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Civil Law Review 2 2013 - 2014

CIVIL LAW REVIEW 2


()l*gat*o+, - .o+tract, Sale, 'ea,e Part+er,h*/ Age+cy .re0*t Tra+,act*o+, Tort, - 1a2age,

Atty. VIVIANA MARTIN PAGUIRIGAN School Year 2013 2014

ARA AG! "AR#N $. %A$ANA! &AN#T% G. &A'AYA&AY! $#TSY R.

*WARNING & DISCLAIMER: This compilation contains case digests for Civil Law Review 2. Some of the contents are personal digests of the authors and some are gathered through research. Contents may not be

ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014 accurate, hence, reading the cases in full text is highly recommended. This is for personal use only and no copyright infringement intended.

LIST OF CASES
SY 2013 2014
OBLIGATIONS & CONTRACTS ARTICLES 1156- 1246
Macasaet vs. COA173 SCRA 352 Phil. Export vs. Eusebio Co st.et al.!ul" 13# 2$$% &a 'uili' vs. CA.2(( SCRA 7) Co*ap ia +e eral vs. Ara,a7 Phil. %55 -eloso vs. .o ta osa.13 Phil. 7/ 0a"la vs. Sila ' tra sit73 Phil. 557 1ee vs. 2e +u,*a ..1)7 SCRA 277 0ar,a'a vs. CA..2() SCRA 1$5 3PC vs. CA..1(1 SCRA 33% Picart vs. S*ith37 Phil )13 Co soli4ate4 0a 5 vs. CA a 4 2ia,..Sept. 11# 2$$3 Sch*i4t, tra sport vs. tra sport -e ture..April 22# 2$$5 Real vs. 0elo.!a . 2(# 2$$7 Phil. Co**u icatio s vs. +lobe &eleco*..Ma" 25# 2$$% S0&C vs. CA2%/ SCRA 2$( Macta Cebu 6 t7l Airport vs. &u4tu4.3ov. 1%# 2$$) So ' .o vs. 8a9aii Phil. Co..%7 Phil )21 Corte, vs. CA.!ul" 12# 2$$( +il vs. CA a 4 8eirs o: MatulacSept. 12# 2$$3 Spouses Ra"os vs. CA a 4 Mira 4a..!ul" 1%# 2$$% Cor4ero vs. ..S. Ma a'e*e t 2ev7t.Oct. 31# 2$$( Calero vs. Cario .1$7 Phil. 5%/ &R0 vs. CA.177 SCRA 7)) Phil. 0loo*i ' Mills vs. CA a 4 &R0Oct. 15# 2$$3 Cou tr" 0a 5ers vs. CA..2$1 SCRA %5) Co*. Cre4it vs. CA..1(/ SCRA 1 Pr"ce Corp. vs. Pa'cor.Ma" (# 2$$5 Asiatrust 2ev7t 0a 5 vs. Co cepts &ra4i '.!u e 2$# 2$$3 !iso vs. CA1(% SCRA 33/ 1o vs. ;!S Eco<.or*9or5.Oct. )# 2$$3 P30 vs. Pi e4a.1/7 SCRA 1 PC60a 5 vs. CA.!a . 31# 2$$( Culaba vs. CA a 4 sa Mi'uel Corp..April 15# 2$$% =SEE> Republic Act 3o. )1)3 ? repeale4 Republic Act 3o. 52/ 9hich prohibits pa"*e t o: *o e" obli'atio s i curre c" other tha Philippi e curre c".@

ARTICLES 1247 1337


&o9 e A Cit" 2ev7t vs. CA a 4 -olu ta4!ul" 1%# 2$$% Coro el vs. Capati..Ma" 2(# 2$$5 People7s 6 4ustrial Co*. Corp. vs. CA..2)1 SCRA 2$7 E+MP6 vs. CA....2)2 SCRA 553 ARAFAG HABANA JALAYAJAY Page 2

Civil Law Review 2 2013 - 2014 3a'a &elepho e Co vs. CA23$ SCRA 351 &ra s. Paci:ic 6 4. -s. CA235 SCRA %/% Silahis vs. 6AC.1)$ SCRA 21 .ra cia vs. CA.1(2 SCRA 753 0P6 vs. CA =127/@..!u e )# 2$$( Citiba 5 vs. Sabe ia o..eb. 12# 2$$7 People7s 0a 5 vs. S"vels.1(% SCRA 2%7 Bou ' vs. CA1/( SCRA 2%7 PS0a 5 vs. Spouses Ma alac =12/2@...April 2(# 2$$5 Astro Electro ics vs. Phil. Export =13$2@...Sept. 23# 2$$3 Car*elcra:t vs. 31RC..1)( SCRA 3/3 Acol vs. PC60a 5 =13$(@.!ul" 25# 2$$( &iu vs. Plati u* Pla s..eb. 2)# 2$$7 Avo vs. 1u a2ec. 2$# 2$$( Piltel vs. &ecso ..Ma" 7# 2$$% P30 vs. Pa4illa =13$)@.1/( SCRA 537 2;C 8ol4i 's vs. CA =1311@32/ SCRA ((( &a a" Recreatio vs. .austo =1311@.April 12# 2$$5 1le a4o vs. 1le a4o.March %# 2$$/ +ilchrist vs. Cu44" =131%@2/ Phil. 5%2 Mo tecillo vs. Re" es =1317@!ul" 2(# 2$$2 .ra cisco vs. 8errera =131)@.3ov. 21# 2$$2 Coro el vs. Co sta ti o =1317@...eb. 7# 2$$3 1au4icio vs. Arias =131/@..%3 Phil. 27$ -illa ueva vs. CA =131/@..2%% SCRA 3/5 A4el:a vs. CA =132%@2%$ SCRA 5(5 Serra vs. CA22/ SCRA (1 Malbarosa vs. CA =132%@..April 3$# 2$$3 -4a. 2e Ape vs. CA =1332@..April 15# 2$$5 Ma"or vs. 0ele .!u e 3# 2$$%

ARTICLES 1338 1428


0autista vs. CA..Au'. 11# 2$$% 2au4e 8er ae, vs. 2elos A 'eles27 SCRA 127( Clau4el vs. CA1// SCRA 113 0er*a Me*orial vs. Che '..Ma" (# 2$$5 +u,*a 0ocali ' vs. 0o evie.2$( SCRA (() ECuatorial Realt" vs. Ma":air &heater..2(% SCRA %)3 Rivera vs. 2el Rosario =13)1@..!a . 15# 2$$% &a a" Recreatio vs. .austoApril 12# 2$$5 Republic vs. 2avi4 =13)5@..Au'. 1(# 2$$% Air .ra ce vs. CA =separate actio @.2%5 SCRA %)5 Chi a 0a 5i ' vs. CA =13)7@.327 SCRA 37) Ca49alla4er vs. S*ith 0ell &ra4i '.7 Phil. %(1 ARAFAG HABANA JALAYAJAY Page 3

Civil Law Review 2 2013 - 2014 -4a. 2e 0u cio vs. Estate o: 4e 1eo .15( SCRA 353

Asia Pro4uctio s vs. Pa o..2$5 SCRA Averia vs. Averia =1%$3@Au'. 13# 2$$% Cle*e o vs. 1obre'at =1%$3@Sept. /# 2$$% .ir*e vs. 0u5al E terprisesOct. 23# 2$$3 Su*ipat vs. 0a 'a et al =1%$/@Au'. 13# 2$$% 8ulst vs. PR 0uil4ers...Sept. 3# 2$$7 8ulst vs. PR 0uil4ersSept. 25# 2$$) +ocha vs. 8eirs o: 0aba.Au'. 1/# 2$$3 .or il4a vs. R&C..1(/ SCRA 351 Su ta" vs. CA.251 SCRA %3$ &eDa Mar5eti ' vs. CA..1%) SCRA 3%7 20P vs. A4il..1(1 SCRA 3$7

ARTICLES 1429 1519


Roblett vs. CA.2(( SCRA 71 0ucto vs. +abar..55 SCRA %// Olaco vs. CA.22$ SCRA (5( Chiao Si ' &a vs. CA22) SCRA 75 +ica o vs. +e'ato157 SCRA 1%1 Cru, vs. .er a 4o.2ec. /# 2$$5 Pi 'ol vs. CA.22( SCRA 11) Portu'al vs. CA15/ SCRA 17/ Sa che, vs. Ri'os =1%7/@.%5 SCRA 3() Eulo'io vs. ApelesSept. 2$# 2$$/ Rosario vs. PC6 =1%)%@3ov. 11# 2$$5 Pa'talu a vs. -4a. 2e Ma ,a o Sept. 13# 2$$7 .or il4a vs. R&C =1%/1@!a . 2%# 1/)/ Ola'uer vs. 1ocsi =1%/1@...eb. 12# 2$$7 3or5is vs. CA =1%/(@..1/3 SCRA (/% +aisa o vs. 6C3A =15$%@.!u e )# 2$$( 1a9"ers Publishi ' vs. &abora =15$%@..13 SCRA (/% 2ura vs. 6AC.13) SCRA %)/ A, ar vs. Bap4a 'o13 SCRA %)(

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Civil Law Review 2 2013 - 2014

ARICLES 1520 1610


Ra4io9ealth vs. Palileo =15%%@1/7 SCRA 2%5 3u'ui4 vs. CA..171 SCRA 213 &orreca*po vs. Ali 4o'a =15%%@..eb. 2)# 2$$7 +urrea vs. Suplico.April 2(# 2$$( Moles vs. 6AC1(/ SCRA 777 -illostas vs. CA.21$ SCRA %/1

Spouses E" vs. Arri,a =15%)#5)#5/@..Au'. 17# 2$$( 2e +u,*a vs. &o"ota =15((@..3ov. 2/# 2$$( +oo4"ear vs. S" =15((@.3ov. /# 2$$5 -illarica vs. CA =1($1@2( SCRA 1)/ 1eal vs. CA.155 SCRA 3/5 0uce vs. CA157 SCRA 33$ Sa tos vs. CA17/ SCRA 3(3 A4orable vs. 6 acala1$3 Phil %)1 0a 4o ' vs. Austria.31 Phil. %7$ 0a"Cue vs. boloro..1%3 SCRA %12 E" vs. CA.2%( SCRA 7$3 -er4a4 vs. CA..25( SCRA 5/3

LEASE
0P6 vs. 2o*i 'o.3ov. 27# 2$$( 3a5pil vs. 3&2C =1(5%@.Sept. 2(# 2$$( Parilla vs. Pilar =1(7)@.3ov. 3$# 2$$( +o ;i ' vs. +ero i*o.)1 Phil. %%5 CMS 6 vest*e t vs. 6AC13/ SCRA 75 .er*i vs. CA...1/( SCRA 725 Ma truste vs. CA =1(7)@17/ SCRA 137 Ro*a Catholic vs. CA2(/ SCRA 1%7 ARAFAG HABANA JALAYAJAY Page 3

Civil Law Review 2 2013 - 2014

PARTNERSHIP
A'a4 vs. *abato23 SCRA 1223 Obillos vs. C6R =17(/@.13/ SCRA %3( Pascual vs. C6R.1(( SCRA 5($ 1ito Dua vs. 1ito Dua =1771<73@2ec. 13# 2$$5 Orte'a vs. CA =1)$%@...2%5 SCRA 52/ 2elos Re"es vs. 1u5ba =1)1(@.35 Phil 757 Mu asCue vs. CA13/ SCRA 533

AGENCY
2oles vs. A 'eles =1)()@...!u e 2(# 2$$( Rallos vs. Ba 'co.2$ Phil. 2(/ +o,u vs. Merca4o =1)73@2ec. 1/# 2$$( A 'eles vs. P3RAu'. 31# 2$$(

Siasat vs. 6AC..13/ SCRA 23) -etoso vs. CA =1)7(@2($ SCRA 5/3 Cuiso vs. CA =1))3@.227 SCRA 3/1 Rural 0a 5 o: 0o bo vs. CA =1))3@.212 SCRA 25 20P vs. CA =1)/)@..231 SCRA 37$ +ree -alle" vs. 6AC =1/$5@.133 SCRA (/7 Sevilla vs. CA @1/27@..1($ SCRA 171 -ale ,uela vs. CA1/1 SCRA 1

CREDIT TRANSACTIONS LOAN


ARAFAG HABANA JALAYAJAY Page 4

Civil Law Review 2 2013 - 2014 Ester Shippi ' 1i es vs. CA.23% SCRA 7) .lore 4o vs. CA..2(5 SCRA (7) P30 vs. CA.23) SCRA 2$ Si'a<a vs. -illa ueva!a . 2$# 2$$/ Alcara, vs. ECuitable.!ul" 2)# 2$$(

DEPOSIT
+ullas vs. P30.(2 Phil. 51/ +ui 'o a vs. Cit" .iscal12) SCRA 577 Re"es vs. 0P6.25% SCRA Ce tral 0a 5 vs. Cit"trust.eb. %# 2$$/

GUARANTY
&ra4ers 6 sura ce vs. 2" E ' +io51$% Phil )$( Spouses &oh vs. Soli4ba 5..Au'. 7# 2$$3 &ota es vs. Chi aba 5!a . 1/# 2$$/

PLEDGE AND
1($

ORTGAGE

2i,o vs. Su ta".%7 SCRA E" &o ' vs. CA.1(1 SCRA 3)3 Ac*e Shoe Rubber vs. CA2($ SCRA 71% Roxas vs. CA..221 SCRA 72/ Cer a vs. CA..22$ SCRA 517

3orther Motors vs. CoCuia..(( SCRA 37% 3orther Motors vs. CoCuia..() SCRA %1% Ma5ati 1easi ' vs. Fearever &extile122 SCRA 2/( Associate4 6 sura ce vs. 6"a..1$3 Phil. /72

CONCURRENCE AND PRE!ERENCE O! CREDITS


Republic vs. Peralta.15$ SCRA 37 ARAFAG HABANA JALAYAJAY Page 5

Civil Law Review 2 2013 - 2014 20P vs. 31RC23( SCRA 117

TORTS AND DA AGES


Pci 1easi ' vs. ECP0 =127(@!ul" %# 2$$) Ca4ie te vs. Macas =217/@..3ov. 1%# 2$$) Capili vs. Car4a a..3ov. 2# 2$$( Pro:essio al Services 6 c. vs. A'a a.!a . 31# 2$$7 +la People7s 1u*ber vs. 6AC173 SCRA %(5 A:rica vs. Caltex1( SCRA %%) 2ula" vs. CA.2%3 SCRA 22$ Custo4io vs. Ca..253 SCRA 2)3 1ibi vs. 6AC.21% SCRA 1( Coca Cola vs. CA227 SCRA 2/3 Cit" o: Ma ila vs. &eotico..22 SCRA 2(7 +uilatco vs. Cit" o: 2a'upa 171 SCRA 3)3 +otesco vs. Chatto..21$ SCRA 1/ MM&C vs. CA2/) SCRA %/5 +elu, vs. CA..!ul" 2$# 1/(1 .lores vs. Pi e4a =22$(@..3ov. 1%# 2$$) -illa ueva vs. ECP0327 SCRA 3/1 6 hel4er vs. CA..122 SCRA 577 &a vs. CA..23/ SCRA 311 +eral4e, vs. CA..23$ SCRA 321 People vs. Pra4es.23/ SCRA %11 RCP6 vs. CA1/5 SCRA 1%7 -4a. 2e Me4i a vs. Cresce cia..// Phil. 5$7

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Civil Law Review 2 2013 - 2014

OBLIGATIONS & CONTRACTS


!LA"IO # ACASAET & ASSOCIATES$ INC% "&% COA '() PHILIPPINE TOURIS AUTHORITY +.R. 3o. )37%) Ma" 12# 1/)/

Article -6 o: the Co tract# has o beari ' o the prese t co trovers" either. 6t spea5s o: a " *aDor cha 'e i the pla i ' a 4 e 'i eeri ' aspects ecessitati ' the a9ar4 a 4 pa"*e t o: a44itio al co*pe satio . A4*itte4l"# there 9as o a44itio al 9or5 b" petitio er# 9hich reCuire4 a44itio al co*pe satio . Rather# petitio erKs clai* is :or pa"*e t o: the bala ce o: its pro:essio al :ees base4 o the G:i al actual proDect costG a 4 ot :or a44itio al co*pe satio base4 o Article -6. &he ter*i olo'ies i the co tract bei ' clear# leavi ' o 4oubt as to the i te tio o: the co tracti ' parties# their literal *ea i ' co trol =Article 137$# Civil Co4e@. &he price escalatio cost *ust be 4ee*e4 i clu4e4 i the :i al actual proDect cost a 4 petitio er hel4 e title4 to the pa"*e t o: its a44itio al pro:essio al :ees. Obli'atio s arisi ' :ro* co tract have the :orce o: la9 bet9ee the co tracti ' parties a 4 shoul4 be co*plie4 9ith i 'oo4 :aith =Article 11 5/# Civil Co4e@. !ALLO* &he ruli ' o: respo 4e t Co**issio o Au4it is hereb" SE& AS62E a 4 respo 4e t Philippi es &ouris* Authorit" is hereb" or4ere4 to pa" petitio er the a44itio al a*ou t o: P21/#3$2.%7 to co*plete the pa"*e t o: its pro:essio al :ee u 4er their Co tract :or ProDect 2esi' a 4 Ma a'e*e t Services. DOCTRINE* &he co tract is the la9 bet9ee parties.

!ACTS* O 15 Septe*ber 1/77 respo 4e t Philippi e &ouris* Authorit" =P&A@ e tere4 i to a Co tract :or GProDect 2esi' a 4 Ma a'e*e t Services :or the 4evelop*e t o: the propose4 Ha*boa 'a +ol: a 4 Cou tr" ClubI i Ha*boa 'a Cit" 9ith petitio er co*pa "# but ori'i all" 9ith .lavio ; Macasaet alo e. E 4er Article 6- o: sai4 Co tract# petitio er 9as to be e title4 to seve =7J@ o: the Gactual co structio cost.G Pursua t to the :ore'oi ' Sche4ule# the P&A *a4e perio4ic pa"*e ts o: the stipulate4 pro:essio al :ees to petitio er. A 4# upo co*pletio o: the proDect# P&A pai4 petitio ers 9hat it perceive4 to be the bala ce o: the latterKs pro:essio al :ees. 6t tur e4 out# ho9ever# that a:ter the proDect 9as co*plete4# P&A pai4 Supra Co structio Co*pa "# the *ai co tractor# the a44itio al su* o: P3#1%)#1/).2( represe ti ' the escalatio cost o: the co tract price 4ue to the i crease i the price o: co structio *aterials. Epo lear i ' o: the price escalatio # petitio er reCueste4 pa"*e t o: P21/#3$2.%7 a44itio al pro:essio al :ee represe ti ' seve =7J@ perce t o: P3#1%)#1/).2(. O 3 !ul" 1/)5 P&A 4e ie4 pa"*e t o the 'rou 4 that Gthe subDect price escalatio re:erre4 to i crease4 cost o: co structio *aterials a 4 4i4 ot e tail a44itio al 9or5 o the part o: petitio er as to e title it to a44itio al co*pe satio u 4er Article -6 o: the co tract.G ISSUE* Fhether or ot the price escalatio i clu4e4 i the G:i al actual proDect cost.G shoul4 be

co tracti '

HELD* &hat a escalatio clause 9as ot speci:icall" provi4e4 :or i the Co tract is o: o *o*e t either :or it *a" be co si4ere4 as alrea4" Gbuilt<i G a 4 u 4erstoo4 :ro* the ver" ter*s Gactual co structio cost#G a 4 eve tuall" G:i al actual proDect cost.G ARAFAG HABANA JALAYAJAY Page 7

Civil Law Review 2 2013 - 2014 e'otiatio s :or a :orei' loa to :i a ce the co*pletio o: the proDect. 6t also 9rote SO0 protesti ' the call :or lac5 o: :actual or le'al basis# si ce the :ailure to co*plete the ProDect 9as 4ue to =1@ the 6raCi 'over *e tKs lac5 o: :orei' excha 'e 9ith 9hich to pa" its =-PEC6Ks@ acco*plish*e ts a 4 =2@ SO0Ks o co*plia ce :or the past several "ears 9ith the provisio i the co tract that 75J o: the billi 's 9oul4 be pai4 i ES 4ollars. SubseCue tl"# or o 1/ 3ove*ber 1/)(# respo 4e t -PEC6 a4vise4 the petitio er ot to pa" "et Al Ahli 0a 5 because e::orts 9ere bei ' exerte4 :or the a*icable settle*e t o: the ProDect. O 1% April 1/)7# the petitio er receive4 a other telex *essa'e :ro* Al Ahli 0a 5 stati ' that it ha4 alrea4" pai4 to Ra:i4ai 0a 5 the su* o: ESM)7(#5(% u 4er its letter o: 'uara tee# a 4 4e*a 4i ' rei*burse*e t b" the petitio er o: 9hat it pai4 to the latter ba 5 plus i terest thereo a 4 relate4 expe ses. O ( 3ove*ber 1/)7# Phil'uara tee i :or*e4 -PEC6 that it 9oul4 re*it ESM)7(#5(% to Al Ahli 0a 5# a 4 reiterate4 the Doi t a 4 soli4ar" obli'atio o: the respo 4e ts to rei*burse the petitio er :or the a4va ces *a4e o its cou ter<'uara tee. &he petitio er thus pai4 the a*ou t o: ESM)7(#5(% to Al Ahli 0a 5 o: ;u9ait o 21 !a uar" 1/)). &he # o ( Ma" 1/))# the petitio er pai4 to Al Ahli 0a 5 o: ;u9ait ESM5/#12/.)3 represe ti ' i terest a 4 pe alt" char'es 4e*a 4e4 b" the latter ba 5. O 1/ !u e 1//1# the petitio er se t to the respo 4e ts separate letters 4e*a 4i ' :ull pa"*e t o: the a*ou t o: P%7#)72#373./) plus accrui ' i terest# pe alt" char'es# a 4 1$J attor e"Ks :ees pursua t to their Doi t a 4 soli4ar" obli'atio s u 4er the 4ee4 o: u 4erta5i ' a 4 suret" bo 4. Fhe the respo 4e ts :aile4 to pa"# the petitio er :ile4 o / !ul" 1//1 a civil case :or collectio o: a su* o: *o e" a'ai st the respo 4e ts be:ore the R&C o: Ma5ati Cit". A:ter 4ue trial# the trial court rule4 a'ai st Phil'uara tee a 4 hel4 that the latter ha4 o vali4 cause o: actio a'ai st the respo 4e ts. 6t opi e4 that at the ti*e the call 9as *a4e o the 'uara tee 9hich 9as execute4 :or a speci:ic perio4# the 'uara tee ha4 alrea4" lapse4 or expire4. &here 9as o vali4 re e9al or exte sio o: the 'uara tee :or :ailure o: the petitio er to secure respo 4e tsK express co se t thereto. &he trial court also :ou 4 that the Doi t ve ture co tractor i curre4 o 4ela" i the executio o: the ProDect. Co si4eri ' the ProDect o9 erKs violatio s o: the co tract 9hich re 4ere4 i*possible the Doi t ve ture co tractorKs per:or*a ce o: its u 4erta5i '# o vali4 call o the 'uara tee coul4 be *a4e. .urther*ore# the trial court hel4 that o vali4 otice 9as :irst *a4e b" the ProDect o9 er SO0 to the Doi t ve ture co tractor be:ore the call o the 'uara tee. Accor4i 'l"# it 4is*isse4 the co*plai t# as 9ell as the Page 10

PHILIPPINE E+PORT AND !OREIGN LOAN GUARANTEE CORPORATION "&% "%P% EUSEBIO CONSTRUCTION$ INC% G%R% N,% 140047 -./0 13$ 2004 !ACTS* O 11 !u e 1/)1# SO0 a 4 the Doi t ve ture -PEC6 a 4 AD"al execute4 the service co tract :or the co structio o: the 6 stitute o: Ph"sical &herap" ? Me4ical Rehabilitatio Ce ter# Phase 66# i 0a'h4a4# 6raC# 9herei the Doi t ve ture co tractor u 4ertoo5 to co*plete the ProDect 9ithi a perio4 o: 5%7 4a"s or 1) *o ths. E 4er the Co tract# the !oi t -e ture 9oul4 suppl" *a po9er a 4 *aterials# a 4 SO0 9oul4 re:u 4 to the :or*er 25J o: the proDect cost i 6raCi 2i ar a 4 the 75J i ES 4ollars at the excha 'e rate o: 1 2i ar to 3.37777 ES 2ollars. &he co structio # 9hich 9as suppose4 to start o 2 !u e 1/)1# co**e ce4 o l" o the last 9ee5 o: Au'ust 1/)1. 0ecause o: this 4ela" a 4 the slo9 pro'ress o: the co structio 9or5 4ue to so*e setbac5s a 4 4i::iculties# the ProDect 9as ot co*plete4 o 15 3ove*ber 1/)2 as sche4ule4. 0ut i October 1/)2# upo :oreseei ' the i*possibilit" o: *eeti ' the 4ea4li e a 4 upo the reCuest o: Al Ahli 0a 5# the Doi t ve ture co tractor 9or5e4 :or the re e9al or exte sio o: the Per:or*a ce 0o 4 a 4 A4va ce Pa"*e t +uara tee. &he suret" bo 4 9as also exte 4e4 :or a other perio4 o: o e "ear# :ro* 12 Ma" 1/)2 to 12 Ma" 1/)3.1) &he Per:or*a ce 0o 4 9as :urther exte 4e4 t9elve ti*es up to ) 2ece*ber 1/)(# 9hile the A4va ce Pa"*e t +uara tee 9as exte 4e4 three ti*es *ore up to 2% Ma" 1/)% 9he the latter 9as ca celle4 a:ter :ull re:u 4 or rei*burse*e t b" the Doi t ve ture co tractor. &he suret" bo 4 9as li5e9ise exte 4e4 to ) Ma" 1/)7. As o: March 1/)(# the status o: the ProDect 9as 51J acco*plishe4# *ea i ' the structures 9ere alrea4" :i ishe4. &he re*ai i ' %7J co siste4 i electro< *echa ical 9or5s a 4 the 2J# sa itar" 9or5s# 9hich both reCuire4 i*portatio o: eCuip*e t a 4 *aterials. O 2( October 1/)(# Al Ahli 0a 5 o: ;u9ait se t a telex call to the petitio er 4e*a 4i ' :ull pa"*e t o: its per:or*a ce bo 4 cou ter<'uara tee. Epo receivi ' a cop" o: that telex *essa'e o 27 October 1/)(# respo 4e t -PEC6 reCueste4 6raC &ra4e a 4 Eco o*ic 2evelop*e t Mi ister Moha**a4 .a4hi 8ussei to recall the telex call o the per:or*a ce 'uara tee :or bei ' a 4rastic actio i co trave tio o: its *utual a'ree*e t 9ith the latter that =1@ the i*positio o: pe alt" 9oul4 be hel4 i abe"a ce u til the co*pletio o: the proDectL a 4 =2@ the ti*e exte sio 9oul4 be ope # 4epe 4i ' o the 4evelop*e ts o the ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 cou terclai*s a 4 cross<clai*# a 4 or4ere4 the petitio er to pa" attor e"Ks :ees o: P1$$#$$$ to respo 4e ts -PEC6 a 4 Eusebio Spouses a 4 P1$$#$$$ to 3<Plex a 4 the Sa tos Spouses# plus costs. ISSUE1S* i. the 4ela" 9as attributable to -PEC6# still the e::ects o: that 4ela" cease4 upo the re u ciatio b" the cre4itor# SO0# 9hich coul4 be i*plie4 9he the latter 'ra te4 several exte sio s o: ti*e to the :or*er. 0esi4es# o 4e*a 4 has "et bee *a4e b" SO0 a'ai st the respo 4e t co tractor. 2e*a 4 is 'e erall" ecessar" eve i: a perio4 has bee :ixe4 i the obli'atio . A 4 4e:ault 'e erall" be'i s :ro* the *o*e t the cre4itor 4e*a 4s Du4iciall" or extra<Du4iciall" the per:or*a ce o: the obli'atio . Fithout such 4e*a 4# the e::ects o: 4e:ault 9ill ot arise. Moreover# the petitio er as a 'uara tor is e title4 to the be e:it o: excussio # that is# it ca ot be co*pelle4 to pa" the cre4itor SO0 u less the propert" o: the 4ebtor -PEC6 has bee exhauste4 a 4 all le'al re*e4ies a'ai st the sai4 4ebtor have bee resorte4 to b" the cre4itor. 6t coul4 also set up co*pe satio as re'ar4s 9hat the cre4itor SO0 *a" o9e the pri cipal 4ebtor -PEC6.(3 6 this case# ho9ever# the petitio er has clearl" 9aive4 these ri'hts a 4 re*e4ies b" *a5i ' the pa"*e t o: a obli'atio that 9as "et to be sho9 to be ri'ht:ull" 4ue the cre4itor a 4 4e*a 4able o: the pri cipal 4ebtor. 6t is clear that the pa"*e t *a4e b" the petitio er 'uara tor 4i4 ot i a " 9a" be e:it the pri cipal 4ebtor# 'ive the proDect status a 4 the co 4itio s obtai i ' at the ProDect site at that ti*e. Moreover# the respo 4e t co tractor 9as :ou 4 to have vali4 4e:e ses a'ai st SO0# 9hich are :ull" supporte4 b" evi4e ce a 4 9hich have bee *eritoriousl" set up a'ai st the pa"i ' 'uara tor# the petitio er i this case. A 4 eve i: the 4ee4 o: u 4erta5i ' a 4 the suret" bo 4 secure4 petitio erKs 'uara t"# the petitio er is preclu4e4 :ro* e :orci ' the sa*e b" reaso o: the petitio erKs u 4ue pa"*e t o the 'uara t". Ri'hts u 4er the 4ee4 o: u 4erta5i ' a 4 the suret" bo 4 4o ot arise because these co tracts 4epe 4 o the vali4it" o: the e :orce*e t o: the 'uara t".

ii.

Fhether the petitio er is e title4 to rei*burse*e t o: 9hat it pai4 to Al Ahli 0a 5 o: ;u9ait base4 o the 4ee4 o: u 4erta5i ' a 4 suret" bo 4 :ro* the respo 4e ts. Fhether the respo 4e t co tractor has 4e:aulte4 i its obli'atio s that 9oul4 Dusti:" resort to the 'uara t".

HELD* 6. 3O. As :ou 4 b" both the Court o: Appeals a 4 the trial court# the 4ela" or the o <co*pletio o: the ProDect 9as cause4 b" :actors ot i*putable to the respo 4e t co tractor. 6t 9as rather 4ue *ai l" to the persiste t violatio s b" SO0 o: the ter*s a 4 co 4itio s o: the co tract# particularl" its :ailure to pa" 75J o: the acco*plishe4 9or5 i ES 2ollars. 6 4ee4# 9here o e o: the parties to a co tract 4oes ot per:or* i a proper *a er the prestatio 9hich he is bou 4 to per:or* u 4er the co tract# he is ot e title4 to 4e*a 4 the per:or*a ce o: the other part". A part" 4oes ot i cur i 4ela" i: the other part" :ails to per:or* the obli'atio i cu*be t upo hi*. &he petitio er# ho9ever# *ai tai s that the pa"*e ts b" SO0 o: the *o thl" billi 's i purel" 6raCi 2i ars 4i4 ot re 4er i*possible the per:or*a ce o: the ProDect b" -PEC6. Such posture is Cuite co trar" to its previous represe tatio s. 6 his 2( March 1/)7 letter to the O::ice o: the Mi44le Easter a 4 A:rica A::airs =OMEAA@# 2.A# Ma ila# petitio erKs Executive -ice< Presi4e t !esus M. &aNe4o state4 that 9hile -PEC6 ha4 ta5e ever" possible *easure to co*plete the ProDect# the 9ar situatio i 6raC# particularl" the lac5 o: :orei' excha 'e# 9as provi ' to be a 'reat obstacle. i. 6 or4er that the 4ebtor *a" be i 4e:ault it is ecessar" that the :ollo9i ' reCuisites be prese t> =1@ that the obli'atio be 4e*a 4able a 4 alrea4" liCui4ate4L =2@ that the 4ebtor 4ela"s per:or*a ceL a 4 =3@ that the cre4itor reCuires the per:or*a ce because it *ust appear that the tolera ce or be evole ce o: the cre4itor *ust have e 4e4. As state4 earlier# SO0 ca ot "et 4e*a 4 co*plete per:or*a ce :ro* -PEC6 because it has ot "et itsel: per:or*e4 its obli'atio i a proper *a er# particularl" the pa"*e t o: the 75J o: the cost o: the ProDect i ES 2ollars. &he -PEC6 ca ot "et be sai4 to have i curre4 i 4ela". Eve assu*i ' that there 9as 4ela" a 4 that ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014 -ACINTO TANGUILIG "&%COURT O! APPEALS '() "ICENTE HERCE -R G%R% N,% 117190% -'(.'20 2$ 1997 !ACTS* 6 April 1/)7 petitio er !aci to M. &a 'uili' 4oi ' busi ess propose4 to respo 4e t -ice te 8erce !r. to co struct a 9i 4*ill s"ste* :or hi*. A:ter so*e e'otiatio s the" a'ree4 o the co structio o: the 9i 4*ill :or a co si4eratio o: P($#$$$.$$ 9ith a o e< "ear 'uara t" :ro* the 4ate o: co*pletio a 4 accepta ce b" respo 4e t 8erce !r. o: the proDect. Pursua t to the a'ree*e t respo 4e t pai4 petitio er a 4o9 pa"*e t o: P3$#$$$.$$ a 4 a i stall*e t pa"*e t o: P15#$$$.$$# leavi ' a bala ce o: P15#$$$.$$. O 1% March 1/))# 4ue to the re:usal a 4 :ailure o: respo 4e t to pa" the bala ce# petitio er :ile4 a co*plai t to collect the a*ou t. 6 his A s9er be:ore the trial court respo 4e t 4e ie4 the clai* sa"i ' that he ha4 alrea4" pai4 this a*ou t to the Sa Pe4ro +e eral Mercha 4isi ' 6 c. =SP+M6@ 9hich co structe4 the 4eep 9ell to 9hich the 9i 4*ill s"ste* 9as to be co ecte4. Accor4i ' to respo 4e t# si ce the 4eep 9ell :or*e4 part o: the s"ste* the pa"*e t he te 4ere4 to SP+M6 shoul4 be cre4ite4 to his accou t b" petitio er. Moreover# assu*i ' that he o9e4 petitio er a bala ce o: P15#$$$.$$# this shoul4 be o::set b" the 4e:ects i the 9i 4*ill s"ste* 9hich cause4 the structure to collapse a:ter a stro ' 9i 4 hit their place. Petitio er 4e ie4 that the co structio o: a 4eep 9ell 9as i clu4e4 i the a'ree*e t to buil4 the 9i 4*ill s"ste*# :or the co tract price o: P($#$$$.$$ 9as solel" :or the 9i 4*ill asse*bl" a 4 its i stallatio # exclusive o: other i ci4e tal *aterials ee4e4 :or the proDect. 8e also 4iso9 e4 a " obli'atio to repair or reco struct the s"ste* a 4 i siste4 that he 4elivere4 it i 'oo4 a 4 9or5i ' co 4itio to respo 4e t 9ho accepte4 the sa*e 9ithout protest. 0esi4es# its collapse 9as attributable to a t"phoo # a :orce *aDeure# 9hich relieve4 hi* o: a " liabilit". R&C hel4 that the co structio o: the 4eep 9ell 9as ot part o: the 9i 4*ill proDect as evi4e ce4 clearl" b" the letter proposals sub*itte4 b" petitio er to respo 4e t. CA reverse4 the trial court. 6t rule4 that the co structio o: the 4eep 9ell 9as i clu4e4 i the a'ree*e t o: the parties because the ter* G4eep 9ellG 9as *e tio e4 i both proposals. ISSUE1S* i. ii. HELD* 6. &he prepo 4era ce o: evi4e ce supports the :i 4i ' o: the trial court that the i stallatio o: a 4eep 9ell 9as ot i clu4e4 i the proposals o: petitio er to co struct a 9i 4*ill s"ste* :or respo 4e t. 3otabl"# o9here i either proposal is the i stallatio o: a 4eep 9ell *e tio e4# eve re*otel". 3either is there a ite*i,atio or 4escriptio o: the *aterials to be use4 i co structi ' the 4eep 9ell. &here is absolutel" o *e tio i the t9o =2@ 4ocu*e ts that a 4eep 9ell pu*p is a co*po e t o: the propose4 9i 4*ill s"ste*. &he co tract prices :ixe4 i both proposals cover o l" the :eatures speci:icall" 4escribe4 therei a 4 o other. Fhile the 9or4s G4eep 9ellG a 4 G4eep 9ell pu*pG are *e tio e4 i both# these 4o ot i 4icate that a 4eep 9ell is part o: the 9i 4*ill s"ste*. &he" *erel" 4escribe the t"pe o: 4eep 9ell pu*p :or 9hich the propose4 9i 4*ill 9oul4 be suitable. .or i: the real i te t o: petitio er 9as to i clu4e a 4eep 9ell i the a'ree*e t to co struct a 9i 4*ill# he 9oul4 have use4 i stea4 the co Du ctio s Ga 4G or G9ith.G Si ce the ter*s o: the i stru*e ts are clear a 4 leave o 4oubt as to their *ea i ' the" shoul4 ot be 4isturbe4. Moreover# it is a car4i al rule i the i terpretatio o: co tracts that the i te tio o: the parties shall be accor4e4 pri*or4ial co si4eratio a 4# i case o: 4oubt# their co te*pora eous a 4 subseCue t acts shall be pri cipall" co si4ere4. 66. 6 a lo ' li e o: cases this Court has co siste tl" hel4 that i or4er :or a part" to clai* exe*ptio :ro* liabilit" b" reaso o: :ortuitous eve t u 4er Art. 117% o: the Civil Co4e the eve t shoul4 be the sole a 4 proxi*ate cause o: the loss or 4estructio o: the obDect o: the co tract. .our =%@ reCuisites *ust co cur> =a@ the cause o: the breach o: the obli'atio *ust be i 4epe 4e t o: the 9ill o: the 4ebtorL =b@ the eve t *ust be either u :oreseeable or u avoi4ableL =c@ the eve t *ust be such as to re 4er it i*possible :or the 4ebtor to :ul:ill his obli'atio i a or*al *a erL a 4# =4@ the 4ebtor *ust be :ree :ro* a " participatio i or a''ravatio o: the i Dur" to the cre4itor. Petitio er :aile4 to sho9 that the collapse o: the 9i 4*ill 9as 4ue solel" to a :ortuitous eve t. 6 teresti 'l"# the evi4e ce 4oes ot 4isclose that there 9as actuall" a t"phoo o the 4a" the 9i 4*ill collapse4. Petitio er *erel" state4 that there 9as a Gstro ' 9i 4.G 0ut a stro ' 9i 4 i this case ca ot be :ortuitous < u :oreseeable or u avoi4able. O the co trar"# a stro ' 9i 4 shoul4 be prese t i places 9here 9i 4*ills are co structe4# other9ise the 9i 4*ills 9ill ot tur . Fhether petitio er is u 4er obli'atio to reco struct the 9i 4*ill a:ter it collapse4.

Fhether the a'ree*e t to co struct the 9i 4*ill s"ste* i clu4e4 the i stallatio o: a 4eep 9ell.

ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014 &he appellate court correctl" observe4 that G'ive the e9l"<co structe4 9i 4*ill s"ste*# the sa*e 9oul4 ot have collapse4 ha4 there bee o i here t 4e:ect i it 9hich coul4 o l" be attributable to the appellee.G 6t e*phasi,e4 that respo 4e t ha4 i his :avor the presu*ptio that Gthi 's have happe e4 accor4i ' to the or4i ar" course o: ature a 4 the or4i ar" habits o: li:e.G &his presu*ptio has ot bee rebutte4 b" petitio er. .i all"# petitio erKs ar'u*e t that private respo 4e t 9as alrea4" i 4e:ault i the pa"*e t o: his outsta 4i ' bala ce o: P15#$$$.$$ a 4 he ce shoul4 bear his o9 loss# is u te able. 6 reciprocal obli'atio s# either part" i curs i 4ela" i: the other 4oes ot co*pl" or is ot rea4" to co*pl" i a proper *a er 9ith 9hat is i cu*be t upo hi*. Fhe the 9i 4*ill :aile4 to :u ctio properl" it beca*e i cu*be t upo petitio er to i stitute the proper repairs i accor4a ce 9ith the 'uara t" state4 i the co tract. &hus# respo 4e t ca ot be sai4 to have i curre4 i 4ela"L i stea4# it is petitio er 9ho shoul4 bear the expe ses :or the reco structio o: the 9i 4*ill. Article 11(7 o: the Civil Co4e is explicit o this poi t that i: a perso obli'e4 to 4o so*ethi ' :ails to 4o it# the sa*e shall be execute4 at his cost. !ALLO* &he appeale4 4ecisio is MO26.6E2. Respo 4e t -6CE3&E 8ERCE !R. is 4irecte4 to pa" petitio er !AC63&O M. &A3+E616+ the bala ce o: P15#$$$.$$ 9ith i terest at the le'al rate :ro* the 4ate o: the :ili ' o: the co*plai t. 6 retur # petitio er is or4ere4 to Greco struct subDect 4e:ective 9i 4*ill s"ste*# i accor4a ce 9ith the o e<"ear 'uara t"G a 4 to co*plete the sa*e 9ithi three =3@ *o ths :ro* the :i alit" o: this 4ecisio .

ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014

LA CO PA3IA GENERAL DE TABACOS DE !ILIPINA "&%"ICENTE ARA4A G%R% N,% 3019 !ACTS* &he co tract se 4s upo 9as execute4 o the 11th 4a" o: !u e# 1/$1. 0" ter*s thereo: the 4e:e 4a t pro*ise4 to pa" the plai ti:: )#$$$ pesos as :ollo9s> 5$$ pesos o the 3$th o: !u e# 1/$1# a 4 the re*ai 4er at the rate o: 1$$ pesos a *o th# pa"able o the 3$th 4a" o: each *o th# u til the e tire )#$$$ pesos 9as pai4. &he 4e:e 4a t pai4 %$$ pesos a 4 o *ore. &he plai ti:: brou'ht this actio i the court to :oreclose a *ort'a'e :or )#$$$ pesos upo certai la 4 i the Provi ce o: 1e"te. A 4e*urrer to the co*plai t 9as overrule4# but to the or4er overruli ' it the 4e:e 4a t 4i4 ot except. &he 4e:e 4a t a s9ere4# alle'i ' that the 4ocu*e t# the basis o: the plai ti::7s clai*# 9as execute4 throu'h error o his part a 4 throu'h :rau4 o the part o: the plai ti::. A trial 9as ha4 a 4 Du4'*e t 9as e tere4 :or the plai ti:: as pra"e4 :or i its co*plai t. &he 4e:e 4a t *ove4 :or a e9 trial o the 'rou 4 that the 4ecisio 9as ot Dusti:ie4 b" the evi4e ce# this *otio 9as 4e ie4# to its 4e ial the 4e:e 4a t accepte4# a 4 he has brou'ht the case to the SC :or revie9. ISSUE* Fhether the 4ebtor is to be co si4ere4 to be i 4e:ault. HELD* &his suit 9as co**e ce4 o the 12th 4a" o: !u e# 1/$3. &here 9as o provisio i the co tract b" 9hich# upo :ailure to pa" o e i stall*e t o: the 4ebt# the 9hole 4ebt shoul4 thereupo beco*e at o ce pa"able. Fe are o: the opi io that the obli'atio ca be e :orce4 i this actio :or o l" the a*ou t 4ue a 4 pa"able o the 12th 4a" o: !u e# 1/$3. &he court belo9 'ave o cre4it :or the pa"*e t o: %$$ pesos a4*itte4 b" the co*plai t to have bee receive4 b" the plai ti::. 6t is allo9e4 i terest upo the e tire 4ebt :ro* the 1st 4a" o: !ul"# 1/$1. &he co tract 4oes ot provi4e :or the pa"*e t o: a " i terest. &here is o provisio i it 4eclari ' expressl" that the :ailure to pa" 9he 4ue shoul4 put the 4ebtor i 4e:ault. &here 9as there:ore o 4e:ault 9hich 9oul4 *a5e hi* liable :or i terest u til a 4e*a 4 9as *a4e. =Civil Co4e# art. 11$$L Ma resa# Co*. o Civil Co4e# vol )# p. 5(.@ ARIANO "ELOSO$ ET AL% "S% ANICETA !ONTANOSA ARAFAG HABANA JALAYAJAY Page 14

Civil Law Review 2 2013 - 2014 G% R% N,% 4874% '256 2$ 1909 A caDas =art. 11$)# Civil Co4e@# but such 4e:ault ca ot 4ate bac5 o: Septe*ber# 1)/3# that is# :ro* the ti*e o: the last pa"*e t *a4e b" the* or b" A iceta .o ta osa. Article 11$$ o: the Civil Co4e rea4s OPerso s obli'e4 . . . are i 4e:ault :ro* the *o*e t 9he the cre4itor 4e*a 4s the :ul:ill*e t o: their obli'atio # Du4iciall" or extra<Du4iciall"#I A 4 the Du4icial 4e*a 4 :or the :ul:ill*e t o: sai4 obli'atio 9as o l" *a4e i 1)/(L he ce# as the 4ate o: the co*plai t i terpose4 i that "ear has ot bee :ixe4# the et a*ou t clai*e4 therei shoul4 o l" co**e ce to bear le'al i terest :ro* the latter part o: 1)/(# or rather :ro* the be'i i ' o: 1)/7. 6 a 4ecisio o: 2ece*ber 3# 1/$2# the supre*e court o: Spai hel4> O&hat it is a pri ciple o: la9# ac5 o9le4'e a 4 sa ctio e4 b" article 11$$# i relatio to article 11$) o: the Civil Co4e# that i terest upo 4e:ault o l" beco*es 4ue :ro* the ti*e o: the Du4icial or extraDu4icial otice b" the cre4itor to the 4ebtor# u less other9ise expressl" provi4e4 b" la9# or b" virtue o: a co tract# or o accou t o: special circu*sta ces 4epe 4i ' upo the ature o: the obli'atio . I

!ACTS* Plai ti::s Maria o# 2a*ia a# a 4 Melchor -eloso are the sole la9:ul heirs o: +avi o -eloso a 4 0ue ave tura -eloso# their :ather a 4 brother# respectivel"L 9hile 2e:e 4a ts are A iceta .o ta osa# as 9i4o9 o: Roberto A caDas# a 4 .lore ti a# 1eo a# Maria# !ua # Ro*ual4o# -ice ta# a 4 .elix# all o: the sur a*e o: A caDas# the la9:ul chil4re o: the 4ecease4 Roberto# a 4 Este:a ia .o ta osa# *other a 4 le'al 'uar4ia o: the *i or !ose A caDas. &hat at the 4eath o: +avi o -eloso# Roberto A caDas o9e4 hi* the su* o: 5#$(5 pesos 9hich he ha4 borro9e4 prior to the "ear 1))1L i the apportio *e t o: the estate# this 4ebt o: 5#$(5 pesos 9e t to 0ue ave tura -eloso as his portio L that i the "ear 1))2# Roberto A caDas# a:ter havi ' ac5 o9le4'e4 the tra s:er o: his i 4ebte4 ess b" i herita ce to 0ue ave tura -eloso# co ti ue4 to receive su*s o: *o e" :ro* the latter o: the sa*e co 4itio s# that is# as loa s# a 4 bou 4 hi*sel: to *a5e a ual pa"*e ts i su'ar. O the 11th o: October# 1))3# the 4ebt o: Roberto A caDas a*ou te4 to 1$#%%/. 1) pesos 9hich rose to 1%#%3/. %$ pesos# 9hich su*# ho9ever# 9as re4uce4 to 12#3(5. 2$ pesos b" the pa"*e t o: 2#$7%. 2$ pesos o accou t. Ep to the "ear 1)/3 the 2e:e 4a ts *a4e pa"*e ts a*ou ti ' to (%2. 27 pesos 9hich re4uce4 the a*ou t o9i ' to 11#722. %3 pesos. O the 4eath o: 0ue ave tura -eloso# the 2e:e 4a ts# as his sole a 4 la9:ul heirs# i herite4# a 4 that sa*e "ear 4ivi4e4 bet9ee the* all his propert" 9ith the exceptio o: the above<*e tio e4 cre4it# 9hich is at prese t hel4 pro i 4iviso bet9ee the*# a 4 the"# as the la9:ul heirs o: 0ue ave tura -eloso# the cre4itor# have repeate4l" calle4 upo the 2e:e 4a ts to pa" the sai4 cre4it# heirs 4e " bei ' liable :or 4ebt si ce o l" o e heir co ti ue4 to pa" a:ter 4eath o: 4ece4e t# thus 'ivi ' rise to the :ili ' o: the co*plai t. ISSUE* Fhether or ot 4e:e 4a ts are i 4e:ault a 4 shoul4 o9 be liable :or the le'al i terest o: the 4ebt. HELD* 3either is the se te ce co tai e4 i the Du4'*e t appeale4 :ro*# that Othe le'al i terest o the sai4 su* at the rate o: ( per ce t per a u* shall be pa"able :ro* the *o th o: Septe*ber# 1)/3#I i accor4a ce 9ith the la9. 6t is proper to se te ce the 2e:e 4a ts to pa" the le'al i terest o: ( per ce t per a u* b" reaso o: the 4e:ault i curre4 b" the heirs o: ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014 SO!RONIO T% BAYLA "&% SILANG TRA!!IC CO%$ INC%$ G%R% N,&% L-48195 '() 48196 '0 1$ 1942 !ACTS* Petitio ers i stitute4 a actio i the C.6 o: Cavite a'ai st the respo 4e t Sila ' &ra::ic Co.# 6 c. to recover certai su*s o: *o e" 9hich the" ha4 pai4 severall" to the corporatio o accou t o: shares o: stoc5 the" i 4ivi4uall" a'ree4 to ta5e a 4 pa" :or u 4er certai speci:ie4 ter*s a 4 co 4itio s that# Osubscriber :urther a'rees that i: he :ails to pa" a " o: sai4 i stall*e t 9he 4ue# or to per:or* a " o: the a:oresai4 co 4itio s# or i: sai4 shares shall be attache4 or levie4 upo b" cre4itors o: the sai4 subscriber# the the sai4 shares are to revert to the seller a 4 the pa"*e ts alrea4" *a4e are to be :or:eite4 i :avor o: sai4 seller# a 4 the latter *a" the ta5e possessio # 9ithout resorti ' to court procee4i 's.I &he respo 4e t corporatio set up the 4e:e se that the subscribe4 shares o: stoc5 o: petitio ers ha4 alrea4" auto*aticall" reverte4 to the 4e:e 4a t# a 4 the i stall*e ts pai4 b" the* ha4 alrea4" bee :or:eite4. R&C absolve4 the 4e:e 4a t :ro* the co*plai t a 4 4eclare4 ca cele4 =:or:eite4@ i :avor o: the 4e:e 4a t the shares o: stoc5 i Cuestio . 6t hel4 that the resolutio o: Au'ust 1# 1/37# 9as ull a 4 voi4# citi ' -elasco vs. Poi,at =37 Phil.# )$2@ that Ga corporatio has o le'al capacit" to release a ori'i al subscriber to its capital stoc5 :ro* the obli'atio to pa" :or sharesL a 4 a " a'ree*e t to this e::ect is i vali4G CA *o4i:ie4 o: the R&C 4ecisio . 6t hel4> that part o: the Du4'*e t 4is*issi ' plai ti::Ks co*plai t is a::ir*e4# but that part thereo: 4eclari ' their subscriptio ca cele4 is reverse4. 2e:e 4a t is 4irecte4 to 'ra t plai ti::s 3$ 4a"s a:ter :i al Du4'*e t 9ithi 9hich to pa" the arrears o their subscriptio . Petitio ers i sist that the" have the ri'ht to recover the a*ou ts it pai4# 9hile the respo 4e t a 4 cross<petitio er o its part co te 4s that sai4 a*ou ts have bee auto*aticall" :or:eite4 a 4 the shares o: stoc5 have reverte4 to the corporatio u 4er their a'ree*e t. ISSUE* Fhether a particular co tract is a subscriptio or a sale o: stoc5 is a *atter o: co structio a 4 4epe 4s upo its ter*s a 4 the i te tio o: the partiesP Fhether u 4er the co tract bet9ee the parties the :ailure o: the purchaser to pa" a " o: the Cuarterl" i stall*e ts o the purchase price auto*aticall" 'ave rise to the :or:eiture o: the a*ou ts alrea4" pai4 a 4 the reversio o: the shares to the corporatio P ARAFAG HABANA JALAYAJAY Page 14

HELD* 6t see*s clear :ro* the ter*s o: the co tracts i Cuestio that the" are co tracts o: sale a 4 ot o: subscriptio . &he lo9er courts erre4 i overloo5i ' the 4isti ctio bet9ee subscriptio a 4 purchase GA subscriptio # properl" spea5i '# is the *utual a'ree*e t o: the subscribers to ta5e a 4 pa" :or the stoc5 o: a corporatio # 9hile a purchase is a i 4epe 4e t a'ree*e t bet9ee the i 4ivi4ual a 4 the corporatio to bu" shares o: stoc5 :ro* it at stipulate4 price.G 6 so*e particulars the rules 'over i ' subscriptio s a 4 sales o: shares are 4i::ere t. .or i sta ce# the provisio s o: our Corporatio 1a9 re'ar4i ' calls :or u pai4 subscriptio a 4 assess*e t o: stoc5 =sectio s 37<5$@ 4o ot appl" to a purchase o: stoc5. 1i5e9ise the rule that corporatio has o le'al capacit" to release a ori'i al subscriber to its capital stoc5 :ro* the obli'atio to pa" :or his shares# is i applicable to a co tract o: purchase o: shares. &he co tract 4i4 ot expressl" provi4e that the :ailure o: the purchaser to pa" a " i stall*e t 9oul4 'ive rise to :or:eiture a 4 ca celatio 9ithout the ecessit" o: a " 4e*a 4 :ro* the sellerL a 4 u 4er article 11$$ o: the Civil Co4e perso s obli'e4 to 4eliver or 4o so*ethi ' are ot i 4e:ault u til the *o*e t the cre4itor 4e*a 4s o: the* Du4iciall" or extra Du4iciall" the :ul:ill*e t o: their obli'atio # u less =1@ the obli'atio or the la9 expressl" provi4es that 4e*a 4 shall ot be ecessar" i or4er that 4e:ault *a" arise# =2@ b" reaso o: the ature a 4 circu*sta ces o: the obli'atio it shall appear that the 4esi' atio o: the ti*e at 9hich that thi ' 9as to be 4elivere4 or the service re 4ere4 9as the pri cipal i 4uce*e t to the creatio o: the obli'atio . !ALLO* CA 4ecisio reverse4. 2e:e 4a t Sila ' &ra::ic Co.# 6 c.# 9as or4ere4 to pa" to the plai ti::s# the su*s o: P3($# P375# P(75# a 4 P(75# respectivel"# 9ith le'al i terest o each o: sai4 su*s :ro* Ma" 2)# 1/3)# the 4ate o: the :ili ' o: the co*plai t# u til the 4ate o: pa"*e t# a 4 9ith costs i the three i sta ces.

Civil Law Review 2 2013 - 2014 ALE+ G% LEE$ "&% HON% SAL"ADOR P% DE GU4 AN$ -R% G%R% N,% 90926 -./0 6$ 1990 !ACTS* O 3ove*ber )# 1/)3# petitio er Alex 0. 1ee purchase4 :ro* respo 4e t Motor Cars throu'h its :reela ce a'e t# o e =1@ u it &o"ota Corolla 1i:tbac5# 1/)3 *o4el# 9ith the Cuote4 price o: P1%/#7$$.$$ plus *iscella eous expe ses o: P1$#$33.$$. O the sa*e 4ate# petitio er 1ee as custo*er# si' e4 the vehicle sales or4er. &he 4eliver" o: the subDect vehicle 9as 9ithi the *o th o: 3ove*ber# 1/)3. 6 vie9 o: such or4er# petitio er 1ee 4eposite4 the a*ou t o: P1#$$$.$$ o 3ove*ber 1$# 1/)3 as reCuire4 i the a:oresai4 price Cuotatio . &hereupo # o 2ece*ber 15# 1/)3# petitio erKs cou sel# Att". 2oroteo A. 2a4al# 9rote Mr. 3icolas O. Carra ceDa# !r.# Executive -ice<Presi4e t o: Motorcars# 4e*a 4i ' :or 4eliver" o: the sai4 &o"ota car. &he respo 4e t car co*pa " replie4 o 2ece*ber 1/# 1/)3# throu'h its cou sel Att". 0e Da*i S. 0e ito# that 4ue to the su44e cha 'e o: prices b" the car *a u:acturer# the" ha4 4eci4e4 to exercise the optio co tai e4 i the vehicle sales or4er# 9hich states> Fhe ever 4eposits are *a4e b" custo*ers :or vehicles# parts a 4 services or4ere4# the sales :or such vehicles# parts or services shall be at the optio o: Motorcars# 6 c.# a 4 re:u 4 o: the 4eposits shall be *a4e upo reCuest a 4 9ithout u 4ue 4ela" shoul4 such optio be exercise4. &he respo 4e t car co*pa " thus o::ere4 to re:u 4 petitio erKs 4eposit o: P1#$$$.$$. Respo 4e t co te 4e4 that the obli'atio is i*possible :or the car *a u:acturer ha4 close4 shop a 4 o lo 'er *a u:acturi ' 1/)3 *o4els o: &o"ota. Petitio er re:use4 the o::er. ISSUE* Shoul4 respo 4e t Motorcars be *a4e liable to :ul:ill a see*i 'l" i*possible obli'atio P HELD* 6t is ot possible :or Motorcars to co*pl" 9ith the 9rit o: executio si ce a4*itte4l"# the the 2elta Motors 9ho *a u:acture4 1/)3 *o4els o: &o"ota 1i:tbac5 ha4 alrea4" close4 shop# but be this as it *a"# there is o Cuestio that i 4ee4 there 9as a per:ecte4 co tract o: sale bet9ee petitio er 1ee a 4 private respo 4e t Motorcars pursua t to this CourtKs =throu'h the &hir4 2ivisio @ resolutio 4ate4 Au'ust 31# 1/)7. IGNACIO BAR4AGA "&% CA '() ANGELITO AL"IAR$ ARAFAG HABANA JALAYAJAY Page 15 &he relie: le:t :or petitio er 1ee is that :ou 4 u 4er Article 117$ o: the Civil Co4e 9hich provi4es> G=&@hose 9ho i the per:or*a ce o: their obli'atio s are 'uilt" o: :rau4# e'li'e ce or 4ela"# a 4 those 9ho i a " *a er co trave e the te or thereo:# are liable :or 4a*a'es.G &he repl" letter o: private respo 4e t co*pa " 4ate4 2ece*ber 1/# 1/)3 9hich sai4 that G4ue to the su44e cha 'e o: prices b" the car *a u:acturer# the" have 4eci4e4 to exercise the optio . . .G 4i4 ot relieve Motorcars :ro* the co tract ha4 e tere4 i to 9ith petitio er 1ee. &here 9as there:ore 4ela" i the 4eliver" o: the subDect vehicle 9hich e titles petitio er to be a9ar4e4 4a*a'es. &he recor4s sho9 that the subDect vehicle shoul4 have bee 4elivere4 9ithi the *o th o: 3ove*ber# 1/)3.

Civil Law Review 2 2013 - 2014 G%R% N,% 115129% !782.'20 12$ 1997 !ACTS* &he petitio er7s 9i:e 9as su::eri ' :ro* a 4ebilitati ' ail*e t a 4 9ith :ore9ar i ' o: her i*pe 4i ' 4eath# she expresse4 her 9ish to be lai4 to rest be:ore Christ*as 4a" to spare her :a*il" o: the lo ' vi'ils as it 9as al*ost Christ*as. A:ter his 9i:e passe4 a9a"# petitio er bou'ht *aterials :ro* herei private respo 4e ts :or the co structio o: her iche. Private respo 4e ts ho9ever :aile4 to 4eliver o a'ree4 ti*e a 4 4ate 4espite repeate4 :ollo9<ups. &he iche 9as co*plete4 i the a:ter oo o: the 27th o: 2ece*ber# a 4 0ar,a'aKs 9i:e 9as :i all" lai4 to rest. 8o9ever# it 9as t9o<a 4<a<hal: =2<1Q2@ 4a"s behi 4 sche4ule.

ISSUE* Fas there 4ela" i the per:or*a ce o: the private respo 4e tKs obli'atio P

HELD* BES. Si ce the respo 4e t 9as e'li'e t a 4 i curre4 4ela" i the per:or*a ce o: his co tractual obli'atio s# the petitio er is e title4 to be i 4e* i:ie4 :or the 4a*a'e he su::ere4 as a co seCue ce o: the 4ela" or co tractual breach. &here 9as a speci:ic ti*e a'ree4 upo :or the 4eliver" o: the *aterials to the ce*eter". &his is clearl" a case o: o <per:or*a ce o: a reciprocal obli'atio # as i the co tract o: purchase a 4 sale# the petitio er ha4 alrea4" 4o e his part# 9hich is the pa"*e t o: the price. 6t 9as i cu*be t upo respo 4e t to i**e4iatel" :ul:ill his obli'atio to 4eliver the 'oo4s other9ise 4ela" 9oul4 attach. A a9ar4 o: *oral 4a*a'es is i cu*be t i this case as the petitio er has su::ere4 so *uch.

NATIONAL PO9ER CORPORATION NPC "S% CA'() :CEPALCO; G%R% N,% 113613 S7<=7>872 26$ 1997 !ACTS* ARAFAG HABANA JALAYAJAY Page 16

Civil Law Review 2 2013 - 2014 sustai e4 b" EC6 coul4 be attribute4 to 3PC ot9ithsta 4i ' the occurre ce o: a :orce *aDeureP 2. Fhether or ot EC6 is e title4 to exe*plar" 4a*a'esP HELD* Bes. 3PC 9as u 4oubte4l" e'li'e t because it ope e4 the spill9a" 'ates o: the A 'at 2a* o l" at the hei'ht o: t"phoo OFel*i 'I 9he it 5 e9 ver" 9ell that it 9as sa:er to have ope e4 the sa*e 'ra4uall" a 4 earlier# as it 9as also u 4e iable that 3PC 5 e9 o: the co*i ' t"phoo at least :our 4a"s be:ore it actuall" struc5. A 4 eve thou'h the t"phoo 9as a act o: +o4 or 9hat 9e *a" call :orce *aDeure# 3PC ca ot escape liabilit" because its e'li'e ce 9as the proxi*ate cause o: the loss a 4 4a*a'e. As 9e have rule4 i !ua .. 3a5pil A So s v. Court o: Appeals# =1%% SCRA 5/(# ($(< ($7@> &hus# i: upo the happe i ' o: a :ortuitous eve t or a act o: +o4# there co curs a correspo 4i ' :rau4# e'li'e ce# 4ela" or violatio or co trave tio i a " *a er o: the te or o: the obli'atio as provi4e4 :or i Article 117$ o: the Civil Co4e# 9hich results i loss or 4a*a'e# the obli'or ca ot escape liabilit". &he pri ciple e*bo4ie4 i the act o: +o4 4octri e strictl" reCuires that the act *ust be o e occasio e4 exclusivel" b" the viole ce o: ature a 4 hu*a a'e cies are to be exclu4e4 :ro* creati ' or e teri ' i to the cause o: the *ischie:. Fhe the e::ect# the cause o: 9hich is to be co si4ere4# is :ou 4 to be i part the result o: the participatio o: *a # 9hether it be :ro* active i terve tio or e'lect# or :ailure to act# the 9hole occurre ce is thereb" hu*a i,e4# as it 9as# a 4 re*ove4 :ro* the rules applicable to the acts o: +o4. =1 Corpus !uris# pp. 117%<1175@. &hus# it has bee hel4 that 9he the e'li'e ce o: a perso co curs 9ith a act o: +o4 i pro4uci ' a loss# such perso is ot exe*pt :ro* liabilit" b" sho9i ' that the i**e4iate cause o: the 4a*a'e 9as the act o: +o4. &o be exe*pt :ro* liabilit" :or loss because o: a act o: +o4# he *ust be :ree :ro* a " previous e'li'e ce or *isco 4uct b" 9hich the loss or 4a*a'e *a" have bee occasio e4. =.ish A Elective Co. v. Phil. Motors# 55 Phil. 12/L &uc5er v. Mila %/ O.+. %37/L 1i*pa 'co A So s v. Ba 'co Stea*ship Co.# 3% Phil. 5/%# ($%L 1asa* v. S*ith# %5 Phil. (57@. Substa tial evi4e ce is 4e:i e4 as such releva t evi4e ce as a reaso able *i 4 *i'ht accept as a4eCuate to support a co clusio =Philippi e Metal Pro4ucts# 6 c. v. Court o: 6 4ustrial Relatio s# /$ SCRA 135 S1/7/TL Police Co**issio v. 1oo4# 127 SCRA 757 S1/)%TL Ca ete v. FCC# 13( SCRA 3$2 S1/)5T@ Page 17

EC6 e tere4 i to a co tract 9ith 3AFASA to u 4erta5e a co structio o: a tu el :ro* 6po 2a* to 0icti i clu4i ' all *aterials# eCuip*e t a 4 labor :or the sai4 co structio :or )$$ 4a"s. &he proDect i volve4 2 phases. &he :irst i volves tu el 9or5s a 4 the seco 4 co sists o: out9or5s at both e 4s o: the tu el. As soo as EC6 :i ishe4 the tu el 9or5s i 0icti# it tra s:erre4 all its eCuip*e ts to 6po 2a* to :i ish the seco 4 phase o: the proDect. &he recor4 sho9s that o 3ove*ber %#1/(7# t"phoo RFel*i '7 hit Ce tral 1u,o # passi ' throu'h 4e:e 4a t7s =3PC@ A 'at 8"4ro<electric ProDect a 4 2a* at lpo# 3or,a'ara"# 0ulaca . Stro ' 9i 4s struc5 the proDect area# a 4 heav" rai s i ter*itte tl" :ell. 2ue to the heav" 4o9 pour# the 9ater i the reservoir o: the A 'at 2a* 9as risi ' perilousl" at the rate o: sixt" =($@ ce ti*eters per hour. &o preve t a over:lo9 o: 9ater :ro* the 4a*# si ce the 9ater level ha4 reache4 the 4a 'er hei'ht o: 212 *eters above sea level# the 4e:e 4a t corporatio cause4 the ope i ' o: the spill9a" 'ates.I EC6 sue4 3PC :or 4a*a'es. &he trial court a 4 the court o: appeals :ou 4 that 4e:e 4a t 3PC 9as e'li'e t 9he ope e4 the 'ates o l" at the hei'ht o: the t"phoo hol4i ' that it coul4 have ope e4 the spill 'ates 'ra4uall" a 4 shoul4 have 4o e so be:ore the Rt"phoo 7 ca*e. &hus both courts a9ar4e4 EC6 :or 4a*a'es. 3PC assails the 4ecisio o: the CA as bei ' erro eous o the 'rou 4s# i ter alia# that the loss sustai e4 b" EC6 9as 4ue to :orce *aDeure. 6t ar'ue4 that the rapi4 rise o: 9ater level i the reservoir 4ue to heav" rai s brou'ht about b" the t"phoo is a extraor4i ar" occurre ce that coul4 ot have bee :oresee . O the other ha 4# EC6 assails the 4ecisio o: the court o: appeals *o4i:"i ' the 4ecisio o: the trial court eli*i ati ' the a9ar4i ' o: exe*plar" 4a*a'es.

ISSUES* 1. Fhether or ot 3PC is liable :or 4a*a'es eve thou'h the cause o: the 4a*a'e is 4ue to a :orce *aDeureP Other9ise state4# 9hether or ot the 4a*a'e

ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014

Exe*plar" 2a*a'es 3o. As to the Cuestio o: exe*plar" 4a*a'es# 9e sustai the appellate court i eli*i ati ' the sa*e si ce it :ou 4 that there 9as o ba4 :aith o the part o: 3PC a 4 that either ca the latter7s e'li'e ce be co si4ere4 'ross. 6 2ee 8ua 1io ' Electrical ECuip*e t Corp. v. Re"es# =1%5 SCRA 713# 71/@ 9e rule4>
3either *a" private respo 4e t recover exe*plar" 4a*a'es si ce he is ot e title4 to *oral or co*pe sator" 4a*a'es# a 4 a'ai because the petitio er is ot sho9 to have acte4 i a 9a to # :rau4ule t# rec5less or oppressive *a er =Art. 223%# Civil Co4eL Butu5 v. Ma ila Electric Co.# 2 SCRA 377L .ra cisco v. +over *e t Service 6 sura ce S"ste*# 7 SCRA 577L +utierre, v. -ille'as# ) SCRA 527L Air .ra ce v. Carrascoso# 1) SCRA 155L Pa Paci:ic =Phil.@ v. Phil. A4vertisi ' Corp.# 23 SCRA /77L Marcha v. Me 4o,a# 2% SCRA )))@.

A ADO PICART "S% !RAN# S ITH$ -R%$ G%R% N,% L-12219 '256 15$ 1918 !ACTS* Plai ti:: A*a4o Picart 9as ri4i ' o his po " o the Carlata 0ri4'e i Sa .er a 4o# 1a E io 9he the ARAFAG HABANA JALAYAJAY Page 20

Civil Law Review 2 2013 - 2014 4e:e 4a t# ri4i ' o his car# approache4. 2e:e 4a t ble9 his hor to 'ive 9ar i '. Plai ti:: *ove4 the horse to the ri'ht i stea4 o: *ovi ' to the le:t# reaso i ' that he ha4 o su::icie t ti*e to *ove to the ri'ht 4irectio . 2e:e 4a t co ti ue4 to approach# a 4 9he he ha4 'otte Cuite ear# he Cuic5l" tur e4 to the le:t. &he horse 9as :ri'hte e4 that it tur e4 his bo4" across the bri4'e. 8is li*b 9as bro5e a 4 the ri4er 9as thro9 o:: a 4 'ot i Dure4. &he horse 4ie4. A actio :or 4a*a'es 9as :ile4 a'ai st the 4e:e 4a t. ISSUE* Fhether or ot the 4e:e 4a t i *a euveri ' his car i the *a er above 4escribe4 9as 'uilt" o: e'li'e ce such as 'ives rise to a civil obli'atio to repair the 4a*a'e 4o e HELD* As the 4e:e 4a t starte4 across the bri4'e# he ha4 the ri'ht to assu*e that the horse a 4 ri4er 9oul4 pass over to the proper si4eL but as he *ove4 to9ar4 the ce ter o: the bri4'e it 9as 4e*o strate4 to his e"es that this 9oul4 ot be 4o eL a 4 he *ust i a *o*e t have perceive4 that it 9as too late :or the horse to cross 9ith sa:et" i :ro t o: the *ovi ' vehicle. 6 the ature o: thi 's this cha 'e o: situatio occurre4 9hile the auto*obile 9as "et so*e 4ista ce a9a"L a 4 :ro* this *o*e t it 9as o lo 'er 9ithi the po9er o: the plai ti:: to escape bei ' ru 4o9 b" 'oi ' to a place o: 'reater sa:et". &he co trol o: the situatio ha4 the passe4 e tirel" to the 4e:e 4a t. &he test b" 9hich to 4eter*i e the existe ce o: e'li'e ce i a particular case *a" be state4 as :ollo9s> 2i4 the 4e:e 4a t i 4oi ' the alle'e4 e'li'e t act use that reaso able care a 4 cautio 9hich a or4i aril" pru4e t perso 9oul4 have use4 i the sa*e situatio P 6: ot# the he is 'uilt" o: e'li'e ce. Co 4uct is sai4 to be e'li'e t 9he a pru4e t *a i the positio o: the tort:easor 9oul4 have :oresee that a e::ect har*:ul to a other 9as su::icie tl" probable to 9arra t his :ore'oi ' the co 4uct or 'uar4i ' a'ai st its co seCue ces. e'li'e ce o: the 4e:e 4a t succee4e4 the e'li'e ce o: the plai ti:: b" a appreciable i terval. E 4er these circu*sta ces the la9 is that the perso 9ho has the last :air cha ce to avoi4 the i*pe 4i ' har* a 4 :ails to 4o so is char'eable 9ith the co seCue ces# 9ithout re:ere ce to the prior e'li'e ce o: the other part".

6t 'oes 9ithout sa"i ' that the plai ti:: hi*sel: 9as ot :ree :ro* :ault# :or he 9as 'uilt" o: a tece4e t e'li'e ce i pla ti ' hi*sel: o the 9ro ' si4e o: the roa4. 0ut as 9e have alrea4" state4# the 4e:e 4a t 9as also e'li'e tL a 4 i such case the proble* al9a"s is to 4iscover 9hich a'e t is i**e4iatel" a 4 4irectl" respo sible. 6t 9ill be ote4 that the e'li'e t acts o: the t9o parties 9ere ot co te*pora eous# si ce the ARAFAG HABANA JALAYAJAY

THE CONSOLIDATED BAN# '() TRUST CORPORATION "S% CA '() L%C% DIA4 & CO PANY G%R% N,% 138569% S7<=7>872 11$ 2003 !ACTS* Private respo 4e t 1.C. 2ia, i structe4 his e*plo"ee# Calapre# to 4eposit i his savi 's accou t i petitio er ba 5. Calapre le:t the passboo5 o: 1.C. 2ia, to Page 21

Civil Law Review 2 2013 - 2014 the teller o: the petitio er ba 5 because it 9as ta5i ' ti*e to acco*plish the tra sactio a 4 he ha4 to 'o to a other ba 5. Fhe he retur e4# the teller tol4 hi* that so*ebo4" 'ot it. &he :ollo9i ' 4a"# a i*postor succee4e4 i 9ith4ra9i ' P3$$#$$$.$$ b" usi ' sai4 passboo5 a 4 a :alsi:ie4 9ith4ra9al slip. Private respo 4e t sue4 the ba 5 :or the a*ou t 9ith4ra9 b" the u 5 o9 thir4 perso . R&C applie4 rules o savi 's accou t 9ritte o the passboo5 SGPossessio o: this boo5 shall raise the presu*ptio o: o9 ership a 4 a " pa"*e t or pa"*e ts *a4e b" the ba 5 upo the pro4uctio o: the sai4 boo5 a 4 e tr" therei o: the 9ith4ra9al shall have the sa*e e::ect as i: *a4e to the 4epositor perso all".GT R&C sai4 that the bur4e o: proo: shi:te4 to 1C 2ia, to prove that the si' atures are ot :or'e4. Also# the" applie4 the rule that the hol4er o: the passport is presu*e4 to be the o9 er. 6t 9as also hel4 that Soli4ba 5 4i4 ot have a " participatio i the custo4" a 4 care o: the passboo5 a 4 as such# their act o: allo9i ' the 9ith4ra9al 9as ot the proxi*ate cause o: the loss. &he proxi*ate cause 9as 1C 2ia,7 e'li'e ce. As re'ar4s the co te tio that 1C 2ia, a 4 Soli4ba 5 ha4 precautio ar" proce4ures =li5e a secret ha 4sha5e o: sorts@ 9he ever the :or*er 9ith4re9 a lar'e su*# R&C poi te4 out that 1C 2ia, 4isre'ar4e4 this i the past 9ith4ra9al. CA# o the other ha 4# sai4 that the proxi*ate cause o: the u authori,e4 9ith4ra9al is Soli4ba 5Ks e'li'e ce# appl"i ' 3CC 217(. CA sai4 the 3 ele*e ts o: U2 are prese t S4a*a'esL :ault or e'li'e ceL co ectio o: cause a 4 e::ectT. &he teller coul4 have calle4 up 1C 2ia, si ce the a*ou t bei ' 4ra9 9as si' i:ica t. Proxi*ate cause is tellerKs :ailure to call 1C 2ia,. CA rule4 that 9hile 1C 2ia, 9as e'li'e t i e trusti ' its 4eposits to its *esse 'er a 4 its *esse 'er i leavi ' the passboo5 9ith the teller# Soli4ba 5 coul4 ot escape liabilit" because o: the 4octri e o: Olast clear cha ce.I Soli4ba 5 coul4 have averte4 the i Dur" ha4 it calle4 up 1C 2ia, to veri:" the 9ith4ra9al. ISSUE* Fhether or ot petitio er ba 5 is liable solel" :or the a*ou t 9ith4ra9 b" the i*postorP

3o. &he ba 5 is liable :or breach o: co tract 4ue to e'li'e ce or culpa co tractual. &he co tract bet9ee the ba 5 a 4 its 4epositor is 'over e4 b" the provisio s o: the Civil Co4e o si*ple loa . Article 1172 o: the Civil Co4e provi4es that Orespo sibilit" arisi ' :ro* e'li'e ce i the per:or*a ce o: ever" 5i 4 o: obli'atio is 4e*a 4ableI. &he ba 5 is liable to its 4epositor :or breach o: the savi 's 4eposit a'ree*e t 4ue to e'li'e ce or culpa co tractual. O&he ba 5 is u 4er obli'atio to treat the accou ts o: its 4epositors 9ith *eticulous care# al9a"s havi ' i *i 4 the :i4uciar" ature o: their relatio ship =Si*ex 6 ter atio al vs. CA@I. &he tellers 5 o9# or shoul4 5 o9# that the rules o savi 's accou t provi4e that a " perso i possessio o: the passboo5 is presu*ptivel" its o9 er. 6: the tellers 'ive the passboo5 to the 9ro ' perso # the" 9oul4 be clothi ' that perso presu*ptive o9 ership o: the passboo5# :acilitati ' u authori,e4 9ith4ra9als b" that perso . &he 4octri e o: last clear cha ce states that 9here both parties are e'li'e t but the e'li'e t act o: o e is appreciabl" later tha that o: the other# or 9here it is i*possible to 4eter*i e 9hose :ault or e'li'e ce cause4 the loss# the o e 9ho ha4 the last clear opportu it" to avoi4 the loss but :aile4 to 4o so# is char'eable 9ith the loss. &his 4octri e is ot applicable to the prese t case. &he co tributor" e'li'e ce o: the private respo 4e t or his last clear cha ce to avoi4 the loss 9oul4 ot exo erate the petitio er :ro* liabilit". 8o9ever# it serves to re4uce the recover" o: 4a*a'es b" the private respo 4e t. E 4er Article 1172# Othe liabilit" *a" be re'ulate4 b" the courts# accor4i ' to the circu*sta cesI. 6 this case# respo 4e t 1.C. 2ia, 9as 'uilt" o: co tributor" e'li'e ce i allo9i ' a 9ith4ra9al slip si' e4 b" its authori,e4 si' atories to :all i to the ha 4s o: a i*postor. &hus# the liabilit" o: petitio er ba 5 shoul4 be re4uce4. 6 P8616PP63E 0A3; O. COMMERCE -S. CA# the Supre*e Court allocate4 the 4a*a'es bet9ee the 4epositor 9ho is 'uilt" o: co tributor" e'li'e ce a 4 the ba 5 o a %$<($ ratio. &he sa*e ruli ' 9as applie4 to this case. Petitio er ba 5 *ust pa" o l" ($J o: the actual 4a*a'es.

HELD* 3o. Petitio er Soli4ba 5 Corporatio shall pa" private respo 4e t 1.C. 2ia, a 4 Co*pa "# CPA7s o l" ($J o: the actual 4a*a'es a9ar4e4 b" the Court o: Appeals. &he re*ai i ' %$J o: the actual 4a*a'es shall be bor e b" private respo 4e t 1.C. 2ia, a 4 Co*pa "# CPA7s. ARAFAG HABANA JALAYAJAY SCH IDT TRANSPORT "S% TRANSPORT "ENTURE INC% A<2?/ 22$ 2005 !ACTS* Page 22

Civil Law Review 2 2013 - 2014 obli'atio # *ust be i 4epe 4e t o: hu*a 9illL =2@ it *ust be i*possible to :oresee the eve t 9hich co stitute the caso :ortuito# or i: it ca be :oresee it *ust be i*possible to avoi4L =3@ the occurre ce *ust be such as to re 4er it i*possible :or the 4ebtor to :ul:ill his obli'atio i a " *a erL a 4 =%@ the obli'or *ust be :ree :ro* a " participatio i the a''ravatio o: the i Dur" resulti ' to the cre4itor. &he pri ciple e*bo4ie4 i the act o: +o4 4octri e strictl" reCuires that the act *ust be occasio e4 solel" b" the viole ce o: ature. 8u*a i terve tio is to be exclu4e4 :ro* creati ' or e teri ' i to the cause o: the *ischie:. Fhe the e::ect is :ou 4 to be i part the result o: the participatio o: *a # 9hether 4ue to his active i terve tio or e'lect or :ailure to act# the 9hole occurre ce is the hu*a i,e4 a 4 re*ove4 :ro* the rules applicable to the acts o: +o4. &he appellate court# i a::ir*i ' the :i 4i ' o: the trial court that hu*a i terve tio i the :or* o: co tributor" e'li'e ce b" all the 4e:e 4a ts resulte4 to the loss o: the car'oes# hel4 that u loa4i ' outsi4e the brea59ater# i stea4 o: i si4e the brea59ater# 9hile a stor* si' al 9as up co stitutes e'li'e ce. 6t thus co clu4e4 that the proxi*ate cause o: the loss 9as 0lac5 Sea7s e'li'e ce i 4eci4i ' to u loa4 the car'oes at a u sa:e place a 4 9hile a t"phoo 9as approachi '. &he loss thus :alls outsi4e the Gact o: +o4 4octri e.G

O Septe*ber 1//1# S&CO Pte. 1t4 Si 'apore shippe4 3%5 hot rolle4 steel sheets i coil :ro* the port o: Russia. &he car'oes 9hich 9ere to be 4ischar'e4 i Ma ila 9ere i sure4 9ith 6 4ustrial 6 sura ce Co*pa ". &he co si' ee 1ittle +ia t Steel Pipe e 'a'e4 the services o: petitio er Sch*i4t &ra sport to secure the reCuisite cleara ces a 4 4eliver the car'oes to Cai ta Ri,al. Respo 4e t &ra sport -e ture o the other ha 4 9as e 'a'e4 b" Sch*i4t to to9 the bar'e co tai i ' the car'oes to the ship"ar4. &he arrastre operator 9as able to u loa4 o l" 37 out o: the 3%5 coils 4ue to i cle*e t 9eather co 4itio s. &he bar'e co tai i ' the 37 coils pitche4 a 4 rolle4 9ith the 9aves a 4 eve tuall" capsi,e4. Co si' ee 1ittle +ia t the :ile4 a i sura ce clai* a'ai st 6 4ustrial 6 sura ce 9hich i tur :ile4 a co*plai t a'ai st Sch*i4t to recover the a*ou t it pai4 to 1ittle +ia t. &he &rial Court hol4s Sch*i4t &ra sport a 4 &ra sport -e ture soli4aril" liable :or the a*ou t. &he 4ecisio 9as a::ir*e4 b" the CA a 4 the 4e:e se o: :ortuitous eve t 9as 4iscre4ite4. 8e ce# Sch*i4t &ra sport :ile4 this petitio be:ore the SC a'ai st &-6# 6 4ustrial 6 sura ce a 4 the 0lac5 Sea. ISSUE* Fhether or ot the loss o: the car'oes 9as 4ue to a :ortuitous eve t# he ce# petitio ers shoul4 ot be hel4 liableP

HELD* 3O. &he Supre*e Court hel4 that 9he a :ortuitous eve t occurs# Article 117% o: the Civil Co4e absolves a " part" :ro* a " a 4 all liabilit" arisi ' there:ro*> AR&. 117%. Except i cases expressl" speci:ie4 b" the la9# or 9he it is other9ise 4eclare4 b" stipulatio # or 9he the ature o: the obli'atio reCuires the assu*ptio o: ris5# o perso shall be respo sible :or those eve ts 9hich coul4 ot be :oresee # or 9hich thou'h :oresee # 9ere i evitable. 6 or4er# to be co si4ere4 a :ortuitous eve t# ho9ever# =1@ the cause o: the u :oresee a 4 u expecte4 occurre ce# or the :ailure o: the 4ebtor to co*pl" 9ith his REAL "S% BELO -'(.'20 26$ 2007

ARAFAG HABANA JALAYAJAY

Page 23

Civil Law Review 2 2013 - 2014 !ACTS* Petitio er -ir'i ia Real a 4 respo 4e t Sesi e 4o 0elo both o9 e4 a 4 operate4 a :ast:oo4 stall i the :oo4 court ce ter o: PFE. A :ire bro5e out at the petitio er7s stall 9hich sprea4 a 4 'utte4 other stalls i the area i clu4i ' that o: the respo 4e t7s. Respo 4e t 4e*a 4e4 pa"*e t :ro* the petitio er but the latter re:use4. 8e ce# a case :or 4a*a'es 9as :ile4 be:ore the M&C. ta 5 i stalle4 at petitio erKs :ast:oo4 stall a 4 her e*plo"ees :aile4 to preve t the :ire :ro* sprea4i ' a 4 4estro"i ' the other :ast:oo4 stalls# i clu4i ' respo 4e tKs :ast:oo4 stall. Such circu*sta ces 4o ot support petitio erKs theor" o: :ortuitous eve t.

Respo 4e t alle'e4 that petitio er :aile4 to exercise 4ue 4ili'e ce i the up5eep a 4 *ai te a ce o: her coo5i ' eCuip*e ts# as 9ell as the selectio a 4 supervisio o: her e*plo"eesL that petitio erKs e'li'e ce 9as the proxi*ate cause o: the :ire that 'utte4 the :ast:oo4 stalls. &he petitio er o the other ha 4 4e ie4 liabilit" o the 'rou 4s that the :ire 9as a :ortuitous eve t a 4 that she exercise4 4ue 4ili'e ce i the selectio a 4 supervisio o: her e*plo"ees. M&C re 4ere4 Du4'*e t i :avour o: respo 4e t 0elo a 4 9as a::ir*e4 b" the R&C a 4 CA upo appeal.

ISSUE* Fhether or ot the :ire that bro5e out :ro* petitio er7s stall is a :ortuitous eve tP

HELD* 3O. !urispru4e ce 4e:i es the ele*e ts o: a G:ortuitous eve tG as :ollo9s> =a@ the cause o: the u :oresee a 4 u expecte4 occurre ce *ust be i 4epe 4e t o: hu*a 9illL =b@ it *ust be i*possible to :oresee the eve t 9hich co stitutes the caso :ortuito# or i: it ca be :oresee # it *ust be i*possible to avoi4L =c@ the occurre ce *ust be such as to re 4er it i*possible :or the 4ebtor to :ul:ill his obli'atio i a or*al *a erL a 4 =4@ the obli'or *ust be :ree :ro* a " participatio i the a''ravatio o: the i Dur" resulti ' to the cre4itor. Article 117% o: the Civil Co4e provi4es that o perso shall be respo sible :or a :ortuitous eve t 9hich coul4 ot be :oresee # or 9hich# thou'h :oresee # 9as i evitable. 6 other 9or4s# there *ust be a e tire exclusio o: hu*a a'e c" :ro* the cause o: i Dur" or loss. PHILIPPINE CO UNICATIONS "S% GLOBE '0 25$ 2004

6t is establishe4 b" evi4e ce that the :ire ori'i ate4 :ro* lea5i ' :u*es :ro* the 1P+ stove a 4 ARAFAG HABANA JALAYAJAY

!ACTS* Page 24

Civil Law Review 2 2013 - 2014 the 4ebtor to :ul:ill the obli'atio i a or*al *a erL a 4 c. the obli'or *ust be :ree o: participatio i # or a''ravatio o:# the i Dur" to the cre4itor. Philco*sat a 4 +lobe ha4 o co trol over the o <re e9al o: the ter* o: the RP<ES Militar" 0ases A'ree*e t 9he the sa*e expire4 i 1//1# because the prero'ative to rati:" the treat" exte 4i ' the li:e thereo: belo 'e4 to the Se ate. Resolutio 3o. 1%1 o: the Philippi e Se ate a 4 the 3ote -erbale o: the Philippi e +over *e t to the ES +over *e t are acts# 4irectio or reCuest o: the +over *e t o: the Philippi es a 4 circu*sta ces be"o 4 the co trol o: the 4e:e 4a t. &he :or*al or4er :ro* C4r. Falter Corliss o: the ES3# the letter oti:icatio :ro* A&& a 4 the co*plete 9ith4ra9al o: all the *ilitar" :orces a 4 perso el :ro* Cubi Poi t i the "ear<e 4 1//2 are also acts a 4 circu*sta ces be"o 4 the co trol o: the 4e:e 4a t. Article 117%# 9hich exe*pts a obli'or :ro* liabilit" o accou t o: :ortuitous eve ts or :orce *aDeure# re:ers ot o l" to eve ts that are u :oreseeable# but also to those 9hich are :oreseeable# but i evitable. O the seco 4 issue# the ES *ilitar" :orces a 4 perso el co*pletel" 9ith4re9 :ro* Cubi Poi t o l" o 31 2ece*ber 1//2. &hus# u til that 4ate# the ES2CA ha4 co trol over the earth statio a 4 ha4 the optio o: usi ' the sa*e. .urther*ore# Philco*sat coul4 ot have re*ove4 or re 4ere4 i e::ective sai4 co**u icatio :acilit" u til a:ter 31 2ece*ber 1//2 because Cubi Poi t 9as accessible o l" to ES aval perso el up to that ti*e. 8e ce# +lobe is liable :or pa"*e t o: re tals u til 2ece*ber 1//2.

O Ma" 7# 1//1 Philco*sat A +lobe e tere4 i to a a'ree*e t 9hereb" Philco*sat obli'e4 itsel: to establish# operate A provi4e a 60S sta 4ar4 0 earth statio :or the exclusive use o: ES 4e:e se co**u icatio s A'e c" =ES2CA@. &he ter* 9as :or ($ *o ths or 5 "rs 6 tur # +lobe pro*ise4 to pa" Philco*sat *o thl" re tals. At the executio o: the a'ree*e t# both parties 5 e9 that *ilitar" 0ases A'ree*e t 9as to expire i 1//1. SubseCue tl"# Philco*sat i stalle4 the earth statio A ES2CA *a4e use o: the sa*e. &he se ate passe4 a resolutio expressi ' its 4ecisio ot to co cur i the rati:icatio o: the treat" o: :rie 4ship. So the RP<ES Militar" bases A'ree*e t ter*i ate it o 2ec. 31# 1//2. +lobe oti:ie4 Philco*sat its i structio to 4isco ti ue e::ective 3ov. )# 1//2# i vie9 o: the 9ith4ra9al o: ES *ilitar" perso el. Philco*sat se t a repl" to pa" the stipulate4 re tals eve a:ter +lobe shall have 4isco ti ue4 the use o: earth statio a:ter 3ov. ) 1//2. A:ter the ES *ilitar" :orce le:t Subic# Philco*sat se t a letter 4e*a 4i ' pa"*e t. 8o9ever# +lobe re:use4 to hee4 Philco*sat Rs 4e*a 4 because the ter*i atio o: the ES *ilitar" bases a'ree*e t co stitute :orce *aDeure a 4 sai4 eve t exe*pte4 it :ro* pa"i ' re tals.

ISSUE1S* Fhether or ot the ter*i atio o: the RP<ES Militar" 0ases A'ree*e t co stitutes :orce *aDeure 9hich 9oul4 exe*pt +lobe :ro* co*pl"i ' 9ith its obli'atio to pa" re tals u 4er its A'ree*e t 9ith Philco*satP Fhether or ot +lobe is liable to pa" re tals u 4er the a'ree*e t :or the *o th o: 2ece*ber 1//2P

HELD* BES. 6 or4er that +lobe *a" be exe*pt :ro* o <co*plia ce 9ith its obli'atio to pa" re tals u 4er Sectio )# the co curre ce o: the :ollo9i ' ele*e ts *ust be establishe4>

a. the eve t *ust be i 4epe 4e t o: the hu*a 9illL b. the occurre ce *ust re 4er it i*possible :or ARAFAG HABANA JALAYAJAY

SECURITY BAN# & TRUST CO PANY '() ROSITO C% ANHIT Page 23

Civil Law Review 2 2013 - 2014 "S% COURT O! APPEALS '() YS AEL C% !ERRER O5=,872 11$ 1995 !ACTS* S0&C a 4 Ma hit co tracte4 .errer to co struct i 2$$ 4a"s a buil4i ' i co si4eratio o: 1#7($#$$$.$$. .errer 9as able to :i ish the co structio o: the buil4i ' 9ithi the prescribe4 ti*e# but i curre4 a44itio al expe ses o: about 3$$#$$$.$$ o top o: the ori'i al cost 4ue to 4rastic i creases i co structio *aterials. .errer *a4e ti*el" 4e*a 4s :or pa"*e t o: the i crease4 cost# a 4 S0&C a 4 a represe tative o: a architectural :ir* co sulte4 b" S0&C veri:ie4 .errer7s clai*s :or a44itio al cost. A reco**e 4atio 9as the *a4e to settle the clai* :or 2$$#$$$.$$ but S0&C 4i4 ot pa" the a*ou t# a 4 i stea4 4e ie4 a " liabilit" :or the a44itio al cost. .errer the :ile4 a clai* :or breach o: co tract 9ith 4a*a'es i the R&C# 9hich rule4 i :avor o: .errer# Court o: Appeals a::ir*e4 the 4ecisio . F8ERE.ORE# 9ith the above *o4i:icatio i respect o: the a*ou t o: attor e"Ks :ees# the appeale4 4ecisio o: the Court o: Appeals i CA +.R. C- 3o. %$%5$ is A..6RME2.

ISSUE* Fhether or ot S0&C shoul4 be hel4 liable :or the i crease i the cost o: co structio 4ue to the 4rastic i crease i the cost o: *aterialsP

HELD* BES. E 4er Art 11)2 o: the 3CC# a co 4itio al obli'atio shall be voi4 i: its :ul:ill*e t 4epe 4s upo the sole 9ill o: the 4ebtor. E 4er Art 6V o: the buil4i ' co tract it allo9s :or the a4Dust*e t o: the co tract price upo *utual a'ree*e t o: the parties. 6t is the abse ce o: this *utual a'ree*e t that the ba 5 is usi ' to support its co te tio that it is ot liable :or the i crease4 cost# a 4 i e::ect this is a obli'atio 4epe 4e t o S0&C7s sole 9ill# si ce its co se t is reCuire4 :or the recover" o: the i crease4 cost to be allo9e4. &his i e::ect allo9s S0&C to acCuire the co structe4 buil4i ' at a price that is :ar belo9 its actual co structio cost# a 4 this co stitutes u Dust e rich*e t :or S0&C at the expe se o: .errer. &his is ot allo9e4 b" la9 b" virtue o: Art 22 o: 3CC. ACTAN CEBU INT@L AIRPORT "S% TUDTUD N,A7>872 14$ 2008

ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014 Fhile the MC6AA is obli'e4 to reco ve" 1ot 3o. /)) to respo 4e ts# respo 4e ts *ust retur to the MC6AA 9hat the" receive4 as Dust co*pe satio :or the expropriatio o: 1ot 3o. /))# plus le'al i terest to be co*pute4 :ro* 4e:ault# 9hich i this case ru s :ro* the ti*e the MC6AA co*plies 9ith its obli'atio to the respo 4e ts. Respo 4e ts *ust li5e9ise pa" the MC6AA the ecessar" expe ses it *a" have i curre4 i sustai i ' 1ot 3o. /)) a 4 the *o etar" value o: its services i *a a'i ' it to the exte t that respo 4e ts 9ere be e:ite4 thereb". .ollo9i ' Article 11)7 o: the Civil Co4e# the MC6AA *a" 5eep 9hatever i co*e or :ruits it *a" have obtai e4 :ro* 1ot 3o. /))# a 4 respo 4e ts ee4 ot accou t :or the i terests that the a*ou ts the" receive4 as Dust co*pe satio *a" have ear e4 i the *ea ti*e. 6 accor4a ce 9ith the earlier<Cuote4 Article 11/$ o: the Civil Co4e vis<W<vis Article 11)/ 9hich provi4es that GSiT: a thi ' is i*prove4 b" its ature# or b" ti*e# the i*prove*e t shall i ure to the be e:it o: the cre4itor x x x#G respo 4e ts# as cre4itors# 4o ot have to settle as part o: the process o: restitutio the appreciatio i value o: 1ot /)) 9hich is a atural co seCue ce o: ature a 4 ti*e.

!ACTS* Pre4ecessors<i <i terest or respo 4e ts 9ere the ori'i al o9 ers o: the lot i Cuestio . 6 1/%/# the 3atio al Airports Corporatio # a public corporatio o: the RP e*bar5e4 o a proDect to expa 4 the Cebu 1ahu' Airport. .or this purpose# a expropriatio case 9as :ile4 a 4 the la 4 9as later o tra s:erre4 to the RP. 8o9ever o structures relate4 to the operatio o: the 1ahu' Airport 9as co structe4 i the sai4 lot. &he sai4 lot 9as the tra s:erre4 to the Air &ra sport O::ice =A&O@ the to Macta Cebu 6 ter atio al Airport Authorit" =MC6AA@ but still o co structio 9as *ai4 o the lot. Fhe MC6A ope e4 :or co**ercial :li'hts# the 1ahu' Airport 9as close4 a 4 aba 4o e4. &he respo 4e ts the 4e*a 4e4 to repurchases the lot i Cuestio at the sa*e price at the ti*e o: the ta5i '# 9ithout i terest# o structures or i*prove*e ts havi ' bee erecte4 thereo a 4 the 1ahu' Airport havi ' bee close4 a 4 aba 4o e4# the purpose :or 9hich the lot 9as ta5e o lo 'er exist. As the 4e*a 4 re*ai e4 u hee4e4# a case :or reco ve"a ce 9ith 4a*a'es 9as :ile4 'rou 4e4 o the alle'e4 assura ce *a4e b" 3AC that the ori'i al o9 ers 9oul4 be e title4 to repurchases the lot 9he a 4 i the eve t it 9as o lo 'er use4 :or airport purposes. R&C rule4 i :avour o: the respo 4e ts a 4 9as a::ir*e4 b" the CA# he ce# this appeal.

ISSUE* Fhether or ot MC6AA is obli'e4 to reco ve" the la 4 the respo 4e tsP

HELD* BES. &he ri'hts a 4 4uties bet9ee the MC6AA a 4 respo 4e ts are 'over e4 b" Article 11/$ o: the Civil Co4e 9hich provi4es> Fhe the co exti 'uish*e parties# upo shall retur receive4. 4itio s have :or their purpose the t o: a obli'atio to 'ive# the the :ul:ill*e t o: sai4 co 4itio s# to each other 9hat the" have

6 case o: the loss# 4eterioratio # or i*prove*e t o: the thi '# the provisio s 9hich# 9ith respect to the 4ebtor# are lai4 4o9 i the prece4i ' article SArticle 11)/T shall be applie4 to the part" 9ho is bou 4 to retur . ARAFAG HABANA JALAYAJAY

SONG !O "S% HA9AIIN PHIL%CO S7<=7>872 16$ 1925 Page 25

Civil Law Review 2 2013 - 2014 9as o l" a sli'ht breach o: co tract 9he the pa"*e t 9as 4ela"e4 :or 2$ 4a"s a:ter 9hich 8a9aiia <Philippi e Co. accepte4 the pa"*e t o: the over4ue accou ts a 4 co ti ue4 9ith the co tract# 9aivi ' its ri'ht to resci 4 the co tract. &he 4ela" i the pa"*e t o: So ' .o A Co. 9as ot such a violatio :or the co tract. =3@ Fith re'ar4 to the thir4 Cuestio # the :irst cause o: actio o: So ' .o A Co. is base4 o the 'reater expe se to 9hich it 9as put i bei ' co*pelle4 to secure *olasses :ro* other sources to 9hich Supre*e Court rule4 that P3#$$$ shoul4 be pai4 b" 8a9aiia < Philippi e Co. 9ith le'al i terest :ro* October 2# 1/23 u til pa"*e t. &he seco 4 cause o: actio 9as base4 o the lost pro:its o accou t o: the breach o: co tract. Supre*e Court sai4 that So ' .o A Co. is ot e title4 to recover a "thi ' u 4er the seco 4 cause o: actio because the testi*o " o: Mr. So ' 8e ' 9ill :ollo9 the sa*e li e o: thou'ht as that o: the trial court 9hich i u sustai able a 4 there 9as o *ea s :or the court to :i 4 out 9hat ite*s *a5e up the P1%#$$$ o: alle'e4 lost pro:its.

!ACTS* 8a9aiia <Philippi e Co. 'ot i to a co tract 9ith So ' .o A Co. 9here it 9oul4 4eliver *olasses to the latter. 8a9aiia <Philippi e Co. 9as able to 4eliver 55#$$( 'allo s o: *olasses be:ore the breach o: co tract. S.C :ile4 a co*plai t :or breach o: co tract a'ai st 8a9aiia <Philippi e Co. a 4 as5e4 P7$#3(/.5$. 8a9aiia <Philippi e Co. a s9ere4 that there 9as a 4ela" i the pa"*e t :ro* So ' .o A Co. a 4 that 8a9aiia <Philippi e Co. has the ri'ht to resci 4 the co tract 4ue to that a 4 clai*s it as a special 4e:e se. &he Du4'*e t o: the trial court co 4e* e4 8a9aiia <Philippi e Co. to pa" So ' .o A Co. a total o: P35#317./3# 9ith le'al i terest :ro* the 4ate o: the prese tatio o: the co*plai t# a 4 9ith costs. ISSUE1S* =1@ 2i4 8a9aiia <Philippi e Co. a'ree to sell %$$#$$$ 'allo s o: *olasses or 3$$#$$$ 'allo s o: *olassesP =2@ 8a4 8a9aiia <Philippi e Co. the ri'ht to resci 4 the co tract o: sale *a4e 9ith So ' .o A Co.P =3@ O the basis :irst# o: a co tract :or 3$$#$$$ 'allo s o: *olasses# a 4 seco 4# o: a co tract i*pru4e tl" breache4 b" 8a9aiia <Philippi e Co.# 9hat is the *easure o: 4a*a'esP HELD* =1@ O l" 3$$#$$$ 'allo s o: *olasses 9as a'ree4 to b" 8a9aiia <Philippi e Co. as see i the 4ocu*e ts prese te4 i court. &he la 'ua'e use4 9ith re:ere ce to the a44itio al 1$$#$$$ 'allo s 9as ot a 4e:i ite pro*ise. =2@ Fith re:ere ce to the seco 4 Cuestio # 4oubt has rise as to 9he So ' .o A Co. 9as suppose4 to *a5e the pa"*e ts :or the 4eliver" o: *olasses as sho9 i the 4ocu*e ts prese te4 b" the parties. &he Supre*e Court sai4 that 8a9aiia < Philippi e Co. 4oes ot have the ri'ht to resci 4 the co tract. 6t shoul4 be ote4 that the ti*e o: pa"*e t stipulate4 :or i the co tract shoul4 be treate4 as o: the prese ce o: the co tract. &here

ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014 CORTES A&% COURT O! APPEALS -./0 12$ 2006

Cortes avers that he 4elivere4 the &C&7s throu'h the bro5er7s so . 8e :urther avers that the bro5er7s so 4elivere4 it to the bro5er# 9ho i tur 4elivere4 the* to the Corporatio . Marcosa Sa che,7s u rebutte4 testi*o " is that# she 4i4 ot receive the &C&s. She also 4e ie4 5 o9le4'e o: 4eliver" thereo: to her so # Ma ". Fhat :urther stre 'the e4 the :i 4i 's o: the Court o: Appeals that Cortes 4i4 ot surre 4er the subDect 4ocu*e ts 9as the o::er o: Cortes7 cou sel at the pre<trial to 4eliver the &C&s a 4 the 2ee4 o: Absolute Sale i: the Corporatio 9ill pa" the bala ce o: the 4o9 pa"*e t. 6 4ee4# i: the sai4 4ocu*e ts 9ere alrea4" i the ha 4s o: the Corporatio # there 9as o ee4 :or Cortes7 cou sel to *a5e such o::er. Co si4eri ' that their obli'atio 9as reciprocal# per:or*a ce thereo: *ust be si*ulta eous. &he *utual i actio o: Cortes a 4 the Corporatio there:ore 'ave rise to a co*pe satio *orae or 4e:ault o the part o: both parties because either has co*plete4 their part i their reciprocal obli'atio . Cortes is "et to 4eliver the ori'i al cop" o: the otari,e4 2ee4 a 4 the &C&s# 9hile the Corporatio is "et to pa" i :ull the a'ree4 4o9 pa"*e t o: P2#2$$#$$$.$$. &his *utual 4ela" o: the parties ca cels out the e::ects o: 4e:ault# such that it is as i: o o e is 'uilt" o: 4ela". E 4er Article 11(/ o: the Civil Co4e# :ro* the *o*e t o e o: the parties :ul:ills his obli'atio # 4ela" b" the other be'i s. Si ce Cortes 4i4 ot per:or* his part# the provisio o: the co tract reCuiri ' the Corporatio to pa" i :ull the 4o9 pa"*e t ever acCuire4 obli'ator" :orce.

!ACTS* .or the purchase price o: 3.7M# -illa Espera ,a 2evelop*e t Corporatio =ve 4ee@ a 4 A to io Cortes =ve 4or@ e tere4 i to a co tract o: sale over the lots locate4 at 0aclara # ParaNaCue# Metro Ma ila. &he Corporatio a4va ce4 to Cortes the total su* o: P1#213#$$$.$$. 6 Septe*ber 1/)3# the parties execute4 a 4ee4 o: absolute sale o the :ollo9i ' ter*s> &he Corporatio shall a4va ce 2.2 M as 4o9 pa"*e t# a 4 Cortes shall li5e9ise 4eliver the &C& :or the 3 lots. &he bala ce o: 1.5M shall be pa"able 9ithi a "ear :ro* the 4ate o: the executio . &he Corporatio :ile4 the i sta t case :or speci:ic per:or*a ce see5i ' to co*pel Cortes to 4eliver the &C&s a 4 the ori'i al cop" o: the 2ee4 o: Absolute Sale. Accor4i ' to the Corporatio # 4espite its rea4i ess a 4 abilit" to pa" the purchase price# Cortes re:use4 4eliver" o: the sou'ht 4ocu*e ts. 6t pra"e4 :or 4a*a'es# attor e"7s :ees a 4 liti'atio expe ses. Cortes clai*e4 that the o9 er7s 4uplicate cop" o: the three &C&s 9ere surre 4ere4 to the Corporatio a 4 it is the latter 9hich re:use4 to pa" i :ull the a'ree4 4o9 pa"*e t. R&C re 4ere4 a 4ecisio resci 4i ' the sale a 4 4irecte4 Cortes to retur to the Corporatio the a*ou t o: P1#213#$$$.$$# plus i terest. CA reverse4 the 4ecisio a 4 4irecte4 Cortes to execute a 2ee4 o: Absolute Sale co ve"i ' the properties a 4 to 4eliver the sa*e to the Corporatio to'ether 9ith the &C&s# si*ulta eous 9ith the Corporatio 7s pa"*e t o: the bala ce o: the purchase price o: P2#%)7#$$$.$$.

ISSUES* Fhether or ot Cortes 4elivere4 the &C&s a 4 the ori'i al 2ee4 to the Corporatio P3O. FO3 there is 4ela" i the per:or*a ce o: the parties7 obli'atio that 9oul4 Dusti:" the rescissio o: the co tract o: saleP &8ERE 6S 2E1AB 63 0O&8 PAR&6ES =co*pe satio *orae@

HELD* ARAFAG HABANA JALAYAJAY

GIL "S% CA '() HEIRS OD

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Civil Law Review 2 2013 - 2014 S7<=7>872 12$ 2003 !ACTS* &he case at ha 4 revolves arou 4 a 4ispute4 parcel o: co**ercial la 4 ori'i all" co<o9 e4 b" Co cepcio Pal*a +il# a 4 her sister# 3ieves Pal*a +il 9ho 9as *arrie4 to A 'el -illarica. Co cepcio :ile4 a co*plai t a'ai st her sister 3ieves Civil Case 3o. 11($ :or speci:ic per:or*a ce# to co*pel the 4e:e 4a t to ce4e a 4 4eliver to her a u 4ivi4e4 portio o: the sai4 propert". &he lo9er court rule4 i :avor o: Co cepcio . CA a::ir*e4 a 4 the 4ecisio beca*e :i al a 4 executor". &he sheri:: ha4 the propert" sub4ivi4e4 a 4 execute4 a 2ee4 o: &ra s:er o: o e o: the :our lots to Co cepcio . Co cepcio execute4 a 4ee4 o: absolute sale over the sai4 lot i :avor o: 6lu*i a4a Pacetes. Also# Co cepcio :ile4 a co*plai t :or u la9:ul 4etai er a'ai st the spouses A 'el a 4 3ieves -illarica Civil Case 3o. 22%(# 9hich the M&C 4eci4e4 i :avor o: Co cepcio . Mea 9hile# the spouses A 'el a 4 3ieves -illarica :ile4 a co*plai t a'ai st the sheri:: a 4 Co cepcio 9ith the Civil Case 3o. 2151 :or the ulli:icatio o: the 4ee4 o: tra s:er execute4 b" the sheri::. 6lu*i a4a Pacetes :ile4 a *otio to i terve e i Civil Case 3o. 2151# as ve 4ee o: the propert" subDect o: the case# 9hich 9as 'ra te4 b" the court. She the :ile4 a *otio to 4is*iss the co*plai t. &he court 'ra te4 the *otio . O the basis o: the 4ee4 o: tra s:er execute4 b" Sheri::# the Re'ister o: 2ee4s issue4 &C&s i the a*e o: Co cepcio . 8o9ever# the latter :aile4 to tra s:er title to the propert" to a 4 u 4er the a*e o: 6lu*i a4a Pacetes. Co seCue tl"# the latter 4i4 ot re*it the bala ce o: the purchase price o: the propert" to Co cepcio . More tha :ive "ears havi ' elapse4 9ithout the 4ecisio i the u la9:ul 4etai er case bei ' e :orce4# 6lu*i a4a :ile4 a co*plai t Civil Case 3o. %%13 :or the revival a 4 executio o: the 4ecisio o: the u la9:ul 4etai er case. SubseCue tl"# the lot 9as sol4 to Co sta cio Ma'la a the to E*ilio Matulac. 6 the *ea ti*e# o Au'ust )# 1/77# 6lu*i a4a co si' e4 9ith the court i the speci:ic per:or*a ce case the a*ou t o: P11#/)3.$$ o l" as pa"*e t o: the purchase price o: the propert". &hree o: the survivi ' heirs o: Co cepcio +il# a*el"# Perla Pal*a +il# -ice te 8i,o # !r. a 4 A 'el Pal*a +il :ile4 o !u e 17# 1/)2# a co*plai t a'ai st E*ilio Matulac# Co sta cio Ma'la a# A'apito Pacetes# a 4 the Re'ister o: 2ee4s# 9ith the C.6 :or the ca cellatio o: the 4ee4 o: sale execute4 b" Co cepcio i :avor o: 6li*i a4a PacetesL the 4ee4 o: sale execute4 b" the latter i :avor o: Co sta cio Ma'la aL the 4ee4 o: sale execute4 b" the latter i :avor o: E*ilio Matulac. ARAFAG HABANA JALAYAJAY Petitio ers i this case assert that private respo 4e t 6lu*i a4a Pacetes :aile4 to pa" the bala ce o: the purchase price i the a*ou t o: P1%#1$$.$$. &he" 4i4 co si' a 4 4eposit the a*ou t o: P11#/)3.$$# but o l" o Au'ust )# 1/77# t9e t" o e "ears :ro* the executio o: the 2ee4 o: Absolute Sale i :avor o: the sai4 spouses# 9ithout the latter i stituti ' a actio :or the ca cellatio o: their obli'atio . Accor4i ' to the petitio ers# the co si' atio *a4e b" 6lu*i a4a Pacetes o: the a*ou t 4i4 ot pro4uce a " le'al e::ect. 6 the proce4ural aspect# it is i*porta t to ote that the petitio ers :aile4 to i*plea4 all the co*pulsor" heirs o: the 4ecease4 Co cepcio +il i their co*plai t. Fhe she 4ie4 i testate# Co cepcio +il# a spi ster# 9as survive4 b" her sister 3ieves# a 4 her ephe9s a 4 ieces# three o: 9ho* are the petitio ers herei . ISSUE* Fhether or ot the propert" has bee co ve"e4 to 6lu*i a4a Pacetes a 4 the subseCue t ve 4ees i spite o: the bala ce that existe4 :or 21 "earsP HELD* BES. &he subseCue t tra s:ers o: the propert" :ro* Pacetes to Ma'la a# a 4 the :ro* Ma'la a to herei *ova t Matulac# 9as acCuire4 pe 4e te lite. &he latter =Matulac@ as the latest o9 er o: the propert"# 9as# as aptl" put b" the trial court# subro'ate4 to all the ri'hts a 4 obli'atio s o: Pacetes. 8e is thus the part" 9ho o9 has a substa tial i terest i the propert". Matulac is a real part"<i < i terest subro'ate4 to all the ri'hts o: 6lu*i a4a Pacetes# i clu4i ' the ri'ht to the issua ce o: a 9rit o: executio i his a*e. &he ve 4ee pai4 the 4o9 pa"*e t o: P7#5$$.$$. 0" the ter*s o: the co tract# the obli'atio o: the ve 4ee to pa" the bala ce o: the purchase price e sue4 o l" upo the issua ce o: the certi:icate o: title b" the Re'ister o: 2ee4s over the propert" sol4 to a 4 u 4er the a*e o: the ve 4ee# a 4 the 4eliver" thereo: b" the ve 4or Co cepcio +il to the latter. Co cepcio :aile4 to secure a certi:icate o: title over the propert". Fhe she 4ie4 i testate o Au'ust %# 1/5/# her obli'atio to 4eliver the sai4 title to the ve 4ee 4evolve4 upo her heirs# i clu4i ' the petitio ers. &he sai4 heirs# i clu4i ' the petitio ers :aile4 to 4o so# 4espite the lapse o: ei'htee "ears si ce Co cepcio s 4eath. 6lu*i a4a 9as ot "et obli'e4 o Au'ust )# 1/77 to pa" the bala ce o: the purchase price o: the propert"# but as a si' o: 'oo4 :aith# she evertheless co si' e4 the a*ou t o: P11#/)3.$$# part o: the bala ce o: the purchase price o: P1%#$$$.$$# 9ith the court i Civil Case 3o. 11($.

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Civil Law Review 2 2013 - 2014 3. &hat upo :ull pa"*e t o: the co si4eratio hereo:# the SE11ER shall execute a 2ee4 o: Absolute Sale i :avor o: the 0EBER that the pa"*e t o: capital 'ai s tax shall be :or the accou t o: the SE11ER a 4 that 4ocu*e tar" sta*ps# tra s:er tax# re'istratio expe ses :or the tra s:er o: title i clu4i ' the otari,atio a 4 preparatio o: this Co tract a 4 subseCue t 4ocu*e ts i: a " are to be execute4# real estate taxes :ro* !a uar" 1# 1/)( a 4 other *iscella eous expe ses shall be :or the accou t o: the 0EBERL the SE11ER hereb" represe ts that all associatio 4ues has bee pai4 but that subseCue t to the executio o: this Co tract the pa"*e t o: the sa*e shall 4evolve upo the 0EBER. Co strui ' the co tracts to'ether# it is evi4e t that the parties execute4 a contract to sell and not a contract of sale. &he petitio ers retai e4 o9 ership 9ithout :urther re*e4ies b" the respo 4e ts u til the pa"*e t o: the purchase price o: the propert" i :ull. Such pa"*e t is a positive suspe sive co 4itio # :ailure o: 9hich is ot reall" a breach# serious or other9ise# but a eve t that preve ts the obli'atio o: the petitio ers to co ve" title :ro* arisi '# i accor4a ce 9ith Article 11)% o: the Civil Co4e. &he o <:ul:ill*e t b" the respo 4e t o: his obli'atio to pa"# 9hich is a suspe sive co 4itio to the obli'atio o: the petitio ers to sell a 4 4eliver the title to the propert"# re 4ere4 the co tract to sell i e::ective a 4 9ithout :orce a 4 e::ect. &he parties sta 4 as i: the co 4itio al obli'atio ha4 ever existe4. Article 11/1 o: the 3e9 Civil Co4e 9ill ot appl" because it presupposes a obli'atio alrea4" exta t. &here ca be o rescissio o: a obli'atio that is still o <existi '# the suspe sive co 4itio ot havi ' happe e4. 8o9ever# the respo 4e ts *a" rei state the co tract to sell b" pa"i ' the P2/#223.(7# a 4 the petitio ers *a" a'ree thereto a 4 accept the respo 4e tsK late pa"*e t. In this case, the petitioners had decided before and after the respondents filed this complaint in Civil Case No. 15639 to accept the payment of P29,223.6 , to e!ec"te the deed of absol"te sale over the property and ca"se the transfer of the title of the s"b#ect property to the respondents. $he petitioners even filed its amended complaint in Civil Case No. 159%& for the collection of the said amo"nt . &he Court o: Appeals ca ot# thus# be :aulte4 :or a::ir*i ' the 4ecisio o: the trial court a 4 or4eri ' the petitio ers to co ve" the propert" to the respo 4e ts upo the latterKs pa"*e t o: the a*ou t o: P2/#223.(7# provi4e4 that the propert" has ot bee sol4 to a thir4< part" 9ho acte4 i 'oo4 :aith.

SPOUSES RAYOS "S% COURT O! APPEALS -./0 14$ 2004 !ACTS* O 1/)5# Spouses Ra"os secure4 a short ter* loa :ro* the Philippi e Savi 's 0a 5 pa"able 9ithi a perio4 o: o e "ear i Cuarterl" i stal*e ts. 6t 9as evi4e ce4 b" a pro*issor" ote a 4 the spouses execute4 a REM over their propert" locate4 i 1as Pi as. O the sa*e "ear the spouses execute4 a 2ee4 o: Absolute Sale 9ith Assu*ptio o: Mort'a'e over the propert" 9ith spouses Mira 4a. 8o9ever# the spouses execute4 a other 4ocu*e t# a co tract to sell the sai4 propert" i :avour o: the respo 4e ts. Respo 4e t Ro'elio Mira 4a the :ile4 a applicatio 9ith PS0 to secure approval o: his assu*ptio o: the petitio er7s obli'atio o the loa but such 9as 4isapprove4. 3evertheless# Ro'elio pai4 the :irst a 4 seco 4 Cuarterl" i stal*e t :or the accou t o: petitio ers. Petito er the receive4 a letter :ro* the ba 5 re*i 4i ' hi* o: the last Cuarterl" i stal*e t a 4 :eari ' that the respo 4e ts 9ill ot be able to pa" the i stal*e t# he pai4 the a*ou t 4ue. 8e the a4vise4 the ba 5 ot to tur over the 4uplicate title to respo 4e ts. Respo 4e ts the :ile4 a case a'ai st petitio ers a 4 the ba 5 clai*i ' that the ba 5 co spire4 9ith spouses Ra"os i preve ti ' hi* :ro* pa"i ' the last i stal*e t a 4 i re:usi ' to tur over the 4uplicate title thereb" preve ti ' the tra s:er o: the propert" to his a*e. ISSUE* Fhether or ot petitio er ha4 u ilaterall" ca celle4 the co tract 9he he pai4 the last Cuarterl" i stal*e tP HELD* 3O.6t bears stressi ' that the petitio ers a 4 the respo 4e ts execute4 t9o i terrelate4 co tracts# vi,> the 2ee4 o: Sale 9ith Assu*ptio o: Mort'a'e 4ate4 2ece*ber 2(# 1/)5# a 4 the Co tract to Sell 4ate4 !a uar" 2/# 1/)(. &o 4eter*i e the i te tio o: the parties# the t9o co tracts *ust be rea4 a 4 i terprete4 to'ether. E 4er the t9o co tracts# the petitio ers bou 4 a 4 obli'e4 the*selves to execute a 4ee4 o: absolute sale over the propert" a 4 tra s:er title thereo to the respo 4e ts a:ter the pa"*e t o: the :ull purchase price o: the propert"# i clusive o: the Cuarterl" i stall*e ts 4ue o the petitio ersK loa 9ith the PS0> ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014 ot reall" a breach# serious or other9ise# but a eve t that preve ts the obli'atio s o: the petitio ers to co ve" title :ro* arisi '# i accor4a ce 9ith Article 11)% o: the Civil Co4e. x xx &he o <:ul:ill*e t b" the respo 4e t o: his obli'atio to pa"# 9hich is a suspe sive co 4itio to the obli'atio o: the petitio ers to sell a 4 4eliver the title to the propert"# re 4ere4 the co tract to sell i e::ective a 4 9ithout :orce a 4 e::ect. &he parties sta 4 as i: the co 4itio al obli'atio ha4 ever existe4. Article 11/1 o: the 3e9 Civil Co4e 9ill ot appl" because it presupposes a obli'atio alrea4" exta t. &here ca be o rescissio o: a obli'atio that is still o <existi '# the suspe sive co 4itio ot havi ' happe e4. SE*phasis a 4 u 4erscori ' supplie4L citatio s o*itte4T &he subDect co tract to sell clearl" states that Gtitle 9ill be tra s:erre4 b" the o9 er =petitio ers@ to the bu"er =respo 4e t@ upo co*plete pa"*e t o: the a'ree4 purchase price.G Si ce respo 4e t :aile4 to :ull" pa" the purchase price# petitio ers7 obli'atio to co ve" title to the properties 4i4 ot arise. Fhile rescissio 4oes ot appl" i this case# petitio ers *a" evertheless ca cel the co tract to sell# their obli'atio ot havi ' arise .

CORDERO "S% !%S% ANAGE ENT DE"ELOP ENT O5=,872 31$ 2006 !ACTS* 0ele Cor4ero a 4 ( others# herei petitio ers# e tere4 i to a co tract to sell 9ith ..S. Ma a'e*e t 2evelop*e t over 5 parcels o: la 4 locate4 i 3asu'bo# 0ata 'as. E 4er the ter*s o: the co tract# a 4o9 pa"*e t o: P3.5M a 4 the pa"*e t o: the re*ai i ' bala ce i ( Cuarterl" i stal*e ts. 8o9ever# respo 4e t 4e:aulte4 :ro* pa"*e t. &hus# a:ter 4e*a 4i ' the respo 4e ts to pa" the re*ai i ' a*ou t# petitio ers :ile4 a co*plai t :or rescissio o: the co tract 9ith 4a*a'es. Respo 4e t co te 4s that the petitio ers 9ere the :irst o es 9ho violate4 the co tract to sell b" preve ti ' access to the propert" 4espite the pa"*e t o: P2.5M 9orth o: ear est *o e" a 4 that the petitio ers re:use4 to execute the :i al co tract o: price. &he R&C rule4 i :avour o: petitio ers 9hile the CA rule4 i :avour o: the respo 4e ts. 6 their MR# petitio ers co te 4 that the co tract to sell *a" be subDect to rescissio u 4er Art. 11/1 o: the 3CC as it i volves reciprocal obli'atio s. ISSUE* Fhether or ot a co tract to sell *a" be subDect to rescissio u 4er Art. 11/1P HELD* 3O. E 4er a co tract to sell# the seller retai s title to the thi ' to be sol4 u til the purchaser :ull" pa"s the a'ree4 purchase price. &he :ull pa"*e t is a positive suspe sive co 4itio # the o <:ul:ill*e t o: 9hich is ot a breach o: co tract but *erel" a eve t that preve ts the seller :ro* co ve"i ' title to the purchaser. &he o < pa"*e t o: the purchase price re 4ers the co tract to sell i e::ective a 4 9ithout :orce a 4 e::ect. Si ce the obli'atio o: petitio ers 4i4 ot arise because o: the :ailure o: respo 4e t to :ull" pa" the purchase price# Article 11/1 o: the Civil Co4e 9oul4 have o applicatio . 'ayos v. Co"rt of (ppeals explai e4> Co strui ' the co tracts to'ether# it is evi4e t that the parties execute4 a contract to sell a 4 ot a co tract o: sale. &he petitio ers retai e4 o9 ership 9ithout :urther re*e4ies b" the respo 4e ts u til the pa"*e t o: the purchase price o: the propert" i :ull. Such pa"*e t is a positive suspe sive co 4itio # :ailure o: 9hich is ARAFAG HABANA JALAYAJAY

CALERO "S% CARRION '256 30$ 1960 Page 32

Civil Law Review 2 2013 - 2014 his sub*issio that the a'ree*e t create4 a i*plie4 trust# plai ti::<appella t cites the provisio s o: Articles 1%52 a 4 1%53 o: the e9 Civil Co4e 9hich rea4 as :ollo9s> AR&. 1%52. 6: t9o or *ore perso s a'ree to purchase propert" a 4 b" co**o co se t the le'al title is ta5e i the a*e o: o e o: the* :or the be e:it o: all# a trust is create4 b" :orce o: la9 i :avor o: the others i proportio to the i terest o: each. AR&. 1%53. Fhe propert" is co ve"e4 to a perso i relia ce upo his 4eclare4 i te tio to hol4 it :or# or tra s:er it to a other or the 'ra tor# there is a i*plie4 trust i :avor o: the perso 9hose be e:it is co te*plate4. &he co te tio is 9ithout *erit# Article 1%52 aboveCuote4 is i applicable to this case :or the reaso that there is absolutel" o stipulatio i the co tract# Exhibit A# that there 9oul4 be a Doi t purchase o: the propert" a 4 that the le'al title thereto 9as to be place4 i the a*e o: the 4e:e 4a ts :or the be e:it o: the*selves a 4 herei plai ti::. &he recitals i the co tracts prece4i ' the para'raph co tai i ' the obli'atio assu*e4 b" the 4e:e 4a ts# *erel" re:er to the services re 4ere4 b" the plai ti:: as bro5er 9ho e'otiate4 the sale o: the propert" to the 4e:e 4a ts a 4 9hich the 4e:e 4a ts a'ree4 to co*pe sate. 3othi ' co tai e4 therei 9oul4 i 4icate that the propert" 9as bei ' purchase4 :or the be e:it o: the plai ti:: a 4 the 4e:e 4a ts. &he ter*s o: the co tract a4*it o 4oubt that the 2$J to be pai4 the plai ti:: is o: a " a*ou t 9hich *a" be obtai e4 b" the sale o: the propert" a:ter 4e4ucti ' the purchase price thereo:# 9hich shall be ta5e :ro* the liCui4ate4 be e:it obtai e4 b" the o9 ers out o: the sale o: the sai4 propert". 3either is Article 1%53 applicable# because there is absolutel" othi ' i the a'ree*e t 9hich eve re*otel" i 4icates that the propert" 9as co ve"e4 to the 4e:e 4a ts i relia ce upo their 4eclare4 i te tio to hol4 it :or# or tra s:er it to# a other or the 'ra tor. Eve the ver" alle'atio s o: plai ti::Ks co*plai t clearl" re:lect the true ature o: the a'ree*e t. 6t appears there:ro* that althou'h the ori'i al parties to purchase the propert" tribute P1$#$$$.$$ a 4 the 4e:e 4a ts to put up P15#$$$.$$ o accou t o: the 4o9 pa"*e t o: P25#$$$.$$@# the sa*e 9as aba 4o e4 a 4 the parties subseCue tl" a'ree4 that the 4e:e 4a ts 9oul4 bu" the propert" exclusivel" i their a*e a 4 :or their o9 accou t.

!ACTS* .ro* the or4er o: the Court o: .irst 6 sta ce o: Ma ila =i Civil Case 3o. 31%$/@ 4is*issi ' his co*plai t# o the 'rou 4 o: prescriptio # plai ti:: .e4erico Calero i terpose4 this appeal 4irectl" to this Court o Cuestio s purel" o: la9. O !ul" 1)#1/57# 4e:e 4a t re e9e4 their *otio to 4is*iss# o the 'rou 4s that =1@ the a*e 4e4 co*plai t states o cause o: actio =2@ the plai ti::Ks cause o: actio # i: a "# is barre4 b" the Statute o: 1i*itatio s =Sec. 1SeT# Rule )# Rule o: Court@# a 4 =3@ the plai ti::Ks ori'i al co*plai t bei ' 9ithout cause o: actio # it ca ot be a*e 4e4 a 4Qor cure4 b" sai4 a*e 4e4 co*plai t 9hich cha 'es plai ti::Ks theor" o: the case. 6 co ectio 9ith the seco 4 'rou 4 *e tio e4# 4e:e 4a ts state4> Plai ti::Ks ri'ht o: actio accrue4 i the "ear 1/37 9he the :irst o: plai ti::s alle'e4 various o::ers to 4e:e 4a ts to sell the propert" at price o::ere4 b" bu"ers 9as re:use4 b" 4e:e 4a ts =Pars. 13 a 4 1% o: Co*plai t@. 6t is pate t# there:ore# that is# te =1$@ "ears :ro* the "ear 1/37. Co si4eri ' that plai ti::Ks co*plai t 9as :ile4 o 2ece*ber 21# 1/5(# plai ti::Ks cause o: actio i: a "# is obviousl" u e :orceable a 4 barre4 b" the Statue o: 1i*itatio s. &o this *otio # plai ti:: :ile4 his oppositio o Au'ust 2# 1/57# to 9hich 4e:e 4a ts :ile4 a reDoi 4er o Au'ust )# 1/57. &o this reDoi 4er# plai ti:: :ile4 a cou ter< repl" o Au'ust 12# 1/57. O Au'ust 21# 1/57# the court issue4 a or4er 4e "i ' 4e:e 4a tKs *otio to 4is*iss. .ro* this or4er# 4e:e 4a ts :ile4 a *otio :or reco si4eratio o Au'ust 27# 1/57# 9hich 9as 4ul" oppose4 b" plai ti:: o Septe*ber 7# 1/57. O Septe*ber 1(# 1/57# 4e:e 4a ts :ile4 a reDoi 4er to sai4 oppositio . .ro* the above<Cuote4 or4er# plai ti:: :ile4 a *otio :or reco si4eratio o October 3# 1/57# 9hich 9as 4ul" oppose4 b" 4e:e 4a ts o October 1)# 1/57. O October 23# 1/57# the court 4e ie4 sai4 *otio . 8e ce# this appeal. Plai ti:: clai*s that the lo9er court erre4 i 4is*issi ' his co*plai t# co te 4i ' that =a@ the a'ree*e t Exhibit A attache4 to the a*e 4e4 co*plai t a 4 *a4e a i te'ral part thereo:# create4 Gu :i4eico*iso i*plicitoG or a i*plie4 trust# 9hich is ot subDect to prescriptio # a 4 =b@ that eve a4*itti ' the obli'atio is subDect to a suspe sive u 4eter*i e4 perio4 = ot co 4itio @# the actio to have such perio4 :ixe4 b" the court has ot "et prescribe4. 6 support o: ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014 Plai ti::<appella t ext co te 4s that the lo9er court also erre4 i 4is*issi ' his co*plai t o the :i 4i ' that plai ti::Ks ri'ht o: actio to have the perio4 :ixe4 :or the sale o: the propert" ha4 alrea4" prescribe4. 6t is ur'e4 that the ti*e :or e :orci ' their ri'ht o: actio to have the perio4 Du4iciall" 4eter*i e4 4i4 ot be'i to ru u til the 4e:e 4a ts ha4 bee :or*all" 4e*a 4e4 a 4 the" re:use4 to sell the propert". 6t 9as o l" the # it is ar'ue4# that the perio4 o: prescriptio starte4 to ru . &his see*s to be illo'ical. 0e:ore the perio4 is :ixe4# the 4e:e 4a tsK obli'atio to sell is suspe 4e4 a 4 the"# there:ore# ca ot be co*pelle4 to act. .or this reaso # a co*plai t to e :orce i**e4iatel" the pri cipal obli'atio subDect to the suspe sive perio4 be:ore this is :ixe4# 9ill ot prosper. 0ut this is ot to sa" that the plai ti:: has o cause o: actio . 8is cause o: actio u 4er the a'ree*e t is to have the court :ix the perio4 a 4 a:ter the expiratio o: that perio4# to co*pel the per:or*a ce o: the pri cipal obli'atio to sell. A 4 this ri'ht to have the perio4 Du4iciall" :ixe4 is bor :ro* the 4ate o: the a'ree*e t itsel: 9hich co tai s the u 4eter*i e4 perio4. ExtraDu4icial 4e*a 4 is ot esse tial :or the creatio o: this cause o: actio to have the perio4 :ixe4. 1 6t exists b" operatio o: la9 :ro* the *o*e t such a a'ree*e t subDect to a u 4eter*i e4 perio4 is e tere4 i to# 9hether the perio4 4epe 4s upo the 9ill o: the 4ebtor alo e# or o: the parties the*selves# or 9here :ro* the ature a 4 the circu*sta ces o: the obli'atio it ca be i :erre4 that a perio4 9as i te 4e4. &his is the clear i te 4*e t o: Article 11/7 o: the 3e9 Civil Co4e as 9ell as Article 112) o: the Spa ish Civil Co4e a 4 the applicable 4octri e lai4 4o9 b" this Court. A 4 si ce the a'ree*e t 9as execute4 o Ma" 2)# 1/37 a 4 the co*plai t to have the perio4 :ixe4 9as :ile4 o 2ece*ber 21# 1/5( or a:ter al*ost 2$ "ears# plai ti::Ks actio is clearl" a 4 i 4isputabl" barre4 u 4er the Statute o: 1i*itatio s. Fhere:ore# :i 4i ' o reversible error i the or4er appeale4 :ro*# the sa*e is hereb" a::ir*e4# 9ith costs a'ai st the plai ti::<appella t. So or4ere4.

TRADERS ROYAL BAN# A&% CA !ACTS* &he Philippi e 0loo*i ' Mills# 6 c. a 4 Al:re4o ARAFAG HABANA JALAYAJAY Page 34

Civil Law Review 2 2013 - 2014 Chi ' Doi tl" sub*itte4 to the Securities a 4 Excha 'e Co**issio a petitio :or suspe sio o: pa"*e ts 9here Al:re4o Chi ' 9as Doi e4 as co<petitio er because u 4er the la9# he 9as alle'e4l" e title4# as suret"# to avail o: the 4e:e ses o: P0M a 4 he 9as expecte4 to raise *ost o: the stoc5hol4ersK eCuit" o: Pl$$ *illio bei ' reCuire4 u 4er the pla :or the rehabilitatio o: P0M. &ra4ers Ro"al 0a 5 9as i clu4e4 a*o ' P0MKs cre4itors a*e4 i Sche4ule A acco*pa "i ' P0MKs petitio :or suspe sio o: pa"*e ts. &he petitio er ba 5 :ile4 a case to collect Php22#227#7/%.$5 represe ti ' P0M7s outsta 4i ' obli'atio to the ba 5. Chi ' 9as i*plea4e4 as a 4e:e 4a t :or havi ' si' e4 as a suret" to the exte t o: 1$M. SEC ho9ever issue4 a or4er that P0M 9ill 'o u 4er a rehabilitatio a 4 receivership# thus or4ere4 all actio s :or clai*s pe 4i ' be:ore a " court to be suspe 4e4 u til :urther or4ers :ro* the SEC. As a result# the court 4roppe4 P0M :ro* the co*plai t but 4e ie4 Chi '7s *otio to 4is*iss.
subseCue tl" be 4irecte4 a'ai st the others# as lo ' as the 4ebt has ot bee :ull" collecte4.

6t is ele*e tar" that a corporatio has a perso alit" 4isti ct a 4 separate :ro* its i 4ivi4ual stoc5hol4ers or *e*bers. 0ei ' a o::icer or stoc5hol4er o: a corporatio 4oes ot *a5e o eKs propert" the propert" also o: the corporatio # :or the" are separate e tities =A4elio Cru, vs. Uuiterio 2alisa"# 152 SCRA %)2@.Chi 'Ks act o: Doi i ' as a co<petitio er 9ith P0M i SEC Case 3o. 225$ 4i4 ot vest i the SEC Duris4ictio over his perso or propert"# :or Duris4ictio 4oes ot 4epe 4 o the co se t or acts o: the parties but upo express provisio o: la9.

ISSUE* Fhether the court a )"o coul4 acCuire Duris4ictio over Chi ' i his perso al a 4 i 4ivi4ual capacit" as a suret" o: P0M i the collectio suit :ile4 b" the ba 5# 4espite the :act that P0MKs obli'atio to the ba 5 ha4 bee place4 u 4er receivership b" the SEC.

HELD* BES. Althou'h Chi ' 9as i*plea4e4 i SEC Case 3o. 225$# as a co<petitio er o: P0M# the SEC coul4 ot assu*e Duris4ictio over his perso a 4 properties. &he Securities a 4 Excha 'e Co**issio 9as e*po9ere4# as rehabilitatio receiver# to ta5e custo4" a 4 co trol o: the assets a 4 properties o: P0M o l"# :or the SEC has Duris4ictio over corporatio s o l" ot over private i 4ivi4uals# except stoc5hol4ers i a i tra< corporate 4ispute.

Chi ' ca be sue4 separatel" to e :orce his liabilit" as suret" :or P0M# as expressl" provi4e4 b" Article 121( o: the 3e9 Civil Co4e>

AR&. a'ai st a " o: si*ulta eousl". the* shall ot

121(. &he cre4itor *a" procee4 the soli4ar" 4ebtors or all o: the* &he 4e*a 4 *a4e a'ai st o e o: be a obstacle to those 9hich *a"

PHILIPPINE BLOO ING

ILLS$ INC% A& CA

ARAFAG HABANA JALAYAJAY

Page 33

Civil Law Review 2 2013 - 2014 !ACTS* &he case is a o::shoot o: the 4ecisio i &ra4ers Ro"al 0a 5 v.s. CA 9herei the court rule4 the issue o: Chi '7s separate liabilit" as a suret" 4espite the rehabilitaio procee4i 's be:ore the SEC. Chi ' 9as the Se ior -ice Presi4e t o: P0M. 6 his perso al capacit" a 4 ot as a corporate o::icer# Chi ' si' e4 a 2ee4 o: Suret"ship 4ate4 21 !ul" 1/77 bi 4i ' hi*sel: to pa" 1$M.
AR&. 121(. &he cre4itor *a" procee4 a'ai st a " o e o: the soli4ar" 4ebtors or so*e or all o: the* si*ulta eousl". &he 4e*a 4 *a4e a'ai st o e o: the* shall ot be a obstacle to those 9hich *a" subseCue tl" be 4irecte4 a'ai st the others# so lo ' as the 4ebt has ot bee f"lly collecte4.

Al:re4o Chi ' o9 clai*s that si ce the SEC ha4 alrea4" issue4 a 4ecisio approvi ' a revise4 rehabilitatio pla :or P0M7s cre4itors# a 4 that P0M obtai e4 the cre4it acco**o4atio s :or corporate purposes that 4i4 ot re4ou 4 to his perso al be e:it. 8e :urther clai*e4 that eve as a suret"# he has the ri'ht to the 4e:e ses perso al to P0M. &hus# his liabilit" as suret" 9oul4 attach o l" i:# a:ter the i*ple*e tatio o: pa"*e ts sche4ule4 u 4er the rehabilitatio pla # there 9oul4 re*ai a bala ce o: P0M7s 4ebt to &R0. &hat as suret" a 4 soli4ar" 4ebtor# he shoul4 be e:it :ro* the cha 'e o: the ature o: the obli'atio as provi4e4 i Art. 1222 3CC.

ISSUE* Fhether Chi '7s liabilit" is li*ite4 to the a*ou t state4 i P0M7s rehabilitatio pla P

HELD* 3O. Art.1222 o: the 3CC *a" ot appl" to Chi '


OArt. 1222. A soli4ar" 4ebtor *a"# i actio s :ile4 b" the cre4itor# avail hi*sel: o: all 4e:e ses 9hich are 4erive4 :ro* the ature o: the obli'atio a 4 o: those 9hich are perso al to hi*# or pertai to his o9 share. Fith respect to those 9hich perso all" belo ' to the others# he *a" avail hi*sel: thereo: o l" as re'ar4s that part o: the 4ebt :or 9hich the latter are respo sible.I

6 'ra ti ' the loa to P0M# &R0 reCuire4 Chi '7s suret" precisel" to i sure :ull recover" o: the loa i case P0M beco*es i solve t or :ails to pa" i :ull. &his 9as the ver" purpose o: the suret". &hus# Chi ' ca ot use P0M7s :ailure to pa" i :ull as Dusti:icatio :or his o9 re4uce4 liabilit" to &R0. As suret"# Chi ' a'ree4 to pa" i :ull P0M7s loa i case P0M :ails to pa" i :ull :or a " reaso # i clu4i ' its i solve c". &R0# as cre4itor# has the ri'ht u 4er the suret" to procee4 a'ai st Chi ' :or the e tire a*ou t o: P0M7s loa . &his is clear :ro* Article 121( o: the Civil Co4e> ARAFAG HABANA JALAYAJAY COUNTRY BAN#ERS INSURANCE CORPORATION A&% CA Page 34

Civil Law Review 2 2013 - 2014

!ACTS* Respo 4e t Oscar -e ta illa E terprises Corporatio =O-EC@# as lessor# a 4 the petitio er E riCue .. S"# as lessee# e tere4 i to a lease a'ree*e t over the Ave ue# 0roa49a" a 4 Capitol &heaters a 4 the la 4 o 9hich the" are situate4 i Caba atua Cit" :or ( "ears co**e ci ' :ro* !u e 13# 1/77 a 4 e 4i ' !u e 12#1/)3. A:ter *ore tha t9o =2@ "ears o: operatio o: the Ave ue# 0roa49a" a 4 Capitol &heaters# the lessor O-EC *a4e 4e*a 4s :or the repossessio o: the sai4 lease4 properties i vie9 o: the S"Ks arrears i *o thl" re tals a 4 o <pa"*e t o: a*use*e t taxes. 2ue to S"7s :ailure to pa" the a*ou t i :ull# O-EC pa4loc5e4 the 'ates o: three theaters. S" as5e4 :or re:or*atio o: the lease a'ree*e t# 4a*a'es a 4 i Ductio . O-EC o the other ha 4# alle'e4 i its a s9er b" 9a" o: cou terclai*s# that b" reaso o: S"Ks violatio o: the ter*s o: the subDect lease a'ree*e t# O-EC beca*e authori,e4 to e ter a 4 possess the three theaters i Cuestio a 4 to ter*i ate sai4 a'ree*e t a 4 the bala ce o: the 4eposits 'ive b" S" to O-EC ha4 thus beco*e :or:eite4L that O-EC 9oul4 be losi ' P5$#$$$.$$ :or ever" *o th that the possessio a 4 operatio o: sai4 three theaters re*ai 9ith S" a 4 that O-EC i curre4 P5$$#$$$.$$ :or attor e"Ks service. &he trial court rule4 i :avor o: O-EC# a 4 hel4 that the ca cellatio o: the a'ree*e t 9as i accor4a ce 9ith the stipulatio i their lease a'ree*e t. A a9ar4 :or 4a*a'es a 4 arrears i re tal a 4 taxes plus 1$$#$$$ as i Du ctio bo 4 a 4 :or:eiture o: the 2/$#$$$ 4eposit. 6t hel4 that the :or:eiture clause i their lease a'ree*e t states that the 4eposit shall be 4ee*e4 :or:eite4 9ithout preDu4ice to a " other obli'atio s still o9i ' b" the lessee to the lessor.

A pe al clause is a accessor" obli'atio 9hich the parties attach to a pri cipal obli'atio :or the purpose o: i suri ' the per:or*a ce thereo: b" i*posi ' o the 4ebtor a special prese tatio ='e erall" co sisti ' i the pa"*e t o: a su* o: *o e"@ i case the obli'atio is ot :ul:ille4 or is irre'ularl" or i a4eCuatel" :ul:ille4.

As a 'e eral rule# i obli'atio s 9ith a pe al clause# the pe alt" shall substitute the i 4e* it" :or 4a*a'es a 4 the pa"*e t o: i terests i case o: o < co*plia ce. &his is speci:icall" provi4e4 :or i Article 122(# par. 1# 3e9 Civil Co4e. 6 such case# proo: o: actual 4a*a'es su::ere4 b" the cre4itor is ot ecessar" i or4er that the pe alt" *a" be 4e*a 4e4 =Article 122)# 3e9 Civil Co4e@. 8o9ever# there are exceptio s to the rule that the pe alt" shall substitute the i 4e* it" :or 4a*a'es a 4 the pa"*e t o: i terests i case o: o < co*plia ce 9ith the pri cipal obli'atio . &he" are :irst# 9he there is a stipulatio to the co trar"L seco 4# 9he the obli'or is sue4 :or re:usal to pa" the a'ree4 pe alt"L a 4 thir4# 9he the obli'or is 'uilt" o: :rau4.

ISSUE* Fhether or ot the :or:eiture clause 9oul4 u Dustl" e rich O-EC at the expe se o: S"

&his suppose4 4a*a'e su::ere4 b" O-EC 9as the alle'e4 P1$#$$$.$$ a *o th i crease i re tal :ro* P5$#$$$.$$ to P($#$$$#$$@# 9hich O-EC :aile4 to reali,e :or te *o ths :ro* .ebruar" to 3ove*ber# 1/)$ i the total su* o: P1$$#$$$.$$. &his opportu it" cost 9hich 9as 4ul" prove be:ore the trial court# 9as correctl" *a4e char'eable b" the sai4 court a'ai st the i Du ctio bo 4 poste4 b" C06SCO. &he u 4erta5i ' assu*e4 b" C06SCO u 4er subDect i Du ctio re:ers to *all s"ch dama+es as s"ch party may s"stain by reason of the in#"nction i: the Court shoul4 :i all" 4eci4e that the Plai ti:: 9asQ9ere ot e title4 thereto.G &hus# the respo 4e t Court correctl" sustai e4 the trial court i hol4i ' that the bo 4 shall a 4 *a" a s9er o l" :or 4a*a'es 9hich O-EC *a" su::er as a result o: the i Du ctio .

HELD* 3O. A provisio 9hich calls :or the :or:eiture o: the re*ai i ' 4eposit still i the possessio o: the lessor# 9ithout preDu4ice to a " other obli'atio still o9i '# i the eve t o: the ter*i atio or ca cellatio o: the a'ree*e t b" reaso o: the lesseeKs violatio o: a " o: the ter*s a 4 co 4itio s o: the a'ree*e t is a pe al clause that *a" be vali4l" e tere4 i to. ARAFAG HABANA JALAYAJAY Page 35

Civil Law Review 2 2013 - 2014 CO ERCIAL CREDIT CORPORATION A&% CA 6 the prese t case# the co*pro*ise a'ree*e t 9as volu taril" e tere4 i to b" the parties assiste4 b" their respective cou sel a 4 9as 4ul" approve4 b" the trial court. 6 4ee4# it 9as co :ir*e4 b" the respo 4e t appellate court to be la9:ul. &here 9as# there:ore# o co'e t basis :or the respo 4e t appellate court to *o4i:" sai4 co*pro*ise a'ree*e t b" re4uci ' the pe alt" a 4 attor e"Ks :ees provi4e4 :or therei .

!ACTS* So*eti*e i 1/7) private respo 4e t Ca'a"a 2e Oro Coliseu*# 6 c. execute4 a pro*issor" ote i the a*ou t o: P32/#)52.5% i :avor o: petitio er Co**ercial Cre4it Corporatio o: Ca'a"a 4e Oro# pa"able i 3( *o thl" i stall*e ts. &he ote is secure4 b" a real estate *ort'a'e 4ul" execute4 b" private respo 4e t i :avor o: petitio er. As sai4 respo 4e t 4e:aulte4 i the pa"*e t o: the *o thl" i stall*e ts 4ue# petitio er procee4e4 9ith the extraDu4icial :oreclosure o: the real estate *ort'a'e i Septe*ber# 1/7/. .ive *i orit" stoc5hol4ers o: private respo 4e t i stitute4 a actio Cuestio i ' the po9er o: the private respo 4e t to execute the real estate *ort'a'e 9ithout the co se t o: its stoc5hol4ers. A co*pro*ise a'ree*e t 9as e tere4 i to 9hich states that the stoc5hol4ers rati:" the sai4 loa a 4 real estate *ort'a'e e tere4 i to a 4 assi' e4 b" Coliseu*. &hat the corporatio ha4 a outsta 4i ' obli'atio to Co**ercial Cre4it i the a*ou t o: P2%/#2(3.23# that the" a'ree to pa" i terest o: 1(J per a u*. 8o9ever# Coliseu* still :aile4 to co*pl" 9ith the ter*s o: the Du4'*e t. Petitio er :ile4 a ex parte *otio :or the issua ce o: a 9rit o: executio o *arch 1/)3. &he court 'ra te4 the *otio # a 4 a auctio sale 9as issue4 o *arch 11#1/)3. Private Respo 4e t see5s to a ul the co*pro*ise<Du4'*e t.

ISSUE* Fhether or ot a co*pro*ise Du4'*e t 9hich 9as :ou 4 b" the CA to be la9:ul *a" be *o4i:ie4 b" the sa*e courtP

HELD* 3O. 6t is axio*atic that a co*pro*ise Du4'*e t is :i al a 4 i**e4iatel" executor". O ce a Du4'*e t beco*es :i al a 4 executor"# the prevaili ' part" ca have it execute4 as a *atter o: ri'ht a 4 the executio beco*es a *i isterial 4ut" o the part o: the court . A Du4icial co*pro*ise has the :orce a 4 e::ect o: res #"dicata . Such a :i al a 4 executor" Du4'*e t ca ot be *o4i:ie4 or a*e 4e4. 6: a a*e 4*e t is to be *a4e# it *a" co sist o l" o: suppl"i ' a o*issio # stri5i ' out a super:luit" or i terpreti ' a a*bi'uous phrase therei i relatio to the bo4" o: the 4ecisio 9hich 'ives it li:e . A co*pro*ise Du4'*e t shoul4 ot be 4isturbe4 except :or vices i co se t or :or'er". ARAFAG HABANA JALAYAJAY

PRYCE CORPORATION A&% PAGCOR Page 36

Civil Law Review 2 2013 - 2014

!ACTS* 6 1//2# a represe tatives :ro* Pr"ce Properties Corporatio =PPC@ *a4e represe tatio s 9ith the Philippi e A*use*e t a 4 +a*i ' Corporatio =PA+COR@ o the possibilit" o: setti ' up a casi o i Pr"ce Pla,a 8otel i Ca'a"a 4e Oro Cit". O Septe*ber 1//2# PPC a 4 PA+COR e tere4 i to a lease co tract :or the operatio o: casi o i Pr"ce 8otel i Ca'a"a :or 3 "ears. 8ours be:ore the :or*al ope i ' o: the casi o# a public rall" sta'e4 b" so*e local o::icials# resi4e ts a 4 reli'ious lea4ers 9as hel4. &he" alle'e4 that i 1//$ there 9as a or4i a ce passe4 b" the cit" prohibiti ' the operatio o: casi os i their area. PA+COR suspe 4e4 the ope i '. 6t Cuestio e4 the or4i a ce alle'i ' that it 9as u co stitutio al. &he" resu*e4 the casi o operatio s but still# the" 9ere bo*bar4e4 9ith rallies. &he O::ice o: the Presi4e t a4vise4 PA+COR to stop operatio s. PPC se t PA+COR a letter :or the :ull re tal pa"*e t i case o: pre<ter*i atio o: the lease. PA+COR 4ecli e4 to pa"# a 4 i stea4 as5e4 :or rei*burse*e t o: the re tal 4eposit a 4 expe ses :or per*a e t i*prove*e ts. CA> i :avor o: PPC. 6t hel4 that the PA+COR7S preter*i atio o: the Co tract o: 1ease 9as u Dusti:ie4. &he appellate court explai e4 that public 4e*o stratio s a 4 rallies coul4 ot be co si4ere4 as :ortuitous eve ts that 9oul4 exe*pt the 'a*i ' corporatio :ro* co*pl"i ' 9ith the latter7s co tractual obli'atio s. &here:ore# the Co tract co ti ue4 to be e::ective u til PPC electe4 to ter*i ate it o 3ove*ber 25# 1//3.As PA+COR ha4 a4*itte4 its :ailure to pa" the re tals :or Septe*ber to 3ove*ber 1//3# PPC correctl" exercise4 the optio to ter*i ate the lease a'ree*e t. Previousl"# the Co tract re*ai e4 e::ective# a 4 PPC coul4 collect the accrue4 re tals. 8o9ever# :ro* the ti*e it ter*i ate4 the Co tract o 3ove*ber 25# 1//3# PPC coul4 o lo 'er 4e*a 4 pa"*e t o: the re*ai i ' re tals as part o: actual 4a*a'es

HELD* &ERM63A&E2. 6 ter*i atio # the co tract is 4ee*e4 vali4 at the i ceptio prior to ter*i atio . &he co tract bi 4s the parties 9ho are obli'e4 to observe the provisio s state4 therei . Rescissio # it is 4ee*e4 i existe t a 4 the parties are retur e4 to their status Cuo a te. &hus# *utual restitutio is reCuire4 i a rescissio =or resolutio @# i or4er to bri ' bac5 the parties to their ori'i al situatio prior to the i ceptio o: the co tract. Appl"i ' this pri ciple to this case# it *ea s that PPC 9oul4 re<acCuire possessio o: the lease4 pre*ises# a 4 PA+COR 9oul4 'et bac5 the re tals it pai4 the :or*er :or the use o: the hotel space. 6 co trast# the parties i a case o: ter*i atio are ot restore4 to their ori'i al situatio L either is the co tract treate4 as i: it ever existe4. Prior to its ter*i atio # the parties are obli'e4 to co*pl" 9ith their co tractual obli'atio s. O l" after the co tract has bee ca celle4 9ill the" be release4 :ro* their obli'atio s. 6 this case# the actio s a 4 plea4i 's o: petitio er sho9 that it ever i te 4e4 to rescind the 1ease Co tract :ro* the be'i i '. &his :act 9as evi4e t 9he it :irst sou'ht to collect the accrue4 re tals :ro* Septe*ber to 3ove*ber 1//3 because# as previousl" state4# it actuall" 4e*a 4e4 the e :orce*e t o: the 1ease Co tract prior to ter*i atio . A " i te t to resci 4 9as ot sho9 # eve 9he it abro'ate4 the Co tract o 3ove*ber 25# 1//3# because such abro'atio 9as ot the rescission provi4e4 :or u 4er Article 1(5/. .uture re tals ca ot be clai*e4 as co*pe satio :or the use or e Do"*e t o: a other7s propert" a:ter the ter*i atio o: a co tract. Fe stress that b" abro'ati ' the Co tract i the prese t case# PPC release4 PA+COR :ro* the latter7s :uture obli'atio s# 9hich i clu4e4 the pa"*e t o: re tals. &o 'ra t that ri'ht to the :or*er is to u Dustl" e rich it at the latter7s expe se. 8o9ever# it appears that Sectio VV =c@ 9as i te 4e4 to be a pe alt" clause. &hat :act is *a i:est :ro* a rea4i ' o: the *a 4ator" provisio u 4er subpara'raph =a@ i co Du ctio 9ith subpara'raph =c@ o: the Co tract. A pe al clause is Oa accessor" obli'atio 9hich the parties attach to a pri cipal obli'atio :or the purpose o: i suri ' the per:or*a ce thereo: b" i*posi ' o the 4ebtor a special prestatio ='e erall" co sisti ' i the pa"*e t o: a su* o: *o e"@ i case the obli'atio is ot :ul:ille4 or is irre'ularl" or i a4eCuatel" :ul:ille4.I

ISSUE* Fhether ter*i ate4P the co tract 9as resci 4e4 or

ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014

6 obli'atio s 9ith a pe al clause# the 'e eral rule is that the pe alt" serves as a substitute :or the i 4e* it" :or 4a*a'es a 4 the pa"*e t o: i terests i case o: o co*plia ceL that is# i: there is o stipulatio to the co trar"#i 9hich case proo: o: actual 4a*a'es is ot ecessar" :or the pe alt" to be 4e*a 4e4. &here are exceptio s to the a:ore*e tio e4 rule# ho9ever# as e u*erate4 i para'raph 1 o: Article 122( o: the Civil Co4e> 1@ 9he there is a stipulatio to the co trar"# 2@ 9he the obli'or is sue4 :or re:usal to pa" the a'ree4 pe alt"# a 4 3@ 9he the obli'or is 'uilt" o: :rau4. 6 these cases# the purpose o: the pe alt" is obviousl" to pu ish the obli'or :or the breach. 8e ce# the obli'ee ca recover :ro* the :or*er ot o l" the pe alt"# but also other 4a*a'es resulti ' :ro* the o :ul:ill*e t o: the pri cipal obli'atio . 6 the prese t case# the :irst exceptio applies because Article VV =c@ provi4es that# asi4e :ro* the pa"*e t o: the re tals correspo 4i ' to the re*ai i ' ter* o: the lease# the lessee shall also be liable O:or a " a 4 all 4a*a'es# actual or co seCue tial# resulti ' :ro* such 4e:ault a 4 ter*i atio o: this co tract.I 8avi ' e tere4 i to the Co tract volu taril" a 4 9ith :ull 5 o9le4'e o: its provisio s# PA+COR *ust be hel4 bou 4 to its obli'atio s. 6t ca ot eva4e :urther liabilit" :or liCui4ate4 4a*a'es. 6 this case# PA+COR7s breach 9as occasio e4 b" eve ts that# althou'h ot :ortuitous i la9# 9ere i :act real a 4 pressi '. 9e :i 4 that PA+COR co 4ucte4 a series o: e'otiatio s a 4 co sultatio s be:ore e teri ' i to the Co tract. 6t 4i4 so ot o l" 9ith the PPC# but also 9ith local 'over *e t o::icials# 9ho assure4 it that the proble*s 9ere sur*ou table. 1i5e9ise# PA+COR too5 pai s to co tes t the or4i a ces be:ore the courts# 9hich co seCue tl" 4eclare4 the* u co stitutio al. O top o: these 4evelop*e ts# the 'a*i ' corporatio 9as a4vise4 b" the O::ice o: the Presi4e t to stop the 'a*es i Ca'a"a 4e Oro Cit"# pro*pti ' the :or*er to cease operatio s prior to Septe*ber 1//3.

ASIATRUST DE"ELOP ENT A& CONCEPTS ARAFAG HABANA JALAYAJAY Page 40

Civil Law Review 2 2013 - 2014 TRADING to co*pletel" rehabilitateI its accou t i accor4a ce 9ith the MOA. Fhe the respo 4e t :aile4 to *a5e the sai4 pa"*e ts# the petitio er o April 25# 1/)/ se t a :i al 4e*a 4 o the respo 4e t to pa" its e tire obli'atio u 4er the 6+1. i the a*ou t o: P2#3(1#/7$.1$ 9ithi :ive 4a"s :ro* receipt thereo:. Respo 4e t :ile4 9ith the R&C o: Ma5ati :or 4eclarator" relie: a 4 alle'e4 that it is up to 4ate i the pa"*e t o: its loa obli'atio a 4# accor4i ' to its recor4# the re*ai i ' bala ce a*ou te4 to o l" P31(#55$.%). &he respo 4e t pra"e4 :or the trial court to 4eter*i e the ri'hts a 4 4uties o: the parties u 4er the MOA to avoi4 the *isco*putatio o: the loa obli'atio a 4 a " breach thereo:. 6 its a s9er# the petitio er averre4 that as o: .ebruar" 15# 1/))# the outsta 4i ' obli'atio o: the respo 4e t a*ou te4 to P2#)33#)(7.$%. Accor4i ' to the petitio er# the *o thl" a*orti,atio s pai4 b" the respo 4e t covere4 o l" the pe alties accrui ' o the loa . .urther# 4eclarator" relie: as a re*e4" sou'ht b" the respo 4e t 9as alle'e4l" i*proper as it alrea4" co**itte4 a breach o: its obli'atio s. &he respo 4e t :ile4 the actio a )"o *erel" to 4e:er or avoi4 pa"*e t o: its le'all" co tracte4 loa obli'atio 9ith the petitio er. 0" 9a" o: co*pulsor" cou terclai*# the petitio er pra"e4 :or 4a*a'es a 4 attor e"7s :ees. &he respo 4e t the :ile4 a a*e 4e4 co*plai t alle'i ' that as o: Au'ust 1/)/# it ha4 alrea4" pai4 the petitio er the total a*ou t o: P2#25/#25/ a 4 that there 9as a overpa"*e t o: P1$$#$$$. &he respo 4e t pra"e4 that the petitio er be or4ere4 to re:u 4 the a*ou t overpai4# as 9ell as to release the *ort'a'es a 4 to pa" 4a*a'es a 4 attor e"7s :ees.

!ACTS* 6 March 1//(# respo 4e t Co cepts &ra4i ' Corporatio obtai e4 :ro* petitio er Asiatrust 2evelop*e t Corporatio a cre4it acco**o4atio i the a*ou t o: P2#$$$#$$$ covere4 b" a loa a'ree*e t a 4 secure4 b" real a 4 chattel *ort'a'es. &he a*ou t 9as 4ra9 :ro* a 6 4ustrial +uara tee 1oa .u 4 =6+1.@ accou t ope e4 b" the petitio er i :avor o: the respo 4e t. O March %# 1/)(# the respo 4e t execute4 Pro*issor" 3ote i :avor o: the petitio er. E 4er the pro*issor" ote# the pri cipal a*ou t o: P2#$$$#$$$ 9oul4 be char'e4 a i terest o: 23J per a u*# i clusive o: 1J service :ee. Attache4 to a 4 *a4e part o: the pro*issor" ote 9as the sche4ule o: a*orti,atio a'ree4 upo b" the parties. As set :orth i the sche4ule# the pa"*e t o: the loa 9as to be a*orti,e4 Cuarterl" over a perio4 o: te "ears 9ith a t9o< "ear 'race perio4 o the pri cipal pa"*e t. &he :irst pa"*e t :ell 4ue o Ma" 15# 1/)( a 4 the subseCue t i stall*e ts 9ere to be pai4 ever" three *o ths therea:ter. 6 the eve t that the respo 4e t 4e:aulte4 i the pa"*e t o: a " i stall*e t or i terest thereo:# para'raph % o: the pro*issor" ote provi4e4 that>
... the e tire a*ou t outsta 4i ' u 4er this 3ote shall i**e4iatel"# 9ithout ee4 :or a " otice# 4e*a 4# prese t*e t# protest# or o: a " other act or 4ee4# the ri'ht to all o: 9hich is hereb" 9aive4 b" the u 4ersi' e4> =i@ beco*e 4ue# pa"able a 4 4e:aulte4L =ii@ be subDect to a pe alt" eCuivale t to thirt"<six perce t =3(J@ per a u* thereo:L =iii@ to'ether 9ith sai4 pe alt"# co**e ce to ear i terest as Ss icT the rate o: t9e t"<three perce t =23J@ per a u* cou te4 :ro* the 4ate o: 4e:ault u til :ull pa"*e t thereo:.

Respo 4e t :aile4 to pa"# pro*pti ' petitio er to e :orce the acceleratio clause. Respo 4e t expresse4 expresse4 its 9illi ' ess to settle its obli'atio a 4# 4ue to its ti'ht :i a cial situatio # e'otiate4 :or a *o4i:ie4 pa"*e t sche*e a 4 thus# the parties e tere4 i to a Me*ora 4u* o: A'ree*e t. 6 co*plia ce 9ith its u 4erta5i ' u 4er the MOA# the respo 4e t 4elivere4 the :irst chec5 4ate4 Ma" 5# 1/)) i the a*ou t o: P15/#25/.1% a 4 :our other chec5s i the su* o: P15$#$$$ each or :or the total a*ou t o: P75/#25/.1%. &his 9as :ollo9e4 b" a other batch o: :ive chec5s coveri ' the *o ths o: October 1/)) to .ebruar" 1/)/# also i the a*ou t o: P15$#$$$ each or :or a total a*ou t o: P75$#$$$.

ISSUE* Fhether or ot petitio er 9aive4 the collectio o: accrue4 pe alties a *iscella eous char'es u 4er the pro*issor" ote b" e teri ' i to the MOAP

O March 3$# 1/)/# the petitio er 9rote to the respo 4e t reCuesti ' :or the 4eliver" o: the Olast chec5s ARAFAG HABANA JALAYAJAY

HELD* Page 41

Civil Law Review 2 2013 - 2014 BES. 0" e teri ' a'ree*e t# the ba 5 9aive4 e tire loa . 0" such 9aiver# bee re 4ere4 i 4e:ault# a 9aive4 u 4er the MOA. i to a *e*ora 4u* o: the 4e*a 4abilit" o: the Co cept &ra4i ' has ot 4 also# the pe alt" 9as the petitio er. Article 122/ o: the Civil Co4e states>
Art. 122/. &he Du4'e shall eCuitabl" re4uce the pe alt" 9he the pri cipal obli'atio has bee partl" or irre'ularl" co*plie4 9ith b" the 4ebtor. Eve i: there has bee o per:or*a ce# the pe alt" *a" also be re4uce4 b" the courts i: it is i iCuitous or u co scio able.

E 4er the sche4ule o: a*orti,atio co tai e4 i the pro*issor" ote# the respo 4e t obli'e4 to pa" the pri cipal obli'atio i Cuarterl" a*orti,atio s over a perio4 o: te "ears a 4 that i case o: 4e:ault# the e tire a*ou t shall be 4ue a 4 4e*a 4able i its e tiret". O the other ha 4# u 4er the MOA# a e9 *o4e o: pa"*e t 9as a'ree4 upo # i.e., the pa"*e t b" the respo 4e t o: the i itial a*ou t o: P15/#25/.1% a 4 subseCue t pa"*e ts o: P15$#$$$ ever" *o th u til :ull pa"*e t o: the loa obli'atio . &he MOA# i e::ect# re 4ere4 the loa o lo 'er 4ue a 4 4e*a 4able i its e tiret" at the ti*e o: its executio # precisel" because it allo9e4 the respo 4e t u 4er the e9 sche4ule o: pa"*e ts to pa" the sa*e b" *o thl" i stall*e ts. 6t bears stressi ' that the MOA provi4e4 that the *o4e o: pa"*e t arose Oout o: the 0A3;7s liberalit".I &o allo9 the petitio er to collect pe alt" char'es as i: the respo 4e t 9ere i 4e:ault# ot9ithsta 4i ' the existe ce o: a e9 pa"*e t sche4ule# 9oul4 be i co siste t 9ith the a:oresai4 a'ree*e t. 6t *ust be stresse4# ho9ever# that the :ore'oi ' shoul4 ot be co strue4 as to *ea that the respo 4e t coul4 o lo 'er be hel4 i 4e:ault a 4 that the petitio er co*pletel" 9aive4 collectio o: pe alt" char'es i case o: 4e:ault. 3o <pa"*e t b" the respo 4e t o: a " o: the *o thl" i stall*e ts as provi4e4 u 4er the MOA 9oul4 re 4er it i 4e:ault a 4 the petitio er coul4 collect the pe alt" char'es there:or. As 9ill be sho9 later# the CA 4i4 i :act 4eter*i e the exact ti*e 9he the respo 4e t 4e:aulte4 o its obli'atio u 4er the MOA a 4 accor4i 'l" rec5o e4 there:ro* the pe alt" char'es 4ue the petitio er. As ote4 b" the CA# a:ter the last pa"*e t o: P15$#$$$ o Septe*ber 1/)/# the respo 4e t still o9e4 the petitio er the su* o: P3$/#2/).5). &he respo 4e t7s o <pa"*e t o: the a*orti,atio s 4ue a:ter the sai4 4ate re 4ere4 the bala ce 4ue a 4 4e*a 4able i its e tiret"# i accor4a ce 9ith the acceleratio clause u 4er the MOA. .urther# si ce the respo 4e t 4e:aulte4 i its *o thl" pa"*e ts a:ter Septe*ber 1/)/# it 9as o l" the that it coul4 be ri'ht:ull" i*pose4 the pe alt" char'es i accor4a ce 9ith the pro*issor" ote. &hus# co trar" to the petitio er7s co te tio # the CA 4i4 ot rule that the MOA operate4 as a 9aiver b" the petitio er o: its ri'ht to collect pe alt" char'es. &he petitio er :aults the CA :or re4uci ' the pe alt" char'es :ro* 3(J to 3J per a u* o its :i 4i ' that the :or*er rate 9as too excessive# co si4eri ' that the petitio er ha4 alrea4" char'e4 a i terest rate o: 23J per a u* a 4 that the pri cipal obli'atio ha4 bee partl" co*plie4 9ith. &his Court 4oes ot a'ree 9ith ARAFAG HABANA JALAYAJAY

-ISON "%S% CA Page 42

Civil Law Review 2 2013 - 2014 3ot satis:ie4 9ith the 4ecisio o: the trial court# petitio ers appeale4 to the Court o: Appeals. A'reei ' 9ith the :i 4i 's a 4 co clusio s o: the trial court# the Court o: Appeals o 3ove*ber %# 1/7( a::ir*e4 the :or*erKs 4ecisio .

!ACTS* Petitio ers# the spouses 3e9to a 4 Salvacio !iso # e tere4 i to a Co tract to Sell 9ith private respo 4e t# Robert O. Phillips A So s# 6 c.# 9hereb" the latter a'ree4 to sell to the :or*er a lot at the -ictoria -alle" Sub4ivisio i A tipolo# Ri,al :or P55#$$$.$$# 9ith i terest at )#1/(5 per a u*# pa"able o a i stall*e t basis. Petitio ers pai4 private respo 4e ts a 4o9 pa"*e t o: P11#$$$.$$ o October 2$# 1/(1 a 4 :ro* October 27# 1/(1L to Ma" )# 1/(5 a *o thl" i stall*e t o: P533.)5. 2ue to the :ailure o: petitio ers to buil4 a house as provi4e4 i the co tract# the stipulate4 pe alt" o: P5.$$ per sCuare *eter 9as i*pose4 to the e::ect that the *o thl" a*orti,atio 9as i crease4 to P7$7.2%. O !a uar" 1# 1/((# .ebruar" 1# 1/(( a 4 March 1# 1/((# petitio ers :aile4 to pa" the *o thl" i stall*e ts 4ue o sai4 4ates althou'h petitio ers subseCue tl" pai4 the a*ou ts 4ue a 4 these 9ere accepte4 b" private respo 4e t. Petitio ers :aile4 to pa" :ro* October 1/(( to !a uar" 1/(7. O !a uar" 11# 1/(7# private respo 4e t se t a letter to petitio ers calli ' their atte tio to the :act that their accou t 9as :our *o ths over4ue. &his letter 9as :ollo9e4 up b" a other letter 9here private respo 4e t re*i 4e4 petitio er o: the auto*atic rescissio clause o: the co tract. Petitio ers eve tuall" pai4 o March 1# 1/(7. Petitio ers a'ai :aile4 to pa" the *o thl" i stall*e ts 4ue .&hus# private respo 4e t retur e4 petitio ersK chec5 a 4 i :or*e4 the* that the co tract 9as ca celle4 9he o April 1# 1/(7 petitio ers :aile4 to pa" the *o thl" i stall*e t 4ue# thereb" *a5i ' their accou t 4eli Cue t :or three *o ths. O April 1/# 1/(7# petitio ers te 4ere4 pa"*e t :or all the i stall*e ts alrea4" 4ue but the te 4er 9as re:use4. Petitio ers cou tere4 b" :ili ' a co*plai t :or speci:ic per:or*a ce 9ith the Court o: .irst 6 sta ce o: Ri,al o Ma" %# 1/(7 a 4 co si' i ' the *o thl" i stall*e ts 4ue 9ith the court. &he &C re 4ere4 Du4'*e t i :avor o: private respo 4e t# 4is*issi ' the co*plai t a 4 4eclari ' the co tract ca celle4 a 4 all pa"*e ts alrea4" *a4e b" petitio er :ra chise. or4eri ' petitio ers to pa" P1#$$$.$$ as a 4 :or attor e"Ks :eesL a 4 4eclari ' the co si' atio a 4 te 4er o: pa"*e t *a4e b" petitio ers as ot a*ou ti ' to pa"*e t o: the correspo 4i ' *o thl" i stall*e ts.

ISSUE* Fhether or ot rescissio o: the co tract a 4 the :or:eiture o: the pa"*e ts alrea4" *a4e b" petitio er is vali4P

HELD* BES. RESC6SS6O3 O. CO3&RAC& FAS -A162. &here is o 4e "i ' that i the i sta t case the resolutio or rescissio o: the Co tract to Sell 9as vali4. 3either ca it be sai4 that the ca cellatio o: the co tract 9as i e::ective :or :ailure o: private respo 4e ts to 'ive petitio ers otice thereo: as petitio ers 9ere i :or*e4 ca celle4 private respo 4e t that the co tract 9as ca celle4 i the letter 4ate4 April (# 1/(7 =Exh. G2G@. As R.A. 3o. (5)5(# 9as ot "et e::ective# the otice o: ca cellatio ee4 ot be b" otarial act# private respo 4e tKs letter bei ' su::icie t co*plia ce 9ith the le'al reCuire*e t. &he :acts o: K:ee i sta t case shoul4 be 4isti 'uishe4 :ro* those i the Palay Inc. case# as such 4isti ctio 9ill explai 9h" the Court i sai4 case i vali4ate4 the resolutio o: the co tract. 6 sai4 case# the sub4ivisio 4eveloper# 9ithout i :or*i ' the bu"er o: the ca cellatio o: the co tract# resol4 the lot to a other perso . &he lot bu"er i sai4 case 9as o l" i :or*e4 o: the resolutio o: the co tract so*e six "ears later a:ter the 4eveloper# reDecte4 his reCuest :or authorit" to assi' his ri'hts u 4er the co tract. Such a situatio 4oes ot obtai ill ess> the i sta t case. 6 :act# petitio ers 9ere i :or*e4 o: the ca cellatio o: their co tract i April 1/(7# 9he private respo 4e t 9rote the* the letter 4ate4 April (# 1/(7 =Exh. G2G@# a 4 9ithi a *o th the" 9ere able to :ile a co*plai t a'ai st Private respo 4e t. Fhile the resolutio o: the co tract a 4 the :or:eiture o: the a*ou ts alrea4" pai4 are vali4 a 4 bi 4i ' upo petitio ers# the Court is co vi ce4 that the :or:eiture o: the a*ou t o: P5.$$ althou'h it i clu4es the accu*ulate4 :i es :or petitio ersK :ailure to co struct a house as reCuire4 b" the co tract# is clearl" i iCuitous co si4eri ' that the co tract price is o l" P(#173.15 &he :or:eiture o: :i:t" perce t =5$J@ o: the a*ou t alrea4" pai4# or P3#2)3.75 appears to be a :air settle*e t. 6 arrivi ' at this a*ou t the Court 'ives 9ei'ht to the :act that althou'h petitio ers have bee 4eli Cue t i pa"i ' Page 43

ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 their a*orti,atio s several ti*es to the preDu4ice o: private respo 4e t# 9ith the ca cellatio o: the co tract the possessio o: the lot revie9.... to private respo 4e t 9ho is :ree to resell it to a other part". Also# ha4 R.A. 3o. (5)5(# bee applicable to the i sta t case# the sa*e perce ta'e o: the a*ou t alrea4" pai4 9oul4 have bee :or:eite4 S&orralba 3=b@.T &he CourtKs 4ecisio to re4uce the a*ou t :or:eite4 :i 4s support i the Civil Co4e. As state4 i para'raph 3 o: the co tract# i case the co tract is ca celle4# the a*ou ts alrea4" pai4 shall be :or:eite4 i :avor o: the ve 4or as liCui4ate4 4a*a'es. &he Co4e provi4es that liCui4ate4 4a*a'es# 9hether i te 4e4 as a i 4e* it" or a pe alt"# shall be eCuitabl" re4uce4 i: the" are i iCuitous or u co scio able AR&.2227. .urther# i obli'atio s 9ith a pe al clause# the Du4'e shall eCuitabl" re4uce the pe alt" 9he the pri cipal obli'atio has bee partl" or irre'ularl" co*plie4 9ith b" the 4ebtor

LO "S% #-S ECO-!OR 9OR# ARAFAG HABANA JALAYAJAY Page 44

Civil Law Review 2 2013 - 2014 bee exti 'uishe4 b" co*pe satio . 6 other 9or4s# respo 4e t alle'e4 the o <existe ce o: the cre4it a 4 asserte4 its clai* to petitio er7s 9arra t" u 4er the assi' *e t. Petitio er :aile4 to *a5e 'oo4 his 9arra t" that the assi' ee 9ill be able to recover 9hatever collectibles the sai4 assi' or have a'ai st a thir4 perso . &he assi' *e t bei ' i existe t a 4 i e::ectual it 4i4 ot exti 'uish the petitio er7s obli'atio .

!ACTS* Petitio er 1o# a buil4i ' co tractor# or4ere4 sca::ol4i ' eCuip*e ts :ro* respo 4e t ;!S 9orth P5%$#%25.)$. 8e pai4 a 4o9 pa"*e t i the a*ou t o: P15$#$$$. &he bala ce 9as *a4e pa"able i te *o thl" i stal*e ts. Respo 4e t 4elivere4 the sca::ol4i 's to petitio er. Petitio er 9as able to pa" the :irst t9o *o thl" i stal*e ts. 8o9ever# his busi ess# ho9ever# e cou tere4 :i a cial 4i::iculties a 4 he 9as u able to settle his obli'atio 4espite 4e*a 4s. Petitio er a 4 respo 4e t execute4 a 2ee4 o: Assi' *e t# petitio er assi' i ' to respo 4e t his receivables o: P335#%2(.1% :ro* !o*ero Realt" Corp. 8o9ever# 9he the respo 4e t trie4 to collect :ro* !o*ero# the latter re:use4 to ho or the 2ee4 o: Assi' *e t clai*i ' that petitio er 9as also i 4ebte4 to it. Respo 4e t the 4e*a 4e4 :ro* the petitio er the pa"*e t o: his obli'atio # but petitio er re:use4 to pa" clai*i ' that his obli'atio ha4 bee exti 'uishe4 9he the" execute4 the 2ee4 o: Assi' *e t. As a result# respo 4e t :ile4 a actio :or recover" o: a su* o: *o e" a'ai st the petitio er.

ISSUE* Fhether the 2ee4 o: Assi' *e t exti 'uishe4 the petitio er7s obli'atio P

HELD* 3O. A assi' *e t o: cre4it is a a'ree*e t# 9hich is i the ature o: a sale perso al propert"# pro4uce4 the e::ects o: a 4atio i pa"*e t 9hich *a" exti 'uish the obli'atio . 6 4acio e pa'o# as a special *o4e o: pa"*e t# the 4ebtor o::ers a other thi ' to the cre4itor 9ho accepts it as eCuivale t o: pa"*e t o: a outsta 4i ' 4ebt. 6 or4er that there be a vali4 4atio i pa"*e t# the :ollo9i ' *ust be prese t> =1@ &here *ust be the per:or*a ce o: the prestatio i lieu o: pa"*e t# 9hich ca be a cre4it a'ai st thir4 perso L =2@ &here *ust be so*e 4i::ere ce bet9ee the prestatio 4ue a 4 that 9hich is 'ive i substitutio L =3@ &here *ust be a a'ree*e t bet9ee the cre4itor a 4 4ebtor that the obli'atio is i**e4iatel" exti 'uishe4 b" reaso o: the per:or*a ce o: a prestatio 4i::ere t :ro* that 4ue.&he u 4erta5i ' reall" parta5es i o e se se o: the ature o: sale# that is# the cre4itor is reall" bu"i ' the thi ' or propert" o: the 4ebtor# pa"*e t :or 9hich is to be char'e4 a'ai st the 4ebtor7s 4ebt. As such# petitio er# as ve 4or or assi' or# is bou 4 to 9arra t the existe ce a 4 le'alit" o: the cre4it at the ti*e o: the sale or assi' *e t. Fhe !o*ero clai*e4 that it 9as o lo 'er i 4ebte4 to petitio er si ce the latter also ha4 a u pai4 obli'atio to it# it esse tiall" *ea t that its obli'atio to petitio er has ARAFAG HABANA JALAYAJAY

PNB "S% PINEDA Page 43

Civil Law Review 2 2013 - 2014 P30Ks possessio o: the subDect *achi er" a 4 eCuip*e t bei ' precisel" as a :or* o: securit" :or the a4va ces 'ive to &CC u 4er the 1etter o: Cre4it# sai4 possessio b" itsel: ca ot be co si4ere4 pa"*e t o: the loa secure4 thereb". Pa"*e t 9oul4 le'all" result o l" a:ter P30 ha4 :oreclose4 o sai4 securities# sol4 the sa*e a 4 applie4 the procee4s thereo: to &CCKs loa obli'atio . Mere possessio 4oes ot a*ou t to :oreclosure. 3either ca sai4 repossessio a*ou t to dacion en pa+o . 2atio i pa"*e t ta5es place 9he propert" is alie ate4 to the cre4itor i satis:actio o: a 4ebt i *o e" a 4 the sa*e is 'over e4 b" sales. 2atio i pa"*e t is the 4eliver" a 4 tra s*issio o: o9 ership o: a thi ' b" the 4ebtor to the cre4itor as a accepte4 eCuivale t o: the per:or*a ce o: the obli'atio . &he repossessio o: the *achi er" a 4 eCuip*e t i Cuestio 9as *erel" to secure the pa"*e t o: &CCKs loa obli'atio a 4 ot :or the purpose o: tra s:erri ' o9 ership thereo: to P30 i satis:actio o: sai4 loa . &hus# o dacion en pa+o 9as ever acco*plishe4# he ce# there is o pa"*e t *a4e a 4 obli'atio is ot exti 'uishe4.

!ACTS* Arro"o Spouses@X# obtai e4 a loa o: P5)$#$$$.$$ :ro* petitio er ba 5 to purchase ($J o: the subscribe4 capital stoc5# a 4 thereb" acCuire the co trolli ' i terest o: private respo 4e t &a"abas Ce*e t Co*pa "# 6 c. =&CC@. As securit" :or sai4 loa # the spouses Arro"o execute4 a real estate *ort'a'e over a parcel o: la 4 1a -ista propert". &CC the :ile4 9ith petitio er ba 5 a applicatio a 4 a'ree*e t :or the establish*e t o: a ei'ht =)@ "ear 4e:erre4 letter o: cre4it =1QC@ :or M7#$$$#$$$.$$ i :avor o: &o"o Me 5a ;aisha# 1t4. to cover the i*portatio o: a ce*e t pla t *achi er" a 4 eCuip*e t. Epo approval o: sai4 applicatio a 4 ope i ' o: a 1QC the Arro"o spouses execute4 a Suret" A'ree*e t a 4 Cove a t to secure the loa acco**o4atio . &he i*porte4 ce*e t pla t *achi er" a 4 eCuip*e t arrive4 :ro* !apa a 4 9ere release4 to &CC u 4er a trust receipt a'ree*e t. &CC# :aile4 to re*it a 4Qor pa" the correspo 4i ' a*ou t covere4 b" the 4ra9i 's. &hus# P30 oti:ie4 &CC o: its i te tio to repossess# as it later 4i4# the i*porte4 *achi er" a 4 eCuip*e t :or :ailure o: &CC to settle its obli'atio s u 4er the 1QC. 6 the *ea ti*e# the perso al accou ts o: the spouses Arro"o# 9hich i clu4e4 a other loa o: P1($#$$$.$$ secure4 b" a real estate *ort'a'e over parcels o: a'ricultural la 4 5 o9 as 8acie 4a 0aco ha4 li5e9ise beco*e 4ue. .ailure o: Arro"o spouses to pa" the loa # P30 :ile4 a petitio :or extra<Du4icial :oreclosure o: the real estate *ort'a'es over the properties 5 o9 as the 1a -ista propert" a 4 8acie 4a 0aco . &CC co te 4s that such :oreclosure ca ot be 4o e because the ba 5 has alrea4" repossesse4 it7s i*porte4 *achi er" a 4 eCuip*e t.

ISSUE* Fhether or ot &CC7s liabilit" has bee exti 'uishe4 b" the repossessio o: P30 o: the i*porte4 ce*e t pla t *achi er" a 4 eCuip*e tP

HELD* 3o# liabilit" 9as ot exti 'uishe4. 6 this case P30 too5 possessio o: the i*porte4 ce*e t pla t *achi er" a 4 eCuip*e t pursua t to the trust receipt a'ree*e t execute4 b" a 4 bet9ee P30 a 4 &CC 'ivi ' the :or*er the u Cuali:ie4 ri'ht to the possessio a 4 4isposal o: all propert" shippe4 u 4er the 1etter o: Cre4it u til such ti*e as all the liabilities a 4 obli'atio s u 4ersai4 letter ha4 bee 4ischar'e4.

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Civil Law Review 2 2013 - 2014 PCIBAN# "S% CA proportio ate part o: the prestatio 9hich co stitutes the obDect o: the obli'atio . Article 12$) o: the Civil Co4e *a 4ates the eCual shari ' o: cre4itors i the pa"*e t o: 4ebt i the abse ce o: a " la9 or stipulatio to the co trar". &here 9as "et o a'ree*e t as o: that 4ate co cer i ' the correspo 4i ' share o: each cre4itor. 6t 9as o l" o ) March 1/7/ 9he PC60 co**u icate4 to Atlas the perce ta'e o: pa"*e ts to be re*itte4 to PC60 a 4 M0C. 0e:ore sai4 4ate# Atlas coul4 be secure i the thou'ht that the *atter o: shari ' 9as best le:t to the cre4itors to 4eci4e. &he a*ou t e title to PC60 is there:ore a i ter al *atter bet9ee it a 4 M0C.

!ACTS* PC60 a 4# Ma ila 0a 5i ' Corporatio =M0C@ 9ere Doi t bi44ers i a :oreclosure sale o: assorte4 *i i ' *achi er" a 4 eCuip*e t previousl" *ort'a'e4 to the* b" the Philippi e 6ro Mi es# 6 c. =P6M@. .our "ears later# Atlas a'ree4 to purchase so*e o: these properties o9 e4 Doi tl" b" PC60 a 4 M0C# evi4e ce4 b" a 2ee4 o: Sale 9ith the parties a'reei ' therei to a i itial 4o9 pa"*e t o: P12#$$$#$$$.$$ a 4 the bala ce o: P1)#$$$#$$$.$$ pa"able i six *o thl" i stall*e ts. &he co tract co tai e4 certai provisio s expressl" 9arra ti ' the properties :ree :ro* all lie s a 4 ecu*bra ces a 4 :reei ' Atlas :ro* all clai*s a 4 i ci4e tal actio s o: the u io 3AMAFE. &he 3AMAFE the *a4e a clai* 9hich ste**e4 :ro* a labor 4ispute 9herei 3AMAFE obtai e4 a :avorable Du4'*e t a'ai st P6M i the a*ou t o: P%#2/)#3$7.77# 9hich Atlas pai4.

Accor4i ' to Atlas# apart :ro* the 4o9 pa"*e t a 4 i stall*e t pa"*e ts it shoul4 be cre4ite4 9ith its pa"*e t o: P%#2/)#3$7.77 to 3AMAFE. &hus# Atlas clai*s to have *a4e a overpa"*e t a 4 that PC60 shoul4 rei*burse to it P233#()%.23. Fhe PC60 re:use4 to pa"# Atlas sue4 PC60 to obtai rei*burse*e t o: the alle'e4 overpa"*e t. PC60 co te 4e4 that Atlas still o9e4 it a total o: P/$)#3/).75. 6t also alle'e4 that eve be:ore the 9rit o: 'ar ish*e t 9as serve4 o Atlas# the Du4'*e t i :avor o: 3AMAFE 9as re4uce4 a 4 ha4 alrea4" bee partiall" satis:ie4. Atlas coul4 ot cre4it the a*ou t receive4 b" 3AMAFE i satis:actio o: the Atlas obli'atio to PC60.

=2@ As :ou 4 b" the Court the Du4'*e t o 3AMAFE7s clai* 9as re4uce4 it toP3#(/7#$%7.77. Clearl"# Atlas overpai4 3AMAFE. 6t i**e4iatel" pai4 3AMAFE# 9ithout *a5i ' a " i vesti'atio or co sultatio 9ith PC60. Article 123( o: the Civil Co4e applies i this i sta ce that 9hoever pa"s :or a other *a" 4e*a 4 :ro* the 4ebtor 9hat he has pai4# except that i: he pai4 9ithout the 5 o9le4'e or a'ai st the 9ill o: the 4ebtor# he ca recover o l" i so:ar as the pa"*e t has bee be e:icial to the 4ebtor. PC60 is the 4ebtor i this case# 9hile Atlas is the thir4 perso 9ho pai4 the obli'atio o: the 4ebtor 9ithout the latter7s 5 o9le4'e a 4 co se t. Atlas the *a" o l" recover :ro* PC60 the a*ou t o: pa"*e t 9hich has be e:ite4 the latter. 6: the 4ebt has bee pai4 such as i this case# a pa"*e t b" a thir4 perso 9oul4 co stitute a pa"*e t o: 9hat is ot 4ueL his re*e4" 9oul4 be a'ai st the perso 9ho receive4 the pa"*e t =3AMAFE@ a 4 ot a'ai st the 4ebtor 9ho 4i4 ot be e:it :ro* the pa"*e t.

ISSUE* Fhether or ot PC60 ca 4e*a 4 :ro* Atlas *ore tha 9hat it receive4 :ro* M0CP Fhether or ot Atlas ca 4e*a 4 rei*burse*e t :ro* PC60 :or the pa"*e t *a4e to 3AMAFEP

HELD* =1@ 3o. &his case is 4ee*e4 as a Doi t obli'atio # 9here there is a co curre ce o: several cre4itors# or o: several 4ebtors or o: several 4ebtors or o: several cre4itors a 4 4ebtors# b" virtue o: 9hich each o: the cre4itors has a ri'ht to 4e*a 4# a 4 each o: the 4ebtors is bou 4 to re 4er# co*plia ce 9ith his ARAFAG HABANA JALAYAJAY Page 45

Civil Law Review 2 2013 - 2014 that 4ischar'e4 their obli'atio to the private respo 4e t. &he petitio ers7 loss coul4 have bee avoi4e4 i: the" ha4 si*pl" exercise4 4ue 4ili'e ce i ascertai i ' the i4e tit" o: the perso to 9ho* the" alle'e4l" *a4e the pa"*e ts. 3e'li'e ce is the o*issio to 4o so*ethi ' 9hich a reaso able *a # 'ui4e4 b" those co si4eratio s 9hich or4i aril" re'ulate the co 4uct o: hu*a a::airs# 9oul4 4o# or the 4oi ' o: so*ethi '# 9hich a pru4e t a 4 reaso able *a 9oul4 ot 4o.&he *ost pru4e t thi ' the petitio shoul4 have 4o e 9as to ascertai the i4e tit" a 4 authorit" o: the perso 9ho collecte4 their pa"*e ts. .aili ' this# the petitio ers ca ot clai* that the" acte4 i 'oo4 :aith 9he the" *a4e such pa"*e ts.

CULABA "S% CA '() SAN

IGUEL CORP%

!ACTS* &he spouses Culaba 9ere the o9 ers o: the Culaba store a 4 9ere e 'a'e4 i the sale a 4 4istributio o: Sa Mi'uel Corp.7s beer pro4ucts. SMC sol beer pro4ucts the Culaba spouses i the a*ou t o: P2)#(5$.$$ as evi4e ce4 b" a &e*porar" Cre4it 6 voice. Caluba spouses *a4e a partial pa"*e t o: P3#7%$ leavi ' a u pai4 bala ce o: P2%#/1$. As the" :aile4 to pa" 4espite 4e*a 4s# SMC :ile4 a actio :or collectio o: a su* o: *o e" a'ai st the*. 2e:e 4a t ?spouses 4e ie4 a " liabilit"# clai*i ' that the" ha4 alrea4" pai4 the plai ti:: i :ull separate occasio s. 2e:e 4a ts prese te4 :our &e*porar" Char'e Sales 1iCui4atio Receipts =&CS1@. .ra cisco Caluba testi:ie4 that he *a4e the pa"*e ts to a SMC supervisor 9ho ca*e i a SMC va . 8e 9as the sho9e4 a list o: custo*er7s accou tabilities 9hich i clu4e4 his accou t. SMC the sub*itte4 a publisher7s a::i4avit to prove that the e tire boo5let o: &CS1 Receipts beari ' 3os. 273$1<2735$ 9ere reporte4 lost b" it# a 4 that it cause4 the publicatio o: the otice o: loss i the !ul" /# 1/)3 issue o: the 2ail" Express.

ISSUE* Fhether or ot the pa"*e t *a4e b" .ra cisco Culaba to the alle'e4 MC supervisor exti 'uishe4 its obli'atio 9ith SMCP

HELD* 3o. Pa"*e t is a *o4e o: exti 'uishi ' a obli'atio . Article 12%$ o: the Civil Co4e provi4es that pa"*e t shall be *a4e to the perso i 9hose :avor the obli'atio has bee co stitute4# or his successor<i < i terest# or a " perso authori,e4 to receive it. 6 this case# the pa"*e ts 9ere purporte4l" *a4e to a GsupervisorG SMC# 9ho 9as cla4 i a SMC u i:or* a 4 4rove a SMC va . 8e appeare4 to be authori,e4 to accept pa"*e ts as he sho9e4 a list o: custo*ers7 accou tabilities a 4 eve issue4 SMC liCui4atio receipts 9hich loo5e4 'e ui e. E :ortu atel" :or petitio er .ra cisco Culaba# he 4i4 ot ascertai the i4e tit" a 4 authorit" o: the sai4 supervisor# or 4i4 he as5 to be sho9 a " i4e ti:icatio to prove that the latter 9as# i 4ee4# a SMC supervisor. &he petitio ers relie4 solel" o the *a 7s represe tatio . &hus# the pa"*e ts the petitio ers clai*e4 the" *a4e 9ere ot the pa"*e ts ARAFAG HABANA JALAYAJAY Page 46

Civil Law Review 2 2013 - 2014 TO9NE & CITY DE"ELOP ENT CORPORATION "S% CA '() GUILLER O R% "OLUNTAD !ACTS* Respo 4e t +uiller*o -olu ta4 =+uiller*o@ a 4 petitio er &o9 e A Cit" 2evelop*e t Corporatio 9ere both e 'a'e4 i the co structio busi ess. &he" e tere4 i to a co tract :or the =a@ co structio o: several housi ' u its belo 'i ' to or reserve4 :or 4i::ere t i 4ivi4ualsL =b@ repair o: several existi ' housi ' u its belo 'i ' to 4i::ere t i 4ivi4ualsL a 4 =c@ repair o: :acilities# all locate4 at the -ir'i ia -alle" Sub4ivisio # o9 e4 a 4 4evelope4 b" the petitio er. &he total co tract cost a*ou te4 to O e Millio .ort" O e &housa 4 &hree 8u 4re4 .i:t" 3i e =P1#$%1#35/.$$@ Pesos. &he parties a'ree4 that +uiller*o shoul4 be pai4 i :ull b" petitio er the a'ree4 co tract cost upo co*pletio o: the proDect. Pe 4i ' co*pletio o: the proDect# +uiller*o 9as allo9e4 b" petitio er to occup"# :ree o: char'e# o e o: its houses at the -ir'i ia -alle" Sub4ivisio . A:ter co*pleti ' the co structio a 4 repair 9or5s subDect o: the co tract# +uiller*o 4e*a 4e4 pa"*e t :or his services. Fhe petitio er :aile4 to satis:" his clai* i :ull# +uiller*o :ile4 o April 3$# 1//$ a Co*plai t :or collectio a'ai st petitio er be:ore the R&C o: Ma ila alle'i ' that petitio er pai4 hi* o l" the a*ou t o: P(/#%$$.$$# leavi ' a bala ce o: P/71#/5/.$$ u 4er the ter*s o: their co tract. 6 its A s9er 9ith Cou ter<clai*s =sic@# petitio er averre4 that it ha4 alrea4" pai4 +uiller*o the a*ou t o: P1#$22#7/3.%( :or his services a 4 that there 9as eve a overpa"*e t o: P5)#1)/.%( as evi4e ce4 b" the vouchers issue4 to hi*. Petitio er :urther clai*e4 that +uiller*o is liable :or u pai4 re tals a*ou ti ' to P((#$$$.$$ as o: !u e 1//$ :or his occupa c" o: o e o: the houses i -ir'i ia -alle" Sub4ivisio si ce 1/)5. correctl" poi te4 out b" the trial court 9hich the appellate court uphel4# vouchers are ot receipts. 6t shoul4 be ote4 that a voucher is ot ecessaril" a evi4e ce o: pa"*e t. 6t is *erel" a 9a" or *etho4 o: recor4i ' or 5eepi ' trac5 o: pa"*e ts *a4e. A proce4ure a4opte4 b" co*pa ies :or the or4erl" a 4 proper accou ti ' o: :u 4s 4isburse4. E less it is supporte4 b" a actual pa"*e t li5e the issua ce o: a chec5 9hich is subseCue tl" e cashe4 or e'otiate4# or a actual pa"*e t o: cash 4ul" receipte4 :or as is custo*ar" a*o ' busi ess*e # a voucher re*ai s a piece o: paper havi ' o evi4e tiar" 9ei'ht. A receipt is a 9ritte a 4 si' e4 ac5 o9le4'*e t that *o e" has bee or 'oo4s have bee 4elivere4# 9hile a voucher is 4ocu*e tar" recor4 o: a busi ess tra sactio . &he re:ere ces to alle'e4 chec5 pa"*e ts i the vouchers prese te4 b" the petitio er 4o ot vest the* 9ith the character o: receipts. E 4er Article 12%/ o: the Civil Co4e# pa"*e t o: 4ebts i *o e" has to be *a4e i le'al te 4er a 4 the 4eliver" o: *erca tile 4ocu*e ts# i clu4i ' chec5s# Oshall pro4uce the e::ect o: pa"*e t o l" 9he the" have bee cashe4# or 9he throu'h the :ault o: the cre4itor the" have bee i*paire4.I .ro* the text o: the Civil Co4e provisio # it is clear that there are t9o exceptio s to the rule that pa"*e t b" chec5 4oes ot exti 'uish the obli'atio . 3either exceptio is prese t i this case. Co cer i ' the :irst# petitio er :aile4 to pro4uce the ori'i als o: the chec5s a:ter their suppose4 e cash*e t a 4 eve the ba 5 state*e ts althou'h the suppose4 pa"*e ts b" chec5 9ere e::ecte4 o l" about 5 "ears be:ore the :ili ' o: the collectio suit. A e t the seco 4 exceptio # the 4octri e is that it 4oes ot appl" to i stru*e ts execute4 b" the 4ebtor hi*sel: a 4 4elivere4 to the cre4itor. 6 4ubitabl"# that is ot the situatio i this case. Petitio er also relie4 upo the testi*o " o: its Corporate Secretar"# Rho4ora A'uila. A'ai # the issue about the cre4ibilit" o: sai4 9it ess i volves a Cuestio o: :act 9hich is a 4e:i ite i co 'ruit" i petitio s :or revie9# as i the case be:ore us. 6 a " eve t# the Court o: Appeals co vi ci 'l" 4ebu 5e4 the testi*o ".

ISSUES* Fhether petitio er ha4 pai4 +uiller*o i :ull i accor4a ce 9ith their co tract as evi4e ce4 b" the vouchers a 4 9hether these vouchers su::ices as evi4e ce o: pa"*e t. HELD* 6 the case at bar# petitio er has relie4 o vouchers to prove its 4e:e se o: pa"*e t. 8o9ever# as

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Civil Law Review 2 2013 - 2014 her to si' bla 5 sheets o: paper. She 9a ts the court to believe that she 4i4 ot 5 o9 o: the co te ts o: Exhibits OA<1I a 4 O0<1#I a 4 that these 4ocu*e tar" evi4e ce coul4 have bee o e o: those bla 5 sheets o: paper that respo 4e t has as5e4 her to si' . Fe :i 4 this tale u acceptable# abse t a " :or* o: 4uress or i ti*i4atio :ro* respo 4e t# 9hich petitio er 4oes ot eve alle'e. &i*e a 4 a'ai # 9e have hel4 that o e 9ho is o: a'e a 4 a busi ess9ise is presu*e4 to have acte4 9ith 4ue care a 4 to have si' e4 the 4ocu*e ts i Cuestio 9ith :ull 5 o9le4'e o: its co te ts a 4 co seCue ces. Petitio er is ot o e i' ora t# illiterate perso 9ho coul4 be easil" 4upe4 i to si' i ' bla 5 sheets o: papers. She has borro9e4 lar'e su*s o: *o e" :ro* respo 4e t. 6 :act# petitio er7s total loa obli'atio to respo 4e t has reache4 over *illio s o: pesos. Petitio er has tra sacte4 busi ess 9ith respo 4e t several ti*es. A*o ' others# the" i clu4e tra sactio s i volvi ' a pacto 4e retro sale 9hich is the subDect o: a other pe 4i ' case bet9ee the parties a 4 loa s a*ou ti ' to P2M a 4 P1M# secure4 b" 4ee4s o: real estate *ort'a'e a 4 chattel *ort'a'e# respectivel". As the lo9er court correctl" poi te4 out# petitio er appare tl" 5 o9s ho9 to ta5e care o: her busi ess 4eali 's. &hus# o October 21# 1//2 a 4 .ebruar" 22# 1//3# she cause4 the executio o: t9o 4ocu*e ts e title4 O2ischar'e o: Real Estate Mort'a'eIS27T a 4 O2ischar'e o: Chattel Mort'a'e#IS2)T respectivel"# 9he she pai4 respo 4e t the :ull co si4eratio o: the pro*issor" otes o: P2M a 4 P1M# 9herei the *ort'a'es serve4 as securit" :or the pa"*e t o: sai4 otes. Si*ilarl"# petitio er# upo pa"*e t o: P1M to respo 4e t o 3ove*ber 13# 1//2# retrieve4 the Metroba 5 Chec5s 9hich she issue4 as securit" to respo 4e t. 6 teresti 'l"# i the case o: the t9o chec5s subDect *atter o: this liti'atio # petitio er 4i4 ot eve 4e*a 4 their retur :ro* respo 4e t# ot9ithsta 4i ' her clai* that she has pai4 i :ull her loa obli'atio . All she prese te4 9as a letter or4eri ' Metroba 5 to stop pa"*e t o: the chec5s 9ithout proo: that it has bee receive4 b"# or actuall" se t to Metroba 5 +ua'ua. A'ai # 9e reiterate the rule that 9he the existe ce o: a 4ebt is :ull" establishe4 b" the evi4e ce co tai e4 i the recor4# the bur4e o: provi ' that it has bee exti 'uishe4 b" pa"*e t 4evolves upo the 4ebtor 9ho o::ers such 4e:e se to the clai* o: the cre4itor. Eve 9here respo 4e t<cre4itor 9ho 9as plai ti:: i the lo9er court# alle'es o <pa"*e t# the 'e eral rule is that the o us rests o the petitio er<4ebtor 9ho 9as 4e:e 4a t i the lo9er court# to prove pa"*e t# rather tha o the plai ti::<cre4itor to prove o <pa"*e t. &he 4ebtor has the bur4e o: sho9i ' 9ith le'al certai t" that the obli'atio has bee 4ischar'e4 b" pa"*e t. &his# petitio er :aile4 to 4o !ALLO* 2e ie4. R&C a 4 CA 4ecisio A..6RME2 Page 30

NOE I

% CORONEL "S% ENCARNACION C% CAPATI G% R% N,% 157836% '0 26$ 2005

SM> Exti 'uish*e t o: Pa"*e t !ACTS* Petitio er co tracte4 t9o loa s :ro* respo 4e t o Septe*ber %# 1//2 a 4 October 25# 1//2. &he :irst a*ou te4 to P121#$$$.$$ pa"able o or be:ore .ebruar" %# 1//3 a 4 the seco 4 a*ou te4 to P3(3#$$$.$$ pa"able o or be:ore March 25# 1//3. 6 retur # petitio er issue4 respo 4e t t9o chec5s :or the :irst a 4 seco 4 loa . &he t9o loa s are e*bo4ie4 i t9o ha 49ritte i stru*e ts. Petitio er :aile4 to pa" her loa s upo *aturit" 4espite repeate4 4e*a 4s :ro* respo 4e t. &he t9o chec5s she issue4 9ere 4isho ore4 9he prese te4 :or pa"*e t o .ebruar" 1(# 1//3 a 4 April 7# 1//3. 8e ce# o Septe*ber 1%# 1//3# respo 4e t :ile4 a co*plai t :or su* o: *o e" a 4 4a*a'es 9ith attach*e t a'ai st petitio er be:ore the Re'io al &rial Court o: +ua'ua# Pa*pa 'a. Petitio er 4e ie4 co tracti ' the t9o loa s i the a*ou ts o: P121#$$$.$$ a 4 P3(3#$$$.$$ :ro* respo 4e t. She alle'e4 that the Metroba 5 chec5s represe ti ' the :ore'oi ' a*ou ts 9ere t9o o: several chec5s she issue4 i :avor o: respo 4e t :or a loa a*ou ti ' to P1.1$1 *illio 9hich she has :ull" pai4. She clai*e4 that 4espite :ull pa"*e t# respo 4e t still 4eposite4 the t9o chec5s because o: a 4ispute bet9ee the* arisi ' :ro* respo 4e t7s 4e*a 4 :or exorbita t a 4 a44itio al i terest o the P1.1$1 *illio loa . Petitio er alle'e4 :urther that there 9ere i sta ces 9he respo 4e t as5e4 her to a::ix her si' ature o bla 5 sheets o: paperY thereb" i*pl"i ' that the co te ts o: Exhibits co tai i ' the loa a'ree*e ts 9ere 9ritte b" respo 4e t o sheets o: paper si' e4 i a4va ce b" petitio er. &he R&C rule4 i :avor o: respo 4e t or4eri ' hi* to pa". &he CA a::ir*e4 such 4ecisio . 8e ce# this petitio . ISSUE* Fhether pa"*e t 9as *a4e a 4 that it 9as :ull" exti 'uishe4. HELD* Petitio er tries to escape respo sibilit" b" testi:"i ' that it has bee respo 4e t7s practice to as5 ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 6 petitio ersK a s9er to the :irst cause o: actio # the" averre4 that it shoul4 be 4is*isse4 because =1@ it 4oes ot su::icie tl" state a cause o: actio :or re:or*atio o: co tractL =2@ it is barre4 b" prescriptio # the sa*e havi ' bee :ile4 *ore tha te =1$@ "ears a:ter the executio o: the co tractL a 4 =3@ it is barre4 b" estoppel# si ce private respo 4e t see5s to e :orce the co tract i the sa*e actio . Petitio ers :urther alle'e4 that their utili,atio o: private respo 4e tKs posts coul4 ot have cause4 their 4eterioratio because the" have alrea4" bee i use :or eleve =11@ "earsL a 4 that the value o: their expe ses :or the te =1$@ telepho e li es lo ' e Do"e4 b" private respo 4e t :ree o: char'e are :ar i excess o: the a*ou ts clai*e4 b" the latter :or the use o: the posts# so that i: there 9as a " i eCuit"# it 9as su::ere4 b" the*. A 4 9ith respect to the seco 4 cause o: actio # petitio ers clai*e4# that their telepho e service ha4 bee cate'ori,e4 b" the 3atio al &eleco**u icatio Corporatio =3&C@ as Gver" hi'hG a 4 o: Gsuperior Cualit".G &he R&C rule4 that 9hile i a actio :or re:or*atio o: co tract# it ca ot *a5e a other co tract :or the parties# it ca # ho9ever# :or reaso s o: Dustice a 4 eCuit"# or4er that the co tract be re:or*e4 to abolish the i eCuities therei . &hus# sai4 court rule4 that the co tract shoul4 be re:or*e4 b" or4eri ' petitio ers to pa" private respo 4e t co*pe satio :or the use o: their posts i 3a'a Cit"# 9hile private respo 4e t shoul4 also be or4ere4 to pa" the *o thl" bills :or the use o: the telepho es also i 3a'a Cit". Petitio ers appeale4 to respo 4e t CA# ho9ever the sa*e 9as a::ir*e4. ISSUES* 1. Fhether Article 12(7 o: the 3e9 Civil Co4e is applicable 2. Fhether co tract shoul4 be re:or*e4 3. Fhether the co tract 9as subDect to a potestative co 4itio 9hich re 4ere4 sai4 co 4itio voi4. HELD* Article 12(7 spea5s o: GserviceG 9hich has beco*e so 4i::icult. &a5i ' i to co si4eratio the ratio ale behi 4 this provisio # the ter* GserviceG shoul4 be u 4erstoo4 as re:erri ' to the Gper:or*a ceG o: the obli'atio . 6 the prese t case# the obli'atio o: private respo 4e t co sists i allo9i ' petitio ers to use its posts i 3a'a Cit"# 9hich is the service co te*plate4 i sai4 article. .urther*ore# a bare rea4i ' o: this article reveals that it is ot a reCuire*e t thereu 4er that the co tract be :or :uture service 9ith :uture u usual cha 'e. Accor4i ' to Se ator Arturo M. &ole ti o# 1$ Article Page 31

NAGA TELEPHONE CO%$ INC% :NATELCO; AND LUCIANO % AGGAY "S% CA AND CA ARINES SUR II ELECTRIC COOPERATI"E$ INC% :CASURECO II; G%R% N,% 107112 !782.'20 24$ 1994 !ACTS* Petitio er 3a'a &elepho e Co.# 6 c. =3A&E1CO@ is a telepho e co*pa " re 4eri ' local as 9ell as lo ' 4ista ce telepho e service i 3a'a Cit" 9hile private respo 4e t Ca*ari es Sur 66 Electric Cooperative# 6 c. =CASERECO 66@ is a private corporatio establishe4 :or the purpose o: operati ' a electric po9er service i the sa*e cit". O 3ove*ber 1# 1/77# the parties e tere4 i to a co tract :or the use b" petitio ers i the operatio o: its telepho e service the electric li'ht posts o: private respo 4e t i 3a'a Cit". 6 co si4eratio there:or# petitio ers a'ree4 to i stall# :ree o: char'e# te =1$@ telepho e co ectio s :or the use b" private respo 4e t. &he sai4 co tract also provi4e4> &hat the ter* or perio4 o: this co tract shall be as lo ' as the part" o: the :irst part has ee4 :or the electric li'ht posts o: the part" o: the seco 4 part it bei ' u 4erstoo4 that this co tract shall ter*i ate 9he :or a " reaso 9hatsoever# the part" o: the seco 4 part is :orce4 to stop# aba 4o e4 SsicT its operatio as a public service a 4 it beco*es ecessar" to re*ove the electric li'htpostL A:ter the co tract ha4 bee e :orce4 :or over te =1$@ "ears# private respo 4e t :ile4 9ith R&C a'ai st petitio ers :or re:or*atio o: the co tract 9ith 4a*a'es# o the 'rou 4 that it is too o e<si4e4 i :avor o: petitio ersL that it is ot i co :or*it" 9ith the 'ui4eli es o: the 3atio al Electri:icatio A4*i istratio =3EA@ 9hich 4irect that the reaso able co*pe satio :or the use o: the posts is P1$.$$ per post# per *o thL that a:ter eleve =11@ "ears o: petitio ersK use o: the posts# the telepho e cables stru ' b" the* thereo have beco*e *uch heavier 9ith the i crease i the volu*e o: their subscribers# 9orse e4 b" the :act that their li e*e bore holes throu'h the posts at 9hich poi ts those posts 9ere bro5e 4uri ' t"phoo sL that a post o9 costs as *uch as P2#(3$.$$L so that Dustice a 4 eCuit" 4e*a 4 that the co tract be re:or*e4 to abolish the i eCuities thereo . Private respo 4e t also co*plai e4 about the poor servici ' b" petitio ers o: the te =1$@ telepho e u its 9hich ha4 cause4 it 'reat i co ve ie ce a 4 4a*a'es to the tu e o: ot less tha P1$$#$$$.$$

ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 12(7 states i our la9 the 4octri e o: u :orsee eve ts. &his is sai4 to be base4 o the 4iscre4ite4 theor" o: rebus sic sta tibus i public i ter atio al la9L u 4er this theor"# the parties stipulate i the li'ht o: certai prevaili ' co 4itio s# a 4 o ce these co 4itio s cease to exist the co tract also ceases to exist. Co si4eri ' practical ee4s a 4 the 4e*a 4s o: eCuit" a 4 'oo4 :aith# the 4isappeara ce o: the basis o: a co tract 'ives rise to a ri'ht to relie: i :avor o: the part" preDu4ice4. O the issue o: re:or*atio o: co tract# petitio ers alle'e that respo 4e t courtKs ruli ' that the ri'ht o: actio Garose o l" a:ter sai4 co tract ha4 alrea4" beco*e 4isa4va ta'eous a 4 u :air to it 4ue to subseCue t eve ts a 4 co 4itio s# 9hich *ust be so*eti*e 4uri ' the latter part o: 1/)2 or i 1/)3 . . .G is erro eous. 6 re:or*atio o: co tracts# 9hat is re:or*e4 is ot the co tract itsel:# but the i stru*e t e*bo4"i ' the co tract. 6t :ollo9s that 9hether the co tract is 4isa4va ta'eous or ot is irreleva t to re:or*atio a 4 there:ore# ca ot be a ele*e t i the 4eter*i atio o: the perio4 :or prescriptio o: the actio to re:or*. Article 11%% o: the 3e9 Civil Co4e provi4es# i ter alia# that a actio upo a 9ritte co tract *ust be brou'ht 9ithi te =1$@ "ears :ro* the ti*e the ri'ht o: actio accrues. Clearl"# the te =1$@ "ear perio4 is to be rec5o e4 :ro* the ti*e the ri'ht o: actio accrues 9hich is ot ecessaril" the 4ate o: executio o: the co tract. As correctl" rule4 b" respo 4e t court# private respo 4e tKs ri'ht o: actio arose Gso*eti*e 4uri ' the latter part o: 1/)2 or i 1/)3 9he accor4i ' to Att". 1uis +e eral# !r. . . .# he 9as as5e4 b" =private respo 4e tKs@ 0oar4 o: 2irectors to stu4" sai4 co tract as it alrea4" appeare4 4isa4va ta'eous to =private respo 4e t@ =p. 31# ts # Ma" )# 1/)/@. =Private respo 4e tKs@ cause o: actio to as5 :or re:or*atio o: sai4 co tract shoul4 thus be co si4ere4 to have arise o l" i 1/)2 or 1/)3# a 4 :ro* 1/)2 to !a uar" 2# 1/)/ 9he the co*plai t i this case 9as :ile4# te =1$@ "ears ha4 ot "et elapse4.G Re'ar4i ' the last issue# petitio ers alle'e that there is othi ' purel" potestative about the prestatio s o: either part" because petitio erKs per*issio :or :ree use o: telepho es is ot *a4e to 4epe 4 purel" o their 9ill# either is private respo 4e tKs per*issio :or :ree use o: its posts 4epe 4e t purel" o its 9ill. Petitio ersK alle'atio s *ust be uphel4 i this re'ar4. A potestative co 4itio is a co 4itio # the :ul:ill*e t o: 9hich 4epe 4s upo the sole 9ill o: the 4ebtor# i 9hich case# the co 4itio al obli'atio is voi4. 0ase4 o this 4e:i itio # respo 4e t courtKs :i 4i ' that the provisio i the co tract# to 9it>
=a@ &hat the ter* or perio4 o: this co tract shall be as lo ' as the part" o: the :irst part =petitio er@ has ee4 :or the electric li'ht posts o: the part" o: the seco 4 part =private respo 4e t@ . . .. is a potestative co 4itio # is correct. 8o9ever# it *ust have overloo5e4 the other co 4itio s i the sa*e provisio # to 9it> . . . it bei ' u 4erstoo4 that this co tract shall ter*i ate 9he :or a " reaso 9hatsoever# the part" o: the seco 4 part =private respo 4e t@ is :orce4 to stop# aba 4o e4 =sic@ its operatio as a public service a 4 it beco*es ecessar" to re*ove the electric li'ht post L 9hich are casual co 4itio s si ce the" 4epe 4 o cha ce# ha,ar4# or the 9ill o: a thir4 perso . 6 su*# the co tract is subDect to *ixe4 co 4itio s# that is# the" 4epe 4 partl" o the 9ill o: the 4ebtor a 4 partl" o cha ce# ha,ar4 or the 9ill o: a thir4 perso # 9hich 4o ot i vali4ate the a:ore*e tio e4 provisio

!ALLO* Petitio 2E36E2. CA 4ecisio A..6RME2.

TRANS-PACI!IC INDUSTRIAL SUPPLIES$ INC% "S% CA '() ASSOCIATED BAN# Page 32

ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 G%R% N,% 109172 !ACTS* HELD* 6 1/7/# petitio er applie4 :or a 4 9as 'ra te4 several :i a cial acco**o4atio s a*ou ti ' to P1.3 M b" respo 4e t Associate4 0a 5. &he loa s 9ere evi4e ce4 a 4 secure4 b" :our =%@ pro*issor" otes# a real estate *ort'a'e coveri ' three parcels o: la 4 a 4 a chattel *ort'a'e over petitio erKs stoc5 a 4 i ve tories. E able to settle its obli'atio i :ull# petitio er reCueste4 :or# a 4 9as 'ra te4 b" respo 4e t ba 5# a restructuri ' o: the re*ai i ' i 4ebte4 ess 9hich the a*ou te4 to P1#$57#5$$.$$# as all the previous pa"*e ts *a4e 9ere applie4 to pe alties a 4 i terests. &o secure the re<structure4 loa o: P1#213#%$$.$$# three e9 pro*issor" otes 9ere execute4 b" &ra s<Paci:ic. &he *ort'a'e4 parcels o: la 4 9ere substitute4 b" a other *ort'a'e coveri ' t9o other parcels o: la 4 a 4 a chattel *ort'a'e o petitio erKs stoc5 i ve tor". &he release4 parcels o: la 4 9ere the sol4 a 4 the procee4s a*ou ti ' to P1#3)(#(1%.2$# accor4i ' to petitio er# 9ere tur e4 over to the ba 5 a 4 applie4 to &ra s<Paci:icKs restructure4 loa . SubseCue tl"# respo 4e t ba 5 retur e4 the 4uplicate ori'i al copies o: the three pro*issor" otes to &ra s<Paci:ic 9ith the 9or4 GPA62G sta*pe4 thereo . 2espite the retur o: the otes# or o 2ece*ber 12# 1/)5# Associate4 0a 5 4e*a 4e4 :ro* &ra s< Paci:ic pa"*e t o: the a*ou t o: P%/2#1$$.$$ represe ti ' accrue4 i terest o o e o: the P37s. Accor4i ' to the ba 5# the pro*issor" ote 9as erro eousl" release4. 6 itiall"# &ra s<Paci:ic expresse4 its 9illi ' ess to pa" the a*ou t 4e*a 4e4 b" respo 4e t ba 5. 1ater# it ha4 a cha 'e o: heart a 4 i stea4 i itiate4 a actio be:ore the Re'io al &rial Court o: Ma5ati# 0r. 1%(# :or speci:ic per:or*a ce a 4 4a*a'es. &here it pra"e4 that the *ort'a'e over the t9o parcels o: la 4 be release4 a 4 its stoc5 i ve tor" be li:te4 a 4 that its obli'atio to the ba 5 be 4eclare4 as havi ' bee :ull" pai4. &he R&C re 4ere4 Du4'*e t i :avor o: &ra s<Paci:ic. &he CA reverse4 the R&C 4ecisio . 3O. &he Court :ou 4 o reversible error co**itte4 b" the appellate court i 4isposi ' o: the appeale4 4ecisio . As 'lea e4 :ro* the 4ecisio o: the court a Cuo# Du4'*e t 9as re 4ere4 i :avor o: petitio er o the basis o: presu*ptio s. &he above 4isCuisitio :i 4s o :actual support# ho9ever# per revie9 o: the recor4s. &he presu*ptio create4 b" the Art. 1271 o: the Civil Co4e is ot co clusive but *erel" pri*a :acie. 6: there be o evi4e ce to the co trar"# the presu*ptio sta 4s. Co versel"# the presu*ptio loses its le'al e::icac" i the :ace o: proo: or evi4e ce to the co trar". 6 the case at bar# the Court :i 4s su::icie t Dusti:icatio to overthro9 the presu*ptio o: pa"*e t 'e erate4 b" the 4eliver" o: the 4ocu*e ts evi4e ci ' petitio ers7 i 4ebte4 ess. 6t *a" ot be a*iss to a44 that Article 1271 o: the Civil Co4e raises a presu*ptio # ot o: pa"*e t# but o: the re u ciatio o: the cre4it 9here *ore co vi ci ' evi4e ce 9oul4 be reCuire4 tha 9hat or*all" 9oul4 be calle4 :or to prove pa"*e t. &he ratio ale :or allo9i ' the presu*ptio o: re u ciatio i the 4eliver" o: a private i stru*e t is that# u li5e that o: a public i stru*e t# there coul4 be Dust o e cop" o: the evi4e ce o: cre4it. Fhere several ori'i als are *a4e out o: a private 4ocu*e t# the i te 4*e t o: the la9 9oul4 thus be to re:er to the 4eliver" o l" o: the ori'i al rather tha to the ori'i al 4uplicate o: 9hich the 4ebtor 9oul4 or*all" retai a cop". !ALLO* Petitio is 2E36E2 :or lac5 o: *erit. A.B.&= 19$ 1994 Fhether petitio er has i 4ee4 pai4 i obli'atio to respo 4e t ba 5. :ull its

SILAHIS ISSUES*

AR#ETING CORPORATION "S% IAC '() GREGORIO DE LEON G% R% N,% L-74027 D757>872 7$ 1989

ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014 E 4oubte4l"# petitio er a4*its the vali4it" o: its outsta 4i ' accou ts 9ith private respo 4e t i the a*ou t o: P22#213.75 as co tai e4 i its a s9er. 0ut 9hether private respo 4e t is liable to pa" the petitio er a 2$J *ar'i or co**issio o the subDect sale to 2ole Philippi es# 6 c. is vi'orousl" 4ispute4. &his circu*sta ce preve ts le'al co*pe satio :ro* ta5i ' place. &he Court a'rees 9ith respo 4e t appellate court that there is o evi4e ce o recor4 :ro* 9hich it ca be i :erre4 that there 9as a " a'ree*e t bet9ee the petitio er a 4 private respo 4e t prohibiti ' the latter :ro* selli ' 4irectl" to 2ole Philippi es# 6 corporate4. 2e:i itel"# it ca ot be asserte4 that the 4ebit *e*o 9as a co tract bi 4i ' bet9ee the parties co si4eri ' that the sa*e# as correctl" :ou 4 b" the appellate court# 9as ot si' e4 b" private respo 4e t or 9as there a " *e tio therei o: a " co**it*e t b" the latter to pa" a " co**issio to the :or*er i volvi ' the sale o: sproc5ets to 2ole Philippi es# 6 c. i the a*ou t o: P111#$$$.$$. 6 4ee4# such 4ocu*e t ca be ta5e as sel:< servi ' 9ith o probative value abse t a sho9i ' or at the ver" least a i :ere ce# that the part" sou'ht to be bou 4 asse te4 to its co te ts or sho9e4 co :or*it" thereto. !ALLO* Uuestio e4 4ecisio court is hereb" a::ir*e4. o: respo 4e t appellate

!ACTS* O various 4ates i October# 3ove*ber a 4 2ece*ber# 1/75# +re'orio 4e 1eo 4oi ' busi ess u 4er the a*e a 4 st"le o: Mar5 6 4ustrial Sales sol4 a 4 4elivere4 to Silahis Mar5eti ' Corporatio various ite*s o: *ercha 4ise covere4 b" several i voices i the a''re'ate a*ou t o: P22#213.75 pa"able 9ithi thirt" =3$@ 4a"s :ro* 4ate o: the coveri ' i voices. Alle'e4l" 4ue to SilahisK :ailure to pa" its accou t upo *aturit" 4espite repeate4 4e*a 4s# 4e 1eo :ile4 a co*plai t :or the collectio o: the sai4 accou ts i clu4i ' accrue4 i terest thereo i the a*ou t o: P((1.$3 a 4 attor e"Ks :ees o: P5#$$$.$$ plus costs o: liti'atio . &he a s9er a4*itte4 the alle'atio s o: the co*plai t i so:ar as the i voices 9ere co cer e4 but prese te4 as a::ir*ative 4e:e sesL SaT a 4ebit *e*o :or P22#2$$.$$ as u reali,e4 pro:it :or a suppose4 co**issio that Silahis shoul4 have receive4 :ro* 4e 1eo :or the sale o: sproc5ets i the a*ou t o: P111#$$$.$$ *a4e 4irectl" to 2ole Philippi es# 6 corporate4 b" the latter so*eti*e i Au'ust 1/75L a 4 SbT SilahisK clai* that it is e title4 to retur the stai less steel scree 9hich 9as :ou 4 4e:ective b" its clie t# 0or4e 6 ter atio al# 2avao Cit"# a 4 to have the correspo 4i ' a*ou t ca celle4 :ro* its accou t 9ith 4e 1eo . ISSUE* Fhether or ot private respo 4e t is liable to the petitio er :or the co**issio or *ar'i :or the 4irect sale 9hich the :or*er co clu4e4 a 4 co su**ate4 9ith 2ole Philippi es# 6 corporate4 9ithout coursi ' the sa*e throu'h herei petitio er. HELD* 6t *ust be re*e*bere4 that co*pe satio ta5es place 9he t9o perso s# i their o9 ri'ht# are cre4itors a 4 4ebtors to each other. Article 127/ o: the Civil Co4e provi4es that> G6 or4er that co*pe satio *a" be proper# it is ecessar"> S1T that each o e o: the obli'ors be bou 4 pri cipall"# a 4 that he be at the sa*e ti*e a pri cipal cre4itor o: the otherL S2T that both 4ebts co sist i a su* o: *o e"# or i: the thi 's 4ue are co su*able# the" be o: the sa*e 5i 4# a 4 also o: the sa*e Cualit" i: the latter has bee state4L S3T that the t9o 4ebts be 4ueL S%T that the" be liCui4ate4 a 4 4e*a 4ableL S5T that over either o: the* there be a " rete tio or co trovers"# co**e ce4 b" thir4 perso s a 4 co**u icate4 i 4ue ti*e to the 4ebtor.G

ENGRACIO !RANCIA "S% IAC '() HO !ERNANDE4 G%R% N,% L-67649 -.(7 28$ 1988

ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014 !ACTS* E 'racio .ra cia is the re'istere4 o9 er o: a resi4e tial lot# 32) sCuare *eters# a 4 a t9o<stor" house built upo it situate4 at 0arrio Sa 6si4ro# o9 2istrict o: Sta. Clara# Pasa" Cit"# Metro Ma ila. O October 15# 1/77# a 125 sCuare *eter portio o: .ra ciaKs propert" 9as expropriate4 b" the Republic o: the Philippi es :or the su* o: P%#11(.$$ represe ti ' the esti*ate4 a*ou t eCuivale t to the assesse4 value o: the a:oresai4 portio . Si ce 1/(3 up to 1/77 i clusive# .ra cia :aile4 to pa" his real estate taxes. &hus# o 2ece*ber 5# 1/77# his propert" 9as sol4 at public auctio pursua t to Sectio 73 o: Presi4e tial 2ecree 3o. %(% 5 o9 as the Real Propert" &ax Co4e i or4er to satis:" a tax 4eli Cue c" o: P2#%$$.$$. 8o .er a 4e, 9as the hi'hest bi44er :or the propert". O March 2$# 1/7/# .ra cia :ile4 a co*plai t to a ul the auctio sale. 8e later a*e 4e4 his co*plai t o !a uar" 2%# 1/)$. &he petitio er see5s to set asi4e the auctio sale o: his propert" 9hich too5 place o 2ece*ber 5# 1/77# a 4 to allo9 hi* to recover a 2$3 sCuare *eter lot 9hich 9as sol4 at public auctio to 8o .er a 4e, a 4 or4ere4 title4 i the latterKs a*e. 8e :urther averre4 that his tax 4eli Cue c" o: P2#%$$.$$ has bee exti 'uishe4 b" le'al co*pe satio si ce the 'over *e t o9e4 hi* P%# 11(.$$ 9he a portio o: his la 4 9as expropriate4. &he lo9er court re 4ere4 a 4ecisio i :avor .er a 4e, 9hich 9as a::ir*e4 b" the 6 ter*e4iate Appellate Court . 8e ce# this petitio :or revie9. ISSUE* Fhether or ot the tax 4eli Cue c" o: .ra cia has bee exti 'uishe4 b" le'al co*pe satio . RULING* &here is o le'al basis :or the co te tio . 0" le'al co*pe satio # obli'atio s o: perso s# 9ho i their o9 ri'ht are reciprocall" 4ebtors a 4 cre4itors o: each other# are exti 'uishe4 =Art. 127)# Civil Co4e@. &he circu*sta ces o: the case 4o ot satis:" the reCuire*e ts provi4e4 b" Article 127/# to 9it> =1@ that each o e o: the obli'ors be bou 4 pri cipall" a 4 that he be at the sa*e ti*e a pri cipal cre4itor o: the otherL =2@ that the t9o 4ebts be 4ue. &he Court ha4 co siste tl" rule4 that there ca be o o::<setti ' o: taxes a'ai st the clai*s that the taxpa"er *a" have a'ai st the 'over *e t. A perso ca ot re:use to pa" a tax o the 'rou 4 that the 'over *e t o9es hi* a a*ou t eCual to or 'reater tha the tax bei ' collecte4. &he collectio o: a tax ca ot a9ait the results o: a la9suit a'ai st the 'over *e t. 6 a44itio # a taxpa"er ca ot re:use to pa" ARAFAG HABANA JALAYAJAY his tax 9he calle4 upo b" the collector because he has a clai* a'ai st the 'over *e tal bo4" ot i clu4e4 i the tax lev". &here are also other :actors 9hich co*pelle4 the Court to rule a'ai st the petitio er. &he tax 9as 4ue to the cit" 'over *e t 9hile the expropriatio 9as e::ecte4 b" the atio al 'over *e t. Moreover# the a*ou t o: P%#11(.$$ pai4 b" the atio al 'over *e t :or the 125 sCuare *eter portio o: his lot 9as 4eposite4 9ith the Philippi e 3atio al 0a 5 lo ' be:ore the sale at public auctio o: his re*ai i ' propert". 3otice o: the 4eposit 4ate4 Septe*ber 2)# 1/77 9as receive4 b" the petitio er o Septe*ber 3$# 1/77. &he petitio er a4*itte4 i his testi*o " that he 5 e9 about the P%#11(.$$ 4eposite4 9ith the ba 5 but he 4i4 ot 9ith4ra9 it. 6t 9oul4 have bee a eas" *atter to 9ith4ra9 P2#%$$.$$ :ro* the 4eposit so that he coul4 pa" the tax obli'atio thus aborti ' the sale at public auctio . !ALLO* &he petitio :or revie9 9as 4is*isse4.

BAN# O! THE PHILIPPINE ISLANDS "S% CA '() -I Y T% GO G%R% N,% 142731 -.(7 8$ 2006

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Civil Law Review 2 2013 - 2014 a*ou ts to the outsta 4i ' obli'atio o: 3oah7s Ar5# as expresse4 i a letter :ro* .E0&C 4ate4 Ma" 1/# 1//)#/ .E0&C has 9aive4 4e:ault# ovate4 the co tract o: loa as e*bo4ie4 i the pro*issor" otes a 4 is there:ore estoppe4 :ro* :oreclosi ' o the *ort'a'e4 propert". .E0&C7s act o: 9ithhol4i ' the lease pa"*e ts a 4 appl"i ' the* to the outsta 4i ' obli'atio o: 3oah7s Ar5 is *erel" a ac5 o9le4'e*e t o: the le'al co*pe satio that occurre4 b" operatio o: la9 bet9ee the parties. &he Court has expou 4e4 o co*pe satio a 4 *ore speci:icall" o le'al co*pe satio as :ollo9s> x x x co*pe satio is a *o4e o: exti 'uishi ' to the co curre t a*ou t the obli'atio s o: perso s 9ho i their o9 ri'ht a 4 as pri cipals are reciprocall" 4ebtors a 4 cre4itors o: each other. 1e'al co*pe satio ta5es place b" operatio o: la9 9he all the reCuisites are prese t# as oppose4 to co ve tio al co*pe satio 9hich ta5es place 9he the parties a'ree to co*pe sate their *utual obli'atio s eve i the abse ce o: so*e reCuisites.1$ &he Civil Co4e e u*erates the reCuisites o: le'al co*pe satio # thus> Art. 127). Co*pe satio shall ta5e place 9he t9o perso s# i their o9 ri'ht# are cre4itors a 4 4ebtors o: each other. Art. 127/. 6 or4er that co*pe satio *a" be proper# it is ecessar"> =1@ &hat each o e o: the obli'ors be bou 4 pri cipall"# a 4 that he be at the sa*e ti*e a pri cipal cre4itor o: the otherL =2@ &hat both 4ebts co sist i a su* o: *o e"# or i: the thi 's 4ue are co su*able# the" be o: the sa*e 5i 4# a 4 also o: the sa*e Cualit" i: the latter has bee state4L =3@ &hat the t9o 4ebts be 4ueL =%@ &hat the" be liCui4ate4 a 4 4e*a 4ableL =5@ &hat over either o: the* there be a " rete tio or co trovers"# co**e ce4 b" thir4 perso s a 4 co**u icate4 i 4ue ti*e to the 4ebtor. 6t is clear :ro* the :acts that .E0&C a 4 3oah7s Ar5 are both pri cipal obli'ors a 4 cre4itors o: each other. &heir 4ebts to each other both co sist i a su* o: *o e". As 4iscusse4 above# the ei'ht pro*issor" otes o: 3oah7s Ar5 are all 4ueL a 4 the lease pa"*e ts o9e4 b" .E0&C beco*e 4ue each *o th. 3oah7s Ar57s 4ebt is liCui4ate4 a 4 4e*a 4ableL a 4 .E0&C7s lease pa"*e ts are liCui4ate4 a 4 are 4e*a 4able ever" *o th as the" :all 4ue. 1astl"# there is o rete tio or co trovers" co**e ce4 b" thir4 perso s over either o: the 4ebts. 3ovatio 4i4 ot occur as private respo 4e t ar'ue4. &he Court has 4eclare4 that a co tract ca ot be ovate4 i the abse ce o: a e9 co tract execute4 bet9ee the parties. &he le'al co*pe satio # 9hich 9as Page 34

!ACTS* Petitio er# .ar East 0a 5 a 4 &rust Co*pa "# 'ra te4 a total o: ei'ht =)@ loa s to 3oah7s Arc Mercha 4isi ' =3oah7s Ar5 is a si 'le proprietorship o9 e4 b" Mr. Albert &. 1oo"u5o@. &he sai4 loa s 9ere evi4e ce4 b" i4e tical Pro*issor" 3otes all si' e4 b" Albert &. 1oo"u5o# private respo 4e t !i**" &. +o a 4 o e Filso +o. 1i5e9ise# all loa s 9ere secure4 b" real estate *ort'a'e co stitute4 over a parcel o: la 4 re'istere4 i the a*es o: Mr. 1oo"u5o a 4 herei private respo 4e t. Petitio er# clai*i ' that 3oah7s Ar5 4e:aulte4 i its obli'atio s# extraDu4iciall" :oreclose4 the *ort'a'e. &he auctio sale 9as set o 1% April 1//) but o ) April 1//) private respo 4e t :ile4 a co*plai t :or 4a*a'es 9ith pra"er S:orT issua ce o: &RO a 4Qor 9rit o: preli*i ar" i Du ctio see5i ' StoT e Doi the auctio sale. 6 the Or4er 4ate4 1% April 1//) a te*porar" restrai i ' or4er 9as issue4 a 4 i the sa*e or4er the applicatio :or Preli*i ar" 6 Du ctio 9as set :or heari ' SiT the a:ter oo o: the sa*e 4a". ISSUE* Fhether petitio er corporatio 4e:aultP Fhether there 9as a ovatio P HELD* BES. Petitio er corporatio alle'es that there ha4 bee o 4e*a 4 o the part o: respo 4e t ba 5 previous to its :ili ' a co*plai t a'ai st petitio er a 4 Re e ; echt perso all" :or collectio o petitio er7s i 4ebte4 ess. .or a obli'atio to beco*e 4ue there *ust 'e erall" be a 4e*a 4. 2e:ault 'e erall" be'i s :ro* the *o*e t the cre4itor 4e*a 4s the per:or*a ce o: the obli'atio . Fithout such 4e*a 4# Du4icial or extraDu4icial# the e::ects o: 4e:ault 9ill ot arise. &he Civil Co4e i Article 11(/) provi4es that o e i curs i 4ela" or is i 4e:ault :ro* the ti*e the obli'or 4e*a 4s the :ul:ill*e t o: the obli'atio :ro* the obli'ee. 8o9ever# the la9 expressl" provi4es that 4e*a 4 is ot ecessar" u 4er certai circu*sta ces# a 4 o e o: these circu*sta ces is 9he the parties expressl" 9aive 4e*a 4. 8e ce# si ce the co<si' ors expressl" 9aive4 4e*a 4 i the pro*issor" otes# 4e*a 4 9as u ecessar" :or the* to be i 4e:ault. 3O3E. Private respo 4e t :urther ar'ues that b" 9ithhol4i ' the lease pa"*e ts .ar East 0a 5 a 4 &rust Co*pa " =.E0&C@ o9e4 3oah7s Ar5 :or the space .E0&C 9as leasi ' :ro* 3oah7s Ar5 a 4 appl"i ' sai4 ARAFAG HABANA JALAYAJAY 9as alrea4" i

Civil Law Review 2 2013 - 2014 ac5 o9le4'e4 b" .E0&C i its Ma" 1/# 1//) letter# occurre4 b" operatio o: la9# as 4iscusse4 above. As a co seCue ce# it ca ot be co si4ere4 a e9 co tract bet9ee the parties. 8e ce# the loa a'ree*e t# as e*bo4ie4 i the pro*issor" otes a 4 the real estate *ort'a'e# subsists. Si ce the co*pe satio bet9ee the parties occurre4 b" operatio o: la9# .E0&C 4i4 ot 9aive 3oah7s Ar57s 4e:ault. As a result o: the abse ce o: ovatio or 9aiver o: 4e:ault# .E0&C is there:ore ot estoppe4 :ro* procee4i ' 9ith the :oreclosure. !ALLO* Petitio is +RA3&E2.

CITIBAN# "S% ODESTA R% SABENIANO G%R% N,% 156132 !782.'20 6$ 2007 !ACTS* Petitio er Citiba 5 is a ba 5i ' corporatio 4ul" authori,e4 u 4er the la9s o: the ESA to 4o co**ercial ba 5i ' activities the Philippi es. Sabe ia o 9as a ARAFAG HABANA JALAYAJAY Page 35

Civil Law Review 2 2013 - 2014 clie t o: both Petitio ers Citiba 5 a 4 .3C0 .i a ce. Respo 4e t :ile4 a co*plai t a'ai st petitio ers clai*i ' to have substa tial 4eposits# the procee4s o: 9hich 9ere suppose4l" 4eposite4 auto*aticall" a 4 4irectl" to respo 4e t7s accou t 9ith the petitio er Citiba 5 a 4 that alle'e4l" petitio er re:use4 to 4espite repeate4 4e*a 4s. Petitio er alle'e4 that respo 4e t obtai e4 several loa s :ro* the :or*er a 4 i 4e:ault# Citiba 5 exercise4 its ri'ht to set<o:: respo 4e t7s outsta 4i ' loa s 9ith her 4eposits a 4 *o e". R&C 4eclare4 the act ille'al# ull a 4 voi4 a 4 or4ere4 the petitio er to re:u 4 the a*ou t plus i terest# or4eri ' Sabe ia o# o the other ha 4 to pa" Citiba 5 her i 4ebte4 ess. CA a::ir*e4 the 4ecisio e tirel" i :avor o: the respo 4e t. ISSUE* Fhether petitio er *a" exercise its ri'ht to set< o:: respo 4e t7s loa s 9ith her 4eposits a 4 *o e" i Citiba 5<+e evaP HELD* 6t is the petitio ers7 co te tio that the ter* GCitiba 5# 3.A.G use4 therei shoul4 be 4ee*e4 to re:er to all bra ches o: petitio er Citiba 5 i the Philippi es a 4 abroa4L thus# 'ivi ' petitio er Citiba 5 the authorit" to appl" as pa"*e t :or the P3s eve respo 4e t7s 4ollar accou ts 9ith Citiba 5<+e eva. Still procee4i ' :ro* the pre*ise that all bra ches o: petitio er Citiba 5 shoul4 be co si4ere4 as a si 'le e tit"# the it shoul4 ot *atter that the respo 4e t obtai e4 the loa s :ro* Citiba 5<Ma ila a 4 her 4eposits 9ere 9ith Citiba 5< +e eva. Respo 4e t shoul4 be co si4ere4 the 4ebtor =:or the loa s@ a 4 cre4itor =:or her 4eposits@ o: the sa*e e tit"# petitio er Citiba 5. Si ce petitio er Citiba 5 a 4 respo 4e t 9ere pri cipal cre4itors o: each other# i co*plia ce 9ith the reCuire*e ts u 4er Article 127/ o: the Civil Co4e# the the :or*er coul4 have ver" 9ell use4 o::<setti ' or co*pe satio to exti 'uish the parties7 obli'atio s to o e a other. A 4 eve 9ithout the P3s# o::<setti ' or co*pe satio 9as still authori,e4 because accor4i ' to Article 12)( o: the Civil Co4e# GCo*pe satio ta5es place b" operatio o: la9# eve thou'h the 4ebts *a" be pa"able at 4i::ere t places# but there shall be a i 4e* it" :or expe ses o: excha 'e or tra sportatio to the place o: pa"*e t.G 6t is true that the a:ore<Cuote4 Sectio 2$ o: the +e eral 0a 5i ' 1a9 o: 2$$$ expressl" states that the ba 5 a 4 its bra ches shall be treate4 as o e u it. 6t shoul4 be poi te4 out# ho9ever# that the sai4 provisio applies to a u iversal or co**ercial ba 5# 4ul" establishe4 a 4 or'a i,e4 as a Philippi e corporatio i accor4a ce 9ith Sectio ) o: the sa*e statute# a 4 authori,e4 to establish bra ches 9ithi Philippi es. or outsi4e the

&he +e eral 0a 5i ' 1a9 o: 2$$$# ho9ever# 4oes ot *a5e the sa*e cate'orical state*e t as re'ar4s to :orei' ba 5s a 4 their bra ches i the Philippi es. Fhat Sectio 7% o: the sai4 la9 provi4es is that i case o: a :orei' ba 5 9ith several bra ches i the cou tr"# all such bra ches shall be treate4 as o e u it. As to the relatio s bet9ee the local bra ches o: a :orei' ba 5 a 4 its hea4 o::ice# Sectio 75 o: the +e eral 0a 5i ' 1a9 o: 2$$$ a 4 Sectio 5 o: the .orei' 0a 5s 1iberali,atio 1a9 provi4e :or a G8o*e O::ice +uara tee#G i 9hich the hea4 o::ice o: the :orei' ba 5 shall 'uara tee pro*pt pa"*e t o: all liabilities o: its Philippi e bra ches. Fhile the 8o*e O::ice +uara tee is i accor4 9ith the pri ciple that these local bra ches# to'ether 9ith its hea4 o::ice# co stitute but o e le'al e tit"# it 4oes ot ecessaril" support the vie9 that sai4 pri ciple is true a 4 applicable i all circu*sta ces. !ALLO* Petitio is partl" 'ra te4 9ith *o4i:icatio . 1. Citiba 5 is or4ere4 to retur to respo 4e t the pri cipal a*ou t o: P31)#)/7.3% a 4 P2$3#15$.$$ plus 1%.5J per a u* 2. &he re*itta ce o: ES M1%/#(32.// :ro* respo 4e t7s Citiba 5<+e eva accou t is 4eclare4 ille'al# ull a 4 voi4# thus Citiba 5 is or4ere4 to re:u 4 sai4 a*ou t i Philippi e curre c" or its eCuivale t usi ' excha 'e rate at the ti*e o: pa"*e t. 3. Citiba 5 to pa" respo 4e t *oral 4a*a'es o: P3$$#$$$# exe*plar" 4a*a'es :or P25$#$$$# attor e"7s :ees o: P2$$#$$$. %. Respo 4e t to pa" petitio er the bala ce o: her outsta 4i ' loa s o: P1#$(/#)%7.%$ i clusive o:: i terest.

PEOPLECS BAN# AND TRUST CO PANY "S% SY"ELCS INCORPORATED$ ANTONIO Y% SYYAP '() ANGEL Y SYYAP G%R% N,% L-29280 A.B.&= 11$ 1988 !ACTS*

ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014 &his is a actio :or :oreclosure o: chattel *ort'a'e execute4 i :avor o: the plai ti:: b" the 4e:e 4a t S"velKs 6 corporate4 o its stoc5s o: 'oo4s# perso al properties a 4 other *aterials o9 e4 b" it a 4 locate4 at its stores or 9arehouses i 4i::ere t areas i Ma ila. &he chattel *ort'a'e 9as i co ectio 9ith a cre4it co**ercial li e i the a*ou t o: P/$$#$$$.$$ 'ra te4 the sai4 4e:e 4a t corporatio # the expir" 4ate o: 9hich 9as Ma" 2$# 1/((. O Ma" 2$# 1/(5# 4e:e 4a ts A to io -. S""ap a 4 A 'el B. S""ap execute4 a u 4erta5i ' i :avor o: the plai ti:: 9hereb" the" both a'ree4 to 'uara tee absolutel" a 4 u co 4itio all" a 4 9ithout the be e:it o: excussio the :ull a 4 pro*pt pa"*e t o: a " i 4ebte4 ess to be i curre4 o accou t o: the sai4 cre4it li e. A'ai st the cre4it li e 'ra te4 the 4e:e 4a t S"velKs 6 corporate4 the latter 4re9 a4va ces i the :or* o: pro*issor" otes. 6 vie9 o: the :ailure o: the 4e:e 4a t corporatio to *a5e pa"*e t i accor4a ce 9ith the ter*s a 4 co 4itio s a'ree4 upo i the Co**ercial Cre4it A'ree*e t the plai ti:: starte4 to :oreclose extraDu4iciall" the chattel *ort'a'e. 8o9ever# because o: a atte*pt to have the *atter settle4# the extra<Du4icial :oreclosure 9as ot pushe4 thru. As o pa"*e t ha4 bee pai4# this case 9as eve tuall" :ile4 9ith the 6AC o: Ma ila. ISSUE* Fhether the lo9er court erre4 i ot hol4i ' that the obli'atio secure4 b" the Chattel Mort'a'e sou'ht to be :oreclose4 9as ovate4 b" the subseCue t executio bet9ee appellee a 4 appella t A to io -# S""ap o: a real estate *ort'a'e as a44itio al collateral to the obli'atio secure4 b" sai4 chattel *ort'a'eP HELD* 3O. 3ovatio ta5es place 9he the obDect or pri cipal co 4itio o: a obli'atio is cha 'e4 or altere4. 6t is ele*e tar" that ovatio is ever presu*e4L it *ust be explicitl" state4 or there *ust be *a i:est i co*patibilit" bet9ee the ol4 a 4 the e9 obli'atio s i ever" aspect. 6 the case at bar# there is othi ' i the Real Estate Mort'a'e 9hich supports appella tsKsub*issio . &he co tract o its :ace 4oes ot sho9 the existe ce o: a explicit ovatio or i co*patibilit" o ever" poi t bet9ee the Gol4 a 4 the G e9G a'ree*e ts as the seco 4 co tract evi4e tl" i 4icates that the sa*e 9as execute4 as e9 a44itio al securit" to the chattel *ort'a'e previousl" e tere4 i to b" the parties. Moreover# recor4s sho9 that i the real estate *ort'a'e# appella ts a'ree4 that the chattel *ort'a'e Gshall re*ai i :ull :orce a 4 shall ot be i*paire4 b" this =real estate@ *ort'a'e.G ARAFAG HABANA JALAYAJAY

!ALLO* Appeal is 26SM6SSE2 :or lac5 o: *erit a 4 the Du4'*e t appeale4 :ro* is A..6RME2.

-ESSE YOUNG "S% CA '() THE PEOPLE O! THE PHILIPPINES G%R% N,% 140425% '256 10$ 2005 !ACTS* O !ul" 11# 1/)1# !esse to'ether 9ith his *other Ai4a Bou ' a 4 his sister !uliet Bou ' 9e t to the house o: private co*plai a t 6 es E" as5i ' her to Page 37

Civil Law Review 2 2013 - 2014 e cash three chec5s 9ith a total value o: P5$#$$$.$$. Si ce 6 es is a close :rie 4 o: the Bou 's a 4 because the" ba4l" ee4e4 *o e"# 6 es a'ree4 to excha 'e the three chec5s 9ith cash. O e o: the chec5s is Philippi e 0a 5 o: Co**u icatio s =P0C@ 9ith a value o: P2$#$$$.$$ 4ra9 b" !esse. O Au'ust 31# 1/)1# 6 es 4eposite4 sai4 chec5 i her accou t 9ith the Co soli4ate4 0a 5 a 4 &rust Corporatio =C0&C@. O Septe*ber 1# 1/)1# C0&C calle4 her up i :or*i ' her that the subDect chec5 9as 4isho ore4 because there 9as a stop pa"*e t or4er a 4 because o: i su::icie c" o: :u 4s to cover the a*ou t appeari ' i the chec5. &herea:ter# 6 es i :or*e4 !esse throu'h telepho e that the chec5 9as 4isho ore4. !esse assure4 her that he 9oul4 *a5e 'oo4 the chec5. 8o9ever# he 4i4 ot :ul:ill his pro*ise. &his pro*pte4 6 es to see5 the help o: her la9"er. 8er la9"er 9rote a 4e*a 4 letter a 4 se t the sa*e to !esse 9ho re:use4 to receive the sa*e. O the other ha 4# !esse 4e ie4 these alle'atio s a 4 clai*s clai*s that he 9as ot 'ive otice o: 4isho or. 8e co te 4s that u 4er Sectio 2 o: 0P 0l'. 22# otice o: 4isho or or 4e*a 4 :or pa"*e t couple4 9ith his :ailure to pa" 9ithi :ive ba 5i ' 4a"s is a prereCuisite be:ore he ca be char'e4 :or violatio o: 0P 0l'. 22. &he R&C re 4ere4 Du4'*e t :i 4i ' !esse 'uilt" be"o 4 reaso able 4oubt o: violati ' 0P 0l'. A 4 a civil liabilit" to pa" co*plai a t the su* o: P2$#$$$.$$. CA a::ir*e4 i toto i R&C 4ecisio . ISSUE* Fhether the co victio o: petitio er o: the cri*e char'e4 is proper i the abse ce o: prior 4e*a 4 :or pa"*e t o: the :ace value o: subDect chec5P HELD* Fe ote that 9e have hel4 i previous cases that the 4ra9er7s act o: oti:"i ' the pa"ee at the ti*e o: the issua ce o: the chec5 that he 4oes ot have su::icie t :u 4s to cover the a*ou t o: such chec5 *a" operate to absolve the 4ra9er :ro* liabilit" u 4er 0P 0l'. 22. 8o9ever# it *ust be e*phasi,e4 that i sai4 cases# the chec5s 9ere 4ra9 a 4 issue4 i 'oo4 :aith a 4 9ithout i te tio o the part o: their respective 4ra9ers to appl" sai4 chec5s :or accou t or :or value. 6 Ma' o vs. Court o: Appeals# the rubber chec5s 9ere si*pl" issue4 to cover a 9arra t" 4eposit i a lease co tract retur able to the 4ra9er upo the satis:actor" co*pletio o: the e tire perio4 o: lease. &he 4ra9er 4i4 ot be e:it :ro* the 4eposit si ce the chec5s 9ere use4 o l" as a 4eposit to serve as securit" :or the :aith:ul per:or*a ce o: the 4ra9er7s obli'atio as a lessee o: a eCuip*e t. O the other ha 4# i 64os vs. Court o: ARAFAG HABANA JALAYAJAY Appeals# the subDect chec5 9as issue4 :or the *ere purpose o: evi4e ci ' the private co*plai a t7s share or i terest i a part ership he e tere4 i to 9ith the 4ra9er o: the chec5. &he chec5 9as si*pl" *ea t to sho9 the 4ra9er7s co**it*e t that 9he the receivables o: the part ership are collecte4 a 4 'oo4s are sol4 a 4 o l" 9he such collectio a 4 sale 9ere reali,e4# 9oul4 the 4ra9er 'ive to the private co*plai a t the et a*ou t 4ue hi* represe ti ' his i terest i the part ershipL it 4i4 ot i volve a 4ebt o: or a " a*ou t 4ue a 4 pa"able b" the 4ra9er. &hus# the operative :acts i the prese t case are 4i::ere t. 8erei petitio er issue4 the subDect chec5 i excha 'e :or cash 'ive to hi* a 4 his *other a 4 sister b" private co*plai a t. 8e ce# as 4isti 'uishe4 :ro* Ma' o a 4 64os# it is clear that i the i sta t case the chec5 9as i te 4e4 to appl" :or accou t or :or value. Si ce the three ele*e ts o: the o::e se pu ishe4 u 4er the :irst para'raph o: Sectio 1 o: 0P 0l'. 22 are prese t i the i sta t case# 9e :i 4 o error i the Court o: Appeals7 a::ir*atio o: the trial court7s 4ecisio co victi ' petitio er o: violatio o: 0P 0l'. 22. !ALLO* CA 4ecisio a::ir*e4.

PHILIPPINE SA"INGS BAN# "S% SPOUSES ANALAC A<2?/ 26$ 2005 !ACTS* O 1/7(# Spouses Ma alac obtai e4 a loa :ro* PS 0a 5 covere4 b" a pro*issor" ote. &he Spouses execute4 a REM as a securit". 2ue to their i abilit" to pa" the loa # such 9as restructure4 i 1/77

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Civil Law Review 2 2013 - 2014 a 4 the Spouses si' e4 a other Pro*issor" 3ote a 4 a other REM over the sa*e properties. O 1/7/# Ma alac a 4 Spouses +alicia# 9ith the co se t o: PS 0a 5 e tere4 i to a 2ee4 o: Sale 9ith Assu*ptio o: Mort'a'e. &herea:ter# the parcels o: la 4 purchase4 b" the +alicias to'ether 9ith other properties 9ere i tur *ort'a'e4 b" the* to secure a loa the" obtai e4 also :ro* PS 0a 5. the sa*e "ear# Spouses Ma alac pai4 PS 0a 5 the value o: the parcels o: la o9 re'istere4 i the a*e o: the +alicias. PS 0a 5 the execute4 a partial release o: the REM covere4 b" the a:oresai4 properties. &herea:ter# Spouses Ma alac 4e:aulte4 a'ai i pa"*e t o: their loa 4espite repeate4 4e*a 4s# he ce# PS 0a 5 :ile4 :or a petitio :or extraDu4icial :oreclosure o: their 5 re*ai i ' *ort'a'e4 properties. &he :oreclosure sale procee4e4 9ith PS 0a 5 as the hi'hest bi44er. &he Spouses :aile4 to re4ee* the sai4 properties a 4 e9 certi:icates o: title 9ere issue4 i :avour o: the ba 5. O 2ece*ber 1(# 1/)3# MaNalac 9rote the Chair*a o: the 0oar4 o: PS0a 5 as5i ' i :or*atio o their reCuest :or the partial release o: the *ort'a'e .E close4 i the sa*e letter is a Cashier7s Chec5 :or P1#2$$#$$$.$$. Epo receipt o: the chec5# &he 0a 57s Assista t Ma a'er issue4 a receipt o: the sai4 Cashier7s Chec5. 6t is u 4erstoo4 ho9ever# that receipt o: sai4 chec5 is ot a co**it*e t o the part o: the 0a 5 to release the .our =%@ &C&s reCueste4 to be release4 o "our letter 4ate4 1/ 2ece*ber 1/)3. O 2ece*ber 1/# 1/)3# the ba 5 applie4 P1#$$$#$$$.$$ o: the P1#2$$#$$$.$$ to the loa accou t o: the +alicias as pa"*e t :or the arreara'es i i terest a 4 the re*ai i ' P2$$#$$$.$$ thereo: 9as applie4 to the expe ses relative to the accou t o: MaNalac. O Ma" 23# 1/)5# the ba 5 sol4 the propert" covere4 b" &C& 3o. 7///( =previousl" &C& 3o. 3%35/3@ to Ester -illa ueva 9ho therea:ter sol4 it to MaNalac. O October 3$# 1/)5# the la 4 covere4 b" &C& 3o. 7///5 9as sol4 b" the ba 5 to &eresita !albue a. &herea:ter# or o October 2$# 1/)(# MaNalac i stitute4 a actio :or 4a*a'es# 4oc5ete4 as Civil Case 3o. 53/(7# be:ore the Re'io al &rial Court o: Pasi'# 0ra ch 1(1# a'ai st PS0a 5 a 4 its o::icers a*el" Ce,ar -ale ,uela# Al:re4o 0arretto a 4 A to io -ira"# a 4 spouses AleDa 4ro a 4 &eresita !albue a. &he R&C re 4ere4 Du4'*e t o: a ul*e t o: the Certi:icate o: Sale issue4 i :avour o: PS 0a 5 as 9ell as the Co tract to Sell execute4 b" the ba 5 i :avour Spouses !albue a. &he 4ecisio 9as a::ir*e4 b" the CA# he ce# this appeal be:ore the SC. ISSUE* Fhether or ot there 9as previous *ort'a'e propertiesP ovatio o: the

HELD* 3O. 3ovatio is the exti 'uish*e t o: a obli'atio b" the substitutio or cha 'e o: the obli'atio b" a subseCue t o e 9hich exti 'uishes or *o4i:ies the :irst# either b" cha 'i ' the obDect or pri cipal co 4itio s# or# b" substituti ' a other i place o: the 4ebtor# or b" subro'ati ' a thir4 perso i the ri'hts o: the cre4itor. 6 or4er :or ovatio to ta5e place# the co curre ce o: the :ollo9i ' reCuisites is i 4ispe sable> 1. &here *ust be a previous vali4 obli'atio # 2. &here *ust be a a'ree*e t o: the parties co cer e4 to a e9 co tract# 3. &here *ust be the exti 'uish*e t o: the ol4 co tract# a 4 %. &here *ust be the vali4it" o: the e9 co tract. &he ele*e ts o: ovatio are pate tl" lac5i ' i the i sta t case. MaNalac te 4ere4 a chec5 :or P1#2$$#$$$.$$ to PS0a 5 :or the release o: % parcels o: la 4 covere4 b" &C& 3os. 3<3(1/2# 3(1/3# a 4 3(1/%# u 4er the loa accou t o: the +alicias a 4 %17$12 = o9 &C& 3o. 7///(@ u 4er the loa accou t o: MaNalac. 8o9ever# 9hile the ba 5 applie4 the te 4ere4 a*ou t to the accou ts as speci:ie4 b" MaNalac# it evertheless re:use4 to release the subDect properties. 6 stea4# it issue4 a receipt 9ith a otatio that the accepta ce o: the chec5 is ot a co**it*e t o the part o: the ba 5 to release the % &C&s as reCueste4 b" MaNalac. .ro* the :ore'oi '# it is obvious that there 9as o a'ree*e t to :or* a e9 co tract b" ovati ' the *ort'a'e co tracts o: the MaNalacs a 4 the +alicias. 6 accepti ' the chec5# the ba 5 o l" acce4e4 to MaNalac7s i structio o 9hose loa accou ts the procee4s shall be applie4 but reDecte4 the other co 4itio that the % parcels o: la 4 be release4 :ro* *ort'a'e. Clearl"# there is o *utual co se t to replace the ol4 *ort'a'e co tract 9ith a e9 obli'atio . &he co :licti ' i te tio a 4 acts o: the parties u 4erscore the abse ce o: a " express 4isclosure or circu*sta ces 9ith 9hich to 4e4uce a clear a 4 u eCuivocal i te t b" the parties to ovate the ol4 a'ree*e t. 3ovatio is ever presu*e4# a 4 the anim"s novandi, 9hether totall" or partiall"# *ust appear b" express a'ree*e t o: the parties# or b" their acts that are too clear a 4 u *ista5able. &he exti 'uish*e t o: the ol4 obli'atio b" the e9 o e is a ecessar" ele*e t o: ovatio # 9hich *a" be e::ecte4 either expressl" or i*plie4l". &he ter* Gexpressl"G *ea s that the co tracti ' parties i co trovertibl" 4isclose that their obDect i executi ' the e9 co tract is to exti 'uish the Page 41

ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 ol4 o e. Epo the other ha 4# o speci:ic :or* is reCuire4 :or a i*plie4 ovatio # a 4 all that is prescribe4 b" la9 9oul4 be a i co*patibilit" bet9ee the t9o co tracts. Fhile there is reall" o har4 a 4 :ast rule to 4eter*i e 9hat *i'ht co stitute to be a su::icie t cha 'e that ca bri ' about ovatio # the touchsto e :or co trariet"# ho9ever# 9oul4 be a irreco cilable i co*patibilit" bet9ee the ol4 a 4 the e9 obli'atio s. 3either ca MaNalac be 4ee*e4 substitute 4ebtor 9ithi the co te*platio o: Article 12/3 o: the Civil Co4e# 9hich states that> Art. 12/3. 3ovatio 9hich co sists i substituti ' a e9 4ebtor i the place o: the ori'i al o e# *a" be *a4e 9ithout the 5 o9le4'e or a'ai st the 9ill o: the latter# but ot 9ithout the co se t o: the cre4itor. Pa"*e t b" the e9 4ebtor 'ives hi* the ri'hts *e tio e4 i articles 123( a 4 1237. 6 or4er to cha 'e the perso o: the 4ebtor# the ol4 o e *ust be expressl" release4 :ro* the obli'atio # a 4 the thir4 perso or e9 4ebtor *ust assu*e the :or*er7s place i the relatio . 3ovatio is ever presu*e4. Co seCue tl"# that 9hich arises :ro* a purporte4 cha 'e i the perso o: the 4ebtor *ust be clear a 4 express. 6t is thus i cu*be t o MaNalac to sho9 clearl" a 4 u eCuivocall" that ovatio has i 4ee4 ta5e place. 6 ,a+dalena -states Inc. v. 'odri+"e.# 9e hel4 that Gthe *ere :act that the cre4itor receives a 'uara t" or accepts pa"*e ts :ro* a thir4 perso 9ho has a'ree4 to assu*e the obli'atio # 9he there is o a'ree*e t that the :irst 4ebtor shall be release4 :ro* respo sibilit"# 4oes ot co stitute a ovatio # a 4 the cre4itor ca still e :orce the obli'atio a'ai st the ori'i al 4ebtor.G MaNalac has ot sho9 b" co*pete t evi4e ce that the" 9ere expressl" ta5i ' the place o: +alicia as 4ebtor# or that the latter 9ere bei ' release4 :ro* their soli4ar" obli'atio . 3or 9as it sho9 that the obli'atio o: the +alicias 9as bei ' exti 'uishe4 a 4 replace4 b" a e9 o e. &he existe ce o: ovatio *ust be sho9 i clear a 4 u *ista5able ter*s. +ra ti ' ar+"endo that a e9 obli'atio 9as establishe4 9ith the accepta ce b" the ba 5 o: the PC60 Chec5 a 4 its applicatio to the loa accou t o: MaNalac o the co 4itio that &C& 3o. %17$12 9oul4 be release4# this e9 obli'atio ho9ever coul4 ot suppla t the October 13# 1/77 real estate *ort'a'e execute4 b" MaNalac# 9hich# b" all i te ts a 4 purposes# is o9 a 4e:u ct a 4 o <existe t co tract. As *e tio e4 earlier# ovatio ca ot be presu*e4.

ASTRO ELECTRONICS AND PETER RO+AS "S% PHIL% E+PORT AND !OREIGN LOAN GUARANTEE CORP% S7<=7>872 23$ 2003 !ACTS* Petitio er Astro 9as 'ra te4 several loa s b" Phil&rust 9ith i terest a 4 pro*issor" otes. 6 each pro*issor" otes# Petitio er Roxas si' e4 t9ice# as Presi4e t o: Astro a 4 i his perso al capacit". Roxas

ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014 also si' e4 a Co ti ui ' Suret"ship A'ree*e t i :avour o: Phil&rust 0a 5# as Presi4e t o: Astro a 4 as suret". &herea:ter# Phil'uara tee 9ith the co se t o: Astro 'uara tee4 i :avour o: Phil&rust the pa"*e t o: 7$J o: Astro7s loa # subDect to the co 4itio that upo pa"*e t# it shall be proportio all" subro'ate4 to the ri'hts o: Phil&rust a'ai st Astro. As a result o: Astro7s :ailure to pa" 4espite 4e*a 4s# Phil +uara tee :ile4 a'ai st Astro a 4 Roxas a co*plai t :or su* o: *o e" i the Ma5ati R&C. R&C re 4ere4 Du4'*e t 'ia ts petitio er 9hich 9as a::ir*e4 b" the CA. ISSUE* Fhether or ot Roxas shoul4 be hel4 soli4aril" liable 9ith Astro :or the su* o: *o e"P HELD* BES. &he i sta t case is o e o: the le'al subro'atio that occurs b" operatio o: la9# a 4 9ithout ee4 o: the 4ebtor7s 5 o9le4'e. .urther# Phil'uara tee# as 'uara tor# beca*e the tra s:eree o: all the ri'hts o: Philtrust as a'ai st Roxas a 4 Astro because the O'uara tor 9ho pa"s is subro'ate4 b" virtue thereo: to all the ri'hts 9hich the cre4itor ha4 a'ai st the 4ebtor.I Subro'atio is the tra s:er o: all ri'hts o: the cre4itor to a thir4 perso # 9ho substitutes hi* i all his ri'hts. 6t *a" either be le'al or co ve tio al. 1e'al subro'atio is that 9hich ta5es 9ithout a'ree*e t but b" operatio o: la9 because o: certai acts. 6 sta ces o: le'al subro'atio are those provi4e4 i Art. 13$2 o: the Civil Co4e. Co ve tio al subro'atio # o the other ha 4# is that 9hich ta5es place b" a'ree*e t o: the parties. 6 the i sta t case# Astro7s loa 9ith Philtrust 0a 5 is secure4 b" three pro*issor" otes. &hese pro*issor" otes are vali4 a 4 bi 4i ' a'ai st Astro a 4 Roxas. As it appears o the otes# Roxas si' e4 t9ice> :irst# as presi4e t o: Astro a 4 seco 4# i his perso al capacit". 6 si' i ' his a*e asi4e :ro* bei ' the Presi4e t o: Asro# Roxas beca*e a co<*a5er o: the pro*issor" otes a 4 ca ot escape a " liabilit" arisi ' :ro* it. E 4er the 3e'otiable 6 stru*e ts 1a9# perso s 9ho 9rite their a*es o the :ace o: pro*issor" otes are *a5ers# pro*isi ' that the" 9ill pa" to the or4er o: the pa"ee or a " hol4er accor4i ' to its te or. &hus# eve 9ithout the phrase Operso al capacit"#I Roxas 9ill still be pri*aril" liable as a Doi t a 4 several 4ebtor u 4er the otes co si4eri ' that his i te tio to be liable as such is *a i:este4 b" the :act that he a::ixe4 his si' ature o each o: the pro*issor" otes t9ice 9hich ARAFAG HABANA JALAYAJAY Roxas7 clai* that the phrases Oi his perso al capacit"I a 4 Oi his o::icial capacit"I 9ere i serte4 o the otes 9ithout his 5 o9le4'e 9as correctl" 4isre'ar4e4 b" the R&C a 4 the Court o: Appeals. 6t is ot 4ispute4 that Roxas 4oes ot 4e " that he si' e4 the otes t9ice. As aptl" :ou 4 b" both the trial a 4 appellate court# Roxas 4i4 ot o::er a " expla atio 9h" he 4i4 so. 6t 4evolves upo hi* to overco*e the presu*ptio s that private tra sactio s are presu*e4 to be :air a 4 re'ular a 4 that a perso ta5es or4i ar" care o: his co cer s. Asi4e :ro* his sel:<servi ' alle'atio s# Roxas :aile4 to prove the truth o: such alle'atio s. &hus# sai4 presu*ptio s prevail over his clai*s. 0are alle'atio s# 9he u substa tiate4 b" evi4e ce# 4ocu*e tar" or other9ise# are ot eCuivale t to proo: u 4er our Rules o: Court. ecessaril" 9oul4 i*pl" that he is u 4erta5i ' the obli'atio i t9o 4i::ere t capacities# o::icial a 4 perso al. &he three pro*issor" otes u i:or*l" provi4e> O.OR -A1EE RECE6-E2# 6QFe Doi tl"# severall" a 4 soli4aril"# pro*ise to pa" to P861&RES& 0A3; or or4er...I A i stru*e t 9hich be'i s 9ith O6I# OFeI# or OEither o: usI pro*ise to pa"# 9he si' e4 b" t9o or *ore perso s# *a5es the* soli4aril" liable. Also# the phrase ODoi t a 4 severalI bi 4s the *a5ers Doi tl" a 4 i 4ivi4uall" to the pa"ee so that all *a" be sue4 to'ether :or its e :orce*e t# or the cre4itor *a" select o e or *ore as the obDect o: the suit. 8avi ' si' e4 u 4er such ter*s# Roxas assu*e4 the soli4ar" liabilit" o: a 4ebtor a 4 Philtrust 0a 5 *a" choose to e :orce the otes a'ai st hi* alo e or Doi tl" 9ith Astro.

CAR ELCRA!T CORPORATION &1OR CAR EN "% YULO "S% NLRC -.(7 6$ 1990 !ACTS* &he Ca*elcra:t E*plo"ees E io sou'ht but 4i4 ot 'et reco' itio :ro* the petitio ers. Co seCue tl"# it :ile4 a petitio :or certi:icatio electio i !u e 1/)7. O !ul" 13# 1/)7# Ca*elcra:t Corporatio # throu'h its presi4e t a 4 'e eral *a a'er# Car*e Bulo# Page 43

Civil Law Review 2 2013 - 2014 a ou ce4 i a *eeti ' 9ith the e*plo"ees that it 9oul4 cease operatio s o Au'ust 13# 1/)7# 4ue to serious :i a cial losses. Operatio s 4i4 cease as a ou ce4. O Au'ust 17# 1/)7# the u io :ile4 a co*plai t 9ith the 2epart*e t o: 1abor a'ai st the petitio ers :or ille'al loc5out# u :air labor practice a 4 4a*a'es# :ollo9e4 the ext 4a" 9ith a other co*plai t :or pa"*e t o: u pai4 9a'es# e*er'e c" cost o: livi ' allo9a ces# holi4a" pa"# a 4 other be e:its. O 3ove*ber 2/# 1/))# the 1abor Arbiter 4eclare4 the shut4o9 ille'al a 4 violative o: the e*plo"eesK ri'ht to sel:<or'a i,atio . &he clai* :or u pai4 be e:its 9as also 'ra te4. 31RC a::ir*e4 the 4ecisio 9ith *o4i:icatio s. 6t 9as the co te tio o: petitio er that the e*plo"ees are stoppe4 :ro* clai*i ' the alle'e4 u pai4 9a'es a 4 other co*pe satio as the" si' e4 9aivers *a4e volu taril" a 4 that this co tract bet9ee the t9o parties shoul4 be respecte4. ISSUE* Fhether or ot the 9aivers si' e4 b" the e*plo"ees vali4 or otP HELD* 3O. &he co te tio o: the petitio ers that the e*plo"ees are estoppe4 :ro* clai*i ' the alle'e4 u pai4 9a'es a 4 other co*pe satio *ust also be reDecte4. &his clai* is base4 o the 9aivers suppose4l" *a4e b" the co*plai a ts o the u 4ersta 4i ' that Gthe *a a'e*e t 9ill i*ple*e t prospectivel" all be e:its u 4er existi ' labor sta 4ar4 la9s.G &he petitio ers ar'ue that this assura ce provi4e4 the co si4eratio that *a4e the Cuitclai*s execute4 b" the e*plo"ees vali4. &he" a44 that the 9aivers 9ere *a4e volu taril" a 4 co te 4 that the co tract shoul4 be respecte4 as the la9 bet9ee the parties. Eve i: volu taril" execute4# a'ree*e ts are i vali4 i: the" are co trar" to public polic". &his is ele*e tar". &he protectio o: labor is o e o: the policies lai4 4o9 b" the Co stitutio ot o l" b" speci:ic provisio but also as part o: social Dustice. &he Civil Co4e itsel: provi4es> AR&. (. Ri'hts *a" be 9aive4# u less the 9aiver is co trar" to la9# public or4er# public polic"# *orals# or 'oo4 custo*s# or preDu4icial to a thir4 perso 9ith a ri'ht reco' i,e4 b" la9. AR&. 13$(. &he co tracti ' parties *a" establish such stipulatio s# clauses# ter*s a 4 co 4itio s as the" *a" 4ee* co ve ie t# provi4e4 the" are ot co trar" to la9# *orals# 'oo4 custo*s# public or4er# or public polic". &he subor4i ate positio o: the i 4ivi4ual e*plo"ee vis/a/vis *a a'e*e t re 4ers hi* especiall" vul erable to its bla 4ish*e ts a 4 i*portu i 's# a 4 eve i ti*i4atio s# that *a" result i his i*provi4e tl" i: relucta tl" si' i ' over be e:its to 9hich he is clearl" e title4. Reco' i,i ' this 4a 'er# 9e have co siste tl" hel4 that Cuitclai*s o: the 9or5ersK be e:its 9i ot estop the* :ro* asserti ' the* Dust the sa*e o the 'rou 4 that public polic" prohibits such 9aivers. &hat the e*plo"ee has si' e4 a satis:actio receipt 4oes ot result i a 9aiverL the la9 4oes ot co si4er as vali4 a " a'ree*e t to receive less co*pe satio tha 9hat a 9or5er is e title4 to recover. A 4ee4 o: release or Cuitclai* ca ot bar a e*plo"ee :ro* 4e*a 4i ' be e:its to 9hich he is le'all" e title4. Release a 4 Cuitclai* is i eCuitable a 4 i co 'ruous to the 4eclare4 public polic" o: the State to a::or4 protectio to labor a 4 to assure the ri'hts o: 9or5ers to securit" o: te ure. All tol4# the co 4uct o: the petitio ers to9ar4 the e*plo"ees has bee less tha co**e 4able. 6 4ee4# it is reprehe sible. .irst# the co*pa " i vei'le4 the* to 9aive their clai*s to co*pe satio 4ue the* o the pro*ise that :uture be e:its 9oul4 be pai4 =a 4 to *a5e *atters 9orse# there is o sho9i ' that the" 9ere i 4ee4 pai4@. Seco 4# it re:use4 to reco' i,e the respo 4e t u io # su''esti ' to the e*plo"ees that the" Doi a other u io acceptable to *a a'e*e t. &hir4# it threate e4 the e*plo"ees 9ith the closure o: the co*pa " a 4 the actuall" 4i4 so 9he the e*plo"ees i siste4 o their 4e*a 4s. All these acts re:lect o the bona fides o: the petitio ers a 4 u *ista5abl" i 4icate their ill 9ill to9ar4 the e*plo"ees.

ACOL "S% PHILIPPINE CO ERCIAL CREDIT CARD INCORPORATED -./0 25$ 2006 !ACTS* O Au'ust 2$# 1/)2# petitio er Ma uel Acol applie4 9ith respo 4e t :or a 0a 5ar4 cre4it car4 a 4 exte sio . 0oth 9ere issue4 to hi* shortl" therea:ter. .or several "ears# he re'ularl" use4 this car4# purchasi ' :ro* respo 4e tKs accre4ite4 establish*e ts a 4 pa"i ' the correspo 4i ' char'es :or such Page 44

ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 purchases. Petitio er 4iscovere4 the loss o: his cre4it car4. A:ter exhausti ' all e::orts to :i 4 it# o April 1/# 1/)7# a Su 4a"# he calle4 up respo 4e tKs o::ice a 4 reporte4 the loss. &he represe tative he spo5e to tol4 hi* that his car4 9oul4 be i**e4iatel" i clu4e4 i the circular o: lost car4s. A'ai # o April 2$# 1/)7# petitio er calle4 up respo 4e t to reiterate his report o the loss o: his car4. 8e i Cuire4 i: there 9ere other reCuire*e ts he ee4e4 to co*pl" 9ith i co ectio 9ith the loss. Respo 4e tKs represe tative a4vise4 hi* to put i to 9riti ' the otice o: loss a 4 to sub*it it# to'ether 9ith the exte sio car4s o: his 9i:e a 4 4au'hter. Petitio er pro*ptl" 9rote a letter 4ate4 April 2$# 1/)7 co :ir*i ' the loss a 4 se t it to respo 4e t 9hich receive4 it o April 22# 1/)7. O April 21# 1/)7# a 4a" be:ore receivi ' the 9ritte otice# respo 4e t issue4 a special ca cellatio bulleti i :or*i ' its accre4ite4 establish*e ts o: the loss o: the car4s o: the e u*erate4 hol4ers# i clu4i ' petitio erKs. E :ortu atel"# it tur e4 out that so*ebo4" use4 petitio erKs car4 o April 1/ a 4 2$# 1/)7 to bu" co**o4ities 9orth P7(#$(7.2). &he accre4ite4 establish*e ts reporte4 the i voices :or such purchases to respo 4e t 9hich the bille4 petitio er :or that a*ou t. 3o etheless# respo 4e t i siste4 o colleti ' a 4 alle'e4 that it 9as the *ost practicable proce4ure o: the co*pa ". 6t cite4 provisio o. 1 o: the G&er*s a 4 Co 4itio s +over i ' &he 6ssua ce a 4 Ese o: the 0a 5ar4G :ou 4 at the bac5 o: the applicatio :or*>
xxx 8ol4erKs respo sibilit" :or all char'es *a4e throu'h the use o: the car4 shall co ti ue u til the expiratio or its retur to the Car4 6ssuer or u til a reaso able ti*e a:ter receipt b" the Car4 6ssuer o: 9ritte otice o: loss o: the Car4 a 4 its actual i clusio i the Ca cellatio 0ulleti . xxx

&he verbal a 4 9ritte otices ot9ithsta 4i '# respo 4e t i siste4 o billi ' petitio er 1uis Er*itaNo# Ma uelitaKs husba 4 a 4 the pri cipal car4hol4er# :or purchases *a4e a:ter the 4ate o: the loss totalli ' P3#1/7.7$. &o Dusti:" the billi '# respo 4e t 0ECC cite4 the :ollo9i ' stipulatio i their co tract>
6 the eve t the car4 is lost or stole # the car4hol4er a'rees to i**e4iatel" report its loss or the:t i 9riti ' to 0ECC purchases *a4eQi curre4 arisi ' :ro* the use o: the lostQstole car4 shall be :or the exclusive accou t o: the car4hol4er a 4 the car4hol4er co ti ues to be liable :or the purchases *a4e throu'h the use o: the lostQstole 0P6 Express Car4 u til a:ter such otice has bee 'ive to 0ECC a 4 the latter has co**u icate4 such lossQthe:t to its *e*ber establish*e ts.

6t is 9orth oti ' that# Dust li5e the assaile4 provisio i this case# the stipulatio 4evise4 b" respo 4e t 0ECC reCuire4 t9o co 4itio s be:ore the car4hol4er coul4 be relieve4 o: respo sibilit" :ro* u authori,e4 char'es> =1@ the receipt b" the car4 issuer o: a 9ritte otice :ro* the car4hol4er re'ar4i ' the loss a 4 =2@ the oti:icatio to the issuerKs accre4ite4 establish*e ts re'ar4i ' such loss. Fe struc5 4o9 this stipulatio as co trar" to public polic" a 4 'ra te4 the Er*itaNosK petitio >
Pro*pt otice b" the car4hol4er to the cre4it car4 co*pa " o: the loss or the:t o: his car4 shoul4 be e ou'h to relieve the :or*er o: a " liabilit" occasio e4 b" the u authori,e4 use o: his lost or stole car4. &he Cuestio e4 stipulatio i this case# 9hich still reCuires the car4hol4er to 9ait u til the cre4it car4 co*pa " has oti:ie4 all its *e*ber<establish*e ts# puts the car4hol4er at the *erc" o: the cre4it car4 co*pa " 9hich *a" 4ela" i 4e:i itel" the oti:icatio o: its *e*bers to *i i*i,e i: ot to eli*i ate the possibilit" o: i curri ' a " loss :ro* u authori,e4 purchases. Or# as i this case# the cre4it car4 co*pa " *a" :or so*e reaso :ail to pro*ptl" oti:" its *e*bers throu'h absolutel" o :ault o: the car4hol4er. &o reCuire the car4hol4er to still pa" :or the u authori,e4 purchases a:ter he has 'ive pro*pt otice o: the loss or the:t o: his car4 to the cre4it car4 co*pa " 9oul4 si*pl" be u :air a 4 u Dust. &he Court ca ot 'ive its asse t to such a stipulatio 9hich coul4 clearl" ru a'ai st public polic".

R&C rule4 i :avour o: petitio er but 9as reverse4 b" CA. 8e ce this i sta t petitio be:ore the SC. ISSUE* Fhether or ot Provisio 3o. 1 is vali4 a 4 bi 4i ' o the petitio er 'ive that the co tract 9as o e o: a4hesio P HELD* 3O. &he :acts o: this case are virtuall" i4e tical 9ith those o: -rmita0o v. C(. 6 that case# petitio er< exte sio car4hol4er Ma uelita Er*itaNo lost her car4 o the i'ht o: Au'ust 2/# 1/)/ 9he her ba' 9as s atche4 i Ma5ati. &hat ver" sa*e eve i '# she reporte4 the loss a 4 i**e4iatel" therea:ter se t 9ritte otice to the respo 4e t cre4it car4 co*pa "# 0P6 Express Car4 Corp. =0ECC@.

6 this case# the stipulatio i Cuestio is Dust as repu' a t to public polic" as that i -rmita0o. As petitio er poi ts out# the e::ectivit" o: the ca cellatio o: the lost car4 rests o a act e tirel" be"o 4 the co trol o: the car4hol4er. Forse# the phrase Ga:ter a reaso able ti*eG 'ives the issuer the opportu it" to actuall" pro:it :ro* u authori,e4 char'es 4espite receipt o: i**e4iate 9ritte otice :ro* the car4hol4er. E 4er such a stipulatio # petitio er coul4 have theoreticall" 4o e ever"thi ' i his po9er to 'ive respo 4e t the reCuire4 9ritte otice. 0ut i: respo 4e t too5 a Greaso ableG ti*e =9hich coul4 be i 4e:i ite@ to i clu4e the car4 i its ca cellatio bulleti # it coul4 still hol4 the car4hol4er liable :or 9hatever u authori,e4 char'es 9ere i curre4 9ithi that spa o: ti*e. &his 9oul4 have bee trul" i iCuitous# co si4eri ' the a*ou t respo 4e t 9a te4 to hol4 petitio er liable :or. Page 43

ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 Article 13$( o: the Civil Co4e prohibits co tracti ' parties :ro* establishi ' stipulatio s co trar" to public polic". &he assaile4 provisio 9as Dust such a stipulatio . 6t is 9ithout a " hesitatio there:ore that 9e stri5e it 4o9 .

TIU A&% PLATINU PLANS PHILIPPINES !782.'20 28$ 2007 !ACTS* Respo 4e t Plati u* Pla s Philippi es# 6 c. is a 4o*estic corporatio e 'a'e4 i the pre< ee4 i 4ustr". .ro* 1/)7 to 1/)/# petitio er 2ais" 0. &iu 9as its 2ivisio Mar5eti ' 2irector. O !a uar" 1# 1//3# respo 4e t re<hire4 petitio er as Se ior Assista t -ice< Presi4e t a 4 &erritorial Operatio s 8ea4 i char'e o: its 8o ' ;o ' a 4 Asea operatio s. &he parties execute4 a co tract o: e*plo"*e t vali4 :or :ive "ears. ARAFAG HABANA JALAYAJAY Page 44

Civil Law Review 2 2013 - 2014

O Septe*ber 1(# 1//5# petitio er stoppe4 reporti ' :or 9or5. 6 3ove*ber 1//5# she beca*e the -ice Presi4e t :or Sales o: Pro:essio al Pe sio Pla s# 6 c.# a corporatio e 'a'e4 also i pre< ee4 i 4ustr". Co seCue tl"# respo 4e t sue4 petitio er :or 4a*a'es be:ore the R&C o: Pasi' Cit"# 0ra ch 2(1. Respo 4e t alle'e4# a*o ' others# that petitio er7s e*plo"*e t 9ith Pro:essio al Pe sio Pla s# 6 c. violate4 the o <i volve*e t clause i her co tract o: e*plo"*e t. 6 uphol4i ' the vali4it" o: the o < i volve*e t clause# the trial court rule4 that a co tract i restrai t o: tra4e is vali4 provi4e4 that there is a li*itatio upo either ti*e or place. 6 the case o: the pre< ee4 i 4ustr"# the trial court :ou 4 the t9o<"ear restrictio to be vali4 a 4 reaso able. O appeal# the Court o: Appeals a::ir*e4 the trial court7s ruli '. 6t reaso e4 that petitio er e tere4 i to the co tract o her o9 9ill a 4 volitio . &hus# she bou 4 hersel: to :ul:ill ot o l" 9hat 9as expressl" stipulate4 i the co tract# but also all its co seCue ces that 9ere ot a'ai st 'oo4 :aith# usa'e# a 4 la9. &he appellate court also rule4 that the stipulatio s prohibiti ' o <e*plo"*e t :or t9o "ears 9as vali4 a 4 e :orceable co si4eri ' the ature o: respo 4e ts busi ess.

6 su*# &he Court :i 4s the o <i volve*e t clause ot co trar" to public 9el:are a 4 ot 'reater tha is ecessar" to a::or4 a :air a 4 reaso able protectio to respo 4e t. 8e ce the restrai t is vali4 a 4 such stipulatio prevails.

ISSUE* Fhether or ot the CA erre4 i vali4it" o: the o <i volve*e t clauseP sustai i ' the

HELD* BES. 6 this case# the o <i volve*e t clause has a ti*e li*it> t9o "ears :ro* the ti*e petitio er7s e*plo"*e t 9ith respo 4e t e 4s. 6t is also li*ite4 as to tra4e# si ce it o l" prohibits petitio er :ro* e 'a'i ' i a " pre< ee4 busi ess a5i to respo 4e t7s. More si' i:ica tl"# si ce petitio er 9as the Se ior Assista t -ice<Presi4e t a 4 &erritorial Operatio s 8ea4 i char'e o: respo 4e t7s 8o '5o ' a 4 Asea operatio s# she ha4 bee priv" to co :i4e tial a 4 hi'hl" se sitive *ar5eti ' strate'ies o: respo 4e t7s busi ess. &o allo9 her to e 'a'e i a rival busi ess soo a:ter she leaves 9oul4 *a5e respo 4e t7s tra4e secrets vul erable especiall" i a hi'hl" co*petitive *ar5eti ' e viro *e t. ARAFAG HABANA JALAYAJAY

A"ON COS ETICS A&% LUNA 511 SCRA 376 !ACTS* &he prese t petitio ste**e4 :ro* a co*plai t 4ate4 1 2ece*ber 1/))# :ile4 b" herei respo 4e t 1u a alle'i '# i ter aliaY that she be'a 9or5i ' :or 0eauti:o t# 6 c. i 1/72# :irst as a :ra chise 4ealer a 4 the a "ear later# as a Supervisor. So*eti*e i 1/7)# Avo Cos*etics# 6 c. =Avo @# herei petitio er# acCuire4 a 4 too5 over the *a a'e*e t a 4 operatio s o: 0eauti:o t# 6 c. 3o etheless# respo 4e t 1u a co ti ue4 9or5i ' :or sai4 successor co*pa ". Asi4e :ro* her 9or5 as a supervisor# respo 4e t 1u a also acte4 as a *a5e<up artist o: petitio er# :or 9hich she receive4 a per Page 45

Civil Law Review 2 2013 - 2014 4ie* :or each theatrical per:or*a ce. &he co tract 9as that> &he Co*pa " a'rees> 1@ &o allo9 the Supervisor to purchase at 9holesale the pro4ucts o: the Co*pa ". The Supervisor agrees: 1@ &o purchase pro4ucts :ro* the Co*pa " exclusivel" :or resale a 4 to be respo sible :or obtai i ' all per*its a 4 lice ses reCuire4 to sell the pro4ucts o retail. The Company and the Supervisor mutually agree: 1@ &hat this a'ree*e t i o 9a" *a5es the Supervisor a e*plo"ee or a'e t o: the Co*pa "# there:ore# the Supervisor has o authorit" to bi 4 the Co*pa " i a " co tracts 9ith other parties. 2@ &hat the Supervisor is a i 4epe 4e t retailerQ4ealer i so:ar as the Co*pa " is co cer e4# a 4 shall have the sole 4iscretio to 4eter*i e 9here a 4 ho9 pro4ucts purchase4 :ro* the Co*pa " 9ill be sol4. 8o9ever# the Supervisor shall ot sell such pro4ucts to stores# super*ar5ets or to a " e tit" or perso 9ho sells thi 's at a :ixe4 place o: busi ess. 3@ &hat this a'ree*e t superse4es a " a'ree*e tQs bet9ee the Co*pa " a 4 the Supervisor. %@ &hat the Supervisor shall sell or o::er to sell# 4ispla" or pro*ote o l" a 4 exclusivel" pro4ucts sol4 b" the Co*pa ". 5@ Either part" *a" ter*i ate this a'ree*e t at 9ill# 9ith or 9ithout cause# at a " ti*e upo otice to the other. 1ater# respo 4e t 1u a e tere4 i to the sales :orce o: Sa 4re Philippi es 9hich cause4 her ter*i atio :or the alle'e4 violatio o: the ter*s o: the co tract. &he trial court rule4 i :avor o: 1u a that the co tract 9as co trar" to public polic" thus the 4is*issal 9as ot proper. &he Court o: Appeals a::ir*e4 the 4ecisio # he ce this petitio . o: the perso # but la9 9hich i certai respects a::ects the i terest o: societ". Plai l" put# public polic" is that pri ciple o: the la9 9hich hol4s that o subDect or citi,e ca la9:ull" 4o that 9hich has a te 4e c" to be i Durious to the public or a'ai st the public 'oo4. As applie4 to co tracts# i the abse ce o: express le'islatio or co stitutio al prohibitio # a court# i or4er to 4eclare a co tract voi4 as a'ai st public polic"# *ust :i 4 that the co tract as to the co si4eratio or thi ' to be 4o e# has a te 4e c" to i Dure the public# is a'ai st the public 'oo4# or co trave es so*e establishe4 i terests o: societ"# or is i co siste t 9ith sou 4 polic" a 4 'oo4 *orals# or te 4s clearl" to u 4er*i e the securit" o: i 4ivi4ual ri'hts# 9hether o: perso al liabilit" or o: private propert". .ro* a other perspective# the *ai obDectio to exclusive 4eali ' is its te 4e c" to :oreclose existi ' co*petitors or e9 e tra ts :ro* co*petitio i the covere4 portio o: the releva t *ar5et 4uri ' the ter* o: the a'ree*e t. O l" those arra 'e*e ts 9hose probable e::ect is to :oreclose co*petitio i a substa tial share o: the li e o: co**erce a::ecte4 ca be co si4ere4 as voi4 :or bei ' a'ai st public polic". &he :oreclosure e::ect# i: a "# 4epe 4s o the *ar5et share i volve4. &he releva t *ar5et :or this purpose i clu4es the :ull ra 'e o: selli ' opportu ities reaso abl" ope to rivals# a*el"# all the pro4uct a 4 'eo'raphic sales the" *a" rea4il" co*pete :or# usi ' easil" co vertible pla ts a 4 *ar5eti ' or'a i,atio s. Appl"i ' the prece4i ' pri ciples to the case at bar# there is othi ' i vali4 or co trar" to public polic" either i the obDectives sou'ht to be attai e4 b" para'raph 5# i.e.# the exclusivit" clause# i prohibiti ' respo 4e t 1u a# a 4 all other Avo supervisors# :ro* selli ' pro4ucts other tha those *a u:acture4 b" petitio er Avo . 8avi ' hel4 that the Oexclusivit" clauseI as e*bo4ie4 i para'raph 5 o: the Supervisor7s A'ree*e t is vali4 a 4 ot a'ai st public polic"# 9e o9 pass to a co si4eratio o: respo 4e t 1u a7s obDectio s to the vali4it" o: her ter*i atio as provi4e4 :or u 4er para'raph ( o: the Supervisor7s A'ree*e t 'ivi ' petitio er Avo the ri'ht to ter*i ate or ca cel such co tract. &he para'raph ( or the Oter*i atio clauseI therei expressl" provi4es that> &he Co*pa " a 4 the Supervisor *utuall" a'ree> (@ Either part" *a" ter*i ate this a'ree*e t at 9ill# 9ith or 9ithout cause# at a " ti*e upo otice to the other. 6 the case at bar# the ter*i atio clause o: the Supervisor7s A'ree*e t clearl" provi4es :or t9o 9a"s o: ter*i ati ' a 4Qor ca celi ' the co tract. O e *o4e 4oes ot exclu4e the other. &he co tract provi4e4 that it ca be ter*i ate4 or ca celle4 :or cause# it also state4 that it ca be ter*i ate4 9ithout cause# both at a " ti*e Page 46

ISSUE* Fhether the Court o: Appeals erre4 i ruli ' that the Supervisor7s A'ree*e t 9as i vali4 :or bei ' co trar" to public polic"P Fhether there 9as subversio o: the auto o*" o: co tracts b" the lo9er courtsP HELD* A'ree*e ts i violatio o: or4e pZblico *ust be co si4ere4 as those 9hich co :lict 9ith la9# 9hether properl"# strictl" a 4 9holl" a public la9 or 9hether a la9 ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 a 4 a:ter 9ritte otice. &hus# 9hether or ot the ter*i atio or ca cellatio o: the Supervisor7s A'ree*e t 9as O:or cause#I is i**aterial. &he o l" reCuire*e t is that o: otice to the other part". Fhe petitio er Avo chose to ter*i ate the co tract# :or cause# respo 4e t 1u a 9as 4ul" oti:ie4 thereo:. Forth stressi ' is that the ri'ht to u ilaterall" ter*i ate or ca cel the Supervisor7s A'ree*e t 9ith or 9ithout cause is eCuall" available to respo 4e t 1u a# subDect to the sa*e otice reCuire*e t. Obviousl"# o a4va ta'e is ta5e a'ai st each other b" the co tracti ' parties.

PILIPINO TELEPHONE CORPORATION "S% TECSON '0 7$ 2004 !ACTS* Mr. &ecso applie4 :or six cellular pho e subscriptio s 9ith Pilipi o &elepho e Corporatio =P61&E1@. &he applicatio s 9ere approve4 a 4 covere4 b" six *obili e service a'ree*e ts# all o: 9hich provi4es> O-e ue o: all suits arisi ' :ro* this A'ree*e t or a " other suit 4irectl" or i 4irectl" arisi ' :ro* the relatio ship bet9ee P61&E1 a 4 subscriber shall be i the proper courts o: Ma5ati# Metro Ma ila. Subscriber hereb" expressl" 9aives a " other ve ues.I Mr. &ecso :ile4 9ith the R&C# 6li'a Cit"# 1a ao 2el 3orte# a co*plai t a'ai st petitio er :or a OSu* o:

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Civil Law Review 2 2013 - 2014 Mo e" a 4 2a*a'es.I P61&E1 *ove4 :or the 4is*issal o: the co*plai t o the 'rou 4 o: i*proper ve ue. ISSUE* Fhether or 9ro ' ve ueP HELD* Sectio %# Rule %# o: the Revise4 Rules o: Civil Proce4ure allo9s the parties to a'ree a 4 stipulate i 9riti '# be:ore the :ili ' o: a actio # o the exclusive ve ue o: a " liti'atio bet9ee the*. Such a a'ree*e t 9oul4 be vali4 a 4 bi 4i ' provi4e4 that the stipulatio o the chose ve ue is exclusive i ature or i i te t# that it is expresse4 i 9riti ' b" the parties thereto# a 4 that it is e tere4 i to be:ore the :ili ' o: the suit. &he provisio co tai e4 i para'raph 22 o: the OMobile Service A'ree*e t#I a sta 4ar4 co tract *a4e out b" petitio er P61&E1 to its subscribers# appare tl" accepte4 a 4 si' e4 b" respo 4e t# states that the ve ue o: all suits arisi ' :ro* the a'ree*e t# or a " other suit 4irectl" or i 4irectl" arisi ' :ro* the relatio ship bet9ee P61&E1 a 4 subscriber# Oshall be i the proper courts o: Ma5ati# Metro Ma ila.I &he a44e4 stipulatio that the subscriber Oexpressl" 9aives a " other ve ueI shoul4 i 4icate# clearl" e ou'h# the i te t o: the parties to co si4er the ve ue stipulatio as bei ' preclusive i character. ot the co*plai t 9as :ile4 i the

PHILIPPINE NATIONAL BAN# "S% CA A<2?/ 30$ 1991 !ACTS* Private respo 4e t =PR@ A*brosio Pa4illa# applie4 :or a 4 9as 'ra te4 a cre4it li e o: 321.)*illio # b" petitio er P30. &his 9as :or a ter* o: 2 "ears at 1)J i terest per a u* a 4 9as secure4 b"real estate *ort'a'e a 4 2 pro*issor" otes execute4 i :avor o: Petitio er b" PR. &he cre4it a'ree*e ta 4 the pro*issor" otes# i e::ect# provi4e that PR a'rees to be bou 4 b" Oi creases to the i terest ratestipulate4# provi4e4 it is 9ithi the li*its provi4e4 :or b" la9I.Co :lict i this case arose 9he Petitio er u ilaterall" i crease4 the i terest rate :ro* 1)J to> =1@ 32JS!ul" 1/)%TL =2@ %1J SOctober 1/)%TL a 4 =3@ %)J S3ove*ber 1/)%T# or 3 ti*es 9ithi the spa o: a si 'le"ear.

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Civil Law Review 2 2013 - 2014 &his 9as 4o e 4espite the u*erous letters o: reCuest *a4e b" PR that the i terest rate bei crease4 o l" to 21J or 2%J.PR :ile4 a co*plai t a'ai st Petitio er 9ith the R&C. &he latter 4is*isse4 the case :or lac5 o: *erit. Appeal b" PR to CA resulte4 i his :avor. 8e ce the petitio :or certiorari u 4er Rule %5 o: ROC :ile4 b"P30 9ith SC. ISSUE* 2espite the re*oval o: the Esur" 1a9 ceili ' o i terest# *a" the ba 5 vali4l" i crease the stipulate4 i terest rate o loa s co tracte4 9ith thir4 perso s as o:te as ecessar" a 4 a'ai st the protest o: such perso sP HELD* 3O. Althou'h u 4er Sec. 2 o: P2 11(# the Mo etar" 0oar4 is authori,e4 to prescribe the *axi*u* rate o: i terest :or loa s a 4 to cha 'e such rates 9he ever 9arra te4 b" prevaili ' eco o*ic a 4 social co 4itio s# b" express provisio # it *a" ot 4o so Oo:te er tha o ce ever" 12 *o thsI. 6: the Mo etar" 0oar4 ca ot# *uch less ca P30# e::ect i creases o the i terest rates *ore tha o ce a "ear. 0ase4 o the cre4it a'ree*e t a 4 pro*issor" otes execute4 bet9ee the parties# althou'h PR 4i4 a'ree to i crease o the i terest rates allo9e4 b" la9# o la9 9as passe4 9arra ti ' Petitio er to e::ect i crease o the i terest rates o the existi ' loa o: PR :or the *o ths o: !ul" to 3ove*ber o: 1/)%.3either there bei ' a " 4ocu*e t execute4 a 4 4elivere4 b" PR to e::ect such i crease. .or escalatio clauses to be vali4 a 4 9arra t the i crease o: the i terest rates o loa s# there *ust be>=1@ i crease 9as *a4e b" la9 or b" the Mo etar" 0oar4L =2@ stipulatio *ust i clu4e a clause :or the re4uctio o: the stipulate4 i terest rate i the eve t that the *axi*u* i terest is lo9ere4 b" la9 or b" the Mo etar" boar4. 6 this case# P30 *erel" relie4 o its o9 0oar4 Resolutio s# 9hich are ot la9s or resolutio s o: the Mo etar" 0oar4. 2espite the suspe sio o: the Esur" 1a9# i*posi ' a ceili ' o i terest rates# this 4oes ot authori,e ba 5s to u ilaterall" a 4 successivel" i crease i terest rates i violatio o: Sec. 2 P2 11(.6 creases u ilaterall" e::ecte4 b" P30 9as i violatio o: the Mutualit" o: Co tracts u 4er Art. 13$). &his provi4es that the vali4it" a 4 co*plia ce o: the parties to the co tract ca ot be le:t to the 9ill o: o e o: the co tracti ' parties. 6 creases *a4e are there:ore voi4. 6 crease o the stipulate4 i terest rates *a4e b" P30 also co trave es Art. 1/5(. 6t provi4es that# O o i terest shall be 4ue u less it has bee expressl" stipulate4 i 9riti 'I. PR ever a'ree4 i 9riti ' to pa" i terest ARAFAG HABANA JALAYAJAY i*pose4 b" P30 i excess o: 2%J per a u*. 6 terest rate i*pose4 b" P30# as correctl" :ou 4 b" CA# is i 4ubitabl" excessive.

D#C HOLDINGS CORPORATION "S% CA A<2?/ 5$ 2000 !ACTS* &he subDect o: the co trovers" is a parcel o: la 4 locate4 i Mali ta# -ale ,uela# 9hich 9as ori'i all" o9 e4 b" private respo 4e t -ictor E. 0artolo*e7s 4ecease4 *other# E car acio 0artolo*e. &his lot 9as i :ro t o: o e o: the textile pla ts o: petitio er a 4# as such# 9as see b" the latter as a pote tial 9arehouse site. O March 1(# 1/))# petitio er e tere4 i to a Co tract o: 1ease 9ith Optio to 0u" 9ith E car acio 0artolo*e# 9hereb" petitio er 9as 'ive the optio to lease or lease 9ith purchase the subDect la 4# 9hich optio *ust be exercise4 9ithi a perio4 o: t9o "ears cou te4 :ro* the si' i ' o: the Co tract. Fithi the t9o< Page 51

Civil Law Review 2 2013 - 2014 "ear perio4# petitio er shall serve :or*al 9ritte otice upo the lessor E car acio 0artolo*e o: its 4esire to exercise its optio . &he co tract also provi4e4 that i case petitio er chose to lease the propert"# it *a" ta5e actual possessio o: the pre*ises. 6 such a eve t# the lease shall be :or a perio4 o: six "ears# re e9able :or a other six "ears# a 4 the *o thl" re tal :ee shall be P15#$$$.$$ :or the :irst six "ears a 4 P1)#$$$.$$ :or the ext six "ears# i case o: re e9al. Petitio er re'ularl" pai4 the *o thl" re tal provi4e4 :or b" the Co tract to E car acio u til her 4eath i !a uar" 1//$. &herea:ter# petitio er course4 its pa"*e t to private respo 4e t -ictor 0artolo*e# bei ' the sole heir o: E car acio . -ictor# ho9ever# re:use4 to accept these pa"*e ts. Mea 9hile# o !a uar" 1$# 1//$# -ictor execute4 a A::i4avit o: Sel:<A4Du4icatio over all the properties o: E car acio # i clu4i ' the subDect lot. Accor4i 'l"# respo 4e t Re'ister o: 2ee4s ca celle4 &ra s:er Certi:icate o: &itle a 4 issue4 &ra s:er Certi:icate o: &itle i the a*e o: -ictor 0artolo*e. O March 1%# 1//$# petitio er serve4 upo -ictor# via re'istere4 *ail# otice that it 9as exercisi ' its optio to lease the propert"# te 4eri ' the a*ou t o: P15#$$$.$$ as re t :or the *o th o: March. A'ai # -ictor re:use4 to accept the te 4ere4 re tal :ee a 4 to surre 4er possessio o: the propert" to petitio er. Petitio er thus ope e4 Savi 's Accou t 3o. 1<$%< $255)<6<1 9ith the Chi a 0a 5i ' Corporatio # Cubao 0ra ch# i the a*e o: -ictor 0artolo*e a 4 4eposite4 therei the P15#$$$.$$ re tal :ee :or March as 9ell as P(#$$$.$$ reservatio :ees :or the *o ths o: .ebruar" a 4 March. Petitio er also trie4 to re'ister a 4 a otate the Co tract o the title o: -ictor to the propert". Althou'h respo 4e t Re'ister o: 2ee4s accepte4 the reCuire4 :ees# he evertheless re:use4 to re'ister or a otate the sa*e or eve e ter it i the 4a" boo5 or pri*ar" re'ister. &hus# o April 23# 1//$# petitio er :ile4 a co*plai t :or speci:ic per:or*a ce a 4 4a*a'es a'ai st -ictor a 4 the Re'ister o: 2ee4s. Mea 9hile# o Ma" )# 1//$# a Motio :or 6 terve tio 9ith Motio to 2is*iss 9as :ile4 b" o e A 4res 1a o,o# 9ho clai*e4 that he 9as a 4 has bee a te a t<tiller o: the subDect propert"# 9hich 9as a'ricultural ricela 4# :or :ort"<:ive "ears. 8e Cuestio e4 the Duris4ictio o: the lo9er court over the propert" a 4 i vo5e4 the Co*prehe sive A'raria Re:or* 1a9 to protect his ri'hts that 9oul4 be a::ecte4 b" the 4ispute bet9ee the ori'i al parties to the case. A:ter trial o the *erits# the R&C re 4ere4 Du4'*e t 4is*issi ' the Co*plai t a 4 9as a::ir*e4 b" the CA. ISSUE* ARAFAG HABANA JALAYAJAY

Fhether or ot the Co tract o: 1ease 9ith Optio to 0u" e tere4 i to b" the late E car acio 0artolo*e 9ith petitio er 9as ter*i ate4 upo her 4eath or 9hether it bi 4s her sole heir# -ictor# eve a:ter her 4e*iseP HELD* 3O. Article 1311 o: the Civil Co4e provi4es# as :ollo9s<
GAR&. 1311. Co tracts ta5e e::ect o l" bet9ee the parties# their assi' s a 4 heirs# except i case 9here the ri'hts a 4 obli'atio s arisi ' :ro* the co tract are ot tra s*issible b" their ature# or b" stipulatio or b" provisio o: la9. &he heir is ot liable be"o 4 the value o: the propert" he receive4 :ro* the 4ece4e t.

&he 'e eral rule# there:ore# is that heirs are bou 4 b" co tracts e tere4 i to b" their pre4ecessors< i <i terest except 9he the ri'hts a 4 obli'atio s arisi ' there:ro* are ot tra s*issible b" =1@ their ature# =2@ stipulatio or =3@ provisio o: la9. 6 the case at bar# there is either co tractual stipulatio or le'al provisio *a5i ' the ri'hts a 4 obli'atio s u 4er the co tract i tra s*issible. More i*porta tl"# the ature o: the ri'hts a 4 obli'atio s therei are# b" their ature# tra s*issible. &he ature o: i tra s*issible ri'hts as explai e4 b" Arturo &ole ti o# a e*i e t civilist# is as :ollo9s> GA*o ' co tracts 9hich are i tra s*issible are those 9hich are purel" perso al# either b" provisio o: la9# such as i cases o: part erships a 4 a'e c"# or b" the ver" ature o: the obli'atio s arisi ' there:ro*# such as those reCuiri ' special perso al Cuali:icatio s o: the obli'or. 6t *a" also be state4 that co tracts :or the pa"*e t o: *o e" 4ebts are ot tra s*itte4 to the heirs o: a part"# but co stitute a char'e a'ai st his estate. &hus# 9here the clie t i a co tract :or pro:essio al services o: a la9"er 4ie4# leavi ' *i or heirs# a 4 the la9"er# i stea4 o: prese ti ' his clai* :or pro:essio al services u 4er the co tract to the probate court# substitute4 the *i ors as parties :or his clie t# it 9as hel4 that the co tract coul4 ot be e :orce4 a'ai st the *i orsL the la9"er 9as li*ite4 to a recover" o the basis o: )"ant"m mer"it.G 6 A*erica Durispru4e ce# G=F@here acts stipulate4 i a co tract reCuire the exercise o: special 5 o9le4'e# 'e ius# s5ill# taste# abilit"# experie ce# Du4'*e t# 4iscretio # i te'rit"# or other perso al Cuali:icatio o: o e or both parties# the a'ree*e t is o: a perso al ature# a 4 ter*i ates o the 4eath o: the part" 9ho is reCuire4 to re 4er such service.G 6 the case at bar# there is o perso al act reCuire4 :ro* the late E car acio 0artolo*e. Rather# Page 52

Civil Law Review 2 2013 - 2014 the obli'atio o: E car acio i the co tract to 4eliver possessio o: the subDect propert" to petitio er upo the exercise b" the latter o: its optio to lease the sa*e *a" ver" 9ell be per:or*e4 b" her heir -ictor. As earl" as 1/$3# it 9as hel4 that G=8@e 9ho co tracts 4oes so :or hi*sel: a 4 his heirs.G 6 1/52# it 9as rule4 that i: the pre4ecessor 9as 4ut"<bou 4 to reco ve" la 4 to a other# a 4 at his 4eath the reco ve"a ce ha4 ot bee *a4e# the heirs ca be co*pelle4 to execute the proper 4ee4 :or reco ve"a ce. &his 9as 'rou 4e4 upo the pri ciple that heirs ca ot escape the le'al co seCue ce o: a tra sactio e tere4 i to b" their pre4ecessor<i <i terest because the" have i herite4 the propert" subDect to the liabilit" a::ecti ' their co**o a cestor. 6t is :utile :or -ictor to i sist that he is ot a part" to the co tract because o: the clear provisio o: Article 1311 o: the Civil Co4e. 6 4ee4# bei ' a heir o: E car acio # there is privit" o: i terest bet9ee hi* a 4 his 4ecease4 *other. 8e o l" succee4s to 9hat ri'hts his *other ha4 a 4 9hat is vali4 a 4 bi 4i ' a'ai st her is also vali4 a 4 bi 4i ' as a'ai st hi*. 6 the case at bar# the subDect *atter o: the co tract is li5e9ise a lease# 9hich is a propert" ri'ht. &he 4eath o: a part" 4oes ot excuse o per:or*a ce o: a co tract 9hich i volves a propert" ri'ht# a 4 the ri'hts a 4 obli'atio s thereu 4er pass to the perso al represe tatives o: the 4ecease4. Si*ilarl"# o per:or*a ce is ot excuse4 b" the 4eath o: the part" 9he the other part" has a propert" i terest i the subDect *atter o: the co tract. E 4er both Article 1311 o: the Civil Co4e a 4 Durispru4e ce# there:ore# -ictor is bou 4 b" the subDect Co tract o: 1ease 9ith Optio to 0u". &hat bei ' resolve4# 9e o9 rule o the issue o: 9hether petitio er ha4 co*plie4 9ith its obli'atio s u 4er the co tract a 4 9ith the reCuisites to exercise its optio . &he pa"*e t b" petitio er o: the reservatio :ees 4uri ' the t9o<"ear perio4 9ithi 9hich it ha4 the optio to lease or purchase the propert" is ot 4ispute4. 6 :act# the pa"*e t o: such reservatio :ees# except those :or .ebruar" a 4 March# 1//$ 9ere a4*itte4 b" -ictor Petitio er also pai4 the P15#$$$.$$ *o thl" re tal :ee o the subDect propert" b" 4epositi ' the sa*e i Chi a 0a 5 Savi 's Accou t 3o. 1<$%<$255)<6<1# i the a*e o: -ictor as the sole heir o: E car acio 0artolo*e#1S1/T :or the *o ths o: March to !ul" 3$# 1//$# or a total o: :ive =5@ *o ths# 4espite the re:usal o: -ictor to tur over the subDect propert". 1i5e9ise# petitio er co*plie4 9ith its 4ut" to i :or* the other part" o: its i te tio to exercise its optio to lease throu'h its letter 4ate4 Match 12# 1//$# 2 S21T 9ell 9ithi the t9o<"ear perio4 :or it to exercise its optio . Co si4eri ' that at that ti*e E car acio 0artolo*e ha4 alrea4" passe4 a9a"# it 9as le'iti*ate :or petitio er to have a44resse4 its letter to her heir. 6t appears# there:ore# that the exercise b" petitio er o: its optio to lease the subDect propert" 9as *a4e i accor4a ce 9ith the co tractual provisio s. Co co*ita tl"# private respo 4e t -ictor 0artolo*e has the obli'atio to surre 4er possessio o: a 4 lease the pre*ises to petitio er :or a perio4 o: six =(@ "ears# pursua t to the Co tract o: 1ease 9ith Optio to 0u".

TANAY RECREATION CENTER AND DE"ELOP ENT CORP% A&% CATALINA ATIEN4O !AUSTO A<2?/ 12$ 2005 !ACTS* Petitio er &a a" Recreatio Ce ter a 4 2evelop*e t Corp. =&RC2C@ is the lessee o: a 3#$/$< sCuare *eter propert" locate4 i Sitio +a"as# &a a"# Ri,al# o9 e4 b" Catali a Matie ,o .austo# u 4er a Co tract o: 1ease. O this propert" sta 4s the &a a" Coliseu* Coc5pit operate4 b" petitio er. &he lease co tract provi4e4 :or a 2$<"ear ter*# subDect to re e9al 9ithi sixt" 4a"s prior to its expiratio . &he co tract also provi4e4 that shoul4 .austo 4eci4e to sell the propert"# petitio er shall have the Opriorit" ri'htI to purchase the sa*e. O !u e 17# 1//1# petitio er 9rote .austo i :or*i ' her o: its i te tio to re e9 the lease. 8o9ever# it 9as .austo7s 4au'hter# respo 4e t A u ciacio .. Pacu a"e # 9ho replie4# as5i ' that

ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014 petitio er re*ove the i*prove*e ts built thereo # as she is o9 the absolute o9 er o: the propert". 6t appears that .austo ha4 earlier sol4 the propert" to Pacu a"e a 4 title has alrea4" bee tra s:erre4 i her a*e. Petitio er :ile4 a A*e 4e4 Co*plai t :or A ul*e t o: 2ee4 o: Sale# Speci:ic Per:or*a ce 9ith 2a*a'es# a 4 6 Du ctio . 6 her A s9er# respo 4e t clai*e4 that petitio er is estoppe4 :ro* assaili ' the vali4it" o: the 4ee4 o: sale as the latter ac5 o9le4'e4 her o9 ership 9he it *erel" as5e4 :or a re e9al o: the lease. Accor4i ' to respo 4e t# 9he the" *et to 4iscuss the *atter# petitio er 4i4 ot 4e*a 4 :or the exercise o: its optio to purchase the propert"# a 4 it eve as5e4 :or 'race perio4 to vacate the pre*ises. ISSUE* Fhetehr or ot petitio er7s priorit" ri'ht to purchase also re::ere4 to the ri'ht o: :irst re:usalP HELD* Fhe a lease co tract co tai s a ri'ht o: :irst re:usal# the lessor is u 4er a le'al 4ut" to the lessee ot to sell to a "bo4" at a " price u til a:ter he has *a4e a o::er to sell to the latter at a certai price a 4 the lessee has :aile4 to accept it. &he lessee has a ri'ht that the lessorKs :irst o::er shall be i his :avor. Petitio er7s ri'ht o: :irst re:usal is a i te'ral a 4 i 4ivisible part o: the co tract o: lease a 4 is i separable :ro* the 9hole co tract. &he co si4eratio :or the lease i clu4es the co si4eratio :or the ri'ht o: :irst re:usal a 4 is built i to the reciprocal obli'atio s o: the parties. 6t 9as erro eous :or the CA to rule that the ri'ht o: :irst re:usal 4oes ot appl" 9he the propert" is sol4 to .austo7s relative. Fhe the ter*s o: a a'ree*e t have bee re4uce4 to 9riti '# it is co si4ere4 as co tai i ' all the ter*s a'ree4 upo . As such# there ca be# bet9ee the parties a 4 their successors i i terest# o evi4e ce o: such ter*s other tha the co te ts o: the 9ritte a'ree*e t# except 9he it :ails to express the true i te t a 4 a'ree*e t o: the parties. 6 this case# the 9or4i ' o: the stipulatio 'ivi ' petitio er the ri'ht o: :irst re:usal is plai a 4 u a*bi'uous# a 4 leaves o roo* :or i terpretatio . 6t si*pl" *ea s that shoul4 .austo 4eci4e to sell the lease4 propert" 4uri ' the ter* o: the lease# such sale shoul4 :irst be o::ere4 to petitio er. &he stipulatio 4oes ot provi4e :or the Cuali:icatio that such ri'ht *a" be exercise4 o l" 9he the sale is *a4e to stra 'ers or perso s other tha .austo7s 5i . &hus# u 4er the ter*s o: petitio er7s ri'ht o: :irst re:usal# .austo has the le'al 4ut" to petitio er ot ARAFAG HABANA JALAYAJAY to sell the propert" to a "bo4"# eve her relatives# at a " price u til a:ter she has *a4e a o::er to sell to petitio er at a certai price a 4 sai4 o::er 9as reDecte4 b" petitio er.

ESTATE O! LLENADO "S% LLENADO '256 4$ 2009 !ACTS* &he subDect o: this co trovers" is a parcel o: la 4 i 0arrio Mali ta# -ale ,uela# a 4 re'istere4 i the a*es o: E4uar4o 1le a4o a 4 !or'e 1le a4o. &he subDect lot o ce :or*e4 part o: 1ot 2%/<2 o9 e4 b" a 4 re'istere4 i the a*e o: their :ather# Cor elio 1le a4o =Cor elio@. O 2ece*ber 2# 1/75# Cor elio lease4 to his ephe9# Ro*eo 1le a4o =Ro*eo@# :or a perio4 o: :ive "ears# re e9able :or a other :ive "ears at the optio o: Cor elio. O March 31# 1/7)# Cor elio# Ro*eo a 4 the latter7s cousi Orla 4o 1le a4o =Orla 4o@ execute4 a A'ree*e t 9hereb" Ro*eo assi' e4 all his ri'hts to Orla 4o over the u expire4 portio o: the a:oresai4 lease co tract. &he parties :urther a'ree4 that Orla 4o shall have the optio to re e9 the lease co tract :or a other three "ears co**e ci ' :ro* 2ece*ber 3# Page 54

Civil Law Review 2 2013 - 2014 1/)$# up to 2ece*ber 2# 1/)3# re e9able :or a other :our "ears or up to 2ece*ber 2# 1/)7# a 4 that G4uri ' the perio4 that Sthis a'ree*e tT is e :orce4# the x x x propert" ca ot be sol4# tra s:erre4# alie ate4 or co ve"e4 i 9hatever *a er to a " thir4 part".G Shortl" therea:ter or o !u e 2%# 1/7)# Cor elio a 4 Orla 4o e tere4 i to a Supple*e tar" A'ree*e t a*e 4i ' the March 31# 1/7) A'ree*e t. E 4er the Supple*e tar" A'ree*e t# Orla 4o 9as 'ive a a44itio al optio to re e9 the lease co tract :or a a''re'ate perio4 o: 1$ "ears at :ive<"ear i tervals# that is# :ro* 2ece*ber 3# 1/)7 to 2ece*ber 2# 1//2 a 4 :ro* 2ece*ber 3# 1//2 to 2ece*ber 2# 1//7. &he sai4 provisio 9as i serte4 i or4er to co*pl" 9ith the reCuire*e ts o: Mobil Philippi es# 6 c. :or the operatio o: a 'asoli e statio 9hich 9as subseCue tl" built o the subDect lot. Epo the 4eath o: Orla 4o o 3ove*ber 7# 1/)3# his 9i:e# Fe i:re4a 1le a4o =Fe i:re4a@# too5 over the operatio o: the 'asoli e statio . Mea 9hile# o !a uar" 2/# 1/)7# Cor elio sol4 1ot 2%/<2 to his chil4re # a*el"# E4uar4o# !or'e# -ir'i ia a 4 Cor elio# !r.# throu'h a 4ee4 o: sale# 4e o*i ate4 as G;asulata sa +a ap 3a 0iliha #G :or the su* o: P1($#$$$.$$. As state4 earlier# the subDect lot# 9hich :or*s part o: 1ot 2%/<2# 9as sol4 to E4uar4o a 4 !or'e# a 4 title4 i their a*es u 4er &C& 3o. -<1()/. Several *o ths therea:ter or o Septe*ber 7# 1/)7# Cor elio passe4 a9a". So*eti*e i 1//3# E4uar4o i :or*e4 Fe i:re4a o: his 4esire to ta5e over the subDect lot. 8o9ever# the latter re:use4 to vacate the pre*ises 4espite repeate4 4e*a 4s. &hus# E4uar4o :ile4 a co*plai t :or u la9:ul 4etai er be:ore the M&C a'ai st Fe i:re4a. O !ul" 22# 1//(# the Metropolita &rial Court re 4ere4 its 2ecisio i :avor o: E4uar4o a 4 or4ere4 Fe i:re4a to> =1@ vacate the lease4 pre*isesL =2@ pa" E4uar4o reaso able co*pe satio :or the use a 4 occupatio o: the pre*ises plus attor e"7s :ees# a 4 =3@ pa" the costs o: the suit. Fi i:re4a appeale4 the 4ecisio a 4 9as reverse4 b" the R&C but also reverse4 b" the CA upo E4uar4o7s appeal. Previousl"# a:ter E4uar4o i stitute4 the a:oresai4 u la9:ul 4etai er case o Septe*ber 2%# 1//3# herei petitio er Fe i:re4a# i her capacit" as a4*i istratrix o: the estate o: Orla 4o 1le a4o# Du4icial 'uar4ia o: their *i or chil4re # a 4 survivi ' spouse a 4 le'al heir o: Orla 4o# co**e ce4 the subDect Co*plai t#11 later a*e 4e4# o 3ove*ber 1$# 1//3 :or a ul*e t o: 4ee4 o: co ve"a ce# title a 4 4a*a'es a'ai st herei respo 4e ts E4uar4o# !or'e# .eli,a 1le a4o =*other o: the 1le a4o brothers@# a 4 the Re'ister o: 2ee4s o: -ale ,uela# Metro Ma ila. Petitio er alle'e4 that the tra s:er a 4 co ve"a ce o: the subDect lot b" Cor elio i :avor o: respo 4e ts E4uar4o a 4 !or'e# 9as :rau4ule t a 4 i ba4 :aith co si4eri ' that the March 31# 1/7) A'ree*e t provi4e4 that 9hile the lease is i :orce# the subDect lot ca ot be sol4# tra s:erre4 or co ve"e4 to a " thir4 part"L that the perio4 o: the lease 9as u til 2ece*ber 3# 1/)7 9ith the optio to re e9 'ra te4 to Orla 4oL that the subDect lot 9as tra s:erre4 a 4 co ve"e4 to respo 4e ts E4uar4o a 4 !or'e o !a uar" 2/# 1/)7 9he the lease 9as i :ull :orce a 4 e::ect *a5i ' the sale ull a 4 voi4L that Cor elio verball" pro*ise4 Orla 4o that i case he =Cor elio@ 4eci4es to sell the subDect lot# Orla 4o or his heirs shall have :irst priorit" or optio to bu" the subDect lot so as ot to preDu4ice Orla 4o7s busi ess a 4 because Orla 4o is the o9 er o: the propert" a4Dace t to the subDect lotL a 4 that this pro*ise 9as 9a to l" 4isre'ar4e4 9he Cor elio sol4 the sai4 lot to respo 4e ts !or'e a 4 E4uar4o. ISSUE* Fhether or ot the sale o: the subDect lot b" Cor elio to his so s# respo 4e ts E4uar4o a 4 !or'e# is i vali4 :or =1@ violati ' the prohibitor" clause i the lease a'ree*e t bet9ee Cor elio a 4 Orla 4oL =2@ co trave i ' the ri'ht o: :irst re:usal o: Orla 4o over the subDect lot.

HELD*
6t is ot 4ispute4 that the lease a'ree*e t co tai e4 a optio to re e9 a 4 a prohibitio o the sale o: the subDect lot i :avor o: thir4 perso s 9hile the lease is i :orce. Petitio er clai*s that 9he Cor elio sol4 the subDect lot to respo 4e ts E4uar4o a 4 !or'e the lease 9as i :ull :orce a 4 e::ect# thus# the sale violate4 the prohibitor" clause re 4eri ' it i vali4. 6 resolvi ' this issue# it is ecessar" to 4eter*i e 9hether the lease a'ree*e t 9as i :orce at the ti*e o: the subDect sale a 4# i: it 9as i :orce# 9hether the violatio o: the prohibitor" clause i vali4ate4 the sale. E 4er Article 1311 o: the Civil Co4e# the heirs are bou 4 b" the co tracts e tere4 i to b" their pre4ecessors<i <i terest except 9he the ri'hts a 4 obli'atio s therei are ot tra s*issible b" their ature# b" stipulatio or b" provisio o: la9. A co tract o: lease is# there:ore# 'e erall" tra s*issible to the heirs o: the lessor or lessee. 6t i volves a propert" ri'ht a 4# as such# the 4eath o: a part" 4oes ot excuse o < per:or*a ce o: the co tract. &he ri'hts a 4 obli'atio s pass to the heirs o: the 4ecease4 a 4 the heir o: the 4ecease4 lessor is bou 4 to respect the perio4 o: the lease. &he sa*e pri ciple applies to the optio to re e9 the lease. As a 'e eral rule# cove a ts to re e9 a lease Page 53

ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 are ot perso al but 9ill ru 9ith the la 4. Co seCue tl"# the successors<i <i terest o: the lessee are e title4 to the be e:its# 9hile that o: the lessor are bur4e e4 9ith the 4uties a 4 obli'atio s# 9hich sai4 cove a ts co :erre4 a 4 i*pose4 o the ori'i al parties. &he :ore'oi ' pri ciples appl" 9ith 'reater :orce i this case because the parties expressl" stipulate4 i the March 31# 1/7) A'ree*e t that Ro*eo# as lessee# shall tra s:er all his ri'hts a 4 i terests u 4er the lease co tract 9ith optio to re e9 Gi :avor o: the part" o: the &hir4 Part =Orla 4o@# the latter7s heirs# successors a 4 assi' sG i 4icati ' the clear i te t to allo9 the tra s*issibilit" o: all the ri'hts a 4 i terests o: Orla 4o u 4er the lease co tract u to his heirs# successors or assi' s. Accor4i 'l"# the ri'hts a 4 obli'atio s u 4er the lease co tract 9ith optio to re e9 9ere tra s*itte4 :ro* Orla 4o to his heirs upo his 4eath o 3ove*ber 7# 1/)3. 6t 4oes ot :ollo9# ho9ever# that the lease subsiste4 at the ti*e o: the sale o: the subDect lot o !a uar" 2/# 1/)7. Fhe Orla 4o 4ie4 o 3ove*ber 7# 1/)3# the lease co tract 9as set to expire 2( 4a"s later or o 2ece*ber 3# 1/)3# u less re e9e4 b" Orla 4o7s heirs :or a other :our "ears. Fhile the optio to re e9 is a e :orceable ri'ht# it *ust ecessaril" be :irst exercise4 to be 'ive e::ect. &here is o 4ispute that i the i sta t case# the lessees =private respo 4e ts@ 9ere 'ra te4 the optio to re e9 the lease :or a other :ive =5@ "ears a:ter the ter*i atio o: the ori'i al perio4 o: :i:tee "ears. Bet# there 9as ever a " positive act o the part o: private respo 4e ts be:ore or a:ter the ter*i atio o: the ori'i al perio4 to sho9 their exercise o: such optio . &he sile ce o: the lessees a:ter the ter*i atio o: the ori'i al perio4 ca ot be ta5e to *ea that the" opte4 to re e9 the co tract b" virtue o: the pro*ise b" the lessor# as state4 i the ori'i al co tract o: lease# to allo9 the* to re e9. 3either ca the exercise o: the optio to re e9 be i :erre4 :ro* their persiste ce to re*ai i the pre*ises 4espite petitio ers7 4e*a 4 :or the* to vacate. Si*ilarl"# the electio o: the optio to re e9 the lease i this case ca ot be i :erre4 :ro* petitio er Fe i:re4a7s co ti ue4 possessio o: the subDect lot a 4 operatio o: the 'asoli e statio eve a:ter the 4eath o: Orla 4o o 3ove*ber 7# 1/)3 a 4 the expiratio o: the lease co tract o 2ece*ber 3# 1/)3. 6 the u la9:ul 4etai er case a'ai st petitio er Fe i:re4a a 4 i the subDect co*plai t :or a ul*e t o: co ve"a ce# respo 4e ts co siste tl" *ai tai e4 that a:ter the 4eath o: Orla 4o# the lease 9as ter*i ate4 a 4 that the" per*itte4 petitio er Fe i:re4a a 4 her chil4re to re*ai i possessio o: the subDect propert" out o: tolera ce a 4 respect :or the close bloo4 relatio ship bet9ee Cor elio a 4 Orla 4o. 6t 9as i cu*be t# there:ore# upo petitio er as the plai ti:: 9ith the bur4e o: proo: 4uri ' the trial belo9 to establish b" so*e ARAFAG HABANA JALAYAJAY positive act that Orla 4o or his heirs exercise4 the optio to re e9 the lease. A:ter 'oi ' over the recor4s o: this case# 9e :i 4 o evi4e ce# testi*o ial or 4ocu*e tar"# o: such ature 9as prese te4 be:ore the trial court to prove that Orla 4o or his heirs exercise4 the optio to re e9 prior to or at the ti*e o: the expiratio o: the lease o 2ece*ber 3# 1/)3. 6 particular# the testi*o " o: petitio er Fe i:re4a is 9a ti ' i 4etail as to the eve ts surrou 4i ' the i*ple*e tatio o: the subDect lease a'ree*e t a:ter the 4eath o: Orla 4o a 4 a " overt acts to establish the re e9al o: sai4 lease. +ive the :ore'oi '# it beco*es u ecessar" to resolve the issue o 9hether the violatio o: the prohibitor" clause i vali4ate4 the sale a 4 co :erre4 o9 ership over the subDect lot to Orla 4o7s heirs# 9ho are *ere lessees# co si4eri ' that at the ti*e o: sai4 sale o !a uar" 2/# 1/)7 the lease a'ree*e t ha4 lo ' bee ter*i ate4 :or :ailure o: Orla 4o or his heirs to vali4l" re e9 the sa*e. As a result# there 9as o obstacle to the sale o: the subDect lot b" Cor elio to respo 4e ts E4uar4o a 4 !or'e as the prohibitor" clause u 4er the lease co tract 9as o lo 'er i :orce. Petitio er also a chors its clai* over the subDect lot o the alle'e4 verbal pro*ise o: Cor elio to Orla 4o that shoul4 he =Cor elio@ sell the sa*e# Orla 4o 9oul4 be 'ive the :irst opportu it" to purchase sai4 propert". Accor4i ' to petitio er# this a*ou te4 to a ri'ht o: :irst re:usal i :avor o: Orla 4o 9hich *a" be prove4 b" parole evi4e ce because it is ot o e o: the co tracts covere4 b" the statute o: :rau4s. Co si4eri ' that Cor elio sol4 the subDect lot to respo 4e ts E4uar4o a 4 !or'e 9ithout :irst o::eri ' the sa*e to Orla 4o7s heirs# petitio er ar'ues that the sale is i violatio o: the latter7s ri'ht o: :irst re:usal a 4 is# thus# rescissible.

GILCHRIST "S% CUDDY 29 P6?/ 542 !ACTS* Cu44" lease4 a ci e*ato'raph :il* RHi'o*arI to +ilchrist 9ho o9 e4 a theater i 6loilo :or o e 9ee5 be'i i ' Ma" 2(# 1/13 at a a'ree4 re tal o: P125.$$. 2e:e 4a tsEspeDo a 4 Hal4aria'a i 4uce4 their co< 4e:e 4a t Cu44" to brea5 his co tract o: lease9ith plai ti:: +ilchrist b" o::eri ' Cu44" a re tal o: P35$.$$. ISSUE*

Page 54

Civil Law Review 2 2013 - 2014 Fhether or ot such acts o: EspeDo a 4 Hal4aria'a 9ere actio able a 4 i: so u 4er 9hat le'al pri cipleP HELD* O&he liabilit" o: the appella ts =EspeDo a 4 Hal4aria'a@ arises :ro* u la9:ul actsa 4 ot :ro* co tractual obli'atio s# as the" 9ere u 4er o such obli'atio to i 4uce Cu44" to violate his co tract 9ith +ilchrist. So that i: the actio o: +ilchrist ha4 bee o e:or 4a*a'es# it 9oul4 be 'over e4 b" Chapter 2# title 1(# boo5 % o: the =Spa ish@ CivilCo4e. Article 1/$2 o: that co4e provi4es that a perso 9ho# b" act or o*issio # causes4a*a'e to a other 9he there is :ault or e'li'e ce# shall be obli'e4 to repair the 4a*a'eso 4o e. &here is othi ' i this article 9hich reCuires as a co 4itio prece4e t to theliabilit" o: a tort:easor that he *ust 5 o9 the i4e tit" o: a perso to 9ho* he causes4a*a'e. 6 :act# the chapter 9herei this article is :ou 4 clearl" sho9s that o such 5 o9le4'e is reCuire4 i or4er that the i Dure4 part" *a" recover :or the 4a*a'e su::ere4.I

ONTECILLO "% REYNES -ULY 26$ 2002 !ACTS* 6' acia Re" es is the o9 er o: a lot situate4 i Mabolo# Cebu Cit"# 9ith a area o: %%) sCuare *eters. 6 1/)1# Re" es sol4 1)5 sCuare *eters o: the Mabolo 1ot to the Abuca" Spouses 9ho built a resi4e tial house o the lot the" bou'ht. Re" es alle'e4 :urther that o March 1# 1/)% she si' e4 a 2ee4 o: Sale o: the Mabolo 1ot i :avor o: Mo tecillo. Re" es# bei ' illiterate# si' e4 b" a::ixi ' her thu*b<*ar5 o the 4ocu*e t. Mo tecillo pro*ise4 to pa" the a'ree4 P%7#$$$.$$ purchase price 9ithi o e *o th :ro* the si' i ' o: the 2ee4 o: Sale. Re" es :urther alle'e4 that Mo tecillo :aile4 to pa" the purchase price a:ter the lapse o: the o e<*o th perio4# pro*pti ' Re" es to 4e*a 4 :ro* Mo tecillo the retur o: the 2ee4 o: Sale. Si ce Mo tecillo re:use4 to retur ARAFAG HABANA JALAYAJAY Page 55

Civil Law Review 2 2013 - 2014 the 2ee4 o: Sale# Re" es execute4 a 4ocu*e t u ilaterall" revo5i ' the sale a 4 'ave a cop" o: the 4ocu*e t to Mo tecillo. SubseCue tl"# Re" es si' e4 a 2ee4 o: Sale tra s:erri ' to the Abuca" Spouses the e tire Mabolo 1ot# a 4 at the sa*e ti*e co :ir*e4 the previous sale i 1/)1 o: a 1)5<sCuare *eter portio o: the lot. Re" es a 4 the Abuca" Spouses alle'e4 that o !u e 1)# 1/)% the" receive4 i :or*atio that the Re'ister o: 2ee4s o: Cebu Cit" issue4 Certi:icate o: &itle 3o. /$)$5 i the a*e o: Mo tecillo :or the Mabolo 1ot. Re" es a 4 Spouses Abuca" the :ile4 a co*plai t :or 2eclaratio o: 3ullit" a 4 Uuieti ' o: &itle a'ai st petitio er Ri4o Mo tecillo. Re" es a 4 the Abuca" Spouses ar'ue4 that O:or lac5 o: co si4eratio there 9as o *eeti ' o: the *i 4sI bet9ee Re" es a 4 Mo tecillo % 6 his A s9er# Mo tecillo# a ba 5 executive 9ith a 0.S. Co**erce 4e'ree clai*e4 he 9as a bu"er i 'oo4 :aith a 4 ha4 actuall" pai4 the P%7#$$$.$$ co si4eratio state4 i his 2ee4 o: Sale. Mo tecillo# ho9ever# a4*itte4 he still o9e4 Re" es a bala ce o: P1$#$$$.$$. 8e also alle'e4 that he pai4 P5$#$$$.$$ :or the release o: the chattel *ort'a'e 9hich he ar'ue4 co stitute4 a lie o the Mabolo 1ot. 8e :urther alle'e4 that he pai4 :or the real propert" tax as 9ell as the capital 'ai s tax o the sale o: the Mabolo 1ot. Mo tecillo also clai*e4 that the co si4eratio :or the sale o: the Mabolo 1ot 9as the a*ou t he pai4 to Cebu 6ce a 4 Col4 Stora'e Corporatio :or the *ort'a'e 4ebt o: 0ie ve i4o !a"a'. Mo tecillo ar'ue4 that the release o: the *ort'a'e 9as ecessar" si ce the *ort'a'e co stitute4 a lie o the Mabolo 1ot. &he trial court re 4ere4 a 4ecisio 4eclari ' the 2ee4 o: Sale to Mo tecillo ull a 4 voi4 a 4 or4ere4 the ca cellatio o: Mo tecillo7s &ra s:er Certi:icate o: &itle 3o. /$)$5 a 4 the issua ce o: a e9 certi:icate o: title i :avor o: the Abuca" Spouses. &he trial court :ou 4 that Mo tecillo7s 2ee4 o: Sale ha4 o cause or co si4eratio because Mo tecillo ever pai4 Re" es the P%7#$$$.$$ purchase price# co trar" to 9hat is state4 i the 2ee4 o: Sale that Re" es receive4 the purchase price. &he trial court rule4 that Mo tecillo7s 2ee4 o: Sale pro4uce4 o e::ect 9hatsoever :or 9a t o: co si4eratio . 3ot satis:ie4 9ith the trial court7s 2ecisio # Mo tecillo appeale4 the sa*e to the Court o: Appeals. &he CA a::ir*e4 the 2ecisio o: the trial court in toto a 4 4is*isse4 the appeal. Still 4issatis:ie4# Mo tecillo :ile4 the prese t petitio :or revie9 o certiorari. Mo tecillo ar'ues that his ARAFAG HABANA JALAYAJAY 2ee4 o: Sale has all the reCuisites o: a vali4 co tract. Mo tecillo asserts there is o lac5 o: co si4eratio that 9oul4 preve t the existe ce o: a vali4 co tract. Mo tecillo ar'ues there is o l" a breach o: his obli'atio to pa" the :ull purchase price o ti*e. Such breach *erel" 'ives Re" es a ri'ht to as 5 :or speci:ic per:or*a ce# or :or a ul*e t o: the obli'atio to sell the Mabolo 1ot u 4er Art. 11/1. Mo tecillo also asserts that the o l" issue i co trovers" is Othe *o4e a 4Qor *a er o: pa"*e t a 4Qor 9hether or ot pa"*e t has bee *a4e.I Mo tecillo i*plies that the *o4e or *a er o: pa"*e t is separate :ro* the co si4eratio a 4 4oes ot a::ect the vali4it" o: the co tract.

ISSUES* 1. Fas there a a'ree*e t bet9ee Re" es a 4 Mo tecillo that the state4 co si4eratio o: P%7#$$$.$$ i the 2ee4 o: Sale be pai4 to Cebu 6ce a 4 Col4 Stora'e to secure the release o: the &ra s:er Certi:icate o: &itleP 2. 6: there 9as o e# is the 2ee4 o: Sale voi4 :ro* the be'i i ' or si*pl" rescissibleP

HELD* 1. NONE . Mo tecillo7s 2ee4 o: Sale 4oes ot state that the P%7#$$$.$$ purchase price shoul4 be pai4 b" Mo tecillo to Cebu 6ce Stora'e. Mo tecillo :aile4 to a44uce a " evi4e ce be:ore the trial court sho9i ' that Re" es ha4 a'ree4# verball" or i 9riti '# that the P%7#$$$.$$ purchase price shoul4 be pai4 to Cebu 6ce Stora'e. Abse t a " evi4e ce sho9i ' that Re" es ha4 a'ree4 to the pa"*e t o: the purchase price to a " other part"# the pa"*e t to be e::ective *ust be *a4e to Re" es# the ve 4or i the sale. &hus# Mo tecillo7s pa"*e t to Cebu 6ce Stora'e is ot the pa"*e t that 9oul4 exti 'uish Mo tecillo7s obli'atio to Re" es u 4er the 2ee4 o: Sale. &he trial court :ou 4 that Re" es ha4 othi ' to 4o 9ith !a"a'7s *ort'a'e 4ebt 9ith Cebu 6ce Stora'e. &he trial court *a4e the :ollo9i ' :i 4i 's o: Page 56

Civil Law Review 2 2013 - 2014 :act that 6' acia Re" es 9as ot a part" to or priv" o: the obli'atio i :avor o: the Cebu 6ce a 4 Col4 Stora'e Corporatio # the obli'atio bei ' exclusivel" o: 0ie ve i4o !a"a' a 4 9i:e 9ho *ort'a'e4 their resi4e tial house co structe4 o the la 4 subDect *atter o: the co*plai t. &he pa"*e t b" the 4e:e 4a t to release the resi4e tial house :ro* the *ort'a'e is a *atter bet9ee hi* a 4 !a"a' a 4 ca ot b" i*plicatio or 4eceptio be *a4e to appear as a e cu*bra ce upo the la 4. &hus# Mo tecillo7s pa"*e t to !a"a'7s cre4itor coul4 ot possibl" re4ou 4 to the be e:it o: Re" es. 2. "OID AB INITIO E 4er Article 131) o: the Civil Co4e# OS&There is o co tract u less the :ollo9i ' reCuisites co cur> =1@ Co se t o: the co tracti ' partiesL =2@ ObDect certai 9hich is the subDect *atter o: the co tractL =3@ Cause o: the obli'atio 9hich is establishe4.I Article 1352 o: the Civil Co4e also provi4es that OSCTo tracts 9ithout cause x x x pro4uce o e::ect 9hatsoever.I O its :ace# Mo tecillo7s 2ee4 o: Absolute Sale appears supporte4 b" a valuable co si4eratio . 8o9ever# base4 o the evi4e ce prese te4 b" both Re" es a 4 Mo tecillo# the trial court :ou 4 that Mo tecillo ever pai4 to Re" es# a 4 Re" es ever receive4 :ro* Mo tecillo# the P%7#$$$.$$ purchase price. &here 9as i 4isputabl" a total abse ce o: co si4eratio co trar" to 9hat is state4 i Mo tecillo7s 2ee4 o: Sale. Fhere the 4ee4 o: sale states that the purchase price has bee pai4 but i :act has ever bee pai4# the 4ee4 o: sale is ull a 4 voi4 ab initio :or lac5 o: co si4eratio . 4isa'ree*e t o the *a er o: its pa"*e t 9ill ot result i co se t# thus preve ti ' the existe ce o: a vali4 co tract :or lack of consent % &his lac5 o: co se t is separate a 4 4isti ct :ro* lack of consideration 9here the co tract states that the price has bee pai4 9he i :act it has ever bee pai4. 6 su**ar"# Mo tecillo7s 2ee4 o: Sale is ull a 4 voi4 ab initio ot o l" :or lac5 o: co si4eratio # but also :or lac5 o: co se t.

&his is ot *erel" a case o: :ailure to pa" the purchase price# as Mo tecillo clai*s# 9hich ca o l" a*ou t to a breach o: obli'atio 9ith rescissio as the proper re*e4". Fhat 9e have here is a purporte4 co tract that lac5s a cause < o e o: the three esse tial reCuisites o: a vali4 co tract. .ailure to pa" the co si4eratio is 4i::ere t :ro* lac5 o: co si4eratio . &he :or*er results i a ri'ht to 4e*a 4 the :ul:ill*e tor ca cellatio o: the obli'atio u 4er a existi ' vali4 co tract 9hile the latter preve ts the existe ce o: a vali4 co tract. O e o: the three esse tial reCuisites o: a vali4 co tract is co se t o: the parties o the obDect a 4 cause o: the co tract. 6 a co tract o: sale# the parties *ust a'ree ot o l" o the price# but also o the *a er o: pa"*e t o: the price. A a'ree*e t o the price but a ARAFAG HABANA JALAYAJAY

!RANCISCO "% HERRERA !ACTS* Eli'io 8errera# Sr.# the :ather o: respo 4e t# 9as the o9 er o: t9o parcels o: la 4# o e co sisti ' o: 5$$ sC. *.=.irst parcel o: la 4@ a 4 a other co sisti ' o: %51 sC. *.=Seco 4 Parcel o: la 4@# both 9ere locate4 at 0ara 'a" Sa A 4res# Cai ta# Ri,al. !ulia .ra cisco bou'ht :ro* sai4 la 4o9 er the :irst parcel :or the price o: P1#$$$#$$$# pai4 i i stall*e ts :ro* 3ove*ber 3$# 1//$ to Au'ust 1$# 1//1. 1ater# petitio er bou'ht the seco 4 parcel :or P75$#$$$. Co te 4i ' that the co tract price :or the t9o parcels o: la 4 9as 'rossl" i a4eCuate# the chil4re o: Eli'io# Sr. trie4 to e'otiate 9ith petitio er to i crease the purchase price. Fhe petitio er re:use4# herei respo 4e t the :ile4 a co*plai t :or a ul*e t o: Page 57

Civil Law Review 2 2013 - 2014 sale# 9ith the R&C o: A tipolo Cit". 6 his co*plai t# respo 4e t clai*e4 o9 ership over the seco 4 parcel# alle'e4l" b" virtue o: a sale i his :avor si ce 1/73. 8e li5e9ise clai*e4 that the :irst parcel 9as subDect to the co<o9 ership o: the survivi ' heirs o: .ra cisca A. 8errera# the 9i:e o: Eli'io# Sr.# co si4eri ' that she 4ie4 i testate o April 2# 1//$# be:ore the alle'e4 sale to petitio er. .i all"# respo 4e t also alle'e4 that the sale o: the t9o lots 9as ull a 4 voi4 o the 'rou 4 that at the ti*e o: sale# Eli'io# Sr. 9as alrea4" i capacitate4 to 'ive co se t to a co tract because he 9as alrea4" a::licte4 9ith senile dementia, characteri,e4 b" 4eteriorati ' *e tal a 4 ph"sical co 4itio i clu4i ' loss o: *e*or". 6 his a s9er# petitio er as 4e:e 4a t belo9 alle'e4 that respo 4e t 9as estoppe4 :ro* assaili ' the sale o: the lots. Petitio er co te 4e4 that respo 4e t ha4 e::ectivel" rati:ie4 both co tracts o: sales# b" receivi ' the co si4eratio o::ere4 i each tra sactio . &he R&C rule4 i :avor o: respo 4e t# 9hich 4ecisio 9as a::ir*e4 b" the CA. .ra cisco elevate4 the *atter to the SC via a petitio :or revie9 o certiorari. 8e ar'ues that the co tracts o: sale i the i sta t case# :ollo9i ' Article 13/$ o: the Civil Co4e are *erel" voi4able a 4 ot voi4 ab i itio. 8e ce# sai4 co tracts ca be rati:ie4. Petitio er ar'ues that 9hile it is true that a 4e*e te4 perso ca ot 'ive co se t to a co tract pursua t to Article 1327# o etheless the 4e*e tia a::ecti ' o e o: the parties 9ill ot *a5e the co tract voi4 per se but *erel" voi4able. 8e ce# 9he respo 4e t accepte4 the purchase price o behal: o: his :ather 9ho 9as alle'e4l" su::eri ' :ro* se ile 4e*e tia# respo 4e t e::ectivel" rati:ie4 the co tracts. &he rati:ie4 co tracts the beco*e vali4 a 4 e :orceable as bet9ee the parties. those 9here o e o: the esse tial reCuisites o: a vali4 co tract as provi4e4 :or b" Article 131) o: the Civil Co4e is totall" 9a ti 'L a 4 =2@ those 4eclare4 to be so u 4er Article 1%$/ o: the Civil Co4e. 0" co trast# a voi4able or a ullable co tract is o e i 9hich the esse tial reCuisites :or vali4it" u 4er Article 131) are prese t# but vitiate4 b" 9a t o: capacit"# error#viole ce# i ti*i4atio # u 4ue i :lue ce# or 4eceit. Article 131) o: the Civil Co4e states that o co tract exists u less there is a co curre ce o: co se t o: the parties# obDect certai as subDect *atter# a 4 cause o: the obli'atio establishe4. Article 1327 provi4es that i sa e or 4e*e te4 perso s ca ot 'ive co se t to a co tract. 0ut# i: a i sa e or 4e*e te4 perso 4oes e ter i to a co tract# the le'al e::ect is that the co tract is voi4able or a ullable as speci:icall" provi4e4 i Article 13/$. 6 the prese t case# it 9as establishe4 that the ve 4or Eli'io# Sr. e tere4 i to a a'ree*e t 9ith petitio er# but that the :or*er7s capacit" to co se t 9as vitiate4 b" se ile 4e*e tia. 8e ce# 9e *ust rule that the assaile4 co tracts are ot voi4 or i existe t per seL rather# these are co tracts that are vali4 a 4 bi 4i ' u less a ulle4 throu'h a proper actio :ile4 i court seaso abl". A a ullable co tract *a" be re 4ere4 per:ectl" vali4 b" rati:icatio # 9hich ca be express or i*plie4. 6*plie4 rati:icatio *a" ta5e the :or* o: accepti ' a 4 retai i ' the be e:its o: a co tract. &his is 9hat happe e4 i this case. Respo 4e t7s co te tio that he *erel" receive4 pa"*e ts o behal: o: his :ather *erel" to avoi4 their *isuse a 4 that he 4i4 ot i te 4 to co cur 9ith the co tracts is u co vi ci '. 6: he 9as ot a'reeable 9ith the co tracts# he coul4 have preve te4 petitio er :ro* 4eliveri ' the pa"*e ts# or i: this 9as i*possible# he coul4 have i**e4iatel" i stitute4 the actio :or reco ve"a ce a 4 have the pa"*e ts co si' e4 9ith the court. 3o e o: these happe e4. As :ou 4 b" the trial court a 4 the Court o: Appeals# upo lear i ' o: the sale# respo 4e t e'otiate4 :or the i crease o: the purchase price 9hile receivi ' the i stall*e t pa"*e ts. 6t 9as o l" 9he respo 4e t :aile4 to co vi ce petitio er to i crease the price that the :or*er i stitute4 the co*plai t :or reco ve"a ce o: the properties. Clearl"# respo 4e t 9as a'reeable to the co tracts# o l" he 9a te4 to 'et *ore. .urther# there is o sho9i ' that respo 4e t retur e4 the pa"*e ts or *a4e a o::er to 4o so. &his bolsters the vie9 that i 4ee4 there 9as rati:icatio . O e ca ot e'otiate :or a i crease i the price i o e breath a 4 i the sa*e breath co te 4 that the co tract o: sale is voi4. 3or ca 9e :i 4 :or respo 4e t7s ar'u*e t that Page 60

ISSUE* Are the assaile4 co tracts o: sale voi4 or *erel" voi4able a 4 he ce capable o: bei ' rati:ie4P

HELD* "IODABLE . A voi4 or i existe t co tract is o e 9hich has o :orce a 4 e::ect :ro* the ver" be'i i '. 8e ce# it is as i: it has ever bee e tere4 i to a 4 ca ot be vali4ate4 either b" the passa'e o: ti*e or b" rati:icatio . &here are t9o t"pes o: voi4 co tracts> =1@ ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 the co tracts 9ere voi4 as Eli'io# Sr.# coul4 ot sell the lots i Cuestio as o e o: the properties ha4 alrea4" bee sol4 to hi*# 9hile the other 9as the subDect o: a co< o9 ership a*o ' the heirs o: the 4ecease4 9i:e o: Eli'io# Sr. 3ote that it 9as :ou 4 b" both the trial court a 4 the Court o: Appeals that Eli'io# Sr.# 9as the O4eclare4 o9 erI o: sai4 lots. &his :i 4i ' is co clusive o us. As 4eclare4 o9 er o: sai4 parcels o: la 4# it :ollo9s that Eli'io# Sr.# ha4 the ri'ht to tra s:er the o9 ership thereo: u 4er the pri ciple o: Dus 4ispo e 4i. 6 su*# the appellate court erre4 i sustai i ' the Du4'*e t o: the trial court that the 4ee4s o: sale o: the t9o lots i Cuestio 9ere ull a 4 voi4.

CORONEL "% CONSTANTINO

!ACTS* &he subDect propert" co sists o: t9o parcels o: la 4 situate4 i Sta. Mo ica# 8a'o o"# 0ulaca # 4esi' ate4 as Ca4astral 1ots 3os. 5737 a 4 573). &he propert" is ori'i all" o9 e4 b" 8o oria A'ui al4o. O e< hal: =1Q2@ o: it 9as i herite4 b" E*ilia Me5i ' -4a. 4e Coro el to'ether 9ith her so s 0e Da*i # Catali o a 4 Ce:eri o# all sur a*e4 Coro el. &he other hal: 9as i herite4 b" .lore ti o Co sta ti o a 4 Aurea 0ue suceso. Co sta ti o a 4 0ue suceso :ile4 a ARAFAG HABANA JALAYAJAY Page 61

Civil Law Review 2 2013 - 2014 co*plai t :or 4eclaratio o: o9 ership# Cuieti ' o: title a 4 4a*a'es 9ith pra"er :or 9rit o: *a 4ator" a 4Qor prohibitor" i Du ctio 9ith the Re'io al &rial Court o: 0ulaca =0ra ch )@ a'ai st 0e Da*i # E*ilia a 4 !oh 2oes. Plai ti::s alle'e that> o April 23# 1/)1# !ess C. Sa tos a 4 Priscilla 0er ar4o purchase4 the propert" belo 'i ' to E*ilia a 4 her so s b" virtue o: a 4ee4 o: sale si' e4 b" E*ilia :or the a*ou t o: P25#$$$L o !u e 21# 1//$# Sa tos a 4 0er ar4o i tur sol4 the sa*e to Co sta ti o a 4 0ue suceso b" virtue o: a co*pro*ise a'ree*e t i Civil Case 3o. )2)/<ML the" are the o9 ers o: the subDect propert" a 4 4e:e 4a ts have ille'all" starte4 to i tro4uce co structio o the pre*ises i Cuestio L a 4 pra" that O4e:e 4a ts respect# ac5 o9le4'e a 4 co :ir* the ri'ht o: o9 ership o: the plai ti::s to the share# i terest a 4 participatio o: the o e<thir4 =1Q3@ portio o: the above 4escribe4 propert"I. &he R&C rule4 i :avor o: the plai ti::s. O appeal# the CA a::ir*e4 the 4ecisio o: the lo9er court. SA ;A&E3ABA3 36&O# 5a*i a" lu*a'4a sa 5asulata ' ito sa ba"a ' Malabo # Ri,al 'a"o ' i5a<23 ' Abril# 1/)1. =Si' e4@ =Si' e4@ !ESS C. SA3&OS

EM616A M6C;63+ -4a. CORO3E1 3a'bili 3a5abili =Si' e4@

=E si' e4@

0E3!AM63 M. CORO3E1 PR6SC611A 0ER3AR2O 3a'bili 3a5abiliI

ISSUES* 1. Fhether or ot the co tract o: sale execute4 b" a pare t co<o9 er# i her o9 behal:# is u e :orceable 9ith respect to the shares o: her co<heirs chil4re P 2. Fhether or ot the *i or chil4re ca rati:" u authori,e4 actio s o: their pare tsP 3. Fhether or o the co<heirs are i 4ispe sable 4e:e 4a ts i a actio :or 4eclaratio o: o9 ership a 4 Cuieti ' o: titleP

&hus# it is clear# as alrea4" state4# that petitio er 0e Da*i 4i4 ot si' the 4ocu*e t a 4 that the shares o: Catali o a 4 Ce:eri o i the subDect propert" 9ere ot sol4 b" the*. Si ce the shares o: Catali o a 4 Ce:eri o 9ere ot sol4# plai ti::s Co sta ti o a 4 0ue suceso have o cause o: actio a'ai st the* or a'ai st a " o: their heirs. 6 the prese t case# the heirs o: Catali o a 4 Ce:eri o are ot i 4ispe sable parties because a co*plete 4eter*i atio o: the ri'hts o: herei petitio ers a 4 respo 4e ts ca be ha4 eve i: the sai4 heirs are ot i*plea4e4. 0esi4es# it is u 4ispute4 that petitio ers ever raise4 be:ore the trial court the issue o: the private respo 4e ts7 :ailure to i*plea4 sai4 heirs i their co*plai t. 6 stea4# petitio ers activel" participate4 i the procee4i 's i the lo9er court a 4 raise4 o l" the sai4 issue o appeal 9ith the Court o: Appeals. 6 the prese t case# petitio ers7 participatio i all sta'es o: the case 4uri ' trial# 9ithout raisi ' the issue o: the trial court7s lac5 o: Duris4ictio over i 4ispe sable parties# estops the* :ro* challe 'i ' the vali4it" o: the procee4i 's therei . .urther# the 4ee4 o: sale is ot a co*pete t proo: that petitio er 0e Da*i ha4 sol4 his o9 share o: the subDect propert". 6t ca ot be 4ispute4 that 0e Da*i 4i4 ot si' the 4ocu*e t a 4 there:ore# it is u e :orceable a'ai st hi*. E*ilia execute4 the i stru*e t i her o9 behal: a 4 ot i represe tatio o: her three chil4re . Co seCue tl"# the sale o: the subDect propert" *a4e b" E*ilia i :avor o: Sa tos a 4 0er ar4o is li*ite4 to the portio 9hich *a" be allotte4 to her upo the ter*i atio o: her co<o9 ership over the subDect propert" 9ith her chil4re . &he three so s o: E*ilia 4i4 ot rati:" the sale. Page 62

HELD* A care:ul rea4i ' o: the O;asulata ' 0iliha ' Patulu"a I 9hich is a private 4ocu*e t# ot havi ' bee 4ul" otari,e4# sho9s that o l" the share o: E*ilia i the subDect propert" 9as sol4 because 0e Da*i 4i4 ot si' the 4ocu*e t a 4 the shares o: Ce:eri o a 4 Catali o 9ere ot subDect o: the sale. Perti e t portio s o: the 4ocu*e t rea4 as :ollo9s>

O;ASE1A&A3 3+ 06168A3+ PA&E1EBA3I ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 ORati:icatio *ea s that o e u 4er o 4isabilit" volu taril" a4opts a 4 'ives sa ctio to so*e u authori,e4 act or 4e:ective procee4i '# 9hich 9ithout hissa ctio 9oul4 ot be bi 4i ' o hi*. 6t is this volu tar" choice# 5 o9i 'l" *a4e# 9hich a*ou ts to a rati:icatio o: 9hat 9as thereto:ore u authori,e4# a 4 beco*es the authori,e4 act o: the part" so *a5i ' the rati:icatio . 3o evi4e ce 9as prese te4 to sho9 that the three brothers 9ere a9are o: the sale *a4e b" their *other. E a9are o: such sale# Catali o# Ce:eri o a 4 0e Da*i coul4 ot be co si4ere4 as havi ' volu taril" re*ai e4 sile t a 4 5 o9i 'l" chose ot to :ile a actio :or the a ul*e t o: the sale. &heir alle'e4 sile ce a 4 i actio *a" ot be i terprete4 as a act o: rati:icatio o their part. &o repeat# the sale is vali4 i so:ar as the share o: petitio er E*ilia Me5i ' -4a. 4e Coro el is co cer e4. 8e ce# !ess C. Sa tos a 4 Priscilla 0er ar4o# 9ho purchase4 the share o: E*ilia# beca*e co<o9 ers o: the subDect propert" to'ether 9ith 0e Da*i a 4 the heirs o: Ce:eri o a 4 Catali o. As such# Sa tos a 4 0er ar4o coul4 vali4l" 4ispose o: that portio o: the subDect propert" pertai i ' to E*ilia i :avor o: herei private respo 4e ts Co sta ti o a 4 0ue suceso. 8o9ever# the particular portio s properl" pertai i ' to each o: the co< o9 ers are ot "et 4e:i e4 a 4 4eter*i e4 as o partitio i the proper :oru* or extraDu4icial settle*e t a*o ' the parties has bee e::ecte4 a*o ' the parties. Co seCue tl"# the pra"er o: respo 4e ts :or a *a 4ator" or prohibitor" i Du ctio lac5s *erit. Plai ti::s< private respo 4e ts .lore ti o Co sta ti o a 4 Aurea 0ue suceso are 4eclare4 o9 ers o: o e<hal: =1Q2@ u 4ivi4e4 portio o: the subDect propert" plus the o e< :ourth =[@ u 4ivi4e4 share o: 4e:e 4a t<petitio er E*ilia Me5i ' -4a. 4e Coro elL a 4# 4e:e 4a t<petitio er 0e Da*i Coro el to'ether 9ith the heirs o: Catali o Coro el a 4 the heirs o: Ce:eri o Coro el are 4eclare4 o9 ers o: o e<:ourth =[@ share each o: the other o e<hal: =1Q2@ portio o: the subDect propert"# 9ithout preDu4ice to the parties e teri ' i to partitio o: the subDect propert"# Du4icial or other9ise.

LAUDICO "% ARIAS

!ACTS* -ice te Arias# 9ho# 9ith his co<4e:e 4a ts# o9 e4 the buil4i ' 3os. 2$5 to 221 o Carrie4o Street# o his behal: a 4 that o: his co<o9 ers# 9rote a letter to the plai ti::# Ma*erto 1au4ico# 'ivi ' hi* a optio to lease the buil4i ' to a thir4 perso # a 4 tra s*itti ' to hi* :or that purpose a te tative co tract i 9riti ' co tai i ' the co 4itio s upo 9hich the propose4 lease shoul4 be *a4e. 1ater Mr. 1au4ico prese te4 his co<

ARAFAG HABANA JALAYAJAY

Page 63

Civil Law Review 2 2013 - 2014 plai ti::# Mr. .re4. M. 8ar4e # as the part" 4esiri ' to lease the buil4i '. O o e ha 4# other co 4itio s 9ere a44e4 to those ori'i all" co tai e4 i the te tative co tract# a 4# o the other# cou ter<propositio s 9ere *a4e a 4 expla atio s reCueste4 o certai poi ts i or4er to *a5e the* clear. &hese e'otiatio s 9ere carrie4 o b" correspo 4e ce a 4 verball" at i tervie9s hel4 9ith Mr. -ice te Arias# o 4e:i ite a'ree*e t havi ' bee arrive4 at u til the plai ti::# Mr. 1au4ico# :i all" 9rote a letter to Mr. Arias o March (# 1/1/# a4visi ' hi* that all his propositio s# as a*e 4e4 a 4 supple*e te4# 9ere accepte4. 6t is a4*itte4 that this letter 9as receive4 b" Mr. Arias b" special 4eliver" at 2.53 p.*. o: that 4a". O that sa*e 4a"# at 11.25 i the *or i '# Mr. Arias ha4# i tur # 9ritte a letter to the plai ti::# Mr. 1au4ico# 9ith4ra9i ' the o::er to lease the buil4i '. &he chie: pra"er o: the plai ti:: i this actio is that the 4e:e 4a ts be co*pelle4 to execute the co tract o: lease o: the buil4i ' i Cuestio . 6t thus results that 9he Arias se t his letter o: 9ith4ra9al to 1au4ico# he ha4 ot "et receive4 the letter o: accepta ce# a 4 9he it reache4 hi*# he ha4 alrea4" se t his letter o: 9ith4ra9al. Our atte tio has bee calle4 to a 4octri e lai4 4o9 i so*e 4ecisio s to the e::ect that or4i aril" otice o: the revocatio o: a o::er *ust be 'ive to avoi4 a accepta ce 9hich *a" co vert i i to a bi 4i ' co tract# a 4 that o such otice ca be 4ee*e4 to have bee 'ive to the perso to 9ho* the o::er 9as *a4e u less the revocatio 9as i :act brou'ht ho*e to his 5 o9le4'e. &his# ho9ever# has o applicatio i the i sta t case# because 9he Arias receive4 the letter o: accepta ce# his letter o: revocatio ha4 alrea4" bee receive4. &he latter 9as se t throu'h a *esse 'er at 11.25 i the *or i ' 4irectl" to the o::ice o: 1au4ico a 4 shoul4 have bee receive4 i**e4iatel" o that sa*e *or i '# or at least# be:ore Arias receive4 the letter o: accepta ce. O this poi t 9e 4o ot 'ive a " cre4e ce to the testi*o " o: 1au4ico that he receive4 this letter o: revocatio at 3.3$ i the a:ter oo o: that 4a". 1au4ico is i tereste4 i 4estro"i ' the e::ect o: this revocatio so that the accepta ce *a" be vali4# 9hich is the pri cipal 'rou 4 o: his co*plai t. 0ut eve supposi ' 1au4icoKs testi*o " to be true# still the 4octri e i vo5e4 has o applicatio here. Fith re'ar4 to co tracts bet9ee abse t perso s there are t9o pri cipal theories# to 9it# o e hol4i ' that a accepta ce b" letter o: a o::er has o e::ect u til it co*es to the 5 o9le4'e o: the o::erer# a 4 the other *ai tai i ' that it is e::ective :ro* the ti*e the letter is se t. &he Civil Co4e# i para'raph 2 o: article 12(2# has a4opte4 the :irst theor" a 4# accor4i ' to its *ost e*i e t co**e tators# it *ea s that# be:ore the accepta ce is 5 o9 # the o::er ca be revo5e4# it ot bei ' ecessar"# i or4er :or the revocatio to have the e::ect o: i*pe4i ' the per:ectio o: the co tract# that it be 5 o9 b" the accepta t.Mucius Scaevola sa"s apropros> G&o our *i 4# the po9er to revo5e is i*plie4 i the criterio that o co tract exists u til the accepta ce is 5 o9 . As the tie or bo 4 spri 's :ro* the *eeti ' or co curre ce o: the *i 4s# si ce up to that *o*e t there exists o l" a u ilateral act# it is evi4e t that he 9ho *a5es it *ust have the po9er to revo5e it b" 9ith4ra9i ' his propositio # althou'h 9ith the obli'atio to pa" such 4a*a'es as *a" have bee sustai e4 b" the perso or perso s to 9ho* the o::er 9as *a4e a 4 b" 9ho* it 9as accepte4# i: he i tur :aile4 to 'ive the* otice o: the 9ith4ra9al o: the o::er. &his vie9 is co :ir*e4 b" the provisio o: article 1257# para'raph 2# co cer i ' the case 9here a stipulatio is *a4e i :avor o: a thir4 perso # 9hich provisio authori,es the co tracti ' parties to revo5e the stipulatio be:ore the otice o: its Page 64

ISSUE* Fhether or ot there 9as a per:ecte4 co tract o: lease bet9ee the partiesP

HELD* 3o e. E 4er article 12(2# para'raph 2# o: the Civil Co4e# a accepta ce b" letter 4oes ot have a " e::ect u til it co*es to the 5 o9le4'e o: the o::erer. &here:ore# be:ore he lear s o: the accepta ce# the latter is ot "et bou 4 b" it a 4 ca still 9ith4ra9 the o::er. Co seCue tl"# 9he Mr. Arias 9rote Mr. 1au4ico# 9ith4ra9i ' the o::er# he ha4 the ri'ht to 4o so# i as*uch as he ha4 ot"et receive otice o: the accepta ce. A 4 9he the otice o: the accepta ce 9as receive4 b" Mr. Arias# it o lo 'er ha4 a " e::ect# as the o::er 9as ot the i existe ce# the sa*e havi ' alrea4" bee 9ith4ra9 . &here 9as o *eeti ' o: the *i 4s# throu'h o::er a 4 accepta ce# 9hich is the esse ce o: the co tract. Fhile there 9as a o::er# there 9as o accepta ce# a 4 9he the latter 9as *a4e a 4 coul4 have a bi 4i ' e::ect# the o::er 9as the lac5i '. &hou'h both the o::er a 4 the accepta ce existe4# the" 4i4 ot *eet to 'ive birth to a co tract. ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 accepta ce. &hat case is Cuite si*ilar to that u 4er co**e t# as sai4 stipulatio i :avor o: a thir4 perso =9ho# :or the ver" reaso o: bei ' a thir4 perso # is ot a co tracti ' part"@ is ta ta*ou t to a o::er *a4e b" the *a5ers o: the co tract 9hich *a" or *a" ot be accepte4 b" hi*# a 4 9hich 4oes ot have a " e::ect u til the obli'or is oti:ie4# a 4 *a"# be:ore it is accepte4# be revo5e4 b" those 9ho have *a4e itL there:ore# the case bei ' si*ilar# the sa*e rule applies.G

"ILLANUE"A "% CA

!ACTS* 6 1//1# private respo 4e t# Al*ario +o Ma uel :ile4 a civil actio :or su* o: *o e" 9ith 4a*a'es be:ore the Re'io al &rial Court o: Cebu Cit"# 0ra ch ) a'ai st petitio er# .elix -illa ueva a 4 his 9i:e Melchora. &he subDect *atter o: the actio i volve4 a chec5 4ate4 !u e 3$# 1//1 i the a*ou t o: P1(7#($$.$$ issue4 b" ARAFAG HABANA JALAYAJAY Page 63

Civil Law Review 2 2013 - 2014 petitio er i :avor o: private respo 4e t. &he chec5 suppose4l" represe te4 pa"*e t o: loa s previousl" obtai e4 b" petitio er :ro* private respo 4e t as capital :or the :or*erKs *i i ' a 4 :ertili,er busi ess. &he chec5 9he 4ul" represe te4 :or pa"*e t 9as 4isho ore4 4ue to i su::icie c" o: :u 4s. A 4e*a 4 9as *a4e upo petitio er to *a5e 'oo4 the chec5 but he :aile4 to 4o so. Private respo 4e t the :ile4 a cri*i al co*plai t :or violatio o: 0atas Pa*ba sa 0ila ' 22 be:ore the Cebu Cit" ProsecutorKs O::ice a 4 the subDect civil co*plai t :or su* o: *o e". Petitio er# o the other ha 4# avers that his pri cipal obli'atio o l" a*ou ts to P23#%2$.$$. &he R&C rule4 i :avor o: private respo 4e t 4irecti ' -illa ueva to pa" P1(7#($$. Appare tl" a''rieve4# both parties appeale4 the 4ecisio to the Court o: Appeals. Petitio er pra"e4 :or the reversal o: the trial courtKs 4ecisio a 4 co te 4e4 that his pri cipal obli'atio is o l" P23#%2$.$$# 9hile private respo 4e t sou'ht i terest o: te perce t =1$J@ o: the pri cipal obli'atio L t9e t"< :ive perce t =25J@ as attor e"Ks :ees# as 9ell as *oral a 4 exe*plar" 4a*a'es. &he Court o: Appeals 4is*isse4 the petitio a 4 a::ir*e4 the 4ecisio o: the trial court subDect to the *o4i:icatio that petitio er 9as 4irecte4 to a44itio all" pa" private respo 4e t attor e"Ks :ees a 4 liti'atio expe ses i the a*ou t o: te =1$J@ perce t o: P1(7#$$$.$$# a 4 the e tire obli'atio to ear i terest at six =(J@ perce t per a u* :ro* the :ili ' o: the co*plai t. Petitio er o9 co*es be:ore this Court basicall" alle'i ' the sa*e issues raise4 be:ore the Court o: Appeals as :ollo9s> =a@ the Court o: Appeals erre4 i ot ruli ' that the :ive =5J@ a 4 te =1$J@ perce t i terest i*pose4 is ot e :orceable 4ue to abse ce o: such stipulatio i 9riti 'L =b@ the Court o: Appeals erre4 i ot :i 4i ' that petitio er is o l" liable :or the a*ou t P23#%2$.$$L a 4 =c@ the Court o: Appeals erre4 i ot 4eclari ' that the Ce tral 0a 5 a 4 Mo etar" 0oar4 has o po9er or authorit" to repeal the usur" la9. 6. Fhe a obli'atio # re'ar4less o: its source# i.e.# la9# co tracts# Cuasi<co tracts# 4elicts or Cuasi<4elicts is breache4# the co trave or ca be hel4 liable :or 4a*a'es. &he provisio s u 4er &itle V-66 o G2a*a'esG o: the Civil Co4e 'over i 4eter*i i ' the *easure o: recoverable 4a*a'es. 66. Fith re'ar4 particularl" to a a9ar4 o: i terest i the co cept o: actual a 4 c o*pe sator" 4a*a'es# the rate o: i terest# as 9ell as the accrual thereo:# is i*pose4# as :ollo9s>
1. Fhe the obli'atio is breache4# a 4 it co sists i the pa"*e t o: a su* o: *o e"# i.e.# a loa or :orbeara ce o: *o e"# the i terest 4ue is that 9hich *a" have bee stipulate4 i 9riti '. .urther*ore# the i terest 4ue shall itsel: ear le'al i terest :ro* the ti*e it is Du4iciall" 4e*a 4e4. 6 the abse ce o: stipulatio # the rate o: i terest shall be 12J per a u* to be co*pute4 :ro* 4e:ault# i.e.# :ro* Du4icial or extraDu4icial 4e*a 4 u 4er a 4 subDect to the provisio s o: Article 11(/ o: the Civil Co4e. 2. Fhe a obli'atio # ot co stituti ' a loa or :orbeara ce o: *o e"# is breache4# a i terest o the a*ou t o: 4a*a'es a9ar4e4 *a" be i*pose4 at the 4iscretio o: the court at the rate o: (J per a u*. . 3. Fhe the Du4'*e t o: the court a9ar4i ' a su* o: *o e" beco*es :i al a 4 executor"# the rate o: le'al i terest# 9hether the case :alls u 4er para'raph 1 or para'raph 2# above# shall be 12J per a u* :ro* such :i alit" u til its satis:actio # this i teri* perio4 bei ' 4ee*e4 to be b" the a eCuivale t to a :orbeara ce o: cre4it.

Appl"i ' the :ore'oi ' rules# si ce the pri cipal obli'atio i the a*ou t o: P1(7#($$.$$ is a loa # the sa*e shoul4 ear le'al i terest at the rate o: 12J per a u* co*pute4 :ro* the ti*e the co*plai t 9as :ile4 u til the :i alit" o: this 4ecisio . O the other ha 4# i: the total obli'atio is ot satis:ie4 it shall :urther ear le'al i terest at the rate o: 12J per a u* co*pute4 :ro* the :i alit" o: the 4ecisio u til pa"*e t thereo:# the i teri* perio4 bei ' 4ee*e4 to be a :orbeara ce o: cre4it.

ISSUE* Fhether or ot the i terest i*pose4 is vali4P ADEL!A PROPERTIES A&% CA

HELD* As re'ar4s the *atter o: le'al i terest# this Court# i the case o: Easter Shippi ' 1i es# 6 c. v. Court o: Appeals lai4 4o9 the :ollo9i ' 'ui4eli es> ARAFAG HABANA JALAYAJAY

!ACTS* Rosario<!i*e e, Casta e4a# Salu4 !i*e e, =private respo 4e ts@# their brothers !ose a 4 2o*i a4or !i*e e, 9ere co<o9 ers o: a re'istere4 la 4 locate4 i 1as Pi as. !ose a 4 2o*i a4or e tere4 i to a Page 64

Civil Law Review 2 2013 - 2014 A'ree*e t to Sell 9ith A4el:a 9ith respect to the easter portio o: the la 4 9hich 9as apportio e4 to the t9o brothers throu'h a extraDu4icial partitio a*o ' the sibli 's. A4el:a also 9ishe4 to bu" the 9ester portio belo 'i ' to private respo 4e ts so petitio er a 4 private respo 4e ts execute4 a Exclusive Optio to Purchase the propert" a*ou ti ' to P2#)5(#15$.$$. P5$#$$$ 9as a'ree4 to be pai4 as optio *o e" 9hich shall be cre4ite4 as partial pa"*e t. Epo :ailure o: A4el:a to pa" the bala ce# the optio shall be ca celle4 a 4 that 5$J o: the optio *o e" 9ill be :or:eite4 9hile the other 5$J 9ill be retur e4 to A4el:a 9he the propert" 9ill be sol4 to a other. Att". 0er ar4o# cou sel o: private respo 4e ts# hel4 the title o: Salu4 u til it 9as tur e4 over to A4el:a. &he latter the *a4e a otatio s o the title o: the exclusive optio to purchase. 0e:ore A4el:a 9as able to pa" the bala ce o: the price# the ephe9s a 4 ieces o: private respo 4e ts :ile4 a actio :or recover" o: o9 ership a'ai st A4el:a# private respo 4e ts# !ose a 4 2o*i a4or !i*e e,. A4el:a the oti:ie4 private respo 4e ts that the" shoul4 settle the case 9ith their ephe9s a 4 ieces 9hile the pa"*e t 9as suspe 4e4 u til the *atter 9as resolve4. Salu4 attribute4 the actio o: A4el:a as Olac5 o: 9or4 o: ho orI. SubseCue tl"# the case :ile4 b" their ephe9s a 4 ieces 9ere 4is*isse4. O that sa*e 4a"# a 4ee4 o: co 4itio al sale 9as execute4 i :avor o: E*"le e Chua b"private respo 4e ts. A4el:a# upo lear i ' o: the 4is*issal o: the case i :or*e4 private respo 4e ts# throu'h Att". 0er ar4o# o: its 9illi ' ess to pa" the purchase price a 4 that the ecessar" 4ee4 o: sale be 'ive i its :avor. Private respo 4e ts i' ore4 the sa*e. SubseCue tl"# private respo 4e ts retur e4 the 5$J o: the optio price a 4 as5e4 A4el:a to retur the title. !u4'*e t o: the trial court hel4 that that the a'ree*e t e tere4 i to b" the parties 9as *erel" a optio co tract# a 4 4eclari ' that the suspe sio o: pa"*e t b" herei petitio er co stitute4 a cou ter<o::er 9hich# there:ore# 9as ta ta*ou t to a reDectio o: the optio . &he CA a::ir*e4 this 4ecisio . co tractP 2. Fhether or ot there 9as a vali4 suspe sio o: pa"*e t o: the purchase price b" sai4 petitio er# a 4 the le'al e::ects thereo: o the co tractual relatio s o: the partiesP

HELD* &he 4isti ctio bet9ee the t9o is i*porta t :or i co tract o: sale# the title passes to the ve 4ee upo the 4eliver" o: the thi ' sol4L 9hereas i a co tract to sell# b" a'ree*e t the o9 ership is reserve4 i the ve 4or a 4 is ot to pass u til the :ull pa"*e t o: the price. 6 a co tract o: sale# the ve 4or has lost a 4 ca ot recover o9 ership u til a 4 u less the co tract is resolve4 or resci 4e4L 9hereas i a co tract to sell# title is retai e4 b" the ve 4or u til the :ull pa"*e t o: the price# such pa"*e t bei ' a positive suspe sive co 4itio a 4 :ailure o: 9hich is ot a breach but a eve t that preve ts the obli'atio o: the ve 4or to co ve" title :ro* beco*i ' e::ective. &hus# a 4ee4 o: sale is co si4ere4 absolute i ature 9here there is either a stipulatio i the 4ee4 that title to the propert" sol4 is reserve4 i the seller u til the :ull pa"*e t o: the price# or o e 'ivi ' the ve 4or the ri'ht to u ilaterall" resolve the co tract the *o*e t the bu"er :ails to pa" 9ithi a :ixe4 perio4. &he parties ever i te 4e4 to tra s:er o9 ership to petitio er except upo the :ull pa"*e t o: the purchase price. .irstl"# the exclusive optio to purchase# althou'h it provi4e4 :or auto*atic rescissio o: the co tract a 4 partial :or:eiture o: the a*ou t alrea4" pai4 i case o: 4e:ault# 4oes ot *e tio that petitio er is obli'e4 to retur possessio or o9 ership o: the propert" as a co seCue ce o: o <pa"*e t. &here is o stipulatio a e t reversio or reco ve"a ce o: the propert" to herei private respo 4e ts i the eve t that petitio er 4oes ot co*pl" 9ith its obli'atio . Fith the abse ce o: such a stipulatio # althou'h there is a provisio o the re*e4ies available to the parties i case o: breach# it *a" le'all" be i :erre4 that the parties ever i te 4e4 to tra s:er o9 ership to the petitio er to co*pletio o: pa"*e t o: the purchase price.

ISSUES* 1. Fhether o: ot the GExclusive Optio to PurchaseG execute4 bet9ee petitio er A4el:a Properties# 6 c. a 4 private respo 4e ts Rosario !i*e e,<CastaNe4a a 4 Salu4 !i*e e, is a optio ARAFAG HABANA JALAYAJAY &he co troverte4 4ocu*e t shoul4 le'all" be co si4ere4 as a per:ecte4 co tract to sell. A optio # as use4 i the la9 o sales# is a co ti ui ' o::er or co tract Page 65

Civil Law Review 2 2013 - 2014 b" 9hich the o9 er stipulates 9ith a other that the latter shall have the ri'ht to bu" the propert" at a :ixe4 price 9ithi a certai ti*e# or u 4er# or i co*plia ce 9ith# certai ter*s a 4 co 4itio s# or 9hich 'ives to the o9 er o: the propert" the ri'ht to sell or 4e*a 4 a sale. 6t is also so*eti*es calle4 a Gu accepte4 o::er.G A optio is ot o: itsel: a purchase# but *erel" secures the privile'e to bu". 6t is ot a sale o: propert" but a sale o: propert" but a sale o: the ri'ht to purchase. 6t is si*pl" a co tract b" 9hich the o9 er o: propert" a'rees 9ith a other perso that he shall have the ri'ht to bu" his propert" at a :ixe4 price 9ithi a certai ti*e. 8e 4oes ot sell his la 4L he 4oes ot the a'ree to sell itL but he 4oes sell so*ethi '# that it is# the ri'ht or privile'e to bu" at the electio or optio o: the other part". 6ts 4isti 'uishi ' characteristic is that it i*poses o bi 4i 'obli'atio o the perso hol4i ' the optio # asi4e :ro* the co si4eratio :or the o::er. E til accepta ce# it is ot# properl" spea5i '# a co tract# a 4 4oes ot vest# tra s:er# or a'ree to tra s:er# a " title to# or a " i terest or ri'ht i the subDect *atter# but is *erel" a co tract b" 9hich the o9 er o: propert" 'ives the optio ee the ri'ht or privile'e o: accepti ' the o::er a 4 bu"i ' the propert" o certai ter*s. O the other ha 4# a co tract# li5e a co tract to sell# i volves a *eeti ' o: *i 4s t9o perso s 9hereb" o e bi 4s hi*sel:# 9ith respect to the other# to 'ive so*ethi ' or to re 4er so*e service. Co tracts# i 'e eral# are per:ecte4 b" *ere co se t# 9hich is *a i:este4 b" the *eeti ' o: the o::er a 4 the accepta ce upo the thi ' a 4 the cause 9hich are to co stitute the co tract. &he o::er *ust be certai a 4 the accepta ce absolute. &he 4isti ctio bet9ee a Goptio G a 4 a co tract o: sale is that a optio is a u accepte4 o::er. 6t states the ter*s a 4 co 4itio s o 9hich the o9 er is 9illi ' to sell the la 4# i: the hol4er elects toaccept the* 9ithi the ti*e li*ite4. 6: the hol4er 4oes so elect# he *ust 'ive otice to the other part"# a 4 the accepte4 o::er thereupo beco*es a vali4 a 4 bi 4i ' co tract. 6: a accepta ce is ot *a4e 9ithi the ti*e :ixe4# the o9 er is o lo 'er bou 4 b" his o::er# a 4 the optio is at a e 4. A co tract o: sale# o the other ha 4# :ixes 4e:i itel" the relative ri'hts a 4 obli'atio s o: both parties at the ti*e o: its executio . &he o::er a 4 the accepta ce are co curre t# si ce the *i 4s o: the co tracti ' parties *eet i the ter*s o: the a'ree*e t. 6t *ust be stresse4 that there alrea4" existe4 a per:ecte4 co tract bet9ee the parties at the ti*e the alle'e4 cou ter<o::er 9as *a4e. &hus# a " e9 o::er b" ARAFAG HABANA JALAYAJAY a part" beco*es bi 4i ' o l" 9he it is accepte4 b" the other. 6 the case o: private respo 4e ts# the" actuall" re:use4 to co cur i sai4 o::er o: petitio er# b" reaso o: 9hich the ori'i al ter*s o: the co tract co ti ue4 to be e :orceable. At a " rate# the sa*e ca ot be co si4ere4 a cou ter<o::er :or the si*ple reaso that petitio erKs sole purpose 9as to settle the civil case i or4er that it coul4 alrea4" co*pl" 9ith its obli'atio . 6 :act# it 9as eve i 4icative o: a 4esire b" petitio er to i**e4iatel" co*pl" there9ith# except that it 9as bei ' preve te4 :ro* 4oi ' so because o: the :ili ' o: the civil case 9hich# it believe4 i 'oo4 :aith# re 4ere4 co*plia ce i*probable at that ti*e. 6 a44itio # o i :ere ce ca be 4ra9 :ro* that su''estio 'ive b" petitio er that it 9as totall" aba 4o i ' the ori'i al co tract. &he test i 4eter*i i ' 9hether a co tract is a Gco tract o: sale or purchaseG or a *ere Goptio G is 9hether or ot the a'ree*e t coul4 be speci:icall" e :orce4. &here is o 4oubt that the obli'atio o: petitio er to pa" the purchase price is speci:ic# 4e:i ite a 4 certai # a 4 co seCue tl" bi 4i ' a 4 e :orceable. 8a4 private respo 4e ts chose to e :orce the co tract# the" coul4 have speci:icall" co*pelle4 petitio er to pa" the bala ce o: P2#)$(#15$.$$. &his is 4isti ctl" *a4e *a i:est i the co tract itsel: as a i te'ral stipulatio # co*plia ce 9ith 9hich coul4 le'all" a 4 4e:i itel" be 4e*a 4e4 :ro* petitio er as a co seCue ce. &he alle'e4 optio *o e" o: P5$#$$$.$$ 9as actuall" ear est *o e" 9hich 9as i te 4e4 to :or* part o: the purchase price. &he a*ou t o: P5$#$$$.$$ 9as ot 4isti ct :ro* the cause or co si4eratio :or the sale o: the propert"# but 9as itsel: a part thereo:. 6t is a statutor" rule that 9he ever ear est *o e" is 'ive i a co tract o: sale# it shall be co si4ere4 as part o: the price a 4 as proo: o: the per:ectio o: the co tract. 6t co stitutes a a4va ce pa"*e t a 4 *ust# there:ore# be 4e4ucte4 :ro* the total price. Also# ear est *o e" is 'ive b" the bu"er to the seller to bi 4 the bar'ai . &here are clear 4isti ctio s bet9ee ear est *o e" a 4 optio *o e"> =a@ ear est *o e" is part o: the purchase price# 9hile optio *o e" i4s the *o e" 'ive as a 4isti ct co si4eratio :or a optio co tractL =b@ ear est *o e" is 'ive o l" 9here there is alrea4" a sale# 9hile optio *o e" applies to a sale ot "et per:ecte4L a 4 =c@ 9he ear est *o e" is 'ive # the bu"er is bou 4 to pa" the bala ce# 9hile 9he the 9oul4< be bu"er 'ives optio *o e"# he is ot reCuire4 to bu". Page 66

Civil Law Review 2 2013 - 2014 therei plai ti::sK share i that parcel o: la 4 speci:icall" covere4 b" &C& 3o. 3$/773. 6 other 9or4s# the plai ti::s therei 9ere clai*i ' to be co<o9 ers o: the e tire parcel o: la 4 4escribe4 i &C& 3o. 3$/773# a 4 ot o l" o: a portio thereo: or# as i correctl" i terprete4 b" the lo9er courts# 4i4 their clai* pertai exclusivel" to the easter hal: a4Du4icate4 to the !i*e e, brothers. Such bei ' the case# petitio er 9as Dusti:ie4 i suspe 4i ' pa"*e t o: the bala ce o: thepurchase price b" reaso o: the a:oresai4 vi 4icator" actio :ile4 a'ai st it. &he assura ce *a4e b" private respo 4e ts that petitio er 4i4 ot have to 9orr" about the case because it 9as pure a 4 si*ple harass*e t is ot the 5i 4 o: 'uara t" co te*plate4 u 4er the exceptive clause i Article 15/$ 9herei the ve 4or is bou 4 to *a5e pa"*e t eve 9ith the existe ce o: a vi 4icator" actio i: the ve 4ee shoul4 'ive a securit" :or the retur o: the price. 2. 0e that as it *a"# a 4 the vali4it" o: the suspe sio o: pa"*e t ot9ithsta 4i '# 9e :i 4 a 4 hol4 that private respo 4e ts *a" o lo 'er be co*pelle4 to sell a 4 4eliver the subDect propert" to petitio er :or t9o reaso s# that is# petitio erKs :ailure to 4ul" e::ect the co si' atio o: the purchase price a:ter the 4isturba ce ha4 cease4L a 4# seco 4aril"# the :act that the co tract to sell ha4 bee vali4l" resci 4e4 b" private respo 4e ts. &he recor4s o: this case reveal that as earl" as .ebruar" 2)# 1//$ 9he petitio er cause4 its exclusive optio to be a otate4 a e9 o the certi:icate o: title# it alrea4" 5 e9 o: the 4is*issal o: civil Case 3o. )/<55%1. 8o9ever# it 9as o l" o April 1(# 1//$ that petitio er# throu'h its cou sel# 9rote private respo 4e ts expressi ' its 9illi ' ess to pa" the bala ce o: the purchase price upo the executio o: the correspo 4i ' 4ee4 o: absolute sale. At *ost# that 9as *erel" a otice to pa". &here 9as o proper te 4er o: pa"*e t or co si' atio i this case as reCuire4 b" la9. &he *ere se 4i ' o: a letter b" the ve 4ee expressi ' the i te tio to pa"# 9ithout the acco*pa "i ' pa"*e t# is ot co si4ere4 a vali4 te 4er o: pa"*e t. 0esi4es# a *erete 4er o: pa"*e t is otsu::icie t to co*pel private respo 4e ts to 4eliver the propert" a 4 execute the 4ee4 o: absolute sale. 6t is co si' atio 9hich is esse tial i or4er to exti 'uish petitio erKs obli'atio to pa" the bala ce o: the purchase price. &he rule is 4i::ere t i case o: a optio co tract or i le'al re4e*ptio or i a sale 9ith ri'ht to repurchase# 9herei co si' atio is ot ecessar" because these cases i volve a exercise o: a ri'ht or Page 67

&he a:oreCuote4 characteristics o: ear est *o e" are appare t i the so<calle4 optio co tract u 4er revie9# eve thou'h it 9as calle4 Goptio *o e"G b" the parties. 6 a44itio # private respo 4e ts :aile4 to sho9 that the pa"*e t o: the bala ce o: the purchase price 9as o l" a co 4itio prece4e t to the accepta ce o: the o::er or to the exercise o: the ri'ht to bu". O the co trar"# it has bee su::icie tl" establishe4 that such pa"*e t 9as but a ele*e t o: the per:or*a ce o: petitio erKs obli'atio u 4er the co tract to sell. 66 &o Dusti:" its :ailure to pa" the purchase price 9ithi the a'ree4 perio4# petitio er i vo5es Article 15/$ o: the civil Co4e 9hich provi4es>
Art. 15/$. Shoul4 the ve 4ee be 4isturbe4 i the possessio or o9 ership o: the thi acCuire4# or shoul4 he have reaso able 'rou 4s to :ear such 4isturba ce# b" a vi 4icator" actio or a :oreclosure o: *ort'a'e# he *a" suspe 4 the pa"*e t o: the price u til the ve 4or has cause4 the 4isturba ce or 4a 'er to cease# u less the latter 'ives securit" :or the retur o: the price i a proper case# or it has bee stipulate4 that# ot9ithsta 4i ' a " such co ti 'e c"# the ve 4ee shall be bou 4 to *a5e the pa"*e t. A *ere act o: trespass shall ot authori,e the suspe sio o: the pa"*e t o: the price.

Respo 4e t court re:use4 to appl" the a:oreCuote4 provisio o: la9 o the erro eous assu*ptio that the true a'ree*e t bet9ee the parties 9as a co tract o: optio . As 9e have herei be:ore 4iscusse4# it 9as ot a optio co tract but a per:ecte4 co tract to sell. -eril"# there:ore# Article 15/$ 9oul4 properl" appl". 0oth lo9er courts# ho9ever# are i accor4 that si ce Civil Case 3o. )/<55%1 :ile4 a'ai st the parties herei i volve4 o l" the easter hal: o: the la 4 subDect o: the 4ee4 o: sale bet9ee petitio er a 4the !i*e e, brothers# it 4i4 ot# there:ore# have a " a4verse e::ect o private respo 4e tsK title a 4 O9 ership over the 9ester hal: o: the la 4 9hich is covere4 b" the co tract subDect o: the prese t case. Fe have 'o e over the co*plai t :or recover" o: o9 ership :ile4 i sai4 case a 4 9e are ot persua4e4 b" the :actual :i 4i 's *a4e b" sai4 courts. At a 'la ce# it is easil" 4iscer ible that# althou'h the co*plai t pra"e4 :or the a ul*e t o l" o: the co tract o: sale execute4 bet9ee petitio er a 4 the !i*e e, brothers# the sa*e li5e9ise pra"e4 :or the recover" o: ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 privile'e =to bu"# re4ee* or repurchase@ rather tha the 4ischar'eo: a obli'atio # he ce te 4er o: pa"*e t 9oul4 be su::icie t to preserve the ri'ht or privile'e. &his is because the provisio s o co si' atio are ot applicable 9he there is o obli'atio to pa". A co tract to sell# as i the case be:ore us# i volves the per:or*a ce o: a obli'atio # ot *erel" the exercise o: a privile'e o: a ri'ht. co seCue tl"# per:or*a ce or pa"*e t *a" be e::ecte4 ot b" te 4er o: pa"*e t alo e but b" both te 4er a 4 co si' atio . .urther*ore# petitio er o lo 'er ha4 the ri'ht to suspe 4 pa"*e t a:ter the 4isturba ce cease4 9ith the 4is*issal o: the civil case :ile4 a'ai st it. 3ecessaril"# there:ore# its obli'atio to pa" the bala ca'ai arose a 4 resu*e4 a:ter it receive4 otice o: such 4is*issal. E :ortu atel"# petitio er :aile4 to seaso abl" *a5e pa"*e t# as i :act it has 4eposit the *o e" 9ith the trial court 9he this case 9as ori'i all" :ile4 therei . 0" reaso o: petitio erKs :ailure to co*pl" 9ith its obli'atio # private respo 4e ts electe4 to resort to a 4 4i4 a ou ce the rescissio o: the co tract throu'h its letter to petitio er 4ate4 !ul" 27# 1//$. &hat 9ritte otice o: rescissio is 4ee*e4 su::icie t u 4er the circu*sta ces. Article 15/2 o: the Civil Co4e 9hich reCuires rescissio either b" Du4icial actio or otarial act is ot applicable to a co tract to sell. .urther*ore# Du4icial actio :or rescissio o: a co tract is ot ecessar" 9here the co tract provi4es :or auto*atic rescissio i case o: breach# as i the co tract i volve4 i the prese t co trovers". 6 the case at bar# it has bee sho9 that althou'h petitio er 9as 4ul" :ur ishe4 a 4 4i4 receive a 9ritte otice o: rescissio 9hich speci:ie4 the 'rou 4s there:ore# it :aile4 to repl" thereto or protest a'ai st it. 6ts sile ce thereo su''ests a a4*issio o: the veracit" a 4 vali4it" o: private respo 4e tsK clai*. .urther*ore# the i itiative o: i stituti ' suit 9as tra s:erre4 :ro* the resci 4er to the 4e:aulter b" virtue o: the auto*atic rescissio clause i the co tract. 0ut the # the recor4s bear out the :act that asi4e:ro* the lac5a4aisical *a er 9ith 9hich petitio er treate4 private respo 4e tsK latter o: ca cellatio # it utterl" :aile4 to seriousl" see5 re4ress :ro* the court :or the e :orce*e t o: its alle'e4 ri'hts u 4er the co tract. 6: private respo 4e ts ha4 ot ta5e the i itiative o: :ili ' Civil Case 3o. 7532# evi4e tl" petitio er ha4 o i te tio to ta5e a " le'al actio to co*pel speci:ic per:or*a ce :ro* the :or*er. 0" such cavalier 4isre'ar4# it has bee e::ectivel" estoppe4 :ro* see5i ' the a::ir*ative relie: it o9 4esires but 9hich it ARAFAG HABANA JALAYAJAY ha4 thereto:ore 4is4ai e4.

SERRA "S% COURT O! APPEALS$ RCBC 229 SCRA 61 !ACTS* Serra o9 e4 a parcel o: u re'istere4 la 4 locate4 i Masbate. 6 1/75# he e tere4 9ith respo 4e t Page 70

Civil Law Review 2 2013 - 2014 RC0C i to a Co tract o: 1ease 9ith a Optio to 0u". &he esse tial provisio s provi4e that RC0C 9ill lease the la 4 :or 25 "ears :ro* !u e 1# 1/75 to !u e 1# 2$$$# 9ith a optio to bu" 9ithi 1$ "ears :ro* the 4ate o: si' i ' the co tract =Ma" 2$#1/75@ at a price ot 'reater tha P21$. Serra re'istere4 the la 4 9ithi three "ears :ro* the si' i ' o: the co tract. 8e the pursue4 RC0C to exercise the optio but it 9as ot u til Septe*ber %# 1/)% that RC0C expresse4 its optio . 6t o::ere4 to bu" the propert" at the a'ree4 price o: ot 'reater tha P21$ per sCuare *eter or a total o: P7)#%3$. Serra tol4 RC0C that he is o lo 'er selli ' the propert". RC0C sou'ht a actio :or speci:ic per:or*a ce a'ai st Serra. Petitio er ar'ue4 that the optio 9as ot supporte4 b" a " co si4eratio 4isti ct :ro* the price a 4 he ce ot bi 4i ' upo hi*L that as a co 4itio :or the vali4it" o: the optio # it shoul4 have exercise4 its optio 9ithi a reaso able ti*e a:ter the re'istratio o: the la 4 u 4er the &orre s s"ste*# that i its 4ela"e4 actio to e :orce the optio # it has :or:eite4 9hatever its clai* to the sa*e. &he lo9er courts rule4 i :avor o: RC0C :i 4i ' the optio co tract vali4 a 4 is supporte4 b" a 4isti ct a 4 separate co si4eratio as e*bo4ie4 i the a'ree*e t. 6 a u ilateral pro*ise to sell# 9here the 4ebtor ails to 9ith4ra9 the pro*ise be:ore the accepta ce b" the cre4itor# the tra sactio beco*es a bilateral co tract to sell a 4 to bu" a 4 the parties *a" reciprocall" 4e*a 4 per:or*a ce. A price is co si4ere4 certai i: it is so 9ith re:ere ce to a other thi ' certai or 9he the 4eter*i atio is le:t to the Du4'*e t o: a speci:ie4 perso . A 4 'e erall"# 'ross i a4eCuac" o: price 4oes ot a::ect a co tract o: sale. Co tracts are to be co strue4 accor4i ' to the se se a 4 *ea i ' o: the ter*s 9hich the parties have use4. 6 this case# there is evi4e ce to sho9 that the i te tio o: the parties is to pe' the price P21$ per sCuare *eter. &his 9as co :ir*e4 b" petitio er hi*sel: i his testi*o ". Moreover# b" his subseCue t acts o: havi ' the la 4 title4 u 4er the &orre s s"ste*# a 4 i pursui ' the ba 5 *a a'er to e::ect the sale i**e4iatel"# *ea s that he u 4erstoo4 per:ectl" 9ell the ter*s o: the co tract. 8e eve ha4 the sa*e propert" *ort'a'e4 to the respo 4e t so*eti*e i 1/7/# 9ithout the sli'htest hi t o: 9a ti ' to aba 4o his o::er to sell the propert" at the a'ree4 price o: P21$. &he 4ecisio o: the appellate court 9as a::ir*e4.

ISSUE* Fhether the price O ot 'reater tha P21$I is certai or 4e:i ite. P

HELD* &here is o 4ispute that the co tract 9as vali4 a 4 existi ' bet9ee the parties. 3either the provisio s sho9 a co tract o: a4hesio . Serra 9as a CPA<la9"er 9he he e tere4 i to the co tract. 6 his stature# he shoul4 have bee *ore care:ul i e teri ' i to tra sactio s speciall" those co cer i ' valuable properties. Article 132% provi4es that 9he a o::er has allo9e4 the o::eree a certai perio4 to accept# the o::er *a"be 9ith4ra9 at a "ti*e be:ore accepta ce b" co**u icati ' such 9ith4ra9al# except 9he the optio is :ou 4e4 upo co si4eratio # as so*ethi ' pai4 or pro*ise4. O the other ha 4# Article 1%2/ provi4es that a accepte4 u ilateral pro*ise to bu" a 4 sell a 4eter*i ate thi ' :or a price certai is bi 4i ' upo the pro*isor i: the pro*ise is supporte4 b" a co si4eratio 4isti ct :ro* the price.

ALBAROSA "S% CA$ S%E%A% DE"ELOP ENT CORP% APRIL 30%2003 !ACTS* Salva4or Malbarosa 9as the presi4e t a 4 'e eral *a a'er o: Philtectic Corp.# a 4 a o::icer o:

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Civil Law Review 2 2013 - 2014 other co*pa ies o9 e4 b" respo 4e t S.E.A. 2evelop*e t Corp. =SEA2C@. 8e 9as issue4 9ith a 1/)2 Mitsubishi +alla t b" SEA2C. 8e expresse4 his 4esire to retire :ro* the respo 4e t7s 'roup o: co*pa ies to -alero# vice<chair*a o: the 0oar4 o: 2irectors o: respo 4e t# a 4 reCueste4 :or his 1/)/ i ce tive co*pe satio . 8e 9rote a resi' atio letter to -alero a 4 repeate4 his i ce tive co*pe satio . 2a Costa# presi4e t o: respo 4e t# *et 9ith petitio er to 4iscuss his retire*e t i ce tives a 4 the *o4e o: pa"*e t a 4 he 9as tol4 that Malbarosa 9ill be receivi ' P3/5#$$$. O March 1%# 1//$# respo 4e t throu'h -alero 9rote a letter o::er to petitio er stati ' that the" have accepte4 his resi' atio a 4 that the i ce tive he 9ill receive is P251#$57.(7# 6t propose4 that the i ce tive 9ill be pai4 as :ollo9s> the 1/)2 *itsubishi 9orth P22$#$$$ a 4 P($#$$$ 9orth o: shares 9ith &ra4estar 6 tl.# a subsi4iar" o: SEA2C. 6: he a'rees# petitio er shoul4 a::ix his si' ature belo9 the 9or4 A+REE2> SA1-A2OR MA10AROSA o the space provi4e4 i the letter. 2is*a"e4 9ith the o::er# he re:use4 to si' the ori'i al but i stea4 a::ixe4 his si' ature o the 4uplicate cop" 9riti ' therei ORECE6-E2 OR6+63A1 .OR RE-6EF PERPOSES. &9o 9ee5s :ro* the # respo 4e t has ot receive4 or hear4 :ro* petitio er so it or4ere4 -alero to 9ith4ra9 the o::er a 4 to recover the car. Respo 4e t 9as able to secure a 9rit o: replevi but Malbarosa :ile4 a cou terbo 4 so the cur re*ai e4 i his possessio . Petitio er alle'e4 that he has accepte4 the o::er o March 2)#1//$ b" a::ixi ' his si' ature o the letter<o::er a 4 o the :ollo9i ' 4a"# he calle4 up 2a Costa i his o::ice to tell hi* about his accepta ce but he 9as o l" able to tal5 to his secretar" si ce he 9as out. &he secretar" pro*ise4 to rela" the sa*e a 4 testi:ie4 that she 4i4. &he o l" respo se o: 2a Costa 9as a o4. A e t the :irst issue# the petitio er posits that the respo 4e t ha4 'ive hi* a reaso able ti*e :ro* March 1%# 1//$ 9ithi 9hich to accept or reDect its March 1%# 1//$ 1etter<o::er. 8e ha4 alrea4" accepte4 the o::er o: the respo 4e t 9he he a::ixe4 his co :or*it" thereto o the space provi4e4 there:or o March 2)# 1//$ a 4 ha4 se t to the respo 4e t corporatio o April 7# 1//$ a cop" o: sai4 March 1%# 1//$ 1etter<o::er beari ' his co :or*it" to the o::er o: the respo 4e tL he ce# the respo 4e t ca o lo 'er 4e*a 4 the retur o: the vehicle i Cuestio . 8e :urther avers that he ha4 alrea4" i*plie4l" accepte4 the o::er 9he a:ter sai4 respo 4e tKs o::er# he retai e4 possessio o: the car. .or its part# the respo 4e t co te 4s that the issues raise4 b" the petitio er are :actual. &he Duris4ictio o: the Court u 4er Rule %5 o: the Rules o: Court# as a*e 4e4# is li*ite4 to revisi ' a 4 correcti ' errors o: la9 o: the CA. As co clu4e4 b" the Court o: Appeals# there ha4 bee o accepta ce b" the petitio er o: its March 1%# 1//$ 1etter<o::er. &he receipt b" the petitio er o: the ori'i al o: the March 1%# 1//$ 1etter<o::er :or revie9 purposes a*ou te4 *erel" to a cou ter<o::er o: the petitio er. &he :i 4i 's o: the Court o: Appeals are bi 4i ' o the petitio er. &he petitio er a44uce4 o proo: that the respo 4e t ha4 'ra te4 hi* a perio4 9ithi 9hich to accept its o::er. &he latter 4ee*e4 its o::er as ot accepte4 b" the petitio er i li'ht o: petitio erKs a*bivale ce a 4 i 4ecisio o March 1(# 1//$ 9he he receive4 the letter<o::er o: respo 4e t. Fe 4o ot a'ree 9ith the petitio er. E 4er Article 131) o: the Civil Co4e# the esse tial reCuisites o: a co tract are as :ollo9s>
Art. 131). &here is o co tract u less the :ollo9i ' reCuisites co cur> =1@ Co se t o: the co tracti ' partiesL

ISSUES* Fhether there 9as a vali4 accepta ce *a4e b" petitio er. P Fhether there 9as a vali4 9ith4ra9al o: letter< o::er b" respo 4e tP

=2@ ObDect certai 9hich is the subDect *atter o: the co tractL =3@ Cause o: the obli'atio 9hich is establishe4.

HELD* &he petitio is 4is*isse4. ARAFAG HABANA JALAYAJAY

E 4er Article 131/ o: the 3e9 Civil Co4e# the co se t b" a part" is *a i:este4 b" the *eeti ' o: the o::er a 4 the accepta ce upo the thi ' a 4 the cause 9hich are to co stitute the co tract. A o::er *a" be reache4 at a " ti*e u til it is accepte4. A o::er that is ot accepte4 4oes ot 'ive rise to a co se t. &he Page 72

Civil Law Review 2 2013 - 2014 co tract 4oes ot co*e i to existe ce. &o pro4uce a co tract# there *ust be accepta ce o: the o::er 9hich *a" be express or i*plie4 but *ust ot Cuali:" the ter*s o: the o::er. &he accepta ce *ust be absolute# u co 4itio al a 4 9ithout varia ce o: a " sort :ro* the o::er.&he accepta ce o: a o::er *ust be *a4e 5 o9 to the o::eror. E less the o::eror 5 o9s o: the accepta ce# there is o *eeti ' o: the *i 4s o: the parties# o real co curre ce o: o::er a 4 accepta ce. &he o::eror *a" 9ith4ra9 its o::er a 4 revo5e the sa*e be:ore accepta ce thereo: b" the o::eree. &he co tract is per:ecte4 o l" :ro* the ti*e a accepta ce o: a o::er is *a4e 5 o9 to the o::eror. 6: a o::eror prescribes the exclusive *a er i 9hich accepta ce o: his o::er shall be i 4icate4 b" the o::eree# a accepta ce o: the o::er i the *a er prescribe4 9ill bi 4 the o::eror. O the other ha 4# a atte*pt o the part o: the o::eree to accept the o::er i a 4i::ere t *a er 4oes ot bi 4 the o::eror as the abse ce o: the *eeti ' o: the *i 4s o the altere4 t"pe o: accepta ce. A o::er *a4e inter praesentes *ust be accepte4 i**e4iatel". 6: the parties i te 4e4 that there shoul4 be a express accepta ce# the co tract 9ill be per:ecte4 o l" upo 5 o9le4'e b" the o::eror o: the express accepta ce b" the o::eree o: the o::er. A accepta ce 9hich is ot *a4e i the *a er prescribe4 b" the o::eror is ot e::ective but co stitutes a cou ter< o::er 9hich the o::eror *a" accept or reDect. &he co tract is ot per:ecte4 i: the o::eror revo5es or 9ith4ra9s its o::er a 4 the revocatio or 9ith4ra9al o: the o::eror is the :irst to reach the o::eree. &he accepta ce b" the o::eree o: the o::er a:ter 5 o9le4'e o: the revocatio or 9ith4ra9al o: the o::er is i e::icacious. &he ter*i atio o: the co tract 9he the e'otiatio s o: the parties ter*i ate a 4 the o::er a 4 accepta ce co cur# is lar'el" a Cuestio o: :act to be 4eter*i e4 b" the trial court. this case# the respo 4e t *a4e its o::er throu'h its -ice<Chair*a o: the 0oar4 o: 2irectors# Se e -alero. O March 1(# 1//$# 2a Costa ha 4e4 over the ori'i al o: the March 1%# 1//$ 1etter<o::er o: the respo 4e t to the petitio er. &he respo 4e t reCuire4 the petitio er to accept the o::er b" a::ixi ' his si' ature o the space provi4e4 i sai4 letter<o::er a 4 9riti ' the 4ate o: sai4 accepta ce# thus :oreclosi ' a i*plie4 accepta ce or a " other *o4e o: accepta ce b" the petitio er. 8o9ever# 9he the letter<o::er o: the respo 4e t 9as 4elivere4 to the petitio er o March 1(# 1//$# he 4i4 ot accept or reDect the sa*e :or the reaso that he ee4e4 ti*e to 4eci4e 9hether to reDect or accept the sa*e. &here9as o co tract per:ecte4 bet9ee the petitio er a 4 the ARAFAG HABANA JALAYAJAY 6 respo 4e t corporatio . Althou'h the petitio er clai*s that he ha4 a::ixe4 his co :or*it" to the letter<o::er o March 2)# 1//$# the petitio er :aile4 to tra s*it the sai4 cop" to the respo 4e t. 6t 9as o l" o April 7# 1//$ 9he the petitio er appe 4e4 to his letter to the respo 4e t a cop" o: the sai4 March 1%# 1//$ 1etter<o::er beari ' his co :or*it" that he oti:ie4 the respo 4e t o: his accepta ce to sai4 o::er. 0ut the # the respo 4e t# throu'h Philtectic Corporatio # ha4 alrea4" 9ith4ra9 its o::er a 4 ha4 alrea4" oti:ie4 the petitio er o: sai4 9ith4ra9alvia respo 4e tKs letter 4ate4 April %# 1//$ 9hich 9as 4elivere4 to the petitio er o the sa*e 4a". 6 4ubitabl"# there 9as o co tract per:ecte4 b" the parties o the March 1%# 1//$ 1etter<o::er o: the respo 4e t. &he petitio erKs plai t that he 9as ot accor4e4 b" the respo 4e t reaso able ti*e to accept or reDect its o::er 4oes ot persua4e. 6t *ust be u 4erscore4 that there 9as o ti*e :ra*e :ixe4 b" the respo 4e t :or the petitio er to accept or reDect its o::er. Fhe the o::eror has ot :ixe4 a perio4 :or the o::eree to accept the o::er# a 4 the o::er is *a4e to a perso prese t# the accepta ce *ust be *a4ei**e4iatel". 6 this case# the respo 4e t *a4e its o::er to the petitio er 9he 2a Costa ha 4e4 over o March 1(# 1//$ to the petitio er its March 1%# 1//$ 1etter<o::er but that the petitio er 4i4 ot accept the o::er. &he respo 4e t# thus# ha4 the optio to 9ith4ra9 or revo5e the o::er# 9hich the respo 4e t 4i4 o April %# 1//$. Eve i: it is assu*e4 that the petitio er 9as 'ive a reaso able perio4 to accept or reDect the o::er o: the respo 4e t# the evi4e ce o recor4 sho9s that :ro* March 1(# 1//$ to April 3# 1//$# the petitio er ha4 *ore tha t9o 9ee5s 9hich 9as *ore tha su::icie t :or the petitio er to accept the o::er o: the respo 4e t. Althou'h the petitio er avers that he ha4 accepte4 the o::er o: the respo 4e t o March 2)# 1//$# ho9ever# he :aile4 to tra s*it to the respo 4e t the cop" o: the March 1%# 1//$ 1etter<o::er beari ' his co :or*it" thereto. E less a 4 u til the respo 4e t receive4 sai4 cop" o: the letter< o::er# it ca ot be ar'ue4 that a co tract ha4 alrea4" bee per:ecte4 bet9ee the petitio er a 4 the respo 4e t. O the seco 4 issue# the petitio er avers that Philtectic Corporatio # althou'h a 9holl"<o9 e4 a 4 co trolle4 subsi4iar" o: the respo 4e t# ha4 o authorit" to 9ith4ra9 the o::er o: the respo 4e t. &he resolutio o: the respo 4e t authori,i ' Philtectic Corporatio to ta5e such actio a'ai st the petitio er i clu4i ' the i stitutio Page 73

Civil Law Review 2 2013 - 2014 o: a actio a'ai st hi* :or the recover" o: the subDect car 4oes ot authori,e Philtectic Corporatio to 9ith4ra9 the March 1%# 1//$ 1etter<o::er o: the respo 4e t. &he 9ith4ra9al b" Philtectic Corporatio o April %# 1//$ o: the o::er o: the respo 4e t 9as i e::ective i so:ar as the petitio er 9as co cer e4. &he respo 4e t# :or its part# asserts that the petitio er ha4 :aile4 to put i issue the *atter o: lac5 o: authorit" o: Philtectic Corporatio to 9ith4ra9 :or a 4 i behal: o: the respo 4e t its March 1%# 1//$ 1etter<o::er. 6t co te 4s that the authorit" o: Philtectic Corporatio to ta5e such actio i clu4i ' the i stitutio o: a actio a'ai st the petitio er :or the recover" o: the car ecessaril" i clu4e4 the authorit" to 9ith4ra9 the respo 4e tKs o::er. Eve the # there 9as o ee4 :or the respo 4e t to9ith4ra9 its o::er because the petitio er ha4 alrea4" reDecte4 the respo 4e tKs o::er o March 1(# 1//$ 9he the petitio er receive4 the ori'i al o: the March 1%# 1//$ 1etter<o::er o: the respo 4e t 9ithout the petitio er a::ixi ' his si' ature o the space there:or. Fe 4o ot a'ree 9ith the petitio er. 6*plicit i the authorit" 'ive to Philtectic Corporatio to 4e*a 4 :or a 4 recover :ro* the petitio er the subDect car a 4 to i stitute the appropriate actio a'ai st hi* to recover possessio o: the car is the authorit" to 9ith4ra9 the respo 4e tKs March 1%# 1//$ 1etter<o::er. 6t ca ot be ar'ue4 that respo 4e t authori,e4 Philtectic Corporatio to 4e*a 4 a 4 sue :or the recover" o: the car a 4 "et 4i4 ot authori,e it to 9ith4ra9 its March 1%# 1//$ 1etter< o::er to thepetitio er. 0esi4es# 9he he testi:ie4# Se e -alero state4 that the April %# 1//$ letter o: Philtectic Corporatio to the petitio er 9as upo his i structio a 4 co :or*abl" 9ith the a:oresai4 resolutio o: the 0oar4 o: 2irectors o: the respo 4e t.

"DA% DE APE "% CA

ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014 !ACTS* Petitio er 9as the 9i:e o: .ortu ato Ape =4ecease4@. .ortu ato 9as o e o: the eleve chil4re 9ho i herite4 1Q11 o: a la 4 o9 e4 b" his :ather Cleopas. 2uri ' the li:eti*e o: .ortu ato# +e erosa Ca9it 4e 1u*a" o =private respo 4e t@ i stitute4 a actio :or speci:ic per:or*a ce o: a 4ee4 o: sale 9ith 4a*a'es a'ai st .ortu ato a 4 his 9i:e# petitio er. ISSUE* Fhether or ot a co tract o: sale existe4 bet9ee the partiesP

HELD* &he recor4s o: this case betra" the sta ce o: private respo 4e t that .ortu ato Ape e tere4 i to such a a'ree*e t 9ith her. A co tract o: sale is a co se sual co tract# thus# it is per:ecte4 b" *ere co se t o: the parties. 6t is bor :ro* the *o*e t there is a *eeti ' o: *i 4s upo the thi ' 9hich is the obDect o: the sale a 4 upo the price. Epo its per:ectio # the parties *a" reciprocall" 4e*a 4 per:or*a ce# that is# the ve 4ee *a" co*pel the tra s:er o: the o9 ership a 4 to 4eliver the obDect o: the sale 9hile the ve 4or *a" 4e*a 4 the ve 4ee to pa" the thi ' sol4. .or there to be a per:ecte4 co tract o: sale# ho9ever# the :ollo9i ' ele*e ts *ust be prese t> co se t# obDect# a 4 price i *o e" or its eCuivale t. &he esse ce o: co se t is the a'ree*e t o: the parties o the ter*s o: the co tract# the accepta ce b" o e o: the o::er *a4e b" the other. 6t is the co curre ce o: the *i 4s o: the parties o the obDect a 4 the cause 9hich co stitutes the co tract. &he area o: a'ree*e t *ust exte 4 to all poi ts that the parties 4ee* *aterial or there is o co se t at all. &o be vali4# co se t *ust *eet the :ollo9i ' reCuisites> =a@ it shoul4 be i telli'e t# or 9ith a exact otio o: the *atter to 9hich it re:ersL =b@ it shoul4 be :ree a 4 =c@ it shoul4 be spo ta eous. 6 telli'e ce i co se t is vitiate4 b" errorL :ree4o* b" viole ce# i ti*i4atio or u 4ue i :lue ceL spo ta eit" b" :rau4. 6 this Duris4ictio # the 'e eral rule is that he 9ho alle'es :rau4 or *ista5e i a tra sactio *ust substa tiate his alle'atio as the presu*ptio is that a perso ta5es or4i ar" care :or his co cer s a 4 that private 4eali 's have bee e tere4 i to :airl" a 4 re'ularl". &he exceptio to this rule is provi4e4 :or u 4er Article 1332 o: the Civil Co4e 9hich provi4es that O9he o e o: the parties is u able to rea4# or i: the co tract is i a la 'ua'e ot u 4erstoo4 b" hi*# a 4 *ista5e or :rau4 is alle'e4# the perso e :orci ' the co tract *ust sho9 that the ter*s thereo: have bee :ull" explai e4 to the :or*er.I

+e erosa averre4 that she e tere4 9ith a co tract o: sale 9ith .ortu ato re'ar4i ' his share i the propert" :or P5#$$$.$$. .ortu ato 9e t to her store at the ti*e 9he their lease co tract 9as about toexpire. 8e alle'e4l" 4e*a 4e4 the re tal pa"*e t :or his la 4 but as she 9as o lo 'er i tereste4 i re e9i ' their lease a'ree*e t# the" a'ree4 i stea4 to e ter i to a co tract o: sale 9hich .ortu ato acce4e4 to provi4e4 private respo 4e t bou'ht his portio o: 1ot 3o. 231/ :or P5#$$$.$$. &herea:ter# she as5e4 her so <i <la9 .lores to prepare the a:ore*e tio e4 receipt. .lores rea4 the 4ocu*e t to .ortu ato a 4 as5e4 the latter 9hether he ha4 a " obDectio thereto. .ortu ato the 9e t o to a::ix his si' ature o the receipt. &he a'ree*e t 9as evi4e ce4 b" a receipt prese te4 i court. .ortu ato 4e ie4 the sale a 4 alle'e4 that the si' ature appeari ' as his 9as :or'e4. Accor4i ' to .ortu ato# 9hat 9as execute4 bet9ee the* 9as a lease co tract :or :ive "ears 9hich 9as pai4 a uall" b" +e erosa o i stall*e t. O the 4a" that .ortu ato a 4 his 9i:e 9e t to collect the pa"*e t o: re t# he 9as *a4e to si' a paper b" +e erosa 9ithout explai i ' 9hat 9as 9ritte thereo . Petitio er i siste4 that the e tire 1ot 3o. 231/ ha4 ot "et bee :or*all" sub4ivi4e4 that o 11 April 1/71 she a 4 her husba 4 9e t to private respo 4e t7s house to collect past re tals :or their la 4 the lease4 b" the :or*er# ho9ever# the" *a a'e4 to collect o l" thirt" pesos# that private respo 4e t *a4e her =petitio er7s@ husba 4 si' a receipt ac5 o9le4'i ' the receipt o: sai4 a*ou t o: *o e" a 4 that the co te ts o: sai4 receipt=prepare4 b" A 4res .lores# ephe9 o: +e erosa@ 9ere ever explai e4 to the*. She also state4 i her testi*o " that her husba 4 9as a illiterate a 4 o l" lear e4 ho9 to 9rite his a*e i or4er to be e*plo"e4 i a su'ar ce tral. As :or private respo 4e t7s purchase o: the shares o9 e4 b" .ortu ato7s co<o9 ers# petitio er *ai tai e4 that either she or her husba 4 receive4 a " otice re'ar4i ' those sales tra sactio s. &he R&C rule4 i :avor o: petitio er but 9as reverse4 b" the CA. ARAFAG HABANA JALAYAJAY

6 this case# as private respo 4e t is the o e see5i ' to e :orce the clai*e4 co tract o: sale# she Page 73

Civil Law Review 2 2013 - 2014 bears the bur4e o: provi ' that the ter*s o: the a'ree*e t 9ere :ull" explai e4 to .ortu ato Ape 9ho 9as a illiterate. &his she :aile4 to 4o. Fhile she clai*e4 i her testi*o " that the co te ts o: the receipt 9ere *a4e clear to .ortu ato# such alle'atio 9as 4ebu 5e4 b" A 4res .lores hi*sel: 9he the latter too5 the 9it ess sta 4. As ca be 'lea e4 :ro* .lores7s testi*o "# 9hile he 9as ver" *uch a9are o: .ortu ato7s i abilit" to rea4 a 4 9rite i the E 'lish la 'ua'e# he 4i4 ot bother to :ull" explai to the latter the substa ce o: the receipt. 8e eve 4is*isse4 the i4ea o: as5i ' so*ebo4" else to assist .ortu ato co si4eri ' that a *easl" su* o: thirt" pesos 9as i volve4. Evi4e tl"# it 4i4 ot occur to .lores that the 4ocu*e t he hi*sel: prepare4 pertai s to the tra s:er alto'ether o: .ortu ato7s propert" to his *other<i <la9. 6t is precisel" i situatio s such as this 9he the 9is4o* o: Article 1332 o: the Civil Co4e rea4il" beco*es appare t 9hich is Oto protect a part" to a co tract 4isa4va ta'e4 b" illiterac"# i' ora ce# *e tal 9ea5 ess or so*e other ha 4icap.I

ANDREA

AYOR$ "ERGEL RO ULO "S% LOURDES BELEN

ARAFAG HABANA JALAYAJAY

Page 74

Civil Law Review 2 2013 - 2014 !ACTS* A 4rea Ma"or 9as the ori'i al o9 er o: the subDect la 4. She sol4 it to respo 4e t 1our4es 0ele :or P1)#$$$o a i stal*e t basis. 1our4es 9as able to pa" P11#%%5. 1our4es sol4 it bac5 to A 4rea :or the sa*e price a 4 a ;asulata ' 0iliha ' &ulu"a 9as execute4 i :avour o: A 4rea. A :e9 4a"s a:ter# A 4rea execute4 a *ort'a'e over the sa*e propert" i :avour o: a loa obtai e4 :ro* 0ele :or P12#$$$. 0ele the :ile4 a case a'ai st petitio ers alle'i ' :rau4 e*plo"e4 b" A 4rea a 4 Ro*ulo. She averre4 that the petitio ers *a4e her believe that the 4ee4 o: sale i itiall" execute4 9as voi4 because it 4i4 ot re:lect the true a'ree*e t 9ith re'ar4 to the *o4e o: pa"*e t. Accor4i ' to petitio ers# the 4ee4 state4 that the sale 9as pai4 i cash 9hile the pa"*e t 9as reall" i i stal*e t basis. 0ecause o: thisshe 9as *a4e to believe that she 9as to lose 9hatever she has pai4 9hich 9as 7$J o: the total price. Petitio ers co vi ce4 her to execute a 4ee4 o: *ort'a'e i :avour o: A 4rea. 0elievi ' that this 9ill protect her ri'ht# she execute4 t9o 4ocu*e ts# the ;asulata ' 0iliha ' &ulu"a at ;asulata ' Sa 'laa . As it tur e4 out# this 9as Dust a sche*e *a4e b" petitio ers i or4er to recover the propert" :ro* her# he ce she 9a te4 to a ul the sai4 4ee4s. Petitio ers 4e ie4 the alle'atio s a 4 state4 that 0ele :reel" a 4 volu taril" *a4e the sai4 co tracts a 4 the t9o are bi 4i ' bet9ee the*. !u4'*e t 9as 'ive i :avour o: 0ele . or4i aril" pru4e t perso i to error# ta5i ' i to accou t the circu*sta ces o: each case. &his bri 's to the :ore 1our4es M. 0ele 7s li*ite4 e4ucatio al attai *e t. Fhile i 4ee4 petitio ers poi t out that the 4ee4s 4e o*i ate4 as 1as"latan n+ 2ilihan+ $"l"yan a 4 1as"latan n+ 3an+laan 9ere execute4 i $a+alo+ # a close scruti " thereo: sho9s that the" are practicall" literal tra slatio s o: their E 'lish cou terparts. &hus# the *ere :act that the 4ocu*e ts 9ere execute4 i the ver acular either clari:ie4 or si*pli:ie4 *atters :or 1our4es 9ho a4*itte4 o cross<exa*i atio that she *erel" :i ishe4 +ra4e 3# coul4 9rite a little# a 4 u 4ersta 4 a little o: the $a+alo+ la 'ua'e. &he appellate court coul4 ot the be :aulte4 9he it i vo5e4 Article 1332 o: the Civil Co4e 9hich states>
AR&. 1332. Fhe o e o: the parties is u able to rea4# or i: the co tract is i a la 'ua'e ot u 4erstoo4 b" hi*# a 4 *ista5e or :rau4 is alle'e4# the perso e :orci ' the co tract *ust sho9 that the ter*s thereo: have bee :ull" explai e4 to the :or*er.

ISSUE* Fhether the courts correctl" :ou 4 that petitio ers e*plo"e4 :rau4 a 4 u 4ue i :lue ce over 0ele i executi ' the t9o co tractsP

As aptl" poi te4 out b" the Court o: Appeals# the pri ciple that a part" is presu*e4 to 5 o9 the i*port o: a 4ocu*e t to 9hich he a::ixes his si' ature is *o4i:ie4 b" the :ore'oi ' article. E 4er the sai4 article#9here a part" is u able to rea4 or 9he the co tract is i a la 'ua'e ot u 4erstoo4 b" a part" a 4 *ista5e or :rau4 is alle'e4# the obli'atio to sho9 that the ter*s o: the co tract ha4 bee :ull" explai e4 to sai4 part" 9ho is u able to rea4 or u 4ersta 4 the la 'ua'e o: the co tract 4evolves o the part" see5i ' to e :orce it. &he bur4e rests upo the part" 9ho see5s to e :orce the co tract to sho9 that the other part" :ull" u 4erstoo4 the co te ts o: the 4ocu*e t. 6: he :ails to 4ischar'e this bur4e # the presu*ptio o: *ista5e# i: ot# :rau4# sta 4s u rebutte4 a 4 co trolli '. 6 this case# petitio ers alle'e4 that 1our4es M. 0ele a::ixe4 her si' ature o the Cuestio e4 co tracts :reel" a 4 volu taril". Fe have assi4uousl" scoure4 the recor4 but li5e the appellate court 9e have ot co*e across co vi ci ' evi4e ce to support their alle'atio s. 6 civil cases# he 9ho alle'es a :act has the bur4e o: provi ' it b" a prepo 4era ce o: evi4e ce. Su::ice it to state that such sel:<servi ' clai*s are ot e ou'h to rebut the presu*ptio o: :rau4 provi4e4 :or i Article 1332 o: the Civil Co4e. As the part" clai*i ' a::ir*ative relie: :ro* the court# it is i cu*be t upo petitio ers to co vi ci 'l" prove their clai*. &his the" :aile4 to 4o. Page 75

HELD* AR&. 133). &here is :rau4 9he # throu'h i si4ious 9or4s or *achi atio s o: o e o: the co tracti ' parties# the other is i 4uce4 to e ter i to a co tract 9hich# 9ithout the*# he 9oul4 ot have a'ree4 to.

As 4e:i e4# :rau4 re:ers to all 5i 4s o: 4eceptio # 9hether throu'h i si4ious *achi atio # *a ipulatio # co ceal*e t or *isreprese tatio to lea4 a other part" i to error. &he 4eceit e*plo"e4 .OR *ust be serious. 6t *ust be su::icie t to i*press or lea4 a ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 0are alle'atio s# u substa tiate4 b" evi4e ce are ot eCuivale t to proo: u 4er our Rules. 6 short# *ere alle'atio s are ot evi4e ce. Co ce4e4l"# both the 1as"latan n+ 2ilihan+ $"l"yan and the 1as"latan n+ 3an+laan are public 4ocu*e ts a 4 there is o 4ispute that 'e erall"# a otari,e4 4ocu*e t carries the evi4e tiar" 9ei'ht co :erre4 upo it 9ith respect to its 4ue executio . 6 a44itio # 4ocu*e ts ac5 o9le4'e4 be:ore a otar" public have i their :avor the presu*ptio o: re'ularit". 8o9ever# the presu*ptio is ot absolute a 4 *a" be rebutte4 b" clear a 4 co vi ci ' evi4e ce to the co trar". &he presu*ptio ca ot be *a4e to appl" i this case because the re'ularit" i the executio o: the 4ocu*e ts 9ere challe 'e4 i the procee4i 's belo9 9here their prima facie vali4it" 9as overthro9 b" the hi'hl" Cuestio able circu*sta ces poi te4 out b" both trial a 4 appellate courts. .urther*ore# otari,atio per se is ot a 'uara tee o: the vali4it" o: the co te ts o: a 4ocu*e t. &here are# *oreover# other :actual circu*sta ces poi te4 out b" both the trial a 4 appellate courts 9hich *ilitate a'ai st the co te tio o: petitio ers. &he evi4e ce o recor4 sho9s that the respo 4e ts 0ele s i te 4e4 to sta" a 4 occup" the subDect la 4 :or a co si4erable le 'th o: ti*e. As bor e out b" the recor4s# respo 4e ts bou'ht :ro* Celita 0or4eos the house sta 4i ' o the subDect la 4 the o9 e4 b" A 4rea Ma"or. .our "ears later or o 3ove*ber 27# 1/7/# respo 4e ts bou'ht the subDect la 4 :ro* petitio er A 4rea Ma"or. &he" bou'ht the sai4 la 4 throu'h i stall*e ts a 4 alrea4" pai4 P11#%%5.$$ o: the P1)#$$$.$$ purchase price. &he" also cause4 the tra s:er i their a*es o: the tax 4eclaratio s over the subDect la 4 a 4 house. &his the" 4i4 eve be:ore the" coul4 have co*plete4 the pa"*e t o: the purchase price. 6 short# their i te tio a 4 4esire to sta" o the propert" is ver" evi4e t. Petitio ers7 su''estio #there:ore# that respo 4e ts *a4e a su44e volte :ace a 4 4eci4e4 to resell the propert" to the* ? seve *o ths :ro* the 4ate o: the propert"7s acCuisitio # a:ter pa"*e t o: al*ost t9o<thir4s o: the purchase price a 4 tra s:erri ' the tax 4eclaratio s thereo: i respo 4e ts7 a*es# bor4ers o the absur4 a 4 the i cre4ible. 6t si*pl" is co trar" to hu*a experie ce :or respo 4e ts to have ha4 a hast" cha 'e o: heart to 4ispose o: the la 4 o 9hich the" i te 4 to *a5e their ho*e a 4 upo 9hich the" ha4 i veste4 so *uch. Petitio ers a4va ce the excuse that respo 4e ts ARAFAG HABANA JALAYAJAY 9a te4 to i**e4iatel" 4ispose o: the subDect propert" because the area 9oul4 be soo co verte4 i to a par5. 6: this 9ere so# 9h" 9oul4 1our4es 0ele therea:ter accept the ver" sa*e propert" as securit" 5 o9i ' :ull" 9ell that it 9oul4 revert to the public 4o*ai P A *ort'a'e subDects the propert" upo 9hich it is i*pose4# 9hoever the possessor *a" be# to the :ul:ill*e t o: the obli'atio 9hose securit" it 9as co stitute4. &hus# i case o: o <pa"*e t# the cre4itor *a" procee4 a'ai st the propert" :or the :ul:ill*e t o: the obli'atio . 3o cre4itor 9oul4 accept propert" as securit" :or the :ul:ill*e t o: the obli'atio 5 o9i ' that the propert" o::ere4 as securit" 9oul4 soo be out o: the co**erce o: *a . .i all"# the o <prese tatio o: petitio er A 4rea Ma"or o the 9it ess sta 4 is li5e9ise ot lost o us a 4 a44s to the 9ea5 ess o: petitio ers7 cause. Fhile it is true that the o <prese tatio o: a 9it ess is ot a reaso :or 4iscre4iti ' a part"7s 4e:e se# still 9e are i cli e4 to ta5e this o*issio a'ai st the* i vie9 o: the u*erous loopholes i their 4e:e se. All tol4# 9e see o reaso i overtur i ' the :i 4i 's o: the appellate court. As has o:te bee state4# GStThe Duris4ictio o: this Court over cases brou'ht to it :ro* the Court o: Appeals is li*ite4 to a revie9 o: Cuestio s o: la9 si ce the :actual co clusio s thereo are co clusive. &here are o: course exceptio s to this rule# but o e obtai i the case at bar to 9arra t a scruti " o: the Court o: Appeals7 co clusio s 9hich are supporte4 b" the evi4e ce o recor4 a 4 carr" *ore 9ei'ht# it havi ' a::ir*e4 the trial court7s :actual co clusio s.G

Page 76

Civil Law Review 2 2013 - 2014 &he authe ticit" o: si' atures is ot a hi'hl" tech ical issue i the sa*e se se that Cuestio s co cer i '# e.'.# Cua tu* ph"sics or topolo'" or *olecular biolo'"# 9oul4 co stitute *atters o: a hi'hl" tech ical ature. &he opi io o: a ha 49riti ' expert o the 'e ui e ess o: a Cuestio e4 si' ature is certai l" *uch less co*pelli ' upo a Du4'e tha a opi io re 4ere4 b" a specialist o a hi'hl" tech ical issue. 6 the case at bar# the presu*ptio o: vali4it" a 4 re'ularit" prevails over alle'atio s o: :or'er" a 4 :rau4. As a'ai st 4irect evi4e ce co sisti ' o: the testi*o " o: a 9it ess 9ho 9as ph"sicall" prese t at the si' i ' o: the co tract a 4 9ho ha4 perso al 5 o9le4'e thereo:# the testi*o " o: a expert 9it ess co stitutes i 4irect or circu*sta tial evi4e ce at best. Car*elita Marceli o# the 9it ess to the 2ee4 o: Absolute Sale# co :ir*e4 the 'e ui e ess# authe ticit" a 4 4ue executio thereo:. 8avi ' bee ph"sicall" prese t to see the 4ece4e t Cesar Morelos a 4 petitio er 1aura 0autista a::ix their si' atures o the 4ocu*e t# the 9ei'ht o: evi4e ce prepo 4erates i :avor o: petitio ers. As to the alle'e4 i su::icie t co si4eratio o: the sale o: the propert"# the *ere i a4eCuac" o: the price 4oes ot a::ect its vali4it" 9he both parties are i a positio to :or* a i 4epe 4e t Du4'*e t co cer i ' the tra sactio # u less :rau4# *ista5e or u 4ue i :lue ce i 4icative o: a 4e:ect i co se t is prese t. A co tract *a" co seCue tl" be a ulle4 o the 'rou 4 o: vitiate4 co se t a 4 ot 4ue to the i a4eCuac" o: the price. 6 the case at bar# ho9ever# o evi4e ce to prove :rau4# *ista5e or u 4ue i :lue ce i 4icative o: vitiate4 co se t 9as prese te4 other tha the respo 4e t7s sel:<servi ' alle'atio s. !ALLO* the Petitio is +RA3&E2. CA 4ecisio RE-ERSE2. R&C 4ecisio RE63S&A&E2.

LAURA '() ERIBERTO BAUTISTA A&% CA '() !ERNANDO ORELOS$ G%R% N,% 158015% A.B.&= 11$ 2004 !ACTS* &he 4ispute i volves a parcel o: la 4 situate4 alo ' Mace4a Street# Sa*paloc# Ma ila# co tai i ' a area o: approxi*atel" 1$5 sCuare *eters. &his parcel o: la 4 9as previousl" o9 e4 a 4 re'istere4 i the a*e o: the late Cesar Morelos. Cesar is the u cle o: petitio er 1aura Morelos 0autista# bei ' the brother o: her *other# Rosario Morelos. Cesar# 9ho 9as *arrie4 to Rosario 2ura # 4i4 ot have a " chil4re . Rosario 4ie4 i 1/72. Cesar 4ie4 o: car4iac arrest o April 15# 1/)2. 2uri ' his li:eti*e# Cesar sol4 a 4 co ve"e4 the above<*e tio e4 parcel o: la 4 i :avor o: petitio er 1aura Morelos 0autista# as evi4e ce4 b" a O2ee4 o: Absolute SaleI otari,e4 b" 1uis M. 4e +u,*a . Accor4i 'l"# &ra s:er Certi:icate o: &itle 9as issue4 i the a*e o: petitio er 1aura 0autista. Respo 4e t .er a 4o Morelos# clai*i ' to be the ille'iti*ate chil4 o: Cesar Morelos 9ith A 'eli a 1i*< +ue# i stitute4 a co*plai t :or the 4eclaratio o: ullit" o: sale a 4 title 9ith 4a*a'es be:ore the R&C Ma ila. At the trial# he prese te4 testi*o ies o: expert 9it esses 9ho clai*e4 that the si' ature o: Cesar Morelos o the 2ee4 o: Absolute Sale a 4 the :i 'erpri ts appeari ' o his Resi4e ce Certi:icate 9ere ot his. Petitio ers cou tere4 that the 2ee4 o: Absolute Sale 9as vali4. &he 9it ess to the 2ee4# Car*elita Marceli o# testi:ie4 that she sa9 Cesar Morelos a 4 petitio er 1aura 0autista si' the sa*e. &he R&C rule4 i :avor o: 0autista a 4 4eclare4 the sale vali4. &he CA 4eclare4 the sale as ull a 4 voi4 ISSUE* Fhether the sale is vali4P Fhether i a4eCuac" o: the price i vali4ates the saleP HELD* As a 'e eral rule# :or'er" ca ot be presu*e4 a 4 *ust be prove4 b" clear# positive a 4 co vi ci ' evi4e ce. &he bur4e o: proo: lies o the part" alle'i ' :or'er". 8e ce# a :i 4i ' o: :or'er" 4oes ot 4epe 4 e tirel" o the testi*o " o: ha 49riti ' experts. Althou'h such testi*o " *a" be use:ul# the Du4'e still exercises i 4epe 4e t Du4'*e t o the issue o: authe ticit" o: the si' atures u 4er scruti "L he ca ot rel" o the *ere testi*o " o: the ha 49riti ' expert.

ARLENE DAUDEN-HERNAE4 A&% DE LOS ANGELES Page 77

ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 G%R% N,% L-27010 !ACTS* Petitio er Marle e 2au4e <8er ae,# a *otio picture actress# ha4 :ile4 a co*plai t a'ai st herei private respo 4e ts# 8oll"9oo4 .ar East Pro4uctio s# 6 c.# a 4 its Presi4e t a 4 +e eral Ma a'er# Ra*o -ale ,uela# to recover P1%#7$$.$$ represe ti ' a bala ce alle'e4l" 4ue sai4 petitio er :or her services as lea4i ' actress i t9o *otio pictures pro4uce4 b" the co*pa "# a 4 to recover 4a*a'es. Epo *otio o: 4e:e 4a ts# the respo 4e t court =!u4'e Fal:ri4o 4e los A 'eles@ or4ere4 the co*plai t 4is*isse4# *ai l" because the Gclai* o: plai ti:: 9as ot evi4e ce4 b" a " 9ritte 4ocu*e t# either public or privateG# a 4 the co*plai t G9as 4e:ective o its :aceG :or violati ' Articles 135( a 4 135) o: the Civil# Co4e o: the Philippi es# as 9ell as :or co tai i ' 4e:ective alle'e# petitio s. Plai ti:: sou'ht reco si4eratio o: the 4is*issal a 4 :or a4*issio o: a a*e 4e4 co*plai t# attache4 to the *otio . &he court 4e ie4 reco si4eratio a 4 the leave to a*e 4 o 'rou 4s that the co*plai t is bei ' pro :or*a# a 4 :urther 4eclare4 the 4is*issal :i al a 4 u appealable. 8e ce this petitio . ISSUE* Fhether the lo9er court abuse4 its 4iscretio i ruli ' that a co tract :or perso al services i volvi ' *ore tha P5$$.$$ 9as either i vali4 or u e :orceable u 4er the last para'raph o: Article 135) o: the Civil Co4e o: the Philippi esP HELD* BES. Fe hol4 that there 9as abuse# si ce the ruli ' herei co teste4 betra"s a basic a 4 la*e table *isu 4ersta 4i ' o: the role o: the 9ritte :or* i co tracts# as or4ai e4 i the prese t Civil Co4e. 6 the *atter o: :or*alities# the co tractual s"ste* o: our Civil Co4e still :ollo9s that o: the Spa ish Civil Co4e o: 1))/ a 4 o: the GOr4e a*ie to 4e AlcalaG o: uphol4i ' the spirit a 4 i te t o: the parties over :or*alities> he ce# i 'e eral# co tracts are vali4 a 4 bi 4i ' :ro* their per:ectio re'ar4less o: :or* 9hether the" be oral or 9ritte . &his is plai :ro* Articles 1315 a 4 135( o: the prese t Civil Co4e. &hus# the :irst cite4 provisio prescribes>
AR&. 1315. Co tracts are per:ecte4 b" *ere co se t# a 4 :ro* that *o*e t the parties are bou 4 ot o l" to the :ul:ill*e t o: 9hat has bee expressl" stipulate4 but also to all the co seCue ces 9hich#

A<2?/ 30$ 1969

accor4i ' to their ature# *a" be i 'oo4 :aith# usa'e a 4 la9.

5eepi ' 9ith

Co cor4a tl"# the :irst part o: Article 135( o: the Co4e Provi4es>
AR&. 135(. Co tracts shall be obli'ator" i 9hatever :or* the" *a" have bee e tere4 i to# provi4e4 all the esse tial reCuisites :or their vali4it" are prese t....

&hese esse tial reCuisites last *e tio e4 are or*all" =1@ co se t =2@ proper subDect *atter# a 4 =3@ co si4eratio or causa :or the obli'atio assu*e4 =Article 131)@. So that o ce the three ele*e ts exist# the co tract is 'e erall" vali4 a 4 obli'ator"# re'ar4less o: the :or*# oral or 9ritte # i 9hich the" are couche4. &o this 'e eral rule# the Co4e a4*its exceptio s# set :orth i the seco 4 portio o: Article 135(> 8o9ever# 9he the la9 reCuires that a co tract be i so*e :or* i or4er that it *a" be vali4 or e :orceable# or that a co tract be prove4 i a certai 9a"# that reCuire*e t is absolute a 4 i 4ispe sable.... 6t is thus see that to the 'e eral rule that the :or* =oral or 9ritte @ is irreleva t to the bi 4i ' e::ect i ter parties o: a co tract that possesses the three vali4ati ' ele*e ts o: co se t# subDect *atter# a 4 causa# Article 135( o: the Co4e establishes o l" t9o exceptio s# to 9it> =a@ Co tracts :or 9hich the la9 itsel: reCuires that the" be i so*e particular :or* =9riti '@ i or4er to *a5e the* vali4 a 4 e :orceable =the so<calle4 sole* co tracts@. O: these the t"pical exa*ple is the 4o atio o: i**ovable propert" that the la9 =Article 7%/@ reCuires to be e*bo4ie4 i a public i stru*e t i or4er Gthat the 4o atio *a" be vali4G# i.e.# existi ' or bi 4i '. Other i sta ces are the 4o atio o: *ovables 9orth *ore tha P5#$$$.$$ 9hich *ust be i 9riti '# Gother9ise the 4o atio shall be voi4G =Article 7%)@L co tracts to pa" i terest o loa s =*utuu*@ that *ust be Gexpressl" stipulate4 i 9riti 'G =Article 1/5(@L a 4 the a'ree*e ts co te*plate4 b" Article 17%%# 1773# 1)7% a 4 213% o: the prese t Civil Co4e. =b@ Co tracts that the la9 reCuires to be prove4 b" so*e 9riti ' =*e*ora 4u*@ o: its ter*s# as i those covere4 b" the ol4 Statute o: .rau4s# o9 Article 1%$3=2@ o: the Civil Co4e. &heir existe ce ot bei ' provable b" *ere oral testi*o " =u less 9holl" or partl" execute4@# these co tracts are exceptio al i reCuiri ' a 9riti ' e*bo4"i ' the ter*s thereo: :or their e :orceabilit" b" actio i court. &he co tract sue4 upo b" petitio er herei =co*pe satio :or services@ 4oes ot co*e u 4er either exceptio . 6t is true that it appears i clu4e4 i Article 135)# last clause# provi4i ' that Gall other co tracts 9here the a*ou t i volve4 excee4s :ive hu 4re4 pesos Page 100

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Civil Law Review 2 2013 - 2014 *ust appear i 9riti '# eve a private o e.G 0ut Article 135) o9here provi4es that the abse ce o: 9ritte :or* i this case 9ill *a5e the a'ree*e t i vali4 or u e :orceable. O the co trar"# Article 1357 clearl" i 4icates that co tracts covere4 b" Article 135) are bi 4i ' a 4 e :orceable b" actio or suit 4espite the abse ce o: 9riti '. AR&. 1357. 6: the la9 reCuires a 4ocu*e t or other special :or*# as i the acts a 4 co tracts e u*erate4 i the :ollo9i ' article# the co tracti ' parties *a" co*pel each other to observe that :or*# o ce the co tract has bee per:ecte4. &his ri'ht *a" be exercise4 si*ulta eousl" 9ith the actio the co tract. 6t thus beco*es i evitable to co clu4e that both the court a Cuo as 9ell as the private respo 4e ts herei 9ere 'rossl" *ista5e i hol4i ' that because petitio er 2au4e Ks co tract :or services 9as ot i 9riti ' the sa*e coul4 ot be sue4 upo # or that her co*plai t shoul4 be 4is*isse4 :or :ailure to state a cause o: actio because it 4i4 ot plea4 a " 9ritte a'ree*e t. &he basic error i the courtKs 4ecisio lies i overloo5i ' that i our co tractual s"ste* it is ot e ou'h that the la9 shoul4 reCuire that the co tract be i 9riti '# as it 4oes i Article 135). &he la9 *ust :urther prescribe that 9ithout the 9riti ' the co tract is ot vali4 or ot e :orceable b" actio . !ALLO* &he or4er 4is*issi ' the co*plai t 9as set asi4e# a 4 the case 9as or4ere4 re*a 4e4 to the court o: ori'i :or :urther procee4i 's ot at varia ce 9ith this 4ecisio .

HEIRS O! CECILIO :'/&, D(,E( '& BASILIO; CLAUDEL A&%CA$ HEIRS O! ACARIO$ ESPERIDIONA$ RAY UNDA '() CELESTINA$ '// &.2('>7) CLAUDEL ARAFAG HABANA JALAYAJAY Page 101

Civil Law Review 2 2013 - 2014 G%R% N,% 85240 -./0 12$ 1991 !ACTS* As earl" as 2ece*ber 2)# 1/22# 0asilio also 5 o9 as GCecilioG Clau4el# acCuire4 :ro* the 0ureau o: 1a 4s so*e parcel o: la 4s o: the Mu ti lupa Estate Sub4ivisio # locate4 i the poblacio o: Mu ti lupa# Ri,al# 9ith a area o: 1$#1$7 sCuare *etersL he secure4 &C& Rs i 1/23L he also 4eclare4 the lot i his a*e. 8e 4uti:ull" pai4 the real estate taxes thereo u til his 4eath i 1/37. 3 &herea:ter# his 9i4o9 G0asiliaG a 4 later# her so !ose# o e o: the herei petitio ers# pai4 the taxes. &hirt" i e "ears a:ter Cecilio7s 4eath# t9o bra ches o: CecilioKs :a*il" co teste4 the o9 ership over the la 4<o o e ha 4 the chil4re o: Cecilio herei petitio ers =herei a:ter re:erre4 to as 8E6RS O. CEC616O@# a 4 o the other# the brother a 4 sisters o: Cecilio herei private respo 4e ts =herei a:ter re:erre4 to as S60163+S O. CEC616O@. 6 1/72# the 8E6RS O. CEC616O partitio e4 this lot a*o ' the*selves a 4 obtai e4 the correspo 4i ' &ra s:er Certi:icates o: &itle o their shares. .our "ears later# o 2ece*ber 7# 1/7(# private respo 4e ts S60163+S O. CEC616O# :ile4 a GCo*plai t :or Ca cellatio o: &itles a 4 Reco ve"a ce 9ith 2a*a'es#G alle'i ' that %( "ears earlier# or so*eti*e i 1/3$# their pare ts ha4 purchase4 :ro* the late Cecilio Clau4el several portio s o: the subDect lot.&he" a4*itte4 that the tra sactio 9as verbal. 8o9ever# as proo: o: the sale# the S60163+S O. CEC616O prese te4 a sub4ivisio pla o: the sai4 la 4# 4ate4 March 25# 1/3$# i 4icati ' the portio s alle'e4l" sol4 to the S60163+S O. CEC616O. C.6<Ri,al 4is*isse4 the co*plai t# 4isre'ar4i ' the above sole evi4e ce =sub4ivisio pla @ prese te4 b" the S60163+S O. CEC616O. CA reverse4 the R&C 4ecisio . ISSUES* Fhether or ot a co tract o: sale o: la 4 *a" be prove orall"P Fhether or ot the prescriptive perio4 :or :ili ' a actio :or ca cellatio o: titles a 4 reco ve"a ce 9ith 4a*a'es =the actio :ile4 b" the S60163+S O. CEC616O@ shoul4 be cou te4 :ro* the alle'e4 sale upo 9hich the" clai* their o9 ership =1/3$@ or :ro* the 4ate o: the issua ce o: the titles sou'ht to be ca celle4 i :avor o: the 8E6RS O. CEC616O =1/7(@P HELD* ARAFAG HABANA JALAYAJAY &he rule o: thu*b is that a sale o: la 4# o ce co su**ate4# is vali4 re'ar4less o: the :or* it *a" have bee e tere4 i to. .or o9here 4oes la9 or Durispru4e ce prescribe that the co tract o: sale be put i 9riti ' be:ore such co tract ca vali4l" ce4e or tra s*it ri'hts over a certai real propert" bet9ee the parties the*selves. 8o9ever# i the eve t that a thir4 part"# as i this case# 4isputes the o9 ership o: the propert"# the perso a'ai st 9ho* those clai* is brou'ht ca ot prese t a " proo: o: such sale a 4 he ce has o *ea s to e :orce the co tract. &hus the Statute o: .rau4s 9as precisel" 4evise4 to protect the parties i a co tract o: sale o: real propert" so that o such co tract is e :orceable u less certai reCuisites# :or purposes o: proo:# are *et. &he provisio s o: the Statute o: .rau4s perti e t to the prese t co trovers"# state>
Art. 1%$3 =Civil Co4e@. &he :ollo9i ' co tracts are u e :orceable# u less the" are rati:ie4> xxx xxx xxx 2@ &hose that 4o ot co*pl" 9ith the Statute o: .rau4s as set :orth i this u*ber. 6 the :ollo9i ' cases# a a'ree*e t herea:ter *a4e shall be u e :orceable b" actio u less the sa*e# or so*e ote or *e*ora 4u* thereo:# be i 9riti '# a 4 subscribe4 b" the part" char'e4# or b" his a'e tL evi4e ce# there:ore# o: the a'ree*e t ca ot be receive4 9ithout the 9riti '# or a seco 4ar" evi4e ce o: its co te ts> xxx xxx xxx e@ A a'ree*e t :or the leasi ' :or a lo 'er perio4 tha o e "ear# or :or the sale o: real propert" or o: a i terest therei L xxx xxx xxx

&he purpose o: the Statute o: .rau4s is to preve t :rau4 a 4 perDur" i the e :orce*e t o: obli'atio s 4epe 4i ' :or their evi4e ce upo the u assiste4 *e*or" o: 9it esses b" reCuiri ' certai e u*erate4 co tracts a 4 tra sactio s to be evi4e ce4 i Friti '. &he provisio s o: the Statute o: .rau4s ori'i all" appeare4 u 4er the ol4 Rules o: Evi4e ce. 8o9ever 9he the Civil Co4e 9as re<9ritte i 1/%/ =to ta5e e::ect i 1/5$@# the provisio s o: the Statute o: .rau4s 9ere ta5e out o: the Rules o: Evi4e ce i or4er to be i clu4e4 u 4er the title o E e :orceable Co tracts i the Civil Co4e. &he tra s:er 9as ot o l" a *atter o: st"le but to sho9 that the Statute o: .rau4s is also a substa tive la9. &here:ore# except u 4er the co 4itio s provi4e4 b" the Statute o: .rau4s# the existe ce o: the co tract o: sale *a4e b" Cecilio 9ith his sibli 's 13 ca ot be prove4. 2 4 6ssue> Page 102

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Art. 11%5. &he :ollo9i ' actio s *ust be co**e ce4 9ithi six "ears> =1@ Epo a oral co tract . .

6: the parties S60163+S O. CEC616O ha4 alle'e4l" 4erive4 their ri'ht o: actio :ro* the oral purchase *a4e b" their pare ts i 1/3$# the the actio :ile4 i 1/7( 9oul4 have clearl" prescribe4. More tha six "ears ha4 lapse4. Fe 4o ot a'ree 9ith the parties S60163+S O. CEC616O 9he the" reaso that a i*plie4 trust i :avor o: the S60163+S O. CEC616O 9as establishe4 i 1/72# 9he the 8E6RS O. CEC616O execute4 a co tract o: partitio over the sai4 properties. 0ut as 9e ha4 poi te4 out# the la9 reco' i,es the superiorit" o: the torre s title. Above all# the torre s title i the possessio o: the 8E6RS O. CEC616O carries *ore 9ei'ht as proo: o: o9 ership tha the surve" or sub4ivisio pla o: a parcel o: la 4 i the a*e o: S60163+S O. CEC616O. &he Court has i variabl" uphel4 the i 4e:easibilit" o: the torre s title. 3o possessio b" a " perso o: a " portio o: the la 4 coul4 4e:eat the title o: the re'istere4 o9 ers thereo:. 6 the prese t case# ho9ever# the :acts belie the clai* o: o9 ership. !ALLO* Petitio +RA3&E2. CA 4ecisio RE-ERSE2 a 4 SE& AS62E. C.6 4ecisio RE63S&A&E2

BER AN

E ORIAL PAR#$ INC% '() LUISA CHONG "S% !RANCISCO CHENG G%R% N,% 154630 '0 6$ 2005

!ACTS*

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Civil Law Review 2 2013 - 2014 0er*a Me*orial Par5# 6 c. =0MP6@ is the o9 er a 4 operator o: the 6loilo Me*orial Par5 =6MP@ locate4 i !aro# 6loilo Cit". O e o: the sales cou selors o: the corporatio 9as 1uisa Cho '. O !a uar" 1)# 1//%# Co chita Che '# .ra cisco Che '7s 9i:e# 4ie4. O !a uar" 2$# 1//%# Che ' purchase4 :ro* 0MP6 a *e*orial lot. &he re*ai s o: Co chita 9ere i terre4 i the sai4 lot. So*eti*e i Ma" 1//%# Che ' purchase4 :ro* the 0MP6 a bi''er lot i the 6MP 9here the re*ai s o: his 9i:e 9oul4 be tra s:erre4. 8e 9as sho9 a price list o: the lots i the sai4 par5# i clu4i ' 2%<1ot .a*il" Estate# Sr.# 9ith a at< ee4 price o: P35$#$$$.$$# i clusive o: the cost o: perpetual care. 0MP6 o::ere4 to sell the sai4 lot to Che ' at a pre< ee4 price o: P25$#$$$.$$# less P11$#$$$.$$ o: his pa"*e t o: P15$#$$$.$$ or i the et price o: P1%$#$$$.$$. 8e 9as 'ive a co*putatio o: the price :or his co si4eratio a 4 approval. Che ' a'ree4 to purchase the lot u 4er their Pre<3ee4 Purchase A'ree*e t . Che ' the pai4 o *o thl" i stall*e t. SubseCue tl"# Che ' receive4 a state*e t o: accou t :ro* 0MP6 sho9i ' that he still ha4 a bala ce. Che '# throu'h cou sel# i :or*e4 0MP6 that he ha4# i :act# *a4e a overpa"*e t# 4e*a 4e4 that the excess pa"*e t be re:u 4e4 to hi*# a 4 that the Certi:icate o: O9 ership :or 2%<1ot be issue4 to hi*. 6 a state*e t o: accou t Che ' prepare4# 8e state4 therei that the cost o: the t9o lots 9as P25$#$$$.$$# a 4 that he ha4 *a4e a total pa"*e t o: P327#375.$$. 0MP6 ca*e out 9ith their o9 state*e t o: accou ts that that Che ' has a bala ce. Che ' :ile4 a Co*plai t a'ai st the 6MP# ot a'ai st 0MP6# a 4 1uisa Cho ' i the R&C o: 6loilo Cit"# :or speci:ic per:or*a ce 9ith 4a*a'es. 8e asserte4 that he ha4 *a4e a overpa"*e t :or the sai4 lot. &he trial court re 4ere4 Du4'*e t i :avor o: Che '. CA a::ir*e4 the R&C 4ecisio . ISSUE* Fhether the petitio ers a 4 the respo 4e t ha4 a'ree4 that the et price o: 2%<1ot 9as o l" P1%$#$$$.$$ as it appears i the Pre<3ee4 Purchase A'ree*e t%2 is :actualP HELD* &he respo 4e t si' e4 the a'ree*e t a 4 9as :ur ishe4 9ith a cop". 6 4ee4# the respo 4e t co :ir*e4 i his co*plai t that he si' e4 the a'ree*e t. &he respo 4e t ca ot :ei' i' ora ce o: the ter*s o: the a'ree*e t b" alle'i ' that he a::ixe4 his si' ature o a bla 5 :or*# a 4 o his bare:ace4 a 4 sel:<servi ' pretext that he 9as su::eri ' :ro* her ia a 4 ha4 to be operate4 o i :ive 4a"s. .irst. At the botto* o: the a'ree*e t is the a4vice 'ive to the respo 4e t> GPlease Rea4 &his Co tract.G Seco 4. &he respo 4e t ha4 bee a busi ess*a :or 5$ "ears be:ore he si' e4 the a'ree*e t. &he Court ca ot believe that he 9oul4 si' a bla 5 a'ree*e t 9ithout :irst rea4i ' a 4 revie9i ' the ter*s a 4 co 4itio s co tai e4 therei . &he respo 4e t is presu*e4 to ta5e or4i ar" care o: his co cer sL that the private tra sactio 9as :air a 4 re'ularL that the or4i ar" course o: busi ess has bee :ollo9e4L a 4 that the respo 4e t i te 4e4 the or4i ar" co seCue ces o: his volu tar" act. &hir4. &he respo 4e t a4*itte4 i his Co**e t 4ate4 .ebruar" 13# 1//7 that he ha4 a'ree4 to the co versio o: 12<1ot to 2%<1ot# a 4 that the petitio er :ur ishe4 hi* a co*putatio 9hich he appe 4e4 to his plea4i '. &he co*putatio sho9s that the et price o: 2%<1ot is P1%$#$$$.$$. .ourth. &he respo 4e t co*plie4 9ith the ter*s a 4 co 4itio s o: the Pre<3ee4 Purchase A'ree*e t a 4 *a4e the reCuisite 4o9 pa"*e t a 4 the *o thl" i stall*e ts :or 17 *o ths 9ithout a " plai t. 8e ever 4e*a 4e4 :or a cop" o: the sai4 a'ree*e t# or co*plai e4 to the petitio ers that the co te ts thereo: 4i4 ot re:lect their arra 'e*e t# or 4e*a 4e4 that the sai4 a'ree*e t be re:or*e4 to re:lect their true a'ree*e t. 6t 9as o l" 9he the respo 4e t receive4 the state*e t o: his accou t :ro* 0MP6 so*eti*e i March 1//( that he alle'e4 :or the :irst ti*e that he ha4 overpai4 0MP6 :or 2%<1ot. .i:th. &he respo 4e t :aile4 to a44uce evi4e ce that he 9as su::eri ' :ro* her ia a 4 that he 9as to be operate4 o i :ive 4a"s a:ter si' i ' the Ma" 11# 1//% Pre<3ee4 Purchase A'ree*e t. Article 137$ o: the 3e9 Civil Co4e provi4es that i: the ter*s o: a co tract are clear a 4 leave o 4oubt upo the i te tio o: the co tracti ' parties# the literal *ea i ' o: its stipulatio shall co trol. 3o a*ou t o: extri sic ai4s are reCuire4 a 4 o :urther extra eous sources are ecessar" i or4er to ascertai the parties7 i te t# 4eter*i able as it is# :ro* the co tract itsel:. &he recor4s are clear that the respo 4e t u 4erstoo4 the ature o: the co tract he e tere4 i to. 6:# i 4ee4# the stipulatio s as e*bo4ie4 i the a:ore*e tio e4 Pre<3ee4 Purchase A'ree*e t 9ere ot the true i te tio o: the parties# the respo 4e t shoul4 have :ile4 the correspo 4i ' actio :or re:or*atio o: the co tract. 0ut he 4i4 ot. &he hor boo5 rule o i terpretatio o: co tracts 'ives pri*ac" to the i te tio o: the parties# 9hich is the Page 104

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Civil Law Review 2 2013 - 2014 la9 a*o ' the*. Elti*atel"# their i te tio is to be 4eciphere4 ot :ro* the u ilateral post :acto assertio s o: o e o: the parties# but :ro* the la 'ua'e use4 i the co tract. A 4 9he the ter*s o: the a'ree*e t# as expresse4 i such la 'ua'e# are clear# the" are to be u 4erstoo4 literall"# Dust as the" appear o the :ace o: the co tract.

GU4 AN$ BOCALING & CO% "S% RAOUL S% "% BONNE"IE G%R% N,% 86150 '256 2$ 1992 !ACTS* &he subDect o: the co trovers" is a parcel o: la 4 *easuri ' ($$ sCuare *eters# *ore or less# 9ith t9o buil4i 's co structe4 thereo # belo 'i ' to the 6 testate Estate o: !ose 1. Re" oso.

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Civil Law Review 2 2013 - 2014 &his propert" 9as lease4 to Raoul S. 0o evie a 4 Christopher 0o evie b" the a4*i istratrix# A:rica -al4e, 4e Re" oso# :or a perio4 o: o e "ear be'i i ' Au'ust )# 1/7(# at a *o thl" re tal o: P%#$$$.$$. &he Co tract o: lease co tai e4 the :ollo9i ' stipulatio > \ 6 case the 1ESSOR 4esire or 4eci4es to sell the lease propert"# the 1ESSEES shall be 'ive a :irst priorit" to purchase the sa*e# all thi 's a 4 co si4eratio s bei ' eCual. O 3ove*ber 3# 1/7( Re" oso clai*s she oti:ie4 the private respo 4e ts b" re'istere4 *ail that she 9as selli ' the lease4 pre*ises :or P($$.$$$.$$ less a *ort'a'e loa o: P1$$#$$$.$$# a 4 9as 'ivi ' the* 3$ 4a"s :ro* receipt o: the letter 9ithi 9hich to exercise their ri'ht o: :irst priorit" to purchase the subDect propert". She sai4 that i the eve t that the" 4i4 ot exercise the sai4 ri'ht# she 9oul4 expect the* to vacate the propert" ot later tha March# 1/77. O !a uar" 2$# 1/77# Re" oso se t a other letter to private respo 4e ts a4visi ' the* that i vie9 o: their :ailure to exercise their ri'ht o: :irst priorit"# she ha4 alrea4" sol4 the propert". Epo receipt o: this letter# the private respo 4e ts 9rote Re" oso i :or*i ' her that either o: the* ha4 receive4 her letter 4ate4 3ove*ber 3# 1/7(L that the" ha4 a4vise4 her a'e t to i :or* the* o::iciall" shoul4 she 4eci4e to sell the propert" so e'otiatio s coul4 be i itiate4L a 4 that the" 9ere Gco strai e4 to re:use =her@ reCuest :or the ter*i atio o: the lease. O March 7# 1/77# the lease4 pre*ises 9ere :or*all" sol4 to petitio er +u,*a # 0ocali ' A Co. &he Co tract o: Sale provi4e4 :or i**e4iate pa"*e t o: P137#5$$.$$ o the purchase price# the bala ce o: P2(2#5$$.$$ to be pai4 o l" 9he the pre*ises 9ere vacate4. O April 12# 1/77# Re" oso 9rote a letter to the private respo 4e ts 4e*a 4i ' that the" vacate the pre*ises 9ithi 15 4a"s :or their :ailure to pa" the re tals :or :our *o ths. Fhe the" re:use# Re" oso :ile4 a co*plai t :or eDect*e t a'ai st the* i the cit" court o: Ma ila. O Septe*ber 25# 1/7/# the parties sub*itte4 a Co*pro*ise A'ree*e t# 9hich provi4e4 i ter alia that Gthe 4e:e 4a t Raoul S.-. 0o evie shall vacate the pre*ises subDect o: the 1ease Co tract# -olu taril" a 4 Peace:ull" ot later tha October 31# 1/7/.G &his a'ree*e t 9as approve4 b" the Cit" Court a 4 beca*e the basis o: its 4ecisio . 8o9ever# as the private respo 4e ts :aile4 to co*pl" 9ith the above< Coute4 stipulatio # Re" oso :ile4 a *otio :or executio o: the Du4'*e t b" co*pro*ise# 9hich 9as 'ra te4 o 3ove*ber )# 1/7/. R&C 4eci4e4 i :avor o: the Re" oso a 4 or4ere4 respo 4e t to vacate the pre*ises asap. ISSUE* Fhether the respo 4e t court erre4 i ruli ' that the 'ra t o: :irst priorit" to purchase the subDect properties b" the Du4icial a4*i istratrix ee4e4 o authorit" :ro* the probate courtP Fhether the Co tract o: Sale 9as ot voi4able but rescissibleP Fhether petitio er bu"er is i 'oo4 :aithP

HELD* 1st 6ssue> &he Court a'rees 9ith the respo 4e t court that it 9as ot ecessar" to secure the approval b" the probate court o: the Co tract o: 1ease because it 4i4 ot i volve a alie atio o: real propert" o: the estate or 4i4 the ter* o: the lease excee4 o e "ear so as top *a5e it :all u 4er Article 1)7)=)@ o: the Civil Co4e. O l" i: Para'raph 2$ o: the Co tract o: 1ease 9as activate4 a 4 the sai4 propert" 9as i te 4e4 to be sol4 9oul4 it be reCuire4 o: the a4*i istratrix to secure the approval o: the probate court pursua t to Rule )/ o: the Rules o: Court. 2 4 6ssue Eve i: the or4er o: the probate court 9as vali4# the private respo 4e ts still ha4 a ri'ht to resci 4 the Co tract o: Sale because o: the :ailure o: Re" oso to co*pl" 9ith her 4ut" to 'ive the* the :irst opportu it" to purchase the subDect propert". &he petitio er ar'ues that assu*i ' the Co tract o: Sale to be voi4able# o l" the parties thereto coul4 bri ' a actio to a ul it pursua t to Article 13/7 o: the Civil Co4e. 6t is stresse4 that private respo 4e ts are stra 'ers to the a'ree*e t a 4 there:ore have o perso alit" to see5 its a ul*e t. &he respo 4e t court correctl" hel4 that the Co tract o: Sale 9as ot voi4able but rescissible. E 4er Article 13)$ to 13)1 =3@ o: the Civil Co4e# a co tract other9ise vali4 *a" o etheless be subseCue tl" resci 4e4 b" reaso o: i Dur" to thir4 perso s# li5e cre4itors. &he status o: cre4itors coul4 be vali4l" accor4e4 the 0o evies :or the" ha4 substa tial i terests that 9ere preDu4ice4 b" the sale o: the subDect propert" to the petitio er 9ithout reco' i,i ' their ri'ht o: :irst priorit" u 4er the Co tract o: 1ease.

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Civil Law Review 2 2013 - 2014 Rescissio is a re*e4" 'ra te4 b" la9 to the co tracti ' parties a 4 eve to thir4 perso s# to secure reparatio :or 4a*a'es cause4 to the* b" a co tract# eve i: this shoul4 be vali4# b" *ea s o: the restoratio o: thi 's to their co 4itio at the *o*e t prior to the celebratio o: sai4 co tract. 6t is a relie: allo9e4 :or the protectio o: o e o: the co tracti ' parties a 4 eve thir4 perso s :ro* all i Dur" a 4 4a*a'e the co tract *a" cause# or to protect so*e i co*patible a 4 pre:ere ce ri'ht create4 b" the co tract. Recissio i*plies a co tract 9hich# eve i: i itiall" vali4# pro4uces a lesio or pecu iar" 4a*a'e to so*eo e that Dusti:ies its i vali4atio :or reaso s o: eCuit". 6t is true that the acCuisitio b" a thir4 perso o: the propert" subDect o: the co tract is a obstacle to the actio :or its rescissio 9here it is sho9 that such thir4 perso is i la9:ul possessio o: the subDect o: the co tract a 4 that he 4i4 ot act i ba4 :aith. 8o9ever# this rule is ot applicable i the case be:ore us because the petitio er is ot co si4ere4 a thir4 part" i relatio to the Co tract o: Sale or *a" its possessio o: the subDect propert" be re'ar4e4 as acCuire4 la9:ull" a 4 i 'oo4 :aith. 3r4 6ssue> &he petitio er ca ot be 4ee*e4 a purchaser i 'oo4 :aith :or the recor4 sho9s that its cate'oricall" a4*itte4 it 9as a9are o: the lease i :avor o: the 0o evies# 9ho 9ere actuall" occup"i ' the subDect propert" at the ti*e it 9as sol4 to it. Althou'h the Co tract o: 1ease 9as ot a otate4 o the tra s:er certi:icate o: title i the a*e o: the late !ose Re" oso a 4 A:rica Re" oso# the petitio er ca ot 4e " actual 5 o9le4'e o: such lease 9hich 9as eCuivale t to a 4 i 4ee4 *ore bi 4i ' tha presu*e4 otice b" re'istratio . A purchaser i 'oo4 :aith a 4 :or value is o e 9ho bu"s the propert" o: a other 9ithout otice that so*e other perso has a ri'ht to or i terest i such propert" a 4 pa"s a :ull a 4 :air price :or the sa*e at the ti*e o: such purchase or be:ore he has otice o: the clai* or i terest o: so*e other perso i the propert". +oo4 :aith co otes a ho est i te tio to abstai :ro* ta5i ' u co scie tious a4va ta'e o: a other. &este4 b" these pri ciples# the petitio er ca ot te abl" clai* to be a bu"er i 'oo4 :aith as it ha4 otice o: the lease o: the propert" b" the 0o evies a 4 such 5 o9le4'e shoul4 have cautio e4 it to loo5 4eeper i to the a'ree*e t to 4eter*i e i: it i volve4 stipulatio s that 9oul4 preDu4ice its o9 i terests. Moreover# the petitio er also ca ot i vo5e the Co*pro*ise A'ree*e t 9hich it sa"s ca cele4 the ri'ht o: :irst priorit" 'ra te4 to the 0o evies b" the Co tract o: 1ease. &his a'ree*e t 9as set asi4e b" the parties thereto# resulti ' i the restoratio o: the ori'i al ri'hts o: the private respo 4e ts u 4er the Co tract o: 1ease. !ALLO* Petitio 2E36E2.

EFUATORIAL REALTY "S% AY!AIR N,A7>872 21$ 1996 !ACTS* Petitio er Car*elo a 4 0auer*a 6 c. lease4 its parcel o: la 4 9ith 2<store" buil4i ' to respo 4e t Ma":air &heater 6 c. &he" e tere4 a co tract 9hich provi4es that i: the 1ESSOR shoul4 4esire to sell the lease4 pre*ises#

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Civil Law Review 2 2013 - 2014 the 1ESSEE shall be 'ive 3$<4a"s exclusive optio to purchase the sa*e. Car*elo i :or*e4 Ma":air that it 9ill sell the propert" to ECuatorial. Ma":air *a4e 5 o9 its i terest to bu" the propert" but o l" to the exte t o: the lease4 pre*ises. 3ot9ithsta 4i ' Ma":air7s i te tio # Car*elo sol4 the propert" to ECuatorial. ISSUE* FO3 the sale o: the propert" to ECuatorial is vali4P HELD* &he sale o: the propert" shoul4 be resci 4e4 because Ma":air has the ri'ht o: :irst re:usal. 0oth ECuatorial a 4 Car*elo are i ba4 :aith because the" 5 e9 o: the stipulatio i the co tract re'ar4i ' the ri'ht o: :irst re:usal. &he stipulatio is a ot a optio co tract but a ri'ht o: :irst re:usal a 4 as such the reCuire*e t o: a separate co si4eratio :or the optio # has o applicabilit" i the i sta t case. &he co si4eratio is built i the reciprocal obli'atio o: the parties. 6 reciprocal co tract# the obli'atio or pro*ise o: each part" is the co si4eratio :or that o: the other. =Pro*ise to lease i retur o: the ri'ht to :irst re:usal@ Fith re'ar4 to the i*possibilit" o: per:or*a ce# o l" Car*elo ca be bla*e4 :or ot i clu4i ' the e tire propert" i the ri'ht o: :irst re:usal. Court hel4 that Ma":air *a" ot have the optio to bu" the propert". 3ot o l" the lease4 area but the e tire propert".

RI"ERA "S% DEL ROSARIO G%R% N,% 144934 -'(.'20 15$ 2004 !ACTS* 2el Rosario is the re'istere4 o9 ers o: 1ot 3o. 1$)3<C# a parcel o: la 4 situate4 at 1olo*bo"# 0ulaca . .i4ela 4el Rosario borro9e4 P25$#$$$ :ro* Maria o Rivera i the earl" part o: 1/)7. &o secure the loa # she a 4 Maria o Rivera a'ree4 to execute a 4ee4 o: real estate *ort'a'e a 4 a a'ree*e t to sell the la 4. Co seCue tl"# Maria o 4ra:te4 the 2ee4 o: Real Estate

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Civil Law Review 2 2013 - 2014 Mort'a'e# a ;asu 4ua 2ee4 o: Absolute Sale. =A'ree*e t to Sell@# a 4 a pa"*e t o: the purchase price is a positive suspe sive co 4itio # the :ailure o: 9hich is ot a breach# casual or serious# but a situatio that preve ts the obli'atio o: the ve 4or to co ve" title :ro* acCuiri ' a obli'ator" :orce. Respo 4e ts bou 4 the*selves to 4eliver a 4ee4 o: absolute sale a 4 clea title a:ter petitio ers have *a4e the seco 4 i stall*e t. &his pro*ise to sell 9as subDect to the :ul:ill*e t o: the suspe sive co 4itio . Petitio ers ho9ever :aile4 to co*plete pa"*e t o: the seco 4 i stall*e t. &he o <:ul:ill*e t o: the co 4itio re 4ere4 the co tract to sell i e::ective a 4 9ithout :orce a 4 e::ect. 6t *ust be stresse4 that the breach co te*plate4 i Article 11/1 o: the 3e9 Civil Co4e is the obli'or7s :ailure to co*pl" 9ith a obli'atio alrea4" exta t# ot a :ailure o: a co 4itio to re 4er bi 4i ' that obli'atio . .ailure to pa"# i this i sta ce# is ot eve a breach but a eve t that preve ts the ve 4or7s obli'atio to co ve" title :ro* acCuiri ' bi 4i ' :orce. 8e ce# the a'ree*e t o: the parties i the i sta t case *a" be set asi4e# but ot because o: a breach o the part o: petitio ers :or :ailure to co*plete pa"*e t o: the seco 4 i stall*e t. Rather# their :ailure to 4o so preve te4 the obli'atio o: respo 4e ts to co ve" title :ro* acCuiri ' a obli'ator" :orce. Fhile Article 11/1 uses the ter* rescissio # the ori'i al ter* use4 i Article 112% o: the ol4 Civil Co4e# :ro* 9hich Article 11/1 9as base4# 9as resolutio .%( Resolutio is a pri cipal actio that is base4 o breach o: a part"# 9hile rescissio u 4er Article 13)3 is a subsi4iar" actio li*ite4 to cases o: rescissio :or lesio u 4er Article 13)1 o: the 3e9 Civil Co4e.

&he ;asu 4ua provi4e4 the Riveras 9oul4 purchase the lot :or P2.1M. &here 9ere 3 i stall*e ts> o 25$ ; upo the si' i ' o: the ;asu 4ua o 75$; o Au'ust 31# 1/)7 o 1.1M o 2ece*ber 31# 1/)7. &he 2ee4 o: Absolute Sale 9oul4 be execute4 o l" a:ter the seco 4 i stall*e t is pai4 a 4 a post4ate4 chec5 :or the last i stall*e t is 4eposite4 9ith .i4ela.Althou'h .i4ela i te 4e4 to si' o l" the ;asu 4ua A the real estate *ort'a'e# she i a4verte tl" a::ixe4 her si' ature o all 3 4ocu*e ts. Rivera :aile4 to co*plete the pa"*e t i the 2 4 i stall*e t.Respo 4e ts :ile4 a co*plai t as5i ' :or the rescissio o: ;asu 4ua :or :ailure o: Rivera7s to co*pl" 9ith its co 4itio 7s. &he" also sou'ht the a ul*e t o: the 4ee4 o: absolute sale o the 'rou 4 o: :rau4 A the reco ve"a ce o: the e tire propert". Petitio ers sa" that there ca be o rescissio because i accor4a ce 9ith Article 13)3# the 4el Rosarios *ust sho9 that there 9ere o other le'al *ea s available to obtai reparatio other tha to :ile a case :or rescissio . 30> 3ieto 9as the te a t o: the propert". Fhe the Riveras sho9e4 to 3ieto that the" 9ere the e9 o9 ers# he 4esiste4 :ro* vacati ' the propert". &he Riveras a'ree4 to 'ive hi* a s*all piece o: the la 4 i Cuestio . &he R&C 4eclare4 the 4ee4 o: absolute sale as ull a 4 voi4. &he CA *o4i:ie4 the R&C7s 4ecisio i so:ar as it 4ee*e4 the portio pertai i ' to 3ieto as vali4. 6SSEE> FO3 the co tract e tere4 i to bet9ee parties *a" be resci 4e4 base4 o Art 11/1P 3O the

FO3 the 4ee4 o: absolute sale is ull a 4 voi4 i its e tiret" as oppose4 to the CA7s 4ecisio o: vali4it" pertai i ' to 3ieto7s shareP BES# -O62 63 6&S E3&6RE&B HELD* &he ;asu 4ua reveals that it is i the ature o: a co tract to sell# as 4isti 'uishe4 :ro* a co tract o: sale. 6 a co tract o: sale# the title to the propert" passes to the ve 4ee upo the 4eliver" o: the thi ' sol4L 9hile i a co tract to sell# o9 ership is# b" a'ree*e t# reserve4 i the ve 4or a 4 is ot to pass to the ve 4ee u til :ull pa"*e t o: the purchase price. 6 a co tract to sell# the ARAFAG HABANA JALAYAJAY

TANAY RECREATION CENTER AND DE"ELOP ENT CORP% "S% CATALINA ATIEN4O !AUSTO G%R% N,% 140182% A<2?/ 12$ 2005 !ACTS* Petitio er &a a" Recreatio Ce ter a 4 2evelop*e t Corp. =&RC2C@ is the lessee o: a 3#$/$< sCuare *eter propert" locate4 i Sitio +a"as# &a a"# Ri,al# o9 e4 b" Catali a Matie ,o .austo# u 4er a Co tract o: 1ease. O this propert" sta 4s the &a a" Coliseu* Coc5pit operate4 b" petitio er. &he lease co tract provi4e4 :or a 2$<"ear ter*# subDect to re e9al Page 107

Civil Law Review 2 2013 - 2014 9ithi sixt" 4a"s prior to its expiratio . &he co tract also provi4e4 that shoul4 .austo 4eci4e to sell the propert"# petitio er shall have the Opriorit" ri'htI to purchase the sa*e. O !u e 17# 1//1# petitio er 9rote .austo i :or*i ' her o: its i te tio to re e9 the lease. 8o9ever# it 9as .austo7s 4au'hter# respo 4e t A u ciacio .. Pacu a"e # 9ho replie4# as5i ' that petitio er re*ove the i*prove*e ts built thereo # as she is o9 the absolute o9 er o: the propert". 6t appears that .austo ha4 earlier sol4 the propert" to Pacu a"e a 4 title has alrea4" bee tra s:erre4 i her a*e. Petitio er :ile4 a A*e 4e4 Co*plai t :or A ul*e t o: 2ee4 o: Sale# Speci:ic Per:or*a ce 9ith 2a*a'es# a 4 6 Du ctio . 6 her A s9er# respo 4e t clai*e4 that petitio er is estoppe4 :ro* assaili ' the vali4it" o: the 4ee4 o: sale as the latter ac5 o9le4'e4 her o9 ership 9he it *erel" as5e4 :or a re e9al o: the lease. Accor4i ' to respo 4e t# 9he the" *et to 4iscuss the *atter# petitio er 4i4 ot 4e*a 4 :or the exercise o: its optio to purchase the propert"# a 4 it eve as5e4 :or 'race perio4 to vacate the pre*ises. ISSUE* &he co te tio i this case re:ers to petitio er7s priorit" ri'ht to purchase# also re:erre4 to as the ri'ht o: :irst re:usalP HELD* Fhe a lease co tract co tai s a ri'ht o: :irst re:usal# the lessor is u 4er a le'al 4ut" to the lessee ot to sell to a "bo4" at a " price u til a:ter he has *a4e a o::er to sell to the latter at a certai price a 4 the lessee has :aile4 to accept it. &he lessee has a ri'ht that the lessorKs :irst o::er shall be i his :avor. Petitio er7s ri'ht o: :irst re:usal is a i te'ral a 4 i 4ivisible part o: the co tract o: lease a 4 is i separable :ro* the 9hole co tract. &he co si4eratio :or the lease i clu4es the co si4eratio :or the ri'ht o: :irst re:usal a 4 is built i to the reciprocal obli'atio s o: the parties. 6t 9as erro eous :or the CA to rule that the ri'ht o: :irst re:usal 4oes ot appl" 9he the propert" is sol4 to .austo7s relative. Fhe the ter*s o: a a'ree*e t have bee re4uce4 to 9riti '# it is co si4ere4 as co tai i ' all the ter*s a'ree4 upo . As such# there ca be# bet9ee the parties a 4 their successors i i terest# o evi4e ce o: such ter*s other tha the co te ts o: the 9ritte a'ree*e t# except 9he it :ails to express the true i te t a 4 a'ree*e t o: the parties. 6 this case# the 9or4i ' o: the stipulatio 'ivi ' petitio er the ri'ht o: :irst re:usal is plai a 4 u a*bi'uous# a 4 leaves o ARAFAG HABANA JALAYAJAY roo* :or i terpretatio . 6t si*pl" *ea s that shoul4 .austo 4eci4e to sell the lease4 propert" 4uri ' the ter* o: the lease# such sale shoul4 :irst be o::ere4 to petitio er. &he stipulatio 4oes ot provi4e :or the Cuali:icatio that such ri'ht *a" be exercise4 o l" 9he the sale is *a4e to stra 'ers or perso s other tha .austo7s 5i . &hus# u 4er the ter*s o: petitio er7s ri'ht o: :irst re:usal# .austo has the le'al 4ut" to petitio er ot to sell the propert" to a "bo4"# eve her relatives# at a " price u til a:ter she has *a4e a o::er to sell to petitio er at a certai price a 4 sai4 o::er 9as reDecte4 b" petitio er.

REPUBLIC O! THE PHILIPPINES$ R7<27&7(=7) 80 =67 SOCIAL SECURITY SYSTE "S% -ERRY "% DA"ID G%R% N,% 155634% A.B.&= 16$ 2004 !ACTS* !err" -. 2avi4 is a e*plo"ee o: the SSS. Pursua t to its E*plo"ees7 8ousi ' 1oa Pro'ra*# SSS a9ar4e4 2avi4 a house a 4 lot locate4 at 3orth .airvie9# Uue,o Cit". A 2ee4 o: Co 4itio al Sale over the subDect propert" 9as therea:ter execute4 bet9ee the parties.

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Civil Law Review 2 2013 - 2014 O reports that u*erous violatio s have bee co**itte4 b" so*e o: the housi ' a9ar4ees i co ectio 9ith the co 4itio s 'over i ' their sales# SSS co 4ucte4 a i vesti'atio o the *atter. &he i vesti'atio reveale4 that i the case o: SRespo 4e tT 2avi4# he co**itte4 t9o =2@ violatio s o: his 4ee4 o: co 4itio al sale# to 9it> =1@ either the Srespo 4e tT or his i**e4iate :a*il" resi4e4 a 4Qor occupie4 the sai4 housi ' u it# a 4 =2@ he allo9e4 a certai 0ue ave tura Pe us to possess a 4 occup" the propert". As a co seCue ce o: these violatio s# SSS se t a letter to 2avi4 :or*all" revo5i '# ter*i ati ' a 4Qor resci 4i ' the 4ee4 o: co 4itio al sale. 8o9ever# the latter re:use4 to vacate a 4 surre 4er possessio o: the subDect propert"# pro*pti ' SSS to i stitute a co*plai t 9ith the Uue,o Cit" R&C o March 2)# 1//( revo5i ' the 4ee4 o: co 4itio al sale a 4 li5e9ise pra"i ' :or the issua ce o: a 9rit o: possessio i its :avor. SRespo 4e tT 2avi4 4e ie4 the alle'e4 violatio s o: the 4ee4 o: co 4itio al sale# stati ' that 0ue ave tura Pe us# allu4e4 to b" the Spetitio erT as possessor< occupa t o: the subDect propert"# 9as i :act a careta5er u til a 4 a:ter the ecessar" re ovatio s a 4 *o4i:icatio s o the house 9ere *a4e. R&C 4is*isse4 the case a 4 rule4 i :avor o: 2avi4. CA a::ir*e4 i toto the R&C 4ecisio . ISSUE* Fhether respo 4e t violate4 the ter*s a 4 co 4itio s o: the O2ee4 o: Co 4itio al SaleIP Fhether Rescissio is the proper recourseP HELD* 1st 6ssue Petitio er avers that respo 4e t violate4 the ter*s a 4 co 4itio s o: the 2ee4 o: Co 4itio al Sale# 9he he :aile4 to Oactuall" occup" a 4 possess the propert" at all ti*esI a 4 allo9e4 other perso s to 4o so. Certai rules o: co tract i terpretatio co*e to *i 4 at this poi t. .irst# i co strui ' a co tract# it is a :u 4a*e tal tas5 to ascertai the i te tio o: the co tracti ' parties. As a rule# such i te tio is 4eter*i e4 b" loo5i ' at the 9or4s use4 << at all the 9or4s rather tha at a particular 9or4 or t9oL a 4 at 9or4s i co text rather tha Dust 9or4s sta 4i ' alo e. 6 4ee4# u 4er Article 137% o: the Civil Co4e# Othe various stipulatio s o: a co tract shall be i terprete4 to'ether# attributi ' to the 4oubt:ul o es that se se 9hich *a" result :ro* all o: the* ta5e Doi tl".I Seco 4# the ascertai e4 i te tio o: the parties is 4ee*e4 a i te'ral part o: the co tract# as thou'h it has bee ori'i all" expresse4 i u eCuivocal ter*s. A 4 thir4# the reaso able ess o: the result obtai e4# a:ter a al"sis a 4 co structio co si4ere4. o: a co tract# *ust also be care:ull"

&he co 4itio s that 9ere alle'e4l" violate4 b" respo 4e t are co tai e4 i para'raph 1$ o: the 2ee4 o: Co 4itio al Sale. Plai l"# the pri*ar" i te tio behi 4 the above<Cuote4 stipulatio s is to restrict the sale# the use a 4 the be e:it o: the housi ' u its to SSS e*plo"ees a 4 their i**e4iate :a*ilies o l". &his obDective is i li e 9ith that o: the SSS housi ' loa pro'ra* << to ai4 its e*plo"ees i acCuiri ' their o9 49elli ' u its at a lo9 cost. Such i te t# 4ra9s li:e also :ro* the social Dustice polic" o: RA 11(1# as a*e 4e4# other9ise 5 o9 as the OSocial Securit" S"ste* 1a9I 'ra ti ' 4irect housi ' loa s to covere4 e*plo"ees a 4 'ivi ' priorit" to lo9< i co*e 'roups. 6 4ee4# the above 'oal is co :ir*e4 b" the reCuire*e t that respo 4e t<ve 4ee a 4 his heirs or assi' s *ust actuall" occup" a 4 possess the propert" at all ti*esL b" the proscriptio that he *ust ot sell# assi' # e cu*ber# *ort'a'e# lease# sublet or i a " *a er alter or 4ispose o: the propert" :or the :irst :ive =5@ "earsL a 4 b" the :urther proviso that he *a" alie ate or tra s:er his ri'hts thereto at a " ti*e prior to :ull pa"*e t# but o l" to petitio er u 4er its ri'ht o: :irst re:usal or to a " other eli'ible SSS e*plo"ee. &hese restrictive cove a ts are u 4e iabl" vali4 u 4er Article 13$( o: the Civil Co4e. &he use o: the co Du ctive a 4 i subpara'raph =c@ is ot b" a " cha ce a surplusa'e. 3either is it *ea t to be 9ithout a " le'al si' i:icatio . 6ts use is co :ir*ator" o: the restrictive i te t that the houses provi4e4 b" petitio er shoul4 be :or the exclusive use a 4 be e:it o: the SSS e*plo"ee<be e:iciar". 6t is easil" 4iscer ible# there:ore# that both Oactual occupa c"I a 4 Opossessio at all ti*esI << ot Dust o e or the other << 9ere i*pose4 as co 4itio s upo respo 4e t. &he 9or4 a 4 << 9hether it is use4 to co ect 9or4s# phrases or :ull se te ces << *ust be accepte4 i its co**o a 4 usual *ea i ' as Obi 4i ' to'ether a 4 as relati ' to o e a other.I A 4 i*plies a co Du ctio # Doi 4er or u io . &hus# respo 4e t ha4 to co*pl" 9ith ot o e# but t9o# co curri ' co 4itio s << actual occupa c" a 4 possessio at all ti*es. &he Cuestio is# 4i4 heP Fe rule that he 4i4 ot. 2 4 6ssue> 6 vie9 o: the :ore'oi ' 4iscussio # 9e rule that rescissio o: the Co tract is the proper recourse. Article 11/1 o: the Civil Co4e provi4es> OArt. 11/1. &he po9er to resci 4 obli'atio s is i*plie4 i reciprocal o es# i case o e o: the obli'ors shoul4 ot co*pl" 9ith 9hat is i cu*be t upo hi*. Page 111

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Civil Law Review 2 2013 - 2014

O&he i Dure4 part" *a" choose bet9ee :ul:ill*e t a 4 the rescissio o: the obli'atio # 9ith the pa"*e t o: 4a*a'es i either case. 8e *a" also see5 rescissio eve a:ter he has chose :ul:ill*e t# i: the latter shoul4 beco*e i*possible.I As ote4 i previous cases# the rescissio co te*plate4 u 4er Article 11/1 is a pri cipal actio :or Oresolutio #I 9hich is base4 o a breach b" a part" o: its reciprocal obli'atio s. &he prese t Co tract is o e o: co 4itio al sale << o:te ti*es re:erre4 to as a co tract to sell# 9herei o9 ership or title is retai e4 b" the ve 4or u til O:ull pa"*e t b" the -E32EE o: the :ull purchase price o: the PROPER&B# 9ith all the i terest 4ue thereo # as 9ell as taxes a 4 other char'es A32 upo their :aith:ul co*plia ce 9ith all the co 4itio s o: this Co tract x x x.I Althou'h a tra s:er o: o9 ership or title :ro* the seller to the bu"er is or*all" pre4icate4 upo the pa"*e t o: the purchase price# the parties are evertheless :ree to stipulate other la9:ul co 4itio s b" 9hich the" bi 4 the*selves a 4 upo 9hich tra s:er o: o9 ership 4epe 4s. 6 this case# that other obli'atio 9as :aith:ul co*plia ce 9ith the co 4itio s o: the Co tract. Respo 4e t 4i4 ot :aith:ull" co*pl" 9ith the co 4itio s u 4er subpara'raphs =1$@=a@ a 4 =c@. 8is o co*plia ce also co stitute4 a breach o: his reciprocal obli'atio s u 4er the 2ee4. &he 2ee4 itsel: provi4es :or its a ul*e t a 4 ca cellatio b" reaso o: a breach o: the ter*s a 4 co 4itio s stipulate4 therei . 2octri all"# *utual restitutio *ust :ollo9 rescissio . E 4er Article 13)5 o: the Civil Co4e# Orescissio creates the obli'atio to retur the thi 's 9hich 9ere the obDect o: the co tract# to'ether 9ith their :ruits# a 4 the price 9ith its i terests x x x.I Moreover# OStTo resci 4 is to 4eclare a co tract voi4 at its i ceptio a 4 to put a e 4 to it as thou'h it ever 9as.I 8e ce# rescissio restores the parties to their relative positio s# as i: o co tract has bee *a4e. Para'raph 11# cite4 above# supports the *utual restitutio reCuire4 i rescissio . Respo 4e t is thus obli'e4 to retur the house a 4 lot sol4# as 9ell as re tal pa"*e ts he *a" have ear e4# i: a ". O the other ha 4# petitio er is *a 4ate4 to re:u 4 to hi* his :ull pa"*e t o: P172#/7).)5 plus le'al i terest o: ( perce t per a u*# as 9ell as the value o: substa tial i*prove*e ts i tro4uce4 b" hi*# as appraise4 b" petitio er. 6 4ee4# stipulate4 i the 2ee4 is such appraisal b" the ve 4or# upo tra s:er o: the propert" to petitio er or to a " o: its eli'ible e*plo"ees. &his co 4itio is reaso abl" a 4 Dustl" applicable a 4 proper i the prese t case. !ALLO* Petitio +RA3&E2.

AIR !RANCE "S% CA G%R% N,% L-57339 D757>872 29$ 1983 !ACTS* So*eti*e i .ebruar"# 1/7$# the late !ose +. +a a a 4 his :a*il" =the +A3AS@# purchase4 :ro* A6R .RA3CE throu'h 6*perial &ravels# 6 corporate4# i e =/@ Gope <4ate4G air passa'e tic5ets :or the Ma ilaQOsa5aQ&o5"oQMa ila route.

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Civil Law Review 2 2013 - 2014 O 2% April 1/7$# A6R .RA3CE excha 'e4 or substitute4 the a:ore*e tio e4 tic5ets 9ith other tic5ets :or the sa*e route. At this ti*e# the +A3AS 9ere boo5e4 :or the Ma ilaQOsa5a se'*e t o A6R .RA3CE .li'ht 1)% :or ) Ma" 1/7$# a 4 :or the &o5"oQMa ila retur trip o A6R .RA3CE .li'ht 1)7 o 22 Ma" 1/7$. &he a:oresai4 tic5ets 9ere vali4 u til ) Ma" 1/71# the 4ate 9ritte u 4er the pri te4 9or4s G3o valuable apres 4e =*ea i '# G ot vali4 a:ter theG@. &he +A3AS 4i4 ot 4epart o ) Ma" 1/7$. 6 the *ea ti*e# the +A3AS ha4 sche4ule4 their 4eparture o 7 Ma" 1/71 or o e 4a" be:ore the expir" 4ate. 6 the *or i ' o: the ver" 4a" o: their sche4ule4 4eparture o the :irst le' o: their trip# &eresita reCueste4 travel a'e t Ella to arra 'e the revali4atio o: the tic5ets. Ella 'ave the sa*e e'ative a s9er a 4 9ar e4 her that althou'h the tic5ets coul4 be use4 b" the +A3AS i: the" le:t o 7 Ma" 1/71# the tic5ets 9oul4 o lo 'er be vali4 :or the rest o: their trip because the tic5ets 9oul4 the have expire4 o ) Ma" 1/71. &eresita replie4 that it 9ill be up to the +A3AS to *a5e the arra 'e*e ts. Fith that assura ce# Ella o his o9 # attache4 to the tic5ets vali4ati ' stic5ers :or the Osa5aQ&o5"o :li'ht# o e a !A1. stic5er a 4 the other a SAS =Sca 4i avia Air9a"s S"ste*@ stic5er. &he SAS stic5er i 4icates thereo that it 9as GReevaluate4 b"> the Philippi e &ravel 0ureau# 0ra ch 3o. 2G =as sho9 b" a circular rubber sta*p@ a 4 si' e4 GA4orG# a 4 the 4ate is ha 49ritte i the ce ter o: the circle. &he appear u 4er pri te4 hea4i 's the otatio s> !1. 1$) =.li'ht@# 1( Ma" =2ate@# 1$%$ =&i*e@# O; =status@. Appare tl"# Ella *a4e o *ore atte*pt to co tact A6R .RA3CE as there 9as o *ore ti*e. 3ot9ithsta 4i ' the 9ar i 's# the +A3AS 4eparte4 :ro* Ma ila i the a:ter oo o: 7 Ma" 1/71 o boar4 A6R .RA3CE .li'ht 1)% :or Osa5a# !apa . ISSUE* Fhether or ot# u 4er the e viro *e tal *ilieu the +A3AS have *a4e out a case :or breach o: co tract o: carria'e e titli ' the* to a a9ar4 o: 4a*a'esP e rich*e t co si4eri ' that a i crease o: :ares too5 e::ect# as authori,e4 b" the Civil Aero autics 0oar4 =CA0@ i April# 1/71. &he co clusio is i evitable that the +A3AS brou'ht upo the*selves the pre4ica*e t the" 9ere i :or havi ' i siste4 o usi ' tic5ets that 9ere 4ue to expire i a e::ort# perhaps# to beat the 4ea4li e a 4 i the thou'ht that b" co**e ci ' the trip the 4a" be:ore the expir" 4ate# the" coul4 co*plete the trip eve therea:ter. 6t shoul4 be recalle4 that A6R .RA3CE 9as eve u a9are o: the vali4ati ' SAS a 4 !A1. stic5ers that Ella ha4 a::ixe4 spuriousl". Co seCue tl"# !apa Air 1i es a 4 A6R .RA3CE *erel" acte4 9ithi their co tractual ri'hts 9he the" 4isho ore4 the tic5ets o the re*ai i ' se'*e ts o: the trip a 4 9he A6R .RA3CE 4e*a 4e4 pa"*e t o: the a4Duste4 :are rates a 4 travel taxes :or the &o5"oQMa ila :li'ht. !ALLO* !u4'*e t RE-ERSE2

HELD* 3o. it is clear that A6R .RA3CE ca ot be :aulte4 :or breach o: co tract 9he it 4isho ore4 the tic5ets o: the +A3AS a:ter ) Ma" 1/71 si ce those tic5ets expire4 o sai4 4ateL or 9he it reCuire4 the +A3AS to bu" e9 tic5ets or have their tic5ets re<issue4 :or the &o5"oQMa ila se'*e t o: their trip. 3either ca it be sai4 that# 9he upo sale o: the e9 tic5ets# it i*pose4 a44itio al char'es represe ti ' :are 4i::ere tials# it 9as *otivate4 b" sel:<i terest or u Dust ARAFAG HABANA JALAYAJAY

CHINA BAN#ING CORPORATION "S% CA 327 SCRA 378 !ACTS* Al:o so Roxas Chua a 4 his 9i:e ;ia ' Mi ' Chu Chua 9ere the o9 ers o: a resi4e tial la 4 i Sa !ua # Metro Ma ila# covere4 b" &ra s:er Certi:icate o: &itle 3o. %1$($3. O !u e1/# 1/)5# petitio er Chi a 0a 5 :ile4 9ith the Re'io al &rial Court o: Ma ila# 0ra ch 2/# a actio :or collectio o: su* o: *o e" a'ai st Paci:ic Multi A'ro<6 4ustrial Corporatio a 4 Page 113

Civil Law Review 2 2013 - 2014 Al:o so Chua 9hich 9as 4oc5ete4 as Civil Case 3o. )5< 31257. O 3ove*ber 7# 1/)5# the trial court pro*ul'ate4 its 4ecisio i Civil Case 3o. )5<31257 i :avor o: Chi a 0a 5i ' Corporatio . O 3ove*ber 21# 1/))# Al:o so Roxas Chua execute4 a public i stru*e t 4e o*i ate4 as GAssi' *e t o: Ri'hts to Re4ee*#G 9hereb" he assi' e4 his ri'hts to re4ee* the o e<hal: u 4ivi4e4 portio o: the propert" to his so # private respo 4e t Pauli o RoxasChua. Pauli o re4ee*e4 sai4 o e<hal: share o the ver" sa*e 4a". O the other ha 4# i co ectio 9ith Civil Case 3o. )5<31257# a other otice o: lev" o executio 9as issue4 o .ebruar" %# 1//1 b" the 2eput" Sheri:: o: Ma ila a'ai st the ri'ht a 4 i terest o: Al:o so Roxas Chua i &C& %1$($3. &herea:ter# a certi:icate o: sale o executio 4ate4 April 13# 1//2 9as issue4 b" the Sheri:: o: 0ra ch 3/# R&C Ma ila i Civil Case 3o. )5<31257# i :avor o: Chi a0a 5 a 4 i scribe4 at the bac5 o: &C& %1$($3 as E tr" 3o. $1)/( o Ma" %# 1//2. O Ma" 2$#1//3# Pauli o Roxas Chua a 4 ;ia ' Mi ' Chu Chua i stitute4 Civil Case 3o. (31// be:ore theR&C o: Pasi'# Metro Ma ila a'ai st Chi a 0a 5# averri ' that Pauli o has a prior a 4 better ri'ht over the ri'hts# title# i terest a 4 participatio o: Chi a 0a 5i ' Corporatio i &C&%1$($3. &he trial court re 4ere4 a 4ecisio o !ul" 15# 1//% i :avor o: private respo 4e tPauli o Roxas Chua. O appeal# the Court o: Appeals a::ir*e4 the ruli ' o: the trial court ISSUE* Fhether or ot the assi' *e t o: the ri'ht o: re4e*ptio *a4e b" Al:o so Roxas Chua i :avor o: private respo 4e t Pauli o 9as 4o e to 4e:rau4 his cre4itors a 4 *a" be resci 4e4 u 4er Article 13)7 o: the Civil Co4eP presu*ptio that the co ve"a ce is :rau4ule t has ot bee overco*e. At the ti*e a Du4'*e t 9as re 4ere4 i :avor o: Chi a 0a 5 a'ai st Al:o so a 4 the corporatio # Pauli o 9as still livi ' 9ith his pare ts i the subDect propert". Pauli o hi*sel: a4*itte4 that he 5 e9 his :ather 9as heavil" i 4ebte4 a 4 coul4 ot a::or4 to pa" his 4ebts. &he tra s:er 9as u 4oubte4l" *a4e bet9ee :ather a 4 so at a ti*e 9he the :ather 9as i solve t a 4 ha4 o other propert" to pa" o:: his cre4itors. 8e ce# it is o: o co seCue ce 9hether or ot Pauli o ha4 'ive valuable co si4eratio :or the co ve"a ce. Petitio is 'ra te4.

HELD* BES. Existe ce o: :rau4 or i te t to 4e:rau4 cre4itors *a" either be presu*e4 i accor4a ce 9ith Article 13)7 o: the Civil Co4e or 4ul" prove4 as the case *a" be. A:ter his co Du'al share i &C& %1$($3 9as :oreclose4 b" Metroba 5# the o l" propert" that Al:o so Roxas Chua ha4 9as his ri'ht to re4ee* the sa*e# it :or*i ' part o: his patri*o ". GPropert"G u 4er civil la9 co*prehe 4s ever" species o: title# i choate or co*plete# le'al or eCuitable. 6 the case at bar#the

CAD9ALLADER & CO PANY "S% S ITH$ BELL & CO PANY !782.'20 9$ 1907 !ACTS* 6 this actio the plai ti::# as assi' ee o: the Paci:ic Export 1u*ber Co*pa "# sues :or M3#%)(# E ite4 States curre c"# the 4i::ere ces bet9ee the a*ou t tur e4 over to the co*pa " o accou t o: a car'o o: ce4ar piles co si' e4 to the 4e:e 4a ts as its a'e ts a 4 a:ter9ar4s bou'ht b" the*# a 4 the a*ou t actuall" receive4 b" the* o the subseCue t sale Page 114

ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 thereo:. &he 4e:e 4a t 9ere allo9e4 b" the court belo9 a cou terclai* o: M(#//3.)$# E ite4 States curre c"# :ro* 9hich 9as 4e4ucte4 M2#$(3.1( :or the plai ti::s clai*# leavi ' a bala ce i :avor o: the 4e:e 4a ts o: M%#/3$.(%# :or the eCuip*e t o: 9hich# to 9it# /#)(1.2) pesos# Du4'*e t 9as e tere4. &he 4e:e 4a ts have ot appeale4. &he plai ti:: too5 several exceptio s# but o the ar'u*e t its cou sel state4 that its co te tio 9as co :i e4 to the allo9a ce b" the trial court o: the co**issio s o: the 4e:e 4a t o selli ' the pili '. 6 Ma" 1/$2# the Paci:ic Export 1u*ber Co*pa " o: Portla 4 shippe4 upo the stea*er Uuito :ive hu 4re4 a 4 ei'ht"<o e =5)1@ piles to the 4e:e 4a t# 8e r" F. Peabo4" A Co*pa "# at Ma ila# o the sale o: 9hich be:ore stora'e the co si' ees 9ere to receive a co**issio o: o e hal: o: 9hatever su* 9as obtai e4 over M15 :or each pile a 4 5 per ce t o: the price o: the piles sol4 a:ter stora'e. A:ter the arrival o: the stea*er o Au'ust 2# Peabo4" a 4 Co*pa " 9rote the a'e t o: the Paci:ic Co*pa " at Sha 'hai that :or lac5 o: a 4e*a 4 the piles 9oul4 have to be sol4 at co si4erabl" less tha M15 apieceL 9hereupo the co*pa "7s a'e t 4irecte4 the* to *a5e the best possible o::er :or the piles# i respo se to 9hich o Au'ust 5 the" tele'raphe4 hi* a o::er o: M12 apiece. 6t 9as accepte4 b" hi* o Au'ust (# i co seCue ce o: 9hich the 4e:e 4a t pai4 the Paci:ic Co*pa " M(#/72. 6t a:ter9ar4s appeare4 that o !ul" / Peabo4" A Co*pa " ha4 e tere4 i to e'otiatio s 9ith the 6 sular Purchasi ' A'e t :or the sale :or the piles at M2$ a piece# resulti ' o: Au'ust % i the sale to the +over *e t o: t9o hu 4re4 a 4 thirtee =213@ piles at M1/ each. More o: the* 9ere a:ter9ar4s sol4 to the +over *e t at the sa*e :i'ure a 4 the re*ai 4er to other parties at carr"i ' prices# the 9hole reali,i ' to the 4e:e 4a ts M1$#%1.((# a*ou ti ' to M3#%%5.(( above the a*ou t pai4 b" the 4e:e 4a t to the plai ti:: there:or. &hus it is clear that at the ti*e 9he the a'e ts 9ere bu"i ' :ro* their pri cipal these piles at M12 apiece o the stre 'th o: their represe tatio that o better price 9as obtai able# the" ha4 alrea4" sol4 a substa tial part o: the* at M1/. 6 these tra sactio s the 4e:e 4a t# S*ith# 0ell A Co*pa "# 9ere associate4 9ith the 4e:e 4a ts# 8e r" F. Peabo4" A Co*pa "# 9ho co 4ucte4 the e'otiatio s# a 4 are co seCue tl" accou table 9ith the*. ISSUE* Fhether or ot the sale 9as :rau4ule t# he ce *a" be a ulle4 b" the a''rieve4 part"P HELD* 6 volve4 i this case is a atte*pt b" a 4au'hter to clai* her share i her :atherKs estate so*e sixt"<three "ears a:ter the latterKs 4e*ise. &he :ather# A 4res Arro"o# 4ie4 so*eti*e i 1/$1. 8e le:t a estate appare tl" o: o *ea si,e# co*prise4 o: properties locate4 *ai l" i 6loilo a 4 3e'ros Occi4e tal. 8e 9as survive4 b" three co*pulsor" heirs> .elix Arro"o# a Page 113 BES. 6t is plai t that i co ceali ' :ro* their pri cipal the e'otiatio s 9ith the +over *e t# resulti ' i a sale o: the piles at 1/ a piece a 4 i *isreprese ti ' the co 4itio o: the *ar5et# the a'e ts co**itte4 a breach o: 4ut" :ro* 9hich the" shoul4 be e:it. &he co tract o: sale to the*selves thereb" i 4uce4 9as :ou 4e4 o their :rau4 a 4 9as subDect to a ul*e t b" the a''rieve4 part". =Civil Co4e# articles 12(5 a 4 12(/.@ Epo a ul*e t the parties shoul4 be restore4 to their ori'i al positio b" *utual restitutio . =Article 13$3 a 4 13$(.@ &here:ore the 4e:e 4a ts are ot e title4 to retai their co**issio reali,e4 upo the piles i clu4e4 u 4er the co tract so a ulle4. 6 respect o: the 213 piles# 9hich at the ti*e o: the *a5i ' o: this co tract o Au'ust 5 the" ha4 alrea4" sol4 u 4er the ori'i al a'e c"# their co**issio shoul4 be allo9e4. &he court belo9 :ou 4 the et a*ou t 4ue :ro* the 4e:e 4a ts to the plai ti:: :or the Uuito piles# a:ter 4e4ucti ' the expe se o: la 4i ' the sa*e a 4 M5%3.1$ co**issio # 9as M1#7($.))# o 9hich it allo9e4 i terest at the rate o: ( per ce t :ro* March 1# 1/$3. &his a*ou t shoul4 be i crease4 b" the a44itio thereto o: the a*ou t o: the co**issio 4isallo9e4# to 9it# M331.17 'ivi ' M2#$/2.$5. 6 terest co*pute4 o this su* to the 4ate o: the e tr" o: Du4'*e t belo9 a*ou ts to M35/.77# 9hich a44e4 to the pri cipal su* *a5es M2#2%1.)2# the a*ou t o: plai ti::7s clai*# 9hich is to be 4e4ucte4 :ro* 4e:e 4a ts7 cou terclai* o: M(#//3.)$# leavi ' a bala ce o: M%#5%1./)# eCuivale t to /#$)3./( pesos# the a*ou t :or 9hich Du4'*e t belo9 shoul4 have bee e tere4 i :avor o: the 4e:e 4a ts.

"DA% DE BUNCIO "S% ESTATE OS SPOUSES DE LEON D757>872 14$ 1987 !ACTS*

ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 le'iti*ate so b" his :irst 9i:e# a 4 .ilo*e a Arro"o a 4 Si*plicio Arro"o# le'iti*ate chil4re b" his seco 4 9i:e. A4*i istratio o: his estate 9as assu*e4 a 4 u 4erta5e b" .elix Arro"o# as the ol4est so # evi4e tl" 9ithout obDectio :ro* his brother or sister. O .ebruar" 1/# 1/(%# his 4au'hter# the a:ore a*e4 .ilo*e a Arro"o# the alrea4" )% "ears o: a'e a 4 a 9i4o9# to'ether 9ith her six =(@ chil4re # :ile4 suit i the the Court o: .irst 6 sta ce o: 3e'ros Occi4e tal# see5i ' to recover :ro* the estate o: the late Spouses A ita 4e 1eo a 4 Sera:i -illa ueva# Sr. a 4 their chil4re # 9hat she clai*e4 to be o e thir4 =1Q3@ o: the properties le:t b" her 4ecease4 :ather. 8er co*plai t alle'e4 that her share i the i herita ce ha4 at all ti*es bee hel4 i trust b" .elix Arro"o a 4 a:ter his 4eath# b" his heirs a 4 successors<i <i terest# 9ho are the 4e:e 4a ts a*e4 i her co*plai t# a 4 she ha4 bee 4eprive4 o: that share throu'h :rau4 a 4 *isreprese tatio . &he 4e:e 4a t A ita 4e 1eo 9as the 'ra 44au'hter o: .elix Arro"o b" his 4au'hter# .ortu ata. Sera:i -illa ueva 9as her husba 4. &he" *ove4 to 4is*iss the co*plai t o several 'rou 4s> :ailure o: the co*plai t to state a cause o: actio # res Du4icata# laches# estoppel# release# a 4 bar b" the statute o: li*itatio s. &he &rial Court sustai e4 the *otio a 4 4is*isse4 the actio # b" Or4er 4ate4 March 1%# 1/((. 6t also 4irecte4 the Re'ister o: 2ee4s o: 6loilo# 3e'ros Occi4e tal# etc.# to ca cel the a otatio o: lis pe 4e s cause4 to be *a4e b" the plai ti::s o all the certi:icates o: title o: the la 4 i volve4 i the liti'atio . O .ebruar" 1/# 1/%$# the parties execute4 a co*pro*ise a'ree*e t e title4 Co ve io 4e &ra saccio 9hich the" ac5 o9le4'e4 be:ore a otar" public. 0" it# the 0u cio Spouses a 4 their co<plai ti::s sol4# tra s:erre4 a 4 co ve"e4 all their ri'hts# title a 4 i terests over all the properties i volve4 i the liti'atio i :avor o: the 4e:e 4a t spouses# A ita a 4 Sera:i -illa ueva. O the sa*e 4a" the parties :ile4 a Peticio 9ith the Court pra"i ' that Du4'*e t be re 4ere4 i accor4a ce 9ith their co ve io &his the Court 4i4 the :ollo9i ' 4a"# .ebruar" 2$# 1/%$. 8o9ever# o March 1%# 1/%( =a:ter 1iberatio @# the plai ti::s :ile4 a *otio to vacate the 4ecisio o: .ebruar" 2$# 1/%$. &he" alle'e4 as 'rou 4s there:or :rau4# *isreprese tatio # 4eceit a 4 u 4ue i :lue ce vitiati ' their co se t to the Co ve io 4e &ra saccio . !ACTS* ISSUE* Fhether or ot the actio :or a ul*e t o the 'rou 4 o: :rau4 has bee barre4 b" prescriptio P HELD* ARAFAG HABANA JALAYAJAY So*eti*e i March 1/7(# private respo 4e ts# 9ho clai*e4 to be the o9 ers o: a buil4i ' co structe4 o a lot lease4 :ro* 1ucio Sa A 4res a 4 locate4 i -ale ,uela# 0ulaca # o::ere4 to sell the buil4i ' to the petitio ers :or P17$#$$$.$$. Petitio ers a'ree4 because o: private respo 4e tsK assura ce that the" 9ill also Page 114 BES. &he actio to a ul a co tract o the 'rou 4 that co se t is vitiate4 b" *ista5e# viole ce# i ti*i4atio # u 4ue i :lue ce or :rau4 prescribes i :our =%@ "earsL a 4 the perio4 is rec5o e4# i case o: *ista5e or :rau4# :ro* the ti*e o: the 4iscover" o: the sa*e. 6t is ote9orth" that as earl" as March 1%# 1/%( the appella ts alrea4" ha4 plea4e4 :rau4 i the *otio :ile4 b" the* o that 4a" to set asi4e the Du4'*e t re 4ere4 i Civil Case 3o. 72()> their co te tio 9as that their co se t to the co ve io 4e tra saccio 9hich the Du4'*e t ha4 approve4# ha4 bee obtai e4 b" :rau4# or u 4ue *achi atio s. 6t is thus ot u reaso able# surel"# to co si4er March 1%# 1/%( as the 4a" o: the 4iscover" o: the :rau4. So co si4ere4# it shoul4 at o ce be appare t that the prescriptive perio4 o: :our =%@ "ears ha4 lo ' elapse4 9he Civil Case 3o. 72$$ 9as i stitute4 b" the appella ts o .ebruar" 1/# 1/(%# ei'htee =1)@ "ears a:ter9ar4s. Alter ativel" cate'ori,i ' the appella tsK cause o: actio as o e :or recover" o: propert" hel4 b" 4e:e 4a ts u 4er a co structive trust# 9oul4 ot i*prove their situatio . &he statute o: li*itatio s 9oul4 still preclu4e their success. Assu*i ' the creatio o: a i*plie4 trust over the real propert" i Cuestio :ro* the ti*e that .elix Arro"o too5 over possessio a 4 a4*i istratio thereo: so*eti*e i 1/$1# the perio4 o: prescriptio to recover the propert"<set b" la9 at te =1$@ "ears<be'a to ru :ro* the ti*e that &orre s titles 9ere obtai e4 over the propert" i the a*e o: the trustee or his successors<i <i terest. A actio :or reco ve"a ce base4 o a i*plie4 or co structive trust *ust per:orce prescribe i te "ears a 4 ot other9ise. A lo ' li e o: 4ecisio s o: this Court# a 4 o: ver" rece t vi ta'e at that# illustrates this rule. E 4oubte4l"# it is o9 9ell<settle4 that a actio :or reco ve"a ce base4 o a i*plie4 or co structive trust prescribes i te "ears :ro* the issua ce o: the &orre s title over the propert". 6t bei ' clear :ro* the recor4 that the appella ts ha4 brou'ht their suit# Civil Case 3o. 72()# *ore tha te =1$@ "ears a:ter titles ha4 bee obtai e4 over the propert" clai*e4 b" the appellees or their pre4ecessor<i <i terest# their cause o: actio pre4icate4 o co structive trust is barre4 b" prescriptio . ASIA PRODUCTION "S% PANO -'(.'20 27$ 1992

Civil Law Review 2 2013 - 2014 assi' to the petitio ers the co tract o: lease over the la 4. &he above a'ree*e t a 4 pro*ise 9ere ot re4uce4 to 9riti '. Private respo 4e ts u 4ertoo5 to 4eliver to the petitio ers the 4ee4 o: co ve"a ce over the buil4i ' a 4 the 4ee4 o: assi' *e t o: the co tract o: lease 9ithi sixt" =($@ 4a"s :ro* the 4ate o: pa"*e t o: the 4o9 pa"*e t o: P2$#$$$.$$. &he bala ce 9as to be pai4 i *o thl" i stall*e ts. O 2$ March 1/7(# petitio ers pai4 the 4o9 pa"*e t a 4 issue4 ei'ht =)@ post 4ate4 chec5s 4ra9 a'ai st the ECuitable 0a 5i ' Corporatio :or the pa"*e t o: the ei'ht =)@ *o thl" i stal*e ts. Rel"i ' o the 'oo4 :aith o: private respo 4e ts# petitio ers co structe4 i Ma" 1/7( a 9eavi ' :actor" o the lease4 lot. E :ortu atel"# private respo 4e ts# 4espite exte sio s 'ra te4# :aile4 to co*pl" 9ith their u 4erta5i ' to execute the 4ee4 to sale a 4 to assi' the co tract 4espite the :act that the" 9ere able to e cash the chec5s 4ate4 3$ !u e a 4 3$ !ul" 1/7( i the total a*ou t o: P3$#$$$.$$. Forse# the lot o9 er *a4e it plai to petitio ers that he 9as u 9illi ' to 'ive co se t to the assi' *e t o: the lease u less petitio ers a'ree4 to certai o erous ter*s# such as a i crease i re tal# or the purchase o: the la 4 at a ver" u co scio able price. Petitio ers therea:ter re*ove4 their e::ects :ro* the 4ispute4 la 4 a 4 there:ore :ile4 a case :or the collectio o: the pai4 i stal*e ts 9hich the lo9er court 4is*isse4 because it :alls 9ithi the purvie9 o: the reCuire*e ts as set :orth i the Statute o: .rau4s. 8e ce# this petitio . Partial executio is eve e ou'h to bar the applicatio o: the statute . F8ERE.ORE# the petitio is hereb" +RA3&E2. &he challe 'e4 Or4ers o: 1) April 1/7/ a 4 21 !u e1/7/ i Civil Case 3o. U<235/3 o: the court belo9 are hereb" A33E11E2 a 4 SE& AS62E# a 4 the co*plai t i sai4 case is hereb" or4ere4 RE63S&A&E2. &he 4e:ault or4er a'ai st private respo 4e t 1olita 1ee 1e 8ua shall sta 4 a 4 private respo 4e t Alberto 2" is or4ere4 to :ile his A s9er to the co*plai t 9ith the court belo9 9ithi te =1$@ 4a"s :ro* receipt o: this 4ecisio . &his 4ecisio shall be i**e4iatel" executor.

ISSUE* Fhether or ot a actio :or the re:u 4 o: partial pa"*e ts o: the purchase price o: a buil4i ' covere4 b"a oral a'ree*e t to sell it 9ith a oral pro*ise to assi' the co tract o: lease o the lot 9here thebuil4i ' is co structe4 is barre4 b" the Statute o: .rau4sP GREGORIO A"ERIA "S% DO INGO A"ERIA A.B.&= 13$ 2004 HELD* !ACTS* 3O. &he statute o: :rau4s is ot applicable because there is partial per:or*a ce i the a:ore*e tio e4 co tract 9hich is the pa"*e t o: co si4eratio i liu o: the pro*ise o: the 4e:e 4a ts. 6t 'oes 9ithout sa"i ' the # as hel4 i the earl" case o: Al*irol# et al. vs. Mo serrat# that the statute 9ill appl" o l" to executor" rather tha execute4 co tracts. Macaria .ra cisco =Macaria@ a 4 Marcos Averia co tracte4 *arria'e 9hich bore six issues# a*el"> +re'orio# &eresa# 2o*i 'o# A 'el# .elipe a 4 .eli*o . Macaria 9as 9i4o9e4 a 4 she co tracte4 a seco 4 *arria'e 9ith Roberto Ro*ero =Ro*ero@ 9hich bore o issue.

ARAFAG HABANA JALAYAJAY

Page 115

Civil Law Review 2 2013 - 2014 Ro*ero 4ie4 o .ebruar" 2)# 1/()# leavi ' three a4Doi i ' resi4e tial lots locate4 at Sa*paloc# Ma ila. 6 a 2ee4 o: ExtraDu4icial Partitio a 4 Su**ar" Settle*e t o: the Estate o: Ro*ero# the house a 4 lot co tai i ' 15$ sCuare *eters at 725 Extre*a4ura Street# Sa*paloc 9as apportio e4 to Macaria. Alle'i ' that :rau4 9as e*plo"e4 b" her co< heirs i the partitio o: the estate o: Ro*ero# Macaria :ile4 o !u e 1# 1/7$ a actio :or a ul*e t o: title a 4 4a*a'es be:ore the Court o: .irst 6 sta ce o: Ma ila a'ai st her co<heirs 2o*i 'o -ira". Macaria7s so +re'orio a 4 his :a*il" a 4 4au'hter &eresa7s :a*il" live4 9ith her at Extre*a4ura u til her 4eath o March 2)# 1/)3. Close to six "ears a:ter Macaria7s 4e*ise or o !a uar" 1/# 1/)/# her chil4re 2o*i 'o# A 'el a 4 .elipe# alo ' 9ith Susa Pela"o v4a. 4e Averia =9i4o9 o: Macaria7s 4ecease4 so .eli*o @# :ile4 be:ore theR&C o: Ma ila a co*plai t a'ai st their brother +re'orio a 4 iece S"lva a -er'ara Greprese ti ' her abse tee *otherG &eresa Averia# :or Du4icial partitio o: the Extre*a4ura propert" i clusive o: the 3$ sCuare *eters Du4iciall" a9ar4e4. &he 4e:e 4a ts +re'orio a 4 S"lva a -er'ara# i their A s9er to the Co*plai t# cou tere4 that +re'orio a 4 his late 9i:e A'ripi a spe t :or the liti'atio expe ses i Civil Case 3o. 7//55# upo the reCuest o: Macaria# a 4 the couple spe t ot less P2$#$$$.$$ :or the purpose G9hich a*ou t 4ue to the i :latio o: the Philippi e peso is o9 eCuivale t to *ore or less P2$$#$$$.$$LG that :ro* 1/7% to 1/)3# Macaria 9as be4ri44e a 4 it 9as +re'orio7s 9i:e A'ripi a 9ho urse4 a 4 too5 care o: herL that be:ore Macaria 4ie4# she i co si4eratio o: the court a 4 other expe ses 9hich 9ere 4e:ra"e4 b" +re'orio a 4 his 9i:e i prosecuti ' Civil Case 3o. 7//55 a 4 o: Gthe 5i 4 ess o: the sai4 couple i cari ' :or her#G verball" sol4 to the spouses +re'orio a 4 A'ripi a o e<hal: =]@ o: her Extre*a4ura propert". &he alle'e4 co ve"a ces purporte4l" *a4e b" Macaria .ra cisco a 4 plai ti::<appella t 2o*i 'o Averia are u e :orceable as the reCuire*e ts u 4er the Statute o: .rau4s have ot bee co*plie4 9ith. Article 1%$3# 2=e@ o: the 3e9 Civil Co4e. &he t9o =2@ tra sactio s i Cuestio bei ' a'ree*e ts :or the sale o: real propert" or o: a i terest therei are i clear co trave tio o: the prescriptio that it *ust be i 9riti ' a 4 subscribe4 b" the part" char'e4 or b" a a'e t thereo:. 8e ce# the stro ' i siste ce b" 4e:e 4a ts<appellees o the verbal co ve"a ces ca ot be *a4e the basis :or the alle'e4 o9 ership over the u 4ivi4e4 i terests clai*e4 b" +re'orio Averia. &he parol evi4e ce upo 9hich the trial court a chore4 its a9ar4 i :avor o: 4e:e 4a t<appellee +re'orio Averia is irre'ular as such 5i 4 o: evi4e ce is :oreclose4 b" Article 1%$3 o: the Civil Co4e that o evi4e ce o: the alle'e4 a'ree*e ts ca be receive4 9ithout the 9riti ' o: seco 4ar" evi4e ce 9hich e*bo4ies the sale o: the real propert". &he i tro4uctio o: the testi*o ies o: +re'orio Averia7s 9it esses 9ere ti*el" obDecte4 to b" plai ti::s<appella ts. Si ce the testi*o ies o: 4e:e 4a ts<appellees7 9it esses are i a4*issible# the such exclusio has pulle4 the ru' u 4er the assaile4 4ecisio o: the trial court a 4 it has o *ore le' to sta 4 o .

ISSUE* Fhether or ot receptio o: parol evi4e ce i this case is i accor4a ce 9ith the la9P

HELD* BES. respo 4e ts 9aive4 a " obDectio to the a4*issio o: parol evi4e ce# he ce# it is a4*issible a 4 e :orceable :ollo9i ' Article 1%$5 o: the Civil Co4e. 6 4ee4# except :or the testi*o " o: petitio er +re'orio beari ' o the verbal sale to hi* b" Macaria o: the propert"# the testi*o ies o: petitio ers7 9it esses S"lva a -er'ara Clutario a 4 .lora 1a,aro Rivera beari ' o the sa*e *atter 9ere ot obDecte4 to b" respo 4e ts. !ust as the testi*o ies o: +re'orio# !r. a 4 -ero ica 0autista beari ' o the receipt b" respo 4e t 2o*i 'o o !ul" 23# 1/)3 :ro* +re'orio7s 9i:e o: P5#$$$.$$ represe ti ' partial pa"*e t o: the P1$#$$$.$$ valuatio o: his =2o*i 'o7s@ 1Q( share i the Page 116

&he R&C re 4ere4 Du4'*e t i :avour o: +re'orio Averia. O appeal# CA reverse4 the 4ecisio o: the trial court. CA hel4 that the alle'e4 tra s:ers *a4e b" Macaria a 4 2o*i 'o i :avor o: +re'orio 9ere bere:t o: a " 9ritte *e*ora 4a# hel4 that it 9as error :or the trial court to rel" solel" o the evi4e ce a44uce4 b" the 4e:e 4a ts co sisti ' o: the testi*o ies o: +re'orio# -ero ica 0autista# S"lva a -er'ara Clutario# Att". Mario C.R. 2o*i 'o# .eli*o 2a'o 4o a 4 +re'orio Averia# !r. &he CA explai e4 its ruli ' i this 9ise>

ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 propert"# a 4 o: the testi*o " o: .eli*o 2a'o 4o beari ' o the receipt b" 2o*i 'o o: P5#$$$.$$ :ro* +re'orio 9ere ot obDecte4 to. .ollo9i ' Article 1%$5 o: the Civil Co4e# the co tracts 9hich i :ri 'e4 the Statute o: .rau4s 9ere rati:ie4 b" the :ailure to obDect to the prese tatio o: parol evi4e ce# he ce# e :orceable. AR&6C1E 1%$3. &he :ollo9i ' co tracts are u e :orceable# u less the" are rati:ie4> xxx =2@ &hose that 4o ot co*pl" 9ith the Statute o: .rau4s as set :orth i this u*ber. 6 the :ollo9i ' cases a a'ree*e t herea:ter *a4e shall be u e :orceable b" actio # u less the sa*e# or so*e ote or *e*ora 4u* thereo:# be i 9riti '# a 4 subscribe4 b" the part" char'e4# or b" his a'e tL evi4e ce# there:ore# o: the a'ree*e t ca ot be receive4 9ithout the 9riti '# or a seco 4ar" evi4e ce o: its co te ts> xxx =e@ A a'ree*e t :or the leasi ' :or a lo 'er perio4 tha o e "ear# or :or the sale o: real propert" or o: a i terest therei L x x x =E*phasis a 4 u 4erscori ' supplie4@# Co trar" the to the :i 4i ' o: the CA# the a4*issio o: parol evi4e ce upo 9hich the trial court a chore4 its 4ecisio i :avor o: respo 4e ts is ot irre'ular a 4 is ot :oreclose4 b" Article 1%$5. 6 a " eve t# the Statute o: .rau4s applies o l" to executor" co tracts a 4 ot to co tracts 9hich are either partiall" or totall" per:or*e4. 6 the case at bar# petitio ers clai*e4 that there 9as total per:or*a ce o: the co tracts# :ull pa"*e t o: the obDects thereo: havi ' alrea4" bee *a4e a 4 the ve 4ee +re'orio havi '# eve a:ter Macaria7s 4eath i 1/)3# co ti ue4 to occup" the propert" u til a 4 a:ter the :ili ' o !a uar" 1/# 1/)/ o: the co*plai t subDect o: the case at bar as i :act he is still occup"i ' it. 6 provi ' the :act o: partial or total per:or*a ce# oral evi4e ce *a" be receive4 as 9hat the trial court i the case at bar 4i4. 3ote4 civilist Arturo M. &ole ti o eluci4ates o the *atter> &he statute o: :rau4s is ot applicable to co tracts 9hich are either totall" or partiall" per:or*e4# o the theor" that there is a 9i4e :iel4 :or the co**issio o: :rau4s i executor" co tracts 9hich ca o l" be preve te4 b" reCuiri ' the* to be i 9riti '# a :act 9hich is re4uce4 to a *i i*u* i execute4 co tracts because the i te tio o: the parties beco*es appare t b" their executio # a 4 executio co clu4es# i *ost cases# the ri'hts o: the parties. 8o9ever it is ot e ou'h :or a part" to alle'e partial per:or*a ce i or4er to re 4er the Statute o: .rau4s i applicableL such partial per:or*a ce *ust be 4ul" prove4. 0ut either is such part" reCuire4 to establish such partial per:or*a ce b" 4ocu*e tar" proo: be:ore he coul4 have the opportu it" to i tro4uce oral testi*o " o the tra sactio . &he partial per:or*a ce *a" be 4ocu*e tar" or oral evi4e ce. prove4 b" either

CLE ENO "S% LOBREGAT S7<=7>872 9$ 2004 !ACTS* &he Spouses 3ilus a 4 &eresita Sacra*e to 9ere the o9 ers o: a parcel o: la 4 a 4 the house co structe4 thereo locate4 i 3ovaliches# Uue,o Cit". &he Spouses Sacra*e to *ort'a'e4 the propert" 9ith the SSS as securit" :or their housi ' loa a 4# li5e9ise# surre 4ere4 the o9 er7s a 4 4uplicate copies o: the certi:icate o: title. O Septe*ber 2# 1/)$# the spouses execute4 a 2ee4 o: Sale 9ith Assu*ptio o: Mort'a'e i :avour o: Page 117

ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 Spouses Cle*e o 9ith the co se t o: SSS. O March (# 1/)1# the Re'ister o: 2ee4s issue4 &C& 3o. 2772%% over the propert" i the a*e o: the ve 4ees# 9ho# i tur # execute4 a Real Estate Mort'a'e Co tract over the propert" i :avor o: the SSS to secure the pa"*e t o: the a*ou t o: P22#/$$.$$# the bala ce o: the loa . &he Spouses Cle*e o also surre 4ere4 the o9 er7s 4uplicate cop" o: the sai4 title to the SSS. 8o9ever# per the recor4s o: the SSS 1oa s 2epart*e t# the ve 4ors =the Spouses Sacra*e to@ re*ai e4 to be the 4ebtors. O !ul" 1# 1//2# respo 4e t Ro*eo R. 1obre'at# a la9"er a 4 a Electio Re'istrar i the Co**issio o Electio s# :ile4 a Co*plai t a'ai st the petitio ers# the Spouses Cle*e o# a 4 3ilus Sacra*e to :or breach o: co tract# speci:ic per:or*a ce 9ith 4a*a'es 9ith the R&C o: Uue,o Cit". &he petitio ers# :or their part# :ile4 a Co*plai t a'ai st the respo 4e t :or recover" o: possessio o: propert" 9ith 4a*a'es. Respo 4e t clai*e4 that he e tere4 i to a verbal a'ree*e t 9ith petitio er Cle*e o :or the sale o: the subDect propert" a 4 that he *a4e several i stal*e ts :or the purchase4 price. 8e :urther clai*e4 that Cle*e o# i repl" to his letter sai4 that he ever sol4 the propert" to respo 4e t a 4 that he *erel" tolerate4 respo 4e t7s possessio o: the propert" :or o e "earL that the latter o::ere4 to bu" the propert" but he reDecte4 the o::erL a 4 that he i stea4 co se te4 to lease the propert" to the respo 4e t. &he petitio er also 4eclare4 i his letter to respo 4e t that eve thou'h he co se te4 i to the sale# such 9as u e :orceable as there 9as o 4ocu*e t execute4 b" the* to evi ce the sale. Petitio er Cle*e o o the other ha 4 clai*e4 that so*eti*e i !u e 1/)7# petitio er Cle*e o# !r. a'ree4 to sell the propert" :or P27$#$$$.$$ pa"able i three =3@ i stall*e ts> =a@ P/$#$$$.$$ upo the respo 4e t7s ta5i ' possessio o: the propert"L =b@ P/$#$$$.$$ pa"able 9ithi six =(@ *o ths therea:terL a 4 =c@ P/$#$$$.$$ ot later tha !u e 1# 1/)). &he respo 4e t assure4 petitio er Cle*e o# !r. that there 9oul4 be othi ' to 9orr" about the 4ocu*e tatio o: the saleL bei ' a la9"er# he 9oul4 ta5e care o: ever"thi '. 8o9ever# the respo 4e t :aile4 to pa" the bala ce o: the purchase price o: the propert" i the a*ou t o: P15(#/7$.$% 4espite pro*ises to 4o so. O Septe*ber 1(# 1/)/# petitio er Cle*e o# !r. 9e t to the respo 4e t7s house to tal5 to hi* a e9# but the latter 9as o9here to be :ou 4. 8e *a4e a t"pe9ritte letter to the respo 4e t# stati ' that the latter ha4 bee 'ive *ore tha e ou'h ti*e to exercise the optio to bu" the propert" but :aile4 to 4o soL he ce# the o::er 9as 4ee*e4 ca celle4. &he petitio er le:t the letter 9ith the respo 4e t7s 4au'hter# Michelle 1obre'at. &he trial court re 4ere4 Du4'*e t i :avour o: petitio ers. Respo 4e t appeale4 to the CA 9hich reverse4 the 4ecisio ruli ' thatthe co tract e tere4 i to bet9ee the parties 9as a co tract o: sale# ot a co tract to sell. &he appellate court also rule4 that Article 1%$3=2@ 9as ot applicable because the co tract 9as alrea4" partl" per:or*e4# si ce partial pa"*e ts ha4 bee *a4e b" the respo 4e t as evi4e ce4 b" receipts si' e4 b" the petitio ers. ISSUE* Fhether or ot the i sta ts case :alls u 4er Article 1%$3 o: the 3CC# he ce u e :orceableP HELD* 3O. Article 1%$3 is applicable o l" to executor" co tracts a 4 ot to co*plete4# execute4 or partiall" execute4 co tracts as such i the case at bar. Fe :i 4 a 4 so hol4 that the co tract bet9ee the parties 9as a per:ecte4 verbal co tract o: sale# ot a co tract to sell over the subDect propert"# 9ith the petitio er as ve 4or a 4 the respo 4e t as ve 4ee. Sale is a co se sual co tract a 4 is per:ecte4 b" *ere co se t# 9hich is *a i:este4 b" a *eeti ' o: the *i 4s as to the o::er a 4 accepta ce thereo: o three ele*e ts> subDect *atter# price a 4 ter*s o: pa"*e t o: the price. &he co tract e tere4 i to b" the parties 9as ot a co tract to sell because there 9as o a'ree*e t :or the petitio ers to retai o9 ership over the propert" u til a:ter the respo 4e t shall have pai4 the purchase price i :ull# or a a'ree*e t reservi ' to the petitio ers the ri'ht to u ilaterall" resolve the co tract upo the bu"er7s :ailure to pa" 9ithi a :ixe4 perio4. E li5e i a co tract o: sale# the pa"*e t o: the price is a positive suspe sive co 4itio i a co tract to sell# :ailure o: 9hich is ot a breach but a eve t that preve ts the obli'atio o: the ve 4or to co ve" the title :ro* beco*i ' e::ective. &he co tract o: sale o: the parties is e :orceable ot9ithsta 4i ' the :act that it 9as a oral a'ree*e t a 4 ot re4uce4 i 9riti ' as reCuire4 b" Article 1%$3=2@ o: the 3e9 Civil Co4e# 9hich rea4s>
Art. 1%$3. &he :ollo9i ' co tracts are u e :orceable# u less the" are rati:ie4> G=2@ &hose that 4o ot co*pl" 9ith the Statute o: .rau4s as set :orth i this u*ber. 6 the :ollo9i ' cases# a a'ree*e t herea:ter *a4e shall be u e :orceable b" actio # u less the sa*e# or so*e ote or *e*ora 4u* thereo:# be i 9riti '# a 4 subscribe4 b" the parties char'e4# or b" his a'e tL evi4e ce# there:ore# o: the a'ree*e t ca ot be receive4 9ithout the 9riti '# or a seco 4ar" evi4e ce o: its co te ts>

ARAFAG HABANA JALAYAJAY

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R=4@ A a'ree*e t :or the sale o: 'oo4s# chattels or thi 's i actio # at a price ot less tha :ive hu 4re4 pesos# u less the bu"er accepts a 4 receives part o: such 'oo4s a 4 chattels# or the evi4e ces# or so*e o: the*# o: such thi 's i actio # or pa" at the ti*e so*e part o: the purchase *o e"> but 9he a sale is *a4e b" auctio a 4 e tr" is *a4e b" the auctio eer i his sales boo5# at the ti*e o: the sale# o: the a*ou t a 4 5i 4 o: propert" sol4# ter*s o: sale# price# a*es o: the purchasers a 4 perso o 9hose accou t the sale is *a4e# it is a su::icie t *e*ora 4u*L 7G

&his is so because the provisio applies o l" to executor"# a 4 ot to co*plete4# execute4 or partiall" execute4 co tracts. 6 this case# the co tract o: sale ha4 bee partiall" execute4 b" the parties# 9ith the tra s:er o: the possessio o: the propert" to the respo 4e t a 4 the partial pa"*e ts *a4e b" the latter o: the purchase price thereo:. Fe a'ree 9ith the petitio ers7 co te tio that the respo 4e t 4i4 ot pa" the total purchase price o: the propert" 9ithi the stipulate4 perio4. Moreover# the respo 4e t 4i4 ot pa" the bala ce o: the purchase price o: the propert". 8o9ever# such :ailure to pa" o the part o: the respo 4e t 9as ot because he coul4 ot pa"# but because petitio er A 'el Cle*e o# !r. tol4 hi* ot to 4o so. &he latter i structe4 the respo 4e t to co ti ue pa"i ' the *o thl" a*orti,atio s 4ue to the SSS o the loa . E 5 o9 to the respo 4e t# petitio er A 'el Cle*e o# !r. 9a te4 to i crease the purchase price o: the propert" at the prevaili ' *ar5et value i 1//2# a 4 ot its value i 1/)7 9he the co tract o: sale 9as per:ecte4. &he petitio ers :aile4 to prove their clai* that a lease purchase a'ree*e t over the propert" 9as e tere4 i to. Except :or their bare clai*# the" :aile4 to a44uce a *orsel o: 4ocu*e tar" evi4e ce to prove the sa*e. O the other ha 4# all the receipts issue4 b" the* o the partial pa"*e ts *a4e b" the respo 4e t 9ere :or the purchase price o: the propert"# a 4 ot as re tals thereo:. SPOUSES !IR E "S% BU#AL ENTERPRISES & DE"ELOP ENT O5=,872 23$ 2003 !ACTS* Spouses Co sta te a 4 A,uce a .ir*e are the re'istere4 o9 ers o: a parcel o: la 4 locate4 o 2ahlia Ave ue# .airvie9 Par5# Uue,o Cit". Re ato 4e Castro# the vice presi4e t o: 0u5al E terprises a 4 2evelop*e t Corporatio authori,e4 his :rie 4# &eo4oro Aviles# a bro5er# to e'otiate 9ith the Spouses .ir*e :or the purchase o: the Propert". O 2) March co*plai t :or speci:ic the trial court# alle'i ' o their a'ree*e t to ARAFAG HABANA JALAYAJAY 1//5# 0u5al E terprises :ile4 a per:or*a ce a 4 4a*a'es 9ith that the Spouses .ir*e re e'e4 sell the Propert". &he co*plai t Page 121

Civil Law Review 2 2013 - 2014 as5e4 the trial court to or4er the Spouses .ir*e to execute the 4ee4 o: sale a 4 to 4eliver the title to the Propert" to 0u5al E terprises upo pa"*e t o: the a'ree4 purchase price. O 7 Au'ust 1//)# the trial court re 4ere4 Du4'*e t a'ai st 0u5al E terprises# 4is*issi ' the case a 4 or4eri ' 0u5al E terprises to pa" the Spouses Co sta te a 4 A,uce a .ir*e =1@ the su* o: P335#/(%./$ as a 4 b" 9a" o: actual a 4 co*pe sator" 4a*a'esL =2@ the su* o: P5$$#$$$.$$ as a 4 b" 9a" o: *oral 4a*a'esL =3@ the su* o: P1$$#$$$.$$ as a 4 b" 9a" o: attor e"7s :eesL a 4 =%@ the costs o: the suit. &he trial court hel4 there 9as o per:ecte4 co tract o: sale as 0u5al E terprises :aile4 to establish that the Spouses .ir*e 'ave their co se t to the sale o: the Propert"L a 4 that Aviles ha4 o vali4 authorit" to bi 4 0u5al E terprises i the sale tra sactio . 0u5al E terprises appeale4 to the Court o: Appeals# 9hich reverse4 a 4 set asi4e the 4ecisio o: the trial court. &he appellate court or4ere4 the Spouses .ir*e to execute the 2ee4 o: Absolute Sale tra s:erri ' the o9 ership o: the subDect propert" to 0u5al E terprises i**e4iatel" upo receipt o: the purchase price o: P3#22%#$$$.$$ a 4 to per:or* all such acts ecessar" a 4 proper to e::ect the tra s:er o: the propert" covere4 b" &C& 2(%2%3 to 0ula5 E terprisesL a 4 4irecte4 0u5al E terprises to 4eliver the pa"*e t o: the purchase price o: the propert" 9ithi ($ 4a"s :ro* the :i alit" o: the Du4'*e t. &he Court o: Appeals hel4 that the lac5 o: a boar4 resolutio authori,i ' Aviles to act o behal: o: 0u5al E terprises i the purchase o: the Propert" 9as cure4 b" rati:icatio L i as*uch as 0u5al E terprises rati:ie4 the purchase 9he it :ile4 the co*plai t :or the e :orce*e t o: the sale. &he spouses .ir*e :ile4 the petitio :or revie9 o certiorari be:ore the Supre*e Court. ter*s o: pa"*e t as 9oul4 result i a per:ecte4 co tract o: sale. .urther# there 9as o approval :ro* the 0oar4 o: 2irectors o: 0u5al E terprises as 9oul4 :i ali,e a " tra sactio 9ith the Spouses .ir*e. Aviles 4i4 ot have the proper authorit" to e'otiate :or 0u5al E terprises. Aviles testi:ie4 that his :rie 4# 2e Castro# ha4 as5e4 hi* to e'otiate 9ith the Spouses .ir*e to bu" the Propert". 2e Castro# as 0u5al E terprises7 vice presi4e t# testi:ie4 that he authori,e4 Aviles to bu" the Propert". 8o9ever# there is o 0oar4 Resolutio authori,i ' Aviles to e'otiate a 4 purchase the Propert" o behal: o: 0u5al E terprises. A corporatio ca o l" exercise its po9ers a 4 tra sact its busi ess throu'h its boar4 o: 4irectors a 4 throu'h its o::icers a 4 a'e ts 9he authori,e4 b" a boar4 resolutio or its b"<la9s. Aviles# 9ho e'otiate4 the purchase o: the Propert"# is either a o::icer o: 0u5al E terprises or a *e*ber o: the 0oar4 o: 2irectors o: 0u5al E terprises. &here is o 0oar4 Resolutio authori,i ' Aviles to e'otiate a 4 purchase the Propert" :or 0u5al E terprises. &here is also o evi4e ce to prove that 0u5al E terprises approve4 9hatever tra sactio Aviles *a4e 9ith the Spouses .ir*e. 6 :act# the presi4e t o: 0u5al E terprises 4i4 ot si' a " o: the 4ee4s o: sale prese te4 to the Spouses .ir*e. Eve 2e Castro a4*itte4 that he ha4 ever *et the Spouses .ir*e. Co si4eri ' all these circu*sta ces# it is hi'hl" i*probable :or Aviles to :i ali,e a " co tract o: sale 9ith the Spouses .ir*e. .urther*ore# the Court otes that i the Co*plai t :ile4 b" 0u5al E terprises 9ith the trial court# Aviles si' e4 the veri:icatio a 4 certi:icatio o: o <:oru* shoppi '. &he veri:icatio a 4 certi:icatio o: o <:oru* shoppi ' 9as ot acco*pa ie4 b" proo: that 0u5al E terprises authori,e4 Aviles to :ile the co*plai t o behal: o: 0u5al E terprises. &he po9er o: a corporatio to sue a 4 be sue4 is exercise4 b" the boar4 o: 4irectors. O&he ph"sical acts o: the corporatio # li5e the si' i ' o: 4ocu*e ts# ca be per:or*e4 o l" b" atural perso s 4ul" authori,e4 :or the purpose b" corporate b"<la9s or b" a speci:ic act o: the boar4 o: 4irectors.I &he purpose o: veri:icatio is to secure a assura ce that the alle'atio s i the plea4i ' are true a 4 correct a 4 that it is :ile4 i 'oo4 :aith. &rue# this reCuire*e t is proce4ural a 4 ot Duris4ictio al. 8o9ever# the trial court shoul4 have or4ere4 the correctio o: the co*plai t si ce Aviles 9as either a o::icer o: 0u5al E terprises or authori,e4 b" its 0oar4 o: 2irectors to act o behal: o: 0u5al E terprises.

ISSUE* Fhether there 9as a per:ecte4 co tract bet9ee the Spouses .ir*e a 4 0u5al E terprises# the latter alle'e4l" bei ' represe te4 b" AvilesP HELD* 3O. &here 9as o co se t o the part o: the Spouses .ir*e. Co se t is a esse tial ele*e t :or the existe ce o: a co tract# a 4 9here it is 9a ti '# the co tract is o <existe t. &he esse ce o: co se t is the co :or*it" o: the parties o the ter*s o: the co tract# the accepta ce b" o e o: the o::er *a4e b" the other. &he Spouses .ir*e :latl" reDecte4 the o::er o: Aviles to bu" the Propert" o behal: o: 0u5al E terprises. &here 9as there:ore o co curre ce o: the o::er a 4 the accepta ce o the subDect *atter# co si4eratio a 4 ARAFAG HABANA JALAYAJAY

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LYDIA SU IPAT "S% BRIGIDO BANGA A.B.&= 13$ 2004 !ACTS* &he spouses Placi4a &abo<tabo a 4 1auro Su*ipat# 9ho are chil4less# acCuire4 three parcels o: la 4. 1auro Su*ipat# ho9ever# sire4 :ive ille'iti*ate chil4re out o: a extra<*arital a::air 9ith Pe4ra 2acola# a*el"> herei 4e:e 4a ts<appellees 1"4ia# 1aurito#Alicia# AleDa 4ro a 4 1ira:e# all sur a*e4 Su*ipat. O !a uar" 5# 1/)3# 1auro Su*ipat execute4 a 4ocu*e t 4e o*i ate4 G2EE2 O. A0SO1E&E &RA3S.ER A32QOR UE6&<C1A6M O-ER REA1 PROPER&6ESG =the assaile4 4ocu*e t@ i :avour o: 4e:e 4a ts<appellees coveri ' the three parcels o: la 4 =the properties@. 6t appears that o !a uar" 5# 1/)3 9he the assaile4 4ocu*e t 9as execute4# 1auro Su*ipat 9as ARAFAG HABANA JALAYAJAY Page 123

Civil Law Review 2 2013 - 2014 alrea4" ver" sic5 a 4 be4ri44e L that upo 4e:e 4a t< appellee 1"4ia7s reCuest# their ei'hbor 0e Da*i Rivera li:te4 the bo4" o: 1auro Su*ip at9here upo 1"4ia 'ui4e4 his =1auro Su*ipat7s@ ha 4 i a::ixi ' his si' ature o the assaile4 4ocu*e t 9hich she ha4 brou'htL that 1"4ia therea:ter le:t but later retur e4 o the sa*e 4a" a 4 reCueste4 1auro7s u lettere4 9i:e Placi4a to si' o the assaile4 4ocu*e t# as she 4i4 i haste# eve 9ithout the latter 'etti ' a respo sive a s9er to her Cuer" o 9hat it 9as all about. A:ter 1auro Su*ipat7s 4eath#his 9i:e Placi4a# a 4 4e:e 4a ts<appellees Doi tl" a4*i istere4 the properties 5$J o: the pro4uce o: 9hich 9e t to plai ti::< appella t. 0ut as Placi4a7s share i thepro4uce o: the properties 49i 4le4 u til she o lo 'er receive4 a " a 4 lear i ' that the titles to the properties i Cuestio 9ere alrea4" tra s:erre4Q*a4e i :avor o: the 4e:e 4a ts< appellees# she :ile4 a co*plai t :or 4eclaratio o: ullit" o: titles# co tracts# partitio # recover" o: o9 ership o9 the subDect o: the prese t appeal.7 &he trial court :ou 4 that the subDect properties are co Du'al. 8o9ever# because Placi4a :aile4 to Cuestio the 'e ui e ess a 4 4ue executio o: the 4ee4 a 4 eve a4*itte4 havi ' a::ixe4 her si' ature thereo # the trial court 4eclare4 that the e tiret" o: the subDect properties# a 4 ot Dust 1auro Su*ipat7s co Du'al share# 9ere vali4l" tra s:erre4 to the 4e:e 4a ts# the petitio ers herei . 0ut the Court o: Appeals a ulle4 the 4ee4 i so:ar as it covers Placi4a7s co Du'al share i the subDect properties because the latter7s co se t thereto 9as vitiate4 b" *ista5e 9he she a::ixe4 her si' ature o the 4ocu*e t. &he 4ee4 covers three =3@ parcels o: la 4. 0ei ' a 4o atio o: i**ovable propert"# the reCuire*e ts :or vali4it" set :orth i Article 7%/ o: the Civil Co4e shoul4 have bee :ollo9e4#
-i,> 6 or4er that the 4o atio o: the i**ovable *a" bevali4# it *ust be *a4e i a public 4ocu*e t# speci:"i ' therei the propert" 4o ate4 a 4 the value o: the char'es 9hich the4o ee *ust satis:".&he accepta ce *a" be *a4e i the sa*e 4ee4 o: 4o atio or i a separate public 4ocu*e t# but it shall ot ta5e e::ect u less it is 4o e 4uri ' the li:eti*e o: the 4o or.

6: the accepta ce is *a4e i a separate i stru*e t# the 4o or shall be oti:ie4 thereo: i a authe tic :or*# a 4 this step shall be ote4 i both i stru*e ts. 6 this case#the 4o ees7 accepta ce o: the 4o atio is ot *a i:este4 either i the 4ee4 itsel: or i a separate 4ocu*e t. 8e ce# the 4ee4 as a i stru*e t o: 4o atio is pate tl" voi4. 2.@ 3O. 0ei ' a absolute ullit"# both as a 4o atio a 4 as a sale# the 4ee4 is subDect to attac5 at a " ti*e# i accor4a ce 9ith the rule i Article 1%1$ o: the Civil Co4e that a actio to 4eclare the i existe ce o: a voi4 co tract 4oes ot prescribe. Fhe there is a sho9i ' o: ille'alit"# the propert" re'istere4 is 4ee*e4 to be si*pl" hel4 i trust :or the real o9 er b" the perso i 9hose a*e it is re'istere4# a 4 the :or*er the has the ri'ht to sue :or the reco ve"a ce o: the propert". &he actio :or the purpose is also i*prescriptible. As lo ' as the la 4 9ro ':ull" re'istere4 u 4er the &orre s s"ste* is still i the a*e o: the perso 9ho cause4 such re'istratio # a actio i perso a* 9ill lie to co*pel hi* to reco ve" the propert" to the real o9 er. HULST "S% PR BUILDERS INC% S7<=7>872 3$ 2007 !ACTS* !acobus 8ulst a 4 64a are spouses a 4 2utch atio als# a 4 e tere4 a Co tract to Sell 9ith PR 0uil4ers to bu" a to9 house i 0ata 'as. PR 0uil4ers :aile4 to co*pl" 9ith its verbal pro*ise to co*plete theproDect b" !u e 1//5# so the 8ulst spouses :ile4 be:ore the 81ER0 :or rescissio o: co tract 9ith i terest# 4a*a'es a 4 attor e" :ees. &he 81ER0 Arbiter 4eci4e4 i :avor o: the spouses. A:ter9ar4s# the spouses 4ivorce4. 64a assi' e4 her ri'hts over theto9 house to !acobus# 9ho co ti ue4 to pursue the case. &he Sheri:: i*ple*e te4 the Frit o: Executio b" lev"i ' o Page 124

ISSUES* Fhether or ot the Cuestio e4 4ee4 b" its ter*s or u 4er the surrou 4i ' circu*sta ces has vali4l" tra s:erre4 title to the 4ispute4 properties to the petitio ersP Fhether or ot the Cuestio e4 4ee4 is subDect to prescriptio P HELD* 1.@ 3O. A perusal o: the 4ee4 reveals that it is actuall" a 'ratuitous 4ispositio o: propert" \a 4o atio \ althou'h 1auro Su*ipat i*pose4 upo the petitio ers the co 4itio that he a 4 his 9i:e# Placi4a# shall be e title4 to o e<hal: =1Q2@ o: all the :ruits or pro4uce o: the parcels o: la 4 :or their subsiste ce a 4 support.

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Civil Law Review 2 2013 - 2014 respo 4e ts 15 parcels o: la 4 covere4 b" 13 &C&s. A public auctio 9as set a:ter9ar4s o: the levie4 properties. Respo 4e t :ile4 a Er'e t Motio to Uuash Frit o: 1ev" o the 'rou 4 that a over lev" 9as *a4e. &he a''re'ate4 appraise4 value o: the properties base4 o the Appraisal Report is over P)3.( *illio . Fithout a restrai i ' or4er :ro* the 81ER0# the Sheri:: procee4e4 to sell the properties at the public auctio . 8oll" Properties Realt" Corporatio 9o the bi4 :or all 15 parcels o: la 4 at P5.% *illio . P5.3 *illio 9as tur e4 over to 8ulst to satis:" the Du4'*e t a9ar4. 1ater o the sa*e 4a"# the Sheri:: receive4 a or4er 4ate4 o the 4a" o: the auctio :ro* the 81ER0 Arbiter to suspe 4 executio . &he 81ER0 Arbiter a 4 2irector or4ere4 to set asi4e the Sheri::s lev"# sa"i ' that the valuatio s o: the Sheri:: a 4 the Appraisal Report is so e're'ious at P( *illio a 4 P)3.( *illio respectivel". &he court is Dusti:ie4 to i terve e 9here the i a4eCuac" o: price shoc5sthe co scie ce. &he Sheri:: shoul4 have loo5e4 i to the *atter :irst a 4 ot 4isre'ar4 the obDectio s o: PR 0uil4ers cou sel. Fhat is at issue is ot the value o: the properties as 4eter*i e4 4uri ' the auctio sale# but the 4eter*i atio o: value levie4 upo b" the Sheri:: ta5i ' i co si4eratio the :air *ar5et value o: the properties levie4 upo to 4eter*i e 9hether the" are su::icie t to satis:" the Du4'*e t. A " lev" i excess o: the Du4'*e t a9ar4 is voi4. 8ulst :ile4 be:ore the CA. &he CA 4is*isse4 the petitio sa"i ' that the i a4eCuac" o: price bei ' suppose4l" i**aterial i the ri'ht to re4ee*is ot applicable# because the a4eCuac" i the prese t case is ot *ere i a4eCuac" but a i a4eCuac" that shoc5s the se ses. &he a''re'ate value o: P)3.( *illio shoc5i 'l" excee4s the Du4'*e t 4ebt o: o l" arou 4 P( *illio . ISSUE* Fhether or ot the Co tract to Sell 9as a voi4 a 4 i existe t co tractP RULING* BES. SC 'ra te4 petitio a 4 4eclare4 81ER0 or4er 3E11 a 4 -O62. 1. .orei' ers acCuiri ' Philippi e propert" .irst# SC i**e4iatel" a44resse4 the i*porta t :act that the 8ulst spouses are :orei' atio als 9ho are 4isCuali:ie4 u 4er the Co stitutio :ro* o9 i ' real propert" i their a*es. 6t is u eCuivocal that the Co tract to Sell e tere4 i to b" the 8ulst spouses is voi4# si ce the" are both 2utch atio als. ARAFAG HABANA JALAYAJAY

Art 1%$/ o: the Civil Co4e provi4es that all co tracts 9hose cause# obDect or purpose is co trar" to la9 or public polic" a 4 those expressl" prohibite4 or 4eclare4 voi4 b" la9 are i existe t a 4 voi4 :ro* the be'i i '. Art 1%1$ provi4es that the actio or 4e:e se :or the 4eclaratio o: the i existe ce o: a co tract 4oes ot prescribe. A voi4 co tract is eCuivale t to othi 'L it pro4uces o civil e::ect. 6t 4oes ot create# *o4i:" or exti 'uish a Duri4ical relatio . 2. Exceptio s to Pari 2elicto +e erall"# parties to a voi4 a'ree*e t ca ot expect the ai4 o: the la99he the" are 4ee*e4 i pari 4elicto. &here shoul4 have bee o suitto recover :ro* o e to the other. &here are exceptio s# particularl" Article 1%1% =c@ 9hich provi4es that> OFhe *o e" is pai4 or propert" 4elivere4 :or a ille'al purpose# the co tract *a" be repu4iate4 b" o e o: the parties be:ore the purpose has bee acco*plishe4# or be:ore a " 4a*a'e has bee cause to a thir4 perso . 6 such case# the courts *a"# i: the public i terest 9ill be subserve4# allo9 the part" repu4iati ' the co tract to recover the *o e" or propert".I 3. Co tract to Sell# ot Co tract o: Sale. 1%1%# ot 1%12 8ulst spouses a 4 PR 0uil4ers e tere4 a Co tract to Sell# ot a Co tract o: Sale. 6 a Co tract o: Sale# the title passes to the bu"er upo 4eliver" o: the purchase price. A Co tract to Sell is a co 4itio al sale 9here the obli'ator" :orce o: the sellers obli'atio to tra s:er title is subor4i ate4 to the happe i ' o: a :uture a 4 u certai eve t. 6: the suspe sive co 4itio 4oes ot ta5e place# the parties 9oul4 sta 4 as i: the co 4itio al obli'atio ever existe4. Art 1%1%# ot Art 1%12 applies because the u la9:ul or :orbi44e cause that 4oes ot co stitute a cri*i al o::e se re:erre4 to i Art 1%12 has ot ta5e place be:ore the purpose 9as acco*plishe4 or be:ore a " 4a*a'e has bee cause. O9 ership 9as ot tra s:erre4 to the alie petitio er i the Co tract to Sell be:ore 8ulst :ile4 :or rescissio . 6 a Co tract to Sell# o9 ership has ot "et tra s:erre4 to 8ulst 9he he :ile4 :or rescissio . &he i te t to circu*ve t the co stitutio al proscriptio o alie s o9 i ' real propert" or the violatio o: the la9 4i4 ot *ateriali,e because petitio er cause4 the rescissio o: the co tract be:ore the executio o: the :i al 4ee4 tra s:erri ' o9 ership. 8ulst ca recover u 4er the exceptio =c@ u 4er Article 1%1%. O e 9ho repu4iates the a'ree*e t a 4 4e*a 4s his *o e" be:ore the ille'al act has ta5e place is e title4 to recover. &he co tract bei ' voi4 a 4 i existe t# he is# ho9ever# o l" e title4 to recover the Page 123

Civil Law Review 2 2013 - 2014 purchase price pai4 a 4 ot 4a*a'es a 4 i terests 4ue to abse ce o: a Duri4ical tie. %. +ross i a4eCuac" o: price +ross i a4eCuac" o: price 4oes ot ulli:" a executio sale# except i: itis o e that shoc5s the co scie ce to allo9 the courts to i terve e. .urther*ore# 9here there is ri'ht to re4ee*# the i a4eCuac" o: price shoul4 be i**aterial si ce the Du4'*e t 4ebtor *a" reacCuire the propert" or else sell his ri'ht to re4ee* a 4 recover a " loss. &he 81ER0 Arbiter a 4 2irector ha4 o su::icie t :actual basis to 4eter*i e the value o: the properties. PR 0uil4ers o l" sub*itte4 a Appraisal Report base4 o sur*ises a 4 assu*ptio that the u it appraise4 ha4 alrea4" bee built. &he proDecte4 value 4i4 ot beco*e a realit" because the propert" has ot bee 4evelope4. &he Appraisal Report is ot the best proo: to sho9 that there 9as i a4eCuac" that shoc5s the co scie ce. &he 81ER0 Arbiter lost Duris4ictio b" virtue o: the co su**atio o: the auctio sale. &he 9i i ' bi44er# 8oll" Properties Realt" Corporatio # ri'ht:ull" acCuire4 the properties. &he Sheri:: 9as ri'ht to procee4 9ith the public auctio abse t a " or4er :ro* the 81ER0 Arbiter a 4 2irector o the set 4ate. Each o: the 15 properties 9ere success:ull" bi44e4 upo a 4 sol4 a 4 the 4ebt a 4 :ees :ull" satis:ie4 a 4 re*itte4 upo pa"*e t b" 8oll" Properties. Fhat 9as o l" le:t to be 4o e 9as the issua ce o: the certi:icates o: sale to the 9i i ' bi44er.

!ELI+ GOCHAN A&% HEIRS O! BABA !ACTS* &he co Du'al propert" o: spouses Ra"*u 4o 0aba a 4 2orotea 6 ot# 9as ori'i all" title4 i the a*e o: 2orotea. A:ter Ra"*u 4o7s 4e*ise# a extraDu4icial settle*e t o: his estate# i clu4i ' 1ot 3o. 3537# 9as execute4 a*o ' the heirs o: Ra"*u 4o# a*el"# 2orotea 6 ot a 4 his 2 chil4re # -ictoria o 0aba a 4 +re'orio 0aba. O e<hal: u 4ivi4e4 portio o: the (#32( sCuare *eter lot 9as a4Du4icate4 i :avor o: 2orotea# a 4 the other hal: 4ivi4e4 bet9ee -ictoria o a 4 +re'orio. O 2ece*ber 2)# 1/((# 2orotea# -ictoria o a 4 +re'orio# i co si4eratio o: the a*ou t o: P2#3%(.7$# sol4 1ot 3o. 3537 to petitio er .elix +ocha a 4 So s Realt" Corporatio =+ocha Realt" @. Co seCue tl"# OC& 3o. RO<$)2$ 9as ca celle4 a 4 i lieu thereo:# &ra s:er Certi:icate o: &itle 3o. &<1)%2# 4ate4 .ebruar" 23# 1/() 9as issue4 i :avor o: +ocha Realt". So*eti*e i 1//5# +ocha e tere4 i to a Doi t ve ture ARAFAG HABANA JALAYAJAY Page 124

Civil Law Review 2 2013 - 2014 a'ree*e t 9ith Sta. 1ucia Realt" a 4 2evelop*e t Corporatio 6 c. :or the 4evelop*e t# a*o ' others# o: 1ot 3o. 3537# i to a sub4ivisio . O !u e 13# 1//(# respo 4e ts7 heirs# :ile4 a co*plai t :or Cuieti ' o: title a 4 reco ve"a ce 9ith 4a*a'es a'ai st petitio ers 9ith the R&C o: 1apu<1apu Cit". &he" alle'e4 that the" are a*o ' the 7 chil4re o: 2orotea 6 ot a 4 Ra"*u 4o 0abaL that petitio ers co ive4 9ith 2orotea 6 ot# -ictoria o a 4 +re'orio 0aba i executi ' the extraDu4icial settle*e t a 4 4ee4 o: sale 9hich :rau4ule tl" 4eprive4 the* o: their here4itar" share i 1ot 3o. 3537L a 4 that sai4 tra sactio s are voi4 i so:ar as their respective shares are co cer e4 because the" ever co se te4 to the sai4 sale a 4 extraDu4icial settle*e t# 9hich ca*e to their 5 o9le4'e barel" a "ear prior to the :ili ' o: the co*plai t. 6 its a s9er# petitio er +ocha Realt" averre4 that respo 4e ts have o perso alit" to sue because the" are ot chil4re o: 2orotea 6 ot a 4 Ra"*u 4o 0abaL that eve assu*i ' the" are la9:ul heirs o: the spouses# their actio is barre4 b" estoppel# laches a 4 prescriptio :or havi ' bee :ile4 *ore tha 2) "ears a:ter the issua ce o: the tra s:er certi:icate o: title i its a*eL a 4 that a " 4e:ect i the tra sactio s lea4i ' to its acCuisitio o: 1ot 3o. 3537 9ill ot a::ect its title because it is a purchaser i 'oo4 :aith a 4 :or value. O Ma" 3# 1//7# the co*plai t :or Cuieti ' o: title a 4 reco ve"a ce 9ith 4a*a'es :ile4 a'ai st petitio er 9as 4is*isse4 o the 'rou 4 o: prescriptio a 4 laches. &he trial court rule4 that respo 4e ts7 actio is o e :or e :orce*e t o: i*plie4 or co structive trust base4 o :rau4 9hich prescribes i 1$ "ears :ro* the issua ce o: title over the propert". 8e ce# respo 4e ts7 actio 9as barre4 b" prescriptio a 4 laches :or havi ' bee :ile4 a:ter 2) "ears :ro* the ti*e +ocha Realt" obtai e4 title to the propert". Respo 4e ts appeale4 to the Court o: Appeals 9hich reverse4 the 4ecisio o: the trial court a 4 rei state4 the co*plai t o: respo 4e ts. ISSUE* Fhether there is a cause o: actio to 4eclare the i existe ce o: the co tract o: sale 9ith respect to the share o: respo 4e ts i the subDect lot o the 'rou 4 o: abse ce o: a " o: the esse tial reCuisites o: a vali4 co tractP HELD* E 4er Article 131) o: the Civil Co4e# there is o co tract u less the :ollo9i ' reCuisites co cur> =1@ co se t o: the co tracti ' partiesL =2@ obDect certai 9hich is the subDect *atter o: the co tractL a 4 =3@ cause o: the obli'atio . &he abse ce o: a " o: these esse tial reCuisites re 4ers the co tract i existe t a 4 a actio or 4e:e se to 4eclare sai4 co tract voi4 ab initio 4oes ot prescribe# pursua t to Article 1%1$ o: the sa*e Co4e. 6 4elos 'eyes v. Co"rt of (ppeals # it 9as hel4 that o e o: the reCuisites o: a vali4 co tract u 4er Article 131) o: the Civil Co4e# a*el"# the co se t a 4 the capacit" to 'ive co se t o: the parties to the co tract# is a i 4ispe sable co 4itio :or the existe ce o: co se t. &here is o e::ective co se t i la9 9ithout the capacit" to 'ive such co se t. 6 other 9or4s# le'al co se t presupposes capacit". 6 5eirs of 'omana In+#"+/$iro v. Casals # the Court# appl"i ' Article 1%1$ o: the Civil Co4e 1 S 2 $ 4eclare4 that a clai* o: prescriptio is u availi ' 9here the assaile4 co ve"a ce is voi4 ab initio 9ith respect to those 9ho ha4 o 5 o9le4'e o: the tra sactio . &he case i volve4 a :rau4ule t sale a 4 extraDu4icial settle*e t o: a lot execute4 9ithout the 5 o9le4'e a 4 co se t o: so*e o: the co<o9 ers. 6t 9as hel4 that the sale o: the realt" is voi4 i so :ar as it preDu4ice4 the shares o: sai4 co<o9 ers a 4 that the issua ce o: a certi:icate o: title over the 9hole propert" i :avor o: the ve 4ee 4oes ot 4ivest the other co<o9 ers o: the shares that ri'ht:ull" belo 'e4 to the*. &he ullit" o: the sai4 sale procee4s :ro* the abse ce o: le'al capacit" a 4 co se t to 4ispose o: the propert". 3e*o 4at Cuo4 o habet \ 3o o e ca 'ive *ore tha 9hat he has. Assu*i ' that the alle'atio s i respo 4e ts7 co*plai t are true# their clai* that the executio o: the extraDu4icial settle*e t a 4 the 4ee4 o: sale i volvi ' 1ot 3o. 3537# 9hich le4 to the issua ce o: a certi:icate o: title i the a*e o: +ocha Realt"# 9as 9ithout their 5 o9le4'e or co se t# 'ives rise to a i*prescriptible cause o: actio to 4eclare sai4 tra sactio i existe t o the 'rou 4 o: abse ce o: le'al capacit" a 4 co se t. 8e ce# the 4is*issal o: respo 4e ts7 co*plai t o the 'rou 4 o: prescriptio 9as erro eous. .6t is but :air# 9ithout preDu4'i ' the issues# that the parties be allo9e4 to substa tiate their respective clai*s a 4 4e:e ses i a :ull<blo9 trial# a 4 obtai a ruli ' o all the issues prese te4 i their plea4i 's. 6 4ee4# 9hile the aver*e ts i the co*plai t sho9 that respo 4e ts7 actio is i*prescriptible# +ocha Realt" is ot preclu4e4 :ro* prese ti ' evi4e ce that it is a purchaser i 'oo4 :aith or that respo 4e ts have o perso alit" to sue :or reco ve"a ce or# eve assu*i ' that the" are la9:ul heirs o: 2orotea 6 ot a 4 Ra"*u 4o 0aba# that the" are 'uilt" o: laches or are estoppe4 :ro* Cuestio i ' thevali4it" o: the extraDu4icial partitio a 4 4ee4 o: sale o: 1ot 3o. 3537 9ith respect to their shares. &he trial court thus erre4 i 4is*issi ' respo 4e t7s co*plai t o the 'rou 4 o: prescriptio a 4 laches# a 4 9hile the Court o: Appeals is correct i or4eri ' the rei state*e t o: the co*plai t.

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DA"ID P% !ORNILDA "S RTC !ACTS* &he 4ecease4# !ulio M. Catolos :or*erl" o9 e4 six =(@ parcels o: la 4 locate4 i &a a"# Ri,al# 9hich are the co troverte4 properties i the prese t liti'atio . 8is estate 9as the subDect o: settle*e t i SpecialProcee4i 's 3o. 31$3 o: the the Court o: .irst 6 sta ce o: Ri,al. .or i64a a 4 Asu cio M. Pasa*ba 9ere so*e o: the le'al heirs a 4 9ere represe te4 i the case b" Att". Ser'io A*o o" =herei a:ter re:erre4 to as Respo 4e t A*o o"@. A ProDect o: Partitio 9as :ile4 i the 6 testate Court 9hereb" the Co troverte4 Parcels 9ere a4Du4icate4 to Al:o so 6. .or il4a a 4 Asu cio M. Pasa*ba. O 12 !a uar" 1/(5# the Court approve4 the ProDect o: Partitio . 6t 9as ot u til ( Au'ust 1/(/# ho9ever# that the estate 9as 4eclare4 close4 a 4 ter*i ate4 a:ter estate a 4 i herita ce taxes ha4 bee pai4# the clai*s a'ai st the estate settle4 a 4 all properties a4Du4icate4.

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Civil Law Review 2 2013 - 2014 Ei'ht =)@ 4a"s therea:ter# or o 2$ !a uar" 1/(5# Al:o so 1. .or il4a a 4 Asu cio M. Pasa*ba execute4 a Co tract o: Mort'a'e 9herei the" *ort'a'e4 the Co troverte4 Parcels to Respo 4e t A*o o" as securit" :or the pa"*e t o: his attor e"Ks :ees :or services re 4ere4 i the a:ore*e tio e4 i testate procee4i 's. Asu cio M. Pasa*ba 4ie4 o 2% .ebruar" 1/(/ 9hile Al:o so 1. .or il4a passe4 a9a" o 2 !ul" 1/(/. Petitio ers are so*e o: the heirs o: Al:o so 6. .or il4a. Si ce the *ort'a'e i 4ebte4 ess 9as ot pai4# o 21 !a uar" 1/7$# Respo 4e t A*o o" i stitute4 :oreclosure procee4i 's be:ore the Court o: .irst 6 sta ce o: Ri,al# at Pasi'# 0ra ch -666 e title4G Ser'io 6. A*o o" vs. 8eirs o: Asu cio M. Pasa*ba a 4 8eirs o: Al:o so 1. .or il4aG Petitio ers# as 4e:e 4a ts therei # alle'e4 that the a*ou t a'ree4 upo as attor e"Ks :ees 9as o l" Pll#(/5./2 a 4 that the su* o: P27#($$.$$ 9as u co scio able a 4 u reaso able. O 2) Septe*ber 1/72# the &rial Court re 4ere4 Du4'e*e t i the .oreclosure Case or4eri ' the Pasa*ba a 4 .or il4a heirs to pa" Respo 4e t A*o o"# 9ithi i et" =/$@.4a"s :ro* receipt o: the 4ecisio # O ( .ebruar" 1/73# the Co troverte4 Parcels 9ere :oreclose4 a 4 o 23 March 1/73# a auctio sale 9as hel4 9ith Respo 4e t A*o o" as the sole bi44er :or P23#7($.$$. Sai4 sale 9as co :ir*e4 b" the &rial Court. &o satis:" the 4e:icie c"# a other executio sale 9as co 4ucte4 9ith Respo 4e t A*o o" as the sole bi44er :or P12#137.5$. O the basis o: a A::i4avit o: Co soli4atio o: O9 ership b" Respo 4e t A*o o"# the correspo 4i ' tax 4eclaratio s coveri ' the Co troverte4 Parcels 9ere co soli4ate4 i his a*e. O 1/ 2ece*ber 1/73# or a "ear a:ter the Du4'*e t i the .oreclosure Case# a actio :or A ul*e t o: !u4'*e t e title4 G ,aria Penano et al. vs. 3er+io (monoy, et al .G sCuarel" put i issue 9ere the properiet" o: the *ort'a'e# the vali4it" o: the Du4'*e t o: :oreclosure sale a 4 the te abilit" o: aCuisitio b" respo 4e t O*o o" at the sheri::7s sale. &his petitio *ai l" asserts that the *ort'a'e a 4 the sheri:: sale are voi4 :or the" are co trar" to Art. 1%/1 o: the Civil Co4e. E 4er this provisio # a la9"er is prohibite4 :ro* acCuiri ' either b" purchase or assi' *e t the propert" or ri'hts i volve4 9hich are the obDect o: the liti'atio i 9hich the" i terve e b" virtue o: their pro:essio . ISSUE* Fhether the *ort'a'e co stitute4 o the co troverte4 parcels o: la 4 i :avor o: A*o o" co*es ARAFAG HABANA JALAYAJAY &he :act that the properties 9ere :irst *ort'a'e4 a 4 o l" subseCue tl" acCuire4 i a auctio sale lo ' Page 127 9ithi the scope o: the prohibitio i Art. 1%/1 o: the Civil Co4eP HELD* E 4er Art. 1%/1 o: the Civil Co4e> $he follo6in+ persons cannot ac)"ire by p"rchase eve at a public or Du4icial or auctio # either i perso or throu'h the *e4iatio o: a other> =5@ !ustices# Du4'es# prosecuti ' attor e"s# ... the property and ri+hts in liti+ation or levie4 upo o executio be:ore the court 9ithi 9hose Du ctio or territor" the" exercise their respective :u ctio sL this prohibitio i clu4es the act o: acCuitti ' b" assi' *e t a 4 shall appl" to la6yers 6ith respect to the property and ri+hts 6hich may be the ob#ect of any liti+ation in 6hich they may ta7e part by virt"e of their profession . E 4er the a:oreCuote4 provisio # a la9"er is prohibite4 :ro* acCuiri ' either b" purchase or assi' *e t the propert" or ri'hts i volve4 9hich are the obDect o: the liti'atio i 9hich the" i terve e b" virtue o: their pro:essio &he prohibitio o purchase is all e*braci ' to i clu4e ot o l" sales to private i 4ivi4uals but also public or Du4icial sales &he ratio ale a4va ce4 :or the prohibitio is that public polic" 4isallo9s the tra sactio s i vie9 o: the :i4uciar" relatio ship i volve4 i.e.# the relatio o: trust a 4 co :i4e ce a 4 the peculiar co trol exercise4 b" these perso s 6 the i sta t case# it is u 4ispute4 that the Co troverte4 Parcels 9ere part o: the estate o: the late !ulio M. Catolos subDect o: i testate estate procee4i 's# 9herei Respo 4e t A*o o" acte4 as cou sel :or so*e o: the heirs :ro* 1/5/ u til 1/() b" his o9 a4*issio that these properties 9ere a4Du4icate4 to Al:o so .or il4a a 4 Asu cio M. Pasa*ba i the ProDect o: Partitio approve4 b" the Court o 12 !a uar" 1/(5L that o 2$ !a uar" 1/(5# or o l" ei'ht =)@ 4a"s therea:ter# a 4 9hile he 9as still i terve i ' i the case as cou sel# these properties 9ere *ort'a'e4 b" petitio ersK pre4ecessor<i <i terest to Respo 4e t A*o o" to secure pa"*e t o: the latterKs attor e"Ks :ees i the a*ou t o: P27#($$.$$L that si ce the *ort'a'e i 4ebte4 ess 9as ot pai4# Respo 4e t A*o o" i stitute4 a actio :or Du4icial :oreclosure o: *ort'a'e o 21 !a uar" 1/7$L that the *ort'a'e 9as subseCue tl" or4ere4 :oreclose4 a 4 auctio sale :ollo9e4 9here Respo 4e t A*o o" 9as the sole bi44er :or P23#($$.$$L a 4 that bei ' short o: the *ort'a'e i 4ebte4 ess# he applie4 :or a 4 :urther obtai e4 a 4e:icie c" Du4'*e t.

Civil Law Review 2 2013 - 2014 a:ter the ter*i atio o: the i testate procee4i 's 9ill ot re*ove it :ro* the scope o: the prohibitio . &o rule other9ise 9oul4 be to cou te a ce i 4irectl" 9hat ca ot be 4o e 4irectl". 0ei ' a voi4 co tract# the actio or 4e:e se :or the 4eclaratio o: its i esiste ce is i*prescriptible . &he 4e:ect o: a voi4 or i existe ce co tract is per*a e t. Mere lapse o: ti*e ca ot 'ive it e::icac". 3either ca the ri'ht to set up the 4e:e se o: ille'alit" be 9aive4. &he six =(@ parcels o: la 4 herei co troverte4 are hereb" or4ere4 retur e4 to petitio ers u less so*e o: the* have bee co ve"e4 to i oce t thir4 perso s. Fith respect to petitio ersK pra"er :or 4isbar*e t b" reaso o: *alpractice o: Respo 4e t A*o o" e*bo4ie4 i their plea4i ' e title4 KMahi'pit a Musi"u ' para Papa a'uti ;au' a" ' Pa'lalapasta 'a K a 4 KMasasa*a ' +a9ai =Mal< Pracrices@ a 4 GPa i i 4i'a =Me*ora 4u*@G both :ile4 o Ser'io 6. A*o o" is hereb" reCuire4# 9ithi :i:tee =15@ 4a"s :ro* otice hereo:# to sub*it a A s9er thereto. A:ter receipt o: the sa*e# a e9 4oc5et u*ber 9ill be assi' e4 to the case.

SUNTAY "S% CA !ACTS* Respo 4e t .e4erico Su ta" 9as the re'istere4 o9 er o: a parcel o: la 4 situate4 i Sto. 3iNo# 8a'o o"# 0ulaca . .e4erico applie4 as a *iller< co tractor o: the the 3atio al Rice a 4 Cor Corporatio =3AR6C@. 8o9ever# his applicatio # althou'h prepare4 b" his ephe9<la9"er# petitio er Ra:ael Su ta"# 9as 4isapprove4# obviousl" because at that ti*e he 9as tie4 up 9ith several u pai4 loa s. .or purposes o: circu*ve tio # he ha4 thou'ht o: allo9i ' Ra:ael to *a5e the applicatio :or hi*. Ra:ael prepare4 a absolute 4ee4 o: sale 9hereb" .e4erico# :or a 4 i co si4eratio o: P2$#$$$.$$ co ve"e4 to Ra:ael sai4 parcel o: la 4 9ith all its existi ' structures. 1ess tha three *o ths a:ter this co ve"a ce# a cou ter sale 9as prepare4 a 4 si' e4 b" Ra:ael 9ho also cause4 its 4eliver" to .e4erico. &hrou'h this cou ter co ve"a ce# the sa*e parcel o: la 4 9ith all its existi ' structures 9as sol4 b" Ra:ael bac5 to .e4erico :or the sa*e co si4eratio o: ARAFAG HABANA JALAYAJAY Page 130

Civil Law Review 2 2013 - 2014 P2$#$$$.$$. .e4erico the reCueste4 Ra:ael to 4eliver his cop" o: the &C& :or the subDect la 4 so that he ca have the cou ter 4ee4 o: sle i his :avor re'istere4 i his a*e# Ra:ael re:use4 such reCuest. As a result# .e4erico :ile4 a co*plai t :or reco ve"a ce a 4 4a*a'es a'ai st Ra:ael. .e4erico all'e4 that the :irst sale o: the la 4 9as per:ecte4 si ce Ra:ael ever pai4 or 4elivere4 the pa"*e t a 4 he ever 4e*a 4e a 4 receive4 the su* o: P2$#$$$ or a " valuable co si4eratio . Also# that the 2ee4 o: Absolute Sale is a absolutel" si*ulate4 or :ictitious tra sactio . ISSUE* Fhether or ot there 9as a vali4 sale bet9ee .e4erico a 4 Ra:aelP HELD* 3o# there 9as o per:ecte4 sale. 6t is provi4e4 b" la9 that a co tract o: purchase a 4 sale is voi4 a 4 pro4uces o e::ect 9hatsoever 9here the sa*e is 9ithout cause or co si4eratio i that the purchase price# 9hich appears i the sai4 co tract# has i :act ever bee pai4 b" the purchaser to the ve 4or. 6 this case# co si4eri ' the :ollo9i ' :acts> =1@ &hat the 2 i stru*e ts 9ere execute4 closel" o e the other i volvi ' tra s:er a 4 re<tra s:er o: the sa*e propert" at exactl" the sa*e priceL =2@ &he existi ' close relatio ship bet9ee the partiesL a 4 =3@ &he i a4eCuac" o: the price i relatio to the locatio a 4 ature o: the propert"# the 2ee4 o: Sale is :ou 4 to be a *ere acco**o4atio arra 'e*e t execute4 9ithout a " co si4eratio a 4 there:ore a si*ulate4 co tract o: sale. .urther*ore# the co*plete abse ce o: a atte*pt i a " *a er o the part o: Ra:ael to assert his ri'hts o: o9 ership over the la 4 a 4 the rice*ill is a clear ba4'e o: :rau4. .e4erico re*ai e4 i actual possessio # cultivatio a 4 occupatio o: the 4ispute4 lot :urther proves the :ictitious ess o: the tra s:er. &here:ore# the 4ee4 o: sale execute4 b" .e4erico i :avor o: his ephe9# Raphael# is absolutel" si*ulate4 a 4 :ictitious a 4# he ce# ull a 4 voi4.

TE-A !ACTS*

AR#ETING "S% CA

O Ma" 1/75# 4e:e 4a t Pe4ro 3ale bou'ht :ro* the plai ti:: &eDa Mar5eti ' a *otorc"cle :or the su* o: P)#$$$. 2e:e 4a t pai4 a 4o9 pa"*e t o: P1#7$$ 9ith a pro*ise that he 9oul4 pa" plai ti:: the bala ce 9ithi ($ 4a"s. &he 4e:e 4a t# ho9ever# :aile4 to co*pl" 9ith his pro*ise a 4 reCueste4 :or a exte sio . 8o9ever# 4e:e 4a t still :aile4 to co*pl". 6 this particular tra sactio a chattel *ort'a'e 9as co stitute4 as a securit" :or the pa"*e t o: the bala ce o: the purchase price. 6t 9as :irst *ort'a'e4 to &eDa Mar5eti '# ho9ever# it 9as :ou 4 that &eDa Mar5eti ' a 4 A 'el !aucia are o e a 4 the sa*e# a 4 it 9as *a4e to appear that 9a" so that 3ale coul4 attache4 the u it to !uacia 7s :ra chiseQMC8 1i e. &he a'ree*e t also provi4es that &eDa Mar5eti ' 9ill *a5e the "earl" re'istratio o: the *otorc"cle. &eDa Mar5eti '# ho9ever# :aile4 to re'ister o the 'rou 4 that 4e:e 4a t :aile4 to co*pl" 9ith so*e reCuire*e ts. &eDa Mar5eti '

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Civil Law Review 2 2013 - 2014 :ile4 a actio :or Su* o: Mo e" 9ith 2a*a'es a'ai st 3ale. ISSUE* ISSUE* Fhether or ot there is a vali4 a 4 existi ' Co tract o: SaleP HELD* 3o# the co tract is ull a 4 voi4. &he parties operate4 u 4er a arra 'e*e t 5 o9 as the O5abit s"ste*I 9hereb" a perso 9ho has bee 'ra te4 a certi:icate o: public co ve ie ce allo9s a other perso 9ho o9 s *otor vehicles to operate u 4er such :ra chise :or a :ee. A certi:icate o: public co ve ie ce is a special privile'e co :erre4 b" the 'over *e t. Abuse o: this privile'e b" the 'ra tees thereo: ca ot be cou te a ce4. Althou'h ot outri'htl" pe ali,e4 as a cri*i al o::e se# the 5abit s"ste* is i variabl" reco' i,e4 as bei ' co trar" to public polic" a 4# there:ore# voi4 a 4 i existe t u 4er Article 1%$/ o: the Civil Co4e. As provi4e4 i Article 1%22 o: the Civil Co4e# OA co tract 9hich is the 4irect result o: a previous ille'al co tract# is also voi4 a 4 i existe tI. 6t is a :u 4a*e tal pri ciple that the court 9ill ot ai4 either part" to e :orce a ille'al co tract# but 9ill leave both 9here it :i 4s the . Fhether or ot a pro*issor" ote execute4 i co si4eratio o: a previous pro*issor" ote 9hich ha4 bee barre4 b" prescriptio co stitutes as a 9aiver to the ri'ht o: prescriptio o: the actio P HELD* Bes. &he Court rule4 that 9he a 4ebt is alrea4" barre4 b" prescriptio # it ca ot be e :orce4 b" the cre4itor. 0ut a e9 co tract reco' i,i ' a 4 assu*i ' the prescribe4 4ebt 9oul4 be vali4 a 4 e :orceable. 6 this case# respo 4e t Co :esor execute4 a seco 4 pro*issor" ote 9hereb" he pro*ise4 to pa" the a*ou t covere4 b" the previous pro*issor" ote# a 4 upo :ailure to 4o so# a'ree4 to the :oreclosure o: the *ort'a'e. Respo 4e t thereb" e::ectivel" a 4 expressl" re ou ce4 a 4 9aive4 is ri'ht to the prescriptio coveri ' the :irst pro*issor" ote. Si ce the seco 4 pro*issor" ote states that :ailure to pa" 9ill allo9 such :oreclosure o: *ort'a'e the co Du'al propert" use4 to secure the *ort'a'e is liable :or this obli'atio .

DBP "S% ADIL ROBLETT "S% CA !ACTS* !ACTS* O .ebruar"1/%$ spouses Patricio Co :esor a 4 !ovita -illa:uerte obtai e4 a a'ricultural loa :ro* 20P# i the su* o: P2#$$$.$$# as evi4e ce4 b" a pro*issor" ote o: sai4 4ate 9hereb" the" bou 4 the*selves Doi tl" a 4 severall" to pa" the accou t i 1$ eCual "earl" a*orti,atio s. As the obli'atio re*ai e4 outsta 4i ' a 4 u pai4 eve a:ter the lapse o: the a:oresai4 te <"ear perio4# Co :esor# 9ho 9as b" the a *e*ber o: the Co 'ress o: the Philippi es# execute4 a seco 4 pro*issor" ote o April 11# 1/(1 expressl" ac5 o9le4'i ' sai4 loa a 4 pro*isi ' to pa" the sa*e o or be:ore !u e 15# 1/(1 a 4 upo his :ailure to pa" he a'rees to the :oreclosure o: *ort'a'e over a certai co Du'al propert". Sai4 spouses ot havi ' pai4 the obli'atio o the speci:ie4 4ate# the 20P :ile4 a co*plai t 4ate4 Septe*ber 11# 1/7$ i the Cit" Court o: 6loilo Cit" a'ai st the spouses :or the pa"*e t o: the loa . ARAFAG HABANA JALAYAJAY O 2ece*ber 1/)5 Roblett 6 4ustrial Co structio Corporatio =R6CC@ trou'h its Asst#<-P Aller#!r.# e tere4 i to a a'ree*e t 9ith Co tractors ECuip*e t Corporatio =CEC@ 9herei the latter 9oul4 lease to the :or*er various co structio eCuip*e t :or its proDects. A o::<setti ' arra 'e*e t 9as also *a4e 9herei respo 4e t CEC receive4 :ro* R6CC co structio *aterials 9orth P115#$$$ thus re4uci ' petitio er7s bala ce to P227#/$/.3). A 4a" be:ore the executio o: the a'ree*e t# R6CC pai4 CEC P1$#$$$ i post4ate4 chec5s 9hich 9ere eve tuall" 4isho ore4. CEC 4ebite4 the a*ou t to R6CC7s accou t i creasi ' its bala ce to P237# /$/.3). O Septe*ber 1/)( CEC i stitute4 a actio :or a su* o: *o e" a'ai st petitio er R6CC. R6CC co te 4s that a:ter 4eliberatio a 4 au4it it appeare4 that petitio er overpai4 respo 4e t CEC b" P12#$$$. 8o9ever# Ma ali'o4# +e eral Ma a'er o: Page 132

Civil Law Review 2 2013 - 2014 CEC 4eclare4 that R6CC receive4 a state*e t o: accou t i the a*ou t o: P237#35$.1) 9hich it ever Cuestio e4. ISSUE* Fhether the 4e:e 4a t *a" be co si4ere4 to have :ull" pai4 its obli'atio b" 9a" o: o::setti ' :or the P115#$$$ co structio *aterials receive4 b" the plai ti::P HELD* 3o. Petiti er<4e:e 4a t R6CC have ot "et pai4 its obli'atio . Estoppel i pais arises 9he o e# b" is acts# represe tatio s or a4*issio s# or b" his o9 sile ce 9he he ou'ht to spea5 out# i te tio all" or throu'h culpable e'li'e ce# i 4uces a other to believe certai :acts to exist a 4 such other ri'ht:ull" relies a 4 acts o such belie:# so that he 9ill be preDu4ice4 i: the :or*er is per*itte4 t 4e " the existe ce o: such :acts. &his is applicable i the prese t case. A state*e t o: accou t :or P37(#35$1) coveri ' a certai perio4 9as receive4 :ro* respo 4e t b" petitio er 9ithout a protest :ro* the latter. 3either 4i4 petitio er co trovert the 4e*a 4 letter co cer i ' the over4ue accou t o: P327#/$/#3)# rather it eve as5e4 that the" be 'ive a*ple ti*e to source :u 4s to settle the accou t.

BUCTON "S% GABAR !ACTS* So*eti*e i 1/%( 4e:e 4a t !ose:i a 1la*oso +abar bou'ht a la 4 :ro* the spouses -illari o i stall*e t basis# P5$$ 4o9 # the bala ce pa"able i i stall*e ts. !ose:i a e tere4 i to a verbal a'ree*e t 9ith her sister<i <la9# plai ti:: 3ica ora +abar 0ucto # that the latter 9oul4 pa" o e<hal: o: the price =P3#$$$@ a 4 9oul4 the o9 o e<hal: o: the la 4. Pursua t to this u 4ersta 4i ' 3ica ora 'ave her sister<i <la9 !ose:i a the i itial a*ou t o: P1#$$$# :or 9hich the latter si' e4 a receipt. Mea 9hile# a:ter !ose:i a ha4 receive4 i !a uar"# 1/%( the i itial a*ou t o: P1#$$$ as above state4# plai ti::s too5 possessio o: the portio o: the la 4 i 4icate4 to the* b" 4e:e 4a ts a 4 built a *o4est ipa house therei . About t9o "ears later plai ti::s built behi 4 the ipa house a other house :or re t. A 4# subseCue tl"# plai ti::s co structe4 a house o: stro ' *aterials# 9ith three apart*e ts i the lo9er portio :or re tal purposes.

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Civil Law Review 2 2013 - 2014 6 !a uar"# 1/%7 the spouses -illari execute4 the 4ee4 o: sale o: the la 4 i :avor o: 4e:e 4a t !ose:i a 1la*oso +abar# Plai ti::s the sou'ht to obtai a separate title :or their portio o: the la 4 i Cuestio . 2e:e 4a ts repeate4l" 4ecli e4 to acco**o4ate plai ti::s. &heir excuse> the e tire la 4 9as still *ort'a'e4 9ith the Philippi e 3atio al 0a 5 as 'uara tee :or 4e:e 4a tsK loa o: P3#5$$ co tracte4 o !u e 1(# 1/%7. Plai ti::s co ti ue4 e Do"i ' their portio o: the la 4. pla ti ' :ruit trees a 4 receivi ' the re tals o: their buil4i 's. 6 1/53# 9ith the co se t o: 4e:e 4a ts =9ho 9ere livi ' o their portio @# plai ti::s ha4 the e tire la 4 surve"e4 a 4 sub4ivi4e4 preparator" to obtai i ' their separate title to their portio . A:ter the surve" a 4 the pla ti ' o: the co crete *o u*e ts 4e:e 4a ts erecte4 a :e ce. 0ucto :ile4 a actio :or speci:ic per:or*a ce or4eri ' 4e:e 4a t spouses to execute i their :avor a 4ee4 o: sale o: the o e hal: o: the propert". 2e:e 4a ts 4e ies a'ree*e t to sell to plai ti::s o e<hal: o: the la 4 i liti'atio . She 4eclare4 that the a*ou ts she ha4 receive4 :ro* plai ti:: 3ica ora +abar 0ucto \ :irst# P1#$$$# the P%$$ \ 9ere loa s# ot pa"*e t o: o e<hal: o: the price o: the la 4 =9hich 9as P3#$$$@. ISSUE* Fhether or ot petitio er is e title4 to co*pel respo 4e t to execute a :or*al 4ee4 o: co ve"a ce over the subDect la 4P HELD* Bes# petitio er *a" co*pel respo 4e t to execute a :or*al 4ee4 o: co ve"a ce a 4 to obtai their separate title to the la 4. 6t is clear that petitio er 0ucto pai4 P1#5$$ to respo 4e t !ose:i a +abar as purchase price o: o e<hal: o: the subDect lot. &he sale# althou'h ot co si' e4 i a public i stru*e t or :or*al 9riti '# is evertheless vali4 a 4 bi 4i ' bet9ee petitio ers a 4 private respo 4e ts# :or the ti*e<ho ore4 rule is that eve a verbal co tract o: sale or real estate pro4uces le'al e::ects bet9ee the parties. Althou'h at the ti*e sai4 petitio er pai4 P1#$$$.$$ as part pa"*e t o: the purchase price o !a uar" 1/# 1/%(# private respo 4e ts 9ere ot "et the o9 ers o: the lot# the" beca*e such o9 ers o !a uar" 2%# 1/%7# 9he a 4ee4 o: sale 9as execute4 i their :avor b" the -illari spouses. E 4er Article 1%3% o: the Civil Co4e# O9he a perso 9ho is ot the o9 er o: a thi ' sells or alie ates a 4 4elivers it# a 4 later the seller or 'ra tor acCuires title thereto# such title passes b" operatio o: la9 to the bu"er or 'ra tee.G Petitio ers there:ore beca*e o9 ers o: the o e<hal: portio o: the lot i Cuestio b" virtue o: a sale 9hich# thou'h ot evi4e ce4 b" a :or*al 4ee4# 9as OLACO "S% CA !ACTS* 6t appears that o Ma" 1/%3# the Philippi e Su'ar Estate 2evelop*e t Co*pa "# 1t4.# sol4 a parcel o: la 4# # situate4 at OroCuieta St.# Sta. Cru, # Ma ila# 9ith the 2ee4 o: Absolute Sale a*i ' E*ilia OK1aco as ve 4eeL therea:ter# &ra s:er Certi:icate o: &itle 3o. ((%5( 9as issue4 i her a*e. O Ma" 1/($# private respo 4e t<spouses -ale ti Co Cho Chit a 4 O 1a" ;ia lear e4 :ro* the e9spapersthat E*iliaOK1aco sol4 the sa*e propert" to the Ro*a Catholic Archbishop o: Ma ila :or P23$#$$$.$$# 9ith assu*ptio o: the real estate *ort'a'e co stitute4 thereo . Respo 4e t< spouses sue4 petitio erspouses E*ilia OK1aco a 4 8u'o 1u a to recover the purchase price o: the la 4# respo 4e t<spouses asserti ' that petitio er E*ilia OK1aco 5 e9 that the" 9ere the real ve 4ees o: the OroCuieta propert" a 4 that the le'al title thereto 9as *erel" place4 i her a*e. &he" co te 4 that E*ilia OK1aco breache4 the trust 9he she sol4 the la 4. O Page 134 evertheless prove4 b" both 4ocu*e tar" a 4 parole evi4e ce.

ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 Septe*ber 1/7(# :i 4i ' o trust relatio bet9ee the parties# the trial court 4is*isse4 the co*plai t to'ether 9ith the cou terclai*. Petitio ers a 4 respo 4e ts appeale4. ISSUE* Fhether or ot there 9as a relatio s bet9ee partiesP existi ' trust 8e ce# prescriptio 4i4 ot be'i to ru u til the sale o: the subDect propert"# 9hich is clearl" a act o: repu4iatio .

Fhether or ot prescriptio has set i P HELD* Bes# there is a existi ' trust relatio s. &he Court hel4 that a resulti ' trust 9as i 4ee4 i te 4e4 b" the parties u 4er Art. 1%%) o: the Civil Co4e# 9hich states that O&here is a i*plie4 trust 9he propert" is sol4# a 4 the le'al estate is 'ra te4 to o e part" but the price is pai4 b" a other :or the purpose o:havi ' the be e:icial i terest o: the propert". &he :or*er is the trustee# 9hile the latter is the be e:iciar"..IRespo 4e t< spouses explai e4 that the reaso 9h" the" 4i4 ot place the properties i their a*e 9as that bei ' Chi ese atio als at the ti*e o: the purchase the" 4i4 ot 9a t to execute the reCuire4 a::i4avit to the e::ect that the" 9ere allies o: the !apa ese. Si ce O 1a" ;ia too5 care o: E*ilia 9he she 9as still "ou '# she 4i4 ot hesitate to place the title o: the propert" i E*ilia7s a*e. &his arra 'e*e t 9as also *a4e b" the sai4 respo 4e t<spouses i a other lot 9here it 9as place u 4er the a*e o: A*brosio O71aco# the brother o: E*ilia. 6t 9as establishe4 b" A*brosio i a other actio :or reco ve"a ce i sititute4 a'ai st hi* b" the respo 4e t<spouses that the latter use4 his a*e i bu"i 'the ;usa '<loob propert" 9hile that o: petitio er E*ilia 9as use4 i the purchase o: the OroCuieta propert". 6 e::ect# there 9as a i*plie4 a4*issio b" A*brosio that his sister E*ilia# li5e hi* 9as *erel" use4 as a 4u**". As :or the prescriptio # the Court rule4 that it has ot set i . 6 resulti ' trust# the rule o: i*prescriptibilit" *a" appl" as lo ' as trustee has ot repu4iate4 the trust. O ce it is repu4iate4# it is co verte4 to a co structive trust a 4 subDect to prescriptio . A resulti ' trust is repu4iate4 i: the :ollo9i 'reCuisites co cur> =1@ the trustee has per:or*e4 u eCuivocal acts o: repu4iatio L =2@ Such positive ats o: repu4iatio have bee *a4e 5 o9 to the cestui Cui trustL =3@ the evi4e ce is clear a 4 co vi ci '. &hus u til that poi t# respo 4e t<spouses 9ere ot a9are o: the act o: E*ilia 9hich 9oul4 co ve" to the* the i4ea that she 9as repu4iati ' the resulti ' trust. &he seco 4 reCuisite is there:ore abse t.

CHIAO LIONG TAN A&% CA !ACTS* Petitio er Chiao 1io ' &a clai*s to be the o9 er o: a 6su,u El: va # 9hich he purchase4 i March# 1/)7. As o9 er thereo:# petitio er sa"s he has bee i possessio # e Do"*e t a 4 utili,atio o: the sai4 *otor vehicle u til it 9as ta5e :ro* hi* b" his ol4er brother# &a 0a Bo '. Petitio er relies pri cipall" o the :act that the 6su,u El: va is re'istere4 i his a*e u 4er Certi:icate o: Re'istratio 3o. 15$1/$/. 8e clai*s i his testi*o " be:ore the trial court that the sai4 vehicle 9as purchase4 :ro* 0ali ta9a5 6su,u Motor Ce ter :or a price o: over P1$$#$$$.$$L that he se t his brother to pa" :or the va a 4 the receipt :or pa"*e t 9as place4 i his =petitio erKs@ a*e because it 9as his *o e" that 9as use4 to pa" :or thevehicleL that he allo9e4 his brother to use the va because the latter 9as 9or5i ' :or his co*pa "# the C1& 6 4ustriesL a 4 that his brother later re:use4 to retur the va to hi* a 4 appropriate4 the sa*e :or hi*sel:.

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Civil Law Review 2 2013 - 2014 O the other ha 4# private respo 4e t testi:ie4 that C1& 6 4ustries is a :a*il" busi ess that 9as place4 i petitio erKs a*e because at that ti*e he 9as the leavi ' :or the E ite4 States a 4 petitio er is the re*ai i ' .ilipi o i the :a*il" resi4i ' i the Philippi es. Fhe the :a*il" busi ess ee4e4 a vehicle i 1/)7 :or use i the 4eliver" o: *achi er" to its custo*ers# he as5e4 petitio er to loo5 :or a vehicle a 4 'ave hi* the a*ou t o: P5#$$$.$$ to be 4eposite4 as 4o9 pa"*e t :or a 6su,u El: -a 9hich 9oul4 be available i about a *o th. A:ter a *o th# he hi*sel: pai4 the 9hole price out o: a loa o: P1%$#$$$.$$ 9hich he obtai e4 :ro* his :rie 4 &a Pit Si . 6 as*uch as the receipt :or the 4o9 pa"*e t 9as place4 i the a*e o: petitio er a 4 si ce he 9as still o 'oo4 ter*s 9ith hi*# private respo 4e t allo9e4 the re'istratio o: the vehicle i petitio erKs a*e. 6t 9as also their u 4ersta 4i ' that he 9oul4 5eep the va :or hi*sel: because C1& 6 4ustries 9as ot i a positio to pa" hi*. 8e ce# :ro* the ti*e o: thepurchase# he ha4 bee i possessio o: the vehicle i clu4i ' the ori'i al re'istratio papers thereo:# but allo9i ' petitio er :ro* ti*e to ti*e to use the va :or 4eliveries o: *achi er". A:ter heari '# the trial court :ou 4 :or private respo 4e t. .i 4i ' o *erit i the appeal# the respo 4e t Court o: Appeals a::ir*e4 the 4ecisio o: the trial court. ISSUE* FO3 the Certi:icate o: Re'istratio o: the subDect *otor vehicle is proo: o: o9 ership b" the petitio er<appella tP !ACTS* HELD* A certi:icate o: re'istratio o: a *otor vehicle i o eKs a*e i 4ee4 creates a stro ' presu*ptio o: o9 ership. .or all practical purposes# the perso i 9hose :avor it has bee issue4 is virtuall" the o9 er thereo: u less prove4 other9ise. 6 other 9or4s# such presu*ptio is rebuttable b" co*pete t proo:. &he 3e9 Civil Co4e reco' i,es cases o: i*plie4 trust other tha those e u*erate4 therei . &hus# althou'h o speci:ic provisio coul4 be cite4 to appl" to the parties herei # it is u 4e iable that a i*plie4 trust 9as create4 9he the certi:icate o: re'istratio o: the *otor vehicle 9as place4 i the a*e o: the petitio er althou'h the price thereo: 9as ot pai4 b" hi* but b" private respo 4e t. &he pri ciple that a trustee 9ho puts a certi:icate o: re'istratio i his a*e ca ot repu4iate the trust b" rel"i ' o the re'istratio is o e o: the 9ell<5 o9 li*itatio s upo a title. A trust# 9hich 4erives its stre 'th :ro* ARAFAG HABANA JALAYAJAY &his case co cer s a rather lar'e tract o: la 4 situate4 i 8i i'ara # 3e'ros Occi4e tal. &he la 4# 5 o9 as 1ot )1)# 9as ori'i all" o9 e4 b" t9o co< o9 ers i eCual shares> =1@ ,a!imo 8"anico # *arrie4 to Rosa +e'ato# a 4 =2@ ,atilde 9eolin+o # *arrie4 to 2io isio Mo 'cal. &heir co<o9 ership 9as so set out i their certi:icate o: title. Maxi*o !ua ico 4ie4 o Ma" 21# 1/%2# survive4 b" his 9i:e# the a:ore a*e4 Rosa +e'ato# a 4 three =3@ *i or chil4re > Prese tacio # Resurreccio # a 4 Catali a. &he other co<o9 er# Matil4e +eoli 'o# a 4 her husba 4# 2io isio Mo 'cal# also 4ie4L a 4 their o l" chil4# 1oreto Mo 'cal# execute4 a a::i4avit a4Du4icati ' to hersel:# as sole heir# her *otherKs o e<hal: =1Q2@ share i 1ot )1). &hat share she sol4 o 2ece*ber 1%# 1/51 to Rosa +ica o. 6 virtue thereo:# &C& o: the ori'i al co< o9 ers 9as ca celle4 a 4 a e9 o e 9as issue4 i the a*es o: =1@ ,a!imo 8"anico # *arrie4 to Rosa GICANO "S GEGATO theco :i4e ce o e reposes o a other especiall" bet9ee brothers# 4oes ot lose that character si*pl" because o: 9hat appears i a le'al 4ocu*e t. F8ERE.ORE# the i sta t petitio :or revie9 is hereb" 2E36E2.

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Civil Law Review 2 2013 - 2014 +e'ato =1Q2 share@ a 4 =2@ 'osa 9icano # *arrie4 to +or'o io +eolle'ue =1Q2 share@. O Au'ust 23# 1/52# a 4ocu*e t 9as execute4 9hich 'ave rise to the co trovers" at bar. &hat 4ocu*e t purporte4 to be a 2ee4 o: Sale# or *ore properl"# a 4ee4 o: dacion en pa+o de de"da # i te 4e4 to satis:" a 4ebt o: P2#333.33 o: the late Maxi*o !ua ico to Rosa +ica o b" the co ve"a ce o: sai4 Maxi*o !ua icoKs o e<hal: =1Q2@ share i 1ot )1). &9e t"<three =23@ "ears a:ter9ar4s# or o .ebruar" 13# 1/7(# Rosa +e'ato a 4 her 4au'hters# Resurreccio a 4 Catali a# brou'ht a actio i the Court o: .irst 6 sta ce o: 3e'ros Occi4e tal a'ai st Rosa +ica o a 4 her husba 4# +or'o io +eolle'ue# to co*pel the latter to reco ve" 1ot 3o. )1) to the* a 4Qor pa" 4a*a'es. Rosa +e'ato a 4 her 4au'hters alle'e4 that it ha4 ever bee their i te tio to tra s:er the e tire o e<hal: =1Q2@ share i 1ot 3o. )1) to Rosa +ica o i pa"*e t o: Maxi*o !ua icoKs 4ebt i the su* o: P2#333.33# but only one/third of the share of the minors in said "ndivided half o: the propert"L that the" 4iscovere4 the :rau4 perpetrate4 o the* o l" i 1/75# 9he the" hire4 a surve"or to partitio the propert" a 4 the latter i :or*e4 the* that title to 1ot 3o. )1) ha4 lo ' si ce issue4 solel" i the a*e o: 3e ita +eolle'ue# 9ho ha4 purchase4 it :ro* her *other# Rosa +e'ato +eolle'ue a 4 ha4 i 4ue course obtai e4 title i her a*eL a 4 that o October 17# 1/7%# sai4 3e ita +eolle'ue ha4 *ort'a'e4 the lot to the Philippi e Co**ercial a 4 6 4ustrial 0a 5 as securit" :or a loa . Rosa +ica o a 4 her co<4e:e 4a ts :ile4 a *otio to 4is*iss the co*plai t alle'i ' as 'rou 4s there:or# plai ti::sK lac5 o: cause o: actio # laches# estoppel# a 4 prescriptio . &he &rial Court pro*ul'ate4 a Or4er 4is*issi ' the co*plai t. &he &rial CourtKs Or4er 9as ho9ever reverse4 b" the Court o: Appeals a 4 the case 9as re*a 4e4 9ith i structio s that a :ull 4ress trial o the *erits be co 4ucte4. ISSUE* FO3 4is*issal o: the case 9as properP HELD* 6 the case at bar# Rosa +e'ato a 4 her *i or chil4re b" her 4ecease4 husba 4# Maxi*o !ua ico =sai4 chil4re bei ' represe te4 b" their Du4icial 'uar4ia # Ra*u 4o Pu 4o @ ha4 execute4 a 4ee4 o: sale a 4 ac5 o9le4'e4 it be:ore a otar" public 9hich# upo its :ace# tra s:erre4 the e tiret" o: Maxi*o !ua icoKs ri'ht# share a 4 i terest i 1ot 1)1 to Rosa ARAFAG HABANA JALAYAJAY +ica o. 3o9# i: it be true that the" 9ere 4eceive4 i to executi ' that 4ee4 o: sale b" Rosa +ica o# 9ho ta5i ' a4va ta'e o: their i' ora ce ha4 *a4e the* believe that the 4ee4 co ve"e4 o l" 1Q3 o: the chil4re Ks share i their i herita ce :ro* their :ather# the" certai l" ha4 the ri'ht to sue Rosa +ica o# a 4 a:ter prese ti ' evi4e ce o: the :rau4 perpetrate4 upo the*# recover so *uch o: the propert" as the" ha4 ever i te 4e4 to tra s:er# a 4 recover the 4a*a'es thereb" su::ere4 b" the*. 0ut the" certai l" 4i4 ot have all the ti*e i the 9orl4 to that suit. &he" ha4 to 4o it 9ithi te =1$@ "ears :ro* the issua ce to Rosa +ica o o: title to the propert" o the stre 'th o: the suppose4l" :rau4ule t 4ee4 o: sale. &he" 4i4 ot :ile their actio 9ithi this statutor" perio4. &he" :ile4 it o l" a:ter t9e t"<three =23@ "ears. Fhe :ile4# their actio ha4 alrea4" bee b" prescriptio . &he" ha4 slept o their ri'hts. &i*e ero4e4 their ri'ht o: actio a 4 ulti*atel" erase4 it# as a sa 4 castle o a shore is slo9l" a 4 i exorabl" obliterate4 b" the risi ' ti4e. F8ERE.ORE# the 2ecisio Appeals is RE-ERSE2. o: the Court o:

SPS% CRU4 "S% SPS% !ERNANDO D757>872 9$ 2005 !ACTS* 1uis -. Cru, a 4 Ai4a Cru, =petitio ers@ are occupa ts o: the :ro t portio o: a propert" locate4 i 0ulaca . Spouses AleDa 4ro .er a 4o# Sr. a 4 Rita .er a 4o =respo 4e ts@ :ile4 be:ore the R&C a co*plai t :or accio publicia a a'ai st petitio ers# 4e*a 4i ' the latter to vacate the pre*ises a 4 to pa" the a*ou t o: P5$$.$$ a *o th as reaso able re tal :or the use thereo:. Respo 4e ts alle'e4 i their co*plai t that> =1@ the" are o9 ers o: the propert"# havi ' bou'ht the sa*e :ro* the spouses Clo4ual4o a 4 &eresita +lorioso =+loriosos@L =2@ prior to their acCuisitio o: the propert"# the +loriosos o::ere4 to sell to petitio ers the rear portio o: the propert" but the tra sactio 4i4 ot *ateriali,e 4ue to petitio ers7 :ailure to exercise their optio L =3@ the o::er to sell is e*bo4ie4 i a ;asu 4ua L =%@ 4ue to petitio ers7 :ailure to bu" the allotte4 portio # respo 4e ts bou'ht the 9hole propert" :ro* the +loriososL a 4 =5@ 4espite repeate4 4e*a 4s# petitio ers re:use4 to vacate the propert". &he R&C rule4 i .er a 4o. :avor o: the spouses

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Civil Law Review 2 2013 - 2014 co :ir*s the co clusio that it is a co tract to sell. &his is because the *a er o: pa"*e t o: the purchase price is a esse tial ele*e t be:ore a vali4 a 4 bi 4i ' co tract o: sale ca exist. Althou'h the Civil Co4e 4oes ot expressl" state that the *i 4s o: the parties *ust also *eet o the ter*s or *a er o: pa"*e t o: the price# the sa*e is ee4e4# other9ise there is o sale. As hel4 i &o"ota Sha9# 6 c. vs. Court o: Appeals# a 4e:i ite a'ree*e t o the *a er o: pa"*e t o: the price is a esse tial ele*e t i the :or*atio o: a bi 4i ' a 4 e :orceable co tract o: sale. SPOUSES PINGOL "S% CA '() HEIRS O! !RANCISCO DONASCO 226 SCRA 118 !ACTS* 6 1/(/# Pi 'ol# the o9 er o: a lot =1ot 3o. 3223@ i Calooca Cit"# execute4 a 2EE2 O. A0SO1E&E SA1E O. O3E<8A1. O. A3 E326-62E2 POR&6O3 O. ShisT PARCE1 O. 1A32 i :avor o: 2o asco =private respo 4e t@# pa"able i ( "ears. 6 1/)%# 2o asco 4ie4 a 4 9as o l" able to pa" P)#3(/ plus P2#$$$ 4o9 pa"*e t# leavi ' a bala ce o: P1$#1(1. &he heirs o: 2o asco re*ai e4 i possessio o: such lot a 4 o::ere4 to settle the bala ce 9ith Pi 'ol. 8o9ever# Pi 'ol re:use4 to accept the o::er a 4 4e*a 4e4 a lar'er a*ou t. &hus# the heirs o: 2o asco :ile4 a actio :or speci:ic per:or*a ce =9ith Pra"er :or Frit o: Preli*. 6 Du ctio # because Pi 'ol 9ere e croachi ' upo 2o asco7s lot@. Pi 'ol averre4 that the sale a 4 tra s:er o: title 9as co 4itio al upo the :ull pa"*e t o: 2o asco =co tract to sell# ot co tract o: sale@. Fith 2o asco7s breach o: the co tract i 1/7( a 4 4eath i 1/)%# the sale 9as 4ee*e4 ca celle4# a 4 the heirs7 co ti uous occupa c" 9as o l" bei ' tolerate4 b" Pi 'ol. ISSUES* =1@ Fhether or ot Pi 'ol ca re:use to tra s:er title to 2o ascoP =2@ Fhether or Cuiet titleP HELD* =1@ 3o. &he co tract bet9ee Pi 'ol a 4 2o asco is a co tract o: sale a 4 ot a co tract to sell. &he acts o: the parties# co te*pora eous a 4 subseCue t to the co tract# clearl" sho9 that the parties i te 4e4 a absolute 4ee4 o: saleL the o9 ership o: the lot 9as tra s:erre4 to the 2o asco upo its actual =upo 2o asco7s possessio a 4 co structio o: the house@ Page 136 ot 2o asco has the ri'ht to

ISSUE* Fhether the =;asu 4ua @ bet9ee the parties 9as a O*ere o::er to sell#I a 4 ot a per:ecte4 OCo tract o: Purchase a 4 SaleIP HELD* E 4er Article 1%5) o: the Civil Co4e# a co tract o: sale is a co tract b" 9hich o e o: the co tracti ' parties obli'ates hi*sel: to tra s:er the o9 ership a 4 to 4eliver a 4eter*i ate thi '# a 4 the other to pa" there:ore a price certai i *o e" or its eCuivale t. Article 1%75 o: the Co4e :urther provi4es that the co tract o: sale is per:ecte4 at the *o*e t there is *eeti ' o: the *i 4s upo the thi ' 9hich is the obDect o: the co tract a 4 upo the price. .ro* that *o*e t the parties *a" reciprocall" 4e*a 4 per:or*a ce subDect to the provisio s o: the la9 'over i ' the :or* o: co tracts. 6 a co tract o: sale# the title to the propert" passes to the ve 4ee upo the 4eliver" o: the thi ' sol4# as 4isti 'uishe4 :ro* a co tract to sell 9here o9 ership is# b" a'ree*e t# reserve4 i the ve 4or a 4 is ot to pass to the ve 4ee u til :ull pa"*e t o: the purchase price. Other9ise state4# i a co tract o: sale# the ve 4or loses o9 ership over the propert" a 4 ca ot recover it u til a 4 u less the co tract is resolve4 or resci 4e4L 9hereas# i a co tract to sell# title is retai e4 b" the ve 4or u til :ull pa"*e t o: the price. 6 the latter co tract# pa"*e t o: the price is a positive suspe sive co 4itio # :ailure o: 9hich is ot a breach but a eve t that preve ts the obli'atio o: the ve 4or to co ve" title :ro* beco*i ' e::ective. &he ;asu 4ua provi4es :or the :ollo9i ' ter*s a 4 co 4itio s> =a@ that the +loriosos a'ree4 to sell to petitio ers a portio o: the propert" 9ith a area o: 213 *eters at the price o: P%$.$$ per sCuare *eterL =b@ that i the title that 9ill be cause4 to be issue4# the a''re'ate area is 223 sCuare *eters 9ith 1$ *eters thereo: servi ' as ri'ht o: 9a"L =c@ that the ri'ht o: 9a" shall have a 9i4th o: 1.75 *eters :ro* 1ope, !ae a roa4 'oi ' to9ar4s the bac5 o: the lot 9here petitio ers 9ill buil4 their house o the portio o: the lot that the" 9ill bu"L =4@ that the expe ses :or the surve" a 4 :or the issua ce o: the title 9ill be 4ivi4e4 bet9ee the parties 9ith each part" 'ivi ' a a*ou t o: o less tha P%$$.$$L a 4 =e@ that petitio ers 9ill 4e:i itel" relocate their house to the portio the" bou'ht or 9ill bu" b" !a uar" 31# 1/)%. &he :ore'oi ' ter*s a 4 co 4itio s sho9 that it is a co tract to sell a 4 ot a co tract o: sale. .or o e# the co spicuous abse ce o: a 4e:i ite *a er o: pa"*e t o: the purchase price i the a'ree*e t ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 a 4 co structive 4eliver" =upo executio o: the co tract@. &he 4eliver" o: the lot 4iveste4 Pi 'ol o: his o9 ership a 4 he ca ot recover the title u less the co tract is resolve4 or resci 4e4 u 4er Art. 15/2 o: 3CC. 6t states that the ve 4ee *a" pa" eve a:ter the expiratio o: the perio4 stipulate4 as lo ' as o 4e*a 4 :or rescissio has bee *a4e upo hi* either Du4iciall" or b" otarial act. Pi 'ol either 4i4 so. 8e ce# 2o asco has eCuitable title over the propert". =2@ Althou'h the co*plai t :ile4 b" the 2o ascos 9as a actio :or speci:ic per:or*a ce# it 9as actuall" a actio to Cuiet title. A clou4 has bee cast o the title# si ce 4espite the :act that the title ha4 bee tra s:erre4 to the* b" the executio o: the 4ee4 o: sale a 4 the 4eliver" o: the obDect o: the co tract# Pi 'ol a4a*a tl" re:use4 to accept the pa"*e t b" 2o ascos a 4 i siste4 that the" o lo 'er ha4 the obli'atio to tra s:er the title. 2o asco# 9ho ha4 *a4e partial pa"*e ts a 4 i*prove*e ts upo the propert"# is e title4 to bri ' suit to clear his title a'ai st Pi 'ol 9ho re:use4 to tra s:er title to hi*. 6t is ot ecessar" that 2o asco shoul4 have a absolute title# a eCuitable title bei ' su::icie t to clothe hi* 9ith perso alit" to bri ' a actio to Cuiet title. Prescriptio ca ot also be i vo5e4 a'ai st the 2o ascos because a actio to Cuiet title to propert" i O3E7s POSSESS6O3 is i*prescriptible. !ALLO* 2ecisio appeale4 :ro* 9as A..6RME2 b" SC. "DA% DE PORTUGAL "S% IAC '() HUGO PORTUGAL G%R% N,% 73564 '256 25$ 1988 !ACTS* Petitio er Cor elia Cla or a 4 her late husba 4 Pascual Portu'al 9ere the o9 ers o: the parcels o: la 4 locate4 i Cavite. So*eti*e i 1/(7# Private respo 4 8u'o Portu'al# a so o: the spouses# borro9e4 :ro* his *other# Cor elia# the Certi:icates o: title o pretext that he ha4 to use the* i securi ' a loa that he 9as e'otiati '. Cor elia 4elivere4 the t9o titles to her so . Fhe Pascual Portu'al 4ie4 i 1/7%# the other heirs :or purposes o: executi ' a extra Du4icial partitio o: the properties 9ishe4 to have all the properties o: the spouses collate4. Cor elia the as5e4 8u'o :or the retur o: the titles ho9ever# 8u'o *a i:este4 that the sai4 titles o lo 'er exist that the titles are alrea4" tra s:erre4 a 4 re'istere4 i his brother7s a*e\E*ilio Portu'al. &his :alsi:icatio 9as tri''ere4 b" a 4ee4 o: sale b" 9hich the spouses Pascual Portu'al a 4 Cor elia Cla or purporte4l" sol4 :or P)#$$$.$$ the t9o parcels o: la 4 a4verte4 to earlier to their t9o so s# 8u'o a 4 ARAFAG HABANA JALAYAJAY E*ilia o. Co :ro te4 b" his *other o: this :rau4# E*ilia o 4e ie4 a " participatio . A 4 to sho9 his 'oo4 :aith# E*ilia o cause4 the reco ve"a ce o: the other a 4 9hich 9as co ve"e4 to hi* i the voi4 4ee4 o: sale. 8u'o# o the other ha 4# re:use4 to *a5e the ecessar" restitutio thus co*pelli ' the petitio ers# his *other a 4 his other brothers a 4 sisters# to i stitute a actio :or the a ul*e t o: the co troversial 4ee4 o: sale a 4 the reco ve"a ce o: the title. R&C rule4 i :avor o: Cor elia a 4 4eclares the 4ee4s i operative. Appellate court reverse4 sai4 4ecisio . ISSUE* Fhether the sale is voi4 ab i itioP HELD* Fe :i 4 the petitio *eritorious. &he case at bar is ot purel" a actio :or reco ve"a ce base4 o a i*plie4 or co structive trust. 3either is it o e :or the a ull*e t o: a :rau4ule t co tract. A closer scruti " o: the recor4s o: the case rea4il" supports a :i 4i ' that :rau4 a 4 *ista5e are ot the o l" vices prese t i the assaile4 co tract o: sale as hel4 b" the trial court. More tha these# the alle'e4 co tract o: sale is vitiate4 b" the total abse ce o: a vali4 cause or co si4eratio . &he petitio ers i their co*plai t# assert that the"# particularl" Cor elia# ever 5 e9 o: the existe ce o: the Cuestio e4 4ee4 o: sale. &he" clai* that the" ca*e to 5 o9 o: the suppose4 sale o l" a:ter the private respo 4e t# upo their repeate4 e treaties to pro4uce a 4 retur the o9 erKs 4uplicate cop" o: the tra s:er certi:icate o: title coveri ' the t9o parcels o: la 4# sho9e4 to the* the co troversial 4ee4. A 4 their clai* 9as i**easurabl" bolstere4 9he the private respo 4e tKs co<4e:e 4a t belo9# his brother E*ilia o Portu'al# 9ho 9as alle'e4l" his co<ve 4ee i the tra sactio # 4isclai*e4 a " 5 o9le4'e or participatio therei . 6: this is so# a 4 this is ot co tra4icte4 b" the 4ecisio s o: the courts belo9# the i evitable i*plicatio o: the alle'atio s is that co trar" to the recitals :ou 4 i the assaile4 4ee4# o co si4eratio 9as ever pai4 at all b" the private respo 4e t. Appl"i ' the provisio s o: Articles 135$# 1352# a 4 1%$/ o: the e9 Civil Co4e i relatio to the i 4ispe sable reCuisite o: a vali4 cause or co si4eratio i a " co tract# a 4 9hat co stitutes a voi4 or i existe t co tract# 9e rule that the 4ispute4 4ee4 o: sale is voi4 ab i itio or i existe t# ot *erel" voi4able. A 4 it is provi4e4 i Article 1%1$ o: the Civil Co4e# that K=&@he actio or 4e:e se :or the 4eclaratio o: the i existe ce o: a co tract 4oes ot prescribe.

Page 137

Civil Law Review 2 2013 - 2014 0ut eve i: the actio o: the petitio ers is :or reco ve"a ce o: the parcel o: la 4 base4 o a i*plie4 or co structive trust# still it has bee seaso abl" :ile4. .or as hereto:ore state4# it is o9 settle4 that actio s o: this ature prescribe i te "ears# the poi t o: re:ere ce bei ' the 4ate o: re'istratio o: the 4ee4 or the 4ate o: the issua ce o: the certi:icate o: tit6e over the propert". 6 this case# the petitio er co**e ce4 the i sta t actio :or reco ve"a ce i the trial court o October 2(# 1/7(# or less tha te "ears :ro* !a uar" 23# 1/(7 9he the 4ee4 o: sale 9as re'istere4 9ith the Re'ister o: 2ee4s. Clearl"# eve o this basis alo e# the prese t actio has ot "et prescribe4. !ALLO* Petitio 9as partl" 'ra te4. 0oth the trial a 4 appellate 4ecisio s# reverse4. SANCHE4 "S% RIGOS 45 SCRA 368 -.(7 1972 !ACTS* 6 a i stru*e t e title4 GOptio to Purchase#G execute4 o April 3# 1/(1# 4e:e 4a t<appella t Severi a Ri'os Ga'ree4# pro*ise4 a 4 co**itte4 ... to sellG to plai ti::<appellee 3icolas Sa che, :or the su* o: P1#51$.$$ 9ithi t9o =2@ "ears :ro* sai4 4ate# a parcel o: la 4 situate4 i the barrios o: Abar a 4 Sibot# Sa !ose# 3ueva EciDa. 6t 9as a'ree4 that sai4 optio shall be 4ee*e4 Gter*i ate4 a 4 elapse4#G i: OSa che, shall :ail to exercise his ri'ht to bu" the propert"G 9ithi the stipulate4 perio4. O March 12# 1/(3# Sa che, 4eposite4 the su* o: Pl#51$.$$ 9ith the C.6 o: 3ueva EciDa a 4 :ile4 a actio :or speci:ic per:or*a ce a 4 4a*a'es a'ai st Ri'os :or the latter7s re:usal to accept several te 4ers o: pa"*e t that Sa che, *a4e to purchase the subDect la 4. 2e:e 4a t Ri'os co te 4e4 that the co tract bet9ee the* 9as o l" Oa u ilateral pro*ise to sell# a 4 the sa*e bei ' u supporte4 b" a " valuable co si4eratio # b" :orce o: the 3e9 Civil Co4e# is ull a 4 voi4.G Plai ti:: Sa che,# o the other ha 4# alle'e4 i his co*plia t that# b" virtue o: the optio u 4er co si4eratio # G4e:e 4a t a'ree4 a 4 co**itte4 to sellG a 4 Gthe plai ti:: a'ree4 a 4 co**itte4 to bu"G the la 4 4escribe4 i the optio . &he lo9er court re 4ere4 Du4'*e t i :avor o: Sa che, a 4 or4ere4 Ri'os to accept the su* Sa che, Du4iciall" co si' e4# a 4 to execute i his :avor the reCuisite 4ee4 o: co ve"a ce. &he Court o: Appeals certi:ie4 the case at bar to the Supre*e Court :or it i volves a Cuestio purel" o: la9. ISSUE* Fas there a co tract to bu" a 4 sell bet9ee the parties or o l" a u ilateral pro*ise to sellP ARAFAG HABANA JALAYAJAY

HELD* &he Supre*e Court a::ir*e4 the lo9er court7s 4ecisio . &he i stru*e t execute4 i 1/(1 is ot a Gco tract to bu" a 4 sell#G but *erel" 'ra te4 plai ti:: a Goptio G to bu"# as i 4icate4 b" its o9 title GOptio to Purchase.G &he optio 4i4 ot i*pose upo plai ti:: Sa che, the obli'atio to purchase 4e:e 4a t Ri'osK propert". Ri'os Ga'ree4# pro*ise4 a 4 co**itte4G hersel: to sell the la 4 to Sa che, :or P1#51$.$$# but there is othi ' i the co tract to i 4icate that her a:ore*e tio e4 a'ree*e t# pro*ise a 4 u 4erta5i ' is supporte4 b" a co si4eratio G4isti ct :ro* the priceG stipulate4 :or the sale o: the la 4. &he lo9er court relie4 upo Article 135% o: the Civil Co4e 9he it presu*e4 the existe ce o: sai4 co si4eratio # but the sai4 Article o l" applies to co tracts i 'e eral. 8o9ever# it is ot Article 135% but the Article 1%7/ o: the sa*e Co4e 9hich is co trolli ' i the case at bar because the latter7s 2 4 para'raph re:ers to GsalesG i particular# a 4# *ore speci:icall"# to Ga accepte4 u ilateral pro*ise to bu" or to sell.G Si ce there *a" be o vali4 co tract 9ithout a cause or co si4eratio # the pro*isor is ot bou 4 b" his pro*ise a 4 *a"# accor4i 'l"# 9ith4ra9 it. Pe 4i ' otice o: its 9ith4ra9al# his accepte4 pro*ise parta5es# ho9ever# o: the ature o: a o::er to sell 9hich# i: accepte4# results i a per:ecte4 co tract o: sale. Epo *ature 4eliberatio # the Court reiterates the 4octri e lai4 4o9 i the At5i s case a 4 4ee*e4 aba 4o e4 or *o4i:ie4 the vie9 a4here4 to i the South9ester Co*pa " case. ENRICO S% EULOGIO "S% SPOUSES CLE ENTE APELES G%R% N,% 167884 -'(.'20 20$ 2009 !ACTS* &he real propert" i Cuestio co sists o: a house a 4 lot situate4 at 3o. )7 &i*o' Ave ue# Uue,o Cit" =subDect propert"@. 6 1/7/# the spouses Apeles lease4 the subDect propert" to Arturo Eulo'io =Arturo@# E rico7s :ather. Epo Arturo7s 4eath# his so E rico succee4e4 as lessor o: the subDect propert". E rico use4 the subDect propert" as his resi4e ce a 4 place o: busi ess. E rico 9as e 'a'e4 i the busi ess o: bu"i ' a 4 selli ' i*porte4 cars. O ( !a uar" 1/)7# the spouses Apeles a 4 E rico alle'e4l" e tere4 i to a Co tract o: 1ease 9ith Optio to Purchase i volvi ' the subDect propert". Accor4i ' to the sai4 lease co tract# 1u, Apeles 9as authori,e4 to e ter i to the sa*e as the attor e"<i <:act o: her husba 4# Cle*e te# pursua t to a Special Po9er Page 140

Civil Law Review 2 2013 - 2014 o: Attor e" execute4 b" the latter i :avor o: the :or*er o 2% !a uar" 1/7/. &he co tract purporte4l" a::or4e4 E rico# be:ore the expiratio o: the three<"ear lease perio4# the optio to purchase the subDect propert" :or a price ot excee4i ' P1.5 Millio . 0e:ore the expiratio o: the three<"ear lease perio4 provi4e4 i the lease co tract# E rico exercise4 his optio to purchase the subDect propert" b" co**u icati ' verball" a 4 i 9riti ' to 1u, his 9illi ' ess to pa" the a'ree4 purchase price# but the spouses Apeles suppose4l" i' ore4 E rico7s *a i:estatio . &he R&C re 4ere4 a 2ecisio i :avor o: E rico. O appeal# the CA reverse4 the rtc 4ecisio . ISSUE* Fhether the Co tract o: 1ease 9ith Optio purchase shoul4 be uphel4P HELD* A optio is a co tract b" 9hich the o9 er o: the propert" a'rees 9ith a other perso that the latter shall have the ri'ht to bu" the :or*er7s propert" at a :ixe4 price 9ithi a certai ti*e. 6t is a co 4itio o::ere4 or co tract b" 9hich the o9 er stipulates 9ith a other that the latter shall have the ri'ht to bu" the propert" at a :ixe4 price 9ithi a certai ti*e# or u 4er# or i co*plia ce 9ith certai ter*s a 4 co 4itio sL or 9hich 'ives to the o9 er o: the propert" the ri'ht to sell or 4e*a 4 a sale. A optio is ot o: itsel: a purchase# but *erel" secures the privile'e to bu". 6t is ot a sale o: propert" but a sale o: the ri'ht to purchase. 6t is si*pl" a co tract b" 9hich the o9 er o: the propert" a'rees 9ith a other perso that he shall have the ri'ht to bu" his propert" at a :ixe4 price 9ithi a certai ti*e. 8e 4oes ot sell his la 4L he 4oes ot the a'ree to sell itL but he 4oes sell so*ethi '# i.e.# the ri'ht or privile'e to bu" at the electio or optio o: the other part". 6ts 4isti 'uishi ' characteristic is that it i*poses o bi 4i ' obli'atio o the perso hol4i ' the optio # asi4e :ro* the co si4eratio :or the o::er. 6t is also so*eti*es calle4 a Ou accepte4 o::erI a 4 is sa ctio e4 b" Article 1%7/ o: the Civil Co4e>
Art. 1%7/. A pro*ise to bu" a 4 sell a 4eter*i ate thi ' :or a price certai is reciprocall" 4e*a 4able. A accepte4 u ilateral pro*ise to bu" or to sell a 4eter*i ate thi ' :or a price certai is bi 4i ' upo the pro*issor i: the pro*ise is supporte4 b" a co si4eratio 4isti ct :ro* the price.

&he seco 4 para'raph o: Article 1%7/ provi4es :or the 4e:i itio a 4 co seCue t ri'hts a 4 obli'atio s u 4er a optio co tract. .or a optio co tract to be vali4 a 4 e :orceable a'ai st the pro*issor# there *ust be a separate a 4 4isti ct co si4eratio that supports it. Fe have pai sta5i 'l" exa*i e4 the Co tract o: 1ease 9ith Optio to Purchase# as 9ell as the plea4i 's sub*itte4 b" the parties# a 4 their testi*o ies i ope court# :or a " 4irect evi4e ce or evi4e ce aliu 4e to prove the existe ce o: co si4eratio :or the optio co tract# but 9e have :ou 4 o e. &he o l" co si4eratio a'ree4 upo b" the parties i the sai4 Co tract is the suppose4 purchase price :or the subDect propert" i the a*ou t ot excee4i ' P1.5 Millio # 9hich coul4 ot be 4ee*e4 to be the sa*e co si4eratio :or the optio co tract si ce the la9 a 4 Durispru4e ce explicitl" 4ictate that :or the optio co tract to be vali4# it *ust be supporte4 b" a co si4eratio separate a 4 4isti ct :ro* the price. 6 the prese t case# it is i 4ubitable that o co si4eratio 9as 'ive b" E rico to the spouses Apeles :or the optio co tract. &he abse ce o: *o etar" or a " *aterial co si4eratio 5eeps this Court :ro* e :orci ' the ri'hts o: the parties u 4er sai4 optio co tract. !ALLO* Petitio is 2E36E2. SPOUSES ROSARIO "S% PCI LEASING AND !INANCE$ INC%$ G%R% N,% 139233$ N,A7>872 11$ 2005 !ACTS* O April 1)# 1//%# the spouses Rosario purchase4 a 6su,u El: Pic5<up Etilit" vehicle :ro* CarMercha ts# 6 c. &he tra sactio 9as covere4 b" a Purchase A'ree*e t 9hereb" the spouses u 4ertoo5 to *a5e a 4o9 pa"*e t o: P1/$#$$$.$$ o: the total purchase price o: P3)$#$$$.$$. &he spouses the applie4 :or a loa 9ith PC6 1easi ' to pa" :or the bala ce o: P1/$#$$$.$$. Epo approval o: their loa applicatio # the spouses Rosario execute4 a pro*isor" ote a 4 u 4ertoo5 to pa" the loa o *o thl" i stall*e t. &o secure the pa"*e t o: the loa # the" execute4 a chattel *ort'a'e i :avor o: PC6 over the 6su,u pic5<up. &he *otor vehicle 9as the 4elivere4 to the spouses a 4 9as re'istere4 i their a*es. 2espite 4e*a 4s# the spouses Rosario :aile4 to pa" the a*orti,atio s o their loa pro*pti ' PC6 to :ile a co*plai t :or OSu* o: Mo e" 9ith 2a*a'es 9ith a Pra"er :or a Frit o: Replevi I 9hich 9as 'ra te4 b" the court. Page 141

to

ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 pra"er :or a 9rit o: replevi base4 o the pro*issor" ote a 4 the chattel *ort'a'e execute4 b" the petitio ers i its :avor. Eve assu*i ' that the respo 4e t is the assi' ee o: CarMercha ts# 6 c. a 4 that Article 1%)% o: the 3e9 Civil Co4e is applicable# it is ot proscribe4 :ro* sui ' the petitio ers :or their u pai4 bala ce. &he :act o: the *atter is that the respo 4e t 4i4 ot :oreclose the chattel *ort'a'e# but opte4 to sue the petitio ers :or the bala ce o: their accou t u 4er the pro*issor" ote# 9ith a plea :or a 9rit o: replevi . 0" securi ' a 9rit o: replevi # the respo 4e t 4i4 ot thereb" :oreclose the chattel *ort'a'e. !ALLO* Petitio PAR&6A11B +RA3&E2. CA 4ecisio A..6RME2 9ith *o4i:icatio s. PAGTALUNAN "S% "DA% DE AN4ANO G%R% N,% 147695 S7<=7>872 13$ 2007 !ACTS* 2. Fhether the provisio s o: Art.1%)% o: the CC applies to the case at barP HELD* &here is o :actual basis :or the petitio ers7 clai* that CarMercha ts# 6 c. ha4 assi' e4 its ri'hts to collect the bala ce o: the purchase price to the respo 4e t. &he :act o: the *atter is that the petitio ers a4*itte4 i their petitio at be ch that the" 9ere 4eclare4 i 4e:ault a 4 :aile4 to prove such clai*. &he evi4e ce o recor4 clearl" sho9s that the petitio ers secure4 a loa :ro* the respo 4e t to pa" the P1/$#$$$.$$ bala ce to CarMercha ts# 6 c.# a 4 eve execute4 a pro*issor" ote evi4e ci ' their loa i :avor o: the respo 4e t. &he petitio ers :orth9ith execute4 a chattel *ort'a'e i :avor o: the respo 4e t over the vehicle as securit" :or the pa"*e t o: their loa a 4 the i terests thereo . 6t bears stressi ' that# u 4er Article 1(25 o: the 3e9 Civil Co4e# a assi' *e t o: cre4it# ri'ht or actio *ust appear i a public 4ocu*e t to bi 4 thir4 perso s. &here is o evi4e ce o recor4 to prove that Car Mercha ts# 6 c. execute4 such a 4ee4# assi' i ' its ri'ht to collect the bala ce o: the purchase price o: the vehicle :ro* the petitio ersL he ce# Article 1%)% o: the 3e9 Civil Co4e 4oes ot appl" i this case. Eve a cursor" rea4i ' o: the respo 4e t7s co*plai t i the R&C 9ill rea4il" sho9 that the respo 4e t 4i4 ot alle'e that it 9as the assi' ee o: CarMercha ts# 6 c. i so:ar as the ri'ht to collect the bala ce o: the purchase price o: the vehicle :ro* the petitio ers 9as co cer e4. 3either 4i4 the respo 4e t a44uce a " evi4e ce that it 9as such assi' ee. &he respo 4e t sue4 the petitio ers :or su* o: *o e" 9ith ARAFAG HABANA JALAYAJAY Patricio Pa'talu a e tere4 i to a Co tract to Sell 9ith private respo 4e t Ma ,a o over a house a 4 lot :or P17;# to be pai4 i i stall*e ts. P15$$ as 4o9 pa"*e t upo executio o: the Co tract P15$ as eCual *o thl" i stall*e ts u til the :ull price is pai4. &he co tract provi4es that i case o: 4e:ault i the pa"*e t o: a " o: the i stall*e ts :or /$ 4a"s a:ter its 4ue 4ate# the co tract 9oul4 be auto*aticall" resci 4e4 9ithout ee4 o: Du4icial 4eclaratio # a 4 that all pa"*e ts *a4e a 4 all i*prove*e ts 4o e o the pre*ises b" respo 4e t 9oul4 be co si4ere4 as re tals :or the use a 4 occupatio o: the propert" or pa"*e t :or 4a*a'es su::ere4# a 4 respo 4e t 9as obli'e4 to peace:ull" vacate the pre*ises a 4 4eliver the possessio thereo: to the ve 4or. Ma ,a o pai4 o l" P12#/5$. She alle'e4l" stoppe4 pa"i ' a:ter 2ece*ber 1/7/ 9ithout a " Dusti:icatio or expla atio . Pa'talu a asserte4 that 9he respo 4e t cease4 pa"i ' her i stall*e ts# her status o: bu"er 9as auto*aticall" tra s:or*e4 to that o: a lessee. &here:ore# she co ti ue4 to possess the propert" b" *ere tolera ce o: Patricio a 4# subseCue tl"# o: petitio er. Pa'talu a issue4 a 4e*a 4 letter :or Ma ,a o to vacate the pre*ises o: the propert". ISSUE* Fhether Pa'talu a *a" vali4l" resci 4 the co tract to sell o accou t that the Ma ,a o stoppe4 pa"i ' the i stall*e tsP Page 142

6 their A s9er to the co*plai t# the spouses Rosario alle'e4 that the chattel *ort'a'e the" execute4 i :avor o: PC6 1easi ' coveri ' the *otor vehicle 9as i e::ect a co tract o: sale o: perso al propert"# pa"able i i stall*e ts to be 'over e4 b" Article 1%)%S13T o: the 3e9 Civil Co4e o: the Philippi es. &he" :urther alle'e4 that si ce PC6 1easi ' opte4 to :oreclose the chattel *ort'a'e# it 9as estoppe4 :ro* collecti ' the bala ce o: their accou t u 4er the pro*issor" ote a 4 chattel *ort'a'e. R&C re 4ere4 Du4'*e t i :avor o: PC6. &he" 9e t o appeal but the CA 4is*isse4 the sa*e. ISSUE* 1. Fhether PC6 =as a assi' ee o: Car Merch ats# 6 c.@ is proscribe :ro* collecti ' the bala ce o: the purchase price o: the vehicleP

Civil Law Review 2 2013 - 2014 *ort'a'e i 4ebte4 ess# he applie4 :or a 4 :urther obtai e4 a 4e:icie c" Du4'*e t. HELD* 3O# the rescissio *ust be otarial. &he a'ree*e t coul4 ot be auto*aticall" resci 4e4 si ce there 9as 4eliver" to the bu"er. A Du4icial 4eter*i atio o: rescissio *ust be secure4 b" petitio er as a co 4itio prece4e t to co vert the possessio 4e :acto o: respo 4e t :ro* la9:ul to u la9:ul. R.A 3o. (552# 9hich 'over s sales o: real estate o i stall*e t# is applicable i the resolutio o: this case. 3o9# it is i cu*be t upo petitio er to prove that the Co tract to Sell ha4 bee ca celle4 i accor4a ce 9ith R.A. 3o. (552. R.A. 3o. (552# 9hich reCuires a otarial act o: rescissio a 4 the re:u 4 to the bu"er o: the :ull pa"*e t o: the cash surre 4er value o: the pa"*e ts o the propert". &here bei ' o vali4 ca cellatio o: the Co tract to Sell# Ma ,a o has the ri'ht to co ti ue occup"i ' the propert" subDect o: the Co tract to Sell a 4 the 4is*issal o: the u la9:ul 4etai er case 9as proper. 0ut co si4eri ' that the Co tract to Sell 9as ot ca celle4 b" the ve 4or vali4l" i accor4a ce 9ith R.A. 3o. (552 a 4 a:ter 22 "ears o: co ti uous possessio o: the propert"# it is o l" ri'ht a 4 Dust to allo9 respo 4e t to pa" her arrears a 4 settle the bala ce o: the purchase price# subDect to i terests. !ORNILDA "S% RTC G%R% N,% 72306 O5=,872 6$ 1988 !ACTS* &he Co troverte4 Parcels o: la 4 9ere part o: the estate o: the late !ulioM. Catolos subDect o: i testate estate procee4i 's# 9herei Respo 4e t A*o o" acte4 as cou sel :or so*e o: the heirs :ro*1/5/ u til 1/() b" his o9 a4*issio . &hese properties 9ere a4Du4icate4 to Al:o so .or il4a a 4 Asu cio M. Pasa*ba i the ProDect o: Partitio approve4 b" the Court o 12 !a uar" 1/(5. O 2$ !a uar" 1/(5# or o l" ei'ht =)@ 4a"s therea:ter# a 4 9hile he 9as still i terve i ' i the case as cou sel# these properties 9ere *ort'a'e4 b" petitio ersK pre4ecessor<i <i terest to Respo 4e t A*o o" to secure pa"*e t o: the latterKs attor e"7s :ees i the a*ou t o: P27#($$.$$. Si ce the *ort'a'e i 4ebte4 ess 9as ot pai4# Respo 4e t A*o o" i stitute4 a actio :or Du4icial :oreclosure o: *ort'a'e o 21 !a uar" 1/7$. &he *ort'a'e 9as subseCue tl" or4ere4 :oreclose4 a 4 auctio sale :ollo9e4 9here Respo 4e t A*o o" 9as the sole bi44er :orP23#($$.$$. 0ei ' short o: the ARAFAG HABANA JALAYAJAY ISSUE* Fhether the *ort'a'e co stitute4 o the Co troverte4 Parcels i :avor o: Respo 4e t A*o o" co*es 9ithi the scope o: the prohibitio i Article 1%/1 o: the Civil Co4eP HELD* BES. &he perti e t portio s o: the sai4 Articles rea4>
Art. 1%/1.&he :ollo9i ' perso s ca ot acCuire b" purchase eve at a public or Du4icial or auctio # either i perso or throu'h the *e4iatio o: a other> xxx xxx xxx =5@ !ustices# Du4'es# prosecuti ' attor e"s# ... the propert" a 4 ri'hts i liti'atio or levie4 upo o executio be:ore the court 9ithi 9hose Du ctio or territor" the" exercise their respective :u ctio sL this prohibitio i clu4es the act o: acCuitti ' b" assi' *e t a 4 shall appl" to la9"ers 9ith respect to the propert" a 4 ri'hts 9hich *a" be the obDect o: a " liti'atio i 9hich the" *a" ta5e part b" virtue o: their pro:essio

E 4er the a:ore Cuote4 provisio # a la9"er is prohibite4 :ro* acCuiri ' either b" purchase or assi' *e t the propert" or ri'hts i volve4 9hich are the obDect o: the liti'atio i 9hich the" i terve e b" virtue o: their pro:essio . &he prohibitio o purchase is all e*braci ' to i clu4e ot o l" sales to private i 4ivi4uals but also public or Du4icial sales at the ti*e the *ort'a'e 9as execute4# there:ore# the relatio ship o: la9"er a 4 clie t still existe4# the ver" relatio o: trust a 4 co :i4e ce sou'ht to be protecte4 b" the prohibitio # 9he a la9"er occupies a va ta'e positio to press upo or4ictate ter*s to a harasse4 clie t. .ro* the ti*e o: the executio o: the *ort'a'e i his :avor# Respo 4e t A*o o" ha4 alrea4" asserte4 a title a4verse to his clie tsK i terests at a ti*e 9he the relatio ship o: la9"er a 4 clie t ha4 ot "et bee severe4. Co si4eri ' that the *ort'a'e co tract# e tere4 i to i co trave tio o: Article 1%/1 o: the Civil Co4e is expressl" prohibite4 b" la9# the sa*e *ust be hel4 i existe t a 4 voi4 ab i itio. EDUARDO B% OLAGUER "S% E ILIO PURUGGANAN G%R% N,% 158907 !ACTS* Page 143

Civil Law Review 2 2013 - 2014 &here are t9o versio s o: the stor"> Petitio er E4uar4o 0. Ola'uer alle'es that he 9as the o9 er o: ($#$$$ shares o: stoc5 o: 0usi ess4a" Corporatio =0usi ess4a"@ . At the ti*e he 9as e*plo"e4 9ith the corporatio # petitio er 9ith respo 4e ts 9as active i the political oppositio a'ai st the Marcos 4ictatorship. A ticipati ' the possibilit" that petitio er 9oul4 be arreste4 a 4 4etai e4 b" the Marcos *ilitar"# 1ocsi # !oaCui # a 4 8ector 8oli:eNa ha4 a u 9ritte a'ree*e t that# i the eve t that petitio er 9as arreste4# the" 9oul4 support the petitio er7s :a*il" b" the co ti ue4 pa"*e t o: his salar". Petitio er also execute4 a Special Po9er o: Attor e" =SPA@# o 2( Ma" 1/7/# appoi ti ' as his attor e"s<i <:act 1ocsi # !oaCui a 4 8o:ileNa :or the purpose o: selli ' or tra s:erri ' petitio er7s shares o: stoc5 9ith 0usi ess4a" O 2% 2ece*ber 1/7/# petitio er 9as arreste4 b" the Marcos *ilitar" b" virtue o: a Arrest# Search a 4 Sei,ure Or4er a 4 4etai e4 :or alle'e4l" co**itti ' arso . 2uri ' the petitio er7s 4ete tio # respo 4e t 1ocsi or4ere4 :ello9 respo 4e t Puru''a a to ca cel the petitio er7s shares i the boo5s o: the corporatio a 4 to tra s:er the* to respo 4e t 1ocsi 7s a*e. Respo 4e t 1ocsi co te 4e4 that petitio er approache4 hi* a 4 reCueste4 hi* to sell# a 4# i: ecessar"# bu" petitio er7s shares o: stoc5 i 0usi ess4a"# to assure support :or petitio er7s :a*il" i the eve t that so*ethi ' shoul4 happe to hi*# particularl" i: he 9as Daile4# exile4 or :orce4 to 'o u 4er'rou 4. At the ti*e petitio er 9as e*plo"e4 9ith 0usi ess4a"# respo 4e t 1ocsi 9as u a9are that petitio er 9as part o: a 'roup# 1i'ht<a<.ire Move*e t# 9hich activel" sou'ht the overthro9 o: the Marcos 'over *e t throu'h a ar*e4 stru''le. 8e 4e ie4 that he *a4e a " arra 'e*e ts to co ti ue pa"i ' the petitio er7s salar" i the eve t o: the latter7s i*priso *e t &he trial court i its 2ecisio # 4ate4 2( !ul" 1//5# 4is*isse4 the Co*plai t :ile4 b" the petitio er. 6t rule4 that the sale o: shares bet9ee petitio er a 4 respo 4e t 1ocsi 9as vali4. &he trial court co clu4e4 that petitio er ha4 i te 4e4 to sell the shares o: stoc5 to a "o e# i clu4i ' respo 4e t 1ocsi # i or4er to provi4e :or the ee4s o: his :a*il" shoul4 he be Daile4 or :orce4 to 'o u 4er'rou 4L a 4 that the SPA 4ra:te4 b" the petitio er e*po9ere4 respo 4e t 1ocsi # a 4 t9o other a'e ts# to sell the shares :or such price a 4 u 4er such ter*s a 4 co 4itio s that the a'e ts *a" 4ee* proper. 6t :urther :ou 4 that petitio er co se te4 to have respo 4e t 1ocsi bu" the shares hi*sel:. O appeal# the Court o: Appeals a::ir*e4 the 2ecisio o: the trial court that there 9as a per:ecte4 co tract o: sale. ISSUE* Fhether there 9as a PER.EC&E2 CO3&RAC& O. SA1E 0E&FEE3 PE&6&6O3ER A32 MR. 1OCS63 O-ER &8E S8ARESP HELD* BES. Petitio er alle'es that the purporte4 sale bet9ee hi*sel: a 4 respo 4e t 1ocsi o: the 4ispute4 shares o: stoc5 is voi4 si ce it co trave es Article 1%/1 o: the Civil Co4e# 9hich provi4es that>
AR&. 1%/1. &he :ollo9i ' perso s ca ot acCuire b" purchase# eve at a public or Du4icial auctio # either i perso or throu'h the *e4iatio o: a other> xxxx =2@ A'e ts# the propert" 9hose a4*i istratio or sale *a" have bee e truste4 to the*# u less the co se t o: the pri cipal has bee 'ive L x x x.

6t is# i 4ee4# a :a*iliar a 4 u iversall" reco' i,e4 4octri e that a perso 9ho u 4erta5es to act as a'e t :or a other ca ot be per*itte4 to 4eal i the a'e c" *atter o his o9 accou t a 4 :or his o9 be e:it 9ithout the co se t o: his pri cipal# :reel" 'ive # 9ith :ull 5 o9le4'e o: ever" 4etail 5 o9 to the a'e t 9hich *i'ht a::ect the tra sactio . &he prohibitio a'ai st a'e ts purchasi ' propert" i their ha 4s :or sale or *a a'e*e t is# ho9ever# clearl"# ot absolute. 6t 4oes ot appl" 9here the pri cipal co se ts to the sale o: the propert" i the ha 4s o: the a'e t or a4*i istrator. 6 the prese t case# the parties have co :licti ' alle'atio s. Fhile respo 4e t 1ocsi averre4 that petitio er ha4 per*itte4 hi* to purchase petitio er7s shares# petitio er vehe*e tl" 4e ies havi ' 5 o9 o: the tra sactio . 8o9ever# recor4s sho9 that petitio er7s positio is less cre4ible tha that ta5e b" respo 4e t 1ocsi 'ive petitio er7s co te*pora eous a 4 subseCue t acts. 6 1/)$# 9he .er a 4o retur e4 a stoc5 certi:icate she borro9e4 :ro* the petitio er# it 9as *ar5e4 Oca celle4.I Althou'h the petitio er alle'e4 that he 9as :urious 9he he sa9 the 9or4 ca celle4# he ha4 ot 4e*a 4e4 the issua ce o: a e9 certi:icate i his a*e. 6 stea4 o: havi ' bee put o his 'uar4# petitio er re*ai e4 sile t over this obvious re4 :la' a 4 co ti ue4 receivi '# throu'h his 9i:e# pa"*e ts 9hich totalle4 to the a''re'ate a*ou t o: the shares o: stoc5 value4 at par. Fhe the pa"*e ts stoppe4# o 4e*a 4 9as *a4e b" either petitio er or his 9i:e :or :urther pa"*e ts. .ro* the :ore'oi '# it is clear that petitio er 5 e9 o: the tra sactio # a'ree4 to the purchase price o:

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Civil Law Review 2 2013 - 2014 P($$#$$$.$$ :or the shares o: stoc5# a 4 ha4 i :act :acilitate4 the i*ple*e tatio o: the ter*s o: the pa"*e t b" provi4i ' respo 4e t 1ocsi # throu'h petitio er7s 9i:e# 9ith the i :or*atio o the ba 5 accou ts o: his i <la9s. Petitio er7s 9i:e a 4 his so eve provi4e4 receipts :or the pa"*e ts that 9ere *a4e to the* b" respo 4e t 1ocsi #S%3T a practice that bespea5s o: a o erous tra sactio a 4 ot a act o: 'ratuit". !ALLO* Petitio 9as 2E36E2. NOR#IS DISTRIBUTORS INC% "S% CA '() NEPALES 193 SCRA 694 !782.'20 1991 ISSUE* !ACTS* O Septe*ber 2$# 1/7/# private respo 4e t Alberto 3epales bou'ht :ro* the 3or5is 2istributors# 6 c. =3or5is@ i its 0acolo4 bra ch a bra 4 e9 Ba*aha Fo 4erbi5e *otorc"cle Mo4el B122V 9ith E 'i e 3o.12<32/%$1; .ra*e 3o.312<$32/%$1# color *aroo # 9hich 9as the o 4ispla" i the 3or5is sho9roo*. &he 0ra ch Ma a'er Aveli o 1abaDo a'ree4 to accept the P7#5$$.$$ price pa"able b" *ea s o: a 1etter o: +uara t" :ro* the 2evelop*e t 0a 5 o: the Philippi es =20P@# ;aba 5ala . 8e ce# cre4it 9as exte 4e4 to 3epales# a 4 as securit" :or the loa # he execute4 a chattel *ort'a'e o the *otorc"cle i :avor o: 20P. 1abaDo issue4 the 3or5is Sales 6 voice 3o. $12$ per:ecti ' the co tract o: sale# a 4 3epales si' e4 the sa*e to co :or* to the ter*s o: the sale# 9hile the u it re*ai e4 i 3or5isK possessio . O 3ove*ber (# 1/7/# it 9as re'istere4 u 4er Alberto 3epales7 a*e i the 1a 4 &ra sportatio Co**issio . O !a uar" 22# 1/)$# the *otorc"cle 9as 4elivere4 to a certai !ulia 3epales 9ho 9as alle'e4l" the a'e t o: Alberto 3epales but the latter 4e ies it. &he recor4 sho9s# ho9ever# that Alberto a 4 !ulia 3epales prese te4 the u it to 20PKs Appraiser<6 vesti'ator Er esto Arriesta at the 20P o::ices i ;aba 5ala # 3e'ros Occi4e tal 0ra ch. O .ebruar" 3# 1/)$# the *otorc"cle *et a acci4e t at 0i alba'a # 3e'ros Occi4e tal 9hile bei ' 4rive b" a certai Hacarias Pa"ba. &he u it 9as a total 9rec5# 9as retur e4# a 4 store4 i si4e 3or5isK 9arehouse. O March 2$# 1/)$# 20P release4 the procee4s o: private respo 4e tKs *otorc"cle loa to 3or5is i the total su* o: P7#5$$. As the price o: the *otorc"cle later i crease4 to P7#)2) i March# 1/)$# 3epales pai4 the 4i::ere ce o: P32) a 4 4e*a 4e4 the 4eliver" o: the *otorc"cle. 3or5is :aile4 to 4eliver the u it# a 4 3epales :ile4 a actio :or speci:ic per:or*a ce 9ith 4a*a'es i the R&C o: 8i*a*a"la # 3e'ros Occi4e tal. 3or5is a s9ere4 that the *otorc"cle ha4 alrea4" bee ARAFAG HABANA JALAYAJAY HELD* A::ir*i ' the 4ecisio o: the Court o: Appeals# the Supre*e Court reiterate4 that Article 1%/( o: the Civil Co4e 9hich provi4es that Gi the abse ce o: a express assu*ptio o: ris5 b" the bu"er# the thi 's sol4 re*ai at sellerKs ris5 u til the o9 ership thereo: is tra s:erre4 to the bu"er#G is applicable i the case at bar :or there 9as either a actual or co structive 4eliver" o: the thi ' sol4. &he Court o: Appeals correctl" rule4 that the purpose o: the executio o: the sales i voice 4ate4 Septe*ber 2$# 1/7/ a 4 the re'istratio o: the vehicle i the a*e o: Alberto 3epales 9ith the 1a 4 Re'istratio Co**issio 9as ot to tra s:er the o9 ership a 4 4o*i io over the *otorc"cle to hi*# but o l" to co*pl" 9ith the reCuire*e ts o: the 20P :or processi ' private respo 4e tKs *otorc"cle loa . &he circu*sta ces i the case itsel: *ore tha a*pl" rebut the 4isputable presu*ptio o: 4eliver" upo 9hich 3or5is a chors its 4e:e se to 3epalesK actio . Fho shoul4 bear the ris5 o: lossP 4elivere4 to private respo 4e t be:ore the acci4e t# he ce# he shoul4 bear the ris5 o: loss or 4a*a'e as o9 er o: the u it. &he lo9er court rule4 i :avor o: 3epales# a 4 the Court o: Appeals a::ir*e4 the 4ecisio but 4elete4 the a9ar4 o: 4a*a'es Gi the a*ou t o: P5$.$$ a 4a" :ro* .ebruar" 3# 1/)$ u til pa"*e t o: the prese t value o: the 4a*a'e4 vehicle.G 3or5is co ce4es that there 9as o GactualG 4eliver" o: the vehicle# but i sists that there 9as co structive 4eliver" o: the u it upo the issua ce o: the sales i voice# upo the re'istratio o: the u it i 3epales7 a*e# a 4 upo the issua ce o: the o::icial receipt.

GAISANO "S% INSURANCE -.(7 8$ 2006 !ACTS* 6MC a 4 1evi Strauss =Phils.@ 6 c. =1SP6@ separatel" obtai e4 :ro* respo 4e t :ire i sura ce policies 9ith boo5 4ebt e 4orse*e ts. &he i sura ce policies provi4e :or covera'e o Gboo5 4ebts i co ectio 9ith rea4"<*a4e clothi ' *aterials 9hich

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Civil Law Review 2 2013 - 2014 have bee sol4 or 4elivere4 to various custo*ers a 4 4ealers o: the 6 sure4 a "9here i the Philippi es.G &he policies 4e:i e4 boo5 4ebts as the Gu pai4 accou t still appeari ' i the 0oo5 o: Accou t o: the 6 sure4 %5 4a"s a:ter the ti*e o: the loss covere4 u 4er this Polic".G &he policies also provi4e :or the :ollo9i ' co 4itio s> 1. Farra te4 that the Co*pa " shall ot be liable :or a " u pai4 accou t i respect o: the *ercha 4ise sol4 a 4 4elivere4 b" the 6 sure4 9hich are outsta 4i ' at the 4ate o: loss :or a perio4 i excess o: six =(@ *o ths :ro* the 4ate o: the coveri ' i voice or actual 4eliver" o: the *ercha 4ise 9hichever shall :irst occur. 2. Farra te4 that the 6 sure4 shall sub*it to the Co*pa " 9ithi t9elve =12@ 4a"s a:ter the close o: ever" cale 4ar *o th all a*ou t sho9 i their boo5s o: accou ts as u pai4 a 4 thus beco*e receivable ite* :ro* their custo*ers a 4 4ealers. +aisa o is a custo*er a 4 4ealer o: the pro4ucts o: 6MC a 4 1SP6. O .ebruar" 25# 1//1# the +aisa o Superstore Co*plex i Ca'a"a 4e Oro Cit"# o9 e4 b" petitio er# 9as co su*e4 b" :ire. 6 clu4e4 i the ite*s lost or 4estro"e4 i the :ire 9ere stoc5s o: rea4"<*a4e clothi ' *aterials sol4 a 4 4elivere4 b" 6MC a 4 1SP6. 6 sura ce o: A*erica :ile4 a co*plai t :or 4a*a'es a'ai st +aisa o. 6t alle'es that 6MC a 4 1SP6 9ere pai4 :or their clai*s a 4 that the u pai4 accou ts o: petitio er o the sale a 4 4eliver" o: rea4"<*a4e clothi ' *aterials 9ith 6MC 9as P2#11/#2$5.$$ 9hile 9ith 1SP6 it 9as P535#(13.$$. &he R&C re 4ere4 its 4ecisio 4is*issi ' 6 sura ceKs co*plai t. 6t hel4 that the :ire 9as purel" acci4e talL that the cause o: the :ire 9as ot attributable to the e'li'e ce o: the petitio er. Also# it sai4 that 6MC a 4 1SP6 retai e4 o9 ership o: the 4elivere4 'oo4s a 4 *ust bear the loss. &he CA re 4ere4 its 4ecisio a 4 set asi4e the 4ecisio o: the R&C. 6t or4ere4 +aisa o to pa" 6 sura ce the P 2 *illio a 4 the P 5$$#$$$ the latter pai4 to 6MC a 4 1evi Strauss. 8e ce this petitio . ISSUE1S* 1. FO3 the CA erre4 i co strui ' a :ire i sura ce polic" o boo5 4ebts as o e coveri ' the u pai4 accou ts o: 6MC a 4 1SP6 si ce such i sura ce applies to loss o: the rea4"<*a4e clothi ' *aterials sol4 a 4 4elivere4 to petitio er 2. FO3 6MC bears the ris5 o: loss because it expressl" reserve4 o9 ership o: the 'oo4s b" stipulati ' i the sales i voices that GSiTt is :urther a'ree4 that ARAFAG HABANA JALAYAJAY *erel" :or purpose o: securi ' the pa"*e t o: the purchase price the above 4escribe4 *ercha 4ise re*ai s the propert" o: the ve 4or u til the purchase price thereo: is :ull" pai4.G 3. FO3 petitio er is liable :or the u pai4 accou ts %. FO3 it has bee establishe4 that petitio er has outsta 4i ' accou ts 9ith 6MC a 4 1SP6. HELD* 1. 3O. 3o9here is it provi4e4 i the Cuestio e4 i sura ce policies that the subDect o: the i sura ce is the 'oo4s sol4 a 4 4elivere4 to the custo*ers a 4 4ealers o: the i sure4. &hus# 9hat 9ere i sure4 a'ai st 9ere the accou ts o: 6MC a 4 1SP6 9ith petitio er 9hich re*ai e4 u pai4 %5 4a"s a:ter the loss throu'h :ire# a 4 ot the loss or 4estructio o: the 'oo4s 4elivere4. 2. BES. &he prese t case clearl" :alls u 4er para'raph =1@# Article 15$% o: the Civil Co4e> AR&. 15$%. E less other9ise a'ree4# the 'oo4s re*ai at the sellerKs ris5 u til the o9 ership therei is tra s:erre4 to the bu"er# but 9he the o9 ership therei is tra s:erre4 to the bu"er the 'oo4s are at the bu"erKs ris5 9hether actual 4eliver" has bee *a4e or ot# except that> =1@ Fhere 4eliver" o: the 'oo4s has bee *a4e to the bu"er or to a bailee :or the bu"er# i pursua ce o: the co tract a 4 the o9 ership i the 'oo4s has bee retai e4 b" the seller *erel" to secure per:or*a ce b" the bu"er o: his obli'atio s u 4er the co tract# the 'oo4s are at the bu"erKs ris5 :ro* the ti*e o: such 4eliver" &hus# 9he the seller retai s o9 ership o l" to i sure that the bu"er 9ill pa" its 4ebt# the ris5 o: loss is bor e b" the bu"er. Petitio er bears the ris5 o: loss o: the 'oo4s 4elivere4. 6MC a 4 1SP6 ha4 a i surable i terest u til :ull pa"*e t o: the value o: the 4elivere4 'oo4s. E li5e the civil la9 co cept o: res perit 4o*i o# 9here o9 ership is the basis :or co si4eratio o: 9ho bears the ris5 o: loss# i propert" i sura ce# o eKs i terest is ot 4eter*i e4 b" co cept o: title# but 9hether i sure4 has substa tial eco o*ic i terest i the propert". Sectio 13 o: our 6 sura ce Co4e 4e:i es i surable i terest as Gever" i terest i propert"# 9hether real or perso al# or a " relatio thereto# or liabilit" i respect thereo:# o: such ature that a co te*plate4 peril *i'ht 4irectl" 4a* i:" the i sure4.G Pare theticall"# u 4er Sectio 1% o: the sa*e Co4e# a i surable Page 144

Civil Law Review 2 2013 - 2014 i i i i terest i propert" *a" co sist i > =a@ a existi ' terestL =b@ a i choate i terest :ou 4e4 o existi ' terestL or =c@ a expecta c"# couple4 9ith a existi ' terest i that out o: 9hich the expecta c" arises. Art. 22$7. 6: the plai ti::Ks propert" has bee i sure4# a 4 he has receive4 i 4e* it" :ro* the i sura ce co*pa " :or the i Dur" or loss arisi ' out o: the 9ro ' or breach o: co tract co*plai e4 o:# the i sura ce co*pa " shall be subro'ate4 to the ri'hts o: the i sure4 a'ai st the 9ro '4oer or the perso 9ho has violate4 the co tract. As to 1SP6# respo 4e t :aile4 to prese t su::icie t evi4e ce to prove its cause o: actio . &here 9as o evi4e ce that respo 4e t has bee subro'ate4 to a " ri'ht 9hich 1SP6 *a" have a'ai st petitio er. .ailure to substa tiate the clai* o: subro'atio is :atal to petitio erKs case :or recover" o: P535#(13.$$. LA9YERS COOPERATI"E PUBLISHING "S% PER!ECTO A<2?/ 30$ 1965 !ACTS* Per:ecto A. &abora=bu"er@ bou'ht :ro* the 1a9"ers Cooperative Publishi ' Co*pa "=seller@ o e co*plete set o: A*erica !urispru4e ce co sisti ' o: %)volu*es 9ith 1/5% poc5et parts# plus o e set o: A*erica !urispru4e ce# +e eral 6 4ex# co sisti ' o: % volu*es# :or a total price o: P1#(75.5$ 9hich# i a44itio to the cost o: :rei'ht o: P(./$# *a5es a total o: P1#()2.%$. &abora *a4e a partial pa"*e t o: P3$$.$$# leavi ' a bala ce o: P1#3)2.%$. &he boo5s 9ere 4ul" 4elivere4 a 4 receipte4 :or b" &abora o Ma" 15# 1/55 i his la9 o::ice i 3a'a Cit". 8o9ever# a bi' :ire bro5e out i that localit" 9hich 4estro"e4 a 4 bur e4 all the buil4i 's sta 4i ' o o e 9hole bloc5 i clu4i ' at the la9 o::ice a 4 librar" o: &abora. As a result# the boo5s bou'ht :ro* the co*pa " as above state4# to'ether 9ith &aboraKs i*porta t 4ocu*e ts a 4 papers# 9ere bur e4 4uri ' the co :la'ratio . &his u :ortu ate eve t 9as i**e4iatel" reporte4 b" &abora to the co*pa " i a letter he se t o Ma" 2$# 1/55. O Ma" 23# the co*pa " replie4 a 4 as a to5e o: 'oo49ill it se t to &abora :ree o: char'e volu*es 75# 7(# 77 a 4 7) o: the Philippi e Reports. As &abora :aile4 to pa" he *o thl" i stall*e ts a'ree4 upo o the bala ce o: the purchase price ot9ithsta 4i ' the lo ' ti*e that ha4 elapse4# the co*pa " 4e*a 4e4 pa"*e t o: the i stall*e ts 4ue# a 4 havi ' :aile4# to pa" the sa*e# it co**e ce4 the prese t actio be:ore the C.6 o: Ma ila :or the recover" o: the bala ce o: the obli'atio . 2e:e 4a t# i his a s9er# plea4e4 :orce *aDeure as a 4e:e se. 8e alle'e4 that the boo5s bou'ht :ro* the ARAFAG HABANA JALAYAJAY Page 145

A "o e has a i surable i terest i propert" 9ho 4erives a be e:it :ro* its existe ce or 9oul4 su::er loss :ro* its 4estructio . 6 4ee4# a ve 4or or seller retai s a i surable i terest i the propert" sol4 so lo ' as he has a " i terest therei # i other 9or4s# so lo ' as he 9oul4 su::er b" its 4estructio # as 9here he has a ve 4orKs lie . 6 this case# the i surable i terest o: 6MC a 4 1SP6 pertai to the u pai4 accou ts appeari ' i their 0oo5s o: Accou t %5 4a"s a:ter the ti*e o: the loss covere4 b" the policies. 3. BES. Petitio erKs ar'u*e t that it is ot liable because the :ire is a :ortuitous eve t u 4er Article 117%32 o: the Civil Co4e is *isplace4. As hel4 earlier# petitio er bears the loss u 4er Article 15$% =1@ o: the Civil Co4e. Moreover# it *ust be stresse4 that the i sura ce i this case is ot :or loss o: 'oo4s b" :ire but :or petitio erKs accou ts 9ith 6MC a 4 1SP6 that re*ai e4 u pai4 %5 4a"s a:ter the :ire. Accor4i 'l"# petitio erKs obli'atio is :or the pa"*e t o: *o e". As correctl" state4 b" the CA# 9here the obli'atio co sists i the pa"*e t o: *o e"# the :ailure o: the 4ebtor to *a5e the pa"*e t eve b" reaso o: a :ortuitous eve t shall ot relieve hi* o: his liabilit". &he ratio ale :or this is that the rule that a obli'or shoul4 be hel4 exe*pt :ro* liabilit" 9he the loss occurs thru a :ortuitous eve t o l" hol4s true 9he the obli'atio co sists i the 4eliver" o: a 4eter*i ate thi ' a 4 there is o stipulatio hol4i ' hi* liable eve i case o: :ortuitous eve t. 6t 4oes ot appl" 9he the obli'atio is pecu iar" i ature. E 4er Article 12(3 o: the Civil Co4e# GSiT a obli'atio to 4eliver a 'e eric thi '# the loss or 4estructio o: a "thi ' o: the sa*e 5i 4 4oes ot exti 'uish the obli'atio .G &his rule is base4 o the pri ciple that the 'e us o: a thi ' ca ever perish. A obli'atio to pa" *o e" is 'e ericL there:ore# it is ot excuse4 b" :ortuitous loss o: a " speci:ic propert" o: the 4ebtor. %. BES. Fith respect to 6MC# the respo 4e t has a4eCuatel" establishe4 its clai*. &he P 3 * clai* has bee prove . &he subro'atio receipt# b" itsel:# is su::icie t to establish ot o l" the relatio ship o: respo 4e t as i surer a 4 6MC as the i sure4# but also the a*ou t pai4 to settle the i sura ce clai*. &he ri'ht o: subro'atio accrues si*pl" upo pa"*e t b" the i sura ce co*pa " o: the i sura ce clai* Respo 4e tKs actio a'ai st petitio er is sCuarel" sa ctio e4 b" Article 22$7 o: the Civil Co4e 9hich provi4es>

Civil Law Review 2 2013 - 2014 plai ti:: 9ere bur e4 4uri ' the :ire that bro5e out i 3a'a Cit" o Ma" 15# 1/55# a 4 si ce the loss 9as 4ue to :orce *aDeure he ca ot be hel4 respo sible :or the loss. C.6 re 4ere4 Du4'*e t :or the plai ti::. 6t or4ere4 &abora to pa" the su* o: P1#3)2.%$# 9ith le'al i terest thereo :ro* the :ili ' o: the co*plai t# plus a su* eCuivale t to 25J o: the total a*ou t 4ue as liCui4ate4 4a*a'es# a 4 the cost o: actio . DURAN "S% IAC G%R% N,% L - 64159 !ACTS* Petitio er Circe S. 2ura o9 e4 t9o =2@ parcels o: la 4 i Calooca Cit" 9hich she ha4 purchase4 :ro* the MoDa Estate. She le:t the Philippi es :or the ES i !u e 1/5% a 4 retur e4 i Ma" 1/((. O Ma" 13# 1/(3# a 2ee4 o: Sale o: the t9o lots *e tio e4 above 9as *a4e i :avor o: Circe7s *other# .e S. 2ura 9ho# o 2ece*ber 3# 1/(5# *ort'a'e4 the sa*e propert" to private respo 4e t Erli 4a 0. Marcelo<&ia 'co. Fhe petitio er Circe S. 2ura ca*e to 5 o9 about the *ort'a'e *a4e b" her *other# she 9rote the Re'ister o: 2ee4s o: Calooca Cit" i :or*i ' the latter that she ha4 ot 'ive her *other a " authorit" to sell or *ort'a'e a " o: her properties i the Philippi es. .aili ' to 'et a a s9er :ro* the re'istrar# she retur e4 to the Philippi es. Mea 9hile# 9he her *other# .e S. 2ura # :aile4 to re4ee* the *ort'a'e properties# :oreclosure procee4i 's 9ere i itiate4 b" private respo 4e t Erli 4a 0. Marcelo &ia 'co a 4# ulti*atel"# the sale b" the sheri:: a 4 the issua ce o: Certi:icate o: Sale i :avor o: the latter. Petitio er Circe S. 2ura clai*s that the 2ee4 o: Sale i :avor o: her *other .e S. 2ura is a :or'er"# sa"i ' that at the ti*e o: its executio i 1/(3 she 9as i the E ite4 States. O the other ha 4# the a4verse part" alle'es that the si' atures o: Circe S. 2ura i the sai4 2ee4 are 'e ui e a 4# co seCue tl"# the *ort'a'e *a4e b" .e S. 2ura i :avor o: private respo 4e t is vali4. &he appellate court hel4 the sa*e to be 'e ui e because there is the presu*ptio o: re'ularit" i the case o: a public 4ocu*e t a 4 Othe :act that Circe has ot bee able to satis:actoril" prove that she 9as i the E ite4 States at the ti*e the 4ee4 9as execute4 i 1/(3. 0ut eve i: the si' atures 9ere a :or'er"# a 4 the sale 9oul4 be re'ar4e4 as voi4# still it is Our opi io that the 2ee4 o: Mort'a'e is -A162# 9ith respect to the *ort'a'ees# the 4e:e 4a ts<appella ts. Fhile it is true that u 4er Art. 2$)5 o: the Civil Co4e# it is esse tial that the *ort'a'or be the absolute o9 er o: the propert" *ort'a'e4# a 4 9hile as bet9ee the 4au'hter a 4 the *other# it 9as the 4au'hter 9ho still o9 e4 the lots# S&611 i so:ar as i oce t thir4 perso s are co cer e4 the o9 er 9as alrea4" the *other =.e S. 2ura @ i as*uch as she ha4 alrea4" beco*e the re'istere4 o9 er. &he *ort'a'ee ha4 the ri'ht to rel" upo 9hat appeare4 i the certi:icate o: title# a 4 4i4 ot have to i Cuire :urther. 6: the rule 9ere other9ise# the e::icac" a 4 co clusive ess o: &orre s Certi:icate o: &itles 9oul4 be :utile a 4 u'ator". Page 146

ISSUE* Fhether or ot respo 4e t &abora shoul4 bear the loss a 4 pa" the u pai4 purchase price. HELD* BES. &hou'h it 9as a'ree4 that the title o: the o9 ership o: the boo5s shoul4 re*ai 9ith the seller u til the purchase shall have bee :ull" pai# it 9as also expressl" a'ree4 upo that the loss or 4a*a'e a:ter the 4eliver" shall be bor e b" the bu"er. 6 pursua ce o: the co tract# the o9 ership o: the 'oo4s has bee retai e4 b" the seller *erel" to secure per:or*a ce b" the o: his obli'atio . Moreover# the 'oo4s 9ere at the bu"er7s ris5 :ro* the ti*e o: 4eliver". &hou'h it 9as a'ree4 that the title o: the o9 ership o: the boo5s shoul4 re*ai 9ith the seller u til the purchase price shall have bee :ull" pai4# it 9as also expressl" a'ree4 upo that the loss or 4a*a'e a:ter 4eliver" shall be bor e b" the bu"er. 6 pursua ce o: the co tract# the o9 ership o: the 'oo4s has bee retai e4 b" the seller *erel" to secure per:or*a ce b" the bu"er o: his obli'atio . Moreover# the 'oo4s 9ere at the bu"er7s ris5 :ro* the ti*e o: the 4eliver". 6t 9as provi4e4 i the co tract that Gtitle to a 4 o9 ership o: the boo5s shall re*ai 9ith the seller u til the purchase price shall have bee :ull" pai4. 1oss or 4a*a'e to the boo5s a:ter 4eliver" to the bu"ershall be bor e b" the bu"er.G G7(72'/ R./7* the loss o: the obDect o: the co tract o: sale is bor e b" the o9 er# or i case o: :orce *aDeure the o e u 4er obli'atio to 4eliver theobDect is exe*pt :ro* liabilit". 0E&# this rule 4oes ot appl" i this case because the parties clearl" a'ree4 to the above*e tio e4 co trar".

ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 :aulte4 ISSUE* Fhether or ot Erli 4a 0. Marcelo<&ia 'co 9as a bu"er i 'oo4 :aith a 4 :or valueP HELD* +oo4 :aith# 9hile it is al9a"s to be presu*e4 i the abse ce o: proo: to the co trar"# reCuires a 9ell< :ou 4e4 belie: that the perso :ro* 9ho* title 9as receive4 9as hi*sel: the o9 er o: the la 4# 9ith the ri'ht to co ve" it. Other9ise state4# 'oo4 :aith is the opposite o: :rau4 a 4 it re:ers to the state o: *i 4 9hich is *a i:este4 b" the acts o: the i 4ivi4ual co cer e4. 6 the case at bar# private respo 4e ts# i 'oo4 :aith relie4 o the certi:icate o: title i the a*e o: .e S. 2ura a 4 as aptl" state4 b" respo 4e t appellate court OSeTve o the suppositio that the sale 9as voi4# the 'e eral rule that the 4irect result o: a previous ille'al co tract ca ot be vali4 =o the theor" that the spri ' ca ot rise hi'her tha its source@ ca ot appl" here :or Fe are co :ro te4 9ith the :u ctio i 's o: the &orre s S"ste* o: Re'istratio . &he 4octri e to :ollo9 is si*ple e ou'h> a :rau4ule t or :or'e4 4ocu*e t o: sale *a" beco*e the ROO& o: a vali4 title i: the certi:icate o: title has alrea4" bee tra s:erre4 :ro* the a*e o: the true o9 er to the a*e o: the :or'er or the a*e i 4icate4 b" the :or'er.I &hus# 9here i oce t thir4 perso s rel"i ' o the correct ess o: the certi:icate o: title issue4# acCuire ri'hts over the propert"# the court ca ot 4isre'ar4 such ri'hts a 4 or4er the total ca cellatio o: the certi:icate :or that 9oul4 i*pair public co :i4e ce i the certi:icate o: title. State4 4i::ere tl"# a i oce t purchaser :or value rel"i ' o a torre s title issue4 is protecte4. A *ort'a'ee has the ri'ht to rel" o 9hat appears i the certi:icate o: title a 4# i the abse ce o: a "thi ' to excite suspicio # he is u 4er o obli'atio to loo5 be"o 4 the certi:icate a 4 i vesti'ate the title o: the *ort'a'or appeari ' o the :ace o: sai4certi:icate. 1i5e9ise# Fe ta5e ote o: the :i 4i ' a 4 observatio o: respo 4e t appellate court i that petitio ers 9ere 'uilt" o: estoppel b" laches Oi ot bri 'i ' the case to court 9ithi a reaso able perio4. A tero +aspar# husba 4 o: Circe# 9as i the Philippi es i 1/(% to co struct the apart*e t o the 4ispute4 lots. &his 9as testi:ie4 to b" Circe hersel:. 6 the process o: co structio # speci:icall" i the *atter o: obtai i ' a buil4i ' per*it# he coul4 have 4iscovere4 that the 4ee4 o: sale sou'ht to be set asi4e ha4 bee execute4 o Ma" 13# 1/(3 =the buil4i ' per*it ee4e4 a applicatio b" the appare t o9 er o: the la 4# a*el"# Circe7s *other# .e S. 2ura @. A 4 the a'ai both plai ti::s coul4 have i terve e4 i the :oreclosure suit but the" 4i4 ot. &he" 5ept sile t u til al*ost the last *o*e t 9he the" :i all" 4eci4e4# shortl" be:ore the sheri::7s sale# to :ile a thir4<part" clai*. Clearl"# the plai ti::s ca be ARAFAG HABANA JALAYAJAY :or their estoppel b" laches.I

A4NAR "S% YAPDIANGCO !ACTS* &heo4oro Sa tos a4vertise4 i the e9spapers the sale o: his .or4 .airla e 5$$. A:ter the a4vertise*e t# a certai 4e 2ios# clai*i ' to be the ephe9 o: Marella# 9e t to the resi4e ce o: Sa tos a 4 expressi ' his u cle7s i te t to purchase the car. Si ce Sa tos 9as Kt arou 4# it 9as 6ri eo 9ho tal5e4 9ith 4e 2ios. O bei ' i :or*e4# Sa tos a4vise4 his so to see Marella# 9hich the so 4i4. Marella expresse4 his i te tio to purchase the car. A 4ee4 o: sale 9as prepare4 a 4 6ri eo 9as i structe4 b" his :ather ot to part 9ith the 4ee4 a 4 the car 9ithout receivi ' the purchase price :ro* Marella. Fhe iri eo a 4 4e 2ios arrive4 at the resi4e ce o: Marella# the latter averre4 that his *o e" 9as short a 4 ha4 to borro9 :ro* his sister. 8e the i structe4 4e 2ios a 4 6ri eo to 'o the suppose4 house o: the sister to obtai the *o e" 9ith a u i4e ti:ie4 perso . 8e also as5e4 6ri eo to leave the 4ee4 to have his la9"er see it. Rel"i ' o the 'oo4 :aith o: Marella# 6ri eo 4i4 as reCueste4. Epo arrivi ' at the house o: Marella7s suppose4 to be sister# 4e 2ios a 4 the u i4e ti:ie4 perso the 4isappeare4 to'ether 9ith the car. &his pro*pte4 Sa tos to report the i ci4e t to the authorities. &herea:ter# Marella 9as able to sell the la 4 to A, ar. A 4 9hile i possessio o: the car# police authorities co :iscate4 the sa*e. &his pro*pte4 A, ar to :ile a actio :or replevi . ISSUE* Fho has better ri'ht over the carP HELD* Marella ever ha4 title to the car as the car 9as Kt ever 4elivere4 to hi*. Fhile there 9as a 4ee4 o: sale i his :avor# he 9as o l" able to obtai possessio o: the car si ce he stole it :ro* Sa tos. &he applicable la9 is Article 55/. &he rule is to the e::ect that i: the o9 er has lost a thi '# or i: he has bee u la9:ull" 4eprive4 o: it# he has a ri'ht to recover it# ot o l" :ro* its :i 4er# thie: or robber# but also :ro* thir4 perso s 9ho *a" have acCuire4 it i 'oo4 :aith :ro* such :i 4er# thie: or robber.

&he sai4 article establishes 2 exceptio s to the 'e eral rule o: irrevi 4icabilt"\to 9it# the o9 er has lost the thi ' or has bee u la9:ull" 4eprive4 thereo:. 6 these cases# the possessor ca ot retai the thi ' as a'ai st the o9 er 9ho *a" recover it 9ithout pa"i ' a " Page 147

Civil Law Review 2 2013 - 2014 i 4e* it"# except 9he the possessor acCuire4 it i a public sale. .urther*ore# the co**o la9 pri ciple that 9here o e o: t9o i oce t perso s *ust su::er a :rau4 perpetrate4 b" a other# the la9 i*poses the loss upo the part" 9ho# b" his *isplace4 co :i4e ce# has e able the :rau4 to be co**itte4# ca ot be applie4 i this case# 9hich is covere4 b" a express provisio o: la9. RADIO9EALTH !INANCE CO PANY "S% PALILEO '0 20$ 1991 !ACTS* 6 April 1/7$# 4e:e 4a t spouses E riCue Castro a 4 8er*i io R. Castro =spouse Castro@ sol4 to herei respo 4e t Ma uelito Palileo a parcel o: u re'istere4 coco ut la 4 i Suri'ao 4el 3orte. &he sale is evi4e ce4 b" a otari,e4 2ee4 o: Absolute Sale# but the 4ee4 9as ot re'istere4 i the Re'istr" o: Propert" :or u re'istere4 la 4s i the provi ce o: Suri'ao 4el 3orte. Si ce the executio o: the 4ee4 o: sale# Palileo 9ho 9as the e*plo"e4 i 1ia 'a# Suri'ao 4el Sur# exercise4 acts o: o9 ership over the la 4 throu'h his *other Ra:aela Palileo# as a4*i istratrix or overseer. Ma uelito Palileo has co ti uousl" pai4 the real estate taxes o sai4 la 4 :ro* 1/71 u til the prese t. 6 3ove*ber 1/7(# the C.6 o: Ma ila re 4ere4 a Du4'*e t 9as re 4ere4 a'ai st 4e:e 4a t E riCue &. Castro to pa" herei petitio er Ra4io9ealth .i a ce Co*pa " =Ra4io9ealth@# the su* o: P22#35$.35 9ith i terest rate o: 1(J per a u* :ro* 3ove*ber 2# 1/75 u til :ull" pai4# a 4 upo the :i alit" o: the Du4'*e t# a 9rit o: executio 9as issue4. &he Provi cial Sheri:: Marietta E. Eviota# throu'h 4e:e 4a t 2eput" Provi cial Sheri:: 1eopol4o Ris*a# levie4 upo a 4 :i all" sol4 at public auctio the subDect la 4 that 4e:e 4a t E riCue Castro ha4 sol4 to Palileo i 1/7$. &he sai4 Provi cial Sheri:: execute4 a certi:icate o: sale 9as b" the i :avor o: Ra4io9ealth as the o l" bi44er# a 4 upo expiratio o: the re4e*ptio perio4# she also execute4 a 4ee4 o: :i al sale. 0oth 4ocu*e ts 9ere re'istere4 9ith the Re'istr" o: 2ee4s. 1ear i ' o: 9hat happe e4 to the la 4# Palileo :ile4 a actio :or recover" o: the subDect propert". &he court a Cuo re 4ere4 a 4ecisio i :avor o: Palileo# 9hich the Court o: Appeals a::ir*e4. HELD* &he Supre*e Court li5e9ise a::ir*e4 the appellate court7s 4ecisio o this case. &here is o 4oubt that ha4 the subDect propert" bee a re'istere4 la 4# this case 9oul4 have bee 4eci4e4 i :avor o: Ra4io9ealth si ce it 9as the co*pa " that ha4 its clai* :irst recor4e4 i the Re'istr" o: 2ee4s :or it is the act o: re'istratio that operates to co ve" a 4 a::ect re'istere4 la 4. &here:ore# a bo a:i4e purchaser o: a re'istere4 la 4 at a executio sale acCuires a 'oo4 title as a'ai st a prior tra s:eree# i: such tra s:er 9as u recor4e4. 8o9ever# a 4i::ere t set o: rules applies i the case at bar 9hich 4eals 9ith a parcel o: u re'istere4 la 4. E 4er Act 3o. 33%%# re'istratio o: i stru*e ts a::ecti ' u re'istere4 la 4s is G9ithout preDu4ice to a thir4 part" 9ith a better ri'ht.G &he a:ore Cuote4 phrase has bee hel4 b" the Supre*e Court to *ea that the *ere re'istratio o: a sale i o eKs :avor 4oes ot 'ive hi* a " ri'ht over the la 4 i: the ve 4or 9as ot a "*ore the o9 er o: the la 4 havi ' previousl" sol4 the sa*e to so*ebo4" else eve i: the earlier sale 9as u recor4e4. Appl"i ' this pri ciple# the Court o: Appeals correctl" hel4 that the executio sale o: the u re'istere4 la 4 i :avor o: petitio er is o: o e::ect because the la 4 o lo 'er belo 'e4 to the Du4'*e t 4ebtor as o: the ti*e o: the sai4 executio sale. NUGUID "S% CA '256 13$ 1989 !ACTS* &he 4ecease4 spouses -ictori o a 4 Crisa ta 4ela Rosa 9ere the re'istere4 o9 ers o: a parcel o: la 4 situate4 i 0ataa # a 4 covere4 b" OC&. -ictori o 4ela Rosa =9i4o9e4 b" the @ sol4 o e^ hal: o: the sai4 propert" to !ulia a Sala,ar :or P /5.$$. &his sale 9as ot re'istere4. 6**e4iatel" a:ter the sale# !ulia a Sala,ar co structe4 a house o the lot she purchase4. Petitio er spouses cause4 the re'istratio o: a 4ocu*e t e title4 O;asulata ' Partiha at 0iliha .I 6 this 4ocu*e t# Marcia a 4ela Rosa# -ictoria 0ue ave tura# Er esto 0ue ave tura# -ir'ilio 0ue ave tura# a 4 .elicisi*o 0ue ave tura<all heirs o: -ictori o a 4 Crisa ta 4ela Rosa< sol4 to the petitio ers the e tire area o: the propert" :or the su* o: P3$$.$$. SubseCue tl"# the OC& 9as ca celle4 b" the Re'ister o:

ISSUE* Fho is the ri'ht:ul o9 er o: the subDect propert"P

ARAFAG HABANA JALAYAJAY

Page 130

Civil Law Review 2 2013 - 2014 2ee4s# a 4 &C& 9as issue4 i petitio ers. the a*es o: the *a4e o *e tio o: the prior u re'istere4 sale to their pre4ecessor<i <i terest# !ulia a Sala,ar. &hus# 9he the petitio ers re'istere4 the sale i their :avor 9ith the Re'ister o: 2ee4s# the" 4i4 so 9ithout a " 5 o9le4'e about the prior sale i :avor o: !ulia a Sala,ar. &he petitio ers# there:ore# ha4 acte4 i 'oo4 :aith. SPS% TORRECA PO "S% ALINDOGAN !782.'20 28$ 2007 !ACTS* ISSUE* Fhether or ot the subseCue t sale is vali4# the petitio er spouses bei ' purchasers i 'oo4 :aith. O Ma" 2%# 1//7# spouses !ose a 4 1i a 0el*es execute4 a 4ee4 o: sale to here i respo 4e ts# over 1ot 3o. 552%<8 a 4 the house co structe4 thereo locate4 i Ra9is# 1e'a,piCit". O !ul" %# 1//7# 1i a 0el*es 9rote respo 4e ts 9herei she 4elivere4 the possessio o: the house a 4 lot to the*. 8o9ever# o !ul" 5# 1//7# be:ore the" coul4 ta5e the actual possessio o: the propert"# the herei petitio ers# a 4 spouses !o atha 1o,ares a 4 !ocel" &orreca*po# e tere4 a 4 occupie4 the pre*ises. As the petitio ers re:use4 to vacate the propert" 4espite repeate4 4e*a 4s# respo 4e t spouses Ali 4o'a :ile4 a'ai st the* a co*plai t :or recover" :or o9 ership a 4 possessio 9ith 4a*a'es 9ith the R&C o: 1e'a,pi Cit". 6 their A s9er to the co*plai t# petitio ers clai*e4 that o March 25# 1//7# spouses 0el*es receive4 :ro* the* P73#$$$.$$ as a4va ce pa"*e t :or the sale o: the house a 4 lot. O April )# 1//7# petitio ers a 4 spouses 0el*es execute4 a GCo tract to 0u" a 4 SellG coveri ' the sa*e propert". &he parties a'ree4 as :ollo9s> that the total co si4eratio is P35$#$$$.$$L that upo the si' i ' o: the co tract# petitio ers shall pa" spouses 0el*es P22$#$$$.$$L a 4 that the bala ce o: P13$#$$$.$$ shall be pai4 upo the issua ce o: the certi:icate o: title i the a*es o: petitio ers. &o co*plete the a'ree4 partial pa"*e t o: P22$#$$$.$$ *e tio e4 i the co tract# petitio ers pai4 spouses 0el*es P13$#$$$.$$#but the latter re:use4 to accept the a*ou t. &hus# o !ul" 7# 1//7# petitio ers :ile4 9ith the R&C# 0ra ch 1)# &abaco# Alba"# Civil Case 3o. &<1/1%# a Co*plai t :or Speci:ic Per:or*a ce a'ai stspouses 0el*es. O !ul" 1%# 2$$$# the R&C# i Civil Case 3o. /%21# o9 be:ore us# re 4ere4 a2ecisio i :avor o: respo 4e ts ISSUE* Fhether or ot the 8o orable Court o: Appeals erre4 9he it 4eclare4 the respo 4e ts as the o9 ers a 4 e title4 the* to the possessio o: the lot i Cuestio . Page 131

&he private respo 4e ts clai* that the 4ocu*e t is a :or'e4 4ee4. &he petitio ers assert that the la 4 subDect o: this case 9as o::ere4 to the* :or sale b" 3icolas 4ela Rosa 9ho the clai*e4 that he ha4 alrea4" purchase4 the shares o: the heirs over the subDect propert" as evi4e ce4 b" a private 4ocu*e t e title4 O;asu 4ua I. &he R&C 4is*isse4 the co*plai t :ile4 b" the private respo 4e ts# but o appeal# this 9as reverse4 b" the Court o: Appeals. 8e ce# this petitio .

HELD* BES.&he Ori'i al Certi:icate o: &itle 3o. 377) coveri ' the e tire propert" 9as clea a 4 :ree :ro* a " a otatio o: a e cu*bra ce# a 4 there 9as othi ' 9hatsoever to i 4icate o its :ace a " vice or i :ir*it" i the title o: the re'istere4 o9 ers<the spouses -ictori o a 4 Crisa ta 4ela Rosa. &hus# the petitio ers coul4 ot have 5 o9 o: the prior sale to !ulia a Sala,ar as# precDsel"# ^it 9as ot re'istere4. &he 'e eral rule is that i: the propert" sol4 is re'istere4 la 4# the purchaser i 'oo4 :aith has a ri'ht to rel" o the certi:icate o: title a 4 is u 4er o 4ut" to 'o behi 4 it to loo5 :or :la9s. &his ot9ithsta 4i '# the petitio ers 4i4 ot rel" solel" upo the certi:icate o: title. &he" perso all" i specte4 the subDect propert". E 4e iabl"# the" :ou 4 the sa*e to be occupie4 b" t9o houses# o e belo 'i ' to a certai 2ora" 4ela Rosa a 4 the other to spouses Pe4ro +uevarra a 4 Pascuala &ole ti o# pare ts o: the respo 4e ts +uevarras. Epo bei ' i :or*e4 o: the petitio ers7 4esire to purchase the la 4# 2ora" 4ela Rosa appare tl" o::ere4 to sell her house# 9hich o::er 9as accepte4 b" the petitio ers. As re'ar4s the spouses +uevarra# 9e :i 4 o reaso to 4isturb the trial court7s :i 4i ' that the" the*selves reCueste4 that the" be allo9e4 to re:rai o the propert" u til such ti*e that the petitio ers 9oul4 ee4 the e tire pre*isesL a 4 i lieu o: re tals to the petitio ers# the" o::ere4 to co ti ue pa"i ' the real estate taxes :or o e<hal: o: the propert" as this 9as their arra 'e*e t 9ith the previous o9 ers<to 9hich reCuest the petitio ers acce4e4. Evi4e tl"# either 2ora" 4ela Rosa or the spouses +uevarra pro:esse4 o9 ership over the portio s o: la 4 the" 9ere occup"i 'L o the co trar"# b" their actuatio s the" expressl" ac5 o9le4'e4 that the" 9ere ot the real o9 ers o: the sai4 propert". &he spouses +uevarra# i particular# ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 tra s:erre4 to his 4au'hter. .i all"# the tra s:er o: the piso 9orth P(%#$$$.$$ 9as execute4 a 4 the heirs arrive4 at a a*icable settle*e t re'ar4i ' the estate o: A4eli a +urrea. 8e ce# Ricar4o +urrea 9ith4re9 his Oppositio a 4 the heirs the 4re9 up a proDect o: partitio 9hich 9as eve tuall" approve4 b" the probate court. Pursua t to the proDect o: partitio # the :ollo9i ' properties 9ere a4Du4icate4 to Ricar4o +urrea> =1@ the 9hole o: the 0a'uio lot =9ith assesse4 value o: P2(#35$.$$@L =2@ the 9hole o: the Sa !ua lot =9ith assesse4 value o: P/#(3$.$$@L a 4 =3@ a parcel o: la 4 i Po teve4ra# 3e'ros Occi4e tal =9ith assesse4 value o: P3$$.$$@. As pa"*e t o: his attor e"7s :ees# Ricar4o +urrea o::ere4 the Sa !ua lot to Att". Suplico 9ho 9as i itiall" hesita t to accept the sa*e as the propert" is occupie4 b" sCuatters. 8o9ever# i or4er ot to a ta'o i,e his clie t# Att". Suplico a'ree4 to Ricar4o +urrea7s proposal 9ith the :urther u 4ersta 4i ' that he 9ill receive a a44itio al co**issio o: 5J i: he sells the 0a'uio propert". &herea:ter# the 4ee4 o: &ra s:er o: Ri'hts a 4 6 terest 9as 4ra:te4. &he sai4 4ee4 9as prese te4 to Ricar4o +urrea :or his si' ature. &hat be:ore si' i ' the sa*e# the co te ts o: the 4ee4 9ere :irst explai e4 to Ricar4o +urrea b" Att". Suplico a 4 Att". Ma uel Pa*a# the otar" public. O Au'ust 2$# 1/75# the 4ee4 9as :i all" si' e4 b" Ricar4o +urrea at the o::ice o: Att". Pa*a# i the prese ce o: the latter# Att". Suplico# -ictor &upas a 4 a other perso # the last t9o acti ' as 9it esses. 1ater# o October 7# 1/)$# Att". Suplico re'istere4 the 4ee4 a 4 obtai e4 a titleQ&C& to the Sa !ua propert" u 4er his a*e. Ricar4o +urrea 4ie4 o October 22# 1/)$. A:ter his 4eath# his heirs i stitute4 a procee4i ' :or the settle*e t o: Ricar4o +urrea7s estate. 6 the sai4 procee4i 's# Att". Suplico :ile4 several clai*s :or u pai4 attor e"7s :eesL ho9ever# all 9ere 4is*isse4 9ith :i alit". Also i the sa*e case# the estate7s a4*i istrator# Carlos +urrea# :ile4 a 6 ve tor" o: Properties le:t b" the 4ece4e t# 9hich 4i4 ot i itiall" i clu4e the propert" subDect o: this case. &he sai4 lot 9as i clu4e4 o l" subseCue tl" i the A*e 4e4 6 ve tor". Plai ti::s a 4 4e:e 4a t appeale4 the case to the CA. Plai ti::s<appella ts co te 4e4 that the R&C erre4> i uphol4i ' the vali4it" o: the suppose4 co tract o: attor e"7s :ees bet9ee Ricar4o a 4 4e:e 4a t< appella t 9hich provi4e4 :or the pa"*e t o: attor e"7s :ees i the :or* o: real propert" because such a a'ree*e t is prohibite4 b" Article 1%/1 o: the Civil Co4eL i li*iti ' its evaluatio o: the tra s:er o: ri'hts a 4 i terests i 4e:e 4a t<appela t7s :avor o l" o the basis o: 9hether the 4ee4 evi4e ci ' sai4 tra s:er o: ri'hts a 4 i terests 9as :or'e4# 9ithout re'ar4 to the :acts a 4 circu*sta ces surrou 4i ' its executio L i ot :i 4i ' that 4e:e 4a t<appella t has bee :ull" pai4 :or all the services he ha4 re 4ere4 :or Ricar4oL i ot Page 132

HELD* &he trial court hel4 that the tra sactio bet9ee petitio ers a 4 spouses 0el*es is a *ere co tract to sell. &hus# the latter 4i4 ot tra s:er o9 ership o: the house a 4 lot to petitio ers. &he te or o: the a:ore< Cuote4 provisio o: the co tract clearl" co :ir*s that the tra sactio bet9ee the 4e:e 4a ts a 4 the 0el*eses 9as ot a co tract o: sale# as 4e:i e4 b" Art. 1%5) o: the Civil Co4e. 6 4ee4# the true a'ree*e t bet9ee petitio ers a 4 spouses 0el*es is a co tract to sell. 3ot o l" 4i4 the parties 4e o*i ate their co tract as OCo tract to 0u" a 4 Sell#I but also speci:ie4 there i that the bala ce o: the purchase price i the a*ou t o: 13$# $$$.$$ is to be pai4 b" petitio ers upo the issua ce o: a certi:icate o: title. &hat spouses 0el*es have i their possessio the certi:icate o: title i 4icates that o9 ership o: the subDect properl" 4i4 ot pass to petitio ers.

&hus# the petitio is 4e ie4 a 4 the assaile4 2ecisio o: the Court o: Appeals 4ate4 3ove*ber 1)# 2$$2 i CA<+.R. C- 3o. ()5)3 A::ir*e4 "DA% DE GURREA "S% SUPLICO A<2?/ 26$ 2006 !ACTS*
&he lot i Cuestio situate4 at 2%5 Mar e Street# Sa !ua # Metro Ma ila 9as ori'i all" o9 e4 b" o e o: herei plai ti::s7 Attor e"<i <.act# Rosali a +urrea. &hat so*eti*e i 1/5)# Rosali a +urrea tra s:erre4 the o9 ership o: sai4 lot to A4eli a +urrea# 9hose o9 ership 9as evi4e ce4 b" &C& &hat A4eli a +urrea co ti ue4 to be the o9 er o: the lot u til her 4eath. &herea:ter# a special procee4i ' 9as i stitute4 to have the 9ill she execute4 4uri ' her li:eti*e probate4 a 4 to settle her estate. Ricar4o +urrea# represe te4 b" a 4 throu'h his cou sel Att". E riCue Suplico =the 4e:e 4a t@# :ile4 a Oppositio i Special Proc. 3o. 71)5. 6 co si4eratio o: sai4 represe tatio # Ricar4o +urrea a'ree4 to pa" Att". Suplico Ga co ti 'e t :ee o: t9e t" =2$J@ o: 9hatever is 4ue *e# either real or perso al propert". 2uri ' the pe 4e c" o: the procee4i 's a 4 upo the oral i structio s o: Ricar4o +urrea# Att". Suplico e'otiate4 9ith the other heirs o: A4eli a +urrea re'ar4i ' the tra s:er o: the piso =apart*e t buil4i '@ i Spai to Ricar4o +urrea7s 4au'hter# !uliet +urrea 4e Mele 4res. Ricar4o +urrea :urther i structe4 Att". Suplico ot to e ter i to a " settle*e t 9ith the heirs u less the piso is ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 4eclari ' the pa"*e t o: the subDect lot as attor e"7s :ees to be u co scio able base4 o the 'ui4eli es :or 4eter*i i ' attor e"7s :ees. O .ebruar" 2%# 2$$$# the CA re 4ere4 its 2ecisio a::ir*i '# in toto, the Du4'*e t o: the R&C. &he CA *ai tai e4 the lo9er court7s ruli ' that the plai ti::s< appella ts :aile4 to prese t clear a 4 co vi ci ' evi4e ce that 4e:e 4a t<appella t 4e:rau4e4 a 4 exerte4 u 4ue i :lue ce o Ricar4o i the latter7s executio o: the 4ee4 o: &ra s:er o: Ri'hts a 4 6 terest a 4 i co seCue tl" tra s:erri ' his o9 ership o: the Sa !ua lot i his =4e:e 4a t<appella t7s@ :avorL a 4 that base4 o the evi4e ce# the Sa !ua lot *a" be co si4ere4 as reaso able attor e"7s :ees :or 4e:e 4a t< appella t. ISSUE1S* 1. Fhether or ot the tra s:er o: ri'hts a 4 i terests violative o: Article 1%/1 o: the 3CC# there:ore ull a 4 voi4P 2. Fhether or ot the suppose4 co tract :or attor e"7s :ees i the :or* o: the *a i:estatio provi4i ' :or the pa"*e t out o: the properties i liti'atio is vali4P 3. Fhether or ot petitio ers are e title4 to the ca cellatio o: respo 4e t attor e"7s title over the propert" a 4 the reco ve"a ce thereo: to herei petitio ersP HELD* &he Court :i 4s the petitio *eritorious. A e t the :irst issue# it is ecessar" to resolve 9hether the subDect propert" 9as still the obDect o: liti'atio at the ti*e the 4ee4 o: &ra s:er o: Ri'hts a 4 6 terest i :avor o: respo 4e t 9as execute4L a 4 i: so# 9hether the sa*e shoul4 be co si4ere4 ull a 4 voi4 :or bei ' violative o: the provisio s o: Article 1%/1 o: the Civil Co4e.
Article 1%/1=5@ o: the Civil Co4e provi4es> 1%/1. &he :ollo9i ' perso s ca ot acCuire b" purchase# eve at a public or Du4icial auctio # either i perso or throu'h the *e4iatio o: a other> =5@ !ustices# Du4'es# prosecuti ' attor e"s# cler5s o: superior a 4 i :erior courts# a 4 other o::icers a 4 e*plo"ees co ecte4 9ith the a4*i istratio o: Dustice# the propert" a 4 ri'hts i liti'atio or levie4 upo a executio be:ore the court 9ithi 9hose Duris4ictio or territor" the" exercise their respective :u ctio sL this prohibitio i clu4es the act o: acCuiri ' b" assi' *e t a 4 shall appl" to la9"ers# 9ith respect to the propert" a 4 ri'hts 9hich *a" be the obDect o: a " liti'atio i 9hich the" *a" ta5e part b" virtue o: their pro:essio .

Fe a'ree 9ith the petitio ers7 u 4ispute4 co te tio that 9he the 4ee4 o: &ra s:er o: Ri'hts a 4 6 terest 9as execute4# the title over the subDect lot 9as still i the a*e o: A4eli a +urrea a 4 that it 9as o l" o October 7# 1/)$ that the title 9as tra s:erre4 i the a*e o: Ricar4o. &he rule is that as lo ' as the or4er :or the 4istributio o: the estate has ot bee co*plie4 9ith# the probate procee4i 's ca ot be 4ee*e4 close4 a 4 ter*i ate4. &he probate court loses Duris4ictio o: a estate u 4er a4*i istratio o l" a:ter the pa"*e t o: all the 4ebts a 4 the re*ai i ' estate 4elivere4 to the heirs e title4 to receive the sa*e. 6 the prese t case# 9hile the subDect lot 9as assi' e4 as Ricar4o7s share i the proDect o: partitio execute4 b" the heirs o: A4eli a +urrea# the title over the subDect lot 9as still i the a*e o: the latter a 4 9as ot "et co ve"e4 to Ricar4o 9he the &ra s:er o: Ri'hts a 4 6 terest 9as execute4. As correctl" cite4 b" petitio ers# the Court hel4 i 1ucero v. 0aNa'a that> StThe ter* G4eliver"G or tra4itio has t9o aspects> =1@ the 4e Dure 4eliver" or the executio o: 4ee4s o: co ve"a ce a 4 =2@ the 4eliver" o: the *aterial possessio =.lore 4o vs. .o,# 2$ Phil. 3))# 3/3@. &he usual practice is that# i: the la 4 to be 4elivere4 is i the a*e o: the 4ece4e t# the a4*i istrator executes a 4ee4# co ve"i ' the la 4 to the 4istributee. &hat 4ee4# to'ether 9ith the proDect o: partitio # the or4er approvi ' it# the letters o: a4*i istratio a 4 the certi:icatio as to the pa"*e t o: the estate# i herita ce a 4 realt" taxes# is re'istere4 i the correspo 4i ' Re'istr" o: 2ee4s. &itle 9oul4 the be issue4 to the 4istributee. &herea:ter# the a4*i istrator or executor places hi* i *aterial possessio o: the la 4 i: the sa*e is i the custo4" o: the :or*er. 6t :ollo9s that# si ce at the ti*e o: executio o: the 4ee4 o: &ra s:er o: Ri'hts a 4 6 terest# the subDect propert" still :or*e4 part o: the estate o: A4eli a# a 4 there bei ' o evi4e ce to sho9 that *aterial possessio o: the propert" 9as 'ive to Ricar4o# the probate procee4i 's co cer i ' A4eli a7s estate ca ot be 4ee*e4 to have bee close4 a 4 ter*i ate4 a 4 the subDect propert" still the obDect o: liti'atio . 8avi ' bee establishe4 that the subDect propert" 9as still the obDect o: liti'atio at the ti*e the subDect 4ee4 o: &ra s:er o: Ri'hts a 4 6 terest 9as execute4# the assi' *e t o: ri'hts a 4 i terest over the subDect propert" i :avor o: respo 4e t is ull a 4 voi4 :or bei ' violative o: the provisio s o: Article 1%/1 o: the Civil Co4e 9hich expressl" prohibits la9"ers :ro* acCuiri ' propert" or ri'hts 9hich *a" be the obDect o: Page 133

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Civil Law Review 2 2013 - 2014 a " liti'atio i 9hich the" *a" ta5e part b" virtue o: their pro:essio . Article 1%$/ o: the sa*e Co4e provi4es# a*o ' others# that co tracts 9hich are expressl" prohibite4 or 4eclare4 voi4 b" la9 are co si4ere4 i existe t a 4 voi4 :ro* the be'i i '. A e t the seco 4 issue# the Court has alrea4" hel4 that the sai4 propert" is still the obDect o: liti'atio at the ti*e the subDect Ma i:estatio a 4 &ra s:er o: Ri'hts a 4 6 terest 9ere execute4 a 4# thus# *a" ot be acCuire4 b" respo 4e t pursua t to the provisio s o: Article 1%/1 o: the Civil Co4e. As to the thir4 issue# it :ollo9s that respo 4e t7s title over the subDect propert" shoul4 be ca celle4 a 4 the propert" reco ve"e4 to the estate o: Ricar4o# the sa*e to be 4istribute4 to the latter7s heirs. &his is 9ithout preDu4ice# ho9ever# to respo 4e t7s ri'ht to clai* his attor e"7s :ees :ro* the estate o: Ricar4o# it bei ' u 4ispute4 that he re 4ere4 le'al services :or the latter. OLES "S% IAC -'(.'20 31$ 1989 !ACTS* !err" Moles=petitio er@ bou'ht :ro* Maria o 2iolosa o9 er o: 2iolosa Publishi ' 8ouse a li ot"pe pri ti ' *achi e=seco 4ha 4 *achi e@. Moles pro*ise4 2iolosa that 9ill pa" the :ull a*ou t a:ter the loa :ro* 20P 9orth P5$#$$$.$$ 9ill be release4. Private respo 4e t o retur issue4 a certi:icatio 9herei he 9arrate4 that the *achi e 9as i A<1 co 4itio # to'ether 9ith other express 9arra ties. A:ter the release o: the o: the *o e" :ro* 20P# Petitio er reCuire4 the Respo 4e t to acco*plish so*e o: the reCuire*e ts. O 9hich the 4epe 4a t co*plie4 the reCuire*e ts o the sa*e 4a". O 3ove*ber 2/# 1/77# petitio er 9rote private respo 4e t that the *achi e 9as ot :u ctio i ' properl". &he petitio er :ou 4 out that the sai4 *achi e 9as ot i 'oo4 co 4itio as experts a4vise4 a 4 it 9as 9orth lesser tha the purchase price. A:ter several telepho e calls re'ar4i ' the 4e:ects i the *achi e# private respo 4e t se t t9o tech icia s to *a5e ecessar" repairs but the" :aile4 to put the *achi e i ru i ' co 4itio a 4 si ce the the petitio er 9a u able to use the *achi e a "*ore. ISSUE1S* 1. Fhether there is a i*plie4 9arra t" o: its Cualit" or :it ess. ARAFAG HABANA JALAYAJAY

2. Fhether the hi44e 4e:ects i the *achi e is su::icie t to 9arra t a rescissio o: the co tract bet9ee the parties.

HELD* 1. 6t is 'e erall" hel4 that i the sale o: a 4esi' ate4 a 4 speci:ic article sol4 as seco 4 ha 4# there is o i*plie4 9arra t" as to its Cualit" or :it ess :or the purpose i te 4e4# at least 9here it is subDect to i spectio at the ti*e o: the sale. O the other ha 4# there is also authorit" to the e::ect that i a sale o: seco 4 ha 4 articles there *a" be# u 4er so*e circu*sta ces# a i*plie4 9arra t" o: :it ess :or the or4i ar" purpose o: the article sol4 or :or the particular purpose o: the bu"er.

Sai4 'e eral rule# ho9ever# is exceptio s. Article 15(2 o: our Civil Co4e# ta5e :ro* the E i:or* Sales Act# provi4es> GArt. 15(2. 6 a sale o: 'oo4s# there is 9arra t" or co 4itio as to the Cualit" or :it 'oo4s# as

ot 9ithout 9hich 9as a i*plie4 ess o: the :ollo9s>

=1@ Fhere the bu"er# expressl" or b" i*plicatio # *a5es 5 o9 to the seller the particular purpose :or 9hich the 'oo4s are acCuire4# a 4 it appears that the bu"er relies o the sellerKs s5ill or Du4'*e t =9hether he be the 'ro9er or *a u:acturer or ot@# there is a i*plie4 9arra t" that the 'oo4s shall be reaso abl" :it :or such purposeLG 2. Fe have to co si4er the rule o re4hibitor" 4e:ects co te*plate4 i Article 15(1 o: the Civil Co4e. A re4hibitor" 4e:ect *ust be a i*per:ectio or 4e:ect o: such ature as to e 'e 4er a certai 4e'ree o: i*porta ce. A i*per:ectio or 4e:ect o: little co seCue ce 4oes ot co*e 9ithi the cate'or" o: bei ' re4hibitor". As alrea4" arrate4# a expert 9it ess :or the petitio er cate'oricall" establishe4 that the *achi e reCuire4 *aDor repairs be:ore it coul4 be use4. &his# plus the :act that petitio er ever *a4e appropriate use o: the *achi e :ro* the ti*e o: purchase u til a actio 9as :ile4# attest to the *aDor 4e:ects i sai4 *achi e# b" reaso o: 9hich the rescissio o: the co tract o: sale is sou'ht. &he :actual :i 4i '# there:ore# o: the trial court that the *achi e is ot reaso abl" :it :or the particular purpose :or 9hich it 9as i te 4e4 *ust be uphel4# there bei ' a*ple evi4e ce to sustai the sa*e. Page 134

Civil Law Review 2 2013 - 2014 Electrolux7s bra ch *a a'er o::ere4 to cha 'e the 9ater puri:ier 9ith a other bra 4 or a " o: its applia ce o: the u it i her :avor. Petitio er 4i4 ot accept it as she 9as 4isappoi te4 9ith the ori'i al u it 9hich 4i4 ot per:or* as 9arra te4. ISSUE* Fhether or ot the petitio er is e title4 to resci 4 the co tract o the basis o: a violatio o: the 9arra t" o: the article 4elivere4 b" the respo 4e t HELD* BES. At the ti*e the Electrolux ACua +uar4 9ater puritier 9as 4elivere4 a 4 i stalle4 at petitio er -illostas7 resi4e ce a Farra t" Certi:icate 9as issue4 b" private respo 4e t Electrolux 9hich provi4es that the pro4uct 9ill per:or* e::icie tl" :or o e :ull "ear :ro* 4ate o: ori'i al purchase. 6t clearl" expresses 9arra t" re'ar4i ' the e::icie c" o: the 9ater puri:ier. O this re'ar4# 9hile it is true that Article 1571 o: the Civil Co4e provi4es :or a prescriptive perio4 o: six *o ths :or a re4hibitor" actio # a cursor" rea4i ' o: the te prece4i ' articles to 9hich it re:ers 9ill reveal that sai4 rule *a" be applie4 o l" i case o: i*plie4 9arra ties. &he prese t case i volves o e 9ith a express 9arra t". A e t the Duris4ictio al co*pete ce o: the Metropolita &rial Court to or4er rescissio o: co tract# su::ice it to sa" that the actio 9as i itiate4 b" herei private respo 4e t Electrolux 9he it :ile4 a co*plai t :or collectio o: a su* o: *o e" 9orth P1%#5%$.$$# a'ai st petitio er -illostas. Sai4 a*ou t is i 4ubitabl" 9ithi the Duris4ictio o: the Metropolita &rial Court si ce it 4oes ot excee4 P2$#$$$.$$ exclusive o: i terest a 4 costs but i clusive o: 4a*a'es o: 9hatever =Mace4a v. CA# +.R. 3o. )35%5# 17( SCRA %%$ S1/)/T@. Moreover# the Duris4ictio o: the court over the subDect *atter is 4eter*i e4 b" the alle'atio s o: the co*plai t irrespective o: 9hether or ot the plai ti:: is e title4 to recover upo all or so*e o: the clai*s asserte4 therei =Caparros v. CA# +.R. 3o. 5()$3# 17$ SCRA 75) S1/)/T@. Fhe the petitio er# there:ore# raise4 rescissio o: co tract i her a s9er# the court is ot 4iveste4 o: its Duris4ictio over the case o accou t o: 4e:e ses raise4 b" the a s9er. &he court is the *erel" authori,e4 to receive evi4e ce thereo =2ela Cru, v. 0autista# +.R. 3o. 3/(/2# 1)( SCRA 517# S1//$T@. Clearl"# the Duris4ictio o: the court ca ot be *a4e to 4epe 4 upo the 4e:e ses set up i the a s9er or upo the *otio to 4is*iss. Other9ise# the Cuestio o: Duris4ictio 9oul4 4epe 4 al*ost e tirel" upo the 4e:e 4a t =Caparros v. CA# s"pra.@. SPOUSES UY "S% ARI4A

At a belate4 sta'e o: this appeal# private respo 4e t ca*e up :or the :irst ti*e 9ith the co te tio that the actio :or rescissio is barre4 b" prescriptio . Fhile it is true that Article 1571 o: the Civil Co4e provi4es :or a prescriptive perio4 o: six *o ths :or a re4hibitor" actio # a cursor" rea4i ' o: the te prece4i ' articles to 9hich it re:ers 9ill reveal that sai4 rule *a" be applie4 o l" i case o: i*plie4 9arra ties. &he prese t case i volves o e 9ith a express 9arra t". Co seCue tl"# the 'e eral rule o rescissio o: co tract# 9hich is :our "ears shall appl". Co si4eri ' that the ori'i al case :or rescissio 9as :ile4 o l" o e "ear a:ter the 4eliver" o: the subDect *achi e# the sa*e is 9ell 9ithi the prescriptive perio4. &his is asi4e :ro* the 4octri al rule that the 4e:e se o: prescriptio is 9aive4 a 4 ca ot be co si4ere4 o appeal i: ot raise4 i the trial court# a 4 this case 4oes ot have the :eatures :or a exceptio to sai4 rule. "ILLOSTAS "S% CA -.(7 26$ 1992 !ACTS* Petitio er -illostas a 4 her husba 4 place4 a or4er :or o e u it o: 9ater puri:ier :ro* private respo 4e t7s Electrolux sales a'e ts. Private respo 4e t7s sales a'e ts assure4 petitio er o: the ver" special :eatures o: their bra 4 o: 9ater puri:ier. O Septe*ber 13# 1/)(# a Electrolux ACua +uar4 Fater puri:ier 9as 4elivere4 a 4 i stalle4 at petitio er7s resi4e ce. Petitio er si' e4 the Sales Or4er a 4 the Co tract o: Sale 9ith Reservatio o: &itle i October 1/)(. A 9arra t" certi:icate 9as issue4 b" private respo 4e t 9hich provi4es that the pro4uct 9ill per:or* e::icie tl" :or o e :ull "ear :ro* 4ate o: ori'i al purchase. &he purchase o: sai4 u it 9as o i stall*e t basis u 4er 9hich petitio er 9oul4 pa" the a*ou t o: P1(#1/$.$$ i 2$ *o thl" i stall*e ts o: P(35.$$ a *o th. 8o9ever# a:ter t9o =2@ 9ee5s# petitio er verball" co*plai e4 about the i*purities# 4irti ess a 4 ba4 o4or co*i ' out o: the u it. &hus# private respo 4e t Electrolux cha 'e4 the :ilter o: the u it. Petitio er co*plai e4 :or the seco 4 a 4 thir4 ti*e 9he 4irt" 9ater still ca*e out o: the 9ater puri:ier a:ter the replace*e t o: the :ilter. 6t 9as o the thir4 co*plai t o: petitio er 9he the service tech icia 'ave a4vise that the :ilter shoul4 be cha 'e4 ever" six =(@ *o ths costi ' about P3$$.$$ 9hich 9as co si4ere4 to be u eco o*ical b" the :or*er. O 2ece*ber /# 1/)(# petitio er se t a letter to the private respo 4e t7s bra ch *a a'er stati ' therei her co*plai t that the actual per:or*a ce o: the carbo :ilter 9as o l" :or a *o th i stea4 o: the private respo 4e t7s clai* that the replace*e t o: such :ilter 9ill be o l" o ce ever" six =(@ *o ths. &he petitio er# citi ' the above i ci4e t as u eco o*ical# 4eci4e4 to retur the u it a 4 4e*a 4 a re:u 4 :or the a*ou t pai4. ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014 ISSUE* !ACTS* Spouses E"# petitio ers# purchase4 2$$ sCuare *eters o: the parcel o: la 4 :ro* respo 4e ts. &he co tract stipulate4 that petitio ers ha4 the ri'ht o: choice to 4esi' ate 9hich portio o: the la 4 9oul4 be the subDect o: the sale. Petitio ers exercise4 their ri'ht to choose 9ithi t9o to three *o ths :ro* the sale# i :or*i ' respo 4e ts that the" have selecte4 a 4 i :act occupie4 arou 4 2$$ sCuare *eters o: a portio o: la 4. petitio ers purchase4 a other 2$$ sCuare *eters o: the sa*e la 4 9ith the sa*e optio to choose 9hich portio . &he" selecte4 a 4 occupie4 a a4Doi i ' portio to the lot i their :irst sale appears that the parcels o: la 4 petitio ers ha4 chose a 4 occupie4 9ere alrea4" title4 i the a*es o: the 2el'a4os. 8o9ever# the parcels o: la 4 petitio ers ha4 chose a 4 occupie4 9ere alrea4" title4 i the a*es o: the 2el'a4os. Petitio ers 9ere sue4 :or u la9:ul 4etai er b" the 2el'a4os. &he # petitio ers e tere4 i to a co*pro*ise a'ree*e t 9ith the 2el'a4os a 4 surre 4ere4 possessio o: the subDect parcels o: la 4. Petitio ers co*pro*ise4 the case 9ithout 'ivi ' otice to respo 4e ts. &herea:ter# petitio ers 4e*a 4e4 :ro* respo 4e ts that the" be allo9e4 to choose a'ai :ro* sai4 propert". Fhe respo 4e ts re:use4# petitio ers :ile4 a case :or speci:ic per:or*a ce 9ith 4eliver" o: possessio o: real propert" a 4 4a*a'es. Petitio ers a chore4 their clai* :or speci:ic per:or*a ce o the aver*e t that the" coul4 ot exercise their ri'ht to choose the portio bou'ht :ro* the parcel o:la 4 a:ore< 4escribe4 because the portio poi te4 out b" the petitio ers 9ere alrea4" sol4 a 4 clai*e4 b" thir4 perso s. Respo 4e ts :ile4 their a s9er a 4 b" 9a" o: special a 4 a::ir*ative 4e:e ses alle'e4 that the" ha4 alrea4" co*plie4 9ith their obli'atio to 4eliver# as petitio ers ha4 alrea4" chose a 4 bee i possessio o: the parcels o: la 4 the" chose. Respo 4e ts also :aulte4 petitio ers :or losi ' possessio o: the parcels o: la 4 b" e teri ' i to a co*pro*ise a'ree*e t 9ith the 2el'a4os o t9o 'rou 4s> first # because respo 4e ts have alle'e4l" i itiate4 the ecessar" le'al steps to 4e:e 4 their possessor" ri'hts to the 4ispute4 la 4 b" :ili ' a case :or the 4eclaratio o: ullit" o: the title o: the 2el'a4os# a 4 second # because petitio ers :aile4 to i terpose a thir4<part" co*plai t to i*plea4 respo 4e ts i the u la9:ul 4etai er case. &he RtC 4is*isse4 the co*plai t. &he Ca a::ir*e4 the 4ecisio o: the RtC. Fhether or ot the re*e4" o: the petitio ers is a actio :ro e :orce*e t o: 9arra t" a'ai st evictio P HELD* Bes. 6t is a clear case o: evictio . &he case :or speci:ic per:or*a ce 9hich 9as :ile4 b" petitio ers a'ai st respo 4e ts is ot the proper re*e4" i this case. Rather# sai4 actio 9as purel" a a:terthou'ht o the part o: petitio ers 9he the" 9ere eve tuall" evicte4 :ro* the lots the" bou'ht :ro*respo 4e ts. &he :acts o: the case are ver" clear. Petitio ers bou'ht :ro* respo 4e ts a 2$$ sCuare *eter lot 9hich 9as part o: a bi''er parcel o: la 4 re'istere4 i the a*es o: respo 4e ts# a 4 9hich petitio ers i**e4iatel" too5 possessio o:. A:ter a "ear# petitio ers a'ai bou'ht :ro* respo 4e ts a 4 too5 possessio o: the a4Dace t lot also *easuri ' 2$$ sCuare *eters. Si ce the sale# petitio ers ha4 bee i peace:ul possessio o: the lots u til the" 9ere evicte4 :ro* the sa*e b" thir4 perso s clai*i ' to be the o9 ers :or the e :orce*e t o: 9arra t" a'ai st evictio a 4 ot o e :or speci:ic per:or*a ce. &hus# the actio :or speci:ic per:or*a ce :ile4 b" petitio ers a'ai st respo 4e ts *ust ecessaril" :ail. 6: at all# petitio ers *a" :ile a actio :or the e :orce*e t o: 9arra t" i case o: evictio 9hich ever" ve 4or o: a parcel o: la 4 is e Doi e4 b" la9 to 'uara tee as provi4e4 u 4er Article 15%) o: the 3e9 Civil Co4e> Art. 15%). Evictio shall ta5e place 9he ever b" a :i al Du4'*e t base4 o a ri'ht prior to the sale or a act i*putable to the ve 4or# the ve 4ee is 4eprive4 o: the 9hole or part o: the thi ' purchase4. &he ve 4or shall a s9er :or the evictio eve thou'h othi ' has bee sai4 i the co tract o the subDect. &he co tracti ' parties# ho9ever# *a" i crease# 4i*i ish or suppress this le'al obli'atio o: the ve 4or.0ut eve i: Spetitio ersT 9oul4 :ile a actio :or the e :orce*e t o: 9arra t" i case o: evictio a'ai st Srespo 4e tsT# Fe are a:rai4 that the sa*e 9ill ot prosper. &he recor4s o: the case reveal that the u la9:ul 4etai er case :ile4 b" thir4 perso s a'ai st Spetitio ersT# 9hich le4 to the ouster o: the latter :ro* the subDect lots# 9as 4eci4e4 b" co*pro*ise a'ree*e t 9ithout i*plea4i ' Srespo 4e tsT as thir4< part" 4e:e 4a ts. 6t shoul4 be stresse4 that i or4er :or the case to prosper# it is a preco 4itio that the seller *ust have bee su**o e4 i the suit :or the evictio o: the bu"er. &his rule is provi4e4 u 4er the provisio s o: Articles 155) a 4 155/ o: the 3e9 Civil Co4e# to 9it>

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Civil Law Review 2 2013 - 2014 Art. 155). &he ve 4or shall ot be obli'e4 to *a5e 'oo4 the proper 9arra t"# u less he is su**o e4 i the suit :or evictio at the i sta ce o: the ve 4ee. Art. 155/. &he 4e:e 4a t ve 4ee shall as5# 9ithi the ti*e :ixe4 i the Rules o: Court :or a s9eri ' the co*plai t# that the ve 4or be *a4e a co<4e:e 4a t. 6 or4er that a ve 4or7s liabilit" :or evictio *a" be e :orce4# the :ollo9i ' reCuisites *ust co cur ? a@ there *ust be a :i al Du4'*e tL b@ the purchaser has bee 4eprive4 o: the 9hole or part o: the thi ' sol4L c@ sai4 4eprivatio 9as b" virtue o: a ri'ht prior to the sale *a4e b" the ve 4orL a 4 4@ the ve 4or has bee su**o e4 a 4 *a4e co<4e:e 4a t i the suit :or evictio at the i sta ce o: the ve 4ee. 6 the case at bar# the :ourth reCuisite ? that o: bei ' su**o e4 i the suit :or evictio at the i sta ce o: the ve 4ee ? is ot prese t. DE GU4 AN "S% TOYOTA !ACTS* Petitio er purchase4 :ro* respo 4e t a bra 4 e9 9hite &o"ota 8i<1ux 2.% SS 4ouble cab *otor vehicle# 1//( *o4el# i the a*ou t o: P5$)#$$$. Petitio er *a4e a 4o9 pa"*e t o: P152#%$$# leavi ' a bala ce o: P355#($$ 9hich 9as pa"able i 3( *o ths 9ith 5%J i terest. &he vehicle 9as 4elivere4 to petitio er t9o 4a"s later. O October 1)# 1//)# petitio er 4e*a 4e4 the replace*e t o: the e 'i e o: the vehicle because it 4evelope4 a crac5 a:ter traversi ' Marcos 8i'h9a" 4uri ' a heav" rai . Petitio er asserte4 that respo 4e t shoul4 replace the e 'i e 9ith a e9 o e base4 o a i*plie4 9arra t". Respo 4e t cou tere4 that the alle'e4 4a*a'e o the e 'i e 9as ot covere4 b" a 9arra t". Petitio er :ile4 a co*plai t :or 4a*a'es a'ai st respo 4e t 9ith the R&C. Respo 4e t *ove4 to 4is*issthe case o the 'rou 4 that u 4er Article 1571 o: the Civil Co4e# the petitio er7s cause o: actio ha4 prescribe4 as the case 9as :ile4 *ore tha six *o ths :ro* the 4ate the vehicle 9as sol4 a 4Qor 4elivere4 &he R&C 4is*isse4 the co*plai t a 4 a::ir*e4 b" the CA. Si ce o 9arra t" car4 or a'ree*e t 9as attache4 to the co*plai t# the co tract o: sale o: the subDect pic5<up carrie4 a i*plie4 9arra t" that it 9as :ree :ro* a " hi44e :aults or 4e:ects# or a " char'e or e cu*bra ce ot 4eclare4 or 5 o9 to the bu"er. &he prescriptive perio4 thereo: is six =(@ *o ths u 4er the Civil Co4e =Art. 1571@. Accor4i ' to the R&C a 4 CA# i the Civil Co4e# a re4hibitor" actio :or violatio o: a i*plie4 9arra t" a'ai st hi44e 4e:ects prescribes i six =(@ *o ths# ARAFAG HABANA JALAYAJAY ISSUE* Fhether the actio prescribe4.P o: the petitio er has 9hile i: it base4 o a express 9arra t"S#T the actio prescribes i :our =%@ "ears. E 4er RA 3o. 73/%# the i*plie4 9arra t" ca ot be *ore tha o e =1@ "earL ho9ever# the i*plie4 9arra t" ca o l" be o: eCual 4uratio to that a express 9arra t" 9he the i*plie4 9arra t" o: *ercha tabilit" acco*pa ies a express 9arra t" =Art. ()# par. SeT@. &here:ore# the prescriptive perio4 o: t9o "ears u 4er Art. 1(/ 4oes ot cover a i*plie4 9arra t"# 9hich is ot acco*pa ie4 b" a express 9arra t". 6t is applicable to cases 9here there is a express 9arra t" i the sale o: the co su*er pro4uct. Si ce the case 9as :ile4 al*ost i etee =1/@ *o ths :ro* StheT sale a 4Qor 4eliver". Appl"i ' Art. 1571 o: Civil Co4e# the actio is barre4 b" prescriptio because the co*plai t 9as :ile4 *ore tha six =(@ *o ths a:ter the sale a 4Qor 4eliver" o: the vehicle. 6 a44itio # the 4uratio o: the i*plie4 9arra t" o: ot *ore tha o e =1@ "ear u 4er Art. ()# par =e@ o: RA 3o. 73/% has alrea4" elapse4.

HELD* Petitio er7s ar'u*e t is erro eous. Article 1%/5 o: the Civil Co4e states that i a co tract o: salethe ve 4or is bou 4 to tra s:er the o9 ership o: a 4 to 4eliver the thi ' that is the obDect o: sale. Corollaril"# the perti e t provisio s o: the Co4e set :orth the available re*e4ies o: a bu"er a'ai st the seller o the basis o: a 9arra t" a'ai st hi44e 4e:ects>
Art. 15(1. &he ve 4or shall be respo sible :or 9arra t" a'ai st the hi44e 4e:ects 9hich the thi ' sol4 *a" have# shoul4 the" re 4er it u :it :or the use :or 9hich it is i te 4e4# or shoul4 the" 4i*i ish its :it ess :or such use to such a exte t that# ha4 the ve 4ee bee a9are thereo:# he 9oul4 ot have acCuire4 it or 9oul4 have 'ive a lo9er price :or itL but sai4 ve 4or shall ot be a s9erable :or pate t 4e:ects or those 9hich *a" be visible# or :or those 9hich are ot visible i: the ve 4ee is a expert 9ho# b" reaso o: this tra4e or pro:essio # shoul4 have 5 o9 the*. Art. 15((. &he ve 4or is respo sible to the ve 4ee :or a " hi44e :aults or 4e:ects i the thi ' sol4# eve thou'h he 9as ot a9are thereo:. &his provisio shall ot appl" i: the co trar" has bee stipulate4 a 4 the ve 4or 9as ot a9are o: the hi44e :aults or 4e:ects i the thi ' sol4.

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Art. 1571. Actio s arisi ' :ro* the provisio s o: the prece4i ' te articles shall be barre4 a:ter six *o ths :ro* the 4eliver" o: the thi ' sol4.

E 4er Article 15// o: the Civil Co4e# o ce a express 9arra t" is breache4# the bu"er ca accept or 5eep the 'oo4s a 4 *ai tai a actio a'ai st the seller :or 4a*a'es. 6 the abse ce o: a existi 'express 9arra t" o the part o: the respo 4e t# as i this case# the alle'atio s i petitio er7s co*plai t :or 4a*a'es 9ere clearl" a chore4 o the e :orce*e t o: a i*plie4 9arra t" a'ai st hi44e 4e:ects# i.e .# that the e 'i e o: the vehicle 9hich respo 4e t ha4 sol4 to hi* 9as ot 4e:ective. 0" :ili ' a case# petitio er 9a ts to hol4 respo 4e t respo sible :or breach o: i*plie4 9arra t" :or havi ' sol4 a vehicle 9ith 4e:ective e 'i e. Such bei ' the case# petitio er shoul4 have exercise4 this ri'ht 9ithi six *o ths :ro* the 4eliver" o: the thi ' sol4 *ore tha i etee *o ths :ro* the 4ate o: the 4eliver" o: the *otor vehicle# his cause o: actio ha4 beco*e ti*e<barre4. GOODYEAR PHILIPPINES "S% SY !ACTS* &he vehicle 9as ori'i all" o9 e4 b" +oo4"ear Philippi es# 9hich it purchase4 :ro* 6 4ustrial a 4 &ra sport ECuip*e t# 6 c. i 1/)3. 6t ha4 bee use4 b" the petitio er si ce bee i the service 9he it 9as hiDac5e4. &his hiDac5i ' 9as reporte4 to the Philippi e 3atio al Police 9hich issue4 out a alert alar* o the sai4 vehicle as a stole o e. 6t 9as later o recovere4 a 4 sol4 to respo 4e t S" a 4 later sol4 to !ose 1ee. 0ut the 1ee :ile4 a actio :or rescissio o: co tract 9ith 4a*a'es a'ai st S" because he coul4 ot re'ister the vehicle i his a*e 4ue to the certi:icatio :ro* the P3P Re'io al &ra::ic Ma a'e*e t O::ice that it 9as a stole vehicle a 4 the alar* coveri ' the sa*e 9as ot li:te4. 6 stea4# the P3P i*pou 4e4 the vehicle a 4 char'e4 1ee cri*i all". Petitio er 9as i*plea4e4 as the thir4 part" 4e:e 4a t b" S". A *otio to 4is*iss 9as :ile4 b" petitio er o the t9i 'rou 4s that the co*plai t :aile4 to state a cause o: actio a 4 eve i: it 4i4# such cause o: actio 9as alrea4" exti 'uishe4. &he R&C 'ra te4 the *otio o: the petitio er. 8o9ever# the CA reverse4 the R&C a 4 reaso e4 that the Co*plai t ha4 state4 a cause o: actio . 2eca"se petitio er 4i4 ot *a5e 'oo4 its 9arra t" i the 2ee4 o: Sale> to co ve" the vehicle to Respo 4e t A tho " S" :ree :ro* all lie s# e cu*bra ces a 4 le'al i*pe4i*e ts. &he reporte4 hiDac5i ' o: the vehicle 9as a le'al i*pe4i*e t that preve te4 its subseCue t sale. A 4 also Respo 4e t S" ha4 a ri'ht to protect a 4 a 9arra t" to e :orce# 9hile petitio er ha4 the correspo 4i ' obli'atio to ho or that 9arra t". &he latter cause4 the i*pair*e t o: that ri'ht# thou'h# 9he the vehicle it ha4 sol4 to hi* 9as re:use4 ARAFAG HABANA JALAYAJAY

re'istratio # because o: the o <li:ti ' o: the alert status issue4 at its i sta ce. &hat petitio er ha4 to execute all 4ocu*e ts ecessar" to co :er a per:ect title to hi* be:ore he coul4 see5 recourse to the courts 9as 4ee*e4 a lu4icrous co 4itio prece4e t# because it coul4 easil" re:use to :ul:ill that co 4itio i or4er to obviate the :ili ' o: a case a'ai st it. ISSUE* Fhether or ot petitio er breach the i*plie4 9arra t" a'ai st hi44e e cu*bra cesP HELD* Petitio er 4i4 ot brech the i*plie4 9arra t" a'ai st hi44e e cu*bra ces. Petitio er 4i4 ot breach the i*plie4 9arra t" a'ai st hi44e e cu*bra ces. &he subDect vehicle that ha4 earlier bee stole b" a thir4 part" 9as subseCue tl" recovere4 b" the authorities a 4 restore4 to petitio er# its ri'ht:ul o9 er. Fhether S" ha4 5 o9le4'e o: the loss a 4 subseCue t recover"# the :act re*ai e4 that the vehicle co ti ue4 to be o9 e4 b" petitio er# :ree :ro* a " char'e or e cu*bra ce 9hatsoever. &he Co*plai t 4i4 ot alle'e that petitio er ha4 a cre4itor 9ith a le'al ri'ht to or i terest i the subDect vehicle. &here 9as o i 4icatio either o: a " 4ebt that 9as secure4 b" the vehicle. 6 :act# there 9as ot eve a " clai*# liabilit" or so*e other ri'ht attache4 to the vehicle that 9oul4 lesse its value. 6ts i*pou 4*e t# as 9ell as the re:usal o: its re'istratio # 9as ot the hi 4ra ce or obstructio i the co te*platio o: la9 that the ve 4or 9arra te4 a'ai st. 3either o: those i sta ces arose :ro* a " liabilit" or obli'atio that coul4 be satis:ie4 b" a le'al clai* or char'e o # or propert" ri'ht to << other tha a o9 ership i terest i << the subDect vehicle. Assu*i ' that there 9as a breach o: the i*plie4 9arra t" a'ai st hi44e e cu*bra ces# otice o: the breach 9as ot 'ive to petitio er 9ithi a reaso able ti*e. Article 15)( o: the Civil Co4e reCuirethat otice be 'ive a:ter the breach# o: 9hich S" ou'ht to have 5 o9 . 6 his Co*plai t a'ai st petitio er# there 9as o alle'atio that respo 4e t ha4 'ive petitio er the reCuisite otice. More i*porta t# a actio :or 4a*a'es :or a breach o: i*plie4 9arra ties *ust be brou'ht 9ithi six *o ths ro* the 4eliver" o: the thi ' sol4.&he vehicle 9as u 4erstoo4 to have bee 4elivere4 to S" 9he it 9as place4 i his co trol or possessio . Epo executio o: the 2ee4 o: Sale# co trol a 4 possessio o: the vehicle 9as tra s:erre4 to respo 4e t. &hat the vehicle ha4 bee 4elivere4 is bolstere4 b" the :act that o co trar" alle'atio 9as raise4 i the &hir4<Part" Co*plai t. Fhether the perio4 Page 136

Civil Law Review 2 2013 - 2014 shoul4 be rec5o e4 :ro* the actual or :ro* the co structive 4eliver" throu'h a public i stru*e t# *ore tha six *o ths ha4 lapse4 be:ore the :ili ' o: the Co*plai t. Moreover# the ar'u*e t that there 9as a breach o: the i*plie4 9arra t" a'ai st evictio 4oes ot hol4 9ater# :or there 9as ever a " :i al Du4'*e t base4 o either a ri'ht prior to the saleL or a act that coul4 be i*pute4 to petitio er a 4 4eprive S" o: o9 ership or possessio o: the vehicle purchase4. "ILLARICA "S% CA !ACTS* Spouses -illarica sol4 to the spouses Mo tever4e a lot co tai i ' a area o: 1#17% sCuare*eters situate4 i 4vao :or the price o: P35#$$$. O the sa*e 4a"# spouses co su Di execute4 a other public i stru*e t 9hereb" the" 'ra te4 the spouses -illarica a optio to bu" the sa*e propert" 9ithi a perio4 o: o e "ear :or the price o: P37#$$$. &he Spouses Co su Di re'istere4 the absolute 4ee4 o: sale i co seCue ce o: 9hich the proert" 9as ca celle4 i the a*e o: spouses -illarica a 4 issue4 i :avor the*. &he spouses co su Di sol4 the propert" to !ovito .ra cisco :or the price o: P%7#$$$ b" *ea s o: public i stru*e t o: sale. &he the &C& 9as issue4 i the a*e o: !ovito .ra cisco. Spouses -illarica brou'ht a actio i the C.6 o: 4avao a'ai st the Spouses Co su Di a 4 !ovito .ra cisco :or the re:or*atio o: the i stru*e t o: absolute sale i to a eCuitable *ort'a'e as a securit" :ro* a usurious loa o: P2)#$$$ alle'i ' that such 9as the real i te tio o: the parties. 2e:e 4a ts a s9ere4 that the 4ee4 o: absolute sale expresse4 the real i te tio o: the parties a 4 the" also alle'e4 a cou terclai* :or su*s o: *o e" borro9e4 b" Spouses -illaricas :ro* the spouses co su Ds 9hich 9ere the 4ue a 4 4e*a 4able. ISSUE* Fhether the i stru*e t is a co tract o: sale 9ith pacto 4e retro sale or a optio to bu"P HELD* &he 6 stru*e t is a co tract o: sale 9ith a optio to bu". &he spouses as the e9 o9 ers o: the propert" 'ra te4 the spouses -illaricas a optio to bu" 9ithi the perio4 o: o e "ear :ro* the executio o: the i stru*e t. Sai4 optio to bu" is 4i::ere t a 4 4isti ct :ro* the ri'ht to repurchase 9hich *ust be reserve4 b" the ve 4or# b" stipulatio to that e::ect# i the co tract o: sale. &his is clear :ro* article 1($1 ARAFAG HABANA JALAYAJAY o: the civil co4e# 9hich provi4es> Co ve tio al re4e*ptio shall ta5e place 9he the ve 4or reserves the ri'ht to repurchase the thi ' sol4# 9ith the obli'atio to co*pl" 9ith the provisio s o: art 1(1( a 4 other stipulatio 9hich *a" have a'ree4 upo . &he ri'ht o: repurchase is ot a ri'ht 'ra te4 b" the ve 4or b" the ve 4ee i a subseCue t i stru*e t but is a ri'ht reserve4 b" the ve 4or i the sa*e i stru*e t o: sale as o e o: the stipulatio s o: the co tract. O ce the i stru*e t o: absolute sale is execute4# the ve 4or ca o lo 'er reserve the ri'ht to repurchase a 4 a " ri'ht therea:ter 'ra te4 to the ve 4or b" the ve 4ee i a separate i stru*e t ca ot be a ri'ht o: repurchase but so*e other ri'ht lie the optio to bu". Si ce the i stru*e t 'ra te4 a optio to bu"# the exte sio o: the perio4 o: o e "ear :or the exercise o: the optio b" o e *o th 4oes ot :all u 4er o.3 o: Art 1($2 o: Civil co4e# 9hich provi4es that> 9he upo or a:ter the expiratio o: the ri'ht to repurchase a other i stru*e t exte 4i ' the perio4 o: re4e*ptio or 'ra ti ' a e9 perio4 is execute4. IRENEO LEAL A&% IAC !ACTS* O March 21# 1/%1# 9he a 4ocu*e t e title4 GCo*prave ta#G 9ritte e tirel" i the Spa ish la 'ua'e# i volvi ' three parcels o: la 4# 9as execute4 b" the private respo 4e tKs pre4ecessors<i i terest# -ice te Sa tia'o a 4 his brother# 1uis Sa tia'o# i :avor o: Cirilio 1eal the 4ecease4 :ather o: so*e o: the petitio ers# Pursua t to this GCo*prave ta#G the title over the three parcels o: la 4 i the a*e o: the ve 4ors 9as ca celle4 a 4 a e9 o e 9as issue4 i the a*e o: Cirilo 1eal 9ho i**e4iatel" too5 possessio a 4 exercise4 o9 ership over the sai4 la 4s. Fhe Cirilo 4ie4 o 2ece*ber 1$# 1/5/# the subDect la 4s 9ere i herite4 b" his six chil4re # 9ho are a*o ' the petitio ers# a 4 9ho cause4 the co soli4atio a 4 sub4ivisio o: the properties a*o ' the*selves. 0et9ee the "ears 1/($ a 4 1/(5# the properties 9ere either *ort'a'e4 or lease4 b" the petitio ers<chil4re o: Cirilo 1eal. So*eti*e be:ore the a'ricultural "ear 1/((< 1/(7# -ice te Sa tia'o approache4 the petitio ers a 4 o::ere4 re< repurchase the subDect properties. Petitio ers# ho9ever# re:use4 the o::er. Co seCue tl"# -ice te Sa tia'o i stitute4 a co*plai t :or speci:ic per:or*a ce . At the trial# the court a )"o re 4ere4 its 4ecisio #<4is*issi ' the co*plai t o the 'rou 4 that the sa*e 9as still pre*ature co si4eri ' that there 9as# as "et# o sale or a " alie atio eCuivale t to a sale.

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Civil Law Review 2 2013 - 2014 8o9ever# 6t is a4*itte4 b" both parties that the phrase Gthe" shall ot sell to others these three lots but o l" to the seller -ice te Sa tia'o or to his heirs or successorsG is a express prohibitio a'ai st e sale o: the lots 4escribe4 i the GCo*prave taG to thir4 perso s or stra 'ers to the co tract. ISSUE* Fhether or ot u 4er the a:oreCuote4 para'raph =b@ o: the GCo*prave taG a ri'ht o: repurchase i :avor o: the private respo 4e t existP Plai ti::s 9ere the re'istere4 o9 ers o: three parcels o: la 4 o e o: 9hich is situate4 at Cai ta &a"ta"# Ri,al# a 4 the other t9o situate4 at Pa 4aca # Ma ila# 9hich the" *ort'a'e4 9ith Mo te 4e Pie4a4 A Savi 's 0a 5 to secure a loa o: Pl7)#/53.37. Fhe the loa *ature4# plai ti::s coul4 ot pa"# so# the *ort'a'e 9as :oreclose4 b" the Mo te 4e Pie4a4 A Savi 's 0a 5. Plai ti::s sol4 to the 4e:e 4a ts<spouses the a:ore<*e tio e4 properties# to'ether 9ith all the i*prove*e ts therei :or a co si4eratio o: Pl7/#$$$.$$# a 4 the tra sactio is covere4 b" a 2ee4 o: Sale. &he co si4eratio o: the 4ee4 o: sale 9as use4 b" plai ti::s to repurchase the :oreclose4 properties:ro* the Mo te 4e Pie4a4 A Savi 's 0a 5. A:ter the :oreclose4 properties 9ere repurchase4 b" the plai ti::s# the" 9ere si*ulta eousl" sol4 a 4 4elivere4 to the 4e:e 4a ts< spouses as previousl" state4# b" virtue o: a 4ee4 o: sale. Plai ti::s :ile4 the case :or re:or*atio o: the 4ee4 o: sale 9ith 4a*a'es. &he" alle'e4 that althou'h there is a absolute 4ee4 o: sale# it 4oes ot re:lect or express the true i te tio bet9ee the parties b" reaso o: :rau4 a 4Qor i eCuitable co 4uct o the part o: the 4e:e 4a ts# citi ' article 13(/ o: the Civil Co4e.&hat the a*ou t o: P17/#$$$.$$# as co si4eratio o: the alle'e4 4ee4 o: sale# 9as o l" a loa exte 4e4 b" 4e:e 4a ts to plai ti::s# a 4 that the properties 4escribe4 therei 9ere *ort'a'e4 to secure the loa . &hat the verbal u 4ersta 4i ' 9as :or plai ti::s to pa" a *o thl" i terest o: P%#$$$.$$# a 4 that 4e:e 4a ts actuall" pai4 the a*ou t o: P2$#$$$.$$ as i terest. &he trial court 4is*isse4 the co*plai t &he plai ti::s appeale4 to the court o: appeals 9hich set asi4e the trial courtKs 4ecisio # a 4 4eclare4 the subDect 4ocu*e t# 4e o*i ate4 as 2ee4 o: Sale# as o e o: real estate *ort'a'e. ISSUE* 6t is :urther rule4 that the ri'ht to repurchase 9as 'ive birth b" the co 4itio prece4e t provi4e4 :or i the phrase Gsie*pre " cua 4o estos ulti*os pue4e hacer la co*praG =9he the bu"er has *o e" to bu"@. 6 other 9or4s# it is the respo 4e t courtKs co te tio that the ri'ht *a" be exercise4 o l" 9he the bu"er has *o e" to bu". 6: this 9ere so# the seco 4 para'raph o: Article 15$) 9oul4 appl" \ there is a'ree*e t as to the ti*e# althou'h it is i 4e:i ite# there:ore# the ri'ht shoul4 ARAFAG HABANA JALAYAJAY Fhether or ot the co tract e tere4 i to bet9ee the petitio ers a 4 private respo 4e t is o e o: real estate *ort'a'eP HELD* Bes. &he co si4eratio o: the suppose4 sale i the a*ou t o: P17/#$$$.$$ is i a4eCuate. &hus# be exercise4 9ithi te "ears# because the la9 4oes ot :avor suspe 4e4 o9 ership. Si ce the alle'e4 ri'ht to repurchase 9as atte*pte4 to be exercise4 b" -ice te Sa tia'o o l" i 1/((# or 25 "ears :ro* the 4ate o: the co tract# the sai4 ri'ht has u 4oubte4l" expire4. SPOUSES BUCE "S% CA . !ACTS*

HELD* 3o. &he la9 provi4es that :or co ve tio al re4e*ptio to ta5e place# the ve 4or shoul4 reserve# i o u certai ter*s# the ri'ht to repurchase the thi ' sol4. &hus# the ri'ht to re4ee* *ust be expressl" stipulate4 i the co tract o: sale i or4er that it *a" have le'al existe ce. &here ca be o express or i*plie4 'ra t o: a ri'ht to repurchase# or ca 9e i :er# :ro* a " 9or4 or 9or4s i the Cuestio e4 para'raph# the existe ce o: a " such ri'ht. &he phrase Gi case caseG o: shoul4 be co strue4 to *ea Gshoul4 the bu"ers 9ish to sell 9hich is the plai a 4 si*ple i*port o: the 9or4s# a 4 ot Gthe bu"ers shoul4 sell#G 9hich is clearl" a co torte4 co structio o: the sa*e phre. &he resort to Article 1373 o: the Civil Co4e o: the Philippi es is erro eous. &he subDect phrase is pate t a 4 u a*bi'uous# he ce# it *ust ot be 'ive a other i terpretatio 0ut eve assu*i ' that such a ri'ht o: repurchase is 'ra te4 u 4er the GCo*prave ta#G the petitio er correctl" asserts that the sa*e has alrea4" prescribe4. E 4er Art. 15$) o: the Civil Co4e o: Spai =Art#. 1($( o: the Civil Co4e o: the Philippi es@# the ri'ht to re4ee* or repurchase# i the abse ce o: a express a'ree*e t as to ti*e# shall last :our "ears :ro* the 4ate o: the co tract. 6 this case the # the ri'ht to repurchase# i: it 9as at :our 'uara tee4 u 4er i the GCo*prave ta#G shoul4 have bee exercise 9ithi :our "ears :ro* March 21# 1/%1 =i 4ubitabl" the 4ate o: executio o: the co tract@# or at the latest i 1/%5.

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Civil Law Review 2 2013 - 2014 the *ost lo'ical co clusio that *a" be 4erive4 :ro* the :ore'oi ' is that the P17/.$$$ pesos 9as# i truth# a loa b" the petitio ers to the private respo 4e t to e able the latter to re4ee* his propert" 9hich 9as :oreclose4 b" the ba 5. 0esi4es# ha4 it bee the private respo 4e tKs real i te tio to sell rather tha to *ort'a'e# 9e believe that he coul4 have easil" :ou 4 bu"ers :or the properties 9ho 9oul4 be 9illi ' a 4 able to pa" a price co si4erabl" hi'her tha P17/#$$$.$$. .urther*ore# it has bee satis:actoril" prove that :ro* the ti*e o: executio o: the co tract i issue# the realt" taxes# :or the "ears 1/)$ a 4 1/)1# o the three properties obDects o: the GsaleK# 9ere still pai4 b" the private respo 4e t<appare t ve 4or. Article 1($2# i relatio to Article 1($% o: the Civil Co4e :i 4s stro ' applicatio i the case at ha 4 i the li'ht o: the :ollo9i ' atte 4a t circu*sta ces> 1@ the price o: the GsaleG 9as u usuall" i a4eCuateL 2@ the appare t ve 4or re*ai e4 i possessio o: the properties Gsol4LG 3@ the ve 4or co ti ue4 to pa" the taxes o the thi 's Ksol4LG a 4 %@ the ve 4or pai4 i terest o the suppose4 co si4eratio o: the Gsale.G .ro* these circu*sta ces it *a" be :airl" i :erre4 that the real i te tio o: the parties 9as to secure pa"*e t o: the P17/#$$$ loa exte 4e4 b" the petitio ers to the respo 4e t. SANTOS "S% CA !ACTS* HELD* 2e:e 4a ts .errera a 4 Pe4ro ia 9ere the re'istere4 o9 ers o: the propert" i Cuestio . &he propert" ha4 bee pla te4 to rice :or so*eti*e b" 4e:e 4a ts 3a,areths u 4er a te a c" a'ree*e t 9ith Ro*a a A ia a -4a. 4e .errera# pre4ecessor<i < i terest o: 4e:e 4a t .errera. O .ebruar" 1# 1/71 4e:e 4a ts .errera a 4 Pe4ro ia execute4 a 4ee4 o: sale over the sai4 propert" i :avor o: spouses Apolo ia a 4 Ru:l o Sa tos :or the su* o: P22#$$$#$$. Epo the issua ce o: a e9 title i the a*e o: ve 4ees the a*ou t o: P1(#$$$.$$ 9as 4elivere4 to 4e:e 4a t .errera. Si*ulta eous 9ith the executio o: the 4ee4 o: sale# a <i stru*e t e title4 Pro*ise to Sell 9as execute4 b" the spouses Sa tos i :avor o: 4e:e 4a ts .errera# 9hereb" the :or*er pro*ise4 to sell bac5 the la 4 i Cuestio to the latter :or P22#$$.$$ 9ithi a perio4 o: six *o ths :ro* .ebruar" 1# 1/71. 2e:e 4a ts .errera :aile4 to exercise the ri'ht to repurchase the propert". Spouses Sa tos execute4 a 4ee4 o: absolute sale coveri ' the propert" i Cuestio i :avor o: their 4au'hter .elicitacio :or P3$#$$$.$$. O the sa*e 4ate# .elicitacio a 4 +re'orio Sa tos ARAFAG HABANA JALAYAJAY Bes. Article 137$ o: the 3e9 Civil Co4e provi4es thatL i: the ter*s o: co tract are clear a 4 leave o 4oubt upo the i te tio o: the co tracti ' parties# the literal *ea i ' o: its stipula petitio s shall co trol. 6: the 9or4s appear to be co trar" to the evi4e t i te tio o: the parties# the latter shall prevail over the :or*er. Article 1371 o: the sa*e co4e :urther states thatL 6 or4er to Du4'e the i te tio o: the co tracti ' parties their co te*pora eous a 4 subseCue t acts shall be pri cipall" co si4ere4. 6t is a u 4ispute4 :act that respo 4e t spouses 9ere Gi 4ire ee4 o: *o e"G to settle certai obli'atio s 9he the" e tere4 i to the subDect tra sactio 9ith the petitio ers. Si*ulta eous 9ith the executio o: the sai4 4ocu*e t.# petitio ers execute4 a separate 4ocu*e t# 9hich is the Pro*ise to Sell :or the sa*e a*ou t o: *o e". .ro* the ti*e the 2ee4 o: Absolute Sale 9as execute4 up to the ti*e the actio 9as i stitute4 i court# respo 4e t spouses co ti ue4 to re*ai i actual ph"sical possessio o: the la 4 i 4ispute# throu'h their te a ts 3a,areths 9ho 9ere also *a4e respo 4e ts. .ro* the :ore'oi ' co te*pora eous a 4 subseCue t acts o: the parties# Page 141 execute4 a pro*ise to sell the propert" i :avor o: the .erreras :or P3$#$$$.$$ 9ithi six *o ths. 3ot9ithsta 4i '# the sale o: the propert" to the Sa toses# spouses .errera co ti ue4 i possessio o: the propert" thru their te a ts# the 3a,areths. &he Sa toses i :or*e4 the 3a,areths that the" are the e9 o9 ers o: the propert" i Cuestio a 4 reCuire4 the latter to pa" the re t :or the propert" i Cuestio to the* but the 3a,areths re:use4 to reco' i,e the* as the o9 er o: the propert" a 4 co ti ue4 to 4eliver the harvest shares to the .erreras. 3earl" seve "ears a:ter# plai ti::s# :ile4 a actio :or breach o: 9arra t" a 4 4a*a'es a'ai st the 4e:e 4a ts base4 o the alle'e4 2ee4 o: Absolute Sale. 6 4e:e se# the 4e:e 4a ts ar'ue that the" ever i te 4e4 to sell their la 4 :or such a i a4eCuate price a 4 that the tra s:er certi:icate o: title i :avor o: Apolo ia Sa tos is ull a 4 voi4# the real co tract bet9ee the parties bei ' o e o: eCuitable *ort'a'e o l". &he trial court 4is*isse4 the co*plai t a 4 4eclare4 that the tra sactio is *erel" a eCuitable *ort'a'e. &he appellate court a::ir*e4 the 4ecisio . ISSUE* Fhether or ot the tra sactio is *erel" a eCuitable *ort'a'eP

Civil Law Review 2 2013 - 2014 the trial court :ou 4 that the co tract i issue coul4 ot be 4ee*e4 to be a absolute sale. &he Court a'ree4 9ith the trial courtKs :i 4i 's. &he acts o: the parties i 4icate the prese ce o: a eCuitable *ort'a'e. ECuitable *ort'a'e hasbee 4e:i e4 as o e i 9hich althou'h lac5i ' i so*e :or*alit"# :or* or 9or4s or other reCuisites 4e*a 4e4 b" a statute evertheless reveals the i te tio o: the parties to char'e a real propert" as securit" :or a 4ebt# a 4 co tai s othi ' i*possible or co trar" to la9. &he applicable la9# as :ou 4 i the 3e9 Civil Co4e# provi4es> Art. 1($2. &he co tract shall be presu*e4 to be a eCuitable *ort'a'e# in any o: the :ollo9i ' cases> =1@ Fhe the price o: a sale 9ith ri'ht to purchase is u usuall" i a4eCuateL =2@ Fhe the ve 4or re*ai s i possessio as lessee or other9iseL =3@ Fhe upo or a:ter the expiratio o: the ri'ht to repurchase a other i stru*e t exte 4i ' the perio4 o: re4e*ptio or 'ra ti ' a e9 perio4 is execute4L =%@ Fhe the purchaser retai s :or hi*sel: a part o: the purchase priceL =5@ Fhe the ve 4or bi 4s hi*sel: to pa" the taxes o the thi ' sol4L =(@ 6 a " other cases 9here it *a" be :airl" i :erre4 that the real i te tio o: the parties is that the tra sactio shall secure the pa"*e t o: a 4ebt or the per:or*a ce o: a " other obli'atio . Article 1($% o: the sa*e Co4e# 9hich rea4s> Art. 1($%. &he provisio s o: article 1($2 shall also appl" to co tract purporti ' to be a absolute sale. .irstl"# it 9as :ou 4 that the lot i Cuestio is locate4 9ithi the to9 proper o:Pasi'# Metro Ma ila# behi 4 the ele*e tar" school o: Ca io'a # Pasi'# Metro Ma ila. Petitio er hi*sel: a4*itte4 the :act that the subDect lot is 9ithi the to9 proper o: Pasi'# 0ei ' so# it coul4 thus easil" co**a 4 a *uch hi'her price tha P22#$$$.$$# co si4eri ' :urther that the sa*e *easures about 2#221.)( sCuare *eters# *ore or less. Seco 4l"# it 9as clearl" establishe4 that the private respo 4e ts# throu'h their te a t# re*ai e4 i ph"sical possessio o: the la 4. &hir4l"# the respo 4e t court ote4 thatthere ha4 al9a"s bee a exte sio o: the perio4 to repurchase arisi ' :ro* the :act that there 9ere t9o =2@ sets o: 4ee4 o: sale a 4 9ith a perio4 'ive to the 3o. &he Court o: Appeals erre4 i appl"i ' the thir4 para'raph o: Article 1($( o: the e9 Civil Co4e. &his provisio re:ers to cases i volvi ' a tra sactio 9here o e o: the parties co tests or 4e ies that the true a'ree*e t is o e o: sale 9ith ri'ht o: repurchase. 6 this case# the sale is expressl" 9ith ri'ht to repurchase 'ra ti ' respo 4e t 6 acala the ri'ht to re4ee* 9ithi o e "ear. As this stipulate4 perio4 has expire4 9ithout sai4 respo 4e t havi ' re4ee*e4 the la 4 i Cuestio # the ori'i al purchaser# Arca4io Me 4o,a# ha4 irrevocabl" acCuire4 o9 ership over the propert" i accor4a ce 9ith Article 15$/ o: the ol4 Civil Co4e 9hich 9as i :orce at the ti*e o: the tra sactio i 4ispute. BANDONG "S AUSTRIA !ACTS* ve 4or to repurchase# as see :ro* the t9o =2@ sets o: Pro*ise to Sell. ADORABLE "S INACALA. !ACTS* Respo 4e t 6 acala 9as the re'istere4 o9 er o: a parcel o: la 4 locate4 i barrio -al4e:ue te# Caba atua # 3ueva EciDa. O !ul" 1# 1/%1# throu'h the i terve tio o: Claro Pacis# she execute4 a 4ee4 o: sale coveri ' a 15<hectare lot i :avor o: Arca4io Me 4o,a :or P%2$.$$. &he latter thereupo execute4 a private i stru*e t 'ra ti ' sai4 respo 4e t the optio to repurchase the lot :or the sa*e co si4eratio 9ithi the perio4 o: o e "ear :ro* the 4ate o: the sale. Me 4o,a a:ter9ar4s sol4 the propert" to the spouses Eu'e io a 4 Mar'arita Ra*os to 9ho* a tra s:er certi:icate o: title 9as issue4. &he petitio ers herei # all sur a*e4 A4orable# i tur bou'ht the la 4 :ro* the Ra*os spouses# a 4 the correspo 4i ' tra s:er certi:icate o: title 9as issue4. Si ce the :irst sale i 1/%1# 6 acala# 9ho ha4 ot re4ee*e4 the la 4 :ro* Me 4o,a# ever reli Cuishe4 the possessio thereo:. 6t 9as o l" i 1/51# 4uri ' the ope i ' o: the Pa*pa 'a River 6rri'atio ProDect# 9he the petitio ers atte*pte4 to ta5e ph"sical possessio throu'h o e +ero i*o .aDar4o# 9ho lease4 it :ro* the*# that sai4 petitio ers 9ere apprise4 :or the :irst ti*e o: 6 acalaKs clai* over the lot. ISSUE* Fhether or ot the 4ee4 o: sale bet9ee respo 4e t 6 acala a 4 Me 4o,a shoul4 be 'ive the e::ect o: a *ere pacto 4e retro sale a 4 shoul4 be per*itte4 the ri'ht to repurchase u 4er Article 1($(P HELD*

ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014 O the 2/th o: April# 1/$5# the plai ti::s sol4 to A to io -e te illa# si ce 4ecease4# a parcel o: la 4 :or the su* o: P35$# expressl" reservi ' a ri'ht to repurchase u 4er a 4 i accor4a ce 9ith the ter*s o: the 4ee4 o: sale. &he 9ritte stipulatio > co tract co tai e4 the :ollo9i ' ha4 a per:ect ri'ht to 4o# a 4 the Du4'*e t o: the trial court 9hich 4e ies their ri'ht to e :orce the ter*s o: their co tract o the 'rou 4 that the perio4 o: re4e*ptio ha4 expire4 b" statutor" li*itatio ca ot# there:ore# be sustai e4. BAYFUEN "S% BOLORO !ACTS*
Fe also set :orth that o e o: the pro*ises 9e have *a4e to 2o A to io is that 9e 9ill repurchase this la 4 at the sa*e priceL either o: us *a5e a " stipulatio as to i terest o the *o e" or pro4ucts o: the la 4# but i the *o th o: March o: a " "ear# i: 9e repurchase.&he ve 4ors o::ere4 to repurchase i the *o th o: March# 1/13# but this o::er 9as 4ecli e4 o the 'rou 4 that the ri'ht to repurchase ha4 prescribe4.

&his is a appeal :ro* the 4ecisio o: the the Court o: .irst 6 sta ce o: Abra 4is*issi ' the co*plai t o: plai ti::s<appella ts a'ai st 4e:e 4a t<appellee. O !a uar" 1(# 1/5%# appella ts sol4 the la 4 u 4er Cuestio to the appellee# reservi ' their ri'ht to repurchase the sai4 la 4 9ithi :our =%@ "ears. &he plai ti::s<appella ts :aile4 to repurchase the la 4 9ithi the :our<"ear perio4. &he" o9 assert their ri'ht to repurchase the subDect propert" a:ter *ore tha thirtee =13@ "ears. &he trial court rule4 that the ve 4ors<appella ts have lost their ri'ht to repurchase the la 4 u 4er co trovers" a 4 that b" operatio o: la9# o9 ership o: such la 4 ha4 beco*e co soli4ate4 i the ve 4ee< appellee. &he plai ti::s<appella ts appeale4 the 4ecisio # alle'i ' that the trial court erre4 i hol4i ' that there is o 4ispute bet9ee the parties re'ar4i ' the ature o: the purporte4 G4ee4 o: sale 9ith ri'ht to repurchaseG a 4 that actuall" the tra sactio is a *ort'a'e. 2e:e 4a t< appellee re:utes this b" putti ' up the clai* that the :act that the co tract is i truth a 4ee4 o: sale 9ith ri'ht to repurchase has bee a4*itte4 b" appella ts a 4 the sa*e has bee stipulate4 upo b" the parties. ISSUE* Fhether or *ort'a'eP HELD* 3o. &he trial courtKs :i 4i ' that the co tract is ot a eCuitable *ort'a'e but a 4ee4 o: sale 9ith ri'ht to repurchase is correct. &he purchase price as P2#$$$.$$ :or a parcel o: la 4# partl" ricela 4 a 4 partl" pasture la 4# 9ith a assesse4 value o: P%%$.$$. 0ase4 o the si,e# pro4uctivit" a 4 accessibilit"# the price o: P2#$$$.$$ :or sai4 parcel is a4eCuate. &he ve 4ee a4*itte4l" too5 i**e4iate possessio a:ter the executio o: the co tractL o exte sio o: the perio4 o: re4e*ptio # at or a:ter its expiratio # 9as *a4e. &he ve 4ee 4i4 ot retai a " part o: the purchase price. &he su* o: &9o 8u 4re4 .i:t" Pesos =P25$.$$@ clai*e4 b" ve 4ors<plai ti::s to be Page 143 ot the tra sactio is i 4ee4 a

&he court 9as o: opi io that the ri'ht to repurchase expire4 at the e 4 o: :our "ears :ro* the 4ate o: the co tract# rel"i ' i support o: this ruli ' o the provisio s o: article 15$) o: the Civil Co4e. 6 case o: stipulatio # the perio4 o: re4e*ptio shall ot excee4 te "ears. ISSUE* Fhether or alrea4" prescribe4P HELD* 3o. &he statutor" li*itatio upo the ri'ht o: repurchase to a perio4 o: :our "ears is ot applicable to the co tract u 4er co si4eratio # that li*itatio bei ' applicable o l" to cases 9herei there is o express a'ree*e t touchi ' the 4ate o: re4e*ptio . &he parties havi ' expressl" a'ree4 that the ve 4ors shoul4 have the ri'ht to repurchase i the *o th o: March o: a " "ear a:ter the 4ate o: the co tract# the o l" statutor" li*itatio place4 upo the* i the exercise o: that ri'ht is the li*itatio :ou 4 i the seco 4 para'raph o: article 15$) o: the Civil Co4e cite4 above# 9hich li*its the po9er o: the ve 4or# eve b" express a'ree*e t# to reserve a ri'ht to repurchase :or a lo 'er perio4 tha te "ears. Fe co clu4e# there:ore# that the provisio s o: the co tracto: sale# 9hereb" the parties u 4ertoo5 b" express a'ree*e t to secure to the ve 4ors a ri'ht to repurchase i the *o th o: March o: a " "ear a:ter the 4ate o: the co tract# 9ere vali4 a 4 bi 4i ' upo the parties :or a perio4 o: te "ears :ro* the 4ate o: the co tract but 9holl" 9ithout :orce a 4 e::ect therea:ter. 6t is a4*itte4 that the ve 4ors o::ere4 to repurchase the la 4 i Cuestio i the *o th o: March# 1/13# less tha ei'ht "ears :ro* the 4ate o: the co tract. &his the" ARAFAG HABANA JALAYAJAY ot the ri'ht to repurchase ha4

Civil Law Review 2 2013 - 2014 4elivere4 to the* is ot part o: the purchase price retai e4 b" the ve 4ee# but *erel" the excess o: the value o: the "earl" crops over the purchase price resulti ' :ro* the co*putatio o: the plai ti::s. &he ve 4ee has 4eclare4 the propert" u 4er his a*e a 4 pai4 the correspo 4i ' real estate taxes# a 4 there is o circu*sta ce b" 9hich the Court coul4 :airl" i :er that the tra sactio 9as i te 4e4 b" the parties to secure the pa"*e t o: a 4ebt or loa . &here is o 4oubt as to the true ature o: the tra sactio a 4 it 9as# the Court :i 4s# a co tract o: sale 9ith ri'ht to purchase.0esi4es# ot o e o: the i sta ces e u*erate4 i Article 1($2 o: the Civil Co4e =re presu*ptio that the co tract is o e o: eCuitable *ort'a'e@ exists i this case. Appella ts also i sist that the trial court erre4 i hol4i ' that the o9 ership over the propert" i Cuestio co soli4ate4 b" operatio o: la9 i the 4e:e 4a t<appellee i**e4iatel" a:ter plai ti::s<appella ts :aile4 to repurchase the propert" 9ithi :our "ears. &he Court ha4 alrea4" rule4 i Rosario vs. Rosario that 9here the co tract bet9ee the parties is a4*itte4 a 4 9hich has bee stipulate4 b" the parties to be a 4ee4 o: sale 9ith ri'ht to repurchase# there shoul4 be o issue or 4ispute about the e::ects thereo: that o ce there is :ailure to re4ee* 9ithi the stipulate4 perio4# o9 ership thereo: beco*es veste4 or co soli4ate4 b" operatio o: la9 o the ve 4ee. A " other i terpretatio 9oul4 be violative o: the sa ctit" o: the co tract bet9ee the parties. SPS% -OSE UY "S% CA '() TEODORO L% -ARDELE4A G%R% N,% 109557% N,A7>872 29$ 2000 !ACTS* &eo4oro !ar4ele,a# petitio er# :ile4 a petitio i the *atter o: the 'uar4ia ship o: 2r. Er esto !ar4ele,a# Sr.# upo lear i ' that o e piece o: real propert" belo 'i ' to the latter spouses 9as about to be sol4. &he petitio er averre4 therei that the prese t ph"sical a 4 *e tal i capacit" o: 2r. Er esto !ar4ele,a Sr. preve t hi* :ro* co*pete tl" a4*i isteri ' his properties# i or4er to preve t the loss a 4 4issipatio o: the !ar4ele,a7s real a 4 perso al assets# there 9as a ee4 :or a court<appoi te4 'uar4ia to a4*i ister sai4 properties. +il4a !ar4ele,a# respo 4e t# :ile4 a petitio re'ar4i ' the 4eclaratio o: i capacit" o: 2r. Er esto !ar4ele,a Sr.# assu*ptio o: sole po9ers o: a4*i istratio o: co Du'al properties a 4 authori,atio to sell the propert". She alle'e4 that her husba 47s *e4ical treat*e t a 4 hospitali,atio expe ses 9ere pili ' up a 4 that she ee4 to sell o e piece o: real propert" a 4 its i*prove*e ts. She pra"e4 :or authori,atio :ro* the court to sell sai4 propert". R&C o: 6loilo Cit" re 4ere4 its 4ecisio # :i 4i ' that it 9as co vi ce4 that 2r. Er esto !ar4ele,a Sr. 9as trul" ARAFAG HABANA JALAYAJAY O6 the eve t that o e spouse is i capacitate4 or other9ise u able to participate i the a4*i istratio o: the co Du'al properties# the other spouse *a" assu*e sole po9ers o: a4*i istratio . &hese po9ers 4o ot i clu4e the po9ers o: 4ispositio or e cu*bra ce 9hich *ust have the authorit" o: the court or the 9ritte co se t o: the other spouse. 6 the abse ce o: such authorit" or co se t# the 4ispositio or e cu*bra ce shall be voi4. 8o9ever# the tra sactio shall be co strue4 as a co ti ui ' o::er o the part o: the co se ti ' spouse a 4 the thir4 perso # a 4 *a" be per:ecte4 as a bi 4i ' co tract upo the accepta ce b" the other spouse or authori,atio b" the court be:ore the o::er is 9ith4ra9 b" either or both o::erors.I 6 re'ular *a er# the rules o su**ar" Du4icial procee4i 's u 4er the .a*il" Co4e 'over the procee4i 's u 4er Article 12% o: the .a*il" Co4e. &he situatio co te*plate4 is o e 9here the spouse is abse t# or separate4 i :act or has aba 4o e4 the other or co se t is 9ithhel4 or ca ot be obtai e4. Such rules 4o ot appl" to cases 9here the o <co se ti ' spouse is i capacitate4 or i co*pete t to 'ive co se t. 6 this case# the trial court :ou 4 that the subDect spouse Gis a i co*pete tG 9ho 9as i co*atose or se*i<co*atose co 4itio # a victi* o: stro5e# cerebrovascular acci4e t# 9ithout *otor a 4 *e tal :aculties# a 4 9ith a 4ia' osis Page 144 i capacitate4 to participate i the a4*i istratio o: the co Du'al properties. 8o9ever# &eo4oro :ile4 his oppositio to the procee4i 's bei ' u a9are a 4 ot 5 o9i ' that a 4ecisio has alrea4" bee re 4ere4 o the case. 8e also Cuestio e4 the propriet" o: the sale o: the lot a 4 its i*prove*e ts thereo suppose4l" to pa" the accu*ulate4 :i a cial obli'atio s a 4 hospitali,atio . ISSUE* Fhether petitio er +il4a 1. !ar4ele,a *a" assu*e sole po9ers o: a4*i istratio o: the co Du'al propert"P HELD* Article 12% o: the .a*il" Co4e provi4es as :ollo9s>
OAR&. 12%. &he a4*i istratio a 4 e Do"*e t o: the co Du'al part ership propert" shall belo ' to both spouses Doi tl". 6 case o: 4isa'ree*e t# the husba 47s 4ecisio shall prevail# subDect to recourse to the court b" the 9i:e :or a proper re*e4" 9hich *ust be availe4 o: 9ithi :ive "ears :ro* the 4ate o: the co tract i*ple*e ti ' such 4ecisio .

Civil Law Review 2 2013 - 2014 o: brai ste* i :arct. 6 such case# the proper re*e4" is a Du4icial 'uar4ia ship procee4i ' u 4er Rule /3 o: the 1/(% Revise4 Rules o: Court. 6 the case at bar# the trial court 4i4 ot co*pl" 9ith the proce4ure u 4er the Revise4 Rules o: Court. 6 4ee4# the trial court 4i4 ot eve observe the reCuire*e ts o: the su**ar" Du4icial procee4i 's u 4er the .a*il" Co4e. &hus# the trial court 4i4 ot serve otice o: the petitio to the i capacitate4 spouseL it 4i4 ot reCuire hi* to sho9 cause 9h" the petitio shoul4 ot be 'ra te4. 4OSI A "ERDAD "S% CA G%R% N,% 109972% A<2?/ 29$ 1996 !ACTS* &he petitio er# Hosi*a -er4a4# is the purchaser o: a 2%)<sCuare *eter resi4e tial lot locate4 i 0utua cit". Private respo 4e t# Socorro Cor4ero -4a. 4e Rosales# see5s to exercise a ri'ht o: le'al re4e*ptio over the subDect propert" a 4 traces her title to the late Macaria Ate'a# her *other<i <la9# 9ho 4ie4 i testate o $) March 1/5(. 2uri ' her li:eti*e# Macaria co tracte4 t9o *arria'es> the :irst 9ith A 'el 0ur4eos a 4 the seco 4# :ollo9i ' the latter7s 4eath# 9ith Ca uto Rosales. At the ti*e o: her o9 4eath# Macaria 9as survive4 b" her so Ra*o A. 0ur4eos a 4 her 'ra 4chil4 =b" her 4au'hter .elici4a4 A. 0ur4eos@ Estela 1o,a4a o: the :irst *arria'e a 4 her chil4re o: the seco 4 *arria'e# a*el"# 2avi4 Rosales# !usto Rosales# Ro*ulo Rosales# a 4 Aurora Rosales. Socorro Rosales is the 9i4o9 o: 2avi4 Rosales 9ho hi*sel:# so*eti*e a:ter Macaria7s 4eath# 4ie4 i testate 9ithout a issue. 6 a i stru*e t# 4ate4 1% !u e 1/)2# the heirs o: Ra*o 0ur4eos sol4 to petitio er Hosi*a -er4a4 =their i terest o @ the 4ispute4 lot. Socorro 4iscovere4 the sale. She sou'ht :or the re4e*ptio o: the propert". She te 4ere4 the purchase price o: P23#$$$.$$ to Hosi*a. &he latter re:use4 to accept the a*ou t :or bei ' *uch less tha the lot7s curre t value o: P)$#$$$.$$. 3o settle*e t havi ' bee reache4 be:ore the 1upo ' &a'apa"apa# private respo 4e ts# o 1( October 1/)7# i itiate4 a'ai st petitio er a actio :or O1e'al Re4e*ptio 9ith Preli*i ar" 6 Du ctio I be:ore the Re'io al &rial Court o: 0utua Cit". &he R&C rule4 that the ri'ht to re4ee* the propert" ha4 alrea4" lapse4. O appeal# the CA reverse4 the lo9er court7s 4ecisio a 4 hel4 that Rosales *a" re4ee* the i herita ce ri'ht. ARAFAG HABANA JALAYAJAY

ISSUE* Fhether Socorro Rosales *a" re4ee* the propert"P

HELD* Fhe their i terest i the propert" 9as sol4 b" the 0ur4eos heirs to petitio er# a ri'ht o: re4e*ptio arose i :avor o: private respo 4e tsL thus>
OAR&. 1(1/. 1e'al re4e*ptio is the ri'ht to be subro'ate4# upo the sa*e ter*s a 4 co 4itio s stipulate4 i the co tract# i the place o: o e 9ho acCuires a thi ' b" purchase or 4atio i pa"*e t# or b" a " other tra sactio 9hereb" o9 ership is tra s*itte4 b" o erous title.I OAR&. 1(2$. A co<o9 er o: a thi ' *a" exercise the ri'ht o: re4e*ptio i case the shares o: all the other co<o9 ers or o: a " o: the*# are sol4 to a thir4 perso . 6: the price o: the alie atio is 'rossl" excessive# the re4e*ptio er shall pa" o l" a reaso able o e.I

Fe hol4 that the ri'ht o: re4e*ptio 9as ti*el" exercise4 b" private respo 4e ts. Co ce4e4l"# o 9ritte otice o: the sale 9as 'ive b" the 0ur4eos heirs =ve 4ors@ to the co<o9 ers reCuire4 u 4er article 1(23 o: the Civil Co4e ?
IAR&. 1(23. &he ri'ht o: le'al pre<e*ptio or re4e*ptio shall ot be exercise4 except 9ithi thirt" 4a"s :ro* the otice i 9riti ' b" the prospective ve 4or# or b" the ve 4or# as the case *a" be. &he 4ee4 o: sale shall ot be recor4e4 i the Re'istr" o: Propert"# u less acco*pa ie4 b" a a::i4avit o: the ve 4or that he has 'ive 9ritte otice thereo: to all possible re4e*ptio ers.I

8e ce# the thirt"<4a" perio4 o: re4e*ptio ha4 "et to co**e ce 9he private respo 4e t Rosales sou'ht to exercise the ri'ht o: re4e*ptio o 31 March 1/)7# a 4a" a:ter she 4iscovere4 the sale :ro* the O::ice o: the Cit" &reasurer o: 0utua Cit"# or 9he the case 9as i itiate4# o 1( October 1/)7# be:ore the trial court. &he 9ritte otice o: sale is *a 4ator". &his Court has lo ' establishe4 the rule that ot9ithsta 4i ' actual 5 o9le4'e o: a co<o9 er# the latter is still e title4 to a 9ritte otice :ro* the selli ' co<o9 er i or4er to re*ove all u certai ties about the sale# its ter*s a 4 co 4itio s# as 9ell as its e::icac" a 4 status. !ALLO* Petitio 2E36E2.

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Civil Law Review 2 2013 - 2014 prosper. 8e ce# a:ter o l" about a "ear o: operatio # -illa 4eci4e4 to close it 4o9 . Mrs. He ai4a 2o*i 'o i 4icate4 her i tereste4 i ta5i ' over his restaura t busi ess. 3e'otiatio s pushe4 throu'h a 4 the price o: P(5$#$$$.$$ 9as a'ree4 upo bet9ee the t9o. -illa# ho9ever# i :or*e4 Mrs. 2o*i 'o that as a *ere sub lessee u 4er his sublease co tract 9ith 0P6<.S0# he 9as prohibite4 :ro* assi' i ' his ri'hts as a sub lessee. 6t 9as# there:ore# ecessar" to resci 4 his sublease co tract 9ith 0P6<.S0 so that the latter coul4 4irectl" execute a sublease co tract 9ith the 2o*i 'o spouses. -illa i :or*e4 the pri cipal lessee 0P6<.S0 about the arra 'e*e t a 4 the latter acce4e4. O the ver" sa*e 4a"# -illa vacate4 the subDect pre*ises a 4 tur e4 over the 5e" thereo: to the 2o*i 'os. &he :ollo9i ' 4a" < !u e 27# 1//$ < the 2o*i 'os 9e t to clea a 4 :ix the pre*ises but coul4 ot e ter because the 4oor 9as pa4loc5e4. Appare tl"# !ulia Cru,# the o9 er<lessor# pree*pte4 the 2o*i 'osK i e teri ' the pre*ises.

LEASE
BPI-!A ILY SA"INGS BAN# "S% SPS% 4ENAIDA DO INGO G%R% N,% 158676 N,A7>872 27$ 2006 !ACTS* Respo 4e t !ulia Cru, is the o9 er o: a co**ercial lot a 4 buil4i ' locate4 i 3ovaliches# Uue,o Cit". So*eti*e i April 1/7(# he lease4 out the pre*ises to the .a*il" Savi 's 0a 5 =.S0@. 6 April 1/)/# a:ter the 0a 5 o: the Philippi e 6sla 4s =0P6@ acCuire4 .S0 but be:ore the expiratio o: the ori'i al lease co tract bet9ee Cru, a 4 .S0# a e9 lease a'ree*e t over the sa*e propert" 9as execute4# this ti*e bet9ee 0P6<.S0 a 4 Cru,. O .ebruar" 23# 1/)/# 9hile the ori'i al lease a'ree*e t bet9ee .S0 a 4 Cru, 9as still subsisti '# 0P6<.S0 sublease4 the sa*e pre*ises to respo 4e t 0e Da*i -illa = o9 4ecease4@# a :or*er -ice Presi4e t o: 0P6<.S0. Fhile 0P6<.S0 appare tl" 4i4 ot secure the 9ritte co se t o: !ulia Cru,# it appears that the latter 9as a9are o: the sublease a 4 acce4e4 to it because he *a4e either a obDectio or a protest thereto. 0e Da*i -illa occupie4 a 4 use4 the pre*ises as a restaura t# operati ' there at the GCarousel .oo4 8ouse.G 8is restaura t busi ess# ho9ever# :aile4 to ARAFAG HABANA JALAYAJAY

&he 2o*i 'os thus 4e*a 4e4 o: -illa either co*plia ce 9ith their co tract o: sublease or the retur o: their pa"*e t o: P(5$#$$$.$$. E::orts exerte4 b" -illa a 4 0P6<.S0 to place the 2o*i 'os i possessio o: the subDect pre*ises prove4 :utile 4ue to the re:usal o: Cru, to ope the sa*e.

O accou t o: -illa7s :ailure to retur their total pa"*e t o: P(5$#$$$.$$ :or the place# the 2o*i 'os :ile4 suit i the R&C o: Uue,o Cit" :or a su* o: *o e" 9ith 4a*a'es a'ai st both -illa a 4 0P6<.S0. 6 tur # -illa a 4 0P6<.S0 :ile4 their respective thir4<part" co*plai ts a'ai st Cru,. 0e:ore the R&C# petitio er 0P6<.S0 4e ies 5 o9le4'e o:# let alo e havi ' a "thi ' to 4o 9ith# the tra sactio bet9ee -illa a 4 the 2o*i 'os. 6t poi ts to the express a4*issio o: both the 2o*i 'os a 4 -illa that 0P6<.S0 4i4 ot receive a " portio o: the a*ou t o: P(5$#$$$.$$ as it 9as -illa alo e 9ho receive4 the sa*e :ro* the 2o*i 'os. As petitio er :urther clai*s# it ca*e to 5 o9 o: such pa"*e t o l" 9he the case at bar 9as :ile4. 3ot bei ' a priv" to the a'ree*e t bet9ee the 2o*i 'os a 4 -illa# petitio er co te 4s that it ca ot be :ou 4 soli4aril" liable 9ith -illa :or the a*ou t.

ISSUE* Fhether 0P6<.S0 is soli4aril" liable 9ith -illa to respo 4e t 2o*i 'oP

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Civil Law Review 2 2013 - 2014 !ALLO* CA 4ecisio A..6RME2 i all aspects. HELD* Bes. Fe rule a 4 so hol4# as 4i4 the CA# that either 0P6<.S0 or -illa ca escape liabilit" b" 4isclai*i ' privit" to a a'ree*e t 9ith the 2o*i 'os. &he Court ca ot 'ive cre4e ce to 0P6<.S0Ks posture that it ha4 othi ' to 4o 9ith# or eve ha4 5 o9le4'e o:# the a'ree*e t bet9ee -illa a 4 the 2o*i 'os. &his sce ario is :ar<:etche4# 9hat 9ith the :act that 0P6<.S0 is a part" to the sublease co tract 9ith the 2o*i 'os# a 4# i pursua ce thereo:# eve execute4 a 4ee4 o: rescissio o: its earlier sublease a'ree*e t 9ith -illa. 6t ha4 also exerte4 e::orts# alo ' 9ith -illa# to9ar4s putti ' the 2o*i 'os i possessio o: the pre*ises b" see5i ' out Cru,. Fith such a :actual bac54rop# it is 4i::icult to 'rasp ho9 0P6<.S0 coul4 ot have ta5e part a 4 assure4 the 2o*i 'os o: possessio o: the pre*ises# as :ou 4 b" the t9o =2@ courts belo9. 6 4ee4# it i sults o e7s cre4ulit" :or the petitio er to :ei' i' ora ce o: the sublease a'ree*e t bet9ee -illa a 4 the 2o*i 'os. 6 a " eve t# it is clear that 0P6<.S07s :ailure to put the 2o*i 'os i possessio o: the pre*ises as its sub lessees# i breach o: its o9 co tract 9ith the*# *a5es the petitio er soli4aril" liable 9ith -illa :or the a*ou t the 2o*i 'os ha4 pai4 to e Do" the pre*ises. -illa# o the other ha 4# thou'h ot a priv" to the seco 4 =0P6<.S0 ? 2o*i 'os@ sublease co tract# ha4 his o9 co tract 9ith the 2o*i 'os 9hich he ha4 breache4. Fe re:er to the sale b" -illa :or P(5$# $$$.$$# o: the 'oo49ill o: his restaura t busi ess i the pre*ises a 4 the assi' *e t o: all his ri'hts a 4 i terests thereo # i clu4i ' the eCuip*e t a 4 i*prove*e ts *a4e thereat. &o cap it all# -illa ca ot possibl" escape liabilit" :or sai4 a*ou t as it 9as he 9ho ha4 receive4 the sa*e a 4 eve issue4 a receipt there:or. &o our *i 4# the CA 9as correct i a::ir*i ' the trial courtKs 4isti 'uishi ' bet9ee a sublease a 4 a assi' *e t o: ri'hts. 6 a sublease situatio # the lessee =0P6<.S0# i this case@ co ti ues to be liable to the lessor =Cru,@ :or the pa"*e t o: re t. &he sub lessee =the 2o*i 'os i this case@ pa"s re t ot to the lessor =Cru,@ but to the lesseeQsub<lessor =0P6<.S0@. O the other ha 4# i a assi' *e t o: ri'hts# the assi' ee steps i to the shoes o: the lessee 9ho is thereupo :ree4 :ro* his obli'atio s u 4er the lease because :ro* the o it is the assi' ee 9ho is liable to the lessor :or re tal pa"*e t. 6 other 9or4s# i a assi' *e t o: ri'hts# there is a cha 'e o: lessor# 9hich is ot so i a sublease situatio . 6t is thus u 4ersta 4able 9h" it is ot ecessar" :or the lessor to 'ive his co se t to a sublease# 9hile i a assi' *e t o: ri'hts# it is a ecessit" :or the lessor to reCuire his prior co se t. &his is :or the lessorKs o9 protectio . ARAFAG HABANA JALAYAJAY Page 145

Civil Law Review 2 2013 - 2014 About ei'ht =)@ "ears later# a ocular i spectio 9as *a4e b" the cit" o::ice o: Ma ila to 4eter*i e its sa:et". &he Cit" E 'i eer a 4 0uil4i ' O::icial ha4 or4ere4 the buil4i ' co 4e* e4 a:ter i spectio . Fhe the M&2C 9as about to i itiate the repairs o the buil4i '# the te a ts :ile4 several suits a'ai st itL this preve te4 M&2C :ro* co*pl"i ' 9ith the sai4 or4er. Epo his arrival i the Philippi es# Att". 3a5pil :ile4# o 3ove*ber 5# 1//(# a co*plai t i the Re'io al &rial Court =R&C@ o: Ma ila a'ai st the M&2C# see5i ' :or actual# *oral# a 4 exe*plar" 4a*a'es# attor e"Ks :ees# liti'atio expe ses# costs o: suit a 4 other relie:s. 8e alle'e4 that the M&2C# throu'h its a'e ts a 4 represe tatives a 4 the police*e 9ho acco*pa ie4 the 4e*olitio tea*# :orce4 the 'uar4 to ope the 'ate to the buil4i '# a 4# therea:ter# 2$$ people ar*e4 9ith ha**er a 4 cro9bars starte4 4estro"i ' the *e,,a i e :loor o: the buil4i ' o !ul" 1/# 1//(. 8is roo* 9as 4estro"e4# the 9alls a 4 partitio s 9ere co*pletel" ha**ere4 4o9 # a 4 the electricit" 9as cut o::. 8is perso al belo 'i 's 9ere scattere4# thro9 a9a"# or stole . 8e poi te4 out that he ha4 bee re ti ' the pre*ises a 4 co*pl"i ' 9ith the co 4itio s o: the lease si ce 1/(5. &he M&2C violate4 his ri'ht as lessee to the possessio o: the pre*ises# u la9:ull" 4eprivi ' hi* o: sai4 possessio 9ithout a " la9:ul authorit" or court or4er. NA#PIL "S% ANILA TO9ERS DE"ELOP ENT CORP% G%R% N,% 160886 S7<=7>872 20$ 2006 &he R&C 4is*isse4 the co*plai t o 'rou 4s that 3a5pil :aile4 to prove that the buil4i ' 9as 4e*olishe4. ISSUE* !ACTS* A 1%<store" hi'h rise buil4i ' situate4 i Sta. Cru,# o9 e4 b" Cheo ' ;iao A '# lease4 the buil4i ' to about 2$$ .ilipi o<Chi ese te a ts. O e o: these te a ts 9as Att". 0o i:acio 3a5pil 9ho lease4 Roo* 2$% i the *e,,a i e :loor. 8e use4 the u it as his la9 o::ice. &he te a ts o: the buil4i ' later :or*e4 the 8ouse 6 ter atio al 0uil4i ' &e a ts Associatio # 6 c. =860&A6@. &he propert" 9as *ort'a'e4 9ith the +over *e t Service 6 sura ce S"ste* =+S6S@ as securit" :or a loa A ' ha4 earlier obtai e4. Epo :ailure to pa" the loa # the +S6S ha4 the real estate *ort'a'e :oreclose4 a 4 the propert" sol4 at public auctio # 9ith +S6S as the 9i i ' bi44er. &he latter# i tur # sol4 the propert" to the Ce terto9 Mar5eti ' Corporatio =CMC@ 9hich assi' e4 all its ri'hts to its sister< corporatio # the Ma ila &o9er 2evelop*e t Corporatio =M&2C@. &he 860&A6 proteste4# clai*i ' that its *e*bers ha4 the priorit" to bu" the propert". &he te a ts re:use4 to pa" their re tals a 4 i stea4 re*itte4 the* to 860&A6. ARAFAG HABANA JALAYAJAY Fhether or ot the M&2C is liable :or actual# *oral a 4 exe*plar" 4a*a'es to 3a5pilP HELD* &he petitio o: the M&2C is *eritorious. Article 1(5% o: the Civil Co4e e u*erates the obli'atio s o: the lessor>
=1@ &o 4eliver the thi ' 9hich is the obDect o: the co tract i such a co 4itio as to re 4er it :it :or the use i te 4e4L =2@ &o *a5e o the sa*e 4uri ' the lease all the ecessar" repairs i or4er to 5eep it suitable :or the use :or 9hich it has bee 4evote4# u less there is a stipulatio to the co trar"L =3@ &o *ai tai the lessee i the peace:ul a 4 a4eCuate e Do"*e t o: the lease :or the e tire 4uratio o: the co tract.

.ailure o: the lessor to :ul:ill a " o: these obli'atio s 9ill re 4er the lessor liable :or 4a*a'es. 6 co tracts# the obli'or =lessor@ 9ho acte4 i 'oo4 :aith is liable :or 4a*a'es that are the *aterial a 4 probable Page 146

Civil Law Review 2 2013 - 2014 co seCue ce o: the breach o: the obli'atio a 4 9hich the parties have :oresee or coul4 have reaso abl" :oresee at the ti*e the obli'atio 9as co tracte4. 6 case o: :rau4# ba4 :aith# *alice or 9a to attitu4e# he shall be respo sible :or all 4a*a'es 9hich *a" be reaso abl" attribute4 to the o <per:or*a ce o: the obli'atio . Fhat is evi4e t i the prese t case is that the 4isturba ce o the lease4 pre*ises o !ul" 1/# 1//( 9as actuall" 4o e b" the e*plo"ees u 4er the Cit" E 'i eer o: Ma ila a 4 the Cit" 0uil4i ' O::icial o or4ers o: the Cit" Ma"or 9ithout the participatio o: the M&2C. 6t bears stressi ' that the Cit" 0uil4i ' O::icial is authori,e4 a 4 *a 4ate4 u 4er Sectio 21% o: the 3atio al 0uil4i ' Co4e to or4er the repair# *ai te a ce or 4e*olitio o: the buil4i ' :ou 4 or 4eclare4 to be 4a 'erous or rui ous# 4epe 4i ' upo the 4e'ree o: 4a 'er to li:e# health# sa:et" a 4Qor 9ell<bei ' o: the 'e eral public a 4 its occupa ts as provi4e4 i Sectio 215 thereo:. &here is o Cuestio that the possessio b" respo 4e t o: the lease4 pre*ises ha4 bee 4isturbe4 b" the atte*pt o: the perso el o: the Cit" 0uil4i ' O::icial to repair a 4 rehabilitate the buil4i ' 4ue to M&2CKs :ailure to u 4erta5e the sa*e. A " act or o*issio b" the lessor 9hich causes a substa tial i ter:ere ce 9ith the actual possessio o: the lessee 9ill co stitute a breach o: the obli'atio o: Cuiet e Do"*e t. 6 so*e Duris4ictio s# the lessorKs :ailure to *a5e repairs or alteratio s to the lease4 pre*ises as reCuire4 b" public authorities# particularl" those that are substa tial a 4 structural i ature# co stitutes co structive evictio # 9hich *a5es the lessor liable :or 4a*a'es. Such co clusio is 'rou 4e4 o the :act that the lessors# i those cases# 9ere obli'e4 to *a5e structural a 4 substa tial repairs o the lease4 propert". &he sa*e 4octri e coul4 ver" 9ell be applie4 i our Duris4ictio co si4eri ' that# u 4er our la9s# the lessor is li5e9ise obli'e4 to *a5e the ecessar" repairs o the lease4 pre*ises 9hich 9oul4 u 4oubte4l" i clu4e those that are structural a 4 substa tial i ature. 6 :act# there *a" be a co structive evictio i: the la 4lor4 4oes a 9ro ':ul act or is 'uilt" o: a " 4e:ault or e'lect 9hereb" the lease4 pre*ises are re 4ere4 u sa:e# u :it# or u suitable :or occupa c"# i 9hole# or i substa tial part# :or the purposes :or 9hich the" 9ere lease4. Assu*i ' that Att". 3a5pil lost a " o: his perso al properties# at the ver" least# he shoul4 have i Cuire4 :ro* the o::ice o: the Cit" E 'i eerQCit" 0uil4i ' O::icial a 4 reCueste4 that the" be retur e4 to hi*. !ALLO* Petitio 2E36E2.

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O appeal# the R&C a::ir*e4 the M&C 4ecisio . ISSUE* Fhether petitio ers shoul4 be rei*burse4 :or the i*prove*e ts *a4e thereo P HELD* &he ri'ht o: the lessor upo the ter*i atio o: a lease co tract 9ith respect to use:ul i*prove*e ts i tro4uce4 o the lease4 propert" b" a lessee is covere4 b" Article 1(7) 9hich rea4s>
Art. 1(7). 6: the lessee *a5es# i 'oo4 :aith# use:ul i*prove*e ts 9hich are suitable to the use :or 9hich the lease is i te 4e4# 9ithout alteri ' the :or* or substa ce o: the propert" lease4# the lessor upo the ter*i atio o: the lease shall pa" the lessee o e< hal: o: the value o: the i*prove*e ts at that ti*e. Shoul4 the lessor re:use to rei*burse sai4 a*ou t# the lessee *a" re*ove the i*prove*e ts# eve thou'h the pri cipal thi ' *a" su::er 4a*a'e thereb". 8e shall otL ho9ever cause a " *ore i*pair*e t upo the propert" lease4 tha is ecessar".

PARILLA "S% DR% PROSPERO PILAR$ G%R% N,% 167680 N,A7>872 30$ 2006 !ACTS* Petitio er<spouses Sa*uel a 4 Chi ita Parilla a 4 their co<petitio er<so 2eo4ato Parilla# as 4ealers o: Pilipi as Shell Petroleu* Corporatio =Pilipi as Shell@# have bee i possessio o: a parcel o: la 4 =the propert"@ locate4 at the poblacio o: 0a ta"# 6locos Sur 9hich 9as lease4 to it b" respo 4e t 2r. Prospero Pilar u 4er a 1$<"ear 1ease A'ree*e t e tere4 i to i 1//$. Fhe the lease co tract bet9ee Pilipi as Shell a 4 respo 4e t expire4 i 2$$$# petitio ers re*ai e4 i possessio o: the propert" o 9hich the" built i*prove*e ts co sisti ' o: a billiar4 hall a 4 a restaura t. 2espite 4e*a 4s to vacate# petitio ers a 4 the other occupa ts re*ai e4 i the propert". 8e ce# respo 4e t 9ho has bee resi4i ' i the E ite4 States# throu'h his attor e"<i <:act :ile4 a co*plai t :or eDect*e t be:ore the 0a ta" M&C 9ith pra"er :or the issua ce o: a 9rit o: preli*i ar" i Du ctio 9ith 4a*a'es a'ai st petitio ers a 4 the other occupa ts o: the propert". M&C or4ere4 herei petitio ers a 4 their co< 4e:e 4a ts a 4 all perso s clai*i ' ri'hts u 4er the* to vacate the propert" plus co*pe satio . ARAFAG HABANA JALAYAJAY

Clearl"# it is Article 1(7) o: the 3e9 Civil Co4e 9hich applies to the prese t case. Petitio ersK clai* :or rei*burse*e t o: the alle'e4 e tire value o: the i*prove*e ts 4oes ot thus lie u 4er Article 1(7).3ot eve :or o e<hal: o: such alle'e4 value# there bei ' o substa tial evi4e ce# e.'.# receipts or other 4ocu*e tar" evi4e ce 4etaili ' costs o: co structio . 0esi4es# b" petitio ersK a4*issio # o: the structures the" ori'i all" built K the billiar4 hall# restaura t# sari<sari store a 4 a par5i ' lot# o l" the Kbo4e'a<li5e sari<sari store a 4 the par5i ' lot o9 exist. At all eve ts# u 4er Article 1(7)# it is the lessor 9ho is 'ive the optio # upo ter*i atio o: the lease co tract# either to appropriate the use:ul i*prove*e ts b" pa"i ' o e<hal: o: their value at that ti*e# or to allo9 the lessee to re*ove the i*prove*e ts. &his optio solel" belo 's to the lessor as the la9 is explicit that KSsThoul4 the lessor re:use to rei*burse sai4 a*ou t# the lessee *a" re*ove the i*prove*e ts# eve thou'h the pri cipal thi ' *a" su::er 4a*a'e thereb". 6t appears that the lessor has opte4 ot to rei*burse. !ALLO* Petitio 2E36E2.

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&he or4er o: evictio a'ai st the te a t a::ecte4 the sub<te a ts# eve i: the latter ha4 ot bee sue4 i the 4etai er liti'atio . &hat opi io :ollo9i ' previous ruli 's o: this Court shoul4 be co clusive o the i sta t co trovers". &hese see* to be o co'e t reaso i la9 or lo'ic reCuiri ' a 4i::ere t vie9. &he sub<lessees hol4 the pre*ises subDect to the ri'ht o: the lessee> o ce that ri'ht 4isappears the" have othi ' to sta 4 o . E less the" ca clai* a u 4ersta 4i ' or relatio 9ith the o9 er i 9hich eve t the situatio 9oul4 be better tha that o: *ere sub<lessees.

GO #ING "S% GERONI O G%R% N,% L-2126 A.B.&= 27$ 1948 !ACTS* Sabi o Pa4illa# o9 er o: so*e lots o Echa'ue Street# Ma ila# sou'ht to eDect .elipe A'uasi :ro* the pre*ises :or his :ailure to co*pl" 9ith their lease co tract 9hereb" A'uasi 9as e able4 to co struct thereo so*e Gbaro '<baro 'sG. !u4'*e t o: evictio 9as i 4ue course re 4ere4# 9hich i ti*e beca*e :i al a 4 executor". 6t happe e4 that the structures 9ere occupie4 b" so*e sub<lessees o: A'uasi # Chi ese perso s operati ' stores therei L a 4 9he the sheri:: atte*pte4 to co*pl" 9ith the or4er a 4 to clear the pre*ises the" appeare4 be:ore the *u icipal court alle'i ' that the" ha4 ot bee *a4e parties to the liti'atio # a 4 that co seCue tl" the evictio or4er coul4 ot be le'all" e :orce4 as a'ai st the*# the" petitio e4 :or a 4eclaratio that sai4 or4er 4i4 ot appl" to the* a 4 their possessio s. &he Du4'e 4e ie4 their reCuest. Co seCue tl" sai4 sub<lessees i stitute4 this procee4i ' a 4 reCueste4 :or a preli*i ar" i Du ctio . A:ter heari ' both si4es# this Court 4ecli e4 to issue a restrai i ' 4irective# because it 9as o: the opi io that the or4er to vacate a::ecte4 both the lessee a 4 the sub<lessees. ISSUE* Fhether the restrai i ' 4irectives shoul4 be issue4P HELD* ARAFAG HABANA JALAYAJAY Page 151

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ISSUE* Fhether the co te tio o: petitio er is te ableP HELD* &here is a actio :or 4a*a'es. A actio :or 4a*a'es speci:icall" applicable i a lessor<lessee relatio ship is authori,e4 i Article 1(5/ o: the 3e9 Civil Co4e 9hich states that>
Art. 1(5/. 6: the lessor or the lessee shoul4 ot co*pl" 9ith the obli'atio s set :orth i articles 1(5% a 4 1(57# the a''rieve4 part" *a" as5 :or the rescissio o: the co tract a 4 i 4e* i:icatio :or 4a*a'es# or o l" the latter# allo9i ' the co tract to re*ai i :orce.

C S IN"EST ENTS "S% IAC '() -OSE TAN !ACTS* 6 1/7)# private respo 4e t = !ose &a @ e tere4 i to a oral co tract o: lease :or te "ears 9ith the petitio er CMS 6 vest*e t a 4 Ma a'e*e t Corporatio . &he co tract i volve4 a certai parcel o: la 4 o9 e4 b" petitio er situate4 at Sucat Roa4 # Para aCue Metro Ma ila. &he private respo 4e t co structe4 therei a buil4i ' 9ith the a'ree*e t that private respo 4e t 9ill pa" the lessor the su* o: t9o thousa 4 pesos =P2#$$$.$$@ *o thl" 9hich 9as later o i crease4 to three thousa 4 pesos =P3#$$$.$$@ a *o th. 6 1/)2 o::icers :or CMS i :or*e4 the private respo 4e t to vacate the pre*ises. Private respo 4e t GreCueste4 the 4e:e 4a t that the" ca ot leave the pre*ises o sai4 4ate 4ue to the volu*e o: his busi ess as he has *a " custo*ers a 4 :urther i :or*e4 the 4e:e 4a ts that it 9as their a'ree*e t 9he the" Dust lease4 the la 4 i Cuestio that plai ti:: coul4 sta" i the pre*ises :or ot less tha te =1$@ "ears :ro* !a uar" 2%# 1/7)G 8o9ever# o e 4a" private respo 4e t 9as shoc5e4 a 4 surprise4 upo arrivi ' at his lu*ber 9he he :ou 4 out that there 9ere several *e 'uar4i ' the pre*ises ai4e4 b" a 4 u 4er i structio :ro* CMS. Respo 4e ts sue4 petitio er :or 4a*a'es. Petitio er alle'e4 that private respo 4e tKs co*plai t 4i4 ot have a cause o: actio :or Gthere is o such thi ' i la9 as a actio :or 4a*a'es or a cause o: actio :or 4a*a'esG a 4 that Gthe cause o: actio state4 i private respo 4e tKs co*plai t is o e o: :orcible e tr" a 4 ot o: 4a*a'esI.

Article 1(57 o: the 3e9 Civil Co4e e u*erates the 4uties o: lessee# to Cuote>
Art. 1(57. &he lessee is obli'e4> =1@ &o pa" the price o: the lease accor4i ' to the ter*s stipulate4L =2@ &o use the thi ' lease4 as a 4ili'e t :ather o: a :a*il"# 4evoti ' it to the use stipulate4L a 4 i the abse ce o: stipulatio # to that 9hich *a" be i :erre4 :ro* the ature o: the thi ' lease4# accor4i ' to the custo* o: the placeL =3@ &o pa" the expe se :or the 4ee4 o: lease.

A 4 Article 1(5% o: the 3e9 Civil Co4e lists 4o9 s the obli'atio s o: a lessor# to 9it>
Art. 1(5%. &he lessor is obli'e4> =1@ &o 4eliver the thi ' 9hich is the obDect o: the co tract i such a co 4itio as to re 4er it :it :or the use i te 4e4L =2@ &o *a5e o the sa*e 4uri ' the lease all the ecessar" repairs i or4er to 5eep it suitable :or the use to 9hich it has bee 4evote4# u less there is a stipulatio to the co trar"> =3@ &o *ai tai the lessee i the peace:ul la 4 a4eCuate e Do"*e t o: the lease :or the e tire 4uratio o: the co tract.

6t is ver" clear that Article 1(5/ o: the 3e9 Civil Co4e allo9s the a''rieve4 part" t9o re*e4ies> =1@ rescissio 9ith 4a*a'es# or =2@ 4a*a'es o l" Gallo9i ' the co tract to re*ai i :orce.G &he private respo 4e t opte4 :or the seco 4 re*e4" 'ra te4 b" Article 1(5/ o: the 3e9 Civil Co4e# he ce the actio :or G4a*a'es 9ith preli*i ar" *a 4ator" i Du ctio . Sectio 3 o: Article 1(5% o: the 3e9 Civil Co4e reCuires that the lessor *ust G*ai tai the lessee i the peace:ul a 4 a4eCuate e Do"*e t o: the lease :or the e tire 4uratio o: the co tract.G &he act o: pa4loc5i ' the o::ices o: the private respo 4e t i 1/)2 a 4 the act o: e closi ' 9ith barbe4 Page 152

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Civil Law Review 2 2013 - 2014 9ire the lease4 la 4 a 4 the private respo 4e tKs o::ices are a clear violatio b" the lessor# the petitio ers herei # o: their thir4 obli'atio *a 4ate4 b" Sectio 3 o: Article 1(5/ o: the 3e9 Civil Co4e. &hese acts b" the lessor set at au'ht the 4ut" reCuire4 o: the lessor i the 3e9 Civil Co4e. Article 1(5/ allo9s the lessor or the lessee t9o re*e4ies provi4e4 he is the a''rieve4 part". &here is o 4oubt that the lessee# the private respo 4e t# is the a''rieve4 part". &he 4uties o: the lessee co tai e4 i Article 1(57 have bee co*plie4 9ith b" the private respo 4e t. Moreover# the co tract o: lease e tere4 i to b" the petitio ers a 4 the private respo 4e t 9as a oral co tract :or a te <"ear perio4. Fhe the petitio er pa4loc5e4 a 4 :e ce4 the lease4 la 4 a 4 private respo 4e tKs o::ices i 1/)2# o l" :our =%@ "ears :ro* the i ceptio o: the co tract o: lease# 9ith six =(@ *ore "ears to 'o i the li:e o: the co tract o: lease# the private respo 4e t beca*e the a''rieve4 part". &he private respo 4e t 9as obviousl" 9ithi his ri'hts to :ile a co*plai t :or G4a*a'es 9ith preli*i ar" *a 4ator" i Du ctio .G 8e ce# the lo9er courtKs assu*ptio o: Duris4ictio over the ori'i al case 9as 9arra te4. !ALLO* F8ERE.ORE# &8E 8ERE63 PE&6&6O3 6S 8ERE0B 26SM6SSE2.

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Civil Law Review 2 2013 - 2014 9ith la9# eCuit" a 4 :air pla". 6 the vie9 that MS6 has bee 4isCuali:ie4 :ro* the public bi44i '# the propert" 9as eve tuall" a9ar4e4 to Ma5ati A'ro &ra4i ' a 4 1a .ilipi a E" +o 'co Corporatio . MS6 :ile4 a petitio :or preli*i ar" i Du ctio 9ith the lo9er court. &he sai4 court 'ra te4 the petitio but the Court o: Appeals ulli:ie4 the lo9er court7s ruli ' :or bei ' violative to Sectio 1 o: Procla*atio 3o. 5$ 9hich provi4es> G3o court or a4*i istrative a'e c" shall issue a " restrai i ' or4er or i Du ctio a'ai st the trust i co ectio 9ith the acCuisitio # sale or 4ispositio o: assets tra s:erre4 to it. 3or shall such or4er or i Du ctio be issue4 a'ai st a " purchaser o: assets sol4 b" the &rust to preve t such purchaser :ro* ta5i ' possessio o: a " assets purchase4 b" hi*.G &he CA reDecte4 the lo9er court7s opi io that sai4 procla*atio is u co stitutio al# rather it uphel4 that it co ti ues to be operative a:ter the a::ectivit" o: the 1/)7 Co stitutio b" virtue o: Sectio 3 Art.V-666. 6t also ote4 that MS6 has ot bee 4eprive4 o: its propert" ri'hts si ce those ri'hts are o <existe t a 4 its o l" propert" ri'ht 9as the alle'e4 rei*bursable a4va ces *a4e to 20P# 9hich it *a" sue to collect i a separate actio . 6t :urther hel4 that the issua ce o: 9rit o: preli*i ar" i Du ctio b" the lo9er court a'ai st AP& *a" ot be Dusti:ie4 as a vali4 exercise o: Du4icial po9er :or MS6 4oes ot have a le'all" 4e*a 4able a 4 e :orceable ri'ht o: rete tio over the sai4 propert". &he MS6 the :ile4 this petitio :or certiorari 9ith this Court.

ANUSTRE SYSTE S "S% CA 179 SCRA 136 !ACTS* Ma truste S"ste*s# 6 c. =MS6@ e tere4 i to a i teri* lease a'ree*e t 4ate4 Au'ust 2(# 1/)(9ith the 2evelop*e t 0a 5 o: the Philippi es# the o9 er o: 0a"vie9 Pla,a 8otel. &he a'ree*e t provi4es that MS6 9oul4 operate the hotel :or a *i i*u* o: three *o ths or u til such ti*e that the sai4 properties are sol4 to MS6 or other thir4 parties b" 20P. 2uri ' the sai4 perio4# the Presi4e t issue4 Procla*atio 3o. 5$ e title4 1au chi ' a Pro'ra* :or the Expe4itious 2ispositio or Privati,atio o: certai +over *e t Corporatio s a 4Qor the =acCuire4@ assets thereo: a 4 creati ' a Co**ittee o Privati,atio a 4 the Asset Privati,atio &rust. &he 0a"vie9 8otel has bee o e o: the i4e ti:ie4 assets :or privati,atio a 4 it 9as tra s:erre4 :ro* 20P to AP& :or4 is positio . &he 20P oti:ie4 MS6 that it 9as ter*i ati ' the i teri* lease a'ree*e t. 6t has bee a'ree4 that 3$4a"s :ro* the si' i ' o: the Certi:icatio # the lease co tract 9ill be co si4ere4 as ter*i ate4L the 0a"vie9 8otel 9ill be *a4e available :or i spectio at all ti*es b" other bi44ersL a 4 sai4 propert" 9ill be rea4" :or 4eliver" to a " e9 o9 ers 3$ 4a"s :ro* si' i ' the Certi:icatio . A letter 'ra ti ' a exte sio o: 3$ 4a"s 9as se t b" AP& to MS6. &his is to allo9 the latter to 9i 4 up a::airs a 4 to :acilitate a s*ooth tur <over o: the :acilities to its e9 o9 ers 9ithout ecessaril" i terrupti ' the hotels re'ular operatio . A:ter 15 4a"s# MS6 i :or*e4 AP& that si ce its lease o the hotel properties has bee :or *ore tha o e "ear o9# its lessee status has ta5e the character o: a lo ' ter* o e. As such MS6 as the lessee has acCuire4 certai ri'hts a 4 privile'es u 4er the la9 a 4 eCuit". 6t also co te 4s that it has acCuire4 a priorit" ri'ht to purchase sai4 properties above other i tereste4 parties. AP&# o a repl" sai4 that it has ot :ou 4 a " stipulatio te 4i ' to support MS67s clai* a 4 si ce the Pre<0i44i ' Co :ere ce has bee co 4ucte4# :or AP& to co si4er the reCuest o: MS6 9oul4 ot be i co so a ce ARAFAG HABANA JALAYAJAY

ISSUE* Fhether the CA erre4 i hol4i ' that MS67s ri'hts to the propert" are o <existe t except its ri'ht to use the re:u 4 o: its alle'e4 a4va cesL a 4 i ot 4eclari ' u co stitutio al Sectio 31 o: Procla*atio 3o. 5$P

HELD* &he Court uphel4 the ruli ' o: the CA. 6t a::ir*e4 the Court o: appeals :i 4i ' that MS67s clai* to a pate t co tractual ri'ht to retai possessio o: the 0a"vie9 8otel u til all its a4va ces are pai4 is o <existe tL a 4 as the ri'ht o: rete tio 4oes ot exist# either 4oes the ri'ht to the relie: 4e*a 4e4. A *ere lessee li5e MS6 is ot a buil4er i 'oo4 :aith# he ce the ri'ht o: rete tio 'ive to a possessor i 'oo4 :aith pe 4i ' rei*burse*e t o: his a4va ces :or ecessar" repairs a 4 use:ul i*prove*e ts o a other7s propert" is ot available to a lessee 9hose possessio is ot that o: a o9 er.

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Civil Law Review 2 2013 - 2014 &he Court state4 that it is a settle4 rule that lessees are ot possessor i 'oo4 :aith because the" 5 o9 that their occupa c" o: the pre*ises co ti ue o l" 4uri ' the li:e o: the lease# he ce the" ca ot recover# as a *atter o: ri'ht# the value o: their i*prove*e ts :ro* the lessor# *uch less retai the pre*ises u til the" are rei*burse4 thereo:. &he Court also rule4 that Sectio 31 o: Procla*atio 3o. 5$ 4oes ot i*pair the i here t po9ers o: the courts to settle actual co troversies 9hich are le'all" 4e*a 4able a 4 e :orceable a 4 to 4eter*i e 9hether or ot there has bee a 'rave abuse o: 4iscretio a*ou ti ' to lac5 or excess o: Duris4ictio o the part o: a " bra ch or i stru*e talit" o: the 'over *e t. 6t also ote4 that the po9er o: the courts over the other bra ches a 4 i stru*e talities o: the 'over *e t is li*ite4 o l" to the 4eter*i atio o: 9hether or ot there has bee a 'rave abuse o: 4iscretio a*ou ti ' to lac5 or excess o: Duris4ictio i the exercise o: their authorit" a 4 i the per:or*a ce o: their assi' e4 tas5s. &here ca be o Dusti:icatio o Du4icial i ter:ere ce i the busi ess o: a a4*i istrative a'e c" except 9he it violates citi,e 7s co stitutio al ri'hts# or co**its a 'rave abuse o: 4iscretio # or acts i excess o:# or 9ithout Duris4ictio . !ALLO* &he petitio is 4is*isse4.

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Civil Law Review 2 2013 - 2014 Moreover# the la9 'ra ts the lessee the ri'ht to suspe 4 pa"*e t o: re tals o l" :or the area o: the lease4 propert" 9hich is ot 4elivere4. Petitio er *ove4 to 4is*iss the appeal o the 'rou 4 that the case raises o l" pure Cuestio s o: la9 a 4 that respo 4e t appellate court ha4 o Duris4ictio over the sa*e.

RO AN CATHOLIC ARCHBISHOP O! ANILA "S% CA '() SPS% REYES G%R% N,% 111324% -./0 5$ 1996 !ACTS*

ISSUE* Fhether the co te tio correctP o: herei petitio er is

HELD* A lease a'ree*e t execute4 b" petitio er< lessor# the Ro*a Catholic Archbishop o: Ma ila# a 4 private respo 4e t<lessees# spouses Er esto a 4 1or a Re"es o Au'ust 1# 1/)5 over a parcel o: la 4 locate4 i 6 tra*uros# Ma ila. &he lease co tract provi4e4 :or a te <"ear lease# re e9able :or a other te "ears at the optio o: the lessor. &he co tract li5e9ise provi4e4 :or a 'ra4uate4 sche4ule o: re tal :ees# starti ' 9ith P%.5$ per sCuare *eter o the :irst a 4 seco 4 "ears# i creasi ' up to P(.5$ per sCuare *eter o the i th a 4 te th "ears. Private respo 4e t lessees 9ere also 'ive the ri'ht o: pre<e*ptio # 9ith :irst priorit" to purchase the propert" i: the o9 er# herei petitio er# o::ere4 it :or sale. 6 te 4i ' to have a :ire 9all co structe4# private respo 4e ts alle'e4l" ha4 the propert" relocate4. As a result# the" 4iscovere4 that the a4Dace t o9 erKs co crete :e ce abutte4 o a 4 e croache4 upo 3$./( sCuare *eters o: the lease4 propert". Private respo 4e ts reCueste4 petitio er to *a5e a4Dust*e ts i or4er to correct the e croach*e t proble*. &he spouses Re"es clai* that 4espite repeate4 :ollo9<up# petitio er has :aile4 to ta5e a " actio o their 4e*a 4. Co seCue tl"# the" 4eci4e4 to 9ithhol4 re tal pa"*e ts as Glevera'eG a'ai st petitio er a 4 to :orce the latter to *a5e correctio s or a4Dust*e ts i the area o: subDect la 4. 6 1/)/# petitio er o::ere4 to sell the parcel o: la 4 o a hi'her ter*s but private respo 4e t i sist that it be sol4 to the* at the prevaili ' price 9he the lot 9as :irst o::ere4 i 1/)7. 3o a'ree*e t 9as reache4. Private respo 4e t spouses :ile4 a actio :or speci:ic per:or*a ce a 4 4a*a'es be:ore the R&C. &he lo9er court hel4 that private respo 4e t spouses 9ere i 4ee4 obli'ate4 to pa" re t a:ter havi ' a4*itte4 that the" 4eliberatel" 4e:aulte4 i pa"*e ts. ARAFAG HABANA JALAYAJAY Page 154 6t is u 4erscore4 that the lease co tract si*pl" 'ives the plai ti::s a ri'ht o: pre<e*issio over the lease4 pre*ises. &here 9as as "et o 4e:i ite o::er a 4 accepta ce as re'ar4s the sale o: the propert". &he several co**u icatio s sub*itte4 b" the parties clearl" establishe4 such :act. &he parties are still i the process o: e'otiatio sL there:ore# there is o co tract# a'ree*e t or u 4erta5i ' bet9ee the parties 9hich ca be e :orce4 b" this Court =See Article 13$5 A 131/# Civil Co4e@. 6 the abse ce o: a 4e:i ite o::er a 4 u co 4itio al accepta ce as to the sale o: the propert" i 4ispute# as i this case# either o: the parties *a" sue :or speci:ic per:or*a ce o: a o <existe t co tract. &he 4isputes i the case at bar :or speci:ic per:or*a ce have arise :ro* the 4e*a 4 to *a5e a4Dust*e ts o the propert" 9here the a4Dace t o9 er is alle'e4 to have usurpe4 a part thereo:# the exercise o: the ri'ht o: pre<e*ptio a 4 the pa"*e t o: re tal arreara'es. A ruli ' o the issue o: e croach*e t 9ill per:orce be 4eter*i ative o: the issue o: u pai4 re tals. &hese t9o poi ts 4o ot arise :ro* t9o or *ore causes o: actio # but :ro* the sa*e cause o: actio . 8e ce# this suit 4oes ot reCuire *ultiple appeals. &here is o 'rou 4 :or the splitti ' o: appeals i this case# eve i: it i volves a Or4er 'ra ti ' =a 4 4e "i '@ a *otio to 4is*iss a 4 a Partial !u4'*e t 'ra ti ' a *otio :or Du4'*e t o the plea4i 's. &he subDect *atter covere4 i the Or4er a 4 i the Partial !u4'*e t pertai s to the sa*e lessor<lessee relatio ship# lease co tract a 4 parcel o: la 4. Splitti ' appeals i the i sta t case 9oul4# i e::ect# be violative o: the rule a'ai st *ultiplicit" o: appeals.

Civil Law Review 2 2013 - 2014 0ase4 o the cop" o: the public i stru*e t attache4 i the co*plai t# the part ership 9as establishe4 to operate a :ishpo 4G# a 4 ot to Ge 'a'e i a :ishpo 4 busi ess.I &hus# Mabato7sco te tio that Oit is reall" i co ceivable ho9 a part ership e 'a'e4 i the :ishpo 4 busi ess coul4 exist 9ithout sai4 :ishpo 4 propert" =bei '@ co tribute4 to the part ershipI is 9ithout *erit. &heir co tributio s 9ere li*ite4 to P1$$$ each a 4 either a :ishpo 4 or a real ri'ht thereto 9as co tribute4 to the part ership. &here:ore# Article 1773 o: the Civil Co4e :i 4s o applicatio i the case at bar. Case re*a 4e4 to the lo9er court :or :urther procee4i 's. OBILLOS "S% CIR AGAD "S% !ACTS* Petitio er Mauricio A'a4 clai*s that he a 4 4e:e 4a t Severi o Mabato are part ers i a:ishpo 4 busi ess to 9hich the" co tribute4 P1$$$ each. As *a a'i ' part er# Mabato "earl" re 4ere4the accou ts o: the operatio s o: the part ership. 8o9ever# :or the "ears 1/57<1/(3# 4e:e 4a t :aile4to re 4er the accou ts 4espite repeate4 4e*a 4s. Petitio er :ile4 a co*plai t a'ai st Mabato to 9hicha cop" o: the public i stru*e t evi4e ci ' their part ership is attache4. Asi4e :ro* the share o: pro:its =P1%#$$$@ a 4 attor e"7s :ees =P1$$$@# petitio er pra"e4 :or the 4issolutio o: the part ership a 4 9i 4i ' up o: its a::airs. Mabato 4e ie4 the existe ce o: the part ership alle'i ' that A'a4 :aile4 to pa" hisP1$$$ co tributio . 8e the :ile4 a *otio to 4is*iss o the 'rou 4 o: lac5 o: cause o: actio . &he lo9er court 4is*isse4 the co*plai t :i 4i ' a :ailure to state a cause o: actio pre4icate4 upo the theor" that the co tract o: part ership is ull a 4 voi4# pursua t to Art. 1773 o: our Civil Co4e# because a i ve tor" o: the :ishpo 4 re:erre4 i sai4 i stru*e t ha4 ot bee attache4 thereto .Art. 1771. A part ership *a" be co stitute4 i a " :or*# except 9here i**ovable propert" or real ri'hts are co tribute4 thereto# i 9hich case a public i stru*e t shall be ecessar". Art. 1773. A co tract o: part ership is voi4# 9he ever i**ovable propert" is co tribute4 thereto# i: i ve tor" o: sai4 propert" is ot *a4e# si' e4 b" the partiesL a 4 attache4 to the public i stru*e t. ISSUE* Fhether or ot i**ovable propert" or real ri'hts have bee co tribute4 to the part ership. HELD* ARAFAG HABANA JALAYAJAY Page 155 ABATO .AC&S> O March 2# 1/73# !ose Obillos# Sr. co*plete4 pa"*e t to Orti'as A Co.# 1t4. O t9o lots locate4 at +ree hills. &he ext 4a" he tra s:erre4 his ri'hts to his :our chil4re # the petitio ers# to e able the* to buil4 their resi4e ces. &he co*pa " sol4 the t9o lots to petitio ers :or arou 4 P17);o March 13. See*i 'l"# the &orre s titles issue4 to the* 9oul4 sho9 that the" 9ere co<o9 ers o: the t9o lots. A:ter havi ' hel4 the t9o lots :or *ore tha a "ear# the petitio ers resol4 the* to the Falle4 Cit" Securities Corporatio a 4 Ol'a Cru, Ca a4a :or arou 4 313;. &he" 4erive4 :ro* the sale a total pro:it o: about 13%; or 33; :or each o: the*. &he" treate4 the pro:it as a capital 'ai a 4 pai4 a i co*e tax o ] thereo: or about 1(;.6 April# 1/)$# or o e 4a" be:ore the expiratio o: the 5<"earprescriptive perio4# the C6R reCuire4 the :our petitio ers to pa" corporate i co*e tax o the total pro:it o: 13%; i a44itio to i 4ivi4ual i co*e tax o their shares thereo:. 8e assesse4 arou 4 37; as corporate i co*e tax# arou 4 1); as5$J :rau4 surchar'e a 4 arou 4 15; as %2J accu*ulate4 i terest# or a total o: 71;. Moreover# he also co si4ere4 the share o: the pro:its o: each petitio er i the su* o: about 33; as a G taxable i :ull = ot a *ere capital 'ai o: 9hich ]is taxable@ a 4 reCuire4 the* to pa" 4e:icie c" i co*e taxes a''re'ati ' P5(#7$7.2$ i clu4i ' the 5$J :rau4 surchar'e a 4 the accu*ulate4 i terest. &hus# the petitio ers are bei ' hel4 liable :or 4e:icie c" i co*e taxes a 4 pe alties totali ' about 127; o their pro:it o: 13%;# i a44itio to the tax o capital 'ai s alrea4" pai4. &he Co**issio er acte4 o the theor" that the :our petitio ers ha4 :or*e4 a u re'istere4 part ership or Doi t ve ture 9ithi the *ea i ' o: Sectio s 2% =a@ a 4 )% =b@ o: the &ax Co4e. &he petitio ers co teste4 the assess*e ts. &9o Du4'es o: the &ax Court sustai e4 the sa*e. 8e ce# the i sta t appeal.

PARTNERSHIP

Civil Law Review 2 2013 - 2014 ISSUE* Fhether or part ershipP HELD* 3O. &he Du4'*e t o: the &ax Court is reverse4 a 4 set asi4e. &he assess*e ts are ca celle4. &he court hel4 that it is error to co si4er the petitio ers as havi ' :or*e4 a part ership u 4er Art. 17(7 o: the Civil Co4e si*pl" because the" alle'e4l" co tribute4 17); to bu" the t9o lots# resol4 the sa*e a 4 4ivi4e4 the pro:it a*o ' the*selves. &o re'ar4 the petitio ers as havi ' :or*e4 a taxable u re'istere4 part ership 9oul4 result i oppressive taxatio a 4 co :ir* the 4ictu* that the po9er to tax i volves the po9er to 4estro". &hat eve tualit" shoul4 be obviate4. As testi:ie4 b" !ose Obillos# !r.# the" ha4 o such i te tio . &he" 9ere co< o9 ers pure a 4 si*ple. &o co si4er the* as part ers 9oul4 obliterate the 4isti ctio bet9ee a co<o9 ership a 4 a part ership. &he petitio ers 9ere ot e 'a'e4 i a " Doi t ve ture b" reaso o: that isolate4 tra sactio . &heir ori'i al purpose 9as to 4ivi4e the lots :or resi4e tial purposes. 6: later o the" :ou 4 it ot :easible to buil4 their resi4e ces o the lots because o: the hi'h cost o: co structio # the the" ha4 o choice but to resell the sa*e to 4issolve the co<o9 ership. &he 4ivisio o: the pro:it 9as *erel" i ci4e tal to the 4issolutio o: the co<o9 ership 9hich 9as i the ature o: thi 's a te*porar" state. 6t ha4 to be ter*i ate4 soo er or later. Article 17(/=3@ o: the Civil Co4e provi4es that Gthe shari ' o: 'ross retur s 4oes ot o: itsel: establish a part ership# 9hether or ot the perso s shari ' the* have a Doi t or co**o ri'ht or i terest i a " propert" :ro* 9hich the retur s are 4erive4G. &here *ust be a u *ista5able i te tio to :or* a part ership or Doi t ve ture. &he Court 9e t o to co*pare the i sta t case to other cases li5e Re"es vs. Co**issio er o: 6 ter al Reve ue# 2% SCRA1/)# 9here :ather a 4 so purchase4 a lot a 4 buil4i '# e truste4 the a4*i istratio o: the buil4i ' to a a4*i istrator a 4 4ivi4e4 eCuall" the et i co*e# a 4 :ro* Eva 'elista vs. Collector o: 6 ter al Reve ue# 1$2 Phil. 1%$#9here the three Eva 'elista sisters bou'ht :our pieces o: real propert" 9hich the" lease4 to various te a ts a 4 4erive4 re tals there :ro*. Clearl"# the petitio ers i these t9o cases ha4 :or*e4 a u re'istere4 part ership. &hese cases are 4i::ere t :ro* the case at bar. 6 the i sta t case# 9hat the Co**issio er shoul4 have i vesti'ate4 9as 9hether the :ather 4o ate4 the t9o lots to the petitio ers a 4 9hether he pai4 the 4o orKs tax =See Art.1%%)# Civil Co4e. PASCUAL "&% CIR O5=,872 18$ 1988 ARAFAG HABANA JALAYAJAY Page 156 ot the petitio ers have :or*e4 a !ACTS* Petitio ers bou'ht t9o =2@ parcels o: la 4 :ro* Sa tia'o 0er ar4i o# et al. a 4 o the" bou'ht a other three =3@parcels o: la 4 :ro* !ua RoCue. &he :irst t9o parcels o: la 4 9ere sol4 b" petitio ers i 1/()to Mare ir 2evelop*e t Corporatio # 9hile the threeparcels o: la 4 9ere sol4 b" petitio ers to Erli 4a Re"es a 4 Maria Sa*so . Petitio ers reali,e4 a et pro:it i the sales a 4 the" pai4 thecorrespo 4i ' capital 'ai s taxes b" availi ' o: the taxa* esties 'ra te4 at the ti*e. 8o9ever# i a letter o: the Acti ' 06R Co**issio er E:re 6.Pla a# petitio ers 9ere assesse4 a 4 reCuire4 to pa" a total a*ou t o: P1$7#1$1.7$ as alle'e4 4e:icie c" corporate i co*e taxes :or the "ears 1/() a 4 1/7$ =the "ears o: sales@. Petitio ers proteste4 the sai4 assess*e t i a letter asserti ' that the" ha4 availe4 o: tax a* esties 9a" bac5 i 1/7%. COMM6SS6O3ER> that i the "ears 1/() a 4 1/7$# petitio ers as co<o9 ers i the real estate tra sactio s :or*e4 a u re'istere4 part ership or Doi t ve ture taxable as a corporatio u 4er Sectio 2$=b@ a 4 its i co*e 9as subDect to the taxes prescribe4 u 4er Sectio 2%# both o: the 3atio al 6 ter al Reve ue Co4e that the u re'istere4 part ership 9as subDect to corporate i co*e tax as 4isti 'uishe4 :ro* pro:its 4erive4 :ro* the part ership b" the* 9hich is subDect to i 4ivi4ual i co*e taxL a 4 that the avail*e t o: tax a* est" u 4er P.2. 3o. 23# as a*e 4e4# b" petitio ers relieve4 petitio ers o: their i 4ivi4ual i co*e tax liabilities but 4i4 ot relieve the* :ro* the tax liabilit" o: the u re'istere4 part ership. 8e ce# the petitio ers 9ere reCuire4 to pa" the 4e:icie c" i co*e tax assesse4. C&A> a::ir*e4 the 4ecisio a 4 actio ta5e b" respo 4e t co**issio er 9ith costs a'ai st petitio ers. 6 a separate 4isse ti ' opi io # Associate !u4'e Co sta te RoaCui state4 that co si4eri ' the circu*sta ces o: this case# althou'h there *i'ht i :act be a co<o9 ership bet9ee the petitio ers# there 9as o a4eCuate basis :or the co clusio that the" thereb" :or*e4 a u re'istere4 part ership 9hich *a4e Ghe* liable :or corporate i co*e tax u 4er the &ax Co4e.

ISSUE*

Civil Law Review 2 2013 - 2014 Fhetehr or ot petitio ers :or*e4 a u re'istere4 part ership subDect to corporate i co*e taxP HELD* 3O. &he basis o: the subDect 4ecisio o: the respo 4e t court is the ruli ' o: this Court i Eva 'elista. E-A3+E16S&A CASE> Petitio ers borro9e4 a su* o: *o e" :ro* their :ather 9hich to'ether 9ith their o9 perso al :u 4s the" use4 i bu"i ' several real properties. &he" appoi te4 their brother to *a a'e their properties9ith :ull po9er to lease# collect# re t# issue receipts #etc. &he" ha4 the real properties re te4 or lease4 to various te a ts :or several "ears a 4 the" 'ai e4 et pro:its :ro* the re tal i co*e. &hus# the Collector o: 6 ter al Reve ue 4e*a 4e4 the pa"*e t o: i co*e tax o a corporatio # a*o ' others# :ro* the*. &he esse tial ele*e ts o: a part ership are a*el"> =a@ a a'ree*e t to co tribute *o e"# propert" or i 4ustr" to a co**o :u 4L a 4 =b@i te t to 4ivi4e the pro:its a*o ' the co tracti ' parties are prese t &here is o evi4e ce that petitio ers e tere4 i to a a'ree*e t to co tribute *o e"# propert" or i 4ustr" to a co**o :u 4# a 4 that the" i te 4e4 to 4ivi4e the pro:its a*o ' the*selves. Respo 4e t co**issio er a 4Q or his represe tative Dust assu*e4 these co 4itio s to be prese t o the basis o: the :act that petitio ers purchase4 certai parcels o: la 4 a 4 beca*e co<o9 ers thereo:. &here 9as a series o: tra sactio s 9here petitio ers purchase4 t9e t"<:our =2%@ lots sho9i ' that the purpose 9as ot li*ite4 to the co servatio or preservatio o: the co**o :u 4 or eve the properties acCuire4 b" the*. &he character o: habitualit" peculiar to busi ess tra sactio s e 'a'e4 i :or the purpose o: 'ai 9as prese t. Petitio ers bou'ht t9o=2@ parcels o: la 4 i 1/(5. &he" 4i4 ot sellthe sa*e or *a5e a " i*prove*e ts thereo .6 1/((# the" bou'ht a other three =3@parcels o: la 4 :ro* o eseller. 6t 9as o l" 1/()Fhe the" sol4 the t9o=2@ parcels o: la 4 a:ter9hich the" 4i4 ot *a5e a " a44itio al or e9 purchase. &here*ai i ' three =3@parcels 9ere sol4 b"the* i 1/7$. &hetra sactio s 9ereisolate4. &he charactero: habitualit" peculiarto busi ess tra sactio s:or the purpose o: 'ai 9as ot prese t.Properties 9ere lease4 out tote a ts :or several "ears. &hebusi ess 9as u 4er the*a a'e*e t o: o e o: thepart ers. Such co 4itio existe4 :or over :i:tee =15@"ears3o properties 9erelease4 Eva 'elista case relie4 upo b" the CAis ot si*ilar to the case at bar a 4 9as i correctl" use4. Co curri ' opi io o: Mr. !ustice A 'elo 0autista i Eva 'elista he sai4>6 9ish ho9ever to *a5e the :ollo9i ' observatio Article 17(/o: the e9 Civil Co4e la"s 4o9 the rule :or 4eter*i i ' 9he a tra sactio shoul4 be 4ee*e4 a part ership or a co<o9 ership. Sai4 article para'raphs 2 a 4 3# provi4esL =2@ Co<o9 ership or co< possessio 4oes ot itsel: establish a part ership# 9hether such co<o9 ers or co<possessors 4o or 4o ot share a " pro:its *a4e b" the use o: the propert"L =3@ &heshari ' o: 'ross retur s 4oes ot o: itsel: establish a part ership# 9hether or ot the perso s shari ' the* have a Doi t or co**o ri'ht or i terest i a " propert" :ro* 9hichthe retur s are 4erive4L.ro* the above it appears that the :act that those 9ho a'ree to :or* a co< o9 ership share or 4o ot share a " pro:its *a4e b" the use o: the propert" hel4 i co**o 4oes ot co vert their ve ture i to a part ership. Or the shari ' o: the 'ross retur s 4oes ot o: itsel: establish a part ership 9hether or ot the perso s shari ' therei have a Doi t or co**o ri'ht or i terest i the propert". &his o l" *ea s that# asi4e :ro* the circu*sta ce o: pro:it# the prese ceo: other ele*e ts co stituti ' part ership is ecessar"# suchas the clear i te t to :or* a part ership# the existe ce o: a Duri4ical perso alit" 4i::ere t :ro* that o: the i 4ivi4ual part ers# a 4 the :ree4o* to tra s:er or assi' a " i terest i the propert" b" o e 9ith the co se t o: the others 6t is evi4e t that a isolate4 tra sactio 9hereb" t9o or *ore perso sco tribute :u 4s to bu" certai real estate :or pro:it i theabse ce o: other circu*sta ces sho9i ' a co trar" i te tio ca ot be co si4ere4 a part ership. &he shari ' o: retur s 4oes ot i itsel: establish apart ership 9hether or ot the perso s shari ' therei havea Doi t or co**o ri'ht or i terest i the propert". &here*ust be a clear i te t to :or* a part ership# the existe ce o: a Duri4ical perso alit" 4i::ere t :ro* the i 4ivi4ual part ers#a 4 the :ree4o* o: each part" to tra s:er or assi' the 9holepropert". 6 the prese t case# there is clear evi4e ce o: co<o9 ershipbet9ee the petitio ers. &here is o a4eCuate basis tosupport the propositio that the" thereb" :or*e4 a u re'istere4 part ership. &he t9o isolate4 tra sactio s9hereb" the" purchase4 properties a 4 sol4 the sa*e a :e9"ears therea:ter 4i4 ot thereb" *a5e the* part ers. &he"share4 i the 'ross pro:its as co< o9 ers a 4 pai4 theircapital 'ai s taxes o their et pro:its a 4 availe4 o: the taxa* est" thereb". E 4er the circu*sta ces# the" ca ot beco si4ere4 to have :or*e4 a u re'istere4 part ership9hich is thereb" liable :or corporate i co*e tax# as therespo 4e t co**issio er proposes.

ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014 A 4 eve assu*i ' :or the sa5e o: ar'u*e t that suchu re'istere4 part ership appears to have bee :or*e4# si ce there is o such existi ' u re'istere4 part ership 9ith a4isti ct perso alit" or 9ith assets that ca be hel4 liable :orsai4 4e:icie c" corporate i co*e tax# the petitio ers ca behel4 i 4ivi4uall" liable as part ers :or this u pai4 obli'atio o: the part ership . 8o9ever# as petitio ers have availe4 o: the be e:its o: tax a* est" as i 4ivi4ual taxpa"ers i thesetra sactio s# the" are thereb" relieve4 o: a " :urther taxliabilit" arisi ' there:ro* u si' e4 a 4 u 4ate4. As a u si' e4 4ocu*e t# there ca be o Cuibbli ' that sai4 letter 4oes ot *eet the public i stru*e tatio reCuire*e ts exacte4 u 4er Article 1771 =ho9 part ership is co stitute4@ o: the Civil Co4e. Moreover# bei ' u si' e4 a 4 4oubtless re:erri ' to a part ership i volvi ' *ore tha P3#$$$.$$ i *o e" or propert"# sai4 letter ca ot be prese te4 :or otari,atio # let alo e re'istere4 9ith the Securities a 4 Excha 'e Co**issio =SEC@# as calle4 :or u 4er the Article 1772 =capitali,atio o: a part ership@ o: the Co4e. A 4 i as*uch as the i ve tor" reCuire*e t u 4er the succee4i ' Article 1773 'oes i to the *atter o: vali4it" 9he i**ovable propert" is co tribute4 to the part ership# the ext lo'ical poi t o: i Cuir" tur s o the ature o: Aurelio7s co tributio # i: a "# to the suppose4 part ership. &he Me*ora 4u* is also ot a proo: o: the part ership :or the sa*e is ot a public i stru*e t a 4 a'ai # o i ve tor" 9as *a4e o: the i**ovable propert" a 4 o i ve tor" 9as attache4 to the Me*ora 4u*. Article 1773 o: the Civil Co4e reCuires that i: i**ovable propert" is co tribute4 to the part ership a i ve tor" shall be ha4 a 4 attache4 to the co tract. ORTEGA "S% CA 245 SCRA 529 !ACTS* Orte'a# the a se ior part er i the la9 :ir* 0ito# Misa# a 4 1o,a4a 9ith4re9 i sai4 :ir*.8e :ile4 9ith SEC a petitio :or 4issolutio a 4 liCui4atio o: part ership. &he heari ' o::icer re 4ere4 4ecisio ruli ' that Petitio er7s 9ith4ra9al :ro* the la9 :ir* 0ito# Misa A 1o,a4a 4i4 ot 4issolve the sai4 la9 part ership. Accor4i 'l"# the petitio er a 4 respo 4e ts are hereb" e Doi e4 to abi4e b" the provisio s o: the A'ree*e t relative to the *atter 'over i ' the liCui4atio o: the shares o: a " retiri ' or 9ith4ra9i ' par er i the part ership o: i terest. SEC e ba c rule4 that 9ith4ra9al o: Misa :ro* the :ir* ha4 4issolve4 the part ership.Reaso > si ce it is part ership at 9ill# the la9 :ir* coul4 be 4issolve4 b" a " part er ata "ti*e# such as b" 9ith4ra9al there:ro*# re'ar4less o: 'oo4 :aith or ba4 :aith# si ce opart er ca be :orce4 to co ti ue i the part ership a'ai st his 9ill. 2uri ' the pe 4e c" o: the case#Att". 0ito a 4 Att" 1o,a4a both 4ie4. &he 4eath o: the t9o part ers# as 9ell as the a4*issio o: e9 part ers# i the la9 :ir* pro*pte4 Att". Misa to re e9 hi applicatio :or recievership

LITON-UA -R% "S% LITON-UA SR% D757>872 13$ 2005 !ACTS* Aurelio a 4 E4uar4o are brothers. 6 1/73# Aurelio alle'e4 that E4uar4o e tere4 i to a co tract o: part ership 9ith hi*. Aurelio sho9e4 as evi4e ce a letter se t to hi* b" E4uar4o that the latter is allo9i ' Aurelio to *a a'e their :a*il" busi ess =i: E4uar4o7s a9a"@ a 4 i excha 'e thereo: he 9ill be 'ivi ' Aurelio P1 *illio or 1$J eCuit"# 9hichever is hi'her. A *e*ora 4u* 9as subseCue tl" *a4e :or the sai4 part ership a'ree*e t. &he *e*ora 4u* this ti*e state4 that i excha 'e o: Aurelio# 9ho Dust 'ot *arrie4# retai i ' his share i the :a*il" busi ess =*ovie theatres# shippi ' a 4 la 4 4evelop*e t@ a 4 so*e other i**ovable properties# he 9ill be 'ive P1 Millio or 1$J eCuit" i all these busi esses a 4 those to be subseCue tl" acCuire4 b" the* 9hichever is 'reater. 6 1//2 ho9ever# the relatio ship bet9ee the brothers 9e t sour. A 4 so Aurelio 4e*a 4e4 a accou ti ' a 4 the liCui4atio o: his share i the part ership. E4uar4o 4i4 ot hee4 a 4 so Aurelio sue4 E4uar4o. ISSUE* Fhether or ot there exists a part ershipP HELD* 3o. &he part ership is voi4 a 4 le'all" o existe t. &he 4ocu*e tar" evi4e ce prese te4 b" Aurelio# i.e. the letter :ro* E4uar4o a 4 the Me*ora 4u*# 4i4 ot prove part ership. &he 1/73 letter :ro* E4uar4o o its :ace# co tai s t"pe9ritte e tries# perso al i to e# but is ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014 *ercha 4ise the" bou'ht o cre4it b" the :ir*1u5ba A 0orDa :ro* the plai ti::Ks ship suppl" store a*e4 1a 6 4ustria. A Du4'*e t 9as re 4ere4# o 9hich the 4e:e 4a t :ir* 9asor4ere4 to pa" the su* o: P1#$)(.(5 9ith i terest thereo a*ou ti ' toP1#1$2./5. Esperi4io 0orDa pai4 P522.(/. &eo4oro 4elos Re"es later o brou'ht a suit a'ai st 1u5ba A 0orDa to recover the su* o: P)53# there*ai i ' u pai4 bala ce plus le'al i terest.2e:e 4a t 1u5ba co te 4e4 that he is ot liable# he 9as *erel"a i 4ustrial part er i the :ir* a 4 it 9as 0orDa 9ho :ur ishe4 thecapital. As it 9as prove o trial that the part ership has o *orere*ai i ' propert"# as it is alrea4" i solve t# the court re 4ere4 Du4'*e thol4i ' 0orDa a 4 1u5ba Doi tl" a 4 severall" liable to pa" the su* toplai ti:: 4elos Re"es. ISSUE* 6s a cre4itor e title4 to collect i 4ivi4uall" :ro* the part ers thea*ou t o: the 4ebt that the 4issolve4 part ership o9e4 at the ti*e o: its4issolutio P HELD* Bes. &he cre4itor has the ri'ht to recover :ro* the part ers thereo: i the *a er provi4e4 b" Art. 127 o: the Co4e o: Co**erce = o9'over e4 b" Art. 1)1( o: the Civil Co4e o: the Philippi es@. Art. 127 o: the Co4e o: Co**erce provi4es>GAll the *e*bers o: the 'e eral co< part ership# be the" or be the" ot *a a'i ' part ers o: the sa*e# are perso all" a 4 severall" liable9ith all their properties :or the results o: the tra sactio s *a4e i the a*e a 4 :or the accou t o: the part ership# u 4er the si' ature o: thelatter# a 4 b" the perso authori,e4 to *a5e use thereo:G Fith respect to the :irst assi' *e t o: error# the co te ts o: the 9rit a 4 the retur o: the executio o: the :i al Du4'*e t re 4ere4 i the sai4 case 3o. 375/ sho9 that the 4issolve4 part ership o: 1u5ba A 0orDa ha4 absolutel" o propert" 9hatever o: its o9 . 8a4 a " propert" 9hatever o: the sai4 part ership still re*ai e4# the 4e:e 4a t 1u5ba 9oul4 have poi te4 it out i or4er to avoi4 bei ' obli'e4 to pa" i soli4u* all the bala ce o: the su* 9hich the :ir* 9as se te ce4 to pa" b" the sai4 :i al Du4'*e t o: October 1/# 1/$5. 8e 4i4 ot 4o so because the :ir* o: 1u5ba A 0orDa o lo 'er ha4 a " 5i 4 o: propert" or cre4its# as sho9 b" the 4ocu*e t setti ' :orth the a'ree*e t *a4e b" a 4 bet9ee several cre4itors o: the sai4 :ir*# a thir4 part" a*e4 Ra*o &i sa" a 4 the :or*er part er o: the :ir*# Espiri4io 0orDa# i 9hich 4ocu*e t it appears that the :ir* 1u5ba A 0orDa o9e4 :our cre4itors# a*o ' the* the plai ti:: 2e los Re"es# the total su* o: P1$#1(5.$1 a 4 these cre4itors 9ith so*e 4i::icult" succee4e4 i collecti ' the su* o: P5#$$$ throu'h a tra sactio 9ith the sai4 Ra*o &i sa" 9ho pai4 this last a*ou t :or the Page 161

ISSUE* 1. FO3 the part ership o: 0ito# Misa A 1o,a4a = o9 0ito# 1o,a4a# Orte'a A Castillo@is a part ership at 9illP 2. FO3 the 9ith4ra9al o: Misa 4issolve4 the part ership re'ar4lesso: his 'oo4 or ba4 :aithP HELD* 1. Bes. &he part ership a'ree*e t o: the :ir* provi4es that IStThe part ership shallco ti ue so lo ' as *utuall" satis:actor" a 4 upo the 4eath or le'al i capacit" o: o e o: the part ers# shall be co ti ue4 b" the survivi ' part ers.I 2. Bes. A " o e o: the part ers *a"# at his sole pleasure# 4ictate a 4issolutio o: thepart ership at 9ill =e.'. b" 9a" o: 9ith4ra9al o: a part er@. 8e *ust# ho9ever# act i 'oo4:aith# ot that the atte 4a ce o: ba4 :aith ca preve t the 4issolutio o: the part ership butthat it ca result i a liabilit" :or 4a*a'es. A part ership that 4oes ot :ix its ter* is a part ership at 9ill. &hat the la9 :ir* O0ito# Misa A 1o,a4a#I a 4 o9 O0ito# 1o,a4a# Orte'a a 4 Castillo#I is i 4ee4 such a part ership. &he birth a 4 li:e o: a part ership at 9ill is pre4icate4 o the *utual 4esire a 4 co se t o: the part ers. &he ri'ht to choose 9ith 9ho* a perso 9ishes to associate hi*sel: is the ver" :ou 4atio a 4 esse ce o: the part ership. 6ts co ti ue4 existe ce is# i tur # 4epe 4e t o the co sta c" o: that *utual resolve# alo ' 9ith each part er7s capabilit" to 'ive it# a 4 the abse ce o: a cause :or 4issolutio provi4e4 b" la9 itsel:. &he 4issolutio o: a part ership is the cha 'e i the relatio o: the parties cause4 b" a " part er ceasi ' to be associate4 i the carr"i ' o # as *i'ht be 4isti 'uishe4 :ro* the 9i 4i ' up o:# the busi ess. Epo its 4issolutio # the part ership co ti ues a 4 its le'al perso alit" is retai e4 u til the co*plete 9i 4i ' up o: its busi ess cul*i ati ' i its ter*i atio . &he SC 4e ie4 the petitio . TEODORO DE LOS REYES A&% "ICENTE LU#BAN G%R% N,% 10695$ D757>872 15$ 1916 !ACTS* &eo4oro 4elos Re"es brou'ht a suit i the Court o: .irst 6 sta ceo: Ma ila a'ai st -ice te 1u5ba a 4 Espiri4io 0orDa to recover :ro*the* pa"*e t :or the ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 accou t o: the part er Espiri4io 0orDa. 6t appears that the latter pai4 to the cre4itor 2e los Re"es the a:ore*e tio e4 su* o: P522.(/# o accou t o: the :ir*Ks 4ebt to &eo4oro 4e los Re"es# a 4ebt 9hich 9as reco' i,e4 i the sai4 Du4'*e t o: October 1/# 1/$5. &he attach*e t# or recourse to the propert"# the lac5 o: 9hich procee4i ' 9as co*plai e4 o:# is a procee4i ' that 9as resorte4 to 9he atte*pt 9as *a4e to execute the :i al Du4'*e t re 4ere4 a'ai st the part ership o: 1u5ba A 0orDa# 9hich procee4i ' 'ave e'ative resultsL there:ore# i: the reCuire*e t o: article 237 o: the Co4e o: Co**erce *ust be co*plie4 9ith b" the cre4itor it is evi4e t that it has alrea4" bee 4o e :or the 4e:e 4a t 1u5ba 9as u able to sho9 that the part ership to 9hich he belo 'e4 actuall" possesse4 a " *ore assets. Fith respect to the seco 4 assi' *e t o: error# i: &eo4oro 4e los Re"es is e title4 to collect i 4ivi4uall" :ro* the part ers 1u5ba a 4 0orDa the a*ou t o: the 4ebt that the 4issolve4 part ership o9e4 at the ti*e o: its 4issolutio # it is u Cuestio able that such a ri'ht has 'ive rise to the correspo 4i ' ri'ht o: actio to 4e*a 4 the pa"*e t o: the 4ebt :ro* the part ers i 4ivi4uall"# or :ro* each o: the*# b" the i solve c" o: the part ership# i as*uch as the" are perso all" a 4 severall" liable 9ith all their propert" :or the results o: the operatio s o: the part ership 9hich the" co 4ucte4. Article 127 o: the Co4e o: Co**erce provi4es> All the *e*ber o: the 'e eral copart ership# be the" or be the" ot *a a'i ' part ers o: the sa*e# are perso all" a 4 severall" liable 9ith all their propert" :or the results o: the tra sactio s *a4e i the a*e a 4 :or the accou t o: the part ership# u 4er the si' ature o: the latter# a 4 b" a perso authori,e4 to *a5e use thereo:. UNASFUE "S% CA G%R% N,% L-39780 N,A7>872 11$ 1985 !ACTS* Mu asCue =petitio er@ e tere4 i to a part ership 9ith +ala u 4er the re'istere4 a*eO+ala a 4 AssociatesI as Co tractor. &he" e tere4 i to a 9ritte co tract 9ithrespo 4e t &ropical :or re*o4eli ' the latter7s Cebu bra ch buil4i '. E 4er the co tract#the proDect totale4 25#$$$ to be pai4 i i stall*e tsL 7# $$$ upo si' i ' a 4 (# $$$ ever"15 9or5i ' 4a"s.&ropical *a4e the :irst pa"*e t b" chec5 i the a*e o: Mu asCue. Mu asCue i 4orse4the chec5 i :avor o: +ala to e able +ala to 4eposit it i the ba 5 a 4 pa" :or the*aterials a 4 labor use4 i the proDect. 8o9ever# +ala alle'e4l" spe t P(# 1)3.37 :or his perso al use. Fhe the seco 4 chec5 ca*e# Mu asCue re:use4 to i 4orse it a'ai to+ala .+ala i :or*e4 &ropical o: the *isu 4ersta 4i ' bet9ee hi* a 4 Mu asCue as part ers. 8e ce upo seco 4 pa"*e t# &ropical ARAFAG HABANA JALAYAJAY cha 'e4 the a*e o: the pa"ee o theseco 4 chec5 :ro* Mu asCue to O+ala a 4 AssociatesI 9hich e able4 +ala to e cashthe seco 4 chec5.Mea 9hile# the co structio 9as co ti ue4 throu'h Mu asCue7s sole e::orts b" i curri '4ebts :ro* various suppliers. &he co structio 9or5 9as :i ishe4 ahea4 o: sche4ule 9iththe total expe 4iture reachi ' P 3%# $$$ = ote "u ' co tract ila 255 la '@. Mu asCue :ile4 a co*plai t :or pa"*e t o: su* o: *o e" a 4 4a*a'es a'ai st +ala #&ropical# a 4 &ropical7s Cebu bra ch *a a'er Po s. Cebu Souther 8ar49are Co*pa "a 4 0lue 2ia*o 4 +lass Palace i terve e4 i the case :or the cre4it 9hich the" exte 4e4to the part ership o: Mu asCue a 4 +ala :or the co structio proDect.0oth trial court a 4 Court o: Appeals absolve4 respo 4e ts &ropical a 4 its Cebu*a a'er# Po s# :ro* a " liabilit". &C hel4 +alva a 4 Mu asCue ODoi tl" a 4 severall"Iliable to its cre4itors 9hich 4ecisio 9as *o4i:ie4 b" CA a 4 hel4 the* ODoi tl"I liable. ISSUES* Fhether the obli'atio o: Mu asCue a 4 +ala is Doi t or soli4ar"P HELD* Soli4ar".Fhile it is true that u 4er Article 1)1( o: CC# OAll part ers# i clu4i ' i 4ustrial o es#shall be liable pro rate 9ith all their propert" a 4 a:ter all the part ership assets have bee exhauste4# :or the co tracts 9hich *a" be e tere4 i to the a*e a 4 :or accou t o: the part ership# u 4er its si' ature a 4 b" a perso authori,e4 to act :or the part ership.xxxI# this provisio shoul4 be co strue4 to'ether 9ith Article 1)2% 9hich provi4es that>OAll part ers are liable soli4aril" 9ith the part ership :or ever"thi ' char'eable to the part ership u 4er Articles 1)22 a 4 1)23.I Fhile the liabilit" o: the part ers are *erel" Doi t i tra sactio s e tere4 i to b" the part ership# a thir4 perso 9ho tra sacte4 9ithsai4 part ership ca hol4 the part ers soli4aril" liable :or the 9hole obli'atio i: the caseo: the thir4 perso :alls u 4er Articles 1)22 a 4 1)23. &he obli'atio is soli4ar" because the la9 protects hi*# 9ho i 'oo4 :aith relie4 upo theauthorit" o: a part er# 9hether such authorit" is real or appare t.&ropical ha4 ever" reaso to believe that a part ership existe4 bet9ee Mu asCue a 4+ala a 4 o :ault or error ca be i*pute4 a'ai st it :or *a5i ' pa"*e ts to O+ala a 4AssociatesI because as :ar as it 9as co cer e4# +ala 9as a true part er 9ith realauthorit" to tra sact i behal: o: the part ership it 9as 4eali ' 9ith =because i the :irst place the" e tere4 i to a 4ul" re'istere4 part ership a*e a 4 seco 4l"# Mu asCuee 4orse4 the :irst chec5 pa"*e t to +ala @. &his is eve *ore true i the cases o: thei terve ors Page 162

Civil Law Review 2 2013 - 2014 9ho supplie4 *aterials o cre4it to the part ership. &hus# it is but :air that theco seCue ces o: a " 9ro ':ul act co**itte4 b" a " o: the part ers therei shoul4 bea s9ere4 soli4aril" b" all the part ers a 4 the part ership as a 9hole.8o9ever# as bet9ee Mu asCue a 4 +ala # +ala *ust rei*burse Mu asCue :or the pa"*e ts *a4e to the i terve ors as it 9as satis:actoril" establishe4 that +ala acte4 i ba4 :aith i his 4eali 's 9ith Mu asCue as a part er. her capitalist Arse io Pua. She alle'e4 that her :rie 4s borro9e4 *o e" :ro* respo 4e t a 4 issue4 perso al chec5s i pa"*e t o: the loa L that the chec5s bou ce4 :or i su::icie t :u 4 a 4 the she coul4 o lo 'er locate the*. &hat because o: this# respo 4e t beca*e :urious a 4 threate e4 petitio er that he 9ill :ile a cri*i al co*plai t. RALLOS " YANGCO !ACTS*

AGENCY
DOLES "S% ANGELES G%R% N,% 149353 -.(7 26$ 2006 !ACTS* Ma. Aura A 'eles# respo 4e t :ile4 9ith the R&C a co*plai t :or Speci:ic Per:or*a ce 9ith 2a*a'es a'ai st !ocel" 2oles. Respo 4e t alle'e4 that petitio er 9as i 4ebte4 to the :or*er i the co cept o: a perso al loa a*ou ti ' to P%$5#%3$.$$ represe ti ' the pri cipal a*ou t a 4 i terestL that o October 5# 1//(# b" virtue o: a 2ee4 o: Absolute Sale# petitio er# as seller# ce4e4 to respo 4e t# as bu"er# a parcel o: la 4# as 9ell as the i*prove*e t thero # 9ith a area o: %2 sCuare *eters locate4 i Ca*ella &o9ho*es Sorre te i 0acoor Cavite# i or4er to satis:" her perso al loa 9ith respo 4e tL that this propert" 9as *ort'a'e4 to 3atio al 8o*e Mort'a'e .i a ce Corporatio to secure petitio er7s loa i the su* o: P337# $5$ 9ith that e tit"L that as a co 4itio :or the :ore'oi ' sale# respo 4e t shall assu*e the u 4ue bala ce o: the *ort'a'e a 4 pa" the *o thl" a*orti,atio o: P%#7%).11 :or the re*ai 4er o: the 25 "ears 9hich be'a o Septe*ber 3# 1//%L that upo veri:icatio 9ith the 38M.C# respo 4e t lear e4 that petitio er ha4 i curre4 arreara'es a*ou ti ' to P2(#7%%.$/# i clusive o: pe alties a 4 i terestL that upo i :or*i ' teh petitio er o: her arrears# petitio er# 4e eie4 that she i curre4 the* a 4 re:use4 to pa" the sa*eL that 4espite repeate4 4e*e 4# petitio er re:use4 to cooperate 9ith respo 4e t to execute the ecessar" 4ocu*e ts a 4 other :or*alities reCuire4 to e::ect the tra s:er o: title over the propert"L that petitio er collecte4 re t over the propert" :ort he *o th o: !a uar" 1//7 a 4 re:use4 to re*it the procee4 to respo 4e L a 4 that respo 4e t su::ere4 4a*a'es as a result a 4 9as :orce4 to liti'at. Petitio er# the 4e:e 4a t# 9hile a4*itti ' so*e alle'atio s i the Co*plia t# 4e ie4 that she borro9e4 *o e" :ro* respo 4e t# a 4 averre4 that :ro* !u e to Septe*ber 1//5# she re::ere4 her :rie 4s to respo 4e t 9ho* she 5 e9 to be e 'a'e4 i the busi ess o: le 4i ' *o e" i excha 'e :or perso al chec5s throu'h ARAFAG HABANA JALAYAJAY

Ba 'co se t Rallos a letter i viti ' the latter to be the co si' or i bu"i ' a 4 selli ' lea: tobacco a 4 other ative pro4ucts. &er*s a 4 co 4itio s 9ere also co tai e4 i the letter. _ Accepti ' the i vitatio # Rallos procee4e4 to 4o a co si4erable busi ess 9ith Ba 'co trhou'h the sai4 Colla tes# as his :actor# se 4i ' to hi* as a'e t :or Ba 'co a 'oo4 4eal o: pro4uce to be sol4 o co**issio . _ Rallos se t to the sai4 Colla tes# as a'e t :or Ba 'co# 21) bu 4les o: tobacco i the lea: to be sol4 o co**issio # as ha4 bee other pro4uce previousl". _ &he sai4 Colla tes receive4 sai4 tobacco a 4 sol4 it :or the su* o: P1#7%%. &he char'es :or such sale 9ere P2$(./(# leavi ' i the ha 4s o: sai4 Colla tes the su* o: 1#537.$) belo 'i ' to Rallos. &his su* 9as# appare tl"# co verte4 to his o9 use b" sai4 a'e t. _ 6t appears# ho9ever# that prior to the se 4i ' o: sai4 tobacco Ba 'co ha4 severe4 his relatio s 9ith Colla tes a 4 that the latter 9as o lo 'er acti ' as his :actor. &his :act 9as ot 5 o9 to RallosL a 4 it is co ce4e4 i the case that o otice o: a " 5i 4 9as 'ive b" Ba 'co o: the ter*i atio o: the relatio s bet9ee Ba 'co a 4 his a'e t# Colla tes. _ Ba 'co thus re:use4 to pa" the sai4 su* upo 4e*a 4 o: Rallos# placi ' such re:usal upo the 'rou 4 that at the ti*e the sai4 tobacco 9as receive4 a 4 sol4 b" Colla tes# he 9as acti ' perso all" a 4 ot as a'e t o: Ba 'co. ISSUE* FQ3 Colla tes is a a'e t o: Ba 'co. 6: so# Ba 'co as pri cipal *ust re:u 4 to Rallos the sai4 su* brou'ht b" the sale o: the pro4uceP HELD*

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Civil Law Review 2 2013 - 2014 Bes. Ba 'co# as pri cipal is liable. 8avi ' a4vertise4 the :act that Colla tes 9as his a'e t a 4 havi ' 'ive special otice to Rallos o: that :act# a 4 havi ' 'ive the* a special i vitatio to 4eal 9ith such a'e t# it 9as the 4ut" o: Ba 'co o the ter*i atio o: the relatio ship o: the pri cipal a 4 a'e t to 'ive 4ue a 4 ti*el" otice thereo: to Rallos. Co tracts e tere4 i to i the a*e o: a other perso b" o e 9ho has bee 'ive o authorit" orle'al represe tatio or 9ho has acte4 be"o 4 his po9ers are classi:ie4 as u authori,e4 co tractsa 4 are 4eclare4 u e :orceable# u less the" are rati:ie4. +e erall"# the a'e c" *a" be oral# u less the la9 reCuires a speci:ic :or*. 8o9ever# a specialpo9er o: attor e" is ecessar" :or a a'e t to# as i this case# borro9 *o e"# u less it be ur'e ta 4 i 4ispe sable :or the preservatio o: the thi 's 9hich are u 4er a4*i istratio . Si ce othi ' i this case i volves the preservatio o: thi 's u 4er a4*i istratio # a 4eter*i atio o: 9hether Soria o ha4 the special authorit" to borro9 *o e" o behal: o: respo 4e t is i or4er.6t is a 'e eral rule i the la9 o: a'e c" that# i or4er to bi 4 the pri cipal b" a *ort'a'e o realpropert" execute4 b" a a'e t# it *ust upo its :ace purport to be *a4e# si' e4 a 4 seale4 i the a*e o: the pri cipal# other9ise# it 9ill bi 4 the a'e t o l". 6t is ot e ou'h *erel" that the a'e t 9as i :act authori,e4 to *a5e the *ort'a'e# i: he has ot acte4 i the a*e o: thepri cipal. ANGELEES "S% PNR !ACTS* O Ma" 5# 1/)$# the respo 4e t Philippi e 3atio al Rail9a"s =P3R@ i :or*e4 a certai +au4e cio Ro*ual4e, that it has accepte4 the latter7s o::er to bu"# o a GAS 6S# F8ERE 6SG basis# the P3R7s scrapQu serviceable rails locate4 i 2el Car*e a 4 1ubao# Pa*pa 'a at P1#3$$.$$ a 4 P2#1$$.$$ per *etric to # respectivel"# :or the total a*ou t o: P/(#($$.$$. A:ter pa"i ' the state4 purchase price# Ro*ual4e, a44resse4 a letter to Att". Cipria o 2i,o # P3R7s Acti ' Purchasi ' A'e t. &he 1i,ette R. FiDa co *e tio e4 i the letter 9as 1i,ette FiDa co< A 'eles# petitio erKs o9 4ecease4 9i:e. &hat ver" sa*e 4a" ? Ma" 2(# 1/)$ ? 1i,ette reCueste4 the P3R to tra s:er the locatio o: 9ith4ra9al :or the reaso that the scrapQu serviceable rails locate4 i 2el Car*e a 4 1ubao# Pa*pa 'a 9ere ot rea4" :or hauli '. &he P3R 'ra te4 sai4 reCuest a 4 allo9e4 1i,ette to 9ith4ra9 scrapQu serviceable rails i Murcia# Capas a 4 Sa Mi'uel# &arlac i stea4. 8o9ever# the P3R subseCue tl" suspe 4e4 the 9ith4ra9al i vie9 o: 9hat it co si4ere4 as 4ocu*e tar" 4iscrepa cies couple4 b" reporte4 pil:era'es o: over P5$$#$$$.$$ 9orth o: P3R scrap properties i &arlac.

.aili ' to 4o so# he is respo sible to the* :or 9hatever 'oo4s *a" bee i 'oo4 :aith a 4 9ithout e'li'e ce se t to the a'e t 9ithout 5 o9le4'e# actual or co structive# o: the ter*i atio o: such relatio ship. -ESUS % GO4UN "S% -OSE ERCADO G%R% N,% 167812 D757>872 19$ 2006 !ACTS* 6 the local electio s o: 1//5# respo 4e t vie4 :or the 'uber atorial post i Pa*pa 'a. Epo respo 4e t7s reCuest# petitio er# o9 er o: !M+ Publishi ' 8ouse# a pri ti ' shop locate4 i Sa .er a 4o# Pa*pa 'a# sub*itte4 to respo 4e t 4ra:t sa*ples a 4 price Cuotatio o: ca*pai' *aterials. 0" petitio er7s clai*# respo 4e t7s 9i:e ha4 tol4 hi* that respo 4e t alrea4" approve4 his price Cuotatio a 4 that he coul4 start pri ti ' the ca*pai' *aterials# he ce# he 4i4 pri t ca*pai' *aterials li5e posters beari ' respo 4e t7s photo'raph lea:lets co tai i ' the slate o: part"ca 4i4ates sa*ple ballots poll 9atcher i4e ti:icatio car4s# a 4 stic5ers.+ive the ur'e c" a 4 li*ite4 ti*e to 4o the Dob or4er# petitio er availe4 o: the services a 4:acilities o: Metro A 'eles Pri ti ' a 4 o: St. !oseph Pri ti ' Press# o9 e4 b" his 4au'hter!e i:er +o,u a 4 *other Epi:a ia Macali o +o,u # respectivel" Mea 9hile# o March 31# 1//5# respo 4e t7s sister <i <la9# 1ilia Soria o =1ilia @ obtai e4 :ro*petitio er Gcash a4va ceG o: P253#$$$ alle'e4l" :or the allo9a ces o: poll 9atchers 9ho 9ere atte 4i ' a se*i ar a 4 :or other relate4 expe ses. 1ilia ac5 o9le4'e4 o petitio er7s 1//5 4iar"receipt o: the a*ou t. ISSUE> FQ3 1ilia R. Soria o 9as authori,e4 b" the respo 4e t to receive the cash a4va ce:ro* the petitio er i the a*ou t o: P253#$$$.$$P HELD* 0" the co tract o: a'e c" a perso bi 4s hi*sel: to re 4er so*e service or to 4oso*ethi ' i represe tatio or o behal: o: a other# 9ith the co se t or authorit" o: the latter

ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014 Co seCue tl"# the spouses A 'eles 4e*a 4e4 the re:u 4 o: the a*ou t o:P/(#$$$.$$. &he P3R# ho9ever# re:use4 to pa"# alle'i ' that as per 4eliver" receipt 4ul" si' e4 b" 1i,ette# 5%.(5) *etric to s o: u serviceable rails ha4 alrea4" bee 9ith4ra9 9hich# at P2#1$$.$$ per *etric to # 9ere 9orth P11%#7)1.)$# a a*ou t that excee4s the clai* :or re:u 4. O Au'ust 1$# 1/))# the spouses A 'eles :ile4 suit a'ai st the P3R a 4 its corporate ecretar"# Ro4ol:o .lores# a*o ' others# :or speci:ic per:or*a ce a 4 4a*a'es be:ore the Re'io al &rial Court o: Uue,o Cit". 6 it# the" pra"e4 that P3R be 4irecte4 to 4eliver %( *etric to s o: scrapQu serviceable rails a 4 to pa" the* 4a*a'es a 4 attor e"Ks :ees. O April 1(# 1//(# the trial court# o the postulate that the spouses A 'eles are ot the real parties<i <i terest# re 4ere4 Du4'*e t 4is*issi ' their co*plai t :or lac5 o: cause o: actio . As hel4 b" the court# 1i,ette 9as *erel" a represe tative o: Ro*ual4e, i the 9ith4ra9al o: scrap or u serviceable rails a9ar4e4 to hi* a 4 ot a assi' ee to the latterKs ri'hts 9ith respect to the a9ar4. O appeal# the 4ecisio o: the trail court 9as a::ir*e4 b" the Court o: Appeals# he ce# this petitio . ISSUE* Fhether or ot 1i,ette A 'eles 9as a assi' ee. HELD* 3o. Fhere a'e c" exists# the thir4 part"Ks =i this case# P3RKs@ liabilit" o a co tract is to the pri cipal a 4 ot to the a'e t a 4 the relatio ship o: the thir4 part" to the pri cipal is the sa*e as that i a co tract i 9hich there is o a'e t. 3or*all"# the a'e t has either ri'hts or liabilities as a'ai st the thir4 part". 8e ca ot thus sue or be sue4 o the co tract. Si ce a co tract *a" be violate4 o l" b" the parties thereto as a'ai st each other# the real part"<i < i terest# either as plai ti:: or 4e:e 4a t i a actio upo that co tract *ust# 'e erall"# be a co tracti ' part". &he le'al situatio is# ho9ever# 4i::ere t 9here a a'e t is co stitute4 as a assi' ee. 6 such a case# the a'e t *a"# i his o9 behal:# sue o a co tract *a4e :or his pri cipal# as a assi' ee o: such co tract. &he rule reCuiri ' ever" actio to be prosecute4 i the a*e o: the real part"<i <i terest reco' i,es the assi' *e t o: ri'hts o: actio a 4 also reco' i,es that 9he o e has a ri'ht assi' e4 to hi*# he is the the real part"<i <i terest a 4 *a" *ai tai a actio upo such clai* or ri'ht. Epo scruti " o: the subDect Ro*ual4e,Ks letter to Att". Cipria o 2i,o 4ate4 Ma" 2(#1/)$# it is at o ce ARAFAG HABANA JALAYAJAY appare t that 1i,ette 9as to act Dust as a Greprese tativeG o: Ro*ual4e, i the G9ith4ra9al o: rails#G a 4 ot a assi' ee. 6: 1i,ette 9as 9ithout le'al sta 4i ' to sue a 4 appear i this case# there is *ore reaso to hol4 that her petitio er husba 4# either as her co Du'al part er or her heir# is also 9ithout such sta 4i '. Petitio er *a5es *uch o: the :act that the ter*s Ga'e tG or Gattor e"<i <:actG 9ere o tuse4 i the Ro*ual4e, letter a :oretaste4. 6t bears to stress# ho9ever# that the 9or4s Gpri cipalG a 4 Ga'e t#G are ot the o l" ter*s use4 to 4esi' ate the parties i a a'e c" relatio . &he a'e t *a" also be calle4 a attor e"# prox"# 4ele'ate or# as here# represe tative. 6t ca ot be over e*phasi,e4 that Ro*ual4e,Ks use o: the active verb Gauthori,e4#G i stea4 o: Gassi' e4#G i 4icate4 a i te t o his part to 5eep a 4 retai his i terest i the subDect *atter. State4 a bit 4i::ere tl"# he i te 4e4 to li*it 1i,ette7s role i the scrap tra sactio to bei ' the represe tative o: his i terest therei . A po9er o: attor e" is o l" but a i stru*e t i 9riti ' b" 9hich a perso # as pri cipal# appoi ts a other as his a'e t a 4 co :ers upo hi* the authorit" to per:or* certai speci:ie4 acts o behal: o: the pri cipal. &he 9ritte authori,atio itsel: is the po9er o: attor e"# a 4 this is clearl" i 4icate4 b" the :act that it has also bee calle4 a Gletter o: attor e".G 6ts pri*ar" purpose is ot to 4e:i e the authorit" o: the a'e t as bet9ee hi*sel: a 4 his pri cipal but to evi4e ce the authorit" o: the a'e t to thir4 parties 9ith 9ho* the a'e t 4eals. &he letter u 4er co si4eratio is su::icie t to co stitute a po9er o: attor e". Except as *a" be reCuire4 b" statute# a po9er o: attor e" is vali4 althou'h o otar" public i terve e4 i its executio . A po9er o: attor e" *ust be strictl" co strue4 a 4 pursue4. &he i stru*e t 9ill behel4 to 'ra t o l" those po9ers 9hich are speci:ie4 therei # a 4 the a'e t *a" either 'o be"o 4 or 4eviate :ro* the po9er o: attor e". Co textuall"# all that 1i,ette 9as authori,e4 to 4o 9as to 9ith4ra9 the u serviceableQscrap raili 's. Allo9i ' her authorit" to sue there:or# especiall" i her o9 a*e# 9oul4 be to rea4 so*ethi ' ot i te 4e4# let alo e 9ritte i the Ro*ual4e, letter. SIASAT "S% IAC !'5=&* Respo 4e t &eresita 3acia ce o succee4e4 i co vi ci ' o::icials o: the the 2epart*e t o: E4ucatio a 4 Culture# herei a:ter calle4 2epart*e t# to purchase 9ithout public bi44i '# o e *illio pesos 9orth o: atio al :la's :or the use o: public schools throu'hout the cou tr". Fhe 3acia ce o 9as i :or*e4 b" the Chie: o: the 0u4'et 2ivisio o: the 2epart*e t that the purchase or4ers coul4 ot be release4 u less a :or*al Page 163

Civil Law Review 2 2013 - 2014 o::er to 4eliver the :la's i accor4a ce 9ith the reCuire4 speci:icatio s 9as :irst sub*itte4 :or approval# she co tacte4 the o9 ers o: the E ite4 .la' 6 4ustr" o Septe*ber 17# 1/7%. &he ext 4a"# a:ter the tra sactio 9as 4iscusse4# a 4ocu*e t 9as 4ra9 up 9ith the :ollo9i ' 9or4s O&his is to :or*ali,e our a'ree*e t :or "ou to represe t E ite4 .la' 6 4ustr" to 4eal 9ith a " e tit" or or'a i,atio # private or 'over *e t i co ectio 9ith the *ar5eti ' o: our pro4ucts<:la's a 4 all its accessories. .or "our service# "ou 9ill be e title4 to a co**issio o: thirt" =3$J@ perce tI. &he letter 9as si' e4 b" Mr. Pri*itivo Siasat# o9 er a 4 'e eral *a a'er o: E ite4 .la' 6 4ustr". A:ter the :irst 4eliver" o: 7#3// :la's# respo 4e t7s authorit" 9as revo5e4 b" petitio er. Siasat# a:ter receivi ' the pa"*e t o: P%(/#/)$.$$ o October 23# 1/7% :or the :irst 4eliver"# te 4ere4 the a*ou t o: P23#/$$.$$ or :ive perce t =5J@ o: the a*ou t receive4# to the respo 4e t as pa"*e t o: her co**issio . &he latter alle'e4l" proteste4. She re:use4 to accept the sai4 a*ou t i sisti ' o the 3$J co**issio a'ree4 upo . &he respo 4e t 9as prevaile4 upo to accept the sa*e# ho9ever# because o: the assura ce o: the petitio ersthat the" 9oul4 pa" the co**issio i :ull a:ter the" 4elivere4 the other hal: o: the or4er. &he respo 4e t states that she later o lear e4 that petitio er Siasat ha4 alrea4" receive4 pa"*e t :or the seco 4 4eliver" o: 7#)33 :la's. Fhe she co :ro te4 the petitio ers# the" vehe*e tl" 4e ie4 receipt o: the pa"*e t# at the sa*e ti*e clai*i ' that the respo 4e t ha4 o participatio 9hatsoever 9ith re'ar4 to the seco 4 4eliver" o: :la's a 4 that the a'e c" ha4 alrea4" bee revo5e4. A actio to recover her co**issio s 9as :ile4 b" the respo 4e t. &he trial court a 4 the court o: appeals both 4eci4e4 i :avor o: the respo 4e t. 8e ce# this appeal. I&&.7* Fhether or ot respo 4e t 3acia ce o is e title4 to the co**issio as a'e t o: E ite4 .la' 6 4ustr". e'otiatio s lea4i ' to#a 4 the executio o:# a co tract o: sale o: petitio ersK *ercha 4ise 9ith a " e tit" or or'a i,atio . &he petitio ersK evi4e ce 4oes ot ecessaril" prove that there 9ere t9o separate tra sactio s. &he 4ocu*e t is a 'e eral i 4orse*e t *a4e b" Secretar" Ma uel :or the purchase o: the atio al :la's :or public schools. 6t co tai s o re:ere ce to the u*ber o: :la's to be or4ere4 or the a*ou t o: :u 4s to be release4. 6: the co tracts 9ere separate a 4 4isti ct :ro* o e a other# the 9hole or at least a substa tial part o: the 'over *e tKs suppl" procure*e t process 9oul4 have bee repeate4. 6 this case# 9hat 9ere issue4 9ere *ere i 4orse*e ts :or the release o: :u 4s a 4 authori,atio :or the ext purchase. Si ce o l" o e tra sactio 9as i volve4# 9e 4e " the petitio ersK co te tio that respo 4e t 3acia ce o is ot e title4 to the stipulate4 co**issio o the seco 4 4eliver" because o: the revocatio o: the a'e c" e::ecte4 a:ter the :irst 4eliver". &he revocatio o: a'e c" coul4 ot preve t the respo 4e t :ro* ear i ' her co**issio because as the trial court opi e4# it ca*e too late# the co tract o: sale havi ' bee alrea4" per:ecte4 a 4 partl" execute4. "ELOSO "S CA !'5=&* Petitio er .ra cisco -eloso alle'e4 that he 9as the absolute o9 er o: the subDect propert" a 4 he ever authori,e4 a "bo4"# ot eve his 9i:e# to sell it. 8e alle'e4 that he 9as i possessio o: the title but 9he his 9i:e# 6r*a# le:t :or abroa4# he :ou 4 out that his cop" 9as *issi '. 8e the veri:ie4 9ith the Re'istr" o: 2ee4s o: Ma ila a 4 there he 4iscovere4 that his title 9as alrea4" ca celle4 i :avor o:4e:e 4a t A'lalo*a Escario. &he tra s:er o: propert" 9as supporte4 b" a +e eral Po9er o: Attor e" 4ate4 3ove*ber 2/# 1/)5 a 4 2ee4 o: Absolute Sale# 4ate4 3ove*ber 2# 1/)7# execute4 b" 6r*a -eloso# 9i:e o: the petitio er a 4 appeari ' as his attor e"<i <:act# a 4 4e:e 4a t A'lalo*a Escario. I&&.7* H7/)* Fhether or &he Court rule4 i the a::ir*ative. O e 4oes ot have to u 4erta5e a close scruti " o: the 4ocu*e t e*bo4"i ' the a'ree*e t bet9ee the petitio ers a 4 the respo 4e t to 4e4uce that the Klatter 9as i stitute4 as a 'e eral a'e t. 6 4ee4# it ca easil" be see b" the 9a" 'e eral 9or4s 9ere e*plo"e4 i the a'ree*e t that o restrictio s 9ere i te 4e4 as to the *a er the a'e c" 9as to be carrie4 out or i the place 9here it 9as to be execute4. &he po9er 'ra te4 to the respo 4e t 9as so broa4 that it practicall" covers the ARAFAG HABANA JALAYAJAY propert". H7/)* &he Court rule4 i the a::ir*ative. A exa*i atio o: the recor4s sho9e4 that the assaile4 po9er o: attor e" 9as vali4 a 4 re'ular o its :ace. 6t 9as otari,e4 a 4 as such# it carries the evi4e tiar" 9ei'ht co :erre4 upo it 9ith respect to its 4ue executio . Fhile it is true that it 9as 4e o*i ate4 Page 164 ot there 9as a vali4 sale o: the

Civil Law Review 2 2013 - 2014 as a 'e eral po9er o: attor e"# the 'e eral po9er o: attor e" ha4 expressl" authori,e4 the a'e t or attor e" i :act the po9er to sell the subDect propert". &he special po9er o: attor e" ca be i clu4e4 i the 'e eral po9er 9he it is speci:ie4 therei the act or tra sactio :or 9hich the special po9er is reCuire4. Fhether the i stru*e t be 4e o*i ate4 as G'e eral po9er o: attor e"G or Gspecial po9er o: attor e"G# 9hat *atters is the exte t o: the po9er or po9ers co te*plate4 upo the a'e t or attor e" i :act. 6: the po9er is couche4 i 'e eral ter*s# the such po9er ca ot 'o be"o 4 acts o: a4*i istratio . 8o9ever# 9here the po9er to sell is speci:ic# it ot bei ' *erel" i*plie4# *uch less couche4 i 'e eral ter*s# there ca ot be a " 4oubt that the attor e" i :act *a" execute a vali4 sale. A i stru*e t *a" be captio e4 as Gspecial po9er o: attor e"G but i: the po9ers 'ra te4 are couche4 i 'e eral ter*s 9ithout *e tio i ' a " speci:ic po9er to sell or *ort'a'e or to 4o other speci:ic acts o: strict 4o*i io # the i that case o l" acts o: a4*i istratio *a" be 4ee*e4 co :erre4. &he Court :ou 4 ho9ever# that the basis prese te4 b" the petitio er 9as i a4eCuate to sustai his alle'atio o: :or'er". Mere varia ce o: the si' atures ca ot be co si4ere4 as co clusive proo: that the sa*e 9ere :or'e4. .or'er" ca ot be presu*e4. Petitio er# ho9ever# :aile4 to prove his alle'atio a 4 si*pl" relie4 o the appare t 4i::ere ce o: the si' atures. 8is 4e ial ha4 ot establishe4 that the si' ature o the po9er o: attor e" 9as ot his. &he Court a'rees 9ith the co clusio o: the lo9er court that private respo 4e t 9as a i oce t purchaser :or value. Respo 4e t A'lalo*a relie4 o the po9er o: attor e" prese te4 b" petitio erKs 9i:e# 6r*a. 0ei ' the 9i:e o: the o9 er a 4 havi ' 9ith her the title o: the propert"# there 9as o reaso :or the private respo 4e t ot to believe i her authorit". Moreover# the po9er o: attor e" 9as otari,e4 a 4 as such# carrie4 9ith it the presu*ptio o: its 4ue executio . &hus# havi ' ha4 o i 5li ' o a " irre'ularit" a 4 havi ' o participatio thereo:# private respo 4e t 9as a bu"er i 'oo4 :aith. 6t has bee co siste tl" hel4 that a purchaser i 'oo4 :aith is o e 9ho bu"s propert" o: a other# 9ithout otice that so*e other perso has a ri'ht to# or i terest i such propert" a 4 pa"s a :ull a 4 :air price :or the sa*e# at the ti*e o: such purchase# or be:ore he has otice o: the clai* or i terest o: so*e other perso i the propert". CUISON "S CA !'5=&* Petitio er ;ue Cuiso is a sole proprietorship e 'a'e4 i the purchase a 4 sale o: e9spri t# bo 4 paper a 4 scrap# 9ith places o: busi ess at 0aesa# ARAFAG HABANA JALAYAJAY Uue,o Cit"# a 4 Sto. Cristo# 0i o 4o# Ma ila. .ro* 2ece*ber %# 1/7/ to .ebruar" 15# 1/)$# private respo 4e t 4elivere4 various 5i 4s o: paper pro4ucts a*ou ti ' to P2/7#%)7.3$ to a certai 1ilia &a o: 1& &ra4i '. &he 4eliveries 9ere *a4e b" respo 4e t pursua t to or4ers alle'e4l" place4 b" &iu 8u" &iac 9ho 9as the e*plo"e4 i the 0i o 4o o::ice o: petitio er. 6t 9as li5e9ise pursua t to &iacKs i structio s that the *ercha 4ise 9as 4elivere4 to 1ilia &a . Epo 4eliver"# 1ilia &a pai4 :or the *ercha 4ise b" issui ' several chec5s pa"able to cash at the speci:ic reCuest o: &iu 8u" &iac. 6 tur # &iac issue4 i e =/@ post4ate4 chec5s to private respo 4e t as pa"*e t :or the paper pro4ucts. E :ortu atel"# sa4 chec5s 9ere later 4isho ore4 b" the 4ra9ee ba 5. &herea:ter# private respo 4e t *a4e several 4e*a 4s upo petitio er to pa" :or the *ercha 4ise i Cuestio # clai*i ' that &iu 8u" &iac 9as 4ul" authori,e4 b" petitio er as the *a a'er o: his 0i o 4o o::ice# to e ter i to the Cuestio e4 tra sactio s 9ith private respo 4e t a 4 1ilia &a . Petitio er 4e ie4 a " i volve*e t i the tra sactio e tere4 i to b" &iu 8u" &iac a 4 re:use4 to pa" private respo 4e t the a*ou t correspo 4i ' to the selli ' price o: the subDect *ercha 4ise. 1e:t 9ith o recourse# private respo 4e t :ile4 a actio a'ai st petitio er :or the collectio o:P2/7#%)7.3$ represe ti ' the price o: the *ercha 4ise. &he petitio er rule4 i :avor o: the petitio er but the trial court7s 4ecisio 9as subseCue tl" reverse4 b" the Court o: Appeals. 8e ce# this petitio . I&&.7* Fhether or ot &iu 8u" &iac possesse4 the reCuire4 authorit" :ro* petitio er su::icie t to hol4 the latter liable :or the 4ispute4 tra sactio . H7/)* &he Court rule4 i the a::ir*ative. 6t is a 9ell<establishe4 rule that o e 9ho clothes a other 9ith appare t authorit" as his a'e t a 4 hol4s hi* out to the public as such ca ot be per*itte4 to 4e " the authorit" o: such perso to act as his a'e t# to the preDu4ice o: i oce t thir4 parties 4eali ' 9ith such perso i 'oo4 :aith a 4 i the ho est belie: that he is 9hat he appears to be =Mac5e# et al# v. Ca*ps# 7 Phil. 553 =1/$7TL Philippi e 3atio al 0a 5. v Court o: Appeals# /% SCRA 357 S1/7/T@. .ro* the :acts a 4 the evi4e ce o recor4# there is o 4oubt that this rule obtai s. &he petitio *ust there:ore :ail.

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Civil Law Review 2 2013 - 2014 6t is evi4e t :ro* the recor4s that b" his o9 acts a 4 a4*issio # petitio er hel4 out &iu 8u" &iac to the public as the *a a'er o: his store i Sto. Cristo# 0i o 4o# Ma ila. More particularl"# petitio er explicitl" i tro4uce4 &iu 8u" &iac to 0er ar4i o -illa ueva# respo 4e tKs *a a'er# as his =petitio erKs@ bra ch *a a'er as testi:ie4 to b" 0er ar4i o -illa ueva. Seco 4l"# 1ilia &a # 9ho has bee 4oi ' busi ess 9ith petitio er :or Cuite a 9hile# also testi:ie4 that she 5 e9 &iu 8u" &iac to be the *a a'er o: petitio erKs Sto. Cristo# 0i o 4o bra ch. &his 'e eral perceptio o: &iu 8u" &iac as the *a a'er o: petitio erKs Sto. Cristo store is eve *a4e *a i:est b" the :act that &iu 8u" &iac is 5 o9 i the co**u it" to be the G5i a5apati4G ='o4brother@ o: petitio er. 6 :act# eve petitio er a4*itte4 his close relatio ship 9ith &iu 8u" &iac 9he he sai4 that the" are Gli5e brothersG = 'ollo # p. 5%@. &here 9as thus o reaso :or a "bo4" especiall" those tra sacti ' busi ess 9ith petitio er to eve 4oubt the authorit" o: &iu 8u" &iac as his *a a'er i the Sto. Cristo 0i o 4o bra ch. R.2'/ B'(D A% C,.2= ,G A<<7'/& !'5=&* E4erli 4a +allar4o# 9i:e o: 2a iel Ma ,o# execute4 a special po9er o: attor e" i : avor o: Ru:i o S. ACui o authori,i ' hi* to Osecure a loa :ro* a " ba 5 :or a " a*ou t or other9ise *ort'a'e a propert" i las pi asI. ACui o execute4 a 2ee4 o: Real Estate i :avor o: Rural 0a 5=re:erre4 herei as the 0a 5@ :or the pa"*e t o:loa s a 4 a4va ces obtai e4 b" the *ort'a'or totali ' php 35$#$$$ 9ith 1%J i terestrate. +allar4o a 4 Ma ,o :ile4 a actio a'ai st Ru:i o a 4 the 0a 5 because ACui o alle'e4l" le:t his resi4e ce i 0ulaca a 4 that the plai ti::s 9ere alle'e4l" surprise4 to 4iscover that the propert" 9as *ort'a'e4 to pa" perso al loa s obtai e4 b" ACui o :ro* the 0a 5 solel" :or perso al use a 4 be e:it o: ACui o. Plai ti::s alle'e that ACui o# i the real estate *ort'a'e# appoi te4 the 0a 5 as attor e" i :act a 4 i case o: Du4icial :oreclosure as receiver 9ith correspo 4i ' po9er to sell a 4 that althou'h 9ithout a " express authorit" :ro* +allar4o# ACui o 9aive4 the :or*er7s ri'hts u 4er Sectio 12# Rule 3/ o: the Rules o: Court. &he trial court issue4 a &RO a'ai st the 0a 5. ACui o i his 4e:e se sai4 that plai ti:: authori,e4 hi* to *ort'a'e her propert" to the 0a 5 i or4er to liCui4ate herphp35$#$$$ obli'atio to hi*. &he trial court issue4 a Du4'*e t i :avor o: the 0a 5but the Court o: Appeals reverse4. I&&.7* Fhether or ot the 2ee4 o: Real Estate Mort'a'e execute4 b" ACui o to the 0a 5 is vali4. H7/)* 3o. ACui o7s act o: si' i ' the 2ee4 o: Real Estate Mort'a'e i his a*e alo e as *ort'a'or# 9ithout a " i 4icatio that he 9as si' i ' :or a 4 i behal: o: the propert" o9 er# +allara4o# bou 4 hi*sel: alo e i his perso al capacit" as a 4ebtor o: the 0a 5 a 4 ot as the a'e t or attor e" i :act o: +alalr4o. &he Court o: Appeals :urther observe4 that the 4ee4 o: *ort'a'e 9as execute4 o Au'ust 2(# 1/)1 therei clearl" stipulati ' that it 9as bei ' execute4 Gas securit" :or the pa"*e t o: certai loa s# a4va ces or other acco**o4atio obtai e4 b" the Mort'a'or :ro* the Mort'a'ee i the total su* o: &hree 8u 4re4 .i:t" &housa 4 Pesos o l" =P35$#$$$.$$@G althou'h at the ti*e o such loa or a4va ce ha4 bee obtai e4. &he pro*issor" otes 9ere 4ate4 Au'ust 31# Septe*ber 23 a 4 October 2(# 1/)1 9hich 9ere subseCue t to the executio o: the 4ee4 o: *ort'a'e. &he appella t is correct i clai*i ' that the 4e:e 4a t Rural 0a 5 shoul4 ot have a'ree4 to exte 4 or co stitute the *ort'a'e o the properties o: +allar4o 9ho ha4 o existi ' i 4ebte4 ess 9ith it at the ti*e. E 4er the :acts the 4e:e 4a t Rural 0a 5 appeare4 to have i' ore4 the represe tative capacit" o: ACui o a 4 4ealt 9ith hi* a 4 his 9i:e i their perso al capacities. Sai4 appellee Rural 0a 5 also 4i4 ot co 4uct a i Cuir" o 9hether the subDect loa s 9ere to be e:it the i terest o: the pri cipal =plai ti:: +allar4o@ rather tha that o: the a'e t althou'h the 4ee4 o: *ort'a'e 9as explicit that the loa 9as :or purpose o: the ba 'us a 4 su'po pro4uctio o: 4e:e 4a t ACui o. 6 e::ect# 9ith the executio o: the *ort'a'e u 4er the circu*sta ces a 4 assu*i ' it to be vali4 but because the loa ta5e 9as to be use4 exclusivel" :or ACui oKs busi ess i the Gba 'usG a 4 Gsu'poG pro4uctio # +allar4o i e::ect beco*es a suret" 9ho is *a4e pri*aril" a s9erable :or loa s ta5e b" ACui o i his perso al capacit" i the eve t ACui o 4e:aults i such pa"*e t. E 4er Art. 1)7) o: the Civil Co4e# to obli'ate the pri cipal as a 'uara tor or suret"# a special po9er o: attor e" is reCuire4. 3o such special po9er o: attor e" :or +allar4o to be a suret" o: ACui o ha4 bee execute4.

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Civil Law Review 2 2013 - 2014


the ori'i al co tracts =8ousi ' 1oa A'ree*e t# Pro*issor" 3ote a 4 Real Estate Mort'a'e@ 9ith =respo 4e t ba 5@L

ISSUE* Ma" a ba 5 u ilaterall" raise the i terest rate o a housi ' loa 'ra te4 a e*plo"ee# b" reaso o: the volu tar" resi' atio o: the borro9erP HELD* 6t 9ill ot be a*iss to poi t out that the u ilateral 4eter*i atio a 4 i*positio o: i crease4 i terest rates b" the herei respo 4e t ba 5 is obviousl" violative o: the principle of m"t"ality of contracts or4ai e4 i Article 13$) o: the Civil Co4e. 6 or4er that obli'atio s arisi ' :ro* co tracts *a" have the :orce o: la9 bet9ee the parties# there *ust be m"t"ality bet9ee the parties base4 o their esse tial eCualit". A co tract co tai i ' a co 4itio 9hich *a5es its :ul:ill*e t 4epe 4e t exclusivel" upo the u co trolle4 9ill o: o e o: the co tracti ' parties# is voi4. 8e ce# eve assu*i ' that the . . . loa a'ree*e t bet9ee the P30 a 4 the private respo 4e t 'ave the P30 a lice se =althou'h i :act there 9as o e@ to i crease the i terest rate at 9ill 4uri ' the ter* o: the loa # that lice se 9oul4 have bee ull a 4 voi4 :or bei ' violative o: the pri ciple o: *utualit" esse tial i co tracts. 6t 9oul4 have i veste4 the loa a'ree*e t 9ith the character o: a co tract o: a4hesio # 9here the parties 4o ot bar'ai o eCual :ooti '# the 9ea5er part"Ks =the 4ebtor@ participatio bei ' re4uce4 to the alter ative Gto ta5e it or leave i.I Such a co tract is a veritable trap :or the 9ea5er part" 9ho* the courts o: Dustice *ust protect a'ai st abuse a 4 i*positio . &he respo 4e t ba 5 trie4 to si4estep this 4i::icult" b" averri ' that petitio er +il4a .lore 4o as a :or*er ba 5 e*plo"ee 9as ver" 5 o9le4'eable co cer i ' respo 4e t ba 5Ks le 4i ' rates a 4 proce4ures# a 4 there:ore# petitio ers 9ere Go a eCual :ooti 'G 9ith respo 4e t ba 5 as :ar as the subDect loa co tract 9as co cer e4. &hat may have bee true i so:ar as e teri ' i to the ori'i al loa a'ree*e t a 4 *ort'a'e co tract 9as co cer e4. 8o9ever# that 4oes ot hol4 true 9he it co*es to the 4eter*i atio a 4 i*positio o: escalate4 rates o: i terest as u ilaterall" provi4e4 i the Ma Co* Resolutio # 9here she ha4 o voice at all i its preparatio a 4 applicatio . &o alla" :ears that respo 4e t ba 5 9ill i or4i atel" be preDu4ice4 b" bei ' stuc5 9ith this Gs9eetheart loa G at pate tl" co cessio ar" i terest rates# 9hich accor4i ' to respo 4e t ba 5 is the Gs9eetest 4ealG a "o e coul4 obtai a 4 is a act o: 'e erosit" co si4eri ' that i 1/)5 le 4i ' rates i the ba 5i ' i 4ustr" 9ere pea5i ' 9ell over 3$J p.a.# 9e ee4 o l" poi t out that the ba 5 ha4 the optio to i*pose i its loa co tracts the co 4itio that resi' atio o: a e*plo"ee<borro9er Page 167

CREDIT TRANSACTIONS
SPOUSES !LORENDO "S% CA '() LAND BAN# G%R% N,% 101771 D757>872 17$ 1996 !ACTS* Petitio er +il4a .lore 4o =9as@ a e*plo"ee o: =Respo 4e t 0a 5@ :ro* Ma" 17# 1/7( u til Au'ust 1(# 1/)% 9he she volu taril" resi' e4. 8o9ever# be:ore her resi' atio # she applie4 :or a housi ' loa o: P1%)#$$$.$$# pa"able 9ithi 25 "ears :ro* =respo 4e t ba 5Ks@ Provi4e t .u 4 o !ul" 2$# 1/)3L
&hat the loa . . . 9as actuall" 'ive to =petitio er@ +il4a .lore 4o# . . .# i her capacit" as e*plo"ee o: =respo 4e t ba 5@L &hat o March 1/# 1/)5# =respo 4e t ba 5@ i crease4 the i terest rate o =petitio erKs@ loa :ro* /J per ann"m to 17J# the sai4 i crease to ta5e e::ect o March 1/# 1/)5L &hat the 4etails o: the i crease are e*bo4ie4 i =1a 4ba 5Ks@ Ma Co* Resolutio 3o. )5<$) 4ate4 March 1/# 1/)5# . . . # a 4 i a P. =Provi4e t .u 4@ Me*ora 4u* Circular =3o. )5< $)# Series o: 1/)5@# . . &hat =petitio ers@ proteste4 the i crease# therea:ter# =respo 4e t ba 5@ 5ept o 4e*a 4i ' that =petitio er@ pa" the i crease4 i terest or the e9 *o thl" i stall*e ts base4 o the i crease4 i terest rate# but Plai ti:: Dust as vehe*e tl" *ai tai e4 that the sai4 i crease is u la9:ul a 4 u Dusti:iable. 0ecause o: =respo 4e t ba 5Ks@ repeate4 4e*a 4s# =petitio ers@ 9ere :orce4 to :ile the i sta t suit :or 6 Du ctio a 4 2a*a'esL &hat# Dust the sa*e# 4espite =respo 4e t ba 5Ks@ 4e*a 4s that =petitio ers@ pa" the i crease4 i terest or i crease4 *o thl" i stall*e ts# the" =petitio ers@ have :aith:ull" pai4 a 4 4ischar'e4 their loa obli'atio s# *ore particularl" the *o thl" pa"*e t o: the ori'i al stipulate4 i stall*e t o: P1#2%).72. 2isre'ar4i ' =respo 4e t ba 5Ks@ repeate4 4e*a 4 :or i crease4 i terest a 4 *o thl" i stall*e t# =petitio ers@ are prese tl" up<to<4ate i the pa"*e ts o: their obli'atio s u 4er

ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 9oul4 be a 'rou 4 :or escalatio . &he :act is it 4i4 ot. 8e ce# it *ust live 9ith such o*issio . A 4 it 9oul4 be totall" u :air to o9 i*pose sai4 co 4itio # ot to *e tio that it 9oul4 violate the pri ciple o: *utualit" o: co se t i co tracts. 6t 'oes 9ithout sa"i ' that such escalatio 'rou 4 ca be i clu4e4 i :uture co tracts \ ot to a'ree*e ts alrea4" vali4l" e tere4 i to. 1et it be clear that this Court u 4ersta 4s respo 4e t ba 5Ks positio that the co cessio al i terest rate 9as reall" i te 4e4 as a *ea s to re*u erate its e*plo"ees a 4 thus a escalatio 4ue to resi' atio 9oul4 have bee a vali4 stipulatio . 0ut o such stipulatio 9as i :act *a4e# a 4 thus the escalatio provisio coul4 ot be le'all" applie4 a 4 e :orce4 as a'ai st herei petitio ers. a 4 co :i4e ce bet9ee the*. Accor4i ' to her co*putatio # the total a*ou t she pai4 to petitio er :or the loa a 4 i terest accu*ulate4 toP1#2$$#$$$.$$. Si ce she pai4 petitio er a total a*ou t o: P1#2$$#$$$.$$ :or the P5%$#$$$.$$ 9orth o: loa # a 4 upo bei ' a4vise4 b" her la9"er that she *a4e overpa"*e t to petitio er# she se t a 4e*a 4 letter to petitio er as5i ' :or the retur o: the excess a*ou t o: P(($#$$$.$$. Petitio er# 4espite receipt o: the 4e*a 4 letter# i' ore4 her clai* :or rei*burse*e t. &he R&C re 4ere4 a 2ecisio hol4i ' that respo 4e t *a4e a overpa"*e t o: her loa obli'atio to petitio er a 4 that the latter shoul4 re:u 4 the excess a*ou t to the :or*er. 6t ratioci ate4 that respo 4e t7s obli'atio 9as o l" to pa" the loa e4 a*ou t o: P5%$#$$$.$$# a 4 that the alle'e4 i terests 4ue shoul4 ot be i clu4e4 i the co*putatio o: respo 4e t7s total *o etar" 4ebt because there 9as o a'ree*e t bet9ee the* re'ar4i ' pa"*e t o: i terest. 6t co clu4e4 that si ce respo 4e t *a4e a excess pa"*e t to petitio er i the a*ou t o: P(($#$$$.$$ throu'h *ista5e# petitio er shoul4 retur the sai4 a*ou t to respo 4e t pursua t to the pri ciple o: sol"tio indebiti. &he R&C also rule4 that petitio er shoul4 pa" *oral 4a*a'es :or the sleepless i'hts a 4 9ou 4e4 :eeli 's experie ce4 b" respo 4e t. ISSUE* &8E R&C A32 &8E CA ERRE2 63 RE163+ &8A& 3O 63&ERES& FAS 2EE &O PE&6&6O3ER. &8E R&C A32 &8E CA ERRE2 63 APP1B63+ &8E PR63C6P1E O. 3:;<$I: IN4-2I$IP HELD* 6 terest is a co*pe satio :ixe4 b" the parties :or the use or :orbeara ce o: *o e". &his is re:erre4 to as *o etar" i terest. 6 terest *a" also be i*pose4 b" la9 or b" courts as pe alt" or i 4e* it" :or 4a*a'es. &his is calle4 co*pe sator" i terest. &he ri'ht to i terest arises o l" b" virtue o: a co tract or b" virtue o: 4a*a'es :or 4ela" or :ailure to pa" the pri cipal loa o 9hich i terest is 4e*a 4e4.1 Article 1/5( o: the Civil Co4e# 9hich re:ers to *o etar" i terest# speci:icall" *a 4ates that o i terest shall be 4ue u less it has bee expressl" stipulate4 i 9riti '. As ca be 'lea e4 :ro* the :ore'oi ' provisio # pa"*e t o: *o etar" i terest is allo9e4 o l" i:> =1@ there 9as a express stipulatio :or the pa"*e t o: i terestL a 4 =2@ the a'ree*e t :or the pa"*e t o: i terest 9as re4uce4 i 9riti '. &he co curre ce o: the t9o Page 170

SEBASTIAN SIGA-AN "S% ALICIA "ILLANUE"A G%R% N,% 173227 -'(.'20 20$ 2009 !ACTS* Respo 4e t alle'e4 that she 9as a busi ess9o*a e 'a'e4 i suppl"i ' o::ice *aterials a 4 eCuip*e ts to the Philippi e 3av" O::ice =P3O@ locate4 at .ort 0o i:acio# &a'ui' Cit"# 9hile petitio er 9as a *ilitar" o::icer a 4 co*ptroller o: the P3O :ro* 1//1 to 1//(. Respo 4e t clai*e4 that so*eti*e i 1//2# petitio er approache4 her i si4e the P3O a 4 o::ere4 to loa her the a*ou t o: P5%$#$$$.$$. Si ce she ee4e4 capital :or her busi ess tra sactio s 9ith the P3O# she accepte4 petitio er7s proposal. &he loa a'ree*e t 9as ot re4uce4 i 9riti '. Also# there 9as o stipulatio as to the pa"*e t o: i terest :or the loa . O 31 Au'ust 1//3# respo 4e t issue4 a chec5 9orth P5$$#$$$.$$ to petitio er as partial pa"*e t o: the loa . O 31 October 1//3# she issue4 a other chec5 i the a*ou t o: P2$$#$$$.$$ to petitio er as pa"*e t o: the re*ai i ' bala ce o: the loa . Petitio er tol4 her that si ce she pai4 a total a*ou t o: P7$$#$$$.$$ :or theP5%$#$$$.$$ 9orth o: loa # the excess a*ou t o: P1($#$$$.$$ 9oul4 be applie4 as i terest :or the loa . 3ot satis:ie4 9ith the a*ou t applie4 as i terest# petitio er pestere4 her to pa" a44itio al i terest. Petitio er threate e4 to bloc5 or 4isapprove her tra sactio s 9ith the P3O i: she 9oul4 ot co*pl" 9ith his 4e*a 4. As all her tra sactio s 9ith the P3O 9ere subDect to the approval o: petitio er as co*ptroller o: the P3O# a 4 :eari ' that petitio er *i'ht bloc5 or u 4ul" i :lue ce the pa"*e t o: her vouchers i the P3O# she co ce4e4. &hus# she pai4 a44itio al a*ou ts i cash a 4 chec5s as i terests :or the loa . She as5e4 petitio er :or receipt :or the pa"*e ts but petitio er tol4 her that it 9as ot ecessar" as there 9as *utual trust ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 co 4itio s is reCuire4 :or the pa"*e t o: *o etar" i terest. &hus# 9e have hel4 that collectio o: i terest 9ithout a " stipulatio there:or i 9riti ' is prohibite4 b" la9. 6t appears that petitio er a 4 respo 4e t 4i4 ot a'ree o the pa"*e t o: i terest :or the loa . 3either 9as there co vi ci ' proo: Petitio er7s relia ce o respo 4e t7s alle'e4 a4*issio i the 0atas Pa*ba sa 0l'. 22 cases that the" ha4 a'ree4 o the pa"*e t o: i terest at the rate o: 7J 4eserves sca t co si4eratio . 6 the sai4 case# respo 4e t *erel" testi:ie4 that a:ter pa"i ' the total a*ou t o: loa # petitio er or4ere4 her to pa" i terest. Respo 4e t 4i4 ot cate'oricall" 4eclare i the sa*e case that she a 4 respo 4e t *a4e a e!press stipulatio i 9riti ' as re'ar4s pa"*e t o: i terest at the rate o: 7J. As earlier 4iscusse4# *o etar" i terest is 4ue o l" i: there 9as a e!press stipulatio i 9riti ' :or the pa"*e t o: i terest. &here are i sta ces i 9hich a i terest *a" be i*pose4 eve i the abse ce o: express stipulatio # verbal or 9ritte # re'ar4i ' pa"*e t o: i terest. Article 22$/ o: the Civil Co4e states that i: the obli'atio co sists i the pa"*e t o: a su* o: *o e"# a 4 the 4ebtor i curs 4ela"# a le'al i terest o: 12J per a u* *a" be i*pose4 as i 4e* it" :or 4a*a'es i: o stipulatio o the pa"*e t o: i terest 9as a'ree4 upo . 1i5e9ise# Article 2212 o: the Civil Co4e provi4es that i terest 4ue shall ear le'al i terest :ro* the ti*e it is Du4iciall" 4e*a 4e4# althou'h the obli'atio *a" be sile t o this poi t. All the sa*e# the i terest u 4er these t9o i sta ces *a" be i*pose4 o l" as a pe alt" or 4a*a'es :or breach o: co tractual obli'atio s. 6t ca ot be char'e4 as a co*pe satio :or the use or :orbeara ce o: *o e". 6 other 9or4s# the t9o i sta ces appl" o l" to co*pe sator" i terest a 4 ot to *o etar" i terest. &he case at bar i volves petitio er7s clai* :or *o etar" i terest. S75,() I&&.7* E 4er Article 1/($ o: the Civil Co4e# i: the borro9er o: loa pa"s i terest 9he there has bee o stipulatio there:or# the provisio s o: the Civil Co4e co cer i ' solutio i 4ebiti shall be applie4. Article 215% o: the Civil Co4e explai s the pri ciple o: solutio i 4ebiti. Sai4 provisio provi4es that i: so*ethi ' is receive4 9he there is o ri'ht to 4e*a 4 it# a 4 it 9as u 4ul" 4elivere4 throu'h *ista5e# the obli'atio to retur it arises. 6 such a case# a cre4itor<4ebtor relatio ship is create4 u 4er a Cuasi<co tract 9hereb" the pa"or beco*es the cre4itor 9ho the has the ri'ht to 4e*a 4 the retur o: pa"*e t *a4e b" *ista5e# a 4 the perso 9ho has o ri'ht to receive such pa"*e t beco*es obli'ate4 to retur the sa*e. &he Cuasi<co tract o: solutio i 4ebiti har5s bac5 to the a cie t pri ciple that o o e shall e rich hi*sel: u Dustl" at the expe se o: ARAFAG HABANA JALAYAJAY Page 171 a other. &he pri ciple o: solutio i 4ebiti applies 9here =1@ a pa"*e t is *a4e 9he there exists o bi 4i ' relatio bet9ee the pa"or# 9ho has o 4ut" to pa"# a 4 the perso 9ho receive4 the pa"*e tL a 4 =2@ the pa"*e t is *a4e throu'h *ista5e# a 4 ot throu'h liberalit" or so*e other cause. Fe have hel4 that the pri ciple o: solutio i 4ebiti applies i case o: erro eous pa"*e t o: u 4ue i terest. 6t 9as 4ul" establishe4 that respo 4e t pai4 i terest to petitio er. Respo 4e t 9as u 4er o 4ut" to *a5e such pa"*e t because there 9as o express stipulatio i 9riti ' to that e::ect. &here 9as o bi 4i ' relatio bet9ee petitio er a 4 respo 4e t as re'ar4s the pa"*e t o: i terest. &he pa"*e t 9as clearl" a *ista5e. Si ce petitio er receive4 so*ethi ' 9he there 9as o ri'ht to 4e*a 4 it# he has a obli'atio to retur it. Fhe a obli'atio # ot co stituti ' a loa or :orbeara ce o: *o e" is breache4# a i terest o the a*ou t o: 4a*a'es a9ar4e4 *a" be i*pose4 at the rate o: (J per a u*. Fe :urther 4eclare4 that 9he the Du4'*e t o: the court a9ar4i ' a su* o: *o e" beco*es :i al a 4 executor"# the rate o: le'al i terest# 9hether it is a loa Q:orbeara ce o: *o e" or ot# shall be 12J per a u* :ro* such :i alit" u til its satis:actio # this interim perio4 bei ' 4ee*e4 eCuivale t to a :orbeara ce o: cre4it. 6 the prese t case# petitio er7s obli'atio arose :ro* a Cuasi<co tract o: sol"tio indebiti a 4 ot :ro* a loa or :orbeara ce o: *o e". &hus# a i terest o: (J per a u* shoul4 be i*pose4 o the a*ou t to be re:u 4e4 as 9ell as o the 4a*a'es a9ar4e4 a 4 o the attor e"7s :ees# to be co*pute4 :ro* the ti*e o: the extra<Du4icial 4e*a 4 up to the :i alit" o: this 2ecisio . 6 a44itio # the i terest shall beco*e 12J per a u* :ro* the :i alit" o: this 2ecisio up to its satis:actio . !ALLO* CA 4ecisio A!!IR ED

Civil Law Review 2 2013 - 2014 Petitio er alle'e4 that he 9as issue4 the cre4it car4 as a Oho orar" *e*ber.I As such# he 9as ot reCuire4 to sub*it a " applicatio or si' a " 4ocu*e t prior to the issua ce o: the car4 a 4 he 9as e title4 to pa" o a i stall*e t basis 9ithout a " i terest. 8e 4e ie4 si' i ' the 4ocu*e t &er*s a 4 Co 4itio s +over i ' the 6ssua ce a 4 Ese o: ECuitable -isa Car4. ISSUE* Fhether petitio er is i terest o: his cre4it car4P HELD* &he private respo 4e t *ai tai s that the above stipulatio is a sta 4ar4 clause pri te4 at the bac5 o: each cre4it car4 that it issue4 a 4 that the A'ree*e t *e tio e4 therei re:ers to the &er*s a 4 Co 4itio s 9hich 'over s the use o: the cre4it car4 as co tai e4 i private respo 4e t ECuitable7s sta 4ar4 applicatio :or*. &hus# b" si' i ' the bac5 o: the cre4it car4# petitio er Alcara, has explicitl" co se te4 to the &er*s a 4 Co 4itio s i clu4i ' the applicable i terests# service :ees# attor e"7s :ees a 4 liCui4ate4 4a*a'es i the eve t o: o pa"*e t 9ithi the perio4 state4 i the state*e ts o: accou t re'ularl" se t ever" *o th to the petitio er. 6t is# ho9ever# u 4e iable that petitio er Alcara, accu*ulate4 u pai4 obli'atio s both i his peso a 4 4ollar accou ts throu'h the use o: the cre4it car4 issue4 to hi* b" private respo 4e t ECuitable. As such# petitio er Alcara, is liable :or the pa"*e t thereo:. Si ce the provisio s o: the &er*s a 4 Co 4itio s are i applicable to petitio er Alcara,# the le'al i terest o obli'atio s co sisti ' o: loa or :orbeara ce o: *o e" shall appl"# to 9it>
1. 967( =67 ,8/?B'=?,( ?& 827'567)$ '() ?= 5,(&?&=& ?( =67 <'0>7(= ,G ' &.> ,G >,(70 # i.e.# a loa or :orbeara ce o: *o e"# the i terest 4ue shoul4 be that 9hich *a" have bee stipulate4 i 9riti '. .urther*ore# the i terest 4ue shall itsel: ear le'al i terest :ro* the ti*e it is Du4iciall" 4e*a 4e4. I( =67 '8&7(57 ,G &=?<./'=?,($ =67 2'=7 ,G ?(=727&= &6'// 87 12H <72 '((.> =, 87 5,><.=7) G2,> )7G'./=$ ?%7%$ G2,> I.)?5?'/ ,2 7J=2'I.)?5?'/ )7>'() .()72 '() &.8I75= =, =67 <2,A?&?,(& ,G A2=?5/7 1169 ,G =67 C?A?/ C,)7. .... 3. Fhe the Du4'*e t o: the court a9ar4i ' a su* o: *o e" beco*es :i al a 4 executor"# the rate o: le'al i terest# 9hether the case :alls u 4er para'raph 1 or para'raph 2# above# shall be 12J per a u* :ro* such :i alit" u til its satis:actio # this i teri* perio4 bei ' 4ee*e4 to be b" the a eCuivale t to a :orbeara ce o: cre4it.

ot reCuire4 to pa" the

CRISOSTO O ALCARA4 "S% CA G%R% N,% 152202 !ACTS* Private respo 4e t# ECuitable Cre4it Car4 3et9or5# 6 c. =ECuitable@# is a co*pa " e 'a'e4 i the busi ess o: exte 4i ' cre4it acco**o4atio sQ:acilities throu'h the use o: the cre4it car4s issue4 to its clie tele. 6 Ma" 1//5# private respo 4e t ECuitable issue4 a cre4it car4 to petitio er Crisosto*o Alcara,. &he petitio er throu'h the use o: the sai4 cre4it car4 secure4 cash a4va ces a 4 purchase4 'oo4s a 4 services o cre4it. &hus# the petitio er accu*ulate4 u pai4 cre4it 9ith private respo 4e t a 4 4espite the receipt o: several 4e*a 4 letters# :aile4 to pa" his outsta 4i ' obli'atio s. Private respo 4e t ECuitable sou'ht the pa"*e t o: the accu*ulate4 outsta 4i ' bala ce i clu4i ' i terest o: 2.5J per *o th as 9ell as a *o thl" late pe alt"Qsurchar'e o: 1.5J :or the peso accou t# a 4 1.5J *o thl" i terest a 4 1J late pe alt"Qsurchar'e per *o th :or the 4ollar accou t u til :ull pa"*e t thereo: as provi4e4 i the O&er*s a 4 Co 4itio s +over i ' the 6ssua ce a 4 Ese o: ECuitable -isa Car4I =herei a:ter re:erre4 to as the &er*s a 4 Co 4itio s@. &he private respo 4e t also pra"e4 :or liCui4ate4 4a*a'es o: 25J o: the total a*ou t o: both accou ts a 4 attor e"7s :ees at the sa*e rate alle'e4l" also i accor4a ce 9ith the &er*s a 4 Co 4itio s. Private respo 4e t ECuitable clai*s petitio er Alcara, has a accu*ulate4 outsta 4i ' bala ce o: ESM)#/7$.5% i his 4ollar accou t as o: .ebruar" 1)# 1///# a 4 P1/2#5$$.$$ o his peso accou t as o: .ebruar" 2)# 1/// i clusive o: i terest a 4 surchar'es. &he petitio er a4*itte4 he ha4 *a4e use o: the cre4it car4 issue4 i his a*e b" private respo 4e t ECuitable# but co teste4 the a*ou t o: his liabilit". ARAFAG HABANA JALAYAJAY

6 the prese t case# the recor4s reveal that the pri cipal a*ou t o: the obli'atio o the peso accou t Page 172

Civil Law Review 2 2013 - 2014 o: the subDect cre4it car4 as o: March 17# 1//( isP)1#$$$.$$# 9hile the 4ollar accou t o: the sa*e cre4it car4 has a u pai4 bala ce o: M%#3/7.3% exclusive o: a " i terests# pe alties a 4 other char'es as o: March 3# 1//(. &he extraDu4icial 4e*a 4 :or pa"*e t :or the 4ollar accou t 9as *a4e o !u e 25# 1//( b" virtue o: a letter se t to a 4 4ul" receive4 b" the petitio er. &he !u e 25# 1//( 4e*a 4 letter 9as# ho9ever# sile t o the u pai4 bala ce o the peso accou t. &he recor4s li5e9ise reveal that it 9as o l" o October 5# 1//( that private respo 4e t ECuitable *a" be 4ee*e4 to have extraDu4iciall" 4e*a 4e4 pa"*e t o: the outsta 4i ' obli'atio o: petitio er Alcara, o his peso accou t. 8e ce# it is o l" :ro* the a:oresai4 4ates that the le'al rate o: i terest shall appl" o the 4ollar a 4 peso accou ts# respectivel"# u til :ull pa"*e t thereo:.

=1@Fhether P30 has the ri'ht to appl" a 4eposit to the 4ebt o: 4epositor to the ba 5P =2@ Fhether +ullas is e title4 to 4a*a'esP HELD* &he Civil Co4e co tai s provisio s re'ar4i ' co*pe satio =set o::@ a 4 4eposit. =Articles 11/5 et se).# 175) et se). &he portio s o: Philippi e la9 provi4e that co*pe satio shall ta5e place 9he t9o perso s are reciprocall" cre4itor a 4 4ebtor o: each other =Civil Co4e# article 11/5@. 6 his co ectio # it has bee hel4 that the relatio existi ' bet9ee a 4epositor a 4 a ba 5 is that o: cre4itor a 4 4ebtor. Starti '# there:ore# :ro* the pre*ise that the Philippi e 3atio al 0a 5 ha4 9ith respect to the 4eposit o: +ullas a ri'ht o: set o::# 9e ext co si4er i: that re*e4" 9as e :orce4 properl". &he :act 9e believe is u 4e iable that prior to the *aili ' o: otice o: 4isho or# a 4 9ithout 9aiti ' :or a " actio b" +ullas# the ba 5 *a4e use o: the *o e" sta 4i ' i his accou t to *a5e 'oo4 :or the treasur" 9arra t. At this poi t recall that +ullas 9as *erel" a i 4orser a 4 ha4 issue4 i 'oo4 :aith. As to a 4epositor 9ho has :u 4s su::icie t to *eet pa"*e t o: a chec5 4ra9 b" hi* i :avor o: a thir4 part"# it has bee hel4 that he has a ri'ht o: actio a'ai st the ba 5 :or its re:usal to pa" such a chec5 i the abse ce o: otice to hi* that the ba 5 has applie4 the :u 4s so 4eposite4 i exti 'uish*e t o: past 4ue clai*s hel4 a'ai st hi*. &he 4ecisio cite4 represe ts the *i orit" 4octri e# :or o pri ciple it 9oul4 see* that otice is ot ecessar" to a *a5er because the ri'ht is base4 o the 4octri e that the relatio ship is that o: cre4itor a 4 4ebtor. 8o9ever this *a" be# as to a i 4orser the situatio is 4i::ere t# a 4 otice shoul4 actuall" have bee 'ive hi* i or4er that he *i'ht protect his i terests. Fe accor4i 'l" are o: the opi io that the actio o: the ba 5 9as preDu4icial to +ullas. 0ut to :ollo9 up that state*e t 9ith others provi ' exact 4a*a'es is ot so eas". .or i sta ce# :or alle'e4 libelous articles the ba 5 9oul4 ot be pri*aril" liable. &he sa*e re*ar5 coul4 be *a4e relative to the loss o: busi ess 9hich +ullas clai*s but 9hich coul4 ot be trace4 4e:i itel" to this occurre ce. Also +ullas havi ' eve tuall" bee rei*burse4 lost little throu'h the actual lev" b" the ba 5 o his :u 4s. O the other ha 4# it 9as ot a'reeable :or o e to 4ra9 chec5s i all 'oo4 :aith# the # leave :or Ma ila# a 4 o retur :i 4 that those chec5s ha4 ot bee cashe4 because o: the actio ta5e b" the ba 5. &hat cause4 a 4isturba ce i +ullasK :i a ces# especiall" 9ith re:ere ce to his i sura ce# 9hich 9as i Durious to Page 173

DEPOSIT
PAULINO GULLAS "S% PHILIPPINE NATIONAL G%R% N,% L-43191 N,A7>872 13$ 1935 !ACTS* &he parties to the case are Pauli o +ullas a 4 P30. &he :irst a*e4 is a *e*ber o: the Philippi e 0ar# resi4e t i the Cit" o: Cebu. &he seco 4 a*e4 is a ba 5i ' corporatio 9ith a bra ch i the sa*e cit". Attor e" +ullas has ha4 a curre t accou t 9ith the ba 5. 6t appears :ro* the recor4 that o Au'ust 2# 1/33# the &reasurer o: the E ite4 States :or the E ite4 States -etera s 0ureau issue4 a Farra t i the a*ou t o: M3(1# pa"able to the or4er o: .ra cisco Sabectoria 0acos. Pauli o +ullas a 4 Pe4ro 1ope, si' e4 as e 4orsers o: this chec5. &hereupo it 9as cashe4 b" the Philippi e 3atio al 0a 5. SubseCue tl" the treasur" 9arra t 9as 4isho ore4 b" the 6 sular &reasurer. At that ti*e the outsta 4i ' bala ce o: Attor e" +ullas o the boo5s o: the ba 5 9as P5$/. A'ai st this bala ce he ha4 issue4 certai chec5s 9hich coul4 ot be pai4 9he the *o e" 9as seCuestere4 b" the O Au'ust 2$# 1/33# Attor e" +ullas le:t his resi4e ce :or Ma ila. &he ba 5 o lear i ' o: the 4isho or o: the treasur" 9arra t se t otices b" *ail to Mr. +ullas 9hich coul4 ot be 4elivere4 to hi* at that ti*e because he 9as i Ma ila. &he ba 5 applie4 the outsta 4i ' bala ces i the curre t accou t o: Att". +ullas 9ith P30 to part :or the pa"*e t o: the :ore'oi ' chec5s. ISSUES* ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 hi*. All :acts a 4 circu*sta ces co si4ere4# 9e are o: the opi io that +ullas shoul4 be a9ar4e4 o*i al 4a*a'es because o: the pre*ature actio o: the ba 5 a'ai st 9hich +ullas ha4 o *ea s o: protectio # a 4 have :i all" 4eter*i e4 that the a*ou t shoul4 be P25$. a 4 the 3atio Savi 's a 4 1oa Associatio is that o: cre4itor a 4 4ebtorL co seCue tl"# the o9 ership o: the a*ou t 4eposite4 9as tra s*itte4 to the 0a 5 upo the per:ectio o: the co tract a 4 it ca *a5e use o: the a*ou t 4eposite4 :or its ba 5i ' operatio s# such as to pa" i terests o 4eposits a 4 to pa" 9ith4ra9als. Fhile the 0a 5 has the obli'atio to retur the amo"nt deposited, it has# ho9ever# o obli'atio to retur or 4eliver the same money that 9as 4eposite4. A 4# the :ailure o: the 0a 5 to retur the a*ou t 4eposite4 9ill ot co stitute esta:a throu'h *isappropriatio pu ishable u 4er Article 315# par. l=b@ o: the Revise4 Pe al Co4e# but it 9ill o l" 'ive rise to civil liabilit" over 9hich the public respo 4e ts have o Duris4ictio . 0ut eve 'ra ti ' that the :ailure o: the ba 5 to pa" the ti*e a 4 savi 's 4eposits o: private respo 4e t 2avi4 9oul4 co stitute a violatio o: para'raph 1=b@ o: Article 315 o: the Revise4 Pe al Co4e# evertheless a " i cipie t cri*i al liabilit" 9as 4ee*e4 avoi4e4# because 9he the a:oresai4 ba 5 9as place4 u 4er receivership b" the Ce tral 0a 5# petitio ers +ui 'o a a 4 Marti assu*e4 the obli'atio o: the ba 5 to private respo 4e t 2avi4# thereb" resulti ' i the ovatio o: the ori'i al co tractual obli'atio arisi ' :ro* 4eposit i to a co tract o: loa a 4 co verti ' the ori'i al trust relatio bet9ee the ba 5 a 4 private respo 4e t 2avi4 i to a or4i ar" 4ebtor<cre4itor relatio bet9ee the petitio ers a 4 private respo 4e t. Co seCue tl"# the :ailure o: the ba 5 or petitio ers +ui 'o a a 4 Marti to pa" the 4eposits o: private respo 4e t 9oul4 ot co stitute a breach o: trust but 9oul4 *erel" be a :ailure to pa" the obli'atio as a 4ebtor. Moreover# 9hile it is true that ovatio 4oes ot exti 'uish cri*i al liabilit"# it *a" ho9ever# preve t the rise o: cri*i al liabilit" as lo ' as it occurs prior to the :ili ' o: the cri*i al i :or*atio i court. 6 the case at bar# there is o 4ispute that petitio ers +ui 'o a a 4 Marti execute4 a pro*issor" ote o !u e 17# 1/)1 assu*i ' the obli'atio o: the ba 5 to private respo 4e t 2avi4L 9hile the cri*i al co*plai t :or esta:a 9as :ile4 o 2ece*ber 23# 1/)1 9ith the O::ice o: the Cit" .iscal. 8e ce# it is clear that ovatio occurre4 lo ' be:ore the :ili ' o: the cri*i al co*plai t 9ith the O::ice o: the Cit" .iscal. Co seCue tl"# as a:orestate4# a " i cipie t cri*i al liabilit" 9oul4 be avoi4e4 but there 9ill still be a civil liabilit" o the part o: petitio ers +ui 'o a a 4 Marti to pa" the assu*e4 obli'atio . =2@ Petitio er +ui 'o a *erel" acco**o4ate4 the reCuest o: the 3atio Savi 's a 4 loa Associatio i or4er to clear the ba 5 4ra:t throu'h his 4ollar accou t because the ba 5 4i4 ot have a 4ollar accou t. 6**e4iatel" a:ter the ba 5 4ra:t 9as cleare4# petitio er +ui 'o a authori,e4 3atio Savi 's a 4 1oa Associatio to 9ith4ra9 the sa*e i or4er to be utili,e4 b" the ba 5 :or its operatio s. 6t is sa:e to assu*e that the E.S. 4ollars 9ere co verte4 :irst i to Philippi e pesos be:ore the" 9ere accepte4 a 4 4eposite4 i 3atio Savi 's a 4 1oa Associatio # because the ba 5 Page 174

GUINGONA "S% !LA INIANO !ACTS* .ro* March 1/7/ to March 1/)1# Cle*e t 2avi4 *a4e several i vest*e ts 9ith the 3atio al Savi 's a 4 1oa Associatio . O March 21# 1/)1# the ba 5 9as place4 u 4er receivership b" the 0a '5o Se tral. Epo 2avi47s reCuest# petitio ers +ui 'o a a 4 Marti issue4 a Doi t pro*issor" ote# absorbi ' the obli'atio s o: the ba 5. O !ul" 17# 1/)1# the" 4ivi4e4 the i 4ebte4 ess. 2avi4 :ile4 a co*plai t :or esta:a a 4 violatio o: Ce tral 0a 5 Circular 3o. 3(% a 4 relate4 re'ulatio s re'ar4i ' :orei' excha 'e tra sactio s be:ore the O::ice o: the Cit" .iscal o: Ma ila. Petitio ers :ile4 the herei petitio :or prohibitio a 4 i Du ctio 9ith a pra"er :or i**e4iate issua ce o: restrai i ' or4er a 4Qor 9rit o: preli*i ar" i Du ctio to e Doi the public respo 4e ts to procee4 9ith the preli*i ar" i vesti'atio o the 'rou 4 that the petitio ers7 obli'atio is civil i ature. ISSUE* 1. Fhether the co tract bet9ee 3S1A a 4 2avi4 is a co tract o: 4epositor a co tract o: loa # 9hich a s9er 4eter*i es 9hether the Cit" .iscal has the Duris4ictio to :ile a case :or esta:aP 2. Fhether there 9as a violatio 0a 5 Circular 3o. 3(%P HELD* 1@ Fhe private respo 4e t 2avi4 i veste4 his *o e" o i e. a 4 savi 's 4eposits 9ith the a:oresai4 ba 5# the co tract that 9as per:ecte4 9as a co tract o: si*ple loa or m"t""m a 4 ot a co tract o: 4eposit. 8e ce# the relatio ship bet9ee the private respo 4e t ARAFAG HABANA JALAYAJAY o: Ce tral

Civil Law Review 2 2013 - 2014 is presu*e4 to have :ollo9e4 the or4i ar" course o: the busi ess 9hich is to accept 4eposits i Philippi e curre c" o l"# a 4 that the tra sactio 9as re'ular a 4 :air# i the abse ce o: a clear a 4 co vi ci ' evi4e ce to the co trar". 6 co clusio # co si4eri ' that the liabilit" o: the petitio ers is purel" civil i ature a 4 that there is o clear sho9i ' that the" e 'a'e4 i :orei' excha 'e tra sactio s# Fe hol4 that the public respo 4e ts acte4 9ithout Duris4ictio 9he the" i vesti'ate4 the char'es a'ai st the petitio ers. Co seCue tl"# public respo 4e ts shoul4 be restrai e4 :ro* :urther procee4i ' 9ith the cri*i al case :or to allo9 the case to co ti ue# eve i: the petitio ers coul4 have appeale4 to the Mi istr" o: !ustice# 9oul4 9or5 'reat i Dustice to petitio ers a 4 9oul4 re 4er *ea i 'less the proper a4*i istratio o: Dustice. SPS%REYES "S% BPI !A ILY SA"INGS BAN# G%R% N,&% 149840-41 '256 31$ 2006 !ACTS* O March 2%# 1//5# the Re"es spouses execute4 a real estate *ort'a'e o their propert" i 6loilo Cit" i :avor o: respo 4e t 0P6 .a*il" Savi 's 0a 5# 6 c. =0P6<.S0@ to secure a P15M loa o: &ra sbuil4ers Resources a 4 2evelop*e t Corporatio =&ra sbuil4ers@. &he *ort'a'e co tract bet9ee petitio ers a 4 0P6<.S0 provi4e4# a*o ' others> Fhe &ra sbuil4ers :aile4 to pa" its P15M loa 9ithi the stipulate4 perio4 o: o e "ear# the ba 5 restructure4 the loa throu'h a pro*issor" ote execute4 b" &ra sbuil4ers i its :avor. &he perti e t provisio s o: the pro*issor" ote state4 that>
1. &he procee4s o: the 3ote shall be applie4 to loa accou t o. 211$)33( 2. &he e9 obli'atio o: &ra sbuil4ers to respo 4e t 0a 5 :or :i:tee *illio =P15#$$$#$$$.$$@ shall be pai4 i t9e t" =2$@ Cuarterl" i stall*e ts co**e ci ' o Septe*ber 2)# 1//( a 4 at a i terest rate o: ei'htee =1)J@ per a u*.

petitio ers i 6loilo Cit" a:ter &ra sbuil4ers 4e:aulte4 i its pa"*e ts. &he Ma ila R&C 4is*isse4 petitio ers7 actio s :or *a 4a*us a 4 prohibitio . &heir appeal to the Court o: Appeals 9as li5e9ise 4is*isse4. ISSUE* Fhether there 9as a ovatio o: the *ort'a'e loa co tract bet9ee petitio ers a 4 0P6<.S0 that 9oul4 result i the exti 'uish*e t o: petitio ers7 liabilit" to the ba 5P HELD* 3ovatio is 4e:i e4 as the exti 'uish*e t o: a obli'atio b" the substitutio or cha 'e o: the obli'atio b" a subseCue t o e 9hich ter*i ates the :irst# either b" cha 'i ' the obDect or pri cipal co 4itio s# or b" substituti ' the perso o: the 4ebtor# or subro'ati ' a thir4 perso i the ri'hts o: the cre4itor.
Article 12/2 o: the Civil Co4e o ovatio :urther provi4es> Article 12/2. 6 or4er that a obli'atio *a" be exti 'uishe4 b" a other 9hich substitute the sa*e# it is i*perative that it be so 4eclare4 i u eCuivocal ter*s# or that the ol4 a 4 the e9 obli'atio s be o ever" poi t i co*patible 9ith each other.

&he ca cellatio o: the ol4 obli'atio b" the e9 o e is a ecessar" ele*e t o: ovatio 9hich *a" be e::ecte4 either expressl" or i*plie4l". Fhile there is reall" o har4 a 4 :ast rule to 4eter*i e 9hat *i'ht co stitute su::icie t cha 'e resulti ' i ovatio # the touchsto e# ho9ever# is irreco cilable i co*patibilit" bet9ee the ol4 a 4 the e9 obli'atio s. &hus# the 9ell<settle4 rule is that# 9ith respect to obli'atio s to pa" a su* o: *o e"# the obli'atio is ot ovate4 b" a i stru*e t that expressl" reco' i,es the ol4# cha 'es o l" the ter*s o: pa"*e t# a44s other obli'atio s ot i co*patible 9ith the ol4 o es# or the e9 co tract *erel" supple*e ts the ol4 o e. 0P6<.S0 a 4 &ra sbuil4ers o l" exte 4e4 the repa"*e t ter* o: the loa :ro* o e "ear to t9e t" Cuarterl" i stall*e ts at 1)J i terest per a u*. &here 9as absolutel" o i te tio b" the parties to superse4e or abro'ate the ol4 loa co tract secure4 b" the real estate *ort'a'e execute4 b" petitio ers i :avor o: 0P6< .S0. 6 :act# the i te tio o: the e9 a'ree*e t 9as precisel" to revive the ol4 obli'atio a:ter the ori'i al perio4 expire4 a 4 the loa re*ai e4 u pai4. &he ovatio o: a co tract ca ot be presu*e4. 6 the abse ce o: a express a'ree*e t# ovatio ta5es place o l" 9he the ol4 a 4 the e9 obli'atio s are i co*patible o ever" poi t.

Petitio ers aver that the" 9ere ot i :or*e4 about the restructuri ' o: &ra sbuil4ers7 loa . 6 :act# 9he the" lear e4 o: the e9 loa a'ree*e t so*eti*e i 2ece*ber 1//(# the" 9rote 0P6<.S0 reCuesti ' the ca cellatio o: their *ort'a'e a 4 the retur o: their certi:icate o: title to the *ort'a'e4 propert". &he" clai*e4 that the e9 loa ovate4 the loa a'ree*e t o: March 2%# 1//5. 0ecause the ovatio 9as 9ithout their 5 o9le4'e a 4 co se t# the" 9ere alle'e4l" release4 :ro* their obli'atio u 4er the *ort'a'e. Fhe 0P6<.S0 re:use4 to ca cel the *ort'a'e# petitio ers :ile4 separate petitio s :or *a 4a*us a 4 prohibitio 9ith the Re'io al &rial Court =R&C@ o: Ma ila to co*pel the ba 5 to retur their certi:icate o: title a 4 ca cel the *ort'a'e. 0P6<.S0# o the other ha 4# i stitute4 extraDu4icial :oreclosure procee4i 's a'ai st ARAFAG HABANA JALAYAJAY

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Civil Law Review 2 2013 - 2014 Moreover# u 4er the real estate *ort'a'e execute4 b" the* i :avor o: 0P6<.S0# petitio ers u 4ertoo5 to secure the P15M loa o: &ra sbuil4ers to 0P6<.S0 Gand other credit accommodations of 6hatever nat"re obtained by the 2orro6er=,ort+a+or. G Fhile this stipulatio prove4 to be o erous to petitio ers# either the la9 or the courts 9ill extricate a part" :ro* a u 9ise or u 4esirable co tract e tere4 i to 9ith all the reCuire4 :or*alities a 4 9ith :ull a9are ess o: its co seCue ces. Petitio ers volu taril" execute4 the real estate *ort'a'e o their propert" i :avor o: 0P6<.S0 to secure the P15M loa o: &ra sbuil4ers. &he" ca ot o9 be allo9e4 to repu4iate their obli'atio to the ba 5 a:ter &ra sbuil4ers7 4e:ault. Fhile petitio ers7 liabilit" 9as 9ritte i :i e pri t a 4 i a co tract prepare4 b" 0P6<.S0# it has bee the co siste t hol4i ' o: this Court that co tracts o: a4hesio are ot i vali4 per se. O u*erous occasio s# 9e have uphel4 the bi 4i ' e::ects o: such co tracts. CENTRAL BAN# "S% CITYTRUST BAN#ING CORPORATION G%R% N,% 141835 !782.'20 4$ 2009 !ACTS* Cit"trust :ur ishe4 petitio er 9ith the a*es a 4 correspo 4i ' si' atures o: :ive o: its o::icers authori,e4 to si' chec5s a 4 serve as 4ra9ers a 4 i 4orsers :or its accou t as 9ell as those authori,e4 to 9ith4ra9# si' receipts a 4 per:or* other tra sactio s o its behal:. Petitio er later issue4 securit" i4e ti:icatio car4s to the rovi ' tellers o e o: 9ho* 9as GRou ceval .loresG =.lores@. O !ul" 15# 1/77# .lores prese te4 :or pa"*e t to petitio er7s Se ior &eller 6lu*i a4a 4ela Cru, =6lu*i a4a@ t9o Cit"trust chec5s o: eve 4ate# pa"able to Cit"trust# o e i the a*ou t o: P)5$#$$$ a 4 the other i the a*ou t o:P/$$#$$$# both o: 9hich 9ere si' e4 a 4 i 4orse4 b" Cit"trust7s authori,e4 si' ator"<4ra9ers. A:ter the chec5s 9ere certi:ie4 b" petitio er7s Accou ti ' 2epart*e t# 6lu*i a4a veri:ie4 the*# prepare4 the cash tra s:er slip o 9hich she a::ixe4 her si' ature# sta*pe4 the chec5s 9ith the otatio GReceive4 Pa"*e tG a 4 as5e4 .lores to# as he 4i4# si' o the space above such otatio . 6 stea4 o: si' i ' his a*e# ho9ever# .lores si' e4 as GRosauro C. Ca"ab"abG ? a :act 6lu*i a4a :aile4 to otice. More tha a "ear a 4 i e *o ths later# Cit"trust# alle'i ' that the chec5s 9ere alrea4" ca celle4 because the" 9ere stole # 4e*a 4e4 petitio er to restore the a*ou ts covere4 thereb" to its 4e*a 4 4eposit accou t. Petitio er 4i4 ot hee4 the 4e*a 4# ho9ever. Cit"trust later :ile4 a co*plai t :or esta:a# 9ith reservatio o the :ili ' o: a separate civil actio # a'ai st .lores. .lores 9as co victe4. Cit"trust therea:ter :ile4 be:ore the Re'io al &rial Court =R&C@ o: Ma ila a co*plai t :or recover" o: su* o: *o e" 9ith 4a*a'es a'ai st petitio er 9hich it alle'e4 erre4 i e cashi ' the chec5s a 4 i char'i ' the procee4s thereo: to its accou t# 4espite the lac5 o: authorit" o: GRosauro C. Ca"ab"ab.G ISSUE* Fhether Cit"trust shoul4 be liable solel" :or the lossP HELD* &he co tract bet9ee the ba 5 a 4 its 4epositor is 'over e4 b" the provisio s o: the Civil Co4e o si*ple loa . Article 1/)$ o: the Civil Co4e expressl" provi4es that Gx x x savi 's x x x 4eposits o: *o e" i ba 5s a 4 si*ilar i stitutio s shall be 'over e4 b" the provisio s co cer i ' si*ple loa .G &here is a 4ebtor< cre4itor relatio ship bet9ee the ba 5 a 4 its 4epositor. &he ba 5 is the 4ebtor a 4 the 4epositor is the cre4itor. &he 4epositor le 4s the ba 5 *o e" a 4 the ba 5 a'rees to pa" the 4epositor o 4e*a 4. &he savi 's 4eposit a'ree*e t bet9ee the ba 5 a 4 the 4epositor is the co tract that 4eter*i es the ri'hts a 4 obli'atio s o: the parties. &he la9 i*poses o ba 5s hi'h sta 4ar4s i vie9 o: the :i4uciar" ature o: ba 5i '. Sectio 2 o: Republic Act 3o. )7/1 =GRA )7/1G@# 9hich too5 e::ect o 13 !u e 2$$$# 4eclares that the State reco' i,es the G:i4uciar" ature o: ba 5i ' that reCuires hi'h sta 4ar4s o: i te'rit" a 4 per:or*a ce.G &his e9 provisio i the 'e eral ba 5i ' la9# i tro4uce4 i 2$$$# is a statutor" a::ir*atio o: Supre*e Court 4ecisio s# starti ' 9ith the 1//$ case o: Si*ex 6 ter atio al v. Court o: Appeals# hol4i ' that Gthe ba 5 is u 4er obli'atio to treat the accou ts o: its 4epositors 9ith *eticulous care# al9a"s havi ' i *i 4 the :i4uciar" ature o: their relatio ship.G &his :i4uciar" relatio ship *ea s that the ba 57s obli'atio to observe Ghi'h sta 4ar4s o: i te'rit" a 4 per:or*a ceG is 4ee*e4 9ritte i to ever" 4eposit a'ree*e t bet9ee a ba 5 a 4 its 4epositor. &he :i4uciar" ature o: ba 5i ' reCuires ba 5s to assu*e a 4e'ree o: 4ili'e ce hi'her tha that o: a 'oo4 :ather o: a :a*il". Article 1172 o: the Civil Co4e states that the 4e'ree o: 4ili'e ce reCuire4 o: a obli'or is that prescribe4 b" la9 or co tract# a 4 abse t such stipulatio the the 4ili'e ce o: a 'oo4 :ather o: a :a*il". Sectio 2 o: RA )7/1 prescribes the statutor" 4ili'e ce Page 174

ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 reCuire4 :ro* ba 5s ? that ba 5s *ust observe Ghi'h sta 4ar4s o: i te'rit" a 4 per:or*a ceG i servici ' their 4epositors. Cit"trust7s :ailure to ti*el" exa*i e its accou t# ca cel the chec5s a 4 oti:" petitio er o: their alle'e4 lossQthe:t shoul4 *iti'ate petitio er7s liabilit"# i accor4a ce 9ith Article 217/ o: the Civil Co4e 9hich provi4es that i: the plai ti::7s e'li'e ce 9as o l" co tributor"# the i**e4iate a 4 proxi*ate cause o: the i Dur" bei ' the 4e:e 4a t7s lac5 o: 4ue care# the plai ti:: *a" recover 4a*a'es# but the courts shall *iti'ate the 4a*a'es to be a9ar4e4. .or ha4 Cit"trust ti*el" 4iscovere4 the lossQthe:t a 4Qor subseCue t e cash*e t# their procee4s or part thereo: coul4 have bee recovere4. !ALLO* CA 4ecisio A..6RME2 9ith MO26.6CA&6O3# i that petitio er a 4 Cit"trust shoul4 bear the loss o a ($<%$ ratio. operates prospectivel" a 4 ot retroactivel". 6t o l" secures the 4ebts co tracte4 a:ter the 'uara t" ta5es e::ect. &o appl" the pa"*e t to the obli'atio s co tracte4 be:ore the 'uara t" 9oul4 *a5e the suret" a s9er :or 4ebts outsi4e the 'uara t". &he suret" a'ree*e t 4i4 Kt 'uara tee the pa"*e t o: a " outsta 4i ' bala ce 4ue :ro* the pri cipal 4ebtor but o l" he 9oul4 tur out the sales procee4s to the 2istileria a 4 this he has 4o e# si ce his re*itta ces excee4e4 the value o: the sales 4uri ' the perio4 o: the 'uara t". Seco 4# si ce the 2" E ' 0io57s obli'atio s prior to the 'uara t" 9ere ot covere4# a 4 abse t a " express stipulatio # a " prior pa"*e t *a4e shoul4 be applie4 to the 4ebts that 9ere 'uara tee4 si ce the" are to be re'ar4e4 as the *ore o erous 4ebts.

GUARANTY
TRADERS INSURANCE "S% DY ENG BIO# 104 PHIL 806 !ACTS* 2" E ' +io5 9as a provi cial sales a'e t o: 2istiller" corporatio # 9ith the respo sibilit" o: re*itti ' sales procee4s to the pri cipal corporatio . 8e has a ru i ' bala ce a 4 to satis:" pa"*e t# a suret" bo 4 9as issue4 9ith petitio er as 'uara tor# 9hereb" the" bou 4 the*selves liable to the 4istiller" corporatio . More purchases 9as *a4e b" 2" E ' +io5 a 4 he 9as able to pa" :or these a44itio al purchases. 3o etheless# the pa"*e t 9as :irst applie4 to his prior pa"ables. A re*ai i ' bala ce still is u pai4. &hus# a actio 9as :ile4 a'ai st sales a'e t a 4 suret" co*pa ". !u4'*e t 9as re 4ere4 i :avor o: the corporatio . ISSUE* Fhether suret" shoul4 a s9er :or 4ebts outsi4e the 'uara t"P HELD* &he re*itta ces o: 2" E ' +io5 shoul4 :irst be applie4 to the obli'atio :irst co tracte4 b" hi* a 4 covere4 b" the suret" a'ree*e t. .irst# i the abse ce o: express stipulatio # a 'uara t" or suret"ship ARAFAG HABANA JALAYAJAY Page 175

Civil Law Review 2 2013 - 2014 u pai4 over4ue accou ts o the letters o: cre4it plus i terests a 4 pe alties 9ithi t9e t"<:our =2%@ hours :ro* receipt thereo:. &he 0a 5 also i vo5e4 the Co ti ui ' +uara t" execute4 b" petitio er<spouses 1uis &oh a 4 -ic5" &a &oh 9ho 9ere the o l" parties 5 o9 to be 9ithi atio al Duris4ictio to a s9er as sureties :or the cre4it :acilit" o: .0PC. Petitio er<spouses ho9ever coul4 ot be certai 9hether to 4e " or a4*it the 4ue executio a 4 authe ticit" o: the Co ti ui ' +uara t". &he" coul4 o l" alle'e that the" 9ere *a4e to si' papers i bla 5 a 4 the Co ti ui ' +uara t" coul4 have bee o e o: the*. &he R&C :ou 4 that petitio ers Ovolu taril" a::ixe4 their si' atureSsTI o the Co ti ui ' +uara t" a 4 9ere thus Oat so*e 'ive poi t i ti*e 9illi ' to be liable u 4er those :or*s#I althou'h it hel4 that petitio ers 9ere ot bou 4 b" the suret" co tract si ce the letters o: cre4it it 9as suppose4 to secure 9ere ope e4 lo ' a:ter petitio ers ha4 cease4 to be part o: .0PC. &he appellate court *o4i:ie4 the 2ecisio o: the trial court a 4 hel4 that b" si' i ' the Co ti ui ' +uara t"# petitio er<spouses beca*e soli4aril" liable 9ith .0PC to pa" respo 4e t 0a 5 the a*ou t o: P1$#53/#75).() as pri cipal 9ith t9elve perce t =12J@ i terest per a u* :ro* :i alit" o: the Du4'*e t u til co*pletel" pai4. ISSUE* Fhether Spouses &oh as a 'uara tor :or .0PC are soli4aril" liable to pa" respo 4e t 0a 5P HELD* &his Court hol4s that the Co ti ui ' +uara t" is a vali4 a 4 bi 4i ' co tract o: petitio er<spouses as it is a public 4ocu*e t that e Do"s the presu*ptio o: authe ticit" a 4 4ue executio . Althou'h petitio ers as appellees *a" raise issues that have ot bee assi' e4 as errors b" respo 4e t 0a 5 as part"<appella t# i.e.# u e :orceabilit" o: the suret" co tract# 9e are bou 4 b" the co siste t :i 4i ' o: the courts a Cuo that petitio er< spouses 1uis &oh a 4 -ic5" &a &oh Ovolu taril" a::ixe4 their si' atureSsTI o the suret" a'ree*e t a 4 9ere thus Oat so*e 'ive poi t i ti*e 9illi ' to be liable u 4er those :or*s.I6 the abse ce o: clear# co vi ci ' a 4 *ore tha prepo 4era t evi4e ce to the co trar"# our ruli ' ca ot be other9ise. 6 so:ar as petitio ers stipulate i the Co ti ui ' +uara t" that respo 4e t 0a 5 O*a" at a " ti*e# or :ro* ti*e to ti*e# i SitsT 4iscretio x x x exte 4 or cha 'e the ti*e pa"*e t#I this provisio eve i: u 4erstoo4 as a 9aiver is co :i e4 per se to the 'ra t o: Page 176

SPOUSES TAN TOH"S% SOLID BAN# CORPORATION G%R% N,% 154183% A.B.&= 7$ 2003 !ACTS* Respo 4e t Soli4 0a 5 a'ree4 to exte 4 a Oo* ibus li eI cre4it :acilit" 9orth 1$ M i :acvor o: respo 4e t .irst 0usi ess Paper Corporatio =.0PC@. &he ter*s a 4 co 4itio s 9ere stipulate4 i a Oletter< a4viseI o: the ba 5 9here a stipulatio o: a Oco ti ui ' 'uara t" :or a " a 4 all a*ou ts si' e4 b" the Spouses &oh a 4 3' 1i.I &he Co ti ui ' +uara t" set :orth o *axi*u* li*it o the i 4ebte4 ess that respo 4e t .0PC *a" i cur a 4 :or 9hich the sureties *a" be liable# stati ' that the cre4it :acilit" Ocovers a " a 4 all existi ' i 4ebte4 ess o:# a 4 such other loa s a 4 cre4it :acilities 9hich *a" herea:ter be 'ra te4 to .6RS& 0ES63ESS PAPER CORPORA&6O3.I &he suret" also co tai e4 a 4e :acto acceleratio clause i: O4e:ault be *a4e i the pa"*e t o: a " o: the i stru*e ts# i 4ebte4 ess# or other obli'atio I 'uara tee4 b" petitio ers a 4 respo 4e ts. So as to stre 'the this securit"# the Co ti ui ' +uara t" 9aive4 ri'hts o: the sureties a'ai st 4ela" or abse ce o: otice or 4e*a 4 o the part o: respo 4e t 0a 5# a 4 'ave :uture co se t to the 0a 57s actio to Oexte 4 or cha 'e the ti*e pa"*e t# a 4Qor the *a er# place or ter*s o: pa"*e t#I i clu4i ' re e9al# o: the cre4it :acilit" or a " part thereo: i such *a er a 4 upo such ter*s as the 0a 5 *a" 4ee* proper 9ithout otice to or :urther asse t :ro* the sureties. O 13 !a uar" 1//% respo 4e t 0a 5 receive4 i :or*atio that respo 4e t<spouses ;e eth 3' 1i a 4 Ma. -ictoria 3' 1i ha4 :rau4ule tl" 4eparte4 :ro* their co Du'al ho*e. O 1% !a uar" 1//% the 0a 5 serve4 a 4e*a 4 letter upo .0PC a 4 petitio er 1uis &oh i vo5i ' the acceleratio clause i the trust receipts o: .0PC a 4 clai*e4 pa"*e t :or P1$#53/#75).() as ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 a exte sio a 4 4oes ot surre 4er the prereCuisites there:or as *a 4ate4 i the Oletter<a4vise.I 6 other 9or4s# the authorit" o: the 0a 5 to 4e:er collectio co te*plates o l" authori,e4 exte sio s# that is# those that *eet the ter*s o: the Oletter<a4vise.I Certai l"# 9hile the 0a 5 *a" exte 4 the 4ue 4ate at its 4iscretio pursua t to the Co ti ui ' +uara t"# it shoul4 o etheless co*pl" 9ith the reCuire*e ts that 4o*estic letters o: cre4it be supporte4 b" :i:tee perce t =15J@ *ar'i al 4eposit exte 4ible three =3@ ti*es :or a perio4 o: thirt" =3$@ 4a"s :or each exte sio # subDect to t9e t"<:ive perce t =25J@ partial pa"*e t per exte sio . &his rea4i ' o: the Co ti ui ' +uara t" is co siste t 9ith Philippi e 3atio al 0a 5 v. Court o: Appeals that a " 4oubt o the ter*s a 4 co 4itio s o: the suret" a'ree*e t shoul4 be resolve4 i :avor o: the suret". .urther*ore# the assura ce o: the sureties i the Co ti ui ' +uara t" that OS To act or o*issio o: a " 5i 4 o Sthe 0a 57sT part i the pre*ises shall i a " eve t a::ect or i*pair this 'uara t"I *ust also be rea4 Ostrictissi*i DurisI :or the reaso that petitio ers are o l" acco**o4atio sureties# i.e.# the" receive4 othi ' out o: the securit" co tract the" si' e4. &hus sai4# the acts or o*issio s o: the 0a 5 co ce4e4 b" petitio ers as ot a::ecti ' or i*pairi ' the suret" co tract re:er o l" to those occurri ' Oi the pre*ises#I or those that have bee the subDect o: the 9aiver i the Co ti ui ' +uara t"# a 4 stretch to o other. State4 other9ise# a exte sio o: the perio4 :or e :orci ' the i 4ebte4 ess 4oes ot b" itsel: bri ' about the 4ischar'e o: the sureties u less the extra ti*e is ot per*itte4 9ithi the ter*s o: the 9aiver# i.e.# 9here there is o pa"*e t or there is 4e:icie t settle*e t o: the *ar'i al 4eposit a 4 the t9e t"<:ive perce t =25J@ co si4eratio # i 9hich case the illicit exte sio releases the sureties. E 4er Art. 2$55 o: the Civil Co4e# the liabilit" o: a suret" is *easure4 b" the ter*s o: his co tract# a 4 9hile he is liable to the :ull exte t thereo:# his accou tabilit" is strictl" li*ite4 to that assu*e4 b" its ter*s. &he :ore'oi ' exte sio s o: the letters o: cre4it *a4e b" respo 4e t 0a 5 9ithout observi ' the ri'i4 restrictio s :or exercisi ' the privile'e are ot covere4 b" the 9aiver stipulate4 i the Co ti ui ' +uara t". Evi4e tl"# the" co stitute illicit exte sio s prohibite4 u 4er Art. 2$7/ o: the Civil Co4e# OSaT exte sio 'ra te4 to the 4ebtor b" the cre4itor 9ithout the co se t o: the 'uara tor exti 'uishes the 'uara t".I &his act o: the 0a 5 is ot *ere :ailure or 4ela" o its part to 4e*a 4 pa"*e t a:ter the 4ebt has beco*e 4ue# as 9as the case i u pai4 :ive =5@ letters o: cre4it 9hich the 0a 5 4i4 ot exte 4# 4e:er or put o::# but co*prises co scious# separate a 4 bi 4i ' a'ree*e ts to exte 4 the 4ue 4ate# as 9as a4*itte4 b" the 0a 5 itsel:. As a result o: these illicit exte sio s# petitio er<spouses 1uis &oh a 4 -ic5" &a &oh are relieve4 o: their ARAFAG HABANA JALAYAJAY Page 177 obli'atio s as sureties o: respo 4e t .0PC u 4er Art. 2$7/ o: the Civil Co4e. .urther# 9e ote several suspicious circu*sta ces that *ilitate a'ai st the e :orce*e t o: the Co ti ui ' +uara t" a'ai st the acco**o4atio sureties. .irstl"# the 'uara t" 9as execute4 *ore tha thirt" =3$@ 4a"s :ro* the ori'i al accepta ce perio4 as reCuire4 i the Oletter<a4vise.I &herea:ter# barel" t9o =2@ 4a"s a:ter the Co ti ui ' +uara t" 9as si' e4# corporate a'e ts o: .0PC 9ere replace4 o 12 Ma" 1//3 a 4 other a4Dust*e ts i the corporate structure o: .0PC e sue4 i the *o th o: !u e 1//3# 9hich the 0a 5 4i4 ot i vesti'ate althou'h such 9ere *a4e 5 o9 to it. &he co seCue ce o: these o*issio s is to 4ischar'e the suret"# petitio ers herei # u 4er Art. 2$)$ o: the Civil Co4e# or at the ver" least# *iti'ate the liabilit" o: the suret" up to the value o: the propert" or lie release4. .i all"# the :ore'oi ' o*issio or e'li'e ce o: respo 4e t 0a 5 i :aili ' to sa:e<5eep the securit" provi4e4 b" the *ar'i al 4eposit a 4 the t9e t"<:ive perce t =25J@ reCuire*e t results i the *aterial alteratio o: the pri cipal co tract# i.e.# the Oletter< a4vise#I a 4 co seCue tl" releases the suret". &his i :ere ce 9as a4*itte4 b" the 0a 5 throu'h the testi*o " o: its lo e 9it ess that OS9The ever this obli'atio beco*es 4ue a 4 4e*a 4able# except 9he "ou roll it over# =so@ there is ovatio there o the ori'i al obli'atio s.I As has bee sai4# Oi: the suret"ship co tract 9as *a4e upo the co 4itio that the pri cipal shall :ur ish the cre4itor a44itio al securit"# a 4 the securit" bei ' :ur ishe4 u 4er these co 4itio s is a:ter9ar4s release4 b" the cre4itor# the suret" is 9holl" 4ischar'e4# 9ithout re'ar4 to the value o: the securities release4# :or such a tra sactio a*ou ts to a alteratio o: the *ai co tract.I !ALLO* Petitio +RA3&E2.

Civil Law Review 2 2013 - 2014 liabilit"# ho9ever# 9as li*ite4 to P3$$#$$$.$$# plus i terest. .or the alle'e4 acts o: 4e:rau4atio co**itte4 b" A tiCuera# MarCue, a 4 the petitio erL a 4 :or :ailure o: A tiCuera to pa" his obli'atio s covere4 b" the pro*issor" otes# respo 4e t i stitute4 a co*plai t :or su* o: *o e" 9ith 4a*a'es. A tiCuera a 4 the petitio er 9ere 4eclare4 i 4e:ault# he ce# ex parte heari 's e sue4. &he R&C re 4ere4 4ecisio i :avour o: respo 4e t but 4is*isse4 the case a'ai st petitio er. &he CA upo appeal sustai e4 the vali4it" o: the co ti ui ' suret" a'ree*e t si' e4 b" petitio er. &he suret"ship# accor4i ' to the CA# 9as ot li*ite4 to a si 'le tra sactio L rather# it co te*plate4 a :uture course o: 4eali '# coveri ' a series o: tra sactio s# 'e erall" :or a i 4e:i ite ti*e or u til revo5e4. TOTANES "S% CHINA BAN#ING CORPORATION -'(.'20 19$ 2009 !ACTS* Petitio er a 4 Ma uel A tiCuera =A tiCuera@ *ai tai e4 their i 4ivi4ual savi 's a 4 curre t accou ts 9ith respo 4e t i the latter7s 1e'aspi Cit" 0ra ch. Petitio er a 4 A tiCuera# i co spirac" 9ith respo 4e t7s bra ch *a a'er Ro ie 1ou MarCue, =MarCue,@# alle'e4l" e 'a'e4 i 9hat is co**o l" 5 o9 i ba 5i ' as G5iti ' operatio #G b" *a ipulati ' the ha 4li ' a 4 operatio s o: their 4eposit accou ts. Petitio er a 4 A tiCuera# li5e9ise# e::ecte4 tra s:ers o: :u 4s to each other7s accou ts b" 4ra9i ' chec5s :ro* their respective curre t accou ts a 4 4epositi ' the sa*e 9ith the other7s accou ts b" 9a" o: 4ebit a 4 cre4it *e*os# all i co iva ce 9ith MarCue,# to *a5e it appear that their respective accou ts 9ere su::icie tl" :u 4e4# 9he i truth a 4 i :act# the" 9ere ot. O !ul" /# 1/)(# A tiCuera 4ul" execute4 a 4 4elivere4 Pro*issor" 3ote 3o. 2$)1 i :avor o: the respo 4e t# 9hereb" he pro*ise4 to pa" the latter o !ul" 1(# 1/)(# the su* o: P15$#$$$.$$ 9ith 2%J i terest per a u* u til :ull" pai4. O !ul" 2/# 1/)(# A tiCuera execute4 Pro*issor" 3ote 3o. 2$// :or a other P15$#$$$.$$# pa"able o Au'ust 5# 1/)(# 9ith the sa*e rate o: i terest. A tiCuera a'ree4 i both pro*issor" otes that he 9oul4 pa" a a44itio al a*ou t b" 9a" o: pe alt"# eCuivale t to 1Q1$ o: 1J per 4a" o: the total a*ou t 4ue :ro* 4ate o: 4e:ault u til :ull pa"*e t. &o secure the a:oresai4 obli'atio s# a suret" a'ree*e t :or* 9as execute4 a 4 si' e4 b" A tiCuera as pri cipal a 4 the petitio er as suret". As suret"# petitio er bou 4 hi*sel: to pa" Doi tl" a 4 severall" 9ith A tiCuera# the latter7s obli'atio 9ith the respo 4e t. 8is ISSUE* Fhether or ot the petitio er *a" be hel4 Doi tl" a 4 severall" liable 9ith A tiCuera :or the latter7s u settle4 obli'atio 9ith the respo 4e tP HELD* BES. Petitio er7s liabilit" 9as base4 o the suret" a'ree*e t he execute4 a 4 si' e4 :reel" a 4 volu taril". 8e# ho9ever# ar'ues that sai4 a'ree*e t 9as ot per:ecte4 because the pri cipal obli'atio # 9hich is the cre4it li e# 4i4 ot *ateriali,e. As such# bei ' a stra 'er to a " co tract e tere4 i to b" A tiCuera 9ith the respo 4e t# he shoul4 ot be hel4 liable. .ro* the ter*s o: the co tract# it appears that petitio er Doi tl" a 4 severall" u 4ertoo5# bou 4 hi*sel: a 4 9arra te4 to the respo 4e t Gthe pro*pt pa"*e t o: all over4ra:ts# pro*issor" otes# 4iscou ts# letters o: cre4it# 4ra:ts# bills o: excha 'e# a 4 other obli'atio s o: ever" 5i 4 a 4 ature# i clu4i ' trust receipts a 4 4iscou ts o: 4ra:ts# bills o: excha 'e# pro*issor" otes# etc. x x x :or 9hich the Pri cipal=s@ *a" o9 be i 4ebte4 or *a" herea:ter beco*e i 4ebte4 to the Cre4itor.G &he :act that the co tract o: suret"ship 9as si' e4 b" the petitio er prior to the executio o: the pro*issor" ote 4oes ot e'ate the :or*er7s liabilit". &he co tract e tere4 i to b" the petitio er is co**o l" 5 o9 as a co ti ui ' suret" a'ree*e t. O: course# a suret" is ot bou 4 to a " particular pri cipal obli'atio u til that pri cipal obli'atio is bor . 0ut there is o theoretical or 4octri al i*pe4i*e t :or us to sa" that the suret"ship a'ree*e t itsel: is vali4 a 4 bi 4i ' eve be:ore the pri cipal obli'atio i te 4e4 to be secure4 Page 200

ARAFAG HABANA JALAYAJAY

Civil Law Review 2 2013 - 2014 thereb" is bor # a " *ore tha there 9oul4 be i sa"i ' that obli'atio s 9hich are subDect to a co 4itio prece4e t are vali4 a 4 bi 4i ' be:ore the occurre ce o: the co 4itio prece4e t. Co*prehe sive or co ti ui ' suret" a'ree*e ts are# i :act# Cuite co**o place i prese t 4a" :i a cial a 4 co**ercial practice. A ba 5 or :i a ci ' co*pa " 9hich a ticipates e teri ' i to a series o: cre4it tra sactio s 9ith a particular co*pa "# or*all" reCuires the proDecte4 pri cipal 4ebtor to execute a co ti ui ' suret" a'ree*e t alo ' 9ith its sureties. 0" executi ' such a a'ree*e t# the pri cipal places itsel: i a positio to e ter i to the proDecte4 series o: tra sactio s 9ith its cre4itorL 9ith such suret"ship a'ree*e t# there 9oul4 be o ee4 to execute a separate suret" co tract or bo 4 :or each :i a ci ' or cre4it acco**o4atio exte 4e4 to the pri cipal 4ebtor. As suret"# petitio er7s liabilit" is Doi t a 4 several. 8e 4oes ot i sure the solve c" o: the 4ebtor# but rather the 4ebt itsel:. Suret"ship arises upo the soli4ar" bi 4i ' o: a perso ? 4ee*e4 the suret" ? 9ith the pri cipal 4ebtor# :or the purpose o: :ul:illi ' a obli'atio . &he prestatio is ot a ori'i al a 4 4irect obli'atio :or the per:or*a ce o: the suret"7s o9 act# but *erel" accessor" or collateral to the obli'atio co tracte4 b" the pri cipal. Althou'h a suret" co tract is seco 4ar" to the pri cipal obli'atio # the liabilit" o: the suret" is 4irect# pri*ar" a 4 absolute# or eCuivale t to that o: a re'ular part" to the u 4erta5i '. A suret" beco*es liable :or the 4ebt a 4 4ut" o: the pri cipal obli'or eve 9ithout possessi ' a 4irect or perso al i terest i the obli'atio s co stitute4 b" the latter. F8ERE.ORE# pre*ises co si4ere4# the petitio is 2E36E2 :or lac5 o: *erit. &he 2ecisio o: the Court o: Appeals 4ate4 !u e 2(# 2$$7 a 4 its Resolutio 4ate4 Septe*ber 1/# 2$$7# i CA<+.R. C- 3o. ()7/5# are A..6RME2. SO OR2ERE2.

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Civil Law Review 2 2013 - 2014 NO% 6t reiterate4 the ruli ' i 4e +arcia v. CA# that the co trolli ' provisio is Art. 55/ o: the CC 9hich states that the possessio o: *ovable propert" acCuire4 i 'oo4 :aith is eCuivale t to a title. 3evertheless# o e 9ho has lost a " *ovable or has bee u la9:ull" 4eprive4 thereo: *a" recover it :ro* the perso i possessio o: the sa*e. 6: the possessor o: a *ovable lost o: 9hich the o9 er has bee u la9:ull" 4eprive4# has acCuire4 it i 'oo4 :aith at a public sale# the o9 er ca ot obtai its retur 9ithout rei*bursi ' the price pai4 there :or. 1our4es# bei ' u la9:ull" 4eprive4 o: her ri ' thus she has a ri'ht to recover it :ro* the curre t possessor. 2i,o is e 'a'e4 i a busi ess 9here presu*abl" or4i ar" pru4e ce 9oul4 reCuire hi* to i Cuire 9hether or ot a i 4ivi4ual 9ho is o::eri ' the De9elr" b" ple4'e is e title4 to 4o so. &he pri ciple o: estoppel ca ot help hi* at all. Si ce there 9as o precautio availe4 o:# perhaps because o: the 4i::icult" o: resisti ' opportu it" :or pro:it# he o l" has hi*sel: to bla*e a 4 shoul4 be the last to co*plai i: the ri'ht o: the true o9 er o: the De9elr" shoul4 be reco' i,e4. DOCTRINE* P/7)B7 ,G I>>,A'8/7 (n o6ner of a movable "nla6f"lly pled+ed by another is not estopped from recoverin+ possession. >here the o6ner delivered the diamond rin+ solely for sale on commission b"t the seller instead pa6ned it 6itho"t a"thority, the o6ner is not stopped form p"rs"in+ an action a+ainst the pa6nshop.

PLEDGE AND

ORTGAGE

DI4ON "S% SUNTAY S7<=7>872 1972 !ACTS* 1our4es Su ta" is the o9 er o: a 3<carat 4ia*o 4 ri ' value4 at P5#5$$. She a 4 Clarita Siso e tere4 i to a tra sactio 9herei the ri ' 9oul4 be sol4 o co**issio . Clarita receive4 the ri ' a 4 issue4 a receipt. A:ter so*e ti*e# 1our4es *a4e 4e*a 4s :or the retur o: the ri ' but the latter re:use4 to co*pl". Fhe 1our4es i siste4 o the retur # Clarita 'ave her the pa9 shop tic5et 9hich is the receipt o: the ple4'e a 4 she :ou 4 out that 3 4a"s a:ter the ri ' 9as receive4 b" Clarita# it 9as ple4'e4 b" Melia Siso # the iece o: Clarita7s husba 4 i co iva ce 9ith Clarita 9ith the pa9 shop o: 2o*i a4or 2i,o :or P2#($$. 1our4es the :ile4 a esta:a case. She the as5e4 2o*i a4or 2i,o :or the retur o: the ri ' ple4'e4 but re:use4 to retur the ri ' thus the case :ile4 b" 1our4es. &he C.6 issue4 a 9rit o: replevi so 1our4es 9as able to have possessio o: the ri ' 4uri ' the pe 4e c" o: the case. &he C.6 also rule4 i her :avor 9hich 9as a::ir*e4 b" the CA o appeal. &hus# the case at bar. ISSUE* Fhether or ot the CA erre4 i ruli ' that 1our4es has a ri'ht to possessio o: the ri 'P HELD*

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Civil Law Review 2 2013 - 2014 SPOESES# a actio :or recover" o: possessio 9ith 4a*a'es 9as :ile4. &he case 9as 4eci4e4 i :avor o: ba"a iha . 3ot satis:ie4 9ith this 4ecisio # the SPOESES appeale4 to the Court o: Appeals. &he respo 4e t Court o: Appeals a::ir*e4 i toto the 4ecisio appeale4 :ro*. A *otio :or reco si4eratio o: the sai4 4ecisio 9as 4e ie4 b" the respo 4e t Court. ISSUE * Fhether or ot the 4ee4 o: assi' *e t is ull a 4 voi4 because it is i the ature o: a pactu*co**issoriu* a 4Qor 9as bor e out o: the sa*e. UY TONG "S% CA !ACTS * Petitio ers E" &o ' a 4 ;ho Po +io5 =SPOESES@ use4 to be the o9 ers o: Apart*e t to'ether 9ith the leasehol4 ri'ht over the la 4 o 9hich the buil4i ' sta 4s. &he la 4 is re'istere4 i the a*e o: 1i'a"a 6 vest*e ts# 6 c.. 6t appears that 1i'a"a 6 vest*e ts# 6 c. o9 e4 the buil4i ' 9hich houses the apart*e t u its but sol4 sai4 apart*e t a 4 lease4 a portio o: the la 4 i 9hich the buil4i ' sta 4s to the SPOESES. Spouses purchase4 :ro* private respo 4e t 0a"a iha Auto*otive# 6 c. =0ABA368A3@ 7 u its o: *otor vehicles. &he tra sactio 9as evi4e ce4 b" a 9ritte GA'ree*e tG 9herei state4 that i: the ve 4ee :ails to pa"# the ve 4or shall beco*e auto*aticall" the o9 er o: the apart*e t. Spouses :aile4 to pa" the bala ce o: the purchase4# 4ue to this 0a"a iha :ile4 a actio :or speci:ic per:or*a ce.&he trial court re 4ere4 a Du4'*e t i :avor o: 0a"a iha or4eri ' the 4e:e 4a t to pa" the bala ce to the plai ti:: a 4 i the eve t o: :ailure to 4o so # the" are hereb" to execute the 4ee4 o: absolute sale a 4 or the assi' *e t o: the leasehol4 ri'ht. A or4er :or executio pe 4i ' appeal 9as issue4 b" the trial court a 4 a 4ee4 o: assi' *e t 9as execute4 b" the Spouses over the apart*e t to'ether 9ith the leasehol4 ri'ht over the la 4 o 9hich the buil4i ' sta 4s. 3ot9ithsta 4i ' the executio o: the 4ee4 o: assi' *e t the SPOESES re*ai e4 i possessio o: the pre*ises. 2espite the expiratio o: the sai4 perio4# the SPOESES :aile4 to surre 4er possessio o: the pre*ises i :avor o: 0ABA368A3. &his pro*pte4 0ABA368A3 to :ile a eDect*e t case a'ai st the*. &his actio 9as ho9ever 4is*isse4 o the 'rou 4 that 0ABA368A3 9as ot the real part" i i terest# ot bei ' the o9 er o: the buil4i '. A:ter 4e*a 4s to vacate the subDect apart*e t *a4e b" 0ABA368A3Ks cou sel 9as a'ai i' ore4 b" the ARAFAG HABANA JALAYAJAY HELD * &he prohibitio o pactu* co**issoriu* stipulatio s is provi4e4 :or b" Article 2$)) o: the Civil Co4e> Art. 2$)). &he cre4itor ca ot appropriate the thi 's 'ive b" 9a" o: ple4'e or *ort'a'e# or 4ispose o: the sa*e. A " stipulatio to the co trar" is ull a 4 voi4. &he a:oreCuote4 provisio :ur ishes the t9o ele*e ts :or pactu* co**issoriu* to exist> =1@ that there shoul4 be a ple4'e or *ort'a'e 9herei a propert" is ple4'e4 or *ort'a'e4 b" 9a" o: securit" :or the pa"*e t o: the pri cipal obli'atio L a 4 =2@ that there shoul4 be a stipulatio :or a auto*atic appropriatio b" the cre4itor o: the thi ' ple4'e4 or *ort'a'e4 i the eve t o: o <pa"*e t o: the pri cipal obli'atio 9ithi the stipulate4 perio4. A perusal o: the ter*s o: the Cuestio e4 a'ree*e t evi ces o basis :or the applicatio o: the pactu* co**issoriu* provisio . .irst# there is o i 4icatio o: Ka " co tract o: *ort'a'e e tere4 i to b" the parties. 6t is a :act that the parties a'ree4 o the sale a 4 purchase o: truc5s. Seco 4# there is o case o: auto*atic appropriatio o: the propert" b" 0ABA368A3. Fhe theSPOESES 4e:aulte4 i their pa"*e ts o: the seco 4 a 4 thir4 i stall*e ts o: the truc5s the" purchase4# 0ABA368A3 :ile4 a actio i court :or speci:ic per:or*a ce. &he trial court re 4ere4 :avorable Du4'*e t :or 0ABA368A3 a 4 or4ere4 the SPOESES to pa" the bala ce o: their obli'atio a 4 i case o: :ailure to 4o so# to execute a 4ee4 o: assi' *e t over the propert" i volve4 i this case. &he SPOESES electe4 to execute the 4ee4 o: assi' *e t pursua t to sai4 Du4'*e t. Clearl"# there 9as o auto*atic vesti ' o: title o 0ABA368A3 because it too5 the i terve tio o: the trial court to exact :ul:ill*e t o: the obli'atio # 9hich# b" Page 203

Civil Law Review 2 2013 - 2014 its ver" ature is G. . a athe*a to theco cept o: pacto co**issorio S3orther Motors# 6 c. v. 8errera# +.R. 3o. 1<32(7%# .ebruar" 22#1/73# %/ SCRA 3/2T. A 4 eve 'ra ti ' that the ori'i al a'ree*e t bet9ee the parties ha4 theba4'es o: pactu* co**issoriu*# the 4ee4 o: assi' *e t 4oes ot su::er the sa*e :ate as this 9as execute4 pursua t to a vali4 Du4'*e t. &his bei ' the case# there is o reaso to i*pu' the vali4it" o: the sai4 4ee4 o: assi' *e t. 1/)%# ba 5 a'ai obtai e4 loa o: P1M i % pro*issor" otes o: 25$; each. 2ue to :i a cial co strai ts# the loa 9as ot settle4 at *aturit". 0a 5 applie4 :or extraDu4icial :oreclosure o: chattel *ort'a'e. Ac*e :ile4 actio :or i Du ctio ho9ever R&Culti *atel" 4is*isse4 co*plai t a 4 or4ere4 :oreclosure sa"i ' Ac*e 9as bou 4 b" stipulatio s. CA 4is*isse4 appeal a 4 a::ir*e4 R&C. ISSUE* Fhether or ot it is vali4 a 4 e::ective to have a clause i a chattel *ort'a'e that exte 4s its covera'e to obli'atio s "et to be co tracte4 or i curre4P HELD* AC E S6,7 R.8872 A&% CA A.B.&= 22$ 1996 !ACTS* O 27 !u e 1/7) < Chua Pac ='e eral *a a'er@ o: Ac*e Shoe# Rubber A Plastic Corporatio execute4 i behal: o: Ac*e# a chattel *ort'a'e i :avour o: Pro4ucers 0a 5 o: the Philippi es. &his is to secure a corporate loa o: P3M. &he Chattel *ort'a'e ha4 a provisio that> =c@ 6: the MOR&+A+OR# his heirs# executors or a4*i istrators shall 9ell a 4 trul" per:or* the :ull obli'atio or obli'atio s above<state4 accor4i ' to the ter*s thereo:# the this *ort'a'e shall be ull a 4 voi4. . . .6 case the MOR&+A+OR executes subseCue t pro*issor" ote or otes either as a re e9al o: the :or*er ote# as a exte sio thereo:# or as a e9 loa # or is 'ive a " other 5i 4 o: acco**o4atio s such as over4ra:ts# letters o: cre4it# accepta ces a 4 bills o: excha 'e# releases o: i*port ship*e ts o &rust Receipts# etc.# this *ort'a'e shall also sta 4 as securit" :or the pa"*e t o: the sai4 pro*issor" ote or otes a 4Qor acco**o4atio s 9ithout the ecessit" o: executi ' a e9 co tract a 4 this *ort'a'e shall have the sa*e :orce a 4 e::ect as i: the sai4 pro*issor" ote or otes a 4Qor acco**o4atio s 9ere existi ' o the 4ate thereo:. &his *ort'a'e shall also sta 4 as securit" :or sai4 obli'atio s a 4 a " a 4 all other obli'atio s o: the MOR&+A+OR to the MOR&+A+EE o: 9hatever 5i 4 a 4 ature# 9hether such obli'atio s have bee co tracte4 be:ore# 4uri ' or a:ter the co stitutio o: this *ort'a'e. &he loa o: P3M pai4. Obtai e4 a other loa i 1/)1 P2.7M a 4 9as also pai4. O 1$ a 4 11 !a uar" ARAFAG HABANA JALAYAJAY 3O. R&C a 4 CA 4ecisio s set asi4e.Chattel *ort'a'e ca cover o l" obli'atio s existi ' at the ti*e *ort'a'e is co stitute4 SAct 15$) Chattel Mort'a'e 1a9T. Fhile a ple4'e# real estate *ort'a'e# or a tichresis *a" exceptio all" secure a:ter<i curre4 obli'atio s so lo ' as these :uture 4ebts are accuratel" 4escribe4# a chattel *ort'a'e# ho9ever# ca o l" cover obli'atio s existi ' at the ti*e the *ort'a'e is co stitute4 Althou'h a pro*ise expresse4 i a chattel *ort'a'e to i clu4e 4ebts that are "et to be co tracte4 ca be a bi 4i ' co**it*e t that ca be co*pelle4 upo # the securit" itsel:# ho9ever# 4oes ot co*e i to existe ce or arise u til a:ter a chattel *ort'a'e a'ree*e t coveri ' the e9l" co tracte4 4ebt is execute4 either b" co clu4i ' a :resh chattel *ort'a'e or b" a*e 4i ' the ol4 co tract co