2. GREAT ASIAN SALES CENTER CORPORATION vs.

THE COURT OF APPEALS

FACTS: Great Asian is engaged in the business of buying and selling general merchandise, in particular,
household appliances. The Board of Directors approved a Resolution authorizing its Treasurer and
General Manager Arsenio Lim, to secure a loan from Bancasia and to sign all papers, documents or
promissory notes necessary to secure the loan. Thereafter, Tan Chong Lin signed a Surety Agreement in
favor of Bancasia to guarantee, solidarily, the debts of Great Asian to Bancasia. Arsenio Lim then signed
Deeds of Assignment of Receivables assigning to Bancasia fifteen (15) postdated checks. However, all the
checks were dishonored. Bancasia sent a letter to Tan Chong Lin notifying him of the dishonor and
demanding payment from him. Neither Great Asian nor Tan Chong Lin paid Bancasia the dishonored
checks.

Bancasia filed a complaint for collection of a sum of money against Great Asian and Tan Chong Lin. In is
defense, Great Asian alleged that the complaint was unfounded since there was already a pending
Insolvency proceeding as well as the absence of consideration and consent of all the parties to the Surety
Agreements signed by Tan Chong Lin.

ISSUE: WON Great Asian is liable under the Deeds of Assignment for breach of contract pursuant to the
Civil Code

RULING: YES. The Deeds of Assignment expressly provides one suspensive condition, that is, in case the
drawers fail to pay the checks on maturity, Great Asian obligated itself to pay Bancasia the full face value
of the dishonored checks. This conditional obligation of Great Asian arises from its written contracts with
Bancasia as embodied in the Deeds of Assignment. In short, Great Asian sold the postdated checks on
with recourse basis against itself. This is an obligation that Great Asian is bound to faithfully comply
because it has the force of law as between Great Asian and Bancasia.

Article 1159 of the Civil Code provides that:

"Obligations arising from contracts have the force of law between the contracting parties and should be complied
with in good faith."

Great Asian and Bancasia agreed on this specific with recourse stipulation, despite the fact that the
receivables were negotiable instruments with the endorsement of Arsenio. The contracting parties had
the right to adopt the with recourse stipulation which is separate and distinct from the warranties of an
endorser under the Negotiable Instruments Law.

Furthermore, Article 1306 of the Civil Code provides that:

"The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs, public order, or public policy."

The explicit with recourse stipulation against Great Asian effectively enlarges, by agreement of the
parties, the liability of Great Asian beyond that of a mere endorser of a negotiable instrument. Thus,
whether or not Bancasia gives notice of dishonor to Great Asian, the latter remains liable to Bancasia

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because of the with recourse stipulation, which is independent of the warranties of an endorser under the
Negotiable Instruments Law.

4. VICTORIA MOREO-LENTFER vs. HANS JURGEN WOLFF

FACTS: The petitioners are Gunter Lentfer, a German citizen; his Filipina wife, Victoria Moreo-Lentfer;
and John Craigie Young Cross, an Australian citizen, all residing in Sabang, Puerto Galera. On the other
hand, the Respondent is Hans Jurgen Wolff, a German citizen, residing in San Lorenzo Village, Makati
City. In 1992 the parties entered in a Contract of Sale involving a beach house owned by Young Cross and
a Contract of Lease of the land where the house stood. The sale of the beach house and the assignment of
the lease right would be in the name of Victoria Moreo-Lentfer, but the total consideration of 220,000
Deutschmarks (DM) would be paid by respondent Hans Jurgen Wolff. A promissory note was executed
by him in favor of Young Cross.

However, the Deed of Sale and the Assignment of the Lease Right were surreptitiously executed as it
appears that the beach house was sold to Victoria Moreo-Lentfer. Upon learning of this, Hans Jurgen
Wolff filed a Complaint for annulment of sale and reconveyance of property.

ISSUE: WON Victoria Moreo-Lentfer is liable to Young Cross based on a quasi-contract of solutio indebiti

RULING: YES. The quasi-contract of solutio indebiti harks back to the ancient principle that no one shall
enrich himself unjustly at the expense of another. It applies where (1) a payment is made when there
exists no binding relation between the payor, who has no duty to pay, and the person who received the
payment, and (2) the payment is made through mistake, and not through liberality or some other cause.

In the instant case, the Court is convinced that Victoria Moreo-Lentfer had been unjustly enriched at the
expense of respondent. She acquired the properties through deceit, fraud and abuse of confidence. The
principle of justice and equity does not work in her favor but in favor of respondent Wolff. Whatever she
may have received by mistake from and at the expense of respondent should thus be returned to the
latter, if the demands of justice are to be served. The records show that a bank-to-bank payment was
made by respondent Wolff to petitioner Cross in favor of co-petitioner Moreo-Lentfer. Respondent was
under no duty to make such payment for the benefit of Moreo-Lentfer. There was no binding relation
between respondent and the beneficiary, Moreo-Lentfer. The payment was clearly a mistake. Since
Moreo-Lentfer received something when there was no right to demand it, she had an obligation to return
it.

6. GOVERNMENT SERVICE INSURANCE SYSTEM v. SPOUSES GONZALO

FACTS: In 1969, the spouses Deang obtained a housing loan from the GSIS in the amount of P8, 500.00. The
loan was secured by a real estate mortgage constituted over the spouses' property. As required by the
mortgage deed, the spouses Daeng deposited the owner's duplicate copy of the title with the GSIS. Before
the maturity of the loan, the Daengs were able to settle their debt. They requested the GSIS for the release of
the owner's duplicate copy of the title since they intended to secure a loan from a private lender and use the

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land as collateral security. However, personnel of the GSIS were not able to release the owner's duplicate of
the title as it could not be found despite diligent search. Believing that the title was really lost, GSIS
commenced a reconstitution proceeding for the issuance of a new owner's copy. After the completion of
judicial proceedings, GSIS finally secured and released the reconstituted copy of the owner's duplicate of
Transfer Certificate of Title. The spouses Deang filed a Complaint against GSIS for damages, claiming that as
result of the delay in releasing the duplicate copy of the owner's title, they were unable to secure a private
loan.

ISSUE: WON the GSIS is liable for the negligent act of its employees

RULING: YES. Under the facts, there was a pre-existing contract between the parties. GSIS and the spouses
Deang had a loan agreement secured by a real estate mortgage. The duty to return the owner's duplicate
copy of title arose as soon as the mortgage was released. GSIS insists that it was under no obligation to
return the owner's duplicate copy of the title immediately. This insistence is not warranted. Negligence is
obvious as the owners' duplicate copy could not be returned to the owners. The applicable provisions of the
Civil Code are:

Article 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay and those
who in any manner contravene the tenor thereof are liable for damages.

Article 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable
shall be those that are the natural and probable consequences of the breach of the obligation, and which the
parties have foreseen or could have reasonably foreseen at the time the obligation was constituted."

Since good faith is presumed and bad faith is a matter of fact which should be proved, the Court treated GSIS
as a party who defaulted in its obligation to return the owners' duplicate copy of the title. As an obligor in
good faith, GSIS is liable for all the "natural and probable consequences of the breach of the obligation."

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