delay by not
delivering the purchase price before the expiration of the lease contract. In reciprocal
obligations, delay by one party only begins from the moment the other party fulfills their
obligation. Since the petitioners had not yet executed the deed of sale or expressed
readiness to do so, the Duray spouses had not incurred in delay when they issued a
cashier's check after the expiration of the contract.
In conclusion, the Supreme Court affirmed the decision of the Court of Appeals, ruling in
favor of the Duray spouses. The Court held that the Duray spouses validly exercised their
option to buy the property and were not required to make payment before the expiration of
the lease contract.
iv. Contravention of tenor of obligations (1170)

Pacmac vs. IAC (150 SCRA 555)
PACMAC, Inc. vs. Intermediate Appellate Court
G.R. No. 72405. May 29, 1987.
Facts:
The case involves a dispute between PACMAC, Inc. and Vulcan Industrial & Mineral
Exploration Corporation regarding an exclusive distributorship agreement. PACMAC
claimed that it had been the exclusive distributor of Vulcan's products since 1953.
However, Vulcan unilaterally terminated the agreement in 1965, causing damages to
PACMAC. Vulcan, on the other hand, denied the existence of the exclusive distributorship
agreement and counterclaimed that PACMAC owed them a significant amount of money
for unpaid purchases. The trial court ruled in favor of PACMAC but ordered them to pay
Vulcan the unpaid amount. Both parties appealed the decision to the Intermediate
Appellate Court, which set aside the trial court's decision and ordered PACMAC to pay
Vulcan the unpaid amount.
Issue:
The main issue in the case is the actual business relationship between PACMAC and
Vulcan on August 3, 1965, when Vulcan terminated the agreement.
Ruling:
The Supreme Court disagreed with the appellate court's decision and ruled in favor of
PACMAC. The Supreme Court found that there was evidence of an oral agreement and
subsequent acts between the parties that modified the terms of the distributorship
arrangement. The Supreme Court concluded that the exclusive distributorship agreement
was still in effect on August 3, 1965, and Vulcan's unilateral termination without legal
justification made them liable for damages. The Supreme Court awarded PACMAC
damages based on the diminution of their net income after the termination of the
agreement and also awarded exemplary damages and attorney's fees to PACMAC.
However, PACMAC was also ordered to pay the unpaid amount owed to Vulcan. The
Supreme Court reversed the appellate court's decision and reinstated the trial court's
decision.
Ratio:
The Supreme Court based its decision on the evidence of an oral agreement and
subsequent acts between PACMAC and Vulcan that modified the terms of the
distributorship arrangement. The Supreme Court found that the written contract of
exclusive distributorship between the parties superseded any previous agreements and
that Vulcan had the right to terminate the agreement after its expiration. However, the
Supreme Court disagreed with the appellate court's application of the parol evidence rule,
which prohibits the introduction of evidence of oral agreements that contradict the terms
of a written contract. The Supreme Court held that there was evidence of an oral
agreement and subsequent acts that modified the terms of the distributorship
arrangement, and therefore, the exclusive distributorship agreement was still in effect on
August 3, 1965. Vulcan's unilateral termination without legal justification made them
liable for damages. The Supreme Court awarded PACMAC damages based on the
diminution of their net income after the termination of the agreement and also awarded
exemplary damages and attorney's fees to PACMAC. However, PACMAC was also ordered
to pay the unpaid amount owed to Vulcan.
Llorente, Jr. vs. Sandiganbayan (287 SCRA 382)

Llorente, Jr. vs. Sandiganbayan
G.R. No. 122166. March 11, 1998.
Facts:
The case involves the prosecution of Cresente Y. Llorente, Jr., the former municipal mayor
of Sindangan, Zamboanga del Norte, for violation of Section 3e of the Anti-Graft and
Corrupt Practices Act. Llorente was accused of causing undue injury to Leticia G. Fuertes,
the assistant municipal treasurer, by refusing to sign and approve her payrolls and
vouchers representing her salaries and other emoluments without just valid cause and
without due process of law. The Sandiganbayan found Llorente guilty and sentenced him
to imprisonment, perpetual disqualification from public office, and payment of costs.
Llorente filed a petition for review, arguing that the prosecution failed to establish the
elements of undue injury and bad faith.
Issue:
The main issue raised in the case is whether the prosecution was able to prove the
elements of undue injury and bad faith in the actions of Llorente.
Ruling:
The Supreme Court granted Llorente's petition and acquitted him. The Court held that the
prosecution failed to prove actual injury or undue injury to Fuertes, as she was eventually
paid all her claims. Undue injury requires proof of actual damage, and in this case, there
was no injury beyond the delay in the payment of Fuertes' claims. The Court also found
that Llorente did not act with evident bad faith, as he had valid reasons for withholding the
payment, such as the failure of Fuertes to submit the required money and property
clearance and the lack of appropriation by the Sangguniang Bayan. The Court further
clarified that causing undue injury can include both positive acts and passive acts or
inaction. However, in this case, Llorente's acts did not legally result in undue injury or the
giving of unwarranted benefits, advantage, or preference. The Court suggested that
Llorente's actions may fall under a different provision of the law, but since he was not
charged under that provision, further disquisition was not proper.
Ratio:
The Court's decision was based on the lack of proof of actual injury or undue injury to
Fuertes. Undue injury requires actual damage, and in this case, there was no injury beyond
the delay in payment. The Court also considered Llorente's valid reasons for withholding
the payment, such as the failure of Fuertes to comply with requirements and the lack of
appropriation by the Sangguniang Bayan. The Court clarified that causing undue injury can
include both positive acts and passive acts or inaction, but in this case, Llorente's actions
did not legally result in undue injury or the giving of unwarranted benefits. The Court
suggested that Llorente's actions may fall under a different provision of the law, but since
he was not charged under that provision, further discussion was not appropriate.
FGU Insurance Corp. vs. G.P. Sarmiento Trucking Corp. (G.R.No. 141910,
August 6, 2002)
FGU Insurance Corp. vs. G.P. Sarmiento Trucking Corp.
G.R. No. 141910. August 6, 2002.
Facts:
The case of FGU Insurance Corp. v. G.P. Sarmiento Trucking Corp. involves a dispute over
damages caused to a shipment of refrigerators during transport. G.P. Sarmiento Trucking
Corporation (GPS) was contracted to deliver the refrigerators from the plant site of
Concepcion Industries, Inc. to Central Luzon Appliances. While the truck was traveling in
Tarlac, it collided with another truck, causing damage to the refrigerators. FGU Insurance
Corporation (FGU), the insurer of the shipment, paid Concepcion Industries, Inc. for the
value of the damaged goods and sought reimbursement from GPS.
Issue:
The main issue raised in the case is whether GPS should be held liable for the damages
caused to the refrigerators during transport.
Ruling:
The Supreme Court affirmed the decision of the lower courts, agreeing that GPS was not a
common carrier. However, the Court held that GPS could still be held liable for damages
under the principle of culpa contractual. The Court also clarified that the driver of the
truck, Lambert Eroles, could not be held liable under the contract of carriage as he was
not a party to the agreement. Lastly, the Court discussed the doctrine of res ipsa loquitur,
which was invoked by FGU, and concluded that it did not apply in this case.
Ratio:
The Court agreed with the lower courts that GPS was not a common carrier. However, the
Court held that GPS could still be held liable for damages under the principle of culpa
contractual. The Court explained that the mere proof of the existence of a contract and the
failure to comply with its terms justified a right of relief. GPS failed to prove that it had
exercised due care in transporting the goods, and therefore, it was ordered to pay FGU the
value of the damaged and lost cargoes.
The Court also clarified that the driver of the truck, Lambert Eroles, could not be held liable
under the contract of carriage as he was not a party to the agreement. Any claim against
the driver would have to be based on culpa aquiliana, which would require proof of
negligence or fault.
Lastly, the Court discussed the doctrine of res ipsa loquitur, which was invoked by FGU.
The Court explained that the doctrine could only apply if responsible causes other than
the defendant's conduct were eliminated. In this case, it was not shown that the accident
could have been exclusively due to the driver's negligence, so res ipsa loquitur did not
apply.
In conclusion, the Supreme Court affirmed the decision to dismiss the complaint against
the driver but reversed the decision as regards GPS, ordering it to pay FGU for the value of
the damaged and lost cargoes.
3. Effects of Fortuitous Events in obligations (1174)

Lasam vs. Smith (supra.)
G.R. No. 19495. February 2, 1924.
Facts:
Issue:
Ruling:
Ratio:
liable for damages.
Republic of the Philippines vs. Luzon Stevedoring Corp. (21 SCRA 279)
Republic of the Philippines vs. Luzon Stevedoring Corporation
G.R. No. L-21749. September 29, 1967.
Facts:
The case of Republic of the Philippines v. Luzon Stevedoring Corporation involves a
collision between a barge and a bridge, resulting in damages. On August 17, 1960, a barge
owned by Luzon Stevedoring Corporation was being towed down the Pasig River by
tugboats also owned by the corporation. The barge collided with one of the wooden piles
of the Nagtahan bailey bridge, causing damage to the bridge. The river was swollen and
the current was swift due to heavy rainfall in Manila and the surrounding provinces on
August 15 and 16, 1960. The Republic of the Philippines filed a lawsuit against Luzon
Stevedoring Corporation, seeking damages amounting to P200,000 for the damage
caused by its employees. The corporation denied liability, claiming that it had exercised
due diligence in the selection and supervision of its employees, that the damages were
caused by force majeure, that the Republic had no capacity to sue, and that the bridge was
an obstruction to navigation.
Issue:
1. Whether the collision was caused by force majeure.
2. Whether it was an error for the court to allow the introduction of additional
evidence of damages.
Ruling:
The Supreme Court affirmed the decision of the lower court, holding Luzon Stevedoring
Corporation liable for the damages caused by the collision between the barge and the
bridge. The corporation was ordered to pay the Republic the actual cost of repairing the
bridge.
Ratio:
Regarding the first issue, the Supreme Court held that the collision raised a presumption
of negligence on the part of Luzon Stevedoring Corporation or its employees. The bridge
was an immovable and stationary object with adequate openings for the passage of
watercraft, including barges like the one owned by the corporation. In the ordinary course
of events, such a collision would not happen if proper care was used. The court applied
the "res ipsa loquitur" rule, which is an inference of negligence arising from the
circumstances of the case.
The corporation argued that it had taken precautions by assigning powerful tugboats and
experienced personnel to tow the barge and by double-checking and inspecting the
engines and equipment. However, the court held that these precautions actually
undermined the corporation's defense of force majeure. Force majeure refers to
extraordinary events that are unforeseeable or unavoidable. The court stated that the
possibility of danger was not only foreseeable but actually foreseen by the corporation.
Therefore, the corporation assumed the risk and cannot escape liability.
Regarding the second issue, the court found no abuse of discretion in allowing the
introduction of additional evidence of damages. The decision to allow further evidence
lies within the sound discretion of the trial judge, and there was no clear case of abuse in
this instance.
Austria vs. Court of Appeals (39 SCRA 527)

Austria vs. Court of Appeals
G.R. No. L-29640. June 10, 1971.
Facts:
The case of Austria v. Court of Appeals involves a consignee's exemption from liability for
the loss of consigned jewelry due to a fortuitous event of robbery. Guillermo Austria
consigned a pendant with diamonds valued at P4,500.00 to Maria G. Abad for sale on
commission basis or to be returned on demand. On February 1, 1961, while Abad was
walking home alone in Mandaluyong, Rizal, she was accosted by two men who robbed her
of her purse containing the consigned pendant and other jewelry. Abad failed to return the
jewelry or pay for its value, prompting Austria to file an action for recovery against Abad
and her husband. The trial court ruled in favor of Austria, holding that Abad failed to prove
the fact of robbery and that her negligence in traveling alone at night with valuable jewelry
did not exempt her from liability. However, the Court of Appeals reversed the decision,
finding that the fact of robbery and Abad's possession of the pendant on that day were duly
established, and therefore, relieving the respondents from liability due to a fortuitous
event.
Issue:
The main issue in this case is whether a prior conviction for robbery is necessary to
establish the fact of robbery and relieve the consignee from liability.
Ruling:
The Supreme Court held that a prior conviction for robbery is not necessary to establish
the fact of robbery and relieve the consignee from liability.
Ratio:
The court explained that to constitute a fortuitous event that would exempt a person from
responsibility, it is necessary that the event must be independent of the human will, render
it impossible for the debtor to fulfill the obligation in a normal manner, and the obligor
must be free of participation in or aggravation of the injury to the creditor. A fortuitous
event can be produced by nature or by the act of man, such as robbery. The court
emphasized that the emphasis of the law is on the events, not on the agents or factors
responsible for them. Therefore, it is not necessary to find or punish the persons
responsible for the robbery; it is sufficient to establish that the robbery did take place
without any concurrent fault on the debtor's part, which can be done by preponderant
evidence.
However, the court also noted that in order to completely exonerate the debtor for reason
of a fortuitous event, the debtor must be free of any concurrent or contributory fault or
negligence. In this case, the court found that Abad's conduct of returning alone to her
house in the evening, carrying valuable jewelry, would be negligent per se under the
present circumstances of high criminality in Manila and its suburbs. However, the court
recognized that the same rule should not apply to the 1961 incident, as criminality had not
reached the levels seen in the present day.
The court also rejected the argument that recognizing the fact of robbery in the civil case
before conviction in the criminal action would prejudice the latter case or result in
inconsistency. The court explained that a court finding that a robbery has happened does
not necessarily mean that those accused in the criminal action should be found guilty, and
a ruling that those accused did not commit the robbery would not be inconsistent with a
finding that a robbery did take place. The evidence to establish these facts would not
necessarily be the same.
In conclusion, the Supreme Court dismissed the petition and upheld the decision of the
Court of Appeals, ruling that a prior conviction for robbery is not necessary to establish
the fact of robbery and relieve the consignee from liability. The court emphasized that the
focus should be on the events, not on the agents or factors responsible for them, and that
the debtor must be free of any concurrent or contributory fault or negligence to be
completely exonerated.
Tugade vs. Court of Appeals (85 SCRA 226)

Tugade vs. Court of Appeals
G.R. No. L-47772. August 31, 1978.
Facts:
Inocencio Tugade was found guilty of reckless imprudence resulting in damage to property
after rear-ending another car due to faulty brakes. The incident occurred on a specific date
and place, where Tugade's car collided with the car in front of him due to his inability to
stop his vehicle because of the defective brakes. The lower court had already rendered a
judgment on the case, finding Tugade guilty of the offense.
Issue:
The main issue raised in the case is whether the court should have considered decisions
maintaining that mishaps caused by a fortuitous event do not give rise to liability for
negligence.
Ruling:
The Supreme Court ruled that its decisions are definitive and authoritative, and lower
courts are bound to abide by them. The court affirmed the judgment of the Court of
Appeals, which upheld the lower court's decision finding Tugade guilty of reckless
imprudence resulting in damage to property.
Ratio:
The court explained that the principle enunciated in the La Mallorca case, which held that
mishaps caused by defective brakes are not considered fortuitous events, was a
reiteration of a previously settled rule. The court emphasized that for an event to be
considered fortuitous, there should exist some extraordinary circumstance independent
of the will of the obligor or his employee. In this case, the court found that there was no
such extraordinary circumstance present. The faulty brakes were within the control and
responsibility of Tugade, and his failure to ensure their proper functioning resulted in the
accident. Therefore, the court concluded that Tugade's actions constituted reckless
imprudence, and he should be held liable for the damage to property caused by the
collision.
Southwestern College, Inc. vs. CA (292 SCRA 422)

Southeasthern College, Inc. vs. Court of Appeals
G.R. No. 126389. July 10, 1998.
Facts:
The case of Southeastern College, Inc. v. Court of Appeals involves a complaint for
damages filed against Southeastern College, Inc. by Juanita de Jesus Vda. de Dimaano,
Emerita Dimaano, Remedios Dimaano, Consolacion Dimaano, and Milagros Dimaano.
The incident occurred on October 11, 1989, when a powerful typhoon named "Saling" hit
Metro Manila. The roof of Southeastern College's four-storey school building was partly
ripped off and blown away, causing damage to the respondents' house. An ocular
inspection conducted by a team of engineers revealed that the formation of the buildings
in the area and the direction of the wind contributed to the damage. It was also found that
the improper anchorage of the roof trusses was a likely reason for the roof's dislodging.
Issue:
The main issue raised in the case is whether Southeastern College, Inc. should be held
liable for damages caused by the typhoon and the subsequent damage to the
respondents' house.
Ruling:
The Supreme Court ruled in favor of Southeastern College, Inc. and dismissed the
complaint for damages filed by the respondents.
Ratio:
The court held that the damage caused by the typhoon was a fortuitous event and that
Southeastern College, Inc. was not negligent in the construction and maintenance of its
building. The court emphasized that for a fortuitous event to exempt a person from liability,
there should be no previous negligence or misconduct on their part. In this case, the court
found that the evidence presented by the respondents was insufficient to prove
Southeastern College, Inc.'s negligence. The ocular inspection conducted by a team of
engineers revealed that the formation of the buildings in the area and the direction of the
wind contributed to the damage. It was also found that the improper anchorage of the roof
trusses was a likely reason for the roof's dislodging. However, there was no evidence
presented to show that Southeastern College, Inc. was negligent in the construction and
maintenance of its building. Therefore, the court concluded that the damage caused by
the typhoon was unforeseeable and beyond the control of Southeastern College, Inc., and
thus, it should not be held liable for the damages. The court dismissed the complaint and
set aside the writ of execution issued by the trial court.
Mindex Resources Development vs. Morillo (G.R. No. 138123, March 12, 2002)
Mindex Resources Development vs. Morillo
G.R. No. 138123. March 12, 2002.
Facts:
The case involves a verbal agreement between Ephraim Morillo, the private respondent,
and Mindex Resources Corporation, the petitioner. The agreement was for the lease of
Morillo's 6 x 6 ten-wheeler cargo truck to be used in Mindex's mining operations in Oriental
Mindoro. Unfortunately, while the truck was parked unattended due to mechanical
trouble, it was burned by unidentified persons.
The trial court found Mindex Resources Corporation responsible for the destruction or loss
of the truck. As a result, the court ordered the petitioner to pay the balance of the unpaid
rental, costs of repair and overhaul, and attorney's fees. On appeal, the Court of Appeals
affirmed the trial court's ruling.
Issue:
The main issue raised in the case is whether Mindex Resources Corporation should be
held liable for the destruction or loss of the leased truck.
Ruling:
The Supreme Court denied the petition and upheld the decisions of the lower courts.
Ratio:
The Court held that in order for a fortuitous event to exempt one from liability, it is
necessary that one has committed no negligence or misconduct that may have caused
the loss. In this case, the Court found that Mindex Resources Corporation failed to exercise
reasonable care and caution in safeguarding the leased truck. As a result, the petitioner
was held liable for the loss.
However, the Court found the award of attorney's fees improper. There was insufficient
showing of the petitioner's bad faith in refusing to pay the rentals and repair costs.
Therefore, the award of attorney's fees was deemed unnecessary.
Herbosa vs. CA (374 SCRA 578)

Herbosa vs. Court of Appeals
G.R. No. 119086. January 25, 2002.
Facts:
The case involves a couple named Emmanuel and Rosemarie Herbosa who filed a lawsuit
against Professional Video Equipment (PVE), a division of Solid Distributors, Inc., for
breach of contract and negligence. The couple hired PVE to record their wedding
celebration, but PVE failed to do so due to a mechanical defect in their equipment. The
trial court ruled in favor of the couple and awarded them damages. However,
complications arose when PVE did not receive notice of the judgment and the court
ordered the execution of the judgment. PVE filed an appeal and a motion for
reconsideration, but the auction sale of certain properties had already taken place. PVE
then filed a petition for mandamus to compel the trial court to give due course to their
appeal. Meanwhile, Solid Corporation filed a complaint for damages against the couple
and the sheriff, claiming ownership of the properties levied upon and sold at the auction.
The trial court rendered a summary judgment in favor of Solid Corporation, ordering the
proceeds of the auction sale to be delivered to the corporation. The Court of Appeals
rendered a consolidated decision, reversing the trial court's decision in favor of the couple
and affirming the decision in favor of Solid Corporation.
Issue:
1. Whether PVE can claim due care in the selection and supervision of its employees
as a defense.
2. Whether the couple is entitled to damages for the breach of contract by PVE.
3. Whether the summary judgment in favor of Solid Corporation is valid.
Ruling:
The Supreme Court ordered PVE or Solid Distributors, Inc. to pay the couple actual
damages, moral damages, exemplary damages, and attorney's fees. The Court also
affirmed the return of the auction proceeds to Solid Corporation.
Ratio:
The Court held that PVE cannot claim due care in the selection and supervision of its
employees as a defense. The liability in this case arose from breach of contract and not
from culpa aquiliana. Therefore, PVE cannot use the defense of due care in the selection
and supervision of its employees.
The Court also ruled that the couple is entitled to damages for the wanton and reckless
breach of contract by PVE. PVE failed to fulfill its obligation to record the couple's wedding
celebration due to a mechanical defect in their equipment. This breach of contract caused
the couple to suffer damages, both actual and moral.
Furthermore, the Court upheld the summary judgment in favor of Solid Corporation. The
summary judgment was based on the decision of the Court of Appeals in a separate case.
The trial court correctly ordered the proceeds of the auction sale to be delivered to Solid
Corporation, as it was the rightful owner of the properties levied upon and sold at the
auction.
FGU Insurance Corporation vs. CA (454 SCRA 337)

FGU Insurance Corp. vs. Court of Appeals
G.R. No. 118889. March 23, 1998.
Facts:
The case of FGU Insurance Corp. v. Court of Appeals involves a collision between two cars
that occurred on April 21, 1987, along Epifanio de los Santos Avenue in Mandaluyong City,
Philippines. The car owned by Lydia F. Soriano, driven by Benjamin Jacildone, was traveling
on the outer lane of the highway, while the other car, owned by respondent FILCAR
Transport, Inc. (FILCAR) and driven by Peter Dahl-Jensen as a lessee, was on the center
lane. Dahl-Jensen, a Danish tourist, did not possess a Philippine driver's license. FGU
Insurance Corporation, the insurer of Soriano, paid her damages amounting to
P25,382.20. FGU Insurance Corporation then filed a lawsuit against Dahl-Jensen, FILCAR,
and Fortune Insurance Corporation (FORTUNE), the insurer of FILCAR, for quasi-delict
(fault or negligence) before the Regional Trial Court of Makati City. Dahl-Jensen was
dropped from the complaint as summons was not served on him.
Issue:
The main issue in this case is whether FILCAR can be held liable for the damages caused
by Dahl-Jensen's negligence.
Ruling:
The Supreme Court affirmed the decision of the Court of Appeals, which upheld the
dismissal of FGU Insurance Corporation's complaint. The court ruled that FILCAR cannot
be held liable for the damages caused by Dahl-Jensen's negligence since there was no
employer-employee relationship between them.
Ratio:
The court cited Article 2176 of the Civil Code, which states that whoever causes damage
to another through fault or negligence is obliged to pay for the damage. To sustain a claim
based on quasi-delict, three requisites must concur: (a) damage suffered by the plaintiff,
(b) fault or negligence of the defendant, and (c) a connection between the fault or
negligence of the defendant and the damage incurred by the plaintiff.
The court agreed with the Court of Appeals that FGU Insurance Corporation failed to prove
the second requisite, which is the fault or negligence of FILCAR. The negligence was solely
attributable to Dahl-Jensen, making him personally liable for the damage suffered by
Soriano's vehicle. Since FILCAR was only the owner of the leased car and not the employer
of Dahl-Jensen, it cannot be held responsible for his negligent act.
The court also explained that Article 2180 of the Civil Code, which deals with quasi-delict,
is not applicable in this case. None of the circumstances mentioned in Article 2180, such
as employer-employee relationships, guardianship, or ownership of an establishment,
apply to FILCAR's situation. Therefore, FGU Insurance Corporation has no cause of action
against FILCAR based on quasi-delict, and its claim against FORTUNE as FILCAR's insurer
cannot prosper.
Schmitz Transport and Brokerage Corp. vs. Transport Venture, Inc. (456 SCRA
557)
Schmitz Transport & Brokerage Corp. vs. Transport Venture Inc.
G.R. No. 150255. April 22, 2005.
Facts:
The case involves Schmitz Transport & Brokerage Corp. (petitioner), Transport Venture Inc.
(TVI), Industrial Insurance Company Ltd., and Black Sea Shipping and Dodwell now
Inchcape Shipping Services (respondents). The incident occurred during the unloading of
cargoes from a barge, where 37 coils of hot rolled steel sheets were lost due to a storm.
The trial court found all the defendants liable for negligence, and this decision was
affirmed by the Court of Appeals.
Issue:
The main issue in this case is whether the loss of the cargoes was due to a fortuitous event
or negligence on the part of the defendants.
Ruling:
The court ruled that the loss was not due to a fortuitous event. Although the weather
conditions were initially normal, the defendants failed to promptly tow the barge back to
the pier, which could have prevented the loss. The court found that TVI's failure to provide
a tugboat was the proximate cause of the loss.
The court also held that petitioner and TVI are solidarily liable for the loss of the cargoes.
Petitioner, as a common carrier, failed to exercise due diligence to prevent or minimize the
loss. While petitioner sent checkers and a supervisor to monitor the operations, it failed to
take all available precautions to avoid the loss. TVI, as a handler, was required to exercise
ordinary diligence in handling the cargoes.
On the other hand, Black Sea, as a common carrier, was not held liable as its duty ended
once the goods were constructively delivered to the consignee.
The court also set aside the award of attorney's fees to Industrial Insurance for lack of
factual and legal basis. The court modified the award of interest, stating that it should be
computed from the date of the promulgation of the trial court's decision.
Ratio:
The court based its decision on the fact that the loss of the cargoes was not due to a
fortuitous event. It emphasized that the defendants had the opportunity to prevent the loss
by promptly towing the barge back to the pier. The court held TVI responsible for the loss
as its failure to provide a tugboat was the proximate cause.
The court also found petitioner and TVI solidarily liable for the loss. Petitioner, as a
common carrier, was expected to exercise due diligence to prevent or minimize the loss.
While it had sent checkers and a supervisor to monitor the operations, it failed to take all
available precautions. TVI, as a handler, was required to exercise ordinary diligence in

handling the cargoes.
Black Sea, on the other hand, was not held liable as its duty as a common carrier ended
once the goods were constructively delivered to the consignee.
The court also made adjustments to the award of attorney's fees and interest. It set aside
the award of attorney's fees to Industrial Insurance due to lack of factual and legal basis.
The court modified the computation of interest, stating that it should be computed from
the date of the promulgation of the trial court's decision.
Sps. Poon vs. Prime Savings Bank, G.R. 183794, June 13, 2016.
Spouses Poon vs. Prime Savings Bank
G.R. No. 183794. June 13, 2016.
Facts:
This case involves a dispute between Spouses Jaime and Matilde Poon (petitioners) and
Prime Savings Bank (respondent) over the partial rescission of a lease contract for a
commercial building owned by the petitioners. The lease contract was for a period of 10
years, with a fixed monthly rental of P60,000 and an advance payment of P6,000,000 for
the first 100 months. The contract included a clause stating that if the leased premises
were closed, deserted, or vacated by the lessee, the lessor had the right to terminate the
lease and forfeit all advanced rentals.
However, three years into the lease, the Bangko Sentral ng Pilipinas (BSP) placed the
respondent bank under receivership and eventually ordered its liquidation. As a result, the
respondent vacated the leased premises and demanded the return of the unused advance
rental amounting to P3,480,000. The petitioners refused to comply, arguing that they were
entitled to retain the remaining advance rentals based on the forfeiture clause in the lease
contract.
The Regional Trial Court (RTC) ruled in favor of the respondent, ordering the partial
rescission of the lease agreement and directing the petitioners to refund one-half of the
unused portion of the advance rentals, amounting to P1,740,000. The RTC considered the
closure of the respondent's business as not a fortuitous event and found the forfeiture
clause to be a valid penal clause. However, the court also reduced the penalty by 50% in
consideration of the interests of innocent depositors and creditors.
On appeal, the Court of Appeals (CA) affirmed the RTC's decision. The CA agreed with the
trial court's interpretation of the forfeiture clause as a penal clause and upheld the
reduction of the penalty. The CA also denied the petitioners' claim for damages and
attorney's fees due to lack of proof.
Issue:
The main issues raised in the case were: (1) whether the closure of the respondent's
business constituted a fortuitous event or unforeseen event that would release it from its
contractual obligations, (2) whether the forfeiture clause in the lease contract was a penal
clause, and (3) whether the penalty agreed upon by the parties could be equitably
reduced.
Ruling:
The Supreme Court denied the petition for review on certiorari and upheld the decisions
of the lower courts. The Court ruled that the closure of the respondent's business was not
a fortuitous or unforeseen event, as it was not independent of the respondent's will and
was not tainted with arbitrariness or bad faith by the BSP. The Court also affirmed that the
forfeiture clause in the lease contract was a valid penal clause, as it provided for liquidated
damages and strengthened the coercive force of the obligation. However, the Court agreed
with the reduction of the penalty by 50% in consideration of the interests of innocent
depositors and creditors. The Court also denied the petitioners' claim for damages and
attorney's fees due to lack of proof.
Ratio:
The Supreme Court held that the closure of the respondent's business was not a fortuitous
event and that the clause on forfeiture of advance rentals was a valid penal clause. The
closure of the business was not independent of the respondent's will and was not caused
by an unforeseen event. The closure was a result of the BSP's receivership and liquidation
order, which was within the control of the respondent. Therefore, the respondent could
not be released from its contractual obligations.
The Court also recognized that the forfeiture clause in the lease contract was a valid penal
clause. It provided for liquidated damages and strengthened the coercive force of the
obligation. The clause was clear and unambiguous, and the parties freely agreed to its
terms. As such, the petitioners were entitled to retain the remaining advance rentals as
stipulated in the contract.
However, the Court agreed with the reduction of the penalty by 50% in consideration of the
interests of innocent depositors and creditors. The reduction was equitable and balanced
the rights of the parties involved. It took into account the financial impact of the closure
on innocent depositors and creditors, while still upholding the validity of the penal clause.
Lastly, the Court denied the petitioners' claim for damages and attorney's fees due to lack
of proof. The petitioners failed to provide sufficient evidence to support their claim for
damages and attorney's fees. Without proper proof, the Court could not grant their
request.
In summary, the Supreme Court upheld the decisions of the lower courts in favor of the
respondent. The Court held that the closure of the respondent's business was not a
fortuitous event and that the clause on forfeiture of advance rentals was a valid penal
clause. However, the Court also ruled that the penalty agreed upon by the parties could
be equitably reduced. The Court reduced the penalty by 50% in consideration of the
interests of innocent depositors and creditors. The Court denied the petitioner's claim for
damages and attorney's fees due to lack of proof. Overall, the Court upheld the partial
rescission of the lease agreement and ordered the refund of one-half of the unused
advance rentals.
Yobido v CA, Oct 17, 1997

Yobido vs. Court of Appeals
G.R. No. 113003. October 17, 1997.
Facts:
On April 26, 1988, the Tumboy family boarded a Yobido bus bound for Davao City. While
traveling, the left front tire of the bus suddenly exploded, causing the bus to fall into a
ravine. As a result, Tito Tumboy died and other passengers sustained injuries. The Tumboy
family filed a complaint against Alberta Yobido, the owner of the bus, and Cresencio
Yobido, its driver, for breach of contract of carriage, damages, and attorney's fees.
Issue:
The main issue in this case is whether the bus company and its driver should be held liable
for the death of Tito Tumboy and the injuries sustained by other passengers due to the tire
explosion.
Ruling:
The Supreme Court affirmed the decision of the Court of Appeals, holding the bus
company and its driver liable for the damages.
Ratio:
The court ruled that the tire blowout was not a fortuitous event and that the bus company
failed to prove that it exercised extraordinary diligence in ensuring passenger safety. The
court emphasized that an accident caused by defects in the automobile or through the
negligence of its driver is not a fortuitous event that would exempt the carrier from liability
for damages.
In this case, the tire explosion was a result of a defect in the bus, specifically the left front
tire. The bus company, as the carrier, has the duty to ensure the safety of its passengers. It
is required to exercise extraordinary diligence in maintaining its vehicles and ensuring that
they are in good condition. The court found that the bus company failed to meet this duty.
Furthermore, the court held that the driver, as an employee of the bus company, is also
liable for the damages. The driver has the responsibility to operate the vehicle safely and
to exercise due care in driving. In this case, the driver failed to exercise the necessary
caution, resulting in the accident.
The court also awarded exemplary damages to the respondents. Exemplary damages are
awarded to set an example and to deter others from committing similar acts. In this case,
the bus company and its driver's negligence resulted in the death of a passenger and
injuries to others. The court deemed it necessary to impose exemplary damages to punish
the defendants and to prevent similar incidents from happening in the future.
In conclusion, the Supreme Court affirmed the decision of the Court of Appeals, holding
the bus company and its driver liable for the damages caused by the tire explosion. The
court emphasized the duty of the carrier to exercise extraordinary diligence in ensuring
passenger safety and held that accidents caused by defects in the vehicle or the
negligence of its driver are not considered fortuitous events that would exempt the carrier
from liability. The court also awarded exemplary damages to the respondents as a
deterrent against similar acts of negligence.
Abrogar v Cosmos Bottling, March 15, 2017

Abrogar vs. Cosmos Bottling Co.
G.R. No. 164749. March 15, 2017.
Facts:
This case involves the death of Rommel Abrogar, a participant in the "1st Pop Cola Junior
Marathon" organized by Intergames, Inc. and sponsored by Cosmos Bottling Company.
During the marathon, Rommel was bumped by a passenger jeepney and died due to
severe head injuries. Rommel's parents filed a complaint for damages against Intergames
and Cosmos.
Issue:
The main issues in this case are whether Intergames and Cosmos were negligent in
conducting the marathon, whether the negligence of the jeepney driver was an intervening
cause, whether the doctrine of assumption of risk applies, and whether the heirs of the
deceased can recover damages for loss of earning capacity.
Ruling:
The Supreme Court (SC) partially agreed with the petitioners and held that Intergames was
negligent in conducting the marathon. The Court absolved Cosmos from liability, as its role
was limited to sponsorship and it did not have control over the organization and conduct
of the race. The Court also did not award damages for loss of earning capacity, as the issue
became moot and academic.
Ratio:
The SC ruled that Intergames was negligent in conducting the marathon. It found that the
safety and precautionary measures undertaken by Intergames were inadequate and fell
short of the diligence required under the circumstances. The Court emphasized that
proper coordination and instruction were crucial elements for the safe conduct of the
race, and Intergames' failure to establish these elements constituted negligence.
The SC also held that Intergames' negligence was the proximate cause of Rommel's death,
despite the intervening negligence of the jeepney driver. It explained that proximate cause
is the cause that produces an event in natural and continuous sequence, unbroken by any
new cause. In this case, Intergames' negligence in not conducting the race in a road
blocked off from vehicular traffic and not properly coordinating the volunteers set the
stage for the injury. The negligence of the jeepney driver, although an intervening cause,
was not efficient enough to break the chain of connection between Intergames' negligence
and Rommel's death.
The SC further ruled that the doctrine of assumption of risk does not apply to Rommel. It
explained that Rommel could not have assumed the risk of death when he participated in
the race because death was neither a known nor normal risk incident to running a race.
The SC emphasized that the doctrine of assumption of risk requires the concurrence of
three elements: knowledge of the risk, understanding of its nature, and free and voluntary
choice to incur it. Rommel did not meet these requirements, and therefore, the doctrine
does not apply to him.
As for Cosmos, the SC affirmed the Court of Appeals' ruling absolving it from liability. It
found that Cosmos' role was limited to financing the race and it did not involve itself in the
preparations for the actual conduct of the race. Therefore, the requirement for a direct or
immediate causal connection between Cosmos' sponsorship and Rommel's death did not
exist.
In terms of damages, the SC awarded the petitioners damages for medical,

hospitalization, and burial expenses, as well as moral and exemplary damages. It also
awarded damages for the loss of Rommel's earning capacity, based on his projected gross
annual income and necessary living expenses. The SC further awarded interest on the
damages and attorney's fees.
In conclusion, the SC held Intergames liable for negligence and awarded damages to the
petitioners. It affirmed the Court of Appeals' ruling absolving Cosmos from liability.
4. Usurious Transactions; Interests (1175; 1956; 1957; 1306)

Security Bank and Trust Co. vs. RTC of Makati (263 SCRA 483)
Security Bank and Trust Co. vs. Regional Trial Court of Makati, Branch 61
G.R. No. 113926. October 23, 1996.
Facts:
This case involves a dispute over the interest rate to be imposed in a collection case filed
by Security Bank and Trust Company (SBTC) against Magtanggol Eusebio and Leila
Ventura. The parties had entered into three promissory notes, all of which stipulated an
interest rate of 23% per annum. However, the Regional Trial Court of Makati, Branch 61,
lowered the interest rate to 12% per annum. SBTC filed a motion for partial
reconsideration, arguing that the agreed-upon interest rate should be upheld. The court
denied the motion and held Ventura jointly and severally liable with Eusebio. SBTC then
filed a petition for review on certiorari before the Supreme Court.
Issue:
The main issue in this case is whether the agreed-upon interest rate of 23% per annum is
allowable and not against the Usury Law.
Ruling:
The Supreme Court ruled in favor of SBTC, stating that the agreed-upon interest rate
should be imposed.
Ratio:
The court relied on Central Bank Circular No. 905, which allows contracting parties to
freely stipulate the interest rate on a loan or forbearance of money, goods, or credits. The
circular did not repeal or amend the Usury Law but merely suspended its effectivity. The
court emphasized that when the law is clear and unambiguous, it must be applied
according to its clear language. In this case, the promissory notes were signed after the
effectivity of CB Circular No. 905, and the agreed-upon interest rate was not questioned
by Eusebio. Therefore, the court held that the stipulations in the contract should be
upheld, and the 23% interest rate should be imposed.
In summary, the Supreme Court ruled in favor of SBTC, stating that the agreed-upon
interest rate of 23% per annum should be imposed in the collection case against Eusebio
and Ventura. The court held that the parties freely stipulated the interest rate, and there
was no valid reason for the lower court to impose a lower rate. The court relied on CB
Circular No. 905, which allows contracting parties to freely stipulate the interest rate on
loans or forbearances of money, goods, or credits. The court emphasized that when the
law is clear and unambiguous, it must be applied according to its clear language.
Therefore, the court affirmed the decision of the lower court with the modification that the
23% interest rate should be imposed.
Solangon vs. Salazar (360 SCRA 379)

SPOUSES SOLANGON vs. SALAZAR
G.R. No. 125944. June 29, 2001.
Facts:
In the case of Spouses Solangon v. Salazar, the petitioners, who are spouses Solangon,
obtained three separate loans from the respondent, Salazar. These loans were secured by
a real estate mortgage. The loans had an interest rate of 6% per month or 72% per annum.
When the petitioners failed to pay their third loan obligation, the respondent foreclosed
the mortgage. The petitioners then filed a complaint for annulment of mortgage, arguing
that the subsequent mortgages were null and void due to the unconscionable interest rate.
They also claimed that they signed the third mortgage contract based on the respondent's
assurance that it would not be foreclosed as long as the interest was paid. The trial court
dismissed the complaint, and the Court of Appeals affirmed the decision, ruling that the
interest rate was not unconscionable.
Issue:
The main issue raised in the case is whether the interest rate of 6% per month or 72% per
annum is unconscionable and renders the subsequent mortgages null and void.
Ruling:
The Supreme Court affirmed the decision of the lower courts but reduced the interest rate
to 12% per annum. The Court held that while the Usury Law ceiling on interest rates was
lifted by Central Bank Circular No. 905, lenders do not have the authority to raise interest
rates to levels that would enslave borrowers or lead to a hemorrhaging of their assets. The
Court cited a previous case where it ruled that a stipulated interest rate of 5.5% per month
was iniquitous, unconscionable, and exorbitant. In the present case, the Court found the
interest rate of 6% per month to be definitely outrageous and inordinate, and thus ordered
it to be reduced equitably to 12% per annum.
Ratio:
The Court based its decision on the principle that while the Usury Law ceiling on interest
rates was lifted, lenders still have a responsibility not to impose interest rates that are
oppressive and unconscionable. The Court emphasized that the purpose of lifting the
Usury Law ceiling was to promote financial stability and flexibility, but it does not give
lenders the authority to exploit borrowers. The Court cited a previous case where it ruled
that a stipulated interest rate of 5.5% per month was iniquitous, unconscionable, and
exorbitant. In the present case, the Court found the interest rate of 6% per month to be
definitely outrageous and inordinate, and thus ordered it to be reduced equitably to 12%
per annum. The Court's decision aims to strike a balance between the rights of lenders to
earn a reasonable return on their investments and the protection of borrowers from
oppressive and unconscionable interest rates.
Cauton vs. CA (G.R. No. 158382, Jan. 27, 2004)

Cuaton vs. Salud
G.R. No. 158382. January 27, 2004.
Facts:
The case of Cuaton v. Salud involves a petition for review on certiorari filed by Mansueto
Cuaton against Rebecca Salud and the Court of Appeals. On January 5, 1993, Rebecca
Salud, together with her husband Rolando Salud, filed a suit for foreclosure of real estate
mortgage with damages against Mansueto Cuaton and his mother, Conchita Cuaton. The
trial court declared the mortgage void and ordered Mansueto Cuaton to pay Rebecca
Salud the loan amount of one million pesos plus interests of 10% and 8% per month for
the period of February 1992 to August 1992. Both parties filed their respective notices of
appeal. The Court of Appeals affirmed the judgment of the trial court, prompting Mansueto
Cuaton to file a motion for partial reconsideration regarding the award of interest, arguing
that it was iniquitous and exorbitant. However, the motion was denied by the Court of
Appeals.
Issue:
The main issue raised in the petition for review is whether the 8% and 10% monthly interest
rates imposed on the loan are valid.
Ruling:
The Supreme Court ruled in favor of Mansueto Cuaton, stating that the interest rates were
illegal and unconscionable. The Court cited previous cases where excessive interest rates
were deemed invalid and reduced to 12% per annum.
Ratio:
The Court explained that while the Usury Law was suspended, parties to a loan agreement
should not be allowed to impose interest rates that enslave borrowers or lead to a
hemorrhaging of their assets. Stipulations authorizing iniquitous or unconscionable
interests are considered void from the beginning.
The Court also addressed the argument that the excessive interest rates were not raised
as an issue on appeal. It stated that the matter of interest was raised by the petitioner in
his answer filed with the trial court, and therefore, it can be reviewed by the appellate
court.
Based on the guidelines laid down in Eastern Shipping Lines, Inc. v. Court of Appeals, the
Court ruled that the interest rate of 12% per annum should be imposed on the loan,
computed from the date of its execution until finality of the decision. After the judgment
becomes final and executory, the amount due shall further earn interest at 12% per year.
In conclusion, the Supreme Court granted the petition and modified the decision of the
Court of Appeals. The interest rates of 10% and 8% per month imposed by the trial court
were reduced to 12% per annum. The interest should be computed from the date of the
loan's execution until finality of the decision, and thereafter, it shall earn interest at 12%
per year until the obligation is satisfied.
Integrated Realty Corp. vs. PNB (174 SCRA 295)

Integrated Realty Corp. vs. Philippine National Bank
G.R. No. 60705. June 28, 1989.
Facts:
This case involves a dispute over a loan and time deposit certificates between Integrated
Realty Corporation (IRC) and Raul L. Santos (Santos) as petitioners, and the Philippine
National Bank (PNB), Overseas Bank of Manila (OBM), and the Court of Appeals as
respondents. The case was decided by the Second Division of the Supreme Court on June
28, 1989.
On January 11, 1967, Santos made a time deposit with OBM in the amount of P500,000.00,
and on February 6, 1967, he made another time deposit with OBM in the amount of
P200,000.00. On February 9, 1967, IRC, through Santos, applied for a loan of P700,000.00
with PNB and executed a Deed of Assignment of the two time deposits in favor of PNB.
OBM gave its conformity to the assignment. However, OBM failed to pay PNB after the
maturity dates of the time deposit certificates, and PNB demanded payment from IRC,
Santos, and OBM. IRC and Santos claimed that their obligation to PNB was fully paid with
the assignment of the time deposit certificates, while OBM denied knowledge of the time
deposits. PNB filed a complaint against IRC, Santos, and OBM to collect the loan amount,
and IRC and Santos filed a counterclaim against PNB and a cross-claim against OBM.
The trial court rendered a judgment ordering IRC and Santos to pay PNB the loan amount
plus interest, and ordering OBM to pay IRC and Santos the principal amount of the time
deposits with interest. The Court of Appeals affirmed the decision with modification,
ordering OBM to pay Santos the sum of P700,000.00 due under the time deposit
certificates with interest.
Issue:
1. Whether the liability of IRC and Santos with PNB should be deemed to have been
paid by virtue of the deed of assignment made by IRC in favor of PNB.
2. Whether the interest imposed by PNB is legal.
3. Whether OBM should be held liable for interests on the time deposits from the time
it ceased operations until it resumed business.
4. Whether OBM should reimburse IRC and Santos for the amounts they may be
adjudged to pay PNB.
Ruling:
The court ruled as follows:
1. The deed of assignment made by IRC in favor of PNB is not considered as payment
of the loan. It is deemed a pledge, and IRC and Santos should be held liable to PNB
for the loan amount with interest.
2. The interest imposed by PNB is legal, and IRC and Santos are estopped from
questioning its validity.
3. OBM is not liable for interests on the time deposits during the period it ceased
operations. The court held that it is unfair to require OBM to pay interest when it
was unable to generate funds to cover the payment due to its distressed financial
situation.
4. OBM is not required to reimburse IRC and Santos for the amounts they may be
adjudged to pay PNB. OBM's liability is strictly confined to the provisions of the time
deposit certificates, and IRC and Santos are also at fault for their failure to comply
with their obligations under the promissory notes.
Ratio:
The court reasoned that the deed of assignment made by IRC in favor of PNB cannot be
considered as payment of the loan because it is deemed a pledge. A pledge is a contract
where the debtor delivers a movable property to the creditor as security for the fulfillment
of an obligation. In this case, the time deposit certificates were assigned as security for
the loan, but they were not intended to extinguish the obligation. Therefore, IRC and
Santos should still be held liable to PNB for the loan amount with interest.
Regarding the legality of the interest imposed by PNB, the court held that IRC and Santos
are estopped from questioning its validity. Estoppel is a principle that prevents a party
from denying or asserting something contrary to what they have previously stated or done.
In this case, IRC and Santos had previously acknowledged and agreed to the interest
imposed by PNB when they executed the Deed of Assignment. Therefore, they cannot now
argue against its legality.
As for OBM's liability for interests on the time deposits, the court ruled that OBM is not
required to pay interest during the period it ceased operations. The court considered
OBM's distressed financial situation and held that it would be unfair to require OBM to pay
interest when it was unable to generate funds to cover the payment. OBM's liability is
strictly confined to the provisions of the time deposit certificates.
Lastly, the court held that OBM is not required to reimburse IRC and Santos for the
amounts they may be adjudged to pay PNB. OBM's liability is limited to the provisions of
the time deposit certificates, and IRC and Santos are also at fault for their failure to comply
with their obligations under the promissory notes.
In conclusion, the court ordered IRC and Santos to pay PNB the loan amount with interest,
and ordered OBM to pay IRC and Santos the principal amount of the time deposits with
interest. OBM is also required to pay damages to IRC and Santos for its delay in the
performance of its obligations.
David vs. CA (316 SCRA 710)

David vs. Court of Appeals
G.R. No. 115821. October 13, 1999.
Facts:
The case of David v. Court of Appeals involves a dispute over the execution of a decision
rendered by the Regional Trial Court (RTC) of Manila. The petitioner, Jesus T. David, filed a
complaint against respondent Valentin Afable based on a promissory note. The RTC
rendered a decision in favor of the petitioner, ordering Afable to pay the amount of the
promissory note plus interest. The case reached the Supreme Court, which remanded it
to the trial court for final execution.
Upon the petitioner's motion for an alias writ of execution, Afable's attached properties
were sold at public auction. However, the petitioner contested the computation of simple
legal interest by the respondent sheriff, arguing that compounded interest should be
applied based on the promissory note. Meanwhile, Central Bank Circular No. 416 was
issued, increasing the legal rate of interest from 6% to 12% per annum. The petitioner
moved for the issuance of a certificate of sale with compounded interest, but the trial
court denied the motion and affirmed the computation of the respondent sheriff. The trial
court also increased the rate of legal interest from 6% to 12% per annum.
The petitioner appealed the trial court's decision to the Court of Appeals, which dismissed
the petition. The petitioner then filed a petition for review before the Supreme Court.
Issue:
The main issue in this case is whether the appellate court erred in affirming the trial court's
decision to award simple interest instead of compounded interest.
Ruling:
The Supreme Court, reiterating the doctrine in Philippine American Accident Insurance vs.
Flores, held that no accrued conventional interest can be recovered where no stipulation
to that effect was agreed upon between the parties. The court further explained that the
rule that once a judgment has become final and executory, it is the ministerial duty of the
courts to order its execution is subject to exceptions, such as when supervening events
render the decision no longer enforceable.
Ratio:
In this case, the Court found that no interest was stipulated by the parties, and therefore,
the Philippine American Accident Insurance ruling applies. The Court also held that the
trial court did not err in increasing the rate of legal interest from 6% to 12% per annum
based on Central Bank Circular No. 416, which took effect after the decision had become
executory. The Court emphasized that the passage of the circular was a supervening event
that justified the modification of the decision.
In conclusion, the Supreme Court denied the petitioner's request for compounded
interest and affirmed the lower court's decision to award simple interest based on the
promissory note. The Court also recognized the lower court's authority to modify the
judgment and increase the rate of legal interest.
PNB vs. CA (236 SCRA 766)

G.R. No. 107569. November 8, 1994.
Facts:
The case of Philippine National Bank v. Court of Appeals involves a dispute between the
Philippine National Bank (PNB) and private respondents Remedios Jayme-Fernandez and
Amado Fernandez. On April 7, 1982, the private respondents obtained a loan from PNB
under the Cottage Industry Guaranty Loan Fund (CIGLF) in the amount of P50,000. To
secure the loan, the private respondents executed a Real Estate Mortgage over a parcel of
unregistered agricultural land and a Chattel Mortgage over a thermo plastic-forming
machine. In February 1983, the private respondents were granted an additional loan of
P50,000 by PNB, with the same terms and stipulations as the previous loan. They also
executed a new Credit Agreement and constituted another real estate mortgage over two
parcels of registered land. In August 1984, PNB informed the private respondents that the
interest rate on their loan account was increased to 25% per annum, and later increased
to 30% and 42% in October 1984. The private respondents requested PNB to re-adopt the
12% interest rate and condone the present interest and penalties, but their request was
denied.
Issue:
The main issues raised in the case are: (1) whether the increases in interest rates are
authorized; (2) whether the Credit Agreement and Promissory Notes are binding between
the parties; (3) whether Central Bank Circular No. 773 and Circular No. 905 are applicable;
and (4) whether the private respondents are estopped from questioning the increase in
interest rates.
Ruling:
The Supreme Court ruled in favor of the private respondents and affirmed the decision of
the Court of Appeals. The Court held that the escalation clause in the Credit Agreement
did not give PNB the unilateral right to increase the interest rate without the consent of the
private respondents. While the law and circular allowed contracting parties to freely
stipulate adjustments in the interest rate, any change must be mutually agreed upon. The
Court emphasized the principle of mutuality in contracts and held that a contract
containing a condition that makes its fulfillment dependent exclusively upon the
uncontrolled will of one party is void. The Court also ruled that the private respondents
were not estopped from questioning the increases in interest rates, as their silence cannot
be construed as acceptance of the proposed changes.
Ratio:
The Supreme Court based its decision on the principle of mutuality in contracts. It held
that a contract must be entered into by the parties with their free and voluntary consent,
and any change in the terms of the contract must be mutually agreed upon. The Court
emphasized that a contract containing a condition that makes its fulfillment dependent
exclusively upon the uncontrolled will of one party is void. In this case, the escalation
clause in the Credit Agreement did not give PNB the unilateral right to increase the interest
rate without the consent of the private respondents. Therefore, the increases in interest
rates were not authorized. The Court also ruled that the private respondents were not
estopped from questioning the increases in interest rates, as their silence cannot be
construed as acceptance of the proposed changes.
In conclusion, the Supreme Court ordered PNB to re-apply the 12% interest rate to the
private respondents' indebtedness and disallowed the unilateral increases in interest
rates. The Court affirmed the decision of the Court of Appeals and denied PNB's petition.
Eastern Shipping Lines, Inc. vs CA (234 SCRA 78)

Eastern Shipping Lines, Inc. vs. Court of Appeals
G.R. No. 97412. July 12, 1994.
Facts:
On December 4, 1981, two fiber drums of riboflavin were shipped from Yokohama, Japan
to Manila on the vessel "SS EASTERN COMET" owned by Eastern Shipping Lines. The
shipment was insured under a marine insurance policy. Upon arrival in Manila, the
shipment was discharged to the custody of Metro Port Services, Inc. One drum was found
to be in bad order. The shipment was then received by Allied Brokerage Corporation, who
made deliveries to the consignee. One drum was found to contain spillages and
adulterated/fake contents. The consignee suffered losses totaling P19,032.95. The
insurer, Mercantile Insurance Company, paid the consignee and became subrogated to
the rights of action against the defendants.
Issue:
The main issues raised in this case are: (a) whether the common carrier, arrastre operator,
and customs broker can be held jointly and severally liable for the damage; (b) whether
the payment of legal interest on the claim should be computed from the time the
complaint is filed or from the date the decision is rendered; and (c) whether the applicable
rate of interest is 12% or 6%.
Ruling:
The Supreme Court held that the common carrier, arrastre operator, and customs broker
can be held jointly and severally liable for the damage. It also ruled that the interest should
be computed from the date of the decision of the trial court at a rate of 6% per annum.
Ratio:
The Court explained that the common carrier's duty to observe diligence in the shipment
of goods lasts from the time the articles are surrendered to the carrier until delivered to
the consignee. The arrastre operator and customs broker are also charged with the
obligation to deliver the goods in good condition to the consignee. Therefore, all three
parties can be held jointly and severally liable for any damage sustained during the
shipment.
The Court further clarified that the 6% interest per annum applies when the obligation
breached is not a loan or forbearance of money, and that interest on damages may be
imposed at the discretion of the court. The interest shall begin to run from the time the
claim is made judicially or extrajudicially, or from the date of the judgment if the demand
cannot be reasonably established at the time the claim is made.
Additionally, the Court stated that the 12% interest per annum shall be imposed from the
finality of the judgment until its satisfaction. This means that once the judgment becomes
final and executory, the interest rate will increase to 12% per annum until the judgment is
fully satisfied.
Almeda vs. Cariño (G.R. No. 152143, Jan. 13, 2003)

Almeda vs. Cariño
G.R. No. 152143. January 13, 2003.
Facts:
The case involves a dispute between Avelino G. Cariño and Ponciano L. Almeda over the
unpaid balance of a purchase price for several properties. Cariño sold eight titled lots and
two untitled lots to Almeda. However, Almeda failed to pay the remaining balance of the
purchase price and the interest thereon. As a result, Cariño filed a complaint against
Almeda and Almeda, Inc. in the Regional Trial Court of Biñan, Laguna. The trial court ruled
in favor of Cariño and awarded him nominal damages, attorney's fees, and imposed a 12%
annual interest on the judgment debt. The decision of the trial court was later affirmed by
the Court of Appeals.
Issue:
1) whether the award of nominal damages, attorney's fees, and the imposition of a 12%
interest rate on the judgment debt were proper; and
2) whether the appellate court erred in affirming the decision of the trial court.
Ruling:
The Supreme Court found the appeal unmeritorious and affirmed the decision of the Court
of Appeals. The Court held that the award of nominal damages to Cariño was justified
because Almeda and Almeda, Inc. refused to pay the remaining balance of the purchase
price despite repeated demands, thereby violating Cariño's right to the said amount under
the agreements. The Court also upheld the imposition of a 12% interest rate per annum as
agreed upon by the parties in the contracts. The Court ruled that the stipulations in the
contracts have the force of law between the parties and should be complied with in good
faith. Furthermore, the Court saw no reason to set aside the order of the trial court, as
affirmed by the appellate court, granting Cariño's attorney's fees.
Ratio:
The Supreme Court based its decision on the principle that contracts have the force of law
between the parties. In this case, the contracts between Cariño and Almeda clearly
stipulated the remaining balance of the purchase price and the interest rate to be imposed
in case of default. Since Almeda and Almeda, Inc. failed to fulfill their obligation to pay the
remaining balance, they violated Cariño's right to receive the said amount. Therefore, the
award of nominal damages was justified. Additionally, the Court upheld the imposition of
a 12% interest rate per annum as agreed upon by the parties in the contracts. The Court
emphasized the importance of complying with contractual obligations in good faith.
Lastly, the Court saw no reason to set aside the award of attorney's fees, as the trial court's
decision was affirmed by the appellate court.
In summary, the Supreme Court affirmed the decision of the Court of Appeals, awarding
nominal damages, attorney's fees, and a 12% interest rate to Cariño. The Court held that
the refusal of Almeda and Almeda, Inc. to pay the remaining balance of the purchase price
violated Cariño's right, justifying the award of nominal damages. The Court also upheld
the imposition of a 12% interest rate per annum as agreed upon by the parties in the
contracts. Finally, the Court saw no reason to set aside the award of attorney's fees.
Sebastian Siga-an vs. Alicia Villanueva, G.R. No. 173227, January 20, 2009
Siga-an vs. Villanueva
G.R. No. 173227. January 20, 2009.
Facts:
The case involves a dispute over a loan between petitioner Sebastian Siga-an and
respondent Alicia Villanueva. Villanueva filed a complaint for a sum of money against
Siga-an, alleging that he offered to loan her P540,000.00 in 1992 for her business
transactions with the Philippine Navy Office (PNO). Villanueva claimed that she paid a
total of P1,200,000.00 to Siga-an, including an excess amount of P660,000.00 that she
believed was applied as interest for the loan. However, there was no written agreement or
stipulation regarding the payment of interest. Villanueva demanded the return of the
excess amount, but Siga-an ignored her claim.
Issue:
The main issue in this case is whether Siga-an is entitled to collect interest on the loan
despite the absence of a written agreement.
Ruling:
The court ruled that Siga-an is not entitled to collect interest on the loan. Under Article
1956 of the Civil Code, no interest shall be due unless it has been expressly stipulated in
writing. Since there was no written agreement between Siga-an and Villanueva regarding
the payment of interest, Siga-an cannot collect interest on the loan. The court also applied
the principle of solutio indebiti, which states that if something is received when there is no
it arises. Since Villanueva made an overpayment of her loan obligation to Siga-an, Siga-an
is obligated to return the excess amount.
Ratio:
The court based its decision on Article 1956 of the Civil Code, which provides that no
interest shall be due unless it has been expressly stipulated in writing. Since there was no
written agreement between Siga-an and Villanueva regarding the payment of interest,
Siga-an cannot collect interest on the loan. The court also applied the principle of solutio
indebiti, which is a legal principle that states that if something is received when there is no
it arises. In this case, Villanueva made an overpayment of her loan obligation to Siga-an,
and therefore, Siga-an is obligated to return the excess amount.
Based on the court's ruling, Siga-an was ordered to pay Villanueva the amount of
P335,000.00 as a refundable amount of interest, reduced from the original amount of
P660,000.00. Siga-an was also ordered to pay Villanueva P150,000.00 as moral damages,
P50,000.00 as exemplary damages, and an amount equivalent to 25% of P335,000.00 as
attorney's fees. The court imposed a 6% per annum interest on the refundable amount,
damages, and attorney's fees from the time of the extra-judicial demand until the finality
of the decision, and a 12% per annum interest from the finality of the decision until its
satisfaction.
ASIATRUST Development Bank vs. Tuble, G.R. No. 183987, July 25, 2012
Asiatrust Development Bank vs. Tuble
G.R. No. 183987. July 25, 2012.
Facts:
This case involves a dispute between Asiatrust Development Bank (petitioner) and
Carmelo H. Tuble (respondent), a former vice-president of the bank. Tuble availed himself
of the car incentive plan and loan privileges offered by the bank, acquiring a Nissan
Vanette through a lease agreement and obtaining three separate loans. After Tuble
resigned, he had several obligations to the bank, including the purchase or return of the
Nissan Vanette and the payment of various loans. Tuble requested the bank to offset his
receivables against his outstanding loans, but the bank initially demanded payment
instead. After Tuble followed up his request, the bank finally allowed the offsetting of his
claims and liabilities. However, the bank still filed a Complaint for replevin to recover the
Nissan Vanette and a Petition for Extra-judicial Foreclosure of real estate mortgage to
collect Tuble's liabilities. The bank emerged as the purchaser of the secured property in
the foreclosure proceedings. Tuble redeemed the property by paying the redemption price,
which included additional interest and charges unilaterally imposed by the bank. After
three years, the bank issued Tuble a Clearance necessary for the release of his deferred
incentive plan share. Tuble questioned the redemption price and filed a Complaint for
recovery of a sum of money and damages before the RTC, seeking to collect the excess
charges on the redemption price and moral and exemplary damages.
Issue:
The main issue in the case is whether the bank is entitled to include the interest charges
on Promissory Note No. 0142 and the 18% annual interest on the bid price of P421,800 in
the redemption price.
Ruling:
The court ruled that the bank cannot include these items in the redemption price. The 18%
annual interest on the bid price is not applicable because the Real Estate Mortgage
Contract on the secured property is already extinguished. The bank cannot rely on the
dragnet clause in the contract to impose the interest charges. The court also held that the
bank cannot collect the interest charges on Promissory Note No. 0142 because there was
no default on Tuble's part. The court affirmed the award of moral and exemplary damages
to Tuble, as the bank treated him unfairly and unreasonably. The court found that Tuble
suffered undue embarrassment and humiliation, justifying the award of damages.
Ratio:
The court based its ruling on the legal principles that govern the redemption of foreclosed
properties and the imposition of interest charges. The court held that the bank cannot
include the 18% annual interest on the bid price in the redemption price because the Real
Estate Mortgage Contract has already been extinguished. The court emphasized that the
dragnet clause in the contract cannot be used to impose interest charges when the
contract itself is no longer in effect. Furthermore, the court ruled that the bank cannot
collect the interest charges on Promissory Note No. 0142 because there was no default
on Tuble's part. The court emphasized that interest charges can only be imposed when
there is a valid default on the part of the debtor. In this case, Tuble had not defaulted on
his obligations, so the bank had no legal basis to collect the interest charges. Finally, the
court upheld the award of moral and exemplary damages to Tuble, as the bank treated him
unfairly and unreasonably. The court found that Tuble suffered undue embarrassment and
humiliation due to the bank's actions, justifying the award of damages.
In conclusion, the court affirmed the decision of the CA, ruling in favor of Tuble and
denying the bank's claims for additional charges on the redemption price. The court also
upheld the award of moral and exemplary damages to Tuble.
Sps. Bonrostro vs. Sps. Luna, G.R. No. 172346, July 24, 2013
Spouses Bonrostro vs. Spouses Luna
G.R. No. 172346. July 24, 2013.
Facts:
The case involves a dispute between the spouses Bonrostro and the spouses Luna over a
contract to sell a property. In 1992, Constancia Luna entered into a contract to sell with
Bliss Development Corporation for a house and lot in Quezon City. A year later, Constancia
entered into another contract to sell with Lourdes Bonrostro, who agreed to assume
Constancia's balance with Bliss. The contract stated that Lourdes would make installment
payments for the property. However, Lourdes only made a down payment and failed to
make any subsequent payments. As a result, the spouses Luna filed a complaint for
rescission of the contract and damages against the spouses Bonrostro.
Issue:
The main issue in this case is whether the Court of Appeals (CA) correctly modified the
Regional Trial Court's (RTC) decision regarding interest.
Ruling:
The court affirmed the CA's decision and held that the spouses Bonrostro were liable for
interest on the unpaid installments and for reimbursement of payments made to Bliss.
Ratio:
The court ruled that the spouses Bonrostro's delay in payment constituted a substantial
breach of the contract. The court held that their letter expressing willingness to pay did not
suspend the accrual of interest. The court found that the spouses Bonrostro were in delay
in fulfilling their obligation and were therefore liable for interest on the unpaid installments
from the date of default until full payment.
The court also ruled that the spouses Bonrostro were liable for interest on the amount paid
by the spouses Luna to Bliss as amortization. The court found no evidence to support the
spouses Bonrostro's claim that they were prevented from making payments. Therefore,
the court held that the spouses Luna were entitled to reimbursement of the amount paid
to Bliss with interest.
In conclusion, the court affirmed the CA's decision and held that the spouses Bonrostro
were liable for interest on the unpaid installments and for reimbursement of payments
made to Bliss. The court ruled that the spouses Bonrostro's letter expressing willingness
to pay did not suspend the accrual of interest, and they were in delay in fulfilling their
obligation. The court also found no evidence to support the spouses Bonrostro's claim that
they were prevented from making payments.
BSP Monetary Board Circular No. 799, Series of 2013

RATE OF INTEREST IN THE ABSENCE OF STIPULATION
The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following
revisions governing the rate of interest in the absence of stipulation in loan contracts,
thereby amending Section 2 of Circular No. 905, Series of 1982:
Section 1. The rate of interest for the loan or forbearance of any money, goods or credits
and the rate allowed in judgments, in the absence of an express contract as to such rate
of interest, shall be six percent (6%) per annum.
Section 2. In view of the above, 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 are hereby amended accordingly.
This Circular shall take effect on 1 July 2013.
Nacar vs. Gallery Frames, GR 189871, August 13, 2013

Nacar vs. Gallery Frames
G.R. No. 189871. August 13, 2013.
Facts:
The case of Nacar v. Gallery Frames involves a complaint for constructive dismissal filed
by petitioner Dario Nacar against respondents Gallery Frames and/or Felipe Bordey, Jr. The
Labor Arbiter rendered a decision in favor of the petitioner, awarding him backwages and
separation pay in lieu of reinstatement. The decision was affirmed by the NLRC and the
CA, and became final and executory. However, during the execution proceedings, the
petitioner requested a recomputation of the monetary award to include interest. The Labor
Arbiter granted the motion but only awarded a portion of the requested interest. The NLRC
affirmed the Labor Arbiter's decision, and the CA denied the petitioner's appeal.
Issue:
The main issue in this case is whether the petitioner is entitled to interest on the total
monetary awards.
Ruling:
The Supreme Court ruled in favor of the petitioner and reversed the CA's decision. The
Court held that a recomputation of the monetary award is necessary and that the
petitioner is entitled to interest on the total monetary awards.
Ratio:
The Court based its decision on the principle that when an obligation, regardless of its
source, is breached, the debtor is liable for interest. The Court cited Article 2209 of the
Civil Code, which provides that if the obligation consists in the payment of a sum of money,
and the debtor incurs in delay, the interest shall be the legal rate, which is 12% per annum.
The Court clarified that the legal rate of interest shall be 12% per annum until June 30,
2013, and 6% per annum from July 1, 2013 until full satisfaction of the award.
The Court also emphasized that the award of interest is necessary to compensate the
petitioner for the delay in the payment of his monetary benefits. The Court recognized that
the delay in the payment of monetary awards can cause financial hardship to the
employee, and interest serves as a form of compensation for the damages suffered.
Furthermore, the Court clarified that interest should be computed from the time the
monetary awards became final and executory until full satisfaction. The Court ordered the
Labor Arbiter to make another recomputation of the total monetary benefits awarded to
the petitioner, including the proper interest.
In conclusion, the Supreme Court ruled that the petitioner is entitled to interest on the
total monetary awards. The rate of interest shall be 12% per annum until June 30, 2013,
and 6% per annum from July 1, 2013 until full satisfaction of the award. The Labor Arbiter
was ordered to make another recomputation of the total monetary benefits awarded to
the petitioner, including the proper interest.
University of Pangasinan, Inc. vs. Fernandez, GR 211228, November 12, 2014

University of Pangasinan, Inc. v. Fernandez
G.R. No. 211228. November 12, 2014.
Facts:
The case of University of Pangasinan, Inc. v. Fernandez involves a complaint for illegal
dismissal filed by Florentino and Nilda Fernandez against the University of Pangasinan,
Inc. (UPI) and its officials. The Labor Arbiter ruled in favor of Florentino and Nilda, declaring
their dismissal as illegal and ordering UPI to pay them backwages, allowances, separation
pay, and attorney's fees. UPI appealed to the National Labor Relations Commission
(NLRC), which initially affirmed the Labor Arbiter's decision but later reversed it. Florentino
and Nilda filed a Petition for Certiorari with the Court of Appeals (CA), which granted their
petition and reinstated the Labor Arbiter's decision. UPI appealed to the Supreme Court,
but its petition was denied. Florentino and Nilda then moved for a re-computation of their
award to include the period from the date of the Labor Arbiter's decision up to the finality
of the decision. The CA approved the re-computation and imposed a legal interest of 12%
per annum on the total monetary awards computed from the date of finality of the decision
until full satisfaction. UPI filed a petition for review on certiorari before the Supreme Court,
arguing that the re-computation was not valid and that the backwages and separation pay
should only be computed until the optional retirement age of 60.
Issue:
1. Whether the re-computation of backwages and benefits is valid and should include
the period after the initial decision up to the finality of the decision.
2. Whether the backwages and separation pay should only be computed until the
optional retirement age of 60.
Ruling:
The Supreme Court affirmed the ruling of the Court of Appeals (CA) and held that the re-
computation of backwages and benefits is valid and should include the period after the
initial decision up to the finality of the decision. The Court also ruled that the backwages
and separation pay should not be limited until the optional retirement age of 60.
Ratio:
The Court explained that the re-computation of backwages and benefits is a necessary
consequence of the delay in paying the awards. The purpose of awarding backwages and
benefits is to restore the employee to the position he or she would have been in had it not
been for the illegal dismissal. Therefore, the computation should include the period after
the initial decision up to the finality of the decision to fully compensate the employees for
the delay in receiving their rightful benefits.
Regarding the issue of limiting the backwages and separation pay until the optional
retirement age of 60, the Court held that there is no legal basis to support such limitation.
The computation of backwages and separation pay should be based on the actual period
of unemployment caused by the illegal dismissal. The optional retirement age of 60 is
irrelevant in this case as it does not determine the actual period of unemployment.
Therefore, the backwages and separation pay should be computed until the date of full
satisfaction, without any limitation based on retirement age.
In addition, the Court imposed a legal interest of 12% per annum on the total monetary
awards computed from the date of finality of the decision until full satisfaction. This is in
accordance with prevailing jurisprudence that awards of monetary benefits in labor cases
should earn legal interest to compensate for the delay in payment.
Republic vs. Hon. Mupas, GR 181892, September 8, 2015

Republic of the Philippines vs. Mupas
G.R. No. 181892. April 19, 2016.
Facts:
This case involves the expropriation of the Ninoy Aquino International Airport Terminal 3
(NAIA-IPT III) by the Republic of the Philippines from the Philippine International Air
Terminals Co., Inc. (PIATCO). The Republic executed a concession agreement with PIATCO
for the construction, development, and operation of NAIA-IPT III. However, the concession
agreement was later nullified by the court. The Republic then filed a complaint for
expropriation of NAIA-IPT III and deposited the assessed value of the property with the
Land Bank of the Philippines. The court issued a writ of possession in favor of the Republic
and ordered the release of a portion of the just compensation to PIATCO. The court also
allowed the intervention of Takenaka Corporation and Asahikosan Corporation, who were
subcontractors of PIATCO. The Republic questioned the court's orders and appealed to
the Court of Appeals (CA). The CA computed the just compensation and held that
Takenaka and Asahikosan are liable to share in the expenses of the Board of
Commissioners (BOC). The Republic and PIATCO filed separate motions for
reconsideration, while Takenaka and Asahikosan filed a joint motion for partial
reconsideration.
Issue:
1. Whether PIATCO is entitled to just compensation for the expropriation of NAIA-IPT
III and whether the Republic shall only gain ownership after full payment.
2. Whether the court correctly applied the depreciated replacement cost method in
computing just compensation and imposed interest on the unpaid amount of just
compensation.
3. Whether Takenaka and Asahikosan are entitled to set aside a portion of just
compensation to secure their claims.
4. Whether the Republic shall solely bear the expenses of the BOC.
Ruling:
1. PIATCO is entitled to just compensation for the expropriation of NAIA-IPT III and the
Republic shall only gain ownership after full payment.
2. The court correctly applied the depreciated replacement cost method in
computing just compensation and imposed interest on the unpaid amount of just
compensation.
3. Takenaka and Asahikosan are not entitled to set aside a portion of just
compensation to secure their claims.
4. The Republic shall solely bear the expenses of the BOC.
Ratio:
The Supreme Court held that PIATCO is entitled to just compensation for the expropriation
of NAIA-IPT III. The court applied the depreciated replacement cost method in computing
just compensation, which takes into account the cost of constructing a substitute facility
minus the depreciation. The court also imposed interest on the unpaid amount of just
compensation, as it is a standard practice in expropriation cases to award interest on the

computed just compensation. The court rejected the Republic's argument that PIATCO is
not entitled to the interest award due to its alleged bad faith, stating that interest should
be paid regardless of PIATCO's alleged bad faith. The court further ruled that the interest
on the unpaid compensation should accrue from the date the Republic effectively
deprived PIATCO of the ordinary use of the NAIA-IPT III.
The court denied Takenaka and Asahikosan's request to set aside a portion of just
compensation to secure their claims. The court held that their claims should be pursued
separately and cannot be deducted from the just compensation awarded to PIATCO.
Lastly, the court ruled that the Republic shall solely bear the expenses of the BOC. The
court held that the expenses incurred by the BOC in determining just compensation
should be borne by the Republic, as it is the party seeking to expropriate the property.
Odiamar vs. Valencia, GR 213582, September 12, 2018

Odiamar vs. Valencia
G.R. No. 213582. June 28, 2016.
Facts:
The case of Odiamar v. Valencia involves a dispute over a debt amounting to
P2,100,000.00. The respondent, Linda Odiamar Valencia, filed a complaint against the
petitioner, Nympha S. Odiamar, alleging that the latter owed her the said amount. The
petitioner claimed that it was her deceased parents who owed the respondent money and
that the claim should be filed in the proceedings for the settlement of their estates. The
Regional Trial Court (RTC) ruled in favor of the respondent and ordered the petitioner to
pay the amount of P1,710,049.00 plus interest, attorney's fees, litigation expenses, and
costs of suit. The petitioner appealed to the Court of Appeals (CA), which affirmed the
RTC's decision. Dissatisfied, the petitioner filed a petition for review on certiorari before
the Supreme Court.
Issue:
The main issue before the Supreme Court was whether or not the petitioner should be held
liable to the respondent for the entire debt of P2,100,000.00.
Ruling:
The Supreme Court held that the petitioner's liability to the respondent is well-
established, as the petitioner herself admitted to borrowing money from the respondent.
However, the Supreme Court clarified that the petitioner's debt amounted to only
P1,400,000.00, as opposed to the claimed P2,100,000.00. The Supreme Court also ruled
that there was no novation by substitution of debtor, as there was no express release of
the estates of the petitioner's deceased parents from their obligation. Furthermore, the
Supreme Court held that no interest was due on the loaned amount, as there was no
written agreement for interest. Therefore, the Supreme Court ordered the petitioner to pay
the remaining balance of her principal debt to the respondent, amounting to
P1,010,049.00.
Ratio:
The Supreme Court based its decision on the admission of the petitioner that she
borrowed money from the respondent. This admission established the petitioner's liability
for the debt. However, the Supreme Court clarified that the amount owed by the petitioner
was only P1,400,000.00, as opposed to the claimed P2,100,000.00. The court also
emphasized that there was no novation by substitution of debtor, as there was no express
release of the estates of the petitioner's deceased parents from their obligation. Novation
requires the consent of all parties involved, and in this case, there was no evidence of such
consent. Additionally, the Supreme Court ruled that no interest was due on the loaned
amount, as there was no written agreement for interest. Interest can only be imposed if
there is a clear agreement between the parties. Therefore, the Supreme Court ordered the
petitioner to pay the remaining balance of her principal debt to the respondent, amounting
to P1,010,049.00.
Hrs. of Jarque vs. Jarque, GR 196733, November 21, 2018

Heirs of Jarque vs. Jarque
G.R. No. 196733. November 21, 2018.
Facts:
The case involves a dispute over the ownership of an unregistered parcel of land in the
Philippines. The petitioners, who are the heirs of Roger Jarque, claim that their father
inherited the land from their grandfather and exercised ownership and possession over it.
They allege that their father mortgaged the property and later redeemed it, but it was
subsequently claimed by the respondents, who are the children of Roger's brother. The
respondents argue that their mother, who was married to Roger's father, sold the property
to a third party and later repurchased it, transferring the right of repurchase to their sister
Dominga. The lower courts ruled in favor of the petitioners, declaring them as the rightful
owners of the property. However, the Court of Appeals reversed the decision, finding that
the sale and repurchase were valid and that the respondents acquired ownership through
prescription.
Issue:
The main issue in this case is whether the petitioners or the respondents have the rightful
ownership of the disputed property.
Ruling:
The Supreme Court ruled in favor of the petitioners, declaring them as the rightful owners
of the property and rejecting the respondents' claim of ownership through prescription.
Ratio:
The Court held that the property belonged to the conjugal partnership of Roger's parents
and that there was no evidence of a partition between the heirs. As such, the property
should be considered as part of the estate of Roger's parents and should be inherited by
their heirs. The Court also found that the respondents' possession of the property was only
by mere tolerance and later became possessors in bad faith. Possession in bad faith does
not confer ownership, and the respondents cannot acquire ownership through
prescription. The Court emphasized that ownership of unregistered land can only be
acquired through prescription if the possession is in good faith and with just title. In this
case, the respondents failed to prove that they had just title to the property. Therefore, the
Court upheld the lower courts' ruling in favor of the petitioners and declared them as the
rightful owners of the disputed property.
Asian Construction and Development Corporation v. Cathay Pacific Steel

Corporation, G.R. No. 167942, June 29, 2010
Asian Construction and Development Corporation vs. Cathay Pacific Steel
Corporation
G.R. No. 167942. June 29, 2010.
Facts:
The case involves a dispute between Asian Construction and Development Corporation
(petitioner) and Cathay Pacific Steel Corporation (respondent) regarding the payment for
purchased steel bars. The petitioner made partial payments but failed to settle the
outstanding balance. The respondent sent demand letters, but no payment was made. As
a result, the respondent filed a complaint for a sum of money and damages with the
Regional Trial Court (RTC) of Antipolo City.
In its answer, the petitioner denied authorizing the purchases, claimed no demand for
payment was made, and disputed the truth of the invoices and letters. The trial court ruled
in favor of the respondent, ordering the petitioner to pay the outstanding balance, interest,
attorney's fees, and costs of the suit.
The petitioner appealed to the Court of Appeals (CA), which affirmed the trial court's
decision with modifications. The CA found that there was a specific amount of interest
agreed upon in the invoices and that the petitioner's outstanding balance should earn
interest from the date of demand. The CA also awarded attorney's fees.
The petitioner raised several issues in its appeal to the Supreme Court. It argued that it
disputed its liability in its answer and that the trial court and CA erred in admitting
photocopies of delivery receipts and the testimony of a witness. The petitioner also
contested the interest rate imposed and the award of attorney's fees.
Issue:
1. Whether the petitioner disputed its liability in its answer.
2. Whether the trial court and CA erred in admitting photocopies of delivery receipts
and the testimony of a witness.
3. Whether the interest rate imposed is proper.
4. Whether the award of attorney's fees is proper.
Ruling:
The Supreme Court found that the obligation of the petitioner was duly established
through evidence such as invoices, payments, and witness testimony. The Court upheld
the admissibility of photocopies of delivery receipts and the competence of the witness.
The Court also ruled that the interest rate stipulated in the invoices should be applied and
that the award of attorney's fees was proper.
Ratio:
The Supreme Court based its decision on the following arguments and legal basis:
The obligation of the petitioner was duly established through evidence such as invoices,
payments, and witness testimony. The Court found that the petitioner's denial of
authorizing the purchases and disputing the truth of the invoices and letters were not
supported by sufficient evidence. Therefore, the trial court's ruling in favor of the
respondent was upheld.
The Court upheld the admissibility of photocopies of delivery receipts and the
competence of the witness. The Court found that the photocopies were properly identified
and authenticated, and that the witness had personal knowledge of the transactions.
Therefore, the trial court and CA did not err in admitting the photocopies and the testimony
of the witness.
The Court ruled that the interest rate stipulated in the invoices should be applied. The
Court found that there was a specific amount of interest agreed upon in the invoices, and
therefore, the petitioner's outstanding balance should earn interest from the date of
demand.
The Court ruled that the award of attorney's fees was proper. The Court found that the
respondent was compelled to litigate and incur expenses due to the petitioner's refusal to
pay the outstanding balance. Therefore, the award of attorney's fees was justified.
In conclusion, the Supreme Court denied the petition and affirmed the decision of the CA
with the modification of fixing the attorney's fees at a specific amount. The Court
emphasized the binding nature of contracts of adhesion and the importance of parties
being aware of and objecting to stipulations they find unacceptable.
Toledo v. Hayden, G.R. No. 172139, December 8, 2010

Toledo vs. Hyden
G.R. No. 172139. December 8, 2010.
Facts:
The case involves a dispute between Jocelyn M. Toledo (petitioner) and Marilou M. Hyden
(respondent) regarding several loans obtained by Jocelyn from Marilou. These loans were
acquired between 1993 and 1997, with varying amounts and monthly interest rates
ranging from 6% to 7%. While Jocelyn made regular payments towards the interest, she
failed to fully repay the principal amount of P290,000. In April 1998, Marilou visited Jocelyn
at her office and requested her to acknowledge her debt and issue postdated checks.
Jocelyn complied and signed an "Acknowledgment of Debt" document, as well as issued
seven postdated checks. However, in October 1998, Jocelyn requested a stop payment on
the checks and filed a complaint against Marilou, alleging coercion and excessive interest
rates.
The Regional Trial Court (RTC) ruled in favor of Marilou, declaring the "Acknowledgment of
Debt" valid and ordering Jocelyn to pay the remaining principal amount of P271,100 with a
12% interest per annum. Jocelyn filed a motion for reconsideration, which was denied by
the RTC. Jocelyn then appealed to the Court of Appeals (CA), arguing that the interest rate
was excessive and the "Acknowledgment of Debt" was void. The CA affirmed the RTC's
decision. Jocelyn subsequently filed a petition for review on certiorari with the Supreme
Court.
Issue:

1. Whether the imposition of interest at the rate of 6% to 7% is contrary to law, morals,
good customs, public order, or public policy.
2. Whether the "Acknowledgment of Debt" is an inexistent contract that is void from

the very beginning.
Ruling:
The Supreme Court ruled against Jocelyn, affirming the decisions of the lower courts.
Ratio:
In addressing the first issue, the Supreme Court found that the interest rate of 6% to 7%
per month was not excessive under the circumstances. The court cited Central Bank
Circular No. 905, which suspended the Usury Law ceiling on interest rates, allowing
parties to stipulate interest rates. However, the court also noted that stipulated interest
rates could be declared illegal if they were unconscionable. In this case, the court found
that the interest rate was not iniquitous or unconscionable, considering the nature of the
loan transactions and Jocelyn's awareness of the interest rate. The court also highlighted
that Jocelyn had benefited from the loans for several years and had made regular
payments towards the interest.
Regarding the validity of the "Acknowledgment of Debt," the court found that Jocelyn was
estopped from questioning its validity. Jocelyn had willingly signed the document and had
even used the loaned amounts for her business purposes. The court emphasized that a
party cannot deny the validity of a contract after enjoying its benefits. The court concluded
that Jocelyn's claims of coercion and the excessive interest rate were unfounded.
Therefore, the Supreme Court denied Jocelyn's petition and affirmed the decisions of the
lower courts, declaring the "Acknowledgment of Debt" valid and ordering Jocelyn to pay
the remaining principal amount with the agreed interest rate.
Lara's Gifts & Decors, Inc. v. Midtown Industrial Sales, Inc., G.R. No. 225433 (En
Banc), August 28, 2019
Lara's Gifts & Decors, Inc. vs. Midtown Industrial Sales, Inc.
G.R. No. 225433. August 28, 2019.
Facts:
The case involves a dispute between petitioner Lara's Gifts & Decors, Inc. (petitioner) and
respondent Midtown Industrial Sales, Inc. (respondent). Petitioner purchased various
industrial and construction materials from respondent on a sixty-day credit term. The
purchases amounted to P1,263,104.22 and were subject to a 24% interest per annum on
all accounts overdue. Petitioner issued postdated checks as payment for the materials,
but the checks bounced. After repeated demands, petitioner replaced the bounced
checks with new postdated checks, which were also dishonored. Respondent then filed a
complaint for sum of money with prayer for attachment against petitioner.
The trial court ruled in favor of respondent, ordering petitioner to pay the principal amount
of P1,263,104.22 plus interest at 24% per annum from the date of judicial demand until
full payment. The trial court also awarded attorney's fees in the amount of P50,000.00.
On appeal, the Court of Appeals affirmed the decision of the trial court. The Court of
Appeals held that petitioner failed to prove that the materials delivered by respondent
were substandard and of poor quality. The Court of Appeals also found that the stipulated
24% interest per annum was not unconscionable and should be applied.
Petitioner raised several issues in its petition for review, including the admissibility of the
sales invoices, whether petitioner was in default of its contractual obligations, the
applicability of certain articles of the Civil Code, the validity of the 24% interest rate, and
the duration of the interest rate.
The Supreme Court found the petition without merit and affirmed the decision of the Court
of Appeals with modification. The Court held that petitioner's admission of the existence
of the sales invoices in its answer constituted an admission of their genuineness and due
execution. The Court also held that petitioner failed to prove that the materials delivered
were substandard and of poor quality. The Court upheld the validity of the 24% interest
rate, as it was expressly stipulated in the sales invoices and petitioner, an established
company, could have negotiated for more favorable terms. The Court further held that the
interest rate should be applied until full payment of the obligation. The Court also modified
the interest rate on the attorney's fees, applying the prevailing legal interest rate of 6% per
annum from the finality of the decision until full payment.
Issue:
The main issue in this case is the validity and applicability of the 24% interest rate on the
principal obligation.
Ruling:
The Supreme Court ruled that the 24% interest rate is valid and should be applied until full
payment of the obligation. The Court held that the interest rate was expressly stipulated in
the sales invoices and petitioner, an established company, could have negotiated for more
favorable terms. The Court also modified the interest rate on the attorney's fees, applying
the prevailing legal interest rate of 6% per annum from the finality of the decision until full
payment.
Ratio:
The court provides comprehensive guidelines for the determination of conscionable
interest rates in contracts and emphasizes the importance of parity and fairness between
the parties. The court acknowledges that parties are free to set the interest rate in their
loan contract, but emphasizes that the validity of the interest rate is granted under the
assumption that there is parity between the parties and that the interest rate is not
unconscionable. The court states that any contract heavily weighed in favor of one party
and leading to an unconscionable result is void. It also states that any stipulation regarding
the validity or compliance of the contract that is left solely to the will of one party is invalid.
The court further explains that there are imperfections in the loan market, where one party
may have more bargaining power than the other. In such cases, the state must step in to
correct market imperfections resulting from unequal bargaining positions. The court
emphasizes that in stipulating interest rates, parties must ensure that the rates are neither
iniquitous nor unconscionable.
The court also clarifies that there is no hard and fast rule in determining whether an
interest rate is unconscionable, as it may vary depending on the parties' contexts and the
circumstances in which the interest rate was applied. The court provides examples of
cases where interest rates were found to be unconscionable and cases where they were
upheld as valid.
The court further explains that interest can also function as a form of penalty or indemnity
for damages. It states that interest may be stipulated by the parties as a consequence of
delay, or it may be imposed by the courts for breach of contract. The court cites relevant
articles of the Civil Code that govern the imposition of interest in these situations.
The court also discusses the application of interest on interest, stating that it is only
applicable to stipulated or conventional interest. It clarifies that interest due under Article
2212 of the Civil Code refers to accrued stipulated or conventional interest. The court cites
previous cases to support its interpretation of this provision.
The court concludes by stating that the maximum interest rate that will not cross the line
of conscionability is "not more than twice the prevailing legal rate of interest." If the
stipulated interest exceeds this standard, the creditor must show that the rate is
necessary under current market conditions or that the parties were on an equal footing
when they stipulated on the interest rate. The court also clarifies that if the monetary
interest rate is found to be unconscionable, only the rate is nullified and deemed not
written into the contract, while the parties' agreement on the payment of interest remains.
In such instances, the legal rate of interest prevailing at the time the agreement was
entered into is applied by the courts.
Lara's Gifts & Decors, Inc. v. Midtown Industrial Sales, Inc., G.R. No. 225433 (En
Banc) (Resolution), September 20, 2022
Lara's Gifts & Decors, Inc. vs. Midtown Industrial Sales, Inc.
G.R. No. 225433. September 20, 2022.
Facts:
The case involves a dispute between Lara's Gifts & Decors, Inc. (Lara's Gifts) and Midtown
Industrial Sales, Inc. (Midtown) over the payment of industrial and construction materials
purchased on credit. Lara's Gifts purchased various materials from Midtown from January
to December 2007, amounting to P1,263,104.22. The purchases were on a 60-day credit
term, with a 24% per annum interest charged on overdue accounts. Lara's Gifts issued
post-dated checks to pay for the purchases, but the checks were later dishonored.
Midtown demanded payment through a demand letter, but Lara's Gifts failed to pay. As a
result, Midtown filed a complaint for a sum of money with prayer for attachment.
Issue:
1. Whether Lara's Gifts received a demand letter from Midtown.
2. Whether Lara's Gifts can prove that the materials purchased were substandard.
3. Whether the 24% interest rate charged by Midtown is excessive and
unconscionable.
4. Whether legal interest can be imposed on the compensatory interest.
Ruling:
The Supreme Court denied Lara's Gifts' petition and affirmed the decisions of the lower
courts. The court held that Lara's Gifts' general denial amounted to an admission of the
genuineness and due execution of the sales invoices. The court also found that Lara's Gifts
failed to prove its claim of substandard materials. Furthermore, the court ruled that the
24% interest rate was valid and binding on Lara's Gifts. However, the court modified the
decision by deleting the imposition of legal interest on the compensatory interest.
Ratio:
The court explained that interest on interest is fixed by law and is applicable to
compensatory interest. It clarified that legal rates, including interest on accrued interest
and regular compensatory interest, are not subject to reduction or deletion based on the
unconscionability standard. The court emphasized that legal rates prescribed by law must
be applied as they are, and any reduction or deletion would go against the express
provisions of the Civil Code.
The court also addressed Lara's Gifts' argument that it did not receive any demand letter.
The court held that Lara's Gifts' general denial amounted to an admission of the
genuineness and due execution of the sales invoices, which included the demand for
payment.
Regarding Lara's Gifts' claim of substandard materials, the court found that Lara's Gifts
failed to present sufficient evidence to prove its claim. The court upheld the lower courts'
findings that there was insufficient evidence to support Lara's Gifts' allegations.
In relation to the 24% interest rate, the court ruled that it was valid and binding on Lara's
Gifts. The court held that the interest rate was stipulated in the contract and was within
the bounds of reasonableness.
However, the court modified the decision by deleting the imposition of legal interest on the
compensatory interest. The court held that the judgment award already included interest
at 24% per annum, computed from the date of judicial demand until fully paid. Therefore,
the additional award of legal interest on the 24% per annum compensatory interest was
deemed ultra vires.
In conclusion, the Supreme Court partially granted the motion for reconsideration,
deleting the imposition of legal interest on the compensatory interest. The court affirmed
the awards of the principal amount, stipulated interest, attorney's fees, and costs of the
suit, with the total monetary award bearing legal interest at the rate of 6% per annum from
the finality of the decision until full payment.
Lara's Gifts & Decors, Inc. v. Metro, Inc., G.R. No. 218651 (Notice), August 30,
2023
NO DIGEST YET
5. Presumptions (1176)
Manila Trading & Supply Co. vs. Medina (2 SCRA 549)
Manila Trading & Supply Co. vs. Medina
G.R. No. L-16477. May 31, 1961.
Facts:
The case of Manila Trading & Supply Co. v. Medina involves a dispute between Manila
Trading & Supply Co. and Mariano Medina. Prior to May 7, 1956, Medina had several
accounts with Manila Trading & Supply Co. These accounts were consolidated into a total
balance of P60,000.00, for which Medina executed a promissory note. The note provided
for monthly installments of P4,000.00 plus interest. In January 1957, Manila Trading &
Supply Co. filed a complaint against Medina for his failure to pay the installments due on
the note. A writ of attachment was issued and levied upon eleven of Medina's buses.
Medina admitted the allegations of the complaint regarding the execution of the note, the
failure to pay the installments, and the maturity of the balance due. However, he claimed
that he had made additional payments and presented ten receipts as evidence. The trial
court doubted the authenticity of the receipts and ruled in favor of Manila Trading & Supply
Co., ordering Medina to pay the balance due on the note plus interest, but reducing the
attorney's fees. Medina appealed the decision.
Issue:
The main issue in the case is the authenticity and validity of the additional receipts
presented by Medina as evidence of payment towards the promissory note.
Ruling:
The Supreme Court, upon examination of the evidence, found that the disputed receipts
were not for payments made on the dates claimed by Medina and were not chargeable to
the balance of the promissory note. The court noted several inconsistencies and
differences between the disputed receipts and the genuine receipts admitted by Manila
Trading & Supply Co. The court also considered the fact that Medina's answer had
expressly admitted the balance due and his failure to meet the monthly installments. The
court concluded that the trial court's rejection of the genuineness and validity of the
disputed receipts was not an error.
The court further ruled that the genuine receipts dated January 1957 did not raise the
presumption that prior installments were paid, as they did not specify that they were
issued for the installments corresponding to that month. Even if such recital had been
made, the resulting presumption would only be prima facie, and the evidence showed that
the payments made did not correspond to the installment falling due on the dates of the
genuine receipts.
Therefore, the Supreme Court affirmed the judgment of the trial court, ordering Medina to
pay the balance due on the note plus interest, and awarded costs against him.
Ledesma vs. Realubin (8 SCRA 608)

Ledesma vs. Realubin
G.R. No. L-18335. July 31, 1963.
Facts:
The case of Ledesma v. Realubin involves a dispute between Salud Ledesma and Alberto
Realubin over unpaid gasoline purchases. Salud Ledesma purchased gasoline and motor
oil on credit from Alberto Realubin's Caltex service station in Baguio City from June to
September 1956. The total amount of the purchases was P2,790.60. The purchases were
invoiced in the same printed form, which included a provision for a 1% monthly charge for
overdue accounts and an additional 25% for attorney's fees and collection costs. The
invoices also stated that the courts of Baguio would have exclusive jurisdiction over any
litigation arising from the transaction.
Salud Ledesma denied making the purchases and argued that her truck drivers did not
have the authority to purchase gasoline on her behalf. However, during the trial, it was
admitted that the drivers had the authority to sign the invoices. Salud Ledesma claimed
that she had fully paid the amounts that the plaintiff was collecting from her. She
presented her testimony and pink copies of the invoices as evidence of payment. She also
contended that a handwritten letter, in which she expressed her intention to settle her
account, was a forgery.
The trial court found in favor of Alberto Realubin, and the Court of Appeals affirmed the
decision with certain modifications. Salud Ledesma appealed to the Supreme Court.
Issue:
The main issues raised in the case are: (1) whether the presumption of payment can prevail
over evidence of non-payment, (2) whether the Court of Appeals can increase attorney's
fees despite the winning party not appealing on that issue, and (3) whether the interest on
the main indebtedness can be increased without the creditor's appeal.
Ruling:
The Supreme Court ruled that the presumption of payment cannot prevail over the proven
fact of non-payment. Alberto Realubin presented evidence that the prior purchases were
not paid, and the Court of Appeals found this to be a fact. Therefore, the presumption of
payment cannot be applied.
The Court also held that the Court of Appeals can increase attorney's fees even if the
winning party did not appeal on that issue. The fees determined by the trial court did not
include the service of counsel on appeal, and the Court of Appeals has the authority to fix
counsel fees in accordance with justice and equity.
However, the Supreme Court found that the Court of Appeals erred in increasing the
interest on the main indebtedness from 6% to 12%. Salud Ledesma did not appeal from
the trial court's decision, which awarded 6% interest. Therefore, her failure to appeal
signified her assent to the rate fixed by the trial judge.
Ratio:
The Supreme Court based its decision on the evidence presented during the trial. Alberto
Realubin was able to prove that the prior purchases were not paid, which disproved Salud
Ledesma's claim of full payment. Therefore, the presumption of payment cannot prevail
over the proven fact of non-payment.
Regarding the issue of attorney's fees, the Court held that the Court of Appeals has the
authority to increase attorney's fees even if the winning party did not appeal on that issue.
The fees determined by the trial court did not include the service of counsel on appeal,
and it is within the Court of Appeals' power to fix counsel fees in accordance with justice
and equity.
However, the Court found that the Court of Appeals erred in increasing the interest on the
main indebtedness. Salud Ledesma did not appeal from the trial court's decision, which
awarded 6% interest. Therefore, her failure to appeal signified her agreement to the rate
fixed by the trial judge.
In conclusion, the Supreme Court affirmed the decision of the Court of Appeals with the
modification that the main award shall earn interest at the legal rate from July 18, 1959,
until fully paid.
6. Remedies of Creditors for Breach of Obligations

i. Extrajudicial Remedies (1526, et seq.; 1592; 1593)
ii. Judicial Remedies
a. Principal Remedies
a.1. Specific Performance, Substitute Performance; Equivalent

Performance (1165; 1167; 1168; 1170)
a.2. Rescission (Resolution) (1191)
b. Subsidiary Remedies
b.1. Accion Subrogatoria (1177)
b.2. Accion Pauliana
c. Ancillary Remedies (replevin, attachment, garnishment, etc.)
Siy vs. CA (138 SCRA 536)

Siy vs. Court of Appeals
G.R. No. L-39778. September 13, 1985.
Facts:
The case involves a petition for review seeking to annul and set aside the decision of the
Court of Appeals, which affirmed the trial court's decision ordering the rescission of a
contract of sale between the petitioner, Virgilio Siy, and the respondents, Sergio Valdez
and Virginia Valdez. The dispute arose from subsequent agreements executed by the
parties after the initial contract of sale.
The first agreement was a Deed of Conditional Sale, where the respondents agreed to sell
the property to the petitioner for P22,000.00, subject to the condition that upon the
approval of the petitioner's loan with the Social Security System (SSS) and its payment to
the respondents, the vendors would execute a deed of absolute sale. The parties then
executed a Deed of Sale with Assumption of Mortgage, as the property was mortgaged to
the Government Service Insurance System (GSIS). However, the respondents had not
received any payment from the petitioner at that time.
Subsequently, the parties executed three more contracts, with the last agreement
providing that the respondents would receive a partial amount of P12,000.00, with the
balance of P4,376.00 to be paid within forty-five days. However, the petitioner failed to
make the required payments within the deadline.
The petitioner then filed an action for specific performance, seeking to compel the
respondents to execute the deed of absolute sale and other documents required by the
SSS for the release of the approved loan. The trial court initially ruled in favor of the
petitioner, but upon motion for reconsideration by the respondents, another decision was
rendered in favor of the respondents, ordering the rescission of the contracts.
On appeal, the Court of Appeals affirmed the trial court's decision.

Issue:
1. Whether the trial court had jurisdiction to render the second decision after the first
decision was set aside.
2. Whether the trial court erred in ordering the rescission of the contracts and the
payment of damages and attorney's fees.
Ruling:
The Supreme Court held that the motions for reconsideration filed by the respondents
were not pro forma, as they were meant to point out the findings and conclusions of the
decision that they believed were not supported by law or evidence. The second motion for
reconsideration was considered a supplementary pleading, not a separate motion for
reconsideration. Therefore, the trial court did not lose jurisdiction when it rendered the
second decision.
Regarding the second issue, the Supreme Court held that the respondents were entitled
to rescind the contracts due to the petitioner's breach of contract. The petitioner failed to
make the required payments within the agreed-upon deadlines. The court also upheld the
payment of attorney's fees, considering the circumstances that compelled the
respondents to litigate for the protection of their interests. However, the court found the
award of damages in the amount of P4,376.00 unwarranted, as it included a penalty
clause and part of the purchase price, which was already rescinded. The court ordered the
petitioner to vacate the property and pay monthly rentals of P50.00 with interest from
March 1963 until he vacates the premises.
Ratio:
The motions for reconsideration filed by the respondents were not pro forma, as they were
meant to point out the findings and conclusions of the decision that they believed were
not supported by law or evidence. The second motion for reconsideration was considered
a supplementary pleading, not a separate motion for reconsideration. Therefore, the trial
court did not lose jurisdiction when it rendered the second decision.
The respondents were entitled to rescind the contracts due to the petitioner's breach of
contract. The petitioner failed to make the required payments within the agreed-upon
deadlines. The court also upheld the payment of attorney's fees, considering the
circumstances that compelled the respondents to litigate for the protection of their
interests. However, the court found the award of damages in the amount of P4,376.00
unwarranted, as it included a penalty clause and part of the purchase price, which was
already rescinded. The court ordered the petitioner to vacate the property and pay monthly
rentals of P50.00 with interest from March 1963 until he vacates the premises.
Molina vs. CA (G.R. No. 125755, Feb. 24, 2003)

Molina vs. Court of Appeals
G.R. No. 125755. February 24, 2003.
Facts:
The case of Molina v. Court of Appeals involves a dispute over a Deed of Absolute Sale for
a parcel of land in Naic, Cavite. The petitioner, Pedro Molina, was a co-owner of the land
and executed a Deed of Sale in 1984, conveying his share to his sister, Felisa. However,
more than four years later, upon the request of his sister, Molina executed another Deed
of Absolute Sale in favor of Felisa's son, Margarito Flores, and his wife. Molina then filed
an action for reformation of instrument and/or annulment of document and title with
reconveyance and damages, alleging that the Deed of Absolute Sale did not express the
true will and intention of the parties. The trial court ruled in favor of Molina, but the Court
of Appeals reversed the decision and dismissed Molina's complaint.
Issue:
The main issue in the case is whether the Deed of Absolute Sale should be considered an
equitable mortgage or a valid sale.
Ruling:
The court ruled in favor of the latter, finding that the parties to the Deed were fully aware of
its contents and meaning. There were no acts or events that occurred before, during, or
after the execution of the Deed that would indicate a different intention than to sell the
property to the respondent spouses. The court also noted that the alleged inadequacy of
the price and the petitioner's receipt of rentals from the property did not support the
conclusion that the contract was one of a loan. The court further held that the non-
payment of the entire purchase price did not bar the transfer of ownership or possession
of the property, but rather, it was a resolutory condition that could be remedied through
fulfillment or rescission of the contract.
Ratio:
The court based its ruling on the provisions of the Civil Code, particularly Articles 1602 and
1604, which define an equitable mortgage and provide for the presumption of an equitable
mortgage in certain cases. The court found that the second requisite for the presumption
of an equitable mortgage was absent in this case, as the transaction was clearly a sale on
installment rather than a loan. The court also considered the surrounding circumstances,
such as the regular receipt of rentals by the petitioner and the execution of receipts
acknowledging payment for the property, which supported the conclusion that the
transaction was a valid sale. Therefore, the court affirmed the decision of the Court of
Appeals and dismissed the petitioner's complaint.
Lim vs. CA (263 SCRA 569)

Lim vs. Court of Appeals
G.R. No. 118347. October 24, 1996.
Facts:
The case of Lim v. Court of Appeals involves a contract of sale between the petitioners,
Vicente and Michael Lim, and the respondent, Liberty H. Luna, for a piece of land in
Quezon City. The contract stated that the purchase price was P4,000,000, with P200,000
paid as earnest money. The contract also included a condition that the squatters on the
land should be ejected within 60 days. If the condition was not met, the earnest money
would be refunded to the buyers.
Private respondent Luna failed to eject the squatters despite her alleged efforts to do so.
The parties then met to negotiate a price increase to facilitate the ejectment of the
squatters. They agreed to increase the purchase price to P4,000,000, with the remaining
13.6 square meters given as a discount. Private respondent later tried to return the earnest
money, claiming that she no longer had the obligation to sell the land due to her failure to
eject the squatters. Petitioners refused to accept the refund, and private respondent filed
a complaint for consignation.
Issue:
The main issue in the case is whether the failure to eject squatters invalidates a contract
of sale and relieves the seller of the obligation to sell the land.
Ruling:
The Supreme Court ruled that the failure to eject squatters does not invalidate a contract
of sale. The court held that there was a perfected contract of sale between the parties and
that the failure to eject the squatters was a condition imposed on the performance of the
obligation, not on the perfection of the contract. Therefore, the buyers had the right to
choose whether to demand the return of the earnest money or to proceed with the sale.
Ratio:
The court based its decision on the interpretation of the contract of sale. The contract
clearly stated that the squatters should be ejected within 60 days as a condition for the
sale. However, the court emphasized that this condition was not essential to the
perfection of the contract, but rather to the performance of the obligation. The court
explained that the failure to eject the squatters did not render the contract void or
unenforceable, but rather gave the buyers the option to proceed with the sale or demand
a refund of the earnest money.
The court also considered the actions of the private respondent in determining the
outcome of the case. The court found that private respondent had made little more than
token effort to eject the squatters, revealing her intention to get out of the contract. Her
failure to seek the assistance of courts in ejecting the squatters and her insistence on
rescinding the sale showed her lack of intention to comply with her obligation. Therefore,
the court held private respondent guilty of breach of contract.
In terms of damages, the court awarded moral damages and attorney's fees to the
petitioners. However, the court reduced the amount of moral damages awarded to
P100,000, considering that moral damages are not intended to enrich the complainant at
the expense of the defendant. The court agreed with the award of attorney's fees, as
private respondent's position was clearly unfounded and she acted in bad faith in refusing
to satisfy the petitioners' claim.
Deiparine, Jr. vs. CA (221 SCRA 503)

Deiparine, Jr. vs. Court of Appeals
G.R. No. 96643. April 23, 1993.
Facts:
The case of Deiparine, Jr. v. Court of Appeals involves a construction contract dispute
between Ernesto Deiparine, Jr. and the spouses Cesario and Teresita Carungay. The
Carungays entered into an agreement with Deiparine for the construction of a three-story
dormitory in Cebu City. The contract stated that Deiparine would build the structure in
strict accordance with the plans and specifications provided. Nicanor Trinidad, Jr., a civil
engineer, was designated as the Carungays' representative to inspect and coordinate with
the contractor.
During the construction, Trinidad reported to Cesario Carungay that Deiparine was
deviating from the plans and specifications, compromising the strength and safety of the
building. Carungay ordered Deiparine to secure approval before pouring cement, but this
order was ignored. Carungay then sent a memorandum complaining about the faulty
construction works, but this was also ignored. The parties agreed to conduct cylinder tests
to determine if the structure complied with safety standards. However, Carungay insisted
on core testing, which Deiparine vehemently refused.
The core testing was eventually conducted by Geo-Testing International, and the results
showed that the building was structurally defective. The Carungays filed a complaint for
rescission of the construction contract and damages. Deiparine argued that the court had
no jurisdiction over construction contracts and that the contract did not require any
specific compressive strength or stress test. The trial court ruled in favor of the Carungays,
declaring the contract rescinded and ordering Deiparine to reimburse expenses, demolish
the structure, and pay damages and attorney's fees. The decision was affirmed by the
appellate court.
Issue:
The main issues raised in the case are the jurisdiction of the regular courts over
construction contract disputes and the power of the trial court to grant rescission.
Ruling:
The court ruled that the regular courts have jurisdiction over construction contract
disputes, as the Philippine Domestic Construction Board's adjudicatory powers only apply
to public construction contracts. The court also held that the trial court correctly applied
Article 1191 of the Civil Code, which grants the injured party the right to rescind a contract
in case of breach of faith by one of the parties. In this case, Deiparine's failure to follow the
stipulated plans and specifications constituted a breach of faith, giving the Carungays the
right to rescind the contract.
Ratio:
The court further explained that Article 1385, which Deiparine relied on, only applies to
rescission of specific contracts enumerated in the Civil Code, and the construction
contract is not one of them. The court also rejected Deiparine's argument based on Article
1725, which contemplates voluntary withdrawal by the owner without fault on the part of
the contractor. In this case, the Carungays were forced to seek judicial rescission due to
Deiparine's failure to comply with the contract.
In conclusion, the court affirmed the decision of the lower courts, ruling in favor of the
Carungays and granting rescission of the construction contract. The court emphasized the
importance of acting in good faith and complying with contractual obligations, as stated
in Article 19 and Article 1159 of the Civil Code. The court also fined Deiparine's counsel for
deliberately misquoting the law and warned against further misconduct.
Velarde vs. CA (361 SCRA 56)

Sps. Velarde vs. Court of Appeals
G.R. No. 108346. July 11, 2001.
Facts:
The case involves a deed of sale with assumption of mortgage entered into by the
petitioners, Mariano and Avelina Velarde, and the respondents, David and George
Raymundo. The petitioners paid a downpayment of P800,000 and assumed the mortgage
amount of P1.8 million in favor of the Bank of the Philippine Islands (BPI). The petitioners
also agreed to comply with all the terms and conditions of the real estate mortgage as if
they were the original signatories. However, when the bank denied the application for
assumption of mortgage, the petitioners stopped making payments. As a result, the
respondents sent a notice of cancellation/rescission to the petitioners. The petitioners
filed a complaint against the respondents for specific performance, nullity of cancellation,
writ of possession, and damages. The trial court initially dismissed the complaint but later
directed the parties to proceed with the sale. On appeal, the Court of Appeals upheld the
validity of the rescission.
Issue:
The main issue in this case is whether the failure of the petitioners to pay the balance of
the purchase price constitutes a breach of contract that justifies rescission.
Ruling:
The court ruled that the petitioners' nonpayment of the balance of the purchase price is a
breach of their reciprocal obligation and gives rise to the respondents' right to rescind the
contract. The court also held that the automatic rescission and forfeiture of payment
clauses in the mortgage contract do not apply. Instead, mutual restitution is required. The
court ordered the respondents to return the amount paid by the petitioners as a
consequence of the rescinded contract.
Ratio:
The court based its ruling on the principle of reciprocal obligations. In a contract of sale,
both parties have reciprocal obligations. The seller is obligated to deliver the thing sold,
while the buyer is obligated to pay the purchase price. In this case, the petitioners failed
to fulfill their obligation to pay the balance of the purchase price. This failure constitutes a
breach of contract.
The court also considered the terms and conditions of the real estate mortgage. While the
mortgage contract contained automatic rescission and forfeiture of payment clauses, the
court held that these clauses do not apply in this case. Instead, the court emphasized the
principle of mutual restitution. Mutual restitution requires the parties to return to each
other the things they have received under the contract. In this case, the respondents must
return the amount paid by the petitioners as a consequence of the rescinded contract.
Overall, the court upheld the validity of the rescission and ordered the respondents to
return the amount paid by the petitioners. This decision is based on the breach of contract
by the petitioners and the principle of mutual restitution.
Campos Assets Corp. vs. Club X.O. Company (328 SCRA 520)
Campo Assets Corp. vs. Club X.O. Company
G.R. No. 134986. March 17, 2000.
Facts:
The case of Campo Assets Corp. v. Club X.O. Company involves a dispute over the
possession of a leased property in Pasay City, Philippines. The petitioner, Campo Assets
Corporation, claimed possession of the premises based on the alleged abandonment by
the lessee, Alma Arambulo. On the other hand, the respondent, Club X.O. Company, filed
a complaint for forcible entry to recover possession of the premises. The Metropolitan Trial
Court (MTC) dismissed the case for lack of merit, a decision that was affirmed by the
Regional Trial Court (RTC). However, the Court of Appeals reversed the decision of the
lower courts, ruling that Club X.O. had a cause of action against Campo Assets.
Issue:
The main issue raised in the case is whether Paragraph VI of the Memorandum of
Agreement between Campo Assets and Arambulo, which allows Campo Assets to enter
and take possession of the premises in case of abandonment, is void for being against
public order.
Ruling:
The Supreme Court ruled in favor of Campo Assets. The Court held that the forcible entry
case against Campo Assets must fail because Club X.O. is not even a privy to the contract
of lease between Arambulo and Campo Assets. The Court also found that Arambulo had
abandoned the premises, giving Campo Assets the right to retake possession. Therefore,
Club X.O. cannot claim a better right than Arambulo, who had already lost her right to
retake possession. The decision of the Court of Appeals was set aside and reversed, and
the decision of the RTC was reinstated.
Ratio:
The Court discussed the validity of stipulations in lease contracts that allow the lessor to
enter and take possession of the leased premises without judicial action upon a breach of
the lease contract by the lessee. The Court upheld the validity of such stipulations as long
as they are not contrary to law, morals, good customs, public policy, or public order.
However, the Court noted that allowing the use of unqualified force to repossess the
property and without notice upon the lessee is legally vulnerable and undermines the
philosophy behind the remedy of forcible entry. In this case, the Court found that Campo
Assets had the right to retake possession of the premises due to Arambulo's
abandonment, but emphasized that the use of force should be qualified and reasonable.
Philippine National Construction Corporation vs. Mars Construction

Enterprises, Inc. ( 325 SCRA 624)
Philippine National Construction Corp. vs. Mars Construction Enterprises, Inc.
G.R. No. 133909. February 15, 2000.
Facts:
The case involves a subcontract dispute between Philippine National Construction
Corporation (PNCC) and Mars Construction Enterprises, Inc. The subcontract was for the
supply of approximately 70,000 cubic meters of aggregates consisting of washed sand,
washed 3/4" gravel, washed 1-1/2" gravel, and sub-base. The contract included a default
clause that allowed PNCC to procure the aggregates from other sources if Mars
Construction failed to deliver. The contract was later amended to specify the quantities of
each type of aggregate to be delivered.
After several deliveries of aggregates, PNCC refused to accept a delivery of 17,000 cubic
meters of washed 1-1/2" gravel from Mars Construction. Mars Construction filed a lawsuit
for breach of contract against PNCC. The trial court ruled in favor of Mars Construction,
finding that the amendment made the agreement ambiguous and that the quantities
specified in the amendment were the minimum amounts to be delivered by Mars
Construction. The court ordered PNCC to accept and pay for the delivery of the 17,000
cubic meters of gravel and awarded lost profits to Mars Construction. The Court of
Appeals affirmed the ruling of the trial court.
Issue:
The main issue in this case is whether PNCC is obligated to accept and pay for the delivery
of the 17,000 cubic meters of washed 1-1/2" gravel from Mars Construction.
Ruling:
The Supreme Court held that PNCC is obligated to accept and pay for the delivery of the
17,000 cubic meters of washed 1-1/2" gravel from Mars Construction. The court found that
PNCC had already been compensated for Mars Construction's defaults through penalties
imposed for the cost of procuring materials from other sources. Therefore, the defaults
could not be considered a substantial breach that justified the rescission of the contract.
The court also held that PNCC's exercise of options in case of delay or default constituted
a waiver of its right to rescind the contract. The court affirmed the award of lost profits to
Mars Construction.
Ratio:
The Supreme Court explained that the various stipulations in a contract should be
interpreted together and ambiguous ones should be construed to conform to the sense
that would result if all the provisions are comprehended jointly. In this case, the court
found that the amendment to the contract made the agreement ambiguous, and
therefore, the quantities specified in the amendment should be interpreted as the
minimum amounts to be delivered by Mars Construction.
The court also emphasized that doubts in contracts should be settled in favor of the
greatest reciprocity of interests. In this case, PNCC had already been compensated for
Mars Construction's defaults through penalties, and rescinding the contract would not be
in the best interest of both parties.
Furthermore, the court stated that a contract cannot be unilaterally cancelled or

rescinded by one party on account of infractions by the other party. Judicial action is
necessary for the rescission of a contract to determine if it was proper. In this case, PNCC
did not seek judicial action to rescind the contract, and therefore, it was still obligated to
accept and pay for the delivery of the 17,000 cubic meters of washed 1-1/2" gravel from
Mars Construction.
Based on these principles, the Supreme Court ruled in favor of Mars Construction and
affirmed the lower court's decision to order PNCC to accept and pay for the delivery of the
17,000 cubic meters of washed 1-1/2" gravel and award lost profits to Mars Construction.
DBP vs. CA ( 344 SCRA 492)

Development Bank of the Philippines vs. Court of Appeals
G.R. No. 137557. October 30, 2000.
Facts:
The case involves a petition for review on certiorari of the decision and resolution of the
Court of Appeals affirming with modification the decision of the Regional Trial Court. The
petitioner, Development Bank of the Philippines (DBP), sold a parcel of land to the
respondent spouses, Nilo and Esperanza De La Peña, under a Deed of Conditional Sale.
The Deed stipulated that the balance of the purchase price would be paid in six years on a
semi-annual amortization plan at 18% interest per annum. The De La Peña spouses made
several payments, but failed to pay on the scheduled dates. DBP demanded payment of
the remaining balance, including interests and penalty charges. The De La Peña spouses
proposed a settlement, but the parties failed to reach an agreement. The De La Peña
spouses then filed a complaint for specific performance and damages with injunction. The
trial court dismissed the complaint, but issued a permanent injunction against DBP. The
Court of Appeals affirmed the trial court's decision with modification.
Issue:
The main issue in this case is whether the penalty charges imposed by DBP are
unconscionable and whether the De La Peña spouses are entitled to an injunction to
protect their rights and interests in the land.
Ruling:
The Supreme Court ruled in favor of the De La Peña spouses. The Court held that the
stipulation in the Deed of Conditional Sale regarding the amount of semi-annual
amortizations should be interpreted in favor of the De La Peña spouses, as the contract
was a contract of adhesion prepared by DBP. The Court also held that DBP's unqualified
acceptance of late payments constituted a waiver of its right to rescind the contract.
However, the Court found the interests and penalty charges imposed by DBP to be
excessive and reduced the additional interest to 10% per annum. The Court affirmed the
issuance of the injunction to protect the rights and interests of the De La Peña spouses in
the land.
Ratio:
The Supreme Court based its decision on the interpretation of the Deed of Conditional
Sale and the principle of contract interpretation in favor of the party who did not prepare
the contract. Since the Deed was prepared by DBP and was a contract of adhesion, any
ambiguity or doubt in the contract should be resolved in favor of the De La Peña spouses.
The Court also considered DBP's unqualified acceptance of late payments as a waiver of
its right to rescind the contract, as it showed DBP's intention to continue with the contract
despite the late payments.
Furthermore, the Court found the penalty charges imposed by DBP to be excessive and
unconscionable. While the Court recognized DBP's right to impose penalty charges for late
payments, it held that the amount of penalty charges should be reasonable and
proportionate to the delay in payment. In this case, the Court found the penalty charges to
be excessive and reduced the additional interest to 10% per annum.
Lastly, the Court affirmed the issuance of the injunction to protect the rights and interests
of the De La Peña spouses in the land. The Court recognized that the De La Peña spouses
had a valid and existing contract with DBP, and that their rights and interests in the land
should be protected pending the resolution of the case. The Court held that the permanent
injunction was necessary to prevent irreparable harm to the De La Peña spouses and to
maintain the status quo while the case was being litigated.
In summary, the Supreme Court ruled in favor of the De La Peña spouses, finding the
penalty charges imposed by DBP unconscionable and reducing them, while also affirming
their right to an injunction to protect their rights and interests in the land.
Central Bank of the Philippines vs. Bichara (328 SCRA 807)

Central Bank of the Philippines vs. Spouses Bichara
G.R. No. 131074. March 27, 2000.
Facts:
This case involves a dispute between the Central Bank of the Philippines (petitioner) and
spouses Alfonso and Anacleta Bichara (respondents) over a contract of sale. The
respondents sold two lots to the petitioner, and a new Transfer Certificate of Title (TCT)
was issued in the petitioner's name. However, the petitioner did not immediately pay the
respondents despite the issuance of the title. The petitioner justified the delay in payment
due to the respondents' breach of several conditions in the contract.
Issue:
The main issue in this case is whether the respondents have the right to rescind the
contract of sale or if the petitioner's delay in payment is justified.
Ruling:
The court found in favor of the petitioner and ruled that the respondents' breach of
contract justifies the petitioner's delay in payment. The court denied the respondents'
claim for rescission of the contract.
Ratio:
The court explained that the right to rescind a contract involving reciprocal obligations is
provided for in Article 1191 of the Civil Code. The law allows the "injured party" to choose
between rescission or fulfillment of the obligation, with the payment of damages in either
case.
In this case, the petitioner argued that it was not obliged to pay the purchase price until
the respondents filled up the lots with escombro free from waste materials as stipulated
in the contract. The court agreed with the petitioner's argument and found that the
respondents' failure to perform an essential obligation under the contract justifies the
petitioner's delay in payment.
The court emphasized that a contract of sale involves reciprocity between the parties, and
since the respondents were in bad faith, they cannot seek rescission of the agreement
they themselves breached.
Therefore, the court reinstated the decision of the trial court, which ordered the
respondents to accept the payment made by the petitioner and denied their claim for
rescission.
Hrs. of the late Justice J.B.L. Reyes vs. CA (338 SCRA 282)
Heirs of Reyes vs. Court of Appeals
G.R. Nos. 135180-81 & 135425-26. August 16, 2000.
Facts:
The case of Heirs of Reyes v. Court of Appeals involves a dispute over a lease contract for
a parcel of land in Pasay City. The petitioners in this case are the heirs of Justice Jose B.L.
Reyes, namely Adoracion D. Reyes and the heirs of Edmundo A. Reyes, namely Ma. Teresa
P. Reyes and Carlos P. Reyes. The respondents are the Court of Appeals and Metro Manila
Builders, Inc. (MMB, Inc.).
Justice Jose B.L. Reyes and Dr. Edmundo A. Reyes were co-owners of a parcel of land in
Pasay City. On November 30, 1976, the brothers entered into a 25-year lease contract with
MMB, Inc. at a low rate of rental. The lease contract required MMB, Inc. to cover all present
and future improvements on the property with insurance and to maintain the premises in
good condition. However, the petitioners discovered that MMB, Inc. had not properly
maintained the premises or obtained adequate insurance. MMB, Inc. had also sub-leased
the property to third parties and was earning a significant amount of money from the sub-
leases.
Issue:
The main issue in the case is whether there was a need for judicial rescission of the lease
contract before MMB, Inc. could be compelled to vacate the premises.
Ruling:
The Supreme Court ruled in favor of the petitioners, stating that there was no need for
judicial rescission. The lease contract between the parties included a provision that
allowed the lessors to cancel the contract and require the tenant to vacate the premises
in the event of a breach of the contract's conditions. The Court held that as long as such
agreements are not contrary to law, morals, good customs, public policy, or public order,
they shall have the force of law between the parties. In this case, MMB, Inc. had violated
several conditions of the lease contract, justifying the cancellation of the contract and the
eviction of MMB, Inc.
Ratio:
The Court based its decision on the provision in the lease contract that allowed the lessors
to cancel the contract and require the tenant to vacate the premises in the event of a
breach. The Court emphasized that as long as such agreements are not contrary to law,
morals, good customs, public policy, or public order, they shall have the force of law
between the parties. In this case, MMB, Inc. had violated several conditions of the lease
contract, including failing to properly maintain the premises and obtain adequate
insurance, as well as sub-leasing the property without permission. These breaches
justified the cancellation of the contract and the eviction of MMB, Inc.
The Court also found that the petitioners were not guilty of contempt of court. They had
acted in good faith in implementing the writ of execution and demolishing the
improvements on the property. The temporary restraining order issued by the Court of
Appeals had already lapsed, and there was no willful disobedience to a lawful order.
In conclusion, the Supreme Court ruled in favor of the heirs of Justice Jose B.L. Reyes,
declaring the resolution of the Court of Appeals and the subsequent writ of execution as
void. The Court held that there was no need for judicial rescission of the lease contract, as
the contract itself provided for the cancellation of the contract in the event of a breach.
The Court also acquitted the petitioners of contempt of court, finding that they had acted
in good faith in exercising their proprietary rights.
Pangilinan vs. CA (279 SCRA 590)

Spouses Pangilinan vs. Court of Appeals
G.R. No. 83588. September 29, 1997.
Facts:
The case of Spouses Pangilinan v. Court of Appeals involves a contract to buy and sell a
subdivision lot between the petitioners, Spouses Adoracion C. Pangilinan and George B.
Pangilinan, and the private respondents, Jose R. Canlas and Luis R. Canlas. The contract
was entered into on May 18, 1968, with a total contract price of P17,310.00, payable on an
installment basis. The contract provided for automatic extrajudicial rescission upon
default in payment of three consecutive monthly installments or failure to comply with any
of the terms and conditions. The petitioners made monthly installments amounting to
about 85% of the total price, with the last payment made on May 14, 1975. In 1983, the
attorney-in-fact of the petitioners requested the private respondents to release the title of
the lot as the remaining balance would be paid, but the private respondents informed him
that the lot had already been disposed of and was mortgaged to a rural bank. The attorney-
in-fact then filed a complaint for Specific Performance and Damages before the Regional
Trial Court, which rendered judgment in favor of the petitioners. The private respondents
appealed to the Court of Appeals, which reversed the decision of the trial court.
Issue:
The main issues raised in the case are as follows: 1) whether a creditor can unilaterally and
summarily rescind a contract to sell a subdivision lot, and 2) whether the petitioners are
guilty of laches.
Ruling:
The Supreme Court affirmed the decision of the Court of Appeals, ruling that the
stipulation in the contract providing for automatic rescission upon non-payment is valid
and the petitioners are indeed guilty of laches. Therefore, the petition was denied.
Ratio:
The Court held that the validity of the stipulation in the contract cannot be doubted as it
grants a party the right to rescind a contract unilaterally in case of breach without the need
to go to court. The contract clearly stated that default in payment of three consecutive
monthly installments or failure to comply with any of the terms and conditions would
result in automatic extrajudicial rescission. This provision is enforceable and valid as it
was freely entered into by the parties.
Furthermore, the Court found that the petitioners failed to assert their rights in a timely
manner, which constitutes laches. Laches is 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. In this case, the petitioners waited for almost 15 years
before asserting their rights and demanding the release of the title. This delay prejudiced
the private respondents as they had already disposed of the lot and mortgaged it to a rural
bank. Therefore, the petitioners are guilty of laches and their claim for specific
performance and damages cannot be granted.
In conclusion, the Supreme Court affirmed the decision of the Court of Appeals, ruling
that the stipulation in the contract providing for automatic rescission is valid and the
petitioners are guilty of laches. The Court emphasized the importance of upholding the
terms and conditions agreed upon by the parties in a contract and the need for timely
assertion of rights to prevent prejudice to the other party.
Lim vs. CA (182 SCRA 564)

Spouses Lim vs. Court of Appeals
G.R. No. 85733. February 23, 1990.
Facts:
The case of Spouses Lim v. Court of Appeals involves a dispute over the sale of a property.
The petitioners, Spouses Enrique and Consuelo Lim, purchased a parcel of land in
Diliman, Quezon City from the Pacific Banking Corporation (PBC) for the amount of
P300,000. The private respondents, Sps. Teresita and Oscar Guevarra, Sps. Marcos and
Anita Orlino, Sps. Romulo and Consuelo Orlino, and Sps. Felix and Dolores Orlino, filed a
complaint for the annulment of the deed of sale, claiming that they had a prior valid sale
of the same property.
The property in question was originally owned by Felix, Manuel, and Maria Concepcion
Orlino, who mortgaged it to the Progressive Commercial Bank. The mortgage was
foreclosed and the bank acquired the property. The bank later transferred all its assets,
including the land, to PBC. The private respondents, who had remained in possession of
the land, made an offer to repurchase the property from PBC. PBC agreed to the
repurchase under certain terms and conditions, including the payment of P160,000 in
cash and the conveyance of the private respondents' share of another property. However,
the private respondents failed to fulfill their obligations under the agreement, and PBC
executed a deed of sale over the land in favor of the petitioners.
Issue:
The main issue in the case is whether there was a prior valid sale of the property to the
private respondents, which would render the subsequent sale to the petitioners invalid.
Ruling:
The court ruled in favor of the petitioners, affirming that the prior contract to sell between
the private respondents and PBC was rescinded due to non-payment, making the
subsequent sale to the petitioners valid. The court dismissed the complaint for
annulment.
Ratio:
The court based its ruling on the distinction between a contract of sale and a contract to
sell. In a contract of sale, title passes to the buyer upon delivery of the property, while in a
contract to sell, ownership is reserved in the seller until full payment of the purchase price
is made. In this case, the agreement between PBC and the private respondents was found
to be a contract to sell, as there was no immediate transfer of title and the consideration
agreed upon was never paid. As the private respondents failed to comply with their
obligations, PBC had the right to consider the contract rescinded. The subsequent sale to
the petitioners was therefore valid.
The court also noted that even if there was a prior valid sale to the private respondents,
the petitioners would still prevail under Article 1544 of the Civil Code, which provides that
ownership of immovable property belongs to the person who first recorded it in the
Registry of Property in good faith. The private respondents failed to record their sale, while
the petitioners did, giving them preferential right to the property.
In conclusion, the court ruled in favor of the petitioners, affirming the validity of the sale to
them and dismissing the complaint for annulment. The court based its decision on the
rescission of the prior contract to sell between the private respondents and PBC due to
non-payment, as well as the application of Article 1544 of the Civil Code.
Goldenrod, Inc. vs. CA (299 SCRA 141)

Goldenrod, Inc. vs. Court of Appeals
G.R. No. 127232. September 28, 2001.
Facts:
The case of Goldenrod, Inc. v. Court of Appeals involves the liability of Goldenrod, Inc. and
Sonia G. Mathay for a loan. Goldenrod, Inc. is a corporation engaged in real estate
development, with Sonia G. Mathay as its president. Pathfinder Holdings (Phils.), Inc. is a
corporation engaged in investment of acquired real properties, shares, and other
properties. On June 30, 1988, Pathfinder Holdings loaned Seventy-Six Million Pesos
(P76,000,000.00) to Goldenrod, Inc. as evidenced by a promissory note. Mathay, as surety,
executed a document denominated as "Joint and Several Guarantee" to secure the
payment of the loan. On September 28, 1988, Goldenrod, Inc. failed to pay its debt. About
seven months later, Goldenrod, Inc. offered to settle its account and paid Eighty-Five
Million Pesos (P85,000,000.00) to Pathfinder Holdings. On the same day, Goldenrod, Inc.
issued two promissory notes worth Five Million Pesos (P5,000,000.00) each to Pathfinder
Holdings. When the maturity dates of the promissory notes arrived, Goldenrod, Inc. failed
to pay the total amount of Ten Million Pesos (P10,000,000.00). Pathfinder Holdings filed a
complaint for judicial foreclosure of the real estate mortgage. The trial court ruled in favor
of Pathfinder Holdings, ordering Goldenrod, Inc. and Mathay to pay the amount due. Both
parties appealed the decision.
Issue:
The main issues raised in the case are: 1) whether Goldenrod, Inc. can be held liable for
the amounts stated in the promissory notes, and 2) whether Mathay can be held solidarily
liable with Goldenrod, Inc.
Ruling:
The Supreme Court ruled that Goldenrod, Inc. is liable for the amounts stated in the
promissory notes. The Court found that the promissory notes were issued to cover the
balance of the original debt and were not a separate and new loan. The Court upheld the
factual findings of the lower courts that the promissory notes were meant to cover part of
the total indebtedness. Therefore, Goldenrod, Inc. is liable for the amounts stated in the
promissory notes.
The Court also ruled that Mathay is solidarily liable with Goldenrod, Inc. as a surety. The
Court interpreted the "Joint and Several Guarantee" contract and found that Mathay, as
the lone surety who signed the contract, is jointly and severally liable with Goldenrod, Inc.
for the payment of the debt.
Ratio:
The Supreme Court based its ruling on the interpretation of the promissory notes and
Mathay's liability as a surety. The Court found that the promissory notes were issued to
cover the remaining balance of the original debt and were not a separate and new loan.
Therefore, Goldenrod, Inc. is liable for the amounts stated in the promissory notes.
Regarding Mathay's liability, the Court interpreted the "Joint and Several Guarantee"
contract and found that Mathay, as the lone surety who signed the contract, is jointly and
severally liable with Goldenrod, Inc. for the payment of the debt. This means that Mathay
can be held equally responsible for the payment of the loan along with Goldenrod, Inc.
In conclusion, the Supreme Court affirmed the decision of the Court of Appeals, holding
Goldenrod, Inc. and Mathay solidarily liable for the loan. The Court's decision was based
on the interpretation of the promissory notes and Mathay's liability as a surety.
OBLIGATIONS - Kinds of Obligations

1. Pure and Conditional (1179-1192)
i. Pure obligations
ii. Conditional obligations
a. classification
b. distinguished from obligation with a period/term
c. kinds of conditional obligations
c.1. suspensive and resolutory
c.2. potestative, casual and mixed
c.3. impossible conditions
c.4. positive and negative conditions
d. Constructive fulfilment
e. Fulfillment of obligations
f. Preservation of Rights
g. Rules in case of Loss, Deterioration, or improvement
h. Resolutory Conditions
i. Rescission in Reciprocal Obligations
Pay vs. Vda. De Palanca (57 SCRA 18)

Pay vs. Vda. de Palanca
G.R. No. L-29900. June 28, 1974.
Facts:
In the case of Pay v. Vda. de Palanca, the petitioner, George Pay, sought to collect on a
promissory note executed more than fifteen years earlier by the debtor, Justo Palanca. The
promissory note stated that the debtor would pay either upon receipt of his share from a
certain estate or upon demand. The lower court held that the ten-year period of limitation
of actions applied, as the note was immediately due and demandable based on the
wording "upon demand." The court found that the petitioner's claim had already
prescribed due to the ten-year limitation period.
The facts of the case are as follows: George Pay, the petitioner, was a creditor of the late
Justo Palanca who died on July 3, 1963. The petitioner's claim was based on a promissory
note dated January 30, 1952, in which Justo Palanca and Rosa Gonzales Vda. de Carlos
Palanca promised to pay George Pay the amount of P26,900.00, with interest at 12% per
annum. The petitioner sought to have Segundina Chua Vda. de Palanca, the surviving
spouse of Justo Palanca, appointed as administratrix of a residential property owned by
Justo Palanca. The petitioner intended to file his claim against the administratrix once the
property was brought under administration. However, the court dismissed the petition,
stating that the surviving spouse refused to be appointed as administratrix and that the
property sought to be administered no longer belonged to the debtor. The court also ruled
that the petitioner's rights had already prescribed due to the ten-year limitation period.
Issue:
The main issue raised in the case is whether the petitioner's claim on the promissory note
had already prescribed due to the ten-year limitation period.
Ruling:
The court ruled that the petitioner's claim had indeed prescribed. The promissory note
stated that the debtor would pay either upon receipt of his share from a certain estate or
upon demand. The court found that the wording "upon demand" made the obligation
immediately due. Since the promissory note was dated January 30, 1952, and the petition
was filed on August 26, 1961, more than ten years had already passed, and the action had
prescribed. The court cited Article 1179 of the Civil Code, which provides that every
obligation whose performance does not depend on a future or uncertain event is
demandable at once. The court also noted that the prescriptive period for a written
contract, as stated in the Civil Code, is ten years. Therefore, the court affirmed the lower
court's decision that the petitioner's claim had prescribed.
Ratio:
In summary, the court ruled in the case of Pay v. Vda. de Palanca that the petitioner's claim
on a promissory note had already prescribed due to the ten-year limitation period, despite
the alternative payment options stated in the note. The court found that the wording "upon
demand" made the obligation immediately due, and since more than ten years had passed
since the promissory note was executed, the action had prescribed. The court cited Article
1179 of the Civil Code and the ten-year prescriptive period for written contracts as the
legal basis for its decision.
Luzon Brokerage Co., Inc. vs. Maritime Bldg Co., Inc. (46 SCRA 381)
Luzon Brokerage Co., Inc. vs. Maritime Building Co.
G.R. No. L-25885. November 16, 1978.
Facts:
This case involves a contract to sell a property between Luzon Brokerage Co., Inc. (Luzon)
and Maritime Building Co., Inc. (Maritime). The contract was a conditional sale with title
reserved in the vendor, Myers Building Co., Inc. (Myers), until full payment of the purchase
price. Maritime failed to make the monthly installments as agreed upon, despite collecting
rental payments from the property. Myers exercised its right to cancel the contract and
retain the sums already paid as rentals. Maritime filed a motion for reconsideration, which
was denied by the court.
Issue:
The main issue raised in the case is whether Maritime's second motion for reconsideration
should be granted.
Ruling:
The court ruled that the motion should be denied on several grounds. Firstly, a party litigant
is entitled to only one Supreme Court decision and should not be allowed to keep a case
pending by repetitious reiterations of the same arguments. Secondly, the second motion
for reconsideration raised no new grounds and was merely a reiteration of the same
arguments already found to be unmeritorious. Thirdly, such dilatory motions should have
been denied in consonance with public interest and public policy, which demand that
judgments of courts should become final at some definite time. Lastly, the court
emphasized the importance of precedents and the principle of stare decisis, which have
given consistency and stability to the law.
Ratio:
The court's ruling is based on the legal basis that the contract between the parties was a
contract to sell with reserved title, and Maritime's failure to pay the installments
constituted a breach of the contract. The court upheld the vendor's right to cancel the
contract upon such breach and retain the sums already paid as rentals. The court also
emphasized that Article 1592 of the Civil Code, which grants the vendee the right to pay
even after the expiration of the period for payment, does not apply to contracts to sell. The
court further noted that even if the contract were considered an unconditional sale,
Maritime's breach was a serious breach of contract and it could not invoke the benefits of
Article 1234 of the Civil Code.
The court also highlighted the enactment of Republic Act No. 6552, which provides
protection to buyers of real estate on installment payments. The law recognizes the
vendor's right to cancel the contract upon non-payment of installments, particularly in the
case of industrial and commercial properties. The court emphasized that the law has now
placed the 39-year old jurisprudence of the court into the category of a law, and the court
cannot deny or refuse to honor the vendor's contractual right of cancellation.
In conclusion, the court denied Maritime's second motion for reconsideration,

emphasizing the importance of finality in judgments and upholding the principle of stare
decisis. The court ruled in favor of Luzon and upheld Myers' right to cancel the contract
and retain the sums already paid as rentals. The court also recognized the significance of
Republic Act No. 6552 in affirming the vendor's right of cancellation in the case of
industrial and commercial properties.
Coronel vs. CA (263 SCRA 15)

Coronel vs. Court of Appeals
G.R. No. 103577. October 7, 1996.
Facts:
The case of Coronel v. Court of Appeals involves a dispute over the ownership of a parcel
of land in Quezon City. The petitioners, Romulo A. Coronel and others, entered into a
conditional contract of sale with the respondent, Ramona Patricia Alcaraz, for the
purchase of the property. The contract stated that the sellers would transfer the title to the
property to the buyers upon receipt of a down payment, and the buyers would pay the
remaining balance of the purchase price. However, before the contract could be fully
executed, the sellers sold the property to another petitioner, Catalina B. Mabanag.
Issue:
The main issue in the case is whether the contract between the petitioners and Ramona
Patricia Alcaraz is a contract of sale or a contract to sell.
Ruling:
The court ruled in favor of Ramona Patricia Alcaraz, declaring that the contract between
the parties is a contract of sale. The court held that the essential elements of a contract of
sale, namely consent, determinate subject matter, and price certain, were present in the
agreement. The court also found that the suspensive condition of transferring the title to
the property had been fulfilled, making the contract of sale binding and enforceable.
Ratio:
The court further explained that a contract to sell is different from a conditional contract
of sale. In a contract to sell, the seller reserves the transfer of title to the buyer until the full
payment of the purchase price, while in a conditional contract of sale, the seller may
reserve title to the property until the fulfillment of a suspensive condition. The court held
that in the case at hand, the contract was a conditional contract of sale, as the sellers had
already agreed to sell the property and had undertaken to transfer the title upon receipt of
the down payment.
The court also addressed the issue of double sale, as the property was subsequently sold
to Catalina B. Mabanag. The court applied Article 1544 of the Civil Code, which states that
in case of double sale, ownership will be transferred to the buyer who first takes
possession of the property in good faith, or if there is no possession, to the buyer who first
registers the sale in good faith. The court found that Ramona Patricia Alcaraz had priority
as the first buyer, as she had already taken possession of the property and had registered
the sale before Catalina B. Mabanag. Therefore, Ramona Patricia Alcaraz was declared the
rightful owner of the property.
In conclusion, the court ruled in favor of Ramona Patricia Alcaraz, declaring her as the
rightful owner of the property. The court held that the contract between the parties was a
conditional contract of sale, and that Ramona Patricia Alcaraz had priority as the first
buyer.
Rillo vs. Court of Appeals (274 SCRA 461)

Rillo vs. Court of Appeals
G.R. No. 125347. June 19, 1997.
Facts:
The case of Rillo v. Court of Appeals involves a contract to sell a condominium unit
between petitioner Emiliano Rillo and respondent Corb Realty Investment Corporation.
The contract stipulated that Rillo would pay the purchase price in twelve equal monthly
installments. However, Rillo defaulted on his payments multiple times. Corb Realty
informed Rillo of the cancellation of the contract due to his failure to settle his accounts
on time. Rillo made some payments after the cancellation notice, but still failed to honor
their agreement. Corb Realty then filed a complaint for cancellation of the contract to sell.
Issue:
The main issue in this case is whether Corb Realty has the right to cancel the contract to
sell due to Rillo's repeated defaults in payment.
Ruling:
The Supreme Court affirmed the decision of the Court of Appeals. It held that the contract
between the parties is a contract to sell, and not an absolute conveyance of real property.
The full payment of the purchase price is a positive suspensive condition, the failure of
which is not considered a breach but simply an event that prevents the obligation of the
vendor to convey title. The Court also upheld the application of the Maceda Law, which
gives the seller the right to cancel the contract upon repeated defaults in payment.
Ratio:
The Supreme Court ruled that the contract between Rillo and Corb Realty is a contract to
sell, which means that the full payment of the purchase price is a positive suspensive
condition. This means that the obligation of the vendor to convey title is dependent on the
full payment of the purchase price. Therefore, the failure of Rillo to make the necessary
payments is not considered a breach, but rather an event that prevents Corb Realty from
being obligated to transfer the title of the condominium unit.
The Court also upheld the application of the Maceda Law, which recognizes the right of
the seller to cancel the contract upon non-payment of an installment by the buyer. The
Maceda Law also provides the buyer with a grace period and the right to a refund in case
of default in payment. In this case, Rillo repeatedly defaulted on his payments, which gave
Corb Realty the right to cancel the contract.
However, the Supreme Court disagreed with the Court of Appeals' order for Corb Realty to
refund 50% of the total payments made by Rillo. According to the Maceda Law, the right to
a refund only accrues when the buyer has paid at least two years of installments. Since
Rillo has paid less than two years, he is not entitled to a refund.
In conclusion, the Supreme Court upheld the cancellation of the contract to sell due to
Rillo's repeated defaults in payment. It affirmed the application of the Maceda Law and
denied Rillo's claim for a refund.
Davies, Inc. vs. CA (333 SCRA 684)

Jardine Davies Inc. vs. Court of Appeals
G.R. No. 128066. June 19, 2000.
Facts:
The case of Jardine Davies Inc. v. Court of Appeals involves a dispute over a bidding
contract between Far East Mills Supply Corporation (FEMSCO) and Jardine Nell, with
Purefoods Corporation as the main defendant. In November 1992, a bidding for the supply
and installation of generators at Purefoods Corporation was conducted. Purefoods

confirmed the award of the contract to FEMSCO in a letter dated December 12, 1992.
FEMSCO complied with the requirements by submitting the necessary performance bond
and contractor's all-risk insurance policy. However, Purefoods unilaterally canceled the
award in a letter dated December 22, 1992, and entered into a contract with Jardine Nell.
FEMSCO then filed a lawsuit against both Purefoods and Jardine, with Purefoods being
held liable for breach of contract and Jardine being found not liable for inducing or
conniving with Purefoods. The trial court ruled in favor of FEMSCO against Purefoods and
dismissed the complaint against Jardine. On appeal, the judgment against Purefoods was
affirmed and the dismissal of the complaint against Jardine was reversed. Both Purefoods
and Jardine filed motions for reconsideration, which were denied, leading to these
petitions for review.
Issue:
The main issues raised in the case are: 1) whether there existed a perfected contract
between Purefoods and FEMSCO, and 2) whether Jardine induced or connived with
Purefoods to violate the contract with FEMSCO.
Ruling:
The court ruled that there was a perfected contract between Purefoods and FEMSCO. The
12 December 1992 letter of Purefoods to FEMSCO constituted acceptance of FEMSCO's
offer as contemplated by law. The letter confirmed the award of the contract to FEMSCO
and the "basic terms and conditions" mentioned in the letter were conditions imposed on
the performance of the obligation rather than on the perfection of the contract. Even if it
was considered a "conditional counter-offer," FEMSCO's submission of the performance
bond and contractor's all-risk insurance was an implied acceptance of the counter-offer.
The court also noted that there was no evidence to support the claim that Jardine induced
or connived with Purefoods to violate the contract with FEMSCO.
The court upheld the judgment against Purefoods, ordering them to pay FEMSCO the value
of engineering services rendered, the contractor's mark-up on installation work, moral
damages, exemplary damages, and attorney's fees. The court also reversed the judgment
against Jardine, finding them not liable for inducing or conniving with Purefoods. The court
reduced the amount of moral damages awarded to FEMSCO from P2,000,000.00 to
P1,000,000.00, and the amount of exemplary damages from P2,000,000.00 to
P100,000.00.
Rustan Pulp & Paper Mills, Inc. vs. IAC (214 SCRA 665)
Rustan Pulp & Paper Mills, Inc. vs. Intermediate Appellate Court
G.R. No. 70789. October 19, 1992.
Facts:
The case of Rustan Pulp & Paper Mills, Inc. v. Intermediate Appellate Court involves a
dispute over a contract of sale between Rustan Pulp & Paper Mills, Inc. and Iligan
Diversified Projects, Inc., Romeo A. Lluch, and Roberto G. Borromeo. The contract
contained a provision stating that Rustan Pulp & Paper Mills had the right to stop delivery
of raw materials if the supply became sufficient, with the condition that they would
resume delivery when needed. The dispute arose when Rustan Pulp & Paper Mills
exercised this right and refused to accept further deliveries of raw materials. Iligan
Diversified Projects, Inc., Romeo A. Lluch, and Roberto G. Borromeo filed a complaint for
breach of contract against Rustan Pulp & Paper Mills.
Issue:
The main issue in this case is whether the provision in the contract allowing Rustan Pulp &
Paper Mills to stop delivery of raw materials is valid and enforceable.
Ruling:
The court ruled in favor of Iligan Diversified Projects, Inc., Romeo A. Lluch, and Roberto G.
Borromeo. The court found that the provision in the contract allowing Rustan Pulp & Paper
Mills to stop delivery of raw materials was solely dependent on their will and therefore
inoperative. The court also rejected Rustan Pulp & Paper Mills' argument of frustration of
the commercial object, as they continued to accept deliveries from other suppliers. As a
result, Rustan Pulp & Paper Mills was held liable for breach of contract and ordered to pay
moral damages and attorney's fees.
Ratio:
The court based its decision on the principle that a contract must be binding on both
parties and cannot be solely dependent on the will of one party. In this case, the provision
allowing Rustan Pulp & Paper Mills to stop delivery of raw materials was found to be solely
dependent on their will, as it did not specify any objective criteria for determining when
the supply became sufficient. Therefore, the court deemed this provision inoperative.
The court also rejected Rustan Pulp & Paper Mills' argument of frustration of the
commercial object. Frustration of the commercial object occurs when the purpose of the
contract becomes impossible to fulfill due to unforeseen circumstances. However, in this
case, Rustan Pulp & Paper Mills continued to accept deliveries from other suppliers,
indicating that the commercial object was not frustrated. Therefore, the court held Rustan
Pulp & Paper Mills liable for breach of contract.
Furthermore, the court clarified that the President and Manager of a corporation,
Bienvenido R. Tantoco, Sr. and Romeo S. Vergara, could not be held personally liable under
the contract signed in their official capacity. This is because the contract was signed in
their capacity as representatives of Rustan Pulp & Paper Mills, and personal liability can
only arise if there is a clear intention to bind oneself personally. Therefore, the court
modified the decision to only hold Rustan Pulp & Paper Mills liable for the damages
awarded.
Baluran vs. Navarro (79 SCRA 309)

Baluran vs. Navarro
G.R. No. L-44428.Sep 30, 1977.
Facts:
The case of Baluran v. Navarro involves a dispute over the ownership of a residential lot in
Sarrat, Ilocos Norte. The owners of the lot, Spouses Domingo Paraiso and Fidela Q.
Paraiso, entered into a "Barter Agreement" with spouses Avelino and Benilda Baluran on
February 2, 1964. The agreement stated that the Paraiso couple would exchange their
residential lot for the Baluran's unirrigated riceland. The agreement allowed the Paraiso
couple to continue possessing the riceland and the Baluran couple to build their own
house on the residential lot. However, the agreement also stated that if any of the children
of Natividad P. Obedencio, daughter of the Paraiso couple, chose to reside in the
municipality and build their own house on the residential lot, the Baluran couple would be
obliged to return the lot to the children with damages.
Issue:
The main issue raised in the case is whether the "Barter Agreement" transferred ownership
of the residential lot to the Baluran couple or if it only granted them the right of usufruct.
Additionally, the issue of whether Antonio Obedencio's cause of action had prescribed is
also raised.
Ruling:
The Supreme Court upheld the trial court's ruling in favor of Antonio Obedencio. The Court
held that the nature of the "Barter Agreement" was not a transfer of ownership but a
transfer of material possession. The parties only acquired the right of usufruct, which is
the right to enjoy the property of another. The agreement also contained a resolutory
condition, stating that the right of possession and use would terminate if any of the
children of Natividad Obedencio chose to reside in the municipality and build their house
on the lot. The Court found that Obedencio had acquired the right to recover possession
of the lot when his mother donated it to him in October 1974. Therefore, his complaint filed
in May 1975 was timely.
Ratio:
The Court based its decision on the interpretation of the "Barter Agreement" and the
relevant provisions of the Civil Code. The Court held that the agreement did not transfer
ownership of the residential lot to the Baluran couple, but only granted them the right of
usufruct. The right of usufruct is the right to enjoy the property of another without owning
it. The agreement also contained a resolutory condition, which meant that the right of
possession and use would terminate if any of the children of Natividad Obedencio chose
to reside in the municipality and build their house on the lot.
The Court found that Obedencio had acquired the right to recover possession of the lot
when his mother donated it to him in October 1974. Therefore, his complaint filed in May
1975 was timely. The Court also applied Article 579 of the Civil Code, which allows the
usufructuary (Baluran) to make useful improvements on the property and remove them
without causing damage.
Regarding Baluran's claim for damages, the Court held that there was no basis for
awarding damages as there was no evidence presented. However, the Court emphasized
that a simultaneous transfer of the respective properties should be effected to achieve
substantial justice. Therefore, the Court ordered Baluran to vacate the residential lot and
remove the improvements, but only after the riceland had been restored to his possession
either voluntarily or through judicial proceedings.
Smith, Bell and Co. vs. Sotelo (44 Phil. 875)

Smith, Bell & Co., Ltd. vs. Matti
G.R. No. 16570. March 9, 1922.
Facts:
In the case of Smith, Bell & Co., Ltd. v. Matti, the plaintiff corporation entered into
contracts with the defendant, Vicente Sotelo Matti, for the purchase and sale of various
goods. The contracts did not specify a definite date for delivery, but instead provided
approximate delivery times and included clauses regarding possible delays due to
government regulations and other factors beyond the control of the parties. The tanks
arrived in Manila on April 27, 1919, the expellers on October 26, 1918, and the motors on
February 27, 1919. However, the defendant refused to receive the goods and pay the
prices stipulated. The plaintiff filed a complaint against the defendant, claiming that it had
fulfilled its obligation to deliver the goods within a reasonable time and that the goods
were in good condition. The defendant denied the allegations and counterclaimed for
damages due to the plaintiff's alleged delay in delivery.
Issue:
The main issue in the case was whether the plaintiff had fulfilled its obligation to deliver
the goods within a reasonable time.
Ruling:
The court held that since no definite date was fixed for delivery in the contracts, the
delivery must be regarded as conditional and not one with a term. The fulfillment of the
condition depended not on the will of the plaintiff, but on the occurrence of certain events
beyond its control, such as obtaining priority certificates and permission from the United
States Government. The court cited previous decisions that when the fulfillment of a
condition does not depend on the will of the obligor, but on that of a third person who
cannot be compelled to carry it out, the obligor's part of the contract is considered fulfilled
if they have done all that is in their power.
The court also held that when no date is fixed in a contract for the delivery of goods, time
is considered unessential, and delivery must be made within a reasonable time
determined by the courts based on the circumstances of the case. In this case, the plaintiff
had made all efforts within its power to bring the goods to Manila as soon as possible and
had notified the defendant of their arrival. Therefore, the court concluded that the plaintiff
had fulfilled its obligation within a reasonable time.
Additionally, the court ruled that the intervenor, the Manila Oil Refining and By-Products
Co., Inc., had no right of action against the plaintiff as the contracts were signed by the
defendant in his individual capacity and not on behalf of the intervenor. The court cited
provisions in the Civil Code and the Code of Commerce that when an agent acts in his own
name, the principal has no right of action against the persons with whom the agent has
contracted, and the agent is directly liable to the person with whom he has contracted.
Therefore, the damages claimed by the intervenor were not imputable to the plaintiff.
As a result, the court modified the judgment and ordered the defendant to accept and
receive the goods in question and to pay the plaintiff the agreed-upon price, with interest
and costs.
Hermosa vs. Longara (93 Phil. 971)

Hermosa vs. Longara
G.R. No. L-5267. October 27, 1953.
Facts:
The case of Hermosa v. Longara involves a dispute over credit advances made to an
intestate estate. The petitioners in this case are Luz Hermosa, who is the administratrix of
the Intestate Estate of Fernando Hermosa, R., and Fernando Hermosa, Jr. They appealed
the decision of the Court of Appeals, which approved certain claims presented by Epifanio
M. Longara against the estate. The claims include credit advances made to the intestate
from 1932 to 1944, credit advances made to his son Francisco Hermosa, and credit
advances made to his grandson Fernando Hermosa, Jr. from 1945 to 1947. The claimant
presented evidence that the intestate had asked for the credit advances on the condition
that payment would be made as soon as he received funds from the sale of his property in
Spain.
Issue:
The main issue raised in this case is whether the condition attached to the credit advances
made to the intestate estate is valid and enforceable.
Ruling:
The court ruled in favor of the claimant, Epifanio M. Longara, and affirmed the decision of
the Court of Appeals. The court held that the condition attached to the credit advances
was valid and enforceable.
Ratio:
The court reasoned that the condition attached to the credit advances did not solely
depend on the will of the debtor, but also on other circumstances beyond his control, such
as the presence of a buyer for the property. The court considered this condition as a
suspensive condition, which means that upon its happening, the debt became
immediately due and demandable. The court also found evidence to support the
claimant's assertion that the intestate had promised to pay for the credit advances, as
evidenced by the preservation of the receipts.
The court further ruled that the fact that the suspensive condition took place after the
death of the debtor and that the advances were made more than ten years before the sale
were immaterial. The court held that the obligation retroacted to the date of the
agreement, and the action to recover the advances had not yet prescribed.
Additionally, the court held that credits furnished to the intestate's grandson after his
death should not be allowed, as the obligation to furnish support is extinguished upon the
death of the person obliged to give support.
Finally, the court declined to rule on the issue of whether the claims were barred by the
statute of non-claims, as this question was not raised in the lower courts.
Trillana vs. Quezon Colleges (93 Phil. 383)

Trillana vs. Quezon College, Inc.
G.R. No. L-5003. June 27, 1953.
Facts:
The case of Trillana v. Quezon College, Inc. involves a dispute over a subscription to the
capital stock of Quezon College. Damasa Crisostomo sent a letter to the Board of Trustees
of the college, expressing her intention to subscribe to 200 shares of the college's capital
stock. In her letter, she stated that she would make an initial payment and pay the balance
after she had harvested fish. However, no payment was made on the subscription and
Damasa Crisostomo passed away. The Quezon College, Inc. then filed a claim in the Court
of First Instance of Bulacan to collect the value of the subscription. The claim was
opposed by the administrator of Damasa Crisostomo's estate, and the court dismissed
the claim on the ground that the subscription was not registered with the Securities and
Exchange Commission. The Quezon College, Inc. appealed the decision.
Issue:
The main issue in the case is whether the subscription to the capital stock of Quezon
College ripened into an enforceable contract.
Ruling:
The court ruled that the subscription did not ripen into a contract because there was no
acceptance by the Quezon College, Inc. of Damasa Crisostomo's counter offer. Damasa
Crisostomo's proposal to pay the value of the subscription after she had harvested fish
was a condition dependent upon her sole will, making it facultative in nature and rendering
the obligation void under article 1115 of the old Civil Code.
Ratio:
The court's ruling is based on the fact that Damasa Crisostomo's application for
subscription was at variance with the terms stated in the form letter issued by the Quezon
College, Inc. The college did not accept the term of payment suggested by Damasa
Crisostomo, and there is no evidence that she was aware of any acceptance during her
lifetime. Therefore, the relation between Damasa Crisostomo and the Quezon College,
Inc. had not ripened into an enforceable contract. Additionally, the court emphasized the
need for express acceptance on the part of the college due to the facultative condition
proposed by Damasa Crisostomo. This condition, which depended solely on her will,
rendered the obligation void under article 1115 of the old Civil Code.
In conclusion, the Supreme Court affirmed the dismissal of the Quezon College, Inc.'s
claim for collection of the subscription to its capital stock. The court ruled that the
subscription did not ripen into an enforceable contract due to the void condition proposed
by Damasa Crisostomo. The court's decision was based on the absence of acceptance by
the college of Damasa Crisostomo's counter offer and the facultative nature of the
condition proposed by her.
Philippine Long Distance Company vs. Jeturian, et al (97 Phil. 981)

Philippine Long Distance Telephone Co. vs. Jeturian
No. L-7756. July 30, 1955.
Facts:
The case of Philippine Long Distance Telephone Co. v. Jeturian involves a dispute over the
payment of pension benefits to employees of the petitioner company. On September 18,
1923, the company adopted a "Plan for Employees Pensions" with certain conditions.
However, on November 6, 1945, the company's Board of Directors decided to discontinue
the Pension Plan and all payments retroactively from January 1, 1942. As a result, the
respondent employees filed a claim for the monetary benefits they believed were due to
them under the pension plan.
Issue:
The main issue raised in the case is whether the petitioner company is liable to pay
pension benefits to its employees despite discontinuing the Pension Plan and
retroactively stopping all payments.
Ruling:
The court ruled that the petitioner company is liable to pay pension benefits to its
employees, except for prewar employees who died or voluntarily left the service before the
war.
Ratio:
The court held that the pension plan adopted by the company was not merely a gratuity,
but rather a binding contract. The purpose of the plan was to incentivize employees to
continue their service and work diligently. The court inferred the acceptance of the plan by
the employees from their continued employment with the company after the plan was
made known. It emphasized that acceptance did not need to be express, as it could be
implied from the employees' actions.
The court cited the case of Bosque vs. Yu Chipco, where it was established that a party
that violates a contract cannot demand strict compliance with its terms. Therefore, the
petitioner company, having breached the contract by discontinuing the plan without the
employees' consent, could not now insist on the terms of the contract.
However, the court also recognized that prewar employees who died or voluntarily left the
service before the outbreak of the war should be excluded from receiving pension benefits.
This limitation was based on the principle that the benefits under the pension plan were
intended for employees who continued their service with the company.
In summary, the court affirmed the decision of the Court of Industrial Relations with
modification. It held that the petitioner company was liable to pay pension benefits to its
employees, except for prewar employees who died or voluntarily left the service before the
war. The court emphasized that the pension plan was a binding contract, and the
company's breach of the contract precluded it from insisting on strict compliance with its
terms.
De la Rama Steamship Co. vs. Tan (99 Phil. 1034)

De la Rama Steamship Co. vs. National Development Co.
G.R. No. L-26966. October 30, 1970.
Facts:
The case involves a dispute between De la Rama Steamship Co. and the National
Development Company (NDC) over the use of the "Doña" names on vessels. De la Rama
had entered into a management contract with NDC to operate three vessels, with the
option to purchase them after five years. However, NDC cancelled the contract and De la
Rama filed a supplemental pleading seeking to prevent NDC from using the "Doña" names
on the vessels, reimbursement for expenses, and damages. The case went through
multiple proceedings and the trial court appointed a Board of Accountants to examine the
accounts and make recommendations. Despite multiple opportunities, NDC failed to file
objections to the report of the Board of Accountants. The trial court adopted the findings
and recommendations of the Board of Accountants and ruled in favor of De la Rama.
Issue:
The main issue raised in the case is whether NDC is prohibited from using the "Doña"
names on the vessels and whether De la Rama is entitled to reimbursement for expenses
and damages.
Ruling:
The Supreme Court upheld the trial court's decision. The Court ruled that NDC was
prohibited from using the "Doña" names on the vessels and ordered NDC to reimburse De
la Rama for expenses and damages.
Ratio:
The Court held that De la Rama had acquired a proprietary right to the "Doña" names
through long and exclusive use. The Court emphasized that De la Rama had been using
the "Doña" names on its vessels for a significant period of time and had established a
reputation and goodwill associated with those names. The Court further stated that NDC's
registration of the names did not estop De la Rama from claiming its rights.
The Court also considered the fact that NDC had cancelled the management contract with
De la Rama, which gave rise to the dispute. The Court found that NDC's cancellation of the
contract was unjustified and constituted a breach of contract. As a result, the Court held
that NDC should be held liable for the expenses incurred by De la Rama in operating the
vessels during the period of the contract.
In addition to reimbursement for expenses, the Court also awarded damages and
attorney's fees to De la Rama. The Court found that NDC's actions had caused damage to
De la Rama's reputation and business, and therefore, NDC should be held liable for such
damages. The Court also considered the need to deter similar breaches of contract in the
future and awarded attorney's fees to De la Rama.
Finally, the Court ordered NDC to pay De la Rama the specified amount with legal interest.
The Court emphasized the importance of fulfilling contractual obligations and held that
NDC should be held accountable for the financial consequences of its breach of contract.
Sancho vs. Lizarraga (55 Phil. 601)

Sancho vs. Lizarraga
G.R. No. 33580. February 6, 1931.
Facts:
The case of Sancho v. Lizarraga involves a partnership dispute between Maximiliano
Sancho (plaintiff-appellant) and Severiano Lizarraga (defendant-appellee). The
partnership contract was entered into on October 15, 1920, and the plaintiff sought the
rescission of the contract, reimbursement of his 50,000 peso investment with interest,
and any other just and equitable remedy against the defendant. The defendant denied the
allegations and filed a cross-complaint and counterclaim, seeking the dissolution of the
partnership and payment as its manager and administrator.
The Court of First Instance of Manila found that the defendant had not contributed the full
amount he had promised to invest in the partnership. The court declared the partnership
dissolved due to the expiration of the period for which it was constituted and ordered the
defendant, as the managing partner, to proceed with the liquidation and submit the
accounts and vouchers within thirty days.
Issue:
The main issue raised in the case is whether the plaintiff is entitled to the rescission of the
partnership contract and the return of his investment with interest.
Ruling:
The court ruled in favor of the defendant and dismissed the appeal. The court held that the
plaintiff did not have the right to demand rescission of the partnership contract under
Article 1124 of the Civil Code.
Ratio:
The court explained that Article 1124 pertains to the resolution of obligations in general,
while Articles 1681 and 1682 specifically refer to the contract of partnership. It is a well-
known principle that special provisions prevail over general provisions. Therefore, the
court concluded that the plaintiff did not have the right to demand rescission of the
partnership contract.
Additionally, the court found that the defendant had not contributed the full amount he
had promised to invest in the partnership. As a result, the defendant was deemed indebted
to the partnership for the remainder of his promised contribution, along with interest and
any damages caused.
However, the court agreed with the defendant's argument that the appeal was premature
because the liquidation and submission of accounts had not yet been completed. Citing
the Code of Civil Procedure and a previous case (Natividad vs. Villarica), the court
supported the conclusion that the appeal should not be entertained until the liquidation
process was finished.
In summary, the court affirmed the judgment of the lower court, declaring the partnership
dissolved and ordering the defendant to proceed with the liquidation and submission of
accounts. The plaintiff's appeal was dismissed, and the decision of the lower court was
upheld.
Tayag vs. CA (G.R. No. 103577, Oct. 7, 1996)

Coronel vs. Court of Appeals
G.R. No. 103577. October 7, 1996.
Facts:
The case of Coronel v. Court of Appeals involves a dispute over the ownership of a parcel
of land in Quezon City. The petitioners, Romulo A. Coronel and others, entered into a
conditional contract of sale with the respondent, Ramona Patricia Alcaraz, for the
purchase of the property. The contract stated that the sellers would transfer the title to the
property to the buyers upon receipt of a down payment, and the buyers would pay the
remaining balance of the purchase price. However, before the contract could be fully
executed, the sellers sold the property to another petitioner, Catalina B. Mabanag.
Issue:
The main issue in the case is whether the contract between the petitioners and Ramona
Patricia Alcaraz is a contract of sale or a contract to sell.
Ruling:
The court ruled in favor of Ramona Patricia Alcaraz, declaring that the contract between
the parties is a contract of sale. The court held that the essential elements of a contract of
sale, namely consent, determinate subject matter, and price certain, were present in the
agreement. The court also found that the suspensive condition of transferring the title to
the property had been fulfilled, making the contract of sale binding and enforceable.
Ratio:
The court further explained that a contract to sell is different from a conditional contract
of sale. In a contract to sell, the seller reserves the transfer of title to the buyer until the full
payment of the purchase price, while in a conditional contract of sale, the seller may
reserve title to the property until the fulfillment of a suspensive condition. The court held
that in the case at hand, the contract was a conditional contract of sale, as the sellers had
already agreed to sell the property and had undertaken to transfer the title upon receipt of
the down payment.
The court also addressed the issue of double sale, as the property was subsequently sold
to Catalina B. Mabanag. The court applied Article 1544 of the Civil Code, which states that
in case of double sale, ownership will be transferred to the buyer who first takes
possession of the property in good faith, or if there is no possession, to the buyer who first
registers the sale in good faith. The court found that Ramona Patricia Alcaraz had priority
as the first buyer, as she had already taken possession of the property and had registered
the sale before Catalina B. Mabanag. Therefore, Ramona Patricia Alcaraz was declared the
rightful owner of the property.
In conclusion, the court ruled in favor of Ramona Patricia Alcaraz, declaring her as the
rightful owner of the property. The court held that the contract between the parties was a
conditional contract of sale, and that Ramona Patricia Alcaraz had priority as the first
buyer.
Naga Telephone Company, Inc. vs. CA (230 SCRA 351)

Naga Telephone Co., Inc. vs. Court of Appeals
G.R. No. 107112. February 24, 1994.
Facts:
The case of Naga Telephone Co., Inc. v. Court of Appeals involves a contract between Naga
Telephone Co., Inc. (NATELCO) and Camarines Sur II Electric Cooperative, Inc.
(CASURECO II) for the use of electric light posts in Naga City. The contract was entered
into in 1977 and provided that NATELCO would install ten telephone connections for
CASURECO II in exchange for the use of their electric posts. The contract also stated that
it would terminate if CASURECO II ceased its operation as a public service.
After more than ten years of the contract being in effect, CASURECO II filed a complaint
for reformation of the contract, claiming that it had become unfair and disadvantageous
to them. They argued that the contract did not provide for reasonable compensation for
the use of their posts and that the increase in NATELCO's subscribers had caused damage
to their posts. CASURECO II also claimed that NATELCO had been using their posts
outside of Naga City without any contract or payment.
Issue:
1. Whether Article 1267 of the New Civil Code is applicable to the case.
2. Whether the action for reformation of contract is barred by prescription.
3. Whether there is a potestative condition in the contract.
Ruling:
The Supreme Court denied the appeal and affirmed the decision of the Court of Appeals.
They held that Article 1267 was applicable to the case and that the action for reformation
of contract was not barred by prescription. They also agreed with the Court of Appeals that
there was a potestative condition in the contract, but that it did not invalidate the
provision.
Ratio:
The Supreme Court ruled that Article 1267 of the New Civil Code is applicable to the case.
This article allows for the release of an obligor from a difficult or unfair obligation. In this
case, CASURECO II argued that the contract had become unfair and disadvantageous to
them due to the lack of reasonable compensation for the use of their posts and the
damage caused by NATELCO's increased subscribers. The Court agreed with CASURECO
II and ordered the reformation of the contract to include a monthly rental fee for the use of
CASURECO II's posts.
The Court also held that the action for reformation of contract was not barred by
prescription. They explained that the ten-year period for prescription starts from the time
the cause of action accrues, which in this case was when CASURECO II discovered the
unfairness and disadvantageous nature of the contract. Since CASURECO II filed the
complaint within this period, the action was not barred by prescription.
Regarding the potestative condition in the contract, the Court agreed with the Court of
Appeals that it existed. However, they clarified that the presence of a potestative condition
does not automatically invalidate the provision. In this case, the Court found that the
provision was still valid and enforceable. They emphasized that their decision was
necessary to avoid disruption of essential services and to prevent unjust enrichment by
NATELCO at the expense of CASURECO II. Therefore, NATELCO was ordered to pay
CASURECO II a monthly rental fee for the use of their posts, and CASURECO II was ordered
to pay NATELCO for the use of their telephones.
Universal Food Corp. vs. Court of Appeals (33 SCRA 1)

Universal Food Corp. vs. Court of Appeals
G.R. No. L-29155. February 22, 1971.
Facts:
The case of Universal Food Corp. v. Court of Appeals involves a dispute over the cession
and transfer of the Mafran sauce formula. The petitioner, Universal Food Corporation,
seeks reconsideration of a previous decision and argues for deductions in back salary
based on the respondent's earnings from other sources during the case.
Issue:
1. Whether the respondent ceded and transferred the formula for Mafran sauce or
just the right to use the formula.
2. Whether the findings of fact made by the trial court should be respected and upheld
by the Court of Appeals.
3. Whether the respondent's earnings from other sources should be deducted from
the back salary.
Ruling:
In ruling on the first issue, the Court refers to the terms of the Bill of Assignment and
concludes that what was ceded and transferred was only the use of the Mafran sauce
formula, not the formula itself.
Regarding the second issue, the Court states that the petitioner has not demonstrated the
applicability of any exceptions to the general rule that the findings of fact of the Court of
Appeals are not subject to review by the Supreme Court.
On the third issue, the Court agrees with the petitioner's contention that the respondent's
earnings from other sources should be deducted from the back salary. The Court modifies
its previous decision to allow for this deduction and orders the trial court to receive
evidence on the respondent's earnings and issue the proper writ of execution to enforce
the final judgment.
Ratio:
In ruling on the first issue, the Court considers the terms of the Bill of Assignment and
concludes that what was ceded and transferred was only the use of the Mafran sauce
formula, not the formula itself. The Court takes into account various circumstances, the
admission made by the petitioner, and the factual milieu of the case in reaching this
conclusion.
Regarding the second issue, the Court states that the petitioner has not shown any
exceptions to the general rule that the findings of fact of the Court of Appeals are not
subject to review by the Supreme Court. Therefore, the findings of fact made by the trial
court should be respected and upheld by the Court of Appeals.
On the third issue, the Court agrees with the petitioner's argument that the respondent's
earnings from other sources should be deducted from the back salary. The Court modifies
its previous decision to allow for this deduction and orders the trial court to receive
evidence on the respondent's earnings and issue the proper writ of execution to enforce
the final judgment.
In summary, the Court denies the petitioner's motion for reconsideration and modifies its
previous decision to allow for the deduction of the respondent's earnings from the total
back salary. The Court concludes that what was ceded and transferred was only the use
of the Mafran sauce formula, upholds the findings of fact made by the trial court, and
orders the trial court to determine the respondent's earnings and issue the proper writ of
execution.
Central Philippine University vs. CA (246 SCRA 511)

Central Philippine University vs. Court of Appeals
G.R. No. 112127. July 17, 1995.
Facts:
The case of Central Philippine University v. Court of Appeals involves a donation made by
Don Ramon Lopez, Sr. to Central Philippine University (CPU) in 1939. The donation was a
parcel of land to be used exclusively for the establishment and use of a medical college.
The deed of donation also included conditions that prohibited the sale, transfer, or
encumbrance of the land and required the land to be called "Ramon Lopez Campus" with
any income from the land to be used for improvements and the erection of a building.
In 1989, the heirs of Don Ramon Lopez filed a case for annulment of donation,
reconveyance, and damages against CPU, alleging that the university had not complied
with the conditions of the donation. They also claimed that CPU had negotiated with the
National Housing Authority to exchange the donated property with another land. The trial
court ruled in favor of the heirs, declaring the donation null and void and directing CPU to
reconvey the property.
Issue:
The main issue raised in the case is whether CPU had complied with the conditions of the
donation made by Don Ramon Lopez, Sr. and whether the donation should be declared
null and void.
Ruling:
The Supreme Court upheld the decision of the Court of Appeals, ruling that CPU had failed
to comply with its obligations as the donee and that the donation should be declared null
and void.
Ratio:
The Court held that the donation made by Don Ramon Lopez, Sr. to CPU was an onerous
donation, as it imposed obligations on CPU in exchange for the property. The conditions in
the deed of donation were not resolutory conditions but obligations imposed by the donor.
Therefore, the breach of these conditions would render the donation revocable.
The Court also ruled that the action of the heirs was not barred by prescription, as the
fulfillment of the conditions depended on the exclusive will of CPU. The period for the
establishment of a medical college and the necessary buildings and improvements could
not be quantified in a specific number of years due to various factors and circumstances
involved. Therefore, the Court applied the general rule that when a period is not fixed but
can be inferred, the court may fix the duration of the obligation.
In conclusion, the Supreme Court reinstated and affirmed the decision of the trial court,
directing CPU to reconvey the donated property to the heirs of the donor within thirty days
from the finality of the judgment. The Court held that CPU had failed to comply with its
obligations as the donee and that the donation was now ineffective and revoked.
Santos vs. CA (337 SCRA 67)

Spouses Santos vs. Court of Appeals
G.R. No. 120820. August 1, 2000.
Facts:
This case involves a dispute between Spouses Fortunato and Rosalinda Santos
(petitioners) and Spouses Mariano and Carmen Caseda (respondents) over the ownership
of a house and lot located in Better Living Subdivision, Parañaque, Metro Manila. The
Santos couple mortgaged the property with the Rural Bank of Salinas, Inc. and offered to
sell it to the Casedas. The Casedas made a partial payment of the purchase price and took
possession of the property. However, they failed to pay the remaining balance and suffered
bankruptcy. The Santos couple repossessed the property and collected rentals from the
tenants. The Casedas then offered to pay the balance of the purchase price, but the
Santos couple demanded a higher price. The Casedas filed a complaint for specific
performance and damages, which was dismissed by the trial court but reversed by the
Court of Appeals.
Issue:
The main issue in this case is whether the agreement between the parties was a contract
of sale or a contract to sell.
Ruling:
The Court ruled that the agreement was a contract to sell because there was no valid
transfer of ownership from the Santos couple to the Casedas. The title to the property
remained in the name of Rosalinda Santos, and all payments made by the Casedas were
in her name. The Court also held that the Santoses were merely enforcing the contract
when they repossessed the property for non-payment of the purchase price, and
therefore, there was no need for judicial rescission.
Ratio:
The Court's ruling is based on the definition of a contract of sale, which requires the
transfer of ownership as an essential element. In a contract to sell, ownership is reserved
by the vendor until full payment of the purchase price. The Court found that the agreement
between the parties did not meet the requirements of a contract of sale because there was
no transfer of ownership and the Santoses remained the owners of the property. Therefore,
the Court held that the agreement was a contract to sell.
Conclusion
In conclusion, the Court granted the petition and reversed the decision of the Court of
Appeals. The judgment of the trial court, which dismissed the complaint for specific
performance and damages, was reinstated.
Casano, Jr. vs. CA (470 SCRA 57)

Casiño Jr. vs. Court of Appeals
G.R. No. 133803. September 16, 2005.
Facts:
The case involves a dispute between petitioner Bienvenido M. Casiño Jr. and respondent
Octagon Realty Development Corporation. The dispute arises from a contract for the
supply and installation of narra wood parquet. The contract stated that petitioner was to
fully deliver the labor and materials by May 1990. However, petitioner failed to meet this
deadline. As a result, respondent filed a complaint for rescission of the contract with
damages against petitioner. Respondent alleged that petitioner misrepresented his
qualifications and lacked the necessary funds to complete the work. Respondent sought
rescission of the contract, actual damages, reimbursement, moral damages, and
attorney's fees.
The trial court found that petitioner breached the contract and ordered him to pay
respondent actual and compensatory damages, as well as attorney's fees. The Court of
Appeals affirmed the trial court's decision but reduced the amount of damages awarded.
Petitioner appealed to the Supreme Court, arguing that the rescission of the contract was
not valid, the award of damages was not justified, and there was grave abuse of discretion.
Issue:
The main issue raised in the case is whether the rescission of the contract is valid and
whether the award of damages is justified.
Ruling:
The Supreme Court held that the rescission of the contract was valid and that the award
of damages was justified.
Ratio:
The Supreme Court based its decision on Article 1191 of the Civil Code, which states that
a party to a contract may rescind it if the other party fails to perform its obligations. In this
case, petitioner failed to deliver and install the contracted materials within the agreed
timeframe, which constituted a substantial and fundamental breach of the contract.
Therefore, respondent had the right to rescind the contract.
The Court also found that petitioner had knowledge of respondent's intention to rescind
the contract. This was evident from the several letters sent by respondent demanding
compliance with petitioner's obligations. Therefore, petitioner cannot claim that he was
unaware of the consequences of his breach of contract.
Regarding the award of damages, the Court ruled that respondent had provided sufficient
evidence to substantiate its claim for actual or compensatory damages. The evidence
showed that respondent incurred losses and additional costs due to petitioner's breach
of contract. Therefore, the award of damages was justified.
The Court also upheld the award of attorney's fees. Respondent was compelled to litigate
and incur expenses because of petitioner's breach of contract. Therefore, it was only fair
that petitioner be held responsible for these expenses.
In conclusion, the Supreme Court denied the petition and affirmed the decision of the
Court of Appeals. Petitioner was ordered to pay respondent the awarded damages and
attorney's fees.
F.F. Cruz & Co., Inc. vs. HR Construction Corp., G.R. No. 187521, March 14,
2012
F.F. Cruz & Co., Inc. vs. HR Construction Corp.
G.R. No. 187521. March 14, 2012.
Facts:
The case involves a dispute between F.F. Cruz & Co., Inc. (FFCCI) and HR Construction
Corp. (HRCC) regarding progress billings for a construction project. FFCCI entered into a
subcontract agreement with HRCC for the construction of a portion of the Magsaysay
Viaduct project. The subcontract price was agreed upon at P31,293,532.72. The parties
agreed that HRCC would submit monthly progress billings, which would be paid by FFCCI
within 30 days, subject to deductions. They also agreed to conduct a joint measurement
of the completed works to arrive at a common quantity.
HRCC submitted its first progress billing in September 2004, but FFCCI only approved a
portion of the amount due, claiming that the completed works were not properly
evaluated. FFCCI made subsequent payments based on its own evaluation of the
completed works, but HRCC claimed that it was not paid the full amount due. HRCC then
sent a letter demanding payment of its progress billings, but FFCCI did not comply. HRCC
eventually stopped work on the project and filed a complaint with the Construction
Industry Arbitration Commission (CIAC) for the payment of its overdue obligations.
Issue:
1. Whether FFCCI had waived its right to require a joint measurement of the
completed works.
2. Whether HRCC had the right to rescind the Subcontract Agreement.
3. Whether the arbitration costs should be shared equally by FFCCI and HRCC.
Ruling:
1. FFCCI had waived its right to demand a joint measurement of HRCC's completed
works, and therefore, it was barred from disputing HRCC's valuation of the works.
2. HRCC did not have the right to rescind the Subcontract Agreement, as it had waived
this right by agreeing to continue the performance of its obligations.
3. Both parties should share the arbitration costs equally, as HRCC's work stoppage
was not justified.
Ratio:
The Supreme Court first addressed the procedural issue of the finality and conclusiveness
of the CIAC's factual findings. It ruled that while factual findings of the CIAC are generally
final and not reviewable, there are exceptions when there is evidence of corruption,
misconduct, or other misbehavior by the arbitrators. In this case, the Supreme Court
found that the issues raised by FFCCI involved questions of law and interpretation of the
Subcontract Agreement, and therefore, were proper subjects of review.
The Supreme Court then addressed the substantive issues raised by FFCCI. It ruled that
FFCCI had waived its right to demand a joint measurement of HRCC's completed works,
and therefore, it was barred from disputing HRCC's valuation of the works. The Supreme
Court also found that HRCC did not have the right to rescind the Subcontract Agreement,
as it had waived this right by agreeing to continue the performance of its obligations.
However, the Supreme Court held that both parties should share the arbitration costs
equally, as HRCC's work stoppage was not justified.
In conclusion, the Supreme Court affirmed the decision of the CA, with the modification
that the arbitration costs should be shared equally by FFCCI and HRCC.
International Hotel Corporation vs. Joaquin, Jr. & Suarez, G.R. No. 158361, April
10, 2013
International Hotel Corp. vs. Joaquin Jr.
G.R. No. 158361. April 10, 2013.
Facts:
The case involves International Hotel Corporation (IHC) and Francisco B. Joaquin, Jr. and
Rafael Suarez. Joaquin submitted a proposal to IHC to secure a foreign loan for the
construction of a hotel. IHC approved the proposal and allocated funds for the project.
Joaquin requested payment for his services, and IHC agreed to compensate him and
Suarez with shares of stock. However, due to the failure to secure the loan, IHC cancelled
the shares. Joaquin and Suarez filed a lawsuit for specific performance, annulment,
damages, and injunction. The Regional Trial Court (RTC) held IHC liable and ordered them
to pay Joaquin and Suarez. The Court of Appeals (CA) affirmed the decision but modified
the amounts awarded. IHC appealed to the Supreme Court (SC), arguing that they should
not be held liable and that attorney's fees should be deleted.
Issue:
1. Whether IHC should be held liable for the cancellation of the shares of stock as
compensation for Joaquin and Suarez's services.
2. Whether attorney's fees should be awarded to Joaquin and Suarez.
Ruling:
The Supreme Court (SC) ruled in favor of Joaquin and Suarez with modifications. The SC
held that IHC should not be held liable under Article 1186 and Article 1234 of the Civil
Code. However, they found IHC liable based on the constructive fulfillment of a mixed
conditional obligation. The SC also applied the principle of quantum meruit to determine
the reasonable compensation for Joaquin and Suarez's services. The SC modified the
amounts awarded by the CA and deleted the award of attorney's fees.
Ratio:
The SC held that IHC should not be held liable under Article 1186 and Article 1234 of the
Civil Code. Article 1186 states that the condition shall be deemed fulfilled when the
obligor voluntarily prevents its fulfillment. In this case, IHC did not voluntarily prevent the
fulfillment of the condition, as the failure to secure the loan was beyond their control.
Article 1234 states that if the obligation has been substantially performed in good faith,
the obligor may recover as though there had been a strict and complete fulfillment. Since
the loan was not secured, the obligation was not substantially performed.
However, the SC found IHC liable based on the constructive fulfillment of a mixed
conditional obligation. A mixed conditional obligation is one where the condition is
dependent on the will of the debtor. In this case, the condition for the shares of stock as
compensation was dependent on the successful securing of the loan. Since the loan was
not secured, the condition was not fulfilled. However, the SC held that IHC should still be
liable for the constructive fulfillment of the obligation, as they had already allocated funds
for the project and had agreed to compensate Joaquin and Suarez.
The SC also applied the principle of quantum meruit to determine the reasonable
compensation for Joaquin and Suarez's services. Quantum meruit means "as much as he
deserves" and refers to the reasonable value of services rendered. In this case, Joaquin
and Suarez had already performed services for IHC, and therefore, they were entitled to
reasonable compensation. The SC modified the amounts awarded by the CA to reflect the
reasonable value of their services.
Lastly, the SC deleted the award of attorney's fees. Attorney's fees are not awarded as a
matter of course and must be proven and justified. In this case, the SC found that there
was no basis to award attorney's fees to Joaquin and Suarez.
Wellex Group, Inc. vs. U-Land Airlines Co., Ltd., G.R. No. 167519, January 14,
2015
The Wellex Group, Inc. vs. U-Land Airlines, Co., Ltd.
G.R. No. 167519. January 14, 2015
Facts:
The case involves a dispute between The Wellex Group, Inc. (Wellex) and U-Land Airlines,
Co., Ltd. (U-Land) over a Memorandum of Agreement (MOA). The MOA was entered into by
the parties to expand their respective airline operations in Asia. Under the MOA, U-Land
was supposed to acquire shares of stock from Wellex in Air Philippines International
Corporation (APIC) and Philippine Estates Corporation (PEC). However, the share
purchase agreement was not executed within the agreed 40-day period, and U-Land
discovered that APIC did not actually own any shares in Air Philippines Corporation (APC).
U-Land demanded the return of the amount it paid to Wellex, and filed a complaint for
rescission of the MOA. The Regional Trial Court granted the rescission, which was affirmed
by the Court of Appeals.
Issue:
The main issue in the case is whether the rescission of the MOA was proper.
Ruling:
The court ruled in favor of U-Land and held that rescission was justified due to Wellex's
misrepresentations and failure to fulfill its obligations under the MOA. The court found that
Wellex falsely represented that APIC owned a majority of the shares in APC, which induced
U-Land to enter into the agreement. The court also found that Wellex failed to enter into
the share purchase agreement within the agreed period and did not transfer the APC
shares to APIC. Therefore, U-Land was entitled to rescission and the return of the amount
it paid to Wellex.
Ratio:
The court's ruling is based on the principle that rescission is a remedy available to the
injured party in a contract when there is a breach of faith by the other party. The court found
that Wellex's misrepresentations and failure to fulfill its obligations constituted a breach
of faith, justifying the rescission of the MOA. The court also emphasized that the rescission
was proper because U-Land was the injured party and Wellex could not ask for rescission
while refusing to return the amount it received from U-Land.
Nolasco vs. Cuerpo, et al., GR No. 210215, December 9, 2015

Nolasco vs. Cuerpo
G.R. No. 210215. December 9, 2015.
Facts:
The case of Nolasco v. Cuerpo involves a Contract to Sell over a parcel of land in
Rodriguez, Rizal. The contract stated that the purchase price would be paid in
installments, and the sellers were obligated to transfer the title of the land to their names
within 90 days. However, the sellers failed to transfer the title within the prescribed period,
prompting the buyers to seek rescission of the contract and the return of the amounts they
had already paid. The Regional Trial Court (RTC) ruled in favor of the buyers, ordering the
rescission of the contract and the return of the payments. The sellers appealed to the
Court of Appeals (CA), but the CA affirmed the RTC's ruling. The sellers then filed a petition
for review on certiorari before the Supreme Court.
Issue:
The main issue before the Supreme Court was whether the CA correctly affirmed the
rescission of the contract and the return of the payments.
Ruling:
The Supreme Court ruled that the sellers' failure to transfer the title within the prescribed
period did not constitute a substantial breach that would warrant rescission of the
contract.
Ratio:
The Court explained that for a contract to be rescinded, there must be a substantial breach
that defeats the object of the parties in entering into the agreement. In this case, the
contract provided the buyers with a contractual recourse in the event of the sellers' non-
performance of their obligation to transfer the title, which was to cause the transfer
themselves at the expense of the sellers. Therefore, there was no substantial breach that
would justify rescission.
However, the Supreme Court also noted that the sellers did not pray for the cancellation
of the contract and the forfeiture of the payments in their pleadings before the RTC.
Furthermore, they were declared "as in default" for failing to file the required pre-trial brief
and did not present any evidence in support of their defense. As a result, the Court could
not grant the sellers' prayer for cancellation and forfeiture since it was not raised and
argued before the lower courts. The Court emphasized the principle that a party cannot
change its theory of the case or cause of action on appeal, as it would be unfair to the
adverse party.
In conclusion, the Supreme Court partially granted the sellers' petition, reversing the CA's
ruling and declaring the Contract to Sell to be valid and subsisting. However, the Court
could not grant the sellers' prayer for cancellation and forfeiture of the payments due to
procedural reasons.
Fong vs. Dueñas, GR No. 185592, June 15, 2015.

Fong vs. Dueñas
G.R. No. 185592. June 15, 2015.
Facts:
The case involves a joint venture agreement between George C. Fong and Jose V. Dueñas.
The agreement was for the incorporation of a holding company called Alliance Holdings,
Inc., with a capitalization of P65 million, to be contributed equally by Fong and Dueñas.
Fong was to contribute P32.5 million in cash, while Dueñas was to contribute his shares
in D.C. DANTON, Inc. and Bakcom Food Industries, Inc., which he valued at P32.5 million.
However, Dueñas failed to provide Fong with the financial documents supporting the
valuation of the shares and also failed to incorporate Alliance with the Securities and
Exchange Commission (SEC).
Fong, therefore, decided to limit his contribution to P5 million and eventually rescinded
the joint venture agreement. He demanded the return of his P5 million contribution, but
Dueñas refused, claiming that he had already used the money for the business expenses
of Danton and Bakcom. Fong then filed a complaint against Dueñas for collection of a sum
of money and damages.
The trial court ruled in favor of Fong, ordering Dueñas to return the P5 million and pay
attorney's fees and costs. The Court of Appeals, however, reversed the trial court's
decision, ruling that Fong's letter limiting his contribution to P5 million showed his
intention to convert his contributions to investments in Danton and Bakcom.
Issue:
The main issue raised in the case is whether Fong is entitled to the return of his P5 million
contribution and damages due to the rescission of the joint venture agreement.
Ruling:
The Supreme Court, in granting Fong's petition for review, held that the complaint was
actually a complaint for rescission and that Fong was justified in rescinding the agreement
due to Dueñas' failure to perform his obligations. The Court also found that both parties
had breached their obligations, and therefore, the joint venture agreement was deemed
extinguished. Dueñas was ordered to return the P5 million to Fong, and no damages were
awarded to either party.
Ratio:
The Court ruled that Fong was justified in rescinding the joint venture agreement due to
Dueñas' failure to perform his obligations. Dueñas failed to provide Fong with the financial
documents supporting the valuation of the shares and also failed to incorporate Alliance
with the SEC. These failures constituted a breach of Dueñas' obligations under the
agreement.
The Court also found that Fong's letter limiting his contribution to P5 million did not show
his intention to convert his contributions to investments in Danton and Bakcom. Instead,
it was a manifestation of Fong's decision to limit his contribution due to Dueñas' failures.
Therefore, Fong was entitled to the return of his P5 million contribution.
Both parties were found to have breached their obligations under the joint venture
agreement. As a result, the agreement was deemed extinguished. Since both parties were
at fault, no damages were awarded to either party.
In conclusion, the Supreme Court upheld the trial court's ruling and ordered Dueñas to
return the P5 million to Fong. The joint venture agreement was rescinded due to the
parties' breaches of their obligations, and no damages were awarded.
Sergio Osmeña III, vs. Power Sector Assets and Liabilities Management
Corporation, et. al., GR No. 212686, October 5, 2016
Osmeña III vs. Power Sector Assets and Liabilities Management Corp.
G.R. No. 212686. September 28, 2015.
Facts:
The case involves a petition filed by Senator Sergio R. Osmeña III to stop the sale of the
Naga Power Plant Complex (NPPC) to SPC Power Corporation (SPC). The sale was being
halted due to SPC's exercise of the right to top the winning bid of Therma Power Visayas,
Inc. (TPVI). Osmeña argued that the right to top provision in the Lease Agreement is void
as it goes against public policy. The Power Sector Assets and Liabilities Management
Corporation (PSALM) is the government-owned corporation responsible for the
privatization of the NPPC. SPC is a joint venture corporation between Salcon Power
Corporation and Korea Power Corporation, while TPVI is a subsidiary of AboitizPower.
PSALM conducted a bidding for the sale of the NPPC, and TPVI was declared as the highest
bidder. However, SPC exercised its right to top and offered a higher bid.
Issue:
The main issues in the case are whether certiorari is the proper remedy and if the petitioner
has legal standing to question the validity of SPC's right to top.
Ruling:
The Supreme Court ruled in favor of Osmeña, declaring the right to top provision in the
Lease Agreement as void.
Ratio:
The Court held that the provision contravenes the policy on competitive bidding and does
not have a valid basis as SPC does not have a legitimate interest in the NPPC. The Court
emphasized the importance of public bidding in government contracts and the need to
attract more bidders to ensure the best offer for public assets.
The Court explained that the right to top provision allows the winning bidder to be outbid
by another party, which undermines the principle of competitive bidding. This provision
gives an unfair advantage to the winning bidder and discourages other potential bidders
from participating in the bidding process. It goes against the policy of promoting
transparency, fairness, and equal opportunity in government contracts.
Furthermore, the Court found that SPC did not have a legitimate interest in the NPPC. The
right to top provision should only be allowed if the party exercising the right has a legitimate
interest in the subject matter of the contract. In this case, SPC did not have any existing
rights or interests in the NPPC that would justify its exercise of the right to top. Allowing
SPC to outbid the highest bidder would be contrary to the purpose of competitive bidding,
which is to obtain the best offer for public assets.
The Court emphasized that public bidding is a vital component of government contracts
as it ensures transparency, accountability, and the best use of public funds. It encourages
competition among bidders, leading to better offers and benefits for the government and
the public. The right to top provision in the Lease Agreement undermines these principles
and is therefore void.
In conclusion, the Supreme Court ruled in favor of Osmeña, declaring the right to top
provision in the Lease Agreement as void. The Court emphasized the importance of
competitive bidding in government contracts and the need to attract more bidders to
ensure the best offer for public assets.
PEZA vs. Pilhino Sales Corporation, GR No. 185765, Sept. 28, 2016
Philippine Economic Zone Authority vs. Pilhino Sales Corp.
G.R. No. 185765. September 28, 2016.
Facts:
The case involves a dispute between the Philippine Economic Zone Authority (PEZA) and
Pilhino Sales Corporation (Pilhino) over the delivery of fire trucks. PEZA filed a complaint
for rescission of contract and damages against Pilhino for its failure to deliver the fire
trucks as stipulated in their contract. The Regional Trial Court ruled in favor of PEZA and
ordered Pilhino to pay liquidated damages, exemplary damages, and forfeit its
performance bond. Pilhino appealed to the Court of Appeals, which partially granted the
appeal by reducing the amount of liquidated damages and deleting the forfeiture of the
performance bond. PEZA filed a petition for review on certiorari before the Supreme Court.
Issue:
The main issue raised in the case is whether the contractually stipulated liquidated
damages can still be awarded despite the rescission of the contract.
Ruling:
The Supreme Court ruled that the contractually stipulated liquidated damages can still be
awarded as the parties agreed on the consequences of a breach in their contract. The
court emphasized that the options of rescission and specific performance under Article
1191 of the Civil Code come with the payment of damages. Therefore, the liquidated
damages must be maintained as a rule.
Ratio:
The Supreme Court explained that the contractually stipulated liquidated damages can
still be awarded because the parties agreed on the consequences of a breach in their
contract. The court cited Article 1191 of the Civil Code, which provides for the options of
rescission and specific performance in case of breach of contract. These options come
with the payment of damages. The court emphasized that the parties, in this case, agreed
on the liquidated damages as the measure of damages in case of breach. Therefore, the
liquidated damages must be maintained as a rule.
The court also addressed the issue of the reduction of the liquidated damages by the Court
of Appeals. The Court of Appeals relied on Pilhino's attempt to rectify the situation by
offering new specifications and expressing willingness to shoulder the price difference.
However, the Supreme Court found that Pilhino's offer came too late and was
inconsequential as the complaint for rescission and damages had already been filed. The
court also noted that modifying the contract after it was awarded through public bidding
would undermine fair competition. Therefore, the Court of Appeals' reduction of the
liquidated damages was deemed improper.
In conclusion, the Supreme Court granted PEZA's petition and reinstated the decision of
the Regional Trial Court, ordering Pilhino to pay the original amount of liquidated damages,
exemplary damages, and forfeit its performance bond. The court emphasized the
importance of upholding contractually stipulated liquidated damages and preventing
delinquent parties from evading their own consequences of breach.
Development Bank of the Philippines vs. Sta. Ines Melale Forest Products
Corporation, GR 193068 & 193099, February 1, 2017
Development Bank of the Philippines vs. Sta. Ines Melale Forest Products Corp.
G.R. No. 193068. February 1, 2017.
Facts:
This case involves a dispute between the Development Bank of the Philippines (DBP) and
the National Development Corporation (NDC) as petitioners, and Sta. Ines Melale Forest
Products Corporation, Rodolfo Cuenca, Manuel Tinio, Cuenca Investment Corporation,
and Universal Holdings Corporation as respondents. The case dates back to 1977 when
Galleon Shipping Corporation, now known as National Galleon Shipping Corporation,
encountered financial difficulties and took out several loans. DBP guaranteed Galleon's
foreign loans, and in return, Galleon and its stockholders executed a Deed of Undertaking,
obligating themselves to guarantee DBP's potential liabilities. President Ferdinand Marcos
issued Letter of Instructions No. 1155 in 1981, directing NDC, DBP, and the Maritime
Industry Authority to implement a rehabilitation plan for Galleon. NDC took over Galleon's
operations, and a Memorandum of Agreement was executed between NDC and Galleon's
stockholders, including respondents. However, the share purchase agreement was never
formally executed.
Issue:
The main issue in this case is whether NDC should be considered the new owner of
Galleon's shares of stocks.
Ruling:
The Supreme Court ruled that NDC should not be considered the new owner of Galleon's
shares of stocks.
Ratio:
The court held that the Memorandum of Agreement did not bind NDC to purchase
Galleon's shares and pay the advances made by respondents. The court also held that
novation did not take place and that respondents remained liable under the Deed of
Undertaking. The court found that NDC's delay in reviewing the financial accounts caused
the failure to execute the share purchase agreement. However, the court ruled that NDC
is liable for the advances made by the respondents in Galleon's behalf, as they were valid
and authorized liabilities incurred by Galleon in the course of its business. The court also
discussed the issue of novation and held that for novation to have legal effect, the creditor
must expressly consent to the substitution of the new debtor. In this case, there was no
proof that DBP expressly consented to the substitution of NDC as a co-guarantor of
Galleon's debts. Therefore, the respondents have not been discharged as Galleon's co-
guarantors under the Deed of Undertaking and they remain liable to DBP. The court also
addressed the issue of attorney's fees, moral and exemplary damages, and compensatory
interest as damages. The court upheld the lower court's award of attorney's fees and moral
and exemplary damages, finding them just, reasonable, and supported by the evidence.
However, the court modified the interest rate to be imposed on the advances made and
the payment due for the shares of stock. The court ruled that the advances made and the
payment due were loans or forbearances of money that should earn interest of 12% from
the date the case was filed. After June 30, 2013, the amounts shall earn interest at six
percent (6%) per annum until the Decision becomes final and executory. Finally, the court
denied DBP's claims for damages, as it failed to support its claims of malicious
prosecution and a deliberate act by the respondents to cause loss or injury to DBP.
2. With a Period (1193-1198)

Nepomuceno vs. Narciso (84 Phil. 542)
Nepomuceno vs. Narciso
G.R. No. L-1328. September 9, 1949.
Facts:
The case of Nepomuceno v. Narciso involves Mariano Nepomuceno and Agueda G. de
Nepomuceno as plaintiffs-appellants, and Edilberto A. Narciso and Maura Suarez as
defendants-appellees. On November 14, 1938, Mariano Nepomuceno executed a
mortgage in favor of Edilberto A. Narciso and Maura Suarez on a parcel of land in Angeles,
Pampanga. The mortgage was to secure the payment of P24,000 with an interest rate of
8% per annum within a period of seven years. On September 30, 1943, the parties
executed a notarial document entitled "Partial Novation of Contract" which modified the
terms of the mortgage. The modification included reducing the interest rate to 6% per
annum from December 8, 1941, until the end of the war, and stipulating that the mortgagor
cannot pay off the mortgage while the war is ongoing. The plaintiffs filed a complaint
against the defendants, alleging the execution of the mortgage and its partial novation.
They also stated that they were willing to pay off the mortgage debt and interest, but the
defendants refused to accept the payment. The plaintiffs claimed damages amounting to
P5,000 and deposited P22,356 with the Clerk of Court as payment for the mortgage debt
and interest.
Issue:
The main issue raised in the case was the validity of the stipulation in the contract that
prohibited the mortgagor from paying off the mortgage during wartime. The plaintiffs
argued that the stipulation was against public policy and null and void. They relied on
Article 1255 of the Civil Code, which allows parties to establish any pacts, clauses, and
conditions as long as they are not contrary to law, morals, or public order.
Ruling:
The Supreme Court ruled in favor of the defendants, affirming the lower court's decision
to dismiss the complaint. The Court held that the stipulation in the contract was not
immoral or violative of public order. It was a valid and equitable transaction in accordance
with the provisions of the Civil Code. The mortgagees had the right to refuse the tender of
payment made by the mortgagors before the due date. Therefore, the defendants were not
obligated to accept the payment.
Ratio:
The Court based its decision on Articles 1125 and 1127 of the Civil Code. Article 1125
states that obligations with a fixed date for performance are demandable only when the
day arrives. Article 1127 provides that when a term for the performance of an obligation is
fixed, it is presumed to have been established for the benefit of both the creditor and the
debtor, unless it appears otherwise. In this case, the modification of the mortgage terms
was mutually agreed upon by the parties, and the mortgagor voluntarily agreed not to pay
off the mortgage during wartime in consideration of the reduced interest rate.
In conclusion, the Supreme Court upheld the validity of the mortgage contract stipulation
that prohibited the mortgagor from paying off the mortgage during wartime. The Court
found that the stipulation was not against public policy and was a valid transaction in
accordance with the provisions of the Civil Code. The defendants were not obligated to
accept the tender of payment made by the plaintiffs before the due date.
Berg vs. Magdalena Estate, Inc. (92 Phil. 110)

Berg vs. Magdalena Estate, Inc.
G.R. No. L-3784. October 17, 1952.
Facts:
The case of Berg v. Magdalena Estate, Inc. involves a dispute over the partition of the
Crystal Arcade property in Manila. The plaintiff, Ernest Berg, and the defendant,
Magdalena Estate, Inc., are co-owners of the property, with Berg owning one-third and
Magdalena Estate owning two-thirds. The division is being sought because the parties
cannot agree on the management and partition of the property.
However, Magdalena Estate claims that in 1943, they sold one-third of the property to Berg
with the condition that if either party decided to sell their share, the other party would have
the first option to purchase it at the seller's price. In 1946, Berg offered to sell his share to
Magdalena Estate for P200,000, which was accepted by Magdalena Estate. Berg gave
Magdalena Estate a period of time to make the payment, which would expire in May 1947.
However, despite accepting the offer, Magdalena Estate refused to make the payment,
resulting in damages of P100,000. Magdalena Estate asks for specific performance of the
agreement.
The lower court found in favor of Berg, ruling that no agreement had been reached between
the parties regarding the purchase and sale of the property. The court recognized Berg's
right to demand partition under Rule 71 of the Rules of Court and granted the relief
requested in the complaint. Magdalena Estate appeals the decision.
Issue:
The main issue in the case is whether an agreement to sell the share of the property has
been reached between Berg and Magdalena Estate. The court must also determine the
legal basis for the decision, particularly regarding the evidence submitted by Magdalena
Estate and the application of the statute of frauds.
Ruling:
The court finds that there is sufficient evidence to establish an agreement to sell between
the parties. The applications submitted by Berg and Magdalena Estate to the United States
Treasury Department, seeking permission to sell and purchase the property, respectively,
serve as a note or memorandum of the contract within the purview of the statute of frauds.
The applications contain all the necessary elements of a contract, including the parties,
price, and subject matter. Therefore, the court concludes that an agreement to sell has
been established.
However, the court also finds that Magdalena Estate failed to comply with the terms of the
agreement. The payment of P200,000 was to be made either immediately upon obtaining
the necessary license or within a reasonable time thereafter. Magdalena Estate did not
make the payment within a reasonable time, as it was only able to raise the funds one year
later. The court rejects Magdalena Estate's claim of an extension of time, as there is no
evidence to support it. Therefore, the court concludes that Berg is relieved of his obligation
to sell under the law.
Ratio:
The court's decision is based on the evidence presented and the application of the statute
of frauds. The applications submitted by Berg and Magdalena Estate to the United States
Treasury Department serve as a note or memorandum of the contract, satisfying the
requirements of the statute of frauds. These applications contain all the necessary
elements of a contract, establishing the existence of an agreement to sell.
Furthermore, the court finds that Magdalena Estate failed to comply with the terms of the
agreement. The payment was to be made within a reasonable time, but Magdalena Estate
was only able to raise the funds one year later. Without evidence of an extension of time,
the court rejects Magdalena Estate's claim and relieves Berg of his obligation to sell.
In conclusion, the court affirms the decision of the lower court, granting the relief
requested by Berg. The court finds that there was an agreement to sell between the
parties, but Magdalena Estate failed to comply with the terms of the agreement. Therefore,
Berg cannot be compelled to carry out the sale.
Victorias Planters vs. Victorias Milling Co. (97 Phil. 318)

Victorias Planters Association, Inc. vs. Victorias Milling Co., Inc.
G.R. No. L-6648. July 25, 1955.
Facts:
The case of Victorias Planters Association, Inc. v. Victorias Milling Co., Inc. involves a
dispute over a milling contract between the petitioners, who are sugar cane planters, and
the respondent, a central milling company. The contract stipulated a 30-year period within
which the sugar cane produced by the petitioners would be milled by the respondent. It
also included a provision that in the event of force majeure, the contract would be deemed
suspended during that period.
During the Japanese occupation and the two years after liberation when the mill was being
rebuilt, the petitioners failed to deliver sugar cane for a total of six years.
Issue:
The main issue raised in the case is whether the petitioners can be compelled to deliver
sugar cane to the respondent for six more years after the expiration of the 30-year period
to make up for what they failed to deliver during those six years.
Ruling:
The court ruled that a force majeure event, such as war, relieves the obligor from fulfilling
a contractual obligation. The stipulation in the contract that the contract shall be deemed
suspended during a force majeure event does not mean that the running of the period
agreed upon is stopped. It only relieves the parties from fulfilling their respective
obligations during that time.
In this case, the petitioners were prevented from delivering sugar cane due to the war, and
therefore cannot be compelled to deliver it later on. To require them to do so would be
demanding the fulfillment of an obligation that was impossible to perform at the time it
became due.
The court held that the contracts expired and the milling company is not entitled to any
extension or addition to the 30-year term. The prayer for the petitioners to deliver sugar
cane for six more years was denied as it would effectively be an extension of the contracts.
The court affirmed the judgment in favor of the petitioners and declared that the milling
contracts expired and terminated upon the lapse of the 30-year period.
Ratio:
The court based its decision on the principle that a force majeure event, such as war,
relieves the obligor from fulfilling a contractual obligation. The stipulation in the contract
that the contract shall be deemed suspended during a force majeure event does not mean
that the running of the period agreed upon is stopped. It only relieves the parties from
fulfilling their respective obligations during that time.
In this case, the petitioners were unable to deliver sugar cane due to the war, which
qualifies as a force majeure event. Therefore, they cannot be compelled to deliver it later
on. To require them to do so would be demanding the fulfillment of an obligation that was
impossible to perform at the time it became due.
The court emphasized that the contracts expired and the milling company is not entitled
to any extension or addition to the 30-year term. Granting the prayer for the petitioners to
deliver sugar cane for six more years would effectively be an extension of the contracts,
which is not justified.
Thus, the court affirmed the judgment in favor of the petitioners and declared that the
milling contracts expired and terminated upon the lapse of the 30-year period.
Gonzales vs. Jose (66 Phil. 369)

Gonzales vs. De Leon
G.R. No. L-17250. January 31, 1962.
Facts:
The case of Gonzales v. De Leon involves a dispute over a parcel of land in Catanauan,
Quezon, Philippines. On November 28, 1944, Jose de Luna Gonzales executed a deed of
absolute sale in favor of Juanita Martinez for the said parcel of land. Along with the sale,
they also entered into a contract granting Gonzales an option to purchase the land within
six months after the expiration of one year from the signing of the treaty of peace. This
option was duly registered and annotated in the Transfer Certificate of Title. On October
18, 1952, Martinez assigned her rights and interest in the property to Generosa de Leon.
De Leon then filed an action to eject Gonzales from the land and recover unpaid rentals.
The court of first instance ruled in favor of De Leon, declaring her as the owner of the
property and ordering Gonzales to deliver it to her. The court also ordered Gonzales to pay
rentals and damages. Gonzales appealed the decision to the Court of Appeals, which
affirmed the ruling, except for the award of damages. Gonzales then filed an appeal by
certiorari to the Supreme Court.
Issue:
The main issues raised in the case are whether there was a valid contract of lease between
Gonzales and Martinez, and whether Gonzales still has the right to repurchase the
property.
Ruling:
The Supreme Court ruled in favor of Gonzales, affirming the decision of the Court of
Appeals with the modification that Gonzales shall be entitled to redeem the property
within 30 days, provided that De Leon's credit for overdue rentals is first satisfied.
Ratio:
Regarding the issue of the contract of lease, Gonzales argues that the alleged contract of
lease was a mere devise to circumvent the provisions of the Usury Law and that no rentals
are due from him. However, the deeds incorporating the agreement between Gonzales
and Martinez establish the existence of a contract of lease. The Court of Appeals found
that the deeds expressed the true intent of the parties, and this finding is conclusive.
As for the right to repurchase, Article 1606 of the Civil Code provides that the vendor may
still exercise the right to repurchase within thirty days from the time final judgment was
rendered in a civil action on the basis that the contract was a true sale with right to
repurchase. The Supreme Court, in line with a previous decision, holds that Gonzales is
entitled to redeem the property within 30 days from the date on which the decision of the
Court shall have become final.
Lastly, Gonzales argues that the court of first instance should not have ordered the
execution of its decision during the pendency of the appeal. However, the Court of Appeals
upheld the order of execution, finding that it was justified based on the facts presented in
the petition for execution. The Supreme Court affirms the decision of the Court of Appeals,
with the modification that Gonzales shall be entitled to redeem the property within 30
days, provided that De Leon's credit for overdue rentals is first satisfied.
Borromeo vs. Court of Appeals (47 SCRA 65)

Borromeo vs. Court of Appeals
G.R. No. L-22962. September 28, 1972.
Facts:
The case of Borromeo v. Court of Appeals involves a dispute over the interpretation of a
promissory note and whether the creditor can demand payment after ten years. The
petitioners in this case are Pilar N. Borromeo, Maria B. Putong, Federico V. Borromeo, Jose
Borromeo, Consuelo B. Morales, and Canuto V. Borromeo Jr., while the respondents are
Jose A. Villamor (deceased) and his heirs. The promissory note in question was executed
on November 29, 1933, and it stated that the debtor would pay his indebtedness even after
the lapse of ten years. The Court of Appeals reversed the decision of the lower court, ruling
that the stipulation amounting to a waiver of prescription was not valid.
Issue:
The main issue in this case is the interpretation of the phrase "to pay his indebtedness
even after the lapse of ten years" in the promissory note.
Ruling:
The Supreme Court ruled in favor of the creditor, stating that the phrase meant that the
demand for payment could only be made after the lapse of ten years from the date of the
promissory note.
Ratio:
The Supreme Court based its ruling on the principle that the intention of the parties should
prevail in the interpretation of contracts. They emphasized that the language used in the
promissory note should be understood in accordance with the common usage and
meaning of the words. In this case, the phrase "to pay his indebtedness even after the
lapse of ten years" clearly indicated that the debtor had an obligation to pay the creditor
even after ten years had passed.
The Court also cited the principle that terms, clauses, or conditions contrary to law,
morals, and public order should be separated from the valid and legal contract. In this
case, the stipulation in the promissory note that waived the prescription period for the
creditor's right to demand payment was deemed invalid. However, this invalid stipulation
should not affect the validity of the promissory note as a whole.
Therefore, the Court concluded that the creditor had the right to file a complaint for
collection within the ten-year period after the promissory note was executed. The
judgment of the lower court ordering the payment of the amount due was deemed to be in
accordance with the law.
In summary, the Supreme Court ruled in favor of the creditor, interpreting the promissory
note to mean that the demand for payment could only be made after ten years from the
date of the note. They emphasized the importance of the parties' intention in interpreting
contracts and separated the invalid stipulation from the valid contract. The Court upheld
the judgment of the lower court ordering the payment of the amount due.
Gaite vs. Fonacier (112 Phil. 728)

Gaite vs. Fonacier
G.R. No. L-11827. July 31, 1961.
Facts:
The case of Gaite v. Fonacier involves a dispute over the payment of the balance for the
extracted iron ore. The plaintiff, Fernando Gaite, was appointed as the attorney-in-fact of
defendant Isabelo Fonacier to enter into a contract for the exploration and development
of mining claims. Gaite then assigned the development and exploitation of the claims to
Larap Iron Mines, owned solely by him. Gaite extracted approximately 24,000 metric tons
of iron ore from the claims. Fonacier decided to revoke Gaite's authority and they entered
into a "Revocation of Power of Attorney and Contract" agreement, wherein Fonacier
agreed to pay Gaite the balance of P65,000 for the extracted ore. To secure the payment,
Fonacier provided a surety bond. However, when the bond expired and no sale of the ore
had been made, Gaite demanded payment from Fonacier. When Fonacier and his sureties
failed to pay, Gaite filed a complaint for payment of the balance.
Issue:
The main issues in the case were whether the obligation to pay became due and
demandable when the bond expired, and whether there was a short-delivery of the ore.
Ruling:
The court ruled in favor of Gaite, ordering the appellants to pay him the balance of P65,000
with interest.
Ratio:
The court held that the obligation became due and demandable when the bond expired,
as the appellants failed to renew or replace the bond. The court also found that there was
no short-delivery of the ore, as the exact quantity was not determined and Gaite had
delivered all the ore found in the stockpiles.
The court based its decision on the interpretation of the contract, the nature of conditional
obligations, and the principle of greatest reciprocity of interests. The court emphasized
that the contract between Gaite and Fonacier clearly stated that the payment of the
balance for the extracted ore was secured by a surety bond. The expiration of the bond
without any sale of the ore being made meant that the obligation to pay became due and
demandable. The court also noted that the appellants failed to renew or replace the bond,
further indicating their failure to fulfill their obligation.
Regarding the issue of short-delivery, the court explained that there was no specific
quantity of ore agreed upon in the contract. Gaite had delivered all the ore found in the
stockpiles, and there was no evidence to suggest that there was a short-delivery. The court
emphasized that the burden of proving short-delivery lies with the party making the
allegation, and in this case, Fonacier failed to provide sufficient evidence to support his
claim.
In conclusion, the court ruled in favor of Gaite, ordering the appellants to pay him the
balance of P65,000 with interest. The court's decision was based on the interpretation of
the contract, the nature of conditional obligations, and the principle of greatest reciprocity
of interests.
Radiowealth Finance Company vs. Del Rosario (335 SCRA 288)

Radiowealth Fice Co. vs. Spouses Del Rosario
G.R. No. 138739. July 6, 2000.
Facts:
The case involves a finance company, Radiowealth Finance Company, filing a complaint
against a couple, Spouses Vicente and Maria Sumilang del Rosario, for defaulting on their
monthly installments. The couple had executed a promissory note in favor of the finance
company but failed to pay their obligations despite repeated demands. The finance
company filed a complaint for the collection of a sum of money, but the trial court
dismissed the complaint for failure to substantiate its claims. On appeal, the Court of
Appeals reversed the trial court's decision and remanded the case for further proceedings.
The finance company filed a petition for review on certiorari questioning the decision of
the appellate court.
Issue:
The main issue raised in the case is whether the appellate court erred in remanding the
case for further proceedings instead of rendering judgment on the basis of the evidence
submitted by the finance company.
Ruling:
The Supreme Court ruled in favor of the finance company, finding the petition meritorious.
The Court held that the appellate court should have rendered judgment on the basis of the
evidence submitted by the finance company, as provided by Rule 33, Section 1 of the 1997
Rules of Court. The Court agreed with the finance company that there was sufficient
evidence on record to decide the collection suit, and a remand was unnecessary and
frowned upon by the rules. The Court granted the petition and modified the appealed
decision, setting aside the remand and ordering the couple to pay the outstanding amount
plus penalty charges and attorney's fees.
Ratio:
The Court explained that the consequence of a demurrer to evidence is that if it is granted
by the trial court and the order of dismissal is reversed on appeal, the movant loses the
right to present evidence, and the appellate court shall proceed to render judgment on the
merits on the basis of the plaintiff's evidence. In this case, the trial court granted the
demurrer to evidence and dismissed the complaint, but the appellate court reversed the
dismissal. Therefore, the appellate court should have rendered judgment on the basis of
the evidence submitted by the finance company.
The Court also ruled that the obligation of the couple had already become due and
demandable, as evidenced by the promissory note and the fact that they had started
paying installments on the note. The Court rejected the couple's argument that the
installments were not yet due and demandable, and that a court should fix a period for
payment. The Court held that the intention of the parties was clear from the promissory
note, which provided for monthly installments and included an acceleration clause and a
late payment penalty. The Court ordered the couple to pay the outstanding amount plus
penalty charges and attorney's fees.
The Court also addressed the issue of interest and liquidated damages. The promissory
note did not expressly stipulate interest, but it did provide for a late payment penalty. The
Court held that interest should be deemed included in the penalty. The Court also held
that the liquidated damages provision should not be enforced as it was unconscionable,
and that attorney's fees should be awarded in a reasonable amount. The Court modified
the appealed decision to reflect these rulings.
Fernandez vs. CA (166 SCRA 577)

Fernandez vs. Court of Appeals
G.R. No. 80231. October 18, 1988.
Facts:
The case of Fernandez v. Court of Appeals involves a lease contract between the
petitioner, Celso A. Fernandez, and the respondent, Miguel Tanjangco. The lease contract
was executed on July 31, 1973, for a ten-year period, with an option to renew for another
ten years at the mutual agreement of both parties. The lease was for a piece of land in
Pandacan, Manila, where Fernandez planned to build the New Zamora Market. The
contract also stated that upon expiration of the lease, any improvements made by
Fernandez would automatically belong to Tanjangco without compensation.
Issue:
The main issue in this case is the interpretation of the clause in the lease contract that
states the lease is "renewable for another ten years at the option of both parties under
such terms, conditions, and rental reasonable at that time."
Ruling:
The Supreme Court affirmed the decision of the Court of Appeals, agreeing with their
interpretation of the lease contract. The Court emphasized that the intention of the parties
was clearly expressed in the language of the contract. The clause specified that the option
to renew must be exercised by both parties, and the terms and conditions of the renewal
must be mutually agreed upon. The Court also overruled previous cases, Koh v. Ongsiaco
and Cruz v. Alberto, which had interpreted similar lease contract clauses differently. The
Court held that specific language is necessary to grant a unilateral option to extend or
renew a lease, and there was no such language in this case.
Ratio:
The Supreme Court based its decision on the interpretation of the lease contract. The
Court emphasized that the language of the contract clearly stated that the option to renew
must be exercised by both parties and that the terms and conditions of the renewal must
be mutually agreed upon. The Court held that the clause did not grant a unilateral option
to extend or renew the lease. The Court also overruled previous cases that had interpreted
similar lease contract clauses differently, stating that specific language is necessary to
grant a unilateral option. Therefore, the Court affirmed the decision of the Court of
Appeals, ruling that the lease contract was not validly renewed and Fernandez was not
entitled to another ten-year lease term.
3. Alternative and Facultative (1199-1206)

Agoncillo and Mariano vs. Javier (38 Phil. 424)
Agoncillo vs. Javier
G.R. No. 12611. August 7, 1918.
Facts:
The case of Agoncillo v. Javier involves a dispute over a debt owed by the defendants,
Florencio Alano and Jose Alano, to the plaintiffs, Felipe Agoncillo and his wife Marcela
Mario. The debt was incurred in 1897 by the late Anastasio C. Cruz, who executed a
document promising to pay the plaintiffs a sum of money within one year. The document
also included a provision for the mortgage of a house and lot as security for the debt. The
debt was not paid in full, except for a partial payment of P200 made by Anastasio Alano in
1908. In 1912, Anastasio Alano died and proceedings for the administration of his estate
were initiated. The plaintiffs filed a complaint in 1916 against the administrator of the
estate and the two remaining debtors, seeking payment of the debt or the conveyance of
the mortgaged property. The defendants raised several defenses, including the argument
that the action was barred by the statute of limitations and that the debt had been
extinguished due to the plaintiffs' failure to present their claim to the committee on claims
during the administration proceedings. The trial court ruled in favor of the plaintiffs, but
the defendants appealed to the Supreme Court.
Issue:
The main issues raised in the case are: (1) whether the debt is joint or solidary, (2) whether
the action is barred by the statute of limitations, and (3) whether the plaintiffs' failure to
present their claim to the committee on claims extinguished their right to pursue the debt.
Ruling:
The Supreme Court ruled in favor of the defendants, stating that the debt had prescribed
and their liability was joint, not solidary, resulting in the dismissal of the action against all
the defendants. The court held that a partial payment or acknowledgment made by one
joint debtor does not stop the running of the statute of limitations as to the others. The
court also emphasized that when a plaintiff deliberately adopts a certain theory of the
case and the case is tried and decided upon that theory, the plaintiff cannot change their
theory on appeal. Therefore, the plaintiffs' argument that the debt was solidary and that
the payment made by Anastasio Alano interrupted the prescription of the debt was
rejected. Additionally, the court held that the plaintiffs' failure to present their claim to the
committee on claims during the administration proceedings barred their action against
the estate of Anastasio Alano.
Ratio:
The court's decision was based on the legal principles that joint obligations do not create
solidary liability unless expressly stipulated, that prescription is not interrupted by a
payment made by a stranger to the debt without the authorization of the debtor, and that
the failure to present a claim to the committee on claims extinguishes the claim. The court
also noted that the plaintiffs' leniency in not pursuing their claim for a long period of time
did not change the legal outcome of the case.
Ong Guan Can vs. Century Insurance Co. (46 Phil. 492)
Ong Guan Can vs. Century Insurance Co., Ltd.
G.R. No. 22738. December 2, 1924.
Facts:
The case of Ong Guan Can v. Century Insurance Co., Ltd. involves a dispute between the
plaintiffs, Ong Guan Can and The Bank of the Philippine Islands, and the defendant
insurance company, Century Insurance Co., Ltd. The dispute centers around the issue of
whether the insurance company should pay the plaintiffs the value of their fire insurance
policies or have the option to rebuild the damaged property. The insurance policy in
question contains a clause that allows the insurance company to either pay the amount
of the loss or damage or rebuild the property. However, the insurance company must notify
the plaintiffs of their election and give them the opportunity to express their consent or
objection. In this case, the insurance company did not give a formal notice of its election
to rebuild the property.
Issue:
The main issue in this case is whether the insurance company's failure to give a formal
notice of its election to rebuild the damaged property is a valid ground for the plaintiffs to
refuse the proposition and demand payment for the value of their fire insurance policies.
Ruling:
The court ruled in favor of the plaintiffs and ordered the insurance company to pay the
value of the insurance policies. The court affirmed the judgment of the trial judge, stating
that there was no justification for the reversal of the finding that the insurance company's
election to rebuild the house was improper. The court held that the judgment was in
accordance with the merits of the case and the law.
Ratio:
The court based its decision on the provisions of the insurance policy and the principles
of fairness and justice. The insurance policy clearly states that the insurance company has
the option to either pay the amount of the loss or damage or rebuild the property. However,
for this election to take legal effect, the insurance company must give a formal notice to
the plaintiffs and allow them to express their consent or objection. In this case, the
insurance company failed to give a formal notice of its election to rebuild the property.
While witnesses mentioned the proposed reconstruction, the plaintiffs did not give their
assent to the proposition because the new house would be smaller and made of lower-
quality materials than the original. The trial judge correctly ruled in favor of the plaintiffs,
stating that it would be unfair and unjust to compel them to accept a smaller house
without offering additional indemnity for the difference in size. Additionally, the insurance
company did not tender the insured value of the merchandise contained in the house.
Therefore, the court held that the insurance company's election to rebuild the house was
improper and ordered them to pay the value of the insurance policies to the plaintiffs.
4. Joint and Solidary (1207-1222)

Lafarge Cement Phils. Vs. Continental Cement Corp., et al. (G.R. No. 155173,
November 23, 2004)
Lafarge Cement Philippines Inc. vs. Continental Cement Corporation
G.R. No. 155173. November 23, 2004.
Facts:
The case involves a complaint filed by Continental Cement Corporation (CCC) against
Lafarge Cement Philippines, Inc., Luzon Continental Land Corporation, Continental
Operating Corporation, and Philip Roseberg. CCC filed the complaint with an application
for preliminary attachment. In response, the defendants denied the allegations in the
complaint and filed compulsory counterclaims against CCC, its majority stockholders,
Gregory T. Lim and Anthony A. Mariano, for damages and attorney's fees. CCC, on behalf
of Lim and Mariano, who had not yet filed any responsive pleading, moved to dismiss the
counterclaims. The trial court dismissed the counterclaims for several reasons, but in its
final resolution, it dismissed the counterclaim against Lim and Mariano, even if it included
CCC. The petitioners filed a petition for review, arguing that the counterclaims were
compulsory and that CCC did not have the authority to file a motion to dismiss on behalf
of its co-defendants.
Issue:
The main issue in this case is whether defendants in civil cases can implead persons who
were not parties to the original complaint in their counterclaims.
Ruling:
The Supreme Court ruled in favor of the petitioners and held that the counterclaims were
compulsory. The court applied the "compelling test of compulsoriness" and found that
conducting separate trials for the counterclaims and the main claim would result in a
substantial duplication of time and effort. The court also found that there was a logical
relationship between the main claim and the counterclaims. Therefore, the counterclaims
must be set up in the same action to avoid being barred forever.
The court also ruled that CCC did not have the authority to file a motion to dismiss on
behalf of its co-defendants. While CCC could move to dismiss the counterclaims against
it, it could not file the same motion on behalf of Lim and Mariano without their express
adoption. The court emphasized that a corporation has a separate legal personality from
its officers and cannot act for and on their behalf without being authorized to do so.
Ratio:
The court's decision was based on the principle of compulsory counterclaims. The court
applied the "compelling test of compulsoriness" to determine whether the counterclaims
should be set up in the same action as the main claim. The court found that conducting
separate trials for the counterclaims and the main claim would result in a substantial
duplication of time and effort. Additionally, the court found that there was a logical
relationship between the main claim and the counterclaims, as they arose from the same
set of facts and circumstances. Therefore, the court held that the counterclaims were
compulsory and must be set up in the same action to avoid being barred forever.
The court also emphasized the separate legal personality of a corporation from its officers.
It held that CCC did not have the authority to file a motion to dismiss on behalf of its co-
defendants, Lim and Mariano, without their express adoption. The court stated that a
corporation cannot act for and on behalf of its officers without being authorized to do so.
Therefore, CCC could only move to dismiss the counterclaims against itself, but not on
behalf of its co-defendants.
In conclusion, the Supreme Court granted the petition and reversed the trial court's
orders. The court ordered the trial court to take cognizance of the counterclaims and to
serve summons on Lim and Mariano.
Agoncillo vs. Javier (38 Phil. 424)

Agoncillo vs. Javier
G.R. No. 12611. August 7, 1918.
Facts:
The case of Agoncillo v. Javier involves a dispute over a debt owed by the defendants,
Florencio Alano and Jose Alano, to the plaintiffs, Felipe Agoncillo and his wife Marcela
Mario. The debt was incurred in 1897 by the late Anastasio C. Cruz, who executed a
document promising to pay the plaintiffs a sum of money within one year. The document
also included a provision for the mortgage of a house and lot as security for the debt. The
debt was not paid in full, except for a partial payment of P200 made by Anastasio Alano in
1908. In 1912, Anastasio Alano died and proceedings for the administration of his estate
were initiated. The plaintiffs filed a complaint in 1916 against the administrator of the
estate and the two remaining debtors, seeking payment of the debt or the conveyance of
the mortgaged property. The defendants raised several defenses, including the argument
that the action was barred by the statute of limitations and that the debt had been
extinguished due to the plaintiffs' failure to present their claim to the committee on claims
during the administration proceedings. The trial court ruled in favor of the plaintiffs, but
the defendants appealed to the Supreme Court.
Issue:
The main issues raised in the case are: (1) whether the debt is joint or solidary, (2) whether
the action is barred by the statute of limitations, and (3) whether the plaintiffs' failure to
present their claim to the committee on claims extinguished their right to pursue the debt.
Ruling:
The Supreme Court ruled in favor of the defendants, stating that the debt had prescribed
and their liability was joint, not solidary, resulting in the dismissal of the action against all
the defendants. The court held that a partial payment or acknowledgment made by one
joint debtor does not stop the running of the statute of limitations as to the others. The
court also emphasized that when a plaintiff deliberately adopts a certain theory of the
case and the case is tried and decided upon that theory, the plaintiff cannot change their
theory on appeal. Therefore, the plaintiffs' argument that the debt was solidary and that
the payment made by Anastasio Alano interrupted the prescription of the debt was
rejected. Additionally, the court held that the plaintiffs' failure to present their claim to the
committee on claims during the administration proceedings barred their action against
the estate of Anastasio Alano.
Ratio:
The court's decision was based on the legal principles that joint obligations do not create
solidary liability unless expressly stipulated, that prescription is not interrupted by a
payment made by a stranger to the debt without the authorization of the debtor, and that
the failure to present a claim to the committee on claims extinguishes the claim. The court
also noted that the plaintiffs' leniency in not pursuing their claim for a long period of time
did not change the legal outcome of the case.
Ynchausti vs. Yulo (34 Phil. 978)

Inchausti & Co. vs. Yulo
G.R. No. 7721. March 25, 1914.
Facts:
The case of Inchausti & Co. v. Yulo involves a dispute over a debt owed by the Yulo family.
The debt was originally incurred by Teodoro Yulo, who borrowed money from Inchausti &
Co. for the cultivation of his haciendas. After Teodoro's death, his widow and children,
including Gregorio Yulo, continued to be responsible for the debt. Inchausti & Co.
attempted to secure the debt by obtaining a mortgage on the Yulo's properties.
First, Gregorio Yulo and his siblings executed a notarial document acknowledging their
indebtedness to Inchausti & Co. and mortgaging their properties as collateral for the debt.
Subsequently, another instrument was executed which reduced the amount of the debt
and altered the terms of payment. However, this second instrument was not ratified by all
parties involved.
Inchausti & Co. then filed a lawsuit against Gregorio Yulo, seeking payment of the full
amount of the debt. The Court of First Instance of Iloilo ruled in favor of Gregorio Yulo,
stating that the action was premature and that Inchausti & Co. could bring another suit for
their proportional part of the debt.
Issue:
The main issue in this case is whether Inchausti & Co. can bring an action against Gregorio
Yulo for the full amount of the debt, despite the execution of a subsequent instrument that
reduced the debt and altered the terms of payment.
Ruling:
The Supreme Court reversed the decision of the lower court. The court held that when an
obligation is solidary, the creditor can bring his action against any of the debtors obligated
in solidum. The subsequent instrument executed by the parties did not break the solidarity
stipulated in the previous instrument.
The court also ruled that the remission of any part of the debt made by the creditor in favor
of one or more of the solidary debtors benefits the rest of them. However, the court
recognized that the debt had been reduced and altered by the second instrument, and
therefore, only the reduced amount could be recovered.
Furthermore, the court held that the defense of prematurity of the action could not be
invoked by the solidary debtor whose period for payment had expired, but it could be
invoked by the debtors whose installments had not yet matured.
Therefore, the court ordered Gregorio Yulo to pay his proportional part of the debt, which
was three-sixths of the reduced amount.
Ratio:
The court based its decision on the principle that when an obligation is solidary, the
creditor has the right to bring his action against any of the debtors obligated in solidum.
The subsequent instrument executed by the parties did not break the solidarity stipulated
in the previous instrument, and therefore, Inchausti & Co. had the right to seek payment
from Gregorio Yulo for the full amount of the debt.
The court also recognized that the remission of any part of the debt made by the creditor
in favor of one or more of the solidary debtors benefits the rest of them. However, in this
case, the debt had been reduced and altered by the second instrument, and therefore,
only the reduced amount could be recovered.
Furthermore, the court clarified that the defense of prematurity of the action could not be
invoked by the solidary debtor whose period for payment had expired, but it could be
invoked by the debtors whose installments had not yet matured. In this case, Gregorio
Yulo's period for payment had expired, and therefore, he could not invoke the defense of
prematurity.
Based on these principles, the court ordered Gregorio Yulo to pay his proportional part of
the debt, which was three-sixths of the reduced amount.
International Finance Corporation vs. Imperial Textile Mills, Inc. (475 SCRA 149)
International Fice Corp. vs. Imperial Textile Mills Inc.
G.R. No. 160324. November 15, 2005.
Facts:
The case of International Finance Corp. v. Imperial Textile Mills Inc. revolves around a
dispute regarding the liability of Imperial Textile Mills Inc. (ITM) as a guarantor in a loan
agreement between International Finance Corporation (IFC) and Philippine Polyamide
Industrial Corporation (PPIC). The loan agreement was executed on December 17, 1974,
and ITM, along with Grand Textile Manufacturing Corporation, guaranteed PPIC's
obligations under the loan agreement. However, PPIC failed to make the required
payments, prompting IFC to demand that ITM settle the outstanding balance. The trial
court held PPIC accountable for the loan payment but relieved ITM of its obligation as a
guarantor. On appeal, the Court of Appeals reversed the trial court's decision and ruled
that ITM remained liable as a guarantor.
Issue:
The main issue in the case is whether ITM should be considered a surety and,
consequently, be held solidarily liable with PPIC for the loan payment.
Ruling:
The Court ruled in favor of IFC and held that ITM is indeed a surety and should be held
solidarily liable with PPIC.
Ratio:
The Court based its decision on the explicit language of the guarantee agreement, which
stated that ITM was "jointly and severally" liable and a "primary obligor." The Court
emphasized that the mere use of the words "guarantee" and "guarantor" does not
automatically classify the contract as one of guaranty. Instead, the specific stipulations in
the agreement indicated that ITM's liability was that of a surety. The Court rejected ITM's
argument that any ambiguity in the agreement should be interpreted against IFC, the party
that drafted it, and concluded that there was no ambiguity present.
Furthermore, the Court held that ITM's liability as a surety is governed by Article 2047 of
the Civil Code. This provision states that a surety becomes liable for the debt and duty of
the principal obligor, even without possessing a direct or personal interest in the
obligations established by the latter. The Court also dismissed ITM's claim that there was
a change of theory on appeal, as IFC's arguments before the trial court and the Court of
Appeals were interconnected and related to the enforcement of ITM's solidary liability
under the guarantee agreement.
In conclusion, the Court determined that ITM is a surety and should be held solidarily
liable with PPIC for the loan payment. The Court modified the decision of the Court of
Appeals and ordered ITM to pay the same amounts adjudged against PPIC.
Sps. Ibañez vs. James, GR No. 194272, February 15, 2017

Spouses Ibañez vs. Harper
G.R. No. 194272. February 15, 2017.
Facts:
In the case of Spouses Ibañez v. Harper, the court ruled that there was a valid substitution
of parties after the death of one of the respondents and that the Amended Compromise
Agreement had not been fully complied with by the petitioners, resulting in the annulment
of the trial court's order for the implementation of the agreement.
The facts of the case are as follows: Spouses Amado and Esther Ibañez borrowed
P1,300,000 from Francisco Muñoz, Sr., Consuelo Estrada, and Ma. Consuelo Muñoz. They
issued a promissory note and executed a deed of real estate mortgage as security. The
lenders applied for foreclosure of the mortgage due to non-payment. The spouses Ibañez
filed a complaint for injunction and damages, alleging that the mortgage was novated.
They later filed an amended complaint, seeking to enjoin the execution of the certificate
of sale. The parties entered into an Amended Compromise Agreement, which was
approved by the court and adopted as its decision. The agreement required the spouses
Ibañez to pay P3,000,000, with an initial payment of P2,000,000 to be sourced from a GSIS
loan. The remaining balance of P1,000,000 was to be paid within one year and secured by
a real estate mortgage. The spouses Ibañez partially complied with the agreement but
failed to fully pay the amount due. The trial court granted a motion for execution filed by
the heirs of Francisco Muñoz, Sr., but the spouses Ibañez moved for reconsideration,
arguing that there was no valid substitution of parties after Francisco's death. The trial
court granted their motion, but the heirs of Francisco filed a petition for certiorari with the
Court of Appeals, which reinstated the trial court's order for execution. The spouses
Ibañez filed a petition for review on certiorari with the Supreme Court.
Issue:
The main issues raised in the case are: 1) Whether Francisco Muñoz, Sr. was a real party
in interest; 2) Whether there was a valid substitution of parties after Francisco's death; and
3) Whether the provisions of the Amended Compromise Agreement have been fully
complied with.
Ruling:
The court ruled that Francisco Muñoz, Sr. was a real party in interest as he had a material
interest in the case as the lender of the loan. The court also held that there was a valid
substitution of parties as the heirs of Francisco voluntarily appeared and actively
participated in the case. The court further held that the Amended Compromise Agreement
had not been fully complied with by the spouses Ibañez, as they failed to pay the full
amount due to Francisco and only partially complied with the terms of the agreement.
Therefore, the court affirmed the decision of the Court of Appeals, reinstating the trial
court's order for execution.
Ratio:
The court's ruling was based on the provisions of the Revised Rules of Court, which require
a real party in interest to be a party to the case and allow for substitution of parties in case
of death. The court also considered the principles of due process and the need to protect
the rights of all parties involved. The court emphasized that a compromise agreement is a
binding contract between the parties and has the effect and authority of res judicata.
Therefore, the court held that the Amended Compromise Agreement must be fully
complied with by the parties involved.
5. Divisible and Indivisible (1223-1225

Nazareno vs. CA (G.R. No. 138842, October 18, 2000)
Nazareno vs. Court of Appeals
G.R. No. 138842. October 18, 2000.
Facts:
The case of Nazareno v. Court of Appeals involves a dispute between siblings and the
estate of their deceased parents over the ownership of properties. Maximino Nazareno, Sr.
and Aurea Poblete were husband and wife. After their deaths, their children, Natividad and
Maximino Jr., filed a petition for review on certiorari of the decision of the Court of Appeals
in an action for annulment of sale and damages. The dispute revolves around the
ownership of several properties in Quezon City and Cavite that were acquired by Maximino
Sr. and Aurea during their marriage.
Issue:
The main issue in this case is the validity of a deed of sale without spousal consent.
Ruling:
The court affirmed the decision of the Court of Appeals, declaring the deed of sale null and
void, except for the lots that had already been sold to third parties. The court ordered the
cancellation of the titles issued to Natividad and Maximino Jr. and the restoration of the
original titles to the estate of Maximino Sr.
Ratio:
The court found that the uncorroborated testimony of Romeo, one of the siblings, was
sufficient to overcome the presumption of validity accorded to a notarized document.
Romeo's testimony was found to be credible and supported by other evidence. The court
also held that the deed of sale was simulated and void for lack of consideration.
The court further ruled that the deed of sale was an indivisible contract and could be
questioned by anyone affected by it. In this case, the siblings were directly affected by the
sale and therefore had the right to challenge its validity.
The court also upheld the sale of Lots 13 and 14 to a third party, as the third party was an
innocent purchaser for value. This means that the third party had no knowledge of any
defects or irregularities in the sale and therefore acquired the properties in good faith.
In conclusion, the court affirmed the decision of the Court of Appeals, declaring the deed
of sale null and void, except for the lots that had already been sold to third parties. The
court ordered the cancellation of the titles issued to Natividad and Maximino Jr. and the
restoration of the original titles to the estate of Maximino Sr.
6. With Penal Clause (1226-1230)

SSS vs. Moonwalk Development and Housing Corporation (221 SCRA 119)
Social Security System vs. Moonwalk Development and Housing Corporation
G.R. No. 73345. April 7, 1993.
Facts:
The case of Social Security System v. Moonwalk Development & Housing Corp. involves a
complaint filed by the Social Security System (SSS) against Moonwalk Development &
Housing Corporation (Moonwalk) for failing to compute the 12% interest due on delayed
payments on a loan. This resulted in unpaid balances on the principal loan agreement and
penalties for delayed payments. Moonwalk denied the claims and argued that SSS had the
opportunity to verify the truth but failed to do so. The trial court dismissed the complaint,
stating that Moonwalk's payment of its indebtedness to SSS and SSS's act of canceling the
real estate mortgages extinguished the obligation. The Intermediate Appellate Court
affirmed this decision.
Issue:
The main issue raised in the case is whether Moonwalk is still liable for the unpaid
penalties even after the extinguishment of the principal obligation.
Ruling:
The court ruled that the penalty is not demandable after the extinguishment of the
principal obligation.
Ratio:
The court explained that a penal clause is an accessory obligation that is dependent on
the existence of a principal obligation. In this case, the principal obligation is the loan
between the parties, and the penalty is an accessory obligation to enforce the payment of
the loan. The penalty is demandable in case of non-performance or late performance of
the main obligation, but there must be a breach of the obligation and a demand for the
penalty. However, in this case, there was no demand for the payment of the penalty during
the period when the principal obligation was still subsisting. Therefore, the penalty cannot
be demanded after the extinguishment of the principal obligation.
The court also emphasized that the penalty may be reduced or waived if the principal
obligation has been partly or irregularly complied with by the debtor. In this case,
Moonwalk fully complied with its obligation by paying the loan in full, and the real estate
mortgages were released. Therefore, there was no basis for demanding the penalty, and
any demand made after the extinguishment of the principal obligation was futile.
The court rejected SSS's argument that it could not waive the penalties because the funds
it held were trust funds. The court stated that the case cited by SSS, United Christian
Missionary Society v. Social Security Commission, was not applicable as it dealt with the
collection of premiums and penalties for non-payment of premiums, not the collection of
penalties provided for in contracts. The court held that SSS, as a government-created
corporation, descends to the level of a private person when it enters into a contract with a
private party, and the rules on contract applicable to private parties apply to it. Therefore,
SSS could waive or condone the penalties in this case.
In conclusion, the court affirmed the decision of the respondent court, stating that
Moonwalk's obligation was extinguished and it was not liable for the unpaid penalties. The
court held that the penalty is not demandable after the extinguishment of the principal
obligation, and SSS never demanded the payment of the penalty during the period when
the principal obligation was still subsisting.
Rizal Commercial Banking Corp. vs. CA ( 289 SCRA 242)

Rizal Commercial Banking Corporation vs. Court of Appeals
G.R. No. 128833. April 20, 1998.
Facts:
The case of RCBC v. Court of Appeals involves the fire loss claims of Goyu & Sons, Inc.
(GOYU) with Malayan Insurance Company, Inc. (MICO) in relation to mortgage contracts
entered into by Rizal Commercial Banking Corporation (RCBC) and GOYU. The Court of
Appeals ordered MICO to pay GOYU its claims in the total amount of P74,040,518.58, plus
interest. RCBC was also ordered to pay damages to GOYU. MICO and RCBC separately
appealed the decision, but their petitions were consolidated due to common facts and
issues. The undisputed facts are that GOYU applied for credit facilities with RCBC and
executed mortgage contracts in favor of RCBC. GOYU obtained insurance policies from
MICO and nine endorsements were prepared in favor of RCBC. After a fire loss, both GOYU
and RCBC claimed the insurance proceeds.
Issue:
The main issue raised in the case is whether RCBC, as the mortgagee, has the right to the
insurance proceeds based on the mortgage contracts and the intentions of the parties.
Ruling:
The Court ruled in favor of RCBC, stating that as the mortgagee, RCBC has the right to the
insurance proceeds based on the mortgage contracts and the intentions of the parties.
The endorsements prepared by MICO's underwriter, Alchester Insurance Agency, Inc.,
were considered valid and binding. GOYU was estopped from challenging the
endorsements. The Court also determined the extent of GOYU's outstanding obligation
with RCBC and reduced the surcharges and penalties imposed by RCBC. MICO was not
held liable for withholding the insurance proceeds as it had valid reasons for doing so. The
Court dismissed GOYU's complaint and ordered MICO to deliver the insurance proceeds
to RCBC. GOYU was ordered to pay its loan obligation to RCBC, and RCBC's right to
intervene in another case was recognized.
Ratio:
The Court based its decision on the mortgage contracts and the intentions of the parties
involved. It held that RCBC, as the mortgagee, has the right to the insurance proceeds. The
endorsements prepared by MICO's underwriter were considered valid and binding, and
GOYU was estopped from challenging them. The Court also considered the extent of
GOYU's outstanding obligation with RCBC and reduced the surcharges and penalties
imposed by RCBC. MICO was not held liable for withholding the insurance proceeds as it
had valid reasons for doing so. The Court dismissed GOYU's complaint and ordered MICO
to deliver the insurance proceeds to RCBC. GOYU was ordered to pay its loan obligation
to RCBC, and RCBC's right to intervene in another case was recognized.
Ligutan vs. CA (G. R. No. 138677, Feb. 12, 2002)

Ligutan vs. Court of Appeals
G.R. No. 138677. February 12, 2002.
Facts:
In the case of Ligutan v. Court of Appeals, the petitioners Tolomeo Ligutan and Leonidas
de la Llana obtained a loan from respondent Security Bank & Trust Company in the amount
of P120,000.00 with an interest rate of 15.189% per annum. The loan agreement also
included a penalty of 5% per month in case of default and 10% attorney's fees if a suit were
instituted for collection. When the petitioners defaulted in payment, the bank filed a
complaint for recovery of the amount due. The trial court rendered a decision in favor of
the bank, ordering the petitioners to pay the amount due with the agreed interest rate,
penalty charge, and attorney's fees. The decision was affirmed on appeal by the Court of
Appeals, with the penalty interest reduced from 5% to 3%. The petitioners filed a second
motion for reconsideration and to admit newly discovered evidence that the real estate
mortgage they executed novated the loan agreement.
Issue:
The main issue raised in the case is whether the interest rate, penalty charge, and
attorney's fees stipulated in the loan agreement are reasonable and enforceable.
Ruling:
The Supreme Court ruled in favor of the bank, upholding the penalty interest rate, interest
rate, and attorney's fees.
Ratio:
The Court held that the penalty clause is an accessory undertaking to strengthen the
coercive force of the obligation. It serves as a deterrent for the debtor to fulfill their
obligation on time. In this case, the 3% penalty interest rate, considering the repeated acts
of breach by the petitioners, is not iniquitous or unjustly excessive.
The Court also held that the stipulated interest rate of 15.189% per annum is not
excessive. The interest stipulation is a fundamental part of the banking business and is
necessary to compensate the bank for the use of its funds. The Court recognized that
banks are in the business of lending money and earning interest, and the agreed interest
rate is within the bounds of reasonableness.
Furthermore, the Court ruled that the award of 10% attorney's fees is reasonable.
Attorney's fees are awarded to the prevailing party as indemnity for the expenses of
litigation. In this case, the bank was forced to file a complaint for recovery of the amount
due, and the attorney's fees serve as compensation for the legal services rendered.
The Court also rejected the petitioners' call for a new trial or admission of newly
discovered evidence. The second motion for reconsideration cannot be entertained as it
is a prohibited pleading under the rules. Additionally, the alleged newly discovered
evidence was already known to the petitioners during the earlier proceedings, and they
failed to present it at the appropriate time.
Finally, the Court held that the subsequent execution of the real estate mortgage did not
novate the original loan agreement. The real estate mortgage was an accessory contract
to secure the loan and did not contain an express stipulation to supersede the existing
loan agreement. Therefore, the original loan agreement, including its terms and
conditions, remains valid and enforceable.
Luneta Motor Co. vs. Moral (73 Phil. 80)

Luneta Motor Co. vs. Abad
G.R. No. 45273. April 10, 1939.
Facts:
The case of Luneta Motor Co. v. Abad involves a dispute over the recovery of a sum of
money owed by the defendant, Federico Abad, to the plaintiff, Luneta Motor Co. The
plaintiff sought to recover the amount of P2,674.05, along with accrued stipulated interest
and attorney's fees, which was the balance due on four promissory notes executed by the
defendant on March 12, 1931. In order to secure the payment, the plaintiff obtained a writ
of attachment on the defendant's property.
However, the defendant filed a petition to lift the attachment, and as a condition for the
dissolution of the writ, a counterbond was tendered by the defendant's sureties. The
counterbond stated that if the plaintiff recovered judgment in the action, the defendant
would redeliver the attached property to the officer of the court for payment of the
judgment, and the sureties would pay the plaintiff the full value of the property released.
The lower court granted the defendant's petition and issued an order for the dissolution of
the writ.
Unfortunately, the defendant passed away after the dissolution of the writ. As a result, the
defendant's attorney moved for the dismissal of the case. The trial court granted the
motion to dismiss, and the plaintiff's motion for reconsideration was denied. The plaintiff
then appealed the decision.
Issue:
The main issue in this case is whether the dismissal of the case against the deceased
defendant is proper.
Ruling:
The Supreme Court affirmed the dismissal of the case.
Ratio:
The Supreme Court based its decision on Section 119 of Act No. 190, which provides that
all actions against a deceased person for the recovery of money shall be discontinued.
The court also noted that the obligation of the sureties under the counterbond was
extinguished. This was because the condition of the counterbond, which required the
plaintiff to recover judgment in the action, became a legal impossibility since the case was
dismissed. Therefore, the court ruled that the obligation dependent upon such a condition
must be deemed extinguished, in accordance with Article 1116 of the Civil Code.
In conclusion, the Supreme Court upheld the dismissal of the case against the deceased
defendant and ruled that the obligation of the sureties under the counterbond was
extinguished. The court based its decision on Section 119 of Act No. 190, which
discontinues actions against deceased persons for the recovery of money, and Article
1116 of the Civil Code, which states that obligations dependent on a condition that has
become legally impossible are deemed extinguished.
Cabarroguis, et al. vs. Vicente (107 Phil. 340)

Cabarroguis vs. Vicente
G.R. No. L-14304. March 23, 1960.
Facts:
The case of Cabarroguis v. Vicente involves a nurse named Antonia A. Cabarroguis who
sustained physical injuries in a vehicular accident. In order to avoid court litigation, the
defendant, Telesforo B. Vicente, entered into a compromise agreement with Cabarroguis,
agreeing to pay her a certain amount as damages. However, the defendant failed to
complete the payment within the agreed period, leading Cabarroguis to file a lawsuit in
the Municipal Court of Davao City.
Issue:
The main issue in the case is whether interest should be awarded on the principal
obligation of the defendant.
Ruling:
The ruling of the Supreme Court states that in obligations with a penal clause, the penalty
substitutes the indemnity for damages and the payment of interest. However, there are
exceptions to this rule, such as when the contrary is stipulated, when the debtor refuses
to pay the penalty, or when the obligor is guilty of fraud in fulfilling the obligation. In this
case, since the penalty agreed upon took the place of the payment of interest and the
indemnity for damages, and no stipulation to the contrary was made, no interest can be
awarded on the principal obligation of the defendant.
However, the court also ruled that the plaintiff is entitled to interest on the penalty. The
refusal of the defendant to pay when demand was made by the plaintiff entitles the latter
to interest on the penalty. The court cited Article 2210 of the new Civil Code, which allows
the court to award interest upon damages awarded for breach of contract. This interest is
recoverable from the time of delay, which in this case is from the date of demand, either
judicial or extrajudicial. Since there was no showing as to when demand for payment was
made, the court considered the filing of the complaint as the demand.
Ratio:
The Supreme Court affirmed the decision of the lower court with the modification that
interest shall be allowed only on the amount of the penalty. The court ruled that no interest
can be awarded on the principal obligation of the defendant, but the plaintiff is entitled to
interest on the penalty. This is based on the principle that in obligations with a penal
clause, the penalty substitutes the indemnity for damages and the payment of interest.
However, the court recognized exceptions to this rule, such as when the contrary is
stipulated, when the debtor refuses to pay the penalty, or when the obligor is guilty of fraud
in fulfilling the obligation. In this case, since no stipulation to the contrary was made and
the penalty agreed upon took the place of the payment of interest and the indemnity for
damages, no interest can be awarded on the principal obligation of the defendant.
However, the plaintiff is entitled to interest on the penalty as the defendant refused to pay
when demand was made. The court cited Article 2210 of the new Civil Code, which allows
the court to award interest upon damages awarded for breach of contract. This interest is
recoverable from the time of delay, which in this case is from the date of demand, either
judicial or extrajudicial. Since there was no showing as to when demand for payment was
made, the court considered the filing of the complaint as the demand.
Palmares vs. Court of Appeals (288 SCRA 423)

Palmares vs. Court of Appeals
G.R. No. 126490. March 31, 1998.
Facts:
In the case of Palmares v. Court of Appeals, the facts are as follows: Private respondent
M.B. Lending Corporation granted a loan to the spouses Osmea and Merlyn Azarraga,
along with petitioner Estrella Palmares, in the amount of P30,000.00. Despite making
several payments, there remained an unpaid balance of P13,700.00. The respondent
corporation filed a complaint against petitioner Palmares as the sole defendant, excluding
the principal debtors, claiming that they were insolvent.
Issue:
The main issue raised in the case is whether petitioner Palmares' liability as a co-maker is
that of a surety or a guarantor.
Ruling:
The court ruled that petitioner Palmares is solidarily liable with the principal debtors and
may be sued for the entire obligation.
Ratio:
The court based its ruling on the interpretation of the promissory note and the principles
of suretyship and guaranty. The court emphasized that the terms of the contract clearly
stated that petitioner Palmares bound herself to be jointly and severally liable with the
principal debtors. Therefore, she is primarily liable on the note and may be sued by the
creditor corporation for the entire obligation.
The court also considered the contemporaneous and subsequent acts of the parties,
which showed that petitioner Palmares considered herself equally bound by the contract.
This further supported the court's finding that her liability is that of a surety.
The court explained that a surety is primarily liable and may be sued by the creditor without
first proceeding against the principal debtor. In this case, the creditor corporation chose
to sue petitioner Palmares as the lone party-defendant due to the alleged insolvency of
the principal debtors.
Additionally, the court addressed the issue of the legality and reasonableness of the
interest and penalty charges imposed on the outstanding balance of the loan. The court
held that while the penalty interest of 3% per month and attorney's fees equivalent to 25%
of the total amount due were excessive and unreasonable, the stipulated 6% interest was
valid. As a result, the court reduced the penalty interest to zero and the attorney's fees to
P10,000.00.
In summary, the court ruled that petitioner Palmares is solidarily liable with the principal
debtors and may be sued for the entire obligation. The court based its decision on the clear
terms of the promissory note, the principles of suretyship and guaranty, and the
contemporaneous and subsequent acts of the parties. The court also found that the
penalty interest and attorney's fees imposed were excessive and reduced them to a
reasonable amount.
Umali vs. Miclat (105 Phil. 1109)

Umali vs. Miclat
G.R. No. L-9262. July 10, 1959.
Facts:
The case of Umali v. Miclat involves Marino S. Umali, the President and General Manager
of Maharlika Pictures, Inc. The case was decided on July 10, 1959, by the Supreme Court
of the Philippines, with Justice Bautista Angelo as the ponente. Marino S. Umali contracted
with Efrain Y. Miclat for certain work to be done. Umali signed the contract in his personal
capacity, without stating that he was acting on behalf of Maharlika Pictures, Inc. Umali
argued that the work done by Miclat was not complete or satisfactory and that the contract
should have been directed against the corporation. However, the lower court found Umali
personally liable for the transaction and ordered him to pay Miclat the sum of P675.00,
plus surcharge and attorney's fees. Umali appealed the decision to the Court of Appeals,
but the decision was affirmed in its entirety.
Issue:
The main issue in the case is whether Umali should be held personally liable for the
contract he entered into, despite being the President and General Manager of Maharlika
Pictures, Inc.
Ruling:
The court ruled that Umali is indeed personally liable for the transaction because he
contracted for the work in his personal capacity, without stating that he was acting on
behalf of the corporation. The court found no evidence that Umali entered into the
contract on behalf of the corporation or was authorized to do so by its Board of Directors.
Ratio:
The court based its ruling on the principle of corporate personality. It explained that a
corporation is a separate legal entity from its officers and shareholders. Therefore, when
an officer or shareholder enters into a contract, it must be clear that they are acting on
behalf of the corporation and not in their personal capacity. In this case, Umali signed the
contract without indicating that he was acting on behalf of Maharlika Pictures, Inc. As a
result, he cannot escape personal liability for the contract.
The court also considered the absence of evidence showing that Umali was authorized by
the corporation's Board of Directors to enter into the contract. Without such authorization,
Umali cannot bind the corporation to the contract. The court emphasized that the burden
of proving authority lies with the person claiming to have acted on behalf of the
corporation.
Regarding the surcharge imposed on Umali, the court found that the 10% surcharge
agreed upon in the contract was unreasonable and unconscionable. The court reduced
the surcharge to 20% per annum, which it deemed to be a reasonable amount.
Lastly, the court addressed the issue of interest. The court held that the penalty agreed
upon in the contract, which included the surcharge, would substitute the payment of
interest in case of non-compliance. However, since Umali refused to pay the penalty,
damages could still be collected. Therefore, the court justified the imposition of 6%
interest per annum from the date of the filing of the complaint until full payment of the
obligation due.
In conclusion, the Supreme Court affirmed the decision of the lower court, holding Umali
personally liable for the contract and modifying the surcharge and interest amounts. The
court found that Umali had entered into the contract in his personal capacity and had not
provided any evidence of authorization from the corporation. The court also deemed the
original surcharge to be unreasonable and reduced it to 20% per annum. Additionally, the
court justified the imposition of 6% interest per annum based on the contract and the law.
Filinvest Land, Inc. vs. CA (470 SCRA 260)

Filinvest Land Inc. vs. Court of Appeals
G.R. No. 138980. September 20, 2005.
Facts:
The case involves a complaint for damages filed by Filinvest Land, Inc. (Filinvest) against
Pacific Equipment Corporation (Pecorp) and Philippine American General Insurance
Company. Filinvest awarded Pecorp the development of its residential subdivisions in
Quezon City. However, Pecorp failed to complete the contracted works despite three
extensions granted by Filinvest. Filinvest then wrote to Pecorp advising them of their
intention to take over the project and hold them liable for damages. Filinvest also
submitted a claim against Philippine American General Insurance for the performance
and guarantee bond issued by them. Pecorp claimed that their failure to finish the work
was due to inclement weather and the refusal of Filinvest to accept and pay for finished
work and change orders. Philamgen, on the other hand, argued that they were released
from liability due to amendments made on the contract without their consent. The court
appointed a commissioner to determine the amount of work accomplished by Pecorp and
the amount of work done by Filinvest to complete the project. The commissioner found
that Pecorp had accomplished 94.53% of the contract work and that the unpaid balance
of work done by Pecorp amounted to P1,939,191.67. The commissioner also found
additional work done by Pecorp in the amount of P477,000.00. The court dismissed
Filinvest's complaint and Pecorp's counterclaim, ruling that the penalty for delay imposed
on Pecorp was excessive and reduced it to a reasonable amount. The Court of Appeals
affirmed the decision. Filinvest appealed to the Supreme Court, arguing that the penalty
should not be reduced as it was agreed upon by the parties and represented only 32% of
the contract price.
Issue:
The main issue raised in the case is whether the penalty for delay imposed on Pecorp
should be reduced.
Ruling:
The Supreme Court held that the penalty should be reduced based on partial compliance
by Pecorp and the unconscionability of the penalty. The Court also noted that Filinvest
failed to pay Pecorp for work actually performed. The Court affirmed the decision of the
Court of Appeals.
Ratio:
The Court reasoned that while it is true that the penalty for delay was agreed upon by the
parties and represented only 32% of the contract price, it should still be reduced due to
the partial compliance by Pecorp. The Court found that Pecorp had accomplished 94.53%
of the contract work and that the unpaid balance of work done by Pecorp amounted to
P1,939,191.67. Additionally, the Court considered the unconscionability of the penalty
imposed on Pecorp. The Court also took into account the fact that Filinvest failed to pay
Pecorp for work actually performed. Based on these considerations, the Court affirmed
the decision of the Court of Appeals to reduce the penalty for delay imposed on Pecorp.
Lough, Jr., et al. vs. Bank of the Philippine Islands, GR 225562, March 8, 2017
Spouses Louh, Jr. vs. Bank of the Philippine Islands
G.R. No. 225562. March 8, 2017.
Facts:
The case of Spouses Louh, Jr. v. Bank of the Philippine Islands involves a petition filed by
the Spouses Louh to challenge the decision of the Court of Appeals (CA), which found
them liable to pay their credit card debt to the Bank of the Philippine Islands (BPI). The
Spouses Louh argue that the CA erred in sustaining BPI's complaint and seek the dismissal
of the suit. They also claim that their failure to file a timely answer was due to William's
medical condition and that BPI failed to prove the amounts of their indebtedness.
The facts of the case are as follows: BPI issued a credit card in William's name, with Irene
as the extension card holder. The terms and conditions of the cards' issuance stated that
a 3.5% finance charge and 6% late payment charge would be imposed monthly upon
unpaid credit availments. The Spouses Louh made purchases using the credit cards and
paid regularly based on the amounts indicated in the Statement of Accounts (SOAs).
However, they became delinquent in their payments starting October 14, 2009. By
September 14, 2010, they owed BPI a total amount of P533,836.27. Despite repeated
demands, the Spouses Louh failed to pay BPI. As a result, BPI filed a Complaint for
Collection of a Sum of Money before the Regional Trial Court (RTC) of Makati City.
The Spouses Louh failed to file a timely answer to the complaint and were declared in
default by the RTC. They subsequently filed an answer more than three months after the
prescribed period. The RTC rendered a decision ordering the Spouses Louh to pay BPI the
amount due, plus finance and late payment charges, and attorney's fees. The RTC found
the charges imposed by BPI to be iniquitous and unconscionable, and thus reduced them.
The Spouses Louh filed a motion for reconsideration, which was denied by the RTC. They
then appealed to the CA, but their appeal was also denied.
Issue:
1. Whether the Spouses Louh were properly declared in default for their failure to file
a timely answer and for not seeking to set aside the order of default.
2. Whether BPI presented sufficient evidence to prove the Spouses Louh's
indebtedness.
3. Whether the charges imposed by BPI were iniquitous and unconscionable.
Ruling:
The Supreme Court affirmed the decision of the CA but modified the principal amount and
attorney's fees awarded by the lower courts.
Ratio:
The Court held that the Spouses Louh were properly declared in default for their failure to
file a timely answer and for not seeking to set aside the order of default. The Court
emphasized that the rules of procedure require parties to file their answer within the
prescribed period and failure to do so may result in being declared in default. The Court
also noted that the Spouses Louh had the opportunity to seek the setting aside of the order
of default but failed to do so.
The Court further found that BPI had presented sufficient evidence to prove the Spouses
Louh's indebtedness. The Court considered the delivery receipts, SOAs, and demand
letters presented by BPI as sufficient evidence of the Spouses Louh's unpaid credit card
debt. The Court pointed out that the Spouses Louh had the opportunity to refute BPI's
evidence but failed to do so.
However, the Court found the principal amount and attorney's fees awarded by the lower
courts to be excessive. The Court reduced the principal amount to P113,756.83, which
was indicated in the SOA dated October 14, 2009. The Court also reduced the finance and
late payment charges to 12% each per annum, computed from October 14, 2009 until full
payment. Additionally, the Court reduced the attorney's fees to 5% of the total amount
due. The Court affirmed the award of filing or docket fees and costs of suit.
OBLIGATIONS - Extinguishment of Obligations (1231)

1. Payment or Performance (1232-1251)
i. Application of Payments (1252-1254)
ii. Payment by Cession (1255)
iii. Tender of Payment and Consignation (1256-1261)
Filinvest Credit Corporation vs. Philippine Acetylene Co. (197 Phil. 394)
Filinvest Credit Corp. vs. Philippine Acetylene Co., Inc.
G.R. No. L-50449. January 30, 1982.
Facts:
The case of Filinvest Credit Corp. v. Philippine Acetylene, Co., Inc. involves a dispute over
the return of a mortgaged vehicle and the payment of unpaid taxes. The defendant,
Philippine Acetylene, Co., Inc., purchased a motor vehicle on an installment basis from
Alexander Lim. The defendant executed a promissory note and a chattel mortgage in favor
of Lim. Lim then assigned all his rights, title, and interests over the promissory note and
chattel mortgage to the plaintiff, Filinvest Credit Corporation.
When the defendant defaulted on the payment of the installments, the plaintiff demanded
full payment or the return of the mortgaged vehicle. The defendant chose to deliver the
vehicle to the plaintiff along with a document of "Voluntary Surrender with Special Power
of Attorney to Sell." However, the plaintiff was unable to sell the vehicle due to unpaid
taxes. The plaintiff then requested the defendant to pay the installments in arrears plus
interest and offered to deliver back the vehicle, but the defendant refused to accept it. As
a result, the plaintiff filed an action for collection with damages in the Court of First
Instance.
Issue:
The main issue raised in the case is whether the return of the mortgaged vehicle
constitutes payment and extinguishes the defendant's obligation.
Ruling:
The court ruled that the mere delivery and acceptance of the vehicle does not constitute
actual payment or dacion en pago. The court emphasized that there must be clear consent
from the mortgagee for the delivery to be considered a special mode of payment. In this
case, there was no evidence of the mortgagee's consent to accept the vehicle as payment.
The court also addressed the issue of unpaid taxes on the mortgaged vehicle. The court
held that since the ownership of the vehicle never left the defendant, the burden of the
unpaid taxes falls on the defendant. The court noted that the plaintiff, as the assignee of
the rights, title, and interests, is not liable for the unpaid taxes.
Ratio:
The court based its decision on the principle that the return of the mortgaged vehicle does
not automatically constitute payment. It emphasized that for the delivery to be considered
a special mode of payment, there must be clear consent from the mortgagee. In this case,
there was no evidence to prove that the plaintiff consented to accept the vehicle as
payment. Therefore, the defendant's obligation was not extinguished.
Furthermore, the court held that the burden of unpaid taxes falls on the defendant
because the ownership of the vehicle never left the defendant. The plaintiff, as the
assignee of the rights, title, and interests, is not liable for the unpaid taxes.
In conclusion, the court affirmed the judgment of the Court of First Instance, ordering the
defendant to pay its outstanding obligations and directing the plaintiff to deliver the
mortgaged vehicle to the defendant. The court held that the return of the vehicle did not
constitute payment, and the burden of unpaid taxes falls on the defendant.
Golez vs. Camara (101 Phil. 363)

Golez vs. Camara
G.R. No. L-9160. April 30, 1957.
Facts:
The case of Golez v. Camara involves a dispute between Adriano Golez and Carmelo S.
Camara. The dispute arose from the amount that Golez was required to pay in order for
Camara to make the conveyance stipulated in their contract of lease. The case was initially
heard in the Court of First Instance of Negros Occidental.
Issue:
The main issue in the case is the interpretation of the contract of lease between Golez and
Camara. Specifically, the issue is whether Golez was indebted to Camara or if he had an
option to acquire the property in question for a specified amount.
Ruling:
The court ruled in favor of Golez. The court held that Golez was not indebted to Camara,
but rather had an option to acquire the property in question for a specified amount. The
court also found that the deposit made by Golez, which included a manager's check, was
valid and effective because it had been cashed. Additionally, the court determined that
Camara was bound to convey not only the interest of Isidoro Jimenez, Aurelia Jimenez, and
Vicente Jimenez Yanson in the seven lots constituting the Haciendas Aurelia and
Buenavista, but also the other seventeen lots described in the contract.
Ratio:
The court based its decision on the interpretation of the contract of lease between Golez
and Camara. The court found that Golez was not indebted to Camara, but rather had an
option to acquire the property in question for a specified amount. This interpretation was
supported by the fact that Golez had made a deposit, which included a manager's check,
and that the deposit had been cashed. The court also determined that Camara was bound
to convey not only the interest of Isidoro Jimenez, Aurelia Jimenez, and Vicente Jimenez
Yanson in the seven lots constituting the Haciendas Aurelia and Buenavista, but also the
other seventeen lots described in the contract. Based on these findings, the court affirmed
the lower court's decision and ordered Camara to convey the twenty-four lots to Golez.
Quiros vs. Tan Guinlay (5 Phil. 675)

Gonzalez y Quiroz vs. Tan-Guinlay
G.R. No. 4816. January 27, 1909.
Facts:
The case of Gonzalez y Quiroz v. Tan-Guinlay revolves around a debt dispute between
Francisco Gonzalez y Quiros and Carlos Palanca Tan-Guinlay. The case was heard in the
Court of First Instance of the city of Manila on April 18, 1906. Gonzalez y Quiros claimed
that Germann & Co., Limited owed Tan-Guinlay an amount of 7,741.17 pesos, with interest
from January 1, 1894. Gonzalez y Quiros sought to have this debt applied in payment of his
judgment against Tan-Guinlay. The evidence presented in the case consisted of the books
of Germann & Co. and records of previous proceedings between Gonzalez y Quiros, Tan-
Guinlay, and Germann & Co.
Issue:
The main issue in this case is whether there is sufficient evidence to support Gonzalez y
Quiros' claim that Germann & Co. owed Tan-Guinlay an amount of 7,741.17 pesos, with
interest from January 1, 1894.
Ruling:
The court ruled in favor of Tan-Guinlay, affirming the judgment of the lower court.
Ratio:
The court based its decision on the lack of evidence supporting Gonzalez y Quiros' claim.
The books of Germann & Co. showed that Tan-Guinlay actually owed them 7,358.83
pesos, and Germann & Co. had obtained a judgment against Tan-Guinlay for that amount.
This judgment was never collected and was charged off as a loss. The plaintiff's case relied
on the theory that Germann & Co. received 15,100 pesos in cash from someone on behalf
of Tan-Guinlay, and that 7,358.83 pesos of that amount was applied to Tan-Guinlay's debt,
leaving a balance of 7,741.17 pesos owed by Germann & Co. to Tan-Guinlay. However,
there was no direct evidence to support this theory. The documents presented as evidence
were bills of exchange and promissory notes found among Tan-Guinlay's papers when they
were attached. The books of Germann & Co. contained no entry relating to these
documents, and there was no evidence to show that any money had been received by
Germann & Co. on account of these documents. The court found that the theory presented
by the plaintiff was unsupported by evidence and inherently improbable. Furthermore,
reports by experts appointed in a previous criminal case against Tan-Guinlay and the
manager of Germann & Co. were not admissible as evidence, as they were merely legal
opinions and hearsay. Therefore, the court ruled in favor of Tan-Guinlay, affirming the
judgment of the lower court.
New Pacific Timber & Supply Co. vs. Seneris (101 SCRA 686)
New Pacific Timber & Supply Co., Inc. vs. Seneris
G.R. No. L-41764. December 19, 1980.
Facts:
The case of New Pacific Timber & Supply Co., Inc. v. Seneris involves a complaint for
collection of a sum of money filed by the private respondent, Ricardo A. Tong, against the
petitioner, New Pacific Timber & Supply Company, Inc. A compromise judgment was
rendered by the respondent Judge based on an amicable settlement entered into by the
parties. The judgment required the petitioner to pay the private respondent the amount of
P54,500.00 plus interest and P6,000.00 as attorney's fees within five months.
Due to the petitioner's failure to comply with the judgment obligation, a writ of execution
was issued. Before the scheduled auction sale, the petitioner deposited with the Clerk of
Court the amount of P50,000.00 in cashier's check and P13,130.00 in cash. However, the
private respondent refused to accept the payment. The auction sale proceeded, and the
levied properties were sold to the private respondent as the highest bidder for P50,000.00.
The Ex-Officio Sheriff declared a deficiency of P13,130.00 and issued a certificate of sale
in favor of the private respondent for P50,000.00 only.
The petitioner filed an ex-parte motion for the issuance of a certificate of satisfaction of
judgment, but it was denied by the trial court. The petitioner then filed a petition for
certiorari with the Supreme Court, arguing that the private respondent had no valid reason
to refuse acceptance of the payment and that the auction sale was invalid due to lack of
proper notice.
Issue:
1. Whether a cashier's check is considered as cash in the business sector.
2. Whether the private respondent had a valid reason to refuse acceptance of the
payment.
3. Whether the auction sale was invalid due to lack of proper notice.
Ruling:
The Supreme Court ruled in favor of the petitioner. The court held that a cashier's check is
considered as cash in the business sector. The certification of the check by the drawee
bank transfers the funds from the maker to the payee, making the payee the depositor of
the drawee bank. Therefore, the private respondent had no valid reason to refuse
acceptance of the payment in cashier's check. The auction sale was deemed uncalled for,
and the motion for the issuance of a certificate of satisfaction of judgment was
meritorious. The trial court gravely abused its discretion in denying the motion.
The Supreme Court also ruled that a special civil action of certiorari is the proper remedy
in this case, as the order denying the motion for the issuance of a certificate of satisfaction
of judgment was issued in grave abuse of discretion. The decision of the trial court had
already become final and executory, and the subject of the petition was the order issued
in execution of said decision.
Ratio:
The Supreme Court based its decision on the principle that a cashier's check is considered
as cash in the business sector. The certification of the check by the drawee bank transfers
the funds from the maker to the payee, making the payee the depositor of the drawee bank.
Therefore, the private respondent had no valid reason to refuse acceptance of the
payment in cashier's check.
The court also emphasized that a special civil action of certiorari is the proper remedy in
this case. The order denying the motion for the issuance of a certificate of satisfaction of
judgment was issued in grave abuse of discretion. The decision of the trial court had
already become final and executory, and the subject of the petition was the order issued
in execution of said decision.
As a result, the Supreme Court declared the order of the trial court null and void, as well
as the auction sale and the certificate of sale. The private respondent was ordered to
accept the deposited amount as payment of the judgment obligation, and the levied
properties were to be released to the petitioner. The temporary restraining order previously
issued was made permanent.
Singson vs. Caltex (G.R. No. 137798, Oct. 4, 2000)

Singson vs. Caltex , Incorporated
G.R. No. 137798. October 4, 2000.
Facts:
This case involves a lease contract dispute between Lucia R. Singson (petitioner) and
Caltex (Philippines), Inc. (respondent). The lease contract was entered into in July 1968 for
a parcel of land in Cubao, Quezon City. The contract stated that the lease would run for 20
years and specified the rental rates for the first 10 years and the succeeding 10 years. In
June 1983, petitioner requested an adjustment or increase in the rentals due to
extraordinary inflation. However, respondent refused to make any adjustments. Petitioner
then filed a complaint before the Regional Trial Court (RTC) of Manila, which was later
dismissed for lack of merit. The RTC's decision was affirmed by the Court of Appeals.
Petitioner appealed to the Supreme Court, arguing that there was extraordinary inflation
during the period 1968 to 1983 that would justify an adjustment in the rentals.
Issue:
The main issue in this case is whether there existed extraordinary inflation during the
period 1968 to 1983 that would call for the application of Article 1250 of the Civil Code and
justify an adjustment or increase in the rentals between the parties.
Ruling:
The Supreme Court ruled in favor of the respondent and upheld the dismissal of the
complaint.
Ratio:
The Court held that extraordinary inflation exists when there is a decrease or increase in
the purchasing power of the currency that is unusual or beyond the common fluctuation
in value, and such increase or decrease could not have been reasonably foreseen or was
manifestly beyond the contemplation of the parties at the time of the establishment of the
obligation. The Court cited an example of extraordinary inflation in Germany in the 1920s,
where prices were going up rapidly every week, day, and hour. However, the Court found
that the decline in the value of the Philippine peso during the period 1968 to 1983, although
significant, did not qualify as extraordinary inflation. The Court also emphasized that the
effects of extraordinary inflation should not be applied without an official declaration by
competent authorities. The Court further held that the provisions on rentals in the lease
contract were clear and categorical, and there was no reason to believe that they did not
reflect the true intention and agreement of the parties. If there was a need to adjust the
rent, the parties could have negotiated the amendment of the contract themselves.
Serra vs. CA (229 SCRA 60)

Serra vs. Court of Appeals
G.R. No. 103338. January 4, 1994.
Facts:
The case of Serra v. Court of Appeals involves a contract dispute between Federico Serra
(petitioner) and Rizal Commercial Banking Corporation (RCBC, respondent). The dispute
arises from a "Contract of Lease with Option to Buy" entered into between the parties. The
contract stipulates that RCBC has the option to purchase a parcel of land owned by Serra
within a period of ten years from the date of the contract at a price not greater than P210.00
per square meter. If the land is not registered under the Torrens System within the ten-year
period, RCBC has the right to be paid the market value of the building and improvements
constructed on the land.
After three years, Serra registered the property under the Torrens System. However, when
RCBC exercised its option to buy the property, Serra refused to sell. RCBC then filed a
complaint for specific performance and damages against Serra. The trial court initially
dismissed the complaint, ruling that the option was not supported by a consideration
distinct from the price and that RCBC did not exercise its option within a reasonable time.
However, upon motion for reconsideration, the trial court reversed its decision and
ordered Serra to execute and deliver a deed of sale to RCBC. Serra appealed the decision
to the Court of Appeals, which affirmed the trial court's ruling.
Issue:
1. Whether the contract is a contract of adhesion.
2. Whether the option is supported by a consideration distinct from the price.
3. Whether the rental amount should be adjusted due to extraordinary inflation.
Ruling:
The Supreme Court rejects Serra's arguments and upholds the validity and enforceability
of the contract. The Court explains that a contract of adhesion is binding as long as the
party adhering to the contract is free to reject it entirely. In this case, Serra, a highly
educated individual, had the ability to negotiate the terms of the contract if he wished to
do so. The Court also finds that the option is supported by a consideration distinct from
the price, as RCBC has the obligation to transfer the building and improvements on the
property to Serra if it fails to exercise its option.
Regarding the rental adjustment, the Court rules that there is no basis for such an
adjustment as the contract is the law between the parties. The decline in the purchasing
power of the Philippine peso does not constitute extraordinary inflation that would warrant
a modification of the contract.
Ratio:
The Supreme Court's decision is based on the following arguments and legal basis:
1. A contract of adhesion is binding as long as the party adhering to the contract is
free to reject it entirely. In this case, Serra had the ability to negotiate the terms of
the contract if he wished to do so, indicating that the contract was not oppressive
or unconscionable.
2. The option is supported by a consideration distinct from the price, as RCBC has the
obligation to transfer the building and improvements on the property to Serra if it
fails to exercise its option. This provides a separate benefit to RCBC and justifies
the validity of the option.
3. The contract is the law between the parties, and there is no basis for adjusting the
rental amount due to inflation. The decline in the purchasing power of the
Philippine peso does not constitute extraordinary inflation that would warrant a
modification of the contract.
In conclusion, the Supreme Court dismisses Serra's petition and affirms the decision of
the Court of Appeals, upholding the validity and enforceability of the contract between
Serra and RCBC.
CF Sharp and Co., Inc. vs. Northwest Airlines, Inc. (G.R. No. 133498, April 12,
2002)
C.F. Sharp & Co., Inc. vs. Northwest Airlines, Inc.
G.R. No. 133498. April 18, 2002.
Facts:
The case of C.F. Sharp & Co., Inc. v. Northwest Airlines, Inc. involves a dispute between the
petitioner, C.F. Sharp & Co., Inc., and the respondent, Northwest Airlines, Inc. On May 9,
1974, the two parties entered into an International Passenger Sales Agency Agreement,
which authorized the petitioner to sell air transport tickets on behalf of the respondent.
However, the petitioner failed to remit the proceeds from the ticket sales, leading to a
collection suit filed by the respondent in Japan. The Tokyo District Court rendered a
judgment on January 29, 1981, ordering the petitioner to pay the respondent the amount
of 83,158,195 Yen, with interest. Since the judgment could not be executed in Japan, the
respondent filed a case to enforce the foreign judgment with the Regional Trial Court (RTC)
of Manila. The RTC ordered the petitioner to pay the respondent the sum of 83,158,195 Yen
at the exchange rate prevailing on the date of the foreign judgment, plus 6% interest and
12% additional interest per annum until the entire obligation is fully satisfied.
Issue:
1. Whether the petitioner is only liable for 61,734,633 Yen due to partial payments
made.
2. Whether the imposition of additional interest on top of the 6% interest imposed on
the foreign judgment is valid.
3. Whether the conversion rate for the petitioner's liability should be based on the
prevailing rate at the time of payment or the rate on the date of the foreign
judgment.
4. Whether the petitioner was denied due process when the Court of Appeals ruled
on the applicable conversion rate of its liability, which was not among the issues
submitted for resolution.
Ruling:
The Supreme Court affirmed the decision of the Court of Appeals (CA), with modifications.
The Court ruled as follows:
1. The petitioner is liable for the amount of 61,734,633 Yen, as partial payments had
been made.
2. The imposition of additional interest on top of the 6% interest imposed on the
foreign judgment is valid, but the rate should be lowered from 12% to 6% per
annum.
3. The conversion rate for the petitioner's liability should be based on the prevailing
rate at the time of payment, not the rate on the date of the foreign judgment.
4. The petitioner was not denied due process, as it was afforded an opportunity to be
heard when it filed a motion for reconsideration of the CA decision.
Ratio:
The Court based its decision on the following arguments and legal basis:
1. While Republic Act No. 529 prohibits the stipulation of currency other than
Philippine currency, the Court has held in previous cases that the rate of exchange
for the conversion of foreign currency obligations should be the prevailing rate at
the time of payment. The repeal of RA No. 529 by RA No. 8183 removes the
prohibition on stipulation of currency other than Philippine currency, allowing
obligations to be paid in the currency agreed upon by the parties.
2. The petitioner was not denied due process, as it had the opportunity to be heard
when it filed a motion for reconsideration of the CA decision. The CA's failure to
apply the correct legal rate of interest, to which the respondent is lawfully entitled,
is a plain error that can be corrected by the Court's power to review, even if not
assigned as an error on appeal.
3. The Court modified the CA decision and directed the petitioner to pay the
respondent 61,734,633 Yen, plus damages for the delay at the rate of 6% per
annum from August 28, 1980, until payment is completed. Interest at the rate of
12% per annum is to be counted from the date of filing of the complaint on August
28, 1980, until the obligation is fully satisfied. The petitioner's liability may be paid
in Philippine currency, computed at the exchange rate prevailing at the time of
payment.
Velasco vs. Manila Electric Co. (42 SCRA 556)

Velasco vs. Manila Electric Co.
G.R. No. L-18390. December 20, 1971.
Facts:
The case of Velasco v. Manila Electric Co. involves a motion for reconsideration filed by
Pedro J. Velasco, the plaintiff-appellant, and Manila Electric Co., the defendant-appellee.
The Supreme Court denies Velasco's motion for reconsideration and upholds its previous
decision.
In his motion for reconsideration, Velasco argues that the damages awarded to him were
incorrectly assessed and unreasonably reduced. He claims that the decision erred in not
considering his undeclared income of P8,338.20, which was assessed by the Bureau of
Internal Revenue for the year 1954. However, the Court finds that there is no evidence to
support Velasco's claim that the undeclared amount was part of his regular income. The
Court also points out that including the undeclared amount in Velasco's disclosed
professional earnings for 1954 would result in an abnormally high income for that year.
Therefore, the Court refuses to consider the undisclosed amount as part of Velasco's
regular income for the purpose of computing the reduction in his earnings.
Velasco also argues that the damages awarded to him are inadequate considering the
present high cost of living. He cites Article 1250 of the Civil Code, which states that in case
of extraordinary inflation or deflation of the currency stipulated, the value of the currency
at the time of the establishment of the obligation shall be the basis of payment. However,
the Court finds that Article 1250 is inapplicable to obligations arising from tort, as in the
case at bar. The Court also notes that the damages awarded to Velasco had already taken
into account the changed economic circumstances.
Furthermore, Velasco claims that he lost a chance to sell his house for P95,000 due to the
acts of the defendant. However, the Court finds that there is no adequate proof of loss, as
there is no evidence of the depreciation in the market value of the house caused by the
defendant's acts. The Court also notes that Velasco himself admits that properties have
increased in value by 200% since then.
Issue:
1. Whether the damages awarded to Velasco were incorrectly assessed and
unreasonably reduced.
2. Whether the damages awarded to Velasco are inadequate considering the present
high cost of living.
3. Whether Velasco lost a chance to sell his house due to the acts of the defendant.
Ruling:
The Court denies both motions for reconsideration, affirming its previous decision. The
decision states that the damages awarded to Velasco were not inadequate due to lack of
adequate proof of loss and failure to minimize damages. The Court also reiterates that the
legal rule on extraordinary inflation or deflation of currency does not apply to obligations
arising from tort.
Ratio:
In addressing the first issue, the Court finds that there is no evidence to support Velasco's
claim that the undeclared amount was part of his regular income. Including the
undeclared amount in Velasco's disclosed professional earnings for 1954 would result in
an abnormally high income for that year. Therefore, the Court refuses to consider the
undisclosed amount as part of Velasco's regular income for the purpose of computing the
reduction in his earnings.
Regarding the second issue, the Court determines that Article 1250 of the Civil Code,
which deals with extraordinary inflation or deflation of currency, is inapplicable to
obligations arising from tort. The damages awarded to Velasco had already taken into
account the changed economic circumstances.
In relation to the third issue, the Court finds that there is no adequate proof of loss as there
is no evidence of the depreciation in the market value of Velasco's house caused by the
defendant's acts. Additionally, Velasco himself admits that properties have increased in
value by 200% since then.
In response to the appellee's motion for reconsideration, the Court rejects the argument
that if the noise emitted by the appellee's substation cannot be reduced to the level
imposed by the Court, the remedy would be to compel the appellee to acquire and pay for
the value of the house under the doctrine of "inverse condemnation." The Court finds that
this issue was not raised in the trial court and should not be considered on appeal. The
Court also notes that there is no showing that it is impossible to reduce the substation
noise to the level decreed by the Court.
Lantion vs. NLRC (181 SCRA 513)

Lantion vs. National Labor Relations Commission
G.R. No. 82028. January 29, 1990.
Facts:
The case of Lantion v. National Labor Relations Commission involves three complainants,
Filomeno N. Lantion, Clarita C. Lantion, and Juana C. Fuentes, who were illegally
dismissed by the Gregorio Araneta University Foundation (the University). Filomeno
Lantion held the position of Acting Vice President and Executive Officer of the University,
with 32 years and 7 months of service. Clarita Lantion was the Dean of the Institute of
Business and Agricultural Administration and Head and Professor of the Department of
Business and Finance, with 26 years of service. Juana Fuentes served as the Secretary of
the Chief Legal Officer, with 16 years of service. The University implemented a
retrenchment and reorganization program in 1983, which resulted in the dismissal of the
complainants. The program aimed to address the financial predicament of the University
by separating or retiring all personnel and rehiring them under new salary rates and
benefits. However, the complainants argued that their positions were not affected by the
reorganization and that they were not rehired despite their seniority and qualifications.
Issue:
The main issue in this case is whether the complainants were illegally dismissed by the
University.
Ruling:
The Supreme Court ruled in favor of the complainants, declaring their dismissal as illegal
and ordering their reinstatement with three years of backwages. The Court also upheld the
deletion of interest and attorney's fees awarded by the Labor Arbiter.
Ratio:
The Court held that the complainants were indeed illegally dismissed by the University. It
noted that the retrenchment program implemented by the University was not properly
followed, as the complainants' positions were not affected by the reorganization. The
Court emphasized that the complainants' seniority and qualifications should have been
considered in the rehiring process. Therefore, the Court ordered the reinstatement of the
complainants with three years of backwages to compensate for the period of illegal
dismissal.
Regarding the deletion of interest and attorney's fees, the Court upheld the decision of the
NLRC. The Court explained that there was no evidence of ill-feeling or bad faith on the part
of the University, which would justify the imposition of interest. The Court further stated
that the inflation that occurred did not warrant the imposition of interest without an
agreement between the parties and an official declaration of extraordinary inflation by
competent authorities. As for attorney's fees, the Court ruled that they were not warranted
as wages had not been unlawfully withheld by the University.
In conclusion, the Supreme Court ruled in favor of the complainants, declaring their
dismissal as illegal and ordering their reinstatement with three years of backwages. The
Court based its decision on the failure of the University to properly follow the retrenchment
program and the lack of evidence of ill-feeling or bad faith on the part of the University. The
Court also upheld the deletion of interest and attorney's fees awarded by the Labor Arbiter.
Roman Catholic Bishop of Malolos, Inc. vs. IAC (191 SCRA 411)
Roman Catholic Bishop of Malolos, Inc. vs. Intermediate Appellate Court
G.R. No. 72110. November 16, 1990.
Facts:
The case involves a contract dispute over the sale of land in Bulacan between the Roman
Catholic Bishop of Malolos, Inc. (petitioner) and Robes-Francisco Realty and
Development Corporation (private respondent). The contract stipulated for a
downpayment and the balance to be paid within four years. The private respondent failed
to make the full payment within the grace period, leading to the cancellation of the
contract by the petitioner.
Issue:
1. Whether the private respondent tendered payment within the grace period.
2. Whether the petitioner is obligated to execute a deed of absolute sale before full
payment is made.
3. Whether the use of a certified personal check constitutes valid tender of payment.
Ruling:
The Supreme Court ruled in favor of the petitioner.
Ratio:
The Court held that a finding of sufficient available funds does not automatically prove
tender of payment. Tender of payment requires a positive and unconditional act of offering
legal tender currency and demanding acceptance. The private respondent's use of a
certified personal check, which is not legal tender, did not constitute valid tender of
payment.
The Court also emphasized that the private respondent should have paid the full amount
within the grace period and obtained a receipt before demanding the execution of the
necessary documents.
The Court further noted that the trial court's findings of fact should be given great weight
on appeal, and that the respondent court erred in disregarding these findings. The Court
also clarified that while it is not a trier of facts, it may review the evidence when the findings
of fact of the Court of Appeals are at variance with those of the trial court or when the
inference drawn by the Court of Appeals is manifestly mistaken.
Based on these reasons, the Supreme Court granted the petition and set aside the
decision of the respondent court, reinstating the decision of the trial court. The private
respondent was ordered to pay attorney's fees, litigation expenses, and judicial costs.
Far East Bank and Trust Co. (FEBTC) vs. Diaz Realty, Inc. (G.R. No. 138588,
Aug. 23, 2001)
Far East Bank & Trust Co. vs. Diaz Realty Inc.
G.R. No. 138588. August 23, 2001.
Facts:
This case involves a dispute over a loan and real estate mortgage between Far East Bank
& Trust Company (FEBTC) and Diaz Realty Inc. Diaz Realty Inc. obtained a loan from the
former PaBC Pacific Banking Corporation in the amount of P720,000.00, with an interest
rate of 12% per annum. The loan was secured by a real estate mortgage over two parcels
of land owned by Diaz Realty. In 1981, Allied Banking Corporation rented an office space
in the building constructed on the properties covered by the mortgage contract, with the
conformity of mortgagee PaBC. The parties agreed that the monthly rentals shall be paid
directly to the mortgagee for the lessor's account, either to partly or fully pay off the
mortgage indebtedness. In 1985, PaBC was closed by the Central Bank and placed under
receivership, and FEBTC purchased the credit of Diaz & Company in favor of PaBC. Diaz
Realty was informed about the purchase in 1988. Diaz Realty tendered to FEBTC the
amount of P1,450,000.00 through an Interbank check to prevent the imposition of
additional interests, penalties, and surcharges on its loan. FEBTC did not accept it as
payment but asked Diaz Realty to deposit the amount with the bank's Davao City Branch
Office. Diaz Realty wrote to FEBTC, asking for a reduction of the interest rate from 20% to
12% per annum, but received no reply. FEBTC then told Diaz Realty to change the deposit
into a money market placement, which Diaz Realty did. When there was still no news from
FEBTC regarding the acceptance of the tender of payment, Diaz Realty filed a case at the
Regional Trial Court of Davao City.
Issue:
1. Whether FEBTC should have accepted the tender of payment made by Diaz Realty.
2. Whether the transfer of Diaz Realty's account from PaBC to FEBTC was an
assignment of credit or an ineffective novation.
3. What interest rate should apply to the loan.
4. Whether the mortgage should be cancelled.
5. Whether a new lease negotiation should take place.
6. Whether attorney's fees and costs of litigation should be awarded.
Ruling:
The Supreme Court ruled in favor of Diaz Realty Inc. and made the following dispositions:
1. FEBTC should have accepted the tender of payment made by Diaz Realty.
2. The transfer of Diaz Realty's account from PaBC to FEBTC was an assignment of
credit, not an ineffective novation.
3. The interest rate of 20% per annum should apply until November 14, 1988, and
thereafter, the interest should be computed at 12% per annum until full payment.
4. The mortgage should be cancelled.
5. A negotiation for a new lease should take place.
6. Attorney's fees and costs of litigation should be awarded.
Ratio:
The Supreme Court upheld the validity of the tender of payment made by Diaz Realty and
ruled that FEBTC should have accepted it as payment. The Court reasoned that the tender
of payment was made in order to prevent the imposition of additional interests, penalties,
and surcharges on the loan. FEBTC's refusal to accept the payment was deemed
unjustified.
The Court also held that the transfer of Diaz Realty's account from PaBC to FEBTC was an
assignment of credit, not an ineffective novation. The Court explained that novation
requires the consent of all parties involved, and in this case, there was no evidence to
show that Diaz Realty consented to the novation of the loan agreement.
Regarding the interest rate, the Court ruled that the rate of 20% per annum should apply
until November 14, 1988, as stipulated in the loan agreement. However, after that date,
the interest should be computed at 12% per annum until full payment. The Court based
this decision on the principle of fairness and reasonableness.
The Court further ordered the cancellation of the mortgage, as Diaz Realty had already
tendered payment for the loan. The Court emphasized that the purpose of the mortgage
was to secure the loan, and since the loan was already being paid, there was no need for
the mortgage to remain in effect.
In addition, the Court ordered a negotiation for a new lease, as the original lease
agreement between Diaz Realty and Allied Banking Corporation had expired. The Court
recognized the need for a new lease agreement to protect the rights and interests of both
parties.
Lastly, the Court affirmed the award of attorney's fees and costs of litigation. The Court
recognized that Diaz Realty had to resort to legal action in order to protect its rights and
interests, and thus, it was just and proper to award attorney's fees and costs of litigation.
Jespay Realty Corp. vs. CA, et al. (G.R. No. 113626, Sept. 27, 2002)
Jespajo Realty Corp. vs. Court of Appeals
G.R. No. 113626. September 27, 2002.
Facts:
This case involves a dispute over a lease agreement between Jespajo Realty Corporation
(petitioner) and Tan Te Gutierrez and Co Tong (respondents). The lease agreement was for
an apartment building located in Binondo, Manila. The agreement stated that the lease
period would be effective from February 1, 1985, and would continue for an indefinite
period as long as the lessees were up-to-date in their monthly rental payments. The
agreement also included a provision for a 20% yearly increase in the monthly rentals.
Issue:
The main issue in this case is whether the lease agreement between the parties is
terminable by the lessor and whether the dispute over the increased monthly rentals
should be resolved in a consignation case or an ejectment case.
Ruling:
The Court of Appeals reversed the decision of the Regional Trial Court and reinstated the
ruling of the Metropolitan Trial Court, which dismissed the ejectment suit filed by the
lessor. The Court of Appeals found that the lessor had violated the lease agreement by
charging the lessees a monthly rental of P3,500.00, which exceeded the rental stipulated
in the contract. The court also found that the lessees had consigned the rental payments
due to the lessor's refusal to accept the rentals offered by the lessees.
Ratio:
The court ruled that the lease agreement was not subject to Art. 1687 of the New Civil
Code, which provides for an indefinite lease period if the rent is paid monthly. Instead, the
court found that the lease agreement had a resolutory condition, which stated that the
lease would continue for an indefinite period as long as the lessee was up-to-date in their
monthly rentals. The court held that the lessor's unilateral increase in the monthly rental
to P3,500.00 was a violation of the lease agreement and did not terminate the contract.
The court also found that the lessor's allegation of non-payment of rentals by the lessees
was false. The court upheld the ruling of the Metropolitan Trial Court, which dismissed the
ejectment suit for lack of merit.
The court held that the lessor was estopped from claiming that the lease agreement was
terminable and that the correct amount of rents could be considered in the consignation
case. The court affirmed the decision of the Court of Appeals and denied the petition.
In summary, the Supreme Court ruled in favor of the lessees, stating that the lessor had no
cause of action to eject them for non-payment of increased monthly rentals that exceeded
the agreed-upon terms. The court found that the lease agreement was not terminable by
the lessor and that the dispute over the increased rentals should be resolved in the
consignation case. The court also held that the lessor was estopped from claiming
otherwise.
Aquintey vs. Tibong (511 SCRA 414)

Aquintey vs. Spouses Tibong
G.R. No. 166704. December 20, 2006.
Facts:
The case involves a dispute between Agrifina Aquintey (petitioner) and spouses Felicidad
and Rico Tibong (respondents) over a loan. Agrifina filed a complaint for sum of money and
damages against the respondents, alleging that Felicidad had secured loans from her on
several occasions but failed to pay the outstanding loan amounting to P773,000. The
respondents admitted that they had secured loans from Agrifina but argued that their
obligation had been partially extinguished by the execution of deeds of assignment in favor
of Agrifina. They claimed that Agrifina became the new collector of their debtors and that
the obligation to pay the balance of their loans had been extinguished. The trial court ruled
in favor of Agrifina, ordering the respondents to pay the balance of their loan. The Court of
Appeals affirmed the decision with modification, reducing the balance of the loan.
Issue:
The main issues raised in the case were whether the respondents borrowed P773,000 from
Agrifina and whether the obligation was partially extinguished by the deeds of assignment.
Ruling:
The court ruled that the respondents admitted to borrowing the amount and that the
obligation was partially extinguished by the deeds of assignment. The court found that the
respondents' obligation to pay the balance of their loan was reduced to P33,841.
Ratio:
The court based its ruling on the admission of the respondents that they had indeed
borrowed the amount of P773,000 from Agrifina. This admission established the existence
of the loan and the respondents' obligation to repay it.
However, the court also considered the argument of the respondents that their obligation
had been partially extinguished by the execution of deeds of assignment in favor of
Agrifina. The court examined the deeds of assignment and found that they transferred the
rights and obligations of the respondents' debtors to Agrifina. As a result, Agrifina became
the new collector of the debtors and assumed the responsibility of collecting the
outstanding amounts.
Based on this finding, the court concluded that the respondents' obligation to pay the
balance of their loan was indeed partially extinguished. The court determined the reduced
balance of the loan by subtracting the amounts collected by Agrifina from the total loan
amount. After considering the evidence presented, the court arrived at the reduced
balance of P33,841.
In summary, the court ruled in favor of Agrifina, affirming the trial court's decision. The
court found that the respondents borrowed P773,000 from Agrifina and that their
obligation was partially extinguished by the deeds of assignment. The court determined
the reduced balance of the loan to be P33,841, which the respondents were ordered to
pay.
Telengtan Brothers & Sons, Inc. vs. United States Lines, Inc. (483 SCRA 458)
Telengtan Brothers & Sons, Inc. vs. United States Lines, Inc.
G.R. No. 132284. February 28, 2006.
Facts:
The case involves Telengtan Brothers & Sons, Inc. (Telengtan), a domestic corporation, and
United States Lines, Inc. (U.S. Lines), a foreign shipping corporation. U.S. Lines filed a suit
against Telengtan seeking payment of demurrage charges for goods that Telengtan failed
to withdraw from container vans within the specified period. Telengtan disclaimed liability
and claimed lack of consent for the removal of their goods by U.S. Lines. The trial court
found Telengtan liable for demurrage charges and damages, which was affirmed by the
Court of Appeals (CA). Telengtan appealed to the Supreme Court.
Issue:
(1) whether Telengtan is liable for demurrage charges, and
(2) whether the judgment award should be recomputed in accordance with Article 1250 of
the Civil Code.
Ruling:
The Supreme Court ruled that Telengtan is liable for demurrage charges because it failed
to withdraw its goods from the container vans within the 10-day free period. The Court
upheld the factual findings of the CA, which concluded that Telengtan was at fault for not
taking delivery of its cargo. The Court emphasized that it is the consignee's responsibility
to immediately get the cargo from the carrier upon notification of its arrival.
Regarding the recomputation of the judgment award, the Court held that there was no
extraordinary inflation within the meaning of Article 1250 of the Civil Code. The Court
stated that respondent failed to prove the occurrence of extraordinary inflation since it
filed its complaint in 1981. The Court also noted that the record is devoid of any evidence
of extraordinary inflation. The Court further explained that the decline in the purchasing
power of the Philippine peso over the years cannot be considered as the extraordinary
phenomenon contemplated by Article 1250. The Court emphasized that the value of the
peso at the time of the establishment of the obligation should control and be the basis of
payment, unless there is an agreement to the contrary. In this case, there was no
agreement to the contrary, and therefore, the value of the peso at the time of the
establishment of the obligation should be used for payment.
Ratio:
The Supreme Court affirmed the decision of the CA, holding Telengtan liable for demurrage
charges and damages. The Court also modified the order for recomputation of the
judgment award, deleting the provision for recomputation in accordance with Article 1250
of the Civil Code. The Court based its ruling on the consignee's responsibility to
immediately get the cargo from the carrier upon notification of its arrival. The Court also
emphasized that the decline in the purchasing power of the Philippine peso over the years
cannot be considered as the extraordinary phenomenon contemplated by Article 1250.
Therefore, the value of the peso at the time of the establishment of the obligation should
be used for payment.
International Hotel Corporation vs. Joaquin, Jr. & Suarez, G.R. No. 158361,
April 10, 2013
International Hotel Corp. vs. Joaquin Jr.
G.R. No. 158361. April 10, 2013.
Facts:
The case involves International Hotel Corporation (IHC) and Francisco B. Joaquin, Jr. and
Rafael Suarez. Joaquin submitted a proposal to IHC to secure a foreign loan for the
construction of a hotel. IHC approved the proposal and allocated funds for the project.
Joaquin requested payment for his services, and IHC agreed to compensate him and
Suarez with shares of stock. However, due to the failure to secure the loan, IHC cancelled
the shares. Joaquin and Suarez filed a lawsuit for specific performance, annulment,
damages, and injunction. The Regional Trial Court (RTC) held IHC liable and ordered them
to pay Joaquin and Suarez. The Court of Appeals (CA) affirmed the decision but modified
the amounts awarded. IHC appealed to the Supreme Court (SC), arguing that they should
not be held liable and that attorney's fees should be deleted.
Issue:
1. Whether IHC should be held liable for the cancellation of the shares of stock as
compensation for Joaquin and Suarez's services.
2. Whether attorney's fees should be awarded to Joaquin and Suarez.
Ruling:
The Supreme Court (SC) ruled in favor of Joaquin and Suarez with modifications. The SC
held that IHC should not be held liable under Article 1186 and Article 1234 of the Civil
Code. However, they found IHC liable based on the constructive fulfillment of a mixed
conditional obligation. The SC also applied the principle of quantum meruit to determine
the reasonable compensation for Joaquin and Suarez's services. The SC modified the
amounts awarded by the CA and deleted the award of attorney's fees.
Ratio:
The SC held that IHC should not be held liable under Article 1186 and Article 1234 of the
Civil Code. Article 1186 states that the condition shall be deemed fulfilled when the
obligor voluntarily prevents its fulfillment. In this case, IHC did not voluntarily prevent the
fulfillment of the condition, as the failure to secure the loan was beyond their control.
Article 1234 states that if the obligation has been substantially performed in good faith,
the obligor may recover as though there had been a strict and complete fulfillment. Since
the loan was not secured, the obligation was not substantially performed.
However, the SC found IHC liable based on the constructive fulfillment of a mixed
conditional obligation. A mixed conditional obligation is one where the condition is
dependent on the will of the debtor. In this case, the condition for the shares of stock as
compensation was dependent on the successful securing of the loan. Since the loan was
not secured, the condition was not fulfilled. However, the SC held that IHC should still be
liable for the constructive fulfillment of the obligation, as they had already allocated funds
for the project and had agreed to compensate Joaquin and Suarez.
The SC also applied the principle of quantum meruit to determine the reasonable
compensation for Joaquin and Suarez's services. Quantum meruit means "as much as he
deserves" and refers to the reasonable value of services rendered. In this case, Joaquin
and Suarez had already performed services for IHC, and therefore, they were entitled to
reasonable compensation. The SC modified the amounts awarded by the CA to reflect the
reasonable value of their services.
Lastly, the SC deleted the award of attorney's fees. Attorney's fees are not awarded as a
matter of course and must be proven and justified. In this case, the SC found that there
was no basis to award attorney's fees to Joaquin and Suarez.
Sps. Bonrostro vs. Sps. Luna, G.R. No. 172346, July 24, 2013
Spouses Bonrostro vs. Spouses Luna
G.R. No. 172346. July 24, 2013.
Facts:
The case involves a dispute between the spouses Bonrostro and the spouses Luna over a
contract to sell a property. In 1992, Constancia Luna entered into a contract to sell with
Bliss Development Corporation for a house and lot in Quezon City. A year later, Constancia
entered into another contract to sell with Lourdes Bonrostro, who agreed to assume
Constancia's balance with Bliss. The contract stated that Lourdes would make installment
payments for the property. However, Lourdes only made a down payment and failed to
make any subsequent payments. As a result, the spouses Luna filed a complaint for
rescission of the contract and damages against the spouses Bonrostro.
Issue:
The main issue in this case is whether the Court of Appeals (CA) correctly modified the
Regional Trial Court's (RTC) decision regarding interest.
Ruling:
The court affirmed the CA's decision and held that the spouses Bonrostro were liable for
interest on the unpaid installments and for reimbursement of payments made to Bliss.
Ratio:
The court ruled that the spouses Bonrostro's delay in payment constituted a substantial
breach of the contract. The court held that their letter expressing willingness to pay did not
suspend the accrual of interest. The court found that the spouses Bonrostro were in delay
in fulfilling their obligation and were therefore liable for interest on the unpaid installments
from the date of default until full payment.
The court also ruled that the spouses Bonrostro were liable for interest on the amount paid
by the spouses Luna to Bliss as amortization. The court found no evidence to support the
spouses Bonrostro's claim that they were prevented from making payments. Therefore,
the court held that the spouses Luna were entitled to reimbursement of the amount paid
to Bliss with interest.
In conclusion, the court affirmed the CA's decision and held that the spouses Bonrostro
were liable for interest on the unpaid installments and for reimbursement of payments
made to Bliss. The court ruled that the spouses Bonrostro's letter expressing willingness
to pay did not suspend the accrual of interest, and they were in delay in fulfilling their
obligation. The court also found no evidence to support the spouses Bonrostro's claim that
they were prevented from making payments.
National Power Corporation vs. Ibrahim, et al., GR 175863, February 18, 2015
National Power Corp. vs. Ibrahim
G.R. No. 175863. February 18, 2015.
Facts:
The case of National Power Corp. v. Ibrahim involves a dispute over a parcel of land in
Marawi City. The National Power Corporation (NPC) took possession of the land in 1978
for the purpose of building a hydroelectric power plant. However, it was later discovered
that the land was actually owned by Macapanton K. Mangondato. Mangondato demanded
compensation for the land, and after a decade of negotiations, NPC acknowledged his
right to receive compensation.
Mangondato filed a complaint for reconveyance against NPC, while NPC filed an
expropriation complaint. The two cases were consolidated, and the court ruled in favor of
NPC, ordering it to pay just compensation for the land. NPC appealed the decision, but it
was upheld by the Court of Appeals and the Supreme Court.
During the pendency of the appeal, the Ibrahims and Maruhoms filed a complaint
disputing Mangondato's ownership of the land. They claimed to be the true owners as the
lawful heirs of the original proprietor. They sought to have Mangondato transfer ownership
to them and for NPC to pay them any indemnity due for the land. The court granted a
temporary restraining order and a writ of preliminary injunction to prevent NPC from
making any payments to Mangondato.
Issue:
The main issue in this case is whether NPC is liable to the Ibrahims and Maruhoms for the
indemnity due for the land, despite already making payment to Mangondato.
Ruling:
The court ruled in favor of NPC and absolved it from any liability to the Ibrahims and
Maruhoms for the indemnity due for the land.
Ratio:
The court emphasized that bad faith requires a deliberate commission of a wrong, and
NPC's payment to Mangondato was made in compliance with a court order. Therefore,
NPC cannot be held liable to the Ibrahims and Maruhoms for the indemnity due for the
land. The court also noted that even if the Ibrahims and Maruhoms were the true owners,
NPC's payment to Mangondato could still be considered as a valid payment in good faith
to a possessor of credit, extinguishing its obligation. The court dismissed the case against
NPC and ordered the Ibrahims and Maruhoms to return any garnished funds to
Mangondato.
Sinamban vs. China Banking Corporation, GR 193890, March 11, 2015

Sinamban vs. China Banking Corp.
G.R. No. 193890. March 11, 2015.
Facts:
The case of Sinamban v. China Banking Corp. involves a dispute over the liability of the
spouses Sinamban for the deficiency on promissory notes they co-signed. The spouses
Manalastas executed a real estate mortgage in favor of China Banking Corporation
(Chinabank) to secure a loan for their rice milling business. The spouses Manalastas
executed several promissory notes, two of which were co-signed by the spouses
Sinamban. Chinabank filed a complaint for sum of money against the spouses Manalastas
and the spouses Sinamban for their failure to pay their loan obligations. The Regional Trial
Court (RTC) ruled in favor of Chinabank, holding both sets of spouses liable for the
deficiency. The spouses Sinamban filed a motion for reconsideration, which the RTC
initially granted, relieving them from any liability. However, the RTC later set aside its
previous order and reinstated its decision, holding the spouses Sinamban solidarily liable
with the spouses Manalastas. The spouses Sinamban appealed to the Court of Appeals
(CA), which affirmed the RTC decision with modifications. The CA held that the spouses
Sinamban were solidarily liable for the deficiency on the promissory notes they co-signed.
The spouses Sinamban filed a petition for review with the Supreme Court, arguing that they
should not be held liable for the deficiency.
Issue:
The main issue in this case is whether the spouses Sinamban should be held liable for the
deficiency on the promissory notes they co-signed.
Ruling:
The Supreme Court modified the decision of the Court of Appeals, holding that the
spouses Sinamban were solidarily liable for a portion of the deficiency on the promissory
notes they co-signed.
Ratio:
The Court found that the spouses Sinamban expressly bound themselves to be jointly and
severally liable with the spouses Manalastas when they co-signed the promissory notes.
This means that they can be held liable for the full amount of the deficiency, even if the
other party is unable to pay. The Court also found that the auction proceeds should be
applied pro rata to the outstanding balances of the promissory notes. This means that the
proceeds should be divided proportionately among the spouses Manalastas and the
spouses Sinamban based on their respective outstanding balances.
Furthermore, the Court ruled that the spouses Sinamban were liable for interest on their
shares in the deficiency. The interest rate was set at 12% from November 18, 1998 to June
30, 2013, and 6% from July 1, 2013 until the deficiency is fully paid. This is in accordance
with prevailing jurisprudence and the terms of the promissory notes.
In conclusion, the Supreme Court held that the spouses Sinamban were solidarily liable
for a portion of the deficiency on the promissory notes they co-signed. They were also
ordered to pay interest on their shares in the deficiency. The Court's decision is based on
the express agreement of the parties and the principles of joint and several liability.
Marquez vs. Elisan Credit Corporation GR 194642, April 6, 2015

Marquez vs. Elisan Credit Corp.
G.R. No. 194642. April 6, 2015.
Facts:
The petitioner in this case is Nunelon R. Marquez, who is challenging a court decision
regarding the payment of an unpaid loan balance, interest, penalty, and attorney's fees, as
well as the foreclosure and sale of a motor vehicle under a chattel mortgage. The petitioner
obtained a loan from Elisan Credit Corporation for fifty-three thousand pesos payable in
one hundred eighty days. The loan was secured by a chattel mortgage over a motor vehicle.
Later on, the petitioner obtained a second loan from the respondent for fifty-five thousand
pesos. However, when the second loan matured, the petitioner had only paid a portion of
the amount, leaving an unpaid balance. As a result, the respondent filed a complaint for
judicial foreclosure of the chattel mortgage due to the petitioner's failure to fully pay the
second loan.
Issue:
The main issue raised in this case is whether the second loan obtained by the petitioner
from the respondent should be fully extinguished or if there are still outstanding balances
that need to be paid.
Ruling:
The court ruled in favor of the respondent and partially granted the petition. The court
affirmed the ruling on the crediting of the daily payments made by the petitioner against
the interest and the reduction of the penalty and attorney's fees. However, the court held
that the chattel mortgage could not cover the second loan and ordered the return of the
seized motor vehicle or payment of its value.
Ratio:
The court based its decision on the provisions of the Civil Code and the Chattel Mortgage
Law. According to the court, the daily payments made by the petitioner should be credited
against the interest and not the principal. This is in line with the principle that interest
accrues daily and should be paid first before the principal. The court also reduced the
penalty and attorney's fees, taking into consideration the circumstances of the case.
Furthermore, the court ruled that the chattel mortgage could not cover the second loan.
The court explained that a chattel mortgage can only cover the specific obligation for
which it was constituted. In this case, the chattel mortgage was constituted to secure the
first loan obtained by the petitioner. Therefore, it cannot be extended to cover the second
loan. As a result, the court ordered the return of the seized motor vehicle or payment of its
value as compensation for the foreclosure and sale.
In conclusion, the Supreme Court partially granted the petition and affirmed the ruling on
the crediting of the daily payments against the interest and the reduction of the penalty
and attorney's fees. However, the court held that the chattel mortgage could not cover the
second loan and ordered the return of the seized motor vehicle or payment of its value.
This decision is based on the provisions of the Civil Code and the Chattel Mortgage Law,
which govern the payment of loans and the extent of coverage of a chattel mortgage.
Sps. Tan, et al. vs. China Banking Corporation, GR 200299, August 17, 2016
Spouses Tan vs. China Banking Corp.
G.R. No. 200299. August 17, 2016.
Facts:
The case of Spouses Tan v. China Banking Corp. involves a dispute between petitioner
Lorenze Realty and Development Corporation (represented by Spouses Juan Chuy Tan and
Mary Tan) and respondent China Banking Corporation. Lorenze Realty obtained several
loans from China Bank, and as security, executed real estate mortgages over 11 parcels of
land. However, Lorenze Realty defaulted on its payments, leading China Bank to foreclose
on the properties and sell them at a public auction. After deducting the proceeds from the
sale, there remained a deficiency in the amount of P29,258,179.81. China Bank then filed
a collection suit against Lorenze Realty, seeking payment of the deficiency. The Regional
Trial Court (RTC) ruled in favor of China Bank, and the Court of Appeals (CA) affirmed the
decision with modifications, reducing the penalty surcharge from 24% to 12% per annum.
Lorenze Realty appealed to the Supreme Court.
Issue:
The main issue in the case is whether Lorenze Realty's obligation is fully settled when the
real properties constituted as securities for the loan were sold at a public auction for
P85,000,000.00.
Ruling:
The Supreme Court ruled against Lorenze Realty, stating that the sale of the foreclosed
properties does not extinguish the obligation.
Ratio:
The Court cited Article 1253 of the Civil Code, which states that payment of the principal
shall not be deemed to have been made until the interests have been covered. Since the
proceeds of the sale were first applied to the interest, penalties, and expenses of the sale,
there remained a deficiency in the principal obligation.
The Court also upheld the CA's reduction of the penalty surcharge from 24% to 12% per
annum, citing existing jurisprudence. The Court rejected Lorenze Realty's plea to further
reduce the interest to 3% per annum, affirming that 12% per annum is the legal rate of
interest imposed by the Court in cases where stipulated rates are deemed excessive.
Georgia Osmeña-Jalandoni vs. Carmencita Encomienda, GR 205578, March

1, 2017
Osmeña-Jalandoni vs. Encomienda
G.R. No. 205578. March 1, 2017.
Facts:
The case of Osmeña-Jalandoni v. Encomienda involves a dispute over a large sum of
money between Georgia Osmeña-Jalandoni and Carmen Encomienda. In 1995,
Encomienda met Jalandoni when she was purchasing a condominium unit and Jalandoni
was the real estate broker. They developed a close friendship, and in March 1997,
Jalandoni asked Encomienda to borrow money for a search and rescue operation for her
children in Manila. Encomienda gave Jalandoni P100,000 in a sealed envelope. Over time,
Jalandoni continued to borrow money from Encomienda for various expenses, resulting in
a total amount of around P3,245,836.02 and $6,638.20.
When Jalandoni returned to Cebu in July 1997, she did not inform Encomienda and did not
repay the borrowed money. Encomienda demanded payment, but Jalandoni claimed that
the amounts given were not loans. Encomienda filed a complaint, and the trial court
dismissed the case. However, the Court of Appeals reversed the decision and ordered
Jalandoni to pay Encomienda the claimed amount, plus interest and attorney's fees.
Issue:
The main issue in the case is whether Encomienda is entitled to be reimbursed for the
amounts she spent on Jalandoni. Jalandoni argues that there was never a discussion or
allusion about a loan, and that Encomienda's payments were intended as gifts.
Ruling:
The court ruled in favor of Encomienda and affirmed the decision of the Court of Appeals.
Jalandoni was ordered to pay Encomienda the claimed amount, plus interest and
attorney's fees.
Ratio:
The court found Jalandoni's argument that the payments were gifts to be incredible and
contrary to common experience. The court noted that Jalandoni came from a wealthy
family and was unlikely to be the recipient of charitable acts. Additionally, Jalandoni never
expressed gratitude for the money she received, unlike when Encomienda gave a gift to
Jalandoni's daughter.
The court also rejected Jalandoni's argument that she did not consent to the payments.
Even if she did not authorize the payments, she still benefited from them and must
reimburse Encomienda. The court cited Article 1236 of the Civil Code, which allows a
person who pays for another to demand reimbursement, even if the payment was made
without the debtor's knowledge or against their will.
Jalandoni's defense that there should have been a written acknowledgment or promissory
note for the loans was also rejected by the court. The court emphasized that contracts can
be oral or written, and the absence of written evidence does not negate the existence of a
loan. The court found that Encomienda's actions were consistent with the existence of a
loan, and Jalandoni's lack of objection to the payments further supported the existence of
a loan.
The court concluded that Jalandoni's retention of the money would result in unjust
enrichment and would be against the principles of justice, equity, and good conscience.
Therefore, the court affirmed the decision of the Court of Appeals, ordering Jalandoni to
pay Encomienda the claimed amount, plus interest and attorney's fees. The court
modified the interest rate to 12% per annum from the date of demand until June 30, 2013,
and 6% per annum from July 1, 2013, until full satisfaction.
2. Loss of The Thing Due (1262-1269)

Ortigas & Co. vs. Feati Bank and Trust Co. (94 SCRA 533)
Ortigas & Co., Ltd. Partnership vs. Feati Bank and Trust Co.
G.R. No. L-24670. December 14, 1979.
Facts:
The case of Ortigas & Co., Ltd. Partnership v. Feati Bank and Trust Co. involves a dispute
between Ortigas & Co. and Feati Bank and Trust Co. Ortigas & Co., Limited Partnership, a
real estate company, developed the Highway Hills Subdivision in Mandaluyong, Rizal. In
1952, Ortigas & Co. entered into agreements of sale with Augusto Padilla y Angeles and
Natividad Angeles for two parcels of land in the subdivision. These agreements contained
building restrictions, including the exclusive residential use of the land and specific
requirements for any buildings or improvements. Feati Bank and Trust Co. acquired Lots
Nos. 5 and 6, which were subject to the building restrictions, and began construction of a
building on the lots for banking purposes. Ortigas & Co. demanded that Feati Bank stop
the construction, claiming that it violated the building restrictions.
Issue:
The main issue in the case was whether the municipal resolution declaring the area as a
commercial and industrial zone prevailed over the building restrictions imposed by
Ortigas & Co.
Ruling:
The Supreme Court affirmed the decision of the trial court, ruling in favor of Feati Bank.
The Court held that the municipal resolution declaring the area as a commercial and
industrial zone superseded the building restrictions imposed by Ortigas & Co.
Ratio:
The Court based its decision on the principle of police power, which is the power of the
government to regulate for the promotion of the health, safety, and general welfare of the
people. The Court emphasized that the exercise of police power should be responsive to
social conditions and that the need to promote public welfare may require the restriction
of individual property rights. In this case, the Court found that the municipal resolution
declaring the area as a commercial and industrial zone was a valid exercise of police
power. The resolution was a reasonable response to the development and
commercialization of the area along Epifanio de los Santos Avenue. Therefore, the building
restrictions imposed by Ortigas & Co. could not be enforced against Feati Bank. The Court
prioritized public interest in promoting development over contractual obligations. As a
result, Feati Bank was allowed to proceed with the construction of the building on the lots.
Naga Telephone Co., et al. vs. CA (Feb. 24, 1994)

Naga Telephone Co., Inc. vs. Court of Appeals
G.R. No. 107112. February 24, 1994.
Facts:
The case of Naga Telephone Co., Inc. v. Court of Appeals involves a contract between Naga
Telephone Co., Inc. (NATELCO) and Camarines Sur II Electric Cooperative, Inc.
(CASURECO II) for the use of electric light posts in Naga City. The contract was entered
into in 1977 and provided that NATELCO would install ten telephone connections for
CASURECO II in exchange for the use of their electric posts. The contract also stated that
it would terminate if CASURECO II ceased its operation as a public service.
After more than ten years of the contract being in effect, CASURECO II filed a complaint
for reformation of the contract, claiming that it had become unfair and disadvantageous
to them. They argued that the contract did not provide for reasonable compensation for
the use of their posts and that the increase in NATELCO's subscribers had caused damage
to their posts. CASURECO II also claimed that NATELCO had been using their posts
outside of Naga City without any contract or payment.
Issue:
1. Whether Article 1267 of the New Civil Code is applicable to the case.
2. Whether the action for reformation of contract is barred by prescription.
3. Whether there is a potestative condition in the contract.
Ruling:
The Supreme Court denied the appeal and affirmed the decision of the Court of Appeals.
They held that Article 1267 was applicable to the case and that the action for reformation
of contract was not barred by prescription. They also agreed with the Court of Appeals that
there was a potestative condition in the contract, but that it did not invalidate the
provision.
Ratio:
The Supreme Court ruled that Article 1267 of the New Civil Code is applicable to the case.
This article allows for the release of an obligor from a difficult or unfair obligation. In this
case, CASURECO II argued that the contract had become unfair and disadvantageous to
them due to the lack of reasonable compensation for the use of their posts and the
damage caused by NATELCO's increased subscribers. The Court agreed with CASURECO
II and ordered the reformation of the contract to include a monthly rental fee for the use of
CASURECO II's posts.
The Court also held that the action for reformation of contract was not barred by
prescription. They explained that the ten-year period for prescription starts from the time
the cause of action accrues, which in this case was when CASURECO II discovered the
unfairness and disadvantageous nature of the contract. Since CASURECO II filed the
complaint within this period, the action was not barred by prescription.
Regarding the potestative condition in the contract, the Court agreed with the Court of
Appeals that it existed. However, they clarified that the presence of a potestative condition
does not automatically invalidate the provision. In this case, the Court found that the
provision was still valid and enforceable. They emphasized that their decision was
necessary to avoid disruption of essential services and to prevent unjust enrichment by
NATELCO at the expense of CASURECO II. Therefore, NATELCO was ordered to pay
CASURECO II a monthly rental fee for the use of their posts, and CASURECO II was ordered
to pay NATELCO for the use of their telephones.
Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms

Employees Union, (G.R. No. 185665, February 8, 2012)
Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms Employees
Union
G.R. No. 185665. February 8, 2012.
Facts:
The case of Eastern Telecommunications Philippines, Inc. v. Eastern Telecoms Employees
Union involves a labor dispute between Eastern Telecommunications Philippines, Inc.
(ETPI) and its employees' union, Eastern Telecoms Employees Union (ETEU). ETPI planned
to defer the payment of the 2003 14th, 15th, and 16th month bonuses due to financial
difficulties. ETEU strongly opposed this and filed a complaint with the National
Conciliation and Mediation Board (NCMB) to determine the date of payment. ETPI initially
agreed to pay the bonuses in April 2004 but later refused to do so, leading to a notice of
strike filed by ETEU. The Secretary of Labor and Employment certified the labor dispute for
compulsory arbitration.
Issue:
The main issues raised in the case are whether ETPI is liable to pay the bonuses and
whether the Court of Appeals (CA) erred in not dismissing ETEU's petition for certiorari.
Ruling:
The Supreme Court ruled in favor of ETEU and affirmed the decision of the CA.
Ratio:
The Court held that the grant of the bonuses had become a contractual obligation of ETPI
based on the Collective Bargaining Agreement (CBA) Side Agreements signed in 1998 and
2001. The provision in the CBA Side Agreements did not specify any conditions for the
payment of the bonuses, and ETPI had been consistently giving the bonuses to its
employees from 1975 to 2002.
The Court rejected ETPI's argument that its financial difficulties released it from the
obligation, stating that the parties assumed the risks of unfavorable developments. The
Court emphasized that the principle of non-diminution of benefits prohibits the reduction
or elimination of benefits enjoyed by employees.
Furthermore, the Court held that the bonuses had become part of the employees' salary
or wage due to the long and regular practice of ETPI in giving them. The Court emphasized
that the principle of non-diminution of benefits prohibits the reduction or elimination of
benefits enjoyed by employees.
Therefore, ETPI was ordered to pay the bonuses to the members of ETEU.
The Court also affirmed the CA's decision not to dismiss ETEU's petition for certiorari, as it
found no jurisdictional errors or grave abuse of discretion in the CA's ruling.
Tagaytay Realty Co., Inc. vs. Gacutan, GR 160033, July 1, 2015

Tagaytay Realty Co., Inc. vs. Gacutan
G.R. No. 160033. July 1, 2015.
Facts:
The case involves a dispute between Tagaytay Realty Co., Inc. (petitioner) and Arturo G.
Gacutan (respondent) over the non-completion of promised amenities in a subdivision.
The respondent entered into a contract to sell with the petitioner for the purchase on
installment of a residential lot in the Foggy Heights Subdivision. The petitioner executed
an undertaking to complete the development of the subdivision, including the amenities,
within two years. However, the amenities were not constructed as promised, leading the
respondent to suspend his amortizations. The respondent filed a case against the
petitioner for specific performance, seeking the completion of the amenities and the
delivery of the title to the property. The Housing and Land Use Regulatory Board (HLURB)
ruled in favor of the respondent, ordering the petitioner to accept payment of the balance
of the contract price without interest and penalty, and to execute and deliver the deed of
sale and title to the respondent. The petitioner appealed to the Office of the President
(OP), which upheld the HLURB's decision. The Court of Appeals (CA) affirmed the OP's
decision, stating that the petitioner was not relieved from its obligation to construct the
amenities and that the respondent was not guilty of laches. The petitioner appealed to the
Supreme Court.
Issue:
The main issues raised in this case are: 1) whether the petitioner was released from its
obligation to construct the amenities in the subdivision, and 2) whether the respondent
should pay the annual interest and penalty.
Ruling:
The Supreme Court ruled that the petitioner was not relieved from its statutory and
contractual obligations to complete the amenities. The Court held that the petitioner's
unilateral suspension of the construction of the amenities was not justified and was
intended to save costs, which disadvantaged the lot owners. The Court also rejected the
petitioner's argument that it should be released from its obligations due to unforeseen
economic hardships, as the suspension of construction had preceded the worsening of

economic conditions. Therefore, the petitioner was ordered to fulfill its obligation to
construct the amenities.
Regarding the payment of interest and penalty, the Court held that the respondent was
liable for the stipulated annual interest of 12% but not the penalty. The Court explained
that the annual interest compensated the petitioner for waiting seven years before
receiving the total principal amount, and therefore, the respondent should pay it. However,
the penalty could not be enforced against the respondent because the petitioner had
waived it in the event that the amenities were not completed by a certain date. The Court
also rejected the petitioner's argument that the respondent's claim was barred by laches,
as the respondent had continuously requested updates on the construction and had not
abandoned or declined to assert his rights.
Ratio:
The Supreme Court based its decision on the petitioner's failure to fulfill its obligations to
construct the amenities in the subdivision. The Court emphasized that the petitioner's
suspension of construction was not justified and was intended to save costs, which
disadvantaged the lot owners. The Court also noted that the suspension of construction
had preceded the worsening of economic conditions, and therefore, the petitioner could
not be released from its obligations due to unforeseen economic hardships.
In terms of the payment of interest and penalty, the Court held that the respondent was
liable for the stipulated annual interest of 12% as it compensated the petitioner for waiting
seven years before receiving the total principal amount. However, the penalty could not be
enforced against the respondent because the petitioner had waived it in the event that the
amenities were not completed by a certain date.
The Court also rejected the petitioner's argument of laches, stating that the respondent
had continuously requested updates on the construction and had not abandoned or
declined to assert his rights. Therefore, the respondent's claim was not barred by laches.
In conclusion, the Supreme Court affirmed the decision of the CA with modifications. The
respondent was ordered to pay the balance of the contract price, while the petitioner was
ordered to execute the deed of absolute sale and deliver the property to the respondent.
The petitioner was also ordered to pay the costs of the suit.
3. Condonation or Remission of Debt (1270-1274)

4. Confusion or Merger of Rights (1275-1277)
Yek Tong Lin Fire and Marine Insurance Co. vs. Yusingco (46 Phil. 473)
Yek Tong Lin Fire & Marine Insurance Co., Ltd. vs. Madrigal
G.R. No. 43608. July 20, 1937.
Facts:
The case of Yek Tong Lin Fire & Marine Insurance Co., Ltd. v. Madrigal involves the plaintiff,
Yek Tong Lin Fire & Marine Insurance Co., Ltd., and the defendants, Pelagio Yusingco and
Vicente Madrigal. The plaintiff held a mortgage on the steamship Yusingco, which was
owned by Yusingco. On the other hand, the defendant Madrigal had paid for repairs on the
vessel and was assigned the credit by the repair company. The plaintiff attempted to
foreclose the mortgage, but the vessel was already in custodia legis. Eventually, the vessel
was sold at a public auction, with the plaintiff being the highest bidder.
Issue:
The main issue in this case is whether the credit of a creditor assigned the right to recover
repair costs on a vessel is superior to the credit of a mortgage creditor.
Ruling:
The court ruled that the credit of a creditor assigned the right to recover repair costs on a
vessel is superior to the credit of a mortgage creditor. As a result, the plaintiff lost their
mortgage rights over the vessel.
Ratio:
The court based its decision on provisions of the Civil Code and the Code of Commerce.
The court held that the defendant Madrigal's credit, as the assignee of the repair costs,
had priority over the plaintiff's mortgage credit. This means that the defendant's right to
recover the repair costs took precedence over the plaintiff's mortgage rights. The court
also stated that since the plaintiff had purchased the vessel at the public auction, they
could not collect their mortgage credit from the defendant Madrigal. The court
emphasized the importance of the assignment of the right to recover repair costs, as it
created a superior credit over the mortgage credit. Therefore, the court modified the lower
court's judgment and ordered the defendant Madrigal to turn over the money received
from the sale of the vessel to the plaintiff.
5. Compensation (1278-1290)
Gullas vs. National Bank (62 Phil. 519)
Gullas vs. Philippine National Bank
G.R. No. 43191. November 13, 1935.
Facts:
The case of Gullas v. Philippine National Bank revolves around a dispute between Paulino
Gullas, a depositor, and the Philippine National Bank. On August 2, 1933, a treasury
warrant amounting to $361 was issued to Francisco Sabectoria Bacos and was indorsed
by Gullas and Pedro Lopez. The warrant was subsequently cashed by the Philippine
National Bank but was later dishonored by the Insular Treasurer. At the time, Gullas had
an outstanding balance of P509 in his account with the bank. Without providing Gullas
with any notice, the bank applied this balance to the payment of the dishonored warrant.
Upon Gullas' return to Cebu, he paid the remaining unpaid balance of the warrant. As a
result of the bank's actions, Gullas experienced inconvenience as his checks were not
honored and his reputation was negatively affected.
Issue:
(1) Does the Philippine National Bank have the right to apply a deposit to the debt of a
depositor?
(2) If so, what amount of damages, if any, should be awarded to Gullas?
Ruling:
The court ruled in favor of Gullas, with modifications to the judgment of the trial court. The
Philippine National Bank was ordered to pay Gullas the sum of P250, as well as the costs
of both instances.
Ratio:
The court determined that the relationship between a depositor and a bank is that of a
creditor and debtor. It was established that a bank has the right of set off, allowing it to
apply a deposit in its possession to the payment of any indebtedness owed by the
depositor. However, it was also recognized that notice of dishonor is necessary to charge
an indorser, and the right of action against the indorser does not arise until such notice is
given.
The court adopted the general rule that a bank has the right of set off and concluded that
the Philippine National Bank had the right to apply Gullas' deposit to the debt of the
dishonored warrant. However, the court also recognized that the bank's actions were
prejudicial to Gullas as an indorser, and that notice should have been given to him.
Therefore, the court awarded Gullas nominal damages in the amount of P250 for the
bank's premature action.
In summary, the court affirmed the bank's right to set off the deposit but found that the
bank's failure to provide notice to Gullas was a violation of his rights as an indorser. As a
result, the court ordered the Philippine National Bank to pay Gullas the sum of P250 as
nominal damages, in addition to the costs of both instances.
Garcia vs. Lim Chiu Sing (59 Phil. 562)

Garcia vs. Lim Chu Sing
G.R. No. 39427. February 24, 1934.
Facts:
The case of Garcia v. Lim Chu Sing involves a receiver of a bank seeking payment of an
outstanding balance from a debtor who defaulted on promissory notes. The defendant,
Lim Chu Sing, appeals the judgment rendered by the Court of First Instance of Manila. On
June 20, 1930, Lim Chu Sing executed a promissory note for the sum of P19,605.17 with
the Mercantile Bank of China. The note had an interest rate of 6% per annum and was
payable in monthly installments. The defendant defaulted on several payments, leaving
an unpaid balance of P9,105.17. The defendant argues that the debt is not his but of Lim
Cuan Sy, who had an account with the bank and for whom the defendant acted as a surety.
The defendant also claims that his shares of stock in the bank, worth P10,000, should be
used to compensate for the debt.
Issue:
1. Whether the court erred in denying the motion to include Lim Cuan Sy as a party
defendant.
2. Whether it is proper to compensate the defendant's debt with his shares of stock
in the bank.
3. Whether the court erred in awarding attorney's fees.
Ruling:
The court rules as follows:
1. The court finds that the defendant failed to file an exception to the ruling denying
the motion to include Lim Cuan Sy as a party defendant. As a result, the defendant
is estopped from raising this issue on appeal.
2. The court determines that shares of stock in a banking corporation do not

constitute an indebtedness of the corporation to the stockholder. Therefore, the
defendant cannot use his shares to compensate for his debt.
3. The court concludes that the percentage stipulated in the promissory note for costs
and attorney's fees includes judicial costs. Therefore, the defendant should not be
required to pay additional costs.
Ratio:
In the first issue, the court finds that the defendant failed to file an exception to the ruling
denying the motion to include Lim Cuan Sy as a party defendant. This failure to raise the
issue on appeal estops the defendant from raising it at this stage.
In the second issue, the court determines that shares of stock in a banking corporation do
not constitute an indebtedness of the corporation to the stockholder. The defendant's
argument that his shares should be used to compensate for his debt is therefore rejected.
In the third issue, the court concludes that the percentage stipulated in the promissory
note for costs and attorney's fees includes judicial costs. This means that the defendant
should not be required to pay additional costs.
In summary, the court denies the defendant's motion to include another party, rejects the
use of shares in a banking corporation to compensate for the debt, and affirms the award
of attorney's fees with the modification that the costs be eliminated.
Union Bank of the Philippines vs. Development Bank of the Philippines, GR

191555, January 20, 2014
Union Bank of the Philippines vs. Development Bank of the Philippines
G.R. No. 191555. January 20, 2014.
Facts:
The case involves a dispute between Union Bank of the Philippines (Union Bank) and
Development Bank of the Philippines (DBP) regarding outstanding loan obligations of
Foodmasters, Inc. (FI). On May 21, 1979, FI and DBP entered into a Deed of Cession of
Property in Payment of Debt (dacion en pago) where FI ceded certain properties to DBP to
satisfy its loan obligations to DBP and assume FI's obligations to Bancom Development
Corporation (Bancom). DBP also entered into an Assumption Agreement with Bancom,
confirming its assumption of FI's obligations and agreeing to remit up to 30% of any rentals
due from FI to Bancom as payment of the assumed obligations. Bancom later transferred
its receivables, including DBP's assumed obligations, to Union Bank. Union Bank filed a
collection case against DBP, claiming that the rentals have not been remitted despite its
demands. DBP argued that its obligation to Union Bank had not arisen because FI had not
paid the rentals. The Regional Trial Court (RTC) ruled in favor of Union Bank, ordering DBP
to pay the rentals and FI to indemnify DBP. The Court of Appeals (CA) set aside the RTC's
ruling, stating that DBP's obligation to remit the rentals to Union Bank was contingent on
FI's payment to DBP.
Issue:
The main issue in this case is whether DBP is obligated to remit the rentals to Union Bank
despite FI's failure to pay the rentals.
Ruling:
The Court denied the petitions of Union Bank and DBP, upholding the CA's ruling that DBP's
obligation to remit the rentals to Union Bank was contingent on FI's payment to DBP. The
Court granted DBP's appeal, nullifying the writ of execution and ordering Union Bank to
return the funds it received. The Court upheld the denial of Union Bank's motion to affirm
legal compensation, stating that legal compensation could not have taken place between
the debts because the requisites of compensation were not present.
Ratio:
The Court held that DBP's obligation to remit the rentals to Union Bank was contingent on
FI's payment to DBP. The Assumption Agreement between DBP and Bancom clearly stated
that DBP's obligation to remit the rentals was dependent on FI's payment. Since FI had not
paid the rentals, DBP's obligation to remit them to Union Bank had not arisen. Therefore,
Union Bank's claim for the rentals was premature.
Furthermore, the Court explained that legal compensation could not have taken place
between the debts because the requisites of compensation were not present. Legal
compensation requires that the debts be liquidated and demandable, and that they be of
the same kind and quality. In this case, the debts were not of the same kind and quality.
Union Bank's claim was for the rentals, while DBP's claim was for the assumption of FI's
obligations. Therefore, the debts could not be subject to legal compensation.
Based on these reasons, the Court upheld the CA's ruling and ordered Union Bank to return
the funds it received from DBP.
6. Novation (1291-1304)
Zapanta vs. De Rostaeche (21 Phil. 54)
Zapanta vs. De Rotaeche
G.R. No. 6910. January 9, 1912.
Facts:
The case of Zapanta v. De Rotaeche involves a dispute between the plaintiff, Andres
Zapanta, and the defendant, Eduardo De Rotaeche, who was the attorney in fact of Angel
Ortiz. The case was decided by the Supreme Court of the Philippines on January 9, 1912.
On August 4, 1909, Zapanta filed a complaint in the Court of First Instance of the Province
of Sorsogon, seeking to recover damages amounting to P9,687.86. Zapanta alleged that
De Rotaeche had caused an illegal execution and sale of his property. De Rotaeche filed a
demurrer to the complaint, which was overruled, and he then filed a general denial. After
hearing the evidence, the court rendered a judgment in favor of Zapanta, ordering De
Rotaeche to pay him P3,707.26, with legal interest from the date of the filing of the
complaint.
Issue:
1. What is the effect of the agreement between Zapanta and Ramon Echevarria, the
attorney in fact for F. Suarez, on the judgment against Zapanta?
2. Is the judgment against Angel Ortiz valid?
3. Was the denial of a new trial proper?
Ruling:
1. The agreement between Zapanta and Ramon Echevarria did not nullify the
judgment against Zapanta. The agreement recognized the obligations in the
judgment and provided another method for their payment. The court held that the
judgment was not merged in the agreement and that De Rotaeche had the right to
execute the judgment for non-compliance with the agreement.
2. The Supreme Court did not make a ruling on the validity of the judgment against
Angel Ortiz.
3. The Supreme Court did not find any error in the denial of a new trial.
Ratio:
The Supreme Court based its decision on the analysis of the effect of the agreement on
the judgment. The court referred to the Civil Code, which states that for an obligation to be
extinguished by another obligation (novation), the novation or extinguishment must be
expressly declared or the old and new obligations must be absolutely incompatible. In this
case, the agreement did not expressly extinguish the judgment, and its terms were not
absolutely incompatible with the obligations of the judgment. Therefore, the court held
that the judgment was not merged in the agreement and that De Rotaeche had the right to
execute the judgment for non-compliance with the agreement. The court did not make a
ruling on the validity of the judgment against Angel Ortiz and found no error in the denial of
a new trial.
Uraca, et al. vs. Court of Appeals (G.R. No. 115158, Sept. 5, 1997)
Uraca vs. Court of Appeals
G.R. No. 115158. September 5, 1997.
Facts:
The case of Uraca v. Court of Appeals involves a dispute over the ownership of a property
in Cebu City. The respondents, Jacinto Velez Jr., Carmen Velez Ting, Avenue Merchandising
Inc., Felix Ting, and Alfredo Go, offered to sell their lot and commercial building to the
petitioners, Emilia Uraca, Concordia Ching, and Ong Seng, for P1,050,000. The petitioners
accepted the offer in writing, but the respondents later raised the price to P1,400,000. The
petitioners agreed to the new price but proposed payment in installments, which the
respondents did not accept. No payment was made by the petitioners to the respondents.
On July 13, 1985, the respondents sold the property to Avenue Merchandising Inc. for
P1,050,000. The petitioners filed a complaint against the respondents and registered a
notice of lis pendens over the property. The trial court found that there were two perfected
contracts of sale between the parties, one for P1,050,000 and another for P1,400,000. It
also found that Avenue Merchandising Inc. purchased the property in bad faith.
Issue:
The main issue raised in the case is whether there was a novation of the original contract
of sale between the parties and whether the purchase of the property by Avenue
Merchandising Inc. was in bad faith.
Ruling:
The Court of Appeals ruled that there was no novation of the original contract of sale
between the parties because they did not reach an agreement on the new price. It also
held that the Avenue Group's purchase of the property was in bad faith. The Supreme
Court agreed with the Court of Appeals' ruling. It held that since the parties failed to enter
into a new contract that could have extinguished their previously perfected contract of
sale, there was no novation. Therefore, the first sale of the property for P1,050,000
remained valid and existing. The Court also ruled that the Avenue Group's purchase and
registration of the property was tainted with bad faith because they had knowledge of the
petitioners' prior sale.
Ratio:
The Supreme Court based its decision on the principle of novation. Novation is the
extinguishment of an obligation by the substitution or change of the obligation by a
subsequent one that terminates the first. In this case, the Court found that there was no
novation because the parties did not reach an agreement on the new price. The original
contract of sale for P1,050,000 remained valid and existing.
The Court also applied the principle of bad faith in determining the validity of the Avenue
Group's purchase of the property. Bad faith refers to a state of mind affirmatively operating
with furtive design or some motive of self-interest or ill will. The Court found that the
Avenue Group had knowledge of the petitioners' prior sale and still proceeded with the
purchase and registration of the property. This constituted bad faith and rendered their
purchase and registration null and void.
In conclusion, the Court upheld the validity of the original contract of sale between the
petitioners and respondents and declared the Avenue Group's purchase and registration
of the property as null and void. The petitioners were entitled to ownership of the property.
Reyes vs. CA, et al. (G.R. No. 120817, November 4, 1996)

Reyes vs. Court of Appeals
G.R. No. 120817. November 4, 1996.
Facts:
The case of Reyes v. Court of Appeals involves a dispute over a loan agreement between
Elsa B. Reyes, the president of Eurotrust Capital Corporation, and Graciela Eleazar, the
president of B.E. Ritz Mansion International Corporation. The loan agreement was for the
construction of a condominium and business park. Notably, the loan agreement did not
have collateral but had higher interest rates than those allowed by banks. Eleazar issued
postdated checks to cover the loan payments, but they were dishonored by the bank due
to a stop payment order made by Eleazar. As a result, Reyes filed criminal complaints
against Eleazar for violation of B.P. Blg. 22 (Bouncing Checks Law) and estafa (swindling).
Issue:
1. The main issue raised in the case is whether novation by substitution of creditor
occurred.
2. The second issue raised is whether the payments made by Eleazar to AFP-MBAI
resulted in novation.
3. The court also addresses the issue of laches.
Ruling:
1. The court ruled that novation by substitution of creditor did not occur.
2. The court ruled that the payments made by Eleazar to AFP-MBAI did not result in
novation.
3. The court ruled that Reyes is guilty of laches.
Ratio:
1. Novation requires the concurrence of four requisites: a previous valid obligation,
an agreement to a new contract, the extinguishment of the old contract, and the
validity of the new contract. In this case, the court found that the last three
requisites were not present. There was no new agreement for substitution of
creditor between the parties, and the letters exchanged between Reyes and Eleazar
did not indicate that the creditor, AFP-MBAI, agreed to be the substitute creditor.
Novation by substitution of creditor requires an agreement among the original
creditor, the debtor, and the new creditor. Therefore, novation did not occur.
2. The mere acceptance of payments by AFP-MBAI does not automatically result in
novation. There must be an express intention to novate. In this case, there was no
evidence of AFP-MBAI's intention to release Reyes from her obligation. Therefore,
novation did not occur.
3. Laches refers to the unreasonable delay or omission to assert one's rights. In this
case, the court found that Reyes failed to take timely action against the resolutions
of the Secretary of Justice, and her delay in challenging the resolutions warrants a
presumption of abandonment or decline to assert her rights. Therefore, she is
barred from seeking relief in court.
Conclusion
In conclusion, the court affirmed the decision of the respondent court, which sustained
the resolutions of the Secretary of Justice. The court found that novation did not occur in
the loan agreement between Reyes and Eleazar, and Reyes is bound by the finality of the
resolutions. The court also found that Reyes is guilty of laches.
Magdalena Estate, Inc. vs. Rodriguez (18 SCRA 967)

Magdalena Estates, Inc. vs. Rodriguez
G.R. No. L-18411. December 17, 1966.
Facts:
In the case of Magdalena Estates, Inc. v. Rodriguez, the Court of First Instance of Manila
ordered the defendants-appellants, Antonio A. Rodriguez and Herminia C. Rodriguez, to
pay the plaintiff-appellee, Magdalena Estates, Inc., the sum of P655.89 plus interest,
attorney's fees, and costs. The appellants had purchased a parcel of land from the
appellee and executed a promissory note for the unpaid balance of P5,000. The Luzon
Surety Co., Inc. also executed a bond guaranteeing the payment of the balance. When the
obligation became due, the surety company paid the appellee the principal amount of
P5,000. However, the appellee demanded payment of the accrued interest of P655.89
from the appellants, who refused to pay. The appellee then filed a suit to collect the
interest. The Municipal Court ruled in favor of the appellee, and the Court of First Instance
affirmed the decision.
Issue:
(1) whether the appellee waived or condoned the interest due,
(2) whether the obligation of the appellants was extinguished by payment or condonation,
and
(3) whether there was novation of the obligation.
Ruling:
The court ruled that the appellee did not waive or condone the interest due. The
promissory note clearly stated that the principal obligation was the balance of the
purchase price of the land, which was P5,000. The appellee accepted the payment of
P5,000 from the surety company without protest or objection because it knew that was
the complete amount undertaken by the surety. The liability of a surety cannot be extended
beyond the terms of the contract. Therefore, the appellee could not apply a part of the
payment for the accrued interest.
The court also ruled that there was no novation of the obligation. Novation by presumption
is not favored and requires the establishment that the old and new contracts are
incompatible in all points or that there is an express agreement or acts of similar import.
In this case, the surety bond was not a new and separate contract but an accessory of the
promissory note. The mere fact that the appellee accepted the surety bond and received
payment from the surety company does not constitute novation.
Ratio:
The court's decision was based on the interpretation of the promissory note and the nature
of the surety bond. The promissory note clearly stated that the principal obligation was the
balance of the purchase price of the land, and the appellee accepted the payment of
P5,000 from the surety company without objection. This showed that the appellee did not
waive or condone the interest due.
Furthermore, the court explained that novation requires the establishment that the old
and new contracts are incompatible in all points or that there is an express agreement or
acts of similar import. In this case, the surety bond was not a new and separate contract
but an accessory of the promissory note. Therefore, the mere acceptance of the surety
bond and payment from the surety company did not constitute novation.
Based on these rulings, the court affirmed the judgment of the lower court, ordering the
appellants to pay the principal amount plus interest to the appellee. The court also held
that the rules on the application of payment in the Civil Code do not apply to a surety
whose liability is both contingent and singular. The appellee cannot apply the payment to
any other obligation.
Pascual vs. Lacsamana (100 Phil. 381)

Pascual vs. Lacsamana
G.R. No. L-10060. November 27, 1956.
Facts:
The case of Pascual v. Lacsamana revolves around a dispute over a debt and obligations
outlined in a promissory note. The defendant, Jose Lacsamana, executed a document on
July 23, 1951 (Exhibit A), acknowledging his debt of P6,405.53 to the plaintiff, Maria S.
Pascual. The document also stated that the debt would be paid on December 31, 1951,
and that Lacsamana would sell all the fish harvested from his fishponds through Pascual,
who would receive a 5% commission. Additionally, Lacsamana promised to pay interest
of 12% per year until the debt was fully paid. If he failed to pay, he agreed to pay 25% of the
debt as damages or attorney's fees. On February 27, 1953, Lacsamana executed another
document (Exhibit D), which stated that he had not yet paid the debt and promised to pay
it on March 20, 1953. However, Exhibit D did not mention the obligation to deliver fish to
Pascual or the payment of liquidated damages. Pascual filed a lawsuit claiming that
Lacsamana had not paid the debt as agreed in Exhibit A and had failed to deliver the fish,
causing her to lose a commission of approximately P700. She sought payment of the debt,
interest at 12% per year, the unrealized commission, and 25% of the debt as liquidated
damages. Lacsamana argued that on February 27, 1953, he and Pascual had settled and
liquidated their outstanding accounts, and as a result, he executed Exhibit D. He also filed
a counterclaim, alleging that he had delivered fish worth P1,198.15 and that Pascual still
owed him P1,004.25 after deducting the commission. The trial court ruled in favor of
Pascual, ordering Lacsamana to pay the debt of P6,405.53, interest at 12% per year, 25%
of the debt as liquidated damages and attorney's fees, and the costs. The court dismissed
Lacsamana's counterclaim.
Issue:
The main issue raised in the case is whether Exhibit D novated Exhibit A.
Ruling:
The Supreme Court affirmed the judgment of the trial court in its entirety.
Ratio:
The Supreme Court examined the two documents, Exhibit A and Exhibit D, and found that
Exhibit D did not mention the obligation to deliver fish or the payment of liquidated
damages. It only referred to past unfulfilled promises to pay and a final promise to pay on
March 20, 1953. The court held that for novation to exist, there must be a change,
substitution, or renewal of an obligation with the intention of extinguishing or modifying
the former obligation. Mere extension of payment and the addition of another obligation
not incompatible with the old one is not a novation. The court also emphasized that
novation is never presumed and there must be a declaration to that effect in unequivocal
terms or the old and new obligations must be incompatible. Based on these findings, the
Supreme Court concluded that Exhibit D did not novate Exhibit A. Therefore, the trial
court's ruling in favor of Pascual, ordering Lacsamana to pay the debt, interest, liquidated
damages, and attorney's fees, was affirmed. The court also deemed Lacsamana's appeal
frivolous and sentenced him to pay double costs.
La Tondeña, Inc. vs. Alto Surety & Insurance Co. (101 Phil. 879)
La Tondeña, Inc. vs. Alto Surety & Insurance Co., Inc.
G.R. No. L-10132. July 18, 1957.
Facts:
The case of La Tondeña, Inc. v. Alto Surety & Insurance Co., Inc. involves a dispute between
La Tondeña, Inc. and Alto Surety & Insurance Co., Inc. The facts of the case are as follows:
On April 21, 1949, Primitivo P. Ferrer executed a second chattel mortgage in favor of La
Tondeña, Inc. to guarantee payment of certain amounts. Some of the properties were
already subject to a first mortgage in favor of Pedro Ruiz. Both mortgages were duly
registered. On August 18, 1949, Pedro Ruiz sought foreclosure of the first mortgage and
filed an action in court. Ferrer secured the release of the properties by means of a
redelivery bond guaranteed by Alto Surety. The court rendered judgment on December 1,
1950, sentencing Ferrer to pay Ruiz. Alto Surety paid for Ferrer on June 19, 1952.
While the first case was still pending, La Tondeña, Inc. filed a foreclosure proceeding
against Ferrer on November 15, 1949. Judgment was rendered on June 7, 1950, sentencing
Ferrer to pay La Tondeña, Inc. If Ferrer did not pay, La Tondeña, Inc. would proceed with
the foreclosure. The Provincial Sheriff levied on the mortgaged properties and advertised
them for sale. However, La Tondeña, Inc. directed the sheriff to release the properties from
levy on the condition that Ferrer would satisfy the judgment by March 31, 1951. If Ferrer
failed to do so, La Tondeña, Inc. would be at liberty to proceed with the foreclosure.
On March 13, 1951, Alto Surety filed complaints against Ferrer and secured writs of
preliminary attachment. On April 23, 1951, the Provincial Sheriff attached the properties
mortgaged by Ferrer to La Tondeña, Inc. Ferrer did not pay his debt to La Tondeña, Inc. by
the end of March 1951, and La Tondeña, Inc. obtained an alias writ of execution. However,
the foreclosure sale could not proceed because of the attachment by Alto Surety. La
Tondeña, Inc. filed a third-party claim to the property, and Alto Surety issued an indemnity
bond to maintain its levy. The goods were sold at auction at the instance of Alto Surety and
purchased by them.
Issue:
The main issues raised in the case are as follows: (1) Whether the mortgage lien of La
Tondeña, Inc. was extinguished by the release of the execution levy; (2) Whether the
extension of time granted by La Tondeña, Inc. to Ferrer constituted novation that
extinguished the original judgment; (3) Whether Alto Surety had superior rights over La
Tondeña, Inc. as the second mortgagee.
Ruling:
The court ruled in favor of La Tondeña, Inc. on all issues.
Ratio:
The court held that the mortgage lien remained valid and was not extinguished by the
release of the execution levy. The purpose of the mortgage lien is to ensure that a judgment
for the debt will remain collectible and will be satisfied from the proceeds of the
mortgaged property.
The court also held that the extension of time granted by La Tondeña, Inc. to Ferrer did not
constitute novation that extinguished the original judgment. The intent of the parties to
novate an obligation must be clearly expressed or apparent from the incompatibility of the
old and new obligations. In this case, the subsequent agreement between La Tondeña,
Inc. and Ferrer recognized that the judgment of foreclosure continued to be in force.
Lastly, the court held that Alto Surety did not have superior rights over La Tondeña, Inc. as
the second mortgagee. The subrogation in favor of Alto Surety did not exist when the
attachment was levied, and therefore, did not make the attachment superior to the lien of
the second mortgagee. Alto Surety was liable for damages for wrongfully refusing to
surrender the mortgaged property.
In conclusion, the Supreme Court ruled in favor of La Tondeña, Inc., stating that the
mortgage lien remained valid, the extension of time did not extinguish the original
judgment, and Alto Surety did not have superior rights over La Tondeña, Inc. as the second
mortgagee.
Dungo vs. Lopeña (6 SCRA 1007)

Duñgo vs. Lopena
G.R. No. L-18377. December 29, 1962.
Facts:
The case of Dungo v. Lopena involves a dispute over a compromise agreement in a real
estate mortgage case. The petitioner, Anastacio Dugo, and another individual purchased
three parcels of land from the respondents, Adriano Lopena and Rosa Ramos. To secure
the payment of the balance, Dugo and the other buyer executed a Deed of Real Estate
Mortgage. When they defaulted on the first installment, Lopena and Ramos filed a
complaint for foreclosure of the mortgage. The parties then entered into a compromise
agreement, which extended the payment deadline. However, Dugo did not sign the
agreement, but his co-buyer represented that his signature covered both of them. The
agreement was approved by the court. Later, a tri-party agreement was entered into, with
a third party assuming the debt. When Dugo failed to pay, Lopena and Ramos filed a
motion for the sale of the mortgaged property, which was granted. Dugo then filed a
motion to set aside the proceedings, arguing that the compromise agreement was void as
he did not sign it. The motion was denied, and Dugo appealed. The court dismissed the
appeal, leading to the present case.
Issue:
The main issues raised in the case are: (1) whether the compromise agreement, its
approval, and subsequent proceedings were valid or void as to Dugo, and (2) whether the
lower court abused its discretion in dismissing Dugo's appeal.
Ruling:
The court ruled that the absence of Dugo's signature on the compromise agreement did
not render it void but merely unenforceable. While a special power of attorney is required
to bind another party to a compromise agreement, the absence of such power does not
invalidate the agreement. The court also found that Dugo had ratified the compromise
agreement through his actions, including the tri-party agreement. The court cited the
principle that when a client fails to promptly repudiate the action of their attorney, they
cannot later contest its validity. Additionally, the court held that novation by presumption
was not favored and that there was no novation in this case as there was no release of the
original debtor. The court concluded that the compromise agreement was valid and
enforceable against Dugo, and therefore, the lower court did not abuse its discretion in
dismissing his appeal.
Ratio:
The court upheld the validity of the compromise agreement, ruling that the absence of
Dugo's signature did not render it void but merely unenforceable. The court based its
decision on the requirement of a special power of attorney to bind another party to a
compromise agreement, stating that the absence of such power does not invalidate the
agreement. The court also found that Dugo had ratified the compromise agreement
through his actions, including the tri-party agreement. The court cited the principle that
when a client fails to promptly repudiate the action of their attorney, they cannot later
contest its validity. Additionally, the court held that novation by presumption was not
favored and that there was no novation in this case as there was no release of the original
debtor. The court concluded that the compromise agreement was valid and enforceable
against Dugo, and therefore, the lower court did not abuse its discretion in dismissing his
appeal.
In summary, the court upheld the validity of the compromise agreement, ruling that the
absence of Dugo's signature did not render it void but merely unenforceable. The court
found that Dugo had ratified the agreement and that there was no novation. Therefore, the
lower court's dismissal of Dugo's appeal was affirmed.
Kabankalan Sugar Co. vs. Pacheco (55 Phil. 55)

Kabankalan Sugar Co., Inc. vs. Pacheco
G.R. No. 33654. December 29, 1930.
Facts:
The case of Kabankalan Sugar Co., Inc. v. Pacheco involves a dispute over the validity of a
contract between Kabankalan Sugar Co., Inc. and Josefa Pacheco. The contract in
question pertains to an easement of right of way on Pacheco's property. The contract was
initially entered into on November 1, 1920, with a duration of twenty years. However, a
subsequent contract was executed on September 29, 1922, which reduced the duration
of the easement to seven crops or seven years.
Issue:
The main issue raised in the case is whether the subsequent contract executed on
September 29, 1922, modified and extinguished the previous contractual obligation
entered into on November 1, 1920.
Ruling:
The Supreme Court affirmed the decision of the trial court, ruling in favor of Pacheco. The
Court held that the reduction of the duration of the easement in the subsequent contract
constituted novation and extinguished the previous contractual obligation.
Ratio:
The Court based its decision on Article 1203 of the Civil Code, which provides that
obligations may be modified by changing their object or principal conditions. In this case,
the duration of the right of way was one of the principal conditions of the contract, and its
reduction in the subsequent contract constituted novation. The Court emphasized that
the second contract imposed additional obligations on the appellant, such as the
obligation to mill sugar cane in their central, but it also granted them additional easements
and relieved them from paying rent for the easements. Therefore, the Court found no error
in the judgment appealed from and affirmed it in its entirety.
GSIS vs. Court of Appeals (169 SCRA 744)

Government Service Insurance System vs. Court of Appeals
G.R. No. L-40824. February 23, 1989.
Facts:
The case of Government Service Insurance System v. Court of Appeals involves a dispute
over the validity of a foreclosure and sale of a co-owned property. The petitioner,
Government Service Insurance System (GSIS), granted two loans to the Lagasca spouses,
who executed a deed of mortgage in favor of GSIS. The mortgage included the property co-
owned by the Lagasca spouses and the respondents, Mr. and Mrs. Isabelo R. Racho. The
Racho couple signed the mortgage contracts to accommodate the Lagasca spouses, as
the loans were solely for their benefit. However, the Lagasca spouses failed to fulfill their
obligation to assume the mortgage and secure the release of the Racho couple's share in
the property. As a result, GSIS extrajudicially foreclosed the mortgage and sold the
property at public auction. The Racho couple filed a complaint seeking to declare the
foreclosure and related documents null and void, and to recover their share of the property
or its value. The trial court dismissed the complaint, but the Court of Appeals reversed the
decision and declared the foreclosure void as it did not provide sufficient notice to the
Racho couple. The Court of Appeals also ordered GSIS to reconvey the Racho couple's
share of the property and awarded damages and attorney's fees. GSIS appealed the
decision to the Supreme Court.
Issue:
The main issues raised in the case are: (1) whether the Racho couple is liable under the
mortgage contracts as accommodation parties, and (2) whether the lack of personal
notice to the Racho couple in the extrajudicial foreclosure sale impairs its validity.
Ruling:
The Supreme Court ruled in favor of GSIS.
Ratio:
The Court held that the promissory note and mortgage deeds involved in the case are not
negotiable instruments under the Negotiable Instruments Law because they do not
comply with the requirements to be considered as such. Therefore, the provisions of the
Civil Code and special laws on mortgages apply instead.
The Court also found that the Racho couple signed the mortgage contracts to
accommodate the Lagasca spouses, but their consent made them solidarily liable for the
debt. The Court emphasized that as long as valid consent was given, the fact that the loans
were solely for the benefit of the Lagasca spouses does not invalidate the mortgage with
respect to the Racho couple's share in the property.
Furthermore, the Court held that the lack of personal notice to the Racho couple in the
extrajudicial foreclosure sale does not impair its validity, as Act No. 3135, as amended,
does not require personal notice to the mortgagor.
In conclusion, the Supreme Court ruled that the mortgage contracts are valid and the
Racho couple is liable for the loans despite them being solely for the benefit of the Lagasca
spouses. The Court also held that the lack of personal notice to the Racho couple in the
foreclosure sale does not invalidate it. Therefore, the Court reversed the decision of the
Court of Appeals and reinstated the decision of the trial court.
Cochingyan, Jr. vs. R & B Surety and Insurance Co., Inc. (151 SCRA 339)
Cochingyan, Jr. vs. R&B Surety and Insurance Co., Inc.
G.R. No. L-47369. June 30, 1987.
Facts:
The case of Cochingyan, Jr. v. R & B Surety and Insurance Co., Inc. involved Pacific
Agricultural Suppliers, Inc. (PAGRICO) applying for an increase in its line of credit from
P400,000.00 to P800,000.00 with the Philippine National Bank (PNB). In order to secure
PNB's approval, PAGRICO had to provide a surety bond in the amount of P400,000.00,
which was issued by R & B Surety and Insurance Co., Inc. (R & B Surety). The surety bond
stated that R & B Surety and PAGRICO were jointly and severally liable to comply with the
terms and conditions of the line of credit. R & B Surety also entered into indemnity
agreements with various parties, including the petitioners, Joseph Cochingyan, Jr. and
Jose K. Villanueva. These indemnity agreements stated that the indemnitors would pay an
annual premium and indemnify R & B Surety for any damages or expenses incurred.
When PAGRICO failed to comply with its obligations to PNB, PNB demanded payment
from R & B Surety. R & B Surety made payments to PNB and then demanded
reimbursement from the petitioners. When the petitioners failed to comply, R & B Surety
filed a lawsuit against them.
Issue:
The main issues raised in the case were:
1) whether the Trust Agreement extinguished the obligations of R & B Surety and the
petitioners under the Surety Bond and indemnity agreements,
2) whether the Trust Agreement released the petitioners from their obligations as
indemnitors, and
3) whether the filing of the lawsuit was premature.
Ruling:
The court ruled that the Trust Agreement did not extinguish the obligations under the
Surety Bond and indemnity agreements. The Trust Agreement merely added another party,
the Trustor, to assume the same obligations as R & B Surety. The court also held that the
Trust Agreement did not release the petitioners from their obligations as indemnitors. The
petitioners remained second-tier parties and any extension of time granted to the first-tier
obligors did not prejudice the second-tier parties. Finally, the court ruled that the filing of
the lawsuit was not premature, as the indemnity agreements allowed R & B Surety to
recover from the petitioners even before it had paid PNB.
Ratio:
The court based its decision on the interpretation of the Trust Agreement and the
indemnity agreements. The court found that the Trust Agreement did not extinguish the
obligations under the Surety Bond and indemnity agreements because it merely added
another party, the Trustor, to assume the same obligations as R & B Surety. The court also
held that the Trust Agreement did not release the petitioners from their obligations as
indemnitors because they remained second-tier parties and any extension of time granted
to the first-tier obligors did not prejudice the second-tier parties. Finally, the court ruled
that the filing of the lawsuit was not premature because the indemnity agreements
allowed R & B Surety to recover from the petitioners even before it had paid PNB.
In conclusion, the court affirmed the decision of the trial court, holding the petitioners
liable to reimburse R & B Surety for payments made to PNB. The Surety Bond and
indemnity agreements were found to be valid and enforceable.
Chester Babst vs. Court of Appeals (G.R. Nos. 9939 and 104625, January 26,
2001)
Babst vs. Court of Appeals
G.R. No. 99398. January 26, 2001.
Facts:
The case of Babst v. Court of Appeals involves the dispute between the Bank of the
Philippine Islands (BPI) and Elizalde Steel Consolidated, Inc. (ELISCON) regarding the
recovery of a debt. BPI filed a complaint against ELISCON, Pacific Multi-Commercial
Corporation (MULTI), and Chester Babst to enforce payment of a promissory note and
three domestic letters of credit. The trial court ruled in favor of BPI and ordered ELISCON
to pay the outstanding amount. ELISCON, MULTI, and Babst filed appeals, and the Court
of Appeals modified the decision by ordering ELISCON to pay BPI and reimburse MULTI
and Babst for any amount they paid on ELISCON's behalf. The consolidated petitions seek
a review of the Court of Appeals' decision.
Issue:
The main issue in the case is whether BPI consented to the assumption by the
Development Bank of the Philippines (DBP) of ELISCON's obligations, thereby releasing
ELISCON from its debt to BPI.
Ruling:
The court ruled in favor of ELISCON, MULTI, and Babst. It held that BPI's conduct indicated
its consent to the substitution of DBP as the debtor. Even if BPI's account officer did not
have express authority to consent to the substitution, BPI could have subsequently
objected to it. BPI's failure to do so meant that it acquiesced to DBP assuming ELISCON's
obligations. Therefore, there was a valid novation, and ELISCON was released from its
debt to BPI. The court also ruled that the contracts of suretyship executed by Babst and
MULTI were extinguished along with the original obligation.
Ratio:
The court cited Article 1293 of the Civil Code, which states that novation by substitution
of debtors requires the consent of the creditor. While the consent does not have to be
express, it must be given at any time and in any form. The court also referred to previous
cases that recognized implied consent of the creditor to the substitution of debtors.
Conclusion
In conclusion, the court reversed the decision of the Court of Appeals and dismissed BPI's
complaint against ELISCON, MULTI, and Babst. BPI was directed to enforce its cause of
action against DBP. The prescriptive period for BPI to file its action was interrupted when
it filed the complaint against ELISCON.
Villanueva vs. Girged (110 Phil. 478)

Villanueva vs. Girged
G.R. No. L-15154. December 29, 1960.
Facts:
The case of Villanueva v. Girged involves an appeal by plaintiff Gil Villanueva from an order
of the Court of First Instance of Agusan, dismissing the complaint against defendant Lucio
S. Legaspi for lack of cause of action. The complaint alleges three causes of action: the
first is for the recovery of a sum of money represented by a dishonored check issued by
defendant Girged; the second is for unpaid services rendered as a stevedore; and the third
is for moral damages and attorney's fees. The lower court dismissed the complaint against
Legaspi based on his special defense that he did not assume the obligations of Girged and
that the condition for the assumption of obligation had not been fulfilled.
Issue:
The main issue in this case is whether the allegations in the complaint are sufficient to
state a cause of action against Legaspi.
Ruling:
The court affirms the order of dismissal issued by the lower court, stating that Legaspi did
not assume Girged's obligation and that the condition for the assumption of obligation had
not been fulfilled. Therefore, Legaspi cannot be held liable for the amounts claimed by the
plaintiff.
Ratio:
The court focuses on the nature and effect of a letter, Annex B, which Legaspi had
executed. Legaspi argues that he did not assume Girged's obligation but merely assured
the plaintiff that any amount due to him by Girged would be taken care of in Girged's third
shipment of logs to Japan. Legaspi also contends that the condition for the assumption of
obligation, the completion of the third shipment, had not been fulfilled. The court agrees
with Legaspi's arguments and concludes that Legaspi did not assume Girged's obligation
and that the condition for the assumption of obligation had not been fulfilled.
In its ruling, the court emphasizes that there is no allegation in the complaint that the third
shipment of logs to Japan has been completed, and even if Legaspi's letter Annex B
entailed an assumption of obligation, it is not yet due. The court also notes that there is no
allegation in the complaint that the causes of action arose from transactions with the
alleged partnership between Girged and Legaspi. Therefore, the court affirms the
dismissal of the complaint against Legaspi for lack of cause of action.
In its ratio, the court explains that Legaspi did not assume Girged's obligation based on the
language of his letter Annex B. Legaspi merely assured the plaintiff that any amount due
to him by Girged would be taken care of in Girged's third shipment of logs to Japan. The
court also highlights that the condition for the assumption of obligation, the completion
of the third shipment, had not been fulfilled. The court further notes that there is no
allegation in the complaint that the causes of action arose from transactions with the
alleged partnership between Girged and Legaspi. Therefore, the court concludes that
Legaspi cannot be held liable for the amounts claimed by the plaintiff.
Hodges vs. Rey (111 Phil. 219)

C. N. Hodges vs. Rey
G.R. No. L-12554. February 28, 1961.
Facts:
The case of C.N. Hodges v. Rey involves a borrower named Matias C. Rey who obtained a
loan from C.N. Hodges in the amount of P3,000.00. Rey then authorized the Philippine
National Bank (PNB) to pay his debt to Hodges out of any future crop loan or agricultural
line that the bank might grant him for the agricultural year 1939-40. The bank confirmed
this arrangement in a letter to Hodges.
Subsequently, the bank granted Rey an agricultural line of P39,000.00, but this line was
subject to several conditions. One of these conditions was that any unpaid balance from
Rey's previous agricultural line would be charged against the new line. It was discovered
that Rey had an unpaid balance of over P55,000.00 from his previous line. Despite this, the
bank's acting manager authorized the payment of P2,000.00 to Hodges on account of
Rey's debt, leaving a balance of P1,000.00.
In 1952, Hodges filed a complaint in the Municipal Court of Iloilo to collect the remaining
balance of P1,000.00, plus interest, attorney's fees, and costs of suit. The Municipal Court
dismissed the complaint against the bank but ordered Rey to pay Hodges. Hodges
appealed to the Court of First Instance of Iloilo, which also dismissed the complaint.
Hodges then appealed to the Supreme Court.
Issue:
The main issue in this case is whether the bank, PNB, is obligated to pay Hodges the
remaining balance of Rey's debt.
Ruling:
The Supreme Court ruled that the bank is not obligated to pay Hodges.
Ratio:
The court found that the bank did not assume the obligation to pay Rey's debt to Hodges.
The bank simply confirmed the arrangement between Rey and Hodges, wherein Rey
authorized the bank to pay his debt out of any future crop loan or agricultural line.
Although the bank granted Rey an agricultural line, it was subject to conditions, one of
which was that any unpaid balance from Rey's previous line would be charged against the
new line. Since Rey had an unpaid balance of over P55,000.00 from his previous line, there
were no funds available to the bank that could be used to pay Hodges.
The court held that the bank's payment of P2,000.00 to Hodges was a mistake and cannot
be construed as binding the bank to pay the remainder of Rey's debt. Therefore, the
Supreme Court affirmed the decision of the lower court, dismissing Hodges' complaint
against the bank. The court held that the bank is not obligated to pay Hodges the remaining
balance of Rey's debt.
South City Homes, Inc., et al. vs. Court of Appeals (G. R. No. 135462,
December 7, 2001)
South City Homes, Inc. vs. BA Fice Corp.
G.R. No. 135462. December 7, 2001.
Facts:
The case of South City Homes, Inc. v. BA Finance Corp. involves a dispute over a suretyship
agreement and the assignment of credit. The petitioners in the case are South City Homes,
Inc., Fortune Motors (Phils.), and Palawan Lumber Manufacturing Corporation, while the
respondent is BA Finance Corporation. The case was decided by the Supreme Court on
December 7, 2001.
Prior to the transactions covered by the drafts and trust receipts, Fortune Motors
Corporation had been availing of credit facilities from BA Finance Corporation. On January
17, 1983, Joseph L. G. Chua, President of Fortune Motors Corporation, executed a
Continuing Suretyship Agreement in favor of BA Finance Corporation, guaranteeing the
payment of any and all indebtedness of Fortune Motors Corporation. On February 3, 1983,
Palawan Lumber Manufacturing Corporation and South City Homes, Inc. also executed
Continuing Suretyship Agreements with BA Finance Corporation, guaranteeing the
payment of Fortune Motors Corporation's indebtedness. Subsequently, Canlubang
Automotive Resources Corporation (CARCO) drew six drafts in its favor, payable thirty days
after sight, charged to the account of Fortune Motors Corporation. Fortune Motors
Corporation executed trust receipts covering the motor vehicles delivered to it by CARCO,
agreeing to remit the proceeds of any sale and surrender the remaining unsold vehicles.
The drafts and trust receipts were assigned to BA Finance Corporation. When Fortune
Motors Corporation failed to pay the amounts due under the drafts and trust receipts, BA
Finance Corporation sent a demand letter to the sureties. Since the defendants failed to
settle their outstanding account, BA Finance Corporation filed a complaint for a sum of
money with the Regional Trial Court of Manila. The trial court ordered the defendants to
pay the outstanding amounts due under the drafts and trust receipts, as well as attorney's
fees and costs of suit. The defendants filed a motion to dismiss, arguing that there was no
principal obligation at the time the suretyship agreements were entered into and that the
suretyship agreements were null and void. The trial court denied the motion to dismiss and
rendered judgment in favor of BA Finance Corporation. The defendants appealed the
decision to the Court of Appeals, which affirmed the decision of the trial court with
modifications.
Issue:
(1) whether the suretyship agreement is valid;
(2) whether there was a novation of the obligation so as to extinguish the liability of the
sureties; and
(3) whether BA Finance Corporation has a valid cause of action for a sum of money
following the drafts and trust receipts transactions.
Ruling:
The Supreme Court ruled in favor of BA Finance Corporation on all three issues.
Ratio:
The Court held that the suretyship agreement is valid, as the Civil Code allows a suretyship
agreement to secure future debts even if the amount is not yet known. The Court also held
that there was no novation of the obligation, as the assignment of the drafts and trust
receipts did not extinguish the liabilities of the sureties. Finally, the Court held that BA
Finance Corporation had a valid cause of action for a sum of money following the drafts
and trust receipts transactions, as the trust receipts allowed for alternative actions in the
event of default by the entrustee.
In conclusion, the Supreme Court affirmed the decision of the Court of Appeals, affirming
the validity of the suretyship agreement and the assignment of credit, and granting BA
Finance Corporation a valid cause of action for a sum of money.
Rodriguez vs. Court of Appeals (207 SCRA 553)

Rodriguez vs. Court of Appeals
G.R. No. L-29264. August 29, 1969.
Facts:
The case of Rodriguez v. Court of Appeals involves a dispute over a contract of sale for a
parcel of land. The petitioner, Barbara Lombos Rodriguez, filed a petition for mandamus
and certiorari with the Supreme Court to challenge the decision of the Court of Appeals.
The Court of Appeals had ruled in favor of the respondents, Atanacio Valenzuela,
Maximina Victorio, Liberata Santos, and the heirs of Nieves Cruz, who were the original
sellers of the land.
The facts of the case are as follows: On December 31, 1958, Nieves Cruz authorized
Atanacio Valenzuela, Maximina Victorio, and Liberata Santos to sell a parcel of land
belonging to her. The agreement stated that the price payable to Nieves Cruz would be
P1.60 per square meter, and any overprice would go to the agents. Nieves Cruz received
an advance payment of P10,000 upon the execution of the agreement and another
P10,000 on January 5, 1959. The balance of the purchase price was to be paid upon the
issuance of the Torrens title over the property. However, Nieves Cruz and her children
collected various sums of money from the agents between July 3, 1959, and September 3,
1961, which were receipted for as payments for the land. These payments totaled
P27,198.60, in addition to the initial P20,000.
Proceedings to place the land under the Torrens system were initiated, and the land court
found that Nieves Cruz had sold her share of the land to Atanacio Valenzuela, Maximina
Victorio, and Liberata Santos, and had received a partial payment of P22,000. The land
was subsequently registered in the names of the applicants, subject to the rights of the
buyers over Nieves Cruz's share.
In September 1961, Nieves Cruz sold the property to Barbara Lombos Rodriguez for
P77,216. However, Nieves Cruz later attempted to rescind the original agreement and sent
a notice of rescission to Atanacio Valenzuela, Maximina Victorio, and Liberata Santos,
along with a check for P48,338.60. The defendants refused to accept the rescission,
claiming that the balance of the purchase price was not due until after the 1962 harvest.
Nieves Cruz filed a complaint for rescission of the agreement, cancellation of the
annotation on the title, and damages against Atanacio Valenzuela, Maximina Victorio,
Liberata Santos, and Barbara Lombos Rodriguez. The trial court ruled in favor of Nieves
Cruz and Rodriguez, ordering the cancellation of the annotation on the title and awarding
damages and attorney's fees. The defendants counterclaimed for the annulment of the
sale to Rodriguez and the reconveyance of the land to them.
The Court of Appeals reversed the decision of the trial court, declaring the sale to
Rodriguez null and void and ordering the cancellation of the transfer certificate of title
issued in her favor. The court found that Nieves Cruz had agreed to sell her share of the
land to Atanacio Valenzuela, Maximina Victorio, and Liberata Santos, and that Rodriguez
was aware of their prior rights over the property. The court held that Rodriguez's
acquisition of the land was subject to the superior rights of the defendants. The court also
ordered Rodriguez to return the land to the defendants upon payment of the balance of
the purchase price.
Issue:
1. Whether the Court of Appeals had jurisdiction over the appeal.
2. Whether the denial of the petitioner's motion for new trial constituted grave abuse.
3. Whether there was substantial evidence to support the finding of a valid contract
of sale between Nieves Cruz and the respondents.
4. Whether the Court of Appeals should have ordered restitution by Nieves Cruz.
Ruling:
1. The petitioner's claim of grave abuse by the Court of Appeals in denying her motion
for new trial was without merit.
2. The value of the land in controversy was below P200,000, based on the evidence
presented, and therefore the Court of Appeals had jurisdiction over the appeal.
3. There was substantial evidence supporting the finding of the Court of Appeals that
Nieves Cruz had agreed to sell her share of the land to the respondents. The court
considered the testimony of Andres Nery, the receipts signed by Nieves Cruz and/or
her children, and the notation in the certificate of title. The court concluded that
the sale was valid and recognized in the land registration proceedings.
4. The estate of Nieves Cruz was liable to the petitioner for the return of the purchase
price, less the amount deposited by the respondents with the trial court. The court
clarified that the heirs of Nieves Cruz could only be held individually liable for
restitution to the extent of their inheritance from her. The court did not order Nieves
Cruz to restore what she had received from the petitioner, as no claim for restitution
had been made against her in the pleadings.
Ratio:
1. The petitioner's claim of grave abuse by the Court of Appeals in denying her motion
for new trial was without merit because the court found no evidence to support her
claim.
2. The court determined that the value of the land in controversy was below P200,000,
based on the evidence presented, and therefore the Court of Appeals had
jurisdiction over the appeal.
3. The court found that there was substantial evidence supporting the finding of a
valid contract of sale between Nieves Cruz and the respondents. The court
considered the testimony of Andres Nery, the receipts signed by Nieves Cruz and/or
her children, and the notation in the certificate of title. These pieces of evidence
established the existence of a valid contract of sale.
4. The court held that the estate of Nieves Cruz was liable to the petitioner for the
return of the purchase price, less the amount deposited by the respondents with
the trial court. The court clarified that the heirs of Nieves Cruz could only be held
individually liable for restitution to the extent of their inheritance from her. This
ruling was based on the principle of individual liability and the absence of a claim
for restitution against Nieves Cruz in the pleadings.
In conclusion, the Supreme Court denied the petition for mandamus and certiorari,
upholding the decision of the Court of Appeals. The court held that the Court of Appeals
had jurisdiction over the appeal, and that there was substantial evidence supporting the
finding of a valid contract of sale between Nieves Cruz and the respondents. The court
also ordered the estate of Nieves Cruz to return the purchase price to the petitioner,
subject to the individual liability of the heirs.
Philippine Savings Bank vs. Manalac, Jr. (457 SCRA 203)

Philippine Savings Bank vs. Spouses Mañalac
G.R. No. 145441. April 26, 2005.
Facts:
This case involves a dispute between Philippine Savings Bank (PSBank) and spouses
Rodolfo and Rosita Mañalac. The Mañalacs obtained a loan from PSBank and executed a
real estate mortgage over several properties as security. Due to their failure to pay the loan
installments, PSBank filed for extrajudicial foreclosure of the properties and eventually
became the highest bidder in the foreclosure sale. The Mañalacs attempted to repurchase
the foreclosed properties by tendering a check to PSBank, but the bank refused to release
the properties. The Mañalacs then filed a case for damages against PSBank.
Issue:
1) whether the consolidation of Civil Case No. 53967 with LRC Case No. R-3951 is proper;
2) whether novation occurred when PSBank applied the tendered check to the loan
accounts of the Mañalacs and the Galicias;
3) whether the Mañalacs have the right to repurchase the foreclosed property; and
4) whether the Mañalacs are entitled to moral damages.
Ruling:
The court ruled that the consolidation of the two cases is proper in order to promote a
more expeditious and less expensive resolution of the controversy. It also held that
novation did not occur because there was no clear and unequivocal intent by the parties
to replace the old mortgage contract with a new obligation. The court further ruled that the
Mañalacs do not have the right to repurchase the foreclosed property as the mortgage
contract was effectively cancelled by the foreclosure and consolidation of ownership.
However, the court awarded moral damages to Rosita Mañalac for the bank's unjustified
refusal to make a definite commitment while profiting from the proceeds of the check.
Ratio:
The court's decision is based on the principles of consolidation of cases, the requirements
for novation, and the rights of the parties in a foreclosure situation. The court considered
the actions and intentions of the parties in determining the outcome of the case. The
consolidation of the two cases was deemed proper to ensure a more efficient and cost-
effective resolution of the dispute. Novation was not found to have occurred because
there was no clear intention to replace the old mortgage contract with a new obligation.
The court also held that the Mañalacs do not have the right to repurchase the foreclosed
property as the foreclosure and consolidation of ownership effectively cancelled the
mortgage contract. However, the court awarded moral damages to Rosita Mañalac due to
the bank's unjustified refusal to make a definite commitment while benefiting from the
proceeds of the check.
Odiamar vs. Valencia, GR 213582, June 28, 2016

Odiamar vs. Valencia
G.R. No. 213582. June 28, 2016.
Facts:
The case of Odiamar v. Valencia involves a dispute over a debt amounting to
P2,100,000.00. The respondent, Linda Odiamar Valencia, filed a complaint against the
petitioner, Nympha S. Odiamar, alleging that the latter owed her the said amount. The
petitioner claimed that it was her deceased parents who owed the respondent money and
that the claim should be filed in the proceedings for the settlement of their estates. The
Regional Trial Court (RTC) ruled in favor of the respondent and ordered the petitioner to
pay the amount of P1,710,049.00 plus interest, attorney's fees, litigation expenses, and
costs of suit. The petitioner appealed to the Court of Appeals (CA), which affirmed the
RTC's decision. Dissatisfied, the petitioner filed a petition for review on certiorari before
the Supreme Court.
Issue:
The main issue before the Supreme Court was whether or not the petitioner should be held
liable to the respondent for the entire debt of P2,100,000.00.
Ruling:
The Supreme Court held that the petitioner's liability to the respondent is well-
established, as the petitioner herself admitted to borrowing money from the respondent.
However, the Supreme Court clarified that the petitioner's debt amounted to only
P1,400,000.00, as opposed to the claimed P2,100,000.00. The Supreme Court also ruled
that there was no novation by substitution of debtor, as there was no express release of
the estates of the petitioner's deceased parents from their obligation. Furthermore, the
Supreme Court held that no interest was due on the loaned amount, as there was no
written agreement for interest. Therefore, the Supreme Court ordered the petitioner to pay
the remaining balance of her principal debt to the respondent, amounting to
P1,010,049.00.
Ratio:
The Supreme Court based its decision on the admission of the petitioner that she
borrowed money from the respondent. This admission established the petitioner's liability
for the debt. However, the Supreme Court clarified that the amount owed by the petitioner
was only P1,400,000.00, as opposed to the claimed P2,100,000.00. The court also
emphasized that there was no novation by substitution of debtor, as there was no express
release of the estates of the petitioner's deceased parents from their obligation. Novation
requires the consent of all parties involved, and in this case, there was no evidence of such
consent. Additionally, the Supreme Court ruled that no interest was due on the loaned
amount, as there was no written agreement for interest. Interest can only be imposed if
there is a clear agreement between the parties. Therefore, the Supreme Court ordered the
petitioner to pay the remaining balance of her principal debt to the respondent, amounting
to P1,010,049.00.
Ever Electrical Manufacturing, Inc. vs. Philippine Bank of Communications,

GR 187822-23, August 3, 2016
Ever Electrical Manufacturing, Inc. vs. Philippine Bank of Communications
G.R. Nos. 187822-23. August 3, 2016.
Facts:
The case involves a dispute between Ever Electrical Manufacturing, Inc. (Ever) and the
Philippine Bank of Communications (PBCom). Ever had obtained a loan from PBCom and
had entered into a compromise agreement with PBCom. Under the compromise
agreement, Ever's president, Vicente Go, assumed full liability for the loan. However,
Vicente failed to make the necessary payments as stipulated in the compromise
agreement. As a result, PBCom filed a motion for execution with the Regional Trial Court
(RTC), seeking to enforce the compromise agreement. The RTC granted the motion and
issued a writ of execution. Subsequently, the properties mortgaged by Ever were sold at a
public auction, with PBCom being the highest bidder.
Issue:
1. Whether the writ of execution and auction sale are valid.
2. Whether there was novation of the original loan agreement.
Ruling:
The court ruled in favor of PBCom on both issues.
Ratio:
Regarding the validity of the writ of execution and auction sale, the Court of Appeals (CA)
dismissed the petitions filed by Ever and Vicente, affirming that Vicente had indeed failed
to comply with the compromise agreement. The CA also found no merit in the argument
that the writ of execution was directed at the wrong party. The Supreme Court upheld the
CA's ruling, stating that there was no novation of the original loan agreement. The Court
emphasized that PBCom had the right to collect from Ever under the terms of the original
loan agreement. Therefore, the writ of execution and auction sale were deemed valid.
In reaching its decision, the Court considered the fact that Vicente, as Ever's president,
had assumed full liability for the loan in the compromise agreement. The Court noted that
Vicente's failure to make the necessary payments constituted a breach of the compromise
agreement. As a result, PBCom was entitled to enforce the compromise agreement
through the writ of execution and auction sale.
Furthermore, the Court rejected the argument of novation raised by Ever and Vicente. The
Court explained that novation requires the substitution or alteration of an obligation by a
subsequent agreement. In this case, there was no evidence of any subsequent agreement
that would have novated the original loan agreement. The Court emphasized that the
compromise agreement did not extinguish the original loan agreement, but rather
modified the terms of payment. Therefore, PBCom retained its right to collect from Ever
under the original loan agreement.
In conclusion, the Supreme Court affirmed the validity of the writ of execution, levy on
execution, and auction sale. The Court held that PBCom had the right to collect from Ever
under the terms of the original loan agreement, and that there was no novation of the
original loan agreement.
Figuera vs. Ang, GR 204264, June 29, 2016

Figuera vs. Ang
G.R. No. 204264. June 29, 2016.
Facts:
The case involves a dispute between Jennefer Figuera (Figuera) and Maria Remedios Ang
(Ang) over a deed of assignment of business rights. Ang transferred her business rights
over her single proprietorship business, Enhance Immigration and Documentation
Consultants (EIDC), to Figuera for a consideration of P150,000. As part of the agreement,
Ang was supposed to pay the utility bills for EIDC up to December 2004. However, Figuera
paid the utility bills without Ang's consent. Figuera then tendered a payment of P42,096.79
to Ang, deducting the amount paid for the utility bills from the consideration. Ang refused
to accept the payment, leading Figuera to file a complaint for specific performance before
the Regional Trial Court (RTC). The RTC ruled in Ang's favor, stating that Figuera must
tender the full amount of P150,000. Figuera appealed to the Court of Appeals (CA), arguing
that legal subrogation and compensation had taken place. The CA affirmed the RTC's
ruling, stating that Figuera's payment was insufficient and that she failed to prove Ang's
consent to the payment. Figuera filed a petition for review on certiorari before the Supreme
Court.
Issue:
The main issue in this case is whether there was a valid tender of payment and
consignation.
Ruling:
The Supreme Court granted the petition and reversed the CA's ruling. The Court held that
legal subrogation and compensation had taken place, extinguishing Figuera's obligation to
Ang to the extent of the amount paid for the utility bills. The Court also found that Figuera's
tender of payment was valid and ordered Ang to accept the remaining amount of Figuera's
payment.
Ratio:
The Court ruled that legal subrogation and compensation had taken place in this case.
Legal subrogation occurs when a third person, not interested in the obligation, pays with
the express or tacit approval of the debtor. In this case, Figuera paid the utility bills without
Ang's consent, but the Court found that Ang had impliedly consented to the payment by
not objecting to it. As a result, Figuera was subrogated to the rights of the creditor (utility
company) and was entitled to be reimbursed for the amount paid.
Furthermore, the Court held that compensation had also taken place. Compensation is a
mode of extinguishing obligations where two persons, in their own right, are creditors and
debtors of each other. In this case, Figuera had a claim against Ang for the amount paid for
the utility bills, while Ang had a claim against Figuera for the remaining balance of the
consideration. The Court found that these two claims were compensable, and therefore,
Figuera's obligation to Ang was extinguished to the extent of the amount paid for the utility
bills.
Regarding the issue of tender of payment, the Court held that Figuera's tender of payment
was valid. Tender of payment is the act of offering to the creditor what is due, with the
intent of extinguishing the obligation. Figuera tendered a payment of P42,096.79 to Ang,
deducting the amount paid for the utility bills from the consideration. The Court found that
this tender of payment was valid because Figuera had already been legally subrogated to
the rights of the creditor (utility company) and had a valid claim against Ang for the
remaining balance of the consideration.
In conclusion, the Supreme Court ruled that legal subrogation and compensation had
taken place, extinguishing Figuera's obligation to Ang to the extent of the amount paid for
the utility bills. The Court also found that Figuera's tender of payment was valid and
ordered Ang to accept the remaining amount of Figuera's payment.
Liam vs. United Coconut Planters Bank, GR 194664, June 15, 2016
Liam vs. United Coconut Planters Bank
G.R. No. 194664. June 15, 2016.
Facts:
The case involves a complaint for specific performance filed by Florita Liam against United
Coconut Planters Bank (UCPB) after experiencing delays and issues with her
condominium unit purchase. Liam entered into a contract to sell with developer
Primetown Property Group, Inc. (PPGI) for the purchase of a condominium unit in Makati
City. PPGI obtained a loan from UCPB to finance the construction of the condominium
project and partially settled the loan by transferring its right to collect receivables from
condominium buyers, including Liam, to UCPB. Liam made payments to UCPB but later
requested for deferment of her payments due to the delayed delivery of the unit. She also
requested for a refund of her payments.
Issue:
The main issue raised in the case is whether UCPB can be held liable for the delays and
issues with the condominium unit purchase, and whether Liam is entitled to specific
performance or a refund of her payments.
Ruling:
The Court ruled in favor of UCPB and denied Liam's petition for review. The Court affirmed
the decision of the Court of Appeals (CA) that UCPB was wrongly impleaded in the
complaint and that the lack of an appeal bond did not render the appealed judgment final
and executory. The Court held that the transaction between UCPB and PPGI was an
assignment of credit, not subrogation, and UCPB should not be held liable for the
obligations and liabilities of PPGI under the contract to sell with Liam.
Ratio:
The Court based its decision on the fact that UCPB was merely an assignee of PPGI's
receivables and should not be held liable for PPGI's breach of its obligation to Liam. The
Court clarified that the transaction between UCPB and PPGI was an assignment of credit,
which means that UCPB only acquired the right to collect receivables from condominium
buyers, including Liam. UCPB did not assume the obligations and liabilities of PPGI under
the contract to sell. Therefore, UCPB cannot be held liable for the delays and issues with
the condominium unit purchase.
The Court also addressed Liam's argument that the Court has the power to review the facts
and evidence in the case. The Court explained that in a petition for review, the Court's
power is limited to reviewing questions of law. The Court cannot re-evaluate the factual
findings of the lower courts unless there is a clear showing of grave abuse of discretion. In
this case, the Court found no grave abuse of discretion on the part of the CA in ruling that
UCPB was wrongly impleaded in the complaint.
Furthermore, the Court clarified that the lack of an appeal bond did not affect the finality
of the appealed judgment. The Court explained that the appeal bond is only necessary to
stay the execution of the judgment pending appeal. In this case, the lack of an appeal bond
did not prevent the Court from reviewing the merits of the case and affirming the CA's
ruling that UCPB should not be held liable for the obligations and liabilities of PPGI under
the contract to sell with Liam.
SM Systems Corporation vs. Camerino, et al., GR 178591, March 29, 2017

SM Systems Corp. vs. Camerino
G.R. No. 178591. July 30, 2018.
Facts:
The case of SM Systems Corp. v. Camerino involves a dispute over the validity of an
Irrevocable Power of Attorney (IPA) and a compromise agreement between Springsun
Management Systems Corporation (Springsun) and the farmers. Victoria Homes, Inc.
owned three lots in Muntinlupa, Rizal, which were cultivated by the respondents, who
were farmers-tenants. Without notifying the farmers, Victoria Homes sold the lots to
Springsun, who subsequently mortgaged them to Banco Filipino Savings and Mortgage
Bank. When Springsun failed to pay its loans, the lots were foreclosed and eventually
redeemed by Springsun. The farmers filed a complaint for redemption of the lots, and the
RTC ruled in their favor. Springsun appealed to the CA, but the appellate court affirmed the
RTC decision. Springsun then appealed to the Supreme Court, but the decision became
final and executory. Meanwhile, the farmers executed an IPA in favor of Mariano Nocom,
authorizing him to pay the redemption price to Springsun. Oscar Camerino filed a petition
to revoke the power of attorney, and the RTC issued a summary judgment revoking the IPA.
The CA affirmed the revocation, but the Supreme Court reversed the decision and
remanded the case to the RTC for proper proceedings. While the case for revocation of the
IPA was pending, the farmers deposited the redemption amount with the RTC and the lots
were transferred to their names. Springsun and the farmers (except Oscar) then entered
into a compromise agreement, wherein the farmers agreed to receive a compromise
settlement of P300,000 each. Springsun filed a motion to hold execution in abeyance, but
the RTC denied the motion.
Issue:
1. Whether the Irrevocable Power of Attorney (IPA) executed by the farmers in favor of
Mariano Nocom is valid and binding.
2. Whether the compromise agreement between Springsun and the farmers is valid.
Ruling:
The Supreme Court ruled in favor of Nocom and the respondents. The court held that the
IPA executed by the farmers in favor of Nocom remains valid and binding unless annulled
by the courts. The dismissal of the action for revocation of the IPA meant that there was no
longer any controversy surrounding its validity. Therefore, Nocom validly redeemed the
lots from Springsun. The court also declared the compromise agreement between
Springsun and the farmers null and void. The Supreme Court upheld the denial of
Springsun's motion to hold execution in abeyance.
Ratio:
1. The dismissal of the case for revocation of the IPA rendered the IPA valid and
binding. The court emphasized that unless annulled by the courts, a power of
attorney remains valid. The dismissal of the action for revocation meant that there
was no longer any controversy surrounding the validity of the IPA. Therefore,
Nocom, as the attorney-in-fact, validly redeemed the lots from Springsun.
2. The compromise agreement between Springsun and the farmers was declared null
and void. The court found that the amount offered in the compromise agreement,
P300,000 each for the farmers (except Oscar), was unconscionable. The court held
that for a compromise agreement to be valid, it must be fair and reasonable. In this
case, the amount offered was deemed unconscionable and therefore, the
compromise agreement was nullified.
3. The Supreme Court upheld the denial of Springsun's motion to hold execution in
abeyance. The court found that the CA correctly upheld the denial, as there was no
legal basis to hold the execution in abeyance.
In conclusion, the Supreme Court ruled that the dismissal of the case for revocation of the
IPA rendered the IPA valid and binding, resulting in the nullification of the compromise
agreement between Springsun and the farmers. The court upheld the denial of Springsun's
motion to hold execution in abeyance.
CONTRACTS - Concept of Contracts (Art. 1305; 1307)

Sps, Pascual vs. Ramos, (G.R No.144712, July 4, 2002)
Sps. Pascual vs. Ramos
G.R. No. 144712. July 4, 2002.
Facts:
This case involves a petition for review on certiorari filed by Spouses Silvestre and Celia
Pascual (the Pascuals) against Rodrigo V. Ramos. The case originated from a petition for
consolidation of title or ownership filed by Ramos against the Pascuals, alleging that they
executed a Deed of Absolute Sale with Right to Repurchase over two parcels of land and
improvements located in Bulacan, Bulacan. The Pascuals admitted signing the deed but
claimed that it was actually a real estate mortgage. They also argued that there was no
agreement limiting the period to exercise the right to repurchase and that they had
overpaid Ramos.
Issue:
The main issue raised in the case is whether the Pascuals are liable for 5% interest per
month as ordered by the trial court.
Ruling:
The Supreme Court held that parties are bound by the stipulations in the contracts they
voluntarily enter into. It ruled that the interest rate of 7% per month, as agreed upon by the
parties, is binding. The Court also noted that there was no evidence of fraud or undue
influence exerted by Ramos on the Pascuals. Therefore, the petition was denied, and the
decision of the Court of Appeals was affirmed.
Ratio:
The Court based its decision on the principle that parties are bound by the terms and
conditions they voluntarily agree to in a contract. In this case, the Pascuals admitted
signing the Deed of Absolute Sale with Right to Repurchase, which contained the
stipulation of a 7% interest rate per month. Since there was no evidence of fraud or undue
influence exerted by Ramos on the Pascuals, the Court upheld the validity and
enforceability of the contract. The Court emphasized that it is not its role to interfere with
the terms of a contract freely entered into by the parties. Therefore, the Pascuals are liable
for the 7% interest rate per month as agreed upon in the contract. The Court also noted
that the trial court's finding that the transaction was a loan secured by a mortgage and that
the Pascuals had overpaid the loan was not relevant to the issue of the interest rate. The
Court's decision is in line with the principle of freedom of contract and upholds the
sanctity of agreements between parties.
Cuizon vs. C.A, (260 SCRA 645)

Cuizon y Montalban vs. Court of Appeals
G.R. No. 102096. August 22, 1996.
Facts:
The case involves a dispute between petitioner Carmela Cuizon and respondents Gerardo
and Maria Paray over the conveyance of land and the obligations of the parties involved.
Cuizon entered into an agreement with the Parays, wherein she would secure loans using
their land as collateral. The agreement stated that for every loan release, the Parays would
convey a portion of the land to Cuizon at an agreed price of P170.00 per square meter.
Cuizon paid a total of P198,000.00 from the loan proceeds to the Parays, deducting the
purchase price of one lot. However, when Cuizon demanded the conveyance of another
lot, the Parays refused and demanded an accounting of the loans and collaterals. Cuizon
filed a complaint for specific performance, seeking the conveyance of the remaining lot
and reimbursement of taxes paid. The trial court ruled in favor of Cuizon, ordering the
Parays to convey the lot and reimburse the taxes. The Parays appealed to the Court of
Appeals, which annulled the trial court's decision and ordered the Parays to execute a
deed of sale for the remaining lot. Cuizon filed a petition for certiorari with the Supreme
Court.
Issue:
The main issue in this case is the interpretation of the agreement between the parties and
the determination of the true intention of the contracting parties. Cuizon argues that the
agreement was for her to secure loans using the Parays' land as collateral, with the loan
proceeds to be shared by them and treated as the purchase price of the lots. The Parays,
on the other hand, claim that Cuizon agreed to buy the lots for a total price of P699,890.00,
to be paid using the loan proceeds.
Ruling:
The Supreme Court ruled in favor of Cuizon, affirming the trial court's decision. The Court
held that the Deed of Sale, which stated a purchase price of P25,120.00 for one lot, was
the embodiment of the parties' true agreement. The Deed of Agreement, which stated a
higher purchase price, was found to be a simulated agreement and not intended to
produce legal effects. The Court also held that the fair market value of the remaining lot
should not be used as the price, as it was not in accordance with the parties' agreement.
Instead, the agreed price of P170.00 per square meter should be used. The Court ordered
the Parays to execute a deed of sale for the remaining lot and reimburse Cuizon for the
taxes paid. The Court also denied Cuizon's claim for reimbursement of the amount used
in building the house on the lot, as she was the owner of the lot and had voluntarily decided
to build the house.
Ratio:
The Supreme Court based its decision on the interpretation of the agreement between the
parties. It held that the Deed of Sale, which stated a purchase price of P25,120.00 for one
lot, was the true agreement of the parties. The Court found that the Deed of Agreement,
which stated a higher purchase price, was a simulated agreement and not intended to
produce legal effects. The Court emphasized that the intention of the parties should
prevail in interpreting the agreement.
Furthermore, the Court held that the fair market value of the remaining lot should not be
used as the price, as it was not in accordance with the parties' agreement. Instead, the
agreed price of P170.00 per square meter should be used. This was based on the clear
terms of the agreement between the parties.
In terms of Cuizon's claim for reimbursement of the amount used in building the house on
the lot, the Court denied it. The Court reasoned that Cuizon was the owner of the lot and
had voluntarily decided to build the house. Therefore, she could not claim reimbursement
for the expenses incurred in building the house.
Overall, the Supreme Court affirmed the trial court's decision, ordering the Parays to
execute a deed of sale for the remaining lot and reimburse Cuizon for the taxes paid.
CONTRACTS - Principles of Contracts

a. Liberty or Autonomy of Contracts (1306; 1409; 1376;)
Castro vs. Court of Appeals (99 SCRA 722)
Castro vs. Court of Appeals
G.R. No. L-44727. September 11, 1980.
Facts:
The case involves a group of agricultural workers, namely Benigno Castro, Fortunato
Lagman, Ruperto Garamonte, Arsenio Torres, and Domingo Manalo, who claim to be
tenants on landholdings owned by Candido Baron. Garamonte, Manalo, and Torres started
working on the landholdings in 1963, while Castro and Lagman were employed in 1969
and 1970, respectively. In response to a case involving their alleged tenancy relationship
with Baron, the petitioners filed a complaint to nullify their contracts for hired services and
affirm the existence of a tenancy relationship. The trial court dismissed their complaint
and declared them as mere hired laborers of Baron. The Court of Appeals affirmed the trial
court's decision, prompting the petitioners to file a petition for review on certiorari with the
Supreme Court.
Issue:
The main issues raised in the case are: (1) whether the petitioners are tenants or mere
hired laborers, and (2) whether the Court of Appeals had jurisdiction over the appeal or if
the case should have been referred to the Ministry of Agrarian Reform.
Ruling:
The Supreme Court dismissed the petition and affirmed the decision of the Court of
Appeals. The court ruled that the petitioners were mere hired laborers based on the
evidence presented, including the contracts they signed with Baron. The court held that
the contracts were voluntarily and intelligently entered into and that the petitioners were
estopped from impugning their validity. The court also ruled that the case did not fall under
the referral provisions of Presidential Decrees Nos. 316 and 946, as it did not involve
tenants. The court further held that the decrees could not be applied retroactively and that
they only applied to bona fide tenants.
Ratio:
The court based its decision on the evidence presented, particularly the contracts signed
by the petitioners. The court found that the contracts were voluntarily and intelligently
entered into, indicating that the petitioners were aware that they were being hired as
laborers and not as tenants. As such, the court held that the petitioners were estopped
from impugning the validity of the contracts.
The court also considered the provisions of Presidential Decrees Nos. 316 and 946, which
provide for the referral of cases involving tenancy disputes to the Ministry of Agrarian
Reform. However, the court ruled that these provisions did not apply to the present case
as it did not involve tenants. The court emphasized that the decrees could not be applied
retroactively and that they only applied to bona fide tenants.
In conclusion, the Supreme Court found that the petitioners were mere hired laborers and
not tenants. The court upheld the validity of their contracts for hired services and
dismissed their claim for recognition as tenants. The court also affirmed the jurisdiction
of the Court of Appeals over the appeal and held that the case did not fall under the referral
provisions of Presidential Decrees Nos. 316 and 946.
Banco Filipino Savings and Mortgage Bank vs. Navarro (G.R. No .L-46591, July
28, 1987)
Banco Filipino Savings and Mortgage Bank vs. Navarro
G.R. No. L-46591. July 28, 1987.
Facts:
The case of Banco Filipino Savings and Mortgage Bank v. Navarro involves a dispute over
the validity of an Escalation Clause in a loan agreement. The petitioner, Banco Filipino,
granted a loan to the respondent, Florante del Valle, which was secured by a real estate
mortgage. The loan had an initial interest rate of 12% and a term of 15 years. However,
Banco Filipino invoked an Escalation Clause in the loan agreement, which stated that the
interest rate could be increased if a law was enacted that increased the lawful rate of
interest for that type of loan. The Escalation Clause was based on Circular No. 494 issued
by the Central Bank on January 2, 1976, which set the maximum interest rate for loans with
a maturity of more than 730 days at 19% per annum.
Issue:
The main issue in this case is whether Banco Filipino can increase the interest rate on the
loan based on the Escalation Clause.
Ruling:
The Court ruled in favor of the respondent, Florante del Valle. The Court held that Banco
Filipino could not rely on the Escalation Clause to increase the interest rate because
Circular No. 494 was not a law. Although the circular had the force and effect of law, it was
an administrative regulation and not a law itself. The Court emphasized that the Escalation
Clause specifically referred to an increase in interest rate made by "law" alone.
Ratio:
The Court based its decision on the distinction between a law and an administrative
regulation. The Monetary Board guidelines, which were quoted in a letter from the Central
Bank to the borrower, clearly distinguished between a law and a Central Bank regulation.
The guidelines stated that for a loan's interest to be subject to the increases provided in
Circular No. 494, there must be an Escalation Clause allowing the increase "in the event
that any law or Central Bank regulation is promulgated increasing the maximum interest
rate for loans." This distinction between a law and an administrative regulation was also
recognized in other provisions of the law.
The Court also clarified that escalation clauses, like the one in question, can be held valid.
However, in order for such a clause to be valid, it must specifically provide for an increase
in interest if increased by law or by the Monetary Board, and it must also include a
provision for reduction of the stipulated interest if the applicable maximum rate of interest
is reduced by law or by the Monetary Board.
In conclusion, the Court ruled that Banco Filipino could not increase the interest rate on
the loan based on the Escalation Clause because Circular No. 494 was not the "law"
contemplated by the parties. The Court also held that the circular should not be applied
to loans secured by registered real estate in the absence of any specific indication and in
contravention of the policy behind the law. The Court made the temporary restraining
orders previously issued in the case permanent if the escalation clauses were identical to
the one in question and the loans had applied the increased rate of interest authorized by
Circular No. 494.
Ferrazzini vs. Gsell, (34 Phil. 697)

Ferrazzini vs. Gsell
G.R. No. 10712. August 10, 1916.
Facts:
The case of Ferrazzini v. Gsell involves a dispute between Anselmo Ferrazzini, the plaintiff-
appellee, and Carlos Gsell, the defendant-appellant. Ferrazzini was employed by Gsell in
his industrial enterprises in Manila. However, Gsell discharged Ferrazzini without giving
him the required six months' written notice as stated in their contract. Gsell claimed that
the discharge was lawful due to Ferrazzini's absence, unfaithfulness, and disobedience of
orders. Ferrazzini filed a lawsuit seeking damages for wrongful discharge. The trial court
ruled in favor of Ferrazzini, finding that his discharge was not justified. Gsell appealed the
decision, arguing that the trial court erred in its findings and in not considering his
counterclaim.
Issue:
The main issue in the case is whether Ferrazzini's discharge was justified. Another issue
raised in the case is whether the trial court erred in not considering Gsell's counterclaim.
Ruling:
The court ruled that Ferrazzini's discharge was justified. The court also found that the trial
court erred in not considering Gsell's counterclaim. The court declared the contract
provision prohibiting Ferrazzini from engaging in any business in the Philippines without
written permission as void.
Ratio:
The court held that Gsell was authorized to consider Ferrazzini's whole course of conduct
in determining whether to terminate his employment. The court found that Ferrazzini
violated the defendant's orders by leaving the factory during working hours to drink and by
creating discontentment among the employees. Therefore, the court concluded that
Ferrazzini's discharge was justified.
Regarding the issue of the trial court's failure to consider Gsell's counterclaim, the court
found that the trial court made a manifest error in disregarding Gsell's verbal petition to
amend his answer and accept his counterclaim. The court stated that the counterclaim
should have been considered and decided upon its merits.
The court also addressed the validity of a contract provision that prohibited Ferrazzini from
engaging in any business in the Philippines without written permission from Gsell. The
court ruled that this provision was void as it constituted an undue and unreasonable
restraint of trade and was against public policy. The court explained that contracts in
restraint of trade are unenforceable because they are repugnant to the established public
policy. The court cited previous cases that held similar contracts to be unenforceable. The
court concluded that the provision in question went beyond what was necessary for the
protection of Gsell's interests and would force Ferrazzini to leave the Philippines to find
employment elsewhere.
In summary, the court ruled that Ferrazzini's discharge was justified due to his violation of
company rules. The court also declared the contract provision prohibiting Ferrazzini from
engaging in any business in the Philippines without written permission as void. The court
found that the trial court erred in not considering Gsell's counterclaim and held that the
counterclaim should have been decided upon its merits.
Del Castillo vs. Richmond, (45 Phil.697)

Del Castillo vs. Richmond
G.R. No. 21127. February 9, 1924.
Facts:
The case of Del Castillo v. Richmond involves a contract between Alfonso del Castillo and
Shannon Richmond. The contract was executed on July 20, 1915, and it stipulates that del
Castillo will work as a pharmacist in Richmond's drugstore, known as the Botica
Americana, located in the district of Legaspi, Albay. In exchange for his services, del
Castillo will receive a monthly salary of P125. The contract also includes a provision
prohibiting del Castillo from opening or having any interest in any other drugstore within a
four-mile radius of Legaspi, while Richmond or his heirs may own or have an interest in
other drugstores within the districts of Legaspi, Albay, and Daraga. Additionally, the
contract prohibits del Castillo from divulging or using any of Richmond's business secrets
or private formulas.
Del Castillo filed a lawsuit in the Court of First Instance of Albay on October 18, 1922,
seeking to have the contract declared null and void. He argued that the restrictions placed
upon him were illegal, unreasonable, and contrary to public policy. Richmond, on the
other hand, argued that the restrictions were necessary to protect his business interests,
as del Castillo had gained knowledge of trade secrets and established relationships with
customers during his employment.
Issue:
The main issue raised in the case is whether the restrictions placed upon del Castillo in
the contract are illegal, unreasonable, and contrary to public policy.
Ruling:
The Supreme Court upheld the lower court's decision, affirming the validity of the
contract.
Ratio:
The court cited the general rule that contracts restricting trade are valid as long as there is
a limitation on either time or place. It emphasized that the public welfare must always be
considered, and if the restraint on one party is not greater than the protection required by
the other party, the contract will be upheld. The court stated that the test for determining
the reasonableness of a contract is whether it is reasonably necessary to protect the
interests of the parties involved. In this case, considering the nature of Richmond's
business and the limitations placed on del Castillo, the court found the restrictions to be
legal, reasonable, and not contrary to public policy.
Therefore, the Supreme Court affirmed the lower court's judgment, declaring the contract
between del Castillo and Richmond to be valid and enforceable.
Daywalt vs. Agustinos Recoletos, (39 Phil. 587)

Daywalt vs. La Corporacion de los Padres Agustinos Recoletos
G.R. No. 13505. February 4, 1919.
Facts:
The case of Daywalt v. La Corporacion de los Padres Agustinos Recoletos involves a
contract dispute over a tract of land in the Province of Mindoro, Philippines. In 1902,
Teodorica Endencia entered into a contract to sell the land to Geo. W. Daywalt, with the
condition that a deed would be executed once the title to the land was perfected. A decree
recognizing Teodorica as the owner was entered in 1906, but the Torrens certificate was
not issued until later. In 1908, the parties entered into a new contract, stating that
Teodorica would deliver the land to Daywalt upon receiving the Torrens title. However, it
was later discovered that the area of the land was larger than stated in the contract. This
led to litigation, and Daywalt eventually obtained a decree for specific performance,
ordering Teodorica to convey the entire tract of land to him.
During this time, the defendant corporation, La Corporacion de los Padres Agustinos
Recoletos, owned adjacent land and had been grazing their cattle on Teodorica's land with
her permission. Daywalt sought damages from the corporation for the use and occupation
of the land during this period. The trial court found the corporation liable for damages and
awarded Daywalt P2,497. Daywalt appealed, arguing that the damages should be higher.
Issue:
The main issue in this case is whether the damages awarded by the trial court for the use
and occupation of the land by the defendant corporation are sufficient.
Ruling:
The Supreme Court affirmed the trial court's decision, stating that the damages awarded
were sufficient to compensate Daywalt for the use and occupation of the land.
Ratio:
The court determined that the rental value of the land for grazing purposes was 50
centavos per hectare per annum, based on evidence presented. This amount was
considered reasonable and sufficient to compensate Daywalt for the use and occupation
of the land by the defendant corporation. The court also rejected Daywalt's claim for
damages resulting from the corporation's interference in the contract between him and
Teodorica. The court held that a stranger to a contract cannot be held more liable for
damages than the party directly involved in the contract. In this case, the defendant
corporation was not a party to the contract between Daywalt and Teodorica, and therefore
could not be held liable for any damages resulting from the interference. Furthermore, the
court found that the damages sought by Daywalt for his inability to comply with a separate
contract for the sale of the land were too remote and speculative to be recoverable. The
court reasoned that Daywalt's inability to fulfill the separate contract was not directly
caused by the defendant corporation's actions, and therefore the damages sought were
not recoverable.
In summary, the court held that the defendant corporation was liable for damages for the
use and occupation of the land, but not for interfering with the contract between Daywalt
and Teodorica. The damages awarded were based on the rental value of the land for
grazing purposes. The court also determined that the damages sought by Daywalt for his
inability to fulfill a separate contract were not recoverable.
Cui vs. Arellano University, (112 Phil. 135)

Cui vs. Arellano University
G.R. No. L-15127. May 30, 1961.
Facts:
The case of Cui v. Arellano University involves a law student named Emeterio Cui and his
former university, Arellano University. The case was decided by the Supreme Court of the
Philippines on May 30, 1961. Emeterio Cui enrolled in the preparatory law course at
Arellano University before continuing his law studies there. During his time at the
university, he received scholarship grants for his scholastic merit, and his tuition fees were
refunded to him after each semester. However, during his last semester of law school, Cui
failed to pay his tuition fees because his uncle, who was the dean of the College of Law at
Arellano University, had left the university and accepted a position at Abad Santos
University. As a result, Cui transferred to Abad Santos University for his last semester and
graduated from there. After graduating, Cui applied to take the bar examination and
needed his transcripts from Arellano University. However, the university refused to release
his transcripts unless he paid back the refunded tuition fees totaling P1,033.87. Cui paid
the amount under protest so that he could take the bar examination, but he later filed a
lawsuit seeking to recover the amount he paid, as well as other damages and expenses.
Issue:
The main issue in the case was whether the provision in the contract between Cui and
Arellano University, which required Cui to refund his scholarship grants if he transferred to
another school, was valid.
Ruling:
The Supreme Court held that the provision in the contract requiring Cui to refund his
scholarship grants was null and void. The court reversed the decision of the lower court
and ordered Arellano University to pay Cui the amount of P1,033.87, with interest, as well
as the costs of the case. The court also dismissed the university's counterclaim for
damages and attorney's fees.
Ratio:
The court reasoned that the provision in the contract requiring Cui to refund his
scholarship grants was contrary to public policy and therefore null and void. Scholarships
are awarded in recognition of merit and to help gifted students, not to keep outstanding
students in school to bolster its prestige and increase its business potential. The court
cited a memorandum from the Director of Private Schools, which stated that scholarships
should not be conditional on students continuing in the same school, as support for its
decision. The court concluded that regardless of the validity of the memorandum, the
stipulation in the contract was against public policy and should not be upheld. Therefore,
Arellano University was ordered to pay Cui the amount he paid under protest, as well as
other costs.
Capitol Medical Center vs. CA G. R. No. 82499, October 13, 1989

Capitol Medical Center, Inc. vs. Court of Appeals
G.R. No. 82499. October 13, 1989.
Facts:
The case of Capitol Medical Center, Inc. v. Court of Appeals involves a class suit filed by
students against a medical college demanding its reopening after the school
administration decided to close it due to disruptions caused by faculty and students. In
the first semester of the school year 1987-1988, the Capitol Medical Center College
(CMCC) had 900 students enrolled in various courses. However, halfway through the
semester, the college faculty demanded vacation and sick leave privileges similar to those
enjoyed by hospital personnel. The school administration and faculty were unable to reach
an agreement, and the situation escalated into open hostility. The school administration,
fearing mass action by the students, decided to close the college at the end of the
semester. The decision to close was duly reported to the Secretary of Education, Culture
and Sports.
Issue:
The main issue in the case is whether the students have a legal right to reenroll and
whether the school has an obligation to readmit them.
Ruling:
The Supreme Court ruled that the students had no legal right to reenroll and the school
had no obligation to readmit them. The Court held that the trial court had gravely abused
its discretion in ordering the reopening of the school.
Ratio:
The Court held that the students did not have a clear legal right to reenroll, as their
contracts with the school were terminated at the end of the first semester. The Court
emphasized that the school had the right to close when the entire faculty and student
population boycotted their classes. It further stated that there was no law or rule obligating
a school to remain open until its students completed their courses. The Court concluded
that the trial court's order was arbitrary and unfair to the school.
Sy Suan vs. Regala, (105 Phil.1024)

Sy Suan vs. Regala
G.R. No. L-9506. June 30, 1959.
Facts:
The case of Sy Suan v. Regala involves a verbal contract between Sy Suan, Price
Incorporated, and Regala. On April 11, 1953, Sy Suan, who was the president and general
manager of Price Incorporated, executed a special power of attorney in favor of Regala.
This power of attorney authorized Regala to prosecute import license applications on
behalf of Sy Suan and Price Incorporated. Regala followed up and prosecuted three
pending applications for industrial starch import licenses with the Import Control Office.
On May 19, 1953, the Import Control Office issued three licenses as a result of Regala's
efforts. Prior to the execution of the power of attorney, Sy Suan and Regala verbally agreed
that Regala would receive a 10% commission based on the total value of the approved
licenses. Sy Suan and Price Incorporated paid Regala P3,000.00 as partial payment for his
services upon the release of the licenses.
Issue:
The main issue in this appeal is the validity of the verbal contract between Sy Suan, Price
Incorporated, and Regala. The petitioners argue that the contract is against public policy
as it increases the cost of production of candies, which they manufacture. They claim that
this increase will be passed on to the consuming public, thus frustrating the government's
goal of lightening the burden of the people and making essential consumer goods more
affordable. The petitioners also argue that such contracts serve as a deterrent to the
creation of new industries and can influence and corrupt the judgment of government
agencies processing license applications.
Ruling:
The Supreme Court ruled in favor of the petitioners and declared the contract null and
void. The court held that contracts stipulating a certain percentage to intermediaries in
connection with the issuance of licenses or quota allocations are illegal and against public
policy. The court reasoned that the intervention of intermediaries can only serve to
influence or corrupt the judgment of public officials involved in the issuance of licenses,
which goes against the government's policy of considering applications strictly on their
merits. The court cited provisions of Republic Act 650, which prohibit the payment or
acceptance of fees, premiums, or compensation other than those allowed by law or

regulations in connection with the issuance of licenses or quota allocations. The court
also referred to the case of Mathew S. Tee vs. Tacloban Electric T Ice Plant Co., Inc., et al.,
where a similar contract was deemed contrary to public morals and public policy. The
court concluded that agreements against public policy are illegal and void, and contracts
that tend to operate to the detriment of the public interest are against public policy and
void. Therefore, the contract between Sy Suan, Price Incorporated, and Regala was
declared null and void.
Ratio:
The Supreme Court based its decision on the grounds that contracts stipulating a certain
percentage to intermediaries in connection with the issuance of licenses or quota
allocations are illegal and against public policy. The court emphasized that the
intervention of intermediaries can only serve to influence or corrupt the judgment of public
officials involved in the issuance of licenses, which goes against the government's policy
of considering applications strictly on their merits. The court also relied on provisions of
Republic Act 650, which prohibit the payment or acceptance of fees, premiums, or
compensation other than those allowed by law or regulations in connection with the
issuance of licenses or quota allocations. Additionally, the court referred to a previous
case where a similar contract was deemed contrary to public morals and public policy.
The court concluded that agreements against public policy are illegal and void, and
contracts that tend to operate to the detriment of the public interest are against public
policy and void. Therefore, the contract between Sy Suan, Price Incorporated, and Regala
was declared null and void.
Tee vs. Tacloban Electric and Ice Plant Co., (105 Phil.168)
Tee vs. Tacloban Electric and Ice Plant Co., Inc.
G.R. No. L-11980. February 14, 1959.
Facts:
The case of Tee v. Tacloban Electric and Ice Plant Co., Inc. involves a plaintiff named
Mathew S. Tee who is seeking payment for his services in securing a foreign exchange
allocation. The defendants in the case are Tacloban Electric and Ice Plant Co., Inc., Chan
Bun Chit, and Victoriano Chan. The events of the case took place in August 1955 in
Tacloban City, Philippines.
According to the plaintiff's complaint, the defendants approached him and asked for his
assistance in securing a foreign exchange allocation for the purchase of machinery and
supplies for the expansion of Tacloban Electric and Ice Plant Co., Inc. The plaintiff agreed
to help and was promised the usual fee for his services. He worked for approximately six
months, preparing and filing papers, and following up with various government offices to
obtain the necessary foreign exchange allocation. Eventually, the Central Bank granted an
allocation of $243,500.
The plaintiff claims that the usual fee for his services is 10% of the value of the allocation
obtained, which amounts to P48,700. However, the defendants refused to pay him without
any justifiable cause.
The defendants filed motions to dismiss the case, arguing that the contract between the
parties is null and void. The Court of First Instance of Manila granted the motions and
dismissed the case. The plaintiff appealed the decision, raising several issues.
Issue:
The main issue in the case is the validity of the contract relied upon by the plaintiff.
Ruling:
The court held that the contract is inexistent and void from the beginning.
Ratio:
The court agreed with the lower court's view that the contract is null and void. The court
cited Article 1409(1) of the Civil Code, which prohibits contracts that are inconsistent with
the law and public policy. In this case, the court referred to Section 14 of the Central Bank
Charter and Act 265 of the Republic, which prohibit and punish any person except the
interested party from working for and on behalf of the party interested in obtaining a dollar
allocation's approval.
The court emphasized that all applications for foreign exchange should be made through
authorized agent banks, and under no circumstances should the applicant, his agent, or
representative follow up an application with the Central Bank. The plaintiff's alleged
contract and services in following up the papers with the Central Bank are inconsistent
with the law and public policy.
Furthermore, the court stated that the agreement is contrary to good customs and public
order. Public interest requires that applications for foreign exchange be considered and
acted upon strictly on the merits and demerits of each case. The proceedings for the
determination of these applications should be conducted in an impersonal and impartial
manner to prevent favoritism or irregularities. The purpose of the circular requiring
applications to be filed through agent banks is to minimize opportunities for favoritism and
ensure a fair process.
Based on these reasons, the court affirmed the dismissal of the case. The other issues
raised in the appeal were deemed unnecessary to address. The plaintiff was ordered to
pay the costs of the case, and a certified copy of the decision was to be furnished to the
Solicitor General for appropriate action, if any, under relevant laws.
Industrial Personnel and Management Services, Inc. vs. De Vera, et al., GR

205703, March 7, 2016
Industrial Personnel & Management Services, Inc. vs. De Vera
G.R. No. 205703. March 7, 2016.
Facts:
The case involves the petitioners, Industrial Personnel & Management Services, Inc.
(IPAMS), SNC Lavalin Engineers & Contractors, Inc., and Angelito C. Hernandez, who
sought to reverse the decision of the Court of Appeals (CA) which affirmed the ruling of the
National Labor Relations Commission (NLRC) that the respondent, Alberto Arriola, was
illegally dismissed from his overseas employment. Arriola was offered a position as a
Safety Officer in SNC-Lavalin's Ambatovy Project site in Madagascar. He was hired through
IPAMS and his overseas employment contract was processed with the Philippine
Overseas Employment Agency (POEA). However, after three months of work, Arriola
received a notice of pre-termination of employment due to diminishing workload and was
repatriated. Arriola filed a complaint for illegal dismissal and non-payment of overtime
pay, vacation leave, and sick leave pay.
Issue:
The main issue raised in the case is whether a foreign law can govern an overseas
employment contract.
Ruling:
The Supreme Court held that Philippine labor laws should govern the overseas
employment contract.
Ratio:
The Court established four requisites for a foreign law to apply in an overseas employment
contract. First, it must be expressly stipulated in the contract. Second, it must be proven
before the courts. Third, it must not be contrary to Philippine law, morals, good customs,
public order, or public policy. Fourth, the contract must be processed through the POEA.
In this case, the petitioners failed to meet all four requisites, thus Philippine labor laws
should apply.
The Court also found that the petitioners failed to prove any authorized cause for Arriola's
dismissal. They argued that they were suffering from financial losses and Arriola had to be
dismissed, but they did not present credible evidence to support their claim. Therefore,
Arriola was illegally dismissed and entitled to backpay.
The Supreme Court affirmed the decision of the CA and ordered the petitioners to pay
Arriola the amount of backpay awarded by the CA.
b. Mutuality of Contracts (1308; 1182; 1197; 1266-1267; 1309-1310)

Garcia v. Rita Legarda, Inc. (21 SCRA 555)
Garcia vs. Legarda
G.R. No. L-20175. October 30, 1967.
Facts:
The case of Garcia v. Legarda involves a dispute between the petitioners, Maria A. Garcia
and Marcelino A. Timbang, and the respondent, Rita Legarda, Inc., a corporation engaged
in the sale and resale of residential lots. The petitioners filed a civil case against the
respondent, seeking to have certain contracts declared as existing and subsisting, to
compel the respondent to accept payment, and to recover damages and attorney's fees.
The contracts in question were contracts to sell subdivided lots on an installment basis.
Issue:
The main issue raised in the case is whether the respondent had the right to cancel the
contracts due to the petitioners' default in payment of installments.
Ruling:
The Supreme Court ruled in favor of the respondent and upheld the cancellation of the
contracts.
Ratio:
The Court held that the stipulation in the contracts, which allowed the respondent to
cancel the contracts in case of default in payment, was valid and not violative of Article
1308 of the New Civil Code. The Court explained that the stipulation did not leave the
validity or compliance of the contract entirely to the will of one party, but rather gave the
vendor the right to cancel the contract upon fulfillment of certain conditions.
The Court also rejected the argument that the acceptance of late payments by the
respondent waived its right to cancel the contracts. The Court emphasized that the
acceptance of late payments was an act of forbearance on the part of the respondent and
did not waive its right to cancel the contracts.
In conclusion, the Supreme Court upheld the cancellation of the contracts by the
respondent and ruled that the acceptance of late payments did not waive the
respondent's right to cancel. The Court held that the cancellation was not arbitrary and
was in accordance with the stipulations in the contracts.
Allied Banking Corporation vs. Court Appeals, (G.R. No. 124290, January
16,1998)
Allied Banking Corp. vs. Court of Appeals
G.R. No. 124290. January 16, 1998.
Facts:
The case of Allied Banking Corp. v. Court of Appeals involves a lease contract between
Allied Banking Corporation (Allied) and spouses Filemon Tanqueco and Lucia Domingo-
Tanqueco. The lease contract stated that the term of the lease would be fourteen years
and may be renewed for a like term at the option of the lessee. However, the lessors
donated the land to their children, the Tanquecos, and when the lease contract expired,
the Tanquecos demanded that Allied vacate the premises. Allied asserted its option to
renew the lease, leading to a case for ejectment filed by the Tanquecos.
Issue:
The main issues raised in the case are: 1) whether the provision in the lease contract
granting the lessee the sole option to renew the lease is valid and binding, and 2) whether
a lessee has the legal capacity to challenge the validity of a deed of donation executed by
the lessor over the leased premises.
Ruling:
The court ruled that the provision in the lease contract granting the lessee the sole option
to renew the lease is valid and binding.
Ratio:
The court held that the provision in the lease contract granting the lessee the sole option
to renew the lease is valid and binding. It is an express agreement that is subject to
statutory restrictions and is fundamentally part of the consideration in the contract. The
option to renew is a purely executory contract and confers a right to obtain a renewal if
there is compliance with the conditions on which the right is made to depend. The right of
renewal constitutes a part of the lessee's interest in the land and forms a substantial and
integral part of the agreement. The fact that the option is binding only on the lessor and
can be exercised only by the lessee does not render it void for lack of mutuality.
The court also ruled that Allied cannot challenge the validity of the deed of donation as it
is not a party to the contract. A person who is not principally or subsidiarily bound has no
legal capacity to challenge the validity of a contract. They must first have an interest in the
contract.
In summary, the court held that the provision in the lease contract granting the lessee the
sole option to renew the lease is valid and binding. The lessee's exercise of the option
resulted in the automatic extension of the lease under the same terms and conditions.
Allied cannot challenge the validity of the deed of donation as it is not a party to the
contract. The court reversed the decision of the Court of Appeals and ordered Allied to pay
rentals to the lessors at the rate provided in the existing contract.
Encarnacion vs. Baldomar,(77 Phil.470)

Encarnacion vs. Baldomar
G.R. No. L-264. October 4, 1946.
Facts:
The case of Encarnacion v. Baldomar involves the plaintiff, Vicente Singson Encarnacion,
who leased a house to Jacinta Baldomar and her son, Lefrado Fernando, on a month-to-
month basis for a monthly rental of P35. After the liberation of Manila in the last war,
Encarnacion notified the defendants to vacate the house as he needed it for his offices
due to the destruction of his previous building. Despite the demand, the defendants
refused to leave. The case was initially filed in the Municipal Court of Manila, where the
defendants were found to be in arrears in rental payment. The court ordered restitution
and payment of rentals until the defendants vacate the premises. The defendants
appealed the case to the Court of First Instance, arguing that the municipal court had no
jurisdiction over the subject matter due to a claim for damages. However, the motion to
dismiss was denied.
Issue:
The main issue raised in the case is whether the defendants' claim that their contract
allowed them to continue occupying the house indefinitely as long as they paid the rentals
is valid.
Ruling:
The court ruled in favor of the plaintiff, Vicente Singson Encarnacion. The Court of First
Instance affirmed the judgment of the municipal court, ordering the defendants to vacate
the premises and pay outstanding rent. The decision of the Court of First Instance was
affirmed by the Supreme Court, with costs to the defendants.
Ratio:
The court rejected the defendants' claim that their contract allowed them to continue
occupying the house indefinitely as long as they paid the rentals. The court stated that the
lease was always on a month-to-month basis. Allowing the defendants' defense would
give them sole control over the validity and fulfillment of the lease, which is prohibited by
the Civil Code. The court emphasized that the lease agreement clearly stated that it was
on a month-to-month basis, and the defendants cannot unilaterally change the terms of
the lease to their advantage. Therefore, the court upheld the lower court's decision and
ordered the defendants to vacate the premises and pay outstanding rent. The deposits
made by the defendants on account of rentals during the appeal were also ordered to be
delivered to the plaintiff.
Garcia vs. Rita Legarda, Inc., (21 SCRA 555)

Garcia vs. Legarda
G.R. No. L-20175. October 30, 1967.
Facts:
The case of Garcia v. Legarda involves a dispute between the petitioners, Maria A. Garcia
and Marcelino A. Timbang, and the respondent, Rita Legarda, Inc., a corporation engaged
in the sale and resale of residential lots. The petitioners filed a civil case against the
respondent, seeking to have certain contracts declared as existing and subsisting, to
compel the respondent to accept payment, and to recover damages and attorney's fees.
The contracts in question were contracts to sell subdivided lots on an installment basis.
Issue:
The main issue raised in the case is whether the respondent had the right to cancel the
contracts due to the petitioners' default in payment of installments.
Ruling:
The Supreme Court ruled in favor of the respondent and upheld the cancellation of the
contracts.
Ratio:
The Court held that the stipulation in the contracts, which allowed the respondent to
cancel the contracts in case of default in payment, was valid and not violative of Article
1308 of the New Civil Code. The Court explained that the stipulation did not leave the
validity or compliance of the contract entirely to the will of one party, but rather gave the
vendor the right to cancel the contract upon fulfillment of certain conditions.
The Court also rejected the argument that the acceptance of late payments by the
respondent waived its right to cancel the contracts. The Court emphasized that the
acceptance of late payments was an act of forbearance on the part of the respondent and
did not waive its right to cancel the contracts.
In conclusion, the Supreme Court upheld the cancellation of the contracts by the
respondent and ruled that the acceptance of late payments did not waive the
respondent's right to cancel. The Court held that the cancellation was not arbitrary and
was in accordance with the stipulations in the contracts.
Liebenow vs. Phil. Vegetable Oil Co., (39 Phil. 60)

Liebenow vs. Philippine Vegetable Oil Co.
G.R. No. 13463. November 9, 1918.
Facts:
The case of Liebenow v. Philippine Vegetable Oil Co. involves a dispute over the payment
of a bonus. The plaintiff, H.C. Liebenow, filed a lawsuit against the defendant, the
Philippine Vegetable Oil Company, seeking to recover a sum of money as a bonus in
addition to his salary. The contract between the parties stated that Liebenow would
receive a bonus in such amount as the employer may see fit to grant. The Court of First
Instance ruled in favor of the defendant, absolving them from the complaint, and
Liebenow appealed the decision.
Issue:
1. The main issue in this case is whether Liebenow is entitled to a bonus and, if so,
how much.
2. Another important issue in this case is the use of a subpoena duces tecum.
Liebenow had issued a subpoena to the managing director of the Philippine
Vegetable Oil Company, requesting the production of certain documents related to
the company's business.
Ruling:
1. The court ruled that the stipulation in the contract creates a legal obligation on the
part of the employer to pay something by way of a bonus. However, the
determination of the amount of the bonus is left to the discretion of the employer.
The court held that once the discretion of the directors has been exercised and a
bonus has been paid, that discretion cannot be judicially reviewed. The court also
rejected Liebenow's argument that the profits earned by the defendant during his
employment should be considered in determining the amount of the bonus.
2. The court ruled that the evidence sought by Liebenow was irrelevant and refused
to compel the production of the documents. The court explained that the subpoena
duces tecum should only be used to enforce the production of documents that the
witness is bound by law to produce in evidence. The court emphasized that the use
of the subpoena duces tecum should be controlled by the courts to ensure that it
conforms to law and justice.
Ratio:
1. The court based its ruling on the interpretation of the contract between the parties.
The contract clearly stated that Liebenow would receive a bonus in such amount
as the employer may see fit to grant. This language creates a legal obligation on the
part of the employer to pay something by way of a bonus. However, the contract
also gives the employer the discretion to determine the amount of the bonus. The
court held that this discretion is not unlimited and must be exercised in good faith.
Once the discretion has been exercised and a bonus has been paid, the court
cannot review that decision.
The court also rejected Liebenow's argument that the profits earned by the
defendant during his employment should be considered in determining the amount
of the bonus. The court explained that the contract did not provide for such
consideration and that the determination of the bonus amount is solely within the
discretion of the employer. The court emphasized that it is not its role to interfere
with the business decisions of the employer, as long as those decisions are made
in good faith.
2. The court based its ruling on the purpose and scope of the subpoena duces tecum.
The court explained that the subpoena duces tecum is a legal process used to
compel the production of documents that are relevant and necessary to the
resolution of a legal dispute. However, the court also emphasized that the use of
the subpoena duces tecum should be controlled to prevent abuse and ensure
fairness in legal proceedings. In this case, the court found that the documents
requested by Liebenow were not relevant to the issues in the case and therefore
refused to compel their production.
Conclusion
In conclusion, the court affirmed the judgment of the Court of First Instance, ruling in favor
of the defendant. The court held that Liebenow is not entitled to a bonus beyond what has
already been paid to him. The court also upheld the decision to refuse the production of
documents through the subpoena duces tecum, emphasizing the need to control the use
of this process to prevent abuse and ensure fairness in legal proceedings.
PNB vs. CA, (238 SCRA 20) [1994]

G.R. No. 107569. November 8, 1994.
Facts:
The case of Philippine National Bank v. Court of Appeals involves a dispute between the
Philippine National Bank (PNB) and private respondents Remedios Jayme-Fernandez and
Amado Fernandez. On April 7, 1982, the private respondents obtained a loan from PNB
under the Cottage Industry Guaranty Loan Fund (CIGLF) in the amount of P50,000. To
secure the loan, the private respondents executed a Real Estate Mortgage over a parcel of
unregistered agricultural land and a Chattel Mortgage over a thermo plastic-forming
machine. In February 1983, the private respondents were granted an additional loan of
P50,000 by PNB, with the same terms and stipulations as the previous loan. They also
executed a new Credit Agreement and constituted another real estate mortgage over two
parcels of registered land. In August 1984, PNB informed the private respondents that the
interest rate on their loan account was increased to 25% per annum, and later increased
to 30% and 42% in October 1984. The private respondents requested PNB to re-adopt the
12% interest rate and condone the present interest and penalties, but their request was
denied.
Issue:
(1) whether the increases in interest rates are authorized;
(2) whether the Credit Agreement and Promissory Notes are binding between the parties;
(3) whether Central Bank Circular No. 773 and Circular No. 905 are applicable; and
(4) whether the private respondents are estopped from questioning the increase in interest
rates.
Ruling:
The Supreme Court ruled in favor of the private respondents and affirmed the decision of
the Court of Appeals. The Court held that the escalation clause in the Credit Agreement
did not give PNB the unilateral right to increase the interest rate without the consent of the
private respondents. While the law and circular allowed contracting parties to freely
stipulate adjustments in the interest rate, any change must be mutually agreed upon. The
Court emphasized the principle of mutuality in contracts and held that a contract
containing a condition that makes its fulfillment dependent exclusively upon the
uncontrolled will of one party is void. The Court also ruled that the private respondents
were not estopped from questioning the increases in interest rates, as their silence cannot
be construed as acceptance of the proposed changes.
Ratio:
The Supreme Court based its decision on the principle of mutuality in contracts. It held
that a contract must be entered into by the parties with their free and voluntary consent,
and any change in the terms of the contract must be mutually agreed upon. The Court
emphasized that a contract containing a condition that makes its fulfillment dependent
exclusively upon the uncontrolled will of one party is void. In this case, the escalation
clause in the Credit Agreement did not give PNB the unilateral right to increase the interest
rate without the consent of the private respondents. Therefore, the increases in interest
rates were not authorized. The Court also ruled that the private respondents were not
estopped from questioning the increases in interest rates, as their silence cannot be
construed as acceptance of the proposed changes.
In conclusion, the Supreme Court ordered PNB to re-apply the 12% interest rate to the
private respondents' indebtedness and disallowed the unilateral increases in interest
rates. The Court affirmed the decision of the Court of Appeals and denied PNB's petition.
Buenaventura vs. Metropolitan Bank and Trust Company, GR 167082, August 3,

2016
Buenaventura vs. Metropolitan Bank and Trust Co.
G.R. No. 167082. August 3, 2016.
Facts:
The case involves a dispute between Teresita Buenaventura (petitioner) and Metropolitan
Bank and Trust Company (respondent) regarding the validity of promissory notes and the
petitioner's liability for outstanding loan obligations. The petitioner executed two
promissory notes in the amounts of P1,500,000.00 each, payable to the respondent.
Despite demands, the petitioner failed to pay the amounts due on the promissory notes,
resulting in the respondent filing an action for recovery of the outstanding amounts,
interest, penalty, and attorney's fees. The Regional Trial Court (RTC) ruled in favor of the
respondent, directing the petitioner to pay the outstanding amounts, interest, penalty, and
attorney's fees. Dissatisfied, the petitioner appealed, arguing that the promissory notes
were null and void for being simulated and fictitious, and that she was only a guarantor.
The Court of Appeals (CA) affirmed the RTC's decision with modification, ordering the
petitioner to pay the outstanding amounts, interest, penalty, and attorney's fees.
Issue:
1. Whether the promissory notes executed by the petitioner are null and void for being
simulated and fictitious.
2. Whether the petitioner is only a guarantor and not a principal debtor.
Ruling:
The Supreme Court upheld the decision of the Court of Appeals, stating that a contract of
adhesion, such as the promissory notes, is still binding and enforceable as long as its
terms are clear and unambiguous. The Court also rejected the petitioner's claims of
simulation and nullity, as there was no evidence to support such allegations. Additionally,
the Court held that the petitioner was not a mere guarantor but a principal debtor, as
indicated by the language used in the promissory notes. The Court further revised the
monetary awards, ruling that the interest rates imposed by the respondent were higher
than those stipulated in the promissory notes, and thus, the respondent had no legal basis
for imposing such rates. The Court determined the correct interest rates based on the
stipulations in the promissory notes and ordered the petitioner to pay the revised
amounts, including interest, penalty, and attorney's fees.
Ratio:
The Court based its decision on the principle that a contract of adhesion, such as the
promissory notes, is still valid and enforceable as long as its terms are clear and
unambiguous. The Court emphasized that the petitioner failed to provide any evidence to
support her claims of simulation and nullity, and therefore, these claims were dismissed.
The Court also relied on the language used in the promissory notes, which indicated that
the petitioner was a principal debtor and not just a guarantor. This language was deemed
sufficient to establish the petitioner's liability for the outstanding loan obligations.
Furthermore, the Court found that the interest rates imposed by the respondent were
higher than those stipulated in the promissory notes. As a result, the Court ruled that the
respondent had no legal basis for imposing such rates and revised the monetary awards
accordingly. The Court determined the correct interest rates based on the stipulations in
the promissory notes and ordered the petitioner to pay the revised amounts, including
interest, penalty, and attorney's fees.
c. Relativity of Contracts (1311; 1312-1314; 2150; 1729)

Florentino vs. Encarnacion,(79 SCRA 192)
Florentino vs. Encarnacion, Sr.
G.R. No. L-27696. September 30, 1977.
Facts:
The case of Florentino v. Encarnacion, Sr. involves an application for the registration of a
parcel of agricultural land located in Ilocos Sur. The applicants, Miguel Florentino, Rosario
Encarnacion de Florentino, Manuel Arce, Jose Florentino, Victorino Florentino, Antonio
Florentino, Remedios Encarnacion, and Severina Encarnacion, filed the application,
claiming to be the common and pro-indiviso owners of the land. They alleged that they
acquired the land through inheritance from their aunt, Doña Encarnacion Florentino, and
that there were no encumbrances on the land. The application was unopposed, except for
the opposition of the Director of Lands, which was later withdrawn. The Court of First
Instance of Ilocos Sur issued an order of general default and proceeded with the hearing.
Issue:
The main issue in the case revolves around a stipulation in an extrajudicial partition
agreement, marked as Exhibit O-1, which states that the fruits of the land shall be used to
cover religious expenses. The petitioners-appellants sought to have this stipulation
included as an encumbrance on the land's title, while the oppositors-appellees, Salvador
Encarnacion, Sr., Salvador Encarnacion, Jr., and Angel Encarnacion, sought to withdraw
their application on their respective shares of the land.
Ruling:
The Court held that the stipulation in Exhibit O-1 was not revocable at the unilateral option
of the co-owners and that it was binding on all parties involved. The stipulation was
considered a stipulation pour autrui, a stipulation in favor of a third person, in this case,
the Church. The Court found that the intention of the parties was to confer a direct and
material benefit upon the Church, as the fruits of the land had been used for religious
expenses for almost seventeen years without question. The Court also noted that the
Church had impliedly accepted the stipulation before it was sought to be revoked by some
of the co-owners.
Ratio:
The Court rejected the argument that the registration court did not have jurisdiction to
pass upon the validity or invalidity of the agreement. It held that the Land Registration
Court's jurisdiction could be extended to cases involving issues properly litigable in other
independent suits or ordinary civil actions, especially in special and exceptional
circumstances. In this case, the parties had mutually consented to submit the issue of the
stipulation as an encumbrance for determination by the registration court, and there was
sufficient evidence on record for the court to render a decision on the issue.
Therefore, the Court affirmed the decision of the Court of First Instance of Ilocos Sur, but
modified it to allow the annotation of Exhibit O-1 as an encumbrance on the face of the
title to be issued in favor of all the applicants in the registration proceedings.
Young vs. CA (G.R. No. 79518, January 13, 1989)

Young vs. Court of Appeals
G.R. No. 79518. January 13, 1989.
Facts:
The case of Young v. Court of Appeals involves a dispute over the enforcement of a
compromise agreement. The petitioner, Rebecca C. Young, was not a party to the
agreement but claimed that she had a right of first refusal under the agreement. The
defendant, Philippine Holding, Inc., owned a piece of land and a building in Manila. The
owner obtained a demolition order for the building, and one of the tenants, Antonio Young,
filed a case to annul the order. As part of the settlement of the case, a compromise
agreement was submitted to the court, which included a provision giving Antonio Young
and Rebecca Young the right of first refusal if the property was sold. However, before the
agreement was approved by the court, Philippine Holding, Inc. sold the property to PH
Credit Corporation. PH Credit Corporation then subdivided and sold the property to other
parties. Rebecca Young and other plaintiffs filed a case to annul the sale and enforce their
right of first refusal. The trial court dismissed the complaint, and the Court of Appeals
affirmed the decision.
Issue:
The main issue in the case is whether Rebecca Young can enforce the compromise
agreement to which she was not a party.
Ruling:
The Supreme Court ruled that Rebecca Young cannot enforce the compromise
agreement.
Ratio:
The court cited previous cases that established the principle that a compromise
agreement cannot bind persons who are not parties to it. In this case, Rebecca Young was
not a signatory to the compromise agreement and therefore cannot enforce its provisions.
The court also rejected Rebecca Young's argument that she had a right of first refusal
under the agreement as a stipulation pour autrui, which is a stipulation in favor of a third
person. The court explained that for a stipulation pour autrui to be valid, certain requisites
must be met, including the communication of acceptance by the third person to the
obligor. In this case, Rebecca Young did not communicate her acceptance, and the sale
of the property to other parties effectively revoked any right of first refusal she may have
had. Therefore, the court denied the petition and affirmed the decision of the Court of
Appeals.
Cristobal vs. Gomez, (50 Phil.810)

Cristobal vs. Gomez
G.R. No. 27014. October 5, 1927.
Facts:
The case of Cristobal v. Gomez involves a dispute over the ownership of certain properties
in the Philippines. The plaintiffs, Paulina Cristobal and her children, filed a lawsuit against
Marcelino Gomez, the brother of Paulina's deceased husband, Epifanio Gomez. The
properties in question were originally sold under a contract with pacto de retro to Luis R.
Yangco, but Epifanio Gomez later redeemed the properties with the assistance of
Marcelino Gomez and Telesfora Gomez, his brother and sister. The agreement was that
Marcelino and Telesfora would hold and administer the properties until the debt was fully
paid, at which point the properties would be returned to Epifanio Gomez. The agreement
was executed through two documents, Exhibits A and D. Marcelino Gomez eventually paid
off the debt and obtained full ownership of the properties. However, the plaintiffs argued
that the properties should be returned to them as the legitimate children of Epifanio
Gomez. The trial court ruled in favor of the plaintiffs, ordering Marcelino Gomez to
surrender the properties and pay the costs of the proceeding. Marcelino Gomez appealed
the decision.
Issue:
The main issue in the case is whether Marcelino Gomez is obligated to surrender the
properties to the plaintiffs, as the purpose of the trust agreement had been accomplished
and the debt fully paid.
Ruling:
The court ruled in favor of the plaintiffs and affirmed the decision of the trial court. The
court held that Marcelino Gomez, as the trustee, is bound to surrender the properties to
the owner or his successors once the purpose of the trust has been accomplished. The
court also rejected Marcelino Gomez's claim of ownership, as the trust agreement clearly
stated that the properties would be returned to Epifanio Gomez or his legitimate children.
The court further explained that the trust constituted between Marcelino Gomez and
Telesfora Gomez is not subject to the rules governing donations of real property. The
beneficiary of a trust can demand performance of the obligation without formally
accepting the benefit of the trust in a public document. The court also ruled that
prescription is not effective against the beneficiary of a continuing and subsisting trust.
Finally, the court rejected Marcelino Gomez's claim of estoppel based on a notarial act
executed by Epifanio Gomez, as Marcelino Gomez had not been misled by the false
statement in the document.
Ratio:
The court's decision was based on the principle that a trustee is obligated to surrender the
properties to the owner or his successors once the purpose of the trust has been
accomplished. In this case, the purpose of the trust was to hold and administer the
properties until the debt was fully paid, at which point the properties would be returned to
Epifanio Gomez. The court also emphasized that the trust agreement clearly stated that
the properties would be returned to Epifanio Gomez or his legitimate children, which
includes the plaintiffs. The court further explained that the trust constituted between
Marcelino Gomez and Telesfora Gomez is not subject to the rules governing donations of
real property, as it was a trust agreement and not a donation. The court also ruled that
prescription is not effective against the beneficiary of a continuing and subsisting trust,
meaning that the plaintiffs can still claim ownership of the properties even if Marcelino
Gomez had obtained full ownership through prescription. Finally, the court rejected
Marcelino Gomez's claim of estoppel based on a notarial act executed by Epifanio Gomez,
as Marcelino Gomez had not been misled by the false statement in the document.
In conclusion, the court ruled in favor of the plaintiffs, ordering Marcelino Gomez to
surrender the properties to them. The court declared that the plaintiffs are the owners of
the properties and required the successors of Marcelino Gomez to deliver the properties
to the plaintiffs.
Coquia vs. Fieldsmen’s Insurance Co., (26 SCRA 178)

Coquia vs. Fieldmen's Insurance Co., Inc.
G.R. No. L-23276. November 29, 1968.
Facts:
The case of Coquia v. Fieldmen's Insurance Co., Inc. involves a dispute between the heirs
of a deceased driver and an insurance company. The insurance policy in question contains
stipulations that the company will indemnify any authorized driver of the insured's motor
vehicle and will also indemnify the personal representatives of the driver in the event of his
death. The policy further states that the company may make indemnity payable directly to
the claimants or heirs of claimants. The deceased driver had paid a portion of the
premiums for the policy. The heirs of the deceased driver, who are the sole beneficiaries,
filed a complaint against the insurance company to collect the proceeds of the policy. The
insurance company argued that the heirs have no cause of action because they have no
contractual relation with the company and that the insured did not comply with the
provisions of the policy concerning arbitration.
Issue:
The main issue in the case is whether the heirs of the deceased driver have a cause of
action against the insurance company based on the stipulations in the policy.
Ruling:
The court ruled in favor of the heirs of the deceased driver.
Ratio:
The court held that the insurance policy falls under the category of contracts pour autrui,
which allows a third party for whose benefit the contract was made to enforce it. The court
found that the policy clearly confers a favor upon the heirs of the deceased driver, as they
are specifically mentioned as beneficiaries in the policy. The court also noted that the
deceased driver had paid a portion of the premiums, further supporting the conclusion
that the heirs have a direct cause of action against the company. The court further held
that since the heirs could have maintained the action by themselves, they were also
allowed to join the insured in filing the complaint.
Regarding the issue of arbitration, the court found that the parties had waived their right to
demand arbitration. The policy contained a provision stating that any dispute regarding the
company's liability under the policy should be referred to arbitration. However, the record
showed that neither party invoked this provision or made any reference to arbitration
during the negotiations preceding the filing of the case. The court held that the parties' acts
or omissions in this regard amounted to a waiver of their right to demand arbitration.
In conclusion, the court ruled in favor of the heirs of the deceased driver, stating that they
have a cause of action against the insurance company based on the stipulations in the
policy. The court also held that the arbitration provision in the policy was waived by the
parties' actions.
Constantino vs. Espiritu, (39 SCRA 206)

Constantino vs. Espiritu
G.R. No. L-22404. May 31, 1971.
Facts:
The case of Constantino v. Espiritu involves a dispute between Pastor B. Constantino and
Herminia Espiritu, who are the parents of an unborn child. Constantino alleges that he
entered into a trust agreement with Espiritu, wherein he conveyed properties to her with
the understanding that she would hold them in trust for their illegitimate son. However,
Espiritu violated the agreement by mortgaging and attempting to sell the properties. As a
result, Constantino filed a complaint seeking a writ of preliminary injunction to prevent
further alienation of the properties and a judgment ordering Espiritu to execute a deed of
absolute sale in favor of their son.
Issue:
The main issue raised in the case is whether the contract between Constantino and
Espiritu, which was partially performed by the execution of a deed of sale, is enforceable
despite the provisions of the Statute of Frauds.
Ruling:
The Supreme Court ruled in favor of Constantino. The Court held that the contract
between Constantino and Espiritu was a stipulation pour autrui, which means that a third
person (their unborn child) can demand its fulfillment if they have communicated their
acceptance of the contract before it is revoked. The Court also found that the contract had
already been partially performed, and the action brought by Constantino was only for the
enforcement of another phase of the contract, namely the execution of a deed of
conveyance in favor of their son. Therefore, the Court concluded that the contract was
enforceable and remanded the case to the lower court for further proceedings.
Ratio:
The Court based its decision on the principle of stipulation pour autrui, which allows a
third person to enforce a contract if they have accepted it before it is revoked. In this case,
the unborn child of Constantino and Espiritu is considered the third person who can
demand the fulfillment of the contract. The Court also emphasized that the contract had
already been partially performed, as evidenced by the execution of a deed of sale.
Therefore, the action brought by Constantino was merely for the enforcement of another
phase of the contract, which is the execution of a deed of conveyance in favor of their son.
In a separate concurring opinion, Justice Barredo highlighted the importance of

considering the best interests of the child in resolving the case. He argued that even if the
case were considered as involving an express trust, the exception to the parol evidence
rule should apply because the complaint specifically alleged the existence of an implied
trust. Justice Barredo also emphasized that the parol evidence rule should not be used as
a shield to commit fraud, further supporting the enforceability of the contract between
Constantino and Espiritu.
Sps. Pontigon, et al vs. Heirs of Meliton Sanchez, GR 221513, December 6, 2016

Spouses Pontigon vs. Heirs of Sanchez
G.R. No. 221513. December 5, 2016.
Facts:
The case involves a dispute over a parcel of land in the Philippines. The petitioners,
Spouses Luisito Pontigon and Leodegaria Sanchez-Pontigon, were declared as the owners
of the land under Transfer Certificate of Title (TCT) No. 162403-R. The respondents, Heirs
of Meliton Sanchez, filed a complaint seeking the nullity of the title and the reinstatement
of the original certificate of title (OCT) No. 207. The trial court ruled in favor of the
respondents, declaring TCT No. 162403-R null and void. The Court of Appeals affirmed the
decision of the trial court.
Issue:
The main issue in this case is whether the transfer of title to the petitioners was valid.
Ruling:
The court ruled in favor of the petitioners, declaring the transfer of title valid.
Ratio:
The court held that the Extrajudicial Settlement, although a private document, was still
binding on the respondents. The court found that there was no evidence to prove that the
petitioners were complicit in the alleged fraud. The court further held that the irregularities
in the issuance of the title did not necessarily invalidate it.
The court explained that the Extrajudicial Settlement, which served as the basis for the
transfer of title, was a valid document despite not being properly notarized. The court
emphasized that the lack of proper notarization did not automatically render the
document invalid. The court also noted that the respondents failed to present any
evidence to show that the petitioners were involved in any fraudulent activity.
Regarding the missing original certificate of title (OCT), the court held that its absence did
not automatically invalidate the transfer of title. The court explained that the OCT was not
the only basis for the validity of the transfer. The court pointed out that the petitioners were
able to present other evidence, such as tax declarations and tax receipts, to support their
claim of ownership.
The court also considered the issue of prescription. The court ruled that the respondents'
action seeking the nullity of the title was already barred by prescription. The court
explained that the respondents should have filed their complaint within ten years from the
issuance of the title. Since the respondents filed their complaint more than ten years after
the issuance of the title, their action was already time-barred.
In conclusion, the court upheld the validity of the transfer of title to the petitioners and
dismissed the respondents' complaint. The court found that the transfer was valid and
that the respondents' action was already barred by prescription. The court also ruled that
the Extrajudicial Settlement was a valid document, despite not being properly notarized.
The court held that the irregularities in the issuance of the title did not invalidate it.
d. Consensuality of Contracts (1315 vs. 1316 [cf. 1934, 1963, 2093,

1933-1934]; 1305;1306; 448; 1317 cf. 1403 and 1898; 1319;)
ABS-CBN vs. CA, et al., (301 SCRA 572)
ABS-CBN Broadcasting Corp. vs. Court of Appeals
G.R. No. 128690. January 21, 1999.
Facts:
This case involves a dispute between VIVA Productions, Inc. (VIVA) and ABS-CBN
Broadcasting Corporation (ABS-CBN) over a film exhibition agreement. In 1990, ABS-CBN
and VIVA executed a Film Exhibition Agreement, granting ABS-CBN the exclusive right to
exhibit 24 VIVA Films for TV telecast. Later, VIVA offered ABS-CBN a list of 3 film packages
from which ABS-CBN may exercise its right of first refusal. ABS-CBN selected 10 titles
from the list. Del Rosario of VIVA then offered ABS-CBN airing rights over a package of 104
movies for P60 million. However, there was a disagreement on the terms of the agreement.
VIVA later granted RBS the exclusive right to air the 104 VIVA films, including the 14 films
supposedly granted to ABS-CBN. ABS-CBN filed a complaint for specific performance
with prayer for injunction. The RTC granted the prayer and required ABS-CBN to post a
bond. However, while ABS-CBN was moving for reduction of the bond, RBS offered to put
up a counterbond and was allowed to post it. Later, the RTC rendered a decision in favor
of RBS and VIVA, ordering ABS-CBN to pay damages and attorney's fees. ABS-CBN
appealed to the Court of Appeals, which affirmed the RTC decision.
Issue:
1. Whether there was a perfected contract between VIVA and ABS-CBN.
2. Whether RBS was entitled to damages and attorney's fees.
Ruling:
The Court ruled against ABS-CBN, stating that there was no perfected contract between
VIVA and ABS-CBN. The Court also ruled that RBS was entitled to damages. However, the
Court reversed the decision of the Court of Appeals, except for the award of attorney's fees
in favor of VIVA.
Ratio:
The Court held that for a contract to be perfected, there must be a meeting of the minds
between the parties on the essential terms and conditions of the contract. In this case, the
court found that there was no meeting of the minds between VIVA and ABS-CBN. ABS-
CBN's counter-offer substantially varied the terms of VIVA's offer, and therefore, it cannot
be considered a valid acceptance. Additionally, Mr. Del Rosario did not have the authority
to accept ABS-CBN's counter-offer on behalf of VIVA, as corporate powers are exercised
by the Board of Directors. The court also found that there was confusion regarding the
number of films and the total consideration for the contract.
Regarding the issue of damages, the court held that ABS-CBN was liable for actual
damages for filing the complaint despite knowing that it had no cause of action. The court
also awarded attorney's fees to VIVA. However, the court denied RBS's claim for moral and
exemplary damages, as a corporation cannot be awarded moral damages and there was
no sufficient evidence of malice or bad faith on the part of ABS-CBN.
In conclusion, the court ruled that there was no perfected contract between VIVA and ABS-
CBN, but ABS-CBN was held liable for damages and attorney's fees. The court reversed
the decision of the Court of Appeals, except for the award of attorney's fees in favor of
VIVA.
Palattao vs. CA, et al., (G.R. No. 131726, May 7, 2002)

Palattao vs. Court of Appeals
G.R. No. 131726. May 7, 2002.
Facts:
The case involves a dispute between Yolanda Palattao (petitioner) and Marcelo Co
(respondent) over the lease and sale of a property located in Caloocan City. The lease
contract between the parties expired on December 31, 1993, and during the last year of
the contract, they began negotiations for the sale of the property. Petitioner offered to sell
413.28 square meters of the leased lot to respondent, but respondent desired to purchase
the whole 490-square-meter leased premises. The parties failed to reach an agreement on
the extent of the lot subject to the sale.
Petitioner subsequently filed an ejectment case against respondent on the ground of

expiration of the lease contract. Respondent refused to vacate the premises, claiming that
there was a perfected contract of sale of the leased property. He also argued that the filing
of the ejectment case violated their agreement to maintain the status quo during the
negotiations for an amicable settlement.
The Metropolitan Trial Court (MTC) ruled in favor of petitioner and ordered respondent to
vacate the property. However, the Regional Trial Court (RTC) and the Court of Appeals (CA)
reversed the decision of the MTC.
Issue:
1. Whether the filing of the ejectment case violated the agreement to maintain the
status quo during the negotiations for an amicable settlement.
2. Whether a contract of sale was perfected between the parties.
Ruling:
The Supreme Court held that:
1. The status quo agreement applied only during the period of negotiations for an
amicable settlement and did not extend to the duration of the pendency of the
specific performance case. The Court emphasized that injunction suits and
specific performance cases do not preclude the filing of, or abate, an ejectment
case. The Court also found that there were no "strong reasons of equity" to suspend
or dismiss the ejectment case. Therefore, the filing of the ejectment case did not
violate the agreement to maintain the status quo.
2. No contract of sale was perfected between the parties. The Court explained that
contracts of sale are perfected upon the meeting of the minds between the parties.
In this case, the parties did not reach an agreement on the extent of the lot subject
to the sale. Even if they did agree, there was subsequently a mutual withdrawal
from the contract because respondent failed to pay the downpayment and did not
insist on the sale of the subject lot. Therefore, the Court concluded that no contract
of sale was perfected between the parties.
Ratio:
The Court's decision was based on the following arguments and legal basis:
1. The status quo agreement only applied during the negotiations for an amicable
settlement and did not extend to the duration of the pendency of the specific
performance case. Injunction suits and specific performance cases do not
preclude the filing of, or abate, an ejectment case. The Court found that there were
no "strong reasons of equity" to suspend or dismiss the ejectment case.
2. Contracts of sale are perfected upon the meeting of the minds between the parties.
In this case, the parties did not reach an agreement on the extent of the lot subject
to the sale. Even if they did agree, there was subsequently a mutual withdrawal
from the contract because respondent failed to pay the downpayment and did not
insist on the sale of the subject lot. Therefore, the Court concluded that no contract
of sale was perfected between the parties.
In conclusion, the Supreme Court granted the petition and reinstated the decision of the
MTC, with the modification that the monthly rental to be paid by respondent from the
termination of the lease contract until the premises is vacated is reduced to P8,500.00.
National Commercial Bank of Saudi Arabia vs. Court of Appeals, (G.R. No.
124267, January 17, 2005)
National Commercial Bank of Saudi Arabia vs. Court of Appeals
G.R. No. 124267. January 31, 2003.
Facts:
The case of National Commercial Bank of Saudi Arabia v. Court of Appeals involves a
dispute over a duplicated payment of a letter of credit. The petitioner, National
Commercial Bank of Saudi Arabia (NCBSA), filed a case against the respondent, Philippine
Banking Corporation (PBC), to recover the duplication in the payment of the proceeds of a
letter of credit that NCBSA had issued. The trial court rendered a decision in favor of
NCBSA. PBC filed a Motion for Reconsideration, but the motion did not contain a notice of
hearing. NCBSA filed a Motion for Writ of Execution of the decision, and PBC filed a Motion
to Set Motion for Reconsideration for Hearing. The trial court granted NCBSA's Motion for
Writ of Execution and denied PBC's Motion for Reconsideration. PBC appealed the trial
court's decision to the Court of Appeals (CA) via a petition for certiorari, but the CA
dismissed the petition. PBC filed a Motion for Reconsideration, and the CA granted PBC's
petition for certiorari. NCBSA appealed the CA's decision to the Supreme Court.
Issue:
The main issue in this case is whether the absence of a notice of hearing in PBC's Motion
for Reconsideration is fatal and whether it can be cured by a belated filing of a notice of
hearing.
Ruling:
The Supreme Court ruled in favor of NCBSA. The Court held that the requirement of notice
under the Revised Rules of Court is mandatory, and the absence of a notice of hearing is
fatal. In cases of motions to reconsider a decision, the running of the period to appeal is
not tolled by their filing or pendency. PBC's Motion for Reconsideration did not contain the
requisite notice of hearing, and its attempt to cure the defect by filing a Motion to Set the
Motion for Reconsideration for Hearing after the period for filing the Notice of Appeal had
expired was not valid. The Court also held that even if PBC had presented exceptional
reasons for its failure to comply with the notice requirement, the Motion for
Reconsideration would still be denied because it was pro forma. PBC's Motion for
Reconsideration was merely a reiteration of the reasons and arguments raised before the
trial court, which had already been considered and resolved against it on the merits. The
Court emphasized that the finality of the decision of the trial court cannot be set aside
purely on the basis of liberality, and only for the most persuasive of reasons should the
court allow a relaxation of its procedural rules.
Ratio:
The Supreme Court's decision was based on the mandatory requirement of notice under
the Revised Rules of Court. The absence of a notice of hearing in PBC's Motion for
Reconsideration was deemed fatal and could not be cured by a belated filing of a notice
of hearing. The Court emphasized that procedural rules should be strictly followed, and
the finality of a trial court's decision should not be set aside without the most persuasive
of reasons. PBC's Motion for Reconsideration was considered pro forma as it did not
present exceptional reasons to warrant a relaxation of the procedural rules. The Court held
that the running of the period to appeal is not tolled by the filing or pendency of motions
to reconsider a decision. Therefore, PBC's attempt to cure the defect by filing a Motion to
Set the Motion for Reconsideration for Hearing after the period for filing the Notice of
Appeal had expired was not valid.
Development Bank of the Philippines vs. Perez (G.R. No. 14854, November 11,
2004)
Development Bank of the Philippines vs. Perez
G.R. No. 148541. November 11, 2004.
Facts:
The case of Development Bank of the Philippines (DBP) v. Perez involves the respondents,
Bonita O. Perez and Alfredo Perez, who failed to pay their loan obligation to DBP. As a
result, they were forced to agree to a restructuring of their loan to prevent the foreclosure
of their mortgaged properties. However, the respondents later filed a complaint seeking to
nullify the new promissory note, claiming that DBP had restructured their loan in bad faith
and that they were coerced into signing it out of fear of foreclosure. The trial court upheld
the validity of the new promissory note and ordered the respondents to pay their
obligation. The Court of Appeals affirmed the trial court's decision but modified it by
recalculating the total obligation using a formula mandated by Central Bank Circular No.
158.
Issue:
(1) the validity of the new promissory note,
(2) the usurious interest rate agreed upon,
(3) the application of CB Circular No. 158 in computing the total obligation, and
(4) the amount of the total obligation.
Ruling:
The Supreme Court ruled that the new promissory note was validly signed by the
respondents. However, the interest rate agreed upon was found to be usurious. As a result,
the Court reduced the interest rate to the legal rate of twelve percent (12%) per annum.
The Court also held that the formula provided in CB Circular No. 158 cannot be used to
compute the total obligation, as it only applies to the computation of the simple annual
rate. Instead, the total amount of the obligation must be recomputed according to the
terms and conditions agreed upon.
Ratio:
The Court based its ruling on several legal principles. First, it cited Article 1335 of the New
Civil Code, which states that a threat to enforce one's claim through competent authority,
if the claim is just or legal, does not vitiate consent. In this case, the Court found that
signing the promissory note under the threat of foreclosure does not invalidate the
respondents' consent.
Second, the Court determined that the interest rate of eighteen percent (18%) plus
additional interest and penalty charges was highly usurious. Usury refers to an interest
rate that exceeds the legal limit set by law. In this case, the Court found the interest rate to
be usurious and therefore void. However, the unpaid principal debt remained valid.
Third, the Court held that the formula provided in CB Circular No. 158 cannot be used to
compute the total obligation. The circular only applies to the computation of the simple
annual rate and does not provide a comprehensive method for determining the total
obligation. Therefore, the Court ruled that the total amount of the obligation must be
recomputed according to the terms and conditions agreed upon by the parties.
In conclusion, the Supreme Court found that the new promissory note was validly signed
by the respondents. However, the interest rate agreed upon was usurious, resulting in a
reduction to the legal rate of twelve percent (12%) per annum. The Court also held that the
formula in CB Circular No. 158 cannot be used to compute the total obligation and that
the amount must be recomputed according to the agreed terms and conditions. The case
was remanded to the trial court for the determination of the total obligation according to
the reduced interest rate.
Archbishop Fernando R. Capalla, etc. vs. Comelec, G.R. No. 201112, June 13,
2012
Capalla vs. Commission on Elections
G.R. No. 201112. October 23, 2012.
Facts:
The case involves the validity of the extension of the option to purchase under the
Automated Election System Contract. The Comelec and Smartmatic-TIM entered into a
Contract for the Provision of an Automated Election System for the May 10, 2010
Synchronized National and Local Elections. The Comelec was given until December 31,
2010 to exercise the option to purchase the goods listed in the contract. The Comelec
opted not to exercise the option except for 920 units of PCOS machines for special
elections in certain areas. On March 6, 2012, the Comelec resolved to seriously consider
exercising the option subject to certain conditions. On March 29, 2012, the Comelec
accepted Smartmatic-TIM's offer to extend the period to exercise the option until March
31, 2012. The extension agreement was signed on March 30, 2012. The Comelec
eventually approved the Deed of Sale between the Comelec and Smartmatic-TIM to
purchase the PCOS machines for the upcoming 2013 elections. Movants filed separate
petitions challenging the validity of the extension and the subsequent transactions.
Issue:
The main issue raised in the case is whether the extension of the option to purchase is
valid.
Ruling:
The Supreme Court ruled that the extension was valid and did not result in substantial
amendments to the contract.
Ratio:
The Court held that the extension was advantageous to the Comelec and the public. The
Court interpreted the contract to allow for amendments and extensions, and found that
the extension did not give Smartmatic-TIM any additional rights or advantages. The Court
also rejected the argument that the extension should have been subject to public bidding,
finding that the extension did not alter the basic parameters of the contract and did not
prejudice the other bidders. The Court also found that the extension was necessary due to
time and budget constraints, and that the Comelec still had the option to conduct public
bidding for future elections.
e. Obligatory Force of Contracts (1159; 1305; 1315; 1266-1267)

LTB vs. Manubat (58 SCRA 650)
Laguna Tayabas Bus Co. vs. Manabat
G.R. No. L-23546. August 29, 1974.
Facts:
The case involves a dispute between the Laguna Tayabas Bus Company and the Batangas
Transportation Company (petitioners) and Francisco C. Manabat, as the assignee of the
Bian Transportation Company, which was declared insolvent. On January 20, 1956, the
Bian Transportation Company leased its certificates of public convenience to the
petitioners for a period of five years. The lease contract was provisionally approved by the
Public Service Commission, subject to modification or cancellation. After the lease
contract was executed, the Bian Transportation Company was declared insolvent and
Manabat was appointed as its assignee. The petitioners paid the lease rentals up to
December 1957, except for the rental for August 1957, which they deducted without the
consent of the plaintiff. The assignee objected to the deduction, claiming that the contract
of lease would only be suspended if the petitioners could not operate the leased lines due
to the action of the lessor's officers, employees, or laborers. The defendants neither
refunded the deductions nor paid the rentals beginning January 1958, despite demands.
The petitioners filed a petition with the Public Service Commission to suspend the
operation on the leased lines, citing the reduction in the amount of dollars allowed for the
purchase of spare parts and the alleged difficulty in securing said parts. The petition was
granted, and the operation was suspended until December 31, 1959. The assignee filed a
complaint against the petitioners for the recovery of the accrued rentals and subsequent
rentals. The defendants moved to dismiss the complaint, but the motion was denied. The
Court of First Instance ruled in favor of the assignee, ordering the defendants to pay the
rentals, attorney's fees, and damages. The defendants appealed to the Court of Appeals,
which affirmed the decision.
Issue:
The main issue raised in the case is whether the petitioners are entitled to a reduction of
rentals due to the suspension of operations on the leased lines.
Ruling:
The Supreme Court dismissed the original and amended petitions and affirmed the
decision of the Court of Appeals, ordering the petitioners to pay the rentals, attorney's
fees, and costs.
Ratio:
The Court held that the petitioners are not entitled to a reduction of rentals due to the
suspension of operations. The petitioners invoked Article 1680 of the Civil Code, which
grants lessees of rural lands the right to a reduction of rentals in case of extraordinary
fortuitous events. However, the Court held that this provision does not apply to ordinary
leases and does not extend to the petitioners in this case. The Court also rejected the
petitioners' argument that the Reyes v. Caltex case applied by analogy, as it had already
refused to apply Article 1680 in that case. The Court emphasized that the cause of the
petitioners' inability to operate on the leased lines was their own voluntary desistance, not
an extraordinary fortuitous event.
The Court also noted that the lease contract provided a forbearance on the part of the
lessor to operate transportation business along the same lines, which would have
benefited the petitioners even if they did not actually use the certificates of public
convenience. The Court found that the petitioners' conduct, including reneging on their
promise to pay the rentals and seeking to suspend operations only on the leased lines,
demonstrated a malicious intent to reduce operation costs and increase profit.
Based on these findings, the Supreme Court affirmed the decision of the Court of Appeals,
ordering the petitioners to pay the rentals, attorney's fees, and costs.
National Marketing Corp. vs. Atlas Development Corp. (21 SCRA 359)
National Marketing Corp. vs. Atlas Trading Development Corp.
G.R. No. L-21979. September 29, 1967.
Facts:
The case of National Marketing Corporation v. Atlas Trading Development Corporation and
the Alto Surety & Insurance Co., Inc. involves a dispute over the non-delivery of galvanized
steel sheets. The plaintiff, National Marketing Corporation, originally filed the case
through its predecessor, Philippine Relief and Trade Rehabilitation Administration (Pratra).
The plaintiff alleged that defendant Atlas Trading Development Corporation offered to sell
8,000 metric tons of galvanized sheets to the plaintiff, and the plaintiff agreed to purchase
them with the condition that the seller provide a performance bond. A contract of
purchase and sale was executed between the plaintiff and defendant Atlas, with
defendant Alto Surety & Insurance Company acting as surety for the performance bond.
The plaintiff opened a letter of credit with the Philippine National Bank to guarantee
payment. However, neither defendant Atlas nor its principal, West India Commercial Corp.
of New York, delivered the galvanized steel sheets. The plaintiff sought to recover
liquidated damages and the amount of the performance bond from the defendants.
Issue:
The main issue in the case is whether liability can be imposed on the defendants for the
non-delivery of the galvanized steel sheets.
Ruling:
The Supreme Court affirmed the lower court's decision.
Ratio:
The Court held that the discrepancy between the contract and the letter of credit excused
the non-performance by the seller. It emphasized that a letter of credit contains the entire
contract between the parties and is independent of the contract of sale. The Court cited a
New York Supreme Court decision stating that a material variance between the letter of
credit and the sales agreement would excuse non-performance by the seller. Therefore,
since no delivery was made due to the discrepancy, no liability could be imposed on the
defendants. The Court concluded that the lower court's findings of fact and application of
the law were correct, and thus affirmed the decision.
CONTRACTS - Stages and Elements of Contracts

a. Negotiation (1324 vs. 1479; 1319; 1482)
Laudico vs. Arias, (43 Phil.270)
Laudico vs. Rodriguez
G.R. No. L-16530. March 31, 1922.
Facts:
The case of Laudico v. Rodriguez involves a dispute over the formation of a valid contract
of lease between the plaintiffs, Mamerto Laudico and Fred M. Harden, and the
defendants, Manuel Arias Rodriguez et al. On February 5, 1919, Vicente Arias, on behalf of
himself and his co-owners, sent a letter to Laudico offering him an option to lease a
building on Carriedo Street. Laudico presented Harden as the party interested in leasing
the building, and negotiations were conducted through correspondence and verbal
discussions with Vicente Arias. On March 6, 1919, Laudico sent a letter to Arias accepting
all the propositions, as amended and supplemented. However, before Arias received the
letter of acceptance, he had already sent a letter of withdrawal of the offer to Laudico.
Issue:
The main issue in this case is whether a valid contract of lease was formed between the
parties.
Ruling:
The court ruled that no contract was perfected between the plaintiffs and the defendants.
Ratio:
The court based its decision on Article 1262, paragraph 2, of the Civil Code, which states
that an acceptance by letter does not have any effect until it comes to the knowledge of
the offerer. Therefore, before the offerer learns of the acceptance, they are not bound by it
and can still withdraw the offer. In this case, Arias had the right to withdraw the offer since
he had not yet received notice of the acceptance when he sent the letter of withdrawal.
When the notice of acceptance was received by Arias, it no longer had any effect as the
offer had already been withdrawn.
The court emphasized that for a contract to be formed, there must be a meeting of the
minds through offer and acceptance. In this case, although there was an offer and an
acceptance, they did not meet to give birth to a contract.
The court also discussed the doctrine that notice of revocation of an offer must be given
to avoid an acceptance that may convert it into a binding contract. However, this doctrine
did not apply in this case because Arias had already sent the letter of revocation before
receiving the letter of acceptance. The court did not give credence to Laudico's testimony
that he received the letter of revocation after the letter of acceptance, as Laudico had an
interest in invalidating the revocation.
The court further explained that the Civil Code adopted the theory that an acceptance by
letter is not effective until it comes to the knowledge of the offerer. Therefore, the offer can
be revoked before the acceptance is known, and the revocation impedes the perfection of
the contract.
Based on these reasons, the court reversed the judgment appealed from and absolved the
defendants from the complaint.
b. Perfection (1318; 1319)

a. Theories in Perfection of Contracts (Manifestation, Expedition, Reception, and
Cognition Theories)
b. Elements of Contracts
i. Consent (1319-1346)
i-1. Offer
i-2. Acceptance
Yuviengco vs. Dacuycuy (104 SCRA 668)
Yuvienco vs. Dacuycuy
G.R. No. L-55048. May 27, 1981.
Facts:
The petitioners in this case are Suga Sotto Yuvienco, Britania Sotto, and Marcelino Sotto,
who are the owners of a parcel of land and a building. They expressed their willingness to
sell the property to the respondents, who were tenants on the property. The respondents
replied by telegram, stating that they agreed to buy the property and would proceed to
Tacloban to negotiate the details. However, when the petitioners' representative arrived
with a prepared contract to purchase and sell, the respondents found a variance between
the terms of payment and what they had in mind. As a result, the bankdraft offered for
payment was returned, and the document remained unsigned by the respondents. The
respondents then filed an action for specific performance in the Court of First Instance of
Leyte, while the petitioners filed a motion to dismiss the complaint on the grounds that it
stated no cause of action and that the claim alleged was unenforceable under the Statute
of Frauds.
Issue:
The main issue raised in the case is whether there was a perfected contract of sale
between the petitioners and the respondents.
Ruling:
The court ruled that there was no perfected contract of sale. The telegram-reply of the
respondents, which stated "we agree to buy property," did not show the existence of a
perfected contract of sale. The court emphasized that the respondents insisted on further
negotiation of details instead of absolutely accepting the offer. Therefore, the complaint
did not state a cause of action.
The court also ruled that the claim for specific performance was unenforceable under the
Statute of Frauds. The alleged agreement for payment in installments was not supported
by any writing or memorandum, as required by the Statute of Frauds. The court held that
in any sale of real property on installments, the idea of payment on installments must be
in the requisite of a note or memorandum. Since there was no such note or memorandum
in this case, the claim for specific performance was unenforceable.
Ratio:
The court based its decision on the fact that the respondents did not absolutely accept
the offer to buy the property, but instead insisted on further negotiation of details. This
showed that there was no meeting of the minds between the parties, which is essential for
the formation of a contract. Therefore, there was no perfected contract of sale.
Furthermore, the court applied the Statute of Frauds, which requires that agreements for
the sale of real property must be in writing or supported by a note or memorandum. In this
case, the alleged agreement for payment in installments was not supported by any writing
or memorandum. Therefore, the claim for specific performance was unenforceable.
In conclusion, the court held that there was no perfected contract of sale between the
petitioners and the respondents. The claim for specific performance was unenforceable
under the Statute of Frauds because there was no writing or memorandum supporting the
alleged agreement for payment in installments. Therefore, the court set aside the orders
of the lower court and dismissed the respondents' complaint.
Enriquez vs. Sun Life Assurance Co., (41 Phil.269)

Enriquez vs. Sun Life Assurance Company of Canada
G.R. No. 15895. November 29, 1920.
Facts:
The case of Enriquez v. Sun Life Assurance Company of Canada involves a dispute over
the validity of a life annuity contract. The plaintiff, Rafael Enriquez, acting as the
administrator of the estate of the late Joaquin Ma. Herrer, filed a lawsuit against the
defendant, Sun Life Assurance Company of Canada, seeking to recover the amount of
P6,000 that was paid by the deceased for a life annuity. The trial court ruled in favor of the
defendant, prompting the plaintiff to appeal the decision.
The undisputed facts of the case are as follows: On September 24, 1917, Joaquin Herrer
applied for a life annuity from the Sun Life Assurance Company of Canada through its
Manila office. Two days later, he paid P6,000 to the manager of the company's Manila
office and received a provisional receipt. The application was then sent to the company's
head office in Montreal, Canada. On November 26, 1917, the head office sent a cable
notice of acceptance to the Manila office. However, it is disputed whether the Manila
office sent a letter notifying Herrer of the acceptance on the same day. On December 4,
1917, the policy was issued in Montreal. On December 18, 1917, attorney Aurelio A. Torres
wrote to the Manila office, stating that Herrer wanted to withdraw his application. The
Manila office replied on December 19, 1917, informing Torres that the policy had already
been issued and referring to the notification sent on November 26, 1917. Herrer passed
away on December 20, 1917.
Issue:
The main issue in the case is whether Herrer received notice of the acceptance of his life
annuity application.
Ruling:
The court ruled in favor of the plaintiff and held that the contract for a life annuity was not
validly formed. The court applied Article 1262 of the Civil Code, which states that an
acceptance made by letter shall only bind the person making the offer from the time it
came to his knowledge. The court emphasized that the mailing of acceptance completes
the contract of insurance, and if the acceptance is not actually or constructively
communicated to the proposer, no contract is formed. The court also noted that the
presumption of receipt of mail matter applies only when all the necessary facts, such as
proper addressing, stamping, and depositing in the post office, are present. In this case,
since it was not proven that the letter of notification was actually mailed, the presumption
of receipt does not apply.
Ratio:
The court based its decision on Article 1262 of the Civil Code, which governs the
acceptance of contracts made by letter. According to this provision, an acceptance made
by letter only binds the person making the offer from the time it came to his knowledge. In
the case at hand, it was not satisfactorily proven that Herrer received notice of the
acceptance of his life annuity application. The evidence presented by both parties
indicated that the letter notifying Herrer of the acceptance was prepared and signed in the
Manila office of the insurance company but was never actually mailed and received by the
applicant. The court emphasized that the mailing of acceptance is crucial in completing
the contract of insurance. Since the acceptance was not actually or constructively
communicated to Herrer, no valid contract was formed. The court also highlighted that the
presumption of receipt of mail matter only applies when all the necessary facts are
present, such as proper addressing, stamping, and depositing in the post office. In this
case, since it was not proven that the letter of notification was actually mailed, the
presumption of receipt does not apply. Therefore, the court reversed the judgment of the
trial court and ordered the defendant to pay the plaintiff the sum of P6,000 with legal
interest from November 20, 1918, until paid.
Laudico vs. Arias, (43 Phil.270)

Laudico vs. Rodriguez
G.R. No. L-16530. March 31, 1922.
Facts:
The case of Laudico v. Rodriguez involves a dispute over the formation of a valid contract
of lease between the plaintiffs, Mamerto Laudico and Fred M. Harden, and the
defendants, Manuel Arias Rodriguez et al. On February 5, 1919, Vicente Arias, on behalf of
himself and his co-owners, sent a letter to Laudico offering him an option to lease a
building on Carriedo Street. Laudico presented Harden as the party interested in leasing
the building, and negotiations were conducted through correspondence and verbal
discussions with Vicente Arias. On March 6, 1919, Laudico sent a letter to Arias accepting
all the propositions, as amended and supplemented. However, before Arias received the
letter of acceptance, he had already sent a letter of withdrawal of the offer to Laudico.
Issue:
The main issue in this case is whether a valid contract of lease was formed between the
parties.
Ruling:
The court ruled that no contract was perfected between the plaintiffs and the defendants.
Ratio:
The court based its decision on Article 1262, paragraph 2, of the Civil Code, which states
that an acceptance by letter does not have any effect until it comes to the knowledge of
the offerer. Therefore, before the offerer learns of the acceptance, they are not bound by it
and can still withdraw the offer. In this case, Arias had the right to withdraw the offer since
he had not yet received notice of the acceptance when he sent the letter of withdrawal.
When the notice of acceptance was received by Arias, it no longer had any effect as the
offer had already been withdrawn.
The court emphasized that for a contract to be formed, there must be a meeting of the
minds through offer and acceptance. In this case, although there was an offer and an
acceptance, they did not meet to give birth to a contract.
The court also discussed the doctrine that notice of revocation of an offer must be given
to avoid an acceptance that may convert it into a binding contract. However, this doctrine
did not apply in this case because Arias had already sent the letter of revocation before
receiving the letter of acceptance. The court did not give credence to Laudico's testimony
that he received the letter of revocation after the letter of acceptance, as Laudico had an
interest in invalidating the revocation.
The court further explained that the Civil Code adopted the theory that an acceptance by
letter is not effective until it comes to the knowledge of the offerer. Therefore, the offer can
be revoked before the acceptance is known, and the revocation impedes the perfection of
the contract.
Based on these reasons, the court reversed the judgment appealed from and absolved the
defendants from the complaint.
Marlboro vs. Court of Appeals, (G.R. No.125761, April 30, 2003)

Malbarosa vs. Court of Appeals
G.R. No. 125761. April 30, 2003.
Facts:
The case involves a dispute between Salvador P. Malbarosa (petitioner) and S.E.A.
Development Corp. (respondent) over the return of a car assigned to the petitioner by the
respondent. The petitioner was the president and general manager of Philtectic
Corporation, a company owned by the respondent. The respondent assigned a car to the
petitioner and offered him an incentive compensation of P251,057.67, which included the
transfer of the car to him. However, the petitioner did not effectively notify the respondent
of his acceptance of the offer before the respondent withdrew it. The trial court ruled that
there was no perfected contract between the parties and ordered the petitioner to return
the car. The Court of Appeals affirmed the trial court's decision.
Issue:
The main issue in this case is whether there was a valid acceptance of the respondent's
offer by the petitioner.
Ruling:
The Supreme Court ruled that there was no valid acceptance of the respondent's offer by
the petitioner.
Ratio:
The Supreme Court explained that the acceptance of an offer must be made known to the
offeror. In this case, the petitioner did not effectively notify the respondent of his
acceptance before the offer was withdrawn. Therefore, there was no meeting of the minds
between the parties and no contract was perfected.
The Court further stated that if an offeror revokes or withdraws its offer and the revocation
or withdrawal is the first to reach the offeree, the contract is not perfected. Any
acceptance made by the offeree after knowledge of the revocation or withdrawal is
inefficacious. In this case, the respondent withdrew its offer before the petitioner
effectively accepted it, so there was no contract between the parties.
Additionally, the Supreme Court emphasized that if an offeror prescribes the exclusive
manner in which acceptance should be indicated, an acceptance in a different manner
does not bind the offeror. In this case, the respondent required the petitioner to affix his
signature on the letter-offer to indicate his acceptance. However, the petitioner did not do
so, rendering his acceptance ineffective.
In conclusion, the Supreme Court affirmed the decision of the Court of Appeals, ruling
that there was no valid acceptance of the respondent's offer by the petitioner. Therefore,
there was no contract between the parties and the petitioner was ordered to return the car
to the respondent.
Sanchez vs. Rigor, (45 SCRA 368)

Sanchez vs. Rigos
G.R. No. L-25494. June 14, 1972.
Facts:
The case of Sanchez v. Rigos involves a dispute over an "Option to Purchase" contract. The
plaintiff, Nicolas Sanchez, entered into a contract with the defendant, Severina Rigos,
wherein Rigos agreed to sell a parcel of land to Sanchez for a specified price. However,
there was no indication in the contract that Rigos' agreement was supported by a
consideration distinct from the price stipulated for the sale of the land. The lower court
ruled in favor of Sanchez, ordering Rigos to accept the payment made by Sanchez and
execute the necessary deed of conveyance. Rigos appealed the decision.
Issue:
The main issue in this case is whether the contract between Sanchez and Rigos is a valid
"contract to buy and sell" or merely an "option" to buy.
Ruling:
The court ruled that the contract is not a "contract to buy and sell" but rather an "option"
to buy, as indicated by the caption of the instrument. The court emphasized that for a
unilateral promise to be binding, it must be supported by a consideration distinct from the
price. In this case, the plaintiff failed to establish the existence of such consideration.
Ratio:
The court discussed the application of Article 1479 of the Civil Code, which states that a
promise to buy or sell a determinate thing for a price certain is reciprocally demandable.
The court noted that Article 1479 applies specifically to "sales" and requires the
concurrence of a consideration distinct from the price for a unilateral promise to be
binding. The burden of proving the existence of such consideration lies with the promisee.
The court further explained that even if the option to sell is not supported by any
consideration, it can still be withdrawn before acceptance. However, once the offer is
accepted, a bilateral contract of purchase and sale is generated. The court cited a
previous case, Atkins, Kroll & Co., Inc. v. Cua Hian Tek, which treated a unilateral promise
to sell as an option that, upon acceptance, results in a perfected contract of sale.
In this case, the court found that the defendant explicitly averred in her answer that there
was no consideration for her promise to sell. By joining in the petition for a judgment on
the pleadings, the plaintiff impliedly admitted the truth of this averment. Therefore, the
court affirmed the decision of the lower court, ruling in favor of the plaintiff and ordering
the defendant to accept the payment and execute the necessary deed of conveyance.
In a concurring opinion, Justice Antonio agreed with the court's abandonment of the
previous view that an option to sell can be withdrawn even if accepted without
consideration. He emphasized that once the offer to sell is accepted, a bilateral promise
to sell and to buy is formed, and the offeree assumes the obligations of a purchaser. He
also discussed the principle that an offer implies an obligation on the part of the offeror to
maintain it for a reasonable period of time, and revoking the offer arbitrarily would
undermine the stability and security of business transactions.
Leoquinco vs. Postal Savings (47 Phil. 772)

Leoquinco vs. Postal Savings Bank
G.R. No. 23630. August 25, 1925.
Facts:
The case of Leoquinco v. Postal Savings Bank involves a bidder's complaint against the
bank for refusing to accept his bid at a public auction. The plaintiff, Tiburcio Leoquinco,
alleged that he was the highest bidder at a public auction held by the defendants, the
Postal Savings Bank and its board of directors, for the sale of a piece of land. He offered
P27,000 for the property. However, the defendants reserved the right to reject any and all
bids, as stated in Resolution No. 31 of the board of directors and in the public notice
announcing the sale. Despite being the highest bidder, the defendants refused to execute
the deed of sale in favor of the plaintiff. The plaintiff claimed damages amounting to
P25,000 and sought an order for the defendants to execute and deliver the deed of sale.
Issue:
The main issue in this case is whether the defendants had the right to reject the plaintiff's
bid based on the conditions set in the resolution and public notice.
Ruling:
The court ruled in favor of the defendants, affirming their right to reject bids in a public
auction.
Ratio:
The court held that the owner of property offered for sale, whether at a public or private
auction, has the right to prescribe the manner, conditions, and terms of the sale. This
includes the right to require full payment at the time of the sale or to give time for payment,
as well as the right to reject any and all bids. The conditions announced by the auctioneer
or the owner at the time and place of the sale are binding upon all bidders, regardless of
whether they were aware of such conditions. Therefore, the court concluded that the
plaintiff had no grounds to compel the defendants to execute a deed of sale or accept his
bid.
In summary, the court dismissed the bidder's complaint against the Postal Savings Bank,
affirming the bank's right to reject bids based on the conditions set in the resolution and
public notice. The court held that the owner of property offered for sale at auction has the
right to prescribe the manner, conditions, and terms of the sale. The conditions
announced at the time and place of the sale are binding upon all bidders, and the bidder
voluntarily submits to these conditions by participating in the auction. Therefore, the
plaintiff had no grounds to compel the defendants to execute a deed of sale or accept his
bid.
i-3. Parties
i-4. Capacity
Mercado and Mercado vs. Espiritu, (37 Phil. 125)
Mercado vs. Espiritu
G.R. No. L-11872. December 1, 1917.
Facts:
The case of Mercado v. Espiritu involves a dispute over the validity of a deed of sale of a
piece of land. The plaintiffs, Domingo and Josefa Mercado, claimed that they were minors
at the time the deed was executed and sought to have it annulled. They alleged that the
defendant, Jose Espiritu, administrator of the estate of the deceased Luis Espiritu,
fraudulently induced them to sign the deed for a price that was significantly lower than the
value of the land. The lower court dismissed the complaint, ruling that there was
insufficient evidence of the plaintiffs' minority and that the sale should not be annulled.
The plaintiffs appealed the decision.
Issue:
The main issue in the case is whether the plaintiffs were minors at the time the deed of
sale was executed and whether they have the right to have the sale annulled.
Ruling:
The Supreme Court dismissed the claim of the plaintiffs and affirmed the decision of the
lower court. The court held that there was no direct proof of the plaintiffs' minority, such
as certified copies of their baptismal certificates. The statement made by one of the adult
parties to the deed, regarding certain notes made in a private book, was not sufficient to
prove the plaintiffs' minority.
Ratio:
The court also ruled that even if the plaintiffs were minors, the sale of real estate by minors
who have already passed the ages of puberty and adolescence and are near the adult age
is valid. The court cited the provisions of the Civil Code and decisions of the Supreme
Court of Spain to support this ruling. The court held that the plaintiffs cannot be permitted
to excuse themselves from the obligations they assumed in the sale or seek its annulment.
In conclusion, the court dismissed the claim of the plaintiffs and affirmed the validity of
the sale of the land. The court held that there was insufficient evidence of the plaintiffs'
minority and that even if they were minors, the sale should not be annulled.
Hermosa vs. Zobel, (104 Phil. 768)

Hermosa, Jr. vs. Zobel y Roxas
G.R. No. L-11835. October 30, 1958.
Facts:
The case of Hermosa, Jr. v. Zobel y Roxas involves Fernando Hermosa, Jr., who seeks the
rescission of a deed of sale due to misrepresentation of the sale price. The facts of the
case are as follows: Fernando Hermosa, Sr. owned a property in San Sebastian, Spain,
which he inherited from his parents. When he died, intestate proceedings were initiated,
and his daughter Luz Hermosa was appointed as the administratrix of his estate. Luz
Hermosa and Fernando Hermosa, Jr. were the heirs of Fernando Hermosa, Sr. The
administratrix requested permission from the court to sell the property, and the court
granted the permission. However, as there were no bidders in the public auction, the
administratrix requested permission to sell the property privately. She approached
Alfonso Zobel to buy the property, and to overcome objections, Luz and Fernando agreed
to cede and adjudicate the property to Luz, who would then negotiate with the buyer. They
executed a deed of cession and adjudication, which was approved by the probate court.
After the property was adjudicated to Luz Hermosa, she negotiated the sale with Alfonso
Zobel. They agreed on a sale price of P20,000, but to protect the buyer's investment, they
stated a sale price of P80,000 in the deed of sale. They also agreed to make it appear that
P60,000 had been paid to the vendor during the Japanese occupation to avoid taxes. The
sale was completed, and the remaining P5,000 was paid to Luz Hermosa. After Luz
Hermosa's death, Fernando Hermosa, Jr. was appointed as the administrator of her
estate. He discovered that the sale price stated in the deed of sale was P80,000, while only
P20,000 was reported to the probate court. He demanded the payment of the balance
from Alfonso Zobel or the rescission of the sale. When Zobel refused, Hermosa filed a
lawsuit for specific performance or rescission of the sale.
Issue:
The main issue raised in the case is whether Fernando Hermosa, Jr. has the capacity to
bring the action for rescission of the deed of sale and whether his right to rescission has
already prescribed.
Ruling:
The court ruled that Hermosa, Jr. lacks the capacity to bring the action and that his right to
rescission has already prescribed.
Ratio:
The court held that Hermosa, Jr. lacks the capacity to bring the action as the property no
longer belongs to the estate of Fernando Hermosa, Sr. The only party with the right to bring
the action is the administrator of Luz Hermosa's estate or her heirs. The court also rejected
Hermosa's argument that the deed of cession was null and void because he was a minor
at the time of its execution. The court stated that he was almost of age when he executed
the deed. Furthermore, the court found that Hermosa was estopped from disputing the
validity of the cession as he and Luz Hermosa filed a joint petition with the probate court
explaining the reasons for the cession, which was approved by the court.
Even if Hermosa had the legal ground to ask for rescission, the court held that his right of
action had already prescribed. He became of age on January 7, 1948, but he only filed the
lawsuit on May 28, 1954, more than four years after attaining majority. Under Article 1389
of the New Civil Code, an action for rescission prescribes in four years from the removal
of one's incapacity.
The court affirmed the lower court's decision but eliminated the award of damages and
attorney's fees, as it believed that Hermosa filed the lawsuit in good faith based on his
belief that the balance of P60,000 had not been paid.
Braganza vs. Villa (105 Phil. 456)

De Braganza vs. De Villa Abrille
G.R. No. L-12471. April 13, 1959.
Facts:
The case of De Braganza v. De Villa Abrille involves a dispute over a loan agreement
between the petitioners, Rosario L. de Braganza and her sons Rodolfo and Guillermo, and
the respondent, Fernando F. de Villa Abrille. On October 30, 1944, the petitioners received
a loan of P70,000 in Japanese war notes from Villa Abrille. In exchange, they promised to
pay him P10,000 in legal currency two years after the cessation of hostilities or once
international exchange was established in the Philippines, plus 2% interest per annum.
However, the payment was not made, leading Villa Abrille to sue the petitioners in March
1949.
Issue:
The main issue raised in the case is whether the failure of the minors to disclose their age
when entering into the contract constitutes fraud that can be the basis of an action of
deceit.
Ruling:
The court ruled that the failure to disclose their minority does not automatically constitute
fraud. In order to hold the minors liable, the fraud must be actual and not constructive.
The court also held that although the written contract is unenforceable due to their non-
age, the minors are still required to make restitution to the extent that they may have
profited from the loan.
Ratio:
The court explained that the failure to disclose minority does not automatically amount to
fraud because the law presumes that parties to a contract have the capacity to enter into
it. In this case, the minors did not actively deceive the respondent; they simply failed to
disclose their age. Therefore, the court held that the failure to disclose their minority does
not constitute fraud.
The court further discussed the applicability of the four-year period for annulment under
Article 1301 of the Civil Code. It stated that if minority is only raised as a defense without
the minors seeking any positive relief from the contract, the four-year period may not be
applied. In this case, the minors did not file an action for annulment but merely interposed
an excuse from liability.
Based on the evidence presented, the court determined that the minors had used the loan
funds for their support during the Japanese occupation. Therefore, they were deemed to
have profited from the money received. The court calculated their share of the loan to be
2/3 of P70,000, or P46,666.66. As a result, they were ordered to return P1,166.67. The
court clarified that their promise to pay P10,000 in Philippine currency could not be
enforced since they were minors, but their liability was declared based on Article 1304 of
the Civil Code.
In conclusion, the court modified the decision of the appellate court. Rosario Braganza
was ordered to pay 1/3 of P10,000, or P3,333.33, plus 2% interest from October 1944.
Rodolfo and Guillermo Braganza were jointly ordered to pay the total amount of P1,166.67,
plus 6% interest from March 7, 1949. No costs were awarded in this instance.
Frias vs. Esquivel (67 SCRA 487)

FRIAS vs. ESQUIVEL
G.R. No. L-17366. July 31, 1962.
Facts:
The case of Frias v. Esquivel involves an application for the registration of a residential lot
in Nueva Ecija filed by Alfredo Frias and Belen Lustre. Santiago Esquivel and his siblings
opposed the application, claiming ownership of a portion of the land. They also requested
the postponement of the proceedings until a civil case between them and the applicants
was resolved. The court initially granted the postponement but later issued an order of
general default, except for the oppositors and the Director of Lands. In the civil case, it was
determined that the land in question was common property and was sold by one of the
heirs to the applicants. As a result, the court ruled in favor of the applicants and issued a
decree of registration in their name.
Rosario Esquivel-Gonzales, acting as the guardian of the minors Reynaldo and Ricardo
Esquivel, filed a petition to reopen the decree of registration, alleging fraud committed by
the applicants. The petition claimed that the applicants falsely represented themselves
as the owners of the entire residential lot during the registration proceedings, despite
knowing that they were not the owners in its entirety. The petition also alleged that the
applicants manipulated the execution of a deed of sale involving the share of the minor
heirs of Alvaro Esquivel.
Issue:
The main issue in this case is whether the petition to reopen the decree of registration
should be granted based on the alleged fraud committed by the applicants.
Ruling:
The court denied the petition to reopen the decree of registration, affirming the decision
of the lower court.
Ratio:
To justify the setting aside or review of a decree of registration, the party seeking relief must
prove that the registration was obtained through fraud, both actual and extrinsic. In this
case, the alleged fraud was considered intrinsic because it was involved in the same
proceedings where the oppositors had the opportunity to assert their rights and challenge
the documents presented by the applicants. Intrinsic fraud refers to fraud that occurs
within the proceedings themselves. On the other hand, extrinsic fraud is employed to
deprive a party of their day in court, preventing them from asserting their rights to the
property.
Based on the facts presented, the court concluded that the alleged fraud did not meet the
requirements for extrinsic fraud. The oppositors had the chance to contest the applicants'
claims and present their own evidence during the registration proceedings. Therefore, the
decision denying the petition to reopen the decree of registration was upheld.
National Power Corporation vs. National Merchandising Corp. (117 SCRA 789)
National Power Corp. vs. National Merchandising Corp.
G.R. Nos. L-33819 and L-33897. October 23, 1982.
Facts:
The case of National Power Corp. v. National Merchandising Corp. involves a contract of
sale between the National Power Corporation (NPC) and National Merchandising
Corporation (NAMERCO) for the purchase of sulfur. The contract included a stipulation for
liquidated damages in case of breach. The Domestic Insurance Company also executed a
performance bond to guarantee NAMERCO's obligations. However, NAMERCO did not
disclose to NPC that the sale was subject to the availability of a steamer, as instructed by
its principal. The New York supplier was unable to deliver the sulfur due to a lack of
shipping space. As a result, the contract was rescinded by the Government Corporate
Counsel and NPC demanded payment of liquidated damages from NAMERCO and the
surety. NPC then sued for the recovery of the stipulated liquidated damages. The Court of
First Instance ordered NAMERCO and the surety to pay reduced liquidated damages with
interest.
Issue:
The main issue in the case is whether NAMERCO is liable for damages for exceeding its
authority in negotiating the sale.
Ruling:
The court ruled that NAMERCO is liable for damages under Article 1897 of the Civil Code,
which states that an agent who exceeds the limits of his authority without giving sufficient
notice to the party with whom he contracts is personally liable. The court also held that
the stipulation for liquidated damages is enforceable against NAMERCO, but not against
its principal. The liability of the surety, the Domestic Insurance Company, is not affected
by NAMERCO's exceeding its authority. The court further reduced the amount of liquidated
damages to be paid by NAMERCO and the surety.
Ratio:
The court's ruling is based on the principle that an agent who exceeds the limits of his
authority is personally liable for his actions. In this case, NAMERCO failed to disclose to
NPC that the sale was subject to the availability of a steamer, as instructed by its principal.
This failure to disclose constituted a breach of NAMERCO's authority. As a result,

NAMERCO is personally liable for the damages incurred by NPC.
The court also emphasized that the stipulation for liquidated damages is intended to avoid
disputes over the amount of damages. In this case, the stipulation for liquidated damages
is enforceable against NAMERCO, as it was a party to the contract. However, the court
clarified that the stipulation is not enforceable against NAMERCO's principal, as the
principal did not directly enter into the contract with NPC.
The liability of the surety, the Domestic Insurance Company, is not affected by
NAMERCO's exceeding its authority. The surety is still liable for the obligations it
guaranteed under the performance bond.
In determining the amount of damages to be paid, the court considered equitable factors
and reduced the amount of liquidated damages. The court also decided that interest
should not be awarded on the damages.
Overall, the court's ruling is based on the principles of agency law, contract law, and
equitable considerations. NAMERCO is held personally liable for exceeding its authority,
the stipulation for liquidated damages is enforceable against NAMERCO but not its
principal, and the surety remains liable for its obligations. The court also takes into
account equitable factors in determining the amount of damages to be paid.
i-5. Vices of Consent

Pangadil vs. CFI (116 SCRA 347)
Pangadil vs. Court of 1st Instance of Cotabato, Branch I
G.R. No. L-32437. August 31, 1982.
Facts:
The case of Pangadil v. Court of First Instance of Cotabato, Branch I involves a dispute over
a parcel of land that was conveyed to the private respondents through an oral transaction
in 1941. In 1946, petitioner Salandang Pangadil filed a petition in the respondent court to
be appointed as the guardian of her minor siblings in order to execute a document
formalizing the verbal sale made by their father. The court granted the petition and a
document titled "Ratificacion De Una Venta" acknowledging the sale was presented to the
court for approval. The document was approved and the guardianship proceeding was
closed.
Issue:
The main issue raised in the case is whether the document acknowledging the sale of the
land can be considered inexistent and void, and whether the action to annul the sale is
barred by the statute of limitations.
Ruling:
The Supreme Court ruled that the document acknowledging the sale of the land cannot
be considered inexistent and void, and that the action to annul the sale is barred by the
statute of limitations.
Ratio:
The Supreme Court held that the document may not be deemed inexistent and void
because the petitioners intended to be bound by it. Even if there was fraud in the execution
of the document, it would only make the contract voidable, which prescribes in four years
from the discovery of the fraud. The Court also found no basis to categorize the document
as absolutely simulated or fictitious, as the parties intended to be bound by it. Therefore,
the action to annul the contract was not imprescriptible. The Court affirmed the dismissal
of the case.
Dumasug vs. Modelo (34 Phil 252)

Dumasug vs. Modelo
G.R. No. 10462. March 16, 1916.
Facts:
The case of Dumasug v. Modelo was decided on March 16, 1916, by the First Division of
the Supreme Court of the Philippines. The plaintiff in the case was Andrea Dumasug, while
the defendant was Felix Modelo. The case was filed in the Court of First Instance of Cebu.
Andrea Dumasug alleged in her complaint that in November 1911, the defendant
persuaded her to sign a document by falsely claiming that it involved her payment of a
certain sum of money for expenses related to a lawsuit. Dumasug, who did not know how
to write, signed the document in good faith, believing the defendant's claims. However,
three months later, the defendant took possession of Dumasug's carabao and two parcels
of land, claiming that they were conveyed to him through the document. Dumasug
opposed this and filed a lawsuit seeking the nullification of the document and the return
of her properties.
The Court of First Instance of Cebu declared the document null and void, ruling in favor of
Dumasug. The court ordered the defendant to return the properties to the plaintiff and pay
her the value of the carabao, as well as rent for the use of the lands. The defendant
appealed the decision.
Issue:
The main issue in the case was whether the document, marked as Exhibit 1, was null and
void. The defendant claimed that the document conveyed ownership of the properties to
him, while the plaintiff argued that her consent to the document was obtained through
fraud and deceit.
Ruling:
The Supreme Court upheld the decision of the lower court, ruling that the document was
null and void. The court cited Articles 1256 and 1266 of the Civil Code, which state that a
written contract is null and void if one of the parties gives their consent by mistake, which
goes to the substance of the contract. The court found that the plaintiff's consent to the
document was given by mistake, as she believed it related to a debt she owed the
defendant, not the sale of her properties.
Ratio:
The court based its decision on the provisions of the Civil Code, specifically Articles 1256
and 1266. These articles state that a contract is null and void if one of the parties gives
their consent by mistake, which goes to the substance of the contract. In this case, the
court found that the plaintiff's consent to the document was obtained through fraud and
deceit, as she was led to believe that it involved her payment of a certain sum of money
for expenses related to a lawsuit. However, the document actually conveyed ownership of
her properties to the defendant.
The court emphasized that the plaintiff, who did not know how to write, signed the
document in good faith, believing the defendant's claims. The court considered this as a
mistake in giving consent, as the plaintiff did not fully understand the nature and
consequences of the document she signed. Therefore, the court declared the document
null and void.
As a result, the court ordered the defendant to return the properties to the plaintiff, along
with their fruits, and pay the value of the carabao with interest as compensation for the
harm caused. The court also noted that the defendant did not claim reimbursement for
the expenses he allegedly incurred on behalf of the plaintiff, so it did not address that
issue. The decision of the lower court was affirmed, and the defendant was ordered to pay
the costs of the case.
Luna vs. Linatoc, (74 Phil.15)

De Luna vs. Linatoc
G.R. No. 48403. October 28, 1942.
Facts:
The case of De Luna v. Linatoc involves a husband and wife, Agustin De Luna and his wife,
as the petitioners, who filed a case against Jose Linatoc, the respondent. The petitioners
sought to annul the sales made by the wife as the agent of her husband. They claimed that
the sales were made without their knowledge and consent. The lower court ruled in favor
of the respondent, stating that the sales were valid as they were made with the husband's
knowledge and consent.
Issue:
The main issue raised in the case is whether or not the sales made by the wife as the agent
of her husband were valid.
Ruling:
The court ruled that the sales made by the wife as the agent of her husband were indeed
valid. The court found that the sales were made with the husband's knowledge and
consent, as stated in a deed of recognition. The court also declared that the partition of
conjugal partnership property during marriage is illegal and void.
Ratio:
The court's decision was based on the interpretation of the deeds involved in the case. The
court found that the contracts of sale and the deed of recognition could be interpreted in
two ways - one referring to the separate property of the wife as a result of the partition, and
the other referring to the conjugal partnership property. The court adopted the latter
interpretation, as it was more in line with the rules of interpretation of contracts. The court
also cited Article 1284 of the Civil Code, which states that if a clause in a contract admits
of various meanings, it should be understood in a way that makes it most effective.
In conclusion, the court ruled that the sales made by the wife as the agent of her husband
were valid, as they were made with the husband's knowledge and consent. The court also
declared that the partition of conjugal partnership property during marriage is illegal and
void.
Constantino vs. CA, (264 SCRA 59)

Constantino vs. Court of Appeals Case Digest
G.R. No. 116018. November 13, 1996.
Facts:
In the case of Constantino v. Court of Appeals, the petitioner, Nelia A. Constantino,
entered into a contract to sell a parcel of land with the respondents, Aurora S. Roque,
Priscilla S. Luna, and Josefina S. Austria. The land was owned in common by the heirs of
Josefa Torres. The parties agreed that the petitioner would prepare the necessary Deed of
Extrajudicial Settlement of Estate with Sale. However, without the participation of the
respondents, the petitioner had the property surveyed, subdivided, and covered by
transfer certificates of title without their knowledge or consent. When the respondents
discovered that the area of the property sold to the petitioner was much bigger than agreed
upon, they filed an action for annulment of the deed and cancellation of the certificates of
title, with a prayer for damages and attorney's fees.
Issue:
The main issues raised in the case were whether the petitioner waived the right to formally
offer her evidence, and whether the Deed of Extrajudicial Settlement of Estate with Sale
reflected the true intent of the parties.
Ruling:
The court ruled that the petitioner waived the right to formally offer her evidence due to a
considerable lapse of time before her counsel made an effort to do so. The court held that
granting the motion to admit the exhibits would condone inexcusable laxity and non-
compliance with a court order, which would hinder the speedy administration of justice.
Regarding the true intent of the parties, the court found that there was no meeting of the
minds on the land area to be sold. The respondents had not yet agreed on the area since
they were still awaiting the survey. The court also noted that the deed was notarized in
Manila, despite the parties being residents of Bulacan, which cast doubt on the procedural
regularity of the document. The court concluded that the respondents' claim that they did
not sign the document before a notary public was more plausible than the petitioner's
claim.
Furthermore, the court found that the petitioner deceived the respondents by filling in
blank spaces in the deed, having the land surveyed and subdivided, and causing the
issuance of transfer certificates of title without their knowledge or consent. This
constituted fraud, which vitiates consent and warrants the annulment of the contract. The
court also noted that the handwritten figures on the second page of the deed were not
available at the time the document was formalized, further supporting the annulment.
As a result, the court affirmed the decision of the trial court to annul and cancel the deed
and certificates of title, and awarded damages and attorney's fees to the respondents.
Songco vs. Sellner (37 Phil. 254)

Songco vs. Sellner
G.R. No. 11513. December 4, 1917.
Facts:
In the case of Songco v. Sellner, the court ruled that Sellner cannot avoid the contract and
must pay the agreed price for the sugar cane he purchased, despite Songco's
misrepresentation of the quantity of cane in the field. The case was decided on December
4, 1917, by the First Division of the Supreme Court of the Philippines, with Justice Street
as the ponente.
The facts of the case are as follows: In December 1915, the defendant, George C. Sellner,
owned a farm in Floridablanca, Pampanga, which was adjacent to a farm owned by the
plaintiff, Lamberto Songco. Both farms had a significant amount of sugar cane ready to be
cut. Sellner wanted to mill his cane at a nearby sugar central, but the owners of the central
were unsure if they could mill his cane and did not promise to take it. Sellner learned that
the central was going to mill Songco's cane and decided to buy it, expecting to run his own
cane in at the same time. He also wanted to obtain a right of way over Songco's land to
transport his sugar to the central. Sellner bought Songco's cane in the field for P12,000
and executed three promissory notes of P4,000 each. Two of the notes were paid, and
Songco filed a lawsuit to recover the remaining amount on the third note.
Issue:
The main issue raised in the case was whether Sellner could avoid the contract and refuse
to pay the price for the sugar cane due to Songco's misrepresentation of the quantity of
cane in the field. Sellner argued that Songco had exaggerated the probable yield of sugar
from the cane, causing him to overpay for the crop.
Ruling:
The court ruled in favor of Songco and held that Sellner was bound by the contract and
must pay the agreed price.
Ratio:
The court reasoned that Sellner had no right to rely on Songco's representation of the
quantity of cane because it was a matter of opinion and could not be known with certainty
until the cane was harvested and milled. Although Songco's representation was
disingenuous and uncandid, it did not constitute actionable deceit or fraud. The court
emphasized that buyers should not rely solely on sellers' statements and should make
their own inquiries and investigations before entering into a contract. Sellner had the
opportunity to examine the cane and measure the fields himself, which should have
alerted him to the fact that Songco's estimate was a mere opinion.
The court cited various cases that supported its decision, stating that misrepresentations
on matters of opinion, judgment, probability, or expectation are not sufficient grounds for
avoiding a contract. The court also noted that the refusal of the seller to warrant his
estimate should have alerted the buyer that it was a mere opinion. The court concluded
that Sellner's reliance on Songco's representation was imprudent, and he must bear the
consequences of his own imprudence.
Additionally, the court addressed an incident in the case where Songco had sued out an
attachment against Sellner, alleging that he was disposing of his property in fraud of his
creditors. The court found that the attachment had been wrongfully sued out and awarded
damages to Sellner for the amount he had paid to dissolve the attachment. However, the
court refused to award further damages for the injury done to Sellner's credit, as it was
deemed remote and speculative.
In conclusion, the court affirmed the judgment in favor of Songco, ruling that Sellner must
pay the agreed price for the sugar cane despite Songco's misrepresentation. The court
emphasized the importance of buyers conducting their own investigations and not relying
solely on sellers' statements.
Rural Bank of Caloocan City vs. CA (104 SCRA 151)

Rural Bank of Caloocan, Inc. vs. Court of Appeals
G.R. No. L-32116. April 21, 1981.
Facts:
The case involves a dispute between Maxima Castro, a 70-year-old woman, and the Rural
Bank of Caloocan, Inc. Castro obtained a loan from the bank with the assistance of
Severino Valencia, who handled all the necessary arrangements and provided the bank
with Castro's personal information. On the same day, the Valencia spouses also obtained
a loan from the bank and convinced Castro to sign as a co-maker on their promissory note.
Both loans were secured by a real estate mortgage on Castro's property. Eventually, the
mortgage was foreclosed and the property was sold at a public auction. Castro filed a
complaint against the bank, alleging that the Valencias fraudulently induced her to sign as
a co-maker and to mortgage her property. The trial court declared the promissory note,
mortgage contract, and auction sale void. The Court of Appeals affirmed the decision.
Issue:
The main issue in this case is whether the promissory note and mortgage contract are valid
and binding on Castro.
Ruling:
The court ruled that the contracts are void due to substantial mistake and fraud. The
consent of both Castro and the bank was vitiated by the fraud perpetrated by the
Valencias. Although the bank was not directly involved in the fraud, it made a mistake in
giving its consent to the contracts. If Castro had been aware of the nature of the
documents she was signing and if the bank had known the true qualifications of the loan
applicants, they would not have agreed to the contracts. Therefore, the promissory note is
invalid between the bank and Castro, and the mortgage contract is only valid up to the
amount of Castro's personal loan.
The court also held that the consignation made by Castro, even without prior offer or
tender of payment, is valid based on considerations of equity. The bank was holding
Castro liable for a higher amount than what she consigned, and the bank had already
foreclosed the mortgage and scheduled the sale of the property. Castro's deposit was
attached to the record of the case, but the bank did not make any claim to such deposit.
Therefore, Castro was justified in believing that it was pointless to make a previous offer
and tender of payment directly to the bank.
Lastly, the court declared that the auction sale held on the next business day after the
scheduled date, which was declared a special public holiday, is null and void. The
exemption of a holiday applies only to the last day for performing an act required or
permitted by law, not to a day set by an office or officer of the government for an act to be
done. Since the sale was not conducted in accordance with the prescribed notices, it is
invalid.
Ratio:
In conclusion, the court affirmed the decision of the lower court, declaring the promissory
note invalid as against Castro, the mortgage contract null and void beyond the amount of
Castro's personal loan, annulling the foreclosure sale, and ordering the bank to return the
purchase price to the buyer. The court also ordered the bank to pay Castro's personal loan
plus interest, and the Valencia spouses to pay their loan plus interest. The bank, Desiderio,
and the Valencia spouses were also ordered to pay attorney's fees and costs. The court
based its decision on the substantial mistake and fraud committed by the Valencias,
which vitiated the consent of both Castro and the bank. Additionally, the court considered
the equitable principle in allowing Castro's consignation without prior offer or tender of
payment, given the circumstances of the case. Finally, the court emphasized that the
auction sale was invalid due to non-compliance with the prescribed notices and the fact
that it was conducted on a special public holiday.
Asian vs. Jalandoni (45 Phil. 296)

Asiain vs. Jalandoni
G.R. No. 20435. October 23, 1923.
Facts:
The case of Asiain v. Jalandoni involves a land sale contract between the plaintiff, Luis
Asiain, and the defendant, Benjamin Jalandoni. Luis Asiain owns a hacienda called
"Maria" in La Carlota, Occidental Negros, while Benjamin Jalandoni owns an adjoining
hacienda. Asiain offers to sell a portion of his land to Jalandoni for P55,000, indicating that
it contains between 25 and 30 hectares and will produce 2,000 piculs of sugar. However,
it is later discovered that the actual land size is slightly over 18 hectares and the crop only
produces 800 piculs of sugar.
Issue:
The main issue in this case is whether the land sale contract should be rescinded due to
the mutual mistake regarding the quantity of land and crop.
Ruling:
The court rules in favor of the buyer, Jalandoni, and rescinds the contract.
Ratio:
The court's decision is based on Article 1471 of the Civil Code, which states that if land is
sold within boundaries with an expression of the area and if the area is grossly deficient,
the buyer has the option to have the price reduced proportionately or to ask for the
rescission of the contract. In this case, the court determines that the mutual mistake of
the parties regarding the subject-matter of the sale, which is the quantity of land and crop,
is so material that it goes to the essence of the contract. Therefore, the contract is
rescinded.
The court's ruling is based on the principle that equity will rescind a contract for the sale
of land if the boundaries given in the contract contain a material deficiency. The court also
distinguishes this case from a previous case, Irureta Goyena vs. Tambunting, where relief
was denied because there was no statement of quantity in the contract and no indication
of mutual mistake.
In summary, the court rules in favor of Jalandoni and rescinds the land sale contract due
to the mutual mistake regarding the quantity of land and crop. The court applies Article
1471 of the Civil Code, which allows for rescission in cases of gross deficiency in the area
sold. The court's decision is based on the principle of equity and the specific
circumstances of the case.
Tankeh vs. Development Bank of the Philippines, GR 171428, Nov. 11, 2013
Tankeh vs. Development Bank of the Philippines
G.R. No. 171428. November 11, 2013.
Facts:
This case involves a dispute between two brothers, Alejandro V. Tankeh (petitioner) and
Ruperto V. Tankeh (respondent), over their involvement in a shipping company called
Sterling Shipping Lines, Inc. The petitioner alleges that he was deceived and defrauded by
the respondent into signing a promissory note and mortgage contract with the
Development Bank of the Philippines (DBP) for a loan to finance the company's
operations. The petitioner claims that he was promised shares in the company and a
position in its administration, but was excluded from management and not compensated
as a director and stockholder.
The facts of the case are as follows: In 1980, the respondent approached the petitioner
and offered him 1,000 shares worth P1 million to be a director of Sterling Shipping Lines,
Inc. The petitioner agreed and signed the necessary documents, including an assignment
of shares of stock with voting rights. In May 1981, the petitioner signed a promissory note
for a loan from DBP, which was approved in March 1981. The loan was used to finance the
acquisition of an ocean-going vessel named M/V Golden Lilac, which was later renamed
M/V Sterling Ace. The petitioner claims that he was deceived into signing the promissory
note and mortgage contract, as he was not actually a real stockholder of the company and
was excluded from participating in its affairs. He also alleges that the respondent and DBP
committed fraud and negligence in their dealings.
Issue:
The main issue in this case is whether the respondent committed fraud in inducing the
petitioner to enter into the contract and whether the petitioner is entitled to damages and
attorney's fees.
Ruling:
The Regional Trial Court ruled in favor of the petitioner, finding that the respondent had
committed fraud by deceiving the petitioner into signing the promissory note and
mortgage contract. The court declared the promissory note and mortgage contract null
and void as to the petitioner and ordered his release from any obligation or liability arising
from them. The court also denied the counterclaims and cross-claims of the respondents.
On appeal, the Court of Appeals reversed the trial court's decision, finding that the
petitioner had failed to prove by clear and convincing evidence that the respondent
committed fraud. The Court of Appeals held that the alleged fraud was not serious enough
to render the contract voidable and that the petitioner's claim for damages was based on
self-serving allegations.
The Supreme Court partly granted the petitioner's petition for review. The court held that
the petitioner had properly filed a petition for review on certiorari and not a petition for
certiorari. The court also clarified that both dolo causante (fraud in obtaining consent) and
dolo incidente (incidental fraud) must be proven by clear and convincing evidence. The
court emphasized that fraud must be serious and sufficient to impress and lead an
ordinarily prudent person into error.
In this case, the court found that the petitioner had failed to prove by clear and convincing
evidence that the respondent committed fraud. The court noted that the petitioner had
voluntarily signed the promissory note and had knowledge of the consequences. The court
also found that the alleged fraud was not serious enough to render the contract voidable.
However, the court held that the petitioner may be entitled to damages for the
respondent's failure to fulfill his promises and for excluding the petitioner from
management. The court remanded the case to the trial court to determine the amount of
damages and attorney's fees to be awarded to the petitioner.
Ratio:
The Supreme Court clarified that in order to prove fraud, both dolo causante (fraud in
obtaining consent) and dolo incidente (incidental fraud) must be proven by clear and
convincing evidence. The court emphasized that fraud must be serious and sufficient to
impress and lead an ordinarily prudent person into error.
In this case, the court found that the petitioner had failed to prove by clear and convincing
evidence that the respondent committed fraud. The court noted that the petitioner had
voluntarily signed the promissory note and had knowledge of the consequences. The court
also found that the alleged fraud was not serious enough to render the contract voidable.
However, the court held that the petitioner may be entitled to damages for the
respondent's failure to fulfill his promises and for excluding the petitioner from
management. The court remanded the case to the trial court to determine the amount of
damages and attorney's fees to be awarded to the petitioner.
Overall, the Supreme Court partly granted the petitioner's petition for review, sustaining
the finding of fraud but modifying the damages awarded. The respondent Ruperto Tankeh
was ordered to pay moral damages and exemplary damages to the petitioner.
i-6. Simulation of Contracts

Gardner vs. CA (131 SCRA 585)
Gardner vs. Court of Appeals
G.R. No. L-59952.Aug 31, 1984.
Facts:
In the case of Gardner v. Court of Appeals, the respondent, Gardner, entered into a trust
agreement with the defendant, Court of Appeals, involving the transfer of properties. The
agreement was executed on August 31, 1984. However, the transfers were later deemed
simulated and fictitious by the Court of Appeals. As a result, the Trial Court's decision to
nullify the transfers and order reimbursement of cash advances was reinstated.
Issue:
The main issue raised in this case is whether the transfers of properties in the trust
agreement were valid or simulated.
Ruling:
The Court of Appeals ruled that the transfers were simulated and fictitious, thereby
declaring them null and void. The Trial Court's decision to nullify the transfers and order
reimbursement of cash advances was upheld.
Ratio:
The Court's decision was based on the finding that there was no intention to transfer
ownership of the properties. This was evidenced by the lack of consideration and the
absence of any actual change in possession or control of the properties. The trust
agreement was found to be a mere scheme to defraud creditors and evade the payment
of debts.
The Court emphasized that the intention to transfer ownership is a crucial element in any
valid transfer of properties. In this case, the lack of consideration and the absence of any
actual change in possession or control of the properties indicated that there was no
genuine intention to transfer ownership. Therefore, the transfers were declared null and
void.
The Court's decision to order reimbursement of cash advances was based on the principle
of preventing unjust enrichment and upholding the principles of fairness and justice. By
nullifying the transfers and ordering reimbursement, the Court ensured that the defendant
would not benefit from the simulated and fictitious transfers.
Overall, the Court's ruling in this case serves to protect the integrity of property transfers
and prevent fraudulent schemes aimed at evading debts. It upholds the importance of
genuine intention to transfer ownership and ensures that parties cannot unjustly enrich
themselves through simulated and fictitious transfers.
Laganda vs. CA (G.R. No. 55999, August 24, 1984)

Ladanga vs. Court of Appeals
G.R. No. L-55999. August 24, 1984.
Facts:
The case of Ladanga v. Court of Appeals involves the sale of a property by Clemencia A.
Aseneta to her niece, Salvacion Serrano Ladanga. The sale was later declared void due to
nonpayment of the price. The Manila Court of First Instance issued a decision ordering the
register of deeds to issue a new title to Clemencia and the Ladanga spouses to pay
damages and render an accounting of the property's rentals. The Court of Appeals
affirmed this decision.
Issue:
The main issue raised in the case is the validity of the sale. The defendants argued that the
burden of proof was not properly considered and that the sale should be presumed fair
and regular.
Ruling:
The court ruled that the sale was fictitious. This was based on the fact that Clemencia
herself testified that she did not receive the price of P26,000. The court also found that the
Ladanga spouses abused Clemencia's confidence and defrauded her of properties.
Ratio:
The court rejected the argument that Bernardo, as guardian of Clemencia, had no right to
file the complaint. It was established that Bernardo was Clemencia's adopted son and
that Clemencia tacitly approved the action by testifying in the case.
The court affirmed the decision of the Appellate Court with the modification of discarding
the award for moral and exemplary damages.
ii. Object (1347-1349)

Yu Tek & Co. vs. Gonzales (29 Phil. 384)
Yu Tek & Co. vs. Gonzalez
G.R. No. 9935. February 1, 1915.
Facts:
The case of Yu Tek & Co. v. Gonzalez involves a dispute over a written contract for the sale
of sugar. The contract stated that the defendant, Basilio Gonzalez, was to sell 600 piculs
of sugar to the plaintiff, Yu Tek & Co., within a specified period of time. The contract also
included a provision that if Gonzalez failed to deliver the sugar within the specified time,
the contract would be rescinded and Gonzalez would be obligated to return the payment
received and pay an additional amount of P1,200 as indemnity for loss and damages.
Issue:
1) whether parol evidence can be used to modify the terms of the written contract,
2) whether the contract was a perfected sale, and
3) whether the additional amount of P1,200 should be considered as liquidated damages.
Ruling:
The court ruled that parol evidence cannot be used to modify the terms of the written
contract. The contract did not specify that the sugar was to be obtained exclusively from
Gonzalez's own crop, and therefore, the evidence sought to be introduced by Gonzalez
was deemed incompetent.
The court also held that the contract was not a perfected sale. A contract of sale is only
perfected when the parties have agreed upon the price and the thing sold. In this case, the
contract did not specify any particular lot of sugar and the sugar had not been physically
segregated or appropriated. Therefore, the contract was considered an executory
agreement or a promise of sale, rather than a sale.
As a result, the court concluded that the provision regarding the payment of P1,200 was
to be considered as liquidated damages. The contract clearly stated that if Gonzalez failed
to deliver the sugar within the specified time, he would be obligated to pay the sum of
P1,200 as indemnity for loss and damages. The court found that there was no room for
interpretation or construction of this provision and that it was in accordance with the
principles of freedom of contract.
Ratio:
The court's decision was based on the principle that parol evidence cannot be used to
modify the terms of a written contract. The contract in question did not specify that the
sugar was to be obtained exclusively from Gonzalez's own crop, and therefore, any
evidence seeking to modify this provision was deemed incompetent.
The court also relied on the definition of a perfected sale, which requires the parties to
agree upon the price and the thing sold. In this case, the contract did not specify any
particular lot of sugar and the sugar had not been physically segregated or appropriated.
Therefore, the contract was considered an executory agreement or a promise of sale,
rather than a sale.
Regarding the provision for the payment of P1,200, the court found that it should be
considered as liquidated damages. The contract clearly stated that if Gonzalez failed to
deliver the sugar within the specified time, he would be obligated to pay the sum of P1,200
as indemnity for loss and damages. The court determined that there was no need for
interpretation or construction of this provision and that it was in accordance with the
principles of freedom of contract.
In summary, the court ruled that parol evidence cannot modify the terms of the written
contract, the contract was not a perfected sale, and the payment of P1,200 was
considered as valid liquidated damages. The plaintiff was entitled to recover the payment
of P3,000 and the additional amount of P1,200.
Blas vs. Santos (111 Phil. 503)

Blas vs. Santos
G.R. No. L-14070. March 29, 1961.
Facts:
The case involves a dispute over a promise made in a document called Exhibit "A"
regarding the transmission of conjugal properties. The plaintiffs, Maria Gervacio Blas,
Manuel Gervacio Blas, Leoncio Gervacio Blas, and Loida Gervacio, filed a case against
Rosalina Santos, in her capacity as Special Administratrix of the Estate of the deceased
Maxima Santos Vda. de Blas. The plaintiffs sought a judicial declaration that one-half of
the properties left by Maxima Santos be delivered to them as promised in Exhibit "A". The
defendant argued that Exhibit "A" is not a valid and enforceable contract.
Issue:
The main issue in this case is whether Exhibit "A" is a valid trust agreement and
compromise.
Ruling:
The court ruled that Exhibit "A" is a compromise and a contract with sufficient cause or
consideration. It held that the promise made by Maxima Santos to convey one-half of her
share in the conjugal properties is valid. The court also found that Maxima Santos did not
fully comply with her promise. Therefore, the court ordered the defendant to convey and
deliver one-half of the properties to the heirs and legatees of Simeon Blas.
Ratio:
The court's ratio is that Exhibit "A" is a compromise and contract that is not void under
Article 1271 of the Civil Code. The court emphasized that the promise made in Exhibit "A"
refers to existing properties and not to future inheritance. The court also rejected the
argument that the plaintiffs are barred from claiming the properties due to the project of
partition in the settlement of Simeon Blas' estate. The court held that the action to enforce
the promise made in Exhibit "A" did not arise until after Maxima Santos' death. The court
also found that Maxima Santos did not fully comply with her promise to convey one-half
of the properties to the heirs and legatees. Therefore, the court ordered the defendant to
convey and deliver one-half of the properties to the heirs and legatees of Simeon Blas.
Milagros De Belen Vda. De Cabalu vs. Tabu & Laxamana, G.R. No. 188417,
September 24, 2012
Vda. de Cabalu vs. Spouses Tabu
G.R. No. 188417. September 24, 2012.
Facts:
The case involves a dispute over the ownership of a 9,000 square meter lot in Tarlac,
Philippines. The property was originally registered in the name of Faustina Maslum.
Faustina died without any children and left a holographic will, dated July 27, 1939,
assigning and distributing her property to her nephews and nieces. One of the heirs,
Benjamin Laxamana, who died in 1960, was the father of Domingo Laxamana. On March
5, 1975, Domingo allegedly executed a Deed of Sale of Undivided Parcel of Land disposing
of his 9,000 square meter share of the land to Laureano Cabalu.
On August 1, 1994, the forced and legitimate heirs of Faustina executed a Deed of Extra-
Judicial Succession with Partition, which imparted 9,000 square meters of the land to
Domingo. On December 14, 1995, Domingo sold 4,500 square meters of his share to his
nephew, Eleazar Tabamo. The remaining 4,500 square meters of Domingo's share was
registered under his name on May 7, 1996.
Domingo passed away on August 4, 1996. Two months after his death, Domingo
purportedly executed a Deed of Absolute Sale of the remaining 4,500 square meters in
favor of Renato Tabu. The transfer of title was registered, and the property was
subsequently subdivided into two lots.
In 1999, the heirs of Domingo filed an unlawful detainer action against occupants of the
property. In 2002, petitioners filed a case for Declaration of Nullity of Deed of Absolute
Sale, Joint Affidavit of Nullity of Transfer Certificate of Title, Quieting of Title,
Reconveyance, Application for Restraining Order, Injunction and Damages against
respondent spouses.
The Regional Trial Court (RTC) dismissed the complaint, declaring the Deed of Absolute
Sale dated March 5, 1975, null and void for lack of capacity to sell on the part of Domingo.
The Deed of Absolute Sale dated October 8, 1996, was also declared ineffective as it was
executed two months after Domingo's death. The RTC ordered the restoration of the
original title in the name of Faustina subject to partition by her lawful heirs.
Both parties appealed to the Court of Appeals (CA). The CA affirmed the RTC's decision
but deleted the portion declaring the Deed of Absolute Sale dated October 8, 1996, null
and void. The CA found that the March 5, 1975 Deed of Sale was simulated and that
Domingo was an undisputed heir of Faustina.
Petitioners filed a petition for review before the Supreme Court. The main issues to be
resolved were the validity of the March 5, 1975 Deed of Sale and the nullity of the October
8, 1996 Deed of Sale.
Issue:
The main issues to be resolved in this case are the validity of the March 5, 1975 Deed of
Sale and the nullity of the October 8, 1996 Deed of Sale.
Ruling:
The Supreme Court held that the March 5, 1975 Deed of Sale was null and void because
Domingo was not yet the owner of the property at that time. The Court also found that the
October 8, 1996 Deed of Sale was null and void as it was executed after Domingo's death.
The Court ordered the restoration of the original title in the name of Faustina subject to
partition by her lawful heirs.
Ratio:
The Supreme Court ruled that the March 5, 1975 Deed of Sale was null and void because
Domingo did not have the capacity to sell the property at that time. The Court found that
Domingo was not yet the owner of the property as it was only on August 1, 1994, that the
forced and legitimate heirs of Faustina executed a Deed of Extra-Judicial Succession with
Partition, which imparted 9,000 square meters of the land to Domingo. Therefore, the sale
made by Domingo on March 5, 1975, was invalid.
Furthermore, the Court declared the October 8, 1996 Deed of Sale null and void as it was
executed after Domingo's death on August 4, 1996. The Court emphasized that a person
who is already deceased cannot execute a valid deed of sale. Therefore, the transfer of title
and subsequent subdivision of the property based on the October 8, 1996 Deed of Sale
were also deemed ineffective.
As a result, the Court ordered the restoration of the original title in the name of Faustina,
the original owner of the property, subject to partition by her lawful heirs. This means that
the property should be divided among Faustina's nephews and nieces, as stated in her
holographic will.
iii. Cause (1350-1355)

Liguez vs. Court of Appeals, (102 Phil.577)
Liguez vs. Court of Appeals
G.R. No. L-11240. December 18, 1957.
Facts:
The case of Liguez v. Court of Appeals involves a donation of land made by Salvador P.
Lopez to Conchita Liguez. The donation was contested by Liguez's wife and forced heirs,
claiming that it was null and void due to an illicit causa. The Court of Appeals found that
the donation was made in view of Lopez's desire to have sexual relations with Liguez and
that it was part of an onerous transaction with Liguez's parents. As a result, the Court of
Appeals declared the donation inoperative and null and void.
Issue:
The main issue in this case is whether the donation made by Salvador P. Lopez to Conchita
Liguez should be considered null and void due to an illicit causa.
Ruling:
The Supreme Court ruled that the donation made by Salvador P. Lopez to Conchita Liguez
is indeed null and void due to an illicit causa. However, the court allowed Liguez to retain
the property subject to certain conditions, based on the extent of prejudice to the interests
of Lopez's wife and forced heirs.
Ratio:
The Supreme Court explained that the donation should be considered null and void due to
an illicit causa because it was made with the intention of securing Liguez's cohabitation
with Lopez. The court emphasized that liberality can only be considered causa in contracts
of pure beneficence, where there is no intent of producing any satisfaction for the donor.
In this case, the donation was made with the intention of securing a sexual relationship
between Lopez and Liguez, making it an onerous transaction and an illicit causa.
The Court of Appeals applied the pari delicto rule, which states that parties to an illegal
contract, if equally guilty, will not be aided by the law. However, the Supreme Court
disagreed with the application of this rule in this case. They argued that Liguez, being a
minor at the time of the donation, was not equally guilty as Lopez. The court also
emphasized that the rule should not be applied when one party can establish a cause of
action without exposing the illegality of the contract. In this case, Liguez sought to enforce
the donation based on its regularity on its face.
The Supreme Court held that the donation was void in so far as it prejudiced the interests
of Lopez's wife and forced heirs. The wife was entitled to have her share in the property
paid out of Lopez's share of the community profits. The forced heirs were entitled to have
the donation set aside to the extent that it exceeded their legitime. The court ordered the
records to be remanded to the court of origin for further proceedings to determine the
extent of prejudice and to compute the legitimes.
Rodriquez vs. Rodriquez, (20 SCRA 908)

Vda. de Rodriguez vs. Rodriguez
G.R. No. L-23002. July 31, 1967.
Facts:
The case of Vda. de Rodriguez v. Rodriguez involves Concepcion Felix Vda. de Rodriguez,
a widow who seeks to recover her properties that were transferred to her daughter and
then to her husband in order to circumvent the legal prohibition against donations
between spouses. The case was decided on July 31, 1967, by the Supreme Court of the
Philippines. Prior to her marriage to Domingo Rodriguez, Concepcion Felix owned two
fishponds in Bulacan, Bulacan province. On January 24, 1934, she executed a deed of sale
transferring ownership of the fishponds to her daughter, Concepcion Calderon, for the
sum of P2,500.00. The daughter then transferred the fishponds to her mother and
stepfather on January 27, 1934. Both deeds were registered on January 29, 1934, and new
titles were issued in the names of the spouses Rodriguez. Domingo Rodriguez died
intestate on March 6, 1953, and an extrajudicial settlement of his estate was executed on
March 16, 1953, which included the fishponds as conjugal property.
Issue:
The main issue raised in the case is whether the contracts of transfer from Concepcion
Felix to her daughter and from the daughter to the spouses Rodriguez are simulated or
fictitious, and whether they are void for lack of consideration.
Ruling:
The Supreme Court ruled that the contracts were not simulated but illegal. While
simulated contracts are not intended to alter the juridical situation of the parties,
contracts in fraudem legis are intended to indirectly attain a result that the law forbids. In
this case, the contracts were intended to circumvent the legal prohibition against
donations between spouses.
The Court also held that Concepcion Felix cannot recover the properties because she
participated in the transactions and delayed in filing the lawsuit. The rule in pari delicto
non oritur actio applies, which denies recovery to guilty parties inter se. Additionally, the
Court found that Concepcion Felix's action was barred by laches, as she had knowledge
of the nullity of the contracts in 1934 but only filed the lawsuit in 1962. Her conduct also
placed her in estoppel to question the validity of the transfer of her properties.
As for Concepcion Felix's alternative cause of action for 1/5 of the properties in
controversy, the Court ruled that it would not prosper as the action for rescission of the
extrajudicial settlement should have been filed within 4 years from its execution.
Ratio:
The Supreme Court based its decision on the fact that the contracts of transfer were not
simulated but illegal. It explained that simulated contracts are not intended to alter the
juridical situation of the parties, while contracts in fraudem legis are intended to indirectly
attain a result that the law forbids. In this case, the contracts were intended to circumvent
the legal prohibition against donations between spouses. Therefore, the contracts were
deemed illegal.
The Court also applied the rule in pari delicto non oritur actio, which denies recovery to
guilty parties inter se. Since Concepcion Felix participated in the transactions and delayed
in filing the lawsuit, she was considered a guilty party and was barred from recovering the
properties. Additionally, the Court found that her action was barred by laches, as she had
knowledge of the nullity of the contracts in 1934 but only filed the lawsuit in 1962. Her
conduct also placed her in estoppel to question the validity of the transfer of her
properties.
Regarding Concepcion Felix's alternative cause of action for 1/5 of the properties, the
Court ruled that it would not prosper as the action for rescission of the extrajudicial
settlement should have been filed within 4 years from its execution.
In conclusion, the Supreme Court affirmed the decision of the lower court, holding that
the contracts of transfer were not simulated but illegal. Concepcion Felix's action to
recover the properties was barred due to her participation in the transactions and her
delay in filing the lawsuit.
Phil. Banking Corp. vs. Lui She, (21 SCRA 52)

Philippine Banking Corp. vs. Lui She
G.R. No. L-17587.Sep 12, 1967.
Facts:
The case of Philippine Banking Corp. v. Lui She involved a lease agreement between the
Philippine Banking Corporation (PBC) and Lui She, a Chinese national. The lease
agreement allowed Lui She to lease a parcel of land owned by PBC, with an option to buy
the property. However, the heirs of the original landowner challenged the validity of the
lease agreement, arguing that it violated the constitutional provision prohibiting the
transfer of land to aliens.
Issue:
The main issue raised in the case was whether the lease agreement, including the option
to buy, was valid despite the constitutional prohibition against the transfer of land to
aliens.
Ruling:
The Supreme Court reversed the decision of the lower court and declared the lease
agreement as void. The Court held that the constitutional prohibition against the transfer
of land to aliens is absolute and cannot be circumvented through lease agreements or
other arrangements. The Court emphasized that the purpose of the constitutional
provision is to preserve and protect the nation's land resources for the benefit of Filipino
citizens.
Ratio:
The Supreme Court based its ruling on the absolute nature of the constitutional
prohibition against the transfer of land to aliens. The Court emphasized that this
prohibition cannot be evaded or bypassed through lease agreements or other
arrangements. The purpose of the constitutional provision is to ensure that the country's
land resources are preserved and protected for the benefit of Filipino citizens.
In this case, the lease agreement between the Filipino landowner and the Chinese lessee,
which included an option to buy, was deemed to be in violation of the constitutional
prohibition. Therefore, the Court declared the lease agreement as void.
As a result of the void lease agreement, the Court ordered the return of the property to the
estate of the original landowner. Additionally, any payments made by the Chinese lessee
under the lease agreement should be returned to him.
In summary, the Supreme Court declared the lease agreement between a Filipino
landowner and a Chinese lessee, including an option to buy, as void for violating the
constitutional prohibition against the transfer of land to aliens. The Court emphasized the
absolute nature of the prohibition and ordered the return of the property to the
landowner's estate and the recovery of payments made by the lessee.
Fisher vs. Robb, (69 Phil.101)

FISHER vs. ROBB
G.R. No. 46274. November 2, 1939.
Facts:
The case of Fisher v. Robb involves a dispute between A.O. Fisher and John C. Robb over
the return of a payment made by Fisher. In September 1935, the board of directors of the
Philippine Greyhound Club instructed Robb to travel to Shanghai to study the operation of
a dog racing course. While in Shanghai, Robb met Fisher, who was the manager of a dog
racing course. Fisher expressed interest in becoming a stockholder in the Philippine
Greyhound Club and sent a telegraphic transfer of P3,000 as the first installment of his
subscription. Later, when the second installment was due, Robb requested Fisher to send
the amount, which Fisher did by sending P2,000 directly to the Philippine Greyhound Club.
However, due to the failure of the enterprise, Robb organized a new company called The
Philippine Racing Club and attempted to save the investment of the stockholders. Fisher
then requested Robb to return the entire amount he had paid to the Philippine Greyhound
Club. Robb refused, stating that he felt morally responsible for the second payments made
by the stockholders, but there was no legal obligation for him to reimburse Fisher.
Issue:
The main issue in this case is whether there was sufficient consideration to justify Robb's
promise to return the payment made by Fisher.
Ruling:
The Supreme Court ruled in favor of Robb, stating that there was no sufficient
consideration for the promise made by Robb.
Ratio:
According to Article 1261 of the Civil Code, a contract requires the consent of the parties,
a definite object, and a consideration. In this case, Fisher did not give or promise anything
to Robb in return for the promise to return the payment. The promise was purely moral and
not legally binding. The Court also cited Article 1275 of the Civil Code, which states that
contracts without consideration or with an illicit consideration have no effect.
Therefore, the Court concluded that Robb was not legally obligated to return the payment
made by Fisher, and the judgment of the trial court was reversed. Robb was absolved from
the complaint, and Fisher was ordered to pay the costs of the case.
Villaroel vs. Estrada, (71 Phil. 14)

Villaroel vs. Estrada
G.R. No. 47362. Diciembre 19, 1940.
Facts:
The case of Villaroel v. Estrada involves a dispute between the plaintiff, Bernardino
Estrada, and the defendant, Juan Villaroel. The case originated from a loan obtained by
Alejandra F. Callao, the mother of the defendant, from Mariano Estrada and Severina in
1912. Alejandra passed away, leaving the defendant as the sole heir. The plaintiffs,
Mariano Estrada and Severina, also passed away, leaving Bernardino Estrada as the sole
heir. On August 9, 1930, the defendant signed a document acknowledging his obligation
to the plaintiff for the amount of P1,000 with 12% interest per year. The Court of First
Instance of Laguna ruled in favor of the plaintiff and ordered the defendant to pay the
claimed amount with legal interest. The defendant appealed the decision.
Issue:
The main issue raised in the case was whether the action to recover the debt was still valid
despite the prescription of the original obligation.
Ruling:
The court ruled in favor of the plaintiff, Bernardino Estrada, and ordered the defendant,
Juan Villaroel, to pay the prescribed debt of P1,000 with interest based on moral
obligation.
Ratio:
The court held that the present action was not based on the original obligation, which had
already prescribed, but on the new obligation voluntarily assumed by the defendant on
August 9, 1930. As the sole heir of the original debtor, the defendant had the legal right to
succeed her in her inheritance. Although the original debt lost its legal effect due to
prescription, it remained a moral obligation for the defendant. The court considered this
moral obligation as sufficient consideration to create and enforce the new obligation
voluntarily assumed by the defendant.
The court ruled that the rule requiring a new promise to pay a prescribed debt to be made
by the same person obligated or by someone legally authorized by them did not apply in
this case. The court emphasized that the present action did not seek to enforce the
obligation of the original debtor, but rather the obligation voluntarily assumed by the
defendant. Therefore, the court confirmed the decision of the lower court, ordering the
defendant to pay the claimed amount with costs.
In summary, the court ruled in favor of the plaintiff, Bernardino Estrada, and ordered the
defendant, Juan Villaroel, to pay the prescribed debt of P1,000 with interest based on
moral obligation. The court held that the new obligation voluntarily assumed by the
defendant was valid and enforceable, despite the prescription of the original obligation.
The court considered the defendant's status as the sole heir of the original debtor as
sufficient legal basis for the enforcement of the new obligation.
Velez vs. Ramos, (40 Phil. 787)

Velez vs. Ramas
G.R. No. 14997. February 16, 1920.
Facts:
Teodoro Velez and his wife, Hermenegilda Chiong Veloso, filed a lawsuit against Salomon
Ramas and Roberto Quirante to recover a sum of money owed to them. The money was
evidenced by a written obligation signed by the defendants, acknowledging their joint and
several liability for the payment of the amount. The defendants argued that the contract
was illegal due to an illicit consideration. Ramas also counterclaimed for the return of a
portion of the money he had already paid. The defendant Quirante did not appear in court
and no defense was made for him. The trial court ruled in favor of the defendants,
absolving them from the complaint and granting Ramas' counterclaim. The plaintiffs
appealed the decision.
Issue:
The main issue in the case is whether the contract between the parties is valid or void due
to an illicit consideration.
Ruling:
The Supreme Court ruled in favor of the defendants, affirming the decision of the trial
court. The Court held that the contract was void because the consideration for the
contract was illicit. The contract was entered into to prevent the prosecution of Restituta
Quirante, who had embezzled money from the plaintiffs. The Court stated that it is against
public policy to allow agreements that prevent or stifle prosecutions for crime. The Court
cited the maxim "ex turpi causa non oritur actio," which means that a contract based on
an unlawful consideration or designed to promote an unlawful object is void. The Court
also noted that the illegality of the contract was apparent on its face.
Ratio:
The Supreme Court based its decision on the principle that a contract with an illicit
consideration is void. In this case, the contract was entered into to prevent the prosecution
of Restituta Quirante, who had committed a crime by embezzling money from the
plaintiffs. The Court emphasized that it is against public policy to allow agreements that
hinder the prosecution of crimes. The Court cited the maxim "ex turpi causa non oritur
actio," which means that a contract based on an unlawful consideration or designed to
promote an unlawful object is void. The Court also pointed out that the illegality of the
contract was evident on its face, as it was entered into to shield a criminal from
prosecution.
The Court also addressed the issue of the defendant Quirante, who did not appear in court
and did not make a defense. The Court explained that when a complaint states a common
cause of action against several defendants and some appear to defend the case while
others default, the defense interposed by those who appear benefits those who fail to
appear. Therefore, if a good defense has been made, all of the defendants must be
absolved. The Court clarified that the proper procedure in such cases is to enter a formal
default order against the defendant who fails to appear and to proceed with the case
based on the answer of the other defendants. If the case is decided in favor of the plaintiff,
a final judgment is entered against all the defendants. If the case is decided against the
plaintiff, the action is dismissed as to all the defendants.
In conclusion, the Supreme Court ruled that the contract between the parties was void
due to an illicit consideration. The defendants were absolved from the complaint, and
Ramas' counterclaim was granted. The Court also clarified the proper procedure when
some defendants appear in court while others default.
Mactal vs. Melegrito, (111 Phil. 363)

Mactal vs. Melegrito
G.R. No. L-16114. March 24, 1961.
Facts:
The case of Mactal v. Melegrito involves a dispute between the plaintiff, Miguel Mactal, and
the defendant, Filomeno Melegrito. Mactal filed a lawsuit to recover the amount of
P1,777.00, along with moral damages and attorney's fees, against Melegrito. Melegrito
admitted some of the allegations in the complaint but denied others, and also raised
special defenses and a counterclaim. The Court of First Instance of Nueva Ecija dismissed
the case, stating that the consideration for the promissory note was the dismissal of a
criminal case for estafa against Melegrito, which was deemed illicit, immoral, contrary to
public policy, and void ab initio. Mactal appealed the decision, arguing that the lower court
erred in considering the promissory note as the basis of the action and that the
consideration was the dismissal of the estafa case.
The facts of the case revealed that Mactal had given Melegrito P1,770.00 to purchase palay
(unhusked rice) on his behalf, with a ten percent commission for Melegrito or the return of
the amount within ten days if he failed to buy the palay. Melegrito neither bought the palay
nor returned the money, prompting Mactal to file an estafa case against him. However,
before the case could be heard, Melegrito requested the dismissal of the case and
promised to pay Mactal the amount owed, plus an additional sum for another transaction.
Melegrito signed a document acknowledging his indebtedness and promising to pay
Mactal within a specified period. The criminal case was then dismissed, but despite
repeated demands, Melegrito failed to fulfill his promise.
Issue:
The main issue raised in the case is whether the consideration for the promissory note
between Mactal and Melegrito was the dismissal of the estafa case or a pre-existing debt.
Ruling:
The court ruled that the consideration for the promissory note was a pre-existing debt, not
the dismissal of the estafa case. Therefore, the promissory note was valid and
enforceable.
Ratio:
The court based its decision on the principle that for a promissory note to be valid and
enforceable, the consideration must be a pre-existing obligation. In this case, the court
found that Melegrito had indeed received the money from Mactal and admitted his
indebtedness. Melegrito argued that he was only a guarantor, not the principal debtor.
However, the court held that the consideration for Melegrito's promise to pay was the pre-
existing debt, not the dismissal of the estafa case. The dismissal merely provided the
occasion for the execution of the promissory note.
The court cited previous cases to support its ruling, emphasizing that the consideration
must be a pre-existing obligation for a promissory note to be valid and enforceable. In this
case, the pre-existing debt owed by Melegrito to Mactal served as the consideration for the
promissory note. Therefore, the court reversed the decision of the lower court and ordered
Melegrito to pay Mactal the sum of P1,777.00, with interest and costs of the proceedings.
In conclusion, the court held that the promissory note was valid and enforceable due to
the pre-existing debt as its consideration, rather than the dismissal of the criminal case.
Ong vs. Ong (G.R. No. 67888, October 8, 1985)

Ong vs. Ong
G.R. No. L-67888. October 8, 1985.
Facts:
The case of Ong v. Ong involves a petition for review on certiorari of the decision of the
Intermediate Appellate Court, which affirmed the judgment of the Regional Trial Court of
Makati. The petitioner, Imelda Ong, challenges the interpretation given by the respondent
Appellate Court to a Quitclaim Deed. On February 25, 1976, Imelda Ong executed a
Quitclaim Deed in favor of Sandra Maruzzo, a minor at the time. The deed transferred all of
Imelda Ong's rights, title, interest, and participation in a parcel of land to Sandra Maruzzo.
The consideration for the transfer was One (P1.00) Peso and other valuable
considerations. On November 19, 1980, Imelda Ong revoked the Quitclaim Deed and
donated the whole property to her son, Rex Ong Jimenez. Subsequently, Sandra Maruzzo,
through her guardian ad litem Alfredo Ong, filed an action against Imelda Ong for the
recovery of ownership/possession and nullification of the Deed of Donation over the
portion belonging to her, as well as for accounting.
Issue:
The main issue raised in the case is whether the Quitclaim Deed executed by Imelda Ong
in favor of Sandra Maruzzo is valid and enforceable, considering that Sandra Maruzzo was
a minor at the time of the execution of the deed.
Ruling:
The Supreme Court upheld the decision of the Appellate Court, ruling in favor of Sandra
Maruzzo. The court held that the Quitclaim Deed is supported by a valid consideration,
which includes the One (P1.00) Peso and other valuable considerations. The court
emphasized that the execution of a deed purporting to convey ownership of a realty is
prima facie evidence of the existence of a valuable consideration, and the party alleging
lack of consideration has the burden of proving such allegation. The court also cited
previous rulings that a simple or pure donation does not require the acceptance of a legal
guardian. Therefore, the Quitclaim Deed is valid and enforceable.
Ratio:
The court based its decision on the fact that the Quitclaim Deed executed by Imelda Ong
in favor of Sandra Maruzzo is supported by a valid consideration, which includes the One
(P1.00) Peso and other valuable considerations. The court explained that the execution of
a deed purporting to convey ownership of a realty is prima facie evidence of the existence
of a valuable consideration, and the party alleging lack of consideration has the burden of
proving such allegation. In this case, Imelda Ong failed to prove that there was no valid
consideration for the Quitclaim Deed. The court also cited previous rulings that a simple
or pure donation does not require the acceptance of a legal guardian. Therefore, even if
the Quitclaim Deed is considered a donation, the acceptance by a legal guardian is not
necessary. Based on these arguments, the court affirmed the decision of the Appellate
Court, ruling in favor of Sandra Maruzzo. Imelda Ong was ordered to pay the costs of the
case.
Eduardo M. Cojuangco, Jr. vs. Republic, G.R. No. 180705. November 27, 2012
Cojuangco, Jr. vs. Republic
G.R. No. 180705. July 9, 2013.
Facts:
The case of Cojuangco, Jr. v. Republic involves the transfer of shares of stock to Eduardo
M. Cojuangco, Jr. The transfer was declared unconstitutional by the Sandiganbayan, which
ordered the reconveyance of the shares to the Government for the benefit of coconut
farmers and the development of the coconut industry. Cojuangco filed a Motion for
Reconsideration after the Supreme Court affirmed the Sandiganbayan's decision. He
argued that his constitutional rights to due process and non-impairment of contract were
violated.
Issue:
The main issue in this case is whether the transfer of shares of stock from the Philippine
Coconut Authority (PCA) to Cojuangco is unconstitutional and whether his constitutional
rights were violated.
Ruling:
The Supreme Court affirmed the decision of the Sandiganbayan, declaring the transfer of
shares of stock to Cojuangco as unconstitutional. The Court ordered the reconveyance of
the shares to the Government for the benefit of coconut farmers and the development of
the coconut industry. The Court also declared that the UCPB shares of alleged fronts,
nominees, and dummies of Cojuangco belonged to the Republic of the Philippines as their
true and beneficial owner. The Court found no reason to modify or abandon its previous
decision, as the arguments presented in the Motion for Reconsideration were
unsubstantial.
Ratio:
The Court based its decision on the unconstitutionality of the transfer of shares of stock
to Cojuangco. It held that the transfer violated the Constitution as it was done without
public bidding and without the necessary approval from the Office of the President. The
Court emphasized that the transfer should have been for the benefit of coconut farmers
and the development of the coconut industry, but it was instead for the benefit of
Cojuangco. The Court also found that the UCPB shares of alleged fronts, nominees, and
dummies of Cojuangco rightfully belonged to the Republic of the Philippines. The Court's
decision was in line with its duty to protect the interests of the coconut farmers and ensure
the proper use of public resources. Cojuangco's arguments regarding his constitutional
rights were deemed unsubstantial, as the Court found no violation of due process or
impairment of contract in the decision. Therefore, the Court denied the petition and
ordered Cojuangco to bear the costs of the case.
Sta. Fe Realty Inc., et al. vs. Sison, GR 199431, August 31, 2016
Sta. Fe Realty, Inc. vs. Sison
G.R. No. 199431. August 31, 2016.
Facts:
The case involves a dispute over the ownership of a parcel of land in Calamba City, Laguna.
The respondent, Jesus M. Sison, filed a complaint for reconveyance of the property against
Sta. Fe Realty, Inc. (SFRI), Victoria Sandejas Fabregas (Fabregas), Jose Orosa, and
Morninglow Realty, Inc. (MRI). The subject property is a portion of land covered by Transfer
Certificate of Title (TCT) No. 61132, originally owned by SFRI. SFRI agreed to sell the
property to Sison, and a deed of sale was executed between SFRI and Fabregas, who then
sold the property to Sison. However, Sison was unable to register the sale and secure a
title in his name due to the refusal of the petitioners to pay taxes and turn over the
necessary documents. SFRI later subdivided the property and sold a portion of it to Orosa.
Sison claimed that the portion sold to Orosa is the same as the portion he bought from
SFRI and Fabregas.
Issue:
The main issue raised in this case is whether the Court of Appeals (CA) erred in affirming
the Regional Trial Court's (RTC) decision to reconvey the subject property to Sison.
Ruling:
The Supreme Court ruled that the petition lacked merit. The Court held that the deeds of
sale between SFRI and Fabregas, and Fabregas and Sison were valid and enforceable. The
petitioners argued that the deeds of sale were simulated and that there was a gross
disproportion between the price and the value of the property. However, the Court found
that the evidence on record established that the deeds of sale were executed freely and
voluntarily. The Court also ruled that the unilateral rescission made by Fabregas was not
valid and binding on Sison, as a judicial or notarial act is necessary before a valid
rescission can take place. The Court further held that Orosa was not a buyer in good faith
and for value, as he should have been aware of Sison's prior possession and claim of
ownership over the property. Therefore, reconveyance of the property to Sison was
warranted. The Court affirmed the CA's decision and upheld the award of damages to
Sison.
Ratio:
The Court based its decision on the validity and enforceability of the deeds of sale between
SFRI and Fabregas, and Fabregas and Sison. The Court found that the evidence on record
established that the deeds of sale were executed freely and voluntarily, and there was no
evidence to support the petitioners' claim that the deeds of sale were simulated. The
Court also emphasized that a judicial or notarial act is necessary for a valid rescission to
take place, and since no such act was performed, Fabregas' unilateral rescission was not
valid and binding on Sison. Furthermore, the Court held that Orosa was not a buyer in good
faith and for value, as he should have been aware of Sison's prior possession and claim of
ownership over the property. Therefore, reconveyance of the property to Sison was
warranted. The Court affirmed the CA's decision and upheld the award of damages to
Sison.
c. Consummation
CONTRACTS - Form of Contracts (1356-1358)

Dauden-Hernaez vs. De los Angeles, (27 SCRA 1276)
Dauden-Hernaez vs. Delos Angeles
G.R. No. L-27010. April 30, 1969.
Facts:
The case of Dauden-Hernaez v. Delos Angeles involves a motion picture actress named
Marlene Dauden-Hernaez. She filed a complaint against Hollywood Far East Productions,
Inc. and its President and General Manager, Ramon Valenzuela, for unpaid services. The
complaint was dismissed by the court due to the lack of a written contract. Dauden-
Hernaez then filed a motion for reconsideration and sought to amend her complaint, but
both were denied by the court. As a result, she filed a petition for certiorari to set aside the
court's orders.
Issue:
The main issue raised in the case is whether the court erred in ruling that a contract for
personal services involving more than P500.00 was either invalid or unenforceable due to
the absence of a written contract.
Ruling:
The court ruled that the court below abused its discretion in dismissing the complaint and
refusing to admit the amended complaint. It emphasized that in the contractual system of
the Civil Code, contracts are valid and binding from their perfection regardless of form,
whether oral or written. The court explained that the requirement of a written contract only
applies to certain solemn contracts or contracts that need to be proved by writing. In this
case, the contract for services did not fall under either exception, and therefore, the
absence of a written contract did not make the agreement invalid or unenforceable. The
court concluded that the lower court and the respondents were mistaken in their
interpretation of the law.
Ratio:
The court's decision was based on the principle that contracts are valid and binding from
their perfection, regardless of whether they are oral or written. The court explained that the
requirement of a written contract only applies to certain solemn contracts or contracts
that need to be proved by writing. In this case, the contract for services did not fall under
either exception. The court emphasized that the absence of a written contract did not
invalidate the agreement for services. The court held that the lower court and the
respondents were mistaken in their interpretation of the law.
Philippine National Railways vs. IAC (G.R. No. 66715, Sep. 18, 1990)
Philippine National Bank vs. Intermediate Appellate Court
G.R. No. 66715. September 18, 1990.
Facts:
The case involves a dispute between the Philippine National Bank (PNB) and Romeo
Alcedo regarding the foreclosure of a mortgage on Alcedo's property. On March 20, 1968,
Leticia de la Vina-Sepe executed a real estate mortgage in favor of PNB to secure a sugar
crop loan. Later, acting as attorney-in-fact for Alcedo, Sepe executed an amended real
estate mortgage to include Alcedo's property as additional collateral for an increased
loan. Alcedo and Sepe verbally agreed to split the loan proceeds, but Alcedo did not
receive his share. He then wrote a letter to PNB revoking the Special Power of Attorney he
had given to Sepe. In response, PNB assured Alcedo that his property would not be used
as collateral for Sepe's future loans. However, Sepe was still able to obtain an additional
loan from PNB using Alcedo's property as collateral. Alcedo requested Sepe to pay her
accounts to prevent foreclosure, but she did not comply. Alcedo then filed a lawsuit
against Sepe and PNB, seeking the annulment of the foreclosure sale and the
reconveyance of his property.
Issue:
The main issue in this case is whether PNB validly foreclosed the mortgage on Alcedo's
property despite Alcedo's revocation of the Special Power of Attorney and PNB's
assurance that his property would not be used as collateral.
Ruling:
The court ruled in favor of Alcedo. The court held that PNB was estopped from foreclosing
the mortgage on Alcedo's property based on the doctrine of promissory estoppel. The
court found that PNB had given a clear assurance to Alcedo that his property would not be
used as collateral for Sepe's future loans. PNB's act and declaration in its letter to Alcedo
were binding on the bank, and it could not go back on its promise. The court also noted
that PNB had acted in bad faith by proceeding with the foreclosure despite Alcedo's
revocation of the Special Power of Attorney. Therefore, the court nullified the foreclosure
sale and ordered PNB to reconvey the property to Alcedo free from liens and
encumbrances. PNB was also ordered to pay moral damages and attorney's fees to
Alcedo.
Ratio:
The court's ruling was based on the principle of estoppel, which prevents a party from
going back on its own acts and representations to the prejudice of another party who relied
on them. The court found that PNB's assurance to exclude Alcedo's property as collateral
created a binding obligation on the bank. The court also noted that the revocation of the
Special Power of Attorney, even though not in a public instrument, was still valid and
binding between the parties. The court emphasized that the doctrine of estoppel is based
on public policy, fair dealing, good faith, and justice, and is designed to prevent injustice
and ensure that parties are held to their commitments.
Manotok Realty vs. CA (L-35367, April 9, 1987)

Manotok Realty, Inc. vs. Court of Appeals
G.R. No. L-35367. April 9, 1987.
Facts:
The case of Manotok Realty, Inc. v. Court of Appeals involves a dispute over the sale of a
lot from Vicente Legarda to Abelardo Lucero. The Court of First Instance of Manila, acting
as a probate court, authorized Legarda to sell the Legarda Tambunting Subdivision.
However, the sale of a portion of the subdivision to Lucero was not properly documented
and did not have the approval of the probate court. Lucero took possession of the lot and
leased it to several tenants, including the private respondent. The probate court later
authorized the Philippine Trust Company to sell the entire subdivision. The petitioner,
Manotok Realty, Inc., acquired the property and filed a complaint for ejectment against
the private respondent.
Issue:
The main issue in this case is whether the sale of the lot from Legarda to Lucero is valid
and binding against the petitioner.
Ruling:
The Supreme Court ruled in favor of Manotok Realty, Inc. and reversed the decision of the
Court of Appeals.
Ratio:
The Court held that the sale between Legarda and Lucero was not valid due to lack of
proper documentation and court approval. The Court emphasized that contracts for the
creation or transmission of real rights over immovable property must be in a public
document and duly registered to be enforceable against third parties. In this case, the sale
between Legarda and Lucero was not properly documented and did not have the approval
of the probate court. Therefore, it cannot be considered valid and binding against the
petitioner.
The Court also stated that the sale did not bind the Legarda-Tambunting estate and could
not affect the rights of the petitioner, who acquired the property with the approval of the
probate court. The probate court later authorized the Philippine Trust Company to sell the
entire subdivision, and the petitioner acquired the property through this authorized sale.
Therefore, the petitioner's ownership of the property is valid and cannot be affected by the
previous sale between Legarda and Lucero.
Furthermore, the Court ruled that the private respondent, as a transferee of Lucero,
cannot claim possession in good faith because he had notice of the petitioner's ownership
and the controversies surrounding the property. The private respondent was aware of the
petitioner's claim to the property and the ongoing legal disputes. Therefore, the private
respondent cannot claim possession in good faith and must yield possession to the
petitioner.
In summary, the Supreme Court ruled that the sale of the lot from Legarda to Lucero was
not valid and binding against the petitioner due to lack of proper documentation and court
approval. The private respondent cannot claim possession in good faith.
CONTRACTS - Reformation of Instruments (1359-1369)

City of Cabanatuan vs. Lazaro (39 SCRA 653)
City of Cabanatuan vs. Lazaro
G.R. No. L-29256. June 30, 1971.
Facts:
The case of City of Cabanatuan v. Lazaro involves a dispute over a lease agreement
between the City of Cabanatuan and Dr. Juan S. Lazaro and Nieves Maningas. The lease
agreement was entered into on December 28, 1959, and covered a portion of Lot No. 1511
in Cabanatuan City. The lease agreement included a provision that allowed the lessees to
renew the lease for another 10 years after the expiration of the original 10-year term.
However, the City of Cabanatuan claimed that this provision was inserted in the
agreement by mistake or accident and did not reflect the true intention of the parties.
Issue:
The main issue raised in the case is whether the City of Cabanatuan is entitled to seek the
reformation of the lease agreement to have the option to renew the lease declared
ineffective.
Ruling:
The Supreme Court reversed the trial court's order of dismissal and remanded the case for
further proceedings, including the impleading of the purchaser of the leased property.
Ratio:
The Court held that every party to a contract has an interest in ensuring that the instrument
accurately reflects the true agreement between the parties. If there is a mistake or
accident in the document, either party can ask for its reformation to prevent future
disputes. In this case, the City of Cabanatuan sought the reformation of the lease
agreement to have the option to renew the lease declared ineffective, as it was not agreed
upon by the parties. The Court rejected the argument that the action was premature,
stating that there was no reason for the City to wait for the expiration of the original lease
term before seeking reformation.
The Court also addressed the issue of the City's sale of the leased property during the
pendency of the action. The Court held that the City still had a real interest in the litigation,
as the success or failure of the reformation action would affect its obligations to the new
owners. The Court suggested that if the trial court wanted to determine the transferee's
position on the issue, it should order the joinder of the purchaser to avoid future
multiplicity of actions.
Lastly, the Court emphasized that the question of whether the City bound itself not to raise
the issue of reformation until after the expiration of the first ten years of the lease was a
matter of defense to be raised in the answer. The Court reiterated that the existence or
non-existence of a cause of action must be determined based on the allegations in the
complaint, which must be deemed admitted for the purposes of a motion to dismiss.
Therefore, the Supreme Court reversed the trial court's order of dismissal and remanded
the case for further proceedings, including the impleading of the purchaser of the leased
property.
Huibonhoa vs. COA, (320 SCRA 625)

Huibonhoa vs. Court of Appeals
G.R. No. 95897. December 14, 1999.
Facts:
This case involves two petitions for review on certiorari seeking the reversal of the
decisions of the Court of Appeals in two separate cases involving the same parties. The
first case, G.R. No. 95897, pertains to a complaint for reformation of contract filed by
Florencia Huibonhoa against the Gojocco siblings. The second case, G.R. No. 102604,
pertains to a complaint for cancellation of lease, ejectment, and collection filed by

Severino Gojocco and Loreta Gojocco Chua against Huibonhoa.
In the first case, Huibonhoa entered into a lease contract with the Gojocco siblings for
three commercial lots in Manila. The contract stipulated that Huibonhoa would construct
a building on the lots and start paying monthly rent upon completion of the building.
However, Huibonhoa failed to complete the building within the agreed timeframe and also
failed to pay the monthly rent. She then filed a complaint for reformation of contract,
alleging that the true intention of the parties was for the rent to start accruing only after the
completion of the building and that the contract should be modified to reflect this
intention. The trial court dismissed the complaint, and the Court of Appeals affirmed the
dismissal.
In the second case, the Gojocco siblings filed a complaint for cancellation of lease,
ejectment, and collection against Huibonhoa for her failure to pay the accrued rent and
for subleasing the premises without their consent. The Metropolitan Trial Court of Manila
initially assumed jurisdiction over the case, but the Regional Trial Court later dismissed
the complaint for lack of jurisdiction. The Court of Appeals affirmed the dismissal, ruling
that the case involved issues beyond the simple issue of possession and that the Regional
Trial Court had jurisdiction over the case.
Issue:
The main issue in this case is whether the Metropolitan Trial Court had jurisdiction over
the complaint for "cancellation of lease, ejectment, and collection" filed by the lessors
against Huibonhoa.
Ruling:
The Court of Appeals affirmed the decision of the Regional Trial Court, which dismissed
the ejectment case filed by the lessors against Huibonhoa. However, the Supreme Court
set aside the decision of the Court of Appeals and upheld the order of ejectment issued
by the Metropolitan Trial Court. The Court held that the complaint for "cancellation of
lease, ejectment, and collection" filed by the lessors was sufficient to establish a cause of
action for unlawful detainer. The Court also noted that the execution of the judgment
ejecting Huibonhoa would cause complications, as she had an agreement with one of the
lessors to continue with the lease. Nevertheless, the Court held that the expiration of the
lease contract rendered the issue of ejectment moot and academic.
In another issue raised in the case, the Court affirmed the decision of the Court of Appeals,
which dismissed Huibonhoa's complaint for reformation of contract. The Court held that
Huibonhoa's aim in filing the action for reformation of the lease contract was to absolve
herself from her delay in payment of monthly rentals and to extend the term of the lease.
However, the Court emphasized that a contract duly executed is the law between the
parties, and events occurring subsequent to the signing of the agreement may alter its
terms only if the court deems it sufficient reasons in law for altering the contract. The
Court held that Huibonhoa's reasons for seeking reformation of the contract were not
sufficient to warrant a modification of its terms.
Ratio:
The governing law on jurisdiction at the time the complaint was filed was Sec. 33(2) of
Batas Pambansa Blg. 129, which vested municipal courts with exclusive original
jurisdiction over cases of forcible entry and unlawful detainer. The Metropolitan Trial Court
is empowered to decide the issue of ownership only if it is indispensable to the resolution
of the issue of possession. In this case, the complaint alleged possession of the property
by the lessee, demands for payment of rental arrearages and vacation of the premises,
and the lessee's continued refusal to surrender possession. These allegations are
sufficient to establish a cause of action for unlawful detainer, and therefore, the
Metropolitan Trial Court had jurisdiction over the case.
The Court held that the complaint for "cancellation of lease, ejectment, and collection"
filed by the lessors was sufficient to establish a cause of action for unlawful detainer. The
Court also noted that the execution of the judgment ejecting Huibonhoa would cause
complications, as she had an agreement with one of the lessors to continue with the lease.
Nevertheless, the Court held that the expiration of the lease contract rendered the issue
of ejectment moot and academic.
The Court affirmed the decision of the Court of Appeals in dismissing Huibonhoa's
complaint for reformation of contract. The Court held that Huibonhoa's reasons for
seeking reformation of the contract were not sufficient to warrant a modification of its
terms. The Court emphasized that a contract duly executed is the law between the parties,
and events occurring subsequent to the signing of the agreement may alter its terms only
if the court deems it sufficient reasons in law for altering the contract.
In terms of the monetary award, the Court held that Huibonhoa was contractually bound
to pay the unpaid rents to one of the lessors, Severino Gojocco. The Court also awarded
interest on the unpaid rents to both Severino Gojocco and Loreta Gojocco Chua. The
amount of monthly rentals upon which interest would be charged was determined based
on the lease contract. The Court also noted that the applicable rate of interest during the
interim period from the finality of the judgment until the monetary award is fully satisfied
would be 12%.
Overall, the Court affirmed the decisions of the lower courts and rejected the arguments
of Huibonhoa and the Gojocco siblings. The Court held that the lease contract should be
enforced as written and that the parties should fulfill their obligations under the contract.
Rita Sarming vs. Dy, et al., (G.R. No. 133646, June 6, 2002)
Sarming vs. Dy
G.R. No. 133643. June 6, 2002.
Facts:
The case of Sarming v. Dy involves a complaint for reformation of instrument filed by the
heirs of Alejandra Delfino against Silveria Flores and her successors-in-interest. The case
originated from a mistake in the designation of the property in a deed of sale. The
grandchildren of Jose, who were the owners of one half portion of Lot 4163, decided to sell
their share to Alejandra Delfino with the knowledge and permission of Silveria. However,
Silveria mistakenly delivered the Original Certificate of Title of Lot No. 5734 instead of Lot
No. 4163. Alejandra paid the necessary fees to release the title to Lot No. 4163, but Silveria
failed to deliver the title for the reformation of the deed of sale. Alejandra filed a complaint
against Silveria for reformation of the deed of sale with damages. Silveria denied the
mistake and claimed ownership of Lot No. 4163.
Issue:
The main issue in this case is whether or not the deed of sale should be reformed due to
the mistake in the designation of the property.
Ruling:
The Supreme Court affirmed the decision of the Court of Appeals, finding that the
designation of the lot in the deed of sale as Lot 5734 was a mistake and that reformation
of the instrument was proper.
Ratio:
The Supreme Court held that reformation of an instrument is allowed when there is a
mutual mistake or mistake of one party and fraud or inequitable conduct on the part of the
other party. In this case, it was established that Silveria mistakenly delivered the Original
Certificate of Title of Lot No. 5734 instead of Lot No. 4163. Alejandra paid the necessary
fees to release the title to Lot No. 4163, but Silveria failed to deliver the title for the
reformation of the deed of sale. The Court found that there was a mistake in the
designation of the property in the deed of sale and that Silveria's failure to deliver the
correct title constituted inequitable conduct. Therefore, the Court ruled that the deed of
sale should be reformed to reflect the correct designation of the property as Lot No. 4163.
Bentir and Formida vs. Judge Leanda and Leyte Gulf Traders, Inc., (G.R. No.
1228991, April 12, 2000)
Rosello-Bentir vs. Leanda
G.R. No. 128991. April 12, 2000.
Facts:
The case of Rosello-Bentir v. Leanda involves a complaint for reformation of a lease
contract. Respondent Leyte Gulf Traders, Inc. entered into a lease contract with petitioner
Yolanda Rosello-Bentir for a period of twenty years starting May 5, 1968. The lease was
later extended for another four years until May 31, 1992. On May 5, 1989, petitioner Bentir
sold the leased premises to petitioner spouses Samuel Pormida and Charito Pormida.
Respondent corporation questioned the sale, claiming that it had a right of first refusal. It
filed a case seeking the reformation of the lease contract, alleging that its lawyers
inadvertently omitted to incorporate in the contract the verbal agreement that respondent
corporation has the right to equal the highest offer in the event the property is leased or
sold after the expiration of the lease.
Issue:
The main issue raised in the case is whether the action for reformation of the lease
contract has already prescribed.
Ruling:
The Supreme Court ruled that the action for reformation had indeed prescribed.
Ratio:
The prescriptive period for actions based on a written contract and for reformation of an
instrument is ten years. In this case, the complaint for reformation was filed twenty-four
years after the execution of the lease contract, which clearly exceeds the prescriptive
period. Therefore, the action for reformation is already barred by prescription.
Furthermore, the Court held that the remedy of reformation no longer lies, as it should
have been filed before the breach or violation of the contract occurred. Reformation is a
remedy that seeks to correct a mistake or error in a written instrument. It is meant to
reform the instrument to reflect the true intention of the parties. However, once the
contract has been breached or violated, the remedy of reformation is no longer available.
In this case, the respondent corporation only sought reformation after the property was
already sold to the petitioner spouses. Therefore, the remedy of reformation is no longer
applicable.
Based on these reasons, the Supreme Court granted the petition and reinstated the order
of the trial court dismissing the complaint. The action for reformation has already
prescribed and the remedy of reformation is no longer available in this case.
NIA vs. Gamit, et al., (215 SCRA 436)

National Irrigation Administration vs. Gamit
G.R. No. 85869. November 6, 1992.
Facts:
The case of National Irrigation Administration v. Gamit involves a complaint filed by
Estanislao Gamit against the National Irrigation Administration (NIA) for the reformation of
a lease contract. The case was initially filed in the RTC of Roxas, Isabela, and was later
appealed to the Court of Appeals. Gamit alleges that provisions were inserted through
mistake and fraud.
Issue:
The main issue raised in the case is whether the contract between Gamit and NIA should
be interpreted as a lease contract with the right to purchase or a contract of sale.
Ruling:
The Supreme Court held that the trial court erred in not conducting a trial to determine the
true intention of the parties. The court set aside the decisions of the trial court and the
Court of Appeals and remanded the case to the trial court for further proceedings.
Ratio:
The court explained that the complaint clearly raises the issue that the contract does not
express the true intention of the parties due to mistake and fraud. Therefore, a trial should
have been conducted to hear the evidence and ascertain the true intention of the parties.
The court emphasized the distinction between interpretation and reformation of

contracts. Interpretation aims to ascertain the true intention of the parties, while
reformation is a remedy in equity to make a written instrument express or conform to the
real intention of the parties. In this case, the complaint seeks reformation of the contract,
as it alleges mistake and fraud in the insertion of certain provisions.
The court further noted that summary judgment is not proper in this case because there is
a genuine issue or material controversy raised in the pleadings. Summary judgment can
only be resorted to when there are no questions of fact in issue or when the material
allegations of the pleadings are not disputed.
Therefore, the Supreme Court set aside the decisions of the trial court and the Court of
Appeals and remanded the case to the trial court for further proceedings.
CONTRACTS - Interpretation of Contracts (1370-1379)

Kasilag vs. Rodriguez (69 Phil. 217)
Kasilag vs. Rodriguez
G.R. No. 46623. December 7, 1939.
Facts:
This case involves a dispute over a contract for a piece of land in the Philippines. The
contract, known as Exhibit 1, was entered into by Marcial Kasilag and Emiliana Ambrosio
on May 16, 1932. The contract stated that Kasilag would loan Ambrosio P1,000 with an
interest rate of 12% per annum, and in return, Ambrosio would mortgage the
improvements on the land she acquired as a homestead. The contract also included
provisions for the redemption of the mortgage and the possibility of an absolute deed of
sale if Ambrosio failed to redeem the mortgage within a specified period of time.
Issue:
The main issue in this case is the nature and validity of the contract between Ambrosio
and Kasilag. The trial court held that the contract was a mortgage on the improvements,
while the Court of Appeals held that it was an absolute sale.
Ruling:
The Supreme Court, in its majority decision, agrees with the trial court that the contract
was a mortgage on the improvements. The court finds that the language of the contract
itself supports this interpretation and that the subsequent actions of the parties also
indicate that it was intended as a mortgage.
Ratio:
The Supreme Court held that the contract should be interpreted based on the intention of
the parties as expressed in the language of the document. The court concluded that
Exhibit 1 was a valid mortgage of the improvements on the land, not an absolute deed of
sale. The court also found that Kasilag acted in good faith in taking possession of the land
and enjoying its fruits.
The court further held that the heirs of Ambrosio were entitled to the possession of the
land and the mortgaged improvements, but they must pay Kasilag the value of the
improvements. The court also stated that the heirs could redeem the mortgage by paying
the loan amount within three months, or Kasilag could ask for the public sale of the
improvements to satisfy his credit.
In summary, the Supreme Court ruled that the contract between Kasilag and Ambrosio
was a valid mortgage of the improvements on the land. Kasilag acted in good faith in taking
possession of the land. The heirs of Ambrosio were entitled to the possession of the land
and the mortgaged improvements, but they must pay Kasilag the value of the
improvements. The court also stated that the heirs could redeem the mortgage or Kasilag
could ask for the public sale of the improvements.
University of the Philippines vs. Gabriel (G.R. No. 70826, Oct. 12, 1987)
University of the Philippines vs. Gabriel
G.R. No. 70826. October 12, 1987.
Facts:
The case of University of the Philippines v. Gabriel involves a dispute between the
University of the Philippines (UP) and a sub-contractor named Allied Plumbing Company.
The sub-contractor claimed that it had completed the plumbing works at the Biological
Science Building of the UP College of Agriculture, but the main contractor, Beta
Construction Company, refused to pay the balance and additional payments. As a result,
the sub-contractor filed a complaint for "sum of money with damages" against UP and
Beta. The lower court ruled in favor of the sub-contractor and held UP and Beta jointly and
severally liable to pay the unpaid balance and damages. UP appealed the decision to the
Intermediate Appellate Court, which affirmed the lower court's ruling. UP then filed a
petition with the Supreme Court.
Issue:
The main issue in the case is whether UP is solidarily liable with Beta to pay the sub-
contractor's claims.
Ruling:
The Supreme Court ruled in favor of UP and held that UP is not liable to pay the unpaid
balance for labor and materials to the sub-contractor.
Ratio:
The Court based its decision on the fact that the sub-contractor failed to prove that the
works were approved and completed adequately. The Court emphasized that it is essential
for there to be approval of the works completed by the sub-contractor before UP can be
made liable under the sub-contract. In this case, there was conflicting evidence regarding
the completion and quality of the sub-contractor's works, with Beta claiming that the
works were defective and had to be repaired. The Court concluded that there was no
evidence showing approval of the works performed by the sub-contractor and that the
sub-contractor had no valid claim against UP.
The Court also addressed the applicability of Article 1729 of the New Civil Code, which
provides that those who furnish labor and materials for a work undertaken by a contractor
have an action against the owner up to the amount owing from the owner to the contractor.
The Court held that this provision is subject to special laws, and in this case, Act No. 3959
applies. However, the Court clarified that Act No. 3959 was intended for private persons
or entities and does not cover government employment. The Court pointed out that UP is
a public institution of higher learning performing a governmental function, and therefore,
Act 3688, which provides for the protection of persons furnishing labor and materials for
the construction of public works, is the applicable law. The Court concluded that the sub-
contractor should have sued the main contractor and its surety company for unpaid labor
and materials instead of proceeding against UP.
In summary, the Supreme Court ruled that UP is not liable to pay the unpaid balance for
labor and materials to the sub-contractor because the sub-contractor failed to prove that
the works were approved and completed adequately. The Court also held that the sub-
contractor should have sued the main contractor and its surety company instead of
proceeding against UP.
Sy vs. CA (131 SCRA 116)

Sy vs. Court of Appeals
G.R. No. 127263. April 12, 2000.
Facts:
The case of Sy v. Court of Appeals involves a Filipina woman named Filipina Sy who seeks
legal separation from her husband, Fernando Sy. The couple got married on November 15,
1973, but Filipina claims that their marriage is void from the beginning due to the absence
of a marriage license. She also alleges that Fernando has been physically violent and
sexually unfaithful, and she filed a criminal case against him for attempted parricide. The
Regional Trial Court granted Filipina's petition for legal separation and awarded custody of
their children to her. However, when Filipina filed a petition for the declaration of absolute
nullity of their marriage on the ground of psychological incapacity, the trial court denied
the petition. The Court of Appeals affirmed the decision of the trial court, stating that
Filipina failed to provide sufficient evidence of psychological incapacity. Filipina appealed
to the Supreme Court.
Issue:
1) Whether or not the marriage between Filipina and Fernando is void from the beginning
due to the absence of a marriage license, and
2) Whether or not Fernando is psychologically incapacitated at the time of their marriage.
Ruling:
The Supreme Court ruled that the marriage between Filipina and Fernando is indeed void
from the beginning because it was contracted without a marriage license. The court found
that the marriage license was issued almost one year after the ceremony took place, and
there was no claim of an exceptional character that would exempt the marriage from the
requirement of a license. Therefore, under Article 80 of the Civil Code, the marriage is
considered void ab initio.
As a result, the issue of psychological incapacity becomes moot because the marriage is
already declared void. The court did not need to determine whether or not Fernando is
psychologically incapacitated.
Ratio:
The Supreme Court based its decision on Article 80 of the Civil Code, which states that
marriages contracted without a marriage license are void from the beginning, except in
cases where the marriage falls under the exceptions provided by law. In this case, the
court found that there was no claim of an exceptional character that would exempt the
marriage from the requirement of a license. The fact that the marriage license was issued
almost one year after the ceremony took place clearly indicates that the marriage was
contracted without a valid license.
Since the marriage is declared void ab initio, the court did not need to delve into the issue
of psychological incapacity. The court emphasized that the absence of a marriage license
is a clear and sufficient ground to declare the marriage void, and there is no need to further
examine the other grounds raised by Filipina.
In conclusion, the Supreme Court granted Filipina's petition and declared the marriage
between her and Fernando void ab initio due to the absence of a marriage license. The
decisions of the trial court and the Court of Appeals were set aside.
Angeles vs. Calasang (L-42283, March 18, 1985)

Angeles vs. Calasanz
G.R. No. L-42283. March 18, 1985.
Facts:
The case involves a contract to sell a piece of land in Cainta, Rizal between the
defendants-appellants, Ursula Torres Calasanz and Tomas Calasanz, and the plaintiffs-
appellees, Buenaventura Angeles and Teofila Juani. The contract stated that the plaintiffs-
appellees would pay a total amount of P3,920.00 plus 7% interest per annum. The
plaintiffs-appellees made a downpayment of P392.00 and agreed to pay the balance in
monthly installments of P41.20. They diligently paid the monthly installments until July
1966, totaling P4,533.38. The defendants-appellants accepted delayed payments from
the plaintiffs-appellees. However, on January 28, 1967, the defendants-appellants
cancelled the contract due to the plaintiffs-appellees' failure to meet subsequent
payments. The plaintiffs-appellees filed a case to compel the defendants-appellants to
execute the final deed of sale, claiming that they have already paid the total amount of
P4,533.38. The lower court ruled in favor of the plaintiffs-appellees, declaring that the
contract was not validly cancelled and ordering the defendants-appellants to execute the
final deed of sale. The defendants-appellants appealed the decision.
Issue:
The main issue in this case is whether or not the contract to sell has been validly cancelled
by the defendants-appellants.
Ruling:
The court ruled in favor of the plaintiffs-appellees, declaring that the contract was not
validly cancelled.
Ratio:
The court held that the breach of the contract by the plaintiffs-appellees was slight and
casual. Despite their failure to meet subsequent payments, the plaintiffs-appellees had
diligently paid the monthly installments for almost nine years and had paid an aggregate
amount higher than the principal obligation. The court considered this breach to be minor
and not sufficient grounds for the defendants-appellants to cancel the contract.
The court also considered the contract to sell as a contract of adhesion. In a contract of
adhesion, the terms of the contract are usually prepared by one party and presented to the
other party on a take-it-or-leave-it basis. In such contracts, any ambiguity or doubt in the
interpretation of the terms must be resolved against the party who prepared the contract.
In this case, the court construed the provision in the contract granting the sellers an
absolute and automatic right of rescission as contrary to law. The court held that such a
provision is unfair and oppressive to the buyers, and therefore, should not be upheld.
Furthermore, the court noted that the defendants-appellants had accepted delayed
payments from the plaintiffs-appellees. By accepting these delayed payments, the
defendants-appellants had effectively waived their right to rescind the contract. The court
emphasized that the defendants-appellants cannot be allowed to accept payments when
it is convenient for them and then cancel the contract when it is not.
Based on these reasons, the court ordered the defendants-appellants to execute the final
deed of sale in favor of the plaintiffs-appellees. The court also awarded attorney's fees to
the plaintiffs-appellees. However, the court modified the decision to require the plaintiffs-
appellees to pay the remaining balance without any interest, considering that they had
already paid an aggregate amount higher than the principal obligation.
In summary, the court ruled that the cancellation of the contract by the defendants-
appellants was not valid. The court considered the breach of the contract to be slight and
casual, and the provision granting the sellers an absolute and automatic right of rescission
as contrary to law. The court also emphasized that the defendants-appellants had waived
their right to rescind by accepting delayed payments. Therefore, the court ordered the
defendants-appellants to execute the final deed of sale and pay attorney's fees, while
requiring the plaintiffs-appellees to pay the remaining balance without any interest.
Century Properties, Inc. vs. Babiano, et al, GR 220978, July 5, 2016

Century Properties, Inc. vs. Babiano
G.R. No. 220978. July 5, 2016.
Facts:
The case of Century Properties, Inc. v. Babiano involves a dispute over unpaid
commissions between Century Properties, Inc. (CPI) and its former employees, Edwin J.
Babiano and Emma B. Concepcion. Babiano was hired by CPI as Director of Sales and
eventually became Vice President for Sales. His employment contract included a
"Confidentiality of Documents and Non-Compete Clause" which prohibited him from
disclosing confidential information and working for a competitor while employed by CPI.
Concepcion, on the other hand, was initially hired as a Sales Agent and later promoted to
Project Director. Her employment agreement stated that no employer-employee
relationship existed between her and CPI.
CPI accused Babiano of breaching the confidentiality clause by providing a competitor

with information about CPI's marketing strategies and recruiting CPI personnel to join the
competitor. Babiano resigned and admitted to accepting a position with the competitor
while still employed by CPI. CPI also claimed that Concepcion's money claims should be
litigated in an ordinary civil action since there was no employer-employee relationship
between them.
The Labor Arbiter ruled in favor of CPI, dismissing the complaint for lack of merit. However,
the National Labor Relations Commission (NLRC) reversed the decision and ordered CPI
to pay Babiano and Concepcion their unpaid commissions. The NLRC found that the
forfeiture of Babiano's commissions under the confidentiality clause was confiscatory
and unreasonable. It also ruled that there was an employer-employee relationship
between Concepcion and CPI based on the control test.
CPI appealed to the Court of Appeals (CA), which affirmed the NLRC's ruling but increased
the amount of unpaid commissions awarded to Babiano and Concepcion. The CA held
that the confidentiality clause only applied after the termination of the employer-
employee relationship and that there was an employer-employee relationship between
Concepcion and CPI based on the control test.
CPI filed a petition for review on certiorari before the Supreme Court.
Issue:
1. Whether Babiano breached the confidentiality clause in his employment contract
and if the forfeiture of his commissions was justified.
2. Whether there was an employer-employee relationship between Concepcion and
CPI.
Ruling:
The Supreme Court ruled in favor of CPI on the first issue and in favor of Concepcion on
the second issue.
Ratio:
The Court held that the confidentiality clause in Babiano's employment contract applied
during the pendency of his employment with CPI. Babiano's acceptance of a position with
a competitor while still employed by CPI constituted a breach of the clause, justifying the
forfeiture of his unpaid commissions. The Court emphasized the importance of upholding
confidentiality agreements to protect a company's trade secrets and competitive
advantage.
Regarding the second issue, the Court affirmed the existence of an employer-employee
relationship between Concepcion and CPI based on the control test. The control test
determines the existence of an employment relationship by examining the degree of
control exercised by the employer over the employee. In this case, CPI had control over
Concepcion's work as evidenced by her promotion and the fact that she was subject to
CPI's rules and regulations.
However, the Court modified the Court of Appeals' ruling by forfeiting Babiano's
commissions and ordering CPI to pay Concepcion her unpaid commissions in the amount
of P591,953.05. The Court held that Concepcion's failure to appeal the NLRC's
computation of her unpaid commissions did not preclude the Court of Appeals from
recomputing the amount to ensure a complete and just resolution of the case. This
decision highlights the Court's commitment to providing a fair and equitable resolution to
labor disputes.
Werr International Corporation vs. Highlands Prime, Inc., GR 187543 & 187580,
February 8, 2017
Werr Corp. International vs. Highlands Prime, Inc.
G.R. No. 187543. February 8, 2017.
Facts:
This case involves a dispute between Highlands Prime, Inc. (HPI) and Werr Corporation
International (Werr) regarding a construction project. HPI hired Werr to construct
residential units in Tagaytay Midlands Complex, Batangas. The parties entered into a
General Building Agreement, which stated that Werr had to complete the project within
210 calendar days and that HPI would pay a lump sum contract price. The agreement also
included provisions for liquidated damages in case of delay in the construction.
Werr commenced construction after receiving a downpayment from HPI. However, the
project was not completed on time, leading to several extensions granted by HPI.
Eventually, HPI terminated the contract with Werr due to the project's non-completion.
Werr then demanded payment of the balance of the contract price, while HPI claimed that
it had already deducted amounts from the retention money for payments made to
suppliers and additional costs incurred after termination.
The case was brought before the Construction Industry Arbitration Commission (CIAC),
which ruled in favor of Werr for the balance of the retention money but also granted HPI's
claim for liquidated damages. The CIAC applied the industry practice that liquidated
damages do not accrue after achieving substantial compliance. HPI filed a petition for
review with the Court of Appeals (CA), which affirmed the CIAC's findings on the allowable
charges against the retention money but disagreed with the computation of liquidated
damages. The CA ruled that liquidated damages should be computed until the termination
of the contract, resulting in a lower amount.
Werr appealed to the Supreme Court, arguing that the CA erred in modifying the CIAC
decision on liquidated damages. HPI also raised arguments regarding the charges against
the retention money, the computation of liquidated damages, the cost of arbitration, and
the award of attorney's fees and litigation expenses.
Issue:
1. Whether the charges against the retention money are within the scope of review
under Rule 45.
2. Whether the computation of liquidated damages should be until substantial
completion or until the termination of the contract.
3. Whether Werr achieved 95% completion before termination.
4. Whether the CA erred in modifying the CIAC decision on liquidated damages.
5. Whether the cost of arbitration was properly ruled upon.
6. Whether the denial of attorney's fees and litigation expenses was proper.
Ruling:
The Supreme Court denied the appeals and affirmed the CA's decision.
Ratio:
The Court held that the charges against the retention money were factual issues beyond
the scope of review under Rule 45. This means that the Court cannot review the factual
findings made by the CIAC and the CA regarding the charges against the retention money.
The Court also ruled that the industry practice of computing liquidated damages until
substantial completion of the project applies. However, Werr failed to prove that it
achieved 95% completion before termination. Therefore, liquidated damages should be
computed until the termination of the contract.
Regarding the CA's modification of the CIAC decision on liquidated damages, the Court
held that the CA did not err in doing so. The CA's computation of liquidated damages until
the termination of the contract was deemed proper and resulted in a lower amount.
The Court upheld the CA's ruling on the cost of arbitration, stating that the CA did not
commit any error in its ruling on this matter.
Lastly, the Court affirmed the denial of attorney's fees and litigation expenses, agreeing
with the CA's decision on this issue.
CONTRACTS - Defective Contracts

a. Rescissible Contracts (1380-1389)
Rosencor Development Corporation vs. Inquing, et al., (G.R. No. 140479, March
8, 2001)
Rosencor Development Corp. vs. Inquing
G.R. No. 140479. March 8, 2001.
Facts:
The case involves a petition for review on certiorari seeking the reversal of the decision of
the Court of Appeals. The respondents filed a complaint against Rosencor Development
Corporation, Rene Joaquin, and Eufrocina de Leon for the annulment of an absolute deed
of sale. The complaint was later amended to one for rescission of the deed of sale. The
respondents claimed that they were the lessees of a residential apartment and were
verbally granted the right of first refusal if the property was ever sold. After the death of the
owners, the management of the property was transferred to Eufrocina de Leon, who later
offered to sell the property to the respondents. However, the property was eventually sold
to Rosencor Development Corporation. The trial court dismissed the complaint, ruling
that the right of first refusal was unenforceable under the law. The Court of Appeals
reversed the decision and ordered the rescission of the deed of sale, the reconveyance of
the property to de Leon, and the opportunity for the respondents to exercise their right of
first refusal.
Issue:
The main issue raised in the case is whether the Court of Appeals erred in ordering the
rescission of the deed of sale and in concluding that the respondents had established their
right of first refusal.
Ruling:
The Supreme Court held that a right of first refusal is not covered by the provisions of the
New Civil Code on the statute of frauds and need not be in writing to be enforceable. The
Court also found that the respondents had satisfactorily proven their right of first refusal.
However, the Court ruled that the petitioners did not act in bad faith and therefore the
rescission of the deed of sale was not warranted. The Court reinstated the decision of the
trial court, dismissing the action for rescission and ordering the payment of monthly
rentals to the respondents.
Ratio:
The Court ruled that a right of first refusal is not covered by the provisions of the New Civil
Code on the statute of frauds. The statute of frauds requires certain contracts, including
contracts for the sale of real property, to be in writing to be enforceable. However, the
Court held that a right of first refusal is not a contract for the sale of real property, but rather
a contractual grant of a privilege to buy the property if the owner decides to sell it. As such,
it does not fall within the scope of the statute of frauds and need not be in writing to be
enforceable.
The Court also found that the respondents had satisfactorily proven their right of first
refusal. The respondents presented evidence showing that they were the lessees of the
property and that they were verbally granted the right of first refusal by the previous
owners. The Court found this evidence to be credible and sufficient to establish the
respondents' right of first refusal.
However, the Court ruled that the rescission of the deed of sale was not warranted
because the petitioners did not act in bad faith. The Court found that the petitioners,
Rosencor Development Corporation, had no knowledge of the respondents' right of first
refusal when they purchased the property. Therefore, they cannot be held liable for the
rescission of the deed of sale. Instead, the Court ordered the payment of monthly rentals
to the respondents as compensation for their right of first refusal being violated.
In conclusion, the Supreme Court upheld the decision of the trial court, dismissing the
action for rescission and ordering the payment of monthly rentals to the respondents. The
Court clarified that a right of first refusal is enforceable even if it is not in writing and that
the rescission of a deed of sale is only warranted if the buyer acted in bad faith.
Khe Hong Cheng vs. CA., (G.R. No. 144169, March 28, 2001)
Khe Hong Cheng vs. Court of Appeals
G.R. No. 144169. March 28, 2001.
Facts:
The case involves a marine insurance company, Philam Insurance Company, Inc., filing a
case to rescind or annul property donations made by the owner of a vessel that sank,
resulting in the loss of a shipment. The owner of the vessel is petitioner Khe Hong Cheng,
also known as Felix Khe, who owns Butuan Shipping Lines. On October 4, 1985, the
Philippine Agricultural Trading Corporation shipped 3,400 bags of copra on board the
vessel M/V PRINCE ERIC, owned by petitioner Khe Hong Cheng. The shipment was
covered by a marine insurance policy issued by American Home Insurance Company.
However, the vessel sank, resulting in the total loss of the shipment. American Home paid
the consignee the amount of P354,000.00 (the value of the copra) and filed a case to
recover the money paid to the consignee based on breach of contract of carriage. While
the case was still pending, petitioner Khe Hong Cheng executed deeds of donations of
parcels of land in favor of his children on December 20, 1989. The trial court rendered
judgment against petitioner Khe Hong Cheng in the case filed by American Home on
December 29, 1993. After the decision became final and executory, a writ of execution was
issued but was not served as it was discovered that petitioner Khe Hong Cheng no longer
had any property as he had conveyed the subject properties to his children. On February
25, 1997, respondent Philam filed a complaint for the rescission of the deeds of donation
executed by petitioner Khe Hong Cheng in favor of his children, alleging that the deeds
were executed in fraud of creditors. Petitioners filed a motion to dismiss the complaint,
arguing that the action had already prescribed. The trial court denied the motion to
dismiss, ruling that the action had not yet prescribed. The Court of Appeals affirmed the
trial court's decision, stating that the action to rescind the donations had not yet
prescribed.
Issue:
The main issue in this case is whether or not the action to rescind the donations has
already prescribed.
Ruling:
The Supreme Court ruled that the action to rescind the deeds of donation had not yet
prescribed and affirmed the decision of the Court of Appeals.
Ratio:
The Court held that the prescriptive period for the action to rescind the deeds of donation
commenced to run when respondent Philam discovered that it had no other legal remedy
to satisfy its claim against petitioner Khe Hong Cheng. An action to rescind or an accion
pauliana must be of last resort, availed of only after all other legal remedies have been
exhausted and proven futile. In this case, respondent Philam filed the complaint within a
month of discovering that petitioner Khe Hong Cheng had no other property to satisfy the
judgment award against him. Therefore, the action had not yet prescribed.
The Court rejected petitioners' argument that the prescriptive period should be counted
from the date of registration of the deeds of donation with the Register of Deeds. The Court
emphasized that an accion pauliana requires the exhaustion of the debtor's property and
that the date of the trial court's decision is immaterial. The cause of action for rescission
of the deeds of donation accrued when respondent Philam discovered that it had no other
legal remedy to satisfy its claim.
Lastly, the Court dismissed petitioners' argument on improper venue, stating that they had
already waived their right to question the venue of the case by failing to raise it in a motion
to dismiss or as an affirmative defense in their answer.
Guzman, Bocaling and Co., Inc. vs. Bonnnevie, (206 SCRA 668)
Guzman, Bocaling & Co. vs. Bonnevie
G.R. No. 86150. March 2, 1992.
Facts:
The case of Guzman, Bocaling & Co. v. Bonnevie involves a lease contract with a right of
first priority. The petitioner, Guzman, Bocaling & Co., purchased a property from the
administratrix, Africa Valdez de Reynoso, without recognizing the right of first priority
granted to the lessees, Raoul S.V. Bonnevie and Christopher Bonnevie. The Contract of
Lease between the Bonnevies and Reynoso stated that if the lessor decides to sell the
property, the lessees shall be given the first priority to purchase it. However, Reynoso sold
the property to the petitioner without offering it to the Bonnevies first.
Issue:
The main issue in this case is whether the Contract of Sale between Reynoso and the
petitioner is valid, considering the right of first priority granted to the Bonnevies.
Ruling:
The court ruled in favor of the Bonnevies, declaring the sale of the property to the petitioner
null and void. The court ordered the execution of a new deed of sale in favor of the
Bonnevies, under the same terms and conditions agreed upon in the Contract of Sale with
the petitioner. The court also ordered the petitioner to pay damages to the Bonnevies.
Ratio:
The court's ruling is based on several factors. Firstly, the court determined that it was not
necessary to secure the approval of the probate court for the Contract of Lease, as it did
not involve an alienation of real property or a lease term exceeding one year. This means
that the lease contract between the Bonnevies and Reynoso was valid and enforceable.
Secondly, the court found that the petitioner was not a buyer in good faith, as it had
knowledge of the lease and should have looked deeper into the agreement to determine if
it contained stipulations that would prejudice its own interests. The petitioner cannot
claim ignorance of the right of first priority granted to the Bonnevies, as it was clearly
stated in the Contract of Lease.
Thirdly, the court held that the Contract of Sale was rescissible, as it caused injury to the
Bonnevies, who had a right of first priority under the Contract of Lease. The sale of the
property to the petitioner without offering it to the Bonnevies first violated their rights and
caused them harm.
Finally, the court rejected the petitioner's argument that the Compromise Agreement
between the parties canceled the right of first priority, as the agreement was set aside and
the original rights of the Bonnevies were restored. The court emphasized that the right of
first priority granted to the Bonnevies was a valid and enforceable provision in the Contract
of Lease, and cannot be easily disregarded or overridden by subsequent agreements.
In conclusion, the court ruled in favor of the Bonnevies and declared the sale of the
property to the petitioner null and void. The court upheld the right of first priority granted
to the Bonnevies and ordered the execution of a new deed of sale in their favor. The court
also ordered the petitioner to pay damages to the Bonnevies for the harm caused by the
violation of their rights.
Concepcion vs. Sta. Anna, (87 Phil. 787)

Concepcion vs. Sta. Ana
G.R. No. L-2277. December 29, 1950.
Facts:
The case of Concepcion v. Sta. Ana involves a dispute over the validity of a sale made by
Perpetua Concepcion, the late sister of the plaintiff, Monico Concepcion, to the
defendant, Paciencia Sta. Ana. The plaintiff alleges that the sale was made with a false
and fictitious consideration, and that the defendant obtained transfer certificates of title
for the properties. The plaintiff argues that the sale is null and void because it was made
with a false consideration. The Court of First Instance of Manila granted the defendant's
motion to dismiss the complaint, stating that the plaintiff, as a non-party to the contract,
does not have the legal capacity to challenge its validity. The court held that the expression
of a false consideration in a contract does not render it non-existent, but rather, it is a
ground for an action for nullity. The effect of a false consideration is limited to making the
contract voidable, not null and void.
Issue:
The main issue in this case is whether the plaintiff, as a non-party to the contract, has the
legal capacity to challenge its validity.
Ruling:
The court ruled that the plaintiff, as a non-party to the contract and not a forced heir,
creditor, or party to the contract, does not have the legal capacity to bring an action to
annul the contract. The court cited Article 1302 of the Civil Code, which states that the
action to annul a contract may be brought by any person principally or subsidiarily bound
by the contract. Since the plaintiff is not bound by the contract, he does not have the right
to bring an action to annul it. The court also cited Articles 1257 and 1302 of the Civil Code,
which state that only parties to the contract or their assignees or representatives have the
legal capacity to challenge its validity.
Ratio:
The court explained that the deceased, Perpetua Concepcion, had the right to dispose of
her properties as the absolute owner, without further limitation than those established by
law. The only limitation on her right to convey the properties without consideration is that
she could not do so in fraud of her creditors. Since the plaintiff does not represent the
deceased or have any rights, actions, or obligations transmitted to him from the contract,
he does not have the legal capacity to bring an action to annul it.
In conclusion, the court affirmed the dismissal of the plaintiff's complaint, ruling that a
non-party to a contract lacks the legal capacity to challenge its validity. The court held that
the sale with a false consideration was voidable rather than null and void.
Rivera vs. Li Tam and Co., (4 SCRA 1072)

Rivera vs. Litam & Company, Inc.
G.R. No. L-16954. April 25, 1962.
Facts:
The case of Rivera v. Litam & Company, Inc. involves Arminio Rivera, the administrator of
the estate of Rafael Litam, who filed a lawsuit to recover 54/204 shares of stock belonging
to the deceased in Li Tam & Co. Inc., or their value. Rivera alleged that the shares had been
fraudulently transferred by the defendants and sought an accounting of the income or
dividends that had accrued to the shares, as well as attorney's fees and costs. The transfer
of the shares was found to be fraudulent based on several circumstances, including the
fact that the transferees were the deceased's own children, no consideration or price was
given or received for the transfer, the shares were the deceased's only properties, there
was no apparent need for him to dispose of all of them, and he had an outstanding
indebtedness of more than P250,000.
Issue:
The main issue raised in the case is whether the transfer of shares of stock by a deceased
individual to his children is fraudulent and should be declared null and void.
Ruling:
The Supreme Court declared the transfer of shares of stock by the deceased individual to
his children null and void. The court held that the transferees and the corporation were
liable for the return of the shares or their values. The court also addressed the liability of
the new corporation, Li Tam & Company, Inc., which had succeeded the old corporation.
The court held that if a new corporation expressly acquired the assets and properties, and
assumed the obligations and liabilities, of an old corporation, it could not excuse itself
from said obligations and liabilities on the argument that the two corporations were
distinct and separate. The court awarded attorney's fees to the plaintiff because he had
been forced to various litigations in order to enforce the payment of his claim.
Ratio:
The court found that the transfer of the shares was fraudulent based on the circumstances
presented. The fact that the transferees were the deceased's own children, no
consideration or price was given or received for the transfer, the shares were the
deceased's only properties, there was no apparent need for him to dispose of all of them,
and he had an outstanding indebtedness of more than P250,000 all pointed to the
fraudulent nature of the transfer. The court declared the transfer null and void and held the
transferees and the corporation liable for the return of the shares or their values.
The court also emphasized that a new corporation cannot escape the obligations and
liabilities of an old corporation if it expressly acquired the assets and properties, and
assumed the obligations and liabilities, of the old corporation. The court held that the two
corporations cannot be considered distinct and separate in such a case.
The court awarded attorney's fees to the plaintiff because he had been forced to various
litigations in order to enforce the payment of his claim. The defendants' objections,
including the claim that the transfer of the shares was not fraudulent and that they did not
receive notice of the hearing, were rejected by the court. The court found that the transfer
was indeed fraudulent based on the evidence presented and that the defendants had
failed to take necessary precautions, such as hiring a new lawyer and informing the court
of their new addresses. The court also held that the denial of their petition for new trial was
not a grave abuse of discretion.
In conclusion, the Supreme Court affirmed the judgment of the lower court, declaring the
transfer of shares null and void and holding the transferees and the corporation liable for
the return of the shares or their values. The court also awarded attorney's fees to the
plaintiff.
Oria vs. McMiking, (21 Philo. 243)

Oria y Gonzalez vs. McMicking
G.R. No. 7003. January 18, 1912.
Facts:
The case of Oria y Gonzalez v. McMicking involves a fraudulent sale of property by Oria
Hermanos & Co. to Manuel Oria y Gonzalez. In August 1909, Gutierrez Hermanos filed a
lawsuit against Oria Hermanos & Co. for the recovery of P147,204.28. In March 1910,
Gutierrez Hermanos filed another lawsuit against Oria Hermanos & Co. for the recovery of
P12,318.57. After the lawsuits were filed, Oria Hermanos & Co. dissolved their partnership
and entered into liquidation. On June 1, 1910, Tomas Oria y Balbas, as the managing
partner in liquidation, entered into a contract with Manuel Oria y Gonzalez to sell all the
property of Oria Hermanos & Co. to him. This included the steamship Serantes. The sale
was for a total price of P274,000, to be paid in installments over a period of 12 years.
On September 17, 1910, Gutierrez Hermanos won their lawsuit against Oria Hermanos &
Co. and obtained a judgment for the amount claimed. The sheriff of Manila demanded
payment from Tomas Oria y Balbas, but he claimed that there were no funds to pay the
judgment. As a result, the sheriff seized the steamship Serantes and announced it for sale
at public auction. Three days before the sale, Manuel Oria y Gonzalez claimed ownership
of the steamship and demanded its possession. The sheriff required Gutierrez Hermanos
to post a bond for protection, and the steamship was eventually sold to Gutierrez
Hermanos at the auction.
Manuel Oria y Gonzalez then filed a lawsuit seeking to prevent the sale of the steamship
and to declare himself as the rightful owner. The trial court ruled in favor of the defendants,
finding that the sale from Oria Hermanos & Co. to Manuel Oria y Gonzalez was fraudulent
and void as to the creditors. The court also found that Manuel Oria y Gonzalez did not have
ownership or possession rights over the steamship at the time of the sale.
Issue:
The main issue in the case is the validity of the sale from Oria Hermanos & Co. to Manuel
Oria y Gonzalez as against the creditors. Gutierrez Hermanos argues that the sale is
fraudulent and void as to the creditors, including themselves.
Ruling:
The court ruled in favor of the defendants and affirmed the decision of the trial court. The
court found that the sale was fraudulent as it prejudiced the rights of the creditors. The
circumstances surrounding the sale, such as the inadequate consideration, the transfer
made after the lawsuits were filed, and the lack of payment or security, indicated fraud.
The court also noted that the sale was made between family members, further raising
suspicions of fraud.
Ratio:
The court further explained that a creditor can attack a fraudulent sale by ignoring it and
seizing the property under their execution. The validity of the sale can then be determined
in the action brought by the alleged owner against the execution creditor. In this case,
since there was no property with which to pay the judgment, the defendants were justified
in seizing the steamship.
Therefore, the court affirmed the judgment of the trial court, declaring the sale fraudulent
and void as to the creditors, and denying Manuel Oria y Gonzalez's claim of ownership and
possession of the steamship.
Lilia B. Ada, etc. vs. Baylon, (G.R. No. 182435, August 13, 2012)
Ada vs. Baylon
G.R. No. 182435. August 13, 2012.
Facts:
The case involves the estate of spouses Florentino Baylon and Maximina Elnas Baylon. The
legitimate children and heirs of the spouses filed a complaint for partition, accounting,
and damages against Florante Baylon, an heir who took possession of the properties and
made a donation without approval. The Regional Trial Court (RTC) rendered a decision
declaring the existence of co-ownership over certain parcels of land and directing their
partition among the heirs. The RTC also rescinded the donation inter vivos in favor of
Florante. Florante sought reconsideration of the decision, but it was denied by the RTC. On
appeal, the Court of Appeals (CA) reversed and set aside the RTC decision insofar as it
rescinded the donation inter vivos. The CA held that before the petitioners may file an
action for rescission, they must first obtain a favorable judicial ruling that the parcels of
land actually belonged to the estate of Spouses Baylon. The CA remanded the case to the
RTC for the determination of ownership of the parcels of land.
Issue:
The main issue in this case is whether the donation inter vivos of certain parcels of land in
favor of Florante may be rescinded.
Ruling:
The Supreme Court partially granted the petition. It held that the RTC correctly ordered the
rescission of the donation inter vivos. The petitioners had established the requisites for
rescission under Article 1381 (4) of the Civil Code. However, the Supreme Court disagreed
with the CA's ruling that a judicial determination of ownership is necessary before
rescission can be sought. The Supreme Court emphasized that the purpose of Article 1381
(4) is to secure the possible effectivity of the impending judgment by a court with respect
to the thing subject of litigation. Thus, a definitive judicial determination is not a condition
precedent to the rescissory action. However, the Supreme Court also noted that a
determination of ownership is necessary for the proper partition of the parcels of land.
Therefore, the case was remanded to the RTC for the determination of ownership.
Ratio:
The Supreme Court held that the RTC correctly ordered the rescission of the donation inter
vivos. The petitioners had established the requisites for rescission under Article 1381 (4)
of the Civil Code. However, the Supreme Court disagreed with the CA's ruling that a judicial
determination of ownership is necessary before rescission can be sought. The Supreme
Court emphasized that the purpose of Article 1381 (4) is to secure the possible effectivity
of the impending judgment by a court with respect to the thing subject of litigation. Thus,
a definitive judicial determination is not a condition precedent to the rescissory action.
However, the Supreme Court also noted that a determination of ownership is necessary
for the proper partition of the parcels of land. Therefore, the case was remanded to the
RTC for the determination of ownership.
b. Voidable Contracts (1390-1402)

Bael vs. Intermediate Appellate Court (169 SCRA 617)
Bael vs. Intermediate Appellate Court
G.R. No. 74423. January 30, 1989.
Facts:
The case of Bael v. Intermediate Appellate Court involves a dispute over land ownership in
the Philippines. The plaintiffs, who are the heirs of Zoilo Bael, allege fraud in the execution
of a deed of sale, while the defendants, Eustaquio Bael and Teofila Jumalon, claim that the
plaintiffs willingly sold their shares. The land in question is a portion of Lot No. 4620,
located in Sto. Nio, Polanco, Zamboanga del Norte. Zoilo Bael inherited the land from his
parents, and upon his death, his wife and children succeeded and took possession of the
land.
In their complaint, the heirs of Zoilo Bael allege that the defendants fraudulently made one
of the plaintiffs, Desiderio Bael, sign a deed of absolute sale covering the land. They claim
that Desiderio Bael believed he was signing a deed of mortgage to guarantee a loan, but
the document was made to appear as a sale. They also allege that the document was not
signed before a notary public and that Eusebia Vda. de Bael, the surviving wife of Zoilo
Bael, did not sign the document but her thumbmark was made to appear on it. The
plaintiffs further assert that the land was not partitioned, and Desiderio Bael and Eusebia
Vda. de Bael were not authorized to alienate or encumber the rights and interests of the
other plaintiffs. The defendants, in their answer, deny the allegations and maintain the
validity of the document, claiming that it was a sale and not a mortgage. They argue that
the shares of the other plaintiffs were sold to them, except for the shares of two minors.
The trial court initially ordered the defendants to deliver the shares of the two minor
plaintiffs, but denied the plaintiffs' request for a preliminary injunction. After a trial on the
merits, the trial court declared the deed of sale and the private deeds of sale valid and
legal. It ordered the plaintiffs, except for the two minors, to execute a public document
based on their private deeds of sale. The trial court also ordered the defendants to pay
damages to the plaintiffs.
Both parties appealed the decision to the Intermediate Appellate Court. The appellate
court set aside the trial court's decision and declared the deed of sale null and void. It
declared the plaintiffs as the absolute owners of the property and ordered the defendants
to allow the plaintiffs to redeem the land upon payment of their respective loans. The
defendants filed a motion for reconsideration, which was denied by the appellate court.
The defendants then filed a petition for certiorari with the Supreme Court. The Supreme
Court, after a careful study of the records, found no cogent reason to fault the findings of
the trial court. It upheld the trial court's decision, ruling that the action for annulment had
prescribed and that the questioned documents were admissible in evidence. The
Supreme Court concluded that the plaintiffs had willingly sold their shares to the
defendants, and therefore, the defendants were the rightful owners of the land. The
decision of the Intermediate Appellate Court was reversed and set aside, and the trial
court's decision was reinstated.
Issue:
The main issue in this case is whether the deed of sale executed by one of the plaintiffs,
Desiderio Bael, was valid or if it was a result of fraud and misrepresentation.
Ruling:
The Supreme Court ruled in favor of the defendants, Eustaquio Bael and Teofila Jumalon.
The Court upheld the trial court's decision, declaring the deed of sale and the private
deeds of sale valid and legal. The Court concluded that the plaintiffs willingly sold their
shares to the defendants, and therefore, the defendants were the rightful owners of the
land.
Ratio:
The Supreme Court based its decision on several grounds. First, the Court found that the
action for annulment had prescribed, meaning that the plaintiffs' claim to annul the deed
of sale was filed beyond the allowed period. Second, the Court determined that the
questioned documents, including the deed of sale, were admissible in evidence. The
Court found no irregularities in the execution of the documents and considered them valid
and binding.
Furthermore, the Court considered the evidence presented by the defendants, which
showed that the plaintiffs willingly sold their shares to the defendants, except for the
shares of two minors. The Court found no evidence of fraud or misrepresentation in the
execution of the deed of sale. The Court also noted that the land was not partitioned, and
Desiderio Bael and Eusebia Vda. de Bael were authorized to alienate or encumber the
rights and interests of the other plaintiffs.
Based on these findings, the Supreme Court concluded that the defendants were the
rightful owners of the land. The decision of the Intermediate Appellate Court, which
declared the deed of sale null and void, was reversed and set aside. The trial court's
decision, which declared the deed of sale and the private deeds of sale valid and legal,
was reinstated.
Braganza vs. Villa Abrille, (105 Phil. 466)

De Braganza vs. De Villa Abrille
G.R. No. L-12471. April 13, 1959.
Facts:
The case of De Braganza v. De Villa Abrille involves a dispute over a loan agreement
between the petitioners, Rosario L. de Braganza and her sons Rodolfo and Guillermo, and
the respondent, Fernando F. de Villa Abrille. On October 30, 1944, the petitioners received
a loan of P70,000 in Japanese war notes from Villa Abrille. In exchange, they promised to
pay him P10,000 in legal currency two years after the cessation of hostilities or once
international exchange was established in the Philippines, plus 2% interest per annum.
However, the payment was not made, leading Villa Abrille to sue the petitioners in March
1949.
Issue:
The main issue raised in the case is whether the failure of the minors to disclose their age
when entering into the contract constitutes fraud that can be the basis of an action of
deceit.
Ruling:
The court ruled that the failure to disclose their minority does not automatically constitute
fraud. In order to hold the minors liable, the fraud must be actual and not constructive.
The court also held that although the written contract is unenforceable due to their non-
age, the minors are still required to make restitution to the extent that they may have
profited from the loan.
Ratio:
The court explained that the failure to disclose minority does not automatically amount to
fraud because the law presumes that parties to a contract have the capacity to enter into
it. In this case, the minors did not actively deceive the respondent; they simply failed to
disclose their age. Therefore, the court held that the failure to disclose their minority does
not constitute fraud.
The court further discussed the applicability of the four-year period for annulment under
Article 1301 of the Civil Code. It stated that if minority is only raised as a defense without
the minors seeking any positive relief from the contract, the four-year period may not be
applied. In this case, the minors did not file an action for annulment but merely interposed
an excuse from liability.
Based on the evidence presented, the court determined that the minors had used the loan
funds for their support during the Japanese occupation. Therefore, they were deemed to
have profited from the money received. The court calculated their share of the loan to be
2/3 of P70,000, or P46,666.66. As a result, they were ordered to return P1,166.67. The
court clarified that their promise to pay P10,000 in Philippine currency could not be
enforced since they were minors, but their liability was declared based on Article 1304 of
the Civil Code.
In conclusion, the court modified the decision of the appellate court. Rosario Braganza
was ordered to pay 1/3 of P10,000, or P3,333.33, plus 2% interest from October 1944.
Rodolfo and Guillermo Braganza were jointly ordered to pay the total amount of P1,166.67,
plus 6% interest from March 7, 1949. No costs were awarded in this instance.
Singson vs. Isabela Sawmill, (88 SCRA 623)

Singson vs. Isabela Sawmill
G.R. No. L-27343. February 28, 1979.
Facts:
The case involves a partnership dispute between Manuel G. Singson, Jose Belzunce,
Agustin E. Tonsay, Jose L. Espinos, Bacolod Southern Lumber Yard, and Oppen, Esteban,
Inc. (plaintiffs-appellees) and Isabela Sawmill, Margarita G. Saldajeno and her husband
Cecilio Saldajeno, Leon Garibay, Timoteo Tubungbanua, and the Provincial Sheriff of
Negros Occidental (defendants). Margarita G. Saldajeno, Leon Garibay, and Timoteo
Tubungbanua entered into a partnership, but Saldajeno later withdrew and sought to
dissolve the partnership. The suit resulted in the execution of an "Assignment of Rights
with Chattel mortgage" in favor of Saldajeno. Garibay and Tubungbanua continued the
business under the same firm name. The plaintiffs extended credits to the partnership, but
later the chattel mortgage was foreclosed and the mortgaged properties were sold at
public auction to Saldajeno, who then sold them for P45,000.
Issue:
The main issue raised in the case is whether the trial court had jurisdiction over the case
and whether the chattel mortgage can be nullified by another court of co-equal
jurisdiction.
Ruling:
The Supreme Court held that the trial court had jurisdiction over the case and that the
chattel mortgage can be nullified by another court of co-equal jurisdiction.
Ratio:
The Supreme Court ruled that the trial court had jurisdiction because the action also
sought the nullity of the chattel mortgage, which is not capable of pecuniary estimation.
The Court explained that the nullity of a chattel mortgage is a question of law and does not
involve the determination of the value of the property involved. Therefore, it falls within the
jurisdiction of the trial court.
The Court also ruled that one branch of the Court of First Instance can take cognizance of
an action to nullify a final judgment of another branch of the same court if the action is
based on the alleged nullity of the judgment due to fraud. In this case, the plaintiffs sought
to nullify the chattel mortgage on the grounds of fraud. The Court held that the trial court
had the authority to hear and decide on this matter.
In affirming the decision of the trial court, the Supreme Court modified it by eliminating
the portion ordering the appellants to pay attorney's fees. The Court found that there was
no legal basis for awarding attorney's fees in this case.
Talag vs. Tankengko (32 Phil. 1066)

NO DIGEST YET
c. Unenforceable Contracts (1403-1408)

Rosencor Development Corporation vs. Inquing, et al.,(supra.)
Rosencor Development Corp. vs. Inquing
G.R. No. 140479. March 8, 2001.
Facts:
The case involves a petition for review on certiorari seeking the reversal of the decision of
the Court of Appeals. The respondents filed a complaint against Rosencor Development
Corporation, Rene Joaquin, and Eufrocina de Leon for the annulment of an absolute deed
of sale. The complaint was later amended to one for rescission of the deed of sale. The
respondents claimed that they were the lessees of a residential apartment and were
verbally granted the right of first refusal if the property was ever sold. After the death of the
owners, the management of the property was transferred to Eufrocina de Leon, who later
offered to sell the property to the respondents. However, the property was eventually sold
to Rosencor Development Corporation. The trial court dismissed the complaint, ruling
that the right of first refusal was unenforceable under the law. The Court of Appeals
reversed the decision and ordered the rescission of the deed of sale, the reconveyance of
the property to de Leon, and the opportunity for the respondents to exercise their right of
first refusal.
Issue:
The main issue raised in the case is whether the Court of Appeals erred in ordering the
rescission of the deed of sale and in concluding that the respondents had established their
right of first refusal.
Ruling:
The Supreme Court held that a right of first refusal is not covered by the provisions of the
New Civil Code on the statute of frauds and need not be in writing to be enforceable. The
Court also found that the respondents had satisfactorily proven their right of first refusal.
However, the Court ruled that the petitioners did not act in bad faith and therefore the
rescission of the deed of sale was not warranted. The Court reinstated the decision of the
trial court, dismissing the action for rescission and ordering the payment of monthly
rentals to the respondents.
Ratio:
The Court ruled that a right of first refusal is not covered by the provisions of the New Civil
Code on the statute of frauds. The statute of frauds requires certain contracts, including
contracts for the sale of real property, to be in writing to be enforceable. However, the
Court held that a right of first refusal is not a contract for the sale of real property, but rather
a contractual grant of a privilege to buy the property if the owner decides to sell it. As such,
it does not fall within the scope of the statute of frauds and need not be in writing to be
enforceable.
The Court also found that the respondents had satisfactorily proven their right of first
refusal. The respondents presented evidence showing that they were the lessees of the
property and that they were verbally granted the right of first refusal by the previous
owners. The Court found this evidence to be credible and sufficient to establish the
respondents' right of first refusal.
However, the Court ruled that the rescission of the deed of sale was not warranted
because the petitioners did not act in bad faith. The Court found that the petitioners,
Rosencor Development Corporation, had no knowledge of the respondents' right of first
refusal when they purchased the property. Therefore, they cannot be held liable for the
rescission of the deed of sale. Instead, the Court ordered the payment of monthly rentals
to the respondents as compensation for their right of first refusal being violated.
In conclusion, the Supreme Court upheld the decision of the trial court, dismissing the
action for rescission and ordering the payment of monthly rentals to the respondents. The
Court clarified that a right of first refusal is enforceable even if it is not in writing and that
the rescission of a deed of sale is only warranted if the buyer acted in bad faith.
Carbonell vs. Poncio, (103 Phil. 655)

Carbonnel vs. Poncio
G.R. No. L-11231. May 12, 1958.
Facts:
The case of Carbonnel v. Poncio involves the plaintiff, Rosario Carbonnel, who claimed
that she purchased a piece of land from the defendant, Jose Poncio. Carbonnel paid a
partial amount for the land and also assumed Poncio's obligation with the Republic
Savings Bank. One of the conditions of the sale was that Poncio would continue to stay on
the land for one year. However, Poncio refused to execute the corresponding deed of sale.
As a result, Carbonnel sought to be declared the owner of the land, the annulment of the
sale to the Infantes, and damages.
Issue:
The main issue in this case is whether or not the Statute of Frauds applies to the contract
between Carbonnel and Poncio, and if Carbonnel can introduce parol evidence to support
her claim of partial performance.
Ruling:
The court ruled in favor of Carbonnel, stating that the Statute of Frauds does not apply to
the contract. Therefore, Carbonnel is allowed to introduce parol evidence to support her
claim of partial performance and seek damages and annulment of the sale.
Ratio:
The court held that the Statute of Frauds is applicable only to executory contracts, not to
contracts that are totally or partially performed. In this case, Carbonnel had already paid
a partial amount for the land and assumed Poncio's obligation with the bank. This partial
performance takes the contract out of the Statute of Frauds.
The court recognized the exceptional effect of part performance in taking an oral contract
out of the statute of frauds. This means that if a contract has been partially performed, the
exclusion of parol evidence would promote fraud or bad faith. Therefore, the court allows
oral evidence to prove both the contract and the part performance.
In conclusion, the court held that Carbonnel is entitled to introduce parol evidence to
establish the truth of her allegation of partial performance. The case was remanded to the
lower court for further proceedings, where Carbonnel can present her evidence and
arguments to support her claim.
Facturan vs. Sabanal, 81 Phil. 512)

Facturan vs. Sabanal
G.R. No. L-2090. September 27, 1948.
Facts:
The case of Facturan v. Sabanal involved petitioners Tomasa Facturan et al. and
respondents Raymunda Sabanal, Herederos de Francisco Sevilla, Benedicto Libcon,
Bernabela Facturan, and Eugenio Sevilla. The decision was rendered on September 27,
1948, by the First Division of the Supreme Court, with Justice Feria as the ponente. The
lower court had relied on the statute of frauds and struck out the oral testimonies of
witnesses for the respondent to prove the acquisition of the disputed property during the
marriage.
Issue:
The main issue raised in the case was whether the Court of Appeals erred in admitting the
oral testimonies of witnesses for the respondent to prove the acquisition of the disputed
property during the marriage. The lower court had excluded these testimonies based on
the statute of frauds, which requires certain contracts, including contracts for the sale of
real property, to be in writing.
Ruling:
The Court ruled in favor of the respondent and upheld the decision of the Court of Appeals.
It held that the statute of frauds was not applicable in this case because it only applies to
executory contracts, not to executed contracts like the sale of the property in question.
The Court emphasized that the widow's testimony, even if uncorroborated, was sufficient
to establish the legal presumption that the property was conjugal. The Court concluded
that there was no sufficient evidence to destroy this presumption.
Ratio:
The Court's decision was based on the interpretation of the statute of frauds and the legal
presumption of conjugal property. The Court held that the statute of frauds only applies to
executory contracts, which are contracts that have not yet been fully performed. In this
case, the sale of the property in question had already been executed, meaning that it had
been fully performed. Therefore, the statute of frauds did not apply.
The Court also emphasized the legal presumption of conjugal property. Under the law,
property acquired during the marriage is presumed to be conjugal unless proven
otherwise. In this case, the widow's testimony, even if uncorroborated, was sufficient to
establish this legal presumption. The Court noted that there was no sufficient evidence
presented to rebut this presumption.
In the dissenting opinion of Justice Briones, he argued that the lower court was correct in
excluding the oral testimonies based on the statute of frauds. He raised concerns about
the potential for fraud if the surviving spouse or their heirs were allowed to establish the
conjugal nature of a property through oral evidence against the claims of the deceased
spouse's heirs. Justice Briones believed that the issue raised in the case was fundamental
and deserved further discussion and consideration.
In summary, the Court of Appeals reversed the lower court's ruling and allowed the
admission of oral testimonies to establish the acquisition of conjugal property. The Court
held that the statute of frauds was not applicable in this case and that the widow's
testimony was sufficient to establish the legal presumption of conjugal property. The
dissenting opinion raised concerns about the potential for fraud and argued for a more
thorough examination of the legal issue.
Diana vs. Macalibo, (75 Phil. 71)

Diama vs. Macalibo
G.R. No. 48409. December 31, 1942.
Facts:
The case of Diama v. Macalibo involves a dispute over the ownership of a piece of land in
Ronda, Cebu. The plaintiffs, Roberta Diama and Cirilo Paglinawan, claimed that Diama
had inherited the land from her deceased mother and sold it to Paglinawan in March 1935.
On the other hand, the defendants, Margarita Macalibo and Gregorio Calimot, who are the
daughter and son-in-law of plaintiff Roberta Diama, alleged that they were the owners of
the property by virtue of an oral contract of sale from Diama to them in 1916, and that the
land had been delivered to them.
During the original trial in April 1937, the defendants offered oral evidence to prove a
consummated sale of the land in question from Diama to them in 1916. However, the
plaintiffs objected to this oral evidence, citing the Statute of Frauds. The court
provisionally allowed the oral evidence to determine whether it was an executed or
executory sale. After the trial, the court found that the contract, based on the oral
evidence, was merely a promise to sell and ruled in favor of the plaintiffs.
Issue:
The main issue in this case is whether oral evidence can be used to prove a consummated
sale of real property.
Ruling:
The court ruled that the objection to the questions asked to the defendant should have
been overruled because the Statute of Frauds does not prohibit oral evidence for such
purpose. The court remanded the case for further proceedings, instructing the trial court
to admit any oral evidence regarding the alleged consummated sale and to render a new
decision.
Ratio:
The court based its ruling on the interpretation of the Statute of Frauds. The Statute of
Frauds requires certain contracts, including contracts for the sale of real property, to be in
writing to be enforceable. However, the court noted that the Statute of Frauds does not
prohibit the use of oral evidence to prove a consummated sale of real property. In this
case, the defendants offered oral evidence to prove that there was a consummated sale
of the land in question from Diama to them in 1916. The court found that the objection to
this oral evidence should have been overruled because it was not prohibited by the Statute
of Frauds. The court also considered the fact that the trial de novo ordered by the Court of
Appeals allowed for the admission of oral evidence. Therefore, the court reversed the
ruling of the trial court and remanded the case for further proceedings, instructing the trial
court to admit any oral evidence regarding the alleged consummated sale and to render a
new decision.
Asturias Sugar Central vs. Montinola, (69 Phil. 725)

Asturias Sugar Central, Inc. vs. Montinola
G.R. No. 46768. Junio 14, 1940.
Facts:
The case of Asturias Sugar Central, Inc. v. Montinola involves a contractual dispute
between Asturias Sugar Central and Gloria Montinola. The dispute arises from a verbal
contract entered into before the 1931-1932 sugar milling season. Under the contract,
Asturias Sugar Central agreed to mill Montinola's sugarcane and give them a share of the
resulting sugar as compensation for the transportation costs. Asturias Sugar Central
fulfilled its obligations under the contract and paid Montinola a bonus after the 1931-1932
season. However, in the following years, Montinola decided to have their sugarcane milled
at a different central, the Central Azucarera de Janiuay.
Issue:
The main issue in this case is whether the verbal contract between Asturias Sugar Central
and Montinola is valid and enforceable, despite the absence of a written agreement.
Ruling:
The court ruled in favor of Montinola, stating that the provisions of Article 335 of Law No.
190 did not apply to their case. The court reasoned that the contract between the parties
had already been consummated, and Montinola had fulfilled their obligations under the
contract. Therefore, the provisions of the law regarding contracts that cannot be fulfilled
within a year did not apply.
Ratio:
The court based its decision on the fact that the contract between Asturias Sugar Central
and Montinola had already been performed. Both parties had fulfilled their obligations
under the contract, with Asturias Sugar Central milling Montinola's sugarcane and
Montinola paying the transportation costs. The court emphasized that the obligations of
the parties arose not only from the contract but also from the law itself.
The court also considered the provisions of Article 335 of Law No. 190, which requires
contracts that cannot be fulfilled within a year to be in writing. However, the court held that
this provision did not apply to the present case because the contract had already been
performed within a year. The court further noted that the purpose of the law is to prevent
fraud and perjury, and since the contract had already been consummated, there was no
risk of fraud or perjury.
In conclusion, the court upheld the decision of the Court of Appeals and ordered Asturias
Sugar Central to pay the amount demanded by Montinola. The court also ordered Asturias
Sugar Central to bear the costs of the legal proceedings.
Western Mindanao Lumber Co. vs. Medalla, (79 SCRA 702)

Western Mindanao Lumber Co., Inc. vs. Medalle
G.R. No. L-23213. October 28, 1977.
Facts:
The case of Western Mindanao Lumber Co., Inc. v. Medalle involves a dispute over a road
right-of-way agreement between Western Mindanao Lumber Co., Inc. (plaintiff-appellant)
and Natividad M. Medalle and Antonio Medalle (defendants-appellees). The complaint
was filed on December 16, 1960, alleging that the plaintiff obtained a right-of-way through
a certain lot from the registered owner, Mr. Luciano Hernandez, in 1955. The plaintiff
improved the road and it has been used not only by the plaintiff but also by the public. The
defendants purchased the lot in 1958 and allowed the continued use and maintenance of
the road. However, the defendants sent a notice of their intention to close the road, which
prompted the plaintiff to file a complaint seeking a writ of preliminary injunction to prevent
the closure of the road and to recognize and respect the road right-of-way agreement.
Issue:
The main issue raised in the case is whether the road right-of-way agreement between the
plaintiff and the defendants is enforceable under the Statute of Frauds and special law.
Ruling:
The Supreme Court ruled in favor of the plaintiff. The trial court erred in dismissing the
case based on the defendants' claim that the agreement is unenforceable under the
statute of frauds. The complaint, as amended, can be viewed as a claim for the recognition
of an existing easement of right-of-way or a demand for the establishment of an easement
of right-of-way, if none exists, with the plaintiff offering to pay reasonable compensation
for the use of the land.
Ratio:
The Supreme Court agreed with the plaintiff, stating that the Statute of Frauds only applies
to specific kinds of transactions, and an agreement creating an easement of right-of-way
is not one of them. The court explained that the complaint, as amended, can be
interpreted as a claim for the recognition of an existing easement of right-of-way or a
demand for the establishment of an easement of right-of-way, if none exists. The plaintiff
also offered to pay reasonable compensation for the use of the land. Therefore, the court
concluded that the trial court erred in dismissing the case based on the defendants' claim
that the agreement is unenforceable under the statute of frauds.
Based on this reasoning, the Supreme Court reversed the judgment appealed from, set
aside the orders of dismissal, and ordered the defendants to keep the road open and
respect the right-of-way agreement. The defendants were also ordered to pay the costs of
the case.
Shoemaker vs. La Tondeña, (68 Phil. 24)

Shoemaker vs. La Tondeña, Inc.
G.R. No. 45667. May 9, 1939.
Facts:
The case of Shoemaker v. La Tondeña, Inc. involves a dispute between Harry Ives
Shoemaker, the plaintiff-appellant, and La Tondeña, Inc., the defendant-appellee. The
case was decided on May 9, 1939, by the First Division of the Supreme Court of the
Philippines, with Justice Villa-Real as the ponente. On March 30, 1929, La Tondeña, Inc.
entered into a written contract with Shoemaker, appointing him as the technical manager
of its factories for a period of five years. The contract stated that Shoemaker would receive
a minimum compensation of P1,500 per month, with an additional 8% of the net earnings
of the company. It also provided for a six-month leave or vacation with full pay during the
last year of the contract. In March 1933, the contract was modified orally, with a temporary
deduction of P200 from Shoemaker's monthly salary and the postponement of his leave
or vacation. Shoemaker continued to fulfill his obligations under the modified contract,
and the company deducted a total of P2,000 from his salary. However, upon the
termination of the contract, the company refused to pay Shoemaker the deducted amount
and grant him his entitled leave.
Issue:
The main issue raised in the case is whether the court erred in sustaining the demurrer
filed by La Tondeña, Inc. The demurrer argued that the facts alleged in Shoemaker's
second amended complaint do not constitute a cause of action because the contract was
oral and therefore unenforceable under the statute of frauds.
Ruling:
The court ruled in favor of Shoemaker. It held that when one party to an oral contract, which
is not to be performed within one year from its execution, has complied with their
obligations within the year, the other party cannot avoid fulfilling their own obligations by
invoking the statute of frauds. The court emphasized that the purpose of the statute of
frauds is to prevent fraud, and allowing the defendant to use it as a defense would be
contrary to this purpose. Therefore, the court concluded that the facts alleged in
Shoemaker's complaint constituted a cause of action.
Ratio:
In its ratio decidendi, the court cited Section 335 of the Code of Civil Procedure, which
provides that an agreement not to be performed within a year is unenforceable unless it is
in writing. However, the court also referred to the equitable principle that the statute of
frauds should not be used as a means to perpetuate fraud. It noted that if one party has
performed their obligations under an oral contract and the other party has benefited from
this performance, it would be unjust to allow the latter to avoid their own obligations.
Therefore, the court held that Shoemaker's complaint should be allowed to proceed, and
the demurrer filed by La Tondeña, Inc. should be overruled.
Conclusion
In conclusion, the Supreme Court ruled in favor of Harry Ives Shoemaker, stating that the
facts alleged in his complaint constituted a cause of action. The court held that the
defendant, La Tondeña, Inc., could not avoid its obligations under the oral contract by
invoking the statute of frauds, as Shoemaker had already fulfilled his obligations within the
year. The case was remanded to the lower court for further proceedings.
Reiss vs. Memije, (15 Phil. 350)

Reiss vs. Memije
G.R. No. 5447. March 1, 1910.
Facts:
The case of Reiss v. Memije involves a dispute over the payment for lumber delivered to
the defendant, Jose M. Memije, for the repair of his house. The plaintiffs, Paul Reiss et al.,
delivered the lumber to Memije's contractor, Buenaventura Kabalsa, who was unable to
secure credit for the purchase. Memije accompanied Kabalsa to the plaintiffs' lumber yard
and assured them of his financial responsibility and ability to pay for the lumber. Based on
this assurance, the plaintiffs agreed to deliver the necessary lumber to Kabalsa for use in
the repair of Memije's house. After the lumber was delivered and used, the plaintiffs filed
a lawsuit against Memije for the unpaid balance of the purchase price.
Issue:
The main issue raised in the case is whether Memije's promise to pay for the lumber is
enforceable despite not being in writing, as required by the Statute of Frauds.
Ruling:
The court ruled in favor of the plaintiffs, stating that the promise to pay falls outside the
provisions of the Statute of Frauds.
Ratio:
The court reasoned that the credit for the lumber was extended solely to Memije, not to
Kabalsa, and therefore, the promise was an original one and not collateral. The court
explained that if goods are sold on the sole credit and responsibility of the party making
the promise, then the promise does not require a written memorandum. The court also
considered the circumstances of the case, including the fact that Memije had no
commercial credit or standing in the community and that the plaintiffs had refused to
extend him any credit. The court concluded that the credit for the lumber was given to
Memije, and therefore, his promise to pay did not need to be in writing.
In summary, the court ruled that Memije's promise to pay for the lumber delivered to his
contractor is enforceable despite not being in writing, as the credit was extended solely to
Memije and not to the contractor. The court held that the promise falls outside the
provisions of the Statute of Frauds and affirmed the judgment in favor of the plaintiffs.
d. Void or Inexistent Contracts (1409-1422)

Liguez vs. Court of Appeals (supra.)
Maria Castillo vs. Josefa Galvan, (85 SCRA 526)

Castillo vs. Galvan
G.R. No. L-27841. October 20, 1978.
Facts:
The case of Castillo v. Galvan involves an action for the annulment of a Deed of Absolute
Sale of certain parcels of land. The plaintiffs, Maria Encarnacion Castillo, Elisea Galvan,
and Patrocinio Galvan, filed the complaint six years after the registration of the deed. They
alleged fraud in securing the signatures of the vendors and want of consideration. On the
other hand, the defendants, Josefa Galvan, Emilio Samson, and Natividad Galvan, filed an
answer with counterclaim, claiming to be the absolute and exclusive owners of the parcels
of land.
Before the trial, the defendants amended their answer to include the defense of statute of
limitations and subsequently moved to dismiss the complaint. The trial court dismissed
the case on the assumption that the plaintiffs' cause of action for fraud had prescribed.
Issue:
The main issue raised in the case is whether or not the defendants can amend their answer
to include the defense of prescription, and if the plaintiffs' cause of action for the
annulment of the contract of sale had already prescribed.
Ruling:
The Supreme Court held that the defendants can amend their answer to include the
defense of prescription, as it is not a substantial alteration within the meaning of the rules.
However, the Court found that the plaintiffs' cause of action for the annulment of the
contract of sale had not prescribed, as it sought a judicial declaration of nullity, which is
imprescriptible.
Ratio:
The Court reasoned that the inclusion of the defense of prescription in the defendants'
amended answer did not substantially alter their defense. The defense of prescription is a
legal defense that can be raised at any stage of the proceedings. Therefore, allowing the
defendants to amend their answer to include this defense does not prejudice the plaintiffs'
rights.
Furthermore, the Court explained that the cause of action for the annulment of the
contract of sale sought a judicial declaration of nullity. This type of action is
imprescriptible, meaning it cannot be barred by the passage of time. The Court
emphasized that the purpose of an action for annulment is to obtain a judgment declaring
the contract void from the beginning. As such, the plaintiffs' cause of action for annulment
had not prescribed, even if it was filed six years after the registration of the deed.
Based on these reasons, the Court reversed the trial court's judgment and remanded the
case for further proceedings. The plaintiffs' cause of action for the annulment of the
contract of sale was found to be valid and not barred by prescription.
Rodriquez vs. Rodriquez, (20 SCRA 908)

Vda. de Rodriguez vs. Rodriguez
G.R. No. L-23002. July 31, 1967.
Facts:
The case of Vda. de Rodriguez v. Rodriguez involves Concepcion Felix Vda. de Rodriguez,
a widow who seeks to recover her properties that were transferred to her daughter and
then to her husband in order to circumvent the legal prohibition against donations
between spouses. The case was decided on July 31, 1967, by the Supreme Court of the
Philippines. Prior to her marriage to Domingo Rodriguez, Concepcion Felix owned two
fishponds in Bulacan, Bulacan province. On January 24, 1934, she executed a deed of sale
transferring ownership of the fishponds to her daughter, Concepcion Calderon, for the
sum of P2,500.00. The daughter then transferred the fishponds to her mother and
stepfather on January 27, 1934. Both deeds were registered on January 29, 1934, and new
titles were issued in the names of the spouses Rodriguez. Domingo Rodriguez died
intestate on March 6, 1953, and an extrajudicial settlement of his estate was executed on
March 16, 1953, which included the fishponds as conjugal property.
Issue:
The main issue raised in the case is whether the contracts of transfer from Concepcion
Felix to her daughter and from the daughter to the spouses Rodriguez are simulated or
fictitious, and whether they are void for lack of consideration.
Ruling:
The Supreme Court ruled that the contracts were not simulated but illegal. While
simulated contracts are not intended to alter the juridical situation of the parties,
contracts in fraudem legis are intended to indirectly attain a result that the law forbids. In
this case, the contracts were intended to circumvent the legal prohibition against
donations between spouses.
The Court also held that Concepcion Felix cannot recover the properties because she
participated in the transactions and delayed in filing the lawsuit. The rule in pari delicto
non oritur actio applies, which denies recovery to guilty parties inter se. Additionally, the
Court found that Concepcion Felix's action was barred by laches, as she had knowledge
of the nullity of the contracts in 1934 but only filed the lawsuit in 1962. Her conduct also
placed her in estoppel to question the validity of the transfer of her properties.
As for Concepcion Felix's alternative cause of action for 1/5 of the properties in
controversy, the Court ruled that it would not prosper as the action for rescission of the
extrajudicial settlement should have been filed within 4 years from its execution.
Ratio:
The Supreme Court based its decision on the fact that the contracts of transfer were not
simulated but illegal. It explained that simulated contracts are not intended to alter the
juridical situation of the parties, while contracts in fraudem legis are intended to indirectly
attain a result that the law forbids. In this case, the contracts were intended to circumvent
the legal prohibition against donations between spouses. Therefore, the contracts were
deemed illegal.
The Court also applied the rule in pari delicto non oritur actio, which denies recovery to
guilty parties inter se. Since Concepcion Felix participated in the transactions and delayed
in filing the lawsuit, she was considered a guilty party and was barred from recovering the
properties. Additionally, the Court found that her action was barred by laches, as she had
knowledge of the nullity of the contracts in 1934 but only filed the lawsuit in 1962. Her
conduct also placed her in estoppel to question the validity of the transfer of her
properties.
Regarding Concepcion Felix's alternative cause of action for 1/5 of the properties, the
Court ruled that it would not prosper as the action for rescission of the extrajudicial
settlement should have been filed within 4 years from its execution.
In conclusion, the Supreme Court affirmed the decision of the lower court, holding that
the contracts of transfer were not simulated but illegal. Concepcion Felix's action to
recover the properties was barred due to her participation in the transactions and her
delay in filing the lawsuit.
Angel Jose Warehousing vs. Chelda Enterprises (23 SCRA 119)

Angel Jose Warehousing Co., Inc. vs. Chelda Enterprises
G.R. No. L-25704.Apr 24, 1968.
Facts:
In the case of Angel Jose Warehousing Co., Inc. v. Chelda Enterprises, the Supreme Court
rendered a decision on April 24, 1968. The case involved a loan contract with usurious
interest, wherein the court ruled that the loan amount was valid but the interest was void.
The court held that the creditor could still recover the principal debt through judicial
action, despite the void interest.
The facts of the case are as follows: Angel Jose Warehousing Co., Inc. entered into a loan
agreement with Chelda Enterprises. The loan agreement stipulated an interest rate of 12%
per annum, which was found to be usurious. Chelda Enterprises failed to pay the loan,
prompting Angel Jose Warehousing Co., Inc. to file a complaint for the recovery of the
principal debt, interest, and attorney's fees.
Issue:
The main issue raised in the case was whether the loan contract with usurious interest
was valid and enforceable.
Ruling:
The court ruled that while the interest was void due to being usurious, the loan amount
itself was still valid. Therefore, the creditor, Angel Jose Warehousing Co., Inc., was entitled
to recover the principal debt through judicial action.
Ratio:
In its ruling, the court held that a loan contract with usurious interest is valid for the loan
amount but void for the interest. This means that the creditor can still enforce the
repayment of the principal debt, but not the usurious interest. The court emphasized that
the prohibition against usury is intended to protect borrowers from oppressive and
unconscionable interest rates.
Furthermore, the court clarified that attorney's fees are not automatically awarded in
cases involving loan contracts. Attorney's fees can only be awarded if stipulated in the
contract or provided by law. In this case, since there was no stipulation for attorney's fees
in the loan agreement and no legal basis for their award, the court denied the creditor's
claim for attorney's fees.
In conclusion, the Supreme Court ruled in favor of Angel Jose Warehousing Co., Inc.,
allowing them to recover the principal debt from Chelda Enterprises despite the usurious
interest. The court emphasized the invalidity of usurious interest rates and clarified the
conditions for the award of attorney's fees in loan contract cases.
Development Bank of the Philippines vs. Perez (G.R. No. 14854, November 11,
2004)
Development Bank of the Philippines vs. Perez
G.R. No. 148541. November 11, 2004.
Facts:
The case of Development Bank of the Philippines (DBP) v. Perez involves the respondents,
Bonita O. Perez and Alfredo Perez, who failed to pay their loan obligation to DBP. As a
result, they were forced to agree to a restructuring of their loan to prevent the foreclosure
of their mortgaged properties. However, the respondents later filed a complaint seeking to
nullify the new promissory note, claiming that DBP had restructured their loan in bad faith
and that they were coerced into signing it out of fear of foreclosure. The trial court upheld
the validity of the new promissory note and ordered the respondents to pay their
obligation. The Court of Appeals affirmed the trial court's decision but modified it by
recalculating the total obligation using a formula mandated by Central Bank Circular No.
158.
Issue:
The main issues raised in the case are as follows: (1) the validity of the new promissory
note, (2) the usurious interest rate agreed upon, (3) the application of CB Circular No. 158
in computing the total obligation, and (4) the amount of the total obligation.
Ruling:
The Supreme Court ruled that the new promissory note was validly signed by the
respondents. However, the interest rate agreed upon was found to be usurious. As a result,
the Court reduced the interest rate to the legal rate of twelve percent (12%) per annum.
The Court also held that the formula provided in CB Circular No. 158 cannot be used to
compute the total obligation, as it only applies to the computation of the simple annual
rate. Instead, the total amount of the obligation must be recomputed according to the
terms and conditions agreed upon.
Ratio:
The Court based its ruling on several legal principles. First, it cited Article 1335 of the New
Civil Code, which states that a threat to enforce one's claim through competent authority,
if the claim is just or legal, does not vitiate consent. In this case, the Court found that
signing the promissory note under the threat of foreclosure does not invalidate the
respondents' consent.
Second, the Court determined that the interest rate of eighteen percent (18%) plus
additional interest and penalty charges was highly usurious. Usury refers to an interest
rate that exceeds the legal limit set by law. In this case, the Court found the interest rate to
be usurious and therefore void. However, the unpaid principal debt remained valid.
Third, the Court held that the formula provided in CB Circular No. 158 cannot be used to
compute the total obligation. The circular only applies to the computation of the simple
annual rate and does not provide a comprehensive method for determining the total
obligation. Therefore, the Court ruled that the total amount of the obligation must be
recomputed according to the terms and conditions agreed upon by the parties.
In conclusion, the Supreme Court found that the new promissory note was validly signed
by the respondents. However, the interest rate agreed upon was usurious, resulting in a
reduction to the legal rate of twelve percent (12%) per annum. The Court also held that the
formula in CB Circular No. 158 cannot be used to compute the total obligation and that
the amount must be recomputed according to the agreed terms and conditions. The case
was remanded to the trial court for the determination of the total obligation according to
the reduced interest rate.
Ras vs. Sua (25 SCRA 153)

Ras vs. Sua
G.R. No. L-23302. September 25, 1968.
Facts:
The case of Ras v. Sua involves Alejandro Ras as the plaintiff-appellee and Estela Sua and
Ramon Sua as the defendants-appellants. The Supreme Court decided on this case on
September 25, 1968. The dispute centers around a leased parcel of land. Ras leased the
land to the Suas on February 25, 1958, without being aware of the provisions of Republic
Act 477. The lease was extended through several contracts, namely Exhibits D, E, F, and G,
each with a specific period of effectiveness. However, the defendants failed to pay the
taxes on the land and the installments due to the National Abaca and Other Fibers
Corporation (NAFCO). As a result, Ras filed a complaint on May 6, 1963, seeking the
annulment of the lease and the return of the land. He also claimed damages and
attorney's fees. The defendants, on the other hand, denied violating any conditions of the
lease and questioned the jurisdiction of the court to order the return of the land.
Issue:
1. Whether the cause of action had prescribed.
2. Whether Ras had the right to reacquire possession of the land.
Ruling:
The Supreme Court ruled in favor of Ras and affirmed the decision of the lower court.
Ratio:
The court rejected the defendants' arguments that the cause of action had prescribed and
that Ras had no right to reacquire possession of the land. The court held that the contracts
Exhibits F and G were still enforceable and that the right to seek the annulment of a
contract in violation of the law is imprescriptible. In other words, there is no time limit for
seeking the annulment of a contract that violates the law.
Furthermore, the court clarified that the violation of Republic Act 477 does not
automatically result in the reversion of the land to the state. Instead, the court ordered the
defendants to comply with the annulment of the contracts and pay rent to Ras. This means
that while the contracts were annulled, the defendants were still obligated to pay rent to
Ras.
In summary, the court upheld the lower court's decision, declaring the contracts Exhibits
F and G as annulled and ordering the defendants to pay monthly rent to Ras. The court
emphasized that the violation of a law does not automatically result in the reversion of the
land to the state, but rather, the annulment of the contract and the payment of rent to the
rightful owner.
Phil. Banking Corp. vs. Lui She, (21 SCRA 52)

Philippine Banking Corp. vs. Lui She
G.R. No. L-17587.Sep 12, 1967.
Facts:
The case of Philippine Banking Corp. v. Lui She involved a lease agreement between the
Philippine Banking Corporation (PBC) and Lui She, a Chinese national. The lease
agreement allowed Lui She to lease a parcel of land owned by PBC, with an option to buy
the property. However, the heirs of the original landowner challenged the validity of the
lease agreement, arguing that it violated the constitutional provision prohibiting the
transfer of land to aliens.
Issue:
The main issue raised in the case was whether the lease agreement, including the option
to buy, was valid despite the constitutional prohibition against the transfer of land to
aliens.
Ruling:
The Supreme Court reversed the decision of the lower court and declared the lease
agreement as void. The Court held that the constitutional prohibition against the transfer
of land to aliens is absolute and cannot be circumvented through lease agreements or
other arrangements. The Court emphasized that the purpose of the constitutional
provision is to preserve and protect the nation's land resources for the benefit of Filipino
citizens.
Ratio:
The Supreme Court based its ruling on the absolute nature of the constitutional
prohibition against the transfer of land to aliens. The Court emphasized that this
prohibition cannot be evaded or bypassed through lease agreements or other
arrangements. The purpose of the constitutional provision is to ensure that the country's
land resources are preserved and protected for the benefit of Filipino citizens.
In this case, the lease agreement between the Filipino landowner and the Chinese lessee,
which included an option to buy, was deemed to be in violation of the constitutional
prohibition. Therefore, the Court declared the lease agreement as void.
As a result of the void lease agreement, the Court ordered the return of the property to the
estate of the original landowner. Additionally, any payments made by the Chinese lessee
under the lease agreement should be returned to him.
In summary, the Supreme Court declared the lease agreement between a Filipino
landowner and a Chinese lessee, including an option to buy, as void for violating the
constitutional prohibition against the transfer of land to aliens. The Court emphasized the
absolute nature of the prohibition and ordered the return of the property to the
landowner's estate and the recovery of payments made by the lessee.
Manotok Realty vs. CA (supra.)

Manotok Realty, Inc. vs. Court of Appeals
G.R. No. L-35367. April 9, 1987.
Facts:
The case of Manotok Realty, Inc. v. Court of Appeals involves a dispute over the sale of a
lot from Vicente Legarda to Abelardo Lucero. The Court of First Instance of Manila, acting
as a probate court, authorized Legarda to sell the Legarda Tambunting Subdivision.
However, the sale of a portion of the subdivision to Lucero was not properly documented
and did not have the approval of the probate court. Lucero took possession of the lot and
leased it to several tenants, including the private respondent. The probate court later
authorized the Philippine Trust Company to sell the entire subdivision. The petitioner,
Manotok Realty, Inc., acquired the property and filed a complaint for ejectment against
the private respondent.
Issue:
The main issue in this case is whether the sale of the lot from Legarda to Lucero is valid
and binding against the petitioner.
Ruling:
The Supreme Court ruled in favor of Manotok Realty, Inc. and reversed the decision of the
Court of Appeals.
Ratio:
The Court held that the sale between Legarda and Lucero was not valid due to lack of
proper documentation and court approval. The Court emphasized that contracts for the
creation or transmission of real rights over immovable property must be in a public
document and duly registered to be enforceable against third parties. In this case, the sale
between Legarda and Lucero was not properly documented and did not have the approval
of the probate court. Therefore, it cannot be considered valid and binding against the
petitioner.
The Court also stated that the sale did not bind the Legarda-Tambunting estate and could
not affect the rights of the petitioner, who acquired the property with the approval of the
probate court. The probate court later authorized the Philippine Trust Company to sell the
entire subdivision, and the petitioner acquired the property through this authorized sale.
Therefore, the petitioner's ownership of the property is valid and cannot be affected by the
previous sale between Legarda and Lucero.
Furthermore, the Court ruled that the private respondent, as a transferee of Lucero,
cannot claim possession in good faith because he had notice of the petitioner's ownership
and the controversies surrounding the property. The private respondent was aware of the
petitioner's claim to the property and the ongoing legal disputes. Therefore, the private
respondent cannot claim possession in good faith and must yield possession to the
petitioner.
In summary, the Supreme Court ruled that the sale of the lot from Legarda to Lucero was
not valid and binding against the petitioner due to lack of proper documentation and court
approval. The private respondent cannot claim possession in good faith.
Marin vs. Adil (130 SCRA 406)

Marin vs. Adil
G.R. No. L-47986. July 16, 1984.
Facts:
The case of Marin v. Adil involves a deed of exchange between Aquilina P. Marin and the
Armada brothers, Manuel P. Armada and Ariston P. Armada. The deed of exchange was
executed in 1963, wherein Marin assigned her hereditary share in the estate of her
deceased mother, Monica Pacificar Vda. de Provido, to the Armada brothers in exchange
for their land in Cotabato and other properties. However, it was later discovered that Marin
did not actually have any rights to the properties she assigned, as they had already been
adjudicated to another relative.
Issue:
The main issue in the case is whether the deed of exchange should be rescinded due to
the parties' lack of right to the properties involved.
Ruling:
The Supreme Court ruled in favor of the Armada brothers, declaring the deed of exchange
void and inexistent.
Ratio:
The Court held that the intention of the parties regarding the properties in the exchange
could not be definitely ascertained, rendering the exchange void. The provisions of the
deed were found to be irreconcilable, as one provision stated that the properties were still
to be awarded or adjudicated to the parties, while another provision assumed that the
parties already had control and possession of the properties.
Furthermore, the Court found that Marin's actions rendered the performance of her
obligation under the deed impossible, allowing the Armada brothers to rescind the deed.
The Court dismissed Marin's counterclaim and denied the Armada brothers' claim for
damages and attorney's fees, as no evidence was presented to support these claims.
As a result, the deed of exchange was declared void and the annotation on the titles of the
properties involved was ordered to be cancelled.
Cabral vs. CA (130 SCRA 498)

Cabral vs. Court of Appeals
G.R. No. 101974. July 12, 2001.
Facts:
In the case of Cabral v. Court of Appeals, petitioner Victoria Cabral filed a petition for the
cancellation of Emancipation Patents and Torrens Titles issued in favor of private
respondents. These patents and titles covered portions of her registered property. The
Regional Director of the Department of Agrarian Reform dismissed her petition. Petitioner
then filed a petition for certiorari with the Court of Appeals questioning the jurisdiction of
the Regional Director.
Issue:
The main issue raised in the case is whether the Regional Director of the Department of
Agrarian Reform has jurisdiction over the cancellation of emancipation patents.
Ruling:
The Supreme Court ruled that the Regional Director of the Department of Agrarian Reform
had no jurisdiction over the cancellation of emancipation patents.
Ratio:
The Court emphasized the exclusive jurisdiction of the Agrarian Reform Adjudicatory
Board (DARAB) in agrarian reform cases. The DARAB has the power to determine and
adjudicate all agrarian disputes, cases, controversies, and matters involving the
implementation of the Comprehensive Agrarian Reform Program. The DARAB has the
authority to delegate its powers and functions to the regional office, but in this case, the
DARAB has delegated such powers and functions to the Regional Agrarian Reform
Adjudicators (RARADs) and the Provincial Agrarian Reform Adjudicators (PARADs). The
DAR Regional Office is primarily tasked with implementing agrarian reform laws, while the
DARAB/RARAD/PARAD is responsible for the adjudication of agrarian reform cases.
Therefore, the DAR Regional Office has no jurisdiction over the cancellation of
emancipation patents.
The Court based its ruling on the provisions of Executive Order No. 229, Executive Order
No. 129-A, and Republic Act No. 6657 (Comprehensive Agrarian Law of 1988), which grant
the DAR quasi-judicial powers and establish the DARAB as the primary adjudicatory body
for agrarian reform cases. The Court also considered the DARAB Revised Rules of
Procedure, which provide specific provisions for the orderly procedure before the DARAB,
RARADs, and PARADs.
In conclusion, the Supreme Court reversed the decision of the Court of Appeals and held
that the Regional Director of the Department of Agrarian Reform had no jurisdiction over
the cancellation of emancipation patents. The Court emphasized the exclusive
jurisdiction of the DARAB in agrarian reform cases and the delegation of powers and
functions to the RARADs and PARADs.
Razon, Inc. vs. PPA (G.R. No.75197, June 22, 1987)

E. Razon, Inc. vs. Philippine Ports Authority
G.R. No. 75197. June 22, 1987.
Facts:
The case involves a dispute between E. Razon, Inc. (ERI) and the Philippine Ports Authority
(PPA) regarding the cancellation of a management contract. ERI, also known as Metro Port
Service, Inc. (MPSI), was awarded a five-year contract in 1966 to operate the arrastre
service for Piers 3 and 5 at the South Harbor in Manila. ERI invested a significant amount
of money in acquiring port-handling equipment based on the assurance that its contract
would be renewed without public bidding. However, in 1971, the Bureau of Customs
informed ERI that a new bidding would be conducted for the operation of the arrastre
service. ERI filed a special civil action to enjoin the bidding and compel the renewal of its
contract. The Court of First Instance issued a writ of preliminary injunction, and the case
was elevated to the Supreme Court.
In 1974, a management contract covering all the piers in the South Harbor was executed
between ERI and the government. The contract had a term of five years, renewable for
another five years. In 1978, ERI allegedly initiated negotiations with the PPA for the renewal
of the contract, but no action was taken. In late 1978, ERI's majority shareholder, Enrique
Razon, was coerced into endorsing in blank ERI's stock certificates covering 60% equity.
The shares were transferred to Alfredo "Bejo" Romualdez, the brother-in-law of then
President Marcos. Romualdez took control of ERI, and Razon remained as President but
without real powers.
On July 18, 1986, some truckers staged a demonstration at the South Harbor to complain
about Razon's management. On the same day, the PPA sent a letter to ERI demanding an
explanation and reply to the complaints. ERI prepared a letter stating that it would reply
early the following week, but it was allegedly not delivered to the PPA. On July 19, 1986,
the PPA informed ERI that it was cancelling the management contract and appointing
Marina Port Services, Inc. as the interim operator of the arrastre service.
ERI filed a petition for certiorari with the Supreme Court, claiming that its right to due
process was violated by the unilateral cancellation of the contract without prior hearing
and investigation. The PPA argued that the contract was null and void due to the illegal
transfer of shares to Romualdez and the violations committed by ERI.
Issue:
The main issue in this case is whether the cancellation of the management contract
between ERI and the PPA was valid and in accordance with the law.
Ruling:
The Supreme Court ruled in favor of the PPA and declared the management contract
between ERI and the PPA null and void. The Court found that the contract was tainted with
illegality due to the illegal transfer of shares to Romualdez and the violations committed
by ERI. The Court also held that the PPA had the authority to cancel the contract and
appoint a new operator.
Ratio:
The Supreme Court based its decision on several grounds. Firstly, the Court found that the
transfer of shares from Razon to Romualdez was illegal and violated the principle of
corporate integrity. The transfer was done under duress and without the proper consent of
the shareholders. This illegal transfer of shares resulted in Romualdez taking control of ERI
and Razon being left without real powers.
Secondly, the Court found that ERI committed several violations, including the failure to
reply to the PPA's letter demanding an explanation and reply to the complaints raised by
the truckers. ERI's failure to respond promptly and adequately to the PPA's concerns
showed a lack of commitment and competence in managing the arrastre service.
Lastly, the Court held that the PPA had the authority to cancel the contract and appoint a
new operator. The PPA is tasked with ensuring the efficient and effective operation of ports
in the Philippines. In this case, the PPA found that ERI's management of the arrastre
service was unsatisfactory and decided to terminate the contract in the best interest of
the public. The Court recognized the PPA's authority to make such decisions and upheld
its power to appoint a new operator.
In conclusion, the Supreme Court ruled in favor of the PPA and declared the management
contract between ERI and the PPA null and void. The Court found that the contract was
tainted with illegality due to the illegal transfer of shares and the violations committed by
ERI. The Court also recognized the PPA's authority to cancel the contract and appoint a
new operator.
Bough vs. Contiveros (40 Phil. 209)

Bough vs. Cantiveros
G.R. No. 13300. September 29, 1919.
Facts:
The case of Basilia Bough and Gustavus Bough v. Matilde Cantiveros and Presbitera
Hanopol involves a dispute over a deed of sale. The plaintiffs, Basilia Bough and Gustavus
Bough, filed a complaint in the Court of First Instance of Leyte seeking to be put in
possession of a property covered by the deed of sale and to be awarded damages. The
defendants, Matilde Cantiveros and Presbitera Hanopol, denied the genuineness and due
execution of the deed of sale and asked for it to be declared null. After trial, the court ruled
in favor of the defendants, declaring the deed of sale null and without effect, and absolving
the defendants from the complaint. The court also ordered the plaintiffs to pay the costs
of the case.
Issue:
The main issue raised in the case is whether the deed of sale is valid or not.
Ruling:
The court ruled in favor of the defendants, declaring the deed of sale null and without
effect, and absolving the defendants from the complaint. The court also ordered the
plaintiffs to pay the costs of the case.
Ratio:
The court explains that the failure to file an affidavit denying the genuineness and due
execution of the document does not prevent the defendants from controverting it by
evidence of fraud, mistake, compromise, payment, statute of limitations, estoppel, and
want of consideration. The court clarifies that the defendants can properly set up the
defenses of fraud and want of consideration, even if they did not deny the genuineness
and due execution of the deed of sale under oath.
The court further discusses the admissibility of parole evidence to establish illegality or
fraud in a written instrument. While public instruments are generally considered evidence
of the fact which gave rise to their execution, the court explains that parole evidence can
be introduced to prove illegality or fraud, as permitted under the Code of Civil Procedure.
In this case, the court finds that the deed of sale was entered into with a fraudulent
intention and for a fraudulent purpose, in order to defeat recovery in a suit at law by a third
party.
The court also addresses the effect of the illegality of the contract. It states that
contracting parties may not establish agreements that conflict with the laws, morals, or
public order. A party to an illegal contract cannot ask the court to enforce their illegal
objectives. However, in cases where the parties to an illegal contract are not equally guilty
and where public policy is considered as advanced by allowing the more excusable party
to sue for relief against the transaction, relief may be given to that party. In this case, the
court finds that the grantor, Basilia Bough, was induced to enter into the agreement by
means of fraud and was made the dupe of the grantee, Matilde Cantiveros. Therefore, the
court decides to place Basilia Bough in the position she was in before the transactions
were entered into.
In conclusion, the court declares the deed of sale null and without effect due to fraud,
absolves the defendants from the complaint, and orders the plaintiffs to pay the costs of
the case. The court's decision is based on the legal principles that the failure to specifically
deny the genuineness and due execution of a written instrument under oath does not
prevent the introduction of evidence of fraud, and that contracts against public policy are
not enforceable.
Homena vs. Casa (157 SCRA 188)

Homena vs. Casa
G.R. No. L-32749. January 22, 1988.
Facts:
The case of Homena v. Casa involves a complaint filed by Sabas H. Homena and Iluminada
Juaneza against Dimas Casa and Maria Castor, as well as the Register of Deeds for the
Province of Cotabato. The plaintiffs alleged unlawful dispossession of their property and
sought the annulment of the title issued to the defendants. The lower court dismissed the
complaint, citing an illegal and void deed of sale as the basis for the plaintiffs' cause of
action.
Issue:
The main issue raised in the case is whether the plaintiffs have a valid cause of action
based on the deed of sale executed by the defendants.
Ruling:
The court ruled that the agreement between the parties is clearly illegal and void ab initio.
The deed of sale was intended to circumvent and violate the law, as it involved the transfer
of a portion of a homestead during the prohibited period under the Public Land Act. As
parties to a void contract, the plaintiffs have no rights that can be enforced, and the court
cannot lend itself to the enforcement of an illegal agreement.
Ratio:
The court based its ruling on the fact that the deed of sale executed by the defendants was
illegal and void from the beginning. The transfer of a portion of a homestead during the
prohibited period under the Public Land Act is expressly prohibited by law. The court
emphasized that parties to a void contract have no rights that can be enforced, and the
court cannot lend its aid to the enforcement of an illegal agreement.
The court also rejected the plaintiffs' invocation of the doctrine of implied trust based on
an illegal contract. The doctrine of implied trust cannot be applied in cases where the
underlying contract is illegal and void. The court held that the issue of prescription or
laches is irrelevant in this case, as the plaintiffs have no cause of action due to the void
nature of the contract.
In conclusion, the court affirmed the dismissal of the plaintiffs' complaint, as their cause
of action was based on an illegal and void deed of sale. The court emphasized that parties
to a void contract have no rights that can be enforced, and the doctrine of implied trust
cannot be invoked in such cases. Therefore, the plaintiffs' appeal was denied, and the
lower court's orders were affirmed.
Spouses Abella vs. Spouses Abella, GR 195166, July 8, 2015

Spouses Abella vs. Spouses Abella
G.R. No. 195166. July 8, 2015.
Facts:
The case involves a dispute between two sets of spouses, namely the petitioners, Spouses
Salvador and Alma Abella, and the respondents, Spouses Romeo and Annie Abella. The
petitioners filed a complaint against the respondents for the payment of a loan amounting
to P500,000. The loan was evidenced by an acknowledgment receipt and was supposed
to be paid within one year.
The respondents, on the other hand, claimed that the amount involved was not a loan but
part of a joint venture involving the lending of money. They argued that they were
approached by the petitioners to manage the money and that they would receive 2.5%
monthly interest.
The trial court ruled in favor of the petitioners, ordering the respondents to pay the unpaid
loan balance plus interest. However, the Court of Appeals reversed the decision, stating
that the loan did not earn interest because it was not properly stipulated in writing.
Issue:
The main issue in this case is whether the loan agreement between the parties should earn
interest despite the absence of a written stipulation.
Ruling:
The Supreme Court held that the loan agreement between the parties should earn interest
at the legal rate of 12% per annum. The court also ordered the respondents to reimburse
the petitioners for the overpaid amount and imposed a legal interest rate of 6% per annum
on the total judgment award.
Ratio:
The court based its ruling on the principle that in the absence of an express stipulation,
the legal interest rate of 12% per annum should be imposed on the loan agreement. The
court emphasized that the respondents failed to present any evidence to support their
claim that the loan was part of a joint venture and that they were entitled to receive 2.5%
monthly interest.
The court also noted that the loan agreement was evidenced by an acknowledgment
receipt, which clearly indicated that it was a loan and not a joint venture. The court further
explained that the respondents' argument that they were approached by the petitioners to
manage the money did not change the nature of the transaction, as it was still a loan.
Moreover, the court emphasized that the respondents' claim that the loan did not earn
interest because it was not properly stipulated in writing was without merit. The court cited
Article 1956 of the Civil Code, which provides that interest due shall earn legal interest
from the time it is judicially demanded. In this case, the petitioners filed a complaint to
demand payment of the loan, thus triggering the accrual of interest.
In addition, the court ordered the respondents to reimburse the petitioners for the
overpaid amount. The court explained that the respondents received monthly payments
from the petitioners, which exceeded the amount of the loan. Therefore, the respondents
were unjustly enriched and should be required to return the excess amount.
Finally, the court imposed a legal interest rate of 6% per annum on the total judgment
award. The court based this decision on prevailing jurisprudence, which provides that in
the absence of an express stipulation, the legal interest rate of 6% per annum should be
imposed on monetary judgments.
Sps. Jonsay, et al. vs. Solidbank Bank Corporation, GR 206459, April 6, 2016
Spouses Jonsay vs. Solidbank Corp.
G.R. No. 206459. April 6, 2016.
Facts:
This case involves a dispute over a mortgage contract and foreclosure proceedings
between Spouses Florante E. Jonsay and Luzviminda L. Jonsay, Momarco Import Co., Inc.
(petitioners), and Solidbank Corporation (now Metropolitan Bank and Trust Company)
(respondent). The petitioners obtained loans from Solidbank and executed a blanket
mortgage over three parcels of land they owned. The loans were consolidated under one
promissory note, with an interest rate of 18.75% per annum and an escalation clause tied
to increases in Central Bank-declared interest rates. The petitioners made payments until
1998, when they defaulted due to financial difficulties. Solidbank proceeded with the
extrajudicial foreclosure of the mortgage and won the auction with a bid of
P82,327,249.54. The petitioners filed a complaint to annul the foreclosure proceedings,
claiming that the amount claimed by Solidbank was bloated, the interest charges were
illegal, and the foreclosure sale was defective.
Issue:
1. Whether the foreclosure proceedings should be annulled due to alleged
irregularities and defects.
2. Whether the interest charges imposed by Solidbank are illegal.
3. Whether the amount claimed by Solidbank in the foreclosure sale is bloated.
Ruling:
The Supreme Court held that the Court of Appeals (CA) had the authority to reverse its
previous decision on a motion for reconsideration. It also ruled that Solidbank had
complied with the publication requirements for the foreclosure sale and that the
petitioners failed to present sufficient evidence to rebut the presumption of regularity. The
Court declared the escalation clause in the loan agreement void and reduced the interest
rates to the stipulated rate of 18.75% per annum. It also reduced the attorney's fees
awarded to the petitioners and ordered Solidbank to pay the excess amount from the
auction proceeds to the petitioners.
Ratio:
The Court first addressed the issue of the CA's authority to reverse its previous decision. It
held that the CA had the power to reconsider and reverse its own decision on a motion for
reconsideration, as long as the motion is filed within the reglementary period and the CA
finds that there are valid grounds for reconsideration. In this case, the CA reversed its
initial decision after finding that there were errors in its previous ruling.
Next, the Court examined the validity of the foreclosure proceedings. It found that
Solidbank had complied with the publication requirements for the foreclosure sale, as
evidenced by the publication of the notice of sale in a newspaper of general circulation.
The Court also noted that the petitioners failed to present sufficient evidence to prove their
allegations of irregularities and defects in the foreclosure sale. Therefore, the Court upheld
the validity of the foreclosure proceedings.
Regarding the interest charges imposed by Solidbank, the Court declared the escalation
clause in the loan agreement void. It held that the escalation clause, which tied the
interest rates to increases in Central Bank-declared interest rates, was unconscionable
and oppressive. The Court reduced the interest rates to the stipulated rate of 18.75% per
annum.
Lastly, the Court addressed the issue of damages and attorney's fees. It reduced the
attorney's fees awarded to the petitioners, considering that the case did not involve
complex legal issues. The Court also ordered Solidbank to pay the excess amount from
the auction proceeds to the petitioners, as the amount claimed by Solidbank was found
to be bloated.
Peña vs. Delos Santos, et al. GR 202223, March 2, 2016

Peña vs. Delos Santos
G.R. No. 202223. March 2, 2016.
Facts:
The case of Peña v. Delos Santos involves a conveyance made by Jesus and Rosita Delos
Santos in favor of their counsel, Atty. Robiso. The conveyance was declared null and void
due to being a prohibited transaction under Article 1491(5) of the Civil Code. The case
originated from a decision of the Regional Trial Court (RTC) of Kalibo, Aklan, which
declared Jesus and Rosita as the lawful owners of a portion of land in Boracay Island. The
losing parties in the case appealed to the Court of Appeals (CA), but their appeals were
dismissed and considered withdrawn. The plaintiffs then filed a petition for review on
certiorari with the Supreme Court, but it was denied. The case was remanded to the RTC
for execution proceedings.
Issue:
The main issue in this case is whether the conveyance made by Jesus and Rosita Delos
Santos in favor of their counsel, Atty. Robiso, is null and void due to being a prohibited
transaction under Article 1491(5) of the Civil Code.
Ruling:
The Supreme Court upheld the ruling that the conveyance made by Jesus and Rosita Delos
Santos in favor of their counsel, Atty. Robiso, is null and void due to being a prohibited
transaction under Article 1491(5) of the Civil Code.
Ratio:
The Supreme Court based its decision on Article 1491(5) of the Civil Code, which prohibits
lawyers from acquiring property or rights in litigation. The Court emphasized that this
prohibition is founded on public policy and cannot be overridden by estoppel or
procedural arguments. The Court also rejected the argument that a separate action for
declaration of nullity is necessary, as the deeds of conveyance were not yet fully executory
at the time. The Court stated that the conveyance was made during the pendency of
litigation and therefore deemed inexistent. By affirming the nullity of the conveyance, the
Court upheld the principle that lawyers should not be allowed to acquire property or rights
in litigation to prevent conflicts of interest and ensure the integrity of the legal profession.
Guillermo, et al. vs. Philippine Information Agency, GR 223751, March 15, 2017
Guillermo vs. Philippine Information Agency
G.R. No. 223751. March 15, 2017.
Facts:
The case of Guillermo v. Philippine Information Agency involves a complaint filed by Miguel
"Lucky" Guillermo and AV Manila Creative Production Co. against the Philippine
Information Agency (PIA) and the Department of Public Works and Highways (DPWH) for
non-payment of money claims. Guillermo and AV Manila alleged that they were contracted
by the DPWH to produce a documentary film called "Joyride" as part of an advocacy
campaign to counteract the negative perception of the outgoing Arroyo Administration.
They claimed that they delivered the finished product and other related materials to the
DPWH and billed the PIA for the services rendered, but no payment was made.
Issue:
The main issue raised in the case is whether Guillermo and AV Manila are entitled to
payment for their services rendered in producing the documentary film "Joyride" for the
DPWH.
Ruling:
The Supreme Court denied the petition for review on certiorari, ruling that Guillermo and
AV Manila are not entitled to payment for their services rendered in producing the
documentary film "Joyride" for the DPWH.
Ratio:
The Court held that the complaint failed to establish the existence of a valid contract and
did not comply with the legal requirements for contracts involving the expenditure of
public funds. The Court found that there was no evidence of a valid contract between
Guillermo, AV Manila, and the DPWH. The complaint also did not comply with the legal
requirements for contracts involving the expenditure of public funds, such as the need for
public bidding and the approval of the appropriate government agency.
The Court also found that the principle of quantum meruit, which allows for the recovery
of reasonable value for services rendered in the absence of a valid contract, was
inapplicable in this case. The Court noted that there was a lack of evidence showing any
public benefit derived from the "Joyride" project. Without evidence of public benefit,
Guillermo and AV Manila cannot claim payment based on quantum meruit.
Furthermore, the Court held that the officers who entered into the contract may be held
personally liable for any damages incurred. The Court emphasized that public officers
should exercise due diligence and observe the necessary legal requirements when
entering into contracts involving public funds. Failure to do so may result in personal
liability for any damages caused.

Lex Doggos Oblicon Case Digest

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University of San Carlos | OBLIGATIONS AND CONTRACTS | Atty. Daryl Bretch M.

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

OBLIGATIONS AND CONTRACTS

CASE DIGESTS ON THE CASES LISTED IN THE SYLLABUS

DONATE GCASH TO PASS OBLICON

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

OBLIGATIONS - General Provisions (Arts. 1156-1162)

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

Pelayo vs. Lauron (12 Phil. 453)

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

Martinez vs. Martinez (1 Phil. 647)

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

ii. Contracts (1159; 1305)

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

Maritime Company of the Philippines vs. Reparations Commission (40 SCRA

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

NHA vs. CA (GR No. 128064, March 1, 2004)

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

iii. Quasi-Contracts (1160; 2142; 2144; 2154)

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

National Commercial Bank of Saudi Arabia vs. Court of Appeals, G. R. No.

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

iv. Delict (1161; 2177; Art. 100, 104 of RPC)

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

Secs. 1-3. Rule III, Revised Rules of Criminal Procedure

No counterclaim, cross-claim or third-party complaint may be filed by the accused in the

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

v. Quasi-delict (1162; 2176)

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM

Elcano vs. Hill (77 SCRA 98)

LEX DOGGOS | BLOCK 2 EH 302 | 2nd Semester S.Y. 2023-2024

ALVERO ARCAMO DONGHIL GABOD KHO LIM