Civ

OBLIGATIONS; In General; Prescription of Actions
FloroMercene, Petitioner, vs. Government Service Insurance System,

Respondent.
G. R. No. 192971, January 10, 2018
(Third Division, Martires, J.)
Nature of the action: Review on certiorari
Facts:
FloroMercene obtained a loan from the Government Service Insurance System
(GSIS), in which a real estate mortgage was executed over his property, as
security. He contracted another loan with GSIS, which was also secured by a
real estate mortgage on the same parcel of land. Mercene filed an action for
quieting of title against GSIS, in which he argued that GSIS did not exercise its
rights as a mortgagee, the mortgage over his property constituted a cloud on the
title, and its right to foreclose had prescribed. GSIS countered that prescription
does not run against it because it is a government entity. The RTC ruled in favor
of Mercene, ordering the cancellation of the mortgages because the annotations
appeared to be valid but was ineffective and prejudicial to the title and right of
GSIS as a mortgagee had prescribed because more than 10 years had lapsed
from the time the cause of action had accrued. The CA reversed the prior ruling,
stating that no prescription had set in because it had not made a demand to
Mercene, and it added that the prescriptive period for a cause of action in a
written contract will only commence at the time of the actual breach or violation.
Issue:
Whether or not the commencement of the prescriptive period is material in
determining the cause of action.
Ruling:
The petition is denied.
In University of Mindanao, Inc. v. BangkoSentralngPilipinas, et al., the Court

clarified that prescription runs in mortgage contract from the time the cause of
action arose and not from the time of its execution, to wit:
The prescriptive period neither runs from the date of the execution of a contract
nor does the prescriptive period necessarily run on the date when the loan
becomes due and demandable. Prescriptive period runs from the date of
demand, subject to certain exceptions.
In other words, ten (10) years may lapse from the date of the execution of
contract, without barring a cause of action on the mortgage when there is a gap
between the period of execution of the contract and the due date or between the
due date and the demand date in cases when demand is necessary.
The mortgage contracts in this case were executed by Saturnine Petalcorin in

1982. The maturity dates of FISLAI's loans were repeatedly extended until the
loans became due and demandable only in 1990. Respondent informed
petitioner of its decision to foreclose its properties and demanded payment in
1999.
The running of the prescriptive period of respondent's action on the

mortgages did not start when it executed the mortgage contracts with
SaturninoPetalcorin in 1982.
1
The prescriptive period for filing an action may run either (1) from 1990 when the
loan became due, if the obligation was covered by the exceptions under Article
1169 of the Civil Code; (2) or from 1999 when respondent demanded payment, if
the obligation was not covered by the exceptions under Article 1169 of the Civil
Code. [emphasis supplied]
In Maybank Philippines, Inc. v. Spouses Tarrosa, the Court explained that the
right to foreclose prescribes after ten (10) years from the time a demand for
payment is made, or when then loan becomes due and demandable in cases
where demand is unnecessary, viz:
An action to enforce a right arising from a mortgage should be enforced within

ten (10) years from the time the right of action accrues, i.e., when the mortgagor
defaults in the payment of his obligation to the mortgagee; otherwise, it will be
barred by prescription and the mortgagee will lose his rights under the
mortgage. However, mere delinquency in payment does not necessarily mean
delay in the legal concept. To be in default is different from mere delay in the
grammatical sense, because it involves the beginning of a special condition or
status which has its own peculiar effects or results.
In order that the debtor may be in default, it is necessary that: (a) the obligation
be demandable and already liquidated; (b) the debtor delays performance;
and (c) the creditor requires the performance judicially or extrajudicially, unless
demand is not necessary — i.e., when there is an express stipulation to that
effect; where the law so provides; when the period is the controlling motive or the
principal inducement for the creation of the obligation; and where demand would
be useless. Moreover, it is not sufficient that the Jaw or obligation fixes a date for
performance; it must further state expressly that after the period lapses, default
will commence. Thus, it is only when demand to pay is unnecessary in case
of the aforementioned circumstances, or when required, such demand is
made and subsequently refused that the mortgagor can be considered in
default and the mortgagee obtains the right to file an action to collect the
debt or foreclose the mortgage.
Thus, applying the pronouncements of the Court regarding prescription on the

right to foreclose mortgages, the Court finds that the CA did not err in concluding
that Mercene's complaint failed to state a cause of action. It is undisputed that his
complaint merely stated the dates when the loan was contracted and when the
mortgages were annotated on the title of the lot used as a security.
Conspicuously lacking were allegations concerning: the maturity date of the loan
contracted and whether demand was necessary under the terms and conditions
of the loan.
2
Specified Contractors & Development, Inc., and Spouses Architect Enrique
O. Olonan and Cecilia R. Olonan, Petitioners, vs. Jose A. Pobocan,
Respondent.
G. R. No. 212472, January 11, 2018
(First Division, Tijam, J.)
Facts:
Jose Pobocan, the president of Specified Contractors and Development, Inc.,
entered into an alleged oral agreement with Architect Enrique Olonan, the
chairman of Specified Contractors, and his wife Cecilia Olonan, in which the
latter agreed to give the former one (1) unit for every building Specific
Contractors were able to construct as part of the compensation package of
Pobocan to entice him to stay with the company, in which each unit of two of
these projects the company were able to build were ceded, assigned, and
transferred to Pobocan. Pobocan requested the execution of the deeds of
assignment or deeds of sale over the units mentioned in his favor, but Architect
Olonan did not act on the said request. Pobocan filed a complaint against
spouses Olonan to execute and deliver the appropriate deeds of conveyance and
to pay moral and exemplary damages. The spouses Olonan filed a motion to
dismiss, arguing that the cause of action had long prescribed because the
alleged agreements were supposedly entered into in 1994 and 1999, which was
indicated in the demand letter of Pobocan.The RTC dismissed the complaint,
stating that although that the action did not prescribed, the agreement should
have been put into writing, and that such written note, memorandum or
agreement should have been attached as actionable documents to the complaint
of Pobocan. The CA reversed the prior ruling.
Issue:
Whether or not the cause of action of Pobocan has already prescribed.
Ruling:
The petition is granted.
As the Court has ascertained that the present suit is essentially for specific
performance - a personal action - over which the court a quo had jurisdiction, it
was therefore erroneous for it to have treated the complaint as a real action
which prescribes after 30 years under Article 1141 of the New Civil Code. In a
personal action, the plaintiff seeks the recovery of personal property, the
enforcement of a contract, or the recovery of damages. Real actions, on the
other hand, are those affecting title to or possession of real property, or interest
therein. As a personal action based upon an oral contract, Article 1145 providing
a prescriptive period of six years applies in this case instead. The shorter period
provided by law to institute an action based on an oral contract is due to the
frailty of human memory. Nothing prevented the parties from reducing the alleged
oral agreement into writing, stipulating the same in a contract of employment or
partnership, or even mentioning the same in an office memorandum early on.
While the respondent's complaint was ingeniously silent as to when the alleged
oral agreement came about, his March 14, 2011 demand letter annexed to his
complaint categorically cites the year 1994 as when he and Architect Olonan
allegedly had an oral agreement to become "industrial partners" for which he
would be given a unit from every building they constructed. From this, Unit 208 of
Sunrise Holiday Mansion I was allegedly assigned to him. Then he went on to
cite his resignation in October of 1997 and his re-employment with the company
3
on December 1, 1999 for which he was allegedly given Unit 803 of the Xavierville
Square Condominium, substituted later on by Unit 708 thereof.
The complaint for specific performance was instituted on November 21, 2011, or
17 years from the oral agreement of 1994 and almost 12 years after the
December 1, 1999 oral agreement. Thus, the respondent's action upon an oral
contract was filed beyond the six-year period within which he should have
instituted the same.
Respondent argued that the prescriptive period should not be counted from 1994
because the condominium units were not yet in existence at that time, and that
the obligation would have arisen after the units were completed and ready for
occupancy. Article 1347 of the New Civil Code is, however, clear that future
things may be the object of a contract. This is the reason why real estate
developers engage in pre-selling activities. But even if we were to entertain
respondent's view, his right of action would still be barred by the statute of
limitations.
Condominium Certificate of Title (CCT) No. N-18347 for Unit 708 of Xavierville
Square Condominium, copy of which was annexed to the complaint, was issued
on September 11, 1997 or more than 13 years before respondent's March 14,
2011 demand letter. CCT No. CT-613 for Unit 208 of Sunrise Holiday Mansion
Building I; also annexed to the complaint, was issued on March 12, 1996 or 14
years before respondent's March 14, 2011 demand letter. Indubitably, in view of
the instant suit for specific performance being a personal action funded upon an
oral contract which must be brought within six years from the accrual of the right,
prescription had already set in.
4
Amparo S. Cruz; Ernesto Halili; Alicia H. Florencio; Donald Halili; Editha H.
Rivera; Ernesto Halili, Jr.; and JulitoHalili, Petitioners, vs. Angelito S. Cruz,
Concepcion S. Cruz, Serafin S. Cruz, and Vicente S. Cruz, Respondents.
G. R. No. 211153, February 28, 2018
(First Division, Del Castillo, J.)
Facts:
Siblings Angelito, Concepcion and Serafin Cruz, together with their other siblings,
Amparo and Antonia Cruz, inherited a 940 square meter parcel of land from their
late parents Felix and Feliza Cruz, in which they executed a deed of extrajudicial
settlement of estate covering the said property, on the agreement that each heir
was to receive an equal portion of the subject property as mandated by law.
When the said property was being subdivided and shown to the respondent
siblings, it was discovered that Antonia was allocated two lots contravened their
agreement among the heirs that they would receive equal shares in the subject
property; that Amparo and Antonia were able to perpetuate the fraud by inducing
Concepcion, who was illiterate, to sign the deed of the extrajudicial settlement of
estate, which was written in English, without previously reading and explaining
the contents to the latter. The respondent siblings filed an action to declare null
and void the extrajudicial settlement because of the presence of fraud. The RTC
dismissed the complaint because the existence of fraud must be alleged
specifically and not generally. The CA reversed the prior ruling. In their petition
with the Supreme Court, Amparo and the heirs of Antonina argued that the action
filed by siblings Angelito, Concepcion and Serafin were already prescribed
because they filed their action 12 years after the execution of the deed of
extrajudicial settlement, which is a written contract, that is beyond the 10 year
prescriptive period, and even assuming that the 4-year prescriptive period based
on fraud applies, the cause of action is also prescribed because while the
supposed fraud was discovered, they did not object when Amparo built their
house on the lots allotted to Concepcion after learning of the survey of the
property. The three siblings countered that the deed of extrajudicial settlement of
estate was made to defraud Concepcion who could not read nor write in English,
which was the language used in the said deed, by letting her sign without reading
the contents of the same, and the prescriptive period to be applied is not the 10-
year period under Article 1144 of the Civil Code, but the 4-year period as held by
the CA, to be computed from the discovery of the fraud.
Issue:
Whether or not the action to nullify the deed of extrajudicial settlement is
prescribed.
Ruling:
In Bautista v. Bautista, it was held that —
As gathered from the above-quoted portion of its decision, the Court of Appeals
applied the prescriptive periods for annulment on the ground of fraud and for
reconveyance of property under a constructive trust.
The extra-judicial partition executed by Teofilos co-heirs was invalid, however.

So Segura v. Segura instructs:
x xxThe partition in the present case was invalid because it excluded six of the
nine heirs who were entitled to equal shares in the partitioned property. Under
5
the rule, 'no extra-judicial settlement shall be binding upon any person who has
not participated therein or had no notice thereof.' As the partition was a total
nullity and did not affect the excluded heirs, it was not correct for the trial court to
hold that their right to challenge the partition had prescribed after two years x xx
The deed of extra-judicial partition in the case at bar being invalid, the action to
have it annulled does not prescribe.
The above pronouncement was reiterated in Neri v. Heirs of

HadjiYusopUy, where the Court ruled:
xxxx
On the issue of prescription, the Court agrees with petitioners that the present
action has not prescribed in so far as it seeks to annul the extrajudicial settlement
of the estate. Contrary to the ruling of the CA the prescriptive period of 2 years
provided in Section 1 Rule 74 of the Rules of Court reckoned from the execution
of the extrajudicial settlement finds no application to petitioners Eutropia, Victoria
and Douglas, who were deprived of their lawful participation in the subject estate.
Besides..an 'action or defense for the declaration of the inexistence of a contract
does not prescribe' in accordance with Article 1410 of the Civil Code. (Citations
omitted)
xxx
Thus, while the CA was correct in ruling in favour of Concepcion and setting
aside the subject deed of extrajudicial settlement, it erred in appreciating and
ruling that the case involved fraud - thus applying the four-year prescriptive
period - when it should have simply held that the action for the declaration of
nullity of the defective deed of extrajudicial settlement does not prescribe, under
the circumstances, given that the same was a total nullity. Clearly, the issue of
literacy is relevant to the extent that Concepcion was effectively deprived of her
true inheritance, and not so much that she was defrauded.
6
Land Bank of the Philippines, Petitioner, vs. Herederos de
CiriacoChunacoDistileria, Inc., Respondent.
G. R. No. 206992, June 11, 2018
(Third Division, Gesmundo, J.)
Nature of the action: Appeal by certiorari
Facts:
Herederos de CiriacoChunacoDistileria, Inc., offered for sale several parcels of
land which they owned to the Republic of the Philippines under the
Comprehensive Agrarian Reform Program. Land Bank of the Philippines came
up with the compensation for the said lands and offered the same to Herederos
in the amount of P957,991.30 but the latter rejected the offer. Herederos filed 12
cases for preliminary administrative determination of just compensation which
were conducted by the Provincial Agrarian Reform Adjudicator (PARAD), in
which it ruled in favor of Herederos. The RTC, sitting as a Special Agrarian Court
(SAC), ruled on the petition filed by Land Bank, declaring that the PARAD
erroneously arrived at the amount for just compensation without considering the
formula set forth by the Department of Agrarian Reform. The PARAD declared
that its decision was final and executory. The Department of Agrarian Reform
Adjudication Board (DARAB) denied the petition of Land Bank, stating that the
petition for determination of just compensation in the RTC-SAC was filed beyond
the 15-day reglementary period under the DARAB Rules, stating that the said
petition was filed out of time because a total of 24 days had lapsed before it was
filed. The CA affirmed the DARAB ruling.
Issue:
Whether or not the petition was filed in time, in respect to the prescriptive period
provided under the Civil Code.
Ruling:
In the recent case of Land Bank of the Philippines v. Dalauta (Dalauta), the 15-
day prescriptive period under Section 11 of the DARAB Rules was struck down
because it undermined and unnecessarily impeded the original and exclusive
jurisdiction of the RTC-SAC to determine just compensation under Section 57 of
R.A. No. 6656. Further, it finally settled once and for all the period within which to
file a petition for judicial determination of just compensation before the RTC-SAC.
In Dalauta, the preliminary determination of just compensation was referred to

the PARAD. In its resolution dated December 4, 1995, the PARAD affirmed the
valuation of the petitioner therein. On February 28, 2000, or four (4) years and
three (3) months later, the respondent filed a petition for judicial determination of
just compensation before the RTC-SAC. One of the issues that had to be
resolved by the Court was whether a petition for judicial determination of just
compensation in the RTC-SAC proscribes if not filed within the 15-day period
under the DARAB Rules. The Court ruled:
xxxx
While R.A. No. 6657 itself does not provide for a period within which a landowner
can file a petition for the determination of just compensation before the SAC, it
cannot be imprescriptible because the parties cannot be placed in limbo
indefinitely. The Civil Code settles such conundrum. Considering that the
payment of just compensation is an obligation created by law, it should
only be ten (10) years from the time the landowner received the notice of
7
coverage. The Constitution itself provides for the payment of just compensation
in eminent domain cases. Under Article 1144, such actions must be brought
within ten (10) years from the time the right of action accrues. Article 1144 reads:
Art. 1144. The following actions must be brought within ten years from the time
the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
Nevertheless, any interruption or delay caused by the government like

proceedings in the DAR should toll the running of the prescriptive period. The
statute of limitations has been devised to operate against those who slept on
their rights, but not against those desirous to act but cannot do so for causes
beyond their control.
In this case, Dalauta received the Notice of Coverage on February 7, 1994. He

then filed a petition for determination of just compensation on February 28, 2000.
Clearly, the filing date was well within the ten-year prescriptive period under
Article 1141.(emphases supplied)
xxxx
It was also determined in Dalauta that the proper prescriptive period to file a
petition for judicial determination of just compensation under R.A. No. 6657 is ten
(10) years pursuant to Article 1144 (2) of the Civil Code. Considering that
payment of just compensation is an obligation created by law, it is only proper
that the ten (10)-year period start from the time the landowner receives the notice
of coverage under the CARP. In addition, any interruption or delay caused by the
government, like proceedings in the DAR, should toll the running of the
prescriptive period. The statute of limitations has been devised to operate against
those who slept on their rights, but not against those desirous to act but cannot
do so for causes beyond their control.
In this case, respondent voluntarily offered for sale its twelve (12) parcels of land
in November 2001. Accordingly, the 10-year prescriptive period began at that
moment because respondent knew that its lands would be covered by the CARP.
Thus, the petition for judicial determination of just compensation filed on April 12,
2004 before the RTC-SAC, which was even tolled by the proceedings before the
PARAD, was squarely and timely filed within the 10-year prescriptive period.
8
OBLIGATIONS; Sources of Civil Obligations; Law
Astrid A. Van de Brug, Martin G. Aguilar and Glenn G. Aguilar, Petitioners,

vs. Philippine National Bank, Respondent.
G. R. No. 207004, June 6, 2018
(Second Division, Caguioa, J.)
Nature of the action: Review under Rule 45 of the Rules of Court
Facts:
Spouses Romulus and Evelyn Aguilar obtained sugar crop loans with the
Philippine National Bank (PNB), which were secured by real estate mortgages
over 4 parcels of land. However, they failed to pay their obligations, which
resulted in the foreclosure of the mortgaged properties, in which ownership was
consolidated under the name of PNB. Romulus sought reconsideration of their
account with PNB based on the Sugar Restitution Law, and after his death,
Evelyn was informed by the bank to comply with the requirements prescribed by
law to arrange and implement restructuring of accounts, to signify her conformity
to the computation of the account, and to submit the 10 year crop production for
certain periods, which they complied. PNB voluntarily conveyed the lands to the
Department of Agrarian Reform (DAR). Following the valuation, the Aguilars
requested to commence the restructuring of the loan account, and the heirs of
the spouses, on three occasions, asked that they be accorded the benefits of
Republic Act 7202, and later they filed an action for implementing said law. The
RTC justified the reconveyance or restitution of the residential lot by crediting the
proceeds of the voluntary offer to sell to DAR of the two agricultural lots, and in
applying the proceeds to the payment of their accounts, said outstanding account
would be fully paid and in addition to that, PNB would still return the balance
thereof to the Aguilars. The CA reversed the RTC ruling.
Issue:
Whether or not the Aguilars are entitled to restitution.
Ruling:
The petition for review is denied.
The sources of obligations under Article 1157 of the Civil Code are: (1) law; (2)
contracts; (3) quasi-contracts; (4) acts or omissions punished by law; and (5)
quasi-delicts. Immediately, sources (2), (3) and (4) are inapplicable in this case.
The Aguilars are not privies to the Compromise Agreement between PNB and
the spouses Pfleider. Regarding law, as PNB’s source of obligation, the CA
correctly ruled that the Aguilars are not entitled to restitution under RA 7202.
Thus, RA 7202 cannot be invoked as the statutory basis to compel PNB to treat
the Aguilars similarly with the spouses Pfleider.
9
OBLIGATIONS; Sources of Civil Obligations; Quasi-contracts;
SolutioIndebiti
H. Villarica Pawnshop, Inc., HL Villarica Pawnshop, Inc., HRV Villarica

Pawnshop, Inc. and Villarica Pawnshop, Inc., Petitioners, vs. Social
Security Commission, Social Security System, Amador M. Monteiro,
Santiago Dionisio R. Agdeppa, Ma. Luz N. Barros-Magsino, Milagros N.
Casuga, and Jocelyn Q. Garcia, Respondents.
G. R. No. 228087, January 24, 2018
Facts:
H. Villarica Pawnshop, Inc., HL Villarica Pawnshop, Inc, HRV Villarica
Pawnshop, Inc., and Villarica Pawnshop, Inc., paid their delinquent contributions
and accrued penalties with the Social Security System (SSS), a year before the
passage of Republic Act No. 9903, otherwise known as the Social Security
Condonation Law of 2009, which offered delinquent employers the opportunity to
settle, without penalty, their accountabilities or overdue contributions within 6
months from the date of its effectivity. The pawnshops sought reimbursement of
the accrued penalties which they paid with the SSS, in which they claimed that
the benefits of the condonation program extends to all employers who have
settled their arrears or unpaid contributions even prior to the effectivity of the law.
Their requests were denied on the ground that they are not covered by the Social
Security Condonation Law. The pawnshops filed their petitions with the Social
Security Commission, in which the latter denied all of them because they did not
have unpaid contributions at the time the law took effect which did not entitle
them to the benefits of the condonation program, thus, there could be no
remission or refund in their favor. The CA affirmed the ruling of the SSC.
Issue:
Whether or not the word accrued under the Social Security Condonation Law is
intended to mean unpaid.
Ruling:
Concomitantly, condonation or remission of debt is an act of liberality, by virtue of

which, without receiving any equivalent, the creditor renounces the enforcement
of the obligation, which is extinguished in its entirety or in that part or aspect of
the same to which the remission refers. It is essentially gratuitous for no
equivalent is received for the benefit given. Relatedly, waiver is defined as a
voluntary and intentional relinquishment or abandonment of a known existing
legal right, advantage, benefit, claim or privilege, which except for such waiver
the party would have enjoyed; the voluntary abandonment or surrender, by a
capable person, of a right known by him to exist, with the intent that such right
shall be surrendered and such person forever deprived of its benefit; or such
conduct as warrants an inference of the relinquishment of such right; or the
intentional doing of an act inconsistent with claiming it. On the other hand, refund
is an act of giving back or returning what was received. In cases of monetary
obligations, a claim for refund exists only after the payment has been made and,
in the act of doing so, the debtor either delivered excess funds or there exists no
obligation to pay in the first place. This right arises either by virtue
of solutioindebiti as provided for in Articles 2154 to 2163 of the Civil Code or by
provision of another positive law, such as tax laws or amnesty laws.
10
A plain reading of Section 4 of R.A. No. 9903 shows that it does not give
employers who have already settled their delinquent contributions as well as their
corresponding penalties the right to a refund of the penalties paid. What was
waived here was the amount of accrued penalties that have not been paidprior to
the law's effectivity—it does not include those that have already been settled.
The words "condoned", "waived" and "accrued" are unambiguous enough to be

understood and directly applied without any resulting confusion. As discussed
earlier, the word ''condonation" is the creditor's act of extinguishing an obligation
by renunciation and the word "waive" is an abandonment or relinquishment of an
existing legal right. On the other hand, the term "accrue" in legal parlance means
"to come into existence as an enforceable claim." Thus, the phrases "shall be
condoned" and "shall likewise have their accrued penalties waived" under
Section 4 of the R.A. No. 9903 can only mean that, at the time of its effectivity,
only existing penalties may be extinguished or relinquished. No further
interpretation is necessary to clarify the law's applicability.
11
Rosemarie Q. Rey, Petitioner, vs. Cesar G. Anson, Respondent.
G. R. No. 211206, November 7, 2018
(Third Division, Peralta, J.)
Facts:
Rosemarie Rey obtained four loans from Cesar Anson, in which the first loan is
subject to 7.5% monthly interest which would be paid bi-monthly, and further
provides that in the event of default, a penalty charge of 10% of the total amount,
plus attorney’s fees, will be paid; and the second loan, 7% monthly interest, both
were secured by their respective real estate mortgages. Rey paid for the
interests from the first loan, but failed to pay the principal obligation when it
became due. She appealed to Anson not to foreclose the mortgage or to impose
the stipulated penalty charges, but to extend the terms thereof, which the latter
agreed. Rey signed a promissory note and executed another deed of real estate
mortgage, which provides that the principal obligation shall be payable in 4
months from the execution of the mortgage and subject to 7.5% interest per
month, which modified the original agreement of the first loan. Later, she also
failed to fulfill her obligation on the second which was also extended by Anson in
another real estate mortgage, which provides that the principal obligation shall be
payable in 6 months from the execution of the mortgage and subject to 7%
interest per month. Rey obtained a third loan, which was subject to 3% monthly
interest and a fourth loan, which was agreed orally that it was subject to 4%
monthly interest. Meanwhile, Anson sent Rey a statement of account seeking full
payment of all four loans. Instead of paying her loan obligations, Rey contended
that the monthly interest rates imposed were excessive and unconscionable and
should be adjusted to the legal rate, and no interest should have been imposed
on the third and fourth loans in the absence of any written agreement imposing
interest. Using the legal rate of interest, all four loans were already fully paid by
Rey, and in fact, she overpaid the said loans, thus, she demands the return of
the excess payment from Anson. Rey, her husband, and mother filed an action
for recomputation of loans and recovery of excess payments and cancellation of
real estate mortgages and checks against Anson. The RTC ruled in favor of Rey,
but it was reversed by the CA.
Issue:
Whether or not Anson must return the excess of the payment made by Rey.
Ruling:
The decision of the Court of Appeals and its resolution are reversed and set
aside.
The Court agrees with petitioner that Articles 1253 and 2154 of the Civil Code
apply to this case, and Cesar Anson is obliged to return to petitioner excess
payments received by him.
xxx
Since Cesar Anson received a total overpayment of P269,700.68 from petitioner,

he is obliged to return the amount in accordance with the principle of
solutioindebiti under Article 2154 of the Civil Code, to wit:
Article 2154. If something is received when there is no right to demand it, and it
was unduly delivered through mistake, the obligation to return it arises.
(Emphasis supplied.)
12
However, in regard to payment of interest on the overpayment made by
petitioner, the Court notes its ruling in Sps. Abella v. Sps. Abella, thus:
As respondents made an overpayment, the principle of solutioindebiti as

provided by Article 2154 of the Civil Code applies. xxx
x xxx
In Moreno-Lentfer v. Wolff, this court explained the application of solutioindebiti:
The quasi-contract of solutioindebiti harks back to the ancient principle that no

one shall enrich himself unjustly at the expense of another. It applies where (1) a
payment is made when there exists no binding relation between the payor, who
has no duty to pay, and the person who received the payment, and (2) the
payment is made through mistake, and not through liberality or some other
cause.
As respondents had already fully paid the principal and all conventional interest
that had accrued, they were no longer obliged to make further payments. Any
further payment they made was only because of a mistaken impression that they
were still due. Accordingly, petitioners are now bound by a quasi-contractual
obligation to return any and all excess payments delivered by respondents.
Nacar provides that “[w]hen an obligation, not constituting a loan or forbearance

of money, is breached, an interest on the amount of damages awarded may be
imposed at the discretion of the court at the rate of 6% per annum.” This applies
to obligations arising from quasi-contracts such as solutioindebiti.
Further, Article 2159 of the Civil Code provides:
Article 2159. Whoever in bad faith accepts an undue payment, shall pay legal
interest if a sum of money is involved, or shall be liable for fruits received or
which should have been received if the thing produces fruits.
He shall furthermore be answerable for any loss or impairment of the thing from
any cause, and for damages to the person who delivered the thing, until it is
recovered.
Consistent however, with our finding that the excess payment made by
respondents were borne out of a mere mistake that it was due, we find it in
the better interest of equity to no longer hold petitioners liable for interest
arising from their quasi-contractual obligation. (Citations omitted; emphasis
supplied.)
In this case, the excess payments made by petitioner were also borne out of a
mistake that they were due; hence, following the ruling in Sps. Abella v. Sps.
Abella, the Court deems it in the better interest of equity not to hold Cesar Anson
liable for interest on the excess payments.
13
OBLIGATIONS; Kinds of Civil Obligations; As to Perfection and
Extinguishment; Conditional
Lily S.Villamil substituted by her heirs Rudy E. Villamil, Solomon E. Villamil,

Teddy E. Villamil, Jr., Deborah E. Villamil, Florence E. Villamil, Genevieve E.
Villamil, and Marc Anthony E. Villamil, Petitioner, vs. Spouses
JuanitoErguiza and Mila Erguiza, Respondents.
G. R. No. 195999, June 20, 2018
(Third Division, Martires, J.)
Facts:
Lily Villamil and her two siblings, entered into an agreement with JuanitoErguiza
to sell the parcel of land owned by the former to the latter, with the condition that
Villamil and her siblings would file a petition to secure authorization for minor
children from the proper courts, and in case of failure to obtain said authority, the
partial payment made by Erguiza shall be applied as rent for 20 years of the
premises. After 20 years, Villamil demanded from Erguiza to return possession of
the property but the latter failed and refused to do so. Erguiza contended that the
agreement between them is for the sale on condition of the subject property, in
which a sale even if conditional transfers ownership to the vendees and they did
not violate any terms and conditions in the agreement, by which Villamil is the
one who made sure that he cannot comply with the terms in the contract. The
MTCC dismissed the action which was affirmed by the RTC, but reversed by the
CA.
Issue:
Whether or not the condition was fulfilled.
Ruling:
Article 1186 of the Civil Code reads:
Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily
prevents its fulfillment.
This provision refers to the constructive fulfillment of a suspensive condition,

whose application calls for two requisites, namely: (a) the intent of the obligor to
prevent the fulfillment of the condition, and (b) the actual prevention of the
fulfillment. Mere intention of the debtor to prevent the happening of the condition,
or to place ineffective obstacles to its compliance, without actually preventing the
fulfillment, is insufficient.
Petitioner and her then co-owners undertook, upon receipt of the down payment
from respondent-spouses, the filing of a petition in court, after which they
promised the latter to execute the deed of absolute sale whereupon the latter
shall, in turn, pay the entire balance of the purchase price. The balance of the
consideration shall be paid only upon grant of the court's approval and upon
execution of the deed of absolute sale.
Here, there is no doubt that petitioner prevented the fulfillment of the suspensive
condition. She herself admitted that they did not file any petition to seek approval
of the court as regards the sale of the shares of the minor owners. In addition,
the other co-owners sold their shares to petitioner such that she was able to
consolidate the title in her name. Thus, the condition is deemed constructively
14
fulfilled, as the intent to prevent fulfillment of the condition and actual prevention
thereof were definitely present. Consequently, it was incumbent upon the sellers
to enter into a contract with respondent-spouses for the purchase of the subject
property.
Respondent-spouses' obligation to pay the balance of the purchase price arises

only when the court's approval of the sale of the minor owners' shares shall have
been successfully secured, in accordance with Article 1181 of the New Civil
Code. Judicial approval is a condition the operative act of which sets into motion
the period of compliance by respondent-spouses of their own obligation, i.e., to
pay the balance of the purchase price. Accordingly, an obligation dependent
upon a suspensive condition cannot be demanded until after the condition takes
place because it is only after the fulfillment of the condition that the obligation
arises. Petitioner cannot invoke the non-fulfillment of the condition in the contract
to sell when she and her then co-owners themselves are guilty of preventing the
fulfillment of such condition. When it has become evident that the condition would
no longer be fulfilled, it was incumbent upon petitioner to inform respondent-
spouses of such circumstance because the choice whether to waive the
condition or continue with the agreement clearly belongs to the latter. Petitioner's
claim that respondent-spouses should have known that the condition would no
longer be necessary because the latter knew that the minor owners had already
reached the age of majority and that they should have been more proactive in
following up the status of the contract to sell, deserves scant consideration. While
petitioner may have been right in the aforementioned instances, the same will not
negate her obligation to inform respondent-spouses of the non-fulfillment of the
condition especially in view of the fact that it was her fault that the condition
became irrelevant and unnecessary.
15
Federal Express Corporation, Petitioner, vs. Luwalhati R. Antonino and
Eliza Bettina RicasaAntonino, Respondents.
G. R. No. 199455, June 27, 2018
(Third Division, Leonen, J.)
Facts:
LuwalhatiAntonino and Eliza Bettina Antonino, who is the owner of a
condominium unit in New York, U.S.A., were in the Philippines when the monthly
charges for the said unit were due. They decided to send several checks to
Veronica Sison who was based in New York for payment of said monthly charges
and estate taxes through Federal Express Corporation (FedEx). Unfortunately,
Sison did not receive such package, resulting in the non-payment of the
obligation of the Antoninos and the foreclosure of the unit. When Sison learned
the non-delivery of the checks, she inquired FedEx on the same, in which she
was informed that the package was delivered to her neighbor but there was no
signed receipt. The Antoninos demanded FedEx for payment of damages but the
latter refused, thus, the complaint for damages. FedEx claimed that the
Antoninos failed to comply with the filing of a written notice of claim within 45
calendar days from the acceptance of the shipment and they misdeclared the
items as “documents” and these are prohibited. The RTC ruled in favor of the
Antoninos, awarding them moral and exemplary damages, which the CA affirmed
the same.
Issue:
Whether or not FedEx is liable for non-compliance with the condition precedent,
which is the filing of a written notice of a claim for non-delivery or misdelivery
within 45 days from acceptance of the shipment.
Ruling:
The petition for review on certiorari is denied.
In Philippine Airlines, Inc. v. Court of Appeals, Philippine Airlines alleged that

shipper Gilda Mejia (Mejia) failed to file a formal claim within the period stated in
the Air Waybill. This Court ruled that there was substantial compliance with the
period because of the zealous efforts demonstrated by Mejia in following up her
claim. These efforts coupled with Philippine Airlines' "tossing around the claim
and leaving it unresolved for an indefinite period of time" led this Court to deem
the requisite period satisfied. This is pursuant to Article 1186 of the New Civil
Code which provides that "[t]he condition shall be deemed fulfilled when the
obligor voluntarily prevents its fulfillment":
Considering the abovementioned incident and private respondent Mejia's own

zealous efforts in following up the claim, it was clearly not her fault that the letter
of demand for damages could only be filed, after months of exasperating follow-
up of the claim, on August 13, 1990. If there was any failure at all to file the
formal claim within the prescriptive period contemplated in the air waybill, this
was largely because of PAL's own doing, the consequences of which cannot, in
all fairness, be attributed to private respondent.
Even if the claim for damages was conditioned on the timely filing of a formal
claim, 'under Article 1186 of the Civil Code that condition was deemed fulfilled,
considering that the collective action of PAL's personnel in tossing around the
claim and leaving it unresolved for an indefinite period of time was tantamount to
"voluntarily preventing its fulfillment." On grounds of equity, the filing of the
baggage freight claim, which sufficiently informed PAL of the damage sustained
16
by private respondent's cargo, constituted substantial compliance with the
requirement in the contract for the filing of a formal claim. (Citations omitted)
Here, the Court of Appeals detailed the efforts made by respondent Luwalhati
and consignee Sison. It also noted petitioner's ambiguous and evasive
responses, nonchalant handling of respondents' concerns, and how these
bogged down respondents' actions and impaired their compliance with the
required 45-day period:
Anent the issues concerning lack of cause of action and their so-called "run-
around" matter, We uphold the lower court's finding that the herein appellees
complied with the requirement for the immediate filing of a formal claim for
damages as required in the Air Waybill or, at least, We find that there was
substantial compliance therewith. Luwalhati testified that the addressee,
Veronica Z. Sison promptly traced the whereabouts of the said package, but to
no avail.xxx
xxx
The foregoing event showLuwalhati's own ardent campaign in following up the

claim. To the Court's mind, it is beyond her control why the demand letter for
damages was only sent subsequent to her infuriating follow-ups regarding the
whereabouts of the said package. We can surmise that if there was any omission
at all to file the said claim within the prescriptive period provided for under the Air
Waybill it was mostly due to herein appellant's own behavior, the outcome
thereof cannot, by any chance, be imputed to the herein appellees. (Grammatical
errors in the original)
Petitioner has been unable to persuasively refute Luwalhati's recollection of the

efforts that she and Sison exerted, and of the responses it gave them. It instead
insists that the 45-day period stated in its Air Waybill is sacrosanct. This Court is
unable to bring itself to sustaining petitioner's appeal to a convenient reprieve. It
is one with the Regional Trial Court and the Court of Appeals in stressing that
respondents' inability to expediently file a formal claim can only be attributed to
petitioner hampering its fulfillment. Thus, respondents must be deemed to have
substantially complied with the requisite 45-day period for filing a formal claim.
17
OBLIGATIONS; Breach of Obligations; Manner of Breach; Delay
Spouses Francisco Ong and Betty Lim Ong, and Spouses Joseph
OngChuan and Esperanza OngChuan, Petitioners, vs. BPI Family Savings
Bank, Inc., Respondent.
G. R. No. 208638, January 24, 2018
(Second Division, Reyes, Jr., J.)
Nature of the action: Review under Rule 45 of the Rules of Court
Facts:
The managers of Bank of Southeast Asia (BSA) visited the office of Melbros
Printing Center to discuss to Spouses Francisco and Betty Lim Ong, who are
engaged in the business of Melbros, the various loan and credit facilities offered
by their bank, in which the latter applied for the same. The spouses Ong
executed a real estate mortgage over their property as security for their
P15,000,000.00 loan and credit line of P5,000,000.00, but they only received
around P10,000,000.00 of the term loan, and P3,000,000.00 in the credit line,
respectively. The spouses already paid the P3,000,000.00 credit line in full, but
the bank refused to release the remaining P2,000,000.00, and then they refused
to pay the amortizations due on their term loan. After BSA merged with the BPI
Family Savings Bank, it filed a petition for extrajudicial foreclosure for the default
of the spouses in the payment of their term loan, which was countered by the
spouses when they filed an action for damages. The RTC ruled in favor of
Spouses Ong, ordering the bank to pay actual damages, but it was reversed by
the CA.
Issue:
Whether or not BSA incurred delay in the performance of its obligations.
Ruling:
The conclusion reached by the appellate court that only the term loan of
P15,000,000.00 was proved to have materialized into an actual contract while the
P5,000,000.00 omnibus line credit remained non-existent is ludicrous. A careful
perusal of the records reveal that the credit facility that BSA extended to
petitioners was a credit line of P20,000,000.00 consisting of a term loan in the
sum of P15,000,000.00 and a revolving omnibus line of P3,000,000.00 to be
used in the petitioner's printing business. In separate Letters both dated January
31, 1997, BSA approved the term loan and the credit line. Such approval and
subsequent release of the amounts, albeit delayed, perfected the contract
between the parties.
xxx
In this case, BSA did not only incur delay in releasing the pre-agreed credit line
of P5,000,000.00 but likewise violated the terms of its agreement with petitioners
when it deliberately failed to release the amount of P2,000,000.00 after
petitioners complied with their terms and paid the first P3,000,000.00 in full. The
default attributed to petitioners when they stopped paying their amortizations on
the term loan cannot be sustained by this Court because long before they sent a
Letter to BSA informing the latter of their refusal to continue paying
amortizations, BSA had already reneged on its obligation to release the amount
previously agreed upon, i.e., the P5,000,000.00 covered by the credit line.
18
Article 1170 of the Civil Code enumerates the instances when parties to a
contract may be held liable for damages, viz.:
Article 1170. Those who in the performance of their obligations are guilty of
fraud, negligence, or delay, and those who in any manner contravene the tenor
thereof, are liable for damages.
It bears stressing that petitioners entered into a credit agreement with BSA to
enable them to buy machineries and equipment for their printing business. On its
face, it can be gleaned that the purpose of the credit agreement with BSA was
indeed to assist and finance petitioner's business by way of providing additional
funds as working capital or revolving fund.
The direct consequences therefore of the acts of BSA are: the machinery and
equipment that were essential to petitioners' business and requisite for its
operations had to be procured so late in time and had crippled the printing of
school supplies, hence, petitioners were constrained to cancel purchase orders
of their clients to petitioners' damage.
19
OBLIGATIONS; Modes of Extinguishment of Obligations; Payment or
Performance
Demosthenes R. Arbilon, Petitioner, vs. SofronioManlangit, Respondent.

G. R. No. 197920, January 22, 2018
Facts:
SofronioManlangit purchased on credit one (1) compressor and one (1) unit of
Stainless Pump, 3 horsepower, single phase for P200,000.00 and P65,000.00,
respectively, from Davao Diamond Industrial Supply. He claimed that the
compressor had been in the possession of a Demosthenes Arbilon, by which he
demanded the same to the latter but failed to return it. Arbilon argued that he is
not the owner of the compressor, and further alleged that the ownership of the
compressor was never vested to Manlangit since he failed to pay the purchase
price of P200,000.00. He further alleged that he voluntarily assumed the
obligation to pay the compressor to Davao Diamond in four installment as it was
indispensable in the mining operations. The RTC dismissed the complaint of
Manlangit, stating that Manlangit voluntarily surrendering the compressor and the
pump and whatever interest and rights he might have on the same and he was
aware that he was no longer the owner of the said equipment. However, it was
reversed by the CA, stating that the transaction was a contract to sell since the
stipulation shows that the goods listed in the invoice shall remain the property of
the seller until fully paid by the buyer.
Issue:
Whether or not the partnership share of Manlangit was used to pay the
compressor.
Ruling:
Hence, the issue of whether there is a partnership that is existing between

petitioner, Leanillo and respondent and whether the partnership share of
respondent was used to pay the compressor are not impliedly included or is
inferable from the issues raised in the pre-trial order. As such, the same cannot
be considered during the trial. Even if We rule that the said issues were included
or inferable by necessary implication from the issues raised in the pre-trial order,
respondent still failed to present an iota of evidence to prove that the partnership
exist or that his partnership shares were used to pay off the compressor. Mere
allegation without sufficient proof is not evidence of the existence of a fact or of
the truthfulness of an allegation.
Since respondent failed to prove that the money used to pay the compressor was
respondent's partnership share nor the existence of a partnership among them,
the payment of Leanillo can be considered as payment by a third party. Under
Article 1236 of the Civil Code, it is provided that:
Article 1236. The creditor is not bound to accept payment or performance by a

third person who has no interest in the fulfillment of the obligation, unless there is
a stipulation to the contrary.
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
20
debtor, he can recover only insofar as the payment has been beneficial to
the debtor. (Emphasis ours)
Under the above-cited provision, Leanillo has the right to demand reimbursement
from respondent since it is undisputed that Leanillo was the one who paid for the
compressor in behalf of respondent. Nevertheless, since Leanillo was never
impleaded as a party in this case, this Court has not acquired any jurisdiction
over her person, and as such, We cannot grant any relief in her favor. "It is well-
settled that courts cannot grant a relief not prayed for in the pleadings or in
excess of what is being sought by a party to a case." This however is without
prejudice to any action that may be brought by Leanillo to claim reimbursement
from respondent.
21
Jose T. Ong Bun, Petitioner, vs. Bank of the Philippine Islands,
Respondent.
G. R. No. 212362, March 14, 2018
(Second Division, Peralta, J.)
Facts:
Ma. Lourdes Ong purchased the 3 silver custodian certificates in the name of her
husband, Jose Ong Bun from the Far East Bank and Trust Company, which was
merged with the Bank of the Philippine Islands (BPI). After the death of his wife,
Ong Bun discovered that the three certificates were still in the safety vault and
were not surrendered to Far East Bank. He communicated with BPI to advise him
on the procedure for the claim of the said certificates, in which BPI replied that
upon their merger with Far East Bank, there were no certificates outstanding,
which meant that they were already fully paid. Several demands were made by
Ong Bun with BPI but the latter refused to pay the certificates. Ong Bun filed an
action for collection of sum of money and damages against BPI. The RTC ruled
in favor of Ong Bun, ordering BPI to pay the certificates and damages. The CA
reversed the prior decision.
Issue:
Whether or not BPI has to pay the silver custodian certificates to Ong Bun.
Ruling:
Simply put, the said CCs are proof that Silver Certificates of Deposits are in the
custody of a custodian, which is, in this case, FEBTC. The CA therefore, erred in
suggesting that the possession of petitioner of the same CCs does not prove an
outstanding deposit because the latter are not the certificates of deposit
themselves. What proves the deposits of the petitioner are the Silver Certificates
of Deposits that have been admitted by the Trust Investments Group of the
FEBTC to be in its custody as clearly shown by the wordings used in the subject
CCs. Custodian Certificate of Silver Certificate of Deposit No. 131200 reads, in
part:
This is to certify that the TRUSTS INVESTMENTS GROUP of FAR EAST BANK
AND TRUST COMPANY (Custodian) has in its custody for and in behalf of *****
JOSE ONG BUN OR MA. LOURDES ONG ***** (Holder) the Silver Certificate of
Deposit in the amount of PESOS: Php500,000.00.
This instrument is transferable only in the books of the Custodian by the holder,
or in the event of transfer, by the transferee or buyer thereof in person or by a
duly authorized attorney-in-fact upon surrender of this instrument together with
an acceptable deed of assignment.
The Holder hereof or transferee can withdraw at anytime during office hours
his/her Silver Certificate of Deposit herein held in custody.
This instrument shall not be valid unless duly signed by the authorized
signatories of the Bank, and shall cease to have force and effect upon payment
under the terms hereof.
The other two custodian certificates are of the same tenor.
22
In its Comment, respondent argued that upon its merger with FEBTC, there were
no longer any outstanding Silver Certificates of Deposits, thus:
As previously discussed, the nature of the Silver Custodian Certificates of Time

Deposit was issued by then FEBTC on the occasion of its 25th year anniversary
in the year 1989. Consequently, these certificates had a term/maturity of twenty-
five (25) months from its issuance or in the year 1991. Further, these certificates
should be accompanied by a Confirmation of Participation which provides for the
details of each participant would have. Upon the merger of FEBTC and BPI
sometime in the year 2000, there were no outstanding Silver Certificates of
Deposit in its books of accounts; neither did the petitioner present the
Confirmation of Participation which should have been attached to his Custodian
Certificates.
Such an argument does not prove that petitioner has already been paid or that
his deposits have already been returned. Likewise, there was no proof .or
evidence that petitioner or his late wife withdrew the said Silver Certificates of
Deposit. When the existence of a debt is fully established by the evidence
contained in the record, the burden of proving that it has been extinguished by
payment devolves upon the debtor who offers such defense to the claim of the
creditor. Even where it is the plaintiff ([petitioner] herein) who alleges non-
payment, the general rule is that the burden rests on the defendant ([respondent]
herein) to prove payment, rather than on the plaintiff to prove non-
payment. Verily, an obligation may be extinguished by payment. However, two
requisites must concur: (1) identity of theprestation, and (2) its integrity. The first
means that the very thing due must be delivered or released; and the second,
that the prestation be fulfilled completely. In this case, no acknowledgment nor
proof of full payment was presented by respondent but merely a pronouncement
that there are no longer apply outstanding Silver Certificates of Deposits in its
books of accounts. xxx
Hence, the conclusion that the Silver Certificates of Deposit may have been
withdrawn by the petitioner or his wife although they failed to surrender the
custodian certificates is speculative and replete of any proof or evidence.
23
Spouses Francis N. Celones and FelicisimaCelones, Petitioners, vs.
Metropolitan Bank and Trust Company and Atty. Crisolito O. Dionido,
Respondents.
G. R. No. 215691, November 21, 2018
Facts:
Spouses Francis and FelicisimaCelones, together with their company,
Processing Partners and Packaging Corporation, obtained various loans from
Metrobank and for which they mortgaged various properties. The spouses
defaulted in paying their loan, as such,Metrobank foreclosed all the mortgaged
properties, in which it was declared the winning bidder upon foreclosure sale.
The spouses offered to redeem the properties from Metrobank, which was
approved by the latter. The spouses found a lawyer named Atty. CrisolitoDionido,
who extended them a loan, wherein the parties agreed for the subrogation of
Atty. Dionido to all the rights, interests of Metrobank over the loan obligation of
the spouses and the foreclosed properties. Upon issuance of payment slips to
the spouses after giving the amount, it caused the redemption of the properties.
Believing such, the spouses demanded from Metrobank the redemption of their
properties but the latter refused to do so. Meanwhile, Atty. Dionido demanded the
spouses to vacate the foreclosed properties in view of the expiration of the
redemption period without the spouses redeeming the same. The spouses filed
an action for declaratory relief and injunction to compel Metrobank to issue the
certificates of redemption and to deliver to them the titles over their properties, in
which the RTC ruled in favor of the spouses, but it was reversed by the CA.
Issue:
Whether or not the lawyer has the right to demand payment from the spouses.
Ruling:
Under the MOA, Metrobank assigned all its rights and interests over the
foreclosed properties to Atty. Dionido. “An assignment of credit has been defined
as the process of transferring the right of the assignor to the assignee who would
then have the right to proceed against the debtor.” Atty. Dionido being an
assignee of Metrobank, he merely steps into the shoes of his assignor,
Metrobank. Atty. Dionido can acquire no greater right than that pertaining to his
assignor. Thus, when Atty. Dionido agreed to the assignment of Metrobank’s
rights and interests over the foreclosed properties under the MOA, he acquires
exactly the rights and interests over the foreclosed properties as of the date of
the signing of the MOA.
Unfortunately, for Atty. Dionido, he merely acquired what right Metrobank has, as
of the date of the signing of the MOA, which was the issuance of a Certificate of
Redemption, because as of that date, the foreclosed properties have already
been redeemed by Spouses Celones from Metrobank. The fact that Spouses
Celones has already redeemed the foreclosed properties was evidenced by the
fact that as soon as Metrobank was paid the redemption amount, the latter
issued payment slips in the name of Spouses Celones. Further, after the
payment of the P55 Million, Metrobank caused the dismissal of the civil cases it
filed for issuance of writ of possession due to the fact that the foreclosed
properties had already been redeemed by the Spouses Celones. Had the P55
Million been paid by Atty. Dionido to Metrobank as a consideration for the
24
assignment of credit, the receipt should have been under the name of Atty.
Dionido and not under the name of Spouses Celones.
Finding that the foreclosed properties had already been redeemed by Spouses
Celones, the Certificate of Redemption should naturally be issued by the
assignee, Atty. Dionido. To accept his contention that the redemption period of
the foreclosed properties had already lapsed and that Spouses Celones has lost
their right over the foreclosed properties is to go against the basic principle of
assignment of credit that the assignee cannot acquire no greater right than the
assignor.
Atty. Dionido however is not left without any remedy or recourse against Spouses
Celones. Under Article 1236 of the Civil Code, it is provided that:
Art. 1236. The creditor is not bound to accept payment or performance by a third
person who has no interest in the fulfillment of the obligation, unless there is a
stipulation to the contrary.
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. (Emphasis ours)
Thus, Atty. Dionido has the right to demand payment of the amount of P55
Million from Spouses Celones since it is undisputed that such amount came from
Atty. Dionido. It is unjust enrichment on the part of Spouses Celones to acquire
the amount of P55 Million and not be required to pay the same. To save on the
time and resources of this Court and because of the possibility that this case will
once again reach this Court, although this case is not an action to recover a sum
of money, we deem it proper to rule on the propriety of Atty. Dionido’s right to
recover the said sum from Spouses Celones. Thus, Spouses Celones should pay
the amount of P55 Million to Atty. Dionido with legal interest counted from the
date of finality of this Decision.
25
Spouses Gildardo C. Loquellano and Rosalina Juliet B. Loquellano,
Petitioners, vs. Hongkong and Shanghai Banking Corporation, Ltd.,
Hongkong and Shanghai Banking Corporation-Staff Retirement Plan and
Manuel Estacion, Respondents.
G. R. No. 200553, December 10, 2018
Facts:
Rosalina Juliet Loquellano, an employee of Hongkong and Shanghai Banking
Corporation (HSBC), and an automatic member of its Staff Retirement Plan
(HSBC-SRP), applied a housing loan with HSBC in the amount of P400,000.00
payable in 25 years at 6% per annum, through monthly salary deduction from her
salary savings account. The loan was secured by setting-off her retirement
benefits and chattel mortgage with a promissory note executed for the payment
of the said loan. Loquellano and her spouse Gildardo, together with the
managing trustee Manuel Estacion entered into a contract of real estate
mortgage wherein the spouses constituted a mortgage over their house and lot to
secure the payment of the loan, in which the monthly installments were
religiously paid. A labor dispute arose between HSBC and the union, which later
culminated in a strike, resulted in the dismissal of Loquellano and other
employees. Because of the strike, Loquellano cannot able to pay the
amortizations. HSBC send a demand letter for the payment of the obligation.
Loquellano offered to make partial payment of her housing loan which HSBC
rejected. Loquellano received an installment due reminder from HSBC-SRP
showing the overdue monthly installments and interest, in which she paid them
using her salary savings account which was still existing, and accepted by
HSBC. HSBC-SRP demanded for the payment of the entire housing loan, in
which she continued to pay them and the said payment reflects on the
installment due reminders issued to her. However, the mortgaged property was
extrajudicially foreclosed by HSBC-SRP and sold at public auction, in which
Estacion was the winning bidder. Spouses Loquellano filed an action for
annulment of sale with damages and preliminary injunction against HSBC and
HSBC-SRP, alleging bad faith in foreclosing the mortgaged property, but HSBC
argued that the entire loan obligations accelerated when Loquellano was
terminated from work and she failed to pay the entire balance of the housing
loan. The RTC ruled in favor of the spouses, which was reversed by the CA.
Issue:
Whether or not the obligation was complied by spouses Loquellano.
Ruling:
The petition for review on certiorari is granted.
To stress, respondent HSBC-SRP continuously sent out monthly Installment Due

Reminders to petitioner Rosalina despite its demand letter dated September 25,
1995 to pay the full amount of the loan obligation within 3 days from receipt of the
letter. It, likewise, continuously accepted petitioner Rosalina’s subsequent
monthly amortization payments until June 1996; thus, making their default
immaterial. Moreover, there was no more demand for the payment of the full
obligation afterwards. Consequently, petitioners were made to believe that
respondent HSBC-SRP was applying their payments to their monthly loan
obligations as it had done before. It is now estopped from enforcing its right to
foreclose by reason of its acceptance of the delayed payments.
26
Also, Article 1235 of the Civil Code provides that when the creditor accepts
performance, knowing its incompleteness and irregularity without protest or
objection, the obligation is deemed complied with. Respondent HSBC-SRP
accepted Rosalina’s payment of her housing loan account for almost one year
without any objection.
Respondent HSBC-SRP argues that estoppel is not applicable since the

payments upon which petitioners rely were made without its knowledge and
consent; that the updated balances were automatically generated by the system;
that petitioner Rosalina made unilateral payments to her salary savings account
knowing that any amount she deposited therein will be automatically credited as
payment for her loan obligations.
We are not persuaded.
It is respondent HSBC-SRP, not petitioner Rosalina, which has access and

control of the computer system with regard to the crediting of the housing loan
payments. It cannot now deny its action of continuously accepting petitioner
Rosalina’s monthly amortizations, coupled with the sending out of installment due
reminders, and statements of her updated housing loan account to prejudice
petitioners who relied thereon.
27
Performance; Special forms of Payment; Dation in Payment
DesiderioDalisay Investments, Inc., Petitioner, vs. Social Security System,

Respondent.
G. R. No. 231053, April 4, 2018
(Third Division, Velasco, Jr., J.)
Facts:
DesiderioDalisay, then president of DesiderioDalisay Investments offered the
Social Security System (SSS) a parcel of land and building to offset the liabilities
of Dalisay Group of Companies (DGC), in which a case was filed against him by
SSS for collection of unremitted SSS premium contributions of the employees of
the latter. The parties, however, failed to agree as to the appraised value, in
which there were no negotiations. DGC recommended to SSS that Asian
Appraisal, Inc. shall do the appraisal, but the latter did not respond to such
request. Thus, DGC suggested that the appraisal will be done by Joson, Capili
and Associates instead, which was approved. After the appraisal report was
made by the said firm, a meeting was held and during that time, the properties
were offered to be turned over to SSS free of liens and encumbrances, or for
dacion, which was accepted at an appraised value. The Social Security
Commission (SSC) discussed with Dalisay Investments on the terms of the
dacion en pago transaction, and then the Philippine National Bank (PNB)
executed a deed of confirmatory sale for Dalisay Investments. SSS demanded
Dalisay Investments to deliver the titles subject to the dacion to the former but
were not done as been told. Despite the request of Dalisay Investments to
reconsider the act of SSS, the latter repeatedly demanded them to deliver the
titles but Dalisay Investments failed to comply. Dalisay Investments filed a
complaint for quieting of title, recovery of possession and damages against SSS.
The RTC ruled that there was no perfected dation in payment between the
parties. The CA reversed the prior ruling.
Issue:
Whether or not there was a perfected dacion en pago.
Ruling:
The instant petition is denied.
Among other modes, an obligation is extinguished by payment or

performance. There is payment when there is delivery of money or performance
of an obligation. Corollary thereto, Article 1245 of the Civil Code provides for a
special mode of payment called dacion in payment (dacion en pago).
In dacion en pago, property is alienated to the creditor in satisfaction of a debt in

money. The debtor delivers and transmits to the creditor the former's ownership
over a thing as an accepted equivalent of the payment or performance of an
outstanding debt. In such cases, Article 1245 provides that the law on sales shall
apply, since the undertaking really partakes—in one sense—of the nature of
sale; that is, the creditor is really buying the thing or property of the debtor, the
payment for which is to be charged against the debtor's obligation.
As a mode of payment, dacion en pago extinguishes the obligation to the extent

of the value of the thing delivered, either as agreed upon by the parties or as may
be proved, unless the parties by agreement—express or implied, or by their
silence—consider the thing as equivalent to the obligation, in which case the
28
obligation is totally extinguished. It requires delivery and transmission of
ownership of a thing owned by the debtor to the creditor as an accepted
equivalent of the performance of the obligation. There is no dacion in payment
when there is no transfer of ownership in the creditor's favor, as when the
possession of the thing is merely given to the creditor by way of security.
In the case at hand, in order to determine whether or not there was indeed a
perfected, or even consummated, dacion in payment, it is necessary to review
and assess the evidence and events that transpired and see whether these
correspond to the three stages of a contract of sale. This is so since, as
previously mentioned, dacion en pago agreements are governed, among others,
by the law on sales.
29
Performance; Special forms of Payment; Application of Payments

G. R. No. 211206, November 7, 2018
Facts:
Issue:
Whether or not Anson must return the excess of the payment made by Rey.
Ruling:
aside.
The Court agrees with petitioner that Articles 1253 and 2154 of the Civil Code
apply to this case, and Cesar Anson is obliged to return to petitioner excess
payments received by him.
Article 1253 of the Civil Code states that “[i]f the debt produces interest, payment
of the principal shall not be deemed to have been made until the interests have
been covered.” The Court reviewed the computation above made by petitioner
for Loan 1 and Loan 2, and found the computation to be correct.
The Court finds that in Loan 1, petitioner already paid in full the principal amount
of P200,000.00 and monthly interest thereon on November 8, 2003, elaving an
30
excess payment of P1,759.64. Further payments made by petitioner from
November 23, 2003 to August 23, 2004 resulted in overpayment amounting to
P144,259.64. The excess payment of P9,259.64 as of November 23, 2003 plus
excess payments made from December 23, 2003 to April 23, 2004 amounting to
P84,259.64 in Loan 1 may be applied to Loan 2, leaving a final excess payment
of P60,000.00 for Loan 1.
As regards Loan 2, petitioner fully paid the principal amount of P350,000.00 and
monthly interest thereon on May 26, 2004, leaving an excess payment of
P31,856.68. Payments made thereafter, from June 26, 2004 to September 26,
2004, resulted in excess payments amounting to P150,380.68 for Loan 2.
Petitioner also made excess payments of P41,360.00 in Loan 3, and P17,960.00
in Loan 4. Hence, the total excess payments made by petitioner in the four loans
amounted to P269,700.68.
31
OBLIGATIONS; Modes of Extinguishment of Obligations; Loss of the thing
due or Impossibility of Performance
SM Investments Corporation, Petitioner, vs. Mac Graphics Carranz

International Corp., Respondent.
G. R. Nos. 224131-32, June 25, 2018
(Second Division, Caguioa, J.)
Facts:
Mac Graphics Carranz International entered into a lease contract with
PilipinasMakro for exclusive use of the latter’s billboard sites located at certain
branches of Makro for a period of 20 years. After two years from the start of the
lease, the majority stockholders of Makro, which included SM Investments
Corporation, increased their ownership of Makro to 60%. Makro terminated its
lease contract with Mac Graphics effective immediately because of the latter’s
alleged failure to obtain certain permits and to obtain a comprehensive all-risk
property insurance for the sites. It added that the 90-day remedy period of the
contract does not apply because Mac Graphics’ violation was not remediable,
and there was no compliance within such period because the insurance policies
were not comprehensive and did not cover the stipulated third party liability, and
they were issued beyond the 90-day period. A meeting among Mac Graphics,
Makro and SM Investments was held, and then the billboards were removed
afterwards, with Mac Graphics being prohibited from entering the leased
premises. Mac Graphics objected to the said removal of the billboards and
demanded to cease and desist from further infringing its rights under the contract
but went unheeded. Mac Graphics filed an action for permanent injunction and
declaration of subsistence of contract and damages against Makro and SM
Investments. The RTC ruled in favor of Mac Graphics, ordering the restoration of
the billboards removed by Makro and SM Investments. The CA affirmed the prior
ruling.
Issue:
Whether or not the pre-termination of the lease contract on the ground of the
failure to obtain permits is valid.
Ruling:
The petitions are hereby granted.
Mac Graphics reiterated its position in its Complaint and invoked Articles
1266 and 1267 of the Civil Code to excuse itself from securing the stipulated
insurance for the billboards and other outdoor advertising materials since the
circumstances brought about by typhoon Milenyo had "not only rendered the
obligation so difficult as to be manifestly beyond the contemplation of the
parties, but in fact made it legally and physically impossible under the
circumstances then prevailing." Mac Graphics likewise invoked the 90-day
curing period under the lease contract.
In its Answer, Makro controverted Mac Graphics' allegations and averred that as
Mac Graphics itself admitted, none of the stipulated licenses/permits and all-risk
insurance coverage was secured prior to, or even on, January 15, 2007, which
was imperative for Mac Graphics to secure the same prior to the commencement
of the lease, and Makro merely enforced its option under the lease contract to
rescind and terminate the lease by reason thereof. Thus, Makro notified Mac
Graphics of the termination of the lease contract and returned to the latter the
checks representing the lease payments for the year 2009.
32
On the 90-day "remedy period" under Section 14(c) of the lease contract, Makro
argued that the licenses/permits and insurance stipulations are by their nature
not remediable since Mac Graphics did not have them prior to the
commencement of the lease. Makro further stated that at any rate, Mac Graphics
did not even comply within the 90-day period, and the insurance policies
(Annexes "K" to "N" to the Complaint), while issued in October 2008, were not
comprehensive and did not cover the stipulated third party liability while the third
party policies (Annexes "0" to "R" to the Complaint) were all issued in April 2009
or way beyond the 90-day period.
Makro concluded that Mac Graphics has no cause of action against it and the
Complaint should be dismissed in its entirety. As additional defense, it invoked
Article 1191 of the Civil Code as its legal justification in resolving the lease
contract.
On the supposed compliance with the licenses/permits and insurance

stipulations, SMIC points out that Mac Graphics secured after the
commencement of the lease on January 15, 2007, a purported "DPWH
Clearance" dated June 10, 2008 (Exh. "M-1") and a purported insurance policy
dated October 23, 2008 to cover the period October 23, 2008 to October 23,
2009 (Exh. "M-6-PI"), which was only for the Makro-Cubao leased property and
did not cover the Makati-based property.
xxx
In fine, both the RTC and the CA initially determined that the pre termination by
PMI without according Mac Graphics the 90-day "remedy period" to correct the
alleged violations by the latter is not justified and, in a way, invalid.
To the Court, a finding of the existence of a clear and unmistakable right in favor
of Mac Graphics necessarily presupposes that PMI's pre-termination of the lease
contract is not valid. Conversely, a finding that PMI's pre-termination is valid and
justified necessarily renders naught whatever rights emanating from the lease
contract that Mac Graphics may have.
Indeed, the resolution of whether Mac Graphics has any right arising from the
lease contract after its pre-termination by PMI hinges on the validity of such pre-
termination. The issue on the existence of right in favor of Mac Graphics is the
mirror image, so to speak, of the issue on the validity of PMI's pre-termination of
the lease contract, and vice versa.
The parties are relentless in their contrary positions on these issues. Mac
Graphics admits its non-compliance with the licenses/permits and insurance
stipulations in the lease contract, but justifies such breach by invoking the
presence of circumstances that rendered it legally and physically impossible to
comply therewith and PMI's disregard of the 90-day "remedy period." On PMI's
part, the outright pre-termination of the lease contract is justified because Mac
Graphics failed to obtain the stipulated licenses/permits and insurance on the
commencement date of the lease contract, which is January 15, 2007. Also, the
insurance obtained was not compliant and obtained beyond the 90-day "remedy
period."
Clearly, PMI has presented a substantial challenge against or contradiction of

Mac Graphic's position. A genuine doubt, which is more legal than factual, exists
on the validity of PMI's act of pre-termination and the tenability of Mac Graphics'
excuse from its non-compliance with the stipulations of the lease contract.
33
OBLIGATIONS; Modes of Extinguishment of Obligations; Condonation or
remission of the debt
H. Villarica Pawnshop, Inc., HL Villarica Pawnshop, Inc., HRV Villarica

Pawnshop, Inc. and Villarica Pawnshop, Inc., Petitioners, vs. Social
Security Commission, Social Security System, Amador M. Monteiro,
Santiago Dionisio R. Agdeppa, Ma. Luz N. Barros-Magsino, Milagros N.
Casuga, and Jocelyn Q. Garcia, Respondents.
G. R. No. 228087, January 24, 2018
Facts:
H. Villarica Pawnshop, Inc., HL Villarica Pawnshop, Inc, HRV Villarica
Pawnshop, Inc., and Villarica Pawnshop, Inc., paid their delinquent contributions
and accrued penalties with the Social Security System (SSS), a year before the
passage of Republic Act No. 9903, otherwise known as the Social Security
Condonation Law of 2009, which offered delinquent employers the opportunity to
settle, without penalty, their accountabilities or overdue contributions within 6
months from the date of its effectivity. The pawnshops sought reimbursement of
the accrued penalties which they paid with the SSS, in which they claimed that
the benefits of the condonation program extends to all employers who have
settled their arrears or unpaid contributions even prior to the effectivity of the law.
Their requests were denied on the ground that they are not covered by the Social
Security Condonation Law. The pawnshops filed their petitions with the Social
Security Commission, in which the latter denied all of them because they did not
have unpaid contributions at the time the law took effect which did not entitle
them to the benefits of the condonation program, thus, there could be no
remission or refund in their favor. The CA affirmed the ruling of the SSC.
Issue:
Whether or not the pawnshops are covered by the Social Security Condonation
Law.
Ruling:
Concomitantly, condonation or remission of debt is an act of liberality, by virtue of

which, without receiving any equivalent, the creditor renounces the enforcement
of the obligation, which is extinguished in its entirety or in that part or aspect of
the same to which the remission refers. It is essentially gratuitous for no
equivalent is received for the benefit given. Relatedly, waiver is defined as a
voluntary and intentional relinquishment or abandonment of a known existing
legal right, advantage, benefit, claim or privilege, which except for such waiver
the party would have enjoyed; the voluntary abandonment or surrender, by a
capable person, of a right known by him to exist, with the intent that such right
shall be surrendered and such person forever deprived of its benefit; or such
conduct as warrants an inference of the relinquishment of such right; or the
intentional doing of an act inconsistent with claiming it. On the other hand, refund
is an act of giving back or returning what was received. In cases of monetary
obligations, a claim for refund exists only after the payment has been made and,
in the act of doing so, the debtor either delivered excess funds or there exists no
obligation to pay in the first place. xxx
34
A plain reading of Section 4 of R.A. No. 9903 shows that it does not give
employers who have already settled their delinquent contributions as well as their
corresponding penalties the right to a refund of the penalties paid. What was
waived here was the amount of accrued penalties that have not been paidprior to
the law's effectivity—it does not include those that have already been settled.
35
OBLIGATIONS; Modes of Extinguishment of Obligations; Novation
Spouses Francis N. Celones and FelicisimaCelones, Petitioners, vs.

Metropolitan Bank and Trust Company and Atty. Crisolito O. Dionido,
Respondents.
G. R. No. 215691, November 21, 2018
Facts:
Spouses Francis and FelicisimaCelones, together with their company,
Processing Partners and Packaging Corporation, obtained various loans from
Metrobank and for which they mortgaged various properties. The spouses
defaulted in paying their loan, as such,Metrobank foreclosed all the mortgaged
properties, in which it was declared the winning bidder upon foreclosure sale.
The spouses offered to redeem the properties from Metrobank, which was
approved by the latter. The spouses found a lawyer named Atty. CrisolitoDionido,
who extended them a loan, wherein the parties agreed for the subrogation of
Atty. Dionido to all the rights, interests of Metrobank over the loan obligation of
the spouses and the foreclosed properties. Upon issuance of payment slips to
the spouses after giving the amount, it caused the redemption of the properties.
Believing such, the spouses demanded from Metrobank the redemption of their
properties but the latter refused to do so. Meanwhile, Atty. Dionido demanded the
spouses to vacate the foreclosed properties in view of the expiration of the
redemption period without the spouses redeeming the same. The spouses filed
an action for declaratory relief and injunction to compel Metrobank to issue the
certificates of redemption and to deliver to them the titles over their properties, in
which the RTC ruled in favor of the spouses, but it was reversed by the CA.
Issue:
Whether or not there is novation of the obligation between Metrobank and
Spouses Celones.
Ruling:
Novation is a mode of extinguishing an obligation by changing its objects or

principal obligations, by substituting a new debtor in place of the old one, or by
subrogating a third person to the rights of the creditor. In order that an obligation
may be extinguished by another which substitute the same, it is imperative that it
be so declared in unequivocal terms, or that the old and the new obligations be
on every point incompatible with each other. Thus, “[n]ovation must be stated in
clear and unequivocal terms to extinguish an obligation. It cannot be presumed
and may be implied only if the old and new contracts are incompatible on every
point.”
As held in the case of Salazar v. J.Y. Brothers Marketing Corp.:
x xx Novation is done by the substituting or change of the obligation by a

subsequent one which extinguishes the first, either by changing the object or
principal conditions, or by substituting the person of the debtor, or by subrogating
a third person in the rights of the creditor. Novation may:
[E]ither be extinctive or modificatory, much being dependent on the nature of the

change and the intention of the parties. Extinctive novation is never
presumed; there must be an express intention to novate; in cases where it
36
is implied, the acts of the parties must clearly demonstrate their intent to
dissolve the old obligation as the moving consideration for the emergence
of the new one. Implied novation necessitates that the incompatibility
between the old and new obligation be total on every point such that the
old obligation is completely superceded by the new one. The test of
incompatibility is whether they can stand together, each one having an
independent existence; if they cannot and are irreconcilable, the
subsequent obligation would also extinguish the first.
An extinctive novation would thus have the twin effects of, first, extinguishing an
existing obligation and, second, creating a new one in its stead. This kind of
novation presupposes a confluence of four essential requisites: (1) a previous
valid obligation, (2) an agreement of all parties concerned to a new contract, (3)
the extinguishment of the old obligation, and (4) the birth of a valid new
obligation. Novation is merely modificatory where the change brought about by
any subsequent agreement is merely incidental to the main obligation (e.g., a
change in interest rates or an extension of time to pay; in this instance, the new
agreement will not have the effect of extinguishing the first but would merely
supplement it or suppliant some but not all of its provisions.) (Emphasis ours)
Examination of the MOA showed no express stipulation as to the novation or

extinction of the CNAR. Thus, for implied novation to exist, it is necessary to
determine whether the CNAR and the MOA are incompatible on every point such
that they cannot be reconciled and stand together.
Under the CNAR, it is provided that Metrobank approved the offer of Spouses
Celones to redeem the property in the amount of P55 Million. While under the
MOA, Metrobank assigned all its rights and interests to Atty. Dionido over the
foreclosed properties including the issuance of a certificate of redemption.
After careful scrutiny of the records, we find that the CNAR only deals with the
redemption right of Spouses Celones while the MOA deals with the assignment
of credit of Metrobank to Atty. Dionido. As such, the CNAR and the MOA can be
reconciled and can both stand together.
37
CONTRACTS; In General
Rolando de Roca, Petitioner, vs. Eduardo C. Dabuyan, Jennifer A.

Branzuela, Jennylyn A. Ricarte, and Herminigildo F. Sabanate,
Respondents.
G. R. No. 215281, March 5, 2018
(First Division, Del Castillo, J.)
Facts:
Eduardo Dabuyan, Jennifer Branzuela, JennylynRicarte and
HerminigildoSabanate filed a complaint for illegal dismissal against RAF Mansion
Hotel Old Management and New Management and VictorianoEwayan, which
later included Rolando de Roca. Despite service of summons to the latter, they
failed to appear in the conference before the NLRC. The labor arbiter ruled,
ordering RAF Mansion to pay backwages and other monetary award to the
complainants. De Roca filed a petition for annulment of judgment referred to the
NLRC, instead of an appeal with the NLRC itself, which was dismissed. The CA
affirmed the arbiter ruling.
Issue:
Whether or not there was a contract of employment between De Roca and the
employees.
Ruling:
All throughout the proceedings, petitioner has insisted that he was not the
employer of respondents; that he did not hire the respondents, nor pay their
salaries nor exercise supervision or control over them, nor did he have the power
to terminate their services. In support of his claim, he attached copies of a lease
agreement - a Contract of Lease of a Building - executed by him and Oceanic
Tours and Travel Agency (Oceanic) represented by Ewayan through his
attorney-in-fact MarilouBuenafe. The agreement would show that petitioner was
the owner of a building called the RAF Mansion Hotel in Roxas Boulevard,
Baclaran, Parañaque City; that on September 25, 2007, Oceanic agreed to lease
the entire premises of RAF Mansion Hotel, including the elevator, water pump,
airconditioning units, and existing furnishings and all items found in the hotel and
included in the inventory list attached to the lease agreement, except for certain
portions of the building where petitioner conducted his personal business and
which were leased out to other occupants, including a bank; that the lease would
be for a period of five years, or from October 15, 2007 up to October 15, 2012;
that the monthly rental would be P450,000.00; and that all expenses, utilities,
maintenance, and taxes - except real property taxes - incurred and due on the
leased building would be for the lessee's account.
xxx
Thus, it would appear from the facts on record and the evidence that petitioner's
building was an existing hotel called the "RAF Mansion Hotel", which Oceanic
agreed to continue to operate under the same name. There is no connection
between petitioner and Oceanic oilier than through the lease agreement
executed by them; they are not partners in the operation of RAF Mansion Hotel.
It just so happens that Oceanic decided to continue operating the hotel using the
original name - "RAF Mansion Hotel".
38
The only claim respondents have in resorting to implead petitioner as a co
respondent in the labor case is the fact that he is the owner of the entire building
called "RAF Mansion Hotel" which happens to be the very same name of the
hotel which Ewayan and Oceanic continued to adopt, for reasons not evident in
the pleadings. It must be noted as well that when they originally filed the labor
case, respondents did not include petitioner as respondent therein. It was only
later on that they moved to amend their complaint, impleading petitioner and thus
amending the title of the case to "x xx, Complainants, versus RAF Mansion
Hotel Old Management and New Management/VictorianoEwayan and Rolando
De Roca, Respondents."
As correctly observed by petitioner, such belated attempt to implead him in the

labor case must be seen as an afterthought. Moreover, the fact that respondents
recognize petitioner as embodying the "new management" of RAF Mansion Hotel
betrays an admission on their part that he had no hand in the "old management"
of the hotel under Ewayan, during which they were hired and maintained as hotel
employees - meaning that petitioner was never considered as Ewayan's partner
and co-employer; respondents merely viewing petitioner as the subsequent
manager taking over from Ewayan, which bolsters petitioner's allegation that
Ewayan had absconded and left respondents without recourse other than to
implead him as the "new management" upon whom the obligation to settle the
claims abandoned by Ewayan now fell.
"Contracts take effect only between the parties, their assigns and heirs, except in
case where the tights and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by provision of law." The
contract of employment between respondents, on the one hand, and Oceanic
and Ewayan on the other, is effective only between them; it does not extend to
petitioner, who is not a party thereto. His only role is as lessor of the premises
which Oceanic leased to operate as a hotel; he cannot be deemed as
respondent's employer - not even under the pretext that he took over as the "new
management" of the hotel operated by Oceanic. There simply is no truth to such
claim.
39
Dale Strickland, Petitioner, vs. Ernst & Young LLP, Respondent.
G. R. No. 193782, August 1, 2018
(First Division, Jardeleza, J.)
Facts:
National Home Mortgage Finance Corporation (NHMFC) and Punongbayan and
Araullo (P&A), at that time the Philippine member of Ernst & Young LLP,and
designated as P&A/Ernst & Young, entered into a Financial Advisory Services
Agreement (FASA) for the liquidation of the Unified Home Lending Program of
NHMFC, in which their engagement was confirmed as exclusive Financial
Advisor for the said project. Dale Strickland, a partner of Ernst & Young, took part
in negotiating the FASA between NHMFC and P&A, in which the former was
asked to formalize the working relationship between P&A/Ernst & Young and
Ernst & Young/Asia Pacific Solutions (EYAPFS) for the FASA with NHMFC.
Meanwhile, Ernst & Young terminated P&A of its membership with the former,
but their working relationship continued. Ernst & Young confirmed the
assignment of Strickland to Manila as a partner and summarized the working
arrangement between P&A and Ernst & Young. Later on, the transactional
relationship between the parties went awry. Notice was given to NHMFC of the
intention of P&A to remove Strickland from the NHMFC Engagement Team as a
result of his resignation from Ernst & Young and EYAPFS and was replaced by
Mark Grinis. Since NHMFC was intent to retain the services of Strickland despite
his separation from Ernst & Young and EYAPFS, the parties entered into
negotiations to define Strickland’s possible continued participation in the project.
Amendments were made but did not materialized. P&A and NHMFC discussed
on a mutual voluntary termination of their agreement, but conflict on the actual
participation of Strickland and his concurrent designation on the project arose
among themselves, as well as on the terms of compensation for Strickland.
Strickland filed a complaint against Ernst & Young, NHMFC, and P&A for
collection of sum of money, in which the RTC referred the case to arbitration, and
Ernst & Young was dropped as defendant in the said case. The CA reversed the
prior ruling, directing the RTC to suspend its proceedings in the case pending
arbitration.
Issue:
Whether or not the case can be referred to arbitration which are contractual in
nature.
Ruling:
The petitions are denied.
Plainly, considering that the arbitration clause is in itself a contract, the setting
forth of its provisions in EYLLP's answer and in its motion to refer to
arbitration, coupled with the actual submission by EYLLP of the Partnership
Agreement, complies with the requirements of Section 7, Rule 8 of the Rules of
Court which Strickland should have specifically denied.
We note that while the cases before us have a foreign element involving foreign
parties and international transactions, the parties do not question the jurisdiction
of our courts to hear and decide the case. The parties quibble only on whether
the dispute between Strickland and EYLLP should be referred to arbitration
despite Strickland's alleged causes of action based on tortious conduct of the
parties in refusing to compensate him for services rendered. Moreover, in relation
to the other defendants, specifically respondent PA, the issue pertains to the
40
suspension of the proceedings in Civil Case No. 05-692 pending resolution of the
arbitration between Strickland and EYLLP.
We have consistently affirmed that commercial relationships covered by our

arbitration laws are purely private and contractual in nature. Article 1306 of the
Civil Code provides for autonomy of contracts where the parties are free to
stipulate on such terms and conditions except for those which go against law,
morals, and public policy. In our jurisdiction, commercial arbitration is a purely
private system of adjudication facilitated by private citizens which we have
consistently recognized as valid, binding, and enforceable.
xxx
The following factors further militate against Strickland's insistence on Philippine

courts to primarily adjudicate his claims of tortious conduct, and not commercial
arbitration, as stipulated in the Partnership Agreement:
1. From his complaint and amended complaint, Strickland's causes of action

against EYLLP and PA hinge primarily on contract, i.e., the Partnership
Agreement, and the resulting transactions and working relationship among the
parties, where Strickland seeks to be paid.
2. The Partnership Agreement is bolstered by the assignment letter of EYLLP to

Strickland confirming his assignment to Manila as partner and which assignment
letter contains a choice of law provision:
I. ASSIGNMENT
Terms of Assignment
x xxx
During the assignment, you will be seconded to Asia Pacific Financial Solutions
LLC and subject to its rules and regulations. Additionally, you must abide by all
laws in the Philippines. It is also expected that you will conduct yourself in a
professional manner at all times, and carry out your duties and responsibilities in
the high standard achieved throughout Ernst & Young practices worldwide.
This assignment letter will be governed by, and construed in accordance

with, the laws of the U.S., under which the firm and you agree to the
exclusive jurisdiction of the U.S. courts. In addition, all terms and
conditions of your Partnership Agreement with Ernst & Young LLP, which
are not consistent with this letter, shall remain in full force and
effect. (Emphasis supplied.)
3. The allegations in Strickland's complaint, specifically his narration of facts,

admit that the entire controversy stems from his working relationship with EYLLP
as a partner, thus:
(14)(9) When the NHMFC Agreement was signed, [Strickland] was a Partner in
E&Y and held the title of Managing Director of Ernst & Young Asia Pacific
Financial Solutions LLC ("EYAPFS"), a 100% owned and controlled subsidiary of
Ernst & Young LLP ("E&Y"). x xx
On the whole, the dispute between Strickland and EYLLP, even considering the
former's allegations of tortious conduct, were properly referred by the CA to
arbitration.
41
G. R. No. 211206, November 7, 2018
Facts:
Issue:
Whether or not the imposition of the monthly interest rates by Anson on the first
and second loans are excessive and unconscionable.
Ruling:
aside.
The freedom of contract is not absolute. Article 1306 of the Civil Code provides
that “[t]he contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.”
In Sps. Albos v. Sps. Embisan, et al. the Court held:
As case law instructs, the imposition of an unconscionable rate of interest on a

money debt, even if knowingly and voluntarily assumed, is immoral and unjust. It
is tantamount to a repugnant spoliation and an iniquitous deprivation of property,
repulsive to the common sense of man. It has no support in law, in principles of
justice, or in the human conscience nor is there any reason whatsoever which
42
may justify such imposition as righteous and as one that may be sustained within
the sphere of public or private morals.
Summarizing the jurisprudential trend towards this direction is the recent case
of Castro v. Tan in which We held:
While we agree with petitioners that parties to a loan agreement have wide
latitude to stipulate on any interest rate in view of the Central Bank Circular No.
905 s. 1982 which suspended the Usury Law ceiling on interest effective January
1, 1983, it is also worth stressing that interest rates whenever unconscionable
may still be declared illegal. There is certainly nothing in said circular which
grants lenders carte blanche authority to raise interest rates to levels which will
either enslave their borrowers or lead to a hemorrhaging of their assets.
In several cases, we have ruled that stipulations authorizing iniquitous or

unconscionable interests are contrary to morals, if not against the law. In Medel
v. Court of Appeals, we annulled a stipulated 5.5% per month or 66% per annum
interest on a P500,000.00 loan and a 6% per month or 72% per annum interest
on a P60,000.00 loan, respectively, for being excessive, iniquitous,
unconscionable and exorbitant. In Ruiz v. Court of Appeals, we declared a 3%
monthly interest imposed on four separate loans to be excessive. In both cases,
the interest rates were reduced to 12% per annum.
In this case, the 5% monthly interest rate, or 60% per annum, compounded
monthly, stipulated in the Kasulatan is even higher than the 3% monthly interest
rate imposed in the Ruiz case. Thus, we similarly hold the 5% monthly interest to
be excessive, iniquitous, unconscionable and exorbitant, contrary to morals, and
the law. It is therefore void ab initio for being violative of Article 1306 of the Civil
Code. With this, and in accord with the Medel and Ruiz cases, we hold that the
Court of Appeals correctly imposed the legal interest of 12% per annum in place
of the excessive interest stipulated in the Kasulatan.(Citations omitted; emphasis
supplied.)
In the case before us, even if Rosemarie Rey initially suggested the interest rate
on the first loan, voluntariness does not make the stipulation on an interest,
which is iniquitous, valid. As Rosemarie Rey later realized through the counsel of
her lawyer that the interest rates of the first and second loans were excessive
and no interest should be imposed on the third and fourth loans, she came to
court for recomputation of the loans and recovery of excess payments.
In this case, the first loan had a 7.5% monthly interest rate or 90% interest per
annum, while the second loan had a 7% monthly interest rate or 84% interest per
annum, which rates are very much higher than the 3% monthly interest rate
imposed in Ruiz v. Court of Appeals and the 5% monthly interest rate imposed
in Sps. Albos v. Sps. Embisan, et al. Based on the ruling of the Spouses
Albos case, the Court holds that the interest rates of 7.5% and 7% are excessive,
unconscionable, iniquitous, and contrary to law and morals; and, therefore,
void ab initio. Hence, the Court of Appeals erred in sustaining the imposition of
the said interest rates, while the RTC correctly imposed the legal interest of 12%
per annum in place of the said interest rates.
43

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OBLIGATIONS; In General; Prescription of Actions

FloroMercene, Petitioner, vs. Government Service Insurance System,

Nature of the action: Review on certiorari

In University of Mindanao, Inc. v. BangkoSentralngPilipinas, et al., the Court

The mortgage contracts in this case were executed by Saturnine Petalcorin in

The running of the prescriptive period of respondent's action on the

An action to enforce a right arising from a mortgage should be enforced within

Thus, applying the pronouncements of the Court regarding prescription on the

Nature of the action: Review on certiorari

Nature of the action: Review on certiorari

In Bautista v. Bautista, it was held that —

The extra-judicial partition executed by Teofilos co-heirs was invalid, however.

The above pronouncement was reiterated in Neri v. Heirs of

Nature of the action: Appeal by certiorari

In Dalauta, the preliminary determination of just compensation was referred to

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

Nevertheless, any interruption or delay caused by the government like

In this case, Dalauta received the Notice of Coverage on February 7, 1994. He

Astrid A. Van de Brug, Martin G. Aguilar and Glenn G. Aguilar, Petitioners,

Nature of the action: Review under Rule 45 of the Rules of Court

H. Villarica Pawnshop, Inc., HL Villarica Pawnshop, Inc., HRV Villarica

Nature of the action: Review on certiorari

Concomitantly, condonation or remission of debt is an act of liberality, by virtue of

The words "condoned", "waived" and "accrued" are unambiguous enough to be

Nature of the action: Review on certiorari

Since Cesar Anson received a total overpayment of P269,700.68 from petitioner,

As respondents made an overpayment, the principle of solutioindebiti as

In Moreno-Lentfer v. Wolff, this court explained the application of solutioindebiti:

The quasi-contract of solutioindebiti harks back to the ancient principle that no

Nacar provides that “[w]hen an obligation, not constituting a loan or forbearance

Further, Article 2159 of the Civil Code provides:

Lily S.Villamil substituted by her heirs Rudy E. Villamil, Solomon E. Villamil,

Nature of the action: Review on certiorari

Article 1186 of the Civil Code reads:

This provision refers to the constructive fulfillment of a suspensive condition,

Respondent-spouses' obligation to pay the balance of the purchase price arises

Nature of the action: Review on certiorari

In Philippine Airlines, Inc. v. Court of Appeals, Philippine Airlines alleged that

Considering the abovementioned incident and private respondent Mejia's own

The foregoing event showLuwalhati's own ardent campaign in following up the

Petitioner has been unable to persuasively refute Luwalhati's recollection of the

Nature of the action: Review under Rule 45 of the Rules of Court

Demosthenes R. Arbilon, Petitioner, vs. SofronioManlangit, Respondent.

Nature of the action: Review on certiorari

Hence, the issue of whether there is a partnership that is existing between

Article 1236. The creditor is not bound to accept payment or performance by a

Nature of the action: Review on certiorari

The other two custodian certificates are of the same tenor.

As previously discussed, the nature of the Silver Custodian Certificates of Time

Nature of the action: Review on certiorari

Nature of the action: Review on certiorari

To stress, respondent HSBC-SRP continuously sent out monthly Installment Due

Respondent HSBC-SRP argues that estoppel is not applicable since the

We are not persuaded.

It is respondent HSBC-SRP, not petitioner Rosalina, which has access and

DesiderioDalisay Investments, Inc., Petitioner, vs. Social Security System,

Nature of the action: Review on certiorari

Among other modes, an obligation is extinguished by payment or

In dacion en pago, property is alienated to the creditor in satisfaction of a debt in

As a mode of payment, dacion en pago extinguishes the obligation to the extent

Rosemarie Q. Rey, Petitioner, vs. Cesar G. Anson, Respondent.

Nature of the action: Review on certiorari