CIVIL LAW REVIEW

CASE DIGESTS

Submitted to: Atty. Crisostomo A. Uribe

Submitted by: Dunag, Mylene L.

Civil Law Review 2- Sunday, 1:00-5:00

Student Number: 25
SY 2017-2018, 1st Sem

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TABLE OF CONTENTS:

I. Obligations

A. ln General

UNITED ALLOY PHILIPPINES CORPORATION vs. UNITED COCONUT

PLANTERS BANK, (G.R. No. 175949) 64

1. Definition
2. Kinds of Obligations as to basis & enforceability
3.Prescription of Actions
4. Elements of Obligations

B. Sources of Civil Obligations

1. Law
2. Contracts
3. Quasi -contracts
a. NegotiorumGestio
b. SolutioIndebiti
BANK OF PHILIPPINE ISLANDS vs. MENDOZA, (GR No. 198799) 39-40

c. Other Quasi-Contracts
4. Acts or omissions punished by Law
5. Quasi-delicts

C. Compliance with Obligations

D. Kinds of Civil Obligations

1. As to Perfection & Extinguishment
a. pure
b. conditional
c. with a term or period

2. As to Plurality of Prestation
a. conjunctive
b. alternative
c. facultative

3. As to rights & obligations of multiple parties

a. Joint
b. Solidary
c. Disjunctive

4. As to performance of prestation
a. Divisible
b. lndivisible
c. Joint indivisible
d. Solidary indivisible
NESTLE PHILIPPINES, INC., vs. PUEDAN, JR., (G.R. No. 220617) 48-49
SPOUSES IBAÑEZ vs. HARPER (G.R. No. 194272) 50-51

5. As to the presence of accessory undertaking in case of breach

a. with a Penal Clause
Distinguish from Liquidated Damages

E. Breach of Obligations
SPOUSES ROMEO PAJARES vs. REMARKABLE LAUNDRY (G.R. No. 212690) 11-12

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 Manner of Breach
1. fraud
2. negligence
3. delay
4. any other manner of contravention
Excuses for non-performance
1. Fortuitous Event
2. Act of creditor

F. Remedies for Breach of Obligations

Extra-judicial remedies
a. expressly granted by law
b. stipulated
Judicial remedies
a. principal remedies
b. subsidiary remedies
c. ancillary remedies

G. Modes of Extinguishment of Obligations

1. Payment or Performance
OSMENA-JALANDONI, vs ENCOMIENDA, (G.R. No. 205578) 33-34

Special Forms of Payment

a. Dation in Payment
b. Application of Payments
c. Payment by Cession or assignment
d. Tender of Payment and Consignation
PHILIPPINE NATIONAL BANK, vs LILIBETH S. CHAN, (G.R. No. 206037) 35-36

2. Loss of the thing clue or Impossibility of Performance

3. Condonation or remission of the debt
4. Confusion or Merger of Rights
5. Compensation
Kinds of Compensation
a. legal
CALIFORNIA MANUFACTURING COMPANY, INC., vs. ADVANCED TECHNOLOGY SYSTEM,
INC., (G.R. No. 202454) 59-58
b. conventional facultative
c. judicial
6. Novation
Kinds of Novation
a. As to its nature
i) subjective or personal
ii) objective or real
b. As to its form
i) express
ii) implied
7. Other Modes

II. CONTRACTS
A. In General
1. Definition
Auto-contract
2. Elements of Contracts
a. essential
KABISIG vs. YOUNG BUILDERS CORPORATION (G.R. No. 212375) 20
FLORDALIZA GRANDE, vs. PHILIPPINE NAUTICAL COLLEGE, (G.R. No. 213137) 60 -61

b. natural
c. accidental

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B. Fundamental Characteristics/Principles of Contracts
1. Consensualityof Contracts
Contract of Adhesion
2. Autonomy of Contracts
3. Mutuality of Contracts
Acceleration Clause
Escalation Clause
4. Obligatory Force of Contracts
5. Relativity of Contracts
Privity of Contracts

C. Classification of Contracts
1. according to degree of dependence
a. preparatory
b. principal
c. accessory
2. according to perfection
MANUEL UBAS Sr., vs. WILSON CHAN, (GR. NO. 215910) 62-63

a. consensual
b. real
c. formal
3. according to solemnity or form
a. any form
b. special form
4. according to purpose
a. transfer of ownership
b. conveyance of use
c. rendition of service
5. according to nature of obligation produced
a. bilateral
b. unilateral
6. according to cause
a. onerous
b. gratuitous or lucrative
c. remuneratory
7. according to risk
a. commutative
b. aleatory
8. according to name
a. nominate
b. Innominate
9. according to subject matter
a. thing
b. right
c. service

D. Stages of Contracts
1. Negotiation
Contract of Option
2. Perfection
3. Performance
4. Consummation

E. Essential Elements of Contracts

1. consent of the contracting parties
Cognition Theory
Manifestation Theory
2. object certain which is the subject matter of the contract
3. cause of the obligation
4. Delivery

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 5. Due observance of prescribed formalities

F. Form of Contracts - Arts. 1356-1358

1. any form - oral
2. special form
a. validity
b. enforceability
c. greater efficacy or convenience

G. Reformation of Contracts
SPOUSES ROSARIO vs. PRISCILLA P. ALVAR, (GR No. 212731) 43

H. Interpretation of Contracts
CATHAY LAND, INC., vs. AYALA LAND, INC., (G.R. No. 210209) 56-57

I. Kinds of Contracts as to Validity

1. Valid and binding
2. Valid but defective
i) Rescissible Contracts
NATIVIDAD R. MUNAR, et al., vs. ATTY. BAUTISTA (A.C. No. 7424) 44-45

ii) Voidable Contracts

iii) Unenforceable Contracts

3. Void or Inexistent

SPECIAL CONTRACTS

SALES
A. In General
Definition
Characteristics
Kinds of Sale
ARIEL G. PALACOS, vs. ATTY. AMORA, JR., (A.C. No. 11504) 52-53

Distinguished from other transactions

B. Elements of a Contract of Sale

Essential Elements
1. consent of the contracting parties
2. determinate subject matter [thing or right)
3. price certain in money or its equivalent
Natural Elements
Accidental Elements

C. Perfection of the Contract

Contract of Option
Formalities of Contract of Sale
D. Rights and Obligations of the Vendor
GONZALEZ, JR., vs. PEÑA, ALABANG COUNTRY CLUB, INC., VERA (G.R. No. 214303) 65-66
ARCAINA vs. INGRAM, (G.R. No. 196444 23-24
ATTY. GEROMO, vs. LA PAZ HOUSING (G.R. No. 211175) 25-26
To transfer ownership
Double Sales
Risk of Loss
To deliver the object
Warranties

E. Rights and Obligations of the Vendee

Payment of Price
Right of inspection
Acceptance

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 Maceda Law - Realty Installment Buyer Act [RA 6552]
F. Remedies for Breach of Contract

Remedies of an Unpaid Seller

Remedies of the Buyer
Recto Law - Sale of Movables on Installment
SPOUSES ORSOLINO, vs. FRANY (G.R. No. 193887) 27-28
KT CONSTRUCTION SUPPLY INC., vs. PHILIPPINE SAVINGS BANK (G.R. No. 228434) 29-30

G. Extinguishment of Sale
Causes
Redemption [Conventional & Legal]
Barter or Exchange
LEASE
I. Nature
HILLTOP MARKET FISH VENDORS' ASSOCIATION vs. .HON. BRAULIO YARANON
(G.R. No. 188057) 37-38

II. A. Kinds of Lease

1. Lease of things [Art. 1642)
2. Lease of work or service f.Art. 1642]
a. household service
b. contract of labor (employment contract)
c. contract for a piece of work
d. contract with common carriers (contract of carriage)
3. Lease of right - License/Franchise

B. Definitions
C. Characteristics
D. Distinguished from other contracts/legal relations

II. Essential Elements

A. consent
B. object /purpose : period
C. cause Formalities

lll. Rights and Obligations of the Lessor & Lessee

LAYGO vs. MUNICIPAL MAYOR OF SOLANO, NUEVA VIZCAYA (G.R. No. 188448) 13-14

A. Necessary repairs
B. Improvements
C. Collapse of a building
D. Reduction of the Rent
E. Extension of the Lease
F. Right of First Refusal
G. Sublease & Assignment of the Lease

IV. Rights and Obligations of Third Persons

A. Suppliers
B. Buyers

V. Termination of the Lease

ILOILO JAR CORPORATION vs. COMGLASCO (G.R. No. 219509) 17-18

A. Loss of the thing

B. Death of either party

C. Expiration of the period Implied New Lease or TacitaReconduccion
AGENCY
I. In General: Nature

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 A. Definition
B. Characteristics
C. Distinguished from/compared with other relations [Features of a contract of agency]

II. Kinds of Agency

A. Actual agency
Kinds of Actual Agency
1. As to manner of creation: express & implied
2. As to compensation
3. As to scope of authority
B. Apparent or Ostensible Agency
C. Agency by Estoppel

Ill. Essential Elements of a Contract of Agency

(1) Consent of the contracting parties: principal & agent only
(2) Object: execution of a juridical act
(3) Cause: presumed to be for compensation
Form: 1869·, 1874, 1878

IV. Obligations of the Agent

A. To carry out the agency
1. To act within the scope of his authority
2. To act on behalf of his principal
Liability of two or more agents
SPOUSES JOHNNY VILLALUZ, vs. .LAND BANK OF THE PHILIPPINES (G.R. No. 192602) 18-19

B. To render an accounting of his transactions and to deliver

C. To be responsible for the acts of the substitute
D. Rules applicable to a commission agent:
Rules applicable to a guarantee commission agent: Del credere agent

V. Rights and Obligations of the Principal

A. To comply with all the obligations which the agent may have contracted within
the scope and in representation of the principal
B. To advance to the agent the sums necessary
C. To reimburse the agent the sums advanced
Liability when there are two or more principals: solidary (Art. 1915)
Rights of Third Persons in Incompatible contracts with agent and principal

VI. Modes of Extinguishment of Agency: Art 1919

PARTNERSHIP
I. In General
A. Definition
B. Characteristics of Partnership as a Contract
C. Distinguished from other Combinations and Relations

II. Essential Requisites

A. Consent of the contracting parties
B. Object certain: to engage in lawful activity
C. Cause
Formal Requirement

III. Classes of Partnerships

A. As to its Object: Universal & Particular Partnership
B. As to Liability of Partners: General & Limited Partnership
C. As to term: Fixed Term, Particular Undertaking & Partnership at Will

IV. Classes of Partners

A. According to their liability: General & Limited Partners

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 B. According to their contribution: Capitalist Partner & Industrial Partner
C. According to the time they join the partnership: Incoming
D. According to Special Duties: Managing

V. The property rights of a partner are: [ Articles 1800 to 1814]

A. His rights in specific partnership property;
B. His interest in the partnership; and
C. His right to participate in the management

VI. Obligations of Partners Among Themselves

A. To make good his promised contribution
B. Fiduciary Duty
C. To participate in the losses Nature of Liabilityof individual partners: Pro-rata,
Subsidiary , Joint or Solidary

VII. Obligations of Partners with regard to Third Persons

VIII. Dissolution, Winding Up and Termination

A. Nature & Effect of Dissolution
B. Causes of Dissolution
C. Distribution of Assets

IX. Limited Partnership

TRUSTS
I. In General
II. Kinds of Trusts
a. Express
b. Implied

CREDIT TRANSACTIONS: LOAN, DEPOSIT, GUARANTY & SURETYSHIP

I. Nature of Credit Transactions
A. Definition
B. Scope
C. Distinguished from Bailments

II. Loans
A. Definition: Purpose
B. Kinds of Loan
i.Commodatum : Precarium
ii. Mutuum or Simple Loan
C. Characteristics
D. Essential Elements: Consent, Object, Cause Formalities
E. Rights & Obligations of Bailor & Bailee in Commodatum
Liability for loss/deterioration due to a fortuitous event
F. Rights & Obligations of Bailor & Bailee in Mutuum
To pay interest: Kinds: Rate

G. Modes of Extinguishment

III. Deposit
1. Nature: Definition: Purpose
2. Kinds of Deposit
i. Extra-judicial: Conventional & Necessary: Irregular Deposit
ii. Judicial
3. Characteristics
4. Essential Elements Subject Matter
5. Rights & Obligation s of Depositor and Depositary
6. Modes of Extinguishment

IV. Aleatory Contracts - Insurance, Gambling, Life Annuity

V. Guaranty and Suretyship: Distinctions

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 A. Nature: Definition: Purpose
B. Characteristics
C. Effects of Guaranty
1. Between the Guarantor and the Creditor: Benefit of Excussion
2. Between the Guarantor and the Debtor: Subrogation
3. Between Co- Guarantors: Benefit of Division
D. Modes of Extinguishment

CREDIT TRANSACTIONS: PLEDGE, MORTGAGE & ANTICHRESIS

I. Provisions common to Pledge and Mortgage
A. Nature: Definition: Purpose
B. Essential elements
C. Indivisibility of the Contract
D. PactumComissorium
E. Right to recover deficiency: Who is entitled to excess?
F. Equity & Right of Redemption
MAHINAY vs. DURA TIRE (GR No. 194152) 31-32

II. Pledge
A. In general
a. Kinds of Pledge
b. Characteristics of Pledge
c. Extent/Coverage of Pledge
B. Rights and Obligations of the Pledgor (Debtor or Third Person)
C. Rights and Obligations of the Pledgee (Creditor)
D. Modes of Extinguishment

III. Chattel and Real Estate Mortgage

A. In general
1. Characteristics
2. Subject Matter
3. Extent/Coverage of the Mortgage

B. Essential Requisites
Formal Requisites: Affidavit of Good faith
PRUDENTIAL BANK vs. RAPANOT (G.R. No. 191636) 15-16

C. Rights and Obligations of the Mortgagor (Debtor or Third person)

D. Rights and Obligations of the Mortgagee (Creditor)
E. Modes of Extinguishment

IV. Antichresis
A. Nature and Characteristics
B. Rights and Obligations of the Debtor and Creditor

V. Concurrence and Preference of Credit

A. General Provisions
B. Classification of Credits
C. Order of Preference of Credits

TORTS & DAMAGES

I. Introduction
A. Nature of Quasi-delict
B. Quasi-delict distinguished from Tort , Crime, Contract
C. Scope/Source s of Law

II. Elements of Quasi-Delict

A. Act or Omission, there being Fault or Negligence
1. Concept of Negligence
2. Standard of Care: Degree of Diligence
3. Proof of Negligence: Burden of Proof
Presumptions of Negligence

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 Doctrine of Res Ipsa Loquitur
B. Damage or Injury
C. Causal Connection between the Act or Omission and the Damage

III. Persons liable

A. The Tortfeasor
B. Vicarious Liability: Persons liable for Tortious Acts of another
C. Nature of Liability
D. Defenses
1. Absence of an element
2. Fortuitous Event
3. Contributory Negligence
4. Prescription
5. Doctrine of Last Clear Chance
6. Double Recovery
7. Lack of Jurisdiction

IV. Liability for Torts Damages

A. In General
B. Kinds of Damages
1. Actual or Compensatory
KABISIG INC., vs. YOUNG BUILDERS CORPORATION (G.R. No. 212375) 21-22

2. Moral
3. Nominal
4. Temperate or Moderate
5. Liquidated
ABROGAR, vs. COSMOS BOTTLING COMPANY (G.R. No. 164749) 41-42

SCANMAR MARITIME SERVICES, INC., vs. DE LEON, (G.R. No. 199977) 46-47

REYES, vs. ORICO DOCTOLERO et al., (G.R. No. 185597) 54-55

JUDITH DARINES AND JOYCE DARINES vs. EDUARDO QUINONES AND ROLANDO QUITAN
(G.R. No. 206468) 67-68

SWIRE REALTY DEVELOPMENT CORPORATION vs. SPECIALTY CONTRACTS GENERAL AND

CONSTRUCTION SERVICES, INC. AND JOSE JAVELLANA (G.R. No. 188027) 69

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SPOUSES ROMEO PAJARES and IDA T.PAJARES, petitioners, vs. REMARKABLE
LAUNDRY AND DRYCLEANING, represented by ARCHEMEDES G. SOLIS, respondent.
G.R. No. 212690, February 20, 2017.
First Division
DEL CASTILLO, J.:
Nature of Action : Petition for Review on Certiorari is the December 11, 2013 Decision of the
Court of Appeals (CA) in CA-G.R. CEB SP No. 07711

Facts:

Remarkable Laundry and Dry Cleaning (respondent) filed a Complaint for Breach of
Contract and Damages against spouses Pajares (petitioners) before the RTC of Cebu City,
Respondent alleged that it entered into a Remarkable Dealer Outlet Contract with petitioners
whereby the latter, acting as a dealer outlet, shall accept and receive items or materials for laundry
which are then picked up and processed by the former in its main plant or laundry outlet that
petitioners violated Article IV (Standard Required Quota & Penalties) of said contract, which
required them to produce at least 200 kilos of laundry items each week, when, on April 30, 2012,
they ceased dealer outlet operations on account of lack of personnel and that respondent made
written demands upon petitioners for the payment of penalties imposed and provided for in the
contract, but the latter failed to pay and that petitioners' violation constitutes breach of contract.
The RTC dismissed the case for lack of jurisdiction since the plaintiffs complaint is for the
recovery of damages for the alleged breach of contract and the total amount of demand in the
complaint is only ₱280,000.00, which is less than the jurisdictional amount of the RTC.

The CA reversed the decision of the RTC and held that, the complaint, is one incapable of
pecuniary estimation thus, one within the RTC's jurisdiction. A case for breach of contract [sic] is
a cause of action either for specific performance or rescission of contracts. An action for rescission
of contract, as a counterpart of an action for specific performance, is incapable of pecuniary
estimation, and therefore falls under the jurisdiction of the RTC.

Issue:

Whether or not CA erred in declaring that the RTC had jurisdiction over respondent's complaint
which, although denominated as one for breach of contract, is essentially one for simple payment
of damages?

Held:

The Court ruled that, the RTC was correct in categorizing Civil Case No. CEB-39025
as an action for damages seeking to recover an amount below its jurisdictional limit. The Court
further ruled that, an analysis of the factual and material allegations in the Complaint shows that
there is nothing therein which would support a conclusion that respondent's Complaint is one for
specific performance or rescission of contract. It should be recalled that the principal obligation of
petitioners under the Remarkable Laundry Dealership Contract is to act as respondent's dealer
outlet. Respondent, however, neither asked the RTC to compel petitioners to perform such
obligation as contemplated in said contract nor sought the rescission thereof. The Complaint's
body, heading, and relief are bereft of such allegation. In fact, neither phrase appeared on or was
used in the Complaint when, for purposes of clarity, respondent's counsels, who are presumed to
be learned in law, could and should have used any of those phrases to indicate the proper
designation of the Complaint. To the contrary, respondent's counsels designated the Complaint as
one for "Breach of Contract & Damages," which is a misnomer and inaccurate. This erroneous
notion was reiterated in respondent's Memorandum wherein it was stated that "the main action of
CEB 39025 is one for a breach of contract." There is no such thing as an "action for breach of
contract." Rather, "[b]reach of contract is a cause of action, but not the action or relief itself. Breach
of contract may be the cause of action in a complaint for specific performance or rescission of
contract, both of which are incapable of pecuniary estimation and, therefore, cognizable by the
RTC. However, breach of contract may also be the cause of action in a complaint for damages.

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 The Court furthermore ruled, what respondent primarily seeks in its Complaint is to recover
aforesaid liquidated damages (which it termed as "incidental and consequential damages")
premised on the alleged breach of contract committed by the petitioners when they unilaterally
ceased business operations. Breach of contract may also be the cause of action in a complaint for
damages filed pursuant to Article 1170 of the Civil Code. It provides:

Art. 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.

In Pacmac, Inc. v. Intermediate Appellate Court,this Court held that the party who unilaterally
terminated the exclusive distributorship contract without any legal justification can be held liable
for damages by reason of the breach committed pursuant to Article 1170.

The Court is convinced that said Complaint is one for damages. True, breach of contract may give
rise to a complaint for specific performance or rescission of contract. In which case, the subject
matter is incapable of pecuniary estimation and, therefore, jurisdiction is lodged with the RTC.
However, breach of contract may also be the cause of action in a complaint for damages. Thus, it
is not correct to immediately conclude, as the CA erroneously did, that since the cause of action is
breach of contract, the case would only either be specific performance or rescission of contract
because it may happen, as in this case, that the complaint is one for damages.

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RODOLFO LAYGO and WILLIE LAYGO, petitioners, vs. MUNICIPAL
MAYOR OF SOLANO, NUEVA VIZCAYA, respondent.
G.R. No. 188448, January 11, 2017
Third Division
JARDELEZA, J.:
Nature of Action: Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court
from the Decision dated December 16, 2008 of the Court of Appeals (CA) in CA-G.R. SP No.
103922 and its Resolution dated June 19, 2009.

Facts:
Aniza Bandrang, filed a complaint with the Sangguniang Bayan of Solano, Nueva Vizcaya,
informing them of the illegal sublease she entered into with petitioners Rodolfo Laygo and Willie
Laygo over Public Market Stalls which petitioners leased from the Municipal Government.
Bandrang claimed that petitioners told her to vacate the stalls, which they subsequently subleased
to another. The Sangguniang Bayan endorsed the letter of Bandrang and a copy of Resolution to
Mayor Dickson for appropriate action. But the mayor failed to take action with the complaint filed
by Bandarang with respect to the sub-lease stall aforementioned.
Mayor Dickson, in response, informed the Sanggunian that the stalls were constructed under a
Build-Operate-Transfer (BOT) scheme, which meant that the petitioners had the right to keep their
stalls until the BOT agreement was satisfied. Bandrang wrote another letter to the Sanggunian,
praying and recommending to Mayor Dickson, by way of a resolution, the cancellation of the lease
contract between the Municipality and petitioners for violating the provision on subleasing. She
suggested that after which, the stalls can be bidded upon anew and leased to the successful bidder.
Mayor Dickson, however, did not act on the letter of Bandrang and on these ferrals of the
Sanggunian.
RTC held that the contract between petitioners and the Municipal Government was a lease contract
and it brushed aside the non-presentation of the written contract of lease, noting that public policy
and public interest must prevail. On appeal the CA affirmed the decision of the RTC. Hence, this
appeal.

Issue:
Whether or not the contracts of the Petitoner’s and the Municipal government is one of lease?

Held:
The SC reversed the decision of the CA.

It ruled that, the type of contract existing between petitioners and the Municipal
Government is disputed. The Municipal Government asserts that it is one of lease, while petitioners
insist that it is a BOT agreement. Both parties, however, failed to present the contracts which they
purport to have. It is likewise uncertain whether the contract would fall under the coverage of the
Statute of Frauds and would, thus, be only proven through written evidence. In spite of these, we
find that the Municipal Government was able to prove its claim, through secondary evidence, that
its contract with petitioners was one of lease.

We have no reason to doubt the certifications of the former mayor of Solano, Mayor Galima, and
the Municipal Planning and Development Office, which show that the contract of the Municipal
Government with petitioners' mother, Clarita, was converted into a BOT agreement for a time in
1992 due to the fire that razed the public market. These certifications were presented and offered
in evidence by petitioners themselves. They prove that Clarita was allowed to construct her stalls
that were destroyed using her own funds, and with the payment of the lease rentals being suspended
until she recovers the cost she spent on the construction. The construction was, in fact, supervised
by the MPDO for a period of three months. The stalls were eventually constructed completely and
awarded to Clarita. She thereafter reoccupied the stalls under a lease contract with the Municipal
Government. In fact, in his Notice dated August 21, 2007, the Municipal Treasurer of Solano
reminded petitioners of their delinquent stall rentals from May 2006 to July 2007. As correctly
posited by the Municipal Government, if the stalls were under a BOT scheme, the Municipal
Treasurer could not have assessed petitioners of any delinquency.

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Also, petitioners themselves raised, for the sake of argument, that even if the contract may be
conceded as one of lease, the municipality is nonetheless estopped from canceling the lease
contract because it subsequently accepted payment of rentals until the time of the filing of the case.

In the same vein, the Sangguniang Bayan Resolution No. 183-2004, which quoted Items No. 9 and
11 of the lease contract on the absolute prohibition against subleasing and the possible termination
of the contract in view of back rentals or any violation of the stipulations in the contract, is
presumed to have been regularly issued. It deserves weight and our respect, absent a showing of
grave abuse of discretion on the part of the members of the Sanggunian.

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PRUDENTIAL BANK (now BANK OF THE PHILIPPINEISLANDS), petitioner, vs.
RONALD RAPANOT and HOUSING &LAND USE REGULATORY BOARD, respondents.
G.R. No. 191636, January 16, 2017
First Division
CAGUIOA, J:
Nature of Action : Appeal by Certiorari under Rule 45 of the Rules of Court (Petition) of the
Decision dated November 18, 2009 (questioned Decision) rendered by the Court of Appeals -
Seventh Division (CA). The questioned Decision stems from a complaint filed by herein private
respondent Ronald Rapanot (Rapanot) against Golden Dragon Real Estate Corporation (Golden
Dragon), Golden Dragon's President Ma. Victoria M. Vazquez and herein petitioner, Bank of the
Philippine Islands, formerly known as Prudential Bank (Bank) for Specific Performance and
Damages (Complaint) before the Housing and Land Use Regulatory Board (HLURB).
Facts:

Rapanot paid Golden Dragon the amount of ₱453,329.64 as a reservation fee for a
condominium unit particularly designated as Unit 2308-B2, and covered by Condominium
Certificate of Title (CCT) No. 2383 in the name of Golden Dragon the developer of said
Condominium Towers
On September 13, 1995, Petitioner bank extended loan to Golden Dragon amounting
₱50,000,000.00 to be utilized by the latter as additional working capital. To secure the loan,
Golden Dragon executed a Mortgage Agreement in favor of the bank, which had the effect of
constituting a real estate mortgage over several condominium units owned and registered under
Golden Dragon’s name. Among the units subject of the Mortgage Agreement was the unit Unit
2308-B2. Rapanot and Golden Dragon then entered into a Contract to Sell covering said unit,
When Rapanot completed payment of the full purchase price of said unit Golden Dragon executed
Deed of Absolute Sale in favor of him. Thereafter, Rapanot made several demands for the delivery
of the unit however it failed to comply. Prompted by Rapanot's verbal demands, Golden Dragon
sent a letter to the Bank requesting for a substitution of collateral for the purpose of replacing Unit
2308 with another unit with the same area. However, the Bank denied Golden Dragon's request
due to the latter's unpaid accounts. Rapanot, through his counsel, sent several demand letters to
Golden Dragon and the Bank, formally demanding the delivery of Unit 2308-B2 free from all liens
and encumbrances. Neither Golden Dragon nor the Bank complied with Rapanot's written
demands.

Rapanot filed a Complaint with the Expanded National Capital Region Field Office of the HLURB,
the Arbiter rendered a decision in favor of Rapanot. The Bank appealed the decision of the HLURB
Board to the Office of the President. The OP issued a resolution denying the Bank's appeal.

The Bank filed a Petition for Review with the CA, assailing the resolution and subsequent order
of the OP, however the CA affirmed the resolution of the OP holding that the Bank cannot be
considered a mortgagee in good faith.

Issue:

Whether or not the CA erred when it affirmed the resolution of the OP holding that the Bank cannot
be considered a mortgagee in good faith?

Held:

No. The Court ruled citing the case of Land Bank of the Philippines v. Belle Corporation,
the Court exhorted banks to exercise the highest degree of diligence in its dealing with properties
offered as securities for the loan obligation.

When the purchaser or the mortgagee is a bank, the rule on innocent purchasers or mortgagees for
value is applied more strictly. Being in the business of extending loans secured by real estate
mortgage, banks are presumed to be familiar with the rules on land registration. Since the banking
business is impressed with public interest, they are expected to be more cautious, to exercise a
higher degree of diligence, care and prudence, than private individuals in their dealings, even those
involving registered lands. Banks may not simply rely on the face of the certificate of title. Hence,

15 | P a g e
they cannot assume that, x x x the title offered as security is on its face free of any encumbrances
or lien, they are relieved of the responsibility of taking further steps to verify the title and inspect
the properties to be mortgaged. As expected, the ascertainment of the status or condition of a
property offered to it as security for a loan must be a standard and indispensable part of the bank's
operations.

If only the Bank exercised the highest degree of diligence required by the nature of its business as
a financial institution, it would have discovered that (i) Golden Dragon did not comply with the
approval requirement imposed by Section 18 of PD 957, and (ii) that Rapanot already paid a
reservation fee and had made several installment payments in favor of Golden Dragon, with a view
of acquiring Unit 2308-B2. The Bank's failure to exercise the diligence required of it constitutes
negligence, and negates its assertion that it is a mortgagee in good faith.

The Court Furthermore ruled citing the case of Far East Bank & Trust Co. v. Marquez that in
granting the loan, petitioner bank should not have been content merely with a clean title,
considering the presence of circumstances indicating the need for a thorough investigation of the
existence of buyers like respondent. Having been wanting in care and prudence, the latter cannot
be deemed to be an innocent mortgagee.

Petitioner cannot claim to be a mortgagee in good faith. Indeed it was negligent, as found by the
Office of the President and by the CA. Petitioner should not have relied only on the representation
of the mortgagor that the latter had secured all requisite permits and licenses from the government
agencies concerned. The former should have required the submission of certified true copies of
those documents and verified their authenticity through its own independent effort.

16 | P a g e
ILOILO JAR CORPORATION, Petitioner vs.
COMGLASCO CORPORATION AGUILA GLASS, Respondent
G.R. No. 219509, January 18, 2017
Second Division
MENDOZA, J.:
Nature of Action: Petition for review on certiorari seeks to reverse and set aside the January 30,
2015 Decision and June 17, 2015 Resolution of the Court of Appeals (CA) in CA-G.R. CV No.
01475, which overturned the February 17, 2005 Amended Order of the Regional Trial Court,
Branch 3 7, Iloilo City (RTC).

Facts:

On August 16, 2000, petitioner Iloilo Jar Corporation (Iloilo Jar), as lessor, and respondent
Comglasco Corporation/Aguila Glass (Comglasco), as lessee, entered into a lease contract over a
portion of a warehouse building. The term of the lease was for a period of three (3) years or until
August 15, 2003.

On December 1, 2001, Comglasco requested for the pre-termination of the lease effective on the
same date. Iloilo Jar, however, rejected the request on the ground that the pre-termination of the
lease contract was not stipulated therein. Despite the denial of the request for pre-termination,
Comglasco still removed all its stock, merchandise and equipment from the leased premises on
January 15, 2002. From the time of the withdrawal of the equipment, and notwithstanding several
demand letters, Comglasco no longer paid all rentals accruing from the said date. Iloilo Jar then
sent a final demand letter to Comglasco, but it was again ignored. Consequently, Iloilo Jar filed a
civil action for breach of contract and damages before the RTC. The RTC ruled in favor of the
petitioner. It opined that Comglasco's answer admitted the material allegations of the complaint
and that its affirmative defense was unavailing because Article 1267 was inapplicable to lease
contracts. Aggrieved, Comglasco appealed before the CA. The CA reversed the decision of the
RTC. The appellate court was of the view that judgment on the pleadings was improper as
Comglasco' s answer tendered an issue considering that lloilo Jar's material allegations were
specifically denied therein. Further, the CA remanded the records to the RTC of further
proceedings.

Issue:

Whether or not Comglasco was justified in treating the lease contract terminated due to the
economic circumstances then prevalent?

Held:

The Court ruled that, to evade responsibility, Comglasco explained that by virtue of Article
1267, it was released from the lease contract. It cited the existing global and regional economic
crisis for its inability to comply with its obligation. Comglasco's position fails to impress because
Article 1267 applies only to obligations to do and not to obligations to give. The Court further
ruled, citing the case of Philippine National Construction Corporation v. Court of Appeals, which
held that petitioner cannot, however, successfully take refuge in the said article, since it is
applicable only to obligations "to do," and not to obligations "to give." An obligation "to do"
includes all kinds of work or service; while an obligation "to give" is a prestation which consists
in the delivery of a movable or an immovable thing in order to create a real right, or for the use of
the recipient, or for its simple possession, or in order to return it to its owner. Considering that
Comglasco' s obligation of paying rent is not an obligation to do, it could not rightfully invoke
Article 1267 of the Civil Code. Even so, its position is still without merit as financial struggles due
to an economic crisis is not enough reason for the courts to grant reprieve from contractual
obligations.

Thus, the RTC was correct in ordering Comglasco to pay the unpaid rentals because the affirmative
defense raised by it was insufficient to free it from its obligations under the lease contract.

17 | P a g e
SPOUSES MAY S. VILLALUZ and JOHNNY VILLALUZ, JR., Petitioners vs.
LAND BANK OF THE PHILIPPINES and the REGISTER OF DEEDS FOR DAVAO
CITY, Respondents
G.R. No. 192602, January 18, 2017
Third Division
JARDELEZA, J.:

Natue of Action: Petition for review on certiorari, which seeks to set aside the Decision dated
September 22, 2009 and Resolution dated May 26, 2010 of the Court of Appeals (CA) in CA-G.R.
CV No. 01307, is whether the mortgage contract executed by the substitute is valid and binding
upon the principal.

Facts:

Paula Agbisit (Agbisit), mother of petitioner May S. Villaluz, requested the latter to
provide her with collateral for a loan. At the time, Agbisit was the chairperson of Milflores
Cooperative and she needed ₱600,000 to ₱650,000 for the expansion of her backyard cut flowers
business. May convinced her husband, Johnny Villaluz, to allow Agbisit to use their land, as
collateral. Spouses Villaluz then executed a Special Power of Attorney in favor of Agbisit
authorizing her to, among others, negotiate for the sale mortgage, or other forms of disposition a
parcel of land and sign in their behalf all documents relating to the sale, loan or mortgage, or other
disposition of the property. The one-page power of attorney neither specified the conditions under
which the special powers may be exercised nor stated the amounts for which the subject land may
be sold or mortgaged.

Agbisit then executed her own Special Power of Attorney, appointing Milflores Cooperative as
attorney-in-fact in obtaining a loan from and executing a real mortgage in favor of Land Bank of
the Philippines (Land Bank). Milflores Cooperative, in a representative capacity, executed a Real
Estate Mortgage in favor of Land Bank in consideration of the ₱3,000,000 loan to be extended by
the latter. Milflores Cooperative also executed a Deed of Assignment of the Produce/Inventory as
additional collateral for the loan. Land Bank partially released one-third of the total loan amount,
or ₱995,500, to Milflores Cooperative. On the same day, Agbisit borrowed the amount of ₱604,750
from Milflores Cooperative. Land Bank released the remaining loan amount of ₱2,000,500 to
Milflores Cooperative. Unfortunately, Milflorcs Cooperative was unable to pay its obligations to
Land Bank. Thus, Land Bank filed a petition for extra-judicial foreclosure sale. Land Bank won
the auction sale as the sole bidder.

The Spouses Villaluz filed a complaint with the Regional Trial Court (RTC) of Davao City seeking
the annulment of the foreclosure sale. The sole question presented before the RTC was whether
Agbisit could have validly delegated her authority as attorney-in-fact to Milflores Cooperative.
Citing Article 1892 of the Civil Code, the RTC held that the delegation was valid since the Special
Power of Attorney executed by the Spouses Villaluz had no specific prohibition against Agbisit
appointing a substitute. Accordingly, the RTC dismissed the complaint. On appeal, the CA
affirmed the RTC Decision.

Issue:

Whether or not an agent is allowed to appoint a sub-agent in the absence of an express agreement
prohibiting Agbisit from appointing a substitute?

Held:

The Court ruled that, Articles 1892 and 1893 of the Civil Code provide the rules regarding
the appointment of a substitute by an agent:

Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing
so; but he shall be responsible for the acts of the substitute:

(1) When he was not given the power to appoint one;

18 | P a g e
 (2) When he was given such power, but without designating the person, and the person
appointed was notoriously incompetent or insolvent.

All acts of the substitute appointed against the prohibition of the principal shall be void.

Art. 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the principal may
furthermore bring an action against the substitute with respect to the obligations which the latter
has contracted under the substitution.

The law creates a presumption that an agent has the power to appoint a substitute. The consequence
of the presumption is that, upon valid appointment of a substitute by the agent, there ipso jure
arises an agency relationship between the principal and the substitute, i.e., the substitute becomes
the agent of the principal. As a result, the principal is bound by the acts of the substitute as if these
acts had been performed by the principal's appointed agent. Concomitantly, the substitute assumes
an agent's obligations to act within the scope of authority, to act in accordance with the principal's
instructions, and to carry out the agency, among others. In order to make the presumption
inoperative and relieve himself from its effects, it is incumbent upon the principal to prohibit the

In the present case, the Special Power of Attorney executed by the Spouses Villaluz contains no
restrictive language indicative of an intention to prohibit Agbisit from appointing a substitute or
sub-agent. Thus, the findings of the CA and the RTC that Agbisit's appointment of Milflores
Cooperative was valid.

19 | P a g e
KABISIG REAL WEALTH DEV., INC. and FERNANDO C. TIO, petitioners, vs.
YOUNG BUILDERS CORPORATION, respondent
G.R. No. 212375, January 25, 2017
Second Division
PERALTA, J.:
Nature of Action: Petition for Review which petitioners Kabisig Real Wealth Dev., Inc. and
Fernando C. Tio filed assailing the Court of Appeals (CA) Decision dated June 28, 2013 and
Resolution dated March 28, 2014 in CA- G.R. CV No. 02945.

Facts:
Kabisig Real Wealth Dev., Inc. (Kabisig), through Ferdinand Tio (Tio), contracted the
services of Young Builders Corporation (Young Builders) to supply labor, tools, equipment, and
materials for the renovation of its building in Cebu City. Young Builders then finished the work
and billed Kabisig for P4,123,320.95. However, despite numerous demands, Kabisig failed to pay.
It contended that no written contract was ever entered into between the parties and it was never
informed of the estimated cost of the renovation. Thus, Young Builders filed an action for
Collection of Sum of Money against Kabisig. The RTC of Cebu City rendered judgment in favor
of Young Builder’s. Kabisig elevated the case to the CA however, the appellate court affirmed the
RTC decision.

Issue:

Whether or not Kabisig is liable to Young Builders in the absence of a written contract between it
and Young Builders?

Held:

The Court ruled that, Under the Civil Code, a contract is a meeting of minds, with respect
to the other, to give something or to render some service. Article 1318 reads:

Art. 1318. There is no contract unless the following requisites concur:

(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract; and
(3) Cause of the obligation which is established.

Accordingly, for a contract to be valid, it must have the following essential elements: (1) consent
of the contracting parties; (2) object certain, which is the subject matter of the contract; and (3)
cause of the obligation which is established. Consent must exist, otherwise, the contract is
nonexistent. Consent is manifested by the meeting of the offer and the acceptance of the thing and
the cause, which are to constitute the contract. By law, a contract of sale, is perfected at the moment
there is a meeting of the minds upon the thing that is the object of the contract and upon the price.
Indeed, it is a consensual contract which is perfected by mere consent. Further, Kabisig's claim as
to the absence of a written contract between it and Young Builders simply does not hold. It is
settled that once perfected, a contract is generally binding in whatever form, whether written or
oral, it may have been entered into, provided the aforementioned essential requisites for its validity
are present. Article 1356 of the Civil Code provides:

Art. 1356. Contracts shall be obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present.

There is nothing in the law that requires a written contract for the agreement in question to be valid
and enforceable. Also, the Court notes that neither Kabisig nor Tio had objected to the renovation
work, until it was already time to settle the bill.

20 | P a g e
KABISIG REAL WEALTH DEV., INC. and FERNANDO C. TIO, petitioners, vs.
YOUNG BUILDERS CORPORATION, respondent
G.R. No. 212375, January 25, 2017
Second Division
PERALTA, J.:
Nature of Actions : Petition for Review which petitioners Kabisig Real Wealth Dev., Inc. and
Fernando C. Tio filed assailing the Court of Appeals (CA) Decision dated June 28, 2013 and
Resolution dated March 28, 2014 in CA- G.R. CV No. 02945

Facts:

Kabisig Real Wealth Dev., Inc. (Kabisig), through Ferdinand Tio , contracted the services
of Young Builders Corporation (Young Builders) to supply labor, tools, equipment, and materials
for the renovation of its building in Cebu City. Young Builders then finished the work and billed
Kabisig for P4,123,320.95. However, despite numerous demands, Kabisig failed to pay. It
contended that no written contract was ever entered into between the parties and it was never
informed of the estimated cost of the renovation. Thus, Young Builders filed an action for
Collection of Sum of Money against Kabisig. The RTC of Cebu City rendered judgment in favor
of Young Builder’s, and ordering the defendants to pay plaintiff P4,123,320.95 representing the
value of services rendered and materials used in the renovation of the building of defendant
Kabisig Real Wealth Dev., Inc. into a restaurant of defendant Ferdinand Tio, by way of actual
damages, plus 12% per annum from until it is fully paid. Kabisig elevated the case to the CA. The
appellate Court affirmed with modification, deleting the award for actual damages, the defendants
Kabisig Real Wealth Dev., Inc. and Ferdinand Tio are ordered to jointly pay the plaintiff Young
Builders Corporation Two Million Four Hundred Thousand (₱2,400,000.00) Pesos as temperate
damages for the value of services, rendered and materials used in the renovation of defendants-
appellants building.

Issue:

Whether or not not Kabisig is liable to Young Builders for the damages as a recompensed for
completing the work?

Held:

Article 2199 of the Civil Code, actual or compensatory damages are those awarded in
satisfaction of, or in recompense for, loss or injury sustained. They proceed from a sense of natural
justice and are designed to repair the wrong that has been done, to compensate for the injury
inflicted. They either refer to the loss of what a person already possesses (dano emergente ), or the
failure to receive as a benefit that which would have pertained to him (lucro cesante ), as in this
case.

A party is entitled to adequate compensation only for such pecuniary loss actually suffered and
duly proved. Indeed, to recover actual damages, the amount of loss must not only be capable of
proof but must actually be proven with a reasonable degree of certainty, premised upon competent
proof or best evidence obtainable of its actual amount. Here, the evidence reveals that Young
Builders failed to submit any competent proof of the specific amount of actual damages being
claimed. The documents submitted by Young Builders either do not bear the name of Kabisig or
Tio, their conformity, or signature, or do not indicate in any way that the amount reflected on its
face actually refers to the renovation project.

Notwithstanding the absence of sufficient proof, Young Builders still deserves to be recompensed
for actually completing the work. In the absence of competent proof on the amount of actual
damages, the courts allow the party to receive temperate damages. Temperate or moderate
damages, which are more than nominal but less than compensatory damages, may be recovered
when the court finds that some pecuniary loss has been suffered but its amount cannot, from the
nature of the case, be proved with certainty.

21 | P a g e
To determine the compensation due and to avoid unjust enrichment from resulting out of a fulfilled
contract, the principle of quantum meruit may be used. Under this principle, a contractor is allowed
to recover the reasonable value of the services rendered despite the lack of a written contract. The
measure of recovery under the principle should relate to the reasonable value of the services
performed. The principle prevents undue enrichment based on the equitable postulate that it is
unjust for a person to retain any benefit without paying for it. Being predicated on equity, said
principle should only be applied if no express contract was entered into, and no specific statutory
provision was applicable.

The principle of quantum meruit justifies the payment of the reasonable value of the services
rendered and should apply in the absence of an express agreement on the fees. It is notable that the
issue revolves around the parties' inability to agree on the fees that Young Builders should receive.
Considering the absence of an agreement, and in view of the completion of the renovation, the
Court has to apply the principle of quantum meruit in determining how much is due to Young
Builders. Under the established circumstances, the total amount of ₱2,400,000.00 which the CA
awarded is deemed to be a reasonable compensation under the principle of quantum meruit since
the renovation of Kabisig's building had already been completed in 2001.

22 | P a g e
DASMARIÑAS T. ARCAINA and MAGNANI T.BANTA, petitioners, vs. NOEMI L.
INGRAM, represented by MA.NENETTE L. ARCHINUE, respondent.

G.R. No. 196444, February 15, 2017

Third Division
JARDELEZA, J.:
Nature of Action: Petition for Review on Certiorari assailing the October 26, 2010 Decision and
March 1 7, 2011 Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 107997, which
affirmed with modification the March 11, 2009 Decision of the Regional Trial Court-Branch 7 of
Legazpi City (RTC). The RTC reversed the July 31, 2008 Order of the 3rd Municipal Circuit Trial
Court of Sto. Domingo-Manito in Albay (MCTC). The MCTC dismissed for insufficiency of
evidence Civil Case No. S-241-a case for recovery of ownership and title to real property,
possession and damages with preliminary injunction (recovery case)-filed by respondent Noemi
L. Ingram (Ingram) against petitioners Dasmariñas T. Arcaina (Arcaina) and Magnani T. Banta
(Banta) [collectively, petitioners].

Facts:

Arcaina is the owner of Lot No. 3230 (property). Arcaina’s attorney-in-fact, Banta,
entered into a contracts with Ingram for the sale of the property. Banta showed ingram and the
latter’s attorney-in-fact, the metes and bounds of the property and represented that Lot No. 3230
has an area of more or less 6,200 square meter (sq.m.) per the tax declaration covering it. The
contract price was P1,860,000.00, with Ingram making instalment payments for the property. They
also separately executed deeds of absolute sale over the property in Ingram’s favor dated March
21, 2005 by Banta, and April 13, 2005 by Arcciana. Subsequentlyy, Ingram caused the property
to be surveyed and discovered that Lot No. 3230 has an area of 12,000 sq.m. Upon learning of the
actual area of the property, Banta allegedly insisted that the difference of 5,800 sq. m. remains
unsold. This was opposed by Ingram who claims that she owns the whole lot by virtue of the sale.
In her Complaint, Ingram prayed that the MCTC declare her owner of the whole property and
order petitioners to pay moral damages, attorney's fees and litigation expenses. She also asked the
court to issue a writ of preliminary injunction to enjoin the petitioners from undertaking acts of
ownership over the alleged unsold portion. The MCTC dismissed the complaint for insufficiency
of evidence. On appeal, the RTC reversed and set aside the Order of the MCTC. The RTC found
that neither of the parties presented competent evidence to prove the property's actual area. Except
for a photocopy of the cadastral map purportedly showing the graphical presentation of the
property, no plan duly prepared and approved by the proper government agency showing the area
of the lot was presented. Hence, the RTC concluded that the area of Lot No. 3230 as shown by the
boundaries indicated in the deeds of sale is only 6,200 sq. m. more or less. Having sold Lot No.
3230 to Ingram, Arcaina must vacate it. The CA affirmed the RTC decision.

Issue:

Whether or not Lot No. 3230 was sold for a lump sum or for a unit price?

Held:

The Court ruled that, in sales involving real estate, the parties may choose between two
types of pricing agreement: a unit price contract wherein the purchase price is determined by way
of reference to a stated rate per unit area (e.g, ₱1,000.00 per sq. m.) or a lump sum contract which
states a full purchase price for an immovable the area of which may be declared based on an
estimate or where both the area and boundaries are stated (e.g., ₱1 million for 1,000 sq.
m., etc.). Here, the Deed of Sale executed by Banta on March 21, 2005 and the Deed of Sale
executed by Arcaina on April 13, 2005 both show that the property was conveyed to Ingram at the
predetermined price of ₱1,860,000.00. There was no indication that it was bought on a per-square-
meter basis. Thus, Article 1542 of the Civil Code governs the sale.

In a lump sum contract, a vendor is generally obligated to deliver all the land covered within the
boundaries, regardless of whether the real area should be greater or smaller than that recited in the

23 | P a g e
deed. However, in case there is conflict between the area actually covered by the boundaries and
the estimated area stated in the contract of sale, he/she shall do so only when the excess or
deficiency between the former and the latter is reasonable.

The Court further ruled, citing the case of Del Prado to the case before us, we find that the
difference of 5,800 sq. m. is too substantial to be considered reasonable. We note that only 6,200
sq. m. was agreed upon between petitioners and Ingram. Declaring Ingram as the owner of the
whole 12,000 sq. m. on the premise that this is the actual area included in the boundaries would be
ordering the delivery of almost twice the area stated in the deeds of sale. Surely, Article 1542 does
not contemplate such an unfair situation to befall a vendor-that he/she would be compelled to
deliver double the amount that he/she originally sold without a corresponding increase in price.
Furthermore ruled citing the case of Asiain v. Jalandoni, we explained that "[a] vendee of a land
when it is sold in gross or with the description 'more or less' does not thereby ipso facto take all
risk of quantity in the land. The use of 'more or less' or similar words in designating quantity covers
only a reasonable excess or deficiency. Therefore, we rule that Ingram is entitled only to 6,200 sq.
m. of the property. An area of 5,800 sq. m. more than the area intended to be sold is not a
reasonable excess that can be deemed included in the sale.

24 | P a g e
ATTY. REYES G. GEROMO, FLORENCIO BUENTIPO, JR., ERNALDO YAMBOT and
LYDIA BUSTAMANTE, Petitioners, vs. LA PAZ HOUSING AND DEVELOPMENT
CORPORATION and GOVERNMENT SERVICE INSURANCE SYSTEM, Respondents.

G.R. No. 211175, January 18, 2017

Second Division
MENDOZA, J.:
Nature of Action: Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing
the September 26, 2013 Decision and the January 29, 2014 Resolution of the Court of
Appeals (CA), in CA-G.R. SP No. 123139, which affirmed the January 11, 2012 Decision of the
Office of the President (OP), dismissing the action for damages filed by the petitioners before the
Housing and Land Regulatory Board (HLURB) against La Paz Housing and Development
Corporation (La Paz) and the Government Service Insurance System (GSIS), on the ground of
breach of warranty against hidden defects.

Facts:

The petitioners acquired individual housing units of Adelina 1-A Subdivision in San Pedro,
Laguna from La Paz, through GSIS financing, as evidenced by their deeds of conditional sale. The
properties were all situated along the old Litlit Creek.

Petitioners, Geromo, Bustamante and Yambot started occupying their respective residential
dwellings. After more than two (2) years of occupation, cracks started to appear on the floor and
walls of their houses. The petitioners, through the President of the Homeowners Association,
requested La Paz, being the developer, to take remedial action. They collectively decided to
construct a riprap/retaining wall along the old creek believing that water could be seeping
underneath the soil and weakening the foundation of their houses. Although La Paz was of the
view that it was not required to build a retaining wall, it decided to give the petitioners ₱3,000.00
each for expenses incurred in the construction of the said riprap/retaining wall. The petitioners
claimed that despite the retaining wall, the condition of their housing units worsened as the years
passed. When they asked La Paz to shoulder the repairs, it denied their request, explaining that the
structural defects could have been caused by the 1990 earthquake and the
renovations/improvements introduced to the units that overloaded the foundation of the original
structures. Petitioners then filed a complaint for breach of contract with damages against La Paz
and GSIS before the HLURB. They all asserted that La Paz was liable for implied warranty against
hidden defects and that it was negligent in building their houses on unstable land. The HLURB
Arbiter found La Paz liable, however the HLURB Board of Commissioners set aside the Arbiter's
decision. Aggrieved, the petitioners elevated the case to the OP but it dismiss the appeal for lack
of merit. The petitioners appealed the OP decision however, the CA affirmed the ruling of the OP
and found that the petitioners had no cause of action against La Paz for breach of warranty against
hidden defects as their contracts were merely contracts to sell, the titles not having been legally
passed on to the petitioners.

Issue:

Whether or not La Paz should be held liable for the structural defects on its implied warranty
against hidden defects?

Held:

Under the Civil Code, the vendor shall be answerable for warranty against hidden defects
on the thing sold under the following circumstances:

Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the thing
sold may have, should they render it unfit for the use for which it is intended, or should they
diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he would
not have acquired it or would have given a lower price for it; but said vendor shall not be

25 | P a g e
answerable for patent defects or those which may be visible, or for those which are not visible if
the vendee is an expert who, by reason of this trade or profession, should have known them.

Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing
sold, even though he was not aware thereof.

This provision shall not apply if the contrary has been stipulated and the vendor was not aware of
the hidden faults or defects in the thing sold.

For the implied warranty against hidden defects to be applicable, the following conditions must be
met:
a. Defect is Important or Serious
i. The thing sold is unfit for the use which it is intended
ii. Diminishes its fitness for such use or to such an extent that the buyer would not have
acquired it had he been aware thereof
b. Defect is Hidden
c. Defect Exists at the time of the sale
d. Buyer gives Notice of the defect to the seller within reasonable time

Here, the petitioners observed big cracks on the walls and floors of their dwellings within two
years from the time they purchased the units. The damage in their respective houses was substantial
and serious. They reported the condition of their houses to La Paz, but the latter did not present a
concrete plan of action to remedy their predicament. They also brought up the issue of water
seeping through their houses during heavy rainfall, but again La Paz failed to properly address
their concerns. The structural cracks and water seepage were evident indications that the soil
underneath the said structures could be unstable. Verily, the condition of the soil would not be in
the checklist that a potential buyer would normally inquire about from the developer considering
that it is the latter's prime obligation to ensure suitability and stability of the ground.

26 | P a g e
SPOUSES DENNIS ORSOLINO AND MELODY ORSOLINO, Petitioners vs
VIOLETA FRANY, Respondent

G.R. No. 193887, March 29, 2017

Third Division
REYES, J.:

Nature of the Action: Petition for review on certiorari under Rule 45 of the Rules 9f Court are
the Decision dated March 30, 2010 and Resolution dated September 1, 2010 of the Court of
Appeals.(CA) in CA-G.R. SP No. 108220, which reversed and set aside the Decision dated March
5, 2009, of the Regional Trial Court (RTC) of Quezon City, Branch 98, in Civil Case No. Q-07-
61602, and reinstated the Decision dated September 19, 2007 of the Metropolitan Trial Court
(MeTC) of Quezon City, Branch 39, in Civil Case No. 35190 for Unlawful Detainer.

Facts:

Spouses Frany claimed that Carolina Orsolino, the mother of petitioner Dennis, authorized
her other son Sander Orsolino to sell the subject property as evidenced by a Special Power of
Attorney (SPA) dated November 20, 2004. On the same date, Sander sold the subject property to
Spouses Frany for the sum of ₱200,000.00, evidenced by a Deed of Sale. The respondent said that
it was agreed upon that Spouses Orsolino, who are the current occupants of the subject property,
shall vacate and peacefully surrender the possession of the same to Spouses Frany on or before the
end of November 2004. However, despite repeated demands to vacate the subject property, the
petitioners failed to do so. The said matter was also brought before the barangay for conciliation
but no settlement was reached. The Spouses Orsolino also alleged that, they were not aware of the
sale made in favor of Spouses Frany; petitioner Dennis has no brother by the name of Sander; the
signature of Carolina appearing in the SP A and Deed of Sale is a forgery; the SP A and the Deed
of Sale are spurious documents; they did not receive any demand letter from Spouses Frany; and
there was no real confrontation before the barangay. The MeTC rendered its judgment in favor of
Spouses Frany and declared the sale of the subject property as valid upon finding that there was
no forgery and, thereby dismissing the complaint. Further held that, the presumption that the Deed
of Sale was duly executed exists, same with the SP A, since there was no evidence to overturn the
presumption as to the authenticity and due execution of the said documents. Aggrieved, the
Spouses Orsolino filed an appeal before the RTC.

The RTC held that, Contrary to the findings of the MeTC, the RTC concluded that both the SP A
and Deed of Sale showed patent irregularities and alterations which render it null and void ab
initio. According to the RTC, these glaring and strange circumstances overcome the presumption
of the authenticity and due execution of the said documents since there has been no explanation
on the said alterations. The RTC also said that nothing was adduced in this case to reconcile the
variance in the place of execution of the subject documents and the place where it was
acknowledged before the notary public.

The CA reinstated the MeTC's judgment. According to the CA, Spouses Orsolino failed to present
any evidence to prove the forgery except to point to the alterations in the place of execution in the
SP A and Deed of Sale. They did not present evidence of the fact of forgery which can be
established by comparing the alleged false signature with the authentic or genuine signature of
Carolina. The CA upheld the validity of the SP A and Deed of Sale which were duly notarized
since the same carry evidentiary weight with respect to their due execution and this presumption
was not rebutted by clear and convincing evidence to the contrary by Spouses Orsolino.

Issue:

Whether or not the authenticity and due execution of the SPA and Deed of Absolute sale have
been sufficiently established?

Held:

The Court agrees with the conclusion of the CA and the MeTC that the validity of the said
documents must be upheld on the ground that it enjoys the presumption of regularity of a public

27 | P a g e
document since the same carry evidentiary weight with respect to their due execution.
Furthermore, the fact of forgery is not established by the patent irregularities and alterations in the
said documents, such as the changing of names of the places and the date written thereon.

A review of the records of this case would show that, notwithstanding, the unexplained erasures
and alterations in the said documents after it was signed by Carolina, no sufficient allegation
indicates that the alleged alterations had changed the meaning of the documents, or that the details
differed from those intended by Carolina at the time that she signed it. Thus, it can only be
concluded that Carolina had voluntarily executed the subject documents, with the intention of
giving effect thereto. Spouses Orsolino's bare allegation that the said alterations invalidated the
sale does not equate with the necessary allegation that the alterations were false or had changed
the intended meaning of the documents.

As to the unexplained erasures and alterations in the said documents, the findings of the CA on
this matter are informative. The Court also took note of the fact that Sander, the person who
prepared the said documents, was never confronted during the trial nor was any affidavit from him
presented by Spouses Orsolino.

28 | P a g e
KT CONSTRUCTION SUPPLY INC., represented by William Go, Petitioner vs
PHILIPPINE SAVINGS BANK, Respondent

G.R. No. 228434, 21 June 2017

Second Division
MENDOZA, J.:

Nature of Action: Petition for review on certiorari seeks to reverse and set aside the April 22,
2016 Decision and November 23, 2016 Resolution of the Court of Appeals (CA) in CA-G.R. CV
No. 103037, which affirmed with modification the June 11, 2014 Decision of the Regional Trial
Court, Branch 133, Makati(RTC)City.

Facts:

Petitioner KT construction Supply, Inc. (KT Construction) obtained a loan from respondent
Philippine Savings Bank (PSBank) in the amount of P2.5 million. The said loan was evidenced by
a promissory note executed on the same date. The said note was signed by William K. Go and
Nancy Go-Tan as Vice-President/General Manager and Secretary/Treasure of KT Construction,
respectively. In addition, both go and Go-Tan signed the note in their perosnal capacities. The
promisorry note stipulated that the loan was payable within a period of sixty (60) months. In
addition, the said note provided for the payment of attorney's fees in case of litigation. On January
3, 2011, PSBank sent a demand letter to KT Construction asking the latter to pay its outstanding
obligation excluding interest, penalties, legal fees, and other charges. For its failure to pay despite
demand, PSBank filed complaint for sum of money against KT Construction. The RTC ruled in
favor of PSBank. It opined that the promissory note expressly declared that the entire obligation
shall immediately beccome due and payable upon default in payment of any installment.
Aggrieved, KT Construction appealed before the CA. The CA affirmed the RTC decision. It
explained that due to the accelaration clause, the loan became due and demandable upon KT
Construction's failure to pay an installment.

Issue:

Whether or not the loan became due and demandable upon KT Construction's failure to pay the
installment?

Held:

The Court ruled that, it has long been settled that an acceleration clause is valid and
produces legal effects. The promissory note explicitly stated that default in any of the installments
shall make the entire obligation due and demandable even without notice or demand. Thus, KT
Construction was erroneous in saying that PSBank's complaint was premature on the ground that
the loan was due only on October 12, 2011. KT Construction's entire obligation became due and
demandable when it failed to pay an installment pursuant to the accelaration clause. Moreover, KT
Construction could not evade responsibility by claiming that it had not received any demand letter
for the payment of the loan. PSBank had sent a demand letter, 10 dated February 3, 2011, asking
KT Construction to pay the remaining obligation within five (5) days from receipt of the letter.
More importantly, even granting that KT Construction did not receive the demand letter, the loan
still became due and demandable because the parties expressly waived the necessity of demand.

Further, KT Construction is mistaken that it could not be held liable for the entire loan obligation
because PSBank failed to prove how many installments it had failed to pay. The Court further
ruled citing the case of Bognot v. RR Lending Corporation, explained that once the indebtedness
had been established, the burden is on the debtor to prove payment, to wit: Jurisprudence tells us
that one who pleads payment has the burden of proving it; the burden rests on the defendant to
prove payment, rather than on the plaintiff to prove non-payment. Indeed, once the existence of an
indebtedness is duly established by evidence, the burden of showing with legal certainty that the
obligation has been discharged by payment rests on the debtor.

KT Construction admitted that it obtained a loan with PSBank. It, nevertheless, averred that it had
been regularly paying the loan. Thus, KT Construction could have easily provided deposit slips

29 | P a g e
and other documentary evidence to prove the fact of payment. It, however, merely alleged that it
religiously paid its obligation without presenting any evidence to substantiate the said obligation.

30 | P a g e
MAKILITO B. MAHINAY Petitioner v. DURA TIRE Respondent

GR No. 194152, Jun 05, 2017

Second Division

LEONEN, J.:

Nature of Action: Petition for Review on Certiorari directly filed before this Court, assailing the
Judgment on the Pleadings dated April 13, 2010 and Order dated September 2, 2010 rendered by
Branch 20 of the Regional Trial Court of Cebu City in Civil Case No. CEB-33639.

Facts:

A parcel of land under the name of A&A Swiss International Commercial, Inc. was
mortgaged to Dura and Rubber Industries, Inc. a corporation engagee in the supply of raw materials
for tire processing and recapping, as security for credit purchases to be made by Move Overland
Venture and Exploring, Inc. Under the mortgage agreement, Dura Tire was given the express
authority to extrajudicially foreclose the property should Move Overland fail to pay its credit
purchases. On June 5, 1992, A&A Swiss sold the property to Mahinay. In the Deed of Absolute
sale, Mahinay acknowledged that the proprty had been previously mortgaged by A&A Swiss to
Dura Tire, holding himself liable for any claims that Dura Tire may have against Move Overland.
Mahinay then wrote Dura Tire, requesting a statement of account of Move Overland's credit
purchases. Mahinay sought to pay Move Overland's obligation to release the property from the
mortgage. Dura Tire, however, ignored Mahinay's request.

For Move Overland's failure to pay its credit purchases, Dura Tire extrajudicially foreclosed the
said property. Mahinay's appeal was also dismissed by the Court of Appeals. The Court of Appeals
held that Mahinay had no right to question the foreclosure of the property.

Relying on the Court of Appeals' finding that he was a substitute mortgagor, Mahinay filed a
Complaint for judicial declaration of right to redeem on August 24, 2007. As the admitted owner
of the [property] at the time of the foreclosure, Mahinay argued that he "must have possessed and
still continues to possess the absolute right to redeem the property.

Mahinay having acquired the property from A&A Swiss before Dura Tire foreclosed the property,
the trial court ruled that Mahinay became a successor-in-interest to the property even before the
foreclosure sale. Therefore, by operation of law, Mahinay was legally entitled to redeem the
property. However, considering that one (1) year period of redemption had already lapsed,
Mahinay could no longer exercise his right of redemption.

Issue:

Whether or not the one (1)-year period of redemption was tolled when Mahinay filed his Complaint
for annulment of foreclosure sale?

Held:

The Court ruled that, contrary to Mahinay's claim, his right to redeem the mortgaged
property did not arise from the Court of Appeals' judicial declaration that he was a substitute
mortgagor of A&A Swiss. By force of law, specifically, Section 6 of Act No. 3135, Mahinay's
right to redeem arose when the mortgaged property was extrajudicially foreclosed and sold at
public auction. There is no dispute that Mahinay had a lien on the property subsequent to the
mortgage. Consequently, he had the right to buy it back from the purchaser at the sale, Dura Tire
in this case, from and at any time within the term of one year from and after the date of the sale.
Section 6 of Act No. 3135 provides:

Section 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore
referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of

31 | P a g e
said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust
under which the property is sold, may redeem the same at any time within the term of one year
from and after the date of the sale; and such redemption shall be governed by the provisions of
sections four hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil
Procedure, in so far as these are not inconsistent with the provisions of this Act.

The right of redemption being statutory, the mortgagor may compel the purchaser to sell back the
property within the one (1)-year period under Act No. 3135. If the purchaser refuses to sell back
the property, the mortgagor may tender payment to the Sheriff who conducted the foreclosure sale.
Here, Mahinay should have tendered payment to Sheriff Laurel instead of insisting on directly
paying Move Overland's unpaid credit purchases to Dura Tire.

The Court further ruled citing the case of Mateo v. Court of Appeals that the right of redemption
must be exercised in the mode prescribed by the statute. The one (1)-year period of redemption is
fixed, hence, non-extendible, to avoid prolonged economic uncertainty over the ownership of the
thing sold.

Since the period of redemption is fixed, it cannot be tolled or interrupted by the filing of cases to
annul the foreclosure sale or to enforce the right of redemption. To rule otherwise would constitute
a dangerous precedent. A likely offshoot of such a ruling is the institution of frivolous suits for
annulment of mortgage intended merely to give the mortgagor more time to redeem the mortgaged
property.

32 | P a g e
GEORGIA OSMENA-JALANDONI, Petitioner vs
CARMEN A. ENCOMIENDA, Respondent

G.R. No. 205578, March 1, 2017

Second Division
PERALTA, J.:

Nature of the Action: Appeal from the Decision of the Court of Appeals, Cebu City (CA) dated
March 29, 2012 and its Resolution dated December 19, 2012 in CA-G.R. CV No. 01339 which set
aside the Decision of the Cebu Regional Trial Court.

Facts:

Encomienda narrated that she met petitioner Georgia Osmeña-Jalandoni in Cebu City when
the former was purchasing a condominium unit and the latter was the real estate broker. Thereafter,
Encomienda and Jalandoni became close friends. On March 2, 1997, Jalandoni called Encomienda
to ask if she could borrow money for the search and rescue operation of her children in Manila,
who were allegedly taken by their father, Luis Jalandoni. Encomienda then went to Jalandoni's
house and handed ₱l00,000.00 in a sealed envelope to the latter's security guard. While in Manila,
Jalandoni again borrowed money for her different errands.

On April 1, 1997, Jalandoni borrowed again ₱l Million from Encomienda and promised that she
would pay the same when her money in the bank matured. All in all, Encomienda spent around
₱3,245,836.02 and $6,638.20 for Jalandoni. When Jalandoni came back to Cebu, she never
informed Encomienda. Encomienda then later gave Jalandoni six (6) weeks to settle her debts.

Despite several demands, no payment was made. Jalandoni insisted that the amounts given were
not in the form of loans. When they had to appear before the Barangay for conciliation, no
settlement was reached. Hence, Encomienda filed a complaint.

For her defense, Jalandoni claimed that there was never a discussion or even just an allusion about
a loan. She confirmed that Encomienda would indeed deposit money in her bank account and pay
her bills in Cebu. But when asked, Encomienda would tell her that she just wanted to extend some
help and that it was not a loan. The RTC of Cebu City dismissed Encomienda's complaint.
Therefore, Encomienda brought the case to the CA. The Court reversed and set aside and render
judgment against defendant Georgia Osmefia-Jalandoni ordering the latter to pay plaintiff Carmen
A. Encomienda.

Issue:

Whether or not Encomienda is entitled to be reimbursed for the amounts she defrayed for
Jalandoni?

Held:

The Court ruled that, Jalandoni insists that she never borrowed any amount of money from
Encomienda. During the entire time that Encomienda was sending her money and paying her bills,
there was not one reference to a loan. In other words, Jalandoni would have the Court believe that
Encomienda volunteeredto spend about ₱3,245,836.02 and $6,638.20 of her hard-earned money
in a span of eight (8) months for her and her family simply out of pure generosity and the kindness
of her heart, without expecting anything in return. Such presupposition is incredible, highly
unusual, and contrary to common experience, unless the benefactor is a billionaire philanthropist
who usually spends his days distributing his fortune to the needy. It is a notable fact that Jalandoni
was married to one of the richest hacienderos of Iloilo and belong to the privileged and affluent
Osmeña family, being the daughter of the late Senator Sergio Osmeña, Jr. Clearly then, Jalandoni
is not one to be a convincing object of anyone's charitable acts, especially not from someone like
Encomienda who has not been endowed with such wealth and powerful pedigree.

33 | P a g e
Jalandoni also contends that the amounts she received from Encomienda were mostly provided
and paid without her prior knowledge and thus she could not have consented to any loan
agreement. She relies on the trial court's finding that Encomienda's claims were not supported by
any documentary evidence. It must be stressed, however, that the trial court merely found that no
documentary evidence was offered showing Jalandoni's authorization or undertaking to pay the
expenses. But the second paragraph of Article 1236 of the Civil Code provides:

Whoever pays for another may demand from the debtor what he has paid, except that if he paid
without the knowledge or against the will of the debtor, he can recover only insofar as the payment
has been beneficial to the debtor.

The Court upheld the CA’s pronouncement that the existence of a contract of loan cannot be denied
merely because it was not reduced in writing. Surely, there can be a verbal loan. Contracts are
binding between the parties, whether oral or written. The law is explicit that contracts shall be
obligatory in whatever form they may have been entered into, provided all the essential requisites
for their validity are present. A simple loan or mutuum exists when a person receives a loan of
money or any other fungible thing and acquires its ownership. He is bound to pay to the creditor
the equal amount of the same kind and quality.

34 | P a g e
PHILIPPINE NATIONAL BANK, Petitioner vs. LILIBETH S. CHAN, Respondent

G.R. No. 206037, March 13, 2017

First Division
DEL CASTILLO, J.:

Nature of the Action: Petition for Review on Certiorari under Rule 45 of the Rules of Court,
assailing the May 28, 2012 Decision and the February 21, 2013 Resolution of the Court of
Appeals (CA) in CA-G.R. SP No. 98112.

Facts:

Respondent Lilibeth S. Chan owns a three-story commercial building located along A.

Linao Street, Paco, Manila covered by Transfer Certificate of Title (TCT). On May 10, 2000, she
leased said commercial building to petitioner Philippine National Bank (PNB) for a period of five
years, with a monthly rental of ₱76,160.00. When the lease expired, PNB continued to occupy the
property on a month-to-month basis. Thereafter, PNB vacated the premises. Meanwhile,
respondent obtained a ₱l,500,000.00 loan from PNB which was secured by a Real Estate Mortgage
constituted over the leased property. In addition, respondent executed a Deed of Assignment over
the rental payments in favor of PNB.

The amount of the respondent's loan was subsequently increased to ₱7,500,000.00. Consequently,
PNB and the respondent executed an Amendment to the Real Estate Mortgage by Substitution of
Collateral, where the mortgage over the leased property was released and substituted by a mortgage
over a parcel of land. Respondent filed a Complaint for Unlawful Detainer before the MeTC,
against PNB, alleging that the latter failed to pay its monthly rentals from October 2004 until
August 2005.

The MeTC ordered PNB to pay respondent accrued rentals with interest at 6% per annum. The
RTC affirmed the MeTC . The RTC held that PNB incurred delay when despite demand, it refused
to pay and vacate the premises.

As regards the payment of legal interest, the CA noted that PNB merely opened a non-drawing
savings account wherein it deposited the monthly rentals from January 16, 2005 to February 2006.
Such deposit of the rentals in a savings account, however, is not the consignation contemplated by
law. Thus, the CA found PNB liable to pay the 6% legal interest rate prescribed under Article 2209
of the Civil Code for having defaulted in the payment of its monthly rentals to the respondent.

Issue:

Whether or not PNB properly consigned the disputed rental payments in the amount of
₱l,348,643.92 with the Office of the Clerk of Court of the MeTC of Manila?

Held:

The Court deny the Petition for Review on Certiorari as we find no reversible error
committed by the CA in issuing its assailed Decision and Resolution. Consignation is the act of
depositing the thing due with the court or judicial authorities whenever the creditor cannot accept
or refuses to accept payment. It generally requires a prior tender of payment.

Under Article 1256 of the Civil Code, consignation alone is sufficient even without a prior tender
of payment a) when the creditor is absent or unknown or does not appear at the place of payment;
b) when he is incapacitated to receive the payment at the time it is due; c) when, without just cause,
he refuses to give a receipt; d) when two or more persons claim the same right to collect; and e)
when the title of the obligation has been lost.

For consignation to be valid, the debtor must comply with the following requirements under the
law:

1) there was a debt due;

35 | P a g e
2) valid prior tender of payment, unless the consignation was made because of some legal cause
provided in Article 1256;
3) previous notice of the consignation has been given to the persons interested in the performance
of the obligation;
4) the amount or thing due was placed at the disposal of the court; and,
5) after the consignation had been made, the persons interested were notified thereof:

Failure in any of the requirements is enough ground to render a consignation ineffective.

In the present case, the records show that: first, PNB had the obligation to pay respondent a
monthly rental of ₱l16,788.44, amounting to ₱l,348,643.92, from January 16, 2005 to March 23,
2006;second, PNB had the option to pay the monthly rentals to respondent or to apply the same as
payment for respondent's loan with the bank, but PNB did neither; third, PNB instead opened a
non-drawing savings account at its Paco Branch under Account No. 202- 565327-3, where it
deposited the subject monthly rentals, due to the claim of Chua of the same right to collect the
rent;and fourth, PNB consigned the amount of Pl,348,643.92 with the Office of the Clerk of Court
of the MeTC of Manila on May 31, 2006.

Note that PNB's deposit of the subject monthly rentals in a non-drawing savings account is not the
consignation contemplated by law, precisely because it does not place the same at the disposal of
the court. Consignation is necessarily judicial; it is not allowed in venues other than the
courts. Consequently, PNB's obligation to pay rent for the period of January 16, 2005 up to March
23, 2006 remained subsisting, as the deposit of the rentals cannot be considered to have the effect
of payment.

36 | P a g e
HILLTOP MARKET FISH VENDORS' ASSOCIATION, INC., Petitioner
vs.
HON. BRAULIO YARANON, City Mayor, Baguio City, HON. GALO WEYGAN, City
Councilor and Chairman Anti-Vice Coordinating Task Force, and the CITY
GOVERNMENT OF BAGUIO, Respondents

G.R. No. 188057, July 12, 2017

Second Division
CARPIO, J.:

Nature of the Action: Petition for review assails the Decision dated 27 November 2008 and the
Resolution dated 15 May 2009 of the Court of Appeals (CA) affirming the Decision dated 28
September 2006 of the Regional Trial Court of Baguio City, Branch 3 (RTC) in Civil Case No.
5994-R.

Facts:

Petitioner Hilltop Market Fish Vendors' Association, Inc. (Hilltop), represented by its
president Gerardo Rillera (Rillera), and respondent City of Baguio, represented by its then Mayor
Luis Lardizabal, entered into a Contract of Lease over a lot owned by the City of Baguio. The
contract provided that the period of lease is 25 years, renewable for the same period at the option
of both parties, and the annual lease rental is ₱25,000, with the first payment commencing upon
the issuance by the City Engineer's Office of the Certificate of full occupancy (Certificate) of the
building to be constructed by Hilltop on the lot. Sometime in 1975, Hilltop constructed the
building, thereafter known as the Rillera building, on the lot. Even though the City Engineer's
Office did not issue a Certificate, Hilltop's members occupied the Rillera building and conducted
business in it.The City Council of Baguio, through its then Mayor Ernesto Bueno, issued
Resolution rescinding the contract of lease with Hilltop, for its continued failure to comply with
its obligation to complete the Rillera building. In Resolution the City Council of Baguio reiterated
its resolution to rescind the contract and sought to undertake the completion of the building.

Subsequently, the City Engineer's Office issued its finding that the two upper floors of the Rillera
building were unsafe for occupancy. Thereafter, it recommended to condemn the building.
Sometime in 2003, then Mayor Bernardo Vergara issued a notice to take over the Rillera
building.Respondent then Mayor Yaranon issued Administrative Order ordering the City Building
and Architects Office (CBAO) and Public Order and Safety Division to immediately close the
Rillera building to have it cleaned, sanitized and enclosed; to prevent illegal activities in it; and for
its completion and preparation for commercial use.Hilltop filed with the RTC a Complaint with
Very Urgent Application for Temporary Restraining Order and Writ of Preliminary
Injunction praying that the court issue an injunction against the implementation of AO No. 30 and
order the concerned office to issue the Certificate to make the contract of lease effective.

The RTC ruled in favor of the City of Baguio and dismissed the complaint.

The CA affirmed the decision of the RTC and ruled that there was already a perfected contract of
lease: the issuance of the Certificate was imposed only on the performance of the obligations
contained in it. The CA held that Hilltop is estopped from claiming that the period of lease has not
began, since it already occupied the Rillera building and conducted business in it even without the
Certificate.

Issue:

Whether or not the Court of Appeals erred in finding that the contract of lease entered into by the
parties was already perfected?

37 | P a g e
Held:

The Court deny the petition.

In a contract of lease, one of the parties binds himself to give to another the enjoyment or
use of a thing for a price certain, and for a period which may be definite or indefinite. Being a
consensual contract, a lease is perfected at the moment there is a meeting of the minds upon the
thing and the cause or consideration which are to constitute the contract.Thereafter, the lessor is
obliged to deliver the thing which is the object of the contract in such a condition as to render it fit
for the use intended, and the lessee is obliged to use the thing leased as a diligent father of a family,
devoting it to the use stipulated or that which may be inferred from the nature of the thing leased.

In a contract of lease, the cause or essential purpose is the use and enjoyment of the thing. The
thing or subject matter of the contract in this case was clearly identified and agreed upon as the lot
where the building would be constructed by Hilltop. The consideration were the annual lease rental
and the ownership of the building upon the termination of the lease period. Considering that Hilltop
and the City of Baguio agreed upon the essential elements of the contract, the contract of lease had
been perfected.

From the moment that the contract is perfected, the parties are bound to fulfill what they have
expressly stipulated.Thus, the City of Baguio gave the use and enjoyment of its lot to Hilltop. Both
the RTC and the CA found that upon the execution of the contract on 22 June 1974, Hilltop took
possession of the lot and constructed the Rillera building on it. Thereafter, Hilltop's members
occupied the Rillera building and conducted business in it up to the present. The findings of fact
of the RTC and the CA are final and conclusive and cannot be reviewed on appeal by this Court.

Since Hilltop exercised its right as lessee based on the contract of lease and the law, it has no basis
in claiming that the contract of lease did not commence.

38 | P a g e
BANK OF PHILIPPINE ISLANDS, Petitioner vs. AMADO M. MENDOZA, Respondent

GR No. 198799, Mar 20, 2017

First Division

PERLAS-BERNABE, J.:

Nature of the Action: Petition for review on certiorari is the Decision dated February 4, 2011
and the Resolution dated August 26, 2011 of the Court of Appeals (CA) in CA-GR. CV No. 91704,
which reversed and set aside the Decision dated May 9, 2007 of the Regional Trial Court of Gapan
City, Nueva Ecija, Branch 87 (RTC) in Civil Case No. 1913, and consequently, dismissed the
complaint filed by petitioner Bank of the Philippine Islands (BPI) against respondents Amado M.
Mendoza (Amado) and his mother, Maria Marcos vda. de Mendoza (Maria; collectively,
respondents).

Facts:

This case stemmed from a Complaint for Sum of Money with Application for Writ of
Attachment filed by BPI against respondents before the RTC.

BPI alleged that respondents, opened a foreign currency savings account (US savings account) at
BPI-Gapan Branch, in cash and in US Treasury Check payable to Ma. Marcos Vda. de Mendoza
(subject check). After the lapse of the thirty (30)-day clearing period. However, on June 26, 1997,
BPI received a notice from its correspondent bank, Bankers Trust Company New York (Bankers
Trust), that the subject check was dishonored due to "amount altered",as evidenced by an electronic
mail (e-mail) advice from Bankers Trust, and (2) a photocopy of the subject check with a notation
"endorsement cancelled" by Bankers Trust as the original copy of the subject check was allegedly
confiscated by the government of the United States of America (US government). This prompted
BPI to inform respondents of such dishonor and to demand reimbursement. BPI then claimed that
respondents allowed BPI to apply the proceeds of their time deposit account to their outstanding
obligation and upon the exhaustion of the said time deposit account, Amado gave BPI a promissory
note containing his promise to pay BPI-Gapan Branch the monthly; and when respondents failed
to fulfill their obligation despite repeated demands, BPI was constrained to give a final demand
letter to respondents . Respondents admitted the withdrawals and exchanged the same with BPI.
Respondents then maintained that Amado only affixed his signature in the letter in order to
acknowledge its receipt, but not to give his consent to the application of the proceeds of their time
deposit account to their purported obligations to BPI.

The RTC ruled in BPI's favor, and accordingly, ordered respondents to pay. The RTC opined that
since respondents withdrew the money prior to the dishonor and that BPI allowed such withdrawal
by mistake, it is only proper that respondents return the proceeds of the same pursuant to the
principle of solutio indebiti under Article 2154 of the Civil Code. The CA reversed and set aside
the RTC's ruling, and consequently, dismissed BPI's complaint for lack of merit.

Issue:

Whether or not the CA correctly dismissed BPI's complaint for sum of money against respondents?

Held:

After a judicious review of the records, including a re-evaluation of the evidence presented
by the parties, the Court is inclined to sustain the findings of the RTC over that of the CA.

In this case, BPI sufficiently complied with the foregoing requisities. First, the existence or due
execution of the subject check was admitted by both parties. Second, the reason for the non-
presentation of the original copy of the subject check was justifiable as it was confiscated by the
US government for being an altered check. The subject check, being a US Treasury Warrant, is
not an ordinary check, and practically speaking, the same could not be easily obtained. Lastly,
absent any proof to the contrary and for the reasons already stated, no bad faith can be attributed

39 | P a g e
to BPI for its failure to present the original of the subject check. Thus, applying the exception to
the Best Evidence Rule, the presentation of the photocopy of the subject check as secondary
evidence was permissible.

Considering that BPI had proven its cause of action by preponderance of evidence, the Court finds
the CA to have erred in dismissing BPI's complaint against respondents. Accordingly, the RTC
ruling must be reinstated, subject to modification in the award of interest imposed on the adjudged
amount.

To recount, respondents were ordered by the RTC to pay BPI the amount of P369,600.51
representing the peso equivalent of the amounts withdrawn by respondents less the amounts
already recovered by BPI, plus legal interest of twelve percent (12%) per annum reckoned from
the time the money was withdrawn,thus, implying that such amount was a loan or a forbearance
of money. However, records reveal that BPI's payment of the proceeds of the subject check was
due to a mistaken notion that such check was cleared, when in fact, it was dishonored due to an
alteration in the amount indicated therein. Such payment on the part of BPI to respondents was
clearly made by mistake, giving rise to the quasi-contractual obligation of solutio indebiti under
Article 2154 in relation to Article 2163 of the Civil Code. Not being a loan or forbearance of
money, an interest of six percent (6%) per annum should be imposed on the amount to be refunded
and on the damages and attorney's fees awarded, if any, computed from the time of demand until
its satisfaction. Consequently, respondents must return to BPI the aforesaid amount, with legal
interest at the rate of six percent (6%) per annum from the date of extrajudicial demand – or on
June 27, 1997, the date when BPI informed respondents of the dishonor of the subject check and
demanded the return of its proceeds – until fully paid.

40 | P a g e
ROMULO ABROGAR and ERLINDA ABROGAR, Petitioners versus
COSMOS BOTTLING COMPANY and INTERGAMES INC Respondents

G.R. No. 164749, March 15, 2017

Third Division
BERSAMIN, J.:
Nature of the Action: Appeal by the parents of the late Rommel Abrogar, seek the review and
reversal of the decision whereby the CA reversed and set aside the judgment rendered in their
favor by the RTC

Facts:

To promote the sales of “Pop Cola”, defendant Cosmos, jointly with Intergames, organized
an endurance running contest. Plaintiffs' son Rommel was one of the participant in an organized
marathon bumped by a passenger jeepney on the route of the race which caused to his death.
As it turned out, that defendants failed to provide adequate safety and precautionary measures and
to exercise the diligence required of them by the nature of their undertaking, in that they failed to
insulate and protect the participants of the marathon from the vehicular and other dangers along
the marathon route. Petitioners sued the respondents to recover various damages for the untimely
death of Rommel. Cosmos denied liability, insisting that it had not been the organizer of the
marathon, but only its sponsor; that its participation had been limited to providing financial
assistance to Intergames. Thus, Cosmos sought to hold Intergames solely liable should the claim
of the petitioners prosper. Intergames asserted that it was not responsible for the accident; that as
the marathon organizer, it did not assume the responsibilities of an insurer of the safety of the
participants; that it nevertheless caused the participants to be covered with accident insurance, that
there could be no cause of action against it because the acceptance and approval of Rommel’s
application to join the marathon

The RTC rendered judgment in favor of plaintiffs- spouses Romulo Abrogar and Erlinda Abrogar
and against defendants Cosmos Bottling Company, Inc. and Intergames, Inc., ordering both
defendants, jointly and severally, to pay and deliver to the plaintiffs. The CA ruled that, appellant
Cosmos was limited to providing financial assistance in the form of sponsorship.

Issue:
Whether or not CA erred in reversing the RTC Decision and consequently holding respondents
free from liability, and in not awarding petitioners with actual, moral and exemplary damages for
the death of their child, Rommel Abrogar?
Held:
The Supreme Court ruled that the CA did not err in absolving Cosmos from liability.

Art. 2202. In crimes and quasi-delicts, the defendant shall be liable for all damages which are the
natural and probable consequences of the act or omission complained of. It is not necessary that
such damages have been foreseen or could have reasonably been foreseen by the defendant.

Accordingly, Intergames was liable for all damages that were the natural and probable
consequences of its negligence. In its judgment, the RTC explained the award of damages in favor
of the petitioners.

The RTC did not recognize the right of the petitioners to recover the loss of earning capacity of
Rommel. It should have, for doing so would have conformed to jurisprudence whereby the Court
has unhesitatingly allowed such recovery in respect of children, students and other non-working
or still unemployed victims. The legal basis for doing so is Article 2206 (1) of the Civil Code,
which stipulates that the defendant “shall be liable for the loss of the earning capacity of the
deceased, and the indemnity shall be paid to the heirs of the latter; such indemnity shall in every
case be assessed and awarded by the court, unless the deceased on account of permanent physical
disability not caused by the defendant, had no earning capacity at the time of his death.”

The Court further ruled citing the case of Metro Manila Transit Corporation v. Court of Appeals,
Compensation of this nature is awarded not for loss of earnings but for loss of capacity to earn

41 | P a g e
money. Evidence must be presented that the victim, if not yet employed at the time of death, was
reasonably certain to complete training for a specific profession

The petitioners sufficiently showed that Rommel was, at the time of his untimely but much
lamented death, able-bodied, in good physical and mental state, and a student in good standing. It
should be reasonable to assume that Rommel would have finished his schooling and would turn
out to be a useful and productive person had he not died. The basis for the computation of earning
capacity is not what he would have become or what he would have wanted to be if not for his
untimely death, but the minimum wage in effect at the time of his death. The formula for this
purpose is:

Net Earning Capacity = Life Expectancy x [Gross Annual Income less Necessary Living Expenses]

Life expectancy is equivalent to 2/3 multiplied by the difference of 80 and the age of the deceased.
Since Rommel was 18 years of age at the time of his death, his life expectancy was 41 years. His
projected gross annual income, computed based on the minimum wage for workers in the non-
agricultural sector in effect at the time of his death, then fixed at P14.00/day, is P5,535.83.
Allowing for necessary living expenses of 50% of his projected gross annual income, his total net
earning capacity is P113,484.52.

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SPOUSES FIRMO S. ROSARIO AND AGNES ANNABELLE DEAN-ROSARIO,
Petitioners vs. PRISCILLA P. ALVAR, Respondent
GR No. 212731, September 6, 2017
First Division
DEL CASTILLO, J.:
Nature of the Action: Petition for Review on Certiorar under Rule 45 of the Rules of Court assails
the May 27, 2014 Decision of the Court of Appeals (CA) in CAG.R. CV No. 98928.

Facts:
Petitioner Agnes borrowed from respondent a total of P600, 000.00 secured by real estate
mortgages. However, the mortgages were discharged. On 1992, Agnes executed two Deeds of
Absolute Sale over the two lots in favor of Priscilla’s daughter, Evangeline Arceo for the amount
of P900, 000.00 each. Evangeline later sold the lots to Priscilla also for the price of P900, 000.00
each.

On 1994, Priscilla sent a demand letter to petitioner asking them to vacate Lot 1. This prompted
the petitioners to file before the RTC of Makati a Complaint for Declaration of Nullity of Contract
of Sale and Mortgage, Cancellation of Transfer Certificates of Title and Issuances of new TCT’s
with Damages against Priscilla.
Petitioners alleged that Priscilla deceived Agnes into signing the Deeds of Absolute Sale in favor
of Evangeline, as Agnes merely intended to renew the mortgages over the two lots.
The RTC rendered a Decision granting Priscilla's complaint for recovery of possession while
denying petitioner spouses Rosario's complaint for declaration of nullity of contract of sale.
On appeal, the CA reversed the Decision of the RTC. The CA ruled that although the transfers
from Agnes to Priscilla were identified as absolute sales, the contracts are deemed equitable
mortgages pursuant to Article 160216 of the Civil Code.

Issue:

Whether or not reformation of the contract is required before the subject lots may be foreclosed?

Held:

We rule in the negative.

Reformation of an instrument is a remedy in equity where a written instrument already executed

is allowed by law to be reformed or construed to express or conform to the real intention of the
parties. The rationale of the doctrine is that it would be unjust and inequitable to allow the
enforcement of a written instrument that does not express or reflect the real intention of the parties.

In the November 15, 2006 Decision, the CA denied petitioner spouses' Complaint for declaration
of nullity of contract of sale on the ground that what was required was the reformation of the
instruments, pursuant to Article 1365 of the Civil Code. In ruling that the Deeds of Absolute Sale
were actually mortgages, the CA, in effect, had reformed the instruments based on the true
intention of the parties. Thus, the filing of a separate complaint for reformation of instrument is no
longer necessary because it would only be redundant and a waste of time.

Besides, in the November 15, 2006 Decision, the CA already declared that absent any proof that
petitioner spouses Rosario had fully paid their obligation, respondent may seek the foreclosure of
the subject lots.

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NATIVIDAD R. MUNAR, et al., Petitioners, vs.
ATTY. ELMER T. BAUTISTA AND ATTY. WINSTON F. GARCIA, Respondents.

A.C. No. 7424, February 08, 2017

Third Division
REYES, J.:

Nature of the Action: Petition for review on certiorari under Rule 45 of the Rules of Court from
the Resolution of the Integrated Bar of the Philippines (IBP) passed by its Board of Governors on
June 5, 2008 adopting the Report and Recommendation dated March 27, 2008 of the Commission
on Bar Discipline (CBD) Investigating Commissioner Atty. Salvador B. Hababag (Commissioner
Hababag) and dismissing the undated administrative Complaint for Disbarment filed on February
1, 2007 by Benny O. Taguba, Natividad R. Munar et al.,

Facts:

Petitioners are public school teachers, residing in Ifugao and Isabela, they were offered by
the marketing promoters of the GSIS and San Lorenzo Ruiz Realty Corporation in a housing
project to be built in Isabela that they will be deducted only in the range of 1,000 to 2,000 pesos
in their salary. They boasted that the Subdivision will "set the standard of fine living" where the
teachers dreams are now a reality.

The petitioners claimed that they were induced to sign blank forms to supposedly reserve housing
units in the Subdivision and were not given the opportunity to review its contents due to the
Representatives' excuse of being in a hurry. The Representatives, however, assured them that they
will return with the filled-up forms for the petitioners' inspection and final decision, and that more
GSIS personnel would meet them regarding the housing project and loan. The petitioners highly
relied on the said assurances by signing the blank forms in contemplation of a good future
investment. But this assurance never happened.

Sometime in 1999, the petitioners were shocked to their 5000 pesos monthly salary deduction.
They complained that the deduction left them with a measly P1,000.00 as "take home" pay. The
petitioners claimed that their signatures in the Authority to Deduct were forged. In 2004, the
petitioners received notices from the GSIS that they still remain liable to pay for the accrued
interests of the principal amount of the housing loan. To their dismay, the value of the housing
loans reflected in their GSIS records ranged from P800,000.00 to more than P1,000,000.00 for a
house and lot they allegedly never bought or even saw, much less occupied. They were also
directed to pay the alleged arrears in order to stop the loans from further escalating in interest and
their retirement pay may not be even enough to settle them.

On January 19, 2004, Atty. Bautista issued a Memorandum regarding the right of GSIS to retain
ownership of the subject housing units and to collect the purchase price thereof through monthly
salary deduction against the petitioners. In support of the collection enhancement of the GSIS on
the matter, the GSIS Board of Trustees (BOT) passed Board Resolution No. 48. Accordingly, Atty.
Garcia, as GSIS General Manager, enforced and implemented the same by effecting salary
deductions on the monthly pay of the petitioners as public school teachers
The petitioners claimed that the allowance and implementation of the collection on arrears on
cancelled housing loans are tantamount to double recovery for the GSIS. In compliance, Atty.
Bautista commented that he rendered a legal opinion as former Chief Legal Counsel of the GSIS
Legal Services Group, upon the request of Arnalda Cuasay, the Senior Vice President of the
Housing and Real Property Development Group, regarding the issue on whether the GSIS can
collect arrearages on a housing loan with a DCS that was cancelled by Republic Act (R.A.) No.
6552 or the Maceda Law. And Atty. Garcia averred that the disbarment complaint against him
constitutes a collateral attack on the validity of Board Resolution No. 48. Then, the IBP dismissed
the complaint filed by the petitioners for lack of merit.
Issue:
Whether or not the petitioner can validly put to force the restoration of their prior position before
the execution of the housing contracts upon the cancellation of the Deed of Conditional Sale?
Held:
The SC affirmed the decision of the IBP.
The contention is untenable. Citing Article 1385 of the New Civil Code: Rescission creates the
obligation to return the things which were the object of the contract, together with their fruits, and

44 | P a g e
the price with its interest; consequently, it can be carried out only when he who demands rescission
can return whatever he may be obliged to restore. The petitioners put to force the restoration of
their prior position before the execution of the housing contracts upon the cancellation of the DCS.
This being so, the GSIS cannot legally collect anything from them anymore as it has retained
possession and ownership of the subject properties.
It should also be noted that Board Resolution No. 48 was passed to enhance the collection efforts
of the GSIS in view of its fiduciary duty to its members regarding the GSIS funds. The assailed
memorandum issued by Atty. Bautista was an enhancement of the collection efforts of the GSIS
on delinquent accounts of members who availed of housing loans. The cancellation of the Deed of
Conditional Sale and the cession of SLRRDC's rights in favor of GSIS warranted such collection
upon the monthly salaries of the petitioners. There being no administrative declaration of the
resolution's invalidity, it was incumbent upon Atty. Garcia to implement the same, as GSIS
President and General Manager, in accordance with his mandate under Section 45 of R.A. No.
8291. Any disobedience would hold him liable under R.A. No. 3019 and the GSIS Charter.
Lastly, the Court commiserates with the sad plight of the petitioners who are among minimum-
income earners highly depending on their wages for their daily needs. Nonetheless, they still
remain liable to pay the arrears indicated in their GSIS records not only for failing to discharge the
burden of proving their allegations in the complaint but also for resorting to a wrong remedy.
Despite thereof, the new GSIS Board Resolution No. 125 which replaced the assailed Board
Resolution No. 48 is deemed to have given them sufficient leeway from payment because interests
and surcharges will no longer accumulate and put to a halt, as explained by Atty. Garcia. Therefore,
their chances of paying the balance of the housing loans would become lighter and no longer that
burdensome.

45 | P a g e
SCANMAR MARITIME SERVICES, INC., CROWN SHIPMANAGEMENT INC., and
VICTORIO Q. ESTA, Petitioners, vs. WILFREDO T. DE LEON, Respondent.
G.R. No. 199977, January 25, 2017
First Division,
SERENO, CJ.:

Nature of the Action: Petition for Review on Certiorari filed by petitioners Scanmar Maritime
Services, Inc., Crown Shipmanagement Inc., and Victorio Q. Esta, assailing the Decision and the
Resolution of the Court of Appeals (CA).The CA affirmed the rulings of the National Labor
Relations Commission (NLRC) and the Labor Arbiter (LA) finding respondent entitled to
disability benefits and attorney's fees.

Facts:

Respondent worked for petitioner Scanmar Maritime Services, Inc. as a seafarer aboard the
vessels of its principal, Crown Ship management, Inc. For 22 years in the service, there was no
account of any ailment he had contracted. But prior to his next deployment, Respondent went to
the office of the petitioner for pre-employment medical examination. But they notice that the
Respondent was dragging his right leg while walking. The company physician referred him to a
neurologist for consultation, management, and clearance. In the meantime, the status of respondent
in his Medical Examination Certificate was marked "pending". Thereafter, the Petitioner no longer
heard from the Respondent. Two years later, in December 2007, the petitioner it received a letter
from respondent asking for disability benefits amounting to USD60,000. It did not reply to the
letter, prompting him to file a Complaint with the LA for disability benefits and attorney's fees.

Before the LA, respondent averred that on his last duty as a Third Mate on board M/V
Thuleland, he began feeling that something was wrong with his body, and that he experienced
lower abdominal pain and saw blood in his stool.

The Petitioner averred before the Labor Arbiter the three main contentions. First, they belied the
claim of respondent that he experienced an illness aboard M/V Thule land, given the absence of
any such entry in the vessel's logbook. Second, petitioners highlighted the fact that when he
disembarked, De Leon did not complain of any illness, request medical assistance, or submit
himself to a post-employment medical examination within three days from his disembarkation, as
required by his POEA Contract. Third, petitioners asserted that he had failed to address his
"pending" status and to follow the company physician's advice for him to consult a neurologist.

The Labor Arbiter ruled in favor of the Respondent, awarding him USD 60,000 disability benefits
and attorney's fees. On appeal the NLRC affirmed the decision of the Labor Arbiter. Then the
decision of the NLRC was elevated thru petition for certiorari with the CA, in which it affirmed
the decision of the NLRC. Hence, this appeal.

Issue:

Whether or not the respondent is entitled for damages due to his injury suffered during the term
of his contract/employment as seafarer?

Held:

The SC reversed the decision of the CA.

It ruled that to be entitled to disability benefits, this Court refers to the provisions of the POEA
Contract, as it sets forth the minimum rights of a seafarer and the concomitant obligations of an
employer. Under Section 20 (B) thereof, these are the requirements for compensability: (1) the
seafarer must have submitted to a mandatory post-employment medical examination within three
working days upon return; (2) the injury must have existed during the term of the seafarer's
employment contract; and (3) the injury must be work-related.

46 | P a g e
It is not disputed that De Leon failed to submit to a post-employment medical examination by a
company-designated physician within three working days from disembarkation. The LA, the
NLRC, and the CA excused him from complying with this requirement, reasoning that he had not
been medically repatriated.

For seafarers claiming disability benefits is to prove the positive proposition that there is a
reasonable causal connection between their ailment and the work for which they have been
contracted. Logically, the labor courts must determine their actual work, the nature of their ailment,
and other factors that may lead to the conclusion that they contracted a work-related injury.

Nonetheless, the records still lack the portrayal of how De Leon contracted the injury, its
symptoms, and its aggravating factors. The curability of the injury, in order to determine whether
it results in a permanent or temporary disability, was not at all discussed in the proceedings below.
In effect, De Leon failed to show before the labor tribunals his functions as a seafarer, as well as
the nature of his ailment. Absent these premises, none of the courts can rightfully deduce any
reasonable causal connection between his ailment and the work for which he was contracted.

For the LA, the NLRC, and the CA, since there was no reported incident befalling De Leon from
the time he disembarked on 13 September 2005 to the time that he underwent medical examination
on 21 November 2005, whatever causative circumstances led to his permanent disability must have
transpired during his 22 years of employment.

47 | P a g e
NESTLE PHILIPPINES, INC., Petitioner, vs. BENNY A. PUEDAN, JR., JAYFER D.
LIMBO, BRODNEY N. AVILA, ARTHUR C. AQUINO, RYAN A. MIRANDA, RONALD
R. ALAVE, JOHNNY A. DIMAYA, MARLON B. DELOS REYES, ANGELITO R.
CORDOVA, EDGAR S. BARRUGA, CAMILO B. CORDOVA, JR., JEFFRY B.
LANGUISAN, EDISON U. VILLAPANDO, JHEIRNEY S. REMOLIN, MARY LUZ A.
MACATALAD,* JENALYN M. GAMUROT, DENNIS G. BAWAG, RAQUEL A.
ABELLERA, AND RICANDRO G. GUATNO, JR., Respondent

G.R. No. 220617, January 30, 2017

First Division,
PERLAS-BERNABE, J.:
Nature of the Action: Petition for review on certiorari are the Decision dated March 26, 2015
and the Resolution dated September 17, 2015 of the Court of Appeals (CA) in CA-G.R. SP No.
132686, which affirmed the Decision dated May 30, 2013 and the Resolution dated August 30,
2013 of the National Labor Relations Commission (NLRC) in LAC No. 02-000699-13/ NCR-03-
04761-12, declaring petitioner Nestle Philippines, Inc. (NPI), jointly and severally liable with
Ocho de Septiembre, Inc. (ODSI) to respondents Benny A. Puedan, Jr., Jayfer D. Limbo, Brodney
N. Avila, Arthur C. Aquino, Ryan A. Miranda, Ronald R. Alave, Johnny A. Dimaya, Marlon B.
Delos Reyes, Angelita R. Cordova, Edgar S. Barruga, Camilo B. Cordova, Jr., Jeffry B. Languisan,
Edison U. Villapando, Jheirney S. Remolin, Mary Luz A. Macatalad, Jenalyn M. Gamurot, Dennis
G. Bawag, Raquel A. Abellera, and Ricandro G. Guatno, Jr. (respondents) for separation pay,
nominal damages, and attorney's fees.

Facts:
Respondents alleged that on various dates, ODSI and NPI hired them to sell various Nestle
products in the assigned covered area. After some time, respondents demanded that they be
considered regular employees of Nestle , but they were directed to sign contracts of employment
with ODSI instead. When respondents refused to comply with such directives, NPI and ODSI
terminated them from their position.8 Thus, they were constrained to file the complaint, claiming
that: ODSI is a labor-only contractor and, thus, they should be deemed regular employees of
Nestle Philippines; and there was no just or authorized cause for their dismissal. Due to this
circumstance the Respondents file a case for illegal dismissal, damages, and attorney's fees.
ODSI averred that it is a company engaged in the business of buying, selling, distributing, and
marketing of goods and commodities of every kind and it enters into all kinds of contracts for the
acquisition thereof. ODSI admitted that on various dates, it hired respondents as its employees and
assigned them to execute the Distributorship Agreement it entered with Nestle Philippines.
Later on, the business relationship between NPI and ODSI turned sour when the former's sales
department badgered the latter regarding the sales targets. Eventually, NPI downsized its
marketing and promotional support from ODSI which resulted to business reverses and in the
latter's filing of a petition for corporate rehabilitation and, subsequently, the closure of its Nestle
unit due to the termination of the Distributorship Agreement and the failure of rehabilitation. Under
the foregoing circumstances, ODSI argued that respondents were not dismissed but merely put in
floating status. The Labor Arbiter dismissed the complaint for lack of merit, but ordered, inter alia,
ODSI and NPI to pay respondents nominal damages in the aggregate amount of P235,728.00 plus
attorney's fees amounting to ten percent of the total monetary awards. Then the NLRC reversed
the decision of the Labor Arbiter and states that the Nestle Philippines to be respondents' true
employer, and thus, ordered it jointly and severally liable with ODSI to pay the monetary claims
of respondents. The CA arrimed the decision of NLRC. Hence, this appeal.

Issue:

Whether or not ODSI is a labor-only contractor of NPI, and consequently, NPI is respondents' true
employer and, thus, deemed jointly and severally liable with ODSI for respondents' monetary
claims?

Held:

The SC reversed the decision of CA.

48 | P a g e
The Court ruled that, In holding NPI jointly and severally liable with ODSI for the monetary
awards in favor of respondents, both the NLRC and the CA held that based on the provisions of
the Distributorship Agreement between them, ODSI is merely a labor-only contractor of NPI. In
this regard, the CA opined that the following stipulations of the said Agreement evinces that NPI
had control over the business of ODSI, namely, that: (a) NPI shall offer to ODSI suggestions and
recommendations to improve sales and to further develop the market; (b) NPI prohibits ODSI from
exporting its products (the No-Export provision); (c) NPI provided standard requirements to ODSI
for the warehousing and inventory management of the sold goods; and (d) prohibition imposed on
ODSI to sell any other products that directly compete with those of NPI.
Thus, contrary to the CA's findings, the aforementioned stipulations in the Distributorship
Agreement hardly demonstrate control on the part of NPI over the means and methods by which
ODSI performs its business, nor were they intended to dictate how ODSI shall conduct its business
as a distributor. Otherwise stated, the stipulations in the Distributorship Agreement do not operate
to control or fix the methodology on how ODSI should do its business as a distributor of NPI
products, but merely provide rules of conduct or guidelines towards the achievement of a mutually
desired result- which in this case is the sale of NPI products to the end consumer.

Verily, it was only reasonable for NPI - it being a local arm of one of the largest manufacturers of
foods and grocery products worldwide - to require its distributors, such as ODSI, to meet various
conditions for the grant and continuation of a distributorship agreement for as long as these
conditions do not control the means and methods on how ODSI does its distributorship business,
as shown in this case. This is to ensure the integrity and quality of the products which will
ultimately fall into the hands of the end consumer.

Thus, the foregoing circumstances show that ODSI was not a labor only contractor of NPI; hence,
the latter cannot be deemed the true employer of respondents. As a consequence, NPI cannot be
held jointly and severally liable to ODSI's monetary obligations towards respondents.

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SPOUSES AMADO O. IBAÑEZ and ESTHER R.IBAÑEZ, petitioners, vs. JAMES
HARPER as Representative of the Heirs of FRANCISCO MUÑOZ, SR., the REGISTER OF
DEEDS OFMANILA and the SHERIFF OF MANILA, respondents.
G.R. No. 194272, February 15, 2017
Third Division
JARDELEZA, J.:
Nature of Action: Amended Petition for Review on Certiorari under Rule 45 of the Revised Rules
of Court assailing the Decision dated October 29, 2009 (assailed Decision) and Resolution dated
September 29, 2010 (assailed Resolution) of the Court of Appeals (CA) in CA-G.R. SP No. 98623.
The CA set aside the Orders dated August 11,2006 and February 20, 2007 and reinstated the Order
dated March 24, 2006 of the Regional Trial Court (RTC) of Manila, Branch 40, in Civil Case No.
97-86454.

Facts:
Spouses Ibanez borrowed from from Francisco Munoz Sr., Consuelo Munoz and Consuelo
Estrada the amount of P1,300,000 payable in three minths, with interest at the rate of 3% a month.
On October 14, 1996, the spouses Ibanez isssued a Promissory Note binding themselves jointly
and severally to pay Ma. Consuelo and Consuelo the loan amount. As a security, the spouses
Ibanez executed a Deed of Real Estate Mortgage10 in favor of Ma. Consuelo and Consuelo over
a parcel of land and its improvements. The mortgage contained the same terms as the promissory
note. It further stipulated that Ma. Consuelo and Consuelo shall have the right to immediately
foreclose the mortgage upon the happening of the following events: (1) filing by the mortgagor of
any petition for insolvency or suspension of payment; and/or (2) failure of the mortgagor to
perform or comply with any covenant, agreement, term or condition of the mortgage.
On September 23, 1997, alleging that the conditions of the mortgage have been violated since
November 17, 1996 and that all check payments were dishonored by the drawee, Ma. Consuelo
and Consuelo applied for foreclosure of the real estate mortgage. The spouses Ibañez filed in the
RTC of Manila a Complaint for injunction and damages with prayers for writ of preliminary
injunction and temporary restraining order against Francisco, Ma. Consuelo, Consuelo. On
December 12, 1997, the spouses Ibañez filed an Amended Complaint.

On June 11, 2002, the parties filed a Joint Motion for Approval of Amended Compromise
Agreement and on June 17, 2002, the RTC approved the Amended Compromise Agreement and
adopted it as its Hatol.

On July 31, 2006, the spouses Ibañez filed a Motion to Adopt/Consider the Judicial Compromise
Agreement dated June 17, 2002 Designated as "Hatol" as the Final and Executory Decision. The
motion prayed that since all thestipulations in the Amended Compromise Agreement have been
complied withto the entire satisfaction of all the contending parties, the CompromiseAgreement
should be considered and adopted as the trial court's decision on the merits. The motion was signed
by Amado Ibañez with the conformity ofConsuelo, signing for herselfand the Branch clerk.

Issue:
Whether or not the obligation is one solidary or joint?

Held:

The SC ruled that the obligation is joint.

In any case, solidary obligations cannot be inferred lightly. They must be positively and clearly
expressed.
The Articles 1207 and 1208 states that:

Art. 1207. The concurrence of two or more creditors or of two or more debtors in one and
the same obligation does not imply that each one of the former has a right to demand, or
that each one of the latter is bound to render, entire compliance with the

50 | P a g e
 prestations. There is a solidary liability only when the obligation expressly so states, or
when the law or the nature of the obligation requires solidarity.

Art. 1208. If from the law, or the nature or the wording of the obligations to which the
preceding article refers the contrary does not appear, the credit or debt shall be presumed
to be divided into as many equal shares as there arc creditors or debtors, the credits or debts
being considered distinct from one another, subject to the Rules of Court governing the
multiplicity of suits.

In this case, given that solidarity could not be inferred from the agreement, the presumption under
the law applies—the obligation is joint. As defined in Article 1208, a joint obligation is one where
there is a concurrence of several creditors, or of several debtors, or of several debtors, or of several
creditors and debtors, by virtue of which each of the creditors has a right to demand, and each of
the debtors is bound to render compliance with his proportionate part of the prestation which
constitutes the object of the obligation. Each debtor answers only for a part of the whole
liability and to each obligee belongs only a part of the correlative rights as it is only in solidary
obligations that payment made to any one of the solidary creditors extinguishes the entire
obligation. This means that Francisco, Ma. Consuelo and Consuelo are each entitled to equal
shares in the P3,000,000 agreed upon in the Amended Compromise Agreement and that payment
to Consuelo and Ma. Consuelo will not have the effect of discharging the obligation with respect
to Francisco.

51 | P a g e
ARIEL G. PALACOS, for and in behalf of the AFP Retirement and Separation Benefits
System (AFP-RSBS), Complainant vs. ATTY. BIENVENIDO BRAULLO M. AMORA, JR.,
Respondent

A.C. No. 11504, August 1, 2017

Nature of the Action: Administrative case arose from a Complaint dated March 11, 20081 filed
by Ariel G. Palacios, in his capacity as the Chief Operating Officer and duly authorized
representative of the AFP Retirement and Separation Benefits System (AFP-RSBS).

Facts:

Complainant is the owner-developer of land estate property located at the Province of

Cavite. Said property was being developed into a residential subdivision, community club house
and two (2) eighteen-hole, worldclass championship golf courses. In 1996,complainant entered
into purchase agreements with several investors in order to finance its Riviera project.

On 02 June 1997, complainant retained the services of respondent of the Amora and Associates
Law Offices to represent and act as its legal counsel in connection with the Riviera project.

As complainant's legal counsel, respondent was privy to highly confidential information regarding
the Riviera project. Respondent was also very familiar with the Riviera project. Respondent
further knew that complainant had valid titles to the properties of the Riviera project and was also
knowledgeable about complainant's transactions with Phil Golf.

After complainant terminated respondent's services as its legal counsel, respondent became Phil
Golfs representative and assignee. Respondent began pushing for the swapping of Phil Golfs
properties with that of complainant. Respondent sent swapping proposals to his former client,
herein complainant, this time in his capacity as Phil Golfs representative and assignee. These
proposals were rejected by complainant for being grossly disadvantageous to the latter. After
complainant's rejection of the said proposals, respondent filed a case against its former client,
herein complainant on behalf of a subsequent client (Phil Golf) before the BLURB for alleged
breach of contract.

Due to respondent actuations, complainant filed the instant action for disbarment.

Issue:

Whether or not respondent (the Amora and Associates Law Offices) acquire the property of a client
subject of litigation?

Held:

Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial
auction, either in person or through the mediation of another: xx xx

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other
officers and employees connected with the administration of justice, the property and rights in
litigation or levied upon an execution before the court within whose jurisdiction or territory they
exercise their respective functions; this prohibition includes the act of acquiring by assignment and
shall apply to lawyers, with respect to the property and rights which may be the object of any
litigation in which they may take part by virtue of their profession.

52 | P a g e
On this point, We sustain the respondent's position that the prohibition contained in Article 1491
does not apply in this case. "The subject properties which were acquired by respondent Amora
were allegedly not in litigation and/or object of any litigation at the time of his acquisition. " 23
The Court in Sabidong v. Solas, clearly ruled: "For the prohibition to apply, the sale or assignment
of the property must take place during the pendency of the litigation involving the property.

53 | P a g e
JOHN E.R. REYES and MERWIN JOSEPH REYES, Petitioners, vs.
Orico Doctolero et al., Respondents.

G.R. No. 185597, August 22, 2017

Third Division
JARDELEZA, J.:

Nature of the Action: Petition for review on certiorari 1 under Rule 45 of the Rules of Court
challenging the Decision2 dated July 25, 2008 and the Resolution3 dated December 5, 2008 of the
Court of Appeals (CA) in CA-G.R. CV No. 88101.

Facts:

The case arose from an altercation between respondent Orico Doctolero (Doctolero ), a
security guard of respondent Grandeur Security and Services Corporation (Grandeur) and
petitioners John E.R. Reyes (John) and Mervin Joseph Reyes (Mervin) in the parking area of
respondent Makati Cinema Square (MCS). Petitioners and Respondent in this case have a different
version as to the facts of the case, however, the case arose when petitioners John Reyes and Mervin
Reyes was shot by the respondent, due to heated arguments regarding parking traffic rules.

Petitioners filed with the Regional Trial Court a complaint for damages against respondents
Doctolero and Avila and their employer Grandeur, charging the latter with negligence in the
selection and supervision of its employees. They likewise impleaded MCS on the ground that it
was negligent in getting Grandeur's services. In their complaint, petitioners prayed that
respondents be ordered, jointly and severally, to pay them actual, moral, and exemplary damages,
attorney's fees and litigation cost.

On the other hand, MCS contends that it cannot be held liable for damages simply because of its
ownership of the premises where the shooting incident occurred.

The RTC held that it re-evaluated the facts and the attending circumstances of the present case and
was convinced that Grandeur has sufficiently overcome the presumption of negligence.
Furthermore, the RTC held that Grandeur was able to show that it observed diligence of a good
father of the family during the existence of the employment when it conducted regular and close
supervision of its security guards assigned to various clients.

Petitioners assailed the RTC Order before the CA. The CA dismissed petitioners' appeal and
affirmed the RTC's Order. It agreed that Grandeur was able to prove with preponderant evidence
that it observed the degree of diligence required in both selection and supervision of its security
guards.

Issue:

Whether or not Grandeur and MCS may be held vicariously liable for the damages caused by
respondents Doctolero and Avila to petitioners John and Mervin Reyes?

Held:

As a general rule, one is only responsible for his own act or omission. 24 This general rule
is laid down in Article 2176 of the Civil Code, which provides:

Art. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage clone. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a quasi-clelict and is governed by the
provisions or this Chapter.

The law, however, provides for exceptions when it makes certain persons liable for the act or
omission of another. One exception is an employer who is made vicariously liable for the tort
committed by his employee under paragraph 5 of Article 2180.

54 | P a g e
Here, both the R TC and the CA found that Grandeur was able to sufficiently prove, through
testimonial and documentary evidence, that it had exercised the diligence of a good father of a
family in the selection and hiring of its security guards. As testified to by its HRD head Ungui,
and corroborated by documentary evidence including clearances from various government
agencies, certificates, and favorable test results in medical and psychiatric examinations.

Grandeur was able to satisfactorily prove that it had exercised due diligence in the selection of
respondents Doctolero and Avila.

Considering all the evidence borne by the records, we find that Grandeur has sufficiently exercised
the diligence of a good father of a family in the selection and supervision of its employees. Hence,
having successfully overcome the legal presumption of negligence, it is relieved of liability from
the negligent acts of its employees, respondents Doctolero and Avila.

55 | P a g e
CATHAY LAND, INC. and CATHAY METAL CORPORATION, Petitioners, vs.
AYALA LAND, INC., A VIDA LAND CORPORATION and LAGUNA TECHNOPARK,
INC., Respondents.

G.R. No. 210209, August 9, 2017

DEL CASTILLO, J.:

Nature of the Action: Petition for Review on Certiorari under Rule 45 of the Rules of Court

Facts:

Petitioners Cathay Land, Inc. and Cathay Metal Corporation (Cathay Group) own and
develop a mixed-use and multi-phase subdivision development project known as the South Forbes
Golf City which covers an area of around 213 hectares of contiguous land in Silang, Cavite.

On February 5, 2003, the Cathay Group filed a Complaint for easement of right of way with prayer
for the issuance of a preliminary injunction/temporary restraining order against respondents Ayala
Land, Inc.,

However, before trial could ensue, the parties executed a Compromise Agreement where they
mutually agreed to amicably settle all their claims as well as other claims and causes of action that
they may have against each other in relation to the Complaint. This includes undertakings relating
to the development of the Cathay Group's properties in the area.

The RTC approved the Compromise Agreement and ordered the parties to strictly comply with the
terms and conditions provided therein.

In 2005, the Cathay Group commenced the development of its South Forbes Golf City project.
Subsequently, however, the Ayala Group noted that Cathay Group's marketing materials for the
project showed plans to develop a thirty-hectare cyber park which will house, among others, call
center offices, and to construct high-rise buildings. The Ayala Group thus made verbal and written
demands to Cathay Group to abide by the terms and conditions of the Compromise Agreement
particularly on its undertaking not to construct high-rise buildings, but to no avail.

Thus, the Ayala Group filed a Motion for Execution with Application for Issuance of a Temporary
Restraining Order and Writ of Injunction before the RTC.

RTC, through Acting Presiding Judge Emma S. Young (Judge Young), granted the motion and
Order on the ground that the Compromise Agreement is immediately final and executory. The
RTC thus ordered that a writ of execution be issued to enforce the terms and conditions of the
Compromise Agreement.

Cathay Group filed a Petition for Certiorari before the Court of appeals, however the Court
dismissed the petition.

Issue:

Whether or not the compromise agreement shall be executed based strictly on the terms agreed by
the parties?

Held:

The Civil Code provides that "[a] compromise is a contract whereby the parties, by making
reciprocal concessions, avoid a litigation or put an end to one already commenced." It has the
effect and authority of res judicata upon the parties, but there shall be no execution except in
compliance with a judicial compromise.

It is settled that once a compromise agreement is approved by a final order of the court, it
transcends its identity as a mere contract binding only upon the parties thereto, as it becomes a
judgment that is subject to execution in accordance with the Rules of Court. Judges, therefore,
have the ministerial and mandatory duty to implement and enforce it.

56 | P a g e
Nevertheless, in implementing a compromise agreement, the "courts cannot modify, impose terms
different from the terms of [the] agreement, or set aside the compromises and reciprocal
concessions made in good faith by the parties without gravely abusing their discretion.

Thus, the RTC, through Judge Young, seriously erred when it issued a Writ of Execution and Writ
of Injunction prohibiting the Cathay Group from constructing buildings with a height of 15 meters
or higher and other developments not in accord with the residential character of the properties of
the Ayala Group in the area. The RTC gravely abused its discretion when it granted a remedy that
is not available to the Ayala Group, thereby imposing terms different from what was agreed upon
by the parties in their Compromise Agreement. Given these circumstances, the CA seriously erred
in dismissing the Petition for Certiorari filed by the Cathay Group.

57 | P a g e
CALIFORNIA MANUFACTURING COMPANY, INC., Petitioner, vs. ADVANCED
TECHNOLOGY SYSTEM, INC., Respondent.

G.R. No. 202454, April 25, 2017

First Division
SERENO, J.:
Nature of the Action: Petition for Review on Certiorari assailing the Decision of the Court of
Appeals (CA) in CA-G.R. CV No. 94409, which denied the appeal filed by California
Manufacturing Company, Inc. (CMCI) from the Decision of Regional Trial Court (RTC) of Pasig
City, Branch 268, in the Complaint for Sum of Money filed by Advanced Technology Systems,
Inc. (ATSI) against the former.

Facts:
CMCI leased from ATSI a Prodopak machine which was used to pack products. The parties
agreed to a monthly rental of ₱98,000 exclusive of tax. Upon receipt of an open purchase order,
ATSI delivered the machine to CMCI's plant at Gateway Industrial Park.

In November 2003, ATSI filed a Complaint for Sum of Money against CMCI to collect unpaid
rentals for the months of June, July, August, and September 2003. ATSI alleged that CMCI was
consistently paying the rents until June 2003 when the latter defaulted on its obligation without
just cause.

CMCI moved for the dismissal of the complaint on the ground of extinguishment of obligation
through legal compensation. The RTC, however, ruled that the conflicting claims of the parties
required trial on the merits. CMCI averred that ATSI was one and the same with Processing
Partners and Packaging Corporation (PPPC), which was a toll packer of CMCI products.

CMCI alleged that in 2000, PPPC agreed to transfer the processing of CMCI's product line from
its factory in Meycauayan to Malolos, Bulacan. Upon the request of PPPC, through its Executive
Vice President Felicisima Celones, CMCI advanced ₱4 million as mobilization fund. PPPC
President and Chief Executive Officer Francis Celones allegedly committed to pay the amount in
12 equal instalments deductible from PPPC's monthly invoice to CMCI beginning in October
2000. CMCI likewise claims that in a letter dated 30 July 2001, 1Felicisima proposed to set off
PPPC's obligation to pay the mobilization fund with the rentals for the Prodopak machine.

After trial, the RTC rendered a Decision in favor of ATSI. The trial court ruled that legal
compensation did not apply because PPPC had a separate legal personality from its individual
stockholders, the Spouses Celones, and ATSI. Moreover, there was no board resolution or any
other proof showing that Felicisima's proposal to set-off the unpaid mobilization fund with CMCI
's rentals to A TSI for the Prodopak Machine had been authorized by the two corporations.
Consequently, the RTC ruled that CMCI's financial obligation to pay the rentals for the Prodopak
machine stood and that its claim against PPPC could be properly ventilated in the proper
proceeding upon payment of the required docket fees

On appeal by CMCI, the CA affirmed the trial court's ruling that legal compensation had not set
in because the element of mutuality of parties was lacking.

Issue:

Whether or not there is mutuality among the parties to justify the application of legal
compensation?

Held:

ARTICLE 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a
principal creditor of the other;

58 | P a g e
 (2) That both debts consist in a sum of money, or if the things due are consumable, they be
of the same kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor.

The law, therefore, requires that the debts be liquidated and demandable. Liquidated debts are
those whose exact amounts have already been determined.

CMCI has not presented any credible proof, or even just an exact computation, of the supposed
debt of PPPC. It claims that the mobilization fund that it had advanced to PPPC was in the amount
of ₱4 million. Yet, Felicisima's proposal to conduct offsetting in her letter dated 30 July 2001
pertained to a ₱3.2 million debt of PPPC to CMCI. Meanwhile, in its Answer to ATSI's complaint,
CMCI sought to set off its unpaid rentals against the alleged ₱10 million debt of PPPC. The
uncertainty in the supposed debt of PPPC to CMCI negates the latter's invocation of legal
compensation as justification for its non-payment of the rentals for the subject Prodopak machine.

59 | P a g e
FLORDALIZA LLANES GRANDE, petitioner, vs. PHILIPPINE NAUTICAL TRAINING
COLLEGE, respondent.
G.R. No. 213137. March 1, 2017
Second Division
PERALTA, J.:
Nature of Action : Petition for Review on Certiorari under Rule 45 of the Rules of Court which
seeks to annul and set aside the Amended Decision dated November 7, 2013 and the Resolution
dated June 25, 2014 of the Court of Appeals in CA-G.R. SP No. 125444

Facts:
Respondent Philippine Nautical Training College, or PNTC, is a private entity engaged in
the business of providing maritime training and education. In 1988, respondent employed
petitioner as Instructor for medical courses like Elementary First Aid and Medical Emergency and
later resigned
In May 2009, petitioner was invited by respondent to resume teaching since it intended to
offer BS Nursing and other courses for maritime training. Grande was employed again by
respondent as Director for Research and Course Department and later on petitioner was given the
additional post of Assistant Vice-President (VP) for Training Department.
In February 2011, several employees of respondent's Registration Department, including
the VP for Training Department were placed under preventive suspension in view of the anomalies
in the enlistment of students. On March 1, 2011, the VP for Corporate Affairs, Frederick Pios
called the petitioner for a meeting and relayed to petitioner the message of PNTC's President, Atty.
Hernani Fabia, for her to tender her resignation from the school in view of the discovery of
anomalies in the Registration Department that reportedly involved her. Pios assured petitioner of
absolution from the alleged anomalies if she would resign.
Petitioner then prepared a resignation letter, signed it and filed it with the Office of the
PNTC President. The respondent accomplished for her the necessary exit clearance. In the evening
of the same date, petitioner, accompanied by counsel, filed a police blotter for a complaint for
unjust vexation against Pios. Petitioner alleged that she was forced to resign from her employment.
On the other hand, respondent claimed that petitioner voluntarily resigned to evade the pending
administrative charge against her.

Issue:
Whether or not there was presence of undue influence exerted on petitioner for her to leave her
employment?

Held:
While indeed there was no employment of force from the language used by Pios, We are
convinced that there was the presence of undue influence exerted on petitioner for her to leave her
employment. The conversation showed that respondent wanted to terminate petitioner's
employment but would want it to appear that she voluntarily resigned. Undue influence is defined
under Article 1337 of the Civil Code, thus:
Art. 1337. There is undue influence when a person takes improper advantage of his power
over the will of another, depriving the latter of a reasonable freedom of choice. The following
circumstances shall be considered: the confidential, family, spiritual, and other relations between
the parties, or the fact that the person alleged to have been unduly influenced was suffering from
mental weakness, or was ignorant in financial distress.
The labor arbiter is correct that petitioner's resignation immediately tendered after the
conversation is not voluntary. With an order coming from the President of PNTC, no less, undue
influence and pressure was exerted upon Petitioner’s letter of resignation and the circumstances
antecedent and contemporaneous to the filing of the complaint for illegal dismissal are substantial
proof of petitioner's involuntary resignation.
Indeed, it is very unlikely that petitioner who was in the thick of preparation for an
upcoming visit and inspection from the Maritime Training Council and who had just requested for
the acquisition of textbooks and teaching aids, and had just submitted a Master Plan to the
corporate officers would simply resign voluntarily. She was in the process of compiling the
necessary documents and library holdings for submission to the Maritime Training Council. In this
case Grande was not among those who were suspended. Clearly, her consent was vitiated.
In the case at bar, petitioner's letter of resignation and the circumstances antecedent and
contemporaneous to the filing of the complaint for illegal dismissal are substantial proof of

60 | P a g e
petitioner's involuntary resignation.1âwphi1 Taken together, the above circumstances are
substantial proof that petitioner's resignation was voluntary.

61 | P a g e
MANUEL UBAS Sr., Petitioner vs. WILSON CHAN, Respondent
GR. NO. 215910, February 06, 2017
First Division
Perlas-Bernabe, J.:
Nature of Action: Assailed in this petition for review on certiorari is the Decision dated October
28.2014 of the Court of Appeals (CA) in CA-G.R. CV No. 04024 dismissing the complaint filed
by petitioner Manuel C. Ubas, Sr. (petitioner) for lack of cause of action.

Facts:
Ubas alleged that Wilson Chan is "doing business under the name and style of
UNIMASTER," was indebted to him in the amount of Pl,500,000.00, representing the price of
boulders, sand, gravel, and other construction materials allegedly purchased by respondent from
him for the construction of Macagtas Dam project. He claimed that the said obligation has long
become due and demandable and yet, respondent unjustly refused to pay the same despite repeated
demands. Further, he averred that respondent had issued three bank checks, payable to "CASH"
in the amount of P500,000.00 each, on January 31, 1998, March 13, 1998, and April 3,
1998,respectively, but when petitioner presented the subject checks for encashment on June 29,
1998, the same were dishonored due to a stop payment order. As such, respondent was guilty of
fraud in incurring the obligation.
Ubas entered into a verbal agreement with Chan for the supply of gravel, sand, and boulders
for the Macagtas Dam project. He presented as the only proof of their business transaction the
subject checks issued to him by Chan and delivered to his office by respondent's worker on
different occasions.
Unimasters' comptroller, Belma Murillo alleged that Engineer Ereberto Mereloswas hired
as project engineer tasked to supervise the work, the hiring of laborers, the delivery and payment
of aggregates, and the payroll, and was likewise in charge of negotiating the supply of aggregates
and the revolving fund for its payments; that the subject checks were issued for the replenishment
of the revolving fund, but Engr. Merelos lost the same sometime in January 1998; and that on
being informed about the loss of the checks, respondent, as President of Unimasters, instructed
Murillo to issue a Stop Payment Order. Chan admitted to having issued the subject checks but
claimed that they were not issued to petitioner. Chan asserted that petitioner was not among their
suppliers

Issue:

Whether there is a perfection of contract between Ubas and Chan?

Held:
The Court finds for petitioner. Jurisprudence holds that "in a suit for a recovery of sum of
money, as here, the plaintiff-creditor has the burden of proof to show that defendant had not paid
[him] the amount of the contracted loan. However, it has also been long established that where the
plaintiff creditor possesses and submits in evidence an instrument showing the indebtedness, a
presumption that the credit has not been satisfied arises in his favor.
Section 24. Presumption of Consideration. - Every negotiable instrument is deemed prima
facie to have been issued for a valuable consideration; and every person whose signature appears
thereon to have become a party thereto for value.
As mentioned, petitioner had presented in evidence the three dishonored checks which
were undeniably signed by respondent. Unimasters' comptroller, Murillo, testified during trial that
"she came to know that the lost checks were deposited in the account of [petitioner as] she was
informed by the officer in charge of the drawee bank, the Far EastBank of Tacloban, City Branch.”
However, there was no showing that Unimasters and/or respondent commenced any action against
petitioner to assert its interest over a significant sum of Pl,500,000.00 relative to the checks that
were supposedly lost/ stolen. Clearly, this paucity of action under said circumstances is again,
inconsistent with ordinary human nature and experience.
The source of obligation, as claimed by petitioner in this case, stems from his contract with
respondent. When they agreed upon the purchase of the construction materials on credit for the
amount of Pl,500,000,00, the contract between them was perfected. Therefore, even if corporate
checks were issued for the payment of the obligation, the fact remains that the juridical tie between
the two (2) parties was already established during the contract's perfection stage and, thus, does
not preclude the creditor from proceeding against the debtor during the contract's consummation
stage.

62 | P a g e
 Moreover, the demand letter, which was admitted by respondent, was personally addressed
to respondent and not to Unimasters as represented by the latter. Also, it deserves mentioning that
in his testimony before the RTC, petitioner explained that he delivered the construction materials
to respondent absent any written agreement due to his trust on the latter, as the holder of the subject
checks which are presumed to have been issued for a valuable consideration, and having
established his privity of contract with respondent, petitioner has substantiated his cause of action
by a preponderance of evidence.
"'Preponderance of evidence' is a phrase that, in the last analysis, means probability of the
truth. It is evidence that is more convincing to the court as worthy of belief than that which is
offered in opposition thereto." Consequently, petitioner's Complaint should be granted.

63 | P a g e
UNITED ALLOY PHILIPPINES CORPORATION, SPOUSES DAVID C.CHUA and
LUTEN CHUA, petitioners, vs. UNITED COCONUTPLANTERS BANK, respondent.
G.R. No. 175949. January 30, 2017
Second Division
Peralta, J.:
Nature of Action: Petition for review on certiorari seeking the reversal and setting aside of the
Decision and Resolution of the Court of Appeals (CA), dated September 21, 2006 and December
11, 2006, respectively, in CA-G.R. CV No. 81079. The assailed Decision affirmed the Decision
of the Regional Trial Court (RTC) of Makati City, Branch 135, in Civil Case No. 01-1332, while
the questioned Resolution denied petitioners' Motion for Reconsideration.

Facts:

On December 18, 2000, herein petitioner corporation, United Alloy Philippines

Corporation applied for and was granted a credit accommodation by herein respondent United
Coconut Planters Bank in the amount of PhP50,000,000.00, as evidenced by a Credit Agreement.
Part of UNIALLOY's obligation under the Credit Agreement was secured by a Surety Agreement,
dated December 18, 2000, executed by UNIALLOY Chairman, Jakob Van Der Sluis UNIALLOY
President, David Chua and his spouse, Luten Chua and one Yang Kim Eng. Six Promissory Notes,
were later executed by UNIALLOY in UCPB's favor,
In addition, as part of the consideration for the credit accommodation, UNIALLOY and
UCPB also entered into a "lease-purchase" contract wherein the former assured the latter that it
will purchase several real properties which UCPB co-owns with the Development Bank of the
Philippines. Subsequently, UNIALLOY failed to pay its loan obligations.
ISSUE: whether or not herein petitioners, together with their co-defendants Van Der Sluis and
Yang, are liable to pay respondent the amounts awarded by the RTC of Makati City in its June 17,
2003 Decision.

Issue:

Whether the unconscionable rate scan be validly reduced by the Courts?

Held:
As ruled upon by both the RTC and the CA, UNIALLOY failed to pay its obligations under
the above promissory notes and that herein petitioner Spouses Chua, together with their co-
defendants Van Der Sluis and Yang freely executed a Surety Agreement whereby they bound
themselves jointly and severally with UNIALLOY, to pay the latter's loan obligations with UCPB.
As correctly held by both the RTC and the CA, Article 1159 of the Civil Code expressly
provides that "obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith." The RTC as well as the CA found nothing
which would justify or excuse petitioners from non-compliance with their obligations under the
contract they have entered into. Thus, it becomes apparent that petitioners are merely attempting
to evade or, at least, delay the inevitable performance of their obligation to pay under the Surety
Agreement and the subject promissory notes which were executed in respondent's favor.

Courts have the authority to strike down or to modify provisions in promissory notes that grant the
lenders unrestrained power to increase interest rates, penalties and other charges at the latter's sole
discretion and without giving prior notice to and securing the consent of the borrowers. This
unilateral authority is anathema to the mutuality of contracts and enable lenders to take undue
advantage of borrowers. Although the Usury Law has been effectively repealed, courts may still
reduce iniquitous or unconscionable rates charged for the use of money.
Pursuant to the ruling in Nacar v. Gallery Frames, et al., the sums of US$435,494.44 and
PhP26,940,950.80 due to UCPB shall earn interest at the rate of 12% per annum from the date of
default, on August, 1,2001, until June 30, 2013 and thereafter, at the rate of 6% per annum, from
July1, 2013 until finality of this Decision. The total amount owing to UCPB as set forth in this
Decision shall further earn legal interest at the rate of 6% per annum from its finality until full
payment thereof, this interim period being deemed to be by then an equivalent to a forbearance of
credit.
Finally, pursuant to the parties' Credit Agreement as well as the subject Promissory Notes,
respondents are also liable to pay a penalty charge at the rate of 1% per month or 12% per annum

64 | P a g e
DELFIN C. GONZALEZ, JR., Petitioner, vs. MAGDALENO M. PEÑA, ALABANG
COUNTRY CLUB, INC., and MS. ARSENIA VERA, Respondents

G.R. No. 214303, January 30, 2017

First Division
Sereno, CJ:

Nature of Action: Before this Court is a Petition for Review on Certiorari assailing the Omnibus
Resolution and Resolution of the Regional Trial Court of Makati City, Branch 65, which denied
the prayer of petitioner Delfin C. Gonzalez, Jr. to be restored as owner of the shares issued by
respondent Alabang Country Club, Inc.

Facts:
The RTC of Bago City adjudged petitioner liable to respondent Magdaleno M. Peña for
the payment of the agency's fees and damages amounting to P28.5 million. Petitioner, together
with his co-petitioners in that case, appealed the Decision, while Peña moved for execution
pending appeal of this ruling. The grant of that motion resulted in the sale to Peña of petitioner's
ACCI shares on 16 October 2000. Through a private sale on 2 May 2001, he was able to sell and
transfer the subject shares to respondent Arsenia Vera.
This Court issued a Decision in G.R. Nos. 145817, 145822, 162562, entitled Urban Bank,
Inc. v. Peña, which vacated with finality the Decision of the RTC of Bago City dated 28 May
1999. Considering that the Decision of the RTC of Bago City had been completely vacated and
declared null and void, this Court held that the concomitant execution pending appeal was likewise
null and without effect. Thus, we held that Urban Bank and its officers and directors, including
petitioner herein, were entitled to the full restoration of their ownership and possession of all
properties that were executed pending appeal, such as the subject shares. We then ordered that the
proceedings with respect to any due restitution under the circumstances shall be transferred to a
regional trial court in the National Capital Region, Makati City. The restitution proceedings were
raffled to the RTC of Makati City, Branch 65. Thereafter, petitioner moved for execution, seeking
restoration of his actual ACCI shares. The ACCI countered that the club shares petitioner was
claiming could no longer be returned to him, because they had already been transferred by Peña to
Vera.
In its Omnibus Resolution dated 30 April 2014, the RTC concluded that Peña's private sale
of the shares to Vera on 2 May 2001 was valid, given that the latter was an innocent purchaser for
value. As such, Vera could not be charged with knowledge of the controversy involving the ACCI
shares. Considering the validity of the sale, the trial court held that the actual restitution of the
property to petitioner was no longer possible.
In all these instances, the RTC refused to restore to Urban Bank, Eric L. Lee, and Delfin
C. Gonzales, Jr. the actual ownership of their respective club shares on the pretext that these had
already been transferred to third parties. Subsequently, petitioner moved for reconsideration, but
the RTC denied his motion.
Aggrieved, he came directly to this Court and asked for the reversal of the ruling of the
trial court's ruling, as well as for the cancellation of the shares in the name of Vera. Petitioner
points out that Peña obtained the property at a public auction that has been declared void by this
Court. He then asserts that Vera, as successor-in-interest, has no right over those shares. He further
claims that the trial court erred in concluding that the actual restitution of the club shares to him
was impossible, since the transfer of the property could have simply been recorded in the club's
stock and transfer books.
In their Comments filed before this Court, both the ACCI and Peña submit that no error
can be imputed to the RTC for declaring the impossibility of the actual restitution of the shares. In
particular, the ACCI claims that because the subject property has been transferred to a third person,
its return to petitioner is no longer possible. Respondent Vera failed to file her comment despite
notice.

Issue:

Whether or not the private sale of shares of Pena to Vera is valid?

Held:
Indeed, the RTC did not comply with our ruling in Urban Bank when it refused to restore
to petitioner the actual ownership of his club shares on the mere pretext that these had already been

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sold by Peña to his successor-in-interest. There is no factual dispute that Peña acquired the ACCI
shares of petitioner by virtue of a winning bid in an execution sale that had already been declared
by this Court, with finality, as null and void. In no uncertain terms, we declared that the
"concomitant execution pending appeal is likewise without any effect. Consequently, all levies,
garnishment and sales executed pending appeal are declared null and void, with the concomitant
duty of restitution."
Void transactions do not produce any legal or binding effect, and any contract directly
resulting from that illegality is likewise void and inexistent. Therefore, Peña could not have been
a valid transferee of the property. As a consequence, his successor-in-interest, Vera, could not have
validly acquired those shares. The RTC thus erred in refusing to restore the actual ACCI shares to
petitioner on the basis of their void transfer to Vera.
Neither was the RTC correct in its characterization of the actual restitution of the ACCI
shares to petitioner as "impossible." For the obligation to be considered impossible under Article
1266 of the Civil Code, its physical or legal impossibility must first be proven. Here, the RTC did
not make any finding on whether or not it was physically impossible to effect the actual restitution
of the property. On the other hand, petitioner correctly points out that since the shares are movable
by nature, the same can be transferred back to Gonzalez, Jr. by recording the transaction in the
stock and transfer book of the club.
As regards legal impossibility, the RTC appears to have jumped to the conclusion that
because of the perfected sale of the shares to Vera, petitioner can no longer claim actual restitution
of the property.
However, Article 1505 of the Civil Code instructs that where goods are sold by a person
who is not the owner thereof, and who does not sell them under authority or with the consent of
the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of
the goods is by his conduct precluded from denying the seller's authority to sell. The Court itself
settled that Peña acquired the properties by virtue of a null and void execution sale. In effect, his
buyers acquired no better title to the goods than he had. Therefore, the RTC erred in appreciating
the existence of legal impossibility in this case on the mere pretext that the properties had already
been transferred to third parties. By virtue of Article 1505, the true owners of the goods are
definitely not legally precluded from claiming the ownership of their actual properties.

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JUDITH DARINES AND JOYCE DARINES, Petitioners vs. EDUARDO QUINONES AND
ROLANDO QUITAN, Respondents

G.R. No. 206468, August 2, 2017

First Division
DEL CASTILLO, J.:

Nature of the Action: Petition for Review on Certiorari assails the October 29, 2012 Decision of
the Court of Appeals in CA-G.R. No. 95638, which reversed and set aside the July 14,2010
Decision of the Regional Trial Court of Baguio City, Branch 3 in Civil Case No. 6363-R for
"Breach of Contract of Carriage & Damages."

Facts:

Petitioners boarded the Aminana Bus line enroute to Baguio City. While traveling along
Kenon Road, the bus crashed into truck. As a result, both vehicles were damaged, and two
passengers of the bus died and the other passengers including petitioners were injured. Petitioners
argued that the operator of Amianan Bus Line, breaached their contract of acrriage as they failed
to bring them safely to their destination. They also contended that Quitan's reckless and negligent
driving caused the collision. Consequently, they prayed for actual, moral, exemplary and temperate
damages, and costs of suit.

To prove the actual damages that she suffered, Judith presented receipts for medicine, and a
summary of expenses, which included those incurred for the ritual dao-is. She explained that she
and Joyce are Igorots, being members of Ibaloi, Kankanay-ey, an indigenous tribe and as their
customary practice, when a member who meets an accident is released from the hospital, they
butcher pigs to remove or prevent bad luck from returning to the family.

The RTC held that since the respondents already paid the actual damages relating to petitioners'
medical and hospitalization expenses, then the only remaining matters for resolution were: whether
respondents were liable to pay petitioners a) actual damages representing the expenses incurred
during the dao-is ritual; and, Judith's alleged lost income; b) moral and exemplary damages; and,
c) attorney's fees.

However, the RTC awarded moral damages grounded on Judith's testimony regarding her pain and
suffering. It likewise awarded exemplary damages by way of correction, and to serve as example
to common carriers to be extraordinarily diligent in transporting passengers.

The CA reversed and set aside the RTC Decision.The CA held that, since no moral damages was
awarded, then there was no basis to grant exemplary damages. Finally, it ruled that because moral
and exemplary damages were not granted, then the award of attorney's fees must also be deleted.

Issue:

Whether or not Petitioners are entitled to moral and exemplary damages because the proximate
cause of their injuries was the reckless driving of Quitan (driver)?

Held:

The Court fully agrees with the CA ruling that in an action for breach of contract, moral
damages may be recovered only when a) death of a passenger results; orb) the carrier was guilty
of fraud and bad faith even if death does not result; and that neither of these circumstances were
present in the case at bar. The CA correctly held that, since no moral damages was awarded then,
there is no basis to grant exemplary damages and attorney's fees to petitioners.

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 The principle that, in an action for breach of contract of carriage, moral damages may be
awarded only in case (1) an accident results in the death of a passenger; or (2) the carrier is guilty
of fraud or bad faith, is pursuant to Article 1764, in relation to Article 2206(3) of the Civil Code,
and Article 2220 thereof,18 as follows: Article 1764. Damages in cases comprised in this Section
shall be awarded in accordance with Title XVIII of this Book, concerning Damages. Article 2206
shall also apply to the death of a passenger caused by the breach of contract by a common carrier.
(Emphasis supplied) Article 2206. The amount of damages for death caused by a crime or quasi-
delict shall be at least three thousand pesos, even though there may have been mitigating
circumstances. In addition: xx xx (3) The spouse, legitimate and illegitimate descendants and
ascendants of the deceased may demand moral damages for mental anguish by reason of the death
of the deceased. Article 2220. Willful injury to property may be a legal ground for awarding moral
damages if the court should find that, under the circumstances, such damages are justly due. The
same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.

Here, petitioners impute negligence on the part of respondents when, as paying passengers, they
sustained injuries when the bus owned and operated by respondent Quifiones, and driven by
respondent Quitan, collided with another vehicle. Petitioners propounded on the negligence of
respondents, but did not discuss or impute fraud or bad faith, or such gross negligence which would
amount to bad faith, against respondents. There being neither allegation nor proof that respondents
acted in fraud or in bad faith in performing their duties arising from their contract of carriage, they
are then not liable for moral damages. The Court also sustains the CA's finding that petitioners are
not entitled to exemplary damages. Pursuant to Articles 2229 and 223432 of the Civil Code,
exemplary damages may be awarded only in addition to moral, temperate, liquidated, or
compensatory damages. Since petitioners are not entitled to either moral, temperate, liquidated, or
compensatory damages, then their claim for exemplary damages is bereft of merit. Finally,
considering the absence of any of the circumstances under Article 220833 of the Civil Code where
attorney's fees may be awarded, the same cannot be granted to petitioners. All told, the CA
correctly ruled that petitioners are not entitled to moral and exemplary damages as well as
attorney's fees.

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SWIRE REALTY DEVELOPMENT CORPORATION, Petitioner vs. SPECIALTY
CONTRACTS GENERAL AND CONSTRUCTION SERVICES, INC. AND JOSE
JAVELLANA, Respondents

G.R. No. 188027, August 09, 2017

Third Division
REYES, JR., J:

Nature of the Action: Petition for review on certiorari under Rule 45 of the Rules of Court
seeking to annul and set aside the Decision dated February 24, 2009 and Resolution dated May 25,
2009 issued by the Court of Appeals (CA) in CA-G.R. CV No. 84706.

Facts:

The Complaint alleges breach of an Agreement to undertake Waterproofing Works (the

Agreement) entered into on December 27, 1996 by the petitioner and the respondents. By virtue
of this, the respondents undertook to perform waterproofing works on the petitioner's
condominium project known as the Garden View Tower for the amount of Php 2,000,000.00 over
a period of 100 calendar days from the execution of the Agreement or until April 6, 1997. The
amount agreed upon is to be paid to the respondents as follows: 20% as down payment, and the
balance of 80% payable through monthly progress billings based on accomplished work, subject
to a 10% retention fee and 1% withholding tax. The Agreement likewise provided that the parties
are liable for penalty in case of delay in the performance of their respective obligations and that
retention fee shall be released to the respondents within 90 days from rnover and acceptance by
the petitioner of the completed work.

The Regional Trial Court rendered its decision, ordering the respondents to pay the petitioner.

The CA reversed and set aside the RTC's decision and directing the petitioner to pay the defendant
Specserv the amount of P157,702.06 with legal interest of six (6) percent per annum form October
10, 1997 until paid.

Issue:
Whether or not petitioner is entitled to damages on account of the respondent’s breach of their
contractual undertaking?

Held:
The Court ruled that, there being a clear breach of contract on the part of the respondents
when they failed to fully comply with their obligation under the contract, having accomplished
only 90% of the waterproofing works within the time agreed upon, and failing to perform the
necessary repairs, they are liable for damages and are bound to refund the excess in payment made
by the petitioner.

The Court therefore modifies the same and accordingly orders the respondents to pay the petitioner
the amount of Php 420,000.00, which shall take the form of actual damages.
Likewise, the respondents are liable for the costs incurred by the petitioner in hiring the services
of Esicor to complete their unfinished work, amounting to Php 124,931.40, in consonance with
Article 1167 of the New Civil Code, which provides:
Article 1167. If a person obliged to do something fails to do it, the same shall be executed at his
cost.
This same rule shall be observed if he does it in contravention of the tenor of the obligation.
Furthermore, it may be decreed that what has been poorly done be undone.

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